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Gaining legitimacy through hiring local workforce at a premium: The case of MNEs in the United Arab Emirates

  • Forstenlechner, Ingo
  • Mellahi, Kamel
Registered author(s):

    This study examines the process and outcomes of cultivating external legitimacy through the employment of host country nationals by multinational enterprises’ (MNEs) affiliates in the United Arab Emirates. It builds on the literatures of both institutional theory and legitimacy. Analysis of data obtained from 48 managers of MNE's affiliates located in the UAE shows that in sectors where the employment of host country nationals is almost taken for granted such as in banking, MNEs are driven by a sense of appropriateness and social legitimacy. In contrast, in sectors where the employment level of UAE nationals is almost nonexistent, those MNEs engaging in localization are driven by the logic of economic efficiency and tend to employ nationals in order to extract rent from the government. The authors discuss the results and their managerial and policy implications.

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    Article provided by Elsevier in its journal Journal of World Business.

    Volume (Year): 46 (2011)
    Issue (Month): 4 (October)
    Pages: 455-461

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    Handle: RePEc:eee:worbus:v:46:y:2011:i:4:p:455-461
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    1. Simon Johnson & Todd Mitton, 2001. "Cronyism and Capital Controls: Evidence from Malaysia," NBER Working Papers 8521, National Bureau of Economic Research, Inc.
    2. Christine M Chan & Shige Makino, 2007. "Legitimacy and multi-level institutional environments: implications for foreign subsidiary ownership structure," Journal of International Business Studies, Palgrave Macmillan, vol. 38(4), pages 621-638, July.
    3. Phillip M Rosenzweig & Nitin Nohria, 1994. "Influences on Human Resource Management Practices in Multinational Corporations," Journal of International Business Studies, Palgrave Macmillan, vol. 25(2), pages 229-251, June.
    4. Raymond Fisman, 2001. "Estimating the Value of Political Connections," American Economic Review, American Economic Association, vol. 91(4), pages 1095-1102, September.
    5. World Bank, 2004. "Unlocking the Employment Potential in the Middle East and North Africa : Toward a New Social Contract," World Bank Publications, The World Bank, number 15011.
    6. Rajesh Kumar & T. K. Das, 2007. "Interpartner Legitimacy in the Alliance Development Process," Journal of Management Studies, Wiley Blackwell, vol. 44(8), pages 1425-1453, December.
    7. Soltani, Ebrahim & Wilkinson, Adrian, 2011. "The Razor's edge: Managing MNC affiliates in Iran," Journal of World Business, Elsevier, vol. 46(4), pages 462-475, October.
    8. MARA FACCIO & RONALD W. MASULIS & JOHN J. McCONNELL, 2006. "Political Connections and Corporate Bailouts," Journal of Finance, American Finance Association, vol. 61(6), pages 2597-2635, December.
    9. Pei Sun & Kamel Mellahi & Eric Thun, 2010. "The dynamic value of MNE political embeddedness: The case of the Chinese automobile industry," Journal of International Business Studies, Palgrave Macmillan, vol. 41(7), pages 1161-1182, September.
    10. Leuz, Christian & Oberholzer-Gee, Felix, 2006. "Political relationships, global financing, and corporate transparency: Evidence from Indonesia," Journal of Financial Economics, Elsevier, vol. 81(2), pages 411-439, August.
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