Academic journal article Management International Review

Innovation in Multinational Firms: Does Cultural Fit Enhance Performance?

Academic journal article Management International Review

Innovation in Multinational Firms: Does Cultural Fit Enhance Performance?

Article excerpt

Abstract and Key Results

* Using a dataset of 139 R&D laboratories located in 21 countries, this study empirically tests whether a fit among R&D laboratory mission and national culture impacts R&D performance.

* Specifically, we assume that some cultures possess a natural advantage when it comes to capability augmenting tasks, while other cultures are better suited to host capability exploiting tasks.

* Where the mission of the laboratory is capability exploiting, our results support a positive effect of culture-mission alignment. However, no relationship between mission-culture alignment and performance can be found in case of capability augmenting laboratories.

Key Words

International R&D. Innovation in MNCs * Cultural Fit * Performance * Location Choice

Introduction

Selecting a wrong location for an overseas R&D laboratory can have serious repercussions for a firm's long term performance: "It generally takes a long time (several years) for a new laboratory to become integrated in the local science community and to make use of locally available external effects (Perrino/Tipping 1989) ... thus, the costs of choosing the second best location for an R&D site are high and often exceed the cost of choosing the second best manufacturing location by a multiple" (Kuemmerle 1996, p. 123). Given the importance of location decisions for overseas R&D laboratories, several researchers have attempted to pinpoint critical determinants for such a decision. Their findings emphasize the proximity to research clusters (Pearson et al. 1993, Pearce/Singh 1992, Kuemmerle 1999, Porter/Stern 2001), the proximity to lead markets (Hakanson/Nobel 1993a, Pearson et al. 1993), subsidies paid by local governments (Hakanson/Nobel 1993a, Cantwell/Mudambi 2000) and the companies' existing stock of knowledge (Gerybadze/ Reger 1999). While these findings provide a good account on the decision where to locate an overseas R&D laboratory, the impact of location on performance has received relatively little attention. In this paper we explore, and empirically test, a link among one of the most salient determinates of location: National culture and the performance of R&D laboratories in multinational firms. If we knew the impact of culture on performance it would be possible to advise firms whether to favor, for example, Germany over the UK, when precision and determination is called for, or whether firms should strive to perform break-through and exploratory tasks in low uncertainty avoidance environments such as the US. Of the few studies that hypothesize a link between culture and innovation (Muralidharan/Phatak 1999, Jones/Davis 2000, Yhomas/Mueller 2000, Jones/Teegen 2001), only two (Muralidharan/Phatak 1999, Jones/Teegen 2001) present empirical evidence on the relationship between culture and R&D laboratory performance. Moreover, both empirical contributions rely on nationally aggregated data of US firms. Yet, in the absence of any firm-level investigation, it remains open if cultural characteristics like individualism or uncertainty avoidance impact the location choice or, probably more important, the laboratory performance once a particular location has been selected. Consequently, as Jones and Teegen (2001, p. 2) put it: "Further testing at the firm level is required for conclusions on the relationship between culture and R&D activity type."

Our paper addresses this research gap by testing a possible link between culture and performance of overseas R&D laboratories. To this end, our paper makes two important contributions: First, firm level as opposed to nationally aggregated data is used to empirically investigate the influence of national culture in the context of overseas R&D laboratories. Second, rather than analyzing whether the culture of a host country motivates companies to place their R&D laboratories in these countries, we examine whether cultural values impact on the performance of overseas R&D laboratories. …

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