Staffing subsidiaries of multinational firms : environmental antecedents and subsidiary level outcomes

Operating in diverse national environments, multinational enterprises (MNEs) can staff overseas subsidiaries with parent country nationals (PCNs), host country nationals (HCNs), third country nationals (TCNs), or any mix of the three, defined as subsidiary staffing modes. The choice of staffing modes leads to a staffing composition, defined as the distribution of PCNs, HCNs, and TCNs in subsidiaries of MNEs. As globalization of businesses increases, a multinational team or workforce has become a reality. The MNE staffing literature has given insufficient attention to national cultural and strategic contingencies of staffing mode choices, and the evolution of staffing modes over time. Previous research in MNE staffing has been mainly focused on staffing of expatriate PCNs and impacts at the individual level. As a result, we know little about the impact of staffing composition on subsidiary outcomes. The objective of this dissertation is to systematically theorize the environmental antecedents of subsidiary staffing modes in MNEs, and the impact of staffing composition on subsidiary outcomes. The dissertation consists of two essays. Based on a review of the MNE staffing literature, the strategic international human resources management (SIHRM) literature, and the domestic staffing literature, the first essay proposes environmental antecedents of subsidiary staffing modes in MNEs. Grounded in the person-environment (P-E) fit perspective, the first essay classifies the environmental antecedents into four dimensions: national, strategic, organizational, and job contexts. It develops propositions regarding the ii Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. impact of fit at each environmental dimension on the choice of staffing modes. To make the model dynamic, the first essay also discusses the role of time in the relationships between environmental variables and staffing modes. Finally, it proposes a four-dimension model of fit assessment, and discusses its implications for individual and organizational performance in the context of subsidiaries of MNEs. As an initial effort to validate the model, the first essay presents two empirical tests of the competing theoretical predictions from agency and institutional theories regarding the impact of cultural distance on the utilization of expatriate PCNs. Agency theory suggests an expatriate PCN-oriented staffing mode under high cultural distance. Expatriate PCNs have better fit with parent firm values and goals. The increased fit reduces uncertainty and agency cost in managing a culturally distant subsidiary. Institutional theory suggests the opposite because an expatriate PCN-oriented staffing mode decreases fit to the local institutional environment, and therefore compromises subsidiary legitimacy in the local environment. I conducted a two-study, three level examination of the competing explanations. Eighty-one subsidiaries of foreign MNEs operating in the U.S. participated in a survey study. Results revealed that cultural distance was positively related to the proportion of expatriate PCNs at the CEO, top management team, and employee levels, but was statistically significant only at the employee level. In another sample of 861 subsidiaries of Japanese MNEs, I found that cultural distance was positively related to the utilization of PCNs at the CEO, top management team, and employee levels. However, as years of operation increased, the positive effect decreased. Based on a review of the MNE staffing literature, SIHRM literature, and the organizational demography and diversity literature, the second essay proposes a process