Abstract/Summary

Governments across the Arabian Gulf aim to reduce their dependence on expatriates by implementing localisation policies. Building on institutional and legitimacy theories, we seek to advance our understanding of the effects of such policies on multinational enterprises (MNEs). We used data from 157 MNEs operating in Saudi Arabia and found the indigenisation of the HRM function is closely correlated with the level of workforce localisation: key factors empowering localisation, defined as recruitment and training practices geared towards the needs of locals, include the demographics and role of the HRM Director. Theoretically, we contribute to the literature on institutionalism and legitimacy by revealing how various institutional forces influence the process of selection and transfer of HRM practices to adapt to the institutional environment of a given context. Our research also shows that if MNEs follow government recommendations, develop links with local educational institutions to target suitable job candidates, and adapt to shortages in local skills and competencies by investing in the training and development of local workers, they will be more likely to achieve success in workforce localisation and legitimacy.