Establishing Cross-Cultural Partnerships Enhances Firm Sales

Cultural diversity in organizations is an important part of today’s business model. Firms are often developing alliances with other firms in multiple countries in an effort to enhance their diversity, offer a multicultural experience, and reach out to consumers around the world. But sometimes questions around the challenges of forming partnerships across the globe hinder the creation of these alliances. But research by Ning Li, assistant professor of marketing at George Mason University School of Management, suggests that it’s worth the effort.

NingLiLi recently received funding to examine the performance impact of a firm’s alliance portfolio cultural diversity and multinational experience gained through managing alliances in multiple countries.

Generally speaking, the more foreign partners a firm forms alliance with or the greater the culture difference between the firm and its partners, the greater the firm’s alliance portfolio cultural diversity is. The more countries the firm enters through alliances, the greater the firm’s multinational experience is.

Li, still early in her study, said, “So far I have found that both alliance portfolio cultural diversity and a firm's multinational experience enhance firm sales, although the benefits of both factors diminish and eventually become negative at extremely high levels. And a firm's multinational experience enhances the performance impact of alliance portfolio cultural diversity.”

Li said, “The findings of this study can help executives develop a more effective strategy to manage their alliance portfolios. Based on the wide-spread knowledge that cultural distance has a negative impact on alliance performance, managers may not want to add cross-cultural partners to their alliance portfolio.”

“The results of this study point to a different approach and suggest that although cultural distances between partner firms have negative impact on individual alliances, overall, allying with a reasonably diverse range of cross-cultural partners brings benefits to the focal firm.”

And with her wide sample set, Li feels that her research is applicable to many businesses. Unlike most research on cross-cultural alliances which focuses on data from firms in a limited number of developed countries, Li’s study covers firms from 48 industries and 135 countries, and these firms manage alliances in 146 countries.

This is not the first time Li has researched alliances and inter-firm marketing collaborations. In the last couple years, she published two articles in two premier marketing journals on this topic. This spring, she had the article “General alliance experience, uncertainty, and marketing alliance governance mode choice,” published in the April 2010 issue of the Journal of the Academy of Marketing Science. Two years ago she had the article “Trust at different organizational levels,” published in the March 2008 issue of the Journal of Marketing.

Ning Li came to George Mason University in August of 2005 after serving on the marketing faculty at the Lerner College of Business and Economics at the University of Delaware. Li has a PhD in business administration and an MS in statistics from Duke University. Discoveries from her research highlight the performance impact of strategic alliances on entrepreneurial or established firms and performance levels of strategic alliances in global markets.

George Mason University School of Management

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