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

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  • Forstenlechner, Ingo
  • Mellahi, Kamel

Abstract

This study examines the process and outcomes of cultivating external legitimacy through the employment of host country nationals by multinational enterprisesâ (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.

Suggested Citation

  • Forstenlechner, Ingo & Mellahi, Kamel, 2011. "Gaining legitimacy through hiring local workforce at a premium: The case of MNEs in the United Arab Emirates," Journal of World Business, Elsevier, vol. 46(4), pages 455-461, October.
  • Handle: RePEc:eee:worbus:v:46:y:2011:i:4:p:455-461
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    References listed on IDEAS

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    1. 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;Academy of International Business, vol. 38(4), pages 621-638, July.
    2. 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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    4. Johnson, Simon & Mitton, Todd, 2003. "Cronyism and capital controls: evidence from Malaysia," Journal of Financial Economics, Elsevier, vol. 67(2), pages 351-382, February.
    5. 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.
    6. 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;Academy of International Business, vol. 41(7), pages 1161-1182, September.
    7. 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.
    8. 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.
    9. Raymond Fisman, 2001. "Estimating the Value of Political Connections," American Economic Review, American Economic Association, vol. 91(4), pages 1095-1102, September.
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    Citations

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    Cited by:

    1. 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.
    2. Malhotra, Shavin & Zhu, PengCheng, 2013. "Paying for cross-border acquisitions: The impact of prior acquirers’ decisions," Journal of World Business, Elsevier, vol. 48(2), pages 271-281.
    3. Dawn L. Keig & Lance Eliot Brouthers & Victor B. Marshall, 2015. "Formal and Informal Corruption Environments and Multinational Enterprise Social Irresponsibility," Journal of Management Studies, Wiley Blackwell, vol. 52(1), pages 89-116, January.
    4. Peng, George Z., 2012. "FDI legitimacy and MNC subsidiary control: From legitimation to competition," Journal of International Management, Elsevier, vol. 18(2), pages 115-131.
    5. Al Ariss, Akram & Guo, Grace Chun, 2016. "Job allocations as cultural sorting in a culturally diverse organizational context," International Business Review, Elsevier, vol. 25(2), pages 579-588.
    6. repec:spr:manint:v:57:y:2017:i:4:d:10.1007_s11575-017-0317-z is not listed on IDEAS
    7. Amankwah-Amoah, Joseph & Ifere, Simeon Emezana & Nyuur, Richard B., 2016. "Human capital and strategic persistence: An examination of underperforming workers in two emerging economies," Journal of Business Research, Elsevier, vol. 69(10), pages 4348-4357.
    8. Amankwah-Amoah, Joseph & Ifere, Simeon & Nyuur, Richard, 2016. "Human capital and strategic persistence: An examination of underperforming workers in two emerging economies," MPRA Paper 71629, University Library of Munich, Germany.
    9. Sidani, Yusuf & Al Ariss, Akram, 2014. "Institutional and corporate drivers of global talent management: Evidence from the Arab Gulf region," Journal of World Business, Elsevier, vol. 49(2), pages 215-224.
    10. Conroy, Kieran M. & Collings, David G., 2016. "The legitimacy of subsidiary issue selling: Balancing positive & negative attention from corporate headquarters," Journal of World Business, Elsevier, vol. 51(4), pages 612-627.
    11. Wafa N. Almobaireek & Ahmed A. Alshumaimeri & Tatiana S. Manolova, 2016. "Building entrepreneurial inter-firm networks in an emerging economy: the role of cognitive legitimacy," International Entrepreneurship and Management Journal, Springer, vol. 12(1), pages 87-114, March.
    12. Ryan, James Christopher, 2016. "Old knowledge for new impacts: Equity theory and workforce nationalization," Journal of Business Research, Elsevier, vol. 69(5), pages 1587-1592.

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