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Conflict in multinational corporations: an integrative framework Susanne Blazejewski, European University Viadrina Wolfgang Dorow, European University Viadrina Abstract The paper proposes a comprehensive, integrative framework for conflict process diagnosis and analysis in MNC including the subprocesses of conflict generation and manifestation, conflict handling and effects. It pays particular attention to the multidimensional context of MNC conflict processes (local/national/transnational cultures, institutions and organizational structures) which in the conflict literature so far has been generally reduced to the value dimension of (national) cultural influences only. Results from past empirical studies and an ongoing exploratory research project are used to derive and critically discuss preliminary hypotheses on the multidimensional influences on each subprocess and so develop, on the basis of the proposed framework, an empirical research program on MNC conflict. Keywords: conflict, multinational corporations, micro-politics, diversity, culture, institutions Introduction Conflict is inherent in social interaction and a constitutive element of organizational life, its burden but also its driving force (Pondy, 1997). While this holds for any kind of social organization, small or large, local or diversified, research shows that conflict potentials can be expected to rise in multinational corporations (MNC). Since MNCs by definition accommodate a range of diverse subsidiaries in different regions of the world and a multitude of stakeholders following their own, often local agenda, they are particularly prone to high levels of organizational conflict. “Frustration and conflict”, according to Tjosvold (1999:233), are “prevalent in parent-subsidiary relationships”, especially when, as in the case of MNCs, these “subsidiaries are based in different countries with diverse cultures”. The current attempts of MNC to closer integrate and coordinate their organizational networks transnationally, i.e. to increase communication and control across borders, will further aggravate the problem (Mead & Jones, 2002) between headquarters and subsidiary but, within the integrated network of today’s MNCs, also laterally among international subsidiaries. Whether between organizational units of the MNC or within international working teams, physical distance and cultural differences tend to worsen existing conflict potentials (Joshi et al., 2002; Roth & Nigh, 1992) or even generate additional conflicts (Earley & Laubach, 2002). Empirical studies demonstrate that cultural heterogeneity in MNC working teams leads to higher levels of, and more intense, interpersonal conflict (Ayoko et al., 2002; Tsui et al., 1992; Jehn et al., 1999; Chevrier, 2003), or at least increases the likelihood of conflicts becoming manifest (Joshi et al., 2002; Armstrong & Cole, 1996; Gibson & Zellmer-Bruhn, 2000). Compared to culturally homogeneous groups, diverse working teams “suffer more conflict, higher turnover and more communication difficulties” (Ayoko et al., 2001; see also Jehn et al., 1997; Tsui et al., 1992; Ayoko et al., 2004). According to some authors (Gilbert, 1997; Adler & Graham, 1989; Moran et al., 1993; Ayoko et al., 2002) culture-based conflicts are the most frequent and problematic form of MNC and workgroup conflict. It is one of conflict research’s most often cited claims that the consequences of conflict in organizations are at least ambiguous. Without referring to the particularly conflictual situation

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of MNC, Deutsch (1985) has early on identified dysfunctional (inefficiencies, costs of conflict handling etc.) as well as functional (prevention of stagnation, external conflict increases internal cohesiveness etc.) effects of social conflict. Van de Vliert and others (Van de Vliert & De Dreu, 1994; De Dreu & Van de Vliert, 2000; Pelled, 1996; Jehn, 1997) have extensively researched under which circumstances diversity leads to either positive or disruptive conflict outcomes. In multinational, culturally diverse contexts, the likelihood of dysfunctionality of conflicts is generally expected to increase. As Northrup (1989) argues, identity-related conflicts, i.e. conflicts involving self-definition and cultural issues, run a greater danger of becoming intractable. Cultural diversity also inhibits trust building among workgroup members (Ayoko et al., 2004) which could reduce dysfunctional conflict processes. Failing to equip employees with the skills to deal with diversity and build up trust across cultural divides thus runs the risk of promoting destructive conflict, eventually resulting in reductions of performance, increased turnover, absenteeism, and dissatisfaction (Hambrick, 1994; Härtel & Fujimoto, 1999; Fujimoto & Härtel, 2004). As Adler and others (Adler, 1986; Cox, 1993; Raghuram & Grud, 1996; Sackmann, 1997; Chevrier, 2003) have repeatedly argued, diversity and conflict in international business therefore need to be actively and effectively managed in order to prevent disruptive consequences. Only then might cultural diversity turn into a key asset of MNCs. In order to manage conflicts in a diverse, multinational context effectively and proactively, we first of all need to understand how these conflicts arise, how and why they unfold, what their effects are and how they are handled in an international environment. This paper therefore proposes a comprehensive, integrative framework for conflict process diagnosis and analysis in MNCs including the subprocesses of conflict generation and manifestation, conflict handling and effects. It pays particular attention to the multidimensional context in which MNC conflicts unfold and carefully delineates the manifold potential influences of these multiple context variables on each of the conflict subprocesses as reported in the literature and by drawing from an exploratory, qualitative study on conflict processes in MNCs located in Germany, Japan and the USA. In this way, we wish to not only present a conceptual framework for conflict analysis but also to develop the basis for an empirical model of intercultural conflict in MNCs which integrates existing (partial) theories from the conflict literature. In the following paragraphs we first identify key elements and influences of MNC conflict in order to understand core requirements for any comprehensive model in this field. We then briefly review the existing literature on conflict, particularly in intercultural contexts, before we introduce Dorow’s (1978/1982; Dlugos et al., 1993) micro-political conflict framework as a suitable basis for the development of a holistic, integrative model of MNC conflict. The main part of the paper provides a systematic analysis of the multiple cultural, institutional and organizational influences on each of the conflict subprocesses (generation, manifestation, handling, outcomes) as the starting point for an empirical research program on MNC conflict. The limitations and potential further development of the proposed framework are addressed in the concluding section. Conflict in MNCs: essential model requirements Any model of conflict in MNC needs to take account of the complexity and multidimensionality of the phenomenon. Potential conflict areas do not only include the extensively researched relationship between headquarters and subsidiaries (Doz & Pralahad, 1981; Pralahad & Doz, 1992; Roth & Nigh, 1992) but also the relationship between

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MNC-units and their external stakeholders (Galdwin & Walter, 1980/1992), between different subsidiaries, which according to Joshi, Labianca and Caligiuri (2002) might even be the most critical conflictual field, as well as inside each organizational unit of the MNC among local staff or between local staff and expatriates or headquarters-oriented subsidiary management. Interface management or “boundary spanners” such as subsidiary managers are “at the center of the strategic tension between conflicting demands on the MNC for global integration and national responsiveness” (Roth & Nigh, 1992:278) and are expected to experience “greater amounts of conflict” (Roloff, 1987:501; see also Joshi et al., 2002; Thomas, 1992). Similarly, members of international project groups or globally dispersed teams (Joshi et al., 2002) within MNCs are subject to higher levels of intercultural stress and conflict. A comprehensive framework for conflict analysis has to consider all these different areas of potential conflict in MNC, but, even more importantly, it also needs to take into account the dynamic linkages between the different conflictual fields. As we will demonstrate below, conflicts in MNCs can escalate across unit boundaries, e.g. cascade down from headquarters to local subsidiaries or relocate from one subsidiary to another. Conflict within an international project team might, for example, trigger a new conflict within respective subsidiary units, or an external conflict of the MNC might turn into a fully-fledged internal dispute. Figure 1: The multidimensional context of MNC conflict Apart from the multiple areas of conflict in MNCs, complexity is added by the multidimensional context in which MNC conflicts unfold (figure 1). The impact of “the larger social context” (Deutsch, 1971) on conflict processes in general has long been recognized

Country B Country A

National institutions Societal culture

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MNC: mutual structure and org. culture

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values

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holders

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(Lewicki et al., 1992; Avruch, 1991) but so far empirical models in particular tend to focus on selected aspects of the conflict context. In fact many studies addressing conflict in its international dimension concentrate on the impact of national cultural differences on conflict, as operationalised by Hofstede’s (1997/2001) or Schwartz’s (1992/1994) value scales. Value differences on the national level are, however, only one factor influencing conflict behavior in MNCs. Only recently has the investigation of the more proximate institutional environment (Whitley, 1992; Peng, 2002) gained new momentum. Even though, to our knowledge, there is so far no detailed analysis of macro-level institutional influences on micro-level conflict processes, we can expect that the existence of specific national labor laws, corporate governance regulations, capital markets and educational systems have a more immediate impact on conflict processes since they effectively determine the individual’s scope of action in conflict situations, establish sanctionable rules for conflict behavior and provide public channels and platforms for conflict handling. Since MNCs operate in multiple institutional environments, which have repeatedly been shown to resist international convergence (Harzing & Sorge, 2003; Whitley, 1992; Whitley & Kristensen, 1996), organizational actors are subject to diverse, potentially conflicting institutional pressures (Westney, 1993; Kostova & Roth, 2002) which might create ambiguity in MNC conflict processes. Transnational institutions for disputing resolution in international business such as the ICC Paris are specifically designed to reduce institutional ambiguity in conflict and are recently gaining in importance (Keller & Platzer, 2003; Lehmkuhl, 2003; Whitley, 2003). Already ninety percent of all cross-border contracts contain a transnational arbitration clause (Whitley, 2003). While transnational arbitration procedures predominantly concern inter-organizational conflict, i.e. between the MNC and external partners and stakeholders, transnational institutionalization also directly affects internal MNC conflict processes, e.g. through the establishment of European or worldwide works councils or transnational unions (Keller & Platzer, 2003). In addition to the macro environment of societal culture and national institutions, organizational level formal and informal structures are key constituents of the conflict context of MNCs. According to Thomas (1992), organizational, not national cultures are often the dominant source of a specific conflict style. Similarly, Earley and Laubach (2002) and others (Mead & Jones, 2002; Ayoko et al., 2004) emphasize the impact of informal structures, communication networks, shared organizational values, commitment, and identification with the organization or workgroup on conflict processes. A culture of trust within the organizational unit is expected to facilitate collaborative conflict handling and reduce dysfunctional conflict outcomes (Johnson & Cullen, 2002). Organizational structure, hierarchy, division of tasks, internal control and coordination mechanisms are more formal elements of the organizational context that determine conflict generation and conflict management (Thomas, 1992; Earley & Laubach, 2002). As Joshi, Labianca and Caligiuri (2002) rightly point out, even in international project teams not all conflicts arise from culture or identity-related issues but also from decision-making structures or workflow, and would also occur in culturally homogeneous groups. The influence of organizational structure is not to be underestimated in conflict situations: formal responsibilities, hierarchies, and the resources attached to respective positions within the chain of command are crucial sources of power in the organizational context and largely determine the impact of handling strategies applied in interpersonal conflict situations (Kolb & Putnam, 1992; Earley & Laubach, 2002). This meso-context is especially important in MNC conflict because MNCs, despite substantial differences in national institutional environments and societal cultures, increasingly establish mutual, cross-cultural and cross-national

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organizational structures (e.g. global business units). They also try to develop elements of a MNC mutual corporate culture (Edström & Galbraith, 1977; Baliga & Jaeger, 1984; Bartlett & Ghoshal, 1998; Martinez & Jarillo, 1989) in order to prevent intra-MNC conflict or at least better channel, integrate and harmonize conflict handling procedures across subsidiaries. On the micro-level, structural, cultural, and institutional influences shape (and are re-confirmed by) legitimized practices (Sheppard, 1992; Kostova & Roth, 2002) of individual conflict management. They largely determine, on the one hand, the individual’s available scope of action in conflict situations (without precluding strategic choice within the available scope of action), and, on the other hand, shape individual values and cognitions. They thus define patterns of perception, expectation and evaluation in conflict situations, provide norms of acceptability and internalized routines of legitimate or adequate conflict behavior in specific contexts. In this way, macro- and meso-levels of cultural and institutional-structural contexts take effect on the micro-level of interpersonal conflict behavior and therefore need to be included as key factors in any kind of comprehensive conflict model or theory (Sheppard, 1992). In addition, several studies have shown that micro-level conflict processes are also influenced by more immediate, situational variables such as the interpersonal history of the conflict parties or task routineness (Pelled et al., 1999; Ayoko et al., 2004; Mead & Jones, 2002). Apart from the conceptualization of key macro-, meso-, and micro-level contextual influences on conflict in MNCs Lewicki, Weiss and Lewin (1992) stress the need to include all elements of the conflict process, from its causes and triggers to its outcomes, as well as different strategies of conflict management into the conflict model. They thus demand that studies go beyond most cross-cultural conflict research which, as we show below, is often limited to communicative handling procedures only. Along with Avruch (1991), they also underscore the need to turn away from normative approaches to conflict management (e.g. Fisher & Ury, 1981) which still proliferate in the conflict literature. On the one hand, conflict causes and triggers must be fully understood before developing recommendations for suitable conflict management techniques. On the other hand, many normative models have been developed from a “Western-inflicted perspective” (Avruch, 1991:9) and thus might not be transferable to other cultural contexts or the intercultural conflict situations in MNCs. Lewicki, Weiss and Lewin (1992), in addition, plead for the development of empirical rather than conceptual models and the integration of existing theories of conflict into any new framework. Accordingly, the integrative conflict model presented below draws heavily on existing concepts of conflict and is specifically designed as the basis for future empirical studies on conflict in MNCs. A brief review of conflict research The existing models from the conflict literature only partially fulfill these basic requirements. Table 1 gives an overview of essential conceptual and empirical approaches using two core dimensions of conflict in MNCs: The first dimension corresponds with our demand for a comprehensive process perspective on conflict which analytically distinguishes between conflict generation and manifestation, conflict handling and outcomes. The second dimension is adopted from Avruch and Black (1991) who, even though they refer to conflict handling only, differentiate between intracultural, cross-cultural, intercultural and transcultural models in conflict research1. In an expanded review of the literature, it might be helpful to consider additional dimensions such as the level of analysis (micro, organizational, societal level conflict; Roloff, 1987; Sheppard, 1992), the methodological approach (empirical or

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conceptual) and the scientific paradigm (Lewicki et al., 1992, who focus their review on descriptive versus normative conflict approaches). Due to limited space in this paper we will refer to these important additional criteria only in passing. Please note also that because this is a work in progress we do not claim the list of authors included to be in any way exhaustive or representative. - insert table 1 about here - Even a cursory glance at table 1 leads us to three immediate conclusions regarding the organizational literature on conflict. Across the Avruch/Black-dimension it shows a clear focus on conflict handling – particularly in cross-cultural conflict research –, often at the expense of an in-depth understanding of the generation, manifestation, and effect elements of the conflict process (Lewicki et al. 1992). The coverage of all elements of the conflict process remains confined to intracultural approaches, that is, to models and concepts that do not explicitly address the influence of cultural or institutional diversity on conflict but tend to implicitly assume cultural homogeneity. Finally, it is important to note that the column on intercultural approaches, that is, the most relevant aspect for MNCs in which, by definition, actors from different cultural backgrounds within a joint organizational network interact closely on a regular basis, is dominated by research on organizational diversity that does not necessarily refer to cultural diversity or only investigates selected elements of the conflict process. In addition, none of the authors addresses the complexity of the conflict context in MNCs which, apart from different cultural values on the societal level, is also subject to more immediate influences of the institutional context and organizational structures. We can therefore support Avruch and Black (1991:37) in their conclusion that “for all this apparent activity, we nevertheless feel that the intercultural perspective is quite underdeveloped”. We now turn to some of the more influential authors from each research cluster to discuss their limitations – as regarded from an MNC-conflict perspective – in more detail and, at the same time, identify important partial insights from these theories which we might integrate into a more comprehensive model of MNC conflict. From the tradition of cross-cultural research, Thomas and Rahim and subsequent researchers applying their MODE- or ROCI instruments respectively (Thomas & Kilmann, 1974; Thomas, 1976; Rahim, 1983; Kozan, 1989; Ting-Toomey et al., 1991; Rahim & Blum, 1994; Elsayed-Ekhouly & Buda, 1996; Morris et al., 1998) exhibit both in their conceptual and empirical contributions a clear focus on conflict handling. Culture, operationalised by Hofstede’s (1997/2001; see e.g. Ting-Toomey et al., 1991; Rahim & Blum, 1994; Chiu & Kosinski, 1994; Elsayed-Ekhouly & Buda, 1996) or Schwartz’s (1992/1994; see e.g. Kozan, 2002; Kozan & Ergin, 1999) value dimensions, is treated as the core variable influencing different styles of conflict management. Beyond this, the complex process of culture-dependent conflict generation and outcomes are not discussed. The perspective in cross-cultural conflict research is comparative, that is, empirical studies from this stream of literature identify different styles of conflict management arising from different societal cultural contexts (which implicitly are assumed to be internally homogeneous) across countries or regions. The typical situation of the MNC in which heterogeneous cultures and conflict styles actually clash in intra-organizational interaction processes is not among the topics investigated, or subject to an implicit, underlying assumption that conflict styles do not change from a cross- to an intercultural situation (Ting-Toomey, 1999). Apart from Ross’ (1993) anthropological study, cross-cultural researchers do also not conceptualize structural-institutional effects on conflict.

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The exclusive focus on ‘soft’ dimensions like values may also be responsible for the fact that many authors from this research tradition only include communicative forms of conflict management in their consideration (Gudykunst & Ting-Toomey, 1988; Kozan, 1989; Ting-Toomey et al., 1991; Rahim & Blum, 1994; Elsayed-Ekhouly & Buda, 1996; Morris et al., 1998; Ting-Toomey, 1999; Gelfand & McCusker, 2002). This is at the expense of structural or third party conflict handling mechanisms which in the dispersed network of the MNC that does not facilitate close and continuous personal interaction across subunits, might play a particular role. In contrast to the comparative orientation of cross-cultural conflict research, the literature on diversity in workgroups (Cox, 1991; Jehn, 1997; Pelled et al., 1999; Jehn et al., 1999) focuses on actual interaction processes among individuals from different social backgrounds. Interestingly, diversity research also differs substantially from cross-cultural approaches in its clear concentration on types of conflict (task and emotional) and conflict outcomes. The different styles and instruments of conflict handling are often excluded from consideration or investigated by different authors using differing conflict frameworks. Regarding intercultural conflict handling, for example, table 1 refers to some studies (Glenn et al., 1977; Anand, 1981; Cohen, 1987) from the political science research tradition on diplomatic negotiation. However, these do not easily translate into the context of the large scale multinational business environment. For our purposes, diversity research is particularly relevant because these authors – in contrast to the general performance criteria used in the MNC literature – more sophisticatedly distinguish between a whole list of negative or positive conflict effects including workgroup productivity, satisfaction level, relationship effects, morale and commitment (Jehn et al., 1999) or problem solving ability, decision quality, anxiety and hostility (Pelled et al., 1999) as potential outcomes of conflict processes in workgroup settings. With regard to our area of interest we have to note, however, that diversity in this type of research does often not refer to cultural diversity in an international setting which would be particularly important in MNC contexts, but to demographic diversity (age, gender, race, marital status, functional area, tenure). The more recent literature on international or geographically dispersed teams (GDT), which we also placed in the intercultural tradition, is free from this limitation and therefore even more relevant to the topic discussed in this paper. In fact, GDTs mirror the situation of MNCs in miniature because they are, as MNCs, characterized by cultural diversity and geographic dispersion and, at the same time, are required to coordinate their activity across national and cultural boundaries in order to achieve a mutual organizational objective. So far, however, this growing stream of literature has not yet produced a comprehensive model on intercultural conflict. Joshi, Labianca and Caligiuri (2002) are, for example, still more concerned with an analysis of where in a dispersed network conflicts arise and less with how these conflicts unfold, how they are managed, and with which results. In addition, authors focus on international teamwork only, i.e. on conflict that arises in a context of small groups with close interaction, a limited timeframe and often gathering specialists who might use a common jargon across national boundaries. Despite these restrictions, we can draw an important implication from their study: Joshi, Labianca and Caligiuri particularly emphasize the importance “of the broader social structure in which the relationship is embedded” (Joshi et al., 2002:282), i.e. of the structural-institutional, not only the value differences as determinants of conflict processes. As already stated above, researchers from the group of intracultural approaches (Pondy, 1967; Dorow, 1978/1982; Krüger, 1981; Berkel, 1992; Thomas, 1992; Rubin, 1994; Wall &

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Callister, 1995; Kollmannsperger, 2000; Rahim, 2002) do not explicitly take into view the problems and consequences of conflict in culturally and institutionally diverse contexts. In addition, most contributions selected here are rather conceptual in nature2 even though the models developed, for example, by Blake, Sheppard and Mouton (1964) and Thomas (1992) serve as the bases for subsequent empirical studies. Apart from Wall and Callister (1995) who collect exhaustive, overly long, unstructured lists of causes of conflict, instruments for their management and potential outcomes of rather uncertain practical benefit, several authors present comprehensive structural or typological models that also serve the theoretical objective of complexity reduction. In the tradition of Pondy (1967) many concepts from the intracultural research tradition cover all the core elements of the conflict process – conflict generation, manifestation, handling and outcomes – although different authors use a different terminology and different subdivisions of these elementary conflict stages. Whereas Thomas (1992:658), for example, distinguishes between subphases of “conflict awareness”, “thoughts and emotions”, “intentions” and “actual conflict behavior” before conflict management activities intervene and produce a certain conflict “outcome”, Pondy (1967:306) sees a need to split up conflict generation into the subprocesses of “latent”, “felt”, “perceived” and “manifest” conflict with a resultant “conflict aftermath”. Most authors, however, agree on using the term “conflict episode”, as coined by Pondy (1967), when they refer to a pattern of conflict generation, conflict management and conflict outcome phases, although the conceptualization of each element can vary considerably. Similarly, most authors pay attention to the possible results of a conflict episode. These might not only include different aspects of task-related dysfunctional or functional consequences of conflict, but also long-term effects on the opponents’ relationship (Pondy, 1967) or changes in the structural conditions of the conflict environment which can lead to an escalation of the conflict episode (Thomas, 1992; Wall & Callister, 1995) or create double-loop learning effects for the organization (Rahim, 2002). Even though most episodic conflict models contain such a feedback-loop between conflict effects and conflict generation, only very few present conflict as a really dynamic, multilevel process. We can in fact distinguish ‘closed’ episodic models which limit their perspective to conflicts between a fixed, dyadic set of actors or around a certain conflict issue that may aggravate and eventually escalate into new, more serious rounds of (the same) conflict (Pondy, 1967; Thomas, 1992; Wall & Callister, 1995)3, and an ‘open’, multilevel process perspective. This later perspective allows us to view conflict as a dynamic, open process that may entail the transfer, relocation or expansion of one conflict issue into other issues and, even more importantly, onto different organizational levels and different organizational actors. As we will argue below, the structural model developed by Dorow (1978/1982) provides a suitable basis for such a multilevel approach to conflict. Regarding the remaining category from table 1, we exclude transcultural theories from further consideration in this paper. These approaches predominantly aim at the development of conflict handling mechanisms applicable across cultures, for example, Gilbert’s discourse ethics (1997), and are mostly normative in orientation. Recommendations for management practice, however, first of all require a systematic analysis of intercultural conflict processes as a solid basis which is the core interest of the paper presented here. This review of main contributions from the literature on organizational conflict leads us to the conclusion that even though many promising partial theories exist, none covers all the relevant aspects of MNC conflict, particularly a consequent process perspective combined with an intercultural and inter-institutional approach. As a first step towards an integrated,

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comprehensive model of MNC conflict, we therefore propose an extension of Dorow’s (1978/ 1982) process framework by a conceptualization of the multidimensional conflict context of the MNC. A micro-political framework for MNC conflict The model developed by Dorow and colleagues (Dorow, 1978/1982; Dlugos & Dorow, 1992; Dlugos et al., 1993) presents a micro-political approach to conflict: it focuses on individual interests and individual political, power-based strategies in conflict processes. As demanded by Lewicki and others (Lewicki et al., 1992; Grunwald & Redel, 1988; Rahim, 2002), it includes and systematically distinguishes between the elementary conflict subprocesses of conflict generation and manifestation, conflict handling and conflict outcomes. The structure of the model is concise and decision-oriented and therefore allows not only for a systematic analysis of empirical conflict processes but also provides a reference framework for more effective decision-making in real conflict situations (Dorow, 1978). In its original outlay, similar to most other process models of conflict from the organizational literature, an intercultural or inter-institutional perspective is not explicitly included, but since, in general, contextual influences on the individual scope of action and on individual cognitions are important elements already in the basic framework, we can easily expand the model in this respect. Figure 2: The MNC conflict process In order to serve as a comprehensive framework for MNC conflict, we therefore propose three extensions of the original model: the conceptualization of the multidimensional context

b

Conflict generation

Conflict manifestation

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Conflict effects

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1. order

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of MNC conflict, a clear focus on intercultural conflict (versus comparative cross-cultural conflict perspectives) as one of the key challenges in MNCs, and the inclusion of multilevel conflict effects, i.e. the potential escalation or cascading down of conflict across MNC subunits. We now briefly describe the core elements of the extended conflict framework (figure 2). (i) Multidimensional context: Conflict in MNCs emerges and its subprocesses – generation, manifestation, handling, outcomes – unfold within the complex, multidimensional cultural, institutional and organizational context described above (figure 1). On the micro-level, the structural and institutional dimensions of the meso- and macro-context determine the individual scope of action in each interaction situation and which of the potentially available alternatives for action are perceived as legitimate, acceptable and adequate. Cultural values and internalized norms function as a filter for individual patterns of preferences, perception, interpretation and behavior in conflict situations which, accordingly, are molded differently in the different, heterogeneous cultural and institutional environments of local MNC subunits. In intercultural conflict processes individual cognitions and perceived scopes of action are therefore expected to differ among conflict actors4. (ii) Conflict generation and manifestation: Conflict arises when individual interests and scopes of action collide in social interaction (Dorow, 1978; Dlugos & Dorow, 1992; Joshi et al., 2002) and this collision is perceived by at least one of the actors involved. As described above, the formation of personal interests, preferences, and perceived scopes of action evolve within a multidimensional cultural and institutional-structural context. From an analytical viewpoint5 the subprocess of conflict generation contains five elements which are all subject to cultural and institutional influences: (a) the perceived alternatives for action as delimited by the organizational structural context (hierarchies, tasks, rights) and as set and legitimized by the larger institutional context; the individual evaluation of these perceived alternatives for action based on individual cognitive patterns, values, and internalized norms, i.e. (b) the identification of consequences to be expected from each alternative action and (c) the evaluation of these expected consequences against the actor’s own preference criteria. In social interaction, the actors then (d) select a personally optimal, satisfycing alternative for action. In this way, all processes of interest formation and conflict generation contain a normative, evaluative component (Dorow, 1978) whereas other authors distinguish between different forms of normative and interest conflicts (Thomas, 1997; Krüger, 1981/1990). Conflict arises when (e) the implementation of one’s selected alternative impedes on or is hindered in its realization by another actor’s individual interests. The conflict becomes manifest when at least one of the parties involved perceives and acknowledges the conflictual situation. Again, individual processes of perception, interpretation, and framing of conflictual situations depend on internalized cognitive patterns which develop differently in different cultural and institutional environments. (iii) Conflict handling: Whereas cross-cultural conflict research is clearly focused on negotiative, communicative conflict handling (Blake et al., 1964; Rahim, 1983; Thomas/Kilmann, 1974; Ting-Toomey et al., 1991; Rubin, 1994; Rahim & Blum, 1994; Tinsley, 1997; Morris et al., 1998), we identify three different basic strategies of conflict management (Dorow, 1978/1982; Kolb & Putnam, 1992). (a) Communicative conflict handling: the party tries to modify the opponent’s cognitions, i.e. his/her interests, preferences and values by using communicative means such as persuasion, information, manipulation or threat. These instruments can only attain their objectives when the opponent (consciously or unconsciously) accepts the cognitive changes intended. (b) Structural conflict

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handling (Kilmann & Thomas, 1978: “contextual modification”): the party’s intervention is directed towards the opponent’s scope of action. Depending on the available power bases he/she restricts the opponent’s available alternatives for action by adjusting organizational structures, systems, hierarchies, responsibilities and regulations, so that the latter no longer has any choice but to act according to the acting party’s interests. In this way the conflict is handled even against the opponent’s will; force does not depend on the opponent’s acceptance. (3) Third party intervention (Thomas, 1992): each party can also call on a third actor (mediators, works council, court, colleagues) who on his/her part can again either apply communicative or structural means of conflict management. From an analytical perspective the selection of a certain conflict management style is structured analogously to the conflict generation phase. Again, each party has available a certain set of alternatives for action from which he/she selects a subjectively optimal alternative of conflict handling instruments against the background of his/her culturally and institutionally formed, individual preference criteria such as the avoidance of open, confrontational conflict, a culture-based consensus orientation, or a preference for third party judgments. In empirical conflict situations, actors tend to apply all three instruments in parallel or sequentially depending on their power bases, their conflict objectives and also on the reactions of the opponent. In addition, the respective cultural and institutional environment in empirical conflict situations will pre-form patterns for routine conflict management. As already described above, cross-cultural research has extensively investigated cultural differences in the usage of communicative strategies of conflict handling (Thomas/Kilmann, 1974; Rahim, 1983; Ting-Toomey et al., 1991; Rahim & Blum, 1994; Tinsley, 1997; Morris et al., 1998). Regarding structural and third party handling, or the effects of proximate institutions on conflict management similar results are not yet available. (iv) Power bases: Largely due to their communicative bias, hardly any one of the conflict models from our overview recognizes the importance of power in conflict processes. In our view, however, the effectiveness of a selected conflict management strategy essentially depends on the availability of adequate power bases and the relative distribution of power means among conflict parties (Dorow, 1982; Kolb, 1986; Gladwin & Walter, 1992; Bergman & Volkema, 1994). The actor can only successfully delimit his/her opponent’s scope of action when he/she has the necessary formal power bases (contractual rights, nominal goods etc.). Adequate personal power bases (expertise, charisma, know-how etc.), in turn, are critical for communicative conflict handling. In intercultural conflict situations, it is important to note, however, that what constitutes an adequate power basis, how it is applicable, accepted and acknowledged might differ among actors from heterogeneous cultural and institutional environments. For example, extensive technical knowledge might be a suitable power basis in a Germanic conflict context whereas in an US-American context expertise will only be accepted and effective as a power basis when coupled with personal charisma. The use of side-payments (formal power means) might be legitimate and acceptable in one cultural context but lead to moral outrage and conflict escalation in another environment. Power is clearly linked to the cultural and institutional context (Clegg, 1989). On the one hand the respective contexts produce patterns of usage, recognition and acceptance of certain power bases. On the other hand, institutional and structural contexts largely determine the relative distribution particularly of formal power bases among actors. Organizational structures, hierarchical positions, the allocation of budgets and responsibilities, or information asymmetries are important constituents of the power structure

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in MNCs. Through the process of conflict handling, power resources are consumed (e.g. nominal resources for side-payments), modified or re-distributed (e.g. through structural conflict handling), thus changing or re-confirming the power structure. Kolb and Putnam (1992) argue that conflict parties with less relative power bases tend to avoid and suppress open conflict with their more powerful opponents and in this way reproduce and institutionalize the existing power structure. (v) Conflict effects and outcomes: The conflict model developed by Dorow (1978) is one of the few that systematically distinguish between conflict handling strategies and the consequences resulting from the application of these strategies in a conflictual situation6. The extended model conceptualizes three different types of conflict effects or outcomes (figure 2): First order effects (episodic effects) include the immediate, single-loop effects on the parties involved resulting from their respective conflict handling initiatives. These comprise the (quasi-)solution of the conflict, i.e. compromise, consensus or enforcement of one actor’s position, the eventual change of interests of one (or both) of the actors achieved, e.g. through persuasion and manipulation, actors’ satisfaction, perceived fairness, effects on the relationship between the conflictual parties, quality and duration of the solution attained (Pondy, 1967; Thomas, 1992) as well as the costs associated with the conflict processes and the resulting consumption of power bases. For diverse workgroups Jehn, Northcraft and Neale (1999) and Pelled, Eisenhardt and Xin (1999) identify workgroup productivity, satisfaction levels, relationship effects, morale and commitment, decision quality, anxiety and hostility as potential core outcomes of conflict processes. Depending on the actors’ individual evaluation of these first order effects conflicts dissolve or escalate into new, more serious rounds. Although most authors from the conflict literature – provided they, contrary to most cross-cultural research, systematically address conflict outcomes at all – focus their attention on these immediate, first order effects, not even diversity researchers discuss the crucial influence of different cultural and institutional contexts on conflict outcomes and their evaluation. Like the subprocesses of conflict generation and conflict management, we suggest that conflict effects are subject to cultural and institutional influences: which consequences are perceived, how they are interpreted and evaluated, and, particularly, according to which criteria they are evaluated depends on the specific context. We will demonstrate in more detail below that, e.g. Asian cultures tend to evaluate conflict outcomes using the culturally important criterion of ‘preservation of face’ whereas US-American conflict participants are more interested in ‘personal satisfaction’ as a dominant criterion for outcome evaluation. The same conflict outcomes will thus be evaluated differently by actors from diverse cultural and institutional environments. Second order effects of conflict are hardly ever discussed by the conflict literature so far and denote conflict effects which go beyond the single episode. Second order effects arise, e.g. when structural conflict handling is applied and not only produces immediate episodic outcomes such as a solution of the problem at hand but also affects the larger structural, institutional or cultural context in which the conflict episode unfolded (Sheppard, 1992). These double-loop effects occur, e.g. when due to an employer-employee conflict episode management decides to install a new incentive system for the entire organizational unit (structural conflict handling) in order to prevent similar conflicts in the future. Similarly, second order effects come about when the conflict episode leads to a reassessment, change or confirmation of general social norms (Coser, 1956).

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Third order effects are – in theory and practice - among the generally overlooked, unintentional, peripheral and therefore particularly dangerous effects of conflict outside of the original conflict cycle. Conflict management in conflict cycle I (figure 2) changes the cognitions, interests and scopes of action of the conflictual parties involved. These adjusted interests and scopes of action may now, in turn, provoke collisions with the scope of action of other actors which reside outside the original conflictual field. In addition, wide-ranging structural changes which are established in conflict cycle I in order to prevent future conflicts in this same area can also induce a change of conflict constraints and context in conflict cycle II. Particularly in MNCs, where we find partly overlapping institutional and cultural contexts, for example elements of a mutual organizational culture, joint decision structures or shared systems (reporting, HR, information systems etc.), can conflict handling procedures in one subunit produce unexpected side effects and even new conflicts in other subunit. For example, a conflict between a MNC headquarter and home-country external stakeholders might lead to the formulation of a new corporate governance policy for the entire company as a means of handling this particular, local conflict (conflict cycle I). When the policy is implemented across the entire MNC as a result of this first conflict process, it might trigger new conflicts (conflict cycle II) in local subsidiaries because those need to function in and adapt to a completely different economic, political and socio-cultural environment. In this way, conflicts cascade down through different levels or units of the MNC, involving new and multiple actors and also new, unexpected conflictual issues. The outcomes of these transferred, localized conflicts, particularly the costs of local conflict handling, for their part, eventually produce repercussions on the original conflict process and can seriously diminish the positive core effects of conflict handling initiatives applied there. It now becomes apparent why a model of MNC conflict requires a stringent process perspective that, as the proposed framework here, allows for the systematic analysis of such side effects and in this way also helps organizational members in practice to identify and estimate potential multilevel effects of conflict in culturally and institutionally diverse environments which previously have often gone unnoticed. Conflict in MNCs: towards an empirical research program Based on the framework and the delineation of the multidimensional context of MNC conflict, we now want to identify in more detail potential influences of heterogeneous cultural, institutional, and organizational contextual factors on each of the core elements of the conflict process. By drawing from an exploratory study on MNC conflict7 and by integrating other partial theories from the conflict literature we hope to lay the groundwork for a comprehensive empirical research program on conflict in MNCs. (i) Conflict generation: In accordance with Deutsch (1985) and Coser (1956) the model stresses the importance of diagnosing the underlying conflict which, particularly in the intercultural and cross-cultural research on conflict, has been conspicuously neglected. From the framework we can derive the following core diagnostic questions to be asked in an empirical MNC conflict situation: Who are the conflictual parties involved? What are their interests and objectives concerning the conflictual issue? What are the key influencing factors behind these interests and objectives of each actor? Regarding this last question, it is essential to detect whether the causes and triggers of the specific conflict are based on cultural factors (differing values, norms, expectations) or instead relate to the organizational structures in place. As Ayoko et al. (2004; Ayoko & Härtel, 2002) discover in their empirical study, fifty percent of the conflicts in heterogeneous workgroups are triggered by cultural

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differences. At a first glance, this figure seems quite high, but on the other hand it also contains the information that half of the conflicts in culturally heterogeneous teams are not immediately caused by value-related issues. As the model helps us to see, conflict in MNCs can also be triggered by structural and institutional delimitation and the eventual collision of individual scopes of action. Joshi, Labianca and Caligiuri (2002) point out that these types of conflict would also be present in culturally homogenous organizational environments and according to Krüger and others (Krüger, 1981; Kieser, 1983; Roloff, 1987; Bolman & Deal, 1991; Kieser & Kubicek, 1992) they are at least partly “built-into” the organizational structure. An empirical study on conflict in MNCs therefore would first of all have to understand how respective local institutions (legal norms, governance systems, shareholder orientations) and organizational structures (hierarchies, centralization/ decentralization, matrix- or team-structures, control systems etc.) impact on the individual scopes of action of each of the actors involved and so lead to conflict between them. Besides the scope of action the incompatible evaluations of perceived alternatives for action by the parties create causes of conflict. Ting-Toomey (1999; Gudykunst & Ting-Toomey, 1988) who focuses exclusively on value-related causes of conflict, points out in her research that different cultures (individualistic versus collectivistic cultures) hold different assumptions, expectations, and evaluation schemes leading to diverse individual interests and goal patterns and eventually to conflict when these diverse interests clash in interpersonal interaction. The link between culture and individual objectives is also stressed by Wildavsky and others (Wildavsky, 1987; Cox et al., 1991; Ross, 1993; Donnellon & Kolb, 1994; Earley & Laubach, 2002). Ayoko, Härtel and Callan (2002), for example, argue that “culture shapes our interaction goals”. In a later publication they continue that “[o]ur research has demonstrated that the triggers of conflict in culturally diverse groups are often related to cultural differences such as values, beliefs, and different interpretations of space. Interview respondents indicated that cultural differences underpinned member differences in work orientations and views of how individuals should interact with one another.” (Ayoko et al., 2004:165). Triandis and others (Triandis, 2002; Triandis & Bhawuk, 1997; Audia &Tams, 2002), for example, have shown that actors from collectivist cultures, by placing (in-)group goals ahead of their own personal interests, exhibit goal systems which are highly different from more individualistic actors and thus, in intercultural encounters, may become a cause for interpersonal conflict. From our own exploratory study we can present additional examples of interest divergence due to different culture-based cognitive schemes: In a multinational consumer goods company a conflict arose around product quality between the members of the Japanese subsidiary and the Swiss headquarter. While the headquarters tried to implement a standardized level of quality across its operations in order to reduce costs of adaptation worldwide, the Japanese managers argued that quality requirements and expectations were still substantially higher in the Japanese market. Due to their different cognitive patterns of perception, expectations and evaluation regarding product quality, conflict between the Japanese and the Swiss managers ensued. Similarly, members of the German and the US-American units of a German-based MNC pursued diverse objectives regarding customer orientation. Whereas for the US members of the organization customer orientation is a key, ingrained element of their cognitive theories-in-use, leading them to the immediate recognition of and willingness to adapt to their main customers’ wish for shorter lead time in delivery, the German management, with different culture-based goal criteria and less internalized norms such as ‘putting the customer first’, are more interested in global process

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standardization. The unresolved conflict has already started to affect the relationship between the US-employees and their local customer. Diverse interests as the basis for conflict generation thus arise from different cultural, institutional and structural contextual influences. It is important to note, however, that particularly in MNCs, despite the heterogeneity of local cultures and institutions, shared, mutual interests also evolve within the organization (Sheppard, 1986; Ting-Toomey, 1999). It would be the primary aim of further systematic empirical studies, by applying the proposed framework, to come up with a taxonomy of interest-based causes and types of conflict in MNCs which occur predominantly in particular constellations of cultural, institutional, and organizational contexts. Whereas usually conflict typologies are theoretically derived (Deutsch, 1985; Dorow, 1978; Krüger, 1981; Gudykunst & Ting-Toomey, 1988; Jehn, 1997) and often, as in the case of Jehn’s (1997) distinction between relationship and task conflict too rough and partially unsystematic (when conflict per se occurs in interpersonal interaction, all conflicts have a relationship component), an empirical taxonomy would allow us not only to test the existing typological models but also to explore multiple dimensions of conflict types including the kind of actors involved, work and performance orientations, group- or self-orientations of interests which can be directly related to the multidimensional contextual influences in MNCs. A substantiated taxonomy of conflict causes and types then gives us the possibility to eventually formulate more concrete hypothesis regarding the relation between conflict generation and contextual influences in MNCs. Are certain institutional constraints (shareholder orientation, tight labor markets, codified industrial relations) connected to particular types of conflict? Do certain types of conflict dominate in specific structural conditions (decentralized versus centralized organizations, matrix-, team-, or global SBU-structures etc.)? Do particular cultural-institutional constellations foster conflict generation between particular actors (superior-subordinate, subordinate-subordinate, expatriate-local etc.)? (ii) Conflict manifestation: Underlying conflicts caused by divergent interests only become manifest when the situation is perceived and defined as ‘conflict’ by at least one of the parties involved (Deutsch, 1971; Dorow, 1978; Klar et al., 1987; Thomas, 1992; Rahim, 2002). Even when there is no ’real’ or ‘objective’ incongruity of goals and objectives, e.g. when ends are shared in a working team, conflicts may occur simply due to misperceptions, misunderstandings, culturally divergent interpretations of the situation, stereotyping or selective information absorption and processing because actors perceive, interpret and define conflict on the basis of their culturally diverse cognitive schemata. Additional conflict potential thus may arise around the ‘right’ definition of conflict in an intercultural interaction process (Kolb & Putnam, 1992). The importance of patterns of perception and interpretation in conflict processes has generally been recognized by the conflict literature (Pondy, 1967; Deutsch, 1971; Jervis, 1976; Knudson et al., 1980; Krüger, 1981; Thomas, 1992; Gibson, 1996; Jehn, 1997; Ting-Toomey, 1999) even though empirical research on intercultural conflict manifestation is still rare and theories tend to be limited to the conceptualization of culture as the core influence on conflict cognitions (Merry, 1987; Klar et al., 1987; Gudykunst & Ting-Toomey, 1988; Northrup, 1989; Ting-Toomey, 1999; Gelfand & McCusker, 2003; Ayoko et al., 2004). While integrating these partial theories into our framework below, it is, however, important to notice that, by providing platforms and legitimate channels for conflict articulation, structural and institutional elements also have an impact on conflict manifestation processes.

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Drawing from existing theories and our own research we now describe potential influences of the cultural, institutional, and organizational context on three subprocesses of conflict manifestation – perception, framing and interpretation, articulation – as the basis for future hypotheses formulation in an empirical research program on MNC conflict. Perception or misperception of conflict is frequently related to language issues. While on the one hand, conflict is clearly connected to verbal and nonverbal communication (Roloff, 1987; Gibson & Zellmer-Bruhn, 2001), on the other hand communication patterns are closely dependent on culture (Segall et al., 1990; Ting-Toomey, 1999; Ayoko et al., 2004). In conflict situations, the relationship between language, culture and conflict leads to two main effects: Since intercultural conflict situations in MNCs involve actors from diverse cultural origins with presumably different native languages who, even though English, for example, functions as the MNC’s official mutual language, will often not be able to speak and understand it as a native speaker would, conflictual claims of their opponents might not be perceived at all or signals misunderstood (Gudykunst & Ting-Toomey, 1988; Tung, 1997; Ting-Toomey, 1999; Johnson & Cullen, 2002). In an empirical study conducted by Ayoko, Härtel and Callan (2002) 85 percent of informants agreed that language as such plays a crucial part in international workgroup conflict and that particularly English as a second, corporate language regularly creates misunderstandings and conflict potentials. But even when actors from diverse cultural backgrounds are able to communicate in a common language or use translators, meanings and concepts behind their words can differ considerably because their mental, perceptual models have been formed differently by differing language systems and differing cultural contexts. Complex concepts such as ‘conflict’ or also ‘trust’ (Ting-Toomey, 1999) evoke different mental representational schemes which, even when the same words are used, attach divergent meanings to them. Language, according to Ting-Toomey (1999:94) functions as a “prism” through which individuals perceive what is “out there” and through which they create and maintain their social and psychological realities (Gelfand & McCusker, 2002). The different conceptualizations of ‘conflict’ also become visible in our exploratory study. In interviews with Japanese MNC managers it turned out that the English word ‘conflict’ as such does not even have a Japanese equivalent. The translation into Japanese requires a precise qualification of the type of conflict (dispute, negotiation, warfare, quarrel etc.), each of which corresponds to different mental schemata. Comparing German with US-American concepts of conflict, interviewees from the German context tended to attach negative associations (and a resulting distancing attitude) in describing their perception of the German word ‘Konflikt’ whereas US-American interviewees used the English word ‘conflict’ more easily and freely and perceived it as a ‘normal’ social phenomenon (see also Tinsley & Brett, 1997). These different patterns of perception of ‘conflict’ can be expected to impact other elements of the conflict process and result, e.g. in different preferred strategies of conflict handling. Particularly, cultures with a negatively associated concept of conflict and higher perceptual barriers to conflict (Grunwald & Redel, 1988) can be expected to avoid open confrontation and to refrain from actively applying micro-political strategies of conflict management. Closely connected to perception, conflict interpretation and definition are core cognitive subprocesses of conflict manifestation. Theories of conflict framing (Mather & Yngvesson, 1981; Klar et al., 1987; Pinkley, 1990/1992; Tinsley & Brett, 1997), conflict attribution (Roloff, 1987; Joshi et al., 2002) and conflict metaphors (Gelfand & McCusker, 2002) contribute to a better understanding of conflict interpretation in intercultural situations. According to empirical studies by Pinkley (1990/1992) conflict frames, i.e. “the initial lens or interpretation of a

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situation, structure, or relationship that guides decision making and behavioral choices” (Pinkley, 1992:97), differ depending on conflict type and context along the dimensions of relationship/task, emotional/intellectual, and compromise/win. Avruch (1991:12) cites an empirical study in which conflict in one societal culture (Costa Rica) was framed as “cognitive and navigational in nature” while another culture (Santa Isabel) saw conflict as being “affective and rhetorically suasive”. Attribution theory, in turn, proposes that different culturally shaped cognitive schemes are responsible for individuals’ interpretation of conflict origins. Whereas actors from one culture attribute conflict to external causes, others see internal traits or dispositions as the causes of conflict (Roloff, 1987). On an another dimension, some people in intercultural situations tend to ascribe conflict to cultural differences whereas others will attribute the same conflict to some structural, e.g. workflow problem (Joshi et al., 2002). Again, how conflicts are framed, or which causes are attributed, is expected to influence handling strategies. The approach developed by Gelfand and McCusker (2002) focuses on the role of metaphors in negotiation processes. They argue that “negotiations are conceptualized through metaphoric mappings [which] have a constitutive function in negotiation […] in that they contain concepts for defining the subjective reality in negotiation (Gelfand & McCusker, 2002:299). Using a sports versus a family or military metaphor for framing and interpreting a conflict situation again affects the choice of conflict handling strategies because metaphors not only produce a set of ideas for interpreting the situation and defining its context and remove equivocality in social interaction but also provide scripts for adequate action at the situation at hand (Gelfand & McCusker, 2002). Empirical studies by Gibson and Zellmer-Bruhn (2001) show that in different cultural contexts different metaphors are used to describe teamwork situations; we would expect similar results in empirical studies on the use of metaphors in intercultural conflict situations. The importance of diverse interpretations of MNC conflict also becomes visible in the following examples from our empirical research: In the case of customer orientation reported above, the US-American informants defined the conflict as a customer-focus versus a process-standardization issue. The German managers, however, believed the ‘real’ cause to be the US-American subsidiary’s inability or unwillingness to accept that the formerly independent company had now become part of a global, centrally administered corporation. This difference in interpretative schemata led to slackness and inattention on the German side regarding the smoldering conflict which remains unresolved to date. Similarly, many of the MNCs included in our empirical study are currently trying to establish standardized systems of managerial performance evaluation. Whereas in the US-American subsidiaries the accompanying direct feedback talks or even 360°-feedback systems are perceived as largely unproblematic, they cause serious conflict escalation in the Japanese context where, as confirmed by the literature (Gudykunst & Ting-Toomey, 1988; Gelfand & McCusker, 2002), failure tends to be attributed to personal, internal causes. US-Americans, in turn, separate the person from the problem and thus do not see even negative feedback as an attack on their identity concept. The last subprocess of conflict manifestation to be discussed is conflict articulation. Do certain cultures refrain from voicing and thereby acknowledging conflict, even though they perceive and interpret the situation as conflictual? Or do actors openly express their conflictual claims? Do parties from different cultural contexts address even minor conflictual issues without delay and thus open the stage for active conflict management, or does a higher threshold of tolerance let them abstain from open acknowledgment although they

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perceive the conflictual interests of their opponents? Again, existing research focuses on the cultural determinants of conflict recognition and articulation (Gudykunst & Ting-Toomey, 1988; Ting-Toomey, 1999; Mead & Jones, 2002; Johnson & Cullen, 2002). Culture as conceptualized as high- versus low-context cultures and/or collectivistic versus individualistic cultures affect conflict articulation in two interrelated ways: On the first dimension, researchers argue that actors from low-context cultures tend to directly address conflicts in an explicit way whereas high-context actors avoid conflict manifestation or prefer indirect, evasive, implicit, also nonverbal styles of articulating their conflictual positions (Gudykunst & Ting-Toomey, 1988; Ting-Toomey, 1999; Johnson & Cullen, 2002): “Whereas revealment is vital in low-context cultures, concealment is vital in high-context systems” (Gudykunst & Ting-Toomey, 1988:156). The other dimension relates to the emotionality of conflict manifestation: while Western individualists tend to express their emotions in a conflictual situation openly (because this is viewed in his/her cultural context as honest and engaging), a collectivist would adhere to different “cultural display rules” (Ting-Toomey, 1999:215) by maintaining a restrained emotional composure (viewed as mature and self-disciplined in his/her local cultural environment). Apart from the cultural impact we can additionally expect that the existence of certain institutions and structures influence conflict articulation styles. Conflict articulation requires adequate channels and platforms such as formal or informal networks, management or team meetings, town hall talks and complaint systems as well as communication channels such as email or intranet which are provided in some organizational contexts but not in others. A well-trained mutual corporate language, mutual technical jargons across language barriers or a clear organizational commitment to a culture of ‘open dialogue’, coupled with adequate incentives, facilitate free and open voicing of conflictual claims in intercultural situations in MNCs which, in turn, allow for targeted, effective conflict management and more productive conflict outcomes. Referring to our conceptual framework and the partial theories on conflict manifestation reviewed above, we can again derive some indications for the systematic development of an empirical research program. Possible hypotheses regarding conflict manifestation in MNCs link contextual constellations including cultural, institutional and structural elements to the subprocesses of conflict perception, interpretation and articulation. Do actors from diverse cultural settings perceive and frame conflict in an intercultural situation differently? Does a mutual language such as English reduce or increase perceived intercultural conflict? Do actors from diverse cultural contexts use different metaphors in interpreting and describing the same intercultural conflict? Do certain institutions or organizational structures increase the amount of openly articulated conflict in MNCs even in high-context cultures? (iii) Conflict handling: Once an underlying conflict has become manifest, i.e. it exists as a psychological and social reality in the eyes of the actors, they will either suppress and avoid open conflict or start to act upon this reality by applying micro-political instruments of conflict management to the situation. The proposed framework conceptualizes three basic strategies of conflict management – communicative, structural and third party handling – whose implementation is expected to depend on cultural, institutional and structural influences on the conflict parties. Which alternatives for conflict handling are available to each party largely depends on what kind of conflict management structures and institutions are provided by his/her environment and on his/her respective power bases which, again, are constituted and legitimated by the organizational structures and institutions assigning, for example, legal and contractual rights as well as nominal resources to individual actors. Which handling

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alternative is preferred and chosen from this portfolio of alternative conflict management strategies, according to our framework, depends in turn on the actors’ value systems, norms, and cultural routines. Based on the framework, it would be the objective of future empirical research to systematically investigate in what kind of contextual constellation which of the three basic strategies is employed and how. Regarding the integration of existing partial theories in our model, the cross-cultural research tradition on conflict management styles (Graham, 1985; Adler et al., 1987; Kozan, 1989; Ting-Toomey et al., 1991; Rahim & Blum, 1994; Elsayed-Ekhouly & Buda, 1996; Tung, 1997; Morris et al., 1998; Ting-Toomey, 1999; Ayoko et al., 2004) is clearly dominated by a restriction to communicative handling, i.e. negotiation situations, and (national) cultural influences (individualism versus collectivism, Hofstede or Schwartz scales) at the expense of structural and third party management and of the multidimensionality of conflict contexts in MNCs. Key findings from the many empirical studies of communicative conflict handling include the identification of core culture-based argumentation styles in negotiation. According to Ting-Toomey (1999:200), for example, “individualists often tend to prefer direct verbal assertions, direct verbal questioning, direct requests for clarifications and answers. In contrast, collectivists prefer to use qualifiers (e.g. “Perhaps we should meet this deadline together”), tag questions (e.g. “Don’t you think you’ll feel better if you finish it and get it out of your way?”), disclaimers (e.g. “If this isn’t too much trouble, let’s try to finish this report together”) to convey a ‘softened’ approach to working out differences.” In the tradition of the Rahim ROCI-model, many empirical studies (e.g. Rahim, 1983; Kozan, 1989; Ting-Toomey et al., 1991; Rahim & Blum, 1994; Elsayed-Ekhouly & Buda, 1996; Morris et al., 1998) identify five different negotiation styles: avoiding (avoid confrontation, accommodate the other party’s wishes), dominating (use expertise and authority to firmly state your own position), integrating (exchange information to solve the problem together), obliging (give in to the other party, satisfy the other party’s expectations), compromising (negotiate and propose a middle ground for breaking deadlocks). Comparing Japan, the US, South Korea, China and Taiwan, Ting-Toomey et al. (1991) show, for example, that individualistic cultures use more integrative conflict strategies than members of collectivistic cultures whereas collectivists use more obliging styles than individualists. Despite these interesting findings, integration of the Rahim or similar approaches (Thomas & Kilmann, 1974) to communicative conflict management styles into our framework seems problematic because they do not systematically distinguish between the means of conflict handling and their effects, i.e. the conflict outcomes; a distinction which, as argued above, is seen as crucial in our concept of intercultural conflict processes. In our view, a compromise as a conflict outcome, for instance, can be reached in different (culture-bound) ways, using diverse conflict handling styles whereas in Rahim’s model style and outcome of “compromising” are invariably interlocked, independent of culturally diverse understanding of the concept of compromise and ways to achieve it. Following our conflict framework we therefore propose an alternative classification of communicative conflict handling styles along rhetorical dimensions such as information, persuasion, manipulation, exchange of threats etc. and relate the different usage patterns of communicative instruments to their contextual determinants. In contrast to the mainstream of cross-cultural conflict management research, we additionally emphasize the importance of incorporating the multidimensional cultural as well as proximate institutional influences on conflict management styles in a comprehensive model. Several authors propose that not only the societal level of culture but also organizational cultures and

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subcultures have a distinct impact on conflict management behavior (Kieser, 1983; Kozan, 2002; Ayoko et al., 2004), even though the extent of this subcultural impact in comparison with the national cultural impact remains far from clear. While Kieser (1983) suggests that conflict in organizations in fact are heavily influenced by organizational socialization processes and mutual organizational value systems, Chevrier (2003:147) suspects that organizational culture in MNCs “cannot help to cope with cultural conflicts when fundamental cultural interpretations arise”. Furthermore, the framework demands the systematic analysis of the interdependence between elements of MNC contexts and the other two basic conflict management strategies, structural and third party conflict handling. Regarding structural conflict handling, empirical studies on MNC conflict management would enable us to derive a taxonomy of structural handling alternatives such as changing control systems, contracts, regulations, organizational structures and resource allocations (Kolb & Putnam, 1992) in order to delimit the opponent’s scope of action and thus force him/her to comply, oblige and withdraw from his/her own interest position. Similarly, concerning third party styles, we need to better understand when which third party is called for (same culture colleagues or superiors, international colleagues e.g. in subsidiary-headquarter conflicts, superiors or same level parties, internal or external mediators etc.) and, in turn, in what context they opt for communicative and/or structural conflict management instruments. Several studies (Leung, 1987; Ting-Toomey, 1988; Cohen, 1991; Ting-Toomey, 1999; Gelfand & McCusker, 2002) indicate that “collectivists tend to prefer an informal third party conflict mediation procedure (such as seeking help from relatives or wise teachers or gurus) more than individualists. While individualists prefer objective advice and facilitation from an impartial formal (certified) third party mediator, collectivists prefer to seek help from someone who already is informed as to the conflict situation and whom they can trust and respect” (Ting-Toomey, 1999:218). Apart from cultural influences, organizational structures and institutional contexts are expected to have an important impact on structural and third party handling styles in particular. On the one hand, institutions on the macro- and meso-level provide channels for conflict management. On the other hand, organizational structures and institutions largely determine (formal) power relations on the micro-level, thus influencing the effectiveness of respective conflict management styles. On the local, organizational level, the establishment of works councils, personnel committees, internal mediators, regular management circles, complaint systems, peer complaint boards, open door programs or grievance procedures provide outlets and platforms for either direct or third party conflict management. In Japanese organizations, for example, the institution of the “nomikai” (after-work get-togethers of staff in informal settings) offers a well-accepted forum for direct and indirect communicative conflict management. As described by one the interviewees in our empirical study (a German expatriate CEO), his early non-conforming to this important tradition led to a high level of hidden, unresolved conflict and frustration among employees. Once he started participating in these gathering, subordinates would form “lines up to the door” in order to tell him, after some beer, about their complaints and conflicts. In the same way, Rahim (2002:209) encourages the institutionalization of “employee advocates, customer and supplier advocate, as well as environment and stockholder advocate” in order to provide effective channels for third party handling in organizational conflict. On the MNC-level, global corporations increasingly establish conflict structures across national borders to facilitate effective inter-unit and intercultural conflict handling. Companies from our sample report the launch of company-wide compliance systems, coordination teams

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(to help in headquarter-subsidiary conflict), MNC-ombudsmen and, with growing importance, of European or even MNC-worldwide works councils. MNC-internal conflict channels such as these can function, according to Kolb and Putnam (1992), as important instruments for keeping eventual conflict within the organizational boundaries and avoiding formal, external litigation procedures which are not only costly but often also lengthy and potentially involve public interest and damage to the corporate image. According to Platzer and others (Müller & Platzer, 2003; Keller & Platzer, 2003) international works councils not only open up new effective channels for MNC-conflict management but, in addition, eventually also are able to prevent disruptive MNC-conflicts: “EWCs [European works councils] prompted changes in internal management communication and coordination processes as they stimulated the establishment of mechanisms by which central management attempted to ensure that upcoming decisions at the level of individual business units with a potential transnational dimension were signaled in advance. EWC also stimulated greater cross-border coordination of national and business managements by central management when implementing decisions with transnational consequences” (Müller & Platzer, 2003:71). Increasingly, international works councils are not only called upon to tackle ‘soft’ conflict issues but also conflicts relating to, for example, workplace and social standards guarantees in transnational restructuring processes (Müller & Platzer, 2003). The co-existence of local and transnational structures as in the case of MNC works councils, however, requires careful regulation of responsibilities and jurisdictions in specific conflict situations. Conflict handling is not only influenced by internal structures but also by institutions which either on a national or transnational level go beyond the single organization. In Japan, for instance, the inter-organizational keiretsu system, fostering long-term, often non-contractual relationships provides institutionalized norms and channels, e.g. the president’s club, for handling conflicts among member organizations (Dore, 1986; Orru et al., 1989). Institutions of the national business system such as industrial relations regulations, labor laws, court systems and minority rights as well as non-state institutions like trade or employer associations, conciliation boards and unions regulate conflict behavior and offer legitimate paths for conflict management across organizational boundaries. Again, the acceptance and usage of these formal structures is highly dependent on contexts. Whereas in the US actors much more quickly and easily make use of the court system, e.g. to solve an employment conflict, in Japan similar conflicts tend to be regulated by using internal institutions (Johnson & Cullen, 2002; Gelfand & McCusker, 2002). To bring charges against one’s own (former) employer is still not considered a legitimate, appropriate procedure of conflict management in Japan (Nakata, 2002). Similarly, we would expect that the US-American preference for structural conflict handling by ‘exit’ is not only due to the individualistic cultural value system, but also to the more proximate institution of a large, dynamic, open external labor market providing sufficient, easy to access alternative employment opportunities. In Germany, the institutional tradition of codetermination, employee participation and long-term labor contracts and strict dismissal protection laws, has presumably led to a higher importance of direct communicative conflict handling procedures. Increasingly, transnational institutions such as international mediating structures, international arbitration courts or codified conflict regulations in international business, e.g. formulated by the EU, provide supplementary outlets for conflict management (Müller & Platzer, 2003; Keller & Platzer, 2003; Lehmkuhl, 2003; Whitley, 2003) that are, however, largely limited to inter-organizational conflict situations. It would be interesting to see in future empirical studies whether the actual usage of these institutional structures in any way

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correlates with the national origin of the conflictual parties involved or their organizational background. The second important impact of organizational structures and institutions concerns the distribution of crucial power bases in intercultural conflict relations: “The distribution of power between or among parties has a significant impact on the course and conduct of conflict” (Northrup, 1989:61). Institutions and internal structures determine who has access to which channels of conflict management and which power bases are available in conflict handling procedures. National juridical institutions largely regulate employer and employee rights, limiting, for example, the employer’s ability to simply sack a troublesome employee as a form of structural conflict handling. National labor markets, in turn, limit an employee’s power bases in conflict when, for example, he/she can no longer credibly threaten his/her employer with giving notice because of closed or overly crowded labor markets. The education system also helps to institutionalize certain types of power bases. In the German context, for example, the higher education system is designed to bring forth highly specialized experts. Technical expertise and specialized knowledge are, in this context, important personal power resources whereas in the US-context charisma and motivational skills and more general, broad knowledge bases are much more accepted as managerial power sources. Similarly, Lane (1992) argues that due to institutional differences British managers tend to claim positional rather than expert authority when compared with Germans who can and do heavily rely on certified skills as a source of power. A second source of power in organizations and therefore an important factor in MNC conflict is the organizational structure, i.e. the allocation of status and resources within the hierarchy (Northrup, 1989; Gladwin & Walter, 1992). For intercultural conflict in MNCs, it is particularly important to note that international and expatriate managers regularly occupy higher management positions in international subsidiaries so that even though their personal power bases may not be effective and acceptable in the local context, they can partially substitute this loss of personal power with enlarged formal power bases. In an empirical research program, it would be interesting to see whether expatriates in fact replace communicative conflict handling (which heavily relies on personal power bases) with structural or third party handling strategies that draw from more formal power bases. In this situation, language also can have a high impact on power distribution (Welch et al., 2004) and conflict handling processes. For example, who’s language is used in intercultural communicative conflict handling? The expat’s, the local employee’s, a mutual company language or a translator who, in turn, could indirectly function as a conflict mediator by assuaging aggressive statements in negotiation or emphasize integrating speech acts of both parties. Based on these brief remarks on cultural, institutional and structural influences on conflict management styles, we can once more derive some preliminary ideas regarding potential hypotheses in an empirical research program on MNC conflict. Do conflictual parties from different cultural, institutional and organizational contexts prefer specific basic conflict management strategies (communicative, structural, third party)? And more precise, what kind of communicative/structural/third party conflict handling style is used predominantly in specific cultural and institutional environments? How do MNC conflict structures such as compliance committees, international works councils etc. affect preferred conflict behavior patterns of organizational members? Do conflict management styles vary when actors address conflictual situations in their own, habitual cultural, institutional and organizational setting, or when they, e.g. as expatriates, need to tackle conflict in foreign environments? What is the role of language in selecting conflict management strategies?

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(iv) Conflict outcomes: Following our framework , an empirical research program would finally have to answer the question when, under which circumstances do which effects of conflict handling occur? Of interest here, analogous to our comments in the paragraph on conflict generation and manifestation, are the outcomes of conflict handling as perceived, interpreted and evaluated by the conflict parties involved on the basis of their respective culture-based cognitive patterns and internalized norms. Concerning conflict outcomes, two aspects come into view: (a) the need to identify first, second and third order effects of empirical conflict processes, and (b) the need to understand the different criteria on the basis of which the parties evaluate the different effects as well as the cultural, institutional and organizational determinants of these evaluative patterns. Apart from the direct, episodic effects of conflict, our framework stresses the importance of analyzing the second and third order effects resulting from conflict handling initiatives. Second order effects regard the institutionalization aspect of conflict handling. Kolb and Putnam (1992) argue that particular strategies of conflict management (communicative and informal third party handling) in fact lead to the solidification of existing structures and power relations in organizations, pointing beyond the single conflict episode: “Negotiation and third party procedures (e.g. mediation) tend to individualize conflict and grievance, and so make systematic changes less likely […] Indeed, in the absence of legal or quasi-legal interventions, these works suggest that when disputes are settled by informal means, power relationships will remain unchanged” (Kolb & Putnam, 1992:318). On the other hand, structural and formal third party handling, in particular, can potentially alter organizational structures and institutionalized patterns of behavior when they are based on adequate power bases and are able to accrue legitimacy for the institutional changes, so that in the long run conflict solutions are internalized by the organizational members affected (Kostova & Roth, 2002). Regarding second order effects, Northrup (1989) additionally draws attention to the fact that culture- and identity-related conflicts run the danger of becoming institutionalized because, due to cultural differences, parties are unable to solve the dispute in a satisfying manner for all conflictual actors involved. While second order effects still concern effects within the original cultural and institutional contexts, the framework defines third order effects as those outcomes that occur when conflict is transferred from one context into another context and there trigger new, context-based conflict processes. In our view, these peripheral, localized conflicts triggered as a result of conflict management need to be carefully analyzed in empirical studies on MNC conflict, particularly because they, in turn, potentially produce local handling initiatives and local conflict outcomes which might backlash onto the original conflict cycle and at least partially cancel out the productive conflict outcomes there. Some empirical results from our exploratory study on MNC conflict exemplify such a multi-level conflict escalation process. In one of our sample companies, headquarters management introduced a catalogue of mutual values and norms (regarding environmental safety, social responsibility, integrity etc.) in order to handle coordination conflicts between the headquarters and its subsidiaries worldwide. As perceived by the headquarters managers the effects of this conflict handling initiative were quite satisfactory. Over the long term, they expected this set of mutual values, supported by corresponding incentive systems and a compliance committee, to be internalized by management worldwide, thus reducing transaction costs in coordination and communication across global corporate operations. Unnoticed by the headquarters management, however, this conflict handling program in conflict cycle I (home-country) triggered unexpected new conflicts at the local, subsidiary level (conflict cycle II), e.g. in the

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Japanese organization. Some of the core values defined by the corporate center, particularly a strict norm regarding “integrity” addressing issues of corruption, unethical and illegal behavior, were perceived as being incompatible with local Japanese behavioral norms and business traditions, for example, the local custom of gift giving between company and customers. In order to solve this local conflict, caused by a difference in cultural contexts and normative systems between headquarters and subsidiary, the Japanese management had to implement adequate conflict handling programs which on the one hand, would enable the Japanese subsidiary to conform to the headquarter standards so as to avoid sanctions or tighter control. On the other hand, their conflict management initiatives needed to address the conflict between subsidiary sales persons and local customers regarding the acceptability of gift exchanging rituals. The Japanese managers opted for an external third party handling procedure by appointing a local law consultancy firm to anonymously advise employees in doubt about their ‘proper’ behavior. Whereas the headquarter management, unaware of this localized, peripheral follow-up conflict, judged the common value program as successful, for the Japanese operation it not only produced serious new conflicts requiring suitable handling strategies but also individual insecurities among local employees, deterioration of customer relations and substantial costs for implementing the third party counseling scheme. This example demonstrates that regarding conflict in MNCs, it is particularly important to identify all, immediate as well as peripheral effects of conflict handling programs because, as in this case, peripheral effects will eventually produce repercussions also on other organizational levels or other organizational units. Specifically, it can be expected that conflict handling affecting MNC-wide structures and norm systems is likely to lead to conflict prolongation and conflict transferal and to trigger complex additional conflict in contexts with diverging cultural and institutional determinants. The second aspect of conflict outcomes regards the importance of empirically identifying against which criteria parties to an intercultural conflict interpret and evaluate the conflict effects in their respective contexts. What an ‘effective’, ‘functional’, ‘satisfying’ conflict outcome is and for whom is largely dependent on institutionalized norms and culture-based cognitive patterns. Individualists and collectivists, for instance, are expected to hold different notions of what constitutes ‘effective’ and ‘appropriate’ practices in conflict resolution (Ting-Toomey, 1999), of what represents a ‘tolerable solution’, a ‘defeat’ or a ‘good compromise’ (Glenn et al., 1977), and whether coercion is acceptable in the situation or not (Tjosvold & Sun, 2001). According to past research (Leung & Bond, 1984; Leung & Iwawaki, 1988; Ting-Toomey, 1999), individualistic and collectivistic cultures also differ in their understanding of fairness in conflict processes. Whereas individualists tend to use the equity norm (self-deservingness norm) in evaluating conflict outcomes which, for example, include the redistribution of resources and rewards, collectivists tend to prefer the communal, equal distribution norm, specifically in in-group situations. Similarly, the importance of relationship effects and the preservation of face as conflict outcomes differ across cultures. While we expect collectivist cultures to emphasize in-group relationship effects and the “other-face”-criterion (Ting-Toomey et al., 1991) in assessing conflict outcomes, individualists presumably focus on “self-face”-issues and individual gains in determining whether a conflict result is acceptable to them. According to Gelfand and McCusker (2002), for example, Japanese require satisfactory conflict outcomes to reflect continuity, harmony, loyalty and protection, whereas Germanic cultures are more likely to apply task performance and process efficiency as dominant evaluation criteria. The different criteria lead to diverse assessments of perceived outcomes of the same conflict and thus

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decisions about the individual actors’ inclination to either accept or reject conflict outcomes. Whether conflict outcomes lead to an escalation of conflicts in additional episodic rounds, whether they are internalized and institutionalized in behavioral routines, or whether adoption and obligation remains “ceremonial” (Kostova & Roth, 2002:220), critically depends on the individuals’ acceptance or non-acceptance, positive or negative evaluation, satisfaction or frustration with the conflict results, always based on each actor’s culturally and institutionally determined patterns of interpretative and evaluative criteria. Conclusion It was the aim of this paper to propose a micro-political framework for the systematic analysis of empirical conflict processes in MNCs. Against the backdrop of the conflict literature, we have tried to not ‘reinvent the wheel’ but to pick up strands from existing, predominantly intra- or cross-cultural (partial) theories of conflict as recommended by Lewicki, Weiss and Lewin (1992) and, on the basis of the micro-political conflict model developed by Dorow (1978/1982), to integrate them into a comprehensive conceptual framework of interpersonal conflict processes in MNCs. In this way, we are able to extend the existing theoretical approaches in three directions: Contrary to the dominant cross- and intercultural research so far, we simultaneously focus on all elements of the conflict process – conflict generation, manifestation, management and outcomes – because, in our view, effective and efficient handling resulting in productive conflict effects requires the careful identification and analysis of underlying conflict causes and types, particularly in intercultural contexts. Secondly, we introduce the notion of a multidimensional cultural, institutional and organizational context of conflict in MNC while most other researchers concentrate exclusively on the effects of (national) value systems on, e.g. conflict handling styles. In our view, it is crucial to supplement these value-based influences by the conceptualization of national and transnational institutions as well as internal organizational structures because they provide the power bases and (legitimate) channels through which culturally preferred conflict management styles pass and become effective. In addition, the approach presented allows us to systematically distinguish between three basic strategies of conflict management – communicative, structural, third party handling – whereas past research, particularly from the cross-cultural tradition, investigates communicative conflict handling only. We suspect that this communicative bias misses the fact that the asymmetric allocation of power in organizations, and particularly between headquarters and subsidiaries of MNCs, frequently leads to the suspension of negotiations and the enforcement of structural conflict handling initiatives which, from the perspective of the mainstream, communication-focused conflict literature, is largely overlooked. Similarly, we systematically distinguish between three kinds of core and peripheral effects of conflict. Particularly in the culturally and institutionally heterogeneous global network of MNCs, conflicts in one area of the company run the danger of being transferred, prolongated and relocated within the corporate system. Again, in theory and practice, these triggering effects of multilevel conflict in MNCs have so far often gone unnoticed. On the basis of the conceptual framework we have then, by drawing from empirical research and our own exploratory study, tried to derive some ideas for the formulation of preliminary hypotheses regarding the contextual effects (culture, institutions, organizational structure) on the different elements of the conflict process. These initial ideas need to be developed further to eventually form the foundation of an extensive empirical research program on the complex, multidimensional influences on MNC conflict.

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There are two major limitations to our approach as presented in this paper which we want to discuss briefly. First of all, by focusing on the contextual influences on each of the conflict process elements we have, due to limited space in this paper, deliberately excluded from our discussion the important analysis of the dynamic linkages between the different elements of the process model. Bergmann and Volkema (1994), for example, have convincingly demonstrated that handling styles are not only contingent on contextual factors as argued here, but also on specific conflict causes. Similarly, conflict outcomes do not only depend on the culture-based, institutionalized cognitive outcome evaluation schemes and the conflict management instruments applied in the situation but, as hypothesized by Jehn and others (Jehn, 1997; Pelled et al., 1999) also on underlying conflict types. Secondly, we have largely circumvented the discussion regarding the operationalization of model variables which, however, would be a prerequisite for any further development of the framework into an empirical research program. Difficulties already arise when we only consider the cultural context factor which in past empirical studies has been operationalised as either a one-dimensional (Gudykunst & Ting-Toomey, 1988; Elsayed-Ekhouly & Buda, 1996; Tinsley, 1997; Ting-Toomey, 1999) or a multi-dimensional phenomenon (Rahim & Blum, 1994; Morris et al., 1998; Kozan & Ergin, 1999; Kozan, 2002) and is either derived from existing studies using national boundaries to infer culture such as Hofstede’s value survey (1997/2001), or from verification of the cultural assumptions by applying cultural measurements in the conflict studies themselves as recommended by Gelfand and McCusker (2002). Finally, we are well aware of the limitations regarding the use of exemplifying results from our own empirical study. Such a small scale, qualitative study does certainly not present an appropriate ground for generalization of our observations. In addition, the research design employed in the study relies heavily on interview data from individual managers, thus foregoing the advantages of, e.g. activity-based techniques particularly for micro-level research (Johnson et al., 2003; Balogun et al., 2003). By cross-checking preliminary interview results with other interviewees from the same company we have, however, tried to reduce the potential bias arising from the modest sample and the limitations of the selected methodology. In addition, expected results from an ongoing quantitative, questionnaire-based survey on conflict in the same MNCs cooperating in the interview phase of the project, will provide a more extensive data base for the further development of our framework on MNC conflict processes.

Notes 1 We use the terms as defined by Avruch/Black (1991): Intracultural: culture as taken to be uniformly distributed across a group or unit, approaches in this tradition ignore potential cultural heterogeneity (Avruch/Black, 1991:29). Cross-cultural: “comparative and contrastive” objectives (Avruch/Black, 1991:35). Intercultural: “at least two individuals or groups, from different cultural traditions, in a situation of conflict” (Avruch/Black, 1991:37). Transcultural: techniques and processes of conflict that are applicable “to a whole range of different cultures” (Avruch/Black, 1991:38). 2 Compare to the review of conflict models by Lewicki, Weiss and Lewin (1992) who while focusing on intracultural approaches lament the dominance of conceptual at the expense of empirically validated models of conflict. 3 Pondy (1967:305) clearly focuses on the dyadic relationship between two actors, even though these might, as a result of the original conflict, escalate the conflict by adding other, previously latent issues. Thomas (1992) includes a third party option, but only as a means of conflict handling and not as a

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potential conflictual party of the conflict episode itself. Processes of transfer of conflict onto other actors and other, even unrelated issues are not discussed. Wall/Callister emphasize that conflict effects may not only alter original causes but also generate new ones (Wall/Callister, 1995:526), but their long lists of consequences of conflict does not contain the possibility of transferal of conflict onto other parties. 4 It is important to emphasize here that the effects of interculturality versus the dominant cross-cultural approach in international comparative conflict research has not yet received sufficient attention in the literature (Tinsley & Brett, 1997). Do individuals in intercultural conflict in fact stick to their habitual patterns of action and theories-in-use (which they have developed in their own, local cultural and institutional context) as implicitly assumed by cross-cultural research (Glenn et al., 1977; Mead & Jones, 2002); do they try to adapt to their opponent’s conflict styles as suggested by acculturation theories (Berry, 1997; Granrose, 1997; Earley & Laubach, 2002); or do they, in contrast, tend to use an even more extreme form of their own cultural conflict patterns (‘more German than the Germans’) because the intercultural situation creates insecurities and anxieties that make actors rely even more on established, well-known routines as preliminary research by Reber (2004) suggests for German expatriates in US-based MNC-subsidiaries? Only future empirical research can answer this crucial question regarding the effects of the intercultural situation on conflict processes. 5 Please note that we do not wish to imply that the processes of interest formation and conflict generation described in the following paragraph necessarily develop in a conscious or sequential manner. Instead, they are often dominated by routines and cognitive patterns which pre-select certain alternatives for action. 6 In our model, a compromise is therefore viewed as an outcome of conflict handling rather than as a handling style (Rahim, 1983; Rahim & Blum, 1994) A compromise, in our model, can be achieved through different means of conflict management, e.g. through side-payments (structural conflict handling), through the intervention of a third party, or by persuasion and negotiation (communicative conflict handling). As we will argue below, it is particularly important to distinguish between conflict management and conflict outcomes because actors from different cultural backgrounds might differ in their conceptualization, interpretation and evaluation of what a ‘compromise’ is (Glenn et al., 1977). 7 The data reported in this paper is derived from a larger empirical study on interaction practices in MNC. So far, 189 two hour interviews have been conducted in both headquarters and subsidiaries of nine MNCs in Japan, the USA, Germany and Switzerland including BASF, Bertelsmann Media Group, Deutsch Post World Net, Henkel, Lufthansa, Nestlé, Pfizer, Toyota and Volkswagen. All interviewees work in management positions either in the headquarters or in subsidiaries, have some management experience in an international context and volunteered for this study. Interviews were conducted in English, Japanese or German depending on the interviewees request and 177 interviews were tape-recorded. The project also applies document analysis and an internet-based questionnaire (ca. 400 participants) to complement the interview data but at the time of writing results from these sources are not yet available. The preliminary results presented here are derived from the interview data only. References Adler, N.J. & Graham, J.L. & Gehrke, T.S. (1987). Business negotiations in Canada, Mexico, and the U.S. In: Journal of Business Research. Vol. 15/4: 41-429. Adler, N.J. & Graham, J.L. (1989). Cross-cultural interaction: The international comparison fallacy? In: Journal of International Business Studies. Vol. 20/3: 515-537. Adler, N.J. (1986). International dimensions of organizational behavior. Boston (MA): Kent Publishing. Alper, S. & Tjosvold, A. & Law, K.S. (2000). Conflict management, efficacy, and performance in organizational teams. In: Personnel Psychology. Vol. 53/3: 625-643. Anand, R.P. (1981). Cultural factors in international relations. New Delhi: Abinhav.

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Table 1: Conflict models

Intra-cultural approaches Cross-cultural approaches Intercultural approaches Trans-cultural approaches

Conflict generation and manifestation

Pondy (1967), Kilmann/Thomas (1978), Dorow (1978), Krüger (1981), Kieser (1983), Grunwald/Redel (1988), Northrup (1989), Pinkley (1990/1992), Berkel (1992), Thomas (1992), Bergmann/Volkema (1994), Wall/ Callister (1995)

Gudykunst/Ting-Toomey (1988), Ross (1993), Ting-Toomey (1999)

Jehn (1995), Jehn (1997), Joshi/Labianca/Caligiuri (2002), Ayoko/Härtel/ Callan (2002) non-cultural diversity: Pelled/Eisenhardt/ Xin (1999), Jehn/ Northcraft/Neale (1999)

Conflict management

Blake/Shepard/Mouton (1964), Pondy (1967), Kilmann/Thomas (1978), Dorow (1978), Grunwald/Redel (1988), Krüger (1981), Berkel (1992), Thomas (1992), Rubin (1994), Bergmann/ Volkema (1994), Wall/Callister (1995), Rahim (2002)

Thomas/Kilmann (1974), Rahim (1983), Graham (1985), Adler/Graham/Gehrke (1987), Gudykunst/Ting-Toomey (1988), Kozan (1989), Avruch/Black (1991), Ting-Toomey et al. (1991), Gladwin/ Walter (1992), Rahim/Blum (1994), Chiu/Kosinski (1994), Elsayed-Ekhouly/Buda (1996), Tinsley/Brett (1997), Tinsley (1997), Morris et al. (1998), Leung/Tjosvold (1998), Tinsley/Pillutla (1998), Ting-Toomey (1999)

Glenn/Witmeyer/Stevenson (1977), Anand (1981), Cohen (1987/1991), Cox (1991), Ayoko/ Härtel/ Callan (2002)

Gilbert (1997), Tjosvold (1999), Ting-Toomey (1999), Ayoko/Härtel/ Callan (2002), Gelfand/ McCusker (2002), Chevrier (2003)

Conflict outcomes and effects

Pondy (1967), Dorow (1978), Northrup (1989), Thomas (1992), Bergmann/Volkema (1994), Wall/ Callister (1995), Kollmannsperger (2000), Alper/Tjosvold/Law (2000)

Leung (1987), Ting-Toomey (1999)

Jehn (1995), Jehn (1997) non-cultural diversity: Pelled/Eisenhardt/Xin (1999), Jehn/ Northcraft/Neale (1999)