How to achieve benefits from diversity in international alliances: Mechanisms and cultural intelligence

• Published date: 01 May 2018
• Author: Robin Pesch,Ricarda B. Bouncken
• Date: 01 May 2018
• DOI: http://doi.org/10.1002/gsj.1167

RESEARCH ARTICLE

How to achieve benefits from diversity in

international alliances: Mechanisms and cultural

intelligence

Robin Pesch | Ricarda B. Bouncken

Department of Law and Economics, Chair of

Strategic Management and Organization,

University of Bayreuth, Bayreuth, Germany

Correspondence

Robin Pesch, Chair of Strategic Management and

Organization, University of Bayreuth, Prieserstr.

2, 95444 Bayreuth, Germany.

Email: robin.pesch@uni-bayreuth.de

Research Summary: Despite interest in alliance manage-

ment in the global strategy field, we have only limited

insights into how firms can manage diversity-related con-

flicts in international alliances. By referring to the conflict

literature, our study introduces task discourse as a crucial

mechanism allowing task conflict resolution. We further

describe conflict resolution via socializing practices,

including social events, joint workshops, and interorgani-

zational teams. Socializing practices and discourse take

advantage of cultural intelligence, empowering managers

to interact efficiently in intercultural settings. Data on

148 international alliances in the photonics and biotech-

nology industries reveal that managerial cultural intelli-

gence improves task discourse, thus enhancing

performance, especially in young alliances. Socializing

practices, however, decrease performance with increasing

cultural distance and without sufficient levels of manage-

rial cultural intelligence.

Managerial Summary: International alliances face a

dilemma. Cross-national differences offer valuable com-

plementarities, but they can also spark a negative spiral

of dysfunctional conflict. Our study shows that task dis-

course is an important mechanism for achieving advan-

tages from the different perspectives offered by

international alliances. Interestingly, our results further

reveal that socializing practices including interorganiza-

tional teams, social events, and joint workshops do not

per se have beneficial effects for international alliances.

Putting people together who are unable to perform in

intercultural settings is damaging to alliance performance.

Our study indicates the specific conditions under which

socializing practices have negative and positive effects

Received: 1 December 2015 Revised and accepted: 2 May 2017

DOI: 10.1002/gsj.1167

Copyright © 2017 Strategic Management Society

Global Strategy Journal. 2018;8:275–300. wileyonlinelibrary.com/journal/gsj 275

and, thus, provokes a discussion about the appropriate

application of these practices.

KEYWORDS

conflict, cultural intelligence, international alliances,

socializing practices, task discourse

1|INTRODUCTION

The different cultural and institutional environments of firms engaged in international alliances can

create beneficial complementarities (Madhok & Tallman, 1998; Parkhe, 1991). Nonetheless, salient

and apparent diversity in international alliances causes ambiguity (Kumar, 2014) and conflicts (ran-

ging from task-related disputes to personal dislike and disagreement (Jehn, 1995)), which can reduce

alliance performance (Demirbag & Mirza, 2000; Hambrick, Li, Xin, & Tsui, 2001; Pak, Ra, & Park,

2009; Steensma & Lyles, 2000). Even though effectively managing these conflicts is critical to gain-

ing advantages from international alliances’inherent diversity, we still know little about how to

resolve them (Ren, Gray, & Kim, 2009).

The purpose of this article is to elucidate how firms can cope with conflicts and improve perfor-

mance in international alliances by creating trustful relationships and leveraging complementarities

between partners. Our theoretical framework is based upon the conflict (Jehn, 1997; Parry, Song, &

Spekman, 2008) and sensemaking literature (Weick, 1995). Our model introduces task discourse as

an instrument for achieving advantages from task-related disputes. Task discourse captures the open

and constructive discussion of ideas, opinions, and problem-solving approaches (Pesch & Bouncken,

2017) and supports alliance partner employees’ability to make sense of conflicting task understand-

ings. We further discuss the appropriateness of socializing practices related to social events, joint

workshops, and interorganizational teams, as these allow members to cope with personal dislike and

disagreement in international alliances. The model hypothesizes that these socializing practices

improve task discourse and performance while supporting the development of interorganizational

trust. Socializing practices can prevent the escalation of affective tensions; international alliance are

highly vulnerable to these due to geographical separation, culture-specific expectations, and a lack

of personal familiarity between firms (Kumar, 2014). However, we emphasize that the beneficial

effects of socializing practices depend on firms’managerial cultural intelligence (Ang & Inkpen,

2008). If managers are not able to interact and perform in intercultural settings, socializing practices

could lead to mistrust and even worsen the interactions among employees in international alliances.

Simply putting people with low managerial cultural intelligence in a room together will decrease

alliance performance. Figure 1 presents our hypothesized model.

We test our hypothesized model via structural equation modeling, using survey data from

148 international alliances involving German firms in the photonics and biotechnology industries.

Our results show that task discourse drives performance, while socializing practices can decrease

interorganizational trust and alliance performance under specific conditions. Given low managerial

cultural intelligence and increasing cultural distance, socializing practices are counterproductive in

international alliances. Particularly for alliances with Asian firms, socializing practices decrease

interorganizational trust. Sixteen post hoc interviews reveal that employees’reserve and

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