A configurational perspective on subsidiary top management team national diversity and performance

Date02 September 2019
Publication Date02 September 2019
AuthorSven Dahms,Suthikorn Kingkaew
SubjectHr & organizational behaviour,Global hrm
A configurational perspective
on subsidiary top management
team national diversity
and performance
Sven Dahms
Department of Strategic Management,
Asian Institute of Management, Makati, The Philippines, and
Suthikorn Kingkaew
Thammasat University Faculty of Commerce and Accountancy,
Bangkok, Thailand
Purpose The purpose of this paper is to investigate what role national top management team diversity
(TMTD) plays in foreign-owned subsidiary performance. The authors develop a conceptual framework based
on the asset bundling model and the neo-configurational perspective to argue that the impact of TMTD on
subsidiary performance depends on its conjunction with other assets.
Design/methodology/approach The authors test our framework on a sample of subsidiaries located in
the emerging economies of Thailand and Taiwan. The authors utilise structuralequation modelling and fuzzy
set qualitative comparative analysis techniques.
Findings The results indicate that TMTD can contribute and hurt subsidiary performance depending on
its bundling with other assets such as organisational network strength, competencies, as well as regional and
cultural differences between the home and host country.
Originality/value This is one of the first studies to empirically test the asset bundling model in the context
of national TMTD in foreign-owned subsidiaries using a configurational approach.
Keywords Quantitative, Top management team, Advanced statistical, Structural equation modelling,
Multinational enterprises, Fuzzy set, Diversity managment, Multinational corporations
Paper type Research paper
1. Introduction
The link between top management team national diversity (TMTD) and performance of
multinational enterprises (MNEs) as a whole and subsidiaries in particular is a highly
contested topic in the field of international human resource management (Gong, 2006;
Colakoglu and Caligiuri, 2008). While substantial progress has been made at the firm level
(e.g. Masulis et al., 2012; Nielsen and Nielsen, 2013; Van Veen et al., 2014; Hooghiemstra et al.,
2019), at the subsidiary level, the link between TMTD and performance is still ambiguous
(Sekiguchi et al., 2011; Lakshman and Jiang, 2016; Tao et al., 2017; Bai et al., 2018). It is
important to develop a better understanding of that issue because ill-fitting TMTD can lead
to serious strategic consequences for the subsidiary as well as the MNE as a whole. For
instance, a currently unresolved dilemma is that of subsidiary legitimacy in the host
country. While greater national diversity can increase host country legitimisation and
subsequent reduced external transaction costs, it might also lead to greater communication
costs with other parts of the MNE network on which the subsidiary ultimately depends for
survival (Tan and Mahoney, 2006; Hyun et al., 2015; Muellner et al., 2017). However, it also
has a more direct impact on human resource management in the subsidiary and the rest of
the MNE. Showing a tendency to have a nationally diverse top management team in the
subsidiary also signals attractive career prospects to potential recruits from the host
country (Ghemawat and Vantrappen, 2015). That has important implications in the global
Personnel Review
Vol. 48 No. 6, 2019
pp. 1507-1529
© Emerald PublishingLimited
DOI 10.1108/PR-10-2018-0389
Received 8 October 2018
Revised 13 December 2018
9 January 2019
Accepted 22 February 2019
The current issue and full text archive of this journal is available on Emerald Insight at:
team national
search for talent in MNEs across the globe (Burbach and Royle, 2010), but especially so in
emerging markets that are beginning to mature and therefore offer attractive positions in
local companies as well (Schmidt, 2011). After all, subsidiaries can be a key source for
managerial talent in MNEs (Mellahi and Collings, 2010). Given the importance of the topic
for the field of international human resource management and current empirical ambiguity,
we suggest to adapt a different conceptual and methodological stance to address the
question of how TMTD affects subsidiary development and performance.
Much of the current literature argues that the impact of TMTD on performance depends
on internal and external factors (Colakoglu et al., 2009; Muellner et al., 2017; Shin et al., 2017).
However, most studies tend to focus on either one or the other perspective. For example, a
popular view taken by researchers is that TMTD can reduce external transactional costs in
the host country due to the reduced liability of foreignness (Harzing, 2001; Tan and
Mahoney, 2006; Hyun et al., 2015). One argument goes that greater diversity at the
subsidiary top management level increases its ability to localise its business practices,
which in turn increases local legitimacy (Williams et al., 2017). However, it has also been
argued that TMTD itself influences the internal workings of the MNE and the position of the
subsidiary within the MNE. For example, TMTD can contribute to knowledge dissipation
within the multinational network due to potentially improved filtering and channelling of
relevant knowledge across the MNE network (Harzing et al., 2016). Others have started to
combine the two angles. For instance, Shin et al. (2017) applied external cultural and internal
transaction cost economic reasoning to identify subsidiary board staffing patterns. Muellner
et al. (2017) argued more from an institutional perspective and found that greater subsidiary
TMTD might also have negative consequences depending on the institutional nuances
between home and host country. Interestingly, both articles suggest curvilinear rather than
linear associations within their symmetric models. This presents considerable progress
compared to earlier studies, which focused exclusively on linear associations between
TMTD and outcome variables such as subsidiary performance (e.g. Gaur et al., 2007;
Colakoglu and Caligiuri, 2008). Therefore, given the ambiguous empirical evidence
regarding internal and external factors, as well as the increasing methodological complexity
applied in the field, we suspect that the underlying patterns in which TMTD influences
performance outcomes in foreign-owned subsidiaries might be more difficult to disentangle
than commonly acknowledged in the field. Consequently, our objective in this paper is to
explain the role played by TMTD in the context of subsidiary level performance by
expanding current conceptual and methodological discussions through asset bundling and
neo-configurational perspectives.
The asset bundling model has been developed by Hennart (2009), and is used to predict
entry mode strategies as well as subsequentsubsidiary development (Verbekeand Hillemann,
2013). The two main arguments in the model that are crucial for our study are that asset
bundling is required at the subsidiary, corporate and host country level to be successful and
that local asset accesscarries non-zero transaction costs. In otherwords, the mere possession
of assets such as research competencies, trademarks, highly skilled workforce or greater top
management team diversity (TMTD) are not per se enough to determine high-performance
outcomes (Rugman and Verbeke, 2001). That is because those assets need to fit in the
subsidiaryspecific environment, which includesfor instance access to local supplier networks
or customers. Those complementary assets in the host location carry managerial costs to
access and develop (Hennart, 2009; Hennart et al., 2015). While theasset bundling model has
found considerable resonance in the entry mode research (Verbeke and Hillemann, 2013), it
has so far only sparingly applied elsewhere (Cavanagh et al., 2017). This might be because
only few methodologies can accommodate the underlying conceptual aspects of the asset
bundling model such as complementarity and substitutability of assets. Here we believe that
the neo-configurational perspective has much to contribute.

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