Implementation and Internalization of Merit-based Compensation and Promotion Practices: Foreign Subsidiaries in Japan

The long economic downturn has influenced labor management practices in Japan. As a response to changes in institutional environment, an increasing number of Japanese and foreign companies have sought to implement labor management practices that are in contrast with traditional seniority-based principles. Using interview data, this study describes the implementation of merit-based compensation and promotion practices in 54 Nordic subsidiaries in Japan. The interviews show that the merit-based practices have faced persistent resistance and that the seniority-based practices have proved robust especially in old subsidiaries. Implications for practice are provided.

Short CV: Vesa Peltokorpi is Assistant Professor of human resource management at HEC School of Management in Paris.