Interpretive Schemes In Cross-National Alliances

In this chapter we propose a framework for understanding how alliance partners interpret alliance functioning and how these interpretations shape their subsequent behaviors. We proceed from the notion that interpretive schemes have important implications for the evolution of cross-national alliances, impacting upon the management of the problems arising from the cultural conflicts and discrepancies inherent in such alliances. We describe the two fundamental interpretive schemes that relate to sensemaking, that of sensemaking of and in chaos, and examine how an appreciation of these interpretive schemes enable us to better manage cultural conflicts and discrepancies that inevitably arise in cross-national alliances. Our framework makes clear that the two types of interpretive schemes need to be appreciated as interpretive frames that are present among the alliance managers to effectively interact and influence partner firms. Briefly, the two types of the interpretive schemes call for different strategies for developing them. Alliance partners embedded in different national cultures rely on interpretive schemes to make sense of the conflicts and discrepancies that emerge in cross-national alliances. The chapter responds to the need of managers with alliance responsibilities for a framework to help develop the most effective ways of managing interpretive schemes in alliances for productive interactions and performance. In this chapter we analyze the impact of national culture on the dynamics of cross-national strategic alliances. In recent years, alliances have become an important tool in a firm’s competitive strategy. A large number of these alliances bring together companies that have been exposed to different institutional environments. These differences are particularly salient in alliances that have been formed between Western and Asian companies. In a landmark study, Hamel (1991) observed that Asian firms out-learned their Western counterparts, and, in the process, strengthened their competitive position. A classic example of this dynamic is represented by the failure of the longstanding alliance between Borden and Meiji Milk (Cauley de la Sierra, 1995). Borden sought an alliance with Meiji Milk to penetrate the Japanese market. The alliance broke up when Meiji Milk sought to introduce products that were in direct competition with Borden. It appears that the alliance was a learning experience for the Japanese company. When they had achieved their objective, they sought to restructure their relation-ship. The case raises a number of key questions—namely, is this interpretation of alliance failure culturally neutral; that is, does it provide an explanation that transcends the cultural boundedness of either party? If it is not culturally neutral, then how is this failure to be interpreted from the Japanese standpoint? Furthermore, even if the Japanese sought to introduce products in the marketplace that were directly competitive with those of Borden, was this intentional or was it unintentional? Did Borden acciden-tally, or otherwise, act in ways that led the Japanese to lessen their commitment to the venture? In what way, and to what extent, did the actors’ coping ability influence their interpretation of the alliance dynamics? Another well-publicized alliance that experienced difficulty is the alliance between KLM and Northwest Airlines (Tully, 1996). Although the alliance had been making money, the personal chemistry among the top-level Dutch and American executives was less than optimal. As the President of KLM remarked, “It’s the European way versus the American way” (Tully, 1996, p. 65). It is not surprising that alliance managers who have been socialized in different institutional environments interpreted alliance dynamics in radically different ways. There is, after all, no one objective reality; there are multiple realities, with each reality being constructed from the standpoint of a particular alliance partner. The idea that reality is socially constructed (Berger Schein, 1996). Debate has also centered on the relative importance of national and organizational culture in explaining organizational behavior. Without entering into the merits of this debate, it is important to recognize that conflicts among alliance partners may stem from, or be exacerbated by, differences in both organizational and national cultures. Some scholars stress the importance of corporate and professional cultures, whereas others highlight the ever-salient influence of national culture, even as they acknowledge the importance of corporate culture (Kumar Kumar Sirmon it is only meant to be suggestive of the kind of work that has been done using national culture as a central explanatory variable. The chapter begins by outlining a model of alliance functioning and then proceeds to discuss how alliance functioning is impacted by national culture.