Organizational separateness and general manager turnover: Behavioral theory in the international context
Liang (Arthur) Li, Vanessa C. Hasse, Marketa RickleyAbstract
Research Summary
Under what conditions do headquarters replace the general manager (GM) of an underperforming subsidiary? We argue that translating performance feedback into managerial intervention requires an inferential step the behavioral theory of the firm has only partially theorized. Headquarters must attribute shortfalls to managerial agency, and the diagnosticity of performance cues is shaped by organizational separateness within multinational enterprises (MNEs). Using data on 891 foreign market‐seeking subsidiaries of Japanese MNEs (1991–2020), we find that subsidiary underperformance increases GM turnover. However, this relationship is contingent and non‐uniform. It weakens with cultural distance between headquarters and subsidiaries (spatial separateness) and strengthens when a regional headquarters (RHQ) is present (stratal separateness). These findings extend behavioral theory to the international context by highlighting how organizational separateness shapes managerial turnover in MNEs.
Managerial Summary
When foreign subsidiary performance falls short of expectations, headquarters must decide whether to replace the subsidiary's general manager (GM). Using data from 891 foreign market‐seeking subsidiaries of Japanese multinational enterprises, we find that underperformance increases the likelihood of GM turnover. However, this relationship is not the same across all subsidiaries. Headquarters are less likely to respond to underperformance with leadership changes when subsidiaries operate in culturally distant countries, but more likely to do so when a regional headquarters (RHQ) is present. For managers, these findings suggest that performance‐based leadership decisions are shaped not only by results, but also by the organizational structures and relationships through which headquarters evaluate subsidiary performance.