Variations in human resource management in asian countries mnc home country and host country effects

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The International Journal of Human Resource
Management
ISSN: 0958-5192 (Print) 1466-4399 (Online) Journal homepage: http://www.tandfonline.com/loi/rijh20
Variations in human resource management in
Asian countries: MNC home-country and host-
country effects
Johngseok Bae , Shyh-Jer Chen & John J. Lawler
To cite this article: Johngseok Bae , Shyh-Jer Chen & John J. Lawler (1998) Variations
in human resource management in Asian countries: MNC home-country and host-country
effects, The International Journal of Human Resource Management, 9:4, 653-670, DOI:
10.1080/095851998340946
To link to this article: http://dx.doi.org/10.1080/095851998340946
Published online: 09 Dec 2010.
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2. Variations in human resource
management in Asian countries: MNC
home-country and host-country effects
Johngseok Bae, Shyh-jer Chen and John J. Lawler
Abstract This paper investigates the determinants of HRM strategy in a random sample
of Ž rms operating in Korea and Taiwan. Both indigenous and foreign-owned Ž rms are
studied. HRM strategy is measured in terms of the company’s reliance on high-
performance, versus more traditional, HRM policies and practices in several different
areas, including stafŽ ng, employee in uence, employee rewards and employee auto-
nomy. Independent variables include the Ž rm’s country or region of origin (USA, Japan,
Europe, Korea or Taiwan), the host country (Korea or Taiwan) and the internal culture of
the Ž rm, as measured by upper management’s perception that human resources constitute
a signiŽ cant source of value for the organization. Pronounced differences are found
across countries of origin and between the two host countries. Managerial values and
various organizational characteristics that serve as control variables are also found to
impact on HRM strategy.
Keywords Human resource management strategy, multinational Ž rm, Korea, Taiwan,
employment practices
As business activities are becoming more global, international management in general,
and international human resource management (IHRM) in particular, have become
important research areas. However, not only have previous studies been narrowly
focused in terms of their topics, but also many of them were not theoretically well-
grounded (Schuler et al., 1993). A great many studies in IHRM are focused on
expatriate selection, training and assignments (Kochan et al., 1992; Schuler et al., 1993;
Welch, 1994). Yet analysis in the Ž eld indicates that host-country nationals (HCNs) are
playing an increasingly important role at all levels in the foreign subsidiaries of
multinational companies (MNCs) (Tung, 1988). The number of HCNs also has
increased, especially in lower management positions. For example, a survey conducted
by Tung (1988) indicates that, in Far Eastern countries, 96 per cent of lower-level
managers in afŽ liates of American MNCs are HCNs; 95 per cent are in European
MNCs and 82 per cent are in Japanese MNCs. In the case of middle management, the
percentages are 81, 75, and 59 per cent, respectively. It seems likely that the proportions
of HCNs in such positions will continue to rise in the future. Thus, we need to
understand the dynamics of HRM strategies within the context of host countries. In
addition, as Lawler et al. (1992) asserted, most studies of the determinants of
employment practices of multinationals towards HCNs have focused on a single type of
employment practice or limited sets of practices, as opposed to the overarching human
resource management system.
In this study, we seek to identify important factors that impact on employment
practices utilized by MNCs and indigenous Ž rms in managing host-country nationals.
We use survey data collected from both types of Ž rms operating in Korea and Taiwan.
The International Journal of Human Resource Management 9:4 August 1998
0958–5192 © Routledge 1998
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3. By using data from Ž rms with various national origins and two different host countries,
we investigate both within-country and between-country variations in employment
practices, as well as factors rooted in the internal characteristics and cultures of these
organizations.
Theoretical background and hypotheses
Many researchers have observed the trend towards workplace transformation in the US
and other countries (Appelbaum and Batt, 1994; Kochan et al., 1986). A common
theme in this process of transition to ‘high performance work systems’ (HPWS), at least
in the US, is that ‘Ž rms gain a strategic advantage from training front-line workers and
utilizing their full participation and that of their representatives at various levels of the
organization’ (Appelbaum and Batt, 1994: 24). These practices are traditionally related
to Japanese HRM systems and internal labour markets of the Ž rm. Since workplace
transformation has also taken place in Asian countries (Bae, 1997b), we can compare
HPWSs of both indigenous Ž rms and MNC subsidiaries.
Following Beer et al. (1985), we investigate four broad HRM policy areas: HR  ow
(recruitment, selection, training and development), work systems (control, teamwork,
job speciŽ city), reward systems (wages and performance assessment) and employee
in uence (employee participation and ownership). In principle, these aspects of HRM
may vary independently. However, in practice, research suggests that they are
interrelated and deŽ ne a continuum of ‘bundles’ of HRM practices. This continuum
may be conceptualized as ranging from a ‘buy-bureaucratic’ to a ‘make-organic’ type of
HRM system (Bae, 1997a). Various authors have employed different expressions for
similar types of HRM systems. As used here, the ‘buy-bureaucratic’ HRM system is
roughly equivalent to ‘cost reduction’ or ‘control’ HRM systems, while a ‘make-
organic’ HRM system is equivalent to ‘commitment maximizing’ or ‘high performance
work systems’ (Arthur, 1992; Pfeffer, 1994; Walton, 1985). The term ‘make’ or ‘buy’
is related to the management of employee competencies, such as knowledge, skills, and
abilities. Organizations with a ‘make’ orientation place emphasis on the internal
development of human resource competencies, while those with a ‘buy’ orientation
seek to acquire such competencies through the external market. The terms ‘organic’ and
‘bureaucratic’ are related to behaviour management of employees (Wright and Snell,
1991) and are familiar to organizational theorists. ‘Bureaucratic’ organizations achieve
control and co-ordination via rules and procedures, while the internal culture and
employee commitment to the organization are central to ‘organic’ organizations.
Organizations without proper employee competencies cannot pursue competitive
advantage by using organic behaviour management. Likewise, with the absence of an
appropriate organic behaviour management system, Ž rms cannot change ‘resources’
into ‘resourcefulness’ for the organizations (MacDufŽ e, 1995; Wright and Snell, 1991).
The ‘buy-bureaucratic’ strategy of HRM is well characterized by mass production
systems with ‘exchangeable workers’ (Womack et al., 1990), as exempliŽ ed by
approaches such as ‘Taylorism’, ‘Fordism’. The types of HRM systems and associated
HRM practices are summarized in Table 1.
What, then, might account for the differences in HRM policies of Ž rms in cross-
national settings? Advocates of the ‘convergence hypothesis’ had argued that several
ideal types of HRM/IR systems would evolve towards a single system during the
process of industrialization (Kerr et al., 1960). Kerr et al. predicted that ‘industrialism
in the end may become one, but it certainly will have found its initial beginnings in the
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4. many’ (1960: 76). This convergence hypothesis implies that HRM/IR systems can
converge across cultural and national boundaries. However, comparative historical
analyses of production and HRM/IR systems have questioned convergence theories
(Dore, 1973; Taira, 1992). Based on this work, national culture as determinant of
organizational action has been the focus of studies in several areas, including
organizational development (Jaeger, 1986), organizational control (Baliga and Jaeger,
1984), choice of entry mode (Kogut and Singh, 1986), strategy (Schneider and Meyer,
1991), recruitment and training (Lawler, 1994; Lawler et al., 1992; Moore and IsHak,
1989) and personnel selection (Adler, 1987; Lawler and Bae, 1996).
The transferability of employment practices across cultures has become a critical
issue. Practical questions that guide transfer of practices include ‘Can we export our
HRM/IR system?’ and ‘Can we import other HRM/IR systems?’ (Taira, 1990: 468). In
the situation studied here, MNCs are potential exporters of employment practices, since
they may seek to apply their home-country HRM/IR systems to host-country
employees. Given social, cultural and organizational differences between home and
host countries, is it possible for the parent company to impose its management and
Table 1 A typology of HRM systems and HRM practices
Broad
HRM
areas
HRM practices Buy-bureaucratic HRM
strategy
Make-organic HRM strategy
HR Flow Recruitment &
selection
Low selectivity;
short-term needs;
external hiring
High selectivity;
long-term potential;
promotion from within
Training &
development
Employment
security
Limited training efforts
Little security
Extensive speciŽ c and general
training
High security
Work
systems
Tasks &
assignment
Clearly/narrowly deŽ ned
jobs; same tasks for long
time
Broadly deŽ ned jobs;
cross-utilization
Teams & job
redesign
Little autonomy &
responsibility
High autonomy &
responsibility
Control Rules & regulations Values & mission
Reward
systems
Wage level Relatively low wages Relatively high wages
Performance- &
ability-based pay
Seniority-based pay; unfair
pay practices
Ability/performance-based pay
fair pay practices
Performance
appraisal
Limited efforts;
administrative purpose
Extensive efforts;
developmental purpose
Employee
in uence
Employee
participation
Very little involvement High involvement
Employee
ownership
Little ownership practices High ownership practices
Culture Separating people from each
other; low trust & co-
operation
Symbolic egalitarianism; high
trust & co-operation
Source: adapted from Arthur (1992), Bae (1997), Beer et al. (1985), Pfeffer (1994) and Walton
(1985).
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5. HRM/IR systems on its subsidiaries? This is an important question in cases where
MNCs want to decide a subsidiary’s HRM/IR policies and practices. In this context, the
convergence hypothesis may imply that it is quite possible for MNCs to transplant their
principles and practices in foreign countries.
On the other hand, cross-cultural theorists especially have raised questions about the
convergence hypothesis and emphasized cultural diversity. From the strategic choice
perspective, the issue of exportability of HRM/IR systems to subsidiaries is a matter of
degree, not of kind (Taira, 1990). Therefore, as Taira (1990) argued, exportability of
HRM/IR systems is not about an ‘all-or-nothing’ choice, but about a ‘what-aspects and
how-much’ choice. This implies that certain functions of HRM/IR may converge, while
others may not.
In addition to the convergence argument, organizational contingencies such as
technology and size also shape the structuring of organizations (Hickson et al., 1979).
One issue in quantitative cross-national research is whether country differences produce
only mean differences of variables or lead to slope differences as well (Przeworski and
Teune, 1970). If we assume that there are slope differences, country variables would
moderate the causal relationships among the variables in uencing HRM practices.
Two interesting Ž ndings need to be addressed here. One concerns the universal
applicability of the ‘technological imperative’. This perspective argues that mainstream
rationalist theory, with the assumption of isomorphic adaptations to task environments,
can be applied to cross-cultural contexts (Lincoln et al., 1986). Previous studies found
that, although rationalist models have considerable explanatory power, there are
‘society-speciŽ c’ (or ‘culture-bounded’) aspects that can add explanatory power
(Lincoln and McBride, 1987). Another interesting Ž nding was that the effects of
organizational contingencies on organization structure were different between countries.
SpeciŽ cally, the effects of operations technology on the structuring of plants were
weaker in Japan than in the US (Lincoln et al., 1986).
These Ž ndings suggest that there are both mean (i.e. levels of structural properties)
and slope (i.e. the causal processes) differences among variables partly because of
cultural and institutional factors. However, these studies were purely cross-national
comparisons because the data were only from within each country. In international
management and HRM studies, the subjects of research are MNCs and/or their
subsidiaries. In international management and HRM studies, another important factor,
the local environment, also needs to be considered. Although comparative management
and HRM studies showed that there are both mean and slope differences, what is less
obvious in international studies is the magnitude and direction of the effects of local
environment.
Hypotheses
Three basic determinants of the HRM practices in MNC subsidiaries may be the host-
country environment, the carry-over effects of the parent Ž rm’s home country and
organization-speciŽ c factors (Yuen and Kee, 1993). Although these factors affect HRM
practices of subsidiaries, it is less obvious as to which speciŽ c factors and to what
degrees they do so.
MNC home-country effects
Previous studies have shown that there were some in uences exerted by an MNC’s
home-country culture on employment practices. For example, Lawler et al. (1992)
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6. found that an MNC’s home country had effects on both employment practices and
HRM professionalization. Their research suggested that Western Ž rms operating in
Thailand had more systematic, rationalized and professionalized HRM systems when
compared with Asian Ž rms (Thai and Japanese). However, MNC subsidiaries usually
face structural and institutional barriers that could prevent the transferability of HRM
systems to other countries (Amante, 1993). In addition, many foreign subsidiaries in
newly industrializing countries (NICs) have ‘ready-to-leave mind sets’ under hostile
investment environments such as increasing wages and government intervention (Bae,
1997b). Referring again to Table 1, the ‘make-organic’ HRM system suggests a long-
term perspective and orientation on the part of management with respect to its
employees. Consequently, we would expect indigenous Ž rms to utilize, in general, such
an approach to a greater extent than MNCs subsidiaries. Among MNC subsidiaries,
Japanese Ž rms are expected to have a greater propensity to utilize a ‘make-organic’ type
of HRM system than Western subsidiaries due to cultural and physical proximity.
Hypothesis 1: Indigenous Ž rms are more likely to have a ‘make-organic’ HRM
strategy than subsidiaries of MNCs.
Hypothesis 2: Western subsidiaries (American and European subsidiaries) are more
likely to rely on performance-based reward strategies than Asian Ž rms (Korean,
Taiwanese and Japanese Ž rms).
Hypothesis 3: Japanese subsidiaries are more likely to have a ‘make-organic’ HRM
strategy than Western subsidiaries.
Hypothesis 2 derives from notions of individualist and collectivist cultures (Hofstede,
1983). Since collectivist societies are tightly integrated, internal equity (vis-à-vis
external equity) in rewards systems is more important. Thus, more individualistic
Western countries would be expected to utilize performance-based reward systems to a
greater degree. Moreover, Asian Ž rms, with an emphasis on ‘longer-termism’ in
organization strategies, may emphasize other HRM functions, such as training, rather
than rewards systems. In contrast, those Ž rms with a short-term perspective are apt to
pursue HRM strategies that are easier to implement, such as a performance-based
rewards system. In addition, our rewards system scale includes a performance
evaluation indicator (positively related to the scale). Since Western Ž rms’ HRM
systems are more systematic and rationalized (Lawler et al., 1992), Western Ž rms may
have higher scores on the rewards system dimensions.
Host-country effects
As comparative research has shown, HRM practices differ across countries. Although
Korea and Taiwan have many common features in economic development and cultural
roots, other features, such as organizational, structural and institutional characteristics,
are quite different. Although we cannot develop the speciŽ c hypotheses for the
differences a priori, it is expected that the two countries would have distinct HRM
practices. Lawler et al. (1995) found there are some HRM areas that can be commonly
used in both indigenous Ž rms and MNC subsidiaries, while other HRM areas show
inter-country variations.
Hypothesis 4: Other things being equal, there will be variations in HRM strategies
between Taiwan and Korea.
Variations in HRM in Asian countries 657
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7. Managerial values
Beyond national variations, we expect that there would be between-company variations.
The factors that could affect HRM strategy of individual Ž rms include organizational
strategy, Ž rm size and management values regarding human resources and technology.
Here, we take HRM values as a possible in uence on HRM strategy. It is suggested that
the values of top management are important in shaping organizational structure and
culture, as well as HRM strategy (Burton, 1995). This suggestion had been a critical
issue in McGregor’s (1960) argument for the importance of the assumptions we make
about people and assertions by Peters and Waterman (1982) regarding the importance
of core values and cultures for effective organizations. Such arguments are also integral
to more recent writings on HRM strategy and high-involvement management, which
emphasize the signiŽ cance of HRM and people as a source of competitive advantages
(Barney, 1991; Lawler, 1991; Pfeffer, 1994; Snell et al., 1996). All these arguments
emphasize adequate management values. For example, Lewin and Yang (1992) found
that HRM values affected various HRM policies. The HRM values of senior executives
in Japanese and US Ž rms operating in the US were positively related to the presence of
written human resource plans, employee training programmes,  exible work rules and
non-Ž nancial and Ž nancial participation programmes. Based on these arguments, we
develop the following hypothesis:
Hypothesis 5: Organizations with management that strongly values the role of HRM
and people in the organization are more likely to have ‘make-organic’ HRM
strategies.
Methods
Data and procedure
A questionnaire was developed to assess the various components of a Ž rm’s HRM
system along the dimensions discussed above. The questions focused on HRM practices
with respect only to non-managerial employees. Since HRM practices often differ
between occupational groups, we chose to focus on a relatively narrow category of jobs
to limit the need to repeat the questions on the HRM system for multiple occupational
categories (thus making the questionnaire too long and unwieldy). The questionnaire
also assessed factors such as the size and industry of the Ž rm. The questionnaires,
which had been translated into Korean and Chinese, were administered to individuals
with principal responsibility for HRM in a random sample of Ž rms in Korea and
Taiwan during 1996. The questionnaire utilized addressed fairly speciŽ c and objective
issues, so that the ambiguity often encountered in translation from one language to
another was not a serious issue here. Although we did not use a formal back-translation
approach, native speakers of Chinese and Korean, other than the translators, closely
checked the translated questionnaires. These individuals were professionals in the HRM
area and thus familiar with the concepts included in the questionnaires. The speciŽ c
components of the questionnaire are described in greater detail below.
Data in Korea were obtained from forty Korean-owned Ž rms and ninety-eight foreign
Ž rms operating there (forty-one subsidiaries and joint ventures (JVs) of American Ž rms,
forty-two European Ž rms, and Ž fteeen Japanese Ž rms). Among the ninety-eight foreign
Ž rms, sixty-four Ž rms (65.3 per cent) are wholly owned foreign companies, while
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8. thirty-four Ž rms (34.7 per cent) are JVs. The sample represents many industries,
covering twenty different two-digit Standard Industrial Code categories. In the case of
company size, while 85 per cent of Korean local Ž rms have over 300 employees, about
70–80 per cent of foreign subsidiaries have fewer than 300 employees. While more than
40 per cent of the foreign companies have been running their business for less than ten
years in Korea, most Korean local Ž rms are over ten years old. The majority of the
sample Ž rms have an independent HRM department, with the exception of the Japanese
cases. As a whole, seventy-Ž ve (54.3 per cent) out of 138 Ž rms are unionized; and
forty-eight (49 per cent) out of ninety-eight foreign invested Ž rms have unions. Union
densities range from 5 to 100 per cent.
We also collected data from twenty-six Taiwanese-owned Ž rms and twenty-six
subsidiaries and JVs. Among twenty-six foreign invested Ž rms, seventeen Ž rms (65.4
per cent) are wholly owned foreign companies, while nine Ž rms (34.6 per cent) are JVs.
Among the total of Ž fty-two Ž rms, thirty-one Ž rms (59.6 per cent) are manufacturing
Ž rms, while the remaining twenty-one (40.4 per cent) are non-manufacturing Ž rms. In
the case of company size, while about 70 per cent of Taiwanese local Ž rms have over
300 employees, most foreign subsidiaries are mid-size Ž rms. While more than half of
the foreign companies have been running their business for less than ten years in
Taiwan, about 65 per cent of Taiwanese local Ž rms are over ten years old. The majority
of the sample Ž rms (88.5 per cent) have independent HRM departments. Half of
Taiwanese Ž rms are unionized, while about a third of foreign invested Ž rms have
unions.
Measurement of variables
Dependent variables for this study include HR  ow, work systems, reward system,
employee in uence and a composite measure of the HRM system as a whole.
Independent variables include unionization, industry, Ž rm size, ownership type, the
values of management regarding HRM, and country dummy for both home and host
countries.
HRM systems HRM variables are scaled by summing a number of 6-point Likert-
type items. A total of thirty-seven items were used to measure HRM practices which
capture aspects of most HRM practices speciŽ ed in Table 1. Firms that are high on the
HR ow scale utilize extensive selection and training procedures and have relatively
high job security. Sample items include: ‘Great importance is placed on the whole
stafŽ ng process in our Ž rm for non-managerial employees’ and ‘The training process
for non-managerial employees in our Ž rm is formal and systematically structured’
(15 very inaccurate, 65 very accurate). The work systems scale covers job design and
control types. Firms at the upper end of this scale tend to use broadly deŽ ned jobs with
enriched designs, team-based work organization and so forth. Narrowly deŽ ned jobs
and a greater presence of rules and formal controls characterize those at the lower end
of the scale. A sample item includes: ‘To what extent do the jobs in your organization
require incumbents to do many different things at work, using a variety of their skills
and talents?’
The reward system scale re ects the degree of the linkage between performance and
pay level and the presence of employee ownership programmes. Sample items include:
‘Pay for non-managerial employees is closely tied to individual or group performance
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9. in our Ž rm’ and ‘Employee Ž nancial participation (e.g. gain sharing, proŽ t sharing, or
employee ownership, etc.) is extensive in our Ž rm’ (15 very inaccurate, 65 very
accurate). The employee inuence scale measures the extent to which employees as
stakeholders are involved in decision making about job-related and organizational
issues. A sample item is: ‘Many different types of employee participation programs
(e.g. information sharing, quality control, work team., etc.) are available for employees
in our organization’ (15 very inaccurate, 65 very accurate). High values represent high
employee involvement and autonomy. High values from these variables represent the
‘make-organic’ type of HRM system; while low values means a ‘buy-bureaucratic’ type
of HRM system.
Finally, a composite index of the HRM system as a whole is constructed by summing
all four HRM policy area scales. This index thus ranges along a continuum from ‘buy-
bureaucratic’ at the lower end to ‘make-organic’ at the higher end.
HRM values Following Bae (1997a), the management HRM values scale is assessed
using six items adapted from Lewin and Yang (1992). Questions about management’s
prioritization of human resource issues in the Ž rm, management’s valuation of human
resources in relation to Ž nancial resources and management’s beliefs about the
contribution of HRM policies and practices to Ž rm performance are used to construct
this scale. The items also measure the signiŽ cance of people vis-à-vis the Ž rm’s proŽ ts
and the belief of management that people and human resource practices are sources of
a Ž rm’s competitive advantage. In addition, another item is included that assesses
whether management of the Ž rm considers the person in charge of HRM as a strategic
partner in formulating and implementing business strategy (Butler et al., 1991). Firms
scoring high on this scale tend to assign high priority to HRM concerns. Of course,
these questions are answered from the perspective of the chief human resource manager
in the Ž rm. Ideally, we would have collected responses from upper management, but the
logistical problems involved in collecting the data in this manner precluded such an
approach.
Control variables The control variables used here include Ž rm size, unionization,
industry and ownership type for MNC subsidiaries. Firm size is deŽ ned as the natural
logarithm of the number of full-time employees (Blau and Schoenherr, 1971; Snell,
1992), following the arguments of Child (1974) and Kimberly (1976) that there is a
curvilinear relationship between size and structural complexity. This logarithmic scale
is also used to normalize the size variable, which might otherwise be badly skewed
(Miller and Droge, 1986). Unionization (when unionized this is coded 1), industry
(manufacturing coded as 1) and ownership type (JVs coded as 1) are all dummy
variables. In addition, national origin consists of a set of dummy variables. The
regression analysis reported below involves both within-country and pooled estimates.
In the case of the within-country regressions, four home-country categories are used for
the Korean data (USA, Japan, Europe and Korea (the reference category)) and four
groups for the Taiwanese data (USA, Japan, Europe and Taiwan (the reference group)).
When the Korean and Taiwanese data are pooled, there are two different factors used
to code country. The Ž rm’s home country is represented by four categories (i.e. USA,
Japan, Europe and indigenous (the reference group)). The host country is represented as
a separate dummy variable (coded as 1 for Korea and 0 for Taiwan).
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10. Results
Reliability coefŽ cients for the HRM values scale and four HRM policy areas scales are
all acceptable. Alpha coefŽ cients of the HRM values scale for Korean and Taiwanese
data are .87 and .84, respectively. Alpha coefŽ cients for all HRM areas are also over
.70, except for work systems from the Taiwanese data (.62). The means of HRM policy
areas and their reliability coefŽ cients are presented in Table 2.
MNC home-country effects
Korean data The results of multiple regression for the four HRM scales and HRM
system as a whole are presented in Table 3. F-tests show that analyses for all Ž ve
dependent variables are signiŽ cant at the .01 level. The values of R2
for the analyses
range from .362 for the work system scale to .608 for the HRM system index.
Among the control variables, the union dummy negatively affects work system.
Industry (manufacturing) has positive effects on employee in uence. Size has positive
Table 2 Means and reliabilities for HRM scales
Korean data Taiwanese data
HRM
areas
Korean
Žrms
USA
Žrms
Japanese
Žrms
European
Ž rms
Alpha Taiwan
Ž rms
USA
Ž rms
Other
foreign
Ž rms
Alpha
HR  ow 4.28 4.10 3.47 3.77 .88 4.08 4.34 4.24 .72
Employee
in uence
3.60 3.47 2.77 3.07 .74 4.17 4.36 3.92 .73
Work
systems
3.74 3.84 3.11 3.66 .71 3.46 3.91 3.48 .62
Reward
systems
3.69 4.29 2.99 3.87 .73 3.92 4.36 4.02 .73
Table 3 The results of regression for four HRM areas: Korean data (N 5 138)
HR ow Work
system
Reward
system
Employee
in uence
Composite
scale
Constant 1.081*** 2.735*** 2.115*** 1.396*** 1.832***
Labour union 2 .057 2 .263** 2 .077 2 .146 2 .136*
Industry 2 .029 .050 .113 .206* .085
Log of size .115** 2 .044 2 .012 .033 .023
Joint venture .035 2 .321** 2 .300** .005 2 .146
Home
country:
USA .020 .012 .616*** 2 .152 .124
Japan 2 .233 2 .420* 2 .350 2 .548** 2 .388**
Europe 2 .008 2 .020 .342* 2 .315 2 .000
HRM values .545*** .340*** .379*** .446*** .428***
R2
.543 .362 .491 .426 .608
F values 19.196*** 9.158*** 15.550*** 11.954*** 24.971***
Notes
* p, .10 ** p, .05 *** p, .01
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11. effects on HR  ow, so larger Ž rms are more likely to have extensive selection and
training programmes. After controlling union existence, industry and size, the HRM
values scale is consistently signiŽ cant. Joint venture Ž rms have more ‘buy-bureaucratic’
type HRM systems in terms of work system and reward system. Finally, there are also
variations among the MNC home countries. In the case of the composite HRM system
scale, only Japan has a signiŽ cant negative sign, meaning that Japanese Ž rms have
lower scores on the continuum of HRM types compared to Korean indigenous Ž rms.
When we observe speciŽ c HRM areas, Japan has signiŽ cant negative signs on work
systems and employee in uence. However, in the case of reward system, Western Ž rms
(both American and European Ž rms) have signiŽ cant positive effects, meaning their
scores on the reward system scale are higher than those of the indigenous Korean
Ž rms.
Taiwanese data The results of multiple regression for the Taiwanese data are
presented in Table 4. The regression equations for all dependent variables except work
systems are signiŽ cant at the .05 signiŽ cance level. Among the control variables, only
one variable (i.e. size) has a signiŽ cant positive effect on one HRM area (i.e. HR
 ow).
The HRM values scale is signiŽ cant in all Ž ve equations. In the case of national
differences, Japanese Ž rms are not distinct from Taiwanese indigenous Ž rms. This is
perhaps due to the small number of Japanese Ž rms (only two Ž rms) in the sample. In
the case of European Ž rms, one signiŽ cantly different area is employee in uence, with
European Ž rms having lower scores than those of Taiwanese indigenous Ž rms. The
coefŽ cients of American Ž rms for all Ž ve equations are positive, although these
coefŽ cients are signiŽ cant for work systems, reward systems and the HRM system as a
whole.
Pooled data The results from the analysis of the pooled data are shown in Table 5. F-
tests show that all Ž ve equations are signiŽ cant at the .01 level. In the case of control
Table 4 The results of regression for four HRM areas: Taiwanese data (N 5 52)
HR  ow Work
system
Reward
system
Employee
inuence
Composite
scale
Constant 1.097** 2.224*** 1.871*** 1.376* 1.642***
Labour union .154 .102 2 .107 .078 .057
Industry 2 .150 2 .150 2 .007 2 .125 2 .108
Log of size .157*** .057 .125 .068 .102
Joint venture .268 2 .117 2 .250 .259 .040
Home
country:
USA .204 .482* .500** .060 .312*
Japan .357 .314 .715 .301 .422
Europe 2 .182 2 .105 .003 2 .795** 2 .270
HRM values .469*** .217* .308** .559*** .388***
R2
.580 .179 .298 .401 .461
F values 7.417*** 1.168 2.284** 3.603*** 4.601***
Notes
* p, .10 ** p, .05 *** p, .01
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12. variables, unionization has no signiŽ cant effects at all. Industry (manufacturing) has a
positive effect on employee in uence, and larger Ž rms are more likely to have extensive
selection and training. Joint ventures vis-à-vis wholly owned Ž rms are negatively
related to work system and reward system. The HRM values scale is signiŽ cant in all
Ž ve models. In the case of MNC home-country effects, Western Ž rms (both American
and European Ž rms) are more likely to have performance-based pay, higher level pay
and extensive performance appraisals, when compared to indigenous Ž rms. Both
Japanese and European Ž rms have negative coefŽ cients for employee in uence,
indicating that these Ž rms provide less autonomy to their employees compared with
Korean and Taiwanese indigenous Ž rms. In the case of host-country difference, Korean
Ž rms (both indigenous and foreign subsidiaries) have signiŽ cant positive coefŽ cients
for work system, indicating that Korean Ž rms have broader and team-based job designs
when compared to Taiwanese Ž rms (both indigenous and foreign subsidiaries). The
Korean coefŽ cient for employee in uence is negative, showing that Korean Ž rms
provide less autonomy and participation opportunities to their employees compared to
Taiwanese Ž rms.
Host-country effects
HRM practices seem to be affected by the national origin of the Ž rm’s parent company
within a given host country. In addition, we also hypothesized HRM practices to be
in uenced by host country, holding constant the Ž rm’s home country. To investigate
these hypotheses, we re-analysed the data by home country. The Ž rst set of the sample
includes only indigenous Ž rms (both Korean and Taiwanese Ž rms). Each group of
foreign Ž rms (USA, Japan and Europe) is then analysed in turn.
Indigenous Ž rms The results of multiple regression for the indigenous Ž rms are
shown in Table 6. This analysis is focused on the differences in HRM practices between
Table 5 The results of regression for four HRM areas: pooled data (N 5 190)
HR ow Work
system
Reward
system
Employee
in uence
Composite
scale
Constant 1.076*** 2.304*** 2.177*** 1.849*** 1.851***
Labour union .022 2 .155 2 .039 2 .051 2 .056
Industry 2 .034 .040 .134 .181* .080
Log of size .124*** 2 .012 .005 .037 .039
Joint venture .107 2 .254** 2 .266** .078 2 .084
Home
country:
USA .088 .196 .586*** 2 .071 .200**
Japan 2 .144 2 .241 2 .249 2 .409* 2 .261*
Europe 2 .022 .034 .280** 2 .348** 2 .014
Host country:
Korea 2 .051 .209* 2 .129 2 .655*** 2 .156**
HRM values .526*** .310*** .366** .468*** .418***
R2
.534 .260 .415 .492 .542
F values 22.880*** 7.042*** 14.180*** 19.343*** 23.694***
Notes
* p, .10 ** p, .05 *** p, .01
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13. Korea and Taiwan. Overall F tests show that four of the Ž ve equations are signiŽ cant
at the .01 level, and the second equation (work system) is signiŽ cant at the .05 level.
The HR  ow scale was explained by independent variables very well. Industry did not
affect HRM policy areas at all; unionization had negative signs for all HRM areas, with
signiŽ cant ones for work system and employee in uence; and size affected HR  ow
positively. The HRM values scale was consistently signiŽ cant for all models, except
work system. National differences occurred for work system and employee in uence.
Korean indigenous Ž rms, compared to Taiwanese indigenous Ž rms, had higher scores
on work system, but lower scores on employee in uence.
US Ž rms The results for the subsidiaries of MNCs are presented in Table 7. All Ž ve
equations are signiŽ cant at the .05 level. Unionization has a negative effect on HR  ow.
Manufacturing Ž rms have positive effects on employee in uence. Size has positive
effects on both HR  ow and employee in uence. The HRM values scale again has
Table 6 The results of regression for four HRM areas: indigenous Ž rms (N 5 66)
HR  ow Work
system
Reward
system
Employee
inuence
Composite
scale
Constant 1.459*** 4.435*** 2.198*** 2.522*** 2.404***
Labour union 2 .081 2 .351* 2 .218 2 .403* 2 .263*
Industry 2 .068 2 .111 .186 .038 2 .011
Log of size .112** 2 .033 .018 .037 2 .033
HRM values .465*** .113 .369*** .369*** .329***
Host country .030 .352* 2 .205 2 .561*** 2 .096
(Korean
Ž rms)
R2
.577 .172 .278 .334 .391
F values 16.380*** 2.491** 4.626*** 6.006*** 7.697***
Notes
* p, .10 ** p, .05 *** p, .01
Table 7 The results of regression for four HRM areas: USA Ž rms (N 5 55)
HR  ow Work
system
Reward
system
Employee
inuence
Composite
scale
Constant .616 2.038** 2.031*** .489 1.293**
Labour union 2 .262* 2 .128 .042 .030 2 .079
Industry 2 .138 2 .045 .011 .324* .038
Log of size .227*** .124 .106 .192** .162***
HRM values .561*** .301** .395*** .559*** .454***
Joint ventures .323** 2 .415** 2 .274 .140 2 .056
Host country 2 .116 .026 .008 2 .779*** 2 .215
(Korean
Ž rms)
R2
.526 .268 .317 .575 .534
F values 8.873*** 2.922** 3.720*** 10.837*** 9.178***
Notes
* p, .10 ** p, .05 *** p, .01
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14. signiŽ cant and positive coefŽ cients for all HRM areas. One interesting Ž nding is that
being a joint venture Ž rm has a positive effect on HR  ow, but a negative effect on
work system. Compared to wholly owned US Ž rms, JVs involving American MNCs
provide more training and extensive stafŽ ng efforts. However, JVs provide more
narrowly deŽ ned jobs. Differences in US Ž rms in Korea and those in Taiwan occurred
for the employee in uence scale.
Japanese Ž rms The regression results for subsidiaries of Japanese MNCs are
presented in Table 8. In the case of Japanese Ž rms, we need to pay attention in the
interpretation because the number of sample Ž rms in Taiwan is only two and the
number in Korea is Ž fteen. Therefore, the results are of quite limited reliability. The
work system and reward system equations are marginally signiŽ cant. Unionization has
negative effects on work system and employee in uence. Both industry and size have
no effects on HRM areas. The HRM values scale has positive effects on all HRM areas
except for work system. One interesting Ž nding is that, contrary to the USA Ž rms, being
a JV has a negative effect on HR  ow, indicating that wholly owned Japanese Ž rms
have more extensive selection and training than JVs.
European Ž rms Regression results for the subsidiaries of European MNCs are shown
in Table 9. Although all equations are signiŽ cant at the .01 level, the single critical
independent variable is HRM values. European Ž rms in Korea also had higher scores on
the work system scale than European Ž rms in Taiwan. All other independent variables
for all HRM areas are not signiŽ cant at all. This may be because many European Ž rms
have so-called ‘segregation HRM policies’ that involve leaving all personnel issues to
local managers (Bae, 1997b). Therefore, management discretionary power rather than
more objective organizational factors is perhaps a more important determinant of HRM
policy.
Discussion and implications
Let us review our Ž ndings in regard to our basic hypotheses. The HRM values scale is
a consistently signiŽ cant factor for HRM strategy, which provides strong support for
Table 8 The results of regression for four HRM areas: Japanese Žrms (N 5 17)
HR ow Work
system
Reward
system
Employee
in uence
Composite
scale
Constant 3.411*** 3.590*** 3.106** 3.953*** 3.515***
Labour union 2 .595 2 .811* 2 .759 2 1.039** 2 .801**
Industry .295 2 .516 .813 2 .060 .133
Log of size .046 .094 .110 .200 .113
HRM values .568*** .230 .383** .300** .370***
Joint ventures 2 1.243** 2 .168 2 1.219* 2 .448 2 .769*
Host country 2 1.431*** 2 1.099** 2 1.428** 2 2.547*** 2 1.626***
(Korean
Ž rms)
R2
.844 .597 .653 .853 .851
F values 9.019*** 2.468* 3.138* 9.674*** 9.487***
Notes
* p, .10 ** p, .05 *** p, .01
Variations in HRM in Asian countries 665
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15. Hypothesis 5. Indigenous Ž rms were hypothesized to have more ‘make-organic’ HRM
strategies (Hypothesis 1). The results showed that this is partially supported for the
Korean data; it is not supported for the Taiwanese data (American Ž rms tend to have
positive, signiŽ cant regression coefŽ cients compared to Taiwanese indigenous Ž rms for
the HRM practices scales); and the results from the pooled data showed mixed results
(American Ž rms have positive coefŽ cients, but Japanese Ž rms have negative coefŽ -
cients). We also found support for Hypothesis 2, which posited that Western Ž rms were
more likely to use performance-based reward systems than Asian Ž rms. However,
contrary to the Hypothesis 3, Japanese Ž rms have more ‘buy-bureaucratic’ strategies
than indigenous Ž rms and American Ž rms. Finally, with regard to Hypothesis 4 and
host-country effects, Korean Ž rms (both indigenous and MNC subsidiaries) vis-à-vis
Taiwanese Ž rms, in most cases, have positive and signiŽ cant coefŽ cients for the work
system and negative and signiŽ cant coefŽ cients for employee in uence.
Two Ž ndings need to be discussed. First of all, American Ž rms generally have more
‘make-organic’ HRM strategies than any other country groups after controlling for size
and industry. This is an unexpected Ž nding because the stereotypical notion of
American Ž rms, at least traditionally, has been that they utilize more in the way of ‘buy-
bureaucratic’ HRM strategies. One explanation for this is that most of the sample
American Ž rms in Korea and Taiwan are ‘excellent’ Ž rms that have survived in both
domestic and international business operations. The indigenous Ž rms included both
large and small Ž rms and may not have been strictly comparable. However, this may
also result from a general increase in tendency by US-based Ž rms to export
‘transformed’ workplace practices that emphasize  exibility and responsiveness to
uncertain environments. Indeed, there is reason to believe that the emergent ‘American
management style’ is now becoming an international standard that is starting to displace
the Japanese management framework so popular a decade ago.
A second unexpected Ž nding is that Japanese Ž rms score higher on the ‘buy-
bureaucratic’ HRM strategy scale compared to indigenous and American Ž rms. One
explanation for this is that, in another Asian country such as Korea, Japanese companies
may be much less inclined to utilize the high-commitment systems typical of operations
within Japan. As previous research has found, Japanese subsidiaries often have more
Table 9 The results of regression for four HRM areas: European Ž rms (N 5 52)
HR  ow Work
system
Reward
system
Employee
inuence
Composite
scale
Constant .565 1.039 2.030** .817 1.113**
Labour union .332 2 .034 2 .026 .232 .126
Industry .050 .198 2 .075 .016 .047
Log of size .101 2 .028 .041 .050 .041
HRM values .601*** .530*** .375*** .531*** .509***
Joint ventures .115 2 .066 2 .295 .062 2 .046
Host country .059 .556** .266 2 .273 .152
(Korean
Ž rms)
R2
.553 .521 .354 .530 .674
F values 9.270*** 8.148*** 4.110*** 8.461*** 15.518***
Notes
* p, .10 ** p, .05 *** p, .01
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16.  exibility in adapting to local environments than American subsidiaries; moreover,
Japanese subsidiaries do not always implement Japanese HRM systems when they
encounter inadequate local environments, such as high turnover rates and low
educational levels of workers (Amante, 1993; Taira, 1980; Yang, 1992). This may
imply that, while American Ž rms may pursue similar HRM strategies both at home and
abroad, Japanese Ž rms would be more sensitive to local environments.
Yet an alternative explanation that must be considered is that the results are due to
selection problems. First of all, Japanese Ž rms in the sample size are few in number
(N5 15), a re ection of the difŽ culty the researchers had in gaining access to such
companies (Japanese Ž rms declined to participate at a much higher rate than either
Korean or American Ž rms). Moreover, two-thirds of them are JVs. As a result, it is
quite possible that the results have biases resulting from sample selectivity.
Bae (in press) pointed out that the three foreign groups (USA, Japan and Europe)
had, in general, different policies regarding the integration of subsidiary and parent-
company HRM policies. These were: (1) American Ž rms had relatively high integration
with those of their parent companies; (2) Japanese subsidiaries had a ‘partly integrated
model’, and (3) the majority of European Ž rms in Korea had the so-called ‘segregation
model’ of leaving all HRM issues to Korean managers. Managers in about 52 per cent
of US subsidiaries in Korean sample responded positively to a question in the survey
indicating a high degree of parent-company in uence over HRM issues in subsidiaries,
while only 40 per cent and 28 per cent of Japanese and European Ž rms, respectively,
answered positively.
In the case of Japanese Ž rms, although they choose expatriates as HRM managers,
their policies are unlike the typical Japanese HRM systems in that they re ect a short-
term perspective with little in-house training. Increasing labour costs and tough
environments for investment probably in uenced Japanese Ž rms to have a ‘ready-to-
leave’ mind set. In the case of European Ž rms, there are at least two reasons for a
segregation model. First, they may wish to overcome national differences through local
responsiveness. Second, perhaps more critically, they have gained their competitive
advantage through advanced technologies and Ž nancial capabilities, leaving human
resources as relatively less important. According to HRM managers, such Ž rms are
most likely to adapt parent-company knowledge and capabilities to rationalize existing
HRM practices.
The theme of this issue of the journal concerns the impact of HRM practices of
multinationals on host-country nationals. We have explored this issue within an Asian
context, considering similarities and differences in HRM practices in Ž rms operating in
two of Asia’s leading economies: Korea and Taiwan. One signiŽ cant aspect of this
study is that it explores these relationships outside the most advanced industrialized
countries (i.e. Western Europe, North America, Japan). We observe signiŽ cant
differences between these two countries with regard to HRM strategy, especially in the
case of the composite HRM strategy measure. We also observe signiŽ cant differences
among companies within host countries as a function of the Ž rm’s home country. The
most surprising Ž nding here is that it is not Japanese Ž rms but rather American Ž rms
that now seem to be trend-setters in utilizing what are generally seen to be more
progressive HRM strategies that both promote the welfare of workers (through hire pay,
greater training, more opportunity for advancement) and organizational effectiveness
(through greater responsiveness to shifting environmental conditions). However, even
though a Ž rm’s national origin is an important consideration in shaping its HRM
strategy, it would seem that the values and perceptions of top management with regard
Variations in HRM in Asian countries 667
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17. to the HR function and the relative signiŽ cance of people as a source of competitive
advantage in the organization are even more important.
Johngseok Bae
Hanyang University (Korea)
Shyh-jer Chen
National Sun Yat-Sen University (Taiwan)
John J. Lawler
University of Illinois at Urbana-Champaign
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