Personnel practices of US- and the Japanese-based multinational corporations in Taiwan: a comparative study

Abstract

A critical issue facing multinational corporations (MNCs) is the control and coordination of foreign subsidiaries. A major challenge lies in integrating practices that contribute to corporate-wide goals while remaining responsive to local practices conducive to subsidiaries' operations in host countries. Subsidiaries thus face frequently conflicting pressures from their parent firm and the local environment. Traditionally, MNC strategy has been analysed in terms of local responsiveness to host country cultural differences, governmental regulations and customer tastes, and global integration of activities to capitalise on economies of scale and scope. This thesis takes the global integration-local responsiveness framework and extends it to personnel practices, positing that MNCs face pressures to be locally responsive to employee preferences and expectations, labour markets, and personnel practices in competing firms. Similarly, MNCs also face internal pressures to globally integrate certain personnel practices across their subsidiaries to aid in co-ordinating the transfer of personnel, skills and technology across national boundaries and enhance organisational learning. Specifically, this thesis compares the recruiting, training, performance appraisal and compensation practices of US- and Japanese-based manufacturing subsidiaries operating in Taiwan to those of their parent firms and local Taiwanese manufacturers with 500 or more employees. It utilises survey and interview data gathered from 72 of the 326 US and 151 of the 640 Japanese manufacturing subsidiaries in Taiwan, and 94 of the 359 largest Taiwanese manufacturers.

The radically different employment environments of the U.S., Japan and Taiwan highlight the differences and similarities in personnel practices internationally and allow comparison of US- and Japanese-based MNCs' approaches to global integration-local adaptation of specific personnel practices. The pressures for global integration and local adaptation were operationalised by adapting a measure based on the similarity of emphasis placed on practices originally developed by Robinson (1994). Using this criterion, global integration was indicated when the practices strongly emphasised in the parent were similarly emphasised in the subsidiary. Conversely, practices strongly emphasised in local firms and similarly emphasised in the subsidiary were interpreted as a sign of local responsiveness.

The findings suggest that the competing demands for global integration and local adaptation should not be viewed as opposite ends of a single continuum, but as two separate dimensions. Placing these demands on orthogonal axes, a global integration-local adaptation matrix is proposed with four basic combinations of personnel practices: universal, global, unique and local. This matrix recognises the realities of a global economy where success may require balancing the competing demands for global integration and local adaptation resulting in subsidiary personnel practices that are unique when compared with those of local competitors and the parent firm. It also recognises the internationalisation of management resulting in the emergence of universal personnel practices. Applying this framework, overall the personnel practices of US-based MNCs operating in Taiwan were found to be responsive to the demands for local adaptation, while the personnel practices of the Japanese manufacturing subsidiaries in Taiwan were found to be unique.