Trojan Horses or Local Allies: Host-country National Managers in Developing Market Subsidiaries
Patricia Klopf and
Phillip C. Nell
Journal of International Management, 2017, vol. 23, issue 3, 306-325
We investigate a multinational corporation's (MNC) decision to appoint host-country national (HCN) managers to foreign subsidiaries based on the institutional context of and familiarity with the host country. HCN managers are commonly associated with specialized knowledge, superior responsiveness, and higher legitimacy. Yet, we argue that local familiarity of HCNs can also be perceived as risky or harmful by MNC parents. We analyze how formal and informal institutions affect the trade-off between positive effects and potential costs associated with HCN managers (“Local allies” vs. “Trojan horses”). We find that legal institutions protect foreign MNCs from potential costs, encourage the use of HCNs and reinforce their benefits. Corruption and corruption distance, however, increase perceived costs associated with HCN managers up to a point at which they outweigh their perceived benefits.
Keywords: Multinational corporations; Subsidiary staffing; Institutional theory; Corruption; Institutional distance (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intman:v:23:y:2017:i:3:p:306-325
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