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Home arrow Business & Finance arrow Human Capital and Innovation: Examining the Role of Globalization
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Cognitive Competencies

Discussions of the cognitive requirements of international assignments tend to emphasize the need to absorb and process a great deal of information from a variety of sources, and to revise one’s conception of the world accordingly. An underlying theme in this literature is that international managers are reluctant to change their ways, and that as a result they are often inattentive to and even dismissive of local aspects that are critical to their business. Clearly, the assumption that runs through these discussions is that, if left to their own devices, international managers tend to be ethnocentric and to miss opportunities in their new environment. This line of thinking accords to the post-World War II international expansion of MNCs. In such preglobalized times, the main concern was that many home-country nationals were unprepared to conduct business in culturally different settings, that they would eth- nocentrically replicate what they did at home and that, as a result, they would fail.

This view of expatriates subscribes to the same premises that characterize research on diversity management, which advocates a series of means (e.g., diversity training) designed to increase executives’ awareness of the nuances inherent in today’s culturally diverse workforce, even within the same country (Sanchez & Brock, 1996; Sanchez & Medkik, 2004). Notwithstanding the importance of cross-cultural understanding and cultural intelligence in today’s heterogeneous workplace (Ang et al., 2007), the primary roots of expatriates’ failure may lie elsewhere. First, globalization has significantly reduced cultural distances and increased awareness of how people live and do business in other countries. Even if an international executive is feeling lost or displaced (or perhaps because of it), she/ he may be too quick to adopt local usages, which can be as strategically deadly as ignoring them. Therefore, we would argue for a moratorium on calls for further study of cognitive complexity as a requirement for international assignments, because even though it is true that the world is increasingly complex and interconnected, international management failures often arise not from failing to understand a complex global environment, but from failing to discern the core, fundamentally innovative aspects of one’s own business model whose localization may threaten its very foundation.

Current thinking on the cognitive requirements of international managers often ignores that a solid understanding of how things work elsewhere, no matter how complex such network of relationships is, should not necessarily lead to significant localization of one’s business practices. In fact, we would argue that it is possibly more important to ensure that international managers possess a strategic understanding of their business, which coupled with their understanding of the global environment will ensure that they do not localize those core aspects of their business model that account for its innovative advantage. In other words, there is a difference between understanding the local terrain and acting locally. Armed with an understanding of local norms, international executives are best positioned to realize that working differently, as their global, strategic imperative dictates, may confer them unique potential for innovation.

It is possible that discussions of cognitive complexity in the context of international management place too much emphasis on differentiation to the detriment of integration (Gupta & Govindarajan, 2002). Admittedly, understanding and changing one’s cognitive schemata to suit a variety of different contexts is important, but such differentiation does not ensure international success. On the contrary, it is the integration of such varied elements and, perhaps more importantly, their subordination to the global imperative represented by the firm strategy that is truly innovativel (Kedia & Mukherji, 1999). In other words, we contend that managers need to have the ability to simplify complex environments while understanding which aspects of their business are strategically important and cannot be sacrificed to local concerns. In simpler terms, managers should not get lost in surface differences among cultures, but should instead have the ability to “separate the figure from the background” by understanding the extent and scope of contextualization that the local environment requires and, more importantly, the threshold of such localization efforts beyond which the innovative advantage of one’s model would be diluted or entirely lost.

As an example, consider the go-to-market strategy of still another orange-flavored soda in the same North African market mentioned earlier. The multinational corporation’s attempt to make this product as popular as possible drove its choice to make the product available in even the most remote rural locations. This decision, together with a low-pricing strategy that deviated from the global platform, created the impression of a b-level brand that was rejected by consumers from premium market segments.

The pressure to give up to local forces might be augmented by heeding the advice of those who seek to skew the so-called “liability of foreignness.” This liability seemingly emanates from the incremental costs involved in acquiring legitimacy, local knowledge, and government contacts (Kostova & Zaheer, 1999; Zaheer, 1995). However, prior research has also demonstrated that such a liability is far from monolithic, because foreignness does at times confer an advantage in areas such as talent recruitment (Newburry, Gardberg, & Sanchez, 2014). In any case, foreignness should not be confused with the global imperative of a multinational corporation. Indeed, the core competencies of the organization are capable of crossing boundaries and do not constitute a liability. On the contrary, they represent a unique set of forces that can fill a void in the local market and, as such, they should be intelligently adapted to the local context rather than abandoned.

 
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