24767: Stick or Twist in the Tidal Wave? Subsidiary General Manager Succession During Political Transitions (session 25978)

We examine how multinational enterprises (MNEs) manage foreign-subsidiary general manager (GM) succession during political transitions in host countries, i.e., political shifts along the democracy-autocracy continuum. Drawing on threat rigidity theory, we postulate that autocratic shifts in host countries – defined as political shifts toward concentration of power to the host country’s political leadership – limit the MNE’s latitude to act independently, thus posing a threat to the international organization, resulting in a lower likelihood of adaptation through foreign-subsidiary GM succession. We also hypothesize that this effect becomes weaker as firm international experience increases – as more internationalized MNEs will respond more swiftly and adapt to political alternations in host countries. Data from 2,151 GM foreign subsidiary successions in 2,201 foreign subsidiaries of Japanese MNEs support our predictions. Our results also evidence the asymmetric effects of regime shifts, suggesting that different directions of political transition (towards democratization vs. autocratization) generate different strategic staffing patterns. Overall, our study sheds light on how MNE leadership is affected by exogenous changes in host-country political environments, offering fundamental implications for IB theory and microfoundational research.

view paper (if available)