Organizational Culture and Organizational Effectiveness in a Global Context

Organizational Culture and Organizational Effectiveness in a Global Context

Andrea Banto (Argosy University, USA)
DOI: 10.4018/978-1-4666-0306-6.ch004
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Globalization increased the expansion of multinational corporations to countries on all continents leading to growth. Companies like Wal-Mart, Southwest, and Apple survived and prospered when other similar companies failed. What made them so successful? It might be a combination of many things, but the most important piece in this mix is their organizational culture. From the global perspective, the organizational culture of a subsidiary is influenced by the home and host-country’s national culture. This is reflected in all its operations and influences the leadership style, decision-making process, team interaction, and the communication style. The inability to master the cultural factors may have a negative influence on the subsidiary’s effectiveness. The organizational culture can be measured through four cultural traits: mission, involvement, adaptability, and consistency. The organizational effectiveness can be measured through the sales growth, market share growth, return on assets, quality improvements, new product development capability, employee satisfaction, and the overall firm performance. This chapter is a review of the applications of Denison’s model of organizational culture and effectiveness in a variety of countries.
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Technological advancement is responsible for the rapidity of changes in societies and economies worldwide. This increases the pressure on leaders to make timely, effective decisions and focus on vision and goals. That organizational culture influences firm effectiveness is assumed by managers and researchers. More research studies are required to gain deeper insights into this relationship. Globalization has led to a tremendous growth in the multinational corporations (MNCs) and determined an expansion to countries on all continents. Two-thirds of the world’s exports of goods and services are made through operations of an MNC (Dunning, 2003). Globalization opens many opportunities for companies, but at the same time creates challenges.

One of these challenges is to understand and appreciate cultural values and practices where they do business around the world. Concepts and constructs that guide business activities are different across countries (Tung, 1999). The companies must focus on their organization’s objectives and values. Globalization has enhanced the need to understand national culture and organizational culture and their effects on the performance of these companies. A company that is too focused on the home country’s work style or culture and fail to adapt will not be effective in the global business arena. At the same time, the consistency of cultural values in worldwide company locations is essential for the well-functioning and success of the corporation (Champy, 2008). Host-country experience, blended with the global company’s culture, assists the subsidiary to contend with global standards and local conditions and requirements.

As a result of market saturation in the developed markets and thus creating less opportunity for growth, multinational corporations turned towards developing countries that showed a great potential and an increased demand for goods and services (Mahajan et al., 2005). Developing markets are low-income economies in transition from a centralized system towards a free market, and are expected to maintain high levels of economic growth in the future (Jacek et al., 2007). They offer reduced taxes, cheap labor, and fewer restrictions overall, determined by the developing countries’ effort to be attractive for Foreign Direct Investments (FDI).

FDI is crucial for the maturation of developing markets. While they do present great opportunities, they are also unpredictable and difficult to model (Sevic, 2005). The key is they have the potential to become developed markets in the future with extensive growth perspectives and diversification possibilities for global investors. Wholly- or partially-owned subsidiaries become one of the most practiced entry modes for MNCs in such countries. The underlying values and beliefs represent an organization’s philosophy to achieve success, as people rely on these values to guide them in their decisions and behaviors. The MNC developed an organizational culture that emerged from their national culture. Therefore, a simple transfer of a successful model in a different national context is questionable, and it can impact the company’s performance.

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Editorial Advisory Board
Table of Contents
Ghassan Al-Qaimari
Bryan Christiansen
Chapter 1
Andreas Michael Hartmann
The theory of cultural dimensions constitutes the foundation of a significant portion of comparative cross-cultural business research. From... Sample PDF
The Theory of Cultural Dimensions
Chapter 2
Suzanne Gagnon, Pamela Lirio
This chapter explores individual intercultural competence as an enacted capability developed through social interaction and experience with dominant... Sample PDF
Follow the Experts Follow the Experts: Intercultural Competence as Knowing-in-Practice
Chapter 3
Kathrin Kiesel, Parissa Haghirian
Exposure to other cultures is common through extensive travel, living in ethnically diverse environments, attending universities abroad, or having... Sample PDF
Bicultural Managers and their Role in Multinational Corporations: An Exploratory Study in Japan
Chapter 4
Andrea Banto
Globalization increased the expansion of multinational corporations to countries on all continents leading to growth. Companies like Wal-Mart... Sample PDF
Organizational Culture and Organizational Effectiveness in a Global Context
Chapter 5
Ekaterina Turkina
Globalization and regionalization in the contemporary world transform inter-state relationships and intensify economic, social, and political... Sample PDF
Cross-Border Inter-Firm Networks in Contemporary Europe: The Effects of Structural and Cultural Embeddedness on Firm Performance
Chapter 6
Omar J. Khan
While the idea of regio-centric firm behavior had been expounded as early as 1969 (see Perlmutter & Heenan, 1974), research in international... Sample PDF
Understanding the Realities of Contemporary Internationalization of the MNE: Regionalization vs. Globalization
Chapter 7
Nigel L Williams, Tom Ridgman, Y S Shi
Small developing countries, in contrast to their developed counterparts, are characterized by a narrow resource base, (relatively) weak... Sample PDF
Resource Based Internationalization from Small Developing Countries: Towards a Phase Model of Internationalization
Chapter 8
Fabrício Fernando Foganhole dos Santos, Irene Kazumi Miura
This chapter provides a framework for understanding the business challenges facing Brazilian companies. Based on the symbolic school of interpretive... Sample PDF
Internationalization of Business in Emerging Countries and National Culture: The Brazilian Case
Chapter 9
Maud Oortwijn
The entry mode choice is at the core of International Business studies (Oortwijn, 2011a). IB research concerns the organization of firm activities... Sample PDF
Foreign Business Environments and Entry Mode Choice: Organize Activities Internal within or External to the Firm?
Chapter 10
Keikoh Ryu
Anti-Japanese sentiment in China since the Second World War has been exacerbated by recent territorial disputes involving the Senkaku Islands and... Sample PDF
China’s “Harmonious Society” Challenges Corporate Japan: Towards a Dual Vision of Profitability and Social Responsibility
Chapter 11
Diana Bank, Mohammad Ayub Khan
As the international business environment becomes increasingly global and competitive, a manager’s job becomes more challenging and diverse. The... Sample PDF
Globalism, Culture, and Business Environment: A Middle Eastern Perspective
Chapter 12
Mohammad Ayub Khan, Diana Bank
In contemporary globalization, companies need to be entrepreneurial, innovative, creative, and dynamic since the life cycle of products is... Sample PDF
Globalism, Culture and Business Environment: A Latin American Perspective
Chapter 13
Anabella Davila, Marta M. Elvira
The purpose of this chapter is to understand the strategic role performance management systems play in organizations, and to identify the evolution... Sample PDF
Performance Management Systems in Mexico
Chapter 14
Magdalena Bielenia-Grajewska
The purpose of this chapter is to discuss Business Performance Management (BPM) by taking into account its communicative and linguistic aspects. To... Sample PDF
Business Performance Management from the Systemic Communicative and Linguistic Side
Chapter 15
Gang Yang, Hans-Christian Pfohl, Sasa Saric
Entrepreneurship deals with how firms explore new short-lived economic opportunities, while strategic management explains how firms create and... Sample PDF
Strategic Entrepreneurship: Competitive Advantages Amidst Globalization and Technological Change
Chapter 16
Manuela Presutti, Lucrezia Zambelli
This work examines to what extent cultural differences at a level both of intra-organizational multinational network and inter-organizational... Sample PDF
A Social Capital Approach to Inter-Cultural Differences: Empirical Evidence from a Global Tour Operator
Chapter 17
Yongjiang Shi, Zheng Liu
This chapter provides the models and variation of culture. Specifically, the following concepts will be introduced: an understanding of the original... Sample PDF
Cultural Models and Variations
Chapter 18
Susan Scott
There are many subtleties within a culture that affect decision-making. Lack of understanding of these nuances enhances the mystique of... Sample PDF
The Impact of Culture on Workplace Conflict in the Caribbean
Chapter 19
Maud Oortwijn
The key problem for commitment to international business activities is the lack of knowledge about a host country and its (business) culture. A... Sample PDF
Immigrant Effect in International Expansion
Chapter 20
Julianne Seely
The purpose of this chapter is to concentrate on Global Human Resource Management (GHRM) by demonstrating how the functional areas of Human Resource... Sample PDF
Human Resource Management for the 21st Century Global Economy
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