Transferability is “the ability to transfer HRM practices originated from the parent company to its subsidiaries. It is influenced not only by factors at national and company levels but also by the knowledge and innovation characteristics of the HRM practice transferred” (Liu 2004, p. 501). There are many factors in transferring HRM practices: national level factors such as national cultural distance and national institutional distance; company level factors such as strategic role of subsidiary, MNCs structure, and compatibility of organizational cultures; and HRM practice level factors such as innovation characteristics of HRM practices and knowledge characteristics of HRM practices.

The transfer mechanisms whereby HRM practices are transferred across nations can be categorized into two types based on the implementation process of transfer: direct and indirect transfer mechanisms (Liu 2004). These mechanisms are complementary rather than substitutable. In direct transfer mechanisms, subsidiaries comply to a set of HRM polices from the parent company through which the MNCs achieve their control over subsidiaries. The advantage of these mechanisms rests in the speed of transfer; MNCs with stronger resource control over their subsidiaries could find them more efficient. The disadvantages is that the compulsory transfer will be resisted by many employees of subsidiaries if they perceive those HRM polices to damage their benefits.

Unlike direct transfer mechanisms, indirect transfer mechanisms implement the transfer of HRM practices to the subsidiaries by attaching the HRM practice to some carriers, which include expatriates and organizational culture from the parent company. In enforcing the effects of integration of organizational culture, MNCs could train employees of subsidiaries to recognize the corporate culture. During the training process, HRM practices attached to the culture carrier are also transferred. Because organizational culture is composed of some levels from surface norms, rituals, and traditions to deeply planted corporate philosophy and values, “HRM practices that can be transferred through indirect mechanism must be compatible with cultural values” (Liu 2004, p. 508).

Local institutional pressures in the form of government legislations can affect subsidiary practices. In general, elements of the host country legal framework shape the way in which some aspects of the employment relationship are conducted between the subsidiary and the parent company. Host country legal regulations represent a strong environmental pressure on subsidiaries: the legal environment of the host country in which the subsidiary operates within, can severely constrain the transfer of HRM practices from its parent company. It is likely that MNCs will adapt to the local practices in nations where institutions are cohesive, integrated and have generated a distinctive business system, such as Britain. Subsidiaries like BMW will have to adapt and follow local legal regulations and HRM practices.

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