Nationality choices regarding executives in subsidiaries: evidence from French multinationals in Asia

Abstract

Whereas the use of host-country nationals (HCNs) is increasing in international business today, research has predominantly focused on parent-country nationals (PCNs). We address this gap by identifying factors that help multinationals (MNCs) make executive staffing decisions between PCNs and HCNs in Asia. We use French MNCs to investigate this question. We adopted a qualitative method by conducting interviews with 30 executives of French subsidiaries located in Singapore and China. Our findings revealed that most French MNCs use significant numbers of PCNs for key positions. Specifically, we found that size of operations in the subsidiary, mode of entry, knowledge transfer, and talent development requirements are key determinants of the choice between PCNs and HCNs for French MNCs. Key points1 Multinationals use PCNs for top positions: (1) when they are running huge projects;(2) when they cannot find skilled; and talented local nationals; and (3) for knowledge transfer and control. 2 Multinationals use HCNs for top positions: (1) to gain legitimacy in the local environment;(2) to use the local market knowledge; (3) because of host country's government pressures; and (4) when the majority of shares is owned by Chinese stakeholders. 3 Our study highlights the specific conditions under which PCNs; HCNs are selected, in a manner different from extant literature.

Cultural Diversity in Top Management Teams – Review and Agenda for Future Research

“…Research grounded in agency theory suggests that the slow progress is due to the costs of international expansion: Diversity increases uncertainty, driving up informationprocessing costs and the risks of opportunism (Collings, Morley, & Gunnigle, 2008;Greve et al, 2015;Van Veen, Sahib, & Aangeenbrug, 2014). When such costs outweigh the potential gains from the presence of foreign nationals on the TMT-as in complex, large-scale projects, where control and chain of command are paramount-firms often rely on home-country executives to staff their subsidiary TMTs (Lakshman & Jiang, 2016). Recruitment of culturally diverse TMT members could also be hampered by a lack of skilled candidates, leaving key positions open to home-country nationals who can channel knowledge from headquarters to subsidiaries and engage in talent development (Lakshman & Jiang, 2016).…”

“…When such costs outweigh the potential gains from the presence of foreign nationals on the TMT-as in complex, large-scale projects, where control and chain of command are paramount-firms often rely on home-country executives to staff their subsidiary TMTs (Lakshman & Jiang, 2016). Recruitment of culturally diverse TMT members could also be hampered by a lack of skilled candidates, leaving key positions open to home-country nationals who can channel knowledge from headquarters to subsidiaries and engage in talent development (Lakshman & Jiang, 2016). Multinationals may also deliberately internationalize their TMTs slowly in order to maintain a balance between a unified corporate culture and regional adaptation (Kundu, Mor, Kumar, & Bansal, 2019).…”

A configurational perspective on subsidiary top management team national diversity and performance

“…While substantial progress has been made at the firm level (e.g. Masulis et al, 2012;Nielsen and Nielsen, 2013;Van Veen et al, 2014;Hooghiemstra et al, 2019), at the subsidiary level, the link between TMTD and performance is still ambiguous (Sekiguchi et al, 2011;Lakshman and Jiang, 2016;Tao et al, 2017;Bai et al, 2018). It is important to develop a better understanding of that issue because ill-fitting TMTD can lead to serious strategic consequences for the subsidiary as well as the MNE as a whole.…”