Abstract
Based on the insight that superior access to knowledge can help foreign firms overcome liabilities of foreignness, we examine whether possession of firm-specific advantages shifts foreign firms’ CEO staffing strategies from local managers, who provide host-market insight, toward expatriates, who possess knowledge transfer and coordination capabilities. We find that, as institutional distance increases, firm-specific advantages from multinationality, regional agglomeration, and host-country experience substitute for the host-market insight of local CEOs. Foreign firms with such advantages instead staff the CEO role with expatriates. Our results are practically relevant to MNCs seeking to allocate a limited talent pool across different institutional contexts.
Highlights
Subsidiary executives may help forestall liabilities of foreignness (Zaheer, 1995) experienced by multinational companies (MNCs) in institutionally distant host markets (Ghemawat and Vantrappen, 2015, Matsuo, 2000, Mezias, 2002)
We began this study with an interest in examining whether possession of firm-specific advantages shifts subsidiary Chief Executive Officers (CEOs) staffing strategy
We hypothesized that possession of firm-specific advantages shifts subsidiary CEO staffing strategy from a local isomorphism strategy based on utilizing the host-market insights of local CEOs, to a strategy which seeks to leverage knowledge transfer and coordination capabilities of expatriates
Summary
Subsidiary executives may help forestall liabilities of foreignness (Zaheer, 1995) experienced by multinational companies (MNCs) in institutionally distant host markets (Ghemawat and Vantrappen, 2015, Matsuo, 2000, Mezias, 2002). Empirical research on subsidiary Chief Executive Officers (CEOs) shows positive (Gaur, Delios, & Singh, 2007), negative (Baik & Park, 2015), as well as curvilinear relationships (Muellner, Klopf, & Nell, 2017) between institutional distance and the presence of expatriates in the subsidiary CEO role. To help reconcile these contradictory findings, we set out to answer the following research question: how do firm-specific advantages moderate the relationship between institutional distance and staffing strategies for the subsidiary CEO role? Firm-specific advantages may offset the liabilities of foreignness experienced by MNCs in institutionally distant host markets, and influence subsidiary CEO staffing strategies
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