1. The Cultural Environment
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.
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7. Culture Does Not Explain Everything
Exhibit 6-1: Research design for the isolation of culture
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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
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11. Language
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12. Language
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13. Language
Exhibit 6-3: Numbers of speakers of major languages of the world (estimated)
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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.
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15. Religion
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16. Religion
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17. Religion
Exhibit 6-5: Adherents to major world religions, by geographic region, 1996 (in millions)
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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
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21. Power Distance (PD)
Exhibit 6-6: Power distance: country examples and organizational implications
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22. Power Distance (PD) Exhibit 6-7: Rank distinctions among the Japanese
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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
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24. Uncertainty Avoidance (UA)
Exhibit 6-8: Uncertainty avoidance: country examples and organizational implications
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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
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26. Individualism/Collectivism (I/C)
Exhibit 6-9: Individualism/collectivism: country examples and organizational implications
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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
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28. Masculinity-Femininity (M/F)
Exhibit 6-10: Masculinity/femininity: country examples and organizational implications
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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)
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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.
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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.
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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
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34. Schwartz’s Classification
Exhibit 6-13: Sample country rankings on Schwartz’s dimensions
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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
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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
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37. National Cultural Clustering
Exhibit 6-14: Ronen and Shenkar’s culture clustering
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38. National Cultural Clustering
Exhibit 6-15: Huntington’s civilization clustering
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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.
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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
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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
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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
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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.
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44. Key Cultural Issues Exhibit 6-19: Americans from A to Z
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45. Key Cultural Issues Cultural Distance Convergence and Divergence
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
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