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RESEARCH ARTICLE
Human Resource Management in Multinational Enterprises: Evidence From a Late Industrializing Economy
Anthony McDonnell • Jonathan Lavelle • Patrick Gunnigle
Received: 8 February 2013 / Revised: 6 January 2014 / Accepted: 6 February 2014 / Published online: 15 April 2014 © Springer-Verlag Berlin Heidelberg 2014
Abstract This paper examines the extent to which human resource management (HRM) practices in multinational enterprises (MNEs) from a small, late developing and highly globalized economy resemble their counterparts from larger, early industrializing countries. The paper draws on data from a large-scale representative survey of 260 MNEs in Ireland. The results demonstrate that there are signi.cant differences between the HRM practices deployed in Irish-owned MNEs and that of their US counterparts but considerable similarity with UK .rms. A key conclusion is that arguments in the literature regarding MNEs moving towards the adoption of global best practices, equating to the pursuance of an American model of HRM, were not obvious. The study found considerable variation from ‘US practices’ amongst indigenous Irish MNEs.
Keywords Best practice . Globalization . Human resource management . Ireland . Late industrializing . Multinational enterprise
1 Introduction
Proponents of globalization suggest that economies are increasingly integrated leading to the emergence of more standardized global management systems and converging HRM practice across countries (Sera 1992; Pudelko and Harzing 2007). Multinational enterprises (MNEs) are arguably the organizational form most likely to ascribe to a standardized management approach because of their susceptibility to globalizing forces (Brewster et al. 2008). While much international management
A. McDonnell (&) Queen’s University Belfast, Management School, Belfast, UK e-mail: a.mcdonnell@qub.ac.uk
J. Lavelle . P. Gunnigle University of Limerick, Kemmy Business School, Limerick, Ireland
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and business scholarship has focused on whether foreign MNEs ascribe to the local norms and traditions, less insight has been provided into HRM practices in domestically-owned MNEs (notable exception being Farndale et al. 2008) and whether these .rms seek to implement what may be considered as dominant or what Pudelko and Harzing term ‘‘perceived global best practices’’ (Pudelko and Harzing 2007, p. 536; Smith and Meiksins 1995). Gooderham and Nordhaug (2003) suggest that best practice in this context means the application of practices which are perceived as key contributors to performance. Pudelko and Harzing (2007) are more speci.c in stating that best practice effectively refers to US management practices, re.ecting that country’s economic dominance over recent decades and the increased HRM discourse that is now evident in business and which is strongly North American led.
This paper further contributes to the literature on a possible convergence and standardization of HRM practice—particularly those suggesting a US styled, ‘best practice’ HRM model is increasingly prevalent (Pudelko and Harzing 2007, 2008). We investigate whether the HRM practices in MNEs from a small, late developing but highly globalized economy resemble those of MNEs from larger, early industrializing nations. Research on small and/or late industrialized countries remains minimalist at best with the exception of the growing literature on the larger, developing Asian economies and India (McDonnell et al. 2011). The focus is on the macro level (i.e., HRM practices at an organizational level) which Batt and Banerjee (2012) argue has received comparatively less attention vis-a`-vis micro level analysis (i.e., work group or employee level).
We are especially interested in the ideas of globalization, dominance and spill­over effects on HRM practice in indigenous or domestic-owned MNEs. At a general level, these effects refer to the in.uence of large and economically powerful economies on smaller, less powerful countries, often manifested through the dependence of smaller host economies (e.g., Ireland) on foreign direct investment (FDI) from larger, developed economies (e.g., US). MNEs emanating from larger economies may act as conduits for the transfer of their home country management practices to host locations. These may subsequently be taken onboard by domestic companies who have become international organizations and that look to mimic their more established and apparently successful counterparts (Begley et al. 2005). This is arguably more likely where organizations potentially have to play ‘catch-up’ in that they are recent to global markets. Thus, they have to .nd a means to gain competitive advantage over established .rms.
The paper draws upon a large-scale representative, organizational-level survey of MNEs operating in Ireland, one of the most ‘‘MNC-dependent economies in the world’’ (Gunnigle et al. 2005, p. 241), to answer the research question: To what extent is there similarity or variation in the HRM practices of indigenous and foreign MNEs?
We now engage with the literature on globalization, dominance and spill-over effects and best practices, incorporating the challenges inherent in identifying such practices. We also make use of the ‘country of origin’ literature in these early sections. Then, the research context is discussed and the methods that were used are espoused. The results are subsequently provided before considering what they mean,
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their contribution to existing knowledge and how future research might proceed to further improve understanding of how MNEs behave.
2 Best Practices and Globalization, Dominance and Spill-over Effects
Arguably the most researched aspect of international and comparative HRM has been on county of origin and host country effects. This body of literature is typically situated within the institutional (DiMaggio and Powell 1983) and cultural (e.g., Hofstede 2001) schools of thought. Much of this scholarship demonstrates that there are country of origin effects in the HRM policies and practices of MNEs (e.g., Almond 2011; Almond et al. 2005; Bjorkman et al. 2007; Ferner 1997; Lavelle et al. 2010; Noorderhaven and Harzing 2003). The argument is made that the greater the cultural or institutional distance between the HQ and subsidiaries, the less likely a MNE will seek to transfer practices across operations. Hence, where there is more similarity in the cultural and institutional distance greater standardization of practices is likely.
While acknowledging the weight of evidence that exists on country of origin effects being present in MNE approaches to HRM, Pudelko and Harzing (2007, 2008) argue that there is increasing adoption of global best practices—a result of organizations’ desire to enhance competitiveness by mimicking dominant and apparently successful models. For some time it has been argued that MNEs represent one of the principal means through which management practices are globally diffused (Bartlett and Ghoshal 1989). According to Pudelko and Harzing (2007), p. 539, hyper-competition and the global integration of economies means that ‘‘the importance of the concept of learning from best practices de.ned by dominant economies has increased’’. Typically, the idea of best practice has been ascribed to the approaches adopted by US-, Japanese-and German-owned MNEs due to the strength of their respective economies and concomitant legacy of economic dominance (Smith and Meiksins 1995). Typically, the US is considered as the primary dominant model (Edwards et al. 2005). Recent empirical work pointed towards evidence of a dominance effect, speci.cally that subsidiary HRM practices of Japanese and German MNEs were converging towards dominant US practice (Pudelko and Harzing 2007, 2008).
Scholarship has also considered the idea of spill-over effects in the context of whether the HRM practices of foreign-owned MNEs are similar or different to domestic .rms (Turner et al. 1997). Whilst strong consistency in results has failed to materialize across these different studies, the tentative conclusions suggest that HRM in foreign-owned MNEs is different to that in domestic .rms (Geary and Roche 2001; McGraw and Harley 2003). More speci.cally, it appears that whilst foreign MNEs may have to adapt local practices on occasion (e.g., for cultural and legislative/regulatory reasons), overall they appear to be more formal and sophisticated in terms of their HRM practices (Hiltrop 1999; McGraw and Harley 2003) than domestic organizations.
Of particular importance here is the work of Geary and Roche (2001, p. 124) who argued that domestic .rms were ‘‘increasingly introducing new HR practices most
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often associated with MNCs’’. They propose that this may be the result of foreign-owned .rms acting as exemplars to domestic organizations and managers with respect to HRM. Begley et al. (2005) identi.ed the role of US FDI in facilitating the development of a strong cadre of managerial talent and the early dominance of American FDI as a training ground for Irish managers. As one Irish executive observed, ‘‘we learned our business skills from American companies, so we are familiar with them’’ (Begley et al. 2005, p. 209). Domestic .rms and, more especially, domestic MNEs may ‘buy in’ talent that have experience working in foreign MNEs which may facilitate knowledge transfer and provide a platform for cross-fertilization of practices that may not be typical of these domestic organizations. Moreover, increased emphasis on investment in education and the impact and popularity of Harvard styled MBA programs re.ect an additional factor that we contend may contribute to commonality in Irish–US business practice.
We draw on, but undertake a somewhat different focus to, the aforementioned literature by contrasting indigenous MNEs and foreign .rms rather than the traditional approach of comparing foreign MNEs against indigenous .rms. This is an approach which Farndale et al. (2008) argues as having much value and merit. The Cranet studies have been particularly focused on this area investigating the practice of domestic and foreign .rms in different contexts (e.g., McGraw and Harley 2003 in Australia). We suggest that domestic MNEs as opposed to domestic .rms are a key distinction too often ignored, and have the potential to provide different insights. Domestic MNEs are more likely to be faced with the pressures of globalization and the inherent competition this brings, compared to .rms which only operate in the domestic market (McGraw and Harley 2003). They are therefore more likely to deploy more formalized and sophisticated management systems and practices in grappling with these challenges. While this may be argued as a plausible scenario, empirical evidence on the HRM systems of MNEs from smaller, later developing countries is somewhat thin on the ground. This paper helps address, in part, this knowledge de.cit.
Child (2000) has previously proposed that MNEs can in.uence the actual structures of national business systems and the policies enacted by institutions within countries. Ferner and Varul (2000) highlighted the innovative capabilities (both positive and negative) of MNEs as a medium for diffusing management practices within different national business systems. Consequently, we contend that a dominance or spill-over effect may occur where the HRM practices of domestic-owned MNEs are shaped by the practices employed by foreign MNEs:
‘‘Firms that operate across national boundaries are most exposed to the forces of globalization, and hence are most likely to fall in line with dominant worldwide practices aimed at enhancing competitiveness in world markets’’ (Brewster et al. 2008, p. 321).
Given the large US investment in Ireland (detailed later), and the permissive nature of the Irish business system (Clark et al. 2005; Gunnigle and McGuire 2001), Irish MNEs may look to imitate what may be perceived as best practices which some scholars (e.g., Pudelko and Harzing 2007, 2008) ascribe to as those emanating from US .rms. In effect we may expect mimetic isomorphism (DiMaggio and
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Powell 1983) whereby there is some degree of ‘‘a spill-over effect’’ from foreign MNEs to the domestic .rms (Geary and Roche 2001, p. 124). Given the competitive nature of global business, domestic MNEs may mimic management practice in ‘successful’ MNEs in an effort to accelerate international growth and concurrently avoid some of the pitfalls and costs of engaging in international business, including unfamiliarity with different economic, cultural and political environments (Zaheer 1995).
‘‘Without possessing unique corporate competencies a company can only
imitate what others already do well’’ (Pudelko and Harzing 2008, p. 400).
Newer MNEs, in this context Irish MNEs (i.e., MNEs from a recently industrialized and internationalized economy), are arguably disadvantaged due to their levels of international experience not being equivalent to their more mature counterparts. A major challenge for these MNEs is developing management practices which assist in reducing the potential disadvantages of internationalization into markets and economies that have seemingly been dominated by longer-established MNEs. For instance, it has been argued that MNEs from small or late developing economies will be disadvantaged due to their lack of international market experience when compared to more seasoned global competitors (Wells 1983; Monks et al. 2001). As a result, .rms relatively new to multinational status may place signi.cant emphasis on establishing well-developed HRM policies and practices early on in their internationalization ‘path’. Kim and Gray (2005) note that MNEs need to be more sophisticated than domestic .rms in their management systems because it will assist them in effectively dealing with the dynamic, evolving environments faced. At a minimum, such .rms are looking to gain some level of competitive parity with existing international .rms. In saying that, HRM is not always viewed as integral to business success and is often a supporting, reactionary function (if even that) in international business growth strategies (Welch and Welch 1997).
Surmizing the literature, one can take the view that the HRM approach of home-owned MNEs from a country classi.ed as a late industrializer and internationalizer may hold much similarity to foreign .rms, especially US .rms, due in part, to mimetic isomorphic pressures. On the other hand, one could argue that considerable variation will be likely on the basis that HRM formalization and sophistication would not have been high on the priority of internationalizing domestic .rms (Monks et al. 2001). Furthermore, with Ireland’s characterization as a liberal market economy, corporate leeway to be innovative and different will be relatively high (Farndale et al. 2008; Ferner 1997).
3 The Challenge of Identifying Dominant/Global Best Practices
A key challenge for researchers that seek to interpret similarities or differences in the results from different studies on whether there is an HRM best practices model emerging is that there is no commonly agreed theoretically or empirically derived list of HRM practices that one can draw upon on which to test the diffusion of
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practices (Becker and Gerhart 1996; Brewster et al. 2008; Edwards et al. 2013). In discussing the idea of ‘best practices’, high performance work systems (HPWSs) inevitably come to the fore (e.g., Combs et al. 2006). Although our paper is not focused upon whether particular HRM practices lead to better organizational performance, we utilize this body of scholarship as an indicator of the HRM practices that MNEs are likely to implement. The HPWS literature does not identify a de.nitive list of HRM practices, however there appears to be a consensus about the HRM functional areas that are important, which we draw upon in this paper: Training and development, compensation, staf.ng, employee empowerment and communication (e.g., Becker and Huselid 1998; Bjorkman et al. 2007).
The literature focusing on country of origin effects varies in focus from those primarily interested in speci.c issues such as employee representation and consultation (e.g., Gunnigle et al. 2005) or corporate control mechanisms (e.g., Harzing and Sorge 2003) to ones that have somewhat greater breadth in terms of HRM practices (Farndale et al. 2008). Pudelko and Harzing (2007) draw conclusions about the move towards dominant (US) practices based on analysis of 12 subjective, micro-focused, bipolar scale measures, covering recruitment, training, promotion, communication and employee incentives. Brewster et al. (2008) focused on different HRM practices but the substantive areas of training, employee consultation, employee incentives and communication were employed. Our study also incorporated most of these substantive areas of HRM, as well as incorporating dimensions which have received limited attention to date. Speci.­cally, we consider international or global structures and practices, including the utilization of worldwide human resource information systems (Kavanagh and Mohan 2008) and global talent management practices. We propose that these are particularly relevant given their global orientation and consequent lower suscep­tibility to local pressures for adaption. Further, in our desire to consider the conclusions of Pudelko and Harzing (2007, 2008) we incorporate a range of practices (e.g., direct forms of employee involvement, performance related pay) which are often construed as indicative of an individualist approach to HRM, viewed as endemic of US business culture (Enderwick 1985; Hofstede 2001). The speci.c practices incorporated in our study are explained in the methodology section and the descriptive results can be found in Table 1.
4 Looking Beyond the Usual Suspects
A novel contribution of this paper is the focus on a small, highly globalized and highly FDI-dependent economy. Global business is no longer the preserve of large MNEs from the major, mature economies. The 2010 World Investment Report identi.ed a signi.cant number of small economies in the top 20 sources of FDI out.ows, including Ireland, Australia, Netherlands and Denmark (UNCTAD 2010). Gammeltoft et al. (2010, p. 95) note that considerable MNE activity stems from the traditionally peripheral economies which are ‘‘reshaping the structure of interna­tional business’’. While many of these emanate from large emerging economies such as China, India and Russia, many others are small, later developing countries
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Human Resource Management in Multinational Enterprises 367 
Table 1 Frequency of HRM practices in Irish-and foreign-owned MNEs 
Irish MNEs (%) US MNEs (%) UK MNEs (%) Rest (%) N 
Organizational and global HR structures 1. International business structures 70 95 88 92 258 2. International HRIS 44 70 49 40 254 3. HR shared services centre 48 45 46 23 259 
Performance management 4. Performance appraisal 89 98 91 92 257 5. Forced distribution 18 49 19 24 192 6. Peer/Upward/360 degree appraisals 52 70 55 52 202 
Rewards and remuneration 7. ESOP 35 43 32 15 252 8. Pro.t sharing 33 34 49 27 234 9. Share options 41 66 34 34 239 10. Variable pay 89 93 91 96 254 
Global talent management 11. Global succession planning 48 67 55 56 252 12. Global management development 42 64 49 56 245 13. Global management training 30 71 40 51 253 
Employee representation and consultation 14. Representative structures 89 66 91 78 259 15. Participative structures 71 86 77 87 249 16. Communication structures 26 75 51 56 258 

Percentages have been rounded up. The ‘N’ is lower in a few cases due to the use of .lter questions. For example, if the company reported that they did not utilize performance appraisals, then they were not asked if forced distribution was applied to appraisals
like Ireland. The focus here is somewhat unusual since much of the extant scholarship has focused on the ‘usual suspects’—‘‘.rms [MNEs] that hold dominant positions in important industries, .rms that have been in existence for a long time and .rms with a strong, recognizable brand’’, speci.cally large, well known, US-owned, manufacturing companies such as Intel, GE and Microsoft (Collinson and Rugman 2010, p. 442).
Ireland’s development trajectory is much later than that of larger economies such as the US, UK and Japan and explains why Ireland is generally classi.ed as a late industrializing and internationalizing economy (O’Malley 1985, 1992). Ireland remained part of the UK until gaining independence in 1922. However, the Irish economy continued to rely on the UK for international trade until the 1960s, when exports to the UK fell from 90 % to less than 30 % (Barry and Bradley 1997). The UK remains a major source of imports into Ireland (Barry and Bradley 1997), and
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UK MNEs continue to play a crucial role in the Irish economy. The most recent IDA1 data identi.ed UK companies as the third largest group (after the US and Germany) by country of origin and source of employment (IDA Ireland 2012).
Given the historical development of the Irish economy and the overwhelming importance of FDI .ows from the US and UK, it is plausible to argue HRM practice among domestically-owned MNEs are likely to be shaped by practice in MNEs from the UK and the US, particularly the latter given its status as a role model for global best practice (Pudelko and Harzing 2007, 2008; Smith and Meiksins 1995). Irish MNE management practices susceptibility to the in.uence of foreign-owned practices are likely to be accentuated by the fact that outward FDI and Irish MNEs are a relatively new phenomenon (Brennan and Verma 2012; McDonnell 2008; Monks et al. 2001) given that much of the country’s industrialization has only taken place since the early 1960s (Buckley and Ruane 2006). The acceleration of economic development can be directly traced to the public policy u-turn in the late 1950s when the government of the day eschewed the extant strategy of protectionism, opened up the economy to international trade and offered a package of .nancial and other incentives to proactively attract inward FDI (O’Gra´da 1997). While the precise con.guration of this package has been tweaked over time, the essence remains largely intact and its legacy is evident in the huge proportion of economic activity accounted for by MNEs and particularly in the surge of investment by MNEs in Ireland during the FDI boom from the early 1990s.
Ireland is one of the world’s most economically globalized economies (KOF 2010) characterized by a particularly strong presence of US MNEs (Lavelle et al. 2009). The recent OECD fact book (OECD 2010) reported Ireland having the .fth highest ratio of inward FDI stock to GDP amongst OECD nations, as well as the highest ratio of employment in foreign subsidiaries across services and manufac­turing industries. The extent of US FDI in Ireland is staggering when one considers there is a population of just 4.6 million. Almost one-.fth of US global investment in the professional and technical services sector is accounted for by Ireland (Walsh 2010). Subsidiaries of US MNEs contribute approximately one-third of all corporation tax collected and more than one quarter of Ireland’s GDP (Walsh 2010). Moreover, Ireland has received signi.cantly greater capital investment from the US than the BRIC (Brazil, Russia, India, China) countries combined (Hamilton and Quinlan 2008; Quinlan 2011).
In addition to inward .ows, the US is also the largest recipient of Irish FDI out.ows and the country now boasts a cadre of indigenous .rms with extensive foreign operations. Thus Ireland is now both a signi.cant source and target of FDI (Gorg 2000; UNCTAD 2010) which makes the focus on domestic MNEs timely. The development of domestic MNEs is viewed as a natural occurrence as .rms move along a growth and development trajectory, particularly in countries with a small national market (Forfa´s 2006). O’Toole (2007) found that 212 Irish .rms have established green.eld sites in foreign locales since 2002, with the US alone host to more than 200 Irish-owned .rms (Walsh 2010). Outward FDI data demonstrates that Irish .rms are investing in international operations like never before (O’Toole 2007),
1 IDA Ireland is the agency charged with attracting foreign investment in Ireland.
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evidenced by the fact that Ireland’s stock of outward FDI as a percentage of GDP is well above the EU average (Forfa´s 2007). Yet despite these data we have very little research evidence on Irish-owned MNEs (notable exceptions are Donnelly 1999; Monks et al. 2001). Monks et al. (2001) found some Irish-owned MNEs used quite ‘comprehensive and proactive IHRM policies and procedures to assist them in the process of internationalization’ while others were less sophisticated in their approach. This study was, however, based on only 11 MNEs and is now dated.
5 Methodology
In this paper we draw on data from a large-scale representative study of HRM practices in MNEs operating in Ireland. The study addresses the limitations of existing studies which too often lacked comprehensiveness by failing to accurately capture the full population of MNEs in a country (cf., Collinson and Rugman 2010; McDonnell et al. 2007). By .rst developing a comprehensive listing of all MNEs in Ireland and then administering a detailed survey to a representative sample, this study helps redress the limited availability of representative, generalizable data (see Lavelle et al. 2009 for greater detail on the methodology). The .rst stage of the study identi.ed a population of 563 MNEs (491 foreign-and 72 domestic-owned). Foreign MNEs were de.ned as wholly or majority foreign-owned organizations in Ireland with 500 or more staff worldwide and at least 100 in their Irish operations. Domestic MNEs were de.ned as all wholly or majority Irish-owned organizations with 500 or more employees worldwide and at least 100 in their foreign operations. The population was strati.ed by country of ownership and sector with a sample of 423 companies selected. Of this sample, 46 companies subsequently were removed due to having ceased operations, not meeting the selection criteria at the time of the survey or double-counting. Consequently, an additional 37 companies were added from the residual population to compensate for these losses meaning that valid sample of MNEs was 414. The second stage was to conduct the .eldwork which took the form of a survey administered through structured personal interviews with the most senior HR practitioner able to answer for all of the Irish operations. The questionnaire consisted of a series of questions across .ve core HR areas—the HR function, pay and performance management, employee representation and consul­tation, employee involvement and communication, and training, development and organizational learning. We also collected a vast range of background data on the operations of MNEs. The survey was strongly focused on actual practice which meant that we drew extensively on dichotomous and list type questions although there were a small number of Likert scales used. This paper draws on a select number of variables from the larger project.
Interviews involved the HR Director/Senior HR Manager and took between 40 and 60 min. The .eldwork took place from June 2006 to February 2007 and yielded 260 questionnaires (213 foreign and 47 indigenous MNEs), an overall response rate of 63 %. This response rate is commendable when compared to response rates for organizational surveys which Baruch and Holtom (2008) suggest average 35 %. We tested for non-response bias (i.e., to establish if there were any signi.cant
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differences between participating MNEs and those that chose not to) by analyzing the participant .rms against two criteria (country of origin and sector), collated from the population development stage. These tests found that non-response bias was not a concern. Our data were not weighted due to the level of similarity with the overall population.
Although the study was based on a structured instrument, some participants did offer additional information in the interviews. We collated the qualitative data provided and following the suggestion of one of the reviewers we utilized this to help elucidate the quantitative results where appropriate. It is important to note that the qualitative aspect cannot be classi.ed as representative as it was entirely at the discretion of the participant to offer additional comment beyond the questions asked.
5.1 Measures
Our key interest is whether HRM in Irish-owned MNEs (n = 47) is statistically different to foreign-owned MNEs, and particularly US (n = 101) and UK (n = 35) owned .rms. We also incorporate a rest of the world category (n = 77) but due to its disparate nature, we urge caution in making any conclusions here. Each of the dependent variables are now explained. We identi.ed 16 dependent variables, which we categorized under .ve broad headings—organizational and global HR structures, performance management, rewards and remuneration, global talent management, and employee representation and consultation.
Organizational and Global HR Structures
1.
International business structures refers to the presence of at least one of the following structures: International product, service or brand based division, regions (e.g., Europe or Asia–Paci.c) or global business functions (e.g., manufacturing, R&D, sales).

2.
International HRIS refers to the presence of a worldwide HR information system (such as PeopleSoft or SAP HR).

3.
HR shared services centre refers to the presence of a shared services centre where common HR services are provided to a range of operating units or divisions in Ireland.


Performance Management
4.
Performance appraisal refers to the presence of a formal system of performance appraisal.

5.
Forced distribution refers to the presence of a system of forced distribution to the results of appraisals i.e., a certain percentage of employees must be in a particular performance category or rating. This variable only applies to MNEs reporting the use of performance appraisals.

6.
Peer/Upward/360 degree appraisals refers to the use of peer, upward or 360 degree feedback in evaluating employee performance. This variable only applies to MNEs reporting the use of performance appraisals.

7.
ESOP refers to the presence of an approved employee share ownership scheme which is a trust that acquires company shares on behalf of employees, providing staff with part ownership of the .rm.

8.
Pro.t sharing refers to the presence of a pro.t sharing scheme. Pro.t sharing refers to .nancial rewards provided to staff beyond their normal salary and bonuses that are dependent on pro.t levels in the .rm.

9.
Share options refers to the presence of a share options scheme which is where employees are given the option of buying company shares, often at reduced rates.

10.
Variable pay refers to the presence of a system of variable pay at the individual or team level (for example merit pay or performance related pay).


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Rewards and Remuneration
Global Talent Management
11.
Global succession planning refers to the presence of a formal system of succession planning that is used across the worldwide operations of the MNC.

12.
Global management development refers to the presence of a formal management development program that is used across the worldwide operations of the MNC.

13.
Global management training refers to the use of formal global management training to develop managers. This variable only applies to MNEs reporting the presence of a formal management development program.


Employee Representation and Consultation
14.
Representative structures refers to the presence of collective employee representation structures, either trade unions or non-union structures of collective employee representation.

15.
Participative structures refers to the presence of formally designated teams and/or problem-solving groups.

16.
Communication structures refers to the presence of a high number of communication practices (by high we mean have at least six out of the following seven communication type practices: Meetings between senior managers and the whole of the work force, meetings between line managers or supervisors and employees, attitude or opinion surveys, suggestion schemes, systematic use of management chain to cascade information, newsletters or emails, and company intranet).


We utilize three key control variables in our analysis:
Worldwide employment refers to the total number of employees in the worldwide company, \ 5,000 employees (n = 80); 5,000–29,999 employees (n = 88); 30,000–59,999 employees (n = 34); [ 60,000 employees (n = 58).
Irish employment refers to the total number of employees in the Irish operations of the ultimate controlling company, \ 500 employees (n = 141); 500–999 employees (n = 42); [ 1,000 employees (n = 77).
Sector is operationalized as a dichotomous variable with 1 = manufacturing (n = 120) and 2 = services (n = 140).
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5.2 Statistical Analysis
Given our focus on whether a practice is used or not, binary logistic regression was deemed to be the most appropriate statistical technique. Before carrying out the regression analyses, the independent variables were checked for multi-collinearity. The tests utilized included exploring the condition index, tolerance values and the variation in.ation factors. No problems were evident. The suitability of the data for the regression models were tested using the Hosmer and Lemeshow (H&L) Goodness-of-Fit test, each of which showed up as non-signi.cant indicating the models adequately .t the data. The H&L test is generally considered the most robust measurement of model .t for logistic regressions than traditional Chi square tests (Peng et al. 2002). The Nagelkerke R2 was used as a supplementary evaluative method and the .ndings for each regression reinforced the results of the H&L test, although the .gures are relatively low.
6 Results
Irish-owned MNEs represent a signi.cant proportion of all MNEs in Ireland although US .rms are by some distance the most prevalent, accounting for 40 % of the total population. Most Irish MNEs are recent or new to multinational status with seven in ten having internationalized post-1980. Irish MNEs tend to be the largest in terms of employment in Ireland but small to medium in terms of worldwide employment compared to the foreign .rms. Fifty-seven per cent of Irish-owned MNEs employ more than 1,000 people in Ireland compared to just 23 % of foreign MNEs, whereas 27 % of foreign MNEs have a worldwide labour force in excess of 60,000 which contrasts with just 2 % of indigenous .rms.
Observation of the frequencies in Table 1 suggests that HRM in Irish MNEs may be quite different to their foreign-owned counterparts, particularly when compared to US .rms, across the majority of HRM practices. For example, the descriptive results point towards lower numbers of Irish MNEs utilizing international human resource information systems, HR shared services centres, forced distribu­tion and 360 degree appraisals, .nancial participation schemes, variable pay, global talent management practices and structures for employee participation and communication.
The extent to which these are signi.cant differences can only be determined through multivariate statistical analysis which we now turn to (see Table 2). The regression analyses provide con.rmation that there are some notable differences between Irish-owned MNEs and their foreign counterparts although there is no statistically signi.cant difference between UK-owned MNEs when compared to Irish MNEs. On a macro-type organizational structure level we found that Irish-owned MNEs are signi.cantly less likely to report the presence of international business structures than US MNEs.
Turning to the HRM measures, we .nd signi.cant differences between Irish-and US-owned MNEs in six cases. Irish-owned MNEs are less likely to have an international HRIS (p \ 0.05), undertake formal performance appraisals (p \ 0.05),
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Table 2  Results of logistic regression analysis 
US  UK  Rest  Hosmer and  Nagelkerke 
MNEs  MNEs  odds  Lemeshow  R2 
odds  odds  ratios  goodness-
ratios  ratios  of-.t test 
Organizational and global HR structures 
1. International business structures  5.76*  NS  0.228 
2. International HRIS  3.22*  NS  0.163 
3. HR shared services centre  -0.324*  NS  0.144 
Performance management 
4. Performance appraisal  8.735*  NS  0.146 
5. Forced distribution  NS  0.189 
6. Peer/Upward/360 degree appraisals  NS  0.191 
Rewards and remuneration 
7. ESOP  -0.210**  NS  0.177 
8. Pro.t sharing  NS  0.049 
9. Share options  NS  0.168 
10. Variable pay  NS  0.097 
Global talent management 
11. Global succession planning  NS  0.227 
12. Global management development  NS  0.194 
13. Global management training  5.09**  NS  0.266 
Employee representation and consultation 
14. Representative structures  -0.132**  -0.283*  NS  0.161 
15. Participative structures  3.467*  4.077*  NS  0.097 
16. Communication structures  7.866**  3.703**  NS  0.221 

The control variables were signi.cant in 9 out of the 16 regressions—international HRIS (sector), HR shared services centre (worldwide employment), forced distribution (worldwide employment), peer/ Upward/360 degree appraisals (worldwide employment), ESOP (worldwide employment and Irish employment), global succession planning (worldwide employment), global management development (sector and worldwide employment), global management training (worldwide employment and Irish employment), and representative structures (sector). Reference group: Irish MNEs
NS non-signi.cant *signi.cance at 5 % level **signi.cance at 1 % level
have formal global management training as a component of their global management development programs (p \ 0.05), provide employee participation structures (p \ 0.05) and offer a high level of employee communication mecha­nisms. Irish MNEs were, however, found to be more likely to have employee representative structures as compared to their US counterparts.
Although the ‘rest of world’ category is disparate, there are some interesting results that demonstrate differences between Irish-owned MNEs and these non-US and UK MNEs. We .nd that Irish MNEs vis-a`-vis this rest of world group are more
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likely to use HR shared services centres (p \ 0.05), offer ESOPs (p \ 0.01) and have representative structures (p \ 0.05), but are less likely to have participative structures (p \ 0.05), and communication structures (p \ 0.01).
There were nine participants (n = 47) in the Irish-owned MNEs that volunteered additional information on their HRM practices, all of who suggested that they were considerably behind other MNEs in terms of sophistication and formalization. There appeared to be a view that foreign MNEs were more advanced in their approach to HRM and that HRM in many Irish MNEs was only beginning to gain some degree of traction and importance in terms of how higher level management viewed the function. The following four quotes are indicative of the additional information gathered from Irish MNEs regarding views of their current HRM policies and practices:
‘‘I think and I have a lot of experience with Irish MNEs that Irish .rms are not very formalized or structured in terms of HR. They are not very sophisticated regarding HR policies and practices’’—HR Director, Irish manufacturing MNE.
‘‘We are not very advanced in HR, very much the older personnel style rather than an advanced HR system’’—HR Director, Irish services MNE.
‘‘HR would not be regarded as central to company strategy which you can really see by the lack of HR personnel per se on sites, there would be no function on the board etc. The company is still very much owner driven in everything it does’’—HR manager, Irish manufacturing MNE.
‘‘Senior management would not really view HR as critical because you can’t quantify it, it is not viewed as integral. For example, taking HR into account when developing corporate strategy would not happen’’—HR manager, Irish services MNE.
7 Discussion, Conclusions and Future Research Avenues
The most critical outcome of our .ndings is that they shed doubt on the contention of US styled, global best HR practices being the norm in MNEs (Pudelko and Harzing 2007, 2008). The predominant differences in the HRM practices of Irish MNEs and US .rms could be classi.ed as those most indicative of the individualist type practices which are often considered endemic of US business culture (Hofstede 2001). US MNEs have long been recognized for their greater centralization and formalization with regard to HR and industrial relations issues, including pay systems, union recognition/avoidance and consultation, and have been suggested as principal innovators in practices such as performance related pay and direct forms of employee involvement (e.g., Enderwick 1985). For example, US MNEs are more likely to have formal performance appraisals, offer high levels of direct communication and participation channels and less likely to provide collective representative structures to staff. In addition to these results being quite characteristic of the US business culture, they may also be linked to union
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recognition since domestic MNEs are signi.cantly more likely to recognize trade unions and typically unionized environments are less likely to have individual performance appraisals (Verma 2005). Overall the data indicates variation not similarity. It would be interesting to consider whether these .ndings hold true in other countries, particularly amongst other small, late developing economies. Through consideration of additional contexts support may grow for considering the development of new models and theories beyond existing ones that are drawn predominately from research in the largest and most mature economies.
Our results here indicate that there are differences in aspects of the business structures and HRM practices between Irish and foreign MNEs, especially with US .rms. Farndale et al. (2008) previously found signi.cant variation between foreign and domestic MNEs on the use of share options and pro.t sharing, strategy brie.ngs and individual pay bargaining. Differences between Irish-and US-owned MNEs were found in almost half of our measures though not with respect to .nancial participation, one of the most signi.cant areas of difference in the Farndale et al. (2008) paper.
A further .nding of note was the lack of signi.cant variation on most of the measures between Irish-owned MNEs and UK .rms. This may re.ect the incredibly strong historical and economic relationship between the UK and Ireland. Due to this history, it is unsurprising that many features of the Irish business system were initially modeled on British traditions, while the UK also represents a key location for international investment (Monks et al. 2001). Consequently, the greater degrees of similarity in the incidence of the HRM practices we investigated are not altogether unexpected.
While there have not been studies that have considered Irish versus foreign MNEs, there has been considerable research that has examined domestic, Irish .rms and foreign MNEs (cf., Geary and Roche 2001; Turner et al. 1997). Geary and Roche (2001) found evidence of differences between foreign and domestic .rms in Ireland but suggested that domestic .rms were increasingly introducing new HR practices that could be typically associated with foreign MNEs due to a type of spill­over process taking place. Due to the similarity in practice in some areas, the idea of there being a spill-over effect may be evident but without longitudinal data and understanding the process of how practices are derived we are unable to make a strong interpretation on this. The lack of signi.cant differences on the use of a formal global succession planning and global management development program was noteworthy as it may be linked to the signi.cant discourse over the past few decades on there being a global war for talent. The global talent management literature has emerged due to MNEs facing signi.cant challenges in locating and retaining suf.cient numbers and quality of talent (e.g., McDonnell et al. 2010; Tarique and Schuler 2010). The lack of difference with US .rms may also be linked to the point made by Begley et al. (2005) that US FDI had a signi.cant role in the development of managerial talent.
Our data, unsurprisingly, fails to point towards an overall speci.c model of HRM practice that is endemic of all MNEs (Brewster et al. 2008). However, while the data does not support signi.cant similarity between all MNEs, there is evidence of some commonality in the HRM practices being used in Irish MNEs
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and that of foreign MNEs. These areas of similarity may be aspects of HRM which domestic MNEs placed signi.cant priority upon since internationalizing. We believe that our results point to the bene.t of a replication study being undertaken to assist in reaching more conclusive .ndings on whether domestic-owned MNEs are increasingly introducing HRM practices in line with their foreign counterparts. This would assist greatly in informing the extent to which there is a spill-over effect taking place. A key challenge for researchers in this .eld is the lack of replication studies making valid comparisons very dif.cult. Too often different studies adopt quite disparate measures rendering comparisons problematic. We suggest that this is a key limitation of research in this area and one that merits greater attention. Linked to the need for further research, the data analyzed in this paper were collected in 2006/07, prior to the global .nancial crisis (GFC). We believe that the type of data collected and used in this paper (i.e., the presence of speci.c practices) are unlikely to have been signi.cantly altered in a positive or negative manner due to the GFC, however we do acknowledge this as a possible scenario and thus is somewhat of a limitation. The sheer fact that there was such a major global event adds to our call for future studies that seek to replicate and enhance the research design here.
Earlier we noted the lack of consensus on which HRM practices to incorporate. While we argue that we have included a signi.cant number and variety of HRM practices to allow solid interpretations of the data we call on future studies to expand further both in terms of breadth and depth. Due to constraints in terms of the length of the survey instrument that we could use we were unable to capture a larger spectrum of HRM practices. In particular, additional questions on training and development and the inclusion of recruitment and selection practices (e.g., the use of assessment centres, psychological testing) would add value. Further, we call for greater consistency in the practices that scholars include in research studies so as to provide enhanced comparisons of results. Linked to this would be the bene.t gained by incorporating domestic only .rms into future research studies and looking at establishing the similarity or variation in HRM practices between them and domestic-owned MNEs. Farndale et al. (2008) previously demonstrated variation in the HRM approaches of domestic only .rms, domestic MNEs and foreign MNEs. More particularly, research that explores whether HRM becomes a more important consideration to domestic .rms looking at pursuing international business expansion and whether there is an increased emphasis as a .rm goes through different stages of international growth would be a welcome addition to knowledge. This would require a longitudinal research design.
One of the few papers to consider Irish MNEs (Monks et al. 2001) but which was based on a small number of cases found that overall HRM was very reactive in internationalizing Irish .rms with the function given little prominence (a point alluded to by some in our data). They did, however, .nd that some of the more recently internationalized Irish companies were more proactive in their HRM function and systems. This was ascribed to needing to .nd a competitive advantage due to being late to the international arena and having to gain some edge over existing .rms. There is progressive acknowledgement of the potential for deriving competitive advantage from a .rm’s human capital when coupled with appropriate
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management structures and practices. This acknowledgement is, in part, due to the increasing professionalization of the HR community brought about through associations like the Chartered Institute of Personnel and Development (UK and Ireland) and Society for Human Resource Management (US) which provides forums for HRM ‘best practice’ discussion. The idea of best practice is something which these associations focus much attention upon. These developments may give rise to increased cross-fertilization of ideas and thus promote innovations in HRM practice. The fact that Irish MNEs are quintessentially a recent phenomenon, coupled with increasing recognition of the role of HRM, may mean that there is greater emphasis placed on innovations in their management practices. We believe that research focused on the rate of innovation in HRM amongst MNEs of varying vintage would make for a worthwhile contribution as it has not been the subject of much investigation.
A .nal point we would like to make regarding future research directions is around the level of analysis. This paper considers the case of Irish-owned MNEs at the home/headquarters (HQ) level against that of the host/subsidiary level from the perspective of foreign MNEs. In the case of foreign MNEs, it is plausible that the Irish operations act as an HQ for the region or of an international product or service division, or global business function of the MNE. We explored this point in our data but due to the small numbers of foreign MNEs acting as HQs we were unable to explore further. However, it is important to acknowledge that the different level of analysis between comparing domestic and foreign MNEs within the one country is a limitation. It would be interesting to establish the similarity and variation of HRM practices of Irish MNE subsidiaries in different host contexts and compare how these match HQ practice and that of other foreign MNE subsidiaries. Irish MNEs in their home operations may struggle to change long-established practice (e.g., indirect consultation structures) but have the scope to do so in their foreign sites. Moreover, multi-level studies that investigate HRM in the home country as well as foreign subsidiaries would substantially aid our understanding in this area. While we call for and note the bene.t of multi-level research, there is likely to be great dif.culty in obtaining a suf.ciently high number of respondents from the different operations of the same MNE to permit such analysis. A similar issue occurs regarding multiple informants. A limitation of this study is that we rely on a single informant. However, to do otherwise would have seriously inhibited our response rate. To address the potential concerns over common method bias, we adopted a research design in line with the recommendations of Wright et al. (2001)by interviewing the most informed respondent in each MNE, devoting considerable time in wording the questions, and piloting extensively. Furthermore, our questioning asked about the presence of actual practice rather than perceptions of the extent of practices existing.
Acknowledgments The authors wish to acknowledge the .nancial support received from the Labour Relations Commission, the Irish Research Council for the Humanities and Social Sciences and the European Commission’s Marie Curie International Research Staff Exchange Scheme (FP7 IRSES-GA­2008-230854 INTREPID). The authors wish to thank the three anonymous referees for their constructive feedback and also Tina Morganella for her assistance with proof-reading.
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Impact of Continuous Performance Management on Job Autonomy,  Motivation, and Turnover Intent of Employees in Multinational Companies within Metro Manila
logo RIBER

Mark Moses H. Pagdonsolan
College of Commerce, University of Santo Tomas

Denise Joy S. Balan
College of Commerce, University of Santo Tomas

Karmi D. Mariscal
College of Commerce, University of Santo Tomas

Jason L. Chiu*
College of Commerce, University of Santo Tomas

ABSTRACT
Continuous Performance Management (CPM) is an emerging global trend in Human Resource Management, which is revolutionizing how performance management is being done in companies. From being a transactional process, CPM has turned performance management into a more employee-centered process which aids employees in their development. Thus, this study aimed to determine the impact of Continuous Performance Management (CPM) to common employee perceptions of job autonomy, motivation, and turnover intent among the employees of multinational companies implementing the trend within Metro Manila, Philippines. Using snowball sampling, a total of 155 employees were requested to answer a 5-part questionnaire covering the 4 constructs. Partial Least Squares Structural Equation Modeling (PLS-SEM) was used as the analysis tool while all the data gathered were processed through SPSS 22 and WarpPLS 5. Having all the study’s hypotheses proven by its findings, this study can support human resource practitioners in understanding the trend better and will give insights on how to leverage their organization’s performance management for employee development and retention.
 Keywords: continuous performance management, motivation, job autonomy, turnover intent.

Received 30 January 2019 | Revised 25 April 2019 | Accepted 10 May 2019.

1. INTRODUCTION

Performance management is a vital human resource process in every organization as it ensures that employee performance is aligned with the organization’s goals and objectives. Currently, the world is witnessing dramatic changes in performance management approaches that organizations use. The traditional annual performance appraisal is now being cast aside as companies are switching to Continuous Performance Management (CPM) which is characterized by collaborative setting of employee goals with his manager, more frequent conversations between a manager and a subordinate; two-way discussions about performance between the same; and affordance of real time and crowdsourced feedback (Zenger, 2017).
In spite of the trend of transitioning from the traditional performance management to the CPM approach, which is seen in some companies, relatively few studies have been written about the future possibilities in the facet of performance management, more so about CPM. As most organizations are still in the process of grasping the hallmarks of the modern performance management, CPM is also important to understand how it may further evolve (Deloitte Consulting LLP, 2017).
Thus, this study intends to determine (1) the effect of the implementation of CPM on employees’ motivation; (2)  the effect of the implementation of CPM on employees’ job autonomy; (3) the effect of job autonomy on turnover intent; (4) the effect of motivation on turnover intent; and (5)  the direct effect of the implementation of CPM on employees’ turnover intent.
 Through this research, a model depicting the possible role of CPM on employees’ perception of job autonomy, motivation and turnover intent can contribute to the existing literature about CPM and be able to objectively explain in detail its beneficial effects.  Likewise, this study can provide knowledge to companies which are still quite traditional when it comes to their performance management. If not the first, this study will be one of the first to study CPM which is a not much explored topic in the field of Human Resource Management.

2. THEORETICAL BACKGROUND

2.1 Theoretical Framework 
This paper is supported by three theories namely, Goal-Setting Theory (1968), Herzberg’s Two-Factor Theory (1974), and McGregor’s Theory Y on employee motivation (1961). 
According to Edwin Locke’s Goal-Setting Theory (1968), individual goals that were established by an employee play an important role in keeping the same motivated to deliver an exceptional performance at work. As explained by Lunenburg (2011), one major finding on hundreds of researches conducted in relation to the theory, is that individuals who are provided with specific and difficult but attainable goals tend to perform better than those with easy and ambiguous goals or worse, with no goals at all. As further elaborated by Yearta, Maitlis, and Briner (1995), it is a cognitive theory of motivation anchored on the premise that people have needs that can be considered as the goals that they want to achieve, and consequently this forms the presumption that human behavior is purposeful and that goals direct an individual’s drive to do a particular action. Thus, applying this theory, an employee who has been involved in the setting of specific and challenging goals with his manager, which is exhibited in continuous performance management, would thereafter feel motivated and passionate towards his work.
Secondly, the Two-factor theory also known as Motivator-hygiene theory, as authored by Frederick Herzberg (1974), suggests that there are two different sets of factors which cause satisfaction and dissatisfaction among employees. Herzberg named the first set as motivators which pertain to intrinsic factors like growth and promotional opportunities, which when granted to employees, bring about job satisfaction and motivation. On the other hand, the second set pertains to hygiene factors or extrinsic factors like pay and benefits which may not be direct motivators but are necessary to prevent dissatisfaction. Meanwhile, this study focuses on a trend in HR which represents a philosophical shift to an ideology that a company has a share in the responsibility of supporting employees’ desire to improve and grow in what they do, called the Continuous Performance Management (CPM) as discussed by Deloitte Development LLC (2017) in their research report. Using the two-factor theory lens, CPM carries several motivators like sense of growth, advancement and achievement. Hence, this theory will provide guidance in knowing how the motivators of CPM influence turnover intention of employees just as how Nanayakkara and Dayarathna (2016) found in their study a strong negative relationship between motivators and employees’ intentions of leaving their current organization. 
Douglas McGregor’s Theory Y states that people can enjoy responsibility and work. Dharejo, Baloch, Jariko & Jhatial (2017) provided evidence for one of Theory Y assumptions that people can solve problems creatively and imaginatively. At the same time, it also proved that employees should be involved in decision-making since they are also able to make good decisions and exercise self-direction. Managers applying this theory use a decentralized and participative management style which is present in CPM, mainly in its feature of allowing a direct report to collaboratively set his work and performance goals with his manager and to suggest his own solutions to his performance issues. In a study conducted by Sorensen and Minahan (2011), the application of McGregor’s Theory Y concepts in the workplace has been successful. Likewise, in the research report of Deloitte Development LLC (2017), it claims that CPM has shifted to a more decentralized organizational control which gives more autonomy and responsibility to employees. Therefore, Theory Y was deemed to be a good foundation in further supporting the claim which Deloitte Development LLC has made in its research report, wherein when employees are given more opportunity to decide on things involving their work and performance, which is present in CPM, the higher the autonomy they perceive at work. 

2.2 Literature Review

Continuous Performance Management
Continuous Performance Management (CPM) is defined as an approach wherein frequent conversations and collaboration with regards to goal setting, work progress, and performance updates, between managers and direct reports are being practiced (Deloitte Development LLC., 2017). Additionally, CPM also includes ongoing check-in conversations between managers and direct reports, periodic performance/development conversations, and continuous, real-time collection of performance feedback data from employees’ networks. Studies have proven some of the features of CPM effective as a tool in enhancing employees’ overall well-being in different aspects. In a study conducted by Singh (2018), the continuous performance-based feedback is seen as a form of fairness among employees.  In another study conducted by Cohen, Willem & Neerincx (2016), it was found that giving employees immediate feedback results to a better performance. 
One of the purposes of Performance Appraisal Systems is to serve as a guide for development to employees (Rajib, Lalatendu & Subhas, 2018). However, instead of using them as a guide, employees treat annual reviews as uncomfortable rituals which if given a choice, they would like to avoid (McElgunn, 2019). Employees fail to recognize the opportunity for growth that companies provide in their performance management strategies. This is what CPM strives to put an end to. Through its features, it aims to build a culture of open communication and continuous improvement that can help employees be the masters of their own development. With this, employees will be seeking for more rooms of improvement in order to stay competent at work, to which the real-time, employee-engaging, continuous performance management would be able to support.   
 Job Autonomy
Job autonomy refers to “a practice or set of practices involving the delegation of responsibility down the hierarchy so as to give employees increased decision-making authority with respect to the execution of their primary work tasks” (Lin, Lin, Lin, & Lin, 2013). According to Wheatley (2017), autonomy can be categorized into two namely: schedule control and job control. Job control refers to how much an employee has control over tasks, work conduct, method, etc. (Karasek, 1979 as cited in Wheatley, 2017). On the other hand, schedule control refers to the control an employee has with regards to the time of paid work to provide flexibility that is usually being associated with work-life balance (Glavin & Schieman, 2012, p. 75; Jang, Park, & Zippay, 2011, p. 136 as cited in Wheatley, 2017). 
Providing the employees an opportunity to take part in relevant decision-making at work, most particularly decisions on their performance standing is one of the practices that CPM exhibits. With the development and growth opportunities that CPM practices bring, the employees are given more freedom to complete their tasks in the way they deem is right and are receiving the support that they need from their supervisors. Thus, it is hypothesized that:
H1: Continuous performance management is positively related to job autonomy.
 Motivation
Motivation, as defined by Sajjad, A.,Ghazanfar, H., & Ramzan, M. (2013), is the “big cause that gives direction to hold the particular behavior”. Similarly, Mescon (1995) (as cited by Kasyoki, F. K. & George, G. E., 2013), defined it as “a process of moving oneself and others to work toward attainment of organizational goals”. On the other hand, Armstrong (2001) perceived motivation as “the factors that influence people to behave in certain expected way” (as cited by Kasyoki & George, 2013). According to him, motivations are built of three concerns: (1) environment which includes working conditions; (2) job-related concerns such as availability of resources and working tools; and (3) personal concerns like opportunities for training and promotions. According to the Self Determination Theory, as explained by Fernet, Austin and Vallerand (2012), there are two broad types of motivation which affect how the employee performs: the autonomous motivation and the controlled motivation. Autonomous motivation pertains to acting with free will, or when employees perform well in their job because of the satisfaction or inherent pleasure that it gives them (intrinsic motivation) or when they personally know the value of their job or tasks (identified regulation). Controlled motivation, on the other hand, refers to an act which was done under internal or external pressure, or when they accomplish their task to avoid feelings of guilt and anxiety, or when they want to attain a sense of self-worth (introjected regulation) and/or because they’re being pressured or driven by an external force. The whole idea of CPM is to make employees realize that they hold their own professional growth and development, thus autonomous motivation. 
Several studies have reinforced the relationship of performance management to employee motivation. According to Kasyoki and George (2013), performance management is a key determinant of motivation. Taking it to a micro perspective, Kaymaz (2011) found out that motivation increases as a result of decrease in performance ambiguity through receiving performance feedback. Furthermore, satisfaction with performance appraisal has a positive effect on increasing the motivation of employees with respect to remuneration (Jabeen, M., 2011); (Farzad, F., & Raisy, A., 2013). Meanwhile, Aslam and Sarwar (2010) asserted that lack of guidance on employees about their initial tasks and performance evaluation criteria would result to a decreased motivation and job dissatisfaction. 
As explained in the previous sections of this study, continuous performance management is more than just a way of evaluating employees. It encompasses real-time feedback, ongoing one-on-one conversations which aim to help in the development of employees. Since CPM is a trend which has not yet been explored enough, the researchers wanted to find out if findings from several studies relating the traditional performance management to motivation would have the similar results with the CPM. Thus, it is hypothesized that:
H2: Continuous performance management is positively related to motivation.

Turnover Intent
According to Nauman (1992) (as cited by Siddiqui & Jamil, 2015), turnover is the instance where an employee separates from the firm while turnover intent refers to the intention of employees to leave their current organization just like as Kaur, Mohindru and Pankaj (2013) pertained to this variable as the likelihood that an individual will change his or her current job within a certain period of time which causes the actual turnover. There is a rich array of studies which have investigated the possible antecedents of turnover intent. One of the pertinent antecedents that were proven to have an effect to turnover intent is motivation (Nanayakkara & Dayarathna, 2016); (Sajjad, Ghazanfar, Ramzan, 2013); (Khan, Khan & Zakirullah, 2016).  Vnouckova and Klupakova (2013) purports that it is likely that employees will leave an organization if there is absence of motivation for without it, they will not have clear goals and will not be able to achieve sense of fulfillment which leads to organizational efficiency. Another variable which has been subjected to study as to whether or not it has relation on employees’ turnover intent is job autonomy. At present, there are a minimal number of studies which support the negative relationship between job autonomy and turnover intent (Galleta, Portoghese & Battiselli, 2011); (Shahzad, 2016). Therefore, to support the generalizability of the claim, researchers need to further perform studies in this area of knowledge. 
Recruiting and selecting new employees and loss of sales due to inexperienced new-hires are the costs of turnover in an organization therefore in the field of Human Resources Management, turnover intent is one of the issues being seriously looked at (Kumar, Ramendran & Yacob, 2012). HR practitioners must always be on the lookout for the possible factors that may be causing employees their intentions to leave as well as the factors that could possibly decrease the same. Thus, the researchers hypothesized that:
H3: Continuous performance management is negatively related to turnover intent
H4: Motivation is negatively related to turnover intent
H5: Job autonomy is negatively related to turnover intent

2.3 The Hypothesized Model











 



 Figure 1: Proposed model of the impact of Continuous Performance Management to motivation, job autonomy and turnover intent of employees

3. METHOD

3.1 Research Design

The researchers used the Partial least Square Structural Equation Model (PLS-SEM) to analyze the impact of continuous performance management on job autonomy, employee motivation and intent to leave of employees in multinational companies located within Metro Manila. As worded by Hox and Berchger (1998), SEM “is a powerful technique that can combine complex path models with latent variables (factors).” The model is comprised of three (3) latent variables and five (5) hypotheses.


3.2 Subjects and Study Site




Employees in multinational companies implementing Continuous Performance Management (CPM) within Metro Manila were chosen as the target respondents for the survey. Considering that CPM is still a new trend in the field of human resources, all cities within Metro Manila were included in anticipation of a small number of companies that would fit the locus of the study.

3.3 Instrumentation

Prior to the conduct of data gathering, pilot testing was done. Some items with less than a Cronbach Alpha of 0.80 were removed since it implies low reliability. Survey questionnaire is composed of five (5) parts, namely:

. Profile of the Respondents. The first part contains the demographic information such as age, years of employment in the company, type of industry where the company belongs, workforce population of the company, and the availability of a software that supports the implementation of Continuous Performance Management. 

. Continuous Performance Management (CPM). This part includes researcher-made questions measuring the independent variable - Continuous Performance Management. The questions were evaluated and validated by three (3) human resource experts. It is comprised of fourteen (14) questions measured with a 6-point likert scale ranging from agree to a much extent (6) to disagree to a much extent (1).

. Motivation (M). Adapted from Aspina Learning Resources, this section consists of sixteen (16) questions which included positive statements such as “I have friends at work” and “I know what results are expected of me”. Responses were also measured using a 6-point likert scale from agree to a much extent (6) to disagree to a much extent (1).

. Job Autonomy (JA). This part which consists of seven (7) items were adapted from the study of Morgeson and Humphrey (2006). Statements such as “The job provides me with significant autonomy in making decisions” and “The job allows me to make a lot of decisions on my own” were asked on a 6-point semantic differential scale.

. Turnover Intent (TI). This 2-item section of the questionnaire was adapted from Moore (2000) and measured a likert scale ranging from agree to a much extent (6) to disagree to a much extent (1) to gauge the rate of employees’ intention to leave.



3.4 Data Collection Procedure and Ethical Considerations

Before the conduct of the study, an online research was made to determine which companies within Metro Manila are implementing CPM. During the said prior research, the researchers have found some company research reports just like the one from Deloitte Consulting, identifying companies which are practicing CPM. Social media platforms, with the aid of google forms such as Facebook and Linkedin were also utilized for the data gathering. This resulted to one-hundred five (105) respondents. Letters of request were also sent to nine (9) companies practicing continuous performance management, within Metro Manila prior to fielding the questionnaire. Two (2) companies agreed to the request to conduct the survey. One-hundred (100) physical copies of the questionnaires were distributed, sixty-two (62) responses were retrieved, and twelve (12) were spoiled, hence having fifty (50) valid responses from the physical copies. 
At the onset of the data gathering, the researchers sent letters of permission to use the adapted tools which consequently, merited affirmative responses from the respective authors. Additionally, the respondents were assured of the confidentiality of their answers and their personal identities.

3.5 Data Analysis

The gathered data were processed through the software, Statistical Package for Social Sciences (SPSS) 22 and WarpPLS 5. Confirmatory factor analysis was used to verify the underlying dimensions of continuous performance management and job autonomy. On the other hand, exploratory factor analysis was used to derive the underlying dimensions of motivation and turnover intention. Partial least Square Structural Equation Model (PLS-SEM) was utilized to evaluate and assess the hypotheses of the proposed model.

4. RESULTS 


Table 1 Demographic characteristics of employees in multinational companies implementing Continuous Performance Management

Profile
 No. of Respondents
 %
 
 Profile
 No. of Respondents
 %


Age
 
 Industry Sector

18-25
 62
 40
 
 Primary
 5
 3.2

26-33
 50
 32.3
 
 Secondary
 5
 3.2

34-41
 37
 23.9
 
 Tertiary
 122
 78.7

42-49
 5
 3.2
 
 Quaternary
 23
 14.8

>50
 1
 0.6
 
 Number of Employees

Number of Years in the Company
 
 <100
 8
 5.2

<1
 38
 24.5
 
 101-500
 15
 9.7

1-5
 95
 61.3
 
 501-1000
 8
 5.2

6-10
 15
 9.7
 
 >1000
 124
 80

>10
 7
 4.5
 
 
 
 

With Software that Supports CPM
 
 
 
 

Yes
 148
 95.5
 
 
 
 


No
 7
 4.5
 
 
 
 



Table 1 shows the demographic profile of the respondents. Out of 155 respondents, majority are within the age bracket of 18-25 (62 or 40%). Most of the respondents have been working in their respective companies between 1-5 years (95 or 61.3%). As to whether the respondents are working in a company with a software that supports CPM, majority answered yes (148 or 95.5%). As to the sector of industry in which the companies of the respondents are engaged in, most answered tertiary (122 or 78.71%) which is comprised of companies engaged in service industry.  Almost all the respondents (124 or 80%) are working in big companies with the total number of employees not lower than 1000.

Confirmatory Factor Analysis of the study constructs

Table 2.1
Confirmatory Factor Analysis of Continuous Performance Management as experienced by multinational company employees

Continuous Performance Management
 .-Coefficient of items to factor dimension


Ongoing check-in conversations
 0.224


My immediate manager/supervisor allows me to suggest my own solution to my own performance issue.
 0.882


My immediate manager/supervisor regularly checks on my progress towards meeting my objective.
 0.866

My immediate manager/supervisor has good listening skills.
 0.831


Ongoing Crowdsourced Feedback
 0.221


My immediate manager/supervisor provides real-time specific feedback related to a particular outcome and expectation.
 0.942

My immediate manager/supervisor provides me immediate/real-time feedback on my performance at work.
 0.925

My co-workers give a constructive feedback without directing it to the person, but to the action itself.
 0.699


Periodic Performance / Development Snapshots
 0.22


My immediate manager/supervisor makes a time to have a one on one discussion and evaluation based on my strength, limitations and growth potential.
 0.956

My immediate manager/supervisor prepares a private location that would be appropriate in discussing performance and avoiding interruptions in the discussion.
 0.922

My immediate manager/supervisor evaluates my performance regularly.



 0.913





Goal Setting
 0.214


My immediate manager/supervisor enlightens me of the expectations about my job performance/performance goals
 0.952

My immediate manager/supervisor and I set performance goals that have clear deadlines and milestones.
 0.952


Coaching and Development Focus
 0.214


My immediate manager/supervisor affords me positive reinforcement and constant support for performance improvements.
 0.962

My immediate manager/supervisor provides extra support to help me in finishing my goals.
 0.944


My immediate manager/supervisor and I collaboratively determine my training objectives that will be useful in improving my knowledge, skills and competencies.
 0.921



Table 2.1 shows how evident continuous performance management is, as experienced by employees of multinational companies implementing it. Results of Confirmatory Factor Analysis revealed that the dimension of ongoing check-in conversations had the greatest effect or contribution to CPM (.=0.224) which is then followed by ongoing crowdsourced feedback (.= 0.221), periodic performance or development snapshots (.=0.22), goal setting (.=0.214), and coaching and development focus (.=0.214).
Allowing an employee to suggest his/her own solution to his/her own performance issue (.=0.882) is strongly relevant in ongoing check-in conversations dimension. Likewise, regularly checking on an employee’s progress towards meeting his/her objectives (.=0.866) and having good listening skills (.=0.831) are also important.
Meanwhile, both of an immediate manager’s act of providing an immediate or real time feedback on the employee’s performance at work (.=0.925) and providing real time feedback related to a particular outcome and expectation (.=0.942) shows great evidence of ongoing crowdsourced feedback. 
In periodic performance or development snapshots, all items are highly relevant, but it is most exhibited when the immediate manager or supervisor makes time to have a one-on-one discussion and evaluation based on the employee’s strength, limitations and growth potential (.=0.956). 
Under the goal setting dimension, both the enlightenment of expectations about job performance/ performance goals (.=0.952) and setting performance goals that have clear deadlines and milestones (.=0.952) with the employee’s immediate manager or supervisor are relevant.
For coaching and development focus, all items were highly significant as they all have a beta coefficient greater than 0.90. 

Table 2.2 Confirmatory Factor Analysis of job autonomy of employees in multinational companies implementing Continuous Performance Management

Job Autonomy
 .-Coefficient  of factor dimension


Work Methods Authority
 0.369


The job allows me to decide on my own how to go about doing my work.
 0.971

The job gives me considerable opportunity for independence and freedom in how I do the work.
 0.964

The job allows me to make decisions about what methods I use to complete my work.
 0.941


Decision-Making Authority
 0.362


The job allows me to make a lot of decisions on my own.
 0.973

The job provides me with significant autonomy in making decisions.
 0.973


Work Scheduling Autonomy
 0.349


The job allows me to make my own decisions about how to schedule my work.
 0.94


The job allows me to decide on the order in which things are done on the job.
 0.94



Table 2.2 substantiates how well multinational companies are exercising autonomy in their current job. Through pilot testing, it was known that two (2) out of nine (9) items in job autonomy were not usable, thus were discarded. All the dimensions; work methods authority, decision-making authority, and work scheduling autonomy had almost the same extent of contribution to the employees’ perception of job autonomy.
Being able to decide on their own on how to go about their work (.=0.971), which gives them the sense of independence in work (.=0.964) mostly contributes to their work methods authority, which is a source of job autonomy. For the second dimension of the same construct, it has been found that decision-making authority largely stems from the opportunity to make decisions on their own (.=0.973) and possessing significant autonomy in making decisions (.=0.973). Likewise, employees may experience the third dimension, work scheduling autonomy if they get to decide on how to schedule or order the things to be done in their job (.=0.94). 

The emerging model
 The study intends to test a hypothesized model that illustrates the relationship of continuous performance management to job autonomy, motivation and turnover intent of employees in multinational companies implementing the Continuous Performance Management approach (See Fig. 1).

Table 3
Model Fit Indices of the resulting models

Model Fit indices
 Values


Average Path Coefficient (APC)
 0.407

Average R-squared (ARS)
 0.468

Average block VIF (AVIF)
 3.165

R-squared contribution ratio (RSCR)
 1


Statistical suppression ratio (SSR)
 1



Table 3 depicts the model fit statistics of the resulting model specifically the Average Path Coefficient (APC), Average R-squared (ARS), Average Block VIF (AVIF), R-squared Contribution Ratio (RSCR) and Statistical Suppression Ratio (SSR). The APC got a value of 0.407. ARS got a value of 0.468. AVIF got a value of 3.165. RSCR got a value of 1. Lastly, SSR got a value of 1. All of the values that were generated fall within the ideal range therefore showing compatibility and fitness of the proposed model.


Figure 2: Emerging model of the causal relationships between Continuous Performance  Management, motivation, job autonomy and turnover intent of employees.

As illustrated in figure 2, SEM analysis revealed the partial mediation effect of job autonomy and motivation between continuous performance management and turnover intent. Specifically, job autonomy negatively affects turnover intent (.=-0.18) as well as motivation (.=-0.17). As already proven in some studies, the more employees are allowed to exercise autonomy at work,  the more they feel motivated, the less likely they think about quitting their current job. The study revealed significant relationships of CPM to motivation and job autonomy (P<0.01); motivation and job autonomy to turnover intent (P=0.01); and CPM to turnover intent (P=0.04) as supported by the computed p-values which are all lower than 0.05.
As also shown, even if CPM had a direct negative effect to turnover intent (.=-0.14), its effect on the latter became stronger when employees were motivated (.=-0.17) and deemed themselves to have autonomy at work (.=-0.18). This means that CPM which is being implemented in some companies should be perceived by employees as a source of motivation and should make them feel that they get to be in control of the aspects of their post. In relation to the emerging model, the succeeding tables (4.1 and 4.3) contains regression weights (.-coefficients) of the items measuring motivation and turnover intent. These variables were factor-analyzed using principal axis factoring varimax rotation. 

Table 4.1
Regression Weights of motivation of employees in multinational companies implementing Continuous Performance Management

Item Code
 Motivation Indicators
 Standardized Regression Weights


M1
 The mission or purpose of my organization makes me feel my job is important.
 0.774

M2
 I know what results are expected of me.
 0.653

M3
 The quantity of my work is enough to keep me busy but not too much to over-burden me.
 0.735

M4
 I have the opportunity to do what I do best every day.
 0.771

M5
 I have all the materials and equipment I need to do my best every day.
 0.728

M6
 I know what my boss thinks of my performance.
 0.71

M7
 The relationship with my boss enables me to be open when discussing work problems and concerns.
 0.813

M8
 I have friends at work.
 0.529

M9
 In the last seven days I have received recognition or praise for doing good work.
 0.724

M10
 My boss keeps me informed about what is going on.
 0.776

M11
 I have opportunities to innovate and work on my initiative.
 0.814

M12
 I am free to choose my own method of working.
 0.687

M13
 I am adequately remunerated for what I do.
 0.765

M14
 Working relationships in my team are good.
 0.699

M15
 I am consulted, and my opinions seem to count.
 0.819


M16
 In the last year I have had opportunities to learn and develop.
 0.705



Table 4.1 affirms that employees under a continuous performance management are highly motivated when they are consulted, and their opinions seem to count (.=0.819), if they have opportunities to innovate, work at their own initiative (.=0.814) and if their relationship with their boss enables them to be open when discussing work problems and concerns (.=0.813). Likewise, the employee feels motivated when his boss keeps him informed about what is going on (.=0.776) and the mission or purpose of his organization makes him feel that his job is important (.=0.774). Remarkably, having friends at work (.=0.529) has the least impact on the motivation of the employees.


Table 4.2
Regression Weights of turnover intent of employees in multinational companies implementing Continuous Performance Management

Item Code
 Turnover Intention Indicators
 Standardized Regression Weights


TI2
 I will probably look for a job at a different company in the next year.
 0.91


TI1
 How likely is it that you will take steps during the next year to secure a job at a different company?
 0.91



 Table 4.2 shows that with the implementation of continuous performance management, employees are less likely to look for a job at a different company in the next year (.=0.91). At the same time, they are less likely to take steps to secure a job at a different company during the next year (.=0.91).

5. DISCUSSION

The study sought to provide a model portraying the impact of continuous performance management approach to the employees of multinational companies in Manila implementing the said approach. The findings were able to prove the existence of significant relationships among the study constructs and supported all the hypotheses made. 
 At present, Continuous Performance Management (CPM) is revolutionizing how companies carry out their performance management. As opposed to traditional annual appraisals, this trend carries the quality of being continuous and non-ending. The same promotes ongoing conversations between superiors and subordinates about work expectations and progress, and continuous crowdsourced feedback (Deloitte Development LLC, 2017). Given the freshness of the approach in the field, there is a limited array of information, more so studies encompassing this topic. In a study made by Bersin by Deloitte (2017), it was emphasized that one of the benefits of the trend is having empowered employees who can involve themselves in aspects involving their work. This claim is reflective of the findings from this study whereas the features of CPM exhibited a positive relationship with job autonomy which means that the more that employees experience the components of the trend, the more they feel that they have autonomy in their work. CPM operates in a way that is consistent with Douglas McGregor’s Theory Y which states that people can enjoy responsibility thus should be given authority to be involved in decision-making at work. The participative and more interactive management style of CPM was proven to foster autonomy among employees which in return enables them to utilize their skills and capabilities in achieving their objectives. Moreover, the results also showed that the dimension of having on-going check-in conversations between a manager and a direct report had the greatest contribution or effect in the variable, CPM. This can be explained by the social exchange theory as mentioned by Sepdiningtyas and Santoso (2017) in their study wherein followers are encouraged to increase their efforts to achieve work goals when given support and trust by their leaders.
The relationship between continuous performance management and motivation is highly significant, which means that if an employee is receiving well-implemented CPM practices, it would most likely lead to increased motivation. This is parallel to theories which have been long established in the field. One of which is demonstrated in Edwin Locke’s theory (1968) and Herzberg’s theory (1974), whereas setting of individual goals and providing growth and promotional opportunities increases an employee's motivation towards work. Apparently, when combined together, the aforementioned practices would comprise the continuous performance management.
It can be deduced from the aforementioned facts that giving employees a share of the responsibility for their own growth and development through consistently having conversations with their superiors about job performance, participation in the setting of their own goals, and ongoing pursuit and giving of feedback from and to colleagues affects some intrinsic aspects of their work. It was proven that experience with CPM makes employees have a sense of autonomy which is known to be one of an individual’s basic psychological needs as asserted by the Self-Determination Theory (Galleta, Portoghese & Battistelli, 2011) and which is also used to retain employees (Kramer & Schmelenberg, 2002). 
On the other hand, studies also show how both the intrinsic variables, autonomy and motivation can curb turnover intent and maintain employees’ membership in their current company. This is affirmed in the study when it revealed a negative relationship of CPM, motivation and job autonomy with turnover intent. This indicates that the more that an employee experiences the features of CPM, he is more motivated and has more autonomy at work, the less likely that the same will think about leaving the organization. The negative relationship between motivation and turnover intent as proven in the study validates all the other findings in the study of Khan, Khan & Zakirullah (2016), Nanayakkara & Dayarathna (2016), and Sajjad, Ghazanfar & Ramzan (2013). This signifies that employees’ internal drive at work may not strongly affect turnover intent but can still contribute to their desire of quitting their current job. In accordance with the existing studies of Shahzad (2016) and Lin, Lin & Lin (2013), the result implies a negative relationship of job autonomy to turnover intent. This means that when an employee is afforded with more autonomy in doing his task, there would be lesser intent of leaving the company. Furthermore, being able to freely develop own work activities also leads to identification and attachment to work environment which, in turn, reduces the employee’s desire to leave. 
 In the study, it was presented that even if CPM had a direct negative effect on turnover intent, its effect on the latter became stronger when employees were motivated and deemed themselves to have autonomy at work. This means that as employees get more motivated and become more autonomous at their work through having ongoing check-in conversations, performance discussions and goal setting with their direct managers; real time crowdsourced feedback; and more focus on their development, they would less likely leave their current organization. 
 Additionally, it can be observed from the demographic data that the biggest chunk of the respondents are millennials who were born from 1981 to 1996 and post-millennials who were born from 1997 and later as defined by Pew Research Center (2018). The high positive relationship of the CPM features with autonomy, which was proven by this study can support studies made about next generations’ preferences at work.  As employees who are part of generations with values and attitudes different from the past generations, millennials and post-millennials have the independent mindset which makes them want managers who would not micromanage them and who would give them the opportunity to think of better processes and solutions at work (Ernst & Young LLP, 2016). This gives them the sense of autonomy to make pertinent decisions which makes them feel more valued. Having mentioned all the foregoing, CPM, with its features being aligned to some work set-up preferences of the younger generation can potentially be the future of managing performance of the next generation workforce. 
 Also, big multinational companies within Metro Manila have greater patronage of CPM, as can be seen in the demographics. However, a more striking piece of information is the concentration of respondents in the tertiary industry sector or the category to which companies involved in providing services to consumers and businesses such as transportation and retail belong. Bowen and Ford (2002), as mentioned in Anderson (2006), have also alluded the difference in managing employees between manufacturing and service sector. According to them, with the customer satisfaction as the end-goal of most service companies, employees are trained to address unique needs of customers. The variety and diversity of tasks that service sector employees need to perform create a bigger room for knowledge, skills and abilities which employees need to acquire and develop. This could explain why more service companies are leaning to CPM for it is characterized by closer interactions between a manager and a direct report, real time crowdsourced feedback and more frequent performance discussions which all aid a tertiary company employee in his continuous learning and development. 

6. CONCLUSION

 This study talks about the emerging trend in the HR industry, the continuous performance management, and its effects on job autonomy, motivation, and turnover intent of the employees in multinational companies implementing the same, within Metro Manila. 
Findings of this study have proven that implementing continuous performance management extremely affects the motivation and job autonomy of employees. Consequently, job autonomy and motivation both have significant but weak effect on the turnover intent of multinational company employees. Hence, providing a performance management system that is immediate, continuous and collaborative; and which helps the employees in their personal and career development would most likely produce well-motivated employees and employees with freedom to decide on their own at work. Another subtle conclusion which can be drawn from the findings is that employees highly value their interactions with their immediate supervisors or managers as shown in the top contributors in the dimensions of CPM.
All these findings only go to show that performance management can go beyond its traditional precept of evaluating employees and using the same for compensation and performance issue purposes. Doing appraisals and having performance conversations with immediate managers or subordinates in a less frequent manner or doing it in a more fixed points of time is not necessarily inferior to the more continuous or ongoing quality of the trend, continuous performance management. However, as presented by the findings of this study, employees can exercise autonomy at work and feel more motivated with the presence of the CPM practices. With the consideration of the workforce readiness through assessment of organizational culture, this can be a strong backboard for companies to invest or develop a more continuous, real-time or ongoing practice of performance management which encourages employees to be more involved in their own development, allows employees to decide on their own and promotes more constant communication between immediate managers and subordinates. As a possible result, a process which is originally meant for regulating compensation and performance, could potentially become a way to increase employee engagement, can form part of the management’s retention programs and consequently be a much more effective way to decrease turnover rate. 
This study shall also serve as a call for action to companies, most particularly to HR practitioners to revisit their performance management approach. Performance management, most particularly, performance appraisals must not be a fault-finding but rather a fact-finding process which can increase employees’ awareness of their own strengths and weaknesses to which they can use as a guide in improving themselves. As a result, this can develop employees who are more motivated rather than disheartened and accepting of one’s weaknesses instead of being defensive, every after a performance discussion or appraisal they undergo. With the proven positive effect of continuous performance management on motivation and job autonomy and its potential to curb turnover intentions of employees, CPM is just one of the several new ideas in the field, which strive to uphold the human side of the practice of human resource management. 
With the seen possible implications which pertain to the next generation work set-up preferences being aligned to the practices under CPM and the greater patronage of tertiary companies to CPM which is potentially due to the different needs of their employees in terms of performance development, this study can be a stepping stone towards the confirmation of the aforementioned probable implications. Due to the scarcity of information, specifically studies revolving around continuous performance management, future researchers may also consider studying this topic using other variables such as job satisfaction or organizational climate. Considering the weak correlation of both job autonomy and motivation to turnover intent, future researches can include other variables and test them for their possible effects between the mentioned variables and turnover intent. Continuous performance management’s impact on the employees receiving it has been the subject of most articles and researches at present, but not much of its effect to the management’s perspective in terms of its benefits in managing direct reports’ performance. Hence, future researchers may consider analyzing the impact of CPM from the perspective of mentors, who train and help in developing skills and performance of direct reports. Additionally, the influence of CPM to a company’s overall organizational performance can also be explored through checking the relationship of CPM practices to employee’s key performance indicators results. Lastly, future researchers may also have a more in-depth research on the possible influence of industry sector from which a certain company belongs, to the impact of CPM. 

APPENDICES
Appendices 1-3: Available from the Author(s) on request. 


Appendix 4: Data Analysis

Frequency Table

Age





Frequency

Percent

Valid Percent

Cumulative Percent



Valid

18-25

62

40.0

40.0

40.0



26-33

50

32.3

32.3

72.3



34-41

37

23.9

23.9

96.1



42-49

5

3.2

3.2

99.4



>50

1

.6

.6

100.0



Total

155

100.0

100.0











Number of Years in the Company





Frequency

Percent

Valid Percent

Cumulative Percent



Valid

<1 yr

38

24.5

24.5

24.5



1-5

95

61.3

61.3

85.8



6-10

15

9.7

9.7

95.5



>10

7

4.5

4.5

100.0



Total

155

100.0

100.0










Sector





Frequency

Percent

Valid Percent

Cumulative Percent



Valid

manufacturing

5

3.2

3.2

3.2



services

37

23.9

23.9

27.1



banking

17

11.0

11.0

38.1



retail

1

.6

.6

38.7



others

95

61.3

61.3

100.0



Total

155

100.0

100.0









Number of Employees in the Organization





Frequency

Percent

Valid Percent

Cumulative Percent



Valid

<100

8

5.2

5.2

5.2



101-500

15

9.7

9.7

14.8



501-1000

8

5.2

5.2

20.0



>1000

124

80.0

80.0

100.0



Total

155

100.0

100.0
















With software that supports CPM





Frequency

Percent

Valid Percent

Cumulative Percent



Valid

yes

148

95.5

95.5

95.5



no

7

4.5

4.5

100.0



Total

155

100.0

100.0













Factor Analysis
KMO and Bartlett's Test


Kaiser-Meyer-Olkin Measure of Sampling Adequacy.
 .912


Bartlett's Test of Sphericity
 Approx. Chi-Square
 1757.447


Df
 120


Sig.
 .000


Communalities



 Initial
 Extraction


M1
 .659
 .600


M2
 .562
 .427


M3
 .688
 .540


M4
 .717
 .594


M5
 .622
 .531


M6
 .544
 .504


M7
 .763
 .660


M8
 .424
 .280


M9
 .593
 .524


M10
 .672
 .602


M11
 .728
 .662


M12
 .533
 .472


M13
 .636
 .586


M14
 .681
 .489


M15
 .760
 .671


M16
 .584
 .497


Extraction Method: Principal Axis Factoring.








Total Variance Explained


Factor
 Initial Eigen values
 Extraction Sums of Squared Loadings


Total
 % of Variance
 Cumulative %
 Total
 % of Variance
 Cumulative %


1
 9.082
 56.760
 56.760
 8.638
 53.988
 53.988


2
 .986
 6.165
 62.926
 
 
 


3
 .940
 5.875
 68.800
 
 
 


4
 .750
 4.688
 73.488
 
 
 


5
 .597
 3.731
 77.219
 
 
 


6
 .549
 3.430
 80.648
 
 
 


7
 .522
 3.264
 83.912
 
 
 


8
 .457
 2.854
 86.766
 
 
 


9
 .384
 2.400
 89.166
 
 
 


10
 .358
 2.240
 91.406
 
 
 


11
 .322
 2.010
 93.416
 
 
 


12
 .274
 1.715
 95.131
 
 
 


13
 .262
 1.635
 96.766
 
 
 


14
 .231
 1.442
 98.208
 
 
 


15
 .183
 1.142
 99.350
 
 
 


16
 .104
 .650
 100.000
 
 
 


Extraction Method: Principal Axis Factoring.

1



Factor Matrixa


 
 Factor


M15
 .819


M11
 .814


M7
 .813


M10
 .776


M1
 .774


M4
 .771


M13
 .765


M3
 .735


M5
 .728


M9
 .724


M6
 .710


M16
 .705


M14
 .699


M12
 .687


M2
 .653


M8
 .529


Extraction Method: Principal Axis Factoring.

a. 1 factors extracted. 4 iterations required.


Rotated Factor Matrixa


a. Only one factor was extracted. The solution cannot be rotated.

Reliability
Reliability Statistics


Cronbach's Alpha
 N of Items


.948
 16



Factor Analysis
KMO and Bartlett's Test


Kaiser-Meyer-Olkin Measure of Sampling Adequacy.
 .500


Bartlett's Test of Sphericity
 Approx. Chi-Square
 177.158


df
 1


Sig.
 .000



Communalities


 
 Initial
 Extraction


TI1
 .687
 .828


TI2
 .687
 .828


Extraction Method: Principal Axis Factoring.



Total Variance Explained


Factor
 Initial Eigenvalues
 Extraction Sums of Squared Loadings


Total
 % of Variance
 Cumulative %
 Total
 % of Variance
 Cumulative %


1
 1.829
 91.444
 91.444
 1.657
 82.833
 82.833


2
 .171
 8.556
 100.000
 
 
 


Extraction Method: Principal Axis Factoring.


 Factor Matrixa


 
 Factor


1


TI2
 .910


TI1
 .910


Extraction Method: Principal Axis Factoring.

a. 1 factors extracted. 8 iterations required.


Rotated Factor Matrixa
a. Only one factor was extracted. The solution cannot be rotated.
Reliability
Reliability Statistics


Cronbach's Alpha
 N of Items


.906
 2



Indicator Weights


 Turnove
 CPM
 Motiv
 JAuto
 Type (a
 SE
 P value
 VIF
 WLS
 ES


lv_Turn
 1
 0
 0
 0
 Formati
 0.065
 <0.001
 0
 1
 1


lv_Goal
 0
 0.214
 0
 0
 Formati
 0.077
 0.003
 3.653
 1
 0.192


lv_Ongo
 0
 0.224
 0
 0
 Formati
 0.076
 0.002
 5.353
 1
 0.21


lv_Peri
 0
 0.22
 0
 0
 Formati
 0.077
 0.002
 4.23
 1
 0.202


lv_Crow
 0
 0.221
 0
 0
 Formati
 0.077
 0.002
 4.632
 1
 0.205


lv_Coac
 0
 0.214
 0
 0
 Formati
 0.077
 0.003
 3.534
 1
 0.191


lv_Moti
 0
 0
 1
 0
 Formati
 0.065
 <0.001
 0
 1
 1


lv_Work
 0
 0
 0
 0.349
 Formati
 0.074
 <0.001
 2.605
 1
 0.313


lv_Deci
 0
 0
 0
 0.362
 Formati
 0.074
 <0.001
 3.857
 1
 0.337


lv_WMet
 0
 0
 0
 0.369
 Formati
 0.074
 <0.001
 4.584
 1
 0.35



Notes: P values < 0.05 and VIFs < 2.5 are desirable for formative indicators; VIF = indicator variance inflation factor; WLS = indicator weight-loading sign (-1 = Simpson's paradox in l.v.); ES = indicator effect size.


R-squared coefficients

Turnover
 CPM
 Motiv
 JAuto


0.197
 
 0.731
 0.478



Adjusted R-squared coefficients

Turnover
 CPM
 Motiv
 JAuto


0.181
 
 0.729
 0.474



Composite reliability coefficients

Turnover
 CPM
 Motiv
 JAuto


1
 0.963
 1
 0.947



Cronbach’s alpha coefficients

Turnover
 CPM
 Motiv
 JAuto


1
 0.951
 1
 0.917



Average variances extracted

Turnover
 CPM
 Motiv
 JAuto


1
 0.838
 1
 0.857


Full collinearity VIFs

Turnover
 CPM
 Motiv
 JAuto


1.22
 3.656
 5.434
 2.816



Q-squared coefficients

Turnover
 CPM
 Motiv
 JAuto


0.197
 
 0.73
 0.477



Minimum and maximum values

Turnover
 CPM
 Motiv
 JAuto


-1.666
 -3.412
 -3.203
 -3.777


1.386
 1.263
 1.317
 1.164



Medians (top) and modes (bottom)

Turnover
 CPM
 Motiv
 JAuto


0.165
 0.056
 0.154
 0.176


1.386
 1.263
 1.317
 1.164



Skewness (top) and exc. kurtosis (bottom) coefficients

Turnover
 CPM
 Motiv
 JAuto


-0.106
 -0.896
 -0.666
 -0.912


-1.138
 0.663
 -0.118
 1.038




ACKNOWLEDGEMENT
This research had been a success through the collaborative efforts of the researchers along with the valuable contribution of several individuals who willingly imparted their knowledge, expertise and support in completion of this study. 
First and foremost, we would like to express our deepest gratitude to our thesis adviser, Asst. Prof. Jason L. Chiu, Ph.D. for his patience, motivation, enthusiasm to help, positivity, guidance, unwavering emotional and technical support throughout the making of this study and his constant encouragement to us to latch on opportunities that are thrown our way. 
Our sincerest thanks also go out to our Research class professor, Dr. Belinda Castro, Ph.D., for being with her class since day 1, guiding us through her noteworthy knowledge in the field of research. Her serenity to enrich her students with sufficient research knowledge and skills had inspired us to deliver quality study. 
We would also like to thank Asst. Prof. Maureen H. Gelle-Jimenez and Prof. Chin Uy, Ph. D., thesis panelists, for sharing to us their valuable insights, comments and suggestions during our defense, for the improvement of our study; 
Ms. Virginia Arceo-Tan, our thesis statistician. It is our pleasure to have worked with such patient and accommodating and professional person; 
The Instructors of the University of Santo Tomas College of Commerce and Business Administration, for their untiring effort in encouraging us to finish our paper. We cannot leave the academe without thanking all these persons who have been by our side throughout this journey; 
All the employees of multinational companies implementing CPM who participated on our thesis survey despite their hectic schedules; 
Our dearest colleagues from the Human Resource Development Management department, whom we formed a strong support system with; 
Last but not the least, our ever loving and supportive families and the one above all of us, the Omnipresent God for granting us strong-will and determination and guiding us all through our shortcoming and difficulties in completing this study, thank You very much Dear Lord.

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Management International Review (2019) 59:93–129
https://doi.org/10.1007/s11575-018-0367-x

1 3

RESEARCH ARTICLE
What Fosters Individual‐Level Absorptive Capacity
in MNCs? An Extended Motivation–Ability–Opportunity
Framework
H. Emre Yildiz1 · Adis Murtic2

· Udo Zander2

· Anders Richtnér2
Received: 26 September 2017 / Revised: 1 August 2018 / Accepted: 16 October 2018 /
Published online: 7 November 2018
© The Author(s) 2018
Abstract
Absorptive capacity has been marked as one of the most important capabilities of
Multinational Corporations for efective management of knowledge. To address
calls for research on micro-level origins of the concept, this paper focuses on the
determinants of individual-level absorptive capacity. We examine the extent to
which individuals’ capability to recognize, assimilate and exploit new knowledge

from the environment is shaped by diferent forms of work motivation (i.e., intrin-
sic and extrinsic), overall ability, exposure to diverse country contexts and personal

characteristics. Drawing on and extending the Motivation–Ability–Opportunity

framework, we develop and test a set of hypotheses. Using a unique dataset col-
lected from 648 individuals in a multinational corporation, we show that individ-
uals’ intrinsic motivation and overall ability are the key antecedents of absorptive

capacity. In contrast, extrinsic motivation does not emerge as a signifcant predictor.
We fnd that past international assignments to distant countries could be detrimental

to individuals’ absorptive capacity. However, our results suggest that for those indi-
viduals who are open to new experiences, assignments to distant countries become

useful opportunity for absorptive capacity development. These fndings contribute

to existing literature by showing efects of alternative types of motivation and under-
scoring the importance of using selective assignment when considering exposure to

diverse country context as a tool for employee capability development.
Keywords Absorptive capacity · Distance · Extrinsic motivation · International
assignments · Intrinsic motivation · Motivation–Opportunity–Ability framework ·
Openness to experience

* H. Emre Yildiz
Emre.Yildiz@fek.uu.se
1 Uppsala University, Uppsala, Sweden
2 Stockholm School of Economics, Stockholm, Sweden

94 H. E. Yildiz et al.

1 3
1 Introduction
The ability to continuously renew, develop and transfer knowledge-based assets
is a central goal for frms. In this regard, absorptive capacity stands out as the
capability to support constant innovation and organizations’ learning from their
environment (van Wijk et al. 2008; Zahra and George 2002). Since Cohen and
Levinthal (1990) originally defned it as the capability to identify, assimilate and

exploit knowledge from the environment (c.f. Lane et al. 2006), absorptive capac-
ity has attracted sustained interest in strategy and organization research (for sys-
tematic reviews, see Lewin et al. 2011; Sun and Anderson 2010; Volberda et al.

2010). The role of absorptive capacity is especially paramount for Multinational

Corporations (MNCs), as sustaining their performance depends upon their abil-
ity to learn from diverse environments within which they operate (Almeida et al.

2002; Minbaeva et al. 2003; Song 2014; Song and Shin 2008; Song et al. 2011;
Regnér and Zander 2011, 2014).

Although the collective body of work on absorptive capacity is quite exten-
sive, it is also biased towards its macro-level antecedents and consequences,

which obscures incumbent role of individual-level factors in the development of
absorptive capacity. We believe that it is an important omission due to several
reasons. To begin with, individuals play a crucial role in the creation, transfer
and absorption of knowledge, which suggests that individual-level factors are a
critical antecedent to frm-level innovative capabilities. According to Foss (2007,
p. 43, emphasis added), this means that an accurate understanding of knowledge
related phenomena (e.g., absorptive capacity) “cannot be reached in lieu of a
starting point in individuals”. Given that intellectual capital is heterogeneously
distributed across and within frms (Rothaermel and Hess 2007), an attempt to
study antecedents and/or consequences of absorptive capacity at the aggregate
level of frm would be prone to ecological fallacy (Peterson et al. 2012). However,
an overwhelming majority of existing absorptive capacity literature has assumed
away that individual-level heterogeneity. Instead, absorptive capacity has been
routinely treated as a collective phenomenon and ubiquitously studied at various
collective levels such as teams (e.g., Nemanich et al. 2010), alliances (e.g., Enkel
and Heil 2014; Newey and Verreynne 2011), industrial districts (e.g., Giuliani
2005) and—most commonly—frms (for a review see, Volberda et al. 2010). As

a result of insufcient attention paid to the individual-level sources and micro-
foundations of absorptive capacity, the concept got reifed over time based on the

critical—yet debatable—assumption that “absorptive capacity resides in the frm

alone [which] has also led researchers to overlook the role of individuals in devel-
oping, deploying, and maintaining absorptive capacity” (Lane et al. 2006, p. 853).

Limited number of recent studies on individual-level absorptive capacity (e.g.,
Enkel et al. 2017; Zhao and Anand 2009), on the other hand, have considered
this capability as an exogenous given and examined its outcomes (e.g., innovative
performance) without probing into antecedent factors that could infuence how

absorptive capacity develops among individual employees. To address the insuf-
cient understanding of micro-level origins of the concept (Hotho et al. 2012), we

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What Fosters Individual-Level Absorptive Capacity in MNCs?...

will examine individual-level antecedents of absorptive capacity, develop a theo-
retical framework suited to this level and empirically test it on a unique dataset.

Shifting our focus from collective to individual-level is important and pinpoints
two additional gaps in existing absorptive capacity research.
First, although we fully concur with the conceptualization of absorptive capacity
as a function of employees’ ability and motivation (Minbaeva et al. 2003, 2014), we

observe that motivational component (i.e., willingness to exert efort towards learn-
ing and knowledge absorption) of absorptive capacity has been treated as a unitary

construct. This represent an important oversight given that past research on organi-
zational behavior emphasize the importance of controlling for the alternative types

of motivation in complex and learning-oriented task environments (Gagné and Deci

2005; Reinholt et al. 2011). Accordingly, we draw inspiration from Self Determi-
nation Theory (Ryan and Deci 2000a) and examine employees’ diferent types of

motivation (i.e., intrinsic and extrinsic) as distinct antecedents of their absorptive
capacity. In particular, due to the inherent ambiguities and uncertainties associated
with new knowledge, we predict that an individual’s absorptive capacity should be
driven by intrinsic interest in learning and personal development. On the other hand,
given that it stimulates individual action by clear and observable outcomes, extrinsic

motivation may undermine certain aspects of absorptive capacity. Therefore, mak-
ing the distinction between diferent types of motivation is necessary to contribute to

further refnement of individual-level absorptive capacity and its antecedents.

Second, recent research has suggested that individual psychological character-
istics matter to a great extent in the development and management of knowledge

(Cabrera et al. 2006; Wang and Noe 2010). However, explicit attention to such indi-
vidual-level heterogeneity is still absent in existing absorptive capacity literature at

large. By directing our attention to micro-level sources of variation in individuals’
absorptive capacity, we aim to address this research gap. We do so by (a) focusing

on a specifc and under-researched type of opportunity for individual-level capabil-
ity development (i.e., medium-term international assignments) and (b) examining

a specifc personality characteristic (i.e., openness to experience) to take individ-
ual-level heterogeneity into consideration when it comes to beneftting from these

opportunities. Similar to Dragoni et al. (2014), we expect that not all individuals

would learn equally from their international assignments and translate their experi-
ences into competence development. In particular, we examine both the nature of

past international assignments (i.e., cumulative distance from home country) and
individual dispositions (i.e., openness to experience) as two determinants of the
extent to which individuals could beneft from international experience and use it as

an opportunity for developing their absorptive capacity. By zeroing in on the indi-
vidual-level diferences, we also difer from extant corpus of work on organizational

capabilities and learning, which doubtfully assumes that “individuals a priori are
homogenous, infnitely malleable, or randomly distributed into organizations” (Felin
and Hesterly 2007, p. 196).
Based on the above, we answer two main questions: (1) what are the respective
efects of motivation (i.e., intrinsic and extrinsic), ability and opportunity on the
degree of individual-level absorptive capacity development? (2) how do individuals’
dispositional attributes (i.e., openness to experience) afect the extent to which they

96 H. E. Yildiz et al.

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can efectively utilize opportunities for capability development? By answering these
questions, we make three contributions to the literature. First, we address currently
limited understanding on the drivers and antecedents of individual-level absorptive

capacity (Volberda et al. 2010). This way, our ambition is to contribute to “a coher-
ent theory of new value creation [which] must start with a consideration of the indi-
viduals who make up the organization” (Felin and Hesterly 2007, p. 196). We thus

aim to shed light on the antecedents of individual-level absorptive capacity, which is
an important—yet hitherto missed—starting point that would enable future research
to better identify cross-level infuences and drivers of frm-level absorptive capacity.
Second, our theoretical framework suggests that absorptive capacity is not just about
employees’ individual abilities and/or cumulative knowledge repositories (Lewin
et al. 2011). Instead, we build on the Motivation–Ability–Opportunity (MOA)
framework (Blumberg and Pringle 1982) and highlight motivation and opportunity
as two additional antecedents of individual-level absorptive capacity. This way, we
seek to identify if and how diferent types of motivation could be used to develop
absorptive capacity in organizations. Third, we complement extant international
business research on expatriation (e.g., Bonache et al. 2010; Stahl and Caligiuri
2005), and examine whether individuals’ exposure to diverse contexts by frequently
partaking in medium-term international projects is conducive to the development of

their own absorptive capacity. We also extend the MOA framework by taking indi-
vidual-level heterogeneities into consideration and showing that only open minded

individuals can beneft from opportunities for skill development via overseas assign-
ments to distant countries. Thus, our paper identifes the boundary conditions within

which employees’ past international experience is translated into competency gains
(c.f. Dragoni et al. 2014).

The paper is structured as follows. In the next section, we give a theoretical back-
ground and develop our hypotheses. Following this, we describe our methodological

design and data collection. We then present the results of our empirical analyses.
Finally, we discuss our fndings and relate them to existing literature.
2 Absorptive Capacity and Its Antecedents
Since the seminal article by Cohen and Levinthal (1990), absorptive capacity has
been at the forefront of the organizational learning and knowledge management
literatures. A myriad of issues has been discussed in diferent sub-streams of the

absorptive capacity literature, such as the economics and management of innova-
tion, business performance, knowledge transfer and organizational learning (Gupta

and Govindarajan 2000; Lane et al. 2001; Tsai 2001; Volberda et al. 2010; Zahra and

George 2002). Empirical insights from these studies evince that absorptive capac-
ity plays a pivotal role in knowledge transfer, organizational learning efciency and

frm innovation performance (Argote et al. 2003; Cockburn and Henderson 1998;
Lane et al. 2006; Lane and Lubatkin 1998; Szulanski 1996; Tsai 2001).
Although the literature on absorptive capacity is vast (for recent surveys of
the feld, see Volberda et al. 2010; Lichtenthaler 2016), attention has been mostly
directed towards organizational-level antecedents. This extensive macro-focus has

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What Fosters Individual-Level Absorptive Capacity in MNCs?...
contributed to our relative lack of understanding of micro-foundations of absorptive

capacity (Lewin et al. 2011). To address this, we focus on individual-level absorp-
tive capacity. In line with earlier studies (e.g., Schleimer and Pedersen 2013), we

acknowledge the multidimensional nature of absorptive capacity. Accordingly,
we empirically examine the distinct dimensions of absorptive capacity in terms of

employees’ recognition, assimilation and exploitation abilities (Cohen and Lev-
inthal 1990).

In this paper, we draw on the Motivation–Opportunity–Ability (MOA) frame-
work (Blumberg and Pringle 1982) and use it as our overarching framework. In this

regard, it would be of value to delineate that it is not our intention to argue that

MOA is the framework that could shed ultimate light on the antecedents of absorp-
tive capacity at the individual-level. However, relative to other individual-level theo-
ries of organizational behavior (e.g., Goal Orientation Theory, Theory of Reasoned

Action), MOA provides a more comprehensive perspective by accounting for both

personal (i.e., internal) and situational (i.e., external) determinants of workplace per-
formance. Moreover, MOA has been demonstrated as a coherent and rigorous theory

that can explain variation in terms of individual-level behavior, action and perfor-
mance in the context of knowledge management (e.g., Chang et al. 2012; Siemsen

et al. 2008). Furthermore, we also draw inspiration from earlier knowledge trans-
fer and absorptive capacity studies, which specifcally emphasize the importance of

simultaneously studying ability, motivation and opportunity to increase our under-
standing of creation, preservation and transfer of knowledge (Argote et al. 2003).

Similarly, in their retrospective study, Minbaeva et al. (2014) invite future studies to
use theories that can elucidate the role of ability, motivation and opportunity in the

development of absorptive capacity. They go even further to single out MOA frame-
work as a fruitful theoretical lens to study knowledge transfer and absorptive capac-
ity in MNCs. Based on this, we believe that MOA is a suitable theoretical perspec-
tive, which could yield complementary insights on the individual-level antecedents

of absorptive capacity.

We conceptualize motivation, ability and opportunity as three interrelated but dis-
tinct antecedents of absorptive capacity (Siemsen et al. 2008). The MOA perspec-
tive represents a meta-theoretic principle that has been widely used to explain indi-
vidual-level phenomena in contexts including knowledge sharing and management

(Argote et al. 2003; Chang et al. 2012; Reinholt et al. 2011; Siemsen et al. 2008).
As noted by Minbaeva et al. (2014, p. 57), MOA framework holds a great potential

“for framing and potentially extending our thinking about mechanisms that contrib-
ute to knowledge transfer in MNCs”. It explains how individuals’ performance is

afected by their motivation (i.e., willingness and inclination to perform) and abil-
ity (i.e., relevant knowledge, skills and experience possessed by the individual) to

carry out their work, as well as the opportunities (i.e., those resources in the work
environment that could facilitate performance) that they are provided with in their
work environment. Previous studies have identifed diferent versions of the MOA

framework with alternative interaction efects (e.g., Boxall and Purcell 2003; Siem-
sen et al. 2008). However, past research on absorptive capacity at the organizational

(Minbaeva et al. 2003) and individual level (Chang et al. 2012) have identifed abil-
ity, motivation and opportunity as distinct building blocks of absorptive capacity. In

98 H. E. Yildiz et al.

1 3

this paper, we follow the same approach and specifcally look into the additive vari-
ant of MOA. Accordingly, we will only test the direct efects of ability, motivation

and opportunity on individual-level absorptive capacity. Similar to earlier studies
(Zahra and George 2002), we consider absorptive capacity as a higher-order latent
construct, which means that it can only be inferred from the nature/intensity actions

and behavior of individuals (also see Lewin et al. 2011 for a similar theoretical rea-
soning). In other words, absorptive capacity of an individual could be captured by a

set activities and routines that are specifcally aimed at the identifying, understand-
ing and exploiting new knowledge (Flatten et al. 2011). We thus build our reasoning

on the MOA framework to examine how motivation, ability and opportunity prompt
an individual to perform specifc activities that would contribute to the development
of his/her absorptive capacity.
2.1 Motivation and Absorptive Capacity

Departing from the currently limited work on the role of efort intensity and motiva-
tion in absorptive capacity (e.g., Minbaeva et al. 2003), we divide motivation into

intrinsic and extrinsic types. As noted in the introduction, diferent types of moti-
vation could afect the degree of efort individuals would be willing to exert on a

specifc type of behavior and such efects would also depend on the specifc out-
come variable of interest. In particular, in this paper we subscribe to the notion that

absorptive capacity is a capability that could be developed over time as a result of
specifc routines and practices (c.f. Hotho et al. 2012; Lewin et al. 2011). In other
words, we do not consider absorptive capacity as a ‘fxed’ capability that emerges
independent of an individual’s level and type of motivation. Instead, depending on

his/her type of work motivation, an individual would be more or less willing to aug-
ment his/her skills to recognize, assimilate and exploit new external knowledge.

Thus, our ensuing theoretical development is primarily aimed at the individual-level
factors afecting development of absorptive capacity, rather than degree of utilization
thereof. To that end, we build on Self Determination Theory to diferentiate between
intrinsic and extrinsic motivation (Gagné and Deci 2005; Ryan and Deci 2000a) and

examine their respective roles in the development of diferent dimensions of individ-
ual-level absorptive capacity (i.e., recognition, assimilation and exploitation).

Intrinsically motivated people work for the sheer joy of it, throwing themselves

into a task purely because they fnd it interesting, with little expectation of imme-
diate rewards (Osterloh and Frey 2000; Ryan and Deci 2000b; Williams and Deci

1996). Earlier studies in educational psychology have shown that intrinsically
motivated individuals score high on learning performance (Vansteenkiste et al.
2004). As stated by Vansteenkinste et al. (2006, p. 20) “intrinsic motivation is
seen as the motivational instantiation of the proactive, growth-oriented nature of
human beings [which] is the natural basis for learning and development”. Because
of the high degree of ambiguity and uncertainty, exploratory learning processes
might however not yield clearly measurable outcomes for any given degree of
efort. Thus, some of the newly identifed, acquired and assimilated ideas might

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What Fosters Individual-Level Absorptive Capacity in MNCs?...

not be taken up, or even turn out to be useless, depriving the individual of recog-
nition or material compensation for his/her eforts in identifying and assimilating

new knowledge. This implies that individuals need to be intrinsically motivated in
order to learn how to explore new ideas and assimilate external knowledge even
if outcomes of such eforts are not immediate or visible (Rigolizzo and Amabile
2015). Past research has shown that intrinsic and autonomous motivation leads to
higher level of efort, perseverance and persistence (Reinholt et al. 2011), all of
which are important to sustain individuals’ willingness to obtain required skills
for the absorption of new knowledge against aforementioned hurdles such as
causal ambiguity and outcome uncertainty.
In contrast to intrinsic motivation, extrinsic motivation is salient when the
activity leads to material rewards and explicit recognition (Gagné and Deci
2005; Porter and Lawler 1968). Hence, extrinsically motivated employees are

more likely to respond to pressure coming from external regulations and/or self-
imposed pressure (Deci and Ryan 1985). Thus, when an individual has a strong

extrinsic motivation, s/he would regulate his/her eforts in response to external
mandates and incentives, which “often leads the individual to put in only the
minimum required efort, focus on short-term gains, and take the easiest route
to attain the externally defned end” (Reinholt et al. 2011, p. 1280). Considering
the inherent uncertainties and risks associated with new knowledge absorption, it
is possible to expect that extrinsic motivation would cause individuals to follow
‘shortcuts’ in their daily work, which could in turn curb individuals’ absorptive
capacity development.
Taken together, the reasoning above suggests diferent forms of motivation play

separate roles in developing individual-level absorptive capacity. While intrinsi-
cally motivated employees would be more inclined to develop skills required for

highly ambiguous and uncertain task of knowledge absorption, extrinsic motiva-
tion would induce some form of ‘short-termism’ among individuals who refrain

from pursuing new (and thus uncertain) ideas that might not have clearly observ-
able and directly measurable outcomes. This suggests that intrinsic motivation

would be conducive to the development of recognition and assimilation capabili-
ties, which require experimentation and risk taking. However, since intrinsically

motivated people would be less interested in the material consequences of their
work eforts, they would be less willing to put efort in enhancing their skills
for exploiting new knowledge. The reverse would be the case for extrinsically

motivated people, for whom eforts for recognizing and assimilating new knowl-
edge would be too uncertain and risky to achieve those concrete results they are

strongly driven by. Development of exploitation capabilities, on the other hand,
would yield a straightforward way to realize material goals and external demands.

Based on this, we expect that intrinsic and extrinsic motivation would have dis-
tinct infuences on diferent dimensions of individuals’ absorptive capacity. More

specifcally, we hypothesize:

100 H. E. Yildiz et al.

1 3
H1a: The higher an individual’s intrinsic work motivation, the higher is her
capacity to recognize and assimilate new external knowledge.
H1b: An individual’s intrinsic work motivation would not have a signifcant
efect on her capacity to exploit new external knowledge.
H1c: An individual’s extrinsic work motivation would not have a signifcant
efect on her capacity to recognize and assimilate new external knowledge.
H1d: The higher an individual’s extrinsic work motivation, the higher is her
capacity to exploit new external knowledge.
2.2 Ability and Absorptive Capacity
The second key determinant of our framework is ability, which we conceptualize

as the skills, capabilities, experience and knowledge required to absorb new knowl-
edge. Generally speaking, ability represents an individual’s own perceived mastery,

understanding and knowledge, which increase their competence and eventual perfor-
mance (Bos-Nehles et al. 2013; Nicholls 1984). Earlier research has shown that lim-
ited education, training and past experience could undermine individuals’ ability to

possess, understand and utilize new information (Anderson and Jolson 1980; Mac-
Innis and Jaworski 1989). Accordingly, ability and past knowledge have been iden-
tifed as the key determinant of absorptive capacity (Cohen and Levinthal 1990).

Indeed, the role of ability is so central that most past literature has simply equated it

with absorptive capacity and measured it by various proxies for cumulative knowl-
edge and experience (for an extensive review, see Maldonado et al. 2015). We depart

from these studies and conceive of ability as an antecedent factor of absorptive
capacity (rather than a proxy thereof) that could increase individuals’ performance
in terms of learning behavior.
To avoid potential criticism for tautological reasoning, we shall emphasize that

we consider ability and absorptive capacity to be two distinct constructs. This dis-
tinction becomes clearer when we consider the paradox of technological capabili-
ties (Song and Shin 2008). That is, although the extent of an existing knowledge

stock could help companies efectively source new knowledge from their environ-
ment, such capabilities might also constrain knowledge seeking behavior due to

well-established technological trajectories (Song 2014). The hypothesis that a large

knowledge stock might lead to limited knowledge sourcing behavior is also corrobo-
rated by the past studies that point out to success traps (e.g., Levinthal and March

1993) as well as emphasize the inherent tradeof between exploration and exploita-
tion in organizational learning (e.g., Gupta et al. 2006; March 1991). This stands to

reason that strong abilities, as refected by accumulated knowledge stock and past
experience, might not always lead to high absorptive capacity. Therefore, it becomes
important to diferentiate between ability and absorptive capacity and to empirically
test the link in between these two constructs.
Above, we highlight the possibility that frms with high levels of knowledge
stocks can fail to identify and understand new technological trends due to their
path-dependent search behavior and/or overconfdence in their abilities. That said,

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What Fosters Individual-Level Absorptive Capacity in MNCs?...

however, we would still predict a positive relationship between ability and absorp-
tive capacity. This prediction is based on the cumulativeness feature of absorptive

capacity, which suggests that “the ability to assimilate information is a function of
the richness of the pre-existing knowledge structure” (Cohen and Levinthal 1990,

p. 131). Thus, the level of individual absorptive capacity would depend on the indi-
vidual’s existing knowledge base, as represented by prior educational background,

vocational experience and on-the-job training (Breaugh and Mann 1984). As indi-
cated by Sun and Anderson (2010, p. 143) “the greater the breadth of [individuals’]

prior knowledge, the greater is their ability to explore new sources of knowledge”. In
addition to this, individuals with a rich knowledge base would fnd it easier to grasp

new knowledge, relate it to their existing repertoire of routines and put it into practi-
cal use. In other words, existing knowledge would determine the degree to which the

individual can recognize, value, understand and use new knowledge. Therefore, we
hypothesize that:
H2: The higher an individual’s ability, the higher is her capacity to recognize,
assimilate and exploit new external knowledge.
2.3 Opportunity and Absorptive Capacity

The third element in our framework is opportunity, which refers to the environmen-
tal and contextual elements that could enable certain actions (Siemsen et al. 2008).

Following previous studies (e.g., Bos-Nehles et al. 2013; Boxall and Purcell 2003;

Waldman 1994), we conceptualize opportunity in terms of individuals’ work envi-
ronment and how their work context is shaped by situational constraints and ena-
bling mechanisms. In the context of an MNC, a particularly interesting factor that

could alter individuals’ work environment and subsequently create opportunities for
skill development is the nature and context of overseas assignments (Dragoni et al.
2014). Past studies have delved into the learning efects of international assignments

on individual employees (for a review, see Barakat and Moussa 2014), with a spe-
cifc focus on the long-term phenomenon of expatriation (Bonache et al. 2010; Coll-
ings et al. 2009; Edström and Galbraith 1977). These studies have shown that MNCs

extensively use expatriates and international assignees alike to foster knowledge
transfer and organizational learning (Nery-Kjerfve and McLean 2012). As such,
international assignees are used to transfer both explicit and, more importantly, tacit
knowledge across diferent units of the MNC. Whereas explicit knowledge in the
form of technical specifcations and details could be mobilized by other means, it
is suggested that transferring complex and deeply embedded tacit knowledge could
be handled more efciently via expatriates (Chang et al. 2012). In other words, it
is possible to conceive of individuals as the prime movers of tacit and inimitable
knowledge, which has been proposed as a key prerequisite for sustained competitive
advantage (Reed and Defllippi 1990).

In addition to seeing them as conduits of organizational-level knowledge trans-
fer and learning, expatriates could also be seen as ‘learning agents’ in and of

themselves. This is especially the case for medium-term assignments, which have
been prevalently used by modern MNCs (see Inkson et al. 1998; Minbaeva and

102 H. E. Yildiz et al.

1 3
Michailova 2004; Meyskens et al. 2009). Medium-term assignments represent a

clinical and theoretically interesting phenomenon wherein individual-level learn-
ing and competence development takes precedence over typical hurdles associated

with relocation and adjustment (Stahl and Caligiuri 2005). That is; overseas assign-
ments present individuals with the opportunity to gain international experience and

this could in turn help them learn new ways and methods of doing business and to

develop professional and personal skills (Crocitto et al. 2005). Thus, through expo-
sure to new and unique business environments, international assignees can get the

opportunity to obtain frst-hand understanding of subtleties and intricacies of dif-
ferent host countries (Hocking et al. 2007). Like expatriation, medium-term over-
seas assignments also provide opportunities to understand diferent business envi-
ronments. However, as they cover a shorter time span, they require less need for

adjustment and demand less bureaucratic efort (Reiche and Harzing 2011). As a
result, more individuals can get involved in medium-term assignments, as compared
to traditional expatriation.1

In other words, even though the depth of experience in
each country is relatively limited in medium-term assignments, individuals could
potentially get exposed to a broader range of business contexts and focus more on
capability development (rather than formal paperwork and cultural adjustment) via
these assignments.

Based on the above, it is possible to think of international assignments as a spe-
cifc form of global work experience, which presents opportunities for personal

development that might not be possible when working in a purely domestic envi-
ronment. In this paper, we adopt the defnition of global work experience as those

assignments that require individuals to physically transcend the national boundaries
of their home country (Dragoni et al. 2014).

Institutional, educational, political, normative, linguistic and economic difer-
ences between home and host countries cause individuals to confront novel, uncer-
tain and ambiguous situations, which could disrupt their habitual routines and cause

psychological dissonance (Fee and Gray 2012). These alternative dimensions of dis-
tance have been regarded as the main constituents of psychic distance since the orig-
inal inception of the concept (e.g., Johanson and Wiedersheim-Paul 1975) as well

as more contemporary approaches to its measurement (e.g., Dow and Karunaratna
2006). Diferences between countries in terms of languages, level of education and
political systems can easily lead to confusion and uncertainty for communication
and interpretation of information (Dow and Karunaratna 2006). In a similar way,
when two countries difer in terms of their industrial development, likelihood of

observing technological incompatibilities would increase drastically, which cre-
ates problems for interaction and transfer of knowledge between these countries

(Tsang and Yip 2007). Furthermore, Eriksson et al. (1997) point out that high level
of cultural distance between the home and the foreign country could make it more
1 Indeed, this pattern is also refected in our sample. Specifcally, 96% of our respondents had at least
one international assignment whereas only 30% had been long-term expatriates abroad. In other words,
a majority of our respondents’ international experience is found to come from their past assignments to

overseas projects, rather than their times abroad as expatriates. Hence, our specifc focus on this alterna-
tive form of international assignment has enabled us to capture opportunities for skill development that

would have been neglected otherwise.

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What Fosters Individual-Level Absorptive Capacity in MNCs?...
complicated to identify and interpret communication signals and intentions. As a

result, it has been argued that greater cultural distance can lead to misunderstand-
ing, friction and confict between individuals (Shenkar et al. 2008). The negative

efects of increased distance are also corroborated by earlier research on expatria-
tion, which shows that increased distance puts additional demands on individuals

and, therefore, could complicate their adjustment process (Caligiuri 2000a; Shafer
et al. 1999; Stahl and Caligiuri 2005).
While the discussion above refects typical negative theoretical assumptions about
the efects of country diferences, recent advances in international business literature
suggest that such diferences could also create fruitful opportunities for learning and

development (c.f. Stahl and Tung 2015). In particular, international assignments to dis-
tant countries entail social interactions with host country locals and give rise to expe-
riences that entail more intense discontinuities, aversive stimuli and unfamiliar occa-
sions as compared to the familiar context of home country setting (Fee et al. 2013). As

indicated by Dragoni et al. (2014, p. 969), when individuals are exposed to countries
that are signifcantly diferent from their own, they “are challenged by salient contrasts
and counterpoints to their current view of the institutional environment, particularly
their implicit assumptions about people, their habits, and motivations”. To cope with
these challenges, individuals need to learn how to reconcile alternative interpretations,
idiosyncratic meanings and multiple realities. To that end, experience with diverse
environments would induce individuals to develop more refned cognitive schemata,

which could foster more elaborate ways of processing, interpreting and understand-
ing the situational environment (Maznevski and Lane 2003). From this perspective,

the distance between home and host country could be seen as a developmental chal-
lenge that is conducive to learning (Collings et al. 2009; DeRue and Wellman 2009).

This contention is also in line with past research, which shows positive outcomes of
diversity and heterogeneity for creativity, generation of alternative perspectives and
wider search for diferent opportunities and solutions (see, Björkman et al. 2007; Stahl

et al. 2010). Furthermore, exposure to diverse national contexts also helps individu-
als integrate alternative (and otherwise inconsistent) information and translate them

into practical solutions and actions (Dragoni et al. 2014). In other words, international

assignments to distant/diverse country contexts provides opportunities to gain com-
petencies for not only observing and understating novel and unfamiliar ideas but also

combining these novelties with existing knowledge base and developing integrated

solutions. Therefore, the exposure to diverse/distant environments would help individ-
uals develop wider interpretation and information processing schemata, which in turn

could develop their ability to integrate diferent worldviews, better manage cognitive

complexity and realize their creative potential. Based on this reasoning, we hypoth-
esize that:

H3: The higher the accumulated (a) educational distance, (b) industrial devel-
opment distance, (c) linguistic distance and (d) cultural distance between an

individual’s home base and the host countries of her past international assign-
ments, the higher is her capacity to recognize, assimilate and exploit new

external knowledge.

104 H. E. Yildiz et al.

1 3
While international assignments are an opportunity for individual competence

development, individuals might not utilize that opportunity to the same extent. Pre-
vious research emphasized the role of individual characteristics to explain heteroge-
neous levels of learning from experience (Dragoni et al. 2009). This is also in line

the interactionist perspective (Anderson et al. 2014), which examines how the inter-
action between the contextual and individual factors might foster or hinder creativ-
ity in organizations (e.g., Shalley et al. 2009; Yuan and Woodman 2010). In other

words, the interactionist perspective argues that human behavior “is a function of
a continuous multidirectional process of person-by-situation interactions” (Endler
1983, p. 160). Accordingly, it is relevant to identify those individual traits that cause
some people to embrace and utilize their diverse experiences more than others. In
this regard, past research has shown that individuals’ openness to experience is an

important trait that could mediate or moderate the link between exposure to diver-
sity and competency gains (Cho and Morris 2015; Leung and Chiu 2008, 2010).

As one of the Big Five personality traits, openness to experience is often asso-
ciated with increased individual-level creativity in organizational contexts (George

and Zhou 2001; Woodman et al. 1993). Unlike absorptive capacity, which is repre-
sented by a specifc set of work-related activities targeted at acquiring and understat-
ing new knowledge, openness to experience is a personality trait that is conceptual-
ized as a stable and extended dimension of individual diferences. This suggests that

openness to experience is basic personality dimension, which is correlated but con-
ceptually distinct from other cognitive attributes such as ability, intellect and crea-
tivity (see McCrae 1987 for a detailed treatise).2

Individuals who are more open to new experiences have been shown to depict
stronger inclination to be visionary, original, novel and independent (McCrae and
Costa 1997). This suggests that openness to experience induces the drive to seek
out new, varied and experimental ideas and experiences. On the other hand, ‘closed’
individuals would prefer to follow conventional routines, traditional solutions and
would feel uneasy about complex and unfamiliar situations (George and Zhou 2001;
McCrae 1987). Thus, individuals who are more open to new experiences would have
higher propensity to adopt divergent thinking and pursue fexible and imaginative
solutions for existing problems (McCrae 1987; McCrae and Costa 1997). Due to

having higher tolerance for ambiguity and stronger need for variety, ‘open’ individu-
als would be more likely to search for creative and innovative ideas (Madjar 2008).

This stands to reason that “openness to experience enables individuals to reach out
to foreign cultures and makes use of novel cultural knowledge to generate creative
solutions to resolve problems” (Chao et al. 2015, p. 82). Following a similar line

of reasoning, Maddux et al. (2009) contend that deriving benefts from a multicul-
tural experience depends more on the adaptation of open and accommodating mind-
set, rather than the depth or duration of this experience. Subsequent studies further

confrm that being adaptive to diferent cultural contexts by remaining open to new
modes of thinking and behaving is an important mechanism that mediates overseas
experience-creativity link (Cho and Morris 2015, Study 1; Leung and Chiu 2008;

2 We are introducing this distinction in order to avoid potential criticism for tautology and lack of con-
ceptual clarity.

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What Fosters Individual-Level Absorptive Capacity in MNCs?...

Maddux and Galinsky 2009, Study 4). Thus, openness to experience has been sin-
gled out as the personality dimension that could determine whether multicultural

exposure yield positive or negative outcomes for individuals (Chao et al. 2015).
In short, we expect that individuals who are more open to new experiences would
enjoy grater competency gains as a result of their international assignments to distant
countries. So, we predict that:
H4: The higher an individual’s openness to new experiences, the stronger the
positive efect of the accumulated distance of past international assignments on
her capacity to recognize, assimilate and exploit new external knowledge.
We graphically present our hypotheses in Fig. 1.

Motivation
- Intrinsic
- Extrinsic

Ability
Past knowledge and
experience

Opportunity
Exposure to
distant/diverse
country contexts

Individual-level
Absorptive Capacity
- Recognition
- Assimilation
- Exploitation

Openness to
Experience
H1a (+)
H1b (0)
H1c (0)
H1d (+)

H2 (+)

H3 (+)

H4 (+)

Fig. 1 Theoretical framework

106 H. E. Yildiz et al.

1 3
3 Data and Method
3.1 Empirical Context and Data Collection
Our empirical setting is a large European multiunit manufacturing MNC with

annual sales of €1.1bn and over 2400 full-time employees. The company manufac-
tures industrial products and the scope of its operations is quite wide, encompassing

R&D, order engineering, manufacturing, site assembling, maintenance and services.

Because it (a) is a high-tech company where most of the engineers do knowledge-
intensive jobs and must continuously learn and apply new knowledge and tech-
nologies, (b) commonly uses middle-term international assignments and sends its

employees abroad for on-site deliveries in a wide variety of countries around the
globe, (c) needs to sustain deep interaction with foreign industrial customers and
regulators due to its strong dependence on international markets (e.g., more than

90% of delivery projects take place outside home country), we believe this com-
pany provides a suitable empirical setting to test our theoretical conjectures on the

antecedents of individual-level absorptive capacity in an international setting. Even
though the focus on a single company might limit generalizability, this design also
yields signifcant benefts, such as controlling for extraneous sources of variation

from organizational-level factors such as culture, structure and suchlike. Further-
more, as this frm is large enough to contain units/departments that show sufcient

intra-organizational variation, we managed to detect meaningful levels of diversity
in terms of antecedent variables included in our framework.
One member of the research team was granted exclusive access to the list of all

employees working at the company. In order to avoid confounding efects of nation-
ality and cultural background, we only targeted domestic workforce of the headquar-
ters (i.e., MNC home country nationals). To get deeper insight about our empiri-
cal context, we conducted series of open-ended interviews with 55 executives and

engineers, none of whom took part in the main survey. Once we prepare the draft
of the questionnaire, we pilot tested it with 20 engineers and four academic experts.
None of these responses were included in the fnal analysis. Although we mostly
used established scales for our construct measurement, we used the feedback from
pre-study interviews and pilot test to make necessary adjustments in the wording
and framing of some questionnaire items. Upon consultation with our informants at

the human resource department of the frm, we identifed those work units and func-
tional areas where engineers’ daily work is knowledge-intensive—i.e. those divi-
sions where absorptive capacity is most relevant. The total number of employees in

the selected work units was 1400. We sent individualized email invitations to these

employees, where we candidly explained the main purposes of the study. Respond-
ents were then directed to an online survey tool. We also gave standard paper-and-
pen option to those who did not prefer online survey. To increase the response rate,

we conducted two tranches of data collection; the second initiated two months

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What Fosters Individual-Level Absorptive Capacity in MNCs?...
after the frst. We conducted series of multi-group confrmatory factor analyses to
check for possible systematic diferences between electronic versus paper-and-pen
responses and between two waves of data collection. We followed the guidelines
provided by Steenkamp and Baumgartner (1998) and Dimitrov (2006). Our results

confrm that our subsets of data coming from diferent means and waves of data col-
lection have both confgural and scalar invariance.3

After eliminating incomplete questionnaires and responses coming from non-
domestic employees, our fnal sample consisted of 648 engineers working across a

range of diferent functional areas. This represents a 46% response rate, which com-
pares favorably with equivalent empirical studies in past literature (e.g., Enkel et al.

2017; Schleimer and Pedersen 2013). The average age of our respondents 43.112
(s.d.=10.245) and 86% of them were male. To control for non-response bias, we

used demographic information available in staf registries. Based on this, we com-
pared mean diferences between responding and non-responding employees in terms

of their age and tenure. Our t test statistics were not signifcant (p>0.10), suggesting
the absence of a systematic diference between participating and non-participating
employees.
3.2 Measures
Most constructs were measured with scales adapted from prior research (Gagné
et al. 2010; Löwik 2013; Minbaeva et al. 2003; Ter Wal and Salter 2011). All the

questionnaire items used a seven-point Likert-type scale (where 1=strongly disa-
gree, 4=neither agree nor disagree, and 7=strongly agree) and participants were

asked to indicate their agreement with the statements. Given that the ofcial work-
ing language of the MNC was English, we did not translate the questionnaire items

to the local language.
3.2.1 Absorptive Capacity

Given our focus on individual-level absorptive capacity, we paid particular atten-
tion to using relevant measurement items suited for our specifc level of analysis.

A majority of the established measurement scales in the existing absorptive capac-
ity literature (i.e., Flatten et al. 2011; Jansen et al. 2005) have been developed for

the collective (e.g., frm or unit) level. As there is no established scale to measure
individual-level absorptive capacity, we draw on past studies with a similar focus as
our own (i.e., Löwik 2013; Ter Wal and Salter 2011).

Using feedback obtained from pre-study interviews of the studied MNC, we com-
bined these two scales and identifed 19 items that could be used to measure our

absorptive capacity construct. When entering these items into an exploratory fac-
tor analysis, we used principal component analysis eliminated fve items with low

3 Full results of our invariance tests are available from the corresponding author upon request.

108 H. E. Yildiz et al.

1 3
item-to-total correlations.4

Using promax rotation, we re-ran the principal compo-
nent analysis with the remaining 14 items. Three main factors with eigenvalues over

1 emerged from our analysis, which collectively explained 64.5% of the variance.

All items in this analysis had primary loadings over 0.5. Only one item had a cross-
loading above 0.30. Using these 14 items, we performed confrmatory factor analysis

to better test the validity of our factor structure. The results confrm that three-fac-
tor model fts better with the data (χ2

(68)=127.075, RMSEA=0.037, CFI=0.987,
TLI=0.983) than the single-factor model that envisages absorptive capacity as a
unitary construct (χ2

(71)=323.638, RMSEA=0.074, CFI=0.946, TLI=0.931)
and that the diference between the two models’ ft was signifcant (Δχ2
=196.563,

Δdf=3, p<0.001).
Our three-factor structure coheres well with the original conceptualization of

Cohen and Levinthal (1990) and a recent empirical study by Schleimer and Ped-
ersen (2013). Accordingly, our frst dimension of absorptive capacity is Recogni-
tion, which refers to the extent to which individuals exert efort to fnd new external

knowledge and are able to notice and recognize the benefts associated with it. We
used four items to measure the Recognition dimension: (1) “I am always actively
looking for new knowledge for my work”, (2) “I intentionally search for knowledge

in many diferent domains to look ‘outside the box’”, (3) “I am good at distinguish-
ing between proftable opportunities and not-so-proftable information or opportu-
nities” and (4) “I easily identify what new knowledge is most valuable to us”. The

alpha coefcient for reliability was 0.775 and maximal reliability is 0.748, which is
at an acceptable level (Hancock and Mueller 2001).

Our second dimension measuring absorptive capacity is Assimilation, which cap-
tures the degree to which individuals can assimilate new knowledge by combining

it with existing knowledge. Six items were used to measure Assimilation dimen-
sion: (1) “I am deeply involved in appraising the usefulness of external ideas”, (2)

“I often analyze the way expertise of external contacts could be related to our busi-
ness needs”, (3) “I strive to comprehend how external knowledge connects to our

ongoing internal R&D activities”, (4) “I take the time to ‘translate’ external knowl-
edge to ensure it is properly understood by my colleagues”, (5) “I make an efort

to ‘repackage’ external knowledge to make sure it gets the attention it deserves”
and (6) “I develop new insights and ideas by combining external knowledge with
existing knowledge available within our frm” (alpha coefcient=0.893, maximal
reliability=0.916).

Our third dimension is Exploitation and refers to the degree to which newly rec-
ognized and assimilated knowledge is applied towards commercial ends. We used

four items to measure this dimension: (1) “I exploit new knowledge to create new
products, services or work methods”, (2) “I constantly consider how I can apply new

4 The eliminated items were as follows: “I work hard to critically assess the potential value of exter-
nal knowledge against our business needs”, “I spend a lot of time processing external knowledge to

get a sense of how it might be meaningful for our business”, “I frequently meet up with colleagues to

explain and discuss new knowledge I obtained externally”, “I perform a central role in connecting exter-
nal knowledge to our ongoing internal R&D activities”, “I often apply newly acquired knowledge to my

work”.

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What Fosters Individual-Level Absorptive Capacity in MNCs?...
knowledge to improve my work”, (3) “When an external idea appeals to me, I work
vigorously to make sure it is implemented, even if the idea was not originally mine”,
(4) “I am willing to take action to make sure that the potential of external ideas I
believe in will be realized” (alpha coefcient=0.825, maximal reliability=0.938).
3.2.2 Intrinsic Motivation
The scale for intrinsic motivation was borrowed from Gagné et al. (2010). Its three
items were: (1) “I am doing this job because I enjoy it very much”, (2) “I am doing
this job because I have fun doing my job”, and (3) “I am doing this job for the
moments of pleasure that this job brings me” (alpha coefcient=0.915, maximal
reliability=0.939).
3.2.3 Extrinsic Motivation
The extrinsic motivation scale was also borrowed from Gagné et al. (2010) and
included three items: (1) “I am doing this job because this job afords me a certain
standard of living”, (2) “I am doing this job because it allows me to make a lot of
money”, and (3) “I am doing this job for the paycheck” (alpha coefcient=0.775,
maximal reliability=0.807).5
3.2.4 Ability

Our ability measure is aimed to capture the extent of individuals’ existing knowl-
edge base, which is conducive to the development of skills required to understand

and absorb new external knowledge (Cohen and Levinthal 1990). Through formal
education, individuals obtain technical knowledge, which is especially important

for technology intensive positions. Longer work experience also helps individu-
als develop industry- and company-specifc knowledge over time (Vinding 2004).

Lastly, training programs is an efective tool for the development of human capital in

companies and individuals’ involvement in such programs would result in an exten-
sive and diverse knowledge base (Minbaeva et al. 2003; Reinholt et al. 2011). Based

on this and in line with past studies’ measures of employee ability (e.g., Breaugh
and Mann 1984), our measure of ability consists of: (1) length (in years) of formal
education; (2) length (in years) of total work experience; and (3) average number of

days spent on professional training per year. Using these three indicators, we com-
puted an additive index for ability and used standardized scores for our estimations.

5 It is important to note that our measures for both motivation types pertain to individuals’ overall moti-
vation towards their job. Thus, our questions do not specifcally capture the motivation to acquire and

apply new external knowledge. That said, however, we would like to note that the vast majority of indi-
vidual participants were working in knowledge-intensive and creative positions. As a result, their usual

duties and responsibilities consisted of seeking, understanding, modifying and applying new knowledge.

Therefore, we assume that our measure of participants’ overall work motivation also captures their moti-
vation for absorbing new knowledge.

110 H. E. Yildiz et al.

1 3
3.2.5 Opportunity

As noted in the hypothesis development section, we consider medium-term inter-
national project assignments as a key opportunity for employees to get exposed to

diverse overseas business contexts. Therefore, our aim was to capture the degree to
which individuals had worked for projects in countries that are diferent from their
home country context. For this purpose, we frst asked our respondents to list the
names of countries in which they had worked as an international project member.
All of these projects are targeted at knowledge acquisition and transfer, with various
aims for the company including product development, innovation creation, delivery

of solutions, technology transfer and development of after market services. Pro-
jects were medium-term in nature, with an average time of completion of around

eleven months. The average number of international projects per individual was 8.5.
Once we obtained the list of countries regarding international assignments, we
calculated pairwise distance scores (i.e., distance between home and host countries)

for various psychic distance stimuli. Data for educational distance, industrial devel-
opment distance, political distance and linguistic distance were all based on index

scores developed by Dow and Karunaratna (2006). Educational distance consists of
three indicators (i.e., diference in the percentage of literate adults and diference
in the levels of second and third level education enrolment between two countries).
Distance in terms of industrial development is measured using nine scales (i.e.,
diference in GDP per capita, energy consumption, percentage of non-agricultural

labor, percentage of urban population and number of cars, newspapers, radios, tel-
ephones and televisions per thousand people). Political distance is measured via four

scales (i.e., Henisz’s Political Constraint Index, Bollen’s Polity measure, Freedom
House Political Rights and Civil Liberties scales). Linguistic distance consists of

three proxies (i.e., diference between the dominant languages of two countries, inci-
dence of the home country’s dominant language in the host country and incidence of

the host country’s dominant language in the home country). All of these multi-scale

indices were aggregated to a single factor indicators using confrmatory factor anal-
ysis.6

Finally, we followed the convention in the feld to measure cultural distance,

using the Kogut and Singh (1988) index and Hofstede’s (2001) four cultural dimen-
sions (i.e., power distance, uncertainty avoidance, individualism vs. collectivism and

masculinity vs. femininity).

For a pairwise distance score to be relevant for our analysis, a given respond-
ent had to be involved in at least one project located in the corresponding country.

We then summed these relevant distance scores to calculate the ‘aggregate distance’
travelled by each of our respondents. For example, if an individual had worked for
projects in Austria, Italy, Germany and Japan, her measure for educational distance
would be the sum of distance scores between home country and each of these four
countries. Using aggregate distance scores, we intended to capture the extent to
which our respondents had been exposed to diferent country contexts and had the
opportunity to develop meta-skills for knowledge absorption.
6 For a more detailed description of methodology and the full dataset, visit https://sites.google.com/site/
ddowresearch/home/scales.

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What Fosters Individual-Level Absorptive Capacity in MNCs?...
3.2.6 Openness to Experience
We measured openness to experience by using the Big Five Inventory (BFI) and
adopted items from John and Srivastava (1999).7

Individuals were asked to evalu-
ate the extent to which they saw themselves as a person who: is curious about many

diferent things, is ingenious, deep thinker, has an active imagination, is inventive,
values artistic, aesthetic experiences and likes to refect (alpha coefcient=0.816,
maximal reliability=0.847).
4 Analysis and Results
4.1 Checking for Common Method Bias
Given that some of our measures are subjective in nature and prone to possible

biases emerging from common rater efects, we have followed the remedies sug-
gested by Podsakof et al. (2003). First of all, we ensured our respondents that their

answers would be kept fully confdential. In addition to that, they were given explicit
instructions that there were no right or wrong answers to our questions and that our
survey was not intended to measure or detect good or bad practice. Furthermore, it

is worth noting that our respondents had above-average levels of education. As indi-
cated by Rindfeisch et al. (2008), there is an inverse relationship between respond-
ents’ education level and likelihood of social desirability bias. We also designed our

questionnaire in a way that the questions/items used to measure the independent and
dependent variables were not adjacent, in order to limit respondents’ use of common
retrieval cues while answering diferent questions (Podsakof et al. 2003).
In addition to the above, we also used a number of post hoc measures to make
sure that our data was not confounded by common method bias. To begin with,
we conducted a Harman’s one-factor test by entering all measurement items for
our multidimensional variables into an exploratory factor analysis at once. This
test extracted fve distinct factors with eigenvalues above one, which collectively
explained 69.3% of the total variance. This gave preliminary evidence for a lack of
a common factor that could individually account for most of the variance. However,
as noted by Podsakof et al. (2003), Harman’s one-factor test is not sufcient to fully

rule out common method bias. For this reason, we took a further step and used con-
frmatory factor analysis to compare three models: (a) a model where we assigned

each item to its theoretically relevant latent variable, (b) a model where all items
were loaded on a common method factor, (c) a model that combined (a) and (b).

7 The present investigation is part of larger project on the microfoundations of innovation in multina-
tional companies. Hence, our survey instrument also included measures for additional individual-level

dispositional and personality dimensions. Thus, we also asked questions to capture other elements of Big
Five personality traits (i.e., agreeableness, extroversion, neuroticism and conscientiousness). However,
based on similar studies in the feld of social psychology (Cho and Morris 2015; Leung and Chiu 2008;
Maddux and Galinsky 2009), we only include openness in our current theoretical model and conduct our
empirical tests accordingly.

112 H. E. Yildiz et al.

1 3

It is important to note that we followed this procedure, as well as conducted Har-
man’s one-factor test, only for our model where absorptive capacity (i.e., recogni-
tion, assimilation and exploitation), intrinsic motivation and extrinsic motivation

were included. Considering that our measures for ability and opportunity are less
subjective and therefore are less likely to be biased due to common rater efects, we
did not include these factors in our comparative models.
Our frst model with fve-factors (recognition, assimilation, exploitation, intrinsic
motivation and extrinsic motivation) performed well in terms of ft with the data (χ2
(155)=413.29, p<0.001, RMSEA=0.051, CFI=0.963, TLI=0.954). Our second
model, only using a common method factor, showed poor ft (χ2

(153)=2350.64,
p<0.001, RMSEA=0.144, CFI=0.683, TLI=0.631) in comparison to our frst
model (Δχ2
=1937.35, Δdf=2, p<0.001). A combination of our frst two models
also showed good ft with the data (χ2

(139)=415.40, p<0.001, RMSEA=0.055,
CFI=0.960, TLI=0.946). However, the diference between frst and the combined
models in terms of ft was not signifcant (Δχ2

=2.11, Δdf=16, p>0.10). As a
last step, we followed the recommendation of Podsakof et al. (2012) and used an

unmeasured latent method factor technique. Accordingly, we compared the signif-
cance of paths in our models with and without the common method factor. Of the

six diferent paths, only one difered in terms of signifcance (i.e., Intrinsic Moti-
vation→Assimilate) across the two models. For this reason, we decided to retain

the common method factor in our models by calculating imputed composite scores,
which controlled for the likely infation/defation due to a common method. We
then used these adjusted composite scores while testing our hypothesized structural
models.
4.2 Results
To test our hypotheses, we used Structural Equation Modeling (SEM) using AMOS.
Table 1 shows the descriptive statistics and correlations among our constructs.

Since some correlation coefcients were noticeably high, we controlled for multi-
collinearity issue. All indicators’ tolerance (VIF) values were between 1.0 and 3.4,

which suggest that multicollinearity was not an issue since they are all less than the
thresholds suggested by Hair et al. (2013). The results of our hypotheses concerning

motivation and ability are estimated in Model 1 (see Table 2). Hypothesis 1a pre-
dicted that intrinsic motivation would have positive efect on individuals’ capacity

to recognize and assimilate new knowledge. Supporting this hypothesis, we found
a positive efect of Intrinsic Motivation on the Recognition (γ=0.306, p<0.001)
and Assimilation (γ=0.279, p<0.001) dimensions of absorptive capacity. On the
other hand, we also found a positive and signifcant efect of intrinsic motivation
on the Exploitation (γ=0.327, p<0.001) dimension, which is not in line with what
we predicted in hypothesis 1b. In hypothesis 1c, our prediction was that Extrinsic
Motivation would have no efect on an individual’s Recognition and Assimilation

capabilities. Consistent with this, we did not detect any negative efect of Extrin-
sic Motivation on Recognition (γ=−0.017, p>0.10), and Assimilation (γ=0.024,

p>0.10) capabilities. Thus, hypothesis 1c is supported. Hypothesis 1d conjectures

113

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What Fosters Individual-Level Absorptive Capacity in MNCs?... Table 1 Inter-item correlations and descriptives

Entries in the diagonal line represent mean and standard deviation (in parentheses) of the corresponding item
Mean score for Ability measure is zero since it is an index variable with standardized (Z) scores. Similarly, mean and standard deviation for Openness to Experience are 0
and 1, respectively, since it is computed based on factor analysis
**Correlation is signifcant at the 0.01 level (2-tailed)

Intrinsic
motivation
Extrinsic
motivation
Ability Educational
distance
Industrial
distance
Political
distance
Linguistic
distance
Cultural
distance
Openness to
experience
Recognition Assimilation Exploitation

Intrinsic
motivation
5.141
(1.004)
Extrinsic
motivation
0.038 3.322
(1.019)
Ability 0.066 −0.020 0 (0.456)
Educational
distance
0.055 0.008 0.321** 4.650
(5.466)

Industrial
distance
0.045 0.017 0.304** 0.980** 7.110
(8.592)

Political
distance
0.042 0.003 0.291** 0.956** 0.955** 4.572
(6.179)

Linguistic
distance
0.050 −0.003 0.281** 0.931** 0.951** 0.955** 1.470
(1.994)

Cultural
distance
0.043 0.014 0.337** 0.917** 0.942** 0.853** 0.888** 20.270
(21.013)

Openness to
experience
0.204** 0.009 0.139** 0.044 0.043 0.037 0.023 0.066 0 (1)
Recognition 0.431** −0.009 0.170** 0.004 0.002 0.013 0.000 0.024 0.605** 4.477
(0.724)
Assimilation 0.297** 0.034 0.145** 0.009 0.002 0.018 −0.011 0.014 0.480** 0.818** 4.166
(0.975)
Exploitation 0.401** 0.009 0.135** −0.041 −0.045 −0.039 −0.055 −0.024 0.513** 0.860** 0.833** 3.930 (0.834)

114 H. E. Yildiz et al.

1 3
that Extrinsic Motivation would have positive infuence on Exploitation dimension
of absorptive capacity. However, counter to our theoretical expectations, we did
not detect any positive efect of Extrinsic Motivation on Exploitation (γ=−0.002,

p>0.10) capacities of individual employees. Thus, our results did not provide sup-
port for hypothesis 1d. Our second hypothesis conjectured a positive relationship

between Ability and absorptive capacity. Consistent with our predictions, we found
that individuals with higher levels of existing knowledge and training had stronger
skills of Recognition (γ=0.230, p<0.001), Assimilation (γ=0.273, p<0.001) and
Exploitation (γ=0.197, p<0.05). Based on this, our hypothesis 2 was supported.8
We developed separate models for hypothesis 3, where we made predictions

regarding whether international assignments to distant countries generate opportuni-
ties for absorptive capacity development. Given that high correlation between dif-
ferent types of distance included in our hypothesis, we decided to run separate mod-
els for each distance index to avoid multicollinearity problem. Our models tested

the efects of aggregate distance traveled by individuals on diferent dimensions of

their absorptive capacity. Counter to our predictions, we found that educational dis-
tance had a negative efect on Recognition (γ=−0.073, p<0.05) and Exploitation

(γ=−0.109, p<0.001), but no signifcant infuence on the Assimilation (γ=−0.054,

p>0.10) dimension (see Table 2, Model 2). Thus, our hypothesis 3a was not sup-
ported. Results followed a similar pattern for our other distance measures as well.

Specifcally, we detected that Industrial Development Distance had a negative efect
on the Recognition (γ=−0.066, p<0.10) and Exploitation (γ=−0.106, p<0.001)
dimensions (see Table 3, Model 4). Therefore, our hypothesis 3b was not supported.

We detected a negative efect of Political Distance on the Exploitation dimen-
sion (γ=−0.096, p<0.05), whereas efects on Recognition (γ=−0.051, p>0.10)

and Assimilation (γ=−0.034, p>0.10) were not signifcant (see Table 4, Model

6). Based on this, we could not confrm hypothesis 3c. All our absorptive capac-
ity dimensions were negatively related to Linguistic Distance (γ=−0.048, p<0.10

for Recognition, γ=−0.065, p<0.10 for Assimilation and γ=−0.096, p<0.05 for
Exploitation), which meant that hypothesis 3d was not supported either (Table 5,
Model 8). Lastly, we found that Cultural Distance had a negative infuence only on
the Exploitation dimension (γ=−0.088, p<0.05), whereas efects on Recognition
(γ=−0.047, p<0.10) and Assimilation (γ=−0.047, p<0.10) were not signifcant.
Thus, we did not obtain support for hypothesis 3e.

In order to test our hypothesis 4, we added series of interaction terms with Open-
ness to experience and diferent distance dimensions to our models. Our results for

Educational Distance (Table 2, Model 3), Industrial Development Distance (Table 3,
Model 5), Political Distance (Table 4, Model 7), Linguistic Distance (Table 5,

Model 9) and Cultural Distance (Table 6, Model 11) are fully in line with our pre-
diction that individuals who are open to new experiences are more likely to efec-
tively use their past international assignments to distant countries as opportunities

8 We retained intrinsic motivation, extrinsic motivation and ability in subsequent models where we
tested distance efects and the reported results were consistent throughout these models.

115

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What Fosters Individual-Level Absorptive Capacity in MNCs?... Table 2 Educational distance

*p<0.10, **p<0.05, ***p<0.001

Model 1 Model 2 Model 3
Estimate SE Estimate SE Estimate SE
Intrinsic motivation → Recognition 0.424*** 0.025 0.426*** 0.025 0.407*** 0.025
Intrinsic motivation → Assimilation 0.288*** 0.036 0.290*** 0.036 0.272*** 0.036
Intrinsic motivation → Exploitation 0.395*** 0.030 0.398*** 0.030 0.382*** 0.030
Extrinsic motivation → Recognition −0.023 0.025 −0.022 0.025 −0.030 0.025
Extrinsic motivation → Assimilation 0.026 0.036 0.027 0.036 0.020 0.036
Extrinsic motivation → Exploitation −0.003 0.029 −0.002 0.029 −0.009 0.029
Ability → Recognition 0.142*** 0.056 0.166*** 0.055 0.147*** 0.056
Ability → Assimilation 0.127*** 0.080 0.144*** 0.079 0.128*** 0.080
Ability → Exploitation 0.109*** 0.066 0.144*** 0.065 0.129*** 0.065
Educational distance → Recognition −0.073** 0.025 −0.078** 0.041
Educational distance → Assimilation −0.054 0.036 −0.057 0.058
Educational distance → Exploitation −0.109** 0.030 −0.113** 0.048
Educational distance×openness to
experience
→ Recognition 0.345*** 0.011
Educational distance×openness to
experience
→ Assimilation 0.279*** 0.016
Educational distance×openness to
experience
→ Exploitation 0.270*** 0.013
Model ft χ2(3)=4.050, RMSEA=0.023,
CFI=0.999, TLI=0.978
χ2(5)=5.016, RMSEA=0.002,
CFI=0.999, TLI=0.989
χ2(8)=11.981, RMSEA=0.028,
CFI=0.998, TLI=0.993

116 H. E. Yildiz et al.

1 3Table 3 Industrial development distance

*p<0.10, **p<0.05, ***p<0.001

Model 4 Model 5
Estimate SE Estimate SE
Intrinsic motivation → Recognition 0.426*** 0.025 0.408*** 0.025
Intrinsic motivation → Assimilation 0.289*** 0.036 0.274*** 0.036
Intrinsic motivation → Exploitation 0.397*** 0.030 0.383*** 0.030
Extrinsic motivation → Recognition −0.021 0.025 −0.031 0.025
Extrinsic motivation → Assimilation 0.027 0.036 0.020 0.036
Extrinsic motivation → Exploitation −0.001 0.029 −0.008 0.029
Ability → Recognition 0.162*** 0.059 0.143*** 0.055
Ability → Assimilation 0.144*** 0.084 0.128*** 0.079
Ability → Exploitation 0.141*** 0.069 0.126*** 0.065
Ind. develop. distance → Recognition −0.066* 0.027 −0.075** 0.041
Ind. develop. distance → Assimilation −0.055 0.038 −0.062 0.059
Ind. develop. distance → Exploitation −0.106** 0.031 −0.113** 0.048
Ind. develop. distance×openness to experience → Recognition 0.331*** 0.011
Ind. develop. distance×openness to experience → Assimilation 0.263*** 0.016
Ind. develop. distance×openness to experience → Exploitation 0.253*** 0.013
Model ft χ2(5)=4.840, RMSEA=0.002, CFI=0.997,
TLI=0.989
χ2(8)=12.053, RMSEA=0.028,
CFI=.0998, TLI=0.993

117

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What Fosters Individual-Level Absorptive Capacity in MNCs?... Table 4 Political distance

*p<0.10, **p<0.05, ***p<0.001

Model 6 Model 7
Estimate SE Estimate SE
Intrinsic motivation → Recognition 0.425*** 0.025 0.410*** 0.025
Intrinsic motivation → Assimilation 0.289*** 0.036 0.274*** 0.036
Intrinsic motivation → Exploitation 0.397*** 0.030 0.384*** 0.030
Extrinsic motivation → Recognition −0.022 0.025 −0.028 0.025
Extrinsic motivation → Assimilation 0.026 0.036 0.022 0.036
Extrinsic motivation → Exploitation −0.003 0.029 −0.007 0.029
Ability → Recognition 0.157*** 0.058 0.138*** 0.055
Ability → Assimilation 0.137*** 0.083 0.121*** 0.080
Ability → Exploitation 0.137*** 0.068 0.122*** 0.065
Political distance → Recognition −0.051 0.027 −0.055 0.043
Political distance → Assimilation −0.034 0.038 −0.037 0.062
Political distance → Exploitation −0.096** 0.031 −0.099** 0.051
Political distance×openness to experience → Recognition 0.300*** 0.011
Political distance×openness to experience → Assimilation 0.246*** 0.015
Political distance×openness to experience → Exploitation 0.230*** 0.012
Model ft χ2(5)=4.464, RMSEA=0.015, CFI=0.991,
TLI=0.970,
χ2(8)=11.403, RMSEA=0.026,
CFI=0.998, TLI=0.994

118 H. E. Yildiz et al.

1 3Table 5 Linguistic distance

*p<0.10, **p<0.05, ***p<0.001

Model 8 Model 9
Estimate SE Estimate SE
Intrinsic motivation → Recognition 0.426*** 0.025 0.415*** 0.025
Intrinsic motivation → Assimilation 0.290*** 0.036 0.279*** 0.036
Intrinsic Motivation → Exploitation 0.398*** 0.030 0.389*** 0.030
Extrinsic motivation → Recognition −0.023 0.025 −0.023 0.025
Extrinsic motivation → Assimilation 0.026 0.036 0.026 0.036
Extrinsic motivation → Exploitation −0.003 0.029 −0.003 0.029
Ability → Recognition 0.161*** 0.058 0.146*** 0.057
Ability → Assimilation 0.146*** 0.083 0.133*** 0.082
Ability → Exploitation 0.141*** 0.068 0.130*** 0.067
Linguistic distance → Recognition −0.067* 0.026 −0.054 0.041
Linguistic distance → Assimilation −0.066* 0.038 −0.055 0.059
Linguistic distance → Exploitation −0.115** 0.031 −0.106** 0.048
Linguistic distance×openness to experience → Recognition 0.233*** 0.007
Linguistic distance×openness to experience → Assimilation 0.195*** 0.047
Linguistic distance×openness to experience → Exploitation 0.167*** 0.003
Model ft χ2(5)=4.763, RMSEA=0.000, CFI=0.979,
TLI=0.983,
χ2(8)=9.426, RMSEA=0.017,
CFI=0.999, TLI=0.997

119

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What Fosters Individual-Level Absorptive Capacity in MNCs?... Table 6 Cultural distance

*p<0.10, **p<0.05, *** p<0.001

Model 10 Model 11
Estimate SE Estimate SE
Intrinsic motivation → Recognition 0.425*** 0.025 0.404*** 0.023
Intrinsic motivation → Assimilation 0.289*** 0.036 0.269*** 0.034
Intrinsic motivation → Exploitation 0.396*** 0.030 0.378*** 0.028
Extrinsic motivation → Recognition −0.022 0.025 −0.029 0.023
Extrinsic motivation → Assimilation 0.027 0.036 0.022 0.034
Extrinsic motivation → Exploitation −0.002 0.029 −0.007 0.028
Ability → Recognition 0.158*** 0.059 0.136*** 0.054
Ability → Assimilation 0.143*** 0.085 0.124*** 0.080
Ability → Exploitation 0.139*** 0.069 0.120*** 0.065
Cultural distance → Recognition −0.047 0.027 −0.060* 0.025
Cultural distance → Assimilation −0.047 0.039 −0.057 0.037
Cultural distance → Exploitation −0.088** 0.032 −0.099** 0.030
Cultural distance×openness to experience → Recognition 0.370*** 0.039
Cultural distance×openness to experience → Assimilation 0.303*** 0.056
Cultural distance×openness to experience → Exploitation 0.302*** 0.046
Model ft χ2(5)=4.654, RMSEA=0.000, CFI=0.999,
TLI=0.998,
χ2(8)=12.853, RMSEA=0.031,
CFI=0.998, TLI=0.992

120 H. E. Yildiz et al.

1 3

for competency gains and to develop their absorptive capacity. In all, we found sup-
port for our hypothesis 4.

5 Discussion and Conclusion

Due to its ability to explain frms’ heterogeneous degree of learning from their envi-
ronment, absorptive capacity is a key source of competitive advantage. This is par-
ticularly the case for MNCs, as they have operations in multiple business environ-
ments and have the opportunity to tap into various external sources of knowledge.

Absorptive capacity has therefore been at the forefront of extant literature on organi-
zational learning, innovation and creativity (Sun and Anderson 2010; Zahra and

George 2002). As noted by Cohen and Levinthal (1990), a consideration of absorp-
tive capacity should begin at the individual-level. In one of the pioneering papers

on knowledge-based view, Grant (1996, p. 109) echoes this point by stating that
“knowledge is viewed as residing within the individual, and the primary role of the

organization is knowledge application rather than knowledge creation” (for a simi-
lar intuition, see Kogut and Zander 1992, 1993). Later studies in international busi-
ness literature raise an equivalent argument by showing that the transfer of knowl-
edge between diferent business units of MNCs happens as a result of exchange

and interaction between individuals (Mäkelä and Brewster 2009; Minbaeva 2016).
Despite these observations, however, the concept of absorptive capacity has mostly
been analyzed at the organizational level. Volberda et al. (2010, p 932) emphasize
that “there may be antecedents of [absorptive capacity] that are placed at the level
of individuals. These antecedents have been similarly neglected in the literature”.
Therefore, individuals and their heterogeneous cognitive structures and behavioral
patterns, which have been mostly assumed away in past research, should be factored
in while studying absorptive capacity. This is the frst research gap that we have
addressed in this study.

Furthermore, studies exploring the factors afecting the development of absorp-
tive capacity are equally scarce in extant literature. Thus, past research has been

mostly interested in the outcomes of absorptive capacity (e.g., innovation, knowl-
edge transfer, survival, performance etc.), whereas its antecedents have rarely been

subject to systematic scrutiny. Among recent exceptions to this general pattern (e.g.,
Hughes et al. 2014; Jansen et al. 2005; Schleimer and Pedersen 2013), we primarily
build our framework on the notable study of Minbaeva et al. (2003) who identify
how human resource management practices could develop absorptive capacity by
increasing the ability and motivation of employees. However, neither this study nor
others that follow (e.g., Wang et al. 2008) diferentiate between the role of diferent

motivation types and other individual-level dispositional factors in absorptive capac-
ity development (c.f. Enkel et al. 2017). This is the second research gap we address

in this paper. Using the MOA framework, we develop a model where we examine
the efect of diferent motivation types (i.e., intrinsic and extrinsic) and ability on

individuals’ levels of absorptive capacity. We further argue that medium-term inter-
national assignments cause individuals to get exposed to diverse/distant business

environments and give them the opportunity for competence development. Yet, to

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What Fosters Individual-Level Absorptive Capacity in MNCs?...

better understand whether all individuals equally beneft from such learning oppor-
tunities (c.f. Dragoni et al. 2014), we also incorporate a key dispositional factor (i.e.,

openness to experience) into our model.
Two important aspects of our fndings are worthy of note and discussion. First
of all, our results imply that individuals’ intrinsic and extrinsic motivation do not
have the same efect on their absorptive capacity. Specifcally, we fnd that intrinsic
motivation can explain variation in all three dimensions of absorptive capacity (i.e.,

recognition, assimilation and exploitation) whereas extrinsic motivation is not a sig-
nifcant predictor of these dimensions. An important implication of this is that work

motivation should be seen as a multidimensional construct, rather than a unitary
measure for employees’ willingness to perform tasks (Reinholt et al. 2011). In this
regard, we extend studies in the knowledge transfer literature, which often do not

diferentiate between diferent forms of motivation and their possible efects on indi-
vidual action and behavior (e.g., Chang et al. 2012; Fey and Furu 2008; Wang et al.

2008). Understanding the distinction between intrinsic and extrinsic motivation is
especially important to identify the right incentives for stimulating individual-level
development and competency gains. For instance, in their model, Minbaeva et al.
(2003) do not distinguish between motivation types and measure the construct at
a general level. Interestingly, however, most of the human resource management
practices they examine as antecedents of absorptive capacity (i.e., performance
appraisal, promotion, performance based compensation) are often associated with
extrinsic motivation of employees (see Minbaeva 2008). This contrasts with our

fnding that it is through intrinsic, rather than extrinsic, motivation that individual-
level absorptive capacity could be fostered. Indeed, past knowledge transfer stud-
ies have been making a clear distinction between intrinsic and extrinsic motivation

(e.g., Lin 2007; Minbaeva et al. 2012). However, this stream of research has been
primarily concerned with knowledge sharing behavior of sending unit employees,
rather than the role of motivation at the recipient end. Thus, our paper provides new
theoretical and empirical insights motivational issues that extend earlier studies by
focusing on how individuals’ distinct capabilities to absorb new knowledge could be
infuenced by diferent types of work motivation.

Why, then, has extrinsic motivation not emerged as a signifcant predictor of indi-
viduals’ absorptive capacity in our study? We might seek an answer in Self Deter-
mination Theory. For extrinsically motivated people, there is a strong expectation

for immediate rewards and/or concrete results, whereas intrinsic motivation is about
the fulflment of tasks for their own sake (Osterloh and Frey 2000; Ryan and Deci
2000a). Therefore, intrinsic motivation is a better impetus for individual action and
behavior when tasks demand creativity and entail uncertainty. This is quite often the

case when it comes to exploration, recognition, assimilation and eventual absorp-
tion of new external knowledge, a process that entails various risks and uncertain-
ties (Zahra and George 2002). In addition, successful absorption of new knowledge

requires creativity and cognitive fexibility, which are often associated with intrinsic
rather than extrinsic motivation (Ryan and Deci 2000b). Seen from this perspective,
our results fall in line with the central tenets of Self Determination Theory.

The second interesting result of our analysis is that assignments to distant coun-
tries and exposure to diverse environmental stimuli is conducive to the development

122 H. E. Yildiz et al.

1 3
of absorptive capacity only when individuals are open to new experiences. This
insight is especially valuable as “more research is needed to understand factors

afecting the efectiveness of learning from the experiences gained through inter-
national assignments” (Ng et al. 2009, p. 227). In developing our initial hypothesis,

our intuition followed a similar thread to that of Dragoni et al. (2014). Accordingly,

we expected that not all individuals would equally beneft from international experi-
ence and the learning opportunities it confers. Yet, unlike focusing on cumulative

time spent abroad in diferent types of global work experiences, we look at whether
and how diversity of business contexts generate opportunities for individual learning
and skill development. More specifcally, we argued that individuals get exposed to
diferent degrees of novelty and uncertainty, depending on the amount of ‘distance

travelled’ between home country and country of assignment. As such, we hypoth-
esized that exposure to higher levels of aggregate distance would provide additional

opportunities for new cognitive schemata development (Fee and Gray 2012; Fee
et al. 2013), which would in turn foster absorptive capacity of individuals. Counter
to our theoretical predictions, however, we found that high degrees of exposure to
distant countries have a detrimental efect on individuals’ absorptive capacity. One
possible reason for this negative efect is that those who are not ready or open to

new experiences could feel overwhelmed and, eventually, stick closer to their habit-
ual routines and practices (Leung and Chiu 2008). On the other hand, we fnd that

individuals with stronger predisposition for openness to new experiences can efec-
tively beneft from their past assignments to educationally, industrially, politically,

linguistically and culturally distant countries. With these results, we extend extant

research on expatriation, which typically focuses on personality traits as a predic-
tor of individuals’ adjustment to and performance during international assignments

(Caligiuri 2000a, b; Huang et al. 2005). Thus, we show that individual-level het-
erogeneities stemming from personality would also afect the extent to which inter-
national assignments could yield competency gains and capability development for

individuals. Similar to our results on motivation, this fnding also has policy impli-
cations for MNCs’ strategies for stafng and selection of personnel for international

assignments.
We are inclined to see limitations of the present investigation as potential avenues
for future research. First of all, one of the main goals of this study is to address
the lack of attention paid to the micro-foundations of absorptive capacity (Volberda
et al. 2010). This is fully in line with the logic of Cohen and Levinthal (1990) that
puts individuals and their cognitions at the forefront of their pioneering treatise on
absorptive capacity. However, throughout the couple of decades that follow their
work, literature has evolved to analyze absorptive capacity an organizational-level

capability (see Sun and Anderson 2010). We do not intend to take sides in the per-
ennial debate on the merits and perils of methodological individualism (see Felin

and Foss 2012). Our contention, which is consistent with others before us (Min-
baeva et al. 2014; Volberda et al. 2010), is that absorptive capacity is a multi-level

concept and it is important to understand both its distinctly individual and collec-
tive aspects. To that end, it is frst important to identify antecedents and drivers of

absorptive capacity at the individual-level, which is what we have focused on in
the present investigation. To extend this starting point, we encourage future studies

123

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What Fosters Individual-Level Absorptive Capacity in MNCs?...
to look at cross-level relationships and the mechanisms with which individuals’
absorptive capacities aggregate to group and organizational level. Elucidating the
ebbs and fows of these mechanisms would be important to identify the conditions

under which individuals’ absorptive capacities aggregate to a higher level by follow-
ing a compositional (i.e., simple and linear aggregation) versus compilational (i.e.,

a non-linear aggregation where collective absorptive capacity is determined by the
weakest or strongest link) patterns of emergence (see Kozlowski and Chao 2012;
Kozlowski and Klein 2000).

Moreover, we only focus on one specifc personal trait (i.e., openness to expe-
rience) that could afect individuals’ diferent degrees of learning from experience

and exposure geographically, institutionally and culturally distant countries. In mak-
ing this choice, we are guided by earlier studies exploring how individuals learn

and develop new cognitive skills as a result of multicultural experiences (Chao et al.
2015; Leung and Chiu 2008, 2010). The logic of our framework could be extended

to other relevant dimensions of personality traits and characteristics such as self-
esteem, need for cognition, learning orientation etc. (see Van Velsor et al. 2004).

Similarly, we did not include job specifc factors in our model. Although we spe-
cifcally aimed at those positions that involve relatively high levels of creativity and

knowledge intensity in our empirical design, it is quite possible that the hypothe-
sized relationships between motivation, ability, opportunity and absorptive capac-
ity would difer across diferent positions with varying levels of engagement with

knowledge.9

Therefore, future studies could pay systematic attention to this hetero-
geneity we assumed away in the present investigation. Furthermore, we only con-
sidered linear efects of aggregate distance on absorptive capacity development.

Earlier work focusing on organizational-level mechanisms suggest that the pattern
of relationship between capability transfer and distance could be curvilinear (e.g.,
Björkman et al. 2007), where optimum level of transfer/learning takes place at some
point between extremely high and extremely low levels of distance between home
and host countries.
Last, but not the least, we acknowledge the inherent limitations of working with

cross-sectional data. For example, our hypothesis concerning the efects of inter-
national assignments on absorptive capacity could be prone to selection bias and

reverse causality. Specifcally, it is possible to expect that those who have higher
absorptive capacity are more likely to be sent to overseas assignments. Thus, we

believe that a more rigorous test of our ideas would be possible by using longitudi-
nal designs and testing dynamic models (Minbaeva et al. 2014). Without a doubt,

absorptive capacity is a complex, dynamic and multi-level and multifaceted phe-
nomenon, which cannot be fully covered in a single study. This requires a collective

progress and the main goal of this paper is to contribute to this cumulative process.
Acknowledgements The authors thankfully acknowledge fnancial support from the Jan Wallander, Tom
Hedelius, and Tore Browaldh Foundation.

9 We would like to thank one of the anonymous reviewer for bringing this point to our attention.

124 H. E. Yildiz et al.

1 3

Open Access This article is distributed under the terms of the Creative Commons Attribution 4.0 Interna-
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and reproduction in any medium, provided you give appropriate credit to the original author(s) and the
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