UK’s Most Confident and Successful Corporate Managers Live Abroad During Their Formative Years, New Research Reveals

Corporate managers widely exposed to more than one culture during their formative years (up until 23 years of age) are more likely to be confident taking difficult and risky decisions, such as acquisitions, new research from the University of Exeter Business School reveals.

The study looked at over 2,000 acquisition decisions taken by board members at 561 UK listed companies, and found that managers who live or study in cultures other than their own more readily take difficult strategic decisions such as deciding to acquire foreign companies.

Co-author, Grzegorz Trojanowski, Associate Professor in Finance at the University of Exeter Business School says corporate managers with wide exposure to different cultures tend to see doing business in foreign countries as providing great opportunities, and they expect to get a positive result from their business activities in these markets.

The study found that, on average, UK company boards have four executive members, most of whom are male. While 18 per cent of all senior managers are foreigners, in 60 per cent of companies all board members are UK citizens. The study found that 22 per cent of executives come from a mixed cultural background or that they have spent significant periods of time at a foreign school or university.

The researchers found a direct link between the international background of board members and the activity of the firm in foreign markets. “The more international the makeup of a board, the more likely the company is to have business activities abroad,” Professor Trojanowski says. “The UK is one of the most diverse countries on earth and this cultural mix has a positive impact on the business focus of British firms, which tends to be disproportionately international.”

“Globally there are 40 per cent more first-generation migrants living in the world today than in 1990 meaning the global population is becoming more diverse. Businesses not only need to deal with this diversity, they have an opportunity to tap into this demographic to employ cross-culturally competent employees and managers.”

Key attributes of managers exposed to multiple cultures when young include:

• Confident making challenging and risky business decisions
• Confident their decisions in foreign cultures will be successful
• Better at understanding and influencing people from diverse cultures
• Innate understanding of subtle differences in business practices and communication styles across cultures
• Often part of a global network for support in decision making
• Better at naturally ‘bridging’ or communicating with people from different cultures
• In the absence of hard facts they will be more comfortable making decisions based on intuition

Professor Trojanowski and his co-author Dorota Piaskowska, Lecturer in Management, University College Dublin, found that as cultural differences increase between the UK and those of target acquisition firms, UK acquirers prefer to buy significant stakes in the target company rather than go for an outright acquisition. This helps to motivate the partial owners, leads to greater local involvement in running the firm and reduces cultural miscommunication. However, those companies making acquisitions that have a significant international mix of board members are more comfortable owning higher stakes in firms in culturally remote countries.

Professor Trojanowski says it’s important for companies to consider how the individual experience of corporate managers impacts the company’s strategy overall. “By looking at an individual’s international experience, companies can better manage their risk profile. If they want to be active in foreign markets, they would do well to employ greater numbers of people who have had significant exposure to different cultures. However, if companies wish to have a greater domestic focus, managers with significant international experience might expose the company to unnecessarily risky behaviour.

“Confidence, often a key attribute among successful executives with a lot of international experience can be a double-edged sword. It may result in an over optimistic perspective and possibly lead to excessively risky behaviour.”

*Source: University of Exeter

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