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10. Resistance to the transfer ofmanagement knowledge ininternational ventures: stepstowards a pathologic interpretation

Gerhard Fink and Nigel J. Holden

INTRODUCTION

Cartwright and Schoenberg (2006) conrm what Michael Porter had

already published by 1987: managers and scholars alike should know that

cross-border acquisitions are overly risky ventures. Many publications

conrm that only about half of the acquisitions are partially successful

(Barnes, 1984; Gregory, 1997; Lessard, 1995; Limmack, 1991; Pettway

and Yamada, 1986; Meschi and Metais, 2006). Irrespective of persistentfailures, in 2004 the total value of international acquisitions was close to

US$ 2 trillion. This inspiring record raises serious doubts as to whether

strategic management is on the right track. In recent years, Probst and

Raisch (2005), Toh and DeNisi (2005) and Rossetti and Choi (2005) have

indicated the need to explore deeper into the motives and reasons for

failure of foreign direct investment activities.

Let us consider a stylized case, which we have derived from 15 inter-

views with middle and top managers of Austrian rms at different time

points after a takeover by a US rm. The well-established and successfulUS rm has developed a clear and explicit corporate culture. The vision

and mission statement, guiding principles and compliance code have been

explicitly formulated. When hired, each staff member gets a booklet and

has to sign that they have taken note of the vision, mission, guiding princi-

ples and compliance code, and explicitly conrm that they will comply with

or live up to the expected standards. This strong business culture is sup-

ported by a relatively centralized model of management control systems.

When this rm acquires a rm in Austria, the rst thing that happens

after the acquisition contract comes into force is that each employee ofthe newly acquired rm also gets the booklet. Very often as a surprise to

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256 Strategic alliances, mergers and acquisitions

most American expatriate managers, usually one-third of staff leave within

three to four months. Labour productivity is declining signicantly.

People then are not performing according to expectations, and exert

passive resistance. Over time more and more people, including the bestpeople, leave the rm. In several instances, when the US rm has acquired

a competitor which it wanted to close down, that was plainly not an unde-

sired effect. In the other cases, the rst expatriate management team from

the headquarters to the new local subsidiaries is soon replaced by new

managers, with the task of retaining the rest of the best by offering them

more favourable contracts than they had before. In close discussion with

those remaining staff, usually a hybrid form between the headquarters

(HQ) management culture and a local management culture is developed.

Sooner or later, the new management hires new staff, of course peoplewith a good t to the corporate culture of the US rm. After another three

to four years most of the rest of the original staff have left the rm. All or

almost all previous staff members are replaced by new ones who better t

the corporate culture of the US rm. Then, in a nal attempt, it is possible

to push through the original US corporate culture with a few amendments,

which have to do with local laws and labour regulations. Why is a pattern

like that emerging? (Fink and Holden, 2008, 113).

A standard explanation would be that the main issue is cultural differ-

ence: national cultures of Austrian and US American managers differ andso does their management behaviour (that is, their cultural standards).

Based on Schwartz (2004), Sagiv and Schwartz (2007) nd some contrast-

ing value perceptions along their three bipolar dimensions: the USA is

high on mastery, but Austria is high on harmony; the USA is medium high

on hierarchy, but Austria is high on egalitarianism; the USA is medium

high on embeddedness, but Austria is high on intellectual autonomy.

Correspondingly, Elias (2004) nds that Austrian managers perceive the

behaviour of US managers as extremely highly performance- and action-

oriented; this corresponds to a high value of mastery. Austrians considerAmericans to be extremely patriotic and strongly conformist regard-

ing rules and political correctness, a manifestation associated with the

higher value of embeddedness and hierarchy in the US culture. However,

Americans offer embeddedness also to others: Americans instantly offer

communication on a rst-name basis, and invite new acquaintances to

private parties and to other forms of socializing. First contact is made

easily, but from the Austrian perspective, it takes a very long while to

get to know the very private attitudes and opinions of Americans. In

conversation with others, Americans tend to be politically correct

and hierarchy-obedient. Austrians exhibit their intellectual autonomy.

Thus, Austrian managers more often than not perceive US managers as




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which will result in conicts, generate uncertainty or create ambiguity.

Some cross-cultural encounters might even lead to the psychologically

disorienting condition (Ferraro, 1994) known as culture shock. Rather

less do we read that such conicts, uncertainties and ambiguities may notbe an inevitable, even logical consequence of two distinct business cul-

tures, or that culture shock may be a result of bad management decisions.

Take the case of the merger between Daimler and Chrysler at the end

of the 1990s. The German carmaker, knowing that international mergers

have a very high probability of failing, underperforming or not delivering

the expected shareholder value, set up a project team to study 100 inter-

national mergers so that their venture would not founder. Two years into

the project hailed as a marriage made in heaven tensions arose over

differences between the German and US management styles. But thesewere almost trivial in comparison with the consequence of a key decision

made by the German management: it was made plain that US designers

would not be invited to help design Mercedes-Benz cars (The Economist,

1999).

Exclusion from designing the companys best-engineered vehicles

offended the American designers so much that it caused their mass defec-

tion to the other big Detroit-based carmakers. This was not then an

inevitable clash, preordained by USGerman cultural differences; this was

the result of managerial ineptitude of a very high order. It was a manifestsignal that the German arm of the newly merged corporation had no

condence in US design capabilities. It surely did not intend to deliver an

insult, but it did. This scenario suggests that cross-cultural clashes may

sometimes be a symptom of bad management rather than an occurrence

with built-in inevitability.

As it happens, we can nd other instances in the management literature

which support this conviction. The retreat of Wal-Mart from Germany in

2006 shows how management decisions made at corporate HQ in blithe

indifference to how things are done in other countries can underminestrategy. The wise men of Wal-Mart based in Arkansas saw no point in

workers councils, which happen to be enshrined in German law. They

underestimated not only their legal importance in the German system of

labour relations, but also their psychological importance to their German

employees. As in the case of DaimlerChrysler and the defection of its US

designers, the Wal-Mart experience suggests that bad management neu-

trally bad management led to cross-cultural tensions with its German

employees and ultimately to Wal-Marts quitting of the German market

(The Economist, 2006; Ghauri and Cateora, 2005).1

In these two examples we have cases of two major corporations which

have made bad management decisions. Let us look at the example of a




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Resistance to the transfer of management knowledge 259

business operation in which the protagonists consciously attempted at

the outset to close a cross-cultural gap. The case concerns a consortium

of French retailers who wished to transfer their know-how in a cultur-

ally sympathetic way to Poland. This took nearly eight years: from 1995to 2003, to be precise. Had the French management known that it would

take so long, they may well have not embarked on the venture. What

exactly went wrong? In the rst place the French miscalculated the legacy

of behaviours and attitudes learned in the socialist era and still persist-

ing: resistance to new ideas, conformity, non-assertiveness, reluctance to

handle information, and so on (Hurt and Hurt, 2005).

This case involving Poland brings us to another instance of Western

misapprehensions about former socialist countries. We consider the EUs

TACIS (Technical Assistance to the Commonwealth of IndependentStates) programme, under whose aegis from 1991 to 2003 3 billion

was allocated by the EU to transfer market economy know-how and

to reinforce democracy and the rule of law in the former Soviet Union.

This process involved hundreds of EU universities, business schools and

consultancies. In 2006 the EU Court of Auditors found that the effective-

ness of EU funds was very low and the results were poor, especially

concerning sustainability, dissemination and project evaluation.2

In the above very contrasting cases we have considered how rms and

organizations have seemingly lost their way as their operations, policiesand assumptions were not in harmony with local realities. Regardless

of the context of the cross-cultural interactions an international

merger, establishing retail operations in other countries, and transferring

management knowledge across borders we see a consistent pattern:

The strategies were undermined relatively quickly.

There were massive nancial losses.

There were instances of bad management, for which differences in

culture are emphatically not an excuse.Cultural differences were not so much a cause of friction as a symp-

tom of anger, resentment and frustration and bad management.

The originally cooperative atmosphere was spoiled. Here we take

atmosphere to be: a pervasive feeling, which is derived from experi-

ence and serves as a determinant of expectations concerning future

cooperation in a business relationship (Holden, 2002).

Beyond that, we can note that:

The outcomes are anticipated neither by managers nor (it seems) by

cross-cultural experts.




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The uniqueness of situations makes it diffi cult for insiders and outsid-

ers to predict cultural impacts and their longer-term consequences.

The impact of the headquarters way of seeing the world

(Weltanschauung)was detrimental.

Out of the above eight factors we have in effect developed a replicable,

universal pathologic statement of cross-cultural interactions. They are

clues as to causes of cross-cultural breakdowns and the consequences that

ow from them. We make no excuse for applying this medical term to the

operations of the corporate world. Business ventures, like human beings,

are prone to inuences which conspire to enhance and, especially in the

context of this contribution, undermine performance. As in real illnesses,

the causes may not be apparent even though the consequences are fullymanifest. Similarly, causes may be established, but the consequences may

not always be predictable.

People in their collective capacity as organizational employees qua

actors, who are directly affected by the pathological stressors that we have

indicated, experience unease and uncertainty. In the standard interna-

tional management literature this is called culture shock, but this term

needs modication so that what it describes is not narrowly focused on

individuals, but on entire groups of people. We term the experience col-

lective culture shock. As it happens, there is a nation which has one word(as opposed to three) to denote it. After their defeat in 1945, the Japanese

descended into a state which they called kyodatsu. In pre-war Japan this

word had been a clinical term used to describe physical or emotional

prostration in individual patients.

Only after the surrender did the world kyodatsugain wide currency to

describe the dejected condition of the people as a whole (Dower, 2000).

In the lexicon in which the term with its war-induced connotations rst

appeared in 1946, it was stated that this despondency posed the greatest of

all possible dangers to the country that it had become the great enemythat could destroy Japan (Dower, 2000).As for immediate post-Second

World War Germany, where great despondency also fell upon an entire

national population, an American naval offi cer based in the Western zone

noted that: From 1945 to the middle of 1948 one saw the probable col-

lapse, disintegration and destruction of a whole nation (cited in Bacque,

2002). This period of trauma is known to the Germans as Stunde Null

(literally zero hour), when almost everything was destroyed, including

material and immaterial values, and when holding onto existence was the

preoccupation of most people (Mller, 2002).

At rst glance, it may seem that the word kyodatsu, given the truly ter-

rible conditions to which it refers, may be too dramatic as an analogue for




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human experiences in cross-cultural interactions in the world of organiza-

tions. Yet it represents a clearly identied human condition, collectively

experienced at times of considerable stress, uncertainty and despondency.

We should note that people who experience collective culture shock maynd it necessary to reject one belief system or set of values, rethink their

lives and take appropriate action to survive as individuals and ensure

that society itself remains viable. In human beings as in societies these

processes, which should be seen as inextricably intertwined, are extremely

complex and involve simultaneous action and learning.

We argue that the cross-cultural dimensions of major organizational

events such as a cross-border merger or the enactment of a knowledge

transfer process throughout international networks cannot be understood

without reference to cultural factors. It is essential to take account of thepathological circumstances shaping and being shaped by such events. To

explain this proposition, we turn to the work of Yolles (2007) and Yolles

and Iles (2006), who have extended a particular variation of the social

viable systems (SVS) model as developed by Schwarz (1997). We shall next

consider the YollesIles scheme, making reference to collective culture

shock, and then discuss the concept of cultural stretch for pathological

insights into cross-cultural business behaviour.

A NEW CONTEXT FOR CULTURE: INPATHOLOGIES OF SOCIAL COLLECTIVES3

Yolles and Iles (2006) note:

It is not new to say that there is a relationship between thinking and action, andthis relationship is conditioned by belief and knowledge. Here, thinking affectsaction, while action and its trials and tribulations are reected in our thinkingand the images that we have and wish to manifest in our social and physical

environment.

This interconnection is shown in Figure 10.1, and its formalization and

generalization establishes a basis for understanding Social Viable Systems

(SVS) theory.

In the context of a multinational corporation this system approach

applies to the multinational corporation as a whole, but also to its head-

quarters, and to subsidiaries. The model leads to the conclusion that every

organization, which belongs to a society or is established within a society,

needs to have characteristics which distinguish it from the society as such.

This distinction has to lie in the value system (beliefs), in the personal-

ity systems (thinking) and in the actions taken (cultural standards which




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262

AP2

AP1

AG2

AG1

affectsrelated

behaviour

Actionsystem

(Culturalstandards,

Language,

Communication)

Empiricaldata

Personalitys

ystem

(Thinkin

g)

experiencesinuence

learningprocesses

hasinuenceon

valuesadjusted

dependingonlearning

frome

xperience

Organiza

tiondomain

Valuesystem

(Beliefs)

Source:

YollesandIles(2006).

Figure10.1

Distributionofthe

typesofknowledgeacrossSVS




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regulate actions, language and communication within this organization or

suborganization).

We distinguish two autopoietic processes: AP1 thinking inuences

action, and AP2 experience with action feeds back into modes of think-ing; and two processes of autogenesis: AG1 values and beliefs inuence

thinking and action, and AG2 learning from evaluated experience with

action leads to adjustment of values and beliefs.

We can describe a cross-border acquisition or some other major inter-

organizational event in terms of the SVS model. Before an acquisition

takes place, we can observe two distinct social systems: the domain of

the prospective new owner, which we call the headquarters domain, and

the prospective subsidiary domain, that is, the domain of the acquisi-

tion. Each of them is embedded into a distinct national culture and hasits own distinct corporate culture. These organizations remain socially

viable only if within the organization the autopoietic processes between

the personality and the action domain function well, and only if the value

systems approximately guide the autopoietic processes AP1 and AP2, but

also are adaptive to changes perceived necessary, what is described by

the processes of autogenesis AG1 and AG2. Interaction between the two

separate social systems takes place in the phenomenological domain (that

is, by action) (Figure 10.2). Conclusions and assessments usually are based

on observed phenomena. Sense-making of these phenomena depends onavailable theory. Next, we offer a pathologic interpretation of observable

phenomena in the case of hesistancy to act and perceived resistance.

COLLECTIVE CULTURE SHOCK

We have already introduced the notion of collective culture shock, by which

we mean a general, complex concomitant of radical systemic change. Specic

outward signs are apparent: staff have problems adjusting to new conditionsand may well be disoriented and disillusioned. The following concept of col-

lective culture shock was developed after comparing several international

comparative culture studies on East Central Europe, which were undertaken

in the course of the 1990s (Fink and Feichtinger, 1998; Fink and Meierewert,

1999) and after studying the literature on the issues of acculturation and

repatriation of individuals, on identifying appropriate persons for expatriate

assignments, and on psychological adjustment of individuals to assignments

abroad (Black et al., 1991; Birdseye and Hill, 1995; Brett, 1980; Dunbar,

1994; Feldman and Thomas, 1992; Fisher, 1986; Gudykunst, 1998a, 1998b;

Harvey, 1997; Jones, 1986; Louis, 1980; Parker and McEvoy, 1993; Pinder

and Schroeder, 1987; Rogers and Ward, 1993; Van Maanen and Schein,




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1979; and so on). We believe that the concept of collective culture shock is

useful for the study of cultural issues in cross-border mergers and acquisi-tions where important factors, which can only marginally be inuenced by

the HQ organizations, have not as yet been explicitly conceptualized

After an acquisition headquarters delegates expatriates as new manag-

ers to the acquired rm with the main task of gaining control over the

acquisition, that is, in order to implement headquarters management

knowledge in the acquired subsidiary. By that, the expatriates declare the

old subsidiary cultural standards as no longer valid and create patholo-

gies in the acquired subsidiary. Staff (personalities) cannot make sense of

the newly implemented rules. The autopoietic processes are blocked. Local

staff cannot adequately apply the new rules: AP1 is blocked. Thinking

(in old terms) does not help to nd the appropriate way of acting. And

Phenomenologicaldomain

AP1

AG2

AG1

AP2

AP1

AG2

AG1

Action system

(Cultural

Standards)

Subsidiary

Personality system

Subsidiary

Value system

Subsidiary

Subsidiary domain

(new acquisition)

Action system

(Cultural

Standards)

Headquarters

Personality system

Headquarters

Value system

Headquarters

Headquarters domain

AP2

Figure 10.2 Types of knowledge in headquarters and new acquisition




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reection on outcomes of action does not help: AP2 is blocked. The reason

for inadequate action is ascribed to the new rules, which are not under-

stood. It is not possible to learn from failed action, because the reasons

for failures are not understood either. Combination and internalizationin the sense of the NonakaTakeuchi model (1995) is not possible. So it is

that staff of the newly acquired subsidiary suffer from a collective culture

shock (Figure 10.3).

Expatriates suffer from individual culture shock. To the best of their

knowledge and abilities they might have conscientiously tried to implement

the rules and management practices, and yet they fail (compare the case

described by Friel, 2005). The outcomes are a disaster or close to disaster.

That obvious deviation from expected outcomes can only be explained

with reference to resistance by local staff, which in effect becomes visible.But, expatriates are mistaken, being inclined to interpret symptoms as

causes. Guidance by headquarters (values, personality) does not solve the

problems. Appropriate interpretation of the failure does not appear to be

possible. The reective processes are blocked (Figure 10.4). Expatriates

cannot make sense of the outcomes of newly implemented best practices.

Headquarters managers reections about their expatriates performance

makes little or no headway, and reconsideration of corporate values in the

light of evaluative perceived experience is blocked, too.

Culture shock as experienced by the individual has been described asbeing:

precipitated by the anxiety that results from losing all our familiar signs andsymbols of social intercourse. These signs or cues include the thousand andone ways in which we orient ourselves to the situations of daily life: how to giveorders, how to make purchases, when and when not to respond. Now thesecues which may be words, gestures, facial expressions, customs, or norms areacquired by all of us in the course of growing up and are as much a part of ourculture, as the language we speak or the beliefs we accept. All of us dependfor our peace of mind on hundreds of these cues, most of which we are not

consciously aware. (Oberg, in Harris and Moran, 1979)

Ferraro (1994) refers to it as a summation of psychologically disorienting

experiences. In conditions of collective culture shock, as in a cross-border

merger, it can be exceptionally tricky for organizations to identify the right

people who can rise above the turmoil.

At the organizational level collective culture shock is manifested as

more than accumulations of psychologically disorienting experiences.

It appears to induce a form of social paralysis characterized by passivity,

endless discussions and hesitant decision-making regardless of the society.

It is apparently not even a question of whether people want to adjust or

not. It appears to be the case that large sections of the staff including




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266

AP1

AP2

AG2

AG1

Actionsystem

Cu

lturalStandards

Subsidiary

Expatriates

Personality

Headquarters

Actionsystem

Cu

lturalStandards

Headquarters

Personalitysystem

Subs

idiary

Valuesystem

Subsidiary

Subsidiarydomain

Figure10.3

Theimpactofexpa

triatesimplementingheadquartersmanagementknow

ledge




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267

Common

Values

Com

mon

Values

Interface

HQ-S

ubsidiary

Hybrid

Actio

n

(CulturalSt

andards)

Headqua

rters

Va

lues

Headquarters

Perso

nality

Headq

uarters

Expa

triate

Personality

Subsidiary

Inpat

riate

Interfac

e

Action

(CulturalStandards)

Subsidiary

Values

Subsid

iary

Figure10.4

Theprocessofhybridization




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previous managers have diffi culty coping with change on this scale. People

feel extremely uncertain. They may even react arrogantly, but they shrink

from taking determined action. It is not entirely surprising therefore that

rms entering into other markets nd that they must adjust their manage-ment principles and normal practices. Foreign rms are challenged to

combine management by condence-building, provide orientation, and

support the self-esteem of local businesses and institutions. Management

by objectives, as traditionally conceived, is often out of place. The adjust-

ment to the new circumstances can be confusing and even traumatic (see,

for example, Black et al., 1991, 298; Ward, 1996).

The degree of confusion of a collective culture shock may be inuenced

by interests, voids between the actual and the perceived change, expecta-

tions, learning capabilities and available resources. Expatriates may beunder orders to dismantle old rules and regulations, and to introduce

new rules. If local people cannot make sense of newly imposed rules,

expatriates merely create vacuums and confusions. Although collective

cultural shock is not a very much studied phenomenon, we can suggest

that important insights from the study of individual cultural shock will

apply to collective cultural shocks, too. We certainly have to distinguish

different effects of desired and undesired change, of gaps between actual

and perceived change, of unrealistic expectations and surprise (compare

the constructs change, contrast and surprise by Louis, 1980; and lifechanging variables by Birdseye and Hill, 1995).

We suggest that the confusion following a radical system change will be

less pronounced if:

an integrative strategy is pursued;

expectations are realistic;

information is broadly available;

resources are devoted to cope with the change.

Under such conditions, we may posit a relatively higher chance of accept-

ance and that overall satisfaction could be reached again. Against that,

the process to overcome confusion becomes more diffi cult and more

protracted if neither civic nor instrumental identity is desired. People feel

marginalized and a negatively charged atmosphere is created. Resistance

to change is an inevitable consequence. Collective adjustment processes

take much longer than individual adjustment, for the simple reason that at

the turning point most of the rules and organization of the new system do

not exist. Information about the new system is not available. The system

has yet to be negotiated and created. While individuals can go back home,

institutions can never return to their old system.What has happened is




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that the cross-border merger has created an organization which is in effect

perceived by headquarters managers as a scarcely manageable hybrid.

HYBRIDIZATION

Evidence of the kind we considered at the beginning of this chapter shows

that hybridization the process of creating a manageable hybrid is all

too often a taxing, protracted experience. Hurt and Hurt (2005) inves-

tigate into some eight years experiences of several French retail chains

with market entry into Poland, and their diffi culties in managing local

subsidiaries. In the rst wave after takeover French expatriates separate

themselves from local people, proudly show off their wealth and drivefancy cars. In a period of about two years these French expatriates can

surely cope with the refusal and passive resistance of local workers. Next-

generation French expatriates begin to notice that they have to learn from

their Polish staff and begin to socialize, concealing rather than parading

their comparatively good income. During that period French expatriates

manage to establish a hybrid corporate culture in local Polish subsidiar-

ies. Hurt and Hurt (2005) call that a common space. In a third wave,

after about 56 years when possibly most of the original local staff have

been replaced, another generation of French expatriates can establish acorporate culture that comes close to the headquarters culture.

Napier (2005) describes the attempt of a Vietnam business school to

import MBA courses from the USA or Western Europe. In spite of all the

good intentions the Vietnamese scholars remained passive during the rst

18 months. Western scholars had diffi culties in coping with that attitude.

Only after a new generation of Western scholars began to socialize with

the Vietnamese did a process of reverse learning establish itself. Western

scholars learned about local conditions. Based on that experience, Western

scholars together with the Vietnamese could adapt Western managementknowledge to local Vietnamese needs. In a long process of about ten years

hybrid forms were developed, which could be absorbed by the Vietnamese

scholars.

In both cases the development of hybrid forms of corporate culture or

of hybrid management concepts is of decisive importance for the process

of coping with collective culture shock. Therefore, in order to explore the

processes of coping with collective culture shock, we have to rene and

extend the Berry (1980) concepts of assimilation, integration, separa-

tion and marginalization by introducing the concept of hybridization.

Hybridization could constitute intermediary stages in integration and

assimilation processes.




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Let us briey reconsider the FrenchPolish retail case (Hurt and Hurt,

2005) The rst step was marginalization: the French implemented their

corporate culture (management knowledge) without further ado. When

this failed, because of the unanticipated cultural shock on both sides, anew generation of expatriates socialized with local Polish middle manag-

ers and reintegration took place (the term common space of Hurt and

Hurt clearly describes a hybrid corporate culture). In the nal step mar-

ginalization strategy was pushed through, staff who did not t were red,

and assimilation was enforced. As in the Vietnam case (Napier, 2005),

the imported and adapted form of management knowledge prevailed.

Transfer of management knowledge to Vietnam nally led to the inte-

gration of Western management knowledge into the Vietnamese context

(Napier, 2005).All too often that hybrid system is nally aborted by sociopathic

leaders from headquarters or sent from headquarters (to use a term of

Yolles and Iles, 2006) with a desire for self-gain at any cost. In terms of

the social viable systems model, hybridization means a partial adjust-

ment process of all three domains, while the four processes remain open.

Blockages of type AP1, AP2, AG1 and AG2 (see Figure 10.4) will not

persist after the initial cultural shock is overcome. We nd several articles

which highlight specic measures and conditions that facilitate the process

of hybridization. We have already mentioned socializing of expatriateswith locals (Hurt and Hurt, 2005; Napier, 2005).

Vance and Paik (2005) emphasize the importance of inpatriation,

whereby local staff identied as management potential are delegated to

headquarters to assume tasks, to socialize with headquarters staff, and to

acquire tacit and explicit knowledge of headquarters management princi-

ples at source. Although issues of inpatriate acculturation are emerging

(Harvey, 1997; Harvey and Miceli, 1999; Harvey et al., 1999; Ward et al.,

2001), upon return to the subsidiary these former inpatriates can more

easily interact with expatriates and create hybrid forms of organizationalcultures that rely on elements of headquarters culture and of prevailing

subsidiary cultures, but also dene the cross-cultural interfaces (Figure

10.4). If the processes of autogenesis are not blocked then organizational

values are adjusted to the hybrid subsystem and action, and to a new

composition of managers and staff (Figure 10.5).

VIA HYBRIDIZATION TO CULTURAL STRETCH

There is now suffi cient evidence that attempts to create mergers are beset

with problems directly connected with the failure to harmonize knowledge




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systems (Hurt and Hurt, 2005; Kuznetsov and Yakavenka, 2005; May et

al., 2005; Napier, 2005). These contributions demonstrate that knowledge

transfer takes longer to succeed than is originally envisaged. We are often

talking in terms of years rather than weeks or months, resulting in the

allocation of unanticipated resources including managers time for copingwith that most recurrent of events, namely todays crisis. What can be

the response to such intractable problems? We suggest a new concept and

explain how it can work in practice. The concept is cultural stretch.

Cultural stretch refers to how individuals or groups of people adjust

their behaviour to suit the demands of working under the impact of a

strong corporate culture, which signicantly differs from a prevailing

culture into which a local subsidiary of a rm is embedded. Meeting

organizational goals calls for alignment of individual staff with the head-

quarters requirements alongside the norms and values embedded inmanifold stakeholder cultures. Cultural stretch is the effort that individu-

als as organizational actors make to reduce the sense of mutual aliena-

tion and wariness, as well as an anarchic impulse to resistance, that often

accompanies processes aimed at merging organizations.

At the individual level cultural stretch means more than mere exibility

and applying, as they say, cross-cultural awareness. Cultural stretch is

evident when an individual takes specic psychological and emotional

steps to create what Nonaka and Takeuchi (1995) call common cognitive

ground with the cultural others. However, overall cultural stretch should

be viewed as an organizational tendency, whose effects may only become

apparent after the passage of years. What is also important to grasp about

Inpat

Personality

Hybrid- Subsidiary

Values

Subsidiary

Values

Headquarters Expat

AP1

AG1

AG2

AP2

AG1

AG2

Action

(Cultural Standards)

Hybrid-Subsidiary

Figure 10.5 A pathologic subsidiary in cultural stretch




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cultural stretch is that it is notionally and practically linked with the

concept of hybridization.

Hybridization can take various forms, some of which probably happen

simultaneously, others consecutively: substitution, sense-making, chang-ing interpretation of texts, improvisation, combination, internalization,

integration. Substitution would mean that part of the existing rules are

replaced by rules imported from another organization, for example

from the new headquarters. A hybrids rules would consist of a set of

rules from the new headquarters and another set that remains from the

acquired local subsidiary. As we already know, this may not suffi ce, since

knowledge changes its meaning when migrating, and locals may not be

in a position to make sense of the newly imported rules. In a process of

sense-making (Weick, 1995) locals and expatriates may develop a mixtureof two social languages within the limits of a single utterance (Bakhtin,

1996, 304). The same text, an utterance that belongs, by its grammatical

and compositional makers, to a single speaker (Bakhtin, 1996, 304) may

contain two speech manners, two styles, two languages, two semantic and

axiological belief systems (Bakhtin, 1996; Fink et al., 2007). It frequently

happens that even one and the same word will belong simultaneously to

two languages, two belief systems that intersect in a hybrid construction

(Bakhtin, 1996, 305).

Changing interpretation of identical texts is often accompanied byimprovisation (Weick, 1998). Local managers and staff adopt variations

of known themes in order to suit the purpose better. The process of

hybridization (Figure 10.4 may be complemented by combination in the

sense of Nonaka and Takeuchi (1995), when new knowledge is combined

with previously existing local knowledge; and by internalization, when

the combined explicit knowledge is converted into new tacit, applicable

knowledge. If and only if there is also a back transfer of that new knowl-

edge into the headquarters, may that conclude a process of integration as

perceived by Berry (1980). New concepts replace both previous conceptsthat existed separately before, at the headquarters and at the acquisition.

Blockages of type AG1 and AG2 (autogenesis, Figures 10.4 and 10.5)

possibly will persist, if headquarters insists on imposing its value system

(vision, mission, basic principles) on local staff. In that case, cultural iden-

tity of local staff with the organization (as a subsidiary of a foreign rm)

might become impossible forever. Extrinsic motivation will become the

main guiding principle: better pay than elsewhere, not necessarily good

pay. Yolles (2007) describes that as a sociopathic organization. The

consequences are: (1) marginalization of others who do not have access

to resources; and (2) marginalization of local staff and of local manag-

ers, in particular. On the one hand, expatriates do not identify with that




19/24


set of values which derives from the local community and from previous

subsidiary values. On the other hand, local staff and local managers do not

identify with that set of corporate values which is not compatible with pre-

vailing national values and host-country cultural standards (Figure 10.5).Those who have to behave within an organization according to rules and

values which they cannot accept, are under permanent cultural stretch.

DISCUSSION AND CONCLUSION

The evidence we have considered from the perspective of cultural stretch

suggests that values, rules, managers and staff are divergent, depending on

the time that has elapsed after the event the merger, the cross-borderacquisition, the transfer of all the knowledge judged to be necessary has

taken place. In the context of foreign direct investment (greeneld invest-

ments, joint ventures, acquisitions and mergers), there is apparent need

of more longitudinal studies. Research should not solely be based on

interviews with the currently present expatriate managers, but also has

to investigate the interests, perceptions and behaviour of local managers

and staff: those who have left the rm, those who remain, and those who

were hired to t the new corporate culture. There is also apparent need to

assess the success of rms not by the expatriate managers perceptionsvoiced in interviews, but by hard data from the prot and loss accounts;

not estimated, but actually measured labour productivity in physical terms

(per employed person and per hour); not overall sales and cash ows, but

sales and cash ows per employed person, and so on.

Industry context may play an important role, too. This is well exem-

plied in the aircraft industry with respect to the failed takeover in

the 1990s of the Dutch concern Fokker by the German aerospace

giant, DASA (Heerkens and Ulijn, 2000). There may be vast differences

between technology-driven corporations and consumer-oriented rms,between industries with strong competitive pressures and industries with

established oligopolistic or even monopolistic competition. Relations

between value systems (national, corporate, personal) have been not

deeply researched, although they have been addressed by a few scholars

(Hofstede et al., 1990; Hofstede and McCrae, 2004; Sagiv and Lee, 2006;

Sagiv et al., 2005). At the organizational level, these interrelations need to

be studied within the framework of negotiations and learning processes

(Yolles, 2006; Magala, 2005).

We have been concerned with cross-cultural situations, although it is

surely clear that cultural stretch also has conceptual applicability to a

purely national-monocultural set of circumstances: for example, when




20/24


one French company takes over another French company, because corpo-

rate cultures differ also within one nation. The notion of cultural stretch

would appear to meet the need for more phenomenon-driven research

(Cheng, 2007; Dunning, 2006; Oesterle and Laudien, 2007) aiming at iden-tication and learning of actual behaviour, communication, and decision-

making within organizations. This kind of research could be undertaken

within the currently predominant paradigm of quantied cultural dimen-

sions or personality traits, but more also needs to be done outside the

dimension paradigm.

It is important to stress that the concept of cultural stretch that we have

elaborated in this chapter is derived from a commentary of several instances

of forms of human resistance to forms of organizational change or the

imposition of new knowledge. We have attempted to relate cultural stretchto the SVS model of Yolles and Iles, as we have wished to demonstrate that

cultural impacts on organizations under the immense strain of major events

such as a cross-border merger can be helpfully viewed in pathological terms.

This perspective can shed useful light on behaviours associated with famil-

iar concepts such as marginalization and assimilation (Berry, 1980) even

Nonaka and Takeuchis (1995) famous model of knowledge creation.

NOTES

1. See also: (http://www.dw-world.de/dw/article/0,2144,318142,00.html; and http://www.wams.de/data/2006/06/18/921179.html.

2. http://eca.europa.eu/audit_reports/special_reports/docs/2006/rs02_06en.pdf; and http://www.rferl.org/featuresarticle/2006/04/c890a3ed-62d6-41f1-b431-6fed09ddf294.html.

3. The theory is based on Fink and Holden (2008).

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