Foreign Subsidiary Staffing Research Articles

Societal trust, formal institutions, and foreign subsidiary staffing

Societal trust, formal institutions, and foreign subsidiary staffing

Factors affecting subsidiary staffing of Japanese multinationals: a panel data analysis

Global staffing is a crucial factor for the success of the overseas operations of multinational corporations (MNCs). This study examines the contextual and organisational factors that affect the localisation of subsidiary staffing in the overseas operations of Japanese multinational companies. Using panel data containing more than 15 000 observations of Japanese overseas subsidiaries and a random‐effects logit model, we found that the cultural distance between the home country and the host country has a significant impact on the localisation of subsidiary staffing. In addition, the strategic importance of subsidiaries, as well as the local market orientation and business experiences in the host country, but not research and development (R&D) intensity of Japanese parent firms, have a significant impact on the localisation of foreign subsidiary staffing. We discuss the theoretical and practical implications of these findings.

Toward a better understanding of MNEs’ local staffing decision: a multilevel analysis

Purpose– The purpose of this paper is to address the question of how regional diversification affects subsidiary staffing composition in multinational enterprises. Another important objective of this study is to examine the effects of institutional distance, specifically regulative and normative distances, on foreign subsidiary staffing composition.Design/methodology/approach– To estimate firm- and country-level parameters simultaneously, hierarchical linear modeling was conducted on a sample of 1,068 foreign subsidiaries of South Korean firms operating in 25 countries in 2014.Findings– The results reveal that intra-regional diversification has a positive effect, whereas inter-regional diversification has a negative effect on local staffing in foreign subsidiaries. In addition, there is a positive association between informal distance (such as normative distance) and local staffing of foreign subsidiaries, while formal distance (such as regulative distance) is negatively related to local staffing of foreign subsidiaries.Research limitations/implications– The cross-sectional nature of the data in this study may preclude examination of the relationships among institutional distance, institutional environment, and subsidiary staffing composition. The authors suggest that future researchers employ a longitudinal design to examine the effects on staffing composition of institutional distance and institutional environments over time.Originality/value– The paper contributes to the literature on international human resources management by highlighting the importance of combining multilevel parameters to improve assessment of the importance of firms’ competitive strategy and institutional environments in local staffing in foreign subsidiaries.

Internal mimetic behavior of MNCs with respect to foreign subsidiary staffing

Purpose – The purpose of this paper is to fill the following research gaps. First, few studies have examined isomorphic behavior of multinational corporations (MNCs) with respect to foreign subsidiary staffing. Second, the adoption by an MNC of its internally preferable practices, which is referred to as internal mimetic behavior, has been less extensively investigated when compared with the imitation of practices adopted by a large number of peer firms. Lastly, factors that facilitate internal mimetic behavior have not been extensively explored. Design/methodology/approach – This study hypothesizes that internal mimetic behavior is affected by both formal and informal institutional distance. The hypotheses are tested using the panel data set that consists of 3,981 foreign subsidiaries of Japanese MNCs. Findings – This study finds that as the formal institutional distance between the host country and the home country increases, MNCs are more likely to adopt internal mimetic behavior. Furthermore, it demonstrates that as the informal institutional distance increases, the likelihood that MNCs adopt internal mimetic behavior decreases. Practical implications – This study suggests that MNCs need to consider the consequences of internal mimetic behavior when they adopt it without having economic rationale. It also suggests that when uncertainty can be mitigated, MNCs should avoid internal mimetic behavior. Originality/value – This study fills the aforementioned research gaps by examining what factors facilitate internal mimetic behavior. It suggests that both economic rationale and isomorphic behavior need to be considered to advance an understanding of foreign subsidiary staffing.

"Localization, resource exploration, and subsidiary performance"

This study sheds light on an evolutionary nature of foreign subsidiary staffing. In comparison to previous studies that have treated subsidiary staffing as a static construct, this study addresses ...

Effects of two staffing decisions on the performance of MNC subsidiaries

Purpose– The purpose of this paper is to examine the relationship between foreign subsidiary staffing and subsidiary performance by focussing on two staffing practices: first, the ratio of parent country nationals (PCNs) to foreign subsidiary employees and second, the number of PCNs assigned to the foreign subsidiary.Design/methodology/approach– Hypotheses predicting curvilinear relationships between the assignment of PCNs and subsidiary performance are tested using a panel data set consisting of 4,858 foreign subsidiaries of Japanese multinational corporations (MNCs).Findings– The results demonstrate that the two staffing practices have different effects on subsidiary performance. The ratio of PCNs to foreign subsidiary employees has an inverted U-shaped relationship with subsidiary performance, while the number of PCNs assigned to the subsidiary has a linear and negative effect on subsidiary performance.Research limitations/implications– The results of this study are subject to limitations. First, the sample used in this study consists solely of the foreign subsidiaries of Japanese firms. This research design limits the generalizability of the findings of this study. Second, other decisions related to subsidiary staffing such as the ratio of PCNs in the subsidiary's top management team need to be examined to advance understandings of the relationship between subsidiary staffing and subsidiary performance.Practical implications– MNCs need to identify the appropriate number of PCNs at which they can achieve the optimal trade-off with the PCN ratio to enhance the competitiveness and the performance of a foreign subsidiary. In doing so, they need to take into consideration that an increase in the number of PCNs has an immediate negative effect on the workplace morale of host country nationals.Originality/value– This study incorporates two staffing practices into its analyses and shows that they have different implications for subsidiary performance. The results suggest that focussing on one staffing practice alone limits understanding of the complex relationship between foreign subsidiary staffing and subsidiary performance.

Who needs to know? Knowledge LOF risk and the subsidiary staffing decision

This paper analyses knowledge-related liability of foreignness (‘KLOF’) risk in the context of foreign subsidiary staffing decisions, to explore how the latter affects the former. KLOF risk related to a lack of complete knowledge of the host country is centred at the critical link between specific home country and host country individuals. Assessment of KLOF risk must begin with the question: ‘Who needs to know?’ Subsidiary staffing decisions shift the location of KLOF risk, changing the answer. To enhance the depth of KLOF analysis, the next step involves assessing knowledge due diligence affecting those with the greatest need for host country information. The central contributions of this KLOF work include identification of the critical link or location of risk affected by staffing decisions, and exploration of knowledge due diligence as the concept that may foster increased understanding of KLOF risk to suggest future measurement and mitigation approaches.

Determinants of foreign subsidiary staffing by service firms

PurposeThe purpose of this paper is to examine how service firms determine foreign subsidiary staffing, emphasizing the joint effect of an attribute specific to the service sector and the institutional environment of the host countries.Design/methodology/approachThis study develops hypotheses regarding the joint effect of human capital intensity and institutional distance on the ratio of parent country nationals to foreign subsidiary employees. A Tobit regression is conducted to test the hypotheses, using a sample that consists of 1,067 foreign subsidiaries of Japanese service firms.FindingsThis study finds that the human capital intensity of a service firm has a positive impact on the ratio of parent country nationals to foreign subsidiary employees. The study also finds that the institutional distance between the host country and the home country is negatively associated with the ratio of parent country nationals. In addition, this study finds that the positive impact of human capital intensity on the ratio of parent country nationals becomes weaker as the institutional distance becomes greater.Originality/valueThis study explores the factors that affect the decisions regarding foreign subsidiary staffing in the service sector. It advances the understanding of the foreign subsidiary staffing of service firms by examining the joint effect of an attribute specific to the service sector and the institutional environment of the host countries. This study shows evidence that the effect of an attribute specific to the service sector is more complex than a linear relationship.

Institutional distance, host country and international business experience, and the use of parent country nationals

This study examines how the institutional distance between a host country and a home country influences foreign subsidiary staffing, and how overseas business experience moderates the effect of institutional distance. Hypotheses regarding the effect of institutional distance on foreign subsidiary staffing are empirically tested using a sample of 2,980 foreign subsidiaries of Japanese firms. This study shows that although the ratio of parent country nationals to subsidiary employees decreases when firms face greater institutional distance, the absolute number of parent country nationals assigned to the subsidiary increases. This study also shows that firms with more overseas business experience replace host country nationals with parent country nationals when there is greater institutional distance.

Isomorphism and foreign subsidiary staffing policies

PurposeThe purpose of this paper is to explore determinants that affect foreign subsidiary staffing policies by employing institutional theory as a theoretical foundation.Design/methodology/approachHypotheses are developed regarding determinants of the ratio of parent country nationals (PCNs) to foreign subsidiary employees. To examine the hypotheses, Tobit regressions are run using a sample of 1,998 foreign subsidiaries of Japanese manufacturers in 40 countries.FindingsThe PCN ratio of foreign subsidiaries is positively associated with the parent firm's taken‐for‐granted PCN ratio and the PCN ratio adopted by other Japanese firms in the same cognitive category. In addition, the positive relationship between the PCN ratio adopted by other Japanese firms in the same cognitive category and the PCN ratio of foreign subsidiaries is moderated by the international experience of the parent firm, such that the positive relationship is weaker as the parent firm accumulates international experience.Originality/valueThe study described in this paper incorporates a sociological perspective into a framework that explains foreign subsidiary staffing decisions. In addition, it shows that under conditions of uncertainty, foreign firms adopt a normatively rational staffing policy, although this does not necessarily guarantee economic rationality.