Abstract Context is a central construct in the study of performance appraisal (PA) systems, but to date studies linking the distal context within which organizations operate to PA have been limited in two ways. First, these studies have focused predominantly on national culture, and have paid less attention to the legal/political and economic environment within which organizations. Second, few studies reflect the growing international nature of business organizations, which create multiple layers of context (e.g., home and host country context). Drawing on both situational strength and institutional theories, we hypothesize the links between the “big three” facets of distal context (i.e., culture, legal/political, and economic) and the processes and purposes of PA systems. Using data from 472 multinational enterprises (MNEs) in 22 countries, we show that all three facets of the distal context of the host country influence decisions about the conduct of PA systems. In addition, we show that the culture and legal/political systems of the home country from which the MNE originated are also linked to the PA processes and purposes. Finally, we find evidence that MNEs are more likely to develop hybridized PA systems that depart from host country norms.
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