Trojan Horses or Local Allies: Host-country National Managers in Developing Market Subsidiaries

Jakob Müllner, Patricia Klopf, Phillip C. Nell

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    Abstract

    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.
    Original languageEnglish
    JournalJournal of International Management
    Volume23
    Issue number3
    Pages (from-to)306-325
    Number of pages20
    ISSN1075-4253
    DOIs
    Publication statusPublished - Sep 2017

    Bibliographical note

    Published online: 14. January 2017

    Keywords

    • Multinational corporations
    • Subsidiary staffing
    • Institutional theory
    • Corruption
    • Institutional distance

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