Flexibility in HRM and Foreign Direct Investment: Do international investors self-select?

Only a few studies so far have tried to assess the role of HRM-flexibility in cross-national location decisions. None of these, however, investigates into a potential heterogeneity across multinationals in terms of their specific needs concerning different types of flexibility in HRM. In this paper, I theoretically and empirically analyze the impact of HRM-flexibility on the type of investment being attracted. The theoretical implications are based on a real options framework and are derived in the context of a British-German comparison. They are confronted with data from an original survey on US-multinationals with manufacturing subsidiaries in Germany and the UK. The analysis reveals that in UK subsidiaries, investments in R&D are significantly lower, and technological uncertainty is significantly felt less strongly than in their German counterparts. Both results are compatible with the implications derived from the real options framework.