Management localization and autonomy

In the early 1990s, Japanese subsidiaries in other parts of Asia were far less likely than their US counterparts to employ local managers, to employ local personnel in senior technical roles, or to have nationals of the host country on their boards. Even where firms employed local managers, they were often “shadowed” by Japanese personnel and relegated primarily to the performance of public relations roles for the company. In their study of Japanese subsidiaries in Australia, Nicholas et al. concluded that Japanese nationals dominated the upper echelons of management, and that “there was a systematic bias in favor of Japanese managers holding key management positions, especially those involving the implementation of the technology or human capital critical to the competitive advantage of the firm.” In part, the low levels of representation of local staff in management positions may stem from the replication of the lifetime employment system in overseas affiliates. This has two effects. First, if expatriates initially staff the subsidiary, any replication of the seniority system inevitably delays the transition to locally recruited managers—unless the senior staff are relocated elsewhere within the corporation. Even if such opportunities for transferring senior staff arise, however, many Japanese subsidiaries expect local recruits to complete a lengthy training and socialization period before they receive promotion. These company expectations generate the second effect: frustration on the part of locally recruited managers with their promotion prospects, which often leads to their seeking employment elsewhere. Several surveys of local managers in Trans-National Corporation subsidiaries in Asia report that Japanese employers were viewed far less favorably than their American or European counterparts Interestingly, in their Asian affiliates, Japanese firms seldom practiced the job rotation and quality-control circles for which they have won much admiration. Instead, a crude “Fordism” often prevailed. The replication of the seniority system in Asian subsidiaries constitutes a structural explanation for the low levels of localization of management in Japanese companies. In addition, the lack of familiarity of most locals with the Japanese language, with corporate culture and with the networks within which the company operates are barriers to localization. Undoubtedly, however, corporate preferences were also a powerful factor acting against localization. Companies see the employment of Japanese managers as facilitating central control over essential operations. They also fear that localization of management will increase the risks of leakage of commercial secrets to the local economy.ng of components and capital goods; replication of production networks; and distribution of R&D activities. Not only was the management in Japanese subsidiaries generally less localized than that of other TNC subsidiaries, but the management enjoyed far less autonomy in key areas of decision-making. Several studies have found that decision-making within Japanese TNCs tended to be hierarchical and centralized in the hands of headquarters. Managers of subsidiaries enjoyed little freedom of action on issues such as the sourcing of capital goods and components In Guyton’s  survey of Japanese affiliates in Malaysia, a majority of the Japanese companies reported that their parent companies dictated where machinery should be acquired The lack of autonomy for local management leads to a second significant difference between Japanese and US subsidiaries