The Determinants of Staff Localization of Korean MNCs' Subsidiaries : Focused on the Factors of HQ and Subsidiaries

This research is to investigate three questions. First, what changes in the level of localization arecaused by corporate strategy? Second, what influence does the local experience and size of theforeign subsidiary have on levels of localization? Third, what influence does the trust level betweenthe MNC headquarter(HQ) and its foreign subsidiaries have on localization?Hypothesis 1 was set under the anticipation that the type of strategy companies pursue will affecttheir subsidiaries and their staff localization level. Analysis revealed that when MNC HQ followedthe multidomestic strategy, the staff localization level of the subsidiary was higher. Hypothesis 2 expected that the level of localization will be higher within foreign subsidiaries withmore local experiences. However, local experience had little noticeable effect statistically on stafflocalization. Hypothesis 3 estimated that the larger the subsidiary, the higher the level of staff localization. Results of empirical analysis showed that size has a positive influence on the degree of stafflocalization. This result also supports the idea that the larger the subsidiary is, the lower the levelof control imposed by the head office on the subsidiaryHypothesis 4 expected that the higher the level of trust between the head office and thesubsidiary, the higher the degree of staff localization in the subsidiary. Analysis showed that thelevel of trust has a positive effect on the degree of staff localization. Trust decreases uncertaintywithin an organizationThis study will provide theoretical and practical implication for staff localization of foreignsubsidiaries based on corporate strategy, resource dependency theory and trust perspective.