The purpose of the dissertation is to understand the positive and negative processes of intercultural work relationships between expatriate managers and host national subordinates. As such, the research question is: How does cultural diversity affect the quality of work relationships between expatriate managers and host national subordinates? To answer the question, ideas are drawn from the cultural diversity literature and leader-member exchange theory. Hypotheses are proposed that cultural diversity can positively and negatively relate to the quality of the work relationships depending on how it is perceived by the parties involved. Specifically, if cultural diversity is perceived as a source of dissimilarity, it leads to an affect-based process, negatively impacting the quality of the work relationships. If it is perceived as a valued resource, on the other hand, it leads to a resource-based process, positively affecting the quality of the work relationships. Using a sample of 72 expatriate manager- host national subordinate dyads, regression analyses are performed to test the proposed hypotheses. The results indicate that indeed, perception of dissimilarity relates negatively, and perception of resource value relates positively, to the quality of the work relationships. Partial support is found that the perceptions mediate the relationships between cultural diversity and the quality of the work relationships. Furthermore, there are different processes for expatriate managers and host national subordinates. The comparison between the two revealed that: (1) expatriate managers regard value diversity (deep level cultural diversity) more negatively as a source of dissimilarity, whereas host national subordinates regard it more positively as a valued resource; (2) host national subordinates are more open to nationality differences (surface level cultural diversity) than expatriate managers. In addition, a positive relationship is found between the quality of the work relationships and host national organizational commitment, task performance and organizational citizenship behaviors, underscoring the long-term significance of expatriate-host national work relationships for multicultural organizations. Overall, the findings suggest that leveraging intercultural work relationships for competitive advantage requires strategies to develop host nationals in addition to the expatriate managers.