Academic journal article Management Revue

MNCs' HRM Strategy and Country of Origin Effect: Do North American, European and Japanese Firms Really Differ?**

Academic journal article Management Revue

MNCs' HRM Strategy and Country of Origin Effect: Do North American, European and Japanese Firms Really Differ?**

Article excerpt

Based upon the sample of 419 MNCs' subsidiaries in Korea, we examined the country of origin effect in the choice of MNCs' HRM strategy: transplantation, localization, and mixed. A multinominal logit regression analysis showed that there is an important country of origin effect in the choice between a localization strategy and a mixed strategy. North American MNCS tended to implement mixed strategy, while Japanese MNCs tended to adopt localization strategy. European MNCs were in the middle. The estimated log odds of choosing a localization strategy over a mixed strategy by Japanese subsidiaries were 1.79 times higher than European subsidiaries and 2.85 times higher than N. American subsidiaries; those by European subsidiaries were 1.59 times higher than N. American subsidiaries. However, the country of origin was not significantly related to the choice between a transplantation strategy and other strategies. We also examined two alternative factors influencing the HRM strategy of foreign subsidiaries: investment strategy and entry strategy. The implications of this and directions for future research are discussed.

Key words: Country of Origin, HRM Strategy, Localization, MNCs, South Korea

Introduction

With rapid globalization, international human resource management (THRM) has become an increasingly important research field. During the 1990s, cross-border mergers and acquisitions became very active worldwide and the FDI by multinational companies (MNCs) tripled reaching U.S.$ 4,759 billion (UN 2000). It has become an important and difficult task for MNCs to manage their foreign subsidiaries while considering global efficiency and local context at the same time.

The MNCs' behavior can be influenced both by socio-political situations (or external factors) and by the headquarter strategies and policies of the home country (or internal factors). For example, Holtbrugge and Berg (2004) found that the operations of German MNCs are influenced by several socio-political interest groups of their host countries. Also, there have been many research efforts to examine the behavior of MNCs, in particular the country of origin effect. This paper focuses on the HQ strategies of MNCs, controlling for socio-political factors by analyzing the human resource management (HRM) strategies of MNCs in Korea.

The country of origin effect has begun to receive renewed attention by several researchers and has given birth to an interesting debate between home country vs. host country effect (Rosenweig/Nohria 1994; Innes/Morris 1995; Roche/Geary 1996; Guest/Hoque 1996; Turner et al. 1997; Ferner 1997; Liu 2004; Glover/Wilkinson 2007). A central issue is whether the HRM of foreign subsidiaries is determined by the "foreignness" of the invested capital (country of origin) or by locally prevalent customs and practices (Roche/Geary 1996). In particular, whether there are significant differences between North American, European and Japanese subsidiaries has been a center of debate and empirical testing (Ferner 1997).

It seems that numerous bodies of research support the country of origin as an important factor explaining the MNCs' behavior. For example, many studies show American MNCs adopt a more centralized and formal management style in their foreign subsidiaries, and this management pattern exerts significant influence on local pay systems, collective bargaining, fringe benefits and training (Bartlett/Ghoshal 1989; Bomers/Peters on, 1977, Hamil 1984; Yeun/Hui 1993). More recent studies support the fact that HRM practices are considerably different according to the countries of origin (Kopp 1994; Rosenweig/Nohria 1994; Innes/Morris 1995; Roche/Geary 1996; Guest/Hoque 1996; Geary/Roche 2001).

In spite of this empirical evidence, however, the controversy over the country of origin effect has continued until now. Under a globalized economy, it can be argued that MNCs become stateless players detaching themselves from a specific nation. …

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