Cultural Differencesand

International Alliance Performance

Based on Work by Sirmon and Lane (2004)

• Opportunity to use knowledge and capabilities not available in the home country.

• Benefits:• Share Costs, Enter New Markets, Innovate Products,

Increase Knowledge & Grow the Business. =Value Creation.

• Challenge:• Differences in National Culture often cited but few

practical methods to analyze and overcome the collaboration and learning difficulties. = Frustration.

• Deeper Analysis Shows:• Challenges are caused by more than National

Culture: Additional Professional & Organizational Culture have impact on venture performance.

• We cant focus on one without addressing the others and expect success

International Alliances

National culture (norms, legal system, business customs, rights, fairness, equality, accountability, independence etc. )Influences Professional Culture. (how people

act in this industry, management expectations, how customers interact with salespeople and sales managers, what incentives are customary, expenses, compensation, customer ownership ).Influences Organizational Culture

(employee handbook, expected behavior at this company, company benefits, recognition, privilege, etc.)

Do Taiwanese and American professionals speak the same language?If so, what is it? If not, how to we understand &

manager it to reach success?

Understanding the Problem

To achieve: increased performance (higher sales,

lower costs, increased market feedback, better product development opportunities) better brand recognition, advertising efforts, etc.)

We have three levels of culture to contend with:1. National C: Legal Systems, Business Purpose,

Equality, Fairness2. Professional C: Trade language, sales

activities, managerial communications, relationships, shared expectations, compensation…

3. Organizational C: Benefits, rights, perks, recognition, authority, accountability, office size, furniture,

To achieve: increased (value adding) performance (higher sales, lower costs, increased market feedback, better product development opportunities) better brand recognition, advertising efforts, etc.)

What we need to understand…

Marketing AllianceProduct

customizationDistribution

selectionSales & serviceUp sellingCo-Branding

Value Creating Activity Effectiveness

R&D AllianceKnowledge transferInnovation centersProduct developmentResearch facilities

International alliances differ in primary value creating activities…depending on what stage they are in (e.g. start-up, mature) or what industry they are in (tools, electronics, auto’s)…

The stages will require different kinds of activities as they progress calling for different resources to be devoted to the venture. Thus the cultural needs will vary over time, requiring greater cross-cultural cooperation.

Failure to consider the differences in how each firm approaches the tasks

Partner Compatibility Underdeveloped

Failure of “Sensemaking”

or the failure to comprehend, understand, explain, attribute, extrapolate and/or predict new stimuli.

Alliances fail to achieve their goals because the partners fail to recognize the difficulty in working together…

What I say and single out and conclude are determined by

who socialized me and how I was socialized, as well as the

audience I anticipate will audit the conclusions I will reach.

--Weick: Sensemaking in Organizations (1995, 62)

Acquired early in life:Family socializationSchools, playInfluence is long and

lasting – holidays, ceremonies,

National Culture

Reinforced by Economic institutions

(social security, federal bank)

Political PartiesRecreation

Deep values common to members. Shared norms, values and priorities that together are known as their peoples: “design for living”

Hofstede (1991) found that 50% of the differences in managers attitudes were infl uenced by National Culture.

Stem from a lack of shared norms or values.

Lack of common understanding may limit the partners interpretation of the others strategic intent

National Culture Challenges

Research by Barkema & Vermeulen (1997) found that:Long term orientationUncertainty

avoidance Had them ost impact on

the success of international alliances.

However, other evidence suggest that differences in national culture can be benefi cial … people are more willing to spend additional effort on avoiding misunderstandings.

Forms a kind of social control that identifies appropriate behaviors and attitudes for organizational members to display

Organizational Culture (Company)

Provides closer clues to members’ behavior than does national culture

It provides members with an organizational identity and collective commitment.

Social or normative glue that holds an organization together… it expresses the values or social ideals and the beliefs that organization members come to share. (Smircich, 1983)

Brown (1988) in a study of Japanese and western Firms found that differences in organizational culture have a profound negative impact in venture performance. Firms spend too much time on cooperation than on the business itself.

Organizational Cultural differences negatively impact the inter-organizational learning

Organizational Culture Challenges

Organizational Cultural differences negatively impact the employee satisfaction and effectiveness in interactions

Domestic alliances also suffer from the same organizational performance issues.

As a result, International Venture Partners with dissimilar organizational cultures will be less likely to effectively achieve the alliance's primary goals. (even when the necessary resources are available)

Developed through socialization members receive during occupational or academic training (company or industry or university)

Professional Culture

Reinforced through professional experiences and interactions.

Lead to a broad understanding on how their occupation should be conducted

…When a group of people who are employed in a functionally similar organization share a set of norms, values, and beliefs related to that occupation.

Trice and Beyer (1993) argue that an individuals professional culture is the most organized, distinctive and pervasive sources of sub-culture in work organizations. (accounting, marketing, sales, engineering)

Separate professional cultures lack a shared set of basic knowledge because their occupational socialization involved different material

Professional Culture Challenges

Often lack experience communicating with members outside their professional culture.

Communication is impaired Frustration emerges from a

lack of “Common Ground”

When ventures need employees from different professional cultures to interface on a project… we expect difficulty, specifi cally:

Again, energy must be diverted from value creating business activities to simple activities that form a basis to communicate and interact with one another.

An Example:

SummaryThe three challenges inhibit the effective interaction of individuals from different cultures.

This then decreases the likelihood that the alliances pooled resources will be shared, combined and leveraged in a manner that achieves the ventures goals.

AppendixCulture

Questions???

International

Business is as

much an Art as it

is a Science.

Wrap Up