Chapter 3

Emphasizing Cultures, Ethics, and Norms

LEARNING OBJECTIVES

After studying this chapter, you should be able to:

1. Define what culture is and articulate its two main manifestations: language and religion

2. Discuss how cultures systematically differ from each other

3. Understand the importance of ethics and ways to combat corruption

4. Identify norms associated with strategic responses when firms deal with ethical challenges

5. Participate in three leading debates on cultures, ethics, and norms

6. Draw implications for action

WHERE DO INFORMAL INSTITUTIONS COME FROM?

informal institutions - cultures, ethics, and norms

socially transmitted information and are part of the heritage that we call cultures, ethics, and norms

ethnocentrism - self-centered mentality within a society; people tend to perceive their own culture, ethics, and norms as “natural, rational, and morally right”

CULTURE

culture - national identity of nation-states

Prof. Geert Hofstede - conducted perhaps the most comprehensive study of how values in the workplace are influenced by culture: “the collective programming of the mind which distinguishes the members of one group or category of people from another”

LANGUAGE

lingua franca - dominance of one language as a global business languageEnglish-speaking countries contribute the largest share of global outputglobalization calls for the use of one common languagenonnative speakers of English who can master English increasingly command a premium in jobs and compensationexpatriate manager not knowing the local language misses a lot of cultural subtleties and can only interact with locals fluent in English

RELIGION

set of common beliefs and practices generally held by a group of people, often codified as prayer, ritual, and religious lawreligion also encompasses ancestral or cultural traditions, writings, history, and mythology, as well as personal faith and mystic experienceleading religions: Christianity (approximately 1.7 billion adherents), Islam (1 billion), Hinduism (750 million) and Buddhism (350 million)

CLASSIFYING CULTURAL DIFFERENCES

context - underlying background upon which interaction takes place

low-context cultures - culture in which communication is usually taken at face value without much reliance on unspoken context

high-context cultures - culture in which communication relies a lot on the underlying unspoken context, which is as important as the words used

CLASSIFYING CULTURAL DIFFERENCES

cluster - countries that share similar cultures together as onecluster approach groups countries that share similar cultures together as one cluster

three influential sets of clusters: Ronen and Shenkar, GLOBE, and Huntington civilizations

civilization - highest cultural grouping of people and the broadest level of cultural identity people have

DIMENSION APPROACH

dimension approach has endeavored to overcome limitations:context only represents one dimensioncluster approach has relatively little to offer regarding differences among countries within one cluster

DIMENSION APPROACH

power distance - extent to which less powerful members within a country expect and accept that power is distributed unequallyindividualism - perspective that the identity of an individual is fundamentally his or her owncollectivism - idea that the identity of an individual is primarily based on the identity of his or her collective groupmasculinity - sex-role differentiation

femininity - sex-role differentiation

uncertainty avoidance - extent to which members in different cultures accept ambiguous situations and tolerate uncertaintylong-term orientation - emphasizes perseverance and savings for future betterment

ETHICS

ethics - principles, standards, and norms of conduct governing individual and firm behaviorcode of conduct - set of guidelines for making ethical decisionsethical relativism -“When in Rome, do as the Romans do”

ethical imperialism - absolute belief that “there is only one set of Ethics (with a capital E), and we have it”corruption - abuse of public power for private benefits usually in the form of briberyForeign Corrupt Practices Act (FCPA) - US law enacted in 1977 that bans bribery to foreign officialsnorms - prevailing practices of relevant players that affect the focal individuals and firms

Economic Development: Western Valuesvs. Eastern Values

Belief in the superiority of Western values has recently been challenged by two sets of Eastern values: Islam and Asian (Confucian).Islamic fundamentalism, which, rightly or wrongly, argues that Western dominance causes the lackluster economic performance of Muslim countries. Marketing of Western products in these countries is seen as a cultural invasion. Islamic fundamentalists prefer to go “back to the roots” by moving away from Western influence.Asian (Confucian) values are widely viewed as the engine behind the “Asian economic miracle.” Not only do Asians proudly proclaim the validity of “Asian values,” but leading Western scholars also increasingly endorse such a view.

Cultural Change: Convergencevs. Divergence

In this age of globalization, one side of the debate argues that there is a great deal of convergence, especially toward more “modern” Western values such as individualism and consumerism.Another side suggests that Westernization in consumption does not necessarily mean Westernization in values. In a most extreme example, on the night of September 10, 2001, 9/11 terrorists enjoyed some American soft drinks, pizzas, and movies and then went on to kill thousands of Americans the next day.A middle-of-the-road group makes two points. First, with the end of the Cold War, the rise of the Internet, and the ascendance of English, there is no doubt some convergence—at least on the surface and among the youth.

Opportunism versus Individualism/Collectivism

Opportunism is a major source of uncertainty that adds to transaction costs, and institutions emerge to combat opportunism. However, critics argue that emphasizing opportunism as “human nature” may backfire in practice by causing distrust that could lead to opportunistic behaviors.Transaction cost theorists acknowledge that opportunists are a minority in any population. However, theorists contend that because of the difficulty in identifying a minority of opportunists before they cause any damage, it is imperative to place safeguards that, unfortunately, treat everybody as a potential opportunist.United States, the leading individualist country, is among societies with a higher level of spontaneous trust, whereas there is greater interpersonal and interfirm distrust in the large society in China.