MNC Subsidiary Size and Expatriate Control : Resource Dependence and Embeddedness / Learning Perspectives

We hypothesize a U-shaped relationship between multinational corporations’ (MNCs’) subsidiary size and expatriate staffing level based on resource dependence theory. Furthermore, based on resource dependence and embeddedness / learning perspectives, the U-shaped relationship is hypothesized to be moderated by parent firm size, equity ownership of the parent firm in the subsidiary, and subsidiary age. A sample of 9579 Japanese overseas subsidiaries over the period 1996-2005 was used to test our hypotheses. Results supported all four hypotheses. There is a U-shaped relationship between subsidiary size and expatriate staffing level. The U-shaped curve is flatter for subsidiaries with larger parents; and steeper for subsidiaries in which the parent firm equity ownership levels are higher. The U-shaped curve gets flatter with increasing subsidiary age. Overall, the variables related to our hypotheses explain approximately 23% of the variance in expatriate staffing level. The theoretical and practical implications of these findings are discussed