Expatriate return on investment in global firms

Abstract

This research examines the extent to which expatriate return on investment (ROI) is operationalised and subsequently managed in global firms. Systems theory and psychological contract theory are applied in two qualitative studies (N= 1 02). Four research questions are addressed in the research. The first three research questions seek to understand how expatriate ROI is defined and measured in global firms, and the barriers that impede measurement. The fourth research question seeks to identify the factors that are likely to influence changes in expatriate ROI to the firm. In study one, interviews are conducted with 51 mobility managers drawn from 18 industries and five world regions. Key findings suggest that firms do not have formal procedures in place to measure expatriate ROJ and instead rely heavily on informal procedures and processes that are seldom aligned to a global strategy. Hence, a systems theory approach towards the operationalisation and management of expatriate ROI is lacking, where considerable cultural, operational, and strategic barriers to measuring and managing ROI are found to exist. In addition, evidence is found that measuring expatriate ROI may not be an important goal for some managers in global firms, where the utilisation of long-term expatriates is often a cost of doing business for which a formal measure may be unnecessary. Instead, the management of expatriates in terms of the practices that are used to support their activities and how the outcomes of those activities impact broader firm performance seem to be more important concerns. In study two, interviews are conducted with 51 expatriate employees drawn from five case firms that participated in study one, representing different industries across six world regions. Key findings suggest that while a strategic, value-based perspective towards international staffing practices is desired and sought by global firms and their expatriate employees, it can be concluded that the effective assessment and management of strategic value is not widely adopted in practice. Furthermore, up to one-third of expatriates are seeking or considering external job opportunities during an international assignment, where poor career management support and changes to expatriate compensation are found to explain turnover intentions. A deeper understanding of the psychological factors relating to expatriate retention and turnover, including the motivation to go abroad, therefore emerges. On this basis, the retention of high-level professional and managerial talent during a long-term international assignment emerged as an important issue that could have serious implications for the achievement of a firm's broader international staffing objectives, as well as the career aspirations of expatriate employees. Overall, the research demonstrated that attention to defining and refining the construct of expatriate ROI has been lacking in global firms. The research has therefore facilitated the development and testing of a conceptual definition and framework to explain expatriate ROI from which it can be concluded that expatriate ROI in practice is organisationally specific, causally ambiguous in terms of the relationship between strategy, HRM, and firm performance, and complex. The research contributes a comprehensive overview of the combination of strategic, contextual, and operational factors that contribute towards the ROI that is sought from long-term international assignments.