A Model of Cultural Differences and International Alliance Performance

Author(s): David G. Sirmon and Peter J. Lane

Source: Journal of International Business Studies, Vol. 35, No. 4 (Jul., 2004), pp. 306-319
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 Journalof internationalBusinessStudies(2004)35, 306-319
? 2004 PalgraveMacmillanLtd. Allrightsreserved0047-2506 $30.00
www.jibs.net

A model of cultural differences and

international alliance performance

DavidG Sirmon'and Abstract

PeterJ Lane2 We propose a model of cultural differences and international alliance
performanceto explain the ambiguous findings regarding the influence of
'ManagementDepartment,ClemsonUniversity,
nationalculturedifferenceson allianceperformance.Buildingon researchon
Clemson,SC, USA;2ManagementDepartment, national,organizational,and professionalcultures,we argue that the closerthe
of New Hampshire,
University Durham,NH,USA domain of a social group is to the value-creatingactivitiesof an alliance,the
more disruptiveculturaldifferences between the partners'members of that
Correspondence: social group will be. Organizationalculture differenceswill tend to be more
DGSirmon,ManagementDepartment, disruptivethan nationalculturedifferences,and differencesin the professional
ClemsonUniversity,SirrineHall,Clemson, culture most relevant to alliance value creation typically will be the most
SC29634-1305,USA.
Tel: +1 864 656 6773 disruptive.Implicationsfor researchand managerialpracticeare discussed,and
Fax:+1 864 656 2015 the model's relevancefor internationalR&Dalliancesis highlighted.
E-mail:dsirmon@clemson.edu Journalof InternationalBusinessStudies(2004) 35, 306-319.
doi:I0.I057/palgrave.jibs.8400089

Keywords:cultural allianceperformance;
differences; culture
professional

International alliances offer firms opportunities to draw upon

knowledge and capabilities not currently controlled or available
within their home country (OECD, 2000). Among other benefits,
this can help firms share costs, enter new markets (Glaister and
Buckley, 1996), supplement their capabilities (Inkpen and Dinur,
1998; Hitt et al., 2000; Lane et al., 2001), seek more radical
innovations by integrating knowledge from different areas of
science and technology (Lubatkin et al., 2001; Nummela, 2003),
and create common platforms for products and services (Mowery
et al., 1998; Caloghirou et al., 2003). However, international
alliances also bring challenges not found within domestic alliances.
Research has shown that differences in national culture can
disrupt collaboration and learning between alliance partners (Lane
and Beamish, 1990; Parkhe, 1991; Lyles and Salk, 1996; Hennart
and Zeng, 2002). However, the conclusion that national culture
differences alone disrupt knowledge sharing between partners
recently has been questioned. Pothukuchi et al. (2002) suggested
that the importance accorded to national culture differences on
international alliance performance may be overstated because most
studies have failed to consider or specify the influence of
Received:2 June2003 organizational culture differences as well. Whereas national culture
Revised: 3 August2003 relates primarily to deep-seated values, organizational culture
Accepted:3 August2003 relates primarily to shared beliefs in organizational practices and
Onlinepublicationdate: 1 July2004 processes (Hofstede et al., 1990). Examining a large sample of
 A model of cultural differences DavidG Sirmonand PeterI Lane
307

international joint ventures, Pothukuchi et al.
(2002, p. 258) found that 'the presumed negative
effect from partner dissimilarity on IJV perfor-
mance originates more from differences in organi-
zational culture than from differences in national
culture'.
Pothukuchi et al.'s (2002) findings suggest that a
more generalized effect may exist: partners'cultural
differences may have more influence on interna-
tional alliance performance as those differences
become more directly related to the alliance's
primary value-creating activities. This paper builds
on that inference by developing a theoretical model
of the performance effects of cultural differences in
international alliances. International alliances are
the focus of the paper because they 'reside at the
confluence of different cultures, including
national, corporate and occupational' (Salk and
Shenkar, 2001, 163).
We argue that an international alliance's perfor-
mance is driven by the alliance's effectiveness in
achieving its primary value-creating activities.
Resource complementarity between alliance part-
ners is often a necessary condition to optimize this
value creation (Harrison et al., 2001). However, in
order to share, combine and leverage complemen-
tary resources, which include both tangible and
intangible assets but not business processes or 'the
actions that firms engage in to accomplish some
business purpose or objective' (Rayet al., 2004, 24),
the partners' employees must interact effectively.
Research suggests that national and organizational
culture differences between these employees affect
their interactions, but this study expands the
consideration of cultural differences to include
professional culture differences. Professional cul-
tures form as people, who span individual organi-
zations, share a set of norms, values and beliefs
related to their occupation (Van Maanen and
Barley, 1984; Jordan, 1990; Trice and Beyer, 1993).
The essence of our argument is that cultural
differences stemming from national, organizational
and professional cultures inhibit international
alliance partners' employees' ability to interact
effectively. Additionally, we argue that professional
culture differences are often the most relevant and

Differencesin Partners'
NationalCultures

P2 + P3 +

Differencesin
Partners'Organizational
Cultures

P4

Differences in
Partners'
Professional Cultures

P5

Related- PI Effectiveness of Performance

Complementary Alliance's of the
Resources Value-creating == International
Activities Alliance

a Thethicknessof thearrowsindicatestherelativestrengthof therelationships 6).

(Proposition

Figure 1 A model of cultural differences and internationalalliance performance. The thickness of the arrows indicates the relative
strength of the relationships(Proposition 6).

journal of International Business Studies

 A model of cultural differences
308
salient cultural differences that the interacting
employees face, and thus professional culture
differences are the most disruptive to the alliance's
effectiveness in achieving its primaryvalue-creating
activities. See Figure 1
The model and propositions developed in this
paper make several contributions. First, we offer a
more detailed theory of how national culture
differences influence international alliance perfor-
mance. We suggest that most of the influence of
national culture is mediated by organizational and
professional culture differences. Second, we pro-
pose that the negative influence of cultural differ-
ences increases as those differences become more
relevant to the alliance's value-creating activities.
Third, although we have proposed a general model
applicable to all types of international alliance, it is
especially relevant to international R&D alliances
(IRDA),which include both R&Djoint ventures and
joint R&D agreements (Hagedoorn and Narula,
1996). The likelihood of finding professional cul-
ture differences between R&D personnel, and the
increasing importance of IRDA to a wide range of
companies (Narula, 1999; Narula and Hagedoorn,
1999; Hagedoorn, 2002; Caloghirou et al., 2003;
Nakamura, 2003), suggest that firms engaging in
them need to be as sensitive to professional culture
differences in the laboratory as they are to national
culture differences across the conference table.
Effectiveness Of Alliances' Value-Creating
Activities
Because international alliances differ in their
primary value-creating activities, the specification
of a metric to measure performance is problematic
(Geringer and Hebert, 1989). For example, the
primary value-creating activity of a marketing-
based alliance may involve the delivery of a strong
co-branded messages, whereas for R&D-based
alliances it is often the development of innovations
or 'scientific or technical knowledge and the
application of that knowledge to the creation of
new and improved products or processes' (Hage-
doorn, 2002, 477). Although these activities may
affect profitability, it is often difficult to detect such
effects. Therefore we suggest that the effectiveness
with which the alliance achieves its primary value-
creating activities is a precursor of alliance perfor-
mance, but that such primary value-creating activ-
ities are specific to the purposes of specific
international alliances.
The literature suggests that the pooling of
complementary resources - those that are not
Journal of International Business Studies
DavidG Sirmonand PeterJ Lane
identical, yet are mutually supportive - is often
necessary for alliances to optimize their primary
value-creating activities (Lane and Lubatkin, 1998;
Das and Teng, 2000; Harrison et al., 2001). Com-
plementary resources allow an alliance to pursue
economies of scope and growth opportunities,
while decreasing risk (Lane and Lubatkin, 1998;
Das and Teng, 2000; Harrison et al., 2001). For
example, Lu and Beamish (2001) found that small
and medium-sized enterprises experienced better
performance when they internationalized by part-
nering with firms that possessed local knowledge
relevant to the newly entered region. The local
knowledge of the partner was a complementary
resource for the internationalizing firm. Further,
Vidal-Suarez (2002) found that the stock market
awarded Spanish firms a 0.2% abnormal return the
day they announced global alliances with partners
that held complementary resources.
However, the presence of complementary
resources alone does not always lead to positive
results for international alliances. Caloghirou et al.
(2003) found no support for the expected positive
relationship between complementary resources and
international research alliance performance, as
measured by the partners' perceptions of success.
Further,Johnson et al. (1996) found that comple-
mentary resources led US firms to trust their
Japanese partners more but not vice versa.Similarly,
Sarkar et al. (2001) found that the presence of
complementary resources did not positively affect
trust or bilateral information exchange between
partners. Further, these authors found that com-
plementary resources had a positive effect on
project outcomes, but not on strategic outcomes.
And, most interestingly, Sarkaret al. (2001) found
that partner compatibility was critical in determin-
ing the effects of complementary resources on
alliance performance.
Model misspecification could be the cause of such
inconsistent results. First, not all the resources of
the partners are relevant to a given alliance's
primary value-creating activities (Das and Teng,
2000). Thus the benefits of pooling complementary
resources should positively affect alliance perfor-
mance only when those resources are related to the
primary value-creating activities of the alliance. For
example, marketing alliances might be concerned
with the complementarity of delivery systems,
compensation practices, and brand or firm reputa-
tion, whereas R&D alliances would be concerned
with the complementarity of research facilities and
research orientations (Caloghirou et al., 2003).
 A model of cultural differences
Second, consideration of the compatibility of the
partners' employees who actually interact in the
primaryvalue-creating activities of the alliance may
be underdeveloped. Madhok and Tallman (1998)
argued that many alliances fail to achieve their
goals in part because the partners underestimate
the difficulty of working together. One common
cause of this shortcoming is a failure to attend to
the differences in how each firm approaches the
processes involved in the primary value-creating
activities of the alliance. Thus, as the implication of
Pothukuchi et al.'s (2002) finding suggests,
increased specificity in the relational compatibility
of partners' employees should lead to increased
understanding of international alliance success.
More formally, the preceding arguments lead to
the following proposition:
P1: The complementarity of partners' resources
positively affects alliance performance only when
those resources are related to the primary value-
creating activities of the international alliance,
and when the employees involved in those
activities interact effectively.
The interaction of the employees involved in the
primary value-creating activity of the alliance is
likely to be driven by sensemaking.Sensemaking is
the process of placing stimuli into categories in
order 'to comprehend, understand, explain, attri-
bute, extrapolate, and predict' (Starbuckand Milli-
ken, 1988, 51). Because sensemaking is shaped by
personal experiences, the interacting employees
can differ in their categorization and linking of
stimuli. In the words of Weick (1995, 62):
What I say and single out and conclude are determined by
who socialized me and how I was socialized, as well as the
audience I anticipate will audit the conclusions I will reach.
Thus, assuming that the appropriateresources are
made available, understanding why some interna-
tional alliances fail to create value effectively
requires the exploration of systematic differences
in the partners' employees' socialization. Three
sources of such socialization are explored in this
paper: one's nation, one's organization and one's
profession. We address each in sequence.
National culture
As stated previously, national culture refers to
deeply set values that are common to the members
of a nation (Hofstede, 1991; Hill, 1997). It is a
system of shared norms, values, and priorities that,
taken together, constitute a 'design for living' for
DavidG Sirmonand PeterJ Lane
309
a people (Hill, 1997, 67). Importantly, national
culture is learned, and provides meaning to 'how
things ought to be' and 'how things ought to be
done' for individuals in a country (Berger and
Luckmann, 1967; Terpstraand David, 1991). These
shared beliefs are acquired early in life through a
person's primary socializing in families, in schools
and at play (Bergerand Luckmann, 1967; Terpstra
and David, 1991). Further,the influence of national
culture is strong and long lasting. For example,
Hofstede (1991) found that national culture
explains 50% of the differences in managers'
attitudes, beliefs, and values, and Laurent (1983)
found that managers of multinational organiza-
tions retain many of their original national values
despite routinely working in culturally diverse
situations.
No nation is expected to have a completely
homogeneous national culture, but national differ-
ences are clearly seen in economic and political
systems (Albert, 1991; Thurow, 1993), educational
systems (Calori et al., 1997), and other institutions
(DiMaggio and Powell, 1983; Hall, 1986; Clegg and
Redding, 1990; Sorge and Maurice, 1990). Thus,
national culture differences between alliance part-
ners can challenge the development of successful
relationships.
These challenges stem partially from the lack of
shared norms or values (Park and Ungson, 1997).
This lack of common understanding may under-
mine the partners' interpretation of each other's
strategic intent, which is crucial in global markets
and partnerships (Hitt et al., 1995). Further,a lack
of shared norms and values may reduce effective
communication (Rao and Schmidt, 1998), trust
(Aulakh et al., 1996; Doney et al., 1998) and
knowledge sharing in joint ventures (Parkhe,
1991; Mohr and Spekman, 1994; Lyles and Salk,
1996). These problems, in turn, have been found to
lead to lower alliance performance (Lane et al.,
2001).
In one noteworthy study, Barkema and Vermeu-
len (1997) examined the influence of differences in
partners' national cultures on international alliance
performance using Hofstede's (1980, 1991) dimen-
sions of national culture. They found that partner
differences in two of the dimensions (uncertainty
avoidance and long-term orientation) had a strong
negative relationship with the survival of the
collaboration over several different periods. How-
ever, the other three dimensions of national culture
(individualism, power distance, masculinity) did
not. Differences in uncertainty avoidance and
Journal of International Business Studies
 A model of cultural differences
310
long-term orientation could represent differences
in how partners perceive and adapt to opportu-
nities and threats in their environment (Schneider,
1991; Schneider and De Meyer, 1991), and thus
may be more difficult to resolve than differences
along the other three dimensions, which represent
attitudes towards personnel.
However, other evidence suggests that differences
in national culture can be beneficial. Because
managers tend to be more aware of the potential
challenges when working with foreign partners,
they may be more willing to spend effort on
avoiding misunderstandings in international alli-
ances than they would in domestic alliances (Very
et al., 1996). In such cases, differences in national
culture can lead to high-level communication and a
more sustained collaboration (Shenkar and Zeira,
1992; Parkand Ungson, 1997). Thus, in some cases,
increased national culture differences can lead to
higher international alliance performance (Morosi-
ni et al., 1998).
These contradictory results suggest that differ-
ences in national culture have a more complex
relationship with international alliance perfor-
mance than has been previously proposed (Salk
and Shenkar, 2001). We argue that this complex
relationship includes the influence of national
culture on both organizational and professional
cultures (Terpstra and David, 1991, chapter 1),
which then in turn influence international alliance
performance by allowing for more effective sharing,
combining and leveraging of the alliance's com-
plementary resources.
Because the beliefs and norms of national culture
are learned early in life, and endure despite
subsequent socialization by organizations and
occupations, national variation within organiza-
tional and professional cultures is likely. First,
differences in national culture systematically influ-
ence organizational cultures through the firm's
administrative heritage - the historical manage-
ment practices that have been used by organiza-
tions within a nation (Bartlett and Ghoshal, 1989;
Calori et al., 1997). A nation's commonly shared
administrative practices provide constraints on the
actions of firms within that nation. However,
national culture does not determine a monolithic
organizational culture for all firms within a coun-
try; instead these firms develop organizational
cultures that vary around certain broad assump-
tions (Bartlett and Ghoshal, 1989; Calori et al.,
1997). Therefore, when international alliance part-
ners collaborate, differences in their national
journal of International Business Studies
DavidG Sirmonand PeterJ Lane
cultures can manifest themselves as differences in
the partners' organizational cultures.
Second, theory suggests and evidence confirms
that national culture is associated with attitudes
that affect professional activities. Extending Hof-
stede's (1980) arguments, Shane (1992, 1993) found
that nations with low power distance, weak
uncertainty avoidance, and high individualism
had higher rates of innovation. Additionally, Kedia
et al. (1992) found that R&D laboratory productiv-
ity was positively associated with low power
distance and high masculinity in both academic
and industrial research settings. Lastly, Shane et al.
(1995) found that the preferred behaviors and
strategies for championing innovations within a
firm varied considerably with national culture. In
short, professionals in the same functional domain
but from different countries can systematically vary
in their attitudes toward and implementation of
the preferred solutions for the problems that those
in their occupation face. Therefore national culture
differences lead to differences in professional
cultures. Specifically, differences in national culture
will increase the differences of partners'employees'
professional cultures. These arguments lead to the
following two propositions:
P2: Differences in international alliance partners'
national culture increase those partners' organi-
zational culture differences.
P3: Differences in international alliance partners'
national culture increase the differences of
partners' employees' professional cultures.
Organizational culture
Consensus has not been reached with regardto the
definition of organizational culture. A review by
Verbeke et al. (1998) found 54 different definitions
of organizational culture between 1960 and 1993.
However, these definitions of organizational cul-
ture revolve around shared group meaning (Hof-
stede et al, 1990; Golden, 1992; Ostroff and Kinicki,
2001). For this study we follow Smircich's, (1983,
344) definition of organizational culture, which is:
social or normative glue that holds an organization together
... it expressesthe values or social ideals and the beliefs that
organization member come to share.
Thus organizational culture forms a type of social
control that identifies appropriate behaviors and
attitudes for organization members to display
(O'Reilly and Chatman, 1996). Further, organizational
 A model of cultural differences
culture provides more proximal cues for organiza-
tion members' behavior than does national culture
because it provides members with an organiza-
tional identity, and facilitates collective commit-
ments (Smircich, 1983). However, it does not
completely supersede or displace the influence of
one's national culture (Hofstede et al., 1990).
There has been less research on organizational
culture and international alliance performance
than on national culture and international alliance
performance. This is surprising, as people from the
same national background differentiate their work
practices as a result of the influence of hetero-
geneous organizational socialization (Hofstede
et al., 1990). However, the results of those studies
strongly suggest that differences in partners' orga-
nizational culture matter greatly to the outcomes of
international alliances.
Based on a study of alliances between Japanese
and Western firms, Brown et al. (1988) concluded
that differences in partners' organizational cultures
can have a significant negative influence on IJV
performance. Such differences can even lead to the
dissolution of alliances as partners are forced to
divert attention and energy to develop interaction
routines aimed at overcoming these differences
(Park and Ungson, 1997). Pothukuchi et al. (2002)
found that organizational culture dissimilarity
negatively affected international partners' satisfac-
tion with the relationship.
Additionally, studies of domestic alliances show a
similar relationship between shared organizational
culture and performance outcomes. In their study
of US R&D alliances, Lane and Lubatkin (1998)
argued that multiple manifestations of organiza-
tional culture would affect inter-organizational
learning. These authors found that partner similar-
ity in research centralization and research compen-
sation practices affected learning outcomes
positively. Further, organizational culture has
been found to be important to the success of
mergers and acquisitions. Weber et al. (1996)
found that dissimilar organizational cultures
between acquirer and target decreased top man-
agers' cooperation and increased negative attitudes
toward the merger.
Overall, similarity of partners' organizational
culture increases partner learning, satisfaction and
effectiveness of interactions, whereas differences in
organizational culture decrease these positive out-
comes. In short, decreased learning, satisfaction
and effectiveness of interactions are expected to
inhibit the business processes used to share,
DavidG Sirmonand PeterJ Lane
311
combine and leverage resources such as knowledge,
relationships and physical assets. Thus partners
with dissimilar organizational cultures will be less
likely to effectively achieve the alliance's primary
value-creating activities, even when the necessary
resources are present:
P4: Differences in the organizational cultures of
international alliance partners negatively moder-
ate the relationship between related complemen-
tary resources and effectiveness of the alliance's
value-creating activities.
Professionalculture
Professional culture is another important type of
culture that can affect international alliances, but it
has received even less attention from scholars than
organizational culture. A professional culture exists
when a group of people who are employed in a
functionally similar occupation share a set of
norms, values and beliefs related to that occupa-
tion. Professional cultures develop through the
socialization that individuals receive during their
occupational education and training (Van Maanen
and Barley, 1984; Jordan, 1990). This initial socia-
lization is then reinforced through their profes-
sional experiences and interactions that lead to a
broad understanding of how their occupation
should be conducted (Brown and Duguid, 1991;
Lave and Wenger, 1991).
The strength and pervasiveness of occupational
socialization that leads to professional cultures
should not be understated. Trice and Beyer (1993,
178) argue that individuals' occupations are '[t]he
most highly organized, distinctive, and pervasive
sources of subcultures in work organizations'.
Members of a professional culture share a 'con-
sciousness of kind' that not only encompasses
functional understanding, but also includes the
sharing of emotional demands and a social identity
related to the occupation (Salaman, 1974; Van
Maanen and Barley, 1984). Therefore most func-
tional areas in an organization (e.g. accounting,
marketing, engineering, operations, sales and
science-based groups) are expected to have distinct
professional cultures; however, we argue that - in
fact - they are not organizational subcultures.
Organizational subcultures develop within a firm
and are based on any number of different types of
shared experience, such as educational, regional,
and ethnic backgrounds (Arnold, 1970), similar
problems (Cohen, 1955), or occupations (Van
Maanen and Barley, 1984; Trice and Beyer, 1993).
journal of International Business Studies
 A model of cultural differences
312
However, Cohen (1972) describes a subculture as a
solution to a group's need to belong to a larger
membership, while also possessing some level of
independence from that membership. Professional
cultures, as utilized in this paper, develop outside
any single organization. The initial source of
socialization for a professional culture is the
educational system where such groups of profes-
sionals are trained. Forexample, Terpstraand David
(1991, 12) point out: 'One could argue that
professional schools spend more time imparting
professional culture than teaching technical skills
or knowledge.' Because professional cultures do not
fit within any single organizational culture, we do
not consider them an organizational subculture.
Instead, professional cultures cut across organiza-
tional boundaries.
When international alliance partners require
employees from different professional cultures to
interface in the primary value-creating activity of
the alliance, the results are expected to be dis-
appointing. Overall, these individuals lack a com-
mon basis from which to interact effectively
because their occupational socialization and result-
ing professional cultures are distinct. First, indivi-
duals from separate professional cultures lack a
shared set of basic knowledge because their occupa-
tional socialization involved different content
material, which is reinforced by different profes-
sional experiences. Second, these individuals often
lack experience communicating with an auditing
audience outside their professional culture. Thus
communication between individuals from separate
professional cultures is impaired. Both of these
factors inhibit the finding of common ground from
which the relationship can develop and produce
value (Lane and Lubatkin, 1998). In such cases,
energy must be diverted from the value-creating
activity of the alliance to the development of basic
routines that help establish a base of shared
knowledge in order to communicate adequately.
Developing such routines requires time, which
leads to increased expenses and could lead to
increased frustration (Park and Ungson, 1997).
Even if these two obstacles can be adequately
overcome, individuals from different professional
cultures may still have deeply ingrained preferences
in their approach to solving problems (Brown and
Duguid, 1991; Lave and Wenger, 1991). These
differences may be difficult to overcome, as the
employees may reflect the 'not-invented-here'
syndrome, which is the resistance to the utilization
of knowledge created elsewhere (Michailova and
journalof InternationalBusinessStudies
DavidG Sirmonand PeterI Lane
Husted, 2003). Further,attempts to compromise in
the approach taken in problem-solving is likely to
lead to less desirable outcomes. For example, if a
compromise is reached, and members from both
professional cultures abandon their preferred pro-
blem-solving approach, both effectively eliminate a
significant amount of their valuable tacit knowl-
edge. Likewise, if either member abandons their
preferred problem-solving approach, the alliance
has effectively lost the expertise of one half of its
contributing members.
The challenges discussed above inhibit the effec-
tive interaction of individuals from different profes-
sional cultures within an international alliance.
This then decreasesthe likelihood that the alliance's
pooled complementary resources will be shared,
combined and leveraged in a manner that effectively
achieves the alliance's primary value-creating
activities. In orderto illustratethe proposed relation-
ship, we present a detailed example of two profes-
sional cultures often involved in IRDAs.
IRDAs are an important form of collaboration
between international partners, and are increasing
in number (for reviews see Narula and Hagedoorn,
1999; Hagedoorn, 2002). By R&D we imply
standard research and development activity devoted to
increasing scientific or technical knowledge and the
application of that knowledge to the creation of new and
improved products and processes. (Hagedoorn, 2002, 477)
Although not perfect, we stipulate that an IRDA's
primary value-creating activity is found in new
innovations and learning. Increases in a firm's rate
of innovation highlight the short-term benefits of
an IRDA, whereas learning captures the potential
long-term gains of the relationship (Sarkaret al.,
2001), even when the actual relationship is short, as
is often the case (Narula and Hagedoorn, 1999).
R&D personnel in an IRDA are drawn predomi-
nantly from two professional groups - scientists
and engineers. Although these two groups are often
treated as interchangeable, research on the sociol-
ogy of knowledge and cognitive models of innova-
tion has shown that they represent two distinct
professional cultures with different norms, beliefs,
values and priorities (De Solla Price, 1982, 1986;
Mikhailov et al, 1984; Nightingale, 1998; Balmer
and Sharp, 1993). Specifically, the professional
cultures of scientists and engineers differ in the
types of knowledge they emphasize, in the ways in
which knowledge develops, and in the types of
innovation process they utilize. Table 1 highlights
these differences.
 A model of cultural differences
Table 1 Engineeringvs scientificprofessionalcultures
Typeof professional Locusof criticalknowledge
culture
Engineering Internal:technology
communities
Scientific External:science
communities
Scientific vs engineering professional cultures: (Mikhailov et al., 1984, 111-120). Scientific knowl-
knowledgetypes edge is usually developed via networks of scientists
These professional cultures differ in the types of
knowledge with which they are primarily con-
cerned. The scientific culture emphasizes knowl-
edge concerning general theories about
relationships associated with physical, biological,
and social phenomena, as well as the methods for
testing them (Burgelman et al., 1996). This defini-
tion encompasses both basic scientific research into
fundamental relationships in nature and applied
scientific research into fundamental relationships
within and between classes of technology. By
contrast, the engineering culture emphasizes tech-
nology, or
the theoretical and practical knowledge, skills and artifacts
that can be used to develop products and services as well as
their production and delivery systems. (Burgelman et al.,
1996, 2)
Although organizational researchers often treat
science and technology as interchangeable (e.g.
Porter, 1985; Latour, 1987), they are in fact
fundamentally different, especially in their rela-
tionship to marketable products and services.
Scientific knowledge can be used to create new
scientific knowledge and new technological knowl-
edge, whereas technological knowledge is used to
create new technological knowledge, processes,
products or services. In other words, technological
knowledge focuses on market needs and trajec-
tories, whereas scientific knowledge focuses on
more fundamental issues.
Scientific vs engineering professional cultures: Scientific vs engineering professional cultures:
knowledgedevelopment innovationprocess
Scientific and engineering cultures also differ in the
processes by which they typically create knowledge
DavidG Sirmonand PeterJ Lane
313
Flowof criticalknowledge Innovationprocess
characteristics
Controlled: economic Problem driven
property rights
Stricttimelines
Marketcriteria
Open: few property rights Curiositydriven
Laxtimelines
Curiositycriteria
in different organizations, industries, and types of
institutions, bound by a common interest in a
broadly defined problem (Kuhn, 1970; Crane, 1972;
Latour, 1987; Tushman and Rosenkopf, 1992).
Members of scientific networks are not typically
rewarded for the economic value of their research;
instead they are rewardedfor their 'contribution' to
the shared understanding of the phenomena
(Mulkay, 1977; de Solla Price, 1982, 1986). The
uncompensated 'contribution' of their research
creates a reciprocal right to draw on the pool of
knowledge 'donated' by other network members
(Hagstrom, 1982). Such reciprocal rights are critical
to the progress of science, as few scientists can build
a stream of research independent of others. The
shared, open and accessible nature of scientific
knowledge fits with its focus on pursuing funda-
mental questions.
By contrast, the engineering culture tends to
create technological knowledge via technological
networks composed of members located in one
organization or in economically linked organiza-
tions. These individuals' rewardsare often based on
the economic value of the technological knowledge
they create (Mulkay, 1977; Barnes and Edge, 1982).
They may draw on external sources of expertise, but
the knowledge created by technological networks is
developed within economic organizations and is
controlled by them (Tushman and Rosenkopf,
1992). The proprietary nature of technological
knowledge fits with its focus on market needs and
trajectories.
The professional culture of scientists tends to follow
loose timetables, primarily utilizes abstract infor-
journal of International Business Studies
 A model of cultural differences
314
mation, and values unexpected findings. New
scientific knowledge often changes incrementally.
New theories and discoveries absorb the knowledge
that has preceded them, and are positioned relative
to the state of the art. Radical new scientific
perspectives emerge less frequently, but they typi-
cally result in a re-conceptualization of prior
findings, rather than their outright disregard
(Kuhn, 1970).
However, the professional culture of scientists is
not based solely on a body of knowledge. Instead,
members are socialized to follow agreed methods
for gathering and communicating evidence via
individual training (ie education) and the publica-
tion process (e.g. peer review) (Gilbert and Mulkay,
1984; Latour, 1987). However, these agreed stan-
dards change over time, and thus the process of
scientific knowledge creation is dynamic (Master-
man, 1970; Gilbert and Mulkay, 1984). The net
effect of this dynamic process is that scientific
knowledge advances through the accumulation of
repeated 'branchings' and 'spiralings' (de Solla
Price, 1986).
By contrast, technology development processes
are typically driven by pressures from markets
(Clark, 1987; Balmer and Sharp, 1993; Adner and
Levinthal, 2001), and begin with ideas of what is
needed to satisfy those pressures. Rewardsfor quick
responses to such market pressures (e.g. first mover
advantage) often lead firms to perform local
searches for solutions. In other words, technologi-
cal knowledge is often produced by extending what
is already well known by the firm. Thus technolo-
gical knowledge is essentially about exploiting and
adapting what is known in order to achieve what is
desired (Rip, 1992; Garud and Rappa, 1994). When
a solution to a technological need is not apparent,
the firm works backwards from its preconceived
ends and evaluates potential starting points (solu-
tions) until an optimal one is found (Nightingale,
1998).
However, in either case, social, political, and
organizational dynamics play a large role in
determining which technological options are pur-
sued (Tushman and Rosenkopf, 1992). Further,
current technological knowledge often makes prior
technological knowledge obsolete. In compara-
tively few cycles of innovation, much of the earlier
technological knowledge has been discarded. Thus,
unlike the development of science-based knowl-
edge, the technological knowledge development
process tends to follow set timetables, utilizes
concrete information, views unexpected findings
Journal of International Business Studies
DavidG Sirmonand PeterJ Lane
as useless or even troubling, and develops in short
linear chains (Allen, 1984, 1997; Mikhailov et al.,
1984, 111-120; de Solla Price, 1986).
Scientificvs engineeringprofessionalcultures:an
example
Because the professional cultures of scientists and
engineers represent such different sets of beliefs,
norms and priorities, they can create severe com-
munication problems and conflict between the
groups. For example, Balmer and Sharp (1993)
suggested that the differences between science
and engineering led to the 1980s conflict in the
UK over which research council would 'shepherd'
biotechnology research. The Medical Research
Council (MRC) had a scientific culture favoring
broadly defined, science-driven research programs
and 'curiosity-led funding'. The engineering culture
of the Science and Engineering Research Council
(SERC),on the other hand, placed more emphasis
on industry relevance and problem-solving. It
routinely shifted priorities and resources in accor-
dance with new developments, and was thus able
to quickly set up the Biotechnology Directorate
that funded research, meeting the industry's needs.
The MRC objected, and the debate that followed
resulted in an inquiry by the House of Lords.
During this inquiry, the MRC condemned the
SERC'sbiotechnology program as 'opportunistic'
and 'freewheeling', interested only in narrowly
focused 'industrially relevant projects' and in
funding too much second-rate science. The SERC,
in turn, called its Biotechnology Directorate 'one of
the jewels in our crown'.
In total, this example demonstrates the potential
for significant conflict between members of differ-
ent professional cultures. However, the potential
for conflict does not reside only in the interactions
of science and engineering professional cultures.
Instead, differences between any professional cul-
tures represented in the value-creating activity of
an international alliance can have significant
negative ramifications. Specifically, we argue that
differences in the professional culture of the
employees who interact in an international alliance
will inhibit the effective sharing, combining and
leveraging of complementary resources. Formally:
P5: Differences in the professional cultures of
international alliance partners' employees nega-
tively moderate the relationship between related
complementary resources and effectiveness of the
alliance's value-creating activities.
 A model of cultural differences
Thus far, we have discussed separately the effects
of cultural differences in international alliances as
they originate from national, organizational and
professional cultures. We began with the contra-
dictory results of the effects of national culture
differences on international alliance performance,
and then proceeded to discuss both organizational
and professional cultures as they pertain to inter-
national alliance performance. However, as Salk
and Shenkar (2001) showed, international joint
venture team members utilize several different
social identities (national, organizational and occu-
pational) as sensemaking mechanisms. Thus indi-
viduals in international alliances rely on multiple
sources of socialization to understand and organize
their interactions and stimuli. However, their
relative effect is left unspecified.
In a study of national subcultures, Lenartowicz
and Roth (2001) found that by identifying sub-
cultures, which more accurately captured differ-
ences in the Brazilianpopulation, they were able to
accurately predict differences in business perfor-
mance based on those subcultures. In other words,
by specifying and understanding a more proximal
and salient culture to which people belong, one can
predict behaviors more accurately. This logic helps
explain Pothukuchi et al.'s (2002) finding that
organizational culture differences have more influ-
ence on alliance performance than national culture
differences because organizational culture see-
mingly is more proximal and salient to the
behaviors of individuals that drive business perfor-
mance in international alliances.
Continuing this logic, we propose that profes-
sional culture is often the most proximal and salient
influence on the behavior of individuals interacting
in the value-creating activities of an international
alliance. Therefore differences between individuals'
professional cultures will be the most disruptive. As
a result, the negative effects stemming from differ-
ences in the professional cultures of partners'
employees will be greater than those effects stem-
ming from difference between either the partners'
organizational or national cultures. Formally:
P6: Differences in the professional cultures of the
employees involved in the alliance's primary
value-creating activities will have more influence
on the relationship between related complemen-
tary resources and the effectiveness of the
alliance's value-creating activities than differ-
ences in the partners' organizational or national
cultures.
DavidG Sirmonand PeterI Lane
315
Discussion And Conclusion
We have introduced a detailed model of cultural
differences and international alliance performance
that differs from prior research in several ways.
First, we have proposed that the performance of
international alliances is influenced by the effec-
tiveness with which an alliance achieves its primary
value-creating activities. Often a necessary condi-
tion for such effectiveness is the presence of
complementary resources that are related to those
activities. However, the presence of complementary
resources alone is insufficient. Additionally, the
partners' employees must be able to interact
effectively in order to share, combine and leverage
those resources. Thus factors that affect these
interactions are critical in understanding interna-
tional alliances' outcomes.
Following the literature, we focused on cultural
differences as factors that affect such interactions.
Building on the findings of Pothukuchi et al.
(2002), we argued that the more salient the cultural
differences are to the value-creating activities of an
alliance, the more disruptive those differences will
be on the alliance's value-creating activities. Thus
differences in organizational culture and profes-
sional culture - not just differences in national
culture - need to be assessed.
We believe that our model offers valuable new
insights for international alliances. We focused on
international alliances because they are increasing
in both number and competitive importance.
Using an example of IRDA, we demonstrated our
model. Building on research from the sociology of
knowledge, we showed that R&D personnel's
professional cultures could be either science-based
or engineering-based. Moreover, because these
cultures are most relevant to the individuals
actually interacting in an IRDA, differences
between these professional cultures will be the
most disruptive to the alliance's value-creating
activities. However, we also feel that our model
presents implications for other contexts in which
culture differences are believed to matter.
This model is relevant to international mergers
and consortia, and also to collaboration within
large multinational firms, where different organiza-
tional cultures exist in separate divisions: differ-
ences in the divisions' organizational cultures may
be most salient. Further, the ideas developed in this
study also have implications for domestic alliances
and mergers. They suggest that the alignment of
professional cultures matters more than the align-
ment of organizational cultures. There is indirect
Journal of International Business Studies
 A model of cultural differences
316
evidence of this phenomenon in Lane and Lubat-
kin's, (1998) study of R&D alliances between US
pharmaceutical and biotechnology firms. They
compared the formalization, centralization, and
compensation practices of the partners, which were
artifacts of their organizational cultures. They
found that differences in research centralization
and research compensation practices were nega-
tively related to R&D alliance performance (ie
learning), but differences in management centrali-
zation and upper management formalization were
not. These findings are in keeping with our
contention that differences in beliefs and norms
matter more as they become more relevant to the
value-creating activities of the alliance.
However, the generalizability of the model is
limited to those situations where value is created
via the sharing, combing and leveraging of com-
plementary resources. Thus, the model does not
apply as well to inter-firm relationships that focus
on cost-cutting or the linking of similar resources.
Clearly, an important next step in this line of
research is the empirical testing of the model
developed in this paper. Several well-developed
measures of national culture and organizational
culture can be used. For example, the study by
Pothukuchi et al. (2002) used both Hofstede's
(1980) measures of national culture values and his
measures of organizational culture (Hofstede,
1991). Professional culture could be assessed using
various different measures, such as formality and
length of professional training, degree of cross-
functional experience of unit members, and the
number of memberships that individuals have of
occupational associations. Each of these measures
of a professional culture would need to be adjusted
for industry norms.
The purpose of this paper was to deductively
develop a model based on prior academic research.
It has therefore avoided normative propositions.
While this may make our ideas seem overly
deterministic, and may suggest that key contingen-
cies are beyond managerial control, this is not the
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About the author
David G Sirmon is an assistant professor at
Clemson University. He earned his Ph.D. at Arizona
Acceptedby Nicolai Juul Foss & TorbenPedersen,DepartmentalEditors,2004. This paper has been with the author for threerevisions.
DavidG Sirmonand PeterI Lane
319
State University. His current research interests
revolve around realizing value creation via resource
management. In addition to JIBS,his research has
appeared in JOM and Entrepreneurship Theory &
Practice.
Peter Lane is an associate professor of strategy and
technology at the University of New Hampshire's
Whittemore School of Business and Economics. He
received his Ph.D. at the University of Connecticut.
His research examines the socio-cognitive processes
related to alliances, M&A, innovation, strategic
renewal, and corporate governance.
Journalof InternationalBusinessStudies