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This document is an authorized copy for the course "Organizational Behavior: Managing People " taught by prof. Anneloes Raes.

insight

MULTICULTURAL MANAGERS

Cultural Competence:
Why It Matters and
How You Can Acquire It
By YIH-TEEN LEE and YUAN LIAO

n international joint venture involving Apollo Tyres of India, Cooper


Tire of the United States and Cooper Chengshan Tire (CCT) of China
highlights what the Financial Times has called
a growing problem for todays managers who
are increasingly doing business across borders.
In 2013, within the space of a few months, the
merger and acquisition degenerated into legal
action. Covering the court case, the FT reported
that the deal seemed to have gone sour largely
due to miscommunication and cross-cultural
misunderstandings.
Evidence showed American and Indian
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https://dx.doi.org/10.15581/002.ART-2746

executives had put entirely different constructions on the same events, and none seems to have
understood their Chinese partner, Mr. Che.
This became clear during union negotiations: While the Americans prioritized speed
and protection of shareholder value, the Indians
focused on building strong relationships The
misunderstandings with Mr. Che appear to have
been even graver, with the Indian executive
testifying he could not understand the English
of his Chinese counterpart, leading to puzzled
exchanges between the parties.
This story is not unusual. Another more
recent FT report on the Indian mobile phone
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Cultural Competence: Why It Matters


and How You Can Acquire It

This document is an authorized copy for the course "Organizational Behavior: Managing People " taught by prof. Anneloes Raes.

The means of minimizing the friction and maximizing


the performance of culturally diverse and globally
dispersed work teams lies right under your nose: Its
about leveraging multicultural individuals.
company, Bharti Airtel, reveals it, too, underestimated cultural factors when it launched an advertising campaign aimed at the African market.
As one Nairobi marketer said, Multinational
companies come with their global brand positioning and they want to cut and paste. But
just putting black models and images of the savannah in an ad for Africa is as crass as putting a
Thai, a Chinese and an Indian in the same ad and
thinking youre reaching Asia, he said.
As executives increasingly find themselves
operating in multicultural contexts, it becomes
paramount that they develop not only awareness of cultural norms and differences, but
capabilities for managing them effectively, in
order to limit the potential for misunderstanding and conflict, as befell the companies in our
previous examples.
In this article, we will explain how companies
might identify and make better use of the invaluable attributes offered by multicultural managers and employees. Drawing on research, interviews and case studies, we suggest how cultural
intelligence might be developed as a vital managerial competence for the world we live in today.

EXECUTIVE SUMMARY
Emerging research suggests
that multicultural individuals
have innate abilities that make
them exceptional candidates
for global leadership yet they
often pass under the radar
of HR. Although companies
are hiring more multicultural
employees, it is frequently
a token gesture to reflect
societys growing ethnic
diversity, or because they
need their language abilities.
Whats really needed, say
the authors, is a greater

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awareness and appreciation


of the beneficial role of
culture in the workplace.
This article explains how
companies might identify
and make better use of the
invaluable attributes offered
by multicultural managers
and employees. Drawing on
research, interviews and case
studies, the authors suggest
how cultural intelligence
might be developed as a vital
managerial competence for
the world we live in today.

The Rise of the


Multicultural Workplace

Technology and globalization have radically


reconfigured the way we work. One visible consequence of this is the rise of the multicultural
workplace, which can expose big differences
in areas such as communication, approaches
to time management and managerial styles.
Some of these differences can cause problems,
including misunderstandings, interpersonal
tensions and weak performance; hence, the
growing importance of cultural awareness in the
workplace.
The good news is that the means of minimizing the friction and maximizing the performance of culturally diverse and globally
dispersed work teams lies right under your
companys own nose: Its about leveraging the
multicultural individuals themselves.
Todays workplaces are brimming with managers and employees who are multicultural in
two senses.
On the one hand, managers and employees
may be intrinsically multicultural in the sense
that they are mixed-race or mixed-ethnic by
birth; theyve lived in more than one country
(expatriates, international students, immigrants and refugees); they were brought up with
at least one other culture besides the dominant
mainstream culture (such as children of immigrants); and/or they are in intercultural relationships. These people have internalized the
values, attitudes, beliefs and assumptions of
more than one culture. (See the sidebar Dont
Dismiss Marginalized Multiculturals.)
On the other hand, monocultural managers
and employees may be experiencing multiculturalism as a feature of doing business internationally. They are being exposed to diverse
cultural influences and values, and they find
themselves having to navigate a wider variety
of viewpoints, opinions and experiences. Suddenly, they realize they need to pay much more
attention to interpersonal interactions and
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Cultural Competence: Why It Matters


and How You Can Acquire It

This document is an authorized copy for the course "Organizational Behavior: Managing People " taught by prof. Anneloes Raes.

Dont Dismiss Marginalized


Multiculturals

hough being multicultural has advantages, some


individuals can suffer from acute feelings of isolation,
homelessness or even depression as they struggle to develop
a real sense of belonging to any one culture. For some, this
leads to an active rejection of all cultures. Naturally, this does
not serve the cause of global leadership.
But it would be unfair to dismiss these so-called
marginalized multiculturals as poor adapters, suffering from
identity crises. Our research has found that living in a state of
in-betweenness can, in fact, be a genuine asset for global
leadership provided that such people develop a healthy selfawareness of their own special gifts. After all, who better to
help bridge cultural divides than those who are able to see all
sides simultaneously?
As both cultural insiders and outsiders, marginalized
multiculturals are prone to have an ambidextrous mind-set
a trait that management scholars say is vital for dealing with
the competing demands, paradoxes and trade-offs of doing
business in the 21st century. Theyre also naturals at playing
devils advocate, which is so essential for decision-making and
avoiding groupthink.
The challenge for companies is to develop effective
methods for tapping into this rare human commodity.
Unfortunately, most companies are still far from realizing, let
alone utilizing, this potential. Organizations should remain on
the lookout for these profiles as serious contenders for global
leadership positions.

make greater efforts to foster inclusive organizational cultures.


In either case, the multicultural workplace
has huge implications for management and
not only in terms of the challenges mentioned
earlier. By learning to be culturally competent,
managers and employees will discover numerous advantages that are indispensable for global
leadership today.

Benets Worth Having

The effect of culture on business management


is a relatively nascent field of research. Geert
Hofstede, a Dutch manager turned academic,
was the first to get the ball rolling in the 1980s
when multinational companies really started
to globalize. Research has only recently started
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to shift from mapping national cultural differences (aka Hofstede) to getting to grips with the
special nature of multicultural individuals.
Here we summarize some of the main findings emerging primarily from psychological
research on bicultural and multicultural individuals. These competences would be highly
beneficial for any manager to have today.
COGNITIVE COMPLEXITY. This refers to the ability

of a person to perceive and respond to variables


based on prior experience and pre-established
insights. Sometimes this is associated with an
even more specific type of cognitive capacity:
integrative complexity. This is the capacity and
willingness to acknowledge the legitimacy of
competing perspectives on the same issue.
In cross-cultural settings, such as a multinational corporation, high levels of integrative
complexity can help managers and employees
understand other cultural perspectives and
accept their legitimacy in shaping how other
people think, feel and behave.
CREATIVITY. In its broadest sense, creativity
means taking existing resources and coming up
with new ideas of value. Having been exposed
to a broad variety of cultural contexts, multicultural individuals tend to develop richer conceptual cognitive structures, from which they
can generate different ideas.
For example, when asked to create a new
type of cuisine, Chinese-American individuals
fused elements from both cultures. While some
dishes may be unconventional in one or another
culture, multicultural individuals are more psychologically prepared to at least try them. In addition, they are more likely to generate new insights on the interrelations between ideas from
various cultures, and synthesize them.
In another example, when the British supermarket chain Tesco began to lose competitiveness in its home market, it invited a team
of Asian managers from its subsidiaries to cast
their eyes on its home operations and identify
improvements. Tesco appreciated that outsiders can often see things that those at home take
for granted.
INTELLECTUAL FLEXIBILITY. Individuals with multicultural mind-sets often have a higher level
of intellectual flexibility. Since they are not
constrained to a single cultural frame and are

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Cultural Competence: Why It Matters


and How You Can Acquire It

This document is an authorized copy for the course "Organizational Behavior: Managing People " taught by prof. Anneloes Raes.

Cultural intelligence is developed as managers become


more sensitive to the influence of culture, as well as
more adept at adapting their behavior to different
cultural contexts and norms.
used to adopting multiple perspectives in their
thinking, they are much more able to think
outside the box.
CULTURAL INTELLIGENCE. This encompasses mal-

leable capabilities that enable individuals to


function effectively in cross-cultural settings.
This includes a meta-cognitive component
being culturally sensitive and mindful which
helps individuals process and accurately interpret cultural knowledge. Cultural intelligence
also helps when it comes to exhibiting acceptable norms and behaviors in interactions with
people from distinct cultures.
Multiculturals may also develop greater
cultural intelligence as they become more sensitive to the influence of culture as well as more
adept at adapting their behaviors to different
cultural contexts. Moreover, their multiple cultural identities give them a wider variety of cultural schemas to guide their behavior, equipping
them with better behavioral adaptability.
ABOUT THE AUTHORS
Yih-teen Lee is an associate
professor of Managing People
in Organizations at IESE. He
holds a PhD in Management
from HEC, University of
Lausanne, and a Masters in
International Business from
National Taiwan University. His
paper on culture and personenvironment fit won the Best
International Paper Award of
the Organizational Behavior
Division at the 2006 Academy
of Management Annual
Meeting. He has co-edited Les
comptences culturelles (2007)
and Cultural Contexts of Human
Resource Development (2009).

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Yuan Liao is an assistant


professor of Managing People
in Organizations at IESE. She
holds a PhD in International
Business from Beedie School
of Business, Simon Fraser
University, and a Masters in
Psychology from the Chinese
University of Hong Kong.
Her research interests lie in
cross-cultural management,
cultural intelligence and
multiculturalism. Her work
has appeared in the Journal of
Business Ethics and the Journal
of International Business
Studies, where she also serves
the editorial review board.

Well-Positioned for
Global Leadership

If all this is true about bicultural and multicultural individuals, the question is: to what extent are they in positions of leadership in your
organization?
Carlos Ghosn, the CEO and Chairman of
Renault-Nissan, is a high-profile case in point.
Born in Brazil, raised in Lebanon, educated in
Paris and fluent in French, Portuguese, English,
Arabic and Japanese, Ghosn splits his time between Paris, Tokyo and other far-flung RenaultNissan facilities around the world. Widely
credited with saving Nissan from the brink of
bankruptcy, Ghosn attributes much of his success to his multicultural background: My background was probably a big asset for me. Being
able to navigate in new cultural contexts not
being rigid or uncomfortable in unfamiliar surroundings was absolutely fundamental.
Multicultural individuals, like Ghosn, can be
invaluable assets to multinational companies.
For example, when they experience cultural
conflicts, they often feel an urge to engage in
deep self-analysis, which in turn results in higher levels of cognitive complexity. This process
increases their ability to differentiate between
and navigate seemingly conflicting realities and
systems. And this can be a huge asset for todays
generation of global managers facing increasingly complex realities.
Another advantage of multicultural leaders is that they do not lug around heavy baggage from any one particular culture. Their lack
of strong identification with any one cultural
group makes them particularly adept at handling diversity. They are also often perceived as
culturally neutral, giving them an edge in their
relations with team members.
Here are a number of other advantages multicultural leaders bring to the table:
When people
interact or operate in cultural settings different

CROSS-CULTURAL ADJUSTMENT.

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Cultural Competence: Why It Matters


and How You Can Acquire It

Haier in Japan: Bringing Two Distant Worlds Together

This document is an authorized copy for the course "Organizational Behavior: Managing People " taught by prof. Anneloes Raes.

n 2012, Chinas home appliances


behemoth, Haier, acquired
Sanyo, the white goods business
of the Japanese household brand,
which also covered Indonesia,
Malaysia, the Philippines and
Vietnam. Given the long history
of mutual distrust and animosity
between China and Japan, one
could be forgiven for questioning
the wisdom of the decision.
It wasnt just the two countries
cultures that were deeply divided;
Haiers corporate culture, which
was based on performance-based
management, stood in stark
contrast to the Japanese focus on
seniority, lifetime employment and
annual salary increases irrespective
of individual performance.
How could Haier dispel the
general mood of distrust among
Sanyos employees and convince
them to sign up to Haiers vision,
especially against the backdrop of
deteriorating relations between
China and Japan?
The key was in Haiers choice
of managers. The first to take the
helm of its Japanese business was

Du Jingguo, a long-serving Haier


executive. Du was Chinese rather
than Japanese, but had managed
a previous joint venture with
Sanyo, had lived in Japan for many
years and had a Japanese wife. He
understood that the success of
Haier Japan hinged on his ability
to integrate Japanese culture
with Haiers corporate culture a
blend of Western management
theories, infused with ancient
Chinese philosophy, and executed
according to local practice.
Thanks to his bicultural mindset, Du was able to play the role
of cultural bridge to perfection
and avoided the trap of viewing
complex situations in simplistic
either/or terms.
Not only did he understand the
importance of putting the Haier
system in place, he also skillfully
deployed culturally nuanced
methods for winning Japanese
workers over to the Haier system.
For example, to achieve more
buy-in from his Japanese team,
Du devoted huge efforts to
communicating informally. This

from their own, they normally need to adjust. As


a result of the intellectual and behavioral flexibility mentioned previously, individuals with
multicultural mind-sets are consistently found
to enjoy better cross-cultural adjustment in
psychological, social and task domains. In other
words, they are better at adapting their behavior
in ways that produce desired outcomes in less
familiar cultural settings.
Psychologically, they tend not to suffer as
much from stress and frustration related to
cultural differences. Socially, they may communicate effectively with people of different
cultural backgrounds and develop good interpersonal relationships. Task-wise, by being
extremely mindful and taking into account
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involved lots of meetings and going


for drinks after work for more than
two years.
When Du took a different
position in Haier, his successor
at the helm of Haier Japan was
Yoshiaki Ito, a young Japanese
national born and raised in
Thailand and educated in the
United States.
Thanks to his multicultural
background, Ito was fully aware
of the cultural obstacles he faced
and was able to switch effortlessly
between languages. He could also
approach challenges from a much
broader perspective.
Under his tutelage, Haiers
Japanese division has reformed its
salary and promotion system, and
restructured its product and staff
development processes.
As the Financial Times noted,
Haiers experience in Japan shows
that developing managers who
not only know the company back
to front but are also culturally
intelligent greatly improves the
chances of success in crosscultural expansion.

multiple perspectives, they accomplish taskrelated goals in cross-cultural work settings.


BOUNDARY SPANNING. Boundary spanning refers

to the activities that allow individuals to broker


or create ties across the boundaries of social or
organizational groups. Cross-cultural collaborations often involve dense and frequent interaction between members belonging to various
cultural groups.
Because of their cultural knowledge and
cognitive complexity, individuals with multicultural mind-sets are often able to establish and share connections and ties with and
between multiple groups to enable the flow
of knowledge, information and resources.
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Cultural Competence: Why It Matters


and How You Can Acquire It

This document is an authorized copy for the course "Organizational Behavior: Managing People " taught by prof. Anneloes Raes.

Organizations should invest time in finding people


who have these skills. When organizations start with
the right people, their training programs will be more
successful at developing truly effective global leaders.
Their strategic position can also contribute to
smoother relations among members of multiple cultural groups.
Similarly, individuals with multicultural mind-sets
can contribute to knowledge transfer within organizations. Because they understand the codes
of multiple cultural groups, they are able to:
codify and decode knowledge and practices;
identify and establish links to facilitate crosscultural social networks and the flow of
knowledge among multiple parties.
Sometimes, they can even serve as cultural interpreters among multiple cultural groups. This
means translating not only across languages but
also across the cultural codes underlying the
messages.

CROSS-CULTURAL KNOWLEDGE TRANSFER.

n
n

Research
suggests that individuals who do not identify
themselves with any particular culture can excel as global leaders not only because of their
ability to handle complexity, diversity and
uncertainty, but also because of their ability
to keep a safe distance from any one culture.
This in-betweenness offers them an unusual
capacity for cognitive and emotional detachment, which allows them to bridge differences
more easily.
Some multicultural leaders can even shift
between cultural personas, like a cultural chameleon. For example, Yoshiaki Ito, the CEO
and President of Haier Asia, the Japanese division of the Chinese home appliances manufacturer, is a Japanese national born and raised
in Thailand and educated in the United States.
To establish personal trust and respect with
his Japanese colleagues and subordinates, Ito
uses a formal Japanese style. However, whenever negotiations stall and a more persuasive
approach is needed, he effortlessly reverts to
a more assertive American style. (See the sidebar on Haier in Japan.)

INTERGROUP & GLOBAL LEADERSHIP.

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Given the array of skills that multicultural


managers have to offer companies, its surprising that they continue to be so overlooked and
undervalued. Granted, more and more organizations are hiring multicultural employees,
but often as a token gesture to reflect societys
growing ethnic diversity. They are also taking
advantage of multiculturals language abilities.
Yet their much broader potential as boundary
spanners or cultural brokers, for example remains largely untapped.

How to Tap the Asset of Culture

Global leaders can be selected or they can be


trained. The main emphasis these days is on
training global leaders. However, these programs are usually extremely costly and do not
guarantee success, in part because the key characteristics such as cognitive complexity and
cultural mindfulness are difficult to instill.
Organizations should invest just as much
time into finding people who already have these
skills, whether they know it or not. When organizations start with the right people, their training programs will be more successful at developing truly effective global leaders.
That said, since multiculturals represent a
comparatively smaller segment of the population, it makes little sense for organizations to
recruit on this basis alone.
However, if you view multiculturalism as
a process that is, people going through identity construction with respect to different cultural groups then the candidate pool widens
considerably.
Perhaps your company has promising yet
largely undetected multiculturals working under its own roof. The first question is how to
identify them, and then how to help them hone
those unique talents.
One way is to develop specific programs
aimed at locating the multiculturals within the
organization. Imagine that you are the manager
of a large Spanish division of a British software
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Cultural Competence: Why It Matters


and How You Can Acquire It

Four Steps to Hone Your Cross-Cultural Skills

This document is an authorized copy for the course "Organizational Behavior: Managing People " taught by prof. Anneloes Raes.

A multicultural mind-set requires serious effort in the following areas.

1|

BROADEN YOUR MIND. Expand


your cultural knowledge
through multiple channels, including newspapers, movies, books,
traveling and working abroad, or
simply surrounding yourself with
people from different cultures.
This is the awareness-raising
phase.

2|

DEVELOP CROSS-CULTURAL
SKILLS THROUGH PRACTICE.

The best way of improving your


cross-cultural skills is through
experiential learning. Working
and traveling abroad is the obvious choice, but there are other
ways to interact and engage with
foreign cultures without leaving
home. Most workplaces will have
expatriate colleagues or foreign
visitors, or you may find yourself
working as part of a global virtual
team. These afford numerous

opportunities to hone your


cross-cultural skills through trial
and error.

3|

BOOST YOUR CULTURAL


META-COGNITION. This

involves consciously monitoring


your own behavior in intercultural
interactions. Pay close attention to how you act and react
in diverse situations. Reflect on
successful as well as unsuccessful
intercultural interactions. Mindfulness exercises i.e., making
nonjudgmental observations,
devoting your full attention, being
present in the moment can be
useful in this process.
It is often a good habit to keep
a journal of your reflections,
writing down what knowledge
and skills you gleaned from each
interaction. Then, you can discuss
these reflections with a trusted

producer. Tucked quietly away within one of


your companys departments is a 30-something Peruvian called Fernando who has spent
15 years living in Madrid, the last five of which
he has been working for your company. In his
early 20s he spent two years studying business
administration in Berlin, where he met his current Swedish wife. He speaks three languages
fluently (Spanish, German and English), is
comfortable in just about any cultural setting,
deals with people from all over the world, and is
performing his admittedly rather undemanding
tasks perfectly well.
Fernando is the perfect example of a gifted
but underappreciated multicultural. His life and
work experience should make him an ideal candidate for fast-track professional development.
Yet his career is going nowhere. Hes not even
on the companys radar. By enlisting the help of
HR and middle managers, your organization will
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mentor. This helps you decide


what action to take next, and
gives you some reference points
to evaluate whether your behavior
is achieving desired goals.

4|

CULTIVATE COGNITIVE
COMPLEXITY. Cognitive com-

plexity requires being able to view


issues from more than one framework, and somehow integrating or
rationalizing multiple, competing
frameworks.
So, having monitored your
own behavior, you need to apply
the same level of conscious,
proactive analysis to appreciating
the differences and similarities
between seemingly conflicting
perspectives and systems. To see
things from another perspective
ultimately involves qualities such
as empathy, sympathy, flexibility
and honest communication.

have a much better chance of tracking down the


likes of Fernando.
Once youve done that, you can try developing their managerial skills while carving out
roles for them that make much better use of
their cross-cultural talents for example, as a
leader of a global virtual team.

Training for All

Beyond selection, it is also beneficial to offer


training and development to multiculturals and
monoculturals alike, so they can be more effective leaders in the global context.
For multiculturals, the objective of the training is to help them be more conscious of their
exceptional multicultural backgrounds and the
associated competences. They can better leverage their singular strengths once they can make
better sense of their cultural backgrounds and
identities, and be aware of their competences.
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Cultural Competence: Why It Matters


and How You Can Acquire It

This document is an authorized copy for the course "Organizational Behavior: Managing People " taught by prof. Anneloes Raes.

Multicultural leaders may relate better to team


members from different cultures and resolve conflicts
more easily. Their multiple talents can also be put to
good use in international negotiations.
For monocultural individuals, it is also
possible to design training programs that contribute to the development of a multicultural
mind-set, moving beyond the frontier of ones
cultural origin.
That said, multiculturals may be better equipped to lead diverse teams and build
trust in multicultural contexts than managers
with only one cultural reference point. Leaders of global virtual teams are often expected
to be the glue that holds the team together,
by initiating relationships among team members and encouraging members to participate
more fully in team activities. This kind of role
is probably going to be easier for individuals
who have experience moving in and out of
cultural groups.
As such, a leader with a multicultural
mind-set may relate better to team members
from different cultures and resolve conflicts
more easily. Whats more, a global team feeds
off multiple perspectives from diverse team
members. When a leader recognizes the value of these alternative inputs and integrates
the most promising ones into the teams processes, he or she raises the teams chances of
producing creative output.
The multiple talents of multiculturals can
also be put to good use in a companys international negotiations, where their natural cultural instincts and insights might make the difference between the company securing a good
deal and a bad one. They can also help smooth
its internal relations and operations by serving as special liaisons between multicultural
divisions or departments.
If your company is short on multicultural
employees or managers, you can do one of two
things:
You can try to instill the rare skills they possess among select members of your current
workforce. Though difficult, it is not impossible. (See the sidebar Four Steps to Hone
Your Cross-Cultural Skills.)
n

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Alternatively, you can start looking beyond


your companys walls. Instead of trying to
create global leaders, you can try to track
them down.
The good news is, today the world is teeming
with people like Carlos Ghosn and Yoshiaki Ito
people who have learned to excel in business
precisely because of, rather than in spite of, the
cultural dimension. To find them, all you need
to do is start looking.
n

TO KNOW MORE
n

Read the case study Haier: Will Venture


Abroad Clean Up or Be a Washout? in IESE
Insight Review (Issue 16, First Quarter 2013) at
www.ieseinsight.com/review
Read or watch IESE professor Pedro Nuenos
interview with Carlos Ghosn, Chairman and
CEO of Renault-Nissan, in IESE Insight Review
(Issue 15, Fourth Quarter 2012) at www.
ieseinsight.com/review
Fitzsimmons, S.R., Y.T. Lee and M.Y. Brannen.
Demystifing the Myth About Marginals. Global
Leadership Insights of the Global Leadership
Academy, 2011.
As this is a burgeoning field of research, the
authors would like to invite managers to join
their research projects and contribute to the
further development of knowledge on this topic.
If you can relate to the phenomena described
in this article, and you are willing to share your
insights and contribute to research, please
contact the authors at YLee@iese.edu and
EYLiao@iese.edu.
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