Institutional Environments, Staffing Strategies and Subsidiary Performance

Abstract

We adopt and develop an institutional perspective to advance our understanding of how host country environments influence subsidiary staffing strategies. We propose and find that firms rely more on parent company nationals (expatriates) in institutionally distant environments for reasons related to the efficient transfer of management practices and firm-specific capabilities. Further, we find that the positive influence of expatriate staffing levels on subsidiary performance (subsidiary labor productivity) is dependent on the institutional distance between the host and home country, and subsidiary experience. We base our findings on our analysis of expatriate employment levels and performance in 12,997 foreign subsidiaries of 2,952 Japanese firms in 48 countries.

Keywords: Regulative distance, normative distance, subsidiary staffing, experience, subsidiary performance