International Business Management

The fundamental aim of a global multinational is to create and sustain competitive advantage if they want to survive and prosper.

The global context in which firms develop and implement business strategies has changed significantly. The knowledge-based economy has made multinational companies increase the transfer of innovation processes to their foreign subsidiaries in order to adapt their products and services to local needs and to make use of the knowledge locally available. The initiatives to optimise the innovation capabilities and obtain competitive advantages have led to a research and development effort at the subsidiary level. Indeed, the benefits of decentralized R&D have been mentioned in Pearce (1997), Birkinshaw (2000), Holm and Pederson (2000), Jones and Davis (2000) and Birkinshaw and Hood (1997, 1998a, 1998b).

Culture is an integrated phenomenon and by recognising and accommodating taboos, rituals, attitudes toward time, social stratification, kinship systems and many other components, a modern manager will pave the way toward greater harmony and achievement in the country in which a multinational business operates (Sherman, Bohlander & Snell (1995).

In addition to some of the multidimensional concepts of culture, two issues have gained prominence from a multinational perspective; corporate culture and the national culture. National culture can be defined as the consolidated programming of the human mind (Hofstede, 1980). At the firm level American management practices which believed that 'one size fits all', tended to be applied globally by US corporations. This outlook is now being replaced with the knowledge that managerial attitudes, values, behaviours and efficacy differ across national cultures (Newman & Nollen, 1996) and as a result, differences in national cultures have call for different management practices.

Being in the preference zone of your own type of culture can be seen as advantageous to multinational location choice, as the absence of trust, and cultural distance, tend to create resistance, frictions, and misunderstandings (Holden, 2001). Thus, cultural sensitivity becomes an important supporting mechanism (see Marschan,Welch &Welch, 1996) for the management of organisations.

To a certain extent organisation performance may also be affected by cultural congruence. For instance, using Hofstede's (1980) national culture dimensions and analogous management practices, Newman & Nollen, (1996) found that work unit financial performance is higher when management practices in the work unit are congruent with the national culture. Reflecting on Hofstede's (1980) work, Schneider (1988) has also indicated that even in a large multinational known for its powerful corporate culture, national differences remain predominant. This suggests that while authors on national and corporate cultures refrain from stepping onto each others toes, they tend to miss out on opportunities for cross-fertilisation. Laurent (1986) proposed that corporate culture is capable of being modified to a certain extent, but is not capable of affecting the deeps level of underlying assumptions that are derived from national culture. It is important to draw the distinction with cultural taxonomies as there is evidence from the findings of some research suggesting that national and corporate culture are separate constructs with variable attitudinal and behavioural correlates (Weber, 1996).

There is a lack of congruence between