| A key tenet of Foreign Direct Investment theories is that foreign subsidiaries face disadvantages when operating in host countries because they are unfamiliar with the business environment (Hymer, 1976; Kindleberger, 1969; and Caves, 1982). Identifying and empirically documenting specific disadvantages that subsidiaries experience enhances these theories. I investigate if labor lawsuits represent a disadvantage for foreign subsidiaries in the United States (US). It is important to understand how the US legal environment affects foreign subsidiaries, particularly labor laws. Identifying and implementing employment practices that ensure compliance to complex US labor laws may be especially difficult for managers of foreign subsidiaries. Consequently, foreign subsidiaries may face more labor lawsuits than their domestic counterparts. Most labor lawsuits allege discrimination based on national origin, race, age, or gender. Suing your employer is an extreme act and the accompanying work force disruptions, legal costs, reputational loss, and potential boycotts significantly affect performance.;This dissertation used Poisson and Negative Binomial regression to compare the number of labor lawsuits brought against 486 subsidiaries of British, Germany and Japan companies operating in the US with a matched sample of US-owned firms. It also investigated effects of foreign subsidiary staffing strategies, aspects of the parent/subsidiary relationship, and the extent of parent firm involvement on subsidiaries' exposure to labor lawsuits. It tracked both federal and state lawsuits and controlled for age, size and location.;Empirical results provide evidence of a labor-related subsidiary disadvantage in the US: foreign subsidiaries faced significantly more labor lawsuits than American firms. Also consistent with the hypotheses, foreign subsidiaries using American top officers and foreign subsidiaries whose parent firms had more US operations faced fewer lawsuits. But foreign subsidiaries using Human Resource (HR) professionals or Americans to handle HR issues faced more labor lawsuits. Whether subsidiaries reported directly to the parent or to a host country headquarters did not affect its exposure to labor lawsuits. Possible explanations and implications of these findings as well as avenues for future research are discussed. |
