Lecture 6

Question 1

4 characteristics of Chinese management

Answer 1

1. Paternalistic leadership
2. Management through relationship
3. Centralized authority
4. Bureaucratic or entrepreneurial management

Question 2

3 elements of paternalistic leadership

Answer 2

1. Autoriteit
2. Welwillend leiderschap
3. Morele integriteit

Question 3

Characteristic of management through relationship

Answer 3

Good conduct more important than objective performance criteria. Informal, direct, face-to-face.

Question 4

Guanxi

Answer 4

Describes a individual’s social network of mutually beneficial personal and business relationships.

Question 5

Renqing

Answer 5

The emotional distance between people.

Question 6

Characteristics of centralized authority

Answer 6

• Simple reporting system preferred (reporting to the top)
• Highly centralized and often arbitrary, ad-hoc decision making
• The authority is not easily delegated

Question 7

Two contrasting observations in Chinese management

Answer 7

• Remarkable continuity of Chinese culture
• Massive changes in Chinese institutions

Question 8

4 Important elements of Confucianism

Answer 8

1. Respect for hierarchy
2. Mutual kindness (welwillendheid)
3. Harmony
4. Hard work, integrity, respect for tradition

Question 9

Ganqing

Answer 9

Feeling, affection, emotion

Question 10

Xinren

Answer 10

Interpersonal trust of one’s integrity and kindness to deliver one’s promises.

Question 11

Paternalistic leadership and centralized authority are supported by:

Answer 11

1. Traditional large power distance
2. Confucianism

Question 12

Management through relationships is supported by:

Answer 12

1. Uncertainty of massive institutional changes
2. Collectivism
3. Confucianism as relation-based moral philosophy
4. Importance of “face”

Question 13

Feng shui

Answer 13

The layout of the physical environment influences good and bad luck

Question 14

On which aspects does country distance have an effect?

Answer 14

• Location choices
• Entry mode
• Standardization of practices
• Transfer of knowledge
• Performance

Question 15

What does a larger cultural distance means?

Answer 15

• Higher anticipated communication, coordination and control costs
• Higher uncertainty
• Entry in that country less likely

Question 16

Cultural distance and internalization: External risk/uncertainty

Answer 16

• Lies in the environment of a foreign venture
• Unpredictability of market, customers, suppliers, competitors
• Risk dealing with governments

Question 17

Cultural distance and internalization: Internal risk/uncertainty

Answer 17

• Lies within the foreign venture (e.g. partner)
• Managing employees
• Behavior of your partner
• Communication with the local partner

Question 18

What do we know about the effect of cultural distance on firm internationalization?

Answer 18

• Firms tend to avoid countries at a large cultural distance
• Firms tend to avoid acquisitions in countries with large cultural distance
• If subsidiaries in culturally distant countries are more integrated this pays off.
  -Subsidiaries in countries with large cultural distance tend to perform less.

Question 19

Why need MNCs to adapt to local environments of international subsidiaries?

Answer 19

Due to:
- Cultural and institutional variance
- Resource endowment of local firms and economy

Question 20

4 Different ways of allowing how diversity enters into the corporation

Answer 20

1. Internal embeddedness (No adaptation to local context)
2. External embeddedness (Subsidiaries adapt to local context but HQ not)
3. Dual embeddedness (HQ embedded in both countries. MNE adapt strategies and practices subject to local institutional and resource conditions)
4. Multiple embeddedness (Some subsidiaries are fully embedded in host context, others in MNE context.)

Look for the pictures in summary.

Question 21

The type/degree of embeddedness depends on

Answer 21

The product/service and the motivation for internalization

But also on:
- History
- Size
- Growth path
- Cultural homogenity of the home country