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

Abstract

Research Summary

This 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 Summary

This 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.