An increasingly globalized economy has produced the paradox of companies that are successful in their country of origin but struggle overseas. The coupon site Groupon, Chinese technology Tencent (WeChat) and the retail chain Target are examples of organizations that flourish domestically, but fail to take off in other countries.
Does this have anything to do with the fact that their leaders are monocultural, in other words, they come from a single cultural background? Are they, therefore, less able to understand and take advantage of business opportunities in unfamiliar cultural contexts? Logically, multicultural CEOs would be more capable of sensing this type of opportunities.
The opposite is also true. The Brazilian firm, Tecsis, run by the son of Japanese immigrants, is the second largest global supplier of wind turbine blades but has failed at cultivating its domestic market. Hence, multicultural leaders can be less than ideal for growing a company in domestic markets.
Leaders for global environments
Management researchers usually assume that the capacities required to compete internationally differ from those needed to compete regionally or even locally. We assume that leaders’ cultural origin also influences their knowledge and cognitive schemas, so that multicultural people can think about international or intercultural phenomena with greater complexity and creativity than those with monocultural backgrounds.
The hypothesis is that the best type of leader for a competitive environment depends on its degree of globalization. In a highly global competitive environment, teams led by multicultural managers tend to outperform teams led by monocultural managers, while the opposite is true in a less globalized environment.
I decided to test this hypothesis together with my colleagues Stacey R. Fitzsimmons and Wade M. Danis, from the University of Victoria (Canada), in the article Multicultural managers and competitive advantage: Evidence from elite football teams, published in the International Business Review.
Lessons from the pitch
To test this, we chose a specific research context –élite men’s football– that would allow us to compare the performance of teams led by monocultural and multicultural leaders –managers— in diverse competitive environments.
The sports context has often been used in management given its similarities to the functioning of traditional organizations in aspects such as external competition, internal cooperation of highly trained professionals, strategic resource management, relationship with internal and external stakeholders, or the development of organizational structures and processes.
We analyzed data from 355 national football teams that participated in the World Cup (FIFA), European Championship (UEFA) and Copa América (CONMEBOL) between 1992 and 2015. This sample is very useful for business contexts since these competitions are frequent and regular; offer transparency regarding changes in leadership strategies and human resources; and provide clear, measurable outcomes, thus facilitating observation, measurement and comparison of the variables over time. Furthermore, as members of national teams, the 23 players cannot be “bought” or transferred between teams, assuring the stability of the sample.
We allocated the variable global competitive environment by tournament type: global and more diverse (World Cup: includes more international players and greater diversity of competitive strategies and changes owing to the frequency of the rounds) or regional (European Championship or Copa América: in which teams compete regionally, leading to less variety and more time between the rounds to change strategies).
Other variables that could have an impact on improved performance were incorporated, such as country population, GDP per capita, football tradition or football skill, among others.
Potential of multicultural leaders
First, what exactly does it mean that someone is multicultural? A typical multicultural is a child of parents coming from two different cultures or an immigrant child exposed to two or more cultures. An example: a kid born to a Mexican father and an American mother or a teenager with Chinese parents who immigrated to the US. However, immigrants have both been exposed to a new culture sufficiently long enough to use cognitive mechanisms similar to those analyzed in our research become de facto multicultural. In our sample of 355 teams, 244 had a monocultural manager and 111 a manager with a multicultural background.
Cultural differences model managerial capabilities in different ways, which has implications for performance.
Multicultural managers display the following skills:
- More attentive to cognitively more distant opportunities from a cognitive point of view, i.e. outside the predominant way of thinking, and especially towards other ways existing in other countries and cultures.
- Capable of using more than one repertoire of cultural norms and values to interpret the world, which helps them to develop greater degrees of cognitive complexity.
- Possessing multiple representations of different cultural systems fosters deeper information processing and complex thinking.
- Able to interact flexibly with individuals from diverse social, political and institutional contexts.
However, these cognitive benefits only come to light when activities are international or intercultural in scope, with preparation in the cultural context or schema. Multicultural leaders perform better in highly competitive global environments, characterized by high levels of variety and flux (such as the World Cup).
On the other hand, monocultural managers are characterized by the following skills:
- They are more likely to capitalize on opportunities that are cognitively closer to their own area of experience and native cultural context.
- They develop strategies tailored to the regional or local competitive context.
- They focus on their closest cultural environment, allowing them to sense subtler opportunities.
Therefore, organizations in less global environments are successful when their leaders prioritize incremental changes in efficiency over flexibility. Given the low levels of variety and flux (such as in the European Championship and Copa América), these environments have fewer strategic opportunities because market competitors use a narrower range of competitive techniques.
Which managers perform better?
The study’s conclusion confirmed our initial hypothesis: multicultural managers have a positive effect on performance when the competitive environment is highly global and is characterized by high levels of variety and flux. In contrast, monocultural managers perform positively when the environment is less global and has lower levels of variety and flux.
In changing global environments characterized by the geographic dispersion of resources, being competitive requires more than having difficult-to-replicate assets. In our research, we are not trying to suggest that multicultural leaders are more suitable or have a superior set of cognitive tools, but rather that these capabilities can provide strategic advantages in certain types of environments.
Nowadays, it is critical that top managers’ skills should match the demands of a business environment that is increasingly characterized by its cultural diversity and complexity and the rapid transformation of markets.