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Global Business Teams

Jan 01, 2006

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Research by Anil Gupta, Qing Cao

The growing cross-border integration of the world economy has brought an increased interest in the structure and dynamics of global business teams (GBTs). Not surprisingly, considerable literature on GBTs has focused on the challenges that such teams face and how mechanisms such as team empowerment can foster effectiveness. Few researchers have systematically examined the strategic reasons why senior executives within a multinational corporation (MNC) create GBTs in the first place and how different types of GBTs can impose different motivational structures and coordination challenges.

Anil Gupta, Ralph J. Tyser Professor of Strategy and Organization and Qing Cao, PhD student in the management and organization department, address the strategic and organizational challenges surrounding GBTs in their paper “The Strategic Embeddedness of Global Business Teams.” Gupta and Cao define GBTs as intra-company work teams consisting of members from multiple countries working on a task that also spans multiple countries. They focus on the individuals comprising the team but also on the strategic context within which each team is embedded in order to more fully understand the antecedents and consequences of internal team dynamics.

“The fact that MNCs exist chiefly for their ability to ensure coordination among subsidiaries located in different countries does not suggest that every unit must be directly dependent on every other unit or that all interdependencies need to be of the same type,” says Gupta.

Gupta and Cao describe three different types of GBTs: P-type, whose goal is primarily to create value by leveraging pooled interdependencies; S-type, in which the GBT is engaged largely in managing scheduled (or sequential) interdependencies; and R-type, which deal with reciprocal interdependencies.Gupta and Cao argue that different types of GBT differ from each other in the alignment of incentives, which influences team members’ level of commitment and motivation tocooperate and the alignment of activities which poses varying degrees of coordination challenges. The authors also examine how differences in GBT type can affect team identity, swift trust, team faultlines, and team-based rewards, all of which can reinforce or weaken members’ motivation to help the team succeed.

The authors postulate that variations in global strategy will have an effect on the extent to which the MNC relies on different types of GBTs. According to the authors, GBTs will be most used by firms pursuing a transnational strategy (such
as Hewlett Packard) where the firm’s value chain activities are geographically dispersed. Direct ties representing a mix of pooled, sequential and reciprocal interdependencies exist in these units. At the other end, the use of GBTs will be lowest in MNCs such as Marriott pursuing a multi-domestic strategy where the entire business model is virtually replicated across countries and interdependencies among the units in such MNCs is largely of the pooled kind. Firms such as Mercedes- Benz, which concentrate most activities in one country and export from this home base to sales affiliates in other countries, are likely to fall somewhere in between Hewlett Packard and Marriott.

GBT type has a moderating impact on the relationship between various coordination
mechanisms and team effectiveness. Gupta and Cao argue that self-management
will have the highest positive impact on team effectiveness in the case of

"Differences in GBT type can affect team identity, swift trust, team faultlines, and team-based rewards, all of which can reinforce or weaken members’ motivation to help the team succeed."

R-type GBTs. Accordingly, hierarchical centralization of decision-making in R-type GBTs is likely to result in reduced sharing of tacit knowledge and delay the speed of mutual adjustment. On these grounds, self-management should be particularly beneficial for R-type GBTs. The authors also propose that richness of communication links, which should match the complexity of required coordination, will have the weakest effect on team effectiveness in the case of P-type GBTs. P-type GBTs generally face significantly lesser coordination complexities than either S-type or R-type GBTs.

“Our study has yielded valuable insights on the internal dynamics of global business teams. First, we have shown that it is particularly critical to take into account the effect of the broader strategic and organizational context in analyzing team dynamics. Second, to the extent that interdependencies can vary in terms of type and extent, this concept needs to be incorporated into studies of all types of teams,” says Cao.

Gupta and Cao’s work is the winner of the Best Paper 1st Runner-Up Award in the Annual Meeting of Academy of International Business in 2005. Gupta is the co-author (with Vijay Govindarajan) of The Quest for Global Dominance: Transforming Global Presence into Global Competitive Advantage (Jossey-Bass, 2001).

For more information about this research, please contact agupta@rhsmith.umd.edu.

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