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

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chapter 6

International Business

Oded Shenkar and Yadong Luo

Chapter 6

The Cultural Environment

Chapter 6: The Cultural Environment

do you know
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

what is culture
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

culture and international business
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

culture and international business5
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

culture does not explain everything
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

culture does not explain everything7
Culture Does Not Explain Everything

Exhibit 6-1: Research design for the isolation of culture

Chapter 6: The Cultural Environment

correlates of culture
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

language
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

language10
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

language11
Language

Chapter 6: The Cultural Environment

language12
Language

Chapter 6: The Cultural Environment

language13
Language

Exhibit 6-3: Numbers of speakers of major languages of the world (estimated)

Chapter 6: The Cultural Environment

religion
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

religion15
Religion

Chapter 6: The Cultural Environment

religion16
Religion

Chapter 6: The Cultural Environment

religion17
Religion

Exhibit 6-5: Adherents to major world religions, by geographic region, 1996 (in millions)

Chapter 6: The Cultural Environment

national culture classifications
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

hofstede s dimensions of culture
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

power distance pd
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

power distance pd21
Power Distance (PD)

Exhibit 6-6: Power distance: country examples and organizational implications

Chapter 6: The Cultural Environment

power distance pd22
Power Distance (PD)

Exhibit 6-7: Rank distinctions among the Japanese

Chapter 6: The Cultural Environment

uncertainty avoidance ua
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

uncertainty avoidance ua24
Uncertainty Avoidance (UA)

Exhibit 6-8: Uncertainty avoidance: country examples and organizational implications

Chapter 6: The Cultural Environment

individualism collectivism i c
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

individualism collectivism i c26
Individualism/Collectivism (I/C)

Exhibit 6-9: Individualism/collectivism: country examples and organizational implications

Chapter 6: The Cultural Environment

masculinity femininity m f
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

masculinity femininity m f28
Masculinity-Femininity (M/F)

Exhibit 6-10: Masculinity/femininity: country examples and organizational implications

Chapter 6: The Cultural Environment

long term orientation lto
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

long term orientation lto30
Long-Term Orientation (LTO)

Exhibit 6-11: Country scores on Confucian dynamism (long-term orientation)

Chapter 6: The Cultural Environment

criticism of hofstede
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

criticism of hofstede32
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

schwartz s classification
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

schwartz s classification34
Schwartz’s Classification

Exhibit 6-13: Sample country rankings on Schwartz’s dimensions

Chapter 6: The Cultural Environment

trompenaars and hampden turner s classification
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

national cultural clustering
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

national cultural clustering37
National Cultural Clustering

Exhibit 6-14: Ronen and Shenkar’s culture clustering

Chapter 6: The Cultural Environment

national cultural clustering38
National Cultural Clustering

Exhibit 6-15: Huntington’s civilization clustering

Chapter 6: The Cultural Environment

corporate culture
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

classifications of corporate culture
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

classifications of corporate culture41
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

other layers of culture
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

key cultural issues
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

key cultural issues44
Key Cultural Issues

Exhibit 6-19: Americans from A to Z

Chapter 6: The Cultural Environment

key cultural issues45
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