Cultural distance and expatriate failure rates: the moderating role of expatriate management practices

Abstract

This study examines moderators of the relationship between cultural distance and the two critical indicators of expatriate failure – maladjustment and premature return rates. Results based on a sample of 126 Taiwanese multinational corporations indicate that expatriate selection and performance management practices moderate the cultural distance–expatriate maladjustment relationship, and expatriate performance management practices moderate the cultural distance–premature return relationship. Additionally, these relationships were stronger when the use of practices was low. We discuss theoretical and practical implications, and offer suggestions for future research.

Keywords:

• Expatriate maladjustment
• expatriate premature return
• expatriate management practices
• cultural distance

Notes

1. The list consists 1,350 companies from the manufacturing sector, 650 companies from the service sector, and 100 companies from the financial sector.

2. The countries included were those with available data from the GLOBE project and these countries include: Argentina, Australia, China, Germany, Hong Kong, India, Indonesia, Japan, Kuwait, Kazakh, Malaysia, Mexico, Namibia, the Netherlands, Poland, Portugal, Singapore, South Korea, Spain, Sweden, Thailand, the United Kingdom, and the United State of America. The excluded countries include: Belgium, Cambodia, Czech Republic, Mongolia, and Vietnam.

3. Another indicator of internationalization used by Hsu and his colleagues (2013), the ratio of foreign assets to total assets in 2014, was not included because the data were not available. Since Hsu et al. (2013) found the ratios to be highly correlated (r = 0.87, p < 0.01), we felt it would be appropriate analytically to use only the ratio of foreign sales to total sales as the indicator of internationalization.