Liability of foreignness or outsider’s advantage? MNCs, diversity signals, and local human capital

Abstract

This research uses signaling theory as an overarching framework to contribute to the question of whether foreign multinational companies (MNCs) enjoy an advantage when pursuing recruiting in local labor markets that show discriminatory practices towards one group of job seekers. While recent research in the field of international management found that foreign MNCs often leverage their otherness by attracting disadvantaged labor market populations, the details of the underlying mechanisms remain unclear. My research addresses this gap by distinguishing between the effect of signals about a company’s foreignness and signals about its support for diversity and inclusion of women on corporate attractiveness. The experimental data for this research was collected by means of manipulated job advertisement vignettes that were distributed to 1,000 university students in South Korea. The results suggest that foreign companies are generally perceived as more attractive than local companies. However, local companies can offset their initial disadvantage vis-à-vis foreign firms if they invest in measures of diversity and inclusion – at least among the female population. The findings call for a more nuanced view of the debate about the liabilities of foreignness and the role of gender. At the same time it alerts to the competitive possibilities for managers of local and foreign companies who are looking to assemble a high quality workforce.