Chapter 6

1. International Business Oded Shenkar and Yadong Luo Chapter 6 The Cultural Environment Chapter 6: The Cultural Environment

2. Do You Know? • In what ways do cultural differences, language and religion influence international investment and trade? • How does corporate culture interact with local and national culture? • Is corporate culture primarily homogeneous throughout an MNE? • What are the major models for comparison of different cultures? • Is it possible to fully define and measure culture? Chapter 6: The Cultural Environment

3. What is Culture • “The knowledge, beliefs, art law, morals, customs and other capabilities of one group distinguishing it from other groups.” • Main features of culture: • Culture is shared • Culture is intangible • Culture is confirmed by others Chapter 6: The Cultural Environment

4. Culture and International Business • Culture is very important to the practice of international business. • Impacts the way strategic moves are presented. • Influences decisions. • The lens through which motivation occurs. • Management, decision making, and negotiations are all influenced through culture. • Culture influences nearly all business functions from accounting to finance to production to service. Chapter 6: The Cultural Environment

5. Culture and International Business • Culture is a key ingredient in the “liability of foreign-ness” described earlier in the Multinational Enterprise chapter. • Culture is what makes international business practice difficult or easy, depending on how similar or different cultures are. • Culture is both divisive and unifying. Chapter 6: The Cultural Environment

6. Culture Does Not Explain Everything • While culture is very important to our understanding of international business, it does not explain everything that is different from one place to another. • Corporate strategy, structure, rivalry, governmental policy, and economics • Culture is not a residual variable; it is useful to know that it is not a primary variable either. It is one of many. Chapter 6: The Cultural Environment

7. Culture Does Not Explain Everything Exhibit 6-1: Research design for the isolation of culture Chapter 6: The Cultural Environment

8. Correlates of Culture • Culture is correlated with other variables that vary cross-nationally, like language and religion. • It is useful to remember that culture often cuts across religious, linguistic, and national borders. • Religious, linguistic and national boundaries also often cut across cultures. Chapter 6: The Cultural Environment

9. Language • Language is the means by which we communicate verbally. • We use it for socialization and for communicating how values and norms are expressed and understood. • There are approximately 20 different language families that cut across national borders. • Not only are words different, but also syntax and usages are also quite different between language families. Chapter 6: The Cultural Environment

10. Language • The artifacts that surround language: • Linguistics – or the meanings of words • Proxemics – or the distance that speakers stand from one another • Pragmatics – the cultural interpretations of words, gestures, and nonverbals • Nonverbals – The gestures and body language that accompanies spoken words • English has become the business world’s lingua franca, and the number one foreign language taught in other countries Chapter 6: The Cultural Environment

11. Language Chapter 6: The Cultural Environment

12. Language Chapter 6: The Cultural Environment

13. Language Exhibit 6-3: Numbers of speakers of major languages of the world (estimated) Chapter 6: The Cultural Environment

14. Religion • Religion contains key values and norms that are reflected in adherents’ way of life. • People try to adopt business practices that will satisfy religious tenets without sacrificing modern practices in business. Chapter 6: The Cultural Environment

15. Religion Chapter 6: The Cultural Environment

16. Religion Chapter 6: The Cultural Environment

17. Religion Exhibit 6-5: Adherents to major world religions, by geographic region, 1996 (in millions) Chapter 6: The Cultural Environment

18. National Culture Classifications • Culture and Nation are not synonymous. • National and cultural boundaries overlap partially, and there will be cultural differences in almost all nations. • To make things simpler, however, scholars have created cultural typologies that try to describe cultural differences and ascribe them to national boundaries. Chapter 6: The Cultural Environment

19. Hofstede’s Dimensions of Culture • Geert Hofstede’s cultural typology is the most often used. • It is based upon a study of 100,000 IBM employees who work in IBM divisions throughout the world. • Hofstede’s survey revealed four underlying dimensions of culture: • Power Distance • Uncertainty Avoidance • Individualism/Collectivism • Masculinity/Femininity • Long-Term Orientation Chapter 6: The Cultural Environment

20. Power Distance (PD) • Power Distance is the extent to which hierarchical differences are accepted in society and articulated in term of deference to higher and lower social and decision levels in organization. • Artifacts of high PD: • Centralization • # Org. Levels- Height • # Supervisors • Wage Differentials • Values, White & Blue Collar Work Chapter 6: The Cultural Environment

21. Power Distance (PD) Exhibit 6-6: Power distance: country examples and organizational implications Chapter 6: The Cultural Environment

22. Power Distance (PD) Exhibit 6-7: Rank distinctions among the Japanese Chapter 6: The Cultural Environment

23. Uncertainty Avoidance (UA) • Uncertainty Avoidance is the extent to which uncertainty and ambiguity are tolerated. • Artifacts of high UA: • Standardization • Structured activities • Written rules • Specialists • No risk tolerance • Ritualistic behavior Chapter 6: The Cultural Environment

24. Uncertainty Avoidance (UA) Exhibit 6-8: Uncertainty avoidance: country examples and organizational implications Chapter 6: The Cultural Environment

25. Individualism/Collectivism (I/C) • I/C is the extent to which the self or the group constitutes the center point of identification for the individual. • Individual self interest is pursued individually, or as a part of a group. • Artifacts of I/C • Firm as “family” • Utilitarian decision making • Group performance Chapter 6: The Cultural Environment

26. Individualism/Collectivism (I/C) Exhibit 6-9: Individualism/collectivism: country examples and organizational implications Chapter 6: The Cultural Environment

27. Masculinity-Femininity (M/F) • Refers to the extent to which traditional masculine values, like aggressiveness and assertiveness, are valued. • Artifacts of M/F • Sex Roles Minimized • More Women In Jobs • Interpersonal Skills Rewarded • Intuitive Skills Rewarded • Social Rewards Valued Chapter 6: The Cultural Environment

28. Masculinity-Femininity (M/F) Exhibit 6-10: Masculinity/femininity: country examples and organizational implications Chapter 6: The Cultural Environment

29. Long-Term Orientation (LTO) • Originally called Confucian Dynamism because of anchoring in the Confucian value system. • Represents such values as thrift, persistence, and traditional respect of social obligations. • Organizations likely to adopt longer planning horizon, with individuals ready to delay gratification. Chapter 6: The Cultural Environment

30. Long-Term Orientation (LTO) Exhibit 6-11: Country scores on Confucian dynamism (long-term orientation) Chapter 6: The Cultural Environment

31. Criticism of Hofstede Hofstede has been subject to broad criticism. Among the criticisms: • Single company’s data, with a large Multinational Enterprise having a strong corporate culture. • Time dependent results, which are an artifact of the time of data collection and analysis. • Business culture, not values culture, representing a reflection of business culture at IBM and not national culture of the countries IBM operates within. Chapter 6: The Cultural Environment

32. Criticism of Hofstede • Non-exhaustive, doesn’t identify all the cultural dimensions possible, but just a few. • Partial geographic coverages, cover only a portion of the world’s cultures and countries. • Western bias, which values western business ideals. • Attitudinal rather than behavioral measures, with no connection between employee attitudes and employee behaviors. • Ecological fallacy, national level data generalized into individual behavior. Chapter 6: The Cultural Environment

33. Schwartz’s Classification • Three polar dimensions of culture: • Embeddedness versus Autonomy • Embeddedness – emphasis on social relationships and tradition • Autonomy – finding meaning in one’s own uniqueness • Hierarchy versus Egalitarianism • Hierarchy – legitimacy of hierarchical role and resource allocation • Egalitarianism – transcendence of self-interests and promoting others’ welfare • Mastery versus Harmony • Mastery – mastering the social environment via self-assertion • Harmony – being “at peace” with nature and society Chapter 6: The Cultural Environment

34. Schwartz’s Classification Exhibit 6-13: Sample country rankings on Schwartz’s dimensions Chapter 6: The Cultural Environment

35. Trompenaars and Hampden-Turner’s Classification • Consists of seven dimensions: • Universalism versus particularism – rules versus relationships • Communitarianism versus individualism – the group versus the individual • Neutral versus emotional • Diffuse versus specific • Achievement versus ascription • Attitudes to time • Attitudes toward the environment Chapter 6: The Cultural Environment

36. National Cultural Clustering • The grouping of cultures based on their relative similarity. • Ronen and Shenkar • A synthesis of eight earlier studies • Eight clusters: Near Eastern, Nordic, Germanic, Anglo, Latin European, Latin American, Far Eastern, and Arab, as well as Independent • Huntington • Based on historical and political observations • Distinguishes seven civilizations: Sinic, Japanese, Hindu, Islamic, Western, Latin American, and African Chapter 6: The Cultural Environment

37. National Cultural Clustering Exhibit 6-14: Ronen and Shenkar’s culture clustering Chapter 6: The Cultural Environment

38. National Cultural Clustering Exhibit 6-15: Huntington’s civilization clustering Chapter 6: The Cultural Environment

39. Corporate Culture • Corporate Culture is the culture adopted, developed and disseminated in an organization. • Corporate culture can deviate from national norms, but that depends upon the strength of culture and the values and practices tied to it. Chapter 6: The Cultural Environment

40. Classifications of Corporate Culture • Hofstede et al: • Value dimensions (factors) • Need for security • Work centrality • Need for authority • Practices • Process-oriented vs. results-oriented • Employee-oriented vs. job-oriented • Parochial vs. professional • Open system vs. closed system • Loose control vs. tight control • Normative vs. pragmatic Chapter 6: The Cultural Environment

41. Classifications of Corporate Culture • Trompenaars and Hampden-Turner • The Family – personal, hierarchical, power-oriented • The Eiffel Tower – specific relations, ascribed status, rational authority • The Guided Missile – egalitarian, impersonal, and task oriented • The Incubator – individual self-fulfillment, personal and egalitarian relations Chapter 6: The Cultural Environment

42. Other Layers of Culture • Ethnicity – significant ethnic communities exist in many countries; likely to affect a myriad of issues • Industry – important layer of culture • Demographics – education, age, seniority and hierarchical level affect difference in values • Ideology – not always consistent with cultures and can vary along time and across regions Chapter 6: The Cultural Environment

43. Key Cultural Issues • Cultural Etiquette – the manners and behavior that are expected in a given situation • Cultural Stereotypes – our beliefs about others, their attitudes and behavior • Ethnocentric – looking at the world from a perspective shaped by our own culture • Auto-stereotypes – how we see ourselves as a group distinguished from others • Hetero-stereotypes – how we are seen by others. Chapter 6: The Cultural Environment

44. Key Cultural Issues Exhibit 6-19: Americans from A to Z Chapter 6: The Cultural Environment

45. Key Cultural Issues • Cultural Distance • The extent to which cultures differ from each other • Hofstede stated that uncertainty avoidance was the most important dimension of FDI • Convergence and Divergence • Convergence hypothesis – assumes that the combination of technology and economics is making countries more alike • Divergence hypothesis – assumes that counties will continue to maintain their distinctive characteristics Chapter 6: The Cultural Environment