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A Model of Cultural Differences and International Alliance Performance

Author(s): David G. Sirmon and Peter J. Lane

Source: Journal of International Business Studies, Vol. 35, No. 4 (Jul., 2004), pp. 306-319
Published by: Palgrave Macmillan Journals
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Journalof internationalBusinessStudies(2004)35, 306-319
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A model of cultural differences and

international alliance performance

DavidG Sirmon'and Abstract

PeterJ Lane2 We propose a model of cultural differences and international alliance
performanceto explain the ambiguous findings regarding the influence of
nationalculturedifferenceson allianceperformance.Buildingon researchon
Clemson,SC, USA;2ManagementDepartment, national,organizational,and professionalcultures,we argue that the closerthe
of New Hampshire,
University Durham,NH,USA domain of a social group is to the value-creatingactivitiesof an alliance,the
more disruptiveculturaldifferences between the partners'members of that
Correspondence: social group will be. Organizationalculture differenceswill tend to be more
DGSirmon,ManagementDepartment, disruptivethan nationalculturedifferences,and differencesin the professional
ClemsonUniversity,SirrineHall,Clemson, culture most relevant to alliance value creation typically will be the most
Tel: +1 864 656 6773 disruptive.Implicationsfor researchand managerialpracticeare discussed,and
Fax:+1 864 656 2015 the model's relevancefor internationalR&Dalliancesis highlighted. Journalof InternationalBusinessStudies(2004) 35, 306-319.

Keywords:cultural allianceperformance;
differences; culture

International alliances offer firms opportunities to draw upon

knowledge and capabilities not currently controlled or available
within their home country (OECD, 2000). Among other benefits,
this can help firms share costs, enter new markets (Glaister and
Buckley, 1996), supplement their capabilities (Inkpen and Dinur,
1998; Hitt et al., 2000; Lane et al., 2001), seek more radical
innovations by integrating knowledge from different areas of
science and technology (Lubatkin et al., 2001; Nummela, 2003),
and create common platforms for products and services (Mowery
et al., 1998; Caloghirou et al., 2003). However, international
alliances also bring challenges not found within domestic alliances.
Research has shown that differences in national culture can
disrupt collaboration and learning between alliance partners (Lane
and Beamish, 1990; Parkhe, 1991; Lyles and Salk, 1996; Hennart
and Zeng, 2002). However, the conclusion that national culture
differences alone disrupt knowledge sharing between partners
recently has been questioned. Pothukuchi et al. (2002) suggested
that the importance accorded to national culture differences on
international alliance performance may be overstated because most
studies have failed to consider or specify the influence of
Received:2 June2003 organizational culture differences as well. Whereas national culture
Revised: 3 August2003 relates primarily to deep-seated values, organizational culture
Accepted:3 August2003 relates primarily to shared beliefs in organizational practices and
Onlinepublicationdate: 1 July2004 processes (Hofstede et al., 1990). Examining a large sample of
A model of cultural differences DavidG Sirmonand PeterI Lane

international joint ventures, Pothukuchi et al. ners is often a necessary condition to optimize this
(2002, p. 258) found that 'the presumed negative value creation (Harrison et al., 2001). However, in
effect from partner dissimilarity on IJV perfor- order to share, combine and leverage complemen-
mance originates more from differences in organi- tary resources, which include both tangible and
zational culture than from differences in national intangible assets but not business processes or 'the
culture'. actions that firms engage in to accomplish some
Pothukuchi et al.'s (2002) findings suggest that a business purpose or objective' (Rayet al., 2004, 24),
more generalized effect may exist: partners'cultural the partners' employees must interact effectively.
differences may have more influence on interna- Research suggests that national and organizational
tional alliance performance as those differences culture differences between these employees affect
become more directly related to the alliance's their interactions, but this study expands the
primary value-creating activities. This paper builds consideration of cultural differences to include
on that inference by developing a theoretical model professional culture differences. Professional cul-
of the performance effects of cultural differences in tures form as people, who span individual organi-
international alliances. International alliances are zations, share a set of norms, values and beliefs
the focus of the paper because they 'reside at the related to their occupation (Van Maanen and
confluence of different cultures, including Barley, 1984; Jordan, 1990; Trice and Beyer, 1993).
national, corporate and occupational' (Salk and The essence of our argument is that cultural
Shenkar, 2001, 163). differences stemming from national, organizational
We argue that an international alliance's perfor- and professional cultures inhibit international
mance is driven by the alliance's effectiveness in alliance partners' employees' ability to interact
achieving its primary value-creating activities. effectively. Additionally, we argue that professional
Resource complementarity between alliance part- culture differences are often the most relevant and

Differencesin Partners'

P2 + P3 +



Differences in
Professional Cultures


Related- PI Effectiveness of Performance

Complementary Alliance's of the
Resources Value-creating == International
Activities Alliance

a Thethicknessof thearrowsindicatestherelativestrengthof therelationships 6).


Figure 1 A model of cultural differences and internationalalliance performance. The thickness of the arrows indicates the relative
strength of the relationships(Proposition 6).

journal of International Business Studies

A model of cultural differences DavidG Sirmonand PeterJ Lane

salient cultural differences that the interacting identical, yet are mutually supportive - is often
employees face, and thus professional culture necessary for alliances to optimize their primary
differences are the most disruptive to the alliance's value-creating activities (Lane and Lubatkin, 1998;
effectiveness in achieving its primaryvalue-creating Das and Teng, 2000; Harrison et al., 2001). Com-
activities. See Figure 1 plementary resources allow an alliance to pursue
The model and propositions developed in this economies of scope and growth opportunities,
paper make several contributions. First, we offer a while decreasing risk (Lane and Lubatkin, 1998;
more detailed theory of how national culture Das and Teng, 2000; Harrison et al., 2001). For
differences influence international alliance perfor- example, Lu and Beamish (2001) found that small
mance. We suggest that most of the influence of and medium-sized enterprises experienced better
national culture is mediated by organizational and performance when they internationalized by part-
professional culture differences. Second, we pro- nering with firms that possessed local knowledge
pose that the negative influence of cultural differ- relevant to the newly entered region. The local
ences increases as those differences become more knowledge of the partner was a complementary
relevant to the alliance's value-creating activities. resource for the internationalizing firm. Further,
Third, although we have proposed a general model Vidal-Suarez (2002) found that the stock market
applicable to all types of international alliance, it is awarded Spanish firms a 0.2% abnormal return the
especially relevant to international R&D alliances day they announced global alliances with partners
(IRDA),which include both R&Djoint ventures and that held complementary resources.
joint R&D agreements (Hagedoorn and Narula, However, the presence of complementary
1996). The likelihood of finding professional cul- resources alone does not always lead to positive
ture differences between R&D personnel, and the results for international alliances. Caloghirou et al.
increasing importance of IRDA to a wide range of (2003) found no support for the expected positive
companies (Narula, 1999; Narula and Hagedoorn, relationship between complementary resources and
1999; Hagedoorn, 2002; Caloghirou et al., 2003; international research alliance performance, as
Nakamura, 2003), suggest that firms engaging in measured by the partners' perceptions of success.
them need to be as sensitive to professional culture Further,Johnson et al. (1996) found that comple-
differences in the laboratory as they are to national mentary resources led US firms to trust their
culture differences across the conference table. Japanese partners more but not vice versa.Similarly,
Sarkar et al. (2001) found that the presence of
Effectiveness Of Alliances' Value-Creating complementary resources did not positively affect
Activities trust or bilateral information exchange between
Because international alliances differ in their partners. Further, these authors found that com-
primary value-creating activities, the specification plementary resources had a positive effect on
of a metric to measure performance is problematic project outcomes, but not on strategic outcomes.
(Geringer and Hebert, 1989). For example, the And, most interestingly, Sarkaret al. (2001) found
primary value-creating activity of a marketing- that partner compatibility was critical in determin-
based alliance may involve the delivery of a strong ing the effects of complementary resources on
co-branded messages, whereas for R&D-based alliance performance.
alliances it is often the development of innovations Model misspecification could be the cause of such
or 'scientific or technical knowledge and the inconsistent results. First, not all the resources of
application of that knowledge to the creation of the partners are relevant to a given alliance's
new and improved products or processes' (Hage- primary value-creating activities (Das and Teng,
doorn, 2002, 477). Although these activities may 2000). Thus the benefits of pooling complementary
affect profitability, it is often difficult to detect such resources should positively affect alliance perfor-
effects. Therefore we suggest that the effectiveness mance only when those resources are related to the
with which the alliance achieves its primary value- primary value-creating activities of the alliance. For
creating activities is a precursor of alliance perfor- example, marketing alliances might be concerned
mance, but that such primary value-creating activ- with the complementarity of delivery systems,
ities are specific to the purposes of specific compensation practices, and brand or firm reputa-
international alliances. tion, whereas R&D alliances would be concerned
The literature suggests that the pooling of with the complementarity of research facilities and
complementary resources - those that are not research orientations (Caloghirou et al., 2003).

Journal of International Business Studies

A model of cultural differences DavidG Sirmonand PeterJ Lane

Second, consideration of the compatibility of the a people (Hill, 1997, 67). Importantly, national
partners' employees who actually interact in the culture is learned, and provides meaning to 'how
primaryvalue-creating activities of the alliance may things ought to be' and 'how things ought to be
be underdeveloped. Madhok and Tallman (1998) done' for individuals in a country (Berger and
argued that many alliances fail to achieve their Luckmann, 1967; Terpstraand David, 1991). These
goals in part because the partners underestimate shared beliefs are acquired early in life through a
the difficulty of working together. One common person's primary socializing in families, in schools
cause of this shortcoming is a failure to attend to and at play (Bergerand Luckmann, 1967; Terpstra
the differences in how each firm approaches the and David, 1991). Further,the influence of national
processes involved in the primary value-creating culture is strong and long lasting. For example,
activities of the alliance. Thus, as the implication of Hofstede (1991) found that national culture
Pothukuchi et al.'s (2002) finding suggests, explains 50% of the differences in managers'
increased specificity in the relational compatibility attitudes, beliefs, and values, and Laurent (1983)
of partners' employees should lead to increased found that managers of multinational organiza-
understanding of international alliance success. tions retain many of their original national values
More formally, the preceding arguments lead to despite routinely working in culturally diverse
the following proposition: situations.
No nation is expected to have a completely
P1: The complementarity of partners' resources
homogeneous national culture, but national differ-
positively affects alliance performance only when ences are clearly seen in economic and political
those resources are related to the primary value-
systems (Albert, 1991; Thurow, 1993), educational
creating activities of the international alliance,
and when the employees involved in those systems (Calori et al., 1997), and other institutions
activities interact effectively. (DiMaggio and Powell, 1983; Hall, 1986; Clegg and
Redding, 1990; Sorge and Maurice, 1990). Thus,
The interaction of the employees involved in the national culture differences between alliance part-
primary value-creating activity of the alliance is ners can challenge the development of successful
likely to be driven by sensemaking.Sensemaking is relationships.
the process of placing stimuli into categories in These challenges stem partially from the lack of
order 'to comprehend, understand, explain, attri- shared norms or values (Park and Ungson, 1997).
bute, extrapolate, and predict' (Starbuckand Milli- This lack of common understanding may under-
ken, 1988, 51). Because sensemaking is shaped by mine the partners' interpretation of each other's
personal experiences, the interacting employees strategic intent, which is crucial in global markets
can differ in their categorization and linking of and partnerships (Hitt et al., 1995). Further,a lack
stimuli. In the words of Weick (1995, 62): of shared norms and values may reduce effective
What I say and single out and conclude are determined by
communication (Rao and Schmidt, 1998), trust
who socialized me and how I was socialized, as well as the (Aulakh et al., 1996; Doney et al., 1998) and
audience I anticipate will audit the conclusions I will reach. knowledge sharing in joint ventures (Parkhe,
1991; Mohr and Spekman, 1994; Lyles and Salk,
Thus, assuming that the appropriateresources are 1996). These problems, in turn, have been found to
made available, understanding why some interna- lead to lower alliance performance (Lane et al.,
tional alliances fail to create value effectively 2001).
requires the exploration of systematic differences In one noteworthy study, Barkema and Vermeu-
in the partners' employees' socialization. Three len (1997) examined the influence of differences in
sources of such socialization are explored in this partners' national cultures on international alliance
paper: one's nation, one's organization and one's performance using Hofstede's (1980, 1991) dimen-
profession. We address each in sequence. sions of national culture. They found that partner
differences in two of the dimensions (uncertainty
National culture avoidance and long-term orientation) had a strong
As stated previously, national culture refers to negative relationship with the survival of the
deeply set values that are common to the members collaboration over several different periods. How-
of a nation (Hofstede, 1991; Hill, 1997). It is a ever, the other three dimensions of national culture
system of shared norms, values, and priorities that, (individualism, power distance, masculinity) did
taken together, constitute a 'design for living' for not. Differences in uncertainty avoidance and

Journal of International Business Studies

A model of cultural differences DavidG Sirmonand PeterJ Lane

long-term orientation could represent differences cultures can manifest themselves as differences in
in how partners perceive and adapt to opportu- the partners' organizational cultures.
nities and threats in their environment (Schneider, Second, theory suggests and evidence confirms
1991; Schneider and De Meyer, 1991), and thus that national culture is associated with attitudes
may be more difficult to resolve than differences that affect professional activities. Extending Hof-
along the other three dimensions, which represent stede's (1980) arguments, Shane (1992, 1993) found
attitudes towards personnel. that nations with low power distance, weak
However, other evidence suggests that differences uncertainty avoidance, and high individualism
in national culture can be beneficial. Because had higher rates of innovation. Additionally, Kedia
managers tend to be more aware of the potential et al. (1992) found that R&D laboratory productiv-
challenges when working with foreign partners, ity was positively associated with low power
they may be more willing to spend effort on distance and high masculinity in both academic
avoiding misunderstandings in international alli- and industrial research settings. Lastly, Shane et al.
ances than they would in domestic alliances (Very (1995) found that the preferred behaviors and
et al., 1996). In such cases, differences in national strategies for championing innovations within a
culture can lead to high-level communication and a firm varied considerably with national culture. In
more sustained collaboration (Shenkar and Zeira, short, professionals in the same functional domain
1992; Parkand Ungson, 1997). Thus, in some cases, but from different countries can systematically vary
increased national culture differences can lead to in their attitudes toward and implementation of
higher international alliance performance (Morosi- the preferred solutions for the problems that those
ni et al., 1998). in their occupation face. Therefore national culture
These contradictory results suggest that differ- differences lead to differences in professional
ences in national culture have a more complex cultures. Specifically, differences in national culture
relationship with international alliance perfor- will increase the differences of partners'employees'
mance than has been previously proposed (Salk professional cultures. These arguments lead to the
and Shenkar, 2001). We argue that this complex following two propositions:
relationship includes the influence of national P2: Differences in international alliance partners'
culture on both organizational and professional
national culture increase those partners' organi-
cultures (Terpstra and David, 1991, chapter 1),
which then in turn influence international alliance zational culture differences.
performance by allowing for more effective sharing, P3: Differences in international alliance partners'
combining and leveraging of the alliance's com- national culture increase the differences of
plementary resources.
Because the beliefs and norms of national culture partners' employees' professional cultures.
are learned early in life, and endure despite
subsequent socialization by organizations and Organizational culture
occupations, national variation within organiza- Consensus has not been reached with regardto the
tional and professional cultures is likely. First, definition of organizational culture. A review by
differences in national culture systematically influ- Verbeke et al. (1998) found 54 different definitions
ence organizational cultures through the firm's of organizational culture between 1960 and 1993.
administrative heritage - the historical manage- However, these definitions of organizational cul-
ment practices that have been used by organiza- ture revolve around shared group meaning (Hof-
tions within a nation (Bartlett and Ghoshal, 1989; stede et al, 1990; Golden, 1992; Ostroff and Kinicki,
Calori et al., 1997). A nation's commonly shared 2001). For this study we follow Smircich's, (1983,
administrative practices provide constraints on the 344) definition of organizational culture, which is:
actions of firms within that nation. However,
national culture does not determine a monolithic social or normative glue that holds an organization together
... it expressesthe values or social ideals and the beliefs that
organizational culture for all firms within a coun- organization member come to share.
try; instead these firms develop organizational
cultures that vary around certain broad assump- Thus organizational culture forms a type of social
tions (Bartlett and Ghoshal, 1989; Calori et al., control that identifies appropriate behaviors and
1997). Therefore, when international alliance part- attitudes for organization members to display
ners collaborate, differences in their national (O'Reilly and Chatman, 1996). Further, organizational

journal of International Business Studies

A model of cultural differences DavidG Sirmonand PeterJ Lane

culture provides more proximal cues for organiza- combine and leverage resources such as knowledge,
tion members' behavior than does national culture relationships and physical assets. Thus partners
because it provides members with an organiza- with dissimilar organizational cultures will be less
tional identity, and facilitates collective commit- likely to effectively achieve the alliance's primary
ments (Smircich, 1983). However, it does not value-creating activities, even when the necessary
completely supersede or displace the influence of resources are present:
one's national culture (Hofstede et al., 1990).
There has been less research on organizational P4: Differences in the organizational cultures of
international alliance partners negatively moder-
culture and international alliance performance
ate the relationship between related complemen-
than on national culture and international alliance
tary resources and effectiveness of the alliance's
performance. This is surprising, as people from the
same national background differentiate their work value-creating activities.
practices as a result of the influence of hetero-
geneous organizational socialization (Hofstede Professionalculture
et al., 1990). However, the results of those studies Professional culture is another important type of
strongly suggest that differences in partners' orga- culture that can affect international alliances, but it
nizational culture matter greatly to the outcomes of has received even less attention from scholars than
international alliances. organizational culture. A professional culture exists
Based on a study of alliances between Japanese when a group of people who are employed in a
and Western firms, Brown et al. (1988) concluded functionally similar occupation share a set of
that differences in partners' organizational cultures norms, values and beliefs related to that occupa-
can have a significant negative influence on IJV tion. Professional cultures develop through the
performance. Such differences can even lead to the socialization that individuals receive during their
dissolution of alliances as partners are forced to occupational education and training (Van Maanen
divert attention and energy to develop interaction and Barley, 1984; Jordan, 1990). This initial socia-
routines aimed at overcoming these differences lization is then reinforced through their profes-
(Park and Ungson, 1997). Pothukuchi et al. (2002) sional experiences and interactions that lead to a
found that organizational culture dissimilarity broad understanding of how their occupation
negatively affected international partners' satisfac- should be conducted (Brown and Duguid, 1991;
tion with the relationship. Lave and Wenger, 1991).
Additionally, studies of domestic alliances show a The strength and pervasiveness of occupational
similar relationship between shared organizational socialization that leads to professional cultures
culture and performance outcomes. In their study should not be understated. Trice and Beyer (1993,
of US R&D alliances, Lane and Lubatkin (1998) 178) argue that individuals' occupations are '[t]he
argued that multiple manifestations of organiza- most highly organized, distinctive, and pervasive
tional culture would affect inter-organizational sources of subcultures in work organizations'.
learning. These authors found that partner similar- Members of a professional culture share a 'con-
ity in research centralization and research compen- sciousness of kind' that not only encompasses
sation practices affected learning outcomes functional understanding, but also includes the
positively. Further, organizational culture has sharing of emotional demands and a social identity
been found to be important to the success of related to the occupation (Salaman, 1974; Van
mergers and acquisitions. Weber et al. (1996) Maanen and Barley, 1984). Therefore most func-
found that dissimilar organizational cultures tional areas in an organization (e.g. accounting,
between acquirer and target decreased top man- marketing, engineering, operations, sales and
agers' cooperation and increased negative attitudes science-based groups) are expected to have distinct
toward the merger. professional cultures; however, we argue that - in
Overall, similarity of partners' organizational fact - they are not organizational subcultures.
culture increases partner learning, satisfaction and Organizational subcultures develop within a firm
effectiveness of interactions, whereas differences in and are based on any number of different types of
organizational culture decrease these positive out- shared experience, such as educational, regional,
comes. In short, decreased learning, satisfaction and ethnic backgrounds (Arnold, 1970), similar
and effectiveness of interactions are expected to problems (Cohen, 1955), or occupations (Van
inhibit the business processes used to share, Maanen and Barley, 1984; Trice and Beyer, 1993).

journal of International Business Studies

A model of cultural differences DavidG Sirmonand PeterI Lane

However, Cohen (1972) describes a subculture as a Husted, 2003). Further,attempts to compromise in

solution to a group's need to belong to a larger the approach taken in problem-solving is likely to
membership, while also possessing some level of lead to less desirable outcomes. For example, if a
independence from that membership. Professional compromise is reached, and members from both
cultures, as utilized in this paper, develop outside professional cultures abandon their preferred pro-
any single organization. The initial source of blem-solving approach, both effectively eliminate a
socialization for a professional culture is the significant amount of their valuable tacit knowl-
educational system where such groups of profes- edge. Likewise, if either member abandons their
sionals are trained. Forexample, Terpstraand David preferred problem-solving approach, the alliance
(1991, 12) point out: 'One could argue that has effectively lost the expertise of one half of its
professional schools spend more time imparting contributing members.
professional culture than teaching technical skills The challenges discussed above inhibit the effec-
or knowledge.' Because professional cultures do not tive interaction of individuals from different profes-
fit within any single organizational culture, we do sional cultures within an international alliance.
not consider them an organizational subculture. This then decreasesthe likelihood that the alliance's
Instead, professional cultures cut across organiza- pooled complementary resources will be shared,
tional boundaries. combined and leveraged in a manner that effectively
When international alliance partners require achieves the alliance's primary value-creating
employees from different professional cultures to activities. In orderto illustratethe proposed relation-
interface in the primary value-creating activity of ship, we present a detailed example of two profes-
the alliance, the results are expected to be dis- sional cultures often involved in IRDAs.
appointing. Overall, these individuals lack a com- IRDAs are an important form of collaboration
mon basis from which to interact effectively between international partners, and are increasing
because their occupational socialization and result- in number (for reviews see Narula and Hagedoorn,
ing professional cultures are distinct. First, indivi- 1999; Hagedoorn, 2002). By R&D we imply
duals from separate professional cultures lack a
shared set of basic knowledge because their occupa- standard research and development activity devoted to
tional socialization involved different content increasing scientific or technical knowledge and the
application of that knowledge to the creation of new and
material, which is reinforced by different profes- improved products and processes. (Hagedoorn, 2002, 477)
sional experiences. Second, these individuals often
lack experience communicating with an auditing Although not perfect, we stipulate that an IRDA's
audience outside their professional culture. Thus primary value-creating activity is found in new
communication between individuals from separate innovations and learning. Increases in a firm's rate
professional cultures is impaired. Both of these of innovation highlight the short-term benefits of
factors inhibit the finding of common ground from an IRDA, whereas learning captures the potential
which the relationship can develop and produce long-term gains of the relationship (Sarkaret al.,
value (Lane and Lubatkin, 1998). In such cases, 2001), even when the actual relationship is short, as
energy must be diverted from the value-creating is often the case (Narula and Hagedoorn, 1999).
activity of the alliance to the development of basic R&D personnel in an IRDA are drawn predomi-
routines that help establish a base of shared nantly from two professional groups - scientists
knowledge in order to communicate adequately. and engineers. Although these two groups are often
Developing such routines requires time, which treated as interchangeable, research on the sociol-
leads to increased expenses and could lead to ogy of knowledge and cognitive models of innova-
increased frustration (Park and Ungson, 1997). tion has shown that they represent two distinct
Even if these two obstacles can be adequately professional cultures with different norms, beliefs,
overcome, individuals from different professional values and priorities (De Solla Price, 1982, 1986;
cultures may still have deeply ingrained preferences Mikhailov et al, 1984; Nightingale, 1998; Balmer
in their approach to solving problems (Brown and and Sharp, 1993). Specifically, the professional
Duguid, 1991; Lave and Wenger, 1991). These cultures of scientists and engineers differ in the
differences may be difficult to overcome, as the types of knowledge they emphasize, in the ways in
employees may reflect the 'not-invented-here' which knowledge develops, and in the types of
syndrome, which is the resistance to the utilization innovation process they utilize. Table 1 highlights
of knowledge created elsewhere (Michailova and these differences.

journalof InternationalBusinessStudies
A model of cultural differences DavidG Sirmonand PeterJ Lane

Table 1 Engineeringvs scientificprofessionalcultures

Typeof professional Locusof criticalknowledge Flowof criticalknowledge Innovationprocess

culture characteristics

Engineering Internal:technology Controlled: economic Problem driven

communities property rights
Scientific External:science Open: few property rights Curiositydriven

Scientific vs engineering professional cultures: (Mikhailov et al., 1984, 111-120). Scientific knowl-
knowledgetypes edge is usually developed via networks of scientists
These professional cultures differ in the types of in different organizations, industries, and types of
knowledge with which they are primarily con- institutions, bound by a common interest in a
cerned. The scientific culture emphasizes knowl- broadly defined problem (Kuhn, 1970; Crane, 1972;
edge concerning general theories about Latour, 1987; Tushman and Rosenkopf, 1992).
relationships associated with physical, biological, Members of scientific networks are not typically
and social phenomena, as well as the methods for rewarded for the economic value of their research;
testing them (Burgelman et al., 1996). This defini- instead they are rewardedfor their 'contribution' to
tion encompasses both basic scientific research into the shared understanding of the phenomena
fundamental relationships in nature and applied (Mulkay, 1977; de Solla Price, 1982, 1986). The
scientific research into fundamental relationships uncompensated 'contribution' of their research
within and between classes of technology. By creates a reciprocal right to draw on the pool of
contrast, the engineering culture emphasizes tech- knowledge 'donated' by other network members
nology, or (Hagstrom, 1982). Such reciprocal rights are critical
to the progress of science, as few scientists can build
the theoretical and practical knowledge, skills and artifacts a stream of research independent of others. The
that can be used to develop products and services as well as
their production and delivery systems. (Burgelman et al.,
shared, open and accessible nature of scientific
1996, 2) knowledge fits with its focus on pursuing funda-
mental questions.
Although organizational researchers often treat By contrast, the engineering culture tends to
science and technology as interchangeable (e.g. create technological knowledge via technological
Porter, 1985; Latour, 1987), they are in fact networks composed of members located in one
fundamentally different, especially in their rela- organization or in economically linked organiza-
tionship to marketable products and services. tions. These individuals' rewardsare often based on
Scientific knowledge can be used to create new the economic value of the technological knowledge
scientific knowledge and new technological knowl- they create (Mulkay, 1977; Barnes and Edge, 1982).
edge, whereas technological knowledge is used to They may draw on external sources of expertise, but
create new technological knowledge, processes, the knowledge created by technological networks is
products or services. In other words, technological developed within economic organizations and is
knowledge focuses on market needs and trajec- controlled by them (Tushman and Rosenkopf,
tories, whereas scientific knowledge focuses on 1992). The proprietary nature of technological
more fundamental issues. knowledge fits with its focus on market needs and

Scientific vs engineering professional cultures: Scientific vs engineering professional cultures:

knowledgedevelopment innovationprocess
Scientific and engineering cultures also differ in the The professional culture of scientists tends to follow
processes by which they typically create knowledge loose timetables, primarily utilizes abstract infor-

journal of International Business Studies

A model of cultural differences DavidG Sirmonand PeterJ Lane

mation, and values unexpected findings. New as useless or even troubling, and develops in short
scientific knowledge often changes incrementally. linear chains (Allen, 1984, 1997; Mikhailov et al.,
New theories and discoveries absorb the knowledge 1984, 111-120; de Solla Price, 1986).
that has preceded them, and are positioned relative
to the state of the art. Radical new scientific Scientificvs engineeringprofessionalcultures:an
perspectives emerge less frequently, but they typi- example
cally result in a re-conceptualization of prior Because the professional cultures of scientists and
findings, rather than their outright disregard engineers represent such different sets of beliefs,
(Kuhn, 1970). norms and priorities, they can create severe com-
However, the professional culture of scientists is munication problems and conflict between the
not based solely on a body of knowledge. Instead, groups. For example, Balmer and Sharp (1993)
members are socialized to follow agreed methods suggested that the differences between science
for gathering and communicating evidence via and engineering led to the 1980s conflict in the
individual training (ie education) and the publica- UK over which research council would 'shepherd'
tion process (e.g. peer review) (Gilbert and Mulkay, biotechnology research. The Medical Research
1984; Latour, 1987). However, these agreed stan- Council (MRC) had a scientific culture favoring
dards change over time, and thus the process of broadly defined, science-driven research programs
scientific knowledge creation is dynamic (Master- and 'curiosity-led funding'. The engineering culture
man, 1970; Gilbert and Mulkay, 1984). The net of the Science and Engineering Research Council
effect of this dynamic process is that scientific (SERC),on the other hand, placed more emphasis
knowledge advances through the accumulation of on industry relevance and problem-solving. It
repeated 'branchings' and 'spiralings' (de Solla routinely shifted priorities and resources in accor-
Price, 1986). dance with new developments, and was thus able
By contrast, technology development processes to quickly set up the Biotechnology Directorate
are typically driven by pressures from markets that funded research, meeting the industry's needs.
(Clark, 1987; Balmer and Sharp, 1993; Adner and The MRC objected, and the debate that followed
Levinthal, 2001), and begin with ideas of what is resulted in an inquiry by the House of Lords.
needed to satisfy those pressures. Rewardsfor quick During this inquiry, the MRC condemned the
responses to such market pressures (e.g. first mover SERC'sbiotechnology program as 'opportunistic'
advantage) often lead firms to perform local and 'freewheeling', interested only in narrowly
searches for solutions. In other words, technologi- focused 'industrially relevant projects' and in
cal knowledge is often produced by extending what funding too much second-rate science. The SERC,
is already well known by the firm. Thus technolo- in turn, called its Biotechnology Directorate 'one of
gical knowledge is essentially about exploiting and the jewels in our crown'.
adapting what is known in order to achieve what is In total, this example demonstrates the potential
desired (Rip, 1992; Garud and Rappa, 1994). When for significant conflict between members of differ-
a solution to a technological need is not apparent, ent professional cultures. However, the potential
the firm works backwards from its preconceived for conflict does not reside only in the interactions
ends and evaluates potential starting points (solu- of science and engineering professional cultures.
tions) until an optimal one is found (Nightingale, Instead, differences between any professional cul-
1998). tures represented in the value-creating activity of
However, in either case, social, political, and an international alliance can have significant
organizational dynamics play a large role in negative ramifications. Specifically, we argue that
determining which technological options are pur- differences in the professional culture of the
sued (Tushman and Rosenkopf, 1992). Further, employees who interact in an international alliance
current technological knowledge often makes prior will inhibit the effective sharing, combining and
technological knowledge obsolete. In compara- leveraging of complementary resources. Formally:
tively few cycles of innovation, much of the earlier
technological knowledge has been discarded. Thus, P5: Differences in the professional cultures of
unlike the development of science-based knowl- international alliance partners' employees nega-
edge, the technological knowledge development tively moderate the relationship between related
process tends to follow set timetables, utilizes complementary resources and effectiveness of the
concrete information, views unexpected findings alliance's value-creating activities.

Journal of International Business Studies

A model of cultural differences DavidG Sirmonand PeterI Lane

Thus far, we have discussed separately the effects Discussion And Conclusion
of cultural differences in international alliances as We have introduced a detailed model of cultural
they originate from national, organizational and differences and international alliance performance
professional cultures. We began with the contra- that differs from prior research in several ways.
dictory results of the effects of national culture First, we have proposed that the performance of
differences on international alliance performance, international alliances is influenced by the effec-
and then proceeded to discuss both organizational tiveness with which an alliance achieves its primary
and professional cultures as they pertain to inter- value-creating activities. Often a necessary condi-
national alliance performance. However, as Salk tion for such effectiveness is the presence of
and Shenkar (2001) showed, international joint complementary resources that are related to those
venture team members utilize several different activities. However, the presence of complementary
social identities (national, organizational and occu- resources alone is insufficient. Additionally, the
pational) as sensemaking mechanisms. Thus indi- partners' employees must be able to interact
viduals in international alliances rely on multiple effectively in order to share, combine and leverage
sources of socialization to understand and organize those resources. Thus factors that affect these
their interactions and stimuli. However, their interactions are critical in understanding interna-
relative effect is left unspecified. tional alliances' outcomes.
In a study of national subcultures, Lenartowicz Following the literature, we focused on cultural
and Roth (2001) found that by identifying sub- differences as factors that affect such interactions.
cultures, which more accurately captured differ- Building on the findings of Pothukuchi et al.
ences in the Brazilianpopulation, they were able to (2002), we argued that the more salient the cultural
accurately predict differences in business perfor- differences are to the value-creating activities of an
mance based on those subcultures. In other words, alliance, the more disruptive those differences will
by specifying and understanding a more proximal be on the alliance's value-creating activities. Thus
and salient culture to which people belong, one can differences in organizational culture and profes-
predict behaviors more accurately. This logic helps sional culture - not just differences in national
explain Pothukuchi et al.'s (2002) finding that culture - need to be assessed.
organizational culture differences have more influ- We believe that our model offers valuable new
ence on alliance performance than national culture insights for international alliances. We focused on
differences because organizational culture see- international alliances because they are increasing
mingly is more proximal and salient to the in both number and competitive importance.
behaviors of individuals that drive business perfor- Using an example of IRDA, we demonstrated our
mance in international alliances. model. Building on research from the sociology of
Continuing this logic, we propose that profes- knowledge, we showed that R&D personnel's
sional culture is often the most proximal and salient professional cultures could be either science-based
influence on the behavior of individuals interacting or engineering-based. Moreover, because these
in the value-creating activities of an international cultures are most relevant to the individuals
alliance. Therefore differences between individuals' actually interacting in an IRDA, differences
professional cultures will be the most disruptive. As between these professional cultures will be the
a result, the negative effects stemming from differ- most disruptive to the alliance's value-creating
ences in the professional cultures of partners' activities. However, we also feel that our model
employees will be greater than those effects stem- presents implications for other contexts in which
ming from difference between either the partners' culture differences are believed to matter.
organizational or national cultures. Formally: This model is relevant to international mergers
and consortia, and also to collaboration within
P6: Differences in the professional cultures of the large multinational firms, where different organiza-
employees involved in the alliance's primary tional cultures exist in separate divisions: differ-
value-creating activities will have more influence ences in the divisions' organizational cultures may
on the relationship between related complemen- be most salient. Further, the ideas developed in this
tary resources and the effectiveness of the study also have implications for domestic alliances
alliance's value-creating activities than differ- and mergers. They suggest that the alignment of
ences in the partners' organizational or national professional cultures matters more than the align-
cultures. ment of organizational cultures. There is indirect

Journal of International Business Studies

A model of cultural differences DavidG Sirmonand Peterj Lane

evidence of this phenomenon in Lane and Lubat- case. Our model suggests that managers need to
kin's, (1998) study of R&D alliances between US carefully evaluate both the complementarity of
pharmaceutical and biotechnology firms. They potential partners' resources and the fit of the
compared the formalization, centralization, and professional cultures of the employees who are
compensation practices of the partners, which were likely to work together in the alliance. Without the
artifacts of their organizational cultures. They former, there is little reason for an alliance. With-
found that differences in research centralization out the latter, the alliance may fail to fulfill the
and research compensation practices were nega- potential promised by the complementary
tively related to R&D alliance performance (ie resources that the partners possess.
learning), but differences in management centrali- Most importantly, the addition of professional
zation and upper management formalization were culture to the model provides managers with a
not. These findings are in keeping with our mechanism, not apparent before, for addressing
contention that differences in beliefs and norms cultural conflict. Organizational cultures evolve
matter more as they become more relevant to the over years and decades; national cultures evolve
value-creating activities of the alliance. over decades and centuries. However, professional
However, the generalizability of the model is cultures may be represented by a relatively small
limited to those situations where value is created group, which makes them more amenable to
via the sharing, combing and leveraging of com- managerial intervention. Managers may influence
plementary resources. Thus, the model does not their professional cultures by hiring and appropri-
apply as well to inter-firm relationships that focus ately rewarding members who develop a level of
on cost-cutting or the linking of similar resources. proficiency with other professional cultures.
Clearly, an important next step in this line of In conclusion, international alliances are an
research is the empirical testing of the model increasingly important tool for expanding a firm's
developed in this paper. Several well-developed competitive advantage. Because they face chal-
measures of national culture and organizational lenges from several sources of cultural difference,
culture can be used. For example, the study by effective collaboration depends on eliminating the
Pothukuchi et al. (2002) used both Hofstede's most disruptive sources of cultural difference. In
(1980) measures of national culture values and his doing so, international alliances increase the like-
measures of organizational culture (Hofstede, lihood that their pooled complementary resources
1991). Professional culture could be assessed using will be shared, combined and leveraged in the
various different measures, such as formality and primary value-creating activities of the alliance,
length of professional training, degree of cross- leading to increased performance.
functional experience of unit members, and the
number of memberships that individuals have of
occupational associations. Each of these measures Acknowledgements
of a professional culture would need to be adjusted We thank the participantsof the Governing Knowl-
for industry norms. edge Processes Conference as part of the Learning,
The purpose of this paper was to deductively Incentives,and Knowledge(LINK)Program,Copenha-
develop a model based on prior academic research. gen School of Business, September 2001, for their
It has therefore avoided normative propositions. helpful comments on earlierdrafts of this paper. We
While this may make our ideas seem overly also thank Nicolai juul Foss and Torben Pedersen,
deterministic, and may suggest that key contingen- DepartmentalEditors,and four JIBSreviewersfor their
cies are beyond managerial control, this is not the insights, critiquesand suggestions.

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journal of International Business Studies

A model of cultural differences DavidG Sirmonand PeterI Lane

Very, P., Lubatkin,M. and Calori, R. (1996) 'A cross-national State University. His current research interests
assessment of acculturativestress in recent Europeanmergers',
InternationalStudies of Management and Organization26(1): revolve around realizing value creation via resource
59-86. management. In addition to JIBS,his research has
Vidal-Suarez, M.A. (2002) 'Stock market response to the appeared in JOM and Entrepreneurship Theory &
formation of global alliances: evidence from Spanish corpora-
tions', EuropeanBusinessReview14: 401-408. Practice.
Weber, Y., Shenkar, 0. and Raveh, A. (1996) 'National and
corporate culture fit in mergers/acquisitions: an exploratory
study', Management Science42:1215-1227. Peter Lane is an associate professor of strategy and
Weick, K.E. (1995) Sensemaking in Organizations, Thousand
Oaks, CA: Sage Publications. technology at the University of New Hampshire's
Whittemore School of Business and Economics. He
received his Ph.D. at the University of Connecticut.
About the author His research examines the socio-cognitive processes
David G Sirmon is an assistant professor at related to alliances, M&A, innovation, strategic
Clemson University. He earned his Ph.D. at Arizona renewal, and corporate governance.

Acceptedby Nicolai Juul Foss & TorbenPedersen,DepartmentalEditors,2004. This paper has been with the author for threerevisions.

Journalof InternationalBusinessStudies