Are business practices across the globalized world converging or diverging?
Based on an article in the latest issue of Management and Organization Review
‘Globalization’ has become the buzzword of the last two decades. According to the online Business Dictionary, it implies the opening of local and nationalistic perspectives to a broader outlook of an interconnected and interdependent world with free transfer of capital, goods, and services across national frontiers. One may wonder, in an increasingly globalized world, are business practices across the globe converging or diverging?
Shawn Pope and John W. Meyer, two Stanford University professors, answer this question by envisaging the rise of a ‘global corporate organization’ that ‘tends to supersede national business contexts’ or at least renders ‘the national institutional environment as less consequential’.
However, according to Dr. Xin Li of Copenhagen Business School in Denmark and Dr. Li Ma of Peking University in China, such a convergence thesis is one-sided and partial because it neglects or downplays the divergence in business practices across the globe. Li and Ma agree with Pope and Meyer that a trend of convergence exists in some aspects of management practices, particularly the operations of business in pursuit of efficiency and accuracy. On the other hand, they argue the forces for convergence and divergence are simultaneously at play and therefore business management practices across the global demonstrate both similarities and differences.
Li and Ma show that things are more complex than Pope and Meyer’s analyses by making four distinctions: (1) the distinction between the minority of large international corporations and the majority of local SMEs, (2) the distinction between appearance and substance in management practices, (3) the distinction between general principles and specifics in management practices, and (4) the distinction between the academic world and the world of business practice. They argue that Pope and Meyer’s convergence thesis is primarily based on the former parts of the four distinctions; but, if the latter parts were taken into account, the pure convergence thesis may not hold water.
Li and Ma then point to two sets of factors that influence the choices of management practices: local business environments and business leaders’ characters.
Following the institutional theory, they argue, international subsidiaries of the same multinational corporation (MNC) have to adopt some common practices mandated by the MNC headquarter on the one hand but also have to adapt their business practices to the institutional environments of host countries on the other hand. So, even within a same MNC, there are simultaneously convergence and divergence in business practices among subsidiaries. Following the upper echelon theory, they argue, business leaders within the same country exhibit different managerial ideologies and demographic characteristics. The difference in leader character has an important impact on business leader’s choice of management practice.
In sum, Li and Ma’s answer is ‘both convergence and divergence’.