Board Diversity and General Manager Turnover in MNC Subsidiaries

Abstract

This study examines the impact of board diversity in multinational companies (MNCs) on the likelihood of general manager (GM) turnover in foreign subsidiaries. Using a longitudinal dataset with 2,177 observations, which includes 649 GM turnover events across 1,040 foreign subsidiaries of Japanese MNCs between 2004 and 2013, we find that board diversity in tenure, education, and gender reduces the likelihood of GM turnover. These findings support the value-in-diversity perspective and are consistent with the view that diversity not only expands the pool of knowledge in the boardroom but also allows the knowledge to be considered more deeply and extensively. As a result, MNCs with diverse boards make well-reasoned decisions and are less reliant on GM turnover as a managerial intervention tool to address foreign subsidiary issues. Our study contributes to the literature in two important ways. First, by focusing on the general manager, we add much needed insights to the role of boards in influencing turnover beyond the CEO position. Second, we advance research on board performance in multinational contexts, which remain understudied.