Comparative and cross cultural management Flashcards
Comparative and cross-cultural management (CCCM)
Studies differences in management styles and organizational approaches between countries
Contingency approach in organization theory
Characteristics of management and organization depend on task environment and related contingency factors
Contingency factors
Technology
Ennvironmental turbulence
Size of the organization
Contingency definition
A circumstance or condition that may or may not apply for some organizations
Two strategies for dealing with contingency fac tors in empirical research
Inclusion of control variables
Matching of samples
What is globalization
A qualitative shift towards a global economic system that is no longer based on autonomous national economies but on a consolidated global marketplace for production, distribution, and consumption
Forces promoting (further) globalization
Decrease of transportation costs
Decrease of communication costs
Integration international financial markets
Mass media, social media
International migration
Forces impending (further) globalization
Economic: lower company profits outside home market
Decreasing economic gains of trade liberalization
Overreliance on China, globally concentrated value chain
Social: unbalanced distribution of benefits
Cultural: Search for cultural authenticity
Political: Limits of democracy
Limits to globalization: Economic
When you start removing trade barriers, the wealth effect is relatively larger than distribution effect
Company level: Shift in emphasis from efficiency, productivity and just in time to resilience, robustness and slack
At country: Increasing desire to harbor integral supply chains
Wealth effect
people spend more as the value of their assets rise
Limits to globalization: social
High societal cost by pursuing economic comparative advantages
Lost jobs and employment opportunities
Social fragility
Frustration and anger of low-income populations
Limits to globalization: political
China as a potential spuerpower and the single biggest rival to the US
Rivalry in multiple areas of economics, politics, and security
Shift from deeper integration –> decoupling
Nationalistic/ populist sentiments and inward/domestic focut
Limits to globalization: Technology
Technological development as an additional factor leading to de-globalization
Digital technologies have made the share of labor cost in value added smaller
Less offshoring –> Re- or near-shoring
Four possible scenarios of globalization
1) Convergence
2) Specialization
3) Incremental adaptation
4) Hybridization
Scenarios of globalization: Convergence
The anglo-american version of capitalism will be adopted worldwide
But: Contradicted by successes of e.g. Japan, korea and china
Scenarios of globalization: Specialization
Conventionnal trade theory: Economies will have specialize in where they have a comparative advantage
But: A large proportion of trade is intra-industry trade
Scenarios of globalization: Incremental adaptation
Countries tend to evolve in the direction of the most efficient system and practices
However, cultures and institutions contrain countries and firms in this process
Scenarios of globalization: Hybridization
Parts of the economy/society become part of the global system
Other parts may remain largely unaffected:
E.g. Healthcare, education, personal services, construction
synthetic Definition of culture
Culture consists of patterns, explicit and implicit, of and for behavior acquired and transmitted by symbos, constituting the distinctive achievements of human groups, including their embodiments in artifacts; the essential core of culture consists of traditional ideas and especially their attached values
The concept of culture:
Human nature: universal and inherited
Culture: Specific to group and learned
Personality: Specific to individual, Inherited and learned
Values
Desirability (good vs. bad)
standards (wrong, justified, encouraged)
Important guiding principles
Beliefs
Ideas you hold to be true
Subjective probability of the causality
Maslows hierarchy of needs
Physiological, safety, love/belonging, esteem, self actualization
Dual processing theory
Humans process information in two distinct ways
Implicit system: Not conscious, automatic, fast, parallel processing, high capacity and effortless
Explicit system: conscious, controllable, relatively slow, sequential processing, limited capacity and effortful
Adaptation
Cultures are responses to environmental conditions and have “survival value”
Cultural change is a process of adaptation and natural selection
Culture change often begins with adaptation to changes in economic life
Differentiation
Human groups increase differences with other groups to mark in-group, out-group distinctions
Found in every culture
Homophily
The tendency of people with similar traits (including physical, cultural, and attitudinal characteristics) to interact with one another more than with people with dissimilar traits
Value homophily
Interacting with people with the similarity of thoughts
Status homophily
We feel more comfortable in interacting with people with similar social positions/conditions
Induced homophily
Interactions over time tend to make individuals more similar (“inbreeding” process)
Individual identity
What distinguishes me from others
Social identity
What do I have in common with specific others
Etic (“outsider”)
Statements refer to distinctions judged appropriate by the community of scientific observers
Emic (“insider”)
Statements refer to distinctions that are significant, meaningful, real, accurate, or in some other fashion regarded as appropriate by the actors themselves
The etic approach:
Choice patterns:
Individualistic (maximize tokens for self)
Competitive (maximize difference tokens for self and for other)
Equality (minimize difference tokens for self and for other)
The etic approach:
Differences found between cultures are typically significant, but small
E.g. the specific form of the alloccation preferences was partly dependent on cultural context
Criticism: just as much or more variance within cultures, than between cultures
six dimensions of hofstede cultural dimenstions
Individualism vs. collectivism
Power distance
Uncertainty avoidance
Masculinity vs. femininity
Long term vs. short term orientation
Indulgence vs restraint
Power distance
The extent to which the less powerful members of organizations and institutions accept and expect that power is distributed unequally
Individualism
Take care of yourself and your immediate family
Collectivism
Integration into strong, cohesive group for protection and loyalty
Uncertainty avoidance
A society’s tolerance for ambiguity; the extent to which members of a culture feel threatened by uncertain or unknown situations
Long term vs short term
Long term: Emphasis on future rewards, in particular perseverance and thrift
Short term: Emphasis on the past and the present; respectful for tradition, preservation of “face” and fulfilling social obligations
Indulgence vs restraint
Indulgence: Enjoying life and having fun
Restraint: Controls gratification of needs and regulates it by strict social norms
Shalom schwarts: theory of ten basic values
10 basic values across culture (universal) emerging in a certain pattern (structure of values)
Values form a circular structure that reflects the motivations each value expresses
Conflicts and compatibility among the 10 values
Stimulation, self-direction, universalism, benevolence, security, conformity, power, achievement and hedonism
Inglehart (WVS) Traditional
Societies that prefer to maintain traditions and norms
View societal change with suspicion
Attach much importance to religion and obedience in children
Inglehart (WVS) Secular-rational
Societies that take a more pragmatic approach
Efforts in modern education as a way to prepare for the future
Attach less importance to religion and obedience in children
Inglehart (WVS) Survival
Emphasis on economic and physical security
Linked with a relatively ethnocentric outlook and low levels of trust and tolerance
Inglehart (WVS) Self-expression
High priority to environmental protection
Growing tolerance of foreigners, gays and lesbians and gender equality
Rising demands for participation in decision making in economic and political life
High power distance
Importance and degree of centralization of power
Income inequality along the hierarchy
Status symbols and privelages
High uncertainty avoidance
Rules and procedures in organization
Formal organizational structure
Managers are expected to be specialists than generalists
Less inclined to job changes
Two main dimenstions of culture change (Inglehart and baker)
Traditional vs. rational-secular authority
Survival vs. self-expression
Modernization
Agrarian –> industrial maximization of material standards of living
Post-modernization:
Industrial –> post-industrial maximization of subjective wellbeing
Transit to modernization
Industrialization
economic growth
Mass education and literacy
Urbanization
Mass media
Division of church and state
Transition to ppost-modernization
Knowledge-based economy
Flexible employment
Sub-urbanization
Growth of non-traditional households
Increasing equality of the genders
Modernization
Shift from emphasis on traditional authority to rational-secular authority
Post-modernization:
Shift from emphasis on survival to well-being (self expression)
Cultural change in three dimensions (beugelsdijk and Welzel (2018))
Collective-individual
Duty-Joy
Distrust-Trust
Collectivism vs individualism
Importance religion; obedience; tradition; respect
Important responsibility; success; not religious; equality men and women
Duty vs Joy
Importance hard work; expertise; people are in need because they are lazy
Importance democracy; new ideas and creativity; imagination
Distrust vs Trust
Respondent is politically conservavtive; sees politics as not very important; regards deocracies to be indecisive
Respondent sees work as a duty towards society; democracies are good at maintaining order; citizens must behave responsibly
Modern management is based on the principles of scientific management
Efficiency
Objectivity
Prescription
Supervision
Postmodern management implies a shift to other values and principles
Creativity (including creation of “self”)
Emotional connection
Interpenetration of work and life
Hermeneutics
Get into the heads of other people
Empathy: The capacity to understand or feel what another person is experienceing
Not risk free, more prone to error the bigger the distance between self and others
Emic vs etic approach
Emic: To gain the insiders perspective
Studies culture-specific phenomena
Constructs emerge from the insiders self understandings
Immersion, open observation, qualitative
Etic: Looks at the research field as an outsider
Cross cultural comparison to define universal phenomena
Based on pre-set constructs (theoretical framework)
Surveys, quantitative
Institutions
Social structures that have attained a high degree of resilience, and are composed of cultural-cognitive, normative, and regulative elements, that together with associated activities and resources, provide stability and meaning to social life
Regulative institutions
Formal rules and regulations
Normative Institutions
Informal norms, values, taboos
Cultural-Cognitive institutions
Shared beliefs, understanding of reality
Measuring institutions (distance) berry, Guillen and Zhou
Economic (income, inlation exports)
Financial (credits to private secotr, number of listed companies)
Political (stability, democracy government consumption)
Administrative (common language/religion)
Cultural (power distance, individualism WVS)
Demographic (life expectancy, birth rate etc.)
Knowledge (nuber of patents, scientific articles)
Connectedness (internet use)
Geography (distance between geographic centers)
Japanese management system: Characteristics
Lifetime employment system (Loyalty, collectivism and social harmony)
–> Compensation system
–> Consensus decision making system
–> Employment adjustment system
Japanese management system: Lifetime employment “consequences”
Japanese core employees are recruited directly from school/college/university
Emphasis on internal training
Are expected (and do expect) to work for the company until retirement
No contractual obligation from either side
Laying off your staff is the “worst sin of an employer”
Employemnt adjustment system (japanese management systems)
“safety valves” to manage employment inflexibility
Overwork as a precaution to overcapacity
Voluntary early retirement
Hiring freeze
Using non-regular workers
Intra- and inter-firm transfers in the “Keiretsu”
(Japanese business structure comprised of a network of different companies, such as banks, manufactureers, distributors and supply chain partners
Consensus decision making (japanese management system)
Consensus refers to the co-orientation of individuals in a group towards a given issue (agreeing and being aware of this agreement, etc.)
Bottom-up and top-down decision making with large role of middle management
Nemawashi
Going around the roots
Informal one-on-one discussions to prepare the ground for a decision
Informally securing prior approval
Checking with everyone who counts before formal decision
Ringiseido
bottom-up system
New initiative moves up each level of the organization for a review (Approval/disapproval)
Approval must be gained by all departments affected by the change
Acts as corporate official record and maintains order of the system
Japanese management system in context (Culture)
strong uncertainty avoidance
Medium-to-strong collectivism and long-term orientation
Very strong masculinity
Characteristics of chinese management
Paternalistic leadership
Management through relationships
Bureaucratic or entrepreneurial management
Centralized authority
Three elements of paternalistic leadership (chinese management)
Authoritarianism
Benevolent leadership
Moral integrity
Authoritarianism
Authority and control
Strong discipline
Obedience from subordinates
Benevolent leadership
Individual care
Cardinal relationship
Concerns for subordinates wellbeing
Protection and welfare from supervisors
Moral integrity
Unselfishness
Integrity
Leading by example
(Characteristics of chinese management)
Good conduct more important than objective performance criteria
Informal, direct, face-to-face
Centralized authority
Simple reporting system preferred (reporting to the top)
Highly centralized and often arbitrary, ad-hoc decision making
The authority is not easily delegated
Confucianism (Context of chinese management)
Respect for hierarchy
Mutual benevolence
Harmony
Virtues likehard work, integrity, respect for tradition
Collectivism (Context of chinese management)
Trust: (strong within the in group)
Weak trust: (versus the out-group)
Within ingroup must keep “face”
Guanxi (context of chinese management)
The mutual trust and feelings between the two parties, through numerous interactions following the self-disclosure dynamic
Integral part of personal relationships and business conduct
Reciprocal nature but for equivalent value
Guanxi sub dimensions
Ganqing: Feeling, affection, emotion
Emotional attachment and understanding amongst parties of a network
Renqing: Informal social obligation
Reciprocity as a basic principle of favors are exchanged
Xinren: Interpersonal trust (integrity and kindness to deliver ones promises)
Corporate governance
The study of power and influence over decision making within the corporation
Comparative corporate governance
The study of relationships between parties with a stake in the firm and how their influence on strategic corporate decision making is shaped by institutions in different countries
Economics and management (Agency perspective)
Corporate governance deals with the ways in which suppliers of finance to corporations assure themselves of getting a return on their investment
Economics and management (team production view)
Corporation embodies a number of stakeholders who invest firm-specific resources, but jointly relinquish control over those resources to a board of directors for their own benefit in order to solve the problem of coordinating efforts within the team
Anglo-Saxon model of dichotonoumous systems
Comes from 18th century UK and it patterned after the calssical liberal ideas of adam smith
Uses common law, which operates with lay judges, broader legal principles and oral arguments
Based on the principle that government intervention in the economy should be minimal
Best real world example: USA
European Model of dichotomous systems
Comes from the economic principles of 19th century france and germany
Places less faith in the invisible hand and calls for more state intervention in economic activity
Has more state ownership
Uses civil (roman) law which is based on professional judges, legal codes and written records
Best real world examples: Germany, france and sweden
Differences between dichotomous sytems
Anglo-American corporate governance system:
Short term equity finance
Dispersed ownership
Strong shareholder rights
Active markets for capital control
Flexible labor marketts
Continental european corporate governance systems:
Long term debt financing
Concentrated blockholder ownership
Weak shareholder rights
Inactive markets for capital control
Rigid labor markets
Dichotomous systems finance view
Anglo-saxon: more equity finance
Rhineland: more bank/debt finance
Dichotomous systems ownership structure
Anglo-saxon: dispersed, more ownership by investment funds
Rhineland: Concentrated, more cross-shareholding with other companies, more ownership by banks/govt/founding families
Dichotomous systems (relationship between stakeholders and management
Anglo-saxon: arms length
Rhineland: Close relationships with stakeholders
Dichotomous systems (governance structures)
Anglo saxon: Unitary board: board of directors
Rhineland: ual board: supervisory board and management board
Dichotomous systems (corporate restructuring)
Anglo-saxon: takeover as a credible threat
Rhineland: hostile takeover is less common
Comparative corporate governance is usually conceived in terms of the mechanisms available to minimize agency problems (what way)
Shareholders are assumed to maximize returns at reasonable risk, focusing on high dividends and rising stock prices
Management may prefer growth to profits, may be lazy or fraudulent and may maintain costly labor or product standards above the necessary competitive minimum
Agency theory has identified at least three models of corporate control:
Managerial control
Blockholder control
Shareholder/external control
Managerial control
Corporate governance characterized by managerial control
Blockholder control
One or few blockholders retain tight control over the firm through concentrated ownership and are thus able to exert their influence over management
Shareholder/external control
In countries with dispersed patterns of ownership, a model of shareholder control has emerged that relies on a number of different market-oriented mechanisms
Bank-oriented systems
Where banks played the central role in corporate monitoring through a combination of debt and equity stakes
Capital market-oriented systems
Characterized by equity finance and the markets for corporate control
Wider social systems regulating the relative supply and demand for different types of savings
Small vs. large firms
Hgih vs. low-income groups
High vs. low income equality
The state
The method of pension finance
how the legal system shapes different dimensions of corporate governance?
1) Establishing the boundaries of property rights
2) defining the quality of law based on legal family origins
3) engaging in new forms of regulation such as soft law
Property rights
Shape capital specifically by establishing rights that favor different types of shareholders
-Veto rights
-voting caps
-Mandatory information disclosure
Quality of corporate law in protecting (minority) shareholders
Poor investor protection»_space; high ownership concentration
Common law
Based on jurisprudence and is characteristic of anglo amreican countries»_space; crants higher minority shareholders fights»_space; dispersed ownership
Civil law:
Based on codes and is characteristic of continental europe»_space; offers weak(er) minority shareholder rights»_space; discourages ownership dispersion
Search costs:
Associated with the identification of potential trading partners
Contracting costs
Associated with negotating and writing an agreement
Monitoring costs
Associated with monitoring the execution of the agreement and ensuring each party lives up to the promises specified in the agreement
Enforcement costs
Associated with ex post bargaining and sanctioning parties that do not live up to the agreement
Trust game
30 out of 32 game trials resulted in a violation of the results predicted by standard
economic theory»_space; first players sent money that averaged slightly over 50% of their
original endowment.
No matter what information the experimenters gave to the 2nd player about the 1st player, the average amount returned to the first player by the second was in excess of
the amount originally sent.
Empirical measures of trust
surveys
Experimental games in the lab
Experimental games in thefield (paired with surveys)
Dynamics of trust
Climate, history, inherited trust
Dynamics of trust (climate)
Durante (2010):
Inhabitants of europes regions are today more trusting to the extent that they were subjected to significant climatic variation between 1500 and 17500
Ostrom (1990):
“trust is high in upland regions where farmers must cultivate scattered plots irrigated by communally maintained ditches
Dynamics of trust (weight of history)
The traffic in slave labor to work plantations in the americas introduced profound mistrust in the population
Dynamics of trust (inherited trust)
Beliefs and behaviors of immigrants are influenced by their countries of origin
Attitudes and beliefs of immigrants are influenced by their countries of residence
E.g. Level of trust of first generation immigrants correlates significantly with the level of trust in their country of origin
High-trust regions exhibit a larger share of value added and exports in industries characterized by greater need-for-delegation
Trust affects the economic performance of firms through two channels
1) Greater trust within the firm improves performance due to decentralized decision-making
2) Economies characterized by low trust may orient themselves toward sectors in which decentralized decision making is less imperative
Trust exerts influence on the functioning of the labor market, through several channels affecting growth:
1) The quality of labor relations
a) Low unemployment
b) better able to adapt to new management methods
c) unions
2) Flexicurity (flexiblity and security)
Flexicurity is linked to better labor market performance
> higher rates of employment and better reallocation of jobs toward more productive enterprises
Inequality (community characteristics)
High trusting societies are also more equal, while low-trusting societies show typically higher levels of income inequality
Ethnic fractionalization
Ethnic diversity drives down trust
Residential segregation, rather than ethnic diversity drives down trust
