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International compensation: learning from how managers respond to variations in local host contexts

Managers and researchers recognize that the tensions created by the interplay of globalization and national environments influence the behaviours of multinational enterprises (MNEs). We develop a model to help explain the effects of both global and local host environments on the design of managerial compensation systems in MNEs. We use a grounded theory-building process by integrating information we obtained from exploring the international compensation systems (ICS) of five MNEs. We extend two contemporary perspectives of IHRM – the national culture and strategic alignment models–and develop the idea that it is the relative degree of variation within and between local host contexts that is critical to understanding managers' ICS decisions. We present a different, pragmatic experimentation view of managers' ICS decision making, which we believe offers insights into how managers deal with the interplay between pressures to create aligned, integrated global systems and pressures to conform to local host contexts.