International environmental complexity and the demand for generalists and specialists in executive selection

Abstract

Research SummaryThis study investigates the selection of generalists and specialists as an organizational response to the complexity of firms' international operations. Drawing on the concept of executive job demands, we identify institutional ambiguity and economic sophistication as two distinct sources of country environmental complexity resulting from a firm's foreign investment and predict how they affect the selection of new executives at multinational firms. Our hypotheses associate institutional ambiguity and economic sophistication with the appointment of executives with generalist and specialist backgrounds, respectively. We also examine how the two sources of environmental complexity interact and test multiple alternative specifications to enhance our understanding of environmental complexity as a determinant of executive job demands in the context of international business. Our empirical analyses are performed on a sample of 436 executive appointments occurring in 132 UK‐based manufacturing firms, observed between 2008 and 2018. Findings show general support for our main hypotheses. We discuss the theoretical and practical implications of our findings as well as directions for future research.Managerial SummaryThis study suggests that companies operating across different international environments through their subsidiary operations will be exposed to distinct demands that vary according to the type of environmental complexity. Our results reveal that companies tend to appoint top managers with specialist backgrounds when their focus is on economically sophisticated environments, whereas top managers with generalist backgrounds tend to be preferred in institutionally ambiguous environments. Our findings enhance our understanding of the demand for executive generalists and specialists in the international business context by showing that top managers' backgrounds are matched with the prevailing type of complexity deriving from the international operations of the firm, thus, questioning the widely held notion that executive generalists are generally preferred over specialists. Our study has important implications for the composition of top management teams and the shaping of executive career paths at multinational firms.

Neo-institutionalism in supply chain management: from supply chain susceptibility to supply chain resilience

“…Scholars agree that highly specific institutional prescriptions with a must set of institutional rules make it generally more difficult to include other demands, while a “may” set offers more discretion for supply chains how to react and potentially promoting innovation (McPherson and Sauder, 2013; Raynard, 2016). For example, Vallone et al (2022) argues that in case of high ambiguous complexity and multiple conflicting logics, companies prefer a generalized approach over a specialized one due to the higher cognitive flexibility and more transferable knowledge and skills.…”

Complexity and multinationals

“…Of course, MNCs develop capabilities to cope with the added challenges and explore strategies that suitably match their resources and distinct advantages. The studies by Steinberg et al (2022), Jonsson and Vahlne (2021), Ma et al (2022), and Vallone et al (2022) examine how MNCs reactively and proactively deal with various aspects of capability and strategy development processes. Well‐thought‐out global strategies help, but their implementation is rarely perfect, trade‐offs are unavoidable, and coordination issues remain ever‐present.…”

“…The better we are at describing and analyzing internal and external environments, the more likely our solutions to handle complexity will be effective. The studies of Steinberg et al (2022) and Vallone et al (2022) provide exemplary uses of existing frameworks, but our knowledge inventory should be refined and expanded. For example, a key question in global strategy research is how MNCs can successfully adapt to different cultural and institutional environments.…”

“…As such, they frame complexity as an opportunity to broaden firms' competitive repertoire. Vallone et al (2022) explore how international environmental complexity influences executive appointments. They frame environmental complexity as institutional ambiguity and economic sophistication and find results suggesting that these relate to the demand for executives with generalist and specialist backgrounds.…”

Strategic leaders in multinational enterprises: A role-specific microfoundational view and research agenda

“…In shaping international strategic choices, top managers are required to absorb and process multi-directional and fluid information across international contexts. This generates high levels of complexity and requires the handling of multiplex environmental stimuli at the time of strategic decision making (Vallone, Elia and Greve, 2022) with a resulting impact on BRat and BRel processes. As Ambos, Andersson andBirkinshaw (2010: 1101) commented, due to the considerable decision-making complexity facing MNEs "we cannot assume that corporate headquarters are fully in control of all decisions across the MNE."…”