Localization in human resource management: Comparing American and European multinational corporations

Using data from the UK, Ireland, France, Denmark, Germany and Sweden collected by the 1995 Cranfield Network on European human resource management (HRM) (Cranet-E) Survey, this study tested two hypotheses: (1) Subsidiaries of American multinational corporations (MNCs) operating in Europe will tend to pursue less localized, more standardized HRM policies and practices than their European counterparts ("the economic dominance hypothesis"). (2) The difference between the approaches of American MNCs and European MNCs operating in Europe to HRM localization will decrease as HRM regulation in the subsidiary's host country increases ("the societal context hypothesis"). The data supported both hypotheses, and showed that economic dominance and societal context interact in their effect on MNCs' decision to localize HRM practices. Implications of the findings for public policy and future research are discussed.