Globalization\" Was Just Coming Into

¶ … globalization" was just coming into vogue. Now it seems like a cliche to say that advanced technology allows multinational firms greater freedom about what to produce and where and that the market for a larger share of goods and services is universal. At the same time, however, these evolutionary factors are dramatically increasing the pressure on companies to become globally competitive. Plus, the entire playing field is changed. Organizations are competing for winning innovations in addition to talent, resources, product advantages and customers. Companies and countries alike no longer vie principally on low costs, but instead on the basis of originality and knowledge as they seek to create, grow and attract high value-added products and services. As a result, more studies are being conducted to determine how to foster innovation in different countries, ranging from country competitiveness reports to regional clusters and knowledge sharing. Ironically, the impact of a country's culture on innovation, more specifically the type of innovation, is not well researched. A better methodology needs to be established as a measurement tool for comparing specific forms of innovation cross-culturally.

Theoretical Basis

Cultural Standards

Many difficulties arise from the underlying concept and definition of culture. Since Alexander Thomas' (1996) theory of culture is well recognized in the inter-culturality debate and frequently used in order to decipher cultural differences, it exemplifies the inter-culturalists' common perspective on culture. Thomas defines culture as a universal orientation-system that is valid for "all" members of a group, organization society or nation. In his opinion, every culture has a unique "cultural standard" that distinguishes it from all others and define who belongs to a culture and what is perceived as "known" and what appears as "alien." In his point-of-view, the "self" and "the other" appear as socially and culturally determined. For instance, Thomas demonstrated that cultures differ from each other with terms of their management of distances: In comparison to Germans, who normally follow the principle of maximizing distance, Americans tend to minimize distances, which can be seen by looking at different greeting practices or the space maintained between two interacting persons. Such markers of difference serve to construct a seemingly unbridgeable divide between the self and the other.

According to Thomas (1996), the deviation of various cultural standards typically is forgotten when the central challenge is to function within one's own culture. The culture-specific orientation-system that everyone shares ensures the functioning of the people's behavior, as it is believed that they know about each other's expectations and what can be anticipated. The opposite is true in the intercultural context: Since there is no sharing of a similar orientation-system on which people from different cultures can rely, the deviation of cultural standards is considered first and leads to problems. That is, the people face a "culture shock" because they are not used to these alien cultural norms. This often leads to feelings of anxiety and anger and with people blaming one another and developing or exacerbating stereotypes.

A similar chain of arguments is found in Geert Hofstede's (2001) conception of "mental models" that are learned in early childhood and fully internalized and thereafter difficult to alter once they are internalized. They become a central aspect of a person's own identity that will not be questioned due to the need for certainty. Hofstede's (2001) major work in the area of culture and innovation, which was conducted in the 1970s, has also become an academic standard. He analyzed national cultural differences across subsidiaries of the multinational company IBM in 64 countries based on the number of patents. Follow-up research to Hofstede included studying students in 23 countries, elites in 19 countries, commercial airline pilots in 23 countries, up-market consumers in 15 countries, and civil service managers in 14 countries. Combined, these studies identified and validated four independent dimensions of national culture differences, with a fifth dimension being added later: power distance, individualism, masculinity, uncertainty avoidance, and long-term orientation. The resulting Hofstede Model of Cultural Dimensions hasa been of considerable use when analyzing a country's culture.

However, a few things have to kept in mind when considering works such as that by Hofstede. First, the country averages do not relate to individuals of that country. Although the model frequently proves to be quite correct when applied to the general population, not all individuals or even regions with subcultures fit into the mould. This standard can be used as a guide, but not a definitive answer. Second, there is a concern about the data reliability that were collected through questionnaires and have their limitations. With cultures the context of the question asked is as important as its content. In some collectivism countries, the individuals may tend to answer the questions as if they were addressed to the group to which they belong. In other more individualistic countries, the answers will most likely be perceived through the eyes of the surveyed individual. Third, is the data up-to-date? Do the cultures of countries change, especially with the most recent globalization?

Thus, studies to date appear to be limited in the following ways:

1. Too simplified models of culture (e.g., Hofstede's four dimensions)

2. Too limited a region (e.g., only European countries)

3. Too few selected measures of innovation (e.g., patent applications or production numbers)

In short, based on the current available studies, it is somewhat possible to determine best management models for different countries based on cultural dimensions, but not possible to attain a deeper understanding of various innovation models and their suitability in different cultural contexts. Yet many companies worldwide have structured their R&D centers to not only follow cost considerations but also certain clusters of knowledge that have emerged over the last several years. Companies have resorted to a "gut feeling" of what research and high value work should be done in various countries based on their previous experience. When talking to managers responsible for making these global decisions, they frequently cannot give a rational answer as to why they decided to produce at location "A" versus location "B"; consciously or unconsciously, they considered their first-hand experience with the predominant local cultural standards.

Multiple Layers of Culture in an Organization

It can be argued that every behavior in the corporate context is influenced by three different layers of culture that together form the total cultural context in which individuals operate [NEED SOURCE]:

1. Individual corporate culture;

2. Regional industrial culture; and

3. Broader regional culture in which the first two contexts are established

A typical example can be the Google Campus in Mountain View, California, where there is a very specific, strong innovative culture that is driven by the co-founders of the company. At the same time, there is the well-researched industrial cluster, the Silicon Valley, in which Google operates its headquarters and, thirdly, the American (Californian) cultural norms.

The individual corporate cultures basically reflect the "rules of the game" -- a specific code of conduct and written and unwritten behavioral norms that define the social interaction within a firm [SOURCE]. These conventions are in turn linked to a deeper set of underlying core values (also called philosophies or ideologies) that provide more general guidance in shaping behavior patterns within the firm (Kotter & Heskett, 1992; Schein, 1992; Deal & Kennedy, 2000). Corporate cultures are a very important element in the way employees collaborate and approach innovative projects, as they define the ways to appropriately conduct work, behave, and even think [SOURCE]. These cultural norms unify the workforce and set the standards of acting, whether it is responding to a customer phone call or approaching a difficult technical problem.

Regional industrial cultures are based on a cluster of industries that are formed on certain local conditions [SOURCE.] Such "hard" factors include availability of capital, physical infrastructure, educational system and the existence of some initially successful leading entrepreneurs. These regional industrial cultures also have a specific culture in common, including their initiative toward hard work, new ideas and entrepreneurial activity.

Broader regional cultures, often defined by the borders of countries, states or ethnicities, are set by the region's core beliefs and values shared by the community and typically carried forward from one generation to the next [SOURCE]. This is where the individual corporate and regional corporate cultures are ultimately established.

It is important to keep in mind that corporate and regional cultures do not exist in isolation from each other; therefore, this model of de-layering culture that ultimately influences individuals in a corporate environment also helps to conceptualize the embedding of firms in regions by looking at overlaps between the three different layers. In other words, there could be corporate cultures that fit well in one region or industrial cluster whereas others fit better some place else. Nevertheless, the moment a corporate setup exists in a specific region (e.g., the R&D Center in Shanghai), it is embedded into the regional culture that will potentially impact upon its ability to innovate [SOURCE].

Models of Comparison

There are basically two standard models for the comparison of cultural standards [SOURCE]. One is the Cultural Dimensions Model (e.g., Hofstede, five different cultural dimensions), and the other one is the Cultural Standards Model (e.g., Alexander Thomas):

1. In a general sense, cultures and differences among cultures can be described and measured along cultural dimensions (Hall, 1990, 2000; Hofstede, 1980, 1993, 2001; House et al., 2004; Kluckhohn & Strodtbeck, 1961; Rokeach, 1973; Schwartz, 1992 and Trompenaars & Hampden-Turner, 1997).

2. In a more detailed and more descriptive sense, the cultural standard method deals with differences in the kinds of perceiving, norms of sensing, thinking, judging, and acting that can cause critical incidents in cross-cultural encounters (Thomas, 1996; Fink & Meierewert,

2001).

Due to significant developments in this field and the available range of value dimension studies, it is better to understand the possible impact of similarities and differences among cultures. Dimensions, which are quantitatively measured, can be used in statistical models (regression analysis) as well as to help explain and predict behaviors independently (SOURCE).

Nevertheless, there are areas that remain unanswered, for example how the different dimension models work together, or whether the different concepts substitute or complement one another. It also remains unknown whether replication of the methods in different contexts or over time would yield different or similar results.

Two particular aspects make it worthwhile to complement the value dimensions with more detailed knowledge about actual norms of behavior, specifically in the context of innovation. If individuals are looking for an appropriate solution to a problem, they would usually choose from a set of behaviors that are based on their value system. However, while values may be the same across cultures, available norms of behavior may be different (Fink & Neyer, 2005)

Value dimensions do not directly predict the actual problems emerging in business and management encounters. Nor do they explain how business encounters are perceived and how and why managers and staff react in a specific way. Guided by values, these reactions are chosen from the available repertoire of behaviors, but ill chosen modes of behavior may produce undesired conflict and counterproductive results if the valid norms of behavior of counterpart cultures are not adequately considered.

To confront these issues Thomas (1996) developed his "cultural standard method" to generate more cultural specific and actionable knowledge. It is based on Jean Paul Piaget's (1962, 1976) developmental psychology and Ernst Boesch's (1980) cultural psychology and concept of action: "An acting person is always considering possible views and judgments of their counterparts as well as own experiences and assumed experiences of others" (p. 135).

The cultural standards model looks at differences that are valid only when making comparisons between two cultures. Cultural standards are based on an applied approach aimed at identifying the characteristic guidelines relevant for cross-cultural interactions. Specifically in the field of innovation, this is very relevant; this is presently observed in a significant increase of cross-border research projects or development undertakings in both government and non-government sectors, which require people in different countries to collaborate on a much deeper level than ever before. The opportunities of communication tools in the 21st century may have leveled previous obstacles in such interactions, such as time-zone, language, geographical distance and real-time sharing of information of any form, but at the same time it has increased the potential of behavioral differences or cultural misfit of projects leading to undesirable results in such interactions.

For the purposes of this study, Thomas' cultural standard method will be applied as the primary methodology.

Innovation

Theories of innovation in business have stemmed mainly from the work of economist Joseph a. Schumpeter (1934). He viewed innovation, ideas applied successfully in practice, as distinctly different from invention, an idea made manifest. A broader definition of Schumpeter's "setting up of a new production function" was suggested by H.G. Barnett (1953), who alluded to innovation as the basis of cultural change and defined innovation as "any thought, behavior, or thing that is new because it is qualitatively different from existing forms. Innovation takes place via a process whereby a new "thought, behavior, or thing," which is "qualitatively different from existing forms," is conceived of and brought into reality (as cited in Barnett, 1953, p. 7; Robertson, 1967, p. 14)

Further, the economist Bengt-Ake Lundvall (DATE) pointed out that innovation can be found in all parts of the economy and at all times. He stressed that innovation is both gradual and cumulative and the process is not linear but "involves continuous interactivity between suppliers, clients, universities, productivity centers etc." (Feinson DATE, p. 17)

That is, innovation is a process that cannot be reduced to an invention / development of a new technology or a new product, but exists in every part of the enterprise value chain. Therefore, it is often aptly referred to as an "innovation value chain." (SOURCE)

There are different ways to differentiate types of innovation. For the purpose of this study, it will be sufficient to use a simplified model that distinguishes between "disruptive innovation" and "sustained innovation" as noted by (SOURCE). Sustained innovation is progressive and appears in the existing infrastructure. It is based on the knowledge of the current market but does not challenge the fundamental hypothesis of market. Disruptive innovation is more revolutionary than sustained innovation. It breaks through current market or technology boundaries and redefines the market, techniques and rules of the game, which in turn brings a fundamental change to business methods (Jui, 2010).

Primary Hypothesis

Based on the available experience of many multinational companies the following hypothesis can thus be formulated:

There is a significant correlation between the existence (or non-existence) of specific cultural standards and the type of corporate innovation that is suited best in this cultural context.

Methodology

It is explained above that general cultural concepts, measuring cultural behavior along a fixed number of cultural dimensions, are limited in their predictive value on bi-lateral interactions between individuals from different cultural backgrounds. This is based on the assumption that:

1. The differences between cultures have to be seen from the perspective of the observer (from the perspective of an Indian, for example, East Germans and West Germans act similar; from the perspective of an East German, the West Germans are too assertive); and

2. It is necessary to distinguish between specific norms of behavior, which may -- though very different -- lead to exactly the same result. (example)

What is required is a research methodology that is able to identify different norms of behavior and so-called "critical incidents" that describe a person's critical contact situation (SOURCE). The potential best way to capture the perplexing behavior of others, the insecurity and its impact on critical projects, is with qualitative interviews of managers, researchers and other employees of multinational companies. These persons should have experienced critical situations that can be analyzed and enable the identification of the corresponding cultural standards.

It should also be kept in mind that critical incidents are not necessarily about negative experience. "Critical" in this context merely means "not compatible with one's own familiar value system." Unexpected, positive experiences can also be considered critical incidents and are just as valuable for the identification of cultural standards.

Therefore, cultural standards have a clearly relative and bilateral character and cannot be generally used in comparing one particular culture area to a variety of others.

(I FEEL THAT THIS NEEDS MORE JUSTIFICATION. CAN YOU COMPARE YOUR INTENDED APPROACH to HOFSTEDE'S HERE?)

The analyzed cultural standards can then be tested against a metrics of innovation measures, along the above systematic of breakthrough innovation (e.g., measured by spin-offs, successful new product launches and product patents) or sustained innovation (measured by number of process ideas, continuous improvement projects, process patents). WHERE IS THIS NOTED "ABOVE?"

Corporate Example

The key study object would be SAP AG and its globally distributed R&D centers, or the SAP Labs. SAP AG is a German software corporation that globally provides enterprise software applications and support to businesses of all sizes. Headquartered in Walldorf, Germany, with regional offices worldwide, SAP was noted the largest enterprise software company in the world in 2009 by the publication "Software Top 100." SAP AG is also the largest software company in Europe and the fourth largest globally. The company's best known products are its SAP Enterprise Resource Planning (SAP ERP) and SAP Business Objects software.

The benefit of using SAP for this present methodology is that the organization has a clear strategy to distribute innovative projects across the globe and to leverage the talent diversity from all its Labs to the maximum possible (SOURCE). Therefore, newly acquired companies usually get integrated into the network of SAP R&D locations, but the centers are not closed down. As a result, SAP has one of the broadest R&D center structures in the software industry, with significant (> 500 engineers) SAP Labs in the United States, Canada, Brazil, France, Israel, Germany, Hungary, Bulgaria, Russia, India and China.