International Business Environments & Operations Chapter 2: Culture

International Business Environments & Operations Chapter 2: Culture
15e, Global Edition Daniels ● Radebaugh ● Sullivan Adapted from a PPT presentation provided by and Copyright © 2015 Pearson Education Ltd. International Business Environments and Operations 15e, Global Edition by Daniels, Radebaugh, and Sullivan

Intreoduction All overheads will not be discussed in class; they are provided for the students’ additional learning and review Good source of definitions and explanations: Multicultural Countries (1) The USA

Home: Little Havana , and, Miami—”The capital of Latin America”
Little Havana is a neighborhood of Miami, Florida, United States. Home to many Cuban exiles, as well as many immigrants from Central and South America, Little Havana is named after Havana, the capital and largest city in Cuba. Little Havana miami florida - - Yahoo Image Search Results Near my home in Little Havana; where I buy my Cuban sandwiches

Home: Little Havana, Miami, Florida—13th Avenue

Ceiba Tree on 13th Ave.—Sacred to many tribes and religions: Bibi Ceiba or Ancient Mother Ceiba, the mother of all trees.

Previous Home: Austin, Texas: Cinco de Mayo Mexican Festival
Texas was once part of Mexico, and still retains a lot of Mexican food, culture, architecture, and festivals.

Alpine Haus restaurant, New Braunfels, Texas, between Austin & San Antonio
Texas has a large population of historically German residents that still maintain some German customs, especially relating to food. We always stop here for the split-pea soup with sausage. German influenced towns in Texas - Fredricksburg, New Braunfels, Bergheim & Boerne.

Major Models of culture: Culture value dimensions:
Geert Hofstede: The Global Leadership and Organizational Behaviour Effectiveness (GLOBE) Project: Shalom Schwartz’ National and Individual Cultural Values: and Mark Peterson & Peter B. Smith: Sources of Guidance in Business Decision-Making: World Values Survey:

Chapter 2 Culture Chapter 2: Culture

The Business of International Business is Culture

Kinds of Culture: Organizational & Societal
ORGANIZATIIONAL CULTURE (Also called “corporate culture”): The values and behaviors that contribute to the unique social and psychological environment of an organization. Organizational culture includes an organization's expectations, experiences, philosophy, and values that hold it together, and is expressed in its self-image, inner workings, interactions with the outside world, and future expectations.

Kinds of Culture: Organizational
Organizational Culture is based on shared attitudes, beliefs, customs, and written and unwritten rules that have been developed over time and are considered appropriate. (1) the ways the organization conducts its business, treats its employees, customers, and the wider community, (2) the extent to which freedom is allowed in decision making, developing new ideas, and personal expression, (3) how power and information flow through its hierarchy, and (4) how committed employees are towards collective objectives.

Kinds of Culture: Organizational
Organizational culture affects the organization's productivity and performance, and provides guidelines on customer care and service, product quality and safety, attendance and punctuality, and concern for the environment. Organizational culture also extends to production-methods, marketing and advertising practices, and to new product creation. Organizational culture tends to be unique for every organization and to be difficult to change.

Models of Organizational Culture
HOFSTEDE: Global Leadership and Organizational Behavior Effectiveness (GLOBE) Project:

Learning Objectives Understand methods for learning about cultural environments Grasp the major causes of cultural difference and change Discuss behavioral factors influencing countries’ business practices Recognize the complexities of cross-cultural information differences, especially communications The Learning Objectives for Chapter 2 are To understand methods for learning about cultural environments To analyze the major causes of cultural difference and change To discuss behavioral factors influencing countries’ business practices To understand guidelines for cultural adjustment

Copyright © 2015 Pearson Education Ltd.
Learning Objectives Analyze guidelines for cultural adjustment Grasp the diverse ways that national cultures may evolve Copyright © 2015 Pearson Education Ltd.

Introduction Learning Objective: Understand methods for learning about cultural environments Learning Objective : To understand methods for learning about cultural environments. Copyright © 2015 Pearson Education Ltd.

Introduction Culture refers to the learned norms based on values, attitudes, and beliefs of a group of people Culture is an integral part of a nation’s operating environment every business function is subject to potential cultural differences What is culture? Culture refers to the learned norms based on values, attitudes, and beliefs of a group of people. Culture can be based on nationality, ethnicity, gender, religion, work organization, profession, age, political party membership, income level, and so on. International business activities incorporate people from all different groups and backgrounds, thus, every business function is subject to cultural differences. Copyright © 2015 Pearson Education Ltd.

Cultural Factors Affecting International Business Operations
Introduction Cultural Factors Affecting International Business Operations This Figure shows the cultural factors affecting international business operations. Copyright © 2015 Pearson Education Ltd.

Introduction Companies need to decide when to make cultural adjustments Fostering cultural diversity can allow a company to gain a global competitive advantage by bringing together people of diverse backgrounds and experience Most people recognize that cross-country differences exist, but they don’t always agree on exactly what they are. It can be beneficial to foster cultural diversity in some cases. Bringing together people of diverse backgrounds and experience can give companies a deeper knowledge about products and services and ways in which to produce and deliver them. Copyright © 2015 Pearson Education Ltd.

Introduction But, cultural collision can occur when a company implements practices that are less effective or when employees encounter distress because of difficulty in accepting or adjusting to foreign behaviors But keep in mind that cultural collision can create problems. Companies doing business in another country must determine which of that nation’s business practices differ from their own and then decide what adjustments, if any, are necessary in order to operate efficiently. Copyright © 2015 Pearson Education Ltd.

Cultural Awareness Problem areas that can hinder managers’ cultural awareness… Subconscious reactions to circumstances The assumption that all societal subgroups are similar Managers that educate themselves about other cultures have a greater chance of succeeding abroad In order to increase their chance for success, managers need to develop their awareness of and sensitivity to other cultures. They can do this by educating themselves. Gathering some basic research on another culture can be instructive. In addition, managers should consider the information they gather to determine if it perpetuates unwarranted stereotypes, covers only limited facets of a country and its culture, or relies on outdated data. Managers should also observe the behavior of those people who have garnered the kind of respect and confidence they themselves will need. Copyright © 2015 Pearson Education Ltd.

Culture and the Nation-State
The nation is a useful definition of society because similarity among people is a cause and an effect of national boundaries laws apply primarily along national lines language and values are shared within borders rites and symbols are shared along national lines We often use the idea of a nation when we talk about culture. In general, within national borders, people largely share such essential attributes as values, language, and race. There is a feeling of “we” that casts foreigners as “they.” Rites and symbols—flags, parades, rallies—and the preservation of national sites, documents, monuments, and museums promote a common perception of history and perpetuates national identity. Copyright © 2015 Pearson Education Ltd.

Culture and the Nation-State
Country-by-country analysis can be difficult because subcultures exist within nations similarities link groups from different countries Managers also need to focus on relevant groups Note though that subcultures do exist within nations and groups from different nations can actually be quite similar. International managers need to focus on relevant groups—differentiating, for example, between the typical attitudes of rural dwellers and those of urban dwellers, or those of young people versus old people.

How Cultures Form and Change
Learning Objective: Grasp the major causes of cultural difference and change Learning Objective : To analyze the major causes of cultural difference and change.

How Cultures Form and Change
Cultural value systems are established early in life but may change through choice or imposition cultural imperialism contact with other cultures cultural diffusion creolization Culture is learned – from parent to child, teacher to student, peer to peer, and so on. So, while cultural value systems tend to be established early in life, they can change. Change can be by choice or it can be imposed – this type of change is called cultural imperialism. Cultural value systems can also change as a result of contact with other cultures. This is known as cultural diffusion. When this change results in mixing cultural elements, the process is known as creolization. Copyright © 2015 Pearson Education Ltd.

Language: Cultural Diffuser and Stabilizer
A common language within a country is a unifying force A shared language between nations facilitates international business Native English speaking countries account for a third of the world’s production English is the international language of business Language acts both as a diffuser of culture and as a stabilizer. On one hand, a common language unifies a culture. However, when people from different areas speak the same language, culture spreads more easily. So, there’s greater cultural homogeneity among all English-speaking countries and among all Spanish-speaking countries than there is between English-speaking countries and Spanish-speaking countries. When nations share a language, business is easier because there’s no need for time consuming and expensive translations. Often, people studying languages choose the ones that are most useful in interacting with other countries. Copyright © 2015 Pearson Education Ltd.

Distribution Of The World’s Major Languages This Map shows the distribution of the world’s major languages. Notice the large number of English speaking, French speaking, and Spanish speaking countries. Copyright © 2015 Pearson Education Ltd.

Major Language Groups: Population and Output This Figure shows the relationship between major language groups and world output. Notice the importance of English as a language of international business.

Religion: Cultural Stabilizer
Religion impacts almost every business function Centuries of profound religious influence continue to play a major role in shaping cultural values and behavior many strong values are the result of a dominant religion Religion also acts as a cultural stabilizer. Dominant religions can have a profound influence in shaping cultural values and behavior. Many religions even impact specific beliefs that may affect business, such as inhibiting the sale of certain products or the performance of work at certain times. McDonald’s, for example, recognizes the Hindu and Muslim influences in India and chooses not to sell beef or pork in the country. Similarly, El Al, the Israeli national airline, does not fly on Saturday, the Jewish Sabbath. When rival religions or factions fight for political control in a country, business is often negatively affected. You might think of property damage, broken supply chains, or breaches in connections with customers as examples.

Religion: Cultural Stabilizer
Distribution Of The World’s Major Religions This Map shows the distribution of major religions around the world.

Behavioral Practices Affecting Business
Learning Objective: Discuss behavioral factors influencing countries’ business practices Learning Objective : To discuss behavioral factors influencing countries’ business practices. Copyright © 2015 Pearson Education Ltd.

Romie Littrell: My focus in teaching and research: Hofstede’s Model of Cultural Value Dimensions:

The Business of International Business is Culture
Prof. Romie Frederick Littrell Department of Management NRU-HSE-SPb

Relevant publications to this presentation
Fetscherin, Marc, Ilan Alon, Romie Littrell, and Kit Kwong Allan CHAN. "In China? pick your brand name carefully." Harvard Business Review (2012). Summarised at: carefully Romie F. Littrell, Ilan Alon, Ka Wai CHAN, (2012) "Regional differences in managerial leader behaviour preferences in China", Cross Cultural Management: An International Journal, Vol. 19 Issue: 3, pp ,

Societal Culture Defined
learned beliefs, values, rules, norms, symbols & traditions that are common to a specific group of people shared qualities of a group that make them unique is the way of life, customs, & scripts of a group of people Terms related to culture – Multicultural – approach or system that takes more than one culture into account Diversity – existence of different cultures or ethnicities within a group or organization

Related Concepts Ethnocentrism –
The tendency for individuals to place their own group (ethnic, racial, or cultural) at the center of their observations of the world Perception that one’s own culture is better or more natural than other cultures Is a universal tendency and each of us is ethnocentric to some degree Ethnocentrism can be a major obstacle to effective business management and leadership Prevents people from understanding or respecting other cultures

Hofstede: Why is culture so important?
Do we need to bother about culture? Every visitor of this site has her or his unique personality, history, and interest. At the same time, we share our human nature. We are group animals. We use language and empathy, and practice collaboration and inter-group competition. The unwritten rules of how we do these things differ from one human group to another. “Culture” is how we call these unwritten rules about how to be a good member of the group.

Hofstede: A Definition of Culture (in the anthropological sense)
collective programming of the mind distinguishing the members of one group or category of people from another group/category -- can be nation, region, organization, profession, generation, gender For review: not shown in class: Geert Hofstede on Culture – YouTube

Mental programmmes

Values Values are strong emotions with a minus and a plus pole Like evil-good, abnormal-normal, dangerous-safe, dirty-clean, immoral- moral, indecent-decent, unnatural- natural, paradoxical-logical, ugly- beautiful, irrational-rational What is rational is a matter of values

The learning of culture

National versus organizational cultures
National culture differences are rooted in values learned before age 10 They pass from generation to generation For organizations, they are given facts Organizational cultures are rooted in practices learned on the job Given enough management effort, they can be changed International organizations are held together by shared practices, not by shared values

Research into national cultures Culture’s Consequences, Geert Hofstede, Initially 5 dimensions; LTO/STO added soon after 1980 book. Inequality: more or less? Power Distance large vs. small The unfamiliar: fight or tolerate? Uncertainty Avoidance strong vs. weak Relation with in-group: loose or tight? Individualism vs. Collectivism Emotional gender roles: different or same? Masculinity vs. Femininity Need gratification: later or now? Long vs. Short term orientation

Hofstede’s website:

National culture dimensions: reliable scores showing relative positions of > 70 countries
Initially based on employees of IBM subsidiaries in 40 countries around 1970 Until 2002, 6 major replications (elites in nations, employees of other corporations, airline pilots, consumers, civil servants) Results very stable – even if cultures shift, countries shift together so relative scores remain valid

Dimension 1: Power Distance
Extent to which the less powerful members of institutions and organizations expect and accept that power is distributed unequally Transferred to children by parents and other elders Hofstede: 10 minutes on power distance: wfyCw

Dimension 2: Uncertainty Avoidance
Extent to which members of a culture feel threatened by ambiguous and unknown situations Not to be confused with risk avoidance: risk is to uncertainty as fear is to anxiety. Uncertainty and anxiety are diffuse feelings – anything may happen This dimension focuses on how cultures adapt to changes and cope with uncertainty. Emphasis is on extent to which a culture feels threatened or is anxious about ambiguity. It is not risk avoidance but rather, how one deals with ambiguity. Hofstede, 10 minutes on Uncertainty Avoidance

SMALL PD, WEAK UA LARGE PD, WEAK UA CHINA, HK, SINGAPORE INDIA, BANGLADESH INDONESIA, MALAYSIA NORDIC CTRS ANGLO CTRS, USA NETHERLANDS GERMAN SPEAKING CENTERS HUNGARY ISRAEL TAIWAN, THAILAND, PAKISTAN LATIN CENTERS, EAST-EUROPE JAPAN, KOREA SMALL PD, STRONG UA LARGE PD, STRONG UA

Dimension 3: Individualism vs. Collectivism
Individualism: A society in which the ties between individuals are loose: everyone is expected to look after self and immediate family Collectivism: A society in which individuals from birth onwards are part of strong in-groups which last a lifetime, in return for loyalty to your in- group you are provided support Hofstede: 10 minutes on I/C:

Dimension 4: Masculinity vs. Femininity
Masculinity: A society in which emotional gender roles are distinct: men are supposed to be assertive, tough and focused on material success, women on the quality of life Femininity: A society in which emotional gender roles overlap: both men and women are supposed to be modest, tender, and focused on the quality of life 10 minutes with Hofstede on Mas/Fem:

COLLECTIVIST,FEMININE
COLLECTIVIST,MASCULINE THAILAND, KOREA, VIETN INDON, MALAYS, SINGAP COSTA RICA, CHILE PORTUGAL, RUSSIA HK, CHINA, JAPAN, PHILS INDIA, BANGLADESH MEXICO, VENEZUELA GREECE, ARAB WORLD SPAIN FRANCE NETHERLANDS NORDIC COUNTRIES CZECHIA, HUNGARY POLAND, ITALY GERMAN SPK CTRIES ANGLO COUNTRIES, USA INDIVIDUALIST, FEMININE INDIVIDUALIST,MASCULINE

Validations of country scores against over 4 measures from other sources
Examples: Power distance: Respect for elders; corruption; polarization and violence in national politics Uncertainty avoidance: Religiosity; xenophobia; identity card obligation; faster driving Individualism: GNP per capita; faster walking; weak family ties; frequency of using the word “I” Masculinity: Assertiveness; performance versus solidarity; fewer women elected; homophobia

Dimension 5: Long Term vs. Short Term Orientation
Long Term Orientation is directed at the future and seeks future rewards through perseverance and thrift Short Term Orientation is directed at the past and present through respect for tradition, fulfilling social obligations and seeking immediate rewards 10 minutes with Hofstede on LTO/STO

SHORT TERM ORIENTATION
LONG TERM ORIENTATION CHINA, HK, TAIWAN JAPAN, VIETNAM KOREA BRAZIL, INDIA THAILAND, SINGAPORE NETHERLANDS, NORDIC COUNTRIES BANGLADESH BELGIUM, FRANCE, GERMANY AUSTRALIA, NEW ZEALAND USA, BRITAIN, CANADA SPAIN, PHILIPPINES AFRICAN COUNTRIES PAKISTAN SHORT TERM ORIENTATION

Ethnic Fractionali-zation Linguistic Fractionali-zation
ETHNOLINGUISTIC FRACTIONALISATION: High numbers=high fractionalization Country Ethnic Fractionali-zation Linguistic Fractionali-zation Religious Fractionali-zation China 0.15 0.13 0.66 India 0.42 0.81 0.33 Japan 0.01 0.02 0.54 Russian Federation 0.25 0.44

Naumov & Puffer (20, p. 714): Hofstede Score Means by Geographic Regions

Ethnolinguistic Areas in China

New Dimensions: Minkov & Hofstede: Indulgence vs. Restraint
Integrating all presently available cross-cultural databases accessible to him, and without an a priori commitment to the five Hofstede dimensions, Michael Minkov defined three new dimensions, two of which cover issues that Hofstede’s five address only partially or not at all. Minkov labelled one of them Indulgence versus Restraint. Indulgence stands for a society which allows relatively free gratification of some desires and feelings, especially those that have to do with leisure, merrymaking with friends, spending, consumption and sex. Its opposite pole, Restraint, stands for a society which controls such gratification, and where people feel less able to enjoy their lives.

Hofsetede & Minkov: Monumentalism vs Self-Effacement (Flexumility) Index (MON)
Monumentalism stands for a society which rewards people who are, metaphorically speaking, like monuments: proud and unchangeable. Its opposite pole, Self-Effacement, stands for a society which rewards humility and flexibility. The Monumentalism Index will probably be negatively correlated with the Long Term Orientation Index, but it includes aspects not covered by the latter.

Highest Monumentalism Scores from Samples (Minkov used a differenct scoring system than Hofstede’s)
UAI PDI IDV MAS LTO_WVS Indulgence Monumentalism Morocco 68 70 46 53 14 175 338 Egypt 7 186 319 Jordan 16 199 316 Puerto Rico 432 312 Venezuela 76 81 12 73 398 309 Iraq 25 307 Nigeria 13 435 306 Salvador, El 94 66 19 40 301 Peru 87 64 42 243 221

Comparison of some average dimension scores
UAI PDI IDV MAS LTO_WVS Indulgence Monumentalism Latvia 63 44 70 9 69 16 77 Ukraine 86 32 76 Korea, South 85 60 18 39 75 93 74 Russia 95 36 81 21 Belarus Estonia 40 30 82 65 Lithuania 42 19 83 62 Taiwan 58 17 45 56 China 80 20 66 87 84 52 Japan 92 54 46 88

Highest Indulgence Scores from Samples (Minkov used a different scoring system than Hofstede’s)
UAI PDI IDV MAS LTO_WVS Indulgence Ghana 4 435 Nigeria 13 Puerto Rico 432 Venezuela 76 81 12 73 16 398 Mexico 82 30 69 24 370 Costa Rica 86 35 15 21 369 Peru 87 64 42 25 243

Lowest Indulgence Scores from Samples
UAI PDI IDV MAS LTO_WVS Indulgence Estonia 60 40 30 82 Ukraine 86 32 Albania 61 24 Russia 95 93 39 36 81 21 Latvia 63 44 70 9 69 16 Pakistan 55 14 50

Correlates of LTO/STO Dimension
Short term Good and evil are absolute Concern with Truth Analytical thinking Weaker at mathematics Old age seen as a bad time but starting late Higher rates of imprisonment Spending rates Focus on bottom line Past and present economic stagnation Long term Good and evil are relative Concern with Virtue Synthetic thinking Better at mathematics Old age seen as a good time and starting early Lower rates of imprisonment Savings rates Aim at market position Past and present economic growth

Are there national management and leadership cultures ?
In national cultures, all spheres of life and society are interrelated: family, school, job, religious practice, economic behavior, health, crime, punishment, art, science, literature, management, leadership Hofstede: There is no separate national management or leadership culture – management and leadership can only be understood as part of the larger culture

For review: recent discussion by Hofstede, about 30 minutes

Review: Additional dimensions: Michael Minkov
About an hour:

Hofstede’s descriptions of expected behaviors and cultural traits as a function of cultural value scores and environment Hofstede, G. (1994) The business of international business is culture, International Business Review, 3(1), Cultural traits summarised from notes of Prof. & Dean Emeritus Charles H. Tidwell, Jr., PhD Andrews University, Berrien Springs, MI, USA, and Adjunct Professor, Southern Adventist University, Collegedale, Tennessee, USA

China: High (80), Russia High (93)
Small Power Distance Societies Large Power In the family: 1. Children encouraged to have a will of their own 2. Parents treated as equals 1. Children educated towards obedience to parents 2. Parents treated as superiors At school: 1. Student-centered education (student initiative) 2. Learning represents impersonal “truth” 1. Teacher-centered education (order) 2. Learning represents personal “wisdom” from teacher (expert, guru) At work place: 1. Hierarchy means an inequality of roles, established for convenience 2. Subordinates expect to be consulted 3. Ideal boss is resourceful democrat Hierarchy means existential inequality 2. Subordinates expect to be told what to do 3. Ideal boss is benevolent autocrat (good father)

Traits: Power Distance in Societies
High Power Distance Low Power Distance Social Norms those in power have privileges all have equal rights powerful people try to look as powerful as possible powerful people try to look less powerful than they are inequality the norm; everyone has specific place inequality should be minimized; no set hierarchy respect for authority respect for individuality Political military / autocratic / oligarchic government government based on majority power struggle power sharing little discussion / violence common much discussion, little violence Work tall organizational pyramids short organizational pyramids wide salary range from top to bottom narrow salary range from top to bottom subordinates expect to be told subordinates expect to be consulted School students dependent on teachers teachers treat students as equals parents side with teachers to maintain order parents may side with students against teachers students treat teachers with respect – even out of class students treat teachers as equals

China: Low (Ind 20); Russia: Low (Ind 39)
Collectivist Societies Individualist In the family: Education towards “we” consciousness Opinions pre-determined by group Obligations to family or in-group: Harmony Respect Shame Education towards “I” consciousness Private, personal opinions expected Obligations to self: Self-interest Self actualization Guilt At school: Formal learning is for the young only Learn how to do Education can be lifelong Learn how to learn At work place: Value standards different for in-group and out-groups: particularism Other people are seen as members of their group Relationship prevails over task Moral model of employer-employee relationship Same value standards apply to all: universalism Other people seen as potential resources Task prevails over relationship Calculative model of employer-employee relationship

Traits of: High Individualism Low Individualism (collectivism) National more economic development developed / wealthy modern industry, urbanization less economic development underdeveloped / poor more traditional agriculture greater social mobility / larger middle class less social mobility / smaller middle class nuclear family extended family / tribe Politics political power by voter political power by interest groups laws / rights same for all law / rights depend on group Religion/ Ideas monotheistic polytheistic individual conversion group conversions matter of fact about science / tech science / tech seen as magic Work family relationships a disadvantage in hiring relatives preferred in hiring hiring and promotion based on skill / rules hiring and promotion take in-group status into account more working hours fewer working hours School teachers deal with individuals teachers deal with groups students expected to speak up students expected to listen learn how to learn learn how to do Other disability a handicap to overcome disability a shame children take care of self as soon as possible children maintain lifelong contacts with family security through insurance security through social network

Masculinity: China: Moderately High: 66; Russia Moderately Low: 36
Feminine Societies Masculine Societies In the family: 1. Stress on relationships 2. Solidarity 3. Resolution of conflicts by compromise and negotiation 1. Stress on achievement 2. Competition 3. Resolution of conflicts by fighting them out At school: 1. Average student is norm 2. System rewards student’s social adaptation 3. Student’s failure at school is relatively minor accident 1. Best students are norm 2. System rewards student’s academic performance 3. Student’s failure at school is disaster, may lead to suicide At work place: 1. Assertiveness ridiculed 2. Undersell yourself 3. Stress on life quality 4. Intuition 1. Assertiveness appreciated 2. Oversell yourself 3. Stress on careers 4. Decisiveness

Traits: Masculinity/ Femininity in Society
High Masculinity Low Masculinity (High Femininity) Social Norms ego oriented relationship oriented money and things are important quality of life and people are important live in order to work work in order to live Politics and Economics economic growth high priority environment protection high priority conflict solved through force conflict solved through negotiation Religion most important in life less important in life only men can be priests both men and women as priests Work larger gender wage gap smaller gender wage gap fewer women in management more women in management preference for higher pay preference for fewer working hours Family and School traditional family structure flexible family structure girls cry, boys don’t; boys fight, girls don’t both boys and girls cry; neither fight failing is a disaster failing a minor accident

UAI: China: Low: 30; Russia: High: 95
Weak Uncertainty Avoidance Societies Strong Uncertainty In the family: 1. What is different is ridiculous or curious 2. Ease, indolence, low stress 3. Aggression and emotions not shown 1. What is different is dangerous 2. Higher anxiety and stress 3. Showing of aggression and emotions accepted At school: 1. Students comfortable with: 2. Unstructured learning situations 3. Vague objectives 4. Broad assignments 5. No time tables 6. Teachers may say “I don’t know” 2. Structured learning situations 3. Precise objectives 4. Detailed assignments 5. Strict time tables 6. Teachers should have all the answers At work place: 1. Dislike of rules, written or unwritten 2. Less formalization and standardization 1. Emotional need for rules, written or unwritten 2. More formalization and standardization

Traits, Uncertainty Avoidance in Societies
High Uncertainty Avoidance Low Uncertainty Avoidance Social Norms conservatism, law and order openness to change, innovation xenophobic tolerance of diversity express emotions supress emotions Politics / Legal System weak interest in politics high interest in politics citizen protest repressed citizen protest accepted more and specific laws and regulations fewer and general laws and regulations Religion Catholic, Islam, Judaism, Shintoism Protestant, Buddhism, Taoism, Hinduism aggressively fundamentalist little persecution for beliefs Ritualized / ceremonial Avoid ritualization and ceremony School teachers have all answers teachers may say “don’t know” structured learning open-ended learning Family traditional gender roles fewer gender roles children taught world is hostile children taught world is benevolent

Long-Term / Short-Term Orientation Long-Term: China: High: 87, Russia: High: 81
High Long Term Low Long Term (i.e. Short Term) emphasis on persistence emphasis on quick results relationships ordered by status status not a major issue in relationships personal adaptability important personal steadfastness and stability important face considerations common but seen as a weakness protection of one’s face is important leisure time not too important leisure time important save, be thrifty spend invest in real estate invest in mutual funds relationships and market position important bottom line important good or evil depends on circumstances belief in absolutes about good and evil

In Hofstede (2002), the five dimensions of national cultures were related to expectations of behavior 1. Expectations of Inequality can lead to reticence of students to interact with lecturer: Less interaction: Large Power Distance More interaction: Small Power Distance

In Hofstede (2002), the five dimensions of national cultures were related to expectations of behavior 2. Reaction to the unfamiliar can influence openness to new ideas and new ways of doing things: Fight: Strong Uncertainty Avoidance Tolerate: Weak Uncertainty Avoidance

In Hofstede (2002), the five dimensions of national cultures were related to expectations of behavior 3.Relation with in-group can affect the perception of the lecturer as an insider or outsider, and determine attitudes toward assisting other students: Loose relationship: Individualism Tight relationship: Collectivism

In Hofstede (2002), the five dimensions of national cultures were related to expectations of behavior 4.Emotional gender roles might affect attitudes toward male and female lecturers and fellow students: Different: Masculinity Same: Femininity

Later: Long Term Orientation Now: Short Term Orientation
In Hofstede (2002), the five dimensions of national cultures were related to expectations of behavior 5.Need gratification: Later: Long Term Orientation Now: Short Term Orientation

Geert Hofstede’s 7-Dimension theory in 2008
Indulgence vs. Restraint: Indulgence defines a society that allows relatively free gratification of some desires and feelings, especially those that have to do with leisure, merrymaking with friends, spending, consumption, and sex. Its opposite pole, Restraint, defines a society which restricts such gratification, and where people feel less free and able to enjoy their lives.

Indulgence vs. Restraint. Minkov (27, p
Indulgence vs. Restraint. Minkov (27, p. 114) specifies that at the societal level, happiness is associated with a perception of life control, with life control being a source of freedom and of leisure. Societies with high means for Indulgence tend to co-mingle work and social activities, and generally have a less “serious” attitude toward work than societies with high means for Restraint.

Monumentalism vs. Flexumility (a created word, with the dimension name changed to Self Effacement by the theorists): Monumentalism is related to pride in self, national pride, making parents proud, and believing religion to be important, similar to McClelland’s (1961) concept of need for achievement

Monumentalism vs. Flexumility (a created word, with the dimension name changed to Self Effacement by the theorists): The Flexumility pole identifies societies valuing humility, with members seeing themselves as not having a stable, invariant self-concept, and a flexible attitude toward Truth.

Hofstede Related to Business Practice

Hofstede - Individualism
High emphasis on person creative person valued initiative valued Low emphasis on group creative person is disruptive conformity valued

General conclusion from culture studies
There is no such thing as a universal economic or psychological rationality NATIONALITY constrains RATIONALITY

Student-level book, 25 Academic book, 21

Further reading, Geert & Gert Jan Hofstede’s website
Details for studenets’ independent review: Further reading, Geert & Gert Jan Hofstede’s website

Hofstede Related to Business Practice

The business of international business is culture
Hofstede, Geert (1994) “The Business of International Business is Culture”, International Business Review, Vol. 3, No. 1, pp Hofstede, Geert (24) “The Business of International Business is Culture, Even More So!”, Academy of Management International Management Division Newsletter, December, pp EC04.pdf

Hofstede: The Business of International Business is Culture, Even More So!
The functioning of international business organizations hinges on intercultural communication and cooperation. Geert Hofstede: “As I wrote in 1994, managing international business means handling both national and organizational culture differences at the same time.”

Organizational cultures are somewhat manageable while national cultures are given facts for management; common organizational cultures across borders are what keeps multinationals together.

As tariff and technological advantages wear off, competition automatically shifts, besides towards economic factors, towards cultural advantages or disadvantages. No country and no organization can be good at everything; cultural strengths imply cultural weaknesses. This is a strong argument for making cultural considerations part of strategic planning, and locating activities in countries, in regions and in organizational units that possess the cultural characteristics necessary for competing in these activities.

Culture is present in the design and quality of products and in the presentation of services. In the 1980s the belief spread that technology and modernity would lead to a worldwide convergence of consumers' needs and desires. This should enable global companies to develop standard brands with universal marketing and advertising programs.

In the 1990s more and more voices in the marketing literature expressed doubts about this convergence, and referred to culture indices to explain persistent cultural differences. Analysing national consumer behaviour data over time, Dutch marketing expert Marieke de Mooij showed that actual buying and consumption patterns in affluent countries in the 1980s and 90s diverged as much as they converged. Affluence implies more possibilities to choose among products and services, and consumers‘ choices reflected psychological and social needs which are culture-bound.

In Mexico? In China? In the USA?
Hofstede: The Business of International Business is Culture, Even More So! In advertising, the same global brand may appeal to different cultural themes in different countries. In general, what is a bicycle? In Mexico? In China? In the USA?

Advertising, and television advertising in particular, is directed at the inner motivation of prospective buyers whose minds have not been and will not be globalised. Organizations moving to unfamiliar cultural environments are often badly surprised by unexpected reactions of the press, the authorities or the public to what they do or want to do.

Perhaps the effect of the collective values of a society is nowhere as clear as in these cases. The values are partly invisible to the newcomer, but they become all too visible in press reactions, government decisions, or organized actions by uninvited interest groups.

Nike Air Muslims took offence at Nike’s “flaming air” logo in June, 1997 when the "flaming air“, claiming that the logo looked too similar to the Arabic form of God's name, "Allah". Nike pulled more than 382,000 pairs of sneakers from the market.

Mergers, acquisitions, joint ventures and alliances across national borders have become quite frequent, but they remain a regular source of cross-cultural clashes. Cross-national ventures have often turned out to be dramatic failures. This will continue as long as management decisions about international ventures will be based solely on financial considerations. Those making the decision rarely imagine the operating problems that arise inside the newly formed hybrid organizations.

Cultural integration takes lots of time, energy, and money.
Hofstede: The Business of International Business is Culture, Even More So! Even within countries, such ventures have a dubious success record, but across borders they are even less likely to succeed. If cultural conditions do look favourable, the cultural integration of the new cooperative structure should still be managed; it does not happen by itself. Cultural integration takes lots of time, energy, and money. These are some of the implications of culture spelled out in the new, edition of my book “Cultures and Organizations: Software of the Mind”.

Culture Shock and Hofstede’s Power Distance
Geert Hofstede (Culture’s Consequences, 1980, p. 21) studied culture within organizations. Part of his study was on the dependence relationship or Power Distance -- the extent to which the less powerful members of an organization expect and accept that power is distributed unequally.

Hofstede uses this story to illustrate Power Difference
The last revolution in Sweden disposed of King Gustav IV, whom they considered incompetent, and surprising invited Jean Baptise Bernadotte, a French general who served under Napoleon, to become their new King. He accepted and became King Charles XIV. Soon afterward he needed to address the Swedish Parliament. Wanting to be accepted, he tried to do the speech in their language. His broken Swedish amused the Swedes so much that they roared with laughter.

Culture Shock The Frenchman was so upset that he never tried to speak Swedish again. Bernadotte was a victim of culture shock -- never in his French upbringing and military career had he experienced subordinates who laughed at the mistakes of their superior. This story has a happy ending as he was considered a very good king and ruled the country as a highly respected constitutional monarch until 1844 (his descendants still occupy the Swedish throne).

Social Stratification
Social ranking is determined by an individual’s achievements and qualifications an individual’s affiliation with, or membership in, certain groups Social stratification determines an individual’s class, status, and financial rewards within a culture. It’s determined by individual achievements and qualifications, and by affiliation and membership in groups.

Social Stratification
Group affiliations can be Ascribed group memberships based on gender, family, age, caste, and ethnic, racial, or national origin Acquired group memberships based on religion, political affiliation, professional association Two other factors that are important education and social connections An individual may belong to a group because of age, gender, family, racial, or ethnic variables. This is known as ascribed group membership. When membership is based on religion, political affiliation, or professional association it’s an acquired group membership. In general, equalitarian societies tend to put more emphasis on acquired group membership. Keep in mind that education and social connections also impact an individual’s rank in a society.

Work Motivation The motivation to work differs across cultures Studies show the desire for material wealth is a prime motivation to work promotes economic development people are more eager to work when the rewards for success are high masculinity-femininity index high masculinity score prefers “to live to work” than “to work to live” The desire to work differs across cultures. In countries where material wealth is valued, there is generally a greater motivation to work. This of course, also helps to promote economic development. In fact, the higher level of development that exists in some countries can be explained by the work of Max Weber who suggested that self-discipline, hard work, honesty, and a belief in a just world foster work motivation and, thus, economic growth. Typically, people are also more eager to work when the potential rewards are high. We can also measure attitudes toward work and achievement using the masculinity-femininity index. The degree to which individuals are assertive, confrontational, and aggressive in their relationships with others varies across borders. These attitudinal differences help explain why an international company may encounter managers abroad who behave differently from what it expects or prefers. Copyright © 2015 Pearson Education Ltd.

Work Motivation Hierarchy of needs theory
Individuals will fill lower-level needs before moving to higher level needs The hierarchy-of-needs theory suggests that people fill lower-level needs before filling higher level needs. An understanding of this theory is helpful to managers as they make decisions regarding reward preferences of employees in different countries. In very poor countries, for example, workers might be motivated with enough compensation to simply satisfy their needs for food and shelter. Workers in other countries may be motivated by other needs.

Maslow andMotivation The physiological needs are high priority. When they are not fulfilled to a sufficient level, almost all effort goes to filling these basic needs. Once these are nearing complete satisfaction, effort is allocated to the next level of the hierarchy, e.g., safety. Once safety is nearing satisfaction, effort is allocated to the next level, and so on for each of the higher needs. The hierarchy-of-needs theory suggests that people fill lower-level needs before filling higher level needs. An understanding of this theory is helpful to managers as they make decisions regarding reward preferences of employees in different countries. In very poor countries, for example, workers might be motivated with enough compensation to simply satisfy their needs for food and shelter. Workers in other countries may be motivated by other needs.

Maslow and Motivation “The chief principle of organization in human motivational life is the arrangement of basic needs in a hierarchy of lesseror greater priority” (Maslow, 1970, p. 59). The ranking of needs differs among cultures: See: slow_Academic_Amnesia_CCCC_Working_Pape r_ pdf The hierarchy-of-needs theory suggests that people fill lower-level needs before filling higher level needs. An understanding of this theory is helpful to managers as they make decisions regarding reward preferences of employees in different countries. In very poor countries, for example, workers might be motivated with enough compensation to simply satisfy their needs for food and shelter. Workers in other countries may be motivated by other needs.

Work Motivation MISLEADING, FROM THE TEXTBOOK: The Hierarchy of Needs and Need-Hierarchy Comparisons This Figure shows the hierarchy of needs and need-hierarchy combinations. Note that needs are broken down into physiological needs, security needs, affiliation needs, esteem needs, and self-actualization needs. The way in which these needs are ranked differs among countries.

EIGHT LEVELS, NOT FIVE Selmer & Littrell (2010) in their review of Maslow’s work find his actual set of needs as depicted in Figure 2 on the following overhead. Maslow expanded his theory to eight levels, specifically naming two lower-level growth needs prior to the general level of self-actualization (Maslow & Lowery, 1998) and one beyond that level (Maslow, 1971). They are: 5) Cognitive: to know, to understand, and explore; 6) Aesthetic: symmetry, order, and beauty; 7) Self-actualization: to find self-fulfilment and realize one's potential; and 8) Self-transcendence: to connect to something beyond the ego or to help others find self-fulfilment and realize their potential.

The physiological needs are high priority
The physiological needs are high priority. When they are not fulfilled to a sufficient level, almost all effort goes to filling these basic needs. Once these are nearing complete satisfaction, effort is allocated t o the next level of the hierarchy, e.g., safety. Once safety is nearing satisfaction, effort is allocated to the next level, and so on for each of the higher needs. “The chief principle of organization in human motivational life is the arrangement of basic needs in a hierarchy of lesser or greater priority” (Maslow, 1970, p. 59). This process is depicted for a hypothetical individual in Figure 1 (from Hagerty, 1999).

Relationship Preferences
Relationship preferences differ by culture Power distance high power distance implies little superior-subordinate interaction autocratic or paternalistic management style low power distance implies consultative style Individualism versus collectivism high individualism – welcome challenges high collectivism – prefer safe work environment Relationships preferences – and more specifically the interactions between bosses, subordinates, and peers – also differ from country to country. Power distance refers to the general relationship between superiors and subordinates. Where it is high, people prefer little consultation between superiors and subordinates. Employees usually prefer one of two management styles: autocratic -ruling with unlimited authority - or paternalistic - regulating conduct by supplying needs. Where power distance is low, they prefer “consultative” styles. Individualism is characterized by a preference for fulfilling leisure time and improving skills outside the organization. It also implies a low preference for receiving compensation in the form of benefits and a high preference for personal decision making and on-the-job challenges. In contrast, collectivism encourages dependence on the organization and a preference for thorough training, satisfactory workplace conditions, and good benefits.

Risk Taking Behavior Risk taking behavior differs across cultures Uncertainty avoidance handling uncertainty Trust degree of trust among people Future orientation delaying gratification Fatalism attitudes of self-determination How people approach risk also varies from country to country. Four types of risks are important: uncertainty avoidance, trust, future orientation, and fatalism. In cultures where there is high uncertainty avoidance employees prefer following set rules even if breaking them may be in the company’s best interest. Similarly, many consumers are not prepared to risk being early adopters of products. In cultures where trust is high, the cost of doing business tends to be lower because managers don’t spend much time fussing over every possible contingency and monitoring every action for compliance with certain business principles. Business decisions can also be influenced by a culture’s attitude toward the future and whether it’s worthwhile to delay gratification in order to invest for the future. Finally, if people believe strongly in self-determination, they may be willing to work hard to achieve goals and take responsibility for performance. But if they’re fatalistic and believe every event in life is inevitable, they’re less likely to accept the basic cause-and-effect relationship between work and reward. Copyright © 2015 Pearson Education Ltd.

Information and Task Processing
Cultures handle information in different ways Perception of cues Obtaining information low context versus high context cultures Information processing Monochronic versus polychronic cultures Idealism versus pragmatism How information is perceived, obtained, and processed differs from country to country. In low context cultures people generally regard only firsthand information that bears directly on the subject at hand as being relevant. Managers typically spend little time on small talk and tend to get to the point. In contrast, in high-context cultures people see seemingly peripheral information as pertinent and infer meanings from things said either indirectly or casually. In monochronic cultures people prefer to work sequentially. So, for example, a transaction with one customer is completed before dealing with another. But in a polychronic culture, people often feel more comfortable working simultaneously on a variety of tasks, such as dealing immediately with multiple customers who need service. Cultures that prefer to establish overall principles before tackling smaller details take an approach called idealism, while those that focus more on details than on abstract principles take a pragmatic approach. Keep in mind that an individual’s approach to information processing can affect business in a number of ways. In a culture of pragmatists like the United States, for example, labor negotiations tend to focus on well-defined issues—say, hourly pay increases for a specific bargaining unit. However, in an idealist culture like that of Argentina, labor disputes tend to blur the focus on specific demands as workers tend to rely first on mass action—such as general strikes or political activities—to publicize basic principles. Copyright © 2015 Pearson Education Ltd.

Communications Cross border communications do not always translate as intended Spoken and written language Silent language Color Distance Time and punctuality Body language Prestige Communication across cultures can be problematic when communications are not translated with the same meaning as intended. This problem can occur with not only with spoken and written language and but also with silent language. Even a slight misuse of words or phrases can have a significant impact on the meaning of a message. Moreover, it’s important to recognize that even when two countries share a language problems can exist. For example, some 4,000 words have different meanings in British and American English. Silent language refers to a host of nonverbal cues. How these physical cues or “body language” are perceived and interpreted varies between cultures. Many Western countries, for instance, associate black with death ,while white has the same connotation in some parts of Asia. Similar differences exist with perceptions of time and punctuality. In the United States, people usually arrive early for business appointments, a few minutes late for dinner at someone’s home, and a bit later still for large social gatherings. In other countries though, the concept of punctuality in any or all of these situations may be different. The appropriate distance people maintain during conversations and prestige also differs between countries. For Americans, the customary distance for a business discussion is 5 to 8 feet; for personal business, it’s 18 inches to 3 feet. The much smaller distances common in Latin America can make many Americans quite uncomfortable. Likewise, a U.S. manager who places great faith in objects as cues to prestige may underestimate the status of foreign counterparts who don’t value large, plush offices on high floors. A foreigner may underestimate U.S. counterparts who perform their own services, such as opening their own doors, fetching their own coffee, and answering unscreened phone calls.

Body Language Is Not A Universal Language
Communications Body Language Is Not A Universal Language These images show how a simple gesture is interpreted quite differently around the world.

Dealing with Cultural Differences
Learning Objective: Analyze guidelines for cultural adjustment Learning Objective : To understand the guidelines for cultural adjustment.

Do managers have to alter their customary practices to succeed in countries with different cultures? Must consider Host society acceptance Degree of cultural differences cultural distance Ability to adjust culture shock and reverse culture shock Company and management orientation So, are managers required to change their customary practices to match those of the host culture? The answer is not always clear. In general, host cultures don’t expect that foreign managers will totally conform with their norms and values, but it is important that they understand and respect the local culture. Managers need to consider how they will be received by the host country, and make adjustments accordingly. In many cases, host countries are willing to view foreigners differently. Managers should also be aware that closely clustered countries may not be as alike as they seem, and so adjustments may be necessary in some cases. Women’s roles and behavior, for example, differ substantially from one Arab country to another even though Arab countries overall are similar culturally. Sometimes, managers going abroad experience culture shock—the frustration that results from having to absorb a vast array of new cultural cues and expectations, and then reverse culture shock when they return home. Copyright © 2015 Pearson Education Ltd.

Three company and management orientations Polycentrism business units abroad should act like local companies Ethnocentrism home culture is superior to local culture overlook national differences Geocentrism integrate home and host practices Companies and managers doing business abroad will typically take one of three basic approaches when dealing with foreigners. Those that take a polycentric approach believe that business units abroad should act like local companies. In contrast, those that take an ethnocentric orientation believe that the home culture is superior to the local culture, and therefore national differences can be overlooked. Finally, those that integrate both home and host practices have a geocentric orientation. Managers should recognize that excessive polycentrism or ethnocentrism can be dangerous. A geocentric approach is often the safest.

Strategies for Instituting Change
Value Systems Cost-Benefit Analysis of change Resistance to too much change Participation Reward Sharing Opinion Leadership Timing Learning Abroad Companies that choose a geocentric approach to their operations will often combine both home and host practices requiring that people in both countries adapt to some degree. Companies may face some resistance to these changes, and so must manage the process carefully. There are various ways to implement changes. Companies may need to promote changes in value systems. A cost-benefit analysis of change can reveal whether a change makes sense. Moving too quickly can create additional resistance to change. Many companies find that encouraging stakeholders to become involved in change and sharing the rewards of making changes can be beneficial. Similarly, using the right channels of influence and the right timing can make a big difference in whether change is accepted. Finally, companies should recognize that they can gain important knowledge from other companies in the market. Emulating their methods can often be successful.

The Future of National Cultures
Scenario 1: New hybrid cultures will develop and personal horizons will broaden Scenario 2: Outward expressions of national culture will continue to become homogeneous while distinct values will remain stable Scenario 3: Nationalism will continue to reinforce cultural identity Scenario 4: Existing national borders will shift to accommodate ethnic differences What will happen to national cultures in the future? Only time will tell. One scenario is that new hybrid cultures will develop and personal horizons will broaden. Another scenario suggests that outward expressions of national culture will continue to become homogeneous while distinct values will remain stable. A third scenario is that nationalism will continue to reinforce cultural identity. Finally, a fourth scenario suggests that existing national borders will shift to accommodate ethnic differences. Copyright © 2015 Pearson Education Ltd.

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.

Hofstede: National versus organizational cultures

Research into national cultures Culture’s Consequences, Geert Hofstede, 1980 5 dimensions
Inequality: more or less? Power Distance large vs. small The unfamiliar: fight or tolerate? Uncertainty Avoidance strong vs. weak Relation with in-group: loose or tight? Individualism vs. Collectivism Emotional gender roles: different or same? Masculinity vs. Femininity Need gratification: later or now? Long vs. Short term orientation

Culture’s recent consequences
11 April 2005 Geert Hofstede The individual components of this presentation and the entire presentation may be used in not-for-profit educational settings with proper attribution. Citation: Hofstede, Geert (2005) Culture’s recent consequences PowerPoint® file, [05 September 2018]

Culture (in the anthropological sense)
collective programming of the mind distinguishing the members of one group or category of people from another group/category can be nation, region, organization, profession, generation, gender

Mental programmmes

Values Values are strong emotions with a minus and a plus pole
Like evil-good, abnormal-normal, dangerous- safe, dirty-clean, immoral-moral, indecent- decent, unnatural-natural, paradoxical- logical, ugly-beautiful, irrational-rational What is rational is a matter of values

The learning of culture

National versus organizational cultures

Research into national cultures Inhabitants of the world, William Darton, 1790

Are there national management and leadership cultures ?
In national cultures, all spheres of life and society are interrelated: family, school, job, religious practice, economic behavior, health, crime, punishment, art, science, literature, management, leadership There is no separate national management or leadership culture – management and leadership can only be understood as part of the larger culture

Other examples of research results (last 10 years)
Consumer behavior Entrepreneurship Business goals Human rights Perceived corruption

Consumer behavior 15 EU countries, 1970 – 2000
When national incomes become more similar, consumer behavior converges as long as a product is scarce After scarcity is over, consumer behavior diverges, following cultural values, especially Uncertainty Avoidance and Masculinity/Femininity which are unrelated to income Research: de Mooij, 2004

Examples of consumer behavior divergence: cars in 15 European countries
Cars per 1000 inhabitants: correlation with GNP/capita 1969 r = .93*** r = .42 ns Percent households with 2 cars: correlation with GNP/cap with MAS index 1970 r = .58* r = .43 ns 1997 r =-.28 r = .62** Prefers new over second hand: correlation with GNP/cap with UncAv index 1970 r = .47* r = .79*** 1997 r =-.32 r = .80*** Source: De Mooij, 2000

Example of consumer behavior: new communication technology in Europe
Adoption of PC’s, internet and mobile phones: no influence of national wealth, but slower where Uncertainty Avoidance was stronger Research: de Mooij, 2004

Example of consumer behavior: use of internet in Europe
Lasting differences in what internet is used for: Feminine cultures use internet more for education and leisure (chatting) Small Power Distance cultures use internet more for business Weak Uncertainty Avoidance cultures use internet more for mail Research: de Mooij, 2004

Entrepreneurship European database on % self-employed in 23 countries (excl. agriculture), Varied from Greece18.6% to Finland 5.7% Correlated positively with Uncertainty Avoidance Especially with UA component: dissatisfaction with life and with democracy For 12 EU countries, economic factors explained 32% of variance. Adding cultural factors: 64% Self-employment arises out of dissatisfaction Wennekers, Noorderhaven, Thurik & Hofstede, 2002

Research: Hofstede et al, 2002
Business goals: Hofstede, G., Van Deusen, C. A., Mueller, C. B., & Charles, T. A. (2002). What goals do business leaders pursue? A study in fifteen countries. Journal of International Business Studies, 33(4), “Goals of successful business persons in your country” As perceived by evening MBA students with full- time day jobs 21 groups, 16 universities, 15 countries, period List of 15 possible goals Clustering of universities and countries based on their answers Country scores correlated with PDI, UAI, IDV, LTO, GNP/capita Research: Hofstede et al, 2002

Business goals: examples of country differences
relatively most important ascribed goals in USA in UK and NZ Growth of the business This year’s profits This year’profits Staying within the law Personal wealth Responsib. tds employees Power Continuity of the business Staying within the law Patriotism, national pride Respecting ethical norms Respecting ethical norms

Business goals: examples of country differences
relatively most important ascribed goals Hong Kong, Hawaii (Asian) in China Profits 10 years from now Respecting ethical norms Creating something new Patriotism, national pride Game and gambling spirit Honor, face, reputation Growth of the business Power Honour, face, reputation Responsib. tds society Personal wealth Profits 10 years from now

Culture and Human Rights
HR Index 1992 based on 1948 Universal Declaration Regression on wealth (GNP/cap) plus culture indices Across 52 countries: only wealth explains differences (50%) If we want more respect for Human Rights we should combat poverty

Human Rights Index 27 poor countries: still only poverty explains differences (38%) 25 wealthy countries: individualism explains differences (53%) “Universal” declaration of human rights is based on individualist values

Perceived corruption An annual Corruption Perception Index (CPI), including almost all countries in the world, is composed by Transparency International of Berlin and published on Internet. It is based on data from business, media and diplomats Globally, the CPI is primarily a matter of national poverty, not of culture (poor countries are perceived as more corrupt)

Perceived corruption When the analysis is limited to wealthy countries, corruption perception differences no longer depend on wealth, but on culture. In 1984, Michael Hoppe collected scores for the first 4 culture dimensions from Western political and intellectual elites, including prominent politicians, based on their own values. 76% of the CPI differences among 18 Western countries in 2002 could be predicted from their elites’ self-scored Power Distance in 1984. Sources: Hoppe,Salzburg Seminar; own research

“Power tends to corrupt, and absolute power corrupts absolutely” (Lord Acton , 1890)

General conclusion from culture studies
There is no such thing as a universal economic or psychological rationality NATIONALITY constrains RATIONALITY

International Business Environments & Operations Chapter 2: Culture

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