corporate culture competitiveness the danfoss universe

Sources of Corporate Culture Competitiveness: From Theory to Practice

3rd YeaAsian Studie

Copenhagen B

Knowledge Management – OrganizationaHuman Resources Management, a

Uriel Alvarado Sarah

Advisor: Lisbeth Clausen, IKL

June

l Culture – Intercultural Communications Case Study: The Danfoss Universe

r Project s Programme usiness School

Hempel Berat Zimberi

2005

Sources of Corporate Culture Competitiveness: The Danfoss Universe

Acknowledgements

During the process of this project we received and combined knowledge from various

sources. We would like to thank all of those involved in the creation of this project.

Our thanks go to Noel Ryan and Gregers Baungaard from Danfoss who not only helped

us formulating the concepts, but assisted us with information and support throughout the

writing of the project. We would also like to thank the HRM department of Danfoss

headquarters and the staff of Danfoss K.K for their time and effort.

We would also like to thank Lisbeth Clausen, our advisor and teacher who provided us

with encouragement and inspiration throughout our studies at the Asian Studies

Programme and in completing this project.

We would finally like to thank Dana Minbaeva for taking the time to guide us with

excellent advice and insights into the field, which certainly added value to our project.

2


1. Executive Summary .................................................................................................... 4 2. Introduction..................................................................................................................... 5 2.1 Thesis Structure ............................................................................................................ 8 Figure 1 ............................................................................................................................... 8

2.2 Research Issue........................................................................................................... 9 2.2 Research Question .................................................................................................... 9

3. Methodology................................................................................................................. 10

3.1 Research Strategy.................................................................................................... 10 3.2 Terms ...................................................................................................................... 12 3.3 Delimitation ............................................................................................................ 19 3.4 Theoretical Tools and Critique ............................................................................... 22 3.5 Data Collection, Resources, and Critique ............................................................... 30

3.5.1 Secondary data collection of related literature................................................. 31 3.5.2 Conduction of interviews with individuals related to the context ................... 32 3.5.3 Formulation of questionnaires ......................................................................... 32

4. Theory ........................................................................................................................... 33

4.1 Organizational Culture............................................................................................ 34 4.2 Intercultural Communications ................................................................................ 38 4.4 Knowledge Management ........................................................................................ 41 4.5 Conceptual Model................................................................................................... 48 4.6 Human Resource Management Practices................................................................ 51 4.6.1 Intercultural Training ........................................................................................... 55 4.7 Cultural Differences................................................................................................ 56

5. Case Study of Danfoss K.K ......................................................................................... 62 6. Discussion: Application of Theory to Danfoss K.K. .................................................... 67 6.1 Recommendations....................................................................................................... 74

6.2 Economic Considerations ....................................................................................... 78 7. Conclusion .................................................................................................................... 79 8. Indications for Future Research .................................................................................... 81 9. Bibliography ................................................................................................................. 82

3


1. Executive Summary The Danish MNC Danfoss presented the challenge of optimizing processes in their

Japanese subsidiary, Danfoss K.K. In light of interdisciplinary studies and an intercultural

phenomenon this project undertook the task of evaluating and combining current theories

in the areas of organizational culture, intercultural communications and knowledge

management to provide solutions and recommendations applicable and relevant to a

North European MNC operating in Japan.

This paper took a strategic approach to the analysis of the issues by viewing effective

knowledge management, intercultural communications, and corporate culture as both

potential sources of competitive advantage and as factors management can directly

influence through HRM practices. Competitive advantage gained is by harnessing the

unique knowledge existent in the organization. Theoretical review found that levels of

ability, motivation, opportunity, and integration can heighten the levels of social capital

and absorptive capacity and in turn knowledge transfer. Additionally an effective transfer

of core values through rich intercultural communications will improve knowledge

transfer and thus culture competitiveness.

In order to make the connections between the fields clear and to aid in providing a

comprehensive analysis this paper provides a conceptual model which illustrates the

connections between the fields of study, how they can be influenced, and to what effect.

The aim is to bring theoretical findings to a practical level that management can apply to

optimize their processes.

The empirical results revealed that Danfoss faces obstacles in the areas of motivation,

integration, ability, and lacks a comprehensive HRM system to effectively improve the

situation. Our recommendations to the company highlight their weaknesses, strengths,

opportunities and threats, and provide the HRM practices and strategies that will enable

them to optimize their processes in Japan, and create sources of competitive advantage.

4


2. Introduction It seems clear that the leading organizations of the future will have to be perpetual

learners, with great intercultural communication capabilities and an emphasis on

unleashing human potential. Firms are shifting focus from the traditional and tangible

resource factors of labor and capital to more intangible factors such as knowledge, top-

line focus, consumer trust, brand and corporate image, social responsibility and

organizational culture. This is reflected in a growing interest among scholars in fields

such as Knowledge Management, Organizational Culture and Intercultural

Communications.

From the field of organizational culture we have been inspired by Edgar Schein who is

considered to be one of the founders of organizational psychology and defines

Organizational Culture as:

“A pattern of shared basic assumptions that the group learned as it solved its problems

of external adaptation and internal integration, that has worked well enough to be

considered valid and, therefore, to be taught to new members as the correct way to

perceive, think, and feel in relation to those problems1."

This definition includes the words (learning and teaching), (in a correct way), (in

relation to those problems) and leads to the question of how can the culture of a firm

become better in dealing with “those problems”?

Knowledge plays an important role in the culture of an organization, and the question

then becomes: how can knowledge be managed in an effective way in relation to the

problems that the firm faces in its context/industry?

The management of knowledge has grown in importance; and a large part of

management literature points to the effective management of knowledge as a qualifier for

1 Edgar H. Schein , Coming to a new awareness of Organizational Culture, in Sloan Magazine Review, winter, p.3-16, Organization Compendium, 2003 Asian Studies Programme

5


enduring competitive advantage in multinational corporations (MNCs) (e.g. Gupta and

Govindarajan, 2000 et al)2.

The last underlying element in Schein’s definition is communication between the

members of the organization. Organizations are devoting substantial energy to mediating

and distributing knowledge, values, and experiences on a world-wide basis to create a

common “working culture”. When people face cross cultural encounters, communication

becomes more complex while companies search for the implementation of their core

values in new working contexts to create an effective working culture in the new cross

cultural communication arena. For this it is crucial that effective Intercultural

communications within the firm is in place.

From Theory to Practice

Strategy is never fixed in stone, no matter how brilliant it is.3

A strategy is built from vision and is designed for practicality. It is crafted rather than

prefabricated, and is constantly worked and reworked as the company goes along. 4

The Danish Company Danfoss presents us with a suitable case that allows for

investigation: a Multinational company already successful in knowledge sharing, facing

intercultural challenges in the context of its subsidiary in Japan (Danfoss KK).

In this project we do not intend to create a strategy from an outsider standpoint. Rather

we intend to present the situation from a neutral external perspective to be able to point at

sources of improvement by creating a theoretical model which could serve as a powerful

tool for the managers to build the most suitable strategy from an insider standpoint.

2 c.f. The MNC Knowledge Transfer, Subsidiary Absorptive Capacity and HRM, Dana Minbaeva, Torben Pedersen, Ingmar Bjorkman, Carl F. Frey, H.J. Park, Journal of International Business Studies, 34, 586-599, 2003, p.1 3 Business Strategy, An Asia Pacific Focus, 2nd Edition, Irene Chow, Neil Holbert, Lane Kelley, Julie Yu, Pearson Prentice Hill, 2004, p.50 4 IBID

6


In today’s increasingly competitive environment MNCs need to adopt the mindset, skill

set, and tool set associated with unleashing human potential.

Human Resources Management practices “can contribute to sustained competitive

advantage through facilitating the development of competencies that are firm specific,

produce complex social relationships,... and generate organizational knowledge”.5

Thus it is relevant to examine the effects of corporate culture, intercultural

communications, knowledge management, and how these aspects can be influenced

through human resource management practices to create sustainable competitive

advantage.

5 Lado and Wilson (1994, p. 699), c.f, HRM practices and MNC knowledge transfer, Dana B. Minbaeva, Department of International Economics and Management, Copenhagen, Denmark: Emerald Group Publishing Limited, 2005, p.2

7


2.1 Thesis Structure Figure 1

As presented in Figure 1(Project structure visualization which guides the reader through

the project, and demonstrates the connection between the sections and the project line),

this project follows a linear-analytic structure answering two different sets of the

questions “what”, “why” and “how”.

Succeeding the Executive Summary: Section 1, and Introduction: Section 2; the

Methodology: Section 3, explains and discusses the relationship between the research

issue, theory, and empirical data. It includes a description of the data collection method

with reference to the interview strategies and the questionnaire administered in relation to

the theory. It also provides a list of terms, a general literature overview, theoretical tools

and critique. Following this, the Theory: Section 4 sets out to explain the theoretical

approach which lays the foundation for the case analysis. It begins answering the “what”

question by introducing the relevant theories from the Organizational Culture,

Intercultural Communications and Knowledge Management fields and the “why”

question by explaining the usage of these. The product of the theoretical approach

capitalizes in the conceptual model which highlights the “why” and leads to the

examination of the “how” question. Subsequently, the relevant Human Resources

Management Practices are presented aiming to answer two of the second set of questions:

“what HR practices”, and “why these practices”. In a narrower perspective compared to

the first set of questions, some of the possible recommendations to the company arise in

the form of HRM practices theories. Cultural considerations are further presented in order

to discuss the implementation of HRM practices. The Danfoss Case: Section 5 provides

the reader with the company background and the challenges that its subsidiary in Japan is

facing. The case study then is analyzed in the Analysis: Section 6. We finalize the project

by answering the “how” of the second set of questions, namely how to implement the

relevant HRM practices, and presenting the conclusions: Section 7: Conclusion provides

a short summary of the study and the conclusions related to the effectiveness in the usage

of the conceptual model.

Conclusion

How

Analysis

Danfoss

What Why

HRM

How

Model

Why

Knowledge

Management

Int.

Communication

Org. Culture

What

Theory

Methodology

Introduction

Executive Summary

8


2.2 Research Issue In accordance with the scope of the Asian Studies Programme third year project criteria,

our project takes an International Management problem within the thematic framework of

“Organisations involved in international competition and/or co-operation in Asia”. From

a company-specific angle we analyze the circumstances of the Danish MNC Danfoss,

focusing on the Japanese subsidiary, Danfoss K.K. By applying interdisciplinary methods

involving social and economic concepts, we have commenced to research our issue of

interest:

From an international perspective what are some of the main aspects of corporate

culture, intercultural communication, and knowledge transfer that can affect the

optimization of processes within the MNC, and how can these factors be influenced by

HRM practices.

2.2 Research Question From this perspective we formed our thesis statement:

We expect to find that HRM practices can influence the transfer of corporate core values,

intercultural communications, and knowledge transfer.

In reference to the above we have formulated the following research question:

How can HRM practices help to maintain corporate core values, and improve

intercultural communications and knowledge transfer within Danfoss K.K. and

between Danfoss K.K and headquarters?

9


3. Methodology

Theory

Methodology

How

Analysis

Danfoss

What Why

HRM

How

Model

Why

Knowledge

Management

Int.

Communication

Org. Culture

What

Introduction

Executive Summary

We will explain the relationship between the research issue, theory, and empirical data.

The reader should then be able to understand the process followed in writing this project.

The methodology chapter includes research strategy, terms, delimitation, theoretical tools

and critique, and data collection resources and critique.

3.1 Research Strategy

Our research strategy followed primarily a deductive strategy as our theoretical findings

lead to the framing of the phenomenon we explored. Prior to the formulation of the

research issue, one of our team members was an intern in the subsidiary of study for 5

months. This observation period founded the basis of the preliminary study6. The first

stage of this period was to refine the faced phenomenon. During this period our team

member was presented with different surface issues possible for research by both the

president of Danfoss Asia and the president of Danfoss K.K. The key issue presented was

“optimizing processes in Danfoss K.K”. This was presented as an intercultural challenge,

and from this perspective we were faced with the questions what and how was the

Japanese subsidiary being affected. The questions “what” and “how” intercultural issues

are affecting operations and “how” Danfoss can improve this, directed us towards the

exploratory method. Saunders, Lewis and Thornhill note that the exploratory research

strategy involves qualitative analysis “…in order to conduct exploratory discussions… to

reveal the “what” and the “how”.”7 The exploratory research strategy was relevant to the

nature of our research, considering that there was not a specific task, but rather a

phenomenon to be explored and perhaps elucidated. This kind of research does not

necessarily provide a specific solution as specific problems that can be solved within the

framework of the research may not be discovered. We began by reviewing intercultural

communications and human resource literature. After completing our first interview with

Danfoss headquarters, we confirmed that HRM strategy, intercultural communications,

6 M. Saunders, P. Lewis, and A. Thornhill, (2000), Research Methods for Business Students, second edition, Prentice Hall Press, p . 21 Conclusion 7 IBID, p. 245

10


and cultural issues were all involved in affecting the operations of the Japanese

subsidiary including knowledge transfer both within the subsidiary and between

headquarters and the subsidiary. At the same time our theoretical reviews also lead us to

HRM strategy theory, which pointed us to the importance of organizational culture,

intercultural communications, and knowledge management as essential factors of

effective operations, and as sources of competitive advantage.

At this point we began the formulation of our research question, the creation of our

analytical framework, and the theoretical model we would be using. Our project framed

the evaluation of the faced phenomenon in terms of “what” “why”, and “how”. What

refers to the fields of study that were needed to optimize operations in Danfoss, why

refers to describing why the combination of these fields is necessary, and how refers to in

what way these fields can be affected to optimize operations. We found that through

strategically implementing HRM practices Danfoss can influence the necessary areas to

optimize operations. Thus, we extended our framework to include the “what”, “why”, and

“how” of HRM practices specific to our case. What refers to the HRM practices to be

considered; why refers to the conclusions of our theoretical findings which shows why it

is necessary to affect through HRM practices the set of fields chosen; and how refers to

the implementation of HRM practices in the cultural setting of Japan.

In order to describe the “why” in an in depth manner, we created a conceptual model

based on a broad theoretical review. This model combines the fields of organizational

culture, intercultural communications, and knowledge management. It additionally looks

at the determinants of effective knowledge transfer (ability, motivation, opportunity, and

integration: A-M-O-I). Our aim is to provide an analytical tool and framework that can be

used by management to analyze from an internal perspective. Our project’s contribution

is in the form of bringing “theory to practice” in an attempt to build on what has been

established in the fields of study.

Addressing our research issue demanded a complex analysis, in which several academic

fields have been combined while incorporating an International and Asian perspective.

11


Thus, throughout the writing of the project we have drawn on the knowledge acquired

through the courses taught at the Asian Studies Programme curriculum8. Our project is

based in the academic field of business economics/business management while

incorporating material from the Asian Studies Programme courses including first and

foremost the Intercultural Communications course and IBM (International Business

Management), as our project is deeply rooted in these fields; the organization course; the

International Economics and Competitiveness course; Japanese Economic Organization;

the Japan and Asia course; and the Interdisciplinary Research Methods I-III courses

which enabled us to utilize a scientific methodological approach in formulating the

research question and method. The combination of knowledge acquired enabled us to

employ an interdisciplinary approach in formulating and answering our research question,

thus fulfilling the third year project requirement of “formulating a multidisciplinary

question suitable for methodological analysis within the framework of a complex theme”9.

Theory

Methodology

How

Analysis

Danfoss

What Why

HRM

How

Model

Why

Knowledge

Management

Int.

Communication

Org. Culture

What

Introduction

Executive Summary

3.2 Terms

Multinational Corporation

According to the Blackwell Encyclopedic Dictionary of International Management

A multinational corporation is ‘a business enterprise that spans multiple nations.

MNCs have offices and/or factories in a number of different countries, usually

with a centralized head office where they coordinate global management.’10

Competitiveness

This project uses Jay Barney’s definitions of competitive advantage “when a firm is

implementing a value creating strategy not simultaneously being implemented by any

current or potential competitors”11 and sustained competitive advantage “when a firm is

8 “Students must demonstrate the skills taught in the Asian Studies Programme Curriculum”, Third Year Project Manual, Asian Studies Programme 9 Third Year Project Manual, Asian Studies Programme 10 (O’Connell, 1997:211), The Blackwell Encyclopedic Dictionary of International Management, John O'Connell, Blackwell publishing, 1998

Conclusion 11 C.F, Knowledge Sharing and Organizational Culture in Multinational Corporations, Andrea Straub-Bauer, Department of Organization and Industrial Sociology, Copenhagen Business School, 2005., p.7

12


implementing value creating strategy not simultaneously being implemented by any

current or potential competitors and when these other firms are unable to duplicate the

benefits of this strategy”12. Our conceptualization of competitiveness borrows from the

resource based view of the firm in that we focus on the internal strengths and weaknesses

of the firm, as opposed to the external opportunities and threats13. “This view assumes

that firms within an industry or group may be heterogeneous with respect to the strategic

resources they control, and that these resources may not be perfectly mobile across firms,

and thus heterogeneity can be long lasting” 14 , and therefore sustained competitive

advantage can be reached through the development of firm specific internal strengths.

Corporate Culture Competitiveness

We refer to corporate culture competitiveness as:

An organizational culture which aids in the achievement of sustainable

competitive advantage through the creation of firm specific, non transferable,

“intangible assets” that are in line with the strategy and goals of the organization.

Some of the factors that can influence the level of corporate culture

competitiveness, among others are knowledge management, intercultural

communications, corporate image, social responsibility, etc.

Organizational Culture

Organizational culture is a difficult term to define, and has a list of well known and

quoted definitions including those of Elliott Jacks (1952), Andrew Pettigrew (1979),

Meryl Reis Louis (1983), Edgar Schein (1985), John van Maamen (1988), Harrison Trice

and Janice Beyer (1993) etc15. For the purpose of this project we have chosen to use the

definition provided by Edgar Schein as his definition holds intercultural communications

and knowledge sharing as intrinsic to organizational culture. He views culture as “the

accumulated shared learning of a given group, covering behavioral, emotional, and

12IBID, p.4 13 Please see appendix for model of resource based and environmental models of competitive advantage, Barney 1991. 14 Firm Resources and Sustained Competitive Advantage, Jay Barney, Texas A&M University, Journal of Management, 1991, Vol.17, No1, 99-120. P.3 15 C.F, Organizational Culture, Core Concepts of Organization Theory, Mary Jo Hatch, Intercultural Communications Compendium Asian Studies Programme, Lisbeth Clausen, 2003

13


cognitive elements of the group member’s total psychological functioning Schein (1997)

and defines organizational culture as

"A pattern of shared basic assumptions that the group learned as it solved its

problems of external adaptation and internal integration that has worked well

enough to be considered valid and, therefore, to be taught to new members as the

correct way to perceive, think, and feel in relation to those problems."

Schein conceptualizes organizational culture in three levels including basic underlying

assumptions, espoused values, and artifacts as presented in the model below. He also

writes that a “strong” organizational culture is identified by a high degree of homogeneity

and stability of group membership and length and intensity of shared experiences of the

group. Although, once an organization has developed a strong culture, as long as the

leadership remains stable it can withstand a high turnover of employees as they will

quickly be assimilated into the culture.

Levels of Culture

Unconscious, taken for granted belief, perception, thoughts, and feelings (ultimate source of values and action)

Espoused Values

Artifacts

Strategies, goals, philosophies (espoused justifications)

Visible organizational structures and processes

Basis Underlying Assumptions

Figure 216

16 Edgar H. Schein , Coming to a new awareness of Organizational Culture, in Sloan Magazine Review, winter, p.3-16, Organization Compendium, 2003 Asian Studies Programme

14


Core Values

This project uses Schein’s definition of espoused values in what we refer to as core

values. The core values of the organization, if viewed as espoused values are identifiable

in research and transferable across the organization. Although basic underlying

assumptions lay at the root of these values, they are difficult to define17, and are based on

the various histories and experiences of organizational members, and thus may not be

transferable across diverse cultures in the MNC. Espoused values define how one should

and should not act, they define the context in which organizational members express

themselves, and finally they are the means through which the basic assumptions are

reinforced or rejected and changed18.

Intercultural Communications

Intercultural communications theory was founded by Edward T Hall in the 1950’s based

on his studies of communication between Japanese and Americans 19 . Intercultural

communication can be simply defined as:

how people, from differing cultural backgrounds, endeavor to communicate.

Cross-cultural communication tries to bring together such relatively unrelated

areas as cultural anthropology and established areas of communications. Its core

is to establish and understand how people from different cultures communicate

with each other. Its charge is to also produce some guidelines with which people

from different cultures can better communicate with each other20.

Knowledge

Knowledge can be simply defined as “The capacity for effective action” (Seng, 2000:

5621). However, in order to clarify our use of knowledge, further explanation is necessary.

According to Straub-Bauer, this definition implies that knowledge is a) an active asset; b) 17 Edgar H. Schein , Coming to a new awareness of Organizational Culture, in Sloan Magazine Review, winter, p.3-16, Organization Compendium, 2003 Asian Studies Programme 18 IBID 19 Edward T Hall and the History of Intercultural Communication: The United States and Japan, Everett M. Rogers, William B. Hart, Yoshitaka Miike, Keio Communication Review, No.24, 2002, Intercultural Communications Compendium, Lisbeth Clausen, 2003 20 Wikipedia online dictionary, http://www.wikipedia.org/ 21 C.F, Knowledge Sharing and Organizational Culture in Multinational Corporations, Andrea Straub-Bauer, Department of Organization and Industrial Sociology, Copenhagen Business School, 2005, p.7

15


regarded as a process rather than an object; c) a product of human reflection and

experience; and d) dependent on context22. We view knowledge as the outcome of a

process which can be seen as an asset. This process is that of human reflection and

experience within specific contexts. Nonaka and Takeuchi differentiate information and

knowledge in this manner:

[I]nformation is a flow of messages, while knowledge is created by that very flow of information, anchored in the beliefs and commitment of its holder. . . . (K)nowledge is essentially related to human action23.

Additionally we see knowledge as not only being within the individual, but also as being

held collectively. Brown and Duguid (1998) refer to this as ‘communities of practice’24.

Thus knowledge within the organization can be the result of collective experiences and

reflections within the organizational context, which is thus context specific in that it

depends on the situation and is created dynamically in the social interaction between

people.

Knowledge Transfer and Knowledge Sharing

According to Minbaeva et al (2003), knowledge transfer is “a process that covers several

stages starting from identifying the knowledge over the actual process of transferring the

knowledge to its final utilization by the receiving unit”25. Knowledge transfer is often

used simultaneously with knowledge sharing26, which can be defined as “Providing one’s

knowledge to others as well as receiving knowledge from others (MANDI Questionnaire

on Knowledge Sharing, 2004)”27.ho As the concepts are used interchangeably in many of

our texts we will use the terms synonymously throughout this report, and when doing so

refer to our understanding of knowledge transfer and sharing as: the individual and

22 IBID 23 The knowledge creating company, how Japanese Companies Create the Dynamics of Innovation, Ikujiro Nonaka and Hirotaka Takeuchi, Oxford University Press, 1995 24 C.F, Knowledge Sharing and Organizational Culture in Multinational Corporations, Andrea Straub-Bauer, Department of Organization and Industrial Sociology, Copenhagen Business School, 2005, p.8 25 MNC knowledge transfer, subsidiary absorptive capacity, and HRM, D Minbaeva, T Pedersen, I Bjo¨rkman, CF Fey, HJ Park, Journal of International Business Studies (2003) 34, 586–599& 2003 Palgrave Macmillan Ltd, p.2 26 Knowledge Sharing and Organizational Culture in Multinational Corporations, Andrea Straub-Bauer, Department of Organization and Industrial Sociology, Copenhagen Business School, 2005, p.8 27 C.f. IBID

16


collective giving, receiving, and utilizing of context relevant human experience and

reflection between individuals and groups within the organization.

Social Capital

For the purpose of this project we focus on firm level social capital, and adopt the

specification of Nahapiet & Ghoshal who state that social capital is...“…the sum of the

actual and potential resources embedded within, available through, and derived from the

network of relationships possessed by an individual or social unit.”28

Absorptive Capacity

According to Cohen & Levinthal, Absorptive capacity is “the ability of the firm to

recognize the value of new, external information, assimilate it, and apply it to commercial

ends”29. This definition was criticized by Zahra & George for not capturing the dynamic

nature of the construct30. They redefined it as “a set of organizational routines and

processes by which firms acquire, assimilate, transform and exploit knowledge to

produce a dynamic organizational capability.” Zahra & George were able to add to the

specification of absorptive capacity by identifying its sub dimensions (acquisition,

assimilation, transformation, and exploitation), and by recognizing its dynamic nature31.

For this reason we will use this definition in this paper.

Trust

Trust is defined as “the willingness to be vulnerable to the actions of another party”

(Mayer et al., 1995: 712), where trustworthiness is “the quality of the trusted party that

makes the “trustor” willing to be vulnerable” (Levin & Cross, 2003: 3)32.

28 C..f. Social Capital as an Antecedent of Absorptive Capacity of Firms, Rajesh S. Upadhyayula & Rajiv Kumar, DRUID Summer Conference, 2004 29 Absorptive Capacity: A New Perspective on Learning and Innovation, Wesley M. Cohen and Daniel A. Levinthal, Administrative Science Quarterly, 35 (1990): 128-152 30 Social Capital as an Antecedent of Absorptive Capacity of Firms, Rajesh S. Upadhyayula & Rajiv Kumar, DRUID Summer Conference, 2004 31 IBID 32 c.f. Angelos Alexopoulos and Kathy Monks, A Social Capital Perspective on the Role of Human Resources Practices in Intra-organizational Knowledge Sharing, Centre for Research in Management Learning and Development Dublin City University Business School, submitted to the 5th International Conference on HRD Research and Practice across Europe, 2004

17


Integration

Integration can be defined as “The need to coordinate, adjust, and regulate relationships

among various actors or units within the system…in order to keep the system

functioning.”33 In other words, we see integration as the process by which individual

parts and persons within an organization are made into a functional and structural whole.

Motivation

“The concept of motivation refers to an individual’s selection of behaviors and what lies

behind making these choices…no matter what their nationality, cultural background, or

physical location, people are motivated by the desire and aspiration to fulfill needs, which

results in goals being accomplished”.34 Campbell et al. 1993 argue that motivation is

determined by the individual’s choice to perform, the level of effort, and the persistence

of that effort35. In this project we view motivation as the willingness of an individual to

achieve goals, participate in various activities and tasks and to interact with other

organizational members.

Opportunity

Angelos Alexopoulos and Kathy Monks refer to the opportunity to access useful channels

and utilize their resources36. We thus define opportunity as the opportunity to access

appropriate channels for communication where the transaction costs of communication

are low or non existent, and the opportunity for organizational members to meet,

integrate, participate in group activities and teamwork and thus transfer knowledge.

33 Sociological Theory and Modern Society, Parsons, Talcott, New York Free Press, 1967 34 Global management and organizational behavior, Konopaske and Ivancevich, McGraw Hill, 2004, p.164 35 C.F, Angelos Alexopoulos and Kathy Monks, A Social Capital Perspective on the Role of Human Resources Practices in Intra-organizational Knowledge Sharing, Centre for Research in Management Learning and Development Dublin City University Business School, submitted to the 5th International Conference on HRD Research and Practice across Europe, 2004 36 Angelos Alexopoulos and Kathy Monks, A Social Capital Perspective on the Role of Human Resources Practices in Intra-organizational Knowledge Sharing, Centre for Research in Management Learning and Development Dublin City University Business School, submitted to the 5th International Conference on HRD Research and Practice across Europe, 2004

18


Ability

Ability can be defined as “including certain human attributes like prior achievement,

initial skills, aptitudes, etc. The ability can/do factor usually denotes ‘a potential for

performing some task which may or may not be utilized’ (Vroom, 1996:198)”.37

3.3 Delimitation

Knowledge Transfer

Within the study of knowledge transfer there are sub categories including horizontal

knowledge transfer (between subsidiaries), vertical knowledge transfer (from

headquarters to subsidiary) and vertical reverse knowledge transfer (from subsidiary to

headquarters)38. Our project focuses on knowledge transfer within the subsidiary of study

and between the subsidiary and headquarters (vertical, vertical-reverse). Although

horizontal knowledge transfer is also important to achieve competitive advantages, due to

specifications of time, scope, and focus we delimitate this area of study.

Theory

Methodology

How

Analysis

Danfoss

What Why

HRM

How

Model

Why

Knowledge

Management

Int.

Communication

Org. Culture

What

Introduction

Executive Summary

Strategic Subsidiaries

The concept of strategic subsidiaries is highlighted by Lai Hong Chung, Patrick Gibbons,

and Herbert Schoch who state that

The organizational context of a MNC is shaped by factors such as the interrelationships between subsidiaries the environmental uncertainties, the size of the subsidiary, the subsidiary location, the nationality of the parent company and the cultural proximity of subsidiary to parent organization. Notwithstanding the effect of these specific contingencies on the design of control systems, it must be realized that subsidiaries have different strategic roles or mandates and therefore may require different controls39.

37 The MNC Knowledge Transfer, Subsidiary Absorptive Capacity and HRM, Dana Minbaeva, Torben Pedersen, Ingmar Bjorkman, Carl F. Frey, H.J. Park, WP 14-2001 38Inspired by Dana Minbaeva, 2005: Strategic Management of Multinational Networks: A subsidiary evolution perspective, Ana Teresa Tavares, University of Porto, Faculty of Economics, 2001 39 Inspired by Dana Minbaeva, 2005: The Influence of Subsidiary Strategic Context and Head Office Strategic Management Style on Control of MNCs : The Experience in Australia, LAI HONG CHUNG, PATRICK T. GIBBONS, and HERBERT P. SCHOCH, Submitted to the Second Asian Pacific Interdisciplinary Research in Accounting Conference, Osaka, Japan, August 4-6, 1998.

Conclusion

19


Although an important observation, due to specifications of time and scope we do not

include considerations of the strategic position of Danfoss K.K in terms of the entire

Danfoss organization.

Social Capital

Social capital has also been divided into external and internal social capital. External

social capital refers to the external linkages to other firms and institutions, and Internal

social capital refers to the linkages within the firm40. According to Adler & Kwon (2002),

a firm’s capacity for effective action is typically a function of both41. However, for the

purpose of this paper we will focus only on internal social capital due to the focus of the

research project. Additionally, social capital has been further divided into structural (the

impersonal properties of the network of relations), relational (the study of interpersonal

relations over time through trust, obligation, shared expectations, etc.), and cognitive

social capital (the label for such properties as shared meanings, language, symbols, etc.

across the members of a network)42. We do make some use of these categories, however

we do not discuss further the dimensions or their implications; as such a discussion

deviates from the objective of the project, and is not possible in regard to the scope and

time allocated to this project. Furthermore, it has also been established that there are

problems in measuring social capital. According to Rajesh S. Upadhyayula & Rajiv

Kumar social capital has been measured at various levels including nation, community,

and inter-firm and intra-firm, however they claim that “most of these measurements are

deficient in their ability to capture the constructs of social capital completely”.43 Thus we

have avoided attempting to measure social capital directly in our research and instead

have focused on some of the determining factors (A-M-O) of social capital which can be

more easily identified, tested, and influenced by HRM practices. This approach also

facilitates the usage of more practical recommendations to the firm, and provides

applicable data for analysis.

40Social Capital as an Antecedent of Absorptive Capacity of Firms, Rajesh S. Upadhyayula & Rajiv Kumar, DRUID Summer Conference, 2004 41 c.f. IBID 42 IBID 43 IBID

20


Absorptive Capacity

As noted above we use the definition of absorptive capacity provided by Zahra & George,

however we delimitate their further suggested two dimensions of absorptive capacity (a.

Potential absorptive capacity (PACAP) which comprises of knowledge acquisition and

assimilation capabilities, and b. Realized absorptive capacity (RACAP) which includes

knowledge transformation and exploitation capabilities)44. When we speak of absorptive

capacity these concepts are inherent, however a full discussion of each of them will not

add significantly to our analysis due to specifications of time and scope, and would

instead overcomplicate this paper in light of its objective to provide a managerial

analytical tool. Furthermore, problems in measuring absorptive capacity have been

identified by Rajesh S. Upadhyayula & Rajiv Kumar, who write “despite the existence of

multiple measures of absorptive capacity, none of them captures the construct completely,

or is general enough to be applied (with minor adaptation) to many firms.45” For this

reason in our research we do not attempt to measure absorptive capacity, but instead

focus on measuring the identified determinants of absorptive capacity to provide

reasonable recommendations to the firm in terms of the HRM practices they can adopt to

improve absorptive capacity.

Trust

The term trust is mentioned extensively in connection with social capital and absorptive

capacity, as being a determinant of both concepts, of social relationships, and effective

communication (see Angelos Alexopoulos and Kathy Monks (2004), Rajesh S.

Upadhyayula & Rajiv Kumar (2004), Minbaeva et al (2001), etc.). However, we have not

looked extensively at the concept of trust as a determinant for a few reasons. First, trust is

a very difficult term to quantify and analyze when applying our theory to the firm,

especially in consideration of time and scope. Additionally, we find that trust fits

intrinsically into the definition of Integration, which we find to be a more workable

concept when dealing with HRM practices. For this reason we use integration as a

determinant of social capital as links between integration and this concept has also been

44 Social Capital as an Antecedent of Absorptive Capacity of Firms, Rajesh S. Upadhyayula & Rajiv Kumar, DRUID Summer Conference, 2004 45 IBID

21


made, and integration lends itself our framework in a more positive way. Furthermore, as

we understand trust as being intrinsic in integration, we have not ignored this term, but

have delimitated it from our focus.

Theory

Methodology

How

Analysis

Danfoss

What Why

HRM

How

Model

Why

Knowledge

Management

Int.

Communication

Org. Culture

What

Introduction

Executive Summary

Human Resource Management

Although we take a strategic point of view when talking about HRM, we do not complete

a full analysis of how to fit HRM strategy to the overall strategy of Danfoss. This project

does not intend to create a comprehensive strategy for Danfoss, but rather provide a basis

for Danfoss to craft a strategy for HRM in Japan in light of other considerations specific

to their firm. Additionally, specifications of time and scope do not allow for such a broad

analysis.

Organizational Structure

Although the organizational structure of the organization in which communication,

knowledge transfer, etc. occur is an important factor for success, we do not include a

theoretical discussion of this aspect due to specifications of time and scope. Additionally,

suggestions to the change of organizational structure may be unreasonable, especially in

the short term.

3.4 Theoretical Tools and Critique

Intercultural Communications

This project uses Intercultural Communications theory in a few manners. Intercultural

communications is viewed as intrinsic to the process of organizational culture, as well as

a strong component of knowledge sharing. We refer to Intercultural Communication

theory to demonstrate how poor intercultural communications can be detrimental to

knowledge sharing and a strong organizational culture, and thus negatively affect

operations of the firm. In knowledge management theory the link between intercultural

communications and knowledge sharing has not been a focus of study, but has rather

Conclusion

22


been taken for granted or treated peripherally46. However according to Sully Taylor and

Joyce S. Osland “when examining organizational learning in MNCs, it is clear that strong

intercultural component must be included in order to study and understand how

organizations can be successful”47. We therefore rely heavily on the conceptual piece

presented by Taylor and Osland based on their review of organizational learning and

intercultural communications literature which presents categories of potential

intercultural communications inhibitors. As their work is pioneering48 we rely on the

categories they have selected, but recognize that future empirical research is necessary to

fully validate these categories.

Organizational Culture

Our project uses organizational culture theory in two contexts. First, we see

organizational culture as a foundation for knowledge sharing, and from this point of view

look into ‘negotiated culture’ and the process by which the MNC can maintain a strong

culture which facilitates knowledge sharing. We rely on a recent study made by Andrea

Straub-Bauer who states that existing research on the relationship between knowledge

sharing and organizational culture is rather limited. “It is purely conceptual or based on

small scale qualitative case studies, relying on a few interviews.”49She was able to

empirically study and prove the connection between organizational culture and

knowledge sharing through statistical testing based on a global survey on knowledge

sharing. Additionally, as we extensively refer to Schein’s definition of organizational

culture it should be noted that his approach takes a functionalist point of view in that he

views culture as something that an organization has. On the other hand the symbolic-

interpretive and the post-modern perspectives treat culture as something an organization

is. As these views take a social constructionist point of view in saying that culture is the

build up of shared interpretive schemes, managers have no ability to control the cultural

environment, but can only manipulate situations due to their strategic role50. Both of

46The Blackwell Handbook of Organizational Learning and Knowledge Management, Sully Taylor and Joyce S. Osland, Edited by Mark Easterby-Smith and Marjorie A. Lyles, Blackwell Publishing, 2003, p. 215 47IBID 48 IBID 49 Knowledge Sharing and Organizational Culture in Multinational Corporations, Andrea Straub-Bauer, Department of Organization and Industrial Sociology, Copenhagen Business School, 2005. 50 IBID

23


these concepts are valid, and give an opposing view to Schein’s treatment of

organizational culture. However, as our project aims to understand the role HRM can

play in organizational culture, we take a functionalist point of view, and Schein’s

definition of organizational culture.

Furthermore, in our discussion of negotiated culture focuses on the model presented by

Brannen & Salk who created their conceptual model to analyze the negotiating process of

culture in a Japanese and German joint venture. It is very difficult to set a model for the

acculturation or the way of negotiating a new working culture without having to make

several assumptions. Brannen & Salk have been able to create a model which gives a

good analytical framework of the way that a Japanese and German company negotiated

their new working culture. However the authors didn’t take in consideration many

variables such as the conditions in which the international joint venture was carried out

and they disregarded the context in which different cultural encounters can happen. On

the other hand, as is not possible to put culture into a box or into numbers this model

among others can give a great help for understanding and improving cross cultural

encounters in which a new ongoing negotiated culture must emerge. Each cross cultural

encounter in which a new working culture will be negotiated will have different variables

and therefore one cannot generalize with one model. Furthermore in 1988, a model

focusing on the process of adaptation and acculturation in mergers and acquisitions was

presented by Nahavandi & Malekzadeh51. However this model only covers the context of

mergers and acquisitions. Based on the models proposed by Brannen & Salk and

Nahavandi & Malekzadeh, Alvarado, Hempel, & Zimberi (2004) proposed an adapted

version based on a case study of IKEA’s methods of acculturation and cultural

negotiation. The adapted model was based on extensive research and a presentation by

Kasper Leschly who currently works in IKEA’s expansion group in China. The adapted

model is used in this project to best describe how an MNC can maintain their core values

while negotiating a new working culture in a surface level. However this model is purely

conceptual based on extensive theoretical review and a few interviews.

51 Acculturation in Mergers and Acquisitions. By: Nahavandi, Afsaneh; Malekzadeh, Ali R.. Academy of Management Review, Jan88, Vol. 13 Issue 1, p79, 12p, 1 chart, 3 diagrams; (AN 4306790)

24


Culture

Cultural dimensions are presented for Danfoss who can then analyze the main values of

the new culture to adapt them into their preferred working culture, and additionally adapt

their own HRM practices to best fit the new culture, which we recommend. Additionally,

we use these dimensions to provide insights into the implementation of HRM practices.

There have been introduced a number of ways for classifying cultures, some of the most

popular ways of classifying cultures has been the more systematic approaches which

focus on the underlying values that influence the more surface levels of culture. In this

context, Hofstede52 has derived value dimensions from questioning preferred states or

behaviors. An alternative approach, based on the ranking of values rather than asking for

preferred states or behaviors has also been presented by Schwartz’s53value types, which

may provide a more robust approach to classifying value dimensions. Research on

national cultures (Hofstede, 1980, 84, 91, 98)5455 can provide important initial clues about

the values, meanings, and behavioral norms that team members might carry into the

MNC. However, despite all efforts there is no commonly acknowledged ‘correct’ concept

of culture or cultural dimensions as yet. There is also a considerable debate about the

validity of the data from which these concepts were derived. For example, Holden

(2002)56 criticizes the relative reliance on Hofstede’s dimensions in the business field. In

his view, the data is necessarily outdated, as it was collected more than thirty years ago.

On the other hand, other research suggests remarkable stability in values. Since there is

no commonly acknowledged ‘correct’ concept of culture or cultural dimensions, these

studies provide us with initial considerations to then do a more in-depth case specific

study considering. We have also used cultural difference concepts and theories in HRM

presented by Terence Jackson. These have been based on cases and experiences and are

52 The Seven Cultures of Capitalism : Value Systems for Creating Wealth in the United States, Britain, Japan, Germany, France, Sweden, and the Netherlands, Hampden-Turner, C. and F. Trompenaars (1994), London, Piatkus. 53Beyond Individualism/Collectivism Schwartz, S. H. (1994): New Dimensions of Values. Individualism and Collectivism: Theory Application and Methods. U. Kim, H. C. Triandis, C. Kagitçibasi, S. C. Choi and G. Yoon. Newbury Park, CA, Sage. 54 Culture's Consequences, International Differences in Work-Related Values, Hofstede, G. H. (1980), Beverly Hills, Sage Publications 55 Cultures and Organizations: Software of the Mind., Hofstede, G. H. (1991), London ; New York, McGraw-Hill. 56 Article 1, Intercultural Communications Compendium, Lisbeth Clausen, 2003

25


well documented. Additionally we were surprised to find reference to the cultural values

necessary to include in Working in Japan: An Insider’s guide for Engineers, The Modern

Working Environment in Japan and Big in Asia 25 strategies for business success, and

the Danish ministry of science technology and innovation website. Although unusual and

non theoretical sources, we found valuable information which corresponded to theoretical

cultural dimensions as well as the knowledge gained in the Asian Studies Programme.

We recognize that as these theories deal with human relations it is impossible to perfectly

portray or put into a box the cultural differences apparent, and the possible emerging

situations. We therefore use these theories to provide an initial overview of the cultural

considerations that need to be taken.

Knowledge

The concepts and theories from knowledge management constitute a relatively new

school of though, which has presented us with challenges as well as opportunities in

exploring a new area of research. We found that many of the concepts have not been

consistently defined or used and that there are still significant areas which have not been

researched in-depth or empirically tested. We based our conceptualization of the

knowledge process mainly in the works of Dana Minbaeva et al, Rajesh S. Upadhyayula

& Rajiv Kumar, and Angelos Alexopoulos and Kathy Monks. Minbaeva (2005)

establishes that motivation and ability are key determinants of absorptive capacity and in

turn knowledge transfer. She also establishes the importance of Integration “The higher

degree of knowledge transfer is expected when closer relationships…Ghoshal and

Bartlett (1988) find that …integration and communication…appeared to be positive to

creation, adoption and diffusion of knowledge by MNC’s subsidiaries”57. Additionally

she establishes that HRM practices can positively influence these factors. Her study is

based on data collected and tested from 92 subsidiaries of Danish MNCs located in 11

countries. Her study contributes to establishing the relationship between HRM practices

and knowledge transfer in the MNC. However the extent to which this can be generalized

to other globally operating companies could be argued. Additional research is needed to

57 HRM practices and MNC knowledge transfer, Dana B. Minbaeva, Department of International Economics and Management, Copenhagen Business School, Emerald group publishing limited, vol. 34, no.1, 2005, p.9

26


develop this link further, which until now has been largely black boxed”58. Following

Minbaeva, Angelos Alexopoulos and Kathy Monks (2004) presented the links between

social capital and ability, motivation, and opportunity. They provide a preliminary

conceptual model which should be strengthened and refined by empirical examination.

Finally Rajesh S. Upadhyayula & Rajiv Kumar (2004) present a theoretical examination

of the link between absorptive capacity and social capital. Although well founded, their

conclusions are in need of empirical testing and more in depth theorization of the

concepts of study that can interrelate each of the individual dimensions of absorptive

capacity and social capital59. However this link is not central to this paper. Additionally

they lead us to Zahra and George (2002) who note the importance of Integration to

absorptive capacity “social integration contributes to knowledge assimilation, occurring

either informally or formally”60 . Zahra and George present a comprehensive outline of

the different perspective and usages to date of absorptive capacity. Their paper is highly

theoretical, yet based on the studies of numerous other scholars. Similarly Rajesh S.

Upadhyayula & Rajiv Kumar lead us to the work of Adler and Kwon (2002) who

presented a paper similar to Zahra and George (2002) in that they highlight the usages

and conceptualizations of social capital by numerous theorists in an attempt to clarify the

concept, stating that A-M-O are determinants of social capital. We therefore use these

papers as references to the uses and conceptualization of absorptive capacity and social

capital. From these papers we were able to define the determinants A-M-O-I for our

conceptual model. We use A-M for absorptive capacity as these determinants were tested

statistically and proven valid by Minbaeva and Additionally, A-M-O have been

conclusively decided as determinants of social capital by Angelos Alexopoulos and

Kathy Monks (2004) and Adler and Kwon (2002). Finally Zahra and George and

Minbaeva point to the importance of integration for knowledge transfer.

58Interview with Dana Minbaeva, May 23, 2005 59 Social Capital as an Antecedent of Absorptive Capacity of Firms, Rajesh S. Upadhyayula & Rajiv Kumar, DRUID Summer Conference, 2004 60 Absorptive Capacity: A Review, Reconceptualization, and Extension, Shaker A. Zahra and Gerard George, Academy of Management Review, 2002, Vol.27, No.2, 185-203

27


HRM theory

We have placed ourselves in the strategic and normative schools of HRM theory. The

strategic school of HRM theory is “primarily concerned with the relationship between a

range of possible external contingencies and HRM policy and practices”61. This group

views HRM as part of an overall strategy and suggests that “when the various sub

systems including HRM are aligned and supporting each other, superior performance is

likely”62. Although we do not attempt to analyze and fit our HRM recommendations to

the various strategies of Danfoss, we view HRM practices as part of a strategy to improve

communications, knowledge transfer, and thus competitiveness. From this perspective we

follow more closely the normative school by establishing a set of linkages that lead to

performance. The strategic school is criticized for not “providing insight into how HRM

policy and practice translate into high performance”63. Additionally, the normative school

has been criticized for “focusing predominantly on the internal characteristics of HRM at

the expense of broader strategic issues, and in advocating a best set of practices while

ignoring the variety of pressures and consequent business strategies is taking a

considerable risk”64. Finally, emphasis on HRM has been criticized for not yet identifying

when human resources matters more, and how much of the variances in performance can

be explained by the human factor (as opposed to factors outside of HRM)65. We have

attempted to overcome the short comings of the strategic and normative schools by

combining them to provide strategic insight with recommendations made through

concrete linkages. In terms of the third criticism, we have attempted to overcome such a

short coming by identifying practices that have been empirically tested to affect the

determinants of study.

61 HRM and performance: a review and research agenda, David Guest, the International Journal of HRM 8:3, 1997. P.264 62 IBID 63 IBID 64 IBID 65 IBID

28


Conceptual Model

The resulting conceptual model contributes to an alternative theorizing of human

resource’s role in the management of organizational culture, organizational knowledge,

and an effective intercultural communication. Following Minbaeva (2005), Angelos

Alexopoulos and Kathy Monks (2004), and Rajesh S. Upadhyayula & Rajiv Kumar

(2004), Adler and Kwon (2002), Zahra and George (2002), Schein (1992), and Taylor

and Osland (2003) specifically the model considers social capital and absorptive capacity,

organizational culture, and intercultural communications while stressing the need for

examining empirically the overlooked impact of human resource practices on the

potential corporate culture competitiveness of the firm. The importance of this model to

our case is that it serves as a framework to be able to analyze the phenomenon of the

subsidiary of study from an interdisciplinary approach. In doing this we take a

functionalist approach which could be criticized by post-modernist or social

constructionist schools. The weakness of the model is in that it lacks statistical

examination and it is based on other studies which have also been criticized. Finally it

could be said that the theories combined in this model may make the phenomenon seem

more complex than the situation requires.

In combining the above fields to construct a clear and meaningful analysis we were

presented with the problem of defining and delimitating concepts. We have relied on the

definitions and conceptualizations of various theories, and attempted to make the links

between these fields clear. We have attempted to create a truly interdisciplinary construct

based faithfully in the thoughts of others in an aim to provide the most practical

recommendations possible in the time and scope of the third year project.

TOWS Matrix

A TOWS Matrix is used to “operationalize66” our model. TOWS is a tool often used in

alternative to a SWOT analysis. There are four possibilities here: strength opportunities,

strength threats, weaknesses-opportunities, and weaknesses and threats. The matching of

66 How to operationalize Porter's diamond of international competitiveness, Alan M Rugman; Alain Verbeke, Ontario Centre for International Business, 1992, p.50

29


strengths and weaknesses with opportunities and threats results in four different sets of

strategic situations This Works to foster the generation of strategic alternatives. It creates

an ideal situation for brainstorming to identify alternative strategies. The four sets are as

follows: SO strategies are developed by thinking of ways that a firm can use its strengths

to take advantage of opportunities in its environment; WO strategies are those that take

advantage of opportunities by overcoming weaknesses; ST strategies use the firm’s

strengths to overcome and avoid threats; WT strategies are those that attempt to minimize

weaknesses and avoid threats. We use the TOWS to highlight and identify areas of

analysis. This analysis tool may be criticized as it only considers certain aspects (T-O-W-

S), however for the purpose of our analysis it proved suitable.

Methodology

Theory

How

Analysis

Danfoss

What Why

HRM

How

Model

Why

Knowledge

Management

Int.

Communication

Org. Culture

What

Introduction

Executive Summary

3.5 Data Collection, Resources, and Critique

The process of data collection consisted of four steps:

1- Team member period of Observation and analysis of report by the entire group

2- Secondary data collection of related literature

3- Conduction of interviews with individuals related to the context

4- Formulation of questionnaires

In response to exploratory research strategy, the choice of the data collection method was

focused on conducting qualitative analysis. The largest share of data collected is primary,

which is from the non-standardized or in depth and semi-structured interviews67. The

other part of qualitative data that is rated secondary is sourced from the company such as

organizational charts, information on personnel, details revealing history and other

related data to the company profile. This data was collected through an exchange of

correspondence via e-mails. We additionally formulated quantitative data through the

distribution of a questionnaire to all employees of the Japanese subsidiary.

Conclusion 67 M. Saunders, P. Lewis, and A. Thornhill, (2000), Research Methods for Business Students, second edition, Prentice Hall Press, p. 243

30


3.5.1 Secondary data collection of related literature

In response to the various issues, we considered numerous disciplines when creating our

theoretical and analytical frameworks. After having reviewed Intercultural

Communications and Organization literature related to the subject, we turned to focus on

topics of HRM strategy and knowledge management. Through this extensive secondary

data collection we found the main sources of our frameworks, which is based on several

main books and a number of more recent articles.

The search for context related literature is mainly focused on collecting secondary data

that is focused on the environment of study. In addition to theoretical papers, we

collected secondary information from Danfoss in the form of organizational charts, the

employee perception survey results, the company handbook, etc.

Secondary literature sources include both quantitative and qualitative data and can be

employed in descriptive research68. The quantitative research method is regarded by some

to be more objective and accurate than the qualitative research method. The quantitative

research method follows certified instructions while in it is claimed that in the qualitative

research method the researcher biases analysis and interpretation of the empirical data.

However, through careful consideration and criticism of qualitative data we think this

criticism can be overcome. Conversely, it is argued that it is just as easy to manipulate

with numbers and statistics.69 We will make use of both quantitative and qualitative

secondary data.

Secondary literature sources are subsequent publication of primary literature and due to

the time it takes to publish the data, the information in the secondary literature sources

can be dated. However most of the sources utilized in this project are considerably recent,

and provided valuable information. Additionally, data employed in secondary literature

68 Saunders, M., Lewis, P., Thornhill, A., 2000, Research Methods for Business Students, (second edition), Great Britain, Pearson Education Limited. 69 Andersen, Ib, 1997, Den skindbarlige virkelighed – Om valg om samfundsvidenskabelige metode, Samfundslitteratur, p.22

31


sources are collected for a purpose which may differ from the research issue. We took

these criticisms into consideration when using the information provided by these sources.

3.5.2 Conduction of interviews with individuals related to the context

We conducted 4 interviews in total including:

- Interview with the International HRM Department, Danfoss Headquarters

- Interview with Danfoss Asia President

- Interview with Danfoss Japan President

3.5.3 Formulation of questionnaires

The questionnaires were formulated based on a review of strategies and literature. We

established beforehand the categories which corresponded to our research, primarily A-

M-O-I, shared culture, and intercultural communications, and constructed the

questionnaires with a variety of questions for each category which attempted to be

somewhat indirect to increase the chances of revealing underlying assumptions. For

instance we did not ask employees directly if they felt motivated, but rather questions like

“I am satisfied with my effort” or “I enjoy my daily work” ranked on a scale from 1 to 7

(please see appendix for full questionnaire). There are some instances where there were

additional questions that would have been beneficial to ask, but were not included.

However, the questions provided sufficient data for each area of study. The questionnaire

was anonymous and was administered via an internet web service70; so that employees

could fill it out online. We were supported by the President’s assistant and an HR

representative in translating and encouraging employees to fill it out. The response rate

was 67% (sent to 62 people, 42 responded). The questionnaire results corresponded well

with other data by providing numeric support to the qualitative results. We accepted the

data as valid.

70 defog.net provided free access to their survey software.

32


4. Theory

How

Analysis

Danfoss

What Why

HRM

How

Model

Why

Knowledge

Management

Int.

Communication

Org. Culture

What

Theory

Methodology

Introduction

Executive Summary

We will begin the Theory section by introducing the different fields of study that we have

categorized as the “what” is needed to be considered to optimize processes. Beginning

with field of organizational culture we will explain our understanding of culture, its

negotiation process and the need of importing the core values into the different

subsidiaries. We will continue by introducing the Intercultural Communication section in

which we will present our understanding of this process and its link to the Knowledge

Management field. We finish the “what” section with Knowledge Management, in which

we will illustrate a process which we argue, will enhance the Knowledge transfer within a

firm.

Figure 3

Conclusion

33


4.1 Organizational Culture

Theory

How

Analysis

Danfoss

What Why

HRM

How

Model

Why

Knowledge

Management

Int.

Communication

Org. Culture

What

Methodology

Introduction

Executive SummaryTaking a functionalist point of departure, we make reference to Schein’s definition of

organizational culture. Schein attempts to provide a definition of organizational culture in

terms of a dynamic model of how culture is learned, passed on, and changed. According

to Schein a “strong” organizational culture is identified by a high degree of homogeneity

and stability of group membership and length and intensity of shared experiences of the

group71. Although, once an organization has developed a strong culture, as long as the

leadership remains stable it can withstand a high turnover of employees as they will

quickly be assimilated into the culture. Schein argues that the culture of the firm can be a

management tool, and thus we infer that it can also be influenced through HRM practices.

We view organizational culture to be central to all processes of the firm, as it influences

the behavior of individuals and the practices within the firm72. According to Straub-Bauer

this means that “on one hand organizational culture influences what organizational

members think about knowledge sharing and how they subconsciously behave in relation

to it, and on the other, through certain organizational practices, it influences directly

knowledge sharing behavior 73 ”. The connection between organizational culture and

knowledge sharing is highlighted in the following models.

71 Edgar H. Schein , Coming to a new awareness of Organizational Culture, in Sloan Magazine Review, winter, p.7, Organization Compendium Asian Studies Programme, 2003 72 IBID

Conclusion 73 Knowledge Sharing and Organizational Culture in Multinational Corporations, Andrea Straub-Bauer, Department of Organization and Industrial Sociology, Copenhagen Business School, 2005, p.33

34


Organizational culture plays a duel role with regards to knowledge sharing leading to a virtuous cycle in which organizational culture, individual behavior and practices reinforce each other.

Individual Behavior Absorptive Capacity

Organizational culture

Knowledge sharing

Organizational practices/structure Technology

Compensation and reward Expatriation

Training & development

Figure 474

Knowledge sharing at cognitive level

Knowledge sharing at behavioral level

Basic assumptions

Artifacts

Values operate both on the behavioral level and on the cognitive level, as they are the means through which the basic assumptions of an organization’s culture are reinforces, rejected or changed. Thus, values are regarded key in creating or sustaining a knowledge-sharing culture.

Values

Figure 575

74 IBID 75 Knowledge Sharing and Organizational Culture in Multinational Corporations, Andrea Straub-Bauer, Department of Organization and Industrial Sociology, Copenhagen Business School, 2005.

35


Starbuck (1992) suggested that the ability to acquire information is proportional to the

norms for exchange of information76, and we therefore argue that the norms and values

which support the exchange of information should be sustained in all areas of the firm. In

order for the knowledge transfer process to occur, and for the corporate culture

competitiveness to be developed and maintained, there needs to be elements of

consistency throughout all areas of the MNC. As culture is developed there are aspects

which are valuable and those which are not, it is the responsibility of headquarters to

select and maintain those values and processes which contribute to the firm through

knowledge transfer, flexibility, a strong set of common norms and values. For instance, it

is noted that the occurrence of a shared vision can facilitate knowledge sharing and

integration among individuals or groups by providing a purposeful meaning to their

actions: ‘A shared vision embodies the collective goals and aspirations of the members of

an organization … [O]organization members who share a vision will be more likely to

become partners sharing or exchanging their resources’ (Tsai & Ghoshal, 1998: 467).77

We therefore make reference to cultural negotiation theory, and the adapted models of

Brannen & Salk and Nahavandi & Malekzadeh 78 to present how the organization should

go about the cultural negotiation process.

Brannen & Salk 2000 introduced a model of cultural negotiation linking organizational

events with issue domains as points of departure for negotiations. In the study they argue

that “We can understand the process of cultural negotiation and as a result be better

prepared to monitor and manage culturally diverse settings.”

The model of Brannen & Salk is based on five assumptions. The first assumption in the

model by Brannen & Salk is that “The national cultural origins of IJV (International Joint

Venture) team members serve as initial anchors or points of departure for team members

76 c.f. Social Capital as an Antecedent of Absorptive Capacity of Firms, Rajesh S. Upadhyayula & Rajiv Kumar, DRUID Summer Conference, 2004 77 c.f. Angelos Alexopoulos and Kathy Monks, A Social Capital Perspective on the Role of Human Resources Practices in Intra-organizational Knowledge Sharing, Centre for Research in Management Learning and Development Dublin City University Business School, submitted to the 5th International Conference on HRD Research and Practice across Europe, 2004 78 Alvarado, Hempel, & Zimberi 2004, Intercultural Communications and Organization, A case of IKEA

36


as sources of values, meanings and norms brought to the bicultural organizational

context.” The second of Brannen & Salk’s model is “The structure of the IJV, the

characteristics of its members and the relations of power and interdependence among

them, and the specific issues and threats confronted by the team will shape which of the

many cultural traits become salient in the social negotiation of the IJV working culture”.

Assumption 3 of Brannen & Salk’s model in our opinion can fit into almost any cross

cultural encounter: “When members from two distinct national and organizational

cultures come together a “negotiated culture” emerges. Assumption 4 of their model says

that “the specific attributes of an IJV working culture will be emergent and cannot be

determined a priori.” Finally, assumption 5: “The cultural stances of organizational actors

may map into “issue domains” in unexpected ways.

However, based on a study of IKEA by Alvarado, Hempel, & Zimberi, 2004, the model

was adapted to better fit the case of the MNC and its subsidiaries in light of the

organization’s strategic goals. The key differences in the second model is that

Headquarters go through the negotiation process from a higher vantage point than the

subsidiary and throughout the process maintain core values which are non-negotiable and

which are present in the final negotiated culture. Thus, although the resulting negotiated

culture cannot be fully determined beforehand, certain values can be selected as non-

negotiable. In the case study by Alvarado, Hempel, & Zimberi, 2004, it was found that

this was aided by two processes shown in the models of Core Values and the Cultural

Surface and of Cultural Focus 79(see figures 6 & 7) below. We argue that these models

present an effective strategy for maintaining the core values of the MNC while allowing

space for flexibility and adaptation to the culture of the subsidiary, also necessary for

achieving success. One strategy used to keep core values is to study the values of the new

culture beforehand and assimilating some of those values into a surface level while

leaving the core values of the corporate culture untouched. Figure 6 depicts the values

which cannot be altered, and the space available for change. In order to gain as much as

possible from foreign ventures MNCs must realize that the competitive advantage of a

transnational organization “lies to a great extent in its ability to identify and transfer best

79 Intercultural Communications and Organization, the IKEA case, Alvarado, Hempel, & Zimberi, 2004

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practices, particularly core competencies and knowledge, between its geographically

dispersed and diverse units (Bartlett & Ghoshal, 1999)”80. Additionally, the importance

of flexibility to adopt to new environments is highlighted by Lyles and Salk (1996, pp.

881-2) who postulate that flexibility promotes knowledge transfer process: “by

encouraging greater receptivity of organizational members to new stimuli from the

outside, by promoting collaboration and exchanges of information within the

organization and by granting members greater latitude in altering activity patterns and

ways of doing things to adopt to perceived changing needs an conditions”81. This should

be supported by HRM practices which maintain focus on strong culture (core values)

Figure 7.

Theory

How

Analysis

Danfoss

What Why

HRM

How

Model

Why

Knowledge

Management

Int.

Communication

Org. Culture

What

Methodology

Introduction

Executive Summary

Figure 682 Figure 783

4.2 Intercultural Communications

There are very few studies that deal with the link between intercultural communication

and organizational learning84. However, we argue that the Intercultural Communication

process is essential to successful knowledge transfer. For instance, at the base of all

theories concerning organizational learning lies the assumption that communication must

80 c.f. Towards a Model of Effective Knowledge Transfer within Transnationals: The Case of Chinese Foreign Invested Enterprises, Paul Miesing, Mark Kriger, and Neil Slough, for the Journal of Technology Transfer, 2003 81 c.f. HRM practices and MNC knowledge transfer, Dana B. Minbaeva, Department of International Economics and Management, Copenhagen Business School, Emerald group publishing limited, vol. 34, no.1, 2005 82 Kasper Leschly, Intercultural Challenges for IKEA in China, Asian Studies Program: Intercultural Communications, 12th December 2003 83 Kasper Leschly, Intercultural Challenges for IKEA in China, Asian Studies Program: Intercultural Communications, 12th December 2003

Conclusion 84The Blackwell Handbook of Organizational Learning and Knowledge Management, Sully Taylor and Joyce S. Osland, Edited by Mark Easterby-Smith and Marjorie A. Lyles, Blackwell Publishing, 2003, p. 213

38


occur in order for knowledge to be created or transferred.85 Additionally, according to

Taylor and Osland “poor intercultural communications is one of the key barriers to global

organizational learning”.86 It is well recognized that communication between members of

different cultures is often filled with “misunderstandings and second guesses because of

language problems, communication style differences and value orientation differences”

(Ting-Toomey, 1999:18).87 These problems are especially visible in the MNC due to the

need to share knowledge across individuals and groups located in highly divergent

cultural environments. In the following section we illustrate how and why Intercultural

Communications affects organizational learning, and highlight some of the key barriers to

effective Intercultural Communications.

According to Huber “information distribution is a determinant of both the occurrence and

breadth of organizational learning”88. Information is distributed by individuals, who are

usually seen as the basis of learning within organizations (Nonaka and Takeuchi, 1995)89.

According to Taylor and Osland, individuals hold internal images of how the world

works, called “mental models” or “schemata”90. These mental models decide what new

information is acquired, retained, used and deleted. Additionally, “they not only help us

make sense of the world we see, they can also restrict our understanding to that which

makes sense within the mental model”91. The perception model illustrates this process,

and suggests that when an actor receives a message that he/she has no corresponding

mental model for the actor will then choose to either ignore the message, assume it is a

variant of something familiar that is already in another mental category and assign

meaning (which may be incorrect in category and meaning), choose to perceive the

signals as unfamiliar and reject them or keep them waiting until they can be related to

something already familiar, or the actor may choose to alter his/her mental categories to

accommodate the new information and assign a new meaning.92 Thus, in each moment of

85 IBID 86 IBID 87c.f. IBID p. 216 88 c.f. The Blackwell Handbook of Organizational Learning and Knowledge Management, Sully Taylor and Joyce S. Osland, Edited by Mark Easterby-Smith and Marjorie A. Lyles, Blackwell Publishing, 2003, p. 217 89 c.f. IBID 90 IBID 91 c.f. IBID 92 Intercultural Communication in the Global Workplace, Linda Beamer and Iris Varner, McGraw Hill Irwin, 2001

39


intercultural communication within the MNC these decisions are taking place, and the

resulting understanding or misunderstanding is directly affecting the knowledge being

transferred and shared. Additionally, as learning takes place through interaction with the

environment, an individual’s mental models change, and these changes affect the

organization’s mental model.93As each individual holds mental models, so does the

organization hold a shared mental model. “The cycles of individual learning affect

learning at the organizational level through their influence on the organization’s shared

mental models”(Kim, 1993:43)94 . Thus the organization as a whole is an important

learner and communicator (Inkpen and Crossan, 1995; Kim, 1993)95. The mental models

that the organization collectively holds help it in decision-making through the schemas,

scripts, and casual maps that result from the mental models. The organization

communicates its mental models internally through established standard operating

procedures, organizational culture, assumptions, artifacts and overt behavior rules that

characterize the organization (Kim, 1993)96. Thus, communication becomes a key factor

both in how the organization learns from the individuals within it and how it

communicates its mental models to these same individuals.

We illustrate Intercultural Communication in the organization in the below form. It

should be noted that intercultural communication occurs at all levels of the organization

(individual, group, department, subsidiary, inter-subsidiary, etc.), but for the sake of

simplicity we have placed the communication line between headquarters and subsidiary.

Figure 8

93The Blackwell Handbook of Organizational Learning and Knowledge Management, Sully Taylor and Joyce S. Osland, Edited by Mark Easterby-Smith and Marjorie A. Lyles, Blackwell Publishing, 2003, 215 94 c.f. IBID 95 c.f. IBID 96 c.f. IBID

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Theory

How

Analysis

Danfoss

What Why

HRM

How

Model

Why

Knowledge

Management

Int.

Communication

Org. Culture

What

Methodology

Introduction

Executive Summary

4.4 Knowledge Management

The link between knowledge and competitive advantage has been debated, having on one

side those who establish a positive link between these constructs (Fiol and Lyles,

1985:803, Barney, 1991)97, and those who do not see a direct relationship between

learning, knowledge, and performance. However, recent empirical efforts have found

support for the direct impact of learning, knowledge, and human and social capital on

performance (e.g., Appleyard, 1996; Bontis et al., 2002 Decarolis and Deeds, 1999; Hitt

et al., 2001; Yeoh and Roth, 1999)98. It is important to note that the conclusion of these

studies is not that “the more learning the better” or “the more knowledge the better”, but

that learning that is effective, and that knowledge that is relevant may have positive

effects on performance.99

It is acknowledged that in today’s world of business, the ability to obtain and transfer

knowledge has become one of the main competitive advantages of MNCs. According to

Bartlett and Ghoshal (1989) “successes of multinational companies very much depend

upon the company’s ability to speedily transfer knowledge throughout the organization. If

important knowledge remains within the individual subsidiary, the opportunities to

maintain competitive advantage in the global market can be diminished; inability of the

firm to transfer knowledge throughout the organization can lead to communication costs

and affect the overall efficiency of the organization”100.

From various research papers we have concluded that absorptive capacity and social

capital are two of the key factors of the level of knowledge transfer. Absorptive Capacity

is the ability of a group of people to absorb and effectively use new information taken

from outside the group. Social Capital is the collective resources of an organization 97 The Blackwell Handbook of Organizational Learning and Knowledge Management, Vera and Crossan, Edited by Mark Easterby-Smith and Marjorie A. Lyles, Blackwell Publishing, 2003, p.133 98 c.f. IBID 99 c.f. IBID 100 Towards a Model of Effective Knowledge Transfer within Transnationals: The Case of Chinese Foreign Invested Enterprises, Paul Miesing, Mark Kriger, and Neil Slough, for the Journal of Technology Transfer, 2003 Conclusion

41


embedded in the social networks of the group. We found through literature review that

levels of motivation, opportunities, integration and ability directly affect the levels of

absorptive capacity and social capital.

Absorptive Capacity

Absorptive Capacity is considered as fundamental to knowledge transfer within the

organization101. Accordingly it has been proposed in the knowledge transfer literature that

the absorptive capacity of the receiving unit is the most significant determinant of

internal knowledge transfer in MNCs (Gupta and Govindarajan, 2000)102.

Cohen and Levinthal, 1990 and Kim, 1998 refer to ability and motivation as being

necessary for absorptive capacity, and term these concepts prior knowledge and intensity

of effort103.

‘Prior knowledge base refers to existing individual units of knowledge available

within the organization’ (Kim, 1998 p.271). Thus, employees’ ability, their

educational background and acquired job-related skills represent the ‘prior

related knowledge’ which the organization needs to assimilate and use (Cohen

and Levinthal, 1990). However, in addition to the prior related knowledge, there

should be a certain level of ‘organizational aspiration’… (Cohen and Levinthal

1990). As proposed by Kim (1998) “the intensity of effort refers to the amount of

energy expended by organizational members to solve problems” (p.271)104.

Following the above explanation, Minbaeva et al relates the term ‘intensity of effort’ to

motivation: “even though the organization may consist of individuals with high abilities

to learn, ‘its ability to utilize the absorbed knowledge will be low if employees’

motivation is low or absent (Baldwin, Magjuka, and Loher, 1991: 52)’105.”

101 The MNC Knowledge Transfer, Subsidiary Absorptive Capacity and HRM, Dana Minbaeva, Torben Pedersen, Ingmar Bjorkman, Carl F. Frey, H.J. Park, Journal of International Business Studies, (2003) 34, 586-599 102 c.f. IBID 103 c.f.IBID 104 IBID 105 IBID

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It is concluded that both aspects of absorptive capacity (ability and motivation) need to be

present in order optimally to facilitate the absorption of knowledge from other parts of

the MNC (Minbaeva et al., 2003).

In reference to other determinants of absorptive capacity according to Minbaeva et al

(2003) “previous research has shown that absorptive capacity will be higher when

extensive intra-organizational communication is in place”.106 Zahra and George (2002)

also categorized social integration mechanisms as an antecedent of absorptive capacity

and note “social integration mechanisms can facilitate the sharing and eventual

exploitation of knowledge..firms that use social integration mechanisms that build such

connections are therefore positioned to make their employees aware of the types of data

that constitutes their potential absorptive capacity” 107 . Thus social networks, or

integration, are necessary for absorptive capacity to flourish.

As is evident in its definition, the role of absorptive capacity is not just to receive new

information, but to utilize this knowledge to achieve greater results:

Clearly, pure transmission of knowledge from the source to the recipient has no

useful value if the recipient does not use the new knowledge. The key element in

knowledge transfer is not the underlying (original) knowledge, but rather the

extent to which the receiver acquires potentially useful knowledge and utilizes this

knowledge in own operations108.

From the above considerations we derive ability, motivation, and integration. In addition

to absorptive capacity we found that social capital is the second fundamental pillar for

knowledge transfer.

106 HRM practices and MNC knowledge transfer, Dana B. Minbaeva, Department of International Economics and Management, Copenhagen Business School, Emerald group publishing limited, vol. 34, no.1, 2005 107 Absorptive Capacity: A Review, Reconceptualization, and Extension, Shaker A. Zahra and Gerard George, Academy of Management Review, 2002, Vol.27, No.2, 185-203 108 The MNC Knowledge Transfer, Subsidiary Absorptive Capacity and HRM, Dana Minbaeva, Torben Pedersen, Ingmar Bjorkman, Carl F. Frey, H.J. Park, Journal of International Business Studies, (2003) 34, 586-599, p.2

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Social Capital

According to Angelos Alexopoulos and Kathy Monks the more recent interest in social

capital can be attributed to the rise of the network economy and the emergence of KIFs

(Knowledge Intensive Firms), (Lesser, 2000)109. As Cohen & Prusak (2001: 16) suggest,

‘the size and intricacy of organizations, the proliferation of critical information, and the

increasing complexity of [work] tasks make connection and cooperation – social capital –

increasingly important’110.

According to Nahapiet & Ghoshal’s (1998) theoretical model social capital consists of

three mutually reinforced dimensions: structural, relational, and cognitive social capital111.

Angelos Alexopoulos and Kathy Monks use these dimensions to link social capital to

ability, motivation, and opportunity:

Structural social capital refers to the pattern, configuration, and purpose of

social interactions. Therefore, central to the structural dimension of social capital,

is the existence of network ties among actors, the configuration of network ties

(i.e., density, connectivity, hierarchy), and the notion of appropriability – that is

networks capacity in serving as information resources for different than initially

developed purposes (Coleman, 1988). Social network theorists (Burt, 1992;

Granovetter, 1973; Hansen, 1999) show that the structural properties of social

relationships constitute major resources of benefits derived from: … referrals

which provide ‘information on available opportunities to people or actors in the

network, hence influencing the opportunity to combine and exchange knowledge’

(ibid: 252-253).112

109 c.f. Angelos Alexopoulos and Kathy Monks, A Social Capital Perspective on the Role of Human Resources Practices in Intra-organizational Knowledge Sharing, Centre for Research in Management Learning and Development Dublin City University Business School, submitted to the 5th International Conference on HRD Research and Practice across Europe, 2004 110 c.f. IBID 111 c.f. IBID 112 Angelos Alexopoulos and Kathy Monks, A Social Capital Perspective on the Role of Human Resources Practices in Intra-organizational Knowledge Sharing, Centre for Research in Management Learning and Development Dublin City University Business School, submitted to the 5th International Conference on HRD Research and Practice across Europe, 2004

44


The relational dimension focuses on the content, rather than the structure, of

social relationships. It refers to the kind of relationships individuals or groups of

individuals have developed with each other through a history of social

interactions.

Finally, the cognitive dimension refers to resources that provide shared

representations, interpretations, and systems of meaning among parties. When

interactions embody shared understandings, common language and codes,

employees can enhance their intercommunication abilities, thereby providing

more opportunities to share knowledge effectively (Morris et al., 2002).

According to Tsoukas & Vladimirou (2001) the existence of shared language … is

vital not only for efficient knowledge transfer, but also for knowledge integration

mainly through the establishment of common cognitive schemata and frameworks,

such as metaphors, analogies, and stories, which act as vehicles for integrating

individual understandings and experiences113.

Accordingly Angelos Alexopoulos and Kathy Monks conclude by establishing that social

capital has a reciprocal relationship to employee’s A-M-O: Though constructing shared

language and vision employees are able to share information, cultivating social ties can

motivate employees to share information, and providing the opportunities to share

knowledge through social interaction, social capital aids in the overall process of

knowledge transfer, and through this process social capital itself is strengthened114. “Thus,

social capital can be viewed as both a cause and outcome of employees’ A-M-O to share

their human capital”115.

113 IBID p. 7 114 Angelos Alexopoulos and Kathy Monks, A Social Capital Perspective on the Role of Human Resources Practices in Intra-organizational Knowledge Sharing, Centre for Research in Management Learning and Development Dublin City University Business School, submitted to the 5th International Conference on HRD Research and Practice across Europe, 2004 115 IBID

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However, although social capital may be a reciprocal facilitator in creating common

cognitive schemata and frameworks, we argue that these can also be created and

reinforced by shared experiences within a single, strong corporate culture. For instance,

‘A shared vision embodies the collective goals and aspirations of the members of an

organization … Organization members who share a vision will be more likely to become

partners sharing or exchanging their resources’ (Tsai & Ghoshal, 1998: 467)116.

Social Capital and Absorptive Capacity

We have already established that absorptive capacity is the ability and motivation to

absorb and use new knowledge, and that this ability and motivation is also influenced by

the opportunity to receive such knowledge in terms of the communication channels

available in the firm. We will now show how social capital aids in providing and

supporting the necessary requirements for absorptive capacity, and how an increase in

absorptive capacity will also positively affect social capital.

According to Angelos Alexopoulos and Kathy Monks social capital aids in the

assimilation or absorption of new information by providing the shared codes and

meanings by which to send and receive new information and provides the inherent social

ties, based on trust and integration, which increase the probability of receiving or sending

the necessary new knowledge to solve problems and thus use and create (exploit) the new

knowledge117. For instance, “it has also been conclusively proven that problems and

solutions simultaneously exist in firms, with problem looking for solutions and solutions

finding problems by chance. In a recent study Rajesh S. Upadhyayula & Rajiv Kumar

suggest that internal social capital increases the probability of such occurrences, i.e.,

problems and solutions finding each other.”118 Furthermore, in a study of information

processing and problem solving, it was found that managers avoided sending problems to

formally designated problem solvers, and instead sent problems to people in their

116 IBID 117 Angelos Alexopoulos and Kathy Monks, A Social Capital Perspective on the Role of Human Resources Practices in Intra-organizational Knowledge Sharing, Centre for Research in Management Learning and Development Dublin City University Business School, submitted to the 5th International Conference on HRD Research and Practice across Europe, 2004 118 Social Capital as an Antecedent of Absorptive Capacity of Firms, Rajesh S. Upadhyayula & Rajiv Kumar, DRUID Summer Conference, 2004, p.7

46


personal ties (Stevenson & Gilly, 1991)119. Thus, “internal social capital (personal ties in

this case) increases the probability of information, solutions and problems meeting each

other” 120 . Additionally, based on our literature review we argue that the increased

integration resulting from social capital positively influences absorptive capacity by

augmenting the networks necessary for seeking new information and thereby increasing

the ability to find the information, which in turn could increase individual’s motivation to

search as there is a higher probability of success.

Finally absorptive capacity, through the new use of knowledge, reinforces social capital

by adding to the sum of resources created by the network and through that also

strengthening the ties within that network through the shared experience of knowledge

creation.

Figure 9

119 c.f. IBID 120IBID p.8

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4.5 Conceptual Model

This model can be broken down into three processes in order to enhance understanding.

As we view sustainable competitive advantage as the ability of the firm to implement

new strategies that are not easily imitated by others, we see knowledge transfer as

intrinsically linked to this process. Knowledge that is transferred within the MNC

throughout its history and experiences will inevitably lead to unique organizational

knowledge, which can help the MNC to better serve diverse markets using diverse groups

of people. In order for knowledge transfer to occur there needs to be successful

Intercultural Communications. Unless members can interpret and understand the signals

and messages of their colleagues, they will not be able to process and use the knowledge

presented to them, nor will they be able to transfer this knowledge to others. Furthermore,

to sustain a situation where knowledge transfer and intercultural communications are

successful, the organization must have a culture which supports these processes and is in

line with the strategy and goals of the organization. Thus our model comprises

knowledge transfer, intercultural communications, and the transfer of core values from

the headquarters.

Theory

How

How

Analysis

Danfoss

What Why

HRM

Model

Why

Knowledge

Management

Int.

Communication

Org. Culture

What

Methodology

Introduction

Executive Summary

Figure 10

Conclusion

48


As we could not encompass this phenomenon into a single term, we found that the

ultimate effect of these processes driven by HRM practices is an enhancement of the

already established corporate culture. The firm focuses on the exportation of core values

to the subsidiary while allowing flexibility for obtaining the idiosyncratic and inimitable

assets121 created in the new context, in this case Japan. This and the local knowledge are

reversely transferred to the headquarters and subsequently other subsidiaries. Since the

sources of these processes are driven by the mission/strategy established by the firm and

affect directly the surface of the corporate culture adding from the intangible assets

created in the subsidiary of focus, we have decided to name this model “Sources of

corporate culture competitiveness.” This concept relies on the resource based view

assumption that firms within an industry (or group) may be heterogeneous with respect to

the strategic resources they control and that these resources may not be perfectly mobile

across firms, and thus heterogeneity can be long lasting.122 As this process will enrich the

corporate culture further adding tacit and explicit knowledge from a different context and

increasing the adaptability of the firm and understanding of new knowledge in areas

before unexplored we argue that this phenomenon affects positively the “culture

competitiveness” of a firm. We further argue that a firm should focus on maintaining its

core values while allowing flexibility to enhance its corporate culture through the

application of a set of HRM practices appropriate for the context which will facilitate

intercultural communication while improving the opportunities, motivation, ability and

integration of the employees and thus facilitating the creation of a compatible network of

employees and the transfer of knowledge.

121 Firm Resources and Sustained Competitive Advantage, Jay Barney, Texas A&M University, Journal of Management 1991, Vol.17, No.1, 99-120, copyright 2001 122 IBID

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Of course, not all of the knowledge/practices/etc. created through this process will lead to

competitive advantage and we thus recognize that it is management’s ability to recognize

and promote the most competitive aspects in terms of the environment that will determine

how much competitive advantage the firm will be able to extract from this process.

According to Barney “to have the potential for sustained competitive advantage, a firm

resource must be valuable in the sense that it exploits opportunities and/or neutralizes

threats in a firm’s environment, it must be rare among a firm’s current and potential

competition, it must be imperfectly imitable, and there cannot be strategically equivalent

substitutes for the resource that are valuable but neither rare or imperfectly imitable”.123 It

is stated that performance advantages based on knowledge that is tacit, complex and

specific might be harder to replicate because the causes of superior performance are more

ambiguous to outside observers than to members of the focal firm (Reed and DeFillippi,

1990; Barney, 1991).124 Thus we argue that the intangible assets created through our

model of sources of cultural competitiveness intrinsically fulfill the requirement of being

difficult to imitate as they are based on complex social networks and processes within the

firm. However, it is up to management to decide which assets best fit adaptation to the

external environment.

We argue that the advantage of our model is that it establishes a link between the

individual knowledge activities and the business performance, where business

performance is defined as a multi-dimensional construct capturing not only the efficiency

gains but also production and product developments. The model shows that there is a

strong link between the micro processes of setting up incentive structures and applying

knowledge management tools through managerial action on the level of the unit and the

business performance. The link goes through the development of absorptive capacity and

social capital and thus the stimulation of knowledge inflow from other units.125 We argue

123 Firm Resources and Sustained Competitive Advantage, Jay Barney, Texas A&M University, Journal of Management 1991, Vol.17, No.1, 99-120, copyright 2001 124 c.f. The Blackwell Handbook of Organizational Learning and Knowledge Management, Chakravarthy et al, Edited by Mark Easterby-Smith and Marjorie A. Lyles, Blackwell Publishing, 2003, p. 313 125 Volker Mahnke, Torben Pedersen and Markus Verzin, The impact of knowledge management on MNC subsidiary performance: the role of absorptive capacity, Department of Management, Politics and Philosophy, Copenhagen Business School, CKG WP 10/2003, CKG Working Paper No. 12/2003, ISBN: 87-91506-10-7, 2003

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that this combined with effective Intercultural Communications and a focus on

maintaining core values is the source of corporate culture competitiveness.

Theory

What Why

How

Analysis

Danfoss

HRM

How

Model

Why

Knowledge

Management

Int.

Communication

Org. Culture

What

Methodology

Introduction

Executive Summary

4.6 Human Resource Management Practices

In HRM literature there lists a plethora of strategies and focus points for increasing

productivity. We outline the key findings below, linked to the competencies we argue are

essential to knowledge transfer, namely A-M-O-I and Intercultural Communications.

It is expected that staffing126, training127, appraisal systems128, incentives129, job security

and collaborative work130, corporate socialization mechanisms131, and career management

and development132 when applied as a system of mutually reinforcing practices, help

MNCs to achieve higher outcomes, in terms of the degree of knowledge transfer. We will

elaborate briefly on each of these practices in the next section. At the end of the section

we discuss the concepts of training for expatriates and local staffs in terms of training for

cross cultural encounters for the purpose of providing a necessary insight to Danfoss.

Staffing

Staffing policies affect the ability of employees as well as their motivation. Staffing

includes job analysis, recruitment, and selection procedures. HRM practices should aim

at acquiring, developing, and retaining human capital.133 Staffing procedures should aim

to bring into vacant positions people with the identified skills and knowledge. HRM

practices can also introduce ‘cultural fit’ criteria in the recruitment and selection

processes that can ensure that prospective employees are capable of demonstrating a

knowledge sharing potential willingness, cross-functional team working skills, and

126 see Minbaeva, 2005 and Angelos Alexopoulos and Kathy Monks, 2004 127 IBID 128 IBID 129 IBID 130 see Angelos Alexopoulos and Kathy Monks, 2004 131 IBID 132 see Minbaeva, 2005 and Angelos Alexopoulos and Kathy Monks, 2004

Conclusion 133 Paul Miesing, Mark Kriger, and Neil Slough, Towards a Model of Effective Knowledge Transfer within Transnationals: The Case of Chinese Foreign Invested Enterprises, for the Journal of Technology Transfer, 2003

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collaborative spirit (Robertson & O’Malley Hammmersley, 2000; Swart & Kinnie,

2003).134

Training

“There is extensive evidence that investment in employees’ training

enhances…organizational performance (Delaney and Huselid, 1996; Koch and McGrath,

1996)”. 135 Additionally, similar training experiences can contribute to building

connections across diverse groups in anticipation of the future formation of cross-

functional teams.136 Training can be a facilitator of not only integration, but also abilities,

and intercultural communication.

Appraisal systems

Appraisal systems can provide employees with feedback on their performance and

competencies, and give directions for enhancing their competencies to meet the needs of

the organization.137 If executed properly, performance appraisals can lead to employee

development, motivation, and ability. This strategy appraises individual and team

performance so that there is a link between individual innovativeness and company

profitability.

Incentives

HRM practices may influence individual performance by providing incentives that elicit

appropriate behaviors. Such incentive systems may include reward systems which

include performance-based compensation, the use of internal promotion systems 138 ,

freedom to do research, freedom to fail, freedom to form teams, freedom to run

134 Angelos Alexopoulos and Kathy Monks, A Social Capital Perspective on the Role of Human Resources Practices in Intra-organizational Knowledge Sharing, Centre for Research in Management Learning and Development Dublin City University Business School, submitted to the 5th International Conference on HRD Research and Practice across Europe, 2004 135 HRM practices and MNC knowledge transfer, Dana B. Minbaeva, Department of International Economics and Management, Copenhagen Business School, Emerald group publishing limited, vol. 34, no.1, 2005 136 Angelos Alexopoulos and Kathy Monks, A Social Capital Perspective on the Role of Human Resources Practices in Intra-organizational Knowledge Sharing, Centre for Research in Management Learning and Development Dublin City University Business School, submitted to the 5th International Conference on HRD Research and Practice across Europe, 2004 137 HRM practices and MNC knowledge transfer, Dana B. Minbaeva, Department of International Economics and Management, Copenhagen Business School, Emerald group publishing limited, vol. 34, no.1, 2005 138 (Huselid, 1995)

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businesses, balancing pay and pride, dual career tracks, recognition rewards, and

balancing team and individual rewards. This strategy uses rewards to motivate personnel

to achieve an organization’s goals of productivity, innovation and profitability. However,

one must be careful when using incentive systems to create motivation among employees,

as this type of motivation lends its self more to extrinsic motivation than intrinsic

motivation. It is essential to motivate employees intrinsically, for instance through

individual development schemes in order to facilitate knowledge transfer, especially tacit

knowledge.

Career management and development

Career management includes empowering people, leading by example, and continued

education. This strategy matches employees’ long-term career goals with organizational

goals through continuing education and training. 139 In career development where

mentoring plays an important role is important as strong connections to a mentor can lead

to increased access to the organizational network resulting in career advancement.140

Job Security and collaborative work

In addition, it is suggested that high levels of employee commitment can be associated

with knowledge sharing proclivity (Hislop, 2003)141. Additionally, “Leana & van Buren

III (1999) suggest that a long term orientation to employment relationships, including the

provision of job security and the promotion of collaborative work, can build relational

contracts between employees and employer and also among employees, thereby

increasing the level of integration”142.

139 HRM practices and MNC knowledge transfer, Dana B. Minbaeva, Department of International Economics and Management, Copenhagen Business School, Emerald group publishing limited, vol. 34, no.1, 2005 140 Angelos Alexopoulos and Kathy Monks, A Social Capital Perspective on the Role of Human Resources Practices in Intra-organizational Knowledge Sharing, Centre for Research in Management Learning and Development Dublin City University Business School, submitted to the 5th International Conference on HRD Research and Practice across Europe, 2004 141 c.f. IBID 142 IBID

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Corporate socialization mechanisms

Corporate socialization mechanisms such as informal socialization, group activities and

projects, company outings, and the creation of shared visions and goals can aid in

integrating employees by providing them the opportunity to communicate and form

social relationships.

Finally, research has also indicated that HRM practices have the most complementary

effect on the degree of knowledge transfer when they are applied as a system.143 In fact,

this point is somewhat self evident, as HRM practices as part of a well thought out

strategy will most likely have a greater effect than HRM practices which are used

arbitrarily. For instance, “while the adoption of individual HRM practices may be

expected to influence innovation performance positively, the adoption of a package of

complementary HRM practices could be expected to affect innovation performance much

more strongly” 144(Laursen and Foss, 2003, p. 257)145. Finally it is recommended that HR

policies maintain a flexible world view throughout the process of creating and

implementing strategies. “They should recruit and place, train and retain, and rotate the

best minds available for the task, wherever they might come from, and be open to flexible

implementation of policies in diverse cultures”146.

The HRM practices should fit the organizational context.147 As, Etzioni (1975) identified

four levels of employee commitment and involvement in the organization, including

moral involvement, calculative involvement, compliant involvement, and alienative

involvement148. We argue that employees working in an environment which does not

correspond to their cultural values and needs will result in alienative involvement, which

is considered a negative set of attitudes that reject the organizational values, where effort

is minimal.

143 HRM practices and MNC knowledge transfer, Dana B. Minbaeva, Department of International Economics and Management, Copenhagen Business School, Emerald group publishing limited, vol. 34, no.1, 2005 144 IBID 145 c.f. IBID 146 Paul Miesing, Mark Kriger, and Neil Slough, Towards a Model of Effective Knowledge Transfer within Transnationals: The Case of Chinese Foreign Invested Enterprises, for the Journal of Technology Transfer, 2003 147 International Human Resource Management, A Cross Cultural Approach, Terence Jackson, Sage Publications, 2002 p.123 148IBID p. 108

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4.6.1 Intercultural Training

In addition to the training considerations mentioned in connection with knowledge

processes. It is important to aid these processes by training in intercultural capabilities as

it has been pointed out that intercultural communications affects some of the key

determinants of our conceptual model.

It is recommended that both local employees and expatriate employees receive cross

cultural and intercultural communications training149. Training should include topics such

as cross cultural and intercultural communications. Additionally, the expatriate may need

a greater understanding of headquarter units than he/she normally acquires within his/her

functional specialization 150 . Cross cultural training should include identifying the

expatriate with the new culture so that he/she will be able to comfortable reproduce the

appropriate behaviours in the new setting151. Additionally it is argued that a level of self

knowledge is essential to be able to effectively adapt to a new culture152. The importance

of cross cultural training is highlighted in the model below. Furthermore, the ability to

communicate with local staff and vice versa is essential to success. Therefore, language

training, even to a beginner level will be beneficial. Even if the company language is

standardized (for instance to English), local staff may not be proficient or completely

capable153. Additionally, we argue that communication styles need to be understood and

included in cross cultural training for intercultural communication to be successful, as

communication encompasses much more than language (for example, body language,

timing, communication channels, etc.). Moreover local staff can also benefit from cross-

cultural training that enables them to operate at maximum efficiency when dealing with

foreigner clients and also with expatriated headquarters staff154. Expatriate assignment

can fail because the local employees are unwilling to modify their behaviour in

149 International management Cross Cultural Dimensions, Second Edition, Richard Mead, Blackwell publishing, 1998, p.407-414 150 IBID 151 IBID 152 Role of Cultural Self Knowledge in Successful Expatriation, Iris I Varner and Teresa M Palmer, Singapore management review, 2005, Volume 27, No. 1 153 IBID 154 International management Cross Cultural Dimensions, Second Edition, Richard Mead, Blackwell publishing, 1998, p.407-414

55


relationship with the visitor155. The training can be administered locally, or by giving

local managers the chance to experience the working culture in headquarters. In many

contexts, the opportunity to work at headquarters or attend training there carries status,

and can be useful incentive to performance156. Additionally, it is important that local staff

also receive training in the company’s official language in order to aid communications

as much as possible. Finally we stress that the more support the organization offers to the

training effort, the more likely that the training will meet its objectives157. In this regard it

is important that headquarters not only supports but encourages and if necessary demands

that employees complete the necessary training.

4.7 Cultural Differences

“It is not only about understanding, but about understanding what the other one

understands” Soren Kirkegaard

“Functions and policies are aimed ultimately at meeting the concerns and goals of the

multinational organization. These include global competitiveness efficiency, local

responsiveness, flexibility, and organizational learning and transfer of information. These

concerns, of course, vary from company to company (Schuler et al., 1993)”158. For this

reason the following section will outline the differences in Danish and Japanese working

cultures. These considerations will be applied in the analysis and recommendations for

the implementation of HRM practices in Japan.

Cultural differences

To highlight some of the key cultural differences between Japanese and Danish culture

we provide the cultural dimensions of Hofstede:

155 IBID 156 IBID 157 IBID 158 International HRM A Cross Cultural Approach, Terence Jackson, Sage Publications, 2002, p.59

56


Figure 11

Denmark Japan

02040

6080

100

PDI IDV MAS UAI0

20

40

60

80

P D I ID V M A S UA I

Power Distance Index (PDI) focuses on the degree of equality, or inequality, between

people in the country's society.159

Individualism (IDV) focuses on the degree the society reinforces individual or collective

achievement and interpersonal relationships.160

Masculinity (MAS) focuses on the degree the society reinforces, or does not reinforce, the

traditional masculine work role model of male achievement, control, and power.161

Uncertainty Avoidance Index (UAI) focuses on the level of tolerance for uncertainty and

ambiguity within the society - i.e. unstructured situations.162

Although important, more necessary than cultural dimensions are specific examples of

differences in practices and values in the working environment highlighted below.

159 http://www.geert-hofstede.com/hofstede_denmark.shtml, ITIM Creating Cultural Competencies 160 IBID 161 IBID 162 IBID

57

http://www.geert-hofstede.com/hofstede_denmark.shtml


Working Culture

Denmark

Denmark has been classified as being socially individualistic 163 , which means that

although Danish society and working culture is group oriented in many aspects, there is a

strong tendency towards individualistic attitudes as well. From a group perspective,

discussing subject to an agreement is important. It is not common to resolve matters by

vote, but rather through discussions which focuses on seeing matters from all possible

perspectives and reaching a consensus164. Great emphasis is also placed on equality and

the ideal that everyone is equal and must have the same rights regardless of their social or

ethnic background. This is expressed in the so-called “Law of Jante,” which is an

unwritten codex of behavior. It says, among other things, “Do not think you are

something” and “Do not think you are more than others.”165 This may also be reflected in

the low ranking of power distance in Danish culture, as bosses are seen more as team

leaders and group facilitators as opposed to being the key decision makers that delegates

tasks to others166. The ability to co-operate is highly regarded, thus employees are often

encouraged to express their opinions freely at meetings and everyone’s opinion is given

consideration when making decisions167. In this regard, the individual aspect of Danish

working culture is also apparent, as Danes are encouraged to express their individual

opinion directly, even to superiors. It is claimed that there is a “pronounced orientation

toward the self, yet with an obligation to help those who are not able to help

themselves”168. “There is an emphasis on individual initiative and achievement, with

one's competency being more important than his or her station in life. The dignity and

worth of individuals is promoted along with the right to a private life and opinions”169.

163 Danish ministry of science technology and innovation, source: Eaton Consulting Group, http://www.workindenmark.dk/Work/0/4/0 164 IBID 165 IBID 166 Copenhagen Capacity, Danish Working Culture, 09.02.05, http://www.copcap.com/composite-1355.htm 167 IBID 168 Executive Planet, Danish working culture, http://www.executiveplanet.com/169 IBID

58

http://www.executiveplanet.com/


In terms of formality, Danish working culture is considered informal and democratic170.

This is reflected in informal dress codes and the norm of addressing superiors by their

first names171. Work emphasized pragmatic decision making depending on the resources

available. “Danes desire that each minute spent on the job is productive and used

effectively”172. This may be because there is also importance placed on the individual

right to have a personal life with family and friends. According to Holt Larsen (1987), a

Danish academic, Danes start their processes by looking at the resources at hand taking a

pragmatic approach rather than focusing on goals and ideals173. Danes use meeting to

keep colleagues and employees up to date, and this constitutes an important part of

Danish working culture. Danes prefer meetings to be short and well structured, with a

preponderance of factual information174. Socialization mechanisms normally commence

in yearly Christmas functions and after work beers usually on Fridays, however these

events do not play as an important role as they may in other cultures. For instance it is

claimed that social life at work is concentrated around the lunch break as many Danes

prioritize family life very highly and go straight home after work175.

Japan

According to Yoko Sano, “it is argued that, if the features of the advanced nations were

individualism, democracy, property rights, a contractual society and openness, then the

Japanese society manifested the contrasting features of collectivism, suppression of

individuality, cooperative systems and insularity”176. Being essentially a group oriented

society, Japanese firms tend to have goals including “unity of feeling for the

organization”, “flexibility in work behaviours”, “stability”, “work regulations” and

170 Copenhagen Capacity, Danish Working Culture, 09.02.05, http://www.copcap.com/composite-1355.htm 171 IBID 172 Danish ministry of science technology and innovation, source: Eaton Consulting Group, http://www.workindenmark.dk/Work/0/4/0 173 c.f. Cultural dimensions of decision making: Denmark and France compared, Jette Schramm-Nielsen, Copenhagen Business School, Frederiksberg, Denmark, Journal of Managerial Psychology, Vol. 16 No. 6, 2001, pp. 404-423, MCB University Press, 0268-3946, 2001 174 Danish ministry of science technology and innovation, source: Eaton Consulting Group, http://www.workindenmark.dk/Work/0/4/0 175 IBID 176 Human Resource Management in Japan By Yoko Sano pg.151

59


“ cooperative labour-management relations ” for employee behaviour outcomes177. The

resulting greater mutual commitment found in Japanese organizations may represent a

capturing of the wider societal values of collectivism and humanism. In order to achieve

these goals, communication between labour and management is considered vital. The

previous research made on the Japanese HRM by James Abegglen show that managers in

Japan were very much involved in various private issues of their employees, as they se

them self as parent of the company178. In turn, Japanese employees often view their firm

and the relations within it as family like. Finally when communicating in a collectivist

society such as Japan discussing a person’s performance openly with him or her is likely

to clash head-on with the society’s harmony norms and may be felt by the subordinate as

an unacceptable loss of face.179 As a group, in Japan, almost all work is done as team as

“team production”. In consequence, there is no simple relation between individual skills

and organizational productivity. The efficacy of “organizational productivity” involves

information sharing, an increase in consciousness of belonging to the firm and harmony

in human relations180. Additionally, the work ethic is connected with the individual’s

interaction with the work group. It is through the work group that employees gain their

identity and associate their activity with the michi, or ‘the way’. As Japanese culture is

relatively indirect, to avoid disputes or to resolve them quickly, adequate

communications are essential181. For instance, to avoid conflict in Japan dictates avoiding

saying something to someone which would put him or her in an embarrassing position, or

causing the other difficulties, even in the competitive world of business.182 In Japanese

there is a term Haragei which means the art (gei) of the belly (hara) where the belly

signifies ones “heart”, what one is really thinking. The art is in transmitting one’s

intention without putting it directly into words. The complementary process is to read

(yomu) another’s intentions (hara o yomu).183 In Japan group consensus is reached

177 IBID 178 IBID 179Working in Japan: An Insider’s guide for Engineers, The Modern Working Environment in Japan Hiroshi Honda- Editor, Raymond C. Vonderau, Kazuo Takaiwa, Daniel Day, Shuichi Rukuda- contributing editors, ASME Press, New York 1992, p.93 180 Human Resource Management in Japan By Yoko Sano pg. 86 181 Human Resource Management in Japan By Yoko Sano pg.151 182 Working in Japan: An Insider’s guide for Engineers, The Modern Working Environment in Japan Hiroshi Honda- Editor, Raymond C. Vonderau, Kazuo Takaiwa, Daniel Day, Shuichi Rukuda- contributing editors, ASME Press, New York 1992 183 Working in Japan: An Insider’s guide for Engineers, The Modern Working Environment in Japan

60


indirectly through ceremonial business practices such as the ringi184 system of decision

making, Nemawushi which is a practice used by management to informally and initially

sound out employee’s ideas on a proposed occurs of action, and ringi seido which is a

formal procedure of management by group consensus. Thus general meetings in the firm

are more a ceremonial closing the previous procedures rather than a place to discuss and

finalize ideas.

Hiroshi Honda- Editor, Raymond C. Vonderau, Kazuo Takaiwa, Daniel Day, Shuichi Rukuda- contributing editors, ASME Press, New York 1992 184 “Whereby proposals are generated and decisions reached through a process of drafting by subordinates, discussion at various levels of an organization, and final approval by senior executives. A key feature of this system is that personal responsibility for specific proposals is avoided, even as group harmony is enhanced.” IBID

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5. Case Study of Danfoss K.K

Theory

Danfoss

How

Analysis

What Why

HRM

How

Model

Why

Knowledge

Management

Int.

Communication

Org. Culture

What

Methodology

Introduction

Executive Summary

Danfoss KK Japan profile

Danfoss KK Japan established its first Japan based sales office in Tokyo’s Ota Ward in 1961. Locations: Head Office 1168-1 Hotozawa, Gotembashi Shizuoka-ken 412-0046 Japan Shin-yokohama office KC Bldg. 4F. 3-16-1 Shinyokohama-shi Kohoku-ku, Kanagawa 222-0033 Japan Osaka Office Kouie Bldg. 2-8-10 Shibata Kita-ku Osaka 530-0012 Japan The mission of the Danfoss Group, as stated below, is the key for all Danfoss business worldwide

• We will produce and deliver products to the total satisfaction of our customers in global markets with a high degree of environmental consciousness.

• We are a committed group of people with meaningful working lives.

• We will globally promote the Danfoss culture while supporting and respecting local values.

• We will seek to strengthen the societies in which we play an active role

Danfoss K.K Goals: Financial: Min 10% annual growth in overall sales in 2004 & onwards. Work towards an 18% expense ratio by the end of 2005 (2006 budget).Work towards a RONA of 14% by the end of 2008 (RONA=BCR/Assets) Customer: Focus on customer needs & satisfaction Processes: Focus on lean (processes, method approach, procedure, organization, technique, system…), quality & value. President of Danfoss K.K. – Japan Gregers Baungaard Human Resource Manager, Danfoss K.K.- Gotemba Yutaka Goto Danfoss K.K. employs about 62 employees in three offices

Danfoss company profile

History

The company of Danfoss is found by Mads Clausen in 1933 and previously called “Dansk Køleautomatik- og Apparat-Fabrik”. Danfoss is based in Nordborg in southern Denmark.

Location Headquarters Danfoss A/S DK – 6340 Nordborg Executive Committee Chief Executive Officer : Jørgen Mads Clausen Chief Finical officer : Ole Steen Andersen Chief Development Officer : Hans Kirk Chief Operation Officer : Niel B. Christiansen Danfoss business areas Matrix Organization (see table *) • Refrigeration & Air Conditioning • Heating • Motion controls • Industrial controls • Water controls • High-Pressure Water Solutions and • Comfort Panels Financial Information Danfoss net sales experienced growth in net sales from 15,434m (dkr) in 2003 to 16,345m (dkr) in 2004, corresponding to 6 % growth. A 9 % increase more than the previous year. More 20 % of the net sales are covered from markets in Eastern Europe, Russia, Asia, among these China. The markets in North and Latin America also showed positive double-digit growth rates.

*The Matrix Organization Advantages Disadvantages 1. Accommodates a wide var ety of i

Project-oriented business activities.

Can create confusion and contradictory policies by allowing dual accountability.

2. Maximizes efficient use of functional managers.

Necessitates tremendous horizontal and vertical coordination.

3. Enhances coordination

Conclusion

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Danfoss Vision The Danfoss Vision defines the desired future state of Danfoss, as well as our desired place in

the market. A vision is a dream of what we want to achieve in the future. Danfoss will be … … a global leader... …

… within our core businesses ...

... as a highly respected company …

… which improves quality of life …

… by mastering advanced technologies …

… in customer applications …

… while creating value for all stakeholders. Danfoss Japan Mission Statement In addition to our global Danfoss Mission, the management at Danfoss Japan has developed he following mission statement, which is specific to Danfoss Japan and defines our purpose as ll as what expectations and values are promoted on a daily basis.

twe

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The case study will be presented through a resume of five perspectives including our

team member’s observation period, our interviews, our survey data, and the EPS data

provided by Danfoss.

Our team member began working for Danfoss in September 2004 in the Shin Yokohama

office. She worked consistently in both the Shin Yokohama and Gotemba office,

although only visited the Osaka office once.

Our team member’s perception was that motivation was low. She noticed that there was

little participation by local staff in strategic meetings, and that staff had various

complaints about the circumstances. For instance, both local employees and expatriates

complained about communication and cultural understanding problems, and some local

employees complained about their compensation levels.

Both the Danfoss Asia and Danfoss K.K presidents commented that the level of

motivation in Japan is low. Possible reasons presented for this were the lack of attention

from HQ in Japan, low levels of integration into the rest of the company, the perception

of Danfoss as a foreign company, the employee’s lack of aggressiveness and “wanting to

do something extraordinary”, and the re-organization of the Gotemba office. It was

mentioned that the situation could be improved through better communication with other

areas of Danfoss, such as the factories. Currently Danfoss K.K uses economic incentives

based on performance to motivate employees.

The Employee Perception Survey (EPS) showed that local staff were least motivated by

wages and conditions of employment (satisfaction rated 48% as compared to the Danfoss

average of 68%), pay compared with similar outside jobs (46%, Danfoss average 60%),

and other conditions of employment compared with similar outside jobs (55%, Danfoss

average 74%). Additionally job security was a great concern, 45% felt secure compared

to the company average of 69%. This factor has also influenced negatively some of the

motivational factors such as overall satisfaction and motivation and faithfulness, which

clearly show that the Gotemba averages are much lower than the rest of Danfoss K.K.

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Finally, the perception of top management was low, 57% compared to the Danfoss

average of 72%. According to our team member’s observations it seems that motivation

is affected by cultural misunderstandings. Finally the Japanese subsidiary represents the

second lowest country in the country map after Malaysia which is in a critical position.

Our questionnaire data supported the above, showing motivation to be at 63%.

However, employees seem satisfied with the level of opportunity for professional and

personal growth, 66% as compared to the company average of 65%.

The ability in Danfoss K.K can be viewed from many perspectives. The perception of

local employee’s abilities is not high. On the other hand, the EPS survey revealed that

employees view top management’s ability to make the right decisions as low, 55%

compared to a company average of 69% as well as top management’s talent to think

globally, 51% compared to a company average of 70%. Additionally, our questionnaire

data showed that the Japanese employees do not view themselves and their colleagues as

being very capable (55%), they also indicated a lack of training (necessary training in

Danfoss: 57.5%). This is the lowest section of our data from our questionnaire. Danfoss

K.K offers leadership competency training programs, and sends its employees to

conferences periodically.

In Danfoss there are various training programs and seminars held, periodic company

social events, and an intranet which according to all of our sources works very well. Our

questionnaire proposed a relatively high level of opportunity for employees in Danfoss

K.K in terms of opportunity to learn and form a career. However, our questionnaire also

showed that employees indicated a lack of training.

Our team member’s observations showed that integration in Danfoss K.K is good

between the local employees and between expatriate employees, however very poor

between the local and expatriate employees. We found that integration between local

employees and expatriate employees was considered low, and was ranked at 0%. It was

also noted that general integration of the subsidiaries was expressed as poor, as the

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subsidiaries do not view themselves as a part of Danfoss Asia or even just Danfoss, but

identify much more with their own subsidiary. Our questionnaire showed that integration

between local employees was the highest ranked section, with 67%. However, the

integration between local and expatriate employees was ranked the second lowest at 55%,

especially socialization with foreign employees was especially low at 40%.

According to our team member’s observation period communication in Danfoss K.K

between Japanese employees is good, however communication between local and

expatriate employees is very poor. For instance in the general meetings there is very little

discussion about strategies and ideas, as the expatriate employees are outspoken, while

the local employees remain silent. The EPS survey ranked top management’s ability to

inform the employees at 51% compared to the Danfoss average of 65%. Top

management’s ability to clearly communicate visions and strategy was ranked at 57%

(Danfoss average: 70%), and their ability to clearly communicate goals and results was

ranked at 58% (Danfoss average: 72). It was noted that communication style differences

are a main cause of this. Direct versus indirect approaches and high versus low context

communication styles were main differences noted. Communication is also hindered by

the location of the Gotemba office. The data from our questionnaire also showed that

communication was low, and that communication with HQ was lower than

communication with other subsidiaries.

The report from our team member’s observation period showed that the core culture of

Danfoss may be understood by the local employees, but it doesn’t seem very deeply

ingrained in them. Additionally, due to cultural differences there did not seem to be a

high level of shared values. It appeared that the working cultures of the expatriates and

local employees remained different, somewhat running parallel to each other, and at

times becoming a cause of conflict. For instance, the EPS survey showed that local

employees viewed the ethics of Danfoss top management to be 61% compared with a

company average of 73%.

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6. Discussion: Application of Theory to Danfoss K.K. Executive Summary

Introduction In the Analysis section we will discuss the connections between the empirical findings

and our theoretical model. We will use a TOWS analysis to determine the strengths,

weaknesses, opportunities, and threats presented to Danfoss according to our model. We

will make recommendations as to which HRM practices should be implemented and how.

Methodology

Figure 12

Communication

Communication between local employees and between expatriates in Danfoss K.K is

strong. Additionally communication between regional managers and between managers

and headquarters is good. Danfoss has recognized the necessity of improving

communication and has thus implemented a leadership development programme for

managerial level. In lower levels there are some cross boarder projects and some transfer

of employees. There is also a fair amount of travel, providing the chance for face to face

meeting.

Theory

What

Analysis

Danfoss

What Why

HRM

How

Model

Why

Knowledge

Management

Int.

Communication

Org. Culture

How

Conclusion

67


However, the main area of concern is the communication between expatriates and locals.

The expatriates perceive that the local employees should change their style of

communication to become more aggressive and express their ideas more directly.

Currently, the communication is one way from the expatriates, as the local employees do

not express themselves directly. There is frustration as local employees do not seem to

express initiative in meetings and planning while the local employees are also frustrated

as they are not provided with the working culture they are used to expressing their ideas

in, indirectly. The perception that the local employees should change is not effective in

improving communications. The expatriate’s attitude toward communication with the

local employees is positive in that they desire more effective discussions, and for the

local employees to have a role in decision making. They would also like to be sure that

the local employee’s needs are met. The problem is that despite good attitudes, there has

been little done to ensure that expatriates and local employees have the intercultural

communication tools to effectively interact. Additionally, this situation has been

recognized by management who seem willing to work on the problem before it worsens.

If nothing is done to improve communications it will continue to effect areas such as

integration, motivation, and knowledge transfer.

Additionally the communication between the three offices is generally poor. The

managers of each office meet approximately once or twice a month, and because the HR

office is located in a different office than the president, a strategic communication point

is broken. The main effect of this lack of communication is lower integration between

Danfoss K.K employees, which may in turn inhibit the creation of a shared culture.

However, it has recently been decided to sell the building in Gotemba and expand the

office in Shin Yokohama. This provides an opportunity to bring necessary departments

together, and to improve general communication, especially between the president and

HR.

Although some expatriates communicate well with headquarters, local employees have

limited communication. The expectations for communication differ between local

employees and headquarters as local employees are indirect and do not feel very

68


comfortable approaching headquarters as they do not have a direct relationship. On the

other hand, headquarters expects that the local employees will contact them if they are in

need of support or advice. Additionally, as the communication within the subsidiary

(between local and expatriate employees) is poor, headquarters may not receive clear

communication from the subsidiaries. From a long term perspective once communication

within the subsidiary begins to improve, communication with headquarters will follow.

Motivation

Low levels of motivation have been one of the main concerns in Danfoss K.K. This could

be because of differing perceptions of what motivation is, and how to motivate an

employee. From our different sources our understanding is that local employees are

making an effort to complete their tasks well and participate in the organization. However,

the working culture has been formed through expatriates working style which in its

differences to the Japanese style has caused friction and misunderstandings, as this has

not been accompanied by cultural training or adaptation to the local culture. Furthermore,

locals have demonstrated certain levels of frustration about the compensation of the

expatriates and feel that they get special treatment. This should be studied and Danfoss

KK should avoid signaling a difference in treatment.

Managers have unsuccessfully tried to implement different motivational policies such as

performance based incentives. However, motivation in Japan is difficult to achieve by

these means, as it is rather a long term process based on group identity and paternalistic

relations with the organization, which fosters loyalty and faithfulness. For this reason

other factors such as integration, communication, and shared values and visions play a

very important role in the long term to achieve a more intrinsic motivation. Additionally,

the sales initiative of Gotemba has had a large impact on employee motivation as it

affects senses of job security, which is central to motivation in Japan. However, if

managed correctly this could have a positive affect on integration and communication. If

the motivation is not improved in Danfoss K.K it could prove to be a threat to effective

operations. This needs to be treated very carefully.

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Integration

This section presented big contrasts. While the integration between Local employees was

one of the highest factors, the integration between expatriates and local employees is an

area of major concern. The division is affecting many factors in the subsidiary, such as

communication, shared culture and the motivation of both expatriates and local

employees. However in Japan integration cannot be achieved in the short term.

Integration should come from a joint effort in trying to understand the different working

cultures and being able to compromise to work together as a team. Some efforts are being

made. There is a need of having more regular cultural workshops and integration

workshops. We have noticed that programmes established in other subsidiaries such as

the “introduction day” have not been applied in Japan.

The fact that the integration of local employees is high represents an important starting

point. Another positive aspect is the good relationship between employees and their

immediate superior.

As for integration of the subsidiary with headquarters Japan was rated as the second

lowest country after Malaysia, which is in a critical condition. That might indicate that

Japan is not well integrated into the rest of Danfoss. We have noticed that Danfoss K.K

has not been given a significant role and may not be a subsidiary of focus. However,

Japanese investment in other areas of Asia and Danfoss K.K’s long term experience in

the region, combined with a growing focus in Asia as a region represents an opportunity

for Japan to become better integrated to the rest of the company.

The lack of integration of Danfoss KK to the overall company has in turn affected the

effective internalization of Danfoss core values. It is also affecting the transfer of

knowledge, as there is little interest from Japanese local employees in helping other

areas/Headquarters and vice-versa. Integration within Danfoss K.K represents an

important area of concern as there is a big contrast between local-local integration and

70


between local employees and expatriates. Thus the link to the Headquarters and the rest

of the company is “broken”.

Corporate Culture

Corporate culture and share visions overall represent an average section. Results from our

empirical data demonstrated that while there is an identifiable level of culture within

Danfoss KK this is not well linked to the overall Danfoss culture and it is not internalized

by the employees. Japanese employees identify themselves more with Danfoss KK rather

than with Danfoss as a whole. Instead of internalizing the core values of Danfoss, a

Danfoss style has been established relating to products, training and other artifacts.

Employees in Danfoss KK perceive the subsidiary as a Japanese firm; on the other hand

Danfoss expatriates have been trying to transfer the notion of Danfoss as an international

company. The internalization of core values is a long term process. Efforts have to be

made in the long run to establish regular seminars and workshops about the company’s

vision, mission and goals. Good relations between expatriates and Local employees

represent an important factor to being able to improve the effective understanding of the

Danfoss organizational culture. The organizational restructuring of Danfoss KK can be

an opportunity to being more proactive in promoting the Danfoss culture.

Ability

Japanese employees in Danfoss KK are perceived by managers as being extremely

organized in a demanding system while having the strictest quality demands. However

results from the applied questionnaire showed ability to be the second lowest factor.

Japanese employees do not view themselves and their colleagues as being very capable.

They also indicated a lack of necessary training in Danfoss. This could be a reflection of

lack of motivation as training has been pointed to be a source of motivation for Japanese

employees. There are many perspectives from where you can see ability in Danfoss KK.

Staffing/recruitment policies could be an area of opportunity to increase overall ability in

the subsidiary. Training in the areas where employees perceive a lack of ability can also

help improving motivation.

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Opportunity

Opportunity for Danfoss K.K employees to interact with employees from other areas of

Danfoss appears high. There are various training programs and seminars held, periodic

company social events, and an intranet which according to all of our sources works very

well. Our questionnaire proposed a relatively high level of opportunity for employees in

Danfoss K.K in terms of opportunity to learn and form a career. However, our

questionnaire also showed that employees indicated a lack of training, which may suggest

that the employees do not feel they have access to, or are not aware of some of the

opportunities available, and the opportunity to learn from HQ and other subsidiaries was

low. The fact that Danfoss provides the needed opportunities is a great strength of the

company. Danfoss KK should encourage its expatriates and local employees to gain from

this. This area could be a great source of strength to improve other factors.

Knowledge Transfer

As Danfoss employees in Danfoss K.K do not see themselves as a part of Danfoss as a

whole, or Danfoss Asia there is less propensity to help others or share knowledge.

Additionally, according to managers there is no culture to share information about issues

like communication processes or management. As the levels of integration are low

between expatriates and local employees knowledge transfer is weakened. There are

some opportunities for knowledge transfer to occur due to the BA organizational

structure. This provides the opportunity to share knowledge; however, the knowledge

transferred is mostly of a technical nature. Knowledge transfer was the fourth worst

ranked section of our questionnaire. However, some managers have identified the

potential value of knowledge transfer and believe that Japan has a lot to teach other

subsidiaries in areas such as quality control and customer service. This provides an

opportunity to develop knowledge transfer into the culture of Danfoss.

HRM Practices

HRM practices in Danfoss K.K are weak as according to managers there is not a real

strategy for HRM in Asia. Additionally, according to the mangers HRM in Asia lacks

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competencies and professionals with understanding of global companies and cross

cultural issues. In Danfoss K.K the HRM department runs like an administration office,

and weak communication between HRM and the President hinders the creation of

policies appropriate to the context. Rather, the evidence suggest that HRM practices are

an arbitrary blend of Japanese and Western practices, and there are many inconsistencies

concerning the treatment of expatriates and local employees resulting in friction, low

integration, and low motivation. Additionally, HRM practices have not been tailored to

hire and train employees with cross cultural abilities and communication abilities, which

in turn affects the potential levels of knowledge transfer and successful communication.

In the Japan office there is no one directly responsible for HRM policies or strategy, and

various persons fill various roles. Many HRM decisions are made by the president, with

no input from his Japanese colleagues due to communication style differences.

Headquarters have not been pro active in encouraging or supporting the HRM

department in Japan. The lack of HRM competencies poses a threat to the optimization of

Danfoss K.K.

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6.1 Recommendations TOWS

Strengths (S) 1. Local-local integration 2. Local-local communication 3. Japan’s high level of skills and overseas investments

Weaknesses (W) 1. Communications 2. The perception of different treatment of expatriates and local employees 3. Low Motivation 4. Low local and expatriate integration 5. Danfoss employees perceive themselves and colleagues as having low levels of ability 6. Managers (and families) lack of training in intercultural abilities prior and during expatriation period.

Opportunities (O) 1. Sale of Gotemba 2. Cultural values based on artifacts, i.e. technicalities 3. Recognition of the skill set in Japan 4. Danfoss provides opportunities for travel, workshops, and training.

SO 1. The sale of Gotemba represents a turning point which can be capitalized as an opportunity to develop the internalization of core values to a deeper level. 2. Draw from the high integration and communication levels already apparent in locals. 3. Use Japan’s high level of skills and overseas investments to increase the subsidiary’s integration into Danfoss Asia and Danfoss as a whole. This will also improve knowledge transfer.

WO 1. Use the sale of Gotemba to improve communications between departments, and to improve the consistency of HR practices to improve the perceptions of treatment. 2. Use the opportunity for workshops, travel, and training to improve communicative ability. 3. Encourage the usage of the opportunities to travel, hold workshops and provide training to improve intercultural and integration programs. Enforce usage on managers. 4. Provide employees with training to improve abilities perceived as week.

Threats (T) 1. Little HR support from HQ and general low HR competencies in Japan. 2. Low levels of knowledge transfer 3. Further disintegration of Danfoss K.K from Danfoss Global. 4. Low levels of motivation and integration between expatriates and local employees could be a threat.

ST 1. Use opportunities for integration and cultural workshops to improve integration between local and expatriate employees. 2. Use resources for training to help improve motivation of employees.

WT 1. HR support from HQ and HR competencies in Japan need to be improved in the short term in order to increase motivation and levels of integration. 2. Integration between Danfoss K.K and Danfoss Global needs to be improved to prevent losing knowledge transfer opportunities and to avoid allowing the further loss of identification with Danfoss Global.

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We have highlighted the main areas of strength, weakness, opportunities, and threats

which Danfoss currently faces. These are combined to provide strategic

recommendations to Danfoss. These recommendations include using the sale of the

Gotemba office as an opportunity to develop the internalization of core values, increase

communication (especially between the president and the HRM department), and to

foster integration using the levels of integration already apparent between locals; Making

better use of the opportunities for travel, training, and workshops to train employees in

the areas of intercultural communications and to improve their level of motivation and

(perceived) ability; Improve the HR competencies greatly by increasing contact with the

headquarters HR department, administering training, and providing a long term HR

strategy.

In addition to the above recommendations, we recognize the need to implement a more

comprehensive system of HRM practices in the short term. Staffing policies can be used

to bring talented employees into the firm with the intercultural and communication

abilities necessary for Danfoss, as well as to concentrate on hiring staff that will “fit”

with the culture of Danfoss. It is important to hire staff in Danfoss Japan with cross

cultural skills who will be able to help in mediating misunderstandings and cultural

differences. This is especially relevant for the HRM department, which currently lacks a

strategic position in motivation, integration, and ability. Staffing policies which use

internal promotion can increase the level of motivation of local employees, as well as for

expatriates by providing a goal and career track. A focus needs to be placed on selecting

and giving proper intercultural training so that expatriates can be effective managers in

the complex scenario of Japan and Asia. For instance, it has been recognized that

expatriates who have a strong individual streak or are an aggressive exponent of Western

management concepts are unlikely to thrive in an environment such as Japan185.

Promotion should take into consideration that long-term employer-employee commitment

and a seniority based promotion system which rewards loyalty are considered important

185 Big in Asia, 25 Strategies for Business Success, Michael Backman and Charlotte Butler, palgrave Macmillan, 2004

75


promotion criteria in Japan. If this system should be changed, it must be ensured that

promotion policies are consistent between expatriate and local employees, and that local

employees understand the basis upon which they can be promoted. It may also be

recommendable to allow space for negotiation when planning promotion policies, as

Japanese employees may become more unmotivated by a system which solely rewards

individual gains at the expense of group loyalty and identity.

Training should be used as a form of motivation, an opportunity for employees to

integrate through shared experiences, to increase the ability and perceived abilities of

employees, and finally to bring employees closer to the Danfoss culture. In Japan training

can be a great source of motivation for employees. It is important that local employees

receive cultural training about Denmark in order to better understand their expatriate

colleagues, their expectations, and the differences in the working culture. It is very

difficult to motivate employees who work in a system they do not understand. Training in

language is essential to improving intercultural communications, and although the

company language may be English, a basic knowledge of Japanese could help expatriates

integrate into the culture. Additionally, the more support the organization offers to the

training effort, the more likely that the training will meet its objectives.186Expatriate

managers should also be warned that bad news rarely travels up and so they will have to

look carefully for clues about staff dissatisfaction. Japanese staff will never become

outspoken and aggressive, and so managers will have to make an effort to compromise in

communication styles. Expatriates in Danfoss K.K. should also keep in mind that

managers are expected to have a paternalistic, caring attitude, but remain distant.

Managers may also have to set more time aside in Asia to monitor staff output.

Appraisal systems and incentives should be used to motivate employees, to encourage

employees to upgrade their abilities, and to encourage employees to develop their

willingness to communicate and share knowledge. In an Asian context it is important to

understand that employees are normally intrinsically motivated and thus using only pay

186 International management Cross Cultural Dimensions, Second Edition, Richard Mead, Blackwell publishing, 1998, p.407-414

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based incentive schemes may not be the most effective method. For instance, singling out

high-performance staff for praise might be counter-productive. It might be interpreted as

an attack on everyone else and the singled out staff might feel to blame rather than proud.

An effort should be made to congratulate team accomplishments, even if it means that

some in the team do not deserve 187 . Incentives often focus on external factors of

motivation, rather than the internal needs or drives of individuals. This is an area over

which the manager has more influence when motivating subordinates: making sure the

incentives match the needs. In this context it is important that the expatriate manager is

able to understand and fulfill the needs of employees of another culture.

Career management in turn can also help to improve motivation and integration by

placing employees on a path similar to their peers. Job security will also increase the

levels of motivation, and if espoused as a company value may aid in the internalization of

Danfoss’s culture.

Lastly corporate socialization and collaborative work will increase the motivation among

local employees by increasing the levels of integration and group identity. These

opportunities will also provide employees the chance to practice their communication and

group building skills. In Japan employees expect to behave as family members, and when

planning corporate social events this mentality should be taken into consideration.

If there are problems implementing new HRM strategies in Danfoss Japan it can be

helpful to bring in an outside agency to help make changes, to avoid accusations of

unfairness or lack of understanding and/or caring.

Finally, it is important that Danfoss headquarters supports expatriates in both

accustoming to the local culture and managing effectively. Headquarters needs to ensure

effective communications between themselves and their overseas managers. It is essential

that Danfoss headquarters takes a pro active role in Asia to ensure that a comprehensive

187 Big in Asia, 25 Strategies for Business Success, Michael Backman and Charlotte Butler, palgrave Macmillan, 2004

77


strategy concerning HRM is being implemented as Japan most likely will not ask for help

in this regard. Additionally, as a future consideration Danfoss could attempt to increase

the rotation of managers and increase the levels of repatriation especially at senior levels

where expatriate knowledge and experience could be used to coordinate communications

between the Headquarters and the countries where they had worked.

6.2 Economic Considerations

We will now shortly present some of the economic considerations that Danfoss can take

before investing in the creation of the “intangible assets” such as motivation, knowledge,

information etc.

The Blackwell book of organizational learning and knowledge management presents a

chapter titled “Knowledge Management: What can organizational economics

contribute?” They propose that the influence of alternative organizational arrangements

on value-creation may be analyzed in terms of motivation, knowledge, information, and

complementarity – and how alternative arrangements embody different ways of

influencing these variables (Buckley and Carter, 1996)188. “Motivation etc. are all in

different ways related to those transaction costs that (in various guises) are central in all

organizational economics theories, and whose size influences the value that may be

created in a world with no problems of motivation, etc. (a “first-best” situation), and,

hence, no transaction costs”.189 Thus Danfoss should analyze the possible costs and

benefits of incentives, Knowledge Management, training, Human resources practices etc.

According to Chris Doucouliagos and Pasquale Sgro case studies of 7 enterprises, for

analyzing training costs data is needed in the following four categories: Measure of

performance, measure of the training, costs of the training and benefits arising from the

training.190 They go on to remark that for most organizations the major difficulty in the

data collection process will be the collection of benefits data and the measurement of

benefits. 188 The Blackwell Handbook of Organizational Learning and Knowledge Management, Nicolai J. Foss and Volker Mahke, Edited by Mark Easterby-Smith and Marjorie A. Lyles, Blackwell Publishing, 2003, p.81 189 c.f. IBID 190 Chris Doucouliagos and Pasquale Sgro enterprise return on a training investment 11 June 2000 NCVER publications

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Often, it may be necessary to seek the co-operation of areas other than the training

function within the organization for data on benefits, and often, some of the benefits

cannot be quantified. They propose 4 steps for calculating the ROI: 1. collect data 2. Pre-

and post-testing 3. Multivariate analysis and 4. Calculate ROI. Cross cultural,

intercultural, expatriate training etc. estimate costs vary; however most researchers agree

that cross cultural training can be costly. The 7 case studies of companies in different

industries presented by Doucouliagos and Sgro received a positive ROI on their training

program and all of those were large (323%, 1000%, 1277%, 256%, 7125% 30%, 980%).

However we do not include a full ROI analysis of Danfoss K.K because we lack the

relevant information, resources and time.

7. Conclusion

Through theoretical and empirical review we have been able to provide a substantial

analysis of Danfoss and its subsidiary in Japan, as well as answer our research question.

Our conceptual model proved to be an effective tool for identifying and highlighting key

areas that Danfoss needs to improve. First and foremost Danfoss needs to develop their

intercultural communications capabilities within Danfoss K.K and between Danfoss K.K

and headquarters. Additionally, the poor integration between expatriate and local

employees in Danfoss K.K is affecting the levels of motivation and communication.

These aspects seem to be hindering knowledge transfer. Perceptions of ability by local

and expatriates employees are in turn lowering motivation. Finally we found that the

opportunities in Danfoss are a strong aspect, and should be used to improve the other

areas. By improving communication and integration Danfoss should be able to transfer

their core values to Danfoss K.K to a deeper level. In doing this they can potentially set

the ground for building a corporate competitive culture. In answering our research

question:

Theory

How

Analysis

Danfoss

What Why

HRM

How

Model

Why

Knowledge

Management

Int.

Communication

Org. Culture

What

Methodology

Introduction

Executive Summary

Conclusion

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How can HRM practices help to maintain corporate core values, and improve

intercultural communications and knowledge transfer within Danfoss K.K. and

between Danfoss K.K and headquarters?

We have concluded that through staffing, training, appraisal systems, incentives, job

security and collaborative work, corporate socialization mechanisms, and career

management and development when applied as a system of mutually reinforcing

practices, HRM can help MNCs to achieve higher outcomes, in terms of the degree of

knowledge transfer, maintenance of core values, and improvement of intercultural

communications. These HRM practices will positively affect ability, motivation,

opportunity, and integration which have shown to increase levels of social capital and

absorptive capacity, and thereby knowledge transfer. We have also found that these

processes should be coupled with training for intercultural communications and cross

cultural abilities supported by a strong culture.

By applying these findings to Danfoss we have been able to provide recommendations to

improve their operations in Danfoss K.K. We have proposed that they begin by

developing a HRM strategy that is in line with the goals of Danfoss. This strategy should

be supplemented by enhancing the HRM capabilities in Danfoss K.K, and should take

into consideration the weak areas we have pointed out.

Thus we have followed the structure of “what” “why” and “how”, showing that HRM

practices by influencing set determinants, coupled with intercultural communications and

a strong corporate culture can increase the level of knowledge transfer and corporate

culture competitiveness in the MNC.

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8. Indications for Future Research

Future research in this area could include statistical examination of our conceptual model.

Additionally theoretical areas such as disseminative capacity and organizational structure

could be considered within our framework in future cases. The role of IT has not been

taken into consideration in this case; however it is a pre-requisite due to the distances in

space between subsidiaries and headquarters and should be studied further in connection

to our research topic. Furthermore, the question of “who” in terms of who possesses

knowledge in an organization could also be examined in light of our current paper. Other

HRM practices and/or determinants, not examined in this paper could be interesting areas

of future research. Finally, the application of our model could be applied in other

countries where the MNC is facing a similar situation as in our case.

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http://www.copcap.com/composite-1355.htm

http://www.workindenmark.dk/Work/0/4/0

http://www.executiveplanet.com/



http://www.wikipedia.org/

Sources of Corporate Culture Com

In 1995 Nonaka and Takeuchi publishedCompany”, considered to be a key turManagement. They begin the book by prese

“The ball gets passed within the team as it mpassed around in the team contains a sharedfor, where it is gong, what kind of a world it a reality. Highly subjective insights, intuitio“what” the ball contains-namely, ideals, v“how” the ball gets passed around in rugbyrunner to the next in a relay race, the ball manner. Unlike relay, it does not move lineais borne out of the team member’s interpla(“here and now”), based on direct experiintensive and laborious interaction among mabout ideals as it is about ideas.”

The conceptual model this project presentsof the many ways it could be completed: LThe coaches represent the Human Resourcon selecting players with the necessary abimotivating and integrating them and therethe communication between the team is brthe coaches have to make sure that theeffective. Also if the players in the back group the team will become less compmanagement practices and training the coteam. We apply this metaphor to Danfoss K

Knowledge Management – OrganizationHuman Resources Management, a

petitiveness: The Danfoss Universe

87

their book “The Knowledge Creating ning point in the study of Knowledge nting the Rugby Metaphor:

oves up the field as a unit. The ball being understanding of what the company stands wants to live in, and how to make that world ns, and hunches are also embraced. That’s alues, and emotions. Now let’s focus on . Unlike how a baton gets passed from one does not move in any defined or structured rly or sequentially. Ball movement in rugby y on the field. It is determined on the spot ence and trial and error. It requires an embers of the team. Similarly, it is as much

intends to complete this metaphor in one et’s then focus on the coaches of the team. es Management Practices that would focus lities; providing them with opportunities; by achieving the team’s goal. However if oken the team can become divided. Thus communication between the players is are not well integrated with the forward etitive. Thus through human resources ach can improve the effectiveness of the K.

al Culture – Intercultural Communications Case Study: The Danfoss Universe

corporate culture competitiveness the danfoss universe

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