Embracing the foreign: Cultural attractiveness and international strategy

Research summary : Prior research focused on cultural differences and their impact on foreign direct investment (FDI), neglecting other potentially relevant variables attesting to the cultural interaction between a multinational enterprise and its host environment. In this article, we draw on interpersonal attraction research to develop a positive approach to cross‐cultural interaction with the cultural attractiveness (CA) construct, whereby members of a focal culture view another culture as desirable. We create a CA measure and establish its predictive validity with country reputation data. Using FDI data for 41 nations from 1985 to 2012 and performance data for 8,519 cross‐border acquisitions (CBA) for 40 nations from 1990 to 2009, we find that CA is a predictor of FDI inflows and CBA outcomes, whose explanatory power is superior to cultural difference measures. Managerial summary : Practitioners have traditionally emphasized potential difficulties of cross‐cultural interaction when dealing with culturally distant countries. In contrast, our study addresses the positive aspects of cultural differences and suggests that a lot can be gained from dealing with attractive cultures, even when they are different. This insight can be helpful, for example, in contemplating/managing international M&As. Managers of acquiring/merging firms can use our approach to identify whether their employees find the partner's culture desirable, and if they do, proceed with the takeover and then adopt the partner's organizational routines during post‐merger integration. This approach can help avoid conflicts, improve performance of home country expatriates, and ultimately, create value for acquiring firms. Copyright © 2016 John Wiley & Sons, Ltd.     

The impact of strategic dissent on organizational outcomes: A meta‐analytic integration

Research summary: Strategic dissent represents divergence in ideas, preferences, and beliefs related to ideal and/or future strategic emphasis. Conventional wisdom in strategic management holds that such differences in managerial cognitions lead to higher‐quality strategic decisions, and thus to enhanced firm performance. However, 4 decades of empirical research have not provided consistent findings or clear insights into the effects of strategic dissent. Hence, we analyze the relative validity of predictions about these effects from both social psychological theories of group behavior and information processing perspectives on decision‐making. Then, we conduct a meta‐analytic path analysis (MASEM) based on current empirical evidence. Synthesizing data from 78 articles, we put to rest the notion that strategic dissent leads to positive outcomes for organizations and estimate how negative its effects actually are. Managerial summary: Top management teams (TMTs) set the tone and direction for their firms in important ways. Top managers, however, often disagree over fundamental issues related to strategy. Such strategic dissent affects how important decisions are made, and thus how the firm performs. In more specific terms and contrary to popular belief, strategic dissent creates not only dysfunctional relationships among top managers, but also disrupts the process by which these managers exchange, discuss, and integrate information and ideas in making strategic decisions. In short, firms have not yet generated value through numerous perspectives, ideas, and opinions among their top managers. We discuss interventions that could prove helpful in efforts to benefit from having diverse cognitions in a TMT.     

The external knowledge sourcing process in multinational corporations

Research summary: We study the processes through which multinational corporations (MNCs) identify and make use of external sources of knowledge. Based on a seven‐year longitudinal study of one MNC's overseas scouting unit, we show how a simple one‐directional “channelling” process gradually gave way to three higher value‐added processes, labelled “translating,” “matchmaking,” and “transforming.” Building on these insights, we develop an integrative framework, defining the conditions under which each of the four processes is likely to transpire, and showing how the stock of social capital held by the scouting unit allows it to perform increasingly high value‐added activities over time. Implications for the MNC, external knowledge sourcing, and boundary‐spanning literatures are discussed. Managerial summary: Over the years, many multinational corporations (MNCs) have created overseas “scouting” units to tap into new ideas and opportunities in leading‐edge markets, but with mixed outcomes. In this study, we describe the development of a European telecom firm's scouting unit in Silicon Valley during the 2000s, focusing on the specific approaches used by the scouting managers to build effective connections between Silicon Valley start‐ups and the firm's business units back in Europe. We identify four distinct approaches for different types of opportunities, and we observe a clear sequencing of effort over time as the scouting managers built the necessary capabilities and credibility. Copyright © 2015 John Wiley & Sons, Ltd.     

Moral judgment in a business setting: The role of managers’ moral foundation,ideology, and level of moral development

Despite the extensive research conducted on moral judgment, the role of moral foundations in moral judgment in business has largely been overlooked. Motivated by the increasing concern about the ethical issues observed in China, this study aims to examine the impact of moral foundations on Chinese managers’ moral judgment while simultaneously looking into the role of moral ideology and the level of managers’ moral development. A sample survey was conducted in Shanghai, China, which involved 451 practicing business managers who were pursuing their MBA degree in a nearby university at the time of data collection. Both structural equation modeling (SEM) and hierarchical regression were used in data analyses. The results reveal that individualizing moral foundations and moral idealism have significant positive impacts on moral judgment. Moreover, the findings indicate that moral relativism and levels of mangers’ moral development moderate the relationship between individualizing moral foundations and moral judgment with the impact of individualizing moral foundations being stronger when managers’ relativism is low rather high or when their moral development is high than it is low. The managerial implications of the research and future research direction are discussed.     

Symbolic or substantive document? The influence of ethics codes on financial executives' decisions

With the recent spate of scandals resulting from the questionable behavior of corporate leaders, there have been calls for various governance mechanisms including ethics codes to guide executive decision‐making. However, the extent to which ethics codes are actually used by executives when making strategic choices as opposed to being merely symbolic is unknown. We develop our hypotheses by combining stakeholder management theory and the theory of planned behavior, and test them with a survey of 302 senior financial executives (e.g., CFOs, VPs of Finance). We find that financial executives are more likely to integrate their company's ethics code into their strategic decision processes if (a) they perceive pressure from market stakeholders to do so (suppliers, customers, shareholders, etc.); (b) they believe the use of ethics codes creates an internal ethical culture and promotes a positive external image for their firms; and (c) the code is integrated into daily activities through ethics code training programs. The effect of market stakeholder pressure is further enhanced when executives also believe that the code will promote a positive external image. Of particular note, we do not find that pressure from non‐market stakeholders (e.g., regulatory agencies, government bodies, court systems) has a unique impact on ethics code use. Copyright © 2004 John Wiley & Sons, Ltd.     

Pioneering Advantage in New Service Development: A Multi-Country Study of Managerial Perceptions

Pioneering advantage in manufacturing firms has received much attention in the management and marketing literature. Few research studies, however, have been conducted to investigate the pioneering advantages and disadvantages involved in new service development, especially across several geographic regions. We build a theoretical framework of pioneering advantage in service industries based on the distinguishing characteristics of services. From this framework, we develop a set of testable propositions about the importance of several types of pioneering advantage (economic, preemptive, technological, and behavioral advantages) to service managers. Specifically, we propose that all of these types of pioneering advantages are important to service managers, and that these managers perceive that pioneering results in improved firm performance. We also propose that, due to the distinguishing characteristics of services such as intangibility and heterogeneity, service managers will not perceive the risks of pioneering in a service industry to be severe. In addition, we propose that certain types of pioneering advantage will be more important to service managers in Western countries than in Asian Pacific countries due to cultural and business environmental differences. In particular, we propose that service managers from Western firms perceive preemptive advantages of pioneering to be more important than do their Asian Pacific counterparts, and service managers from Asian Pacific firms perceive behavioral advantages of pioneering to be more important than do their Western counterparts. To test our propositions empirically, we develop a set of pioneering principles from the literature. We then collect and analyze data from a sample of 982 senior managers in service industries from nine countries: the United States, the United Kingdom, Germany, Japan, China, Taiwan, Hong Kong,1 South Korea, and Singapore. We find evidence of several significant cross‐cultural differences consistent with our propositions. In fact, seven of the eight propositions are strongly or partially supported. The only nonsupported proposition concerned the importance of technological advantage. We find that technological advantages of pioneering are much less important to service managers than are other pioneering advantages. We conclude with strategic recommendations for managers involved in new service development and international or global competition, and provide directions for future research. We note that the insights from this study can help managers from both the West and the Asian Pacific region to better understand their global competitors who pursue a new service pioneering strategy, and can potentially help them select entry deterrence strategies more effectively.     

Erratic strategic decisions: when and why managers are inconsistent in strategic decision making

While decision makers in organizations frequently make good decisions rooted in stable and consistent preferences, such consistency in outcomes is not always the case. In this study, we adopt a psychological perspective of judgment to investigate managers' erratic strategic decisions, which we define as a manager's inconsistent judgments that can shape the direction of the firm. In a study of 2,048 decisions made by 64 CEOs of technology firms, we examine how both metacognitive experience and perceptions of the external environment (hostility and dynamism) could affect the extent to which managers make erratic strategic decisions. The results indicate that managers with greater metacognitive experience make less erratic strategic decisions. The results also indicate that in hostile environments managers make more erratic strategic decisions. But contrary to our expectations, in dynamic environments managers make less erratic strategic decisions. Similarly, hostility and dynamism interact in their effect on erratic strategic decisions in that the positive relationship between environmental hostility and erratic strategic decisions will be less positive for managers experiencing high environmental dynamism than those experiencing low environmental dynamism. These results have important implications for strategic decision‐making research. Copyright © 2010 John Wiley & Sons, Ltd.     

Exploiting innovative opportunities in global purchasing: An assessment of ethical climate and relationship performance

Purchasing managers are expected to balance costs, innovation, supplier management, and corporate social responsibility while coordinating expanding areas of the corporation. The increased responsibilities and pressures to innovate brings purchasing managers into potentially increasingly difficult ethical dilemmas. In this study, we examine the relationships between organizational culture, learning, entrepreneurial innovation, and purchasing outcomes in different ethical climates. To address external business conditions that may influence innovation in purchasing, we also examine the moderating effects of technological and market turbulence. Data from 200 purchasing managers in multinational corporations were used to test the relationships through structural equation modeling. We find that entrepreneurial innovation positively affects the quality of the relationships among sourcing participants when operating in a climate valuing ethics. The study results are particularly relevant for managers concerned that establishing an ethical climate may restrict innovation in the purchasing process.     

Competitive forces and strategic choice decisions: an experimental investigation in the United States and Japan

Managers operate in a complex, uncertain environment and tend to form simplified models in order to cope with this environment and make competitive strategic decisions (i.e., cost‐leadership, differentiation, or focus). In this study, we use an experimental design to examine the strategic choice decision‐making process in firms located in the United States and Japan. We develop several main‐effect propositions regarding managerial selection of competitive strategies, depending on the competitive forces (buyer power, threat of substitutes, threat of new firm entry, and high intensity of rivalry) they are facing. We propose a main effect due to country of origin: Japanese managers prefer a cost‐leadership strategy more than American managers do. We also propose several interaction effects regarding cross‐national differences in strategy selection between Japanese and U.S. managers. To test our propositions, we collected experimental data from 316 U.S. executives and 459 Japanese executives. We assessed relative impacts of the competitive forces on strategic decision‐making using a multilevel regression analysis. The research findings indicated that high buyer power and high substitution threat were associated with a preference for cost‐leadership strategies, and Japanese managers were significantly more likely to prefer a cost‐leadership strategy than U.S. managers. We also found that, under conditions of high buyer power, U.S. managers were less likely than Japanese managers to enter a market with a differentiation or focus strategy. We found little support for other interaction hypotheses, suggesting points of similarity between U.S. and Japanese managers. We conclude with a discussion of theoretical and managerial implications of our results. Copyright © 2002 John Wiley & Sons, Ltd.     

Exploring the ethical behavior of managers: A comparative study of four countries

Donaldson and Dunfee's (1994) social contracts theory of economic ethics was subjected to empirical scrutiny to determine whether it can explain differences in behavior between cultures. Data collected utilizing a series of vignettes developed by Fritzsche and Becker (1984) were examined for differences in indicated ethical behavior among American, Japanese, Korean and Taiwanese managers. Rationale for the behavior was classified according to hyper and community norms which were supported or violated. The results suggest that the three East Asian countries do not neatly cluster together in relation to the U.S. in terms of their patterns of ethical behavior. Nonetheless, when we examined the specific rationale for the decisions provided by the managers, the effects of Asian cultural characteristics became more notable. We also found that the social contracts theory provided a much needed bridge between ethical universalists and relativists. The specific reasons underlying their decisions are discussed in the light of cultural and social differences.This research project was partially supported by a research grant from the School of Business and Management, The Hong Kong University of Science and Technology.     

Cross‐Cultural Creativity: Conceptualization and Propositions for Global New Product Development

In today's global business environment, where multinational companies are pressed to increase revenues in order to survive, creativity may hold the key to ensuring their new product development (NPD) efforts lead to innovations with worldwide appeal, such as Apple's iPad and Gillette's Fusion Razor. To leverage creativity for effective global NPD, businesses want to know how cultures differ in their concepts of creativity and the impact of those differences on approaches to developing new products. Because global new products are increasingly developed in, by, and for multiple cultures, a particular need is for a culturally reflective understanding, or conceptualization, of creativity. While creativity is believed to be culturally tied, the dominant framework of creativity used in business and management assumes that creativity is culturally indifferent or insensitive. This knowledge gap is addressed by studying the role of creativity in NPD practices in a cross‐cultural or global context. The study begins by first developing a culturally anchored conceptualization of creativity. Called cross‐cultural creativity, the concept draws on creativity insights from the field of art and aesthetics. The concept specifies two modes of creativity, neither of which is superior to the other, called the spontaneous or S route and the divergent or D route. The S route emphasizes adaptiveness, processes, intuitiveness, and metamorphism, while the D route focuses on disruptiveness, results, rationality, and literalism. Next, this new concept is applied to NPD by positing how creativity in distinct cultures may shape NPD practices, as illustrated by Japanese and U.S. firms. Research propositions are formulated to capture these patterns, and thereafter, theoretical and practical implications of the framework and propositions are discussed. The implications center on global NPD, which is a complex enterprise involving typically more than one culture to design and develop new products for several geographic markets. The study is of interest to researchers needing a globally situated, culturally attached framework of creativity for international NPD studies, and managers seeking to exploit creativity in multinational and multicultural innovation projects.     

Global mind-sets and cognitive shift in a complex multinational corporation

This article investigates attitudes that underlie international strategy processes. We propose survey scales of these attitudes and describe tests that support their reliability and validity as measures of constructs—including integration, responsiveness, and coordination—that researchers have used for many years in case analyses of international strategy and organization. We also propose and validate scales to capture the perceived alignment with firms' international objectives of key business policies that affect individuals, including accountability for global results, career opportunity and a globally shared meaning system that informs communication and discussion about change. Our discussion of these tests offers an assessment of how changing patterns of association among the measures over time conform to expectations generated by the case-based empirical literature. We argue that these patterns document a process of organizational learning that can link managers' mind-sets with senior managers' intentions in the course of proactive international strategic change. The analysis relies on survey responses taken in 1992 and 1995 from 370 managers in 13 country affiliates and the head office of a U.S.-based diversified multinational corporation (DMNC). © 1998 John Wiley & Sons, Ltd.     

Managerial perceptions of global pioneering advantage: Theoretical framework and empirical evidence in the U.S. and Korea

Managers form mental models of their business environment, and make strategic decisions based on these perceptions of reality. We study managerial perceptions of the competitive advantage gained by a pioneering firm. We expect that managers will make pioneering entry decisions based on their perceptions of pioneering advantages. Due to cross-national cultural and business environment differences, managers from different countries will employ different mental models and thus perceive the relative advantage of pioneering differently.Drawing from the literature on cultural influence on decision-making, we build a theoretical framework of perceived pioneering advantage in different cultural environments. From this framework, and from cultural differences that exist between the United States and South Korea, we derive hypotheses regarding expected cross-cultural perceptual differences. We test these hypotheses using samples of senior product managers from both countries. We find that some, but not all, of the principles of pioneering advantage empirically verified in North America are generalizable to the culturally-different South Korean business environment.     

Motivation matters: Corporate scope and competition in complementary product markets

Research summary : We argue that a pure capabilities‐based view does not accurately explain the competitive dynamics of increasingly common settings in which firms act as both complementors and competitors. We propose that the Awareness‐Motivation‐Capability framework is more appropriate for these settings. We derive predictions from both a pure capabilities view and the AMC framework, and test those predictions in the U.S. auto leasing market, in which the leasing subsidiaries of car manufacturers directly compete with the same independent lessors who provide complements to the manufacturers. Although our results are consistent with capabilities playing an important role, motivation appears to be a critical factor explaining the competitive dynamics of the market. Managerial summary : Firms that compete with business units owned by larger corporate parents face additional considerations. Such subsidiary competitors can be motivated by broader corporate considerations, shifting their objectives, and consequently, their strategic actions. Expecting subsidiary competitors to pursue business unit profitability can mislead managers toward pricing, product mix, or market entry errors. We present an important example from consumer finance, where independent auto lessors, such as Bank of America (BoA), compete with captive leasing subsidiaries like Ford Motor Credit (FMC). Since FMC is motivated to subsidize and support vehicle sales for its manufacturer parent, a cost advantage is not enough for BoA to dominate the market. Understanding broader corporate motivations of competitors helps managers anticipate competition levels in potential markets, thereby improving decision‐making and performance. Copyright © 2015 John Wiley & Sons, Ltd.     

Skew and heavy‐tail effects on firm performance

Research summary : Most strategic management studies adopt an average‐centered view that uses the central tendency to explain between‐group variation in performance (i.e., performance differences between business units, firms, industries, and countries). In this study, we explain within‐group variation using a variance‐centered view that focuses on the peripheral characteristics of performance distributions as defined by skew and heavy tails (i.e., variance and kurtosis). Drawing on performance feedback theory, we hypothesize that successful firms tend to develop a positive skew in their performance distributions, which we call a “positive skew effect” in this study, and that heavy tails moderate this effect. Our analysis of the performance of a group of foreign affiliates provides general support for our hypotheses at both the firm and segment (industry and country) levels. Managerial summary : Managers of multi‐business firms use various approaches to improve the aggregate performance of their business units. Some expand the range of upper performance outliers (exploration) or reduce the range of lower outliers (downsizing); others improve the performance of current business units (exploitation). We find that firms with superior performance tend to have a balanced mix of the three approaches. We also find that segments (countries and industries) with higher mean performances provide environments that facilitate the entry of productive firms and the exit of unproductive firms and provide environments in which incumbents can further improve their performance by learning from others. We observe that successful firms and segments have a positive skew in their performance distributions, which we call a “positive skew effect.” Copyright © 2016 John Wiley & Sons, Ltd.     

Managerial stereotypes in Singaporean subsidiaries of multinational corporations

The responses of 365 managers from 34 Singaporean subsidiaries of multinational companies are used to profile the stereotypes these individuals hold of each other. The managers' replies to 18 semantic differential items show greater agreement on each other's managerial performance and style between expatriate and local managers in British corporations than in Japanese corporations. The results from American corporations are between these two. Stereotyping has been shown to be a very common phenomenon in international relationships (Davidson and Thomson, 1980). Despite some recognition of the importance of stereotyping in international business situations (Hays, 1972), very little empirical work has been conducted into the general process of stereotyping in multinational corporations (viz. Stening and Everett, 1980; Whitehead and King, 1973). Even less research has been conducted on the stereotypes held by expatriate and local personnel in multinational corporations of their own group (auto-stereotypes) and of other groups (hetero-stereotypes). This study examines the auto-stereotypes and hetero-stereotypes held by expatriate and local managers in Singaporean subsidiaries of British, Japanese and American corporations. It is apparent from the comparative management literature that there are differences in attitudes and behaviour among managers from these countries (Haire, Ghiselli, and Porter, 1966; Ronen and Kraut, 1977). There is insufficient basis, however, for anticipating variations among them in terms of their auto-stereotypes and their hetero-stereotypes. This exploratory study presents evidence on the nature of those variations.     

Strategy,human capital investments,business‐domain capabilities,and performance: a study in the global software services industry

Research summary : In knowledge‐based industries, continuous human capital investments are essential for firms to enhance capabilities and sustain competitive advantage. However, such investments present a dilemma for firms, because human resources are mobile. Using detailed project‐level operational, financial, and human capital data from a leading multinational firm in the global IT services industry, this study finds that deliberate investments in improving general human capital can help firms develop superior capabilities and maintain high profits. This paper identifies two types of capabilities essential for success in this industry—technological and business‐domain capabilities—and provides empirical evidence justifying such investments. Theoretical and practical implications of capability‐seeking general human capital investments are discussed. Managerial summary : The primary managerial implication of this research is that capability‐seeking investments in developing general human capital through strategic learning (training and internal certifications) can enhance firm performance. Although investing in general human capital is risky, the firm considered this a strategic necessity in order to thrive in the fast paced IT services industry. By leveraging general technological skills in combination with business‐domain knowledge to address customer's business problems firms can earn and sustain higher profits. Our study also demonstrates how a developing‐country firm responded to strong competitive challenge from global rivals possessing superior capabilities by upgrading the capabilities of its employees through internal development. In doing so the firm was able to narrow the capability gap vis‐à‐vis its foreign peers and expand its business globally. Copyright © 2016 John Wiley & Sons, Ltd.     

Increase in takeover protection and firm knowledge accumulation strategy

Research summary : We argue that the extent to which a firm faces takeover threats affects its knowledge structure. In particular, takeover threats may lead to managers' reluctance to adopt a strategy toward firm‐specific knowledge accumulation because implementing this strategy requires them to acquire specialized skills, which are at risk under takeover threats. Conversely, takeover protection leads to an increase in firm‐specific knowledge. Further, the relationship between takeover protection and firm‐specific knowledge is positively moderated by managerial ownership, which helps align managerial interests with those of shareholders. But the relationship is negatively moderated by managerial tenure, as long‐tenured managers have already committed to their firms. Using a differences‐in‐differences method with Delaware antitakeover rulings in the mid‐1990s as an exogenous shock, we found results supporting these arguments. Managerial summary : We examined how changes in the Delaware antitakeover rulings in mid‐1990s affected the knowledge structure of firms incorporated in Delaware. We reasoned that with a greater level of takeover protection, top managers of those firms incorporated in Delaware felt higher job security, thus providing them stronger incentives to make strategic decisions toward the development of firm‐specific knowledge and to make corresponding human capital investments in specialized skills. Empirically, firms incorporated in Delaware were found to have an increase in the level of firm‐specific knowledge in their knowledge structure after the mid‐1990s. Furthermore, our analysis suggests that the role of takeover protection on top manager incentives is particularly salient when the managers are awarded with more company shares and when the managers have shorter organizational tenure. Copyright © 2015 John Wiley & Sons, Ltd.     

Why strategic factor markets matter: “New” multinationals' geographic diversification and firm profitability

This study examines firm profitability differences among “new” multinational enterprises (NMNEs) pursuing geographic diversification into two distinct types of geographic locations based on the development of strategic factor markets. Building on strategic factor markets theory, we propose that firm‐specific advantages of NMNEs contribute differentially to firm profitability because they evolve differently given strategic factor market differences in host compared to home countries. Using a sample of Korean manufacturing MNEs during the 1993–2003 period, we find that geographic diversification into resource‐poorer host countries has a positive relationship with firm profitability, whereas geographic diversification into resource‐richer host countries has a U‐shaped relationship with firm profitability. Our study demonstrates why strategic factor markets—an important and often overlooked contextual factor—matter in exploring rationales for geographic diversification. Copyright © 2014 John Wiley & Sons, Ltd.