The purpose of this paper is to explore the factors influencing whether a multinational corporation (MNC) appoints an expatriate or a local national as the CEO of its subsidiary.
The study proposes a framework comprising ownership‐specific, location‐specific and internalization‐specific factors to examine determinants of expatriate CEO assignment. MNCs' subsidiaries in Taiwan were selected for the study.
For the effect on the assignment of an expatriated CEO to a subsidiary, the factors of a subsidiary's capability and size, MNC's global strategy and internalization motivation are positive; in contrast, the factor of the host country's locational advantages is negative. In addition, in circumstances of large cultural distances, the effect of high internalization motivation is positive and that of low internalization motivation is negative.
The research does not differentiate between two different types of expatriates and focuses on advanced countries' MNCs' subsidiaries in Taiwan. The theoretical implication of the study lies in the application of the perspectives of resource‐based view and transaction cost theory on an MNC's decision concerning the assignment of an expatriated CEO for subsidiaries.
MNCs could make a subsidiary's staffing decision by taking into account ownership‐, location‐, and internalization‐specific factors. Failure to do so will lead to poor operation of the subsidiary.
The research contributes to knowledge about the determinants of expatriate CEO assignment, and illuminates the importance of ownership, location and internalization factors for MNCs.
