WHEN DOES DECISION AUTONOMY INCREASE EXPATRIATE … · mangers’ perceptions of global integration...

WHEN DOES DECISION AUTONOMY INCREASE EXPATRIATEMANAGERS’ ADJUSTMENT? AN EMPIRICAL TEST

RIKI TAKEUCHIHong Kong University of Science & Technology

JEFFREY P. SHAYUniversity of Montana

JIATAO LIHong Kong University of Science & Technology

To enhance understanding of expatriate adjustment, we examine the effect of thedecision autonomy afforded to expatriate managers on their own adjustment as well asthe moderating effect of global integration pressure. We further investigate the miti-gating effect of a parent company’s operational experience with a particular foreignsubsidiary on this relationship. We examine these issues using survey data from 187expatriate general managers and 24 corporate headquarter executives working in theglobal hotel industry. The results of the study support the hypotheses postulated. Wediscuss implications of these findings.

It has been well established that fostering theinternal development of global talent through inter-national assignments plays a central role in build-ing global competence. International assignmentsprovide the opportunity to develop such competen-cies by immersing expatriate managers in environ-ments conducive to the acquisition of the criticalknowledge, skills, and abilities necessary for globalmanagement. Recognizing this importance, an ex-panding stream of research focusing on expatriateissues has appeared in more recent years (e.g., Shaf-fer & Harrison, 1998; Takeuchi, Yun, & Tesluk,2002; Van Vianen, De Pater, Kristof-Brown, & John-son, 2004; for a meta-analysis, see Bhaskar-Shrini-vas, Harrison, Shaffer, & Luk, 2005). Expatriates aredefined as those “employees of business organiza-tions . . . who are sent overseas on a temporarybasis to complete a time-based task or accomplishan organizational goal” (Harrison, Shaffer, &Bhaskar-Shrinivas, 2004: 203). A recurring theme isthat expatriate adjustment is essential for achievingthe organizational goals and objectives set forth forthese assignments; the growing number of studiesfocusing on the consequences of expatriate adjust-ment reflects the importance of adjustment (e.g.,

Caligiuri, 2000; Kraimer, Wayne, & Jaworski, 2001).Typically, expatriate adjustment is considered toconsist of three facets: work, interaction, and gen-eral adjustment (Black & Stephens, 1989). Workadjustment refers to an expatriate’s degree of psy-chological comfort with a work setting; interactionadjustment refers to his/her degree of psychologicalcomfort regarding interpersonal communicationwith host country nationals; and general adjust-ment is his/her degree of psychological comfortwith a host cultural environment (e.g., Black, 1988;Black & Stephens, 1989).

Despite the progress made in this domain, how-ever, most of the studies have relied on the stressperspective and examined linear relationshipsamong the variables (Harrison et al., 2004), an ap-proach that may be simplistic (Mendenhall & Ma-comber, 1997). For instance, Black, Mendenhall,and Oddou’s (1991) theoretical model of interna-tional adjustment is one of the most influential and,perhaps, most comprehensive theoretical treatiseson expatriate adjustment to date (Bhaskar-Shrini-vas et al., 2005). However, this model only exam-ines direct relationships between independentvariables and adjustment facets, not addressing anyindirect relationships (cf. Mendenhall & Oddou,1997). For example, Black et al. (1991) considered“role discretion,” or the freedom to modify a role(Black, 1988), which is similar to “decision-auton-omy” (our focal construct, defined below), to berelated only to the work facet of adjustment. How-ever, other scholars have found a positive relation-ship between role discretion (or decision auton-

We would like to thank Debra Shapiro and three anon-ymous reviewers for their constructive comments andsuggestions throughout the entire review process. Wealso appreciate the financial support provided to the firstauthor by the Research Grant Council of Hong Kong forthe Direct Allocation Grant (#DAG05/06.BM01).

� Academy of Management Journal2008, Vol. 51, No. 1, 45–60.

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omy) and other (i.e., general and interaction) facetsof adjustment as well (cf. Bhaskar-Shrinivas et al.,2005). Moreover, we consider expatriate adjust-ment to involve considerable complexity, in whicha foreign subsidiary’s decision autonomy, its man-agers’ perceptions of “global integration pressure,”and a parent company’s experience with operatingthe foreign subsidiary interact in a complicatedmanner to influence expatriate adjustmentbehaviors.

By decision autonomy in an international assign-ment context, we mean “the degree to which the[international assignment] provides substantialfreedom, independence, and discretion to the indi-vidual [an expatriate manager] in scheduling thework [at a foreign subsidiary] and determining theprocedures to be used in carrying it out” (Hackman& Oldham, 1976: 258). For example, expatriatemanagers may be afforded decision autonomy attheir particular subsidiary to introduce a new prod-uct or service, make minor modifications to a prod-uct or service, or modify the production or servicedelivery process. This concept is also consistentwith Bartlett and Ghoshal’s (1989; Ghoshal & Bart-lett, 1988) notion of local autonomy, whereby de-cision-making authority is highly decentralized atforeign subsidiaries, and those subsidiaries can ini-tiate new programs or to modify any products orprocesses developed by their parent company.Therefore, decision (or decision-making) autonomyaffords the freedom to implement changes at thesubsidiary level, and it can be one of the mecha-nisms used by MNEs to implement their strategies(Ghoshal & Nohria, 1989).

By global integration pressure, we refer to theextent to which an expatriate manager perceivesthat her or his MNE’s overarching strategy is globalin nature. MNEs pursuing a global strategy tend tobase subsidiary location decisions on the potentialcontributions to globalization efforts, seek globaluniformity in marketing, minimize exchange ratefluctuation risk by attempting to evenly distributerevenue streams over foreign subsidiary markets,and coordinate competitive moves across countries(Johansson & Yip, 1994). Therefore, when a parentcompany pursues a global strategy, expatriate man-agers assigned to foreign subsidiaries are likely toperceive more global integration pressure from theparent firm than expatriate managers working forMNEs pursuing a more “multidomestic” strategy(Johansson & Yip, 1994; Yip, 1989). For instance,they are likely to be expected to follow global prod-uct standards (Kogut, 1985), engage in globally uni-form marketing using global brand names or adver-tising (Takeuchi & Porter, 1986), and participate in

the global market by building major shares in stra-tegic countries (Ohmae, 1985).

It is important to note that the level of decisionautonomy afforded to subsidiary managers and themangers’ perceptions of global integration pres-sures are two distinct constructs: global integrationpressure concerns the characteristics of an MNE asa whole (i.e., the construct relates to strategy), anddecision autonomy concerns the characteristics ofthe subsidiary (i.e., the construct relates to imple-mentation). However, given the multitude of deci-sions that a parent company has to make regardingmarket participation, product/service offerings, thelocation of value-adding activities, marketing, andcompetitive moves (Johansson & Yip, 1994), some-times the implementation mechanisms placed at aparticular foreign subsidiary may not be entirely con-gruent with the global strategy formulated at parentcompany headquarters. For example, Ghoshal andNohria (1989) found that MNEs often utilized differ-ent implementation mechanisms (i.e., levels of deci-sion autonomy afforded to subsidiary managers) fortheir subsidiaries and that for some subsidiaries thisresulted in implementation mechanisms that were inconflict with the MNEs’ overarching strategies (i.e.,global versus multidomestic).

The main objective of this study was to examinewhether the positive relationships between expa-triates’ decision autonomy and levels of adjustment(of the various types defined above) is weaker whenexpatriates feel more rather than less global inte-gration pressure—that is, whether interaction be-tween decision autonomy and global integrationpressure affects expatriates’ adjustment. Addition-ally, we tested the contention that expatriates’likely lower degree of adjustment when they havelower decision autonomy and higher global integra-tion pressure may be mitigated when their parentcompany has more rather than less specific localsubsidiary experience. None of the existing studieshave examined these possible moderating effects.As a result, the current study contributes to theexpatriate adjustment literature by further illustrat-ing the complexity of such adjustment (Menden-hall & Macomber, 1997), which has not typicallybeen the focus of inquiry. As Mendenhall and Ma-comber noted, expatriation entails much morecomplexity than has been modeled, involving non-linear and interaction effects. Thus, our study con-tributes to expatriate adjustment by extending theexisting models (e.g., Black et al., 1991).

THEORETICAL OVERVIEW

The most fundamental decision for MNEs con-cerns the determination of the potential sources of

46 FebruaryAcademy of Management Journal

competitive advantages in globalizing. MNEs usinga global strategy seek to maintain high levels ofproduct and/or service standardization and globalintegration across national markets, and these prac-tices afford competitive advantages through costefficiencies achieved from economies of scope andscale (Harzing, 2002). However, the complexity ofsetting strategy for firms competing worldwide re-quires making additional decisions along a numberof dimensions, such as which foreign markets toenter, how to enter (entry mode), and how to buildthe organization in the foreign market (e.g., select-ing expatriate or host country national managers tolead subsidiary operations) (cf. Johansson & Yip,1994; Robertson & Watson, 2004). Because expatri-ate managers “are the chief catalysts for the imple-mentation of a multinational’s strategic decisions”(Kim & Mauborgne, 1993: 502), they are extensivelyused in many global companies for foreign opera-tions and therefore can play a critical role in thesuccess or failure of an MNE’s operations in a par-ticular overseas market.

The Relationship between Decision Autonomyand Expatriate Adjustment

One mechanism used by MNEs to implementstrategy is the extent to which decision autonomyis afforded to foreign subsidiary managers (Ghoshal& Nohria, 1989). Although previous studies haveexamined the relationship between job autonomyand expatriate adjustment (e.g., Anderzen & Ar-netz, 1999; Aryee & Stone, 1996; Black, 1988; Black& Gregersen, 1991; Gregersen & Black, 1992; Taylor& Napier, 1996), many studies have only examinedcertain facets of expatriate adjustment, predomi-nantly work adjustment, and the results for somefacets have been equivocal. With regard to workadjustment, studies have consistently shown a pos-itive relationship between decision autonomy andwork adjustment (e.g., Anderzen & Arnetz, 1999;Aryee & Stone, 1996; Black, 1988; Black & Gre-gersen, 1991; Taylor & Napier, 1996; Shaffer, Har-rison, & Gilley, 1999). With regard to interactionadjustment, the studies are fewer, and the results,more equivocal. For example, Shaffer et al. (1999)found a significant relationship between role dis-cretion and interaction adjustment, but Black andGregersen (1991) did not. Finally, with regard togeneral adjustment, Shaffer et al. (1999) did notfind a significant relationship between job auton-omy and general adjustment. Similarly, Gregersenand Black (1992) did not find a significant correla-tion between role discretion and general adjust-ment. However, in a comprehensive review of ex-tant expatriate research, Bhaskar-Shrinivas et al.’s

(2005) meta-analysis, decision autonomy was in-deed positively related to all three facets of adjust-ment. Bhaskar-Shrinivas and colleagues suggestedthat this finding was the result of a cross-domaineffect, whereby stressors in one domain (e.g., work)“spilled over” to impact stresses in another domain(e.g., home).

We also consider decision autonomy to have apositive influence on all three facets of adjustment,as a result of spillover (cf. Takeuchi et al., 2002).Furthermore, we argue that expatriate managerswith greater decision autonomy will perceivethemselves as having greater ability to change howthey perform their jobs (i.e., work adjustment), in-teract with local nationals (i.e., interaction adjust-ment), and acquire understanding of their local en-vironment (i.e., general adjustment). Suchunderstanding, Triandis (1994) argued, increasesthe degree of adjustment to the general environ-ment. For instance, Feldman, Folks, and Turnley(1998) argued that the extent to which expatriates’jobs required frequent interaction with coworkerswas positively related to their being accepted byhost country nationals and found that job auton-omy was positively related to socialization (taskmastery and initiation). This expectation is consis-tent with the findings by Shaffer et al. (1999) andBhaskar-Shrinivas et al. (2005).

Hypothesis 1. Decision autonomy is positivelyrelated to expatriate managers’ level of work,interaction, and general adjustment.

The Moderating Effect of GlobalIntegration Pressure

We posit that expatriate managers who perceivethey have been afforded high levels of decisionautonomy are likely to experience cognitive disso-nance when they also perceive high levels of globalintegration pressure. Here, cognition is defined as“any knowledge, opinion, or belief about the envi-ronment, about oneself, or about one’s behavior”(Festinger, 1957: 3). In firms that pursue a globalstrategy, the higher levels of integration requiredbetween affiliate and parent company operationslead to a need for higher levels of control, which, inturn, drives demands for internal consistency.However, as Bartlett and Ghoshal (1989) noted, in-creasingly, firms competing in global industriesmust be simultaneously globally integrated and lo-cally responsive. Thus, in spite of the drive towardinternal consistency, differences between the localenvironments in which an MNE’s subsidiaries arelocated often create the need for differentiation.When the parent firm pursues a global integration

2008 47Takeuchi, Shay, and Li

strategy, this strategy induces rigid mental sche-mata aimed at ensuring local subsidiary conformityto worldwide standards. In these situations, expa-triate managers would perceive a high level ofglobal integration pressure from the parent firm.We argue that such a perception conflicts with thecognitive schemata induced by high decision-mak-ing autonomy, which gives the expatriate managerslatitude to adjust to the local environment via theirdecisions. Increasingly, scholars have recognizedthe need for organizations to achieve disparate ob-jectives at the same time (Bartlett & Ghoshal, 1989).For instance, subsidiary managers are expected tobe able to simultaneously achieve alignment withtheir parent firm’s global integration strategy andadapt to the market environment in which they aresituated (i.e., achieve local responsiveness). Inter-nal organizational tension, such as that betweenalignment and adaptability, global integration andlocal responsiveness, will necessarily create cogni-tive dissonance among subsidiary managers. Forexample, an expatriate manager may be affordedthe autonomy to respond to the local market con-ditions and environment by providing differenti-ated product offerings and services, but the effec-tiveness of this autonomy will be constrained bythe extent to which he or she feels global integra-tion pressure in the form of pressure to reduce costby conforming to standardized product decisionsoriginated elsewhere in the parent company. Thetensions between alignment and adaptability existin many global organizations today, making expa-triate managers’ work particularly challenging.

Cognitive dissonance theory (Festinger, 1957)provides insights into expatriate reactions to suchcognitive dissonance. Per this theory, (1) an aver-sive state of dissonance exists when an individualholds a cognition that is inconsistent with othercognitions, (2) dissonance puts strain on an indi-vidual, who will take measures to reduce, as well asto avoid increases in, the dissonance, and (3) anindividual strives for consistency and attempts toreduce dissonance by changing the discrepant cog-nition to bring it in line with his or her othercognitions (Doran, Stone, Brief, & George, 1991).Brehm and Cohen (1962) extended cognitive disso-nance theory and asserted that the magnitude ofcognitive dissonance is a direct function of thedegree to which a person feels that he/she has achoice about engaging himself/herself in a situationin which cognitive dissonance may exist. As such,expatriate managers who perceive themselves ashaving high decision autonomy but also perceivehigh global integration pressure may experiencehigh cognitive dissonance. As a result, we arguethat under these conditions expatriate managers are

likely to experience a relatively high amount ofstrain. Thus, we expect the positive effect of deci-sion autonomy to be suppressed when global inte-gration pressure is high and propose the following:

Hypothesis 2. The tendency for expatriatemanagers with more decision autonomy to re-port higher levels of work, interaction, and gen-eral adjustment (per Hypothesis 1) is weakeramong expatriate managers who are in foreignsubsidiaries in which global integration pres-sure is higher.

Mitigating Effects of Foreign SubsidiaryOperation Experience

For a couple of reasons, we believe it is possiblefor the negative impact of global integration pres-sure on the positive relationship between decisionautonomy and expatriate adjustment to be miti-gated by a parent company’s experience in manag-ing subsidiaries in foreign countries. First, sinceorganizational learning and the development ofuseful heuristics requires experience in a particularmarket (Luo & Peng, 1999), we contend that anMNE with more experience in a particular foreignmarket is likely to have developed organizationalroutines and practices for effectively managing therelationship between headquarters and a subsid-iary, expatriate managers, and host country envi-ronment in that particular local market. These rou-tines and practices relate, for instance, to learningfrom foreign subsidiaries, new ways for subsidiar-ies to capitalize on local knowledge and capabili-ties, and weaving new subsidiaries into the MNE.We argue that an expatriate manager of a subsidiaryin a location where the parent MNE has operationalexperience will experience fewer challenges as aresult of the MNE’s already established policies,practices, and processes for managers in that localmarket. Further, we submit that without the addi-tional efforts required to adjust products, services,and management practices to meet the needs of amarket in which the MNE has no operational expe-rience, the expatriate is provided more time to fo-cus on his/her adjustment to the host culture. Forexample, when Procter & Gamble entered the inter-national arena in the postwar era, its managementexported their marketing strategies wholesale totheir overseas operations. Only when this strategyfailed did they make adjustments and implementan approach that was more balanced between inte-gration and local responsiveness (Bartlett &Ghoshal, 1989). These adjustments were the resultof Procter & Gamble’s experience operating in aparticular foreign culture. Thus, in general, we ar-


gue that MNEs with more operating experience in ahost country are better positioned to develop organ-izational routines and practices that address theeffects on expatriate subsidiary managers of theinherent tensions between global integration anddecision autonomy.

Second, expatriate adjustment entails “sense-making,” whereby new expatriates “must think anduse rational means to understand the situation”and “to sort out confusion when confronted with anovel situation” (Black et al., 1991: 298). This sense-making occurs at a conscious level and requirescognitive capacities. However, individuals havecognitive limitations as to the amount and com-plexity of the information they can process at anygiven point in time (Simon, 1982). For example,expatriate managers must make sense not only of ahost culture in terms of the values, beliefs, atti-tudes, and behaviors appropriate for this culturebut also in terms of the customers, competitors, andkey stakeholders that comprise the business envi-ronment of the subsidiary (e.g., Barkema, Bell, &Pennings, 1996; Li, 1995). Given the vast amount ofinformation required to understand a new businessenvironment and a new host culture, we argue thatexpatriate managers are likely to experience cogni-tive overload that impedes their adjustment process.

In contrast, when MNEs have operating experi-ence in a host country, they already have gainedimportant information about consumer prefer-ences, competitors, and other aspects of this loca-tion’s business environment (Barkema et al., 1996;Johanson & Vahlne, 1977). Such experience is oftenassociated with the intensity of exposure to certainactivities, which can be operationalized as the timespent in a given host country (Barkema & Ver-meulen, 1997). The knowledge acquired as a resultof an MNE’s operating experience in a particularlocal market we believe is transferred to expatriatemanagers, thereby reducing the need for them toexpend cognitive capacity in processing and learn-ing the new business environment and allowingthem to focus more of their attention on makingsense of the host cultural environment. Therefore,we submit that foreign subsidiary operation expe-rience will mitigate the relationships among globalintegration pressure, decision autonomy, and expa-triate adjustment.

Hypothesis 3. The tendency for decision auton-omy to be weakly related to expatriate adjust-ment for expatriates who perceive higherglobal integration pressure (per Hypothesis 2)is weaker when the parent company has moreexperience in operating the foreign subsidiaryat which the expatriates work.

METHODS

Research Design and Procedures

The current research was part of a research in-vestigation of expatriate MNE employees (e.g.,Shay & Baack, 2004). One of the researchers en-listed the participation of nine MNE hotel chainslisted in the American Hotel and Motel AssociationDirectory. The contact information for all expatriategeneral managers was subsequently obtained fromthe participating firms’ corporate headquarters,which confirmed that all potential respondentspossessed a working knowledge of written and spo-ken English, thereby supporting the use of English-only instruments. To further check the adequacy ofthe English texts, he tested both surveys—one forexpatriate general managers and one for their hostcountry national subordinates—for item and in-struction clarity in a sample of 22 master’s degreestudents from 15 different countries, excluding theUnited States.

The researcher targeted only expatriate generalmanagers of foreign subsidiaries to reduce potentialconfounds associated with different hierarchicalpositions (e.g., Shaffer et al., 1999) or job character-istics (e.g., Naumann, Widmier, & Jackson, 2000).By postal mail, each identified expatriate generalmanager received a survey packet and a letter fromboth the researcher (the second author) and thecorporate contact encouraging participation in thesurvey and ensuring confidentiality of responses.Two, four, and nine weeks from the initial mailing,follow-up letters were sent to the expatriate generalmanagers to remind and encourage them to com-plete and return the surveys. In addition, 24 corpo-rate executives at the headquarters provided re-sponses on MNC performance.

Sample

In total, 310 surveys were sent to expatriate gen-eral managers (GMs), and 36 (4 per multinationalcompany headquarters) surveys were sent to corpo-rate executives. Of the expatriates, 224 responded,for a response rate of 72 percent. Because of miss-ing data (and the use of listwise deletion), the finalsample size for this study became 187, constitutingan effective response rate of 60 percent. For thecorporate executive surveys, the contact person ateach MNE headquarters was asked to identify fourindividuals who had significant “international re-sponsibilities” for their organization. Twenty-four(66%) of the corporate executive surveys were re-turned, with the number of respondents for eachcompany ranging from two to four.

The characteristics of final expatriate sample are


as follows: For the expatriate GM sample, 182 re-spondents (97.3%) were male, and 5 (2.7%) werefemale; their average age was 46.2 years (s.d. � 6.9);they had been on assignment for an average of 3.6years (s.d. � 2.6); and they had an average totalwork experience of 25.6 years (s.d. � 7.2) and anaverage organizational tenure of 13.3 years (s.d. �7.8). These expatriate managers came from 32 dif-ferent countries, including Australia (13), France(16), Germany (19), the United Kingdom (24), andthe United States (26), for example. Furthermore,they were assigned to 82 different host countries,including but not limited to Indonesia (15), China(12), Malaysia (9), Thailand (9), Australia (8), Ger-many (7), the Philippines (7), Russia (5), and Sin-gapore (5).

Of the corporate executives sampled, 19 (79.2%)were male, and 5 (20.8%) were female; their aver-age age was 46.3 (s.d. � 6.96); and they had beenwith their current organization for an average 12.8years (s.d. � 6.95) and had international responsi-bilities for an average 9.1 years (s.d. � 4.5). Thesecorporate executives came from seven differentcountries: Australia (2), China (2), Israel (1), Japan(4), Thailand (1), the United Kingdom (3), andUnited States (11).

Measures

Working as part of the broader research projecton expatriate managers, we selected existing scalesto assess the variables included in this study. Inaddition, we varied response anchors and formatswithin the survey to the extent possible to reducepercept-percept bias. All of the variables exceptcorporate performance were obtained from the ex-patriate general managers.

Global integration pressure. We asked the expa-triate GMs to assess their perceptions of the extentto which their parent company exerted global inte-gration pressure, using Johansson and Yip’s (1994)five-item measure. A sample item asks about the“extent to which services and products are stan-dardized across hotels and require minimal localadaptation” (1, “not at all,” to 5, “to a great extent”;� � .71).

Decision autonomy. The level of decision auton-omy that the expatriate managers possess at thelocal subsidiary (i.e., the hotel) was measured bythree items taken from Bartlett and Ghoshal (1989).A sample item asks the GMs to assess their influ-ence on decisions about the introduction of newservices or products (1, “headquarters decides alone,”to 5, “individual hotel decides alone”; � � .74).

Foreign subsidiary operation experience. Weasked each expatriate GM to indicate, in years, the

length of time that the parent company had beenoperating the particular foreign subsidiary wherehe or she was currently stationed at (i.e., the hotel).

Expatriate adjustment. We used Black and Ste-phen’s (1989) 14-item scale to assess three dimen-sions of expatriate adjustment. Three items as-sessed work adjustment (e.g., job responsibilitiesand performance standards/expectations); 4 itemsassessed interaction adjustment (e.g., socializingwith people from the host culture); and 7 itemsassessed general adjustment (e.g., housing, food,and shopping). Response choice alternativesranged from 1, “not very well,” to 7, “very well.”Cronbach’s alpha coefficients for the work, interac-tion, and general adjustment scales were .86, .82,.91, respectively.

Control variables. We included eight variablesto control for potential confounding effects: corpo-rate performance,1 foreign subsidiary size, expatri-ate GM’s current assignment tenure, and country oforigin (five variables).

The measure of corporate performance was ob-tained from 24 corporate executives from the ninehotel chain headquarters and was included to con-trol for the possibility that poor firm managementaffected expatriate adjustment.2 We used Johanssonand Yip’s (1994) two-item measure: “Would youconsider your company’s profitability (return oninvestment) to be low, average, or high over theprevious three years compared with your competi-tors who operate on a global scale?” and “Does yourcompany possess a small, medium, or large marketshare compared to your competitors who operateon a global scale?” The interrater agreement statis-tics (rwg; James, Demaree, & Wolf, 1984) of theseitems were .99 and .99, respectively. The ICC(1)and ICC(2) values, calculated with Bartko’s (1976)formula and a one-way, random-effects analysis ofvariance (ANOVA), were .16 and .36, and .33 and.60, respectively. Although there is no standardcutoff for ICC(1) reliability, the values for thesevariables exceeded the median of .12 reported byJames (1982). The ICC(2) values, on the other hand,were lower than the .60 cutoff recommended byGlick (1985), as well as the more commonly ac-cepted cutoff of .70. However, given that corporateperformance was used as a control, these ICC(2)

1 We thank one of our anonymous reviewers for raisingthis issue.

2 Given that corporate performance measure resides atthe MNC hotel chain level, ordinary least square regres-sion may provide inaccurate estimates. To gauge thispotential, we ran supplementary analyses in Stata asdetailed below.


values did not “seem low enough to prohibit aggre-gation” (Schneider, White, & Paul, 1998: 155), es-pecially given the rwg and ICC(1) values. In fact,Bliese (2000) recommended examining all aggrega-tion statistics to make an informed decision. Thus,we aggregated the two performance items to thehotel chain level (� � .78).

To control for subsidiary (hotel) effects, we in-cluded size, measured as number of rooms. Currentassignment tenure was measured in years. We in-cluded current assignment tenure as previous stud-ies have used it as a control and shown it to affectexpatriate adjustment (e.g., Van Vianen et al.,2004). Finally, to control for the possibility thatexpatriates’ home cultures exerted influence, weincluded five dummy-coded variables representingthe five most frequent countries of origin.

Analytic Procedures

We used moderated regression analyses to test allthe hypotheses, standardizing the substantive vari-ables (global integration pressure, decision auton-omy, and foreign subsidiary operation experience)before creating interaction terms (Cohen & Cohen,1983) to reduce potential multicollinearity prob-lems. In the first step, the eight control variableswere included. In the second step, we added globalintegration pressure and decision autonomy to ex-amine the main effects. The third step added theinteraction between global integration pressure anddecision autonomy. The fourth step added foreignsubsidiary operation experience to control for itsmain effect. We included foreign subsidiary opera-tion experience in the fourth step (rather than inthe first step) as we were considering it to be anadditional moderator of the relationships amongglobal integration pressure, decision autonomy,and adjustment. In the fifth step, we included thetwo 2-way interaction terms between foreign sub-sidiary operation experience and global integrationpressure, and foreign subsidiary operation experi-ence and decision autonomy. Finally, we includedthe three-way interaction of global integration pres-sure, decision autonomy, and foreign subsidiaryoperation experience in the sixth step.

To gauge the potential impact of firm differencesin the nine hotel chains, we conducted multivariateanalysis of variance on the substantive variablesincluded in this study (i.e., global integration pres-sure, expatriate decision autonomy, and the threefacets of adjustment. The results indicated that theamount of decision autonomy (F � 2.02, p � .05),extent of global integration pressure (F � 2.72, p �.01), and level of work adjustment (F � 2.02, p �.05) differed significantly over the nine hotel

chains, although there was no significant differenceamong these hotel chains on the level of interactionadjustment (F � 1.67, p � .1) and general adjust-ment (F � 1.10, p � .1) for expatriate managers.This result supports our contention that whileMNE strategy differs across the hotel chains, with-in-group differences are also likely to exist, whichprovides the basis of our study. In addition, we rana supplementary analysis using Intercooled Stata8.2 for Windows (Statacorp, 2004) with its “robust”and “cluster” alternative estimation procedures.We conducted this supplementary analysis togauge the potential influence of interdependenciesthat might arise from obtaining responses frommultiple units within a company. Stata’s robustoption produces consistent standard errors even ifthe data are weighted or the residuals are not iden-tically distributed. The cluster option specifies thatthe observations are independent across groups(clusters) but not necessarily independent withingroups, as might be the case with observations col-lected from different hotels of the same MNC hotelchain. However, the results were highly similarfor both.

RESULTS

Table 1 lists the means, standard deviations, andcorrelations for the variables in this study. Un-standardized means and standard deviations fordecision-making autonomy, global integrationpressure, and foreign subsidiary operation experi-ence are listed for informational purposes only be-cause standardized variables were used in all theanalyses. Since significant correlations were foundamong a number of the variables, we further inves-tigated potential multicollinearity using varianceinflation factors (VIFs). The maximum VIF ob-tained in any of the models for substantive vari-ables was substantially below the rule-of-thumbcutoff of 10 for regression models (Ryan, 1997). Infact, they did not exceed a value of 2. Therefore,multicollinearity was not considered an importantissue for these results.

Hypothesis 1 predicts that decision autonomywill be positively related to expatriates’ level ofadjustment. Empirical support for this hypothesiscan be seen in Table 2, models 2, 8, and 14. Whenincluded in the second step, expatriate decisionautonomy was significantly, positively related towork adjustment (� � .13, p � .05), interactionadjustment (� � .15, p � .05), and general adjust-ment (� � .13, p � .05). Thus, these results provideconsistent support for Hypothesis 1.

Hypothesis 2 predicts that the positive relation-ship between decision autonomy and expatriates’


level of adjustment will be weaker among expatri-ate managers who are in foreign subsidiaries wherethere is higher global integration pressure. Empiri-cal support for this prediction can be seen in Table2, models 3 and 9. Global integration pressure mod-erated the relationship between decision autonomyand work adjustment and the relationship betweendecision autonomy and interaction adjustment. Forwork adjustment, the beta weight for the interac-tion term between global integration pressure andexpatriate decision autonomy was significant (� �–.12, p � .05). To plot this interaction, we usedAiken and West’s (1991) approach, defining “high”and “low” on a variable as one standard deviationabove or below the mean. As can be seen in Figure1a, in situations of low global integration pressure(illustrated by the solid line), when expatriateshave high decision autonomy, their level of workadjustment tends to be higher; but the latter posi-tive relationship disappears (becomes flat) underhigh global integration pressure (illustrated by thedotted line). Similarly, for interaction adjustment,the beta weight for the interaction term betweenglobal integration pressure and expatriate decisionautonomy was also significant (� � �.14, p � .05).

Figure 1b shows how the relationships betweenglobal integration pressure and expatriate decisionautonomy affect interaction adjustment. Figure 1balso illustrates a pattern consistent with that ob-served for work adjustment. These results providesupport for work and interaction adjustment butnot general adjustment.

Hypothesis 3 predicts that the tendency for deci-sion autonomy to be negatively related to expatriateadjustment for expatriates under higher perceivedglobal integration pressure (as predicted by Hy-pothesis 2) is weaker when their parent companyhas more experience operating the individual for-eign subsidiaries in which these managers work.Empirical support for this can be seen in Table 2,models 6 and 18. When the three-way interaction ofdecision autonomy, global integration pressure,and foreign subsidiary experience was introducedin step 6, the interaction term explained significantvariance over and above those of the first five stepsfor work adjustment (�R2 � .02, �F � 3.19, p � .05;� � .14, p � .05) and general adjustment (�R2 �.01, �F � 2.75, p � .05; � � .13, p � .05), but not forinteraction adjustment (�R2 � .01, �F � 1.60, p �.05; � � .10, p � .05). To investigate these moder-

TABLE 1Descriptive Statisticsa

Variableb Mean s.d. 1 2 3 4 5 6 7 8 9 10 11 12 13

Control1. Corporate performance 2.71 0.382. Foreign subsidiary size 17.63 4.39 .19**3. Current assignment tenure 3.62 2.64 .06 .14*4. Home country dummy 1:

United States0.16 0.36 �.01 .11 �.08

5. Home country dummy 2:United Kingdom

0.13 0.34 �.11 �.06 �.06 �.16**

6. Home country dummy 3:Germany

0.10 0.30 .18** .03 .18** �.14* �.13*

7. Home country dummy 4:France

0.09 0.28 �.30** �.13* .02 �.13* �.06 �.10

8. Home country dummy 5:Australia

0.07 0.26 .12* �.05 �.11 �.12 �.10 �.09 �.08

Substantive9. Decision autonomy 3.37 0.68 .13* �.02 .07 .05 �.12* .03 �.09 �.04

10. Global integration pressure 2.69 0.65 �.03 �.01 �.13* .03 .18** .04 .02 .06 �.19**11. Foreign subsidiary operation

experience9.81 8.19 �.15* .07 .28** �.14* .13* .12 .05 �.13* �.05 .11

12. Work adjustment 5.93 0.89 .00 �.11 .03 .06 .04 .09 .08 �.18** .06 .12* .0213. Interaction adjustment 5.17 1.37 .00 �.09 �.01 �.01 .01 �.02 .04 �.08 .16** .10 .13* .42**14. General adjustment 5.13 1.26 .04 .08 .06 �.23** .05 .08 .02 �.07 .10 .09 .07 .33** .49**

a n � 187, with listwise deletion.b Means and standard deviations for global integration pressure, decision making autonomy, and foreign subsidiary operation experi-

ence are listed here for informational purposes only. Subsidiary (hotel) size was measured as number of rooms.* p � .05

** p � .01One-tailed tests.


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FIGURE 2Moderating Effects of Foreign Subsidiary Operation Experience on Work Adjustment

FIGURE 1Moderating Effects of Global Integration Pressure on Decision Autonomy–Adjustment Relationships


ating effects further, we plotted the three-way in-teraction, using the same Aiken and West (1991)procedure to define low and high groups notedabove.

Figure 2 shows the three-way interaction effectsamong foreign subsidiary operation experience, de-cision autonomy, and work adjustment. Figure 2adepicts the interaction plot for high foreign subsid-iary operation experience, and Figure 2b showsthe interaction plot for low foreign subsidiary op-eration experience. On the one hand, as can be seenin Figure 2b, when expatriate managers were oper-ating in subsidiaries that were new (i.e., low foreignsubsidiary operation experience), decision-makingautonomy was positively related to work adjust-ment in situations of low global integration pres-sure (illustrated by the solid line), but this posi-tive relationship disappears (becomes flat) in situ-ations of high global integration pressure (illus-trated by the dotted line). This interaction plot ishighly similar to those observed in Figures 1a and1b. On the other hand, as can be seen in Figure 2a,when expatriate managers were operating in sub-sidiaries that were established (i.e., high foreignsubsidiary operation experience), decision auton-omy was negatively related to work adjustment insituations of low global integration pressure (il-lustrated by the solid line), but decision auton-omy was positively related in situations of highglobal integration pressure (illustrated by the dot-ted line). Thus, the dampening effect of high global

integration pressure was mitigated when expatri-ate managers were operating in foreign subsidiarieswith a lot of experience. These results providesupport for Hypothesis 3 with regard to workadjustment.

Figures 3a and 3b depict the moderating effect offoreign subsidiary operation experience on the re-lationship among global integration pressure, deci-sion autonomy, and general adjustment. As can beseen in Figure 3b, when expatriate managers wereoperating in subsidiaries that were new (i.e., lowforeign subsidiary operation experience), decisionautonomy was positively related to general adjust-ment in situations of low global integration pres-sure (illustrated by the solid line), but this positiverelationship disappears (becomes flat) in situationsof high global integration pressure (illustrated bythe dotted line). On the other hand, as can be seenin Figure 3a, when expatriate managers were oper-ating in subsidiaries that were established (i.e.,high foreign subsidiary operation experience), de-cision autonomy was negatively related to generaladjustment in situations of low global integrationpressure (illustrated by the solid line), but decisionautonomy was positively related in situations ofhigh global integration pressure (illustrated by thedotted line). Thus, the dampening effect of highglobal integration pressure was mitigated when ex-patriate managers were operating in foreign subsid-iaries with a lot of experience. Hypothesis 3 issupported with regard to general adjustment. In

FIGURE 3Moderating Effects of Foreign Subsidiary Experience on General Adjustment


sum, these results provide support for the mitigat-ing effect of foreign subsidiary operation experi-ence on work and general adjustment but not inter-action adjustment.

DISCUSSION

In this study, we found that decision autonomywas significantly, positively related to all three fac-ets of expatriate adjustment (Hypothesis 1). Thisresult reinforces the findings by Shaffer and col-leagues (1991) and Bhaskar-Shrinivas and col-leagues (2005) and illustrates another instance ofspillover (cf. Takeuchi et al., 2002). Thus, it high-lights the importance of examining all three facetsof adjustment simultaneously. Second, we foundmoderating effects of global integration pressure(Hypothesis 2) on the relationships between deci-sion autonomy and work adjustment, and decisionautonomy and interaction adjustment. Althoughwe did not find that global integration pressuresignificantly moderated the relationship betweendecision autonomy and general adjustment, thebeta coefficient was, at least, in the predicted di-rection. More specifically, our findings extendBhaskar-Shrinivas et al.’s (2005) meta-analyticfindings by qualifying the positive relationshipsbetween decision autonomy and three facets of ex-patriate adjustment. We are not aware of any exist-ing expatriate studies that have used global integra-tion pressure as an important variable. The resultsof this study show that when the extent of globalintegration pressure experienced by expatriatemanagers is high, the positive relationship betweendecision autonomy and their work and interactionadjustment levels in a foreign country becomesweaker (i.e., there are nonsignificant relationshipsbetween decision autonomy and expatriate adjust-ment facets when global integration pressure ishigh). Thus, one of the main contributions of thisstudy is highlighting the moderating effect of globalintegration pressure on the positive influence ofdecision autonomy on expatriate adjustment.Therefore, it extends the current thinking on expa-triate adjustment, which may be considered sim-plistic (Mendenhall & Oddou, 1997) in the sensethat these prior studies have typically examinedonly the main effects of different variables.

Furthermore, although Ghoshal and colleagues(Ghoshal & Bartlett, 1990; Ghoshal & Nohria, 1989)noted differentiated foreign subsidiaries roleswithin MNEs and found negative effects on subsid-iary performance when the external environmentalconditions in a host country were not congruentwith the structural mechanisms used at a subsid-iary, their research did not examine this impact on

one of an MNE’s most critical resources, its expa-triate managers. Research subsequent to these stud-ies has seemingly accepted that differentiated sub-sidiary roles within MNEs exist without examiningsuch additional negative impacts as those found inthe present study. Thus, our study also contributesto strategic management research by revealing thepotentially negative impact of such incongruenceon employees.

Lastly, the present study goes beyond merely il-lustrating this moderating effect of global integra-tion pressure, which would have had fewer practi-cal implications. However, we also found three-way interaction effects among decision autonomy,global integration pressure, and foreign subsidiaryoperation experience (Hypothesis 3) on work andgeneral facets of expatriate adjustment, wherebyhigh foreign subsidiary operation experience pro-tected expatriates against low adjustment when de-cision autonomy and global integration pressurewere perceived to be incongruent. In other words,increasing foreign subsidiary operation experienceappears to be a promising implementation mecha-nism that has not been discussed in previous stud-ies with regard to effective transnational strategy—that is, achieving standardization while being re-sponsive to local market needs (Bartlett & Ghoshal,1989; Gibson & Birkinshaw, 2004). Therefore, wealso contribute to the international strategic man-agement literature by illustrating one possiblesolution for pursuing an effective transnationalstrategy that has not been discussed before.

Implications for Research and Practice

Our theoretical development and empirical find-ings also possess a number of strengths and pose avariety of research and practical implications. Oneresearch implication is that this study illustratesthe importance of global integration pressure as amoderator of decision autonomy–expatriate adjust-ment relationships. To the best of our knowledge,the present study is the first to investigate theglobal integration pressure experienced by expatri-ate managers at foreign subsidiaries as having amoderating influence on the decision latitude thatexpatriate general managers have and their adjust-ment levels. Thus, our effort opens up new avenuesfor expatriate research in terms of examiningboundary conditions, which might be another way(other than meta-analysis; cf. Bhaskar-Shrinivas etal. [2005]) to resolve some previous, contradictoryfindings. For instance, future research could repli-cate and extend our results by examining expatriatebehaviors, such as job performance and prematurereturn, that are considered important international


assignment outcomes (e.g., Caligiuri, 2000). In ad-dition, firm-level variables such as organizationalcontext (Ghoshal & Bartlett, 1990; Gibson & Birkin-shaw, 2004) could be incorporated in the future.

Moreover, our findings regarding the cognitivedissonance associated with discrepancy betweenthe amount of decision autonomy expatriates haveand the level of global integration pressure theyperceive could be combined with the fit perspec-tive examined by Van Vianen and colleagues (2004)to substantially broaden the scope of this researchdomain. For example, although Van Vianen et al.(2004) investigated the interaction effects betweenexpatriates’ home country values and host countrynationals’ values (as perceived by the expatriates),they found this interaction of values only for theself-transcendence dimension for work and inter-action adjustment (1 out of 12 possible relation-ships). Perhaps other relationships were not foundbecause expatriates’ perceptions of differences onmany cultural values did not translate into cogni-tive dissonance. Thus, our study extends VanVianen et al.’s (2004) study by illustrating the im-portance of a cognitive dissonance perspective.Furthermore, we provide evidence that foreign sub-sidiary operation experience can mitigate the neg-ative effect of cognitive dissonance on expatriateadjustment. Thus, our study provides an impetusfor further research exploring potential moderatorsof the negative influence of cognitive dissonancearising from perceiving discrepant global integra-tion pressure and decision autonomy.

The present study also has both strategic andpersonnel practical implications. On a strategiclevel, although Ghoshal and Nohria (1989) foundthat MNEs often use different implementationmechanisms in different subsidiaries (e.g., varyinglevels of decision autonomy) and that in some in-stances these mechanisms conflict with an MNE’soverarching strategy (i.e., global or multidomestic),our study surfaced the potentially negative impactthat such practices can have. For example, our re-sults indicate that when expatriate managers per-ceive a low level of global integration pressure (acondition consistent with their firm’s pursuing amultidomestic, local responsiveness strategy) butalso perceive a low level of decision autonomy (animplementation mechanism consistent with aglobal strategy), expatriate managers experiencelower levels of both work and interaction adjust-ment. This is important, since expatriate managersare critical for implementing strategy, and expatri-ate adjustment is essential for achieving organiza-tional goals and objectives (e.g., Caligiuri, 2000;Kraimer et al., 2001). Thus, in practice each MNEmust consider the potentially negative impact of

varying its application of implementation mecha-nisms across subsidiaries in ways that are inconsis-tent with the firm’s overarching strategy.

Limitations

Our findings, however, have to be interpreted inlight of some limitations associated with the study.One limitation is the potential for same-source biasaffecting results. It would have been ideal if wecould have used data collected from differentsources. However, for methodological consider-ations, such as maximizing the sample size to ob-tain enough power, and level of analysis issues, weused data collected from the expatriate managersfor all the variables except one control (corporateperformance, obtained from corporate executives).It is possible that same-respondent (and/or com-mon method) bias might have affected the correla-tions between decision autonomy and expatriateadjustment (Hypothesis 1). However, if biases werethe underlying cause, the correlations betweenglobal integration pressure and adjustment shouldhave been equally significant as well. This was notthe case. Furthermore, common method bias is un-likely to be a concern, given our findings of signif-icant two-way and three-way interaction effects(Evans, 1985). Therefore, it is less likely that ourmajor findings (support for Hypotheses 2 and 3)are affected by common method bias. We wouldstill encourage future research to improve theresearch design further and to avoid this poten-tial problem by combining longitudinal data fromdifferent sources.

Another limitation is the cross-sectional natureof the data set, which limits any inferences regard-ing the causal direction. Perhaps expatriates whofelt better adjusted perceived themselves as havingmore decision autonomy at the foreign subsidiary.However, this case would not explain the signifi-cant moderating effect of global integration pres-sure we found. Relatedly, we only considered de-cision autonomy in this study, although Ghoshaland Nohria (1989) argued and provided empiricalsupport for three structural elements (centraliza-tion, formalization, and normative integration)working independently and jointly to affect head-quarters-foreign subsidiary relations. Thus, fu-ture studies should investigate how these otherstructural elements affect the relationships weobserved here.

Finally, given our theoretical focus on explicat-ing the moderating effects of global integrationpressure on decision autonomy–expatriate adjust-ment relationships, we did not include other vari-ables that have been found to influence expatriate


adjustment (e.g., Bhaskar-Shrinivas et al., 2005;Black et al., 1991). In addition, with regard to for-eign subsidiary operation experience, there arelikely to be other variables that can act as modera-tors, including supportive work environments.3

Similarly, we did not control for the effects of vari-ables included in Black et al.’s (1991) model. Thisexclusion prevented us from empirically demon-strating insights beyond those shown by theirmodel. Thus, we encourage those conducting fu-ture studies to control for these existing variablesand to investigate additional moderating variablesthat may have an impact on the relationship be-tween antecedents and expatriate adjustments. De-spite these limitations, however, the present re-search takes a significant step forward and shedssome interesting light on the complexity of expa-triate adjustment. At the same time, it underscoresthe need for more empirical work in this area.

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Riki Takeuchi ([email protected]) is an assistant professor inthe Department of Management of Organizations at theSchool of Business and Management, Hong Kong Univer-sity of Science & Technology. He received his Ph.D. fromthe Robert H Smith School of Business, University ofMaryland at College Park. His research interests revolvearound social exchange relationships and include expatri-ate adjustment (and international human resource man-agement), strategic human resource management, organi-zational justice, and organizational citizenship behaviors.

Jeffrey P. Shay ([email protected]) is an associateprofessor in and the chair of the Management and Market-ing Department at the University of Montana. He received

his Ph.D. from Cornell University. His research interests in-clude expatriate management, international strategy, andstrategic entrepreneurship.

Jiatao (J. T.) Li ([email protected]) is a professor in and the headof the Department of Management of Organizations at theHong Kong University of Science & Technology and the di-rector of the Hang Lung Center for Organizational Research atthe same university. He received his Ph.D. in strategy andinternational management from the University of Texas. Hiscurrent research interests are in the areas of strategy, organi-zation theory, and entrepreneurship, with a focus on issuesrelated to global firms and those from emerging economies.


WHEN DOES DECISION AUTONOMY INCREASE EXPATRIATE … · mangers’ perceptions of global integration...

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