MNC subsidiary staffing architecture: building human and social capital within the organisation

Abstract

The purpose of this paper is to examine the level of human and social capital that different archetypes of subsidiary staffing are associated with, and how this influences the management of knowledge stocks and flows within the MNC. We identify four subsidiary staffing archetypes (local–internal, local–external, global–internal, and global–external) and suggest that each of them can be used for different knowledge-related purposes within the organisation. The local-internal archetype may carry a dual role in both exploiting existing knowledge stocks in their local markets and transferring market knowledge to the headquarters, through the co-existence of a high level of market knowledge and external social capital combined with at least some degree of MNC-specific knowledge and social capital. The local-external archetype, in turn, can play a valuable role in the exploration of new non-redundant knowledge. The global-internal archetype serves a key function in transferring knowledge and best practices from the headquarters to the subsidiaries. Lastly, the global-external archetype seems to have limited human- and social-capital related advantages.

Keywords:

• human capital
• knowledge
• MNC staffing
• social capital

Acknowledgement

The authors would like to thank Tekes, the Finnish Funding Agency for Technology and Innovation for their generous support with this research.

Notes

1. Although Lepak and Snell (1999) focus on employment modes rather than types of staffing, the ‘internal’ and ‘external’ categories of staffing closely correspond to their differentiation between internal development and external acquisition of human capital. In addition to these, Lepak and Snell (1999) differentiate between contracting and alliances as employment modes; these will, however, be excluded from the present analysis in the interest of analytical clarity. Hybrid types of staffing, such as short-term, commuter or virtual assignments, or the use of international business travellers and the related management challenges (Collings et al. 2007; Tarique and Schuler 2008) are excluded for the same reason. The human/social capital and knowledge related consequences of these new forms of staffing would, however, provide a fruitful avenue of future research.

2. It is worth noting that although we also include third country nationals (TCNs) in our analysis, where relevant, our primary focus is on parent country nationals (PCNs) versus host country nationals (HCNs). The differences between PCNs and TCNs are discussed in more detail in the Discussion.

3. Of course, staffing decisions are complex and candidates may not always have the adequate skills for the new appointment. As an anonymous reviewer pointed out, expatriation decisions can sometimes be made for political reasons, to out-pasture long-timers whose performance has reached a plateau, or to open up positions at the HQ. While we exclude these cases from the present study and assume that candidates have adequate skills for the focal task, future research should look into this area in which existing research is extremely scarce.

4. We would like to extend our thanks to an anonymous reviewer for this insight.