Cultural distance, expatriate staffing and subsidiary performance: The case of US subsidiaries of multinational corporations

• Published in: International journal of human resource management Vol. 19; no. 2; pp. 223 - 239
• Main Authors: Colakoglu, Saba, Caligiuri, Paula
• Format: Journal Article
• Language: English
• Published: London Taylor & Francis Group 01.02.2008; Taylor & Francis LLC
• Subjects: Correlation analysis; Cultural differences; cultural distance; Employees; Expatriates; Human resources; Multinational corporations; Multinational enterprises; Organizational culture; Organizational structure; Studies; Subsidiaries; Subsidiary; subsidiary performance; U.S.A; Workforce planning; United States > US
• ISSN: 0958-5192; 1466-4399
• DOI: 10.1080/09585190701799804

This study examines the relationship between cultural distance and the use of parent country expatriates in the wholly-owned US subsidiaries of 52 multinational corporations. This study also investigates the link between the use of expatriates and subsidiary performance as a function of cultural distance. Testing hypotheses based on transaction costs theory, our results suggest that firms rely on a greater number of parent country expatriates when they are culturally distant from the subsidiary (i.e. the United States). This study further demonstrates the bounded rationality problem faced by multinational corporations: cultural distance moderates the relationship between expatriate staffing and subsidiary performance such that a higher ratio of parent country expatriates is related to lower subsidiary performance, particularly in cases when cultural distance is high.