A theory of global strategy and firm efficiencies: Considering the effectsof cultural diversity

The concept of "relatedness," though common in the product diversification literature, has not yet been widely applied to theories of internationaliza tion Expanding internationally requires managerial adaptation due to differ ences between national cultures, but these dynamics have not been used to r epresent the cultural diversity that may hinder efforts to integrate and co ordinate efforts as required by global strategies. Tempering popular perspe ctives that extol the benefits of diversity, the present theory posits that cultural diversity among international divisions of a global firm may actu ally impede efforts to merge activities and expertise between those units. Specifically, direct (market, production, technology) and indirect (knowled ge-based) benefits are more difficult to exploit when cultural diversity ma kes activity sharing and expertise transfer less efficient. Parallel to est ablished product relatedness theory, this thinking postulates that cultural ly related international firms will enjoy greater efficiencies than cultura lly diverse multinationals. (C) 1999 Elsevier Science Inc, All rights reser ved.