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Sources of Corporate Culture Competitiveness: From Theory to Practice

Knowledge Management Organizational Culture Intercultural Communications Human Resources Management, a Case Study: The Danfoss Universe

Uriel Alvarado

Sarah Hempel

Berat Zimberi

Advisor: Lisbeth Clausen, IKL 3rd Year Project Asian Studies Programme Copenhagen Business School June 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.

Sources of Corporate Culture Competitiveness: The Danfoss Universe 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

Sources of Corporate Culture Competitiveness: The Danfoss Universe

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.

Sources of Corporate Culture Competitiveness: The Danfoss Universe

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, topline 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

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

Sources of Corporate Culture Competitiveness: The Danfoss Universe enduring competitive advantage in multinational corporations (MNCs) (e.g. Gupta and Govindarajan, 2000 et al)2.

The last underlying element in Scheins 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

Sources of Corporate Culture Competitiveness: The Danfoss Universe

In todays 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.

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

Sources of Corporate Culture Competitiveness: The Danfoss Universe

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.

Executive Summary

Introduction

Methodology

Theory

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


What

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
Danfoss What Why HRM How Model Int. Communication Org. Culture

Knowledge Management

Why

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

Sources of Corporate Culture Competitiveness: The Danfoss Universe

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?

Sources of Corporate Culture Competitiveness: The Danfoss Universe

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

Executive Summary

Introduction

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.
Theory Methodology

3.1 Research Strategy


What

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
Model Why Knowledge Management Int. Communication Org. Culture

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. 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,
How
6

How

HRM

What

Why

Danfoss

Analysis

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

Conclusion

10

Sources of Corporate Culture Competitiveness: The Danfoss Universe 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 projects 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

Sources of Corporate Culture Competitiveness: The Danfoss Universe Thus, throughout the writing of the project we have drawn on the knowledge acquired through the courses taught at the Asian Studies Programme curriculum . 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 theme9.
Int. Communication Org. Culture What Theory Methodology 8

Executive Summary

Introduction

3.2 Terms
Multinational Corporation According to the Blackwell Encyclopedic Dictionary of International Management

Knowledge Management

Why

Model

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

How

HRM

Competitiveness This project uses Jay Barneys definitions of competitive advantage when a firm is implementing a value creating strategy not simultaneously being implemented by any current or potential competitors and sustained competitive advantage when a firm is
11

What

Why

Danfoss

Analysis

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 (OConnell, 1997:211), The Blackwell Encyclopedic Dictionary of International Management, John O'Connell, Blackwell publishing, 1998 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

How

Conclusion

12

Sources of Corporate Culture Competitiveness: The Danfoss Universe 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 strategy12. 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

IBID, p.4 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

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Sources of Corporate Culture Competitiveness: The Danfoss Universe cognitive elements of the group members 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

Figure 216

Artifacts

Visible organizational structures and processes

Espoused Values

Strategies, goals, philosophies (espoused justifications)

Basis Underlying Assumptions

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

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

Sources of Corporate Culture Competitiveness: The Danfoss Universe Core Values This project uses Scheins 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 1950s 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)
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
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Sources of Corporate Culture Competitiveness: The Danfoss Universe 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 practice24. 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 unit25. Knowledge transfer is often used simultaneously with knowledge sharing26, which can be defined as Providing ones 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

IBID 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 Bjorkman, CF Fey, HJ Park, Journal of International Business Studies (2003) 34, 586599& 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
23

22

27

C.f. IBID

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Sources of Corporate Culture Competitiveness: The Danfoss Universe 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 ends29. This definition was criticized by Zahra & George for not capturing the dynamic nature of the construct 30 . 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.

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

28

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Sources of Corporate Culture Competitiveness: The Danfoss Universe Integration Integration can be defined as The need to coordinate, adjust, and regulate relationships among various actors or units within the systemin 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 individuals selection of behaviors and what lies behind making these choicesno 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 individuals 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.

Sociological Theory and Modern Society, Parsons, Talcott, New York Free Press, 1967 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
34

33

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Sources of Corporate Culture Competitiveness: The Danfoss Universe 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 Methodology

Executive Summary

Introduction

3.3 Delimitation
Theory

Knowledge Transfer Within the study of knowledge transfer there are sub categories including horizontal knowledge transfer (between subsidiaries), vertical knowledge transfer (from
Org. Culture What

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.
Int. Communication

Knowledge Management

Why

Strategic Subsidiaries The concept of strategic subsidiaries is highlighted by Lai Hong Chung, Patrick Gibbons, and Herbert Schoch who state that
How Model

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.

HRM

What

Why

Danfoss

Analysis

The MNC Knowledge Transfer, Subsidiary Absorptive Capacity and HRM, Dana Minbaeva, Torben Pedersen, Ingmar Bjorkman, Carl F. Frey, H.J. Park, WP 14-2001 38 Inspired 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.

37

How

Conclusion

19

Sources of Corporate Culture Competitiveness: The Danfoss Universe 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 firms 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.

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

40

c.f. IBID IBID


IBID

20

Sources of Corporate Culture Competitiveness: The Danfoss Universe 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
Social Capital as an Antecedent of Absorptive Capacity of Firms, Rajesh S. Upadhyayula & Rajiv Kumar, DRUID Summer Conference, 2004 45 IBID
44

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Sources of Corporate Culture Competitiveness: The Danfoss Universe 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.

Executive Summary

Introduction

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.

Methodology

Theory

What

Org. Culture

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.

Int. Communication

Knowledge Management

Why

Model

How

3.4 Theoretical Tools and Critique


HRM

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
How Analysis Danfoss What Why

Conclusion

22

Sources of Corporate Culture Competitiveness: The Danfoss Universe 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 successful47. 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 pioneering 48 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. 49 She 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 Scheins 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 symbolicinterpretive 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
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. 215 47 IBID
48
49 46

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Knowledge Sharing and Organizational Culture in Multinational Corporations, Andrea Straub-Bauer, Department of Organization and Industrial Sociology, Copenhagen Business School, 2005. 50 IBID

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Sources of Corporate Culture Competitiveness: The Danfoss Universe these concepts are valid, and give an opposing view to Scheins 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 Scheins 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 didnt 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 IKEAs methods of acculturation and cultural negotiation. The adapted model was based on extensive research and a presentation by Kasper Leschly who currently works in IKEAs 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.

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)

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Sources of Corporate Culture Competitiveness: The Danfoss Universe

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 Schwartzs53value 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 Hofstedes 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. 53 Beyond Individualism/Collectivism Schwartz, S. H. (1994): New Dimensions of Values. Individualism and Collectivism: Theory Application and Methods. U. Kim, H. C. Triandis, C. Kagitibasi, 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

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Sources of Corporate Culture Competitiveness: The Danfoss Universe well documented. Additionally we were surprised to find reference to the cultural values necessary to include in Working in Japan: An Insiders 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 relationshipsGhoshal and Bartlett (1988) find that integration and communicationappeared to be positive to creation, adoption and diffusion of knowledge by MNCs subsidiaries57. 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

Sources of Corporate Culture Competitiveness: The Danfoss Universe develop this link further, which until now has been largely black boxed58. 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 formally60 . 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.

Interview with Dana Minbaeva, May 23, 2005 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
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Sources of Corporate Culture Competitiveness: The Danfoss Universe 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 practices61. 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 likely62. 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 performance63. 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 risk64. 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.

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

61

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Sources of Corporate Culture Competitiveness: The Danfoss Universe Conceptual Model The resulting conceptual model contributes to an alternative theorizing of human resources 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

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

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Sources of Corporate Culture Competitiveness: The Danfoss Universe 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 firms 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-WS), however for the purpose of our analysis it proved suitable.
Org. Culture What Theory Methodology

Executive Summary

Introduction

3.5 Data Collection, Resources, and Critique


The process of data collection consisted of four steps:

Int. Communication

Knowledge Management

Why

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
How Model

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.

HRM

What

Why

Danfoss

Analysis

How

67

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

Conclusion

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Sources of Corporate Culture Competitiveness: The Danfoss Universe

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

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

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Sources of Corporate Culture Competitiveness: The Danfoss Universe 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 AM-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 Presidents 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.

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Sources of Corporate Culture Competitiveness: The Danfoss Universe

4. Theory
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.

Executive Summary

Introduction

Methodology

Theory

What

Org. Culture

Int. Communication

Knowledge Management

Why

Model

Figure 3

How

HRM

What

Why

Danfoss

Analysis

How

Conclusion

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Sources of Corporate Culture Competitiveness: The Danfoss Universe

4.1 Organizational Culture


Taking a functionalist point of departure, we make reference to Scheins 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.

Executive Summary

Introduction

Methodology

Theory

What

Org. Culture

Int. Communication

Knowledge Management

Why

Model

How

HRM

What

Why

Danfoss

Analysis

How 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 73 Knowledge Sharing and Organizational Culture in Multinational Corporations, Andrea Straub-Bauer, Department of Organization and Industrial Sociology, Copenhagen Business School, 2005, p.33
71

Conclusion

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Sources of Corporate Culture Competitiveness: The Danfoss Universe

Individual Behavior Absorptive Capacity Organizational practices/structure Technology Compensation and reward Expatriation Training & development

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.

Organizational culture

Knowledge sharing

Figure 474

Basic assumptions Knowledge sharing at cognitive level Values Artifacts Knowledge sharing at behavioral level

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

Figure 575

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

74

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Sources of Corporate Culture Competitiveness: The Danfoss Universe 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
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
76

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Sources of Corporate Culture Competitiveness: The Danfoss Universe as sources of values, meanings and norms brought to the bicultural organizational context. The second of Brannen & Salks 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 & Salks 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 organizations 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 nonnegotiable. 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

37

Sources of Corporate Culture Competitiveness: The Danfoss Universe practices, particularly core competencies and knowledge, between its geographically dispersed and diverse units (Bartlett & Ghoshal, 1999) . 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 conditions81. This should be supported by HRM practices which maintain focus on strong culture (core values) Figure 7.
Org. Culture What Theory Methodology 80

Executive Summary

Introduction

Int. Communication

Knowledge Management

Why

Figure 6

82

Figure 7

83

Model

4.2 Intercultural Communications


There are very few studies that deal with the link between intercultural communication and organizational learning . 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
84

How

HRM

What

Why

Danfoss
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

Analysis

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 84 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. 213

81

How

Conclusion

38

Sources of Corporate Culture Competitiveness: The Danfoss Universe 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 learning88. 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 schemata90. 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 model91. 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 86

IBID IBID

87

c.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

Sources of Corporate Culture Competitiveness: The Danfoss Universe 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 individuals mental models change, and these changes affect the organizations mental model. 93 As 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 organizations 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

93 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, 215

94 95

c.f. IBID c.f. IBID 96 c.f. IBID

40

Sources of Corporate Culture Competitiveness: The Danfoss Universe

Executive Summary

4.4 Knowledge Management


Introduction

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
Org. Culture What Theory Methodology

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
Int. Communication

It is acknowledged that in todays 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 companys 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 organization100.

Knowledge Management

Why

Model

How

HRM

What

Why

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
Danfoss

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

Analysis

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

How

Conclusion

41

Sources of Corporate Culture Competitiveness: The Danfoss Universe 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

42

Sources of Corporate Culture Competitiveness: The Danfoss Universe

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

43

Sources of Corporate Culture Competitiveness: The Danfoss Universe

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 important110.

According to Nahapiet & Ghoshals (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

Sources of Corporate Culture Competitiveness: The Danfoss Universe

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 employees 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 capital115.

113 114

IBID p. 7

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

45

Sources of Corporate Culture Competitiveness: The Danfoss Universe 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 knowledge 117 . 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
116 117

IBID

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

Sources of Corporate Culture Competitiveness: The Danfoss Universe 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 individuals 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
120

c.f. IBID

IBID p.8

47

Sources of Corporate Culture Competitiveness: The Danfoss Universe

Executive Summary

4.5 Conceptual Model


Introduction

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

Methodology

Theory

What

Org. Culture

Int. Communication

Knowledge Management

Why

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.
Figure 10
How Model

HRM

What

Why

Danfoss

Analysis

How

Conclusion

48

Sources of Corporate Culture Competitiveness: The Danfoss Universe 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

49

Sources of Corporate Culture Competitiveness: The Danfoss Universe 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 managements 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 firms environment, it must be rare among a firms 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

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

123

50

Sources of Corporate Culture Competitiveness: The Danfoss Universe that this combined with effective Intercultural Communications and a focus on maintaining core values is the source of corporate culture competitiveness.

Executive Summary

Introduction

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 work , corporate socialization mechanisms and development
132 130 131

Methodology

Theory

What

Org. Culture

, and career management


Int. Communication

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.
Why Knowledge Management

Model

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
What Why HRM How

processes that can ensure that prospective employees are capable of demonstrating a knowledge sharing potential willingness, cross-functional team working skills, and
126 127

Danfoss

see Minbaeva, 2005 and Angelos Alexopoulos and Kathy Monks, 2004 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
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
133

Analysis

How

Conclusion

51

Sources of Corporate Culture Competitiveness: The Danfoss Universe collaborative spirit (Robertson & OMalley Hammmersley, 2000; Swart & Kinnie, 2003).134

Training There is
135

extensive

evidence

that

investment

in

employees

training

enhancesorganizational performance (Delaney and Huselid, 1996; Koch and McGrath, 1996). Additionally, similar training experiences can contribute to building

connections across diverse groups in anticipation of the future formation of crossfunctional 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)

52

Sources of Corporate Culture Competitiveness: The Danfoss Universe 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 organizations 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 integration142.

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
141 142

c.f. IBID IBID

53

Sources of Corporate Culture Competitiveness: The Danfoss Universe 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 cultures146. 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.
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.123 148 IBID p. 108
143

54

Sources of Corporate Culture Competitiveness: The Danfoss Universe

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 crosscultural 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

Sources of Corporate Culture Competitiveness: The Danfoss Universe 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 companys 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:

155 156

IBID IBID 157 IBID 158 International HRM A Cross Cultural Approach, Terence Jackson, Sage Publications, 2002, p.59

56

Sources of Corporate Culture Competitiveness: The Danfoss Universe


Figure 11

Denmark

Japan

80 60 40 20 0 P DI ID V M AS UA I

100 80 60 40 20 0 PDI IDV MAS UAI

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.

159 160

http://www.geert-hofstede.com/hofstede_denmark.shtml, ITIM Creating Cultural Competencies IBID 161 IBID 162 IBID

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Sources of Corporate Culture Competitiveness: The Danfoss Universe 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 everyones 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 opinions169.

163 164 165

Danish ministry of science technology and innovation, source: Eaton Consulting Group, http://www.workindenmark.dk/Work/0/4/0

IBID

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

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Sources of Corporate Culture Competitiveness: The Danfoss Universe 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 effectively172. 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 insularity176. 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
176

IBID
Human Resource Management in Japan By Yoko Sano pg.151

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Sources of Corporate Culture Competitiveness: The Danfoss Universe 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 persons performance openly with him or her is likely to clash head-on with the societys 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 individuals 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 ones intention without putting it directly into words. The complementary process is to read (yomu) anothers intentions (hara o yomu). 183 In Japan group consensus is reached
177 178

IBID IBID 179 Working in Japan: An Insiders 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 Insiders 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 Insiders guide for Engineers, The Modern Working Environment in Japan

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Sources of Corporate Culture Competitiveness: The Danfoss Universe 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 employees 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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Sources of Corporate Culture Competitiveness: The Danfoss Universe

5. Case Study of Danfoss K.K


Danfoss company profile Danfoss KK Japan profile

Executive Summary

Introduction

Danfoss KK Japan established its first Japan based sales office in Tokyos Ota Ward in 1961. Locations: History The company of Danfoss is found by Mads Clausen in 1933 and previously called Dansk Kleautomatik- og Apparat-Fabrik. Danfoss is based in Nordborg in southern Denmark. Location Headquarters Danfoss A/S DK 6340 Nordborg Executive Committee Chief Executive Officer : Jrgen 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 *)

Methodology

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 1. Accommodates a wide variety of Project-oriented business activities. 2. Maximizes efficient use of functional managers. 3. Enhances coordination Disadvantages Can create confusion and contradictory policies by allowing dual accountability. Necessitates tremendous horizontal and vertical coordination.

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

Theory

What

Org. Culture

Int. Communication

Knowledge Management

Why

Model

How

HRM

What

Why

Danfoss

Analysis

How

Conclusion

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Sources of Corporate Culture Competitiveness: The Danfoss Universe

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 the following mission statement, which is specific to Danfoss Japan and defines our purpose as well as what expectations and values are promoted on a daily basis.

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Sources of Corporate Culture Competitiveness: The Danfoss Universe The case study will be presented through a resume of five perspectives including our team members 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 members 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 employees 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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Sources of Corporate Culture Competitiveness: The Danfoss Universe Finally, the perception of top management was low, 57% compared to the Danfoss average of 72%. According to our team members 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 employees abilities is not high. On the other hand, the EPS survey revealed that employees view top managements ability to make the right decisions as low, 55% compared to a company average of 69% as well as top managements 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 members 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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Sources of Corporate Culture Competitiveness: The Danfoss Universe 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 members 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 managements ability to inform the employees at 51% compared to the Danfoss average of 65%. Top managements 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 members observation period showed that the core culture of Danfoss may be understood by the local employees, but it doesnt 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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Sources of Corporate Culture Competitiveness: The Danfoss Universe

6. Discussion: Application of Theory to Danfoss K.K.


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.

Executive Summary

Introduction

Methodology

Theory

What

Org. Culture

Int. Communication

Knowledge Management

Why

Figure 12

Model

How

Communication Communication between local employees and between expatriates in Danfoss K.K is strong. Additionally communication between regional managers and between managers
What Why HRM

and headquarters is good. Danfoss has recognized the necessity of improving communication and has thus implemented a leadership development programme for
Danfoss

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.
How Analysis

Conclusion

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Sources of Corporate Culture Competitiveness: The Danfoss Universe 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 expatriates 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 employees 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

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Sources of Corporate Culture Competitiveness: The Danfoss Universe 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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Sources of Corporate Culture Competitiveness: The Danfoss Universe

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.Ks 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

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Sources of Corporate Culture Competitiveness: The Danfoss Universe 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 companys 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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Sources of Corporate Culture Competitiveness: The Danfoss Universe

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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Sources of Corporate Culture Competitiveness: The Danfoss Universe 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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Sources of Corporate Culture Competitiveness: The Danfoss Universe

6.1 Recommendations
TOWS
Strengths (S) 1. Local-local integration 2. Local-local communication 3. Japans 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. 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. 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.

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 Japans high level of skills and overseas investments to increase the subsidiarys integration into Danfoss Asia and Danfoss as a whole. This will also improve knowledge transfer.

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.

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Sources of Corporate Culture Competitiveness: The Danfoss Universe 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

Big in Asia, 25 Strategies for Business Success, Michael Backman and Charlotte Butler, palgrave Macmillan, 2004

185

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Sources of Corporate Culture Competitiveness: The Danfoss Universe 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. 186 Expatriate 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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Sources of Corporate Culture Competitiveness: The Danfoss Universe 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 Danfosss 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

Big in Asia, 25 Strategies for Business Success, Michael Backman and Charlotte Butler, palgrave Macmillan, 2004

187

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Sources of Corporate Culture Competitiveness: The Danfoss Universe 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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Sources of Corporate Culture Competitiveness: The Danfoss Universe 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. Preand 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.
Org. Culture What Theory Methodology

Executive Summary

Introduction

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

Int. Communication

Knowledge Management

Why

Model

How

HRM

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:
Analysis Danfoss What Why

How

Conclusion

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Sources of Corporate Culture Competitiveness: The Danfoss Universe 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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9. Bibliography
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Coming to a new awareness of Organizational Culture, Edgar H. Schein, in Sloan Magazine Review, winter, p.3-16, Organization Compendium, 2003 Asian Studies Programme Crisis Construction and Organizational Learning: Capability Building and Catching up at Hyundi Motor, Linsu Kim, Organization Science, Vol. 9, No.4, 1998 Cross cultural training and effectiveness: A review and theoretical framework for future research, J. Steward Black and Mark Mendenhall, Academy of management review, 1990, Vol. 15, No. 1, 113-136 Cultures and Organizations: Software of the Mind, Hofstede, G. H., London; New York, McGraw-Hill, 1991. Culture's Consequences, International Differences in Work-Related Values, Hofstede, G. H, Beverly Hills, Sage Publications, 1980 Den skindbarlige virkelighed Om valg om samfundsvidenskabelige metode, Samfundslitteratur Andersen, Ib, 1997 Expatriate managers and MNCs ability to control international subsidiaries: the case of Japanese MNCs, Yongsun Paik and Junghoon Derick Sohn, Elsevier, 2003 Facilitating Project Team Learning and Contributions to Organizational Knowledge, George P. Huber, volume 8, number 2, 1999 Firm Resources and Sustained Competitive Advantage, Jay Barney, Texas A&M University, Journal of Management, 1991, Vol.17, No1, 99-120 Global management and Organizational Behaviour, Robert Konapske and John M. Ivancevich. Published by Mc Graw Hill, International edition 2004, New York How to prepare your expatriate employees for cross cultural work environments, IOMAs Report on Management Training and Development, 2005 HRM and performance: a review and research agenda, David Guest, the International Journal of Human Resource Management, 8:3, 1997 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 Intercultural Communication in the Global Workplace, Linda Beamer and Iris Varner, McGraw Hill Irwin, 2001

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Sources of Corporate Culture Competitiveness: The Danfoss Universe International Human Resource Management, A Cross Cultural Approach, Terence Jackson, Sage Publications, 2002 International Management Cross Cultural Dimensions, Second Edition, Richard Mead, Blackwell publishing, 1998, p.407-414 Internal versus External Knowledge Sourcing of Subsidiaries- An Organizational Trade Off, Jens Gammelgaard and Torben Pedersen, Copenhagen Business School Knowledge Integration Mechanisms and the Competitive Performance of Firms- An empirical investigation, Piero Morosini and Olivier Renaud, IMD Working paper 2003 Knowledge Management Processes and International Joint Ventures, Andrew C. Inkpen and Adva Dinur, Organization Science, Vol. 9, No. 4, 1998 Knowledge Managements Social Dimension: Lessons from Nucor Steel, Anil K. Gupta and Vijay Govindarajan, Sloan Management Review, 2000 Knowledge Sharing and Organizational Culture in Multinational Corporations, Andrea Straub-Bauer, Department of Organization and Industrial Sociology, Copenhagen Business School, 2005. Knowledge sharing in knowledge intensive firms: opportunities and limitations of knowledge codification, Akshey Gupta and Snejina Michailove, CKG WP 12/2004 Making the Most of your Companys Knowledge: A strategic framework, George von Krogh, Ikujiro Nonaka, Manfred Aben, Pergamon, 2001 Masculinity and Femininity: The Taboo Dimension of National Cultures, Hofstede, G. H, Thousand Oaks, Calif., Sage Publications, 1998 MNC knowledge transfer, subsidiary absorptive capacity, and HRM, D Minbaeva, T Pedersen, I Bjorkman, CF Fey, HJ Park, Journal of International Business Studies (2003) 34, 586599& 2003 Palgrave Macmillan Ltd. Organizational knowledge learning and memory: three concepts in search of a theory, J.C. Spender, Journal of Organizational Change Management, vol. 9, no. 1, 1996 Organizational learning: The contributing processes and the literatures, George P. Huber, Organization Science, vol. 2, No. 1, 2005 Research Methods for Business Students, M. Saunders, P. Lewis, and A. Thornhill, (2000), second edition, Prentice Hall Press Social Capital as an Antecedent of Absorptive Capacity of Firms, Rajesh S. Upadhyayula & Rajiv Kumar, DRUID Summer Conference, 2004

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Social Capital, Intellectual capital and the Organizational advantage, Janine Nahapiet, Sumantra Ghoshal, Academy of Management Review, vol. 23, no.2, 1998 Sociological Theory and Modern Society, Parsons Talcott, New York Free Press, 1967 Strategic Management of Multinational Networks: A subsidiary evolution perspective, Ana Teresa Tavares, University of Porto, Faculty of Economics, 2001 Strategies and Strategy Making: Strategic Exchange and the Shaping of Individual Lives and Organizational Futures, T. Watson (2003), Journal of Management Studies, 40:5 July The Blackwell Handbook of Organizational Learning and Knowledge Management, Edited by Mark Easterby-Smith and Marjorie A. Lyles, Blackwell Publishing, 2003 The Challenge of Expatriate Compensation: The Sources of Satisfaction and Dissatisfaction among Expatriates, Vesa Suutari and Christelle Tornikoski , The International Journal of Human Resource Management, 2001 The effects of cross cultural training on the acculturation process of the global workforce, Norhayati Zakaria, International Journal of Manpower, 21, 6, 492, 2000 The impact of knowledge management on MNC subsidiary performance: the role of absorptive capacity, Volker Mahnke, Torben Pedersen and Markus Verzin, 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 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. The knowledge Creating Company, How Japanese Companies Create the Dynamics of Innovation, Ikujiro Nonaka and Hirotaka Takeuchi, Oxford University Press, 1995 The Knowledge Retrieval Matrix: Codification and Personification as separate strategies, Jens Gammelgaard and Thomas Ritter, CKG WP, 2004 The MNC Knowledge Transfer, Subsidiary Absorptive Capacity and HRM ,Dana Minbaeva, Torben Pedersen, Ingmar Bjorkman, Carl F. Fey, H.J. Park, WP 14-2001 The Role of Cultural Self Knowledge in Successful Expatriation, Iris I Varner and Teresa M Palmer, Singapore management review, 2005, Volume 27, No. 1

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Sources of Corporate Culture Competitiveness: The Danfoss Universe 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, London, Piatkus, 1994 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 Transactive memory directories in small work unity, Vesa Peltokorpi, emerald, vol. 33, no.4, 2004 Working in Japan: An Insiders 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

Web References Copenhagen Capacity, Danish Working Culture, 09.02.05, http://www.copcap.com/composite-1355.htm Danish ministry of science technology and innovation, source: Eaton Consulting Group, http://www.workindenmark.dk/Work/0/4/0 Executive Planet, Danish working culture, http://www.executiveplanet.com/ ITIM Creating Cultural Competencies, http://www.geerthofstede.com/hofstede_denmark.shtml, Wikipedia online dictionary, http://www.wikipedia.org/

Interviews/ Presentations Dana Minbaeva, May, 23 2005 Kasper Leschly, Intercultural Challenges for IKEA in China, Asian Studies Program: Intercultural Communications, 12th December 2003

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In 1995 Nonaka and Takeuchi published their book The Knowledge Creating Company, considered to be a key turning point in the study of Knowledge Management. They begin the book by presenting the Rugby Metaphor: The ball gets passed within the team as it moves up the field as a unit. The ball being passed around in the team contains a shared understanding of what the company stands for, where it is gong, what kind of a world it wants to live in, and how to make that world a reality. Highly subjective insights, intuitions, and hunches are also embraced. Thats

what the ball contains-namely, ideals, values, and emotions. Now lets focus on how the ball gets passed around in rugby. Unlike how a baton gets passed from one runner to the next in a relay race, the ball does not move in any defined or structured manner. Unlike relay, it does not move linearly or sequentially. Ball movement in rugby is borne out of the team members interplay on the field. It is determined on the spot (here and now), based on direct experience and trial and error. It requires an intensive and laborious interaction among members of the team. Similarly, it is as much about ideals as it is about ideas.
The conceptual model this project presents intends to complete this metaphor in one of the many ways it could be completed: Lets then focus on the coaches of the team. The coaches represent the Human Resources Management Practices that would focus on selecting players with the necessary abilities; providing them with opportunities; motivating and integrating them and thereby achieving the teams goal. However if the communication between the team is broken the team can become divided. Thus the coaches have to make sure that the communication between the players is effective. Also if the players in the back are not well integrated with the forward group the team will become less competitive. Thus through human resources management practices and training the coach can improve the effectiveness of the team. We apply this metaphor to Danfoss KK.

Knowledge Management Organizational Culture Intercultural Communications Human Resources Management, a Case Study: The Danfoss Universe

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