Academic journal article Multinational Business Review

Local Manager Selection Criteria for U.S. Firms in Korea

Academic journal article Multinational Business Review

Local Manager Selection Criteria for U.S. Firms in Korea

Article excerpt

Many U.S. multinational corporations (MNCs) have replaced expatriate managers with local managers for defensive and strategic purposes. For that reason, selecting and training local managers have become more important to the performance and productivity of foreign subsidiaries of U.S. MNCs. MNCs depend more on the competency of the selected local managers. This research investigates the major variables used by U.S. MNCs to select local managers for Korean subsidiaries and identifies the problems encountered in using local managers.

INTRODUCTION

Most research of international human resource management has concentrated on selecting and training expatriate managers for foreign assignments (Naumann, 1992; Boyacigiller, 1990; Black, Mendenhall and Oddou, 1991; Kobrin, 1988; Tung, 1987 and 1988; Mendenhall and Oddou, 1986). However, U.S. multinational corporations (MNCs) recently have selected fewer parent country national (PCN) managers and more host country national (HCN) personnel for staff management positions in their foreign subsidiaries (Lublin, 1989). Tung(1982) and Berenbeim (1993) found that HCNs staff a significant portion of senior management positions in U.S. foreign subsidiaries. Berenbeim (1983) concludes that MNCs almost unanimously desire that HCNs manage local operations.

Unfortunately, research on PCN managers flourishes while studies on HCN management appear intermittently. As a result, ethnocentric attitudes of American researchers tend to dominate the field.

American researchers may subconsciously assume that PCN manager-related issues are more significant or deserve more attention than HCN manager-related issues for several reasons. They often have the same nationality or ethnicity as the PCN managers about whom they write. They may lack experience in dealing with or understanding other nationalities or ethnic groups. Furthermore, they may be unaware of the most important issues in the management of foreign subsidiaries.

Since HCNs increasingly manage foreign subsidiaries, we believe that international human resource management research should shift its focus to pragmatic issues, especially selecting and training HCN managers. In a globally competitive market, the performance of HCN managers increasingly impacts the U.S. foreign subsidiary's operations.

Furthermore, HCN managers serve as catalysts for an effective managerial group in foreign subsidiaries; they bridge the gap between PCN management and local employees (Moran and Harris, 1982).

Taking a new direction, this study will explore why and how U.S. firms select local managers for subsidiaries in Korea. The data collected are analyzed by a varimax rotated factor analysis to identify the major dimensions involved in selecting local managers. This study can provide practitioners and researchers information required in developing effective HCN management selection systems for U.S. MNCs.

FACTORS IN SELECTING HCN MANAGERS

A MNC selects HCN personnel for many reasons. Often, MNCs select HCN managers for defensive reasons, such as minimizing or neutralizing an actual disadvantage from an existing condition. On the other hand, MNCs may select HCN managers for strategic reasons, such as gaining future advantages or preventing future disadvantages.

DEFENSIVE FACTORS

As Kobrin (1988) indicates, a major factor is to mitigate the rising costs of maintaining PCN managers. Harvey (1983) estimates these costs at three times the salary of domestic hires plus relocation costs. Anecdotal data reported by Organization Resource Counselors (1989) verifies this estimate.

PCN managers also have a high failure rate. Chesanow (1984) reports that one third of PCN managers return home prematurely. Many pay a personal price--alcoholism, drug abuse and divorce. Researchers such as Zeira and Banai (1985), Harvey (1983), and Black and Mendenhall (1990) argue the point convincingly. The reported failure rate of PCN managers may be attributed to the absence of any system for selecting qualified HCN managers who support and coordinate with PCN managers, thus creating a cohesive managerial team for subsidiaries. …

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