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Determinants of International and InterculturalHuman Resource Control: The Case of TaiwaneseSubsidiaries int he People's Republic of ChinaBih-Shiaw JawNational Sun Yat-Sen University, Kaohsiung, Taiwan

John HannonPurdue University

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Determinants of International and Intercultural Human ResourceControl: The Case of Taiwanese Subsidiaries in the People's

Republic of China

Bih-Shiaw JawNational Sun Yat-Sen University

John M. HannonPurdue University

96-006

Determinants of International and Intercultural Human ResourceControl: The Case of Taiwanese Subsidiaries in the People's

Republic of China

Bih-Shiaw JawNational Sun Yat-Sen University

John M. HannonPurdue University

96-006

Center for International Business Education and ResearchPurdue University

Krannert Graduate School of Management1310 Krannert Building

West Lafayette, IN 47907-1310Phone: (317) 494-4463FAX: (317) 494-9658

Da.dminants of International and Intercultural HR Control 60611.doc page 1

Determinants of International and Intercultural Human Resource Control:The Case of Taiwanese Subsidiaries in the People's Republic of China

Bih-Shiaw JawNational Sun Vat-Sen University

Kaohsiung, Taiwan886 7 322 4395 v886 7 532 6320 f

John HannonKrannert Graduate School ofManagement

Purdue UniversityWest Lafayette, Indiana 47906 USA

317-494-5871 v317-494-9658 f

[email protected]

· ;.' " ,. ~: .

Drt~ants of International and IntL'n:ultural HR Control 60611.doc page Z

Determinants of International and Intercultural Human Resource Control:The Case of Taiwanese Subsidiaries in the People's Republic of China

ABSTRACT

This study develops a framework to categorize international and intercultural human .resource (IHR) control at" the subsidiary level across cultures. The effects of interorganizationalinterdependencies, competitive strategies, and cultural differences on the three differentdimensions ofIHR control (input, behavior, and output) were studied using a sample of 100Taiwanese subsidiaries operating in the People's Republic ofChina. The most notablerelationships that were found include a robust association between a low cost competitionstrategy and the three dimensions of IHR control and the impact ofcultural differences on onetype of control.

Determinants of International and Intercultural HR Control 6061 I.doc page 3

Within the last decade, People's of Republic of China (PRC) has experienced unprecedented economic

growth. During this time, it has had the highest average growth rate (above 10% per year) of any economy in the

world. Due to its Open Door Policy, the PRC have imported very much capital, technology and management from

foreign countries to help this economic explosion [Von Glinow & Teagarden, 1988; Gallagher, 1995]. According

to Shin Hwa Newspaper Corporation [1995], it has become the most robust developing country in attracting

foreign investment in 1995 (37,000 cases in 1995). Shin Hwa reports that these foreign direct investments (FDI)

came primarily from Hong Kong (202 billion USD), Taiwan (33.9 billion USD) and America (24.9 billion USD) in

1994. In many of the FDI cases in the PRC, the industrial technologies have been transferred with relative success.

Alternatively, human resource management (HRM) transfers seem to encounter much difficulty. In part, this is

attributable to many cultural differences [Mc Laughlin, 1987; Von Glinow & Teagarden, 1988; Bucknall, 1994].

Therefore, it seems appropriate to study the effect of the international and intercultural HRM (IHRM) on FDI

strategies in the PRe.

Taiwan, a major FDI participant in the PRC, has a tense political relationship with PRe. At the same

time, it also has a very important economic relationship with the PRC. Due to the same language and similar

cultures, the PRC is becoming the most preferred partner for FDI. Further, many multinational corporations

(MNCs), such as Philips Electronics, Kentucky Fried Chicken, and Alcatel Telecommunication, manage their PRC

subsidiaries by importing managers from their Taiwan subsidiaries. Although the use of same language fosters the

tight economic relationship between Taiwan and PRC, there are still some cultural differences between them

because of ideological, historical, political, economic, and social welfare differences. An empirical study on the

international and intercultural HRM (IHRM) ofTaiwanese companies operating in the PRC should shed some

light on how HR philosophies, policies, and practices can be shared more easily.

International and intercultural HRM in MNCs has been increasingly mentioned as playing an essential

role in the control of operations in cross-culture context [Edstrom & Galbraith, 1977; Prahalad & Doz, 1981;

Egelhoff, 1984; Jaeger, 1983, Pucik & Katz, 1986; Martinez & Ricks, 1989]. The most recent stream of research in

this area has focused on how HRM strategy fits into the firm's overall business strategy. Although studies have

suggested that strategic context influences integrated human resources practices, scholars know very little about

how separate HRM practices fit into the overall strategic context. In addition, a variety of typologies have been

DelcmUn3l1ts of Intematiccal 3I1d Intercultural HR Control 6061 I.doc page 4

devised to differentiate rHRM. They include: control systems [Egelhoff, 1984; Doz & Prahalad, 1984; Baliga &

Jaeger, 1984; Pucik & Katz, 1986; Martinez, & Jaril1o, 1989]. Yet, a cybernetic model of control [Snel1, 1992]

may provide a broad characterization of global HRM that could be useful to relate individual HRM practices to a

specific type of control in the cross-cultural context. In the present study, we use a cybernetic system of control to

characterize global HRM practices and place them in the overall business strategy context of firms.

Numerous attempts have been made to identify the determinants of human resource management [Dyer,

1984; Tichy, Fombrun & Devanna, 1982; Bamberger & Phil1ips, 1992]. The two most frequently cited factors are

the environment and business strategy [Dyer, 1984]. In the cross-cultural context, it has been argued that

international HR strategy is influenced by different competitive strategies such as the product life cycle [Adler &

Ghadar, 1989], organizational life cycle [Mil1iman, Von Glinow & Nathan, 1991], or Mile's & Snow's [1984]

typology of Prospector. Defender and Analyzer strategies [Bird & Beechler, 1995]. However, as proposed by

Bartlett & Ghoshal [1987] and Prahalad & Doz [1987], global competitive strategies need to garner the cost

advantages of global integration of certain tasks vis-a-vis the differentiation benefits of responding to national

differences in tastes, industry structures, distribution systems, and government regulations. In this study, therefore,

we wil1 build an framework to investigate the relationship between these two strategic dimensions (low cost

str~tegy and local differentiation) and HRM control in a cross-national context.

Additionally, as MNCs can be conceptualized as interorganizational networks [Ghoshal and Bartlett,

1990], subsidiaries ofMNCs operate in the external network also. Typically, they have resource links to

headquarters and other subunits as well as ties to firms and customers in host, home, and other countries. This

interdependence with other organizations creates important implications for HR strategies [Wright & McMahan,

1992; Hannon, Huang & Jaw, 1995]. Baliga and Jaeger [1984] also proposed that the degree of interdependence

between a HQ and its subsidiary was the most crucial factor influencing the extent of delegation and type of HRM

control used by MNCs over their subsidiaries. Thus, we should also investigate the influences of

interorganizational interdependence on individual dimensions of HRM control in a cross-cultural context.

Furthermore, cultural differences have been considered to be an extremely important determinant of

lHRM [Schneider, 1988; Laurent, 1986]. For instance, they have been offered as a contingency variable in the

selection of control systems for subsidiaries [Baliga & Jager, 1984]. Alternatively, competitive strategy is also

Determinants of International and Intercultural HR Control 6061 I .doc page 5

believed to have an influence on HRM [Schuler & Jackson, 1987]. Competitive Strategy has also been thought to

have an interactional influence, along with organizational environment, on HRM [Bamberger & Phillips, 1992].

Furthermore, the institutional structure of the local environment in which a subsidiary is located has also been

considered to play an important role in moderating the influence of economic and technical considerations

[Ghoshal & Bartlett, 1990]. Hence, in the present study, we will investigate the moderating effects of these

determinants on the IHRM control over subsidiaries.

In summary, this paper develops a framework to categorize IHR control at the subsidiary level in cross

cultural contexts and investigates several potential determil.1ants of IHR from a strategic perspective. First, we

review several theories which were used to build the cybernetic system of HR control in cross-cultural context.

Then, we applied them to a sample of Taiwanese subsidiaries in the PRe. The next section summarizes the

research literature on international and intercultural HR control. Next, the determinants of IHR control are

introduced and discussed. Then, we review the sample and methods used in this study. Our results follow this.

Finally, we discuss the role of these findings for practitioners and researchers.

INTERNATIONAL AND INTERCULTURAL HR CONTROL

Control can be defined as any process that helps align the actions of individuals with the interests of their

employing firm [Tannenbaum, 1968]. The effectiveness of an organization's control system is a function of the

degree of alignment in the direction of control and the human resource management policies and practices that are

in place to support it [Ouchi, 1979]. The overall control process has been characterized by Ouchi [1981] as

'people treatment' and consists of selection/screening, training, behavior monitoring and output monitoring. In

this vein; two distinct modes of control, bureaucratic and cultural, have emerged from the literature on HR control

[Baligea & Jaeger, 1984; Pucik & Katz, 1986]. More recently, while examining the supervisor/subordinate

relationship, Snell[1992] identified and studied three types of control: (l)input control, (2) behavior control, and

(3) output control.

Here, we extend this reasoning and we propose that these three types of control affect the

Parent/Subsidiary relationship in the context of International HR. Without a doubt, MNCs control their

subsidiaries' (1) HR inputs (by influencing employee selection and training /socialization practices), (2) HR

Determinants of International and Intercultural HR Control 6061 I.doc page 6

behaviors (through the level of bureaucratic and cultural control they do or do not impose), and (3) HR outputs (by

the reward systems they permit or prescribe).

Input Control

Selection

Selection is a basic control and monitoring mechanism, and it is basically a form of input control. Of

course, it occurs prior to the monitoring of output [Jaeger, 1983]. Job applicants are screened and only those who

are most likely to behave as desired within the organization are allowed into the system [Jaeger and Baliga, 1985].

As proposed by Ouchi (1979), selection is used for the internalization and identification of employees. This

practice is most common in the "professional bureaucracies" such as hospitals, public accounting firms, and

universities. Therefore, a control mode designed to identify and select the most appropriate people can generate

high employee commitment as a result of internalized and shared values [Ouchi, 1979]. The selection process must

identify people who: have the technical skills required (or are trainable), will accept the organization's authqrity,

and can learn the organization's rules and regulations - - and perform in accordance with them.

In the MNC context, when most host-country nationals move into the subsidiary's managerial positions,

some major strategic management and control issues arise. They include, how to assure that local managers are

committed to world-wide rather than just local objective [Kobrin, 1988]. One approach is for the parent company

to use the same criteria for selecting HCNs as is used for expatriates. In addition, a corporate culture value

assessment may be used to insure that candidates' personalities match the firm's values [Evans & Lorange, 1986].

In the PRC, most Taiwanese companies seem to be inclined to select new employees based on the

recommendations of international employees. Indeed, about half of them promote local, highly-educated

employees to be subsidiary managers [Huang, 1995; Kao, Lin Hsu & Lin, 1995]. Alternatively, it is still difficult

to staff all new managers and financial experts using HCNs, especially chief executive officers (CEOs). Therefore,

most Taiwanese companies import CEOs and top executives from their parent companies.

. Training and Socialization

In cybernetic systems, selection and training are considered to be input control activities [Snell, 1992].

Ouchi [1979] proposed that most organizations can rely on selection and screening only to a limited extent.

Thereafter, they may rely on training to impart the desired skills and values. Indeed, training provides

Dctennimmts of International and Intercultural HR Control 606l1.doc page 7

organization members with the necessary abilities and values to be successful in the organization. The component

of training which ultimately has the greatest impact on control is values training or socialization [Etzioni, 1961].

This is an interpersonal process of informally or implicitly teaching organizational values and behavioral

expectations to organizational members to bring them into line with what is required for successful participation

within the organization [Jaeger and Baliga, 1985].

Therefore, MNCs that rely heavily on cultural control tend to emphasize a longitudinal process of

socialization as the primary vehicle for managerial training. Its purpose is to ensure that future managers

thoroughly internalize the corporate culture and related information-processing rules and norms before assuming

managerial responsibilities in a subsidiary [Pucik and Katz, 1986]. In addition many MNCs recognized that

management development programs need to emphasize worldwide information sharing on economic, social,

political, technological and market trends. Some companies export home country training and development

programs to other countries for local employees. In addition, they may bring host-country nationals to corporate

headquarters in order to expose them to the corporate culture and help them develop a corporate perspective

[Dowling and Schuler, 1990].

As indicated by Von Glinow & Teagarden [1988], the Chinese currently believe that training is the

primary vehicle for creating productivity. Additionally, acquiring expertise through training accords a certain

amount of power to the person who has been trained. A likely outcome of trainingis that the individual will be

placed into a managerial position elsewhere, and they will be called upon to apply the training to their job.

However, for the most part, the training is primarily technical training, and behavioral training is virtually

nonexistent and exceedingly difficult to implement. By now, to minimize expatriation costs, most big Taiwanese

companies have begun to devote even more resources to train their local managers in their PRC subsidiaries [Kao

et aI., 1995].

Behavior Control

In the MNC/Subsidiary context, bureaucratic control is manifested when headquarters manages the

operations of subsidiaries primarily through a clearly defined set of rules and procedures. These rules may be

enforced through budgets, on-site inspections, and/or control of management processes [Doz and Prahalad, 1984].

Detcnninants of Intematiooal and Intercuhural HR Cootrol 60611.doc p"ge 8

Bureaucratic control systems operate under principles of rationality and are characterized by a high degree

of formalization. Standard operating procedures (SOPs) are the central elements of a bureaucratic control system.

SOPs constitute behavioral repertoires which are expected of members in the organization and are written down in

the form of company manuals or rule books [Hickson, 1966]. Child [1973] notes that bureaucratic control consists

of the utilization of a limited and explicit set of codified rules and regulations which delineate desired performance

in terms of outputs and lor behaviors. Based on assumption of a centralized hierarchy, behavior control is initiated

at the top of the organization in the form of articulated operating procedures [Cheng and McKinley, 1984; Hitt,

Hoskisson, and Ireland, \990]. Snell [1992] defined bureaucratic behavior control to come in the form of

centralization, articulated procedures, close supervision, and behavior appraisal.

In MNCs, bureaucratic control exists when headquarters controls the operations of a subsidiary primarily

through a clearly defined set of rules and procedures. Doz [1986] notes that there are thirteen elements of

subsidiary performance analyzed monthly by IBM corporate staff, and even more detailed analyses of results are

conducted within each of these broad categories. In fact, centralization, formalization and standardization (such as

written policies, rules, job descriptions, and standard procedures--through manuals and charts) are coordination

mechanisms used by MNCs for integrating activities that remain dispersed across subsidiaries [Martinez and

Jarillo, 1991].

In PRC, the Marxist - Leninist doctrine has historically influenced performance, and except for meeting

output quotas, workers have traditionally not been under pressure to perform [Von Glinow & Teagarden, 1988].

Given this, Kao et al. [1995] argued that tight and explicit monitoring will be useful for managing Chinese

workers in the PRC subsidiaries ofTaiwan companies.

Output Control

The process of output control is basically a process of monitoring an indicator, comparing it with a

standard, and then providing selective rewards and adjustment [Ouch, 1977]. In the case of output control, the

transformation process need not be known, much less monitored, but a reliable and valid measure of the desired

outputs must be available [Quchi, 1977; Hill & Hoskisson, 1987]. In addition, in order to induce performance that·

fulfills an organization's intention, rewards systems need to be linked to results [Kerr, 1985; Snell, 1992].

Detenninanls of Intcmatirnal and Inten:ultural HR Cootrol 60611.doc page 9

In MNCs, it seems particularly important to match the corporation's strategic pursuits with the goals,

competencies, and motivations of key mangers. [Edstrom and Lorange, 1984]. In fact, reward systems in most

MNCs are based on a linkage between performance and financial incentives. Since the decoupling of appraisals

and rewards may render control initiatives ineffective. [Pucik and Katz, 1988]. Furthermore, Pucik [1984] posits

that reward systems must take into account equity issues within the organization and in the external labor market

in these countries where managers are recruited. Therefore, output control in MNCs is based on the use of results

driven appraisals, performance - reward links, and localized monetary incentives.

In the PRC, financial incentives are beginning to influence work behavior [Von Glinow & Teagarden,

1988]. However, some argue that using bonus systems to promote greater work effort will fail because of the small

magnitude of bonuses and preferences for the egalitarian distribution of bonuses [Jackson, 1992]. Nevertheless, as

described by Huang [1995], floating variable wages almost explain 20% of base wages of Chinese workers in PRC

subsidiaries ofTaiwan companies.

THE DETERMINANTS OF IHR CONTROL

Interorganizational Interdependence

The influence of interorganizational interdependence on HRM has been advanced by two perspectives:

resource dependence [Pfeffer & Cohen, 1984; Pfeffer & Langton, 1988] and institutionalism [Scott, 1987]. In the

MNC context, various studies have noted a relationship between the dependence of the subsidiary on the

multinational parent for resources and the influence of that parent over the subsidiary's HRM [Baliga and Jaeger,

1984; Martinez and Ricks, 1989]. However, as indicated by Prahalad and Doz [1981], after subsidiaries mature

and grow, they may have adequate technology, management capability, and marketing capabilities such that the

HQ cannot continue to rely on control over these resource as a means of influencing subsidiary strategy. When this

is the case, the subsidiary's dependence on local resources may become more profound. Additionally, institutional

theorists have argued that the relational networks in the environment play an important role in influencing the

behavior of organizations [Meyer & Scott, 1983; Zucker, 1988]. When a subsidiary is embedded in an external

network (consisting of the parent organization, such as partners, suppliers, regulators, and competitors), its HRM

will be influenced by these host institutions [Wright and McMahan, 1992]. Therefore, it is imperative to

- < ".

D~einimantsof IntematiooaI3IId Intercultural HR Cootrol 60611.doc page 10

investigate the effects of the subsidiary's interdependencies with parent and local institutions on choice of its HRM

controls.

Parent Resource Interdependence

According to a study by Kao et al [1995], 52.3% of raw material for PRC subsidiaries and 73.4% of all

production equipment for PRC subsidiaries comes from their Taiwanese parent companies. In addition, 80% of

Taiwan parent companies executed new product designs and innovations and market. All to say, PRC subsidiaries

have high degree of interdependence with their Taiwan parents.

In fact, MNCs relied on control over resources. such as capital, technology, and management as a means

of influencing subsidiary strategy. According to the resource dependence model [Pfeffer & Salancik, 1978], ifa

subsidiary depends on a flow of valuable resources (e.g. money, technology, information, skills) from intercountry

organizations (e.g. HQ, and subunits of MNCs), its human resource practices will be influenced by them greatly

[Pfeffer & Cohen. 1984; Pfeffer & Langton, 1988]. As indicated by Martinez and Ricks' empirical study [1989],

the influence of a multinational parent over the HRM decisions of an subsidiary is positively related to the extent to

which a multinational parent provides resources to that subsidiary. In this situation, the hierarchical power of HQ

is more effective at counteracting the power of the subsidiary, and it is potentially easier to have direct control over

such a relationship through this mechanism. Similarly, as proposed by Prahalad and Doz [1981], in a pure

hierarchical organization, the support system (such as personnel) tends to be aligned with the hierarchy.

Martinez & Ricks [1989] found that U.S. parent companies tended to be more involved in the selection

process of managers for subsidiaries with high resource dependence on the parent company. Alternatively,

subsidiaries with low resource dependence would simply submit a selection decision to the U.S. parent for approval

after the decision had been made by the subsidiary's general manager. Therefore. the subsidiary's dependence onI .

parent's resources influences the level of input control exercised by the parent.

Additionally, when a subsidiary has high level of dependence on its parent's technology or management

srstem, it is expected that formal training programs or inpatriate visits will be necessary for the subsidiary's

managers or related personnel to become proficient [Pucik & Katz, 1986]. Thus, subsidiary's dependencies on

parent's resources are usually positively related to the level of training & socialization offered.

Deteimin:mts of Intematienal 3I1d Intercultural HR Centrol 6061 I.doc page 11

Furthermore, as indicated by Martinez & Jarillo [1991], a subsidiary's' dependence on parent's technology

or tight integration in the purchasing function will lead to high levels of global integration in the business strategy.

Therefore, more formalization, standardization and centralization will be used as global coordination mechanisms.

Edstrom and Lorange [1984] also indicated that in a global business, conglomerates are characterized by

operational interdependencies evident in product sourcing and standardization of marketing. Hence, a manager's

freedom to act will typically be more restricted. Pucik & Katz [1986] proposed that the explicitness of rules and

bureaucratic control systems are related to how much technology and information is transferred to the subsidiary.

Consequently, subsidiary's dependence on parent's resources will be positively related to IHRM control.

Hypothesis Ja: Interdependence with parent's resources is positively related to IHR input control.Hypothesis Jb: Interdependence on parent's resources is positively related to IHR behavior control.

Locollnstitution Interdependence

Since 1992, the PRC has gradually opened its local markets to MNCs. Since then, most big Taiwanese

companies began to cultivate their relationships with local suppliers, distribution channels, and host governments

in order to penetrate the market in China [Kao et al., 1995]. As the subsidiary matures and becomes bigger, it can

expand its base of technical, manufacturing, financial, and management resources. Likewise, if a subsidiary

interacts with customers, suppliers, regulators, and competitors within this country, or if it is partly owned by local

firms, it will have a high level of local institution dependence. When this is the case, its success may depend more

on how well it fits in its local environment than on how much support it needs from HQ [Doz & Prahalad, 1986].

Additionally, according to institutionalism [Scott, 1987], the HRM practices of a subsidiary will also be

influenced by host governments enacting certain laws (such as Equal Employment Opportunity regulations and

Minimum Wage statutes). Similarly, practices may be influenced by other organizations (such as local

competitors) [Wright & McMahan, 1992]. In other words, host institutions dependencies will influence

subsidiaries' HR practices. For instance, these pressures may necessitate that performance appraisals be directly

linked to reward structures. Indeed, Hambrick & Snow [1989] propose that if the managers are considered to be

independent contnbutors, their rewards should be directly linked to the performance of their units. Consequently,

Hypothesis 2: Dependence on local institutions is positively related to IHR output control.

Determinants of Intcmatiooal and lntcrcuhural HR Cootrol 60611.doc page 12

Competitive Strategy

Schuler & Jackson [1987] are among a growing number of researchers who have made a link between HRM

practices and competitive strategies. To do so, they adapted Porter's [1985] competitive strategies by focusing on

innovative, quality enhancing, and cost reducing HR strategies. Their research revealed that two factors, low cost

competition and local differentiation, are particularly important to a company's HRM control. In addition, as

proposed by Bartlett & Ghoshal [1987] and Prahalad & Doz [1987], global competitive strategies need to capture

the cost advantages of global integration of certain activities vis-a-vis the benefits that could be derived from

responding to national differences in tastes, industry structures, distribution systems and government regulations.

Therefore, we tum to the relationship between these two strategic imperative and human resource control in the

cross-cultural or cross-national context.

Low Cost Competition

When a l'v1NC enters into the mature phase of the product life cycle, cost competition will become the major

business strategy of its subsidiaries. In such a state, the focus is on productivity and cost effectiveness [Alder &

Ghadar, 1989]. Usually, this is a globally integrated firm which develops an integrated approach and enforces

similarity to pursue economies of scale [Adler & Ghadr, 1989]. In this situation, the parent company will

emphasize selecting subsidiary managers who understand and appreciate global strategies (Edstrom & Lorange,

1984]. Additionally, ifa company has an efficiency orientation, it will stress the long-term development of

employee abilities, skills and knowledge [Bird & BeecWer, 1995]. In addition, to reduce costs, MNCs will reduce

their expatriate populations and stress training on local managers [Kobrin, 1988].Therefore, cost competition will

lead to more IHR input control.

Furthermore, Gomez-Mejia, Balkin, & Cardy [1995] proposed that explicit job descriptions and the use of

performance appraisal as a control both fit Porter's overall cost leadership strategies. In addition, Bird and BeecWer

[1995] also propose robust relationships between an efficiency orientation and centralized control systems and

standardized operating procedures. Therefore, it appears that a low cost strategy will lead to more IHR control.

Hypothesis 3a: Cost competition is positively related to IHR input control.Hypothesis 3b: Cost competition is positively related to IHR behavioral control.

DetermmanL~ of lnternatimal and lntercuhural HR Centrol 6061 I.doc page 13

Local Differentiation

If the needs of host country's market differ considerably from those others in which the MNC operates, the

resident subsidiary must differentiate its products to respond to local customers [Bartlett & Ghoshal, 1987].

Sometimes, MNCs use a cultural diversity dimension to differentiate products and services when culturally distinct

markets must be served. In addition, they may tap cultural diversity differences.. as a source of new ideas when

innovation is needed [Alder and Ghadar, 1989]. In this situation, the company should use perquisites and benefits

to attract high skilled labor, scientists, and creative people while using performance appraisals as developmental

tools [Gomez-Mejia et al., 1995]. Furthermore, as proposed by Edstrom & Lorange [1984] , in this situation the

parent needs to stress that the national manager's reward will be linked to financial and market performance

measures. Consequently,

Hypothesis 4: Local differentiation is positively related to /HR output control.

Cultural Difference

Cultural difference refers to the extent that a subsidiary's national culture differs from its corporate culture

[Boyacigiller, 1990]. Key dimensions of culture include such characteristics as: individualism versus collectivism,

large or small power distance, strong or weak universality avoidance, and masculinity versus femininity [Hofstede,

1983]. Laurent's [1986] research demonstrates that there is variance across continents (the U. S. vs. Europe), and

countries (within Europe) along these dimensions. Naturally, the HR policies developed at headquarters usually

reflect the national cultural of the MNC [Schneider, 1988]. According to Schuler & Jackson [1987], MNCs can

choose from a menu ofHR practices, but there remains a need to keep the MNC's and the subsidiary's strategies

and cultures somewhat aligned by taking into account the differences in national cultures where the subsidiaries

are operating. Based on the existing literature [Von Glinow & Teagarden, 1988; Jackson, 1992; Huang, 1995; Kao

et al, 1995], the cultural differences in organizations in the PRC and Taiwan can be categorized as follows, Taiwan

(a) emphasis on cooperation and teamwork, (b) organization takes care of employees' interests, (c) emphasis on

decentralization, ~d) employees help each other, (e) organization actively manages problems; PRC: (a) emphasis on

individual needs, (b) employees look out for their own interests, (c) emphasis on centralization, (d) subordinates

depend on their leader, (e) organization passively addresses problems.

DetcnhinantsofIntemational and Intercultural HR Control 6061 1.doc page 14

Generally speaking, high cultural differences will put a subsidiary in danger of being overpowered by

local cultural and economic forces. When this threat exists, MNCs are more apt to use tight control over the

subsidiaries [Cray, 1984]. Thus, cultural differences will be positively related to lHR behavior control.

Hypothesis 5a Cultural differences Is positively related to IHR behavior control.

Hypothesis 5b: . The interaction ofcultural difference and interdependence with parentresource is positively related to IHR behavior control.

Hypothesis 5c: The interaction ofcultural difference and low cost strategy is negativelyrelated to IHR input control.

For instance, consider the case of subsidiary with a high cultural difference and a high interdependence on

its parent. The parent wilI need to send expatriates to transfer technology and management to the subsidiary.

However, the local employees might be reluctant to accept the parent's culture given the large culture difference.

In this case, the subsidiaries tend to be easily influenced by local cultural or economic forces. Alternatively, when

there are low cultural differences, the expatriates who are sent to transfer the parent's technology and management

systems wilI find it easy to transfer their technology and management to local employees. Thus, behavior control

over the subsidiary will be low. As suggested by Baliga & Jaeger [1984], in the case of a subsidiary with a high

sequential interdependence (receiving resources from other parts of the MNC) and high cultural proximity, the

parent should not adopt behavior control over the subsidiary. Consequently, the interaction of interdependence

with parent and cultural difference is positively related to the behavior control over subsidiaries.

Next, consider the case of a subsidiary with low cost strategy and high cultural differences. Cultural

differences raise costs and complicate of socialization [Baliga & Jaeger, 1984]. Thus, the parent will probably not

rely on selection control over the subsidiary's HR inputs for the reason of low cost consideration. Alternatively, in

the case of low cultural differences, training & socialization which can impart the parent's values and technology

to the subsidiary will become an important alternative to control the subsidiary's HR inputs [Wilkins & Ouchi,

1983]. This is even more likely to be true when the subsidiary is not able to afford a better base of technical and

managerial cap~ilities to pursue a low cost strategy. Consequently, the interaction of low cost strategy and

cultural difference is negatively related to the use of IHR input control over subsidiary.

Dd~3Ilts of International 3Ild Intcrcuhural HR Control 60611.doc page 15

MEASURES AND METHODS

Sample

Three hundred fifty six Taiwanese subsidiaries in the PRC were surveyed during June to September of

1995. The companies that were selected comprise half the 712 Taiwanese subsidiaries which were all listed in the

register compiled by the Association of Taiwanese companies in PRC. Questionnaires were sent to and completed

by the CEO or HR executive of the parent company. One hundred respondents returned questionnaires, for a

response rate of 28%. Summary statistics (see Table I) suggest that these firms present a reasonably

representative sample of the Taiwanese subsidiaries operating in the PRC. In instances, the percentage of

ownership by the parent company was at least 50%. Seventy three subsidiaries are the in manufacturing industry

and twenty seven are service related.

Measures

IHR Control

The HR control items were designed to measure the degree of selection control, training control, behavior

control, and output control used by the parents. They are outlined below:

1. INPUT: Selection control: parent's approval of subsidiaries' managers above second-level, parent'sagreement with staffing of subsidiaries' managers, and parent's procedures for staffing subsidiaries'mangers.

2. INPUT: Training and Socialization control: managers and technicians frequently visit the foreigngroup, parents commitment to training managers, parents involved in managers' skill development,substantial foreign training for subsidiaries' managers before assignment.

3. THROUGHPUT: behavior control: explicit monitoring, frequent feedback, and centralization ofappraisal.

4. OUTPUT: Rewards control: results criteria, performance-reward link, localized monetary incentives.

The measures of control were based upon research by Snell [1992]. They were modified somewhat for this

MNC, as opposed to a solely domestic context. The scale for control consisted of 24 indicators on a 7-point Likert

scale.

lnterorganizationallnterdependence

Two measures of interorganizational interdependence were used: interdependence with parent and

dependence on local institutions. First, parent resource interdependence was measured with a 5-item, 7-point

da~3Ilts of Intematienal and Intercuhural HR Centrol 6061 I.doc page 16

Likert Scale adapted from the work of Martinez and Ricks [1989] and Prahalad and Doz [1981]. It consisted of

questions addressing: the degree to which parent's technology is used, management know-how, the degree of

integration of subsidiary's purchasing with the rest of the corporation, the ratio of the subsidiary's exports to total

sales, and the ratio of the subsidiary's sales to its parent's total sales.

Local institution interdependence was measured with a 7-item, 7-point Likert scale adapted from Ghoshal

and Bartlett [1990]. It included: reliance on local technological expertise, reliance on local managerial expertise,

strength of relationships with local suppliers, reliance on the host government, reliance on host country distribution

channels, and reliance on management know-how provided by local competitors and partners.


Two dimensions of competitive strategy were analyzed to assess the competitive advantages of the

subsidiary: low cost competition and local differentiation cost. The first, low cost competition was measured with

a 4-item Likert Scale adapted from Schuler and Jackson [1989]. It measured the importance ascribed to:

maximizing operating efficiency, maintaining high product quality, stable procurement of raw materials, and

improving operating processes.

Local differentiation was measured with a 4 item, 7-point Likert Scale adapted from Schuler and Jackson

[1989] and Kim and Mauborgne [1992]. It tapped the degree to which the subsidiary: modifies product offerings

to meet local customer needs, adapts promotion schemes to the local markets, innovates new product (or service) to

address local demands, and adapts its distribution approach to the local market.

Cultural Difference

To assess the cultural differences between host country and parent company a 5-item, 7-point scale

adapted from the cultural dimensions of Hofstede [1983] was used. (shown in Table 2). The respondents were

asked the following questions about each item of the five items: What is the level in the parent company? What is

the level in the local environment? The two responses were then compared and the difference between the two was

defined as a cultural difference.

Methodology

The first step in this analysis was to identify the dimensions ofIHR control, competitive strategy, and

interorganizational interdependence. Since it can be used for construct validation, detecting tentative dimensions,

l:3~~:mts of Intematienal :md Intercuhural HR Centrol 6061 1.doc page 17

and identifYing items for deletion [Schwab, 1980], factor analysis was used in this step. It was used to group

together and then reduce the number of items for each of these constructs so that the underlying dimensions could

be identified. The specific method applied was factor analysis of principle components with varimax rotation.

This enabled us to assess the convergence within and divergence between the scales.

The second step consisted of examining the relationships between the different dimensions of IHR control

that emerged and each of their contextual determinants. This facilitates the testing of the hypotheses formulated

previously. One set of hypotheses (1,2,3,4, and 5a) address the main effects that the interdependency, strategy,

and cultural difference variables have on IHR control. Another set (5b and 5c) focuses on the effects of several

interactions on IHR control. Thus, a hierarchical model in which these variables and the interaction terms were

entered according to their predicted causal sequence [Stone and Hollenbeck., 1984; Baron and Kenny, 1986] was

used. The effects of our hypothesized predictors were assessed on the basis of their individual unstandardized

regression coefficients [Duncan, 1975; Aiken and West, 1991] and their contribution to the total variance in IHR

control, evaluated as a change in R2• The interaction terms were entered into the equation after all the related

study variables had been controlled for [Cohen & Cohen, 1983].

Dctcimiil:mts of Intematiooal :md IntL'fcuhural HR Cootrol 6061 I.doc page 18

RESULTS

Intercorrelations

Table 2 give means, standard deviations, and coefficient alphas, for the variables. The alphas indicate

internal consistency [James, Demaree, and Wolf, 1984]. As can be seen, the alphas for all the IHR control

variables, cultural differences and competitive strategy measures were higher than. 70. This is a level which is

satisfactory for basic research; for the proportion of error variance for a scale with an alpha of .80 is precisely the

same for any test regardless of the number of items [Cortina, 1993]. Note that all of the alphas also meet

Nunnally's [1967] criterion of .50 for adequate reliability.

Factor Analyses

IHR Control

The first factor analysis of IHR control produced three stable factors representing input, behavior, output

control. Each had an eigenvalue above 1.0, and in sum they accounted for 82 percent of variance in the data.

Table 3 gives items and factors loadings.

InterorganizationalInterdependence

The second factor analysis for interorganizational interdependence produced two stable factors

representing subsidiaries' dependence on local institutions and interdependence with parent. Each had an

eigenvalue above 1.0, and together they accounted for 41 percent of variance in the data. Table 4 gives these items

and their factor loadings.


The third factor analysis of competitive strategy produced two stable factors representing local

differentiation and low cost competition. Each had an eigen value above 1.0, and in total they accounted for 70

percent of variance in data. Table 5 gives the items and factors loadings.

Moderated Multiple Regression Analyses

Predicting IHR Input Control

In the first hierarchical model (Table 6), we test the hypotheses addressing the main and moderated effects

of the contextual determinants on IHR input control. In Equation 1, we begin by regressing input control on

interorganization interdependence. In Equation 2, cultural difference and the interaction terms generated by

Dliterriiin3llls of Intemational and Intercultural HR Cootrol 6061 1.doc page 19

cultural difference and interorganization interdependence are introduced. These equations make it possible to

examine the main effects of interorganizational interdependence and cultural differences on input control, and

their interactions. In Equation 3, the competitive strategy variables are introduced to examine their main effects on

input control. Next, cultural difference and the interaction terms generated by competitive strategies and cultural

difference are included in Equation 4. Finally, the complete model incorporating interorganizational

interdependencies, competitive strategies, cultural differences and their interactions is represented in Equation 5.

With respect to the predictors of IHR input control, in Table 6, we found that the main effect of a low cost

competition strategy .94 is present (b=O.3, p<.05). In addition, the interaction effect generated by cultural

difference and the low cost competition strategy is significant negative (b=-O.04, p<.05). These findings suggest

that low cost competition is positively related to the selection control over subsidiary. MNCs need to select and

train subsidiary's managers who understand and appreciate the global strategy for pursuing economies of scale in

an integrated and global organization [Edstrom & Lorange, 1984]. However, when cultural difference is high, the

positive effect of low cost competition on input control will be reduced, because decentralizing responsibility is a

means of minimizing payroll costs to foster for executing low cost competition. Moreover, cultural differences

generate higher costs for training & socialization.

It is worthy to note that an initial finding of a main effect of dependence on local institution

interdependence on input control (b=O.20, p<.05) seems to contradict the findings of Martinez & Ricks [1989] and

the argument of Prahalad & Doz [1981]. They argue that dependence on local resources causes the subsidiary to

be more independent, and, thus, the parent will not be able to influence selection decisions. This observation can

be countered as follows: many Taiwanese companies entered into the PRC only within the last six years (see Table

1). Also, due to the restrictions of the PRC's government, many Taiwanese companies have adopted joint venture

arrangements with local partners. In addition, as a result of the political tensions between the PRC and Taiwan,

Taiwanese companies are more dependent on local institutions. In this situation, dependence on local institutions

is not exactly the same as a situation where a subsidiary becomes more independent after a long history, as alluded

-to by Prahalad & Doz [1981]. In this situation, HR input control can import the parent's management of the

subsidiary and become an important control. mechanism at the beginning of the foreign investment, lest the

subsidiary should be swayed by local forces and deviate from the parent's goal [Cray, 1984].

Dctenninants of Intcmatiooal and Intercultural HR Cootrol 60611.doc page 20

Predicting IHR Behal'ior Control

In the second hierarchical model (see Table 7), we test the hypotheses concerning the main and moderated

effects of these contextual determinants on IHR behavior control. In Equation I, we begin by regressing behavior

control on interorganizational interdependencies. In Equation 2, cultural difference is introduced and the

interaction terms generated by the interdependence variables and cultural difference are added. These equations

make it possible to explore the main and interaction effects of interorganizational interdependencies and cultural

differences on bureaucratic behavior control (Hypotheses Ib and 5a). In Equation 3, we isolate the effects of the

competitive strategy variables. In Equation 4, cultural difference and the two interaction terms generated by

competitive strategies and cultural differences are included. These equations enable us to test the main and

interaction effects of competitive strategies on behavior control. In Equation 5, the main and interaction effects for

interorganizational interdependencies, competitive strategies, and cultural differences are represented.

Concerning the determinants of behavior control, we find that initially there are significant positive

relationships between the behavior control and parent resource interdependence (b=O.35 , p<.05) in Equation I and

a positive interaction effect between cultural difference and parent resource interdependence (b=O.05, p<.05) in

Equation 2. In Equation 4, a positive effect for low cost strategy (b=O.79, p<.OI) is observed. These results

suggest that when a subsidiary is highly dependent on parent's resources, the MNC usually will exert behavior

control over the subsidiary. As proposed Martinez & Richks [1989], if a MNC has a greater strategic control over

the resources in its subsidiary, its hierarchical power will facilitate a tighter control over the subsidiary's

performance. When a subsidiary is seen to be in danger of being influenced by local cultural forces, a MNC is more

apt to introduce formalized mechanisms to gain control. Furthermore, Equations 3 and 5 confirm that a low cost

strategy is also associated with increased behavioral control (b=1.52, p<.05).

Predicting IHR Output Control

In the third hierarchical model (see Table 8), we test the hypotheses relating to the determinants of IHR

output control. In Equation I, we begin by regressing output control on the interorganizational interdependence

variables. In Equation 2, we bring in cultural differences and several interaction terms. In Equation 3, we

introduce the competitive strategy variables. Equation 4 includes the competitive strategy and cultural difference

interaction terms as well. In Equation 5, the complete set of main and interaction effects are modeled.

Drtcnninants of Intematimal and Intercultural HR Control 60611.doc page 21

As for the determinants of output control over subsidiaries, these results reveal that local institution

interdependence, parent resource interdependence, and local differentiation strategy are invariant with IHR output

control. Thus, Hypothesis 2 and 4 are not supported. They propose that when a subsidiary is highly dependent on

local resources or adopts a local differentiation strategy, it will increase its output control over the subsidiary by

linking rewards to performance.

As indicated by Von Glinow & Teagarden [1988], due to the cultural and ideological factors, financial

incentives are quite new and they are only beginning to be used to influence Chinese work behavior. Generally,

when a unit within an enterprise performs meritoriously and a cash incentive is distributed, that incentive is

distributed equally among all individuals, no matter where the work group, department, or division is in the

hierarchy. Jackson [1992] also indicated that the failure of the Chinese bonus system to promote greater work

effort in the workplace can be explained from two perspectives: (a) the magnitude of the bonuses and (b) the

egalitarian distribution of bonuses. Therefore, at present, financial incentives do not seem to work well in the

PRC. These conditions may contribute to the non-significant relationships between dependence constructs and

output control.

Additionally, in the PRC, rapid change and innovation are almost universally resented and resisted [Von

Glinow & Teagarden, 1988]. Thus, the motivation of financial incentives to encourage innovative worker behavior

may not be effective. Furthermore, most Taiwanese companies in the PRC execute a local differentiation strategy

usually by modifying their existing products from Taiwan, because of the developing stage of the PRC economy

[ Kao et al., 1995]. This situation may also contribute to the non-significant relationship between local

differentiation and output control. Alternatively, in Equations 3, 4, and 5 in Table 10, we found a positive

relationship between low cost strategy and output control. Therefore, output control may be mostly useful for

encouraging Chinese workers to promote their operational efficiency.

In summary, the conclusions that may be derived from this study are that a low cost strategy has a strong,

positive effect on IHR input control. This effect is even stronger when the cultural difference between the parent

-and subsidiary is low. In addition, a low cost strategy also has a significant, positive effect on IHR behavior control

and IHR output control. Furthermore, cultural difference has a significant, positive effect on IHR output control.

DdLnrun3l1ts of Intcmatiooal and Intercultural HR Cootrol 60611.doc page 22

As proposed by Ghoshal and Bartlett [1990], MNCs are interorganizational networks. They are

embedded in external networks made up of other organizations including: owners, regulators, customers, suppliers,

and other entities. The MNC's headquarters as well as its subsidiaries must interact with these groups. In any

interorganizational network, a subsidiary's HR is liable to be influenced by these interorganizational

interdependencies, which include: parent resource interdependence and local institution interdependence. Indeed,

Baliga and Jaeger [1984] have proposed that these interdependencies are the most crucial factors influencing the

HR policies and practices of any subsidiary. However, these relationships are thought to be moderated by cultural

proximity.

As for the relationship between IHR and business strategy [Bird & Beechler, 1995], it is important to

consider the influence of the subsidiary's host culture and the parent's organizational culture [Schneider, 1988].

Excellent MNCs work to align their organizational culture, overall strategy, and human resource management

practices [Adler & Ghadar, 1989]. In this study, the IHR control mechanisms ofTaiwanese subsidiaries in the

PRC are observed to be affected by interorganizational interdependencies, competitive strategies, and cultural

differences.

Future Research

Although the field of strategic control of IHR has advanced over the last decade, most of the development

has been conceptual, often focusing on the effects of cultural factors or product life cycles on different competitive

strategies and interorganizational interdependencies. As revealed in this study, these factors exert both main and

interaction effects on IHR control. Therefore, the findings from this study should be useful to international human

resource managers and researchers interested in strategic international human resource management.

The current study has several limitations which need to be discussed and improved upon in future

research. First, as noted, the respondents in this study were CEOs and HR executives in Taiwan. Officers or HR

executives in the subsidiaries in the PRC were not surveyed. Future research might incorporate inputs from the

subsidiary-level counterparts of the parent company executives we surveyed. Also, future research might try to

refine the constructs and operationalizations of interorganizational interdependence, competitive strategy, and

cultural differentiation. For example, in this study, items regarding subsidiaries' expatriates, an important factor

related to a subsidiary's dependence on its parent's resource were not included. Martinez and Ricks [1989] point

btiCffiunants of InlemaliooaI and InlL"fcullural HR Cootrol 60611.doc page 23

out that expatriate managers have a substantial influence on affiliates' HRM decisions. Therefore, future studies

that include inputs from this group may be even more informative.

Third, future research might try to refine the constructs and operational definition of human resource

control. For instance, in this study, items related to local acculturation of subsidiaries' expatriates - an important

element of a subsidiary's HRM -_were.not included. In addition, as is shown in Table 1, all ofthe Taiwanese

subsidiaries have been in the PRC for less than six years. This time limitation is likely to have affected

dependence on local institutions. Hence, the subsidiary independence status proposed by Prahalad & Doz [1981]

may not yet be possible.

Finally, the construct domain for output control remains somewhat unclear. Further research might

investigate whether explicit performance reporting systems are best conceived as a form of output control, as Jaeger

and Baliga (1985) suggest, or whether they are associated with behavior control (Snell 1992). As stated by Snell

(1992), researchers have developed many different frameworks to describe both of these types of control. This

study stresses the control over process to be a form of behavior control, thus the subsidiary's frequent reports to

headquarters are construed to be a method for MNCs to control the subsidiary's HR. processes. Obviously, further

research is need to refine this construct.

Despite these limitations, the results from this study provide us with a better understanding of the

relationships between subsidiaries' IHR. strategies and the IHR. controls used to implement them within

multinational corporations.

Deteffi;in3l1ls of International 3l1d Intercultural HR Control 60611.doc page 24

Table 1Subsidiary Sample Profiie

Characteristic Categories Firms (n=100)

Location of Subsidiaries

Parent's Ownership

Employees

. . Subsidiaries' tenure

Industry Type

Kwangtung 24Fugen 9Jiang Su & Shanghai 47Beeipimg & Tianjin 10Others 10

50%-70% 3470%-90% 1490%-100% 52

under 100 42100 - 500 46500 - 1000 6> 1000 6

o - 2 yrs. 372 - 4 yrs. 394 - 6 yrs. 10> 6 yrs. 14

Manufacturing 73Service 27

Determinants of Intematiooal and IntcrL'Ultural HR emu"l 6U6l1.J",; page 2S

Table 2Summary Statistics for Subsidiary Sample

Variables Mean S.D. a 1 2 3 4 5 6 7 8

IHR Control1. Input 38.97 6.43 .842. Behavior 53.35 8.82 .85 .483. Output 32.06 5.59 .84 .17 .25

Competitive Strategy4. Local Differentiation (LD) 18.94 7.20 .93 .06 .11 -.105. Low Cost Competition (LC) 23.87 3.64 .71 .21 .34 .28 .23

Interorganizational Interdependence6. Local Institution (LI) 32.40 6.84 .73 .21 .06 -.02 .45 .107. Parent Resource (PR) 24.57 5.45 .58 .40 .22 .16 -.18 .25 .00

Culture8. Cultural Difference (CD) 16.87 7.31 .82 .18 .25 .10 .14 -.11 -.17 .74

D~erininants of Intematiooal and Intercultural HR CCIltrol 60611.doc page 26

Table 3Factor Analysis of IHR Control

Questionnaire Items Factor Loadings1 2' 3

1. IHR Behavior ControlConsulting with H.Q. in setting appraisal systems 0.68 -0.03 -0.27Parent concern with procedure and methods 0.75 -0.01 -0.07Consulting with H.Q. in setting standards 0.75 -0.20 -0.02Receiving frequent performance feedback from H.Q. 0.70 -0.02 -0.06Parent concern with work process 0.48 0.06 0.05Receiving performance feedback daily from H.Q. 0.36 0.32 0.26Account for detail actions to H.Q. 0.52 0.16 0.18Subsidiary's appraisal place primary on work behavior 0.57 -0.04 0.11Report frequent performance information to H.Q. 0.69 0.10 0.05Performance programs are imposed by H.Q. 0.62 0.21 0.05

2. IHR Input ControlSeries of parent's evaluations for second level managers

before staffing -0.05 0.89 -0.01Parent's agreement with staffing of second level managers 0.07 0.77 -0.10Involvement in on the job training for managers -0.15 0.84 0.04Parent's commitment to training the managers 0.10 0.73 0.03Parent provide staffing procedures for managers 0.16 0.63 -0.03Substantial training for managers -0.06 0.68 0.20Staffing managers with same work value 0.28 0.36 0.05

3. IHR Output ControlPerformance appraisal is based on reaching goals -0.06 -0.08 0.76The incentives are linked to subsidiary's profit 0.06 -0.19 0.78Performance is judged by results -0.14 -0.01 0.75Manager's rewards are linked to concrete results 0.07 0.06 0.82Differences in managers' pay represent performance -0.06 0.07 0.80Target are written 0.23 0.12 0.52Managers receive higher pay in the same industry -0.08 0.15 0.23

Eigenvalue 3.61 1.99 1.00Percentage of Variance Explained 0.45 0.25 0.12Total Variance Explained 0.45 0.70 0.84

Dcterffiinants of International and Intercultural HR Control 60611.doc page 27

Table 4..Factor Analysis of Interorganizational Interdependence

Questionnaire items Factor Loadings1 2

1. Local Institution Interdependence (LI)Dependence on technicians supplyEmphasis of management reference to local competitorsEmphasis of management reference to local partnersDependence on managers supplyEmphasis of relationship with local suppliersEmphasis of relationship with local distributorsEmphasis of relationship with host government

2. Parent Resource Interdependence (PR)Ratio: Subsidiary exports to subsidiary salesTechnology importing from parentManagement systems imported from parentIntegration of purchasing with the sister subsidiariesRatio: Subsidiary sales to MNC sales

EigenvaluePercentage of Variance ExplainedTotal Variance Explained

0.660.700.670.600.570.610.50

0.15-0.12-0.040.17

-0.24

2.820.240.24

0.230.10

-0.170.28

-0.05-0.38-0.01

0.740.690.450.480.51

2.030.170.41

Deteri:i:rin:mL, of Intematimal:md Intercultural fIR CoolIn1 60611.doc page 28

Table 5Factor Analysis of Competitive Strategies

Questionnaire items Factor Loadings1 2

1. Local Differentiation (LD)Modifying product for local useUsing localized marketingControlling local distribution channelsInnovating products for local use

2. Low Cost Competition (LC)Maintaining high product quality controlImproving manufacturing processesHaving stable procurement of raw materialsMaximizing operating efficiency

EigenvaluePercentage of Variance ExplainedTotal Variance Explained

0.860.950.930.89

-0.210.130.14

-0.00

3.610.450.45

0.11-0.09-0.050.07

0.860.770.810.45

1.990.250.70

-/

Delenninants of Intematimal and Illten.:ultural HR Cedrol 606ll.doc page 29

Table 6Results of Hierarchical Regression Analysis for IHR Input Control

Equation 1 Equation 2 Equation 3 Equation 4 Equation 5Variables b. s.e. b. s.e. b. s.e b. s.e. b. s.e.

-_..............._--------- ------------------ ---------------- ----------------- ----------------Intercept 20.85*** 3.88 20.71 9.43 29.87*** 4.30 1.31 10.67 -4.05 12.44

InterorganizationalInterdependenceLocal Institution (LI) .20* .09 .24 .20 .10 .21Parent Resource (PR) .47*** .11 .31 .27 .35 .31

Competitive StrategiesLocal Differentiation (LD) .01 .09 .26 .23 .32 .26Low Cost Competition (LC) .37* .18 1.25** .46 .94* .46

Cultural Difference (CD) -.. 02 .56 1.47 .51 1.10 .68

InteractionsCD*L1 -.00 .01 .00 .01CD*PR .01 .01 .01 .02CD*LD -.01 .01 -.02 .01CD*LC -.04* .02 -.04* .02

df 2,97 5,94 2,97 5,94 9,90F 12.32 5.81 2.33 3.37 4.41R2 .20 .24 .05 .15 .31

AR2 --- .04 --- .10 .16

N=100, *P<.05 **P<.OI ***P<.OOI

Detcnnillants of llllemali'llal and InlL"fLullural HR CmlroI 6061 I.doc page 30

Table 7Results of Hierarchical Regression Analysis for IUR Behavior Control


------------------ ------------------ ---------------- ..---------------- ----------------Intercept 42.17*** 5.81 52.19*** 9.43 33.63*** 4.30 18.91 14.71 27.68 17.44

InterorganizationalInterdependenceLocal Institution (Ll) .08 .13 .36 .29 .32 .29Parent Resource (PR) .35* .16 .36 .29 -.84 .43

Competitive StrategiesLocal Differentiation (LD) .04 .12 .17 .03 -.25 .36Low Cost Competition (LC) .79** .24 1.06 .61 1.52* .65

Cultural Difference (CD) -.65 .79 .70 .68 -.03 .96

InteractionsCD*Ll -.01 02 -.02 .02CD*PR .05* 02 .06 .02CD*LD -.00 .02 .02 .02CD*LC -.01 .03 -.04 .03

df 2,97 5,94 2,97 5,94 9,90F 2.56 3.96 6.21 4.81 3.80R2 .05 .17 .11 .20 .28

L\R2 --- .12 --- .09 .08

N=100, *P<.05 **P<.OI ***P<.OOI

Detennin3IIts of Intematienal3IId Intercuhural HR Centrol 60611.doc page 31

Table 8Results of Hierarchical Regression Analysis for IHR Output Control


-- .._-------------- ------------------ ---------------- ----------------- ----------------Intercept 28.42*** 3.73 17.61 9.13 22.81*** 3.60 6.82 9.29 -.11 11.91

InterorganizationalInterdependenceLocal Institution (LI) -.01 .08 .22 .19 .16 .20Parent Resource (PR) .16 .10 .24 .26 .11 .30

Competitive StrategiesLocal Differentiation (LD) -.14 .08 -.07 .20 -.07 .25Low Cost Competition (LC) .50** .15 1.06** .40 1.01 * .44

Cultural Difference (CD) .70 .54 .70 .68 1.23* .65

InteractionsCD*LI -.02 .01 -.01 .01CD*PR -.01 .01 .00 .02CD*LD .00 .01 .00 .01CD*LC -.03 .02 .03 .02

df 2,97 5,94 2,97 5,94 9,90F 1.31 1.02 6.02 3.27 1.88R:l .03 .05 .11 .15 .16

AR:l --- .02 --- .04 .01

N=100, *P<.05 **P<.OI ***P<.001

Determinants of International and Intercultural HR Control 606 I l.doc page 32

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PURDUE CIBER - 1993 WORKING PAPERS

Gordon M. Phillips, Robert J. Weiner"Information and Normal Backwardation as Determinants of Trading Performance: Evidence from theNorth-Sea Oil Forward Market." 1994. The Economic .Journal.

Stephen R. Goldberg, Frank L. Heflin"The Association Between the Level ofInternational Diversification and Risk. "

John A. Carlson"Risk Aversion, Foreign Exchange Speculation and Gambler's Ruin."

John A. Carlson, Aasim M. Husain, Jeffrey A. Zimmerman"Penalties and Exclusion in the Rescheduling and Forgiveness ofInternational Loans."

Kent D. Miller"Industry and Country Effects on Manager's Perceptions ofEnvironmental Uncertainties. "1993. .Journal of International Business Studies, 24: 693-714.

Stephen R. Goldberg and Joseph H. Godwin"Foreign Currency Translation Under Two Cases-Integrated and Isolated Economies. "

Kent D. Miller"A Comparison ofManagers' Uncertainty Perceptions and Country Risk Indices."

Jon D. Haveman"The Effect ofTrade Induced Displacement on Unemployment and Wages. "

Jon D. Haveman"Some Welfare Effects ofDynamic Customs Union Formation."

John A. Carlson, Insook Kim"Central Banks' Expected Profits From Intervention."

Ifyou would like to request copies ofspecific papers, please contact the Center for International Business Education andResearch, Purdue University, Krannert School ofManagement, West Lafayette, IN 47907.

(Phone: 317/494-4463 or FAX: 317/494-9658)

No. 94-001

No. 94-002

No. 94-003

No. 94-004

No. 94-005

No. 94-006

No. 94-007

No. 94-008

No. 94-009

No. 94-010

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No. 94-012

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No. 94-014

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Casper G. De Vries, Phillip A. Stork, Kees G. Koedijk"Between Realignments and Intervention: The Belgian Franc in the European Monetary System. "

Casper G. de Vries, K. U. Leuven"Stylized Facts ofNominal Exchange Rate Returns. "

Kent D. Miller"Operational Flexibility Responses to Environmental Uncertainties. "

Kent D. Miller"Economic Exposure and Integrated Risk Management. "

Kent D. Miller"Diversifrcation Responses to Environmental Uncertainties. "

John M. Hannon, lng-Chung Huang, Bih-Shiaw Jaw"International Human Resource Strategy and Its Determinants: The Case ofMultinationals andTheirSubsidiaries in Taiwan. "

John M. Hannon, lng-Chung Huang, Bih-Shiaw Jaw"International Human Resource Strategy and Control: The Case ofMultinationals and TheirSubsidiaries. "

John M. Hannon, Yoko Sano"Customer-Driven Human Resource Policies and Practices in Japan. "

John A. Carlson, Insook Kim"Leaning Against the Wind: Do Central Banks Necessarily Lose?"

John A. Carlson, David W. Schodt"Beyond the Lecture: Case Teaching and the Learning ofEconomic Theory. "

Alok R. Chaturvedi, Hemant K. Jain, Derek L. Nazareth"Key Information Systems Management Issues in Developing Countries: Differences in the Indian andUS Contexts. "

Jon Haveman,"The Influence of Changing Trade Patterns on Displacements ofLabor."

Stephen Goldberg, Charles A. Tritschler, Joseph H. Godwin"Financial Reporting for Foreign Exchange Derivatives."

Charles Noussair, Charles Plott, Raymond Riezman"Una investigacion experimental sobre la estructura del comercia interncional (Spanish Version)."Translated: "An Experimental Investigation About the Structure of International Commerce."

Marie Thursby, Richard Jensen"Patent Races, Product Standards, and International Competition."

Kent D. Miller, Jeffrey J. Reuer"Firm Strategy and Economic Exposure to Foreign Exchange Rate Movements."

John Hannon, Yoko Sano"The Determinants ofCorporate Attractiveness in Japan."

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John Hannon, lng-Chung Huang, Cheng-Chen Lin"The Mediating Effect ofPrelPost Assignment Acitivities on the Quality of Work Life ofExpatriates:Evidence for Managers in the P.R.C."

John Hannon, lng-Chung Huang, Cheng-Chen Lin"The Mediating Effects ofOrganization Commitment and Job Involvement on the Relationship BetweenQuality of Work Life and Customer Service Attitudes."

John A. Carlson, Marc Surchat"A Modelfor Filter-Rule Gains in Foreign Exchange Markets."

Ch.N. Noussair, Ch.R. Plott, R. Riezman"The Principles ofExchange Rate Determination in an International Finance Experiment."

Stephen R. Goldberg, Joseph H. Godwin, Myung-Sun Kim, Charles A. Tritschler"On The Determinants of Corporate Hedging With Financial Derivatives."

Ifyou would like to request copies of specific papers, please contact the Center for International Business Education andResearch, Purdue University, Krannert School ofManagement, West Lafayette, IN 47907.

(Phone: 3171494-4463 or FAX: 3171494-9658)

No. 95-001

No. 95-002

No. 95-003

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No. 95-007


Timothy B. Folta"Sovereignty Conditions and Governance Modes: An Option Theory Approach."

John A. Carlson, Dong-Geun Han"Monetary Coordination, Fixed Exchange Rates and Noisy Markets."

Jon D. Haveman"Can Barriers to Trade Make a Differential?"

Kent D. Miller and Jeffrey J. Reuer"Asymmetric Corporate Exposures to Foreign Exchange Rates."

Gerald J. Lynch and Bradley T. Ewing"Money Growth Variability and the Term Structure of Interest Rates in Japan."

Nicholas C. Petruzzi and Maqbool Dada"Inventory and Pricing in GlobalOperations: Learningfrom Observed Demand."

Kala Krishna and Marie Thursby"Whither Flat Panel Displays?"

Ifyou would like to request copies ofspeciflC papers, please contact the Center for International Business Education andResearch, Purdue University, Krannert School ofManagement, West Lafayette, IN 47907.

(Phone: 3171494-4463 or FAX: 3171494-9658)

No. 96-001

No. 96-002

No. 96-003

No. 96-004

No. 96-005

No. 96-006

No. 96-007

No. 96-008

PURDUE CIBER -1996 WORKING PAPERS

Thomas Brush, Catherine Maritan, Aneel Karnani"Managing a Network ofPlants Within Multinational Firms."

John J. McConnell, Heidi J. Dybevik, David Haushalter, Erik Lie"A Survey on Domestic and International Stock Exchange Listings with Implications for Markets andManagers. "

Kala Krishna, Suddhasatwa Roy, Marie Thursby"Implementing Market Access"

Jon Haveman, David Hammels"Trade Creation and Trade Diversion: New Empirical Results"

Riki Takeuchi, John M. Hannon"Antecedents ofExpatriate Spouse Adjustments: An Analysis ofJapanese Spouses in the United States"

Bih-Shiaw Jaw, John M. Hannon"Determinants of International and Intercultural Human Resource Control: The Case Of TaiwaneseSubsidiaries in the People's Republic ofChina"

John M. Hannon, Riki Takeuchi"Adjustment and Job Satisfaction as Antecedents of Intent to Stay: The Case ofJapanese Expatriates inthe United States"

John M. Hannon"Using International Human Resource Management to Inform the Business Intelligence Function"

Ifyou would like to request copies ofspecific papers, please contact the Center for International Business Education andResearch, Purdue University, Krannert School ofManagement, West Lafayette, IN 47907.

(Phone: 3171494-4463 or FAX: 3171494-9658)

determinants of international and intercultural human

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