January 10th, 2018
Values Evolution Theories and Headquarter-Subsidiary Integration
Cultural differences affect various aspects of multinational corporations. One of these aspects is the extent of integration that occurs between a headquarter and its foreign subsidiaries. For close integration between a headquarter and its subsidiaries to occur, it is critical that culturally-defined behaviours and values are clearly understood, apart from the laws and practices that operate in the countries where these subsidiaries reside. Various theories have thus been advanced on how a people’s values evolve, to help managers understand how to manage across cultures. This paper focuses on the theories of convergence, divergence and crossvergence to explain the complexities that characterise headquarter-subsidiary relationships. The paper also assesses the difference between this theoretical framework and other cross-cultural management frameworks.
Convergence, Divergence and Crossvergence in relation to Headquarter-subsidiary Relationships
The evolution of values has been argued on various theoretical frameworks, as well as on factors that affect values at an individual level. The individual-level value influences were traditionally organized into a four-category frame comprised of sociocultural, economic, technological and political influences (Ralston 2008). A modern classification reorganizes the economic, political and technological influences under a single category of business ideology influences (Ralston 2008). In the aspect of framework, convergence and divergence have been the earlier forms explaining the aspect of value evolution. Convergence envisages the synchronization of cultures to a common value system mainly brought about by technological influence (Ralston 2008; Munusamy et al. 2009). Divergence, on the other hand, envisages the retention of specific values of a culture as defined by sociocultural influences, the effect being the continued existence of differences in values between cultures (Ralston 2008). Crossvergence, a relatively new perspective envisages the establishment of new and unique values systems due to the effect of both sociocultural and business ideology influences (Ralston 2008; Jacob 2005).
In explaining headquarter-subsidiary relationships, convergence, divergence and crossvergence offer diverse implications for management. In case of convergence, by progressing towards common cultural values, management practices that work in a given region could also prove successful in foreign subsidiaries (Jacob 2005; Munusamy et al. 2009). This would mean that the process of cultural adjustment for expatriate managers would be less difficult. Divergence on the other hand means that cultural differences still exist and management across cultures would necessitate individuals to adjust rapidly to the cultural values existing in the foreign subsidiaries. The crossvergence perspective implies that management practices must be integrated to give rise to “hybridised” practices that are relevant to heterogeneous culture (Jacob 2005). Such a process in the organization context could be achieved through values’ learning and unlearning process implemented via an organization’s development programs (Jacob 2005). The theories of convergence, divergence and crossvergence are thus important in explaining complexity in headquarter subsidiary relationships. This is because they establish three scenarios that could exist – where technology has helped align some of the values towards synchrony, where sociocultural influences continue to generate a difference in values of different cultures and where various forces (sociocultural and business ideology) work together to bring an hybridized culture. Each of these scenarios would require different managerial approaches for effective headquarter-subsidiary integration. Go to part 2 here.