Complementarities between Entry Mode Equity and Human Capital Decisions

We investigate how human capital decisions made at entry influence the survival of MNC subsidiaries and how they interact with equity entry mode decisions. Our theoretical reasoning claims that some human capital configurations perform better in bundling MNC- specific assets with complementary host country specific assets. We integrate concepts from strategic human capital literature into a model of MNC entry modes. We hypothesize that subsidiaries with a higher share of employees with work experience in other MNC subsidiaries in the host country or with a higher share of expatriates in the subsidiaries management team at entry have a higher probability of survival. Moreover, we reason that these positive effects increase when the subsidiary operates as a joint venture. We test and support these hypotheses with a sample of 5,236 MNC subsidiaries that entered the Portuguese market in the period 1994-2011. Our findings have immediate relevance for both research and practice.