Subsidiary Staffing, Cultural Friction, and Subsidiary Performance: Evidence from Korean Subsidiaries in 63 Countries

41 Pages Posted: 29 Jan 2019

See all articles by Deeksha A. Singh

Deeksha A. Singh

Rutgers Business School - Camden; National University of Singapore (NUS)

Chinmay Pattnaik

The University of Sydney - Discipline of International Business

Jeoung Yul Lee

Hongik University - School of Business

Ajai Gaur

Rutgers Business School - Newark and New Brunswick

Date Written: January 17, 2019

Abstract

Drawing from the notion of cultural friction and based on the agency theory rationalization of multinational enterprise (MNE) headquarter–subsidiary relationship, we examine the impact of cultural friction in foreign subsidiaries on subsidiary performance. We argue that cultural friction, arising due to a high presence of parent country nationals (PCNs) in culturally distant locations, has a detrimental effect on subsidiary performance. This effect is strongest when the cultural friction is at the top management team (TMT) level and weakest when friction is at the regular employee level. This relationship, however, is contingent on factors that work as drags or lubricants for cultural friction between PCNs and host country nationals (HCNs). We identify governance mode and language differences between home and host countries as drag parameters and host country experience and subsidiary interdependence as lubricants that condition the effect of cultural friction on subsidiary performance. Empirical findings based on a longitudinal sample of 7,495 foreign subsidiary observations of 467 Korean MNEs in 63 countries during 1990–2014 provide robust support for our theoretical predictions.

Suggested Citation

Singh, Deeksha A. and Pattnaik, Chinmay and Lee, Jeoung Yul and Gaur, Ajai S., Subsidiary Staffing, Cultural Friction, and Subsidiary Performance: Evidence from Korean Subsidiaries in 63 Countries (January 17, 2019). Available at SSRN: https://ssrn.com/abstract=3317573 or http://dx.doi.org/10.2139/ssrn.3317573

Deeksha A. Singh

Rutgers Business School - Camden ( email )

227 Penn Street
Camden, NJ 08102
United States

National University of Singapore (NUS) ( email )

Bukit Timah Road 469 G
Singapore, 117591
Singapore

Chinmay Pattnaik

The University of Sydney - Discipline of International Business ( email )

Sydney, 2006
Australia

Jeoung Yul Lee

Hongik University - School of Business ( email )

72-1 Sangsu-Dong, Mapo-Gu
Seoul, 121-791
Korea, Republic of (South Korea)

Ajai S. Gaur (Contact Author)

Rutgers Business School - Newark and New Brunswick ( email )

Newark, NJ
United States

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