Journal of World Business 45 (2010) 134–142

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Journal of World Business

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How do MNCs establish their talent pools? Influences on individuals’ likelihood

of being labeled as talent
Kristiina Mäkelä *, Ingmar Björkman 1, Mats Ehrnrooth 2
Hanken School of Economics, Department of Management and Organization, P.O. Box 479, FI-00101 Helsinki, Finland

A R T I C L E I N F O A B S T R A C T

Keywords: Addressing the research question of what influences the likelihood of an individual being labeled as
Talent management ‘talent’ in MNCs, this paper seeks to understand the decision processes involved in the identification of
Multinational corporations MNC-internal talent. We develop a framework suggesting that the decision to include an employee in a
Talent pools
corporate talent pool is a two-stage decision process in which mostly experience-based (on-line)
Talent identification
performance appraisal evaluations are used as an input in largely cognition-based (off-line) managerial
decision making. Consequently, talent pool inclusion is determined not only by performance appraisal
evaluations, but also a number of factors that influence the decision making in the second stage of the
talent identification process. Using empirical insights from an in-depth case study as illustrations, we
identify three such factors—cultural and institutional distance between the locations of a potential
member of the talent pool and the decision makers; homophily between the individual and the decision
makers; and the network position of the person in question.
ß 2009 Elsevier Inc. All rights reserved.

1. Introduction purpose of global staffing and succession planning (Conger &

Talent shortages have become one of the biggest HR concerns
for multinational corporations (MNCs) today (Cappelli, 2008;
Ready & Conger, 2007). A key driver for this surge of interest is the
intensification of global competition, which has led to a growing
need for human capital to manage not only the requirements for
global integration and local adaptation but also international
learning and innovation in MNCs (Bartlett & Ghoshal, 1989; Kang,
Morris, & Snell, 2007; Lepak & Snell, 1999). Indeed, MNCs are
realizing that superior human resources are crucial to their
competitiveness, and that these resources may be found in
different parts of the world (Bryan, Joyce, & Weiss, 2006).
Consequently, talent management, referring to an organization’s
efforts to attract, select, develop and retain talented key employees
(Stahl et al., 2007), has emerged as a high priority issue for
corporations. Although approaches to talent management vary
from what is basically a more integrated version of traditional
human resource practices to a performance-based ranking of
employees and the related management of talent pipelines for the
* Corresponding author. Tel.: +358 40 5593454.
E-mail addresses: kristiina.makela@hanken.fi (K. Mäkelä),
ingmar.bjorkman@hanken.fi (I. Björkman), mats.ehrnrooth@hanken.fi
(M. Ehrnrooth).
1
Tel.: +358 40 7040291.
2
Tel.: +358 40 3521420.
Fulmer, 2003; Lewis & Hackman, 2006), most approaches focus on
a specified pool or pools of managers who are seen as potential
executive talent (Stahl et al., 2007).
Despite recent increased attention to the topic, there is little
evidence that firms do talent management in an effective manner
(Cappelli, 2008; Cohn, Khurana, & Reeves, 2005; Scullion &
Collings, 2006; Sparrow, Brewster, & Harris, 2004), and the field
is lacking rigorous academic research (Lewis & Hackman, 2006). In
particular, recent research has suggested that MNCs are frequently
unable to identify who their most talented employees are and
where they are located (Collings, Scullion, & Morley, 2007;
Michaels, Hanfield-Jones, & Axelrod, 2001). In fact, although we
are learning more about talent management practices (the ‘how’),
there is remarkably little research on the fundamental questions of
who is considered a talent and why (Lewis & Hackman, 2006). This
paper thus seeks to address this research gap by examining the
research question: ‘‘What influences the likelihood of an employee
being labeled as ‘talent’ in MNCs?’’ More specifically, focusing on
MNC-internal employees, we examine what determines whether
an employee is identified as ‘talented’—that is, exhibiting future
leadership potential.
In the following sections, we first review the previous literature
on talent management and the related practice of performance
appraisal in relation to our research question. We then develop a
framework of the determinants of MNC-internal identification of
talent, building on the literature on strategic search and choice
(Gavetti & Levinthal, 2000; Rosenkopf & Almeida, 2003; Tripsas &

1090-9516/$ – see front matter ß 2009 Elsevier Inc. All rights reserved.
doi:10.1016/j.jwb.2009.09.020
 K. Mäkelä et al. / Journal of World Business 45 (2010) 134–142
Gavetti, 2000). Our theoretical arguments for the factors that we
propose to influence talent pool decision making are presented
together with illustrations from an in-depth case study of the
talent management practices of a major MNC. Finally, we discuss
the relevance of our framework to theory and practice.
2. Talent management and employee potential
Talent management typically focuses on a specified pool of
employees who ‘‘rank at the top in terms of capability and
performance’’ (Stahl et al., 2007), and are therefore considered
potential leaders either at present or some point in the future.
Although hiring talent from outside is a key part of talent
management, our focus here is on the existing employees of the
firm. In MNCs, talent management decisions are increasingly
global in that employees from all parts of the organization may be
identified as ‘talent’ – and therefore included in corporate talent
pools – regardless of whether they are parent country nationals,
expatriates or local employees working in overseas units (Stahl
et al., 2007).
Companies typically integrate their talent review processes
closely with the more established practices of performance
management, and firms may also link talent identification with
staffing decisions, investments in training and development, and
compensation and rewards. Stahl et al. (2007) found an increasing
global convergence in these practices: particularly large multi-
nationals are becoming both more sophisticated and more similar
in their management of talented employees. However, the existing
literature appears to focus more on talent management practices
(the ‘how’) and a general prescription to searching for talent
globally rather than the question of ‘who’ and ‘why’ someone in
practice becomes or does not become to be considered as talent.
For example, Lewis and Hackman (2006) suggest that talent
management should focus on employees with high-value added
skills who are difficult to replace, Cappelli (2008) advocates a
flexible balancing of internal development and external hiring,
Scullion and Collings (2006) discuss the need for combining global
and local talent and cultural and gender diversity, and Tarique,
Schuler, and Gong (2006) examine the fit between individual
characteristics and the requirements of different tasks. The
practice through which a certain person is classified as talent as
the outcome of the corporation’s talent identification process and
therefore included in a talent pool is seldom problematized.
The performance appraisal rating that a person receives clearly
has a bearing on whether he or she is considered a talent. Employee
evaluations based on yearly (or biannual) performance appraisals
are the most commonly used data for corporate decision making
on whom to include in talent pools (Cascio, 2006; Stahl et al.,
2007). The direct superior of the evaluated person is usually
responsible for the appraisal process, sometimes with additional
data provided by subordinates and/or peers. Recent research has,
however, suggested that the implementation of a corporate-wide
performance management system is challenging (Cascio, 2006;
Roberson, Galvin, & Charles, 2007). A number of reasons have been
proposed.
First, the way actual practices are implemented may differ
significantly from intended practices (Nishii, Lepak, & Schneider,
2008; Wright & Nishii, 2007). Although MNCs tend to globally
standardize their performance management systems more than
any other HR practice, foreign subsidiaries have still been found to
differ significantly from their parent companies in their imple-
mented practices (Björkman, Smale, Sumelius, Suutari, & Lu, 2008).
This inconsistency can be influenced by, for example, the
institutional and cultural distance between the headquarters
and the focal subsidiary, local norms concerning performance
appraisal practices, the organizational culture and congruence of
135
values between headquarters and the focal subsidiary, the transfer
process related to the practice, and social capital between the two
units (Björkman & Lervik, 2007; Kostova, 1999; Kostova & Roth,
2002).
Secondly, the internalization of practices by subsidiary
managers and employees can also vary significantly (Kostova,
1999). The internalization of a practice refers to the ‘‘state in which
the employees at the recipient unit view the practice as valuable
for the unit and become committed to the practice.’’ While
implementation is a necessary condition for practice adoption, the
internalization of its underlying principles is often the most
challenging element of the transfer process (Kostova & Roth, 2002,
p. 217). A lack of internalization may lead to ceremonial adoption,
superficial obligation, and a low level of commitment (Kostova,
1999; Meyer & Rowan, 1977). In MNCs, cross-cultural factors may
help explain not only differences in the practices that are
implemented (Cascio, 2006), but also the lack of internalization
of practices that are at odds with local cultural values and
behavioral norms.
Thirdly, research has pointed to a number of potential rater
biases in performance appraisals. For example, Roberson et al.
(2007) report that demographic dissimilarity, such as gender and
race, and related stereotypic assumptions, can bias expectations
and the perception, processing and recall of performance-related
evidence. Wood and Marshall (2008) found that the individual-
level self-efficacy of the assessor, and rater training and experience
influence the accuracy of assessment. Further, Palmer and Love-
land (2008) showed that group-level perceptions may polarize
good and bad evaluations through a contrast effect, or an increased
positive halo, in that a single positive rating is likely to create an
overall positive impression. Furthermore, corporate-level factors
such as perceived importance of the practice and senior manage-
ment support can influence accuracy and perceived effectiveness
(Wood & Marshall, 2008).
These factors help explain why decision makers at headquarters
may question the validity of performance appraisals conducted in
foreign units. However, largely missing from the existing literature
is a discussion of how and why MNCs decide that a certain
employee is included in a global talent pool. We argue that
performance appraisal ratings do not automatically translate into
talent pool inclusion or exclusion, but rather that there are several
other factors that influence the outcome of the corporate talent
review process. In what follows we will develop a more
comprehensive understanding of the nature of the decision
making process concerning talent identification.
2.1. Strategic search and choice
We suggest that the identification and evaluation of MNC-
internal talent is a two-stage-process in which mostly experience-
based (on-line) performance appraisal evaluations provide input to
largely cognition-based (off-line) managerial decision making over
whom to include in a talent pool. The idea of a two-stage decision
making process is rooted in the literature on strategic search and
choice. This literature posits that strategic decision making
processes, and the decision makers’ ability to access knowledge,
are driven and limited by decision makers’ experiences and
cognitions (Gavetti & Levinthal, 2000; March, 1991; Nelson &
Winter, 1982). The literature on strategic search and choice
maintains that previous experience and existing cognitive limita-
tions influence both what is on decision makers’ radar screen and
their access to relevant knowledge, guiding their search for, and
choice of, available options (Rosenkopf & Almeida, 2003; Tripsas &
Gavetti, 2000). In this search and choice process, decision makers
typically create simplified heuristics of complex relationships in
the choice landscape, reducing the array of possible choices into a
136 K. Mäkelä et al. / Journal of World Business 45 (2010) 134–142

smaller set of alternatives that enable an identification of the

option perceived to be most attractive (Gavetti, 2005; Gavetti &
Levinthal, 2000).
Further, Gavetti and Levinthal (2000) observed that strategic
search and choice are typically determined by two main types of
processes: experience-based on-line and cognition-based off-line
search. On-line search refers to backward-looking choice processes
which are primarily based on, and limited by, decision makers’
historical experience and accumulation of feedback (Gavetti &
Levinthal, 2000). Off-line search, on the other hand, is forward-
looking in the sense that firm decision makers engage in a more
elaborate cognitive assessment of the different alternatives that
are thought to maximize pay-off. These cognitive processes are
conditioned by the decision makers’ existing paradigms and
understandings of the world and their boundedly rational
perceptions of action-outcome linkages (Gavetti & Levinthal,
2000). In summary, two types of decision making processes can
be distinguished. Both are boundedly rational and path-dependent
in that decision makers have a tendency to focus on alternatives
that are familiar and/or proximate, or fit their existing worldviews
(Rosenkopf & Nerkar, 2001).
If we adapt the notion of strategic search and choice to the
talent management context, it follows that both the decision
makers’ experiences and their cognitions of action-outcome
linkages are likely to determine the identification and evaluation
of employee talent. We suggest that performance appraisal
evaluations can be seen as primarily guided by an experience-
based on-line choice mechanism, in which the superior’s past and
current experience of the performance of the employee provide
input into the appraisal rating. Here, the limitations inherent to the Fig. 1. Talent pool inclusion as a two-stage-process.
experience-based performance appraisals identified above will
limit the rationality of the decision making process. particularly salient to the multinational context, illustrated by
The final decision concerning who is included in a talent pool is empirical quotes from an in-depth case study of a major Finnish
then typically made in talent review meetings. These could be multinational.
conceptualized as primarily guided by off-line cognition-based
choice processes, in which boundedly rational decision makers 3. Case study
engage in an evaluation of both the available performance
appraisal data on the candidates, and the anticipated future The case study was conducted within a process manufacturer
potential of him or her.3 While the focus of the performance which is a world-leader in its field with sales of more than EUR 10
appraisal evaluations is on past achievements, the emphasis in the Billion in 2008. It has 40,000 employees in 35 countries across six
talent review process turns more to the challenging task of continents, and its talent management system represents a typical
assessing the competencies that may be relevant for future case of global talent management in Western multinationals. The
performance, or in positions where the required skills are different fieldwork took place in established European markets (including
from those that led to success in the current and past roles.4 An company headquarters in Finland, and major operations in
important justification for this distinction of the two stages is the Sweden, UK and Germany), and the key emerging market China.
difference between the people involved: performance appraisals The Chinese subsidiary includes regional headquarter functions for
are typically completed by the immediate manager of the the Asia-Pacific region, major production facilities and a local sales
employee, whereas talent review meetings are typically carried and marketing operation.
out by top and HR managers at corporate or divisional head- The main sources of data included 45 in-depth research
quarters, many of which do not have direct experience of the interviews and company-internal documentation relevant to
candidate. Fig. 1 below summarizes the two-staged nature of the talent management and related policies and systems (including
talent pool decision making process. company-internal material on management audits, training
As discussed in the previous section, the first stage is likely to be programs, internal value-based management, and performance
influenced by the general tendency towards biases in the primarily appraisal related material). We conducted interviews with HR
experience-based performance appraisals, exacerbated by local personnel responsible for talent management and related practices
variation in implementation and internalization of practice. The such as performance management both at the company’s European
second stage is likely to be influenced by additional sources of bias headquarters and its units in China, as well as with line and top
influencing the cognitions of decision makers. Below we develop a managers both in Europe and China (for more information on our
number of propositions concerning three potential biases that are data collection and the focal case company, see Appendix A).
It should also be noted at this stage that although the focus of our
3
The term candidate refers to MNC-internal employees who are considered (i.e., paper is on the development of the theoretical framework and the
are candidates for) for talent pools. role of the empirical data is only illustrative, the initial idea of the
4
In the leadership literature the term leadership intransitivity is used to two-stage framework and related biases was inspired by our
highlight that the skills and attitudes required at the next hierarchical level tend to
be different from the present position (see Bartlett & Ghoshal, 1997 and Evans,
observations in the field. Further, for the sake of analytical clarity, in
Pucik, & Björkman, 2009, for discussions of this phenomenon in the context of the development of our propositions we assume that the candidates
MNCs). are working for an MNC unit that is located in his/her home country.
 K. Mäkelä et al. / Journal of World Business 45 (2010) 134–142
4. Determinants of talent identification and evaluation
In line with most major MNCs, the case company defines talent
as employees who exhibit both current high performance and
future potential: ‘‘Talents are those employees who are high
performing and continuously improving within their current
position. . . are mobile and have the potential and the willingness
for further growth in other key positions’’. Following from this
definition, the company has three explicitly defined company-
wide talent pools, including ‘Leadership Team Potentials’ (con-
sisting of approximately 15 people in already senior positions,
seen as potential candidates for the very top posts in the
company), ‘Top Potentials’ (20% of the cohort of employees at
the same hierarchical level, seen as potential for unit-level top
management positions across the global organization), and
‘Potentials’ (20% of the cohort, seen as potential for key middle-
management level positions). In addition, the MNC has a ‘Young
Graduates’ pool for training and development purposes. People in
the various talent pools are, in principle, aware of their inclusion,
although this varies depending on communication at the unit- or
superior-level.
In line with the two-stage framework, the talent management
process is tightly integrated with the company’s performance
management practices. Performance appraisals define perfor-
mance ratings, which depend on the achievement of corporate,
unit and work group targets, personal goals set in the previous
year’s performance appraisal, and an assessment of leadership
qualities along a number of dimensions that are based on a set of
corporate values. The talent pools are formally reviewed through
an annual process where appraisal ratings feed into a management
audit (talent review) process, in which candidates for each talent
pool are identified and evaluated jointly by top and divisional
management and relevant HR managers.
The talent management practices of the case company
correspond largely to those currently seen as ‘typical’ in large
Western multinational corporations (Stahl et al., 2007), and follow
Fig. 2. Determinants of the identification and evaluation of employee talent.
137
the two-stage decision making process described above. The
process, combining primarily on-line experience-based and
significantly more off-line cognition-based search and choice, is
illustrated in the following quote from the HR manager responsible
for the global talent management process.
‘‘For each and every level we do this performance appraisal and
then have a look who’s eligible to go there [in a talent pool]. . .
Achievement of objectives [on a scale of] one to five, and key
competences - that is the first distribution. That is based on
performance only. The next step is then based on this [a
management audit process]. . . it is not a mathematical issue;
even if they are doing well now, do they still have potential to
grow further. And that is ours [to evaluate], done within our
management audit process.’’ [HR manager responsible of the
global talent management process]
As discussed, we suggest that the two-stage nature of the talent
pool inclusion process, and the different actors involved in each of
the stages, makes it susceptible to a number of potential biases that
influence the cognitions of the decision makers in MNCs. These
biases arise from the geographically and culturally dispersed
nature of the multinational organization, and include the cultural
and institutional distance between the locations of the candidate
and the decision makers, homophily between the candidate and
the decision makers, and the network position of the candidate.
These factors operate at the level of the talent review decision
makers and seem to be largely tacit and unintended, but may – as
Nishii et al. (2008) suggest – aggregate into meaningful organiza-
tional-level consequences. It should also be noted at this point that
although the determinants we identify are conceptually different,
and we discuss them separately in the interest of analytical clarity,
in practice they typically occur in various combinations. These
biases are illustrated in Fig. 2 below, and are thereafter discussed in
more detail and illustrated with empirical examples from the case
company.
138 K. Mäkelä et al. / Journal of World Business 45 (2010) 134–142
4.1. Cultural and institutional distance
First, we suggest that cultural and institutional distance can
influence decision makers’ cognitions by affecting how perfor-
mance appraisal evaluations/ratings are viewed and trusted.
Cultural and institutional factors are known to influence the
way organizational practices are implemented and internalized in
foreign subsidiaries (Kostova, 1999; Kostova & Roth, 2002), and the
criteria through which raters assess performance (Cascio, 2006).
These differences and inconsistencies are likely to influence the
extent to which decision makers involved in talent reviews trust
performance evaluations from different parts of the MNC. In other
words, the more culturally and/or institutionally distant the
candidate’s location is from that of the decision makers (usually
headquarters), the less likely decision makers are to trust the
appraisal evaluations/ratings, which in turn is likely to negatively
influence talent pool inclusion. This conjecture is supported by
research that has found a negative association between (national)
cultural distance and interpersonal (Luo, 2002) as well as inter-
unit trust (Nes, Solberg, & Silkoset, 2007), and is illustrated by the
following two quotes. The first of these is from a top manager in the
case company’s Chinese subsidiary, and indicates the lack of trust
that decision makers may have towards candidates from more
distant subsidiaries, with which they have little prior experience.
The second illustrates the potential consequences of cultural
differences in implementing performance appraisals, and the
subsequent impact on trust.
‘‘One of my biggest headaches or big, let’s say disappointment,
is that . . . those top managers or those superiors [form
headquarters] who have never been in China or never been
working with you, I think it will be quite hard to have them trust
you.’’ [top manager in the case company’s Chinese subsidiary]
‘‘We’ve got an HR statistic with which we can measure annually
who has accomplished performance appraisals and who hasn’t:
yes or no. And that number rose to 100% quite quickly. . . One
manager told me that he has 14 subordinates and he had
finished the appraisal discussions in just one day. I said ‘yes, yes,
10 minutes per person, that’s a lot’. Tick the box and you get the
100%. Indeed!’’ [HR manager responsible for the implementa-
tion of global PM systems, referring to performance manage-
ment implementation in one of the case company’s Asian
subsidiaries]
To summarize, we suggest that decision makers are more likely
to trust performance appraisals from culturally and institutionally
proximate than from far-away locations, and candidates from
these units are therefore more likely to be included in corporate
talent pools than employees from more culturally and institu-
tionally distant countries. Based on the arguments above we put
forward the following proposition:
Proposition 1. The higher the cultural and institutional distance
between the locations of the candidate and the decision makers
involved in talent reviews, the less the likelihood that the candi-
date is included in a talent pool.
4.2. Homophily
The inclusion of an employee in a corporate talent pool is not
only influenced by the decision makers’ trust in the accuracy of the
ratings it is also an outcome of their prediction of the future
performance of the candidate. We argue that there will be a
systematic similarity bias in how corporate decision makers
assess future potential, and suggest that it is an outcome of
homophily—the ‘‘tendency to associate with people ‘like’ your-
self’’ (Watts, 1999, p.13). The central idea of homophily is that
similar people are more likely to relate positively to each other
than people who are dissimilar. Similarity can be based on
geographical proximity, or on demographic (e.g., gender, race, age
or kinship), cultural (e.g., nationality, language or religion) or
behavioral (e.g., education, occupation, social class, position,
abilities, attitudes or values) attributes, and it can have powerful
implications for the information people receive and the attitudes
they form (McPherson & Smith-Lovin, 1987; McPherson, Smith-
Lovin, & Cook, 2001). For example, there is extensive evidence
from research on performance appraisals that superiors tend to
rate more positively persons who are similar to themselves (Tsui,
Porter, & Egan, 2002), and it has been shown that subordinates
who are more similar to their superiors are more likely to receive
promotions (Wakabayashi, Graen, & Graen, 1988).
Although all similarity factors may have an influence, we focus
here on cultural and linguistic similarity. These factors are
associated with similar ways of seeing, thinking and behaving.
Previous research has shown these factors to be particularly salient
in the multinational environment (Marschan-Piekkari, Welch, &
Welch, 1999; Mäkelä, Kalla, & Piekkari, 2007).5 We suggest that
culturally and linguistically driven homophily can influence the
cognitions of decision makers in at least two ways.
First, more similar candidates may have greater visibility to the
decision makers than less similar candidates, thereby facilitating
their identification (cf. Singh et al., 2008). For example, a common
language has been found to be positively associated with perceived
trustworthiness within the MNC context (Barner-Rasmussen &
Björkman, 2007; Marschan-Piekkari et al., 1999). Further, cultural
and linguistic similarities have also been identified in the literature
to influence intra-MNC knowledge sharing in such a way that
knowledge flows better within informal homophily-based clusters
than between them (Mäkelä et al., 2007). This enhanced knowl-
edge sharing means that decision makers may be more aware of
the accomplishments and performance of more similar candidates
than those who are more dissimilar, both directly through personal
interaction and indirectly through third-party knowledge and
referrals. The impact of homophily-driven awareness becomes
evident in the following two quotes, where two managers
spontaneously (and completely independently) discuss each other.
One of the quotes is from a senior corporate-level HR manager, the
other from a unit-level manager who is a member of the high
potentials group. Both managers are American, a minority group in
the case company.
Interviewer: ‘‘Who do you know from HR, who do you talk to?’’
The unit manager Y: ‘‘X is probably one of the best HR people
I’ve met. So I have lots of respect for him. I talk to him.’’ [Unit
manager for a key production unit in China, on international
assignment from the case company’s US operations]
HR manager X: ‘‘I would say eventually there will be very strong
demand for US managers to have international assignments. It’s
grown quite a bit over the last 7 years. I have an example of that.
We have now a young American executive Y, who is now the
manager of [an important unit]. . . he’s terrific. He is one of the
guys, one of the people, who one would like to see job rotated
through international assignments.’’ [Senior corporate HR
manager situated in Western Europe]
5
As suggested by an anonymous reviewer, it is conceivable that some aspects of
homophily (such as race and religion) may, in fact, have less of an influence in
international contexts than domestic ones, as these are associated with more
overall diversity.
 K. Mäkelä et al. / Journal of World Business 45 (2010) 134–142
Second, decision makers may either unconsciously exhibit
stronger beliefs in more similar candidates’ competencies through
projection, or be influenced by stereotypic negative perceptions of
the competencies of managers from dissimilar cultural back-
grounds (Roberson et al., 2007). One driver for this largely tacit
behavior is uncertainty reduction: it is safer to select a candidate
who is more similar and thus is more likely to exhibit more familiar
behavioral patterns (cf. Singh et al., 2008). As suggested by
research in sociology, ‘‘the similarity of individuals disposes them
toward a greater level of interpersonal attraction, trust and
understanding’’ (Ruef, Aldrich, & Carter, 2003, p. 198), which
increases the likelihood of a more favorable perception towards
more similar candidates’ competencies. Further, social identity
theory suggests that individuals have a general tendency to prefer
their in-group (such as headquarter nationality) and have more
negative associations towards an out-group (such as minority
nationalities), contributing to informal faultlines in the organiza-
tion (e.g., Tajfel, 1982; Tajfel & Turner, 1986). This homophily-
driven tendency of preferring more similar candidates is illustrated
in the following quote from a HR manager who is coordinating the
management audit process for several divisions in the case
company and who perceived the lack of diversity to be a problem
for the firm. Most of these divisions have either Finnish or Swedish
male managers in key positions.
‘‘[The division heads] are aware of the criteria [for inclusion in
the management audit]. But I must say we have to work much
more on that . . . we have different pictures [of what] do we
really mean with this word [competence] here . . . When I get
the list . . . it is the same nominations from different divisions,
too many Finnish, too many Swedish—Don’t you have any
females, don’t you have any Chinese candidates. . .and so on.’’
[HR manager responsible of the management audit (talent
review) process for several divisions]
To summarize, we suggest that homophily between candidates
and decision makers influences cognition-based decision making,
and therefore the identification and evaluation of talent pool
candidates as put forward in the following proposition:
Proposition 2. The more similar the candidate and the decision
makers involved in talent reviews, the higher the likelihood that
the candidate is included in a talent pool.
4.3. Network position
In addition to homophily, the network position of the candidate
within the organization may positively or negatively influence his
or her visibility, which has consequences for talent pool inclusion.
Network literature suggests that actors in central network
positions benefit from higher knowledge inflows and outflows
than actors positioned more peripherally (e.g., Kildruff & Tsai,
2003; Tsai, 2001). There is also evidence in the literature on the
value of social networks for obtaining jobs and promotions (e.g.,
Boxman, De Graaf, & Flap, 1991; Kim, 2002), in that contacts at high
levels in the organization are associated with career sponsorship
which in turn is positively associated with career progress (Seibert,
Kraimer, & Liden, 2001), and that geographical distance from the
headquarters may lead to an ‘out of sight, out of mind’
phenomenon in terms of career advancement (Mäkelä & Suutari,
2009). We suggest that there is a parallel tendency of network
position that is influencing the likelihood of more centrally located
candidates having higher visibility, and thus being more readily
identified as talent. Talent review decision makers are simply more
likely to come across candidates who are in central network
positions (such as working at headquarters or a central subsidiary,
139
or taking part in high profile international projects or committees)
more frequently than those who are not. The following example
from China illustrates the power of network position, rather than
‘talent’, in deciding upon key assignments.
‘‘Starting from the project leaders that we are incorporating into
[these Chinese investment] projects . . . naturally we take them
from Europe. And then they have their own networks, and it is
very easy for them to recruit project team members from the
same group that they know, they trust, they have done work
with, rather than . . . Chinese engineers, who may not have
proficient English skills—but who have done, you know, ten
projects in China [laughs].’’ [A senior manager at the head-
quarters overseeing the Asian operations of the case company]
Following this, we propose that talent review decision makers
typically have either more personal experience about centrally
located candidates or simply know more about these candidates’
performance and capabilities over and above any records of formal
performance appraisals. We therefore put forward the following
proposition:
Proposition 3. The more central the MNC-internal network posi-
tion of the candidate, the higher the likelihood that he/she is
included in a talent pool.
5. Discussion
The aim of this paper was to shed light on factors that influence
the likelihood of an individual being labeled as ‘talent’ in MNCs. By
focusing on the determinants of talent identification and evaluation,
we suggest that talent pool inclusion is a two-stage decision process
in which primarily experience-based (on-line) performance apprai-
sal evaluations and ratings are used as input in primarily cognition-
based (off-line) managerial decision making. We propose that talent
pool inclusion is not only a function of performance appraisal
evaluations, as suggested by existing literature (see, e.g., Cascio,
2006), but also an outcome of a number of factors that influence the
decision making in the second stage of the talent identification
process. These effects come about from the combination of decision
makers’ cognitive limitations and the geographically and culturally
dispersed nature of the multinational organization. Drawing upon
theory and supported by illustrations from an in-depth case study of
the talent management practices of a major multinational, we
identified three such factors: cultural and institutional distance
between the locations of the talent pool candidate and the decision
makers, homophily between the person in question and the decision
makers, and the network position of the employee. These findings
provide a first contribution in the important but largely untouched
issue of who is considered a talent and why (Collings et al., 2007;
Michaels et al., 2001).
Our study is not without its limitations. First, while we have
argued that cultural and institutional distance between the
candidate’s and decision makers’ locations is negatively associated
with the extent of trust the decision makers have towards the
accuracy of his/her performance appraisal evaluation/rating, it is
also worth noting that there are differences in people’s general
propensity to trust across different cultures (Doney, Cannon, &
Mullen, 1998). Second, we focused on factors influencing the
decision of whether or not a person who works in an MNC unit
located in his/her home country is labeled as ‘talent.’ Although the
propositions developed in this paper are also likely to apply to
expatriates and inpatriates, additional factors may apply for these
employee groups.
Third, our empirical data was derived from a single in-depth
case study used in an exploratory manner to illustrate and support
140 K. Mäkelä et al. / Journal of World Business 45 (2010) 134–142
the theoretical framework that we see as our key contribution. This
theoretical framework clearly needs to be tested in future research.
However, although our results are not directly generalizable, we
have observed a ‘typical case’ (Yin, 2003), and sought theoretical
rather than statistical generalization. In this regard, the patterns
and factors we identified should be seen as working propositions,
or ‘extrapolations’, on the applicability of the findings under
similar but not identical conditions (Lewis & Richie, 2003). Fourth,
there are variations in how different companies engage in talent
management, and the two-stage-process we identified may not be
applicable to all practices. For example, some MNCs may have
national and/or regional talent pools while others focus more on
succession planning rather than on the identification of talent
pools. In addition, some may rely more on external recruitment of
talent. Therefore, although many of the factors discussed above are
likely to be at least partly applicable to most MNCs, more
conceptual and empirical work is warranted on the variety of
corporate praxis related to global talent management.
6. Conclusions and implications
The present study should be viewed as an initial attempt to
explore MNC talent identification; more empirical and theoretical
work is clearly needed and we encourage researchers to explore
how the identification process may be influenced by a number of
factors other than those analyzed here. For example, group
dynamics will play an important role in reaching a consensus
over who are included in a talent pool and who are not, and would
be an interesting avenue of future research. Also, although we have
referred to ‘decision makers’ throughout, it should be noted that
they are not a homogenous group. Indeed, diversity within the
decision making group may have important effects on group
dynamics, and should be further examined. Second, organizational
politics may also play an important role, in that decision makers
may intentionally or unintentionally favor, for instance, members
of their own work groups. Also the opposite may be found if
managers are unwilling to put forward their best people because of
the risk of losing high-performing individuals (Guthridge, Komm,
& Lawson, 2006).
Third, individual agency on the part of the employees aspiring to
become included in corporate talent must not be neglected. For
example, individuals can make themselves more visible (and benefit
from potential halo and impression management effects) by seeking
assignments or project work in central locations or with high-
performing teams. Exogenous individual-level factors may also bias
the accuracy of talent pool inclusion processes either positively or
negatively. For example, in peripheral subsidiaries of which the
decision makers have relatively little knowledge, persons who have
gained more visibility through, e.g., superior language skills may be
more likely to be included in a talent pool than others who have
similar performance appraisal evaluations but who have not been
equally visible. Fourth, MNC-internal and -external legitimacy
considerations may influence corporate talent identification deci-
sions. For instance, certain groups or minorities may ‘have’ to be
represented as MNCs try to show their active approach towards
diversity management. Fifth, there may be systematic differences
across MNCs from different countries. Extensive research has shown
that national differences exist in the propensity to trust strangers
(Zaheer & Zaheer, 2006). For example, Yamagishi, Cook, and Watabe
(1998) found Japanese to trust strangers less than Americans.
Additionally, perceived differences in the quality of the educational
system or management practices may systematically contribute to
the perceived trustworthiness of performance appraisal ratings
from specific countries. Empirical research is needed to shed light on
the impact of such differences on talent pool inclusion of employees
from different national origins.
Lastly, our findings suggest that improving the level of
implementation and internalization of relevant practices –
performance management first and foremost – is of crucial
importance for multinationals: the more aligned appraisal
evaluations and ratings are, and the more they are trusted by
key decision makers, the higher the likelihood that companies get
it right in terms of talent identification. It is without doubt that
while local adaptation can often be required, and even desired, due
to cultural and institutional differences, issues related to the
implementation of corporate policies and internalization of the
values promoted by them remain high both in the academic and
corporate agendas.
7. Managerial relevance
Our framework also carries some further practical implications.
First, and most importantly, it is clear that multinational
companies need to pay attention to not only the ‘how’ of talent
management (i.e., the different practices that are involved in
attracting, developing and retaining talented employees), but also
the ‘who’ and ‘why’. It is important to differentiate between on-line
and off-line processes. As we have shown, there are likely to be a
number of emergent factors influencing managerial decision
making over talent pool inclusion, including cultural and institu-
tional distance, homophily and network position. An increased
awareness of these will enable managers to make more accurate
decisions. Indeed, multinationals are currently making significant
investments in talent development, and the consequences of
getting talent pools right is crucial for the future competitiveness
of the firm. Furthermore, consideration to the question of ‘who’
will also help companies to understand how to develop a
strategically balanced and diversified group of key talents, who
will be able to lead the company in years to come. It is our hope
that this study inspires other scholars to build on this study in
order to augment our understanding of an important and under-
researched topic.
Acknowledgements
We are grateful to the Finnish Funding Agency for Technology
and Innovation (Tekes) (No. 53/31/08) and the Academy of Finland
(No. 122402) for financing this research.
Appendix A. Data collection and analysis
This study is a part of a larger research project around HR and
competence management within four Finnish multinationals,
considering both talent management and related practices such
as performance management, training and development, and
compensation and rewards. The focal data for this study comes
from one of the four case companies, which was seen as a typical
case of global talent management practices in Western multi-
nationals. As mentioned, the case company is a process manu-
facturer, a world-leader in its field with sales of more than EUR 10
Billion in 2008, and has 40,000 employees across six continents.
We examined the case company’s talent management related
policies and practices in Europe, including Finland (HQ), Sweden,
UK and Germany, and the key emerging market China. The data
collection and analysis procedure is described in more detail
below.
All in all, we conducted 45 in-depth interviews with both HR
and line managers. In addition, company-internal documentation
around talent management and related policies and practices
(such as performance appraisals, training programs and internal
values-based management) were used to supplement and
triangulate findings from the interviews. The interviews were
 K. Mäkelä et al. / Journal of World Business 45 (2010) 134–142
Table 1
Research interviews.
Europe China Total
(Finland/Sweden/
UK/Germany).
HR functional managers 6 5 11
Line & top managers 8 26 34
Total number of interviewees 11 31 45
conducted in three separate rounds, the first of which included
pilot interviews with top, HR and line managers at headquarters.
The second round focused on questions pertaining to the perceived
implementation, internalization, integration and effectiveness of
various talent management related practices (including perfor-
mance management and competence development), and other
human, social and organization capital issues both at headquarters
and in China. Issues pertaining to cultural differences, language
and trust were also covered as these were conceived as likely to
influence perceptions of the different practices particularly in, and
with reference to, China. This was followed by a third, follow-up
round in China to dig deeper into selected issues. After the data
collection process, a new corporate talent manager took the
position from the company’s German operation, and a final in-
depth interview was carried out with this key informant to
examine in detail his experiences and interpretations of the
company’s talent management related policies, processes and
practices, and to update and expand earlier findings.
The data collection was carried out by a 6-person team that
included native speakers of Finnish, Swedish, Mandarin and
Cantonese, and we sought to conduct as many interviews as
possible in the respondent’s preferred (native) language. This
approach yielded valuable perceptional data particularly in the
Chinese units, which we would not have been able to obtain had
the interviews been conducted in English. The interviews
included questions such as ‘‘What kinds of global practices and
systems do you have in place related to talent and (more generally)
competence development/performance management/compensation
and rewards?’’, ‘‘What are your key challenges?’’, and ‘‘How are these
processes implemented in your unit?’’, which we sought to explore
from corporate, subsidiary and individual perspectives. Most
interviews, which lasted between 60 and 120 minutes, were
conducted by a team of two interviewers to enhance researcher
triangulation. All interview questions were reviewed and
discussed by our multilingual research team in several rounds
before carrying out the interviews. The interviews were tran-
scribed verbatim creating a retrievable database, with interviews
in Chinese translated into English. We also wrote two case reports
on organizational capability development in the focal company,
which were crosschecked and validated with company repre-
sentatives. Table 1 exhibits the descriptive details of the inter-
views.
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