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A transaction cost analysis of staffing decisions in international operations

Author

Listed:
  • Benito, Gabriel R.G.
  • Tomassen, Sverre
  • Bonache-Pérez, Jaime
  • Pla-Barber, José

Abstract

This paper analyzes staffing decisions in foreign subsidiaries from the perspective of transaction cost theory. We focus on the ex post transaction costs of the employment relation. Specifically, we look at the monitoring, bonding, maladaptation, and bargaining costs of conducting activities in specific subsidiaries in a foreign country. We hypothesize that the transaction costs of using expatriates are lower than those generated by local employees, especially in the higher managerial echelons of foreign subsidiaries, but also that costs can be reduced as individuals become more experienced. We also conjecture that ex post transaction costs are influenced by cultural differences between the host and the home countries, and by characteristics of the companies and their subsidiaries. The framework is empirically corroborated by survey data on a sample of 145 Norwegian MNCs.

Suggested Citation

  • Benito, Gabriel R.G. & Tomassen, Sverre & Bonache-Pérez, Jaime & Pla-Barber, José, 2005. "A transaction cost analysis of staffing decisions in international operations," Scandinavian Journal of Management, Elsevier, vol. 21(1), pages 101-126, March.
    • Handle: RePEc:eee:scaman:v:21:y:2005:i:1:p:101-126
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    Citations

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    Cited by:

    1. Arjen H. L. Slangen & Jean‐François Hennart, 2008. "Do Foreign Greenfields Outperform Foreign Acquisitions or Vice Versa? An Institutional Perspective," Journal of Management Studies, Wiley Blackwell, vol. 45(7), pages 1301-1328, November.
    2. Yang, Jing Yu & Wen, Liang & Volk, Stefan & Lu, Jane Wenzhen, 2022. "Temporal boundaries and expatriate staffing: Effects of parent–subsidiary work-time overlap," Journal of World Business, Elsevier, vol. 57(6).
    3. Muellner, Jakob & Klopf, Patricia & Nell, Phillip C., 2017. "Trojan Horses or Local Allies: Host-country National Managers in Developing Market Subsidiaries," Journal of International Management, Elsevier, vol. 23(3), pages 306-325.
    4. Naoki Ando & Dong Kee Rhee & Namgyoo Park, 2008. "Parent country nationals or local nationals for executive positions in foreign affiliates: An empirical study of Japanese affiliates in Korea," Asia Pacific Journal of Management, Springer, vol. 25(1), pages 113-134, January.
    5. Hendrik Klier & Christian Schwens & Florian B. Zapkau & Desislava Dikova, 2017. "Which Resources Matter How and Where? A Meta-Analysis on Firms’ Foreign Establishment Mode Choice," Journal of Management Studies, Wiley Blackwell, vol. 54(3), pages 304-339, May.
    6. Slangen, Arjen H.L. & van Tulder, Rob J.M., 2009. "Cultural distance, political risk, or governance quality? Towards a more accurate conceptualization and measurement of external uncertainty in foreign entry mode research," International Business Review, Elsevier, vol. 18(3), pages 276-291, June.
    7. Klaus E. Meyer & Chengguang Li & Andreas P. J. Schotter, 2020. "Managing the MNE subsidiary: Advancing a multi-level and dynamic research agenda," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 51(4), pages 538-576, June.
    8. Klaus E. Meyer & Chengguang Li & Andreas P. J. Schotter, 0. "Managing the MNE subsidiary: Advancing a multi-level and dynamic research agenda," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 0, pages 1-39.
    9. Jong Min Lee, 2022. "MNCs as dispersed structures of power: Performance and management implications of power distribution in the subsidiary portfolio," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 53(1), pages 126-155, February.
    10. Lee, Jong Min, 2019. "Intra- and inter-regional diversification, subsidiary value chain activities and expatriate utilization," Journal of International Management, Elsevier, vol. 25(3), pages 1-1.
    11. Peng, George Z. & Beamish, Paul W., 2014. "MNC subsidiary size and expatriate control: Resource-dependence and learning perspectives," Journal of World Business, Elsevier, vol. 49(1), pages 51-62.

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