Subsidiary Staffing in Multinational Enterprises: Agency, Resources, and Performance

Abstract

How likely are multinational enterprises (MNEs) to use expatriate parent country nationals to staff culturally distant subsidiaries? How does their employment affect subsidiary performance? The agency theory prediction is that MNEs will rely more heavily on parent country nationals as cultural distance increases and that this reliance will weaken over time. Both agency theory and the “resource-based view” suggest that a positive effect of expatriate staffing on subsidiary performance increases with cultural distance but decreases over time. Results largely supported the predictions in data on Japanese foreign subsidiaries.