The Effect of Economic and Institutional Development of the Host Country on the Subsidiary Staffing Policies of Korean Multinational Enterprises

We propose that the multinational enterprises (MNEs) from emerging countries face “liabilities of origin (LOR),” in that the extent of the liabilities of foreignness (LOF) encountered in a host country are greater than those faced by MNEs from developed countries. The more developed the host country is in terms of its economic or institutional development relative to the MNE’s country of origin(COO), the greater such liabilities that the MNE is expected to face. We posit that the varying degrees of the LOR influence the extent to which MNEs from emerging countries rely on the parent country nationals (PCNs) in the management of subsidiaries. We also hypothesize that the effects of the length of subsidiary operation and the intangibility of the proprietary assets on the expatriate assignment are moderated by the host country level of development. Multilevel analysis of the subsidiary staffing practices of Korean MNEs largely supports the argument.