Abstract
Globalization of markets and their productions directly benefits multinational companies (MNCs). Firms are increasingly dispersing parts of their production process to various locations around the globe to take advantage of the national differences in the cost and the quality of the production factors. The firms are often able to lower the costs of land, labour, materials and capital. They also have an opportunity to lower transportation costs by moving their production closer to markets. The internationalization of markets has also led to the growth of a number of MNCs to incorporate their operations across countries. The MNC is an efficient way of transferring knowledge and expertise across national borders, because much of the context for implementing employment practices is the same throughout an organization's subsidiaries. Techniques, which have worked successfully in one part of the MNC, are transferred to other subsidiaries of the organization, in order to control and co-ordinate them. This allows the firm to compete with other MNCs. In the field of international human resource management, two issues are important: first of all, to what extent MNCs can be expected to be a source of diffusion of best practices?; and second, in what ways do MNCs diffuse their practices? It must be kept in mind that the influence between MNCs and subsidiaries work in both ways: from headquarters to subsidiaries and from subsidiaries to headquarters. This mutual influence will be analysed in this paper. Plus, the way in which a MNCs policies and culture affects the host country's business environment will be assessed.
