i have attached the outline of the assessment and case study as well.

i have attached the outline of the assessment and case study as well.


Cultural Distance and Change Management 1 Managing Change in Transnational Companies: Does Cultural Distance Matter? Running Title: Cultural Distance and Change Management Kurt Matzler (corresponding author) Faculty of Economics and Management Free University of Bozen-Bolzano Universitätsplatz 1 Piazza Università, Italy Email: [email protected] Andreas Strobl Department of Strategic Management, Marketing and Tourism University of Innsbruck [email protected] Universitätsstrasse 15 6020 Innsbruck, Austria Ellen Krill Department of Strategic Management, Marketing and Tourism University of Innsbruck [email protected] Universitätsstrasse 15 6020 Innsbruck, Austria Accepted for publication in European Journal of International Management mailto:[email protected] Cultural Distance and Change Management 2 Kurt Matzler is professor of Strategic Management at the Department of Strategic Management, Marketing and Tourism at the University of Innsbruck. Furthermore, he is academic director of the Executive MBA program at MCI in Innsbruck and Partner of IMP, an international consulting firm with its headquarters in Innsbruck, Austria. His research focus is on Strategy, Innovation, and M&A. Andreas Strobl is assistant professor at the Department of Strategic Management, Marketing and Tourism at the University of Innsbruck. He received his doctoral degree from Innsbruck University in 2012. His main research focuses on issues related to entrepreneurship and leadership with a special emphasis on the field of mergers and acquisitions. Ellen Krill received her master degree from Innsbruck University in 2013. Currently she works for a major transnational corporation as human resource manager. Cultural Distance and Change Management 3 Managing Change in Transnational Companies: Does Cultural Distance Matter? Abstract Employees’ commitment to change is an important prerequisite for change management success. We test how direct manager’s transformational leadership and top management communication impact employees’ commitment to change and how, in a transnational organization, these relationships are moderated by cultural distance. We measure cultural distance using GLOBE (Global Leadership and Organizational Behaviour Effectiveness Research) dimensions. The results of the study in a German technology company (N=939 employees, operating in 30 countries) show that transformational leadership and top management communication are positively related to affective and normative commitment to change. Cultural distance positively moderates the direct manager’s transformational leadership–affective commitment relationship and reduces the influence of top management communication on normative commitment to change. Keywords: Organizational Change, Transformational Leadership, Top Management Communication, Cultural Distance, GLOBE, Cultural Distance and Change Management 4 1. Introduction Workplaces constantly face change (Herscovitch & Meyer, 2002) and the pace at which organizations go through change has increased tremendously (Piderit, 2000). Hence, managing change has emerged as an important competence (Paton & McCalman, 2008). However, about half of change initiatives fail (Fay & Lührmann, 2004). Thus, the need for a better understanding of organizational change processes is evident (Stensaker & Langley, 2010; van Knippenberg, Martin, & Tyler, 2006). The success of change initiatives depends largely on employees’ willingness to change their behaviours, attitudes, goals, and values (Ashforth & Mael, 1998; George & Jones, 2001; Whelan-Berry, Gordon, & Hinings, 2003) as change processes typically raise several concerns leading to resistance among employees. Fostering commitment to change among employees is therefore a fertile avenue for successfully managing change. Globalization as a force pushing companies towards expanding their activities globally, opening up subsidiaries in different countries leads to a growing number of transnational companies. The transnational nature of companies might yield further complexities for change management initiatives. Thus, in order to plan and implement change effectively in transnational organizations, cultural aspects need to be taken into account, as leadership perception and effectiveness as well as communication effectiveness are determined by cultural differences (House, Javidan, Hanges, & Dorfman, 2002; Merkin, Taras, & Steel, 2014). Managing change in a transnational organization is a particular challenge, as the headquarters has to rely on the foreign subsidiaries in implementing change. Change management literature has shown that two factors strongly influence the willingness of employees to change: Top management communication and leadership behaviour (Hill, Seo, Kang, & Taylor, 2012). What however complicates change management projects in transnational organizations is cultural Cultural Distance and Change Management 5 differences. In this paper, we develop a conceptual model that links top management communication and direct manager’s transformational leadership behaviour to employees’ commitment to change in a transnational organization. The theoretical model and the empirical study yield two important insights: First, the greater the cultural distance between employees and headquarters, the more important is the leadership behaviour of the direct supervisor. In other words: the direct managers’ role as change agents increases with cultural distance. Second, top management (i.e. headquarters) communication is less effective the greater the cultural distance between the foreign subsidiary and the headquarters is. These are substantial additions to extant literature on change management, as we show that change management initiatives in transnational organizations follow their own rules. These findings have important theoretical and managerial implications. The following section develops a research model, which is tested with a sample of 939 employees involved in a change initiative of a transnational technology company with its headquarters in Germany and manufacturing sites and sales offices in 35 countries. The aim of this change process was to implement a global operational excellence initiative. The final section of the paper will discuss the findings and derive conclusions, limitations and an outlook for future research initiatives. 2. Theoretical Framework In this section, we develop the conceptual model for our study. We review literature on change management to conclude that the success of change initiatives strongly hinges on employee acceptance and support for organizational change. Therefore, during change implementation much effort is focused on shaping employees’ beliefs, attitudes, and intentions Cultural Distance and Change Management 6 (Armenakis, Harris, & Mossholder, 1993; Herold, Fedor, & Caldwell, 2007) in general and commitment to change in particular. We also conclude that top management communication and the direct leader’s behaviour (transformational leadership) are of central importance for creating commitment to change. Cultural distance however is an important, so far neglected, variable in such a change management model, as it increases the role of direct managers as change agents and diminishes the effect of top management communication. 2.1. Commitment to change Of all the literature discussing individual-level constructs reported to increase individual readiness to change (i.e. self-efficacy, commitment to change, perceived personal competence, and job satisfaction), commitment to change has received the most attention (Choi, 2011). Herscovitch and Meyer (2002, p. 475) define commitment to change as “a force (mind-set) that binds an individual to a course of action deemed necessary for the successful implementation of a change initiative.” Thus, commitment to change usually reflects an employee’s approval of new regulations, policies, programs and so forth and constitutes a dynamic process (Jaros, 2010). Commitment to change includes not only positive attitudes toward the change, i.e. the employees’ intentions to support it, but also their willingness to work on behalf of its successful implementation (Herold, et al., 2007). Herscovitch and Meyer (2002), drawing on their general theory of workplace commitment (Herscovitch & Meyer, 2002), propose a three-dimensional model of commitment to change, consisting of normative commitment to change (obligation-based), continuance commitment to change (cost-based), and affective commitment to change (feelings-based). Numerous studies on change have used this conceptualization (for a review see for example Bouckenooghe, M. Cultural Distance and Change Management 7 Schwarz, & Minbashian, 2015 or Jaros, 2010). Herscovitch and Meyer (2002) argued (later empirically confirmed by Meyer, Srinivas, Lal, and Topolnytsky (2007)) that, while all three dimensions would relate positively to compliance with the requirements of change, only affective and normative commitment would lead to higher levels of support. Building on Hill et al. (2012) and empirical studies that in fact showed that continuance commitment to change either had no or only a very weak impact on attitudinal and performance outcomes (Bouckenooghe, et al., 2015; Turner Parish, Cadwallader, & Busch, 2008), we focus on affective and normative commitment to change in this study. Affective commitment to change is defined as the “desire to provide support for the change based on a belief in its inherent benefits” and normative commitment to change as “a sense of obligation to provide support for the change” (Herscovitch & Meyer, 2002, p. 475). Various researchers highlighted the overall importance of actions taken by leaders during change (Balogun & Johnson, 2004a; Huy, 2002). Hill et al. (2012) identify two top management– related variables that strongly influence employees’ commitment to change: transformational leadership and top management communication. Transformational leadership includes articulating and presenting a clear vision, displaying charisma, motivating employees through inspiration and intellectual stimulation derived from exposing them to new and complex ways of thinking, and being considerate of their individual needs and desires (Podsakoff, MacKenzie, Moorman, & Fetter, 1990). Thus, transformational leadership is “important during times of change because of the ability of transformational leaders to engage followers and motivate them to support the leader’s chosen direction” (Herold, Fedor, Caldwell, & Liu, 2008, p. 353). Furthermore, transformational leadership fosters absorptive capacity, organizational learning and innovation (García-Morales, Lloréns-Montes, & Verdú-Jover, 2008). Cultural Distance and Change Management 8 Regarding communication during change initiatives, employees expect the top management team to deliver credible information about the type and consequences of change, as it is the top management team which usually determines the direction and scope of change initiatives (Gersick, 1991; Romanelli & Tushman, 1994). The top management team shapes the organization’s general communication style and credibility (Hill, et al., 2012; Pincus, Rayfield, & Cozzens, 1991). However, the role of leaders in developing high levels of affective and normative commitment to change, as well as the specific mechanisms through which employee attitudes and behaviours are affected during change, have been rarely examined (for an exception see Herold, et al.,