Microfoundations of Global Human Capital

What are the individual attributes underlying the actions that spur global innovation? It is reasonable to assume that, although some of those attributes may respond to innate predispositions, they are also likely to be at least partly forged in the process of adapting to different cultures. The literature on international assignments has been understandably passionate about the need to develop a global mindset to succeed in international markets (see Levy, Beechler, Taylor, & Boyacigiller, 2007 for a review). A theme that runs through this literature is that international executives need to undergo a constant metamorphosis by adopting the local ways in a variety of cultural contexts (e.g., Kefalas, 1998). The purpose of the reflection to be presented herein is not to minimize the contributions of prior research and thought on international assignments, but to alert about a common misconception inspired by a less than careful reading of this literature, namely that innovative breakthroughs in an international assignment require that one becomes an accommodating “cosmopolitan chameleon” willing to give up whatever is necessary to succeed locally.

As in physics, international assignments can be said to be ruled by both “centrifugal” and “centripetal” forces. Whereas centrifugal forces, such as local and institutional pressures, pull international assignees toward localization, centripetal forces pull the international assignee towards headquarters’ strategic goals. We argue here that the secret to global innovation lies not on finding a proverbial equilibrium between local (i.e., centrifugal) and global (i.e., centripetal) forces. That is, managing the global-local dilemma does not necessarily involve giving up a bit of the global imperative for the sake of local concerns. On the contrary, in many cases, truly innovative management of international operations requires true “glocalization.” That is, international managers should refuse to mimic the old advice to “act locally” and, instead, stick to certain aspects that one deems strategically critical for achieving innovative breakthroughs and, therefore, are not subject to compromise.

The manager’s ability to ascertain the strategic value of certain aspects of the business is at least as important as the ability to understand the nuances embedded in a different culture. In fact, cultural intelligence, which has been defined as “the capability to function effectively in situ?ations characterized by cultural diversity” (Ang et al., 2007) does not necessarily imply that individuals merely emulate local usages. On the contrary, effective international executives would sometimes purposefully decide against changing certain aspects of the business simply because they do not conform with local norms at face value. In doing so, these executives do not ignore warnings that such aspects oppose local norms; instead, their solid understanding of the host culture, together with a deep understanding of the firm’s strategic imperative, lead them to promote the strategic value added by such distinct innovations, in spite (and often because) of their deviation from local norms.

As an example of the primary argument advanced here, consider the case of fast food American outlets in North African nations like Morocco. In these countries, these hamburger restaurants are often located in prime real estate enjoying the best views of the city and include spacious and luxurious outdoor patios covered with delicate canvas where patrons slowly enjoy their meals and spend time together after finishing them. Management of these chains certainly knows that their positioning in these markets differs markedly from its positioning in the USA. These locales are frequented by entire families seeking to share not only a meal, but also time together, rather than by hurried consumers with a relatively short time to grab something to eat at a convenient place, as it is characteristic in the USA and other developed markets. Nevertheless, these outlets feature hamburgers that have undergone relatively minor modifications in relation to these same products in the USA. The hamburger bun might be slightly larger and shinier and also slightly adapted to local taste, but the essential ingredients and their appearance makes it undeniable that these are hamburgers that conform to how a hamburger looks and tastes like in the USA. Clearly, these operations have been localized, but they still conserve the essence of the brand that they represent or, better, the brand that they represent in the locals’ mind.

The central premise of this manuscript is that advising international managers to “think globally, act locally” (Grauer, 1989) is at least partly misguided, because it suggests that one should give up to local usages as much as needed and as long as the “global” firm benefits from it. This notion of the whole as something that is not affected by the parts ignores current thinking on strategic management, which advocates the creation of a strongly shared corporate climate that signals the importance of certain strategic or core competencies across the board (Bowen & Ostroff, 2004; Sanchez & Levine, 2009). Thus, international managers sometimes need to both think and act globally, which of course does not exclude the fact that, at times, they need to think and act locally too.

The arguments to be introduced herein expand those concerning the need to manage the dualities of the expatriate’s role that were already formulated more than 15 years ago (Sanchez, Spector & Cooper, 2000). Our contention that innovatively managing an international venture requires learning to live with the contradictions that come with the role of expatriate, however, differs from the traditional advice to “balance” global and local concerns. We argue here that truly innovative “glocalization” often implies taking advantage of the asymmetries—or even disrupting the balance—between global and local forces. Unlike the bipolar model that has dominated this field to date, this bidimensional model maintains that managing the dualities of an international role does not imply finding a proverbial point of equilibrium between centripetal (global) and centrifugal (local) forces (Fig. 4.1). On the contrary, true innovations arise from exacerbating rather than reducing the tension between local and global forces, such as for instance ignoring pressures to localize certain aspects of the business which one deems strategically critical and therefore not subject to compromise. Consider for instance the case of a fast-moving consumer goods multinational corporation that, when

Bipolar versus bidimensional models of international assignments

Fig. 4.1 Bipolar versus bidimensional models of international assignments

launching its orange-favored soda in a North African market, chose to keep the sugar level lower than market research preferences. This decision to lower sugar level in their flavored drinks was predicated on the multinational brand’s claim for healthy products, which was thought to trump local preferences, at least in the long term.

In summary, the widely heard advice to “glocalize” is not achieved by simply giving up a bit to local demands, so that one can find a “happy medium.” Quite the opposite, finding the mid-point between the two vectors representing local and global forces can kill innovation, because the global aspects that were sacrificed for the sake of balance may be the ones that conferred the business its uniqueness and competitiveness. As pointed out by Rhinesmith (2005), the global paradox, like any other paradox, cannot be solved, but needs to be managed.

Of course, it is also true that stubborn, parochial resistance to localize marginal aspects of the business may accelerate failure, but being too quick to localize may give up the essence of one’s innovative advantage. After all, there is nothing less innovative, less sustainable, and easier to imitate than the mere replication of the same old and traded local formula. The aspects of the firm’s business model that drive its novelty, innovation, and competitiveness often stem from the uniqueness associated with its global brand, its economies of scale, or other characteristics associated with its global operations, rather than from localization. Excessive localization may dilute such competitive advantage, thereby turning the business into a watered-down, unoriginal replica of better-known, and better-established local enterprises.

The importance of sticking to certain global standards is evidenced by the success of global brands in emerging markets which, in the words of Nigerian consumers, are often “brand-crazy.” As an executive of a US-based firm put it, “in China, if you can brand it, you can sell it.” Therefore, any attempt at localizing a product or service that somehow degrades its brand name is likely to fail. In fact, prior research on the so- called “liability of foreignness” highlights the difficulties of doing business in an unknown environment, but it also points out that simply copying local practices is an ill-advised way to overcome such a liability (Zaheer, 1995). Sticking to the strategic aspects of one’s business model, especially when such model significantly deviates from local usages, undoubtedly represents taking the hard road, but it may prove to be the only way to develop an innovative competitive advantage over time.

The advice to “localize breakfast, globalize lunch,” provides a valid metaphor for what we believe marks a largely overlooked requirement for succeeding abroad. This metaphor is inspired by our interactions with top management of a multinational corporation in the fast food industry whose primary product is American-style hamburgers. This corporation has wisely chosen to internationalize by localizing their breakfast menu with popular breakfast items in each culture (e.g., “Johnny cakes” in Jamaica, “Tajine” in Morocco, “Mallorcas” in Puerto Rico, and “Gallo Pinto” in Costa Rica, to cite a few examples) as a means of attracting customers to consume their core product (i.e., American-style hamburgers) for lunch and dinner. The international managers of this fast food corporation clearly understood the need to stand by their primary, value-added menu item, namely the American-style hamburger which, if replaced by a local delicacy, would have diluted their innovative advantage by turning them into just another local chain.

Arguing in favor of preserving the truly strategic aspects of the firm’s business model does not imply that headquarters’ espoused values are superior to those of host countries. There is no need to revive the debate about cultural relativism, which has questioned the merits of one set of cultural values over the others. Instead, we do advocate a primarily strategic approach to international assignments and, as such, we endorse the view of international executives as the primary decision makers charged with innovative deployment of the global strategy. As part of their strategy-deployment role, international managers should be aware of not only local issues to which they need to adjust, but equally (if not more) important strategically key issues that, in spite of their apparent opposition to local usages, should be kept intact or at least minimally changed. Indeed, these strategically key issues constitute the true innovations that the organization brings to other markets.

The next sections provide further insight into the competencies that international managers require in order to capitalize on the innovative potential that lies behind the apparent conflict between the local and global demands impinging on their role. In the next few pages, we have divided our discussion of these managerial competencies in three major types: cognitive, emotional, and “glocalized entrepreneurship.” We have deliberately chosen the first two terms because they provide a parallel to the constructs of cognitive complexity and cosmopolitanism that are thought to underlie the notion of “global mindset” (Levy et al., 2007; Rhinesmith, 1992). Our position is that discussions of these two constructs have often tilted the balance in favor of “centrifugal” forces, thereby emphasizing the need to adopt local ways to the detriment of the “centripetal” forces calling for the retention or at least minimal modification of strategically critical innovation drivers. The third term, which we have termed glocal- ized entrepreneurship, introduces the idea that a successful international manager is by definition a risk taker, but one that takes calculated risks based on a solid understanding of the how the organization’s strategic core competencies can be combined with knowledge of local voids to form asymmetries that confer the business a competitive advantage.

 
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