Cultural Proximity and Organization

Managing Diversity and Innovation

Federica Ceci, Francesca Masciarelli

• Publisher: Routledge
• Year: 2020
• ISBN:
  9781000206616
• Edition: 1
• Topic: Business
• Subtopic: Management
• Index: Business

Cultural proximity consists in shared language, codes, and norms of communication and exchange between actors. It is generally considered important for organizations, enhancing communication and facilitation interaction between actors. In such situation, diversity is often seen as a source of richness and originality. However, high levels of proximity might create some risk, leading to lock-in and inertia, with a negative impact on the innovativeness of the organization.

While the role of cultural proximity is subject to much debate within organizations studies, a comprehensive understanding of cultural proximity remains elusive. This book explores the organizational implications of the concept of cultural proximity, delving into the managerial challenges posed by diversities and similarities in culture within a business environment using different levels of analysis. The key messages of the present book, grounded on original empirical evidence, can be summarized as follows: cultural proximity is a key factor for managing innovation in present times; innovation requires a deliberate orchestration of the dichotomy between cultural proximity/cultural diversity; there are specific circumstances where proximity can be beneficial for managers and entrepreneurs.

The book will be of value to researchers, academics, managers, and students in the fields of management science, human resource management, innovation studies, and organizational studies.

Part One

Theoretical Approaches to Cultural Proximity

1 Social Capital Theory and Its Application in Innovation Studies

A Theoretical Primer

Introduction

This chapter is intended to offer a theoretical contribution to the understanding of the concept of social capital and its effects on firm innovation through cultural proximity. Nowadays, the extensive distribution of knowledge and research revolutions has made it almost impossible for a single firm to have all the capabilities, resources, and knowledge required for innovation available within its own boundaries. The importance of firms’ interaction and collaboration with other actors for the innovation process is underlined by several studies (Chesbrough, 2003; Freeman, 1991; Powell, Koput, & Smith-Doerr, 1996; Reidolf, 2016; Tether et al., 2002). Innovation is typically considered as the outcome of the joint efforts of different actors, including other firms, such as competitors and suppliers, and customers (von Hippel, 1988; Powell, 1990). These actors usually possess complementary resources, knowledge, and capabilities that the firm needs for its innovation process (Rosenberg, 1982).

Our conceptual framework is informed by the Resource Dependence Theory, which emphasizes how external forces affect the way firms manage those resources to compete in their environment (Pfeffer & Salancik, 1978). Resource Dependence Theory represents a unified theory of power at the organizational level of analysis (Casciaro & Piskorski, 2005) and predicts that a high degree of dependence in organizations is more likely to lead to the absorption of the sources of such dependence (Pfeffer, 1972; Pfeffer & Nowak, 1976; Pfeffer & Salancik, 1978). It provides an explanation not only of the reason why firms adopt innovation strategies, but also why such strategies may be contingent upon firms’ environment. One broad tenet of particular relevance to our research is as follows: firms depend on other organizations controlling resources that are vital to them (Greening & Gray, 1994). Accordingly, firms make strategic choices regarding external relationships with the aim of “altering the system of constraints and dependencies confronting the organization” (Pfeffer & Salancik, 1978, p. 267). Drawing on this tenet, it is argued that the innovation strategies implemented by firms depend on the relationship-based strategies they adopt.

Within the context of the economic geography and innovation literature, scholars suggest that the persistent differences in firms’ performance are partly determined by the resource endowments of the geographical area in which those firms are located. The importance of firm environment is supported by extensive empirical evidence with reference to the geographical concentration of innovative firms. If innovations were the mere result of public and codified knowledge, each firm should have the same probability of being innovative, and this probability should be independent of firm location. Therefore, the geographical distribution of innovations should be equivalent to the geographical distribution of firms. However, on an empirical level, these two distributions are shown to be substantially different: agglomerations of innovative activities are concentrated in particular geographical areas characterized by a process of entrance and the development of innovative firms. Silicon Valley in the USA is the best-known example of such concentration (Saxenian, 1994). Clearly, due to the differences in natural-resource endowments, such as infrastructures and investment in public and private knowledge production, regions have a great impact on the definition of firm innovation. However, while taking all these resources into account, we still lack a satisfactory explanation regarding some persistent differences between regions (Tappeiner, Hauser, & Walde, 2008). Social residue has long been regarded as a factor that might explain the differences in firm performance among regions, after considering other resource endowments (Perroux, 1950). These social factors are necessary to produce value from other sources, facilitating knowledge flows and, hence, leading to innovation.

In this chapter, we explore the role of social capital in promoting innovation by enhancing the benefit resulting from cultural proximity. While previous studies focus on the role of geographical proximity (Hauser, Tappenier, & Walde, 2007; Laursen, Masciarelli, & Prencipe, 2012; Laursen, Masciarelli, & Reichstein, 2016; Murphy, Huggins, & Thompson, 2016; Wang, Guidice, Zhou, & Wang, 2017), here, we focus on cultural proximity, suggesting that external social capital in the geographical area where the firm is located may play a role in determining firm innovation possibilities by increasing the benefit of cultural proximity. Culture is referred to as a set of attitudes, values, and beliefs in the minds of people and it arises from the socio-economic historical relationships of a group of people (Eklinder-Frick, Eriksson, & Hallén, 2014; Ouchi, 2004). It represents “the collective programming of the mind which distinguishes the members of one human group from another… the interactive aggregate of common characteristics that influences a human group’s response to its environment” (Hofstede, 1980, p. 25).

Our main point is that the level of social capital developed in one environment -in the form of informal ties, social norms, and trust- may have a strong impact on cultural proximity, thereby influencing transaction models (Nahapiet & Ghoshal, 1998). Accordingly, the inventory of existing social relationships in society is then investigated (Piazza-Georgy, 2002) as a productive factor or, rather, as a tool that promotes the aggregation of productive factors, thus influencing various economic activities, such as innovation. In this chapter, social capital will be referred to as a public good that is accessible to all the subjects in a given territory.

This chapter is structured as follows: the first section provides an in-depth analysis of the concept of social capital along with an introduction to the possible instruments of measurement. The second section explores the competitive and complementary motivations behind an unequal territorial distribution of innovations, highlighting the reasons why it is legitimate to expect social capital to influence the territorial distribution of innovation. In the third section, a link between social capital, cultural proximity, and innovation is developed. The chapter concludes with a series of propositions aimed at describing the complex relationships regulating social capital, cultural proximity, and innovation.

Social Capital

The concept of social capital has drawn the attention of many researchers in various fields of study, such as political science (Putnam, Leonardi, & Nanetti 1993), sociology (Burt, 1992; Coleman, 1988; Lin, 1999), and economy (Beugelsdijk & van Schaik, 2005; Hauser et al., 2007; Knack & Keefer, 1997). Since the beginning of the 1990s, scholars have clarified their interest in the social dimensions shaping the economic performances of specific geographical contexts. In the field of economics, North (1990) stressed the importance of formal and informal institutions, that is, legal structures and normative rules of the game, in explaining existing differences in terms of economic performance. In political science, Putnam et al. (1993) showed that local civic associations laid the foundation for a widespread dissemination of knowledge and the development of social trust, thereby creating the conditions for effective governance and economic growth. In sociology, Evans (1995) discovered that whether a state was developmental or predatory, it was associated both to the capacity of its public institutions and to the nature of the relationship between state and society. These seminal works have inspired a pervasive and extensive literature on the role of social interaction and community participation merging around a general framework based on the idea of social capital (Woolcock & Narayan, 2000). Social capital entered the economic debate with the privilege of being an independent production factor (Woolcock & Narayan, 2000). The idea of social capital is that friends and associates constitute an important asset, and communities possessing a diverse and rich heritage of social ties and civic associations, will easily benefit from new opportunities (Isham, 2002). The classical economic literature identified three essential factors defining economic growth: land, labor, and physical capital. Schultz (1961) and Becker (1962) introduced the concept of human capital, arguing that the existence of trained and skilled workers is likely to affect economic growth. Economists have a clear view regarding the origins of social capital, as they see it as the product of iterated Prisoner’s Dilemma games (Fukuyama, 1995). When the Prisoner’s Dilemma is not repeated over time, defection produces a Nash equilibrium for both players and, therefore, the game does not result in co-operative outcomes. In repeated games, on the other hand, a tit-for-tat strategy involving co-operation for co-operation, and defection for defection, implies that both players will cooperate.

The term social capital was originally employed to capture the relational resources included in personal ties that are useful for personal development in social organizations (Jacobs, 1961; Loury, 1977). Bourdieu (Bourdieu, 1980) was the first to conceptualize social capital. He defined it as “the sum of the resources, actual or virtual, that accrue to an individual or group by virtue of possessing a durable network of more or less institutionalized relationships of mutual acquaintance and recognition” (Bourdieu, 1980, p. 2). According to Bourdieu (1980), social capital has two main components: (1) the social relation itself; social capital is a resource connected with social networks and group membership: “the volume of social capital possessed by a given agent depends on the size of the network of connections that he can effectively mobilize” (Bourdieu, 1986, p. 249); and (2) the quality shaped by the total amount of relationships between actors (Bourdieu, 1980). As regards the analysis of the concept of social capital, Bourdieu (1980) did not suggest any economic methodology; social capital is an attribute used to increase an agent’s ability to advance his/her objectives. Coleman (1988) went one step further to conceptualize social capital, emphasizing the multidimensional nature of such a concept.

Social capital is defined by its function. It is not a single entity, but a variety of different entities, with two elements in common: they all consist in some aspect of social structures, and they facilitate certain actions of actors within the structure.

Social capital is related to some aspects of social structure that “make possible the achievement of certain ends that would not be attainable in absence” (Coleman, 1990, p. 302). Such a definition is relevant to the interpretation of the empirical evidence found in the social capital and embeddedness literature, and it represents a starting point for the measurement of social capital. By describing the wholesale diamond market in New York City, Coleman (1988) exemplified the influence of social capital on economic performance. The peculiarity of this market lies in the exchange, from one merchant to another, for the inspection of diamond bags worth hundreds of thousands of dollars. These exchanges take place without any formal insurance; therefore, there is no formal guarantee that the merchant receiving these diamond bags will return them. The social structure based on family, community, and religious ties, ensures that, in the event of failure to...

Table of contents

• Cover
• Half Title
• Series Page
• Title Page
• Copyright Page
• Table of Contents
• Introduction
• Part One Theoretical Approaches to Cultural Proximity
• Part Two Applications
• Conclusions
• About the Authors
• Index