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Answers to Study Questions:
Chapter 4
National Diversity and Management
1. Provide a brief outline of the main differences and/or similarities between
the ‘societal effect’ (SE) and the ‘business systems’ (BS) approaches.
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The use of different concepts (i.e. space (SE) as opposed to institution (BS)).
The dynamic character of the SE approach and the static character of BS.
The use of the actor-structure theory also inserts a behavioral element in the SE
approach, which could be seen as a more explicit reference to how culture is
incorporated in the SE approach.
The open-endedness of the SE approach as opposed to the determined character of the
BS approach.
The avoidance of typologies in the SE approach and the theoretical basis as opposed to
the lack of theorizing in the BS approach and the use of a typology.
Unlike to BS approach, the SE approach addresses the ‘efficiency’ question of
contingency theory and, thus, is able to answer the question of competitiveness.
The main aspect the approaches have in common is that they try to explain diversity.
2. What is methodological individualism?
Methodological individualism is the use of research methods such as surveys that target
individuals to explain systemic characteristics.
3. A major aim of the societal effect approach is to contextualize phenomena.
A. Explain what this means and how the approach goes about theorizing
this aim.
B. Explain how contextualization can help the SE approach to overcome the
gap between culturalism and institutionalism.
A. To contextualize phenomena implies to study them as part of their environment. For
example, when trying to explain organizational structure the SE approach would refer
both to systemic but also cultural elements because it sees both influences as
intertwined. It would argue that an hierarchical organizational structure cannot be
explained solely by referring to cultural preferences but also by the educational system
and labor relations – or, in other words, by using contextual factors.
One of the major theoretical features of the approach which provides it with the ability to
contextualize phenomena is its insistence on the reciprocal interactive constitution of
“actors” and “spaces” or the dialectical relationship between the micro (the cultural) and
the macro (the institutional).
B. Contextualization helps the approach to overcome the gap between culturalism and
institutionalism in the sense that the former focuses on explaining phenomena on the
basis of behavioral features (culture), thus, neglecting the contextual or systemic
features; while the latter focuses essentially on systemic features, neglecting the
behavioral aspects. The SE approach clearly tries to integrate both in its explanatory
variable.
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4. Explain how the notion of “space”, which is used within the societal effect
approach is more extensive than the concept of an institution.
The notion of space in the SE approach denotes not only structure or institution but also
process. The fact that it incorporates processes points to the dynamic character of the
approach. The structural aspect of the concept of space refers to the ‘stocks’ and properties,
which characterize the composition of an aggregate of people or of a system. The process
refers to the changes, which occur with regard to a space, over a certain period of time.
Structures and processes are not set apart. A process, for instance, labor market mobility
between enterprises, has a clear structure, being decomposed into relative shares of types of
labor differentiated by age, experience, specialism, education and training, and other salient
variables. Inversely, a structure is characterized by processes since a structure is never
entirely stable. The identity of the structure over time cannot be limited to those elements that
remain stable over a period of time; it also includes a relatively stable pattern of changes.
5. Explain the differences between the concept of background institutions,
which is used in the business systems approach and national culture.
The concept of background institutions refer to social institutions (norms and legal
rules such as property rights) that structure general patterns of trust, cooperation, identity
and subordination in a society (i.e. commitment of employees, corporate culture). They are
reproduced through the family, religious organizations and the education system and often
manifest considerable continuity.
Whitley uses the example of trust and argues that how trust is granted and guaranteed
in an economy especially affects the level of inter-firm cooperation and tendency to delegate
control over resources. Another example is the impact of a society’s level of individualism or
collectivism. Individualistic societies such as the US and the UK tend to have ‘regulatory’
states, a preference for formal, contractual regulation of social relationships, and marketbased employment and skill development systems.
From the above discussion is appears that background institutions include, on the
one hand, norms which could be seen as almost synonymous to culture. In fact, Whitley
explicitly refers to a society’s level of individualism and collectivism, both of which are
dimensions of national culture. On the other, he refers to legal rules, which are institutions
that are embedded in cultural norms and values.
6. Assess whether and how both approaches that have been studied in this
chapter can help you understand differences between organizations in
different countries, in different regions, in different sectors.
Both approaches can be usefully applied to identify and understand differences between
organizations at whatever level of analysis. In practice, the methodological stress on
matched pairs, seems to have induced a tendency to use the approaches for sectoral
analysis.
In principle, the national business system concept and the SE concept are to explain
differences in organization and management between countries.
However, Whitley does point to the need to identify within the BS, the dominant role of
institutions at each level of analysis. He argues that where, for example, regional
governments, financial institutions, skill development, and control systems and broad cultural
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norms and values are distinct from national ones and able to exert considerable discretion in
the economic sphere, it could be expected that distinctive kinds of economic organization
become established at the regional level. This is especially so if national agencies and
institutions are less effective in coordinating activities and implementing policies. The same
argument can be applied to the sectoral level. Indeed, BS are argued to be embedded in an
institutional context that is specific to a nation, a region, or a sector.
Similarly, the SE approach can be used at all levels of analysis. The concepts of space and
actors can be applied at any level of analysis. The stress is on the relations between events,
arrangements, structures and processes. The analytical dialectic that characterizes the
approach allows for forging links between the forms of sectoral, regional and national
regulation to which the various actors active in the different spaces contribute.
7. Explain why it is important to use “matched” samples in comparative
analysis.
Matched examples are essential because they allow us to identify and explain differences
that cannot be attributed to common explanatory variables in organization theory, such as
technology, task environment, firm size, products made, innovation rates, ownership, etc.
8. Assess whether typologies, such as the one developed within the business
systems approach, are useful analytical tools.
Typologies present ideal types that do not represent reality on a one by one basis.
Societies are usually mixtures of differently weighted types applying to a greater or lesser
extent in specific sectors or regions.
Typologies are very crude tools that help us to sketch very broadly the differences
between say Korea and Japan but that are unable to capture the more specific differences
thus failing on more demanding analysis. Typologies are useful in forcing us to identify
linkages between different institutional domains.
An important criticism of approaches that are based on typologies is that they do not
offer a theory. For example, Whitley classifies countries in his typology but fails to explain
why a particular country develops a specific type of business system at a particular time.
Moreover, the approach does not explain the particular pattern of industrialization and growth
that is associated with a particular business system.
9. Explain how the societal effect approach is able to account for change as
well as the type of change it accounts for.
The approach draws on structuration theory, which has made the point that individual
behavior and social structure are reciprocally constituted: It is impossible to imagine a
normative regularity, instituted to be more or less binding, as not being kept in place by
acting individuals. Likewise, individuals do not make behavioral choices without regard for
norms. As such, SE analysis is one of the few approaches, which succeeds at integrating the
macro/micro relationship in a dialectic way, problematizing it as “sets” of interdependent
relations in which “actors” and “spaces” are perceived in their relationship to the wider
society. “Actors” and “spaces” are conceptualized as being interdependent; that is, there are
no actors without spaces and vice versa. By recognizing the actor-structure dynamism,
societal analysis is able to overcome the stasis and inertia that is inherent in the way that the
business systems approach has been developed.
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This pattern of interactions between the actor and the space is argued to reproduce
something, which does not necessarily remain unchanged because actors have the ability to
innovate practices, which reduces the inertia usually implied by institutions. However, since
actors are embedded in the social structures, they replicate some more abstract qualities of
practices even as they innovate them. Indeed, structural properties and rules of the game,
that is, the ‘systems’ properties, tend to load the individual ‘choices’ that actors make in a
specific way. It also happens because actors tend to see particular ‘choices’ as generally
favorable, and develop a specific ‘programming of the mind’. The dynamics in this way link
both, elements of stability and change within ‘non-identical reproduction’.
Furthermore, the interactive relationship between actor and spaces may be marked by
both correspondence and opposition: faced, for example, with hierarchical organization
patterns, the actors may learn to internalize corresponding assumptions and find them
legitimate. They may also develop a dislike for them, and attempt to evade them while trying
at the same time to comply with them. This means that expressed value preferences and
manifest behavior may both converge and diverge (Sorge, 2003). Indeed, not the mental
maps of individuals, nor their values, nor the system characteristics to which they attach
themselves, nor the relations between them can ever be free of conflict or contradictions.
Conflicts and contradictions, between values and between institutional arrangements, and
between values and institutions, exemplify the need for a dialectical perspective. This
dialectical perspective stresses that the openness of social systems goes with conflict.
Indeed, openness and conflict, together, account for the ever-present tendency to
change and modify in ways that go beyond the relatively stable patterns put forward in
Whitley’s business systems framework.
The SE approach, thus, distinguishes two levels of change, one more abstract and the
other more concrete. Concrete practices, arrangements and actor predispositions change
over time. However, since new practices are linked to existing logics of action they will take
on a specific form, which is in accordance with the existing societal identity. In other words,
new practices will be molded by the existing societal institutions while existing societal
institutions remain visible in the specific form that changes take on. The SE approach argues
that this would happen even after full-scale revolutions.
Moreover, within the societal effect approach, actors have a historical dimension. More
concrete, the “construction of actors” has temporal and historical dimensions that help to
shape the actors’ identity and their form of existence in society. Recognition of the historical
nature of the construction of actors and spaces and of the historicity of the processes
involved is another way in which it is possible for the approach to take account of the
dynamics of change.
10. Explain why the business systems framework is a static as opposed to a
dynamic approach.
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The BS argues that the interaction between a business system and its institutional
context is a co-evolutionary process that is strongly path-dependent. The acceptance of
path-dependency involves that radical change is in any case excluded from the
framework.
Unlike the SE approach, the BS approach does draw on the actor-structure theory which
is one way to make an approach dynamic.
The BS approach focuses on structure only and does not consider processes.
11. Explain how, despite the dynamic nature of the societal effect approach,
there is a static aspect to the approach.
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The more static aspect of the SE approach lies in its argument that the distinctiveness of a
particular society lies in the features that a specific type of reciprocal constitution has brought
about. The picture of the analysis is a kind of snap-shot at a certain moment in time, ignoring
the still ongoing processes.
12. Explain whether and how both, the BS and the SE approaches recognize
and are able to incorporate globalization pressures within their framework.
Within the BS approach, it is recognized that the growth of international firms and
markets has modified the significance of purely national institutions, rendering them more
interdependent and less sharply distinct. However, it is maintained that a completely new
transnational model of markets and firms would only develop when supranational political,
financial and labor institutions are established. Such a model would reflect the struggles
between national groupings, actors and institutional arrangements. This is argued not to
have happened yet. Moreover, within the BS approach it is argued that the international
business environment remains less organized and predictable than national business
systems. Business systems are, thus, seen as embedded in an institutional context that is
specific to a nation or region.
Similar to the BS approach, the aim of the SE approach is to explain differences in
organization between countries. Hence, the approach is essentially interested in the societal
or national environment. The open-endedness of the approach, however, involves that it can
be extended to incorporate supra-national influences. In fact, the SE approach could widen
the globalization debate – which is focused on financial flows and commercial exchanges by including an analysis on the context in which globalization forces are active, highlighting
the diversity of reactions from actors at national level. This would mean that a certain priority
would be given to the “local”, which serves as a basis for revealing the “global”. The notion of
“societal” will then need to be reformulated, making it no longer necessarily associated solely
with national spaces (that is, spaces enclosed by the boundaries of the nation state).
13. Explain whether and how institutional interconnectedness can hamper
convergence despite globalization pressures.
The interdependence of the dominant institutions within the BS approach and the extent
to which they are mutually reinforcing are argued to have implications for the cohesiveness
and distinctiveness of business systems. Thus, the strongly interdependent nature of
institutions in post-war Japan is argued to have resulted in the Japanese business system
being much more integrated than its Anglo-American counterparts, and as a corollary, more
difficult to change.
Similarly, since, within the SE approach, change tends to consist of non-identical
reproduction, full ‘convergence’ can hardly take place; convergence can only be partial and
will be balanced by divergent developments.
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