Publication: When are international managers a cost effective solution? an exploratory study in a sample of spanish mncs
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2000-01
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Abstract
A common claim in the literature of expatriation is the one referring to the high costs of
expatriation. In this paper, on the basis of transaction cost literature, we show how limited this
approach is. In particular, we 'consider a set of costs that, although ignored in traditional
expatriation literature, must be accounted for when an MNC is deciding on whether to recruit
expatriates or local managers in its subsidiaries. These costs include selection, training and
performance evaluation costs. We also formulate a series of hypotheses around the situations in
which the total costs of recruiting expatriates are lower than those generated by local managers. We
them test these hypotheses in a sample of 124 SpaniSh MNCs. The results of the study allow us to
explain the apparent contradiction that, although businesses have a need to reduce costs, they
continue to employ apparently costly practices such as expatriation.
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Expatriation, Transaction cost theory, International human resource management '