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行政院國家科學委員會專題研究計畫 成果報告

亞太區域整合下國際企業子公司演進的策略性人力資源管

理

中 華 民 國 94 年 10 月 28 日

Strategic International Human Resource Management of

Subsidiaries Evolution ： Toward the Regional Integration of the

Value-Added Network in the Asia Pacific

Abstract

Over 90% of the Multinational Enterprises (MNEs) have conducted their manufacturing and/or service activities in a regional integration manner in responding to corporate objectives outlined at home. Tie into rapid growth of the Asia Pacific economy and the trend of regional integration, we in this current research have identified five main categories of regional strategy adopted to enhance the responsiveness of the regional integration value-added network at the level of subsidiaries for the Taiwanese MNEs according to the process of growth and evolution of the subsidiary. While, the Taiwanese MNEs are making decisions of their regional integration strategy upon related considerations (covering issues including of labor quality, economic and social factors) pertaining to host societal environment. The intuition of different regional strategic approaches pin point to different international human resource (IHR) strategies, HR competencies, and HR effectiveness. With a sample size of 130 obtained from the Taiwanese foreign

value network symbolizes further HR regional integration & local investment at the level of subsidiary. And, two, the strengthening of regional integration of value-added network requires a package consideration for the subsidiary to escalate its HR business competence, HR strategic effectiveness, and labor quality at host.

Introduction

For more than a decade ago, the economy of Asia Pacific has experienced the highest growth in the world economy. It is believed that the engine of Asia’s economy is resulted by the heavy investment made by multinational companies (MNCs) in the region. Actually, the Asia Pacific region offers a vast reservoir of natural, human and technological resources which can reinforce the global competitive advantages of firms, thus MNCs can get business opportunities in terms of both its markets and its resources (Lasserre & Schütte, 1995). It is crucial for the Taiwanese MNCs to bear global perspective in mind in the era of regionalization since the vast majority of MNCs’ manufacturing and service activities are organized regionally. This can also be understood as MNCs operate at the hub of an extensive business network, and such network is built across the country boarders within the region (Rugman, 2000).

Therefore, it is worthy to investigate the related strategic issues of Taiwanese MNCs and how their foreign subsidiaries responding to the regional integration in Asia Pacific area.

In fact, MNCs that compete internationally must decide how to spread their activities in the value chain among countries (Porter, 1986). Historically, strategic issues of MNCs have been investigated from the standpoint of global integration and local responsiveness at the level of company in the early time of research works (Ghoshal & Bartlett, 1989; Prahalad & Doz, 1989), and then the follow up research investigation progresses to the level of subsidiary (Jarillo & Martinez, 1990) to respond to the strategic importance of subsidiaries. However, the strategic role of the individual subsidiary progressively becomes more important to respond to the need of regional integration in the network of value-added activities. In fact, subsidiary can be defined as a value-adding entity in a host country, and its growth and evolution is closely tied to its ability to add value to the MNC (Birkinshaw & Hood, 1998). Thus, a subsidiary’s strategy from the perception of evolution should be alternatively investigated in terms of regional integration of the value network in the era of regionalization (Rugman, 2000; Dunning, 1994). For that reasons, in our

growth in value activities toward regional integration; thereby subsequently, try to pin point the related strategic local environment factors which enable the leverage position for subsidiary in its regional integration of value network.

Looking from another angle, the main role for the HRM (Human Resource Management) function in MNCs can be analyzed using Porter’s value-chain model which considers HRM as one of the four supportive activities for the five primary activities of the firm in each domestic market to achieve competitive advantages (Poter,1985; Schuler & MacMillan,1984). Recently human resource (HR) issues have been deemed as a strategic leverage; in terms of HR competencies, HR functions (Martell & Carroll, 1995) and HRM effectiveness (Huselid, Jackson & Schuler, 1997) are being regarded as the driven force to create the competitive advantage for an organization. Undoubtedly, a company, in the context of MNCs, should search for the best fit between its external environment and overall strategy and incorporates the two with its HRM policy in the process of organizational evolution (Lengnick-Hall & Lengnick-Hall, 1988; Edstrom & Lorange, 1984; Adler, 1995). In this research, it is our intention to explore further on the relationships of subsidiary’s regional integration strategy with subsidiary’s HR functions, HR competences and HRM

In fact, human capital and labor quality have long been recognized as the lead momentum driven foreign investment into Taiwan by the MNCs in the past decades. To facilitate a better understanding on the research question we proposed, an empirical testing of the above relationship has been undergone. We put together data from 900 subsidiaries of Taiwanese MNCs and among which, 130 have responded our questionnaires through either their HR managers or general managers. We intend for this article to be a milestone in moving beyond the subsidiary’s strategic international HRM (SIHRM) to actually specifying the underlining relationship among subsidiaries’ regional integration strategy and their ISHRM factors.

Literature Review and Theoretical Framework

Regionalization and Subsidiary Evolution

The vast majority of MNCs’ manufacturing and service activities are (and have always been) organized regionally, while the MNCs are being referred as the engines of international business, the reality reflects that their strategies are increasingly regional. World manufacturing is currently dominated by a set of 500 very large MNCs operating in regional business networks. Small and medium-sized businesses

are partners in this business network led by the largest MNCs. (Rugman, 2000). Data indicate that in terms of output (good and services) and input (number of employees and financing), well over 90 percent of MNC manufacturing is intra-regional (Rugman & Hodgetts, 1995).

The need to adopt a regional approach is reinforced by some economic factors. First, certain value added activities can only reap the benefits of economies of scale by being located somewhere in close proximity to service the whole region. Second, MNCs can achieve a regional coordination of certain flows of components and parts. Third, MNCs in certain industries (such as corporate banking) are obliged to make a regional strategy to serve regional customers and to confront regional competitors (Lassere & Schütte, 1995). Undoubtedly, a subsidiary, in the business network of regional market, may produce various products which are sold in regional market or traded within the MNCs; in real practice, a sizeable portion of R&D are also undertaken at the location of production (Rugman, 2001).

In fact, firm that competes internationally must decide how to spread the activities in the value chain among countries (Porter, 1986). The strategic issues being addressed here are, one, the location in the world where each value-added activity is performed,

and two, the configuration options selected ranging from concentrated to dispersed. Due to the fact that subsidiary can be defined as a value-adding entity in a host country, Vernon’s product life cycle (PLC) model (Vernon, 1966) offers good illustration on the development process as subsidiaries’ roles evolve toward high value-added activities – from serving the local market to adapting the technology to local specifications, then exporting back to the home country, and eventually contributing to product development (Harrign, 1984). Alternatively, the network model (Ghoshal & Bartlett, 1991; Forsgren, Holm, & Johanson, 1992) provides another perspective on subsidiary evolution to regional integration. It reflects the reality that many subsidiaries have specialized capabilities on which the rest of the MNC is depending upon. Thus the subsidiary becomes a strong node in the regional work.

Dunning (1994) also proposed a sequence of main phases for the internationalization of value-added activities to be undertaken by the MNCs. In phase Ⅰ, MNCs export to their foreign sales and distribution agents. In phase Ⅱ, MNC expands its foreign value-added activities through means of exportation (goods and services) to its own sales subsidiary. In phase Ⅲ, foreign valued-added activities are likely to change dramatically as and when a firm starts to engage in the foreign production of goods or services. In phase Ⅳ, the growth of MNCs’ activity may take form to widening the

range of products produced by foreign subsidiaries (also known as horizontal diversification of the subsidiary) or take form to deepening the local market and its adjacent market. In phase Ⅴ, part of the R&D for products is also undertaken by foreign subsidiaries.

Subsidiary ‘s Strategy : Toward the Regional Integration of the Value Network

From the perspective of subsidiaries, in terms of regional integration, the strategic issue is that what value-added activities should be positioned to serve the whole region to gain economic benefits (Lassere & Schütte, 1995). The implications of choice are described in Table1.

Table1. Implication of Regional Strategy

Activity Implication Innovation z Regional research

z Coordination of technological intelligence Production z Specialized plants serving the region

z High level of intra-regional flow

Marketing z Marketing research coordination by region z Coordination of marketing programs z Regional pooling of flows

Professional-service z Regional professional engineering

Sources: Lassere & Schütte, 1995

Using the framework outlined above to illustrate the process of internationalization to a specific subsidiary of MNC in term of regional integration of increasing value-added activities (production, marketing, support and services, R&D), we

therefore categorize the subsidiary’s regional integration strategy in terms of value-added activities increment as follow：

Ⅰ：Assembling operation：only a particular part of manufacturing process, usually final assembling, is undertaken by the subsidiary which is intended to supply products to the regional or local market ( example of Ford Motor Co. in Taiwan)

Ⅱ：Professional services：a subsidiary, whether in service or high-tech industry, is established to provide professional service with higher value ( ranging from maintenance, shopping, consultant, technological support to customer or supplier) to the regional or local market (as evident of Microsoft, Intel and their technical service in Taiwan).

Ⅲ：Deepening marketing：considered as more of the downstream (Porter, 1986), as when regional/ local market expands and the local supply capabilities improve, are undertaken by the subsidiary which has successfully penetrated the local market and is seeking for opportunity to further penetrate into adjacent neighboring markets (example of Citibank and P&G in Taiwan).

Ⅳ：Widening production：the subsidiary produces the products that offer the best (and most secure) rate of return; this could lead to increase in capacity for products being produced locally. Such a widening of the product base occurs where there

are opportunities of economies of scale to the subsidiary (example of this category includes production facility of the Japanese electronic MNCs’ operations in Taiwan: Hitachi, Masushita).

Ⅴ：Regional integration center：the subsidiary produce the products which are sold in the world or regional markets, and, in practice, frequently trade within the MNCs. The higher value-added portion of the R&D for the product sold is also undertaken by the subsidiary (example is evident to cover operation of Philips, Taiwan).

Strategic International Human Resource Management (SIHRM) of Subsidiary

The concept of strategic international human resource management (SIHRM) is defined as “human resource management” issues, functions and policies and practices that result from the strategic activities of multinational enterprises and that impact the international concerns and goals of those enterprises (Schuler, et. al, 1993; Schuler, Dowling, P.J. & DeCieri, 1993). With the emergence of SIHRM came a growing recognition, the success of global business depends more importantly on the quality of the MNCs’ human resources and how effectively the corporations’ human resources are managed and developed (Bartlett and Ghoshal, 1992).

External Factors of SIHRM

The significant characteristics of SHRM are long-term focused and with linkages between HRM and strategic planning (Martell & Carroll, 1995); all of which are related to the external factors of the societal environment encountered by the organization (Wheelen & Hunger, 1992). Baron & Kreps (1999) also indicated that political, economic and social environment factors and the structure of labor market are influential factor of the SHRM.

In the context of MNCs, Koopman & Montias (1971) devised a paradigm that composed of environment, system and political stability to help in explaining the selection of location for foreign investment made by MNCs and the competitive advantages of these companies. MNC researchers propose that each subsidiary of MNC operates in its own unique environment that either constrains or determines the activities of that subsidiary (Ghoshal & Nohria, 1989; Rosenzweig & Singh, 1991; Westney, 1994). The relationship between the subsidiary and its local environment has made it clear that local environment characteristics have been factored into the decision to invest in or upgrade a subsidiary (Andersson & Johanson 1996; Ghoshal & Nohria, 1989; Rosenzweig & Nohria, 1995).

state of economy, the general practices of doing business and the structure of labor market are major external factors that influence international HRM. Since the financial crisis hit Asia in 1997, much has been written about the financial, economic and social ramification of the crisis. In fact, downsizing and labor intensification have become widespread in some Asia areas since 1997 (Chu & Siu, 2001), as many manufacturing companies relocated their production plants to the cheaper destinations in the rest of Asia. Consequently, there are of course, practical impediments to extend subordinates’ autonomy and without a substantial investment in training to enhance competence level (Kamoche, 2003).

With this in mind, we therefore propose that inclusive of labor quality, stage and situation of the host economic development, local infra-structure, governmental policies on financing along with maintaining a stable social environment are all major extended factors to be considered by the MNCs at time when formulating a given specific subsidiary’s strategy of regional integration and its HRM policy.

International HR Strategy and Regional Integration

It has been a long time to award the HRM with a more strategic role to ensure for strategic success of the firm. By matching the HRM with business strategy, the

specific HRM programs which cater for critical HR skills, attitude, behaviors and performances are needed to successfully implement the corporate business strategies (Bamberger & Phillips, 1991; Wright & McMaham, 1992). In the context of MNCs, international HR strategy are deemed as strategic tool for ensuring the execution of global competitive strategy whose imperatives are global (or regional) integration and local responsiveness (Heenen&Permulter,1978; Schuler&MacMillan,1984; Laurent, 1986; Bird & Boechler, 1990; Hannon, Huang & Jaw, 1995).

Regional HR Integration：If a subsidiary is involved in more value-added activities which is located to serve the whole region, the imperative for coordination (Porter, 1985) would require its HRM function structured to deliver the international support for its primary value activities (Dowling, Welch & Schuler, 1999). As proposed by Laurent (1986), MNCs are increasingly using staff transfers and training programs to assist in coordination of activities. Lasserre & Schütte (1999) also indicate that regional careers and regional training are necessary for regional integration strategy. Aside from this, when the more integrated the local employees and expatriates are within the subsidiary, the greater the likelihood that local employees choose expatriate referents to pay policies (Toh & DeNis, 2003).

Local HR Investment： As proposed by Porter (1985), human resource management is seen as one of four important support activities to assist all the primary value activities of a company to sustain its competitive advantages. Meanwhile, Dunning (1994) indicates that, in contrast with less value-added activities, subsidiaries with higher value-added activities usually require more HR investment. As a consequence, MNCs need to build capabilities in the Asia Pacific region which will demand for additional and specifically tailored strategic investment in human capital, this can be seen by the creation of local managerial elite rapidly and thoroughly trained to spearhead the corporation into the region (Lasserre & Schütte, 1999).

Based on this, HR functions (such as staffing, training, evaluation, career development) will be executed from the viewpoint of regional integration when a MNC adopts a regio-centric strategy. Meanwhile a subsidiary will capture a higher human capital if it assumes more complex roles and higher value-added activities in the stream of regional integration.

HR Competencies

demonstrate competence in dealing with functional tasks and when they add value to their business (Ulrich, Brockbank, Yeung & Lake, 1995). They add value by contributing and ensuring of brilliant ideas, programs, and initiatives and are being delivered to the business which in term helps the business to compete. In general, a three-domain framework for conceptualizing the HR competencies is proposed and should cover：Knowledge of business, delivery of HR, and management of change process.

When a subsidiary gets involved in the more “valuable” activities which are arranged to serve the whole region, it will be imperative to have more mutual transfers of staffs across borders. Consequently, the need for its HR staffs to become “global” is emergent and their roles will become of more significant value (Stroh & Caligiur, 1998). This requires a broader perspective for the employees to have the ability to handle operations internationally. As proposed by Reynolds (1992), to encourage HR staff to appreciate the international operations of the firm and to develop the policies and activities to support staff throughout the entire global network, HR staff, with increasing opportunities, might be transferred to the foreign line positions that will broaden their perspectives of international business.

As Pucik (1992) indicates HR executives need to learn about the fundamentals of global competition. They must develop an understanding of how this competition affects business conditions in specific market, and what the social, political and economic variable are, that may have an impact on the firm’s strategy in different parts of the world. From this respective, undoubtedly, HR staffs in a subsidiary whose value activities are widely involved with other units in the region will be required to promote their HR competence on knowledge of business, delivery of HR and management of change.

HRM Effectiveness

HRM effectiveness is proposed by stressing upon the impact of firm’s overall HRM quality on performance (Huseild, Jackson & Schwler, 1997). Two types of HRM effectiveness have been asserted to include technical effectiveness and strategic effectiveness. The technical HRM activities that have been increasingly regulated through stakeholders’ expectations covers recruiting, selection, performance, measurement, training and the administration of compensation and benefits, reflecting the high level of knowledge and expertise. The strategic HRM effectiveness on the other hand, involves designing and implementing a set of internally consistent policies

and practices that ensure a firm’s human capital contributes to the achievement of its business objectives (Jackson & Schular, 1995; Huselid et al., 1997).

In the actual business practices, the emergence of more regional integration of subsidiary’s value activities will drive the subsidiary to well establish strong HRM system which can ensure the planned development of potential international executives and allows for an explicit linkage of strategic control configuration with executive appointment (Doz & Prahalad, 1986). Lai et al.(2000) found that as the knowledge flow within the MNCs increased, socialization control mechanisms are frequently used to influence subsidiary managers’ goal and value and to facilitate co-operation and participation in decision making (Van Maanen & Schein, 1979; Ouchi, 1980; Govindarajan & Fisher, 1990; Gupta & Govindarajan, 1991). Further more, at the subsidiary business unit level, which may be located in a global mandate subsidiary, the HR department was more involved in strategic planning, and its role was more established, with more emphasis on how HR staff would help implement a strategy (Oddon & Mendenhall, 1991). Therefore, we propose that the tendency of regional integration of a subsidiary will drive its HRM to have better technical and strategic effectiveness.

Theoretical framework

Given with the above literature review, our research is keen to testify a series of hypotheses pertaining to the strategic IHRM of subsidiary in terms of regional integration in nature.

Our overall research framework constitute as follow:

Hypothesis 1: Subsidiary’s regional integration strategy can be classified into five

different categories in terms of the increments of value-added activities.

Hypothesis 2: Subsidiary’s HRM strategic requirement (regional integration / local

investment) gradually increased depending upon the categories of regional-integration strategy one adopts in terms of the increment of value-added activities possesses by the individual subsidiary.

Hypothesis 3: Subsidiary’s HR competencies gradually increased by categories of

regional- integration strategy that the given subsidiary adopts in terms of the increment of value-added activities.

Hypothesis 4: Subsidiary’s HR effectiveness gradually progressed depending upon the

different categories of the regional-integration strategy one adopts in terms of the increment of value-added activities.

Hypothesis 5: Subsidiary’s external environmental consideration varies by category of

regional-integration strategy which it adopts in terms of value-added activities.

The findings to the examination of above hypotheses will shed insights on strategic IHRM of subsidiary for executing their regional-integration strategy.

Research Method

Sample

To facilitate well constructive findings for the above hypotheses, data gathered includes 900 randomly chosen multinational companies from a pool of 4500 MNCs in Taiwan which were listed in the directory of “1998 Foreign Investment” published by the Ministry of Economic Affairs, Taiwan. 130 effective questionnaire samples were retrieved, comprised of a total of 15 % in response rate. Descriptive statistics of the firms participated in our study are provided in Table 2. Respondents were ranked among senior executives in the HRM positions. The summary of statistics indicates that the firms included in the study are reasonably representative samples of MNC

subsidiaries operating in Taiwan.

Measures

Based on an extensive review of the literature, our survey instrument included items that assessed external environment considerations (18 items), HR regional strategy (4 items), HR competencies (16 items), HR effectiveness (24 items) and subsidiary’s value-added activities in terms of regional integration (10 items). We explored the dimensionality of these scales, using principal components factor analysis with oblique rotation. The indicators for each of the constructs we studied were grouped so that their underlying dimensions could be indicated (Schwab, 1980). As exhibited in Table 3-5, items with factor loadings of .50 or greater were retained and used to construct the indexes described below.

External Environment Considerations

The 18 relevant items were asked to the respondents to indicate the general perception of macro environment (Koopman & Montias, 1971) in host countries , using six-point scale measuring from 1 (very low) to 6 (very high). The five dimensions of the external environment was shown in Table 3, labeled labor quality (factor1, cronbach’s α= .85, for 3 items), economic effect (factor 2, cronbach’s α= .74, for 5 items),

political effect (fator3, cronbach’s α= .78, for 3 items), social support (factor 4, cronbach’s α= .58, for 3 items), legislative protection (factor 5, cronbach’s α= .61, for 3 items).

HR Competencies

The 16 relevant items were asked among respondents to indicate the capabilities of individual firm’s HR professionals (Ulrich et al. 1995; Huselid, Jackson & Schuler, 1997), using a six-point scale. The three dimensions of HR competencies shown in Table 4 matched the definition of their origins. The cronbach’s α readings reported from the analysis reached above .80 for all three; indicating good fit for the internal consistence.

HRM Effectiveness

The 24 relevant items were asked among respondents to indicate the level of satisfactory with “the results currently being achieved” using a six-point scale. The two dimensions of HRM effectiveness were labeled strategic HRM effectiveness (cronbach’s α=.95, for 13 items) and technical HRM effectiveness (cronbach’s α=.95,

the HRM function is to develop a firm’s employees to support its business needs; measurement include items such as facilitating teamwork, communications and involvement, quality enhancement, and developing talent to serve the business in the future. Technical HRM effectiveness, on the other hand, described the perceptions as how well the HRM function performed activities traditionally associated with personnel management; and include recruitment, selection, training, performance appraisal, and compensation administration (Huselid, Jackson, & Schuler, 1997).

Subsidiary’s Regional Integration Strategy

The relevant items were asked among the respondents to indicate how his or her company executed a variety of value-added activities to act as an integrating role in the Asia Pacific region. A six-point scale was used. The four dimensions of strategy shown in Table 5, labeling manufacturing (factor 1, cronbach’s α=0.80, for 3 items), marketing (factor 2, cronbach’s α=0.7, for 3items), R&D (factor 3, cronbach’s α=0.89, for 2items) and service (factor 4, cronbach’s α=0.87, for 2 items)

company executes its HR activities to act as an integrating role in the region. A six-point scale was used to measure from 1(very low) to 6(very high). This variable covers a wide spectrum of indicators including the professional and manager expatriates, training and career development program exported to other subsidiaries in the region by the subsidiary. The cronbach’s α was reported to be 0.92. Alternately, local investment was measured with the total number of local highly educated employees using six-point scale from 1(very low) to 6(very high).

Analysis and Results

Classification of Regional Strategy

The primary objective of this step was to obtain a taxonomy of subsidiary’s strategies in terms of the increments of value-added activities towards regional integration. The second objective was to compare the taxonomy found in this study with the mode; typology depicted in the Hypothesis 1. To testify the first hypothesis, cluster analysis technique was applied following with “K-means” algorithm (Hartigan & Wong, 1979) used to classify the sample into 5 clusters with different levels of various value-added activities (marketing, manufacturing, R&D and service). Table 6 illustrated the mean and number of each cluster. As predicted, these clusters could

be used to label the subsidiaries with strategy of assembling operation (cluster 1, higher manufacturing activities), professional service (cluster 2, higher service activities), deepening marketing (cluster 3, higher manufacturing and marketing activities), widening production (cluster 4, higher manufacturing, R&D, and service) and regional integration center (cluster 5, all activities are high). Obviously, the amount of valued-added activities was increased gradually in various categories for strategy, ranging from cluster 1 and 2 (1 activity) to cluster 5 (4 activities).

Withholding the results from data gathered, we therefore draw the following conclusions from our analysis of the data collected in this study:

Finding 1: Subsidiary’s regional strategy can be classified into 5 categories with different extent and items of value-added activities, namely assembling operation, professional service, deepening marketing, widening production and regional integration center.

External Environment Consideration

dimensions of labor quality (P<.000) and political stability (P<.01) among various regional strategies. It seemed that subsidiaries with the strategy of regional integration center stressed more emphasis on the labor quality and political stability than subsidiaries in other categories. Alternately, it was also worthy to note that subsidiaries with professional service stressed on higher labor quality based on our investigation. These findings revealed that the countries with high quality of human capital generally sustained a greater possibility to attract MNCs to come and set up regional integration center, or to provide a high level of professional service to other subsidiaries in the region.

Undoubtedly, political stability is likely to induce a better and stable interactive relationship among the sister subsidiaries in the same region, a crucial element which host country can not afford to be ignored. As shown in Table 6, when a subsidiary wants to pursuit regional strategy of deepening marketing, the host country it resides currently also required to retaining sound and stable political relationship with other (host) countries in the same region.

Based on our research findings, we then derived the following conclusion from our analysis of the data collected.

Finding 2: Subsidiary’s external environment considerations, namely labor quality and political stability, vary from the categories of regional strategy adopted by individual subsidiary. Local environment with higher labor quality was proven to link to higher level of value activities set up in the subsidiary.

HR Strategy

Table 8 outlined the results of MANOVA for subsidiary’s HR strategy. As indicated, there were significant differences found in both the dimensions of HR regional integration (P<.000) and HR local investment (P<.001) among various categories of regional strategy. It seemed that subsidiary’s strategy with enhanced value-added activities placed more emphasis on both HR regional integration and local investment. These findings were consistent with the argument that, in contrast to less value-added activities, subsidiary with higher value-added activities usually requires more HR investment and exercises more strategic control and coordination; for example using of expatriate manager and professionals to exercise and enhance on the level of strategic control and to improve upon coordination (Dunning, 1994).

testing which enables us to present the conclusion as follows.

Finding 3: Subsidiary’s regional HR strategy, in terms of regional integration and local investment, are emphasized with increase intensity according to the extent of its escalation in the subsidiary’s value-added activities.

HR Competencies

Table 9 specified the results of MANOVA for HR competencies. As indicated, there were significant differences found in the dimensions of HR professional competence (P<.000), business competence (P<.000), and the competence in managing of change (P<.001) among various categories of regional strategy adopted by the subsidiary. The analysis reflected that subsidiaries with the strategy of regional integration center stressed more on various HR competencies than the rest of the remaining categories. These findings revealed that the subsidiary with higher strategic position and importance certainly requires its HR people to demonstrate higher (better) competencies in various accounts for the HR competency to support and sustain its competitive advantage (Ulrich, Brockbank, Yeung & Lake, 1995).

It’s also worthy to note that subsidiaries with the strategy of providing professional service stressed more weights on various HR competencies than subsidiaries involved

mainly in the manufacturing activity. It is believed that professional service requires higher labor quality and hence creating higher value than manufacturing activity. By the same token, subsidiaries that provide professional service with higher value undoubtedly require their HR people to deliver absolute business competencies on tasks.

Supported by the empirical findings given with the statistical analysis conducted, we therefore depict a conclusion set forth.

Finding 4: Subsidiaries with the strategy of creating higher value-added activities require higher HR business competencies.

HRM Effectiveness

Table 10 exhibited the results of MANOVA for subsidiary’s HRM effectiveness. As indicated, there were very significant differences found in both dimensions: strategic (P<.000) and technical (P<.000) among various categories in the regional strategy adopted by the subsidiary. It seemed that subsidiary’s strategy with more value-added activities demonstrated better effectiveness of strategic HRM and

use technical HRM activities to select and develop high-ability employees who could add value to the work processes. On the other hand, the strategic HRM activities help a firm to secure its HR significance and to safe guard against replication (Huselid, Jackson, & Schuler 1997).

It’s also worthy to note that subsidiaries with the strategy of providing professional service demonstrated higher effectiveness on both strategic HRM and technical HRM. The reason may be that professional service requires high-ability employees whose value requires both HRM effectiveness to leverage and sustain.

Finding 5: Subsidiaries with the strategy of creating higher value-added activities have achieved higher levels of both strategic and technical HRM effectiveness.

Summarized from the above, a number of conclusions are hence derived and based upon.

Conclusion and Implication

Our current research study on the strategic HRM of the Taiwanese MNCs’ subsidiaries in responding to their regional integration strategy shed new light on the

international HRM issues in the era of regionalization. It was found that the subsidiary’s strategy can be classified into five categories with different extent and items of value-added activities, ranging from assembling operation, professional service, deepening marketing, widening production, to regional integration center. In addition, in responding to the variation of strategic concerns and approaches, our findings also reveal that factors include external environmental considerations, and regional HR strategy of the subsidiary need to be put under the umbrella evaluation when defining of corporate strategic visions. Nevertheless, our research findings also suggested that when the higher value a subsidiary adds upon its existing activities, it would concurrently emphasize and require for a higher level of regional HR integration, local HR investment, HR business competencies, and HRM effectiveness.

These findings reveal that for those subsidiaries evolving to serve as the regional center or headquarter surely required their host countries to offer a higher level of labor quality and better political stability to enable the HR people to process higher HR competencies in order to achieve higher HRM effectiveness while exercise more complicated HR controls and coordination for regional integration. Moreover, a subsidiary also needs higher HR competencies and HRM effectiveness in order to

Our findings carry several implications. First, when tie the HR development issues to the stages of economic development of a country in the world economy, it is crucially important to promote the labor quality of a given country in lieu to respond for the evolutionary of its economic development and for better competitive edge in dealing with global economy. Or else, the host country will run into difficulties to hold the leverage to attract the MNCs to invest and set up higher value-added unit locally; should this happened, it might further lead to a block in host’s further economic development. In the case of Taiwan economy, having to serve as the Asia-Pacific manufacturing base with an extensive history, Taiwan needs to transcend itself into the stages of innovation driven and/or information-and-service intensity. Without doing so, Taiwan’s position in the world economy will soon be replaced by Mainland China over cheaper manufacturing costs for attracting the MNCs. It is to say that in combination of providing higher labor quality with capabilities of international languages (English for example), be innovation driven, and the ability to offer quality professional services are the major priorities for the Taiwanese government in her development of HR policy.

sides of the straits. Even Taiwanese government hope to develop the island to be a regional logistic center to attract MNCs to set up their manufacturing, marketing and R&D activities locally. However, as shown in the results of this research, political stability and safety are among the lead very important locational considerations for the MNCs in picking up a location to set up their marketing and R&D activities for subsidiary to serve the entire region. Therefore, the ability to keep a sound and peaceful relationship across strait becomes the common expectation of MNCs and their subsidiaries in Taiwan and this also challenges the wisdom of local government.

Third, in the evolving process of value-added activities of subsidiaries, HR people need to promote a good variety of HR competencies while upgrade the organization’s HR activities. By doing so, the subsidiary is able to allow and escalate better value-added activities to leverage the firm’s overall competitive advantage and hence secure its competitive position in the global value chain.

Forth, as shown by this research, when a subsidiary grows and evolves to add more value activities to serve the other units in the region; its HR staff need to broad their views of international business, expand their functions to serve oversea expatriates, and promote their role to become more strategic to match the goals of the MNCs.

Otherwise, the growth and evolution of the subsidiary will be limited, and such will lead to weakening of subsidiary’s primary value activities and eventually causes it to decay and lose in the global competitions.

Last but not least, given to the rather preliminary in its stage of current research, there are still a good number of HR related issues await to be addressed in the researches forthcoming. Issues related to the broadening of the horizon for host economy within the same region and the treatment pertaining to the cross-cultural phenomenon remain to be explored by later scholars. These are critical topics worthwhile of investigation and need to be carried forward by future studies.

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