B.A. – Dissertation

What Are The Critical Success Factors In Expatriate Assignments?

Student:
Thilo Weber

Project/Dissertation M07099 Single/ Double
Module Number Double, etc.

Date of submission 08 October 2004

Oxford Brookes University, 2004

Abstract

Over the past decades organisations have increased their global activities. As a consequence, the role of expatriates has also grown in significance. But, as particularly American researchers claim, expatriate failure rates are still very high. So, what needs to be done to reduce these failure rates?
It is the aim of this dissertation to identify the critical success factors in expatriate assignments. In order to fulfil this aim, the various stages of the so called expatriate cycle will be examined in turn. What are the success factors in the selection, the preparation, and the adaptation phase? How important are an attractive compensation package and the career outcome? All these questions will be answered by current and former expatriates who were interviewed and asked to complete a questionnaire.

TABLE OF CONTENTS

1. INTRODUCTION ... 1
1.1 Background to Dissertation Topic ... 1
1.2 Relevant Definitions ... 1
1.3 Professional and Academic Significance of the Study ... 2
1.4 Research Objectives and Research Question ... 2
1.5 Research Design and Sample Selection ... 3
1.6 Structure of the Dissertation ... 3

2. CRITICAL LITERATURE REVIEW ... 5
2.1 Expatriation in Context ... 5
2.1.1 Motives for Expatriation ... 5
2.1.2 Problems of Expatriation ... 7
2.2 Success Factors in the Individual Phases of the Expatriate Cycle ... 8
2.2.1 Selecting Expatriates ... 9
2.2.2 Preparing and Orienting Expatriates ... 11
2.2.3 The Adjustment Process ... 13
2.2.4 Expatriate Compensation ... 16
2.2.5 Repatriation ... 18
2.3 Concluding Remarks ... 19

3. METHODOLOGY ... 21
3.1 Research Approach and Strategy ... 21
3.2 Sample Selection and Data Collection ... 22
3.3 Ethical Issues ... 23
3.4 Generalisability, Validity and Reliability of the Findings ... 24

4. ANALYSIS AND EVALUATION OF FINDINGS ... 25
4.1 Success Factors in the Selection Process ... 25
4.2 Integration as Potential Success Factor ... 27
4.3 An Appropriate Leadership-Style as Success Factor ... 30
4.4 Compensation as Success Factor ... 31
4.5 Success Factors in Repatriation ... 33

5. CONCLUSIONS AND RECOMMENDATIONS ... 35
5.1 Success Factors in the Selection Process ... 35
5.2 Integration as Potential Success Factor ... 35
5.3 An Appropriate Leadership-Style as Success Factor ... 36
5.4 Compensation as Success Factor ... 36
5.5 Success Factors in Repatriation ... 37
5.6 Closing Remarks ... 38

APPENDIX A: Ethical Review Form ... 39
APPENDIX B: Questionnaire ... 40

BIBLIOGRAPHY ... 49

LIST OF FIGURES AND TABLES

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1. INTRODUCTION

1.1 Background to Dissertation Topic

An understanding of the management of expatriates is of growing importance because of the recent rapid increases in global activity and global competition (Young and Hamill, 1992; cited by Brewster and Harris, 1999). As multinational enterprises (MNEs) increase in number and influence so the role of expatriates in those MNEs grows in significance (Dowling et al., 1994). According to the 1996 survey carried out by the consulting firm Organization Resources Counselors, from a sample of 546 MNEs (87 Asian, 108 European, 351 North American) the most common pattern among the majority of these companies is an increasing use of expatriates (Bonache and Fernández, 1999). The effectiveness of these expatriates and, therefore, the management of this group of employees are recognised as major determinants of success or failure in international business (Tung, 1984; cited by Brewster and Harris, 1999). According to Deresky (2003), most MNEs underestimate the importance of the human resource planning function in the selection, training and acculturation of managers assigned abroad. So, what needs to be taken into consideration when managing expatriates? What do current and former expatriates think are the critical success factors in the selection, preparation, adjustment and repatriation phases? It is the aim of this dissertation to answer that question by exploring a number of ‘cases’.

1.2 Relevant Definitions

Before going into detail, the term ‘expatriate’ should be defined. According to Mendenhall et al. (1995), an expatriate is anyone living or working in a country of which he or she is not a citizen and who can be classified as possessing skills critical to the success of the performance of foreign subsidiaries.
As Evans et al. (2002) stated, expatriation allows the firm to avoid the pathologies of excessive centralisation. Business decisions can be made locally but with the global perspective in mind. Moreover, the standards of the parent firm are transferred abroad via expatriates.

1.3 Professional and Academic Significance of the Study

The importance of expatriate success for professionals is clear. As will be seen later, expatriates are among the most expensive employees. Moreover, according to many academics, expatriate failure rates are still relatively high (see Section 2.1.2). So, in order to avoid costly mistakes, it is essential for companies to be aware of the critical success factors in expatriate assignments.
The academic significance of the study results from the fact that it represents a European contribution to the debate on expatriate failure and success. As Brewster and Harris (1999:6) put it, ‘not only is the vast mass of research into the topic conducted in the USA and focused on US companies, but the US texts have tended to set the agenda’. Furthermore, in contrast to the predominantly descriptive literature in the area of expatriation, the aim of this dissertation is to present new evidence and develop theories and frameworks from a European/German perspective.

1.4 Research Objectives and Research Question

As the above already suggests, the overall aim of this dissertation is to identify the critical success factors in expatriate assignments. This aim is achieved by:

• critically reviewing the existing literature;
• developing five hypotheses to be tested;
• drawing conclusions from the case study.

The five hypotheses are the research objectives that are aimed to answer in order to answer the research question. The following hypotheses were posited for this study:

• Expatriates will support the view of academics that family situation (adaptability of spouse and family, stable marriage, willingness of spouse to live abroad) and flexibility/adaptability (tolerance of ambiguity, listening skills, ability to deal with stress) are the most important success factors in the selection process.
• Expatriates will support the view that integration is a key success factor and that adjustment to interaction with local nationals is more challenging than adjustment to work or to the general environment, thus stressing the need for language and cross-cultural training.
• Expatriates will not support Lanier’s (1979) view that a good manager in one country will be a good manager in any country, thus stressing the need for cross-cultural training, a development of a leadership-style appropriate to the specific country, and a selection considering soft skills such as flexibility and adaptability.
• Expatriates will agree that they would not have decided to move abroad, if it had not been beneficial to them financially, thus stressing the importance of appropriate compensation and benefit packages.
• Expatriates will support the view that a successful repatriation strongly depends on the career outcome.

1.5 Research Design and Sample Selection

As research strategy, a multi-method approach, combining survey and case study methods, was adopted. The survey and case study involves expatriates from Germany living and working in several countries all over the world. So, in contrast to most previous studies on expatriation that are of American origin, this dissertation illustrates the topic from a European/German perspective. The author decided to interview expatriates (rather than HR-managers) because of the personal experiences they have made abroad. As sample selection method, snowball sampling is used.

1.6 Structure of the Dissertation

Including this introduction, the dissertation consists of five chapters. In the following paragraph, the issues each chapter will cover are briefly described.
The following chapter will provide a critical review of existing literature in the field of expatriation. It begins by looking at the motives for and the problems of expatriation and continues with an examination of the success factors in the various phases of the expatriate cycle. Chapter 3 will then discuss the methodological approach undertaken, covering issues such as the research approach and the research strategy chosen, a sample discussion, ethical issues and issues dealing with generalisability, validity and reliability of the research findings. In Chapter 4, using the results obtained from the survey and the interviews, the validity of the above hypotheses will be examined in turn. This examination will help to find out what the critical success factors in expatriate assignments are and, thus to answer the research question. In the last chapter, the research findings will be summarised and subsequently, it will be recommended what companies and expatriates should do in order to be effective and successful abroad.

2. CRITICAL LITERATURE REVIEW

This chapter will provide a critical review of previous research in the field of expatriation. It begins by looking at expatriation in context (Section 2.1). In this section, the motives for and the problems of expatriation will be discussed. In Section 2.2, the critical success factors in expatriate assignments will be examined.

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