Ignoring cultural differences can cause
unfavourable situations and negatively influence the success of production
internationalization projects. A decision to subcontract part of the production
or to produce in a foreign country, requires identifying and controlling the
risks related to cultural differences. Our research objective was to study
these risks and the business practices used to face them. In order to reach this
objective, we studied eight (8) Canadian manufacturing companies, that
outsourced part of their production to China. Results show that the risks
related to cultural differences, can provoke an important divergence between
requirements of the Canadian company and the resulting products manufactured by
the Chinese subcontractor and cause an additional unexpected manufacturing
cost. The risk of misunderstanding and difficulty communicating in addition to
difficulty applying quality control practices were critical for most of the
studied companiesí managers. However, the identified risks could be controlled
with different business practices, which we classified according to their role
of mitigation or contingency. Frequent interaction with Chinese partners, developing
a good trust-based relationship with them and finding ways of encouraging them
to get more involved in the partnership and to suggest solutions and
innovations represent some of the important practices to adopt.
JEL classification numbers: M1.
Keywords: Cultural differences, Production internationalization, International
outsourcing, Outsourcing in China, Risk management, Cross-cultural management.