Sending expats or hiring locals? The impact of communication barriers on foreign subsidiary CEO staffing Online publication date: Fri, 25-Sep-2020
by Helene Tenzer; Matthias Schulz; Hendrik Klier; Christian Schwens
European J. of International Management (EJIM), Vol. 14, No. 5, 2020
Abstract: Communication between headquarters (HQs) and foreign subsidiaries of multinational corporations (MNCs) is crucial for coordination, control, and knowledge transfer, but language barriers and geographic distance impede this exchange. Hypothesising that MNCs react to these hurdles by appointing subsidiary top managers with adequate communication skills, we investigate how the native language barrier, foreign language barrier, and geographic distance between HQs and a foreign subsidiary influence the choice between parent and host/third country nationals as subsidiary CEOs. Testing our hypotheses on a sample of 101 staffing decisions made by German firms in 33 countries, we find a negligible effect of the native language barrier, but establish that a foreign language barrier enhances and higher geographic distance lowers firms' propensity to staff subsidiary CEO positions with parent country nationals. An MNC's international experience was found to moderate these relationships.
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