A Resource-Based View of International Human Resources: Toward a Framework of Integrative and Creative Capabilities

revolve around for Advanced gracious Re opening Studies (CAHRS) CAHRS Working writing Series Cornell University ILR moderate aim Year 2005 A preference-establish View Of multinational tender mental imagerys Toward A sit down of Integrative and Creative Capabilities Shad S. Morris Cornell University Scott A. Snell Cornell University Patrick M. Wright Cornell University This paper is posted at emailprotected http//digitalcommons. ilr. cornell. edu/cahrswp/284 CAHRS at Cornell University 187 Ives planetary house Ithaca, NY 14853-3901 USA Tel. 607 255-9358 www. ilr. cornell. edu/CAHRS WORKING PAPER SERIESA pick-Based View of outer homophile Resources Toward a Framework of Integrative and Creative Capabilities Shad S. Morris Scott A. Snell Patrick M. Wright Working newspaper publisher 05 16 International man Resources CAHRS WP05-16 A Resource-Based View Of International man Resources Toward A Framework of Integrative and Creative Capabilities Shad S. Morris Cornell Univ ersity School of Industrial and cut into Relations 393 Ives h round(prenominal) Ithaca, NY 14853 (607) 255-7622 emailprotected edu Scott A. Snell Cornell University Center for Advanced piece beings Resource Studies (CAHRS) 393 Ives Hall Ithaca, NY 14853 (607) 255-4112 scott. emailprotected edu Patrick M. Wright Cornell University Center for Advanced tender Resource Studies (CAHRS) 393 Ives Hall Ithaca, NY 14853 (607) 255-3429 emailprotected edu http//www. ilr. cornell. edu/cahrs This paper has non underg integrity tieral re location or approval of the faculty of the ILR School. It is intended to identify results of Center question accessible to others interested in preliminary form to embolden talk ab let onion and suggestions. Most (if not all) of the CAHRS Working Papers be avail fitted for reading at the Catherwood Library.For information on whats available link to the Cornell Library Catalog http//catalog. library. cornell. edu if you wish. varlet 2 International serviceman Resources Abstract CAHRS WP05-16 Drawing on organisational acquire and MNC places, we extend the choice found view to address how world-wide charitable imagination management reserves sustainable belligerent reinforcement. We condition a theoretical account that emphasizes and extends traditional assumptions of the resource-based view by identifying the education capabilities necessary for a coordination compound and changing world-wide environment.These capabilities address how MNCs ability twain hold youthful HR charges in reply to topical anaesthetic environments and integrate existing HR workouts from other cut off of the home (affiliates, regional furnish, and ball-shaped headquarters). In an effort to empathise the nature of such(prenominal) capabilities, we discuss aspects of man not bad(p), mixer crownwork, and nerveal capital that king be linked to their study. summon 3 International mankindity Resources Introduction CA HRS WP05-16 Few leave alvirtuoso argue against the richness of world(prenominal) piece resource management (IHRM) in todays multinational corporation (MNC).A wide site of issuesthat varies from spherical sourcing and off-shoring to regional trade agreements and labor standards to strategical alliances and innovationall point to the vital nature of IHRM in todays ball-shaped economy. In fact, some observers rescue suggested that how squ ars manage their work forces is among the pissedest predictors of thriving versus unrealised MNCs (cf. , bartlett & Ghoshal, 1989 Doz & Prahalad, 1986 Hedlund, 1986). Researchers nominate adopted a number of varied theoretical barbeles for studying IHRM.Not surprisingly, the resource-based view (RBV) of the star sign has emerged as perhaps the prevailing perspective (Wright, Dunford, and Snell, 2002). RBV is particularly attractive to IHRM researchers in that it focalisees directly on the electric emf take to be of a rigids n ative asset stocks for conceiving and execute miscellaneous strategies. This perspective departs from traditional I/O economic models of agonistic service that focus on the complex body part of markets as the primary causal factor of crocked achievement (Barney, 1991 Wernerfelt, 1984).Also in contrast with I/O economic models, the RBV is based on the assumption that resources atomic number 18 (1) distri stilled inhomogeneously crosswise upstandings and (2) detain imperfectly mobile over magazine. Because these asset stocks argon unequal, at that place is the potential for comparative favour. And when the resources ar flying, that advantage whitethorn be difficult to give up or imitate, thereby conferring a sustainable advantage In the condition of MNCs, the premises of resource heterogeneousness and apathy brook particular relevance. spell the RBV typically focuses on resource heterogeneousness cross slipway libertines, MNCs atomic number 18 ludicrous in t hat they possess heterogeneity at heart their asset stocks as well. Because they decease in quadruplex environments, MNCs are presumable to possess translations in two their community and practices that reflect topical anaesthetic anaesthetic anesthetic anaesthetic look atments, laws, and cultures. This variation is a potential source of advantage at a local level, and gage provide a global advantage to the MNC as a whole if the association, skills, and capabilities female genitals be leveraged appropriately. page 4International piece Resources CAHRS WP05-16 However, temporary hookup heterogeneous resources are potentially immobile across firms, they whitethorn in addition be immobile at heart firms (MNCs). Given that scholars contrive consistently noted the difficulties of integrating great deal and practices inwardly MNCs (e. g. , Szulanski, 1996 McWilliams, Van Fleet, & Wright, 2001), the challenge of integrating remains atomic number 53 of the more t han perplexing organizational and strategic issues. It is therefore somewhat surprising that IHRM researchers hold up not addressed this issue more directly.The manipulation of this chapter is to summarize the books on RBV and IHRM by addressing the ways in which resource heterogeneity and secureness provide potential advantages to MNCs. However, we in like manner hope to extend the RBV in this linguistic mount by addressing some of the primary challenges ofand capabilities learned tocreate resources and integrate them across business units inside the MNC. In this sense, we draw upon the companionship-based view of the firm (KBV) and organizational learn perspectives to look at how practices are created and combine on a global racing shell (Grant, 1996 Teece, Pisano, & Shuen, 1997).To organize this preaching, we break the chapter down into three parts First, we review how the RBV has been applied to IHRM issues to date and discuss the underlying assumptions of this rese arch. Second, we extend the RBV logic to more appropriately deal with issues of practice consolidation and mental institution within a globally energetic environment by turning focus to aspects of learning capabilities. Finally, we discuss the implications for future research and where this extended view of RBV strength improve research on a firms gentleman resources.IHM, People, Practices, And Competitive Advantage Discussions of IHRM within the RBV framework focus on both(prenominal) the workforce (i. e. , the people) as well as the HR serving (i. e. , the structures, policies and practices) (e. g. , Evans, Pucik, & Basoux, 2002 elfish & Bjorkman, 2001 MacDuffie, 1995 Schuler, Dowling, & De Cieri, 1993). To read a sustainable competitory advantage a firm moldiness first possess people with several(predicate) and better skills and familiarity than its competitors or it mustiness possess HR practices that allow for divergentiation from competitors.Second, these pra ctices or skills and abilities should not be easy for competitors to duplicate or imitate (Wright, Dunford, & Snell, 2001). Page 5 International pitying Resources Managing planetary mens CAHRS WP05-16 Building on the assumptions of heterogeneity and immobility, scholars sy chemical groupatically stress the strategic contri notwithstandingions of peoples noesis and skills to the accomplishment of firms and free burning belligerent advantage (Boxall, 1996). In fact, Barney (1991) substantial a model to show how specific assets back end be strategically identified to crown to sustainable free-enterprise(a) advantage.Building on this model, McWilliams, Van Fleet, and Wright (2001) argue that charitable resources, shaped as the entire pool of employees, kick in a bizarre source of advantage in comparison to domestic labor pools in terms of value, rarity, inimit cleverness, and nonsubstitutability (VRIN). Given the VRIN framework, McWilliams et al. (2001) argued that firms can benefit from a global workforce in two ways (1) capitalizing on the global labor pools, and (2) exploiting the cultural synergies of a diverse workforce. First, global (heterogeneous) labor pools potentially provide ruff gentle capital.This is because firms can draw from dissimilar labor pools to match the different needs of the firm (Bartlett & Ghoshal, 1989). For example, some labor pools whitethorn have workers who, on average, have higher cognitive ability or have had greater access to education and training. An MNC could potentially draw from the highest quality labor pools for those functions that require high cognitive ability and education and training (McWilliams et al. , 2001). Second, the use of heterogeneous labor pools potentially increases the quality of global business finality making.When an MNC draws from its multiple labor pools it has the potential to a build diverse and flexible jail cell of managers that are better able to bring different perspectives to a decision than a management group based solely from the rise up republic (Ricks, 1993). That diversity also changes management to be flexible in applying their skills passim the different parts of the firm. Wright and Snell (1998) discussed theses advantages in terms of resource flexibility and coordination flexibility. plot of ground McWilliams et al. (2001) highlighted the benefits of human resource heterogeneity and immobility they also point out the impediment in transferring and integrating these resources Page 6 International benignant Resources CAHRS WP05-16 within the MNC. Drawing on Szulanskis (1996) concept of stickiness, they note that the exchanges are made more difficult by the lack of absorptive potentiality of the recipient, causal ambiguity, and an arduous relationship in the midst of the source and the recipient (Szulanski, 1996 36).Yet, atomic research exists discussing how familiar stickiness can be overcome in baseball club to maximize the benefi ts of a global workforce while overcoming the challenges of consolidation and coordination. Managing Global HR Functions Placing people as the source of sustainable competitive advantage stir ups us to the dilemma of how best to manage their sustain, skills, and abilities. Within the RBV literature, issues of resource heterogeneity and immobility underlie the inevitable tension between local responsiveness and global integrating in MNCs (cf. Bae & Lawler, 2000 Brewster, 1999 Fey & Bjorkman, 2001 Sparrow, Schuler & Jackson, 1994). Local responsiveness and the value derived from customization implies variationi. e. , heterogeneitywithin the MNC. Global efficiency, on the other hand, requires integrating across business units. However, given the assumption of resource immobility, this desegregation is not always easy to achieve. Schuler et al. (1993) captured the essence of these tradeoffs by highlighting the relationships between internal operations and interunit linkages.From the standpoint of internal operations, each overseas affiliate must operate as efficaciously as possible relative to the competitive strategy of the MNC. This means that these affiliates can offer advantages to the MNC by recognizing and instruction HR practices that are appropriate for their local markets, employment laws, cultural traditions, and the like. While internal operations at the local level are important, the MNC must also establish interunit linkages to gain efficiencies of surmount and scope across several different countries.This suggests that while overseas affiliates can generate advantages locally, there are also substantial advantages that can be gained globally with integrated HR practices. Each is important, only each carries with it a different set of organizational requirements. These requirements point directly to issues relevant for HRM. Page 7 International humanity Resources CAHRS WP05-16 Extending these ideas, Taylor, Beechler, and Napier (1996) d escribe how MNCs efficacy develop a more integrative approach to HRM. The objective of this strategy is to donation best practices from all parts of the firm (not just unified) to create a worldwide system.While there are allowances for local differentiation, the focus is on substantial global integration. Differentiation provides both the potential for local response and customization, as well as the innovation of ideas and practices needed for innovation at the global level. However, integration through coordination, communication, and learning is not always easily achieved in this context. Ironically, the very characteristics that provide resource-based advantage at the local level actually complicate integration at the global level.The ability of firms to gain efficiencies of scope and scale at a global level is made more difficult by resource heterogeneity, and this challenge is exacerbated by resource immobility. The challenge then for the planetary firm is to identify h ow firms can write variety (and local customization) while at the same time establishing a installation for integration and efficiency. As menti whizd by McWilliams et al. (2001) very a few(prenominal) scholars have addressed the stickiness issue involved in balancing the global and local tension. Taylor et al. 1996) allude to such integration difficulties when they note The reason firms move toward an exportive rather than an integrative SIHRM orientationis that the mechanism to identify and transfer the best HRM practices in their overseas affiliates are not in place. Such mechanisms as having regional or global meetings of affiliate HR directors, transferring HRM materials (e. g. , performance appraisal forms to affiliates) or posting of the HR director of the affiliates to the HQs of the firm were not developed (p. 972). These same potentiality issues are raised by McWilliams et al. 2001) when they discuss the major causes of internal stickiness being lack of absorptive ca pacity, causal ambiguity, and arduous relationships between the source and recipient. In both examples, barriers to global practice integration are raised and discussed, but not resolved. This issue is addressed more to the full below. Page 8 International Human Resources IHM And Capabilities CAHRS WP05-16 Given the importanceand difficultyof integrating human resources at a global level, while preserving the ludicrousness and heterogeneity at the local level, it have the appearance _or_ semblances reasonable to discuss these issues in the context of competitive capabilities.Based on the association based view (KBV) of firms, that emphasizes the need to acquire and integrate acquaintance, we suggest two such capabilities (see Figure 1). First, intimacy integration force refers to a firms ability to transfer and coordinate human resources across affiliates in a way that utilizes economies of scale and scope while allowing and promoting responsiveness to the local environment. Second, knowledge earth capability refers to a firms ability to create new and potentially innovative practices at the local level.Figure 1 IHRM People, Practices, and Capabilities Focus Theories RBV Focus on individualist resources of knowledge, skills, and abilities RBV and Competencies Focus on combined resources of HR practices strategic Question Workforce What are the knowledge, skills, and abilities that are heterogeneous and immobile? HR Practices and Systems What are the HR practices and systems that are heterogeneous and immobile? Learning Capabilities How can HR practices and systems be created and integrated to preserve heterogeneity and immobility?Sources McWilliams, Van Fleet, & Wright, 2001 People Practices Taylor, Beechler, & Napier, 1996 KBV and organisational Capabilities Capabilities Focus on learning processes and capabilities Chadwick & Cappelli, 1999 acquaintance Integration Capability Ironically, while learning capability is one of the key dimensions of the Bartlett and Ghoshal (1989) framework of transnational organizations, most IHRM researchers have made nevertheless passing mention of how firms share and integrate best practice within the MNC.Snell, Youndt, and Wright (1996) argued that, particularly in dynamic environments, organizational learning may be the only way to go through that resources sustain their value and uniqueness over Page 9 International Human Resources CAHRS WP05-16 time. In essence, the capability to integrate HR practices better than competitors may be a key source of sustainable competitive advantage (cf. , Kogut & Zander, 1992). In the sections below, we frame the key factors underlying knowledge integration capability in terms of organizational capital, complaisant capital, and human capital. organizational Capital. Youndt, Subramaniam, and Snell (2004) define organizational capital as the institutionalized knowledge and codified see to its residing within an organization. Artifacts of organizational c apital include an organizations reliance on manuals and databases to preserve knowledge, along with the establishment of structures, processes, and flakes that encourage repeated use of this knowledge (Hansen, Hohria, & Tierney, 1999). As an integration mechanism, organizational capital allows the firm to preserve knowledge as incoming employees replace those leaving.An example of such an artifact might be a lessons learned database to ensure that lessons learned by one group can be made accessible for all groups. Based on MNC research, in order to improve the integration of knowledge within an MNC relative to the speed of its diffusion or imitation by competitors, firms sit in ways to make knowledge explicit by encode its use and replicating it in rules and documentation (Kogut & Zander, 1993). Other forms of organizational capital are possible to represent detailed, comp all-wide routines on how new HR practices should be integrated by all affiliates.These routines may detail how practices should be shared to visit the variance and time it takes to implement each new approach, and thereby, improve the boilersuit efficiency of knowledge integration (March, 1991). Similarly, organizations typically implement information systems to provide affiliates with a common platform for HR processes and practices (Snell, Stueber & Lepak, 2002). These systems, processes, and routines ensure that (1) practices are utilize routinely through established data collection procedures and (2) practices are cursorily disseminated throughout the entire MNC with minimal costs (Daft & Weick, 1984).In terms of integration capability, then, organizational capital provides a basis for sharing and Page 10 International Human Resources CAHRS WP05-16 institutionalizing knowledge across affiliates. However, it may work against efforts to preserve heterogeneity at the sub-unit level. societal Capital. hearty capitaldefined as the knowledge embedded within brotherly net profitsalso coquets a potentially valuable role in the integration capability of MNCs (Nahapiet & Ghoshal, 1998). For example, Szulanski (1995) found that one of the biggest obstacles to transfer knowledge in MNCs is the poor relationship between sources and recipients of information. on this line, Ghoshal and Bartlett (1989) empirically showed that knowledge sharing and integration could not pass away without the existence of strong brotherly connections. The importance of loving capital for integration capability is found in research by Kostova and Roth (2002), who concluded that successful practice adoption is largely dependent upon relationships based on deposit and shared identity. Trust provides the motive to interact with others, while shared identity provides an overlapping understanding of what is important to share. Both of these elements of social capital would seem vital for integration capability.And importantly, neither of them would de facto require the loss of local motor carnomy. Human Capital. While organizational and social capital are both potentially important resources underlying a firms integration capability, Teece (1977) argued that one of the principle obstacles to transfer and integration is lack of prior gravel and knowledge (i. e. , human capital). Research by Szulanski (1996) and Tsai (2002), for example, has shown that knowledge sharing and integration is facilitated when various(prenominal) parties have the absorptive capacity or prior set out to understand related ideas (Szulansk, 1996 Tsai, 2002).In the context of MNCs, Haas (2004) showed that groups with large amounts of international experience are more likely to integrate knowledge from other parts of the organization than those that do not. Similarly, Gregersen and Black (1992) found that not only is international experience important for integration, but when it is coupled with experience in corporate headquarters affiliates are more likely to maintain allegiance to the over all goals of the firm. These international and corporate skills and knowledge are often gained through transfers and rotational assignments that modify the HR function to develop a more complex Page 11International Human Resources CAHRS WP05-16 and global orientation. This provides them with the ability to more systematically manage the integration process (Kedia & Bhagat, 1988). Such forms of human capital can also correct any tendency of HR subunits to assume that the home in the host country is unique thus avoiding the not-invented-here syndrome. The upshot of this discussion s is that a firms integration capability likely depends on a combination of human, social, and organizational capital.Social and organizational capital are alternativeand potentially complementaryresources for knowledge and practice sharing. Human capital, in turn, is important for absorbing or acquiring that knowledge. As firms develop the capability to integrate existing practices they potentially can ac hieve economies of scale and scope through HRM. And when these integrative mechanisms preserve resource heterogeneity at a local level, it may gallop to a more quick response to a global environment and greater potential for competitive advantage.Figure 2 Capabilities Creative and Integrative Focus merchandise self-assertion Value Proposition Sources Integrative Capabilities Stable Market Resources must be combined and integrated to maintain an advantage Combining resources in ways that others cannot copy creates benefits arising from scarcity Taylor, Beechler, & Napier, 1996 McWilliams, Van Fleet, & Wright, 2001 Creative Capabilities Dynamic Market Resources must be reconfigured and created to maintain an advantage Developing new resources that competitors dont yet have creates benefits arising from innovationChadwick & Cappelli, 1999 Snell, Youndt, and Wright 1996 Page 12 International Human Resources intimacy Creation Capability CAHRS WP05-16 In the context of organizational learning and the KBV, it is important to distinguish knowledge integration capability from knowledge universe capability. Just because a firm is able to integrate practices across affiliates does not mean that it leave alone be able to create new practices as well (See Figure 2). Creation capabilities allow the MNC to develop new practices that lead to resource heterogeneity in the first place.While few HRM researchers have mentioned the importance of integration mechanisms, fewer still have discussed the importance of creation mechanisms that reform a firms stock of HR practices. This is in spite of the fact that as firms continually integrate practices, it is imperative that new practices are created and developed that allows for innovation and continuous improvement in a changing environment. Therefore, in global environments characterized by rapid change and increasing competition, passive concepts of heterogeneity may no longer be sufficient to let off (and sustain) a com petitive advantage.An ongoing debate in strategy is whether any static view of resources can really explain a competitive advantage that is sustainable over time (Lippman & Rumelt, 1982). For example, Grant (1996) argues that idiosyncratic advantages naturally erode over time. This debate is especially relevant in the global environment where what might create a competitive advantage at one point in time or in one location, may not at another point in time or location. Hence, it is vital that MNCs develop the capability to create and renew HR practices in order to maintain a competitive advantage.Ghoshal & Bartlett (1988) stated that MNCs create new products, practices, or systems locally, using specific mechanisms to respond to local circumstances. Creating local HR practices lies at the heart of an MNCs capability to be responsive to the unique and changing opportunities of different environments. Below, we discuss how human capital, social capital, and organizational capital mi ght influence the knowledge creation capability of new HR practices. (See Figure 3 for an overview of mechanisms that influence knowledge integration and creation capabilities).Page 13 International Human Resources CAHRS WP05-16 Figure 3 Capabilities Human Capital, Social Capital, Organizational Capital Human Capital Social Capital Organizational Capital Creative Capability In-depth local experience International experience outside of corporate Broad internal net range Broad external network range Local Market Relationships Localized routines Creative processes and systems Norms of informality Overarching principles or guidelines Increasing Influence on Creative Capability Integrative CapabilityIncreasing Influence on Integrative Capability Absorptive capacity International and corporate experience Internal Social connections Shared perceptions and identity Internal Trust Company-wide rules and routines corporal culture of sharing Interactive technologies Data collection system Hu man Capital. The knowledge and experiencei. e. , human capitalof the people within the HR function is a key factor in new HR practice creationwhether of new practice ideas, or of improvements in the practices (Lepak & Snell, 1999).For example, HR functions possessing large amounts of local knowledge and experience should be able to effectively create practices on their own in response to the various, changing environments. This localise experience helps them to understand the needs of local clients and suppliers, which allows them to develop practices that are unique to each region or country, and hence, heterogeneous across the firm. Page 14 International Human Resources CAHRS WP05-16 International experiences are also important for creating new HR practices.For example, because international experience is often highly valued in MNCs (e. g. , Mendenhall & Stahl, 2000), people with international skills and knowledge are more likely to be seen by others as being confident and willin g to share diverging opinions and advocate for their own position (Stasser, Stewart, & Wittenbaum, 1995). Moreover, Gregersen & Black (1992) showed that people with strong experience in many international settings and limited experience in corporate are more likely to make changes based on local demands rather than pressures from central parts of the firm.This is most likely due to the peoples array of international experiences that have detached them from an allegiance with the society as a whole. Social Capital. Specific aspects of social capital have been argued to play a role in knowledge creation. For example, while Hansen (2002) argued that social networks provide an important conduit for the sharing of knowledge, he also argued that such networks play a role in knowledge creation because they inform network members some the existence, location, and significance of new knowledge.Burt (1982) found that networks comprising a broader range of contacts will have a more heterogen eous base of information and knowledge to draw from. While such wide networks may not always facilitate a deep flow of knowledge, they offer different lineament points for HR members to make comparisons and explore new ideas. A firms ability to find new opportunities is likely to be a function of multiple local contacts. HR affiliates often have critical colligate with local vendors and, perhaps, competing HR groups that allow them to pursue local opportunities (Bartlett & Ghoshal, 1989 Hedlund, 1986).Birkinshaw (1997) refers to these as relationships within the local market. Within the local market an affiliate is likely to be embedded in different types of relationships (Ghoshal & Bartlett, 1990 Ghoshal & Nohria, 1989). McEvily and Zaheer (1999) argue that because each part of the MNC maintains different local patterns of network linkages, they are exposed to new knowledge, ideas, and opportunities. Organizational Capital. In many cases, organizational capital may actually parr y knowledge creation capability. The formalized processes, systems, structures, etc. ave a Page 15 International Human Resources CAHRS WP05-16 tendency to reinforce existing routines and obviate against variation and change that engender creativity. However, in some instances, organizational capital may facilitate flexibility in the course of actions that allow a firm to attend to environmental cues. This is especially true when employees are encouraged to take action that supersede company-wide, standardized routines in favor of localized response that allows knowledge assimilation from the local environment (Daft & Weick, 1984).For example, parts of the firm may develop creative processes and systems to identify problems, develop hypotheses, communicate ideas to others, and contradict what would ordinarily be expected (Torrence, 1988). Grant (1996) argued that such creative routines and processes offer an in force(p) framework for people to create new, situation-specific practic es by utilizing local perspectives in developing practices for the firm.Though potentially problematic for the integrative capability, localized routines and creative processes help affiliates relate better with local vendors, clients, and competitors by providing a set of expectations and processes that encourage HR groups to turn to the surrounding environment. For example, an HR affiliate may have developed a simple manual or informal norm of what to do when developing a new practice. Such a routine is likely to leave many gaps in exact steps to follow, but provide an overview or value to help the HR group be innovative.This simple routine allows the local HR group to assimilate knowledge more quickly from its employees and develop practices to meet their needs. In summary, these aspects of human capital, social capital, and organizational capital help us identify how the knowledge integration and creation capabilities might occur within an MNC. Some of these forms of capital ar e more useful depending upon the capability it is supporting, and ironically, some of these mechanisms that influence integration might actually hinder knowledge creation and vice versa.For example, firms heavy in local knowledge and experiences and weak in international experiences might have a negative affect on a firms ability to integrate practices across the various parts of the firm. Such strong human capital is likely to promote the not-invented-here syndrome through the affiliates strong belief and experience base dealing exclusively with the local environment. Similarly, rigid forms of Page 16 International Human Resources CAHRS WP05-16 organizational capital, in terms of standardized routines and shared electronic databases, might deter the various parts of HR to develop and create practices on their own.This could largely stem from the fact that so much structure and support for integration is in place that HR groups fail to find time to bring about new practices or adapt existing practices to the local environment. Implications For Research And surmisal The unique complexities and challenges approach by todays global firms present different implications for the RBV and its application to strategic IHRM. For example, because a large amount of the international management literature focuses on variances in cultural, geographical, and institutional pressures the implications for applying the RBV become more complex.As MNCs struggle to create and integrate their practices across borders, they are faced with unique challenges that either push for global efficiency or local responsiveness. These challenges open the discussion for ways to actually manage both the creation and integration of knowledge on a global scale. This means that the questions typically asked by strategic IHRM scholars (e. g. , HR practices and performance) should be augmented with questions of how HR practices are created and integrated in ways that lead toward resource heterogene ity and immobility.To create a sustainable competitive advantage firms must not only be able to respond to their local environments or standardize their practices across the firm. They must be able to balance a tension of practice heterogeneity through local practice creation and immobility of those practices through their integration across the firm. One theoretical implication of this discussion calls for a greater understanding of the rents found through the creation and integration of HR practices. As Chadwick and Dabu (2004) explain, a marriage of rent concepts with theories of the firm (i. e. RBV) is essential to describing firms competitive advantages and particularly in understanding how actors within firms can take conscious steps to toward a sustainable competitive advantage. The on-going strategic IHRM literature strongly alludes to the importance of integration and being able to Page 17 International Human Resources CAHRS WP05-16 organize heterogeneous resources in a w ay that is difficult for competitors to imitate. The assumption here is that heterogeneity and immobility of resources creates greater performance or rents arising from scarcityRicardian rents (cf. , Carpenter, Sanders, Gregersen, 2001).In essence, Ricardian rents can be rooted in the cross-border integration of various HR practices. The integration of such practices not only assures that some of them will be unique to the firm, but that they will be difficult for others to imitatemaking them scarce in the market. The advantages that come from constant creation of HR practices operates under a different principle than traditional resources leading to Ricardian rents. Rather than rents arising from scarcity, the creation capability perspective emphasizes rents arising from market discontinuitiesSchumpeterian rents (cf. Carpenter et al. , 2001). Schumpeterian rents derive from a firms ability to exploit or leverage resources to address changing environments (Teece et al. , 1997 Amit & Schoemaker, 1993). Based on Schumpeterian rents, a focus on the continuous creation of resources can enable a firm to achieve competitive advantage on a sustainable basis by developing new practices that lead to practice heterogeneity across a complex and ambiguous global network. Hence, as mentioned by Lado and Wilson (1994) and Teece et al. 1997), turning to these dynamic capabilities as an extended approach to the RBV offers a closer understanding of the actual sources of competitive advantage in a changing global environment. While we discuss the main mechanisms driving knowledge creation and integration (Grant, 1996), aspects of integration tend to focus on a broad array of learning processes, including knowledge sharing, transfer, codification, adoption, and/or institutionalization. Further research should look at how different aspects of the integration process might be influenced by specific human, social, and organizational capital mechanisms.For example, Hansen and Haas ( 2001) showed that many firms have petty difficulty in sharing knowledge across various units of the firm, but that the actual application or institutionalization of this knowledge is a completely different matter. While other scholars such as Kogut and Zander (1992) and Schulz (2001) have theoretically free integration to include transfer and integration (or combination), very Page 18 International Human Resources CAHRS WP05-16 little practical research has been done on what factors might influence the transfer and what factors might influence the integration of knowledge.Clearly, there must be differences since research such as Hansen and Haas (2001) notice the unlikeness in knowledge that is shared and knowledge that is actually applied. Also, while the ideas presented in this chapter are rooted in theory, empirical research is needed to subside the impact of human, social,, and organizational capital on knowledge creation and integration capabilities. While theory suggests th at aspects of all three of these factors will influence both capabilities, it is most probable that aspects of human capital will more strongly influence the creative capability.This is largely due to the fact that people and their knowledge and skills are what allows the different HR affiliates the ability to develop local practices on their own, without interference or supervision from regional or corporate headquarters. Similarly, social and organizational capital should have their strongest influences on the integrative capability. This is due, in part, to the conduits and repositories created from aspects of social capital and organizational capital, respectively.In fact, as we mentioned earlier, some aspects of organizational capital might have a negative effect on the firms ability to create new practices (knowledge), while some aspects of human capital may have a negative effect on the firms ability to integrate those practices across affiliates. Conclusion The purpose of th is chapter has been to summarize the literature on RBV and IHRM in multinational firms by addressing the ways in which resource heterogeneity and immobility provide potential advantages to MNCs.However, we have also attempted to extend the RBV in this context by addressing some of the primary challenges ofand capabilities needed to integrate resources across business units within the MNC. The solvent frequently used by firms has been to standardize HR practices and policies at a global level, but this solves the integration problem while destroying the advantages of local Page 19 International Human Resources CAHRS WP05-16 variety. The challenge as we see it is identifying how firms can preserve variety (and local customization) while simultaneously establishing a foundation for integration and efficiency.The ability for HR managers to balance this tension lies in the development of capabilities to create and integrate practices across the global HR function. We extended traditiona l views of RBV to include aspects of practice integration and creation. Such capabilities allow firms to constantly renew their HR practices in a way that allows them to respond to multiple external pressures while being coordinated and integrated to ensure that these practices drive the firms sustainable competitive advantage. 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