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Business Groups as an Organizational Model  

Asli M. Colpan and Alvaro Cuervo-Cazurra

Business groups are an organizational model in which collections of legally independent firms bounded together with formal and informal ties use collaborative arrangements to enhance their collective welfare. Among the different varieties of business groups, diversified business groups that exhibit unrelated product diversification under central control, and often containing chains of publicly listed firms, are the most-studied type in the management literature. The reason is that they challenge two traditionally held assumptions. First, broad and especially unrelated diversification have a negative impact on performance, and thus business groups should focus on a narrow scope of related businesses. Second, such diversification is only sustainable in emerging economies in which market and institutional underdevelopment are more common and where business groups can provide a solution to such imperfections. However, a historical perspective indicates that diversified business groups are a long-lived organizational model and are present in emerging and advanced economies, illustrating how business groups adapt to different market and institutional settings. This evolutionary approach also highlights the importance of going beyond diversification when studying business groups and redirecting studies toward the evolution of the group structure, their internal administrative mechanisms, and other strategic actions beyond diversification such as internationalization.


Leader–Member Exchange: A Commentary on Long-Term Staying Power and Future Research Directions  

Terri A. Scandura and Kim Gower

In 1975, the phrase “vertical dyad linkage” (VDL) was introduced to begin examining the quality of the roles between the leaders and direct reports, and it was soon discovered that the linkages ranged between high quality and low quality. That linkage progressed into “leader–member exchange” (LMX) in 1982. In essence, research reached a point where it found a continuum of the quality of the relationship between the two members. High-quality relationships put the employees into the leader’s “ingroup,” while low-quality relationships left employees on the outside looking in. It followed that those in the ingroup would have some say in the decision-making, would have easier access to the leader, and would garner more respect and “liking.” Researchers have used the LMX-7 to examine how the quality of superior/subordinate relationships affects individual, interpersonal, and organization factors like job satisfaction, communication motives, and organizational identification (as did the original LMX scale). Although the LMX-7 remains one of the most prominent psychometric measures of LMX, researchers still debate whether the construct should be considered unidimensional or multidimensional. While the intricacies of LMX-7 versus LMX have been argued, and with teams becoming more of an organizational resource, team–member exchange (TMX) was found to be a supported extension of LMX. While at this point TMX is lacking in the volume and pace of research, due to the difficulties of measurement among a group of people who might have a variety of leaders during the process, the existing research has produced some results that are extremely relevant, now and in the future. Examples of what has been found when the team exchange relationship is high include reduced stress, increased psychological empowerment, increased creativity, increased team performance, increased individual performance, increased organizational citizenship behaviors, increased organizational commitment, and increased job satisfaction, just to name a few. In sum, the investigation into LMX provides a history of the field of LMX and its many iterations and the role it plays in leadership studies. This research includes LMX antecedents, consequences, moderators, mediators, and outcomes, as any field in which over 4,500 papers have been published needs an effective way to highlight the progress and pathways.


Recontextualization in International Business  

Mary Yoko Brannen

Recontextualization in international business (IB) refers to the transformation of meaning of firm offerings (technologies, work practices, products, etc.) as they are uprooted from one context and transplanted into another. The question of whether transferred firm assets will fit into receiving contexts abroad is one of the biggest concerns of multinational enterprises in the internationalization process. Whether a firm internationalizes by means of an international joint- venture, merger or acquisition, or a wholly owned subsidiary, this potential lack of strategic fit of firm assets is considered a major contributor to a firm’s liability of foreignness and ultimate lack of success abroad. As such, much research has been conducted in the field of IB to shed light on understanding the causes, implications, and recommendations for managing strategic fit in the internationalization process. Most IB research has focused on the tangible, explicit, and codifiable aspects of lack of fit, such as differences in technology, metrics, and labor regulations, which are relatively easy to discern. Often overlooked are the more subtle, less visible, tacit differences between sending and receiving contexts that affect how firm offerings are understood in the new organizational environments. Organizational contexts are embedded in multiple and intersecting cultural environments, including the organizational culture internal to the firm and the larger, societal culture external to the firm, as well as the smaller, more particular work group environments within a firm characterized by disparate functional or expert practices. Every cultural environment is embedded with its own meaning system involving distinct work-related assumptions, behaviors, and norms. Given this, unforeseen misalignments easily occur between the sender and receiver contexts stemming from disparities or divergences in meaning systems attributed to the transferred firm offerings, which can significantly affect a firm’s global strategic success. Such are the misalignments that stem from recontextualization. Firm offerings go through a preliminary round of recipient cultural sense-making in which they are assimilated into pre-existing meanings. Then, as they are implemented, acted on, and interacted with, they continue to undergo recontextualization. Language is the vehicle by which firm offerings are transferred (with the rare exception of digital code or numerical formulas), and through which sense-making is processed by individuals in the receiving contexts, thus making semantic fit a necessary complement to strategic fit in elucidating the process of recontextualization. Research in a variety of industries—from highly culturally sensitive ones such as entertainment, to seemingly culture-free, automated industrial contexts such as automotive—has shown that recontextualization will always happen no matter what the industry. This is because sending and receiving contexts can never be the same, so firm offerings will always undergo a certain amount of recontextualization to adjust to the new operating environment. Recontextualization can have positive or negative effects on a firm’s internationalization. Positive recontextualization, if the process is properly understood, can become a source of ongoing organizational learning and, in turn, become a valuable source of competitive advantage. Negative recontextualization, on the other hand, can result in lost opportunities for site-specific learning and strategic realignment, and, in the most severe cases, may seriously hinder transnational transfer and global integration efforts. Yet planning for and monitoring recontextualization are not simple matters. In most cases, managers are initially unaware of all but the most obvious sources of recontextualization, such as differences in language, metrics, organizational structure, or shop-floor layout. However, much of recontextualization happens in situ and cannot be planned for. At best, managers can opine where recontextualization might occur by utilizing industry-specific, cross-cultural consultants or internal boundary-spanners such as bilingual or bicultural employees. In some fortunate cases, managers may become aware of recontextualization early on in transfer efforts as they are confronted with organizational barriers to implementation such as significant differences in industrial and supplier relations. But, for the most part, recontextualization goes unrecognized until productivity plummets and financial goals go unmet without readily identifiable economic or other such quantifiable causes.