Influence of organizational culture on acquisition and use of social capital and importance of social capital for MNEs

Author: Iloka Benneth Chiemelie

Published: 15-October-2014

Introduction

Over the past decades, there have been an increased and rapid development in the field of international human resource management (IHRM) and such development has been fuelled by the growing importance and scope of the activities of multinational enterprises MNEs (Keating and Thompson, 2004). Due to such development, adopting structural solution has become less effective as a result of increased dynamism in the global environment as well as dispersion of vital assets (which includes human) across the globe. Thus, IHRM is presently viewed as a vital tool for successful implementation of MNEs strategies (Bartlett and Ghoshal, 1989; Sparrow et al., 1994; Taylor et al., 1996; De Cieri and Dowling, 1999).

The importance of social capital for MNEs

Social capital has been defined as the summation of actual and potential resources that are inherent within, made available through, or obtained from the network of relations that an individual or social unit does possess (Nahapiet and Ghoshal, 1998: 243), and it is the outcome of a developed social network. 

Social capital is important for MNEs because it is correlated with the creation and sharing of knowledge within and across the company. Kogut and Zander (1993) supported this statement by arguing that the ability of firms to access knowledge through its global network gives them competitive advantage over local firms. This is because the ability of firms to leverage their internal knowledge and innovation enables them to take advantage of its worldwide access to information, learning and creativity as a means of enhancing their products and overall competitive advantage.

Additionally, social capital has the ability to support coordination and as such ensures cooperation of its systems across geographic and cultural boundaries. Research has made known that the creation and transfer of knowledge across and within systems does require the ability and willingness of employees to go through complex organizational task of the whole coordination process as well as necessary communication needed to ensure efficient use of the knowledge (Kogut and Zander, 1992; Nahapiet and Ghoshal, 1998; Storey and Quintas, 2001) and social capital makes this easy as people are willing to share knowledge within their networks in order to engage in beneficial discussion with their friends.

Consumers and labor are becoming globalized

From the above discussion, it becomes clear that the possibility of market (be it labor or consumer) convergence is possible in the form of globalized or localized taste and choice. For instance, products like Apple has become a global taste for innovative and cutting edge technologies -which is why they end up being sold out even before the products are introduced into the market. In order to reduce cost of production, Apple also has factories in China, which are made up of innovative staffs from all over the world and their production units across the world re controlled by their main unit in the USA. Communications are maintained through social networks like Facebook, Skye, Google talk, Twitter, etc. Thus, there is an increased level of globalization of the Apple workforce. Although their global productions are controlled in the USA, its Chinese subsidiaries can effect changes in the production systems in China (such as increasing or decreasing production with subsequent movement of the market orders). Thus, while the system is globalize in terms of common goals and principles, it is also localized in terms of market demand and production process.

Influence of organizational culture on acquisition and use of social capital

When it comes to MNEs, culture in the organization can basically be grouped into two as: having a global view point (caring for all markets across the world and desire to expand with same idea) and having a local view point (focusing on local markets and not binging in foreign ideas in order to avoid drifting off from the local culture). A number of studies (Gomez and Sanchez, 2005a, b; Lengnick-Hall and Lengnick-Hall, 2006) have come out in strong support that having global view point will influence acquisition and use of social capital positively. This is because as such companies internationalize, they want to refer back to areas they did well and enhance on their in the new market, while avoiding their faults in order to evade the associated past negative outcome. Thus, such companies are more likely to acquire high social networks to establishing huge social capital within its realms as well as make use of such social capital for their increased advantaged outcomes.

Conclusion

In conclusion, it is stated that social capital is very important for MNEs because it helps to establish a network of knowledge as well as enhance sharing of such knowledge in order to the company to become more susceptible to positive outcomes. The overall outcome is an increased level of competitive advantage. In any case, it is important to understand that the development of social capital is not easy as it requires huge financial and non-financial investment. Thus, it is recommended mostly for big multinationals that a can afford the cost.

References

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