Last Updated 27 Jan 2021

Cross-border alliances

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Analysing the poor performance should put the emphasis on human factors but people are a less measurable asset and they are often overlooked or not really considered when it comes to the decision to build a cross-border alliance. (Cartwright and Cooper, 1996) In this context the London Business school carried out a survey and found that of forty British acquisitions all forty firms conducted a financial and legal audit of the company they intended to acquire. (Hunt, 1988 in Cartwright and Cooper, 1996)

Rao and Swaminathan (1995) mention a study of Davy, et al (1988) who attributed nearly a third of alliance failures to employee problems caused partly by lack of cultural compatibility. Incompatibility between the prevailing cultural mindsets of allying partners can often prove detrimental to both alliance formation and performance. (web 5) This essay draws the attention to these cultural issues since they are the common sources of incompatibility entailing many problems in different fields of business.

Hofstede (2001) argues, when examining culture as a common source of incompatibility it can bee seen in two manners. On the one hand the national culture and on the other hand the corporate culture of a company. By depicting culture as an onion, the difference gets obvious. The graph (Hofstede, 2001) shows that the outer layers are the organisational culture whereas the national culture relates to the more central layers. The outer parts of the onion, representing the corporate culture, embody symbols, heroes and rituals.

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Symbols are words, gestures and objectives that a firm uses (firm logo, way of speaking to customers and to employees, dress habits etc. ). Rituals refer to social rules which have to be followed in a certain company. Heroes are persons that are highly valued in an organisation and are seen as role models. However the national culture, relating to the more inner layers of the onion model, is seen as values and feelings of wrong or right, good or bad and so on. These values are already acquired in early childhood and are not likely to change in later years.

It gets obvious that the corporate culture of a firm are the elements that can be seen whereas the national culture remains under the surface. Nevertheless the national culture takes a profound influence on the manner the organisational culture is practised, for instance how the management style is or how decisions are made. In the case of cross-border alliances different national and organisational cultures are brought in and might represent a source of incompatibility.

As Cartwright and Cooper (1996) underline, in international alliances, incompatibilities may arise due to differences in national cultures and associated managerial styles whereas in domestic alliances incompatibility is often caused by differences in corporate cultures. In this context Geert Hofstede, a Dutch researcher who did one of the most influential studies on national differences in a cultural context once said, " Culture is more often a source of conflict than of synergy. Cultural differences are a nuisance at best and often a disaster. " (web 6)

Hofstede (2001) sees culture as "[... ]the collective programming of the mind which distinguishes the members of one category of people from another. " The category of people can be a nation, a region or a company which participates in an alliance. Hofstede studied 116,000 people working in dozens of different countries and found highly significant differences in the behaviour and attitudes of employees and managers from different countries who worked within multinational corporations. He identified five important dimensions along which people seem to differ across cultures. (web6)

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