MGTO 630B Managing People Globally for Competitive Advantage

1. MGTO 630BManaging People Globally for Competitive Advantage Transferring Management Systems: Learning in IJVs Saturday, March 1, 2003

2. By the end of today’s class, you should be able to: • Evaluate the factors contributing to knowledge creation / learning in IJVs • Evaluate the impact of culture on IJV learning / performance • Explain the factors that contribute to differentiation (localization) / integration (globalization) of HRM practices

3. A Re-definition of Global HRM • The strategic, policy, and practical issues related to how MNEs of any type or size manage their human resources, including their approaches to balancing issues of differentiating and integration (duality theory) while enhancing the flow of knowledge transfer within the organization – Brewester, 2002

4. Why are alliances important? • Resource-Based View of the Firm • Knowledge basis of sustainable advantage / firm growth • Firms able to develop, transfer and exploit knowledge most likely to succeed • No organization can develop within its boundaries all critical knowledge needed to prosper and grow • Original knowledge sources for most critical inventions at Du Pont (1920 to 1950) came from outside company: suppliers, buyers, universities, consultants, government agencies, competitors • Access to broader knowledge bases through learning increases firm flexibility – external capabilities embedded in inter-firm relationships  ALLIANCES

5. Figure 5-2. Motivation for International Alliances

6. How does learning occur in IJVs? LOCAL PARTNER WHOLLY OWNED SUBSIDIARY vs JV FOREIGN INVESTOR Organizational Level Overseas Training ACQUISITION VS. GREENFIELD Commitment Of human resources Learning Intent & Effort Industrial Experience Organizational Unlearning Individual Level EXPATRIATE MANAGER LOCAL MANAGER Knowledge Tsang, E. W. K. (2001). Managerial learning in foreign-invested enterprises in China. Management International Review, 41, 29-51.

7. Figure 5-3. Obstacles to Learning in International Strategic Alliances Source: Adapted from V. Pucik, “Strategic Alliances, Organizational Learning, andcompetitive Advantage: The HRM Agenda,” Human Resource Management 27 (1988): 77-93.

8. Types of knowledge acquired through alliances • Country specific • Local government • Labour force • Competence with accessing local markets / distribution channels • Firm specific technologies

9. What influences firms’ capabilities to learn / transfer knowledge? • Let’s see what insights we can gain from “American Diagnostics Systems”

10. What influences firms’ capabilities to learn / transfer knowledge? • Cultural distance • US firms learned less from alliances with non-US firms • Governance structure (hierarchy, market, alliance) of firm • Hierarchy > alliance > market • Openness or protectiveness of partners • Characteristics of knowledge transferred • Country of organization • Japanese firms learn the most from alliances with firms in other countries; but, less willing to share expertise compared with firms from other countries (e.g., U.S. MNEs localize management asap; Japanese keep Japanese in top position)

11. Impact of Culture on IJV Knowledge Transfer / Performance • What matters more: National culture (e.g., Thailand), regional culture (Bangkok) or organizational culture (Ferodo)? • Let’s see what insights we can gain from the Ferodo case . . .

12. Thailand: Cultural values that influence Thai workers • Ego (face saving and criticism avoidance) • Grateful (paternalistic) relationships - hierarchy • Smooth interpersonal relationships (harmony) • Interdependence (group orientation) • Fun (sanuk) / pleasure (mai pen rai: never mind / don’t worry)

13. Acknowledged & Accepted Hierarchy ROYAL FAMILY Titled citizens Large business families, prominent civil servants, military leaders Professional bureaucrats, managerial staff, other commercial workers

14. Buddhism  Thai Respect for Hierarchy • Karma • Everything is pre-determined or destined • One’s position in society is static • Social mobility not available / not pursued • Karuna • Quality of being merciful and kind • Harmonious relationships • Higher status person should behave benevolently toward lower status individual • Boss should forgive subordinate who makes mistakes

15. Hierarchy  Behavior • Deep wai (deep bow of respect) to foreign managers • Proper dress, behavior and customs • Senior managers wear suits with jackets to meetings; Subordinates wear only shirts and ties minus jacket • On nom thom ton (lower oneself) • Employee allows boss to look authoritative and knowledgeable even when s/he knows what is being discussed • Power-distance • Junior people don’t speak up; tendency to “beat about the bush” when problems arise because boss should not be disturbed

16. Initiative / Motivation • Initiative • Not encouraged to make mistakes / take initiative • Boss must take initiative, is paid to do so • Motivation • Company image and prestige • Salary rises, bonuses • Convenience at work • Snacks and food • Security • Job title

17. Another view of initiative/ motivation: Harmony • Kreng jai • Restrain self-interest or desire to maintain harmony • Comply with requests of others • BUT • Do not communicate disagreement or dissatisfaction • Do not assert true feelings or opinions • Do not participate in evaluation of situation / problem • Do not admit lack of understanding or mistake

18. Saving Face  Harmony • Sia nah • Avoid situations of potential embarrassment or disadvantage • Create situations where no one is embarrassed, disadvantaged or at fault • BUT • Needs of individual constrained

19. Career Tactics use by Thai Managers (Comparison with those employed by Thai versus US firms in Thailand)