Expatriate Deployment Levels and Subsidiary Growth: A Temporal Analysis

Abstract

We investigate the relationship between expatriate-deployment levels and the growth of international subsidiaries over time. Latent-curve analysis reveals that higher subsidiary growth over the long term is achieved through both (a) a higher proportion of expatriates at subsidiary founding and (b) a slower reduction in the proportion of expatriates over time. These results suggest that the decision to reduce the proportion of expatriates due to cost considerations should be tempered with the potential long-term benefits of expatriates for improving subsidiary growth. Theoretically, our results point to two factors that impact subsidiary changes over time: path dependence and dynamic adjustment costs.

Keywords: path dependence, dynamic adjustment costs, expatriate, subsidiary growth, latent-curve model

JEL Classification: M12, M5