Managing Cultural Distance in
International MR&D Alliances
Vadim Anghel (s1988115)
2
Abstract
The study is investigating the effects of cultural distance on collaboration within multi-partner R&D alliances. The systematic literature review conducted revealed that cultural distance can affect collaboration within MR&D alliances both positively and negatively. While it is recommended to nurture differences towards the good of the alliance, to do so implies adapting management styles to the different cultures involved in a partnership. Cultural training, informal communication and face-to-face communication were amongst the most impactful management solutions found. Furthermore, balancing the transfer of information between partners as well as creating learning loops can assure a positive atmosphere within alliances and, ultimately, enhance collaboration.
Introduction
In today’s interconnected environment, companies can partner with foreign counterparts easier than ever, and due to technological advances, distance barriers fade away in the light of new technologies. Although welcomed by many, this phenomenon raises multiple challenges when it comes to managing the dynamics of multi-partner research and development (MR&D) alliances (Ireland, et al., 2002).
3 are mainly defined as “strategic alliances formed by multiple partner firms to compete against other such groups and against traditional single firms” (Das & Teng, 2002, p. 445).
A specific type of MR&D alliances that has recently started to be in the spotlight are collaborations between industry (e.g., firms)- and science organizations (e.g., universities) (Carayol, 2003; Lee, 2000; Bruneel, et al., 2010; Mora-Valentin, et al., 2004). Although literature proves inconsistent regarding the naming of such alliances1, there is considerable unanimity when it comes to the potential it has to generate positive outcomes. Some of the rents for firms collaborating with universities are, for example, the positive impact on (economic) performance and on productivity (Smith, et al., 1995), the knowledge absorption capabilities it produces, or the increase in economic relevance of the scientific knowledge generated (Carayol, 2003; Lee, 2000). The same articles, however, also highlight that such MR&D alliances also bring about increased risks and costs, or mismatches in terms of knowledge disclosure intentions (Carayol, 2003).
One of the major aspects addressed in the study of alliances is the cooperative and/or competitive behaviour that organizations have been found to exercise. According to Smith, et al. (1995), cooperation is the “process by which individuals, groups, and organizations come together, interact, and form psychological relations for mutual gain or benefit” (p. 10). The more recent view of Arino (2001) brings to the table the aspect of mutual adjustment of partners stating that a cooperative behaviour is the ability and willingness to adjust goals and strategies to the needs of a partner. On contrary, failing to do so results in a competitive behaviour (Arino, 2001).
More complex considerations arise when looking at the cultural background of the organizations involved in MR&D alliances. Traditionally, it has been argued that cross-cultural interactions pose
4 more difficulties than intra-cultural ones and that negotiations often fail due to “problems related to cross-cultural differences” (Parkhe, 1991, p. 581). Relatively little research has theorized how
MR&D alliances with an international composition are managed (Pasa, 2000; Kennedy, 2002;
Den Hartog, et al., 1999; Connaughton & Shuffler, 2007; Ireland, et al., 2002), as much of the literature on alliances has traditionally focussed on dyadic partnerships. However, Das and Tang (2002) explain there are considerable differences in the dynamics of the two types of alliances, related mainly to the social exchanges between partners, the social sanctions that are applied if partners abuse the trust they are endowed with and related to the fact that a macroculture dominates the interactions within alliances.
The main purpose of this paper will, therefore, be to discover effective management methods for international MR&D alliances, with a hindsight to the cultural diversity of the partners involved. This research article will revolve around the following questions: (1) How does the cultural
distance of partners impact collaboration in international multi-partner R&D alliances? and (2) What are the most effective methods for encouraging cooperative behaviour and diminishing competitive behaviour in international multi-partner R&D alliances? The research method will
be a systematic literature review, which has been chosen as it allows to screen results of past research and develop an integrative framework, organizing existing conceptual and empirical evidence regarding alliance dynamics (Meier, 2011).
5
Conceptual background
Parkhe (1991) claims that conflict is viewed in some cultures as beneficial and inevitable to alliance relationships, therefore, suggesting alliances should embrace conflict and create coping mechanisms. According to him, conflicts can be triggered by the societal-, national- or corporate cultures, as well as by the strategic directions or the management practices and organization of alliance partners. The independent variable of this study, the partners’ cultural background, illustrates Parkhe’s (1991) external organizational influencer, the so called “societal culture”. This is defined as “all aspects of life within the society, including norms, values, and behaviours of managers” (Parkhe, 1991, p. 583) in an organization. Thus, due to scope limitations, the study will only marginally touch upon the other types of cultures described by Parkhe (1991), such as the corporate culture or strategic directions.
Several studies have proven that the longevity of alliances is negatively related to the cultural distance of the partners (Parkhe, 1991; Barkema, et al., 1996). However, less studies have shown the impact of cultural differences on cooperation within alliances (Ireland, et al., 2002). The phenomenon has a high relevance as effective cooperation between firms has been proven to have a positive effect on alliance performance (Smith, et al., 1995; Ireland, et al., 2002). Based on the above mentioned studies, an initial proposition of a negative link between cultural distance and the cooperative behaviour of alliance partners can be proposed.
Initial Proposition 1: The cultural distance of MR&D alliance partners has a negative impact on the cooperative behaviour of alliance partners.
6 cooperation into formal and informal, stating that the latter is manly characterized by “adaptable arrangements in which behavioural norms (…) determine the contributions of the parties” (Smith, et al., 1995, p. 10). Contrarily, formal cooperative relationships are mediated by “contractual obligations and formal structures of control” (Smith, et al., 1995, p. 10).
Arino (2001) distinguishes between cooperative and noncooperative behaviour by analysing “how a firm’s perception of its partner’s cooperative behaviour affects the firm’s own cooperative behaviour” (p. 4). She makes a distinction between a noncooperative behaviour by omission (“failing to perform an action beneficial to the partner”) (p. 5) or by commission (“performing an action that is harmful to the partner”) (p. 5). Her analysis concludes that noncooperative behaviour by one of the partners results in a noncooperative behaviour by the other partner(s), and that noncooperation by commission is more likely to be detected and have stronger negative repercussions on the alliance.
Failing to align goals and objectives between alliance partners and, therefore, pursuing a competitive behaviour poses a serious challenge on alliance managers (Ireland, et al., 2002). To learn to cope with differences in the cultural background of alliance partners, several mechanisms have been discussed in literature, including promoting formal training programmes, encouraging informal contact between partners, or increasing the level of transparency in partners’ activities (Parkhe, 1991). Starting from the studies mentioned above, the following is proposed:
7 Both proposition 1 and 2 are subjected to adjustments following the findings of the study. The following preliminary conceptual model will serve as guidance for the remainder of the paper (see Figure 1).
Methodology
A systematic literature review methodology was chosen for this study as it allows to screen and synthesize results of prior research (Meier, 2011) on the topic of MR&D alliances and, ultimately, to establish the linkages between the partners’ cultural backgrounds and their cooperative or competitive behaviour within alliances. The methodology of this research was inspired from the guidelines indicated by Tranfield, et al. (2003) in their paper proposing a rigorous methodology for systematic literature reviews. Their guidelines have been employed (through others) by Meier (2011), whose methodology will be regarded as an example for this paper.
Several search terms have been used to locate articles related to the phenomenon studied (Connaughton & Shuffler, 2007). The search terms chosen are: alliance management, competitive advantage, (university-industry) collaboration, cooperative behaviour, competitive behaviour, coopetition, cultural distance, opportunism, absorptive capacity, differential learning. Furthermore, due to the inconsistent terminology across extant literature, variations of the key words have been created (e.g., Science-Industry alliances, or University-Industry research
Partners’ cultural background
Partners’ cooperative/competitive
behaviour
8 alliances). Nonetheless, the keywords identified have been combined in search strings that have improved the search results (Meier, 2011). Examples are: [‘Alliance management’ AND ‘Opportuni*’], [‘Cooperative behavio*’ AND ‘Competitive behavio*’], and [‘Alliance management’ AND ‘Cultural distance’].
Moreover, the articles selected had to be peer reviewed and to be published after the year 2000, in order to assure the relevance of the information for the current environment. An exception has been made for seminal articles setting the bases of the research agenda studied (such as (Parkhe, 1991) or (Kumar & Nti, 1998)). Furthermore, due to the time and scope limitations of the study, and to ensure the paper is mainly based on empirical evidence, only journal articles have been considered for the systematic literature review (Meier, 2011). Lastly, another aspect taken into account in order to assess the quality and acceptance of the articles reviewed was the number of times the different articles have been cited (Meier, 2011), which was determined with the help of the Google Scholar search engine.
The main database used for locating articles was Business Source Premier (BSP), frequently referred to in business literature (Meier, 2011). BSP has been selected as the main database for retrieving information due to its extensive coverage and accessibility. BSP provides full text for more than 3000 journals and peer-reviewed business publications, such as Academy of Management Review or Organization Science (EBSCO, n.d.). Nonetheless, the database is easily accessible through the University of Groningen online library, which granted a convenient access to information.
9 been made. The articles have been selected to match the key words and search strings mentioned above and to fulfil the year and peer-review requirements of the paper. Lastly, articles that have been cited more than 100 time have been selected, however, an exception was made for essential articles for this paper such as (Arino, 2001) or (Plewa, et al., 2013).
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Author(s) & Year
Type of paper Antecedents of cooperative behaviour Cultural distance effect on cooperation Management strategies for cooperation
1 Arino & de la Torre,
1998 Conceptual *
2 Arino, 2001 Empirical *
3 Bruneel, et al., 2010 Empirical *
4 Connaughton &
Shuffler, 2007 Conceptual * *
5 Das & Teng, 2002 Conceptual *
6 Den Hartog, et al.,
1999 Empirical *
7 Faems, et al., 2005 Empirical *
8 Ireland, et al., 2002 Conceptual *
9 Kennedy, 2002 Empirical *
10 Kumar & Nti, 1998 Conceptual *
11 Mora-Valentin, et al.,
2004 Empirical *
12 Parkhe, 1991 Conceptual * *
13 Pasa, 2000 Empirical *
14 Plewa, et al., 2013 Empirical * *
15 Santoro & Gopalakrishnan,
2000 Empirical *
16 Zakaria, et al., 2004 Conceptual *
17 Zeng & Chen, 2003 Conceptual *
11
Discussion of Findings
As the study focuses on discovering and inventorying effective management strategies for stimulating cooperative behaviour within alliances of partners with different cultural backgrounds, the findings centre on three major areas: (1) finding antecedents of cooperative behaviour amongst partners, (2) determining the influence of cultural distance on cooperation and (3) finding management strategies that have been proven to encourage cooperation.
Antecedents of cooperative behaviour The nature of MR&D alliances
Unlike exploitative collaborations, which mainly focus on enhancing existing organizational competencies, MR&D alliances are mostly explorative-oriented collaborations, which prove to be instrumental in creating new competencies, new products or new technologies (Faems, et al., 2005). The same authors also state that explorative collaborations are most frequently found in alliances with universities and research institutes, because they focus on generating new knowledge and less on exploiting the rents of existing knowledge.
Enhancing collaboration in MR&D alliances
12 Moreover, Bruneel (2010) and his colleagues have argued that elements such as the degree of prior experience partners have in collaborative research, the trust they endow each other with or the breadth of their interaction channels (e.g., joint research collaborations, consultancy work, or more informal interactions in meetings) all have the tendency to diminish the barriers related to university-industry collaborations. Arino (2001) also added that partners who have worked together for longer than 2 years are significantly more tolerant towards partners’ mistakes or actions of misconduct. Actions that used to trigger strong reactions at the beginning of the relationship are becoming more easily accepted, however, commitment is needed throughout the venture's life-time, for the alliance to survive.
Knowledge transfer within MR&D alliance
13 Cultural distance effect on cooperation
To begin with, studies have shown that cultural differences between partners can affect alliances dynamics both negatively and positively. According to Parkhe (1991), on one hand, partners from culturally distant backgrounds can cause complications on team management, bringing about more complex dimensions than in the case of intra-cultural teams. On the other hand, multicultural teams may trigger culturally synergetic solutions, improvement of creativity, cohesiveness between team members, and achievement of greater acceptance of new ideas (Zakaria, et al., 2004). Furthermore, they have also been proven to be more inclusive of the different members’ beliefs and opinions when it comes to decision making and tend to have a more collaborative conflict management approach, using more in-depth discussions before making decisions (Connaughton & Shuffler, 2007).
The seminal study of Parkhe (1991), categorised culture in 4 different tyres: societal culture (representing all aspects of life such as norms, values, and behaviours of managers), national (represented by home government policies, national industry structure, and institutions), corporate-level (represented by values and ideologies guiding companies), and operating-level culture (represented by strategic interests and management styles). As mentioned above, Parkhe (1991) argued that the higher the distance in partners’ backgrounds on each of the four aspects of culture, the more likely it is for longevity to be negatively impacted.
Relational Considerations
14 what Pasa (2000) denoted as "granted power/authority" (the position-based authority granted to the leader), "taking over responsibility" (leader’s attempt to persuade by offering to take on any repercussions that might result), "rationalizing and involving" (the use of factual information and logical arguments to persuade) and "pressure-control" (leader’s use of demand, reminding and frequently checking on the proceeding of a project).
Moving further to the east, Kennedy (2002) argued that cooperation in the Malaysian culture is achieved if leadership style is compassionate, but autocratic. Hierarchy needs to be respected, leading to collective well-being. Collaboration needs to emphasize harmony and avoid assertive and confrontational interactions. This way, unlike the more strict leadership style presented above, managers interacting with Malaysian counterparts would need to be much more skilled at balancing strictness with harmony.
The study of Den Hartog and his colleagues (1999) shows, however, that there are a few leaders’ characteristics that do not seem to know any geographical boundaries. Charismatic and visionary leadership are fairly widely regarded as effective amongst multiple cultures. Although there are slight differences in the definition of charismatic and visionary leadership, the concept proves to be universally endorsed amongst most of the 60 different countries the study has been conducted in.
Operational Considerations
15 collaboration than others; it merely shows the importance of cultural awareness of the partners involved in an alliance.
As a closing remark, Connaughton and Shuffler (2007) also state that the individualism-collectivism dimension (introduced by Hofstede (1980) to show the degree to which individuals work openly within a team) might have lost relevance or at least changed its meaning in today’s interconnected society.
A summary of the findings can be found in Table 2.
Overview of ways in which cultural distance affects cooperation:
- On one hand, cultural distance complicates the management of alliance partners
- On the other, it can result in synergies hard to obtain otherwise and makes partners more inclusive of different opinions when taking decisions
- Cultural background is a multifaceted notion and all aspects should be taken into account when making decisions (societal-, national-, corporate-level-, operating-level cultures) - Different cultures need different management styles (only charisma and visionary
leaderships are culturally independent):
- Western cultures base more on consultation and reaching consensus
- Eastern cultures base more on leader’s persuasive power. Harmony, however, is essential to successful management
- Knowledge transfer takes places in different ways:
- Western cultures have a tendency to transfer more knowledge, due to individualistic orientation
- Eastern cultures have a tendency to collaborate easer, because of the collectivistic orientation
16 The arguments presented above support the a-priori proposition, however, add the notion that cultural differences can also be advantageous for alliances. Hence, the following revised propositions:
Revised Proposition 1: The cultural distance of MR&D alliance partners negatively mediates the impact of cultural background on the cooperative behaviour of alliance partners.
Sub-proposition 1a: The cultural distance of MR&D alliance partners positively mediates the impact of cultural background on the cooperative behaviour of alliance partners.
Sub-proposition 1b: Exploiting differences in the management styles of alliance partners can have a positive impact on the overall performance of MR&D alliances.
Sub-proposition 1c: Exploiting differences in knowledge transfer of alliance partners can have a positive impact on the overall performance of MR&D alliances.
Management strategies for cooperation
17 Management of cultural awareness
Several studies have indicated the importance of having culturally aware partners in alliances. Connaughton and Shuffler (2007) state that individuals will only share knowledge as long as they learn "the cultural logic of other's divergent beliefs" (p. 396). Failing to do so may contribute towards dividing partners in alliances. The authors argue that culturally intelligent team members should be at the core of each team, highlighting the importance of intercultural training. They state that collaboration can be achieved through frequent informal and unplanned communication, which contributes to a shared identity and context. They also mention that face-to-face communication, is beneficial in reducing task conflicts, fostering trust, and enhancing team dynamics especially in the initial phase of the alliance creation.
As mentioned earlier, Parkhe (1991) differentiated between societal, national, corporate-level, and operating-level cultures. He proposed 5 different coping mechanisms for differences in each cultural tyre. To diminish harmful differences in the societal culture, managers should indeed promote formal training programmes, informal contact and transparency (as also mentioned in the study of Connaughton and Shuffler (2007)). For differences in the national context, managers are recommended to emphasize the rational technological and economic factors. Differences in corporate culture can be mediated by encouraging an "intermediate" culture that combines elements of all partners in the alliance. Finally, differences in strategic directions can be managed by creating a flexible structure that permits adaptation to environmental shifts, whereas differences in management practices can be managed by centralizing authority to a single decision point. Information transfer between partners
18 competencies successful alliance partners manage best. Moreover, they find that together with managing cultural differences, adapting and upgrading performance capabilities, determining alliance's scope, and allying with suitable partners they make up the most important success factors of alliances.
Successful cooperation for Zeng and Chen (2003) is a function of partners’ achieving a balance in the social dilemma they face: managing the tensions between cooperation and competition. The authors propose two sets of solutions to the so called social dilemma: structural management solutions and motivational solutions. The structural management solutions proposed are: (1) changing the structure of the payoffs gained by the different parties, herewith discouraging partners to compete, (2) introducing sanction systems, (3) reducing group size, and (4) changing allocation rules of gains. Motivational solutions (changing partner's perceptions of the social environment), on the other hand, suggest (1) introducing face-to-face meetings addressing the social dilemma, (2) establishing long-term goals, (3) and informing partners about negative consequences of competition.
Returning to the findings of Parkhe (1991), a minimum level of beneficial inter-organizational differences (the ones attracting partners to join alliances in the first place) is essential in the formation and maintenance of the alliance. However, harmful differences need to be reduced to a minimum by iterative cycles of learning.
Learning loops
19 restore efficiency and equity, as well as discourage them to rely on decisions or actions taken unilaterally.
A summary of the findings can be found in Table 3.
Table 3: Overview of management strategies that enhance cooperation Overview of management strategies that enhance cooperation:
- Management of MR&D alliances is inherently different than management of dyadic alliances with respect to social exchanges between members, but also the social sanctions and the macroculture created.
- Culturally aware partners and, thus, cultural training are essential for alliances - Frequent informal communication contributes to shared identity
- Face-to-face communication reduces task conflicts, increases trust, and enhances team dynamics
- To reduce cultural distance:
- In societal culture implement formal training programmes and informal contact - National culture emphasize rational and technological factors
- Corporate culture create intermediate culture - Strategic directions create flexible structure - Management practices centralize authority
- Balancing gaining information with revealing information is the key to a successful collaboration and can be achieved through:
- Structural management solutions (e.g. sanction systems, reduction of group size) - Motivational solutions (e.g. face-to-face meetings, long-term goals)
- A minimum level of interorganizational differences is beneficial, and enhances attractiveness of partners
20 The literature reviewed supports the a priori proposition. Furthermore, three other sub-propositions have been created from the findings listed above:
Revised Proposition 2: Management strategies targeted towards diminishing cultural differences of MR&D alliance partners have a positive mediating impact on the relationships between partners’ cultural background and cooperative behaviour of alliance partners.
Sub-proposition 2a: Enhancing cultural awareness of partners in culturally diverse MR&D alliances can have a positive impact on the cooperative behaviour of alliance partners.
Sub-proposition 2b: Balancing knowledge transfer between partners in a culturally diverse MR&D alliance can have a positive impact on the cooperative behaviour of alliance partners.
Sub-proposition 2c: Implementing learning loops can have a positive impact on the cooperative behaviour of MR&D alliance partners.
21 Partners’ cultural background Partners’ cooperative/competitive behaviour Cultural distance of partners:
Managing differences in management and leadership tactics
Managing differences in knowledge transfer
Management strategies for reducing cultural differences:
Increasing cultural awareness (e.g., formal training programmes, informal contact, transparency)
Balancing information transfer between partners (e.g., managing cultural
differences, adapting and upgrading performance capabilities, determining alliance's scope, allying with suitable partners, employing structural management and motivational solutions)
Implementing positive learning-action-reaction loops
22
Conclusions and Limitations
The main purpose of this paper has been to discover a series of effective management methods for international MR&D alliances that have the potential to stimulate the cooperative behaviour of partners from both industrial- and scientific backgrounds. The paper adopted a literature review methodology, which allowed to effectively screen and synthesize results of prior research.
The research found that cultural distance can both complicate the management of alliances, and bring significant synergies into alliances, which are very difficult to achieve without a mix of cultures. Furthermore, culture is a multifaceted element and, therefore, needs a more nuanced management approach, depending on the targeted cultural level. When it comes to geographical regions, western culture have been found to be more effective at transferring knowledge and tend to consult more before reaching consensus. Eastern culture, however, have a tendency to collaborate easier and a balance between persuasive power and harmony assures consensus. Furthermore, due to the major differences between multi-partner and dyadic alliances, it is important to adapt management solutions to the particularities of each alliance. It has been found that some of the most effective management solutions are increasing the level of cultural training and the frequency of informal communication and enhancing the occurrence of face-to-face communication. Furthermore, reducing cultural differences through appropriately designed measures for each type of culture, balancing the transfer of information between partners and creating learning loops can have a radical impact on the success of MR&D alliances.
Implications for research
23 positive impact on alliance collaboration and success. Research has traditionally gone to great lengths to examine how cultural differences can be reduced. However, as indicated in more recent studies, diversity is what attracts partners into alliances in the first place, and future research should define how these differences can be nurtured.
Furthermore, although research has recently made significant progress into the study of MR&D alliances, more research needs to be directed towards identifying the precise cultural synergies that will enhance success within alliances.
Implications for practice
The increasing volume of research makes it difficult for practitioners to gain practical knowledge into successful alliance management strategies. This study intends to provide practitioners with a clearly defined set of successful and feasible management solutions for increasing collaboration in alliances. Managers and policy makers are, therefore, brought forward the importance of cultural awareness in alliances and are explained that assigning time for frequent informal communication and face-to-face contact is essential for increasing collaboration. Furthermore, employing the right tools for reducing cultural differences and balancing information flow can bring significant positive result. Finally, it goes without saying that creating learning systems within alliances, i.e. learning from experience, should be one of the main priorities.
Limitations and future research
24 a capital role. More detailed analyses of the cultures and their interactions are, therefore, recommended here.
Furthermore, a clearer distinction should be made between elements triggering cooperation and elements hampering competition within alliances, as the two variables might not be perfectly opposed.
25
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