Local managing director in a multinational enterprise who are you perspective from vietnam

Local Managing Director in a Multinational Enterprise - Who
are you? Perspective from Vietnam
Hoang Nguyen
University of Social Sciences and Humanities (USSH), Vietnam
Dinh Thoi
Vietnamese - German University in HCMC, Vietnam
Abstract
Foreign direct investment (FDI) is expected not only to bring capital, technology, knowhow and
managerial
skills, but also to contribute to the GDP and create jobs to the host country. In this paper, the
mentioned job is

not the general position in an enterprise, but it is the position in the fingers – the top
managers/ the head
managers. By a mixed qualitative and quantitative approach, the results show that qualified
education degree,
rich working experience, and being trusted, inspired, combined task and relationship-oriented
characteristics

are three key factors to promote a local staff becoming managing director in FDI multinational
enterprise
(MNE). The findings give local staffs the directions to improve themselves professionally to
meet the
requirements of
the

the
foreign

managing
employers

director position;
can understand the

while

characteristics of the local employees for personnel planning.
Keywords: Local Managing Director; Multinational Enterprise (MNE)
1. Introduction
Any foreign company that operates in abroad needs employees from front staffs to middle
managers and the top managers such as managing director (MD). According to the Dictionary of
International Trade, “Managing Director is someone who is responsible for the daily operations of a
company, organization, or corporate division. In some countries, the term is equivalent to CEO (Chief
Executive Officer), the executive head of a company. In other countries, managing directors
primarily work as the heads of individual business units within a company rather than heading up
the company as a whole”. In this paper, “MD” is a mention as the executive head such as CEO, CFO
(Chief Financial Officer), CIO (Chief Information Officer), and COO (Chief Operating Officer) of an
oversea subsidiary MNE in a host country. “Manager” is the head of an individual business unit.
Nonetheless, in the literature review section, “manager” is an umbrella term for people in the
management level. The question is who should be the head – an expatriate, or a local, or a localhired foreign manager? In multinational enterprises (MNEs), hiring MD position in an oversea
subsidiary is very important and depends much on the company’s recruitment policy: whether the
headquarter applies a home-country national strategy which hiring home employees and send them
to abroad branches as expatriates; or a host-country national strategy, which hiring the local people,
or a third-country national strategy which hiring people from a third country. A study by Harzing in
2001a finds that 40.8 percent of 2,689 subsidiaries had a parent-country national as MD. This study
also states that MNEs tended to select parent-country national for the MD positions than for other
lower managing positions such as head of departments. In the same line, Deresky (2011) claims that


there has been a remarkable trend for multinational organizations to hire executives from foreign

countries, in the belief that they “can better affect change than a homegrown executive”. Recently,

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in a survey in 2016, ECA (Employment Conditions Abroad) International note that both Western
and Asian enterprises prefer sending people from home country, train them and put them in
the high position (Mayberry, 2017). However, not all MD expats are successful in their role
because of high hiring cost and non-financial problems such as differences in legal and cultural
distance, stress family, overload responsibility and emotional immaturity (Selmer, 1999).
Interviewing major senior management from 44 Australian and German enterprises doing
business in China, Kühlmann and Hutchings (2010) indicates a trend of substituting expatriate
managers by Chinese managers and local‐hired foreign managers. In Vietnam, according to
data from the Ministry of Labor, Invalids and Social Affairs (MOLISA), by the end of 2014, most
expats are responsible for high management positions, executives, chief representatives or
specialists (MOLISA, 2015). In 2011, MOLISA also announces that over 32% of foreigners
working in Vietnam plays management roles, and 41% are technical experts.
From this regard, there is still a large room for the local people to be promoted to higher positions
in the MNEs. This research tries to find the answer for the question Local managing director in a FDI
multinational enterprise- Who are you? The findings will give a real image of a MD that might be
interesting for those who want to be MD, as well as knowledge for employers who apply the hostcountry national strategy for staffing.

Vietnam is not big country to be too crowded MNEs; however, the country is an example of a
developing country with high economic growth rate, potential market growth, educated labors,
and is a destination of FDI. Therefore, studying this case might be relevant for similar
circumstances.
2. Theoretical Framework
The USA Bureau of Labor Statistics (2014) shows that managers in general are effective
communicators have extraordinary leadership skills, rich managerial experience, and the ability
to stimulate employees. Additionally, the managers must have results-orientation and

innovative thoughts. They have strong business-development abilities and skills to interact with
clients, as well as to work well with staffs and senior managers. This concept reflects fit an
overall people in management level description. However, besides asking for relevant
capacities (candidate side), the recruitment of a MD depends heavily on parent company’
staffing strategy (employer side). In addition, leadership styles also influence staffs’ motivation
and company performance; therefore, personal leadership style of the MD candidate must be a
concern (in colleagues’ perspective). This paper argues that the promotion of a local to the MD
position is not only determined by the candidate’s capacity, but also the headquarter ’strategy,
as well as favorite candidate’s characteristics. Therefore, three dimensions, which are (1)
Candidate qualification, (2) Organization’s strategy, and (3) Leadership styles/ Personal
characteristics, will be reviewed. In this section, the word “manager” is a term for people in
management level.
Well educated and trained degrees with deep executing experience in a particular market are
almost the top requirements for a MD position. Indeed, Grant and Urbanik (2013) identifies working
experience including executives’ responsibilities and job experiences that shaped their know-how is
one of three key categories of factor influencing of career progression to higher executive positions.
Moreover, Sitthipongpanich and Polsir (2013) notes that not only working experience but also
qualified degree is a minimum requirement for a MD position. The author presents that the director
board should consist of various skills, experience, and expertise that are advantageous to the
company. For more specific cases, Hay and Hodgkinson (2006) claim that the key purpose of getting
a MBA degree is that it leads to fast track career success, typically interpreted in terms of increased
salary and higher hierarchical position. In 2006, the Thai Institute of Directors Association issued
Director Nomination best practices, which suggest particular board competencies and director
capabilities. Firstly, the management board must well controlled corporate procedures and
approaches. Secondly, they have best competencies in all firm’s operation, for instance, accounting
and finance, organization and human

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resources management, risk management, crisis management, industrialization, marketing,
and strategic planning.
In Vietnam, people who obtained Western education degrees, have deep Vietnamese market
experience, speak fluent Vietnamese and English are the most hunted for the high position in
MNEs (Forbes Asia, 2012a). Similarity, requirements of education and experience are easy to
find in some famous recruitment websites such as vietnamworks.com, timviecnhanh.com.
Therefore, it is hypothesized that outstanding personal profile with qualified degrees and
working experience is a positive factor on hiring Vietnamese people as MD.
As mentioned earlier, there are different types of staffing strategy: home-country national
strategy, host-country national strategy, and third-country national strategy. Each strategy has its
own advantages and disadvantages. In terms of human resource management, using host-country
national for the MD position gives a better understanding the local institution, the local market
(Scullion and Collings, 2006), and the local staffs for increasing their morale (Vaghefi et al., 1991).
On the other hand, the host-country manager might not absorb all objectives and strategy from the
parent-company because of differences in terms of culture, educated background, language, and
perception. Evenly, Schniederjans et al. (1998) states the probability of national loyalty confliction
between foreign parent-company and local MD’s perspective. On the contrary, a home-country MD
is a guarantee for strictly following the business and management policies, greater control of
organization, and greater cultural understanding. However, this might discouraged the localmanagement. Generally, when a foreign subsidiary has just been established, the headquarter
prefers sending a home-country national MD. Then, when the business is in standard lines, a
localization strategy will be applied and

a host-country national MD is hired to replace the home-country national MD (García et.al, 2009).
Furthermore, each company has their own decision making approach, whether centralization or
decentralization. Centralization means that decision-making authority is at the top of the
organization; while decision-making in decentralization is authorized to the lower levels (GomezMejia & Balkin, 2012). The question is whether the organizational structure and staffing strategy
affects the local MD selection. MOLISA’s record in 2014 that almost all foreigners who are in high
management positions in MNEs in Vietnam were assigned by the native headquarters. As a result,
not many local people keep the role of top managers.

This situation leads to a hypothesis that whether the parent-company’s applies localization
strategy and centralization structure to determine the local MD selection.
In any organization, employees are the central concern; without employees there is no
performance. In addition, employees are followers; consequently, they have the “power” to
evaluate their supervisors positively or negatively. Some managers appear to be nice and
friendly; while others look too serious and dominance. Nonetheless, there is no doubt that
nobody wants to be untrusted. On the other hand, leaders and managers can influence
subordinates by their characteristics and behaviour. An effective leadership can influence
people. However, not all managers are leaders and vice versus. Most managers define a
strategy, and perform executive and administration tasks based on their level; while leaders
lean towards leading people in informal and unstructured way. An effective manager is a
person who can combine his/her official authority with the ability to inspire people. Indeed, Tan
(2011) and Robbins and Judge (2013) states that an organization needs both strong leadership
and strong management. The leaders need to be challenged in current circumstances in order
to create future visions and to encourage people to achieve the common goals. Meanwhile, the
managers concentrate on formulating strategy, operating activities, and making productive
hierarchical structures as well as making clear objectives, maintaining stable environment in
order to keep people work together.
In the book “Một đời quản trị” (A lifetime of governance) (2017), Phan Van Truong, an advisor to
the French Government on international trade writes that Vietnamese business managers often
confuse leadership and management. It is hypothesized that a local MD needs to have strong
leadership as well as strong management skills.


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Manager or leader is human being; they have their own characteristics; therefore, they have
their own leadership style, which can be trained, or can be changed by aging, by experience,
by situation, or even by heavy incidence. According to Gomez-Mejia and Balkin (2012), there

are four major approaches to classify types of leadership.
The Trait theories focus on personal characteristics that can make a person to become a
leader. Some certain traits are self-confidence, determination and communication skills.
However, some researchers proved that some traits can be learnt such as ambition, desire to
lead, and high correspondence.
The Behavioral theories reflect leaders’ behaviors. In other words, these theories try to
describe leadership styles. The two studies which conducted by Ohio State University (1940s)
and University of Michigan (1950s) reveal subordinates reviewing most leadership behaviors.
The description is based on two dimensions: Consideration (at Ohio University)/ Employeeoriented behavior (at Michigan University) and Initiating-structure (at Ohio University)/
Production-oriented behavior (at Michigan University). The first dimension shows leadership’s
concerns about followers in terms of feelings, needs, personal interest, well-being, and
problems. The second dimension refers to completing tasks such as organizing activities,
responsibilities, and performance.
The Leadership style was first developed by Lewis and his students in 1939. They
recognized two leadership styles corresponding to decision making approaches: the Autocratic
style and the Democratic style. For the autocratic style, the leaders make decision by
themselves; while referencing subordinates ideas before making decision is in line with the
democratic style. Although, the democratic style satisfies workers; but the autocratic style
brings better performance due to of strictly monitoring. This theory also provides the third style
– Laissez-faire style in which the leaders refuse to make decision.
The Contingency theories put the leadership styles into particular contexts. In a specific
occurrence, the leaders make decision which matches their behaviour in order to re-act the
situation. According to Fiedler’s model (1960s), leader behaviour or style was determined by
three aspects of a situation: Leader-member relations; Task structure; and Position power. The
Fiedler’ study also supports the results from Ohio State University and University of Michigan in
terms of two styles of leadership: Task-oriented and Relationship-oriented. The task-oriented
leadership want to see results of the tasks; they do not pay much attention to the process to
reach the accomplishments. The people-oriented leadership care about people and try to build
up good interpersonal relationships. Similarly, the Directive leader style in House’s model
(1971, revised 1996) also demonstrates that this kind of leader is comparable with the

Initiating structure/ Production-oriented and Autocratic style in which the leaders set up almost
employees’ activities from shaping targets to forming tasks, scheduling deadlines, and closely
monitoring. Interestingly, this model recognizes three other styles, which are similar to
employee-orientation/ people-orientation as discussed earlier. The leaders are warm and
friendly (in Supportive leader), work with and listen to the employees (Participative leader), and
motivate people by setting challenge goals (Achievement-oriented leader).
By reviewing the above traditional explanation, the hypothesis is whether subordinates
prefer a local MD with a task-oriented or people-oriented style.
In the book “Return on Character: The real reason leaders and their Companies Win”, Kiel (2015)
finds that the company with CEO of strong characteristics gets 9.35% of ROA (Return on Assets)
within a period of two years. This ratio is 5 times higher than a company where employees do not
give high appreciation to their leaders; the ROA is only 1.93%. This means that leader’s
characteristics are crucial for company’ succeed.
It can be said that the role of the administrator as a leader takes the organization forward and
attracts others to follow along to achieve the goal. This is only possible when the manager has the
ability, bravery and good qualities that make others believe and support. The Charismatic leadership
theory demonstrates the leader associated with strategic vision to inspire other people, caring the
needs and motivating followers to get the needs, self-confidence, self-sacrifice, and providing
idealistic role model (Gomez-Mejia and Balkin, 2012). These characteristics make followers admire,
trust and willing to believe their leaders. Tan (2011) confirms


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that trust is vital to powerful initiative correspondence and collaboration. Trust is a primary
attribute associated with leadership; breaking it can have serious adverse effects on a group’s
performance (Dirks and Ferrin, 2002). In the same line, the Transformational leadership style
also emphasizes on building trust by keeping commitment, reliability and persistence to the
followers as well as scarifying themself. Inspiring people is one of positive characteristic of this

style. The leaders promote the followers intellectual stimulation and individualized
consideration. Likewise, motivating is not only manager’ task but also a characteristic in which
the leader can motivate people by asking personal challenging goal, reinforcing desired
behaviors, satisfying followers’ needs, offering opportunities to encourage followers to use their
talent, and giving reward as well (Gomez-Mejia and Balkin, 2012). Talking about rewards in
relations to power, either managers or leaders, they have the powers. A manager has
authorized power to give rewards or punishment to subordinates; but the best leaders inspire
and motivate people to get spirit of discipline to work (Gomez-Mejia and Balkin, 2012). The
capability to affect other individuals implies that leaders have power. The central point is how
to use power fruitfully to influence people in order to achieve the targets. In fact, some
managers prefer applying the coercive power to make employees afraid and setting a distance
with subordinates. The size of distance depends on the national culture. In countries with high
power distance culture, the lower level person has to follow the higher level person without any
discussion. In countries with low power distance culture, the lower level person is respected
and listened by the higher level person. Caculating by Hofstede model 1, Vietnam is a high
power distance country with a score of 70, comparing to China of 80, Singapore of 74 and
Thailand with a score of 64.
Based on the above mentioned major characteristics of a manager/ a leader, it is
hypothesized that a Vietnamese MD is high power distance, but is trusted and is an inspiring
leader.
In summary, to test the portrait of a local MD in MNEs, this paper hypothesizes that the local
staffs need to have a high education degree and rich working experience. In addition, they
should be a trusted person, have good ethics and capacities to inspire people. However, the
study also supposes that Vietnamese MD might be unclear between leadership and
management and they are in large power distance. In addition, the study argues that the local
MD position much depends on the parent-enterprise’s policy regarding organizational structure
and recruitment strategy.
3. Research Methodology
This study uses both qualitative and quantitative method.
The qualitative approach focuses on semi-structured oral in-depth face-to-face interview in

order to explore new ideas and get deep thoughts and information (Boyce and Neale, 2006).
People in management level in MNEs are very busy; thus getting their acceptance for
interviewing is not easy. 23 interviews were arranged with 11 Vietnamese and 03 foreign heads
of individual business unit (as senior manager), 03 Vietnamese and 06 foreign heads of
company (as MD). They have been working some MNEs in Vietnam for 12 to over 30 years. The
meeting took 45 minutes to 60 minutes with some questions related to the research topic with
three main arguments. The first question was candidate’s qualification in terms of education
and working experience. The second question is the organizational strategy whether the parent
company applies localization and decentralization strategy. The last question is the description
MD’s leadership styles.
Data analysis generally follows these steps: (1) Coding the answers corresponding to the
interviewees’ expression; (2) Categorizing the interviewee’s expression into similar or dissimilar
group of ideas; (3) Interpreting the findings with interviewees’ words and sentences.
The quantitative approach is conducted by a sending an online questionnaire to managers
and staffs who are working for MNEs in Vietnam. The aim of this investigation is to collect data
to draw a picture about


1

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Vietnamese MD in local employees’ point of view. The questionnaire contains 39 indicators, in which
37 measuring 09 independent factors and 02 determining dependent factors. The dependent
variable is portrait of a Vietnamese MD. The 9 independent variables are (1) Qualified degree (QD),
(2) Working Experience (WE),

(3) Localization Strategy (LS), (4) Centralization Organization Strategy (CS), (5) Management and

Leadership skill (MLS), (6) Task and Relationship Orientation (TRL), (7) Power distance leader (PD),
(8) Trustworthy leader (TL), and (9) Inspiring leader (IL). The first two factors proxy for candidate’s
conditions; the next two factors represent the organization’ strategy; and the remaining factors
characterize the leadership styles. A five point Likert scale is used from (1) = “Strongly disagree” to
(5) = “Strongly agree” to measure all variables.

According to Hair et al. (2010), the sample size (n) should equal or greater than 5 times of
the number of indicators, but not less than 100. In this survey, the sample size should be 195
(n= 5x39). The questionnaire was delivered to 200 employees of 25 MNEs which located in the
South of Vietnam including Ho Chi Minh City and some neighboring provinces such as Binh
Duong, Dong Nai and Ba Ria Vung Tau. Phonak Vietnam and Samsung Vina are the two
companies which have the highest numbers of requests. The survey is run online on Google
doc from 30 April 2016 to 02 June 2016. There were 137 responses, among which 2 samples
from non-MNEs-employees were removed. Among 135 comebacks, 68.8% are senior managers
(8%), middle managers/supervisors (40.1%), and assistant managers (20.7%); the rest is senior
staffs/staffs. All of them have at least 5 years works for MNEs, and 70.4% are older than 30
year olds. These mean the sample is quite qualification in terms of rich experience; therefore,
their responses can be appreciated.
Data analysis is strictly tested the validity and reliability. Reliability analysis applies
Cronbach’s alpha which is to measure the internal consistency. Peterson (1994), Slater (1995),
Nunally (1978) suggest that 0.6 is an acceptable reliability coefficient. Exploratory Analysis
(EFA) is to check the validity of the construct as well as identify underlying relationships among
measured variables. Indicator must be 0.5 ≤ KMO ≤ 1. After then, multi- regression is used to
determine the relationship and impact level between dependent and independent variables.
4. Result and Discussion
4.1. Qualitative Data Analysis
To get perspective of people who are currently in management level about chances for local
staff to become MD, interviews were conducted with 23 people who are managing directors,
general directors, and heads of business units in FDI MNEs operating in some provinces in the
South of Vietnam including Ho Chi Minh City. The questions go around the three dimensions

that are (1) Candidate qualification, (2) Organization strategy and (3) Leadership style/
personal characteristics. Furthermore, advice on how to become a local MD is discussed.
(1) Candidate Qualification:
All interviewees agree that education is very important; professional/ technical industry
knowledge is required. In addition, broaden management knowledge in supply chain,
operations, finance, and risk management is a plus. However, high degree is great but not
everything. Getting a master in business administration (MBA) is to improve the knowledge, not
due to MD position. Some interviewees have a master degree, but some just hold a bachelor
degree. Besides, most of them were sent to headquarter or others subsidiaries in several
countries for training. Learning by doing is encouraged. Some people said that their capacity is
improved by learning from colleagues and daily works.
Working experience is a crucial requirement. All interviewees have been working for more than
20 years, experiencing several positions either in the same company or in international
environment, or big projects. The people who are MDs now are quite old, and reach to the position
after at least 15 years of working. There is an exceptional case; a Vietnamese MD was promoted
when he was 36 years old. Experience is a managerial


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weapon when handling conflict, risk, crisis situation; solving internal issues; serving in the
market, and forecasting. Some Vietnamese managers point out that foreign colleagues are
very good sources for learning and accumulating experience. This looks like transferring
knowhow and managerial skills.
(2) Organization’s Strategy:
Recruiting a local MD is indeed dependent on organization policy. Except 03 Vietnamese
MDs, the rest of the interviewees say that their companies still apply home-national strategy,
which mean the MDs are sent from the headquarters. Especially in Japanese and Korean
enterprises, MD and head of business unit position must be Japanese or Korean respectively as

their policy and traditional culture. Therefore, the highest position that a local staff can reach is
manager or senior manager. Conversely, European and American companies prefer to hiring
locals for MD positions; but the candidate must be matched against many qualification and
successfully go through headquarter’ strict evaluation. At this moment, no candidate meets the
company’s requirements. Different culture and education system lead to language barrier, trust
issue, limitation of technical skill and weak in risk management. Interestingly, one MD reports
the case of an oversea Vietnamese who had Western education and culture, but he could not
succeed in his fatherland in the role of MD. Normally, in Western MNEs, a foreign MD is
assigned in the starting up stage. When the business is going well, the role will be transferred
to the local staff for saving cost and in-depth understanding of the customers and market. Of
course, the incomer is selected and trained beforehand. In addition, a local MD shares that he
is training a group of local staffs to be the next generation of the company. Based on this
analysis, chances to become local MD in a FDI MNE are plenty.
Centralization Organization Strategy: Most interviewees agree that the structure of an
organization depends on company’s business model, company size and production or service
providing. In their case, the centralization organizational structure is applied. In manufacturing
industry that alway require the discipline and high efficiency, the centralization organizational
structure is to ensure that all activities are controlled and decided by the highest postion. Both
foreign and local MDs prefer centralization organizational structure so that they can handle
almost everything.
(3) MD Personal Characteristics/ Leadership Style
There is only one MD who states that the MD should be an autocratic person while the rest
share the same idea that leadership style depends on individual.
Management and Leadership Skill. Regarding this issue, all interviewees notice that it is not
possible to separate management and leadership skills. However, there are some specific
differences. For middle managers group, they express that management and leadership skills should
be a “combination”, while the MD group uses the word “flexible”. Depending on the contexts, the
ability and subordinates’ behavior, the MD applies either management or leadership in order to get
better results. On the one hand, the MD has to build up and maintain the company’s cultures and
standard policies in which all employees have to strictly follow. On the other hand, keeping good

relationship with local employees is very important. To be re-assigned, the MD needs to gain not
only a good business performance but also good evaluation from both the employees and the
headquarter. For both groups, directly facing with subordinates is necessary to some extent. Official
meeting is the best way to manage what happened and what might happen. The meeting can be an
individual or group discussion in order to get feedbacks and give comments and commands. In
addition, hanging out with subordinates is to build relationship, to get acquaintance, and to close
cultural gap. One middle manager interviewee shows his daily time arrangement as 70% for
producing, 20% for training and 10% for socializing. A little bit different, 50% for operating, 30% for
strategic planning, and 20% for people is the daily division of another MD. It seems like the MD
spends more time contacting with people than the middle manager. There is also differences
between Vietnamese and foreign MD based on the middle manager interviewees’ experience. For
them, the Vietnamese MDs often spend more time on management; whereas, foreign MDs do the
way in contrary. Comparably, a foreign MD displays seven-tenth of leadership appearance, while the
rate is only four-tenth for Vietnamese MD. This means Vietnamese MD does more


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management activities. Indeed, they want to know detailed reports and control strictly any
issues in company. Thus, the subordinates feel easier working with foreign MD than local MD.
Although, both foreign and Vietnamese MDs deeply concentrate on company business results;
however, Vietnamese MD tends to make decision based on feeling and affected by outside
inspiration. A sharing from a foreign MD is that leadership style can be improved and build up;
the more the leader is trained and learnt, the more professional leadership skills they have.
Task and Relationship Orientation. As mentioned above, foreign MDs do less management
works, but they are keen on task accomplishment. An individual idea from a middle manager is
that task occupies 80% of the concern of a foreign MD, while this rate is only 60% for the
Vietnamese MD. This means that Vietnamese MDs always ask for performance, but they care
about the process to get the goals. In fact, many business contracts get acceptance outside

the office. The network/ the social relationship is a supportive part in their business. Most
interviewees agree that result is the biggest concern, but encouraging people to work to
achieve the target is a significant point. Therefore, setting up KPIs for each individual is
necessary. A Vietnamese MD shares that the slogan of his company is “Dialogic, One Family".
This value make people work together as members of family. Task and Relationship-oriented
must be combined nowadays in general and particularly in Asian and Vietnamese culture.
Power Distance Leader. Literature says that power distance is high in Asian and Vietnamese
culture. Foreign interviewees slightly agree with this view since Vietnamese staffs often keep
distance with them because of language and culture barrier. Some foreign managers have tried
learning Vietnamese language, to save more time for communication and to join social activities
with subordinate. One foreign MD realizes that charity works bring them closer because Vietnamese
people love doing charity, especially in the Southern areas. On the side of Vietnamese interviewees,
they identify that the distance is not high in Western MNEs, while the distance is high in Asian MNEs.
A Manager looks like a boss; a staff is just a follower with no comment. However, most interviewees
confirm that the power distance varies on different individuals. One Vietnamese MD strongly
disagrees and says that it is wrong; it depends on individual, not nationality. To some extent, high
power distance is not the indicative factor for Vietnamese MDs. Good leaders can influence the
follower based on their knowledge, experience, abilities, and not by power of organizational position.

Trustworthy Leader. Seeming trustworthy is a so regular characteristic that no interviewees
have any comments. They only share how to build trust. Transparency in activities, especially in
reward and position promotion; Treat fairly in workplace; Do discipline; Build the trust by
keeping the promises, encourage the people to tell the truth; Do good things then subordinates
follow; Respective behaviors; Always believe subordinates are suggested. There is only one
note from one manager about a prejudice that foreign MD works better than Vietnamese MD in
term of fairness, learning, encouragement, and recognition. For him, this is not right at the
moment in Vietnam.
Inspire leader. Confidently, all interviewees confirm that sitting on management position,
inspiring employees is their job. There are many ways to motivate employees such as creating
professional values and culture and convincing them follow; making good working conditions

and environment which employees can develop their skills and career; boosting employees do
work-life balance; sharing successful and failure stories to employees; giving 360-degree
feedback; opening to talks, periodical survey. A foreign MD shares that mistake is usually
acceptable; people grow up based on their fault; but not repeatedly. One mistake is considered
as a serious issue, employees have to take responsibility.
Going through the above analysis, the local MD position in a FDI multinational enterprise is
governed by the parent company’s recruitment policy. Except for MNEs rooted in some Asia
countries like China, Korean and Japan, the Western MNEs open chances to the local staffs if
they meet the company’ high requirements. The requirement does not include high education
degree alike MBA or doctoral degree; but it is about professional knowledge and rich
experience. Beside, personal characteristic is a big concern. The candidate should have both
leadership and management skills; be a result-orientation person, keen on task-orientation

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but cannot lack of relationship-orientation. Certainly, they must be trusted and know how to
stimulate employees to follow, and to work together to achieve the final goals.

4.2. Quantitative Data Analysis
The quantitative approach in this research includes gathering both foreign and Vietnamese
MDs and middle managers to discuss about the local MD position in FDI MNEs. On the
quantitative side, a survey was sent out to collect data to draw a picture about a local MD in
local managers and employees’ description. The data from 135 respondents went through
descriptive analysis; reliability and validity testing; and regression application.
4.3. Descriptive Analysis
The Data contains 39 indicators, in which 37 measuring 09 independent factors and 2
determining dependent factors. The name of 01 dependent variable and 09 independent
variables are shown in Table 1.
Based on the value of Mean in Table 1, it can be said that the respondents generally agree

that Vietnamese MD needs to have qualified education degrees; not only a bachelor degree,
but also higher degree(s). Especially, being excellent in English and the native language of the
parent company is a compulsory. Besides, people say that Vietnamese MD has to have
professional working experience in MNEs and similar industry as well. However, many
respondents are not sure whether oversea working experience is necessary. Some people
clearly pointed out that in order to become a local MD, the person must have been working for
at least fifteen years.
Table 1. Mean’s Value of Variables
Factor
Qualified education degree
Working Experience
Localization Strategy
Centralization
Strategy
Management and Leadership skills
Task and Relationship Orientation
Power distance leader
Trustworthy leader
Inspire leader
Overall Vietnamese MD
Regarding the organizational policy, the respondents totally agree that Vietnamese MD is
only hired if the parent company applies the host-national strategy to localization the
subsidiary business. The respondents realize that hiring a local MD can reduce cost and cultural
barrier. However, some of them think that it is not easy to find a candidate who meets the
employer’s expectation. But this does not mean that it is impossible. The respondents also
recognize that the companies which employ the local MD follow the centralization


organizational structure. However, the structure is quite flexible to adapt to the current
situation in the local and global market.

In term of leadership style and characteristics of a local MD, the respondents show some
evaluation and comparison between Vietnamese MDs, Asian MDs, and Western MDs. Generally,
the respondents agree that

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a MD have both management and leadership skills. They take both Task-oriented and
Relationship-oriented styles to achieve better performance. The MDs often make decision by
themselves without referencing the others’ ideas. Mostly, MDs get trust from subordinates and
have the ability to influence people. Setting the clear goal, ready to give advice, supportive,
fairness, and respected behavior are among inspired ways of the local MD.
Table 2 represents some comparison in the leadership styles of Vietnamese, Asian, and
Western MD.

Leadership style
Management
leadership skill
Task oriented
Relationship oriented
styles
Power distance

Trustworthy leader
Inspiration

Overall, more than 70% of the respondents agree that Vietnamese MD has the ability to
replace the foreign MD. However, the local people prefer working for foreign MD in order to
learn from differences. This is understandable because Western MDs always get higher Mean
values in leadership style and personal characteristics. Although the assumption is based on

scientific evidence, people often said that “A prophet is without honor in his own country”.
4.4. Reliability Testing Analysis
Cronbach's Alpha reliability index indicates whether the measurements are linked or not.
Alpha values: greater than 0.8 are good measures; 0.7 to 0.8 is usable; 0.6 or more is possible
in case the research concept is new or new in the research context (Nunally, 1978; Peterson,
1994; Slater, 1995). Based on the value of “Corrected Item-Total Correlation”, the observations
with variable coefficients are small (less than 0.3), which do not contribute much to the
description of the concept under investigation will be discarded. The scale is chosen if Alpha
reliability is greater than 0.6 (Nunally and Burnstein 1994).
After running the reliability test, 02 whole independent variables including Management and
Leadership Skills, and Power Distance are exclusive. 06 independents variables remain with 27
indicators. The dependent variable is lasted with 02 indicators.

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Table 3. Reliability Analysis Result
Factors
Qualified Degree
Working Experience
Localization Strategy
Centralisation Structure
Management
Leadership skills
Task & Relationship
orientation
Power Distance
Trustworthy
Leadership
Inspiring Leadership

Overall VN MD
4.5. Validity Testing (Exploratory Factor Analysis - EFA)
Exploratory factor analysis (EFA) is applied to clarify the validity of the construct as well as
to find the various relationships among these items, then re-group or reducing the number of
dimensions (Morgan, Leech, Gloeckner, & Barrett, 2012). The Kaiser-Meyer-Olkin (KMO) value is
used to examine the appropriate of factor analysis. According to Mayers, Gamst, and Guarino
(2006), the method of extracting Pricipal Components Analysis coupled with Varimax rotation is
the most commonly used method. Loading factor is the norm to ensure the true level of EFA.
For Hair et al. (1998, 111), factor loading> 0.3 is considered to be the minimum, > 0.4 is
considered important, > 0.5 is considered to be practical. Therefore, 0.5 ≤ KMO ≤ 1 coefficient
is an index used to determine the suitability of factor analysis. In addition, suppress absolute
values is useful for suppressing the factor loadings. Any factors that are lower than a chosen
value are excluded. Stevens (1992) recommends the value greater than 0.4 (which explain
around 16% of variance). Child (2006) suggests the value less than 0.3; while Ho (2006) says
0.33. Field (2000) chose for a value of 0.50. In this study, the suppress absolute values is
chosen less than 0.4 (exactly 0.44). Here is the result from EFA analysis for 6 independents
variables with 27 indicators:

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KMO and Bartlett's Test
Kaiser-Meyer-Olkin Measure of Sampling Adequacy.
Bartlett's Test of Sphericity Approx. Chi-Square
df
Sig.

Total Variance Explained
Initial Eigenvalues
Component

Total

1

7.486

2

3.804

3

1.696

4

1.623

5

1.159

6

1.107

7

.997

8

.946

9

.862

10

.798

11

.789

12

.730

13

.650

14

.555

15

.503

16

.486

17

.385

18

.361

19

.341

20

.299

21

.293

22

.244

23

.221

24

.197

25

.185

26

.157

27

.124

Extraction Method: Principal Component Analysis

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Rotated Component Matrixa

TL4
TL3

TRL4
IL2
IL3
IL4
IL1
TRL3
TL5
TL1
TRL2
TL2
WE3
WE2
WE4
QD1
QD2
WE1
QD5
LS4
LS5
LS3
LS1
LS2
CS3
CS1


CS2
Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization.
a. Rotation converged in 8 iterations.

From the above result, 06 news independent variables are grouped which quite match with
the 03 arguments as early mention that the local MD is influenced by Recruitment
requirements, Organization’s strategy, and Leadership styles/ Personal characteristics. The
Table 4 presents news variables as following:

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Table 4. Variables for Regression Model
Factors
ID1 (PC)
reflects leadership style/ personal
characteristics
ID 2 (WE)
represents recruitment
requirements
ID 3 (QD)
represents recruitment
requirements
ID 4 (LS)
denote organization’s policy
ID 5 (CS)
denote organization’s policy
ID6 (CMD)
denote organization’s policy
Noted that QD5 (Qualified degree) has value of 0.336

4.6. Regression Test
Regression is a statistical measure used to predict and determine the strength of the

relationship between two variables. The dependent variable, denoted y, is regarded as the
outcome which is influenced by the independent variables, denoted x, are the major factors for
explanatory (Sekaran and Bougie 2013).
In this study, overall local MD (Y) is dependent variable that is influenced by leadership
style/ personal characteristics (X1) including Task-Orientation style, Trustworthy leader, and
Inspiration leader; Recruitment requirements including Working Experience (X 2) and Qualified
Education Degree (X3); and Organization’s policy including Localization Strategy (X 4),
Centralization Structure (X5), and Centralization in making decision (X6).
Y = a + b1XPC + b2XWE + b3XQD + b4XLS + b5XCS + b6XCMD + u
Where a is the intercept, b is the slope, and u is the regression residual
The result from the regression analysis is as following:
Model Summary
Model

R

1

.792a

a. Predictors: (Constant), Centralization in making decision, Centralization structure, Localization
strategy, Qualified degree, Working experience, Leadership style

R value is at .792 mean there are considered relationship between dependent variable and
its independent variables. The R Square value of 0.627 indicates that the dependent variable
(Overall local MD) can be explained by the above independent variables.
In the next ANOVA table, the Sig. is 0.000 reflects the statistical significance of the model, in
which the dependent variable is predicted well.
ANOVAb
Model

1

Regression
Residual
Total


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a. Predictors: (Constant), Centralization in making decision, Centralization structure Localization
strategy, Qualified degree, Working experience, Leadership style
b. Dependent Variable: Overall local MD

From the Coefficients table, there are 3 variables that are Leadership Style, Working
Experience, and Qualified Degree has sig. less than 0.005. Both Localization strategy and
Centralization are non-significance.
Coefficientsa

Model
1

(Constant)
Leadership style
Working experience
Qualified degree
Localization strategy
Centralization structure
Centralization in making
decision

a. Dependent Variable: Overall local MD

The relationship equation is as below:
Y = -.163 + .418*XLS + .620*XWE + .0.052*XQD+ .054
The result shows that the Localization strategy and Centralization are not statistically
significant. They do not statistically impact the dependent variable – Overall local MD. But it
does not mean that they are meaningless factors. To some extent, it is understandable that the
host-national strategy and organizational centralization are not decisive factors for selecting a
local MD. The market is a battlefield; the company needs a commander who can lead the
business to the peak of glory. If a local candidate satisfies all requirements, the parent
company has no reason to pay a high fee and high risk for sending a home-nation MD who does
not deeply understand the internal market.
Among these three variables, Working Experience (.620) is the most influential factor, the second
is leadership style (.418), and the last one is qualified education degree (.250). In Vietnamese
education system, qualified degree is an approval for good knowledge and gets more competencies.
In fact, degree does not reflect a person’s knowledge. However, holding higher degree is holding
more chances to get better job. It is just a psychology issue. That is why the current MDs talk about
qualified degree while a part of the respondents (who are in managers’ level and staffs’ level) think
that a MD should have a graduated degree. Besides, fluent English communication is a requirement
due to international working environment. At this moment, it is not difficult to improve English skill,
so English skill is a must, not a priority as ten years ago. As showed in the research, fifteen working
years in MNEs is a minimum period that one person needs before getting promoted to MD position in
Vietnam. Actually, this period depends on company size and the products/services of company. In
manufacturing industry, experience either in starting up a new business, or handling big projects, or
spending in several key positions are good points for MD position. Vietnamese people prefer stable
jobs. They might work for a long time, even for their whole life in only one company; therefore, they
lack diversified working environment’s experience. This might be a disadvantage on their way to
become a MD in a FDI MNE. Certainly, MD is the top position in company; professional knowledge is
definitely a compulsory. However, experience looks more superior. Ghattas, Soffer, and Peleg (2014)

state that experience gained through past process execution is one of criteria driving the decision
making. Similarly,

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Lasmane and Briksnis (2014) find that one of the factors that influence the decision-making of
a CEO is individual experience, which includes beliefs, values, likes and dislikes.
In the leading position, MDs have heavy responsibility on the success of the company. They
work and deal with people from the headquarter, subordinates, customers, partners, and
competitors on a daily basis. The leadership styles of MDs might affect people, working
atmosphere, organization’s culture, and company performance. Bertrand and Schoar (2003)
report that different leadership style, different behavior leads to different decision making and
different performance. In this study, three major characteristics are tested: whether a local MD
is task-orientation or relationship-orientation, whether the local MD can inspire and get trust
from subordinate. Like foreign MDs, Vietnamese MDs always focus on results as first priority.
Task assignment is the equipment to get expected performance. However, if employees do not
accomplish their tasks, there is no achievement. Mishra and Mishra (2013) state that CEOs of
small companies can directly embrace all works; but do not put fingers too depth. Thus, task
and relationship cannot separate nowadays. A MD has to apply both of these styles to direct
the company business. Building code of conduct (COC) and organizational culture are one of
the effective ways to match task delivery and people encouragement. Caring people,
convincing people is a job of MDs. In this day and age, the market is changing rapidly and
affected by technology changes, international trade changes, new entrants, new competitors,
new business patterns and others. Consequently, MDs have to quickly response to the change
by redefining company internal and external resources and reshaping the organizational
structure as well. This asks for inspirational skills to attract the followers first. Horwitch and
Whipple (2014) express that “inspirational skills are exactly what today’s environment
requires”. From this study, what the employees expect from the local MD is their voice in
protecting their financial and non-financial benefits. As culture, the local MD is expected to care

not only employees’ jobs but also employee individual life such as school for children.
Additionally, in Vietnamese culture (and Asian as well), people said that “Praise in public,
Criticize in private”, to some extent this is a way to inspire people. Sometimes, separating work
and personal business is not always helpful. Correspondingly, caring people is one of the ways
to inspire followers. Another linking issue is trust. Trust is a positive inspiration and a vital
matter in any organization. When MDs are trusted by employees, it is easier for them to
convince people; subsequently, working together to get the best performance. Therefore,
trustworthy is a required characteristic of a MD. Mishra and Mishra (2013) believed that
“leaders are critical to developing trust in an organization”. The MDs need to build mutual trust
and rebuild mutual trust, not only in management board, executives and subordinates but also
in the whole company. In professional working environment in MNEs, trusted leader is one of
key factors that help company to survive and develop in globalization. This study shows that
Vietnamese MDs have tried their best to build trust and encourage people to tell the truth.
Transparency in policies and relationships, be a mirror for the employees, or be hungry to get
feedback from employees are some good examples.
Table 5 is a summary of qualitative and quantitative results. All factors are supported in
qualitative analysis while only 05 per 09 factors are accepted in quantitative analysis. Although
the Localization strategy and Centralization structure are denoted for organization’ policies are
reliability and validity; they are not statistically significant in regression analysis.