Staff localization and environmental uncertainty on firm performance in China

Abstract

This paper examined the form of the localization-performance relationship as moderated by environmental uncertainty. We postulated that the positive impact of staff localization on firm performance only continues to a certain point. Beyond this point, the costs of a high degree of staff localization outweigh the benefits. The negative effect of an increase in localization beyond an optimal point is expected to be stronger under the condition of high environmental uncertainty. Both the curvilinear relationship and the moderating effect of environmental uncertainty are confirmed through the survey results of 111 MNC subsidiaries operating in China. The result suggests that MNCs should pay particular attention to balance their deployment of local staff and expatriates in their international expansion. © 2008 Springer Science+Business Media, LLC.