Dynamic capabilities for hire – How former host-country entrepreneurs as MNC subsidiary managers affect performance

Abstract

MNC subsidiaries benefit from managers with entrepreneurial skills for finding superior combinations of MNC and host-country resources. However, such management skills are scarce. We reason that subsidiaries can improve their performance by hiring host-country entrepreneurs as managers since they develop similar skills in start-ups. Our theoretical model integrates mechanisms from entrepreneurial experience into theory on the microfoundations of dynamic capabilities. We test and support our prediction using longitudinal employer–employee data for 5587 foreign MNC subsidiaries in Portugal. Further, we show that performance effects are weaker when a subsidiary’s management is internationally diverse and stronger in dynamic host-country environments.