Knowledge transfer to foreign affiliates of multinationals through expatriation

Abstract

This paper provides empirical evidence of the prevalence and importance of manager transfers to affiliates of multinational corporations (MNCs). Using a unique data set on foreign affiliates of Korean MNCs, I find that most foreign affiliates have managers transferred from their parent companies. These transferred managers at first comprise a significant portion of the managerial positions at foreign affiliates, but gradually become outnumbered by local managers as the affiliates grow. Despite the transferred managers being comparatively few in number, they are positively associated with the growth of the affiliates' productivity. The empirical findings provide evidence that knowledge transfers stemming from the transfer of managers from the parent to foreign affiliates are a source of benefit to foreign affiliates.