Expatriation Practice in a Globalized Economy

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In the world of a globalized economy and the world exchange of information and goods, more and more companies expand their activities outside their countries and even continents. These processes are required by increased competition and the opening of countries to international trade. However, the expansion of companies into foreign markets also requires a deep knowledge of their cultural characteristics, both for promoting goods and organizing business processes. One of the most common approaches to gaining knowledge and successfully launching companies in foreign markets is to assign a company’s employees to temporary work in a foreign cultural environment.

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However, many studies and examples of corporations show that this strategy can fail. Nevertheless, it is unclear what mistakes are critical to such failures and what actions managers might take. Consequently, this report will examine the reasons for the use of expatriation in the globalized economy and the causes for failure to determine how to assign the company’s employee to India effectively.

Reasons for Using Expatriation

The global economy has pushed business beyond national borders. However, the culture of most countries has not completely globalized yet and is significantly different, which is reflected in the way they do business and financial activities. For this reason, companies are forced to study the market they intend to enter in detail to avoid failures due to insufficient planning and mistakes associated with lack of awareness. At the same time, the peculiarities of the work of different industries and companies in the same state also differ, which makes it challenging to study local business activities from theoretical sources.

For this reason, multinational companies use the practice of appointing expatriates. In this context, an expatriate is defined as a person who temporarily lives and works in a country other than their country of origin and residence (McNulty and Brewster, 2019, p. 23). In this way, companies gain or exchange specific practical knowledge that contributes to their business activities.

The specific reasons for appointing expatriates are different depending on the goals of the company. The first reason is to gain knowledge about the specifics of the work of an industry or company in a state. Expatriates can be one of the most effective sources of knowledge when adequately managed, supported, and located in a foreign country (Dahms, 2019; Shaoa and Ariss, 2019). The second reason is the lack of qualified personnel in the country where the company opened a new office or subsidiary (Okeja, 2017, p. 68).

Thus, the company chose to hire or transfer an employee from their main office temporarily to manage and organize the work of a new team or prepare and educate another manager for a permanent position. The third reason is to transfer a corporate culture and principles of work for the employees of a foreign company. For example, if a US company opens in Japan, it needs to embed or adapt its core principles to the local culture; for example, eliminate common in Japan practice of overwork (Franklin, 2017, p.5).

In addition, cultural exchange fosters working relationships with local business and government representatives, which is necessary before opening an office or subsidiary. Thus, the main reason for the appointment of expatriates is cultural exchange and adaptation of the business to operate more efficiently through practical experience and insider knowledge.

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Causes of Expatriate Failure

Managerial Mistakes

An overview of the reasons for expatriate failure should begin with a definition of the term. As Safi and Saxena (2020, p. 1880) note, researchers cannot give a common definition of expatriate failure because they focus on different aspects and expectations of companies. For this reason, early employee return, poor performance, and failure to meet organizational goals can be considered an expatriate failure (Safi and Saxena, 2020, p. 1880). Consequently, these definitions demonstrate that the failure of the expatriate, in general, can be characterized as the inability to fulfill the tasks set by the corporations, which cause harm to its activities in a foreign country.

Most of the reasons for failure are related to management problems, lack of support, and cultural unpreparedness of expatriates. The first reason for the failure is an inadequate selection of the candidate, usually among the available but not skilled workers. At the same time, cultural distance, cultural intelligence, communication skills, adaptability, and cultural motivation are even more critical than technical and professional skills (Wang and Varma, 2017, p. 3; Lorenz, Ramsey and Richey, 2017, p.3). In other words, although an expatriate must have the necessary technical skills, a lack of cultural competence and intelligence is more detrimental since failure to psychologically address intercultural stress can lead to an inability to cope with changes and responsibilities (Lai and Yang, 2017, p. 244).

Furthermore, the lack of material support and cultural training also affects the satisfaction of the expatriate’s family. If the spouse and children of the expatriate have difficulties finding employment or academic success and feel isolated, these problems affect the employee and force them to return earlier. However, cross-cultural training can reduce culture shock and cultural distance for both the assigned employee and his or her family and improve expatriate’s performance (Erogul and Rahman, 2017, p. 17; Qureshi et al., 2017, p. 327). Consequently, the lack of cultural competence and training to obtain it is one of the main reasons for expatriate failure.

Lack of support and breach of the psychological contract is also the cause for the failure. The company and the employee have mutual expectations of expatriation, which come from oral and written discussion. Typically, these expectations include living, working, and paying conditions, as well as the obligation to support the expatriates by the company in exchange for fulfilling their duties (Perera, Yin Teng Chew, and Nielsen, 2016, p. 2).

However, if the sending or host party violates these obligations, for example, the manager does not provide technical and informational support, the employee may fail the task. The perception of a psychological contract breach negatively affects the attitude, engagement, and performance of the expatriate (Perera, Yin Teng Chew, and Nielsen, 2016, p. 10). Thus, the lack of managerial support is a negative reason for both the expatriate’s morale and ability to perform duties due to lack of resources.

Cultural Differences

While the wrong approach to the selection, management, and training of expatriates is the cause of their failure, the initial reason is cultural differences. Corporations need to know these differences to choose a country for opening subsidiaries or offices and preparing expatriates. At the same time, although most of the differences are due to historical traditions and habits that are unique to each country, there is a classification of cultures into individual and collective traits of which are fundamental for most countries.

The name of collective and individual cultures makes it clear that their main difference is the role of the collective for the employee’s work. However, these differences are also reflected in characteristics such as hierarchy rigidity, work motivation, work-life balance, and decision-making. First, because employees in collectivities, the culture is more committed and loyal to the company and has a more rigid hierarchy.

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Hence, a leader most often acts as supportive but directive and paternalistic (Campion and Wang, 2019, p. 353). Employees in a collectivist culture are more dependent on the opinions of the collective and often cannot make a decision without the manager’s consent, which complicates the process of making deals. This aspect, as well as a higher commitment to collective morals and ideals, also increases the time of decision-making (Oumlil and Balloun, 2018, p. 26; Merkin, 2018, p. 173). At the same time, an individualistic culture encourages independence in decision-making, although key issues should be discussed with the collective and the leader.

Secondly, collectivist and individualistic cultures differ in approaches to employee motivation and their individual interests. Employees in an individualistic culture require self-promotion, which makes praise and differentiation an effective way to motivate them (Merkin, 2018, p. 83). At the same time, employees of a collectivist culture strive for harmony and achievement of goals for the team; thus, highlighting their individual merits can negatively affect their self-perception and relationships with colleagues. Third, since a collectivist culture puts common interests above individual interests, the practice of overworking and setting work above personal life is standard (Wang, 2018, p.47).

At the same time, individualists put personal interests ahead of collective ones; hence, the practice of life-work balance is more common. These differences are key for expatriates because ignorance of practices increases cultural distance, which is one of the main reasons for failure (Wang and Varma, 2017). Thus, unpreparedness or inability to adapt to cultural characteristics in a foreign country can lead to isolation from the team, low work performance, and even conflicts.

Cultural Features of India’s Business Environment

Since a Human Resources Director for a multinational company intends to send an expatriate to an Indian office, he or she needs to know some of the specifics of the Indian business culture to select and prepare an employee. Firstly, an important feature is that the hierarchical structure of Indian companies is more paternalistic and centralized than the American one (Rana, 2018, p.19). This feature is reflected in the fact that despite collective discussion, the decision is made by the superior manager, and employees often do not complete tasks without a supervisor’s direction (Sethi, 2016, p. 106). Secondly, Indian culture is collectivist but has some individualistic traits.

Firstly, Indian workers can be self-motivated, recognized, and self-promoting; however, the goals of the team are crucial to them (Rana, 2018, p. 20). This feature demonstrates the gradual shift in Indian culture towards individualism.

Other features that a manager needs to know are the innovativeness, hard work, and bureaucracy of the Indian business culture. Like the United States, India is focused on innovation and development, which helps in the production of new ideas. At the same time, Indian employees have more restrictions on pleasure and put work ahead of their interests (Rana, 2018, p. 22). However, an inconvenient feature for American and European managers is the attitude of Indians towards deadlines, since if no one has indicated the urgency and obligation of the task, employees consider the deadlines to be flexible (Sharma and Dahiya, 2017, 355).

In addition, all directions, requests, and complaints must be recorded so that employees cannot deny that they have been informed (Srivastava, 2019, 102). Knowing these traits is critical for an expatriate to establish a supportive relationship with the community and achieve their goals. At the same time, the manager must be aware of these characteristics to determine whether the candidate for expatriation can cope with them or their cultural distance is too great for the given assignment.

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Conclusion

Therefore, this review demonstrates that expatriation is a beneficial practice to expand into foreign markets; however, it requires many details to be considered. First, managers must responsibly approach selecting candidates for expatriation, taking into account their professional skills, cultural competence, distance and intelligence, and motivation to work in another country. Secondly, expatriates and their families should undergo cross-cultural training to learn about society’s cultural traditions and, in particular, the business environment and business practices. Third, the manager must provide informational, technical, and moral support to the expatriate, as well as satisfy preliminary agreements on working and living conditions.

The basis for all these aspects is an awareness of the cultural characteristics of the host state. For this reason, the manager must study cultural features at the general level of individualistic and collective differences and specific traditions. This knowledge will allow you to select the most suitable candidate for the task and make the necessary preparations. In the case of using an expatriate in India, the main details to be considered are the status and responsibilities of the leader, the use of recognition of individual and team efforts to motivate, flexible deadlines, and the need for written instructions. These details will help the company select the right expatriate and succeed in his international assignment in India.

Reference List

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BusinessEssay. "Expatriation Practice in a Globalized Economy." July 12, 2022. https://business-essay.com/expatriation-practice-in-a-globalized-economy/.