A Study on Determinants of Sustainable Foreign Subsidiary Management in Korea

Purpose The purpose of this paper is to empirically analyze what effects the headquarters’ (HQ) business strategy and corporate culture, the local network embeddedness of the foreign subsidiary, and HQ-subsidiary communication have on the staff localization of foreign subsidiaries. The authors carry out empirical analysis on how localization of foreign subsidiaries ultimately affects the performance of foreign subsidiaries. Design/methodology/approach This study is an empirical analysis on the determinants of staff localization and the relationship between staff localization and corporate performance. In this study, the five hypotheses were proposed and tested using survey data. The authors randomly selected a total of 800 companies as subjects and conducted a survey. The final 222 survey data including HQs and subsidiaries were used for empirical analysis. The statistical analyses such as reliability test, factor analysis and regression were used. Findings This study shows that there was a higher level of staff localization by the foreign subsidiary when the investment goal was market-oriented investment, the Korean foreign subsidiary had stronger local network embeddedness and there was better HQ-subsidiary communication. In addition, the relationship between localization and subsidiary performance shows an inverted U-shape. Such results will give various implications to companies. Originality/value The research that takes a multilayered consideration on factors of the HQ, subsidiaries, and the HQ-subsidiary relationship is rare. To overcome such limitations, this study carried out a survey in order to find more in-depth decision factors. Specifically, this study analyzed the effects of three large aspects of investment goals and corporate culture from the aspect of the HQ, local network embeddedness from the aspect of foreign subsidiaries, and the level of HQ-subsidiary communication from the aspect of HQ-subsidiary relations, and how they affect staff localization.

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The impact of within-country and within-firm factors on Japanese foreign subsidiary performance during economic crisis

Asia-Pacific Journal of Business Administration ◽

10.1108/apjba-12-2016-0113 ◽

2017 ◽

Vol 9 (3) ◽

pp. 190-205 ◽

Cited By ~ 2

Author(s):

Matheus Baldo Cordeiro ◽

Mario Henrique Ogasavara ◽

Gilmar Masiero

Keyword(s):

Economic Crisis ◽

Fixed Effects ◽

Multinational Firms ◽

Negative Impact ◽

Foreign Subsidiaries ◽

Productivity Measurement ◽

Subsidiary Performance ◽

Content Type ◽

Subsidiary Management ◽

The Impact

Purpose The purpose of this paper is to analyze the relevant aspects that influence foreign subsidiary’s performance and remain how they retain competitiveness in international markets during economic crisis. To investigate this effect, this research analyzes the behavior of Japanese subsidiaries located in European countries during the pre- and post-crisis periods that started in the USA in 2008 and spread all over the world. Design/methodology/approach This is a quantitative study with an analysis based on longitudinal data of foreign subsidiaries of Japanese multinational firms during the period 2006-2013. It applies a multiple linear regression with panel data using fixed effects models. Findings The findings show that within-firm factors related to local experiential knowledge, market entry through joint ventures with partners from the same nationality, and subsidiary management with a team of expatriates all have a positive impact on subsidiary performance during times of economic crisis. Moreover, within-country factors involving macroeconomic aspects related to inflation rate and population income indicators show a negative impact on performance. Finally, the results confirm that subsidiary performance is higher in the pre-crisis period, showing the importance of considering economic crisis aspects in longitudinal studies. Practical implications The result has implications for managers of multinational firms to understand which factors most impact the success of their foreign subsidiaries during times of economic crisis. In this way, managers can, with greater confidence, decide to reach the most important performance indicator in subsidiary management. Originality/value The majority of studies on economic crisis is based on an economic perspective and mostly investigates Asian and Argentinean crises. When considering a firm-level perspective, most research studies conducted on a subsidiary level are cross-sectional or use survival as a measure of performance. This paper applies a longitudinal study using subsidiary-level data and analyzes performance by sales and productivity measurement. In addition, it investigates whether or not within-country and within-firm factors impacted subsidiary performance during the 2008 economic crisis.

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