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International Business
Oded Shenkar and Yadong Luo
Chapter 6
The Cultural Environment
Chapter 6: The Cultural Environment
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
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
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
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
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.
Chapter 6: The Cultural Environment
Culture Does Not Explain Everything
Exhibit 6-1: Research design for the isolation of
culture
Chapter 6: The Cultural Environment
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
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
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
Chapter 6: The Cultural Environment
Language
Chapter 6: The Cultural Environment
Language
Chapter 6: The Cultural Environment
Language
Exhibit 6-3:
Numbers of
speakers of
major
languages of
the world
(estimated)
Chapter 6: The Cultural Environment
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.
Chapter 6: The Cultural Environment
Religion
Chapter 6: The Cultural Environment
Religion
Chapter 6: The Cultural Environment
Religion
Exhibit 6-5: Adherents to major world religions, by
geographic region, 1996 (in millions)
Chapter 6: The Cultural Environment
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
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
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
Chapter 6: The Cultural Environment
Power Distance (PD)
Exhibit 6-6: Power distance: country examples and
organizational implications
Chapter 6: The Cultural Environment
Power Distance (PD)
Exhibit 6-7: Rank distinctions among the
Japanese
Chapter 6: The Cultural Environment
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
Chapter 6: The Cultural Environment
Uncertainty Avoidance (UA)
Exhibit 6-8: Uncertainty avoidance: country
examples and organizational implications
Chapter 6: The Cultural Environment
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
Chapter 6: The Cultural Environment
Individualism/Collectivism (I/C)
Exhibit 6-9: Individualism/collectivism: country
examples and organizational implications
Chapter 6: The Cultural Environment
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
Chapter 6: The Cultural Environment
Masculinity-Femininity (M/F)
Exhibit 6-10: Masculinity/femininity: country
examples and organizational implications
Chapter 6: The Cultural Environment
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
Long-Term Orientation (LTO)
Exhibit 6-11:
Country scores
on Confucian
dynamism
(long-term
orientation)
Chapter 6: The Cultural Environment
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.
Chapter 6: The Cultural Environment
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.
Chapter 6: The Cultural Environment
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 selfassertion
• Harmony – being “at peace” with nature and society
Chapter 6: The Cultural Environment
Schwartz’s Classification
Exhibit 6-13: Sample country rankings on
Schwartz’s dimensions
Chapter 6: The Cultural Environment
Trompenaars and Hampden-Turner’s
Classification
•
Consists of seven dimensions:
1. Universalism versus particularism – rules
versus relationships
2. Communitarianism versus individualism –
the group versus the individual
3. Neutral versus emotional
4. Diffuse versus specific
5. Achievement versus ascription
6. Attitudes to time
7. Attitudes toward the environment
Chapter 6: The Cultural Environment
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
Chapter 6: The Cultural Environment
National Cultural Clustering
Exhibit 6-14:
Ronen and
Shenkar’s
culture
clustering
Chapter 6: The Cultural Environment
National Cultural Clustering
Exhibit 6-15:
Huntington’s
civilization
clustering
Chapter 6: The Cultural Environment
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.
Chapter 6: The Cultural Environment
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
Chapter 6: The Cultural Environment
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
Chapter 6: The Cultural Environment
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
Chapter 6: The Cultural Environment
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.
Chapter 6: The Cultural Environment
Key Cultural Issues
Exhibit 619:
Americans
from A to Z
Chapter 6: The Cultural Environment
Key Cultural Issues
• Cultural Distance
– 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
Chapter 6: The Cultural Environment