Keywords

2.1 Introduction

In general, reasons for overseas expansion include accessibility toward consumption area, ease of material/parts procurement, ease of securing human resources, preferential treatment policies of invested country’s government, high local scientific and technological standard, low wages, and reduction of trade costs (Kuemmerle 1999; Dunning 2009). When these conditions are met, a typical company would start investing overseas and start raising the level of localization through a gradual process (Dunning 1993).

A multinational company tends to establish its production subsidiary in a local area during the initial phase of its overseas expansion. Once the management of the local production subsidiary gets on track, the company’s headquarters will transfer the decision-making right on parts procurement to its subsidiary, and such a subsidiary will be transformed into an enterprise that has both sales department and production department. When several of these kinds of production bases start scattering throughout local area, the manufacturer would then set up a supervisory company that can oversee these bases. When the product brand becomes established in the local area, it becomes necessary for the manufacturer to start developing products that can cater closely to the local market in a prompt fashion. To meet these kinds of demands, the manufacturer will set up a technical center in local area and starts its product development process. Once the product development is localized, the manufacturer is able to expand a strategy where production and development are integrated on local basis (Asakawa 2003).

Although we examined the localization of product development above, we can further divide them into local improvement development and local self-development depending on the level of localization that development divisions can achieve (Ronstadt 1978). Local improvement development refers to a development that makes a minor improvement on the product made in home country to cater more to local circumstances. On the other hand, local self-development refers to a development where a local development center comes up with a drawing of the product on its own that is different from its home country. In recent years, we are seeing more and more cases of automobile manufacturers advancing their local self-development to respond to the change in local market needs promptly.

However, for all the efforts so far made by many automotive manufacturers in aggressively advancing such development, the current reality is that local self-development is not advancing as they would have hoped in line with their plan (Park 2012). Although we can think of various reasons as to why local self-development is not advancing, a lack of progress in local development of production technology that underpins the development technology can be cited as a potential significant factor.

If a manufacturer desires to advance self-development at local site, it obviously needs to start making prototypes locally. Needless to say, if the local production technology is at a substandard level, the manufacturer will have a difficult time producing high-precision prototypes at such a site, thus greatly constraining the progress of self-development.

Preceding studies attributed the lack of improvement in local production to the practice of production system where manufacturers would first procure parts and machines from Japan and then engage in processing and assembling at a local site.

Shintaku and Ohki (2012a, b) are advocating that real local procurement is achieved by improving the local production technology by procuring parts and machines on a local basis. In the 2015 interim report of Denso, it states that localization of real production technology is achieved by the utilization of local parts and machines. Localization of real production will become possible by procuring parts and machines in local areas that would otherwise be imported from Japan.

However, when the previous studies discussed the real localization, it mainly focused on the local procurement aspect of parts and machines, and it did not adequately examine the impact the local procurement of molds has on real localization. Even if parts and machines are localized, it will be difficult to improve the production technology in a local area without localizing the production of molds which have a decisive influence over precision and production efficiency of a final product. In many cases, Japanese automotive manufacturers procured molds by first designing the molds used for global models in Japan, then sending its data to plants in Japan and local area, and finally making copied molds at these plants (Tanaka and Okamoto 2013). Although manufacturers can still procure molds by relying on exporting of copied molds or in-house production at a local area, etc., they will not be able to achieve the function where molds serve as the bridge between localization of production and localization of development. In other words, it will mean that they will not be able to achieve the goal of self-designing the development prototypes in a local area by improving the production technology, a role where molds will serve as the bridge between the localization of production and development.

Mold design is also directly connected to the localization of development, while simultaneously connected to the improvement of production technology. During the development process, a mold is required in creating a prototype based on the product drawing. In general, change in design is made during the production of prototypes since many design issues are discovered during this phase. When product design is changed, company is required to make frequent adjustments with the mold suppliers to make another prototype. Manufacturer will have a difficult time changing the design if the development of mold is not localized during this phase.

Even if manufacturers carry out product development locally, they will still need to return the mold back to Japan and repair it there in order to implement a design change as long as the mold supplier is located in Japan. This kind of mold repair process is one of the important factors behind why the period of product development is extended. In other words, since the mold significantly affects the delivery date of a prototype, if the mold supplier is located in Japan, such factor will greatly limit the localization of design development. Accordingly, in this study, we will regard real localization as achieving self-development in a local area through the localization of mold, and we will analyze the effective way to collaborate localization of molds and localization of product development to advance real localization further.

2.2 Supplier Development of Japanese Manufacturers

A number of studies have been conducted on the structure and functions of buyer–supplier relationship in the Japanese automobile industry (Itami 1988; Asanuma 1997; Fujimoto 1998; Dyer and Nobeoka 2000). Japan–U.S comparative studies also suggest that supplier systems constructed by Japanese automobile manufacturers have a competitive advantage (Cusumano and Takeishi 1991; Dyer 1996, 1997).

In particular, a certain study (Sako 2004) suggests that in identifying the characteristics of Japanese automotive manufacturers, one must note that they have been carrying out supplier development for a few decades (in other words, these automotive manufacturers have been carrying out activities to improve organizational capability of suppliers). Based on the comparative case study between three main automobiles manufactures—Honda, Nissan, and Toyota—Sako (2004) observed the factors that enabled automotive manufacturers to strengthen their suppliers’ organizational capability, while simultaneously building a continuous long-term relationship with their suppliers. However, Sako (2004) suggests that Japanese automobile manufacturers will have a difficult time carrying out supplier development overseas for the following reasons: (1) Historical differences between countries, (2) Knowledge being communicated to suppliers from automotive manufacturers includes tacit knowledge and knowledge that is difficult to codify, and (3) The scope of supplier development is expanding (for example, ranging from production process in a plant to the entire company).

Furthermore, Dyer and Nobeoka (2000) have identified the productivity and comparative advantage of knowledge sharing network constructed by Toyota and its suppliers. In Toyota Group, explicit knowledge and tacit knowledge are transferred/shared within the network through the processes such as Toyota’s operation management consulting division(OMCD) providing guidance to suppliers, loaning and dispatching Toyota employees to suppliers, activities of the cooperative committee consisting of the suppliers, and self-research activity (self-study) conducted by cooperative committee.

Reproduction of this type of knowledge sharing network was also conducted in the U.S. Specifically, this network was constructed through the following three steps: (1) Construction of weak ties between Toyota and its suppliers, (2) Construction of strong ties between Toyota and its suppliers, and (3) Construction of strong ties among its suppliers (participation in the cooperative committee).

2.3 Formation of Supply Chains in ASEAN

Meanwhile, the preceding studies have not examined in sufficient detail the formation process of supply chain, supplier development, and localization of parts procurement in the ASEAN region, where Japanese automobile manufacturers have been making a full-scale business development since 1990s. In particular, Japanese manufacturers are running into a cost problem originating in Japan called “Japan Cost” when procuring parts from Asia including ASEAN.

Shintaku and Ohki (2012a, b) have largely divided the localization of parts procurement into “superficial localization” and “real localization.” The superficial localization refers to the case where a company switches over to procure parts from an invested country, but still ends up importing materials and production machines from Japan in actually manufacturing these parts. In other words, it refers to the case where on surface the company is achieving local procurement, but in reality is still facing the problem of Japan Cost. If all they do is to advance this kind of superficial localization, they may potentially not be able to compete against China, Korea, or ASEAN companies which are steadily improving their competitiveness.

On the other hand, when a manufacturer raises the genuine local procurement rate by actually climbing up to the upstream of supply chain (parts, materials, etc.), we call this “real localization.” Advancement of real localization will not only raise the cost competitiveness but also lead to the preparation for risks such as natural disasters.

In order to build supply chain in developing countries where local technological base is nonexistent, companies need to improve the technological capability of local suppliers because it is taken for granted that automobile manufacturers assure the good quality of the product. As mentioned above, Japanese companies have been strengthening their supplier development, i.e., organizational capability of suppliers. They have been able to manufacture high-quality products at a low cost by wisely managing tacit knowledge that cannot be converted into explicit knowledge through organizational process and by wisely managing such knowledge between manufacturers and their suppliers, for example. Accordingly, in order for Japanese companies to build supply chain overseas, they need to transfer the know-how that they have cultivated in Japan to overseas subsidiaries and their suppliers, and they need to provide training such as improving workers’ mindset (willingness to change the status quo) by providing instructors to improve cooperation within organization and between companies, instead of just providing technological procedures. If adequate training cannot be provided within the company, the customer company needs to provide technological support to overcome such shortfall.

This kind of close relationship between companies achieved through technological support is often seen between automobile manufacturers and their suppliers, commonly known as “KEIRETSU”. In the academic field, “KEIRETSU” is regarded as a close relationship between companies, and only empirical studies regarding this close tie (capital, executive, transaction, and debt) have so far been conducted (Lincoln et al. 1996). However, in order to understand KEIRETSU of automobile industry, we need to focus on the management between organizations, instead of just looking at close relations in terms of capital, executives, and transactions. In light of this, in this study, we will examine how supply chain is built in Thailand from the standpoint of automobile manufacturers fostering suppliers through technological support. As mentioned above, the preceding studies did not adequately examine how the relationship between automotive companies (“KEIRETSU”) is formed overseas.

Since KEIRETSU-oriented relationship can advance localization through a close cooperation between automobile manufacturers and their suppliers irrespective of a link in terms of capital and people, technological support by automobile manufacturers with managerial vitality will have a significant impact.

2.4 Relation Between HRM, Corporate Performance, and Employee Behavior

2.4.1 Previous Studies on the Formation of HRM Relating to Firms’ Overseas Expansion

The study of international comparisons regarding the development of HRM can be divided into two approaches: the individual approach that compares the development of individual policies and the approach that makes comparisons between systems by viewing HRM as one such system. There are many preceding studies that are categorized under the individual approach such as the difference between career length during the promotion process (Honda 1999), human resource fostering systems (Suzuki 2004), merit rating system comparison (Kimoto 1994), and results-based policy comparison. These studies have identified differences in HRM practices between countries.

In contrast to the accumulation of these kinds of individual approaches to HRM, there are also studies that attempt to compare the systemic aspect of HRM. In Japan, Aoki (1992) and Asanuma (1997), who attempted to draw comparisons from the standpoint of comparative regulation analysis, succeeded in explaining the rationale behind each HRM system. They succeeded by comparing Japanese and U.S. companies, viewing such companies as archetypes. Furthermore, by using a model that was derived deductively, Marsden (1999) conducted a comparative analysis of major countries in Europe (including the U.K., France, and Germany) that explained the rationale behind classifying, taking system diversification into account. Marsden (1999) also identified the fact that diversification of regulation is not just a rationality that exists on a certain point but is also being influenced by the existing employment practices shared throughout society; consequently, he suggested that HRM system of each country has been constrained by the social rules that have evolved through past events.

In other words, when a company in a certain country decides to invest in another country, the HRM of the company in the country where the investment is made will not only be affected by the HRM implemented in the home country, but also by the social system of the foreign country. As a result, the HRM of such a company will show a difference in its development between its home country and the country in which it invests.

2.4.2 HRM Practices and Corporate Performance

Previous studies have identified that the development of HRM has an impact on the corporate financial outcomes that also serve as the performance indicators of SCM.

Guest (1997) proposed a six-step HRM flow model with elements ranging from HRM strategy to financial outcomes, suggesting that the model can capture organizational performance that contributes toward financial outcomes by applying HRM practices toward the company’s strategy in a consistent manner. This model captures the following sequence as a series of flows and clearly indicates the area of HRM and organizes its input and results: HRM strategy (distinction, cost leadership, etc.) → HRM practices (general personnel measures, work design, etc.) → HRM outcomes (commitment, etc.) → behavior outcomes (motivation, behavior, etc.) → performance outcomes (productivity, turnover rate, etc.) → financial outcomes (profitability, ROI, etc.). Using this kind of HRM model as the theoretical basis, various empirical studies on HRM from the standpoint of strategic HRM were accumulated (Sun et al. 2007).

The attempt to identify the relation between HRM practices and corporate performance was conducted in numerous countries around the world, with the U.S. taking the initiative. For example, Delaney and Huselid (1996) investigated HRM practices and financial outcomes by targeting 590 U.S. companies. They found that employee training practices impact organizational performance in areas such as quality, new product development, and customer satisfaction, while staff selectivity methods impact market performance in areas such as market share and sales.

Outside the U.S., Vlachos (2008) conducted a survey by targeting 71 food manufacturing firms in Greece, and found that information sharing policies toward employees and careful operation of employee hiring processes impacted companies’ financial outcomes. Gooderham et al. (2008) conducted a questionnaire survey by targeting personnel managers of 3200 companies in 16 Western European nations and found that clear implementation of evaluation/dealing of individual and group performance impacted financial outcomes. Furthermore, Fey and Björkman (2001) conducted a survey by targeting personnel managers of 101 companies from Finland, Sweden, the U.S., the U.K., and Germany with operations in Russia. They found that employee ability training, performance evaluation, fostering of managers, and performance feedback toward managers impacted corporate performance. By identifying the direct relation between HRM practices and corporate performance, these studies have made a significant contribution toward verifying the aforementioned HRM model. However, when it comes to the mechanism of how HRM practices contribute to corporate performance, we are still solely relying on the theoretical model provided by Beer et al. (1984) and Guest (1997). Although these studies predicted that employee behavior has an impact, they did not empirically identify the impact. Researchers thus started recognizing the importance of further clarifying the relationship between HRM practices and employee behavior by identifying the type of employee behaviors that can contribute toward corporate performance (Fig. 2.1).

Fig. 2.1
figure 1

Linking HRM and performance (Guest 1997)

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2.4.3 Employee Behavior that Impacts Corporate Performance

Katz and Kahn (1978) categorized the behaviors that enhance performance into three categories: “joining and staying in system,” “dependable behavior,” and “innovative and spontaneous behavior.”

“Joining and staying in system” applies to items such as joining the company, leaving the company, and work absences. High turnover rate and absence rate will excessively raise organizational uncertainty, and this will not only damage the stability of production activity but will also lower productivity. Consequently, participation and affiliation toward systems will be assessed as essential work behavior.

“Dependable behavior” refers to a behavior that can meet the organization’s required standard of performance in a role. Categories and amounts of work performance activities that are expected in the workplace (work rules, job description, requirements of superiors/organization, etc.) are established by the company. When workers meet these standards, the organization can achieve (or exceed) a minimum level of organizational performance. This kind of behavior is being recognized as “in-role behavior.”

“Innovative and spontaneous behavior” refers to discretionary behavior that exceeds the expected behavior and required standards for a given role, and it includes a wide range of behaviors. These behaviors include, among others, “cooperative activities with fellow members,” “actions protective of systems or subsystems,” “self-training for additional organizational responsibility,” and “creative suggestions for organizational improvement.” Katz and Kahn (1978) call this third behavior “extra-role behavior” and suggest that this behavior is extremely important in securing organizational performance.

2.4.4 Two Types of Outside-of-Role Behavior

As one aspect of the third behavior indicated by Katz and Kahn (1978), Smith et al. (1983) conceptualized the employee discretionary behavior entitled “Organizational Citizenship Behavior” (OCB). This behavior is defined as a discretionary-type individual behavior that is beneficial to the organization, which is not guaranteed under the official compensation system. Although individual actions under this type of behavior will not have a significant impact on the overall organizational performance, when accumulated, they will streamline the operation of the organization and will have a medium- to long-term effect on organizational performance (Organ et al. 2005). Many researchers set OCB subscale. “Altruism” and “courtesy,” advocated by Organ (1988), are two well-known behaviors in this category. Altruism refers to a behavior that helps others, and courtesy refers to a behavior that influences others to prevent problems in advance. We can assess this type of behavior as something like the third behavior suggested by Katz and Kahn (1978): “cooperative activities with fellow members” and “actions protective of system or subsystem.”

Activities that promote improvement in organizations and work such as “self-training for additional organizational responsibility” and “creative suggestions for organizational improvement” are other pillars of the third behavior indicated by Katz and Kahn (1978). Improvement activity executed through employees own efforts is one of the most effective ways to achieve corporate goals and improve work efficiency. For example, making a constant effort to improve at the production line has contributed toward improvements in productivity at the production site as well as in product quality. Furthermore, in the service industry, where primary information from consumers is being compiled by onsite workers who are service providers, it is possible to achieve accurate and prompt workplace improvements and to reform the process of providing services based on the initiative of workers. In recent years, many cases where these kinds of improvements and reforms are required by workers have been seen. Morrison and Phelps (1999) conceptualized this type of behavior as “taking charge” and conducted its operationalization. In the same way, similar behaviors such as “innovative behavior” by Scott and Bruce (1994) and “proactive behavior” by Parker et al. (2006) have also been conceptualized. In this study, we will call this type of behavior “improvement behavior.”

OCB and improvement behavior have spontaneity in common, but also have important differences that contribute toward organizational performance through different processes. OCB contributes by urging smooth organizational activity through strengthening the social function of organization, while improvement behavior makes its contribution by changing the structure of the economic function of the organization. With these differences in mind, we believe it is best to examine these two behaviors separately.

2.4.5 Previous Studies on HRM and Employee Behavior

Previous studies have attempted to identify the mechanisms behind how HRM practices contribute toward corporate performance by clarifying the relation between HRM practices and employee behavior. For example, Sun et al. (2007) conducted a survey by targeting 2174 hotel employees of 81 hotels operating in 12 cities in the People’s Republic of China. This survey analyzed the relation between HRM and OCB (OCB is recognized as a well-known employee behavior).

The results of the survey clarified that high-performance human resource practices composed of items such as job security, long-term perspective evaluation, extensive training, and participation in decision-making had an impact on OCB.

Furthermore, Gong et al. (2010) conducted a survey by targeting 454 senior executives who are enrolled in EMBA (Executive Master of Business Administration) programs in Shanghai. This survey was conducted by asking senior executives about their perception of HRM practices, while also asking them about the emotional commitment of middle managers (their subordinates) and condition of OCB. As a result, the study clarified that high-performance human resource practices had an impact on employee behavior through the medium of emotional commitment, while HRM practices directly affected elements of employee behavior.

Furthermore, Nishii et al. (2008) conducted a survey by targeting 4208 employees and 1010 departments of supermarket enterprises. The results of the survey clarified that quality and employee enhancement HR practices had an impact on employee behavior through the medium of employees’ affective commitment and job satisfaction.

As shown above, researchers from various countries have attempted to identify the relation between HRM and employee behavior. These preceding studies only conducted by-country analysis, and therefore did not examine the differences between countries. However, to secure SCM efficiency, we must once again stress the importance of securing the quality of employee behavior of individual companies. Given this, we believe it is important to identify the impact that HRM has on the specific employee behavior that will lead to the desired quality of behavior (in other words, reliable behavior and innovative/spontaneous behavior). Accordingly, in this study, we will attempt to conduct a comparative survey regarding the relation between such HRM practices and employee behavior by comparing Thailand and China—countries that enjoy heavy investment by Japanese companies—and including Japan itself in the comparison.