The JGM BitBlog: Return of the Vikings! Expatriation policies at a Danish trading firm
Agnieszka Nowińska: Aalborg University, Aalborg, Denmark
Jean-François Hennart: Tilburg University, Tilburg, The Netherlands and Aalborg University, Aalborg, Denmark
Svetla Marinova: Aalborg University, Aalborg, Denmark
There are many reasons why firms should not use expatriates to staff their foreign subsidiaries: they often have little knowledge of the host country and hence are prone to make bad decisions; they are expensive, and their high pay and perks generate envy; and they demoralize local subsidiary employees who see their path to the top blocked. Hiring locals makes more sense. Yet expatriates continue to be deployed overseas. Researchers have hypothesized that they are posted abroad for training purposes, to remedy the lack of local talent, and because their in-depth knowledge of HQ's culture and their deep social ties with HQ managers makes them effective in controlling foreign subsidiaries, especially those that need tight coordination with other MNE units. In uncertain environments, expatriates can also make quick judgment calls on their own.
Despite an explosion of articles on expatriates, the number of large-sample studies on why they are hired over locals is quite limited. The typical one looks at samples of multinational firms and investigates which factors explain the share of expatriates in the total employment of their foreign subsidiaries, or whether the managing director of that subsidiary is an expatriate or a local hire. One drawback of this approach is that it pools together firms with different corporate cultures and business models. To control for these sources of heterogeneity, Boyacigiller focuses instead on a single firm, a US multinational bank. Using multiple regression, she finds that the share of US expatriates in the total employment of a foreign subsidiary is higher the higher the degree of interdependence of that subsidiary with other members of the MNE network, the larger its cultural distance to HQ, and the higher its level of political risk.
Are Boyacigiller's results still relevant 33 years later? Are they generalizable to non-US firms? Surprisingly, no one has tried to find out. We replicate her study, but rather than look at the share of expatriates in subsidiary employment, we focus on new hiring decisions. By looking at the LinkedIn profiles of the hires, we investigate with whom a Danish ship bunker trading firm filled foreign subsidiary positions, i.e., whether they were local hires or expatriates, what was their nationality, the specific roles for which they were hired, and the location of their new assignments.
Because a hiring decision may depend on a specific combination of factors, we use a comparative qualitative methodology. This tells us which combinations of variables leads to staffing a position with an expatriate rather than a local. We find that, along with Boyacigiller, expatriates are hired to start new subsidiaries and to staff positions which require a high degree of global coordination-in our case to handle global customers. Our findings add an interesting twist. Contrary to her findings, expats are not sent to manage subsidiaries located in culturally distant and politically risky countries. In our case most expats are Danes. Jobs involving local accounts and those in small subsidiaries located in culturally distant countries are filled with local hires. In other words, we observe an inner ring of Danes sharing both a national and a corporate culture and dealing with global customers, and an outer ring of local employees working on local accounts in small subsidiaries in culturally distant countries. Interestingly, this outer ring is more willing to hire third country expatriates.
To read the full article, please see the Journal of Global Mobility publication:
Nowińska, A., Hennart, J.-F. and Marinova, S. (2023), "Traders across borders: who and where?", Journal of Global Mobility, Vol. 11 No. 3, pp. 437-457. https://doi.org/10.1108/JGM-11-2022-0063" target="_blank" rel="noopener">https://doi.org/10.1108/JGM-11-2022-0063