Twice as Smart? The Importance of Managers’ Formative‐Years’ International Experience for their International Orientation and Foreign Acquisition Decisions
| Author | Dorota Piaskowska,Grzegorz Trojanowski |
| Published date | 01 January 2014 |
| DOI | http://doi.org/10.1111/j.1467-8551.2012.00831.x |
| Date | 01 January 2014 |
Twice as Smart? The Importance of
Managers’ Formative-Years’ International
Experience for their International
Orientation and Foreign
Acquisition Decisions
Dorota Piaskowska and Grzegorz Trojanowski1
University College Dublin, School of Business, Belfield, Dublin 4, Ireland, and 1Xfi Centre for Finance and
Investment, University of Exeter Business School, Rennes Drive, Exeter EX4 4ST, UK
Email: dorota.piaskowska@ucd.ie; G.Trojanowski@ex.ac.uk
This study examined how top management team’s (TMT) international orientation
influences perceptions of environmental uncertainty and how these perceptions impact
international strategic decisions, in particular regarding ownership stakes taken in
foreign acquisitions. We highlighted the need for the concept of TMT international
orientation to encompass executives’ formative-years’ international experiences along
with their international career experiences and nationalities. Empirical tests based on a
sample of 2122 international acquisitions completed by 561 UK firms over the period
1999–2008 showed that TMT international orientation positively moderated the nega-
tive impact of cultural differences and host country risk on acquisition ownership stakes.
The results underscored the importance of considering decision-makers’ attributes due to
their experiences at a young age, beyond their demographic characteristics or profes-
sional experience, in the context of international strategic choices. We also discussed
some implications of one of the possible consequences of executives’ formative interna-
tional experience, namely biculturalism, for international business.
Introduction
As globalization progresses and companies are
ever more present in foreign markets, interna-
tional experience becomes an indispensable yet
still rare resource in the executive suite (Carpen-
ter, Sanders and Gregersen, 2001; Daily, Certo
and Dalton, 2000). Indeed, prior research showed
that managers’ international career experience
plays an important role in their strategic deci-
sions. It helps them to spot and act upon oppor-
tunities in foreign markets, as well as to
understand and manage local peculiarities, such
as differences in cultural and institutional envi-
ronments, business practices, and consumer needs
and preferences (e.g. Herrmann and Datta, 2006;
Johnson, Lenartowicz and Apud, 2006; Levy et
al., 2007; Sambharya, 1996; Tihanyi et al., 2000).
Scholars also argued that international strategic
decisions depend on executives’ national cultural
values and the mix of nationalities represented in
top management teams (TMTs) (Nielsen and
Nielsen, 2011). In this paper, we investigate a
This research has been financially supported by the Eco-
nomic and Social Research Council (grant no. RES-061-
25-0416) and UCD School of Business Seed Funding
(grant no. R10479). The opinions presented are those of
the authors and not of the funding bodies. Research
assistance by Alessandra Cepparulo, Carolin Hecky,
Pawel Lewandowski and Michael Potstada is gratefully
acknowledged. We are grateful to two anonymous
reviewers for their constructive comments.
bs_bs_banner
British Journal of Management, Vol. 25, 40–57 (2014)
DOI: 10.1111/j.1467-8551.2012.00831.x
© 2012 The Author(s)
British Journal of Management © 2012 British Academy of Management. Published by John Wiley & Sons Ltd,
9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA, 02148, USA.
third and thus far under-researched aspect of
executives’ international orientations that may
influence their international strategic decisions:
their international experience in formative years.
The importance of considering if and how this
type of experience matters is underscored by recent
demographic trends, which indicate a marked
increase in the population of individuals who have
been exposed to more than one culture from child-
hood. For instance, more than 13% of the UK
population and 12% of the US population are
foreign-born (UK Annual Population Survey,
2009, www.statistics.gov.uk; US Census, 2010,
www.census.gov), up from about 10% in both
countries a decade earlier, and globally 40% more
than in 1990 (The Economist, 2011). About 15%–
20% of these UK and US subpopulations are
below the age of 24. In the USA, minorities are
expected to exceed 50% of the total population
sometime around 2040, and the proportion of
those who report they belong to more than one
race is to double to about 4% by 2050 (Ortman and
Guarneri, 2009). Many more are second- or later-
generation migrants, or temporal migrants
brought up outside their usual country of resi-
dence, or individuals of mixed ethnic background.
Such individuals have experienced living
abroad and possibly internalized more than one
cultural schema, effectively becoming bicultural
in the latter case. Prior research showed that their
formative cross-cultural experiences, and in par-
ticular biculturalism, have important implications
for their psychological functioning and well-being
(e.g. Benet-Martinez et al., 2002; LaFromboise,
Coleman and Gerton, 1993; Tadmor, Tetlock and
Peng, 2009). Yet, so far little is known about them
as top executives. Do they have skills useful for
today’s complex international activities and cross-
cultural contexts? Do their experiences contribute
to TMT international orientation and interna-
tional strategic decisions?
In an attempt to begin bridging this gap, in this
study we take a closer look at the impact of execu-
tives’ formative-years’ international experience on
some of the most visible and complex strategic
decisions they take: those regarding international
acquisitions. Acquisitions have been the dominant
mode of foreign direct investment over the past
two decades (UNCTAD, 2010). Paralleling this
trend, acquisitions have attracted significant
scholarly attention in several research fields (for
recent literature reviews see Barkema and Schi-
jven, 2008; Haleblian et al., 2009). These literatures
identified multiple factors influencing acquisition
behaviour and performance, including aspects of
the business environment, firm and deal character-
istics, and managerial characteristics such as expe-
rience, cognition and personality (Haleblian et al.,
2009). The importance of the latter set of factors is
particularly striking when viewed through the lens
of upper echelons theory with its key premise that
executives have a profound impact on firms’ stra-
tegic decisions (Hambrick, 2007; Hambrick and
Mason, 1984; Li and Tang, 2010).
We combine insights from these literatures to
arrive at novel explanations of acquisition decision
determinants. First, we argue that the concept
of TMT international orientation is usefully
extended to encompass executives’ international
experiences in formative years, along with their
prior international career experiences and national
cultural backgrounds (cf. Nielsen and Nielsen,
2011). We then address the key research question
of our paper regarding the impact of executives’
international orientations on how they may per-
ceive their ability to manage complex international
acquisitions at various levels of environmental
uncertainty in the form of host country risk and
cultural differences. We hypothesize that execu-
tives’ international formative-years and career
experiences as well as foreign nationalities in
TMTs positively moderate the negative impact of
host country risk and cultural differences on stakes
acquired in foreign targets.
We tested our hypotheses on a sample of 2122
international acquisitions completed by 561 UK
firms over the period 1999–2008. Most interest-
ingly, the empirical results were consistent with
one of the key ideas in our study: TMTs with
executives who have been exposed to multiple cul-
tures from an early age may have a unique reper-
toire of skills and attitudes which make them
particularly effective in cross-cultural situations,
diminishing the negative impact of cultural differ-
ences on foreign acquisition ownership stakes.
Our study makes the following contributions to
the international business (IB) and upper echelons
literatures. First, we highlight the importance of
considering executives’ attributes due to their
experiences at a young age, beyond their demo-
graphic characteristics or professional experience,
as determinants of their strategic orientations.
Specifically, we show how international formative-
years’ experience influences executives’ percep-
TMT formative-years’ experience and acquisitions 41
© 2012 The Author(s)
British Journal of Management © 2012 British Academy of Management.
To continue reading
Request your trial