Electronic Thesis and Dissertation Repository

Thesis Format

Integrated Article

Degree

Doctor of Philosophy

Program

Business

Supervisor

Beamish, Paul W.

2nd Supervisor

Schotter, Andreas P.J.

Co-Supervisor

Abstract

This dissertation, based on interviews with over 40 managers and longitudinal data from over 1,900 foreign subsidiaries, develops new insights regarding subsidiary general manager (GM) changes in multinational enterprises (MNEs).

Essay 1 addresses whether GM successions accelerate or decelerate the momentum for further GM change, and improve or disrupt subsidiary performance. I show that MNE managers learn from prior GM change in order to appoint a right candidate, thus improving subsidiary performance and decelerating the momentum for further succession. But the reduced marginal costs of making succession decisions increasingly render GM change more likely. The accumulated shocks ultimately translate into poor subsidiary performance and lower subsidiary survival likelihood. To improve survival, I show that the subsidiary can deploy a parent country national (PCN) GM at its founding, followed by host country national (HCN) successors.

Essay 2 provides a more accurate account of subsidiary GM successions when subsidiary performance disappoints. It challenges the strategic contingencies perspective, which holds that GMs can accrue power from strategic configurations to weaken the existing association between performance and GM succession. Taking the MNE attention perspective, I show that some strategic configurations that increase subsidiary GM power can also enhance MNE monitoring, thus strengthening rather than weakening the subsidiary performance–subsidiary GM succession link. I conceptualize this as the performance–attention–succession model. I also show that GM succession is an effective subsidiary turnaround strategy.

Essay 3 elaborates a nuanced categorization of subsidiary GM successors. Extant studies suggest that to better address host country business practices and cultures, it is sensible to deploy HCN subsidiary GMs. The data, however, show that using HCN GM successors is not always the best strategy. For HCN GMs promoted from within the subsidiary, ex post opportunism may arise, resulting in unsatisfactory subsidiary performance. Appointing HCN GMs from outside the subsidiary may limit opportunism, but it can entail divided engagement. Expatriating PCN subsidiary GMs, on the other hand, may beget over-reliance on existing practices. I reveal two safeguards that can address bounded reliability.

Summary for Lay Audience

This dissertation, based on interviews with over 40 managers and quantitative data from over 1,900 foreign subsidiaries, aims to provide new insights regarding the subsidiary general manager (GM) changes in multinational enterprises (MNEs).

Essay 1 focuses on continual GM changes. While with every succession, MNE managers learn more about how to select the right candidate, thus reducing the need to change the subsidiary GM again, I found that from a threshold onward, the reduced marginal costs of making succession decisions increasingly render succession more likely. The accumulated shocks ultimately lead to poor subsidiary performance and higher subsidiary exit rate. As a remedy, I show that the subsidiary can deploy a parent country national (PCN) GM at its founding, followed by host country national (HCN) successors.

Essay 2 focuses on the performance–succession relationship. While existing studies hold that GMs can leverage strategic configurations to defer succession when firm performance disappoints, I show that in the presence of structural factors that enhance the subsidiary GM power, the poor performance-succession relationship is not necessarily decreased. However, in the presence of structural factors that enhance MNE monitoring, the poor performance-succession relationship will be strengthened. This model thus provides a more accurate account of subsidiary GM successions when subsidiary performance disappoints. I also show that changing GMs can effectively turn around the ailing subsidiary.

Essay 3 focuses on subsidiary GM successor origin. Although it seems sensible to deploy HCN GMs in market-seeking subsidiaries in order to better address host country environment, I show that using HCN GM successors is not always the best strategy. HCN GM successors promoted from within the subsidiary may pursue self-interest with deceitfulness, resulting in unsatisfactory subsidiary performance. Appointing HCN GMs from outside the subsidiary may address the problem, but it can lead to identity-based discordance. Expatriated PCN subsidiary GMs, on the other hand, may surrender to the force of old habit. The data delineate several managerial tools that can address these issues.

Overall, this dissertation underscores the complexity of subsidiary GM succession, bridges succession strategy with implementation, and provides a springboard for future studies on this largely neglected topic.

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