Cross Cultural Innovation Management – A Study of Automotive Technology System Development

Y. Q. Wang1*, Y. J. Cheng1, Y. Z. Jiang1

1School of Management, Harbin Institute of Technology, P. R. China

* Corresponding author. Tel. 86-451-8641-4045. Fax. 86-451-86414024. email: yqw@hit.edu.cn

Abstract-Globalization has resulted in consolidation in automotive industries. More and more alliances, mergers and acquisitions are occurring cross national borders. There is no doubt that cultural differences in innovation management might exist between combining firms and their employees, which obstruct or promote innovation. Based on a case study in a cross cultural project team, connection between national culture and innovation management is explored, and the potential complementation of the differences prevailing cross-cultural management concept is discussed.

Keywords –Innovation Management, Cross Cultural Management, New Product Development, Germany, China, Automotive Technology system

I. INTRODUCTION

Globalization has resulted in consolidation in automotive industries. More and more alliances, mergers and acquisitions are occurring cross national borders [1]. As customer demands become ever more sophisticated and change more rapidly in the world, international innovation will play an increasing role in a company's ability to keep pace with the level of complexity in its world. There is no doubt that cultural differences in innovation management might exist between combining firms and their employees, which obstruct or promote innovation.

Previous literature mainly focuses on the globalization of R&D activity [2], [3], national systems of innovation [4], and the impact of national culture on of innovation. Within the emerging literature on the national culture and technical innovation, Kedia and Keller [5] examined the relationship between Hofstede’s cultural dimensions and research productivity in Austria, Belgium, Finland, and Sweden. They found that low power distant and high Masculinity were associated with high research productivity. Shane [6] reported the effect of Hofstede’s cultural dimensions on per capita rates of innovation in 33 countries between 1975 and 1980. They found that high individualism, low power distant and weak uncertainty avoidance were associated with rate of innovation. Ettlie [7] examined product development strategies and practices of five companies in the US, Sweden, Germany, Hungary, and Japan. They proposed that the level of influence of culture would be lower in high-tech industries, given the high level of scientific content, which would be less amenable to influence. Thyne [8] investigated the influence of national cultural dimension on new product innovation based on the samples from the US and Belgium. A combination of high power distant and an emphasis on organization system was

found to have the greatest explanatory power for new product innovation. Shore [9] explored the influence of national culture such as power distant, uncertainty avoidance, individualism, future orientation, performance orientation and humane treatment on the international project management process in relation to structure, geographic work distribution, long-term budgetary commitment and pay equity.

While the studies focus on the impacts of national culture on the innovation results, studies of the cultural impact on innovation management and especially complementation of the cultural differences in innovation management have been insufficient. With respect to those backgrounds, our research purpose is to explore differences on innovation management due to cultural differences, to assess the potential complementation of the differences prevailing cross-cultural management concepts, to utilize the potentials of cross-cultural employee participation in innovation. The research also tries to determine cultural dimensions that have impacts on innovation management and how they influence innovation management.

II. METHODOLOGY

While there have been many studies addressing culture’s role in management, no study has specifically identified and linked cultural dimension with innovation management issues. It is challenging to introduce this variable into innovation management study because culture is a construct and therefore is not directly accessible through conversation. It may only be observed indirectly through behaviors. This translates into a practical problem when conducting interviews [9]. Cross-cultural management researchers have usually relied on the work of Hofstede, who only considered problems involved in conducting nomothetic and largely quantitative cross-cultural work. There has as yet been little consideration of the problem characteristics of qualitative and idiographic studies, at least within the management field [10].

The study presented in this paper attempts to explore: What cultural dimensions exist in relation to innovation

management? How do these influence the innovation management? How do cultural differences and diversity inhibit and

facilitate innovation management? Based on the exploratory nature of our focus, a case study

would be used for this research. A case study is an empirical inquiry that investigates a contemporary phenomenon within its real-life context, especially when the boundaries between the phenomenon and context are not clearly evident [11].

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A project–engine management system (EMS) development in a Sino-German Joint Venture is studied. Our case study is relied on the primary data source of in-depth interviews within the project and its workgroup. A protocol is designed and used to guide the semi-constructed interview and data collection, followed by open questions. A total of 15 interviews were performed with project managers and team members. There are 5 local Chinese, 5 Chinese with work experience abroad and 5 Germans. To explore the perception of cultural differences, cross survey is carried out. Chinese interviewees are asked for their opinions about specific questions and circumstance and at the same time talk about the possible notions from their German colleagues in the same situations. The German colleagues are also asked to do the same.

III. THEORETICAL FRAMEWORK

A. Identifying the dimensions of national culture Firstly, the literature on culture and its affect on the

management process were reviewed. This was followed by the identification of those cultural dimensions that may help understand the link between culture and innovation management, and its influence on the innovation management.

Culture can be defined as the collective programming of the mind which distinguishes the members of one group from another [12]. We apply the label “national” to culture to distinguish the characteristics of a society from other forms of culture that we do not directly address here.

Several models of national culture in relation to management and communication haven been suggested. One of the most influential was developed by Hofstede [12]. He studied the cultural beliefs of 116,000 employees from 40 nations working for the same multinational corporation, and suggested that national culture can be classified using four dimensions which include power distance, uncertainty avoidance, individualism-collectivism and masculinity-femininity. Cultural model of Hall [13] focuses on determining what releases the right response rather than sends the right message, and suggested two cultural dimensions such as High/Low context and monochronic/ polychronic time. Trompenaars [14] focuses on determining the way in which a group of people solves problems. He proposes seven cultural dimensions.

According to cultural differences between China and Germany, the following dimensions are selected in this study to explore the influence of national culture on the innovation management.

Monochronic - polychronic time. Monochronic time (M-time) means paying attention to and doing only one thing at a time. Polychronic time (P-time) means being involved with many things at one time.

High – low context communication. A high context communication or message is one in which most of the information is already in the person, while very little is in the coded, explicit, transmitted part of the message. A low context communication is just the opposite; i.e., the mass of the information is vested in the explicit code.

Power distance is the degree to which power is unequally

shared among members of a society. Power is unequally shared in high power distance cultures and more equally shared in low power distance cultures.

Individualism – collectivism suggests a loosely knit social fabric in which people take care of themselves (individualism) contrasted with a social fabric in which people are cared for by the group (collectivism).

Specific and diffuse. People from specific cultures start with elements, concentrate on hard facts, standards and contracts. People from diffuse oriented cultures start with the whole and see each element in perspective of the total. Qualities cherished by diffuse cultures include style, demeanor, ambiance, trust, understanding, etc.

Additionally, thought pattern is also taken into account as a culture dimension for this study. Thought pattern means a habit or process of thought. Person with different world outlooks, different patterns of behavior and values think differently. Consequently, thought pattern differs from culture to culture [15]. Chinese prefer imagination and synthesis thinking, while logical and analysis thought pattern in west countries is favorable [16].

Synthetical – analytical thought pattern. Synthesis refers to the combining of separate parts of a substance into a complete whole by putting together all of its attributes, aspects and connections. Analysis refers to the separation of a substance into parts or separating apart all of its attributes, aspects and connections [16]. B. National culture and innovation management

According to Shilling [17], the key for product innovation management is managing new product development process and team.

A. new product development (NPD) process NPD process can be defined as the process from a new

product idea to the promotion and sale of the product. This process involves activities such as concept generation, user tests, construction, design and development for manufacturability. There are three generations of NPD-Processes. The first generation will be categorized as functional and sequential. The gates of the second generation process are described as formal and rigorous, which means that all sub-processes within a stage need to be completed before a go/stop decision can be made. The third-generation process introduces the possibility of overlapping the stages for greater speed and a less rigid stage-gate system, and introduces the term “fuzzy gates”, which means that go-decisions can be conditional and situational [18]. B. Goals and plans

Goals and plans could create administrative order for innovation project and work as a motivating factor for project members. How well formulated and specific a goal could be and its level of difficulty or challenge affects the performance of a project [19]. There are great levels of uncertainty in NPD process. Innovation uncertainty may be distinguished as externally induced uncertainty about user needs, technologies and competition, and internally induce uncertainty about the resources needed to accomplish an innovation project [20].

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Those uncertainties should be handled and reflected in the planning process and the final layout of plan [19].

Planning is an elusive and controversial concept. Brock [21] summarized the different dimensions of planning processes. The planning process can be complex and comprehensive. Formality of planning refers to extent to which the planning process can vary or whether predetermined systems, styles and timing are always used. Some planning systems are designed to create detailed plans for deployment of resources with the aim of optimal strategy implementation.

In M-time cultures such as the U.S. and Germany, time is treated as a tangible asset and divided into small units and used in a liner way. M-time cultures focus on one activity at a time. In those cultures, the social context of interactions is relatively less important. Instead, the emphasis is on promptness, saving time, and keeping the schedule. In P-time cultures such as France and Spain, multiple activities are performed at the same time. The time schedule is considered as a probable rather than an unchangeable matter. In these cultures, social context of interactions is much more important than keeping schedules [13]. Anecdotal evidence suggests that Americans, for instance, are M-time individuals, while Eastern cultures such as Arabic, Japanese, and Chinese exhibit P-time characteristics [22]. C. Team structure and composition

Lack of communication among different functions of a company can be extremely detrimental to new product development. To rectify this problem, cross-functional product teams should be established with members drawn from more than one functional area, such as engineering, manufacturing, or marketing [17]. The permanent staff of a company can be divided into seven different categories according to their roles in the innovation process: project manager, decision-maker, administrative personnel, researchers, developer and expert advisor [23]. Teams can be structured in a number of ways. One well-known typology classifies teams into four types: functional, lightweight, heavyweight, and autonomous [17].

Teams that incorporate cultural diversity should have greater achievements in problem solving by incorporating multiple viewpoints. Studies have demonstrated that demographic diversity in teams can increase innovative outcomes and overall performance. Diversity of team members, however, can also raise coordination and communication costs. Heterogeneous teams often have greater difficulty integrating objectives and views, leading to conflict and lower group cohesion [17]. D. Problem identification and solving

The development of new products requires both the ability of early problem identification and problem solving through integration of ideas, knowledge and information. The problems present in NPD are typically badly or incompletely defined, complex or evolved from situations under new conditions. Those problems require a creative ability and to think in a new way. In order to increase creativity it is necessary for different knowledge and experience to interact. Conditions for a creative climate include the successful

integration of work groups, formal as well as informal meetings and constellations [19].

Different points of view and different thought patterns may facilitate problem identification and solving from concept generation, system design and development to testing. E. Interpersonal trust

Trust is defined as a willingness to rely on another party and to take actions in circumstances where such action makes one party vulnerable to the other. Interpersonal trust in innovative team predicts innovation effectiveness [24]. When there is cultural diversity between the trustor and the trustee, the trustor willl perceive the trustee as less trustworthy than when the trustee belongs to the same culture [25]. Since each culture’s “collective programming” results in different norms and values, the processes trustors use to decide whether and whom to trust may be heavily dependent upon a society’s culture [26]. The difference on trust development may also be explained by the specific and diffuse culture from Trompenaars [14]. In specific cultures, interactions between people are highly purposeful and well-defined. People are easily accepted into the public sphere, but it is very difficult to get into the private sphere. Specific individuals concentrate on hard facts, standards, and contracts. Diffuse individuals have a large private sphere and a small public one. Newcomers are not easily accepted either. But once they have been accepted, they are admitted into all layers of the individual's life. Qualities cherished by diffuse cultures include style, demeanor, ambiance, trust, understanding, etc. F. Communication

One of the key factors for successful product innovation management is communication and coordination. Product innovation is a knowledge intensive process. It can be described as an information transformation process where information is gathered, processed and transferred in a creative way [27]. Communication is the transfer and understanding of meaning. The effectiveness of the encoded message from the sender and decoding of the message from the receiver are influenced by their knowledge and socio-cultural system [28]. International differences in language, culture and context often impedes the process of knowledge codification. Communication Codification is defined as the individual and collective processes through which knowledge and experience may be structured and made explicit [29].

Hall’s high/low context dichotomy provides a basis in understand the hidden codes in Communication. In low-context culture, most of the information flowing between the sender and the receiver is contained in the message itself. Consequently, the message needs to be explicit and detailed. On the other hand, in a high-context culture, less explicit and detailed information is carried in the message itself. Instead, the sender and the receiver rely more on the context of the communication process to convey the message [13]. Commonly cited examples of countries characterized by low-context cultures are Germany and USA. Examples of countries with high-context cultures include China and Japan [30].

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IV. CASE STUDY

Engine Management System (EMS) merges separately developed fuel injection, ignition and electronic technologies in response to emission legislation, fuel economy regulation and customer demands. An important aspect of EMS development was the ability to meet customer demand for high quality.

The development of EMS is a kind of product, incremental, competence enhancing and architectural innovation. It is a complex project which includes research and development, testing, technical assistance and production across extensive network of generalists and specialists, including engine producer, automaker and parts suppliers, and across functions such as marketing, finance, purchasing and plant.

Heavyweight team structure is used wherein the project manager provides cross-functional integration, and team members are collocated but still report to functional manager as well. EMS project team is diversified and composed of three groups of people. The majority of them are local graduates with doctoral or master degrees, global Chinese who have studied or worked abroad and German expatriates. There are project manager, supporter, coordinator, marketing gatekeeper, technical gatekeeper, system designer, system developer and system evaluator in those teams. In generally, the Germans work as technical gatekeepers, while global Chinese work as project manager, coordinator, and Chinese as project supporter and marketing gatekeeper. The working language is English in the project team.

thought pattern –Synthesis /analysis

time proceeding -monochronic/polychronic

Individualism/collectivism

Specific/diffuse

High/low context

trust

Innovation processplanning

organization

Problem identification and solving

communication

exact planning Doing things sequential

Keep schedule and rules

flat but broadInterrelation

separatelyNarrow but deep

preliminary plandoing things parallelflexible adaptation

succinct informal

explicitformal

Fig. 1 National Culture and Innovation Management

V. FINDING AND DISCUSSION

Based on the case study, we find that there are differences in how people’s thinking, feelings and information are communicated in cross-cultural innovation management. The findings are illustrated in Fig. 1.

Synthesis or analysis thought pattern affects the way of problem identification and solving.

If the synthesis thought pattern predominates in one cultural space, problem should be flatly but broadly viewed and solved with interrelation. A system would be structured with

interrelation and context as a whole. If the analysis thought pattern is predominant in another cultural space, problems would be viewed narrowly and in depth and solved separately, and the system would be structured with specific and separate elements.

Monochronic or polychronic time influences innovation process management.

In M-time culture such as German, innovation activities are clearly divided and fulfilled one after the other. Planning is exact and specific, schedule is very important. Individuals in p-time culture such as Chinese prefer a preliminary and probably plan which can be adjusted on condition. They also prefer doing things in parallel and overlapping the actions and tasks. The high level of organization formalization and standardization, such as a clear description of job and standard procedures, is considered as essential from both cultures. Notions that cultures vary in time proceeding and thought pattern may be the most relevant aspect of cultures for formal, rigid or fuzzy gates in innovation process management.

Individualism/Collectivism and specific/diffuse culture affect trust developing.

German in an individual and specific culture develops trust via demonstration of capability and technical knowledge. The basis of trust is personal honesty and predicable capability: confidence, honesty, reliability and on time. Chinese in a collective and diffuse culture depends on honesty and predictability while interacting with each other: looking after, caring for and assistance. Trust development is easier in-groups.

High-low context culture and communication. There are differences in the way and style of

communication in innovation management process. Chinese with collectivism and high-context culture establish close information networks through informal personal contact. They often exchange information. Most information is already shared in person, and knowledge is very little or succinctly coded. In contrast, information flow in low-context culture between employees is impeded. Managers depend on written report. Information or knowledge are explicitly coded and presented with background information, data and arguments.

Potential complementation of cultural differences Cultural diversity facilitates innovation and NPD in that it

generates more innovation ideas, overall problem identification and more solutions. What is needed is an approach to recognize cultural differences, and respect and reconcile them when the two opposing views can come to fuse or blend and when the strength of one extreme is extended by considering and accommodating the other. The global Chinese perceive cultural difference better than local graduates and German expatriates. Different communication style is not considered as a barrier by global Chinese, but they think that there are differences in document structures.

VI. CONCLUSION

The purpose of this paper is to explore the influence of national cultures on innovation management by conducting interviews with cross-cultural innovation project managers

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and team members. The evidence suggests that synthesis and analysis thought pattern, monochronic and polychronic time, individualism and collectivism, specific and diffuse and high/low context are dimensions of culture that are linked to innovation management. They affect innovation planning and organization, problem identification and solving, trust development and communication. This provides innovation project managers with a framework to develop a more realistic way of understanding and managing differences that are inevitable in cross-cultural innovation projects.

Study suggests that reconciliation of different cultural characteristics especially between synthesis and analysis thought pattern, and formalization and flexibility may facilitate new product success, if the cultural differences are recognized and respected. The cultural differences in the way and style of communication and in specific and definite versus general and probably goals and plans may inhibit innovation management.

There may be individual differences, and an individual may have different cultural characteristics for different activities. An individual may have different behaviors for the same activity at different time. These factors may interact [31]. This suggests that more case studies in the context of cross culture should be conducted in great detail, and the same innovation projects should be studied in local German and Chinese automotive firms. The realistic way to exploit the potentials of cross-cultural employee participation in innovation should also be further studied.

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