Cross-cultural Study of MNEs’ Policy Positions - Beyond Ethics Lecture VIII Cross-cultural Study of MNEs’ Policy Positions - Beyond Ethics

MNEs approaches in dealing with ethically related issues Compliance Approach Conformity with externally imposed Standards Integrity Approach [Paine, 1994] Self-governance to chosen standards

Self-interests Companies are becoming more socially responsible because they know long-term profits will be greater if they act responsibly. ( evidenced in R. Wang’s 2006 study)

Culture and Ethics Studies of impacts of national cultures on ethical decision making [Donaldson 1989, Rest 1986, Wines/Napier 1992, Robertson 1995, Robertson/Hoffman/Herrmann 1999]

Hofstede [1984] 4 cultural dimensions: individualism / collectivism power distance uncertainty avoidance masculinity / femininity

Roberston’s research [1999] “Individualist societies are less ethical “

This Study exams If a company adopts Local Standards/Domestic Standards/Best practices on wage rates, benefits, health insurance, safety, and environmental pollution policy Likert-scale measurements of company’s attitude toward doing “what is right”, “what is legally right”, and other ethically related issues Company characteristics  Type of industry Size Degree of internationalization Importance of the overseas market

This Study exams (Contd..) Company characteristics  Type of industry Size Degree of internationalization Importance of the overseas market

Methodology 200 questionnaires to US subsidiaries in Taiwan, and Taiwanese companies with DFI overseas Overall Sample  43 - 26 Taiwan firms and 17 US firms responded Codes of Conduct/Policies/Standards US – 94% Taiwan – 46%

Methodology Strong correlation between firms with commitments to the integrity approach and having developed codes/policies/standards Businesses from the individualistic cultures are not necessarily less ethical. Prompted by self-interests, corporations will develop policies to ensure better international business practices

Degree of internationalization matters Table 1 Company Characteristics and Decisions on Overseas Facilities (Statistical Significance of the Correlation Analysis) No. of Foreign Subsidiaries Years of International Operations % of Overseas Sales Health Insurance NS .024 Environmental Control .029 Code on Ethical Conduct .009 .007

Degree of internationalization matters Table 2 Compliance Strategy vs. Integrity Strategy Local Standards (Compliance) Best Practices (Integrity) Wage 76.7% 18.6% Benefits 69.8% 27.9% Health 74.4% Safety 41.9% 44.2% Environment

Degree of internationalization matters Table 3 Compliance vs. Integrity Strategy with or without Established Code of Conduct, Policy and Standards With Code Without Code Local Standards (Compliance) Best Practices (Integrity) Wage 79% 18% 73% 20% Benefits 71% 25% 66% 33% Health 64% 93% 7% Safety 35% 50% 53% Environment 43% 46% 47% 40%

Degree of internationalization matters Table 4 Compliance vs. Integrity Strategy of the US and Taiwan Firms Taiwan US Local Standards (Compliance) Best Practices (Integrity) Wage 87% 11% 65% 29% Benefits 67% 27% 70% 30% Health 88% 8% 53% 35% Safety 58% 31% 18% Environment 23% 59%