The Role of PEP in Local Workers’ Organizational Identification in Chinese MNCs in North America
Past research into multinational corporations (MNCs) mostly focus on companies that are from developed countries (e.g., USA, Europe or Japan) and invest in developing countries (e.g., China, India) or companies that are from developed countries (e.g., Japan) and invest in developed countries (e.g., USA). Few studies relate to MNCs that are from developing countries (e.g., China) and invest in developed countries (e.g., USA). Evidence was found that perceived external prestige (PEP) is a big challenge to the MNCs that are from a developing country (e.g., China) and invest in a developed country (e.g., USA) and influence the degree of the employees’ organizational identification (OI).
PEP is what employees believe to be the widespread external stakeholders’ opinion about the company, and its reputation and prestige. The external stakeholders usually include customers, suppliers, government, employees’ family members and so on. Carmeli stated that PEP includes two forms. One is perceived external social prestige, which comprises capabilities and strategic means, and includes attributes of quality of management; quality of products and services; the ability to attract, develop and retain talented people; community and environmental responsibility; and innovativeness. Another is perceived external economic prestige, which comprises attributes of long-run investment, financial soundness and assets exploitation.
Most of the Chinese MNCs lack brand identity, a strong corporate reputation and organizational image in the USA. And currently, the trade war is very tight and tending to increase. Negative information and fake news also seriously affect Americans’ attitude toward Chinese companies. Therefore, it is a big challenge for Chinese MNCs to establish good external prestige among their stakeholders in the USA. On the other hand, local workers usually have the culture biases of the companies from the developed country, so cultural and managerial conflicts happen when they work for the Chinese MNCs. This makes it difficult for local workers to identify with the Chinese MNCs.
The PEP has a positive association with OI. Compared to perceived external economic prestige, however, perceived external social prestige seems to have a larger effect on OI. According to the social identity theory, individuals strive for positive self-esteem. Dutton et al. stated that because organizational members’ self-esteem is derived in part from the social categories to which they perceive themselves belonging, when organizational members see their organization as more respected or prestigious by important outsiders, organizational identification is more likely to take place. Ciftcioglu demonstrated that an employee’s perception of the positive prestige about their organization fosters positive evaluation of one’s self-image. When employees’ perception of working organization is positive or socially valued, they will identify their self with their organization, which influences OI. The reason why the employees who work for 3M, GE and so on usually have high OI is due to the organization’s prestige.
Carmeli stated that economic prestige is essential for an employee’s OI, that one may feel happy to be part of a financially sound organization, as it enables one to fulfill the basic needs of life. This is the one of the reasons the employees who work for Google or Facebook and receive good pay have a high OI. But financial measures are sufficient. An organization that is known for its good social values and norms, congruent with those of its employee, may expect high OI, for it provides fulfillment that goes beyond the basic needs. Therefore, perceived external social prestige seems to have a larger effect on OI than perceived external economic prestige. However, this finding only fits in developed Western countries, in the developing country (e.g., China), people place a priority the external economic prestige over the social prestige. Overall, PEP is a crucial factor that affects OI.
According to Hofstede’s cultural dimensions theory, the USA and China have differences in individualism dimension. Chinese culture is less individualist than America culture. Individualism is the degree to which people in a country prefer to act as individuals rather than as members of a group.
Collectivism has a positive relationship with PEP. Triandis stated that employees with high collectivist orientations place a strong focus on socially oriented goals and concerns for the welfare of others and show great concern for their community. They show heightened concern for the externally perceived image and prestige of the groups to which they belong. The employees with high individualism derive only a small portion of their emotional security and social identity from their community; they place an emphasis on personal interests and the attainment of personal goals.
The Chinese MNCs could take the following approaches to increase local employees’ PEP, thereby fostering their OI.
• Orientation program: Orienting employees to the organization using the process of organizational socialization by which employees learn about and adapt to new jobs, roles, and the culture of the workplace, and the company’s reputation and brand strength in China and in the world. That will help local workers to know the history of their organization and its tradition, which can be perceived as both evidence of good cooperation in the past, and a promise for the future.
• Internal communication: Managers should pay more attention to ensuring that there is sufficient internal dissemination of positive information about the company, including the company’s market position and its size.
• External communication: Usually, the Chinese MNCs aren’t well-known to the external stakeholders (e.g., customers, suppliers, government). So, good communication with external stakeholders to present the whole picture of the company will help them to have a positive impression of the company.
• Good advertising can be used to increase the visibility of an organization, which will have a positive effect on both external and internal stakeholders, i.e., on members’ perception of their organization and their sense of pride.
· In the developed country (e.g. China), the companies can more easily to establish their
external prestige by identifying economic prestige. In contrast, in the USA, an emphasis on social prestige is more important, so Chinese MNCs’ should focus on perceived social prestige to foster local workers’ OI.