Expatriation as an underused resource for organizational learning more

1 Expatriation as an Underused Resource for Organizational Learning by Ariane Berthoin Antal and Kathrin Böhling1 A revised version of this article was published in: H. Albach, M. Dierkes, A. Berthoin Antal, K. Vaillant (eds.), Organisationslernen – institutionelle und kulturelle Dimensionen. WZB Yearbook 1998, edition sigma: Berlin, 1998:215-238 The globalization of economic activities is widely discussed and recognized as an important characteristic of today’s markets. Companies are faced with challenges to manage operations and functions, from manufacturing and distribution to research and development, across national boundaries. To become or remain competitive in today’s world market, companies have to learn to act increasingly internationally (Bartlett/Ghoshal 1989; Ohmae 1990; Porter 1986). This means being able to operate effectively in different parts of the world and to manage across cultures (Schneider/Barsoux 1997). There is growing recognition that in order to be internationally competitive, organizations also need to develop the ability to "move lessons learned from experience and experiments across boundaries" (Ulrich/von Glinow/Jick 1993:52; see also Senge/Sterman 1992). Key actors in international management are expatriates2, the managers who are sent abroad to fill positions at different levels of a local operation, such as general manager, product manager, or engineer. The reasons for sending an expatriate vary, ranging from the provision of knowledge and skills that are not available locally, to the transmission of these skills to local staff, through to the transfer of organizational cultural values and norms, as well as the monitoring and control foreign operations (Boyacigiller 1990; Scullion 1991; Tung 1994). Expatriate managers can thereby act as interfaces between different cultures (Adler 1997; Buhr in this volume). Their potential contribution to organizational learning is significant, yet it has received very little attention in the literature and in practice. We would like to thank Nancy Adler, Moshe Banai, Meinolf Dierkes and Kristina Vaillant for their useful comments on an earlier draft of this article. 2 A distinction is sometimes made in the literature between "expatriates" who are sent from the country in which the corporate headquarters are based to a foreign destination and "inpatriates," the managers who are brought from abroad to the country of headquarters. This distinction is becoming less appropriate as companies are expanding the movement possibilities assigning managers between numerous different countries, rather than simply between a country and headquarters. In this article the term expatriate is used to mean a manager assigned to live and work in another country for a specified period of time. 1 2 This is all the more surprising at a time when some companies are treating expatriation as a developmental assignment in order to broaden managers’ horizons and competences, and there is a trend in leading international companies to require managers to have experience in different cultures before they are considered for senior positions. The connection between the individual learning of expatriates and the process of organizational learning remains unexplored. This article will discuss how expatriates can serve as resources for organizational learning both in the operations to which they are sent as well as in the organizational unit to which they return after the foreign assignment. In order to explore the ways in which expatriates can contribute to organizational learning, three bodies of literature are tapped: theories of organizational learning, studies on expatriation processes, and conceptualizations about internationalization strategies in companies. The literature on organizational learning provides a number of suggestions as to how individual learning on the part of expatriate managers can be linked to organizational learning. The studies on expatriation processes highlight different points at which the connection between individual and organizational learning can take place and indicates how such a transfer can be supported or hindered. The literature on internationalization processes distinguishes between several types of international strategies, each having different implications for expatriation policies and for organizational learning needs. By drawing together the threads from these three bodies of literature, this article seeks to offer an overview of the largely unrecognized potential that expatriates represent for organizational learning. 1. Conceptualizations of organizational learning At the most basic level, it is widely assumed that organizational learning occurs through the medium of individuals - learning agents - and within the context or arena of organizations. However, as Friedman points out, "much theory and research has all but ignored the role of the individual, focusing on the organization as the unit of analysis" (forthcoming:1). The centrality of experience for learning is underscored in most definitions, as illustrated concisely by Kolb: "learning is the process whereby knowledge is created through the transformation of experience" (1984:38). Clearly, it is not the organization but individuals who have the experiences from which lessons 3 can be drawn (Levitt/March 1988). The relatedness of individual and organizational learning is spelled out by Argyris and Schön who state that "organizational learning is not merely individual learning, yet organizations learn only through the experience and action of individuals" (1978:9). They go on to explain that the process of transfer from individual experience to organizational learning requires that learning agents’ discoveries, inventions, and evaluations must be embedded in organizational memory. They must be encoded in the individual images and shared maps of organizational theory-in-use from which individual members will subsequently act. If this encoding does not occur, individuals will have learned but the organization will not have done so. (Argyris/Schön 1978:19). Repositories of encoded learning also include organizations’ working procedures and administrative structures as well as cultural norms which new members of an organization are expected to learn and abide by (Cohen/Bacdayan 1996; Levitt/March 1988; Walsh/Ungson 1991). The concepts of mental maps or theories of action are crucial in understanding organizational learning processes and the function of individuals as agents of organizational learning. Organizations map their environments in order to be able to react and enact (see, for example, Weick 1986). Hedberg (1981) goes a little further when he suggests that environments are artifacts of organizational mental maps. The mental maps are frames of reference that inform and orient the behavior and thinking of the organization’s members. These maps and theories serve as perceptual filters for making sense of the environment and establishing appropriate responses (Daft/Weick 1984; Dierkes/Hähner/Berthoin Antal 1997; Weick 1986). As Kim points out "mental models not only help us make sense of the world we see, they can also restrict our understanding to that which makes sense within the mental model" (1993:39). In other words, information brought into an organization that does not fit the dominant mode of thinking is likely to get ignored or rejected as irrelevant or incorrect. When individuals work within an organizational context, they tend to act on the basis of the theories of action held in the organization. These theories of action imply certain expectations about the consequences of individuals’ acts. When the actual results do not correspond with the expectations, a search process for the error is usually undertaken. This is the fundamental moment for learning to occur. 4 Individuals learn and they contribute to organizational learning by translating their learning into organizational actions and routines. The learning can take two (possibly three3) forms. The most common form is firstorder learning, which corrects or replaces previous knowledge and routines by new procedures and legitimations within a given framework of norms and performance. The basic assumptions of organizations’ mental maps remain constant. Significantly less common in real life is second-order learning, which entails rethinking the organizational norms about performance and the associated assumptions (see, for example, Argyris/Schön 1978; Wolff 1995). Second order learning involves testing, refining, or radically altering cognitive maps and theories of action in light of new situations (see, for example, Shrivastava 1983). There is a tendency in the literature on organizational learning to stress that much more second order learning is needed, particularly in turbulent environments of the kind being faced today. However organizations develop a battery of defensive mechanisms to hamper this kind of learning (Argyris 1993; Hedberg 1981; Schein 1993). When studying organizational learning, it is important to recognize that the relationship between learning and behavioral change is more complex than it might first appear (Krebsbach-Gnath 1995). Cook and Yanow warn that "equating learning with change may leave out much of interest" (1993:377). Huber summarizes the connection between learning from experience and change by explaining that learning can be said to have occurred in an organization if "through its processing of information, the range of its potential behaviors is changed" (1991:89). Although the importance of behavioral changes as an outcome of learning should not be underestimated, the word "potential" in Huber's definition is significant: a possible outcome of learning is a decision to maintain current behavior, but it can only be classified as learning if there is evidence of a conscious decision to that effect. Similarly, as Weick and Ashford (1996) underscore, learning takes place not only when organization members change frames of reference but also when they consciously reaffirm them. Argyris and Schön also describe a third category, "deutero learning", a meta-level process of improving the learning process itself, about which significantly more has been written theoretically, however, than has been documented in practice. For an overview of how different scholars characterize the two or three forms of learning, see Pawlowsky 1994:284. 3 5 Clearly, individuals do not learn from every experience or problem they face, nor do organizations benefit from all the learning done by individual members. In considering what enables an organization to learn from a given situation, Cohen and Levinthal (1990) propose the concept of „absorptive capacity.“ This concept is based on the assumption that "the ability to evaluate and utilize outside knowledge is largely a function of the level of prior related knowledge" because such knowledge "confers an ability to recognize the value of new information, assimilate it, and apply it" (Cohen/Levinthal 1990:128). This implies that the more experience an organization has accumulated in an area, the more able it is to learn from new experiences in this domain. A limitation of the current definition of absorptive capacity, however, is its apparent purely quantitative orientation. Learning is not a simple matter of cumulation. There are other factors, such as power, that mediate the ability of an organization to integrate new knowledge or accept challenges to its mental maps. Power is a significant ingredient in organizational processes (see, for example, Morgan 1986, chapter six), and scholars have only just started to explore its impact on organizational learning (Coopey 1995; Dierkes 1988 and 1992; Gherardi/Nicolini/Odella forthcoming; Krebsbach-Gnath 1995). Ideas compete for attention in an organization (Weick/Ashford 1996:17), and the value attached to ideas is affected by the perceived power of the people or groups with whom the ideas are associated, so learning cannot be seen as divorced from organizational politics. How can the concepts of individuals as agents of organizational learning, first and second order learning, absorptive capacity and power, be applied to the role of expatriates in organizational learning? These are individuals whose learning in one location can be used and stored in the part of the organization to which they are sent. They can serve as agents of organizational learning by "grafting" in the lessons learned from experiences made elsewhere (Huber 1991:90; see also Simon, 1991:125). Expatriates represent a resource for both first and second order learning when they are grafted from one part of the organization to another. The primary purpose of grafting in such „newcomers“ from a different organizational unit is generally to benefit from the different knowledge and skills they can bring to 6 the organization. Expatriates transferred abroad are expected to contribute to first order organizational learning in the country to which they are assigned by sharing their knowledge and skills with local employees and integrating them into organizational routines and procedures. Similarly, expatriates can contribute to first order organizational learning in their subsequent post based on the experiences in the foreign assignment if the new assignment is considered a "grafting" process to transfer new knowledge and skills. However, if the subsequent assignment is simply seen by the organization as a "return to base," it is less likely that the lessons learned by the expatriate abroad will be treated as a potential to be tapped for organizational learning. Expatriates, as newcomers who are grafted into a part of the organization, also have the potential of contributing to second order learning. In addition to bringing in new knowledge and skills, newcomers tend to arrive in an organization holding different frames of reference from those generally shared in the organization, because they have learned from different experiences. Expatriate managers, whose assignment moves them from one country and cultural context to another, bring to each new location the mental maps and theories of action that were generated through experiences in other parts of the organization. March (1991:76) characterizes the process whereby newcomers discover the encoded knowledge of an organization as „slow learning“. He points out that the "slow learning" of newcomers to an established organizational mindset or cultural code is often seen as a problem, but he emphasizes that it should be seen as a particularly rich opportunity for organizational learning. This is because new members who try to learn how to work in an organization, consciously or unconsciously, challenge existing ways of seeing and doing things that the organization's members take for granted. Expatriates who arrive as „newcomers“ to a location with a different mind set and need to learn to operate in a different context are therefore especially well equipped to contribute to second order learning by questioning the usefulness of the locally held mental maps and accepted organizational procedures and behaviors. Such challenging of the validity and appropriateness of engrained theories and routines in a given location to which expatriates are temporarily assigned is sometimes an explicit part of the task assigned to managers sent abroad. They are 7 charged with the task of transferring the cultural values and organizational norms and standards of headquarters to the foreign subsidiary. The expectation is that the expatriates will challenge local customs and "educate" the foreigners to the correct way of seeing and doing things. However, expatriates, like all newcomers, usually face resistance to the recognition of their potential contributions, since the perspectives and experience they bring from one culture to another are not likely to fit comfortably with existing assumptions and ways of seeing things. If expatriates' ideas are rejected as irrelevant or incorrect in a new setting, their ability to contribute to second order learning will be limited. The problem is illustrated by research on the "ethnocentric syndrome" between expatriates and local managers which documents the dysfunctional effect it has for learning from different mindsets in international organizations (Banai 1992). The concept of "absorptive capacity" in organizational learning suggests that organizations that already are relatively experienced in internationalization are likely to be more receptive to learning from their expatriate managers than those that have not had as much experience. If an organization has a history of recognizing the importance of cultural differences in management around the world, for example, it is in a good position to benefit from new skills and insights brought in by its expatriate managers. Nevertheless, the receptiveness of the organization to learn from the experiences of expatriate managers is likely to be influenced by the politics and power relations in the organization. Simply put, the learning brought in from more powerful parts (e.g. headquarters) of the company into less powerful parts (e.g., a subsidiary in a small and/or less developed country) has a higher likelihood of being valued than vice versa. The mediating impact of power on the absorptive capacity of an organization, probably particularly significant for second-order learning where the less legitimate the challenges to the existing mental maps and cultural order are seen to be, the higher the resistance is likely to be. Senior managers sent from headquarters to a subsidiary to challenge the local ways of doing things are usually considered more legitimate contributors to second order learning there than are expatriates who return to base after an assignment in a foreign country. This is due both to the high statusbased power an expatriate manager often has abroad (often a senior post) 8 compared with the lower status of the post he or she holds in the hierarchy on return to headquarters, and to the unequal distribution of power between headquarters and foreign subsidiaries. This suggests that the absorptive capacity of headquarters to benefit from expatriates as resources for second order organizational learning is significantly reduced by skewed power relations. 2. Expatriation processes The second stream of research to explore in order to understand how expatriates can serve as resources for organizational learning is the literature on expatriation processes. Broadly speaking, these processes involve three basic phases: preparation, foreign assignment, and return to the home-organization (or assignment to a new country). The management of these expatriation processes by the organization entails recruiting, training, and developing international managers (see Black/Gregersen/Mendenhall 1992a; Scullion 1992). To the extent that learning is treated in the expatriation literature, its focus is on individual learning. The literature on expatriate managers and expatriation processes has to date only rarely been linked to issues of organizational learning (for exceptions who mention the topic briefly, see Adler 1997 and Baumgarten 1995). An overview of the main issues treated in this field reveals a number of different aspects of relevance for organizational learning. It serves to highlight the urgent need for more conscious attention to learning, in particular the connection between individual learning and organizational learning. It also provides the basis for developing a model with which to explore the points at which expatriates are most likely to contribute to organizational learning. A prevalent topic in the literature refers to the importance of linking international human resource policies and corporate strategies and goals (Adler 1997; Black et al. 1992a; Miller/Beechler/Bhatt/Nath 1986). Significantly for organizational learning, the tenor of most of the empirical literature on this subject shows that practice is far from theory in realizing the desired linkages (see, for example, Enderwick/Hodgson 1993; Fish/Wood 1996; Kumar/Steinmann 1990; Reineke 1989). Related to this topic is the special attention given to the implications of staffing policies for hostcountry organizations, again characterized by studies that are laced with concerns about problems in practice (Banai 1992; Banai/Reisel 1993; Selmer 1996; 9 Zeira/Banai 1981). Organizations therefore have a lot to learn before these gaps between theory and practice in linking international human resource strategies to corporate strategies are closed. The topic in the expatriate literature that is most closely related to learning (albeit only at the individual level) is the training and preparation of expatriates for a foreign assignment (Baumgarten 1995; Harris/Moran 1993; Tung 1981). It is generally accepted by scholars and managers alike that expatriates are more likely to succeed in fulfilling their assignment abroad if they have some cultural training in advance. The gap between theory and practice is smaller in this area than in others, although recent research shows that many companies still do too little to prepare their expatriate managers for international assignments (Stahl 1998). From the perspective of organizational learning, however, there are two weaknesses in the current conceptualization of expatriates’ learning: it is generally treated as a purely individual matter, and as a process that is limited to a pre-departure training course. The image that comes to mind in the current treatment of pre-departure training is that of the expatriate as a storage tank into which information is packed before departure for use during the assignment. Such an approach overlooks the fact that the learning process is an ongoing one, whereas the individual is the agent of the organization and thereby a resource for organizational learning. The need for ongoing learning stems from the dynamics of uncertainty and unpredictability in the international environment, which require expatriates to find ways to cope with unfamiliar situations. antecedent for learning. Coping behavior can be seen as an It is possible to distinguish between intentional and unintentional learning during an expatriate assignment. Intentional learning occurs when expatriates cope with unfamiliar situations they are prepared for through selection and training. Unintentional learning occurs as a result of unforeseen and unprepared situations. In those situations expatriates are challenged to use available resources in a creative and improvising fashion. For organizations to be able to benefit from both the intentional and unintentional individual learning of their expatriates that results from coping with challenges during their assignments, such learning must be recognized and valued by the organizations. A resource that remains invisible or is not considered relevant is unlikely to be tapped. In other 10 words, individual learning must be perceived as an organizational resource and seen as an ongoing process that is not limited to training courses. Expatriate adjustment is another significant topic in the literature. The focus is first of all on processes of adjustment that the expatriate undergoes when sent abroad (Adler 1997; Black et al. 1992a; Black/Gregersen 1991; Brein/David 1971; De Cieri et al. 1991; Kumar/Steinman 1985; Kunst/Simons/Zorn 1996; Mendenhall/Oddou 1985; Stening/Hammer 1992). A major object of study are the factors which contribute to expatriates' adjustment to an unfamiliar environment, recognizing that it is a complex interplay of individual, organizational and environmental aspects4 (Richards 1996; Stahl 1998). Expatriates are sent abroad to fulfill a particular function, and they enter the country and the organization with specific understandings about their role and performance criteria based on their established expectations. In order to be effective in the host-country organization, they cannot adhere rigidly to this frame of reference (Hammer 1987; Selmer/Kang/Wright 1994). The learning entailed by the adaptation process is well illustrated in the words of one expatriate: After talking to my colleagues, including non-Americans, I get the impression that success or failure in getting adjusted depends upon one’s attitudes and expectations. Those who have difficulty adjusting often make invidious comparisons between life here and life back home. Those who ‘fit right in’ seem to see opportunities to experience new and interesting things. They are also more willing to get involved in activities that bring them into contact with other people (cited in Feldman/Thomas 1992: 287). Expatriates have to learn about the social, political, economic conditions of the local organization and be willing to adjust to the local culture enough to be able to bring their value added to bear on the organization (Hofstede 1995). In other words, they have to learn the cultural code of the local organization in order to function effectively in it as bearers of the cultural code of the part of the organization from which they were sent. To a certain extent, this might mean "unlearning" (Hedberg 1981) the attitudes and behaviors learned in the culture of departure (Banai 1985), but this is a fine line: if an expatriate "unlearns" the organizational culture of departure entirely The topic of expatriation and gender is a particularly fruitful field for exploring the interplay of individual, organizational and environmental aspects (see e. g., Adler 1984; Berthoin Antal/Izraeli 1993; Taylor/Napier 1995, 1996; Westwood/Leung 1994). 4 11 and becomes "native" to the local culture, his or her value as a resource for international organizational learning is greatly reduced. Possibly the most obvious indicators of the unused potential for organizational learning that expatriate managers represent are to be found in the literature on the turnover of expatriates and on their adjustment problems after completing an assignment abroad. Quite simply, managers who leave their foreign post early cannot act as agents of organizational learning in the local organization; those who leave the company after a foreign assignment can no longer contribute to the learning of their organization; and equally wasted is the learning experience of returnees who stay with the company but who feel alienated or under pressure to forget their knowledge acquired abroad. There is a not insignificant body of research on the two undesirable turnover phenomena of expatriates breaking off their foreign assignment early, or leaving the organization after returning from their work abroad (Birdseye/Hill 1995; Black/Gregersen/Mendenhall 1992b; De Cieri/Dowling/Taylor 1991; Feldman/Tompson 1993; Harzing 1995; Kunst/Simons/Hall 1996; Naumann 1992). The various contributors to this topic attempt to understand the reasons for turnover and are finding that it cannot be treated as a purely individual problem. Instead, the literature stresses that it is an organizational matter, in that such turnover is seen to be the result of badly managed expatriation processes.5 It is likely that when companies learn to manage the expatriation process better, they will also be able to learn more from their expatriates' experiences.6 For the management of expatriates who do stay with the organization after their return from abroad, the smaller and more recent body of literature on the topic of adjustment problems provides useful insights relevant to organizational learning (Adler 1997; Baumgarten 1995; Black et al. 1992b; Forster 1994; Stroh 1995). This The growing recognition of the significance of the expatriate's family for the expatriate's success is an example of organizational learning in some companies. Research has shown that a high proportion of premature returns by expatriates is linked to the family's unhappiness in the new location (e.g., Tung 1981, 1994). Recognizing this systemic problem, some human resource managers are treating the expatriation not simply as an individual but as a family process, for example by including family members in the initial selection, training and local support process. 6 A particularly interesting example of organizational learning in and from the expatriation process is the creation of a spouses' network in an international company with headquarters in the Netherlands. The spouses contribute to a data base on life in each location which is used by the company and newly assigned expatriates and their families; they have launched a regular newsletter in which information and experiences are shared; and they organize meetings and local support processes for new and former expatriates. 5 12 body of literature is narrower than the literature on adjustment to a foreign environment, and focuses essentially only on the professional reentry difficulties. Adler outlines three potential re-entry strategies for expatriates, and these can usefully be linked to organizational learning: resocialization, whereby the returning expatriates neither recognize nor use the skills and experiences gained abroad; alienation, in which the expatriates who identified so strongly with the foreign culture reject the culture to which they return; and the proactive strategy of using skills and lessons learned from the foreign assignment to "attempt to create the kind of world in which they would like to live" (1997:252). Clearly, the third strategy is the one most likely to contribute to organizational learning, however, "the home organization still must decide to use the returnee's potential contributions and not simply attempt to fit them back in" (Adler 1997:252). Baumgarten (1995), like Adler one of the few scholars who explicitly mentions organizational learning in connection with expatriation, concludes from her research that some of the reentry problems of returning expatriates could be diminished if home-organizations and managers would recognize the value of these experiences for organizational learning. In summary, the expatriation literature is riddled with discussions about problems and one of the key messages that emerges is the need for an integrated strategy and a comprehensive process for managing expatriation. Many of the difficulties faced are attributed to the usually fragmented approach to expatriation. The fragmentation is of a dual nature: first, many companies lack an international human resource policy that is tied to the overall business strategy, so that expatriation is not sufficiently clearly linked to the type of strategic orientation the company has toward its internationalization, that can differ quite significantly (as will be discussed in further detail in the next section). Second, the fragmentation is visible within the human resource management process: the expatriation of an individual is rarely treated as an overall career and development process but rather in a piecemeal manner. For the purposes of understanding the points in the expatriation process at which organizational learning can be maximized, it is useful to take a closer look at a model that covers all the phases comprehensively (see Figure 1). 13 (insert Figure 1 here) Adler (1997) developed the model of the ‘expatriate global career cycle’ to capture the dynamic and wide-ranging character of expatriation processes that should be managed in an organization. The cycle starts with (1) home-country assignment, followed by (2) recruitment and (3) selection of candidates for foreign assignments. In a next stage, recruits (and their families) should receive training aimed at facilitating (4) orientation to the foreign culture and project. Prepared employees (and their families) then move abroad to the assigned post. After completing the assignment, expatriates (and their families) proceed to (5) a new post, usually in their home-country and -organization, a process which might be supported by (6) debriefing and (7) reentry sessions. Adler views cross-cultural entry and homecountry reentry as two major international transitions. Both international job transitions can be seen as key moments for individual learning; if the organization recognizes and values the learning that occurs at these transition points, the individual learning can be tapped and used by the organization to improve existing processes (first order learning) or to challenge and reorient mental maps and theories of action (second order learning). The literature suggests that the first job transition (i.e., assignment abroad) is more likely to be viewed as an opportunity for organizational learning than the second (i.e., return to "base," the part of the organization from which the expatriate came). It is widely expected that expatriates should transfer knowledge and skills (first order learning)7 to the organization to which they are assigned, and expatriates are often charged with transferring to the local operations some of the core cultural values of the international company (second order learning). But it is much less recognized that expatriates’ experiences can contribute to organizational learning in their "return" post, whether in the form of first or second order learning. The very fact that a high number of companies do not guarantee their expatriate managers a job on completion of their foreign assignment (Eicker 1997:K1)8 signals that the learning 7 A current key challenge to many companies is how to speed the transfer of knowledge and skills from headquarters to local staff in the foreign subsidiaries of less developed countries, particularly in light of the high costs of expatriate managers as compared to local managers (Bolger 1997:12) 8 A recent study by Price Waterhouse of 184 companies revealed that only 46 percent of the companies guarantee their expatriates a job on their return. Of potentially even greater significance is that this may be a downward trend, since in 1995 the study showed that this was the case in 69 percent of the companies (Eicker 1997: K1). 14 they have done abroad is not valued particularly highly as a potential resource to be tapped by the home organization. This suggests that organizations are not necessarily very good at building their absorptive capacity for learning from expatriates. 3. Internationalization strategies The third body of research to review for insights into how expatriates can contribute to organizational learning is the literature on the internationalization processes of organizations. Scholars in this area generally assume that there are different stages or phases through which a company moves in becoming progressively international (e.g., Adler 1997; 9 more Banai 1992, Black et al. 1992a, Meffert 1990; Ohmae 1990). Each phase is associated with a particular business strategy and orientation to cultural differences. Such models are a useful tool to explore implications for organizational learning needs and the possible contributions of expatriates in each phase (see, for example, Schreyögg 1996). In general, four types of internationalization strategies are used in the stage models: domestic, multidomestic, multinational, and global or transnational. Whereas Adler (1997) and Ohmae (1990) start their categorization with firms that are essentially domestic, with some export activity, Banai (1992) and Black et al. (1992b) focus only on organizations with foreign activities. Banai frames patterns of internationalization in terms of maturity. His specific concern is with the difficulty of international organizations to integrate subsidiaries’ activities under a common strategy. Black et al. conceptualize patterns of internationalization in terms of value-chain activities and consider their impact upon coordination and control. In order to encompass the whole range of learning to operate in an international environment, we apply here the more comprehensive model provided by Adler (1997), since it includes those organizations that are on the threshold of internationalization. • "Domestic" firms produce goods and services almost exclusively for the domestic market, with a very limited amount of export activity. There is no need for domestic firms to develop sensitivity to national cultural differences due to a lack of 15 international competition and the uniqueness of their goods and services. Hence, expatriation is not an issue at this stage. • "Multidomestic" firms establish operations abroad ranging from sales and marketing offices through to complete production activities. In Ohmae's (1990) terms, full-fledged multidomestic companies "clone" themselves by replicating themselves in different locations around the world. Each business is managed fairly autonomously according to local conditions and requirements and there is little interdependence between the various foreign operations. Expatriates tend to be used to manage the local operations, and "sensitivity to cultural differences [become] critical to implementing effective corporate strategy in the multidomestic phase" (Adler 1997:8). • "Multinational" firms seek to benefit from economies of scale and source critical factors on a worldwide basis. Products and services are almost identical and there are numerous multinational competitors. Corporations in this phase tend to favor an approach to global competitiveness that seeks ‘one-least-cost way’ (Adler 1997:9). The impact of cultural differences and the importance attached to cultural sensitivity is markedly lower in these organizations than in "multidomestic" firms. Interdependence between the various foreign units is higher than in the case of "multidomestic" corporations and as a result, "multinational" corporations exhibit higher coordination needs. Corporate strategies focus on tight integration and control of subsidiaries activities through uniform reporting systems and the use of expatriate managers sent out from headquarters. • The fourth category of Adler's model is the "global" or "transnational" firm. Corporations of this kind try to integrate top quality and least-possible-cost strategies to gain competitive advantage. Worldwide sourcing and marketing to discrete market niches are the distinctive features of "transnational" corporations. Thus, rather than seeing differentiation and integration as opposites, they are viewed as complementary and equally critical to global success. Companies pursuing a "transnational" strategy take a "synergistic" approach (Adler 1997:106) to cultural diversity and the flow of expatriates between units all around the world is no longer dominated by managers originating from headquarters. In addition, it It is debatable whether in practice companies really move in a linear fashion from one stage to the next and it is also questionnable whether the model should be applied in a prescriptive fashion to suggest that the last phase is considered the desirable goal for all, but this is beyond the scope of the paper. 9 16 is likely that the management at headquarters is composed of a greater variety of cultural backgrounds than is the case in the other three phases. What are the implications for organizational learning needs for each of these strategies, and what role can expatriates play in meeting these needs? It would be too simplistic to associate more organizational learning with more internationalization, as might be assumed from a purely quantitative application of the concept of „absorptive capacity“. The learning properties and potentials of organizations based on patterns of internationalization are distinctive in scope rather than in degree. The different strategies and their implications for learning needs are summarized in Table 1. 17 Table 1 Business Strategy Dominant strategic demand competing on local market responsiveness to local conditions worldwide responsivesourcing to find ness, worldlowest cost source wide sourcing, and learning simultaneously universalistic synergistic intensive and tight standardization, equalization, and corporate uniformity increase of efficiency and hierarchy communicative communicative processes and alertness to diversity common set of corporate values Competitive Strategy and Organizational Learning Needs domestic multidomestic multinational transnational Cultural assumption Coordination and control Purposes of expatriation monocultural not applicable none pluralistic extensive and loose preservation and development of differentiation adaptation to local conditions and idiosyncrasy Scope of organi- local zational learning needs "Domestic" firms, whose international activities are limited to minimal export activities, and who therefore do not have expatriate managers, have no immediate need to learn how to work across cultures. When these firms do decide to start internationalizing, whether through the "multidomestic", "multinational" or "transnational" route, they have an enormous amount of organizational learning, both first and second order, ahead of them. "Multidomestic" firms need to develop familiarity with local economic, political, social, and cultural conditions because a sensitivity to multi-faceted diversity is crucial to implementing corporate strategy effectively in this phase. Expatriates can serve as an interface to translate knowledge about local conditions to managers in headquarters while at the same time transferring skills and knowledge from headquarters to the local subsidiary. Firms pursuing a "multidomestic" strategy must learn to discover that there are many effective ways to achieve various ends (equifinality), rather than assuming that there is one best way which is characteristic for domestic and multinational companies. The generation of the "best way" for a particular subsidiary is in itself an organizational learning process. For example, Buhr (in this volume) proposes that one form of organizational learning in "multidomestics" is "Creolization". This results when the expatriate and local managers of the subsidiary learn to establish a local management culture for the subsidiary that combines elements of the local culture and the organizational culture of the parent organization. 18 The learning needs of "multinational" companies are significantly different from those in the first two phases. Since the strategic emphasis is on integration rather than on fostering diversity and idiosyncrasy, the subsidiaries are expected to learn to adapt to corporate standards. Expatriates are sent abroad to foster standardization and equalization, with the goal of transforming local idiosyncrasy into corporate uniformity. A "transnational" strategy implies that knowledge and understanding of issues and conditions in different countries and markets is fundamental to overall business success, so it is perhaps not surprising that the concept of learning is often used in descriptions of this phase and ‘cultural communication’ is recognized as a tool for establishing a common set of corporate values (Earley/Erez 1997:46). Diversity is valued and utilized in this business strategy (Schneider/Barsoux 1997:227), and all the organizational locations are expected to contribute to organizational learning and to learn from each other. Employees from different parts of the "transnational" corporation are sent on assignments abroad in order to foster cross-cultural interaction and implementation of the corporation’s synergistic strategy. It is likely that „Creolization“ will also occur in this phase, in that elements from the local culture are valued in a subsidiary and mixed with elements from the larger organization’s culture. The difference between the process here and that in the „multidomestic“ phase is that in the latter the overall organizational culture is determined by the culture of headquarters, while in the transnational phase the overall organizational culture is itself the result of international synergies. 4. Expatriates and the Politics of International Organizational Learning The review of the three bodies of literature so far suggests that the need and scope for international organizational learning is both significant and diverse. There is the need for first-order and second-order learning in the subsidiaries, as well as in the headquarters of companies operating internationally, that expatriates can contribute to through the lessons learned from their experiences. They can transfer their learning into the organization both during their assignment in a foreign subsidiary and on their return to their "home" organization. Unfortunately, the experiences of expatriate managers suggest that organizations do not generally attach much value 19 to the learning that can be drawn from their individual experiences, as the following comments illustrate: • • "Headquarters has no idea of how things should be run in this country" (American manager, cited in Black et al. 1992a:47). "When you come home, no one appreciates your international experience as much as yourself, or as much as the people you worked with overseas. In fact, overseas, the mere reality of it, does not even exist for most ‘domestic’ employees in this company" (Japanese manager, cited in Black et al. 1992a:268). • "When I came home, I was assigned to a newly created, undefined staff job, where I had no friends, no contacts, and no access to management. Firms need to realize that expatriates have developed independent decision-making skills, have become accustomed to having final authority, and are conditioned to having their business judgment given a lot of credibility by top management. In my new job, my business judgment is much less valued than when I was overseas. Until firms change, expatriates should expect the worst when coming home, to avoid disappointment" (American manager, cited in Black et al. 1992a:236). Looking back at the models and concepts reviewed in this article, it is possible to suggest some reasons why this gap between the potential contribution to organizational learning that expatriates have to offer, and the actual use made of it, exists. Each of the business strategies entails different values attached to the relevance of learning from other parts of the organization around the world. The "domestic" companies see no reason to try to learn from abroad since they expect their foreign customers to adjust to the dominant local market conditions. The "multidomestic" can be said to need to engage in a bi-directional learning process, in which both headquarters and subsidiaries have an interest in learning from each other. It is likely that while the expatriate manager is based abroad, he or she will be tapped for contributions to organizational learning by the local subsidiary and by managers at headquarters who have international coordination responsibilities. On their return they can be assigned to posts pertaining to the coordination of affairs relating to the foreign subsidiary, or they might be asked to 20 pass on their experiences to the next manager going to the country in question. Thus, their individual learning from the experience abroad is transferred into the organization. The kind of organizational learning during both phases is likely to be first order: the role of the expatriate is to transfer knowledge and skills, and enable the two parts of the organization to communicate and understand each other, not, however, to change them. It is not very likely that the experiences gained abroad will be tapped at headquarters after the expatriate's return for second order learning to challenge the way things are run at home. The "multinational" strategy appears to focus only on mono-directional learning, with the expectation on the part of headquarters that the subsidiaries must learn how to do things the "one-best- way" characteristic of that particular corporation's culture. The expatriate has the responsibility of ensuring that the subsidiary learns to implement the right systems with the appropriate skills, and designated common values. This can entail requiring both first and second-order learning in the subsidiary, especially in those subsidiaries that were not founded but acquired and therefore already had an established organizational culture which must adapt to the multinational’s culture. By contrast, there is no expectation that the headquarters might have something to learn from its subsidiaries, so neither during their assignment abroad nor after their return are expatriates enabled to contribute to organizational learning at headquarters. In fact, in an early study, Adler (1981) found that the more expatriates attempted to use their learning at reentry, the lower their ratings from their bosses tended to be. "Multinationals" generally expect their returning expatriates to pursue a re-entry strategy of rapid resocialization to corporate norms rather than a proactive organizational learning strategy. The strategy of the "transnational" is predicated on a multilateral or mutual approach to organizational learning between different parts of the company, including headquarters. In principle, this means that the potential learning is assigned equal value, irrespective of its source of origin, and that the predominance of headquarters is mitigated. For expatriates in such organizations, the frustrations such as those described above might be a thing of the past. These firms are better equipped through their multiculturalism to recognize the value of new knowledge, then assimilate and use it. Through the combination of these elements, they have 21 achieved a greater absorptive capacity for international learning than multidomestic or multinational companies. According to Adler "multiculturalism adds to the complexity of global firms by increasing the number of perspectives, approaches and business methods represented within the organization" (1997:14), and the recognition of these multiple perspectives enables the organization to learn more effectively from different sources. 5. Conclusions and Recommendations The mapping together of the literature on international business strategies, on organizational learning and on expatriation throws a new light on the current understanding of absorptive capacity. The underlying assumption is that there is a linear relationship between the amount of experience an organization has in an area and the receptiveness and ability of the organization to value and use additional knowledge in that area. This assumption needs to be altered to take into account the possibility of "regression" from a bi-directional to a mono-directional learning process that occurs when a "multidomestic" company changes strategy and learns to function as a "multinational." The narrowing down from a bidirectional process of organizational learning in which both the headquarters and the subsidiary learn from each other through expatriates' experiences to a mono-directional process, whereby expatriates are seen as agents of learning only for their impact on the subsidiary, suggests that there are strategic blockages to the growth of an organization's absorptive capacity. The emphasis on management through tight controls in the "multinational" strategy based on a uniform set of standards established by headquarters is clearly a political stance that blocks the possibilities for mutual learning processes. It is very difficult for an expatriate to validate lessons from experiences abroad in an organizational climate that is dominated by thinking formatted in headquarters. These observations on the blockages in the development of absorptive capacity and the underuse of expatriates as resources for organizational learning in internationalization processes support the emerging recognition that theory building on organizational learning must take the dynamics of power relations in organizations into consideration. For international companies, this includes recognizing the 22 possibility in organizations of power differences between headquarters and subsidiaries, for example, or between subsidiaries in countries that are perceived as important and "advanced" and those in countries considered to be less important. The power relations existing between the organizational units of an international company will influence the ability of the organization to recognize and use the learning contribution of expatriate managers. From the review of internationalization models presented here it appears that organizational strategies and power structures that value diversity are more likely to benefit from the potential that expatriates represent for organizational learning. In a political system that values bilateral or multilateral relations and evens out the playing field for managers coming from different countries, there is a greater likelihood for ideas stemming from one location to be considered interesting and worth consideration in another. Developments in the direction of networked structures, or even "virtual" organizations of an international scale in which managers in different locations have a greater need to learn from each other in order to be successful, would set the stage for a different set of dynamics for organizational learning. The redistribution of activities and power around the world, moving functions that have traditionally been centralized in headquarter offices in a single country to different parts of the world, could offer new opportunities for expatriates to see their learning welcomed and used in the years to come. While waiting for significant organizational improvements to occur, however, it may first be useful to take some small steps within existing structures to enhance organizational learning. One could start by asking expatriate managers how to make more effective use of the learning potential their experiences represent. suggestions as these are eminently practical and easy to introduce. "My suggestion for international firms? They could at least brief or work with the people at home who had never been overseas and help them to appreciate an international perspective a bit more." (Japanese expatriate manager, cited by Black et al. 1992a:268). "Firms must value international experience . . . not only appreciate it but actually put it to good use. Don’t let a corporate headquarter’s environment destroy the lessons, "business savvy," negotiation skills, and foreign language Such 23 proficiencies that expatriates learned from the real world . . . a global marketplace." (American manager, cited in Black et al. 1992a:237). "Firms should be using their international managers as assets to grow and expand, instead of giving them away to competitors." (Black et al. 1992a:265) 24 References Adler, N. J. (1981): “Re-entry: managing cross-cultural transitions." In: Group and Organization Studies, Vol. 6, No. 3, pp. 341-356 Adler, N. J. 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