Understanding the mechanisms of value creation from an ever-increasing number of multicultural employees in the global workforce is crucial. Yet competitive advantages cannot be derived from simply employing multicultural personnel argues a new study from Copenhagen Business School.
The research finds that what matters most for a multinational’s competitive advantage is not the employment of multicultural personnel per se but rather the company’s ability to transform this employee’s unique capacities into strategic human capital resources.
The researchers suggest that the development of comparative advantages requires deliberate actions by creating complementarities between these individual capacities and organisational actions.
“The aim of this research is to equip companies with specific tools for how to create value from their multicultural human capital,” says Professor Dana Minbaeva from the Department of Strategy and Innovation, Copenhagen Business School.
The research is published in the Journal of International Business Studies
Deliberate actions, direct benefits
The researchers suggest that despite the growing number of multicultural employees in the global workforce existing literature has not yet examined the circumstances under which their knowledge, skills and abilities can contribute to better performance or even become a source of competitive advantage.
“Despite the increasingly numbers, practitioners within these companies know little about how to manage them more effectively,” says Professor Dana Minbaeva.
The study highlights how multinationals can spend a lot of resources hiring multicultural employees on a competitive global labour market, but this investment will not pay off without changes in specific emerging-enabling factors.
The researchers conducted an in-depth ethnographic study with interviews over the span of two years in two multinationals—a leading fast-moving consumer goods company and a leading auditing and business-consulting company.
“In addition to numerous research implications, we have identified those actions and unpacked the mechanisms needed to increase the value,” says co-author Assistant Professor Hae-Jung Hong, NEOMA Business School.
Emergence enabling factors
The researchers specify that some factors such as multicultural team leadership, team diversity and common language policy would be relevant for short term performance advantage, but to make this advantage sustainable, these will need to be coupled with differentiated HR architecture, a global mindset, and multilingual language practices.
They stress the importance of establishing a differentiated Human Resources (HR) architecture for multicultural personnel. For many companies, this might require new ways of thinking about employee management, as most HR practices are designed to treat everyone equally.
“We argue that in order to ensure that multicultural employee’s qualities, knowledge and skills are amplified and lead to competitive advantages, these companies should establish explicit HR practices for them that differ from their core HR architecture,” says Professor Minbaeva.
The study claims the presence of a global mindset is another emergence-enabling factor on which corporations can focus. However, this may be more challenging, as the concept simultaneously encompasses complexity and diversity.
“This is clearly an area for future collaborative research between academia and practice that could yield interesting insights into the global mindset as a strategic capability relevant for managing a multicultural workforce,” adds Hae-Jung Hong.
The researchers identify numerous team-level processes that relate to team dynamics and to the multicultural qualities of leaders. These implications echo those found in global talent management research. More specifically, to ensure the positive impact of multicultural employees they argue that companies will need to develop their immediate leaders.
“We believe that high team diversity (variety) and the quality of the immediate leaders are the most decisive emergence-enabling factors for the retention of a multicultural workforce,” says Professor Minbaeva.
The researchers argue that language policies, which is the final mechanism, may initially appear to be relatively straightforward but that in reality, many multinationals can find themselves at a disadvantage in this regard.
“These companies need to make their language policies flexible and responsive to the needs of the global market. Our respondents did not express a preference for English as such. Instead, they stressed the importance of explicitly supporting multilingualism as a fundamental part of daily operations,” concludes Hae-Jung Hong.
Journal of International Business Studies
Method of Research
Subject of Research
Multiculturals as strategic human capital resources in multinational enterprises
Article Publication Date