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10. Resistance to the transfer of


management knowledge in
international ventures: steps
towards a pathologic interpretation
Gerhard Fink and Nigel J. Holden
INTRODUCTION
Cartwright and Schoenberg (2006) confrm what Michael Porter had
already published by 1987: managers and scholars alike should know that
cross- border acquisitions are overly risky ventures. Many publications
confrm that only about half of the acquisitions are partially successful
(Barnes, 1984; Gregory, 1997; Lessard, 1995; Limmack, 1991; Pettway
and Yamada, 1986; Meschi and Metais, 2006). Irrespective of persistent
failures, in 2004 the total value of international acquisitions was close to
US$ 2 trillion. This inspiring record raises serious doubts as to whether
strategic management is on the right track. In recent years, Probst and
Raisch (2005), Toh and DeNisi (2005) and Rossetti and Choi (2005) have
indicated the need to explore deeper into the motives and reasons for
failure of foreign direct investment activities.
Let us consider a stylized case, which we have derived from 15 inter-
views with middle and top managers of Austrian frms at diferent time
points after a takeover by a US frm. The well- established and successful
US frm has developed a clear and explicit corporate culture. The vision
and mission statement, guiding principles and compliance code have been
explicitly formulated. When hired, each staf member gets a booklet and
has to sign that they have taken note of the vision, mission, guiding princi-
ples and compliance code, and explicitly confrm that they will comply with
or live up to the expected standards. This strong business culture is sup-
ported by a relatively centralized model of management control systems.
When this frm acquires a frm in Austria, the frst thing that happens
after the acquisition contract comes into force is that each employee of
the newly acquired frm also gets the booklet. Very often as a surprise to
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256 Strategic alliances, mergers and acquisitions
most American expatriate managers, usually one- third of staf leave within
three to four months. Labour productivity is declining signifcantly.
People then are not performing according to expectations, and exert
passive resistance. Over time more and more people, including the best
people, leave the frm. In several instances, when the US frm has acquired
a competitor which it wanted to close down, that was plainly not an unde-
sired efect. In the other cases, the frst expatriate management team from
the headquarters to the new local subsidiaries is soon replaced by new
managers, with the task of retaining the rest of the best by ofering them
more favourable contracts than they had before. In close discussion with
those remaining staf, usually a hybrid form between the headquarters
(HQ) management culture and a local management culture is developed.
Sooner or later, the new management hires new staf, of course people
with a good ft to the corporate culture of the US frm. After another three
to four years most of the rest of the original staf have left the frm. All or
almost all previous staf members are replaced by new ones who better ft
the corporate culture of the US frm. Then, in a fnal attempt, it is possible
to push through the original US corporate culture with a few amendments,
which have to do with local laws and labour regulations. Why is a pattern
like that emerging? (Fink and Holden, 2008, 113).
A standard explanation would be that the main issue is cultural difer-
ence: national cultures of Austrian and US American managers difer and
so does their management behaviour (that is, their cultural standards).
Based on Schwartz (2004), Sagiv and Schwartz (2007) fnd some contrast-
ing value perceptions along their three bipolar dimensions: the USA is
high on mastery, but Austria is high on harmony; the USA is medium high
on hierarchy, but Austria is high on egalitarianism; the USA is medium
high on embeddedness, but Austria is high on intellectual autonomy.
Correspondingly, Elias (2004) fnds that Austrian managers perceive the
behaviour of US managers as extremely highly performance- and action-
oriented; this corresponds to a high value of mastery. Austrians consider
Americans to be extremely patriotic and strongly conformist regard-
ing rules and political correctness, a manifestation associated with the
higher value of embeddedness and hierarchy in the US culture. However,
Americans ofer embeddedness also to others: Americans instantly ofer
communication on a frst- name basis, and invite new acquaintances to
private parties and to other forms of socializing. First contact is made
easily, but from the Austrian perspective, it takes a very long while to
get to know the very private attitudes and opinions of Americans. In
conversation with others, Americans tend to be politically correct
and hierarchy- obedient. Austrians exhibit their intellectual autonomy.
Thus, Austrian managers more often than not perceive US managers as
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Resistance to the transfer of management knowledge 257
superfcial. Austrians surmise not only a lack of openness and the presence
of hidden agendas, but also a lack of interest in other peoples concerns.
In this chapter we propose that another factor is at work; a factor that
is not necessarily visible and for that reason is almost certainly discounted
until it is too late: psychological reactions to the disorienting impact of the
change processes, which are often misinterpreted as staf resistance, but
which are symptomatic of the very pathology of cross- cultural business
encounters. To support this proposition, we develop concepts of collective
culture shock and cultural stretch.
Our starting point is a consideration of four cases involving prominent
organizations in their quest to fnd common cognitive ground (Nonaka
and Takeuchi, 1995) with protagonists in a variety of cross- cultural
interactions, all of which have evolved over several years. The four cases
concern the merger between Daimler and Chrysler, the failure of Wal-
Mart in Germany, the eight- years attempt to transfer French retail man-
agement know- how to Poland, and the indiferent results of the EUs 3
billion fagship programme for transferring market economy know- how
to the former Soviet Union from 1991 to 2003. Regardless of the disparity
in the situations as to actors, cultural diversity, timescales and so forth, we
propose that eight factors emerge which will allow us to develop a repli-
cable, universal pathology of cross- cultural interactions. This pathologic
statement suggests clues as to causes of cross- cultural breakdowns and the
consequences that fow from them.
We will posit cultural stretch in relation to collective culture shock (a
term we discuss at some length) and hybridization, which we see as a
protracted, often painful feature of major events that link the life systems
of two organizations in new formats of variable viability. But our key
conceptual starting point is the social viable systems model developed by
Yolles and Iles (2006). Behind this model is the assumption that there can
in principle exist a structure that enables the system to recognize its own
existence, maintain itself, change, and develop manifestations that can be
seen as indicative of systemic content (Yolles, 2007). This model takes
an abstract view of culture; we are using it to demonstrate the viability of
organizations in the face of cross- culturally mediated impacts.
TOWARDS A REPLICABLE, UNIVERSAL
PATHOLOGIC STATEMENT OF CROSS- CULTURAL
INTERACTIONS
It is a commonplace in the management literature to read that internation-
ally operating frms will experience cultural impacts on their operations
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258 Strategic alliances, mergers and acquisitions
which will result in conficts, generate uncertainty or create ambiguity.
Some cross- cultural encounters might even lead to the psychologically
disorienting condition (Ferraro, 1994) known as culture shock. Rather
less do we read that such conficts, uncertainties and ambiguities may not
be an inevitable, even logical consequence of two distinct business cul-
tures, or that culture shock may be a result of bad management decisions.
Take the case of the merger between Daimler and Chrysler at the end
of the 1990s. The German carmaker, knowing that international mergers
have a very high probability of failing, underperforming or not delivering
the expected shareholder value, set up a project team to study 100 inter-
national mergers so that their venture would not founder. Two years into
the project hailed as a marriage made in heaven tensions arose over
diferences between the German and US management styles. But these
were almost trivial in comparison with the consequence of a key decision
made by the German management: it was made plain that US designers
would not be invited to help design Mercedes- Benz cars (The Economist,
1999).
Exclusion from designing the companys best- engineered vehicles
ofended the American designers so much that it caused their mass defec-
tion to the other big Detroit- based carmakers. This was not then an
inevitable clash, preordained by USGerman cultural diferences; this was
the result of managerial ineptitude of a very high order. It was a manifest
signal that the German arm of the newly merged corporation had no
confdence in US design capabilities. It surely did not intend to deliver an
insult, but it did. This scenario suggests that cross- cultural clashes may
sometimes be a symptom of bad management rather than an occurrence
with built- in inevitability.
As it happens, we can fnd other instances in the management literature
which support this conviction. The retreat of Wal- Mart from Germany in
2006 shows how management decisions made at corporate HQ in blithe
indiference to how things are done in other countries can undermine
strategy. The wise men of Wal- Mart based in Arkansas saw no point in
workers councils, which happen to be enshrined in German law. They
underestimated not only their legal importance in the German system of
labour relations, but also their psychological importance to their German
employees. As in the case of DaimlerChrysler and the defection of its US
designers, the Wal- Mart experience suggests that bad management neu-
trally bad management led to cross- cultural tensions with its German
employees and ultimately to Wal- Marts quitting of the German market
(The Economist, 2006; Ghauri and Cateora, 2005).
1
In these two examples we have cases of two major corporations which
have made bad management decisions. Let us look at the example of a
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Resistance to the transfer of management knowledge 259
business operation in which the protagonists consciously attempted at
the outset to close a cross- cultural gap. The case concerns a consortium
of French retailers who wished to transfer their know- how in a cultur-
ally sympathetic way to Poland. This took nearly eight years: from 1995
to 2003, to be precise. Had the French management known that it would
take so long, they may well have not embarked on the venture. What
exactly went wrong? In the frst place the French miscalculated the legacy
of behaviours and attitudes learned in the socialist era and still persist-
ing: resistance to new ideas, conformity, non- assertiveness, reluctance to
handle information, and so on (Hurt and Hurt, 2005).
This case involving Poland brings us to another instance of Western
misapprehensions about former socialist countries. We consider the EUs
TACIS (Technical Assistance to the Commonwealth of Independent
States) programme, under whose aegis from 1991 to 2003 3 billion
was allocated by the EU to transfer market economy know- how and
to reinforce democracy and the rule of law in the former Soviet Union.
This process involved hundreds of EU universities, business schools and
consultancies. In 2006 the EU Court of Auditors found that the efective-
ness of EU funds was very low and the results were poor, especially
concerning sustainability, dissemination and project evaluation.
2
In the above very contrasting cases we have considered how frms and
organizations have seemingly lost their way as their operations, policies
and assumptions were not in harmony with local realities. Regardless
of the context of the cross- cultural interactions an international
merger, establishing retail operations in other countries, and transferring
management knowledge across borders we see a consistent pattern:
The strategies were undermined relatively quickly.
There were massive fnancial losses.
There were instances of bad management, for which diferences in
culture are emphatically not an excuse.
Cultural diferences were not so much a cause of friction as a symp-
tom of anger, resentment and frustration and bad management.
The originally cooperative atmosphere was spoiled. Here we take
atmosphere to be: a pervasive feeling, which is derived from experi-
ence and serves as a determinant of expectations concerning future
cooperation in a business relationship (Holden, 2002).
Beyond that, we can note that:
The outcomes are anticipated neither by managers nor (it seems) by
cross- cultural experts.
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260 Strategic alliances, mergers and acquisitions
The uniqueness of situations makes it dif cult for insiders and outsid-
ers to predict cultural impacts and their longer- term consequences.
The impact of the headquarters way of seeing the world
(Weltanschauung) was detrimental.
Out of the above eight factors we have in efect developed a replicable,
universal pathologic statement of cross- cultural interactions. They are
clues as to causes of cross- cultural breakdowns and the consequences that
fow from them. We make no excuse for applying this medical term to the
operations of the corporate world. Business ventures, like human beings,
are prone to infuences which conspire to enhance and, especially in the
context of this contribution, undermine performance. As in real illnesses,
the causes may not be apparent even though the consequences are fully
manifest. Similarly, causes may be established, but the consequences may
not always be predictable.
People in their collective capacity as organizational employees qua
actors, who are directly afected by the pathological stressors that we have
indicated, experience unease and uncertainty. In the standard interna-
tional management literature this is called culture shock, but this term
needs modifcation so that what it describes is not narrowly focused on
individuals, but on entire groups of people. We term the experience col-
lective culture shock. As it happens, there is a nation which has one word
(as opposed to three) to denote it. After their defeat in 1945, the Japanese
descended into a state which they called kyodatsu. In pre- war Japan this
word had been a clinical term used to describe physical or emotional
prostration in individual patients.
Only after the surrender did the world kyodatsu gain wide currency to
describe the dejected condition of the people as a whole (Dower, 2000).
In the lexicon in which the term with its war- induced connotations frst
appeared in 1946, it was stated that this despondency posed the greatest of
all possible dangers to the country that it had become the great enemy
that could destroy Japan (Dower, 2000).

As for immediate post- Second
World War Germany, where great despondency also fell upon an entire
national population, an American naval of cer based in the Western zone
noted that: From 1945 to the middle of 1948 one saw the probable col-
lapse, disintegration and destruction of a whole nation (cited in Bacque,
2002). This period of trauma is known to the Germans as Stunde Null
(literally zero hour), when almost everything was destroyed, including
material and immaterial values, and when holding onto existence was the
preoccupation of most people (Mller, 2002).
At frst glance, it may seem that the word kyodatsu, given the truly ter-
rible conditions to which it refers, may be too dramatic as an analogue for
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Resistance to the transfer of management knowledge 261
human experiences in cross- cultural interactions in the world of organiza-
tions. Yet it represents a clearly identifed human condition, collectively
experienced at times of considerable stress, uncertainty and despondency.
We should note that people who experience collective culture shock may
fnd it necessary to reject one belief system or set of values, rethink their
lives and take appropriate action to survive as individuals and ensure
that society itself remains viable. In human beings as in societies these
processes, which should be seen as inextricably intertwined, are extremely
complex and involve simultaneous action and learning.
We argue that the cross- cultural dimensions of major organizational
events such as a cross- border merger or the enactment of a knowledge
transfer process throughout international networks cannot be understood
without reference to cultural factors. It is essential to take account of the
pathological circumstances shaping and being shaped by such events. To
explain this proposition, we turn to the work of Yolles (2007) and Yolles
and Iles (2006), who have extended a particular variation of the social
viable systems (SVS) model as developed by Schwarz (1997). We shall next
consider the YollesIles scheme, making reference to collective culture
shock, and then discuss the concept of cultural stretch for pathological
insights into cross- cultural business behaviour.
A NEW CONTEXT FOR CULTURE: IN
PATHOLOGIES OF SOCIAL COLLECTIVES
3
Yolles and Iles (2006) note:
It is not new to say that there is a relationship between thinking and action, and
this relationship is conditioned by belief and knowledge. Here, thinking afects
action, while action and its trials and tribulations are refected in our thinking
and the images that we have and wish to manifest in our social and physical
environment.
This interconnection is shown in Figure 10.1, and its formalization and
generalization establishes a basis for understanding Social Viable Systems
(SVS) theory.
In the context of a multinational corporation this system approach
applies to the multinational corporation as a whole, but also to its head-
quarters, and to subsidiaries. The model leads to the conclusion that every
organization, which belongs to a society or is established within a society,
needs to have characteristics which distinguish it from the society as such.
This distinction has to lie in the value system (beliefs), in the personal-
ity systems (thinking) and in the actions taken (cultural standards which
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262
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Resistance to the transfer of management knowledge 263
regulate actions, language and communication within this organization or
suborganization).
We distinguish two autopoietic processes: AP1 thinking infuences
action, and AP2 experience with action feeds back into modes of think-
ing; and two processes of autogenesis: AG1 values and beliefs infuence
thinking and action, and AG2 learning from evaluated experience with
action leads to adjustment of values and beliefs.
We can describe a cross- border acquisition or some other major inter-
organizational event in terms of the SVS model. Before an acquisition
takes place, we can observe two distinct social systems: the domain of
the prospective new owner, which we call the headquarters domain, and
the prospective subsidiary domain, that is, the domain of the acquisi-
tion. Each of them is embedded into a distinct national culture and has
its own distinct corporate culture. These organizations remain socially
viable only if within the organization the autopoietic processes between
the personality and the action domain function well, and only if the value
systems approximately guide the autopoietic processes AP1 and AP2, but
also are adaptive to changes perceived necessary, what is described by
the processes of autogenesis AG1 and AG2. Interaction between the two
separate social systems takes place in the phenomenological domain (that
is, by action) (Figure 10.2). Conclusions and assessments usually are based
on observed phenomena. Sense- making of these phenomena depends on
available theory. Next, we ofer a pathologic interpretation of observable
phenomena in the case of hesistancy to act and perceived resistance.
COLLECTIVE CULTURE SHOCK
We have already introduced the notion of collective culture shock, by which
we mean a general, complex concomitant of radical systemic change. Specifc
outward signs are apparent: staf have problems adjusting to new conditions
and may well be disoriented and disillusioned. The following concept of col-
lective culture shock was developed after comparing several international
comparative culture studies on East Central Europe, which were undertaken
in the course of the 1990s (Fink and Feichtinger, 1998; Fink and Meierewert,
1999) and after studying the literature on the issues of acculturation and
repatriation of individuals, on identifying appropriate persons for expatriate
assignments, and on psychological adjustment of individuals to assignments
abroad (Black et al., 1991; Birdseye and Hill, 1995; Brett, 1980; Dunbar,
1994; Feldman and Thomas, 1992; Fisher, 1986; Gudykunst, 1998a, 1998b;
Harvey, 1997; Jones, 1986; Louis, 1980; Parker and McEvoy, 1993; Pinder
and Schroeder, 1987; Rogers and Ward, 1993; Van Maanen and Schein,
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264 Strategic alliances, mergers and acquisitions
1979; and so on). We believe that the concept of collective culture shock is
useful for the study of cultural issues in cross- border mergers and acquisi-
tions where important factors, which can only marginally be infuenced by
the HQ organizations, have not as yet been explicitly conceptualized
After an acquisition headquarters delegates expatriates as new manag-
ers to the acquired frm with the main task of gaining control over the
acquisition, that is, in order to implement headquarters management
knowledge in the acquired subsidiary. By that, the expatriates declare the
old subsidiary cultural standards as no longer valid and create patholo-
gies in the acquired subsidiary. Staf (personalities) cannot make sense of
the newly implemented rules. The autopoietic processes are blocked. Local
staf cannot adequately apply the new rules: AP1 is blocked. Thinking
(in old terms) does not help to fnd the appropriate way of acting. And
Phenomenological
domain
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Headquarters
Headquarters domain
AP2
Figure 10.2 Types of knowledge in headquarters and new acquisition
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Resistance to the transfer of management knowledge 265
refection on outcomes of action does not help: AP2 is blocked. The reason
for inadequate action is ascribed to the new rules, which are not under-
stood. It is not possible to learn from failed action, because the reasons
for failures are not understood either. Combination and internalization
in the sense of the NonakaTakeuchi model (1995) is not possible. So it is
that staf of the newly acquired subsidiary sufer from a collective culture
shock (Figure 10.3).
Expatriates sufer from individual culture shock. To the best of their
knowledge and abilities they might have conscientiously tried to implement
the rules and management practices, and yet they fail (compare the case
described by Friel, 2005). The outcomes are a disaster or close to disaster.
That obvious deviation from expected outcomes can only be explained
with reference to resistance by local staf, which in efect becomes visible.
But, expatriates are mistaken, being inclined to interpret symptoms as
causes. Guidance by headquarters (values, personality) does not solve the
problems. Appropriate interpretation of the failure does not appear to be
possible. The refective processes are blocked (Figure 10.4). Expatriates
cannot make sense of the outcomes of newly implemented best practices.
Headquarters managers refections about their expatriates performance
makes little or no headway, and reconsideration of corporate values in the
light of evaluative perceived experience is blocked, too.
Culture shock as experienced by the individual has been described as
being:
precipitated by the anxiety that results from losing all our familiar signs and
symbols of social intercourse. These signs or cues include the thousand and
one ways in which we orient ourselves to the situations of daily life: how to give
orders, how to make purchases, when and when not to respond. Now these
cues which may be words, gestures, facial expressions, customs, or norms are
acquired by all of us in the course of growing up and are as much a part of our
culture, as the language we speak or the beliefs we accept. All of us depend
for our peace of mind on hundreds of these cues, most of which we are not
consciously aware. (Oberg, in Harris and Moran, 1979)
Ferraro (1994) refers to it as a summation of psychologically disorienting
experiences. In conditions of collective culture shock, as in a cross- border
merger, it can be exceptionally tricky for organizations to identify the right
people who can rise above the turmoil.
At the organizational level collective culture shock is manifested as
more than accumulations of psychologically disorienting experiences.
It appears to induce a form of social paralysis characterized by passivity,
endless discussions and hesitant decision- making regardless of the society.
It is apparently not even a question of whether people want to adjust or
not. It appears to be the case that large sections of the staf including
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268 Strategic alliances, mergers and acquisitions
previous managers have dif culty coping with change on this scale. People
feel extremely uncertain. They may even react arrogantly, but they shrink
from taking determined action. It is not entirely surprising therefore that
frms entering into other markets fnd that they must adjust their manage-
ment principles and normal practices. Foreign frms are challenged to
combine management by confdence- building, provide orientation, and
support the self- esteem of local businesses and institutions. Management
by objectives, as traditionally conceived, is often out of place. The adjust-
ment to the new circumstances can be confusing and even traumatic (see,
for example, Black et al., 1991, 298; Ward, 1996).
The degree of confusion of a collective culture shock may be infuenced
by interests, voids between the actual and the perceived change, expecta-
tions, learning capabilities and available resources. Expatriates may be
under orders to dismantle old rules and regulations, and to introduce
new rules. If local people cannot make sense of newly imposed rules,
expatriates merely create vacuums and confusions. Although collective
cultural shock is not a very much studied phenomenon, we can suggest
that important insights from the study of individual cultural shock will
apply to collective cultural shocks, too. We certainly have to distinguish
diferent efects of desired and undesired change, of gaps between actual
and perceived change, of unrealistic expectations and surprise (compare
the constructs change, contrast and surprise by Louis, 1980; and life
changing variables by Birdseye and Hill, 1995).
We suggest that the confusion following a radical system change will be
less pronounced if:
an integrative strategy is pursued;
expectations are realistic;
information is broadly available;
resources are devoted to cope with the change.
Under such conditions, we may posit a relatively higher chance of accept-
ance and that overall satisfaction could be reached again. Against that,
the process to overcome confusion becomes more dif cult and more
protracted if neither civic nor instrumental identity is desired. People feel
marginalized and a negatively charged atmosphere is created. Resistance
to change is an inevitable consequence. Collective adjustment processes
take much longer than individual adjustment, for the simple reason that at
the turning point most of the rules and organization of the new system do
not exist. Information about the new system is not available. The system
has yet to be negotiated and created. While individuals can go back home,
institutions can never return to their old system. What has happened is
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Resistance to the transfer of management knowledge 269
that the cross- border merger has created an organization which is in efect
perceived by headquarters managers as a scarcely manageable hybrid.
HYBRIDIZATION
Evidence of the kind we considered at the beginning of this chapter shows
that hybridization the process of creating a manageable hybrid is all
too often a taxing, protracted experience. Hurt and Hurt (2005) inves-
tigate into some eight years experiences of several French retail chains
with market entry into Poland, and their dif culties in managing local
subsidiaries. In the frst wave after takeover French expatriates separate
themselves from local people, proudly show of their wealth and drive
fancy cars. In a period of about two years these French expatriates can
surely cope with the refusal and passive resistance of local workers. Next-
generation French expatriates begin to notice that they have to learn from
their Polish staf and begin to socialize, concealing rather than parading
their comparatively good income. During that period French expatriates
manage to establish a hybrid corporate culture in local Polish subsidiar-
ies. Hurt and Hurt (2005) call that a common space. In a third wave,
after about 56 years when possibly most of the original local staf have
been replaced, another generation of French expatriates can establish a
corporate culture that comes close to the headquarters culture.
Napier (2005) describes the attempt of a Vietnam business school to
import MBA courses from the USA or Western Europe. In spite of all the
good intentions the Vietnamese scholars remained passive during the frst
18 months. Western scholars had dif culties in coping with that attitude.
Only after a new generation of Western scholars began to socialize with
the Vietnamese did a process of reverse learning establish itself. Western
scholars learned about local conditions. Based on that experience, Western
scholars together with the Vietnamese could adapt Western management
knowledge to local Vietnamese needs. In a long process of about ten years
hybrid forms were developed, which could be absorbed by the Vietnamese
scholars.
In both cases the development of hybrid forms of corporate culture or
of hybrid management concepts is of decisive importance for the process
of coping with collective culture shock. Therefore, in order to explore the
processes of coping with collective culture shock, we have to refne and
extend the Berry (1980) concepts of assimilation, integration, separa-
tion and marginalization by introducing the concept of hybridization.
Hybridization could constitute intermediary stages in integration and
assimilation processes.
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270 Strategic alliances, mergers and acquisitions
Let us briefy reconsider the FrenchPolish retail case (Hurt and Hurt,
2005) The frst step was marginalization: the French implemented their
corporate culture (management knowledge) without further ado. When
this failed, because of the unanticipated cultural shock on both sides, a
new generation of expatriates socialized with local Polish middle manag-
ers and reintegration took place (the term common space of Hurt and
Hurt clearly describes a hybrid corporate culture). In the fnal step mar-
ginalization strategy was pushed through, staf who did not ft were fred,
and assimilation was enforced. As in the Vietnam case (Napier, 2005),
the imported and adapted form of management knowledge prevailed.
Transfer of management knowledge to Vietnam fnally led to the inte-
gration of Western management knowledge into the Vietnamese context
(Napier, 2005).
All too often that hybrid system is fnally aborted by sociopathic
leaders from headquarters or sent from headquarters (to use a term of
Yolles and Iles, 2006) with a desire for self- gain at any cost. In terms of
the social viable systems model, hybridization means a partial adjust-
ment process of all three domains, while the four processes remain open.
Blockages of type AP1, AP2, AG1 and AG2 (see Figure 10.4) will not
persist after the initial cultural shock is overcome. We fnd several articles
which highlight specifc measures and conditions that facilitate the process
of hybridization. We have already mentioned socializing of expatriates
with locals (Hurt and Hurt, 2005; Napier, 2005).
Vance and Paik (2005) emphasize the importance of inpatriation,
whereby local staf identifed as management potential are delegated to
headquarters to assume tasks, to socialize with headquarters staf, and to
acquire tacit and explicit knowledge of headquarters management princi-
ples at source. Although issues of inpatriate acculturation are emerging
(Harvey, 1997; Harvey and Miceli, 1999; Harvey et al., 1999; Ward et al.,
2001), upon return to the subsidiary these former inpatriates can more
easily interact with expatriates and create hybrid forms of organizational
cultures that rely on elements of headquarters culture and of prevailing
subsidiary cultures, but also defne the cross- cultural interfaces (Figure
10.4). If the processes of autogenesis are not blocked then organizational
values are adjusted to the hybrid subsystem and action, and to a new
composition of managers and staf (Figure 10.5).
VIA HYBRIDIZATION TO CULTURAL STRETCH
There is now suf cient evidence that attempts to create mergers are beset
with problems directly connected with the failure to harmonize knowledge
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Resistance to the transfer of management knowledge 271
systems (Hurt and Hurt, 2005; Kuznetsov and Yakavenka, 2005; May et
al., 2005; Napier, 2005). These contributions demonstrate that knowledge
transfer takes longer to succeed than is originally envisaged. We are often
talking in terms of years rather than weeks or months, resulting in the
allocation of unanticipated resources including managers time for coping
with that most recurrent of events, namely todays crisis. What can be
the response to such intractable problems? We suggest a new concept and
explain how it can work in practice. The concept is cultural stretch.
Cultural stretch refers to how individuals or groups of people adjust
their behaviour to suit the demands of working under the impact of a
strong corporate culture, which signifcantly difers from a prevailing
culture into which a local subsidiary of a frm is embedded. Meeting
organizational goals calls for alignment of individual staf with the head-
quarters requirements alongside the norms and values embedded in
manifold stakeholder cultures. Cultural stretch is the efort that individu-
als as organizational actors make to reduce the sense of mutual aliena-
tion and wariness, as well as an anarchic impulse to resistance, that often
accompanies processes aimed at merging organizations.
At the individual level cultural stretch means more than mere fexibility
and applying, as they say, cross- cultural awareness. Cultural stretch is
evident when an individual takes specifc psychological and emotional
steps to create what Nonaka and Takeuchi (1995) call common cognitive
ground with the cultural others. However, overall cultural stretch should
be viewed as an organizational tendency, whose efects may only become
apparent after the passage of years. What is also important to grasp about
Inpat
Personality
Hybrid- Subsidiary
Values
Subsidiary
Values
Headquarters
Expat
AP1
AG1
AG2
AP2
AG1
AG2
Action
(Cultural Standards)
Hybrid-Subsidiary
Figure 10.5 A pathologic subsidiary in cultural stretch
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272 Strategic alliances, mergers and acquisitions
cultural stretch is that it is notionally and practically linked with the
concept of hybridization.
Hybridization can take various forms, some of which probably happen
simultaneously, others consecutively: substitution, sense- making, chang-
ing interpretation of texts, improvisation, combination, internalization,
integration. Substitution would mean that part of the existing rules are
replaced by rules imported from another organization, for example
from the new headquarters. A hybrids rules would consist of a set of
rules from the new headquarters and another set that remains from the
acquired local subsidiary. As we already know, this may not suf ce, since
knowledge changes its meaning when migrating, and locals may not be
in a position to make sense of the newly imported rules. In a process of
sense- making (Weick, 1995) locals and expatriates may develop a mixture
of two social languages within the limits of a single utterance (Bakhtin,
1996, 304). The same text, an utterance that belongs, by its grammatical
and compositional makers, to a single speaker (Bakhtin, 1996, 304) may
contain two speech manners, two styles, two languages, two semantic and
axiological belief systems (Bakhtin, 1996; Fink et al., 2007). It frequently
happens that even one and the same word will belong simultaneously to
two languages, two belief systems that intersect in a hybrid construction
(Bakhtin, 1996, 305).
Changing interpretation of identical texts is often accompanied by
improvisation (Weick, 1998). Local managers and staf adopt variations
of known themes in order to suit the purpose better. The process of
hybridization (Figure 10.4 may be complemented by combination in the
sense of Nonaka and Takeuchi (1995), when new knowledge is combined
with previously existing local knowledge; and by internalization, when
the combined explicit knowledge is converted into new tacit, applicable
knowledge. If and only if there is also a back transfer of that new knowl-
edge into the headquarters, may that conclude a process of integration as
perceived by Berry (1980). New concepts replace both previous concepts
that existed separately before, at the headquarters and at the acquisition.
Blockages of type AG1 and AG2 (autogenesis, Figures 10.4 and 10.5)
possibly will persist, if headquarters insists on imposing its value system
(vision, mission, basic principles) on local staf. In that case, cultural iden-
tity of local staf with the organization (as a subsidiary of a foreign frm)
might become impossible forever. Extrinsic motivation will become the
main guiding principle: better pay than elsewhere, not necessarily good
pay. Yolles (2007) describes that as a sociopathic organization. The
consequences are: (1) marginalization of others who do not have access
to resources; and (2) marginalization of local staf and of local manag-
ers, in particular. On the one hand, expatriates do not identify with that
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Resistance to the transfer of management knowledge 273
set of values which derives from the local community and from previous
subsidiary values. On the other hand, local staf and local managers do not
identify with that set of corporate values which is not compatible with pre-
vailing national values and host- country cultural standards (Figure 10.5).
Those who have to behave within an organization according to rules and
values which they cannot accept, are under permanent cultural stretch.
DISCUSSION AND CONCLUSION
The evidence we have considered from the perspective of cultural stretch
suggests that values, rules, managers and staf are divergent, depending on
the time that has elapsed after the event the merger, the cross- border
acquisition, the transfer of all the knowledge judged to be necessary has
taken place. In the context of foreign direct investment (greenfeld invest-
ments, joint ventures, acquisitions and mergers), there is apparent need
of more longitudinal studies. Research should not solely be based on
interviews with the currently present expatriate managers, but also has
to investigate the interests, perceptions and behaviour of local managers
and staf: those who have left the frm, those who remain, and those who
were hired to ft the new corporate culture. There is also apparent need to
assess the success of frms not by the expatriate managers perceptions
voiced in interviews, but by hard data from the proft and loss accounts;
not estimated, but actually measured labour productivity in physical terms
(per employed person and per hour); not overall sales and cash fows, but
sales and cash fows per employed person, and so on.
Industry context may play an important role, too. This is well exem-
plifed in the aircraft industry with respect to the failed takeover in
the 1990s of the Dutch concern Fokker by the German aerospace
giant, DASA (Heerkens and Ulijn, 2000). There may be vast diferences
between technology- driven corporations and consumer- oriented frms,
between industries with strong competitive pressures and industries with
established oligopolistic or even monopolistic competition. Relations
between value systems (national, corporate, personal) have been not
deeply researched, although they have been addressed by a few scholars
(Hofstede et al., 1990; Hofstede and McCrae, 2004; Sagiv and Lee, 2006;
Sagiv et al., 2005). At the organizational level, these interrelations need to
be studied within the framework of negotiations and learning processes
(Yolles, 2006; Magala, 2005).
We have been concerned with cross- cultural situations, although it is
surely clear that cultural stretch also has conceptual applicability to a
purely national- monocultural set of circumstances: for example, when
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274 Strategic alliances, mergers and acquisitions
one French company takes over another French company, because corpo-
rate cultures difer also within one nation. The notion of cultural stretch
would appear to meet the need for more phenomenon- driven research
(Cheng, 2007; Dunning, 2006; Oesterle and Laudien, 2007) aiming at iden-
tifcation and learning of actual behaviour, communication, and decision-
making within organizations. This kind of research could be undertaken
within the currently predominant paradigm of quantifed cultural dimen-
sions or personality traits, but more also needs to be done outside the
dimension paradigm.
It is important to stress that the concept of cultural stretch that we have
elaborated in this chapter is derived from a commentary of several instances
of forms of human resistance to forms of organizational change or the
imposition of new knowledge. We have attempted to relate cultural stretch
to the SVS model of Yolles and Iles, as we have wished to demonstrate that
cultural impacts on organizations under the immense strain of major events
such as a cross- border merger can be helpfully viewed in pathological terms.
This perspective can shed useful light on behaviours associated with famil-
iar concepts such as marginalization and assimilation (Berry, 1980) even
Nonaka and Takeuchis (1995) famous model of knowledge creation.
NOTES
1. See also: (http://www.dw- world.de/dw/article/0,2144,318142,00.html; and http://www.
wams.de/data/2006/06/18/921179.html.
2. http://eca.europa.eu/audit_reports/special_reports/docs/2006/rs02_06en.pdf; and http://
www.rferl.org/featuresarticle/2006/04/c890a3ed- 62d6- 41f1- b431- 6fed09ddf294.html.
3. The theory is based on Fink and Holden (2008).
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