Expatriate Managers in International Joint Ventures

Abstract

This study examines multinational corporations (MNCs) use of expatriate managers as a control mechanism in their international joint ventures (IJVs). Expatriate managers allow for local market flexibility and customer responsiveness while fulfilling MNCs purpose of control. Drawing on the transaction cost economics theory (TCE), we developed a set of hypotheses regarding factors that influence IJVs use of expatriate managers. Consistent with the TCE theory that argues firms should align their governance structures with characteristics of the transactions, our analysis reveals that it is IJVs characteristics and not those of the parent firms that significantly affect the use of expatriate managers.