EXPATRIATE RETURN ON INVESTMENT.

Abstract

The costs associated with long-term expatriation are high, yet it is possible a minimal return on investment (ROI) is gained from international assignments. This article uses a strategic ROI approach to extend understanding of the current literature on expatriate return on investment. The literature review develops a conceptual foundation based on three theoretical approaches. First, we apply Becker, Huselid, Pickus and Spratt's (1997) systems theory in which the inter-relationship of human resource management (HRM) activities are seen as a group of activities that can more fully explain increases and decreases in expatriate costs and benefits than individual activities alone. Second, we examine Edstrom and Galbraith's (1977, 1994) model in which the motives for using expatriates help explain why ROI outcomes differ according to the specific objectives of international assignments. Within this context, we examine Barney's (1991) resource-based theory of the firm to explain why the use of expatriates, as a potential source of strategic competitive advantage, can influence increases and decreases in ROI. Third, we apply Dyer and Reeves (1995) performance model to develop a strategic ROI approach, suggesting that firm performance is affected by both the financial and strategic value of an international assignment. The literature review examines current and potential expatriate costs and benefits and suggests a number of key antecedents which can cause expatriate ROI to increase and decrease. The antecedents include planning the assignment, selection and recruitment, the relocation process, training, compensation, family support practices, performance management, turnover, and repatriation. The article concludes with key research questions requiring further investigation. They include defining the ROI equation in terms of the financial and non-financial costs and benefits associated with international assignments, and identifying the factors which can increase and decrease ROI. The research findings are intended to provide MNCs with useful approaches to calculating returns on investment from their international assignments.

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