30.06.2010

Home and Abroad: Balancing the Demands on Expat Managers

TAKEUCHI, Riki | SHAY, Jeffrey P. | LI, J. T.

Expatriate managers can find themselves facing two conflicting demands: carrying out the strategy of their MNE, and adapting to the circumstances of their subsidiary and host country. A manager's success at juggling these demands can make a difference in whether the subsidiary succeeds. The MNE therefore has a vital stake in understanding how to make the best of their manager's overseas experience.

One of the key issues is decision autonomy. Managers are more likely to adjust well to their new post if they have more autonomy to schedule work and carry out tasks, such as introducing new products or services at the foreign subsidiary. Moreover, this positive effect spills over into how well they interact with their host country nationals and adapt to the environment there as well. All three factors can enhance an expatriate's overall adjustment, which is beneficial to the MNE.

Yet, that positive effect can be muted if the manager is simultaneously reined in by a global integration strategy, where the MNE seeks a stronger central direction over the activities of its subsidiaries.

Riki Takeuchi and Jiatao Li of HKUST and Jeffrey P Shay explore these pressures in a study involving 187 expatriate managers from 9 global hotel chains, and 24 of their corporate executives.

"Given the multitude of decisions a parent company has to make, sometimes the implementation mechanisms placed at a particular foreign subsidiary may not be entirely congruent with the global strategy formulated at the parent company," they say.

"Therefore, we examine whether the positive relationship between expatriates' decision autonomy and levels of adjustment is weaker when expatriates feel more, rather than less, global integration pressure." 

"We also want to see whether this may be mitigated when their parent company has more rather than less specific local subsidiary experience."

They find support for both contentions. Expatriate managers working in companies with global integration pressures in which they are also given a high degree of decision autonomy, face conflicting demands and this in turn has a negative affect on their adjustment.

"For example, the expatriate manager may be given the autonomy to respond to local market conditions by providing differentiated product offerings and services, but their effectiveness will be constrained by the extent to which he or she feels global integration pressure to reduce costs by conforming to standardised product decisions originating elsewhere in the parent company," the authors say.

This can be mitigated if the MNE has more experience in that particular foreign subsidiary, though. Such a company already has routines and practices for dealing with the relationship between headquarters and the subsidiary. It also has a substantial amount of information about the market, which frees the expatriate manager to focus more on making sense of their host cultural environment. The study results show MNE experience has a positive effect on expatriate managers' adjustment.

This is the first study to consider the moderating effects of global integration pressures on decision autonomy. It has particular implications for those firms that use different implementation mechanisms in different subsidiaries, such as varying the level of autonomy.

"In practice, each MNE must consider the potentially negative impact of varying its application of implementation mechanisms across subsidiaries in ways that are inconsistent with the firm's overarching strategy," the authors say.

"When expatriate managers perceive a low level of global integration pressure but also a low level of decision autonomy, the managers experience lower levels of both work and interaction adjustment, This is important since these managers are critical for implementing strategy, and their adjustment is essential for achieving organisational goals and objectives."

 

TAKEUCHI, Riki

Adjunct Professor
Management

LI, J. T.

Lee Quo Wei Professor of Business, Chair Professor, Director of Center for Business Strategy and Innovation
Management