Week Five Class Notes

In the last class, we developed the idea that cultures differ significantly across social groups (from civilizations down to towns, tribes, and families) and the reasons for differences are not trivial. Put differently, dealing with cultural difference is not about checking manners and etiquette (or that alone). Still, the Huntington and other papers did not really give us much of a handle for determining how different one culture is from another. That is, how do we classify and compare cultures at a national level?

    There have been various models for classifying cultures. For example, below is one from Ronen and Shenkar (1985). How closely does it seem to match or parallel Huntington's idea of civilization demarcation?


Another approach is shown in the optional reading from Inglehart's World Values Survey data (interesting set of charts!). Their map below is particularly interesting in how it positions the U.S. as a "deviant" case: the U.S. has a much more "traditional" system of values than any other economically advanced country. That is, the U.S. is far more religious while also holding to a strong value for self expression. Again, does this classification scheme match up with Huntington?

           However, the best known classifications scheme (or certainly, the most widely used) is Geert Hofstede's work. He characterized culture (collective programming of the mind) as a national phenomenon based on four (now five) dimensions and scored many countries on those dimensions. This was based on his work at IBM where he surveyed workers at installations in 64 countries in two waves two years apart. From this data, he developed the idea of four bipolar dimensions of culture.

1)Power distance  - degree to which unequally distributed power/authority (individuals and institutions) is accepted in a society.

2)  Uncertainty avoidance or the extent to which people prefer structured situations (where clear rules apply) over unstructured. "What is different, is dangerous" versus "what is different, is interesting"

3)  Individualism or the degree to which people prefer to act (are loyal to) as individuals rather than as a groups/clans/social units

4)  Masculinity or the extent to which attributes like assertiveness, performance, success and competition (which Hofstede says are almost always associated with male roles) do or do not prevail over attributes like quality of life, maintenance of relationships, solidarity, and care for the weak.

5)  Hofstede later added Long Term Orientation - the extent to which values are oriented toward the future rather than the past and present

For more on Hofstede including a pretty handy nation to nation comparison calculator, go to to the Hofstede website.

           For our purposes, he extended these differences to an analysis of American managerial techniques and their applicability in other cultures. The key idea here is that the theories are based on fundamental assumptions about how/why people behave - but those assumptions are implicitly founded on particular assumptions. Hofstede shows that the US not near average on three of four dimensions.

1)  Effect on motivation theory - US has low Uncertainty Avoidance and high Masculinity - Hofstede argues these lead to an "Achievement" orientation. Hofstede also points out that the countries that exhibit this combination are mostly Anglo (see Fig 7). What are the implications here? This is the subject of a discussion question.

2)  Leadership theory - US theories advocate participatory engagement between managers and subordinates but Hofstede argues this is function of middle ground Power Distance (PD) scores. In cultures with higher PD, there is little value in participative management (why?) and vice versa in low PD countries. Moreover, what works from a leadership perspective depends more on the subordinates than the leader

3)  Organization theory - a little more difficult to synopsize -the dimensions of PD and UA relate centralization and formalization dimensions.

Hofstede's work has been criticized because as we have seen, culture is not a purely national attribute. It can have ethnic, religious, local, regional, aside from national attributes or origins. Therefore, the source of differences he identifies is not clear. Second, his data were limited to responses from personnel from one company with demanding criteria for employment with respect to education and skills. Therefore, the people tested may not have been characteristic of the nation. This could be particularly true of countries with more than one cultural group where one group has preferential access to power and opportunity. how then should the values be calculated? Finally, we've seen that cultures do change over time so the scores that Hofstede derived may not be accurate now. (One of my earliest research efforts was to link economic conditions such as unemployment and inflation and political issues like stability to Uncertainty Avoidance scores. There was a very high correlation.  Intuitively, we should see this same effect n consumer behavior in the US during the current economic crisis with respect expenditure and saving patterns).   

Nonetheless, these dimensions have been used more than any other construct in International Business research and have been somewhat supported and validated in a great deal of later work. Given these dimensions, can you really get a feel for how far apart two nations are in terms of culture? Some research suggests we can: Bruce Kogut and Harbir Singh developed a scale that consolidates differences between country pair scores for the dimensions to come up with a proxy for cultural distance. This turned out to be useful in explaining why firms expanding abroad were more Lilly to use joint ventures when the cultural distance was great and acquisitions when distance was smaller. Still, that is a large scale effect and the problem usually comes down to comparing two specific countries (again - the Hofstede calculator is useful but you still have to draw the inferences).

From a purely business perspective understanding cultural differences is obviously important. Ultimately, though,  issues with culture will be of more importance than change/evolution in the political structure of nations. This is one of the great lessons of the 90's and early '00s  - it is not sufficient to merely establish nominal institutional change. Change advocates have to have the patience/foresight to work for cultural shifts as well. This, however, is difficult and slow, which is one of the points of the Pejovich paper.

Change requires the creation or substitution of new models and/or institutions  - this can take a generation or more if the existing models are potent!

Pejovich contrasts informal rules (how things have been done ) and formal rules (particularly institutions). The worst situations when these are in conflict as in C&EE - note the role of the old elite (lip service to the new order) and the over-45's (those with a vested interest in the old regime). They will be resistant to real change  - actively or passively.

How is change implemented in this analysis? Both fiat and voluntary actions - and note how little confidence Pejovich has in the former. Only through voluntary and repeated efforts are the mindsets changed - though this will require time - see p354 for examples of transitional problems! It is interesting to compare Pejovich's experience with Inglehart's findings about transition from last week's readings.

The big takeaways from this week's work are:  

1) Culture and civilization engage deeply held beliefs that, as Huntington pints it, have non-trivial effects. National (or sub-national ) differences matter.

2) Cultures do change but the change takes place over long periods of time (think generations).

3) Managers need to be able to think about how to assess cultural differences. This is not just a matter of etiquette or avoiding faux pas - it certainly matters with respect to basic managerial problems of motivation, compensation, command and control, staffing and HR, etc.

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