Cultural Standards, Innovation Types, and Cross-Cultural R&D Strategy

Introduction

..."Globalization" was just coming into vogue. Now it seems like a cliché 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. The entire playing field has changed: organizations are competing for winning innovations in addition to talent, resources, product advantages, and customers. Companies and countries alike no longer compete 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.

Cultural Standards and Theoretical Foundations

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 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 view, every culture has a unique "cultural standard" that distinguishes it from all others, defines who belongs to a culture, and determines what is perceived as "known" versus what appears as "alien." The "self" and "the other" are thus seen as socially and culturally determined. For instance, Thomas demonstrated that cultures differ from one another in 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 in different greeting practices or the physical 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 is typically forgotten when the central challenge is simply to function within one's own culture. The culture-specific orientation system that everyone shares ensures the functioning of people's behavior, as it is assumed that each person knows the other's expectations and what can be anticipated. The opposite is true in the intercultural context: since there is no shared orientation system on which people from different cultures can rely, deviations from familiar cultural standards are confronted directly and often lead to problems. People face a "culture shock" because they are unaccustomed to these alien cultural norms. This often leads to feelings of anxiety and anger, 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, fully internalized, and thereafter difficult to alter. These models become a central aspect of a person's identity that will not be questioned due to the individual's need for certainty. Hofstede's (2001) major work in the area of culture and innovation, conducted in the 1970s, has become an academic standard. He analyzed national cultural differences across subsidiaries of the multinational company IBM in 64 countries, using the number of patents as a measure. Follow-up research 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 cultural differences, with a fifth dimension added later: power distance, individualism, masculinity, uncertainty avoidance, and long-term orientation. The resulting Hofstede Model of Cultural Dimensions has been of considerable use when analyzing a country's culture.

However, several caveats must be kept in mind when considering work such as Hofstede's. First, country averages do not relate to individuals within that country. Although the model frequently proves quite accurate when applied to the general population, not all individuals or even subregions with distinct subcultures fit the mold. This standard can serve as a guide, but not a definitive answer. Second, there is a concern about data reliability, as the data were collected through questionnaires that have inherent limitations. With cultures, the context of a question is as important as its content. In some collectivist countries, individuals may tend to answer questions as if they were addressed to the group to which they belong. In more individualistic countries, answers will most likely be interpreted through the lens of the individual respondent. Third, there is the question of whether the data remain current — do the cultures of countries change, especially in light of recent globalization?

Studies to date therefore appear to be limited in the following ways:

Based on currently available studies, it is somewhat possible to determine best management models for different countries using 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 follow not only cost considerations but also the knowledge clusters that have emerged over the last several years. Companies have resorted to a "gut feeling" about what research and high-value work should be done in various countries, based on previous experience. When talking to managers responsible for making these global decisions, they frequently cannot provide a rational explanation for why they chose location "A" over location "B"; consciously or unconsciously, they relied on their first-hand experience with the predominant local cultural standards.

Multiple Layers of Organizational Culture

Every behavior in the corporate context can be argued to be influenced by three different layers of culture that together form the total cultural context in which individuals operate:

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

Individual corporate cultures reflect the "rules of the game" — a specific code of conduct and written and unwritten behavioral norms that define social interaction within a firm. 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 appropriate ways to conduct work, behave, and even think. These cultural norms unify the workforce and set standards of conduct, whether in responding to a customer phone call or approaching a difficult technical problem.

Regional industrial cultures are based on clusters of industries formed under certain local conditions. Such "hard" factors include the availability of capital, physical infrastructure, an educational system, and the presence of initially successful leading entrepreneurs. These regional industrial cultures also share a specific culture in common, including their orientation toward hard work, new ideas, and entrepreneurial activity.

Broader regional cultures, often defined by the borders of countries, states, or ethnicities, are shaped by the region's core beliefs and values shared by the community and typically carried forward from one generation to the next. This is the context in which individual corporate and regional industrial cultures are ultimately established.

It is important to keep in mind that corporate and regional cultures do not exist in isolation from each other. This model of de-layering culture — which ultimately influences individuals in a corporate environment — helps conceptualize the embedding of firms within regions by examining the overlaps between the three different layers. In other words, some corporate cultures fit well in one region or industrial cluster, while others fit better elsewhere. Nevertheless, once a corporate setup exists in a specific region (e.g., an R&D center in Shanghai), it is embedded in the regional culture, which will potentially impact its ability to innovate.

Innovation: Definitions and Types

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, which is merely 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 it 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 (Barnett, 1953, p. 7; Robertson, 1967, p. 14).

The economist Bengt-Åke Lundvall further 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 that the process is not linear but "involves continuous interactivity between suppliers, clients, universities, productivity centers, etc." (Feinson, p. 17).

Innovation, then, is a process that cannot be reduced to the invention or development of a new technology or product; it exists throughout every part of the enterprise value chain, and is therefore often aptly referred to as an "innovation value chain."

There are different ways to differentiate types of innovation. For the purpose of this study, it is sufficient to use a simplified model that distinguishes between "disruptive innovation" and "sustained innovation." Sustained innovation is progressive and appears within the existing infrastructure. It is based on knowledge of the current market but does not challenge that market's fundamental assumptions. Disruptive innovation is more revolutionary: 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).