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4.1 Introduction

Scholars assigned a certain importance to culture in the field of management only when they understood that culture is not a universal concept, because what is valid for us may not be so for other people from different countries. Since strategies are formulated by taking into account assumptions that concern the social setting and the relationships that link individuals to one another, national culture is fundamental when deciding a strategy.

Also, operational management is heavily affected by culture, in cases in which the necessity to adapt to a different cultural setting and to the routines and practices of a foreign ally becomes an intimidating assignment and a hindrance to performance.

Cross-national theory has recently reoriented itself to sustain the opinion that culture, in its conventional definition, makes misleading suppositions regarding cultural homogeneity within nations and also makes a mistake when it claims that culture is stable over time. These changes raise an issue about the extent to which the establishment of a system of values within a society and its permanence over time is due to sociocultural influences, rather than business ideology influences. There is no evidence supporting a convergence of cultures, but it is possible to outline a definite “crossvergence” where a combination of societal values and economic ideology occurs and creates a system of values that is considerably different from the ordinary national cultures.

Since managers are more and more willing to reach new markets and gain new customers for their globally expanding firms, the problem of international cooperation that leads to share common advantages has drawn the attention of cross-cultural research, insofar as the integration of theoretical fields to effectively solve business issues has turned into a matter of great interest.

4.2 Members’ Identities and Cultural Values

We assert that only individuals think, not cultures and groups. Individuals build their culture-specific mentalities in their typical idiosyncratic ways. Therefore, to understand individual attitudes and behavior, we should examine the way cultural ideology is represented subjectively for the individual.Footnote 1

We reckon that mentality is internalized in the process of socialization, creating individual differences, and is not preset in people’s minds. The mentality approach, in the way it is analyzed in the humanities, has often neglected or minimized differences among individuals. On the contrary, we assert that individuals do not always think the same way, nor they constantly think in the way prescribed by the culture they are related to. This means that, if required, mentality can be changed, it is not static.

Mentality is here described as a theory-driven psychological attitude in response to new information. Most of the times, mentalities seem unchangeable and it appears that people in a certain culture think and reason the same way when they are subject to particular types of incentives. These are theory-driven processes since mentalities are, to a great extent, founded on people’s beliefs (or implicit theories) of the way reality appears and the way an individual acquires knowledge of it.

It is from personal experience within a specific setting that several of these theories and beliefs arise. It is more probable that individuals who come from similar cultural or socioeconomic groups share some cultural or group-specific theories and beliefs just because they take part in the community (Peng and Akutsu 2001). Nevertheless, people’s “cultural competence” can be a factor of differentiation. Thus, we claim that in people’s theories and beliefs both group and individual differences exist regarding the nature of reality and human knowledge and the best ways to assimilate them.

We essentially think that people react differently to new ideas or new knowledge because of the divergences in what they believe in. Because cultures reflect sets of values and beliefs into which members are socialized (Berry et al. 1992; Tomasello 1999), culture may also affect the meanings that managers attach to issues that confront them.Footnote 2

As argued by Berger and Luckmann (1967) and Van Maanen and Laurent (1993), managers, who are of course members of national societies, not only are of assistance in creating the cultural norms and views, but they also have to face social reinforcement pressures, so their own suppositions and choices generally tend to adapt to those of their national culture. Lodge and Vogel (1987) have pointed out that managerial attitudes and opinions express the multiple ideas and convictions that are embedded in national culture, but, as highlighted by Jackosky and Slocum (1988) and Shane (1995), the latter are also visible in the way members of an organization behave when they perform their duties.

In recent years, the connection between national culture and strategic decision-making has been theoretically investigated. A research by Schneider and De Meyer (1991), based on the interview of managers from different cultural backgrounds, gave evidence of considerable divergences in understanding and approaching strategic problems. In particular, managers of Latin European background showed a powerful crisis predisposition as a response to an environmental adaptation incumbent upon them and they were also more inclined to suggest a proactive type of behavior. To explain their discoveries, Schneider and De Meyer focused on existing divergences in national culture. Nevertheless, the two scholars were not able to detect the elements or the processes that give birth to such divergences, leaving this task to others in the future. Hambrick and Brandon (1988) and Schneider (1989) assume that the diverse values embedded within national cultures may cause the change in the strategic orientation of executive managers. As previously underlined, the way a society comprehends organizations, environments, and their connections is a clear reflection of culture.

As stated by Hofstede (1991), the fundamental dimensions of such comprehension are caught by cultural values, together with wide societal choices that enclose problems of organization and adjustment. Hambrick and Mason (1984) pointed out that executive managers, grown up since they were children within the system of values of their native country, normally tend to orient themselves to that system when they fulfill their duties, and of course also when they make strategic decisions. Therefore, both Hambrick and Brandon and Schneider, believe that executives’ strategic decisions are expression of their cultural values, and they specifically argue that such values will be useful not only to address the way executive managers consider organizations and the external events they have to deal with day-by-day, but also their choices regarding different possible options of strategic behavior.

4.3 National-Level Institutions and Managerial Discretion Across Countries

The concept of managerial discretion, defined as latitude of managerial action, was first introduced by Hambrick and Finkelstein (1987): it helps to comprehend if and when executive managers have strategic leeway (Child 1972).

The original conceptualization indicates that three are the levels from which the extension of managerial discretion arises: the individual (e.g., political insightfulness), the organization (e.g., an idle board of directors), and the environment (e.g., industry growth). Many scholars have started to investigate the way discretion is configured at every single level (for instance, Hambrick and Abrahamson 1995; Carpenter and Golden 1997; Finkelstein and Boyd 1998). Nevertheless, until now, the conceptualization of the environmental factors that shape discretion has been mainly viewed in terms of industry features. Only in the last years, the opinion that managerial discretion may be also heavily affected by national-level elements has been taken into account (Crossland and Hambrick 2007).

As it is evident that organizational phenomena differ considerably from a country to another, the lack of research into the sources from which the discretion of executives emanates at national level is an incredible vacuum. Analyses of resemblances and differences among corporate leaders, as those by Mannari (1974), Muna (1980), and Fidler (1981), together with studies on cross-national divergences in corporate governance, the part played by government, and the effects of globalization (e.g., Aguilera and Jackson 2003; Griffiths and Zammuto 2005; Kim and Prescott 2005; Makino et al. 2004; Spencer et al. 2005), all certainly indicate that there is not cross-national uniformity in managerial discretion.

In 2007, Crossland and Hambrick published a paper in which the very first attempt to effectively analyze cross-national differences in managerial discretion was made. The two scholars discovered that US CEOs had a greater influence on corporate performance than their Japanese and German colleagues, and they claimed that the different impact was caused by cultural divergences, diverse corporate ownership models, and different types of governance that characterized every single country.

A study by Crossland and Hambrick (2011) based on their initial analysis (2007), which takes account of the new institutional theoryFootnote 3 (North 1990), thoroughly examines the mechanisms that allow discretion to be shaped by formal and informal institutions.

These outcomes could better illustrate a series of cross-national divergences in business phenomena. For instance, strategic consequences may derive from national-level managerial discretion. Companies in countries in which executives operate with a high degree of discretion may be perfectly suitable to compete in dynamic industries (e.g., software and high technology), a riskier environment in which it is fundamental to make quick decisions. On the contrary, companies that operate in low discretion countries may get brilliant results in low discretion industries, a context in which the most significant factors are balance and constant enhancement. And even a firm’s competitive strategy within its own industry may be affected by national-level managerial discretion.

Nevertheless, it is necessary to stress that, although it has specific effects on strategy, the discretion of executives is not perforce something that is good or bad in itself, but it is a concept which is purely related to the extent of managerial action. Thus, no general relationship between discretion and national-level competitiveness can be found. A higher level of discretion may allow a company to outline a more heterogeneous strategy, make more rapid decisions, and innovate more quickly. If these factors are considered altogether at the national level, the country’s competitiveness would probably be enhanced. Nevertheless, a higher degree of discretion may also trigger managerial negligence, arrogance, haughtiness, and the definition of radical strategies that may not be approved by shareholders. Considered altogether at the national level, these elements should undermine the economic strength of a nation.

4.4 Culture and National Learning Styles

In this work, the concept of national learning styles is the result of an effective adjustment and combination of Aoki’s work (1994), regarding communication and information flows, and the studies by Di Bella et al. (1996), which were focused on learning orientation and styles. Such elaboration provides a peculiar vision of the differences that arise in the way learning processes occur, as they are shaped by national, institutional, and cultural settings and by consequent variance in organizational frameworks and comprehension of the managerial functions. Contrasts among the learning styles of Japan, Germany, the UK, and the USA are taken into account.

As argued, among others, by Aoki (1994), Japan can be considered a country based on a network economy or organized capitalism, since it is characterized by a quite high level of vertical disintegration and by intricate network connections, suppliers included. Less known is the case of Germany: here, as discussed by Porter (1990) and Lane and Bachmann (1996), despite vertical integration being much higher than in Japan, organized capitalism equally involves solid supplier networks, even if they are not so accurately interlinked. In the USA and the UK, instead, as highlighted by Lippert (1997), because supplier structures are less centralized and are relatively more competitive, capitalism is atomized. Many studies, including those by Sako (1992), Helper and Sako (1995), and Jürgens (2000), confirm these conclusions, even if they point out differences among the various industries: they also show that in the Western countries network structures and processes are starting to reveal some typical characteristics of the Japanese model.

As argued by Nonaka and Reinmöller (1998), in Japanese networks, internal and external learning, linked to a team approach, is intensively supported. Aoki (1994) and Nonaka and Byosiere (1999) have claimed that, since the Japanese consider knowledge as a common property, they tend to facilitate free and intense flows of information across inter and intraorganizational boundaries. Despite some formal peculiarities, knowledge is generally diffused in an informal way. As a result, implicit knowledge is grasped and can be transformed into explicit, conceptual knowledge. Such learning style is similar to the idea of “communal style,” term coined by DiBella et al. (1996). Nonaka and Reinmöller (1998) believe in the ambiguity of the information regarding the contribution of Japanese network to the creation of new conceptual knowledge or the presence of platforms on which different kinds of knowledge can be dynamically transformed.

In fact, distinct bodies of knowledge can be easily combined across boundaries, and this, joined with the tolerance of redundancy, can encourage conceptual learning. Nevertheless, the latter may be even arrested, when, in hierarchically structured networks, domination arises due to a powerful interdependence between big firms and smaller suppliers. However, this possible negative effect can be steadily softened: routinization and self-satisfaction can be discouraged by competition among suppliers, that increases as the customer firm decides to classify them or when lateral communication in suppliers associations occurs. At the same time, cognitive lock-in in strongly interconnected networks may be avoided, since some suppliers are stimulated to deal with numerous customers.

Imai and Itami (1984) explained what can be considered the most appropriate identification of the features of the Japanese style by associating the Japanese networks with their power in encouraging always higher innovation levels. Intense product innovation, together with the extremely positive results in the manufacturing industry, also indicates that the constant incentive of operational learning, combined with the integration of explicit knowledge into efficient systems, effectively improves operational routines, as exemplified by Toyota’s perfection of the JIT process. As discussed by Sako (1992) and Helper and Sako (1995), the Japanese learning style can be well understood when examining the set of supplier networks that function on the basis of long-term implicit contracts, are strongly interconnected to the customer firms, also through solid interpersonal links, are highly interdependent and feel heavily obligated to one another.

The learning style which can be found in the USA and the UK, instead, resembles very much the type described by DiBella et al. (1996) as “rugged individualism.” Such concept emphasizes personal development and is based on the idea of knowledge as private property. Therefore, creation of knowledge is internal to an organization and its diffusion is informal. When an organization is willing to acquire knowledge from an external source, network interconnections are usually loose and short term, thus proving to be more flexible and dynamic if compared to the Japanese.

As stated by Lippert (1997), network connections are not used at their full ­potential, since final assemblers take into account only short-term efficiency. Such characteristics are well expressed by the term “competitive network.” The building of closed and solid networks is also prevented by other factors, such as antitrust legislation. This learning style is considered to be perfectly suitable to conceptual learning and innovation, but its contribution to operational learning and constant incremental improvement is not so effective. It is not fundamental that actors mutually adjust their learning orientations.

Rugged individualism is generally characterized by a higher presence of short length relations, less developed supplier networks, and more decentralized supplier structures. The network organization is typically described by loose connections, strong competition among suppliers, the prevalence of price on quality, a high level of independence for all actors, and the will to maintain short-term commitments. Although there have been some changes recently, trust within networks in the USA and the UK is considerably lower than that in Germany and Japan.

The German learning style is half way between the two previously discussed styles and can be associated to the term “techno-analytic” style, as defined by DiBella et al. (1996). It encourages both internal and external learning, but the latter is not so relevant as in the Japanese model and is limited to the relations between customer and supplier, as it concerns in particular joint product development. Mechanisms to protect the interests of individual firms strengthen from beneath the ability to be prepared for the accumulation of knowledge and the constant improvement of routines. Generally, knowledge is formally diffused, although informality may seldom arise from the rigidity of formal procedures. As argued by Jürgens (2000), in German networks information flows are more intense than in the USA and the UK, but there is a lower organizational flexibility to take in new knowledge. As pointed out by Audretsch (1995), Kern (1996), and Hirsch-Kreinsen (1997), for German firms maintaining their own independence is more important than for Japanese firms: this means that in Germany knowledge crosses boundaries not as easily as in Japan. Germans attempt to make their routines as perfect as they can and conceptual learning has never been very successful in their networks.

The network organization pertaining to the German learning style is described by long-lasting relations and a high level of mutual trust. As highlighted by Lippert (1997), such trust is especially strong between customers and suppliers of an entire system of essential components. In Germany, networks do not have the same hierarchical form as in Japan and independence within the networks is strongly safeguarded by all parties. Relations are less widespread, more formal, and less individualistic than in Japan. Legal regulations are very diffused, but only seldom have to be enforced. Instead, if a comparison has to be made between German and Anglo-American networks, the following differences can be pointed out: the former are more stable, German actors are linked to one another by a higher level of reciprocity and are able to better share risks.

However, as argued by Hirsch-Kreinsen (1997), the closer relations based on trust have impeded a wider opening to new knowledge, that is fundamental for substantial innovation.

Nevertheless, cooperative relations are not the same in every industry, and the German automotive industry, in particular, is characterized by a higher level of conflict. Although it can seem unusual, the possibilities of creating learning networks have been weakened by strong global competition, that demands constant high innovation. As pointed out by Jürgens (2000), the significant changes occurred in the German automotive industry have not contributed to collaborative learning or relational contracting. It is more common now that strong buyer firms dominate smaller suppliers, although such difference in power is not as evident as in the USA and the UK, because of the strength of German medium-sized supplier firms taken altogether and the presence of social and technical norms that regulate the relations within the industry. As highlighted by Lane and Bachmann (1997), German contract law extends risk sharing and makes it harder to take advantage of differences in power.

4.5 Cross-Cultural Values and Relational Learning

As pointed out by Griffith and Myers (2005), the breadth of the research founded on culture leads to the affirmation of the embedment of the expectations regarding culturally based norms in the relational strategies established between dyad partners. The allies create together the intercultural exchange settings and, while such exchange occurs, they are embedded within the relative national cultural factors. As highlighted by Casmir (1999), intercultural communication studies assume that a hybridization of communication protocols within the relationship is caused by the communication setting established through intercultural exchange.

Earlier studies on how multinational organizations deal with intercultural exchange have pointed out that the decisions made by managers who work for companies that run their global business through relationships with partners from different cultures may be influenced by the cultural distance that divides them (Kogut and Singh 1988). And even inequality in the levels, exchange partners are engaged in the business and are pleased with their relationships is caused by behavioral norms and work-related values, which are fundamentally shaped by cultural divergences (Markoczy 2000).

Every single exchange partner has its own peculiar mechanisms of governing relational norms, including knowledge and information transfer between allies (Zhang et al. 2003); such mechanisms vary considerably according to culturally founded expectations. As argued by Griffith and Myers (2005), for instance, managers who have short-term cultural views and work on an individualistic and small power basis believe that knowledge transfer can be a threat to the company’s competitive position, as it gives the partner the possibility to take advantage of the situation for its own benefit. Managers who operate within this culture are less inclined to share knowledge at the same extent as their partners that come from cultures which are less individualistic, more long-term oriented, and maintain large power distance. Basing themselves on this study, Cheung et al. (2011) assume that the cultural distance between dyads negatively affects the impact of relational learning on cross-national relationship performance of the single exchange partner. Performance improves when partners have similar cultural norm expectations, as the governance of knowledge exchange benefits from the coherence among the relational norms on which it is based.

On the contrary, performance is negatively influenced by cultural divergences as a consequence of the different expectations from relational learning activities.