How business groups build globally relevant knowledge from local contexts? Exploring the double-edged sword effect of cultural diversity

Abstract

In this study, we theorize and empirically explore whether and how locally relevant learning contributes to the enhancement of globally relevant learning. We also examine the conditions under which specific types of such locally relevant learning contribute to globally relevant learning in group-affiliated firms in an emerging economy. Using firm-level survey data from India, we explicitly model and test the hypotheses based on our questions. Results suggest positive and significant contributions of home- and host-based locally relevant learning of group-affiliated firms in improving their global learning capabilities. Interestingly, evidence shows an inverse U-shaped moderating effect of dynamic cultural diversity, indicating that the effects of home- and host-based locally relevant learning on globally relevant learning are the highest when dynamic cultural diversity is moderate. The effects are lower when cultural diversity is low or high.