The Effect of Host Country Threats on MNEs' Global Integration Effort via Subsidiary Staffing

How do organizations respond to threat? In this study, we argue that the nature of the threat facing the organization will drive organizational responses. We differentiate between symbolic threat and realist threat. When facing symbolic threat (e.g., the value and moral inconsistency between the host country and the home country environments), multinational firms under the pressure of global integration tend to act rigidly by using expatriates to tighten the control in their subsidiary management. In contrast, when facing the realistic threat (e.g., the economic volatility in the host country environment), multinational firms tend to respond more openly and delegate the control in its subsidiaries by hiring local managers. Our analysis on foreign subsidiaries by Japanese firms in the manufacturing industry largely supports these ideas.