Page 443 - Cultures and Organizations

408 IMPLICATIONS

The international strategic alliance is a prudent means of cooperation
between existing partners. Without creating a new venture, the partners

agree to collaborate on specific products and/or markets for mutual ben-

efit. Given that the risks are limited to the project at hand, this is a safe
way of learning to know each other; neither party’s existence is at stake.
The acquaintance could develop into a joint venture or merger, but in this
case the partners can be expected to know each other’s culture suffi ciently
to recognize the cultural pitfalls.
The joint venture with a foreign partner creates a new business by
pooling resources from two or more founding parties. The venture can
be started greenfield, or the local partner can transfer part of its people

wholesale to the venture. In the latter case, of course, it transfers part of
its culture as well. The cultural risk of joint ventures can be controlled by
clear agreements about which partner supplies which resources, including
what part of management. Joint ventures in which one partner provides the
entire management have a higher success rate than those in which manage-
ment responsibility is shared. Foreign joint ventures can develop new and
creative cultural character istics, based on synergy of elements from the
founding partners. They are a limited-risk way of entering an unknown
country and market. Not infrequently, eventually one of the partners buys
the other(s) out.
In the foreign acquisition a local company is purchased wholesale by
a foreign buyer. The acquired company has its own history and its own
organizational culture; on top of this it represents a national culture dif-
fering from the acquiring corporation’s national culture. Foreign acquisi-
tions are a fast way of expanding, but their cultural risk is considerable. To
use an analogy from family life (such analogies are popular for describing
the relationships among parts of corporations), foreign acquisitions are to
greenfield starts as the bringing up of a foster child, adopted in puberty,

is to the bringing up of one’s own child. In regard to the problems of inte-
grating the new member, one solution is to keep it at arm’s length—that
is, not to integrate it but to treat it as a portfolio investment. Usually,
though, this is not why the foreign company has been purchased. When
integration is imperative, the cultural clashes are often resolved by brute
power: key people are replaced by the corporation’s own men and women.
In other cases key people have not waited for this to happen and have left
on their own account. Foreign acquisitions often lead to a destruction of

human capital, which is eventually a destruction of financial capital as well.