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Managing culture integration and knowledge transfer.

The first significant emerging HRM issue that will be discussed is the extent to which cultural differences in China influence the management behaviour of multi-national enterprises(MNE's) and moreover, the importance of cultural integration in a dynamic society. Firstly, organisational “culture” is defined as the norms, values and shared beliefs by employees and refers to individual behaviours which make up how work gets done in an organisation (Hill, 2007). Essentially, it is how a business outcome is achieved by the behaviours of people, and the drivers which produce desired behaviours. Beechler and Yang (1994) suggests that as the gap between the parent country culture and host country culture widens, the likelihood of the MNE conforming is reduced. However, other research by Gamble (2003) suggests that with a cultural gap, MNE's themselves conform to local customs and practices to bridge that gap. In regards to modern China, through analysis of companies such as Orica who have changed areas like recruiting practices to conform to Chinese cultural influences, it can be said that the latter HRM theory by Gamble (2003) holds true in China.

Communist philosophies such as reliance on the government are also still prevalent in China and this combined with other Chinese cultural concepts such as and ‘guanxi' and ‘danwei' can be a siginificant barrier for MNE's trying to achieve business outcomes (Fan, 2002). Guanxi is a measure which reflects feelings in an interpersonal relationship, the moral obligation to maintain that relationship, and, the idea of being perceived as a morally correct whilst holding ones place in society (Fan, 2002). What's important to note is that ‘guanxi' influences business interactions such as employment represents and financial transactions and not just casual social interactions. The issue for MNE's here is that where in the home-country HR practices such as selection may have been based on knowledge, skills and competencies as well as pay and merit, ‘guanxi' influences become a barrier to strategic recruitment and selection as local HR practices are guanxi-based and require that relationships to be built ahead of time (Zhu, Thomson & DeCieri, 2008). Another example of this barrier is that of state-owned enterprises (SOE's) which still heavily rely on state agencies to assign jobs from the labour market. This is due to historical and cultural roots which are derived from communist philosophies and relations of ‘guanxi' built over a long period of time (Zhu, Thomson & DeCieri, 2008).

With such a diverse culture in China, cultural integration becomes a critical people issue for MNE's in China. This was made clear in a global survey conducted by Wang & Nishiguchi (2007) that stated 67% of both Chinese and non-Chinese survey respondents agreed that cultural integration is the most important people issue and the most critical success factor for a MNE's in China. In regards to this, differences in culture between firms are also a major source of attrition, especially after mergers, and yet according to research and surveys, these differences are rarely investigated by MNE's. For example in mergers or acquisitions, companies may fail to even identify the nature of the “culture” that exists in the other company prior to merging (Wang & Nishiguchi, 2007).

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