Leveraging ethnocentric staffing as a strategic tool in Indian information technology multinational corporations

This thesis examines the staffing policies adopted by major Indian multinationals operating in the United Kingdom and the factors influencing their staffing decisions. It focuses on the information technology service sector and aims to identify the reasons for their persistent ethnocentric staffing policies. Many studies have already focused on the challenges that multinational corporations face when they enter a new market. However, these challenges are more acute in the case of emerging market multinational corporations, due to the liability of emergingness. The thesis uses empirical data from twenty-eight semi-structured individual interviews including parent-country nationals (Indian citizens), host-country nationals, and third-country nationals. The analysis is supplemented by company reports and other secondary sources. Previous research highlights that emerging market multinationals often encounter employee resourcing problems when operating in developed economies. This study argues that such challenges faced by emerging market multinational corporations are particularly acute when they originate from developing countries that were formally colonised by the very nations in which they now operate, as is the case with Indian emerging market multinational corporations in the United Kingdom. The study draws on the insights of the dominance effect theory (Smith and Meiksins, 1995) and the evolutionary theory of multinational corporations (Perlmutter and Heenan, 1974) on the study of Indian information technology multinational corporations in the United Kingdom. If all early-stage multinationals prefer parent-country nationals (Perlmutter and Heenan, 1974), why should Indian multinational corporations differ from this trend and switch to hiring local employees? According to this research, an Indian information technology sector corporation’s decision between using a parent-country national expatriate or a local employee depends on three broad factors, namely, the availability of technically skilled employees on the local labour market; the proximity of the subsidiary to its headquarters; and the cost of hiring locally. In this study, the main contribution is to demonstrate that, even a well-established Indian firm such as Tata Consultancy Services, an entity within the Tata group of companies, has difficulties sourcing employees from the local labour market in the United Kingdom. This research argues that Indian multinationals
have a competitive advantage in the information technology sector worldwide including in the United Kingdom and the cheap Indian workforce is a key factor that contributes to this competitive advantage of Indian information technology service companies in the information technology sector. This theory adds to the literature by (1) challenging the evolutionary theory of multinationals, which has always been considered linear; and (2) discussing how staffing practices of dominant technology companies like Tata Consultancy Services are the way they are not simply because of the cost but also due to their competitive advantage and culture and work practices related factors.