Organizational Culture and Commitment

Transmission in Multinationals

V. Miroshnik

• Publisher: Palgrave Macmillan
• Year: 2013
• Print ISBN:
  9781137361622
• eBook ISBN:
  9781137361639
• Topic: Business
• Subtopic: Business Strategy
• Index: Business

Formation of company citizenship leads to success for the multinational companies by creating psychological alignments of the employee. This, therefore, should be considered as the international strategy of a multinational firm to create unique resources for competitive success. Successful multinational firms develop a common pattern of business performance by creating company citizenships, which include a primary focus on such values as organizational innovation, and a goal orientation. These values ultimately create commitment of the employees. This book proposes that there are some specific espoused values in every important multinational company, which form their organizational cultures and create values, which in turn may create enhanced performance of the organization. We can call this interrelationship between culture and performance as the company citizenship. This company citizenship can be transmitted from one part of the globe to another through the transmission of its corporate management and operations management system as a strategy of a multinational company.

1

Introduction

Importance of this research

Rapid globalization of the world economy brings profound changes in the international business of the main manufacturing organizations. Companies are facing fierce international competition. They try to take advantage of the growing opportunities offered by the international market. These motives are driving companies of the industrialized nations to add more countries to their list of possible locations for trade and profit, particularly in East Asia.

Multinational companies (MNC) today are central agents promoting globalization. With the increasing globalization of business, the level of economic activity of the World now depends upon this form of organization (Andersson and Pahlberg, 1996; Basu, 2000; Birkinshaw and Hood, 1998; Birkinshaw, Hood and Young, 2005; Child, Faulkerner and Pitkethley, 2000). Thus, the MNCs are becoming important subjects for scholarly study because their influence is growing along with internationalization of production in the era of globalization.

Operating across products and markets, nations and cultures, MNCs face diverse problems and complex situations and, therefore, create the most complex form of organization in existence. In the era of globalization, the issues concerning transmission of organizational culture (OC) from headquarters (HQ) of a multinational company to its subsidiaries are becoming increasingly important (Ouchi and Jaeger, 1978; Andersson, Forsgren and Holm, 2002).

The transmission of organizational culture from headquarters to subsidiaries appears to be central to the mechanism for managing overseas subsidiaries in multinational companies (Birkinshaw and Hood, 1998; Andersson, Forsgren and Holm, 2002; Basu, 2010). The transmission of organizational culture is an important part of a coordination mechanism between headquarters and subsidiaries. During the process of transmitting culture, a parent unit of a company should successfully transfer the set of the core values that compose its organizational culture from their parent unit to the subsidiaries worldwide.

In every important multinational company, there are some specific espoused values which form their organizational cultures and create values, which in turn may shape the commitment of its employees. These commitments are the indicator of the successful performance of a company because creation of commitment leads to a company’s success. We can call this interrelationship between culture and commitment company citizenship. This company citizenship can be transmitted by a multinational company from one part of the globe to another through the transmission of its corporate management and operations management systems, as a part of the company’s strategic management process. Formation of company citizenship, based on the firm’s organizational culture, creates unique competitive advantages for a multinational – advantages which are part of its international strategy. This is a new theoretical development because it is different from the existing theoretical explanations of the transmission of values from the social or national environment to the organizational environment (O’Reilly, Chatman and Caldwell, 1991; Cameron and Quinn, 1999).

This concept of company citizenship is directly opposed to two very important theories put forward in recent years. Freedman (2006) has coined the term ‘Flat World’ to describe a world in which people have the ‘Jet-Set Culture’ (Triandis, 2006) of the high Anglo-American executive class, with similar language, education, tastes and preference but with varied citizenships and nationalities. Emergence of this global culture is the result of the globalization process that has been in progress since 1990. This has created a new breed of managerial class whose culture is global, not national. If that is the case, organizational systems that were developed using national characteristics are undergoing changes to include global characteristics. There is also the powerful argument of Hofstede (1980), who thinks organizational culture is related to the national culture of the country in which the company is located, and MNCs cannot avoid the strong influence of the national culture of the host country.

This book, drawing upon the experiences of a major Japanese multinational automobile company (henceforth called Shogun, to maintain confidentiality) has examined the core values of management in Japan, India and Thailand in order to demonstrate that the theories of Freedman (2006) and Hofstede (1980) are not exactly valid. Company citizenship can be formed even in a country with a very different national culture because the strong organizational culture of a multinational company, which gave rise to the values of corporate management and operations management, can override differences in national culture between the home and the host countries of a multinational company. As there different multinational companies with different organizational cultures, there would be different company citizenships for different multinational companies rather than just one Anglo–American ‘Jet-Set’ global culture.

Global culture

Kroeber and Kluckhohn (1952) has defined culture as shared standards operating procedures, unstated assumptions, practices, tools, myths, art, kinship, norms, values, habits about sampling the environment and shared meanings. There is the opinion of Hofstede (1980) that national cultures are different from each other and as a result, different organizational cultures can be formed. However, the belief remains that globalization has given rise to a new ‘Jet-Set’ corporate culture (Triandis, 2006). According to this, MNCs are simply propagating the corporate culture based on Western, mainly American, values and that other cultures would thus be swept away. The main implication is that ultimately there would be one global corporate culture instead of separate individual cultures.

The ‘Jet-Set’ culture emphasizes individualism, self-reliance, competition, uniqueness, hedonism, and emotional detachment within a group. Vertical individualistic culture (U.S. corporate culture) values competitiveness. Horizontal individualistic culture (Australia, Sweden) de-emphasizes hierarchical differentiations (Triandis and Gelfand, 1998). ‘Jet-Set’ culture belongs to an emergent global culture that promotes primarily the vertical individualistic U.S. corporate culture irrespective of national boundaries (Clark and Knowles, 2003). This global culture consists of people who are attached to other members of this culture through a process of self-selection. Core values of global managers are not derived from ethnic groups or national origins but from a cultural cross-pollination (Bird and Stevens, 2003).

Global citizenship

The assumptions of a homogeneous global culture are questionable. U.S. corporate values are the values of the dominant group in United States, which may not be shared by everyone in American society. While national culture is heterogeneous, there are heterogeneous cultures in the world that may cross national boundaries. This creates a number of global cultures for affiliated groups, but not a single global culture (Lincoln and Kalleberg, 1996). The second issue is whether adaptation of a particular managerial practice (for example, ‘just-in-time’ from Japan or ‘downsizing’ from the United States) means cultural adaptation of ‘software of the mind’ or values inherent in these practices (Shingo, 1985). These affect the culture at the level of ‘deep mental programming’ referred by Hofstede (2002).

These authors argue that, in the modern business world, not countries, but multinational companies are establishing their own cultures over the globe. The corporate cultures of leading multinationals are forming their own company citizenships within their borders and globally spreading their way of doing things.

That multinational organizational culture is formed by major values introduced by the founder/top management of that corporation, and may or may not be influenced by the values of the country in which that MNC is operating. That corporate global culture, in turn, forms company citizenship, a new organizational manifestation in the era of globalization. Some successful multinational companies are transcending national cultural differences by developing a common pattern of drivers of business practices through the formation of company citizenship. This book aims to describe the components of company citizenship and to provide evidence of its existence.

Company citizenship in this research refers to a relationship between organizational culture and organizational commitment, working through corporate management and operations management systems. O’Reilly, Chatman and Caldwell (1991) have identified certain dimensions of values of organizational culture. Basu (1999) has pointed out the values of the corporate management system in Toyota, which is considered the role model for Japanese multinational companies. Shingo (1985) has defined values at the core of the operations management system of Toyota. These values are: innovation, stability, respect for people, outcome orientation, detail orientation, team orientation and determination. These values are closely related to what Triandis (2006) described as ‘collectivist’ values, which should give way to the ‘individualistic’ values in a fully ‘globalized’ value system according to the supporters of the ‘Jet-Set’ culture.

National citizenship versus company citizenship

There are important differences, as mentioned by Triandis (2006), between the Western (individualist) and Eastern (collectivist) organizational cultures and, as a result, values of the corporate management system and operations management system in Eastern and Western companies also differ. The cultural value system in Japan promotes hard work and attention to detail, group orientation and consensus orientation (Lincoln and Kalleberg, 1985). It focuses on conflict avoidance, importance of long-term relationships, and uniformity. The end result is a very high level of loyalty for the company. U.S. corporate culture, on the other hand, promotes more communication, coordination, and short-term performance evaluations.

Hofstede (1980) concluded that the organizational culture created in the context of one specific national culture may not be implemented in a different nation because of the variations in national cultures. Recently the GLOBE project (House, Hanges, Javidan, Dorfman and Gupta, 2004) has tried to categorize nations according to their leadership cultures and organizational cultures. In Hofstede’s analysis, national culture and national characteristics form organizational culture.

However, the alternative argument proposed in this book is that organizational culture, along with corporate management and operation management systems, as its components, can be transmittable from one nation to another by a multinational company. If a company can influence its employees with a strong organizational culture it can override influences of national characteristics and can have a superior organizational culture throughout the organization irrespective of national boundaries.

From the above analysis we proceed to the concept, ‘company citizenship’. Company citizenship does not depend on nationality but on the organizational culture of a company irrespective of nationality.

Company citizenship

Company citizenship can be defined as the reflection of the reason for the existence of the company and its organizational culture. Values of the organizational culture – those proposed by founders of a company and developed by top managers – define super-ordinate goals, visions, and the purpose of the company, which binds the corporation to its members in spirit (Basu, 1999; Pascale and Athos, 1981). Leadership defines these features in practical terms in order to disseminate these to its employees. These provide guidelines for decision-making, coordination, evaluation: in other words, for ways of doing things, or, the corporate management and operations management systems.

Corporate management and operations management systems, through their beliefs and assumptions, influence behavior and create values, which in turn affects decisions and actions of the members of the organization and creates a citizenship or membership. Company citizenship is formed for a multinational enterprise first in its home territory but it spreads to the subsidiaries in various parts of the world, creating a common organizational culture throughout. Company citizenship differs from one company to another, as the organizational culture of each company is different from that of another.

Thus, this book argues that instead of a global culture, which is supposed to produce a common global citizenship, in reality we can observe a common company citizenship for a specific multinational companies throughout the world. Moreover, there can be as many company citizenships as there are multinational companies. Thus, in the real business world in the era of globalization, instead of monolith-type of single global culture composed by Western values, or a fusion-type composed by multiple national cultures, there will be a multiplicity of corporate cultures, which form company citizenships, which differ from each other as the organizational culture of Toyota differs from that of Ford.

Company citizenship as a competitive advantage

Continuous growth of a company is needed for the preservation of the values of organizational culture. Continuous progress and respect that can be gained by being associated with a company with continuous growth are the end objective of the employees. A deep religious value to perpetuating growth is also the objective of corporate growth. Employees think and operate with an outlook for the long-term prospects of the organization and for harmony within the work place and the broad social environment. These feelings lead them to develop a family feeling within the work place and responsibility towards fellow employees and the community at large. They believe they have a responsibility towards the organization and the local and global societies, as a multinational company is a global organization.

Irrespective of location, the Japanese multinational company that is the subject of this research (the company we call Shogun) is striving to instill these values into its employees across the globe, creating an organizational citizenship that would carry the essential values of Shogun as a global organization. The fear of loss of face (due to non-achievements of its objectives) to the employees, Japan, and the global community are the motives for Shogun’s efforts to mould every employee, irrespective of nationality, into a company citizen. The way to do that is to transfer the original organizational culture from the parents to the subsidiaries. This book analyzes the organizational culture in the parent operation of this Japanese automobile company with subsidiaries in overseas countries, and examine whether these transmission is successful or not.

Organizational culture is viewed traditionally as an attribute of the company, but not as its important strategic resource; this is due to the fact that it is questionable whether and how culture influences performance. Therefore, the classic question, one that Barney raised (1986) in relation to Porter’s theory of the competitive advantage of a firm (1980, 1985) – whether culture can be a source of competitive advantage and, therefore, can be regarded as a strategic resource of a company – still remains open (Barney, 1986, 1991, 2001; Barney and Clark, 2007).

Organizational culture is an important resource of an MNC because organizational culture is unique and hard to imitate s and may influence the overall performance of the company. The transmission of organizational culture from the parent operation (HQ) to the subsidiaries appears to be the central mechanism for managing overseas subsidiaries in multinational companies (Basu, 2010). This research views transmission of organizational culture as an important part of the coordination mechanism between headquarters and subsidiaries. Dur...

Table of contents

• Cover
• Title
• 1 Introduction
• 2 Organizational Culture and Commitment
• 3 Relationship between the Headquarters and Subsidiaries in Multinational Companies
• 4 Methodology
• 5 Model and Measurement Instrument
• 6 Organizational Culture and Organizational Commitment in the Parent Unit in Japan
• 7 Study B: Analysis of the Organizational Culture and Organizational Commitment in the Thai Subsidiary
• 8 Study C: Organizational Culture and Organizational Commitment in the Indian Subsidiary
• 9 Transmission of Culture-commitment from HQs to Subsidiaries: A Multilevel Model
• 10 Discussion
• 11 Conclusion
• Appendices
• References
• Index