Expatriate Staffing and Foreign Affiliate’s Labor Productivity: Contingent on Foreign Production Intensity and Cultural Distance

Abstract

Purpose - This study examines the effects of expatriate transfer on foreign affiliate’s labor productivity. Design/Methodology - Using Korean owned foreign affiliate level data, we estimate the effect of expatriate transfer on foreign affiliate’s labor productivity using the system generalized method of moments model. We also consider foreign affiliate and host country specific contingencies and test how they are associated with expatriates in enhancing foreign affiliate’s labor productivity. Findings - We consider foreign production intensity and cultural distance between the home (i.e., South Korea) and host countries as key contingencies that influence the effect of expatriates on foreign affiliate’s labor productivity. We find that expatriates are effective in enhancing the labor productivity of less production intensive foreign affiliates. This effect is strengthened as expatriates are deployed to countries that share cultural similarities with the home country. Originality/value - Considering that previous studies provide mixed results on the effect of expatriates, our findings suggest that foreign affiliate specific operational orientation and cultural distance should be considered jointly to understand the true effect of expatriate staffing on foreign affiliate performance.