Affective networks, informal ties, and the limits of expatriate effectiveness
Introduction
Owing to increased business activities by multinational corporations (MNCs) as well as to the further opening of new and large overseas markets (e.g., China, India, Brazil), the use of the expatriate manager has steadily increased within recent decades (Harrison, Shaffer, & Bhaskar-Shrinivas, 2004; Harzing, 2001a, Harzing, 2001b). In fact, a recent survey by PricewaterhouseCoopers (2012) found that expatriation has increased by 25% in the last ten years and this is projected to further grow to 50% by 2020. International assignments represent a significant cost factor for a firm. Considering an assignees fringe benefits and the potential cost attached to the relocation of the expatriate’s family, expatriates are significantly more expensive for a firm than local employees are. Moreover, the success and failure of the expatriate has a direct impact on the performance of the MNC’s investment abroad (Wang & Nayir, 2006). Hence, the effectiveness of an expatriate in the respective host country is important and a key concern for MNCs.
Expatriate effectiveness is currently a rather broad and inconsistently defined term (Mol, Born, & Van der Molen, 2005). Gordon and Teagarden (1995) regard the term expatriate success synonymous for expatriate effectiveness. Integral in this view is the level of efficiency, i.e., how an expatriate masters job-related aspects (administrative, managerial, and technical tasks) in order to meet the demands of stakeholder (e.g., customers, suppliers, headquarters, home and host-country governments, and employee representatives) without wasting resources. Expatriate effectiveness is defined as “the ability to meet stakeholder needs; the ability to negotiate with the environment; and the ability (…) to be adaptable and flexible” (Gordon & Teagarden, 1995, p. 18). Prior studies used to regard expatriate adjustment to a new culture and work environment as well as expatriate performance two core dimensions that determine the effectiveness of expatriates (Bruning, Sonpar, & Wang, 2012; Chen, Kirkman, Kim, Farh, & Tangirala, 2010; Osman-Gani & Rockstuhl, 2008; Shaffer, Harrison, Gregersen, Black, & Ferzandi, 2006). A recent trend in the literature can be seen in the assessment of the environmental sphere in which an expatriate acts in the host country, which is increasingly recognized as a further important dimension affecting expatriate effectiveness. For instance, Harrison et al. (2004) observe that most previous studies tend to focus exclusively on the expatriate themselves, rather than taking into account factors related to the social environment when assessing the effectiveness of expatriates’ actions. In this connection authors stress the importance of an expatriate’s integration into social networks in the host country. Empirical research, though still scarce, finds a positive relationship between expatriate social ties to host country nationals (HCNs) and job performance (Mahajan & Toh, 2014). On the contrary, social ties are found to react negatively to adjustment (Bruning et al., 2012). Given the rather mixed results, scholars have called for more research in this direction. In their comprehensive review on social networks and expatriate effectiveness, Osman-Gani and Rockstuhl (2008) identify a research gap in (1) empirical research that explores the influence of the environmental context, (i.e., the integration of the expatriate in local social networks and their contribution to performance), as well as (2) a lack of understanding of the antecedents and nature of local social networks themselves. The present study attempts to enrich current knowledge in both fields by analyzing the situation of expatriates in South Korea (from this point referred to as Korea). Not only is the country home to a number of globally competitive MNCs such as Samsung, Hyundai, and LG, but their international success, the attractive domestic market, and proximity to China have led to an increase in international assignments to Korea, recently making the country a new emerging top destination for expatriates (Brookfield, 2012).
The purpose of this study is to contribute to filling the current knowledge gap on the role local social networks play on the effectiveness of expatriates and to understand their antecedents better. We approach this research by exploring the dimensions expatriates perceive as important for taking effective actions in business. Thereby we contribute to theory in two important ways. First, we propose a set of dimensions that may define factors of influence on the effectiveness of expatriates in more detail. Second, we provide a deeper insight into the antecedents of social networks, which currently lack thorough understanding (Osman-Gani & Rockstuhl, 2008). In addition to contributing to the literature on social networks and expatriate effectiveness, we believe this study has valuable implications for management practice and may help to improve the preparation of expatriates for assignments abroad.
In the following we first present the theoretical framework by examining the literature on informal business relationships, expatriate effectiveness and social networks, and connect these themes to the case of Korea. We focus on identifying research gaps, upon which research questions are derived guiding this research. Further, we illustrate the applied research methodology and present the results that we discuss in a next step by linking the results to the formulated research questions. Finally, we report on limitations and future research requirements, and provide implications for practice. The conclusion reflects on the findings.
Section snippets
Informal business relationships
Research on the formal mechanisms on how people organize and manage interpersonal transactions with others have a rich history in business and management studies. On the contrary, the informal side of it, which is often complementary, has been largely neglected thus far. The way informal social ties and social networks are established, maintained, strengthened and governed is often embedded in the respective cultural context in which interpersonal transactions take place. Surprisingly, thus
Method and data collection
In-depth expert interviews were conducted in Korea’s capital city, Seoul, in three waves, in 2009, 2012, and 2014. Overall, 32 expatriates were interviewed, who occupied positions ranging from general manager to CEO. The interview partners’ nationalities were German, Swiss, Dutch, and British, with the vast majority being Germans. The industry affiliation and size of the firms the expatriates represented was heterogeneous. The sample included mostly private firms from the manufacturing sector
Factors impacting expatriate effectiveness
As a result of the analysis we were able to identify seven dimensions that represent barriers to expatriate effectiveness. These are: Information transfer, network access, task fulfillment, diversity, communication with headquarters, behavioral ethics, and relationship building (Fig. 2). Several subcategories (second-order themes) could be allocated to each dimension, respectively, which we will report in the following section.
Discussion
By drawing predominantly on the work of North (1990), international business and management science has recently underlined the importance informal institutions play in driving firm strategies and performance (Peng, 2010; Peng, Wang, & Jiang, 2008). Informal social networks or affective ties can be regarded an informal institution. While in the field of human resource management (HRM) the theme of Guanxi has gained prominence (Buckley et al., 2006, Cooke, 2009), clanism in general has so far
Implications for practice
Elaborating further on the recommendations provided in the section “Solutions to increase expatriate effectiveness,” we would like to point out that an expatriate’s attempt to establish Yongo is an endeavor that will very likely fail, as expatriates usually do not possess the contingent requirements. Expatriates should alternatively focus on establishing deep and trustful relationships (i.e., less exclusive ties or Inmaek; see Horak, 2014) with HCNs and reach out to individuals who possess Yongo
Limitations and future research
The results of this study have to be seen in the light of their limitations. First and foremost the sample size in this study is limited and should be regarded rather as a convenience sample. Further, though expatriates from several European countries were questioned, the vast majority of respondents were from Germany. Though we treated their responses as representing a Western view, further respondents from other Western countries (e.g., the US, France, etc.) would have contributed to
Conclusion
This research contributes to the recent trend in expatriate research on understanding expatriates’ integration in HCNNs better (Bruning et al., 2012) by analyzing the link between social integration and expatriate effectiveness as suggested by Osman-Gani and Rockstuhl (2008). We discovered that the Korean form of informal social network, Yongo, can be considered as having a high degree of importance for expatriate effectiveness across several dimensions. As Yongo is important in business but to
Sven Horak is an Assistant Professor at The Peter J. Tobin College of Business of the St. John’s University in New York City, USA, where he researches and teaches in the area of international business and management. His research interests include the fundamental analysis of informal network structures, the influence of informal institutions on decision making behavior and Asian Management.
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Sven Horak is an Assistant Professor at The Peter J. Tobin College of Business of the St. John’s University in New York City, USA, where he researches and teaches in the area of international business and management. His research interests include the fundamental analysis of informal network structures, the influence of informal institutions on decision making behavior and Asian Management.
Inju Yang is Associate Professor in the Department of Management, EDC Paris Business School, France. She holds a PhD from University College Dublin, Ireland. She has published journal articles and a book chapter in the areas of leadership, team dynamics, and international HRM.