Expatriates and Corporate-Level International Strategy: Governing with the Knowledge Contract

Abstract

This paper proposes a methodology for governing expatriate assignments in the context of corporate-level objectives.The approach taken is to envisage expatriate managerial assignments within the theoretical framework of agency theory and the knowledge-based view of the firm. The paper begins with the view that knowledge acquisition and integration is a primary goal for most expatriate assignments. The relationship between expatriate managers and multinational corporation (MNC) headquarters from an agency perspective are considered and the notion of a 'knowledge contract' as a means of governing that relationship is discussed. Four corporate-level international strategies available to MNCs (global, international, transnational, and multidomestic) are then examined and the extent of agency problems under each strategy is discussed. The paper makes specific predictions about the type of knowledge contract that is most likely to address agency problems for each corporate strategy. This research extends agency theory by introducing the knowledge contract as a means of managing agency concerns. This offers a broader range of contract alternatives, moving researchers beyond traditional agency theoretic prescriptions. The research also contributes to the literature on expatriate management by integrating assignment success with research on corporate-level international strategy. Few authors have recognized organizational strategy as an important unit of study in international human resource management. Doing so, however, has yielded a unique set of contingency relationships that would otherwise be obscured.

Keywords: Expatriates, International business, Corporate strategy, Knowledge management, knowledge contract

JEL Classification: F20