Beauty Is in the Eye of the Beholder: Toward a Contextual Understanding of Compensation of Information Technology Professionals Within and Across Geographies

This study provides new insights on compensation and human resources practices of multinational corporations (MNCs) and how they differ from those of domestic companies. The authors focus on cross-geography differences in compensation for IT professionals and take a closer look at returns on master of business administration (MBA) education and information technology (IT) experience. They analyze data on more than 20,000 IT professionals across the United States and India and compare practices of United States–based MNCs and India-based firms for IT professionals in India and of United States–based MNCs for IT professionals in the United States and India. The study finds that MNCs source IT talent from emerging markets because of the lower cost of IT professionals in these markets, coupled with the availability of a large pool of technically qualified professionals. For IT professionals in India, results indicate that United States–based MNCs pay a premium (compared with India firms) for each year of IT experience. By contrast, India firms pay a premium (compared with United States–based MNCs) for IT professionals in India with an MBA. Interestingly, whereas United States–based MNCs do not pay a premium for MBA education in India, they do pay a premium for MBA education in the United States. The findings are informative for IT professionals to decide whether to pursue an MBA or invest in gaining firm-specific experience. The results also provide indirect evidence that MNCs apply a portfolio approach to optimize their profits by using knowledge workers in various locations based on their skills and costs.