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This chapter explores the literature around expatriates in Multinational Corporations, emphasizes the focus of adjusting to cultural differences when preparing expatriates for foreign assignments and also show how it enables them to succeed in their foreign assignments. Different theories and critiques on expatriate training will also be discussed.
Expatriation has long been identified as a coordination and control mechanism used by MNCs ( Edstrom & Galbraith, 1977; Martinez & Jarillo, 1991). As global competition continues to intensify, it becomes increasingly important for multinational corporations (MNCs) to maintain control over their international operations (Barlett & Ghoshal, 1988, 1989; Geringer & Hebert, 1989; Martinez & Jarillo, 1989; Sohn, 1994 ) since appropriate control will ensure that the MNCs’ strategic goals are met and deviations from standards are corrected to enable subsidiaries act in accordance with headquarters’ policies. (Vernon, Wells, & Rangan, 1996)
Numerous definitions of expatriates exist. Several researchers define an expatriate as someone who is assigned to a single foreign country and able to hold a leadership role, (Pucik and Saba, 1998), has high technical skill levels relative to personnel in the host location (Naumann, 1992) and has a limited role or time for his or her assignment in the overseas location (Adler and Bartholomew,1992).
Harzing, (2001) defines expatriates’ as ‘usually home-country assignees who hold top management positions or key positions in functional departments of a foreign subsidiary’.
Shaffer, Harrison and Gilley, (1999) also define an expatriate as a highly skilled worker with unique expertise who is sent to work in another unit of the same company located in a foreign country generally on a temporary basis for a period of at least six months which will usually involve relocation and significant progress in cultural adjustment (Selmer et al.,1998; Coyle and Shortland, 1992; Torbiorn, 1982).
Since the globalization of economies worldwide has resulted in pressure for managers to deal routinely with other cultures and different countries’ business practices (Marchington and Wilkinson, 2008), it has brought a corresponding rise in multinational corporations’ direct investment in different countries. However, as these MNCs expand their operations into foreign countries, they also transfer their human resources and managerial practices to their foreign subsidiaries which are not always successful due to the influence of cultural differences between the home and host countries (Dowling et al, 2008) as shown below.
Figure 2.1 Management Demands of International Growth
Source: Dowling, P.J., Festing, M., and Engle, A.D., Sr. (2008) International Human Resource Management: Managing People in a Multinational Context. 5th Edn. London: Cengage Learning EMEA
As seen in figure 2.1, the globalization of economies worldwide has resulted in pressure for MNCs to deal regularly with other cultures, their beliefs, size, different business practices amongst others and recognising these differences is the first necessary step to anticipating potential threats and opportunities for business encounters (Schneider and Barsoux, 2003).
The implication of this focus is that our contemporary world is one of cultural diversity and the MNCs normally operate within diverse cultural environments. For the expatriates, then, cultural issues of all sorts, whether at home or in the host country, become basic concerns. Culture is what makes us what we are and our cultural backgrounds influence everything we do at all times and in all places. We learn about and live our local cultures through the processes of socialization and acculturation that begin in childhood. Now, in order to be functional in a different culture, we need to appreciate its values, norms, beliefs, and behaviour patterns and learn to adjust to them as much as possible. Proficiency in the language of the host country goes a long way to provide someone with the tools of cultural competence. The more the expatriate knows about the host culture (including speaking the local language), about its values and expectations, and the more proficient he/she is in the local language, the greater his/her chances of a successful job performance. All of this adds to a cross-cultural learning that will greatly facilitate his/her professional life while managing the business of the organization within the parameters of a different culture.
2.2 Types Of Expatriates
Figure 2.2 presents international human resource management activities in three dimensions.
The broad human resource activities of procurement, allocation and utilization.
The national or country categories involved in international HRM activities which are the host-country where a subsidiary may be located; the home-country where the firm is headquartered; and other countries that may be the source of labour, finance and other inputs.
The three categories of employees of an international firm which are the host-country nationals; parent-country nationals and third-country nationals.
Figure 2.2 Types of Expatriates
Source: P.V Morgan (1986) ‘ International Human Resource Management: Fact or Fiction’, Personnel Administrator, Vol. 31, No. 9, pg. 44.
The management of foreign subsidiary operations is a substantial challenge for
multinational corporations because when making the subsidiary staffing decision, they have the option to choosing between parent country nationals (PCNs), host country nationals (HCNs) and third country nationals (TCN) from the home, host or other countries of the MNC as seen in the diagram above.
Perlmutter and Heenan (1974) also widened the analysis of the international human resource selection decision through the dimension of employer staffing choices where four primary philosophies were identified which are the ethnocentric, polycentric, regiocentric, and geocentric staffing .
2.3 Roles of Expatriates
According to Rahim (1983) ‘an expatriate has to play many different roles’ which includes being an agent of direct control, socialization, network builder, boundary spanner, and knowledge transferor which is reflected in the diagram below.
Figure 2.3 The Role of an Expatriate
Source: Dowling, P.J., Festing, M., and Engle, A.D., Sr. (2008) International Human Resource Management: Managing People in a Multinational Context. 5th Edn. London: Cengage Learning EMEA.
As seen in figure 2.3, the reasons for using expatriates are not limited since they have multiple roles.
The expatriate as an agent of direct control can be seen as a control mechanism where the primary role is that of ensuring compliance through direct supervision.
The expatriate as an agent of socialization involves the use of corporate culture as an informal control mechanism since they are bound to be exposed to different viewpoints and perspectives that will shape their behaviour.
As expatriates move between various organisational units, their network of personal relationship changes. Hence, expatriates are network builders that develop social capital by fostering interpersonal linkages that can be used for informal control and communication purposes.
Expatriates are boundary spanners because they can collect host-country information, act as representatives of their firms in the host country and can influence agents.
Expatriates are language nodes since they can learn the language of the host country they are in order to adapt.
Expatriates also transfer competence and knowledge from their home countries to host countries and vice versa in the course of their assignments.
Edstrom and Galbraith (1977) also identify three general company motives for sending out expatriates: position filling (PF), management development and organisation development.
Position filling refers to the transfer of technical knowledge, mainly to developing countries where qualified local nationals are not available (Edstrom and Galbraith, 1977); Transfer for management development gives the expatriate manager in question international experience and develops him for future roles in subsidiaries abroad or with the parent company (Edstrom and Galbraith, 1977); Organisation development occurs where transfers are used to change or maintain the structure and decision processes of the organisation. In this case, transfers are used as a co-ordination and control strategy.
Specifically, the use of expatriate personnel has been recognized as an important control mechanism to monitor and evaluate the activities and behaviours within the subsidiary (Black& Mendenhall, 1990; Boyacigiller, 1990; Edstrom & Galbraith, 1977; Kobrin, 1988; Schuler, Dowling, & De Cieri, 1993; Tung, 1993).
However, this role comprises of two elements which are direct and indirect control. Direct control is defined as the direct involvement in decision making, selection and promotion of local employees while indirect control is exercised through the transmission of values, attitudes and ways of doing things, or by being ‘cultural carriers'(Edstrom and Galbraith 1977; Jaeger 1983; Lu and Bjorkman, 1997).
Whether implicitly or explicitly stated, expatriates are also trainers who are expected to assist the multinational corporations train and develop HCNs to be able to train their replacements ( Dowling et al, 2008) . Expatriates should also be perceived not just as knowledge carriers but, more importantly, as ‘transfer facilitators’ who enhance the transfer of important parent-firm organizational knowledge to its subsidiaries (Bonache and Brewster, 2001; Hébert et al.,2005; Kostova and Roth, 2003). However, according to Fenwick et al, (1999), there has been little empirical investigation as to how effective expatriates have been as agents of socialization since attempts to introduce corporate values and norms ritualized in the form of certain expected behaviours often have negative results at the subsidiary level.
Besides transferring knowledge from headquarters to overseas affiliates, expatriates
also learn from their involvement in managing these operations. In this case,
expatriates play the role of learning agents, absorbing new knowledge on behalf
of the headquarters ( Jaeger and Baliga, 1985) .
Expatriates also serve an important role as transmitters of corporate culture (Jackson,2002) or cultural carrier (Edstrom and Galbraith 1977; Jaeger 1983; Lu and Bjorkman1997) since they are often sent abroad to transmit corporate culture (Jackson, 2002).
Boundary spanning refers to activities, such as gathering information that bridge internal and external organisational contexts ( Dowling et al, 2008) . Expatriates are considered boundary spanners because they can collect host-country information, act as representatives of their firms in the host country and can influence agents ( Dowling et al, 2008) .
2.3.1 Other Roles of Expatriates
Expatriates are used for a variety of other reasons which includes to provide staff with management development experience for future senior managers (Peterson, Sergent, Napier and Shim, 1996), to set up methods of working, new technology or new marketing methods (Jackson, 2002) , for accountability, their technical skills, their knowledge of products and to provide international exposure to key personnel for development purposes (Arvey, Bhagat and Salas, 1991; Klaus, 1995).
Finally, expatriates may be utilized to enforce and protect the company’s interests (Bird & Dunbar, 1991; Dowling, Schuler, & Welch, 1994).
2.4. Major Factors that Affect Expatriates Effectiveness
Many factors may affect the effectiveness of expatriates (Thomas, 2002, Tung, 1998) since as indicated by Rahim (1983) ‘an expatriate has to play many different roles’ which includes being a representative from the parent company; a manager for a local subsidiary company; a local resident; a local citizen or a citizen in both countries; an expert; and a family member.
Figure 2.4 International Assignments: Factors Moderating Performance
Certain factors moderate expatriates’ performance and affect the decision to stay or leave the international assignment. Some of these factors as seen in figure 2.4 below includes the inability to adjust to the foreign culture which has been a consistent reason given for expatriate failure, the length of the assignment which might be quite long, the unwillingness to go for the assignment, work-related and psychological factors amongst others.
Source: Dowling, P.J., Festing, M., and Engle, A.D., Sr. (2008) International Human Resource Management: Managing People in a Multinational Context. 5th Edn. London: Cengage Learning EMEA
2.4.1 Why Expatriates Fail
One of the most prominent issues in international human resource management is the failure of expatriates (Hill, 2005:624; Ã-zbilgin, 2005:132; Black et al., 1991:291;Shaffer & Harrison, 1998:87; Black, 1988:277) which as defined by Hill (2005:624) as the premature return of an expatriate to his or her home country.
Assignments often may not be completed, necessitating the replacement of the expatriate (Bird & Dunbar. 1991; Black, 1988) and the frequently cited reasons for this outcome include the inability of the expatriate or the spouse and family to adjust to the new environment (Black & Gregersen, 1991;Black, Mendenhall. & Oddou. 1991; Gaylord,1979; Harvey, 1985) or diminished job satisfaction and effectiveness (Feldman & Thomas, 1992;1993; Hodgetts, 1993;Miller, 1975; Naumann, 1993; Stening &Hammer, 1992) as a result of workplace conflict around differences in norms and culture.
As relocation, be it domestic or international always causes change for those involved as scholars have repeatedly reported that stress levels increase with cultural environment distance (Torbion, 1982; Black, 1988) which is supported by a recent survey released by the U.S National Foreign Trade Council where it was reported that the inability to adjust to the foreign cultural environment was the key reason for expatriate failure and has continued to remain the major reason given for expatriate failure which has been a subject of considerable interest to researchers.
Additionally, it has been found that the adjustment of the spouse is highly correlated with the adjustment of the expatriate and that the children tend to mirror their parents’ reactions (Black and Stephens, 1989). This was observed after an early study by Tung (1982:67) who found out that the number one reason for the failure of expatriates in the US and Western European MNCs were the inability of the expatriate’s spouse to adjust to the foreign location which proves that family adjustment is a significant criteria that determines expatriates failure in a country ( Selma, 2002) since research over the past 20 years has shown a consistent ranking of the ‘inability of the spouse/partner/family’ to adjust to the foreign culture as a primary cause of early recall which may result from non-preparation for the move abroad or from the inability to work in the foreign country (Dowling et al, 2008).
The spouse’s difficulty in adjustment may also be related to several other factors which include the inability to cope without the familiar network of family and friends, inadequate language skills or cultural training, and inadequate social support programs to assist him or her in developing an acceptable lifestyle overseas (Adler, 1997).
However, Shaffer and Harrison (1998:87) and Black, (1988:277) observe that failure may vary in degree. They highlight the fact that expatriates who remain on the assignment but psychologically withdraw may incur indirect losses for their enterprise. These losses can include a reduction in productivity, market share, and competitive position, as well as damaged staff, customer and supplier relations, and a discredited corporate image and reputation.
Tung (1982:68) surveying United States (US), European and Japanese MNCs, highlighted the severity of the problem when identifying that 7 percent of the United States MNCs experienced expatriate failure rates of 10-40 percent, 69 percent had a recall or failure rate of 10-20 percent, and the remaining 24 percent experienced a failure rate of less than 10 percent. He also observed that US-based MNCs experienced a much higher expatriate failure rate than either Western European or Japanese MNCs.
More recently Shay and Tracey (1997:31) stated that 25 to 40 percent of the United States expatriates assigned to a developed country return home prematurely compared to 70 percent assigned to a developing country. This is supported by Briscoe, Schuler and Claus (2009) who observed that the rate of early return for US expatriates varies in different enterprises (and in different surveys) from 10 percent to 80 percent (with a common failure rate in the 30-40 percent range).
Furthermore, according to Copeland and Griggs (in Shay & Tracey, 1997:31) and Deresky (2002:398), it is estimated that between 30 and 50 percent of expatriates who do complete their assignments are considered ineffective or marginally effective.
Numerous authors have also highlighted the high cost of a failed expatriate assignment. According to authors such as McNerney (1996:1), Shay and Tracey (1997:31), Hill (2005:624), and Chowanec and Newstrom (1991:65), the estimated cost of a failed expatriate assignment ranges between US$250,000 and US$1 million. While authors such as Griffin and Pustay (2002:583) and Black (1988:277) estimate the cost of a failed expatriate assignment at between US$40,000 and US$250,000 (these figures include the expatriate’s original training and moving expenses, as well as lost managerial productivity, but do not include the decreased performance of the foreign subsidiary itself).
In addition, a failed assignment also has an indirect cost implication for a MNC as it can lead to damaged relations with the host country government, a diminished worldwide reputation of the MNC as well as negatively influencing the moral of employees in both the home and host country operations of an MNE (Chowanec & Newstrom, 1991:66; Deresky, 2002:398).
Harvey’s (1995:223) research is also supported by a study of Pricewaterhouse Coopers (PWC) ( 2000:80), who found that the partners of employees were the main reason for failed or unsuccessful international assignments in half the MNCs they surveyed.
Hence there is a body of literature that highlights issues and challenges for organisations and expatriates. A particular issue is the need for organisations to pay attention to organisational support on expatriate and spousal adjustment (Caligiuri et al, 1999) which is not only related to general interactions adjustment but also to better performance on the job.
2.4.2 The Process of Adjustment
As earlier stated by the author, research shows that if the expatriate’s spouse and/or family members are having trouble adjusting abroad, the expatriate will have problems as well, including poor job performance (Black &Gregersen, 1991; Gaylord, 1979; Harvey,1985),which could result in a premature return from the overseas assignment or a poor performance upon completion of his/her assignment.
As a result, several personal dimensions have also been found to impact a manager’s transition to an overseas assignment and when activities available at home cannot be found in the host country, there may be feelings of loneliness, isolation, and frustration, which contribute to culture shock and inhibit adjustment (Church, 1982).
Hence, an international assignment intensifies the stress associated with the transfer of personnel as it involves ‘an entire personal and professional life style modification that impacts the expatriate and other family members (Harvey, 1985:84) often causing a temporary emotional state called culture shock as seen in figure 2.4.2
Figure 2.4.2 The U-Curve
Phase 1: Tourist
Phase 2: Crisis
Culture shock ƒ May exit?
Phase 3: Pulling up
Phase 4: Adjustment
Source: H. De Cieri, P.J Dowling and K.F. Taylor, ‘The Psychological Impact of Expatriate Relocation on Partners’, International Journal on Human Resource Management, Vol. 2, No.3 (1991) p.30.
Adjustment to a foreign culture is multifaceted, and individuals vary in terms of their reaction and coping behaviours and the adjustment curve (sometimes referred to as the U-Curve) is based on psychological reactions to the assignment and is helpful in demonstrating the typical phases that can be encountered during cultural adjustment (Dowling et al, 2008) .
Phase 1 (tourist or honeymoon stage) commences with reactions prior to the assignment which can be a range of positive and negative emotions such as excitement, anxiety, fear of the unknown, or a sense of adventure which can lead to an upswing of mood . Then as the novelty wears off, realities of everyday life in the foreign location begin to intrude, homesickness sets in, and a downswing may commence which can create negative appraisals of the situation and the location leading to a period of crisis (phase 2).This phase can be a critical time, and how the individual copes with the psychological adjustment has an important outcome in terms of success or failure. Once past this crisis point, as the expatriate comes to terms with the demands of the new environment, there is a pulling up (phase 3) resulting in an adjustment (phase 4) to the new environment (Dowling et al, 2008).
In recent studies (Mendenhall and Oddou 1985; Black 1988; Black and Gregersen 1991;Black, Mendenhall and Oddou 1991; McEvoy and Parker 1995), adjustment is seen as a multi-faceted phenomenon with three major dimensions that are addressed and empirically tested: adjustment to the general environment, referring to the general psychological comfort involving aspects such as living conditions, weather or food; adjustment to the work situation, referring to the psychological comfort with culture specific work values and standards; and adjustment to interacting with host nationals, focusing on the comfort with different communication styles in the host setting.
Also, adjustment pertaining to expatriates can be broken down into anticipatory, psychological, environmental/ (socio) cultural, organisational, interaction and personal change adjustment (Black et al, 1991,) and Shaffer et al, (1999) has also identified job factors, organisational factors, personal factors, non-work factors and individual factors as significant to expatriate adjustment.
2.5.1 Definition Of Culture
According to Hickson and Pugh (1995), ‘national culture shapes everything’. National culture influences management practices like structure, strategy and human resources systems; and the effective transfer of management structures and processes relies on the ability to recognise their inherent assumptions and compare them with the cultural assumptions of the potential host country recipient. (Schneider and Barsoux, 2003).
Over the years, culture has been defined in different ways by various writers. Culture was first defined in 1871 by Tylor (Hall,1980: 20) as “the complex whole which includes knowledge, belief, art, morals, custom and any other capabilities and habit acquired by man as a member of society” while Hofstede (2001) also defines culture as ‘the collective programming of the mind that distinguishes the members of one group or category of people from another’ .
At the organizational level, Schein (1985:9) also provides a definition of culture drawn from the framework developed by Kluckholn and Strodtbeck (1961) in (Schneider and Barsoux ( 2003):
… “a pattern of basic assumptions-invented, discovered, or developed by a given group as it learns to cope with its problems of external adaptation and internal integration-that has worked well enough to be considered valid and, therefore, to be taught to new members as correct way to perceive, think and feel in relation to those problems”
Values, behaviour and beliefs are different across cultures and their importance to those cultures should not be underestimated. Whether engaging in strategic alliances, setting up operations abroad or attracting the local market, companies need to discover how culture can be harnessed to drive business forward (Schneider and Barsoux, 2003).
2.5.2 Cultural Adaptation and Knowledge
When expatriates are familiar with the culture, language, and customs of headquarters, it can facilitate the transfer of corporate culture between headquarters and their subsidiaries, enhancing communication and coordination (Boyacigiller,1991; Rosenzweig and Singh, 1991) and can also provide technical and managerial skills that may not be immediately available at the local level.
However, expatriates are not likely to be motivated to engage in active participation in a new environment if they are uncertain as to what an appropriate behaviour is, as such contacts with host nationals could be threatening and increase anxiety (Stephan and Stephan, 1992). Hence, the more information received regarding local behaviours, the more easily the expatriate can adopt culturally appropriate behaviour and thus facilitate the adjustment process.
Expatriates may learn the host culture indirectly prior to direct contact with the host society through pre departure cross cultural training which can be an effective way of gaining cultural knowledge about the host culture (Black, Mendenhall and Oddou, 1991) in order to reduce uncertainty prior to active participation.
Expatriate pre departure knowledge can also contribute to both work and general adjustment overseas (Black, 1988) when such knowledge includes information about the transition which can reduce many of the uncertainties associated with the new role. Work adjustment here includes the extent to which the expatriate is able to adjust to the level of responsibility associated with the assignment as well as his or her pay schedule while adjustment to the general environment refers to the individual’s ability to adjust to non-work factors such as housing conditions and health facilities (Black, 1988). Clarke & Hammer (1995) also observed that interpersonal skills, which are similar to social orientation, tended to facilitate cross cultural adjustment since social skills appear to be critical to the manager’s ability to complete tasks and to establish and maintain effective intercultural relationships, all of which assist in the cultural adjustment of the expatriate and his or her family.
However, cultural knowledge acquired in one’s culture of origin may be inadequate and subject to modifications as one encounter the new environment since cultural knowledge obtained by indirect learning such as through contact with mass media can be superficial and subject to misinterpretation compared to the knowledge obtained by direct contacts with the host society (Lee, 2006; Weimann, 1984).
Also, previous international experience was repeatedly found not to predict expatriate and spousal general adjustment during expatriation (Black, 1988; Black & Gregersen. 1991b; Black & Stephens, 1989) which suggests that many aspects of overseas experience are not generalized from one assignment location to another meaning that expatriate managers are not able to transfer their learning concerning adjustment in one country to another.
2.5.3 The Impact of Training on Cultural Adaptation
Cultural adaptation is a social cognitive process that reduces uncertainty and an affective process that reduces anxiety. The outcomes of cultural adaptation include psychological well being and satisfaction as well as social competence (Gao and Gudykunst, 1990; Ward and Kennedy, 1992). Failure to adjust successfully may lead to negative consequences such as lowered mental health status, feelings of marginality and alienation, heightened psychosomatic systems and identity confusion (Berry et al; 1987).
For expatriates unfamiliar with the customs, cultures, and work habits of the local people, training may be critical to the outcome of overseas assignments since culture shock experienced by people in new and different cultures which reduces the ability to function in a cultural setting because of the perceived discrepancy between an individual’s expectations of how events should proceed and how they actually occur (Black et al. 1992) would be reduced immensely. With complete adjustment, individuals not only accept the customs of the new culture as another way of living but also may actually begin to enjoy them or at least terminate the projection of discomfort onto the host culture (Oberg, 1960). Thus, successful cultural adaptation can be conceptualized as an individual’s general satisfaction with one’s personal situation in the host country (Gudykunst and Hammer, 1983; Torbiorn, 1982).
2.6.1 Factors Affecting Expatriates’ Cross-Cultural Adjustment
Given the multidimensional conceptualization of culture ( Hofstede, 2001) and strong empirical support (Shaffer et al. 1999), the cultural adjustment of expatriates’ is essential.
Following this multi-faceted approach, it appears that some expatriates may be well adjusted to one dimension but at the same time poorly adjusted to another. For example they may adapt themselves to their new work situation in a foreign country but feel uncomfortable in interacting with locals. Without an understanding of the host culture in such a situation, the expatriate is likely to face some difficulty during the his/her assignment.
According to Fontaine (1997:631), the success of international assignments could be ensured if effective preparation, support, and training were provided to the expatriate and their tailing families. Sievers (1998:9), suggests that the majority of MNCs do not have formal policies to address the needs of their expatriates’ families, hence, it is imperative those MNCs
develop comprehensive, flexible and interactive programmes specifically for spouses and children.
2.6.2 Cultural Training
Training is defined as the process of altering employee behaviour and attitudes to increase the probability of goal attainment (Hodgetts & Kuratko, 1991) thereby reducing expatriates’ perceived need to adjust (Black et al.1992; Deshpande & Viswesvaran, 1991; Earley, 1987).It has frequently been argued that training is the ‘litmus test’ of human resource management (Keep, 1989) since the pivotal element of a system is designed to harness the talent of those it employs in ensuring that employees are developed for their roles (Redman and Wilkinson, 2008). Few of the training programmes of organisations’ are available to the public (Morris and Robie, 2001). As a consequence, empirical support on different training methods remains scarce.
Organisations develop their own specific training programs or subcontract them to specialist trainers in view of the perceived needs of their business and managers, but cultural views differ on how training is provided, by whom and for what purpose (Schneider and Barsoux, 2003).Training aims to improve employees’ current work skills and behaviour, whereas development aims to increase abilities in relation to some future position or job (Dowling et al, 2008)
Failed or ineffective intercultural adjustments may be avoided by utilizing effective training to prepare expatria
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