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CULTURE AND PERFORMANCE IN AN INTERNATIONAL CONTEXT

The literature on culture and organizational performance from an international perspective is deep in some areas but less so in others. Moreover, like much of the other literature on culture, it is somewhat dated. Researchers from France and the United Kingdom have, for example, found that the connection between culture and growth was stronger than that between culture and performance.65 Researchers there also found that leadership and culture are linked, certain types of leaders encouraging different types of culture, and certain organizational cultures encouraging leaders that support those cultures.66 Lee and Yu examined relationships between culture and organizational performance in Singaporean firms, and found that industry sector may affect the types of cultures that emerge (e.g., team oriented in hospitals, task oriented in insurance firms, and humanistic oriented in manufacturing firms).67 In addition, the strength of the culture was positively related to performance in firms that were able to adapt to changes in the environment.

Although researchers are urging more work to be done by indigenous scholars within developing or emerging economies, especially regions like Latin America, Africa, or South and Southeast Asia, less is still known about culture in these parts of the world than in Western Europe and North America. Further, although culture and performance have been examined from the perspective of international management and multinational firms, they have received less attention from the perspective of local firms in emerging economies. Given the growth of emerging economies, more data that reflect companies from Asia, South Asia, and Latin America should be available to examine. This opens the possibility of exploring entirely new dimensions of culture. For example, does indigenous culture in areas such as East and Southeast Asia, where a strong Confucian influence remains, influence the development of strong organizational cultures, and how does this relate to performance? Many transition economies that are moving from planned to market-based systems have now had 20 years of (generally) open economic conditions. Yet in countries such as Vietnam, where culture and a history of traditional patterns of behavior dominate (e.g., hierarchy, being told versus taking initiative, jumping at opportunities regardless of their strategic value)/8 organizational culture may be hard to establish independently of the existing (strong) local culture. Without further research, we have no clear sense of the issues and challenges; yet as firms operate globally, greater understanding will be useful.

In contrast to the relative dearth of research coming out of emerging economies, there is quite a body of work on the impact of mergers/acquisitions on culture and performance, including some in an international context.69 As international mergers and acquisitions have increased in the last two decades, they have faced challenges of having to blend cultures, and performance has not always been as hoped for. This should not, however, come as a surprise. A sizeable literature on mergers and acquisitions suggests that even in domestic acquisitions and mergers, culture plays a critical role in long-term success, which has traditionally been quite low.70 According to a survey of 200 top European executives, compatibility and "ability to integrate the new company" was the most important success factor, even more important than financial performance.71

One of the most studied failures in terms of cultures not merging was the Daimler-Chrysler merger (which was revealed to be more an acquisition of Chrysler, despite the public relations campaign to the contrary). Within one year of the 1998 "merger," only one-third of the Chrysler executives remained. Within two years, all the top U.S. executives had left, retired, or were fired, and board size fell from 17 to 13, of which 8 were Germans and only 5 were from the United States. Ultimately, Daimler sold Chrysler to Cerberus Capital in 2007. A major reason for the failure according to both scholars and executives who were willing to comment on it was that the organizational cultures of the German Daimler and American Chrysler were like oil and water, completely incompatible and unable to mesh. Like many other such deals, cultural compatibility is critical but was (and continues to be) explored too lightly during the due diligence phase.72 This case serves to illustrate the need for greater investigation into the role that culture plays (or does not play) in supporting performance and competitive advantage in an international context.

 
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