General manager succession dynamics in MNE foreign subsidiaries

In the rapidly changing environment of global commerce, subsidiary general managers (GMs) within multinational enterprises (MNEs) play an important role. These managers encounter unique difficulties due to their roles within the worldwide corporate structure. Despite the significance of choosing the right subsidiary GMs, there is a surprising scarcity of research on how these GMs are selected and replaced over time. This study explores the decision-making processes behind the succession of subsidiary GMs, uncovering three distinct patterns of succession dynamics and the decision-making models that propel them.

This  multi-stage study commenced with interviews of managers from 14 MNEs with branches in China, offering a rich context for analyzing managerial decision-making. The investigation then centered on three large manufacturing MNEs to better understand succession dynamics. Each MNE adhered to a unique decision-making model, swayed by a specific heuristic (a type of mental shortcut or rule of thumb) that directed their succession choices. The study is qualitative, utilizing semi-structured interviews and secondary data to delve into the complexities of these processes. It underscores the importance of understanding the interaction between bounded rationality (the limits of decision-makers to process complex information) and bounded reliability (the limited ability of managers to fulfill commitments) in shaping GM succession dynamics.

The findings reveal that GM succession dynamics are tied to three distinct decision-making models: a simple rule-based method leading to shorter succession dynamics (up to two years' tenure), a goal-based method resulting in moderate dynamics (three to four years' tenure), and a people-based method associated with longer dynamics (five years or longer). These models are molded by the specific heuristics that center decision-makers' focus on different facets of the succession process. For instance, a rule-based method might prioritize immediate performance, while a people-based method balances immediate impact with long-term goals.

The study concludes that the dynamics of subsidiary GM succession are more intricate than previously believed. It also suggests that the interaction between bounded rationality and bounded reliability at the interface of MNE headquarters and subsidiary leadership warrants more attention. By uncovering distinct succession decision-making models and their underlying heuristics, the research enriches our understanding of the subsidiary GM succession process and the strategic implications for MNEs.

This study has implications for both theory and practice. It enhances our understanding of international business and management by providing a more nuanced perspective of the decision-making processes within MNEs. For practitioners, the findings offer insights into how to better manage the critical process of subsidiary GM succession, which can have profound implications for the success and longevity of their global operations.Li, (Arthur) L., Beamish, P.W., & Schotter, A.P.J. (2024). General manager succession dynamics in MNE foreign subsidiaries (external link) . Journal of International Business Studies. doi: 10.1057/s41267-024-00717-3