International Management and Culture Arild Aspelund

Outline Dealing with people in a global setting The cultural aspect A practical example of International Joint Ventures

International Management International labor markets and global firms International worker mobility problems National management styles and practices National orientations Strategy and control Headquarters – Subsidiary relationship Local subsidiaries need people who can manage well locally Headquarters need people who can coordinate and control worldwide One need to find a trade-off… Dealing with culture in cross-country negotiations and alliances

The Cultural Aspects What is culture? How do you get your culture? The normative definition: The sum total of the beliefs, rules, techniques, institutions, and artifacts that characterize human populations The behavioral definition: The collective programming of the mind How do you get your culture? Culture is taught through socialization processes Socialization processes are the influence from parents, friends, education, and the interaction with a particular society These influences result in patterns of behavior common to all members of a given society A corporation might define such a society and hence define corporate culture

Hofstede’s Four (five) Dimensions of Culture Power distance The extent that a culture excepts that power is unequally distributed Generally low in Scandinavia High in south America and France Uncertainty avoidance Degree to which members of a culture is uncomfortable with risk and uncertainty High uncertainty avoidance in e.g. France, Argentine and Japan Low in the US, Denmark, India and the UK

Hofstede’s Four (five) Dimensions of Culture Individualism The extent to which people are supposed to take care of themselves and be emotional independent from others Generally high in Scandinavia, the US and UK Low in Indonesia, Thailand and South America Masculinity The value attributed to achievement, assertiveness, and material success High in Germany, Japan and the UK Generally low in the feminine societies of the Scandinavian countries and the Netherlands

Hofstede’s Four (five) Dimensions of Culture Long-term Orientation To what extent do people have a future-oriented perspective rather that focus on the present Also labeled “Confucian dynamism”; developed by Chinese scientists A response to the critique of the “Western Mindset” of Hofstede’s original IBM study Long term orientation: Persistence, ordering relationships by status and observing this order, thrift, having a sense of shame Short term orientation: personal steadiness and stability, protecting your ‘face’, respect of tradition, reciprocation of greetings, favors, and gifts On this scale Norway and China are at the opposite ends…

Trompenaar’s Seven Dimensions of Culture - A managerial extension of Hofstede Universialism versus Particularism Ex: A salesman that has not fulfilled his monthly sales quota due to sickness in his family Universal reactions: The US, Canada and Switzerland Particular exceptions: Korea, Russia and China Individualism versus Collectivism Are the rights and values of the individual dominant or subordinate of the collective society? Individualists: Canada, the US, and Switzerland Collectivists: Japan, Egypt and India

Trompenaar’s Seven Dimensions of Culture - A managerial extension of Hofstede Neutral versus Emotional How much emotions are displayed at the workplace Is it acceptable to make a significant investment from “gut feelings” and intuition? No! Japan, Germany, Switzerland and China Yes! Italy and France Specific versus Diffuse Do hierarchies exist only at the workplace or does it exist also in the society outside the company? Ex: Your boss ask you to paint his house over the weekend NO! Australia and the Netherlands ok…China, Japan, Singapore and India

Trompenaar’s Seven Dimensions of Culture - A managerial extension of Hofstede Achievement versus Ascription Is your status in the organization tied to achievements that you have done, or your gender, age, education or social class (ascribed status)? Merit in Scandinavia and the US, the UK and Canada Ascribed in Egypt, Russia, Japan and France Attitudes toward time Time viewed as sequential steps or time viewed as synchronic (many things happen simultaneously) Northern Europe are sequential (punctual and planning) Southern Europe are synchronic and regard chronological precision as mere coincidence…

Trompenaar’s Seven Dimensions of Culture - A managerial extension of Hofstede Attitudes towards the environment Some cultures try to control and subjugate the environment, others try to work with the nature This is a dimension more related to religion and philosophy than national cultures Historically the first is highly associated with western Europe and North America and the industrial revolutions A short list of distinction between Hofstede and Trompenaar Hofstede more related to national cultures and inevitably market selection decisions in marketing and offshoring decisions in sourcing Trompenaar more related to management of multinational enterprises and more applicable to everyday managerial problems Trompenaar is also more recent and had the benefit of looking at Hofstede’s work and some of the critique against it…

Values and Alliances - An Application of Hofstede’s Framework As we have seen , Dutch scientist have traditionally taken lead positions in the study of culture in international Business Harry Barkema and Freek Vermeulen have been key contributors the past two decades The current study seek to answer two questions Which cultural differences are the most disruptive for the initiation and development of International Joint Ventures (IJVs)? Are cultural values stable over time? Unique data from 828 foreign entries of 25 Dutch multinationals in 72 countries, spanning from 1966 to 1994

Values and Alliances - An Application of Hofstede’s Framework Results systematically point to differences in uncertainty avoidance and long-term orientation as key predictors of… tendency to prefer international wholly-owned subsidiaries over IJVs and long-term survival of IJVs These factors dominate over differences in power distance, individualism, and masculinity How would you explain these differences? The study also show that the cultural dimensions are fairly stable over time