Understanding expatriate manager performance: Effects of governance environments on work relationships in relation-based economies

Evidence shows that the majority of Western expatriate managers fail in their job assignments in developing countries. To go beyond attributions of expatriate failure to “cultural differences” this article responds to calls for a theoretical basis for understanding expatriate performance by using a recently developed framework of rule-based and relation-based governance environments to examine how the macro-environment of a country's governance system affects the creation of effective working relationships between executive level expatriate managers and Host Country Nationals (HCNs) on the executive's management team. Based on cross-cultural psychological contract research [Rousseau, D.M., Schalk, R. (2000). Psychological contracts in employment: Cross-national perspectives. Thousand Oaks, CA: Sage.] and the premise that expatriate performance is largely a function of the ability to manage discrepancies between the rule-based expectations of the Western MNC culture and the relation-based expectations of local employees, we develop research propositions to promote future HR research designed to examine the effect of the governance environment on the working relationships between American managers and Chinese HCNs. Implications for future HR efforts to improve the performance of expatriate managers in relation-based societies are also discussed.