The Impact of Subsidiary Top Management Team National Diversity on Subsidiary Performance: Knowledge and Legitimacy Perspectives

Abstract

This study examines the impact of nationality composition within subsidiary top management teams (STMTs) on subsidiary performance. It first gives a review of the multinational team literature. It concludes that nationality diversity is beneficial when it is relevant to a multinational team's task. The study then draws upon two complementary theoretical perspectives: knowledge and legitimacy. It proposes that a heterogeneous STMT nationality composition may enhance subsidiary performance with the effect being stronger in subsidiaries of longer years of operation. Hypotheses were tested in a sample of STMTs from Japanese Multinational Corporations. The study finds that STMT nationality heterogeneity was positively related to subsidiary labor productivity. An interaction effect was also found. As the number of years a subsidiary had been in operation increased, so did the effect of STMT nationality heterogeneity on subsidiary performance.

Keywords: Subsidiary Top Management, Teams, Multinational Teams, Nationality