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Previous studies on the effect of subsidiary staffing on subsidiary performance have examined the relationship between the two variables at certain points in time. These studies demonstrate that subsidiaries with more (or fewer) parent country nationals (PCNs) tend to demonstrate higher performance. However, these studies do not fully analyze whether the performance of a focal subsidiary improves by increasing (or decreasing) the number of PCNs assigned to the subsidiary. To answer this research question, this study addresses the way in which changes in a focal subsidiary’s staffing affect the subsidiary’s performance. It analyzes a panel dataset consisting of 11,286 observations of foreign subsidiaries owned by multinational corporations. This study demonstrates that a change in the deployment of PCNs has a U-shaped relationship with subsidiary performance, and the curve indicates that the performance of a focal subsidiary improves by both increasing and decreasing the deployment of PCNs. This study also finds that the slope of the U-shaped curve is flatter in institutionally distant host countries than in institutionally similar countries. This finding indicates that institutional differences between the host and home countries diminish the positive effect of increasing and decreasing the deployment of PCNs.

This study examines whether isomorphic behavior by multinational corporations positively or negatively affect the performance of foreign subsidiaries. Although previous studies find that multinational corporations have a tendency to mimic practices adopted by other firms, the financial consequences of mimetic behavior remains uncovered. This study addresses multinational corporations' isomorphic behavior regarding foreign subsidiary staffing and hypothesizes the relationship between the imitation of the dominant practice for subsidiary staffing and the subsidiary performance. The panel dataset consisting of 3,284 foreign subsidiaries of multinational corporations are used to test the hypotheses. The results obtained from a fixed effect model indicate that the imitation of the dominant practice adopted in the host country negatively affects the subsidiary performance. This study also finds that the negative relationship between mimetic behavior and subsidiary performance becomes greater as the institutional distance between the host country and the home country increases. The results of this study suggest that isomorphic behavior in pursuit of legitimacy is accompanied by the loss of efficiency.