International Journal of Human Resource Management

ISSN: 0958-5192 (Print) 1466-4399 (Online) Journal homepage: https://www.tandfonline.com/loi/rijh20

A theory-based framework for strategic global

human resource staffing policies and practices

Michael Harvey , Cheri Speier & Milorad M. Novecevic

To cite this article: Michael Harvey , Cheri Speier & Milorad M. Novecevic (2001) A theory-based
framework for strategic global human resource staffing policies and practices, International Journal
of Human Resource Management, 12:6, 898-915

To link to this article: https://doi.org/10.1080/09585190122394

Published online: 09 Dec 2010.

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Int. J. of Human Resource Management 12:6 September 2001 898–915

A theory-based framework for strategic

global human resource stafŽ ng policies
and practices

Michael Harvey, Cheri Speier and Milorad M. Novecevic

Abstract As multinational enterprises increasingly globalize their operations, managing

international human resources strategically becomes a critical factor contributing to
overall organizational performance. The strategic management of international human
resources has received extensive attention, focusing on stafŽ ng issues related to
expatriate assignments. However, empirical Ž ndings indicate limited success of expatria-
tion as an effective method for managing the breadth of international human resource
opportunities. As market opportunities increasingly shift to countries with high cultural
distance from the parent organization and as organizations evolve their strategic
orientation from multinational to global activities, it appears that an exclusive reliance on
expatriation-based stafŽ ng will impede effective management of international human
resources stafŽ ng. The objective of this article is to review and clarify a theory base that
can support a range of international human resource stafŽ ng systems that might be
implemented in a global environment. This discussion uses the combined perspective of
agency and expectancy theories and discusses conditions under which speciŽ c strategic
stafŽ ng choices might be most effective.
Keywords Strategic global human resource stafŽ ng; inpatriate managers; global
network.

Introduction
Strategic global human resources management (SGHRM) has become a critical
management issue as multinational corporations (MNCs) increasingly globalize their
operations, requiring effective managers throughout the world (Schuler et al., 1993;
Taylor et al., 1996). Past research has focused heavily on strategic international human
resource expatriation-based stafŽ ng for managing the combined control and co-
ordination needs between subsidiary and parent operations (Baliga and Jaeger, 1984;
Martinez and Jarillo, 1989; Sohn, 1994; Taylor et al., 1996). This article examines
global stafŽ ng options within existing SGHRM models and suggests an emphasis on the
strategic development of inpatriates, a candidate pool complementary to expatriates,
within existing strategic global human resource stafŽ ng (SGHRM) policies and
practices. Developing inpatriates is particularly critical in light of signiŽ cant changes
occurring in today’s international marketplace – a growing emphasis on global as
opposed to multinational strategies and the expansion of global operations into

Michael Harvey, Dean and Hearin Chair of Global Business, School of Business
Administration, University of Mississippi, USA (tel: +1 662 915 5820; e-mail: mharvey@
bus.olemiss.edu); Cheri Speier, Associate Professor, Michigan State University, Eli Broad
College of Business, East Lansing, MI 48824, USA; Milorad M. Novicevic, Assistant
Professor, University of Wisconsin @ La Crosse, La Crosse, Wisconsin, USA.
The International Journal of Human Resource Management
ISSN 0958-5192 print/ISSN 1466-4399 online © 2001 Taylor & Francis Ltd
http://www.tandf.co.uk/journals
DOI: 10.1080/09585190110063147
 Harvey et al.: SGHR stafŽ ng policies and practices 899
countries having high cultural, legal and geographic distance from the parent
organization.
Successful formulation and implementation of a corporate strategy for managing
global operations requires a commensurate strategy for managing international human
resources (Galbraith and Kozanjian, 1986; Bartlett and Ghoshal, 1992; Schuler et al.,
1993). Existing SGHRM frameworks describe policies and practices focused on
aligning the strategic initiatives of the organization with the development of global
managers while simultaneously managing the tension between integrating global
operations and achieving local responsiveness (Black et al., 1992; Schuler et al., 1993;
Taylor et al., 1996). This SGHRM framework includes ‘human resource management
issues, functions, and policies and practices that results from the strategic activities of
an MNC and that impact the international concerns and goals of those enterprises’
(Schuler et al., 1993). In particular, a SGHRM system is viewed ‘as a way for MNCs
to effectively manage and control their overseas operations’ (Taylor et al., 1996).
Existing SGHRM models (Schuler et al., 1993; Edstrom and Galbraith, 1977;
Heenan and Perlmutter, 1979; Adler and Ghadar, 1990; Milliman et al., 1991; Kobrin,
1991) emphasize all facets of human resources management that must be considered.
This article delves into these existing frameworks and focuses on the SGHRM policies
and practices related to strategic global human resource stafŽ ng (SGHRM). StafŽ ng is
the primary practice that MNCs have used to co-ordinate and control their dispersed
global operations (Dowling and Schuler, 1990).
Existing SGHRM policies and practices include ‘determining and maintaining
stafŽ ng levels that are an appropriate mix and  ow of international assignees’ (Schuler
et al., 1993). Three strategic orientations have been espoused for addressing global
SGHRM:1 1) adaptive/polycentric, 2) exportive/ethnocentric and 3) integrative/regio-
centric and geocentric (Ondrack, 1985; Taylor et al., 1996). First, an adaptive or
polycentric orientation has relied on recruiting primarily host-country nationals (HCNs)
(i.e. individuals from within the country) to manage the subsidiary operation. The
subsidiary adapts its human resource management (HRM) policies, philosophies and
personnel to the local environment with limited intervention or control from the parent
organization (Taylor et al., 1996).
Second, an exportive or ethnocentric orientation to international HRM stafŽ ng has
also been pursued (Welch, 1994). This approach focuses on a full-scale transfer of the
parent organization’s HRM system to the subsidiary and makes use of parent-country
nationals (i.e. expatriates) for stafŽ ng key positions in an overseas subsidiary. From an
SGHRM perspective, an exportive orientation facilitates organizational control while at
the same time providing important international developmental experience for promis-
ing managers of the parent organization (Black and Mendenhall, 1990; Schuler et al.,
1993; Tung, 1993).
Finally, an integrative orientation (Taylor et al., 1996) can be used where HRM
policies and practices transfer from the parent to the subsidiary and from the subsidiary
back to the parent organization. This orientation extends prior research on geocentric
approaches which focused on stafŽ ng subsidiary locations by using the most qualiŽ ed
personnel regardless of nationality (Heenan and Perlmutter, 1979; Schuler et al., 1993).
The regio- and geocentric approach typically also includes the use of third-country
nationals (TCNs) – experienced managers from neither the parent nor the host country,
who have the skills to run subsidiary operations and often take on regional management
responsibilities (Schuler et al., 1993).
The integrative orientation prescribes a transfusion of knowledge between subsidiary
and parent locations that is not, however, typically facilitated by the assignment of
900 The International Journal of Human Resource Management
TCNs. Similarly, HCNs are unfamiliar with informal aspects of parent-company
operations and are unable to share the informal knowledge and co-ordinate subsidiary
operations with the parent organization’s top management unless socialized in the
parent company. Finally, expatriates are brought in from the parent organization
primarily to control the overseas operation and less to in uence the HRM practices and
philosophies of the subsidiary. Therefore, it appears that existing candidate pools for
stafŽ ng international management positions lack the breadth of socially networked
skills/knowledge to support an integrative stafŽ ng orientation. We support the emphasis
on strategic development of a distinct candidate pool – inpatriates – as a mechanism for
achieving this integrative SGHRM orientation.
To some extent, the tacit concept of an inpatriate is already in place. Most researchers
do not differentiate inpatriates from expatriates because both candidate pools are
eventually assigned from the parent organization’s base. Though this outcome-based
approach may be appropriate for certain types of analyses, the expatriate/inpatriate
distinction is necessary for analyses with developmental and strategic ramiŽ cations.
However, a more fully developed conceptualization of inpatriation will be presented,
demonstrating the distinctive attributes and characteristics of an inpatriate when
compared to expatriates. Inpatriation is a formalized process of transferring and/or
hiring HCN/TCN managers into the parent organization of an MNC on a semi-
permanent to permanent basis (Harvey, 1993). Inpatriates can provide a unique global
frame of reference regarding the development of HRM strategy given their intimate
knowledge of subsidiary operations, markets and culture while at the same time having
been socialized into the culture of the parent organization (Harvey and Buckley, 1997).
Recent surveys of Fortune 100 companies suggest that US-based organizations are
increasingly using inpatriates in their operations (Solomon, 1995a, 1995b).
Each of the three SGHRM generic orientations – adaptive, exportive and integrative
– is employed within an MNC for managing global business operations to support or
drive the MNC corporate strategy. The exportive strategy (i.e. expatriation) has
received the majority of research attention because of its long history of practice and is
explored in more detail in the following section to obtain better insights into SGHRS
issues.

Limitations to the exportive (expatriate-centred) orientation in SGHRS

Historically, expatriates have typically been the preferred choice in stafŽ ng strategy for
overseas assignments in United States-based MNCs because of their advanced
technical/business skills, their experience and informal knowledge in working within
the parent organization (Black et al., 1992; Marquardt and Engel, 1993; Dowling et al.,
1994; Harvey, 1996). Yet, the primary organizational appeal of expatriates has been in
the ability for the parent organization to exert control effectively through expatriate
assignments and achieve a high level of integration across global operations (Adler and
Ghadar, 1990; Black et al., 1992; Feldman and Thomas, 1993; Feldman and Thompson,
1993; Birdseye and Hill, 1995). However, there is ample evidence that expatriate
managers experience a high rate of failure because of difŽ culties in adjusting and
managing across cultural settings (e.g. Birdseye and Hill, 1995), increasing the cost of
control of subsidiaries.
In the United States, the failure rate of expatriates has been estimated as between 20
and 40 per cent (Mendenhall et al., 1987; Dowling et al., 1994; Harzing, 1995; Forster,
1997), resulting in signiŽ cant direct (i.e. training, relocation, compensation) and indirect
costs (i.e. reduced service to customers, strained relations with home-country networks,
 Harvey et al.: SGHR stafŽ ng policies and practices 901
damage to the expatriate’s career) (Tung, 1987; Webb and Wright, 1996). Numerous
reasons have been advanced for the high failure rate of expatriates, including lack of
training, inadequate selection criteria, ineffective compensation programmes, in-
effective leadership and family adjustment issues (Harvey, 1985; Black and Stephens,
1989; Harris, 1989; De Cieri et al., 1991; Haveman, 1992; Dowling et al., 1994).
In addition to increasing the rate of expatriation failure, family-related issues create
an additional problem for HRM managers – expatriation assignments are increasingly
refused, with an estimated 25 per cent of the top candidates turning down offers for
overseas relocation assignments (Barham and Devine, 1990; Noe and Barber, 1993;
Global, 1996). A primary driver of this increased refusal rate is the growing number of
dual-career couples (Solomon, 1994; Harvey, 1996, 1997b).
While expatriation refusal rates are increasing, there appears to be a growing need for
overseas managers in emerging markets throughout the world (Expatriate, 1997). Given
the signiŽ cant population increases forecast in developing countries, it is not surprising
that new, untapped markets will emerge and increase the importance/necessity of
operating globally (World Population Prospects, 1995; World Resources, 1996).
However, many of these emerging markets are in countries (e.g. China, Russia, India,
Indonesia, Thailand, Malaysia, Turkey, Philippines, several Eastern European coun-
tries) that may represent difŽ cult relocation assignments for expatriate managers in
terms of cultural adjustment and quality of life.
The difŽ culties of managing operations in these emerging markets relate to less-
developed economic infrastructures, signiŽ cant cultural distance from existing opera-
tions, higher personal risk (social, legal, political, safety, medical) and increased
business complexity that would be difŽ cult to comprehend and master during an
expatriate’s assignment. Furthermore, the greater the economic, legal and cultural
distance, the more likely the expatriate and his/her family will have difŽ culty in
acclimatizing to the new environment (Feldman and Thompson, 1993; Fish and Wood,
1997), accentuating expatriation failure rates (Webb and Wright, 1996). Therefore, if
the expatriation failure rate has been high and refusal rates are increasing, expatriation
failure/refusal rates are likely to increase in the future as opportunities for growth shift
to markets in developing countries.
Just as emerging markets are in uencing the strategic orientation of an MNC from a
multinational to a global involvement, the competitive business environment is
becoming dominantly characterized by cultural heterogeneity of focal markets. From an
SGHRM global perspective, management throughout the MNC, including the con-
stituency of the executive board, should re ect the global, multi-cultural nature of the
business when pursuing a global strategy (Adler and Bartholomew, 1992; Vander-
broeck, 1992). Many Japanese, European and a few United States-based MNCs have
begun developing a multi-cultural corporate climate, management team and workforce
in their parent companies (Maruyama and Gakuin, 1992; Pechter, 1993; Tung, 1993;
Keno, 1994; The Economist, 1994). However, infusing the MNC with constituents from
around the globe demands a more proactive management of human resources than is
currently in place in most multinational organizations today (Moynihan, 1993; Caligiuri
and Stroh, 1995).

Theoretical grounding of SGHRS: an agency and expectancy theory perspective

SGHRS research has tended towards an acceptance of expatriation as the dominant

corporate international human resource strategy utilized by United States-based MNCs
(Scullion, 1991; Ali and Camp, 1996). Given the increasing importance of markets in
902 The International Journal of Human Resource Management
developing countries, expatriation failure/refusal rates and the strategic need for multi-
cultural management teams, the need to identify a complementary set of SGHRS
inpatriate-centred policies and practices is essential. However, it is critical that this
examination has both intuitive and theoretical appeal. A theoretical approach to
SGHRM issues is particularly relevant in view of Bacharach’s (1989) recommendation
that a theoretical foundation is needed in the areas of HRM and strategy. Therefore, we
examine SGHRM policies and practices from a combined agency and expectancy
theory perspective.
Agency theory has been applied to work domains where tasks are highly
unstructured, outcomes are difŽ cult to evaluate and agents enjoy a great deal of
discretion regarding their activities (Eisenhardt, 1988; Tosi and Gomez-Mejia, 1989;
Gomez-Mejia and Balkan, 1992). The relationship between a parent organization and
subsidiary domains has a principal-agent structure (Nohria and Ghoshal, 1994). The
agency problem in the headquarters-subsidiary relationship increases as the subsidiary’s
strategic autonomy and lack of commitment to the goals of the parent organization
increase (Roth and O’Donnell, 1996). Therefore, agency theory provides an appropriate
backdrop for examining the SGHRM stafŽ ng problem of monitoring the headquarters–
subsidiary agency relationship (Wright and McMahan, 1992).
Agency theory provides a theoretical grounding to examine how organizations might
select and structure contracts with agents. However, agency theory is also concerned
with the levels and effect of monitoring. Roth and O’Donnell speciŽ cally propose
that:
future research needs to incorporate other mechanisms by which the agency problem can
be managed, in addition to compensation strategy of the foreign subsidiary. Mechanisms
such as the use of expatriates, third country nationals, or local nationals with extensive
headquarters work experience, as well as management development programs providing
international management rotation, may provide corporate socialization that can in turn
in uence the extent of the agency problem in the headquarters–subsidiary relationship.
(Roth and O’Donnell 1996: 700)
Agency theory, however, provides limited insights into how an assignee selected to
monitor the headquarters–subsidiary relationship might respond to the offered assign-
ment role. Therefore, building upon the agency theory perspective to SGHRS issues, we
utilize expectancy theory to more fully examine an assignee’s motivation in accepting
an assignment to monitor the agency contract (Eisenhardt, 1989).

An agency theory perspective

Agency theory has developed into two interdependent focuses – a theory of human
behaviour (Jensen and Meckling, 1976; Eisenhardt, 1988) or a theory of performance
outcome (Nilakant and Rao, 1994) – both with common monitoring problems. In this
article, we focus on the agency relationship between a parent and subsidiary location
and the resulting international assignee pools that are likely to monitor the subsidiary’s
behaviour and performance under their agency contracts most efŽ ciently. There are two
underlying premises behind agency theory that have important ramiŽ cations for
SGHRM: 1) information asymmetry between the parent and subsidiary location is likely
to exist (Gomez-Mejia and Balkan, 1992); and 2) the goals established for the parent
and subsidiary location may be incongruent (Roth and Ricks, 1994).
Information asymmetry occurs when there is a signiŽ cant difference in the
information needed/available between a parent and subsidiary location. This difference
can be related to a subsidiary’s increased strategic autonomy (Rajagopolan and
 Harvey et al.: SGHR stafŽ ng policies and practices 903
Finkelstein, 1992; Birkinshaw and Fry, 1998) or because there is a signiŽ cant cultural
distance between the headquarters and the subsidiary regarding performance goals
(Roth and O’Donnell, 1996). Selection of an overseas assignee is important in these
situations, as monitoring the subsidiary’s behaviour and performance is ineffective
when the principal does not have sufŽ cient knowledge to assess the subsidiary’s
decisions or other outcomes (Tosi and Gomez-Mejia, 1989; Conlon and Parks, 1990).
Therefore, the principal must select an overseas assignee from a candidate pool to
whom monitoring authority can be delegated (Davis et al., 1997).
In addition to information asymmetry, the degree to which goal congruence exists
regarding performance expectations or the relationship between a speciŽ c event and the
commensurate performance between a parent and subsidiary also in uences the need
for monitoring (Nilakant and Rao, 1994). An organizational goal is deŽ ned as ‘a desired
state of affairs which the organization attempts to realize’ as espoused by top
management (Etzioni, 1964; Roth and Ricks, 1994). The parent organization may have
various goal conŽ gurations, in terms of their scope and breadth, with the emphasis
ranging from the concentrated (single) goal conŽ guration to the dispersed (compre-
hensive, multiple) goal conŽ guration. Goal congruence relates to the commitment of the
subsidiary’s top management to the goal conŽ guration espoused by the parent
organization’s top management. Goal incongruence may arise in the headquarters–
subsidiary relationship because the subsidiary may not consistently support the parent
organization’s resource requirements ‘to maintain the level of organizational slack
necessary to pursue multiple goals’ (Roth and Ricks, 1994: 118) or when the
subsidiary’s management undertakes an autonomous initiative in its external network
using its own organizational slack (Birkinshaw and Fry, 1998).
Therefore, these two sources of agency problem (asymmetry in knowledge about
effort-outcome relationship and goal congruence about effort–outcome standards) can
be combined to produce four different types of efŽ cient monitoring options that can be
applied to SGHRM stafŽ ng choices (Figure 1). More speciŽ cally, when a parent
company possesses complete knowledge about a subsidiary setting, there is low
information asymmetry and the parent can more effectively monitor subsidiary
performance. When parent and subsidiary organizations have congruent goals, there is
limited goal con ict between the parent and subsidiary and the parent can more directly
prescribe standards and activities to the subsidiary.
When the principal–agent relationship is comprised of low information asymmetry
and high goal congruence, agency theory predicts that the selection of a local national
(LN) results in the most efŽ cient monitoring practice for the agency contract. Given the
existing goal congruency, speciŽ c goals can be clearly established and communicated
from the parent to the subsidiary resulting in shared understanding. Similarly, the parent
organization can assess the actions and outcomes of the subsidiary location because of

Goal congruency

Asymmetry in knowledge Low High

Low Third-country nationals Local nationals

High Expatriates Inpatriates

Figure 1 Candidate pool preferences based on agency theory predictions regarding parent-
subsidiary relationship
904 The International Journal of Human Resource Management
the common set of knowledge/information shared between the two organizations. Given
the goal congruence and ease of monitoring, the parent location can form the most
efŽ cient contract by focusing its monitoring choice on the least expensive candidate
pool available – relying heavily on LNs (Heenan and Perlmutter, 1979; Schuler et al.,
1993; Taylor et al., 1996).

P1 : When goal congruence is high and information asymmetry is low between a

parent and subsidiary, selection of managers for foreign assignments should be
from a local national candidate pool.

Alternatively, when the principal–agent relationship is comprised of low information

asymmetry and low goal congruence between the parent and the subsidiary, the
overseas stafŽ ng selection decision should be primarily guided by goal incongruence
resolution considerations. When goal congruence is low, the parent location needs to
exert control over the subsidiary to ensure that speciŽ c initiatives are carried out.
Unfortunately, this often brings ill-feeling towards the manager who has been charged
with enacting these decisions whether that manager comes from the subsidiary or from
the parent organization. Therefore, agency theory predicts that, in this situation, the
most efŽ cient monitoring of the agency contract would be constructed with assignees in
the third-country national (TCN) candidate pool. TCNs have been identiŽ ed as effective
mediators of goal con ict including initiatives such as restructuring, downsizing and
mergers/acquisitions that cannot be resolved effectively and impartially by either local
nationals (LNs) or expatriates (Moynihan, 1993). Furthermore, the TCN manager would
take the brunt of the negative feelings from the subsidiary workforce, minimizing
damage to the relationship between the parent and subsidiary locations. Finally, TCNs
are less costly than expatriates, making this candidate pool more appealing from a
contract monitoring efŽ ciency perspective in terms of minimizing the monitoring
costs.

P2 : When goal congruence and information asymmetry are low between a parent
and subsidiary, selection of managers for foreign assignments should be from a
third-country national candidate pool.

The third distinct principal–agent relationship occurs when there is high information
asymmetry between the parent and subsidiary while at the same time there is signiŽ cant
incongruence in the strategic goals between each location. The parent company will be
guided primarily by a desire to exert relational control over the subsidiary operation,
ensuring that the goals of the parent organization take precedence. At the same time,
there are signiŽ cant differences in the information and knowledge held between the
parent and subsidiary locations. The parent will be unable to monitor the subsidiary or
trust that goals will be achieved with the parent location’s issues given priority without
placing an individual knowledgeable about the parent company into the subsidiary.
Therefore, the most efŽ cient monitoring of the agency contract results in heavy reliance
on the expatriate candidate pool (Hailey, 1992).

P3 : When goal congruence is low and information asymmetry is high between a

parent and subsidiary, selection of managers for foreign assignments should be
from an expatriate candidate pool.

The Ž nal principal–agent relationship involves situations where there is high

information asymmetry between the parent organization and the subsidiary yet there is
 Harvey et al.: SGHR stafŽ ng policies and practices 905
high goal congruence between the locations. In this situation, the parent company will
likely be guided by a desire to better integrate its diverse global operations while at the
same time being highly responsive to the marketplace. Because of the high information
asymmetry between the subsidiary and parent, it is critical to select an overseas
manager who can report back to the parent location the nuances and differences in the
two locations while at the same time having the information and social knowledge to
communicate with locals in the subsidiary location. This duality calls for an integrative
SIHRS orientation resulting in a preferred selection of inpatriates for these assignments
(Harvey, 1993).

P4 : When goal congruence and information asymmetry are high between a parent
and subsidiary, selection of managers for foreign assignments should be from
an inpatriate candidate pool.

SpeciŽ c to SGHRM, developing inpatriates is a process of institutionalized

socialization (Harvey, 1997a). Inpatriation develops the desired characteristics of
personnel who have been socialized into the parent Ž rm and, therefore, re ect its culture
and norms (Pucnik and Katz, 1986) while having the social knowledge (Sohn, 1994) of
local nationals and the subsidiary’s environment. This combination results in personnel
who are capable of interpreting the complexities of speciŽ c global situations in terms
the parent company’s top management can understand and respond to.
Given the existence of information asymmetry and goal congruence between parent
and subsidiary organizations, agency theory provides an appropriate frame from which
to assess SGHRM issues. However, it is important to examine more fully the cultural
and motivational robustness of the existing candidate pools in light of: 1) shifting
towards culturally distant markets that are in the process of globalizing business
operations; and 2) motivational challenges to existing candidate pools to accept these
assignments. The cultural and motivational robustness of candidate pools is a relevant
variable that may in uence the agency costs because of its in uence on candidate
refusal rates and failure in foreign assignments.

Uncertainty in the SGHRM context today and in the future

From the inception of corporate internationalization, the location of subsidiary
operations outside home markets has tended towards expansion into countries that have
similar cultural/economic/legal attributes (e.g. cultural distance, one developed market
to another, similar institutionalized values regarding acceptance of a product) as the
parent organization. As populations in developing countries increase and new market
opportunities emerge, corporations will gravitate to these new markets, increasing the
cultural distance between the parent and emerging subsidiary locations. Cultural
distance is determined by the degree to which there are differences in the cultural
characteristics between the headquarters and subsidiary organizations/markets (Erez
and Earley, 1993; Roth and O’Donnell, 1996). As cultural distance increases, the
information asymmetry associated with the operations, markets, personnel, etc.,
increases (Gomez-Mejia and Balkin, 1992), placing increased importance on relational
monitoring, (i.e. emphasizing stafŽ ng from expatriate and inpatriate candidate
pools).

P5 : The greater the cultural distance between the parent and subsidiary location,
selection of managers for foreign assignments should be from the expatriate or
inpatriate candidate pool.
906 The International Journal of Human Resource Management
A second condition in uencing SGHRM strategy is the strategic importance of
subsidiary operations to the parent organization. Many organizations are evolving from
a multinational to a global environment, resulting in balancing the needs of global
rationalization (e.g. subsidiary is a single part of a worldwide system) and lateral
centralization (e.g. subsidiary has world-wide responsibility for a speciŽ c product or
product line) (Roth and O’Donnell, 1996). In a multinational environment, the parent
organization holds ‘the decision-making authority’ and host-country operations are seen
as tangential or subordinate in the hierarchical structure. As a global strategic
orientation evolves, decision-making authority is more dispersed and thereby integrated
across operating units, resulting in greater goal congruency. Therefore, the parent
organization focuses less on exerting controls but more on co-ordinating activities
between operations.

P6 : As operational strategies move from multinational to global, increasing goal

congruency between locations, selection of managers for foreign assignments
should be from the local national or inpatriate candidate pool.

Finally, organizations may evolve to global strategies while at the same time
operating subsidiaries in developing countries to better penetrate emerging market
opportunities. In these situations, integrating the subsidiary into the existing network of
operations is important, yet the cultural distance between the subsidiary and parent is
likely to be high, resulting in high goal congruency and high information asymmetry.
As the subsidiary operation becomes more tightly intertwined with its sister locations,
it may take on a role of lateral centralization within the network of operations,
increasing the information asymmetry to even a greater extent. The parent organization
will select a foreign manager from a candidate pool who can facilitate integration while,
at the same time, having an understanding of the local cultural/business/government
surroundings.

P7 : As operational strategies move from multinational to global and subsidiaries are

located in countries with high cultural distance, selection of managers for
foreign assignments should be from an inpatriate candidate pool.

Assignees’ motivation to accept the monitoring assignment: an expectancy

theory perspective
Agency theory provides a perspective on identifying the most efŽ cient candidate pool
from which to select overseas managers. However, there is an implicit assumption that
managers in each of the four candidate pools would be equally motivated in accepting
a monitoring assignment. If there are speciŽ c candidate pools that (or conditions in
which speciŽ c candidate pools) would have little motivation to accept an assignment,
the cost of Ž nding a speciŽ c overseas manager who will accept the assignment will go
up signiŽ cantly, increasing monitoring costs. If this cost inefŽ ciency were built into the
candidate pool selection process, an alternative candidate pool might actually result in
more cost-efŽ cient contract monitoring. Therefore, it is a necessity to examine also a
motivational theory, expectancy theory, describing and explaining factors in uencing
an assignee’s motivation to accept the assignment.
The underlying focus of expectancy theory is on valence, instrumentality and
expectancy (VIE) factors in uencing individual motivational effort (Vroom, 1964).
Valence is a preference for or attraction towards speciŽ c outcomes such as performance
(Ž rst-order outcome) or rewards (second-order outcome). Individuals have a probabil-
 Harvey et al.: SGHR stafŽ ng policies and practices 907
istic belief that a given amount of effort will lead to a speciŽ c level of performance (i.e.
expectancy) and that a given level of performance will lead to a speciŽ c reward (i.e.
instrumentality). Motivation to exert effort (e.g. accept an assignment) is the interaction
of the valences between expectancy and instrumentality (Nadler and Lawler, 1977;
Porter and Lawler, 1968; Vroom, 1964). Therefore, individuals must both positively
value the outcomes and believe the outcomes will occur based on their effort in order
to be motivated to exert effort in performing a given task or job.
Porter and Lawler (1968) have added some important enhancements regarding the
motivational effort predicted by expectancy theory that appear to be important here. For
example, they suggest that the level of reward an individual can attain from his/her
performance will need to be perceived as both equitable and within the reward structure
of the institution. Therefore, if the reward infrastructure does not provide an equitable
reward for a given level of performance, the agent would not have sufŽ cient motivation
for exerting effort.

Applying an expectancy theory perspective to SGHRM

When employing a multinational strategy, a parent organization has increased its global
exposure, yet maintains strong controls over subsidiary operations (Adler and Ghadar,
1990). This concern primarily for control encourages the parent organization to select
overseas managers that are most likely to make decisions in the best interest of the
parent organization and can most effectively integrate the subsidiary operations into the
parent ‘way of thinking’. Currently, the ‘best’ monitoring candidates are likely to be
selected from an expatriate pool as opposed to host-country or third-country nationals
(Dowling et al., 1994). Whereas overseas managers from the expatriate pool know and
understand the parent organization, neither host-country nationals nor third-country
nationals, who are not socialized in the parent company, have this knowledge.
Furthermore, host-country nationals and third-country nationals do not have existing
informal relationships with parent organization management and are less likely to
communicate problems or make signiŽ cant changes on behalf of the parent organization
(Marquardt and Engel, 1993).
Therefore, the parent organization must structure motivating incentives that an
expatriate will perceive as resulting in long-term positive outcomes as well as having
short-term rewards. Historically, expatriate assignments have been structured as
medium-term (three to Ž ve years) with somewhat deŽ ned career progression upon
returning to the parent organization (e.g. promotion to a job position one level higher in
the management hierarchy). In addition, many parent organizations use overseas
assignments as a developmental prerequisite for executive management team considera-
tion (Marquardt and Engel, 1993).
Given the parent organization’s ability to structure a contract that is likely to provide
Ž nancial and career-path motivation for an expatriate, how is he/she likely to respond?
The magnitude of perceived risk may hinge on the potential for family stress and sunk
costs based on the economic and cultural distance of the host country from the parent
organization. If the expatriation assignment is in a country with low cultural distance
from his/her own, language barriers pose less of a problem, educational opportunities
for children are typically available, and the amenities that the expatriate and his/her
family are used to are frequently available. Additionally, the potential for Ž nding/
creating an alternative opportunity for a working spouse is more likely to exist. This
does not suggest that the transition will be easy and that all the manager’s and family’s
wants and needs will be readily available. However, there is typically an infrastructure
908 The International Journal of Human Resource Management

Figure 2 SGHRM research model

 Harvey et al.: SGHR stafŽ ng policies and practices 909
in place and the expatriate is likely to have some comfort that he/she and family can
make the adjustment. Therefore, a potential expatriate who is interested in long-term
career progression within the parent organization is likely to perceive an overseas
assignment in a country with minimal cultural distance as appealing, with manageable
acculturation risks (see Figure 2).

P8 : In overseas assignments where there is low cultural distance between the parent
and subsidiary, managers selected from an expatriate pool are likely to have
sufŽ cient motivation to accept the overseas assignment.

Alternatively, a potential expatriate may reach a different conclusion when assessing

an overseas assignment in a country where there is a high cultural and economic
distance from his/her own. Although the same positive career incentives exist, the
hardship for the family may be untenable. Language barriers, more stark cultural
differences and educational and safety concerns are likely to make a family move
difŽ cult, if not impossible. Parent organizations may target single assignees or married
assignees without children; however, this reduces the possible expatriate pool
signiŽ cantly. Additionally, the cultural barriers make expatriation success far more
difŽ cult in these environments and are likely to result in an assignment with less overall
appeal.

P9 : In overseas assignments where there is high cultural distance between the

parent and subsidiary, managers selected from an expatriate pool are likely to
have insufŽ cient motivation to accept the overseas assignment.

If expatriates have low motivation to accept overseas assignments in locations with

signiŽ cant cultural distance, what do parent organizations wanting to exert monitoring
control over subsidiaries do? Although the parent’s ability to exert the kind of control
desired and perhaps needed is reduced signiŽ cantly (Dowling et al., 1994; Korbin,
1988), host-country and third-country nationals could be considered for assignments in
countries with high cultural distance. A host/third-country national who speaks the
language, understands the cultural and political system, and is often a member of the
political élite is likely to be more effective than an expatriate (Korbin, 1988; Tung and
Havlovic, 1996). However, the parent organization’s ability to exert effective outcome,
behaviour or relational control is very limited.
Therefore, when the parent organization is following a multinational strategy,
stafŽ ng overseas operations in countries with signiŽ cant cultural distance is likely to be
problematic. The preferred control mechanism agents – expatriates – have little
motivation to accept these assignments. Given the high cultural distance between the
parent organization and assignments in these countries, as well as important family
needs, it appears that the possibility of increasing the motivation of potential expatriate
managers to accept these assignments is very low. Alternatively, host-country/third-
country nationals can be selected for these positions; however, they have limited
relational knowledge of the parent organization and are unlikely to provide a reliable
monitoring role or to act as a proactive conduit back to the parent. This disjunction
between these candidate pools and the apparent need to satisfy both the control needs
of the parent and motivational needs of the overseas manager suggests that a
complementary relational stafŽ ng strategy – inpatriation – is needed. StafŽ ng overseas
management positions of this nature with inpatriates enables the parent organization to
select and socialize host/third-country nationals in such a way that greater relational
control can be exerted from the parent organization.
910 The International Journal of Human Resource Management
P10: In overseas assignments where there is high cultural distance between the
parent and subsidiary, foreign managers selected from an inpatriate pool are
likely to have sufŽ cient motivation to accept the overseas assignment.
P11: In overseas assignments where there is high cultural distance between the
parent and subsidiary, foreign managers selected from an inpatriate pool are
likely to result in greater assignment success rates than expatriate managers.
As the management of operations evolves and takes on a more global perspective, the
primary stafŽ ng goals involve increasing co-ordination and integration among opera-
tions (Adler and Ghadar, 1990). SpeciŽ c to a HRM perspective, a cross-cultural
management team needs to be developed to manage effectively in a truly global context
(Wiersema and Bentel, 1992). Therefore, a parent organization operating with a global
strategy cannot afford a strong control orientation as created by the drop-in/pull-out
‘paratrooper’ nature of stafŽ ng assignments that most multinationals use. Instead, the
SGHRS requires the selection of overseas managers from candidate pools that will
exchange information between subsidiary locations and the parent organization in a
highly effective and actionable manner.
Expatriates can continue to be identiŽ ed for assignments in countries where there is
low cultural distance. However, if the parent organization’s goal is one of integration
instead of control of the subsidiary’s lateral centralization, it may be more difŽ cult for
‘a foreigner’ to gain an entrée and enable/in uence integration at the subsidiary
location. Although host-country and third-country nationals are likely to be highly
motivated to accept these positions, they are also unlikely to be effective in this context,
as they are perceived as outsiders who do not understand the informal aspects of the
parent organization and its network of operations. This is likely to result in other
managers diminishing the overseas manager’s stature or credibility regarding the
information and decision making exerted in the subsidiary location (Dowling et al.,
1994). An inpatriate, however, is likely to bridge both these issues as they have been
inculcated into the management of the corporation (e.g. have credibility) while at the
same time they have local knowledge of the subsidiary operation (e.g. able to exert
in uence).

SGHRM in global organizations: practical implications of inpatriation

Developing a cognitively multi-cultural, international workforce is considered to be one
of the primary requisites of successfully competing in the global marketplace
(Rhinesmith, 1993; Vanderbroeck, 1992). Operating across cultures effectively will be
a critical success factor for managers in the global marketplace. In particular, the higher
the extent of an MNC’s involvement in globalizing its activities, the greater the need to
socialize the global talent for relational control of its dispersed operations. Therefore,
MNCs must develop new ways to identify, attract, cultivate and retain international
executive talent (Moynihan, 1993; Solomon, 1995a). Today, most organizations that
have effectively learned to exploit global management labour pools rely on socialized
host- and third-country nationals, promoting the most promising to the parent
organization (Moynihan, 1993). On an ad hoc basis, this is likely to facilitate locating
and retaining a small number of qualiŽ ed multi-cultural managers. However, the need
for qualiŽ ed talent across all levels of skills in the organizational hierarchy (e.g. top
management through supervisory managers) will persist for the foreseeable future.
Creativity in Ž nding a sufŽ cient pool of qualiŽ ed managers who can effectively manage
across cultures and functions becomes the primary challenge for international human
 Harvey et al.: SGHR stafŽ ng policies and practices 911
resource managers and requires a far more proactive strategy than ad hoc promotion of
‘promising’ local and third-country nationals.
Revisiting the agency/expectancy theory framework, inpatriation may be a strategic
international stafŽ ng orientation that can address the control/motivation imbalance
created by the increasing use of global strategies and signiŽ cance of emerging markets
in culturally distant countries. As noted in our prior discussion, host- and third-country
nationals are likely to have greater motivation for accepting assignments in developing
countries. The inability of the parent organization to employ relational control over
these managers when pursuing a multinational strategy or to integrate them efŽ ciently
into the operations network when pursuing a global strategy is problematic for
appropriate global strategic stafŽ ng choices. However, a proactive stafŽ ng orientation
to inpatriation goes beyond HRM functional selection of host- and third-country
nationals for overseas assignments. Instead, inpatriation focuses on embedding host-
and third-country nationals into the organization with a deŽ ned career-path and locating
them at the parent organization and/or regionally signiŽ cant subsidiaries to facilitate
learning of the culture, values and decision processes. This proactive strategy helps
ensure, over time, that these individuals are both able to exert informal monitoring
controls on subsidiaries and to integrate their experiences/abilities into the parent
organization.
Inpatriation also aligns with the control/motivational issues espoused by agency/
expectancy theory as examined over time. In attempting to construct the most efŽ cient
monitoring of the agency contract, strengthening the parent organization/overseas
manager relationship over time improves overall efŽ ciency of control and co-
ordination. Uncertainty contributing to information asymmetry is reduced, dysfunc-
tional behaviour contributing to goal incongruence is identiŽ ed and thus monitoring
costs are minimized. With respect to an expatriation strategy, these individuals are
typically used for a single assignment and ‘have earned their stripes’. Therefore, each
time an overseas assignment needs to be Ž lled, there is a great deal of uncertainty
regarding the turnover behaviour and, therefore, monitoring success of the expatriate.
Alternatively, over time an inpatriate is selected for a sequence of overseas
assignments. This repeated selection process allows the parent organization to reduce
uncertainty, facilitating the development of an efŽ cient monitoring of the agency
contract and effective management of overseas operations.
Clearly, there is a signiŽ cant role that inpatriate mangers can play within today’s
global business context. However, creating or formalizing the role of an inpatriate
requires substantial globalization of existing HRM practices and policies. New or
modiŽ ed methods for selection, recruitment, development and retention of inpatriate
managers must be examined. In order to beneŽ t fully from the climate of multi-
culturalism created by the inpatriate, the parent organization must ensure that inpatriates
are legitimized as a part of the core management team (Harvey, 1997a; Harvey and
Miceli, forthcoming) necessitating cultural acceptance of an ‘outsider’ within the parent
organization. By importing their subtle cultural input, the organization has undertaken
the Ž rst strategic step in developing a multi-cultural management group and global
learning organization, which is needed to compete in the global market (Hofstede,
1984; McBride, 1992; Nemetz and Christensen, 1996; McMillen et al., 1997).
In conclusion, there is ample support for the notion that current SGHRS practices are
lacking, particularly in light of changes in the globalization of business and new market
opportunities in culturally distant countries. Formalizing the development of an
inpatriate manager candidate pool enables an organization to take a proactive step in
managing the SGHR stafŽ ng needs in today’s and tomorrow’s global business
912 The International Journal of Human Resource Management
environment. At the same time, it opens the door to a new set of research issues
assessing the policies and practices needed for the effective and feasible recruiting,
selection, development and retention of the inpatriate candidate pool.

Note
1 The three strategies have been given different labels by different authors. As noted in the Taylor
et al. (1996) manuscript, the concepts espoused are comparable. We have chosen to use
adaptive, exportive and integrative and note in the text their relationships with prior
research.

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