Chapter 2: The Case Of Executives’ Cultural Intelligence In Behavioral Strategy: An Introductory Essay and a Research Agenda

The field of behavioral strategy incorporates psychological factors in the theory and practice of strategic management. The rapid pace of globalization, the increasing internationalization of small and large organizations, and the accelerating rate of international business transactions have made executive cultural intelligence (CQ), defined as an executive’s ability to act effectively in culturally diverse settings, a key strategic competency that is missing from the behavioral strategy literature. This chapter shows that incorporating executive CQ into behavioral strategy will give it more theoretical substance and open up new opportunities to explore and investigate its potential. Drawing on this reasoning, I will discuss how studying executive cultural intelligence informs the theory and practice of behavioral strategy. I will also highlight several implications of this perspective for management education and finish the chapter with an agenda for future research in this area.

We may have different religions, different languages, different colored skin, but we all belong to one human race.

—Kofi Annan¹

No culture can live if it attempts to be exclusive.

—Mahatma Gandhi²

These quotes from Kofi Annan, the 7th UN Secretary-General, and 2001 Nobel Peace Prize Winner, and Mahatma Gandhi, the leader of Indian in-dependence, highlight the importance of acknowledging cultural differences and the rising importance of cultural diversity in today’s life. Cultural diversity is, in fact, ubiquitous in the business world and has occupied a central place in the management literature (Brislin & Kim, 2003; Cox & Blake, 1991; Groves & Feyerherm, 2011). Today’s managers are increasingly facing the challenge of dealing with cultural diversity, both inside and outside their organizations. There is no doubt that the failure of managers to embrace these internal and external diversities affects their strategic behavior and consequently jeopardizes the performance of their firms. The question is how the strategy literature can address this issue.

According to Nag, Hambrick, and Chen (2007) the field of strategy “deals with the major intended and emergent initiatives taken by general managers on behalf of owners, involving utilization of resources, to enhance the performance of firms in their external environments” (p. 944). Strategy therefore “rests on the assumption that the thoughts, feelings, and social relations of general managers influence the activities and performance of firms” (Powell, 2011, p. 1485). Given this realization, not only does manager behavior in culturally diverse ontexts matter in strategy but such manager behavior has also become more prominent than ever before in today’s diverse business landscape. As students of strategy, what we need to determine is thus not whether cultural differences matter to companies and managers, but rather what strategy theory can do to better understand this challenge and incorporate it into the theory and practice of strategic management.

Towards this end, I borrow the concept of cultural intelligence (CQ) (Earley & Ang, 2003; Earley & Mosakowski, 2004) from the organizational and social psychology literature and situate it in the sociocognitive texture of strategic management theory known as the behavioral strategy (behavioral strategy) (Powell, Lovallo, & Fox, 2011; Schrager & Madansky, 2013). CQ has been defined as “an outsider’s seemingly natural ability to interpret someone’s unfamiliar and ambiguous gestures the way that person’s compatriots would” (Earley & Mosakowski, 2004, p. 140). Evidence of the performance impact of CQ is accumulating across disciplines, such as cross-cultural management (Earley & Ang, 2003; Presbitero, 2016; Wood & St Peters, 2014), management education (Oliver, de Botton, Soler, &

Merrill, 2011; Rosenblatt, Worthley, & MacNab, 2013), and the leadership literature (Elenkov & Manev, 2009; Kim & Van Dyne, 2012; Maldonado & Vera, 2014), but surprisingly it has yet to break into mainstream research on behavioral strategy.

The purpose of this chapter, therefore, is to introduce CQ to the behavioral strategy community and to provide an outline for future research. Toward these goals, I provide a synthesized review of the field of behavioral strategy and argue for the important yet missing notion of CQ in debates about behavioral strategy. I discuss the origin, drivers, and potential benefits of CQ and suggest several ways it can be incorporated into the behavioral strategy literature. The chapter concludes with a suggestive list of research directions that can help researchers enrich and advance the applications of CQ in behavioral strategy.