Lecture week 4
Timeline
- Lecture 3: leadership and communication
o Single interactions – role of emotions
o Team level challenges and strategies
o Leadership and differences across cultures
Today
- Culture and corporate strategy
o Corporate strategy
o Culture (cultural distance) as main and moderating variable in corporate
strategy
o Conceptual and other issues
o Dealing with issues
Corporate strategy
- How companies create value in the long term
o What is value? Value for whom?
o What is long term?
- HOW?
o Many ways – product diversification, expansion, divestment, HRM etc
o Variables of interest for us – international business related
- IB related variables
o HRM
o Leadership, decision-making etc
o Where to go? – location choices
o How to go? – mode of entry
Exporting, licensing, joint ventures, acquisition, greenfield investment
(in the increasing order of risk and control)
The role of culture
- Individual level (relationship between individual cultural values and outcomes)
o HRM
o Leadership, decision making etc (discussed some of these issues)
- National level (relationship between national cultural values and outcomes)
o Where should a company go? – locations
o How should it go there? – mode of entry
- Culture as a main effect
o Cultural distance
o Individual dimensions (lecture 2)
- Culture as a moderator
o Cultural distance
o Individual dimensions (lecture 2)
Cultural distance
, - Kogut and Singh (1988)
-
- Ith dimension for jth country, Vi is the variance of the index on the ith dimension, u is
the United States (based on their work)
o Dyadic indices constructed going forward for each pair of countries
Culture as a main effect – individual level – individual dimensions
- HRM
o Recruitment and selection – individual level collectivism negatively linked to
preference for use of selection tests
o Appraisal and feedback – collectivism negatively linked to merit based
promotions. Individual feedback useful for both individualists and collectivists,
but group feedback critical only for collectivists
o Remuneration – collectivism positively linked to equality based rewards and
employment security and negatively linked to individual based pay
Culture as a main effect – national level – individual dimensions
- Firms prefer FDI over licensing and seek majority ownership in foreign subsidiaries in
high Power Distance countries
- High uncertainty avoidance in home countries in positively linked to use of
greenfields over acquisitions
Culture as a main effect – national level – cultural distance
- Mode of entry
o As cultural distance (CD) increased…
Tendency to choose joint venture over acquisition
Tendency to choose greenfield over an acquisition
Acquisition performance likely to go down
Timeline
- Lecture 3: leadership and communication
o Single interactions – role of emotions
o Team level challenges and strategies
o Leadership and differences across cultures
Today
- Culture and corporate strategy
o Corporate strategy
o Culture (cultural distance) as main and moderating variable in corporate
strategy
o Conceptual and other issues
o Dealing with issues
Corporate strategy
- How companies create value in the long term
o What is value? Value for whom?
o What is long term?
- HOW?
o Many ways – product diversification, expansion, divestment, HRM etc
o Variables of interest for us – international business related
- IB related variables
o HRM
o Leadership, decision-making etc
o Where to go? – location choices
o How to go? – mode of entry
Exporting, licensing, joint ventures, acquisition, greenfield investment
(in the increasing order of risk and control)
The role of culture
- Individual level (relationship between individual cultural values and outcomes)
o HRM
o Leadership, decision making etc (discussed some of these issues)
- National level (relationship between national cultural values and outcomes)
o Where should a company go? – locations
o How should it go there? – mode of entry
- Culture as a main effect
o Cultural distance
o Individual dimensions (lecture 2)
- Culture as a moderator
o Cultural distance
o Individual dimensions (lecture 2)
Cultural distance
, - Kogut and Singh (1988)
-
- Ith dimension for jth country, Vi is the variance of the index on the ith dimension, u is
the United States (based on their work)
o Dyadic indices constructed going forward for each pair of countries
Culture as a main effect – individual level – individual dimensions
- HRM
o Recruitment and selection – individual level collectivism negatively linked to
preference for use of selection tests
o Appraisal and feedback – collectivism negatively linked to merit based
promotions. Individual feedback useful for both individualists and collectivists,
but group feedback critical only for collectivists
o Remuneration – collectivism positively linked to equality based rewards and
employment security and negatively linked to individual based pay
Culture as a main effect – national level – individual dimensions
- Firms prefer FDI over licensing and seek majority ownership in foreign subsidiaries in
high Power Distance countries
- High uncertainty avoidance in home countries in positively linked to use of
greenfields over acquisitions
Culture as a main effect – national level – cultural distance
- Mode of entry
o As cultural distance (CD) increased…
Tendency to choose joint venture over acquisition
Tendency to choose greenfield over an acquisition
Acquisition performance likely to go down
