| For many years, Korean companies have pursued localization of their foreign subsidiaries as a way of penetrating developed countries. Yet, the level of localization--represented by the number and authority of local staff, and autonomy of the subsidiaries--is relatively low. The purpose of this research is to identify key determinants of the level of localization.;Korean managers of Korean companies, in general, do not trust local nationals. This ethnocentrism is one of the main barriers to hiring local national managers.;The relationships between the headquarters and the subsidiaries are typified by the headquarters' dominance when their interests conflict, and by the headquarters' involvement in the subsidiary's detailed operational matters. This "headquarters mentality" undermines the subsidiary's autonomy.;The top executives of most Korean companies, who are appointed by the founding chairmen of chaebols, are not committed to localization largely because their tenure is short. Expatriates at foreign subsidiaries often side with the headquarters partly because their tenure at the subsidiaries is short. This lack of commitment to localization tends to reinforce the "headquarters mentality.".;The case-study method was used as the prime research method. On the basis of a literature review and a pilot study, certain aspects of Korean management systems were identified as impediments to localization, and four sets of hypotheses were developed. Five companies from different Korean chaebols were selected as the research sites. Additionally, a survey was conducted of 44 U.S. subsidiaries of Korean companies. The research results well supported the hypotheses.;The majority of Korean managers do not feel comfortable working with foreigners, because they are not trained as country specialists in terms of language skills and knowledge of foreign cultures. This unfamiliarity with the local culture is one of the main barriers to hiring local managers.;Traditional Korean personnel-management systems--represented by lifetime employment. promotion of paternalistic relationships, frequent job rotation, and seniority-based evaluation--strongly contribute to ethnocentrism, the headquarters mentality, short managerial tenure, and lack of country specialists. Consequently, these management systems help to explain the failure of many Korean companies to achieve the level of localization they espouse for their U.S. subsidiaries. |
