Managing Uncertainty: Executive Appointments in Foreign Subsidiary Environments
46 Pages Posted: 8 Nov 2014
Date Written: October 1, 2013
This study examines how MNCs use strategic human capital appointments in the subsidiary executive team to manage tension between effective monitoring and local knowledge utilization when faced with subsidiary environment uncertainty. Using a sample of executives from 75 subsidiaries of 34 U.S. and European banks over 5 years, we find that MNCs appear to seek balance through a deliberate configuration of expatriates and local executives in the subsidiary executive team. Overall, we find that environmental uncertainty is not directly linked with a one-size-fits-all executive appointment strategy. Instead, higher levels of uncertainty arising from complexity and competition are associated with a reduced preference for local executives in monitoring and control-oriented functional roles. With rising environmental complexity, this effect appears to be counterbalanced by a greater preference for local executives in implementation-oriented functional roles. However, we do not find evidence of a significant relationship between environmental turbulence and functional role appointments.
Keywords: Multinational companies (MNC), strategic human capital, top management team composition, executive team configuration, environmental uncertainty
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