Home-Host Government Conflict and MNEs’ Subsidiary Manager Staffing Strategy: A Strategic Alignment

In this study, we explore how home-host government relations impact multinational enterprises (MNEs)’ subsidiary manager staffing strategy. By emphasizing a strategic alignment between the host country environment and a subsidiary manager decision, we argue that MNEs’ home-host government conflict, as a salient dimension of government relations, will decrease MNEs’ likelihood of using expatriate managers. That is attributed to expatriates’ disadvantages in providing essential resources and legitimacy to mitigate the increasing host country environmental uncertainty arising from home-host government conflict. Additionally, we argue that geographic distance will mitigate the main negative relationship by decreasing MNEs’ expectation of home-host government conflict duration and escalation. On the contrary, home-host trade mutual dependence will intensify the negative impact of home-host government conflict on expatriate manager assignment through the enhancement of subsidiary managers’ importance in leveraging host country resources to countervail extended cross-border market uncertainty. Using a sample of Japanese manufacturing firms and their foreign subsidiaries from 1993 to 2017, we find robust empirical evidence that corroborates our hypotheses.