Multinational Firm Knowledge,Use of Expatriates,and Foreign Subsidiary Performance

The impact of knowledge transfer on foreign subsidiary performance has been a major focus of research on knowledge management in multinational enterprises (MNEs). By integrating the knowledge‐based view and the expatriation literature, this study examines the relationship between a multinational firm's knowledge (i.e. marketing and technological knowledge), its use of expatriates, and the performance of its foreign subsidiaries. We conceptualize that expatriates play a contingent role in facilitating the transfer and redeployment of a parent firm's knowledge to its subsidiary, depending on the location specificity of the organizational knowledge being transferred and the time of transfer. Our analysis of 1660 foreign subsidiaries of Japanese firms over a 15‐year period indicates that the number of expatriates relative to the total number of subsidiary employees (1) strengthened the effect of a parent firm's technological knowledge (with low location specificity) on subsidiary performance in the short term, but (2) weakened the impact of the parent firm's marketing knowledge (with high location specificity) on subsidiary performance in the long term. We also found that the expatriates' influence on knowledge transfer eventually disappeared. The implications for knowledge transfer research and the expatriate management literature are discussed.     

Impact of nationality composition in foreign subsidiary on its performance: a case of Korean companies

This study explores how the nationality compositions of management teams and employee groups in foreign subsidiaries can affect subsidiary performance. By analyzing firm-level data on 401 South Korean subsidiaries across 35 countries in the period between 2005 and 2007, we found that balanced compositions in both subsidiary management teams (SMTs) and subsidiary employee groups (SEGs) were positively associated with subsidiary performance. The results suggest that the benefits of balanced composition are higher for both innovative and coordinative tasks conducted by management teams and for simple computational tasks conducted by employee groups. The effect of the SMT and SEG compositions on subsidiary performance, however, may depend on the host country's institutional conditions. These findings have practical implications for multinational staffing strategies in order to ensure high performance in subsidiaries and for host country policies used to attract high quality foreign direct investments.     

Valuing Japan-based German expatriate and local manager's functions: do subsidiary age and managerial perspectives matter?

Managerial functions valued by expatriates and reasons for appointing host country managers were examined in an exploratory, multimethod (interview and questionnaire) study with expatriates and local managers as the respondents. Based on theoretical perspectives of agency theory, transaction costs theory, resource-based views and organizational learning theory, changes in the valuation of these functions were hypothesized and examined for subsidiary age and nationality of the respondent. Expatriate and local managers' views supported previous research on certain management functions but differed on others (e.g. management development). The data indicated curvilinear relationships for a number of managerial functions between nationality of top manager and age of the subsidiary. Strategic factors were analysed by subsidiary age and nationality of the respondent manager to understand more about maturity of host company operations and strategic orientations. The results indicated the growth in the strategic functions of technological leadership and market development/branding in older subsidiaries. Implications of the results were discussed.     

Subsidiary staffing,cultural friction,and subsidiary performance: Evidence from Korean subsidiaries in 63 countries

Drawing from the notion of cultural friction and based on the agency theory rationalization of multinational enterprise (MNE) headquarter–subsidiary relationship, we examine the impact of cultural friction in foreign subsidiaries on subsidiary performance. We argue that cultural friction, arising due to a high presence of parent country nationals (PCNs) in culturally distant locations, has a detrimental effect on subsidiary performance. This effect is the strongest when the cultural friction is at the top management team (TMT) level and the weakest when friction is at the regular employee level. However, this relationship is contingent on factors that work as drags or lubricants for cultural friction between PCNs and host country nationals (HCNs). We identify governance mode and language differences between home and host countries as drag parameters and host country experience and subsidiary interdependence as lubricants that condition the effect of cultural friction on subsidiary performance. Empirical findings based on a longitudinal sample of 7,495 foreign subsidiary observations of 467 Korean MNEs in 63 countries during 1990–2014 provide robust support for our theoretical predictions.     

Headquarters−Subsidiary Interdependencies and the Design of Performance Evaluation and Reward Systems in Multinational Enterprises

This study investigates the impact of headquarters–subsidiary interdependencies on performance evaluation and reward systems in multinational enterprises. Headquarters–subsidiary interdependencies refer to the extent to which headquarters and subsidiaries depend on each other to accomplish their tasks. When headquarters–subsidiary interdependencies are present, it becomes more difficult to reward the performance of subsidiary managers because these interdependencies induce noise on subsidiary-level accounting performance measures, while at the same time high levels of goal alignment between headquarters and subsidiary managers are required. Based on survey data from 82 foreign subsidiaries operating in Belgium with headquarters in 14 different countries, our partial least squares path modelling results show that as headquarters–subsidiary interdependencies increase, headquarters use more participative performance evaluation and consider more the effects of uncontrollable factors on subsidiaries' performance when rewarding subsidiary managers. More importantly, while prior research suggests that interdependencies induce noise on unit-level accounting performance measures, our results indicate that participative performance evaluation may mitigate the noise so that headquarters still rely on subsidiary formula-based compensation using accounting measures to reward subsidiary managers.     

The Driving Forces of Subsidiary Absorptive Capacity

The study investigates how a multinational corporation (MNC) can promote the absorptive capacity of its subsidiaries. The focus is on what drives the MNC subsidiary's ability to absorb marketing strategies that are initiated by the MNC parent, as well as how the subsidiary enacts on this absorptive capacity in order to compete in its focal market. The dual embeddedness of MNC subsidiaries plays a key role in this investigation, as subsidiaries belong to the MNC network and are simultaneously embedded in their host country environment. We argue that subsidiary absorptive capacity is formed as a purposeful response to this dual embeddedness. An analysis of marketing strategy absorptions undertaken by 213 subsidiaries reveals that MNCs can assist their subsidiaries to compete in competitive and dynamic focal markets by forming specific organizational mechanisms that are conducive to the development of subsidiary absorptive capacity. The findings hold important theoretical and practical implications.     

The effect of international staffing practices on subsidiary staff retention in multinational corporations

This paper contributes to the scarce body of research on employee turnover in multinational corporations' foreign subsidiaries and addresses some key issues related to dealing with turnover of local staff. Based on a literature review, I conceptualize locals' perceived career prospects and their organizational identification as key variables mediating the relationship between international staffing practices and local staff turnover. In a second step, the paper develops instruments that help international firms to retain their subsidiary staff. Specifically, I focus on how international staffing practices need to be configured to ensure employee retention and I derive moderating factors. My arguments are integrated into a framework for the effect of international staffing practices on subsidiary staff retention in multinational corporations.     

Determinants of central control and subsidiary autonomy in HRM: the case of foreign‐owned multinational companies in Spain

This article examines the factors affecting HRM subsidiary autonomy within multinational companies (MNCs). Drawing on institutional theory arguments, along with an analysis of the impact of international HRM structures, it attempts to identify the multiplicity of factors influencing subsidiary autonomy with regard to HRM. Using data gathered from a highly representative survey of foreign MNC subsidiaries located in Spain, the results identify a number of factors that hold explanatory power. First, the distance between the home and the host country in terms of variety of capitalism is crucial in explaining variations in subsidiary autonomy. In addition, international HR structures, such as the existence of an international policy‐making body and the use of HR shared service centres or HR data reporting mechanisms, are also important in accounting for the degree of autonomy over HR issues experienced by the MNC subsidiaries in our study.     

DIVISION HEADQUARTERS GO ABROAD - A STEP IN THE INTERNATIONALIZATION OF THE MULTINATIONAL CORPORATION*

Why are division headquarters of multinational corporations in some cases located abroad? In the multinational corporation the physical location of division headquarters is a problematic issue because of the need for close links both to corporate headquarters and the foreign subsidiaries. This paper develops a model explaining this location as a consequence of power relations associated with the internationalization of the corporation and tests it on a sample of divisions of Swedish multinationals. the results support the view that power relations have an impact on location of division headquarters. One interesting result is the clear indication of countervailing forces, consisting of an attraction force of foreign dominant subsidiaries and a resisting force related to the interests of corporate headquarters.     

Who's in Charge? An Empirical Study of Executive Staffing Practices in Foreign Subsidiaries

This study investigates executive staffing practices in foreign subsidiaries of multinational corporations. Grounded in a literature review of the reasons for employing either parent country nationals or host country nationals in top management positions in foreign subsidiaries, a number of factors influencing the choice between these alternatives are identified. Using a combination of an archival and mail survey research method, the influence of each of these factors is empirically tested with a sample of nearly 3000 observations. © 2001 John Wiley & Sons, Inc.     

When much is not better? Top management compensation,board structure,and performance in Spanish firms

Previous empirical results reveal several contradictions when relating top management compensation, board structure and levels of performance. While fewer directors and more external directors are associated with better supervision, there is no agreement on the effect on top management compensation level. This lack of consensus is even more noticeable when analyzing the effect performance. This paper offers a theoretical framework and a panel data methodology based empirical study to account for how earlier analyses have differed. Given the large board dimension in the Spanish market, information processing perspectives are confirmed which positively link board size with higher top management compensation. Similarly, a higher proportion of external directors reduces top management compensation levels since it improves supervision and reduces insiders' power. Finally, a quadratic relation is obtained between performance and top management compensation. This relation explains a positive effect, supported by agency theory on performance at low levels of management compensation, and a negative effect which is consequence of higher managers' discretion at high levels.     

Foreign subsidiary perspectives on the mechanisms of global HRM integration

Often in connection with the integration‐responsiveness dilemma, research on HRM in multinational corporations (MNCs) speaks more to explaining the appearance of HRM practices in foreign subsidiaries than to the mechanisms through which such practices are globally integrated. Accordingly, and adopting a subsidiary perspective, the present study has two main aims. The first is to identify the key mechanisms of global HRM integration, how they are used and by whom, and the second is to investigate the factors that explain their usage. The study uses qualitative data from 40 personal interviews conducted with general managers and the most senior HR personnel across 20 Finnish‐owned subsidiaries in China. Based on the contingency view of organisations, explanations for mechanism usage are attributed to certain internal characteristics of the subsidiaries and to the Chinese institutional environment.     

跨国公司子公司治理研究

在经济全球化的今天,跨国公司在境外设立子公司已成为世界各国关注的中心,但同时由于跨国公司自身的特点及子公司的性质使得母子公司间存在着一系列的问题,而这些问题又都主要是源于对跨国公司子公司治理的忽视。对此,从跨国公司子公司的角度出发,探析子公司治理及其治理机制的建构。     

Introduction: service work and its implications for HRM

This article draws on our four case studies to examine the nature of the relationships between ABB and its Canadian subsidiaries. Starting from a critical review of the literature, it develops a framework that is sensitive to three levels of analysis: the factors that shape the parent corporation's strategies, the characteristics of the host countries in which the MNC operates and the characteristics of the local subsidiaries themselves. The empirical material illustrates how innovation is generated by a two-way process, in which the initiative of corporate leaders challenges the ‘interpretation’ of local actors. In doing so, we point to a number of key omissions in the influential attempt by Bartlett and Ghoshal to use ABB to develop a managerial theory of the firm. This research also leads to broader considerations regarding the interface between markets and organizations. As distinct from the orthodox view, a transnational corporation may be conceived as a mediator between the market and a local subsidiary. In many ways, the global corporation channels and mediates the impact of external market forces on internal organizational actors, through a process involving the exercise of politics and power. The article has significant implications for decision making on human resource management. In particular it stresses that local managers, local unions, and employees can think and act strategically only in as far as they properly assess the limits of their respective sphere of organizational autonomy within the corporation.     

In the eyes of the beholder: the HRM capabilities of the HR function as perceived by managers and professionals

This study investigated factors influencing line managers' and professionals' perceptions of the HRM capabilities of the HR function. Using a sample of 913 managers and professionals in subsidiaries of 11 Nordic multinational corporations, we tested the extent to which features of the unit's HRM system, attitudes of the unit's general manager and characteristics of the HR manager helped explain the perceived HRM capabilities. The analysis revealed that perceived HRM practice visibility and HRM inducements (the link between individual performance and HRM‐related benefits) were strong predictors of individual perceptions of the HR function's HRM capabilities. The use of e‐HRM and the most senior manager's attitudes towards the unit's HRM practices were also significantly related to perceived HRM capabilities.     

Transferring HR practices within multinational corporations

There is extensive evidence that planned transfers of management practices by the headquarters of multinational corporations (MNCs) to foreign subsidiaries are not always successful. In this article, we outline a model of factors influencing the transfer of HR practices to MNC units abroad. The article has two main contributions. First, we develop a more holistic understanding of the outcome of HR practice transfer as encompassing three dimensions: implementation, internalisation and integration. Second, we expand current explanations of transfers of practices to foreign units. We argue that transfer of HR practices is a social process where the governance mechanisms used by the MNC, characteristics of the subsidiary HR systems, the social relationship between the subsidiary and MNC headquarters, and the transfer approach taken by headquarters management will influence the outcome of the process.     

The comparative profitability of Canadian- and foreign-controlled firms

This study analyzes factors determining the profitabilty of 750 of Canada's largest manufacturing firms, both domestic- and foreign-controlled, over the period 1968-1972. It is found that US-controlled firms were more profitable than either Canadian- or other foreign-controlled firms, when various firm- and industry-specific factors are held constant. In addition, the higher was the degree of non-resident (presumably American) ownership, the more profitable were US-controlled firms. The reverse was true of other foreign firms. These results for US firms are consistent with the Hymer–Caves and internalization approaches to the multinational corporation. However, the results for other firms are not, thus suggesting that a ‘general’ theory of the multinational corporation has yet to be forwarded.     

Expatriate staffing in foreign subsidiaries of Japanese multinational corporations in the PRC and the United States

This study examines expatriate staffing in foreign wholly-owned subsidiaries and joint ventures of Japanese firms located in the People's Republic of China and the United States. Expatriates are conceptualized as performing two primary functions. The first is a control function in which the expatriate works to align the operations of the subsidiary with that of the Japanese parent. The second function is a knowledge role. In this role, either the expatriate acts to transfer the Japanese parent's knowledge to the subsidiary or the expatriate is an agent for the acquisition of host-country knowledge. We tested for these two functions using subsidiary-level data on Japanese firms' operations in China and the US. Our results indicate that the control function was more prominent in joint ventures in China than in the US. The results also indicate that expatriates played a more significant knowledge-transfer function role in technology and marketing-intensive industries in China than in the US. A lack of MNC experience in China was found to be associated with limited use of expatriates. Finally, expatriate employment was negatively related to the number of subsidiaries of the parent company worldwide.     

Societal institutions and HRM practices: an analysis of four European multinational subsidiaries in Bangladesh

Using the ‘societal-effect’ approach, a variant of the institutional theory developed and tested in Europe, this study investigates the impact of societal institutions on human resource management (HRM) practices of European multinational subsidiaries in Bangladesh, which is now on the list of the Next-11 economies of the world. In-depth case studies of four European multinational subsidiaries revealed the presence of different degrees of influence – partly attributable to societal effect – on the human resource practices of these subsidiaries. Our study added a new dimension to the interface between the strong and weak institutions and how such interfacing accords both legitimacy and reverse legitimacy to MNC subsidiaries and their societal institutions respectively. Another interesting finding of the study is the emergence of political system as a societal institution and, hence, a determinant of HRM practices in these subsidiaries. The study's implications are given.     

A Communication‐Based Theory of the Choice Between Greenfield and Acquisition Entry

This paper develops a communication‐based theory of the choice by multinational enterprises (MNEs) between greenfield and acquisition entry. It argues that MNE parents communicate with their subsidiaries for reasons of knowledge exchange, coordination, monitoring, and socialization. The expected communication costs arising from these activities are argued to increase with the verbal communication barriers existing between a prospective subsidiary and its parent, but this increase is argued to be larger for acquisitions because they require more extensive parent–subsidiary communication than greenfields. I therefore hypothesize that verbal communication barriers have positive effects on the likelihood that MNEs choose greenfield over acquisition entry. I also hypothesize that these effects are weaker for prospective subsidiaries that will have more autonomy or local co‐owners. An analysis of 231 entries by Dutch MNEs into 48 countries lends substantial support to these hypotheses, indicating that geographic and linguistic barriers to verbal communication play important roles in MNEs' establishment mode decisions.