MNC Digitalization - Why IT Professionals Leave MNC Subsidiaries Without Learning Opportunities

Abstract

IT professionals and their knowledge about the use of digital technologies are a cornerstone for the competitiveness of modern MNCs. However, demand for these digital talents is high on many host country labor markets and MNC subsidiaries have strong incentives to retain them. We theorize that the retention of digital talents in MNC subsidiaries emerges from the learning opportunities that they can provide, not just the salaries. We integrate mechanisms from research on MNC mandates into theory explaining voluntary mobility constraints of employees and hypothesize that the non-monetary benefits from acquiring new skills in subsidiaries with mandates for digitalization projects increase the probability to retain IT professionals. We use data for 566 IT professionals employed by 104 foreign MNC subsidiaries in Denmark between 2002 and 2012 for the empirical test of this hypothesis. The results show that digital mandates help retaining IT professionals. The effect is stronger for subsidiaries with additional R&D mandates. However, potentially higher salaries on local labor markets do not outweigh the retention effects of digital mandates. These results have important implications for theory and practice on the readiness of MNCs to exploit digitalization opportunities.