Growthin the international business market has led to a dramatic rise incross-national joint ventures (Blodgett, 1992). Aninternational joint venture (IJV) can be defined as a partnership between twoindividuals or companies based in two different countries in which risks andprofits are shared. The advantage offorming an IJV is that both companies can share their resources without mergingtheir entire business operations (Buckleyand Casson 2009).
Thisinevitably means that alongside sharing capital, technology and markets, theywill also be sharing the human resources of the company, and that is when thequestion of national cultures will determine the success of the IJV. If apartnership is able to effectively integrate both existing national cultures,they would both save a great deal in time, effort, and more importantly, costs.There is plenty of evidence to suggestthat cross-cultural differences are a major reason why so many cross-borderjoint ventures fail (Pooley, 2005).
Anexample of an IJV that proved successful because both parties took the time tostudy one another’s culture is the alliance between Renault and Nissan as seenin the case study. Rather than forcing their workers to work together based onknowledge and intuition, both companies were adamant to teach their employeesabout the opposing company’s culture, social norms, and communication. Bothparties tried to address all kinds of issues that may arise from culturalmiseducation, ranging from language classes to understanding the counterparty’sbusiness culture to avoid any issues. Culturaldifferences between partners and its impact on IJV performance are the mostcommon issues found in IJV research (Li et al.
, 2001). It is also important to note that both parties were open tochange and adaptation, similar to Honda adapting its strategic formulation uponentering the US market as mentioned earlier. Refusal to adapt or change canresult in miscommunication and possible drawbacks in the future. Mintzberg (2011) stated that in creating any type ofpartnership across borders between companies from different countries, it isvital to the survival and success of the partnership that the two companiesunderstand the culture of each other so as to reduce and perhaps avoid anyclashes in the processes of decision-making and the daily operations of thepartnership. So rather than ignoring the cultural differences or pretendingthat they do not exist, addressing them, adapting to them, and potentiallyintegrating them will result in less issues and success for both parties, asseen with the Renault-Nissan alliance.
Managing people in anycompany is an uphill task because senior managers have to deal with employeesfrom around the world with different cultures and ways of doing business. Managingpeople in a transnational corporation to achieve a common goal is even morecomplicated as there are several more factors senior managers have to deal withsuch as expatriate management, global skills management, and legal regulationsof other countries. National culture has a considerable influence on thebehaviour, attitude, and values of employees in a specific country. Thereforein the context of a TNC, human resources tasks such as recruitment, appraisal,and employee development, will all be influenced by national culture.
Hofstede’s (1970) cultural dimensions model can be used to appraise certain IHRMpractices and the influence that national culture has on these practices, inthis case, individualism vs collectivism(IDV) and power distance index (PDI). For example, with regards to recruitment, (Stone et. Al. 2007) concluded that recruiters that come from a country with collectivisticvalues are more likely to give preference to personal references and employeereferrals, whereas recruiters from countries with individualistic values willgive preference to candidates on a merit basis through employment agencies.
Whenmeasuring employee performance and appraisal, if the country where the TNC isoperating is considered individualistic, employees will be appraised on theirown individual performance, whereas if the TNC operates a collectivist culture,employees will be appraised on their teamwork and collective performance (Stone et. Al., 2007). Finally, the influence of nationalcultures is also clear regarding employee development.
In countries where thereis a high power distance culture, the communication between employees and seniormanagement is very formal, resulting in decreased interaction and communicationbetween a TNC’s senior management and their subordinates. On the other hand, incountries where there is a low power distance culture, employees can moreeasily approach their superiors and there is a more open line of communicationbetween them (House et. Al., 2004).
The aforementioned instances clearlyshow how important national culture integration is in a TNC, and how withoutit, there would be a lot of unanswered questions could arise and lead to conflict.An example of unanswered cultural issues that went unanswered is mentioned inthe Richard Pooley (2005) case where a breakdown incommunication cost both companies in the alliance tens of millions of dollars. Onecompany was Japanese and the other was German, and both companies did notprovide their employees with any cultural training as Renault and Nissan did.This resulted in a culture shock for both parties to the point where the alliancewas unmanageable in the end and resulted in the disbandment of the alliance. Itis therefore important to firstly recognize that organizational hierarchy andattitudes towards management differs from culture to culture, and to secondlyaddress this issue by promoting cultural awareness in the workplace.