Managing institutional distance: Examining how firm-specific advantages impact foreign subsidiary CEO staffing |
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Affiliation: | 1. Institute for Financial & Accounting Studies, Xiamen University, China;2. HEC Liège, Management School of the University of Liège, Belgium;3. Research Institute of Economics and Management, Southwestern University of Finance and Economics, China |
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Abstract: | Based on the insight that superior access to knowledge can help foreign firms overcome liabilities of foreignness, we examine whether possession of firm-specific advantages shifts foreign firms’ CEO staffing strategies from local managers, who provide host-market insight, toward expatriates, who possess knowledge transfer and coordination capabilities. We find that, as institutional distance increases, firm-specific advantages from multinationality, regional agglomeration, and host-country experience substitute for the host-market insight of local CEOs. Foreign firms with such advantages instead staff the CEO role with expatriates. Our results are practically relevant to MNCs seeking to allocate a limited talent pool across different institutional contexts. |
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Keywords: | CEO selection Multinational companies (MNCs) Institutional distance Liabilities of foreignness Executive staffing |
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