Antecedents of General Manager Successions in Multinational Enterprise Subsidiaries

Abstract

This study examines the dynamics of general manager (GM) succession in the foreign subsidiaries of multinational enterprises (MNEs). First, drawing on insights from evolutionary theory and the organizational learning literature, we argue that MNEs are adaptive organizations such that prior subsidiary GM changes at the “intra” regional level decrease the probability of further GM change in the focal subsidiary. Our logic is that the accumulated context-specific knowledge may allow MNEs to further develop extant succession routines. Second, in the context at the “inter” regional level, given the high spatial transaction costs, what are more likely to be applied to the focal subsidiary are standardized succession processes, which are less likely to accommodate the situations specific to the focal subsidiary. Due to the reduced marginal costs of making similar changes, prior GM successions that occurred outside the region where the focal subsidiary operates accelerate the momentum for further GM change in this subsidiary. Third, we propose that when changing from a parent-country national to a host-country national GM, succession routines may be refined in order to accommodate particular candidates or particular search committees, which in turn decelerates the momentum for further subsidiary GM change. A fixed effects longitudinal analysis of 1,169 Japanese subsidiary firms between 1995 and 2013 provides empirical evidence to support these arguments.