Magazine article European Business Forum

The Lack of Mobility in the International Executive Labour Market Proves That Where Senior Management Is Concerned Nationality Still Matters a Great Deal

Magazine article European Business Forum

The Lack of Mobility in the International Executive Labour Market Proves That Where Senior Management Is Concerned Nationality Still Matters a Great Deal

Article excerpt

As they try to pass the time during endless rounds of meetings, fonctionnaires at the European Commission sometimes play a game. It's called "spot the nationality." The aim is to decipher small signals sent by meeting participants--body language, looks, dress style, accessories. If you can guess a nationality before the person speaks, you score five points. If you have to wait until they've opened their mouth (and given up more signals) you receive only one point.

National identities within Europe are alive and well, and in fact still determine how Europeans look at and respond to one another. Even after 50 years of European integration, we still immediately recognise each others' national characteristics and stereotypes.

National identities still matter, and not only in European bureaucracies, but also in the business world. If such identities no longer mattered, managers would not be restrained by national or cultural boundaries, and there would be a thriving international market for executive labour, with foreigners sitting on many European top management teams or executive committees. Our research shows otherwise.

In one recent research project, we analysed a panel dataset of large European non-financial firms in Denmark, Finland, the Netherlands, Norway, Sweden, Switzerland, and the UK. We chose these seven countries because they are all open economies. If an international market for executive labour is emerging, it should be possible to establish this in these countries. Our dataset consists of more than 7,000 individual observations of executives' nationalities at the year-ends of 2005, 2004, 2002, and 2000.

We found that over the period 2000-2005, firms in these seven countries have become a bit more open to hiring foreign top managers. By 2005, 24 percent of top managers were foreigners, up from 21 percent in the year 2000. Thus,over three-quarters of all top managers in these open economies come from the firm's home country. Over 51 percent of companies had at least one foreign top executive, up from 47 percent in the year 2000.

Our results show that an international market for executive labour in Europe is, at best, emerging gradually. We could not establish a significant increase over the period we looked at, yet we did find starkly contrasting national patterns and trends. While Swiss, Dutch, and Finnish firms stepped up the hiring of foreign executives over this period, Danish and Norwegian firms actually employed a lower percentage of foreign top managers in 2005 compared to 2000.

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There are numerous reasons why an international market for executive labour will be imperfect and its emergence uneven. For one, top executives themselves are not perfectly mobile. Language and cultural barriers remain, discouraging many executives from leaving the well-known for a less known and riskier challenge. Executives are often well-networked at home, whereas in a foreign environment the value of networks evaporates and past credentials matter less. Also, executives' spouses and children often prefer to settle in one place for a long period than to move from one country to the other.

Many countries' pension systems also effectively discourage cross-border executive mobility. Executives moving abroad in order to take up a less certain assignment will expect a generous compensation package. However, executive pay structures often do not adequately take these pension considerations into account.

Perhaps more importantly, many companies have more than a pro forma relationship with their country of origin. …

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