Overcoming liabilities of origin: Human resource management localization of Chinese multinational corporations in developed markets

Can Ouyang, Mingwei Liu, Yan Chen, Ji Li, Weiping Qin

Research output: Contribution to journalArticlepeer-review

11 Scopus citations

Abstract

Despite the rapid growth of Chinese outward foreign direct investment in developed markets, many Chinese multinational corporations (MNCs) suffer from liabilities of origin (LOR)—capability- and legitimacy-based disadvantages associated with the country of origin. This study identifies localization as a strategic mechanism through which Chinese MNCs overcome their LOR. With a specific focus on human resource management (HRM), we examine how factors associated with firms' perceived LOR, including springboard intent, local competition, and host country regulatory pressures, affect Chinese MNCs' adoption of local HRM practices in developed markets. We differentiate HRM practices that managers intend to adopt from those that are actually implemented and explore how state ownership affects the intention–implementation gap. Based on a sample of Chinese MNCs in the United States, we find that springboard intent, local competition, and host country regulatory pressures are positively associated with intended, but not implemented, HRM localization. Further examination demonstrates that springboard intent and local competition have significant effects on implemented HRM localization among private businesses but not in state-owned enterprises (SOEs). The managerial constraints and resource endowment of Chinese SOEs may hinder their overseas subsidiaries from implementing local HRM practices to address LOR.

Original languageEnglish (US)
Pages (from-to)543-561
Number of pages19
JournalHuman Resource Management
Volume58
Issue number5
DOIs
StatePublished - Sep 1 2019

All Science Journal Classification (ASJC) codes

  • Applied Psychology
  • Strategy and Management
  • Organizational Behavior and Human Resource Management
  • Management of Technology and Innovation

Keywords

  • institutional theory
  • international HRM
  • international strategy
  • strategic HR

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