Study on effects of expatriates’ foreignness into subsidiary performance in the Kazakhstan market

Abstract

Most foreign direct investment (FDI) theories assume that foreign subsidiaries face disadvantages or experience liabilities of their foreignness relative to domestic firms because of information asymmetries and transaction costs. Current research contains two purposes. First, the determinant factors of expatriates’ foreignness, and second, effects of expatriates’ foreignness on subsidiary performance. In order to improve these purposes ten hypotheses were tested. The first nine hypotheses were relating to defining the determinant factors of foreignness of expatriates, and tenth hypothesis has checked the relationship foreignness of expatriates and subsidiary performance. Based on previous research I have suggested nine determinant factors that stimulate the foreignness of expatriates: Hofstede’s dimensions (power distance, uncertainty avoidance, individualism vs. collectivism, and masculinity vs. femininity), business practices, institutional factors (economic, politic), language barrier, and prior experience. Based on the result of empirical analysis, only differences in economical situations, language barrier, and prior experience have significant effect on emerge the liability of foreignness of expatriates. Other factors such as masculinity vs. femininity, power distance, individualism vs. collectivism, uncertainty avoidance, business practice, and politic situation were rejected. Additionally, the result of this regression analysis provided the suggestion that control variables such as gender, education level, and age of respondents were not statistically significant. In conclusion, the relationship between foreignness of expatriates and subsidiary performance has been tested. In accordance to the aforementioned, the regression analysis showed that the relationship between foreignness of expatriates and subsidiary performance was not statistically significant. In other words, current research provides the suggestion that foreignness of expatriates does not negatively affect subsidiary performance. Key words: foreignness of expatriates, subsidiary performance, Hofstede’s dimensions, business practices, institutional factors, language barrier, and prior experience.