International Management Lecture 1: Introduction PDF

International Management Lecture 1: Introduction Globalization, trade, and foreign direct investment Globalization refers to the growing interconnectedness of the international economy. It is associated with growth in: - International trade: the exchange of goods and services across borders (exporting and importing) - Foreign direct investment (FDI): occurs when a firm invests directly in production or other facilities in a foreign country and maintains control over that investment (=investment in physical assets). - Growth in international financial markets: it is associated with the foreign portfolio investment which is an investment in financial assets (stock, bonds, etc.) in a foreign country. Institutions Institutions are a set of rules, formal or informal, that actors generally follow. Therefore, the institutional framework governs individual and firm behavior. The key functions of institutions are to reduce uncertainty, curtail transaction costs, and constrain opportunism. The definition that Scott gave to Institutions is:” Institutions are comprised of regulative, normative, and cultural-cognitive elements that, together with associated activities and resources, provide stability and meaning to social life.” Degree of formality Examples Supportive pillars Formal institutions Laws Regulatory (coercive) Regulations Rules Informal institutions Norms Normative Cultures Cognitive Ethics The three main spheres of countries’ national institutions framework (formal) are: Political systems - Totalitarian or democratic Economic systems - Market or command economy - Varieties of Capitalism view Legal systems - Civil or common law Further institutions - Property rights - Corporate governance The two main informal institution instead are: 1 Culture - Clusters of countries with similar cultures (e.g. GLOBE) - Different dimensions of culture (e.g. Hofstede) Ethics - Principles, standards and norms of conduct governing individual and firm behavior There are two views of institutions: “thin” and “thick”. The “thin” view of institutions primarily focuses on formal structures and regulations within a society. It emphasizes explicit rules, laws, and regulations that shape behavior in the international management context. In the “Thin” view of institutions in the international business literature institutions constrain the actions of MNEs and the focus is among the differences (“Distance”) between an MNE’s home country institution and the institutions it finds in host countries that it expands to. Therefore, the MNE performance is dependent on adapting to the host country's institutional context. Institutions are seen as legal entities with established rules and regulations. Compliance and adherence to laws are crucial, and the legal system is the primary mechanism for enforcement. Agreements and contracts are central, and parties rely on legal means to resolve disputes. The “thick” view of institutions goes beyond formal structures to include informal norms, cultural values, and social practices that influence behavior. It recognizes the broader societal context in shaping managerial decisions and actions. In the “thick” view of institutions in the comparative capitalism literature institutions are the formal and informal “rules of the game” that provide economic agents with incentives and constraints and thereby induce a stable pattern of behavior. Institutions form a framework (national configurations) within which economic actors operate. Institutions can be constraints on their behavior and resources that actors use. Institutions influence actors’ identities, interests, and capacities for action and actors as well shape, maintain, or change institutions. Institutions play a key role in shaping how organizations behave and structure themselves. Due to pressures like laws, professional standards, and the tendency to imitate others, organizations end up adopting similar structures, practices, and routines. This process is known as isomorphism, where organizations in the same field start to look and act alike—not just because it’s efficient, but because it helps them gain legitimacy and approval from their environment. I Although institutions push organizations towards isomorphism, institutional theory also shows how different interpretations of these pressures (economic or technological) can lead to different responses between organizations. Institutions are viewed as embedded in cultural and social contexts, influencing individual and organizational behavior. Informal networks, trust and relationships are vital, often transcending formal agreements. Managers need to adapt to cultural nuances and societal expectations beyond legal requirements. The degree of trust within a society or between business partners is important. Employment relations as formal institutions: Employment relations is concerned with the interaction between employees and employers at the workplace and (where relevant) their representative bodies, such as trade unions and employer associations. The Parties include employers, employees, unions and professional associations and the government and state agencies. The Processes include collective bargaining between unions and employers or employer associations, industrial disputes and dispute resolution mechanisms (e.g. strikes, lockouts, conciliation, arbitration) and the employee participation (voice) at the workplace (e.g. work councils, supervisory board representation). The Outcomes include a collective agreement between employees (and their unions) and employers (and their associations), a 2 decision by a tribunal or conciliation committee that resolves a dispute and an agreement between employees and an employer on an issue at the workplace. National culture as informal institutions: Culture is an informal institution, which is built on normative and cultural-cognitive elements and represent the learned beliefs, values, norms, symbols and traditions that are common to a group of people. Similarities and differences between national cultures can be analyzed by separating culture into several dimensions. Countries can be grouped into cultural clusters that are similar on several cultural dimensions. Germany, USA, Japan and China These countries are the largest economies in the world. Many of the largest MNEs are headquartered there. Germany, USA and Japan belong to the “Triad”, the three regions of developed economies: North America, Western Europe and Japan. China is an example of a newly industrialized economy. Organizations Multinational Entreprises (MNEs) are Organisations and the key actors in international business. MNEs maintain units operating in multiple countries. They consist of local headquarters and foreign subsidiaries. They engage in foreign direct investment (FDI). For managers of MNEs, the challenge is to design systems that retain sufficient unity and coherence to operate as a common enterprise and simultaneously allow sufficient latitude and flexibility to adapt to greatly varying circumstances. MNE strategy and behavior is influenced by its country of origin, which may be a developed or an emerging economy and by new challenges (for example the competing pressures for global integration and local responsiveness). MNEs and Global Governance MNEs are contested actors in the context of Global Governance: on the one hand, they are seen as a major global promoter of economic development, but on the other, they are seen as an instrument of exploitation and domination. Important questions arise in the. light of these observations: how do MNEs make sure that their activities in foreign countries are in line with international labor standards? How do they govern their international supply chains? Each MNEs need a strategy, which can be defined as a firm’s theory about how to compete successfully. Strategic management consists of analysis of the environment and the firm’s strengths and weaknesses, formulation and implementation of a strategy. International business strategy can refer to any strategy outside a firm’s home country. Here focus on the internationalization strategies of MNEs. International Human Resource Management (IHRM) involves managing HR functions like recruitment, training, performance management, and diversity across multiple countries for multinational enterprises (MNEs). MNEs face the 3 challenge of balancing global consistency with adapting to local contexts, as labor laws and cultural norms vary widely. To address this, MNEs often transfer HR practices across borders (e.g., compensation models) but adjust them to fit local needs. International staffing, including expatriation and supporting diversity (such as women in international roles), is another crucial part of IHRM. Strategic International HRM (SIHRM) aligns HR policies with the overall international goals of the MNE, ensuring the workforce supports global competitiveness and market adaptation. In sum, IHRM enables MNEs to manage a diverse, global workforce while meeting both corporate objectives and local expectations. For MNEs is also important to consider the role of women in the international framework: between expatriates and migrants there are usually gender, race and class distinctions and gender discrimination in expatriate selection is very common. The MNE activity has effect on gender equality in host economies: on the one hand it can contribute to gender equality, but on the other it can take advantage of inequalities through exploitation of female labour. Furthermore, gender inequality can be also seen in the top decision-making positions in MNEs (international comparison). The activities of international managers are making decisions, communicating and negotiating and motivating and leading. International managers perform these activities in interaction with employees from different cultures. Furthermore, international managers from different cultural backgrounds perform these activities in different ways. Therefore, cross – culture communication (language and other aspects of communication) skills are vital. Lecture 2: The varieties of capitalism approach and its extensions Classification of economic institutions Capitalism is an economic system based on several fundamental principles, including private ownership, free enterprise and reliance on markets and competition. Several theories of capitalist diversity have been developed – theories that aim to classify these capitalist economic systems into different categories and to evaluate them based on their economic performance. Such a theoretical typology organizes complex webs of casual relationships. By categorizing, a typology combines different constructs into a coherent and explanatory set of types and can provide explanations about the occurrence of certain behaviors and their outcomes. The varieties of capitalism approach 4 The "Varieties of Capitalism" (VoC) framework is a conceptual approach in comparative political economy and economic sociology that was developed to analyze and understand the diversity of economic and institutional arrangements across advanced capitalist economies. The framework was notably introduced by political economists Peter A. Hall and David Soskice in the late 1990s. The most well-known is Hall & Soskice’s VoC approach. However, the VoC approach focuses only on a small number of developed market economies. Others have extended the VoC approach to include emerging market economies. The ideal – typical Varieties of Capitalism is the distinction between Liberal Market Economies (LMEs) and Coordinated Market Economies (CMEs). In LMEs, firms coordinate their activities primarily via hierarchies and competitive market arrangements. In CMEs, firms depend more heavily on non – market relationships to coordinate their endeavors with other actors and to construct their core competencies. Ideal types Liberal market economies Coordinated market economies Empirical examples USA, Britain, Australia, Canada, Switzerland, the Netherlands, New Zealand, Ireland Belgium, Sweden, Norway, Denmark, Finland, Austria, Germany, Japan Each of these forms of capitalism include a set of ‘complementary’ institutions that form the basis of a country’s economic competitiveness and lead to good economic outcomes. Two institutions can be said to be complementary if the presence (or efficiency) of one increases the returns from (or efficiency of) the other. In order to develop, produce, and distribute goods and services profitably, a firm must effectively coordinate with a wide range of actors e.g. investors, employees, unions, the state, suppliers, buyers,... A firm must coordinate with other actors in five spheres: 1. Corporate governance 2. Relations with its own employees (“firm hierarchies”) 3. Industrial relations (“employment relations”) 4. Vocational training and education 5. Inter – firm relations The relations with actors in these spheres are problematic. We can analyze the five spheres in LMEs and take as example the US. Corporate governance: Outsider shareholder dominated. Performance represented by current earning & share prices and Management agency controlled by shareholder exit Employee relations: short term, market relations between employee and employer and top management has unilateral control of the firm industrial relations: employer organizations and unions relatively weak, decentralized wage setting and insecure employment (hire & fire / fluid labor markets) Vocational training/education: vocational education offered on market and labour force has high general skills. Inter-firm relations: market relations, competition and use of formal contracting and subcontracting relationships. We can analyze the five spheres in CMEs and take as example Germany. 5 Corporate governance: long term bank dominated insider systems, cross-directorships, cross-shareholding and management agency controlled through ‘network reputational monitoring’. Network reputational monitoring involves tracking a company’s online reputation across global networks and platforms to identify and address any potential threats, negative perceptions, or risks that could impact its brand and stakeholder trust. Employee relations: long term, formalized participation of employees AND consensus decision-making with management Industrial relations: trade unions and employers organized, industry-wide collective bargaining and pay determination and employment relatively secure. Vocational training: elaborate industry-based training schemes and labour force has high industry-specific and firm-specific skills. Inter-firm relations: development of collaborative networks and cooperation among firms in diffusing technologies Institutions within national business systems are not a random collection. Complementarity occurs where the presence of one institution enhances the returns from another institution. In this way, comparative advantage arises from the ‘bundling’ of complementary institutions. For instance, a country with flexible labor markets and a competitive financial system might excel in industries that require rapid adaptability. Hence, countries cluster around bundles of complementary institutions – two distinct clusters are LMEs and CMEs. LMEs may excel in industries like tech startups or finance, where flexibility and fast-paced innovation are crucial. CMEs often do well in industries that benefit from high skill levels and long-term investments, like advanced manufacturing or automotive sectors. This picture illustrates the relationship between two institutional factors across different countries: corporate governance (measured by stock market capitalization) and industrial relations (measured by employment protection). The horizontal axis represents stock market capitalization (how much the stock market is worth relative to the size of the economy). High stock market capitalization typically indicates a system where businesses rely more on market-based financing, which is common in Liberal Market Economies (LMEs). The vertical axis represents employment protection (how strongly workers are protected through laws or regulations). High employment protection means a stronger emphasis on worker rights and job security, which is characteristic of Coordinated Market Economies (CMEs). Complementarity in LMEs: Corporate governance is based on short-term finance: it undermines credible commitments to cooperation with other firms and employees and permits fast entry/exit to new businesses. 6 There is an inter-firm competition that reinforces external labour market and technology transfer through the market. Industrial relations are adversarial: they enhance technology transfer through external labour market and undermine firm-specific human capital. Finally, there is a general training: investments in transferable skills, permit external labor mobility. Moreover, the lack of sunk training costs reinforces market for corporate control. Complementarity in CMEs Corporate governance is based on long-term finance. It allows credible commitments to cooperation with other firms and employees and access to horizontal information (horizontal information refers to the flow of information across departments or teams at the same organizational level to promote collaboration and coordination). There is an inter-firm cooperation that reduces temptation to ‘poach’ skilled workers and solidifies long-term finance based on relationships. There is also a cooperation in industrial relations that increases productivity based on skill investments. However, codetermination gets employees concerned about profitability. In the end, there is an apprenticeship training: the high skills give employees bargaining power in industrial relations, that involves coordination across firms. Researchers examined whether the countries classified as liberal in the VoC book are actually liberal, and whether the countries classified as coordinated are actually coordinated using empirical data. They found that five of the six "liberal" economies are actually liberal (shaded blue) across all five spheres. They found that only one of the ten "coordinated" economies is actually coordinated (white) across all five spheres. Firms can resolve coordination problems: - Internally within the firm (hierarchies) - Externally (markets or non-market institutions) National institutions shape how firms resolve these coordination problems: - In LMEs, the institutional framework facilitates market coordination. So, firms resolve coordination problems mainly through hierarchies and markets – i.e. arm’s length relations and high levels of competition. - In CMEs, the institutional framework facilitates non-market coordination. So, firms resolve coordination problems not only through hierarchies and markets but also through non-market institutions – i.e. strategic interaction. 7 Both these solutions to coordination problems form institutional equilibria which lead to different types of advantages in economic activity (comparative institutional advantage): - In LMEs, the comparative advantage arises from the flexibility of these coordination arrangements. - In CMEs, the comparative advantage arises from cooperative behaviour among actors, based on information exchange, monitoring, and sanctioning of defections. That is why firms in LMEs and CMEs: - differ in the economic sectors they operate in (e.g. biotechnology vs. machine tools) - use different corporate strategies (price vs. quality competition) - follow different patterns of innovation (radical vs. incremental innovation) How does Innovation vary between LMEs and CMEs? In LMEs, institutions support radical innovation based on new products and processes. - Easy entry and exit from new businesses is possible, including hiring and firing of expert labour and buying companies to access technologies - Investors support risk-taking (venture capital = is a form of private equity financing provided by firms or funds to startup, early-stage, and emerging companies, that have been deemed to have high growth potential) - More hierarchical, centralized power in firms to impose an entrepreneurial vision. In CMEs, institutions support incremental innovation based on refinement of existing products and processes. - Joint research, standard-setting and technology transfer among firms - Clients and suppliers suggest improvements. - Skilled and secure workforce suggests improvements. - Product differentiation strategy leads to a focus on improvement. Limitations of the VoC approach There is a large literature criticizing the VoC approach, in part because it has been so influential. 8 1. Not enough varieties of capitalism: LME/CME distinction doesn’t capture all of the diversity of market economies (many developed and emerging market economies don’t fit either model) 2. Ignores differences within each variety (among CMEs and among LMEs) 3. It is static and determinist: only 2 varieties of capitalism are viable, it does not explain change (can countries switch to another category or become more or less ideal-typical?) and it downplays the role of agency, conflict, power, politics A key criticism of the VoC approach is that it focuses only on a small number of developed market economies. (How) do emerging market economies (Transition economies in Central and Eastern Europe and emerging economies in Asia fit into the VoC classification system? Emerging market economies Emerging market economies are also called developing/transition/newly industrializing economies. They are middle- or low-income economies with growth potential, that typically have less sophisticated market-supporting institutions and fewer locational advantages based on created assets, such as infrastructure and human capital. Examples are transitional economies of Eastern Europe and the Russian Federation and East Asia: (Japan (new developed), the Four tigers (Hong Kong, Korea, Singapore, Taiwan), more tigers (Indonesia, Malaysia, Thailand), China and India. Some countries in Africa, Latin America and Asia remain at a low level of development, measured for example by gross national income (GNI). GNI is the total amount of money earned by a nation's people and businesses. The number includes the nation's gross domestic product plus the income it receives from overseas sources. Central and eastern Europe Post-socialist economies in Central and Eastern Europe have distinctive features like the continued importance of the state, lower levels of stock market development, a weak domestic banking sector and high levels of FDI (Although not equality across all countries). So what type of capitalism is this? Nölke and Vliegenhart classifies these economies as Dependent Market Economies (2009). The core feature is the dependence on investment decisions by MNEs. They have a comparative advantage in the assembly and production of relatively complex and durable consumer goods because of the presence of skilled but cheap labour, transfer of technological innovations within MNEs and the provision of capital via FDI. The central coordination mechanism is a hierarchy within multinational enterprises. Examples of Dependent market economies are Czech Republic, Hungary, Poland, Slovak Republic. 9 Asia Various features of Asian business systems are identified in the literature, e.g. - Strong relationships between business and the state, role of the state in leading development (e.g. industrial policy) - Formation of intra- and inter-firm relationships, the role of large (family-owned) business groups (e.g. keiretsu, chaebol, family business networks) - Institutionalized trust is not a given. Thus, reliance on personal relationships on an individual level (personalistic ties, e.g. guanxi) However, it is often argued that the Asian economies are very diverse and cannot be grouped into one category.  Japanese companies tend to have highly structured and formal relationships between firms within groups known as keiretsu. Keiretsu are families of companies with dense interconnections cutting across sectors, the most important. Of which is nowadays the vertical keiretsu with one major company at its center. Transactions are conducted through alliances of affiliated companies. This creates a form of organization that is in between a hierarchy and a market. Inter-firm relationships are long-term and stable, based on mutual obligations. These inter-firm relationships are expressed through cross-shareholdings and personal relationships as well as through financial and commercial transactions. Bilateral relationships between firms are embedded within a broader family of related companies. Inter-corporate relationships are imbued with symbolic significance which helps sustain links even where there are no formal contracts. 10 Witt and Redding classified in 2013 5 types of business systems in Asia: - (Post-)socialist: China, Vietnam, Laos, India - Advanced city: Hong Kong, Singapore - Emerging Southeast Asian: Indonesia, Malaysia, Philippines, Thailand - Advanced Northeast Asian: Korea, Taiwan - Japanese: Japan  China has more than one business system (multiplexity) and different forms of ownership: o State-owned enterprises: most SOEs have been privatized, about 100 “core SOEs” are left in industries such as oil, power generation, steel, aluminium, automotive, airlines, telecommunication, military equipment… o Town and village enterprises o Foreign-owned businesses, including MNEs and joint ventures (JVs). Many are owned by “overseas Chinese” from Taiwan or Hong Kong, others by European or American MNEs o Domestic privately owned firms Analyzed separately, Chinese private business clusters with Indonesia, Malaysia, Philippines, Thailand in the “Emerging Southeast Asian” business system. The Chinese private sector business system has unique features that strongly reflect the social and cultural structures of the country. First, the sector consists of a large number of small and medium-sized enterprises, which are mainly family owned, with the main objective of accumulating wealth for the family. This ownership model is integrated with a network of personal connections, as companies are linked to each other through family business networks, often based on clan-type interpersonal relationships. Personal relationships and family ties, known as guanxi, play a key role in offsetting limited institutional trust and lack of strict enforcement: In China, it is common not to do business with strangers and base transactions on consolidated relationships. From a management perspective, the sector is characterized by a paternalistic style of leadership, with a top- down decision-making structure, a high level of super visual control and a rather limited delegation of responsibilities. This management model is also reflected in the low levels of qualification of workers and a poorly developed training system. In addition, the workers' union, the General Association of Chinese Trade Unions (ACFTU), has a weak influence on labor dynamics, favoring low union organization. These conditions contribute to the short average working hours in Chinese private enterprises, where workers frequently change jobs. Despite these characteristics, Chinese business networks have been very successful, capturing large market shares in various sectors including toys, ties, lighters and footwear. Lecture 3: Comparative Institutional Analysis: Cultural Classifications 11 Cultures as informal institutions Institutions are a set of rules, formal and inofrmal, that actors generally follow. The insitutional framework governs individual and firm behaviour. The key functions of institutions are to rduce uncertainty, curtail trnsaction costs und constrain oppurtunism. The definiton give by Scott for institutions is “Insitutions comprise regulative, normative and cultural – cognitive elements that, together with associated activities and resources, provide stability and meaning to social life”. Culture’s features The way of life, the learned beliefs, values, rules, norms, customs, scripts, symbols and traditions that are common to a group of people. The shared qualities of a group that make them unique. There are many definitions for “culture”, e.g. - A way of life of a group of people, that configuration of all the more or less stereotyped patterns of learned behaviour, which are handed down from one generation to the text through means of language and imitation. (Barnouw) - A collective phenomenon that is shared with people who live or lived within the same social environment, which is where it was learned. It is the collective programming of the mind which distinguishes the members of one group or category of people from another. (Hofstede) Culture ensures uniformity and predictability of behaviors. Language and religione are strong correlated with culture. Language Religion Language is “a systema c means of communica ng ideas Religion contains key values and norms that are or feeling by the use of conven onalized signs, gestures, reﬂected in adherents’ behaviors and tradi ons. marks, or especially ar culate vocal sounds”. Language is used in interac on with others It is a basis for social iden ty. It determines how values and norms are expressed and it inﬂuences not only the adherents but also extends to communicated the secular segment of the popula on, albeit to a lesser extent. Helps perpetuate culture It also contributes to the perpetua on of culture 12 National cultural classifications The studies that analyse culture are a lot: Hofstede’s study Hofstede provided a parsimonious na onal culture framework consis ng of ini ally 4 dimensions (later expanded). He provided country indexes on these dimensions.: 1. Power distance Power distance is the extent to which less powerful members within a country expect and accept that power is distributed unequally. In organiza ons, high power distance may be associated with: - More centraliza on - Tall organiza onal pyramids - More supervisory personnel - Large wage diﬀeren als - White-collar jobs are valued more than blue-collar jobs. - Less feedback and par cipa on by subordinates - Interac ons among members of diﬀerent hierarchical levels are more formal. 13 2. Uncertainty avoidance Uncertainty avoidance is the extent to which members in diﬀerent cultures accept ambiguous situa ons and tolerate uncertainty. In organiza ons, high uncertainty avoidance may be associated with: - More structuring of ac vi es - More wri en rules - More specialists more standardiza on - Less willingness to take risks. - More resistance to change. - More job security 3. Individualism – collec vism Individualism is the perspec ve that the iden ty of an individual is fundamentally his or her own, whereas collec vism is the idea that the iden ty of an individual is primarily based on the iden ty of his or her collec ve group In organiza ons, high collec vism may be associated with: - Viewing the organiza on as a family or community - Prac ces based on loyalty, sense of duty and group par cipa on. - Sharp dis nc ons between in-group and out-group members In organiza ons, high individualism may be associated with - Impersonal organiza on - Prac ces that encourage individual ini a ve 4. Masculinity – femininity Masculinity refers to values that are tradi onally associated with the male role, such as asser veness, decisiveness, aggressiveness, ambi on, and achievement. Instead, femininity refers to values that are tradi onally associated with the female role, such as compassion, care, nurturance interpersonal harmony, and quality of life. In organiza ons, high masculinity may be associated with: - Aggression and compe on are rewarded. - Focus on career progressions and material rewards. - Paid work is valued as a central life interest. - Sex roles are clearly diﬀeren ated, with few women in high-ranking posi ons. 5. Short term – long term orienta on (added later) Long-term orienta on: emphasizes perseverance and a focus on long-term objec ves. In organiza ons, long-term orienta on may be associated with: - Long-term planning and investments - Less emphasis on short-term proﬁts 6. Indulgence – restraint (added later) The extent to which socie es have strong norms regula ng and suppressing the instant gra ﬁca on of human needs. 14 In organiza ons, indulgence may be associated with - Short-term rewards - Importance of leisure me The GLOBE study The Global Leadership and Organiza onal Behavior Eﬀec veness research program headed by R. House was ini ated in 1991 and involved more than 160 inves gators. Reaserchers used quan ta ve and qualita ve methods to study the responses of 17,000 managers in more than 950 organiza ons. They developed a classiﬁca on of 9 cultural dimensions and dvided countries into 10 cultural clusters that have diﬀerent approaches to leadership. The GLOBE study’s 9 dimensions of culture 1. Uncertainty avoidance: Uncertainty avoidance is deﬁned as the extent to which members of an organiza on or society strive to avoid uncertainty by reliance on social norms, rituals and bureaucra c prac ces. Valued quali es for managers in such cultures are being reliable, orderly, cau ous (they use more detailed planning, there is less delega on, more rules). Cultures with high uncertainty avoidance include France, Spain, Germany, Russia, and India. 2. Power distance: Power distance is deﬁned as the degree to which members of an organiza on or society expect and agree that power should be unequally shared. High power distance cultures, expect leaders to have more authority and are more likely to comply with rules and direc ves without ques oning them. Subordinates are less willing to challenge bosses or to disagree with them. Par cipa ve leadership style is seen as more favorable in low power distance countries such as Western Europe than in high power distance countries such as Russia and China. 3. Ins tu onal collec vism: Societal collec vism reﬂects the degree to which organiza onal and societal ins tu onal prac ces encourage and reward the collec ve distribu on of resources and collec ve ac on. In individualis c Cultures it is more diﬃcult for leaders to inspire strong commitment to team/organiza onal objec ves and followers prefer rewards for individual achievements rather than group achievements. Examples of Individualis c Cultures are Australia, the USA, UK and examples of collec vis c cultures are China and Sweden. 4. In-group collec vism: In-group collec vism Reﬂects the degree to which individuals express pride, loyalty and cohesiveness in their organiza ons or families (Families/Groups/Organiza ons vs. The individual) 5. Gender egalitarianism: Gender egalitarianism is the extent to which an organiza on or a society minimizes gender role diﬀerences and gender discrimina on. Examples of countries with high gender egalitarian values are Norway, Sweden, Denmark, and the Netherlands. Examples of countries with low gender egalitarian values are Japan, Italy, Mexico. 6. Asser veness: Asser veness is the degree to which individuals in organiza ons or socie es are asser ve, confronta onal, and aggressive in social rela onships (Durchsetzungsfähigkeit). In Hofstedes’ classiﬁca ons, asser veness was associated with the label of "masculine". Countries with high levels of asser ve values, leaders who show empathy and compassion are not viewed par cularly favorably. 7. Future orienta on: Future orienta on is the degree to which individuals in organiza ons or socie es engage in future-oriented behaviors such as planning inves ng in the future and delaying gra ﬁca on. Future orienta on is a combina on of Hofstedes’ dimensions of long-term orienta on and also the indulgence restraint. 15 8. Performance orienta on: Performance orienta on is the degree to which individuals in organiza ons or society encourage and reward group members for performance improvement and excellence. In cultures with high- performance orienta on, leader behavior is readily accepted which is geared to improving performance such as se ng challenging goals, se ng ght deadlines, and rewarding achievements. 9. Humane orienta on: Humane orienta on is the degree to which individuals in organiza ons or socie es encourage and reward individuals for being fair, altruis c, friendly, generous, caring and kind to others. This value encourages suppor ve leadership behavior and more par cipa ve leadership styles. Limitations of the studies There is a tendency to equate cultures with countries, but the same cultural group can span many na ons, so that there are fewer cultural clusters than na ons. Secondly, mul ple cultures can exist within na onal borders. Moreover, by focusing on na onal cultures, we ignore subcultures. The cultural dimensions are scien ﬁcally reﬁned, “sophis cated” stereotypes – a set of simplis c generaliza ons about a group that are o en inaccurate, especially regarding individuals. They are not appropriate for understanding the personal values of individuals. Hofstede’s main data was collected in one company (IBM) in the late 1960s: is it really representa ve? Have cultural changes occurred that are not reﬂected in Hofstede’s indices? Hofstede and GLOBE focus on values and assume that there is widespread consensus in a country about those values. But this is increasingly cri cized: Some individuals constantly act in viola on of their values; Some countries tolerate behaviour that deviates from 16 social norms more than others (loose or ght cultures). Some researchers see culture more as a toolkit (a set or grab-bag of stories, frames, categories, rituals and prac ces that actors draw upon to make meaning and take ac on rather than as values (what we prefer, hold dear, or desire). Cultural distance concept In interna onal management research, the distance between countries is measured, in terms of both ins tu onal distance and cultural distance. The Hofstede and Globe databases provide country scores on a set of cultural dimensions and can be used to calculate cultural distance. Cultural distance is the extent to which one culture diﬀers from another (measure this e.g. by summing up the diﬀerences in Hofstede’s cultural dimensions in a cultural distance index). However, the distance construct as well as its opera onaliza on are con nuously being debated. A lot of the research examines the impact of cultural distance on organiza onal decisions and outcomes (e.g. what entry mode MNEs choose, performance of the subsidiary). The idea is: the greater the distance between countries, the greater the liability of foreignness for an MNE (MNEs face disadvantages in a host economy because they are foreign). The same idea is used regarding the distance between formal ins tu ons. However, there are some cri cisms about this view: focusing on distance amounts leads to a “thin” view of ins tu ons. In fact, formal and informal ins tu ons have more complex eﬀects than smply being a nega ve factor if they are diﬀerent across countries. They are not only constraints but also incen ves for the behavior of economic agents. Organizational culture There are many deﬁni ons, and they are not synonymous with those of na onal culture For example: 10. Schein (1985): The pa ern of basic assump ons that a given group has invented, discovered or developed in learning to cope with its problems of external adapta on and internal integra on, and that have worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think and feel in rela on to those problems. 11. Deal/Kennedy (1982): The way we do things around here National culture Organizational culture Shared meanings Shared behaviors Unconditional relationship Conditional relationship Born into it Socialized into it Totally immersed Partially involved Der US-amerikanische und der japanische Organisationstyp im Vergleich Der US-amerikanische Der japanische Organisationstyp (Typ A) Organisationstyp (Typ J) Kurzfristige Beschäftigung Lebenslange Beschäftigung 17 Häufige Leistungsbewertung und schnelle Seltene Leistungsbewertung und langsame Beförderung Beförderung Spezialisierte Karrierewege, Professionalismus Breite Karrierewege, „wandering around“ Explizite Kontrollmechanismen Implizierte Kontrollmechanismen Individuelle Entscheidungsfindung und Kollektive Entscheidungsfindung und Verantwortung Verantwortung Segmentierte Mitarbeiterorientierung Ganzheitliche Mitarbeiterorientierung Implica ons for Interna onal Management The dominant societal culture may not be congruent with the organiza onal culture, esp. in foreign subsidiaries of MNEs. How should managers deal with this? Cultural (business) e que e is the set of manners and behaviours that are expected in a given situa on (business nego a ons, supervisor-subordinate discussion about a raise, ac vi es a er business hours). Viola on of e que e by expatriate managers may be considered oﬀensive by local subordinates or business partners. 18

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