The major theme under discussion is the role of expatriates to determine the performance of the subsidiaries. In this case, expatriates refer to the nationals in a foreign country while subsidiaries refer to the business branches of a parent company operating in a foreign nation (the different state from that of the parent company).
The articles used in this essay are derived from the journals of human resource management and international business review. The sources are very significant since they deal with articles that focus on business-related themes. Therefore, there is no doubt that they offer the best articles for examination and discussion as far as the theme of the role of expatriates in the performance of subsidiaries is concerned. The articles are chosen since they all focused on one aspect, which is the performance of subsidiary firms about expatriates they are the most appropriate since they discuss the relationship between expatriates and subsidiaries from different angles thus can be reviewed objectively. Additionally, the articles are written with a high degree of academic authority since the authors are experts in the theme under study. The dominant issue in the articles is the idea that expatriates influence the performance of subsidiaries. The purpose of this critical essay is to analyses the articles highlighted above with the aim of establishing the connection between subsidiary performance and the expatriate level. Such assist is very significant in explaining how increased expatriates and control, by the parent matter leads to a u-shaped relationship between the subsidiary performance and subsidiary autonomy.
The Analysis
Autonomy of Subsidiaries and their Performance
The primary focus in these articles is the Managment of subsidiary companies and the role or influence of repatriates in the control of the subsidiary companies. Examining the Control and coordination of Japanese subsidiaries in China: problems of an expatriate-based management system Legewie (2002) contends that Japanese expatriate based control system is marked with inside –outsider mentality. The mentality is seen to prevent an actual internationalization of overseas operations in the transnational sense as noted by Legewie (2002) who indicates that too much control by the parent company impacts negatively on the subsidiary’s autonomy.
Besides, the ethnocentrism posed by the expatriate based control system prevents the quick shift to the global operations in a transnational sense. This implies that expatriates have influenced the performance of subsidiary companies. It is in this context that Fang et al. (2018) notes that there is an indirect relationship between expatriates on subsidiary performance and subsidiary autonomy. Fang et al. (2018) further contend that an increase in expatriates reduced the level of subsidiary autonomy. This in turn negatively impacts on the subsidiary performance.
In his study Legewie (2002) asserts that the parent companies in Japan have higher control over their subsidiaries in China. However explaining the impacts of such power, Fang, et al. (2018) notes that the quality of host countries reinforces the adverse effects of expatriates on subsidiary autonomy. This reduces the significance of the latter on subsidiary performance. In this context is noted that assigning many expatriates enables the parent firm to have tighter control over the subsidiary companies and thus reduces their autonomy. The reduced independence reduces the performance of the subsidiaries. This implies that high-quality firms in host countries induce EMNE parents to send less expatriate. This leads to the subsidiaries having a high level of autonomy (Fang et al. 2018).
Centralized Decision-making and Performance in Subsidiary Companies
Moreover, the author notes that there may be more resource exchange between the subsidiaries and the local firms in the host nations with well-designed institutions (Fang et al. 2018). When the subsidiaries are located in host countries with higher institutional quality, they are likely to employ the local people and partake more closely with the domestic supplies and clients. In nutshell, the effects of expatriates on the subsidiary autonomy and performance changes depending on the host nation institutional quality. Legewie (2002) contends that by global standards, the Japanese multinational companies have a high degree of centralized decision making. This explains the lack of autonomy of the subsidiary companies. With this, Fenwick et al. (1999) note that they cannot make an independent decision and thus have to depend on the decision that is made at the headquarters, by the parent company.
Gammelgaard et al. (2012) examine that impact of increases in subsidiary autonomy and network relationships on performance. The ideas of Gammelgaard et al. (2012 agree with the ideas coined by the conclusions of the preceding studies. The relationship between subsidiary autonomy, performance, and level of expatriates can be attributed to the interaction between independence and network relations. The ideas concur with Fenwick et al., (1999) who note that there is a complex interaction between increases in autonomy and the network of relations and the following effects of these changes on performance. Additionally, the authors note that inter-organizational network relationship plays a significant role in the interaction between the factors that produce substantial and passive effects.
Given the above, the Gammelgaard et al. (2012) recommend that there is a need for the parent company and subsidiaries to coordinate strategies for effectively managing all factors simultaneously. The coordination between the subsidiary and the parent company’s is necessary to ensure that there is autonomy of the two sets of companies (Fang et al. 2018). It is worth noting that the best performance of the subsidiary firms depends on their autonomy from the parent company.
Subsidiary Size and the Expatriate Staff Level
Indeed, Penga & Beamish (2014) contends that there is a U-shaped relationship between the subsidiary size and the expatriate staff level. This implies that as the subsidiary increases in size, the number of expatriates and its performance increases. However, as the number of expatriates to the subsidiary increases, it reaches a point where the performance of the expatriate begins to reduce thus forming a curvilinear (u-shaped relationship) (Fang et al. 2018). This explains the continued relevance and explanatory power for resource tendency theory and business research.
Resources
The dependency of subsidiaries on the parent firm’s resources depends on the size of the subsidiary. Penga & Beamish (2014) notes that larger subsidiaries have more resources as compared to smaller subsidiaries. The amount of resource that the subsidiary controls determine its power visa vi its parent firm. In a way, the subsidiary power will affect the relationship between the subsidiary and the parent company and ergo expatriate staffing levels.
Staffing subsidiaries with expatriates is a key tool for the headquarters to exercise its power. However, it is worth noting that dependence on cultural control especially that which uses expatriate assignments in a primary role should tamper with an integrated performance management system
Conclusion
In conclusion, therefore, the major focus of the articles discussed above is examining how expatriates impacts on the performance of subsidiaries. The relationship between expatriate and subsidiary performance is discussed from diver angles. These include autonomy, decision making, the number of staff and resources.
Regarding autonomy, it is evident if the parent company has less control over the subsidiary; the subsidiaries are likely to have a higher level of autonomy. The higher level of autonomy leads to higher performance. Besides, if the parent company has centralized decision making, then the subsidiaries will take long before making decisions thus leading to poor performance. Accordingly, it is important that multinational companies make decentralizes decision making to its foreign subsidiaries. This will enhance the autonomy of the subsidiaries and thus enable them to make a business decision based on the conditions where they are located. Moreover, Subsidiaries with resources have power thus higher performance. There is also a need for multinational companies to reduce the number of expatriates in their operation to enhance the performance of the subsidiaries.
However, there some gaps that these articles have left out. For instance, there is a need to explore the implications for expatriates and their career development in regards to management expectations of both headquarters and host country administrations. It is also note clear if the multinational companies will succeed with their IMC models — this an area that needs an in-depth study.
References
Fenwick, M. S., De Cieri, H. L., & Welch, D. E. (1999). Cultural and bureaucratic control in MNEs: The role of expatriate performance management. In Management International Review (pp. 107-124). Gabler Verlag, Wiesbaden.
Gammelgaard, J., McDonald, F., Stephan, A., Tüselmann, H., & Dörrenbächer, C. (2012). The impact of increases in subsidiary autonomy and network relationships on performance. International Business Review, 21(6), 1158-1172.
Legewie, J. (2002). Control and co-ordination of Japanese subsidiaries in China: problems of an expatriate-based management system. International Journal of Human Resource Management, 13(6), 901-919.
Peng, G. Z., & Beamish, P. W. (2014). MNC subsidiary size and expatriate control: Resource- dependence and learning perspectives. Journal of World Business, 49(1), 51-62.
Tao, F., Liu, X., Gao, L., & Xia, E. (2018). Expatriates, subsidiary autonomy and the overseas subsidiary performance of MNEs from an emerging economy. The International Journal of Human Resource Management, 29(11), 1799-1826.
