Global Teams and Social Capital1
GLOBAL Teams in a Multinational ENTERPRISE:
A Social Capital and Social Networks Perspective
Martha L. Maznevski
McIntire School of Commerce, University of Virginia
Charlottesville, VA USA 22903
t (804) 924-3272; f (804) 924-7074; email
Nicholas A. Athanassiou
College of Business, Northeastern University
360 Huntington Ave., Boston, MA 02115
t (617) 373-5759; f (617) 373-8628; email
Lena Zander
Institute of International Business, Stockholm School of Economics
SE-113 83 Stockholm, Sweden
t +46 8 732 95 19; f +46 8 31 99 27; email
Work In Progress to be Presented at
Organization Science Winter Conference
Colorado, February 2000
GLOBAL Teams in a Multinational ENTERPRISE:
A Social Capital and Social Networks Perspective
Abstract
In this paper we describe how global team effectiveness can be conceptualized and examined from the perspective of social capital. Unlike previous research, which has tended to be unidimensional, the social capital perspective allows us to analyze structure and process in global teams at multiple levels of analysis in a dynamic way. At the same time, the phenomenon of global teams highlights some important ambiguities and equivocalities in the social capital literature. We identify these dilemmas, and suggest that an empirical study of global teams can help to enrich social capital theory itself. We describe the methodology we are currently using to study global teams, including details of variables measured and procedures.
GLOBAL Teams in a Multinational ENTERPRISE:
A Social Capital and Social Networks Perspective
Made possible by communications technology and improved transportation, and made necessary by rapidly increasing globalization of economies, global teams are ubiquitous in today’s multinational enterprises (MNEs). For example, global teams in service firms audit multinational clients, prepare bond and equity offerings for multinationals, facilitate international mergers and acquisitions, and service global advertising clients. MNEs also use these teams to execute their worldwide strategies, and to coordinate and control activities such as new product development and introductions across world markets. The effectiveness of global teams is critical to a multinational organization’s continued competitive success.
Yet, although a few studies have examined MBA groups or conducted case-based research, (e.g., Jarvenpaa & Leidner, 1998; Maznevski & Chudoba, forthcoming; Watson & Kumar, 1993), very little empirical research has been conducted on such teams in their organizational setting. This is in part because of the complexity of the issue. A complete explanation must incorporate individual, relational, organizational and contextual factors in a dynamic way, and previous conceptual approaches and empirical methodologies have not been able to capture all of these elements adequately.
In this research, we build on recent ideas about social capital to identify patterns in the seemingly unmanageable mix of factors that describe global teams and the elements they face. At a generalized level, a global team’s task is to make and implement decisions concerning issues international in scope. To do this, the team members must manage their internal dynamics to combine their knowledge, skills, and capabilities – intellectual capital (Nahapiet & Ghoshal, 1998) – and generate new, high quality intellectual capital. They must also persuade or influence other members of the organization and external constituencies to adapt the new intellectual capital and/or modify their behavior in some way. Social capital, or the “resources embedded in a social structure which are accessed and/or mobilized in purposive actions” (Lin, 1999: 35), has been argued to influence both the generation of intellectual capital and the process of influencing people to implement decisions (Burt, 1992; Lin, 1999; Nahapiet & Ghoshal, 1998). Thus, the social capital perspective simultaneously captures both the decision-making and implementing aspects of the global team’s task, and the internal dynamics and external activities necessary for achieving the team’s mandate.
In the following paragraphs we describe global teams and their role in today’s MNEs, demonstrating how a social capital perspective can add significantly to our understanding of effective global team dynamics. We then examine social capital in more detail, and discuss three aspects of global team social capital that are also of current relevance to social capital theory development in general. In the last sections, we outline the methodology through which we are collecting data to examine these relationships empirically.
The Current State of Global Teams
A global team is an internationally distributed group of people, identified by its members and the organization as a team unit, with a specific mandate to make or implement decisions that are international in scope (Canney Davison & Ward, 1999; Maznevski & Chudoba, forthcoming). The internal dynamics of global teams are rendered highly complex by a group of three characteristics they typically share: task, composition, and communications configuration. For each of these characteristics, the manifestation most often found in global teams is that most closely associated with complex dynamics and strong barriers to effectiveness. Moreover, while all organizational teams must engage in external activities as well as pay attention to internal dynamics (Ancona, 1990; Ancona & Caldwell, 1992), these three characteristics complicate how the team coordinates the external activities and links them with internal dynamics.
A global team’s task is, by definition, international in scope. While it is possible for such a task to be relatively simple, in reality very few global teams are formed to address simple mandates (Canney Davison & Ward, 1999). International tasks incorporate elements spanning different social, legal, political, and economic environments, with each element varying in terms of stability and uncertainty. A global team’s task, then, tends to be highly complex, with the required information and resources being unstructured. The global tasks addressed by these teams tend to be among the most important in the organization, encompassing high penalties for poor performance. They also generally require that members engage in multiple subtasks, from information gathering to creative tasks (McGrath, 1984). To effectively complete tasks that are important, complex, dynamic, unstructured, and multi-faceted, team members must have strong relationships and internal processes, continually adjusting the dynamics for changes in the task’s pace and demands (Cohen & Bailey, 1997; Gersick, 1988; Gersick, 1989; Watson & Kumar, 1993).
Although a global team could be composed of members who are similar to each other but located in different units, global teams tend to have highly diverse composition in two respects (Canney Davison & Ward, 1999; DiStefano & Maznevski, forthcoming). First, members usually represent different parts of the world and therefore tend to have different cultural backgrounds, bringing different values and expectations for how to work together and achieve the team’s mandate. Second, because of the strategic nature of most international tasks, global teams are usually composed of members from different professional backgrounds, and sometimes even members from different partnering organizations. These members bring with them different priorities for information-gathering and decision-making, as well as expectations for group dynamics. Research on group processes and decision-making in diverse teams suggests that effective dynamics, although possible, are difficult to achieve, less likely to emerge than in homogeneous teams, and take longer to emerge if they do so (DiStefano & Maznevski, forthcoming; Maznevski, 1994; Milliken & Martins, 1996; Watson & Kumar, 1993). Thus, although global teams’ tasks generally require the most demanding of relationships and processes, their composition tends to raise enormous barriers to building these relationships and processes in the first place.
The simple fact that global team members are distributed throughout different parts of the world affects how the team configures its communication. Members must coordinate their discussions across time zones and around travel schedules, using a wide variety of communication media with the configuration changing frequently (Lipnack & Stamps, 1997). While the physical units of most large organizations are well-connected through intranets, even these systems cannot always be relied upon for spontaneous communication among global team members who travel, or who are members of partner organizations or subsidiaries. Maintaining effective group dynamics over these types of configurations requires paying explicit attention to rhythms of interaction and managing the constraints imposed on spontaneous communication by distance and technology (Maznevski & Chudoba, forthcoming).
The team’s external activities are also affected by the three characteristics of task, composition, and configuration. Ancona (Ancona, 1990) describes the major external activities of a group as informing, parading, and probing, combining different levels and types of vertical and horizontal communications (Ancona & Caldwell, 1992). The best-performing of their studies’ new-product development teams engaged in a comprehensive strategy of cycling through periods of internal and external focus, using each type of communication at different times. For the mandates typically assigned to global teams, all of these external activities are likely to play a critical role. To be effective, then, the global team must engage in each of them at the appropriate point in the group’s processes, moving back and forth between an external focus and an internal focus, managing a more complex dynamic than other types of teams.
External activities are also likely to be affected by a global team’s composition. According to research on demographic, cultural, and professional diversity, the different members of the team will likely prefer to engage in different types of external activities, and to engage in specific activities in different ways (Jackson, 1991; Milliken & Martins, 1996). While these differences can be leveraged to enhance the effectiveness of the team’s external activities, leveraging them well is difficult and only realized with explicit attention paid to the complexity of the dynamics (DiStefano & Maznevski, forthcoming).
Although no empirical research has been published on the relationship between a global team’s configuration and its external activities, it seems self-evident that coordinating the activities and their results is much more difficult to the extent that team members are distributed around the globe and in business units that cannot interconnect easily. Like composition, though, configuration could also be leveraged to help the team. A broad configuration could enable the team to engage in broader horizontal communication for coordinating work and obtaining feedback, more comprehensive horizontal communication for scanning of the environment, and more pervasive vertical communication for influencing the views of top management and obtaining resources (Ancona & Caldwell, 1992).
Traditional team research has addressed most of these relationships between team characteristics and effectiveness individually and at single points in time, although significantly more attention has been paid to internal process than to external ones (Cohen & Bailey, 1997). However, the sum of this research does not provide clear directions for understanding what will happen when this complex set of characteristics is combined, especially as the team works together over time in an ever-changing environment. The limited body of longitudinal case-based research on teams suggests that a more holistic approach, encompassing multiple characteristics and describing ongoing dynamics, will better illuminate patterns of effectiveness in global teams (Brown & Eisenhardt, 1997; Gersick, 1989; Gersick, 1994; Maznevski & Chudoba, forthcoming).
In this research, following a recent move in the strategy, organizational theory and individual behavior literatures, we introduce to the study of global teams the social capital perspective. Unlike more reductionist approaches that focus on one or two aspects of team dynamics and performance at a time, a social capital perspective adopts the assumptions of structuration theory, incorporating structural and process elements and the interrelationships among them over time (DeSanctis & Poole, 1994; Giddens, 1984). The social capital perspective is concerned with the patterns of relationships among members of a network, how those relationships are built, and how they are drawn upon as resources to accomplish individual and organizational tasks. Because the emphasis is on broader patterns and dynamics, it is well-suited to the study of global teams in the context of multinational enterprises. We turn now to a brief overview of social capital as it has emerged in the management literature.
Conceptual Background on Social Capital and Global Teams
Social capital is the value of the intangible resources lying in relationships among people. It can be drawn upon by those in the relationship to help them achieve something they could not otherwise do (Burt, 1992; Coleman, 1988; Lin, 1999; Nahapiet & Ghoshal, 1998). Social capital describes a manager’s relationships with others and complements human capital and financial capital (Burt, 1992: 8). Social capital differs fundamentally from human and financial capital because it exists only through a specific relationship between two people or groups. No single actor can claim ownership over social capital, which disappears when the relationship on which it depends is severed. In this study, following the major trends in the literature, we conceptualize social capital as assets that exist in the broader environment, that can be accessed by many actors who are aware of them (Coleman, 1990), yet are used better by some than others to achieve their objectives.
Each aspect of social capital reflects some aspect of the social structure owned in common by the parties in a relationship. Because of friendships and obligations, social capital cannot be traded easily; and it enables the achievement of ends that would be costly or impossible without it. This concept is a strong element of the resource based view of the firm, which describes competitive advantage derived from resources that are rare and inimitable (Barney, 1991). Within the structure, social capital increases individuals’ efficiency of action, as networks of social relations increase information diffusion efficiency and minimize redundancy. High levels of trust reduce the probability of opportunism, the need for costly monitoring, and transaction costs.
Social capital is neither inherently good nor bad. On the one hand, it encourages cooperative behavior, and facilitates development of innovative organization forms. It is central to the understanding of institutional dynamics, innovation, and value creation. Conversely, it can be harmful when strong norms and mutual identification exert a powerful positive influence on group performance, and produce collective blindness (Coleman, 1990: 302). It is the situation that determines social capital’s effectiveness.
The social capital perspective is particularly appropriate for the study of global teams. By beginning with the general approach of identifying resources in relationships among team members and between team members and others in their environment, social capital highlights patterns of value creation in the complex and ever-changing sets of relationships needed by global team members. Social capital becomes more important as “… competition becomes more imperfect” (Burt, 1992: 10). Nowhere is competition more imperfect than in the MNE context. Because an MNE operates in multiple national environments, rules of competition become less clear when a managers’ responsibilities extend their reach across borders. Also, these rules change constantly when the firm competes across multiple national markets with multinational competitors. The basic ideas of social capital theory, emphasizing the importance of relationships and their value for achieving tasks otherwise not possible, support research on MNEs which finds that expatriate manager assignments and normative integration are the most effective coordination and control mechanisms for such world-wide organizations (Boyacigiller, 1990; Edstrom & Galbraith, 1977; Roth et al., 1991).
Characteristics of Social Capital
Nahapiet and Ghoshal (1998)introduced a comprehensive framework with which one can view the importance of social capital for MNEs. This framework explicitly suggests certain conditions under which social capital becomes an enabling and enhancing mechanism for sharing and exchanging intellectual capital, or knowledge, an important part of a global team’s task. Intellectual capital consists of individual and social, group-level, knowledge (Spender, 1996). Further, this knowledge can be tacit or explicit (Nonaka & Takeuchi, 1995; Polanyi, 1962). The linkage between social capital and the creation of new intellectual capital in an MNE is crucial because it addresses the MNE managers’ need to understand its multinational activity network – its environments, its nature, and its linkages –embedded in different environments across national borders.
To place Nahapiet and Ghoshal’s perspective in a broader context we turn to Lin (1999). Lin suggests four elements of social capital explain why embedded resources in social networks enhance the outcomes of actions:
(a)a social network facilitates flow of useful information;
(b)an actor’s social ties in a network wield influence on others who play a critical role in decisions
(c)social tie access to resources offer a certification for the actor’s social credentials
(d)access to social relations reinforce an actor’s identity and his/her recognition in a network.
According to Lin’s view, control is an outcome of social capital, not an explanation for why benefits accrue to those with good relations in a social network. These relations enable the actor to access and use social capital to control and influence. Furthermore, there are collective assets such as culture, norms and trust, clearly distinguishable from social capital, that enable access to and creation of social capital (Lin, 1999).
Following Coleman (1988), Lin describes the development of social capital from a neoclassical economic point of view, incorporating basic tenets of sociology. In this view, social capital is created through a capitalization process in which structural and positional variations among actors and variations in their collective assets result in value for the relationship. This relationship, in turn, can lead to desirable outcomes for a network actor. Actors’ structural and positional attributes include their human capital and connectedness to other external resources, while collective assets are relational attributes, such as trust and norms, that exist among actors. The capitalization process determines how accessible and usable an actor’s contacts and resources are, and leads to instrumental outcome (such as wealth, power, reputation), or to expressive returns (such as physical health, mental health, life satisfaction). In the context of management, achieving the organizational objective is an instrumental outcome, while individual satisfaction from the work is an expressive return.