Carla I. Koen. Comparative International Management

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Thanks go to the following reviewers for their comments at various stages in the text’s

development.

Joost Bucker – University of Nijmegen

Robert Carty – London Metropolitan University

Abby Cathcart – University of Sunderland

David Chesley – Doncaster College

Peter Miskell – University of Reading

Patricia Nelson – University of Edinburgh

Can-Seng Ooi – Copenhagen Business School

Frances Tomlinson – University of North London

Jan Ulijn – Eindhoven University of Technology

Ad Van Iterson – Maastricht University

Nimal Wijayaratna – Loughborough University

Thanks to the companies and organizations who granted us permission to reproduce

material in the text. Every effort has been made to trace and acknowledge ownership of

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Acknowledgements

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XII

Guided Tour

Learning Objectives

Each chapter opens with a set of

learning objectives, which

introduce the ideas to be

discussed within the chapter.

Chapter Outline

Each chapter contains a brief

outline at its opening that

highlights the key topics to be

covered in the chapter.

Chapter Outline

1.1 Introduction

1.2 The Economist’s Point of View

‘It’s the culture, stupid!’

The Weber thesis

Social capital and trust

Culture, institutions and the societal environment

Case: Corruption and the Financial and Educational Systems in Nigeria

1.3 How the Economy Influences Culture: the Sociologist’s Stance

Inglehart’s thesis

1.4 Conclusions

Study Questions

Further Reading

References

Appendix: Eurostat definition of regions

THE SOCIETAL ENVIRONMENT AND ECONOMIC DEVELOPMENT 27

Learning Objectives

By the end of this chapter you will be able to:

appreciate why in general we should be interested in the role of culture

evaluate the relationships between culture and economic development

discuss the use of the concept of social capital and trust

explore the role of trust in economic development

explain the relationship between trust and institutions

understand the antecedents of cultural differences between countries

understand the processes of modernization and postmodernization

assess why mono-causal interpretations of the relationship between culture

and economy are not productive.

Chapter

The Societal

Environment and

Economic

Development

SJOERD BEUGELSDIJK AND ANTON VAN SCHAIK

26 COMPARATIVE INTERNATIONAL MANAGEMENT

THE SOCIETAL ENVIRONMENT AND ECONOMIC DEVELOPMENT 4342 COMPARATIVE INTERNATIONAL MANAGEMENT

Table 1.2 Scores for 33 countries’ ‘societal environment’

Country (World Bank code in brackets) Score on ‘societal environment’

Argentina (ARG) 13.6

Australia (AUS) 91.7

Austria (AUT) 82.2

Belgium (BEL) 80.6

Brazil (BRA) 24.6

Canada (CAN) 100

Switzerland (CHE) 99.8

Chile (CHL) 44.4

Colombia (COL) 15.7

Germany (DEU) 85.3

Denmark (DNK) 96.5

Spain (ESP) 71.1

France (FRA) 70.8

United Kingdom (GBR) 84.6

Greece (GRC) 55.8

India (IND) 16.0

Ireland (IRL) 82.5

Italy (ITA) 51.6

Japan (JPN) 82.4

Korea, Rep. of S. (KOR) 24.9

Mexico (MEX) 32.4

Nigeria (NGA) 4.8

The Netherlands (NLD) 91.2

Norway (NOR) 96.0

Oman (OAN) 62.2

Peru (PER) 17.4

Philippines (PHL) 0

Portugal (PRT) 55.7

Sweden (SWE) 95.6

Turkey (TUR) 4.1

United States (USA) 95.6

Venezuela (VEN) 13.9

South Africa (ZAF) 45.7

growth between 1970 and 1992, and the independent variables are investment, years of

education, initial level of welfare in 1970 and the measure of societal environment.

The results indicate that there is a signiﬁcant positive effect of the societal environ-

ment on economic growth while controlling for other variables inﬂuencing growth. The

t-value of 3.52 is a clear indication of the importance of the societal environment for

economic growth. Those countries that grow quickly are also the countries with a culture

based on trust and with efﬁciently functioning institutions. The explained variance equals

almost 50 per cent.

Table 1.3 Relationship between economic growth and the societal context

Dependent variable: growth 1970–1992 Coefficient (t-value)

Independent variables:

GDP 1970

Investment

Human capital (years of education)

Societal environment

.328 (2.39)

.036 (2.23)

.027 (.876)

1.57 (3.52)

Number of countries

Explained variance

1.33

1.48

1.3 How the Economy Influences Culture: the

Sociologist’s Stance

After this discussion on the economist’s perspective on the relationship between culture

and the economy, it is important to make you aware of the inverse direction of causality

between culture and the economy. As mentioned in the introduction to this chapter,

mono-causal explanations are insufﬁcient to explain the complex set of relationships

between culture and economic development. Economic development also inﬂuences the

Box 1.2 Regression Analysis

Regression analysis is a method used to test whether a speciﬁc dependent variable is

related to a number of independent variables. Given the nature of the variables (for

example, continuous, interval, discrete) the mathematical technique used differs. The

most basic type of regression analysis is ordinary least squares (OLS). The objective of

regression analysis is to predict changes in the dependent variable in response to

changes in the independent variables. The effect of a certain variable on the dependent

variable is surrounded by a band of uncertainty. This uncertainty may imply that it is

not possible to detect with conﬁdence whether the independent variable may in some

cases have zero effect. In these cases the effect is called insigniﬁcant. To obtain a stat-

istically signiﬁcant result with 95 per cent conﬁdence, the estimated t-value should be

at least 1.96. Note that regression analysis does not imply causal linkages between

variables. Causality is determined by the theory.

Figures and Tables

Each chapter provides a number of

figures and tables to help you to

visualize the various models,

provide extra data, and to illustrate

and summarize important concepts.

Boxed Examples

Brief boxed examples in the text

demonstrate a variety of different

management scenarios from across

the world, illustrating the main

text’s discussion with examples

from contemporary business

practice.

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GUIDED TOUR XIII

plished through cultural change measures or if this calls for structural elements such as

changes in the ratio of men/women in particular senior positions. Greater representation

by women would then lead to cultural change (Kanter, 1977; Ely, 1995). Another pos-

ition assumes that the use of structural measures – setting targets and controlling to

make sure that these are attained – to recruit or promote greater numbers of females in

order to ﬁll the quota does not imply a qualitative change and may backﬁre as those

recruited/promoted will be evaluated negatively (Alvesson, 2002).

Study Questions

1. What are the main differences between the emic and etic approach to organiz-

ational culture? Under what circumstances would you use either approach?

2. How would you go about analysing the effects of the societal environment on

organizational culture?

3. Explain whether it always makes sense to distinguish between thedifferent levels

(societal, industrial, individual) at which organizational culture can be analysed?

4. Explain the relationship between industry characteristics and organizational

culture.

5. Discuss the relationship between organizational culture and strategy.

6. Discuss whether, how and when organizational culture affects organizational

performance?

7. Explain whether organizational culture can always be changed readily. Discuss

whether there are aspects of organizational culture that are more easily

changed than others and, if so, whether this change can be called real change.

8. How can industry features limit organizational culture change, and how can a

change in the industrial environment enforce organizational culture change?

9. What are the mechanisms that help organizations to perpetuate and reproduce

some of the widely shared assumptions within the organization?

10. Explain whether cultural fit is always essential for successful mergers and

acquisitions.

Further Reading

Each chapter ends with a section

of guided further reading,

providing details of importance

sources and useful articles and

texts for further research and

study.

ORGANIZATIONAL CULTURE RESEARCH 143142 COMPARATIVE INTERNATIONAL MANAGEMENT

concentrate on innovative activities but, as a result of cost-cutting measures, is

now unable to continue to do so. It is clear, however, that rather like the results

of the survey at AO DTS, survey results at KPN WD paint a different picture from

the results that stem from qualitative research sources. Presumably this con-

tradiction is due to the fact that surveys can induce people to answer in an

‘appropriate’ way and/or that the itemsof each dimension, though validated, are

not always interpreted correctly.

The sixth dimension is stability. Characteristic of organizations scoring

high on this dimension is being rule-orientated, emphasizing stability, pre-

dictability, and security of employment; employees are constrained by many

rules. From the survey results it is clear that AO DTS employees do not see

stability as a feature of the organization. In contrast, KPN WD employees

responded positively and hence see KPN WD as an organization that empha-

sizes stability and predictability. In this case, interviews support the survey

results.

The last dimension, team orientation, refers to the extent to which people are

encouraged to cooperate and coordinate within and across units. The survey

results show that AO DTS employees do not see team-orientatedness as a feature

of the organization. Two out of three employees responded negatively. In fact,

qualitative research shows that employees experience the lack of cooperation

within AO DTS as a major weakness. KPN WD employees, on the other hand,

responded positively and emphasized that team orientation is definitely a feature

of the organization.

Main organizational culture differences

Quantitative research, combined with qualitative results, shows the following

organizational culture differences between Atos DTS and KPN WD.

1. Both, AO DTS and KPN WD are results-orientated with respect to the quality

achieved but only AO DTS is results-orientated in financial terms.

2. AO DTS is less employee-orientated than KPN WD.

3. AO DTS is less open (to criticism) than KPN WD.

4. AO DTS is less ethical than KPN WD.

5. Neither organization is truly innovative, but KPN WD is characterized by

structures that could help to improve ‘innovativeness’ if wanted.

6. AO DTS is less rule-orientated, and emphazises less stability and pre-

dictability than KPN WD.

7. AO DTS is less team-orientated than KPN WD.

Questions

1. Explain the concept of organizational culture.

2. Discuss how organizational culture can be measured, and how this has been

approached in the case study. What would be the best way to measure

culture, given that there are shortcomings to the etic and emic approaches>

3. Explain whether the examination of culture in the case study should also

include national culture analysis to provide the companies with valid results?

4. Discuss the factors that can aid understanding of the differences in organiz-

ational culture between AO DTS and KPN WD.

5. Explain whether the organizational culture differences between AO DTS and

KPN WD are such that they should be taken into account during the inte-

gration process of the two subdivisions?

6. Explain the types of measure you think the management of the merged sub-

divisions should take in order to ensure the successful integration of the two

organizations?

7. Explain to what extent institutions (e.g. the stock market) have an influence

on organizational culture. Can you give any other examples of this type?

References

Abrahamson, E. and Fombrun, C.J. (1994) Macrocultures: determinants and conse-

quences. Academy of Management Review 19(4), 728–55.

Adler, N. (1996) International Dimensions of Organizational Behavior. Cincinnati, OH:

South-Western College Publishing.

Adler, N. and Jelinek, M. (1986) Is ‘organization culture’ culture bound? Human

Resource Management 25, 73–90.

Allen, R.F. (1985) Four phases for bringing about cultural change, in Kilmann, R.H.,

Saxton, M.J., Serpa, R. et al. (eds) Gaining Control of the Corporate Culture. San

Francisco: Jossey-Bass, 137–47.

Alvesson, M. (2002) Understanding Organizational Culture. London: Sage.

Berg, P.O. (1986) Symbolic management of human resources. Human Resource

Management 25, 557–79.

Berry, J.W. (1980) Social and cultural change, in Triandis, H.C. and Brislin, R.W. (eds)

Handbook of Cross-cultural Psychology. Boston: Allyn & Bacon, 211–79.

Berry, J.W. (1983) Acculturation: a comparative analysis of alternative forms, in

Samuda, R.J. and Woods, S.L. (eds) Perspectives in Immigrant and Minority

Education. Lanham, MD: University Press of America, 66–77.

Bhagat, R.S. and McQuaid, S.J. (1982) Role of subjective culture in organizations: a

reviewanddirectionsforfutureresearch. Journalof Applied Psychology67(5), 653–85.

Cases

Chapters end with relevant and

up-to-date case studies featuring

real organizations, offering

examples of management from a

variety of different cultures. Case

study questions encourage

students to analyse each case

and the management issues it

raises.

References

Each chapter ends with a full

listing of the books and other

sources referred to in the

chapter, providing the student

with an opportunity to undertake

further study.

MG9353 pre.qxp 10/3/05 8:56 am Page xiii

Technology to Enhance Learning and Teaching

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Online Learning Centre (OLC)

After completing each chapter, log on to the

supporting Online Learning Centre website.

Take advantage of the study tools offered to

reinforce the material you have read in the

text, and to develop your knowledge in a fun

and effective way.

Resources for students include:

Learning objectives

Answers to exercises

Also available for lecturers:

PowerPoint slides

PowerPoints for print handouts

Lecture outline

Case study solutions

Mini-case solutions

For lecturers: Primis Content Centre

If you need to supplement your course with additional

cases or content, create a personalized e-book for your stu-

dents. Visit www.primiscontentcenter.com or e-mail

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XIV

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General Introduction

XVII

Comparative international management is the ﬁeld of inquiry that focuses on differences

in management and organization between countries. By now, there is sufﬁcient aware-

ness of the usefulness of studying management and organization in an international

context. Also, the use of comparison to aid explanation and to enhance understanding of

social phenomena has always been recognized as a valuable tool of social scientiﬁc

research and hence as an end in itself. Despite this wisdom, however, in general, the ﬁeld

of comparative international management is undervalued and few efforts have been

made to apply the insights of the ﬁeld in textbooks. This book is the ﬁrst of its kind to take

this type of comparison seriously and to show the reader the usefulness of broadening its

horizons beyond the familiar and the known to understand better, and hence function

more efﬁciently within international and globalizing economies.

In doing so, we aim to answer calls from prominent scholars (e.g. Vernon, 1994;

Shenkar, 2004) to emphasize the enormous value of comparative work for international

business (IB). In 1994 Vernon was already concerned that, ‘while comparative national

business systems was one of the three core IB areas (the others being international trade

and the multinational enterprise), it was the one most at risk of being overrun by US eth-

nocentrism as well as by high opportunity cost’ (cited in Shenkar, 2004: 164). He argued

that ‘the omission of comparative business and its related components, such as cross-cul-

tural research and comparative management, from the IB agenda is a fundamental error’

(2004: 164). ‘It amounts to no less than negating the value of local knowledge and

assuming no scholarly ‘liability of foreignness’ (Zaheer, 1995, cited in Shenkar, 2004:

164). In a similar vein, Shenkar (2004: 164) argues that ‘the disappearance of the com-

parative perspective has robbed IB of one of its most important theoretical and

methodological bases, and has stripped it of one of its most unique and valuable assets’.

In this book, we try to do justice to the ﬁeld by studying comparative international

management in its broadest sense. Among other things, we will discuss management

styles, decision processes, delegation, spans of control, specialization, organizational

structure, organizational culture, typical career patterns, corporate governance, produc-

tion systems, corporate strategy and labour relations. Moreover, all chapters of this book

use examples from different countries and from different sectors within those countries to

illustrate its approach. However, the purpose of these examples is not just to serve as an

illustration; the acquisition of knowledge of management and organization in different

countries and sectors is also one of the objectives of this book. It covers most EU countries,

the USA, Japan and other Asian countries, some African countries, and Russia.

All chapters depart from the question of whether differences in management and

organization between countries do indeed exist. Do managers in France have a more auto-

cratic management style than managers in Germany? Do organizations in Japan have

more hierarchical layers than organizations in the USA? These questions are difﬁcult to

answer because, if one is interested in cross-national differences in management and

organization, one has to rule out differences caused not by nationally determined vari-

ables, but, for instance, by industry characteristics. In other words, one has to isolate

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differences that have to do with nationality from all other kinds of differences between

organizations and management practices. When trying to explain cross-national differ-

ences, it is not, for example, particularly useful to compare companies in the automobile

industry in Korea with professional service ﬁrms in the UK. Nor is it useful to compare the

management style of elderly supervisors in Belgium with the actions of young executives

in the Netherlands.

Once cross-national differences have been identiﬁed, two additional questions are

asked: how can they be explained, and are they likely to disappear or will they persist?

These questions form the core of each chapter and are answered in a theoretically

informed way, based on cultural and institutional analysis. The book takes a critical

approach not only by evaluating critically the different theoretical strands but also by

assessing the usefulness of the approaches for explaining issues in non-western, non-cap-

italist, less-developed countries and countries in transition. This may mean that, in some

instances, the book appears intensive and highly focused. This approach is in accordance

with the philosophy of the book, which is to offer thorough and well-founded knowledge

rather than provide an easy descriptive tour through the material, and this approach

requires a strong foundation in order to be meaningful.

Plan of the Book

The book consists of 12 chapters, each of which deals with major aspects of comparative

international management and organization, in a comparative way. Each chapter starts

with a learning objectives section and an outline of the chapter, and ends with study ques-

tions followed by an annotated recommended further reading list, one or more closing

case studies, and a full list of references. Each chapter also includes some real-life

examples and brief cases related to the topics discussed. These brief studies usually involve

the application of the topics discussed in countries in transition such as China and Russia

or in less-developed African countries such as Nigeria.

The ﬁrst chapter sets the scene by introducing the main approaches to comparative

international management as well as the globalization debate. The cultural and insti-

tutional theories, which are introduced in this chapter, are treated in a more in-depth way

in Chapters 2 to 4. These two theoretical strands form the cornerstone of the explanations

of the international management and organization issues that are covered in the subse-

quent chapters of the book. The globalization debate is introduced early on in the book in

order to facilitate the understanding of the convergence–divergence question, which is

the thread that connects all chapters. As will be clear from the text, the convergence–

divergence question is quite controversial and, until now, there has been no deﬁnite

answer to it. Hence, while I offer my own perspective in Chapter 12, this should be seen

more as an encouragement to further reﬂection than a deﬁnite answer.

Before digging into the theory, however, Chapter 1 deals with the broader question of

the role of national culture and national institutions in socio-economic development. The

word ‘societal’ is used in the title of this chapter to express the dialectical relationship

between culture and institutions. Chapter 1 deliberately takes a macro perspective, taking

the economy at large instead of the organization as the unit of analysis. Since organiz-

ations are not only economic but also social phenomena that are part of, as well as operate

XVIII COMPARATIVE INTERNATIONAL MANAGEMENT

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within, the economy of a country, it is important to acquire some knowledge of the social

functioning of this broader context.

Chapter 2 discusses several theoretical approaches to national culture in a critical

and balanced way. It shows how national culture shapes organization and management

differently in different countries. In order to further stress the inﬂuence of national

culture on the micro level of the organization, the chapter also includes a section on the

popular topic of cross-cultural negotiation.

Following this chapter on national culture, the inﬂuence of organizational culture on

management and organization is explored in Chapter 3. This chapter emphasizes the

relationship between national and organizational culture, and explains why organiz-

ational cultural differences are important in an international management context.

Chapter 4 discusses important aspects of institutional theory, concentrating on two

major European approaches: the business systems approach and the societal effects

approach. It explains the inﬂuence of the national institutional context on the develop-

ment process of two Asian business systems: the Korean Chaebol and the Taiwanese

business system. In order to be able to answer the convergence–divergence question

theoretically, it tackles the issue of institutional change.

Chapters 5 and 6 concentrate on micro topics, discussing international human

resource management issues and corporate governance aspects respectively. These two

chapters serve dual purposes. First, they provide the background knowledge that is essen-

tial to an understanding of Chapters 7 and 8, which deal with production and innovation

management respectively. Next, they help the reader to understand how the cultural and

national institutional approaches that are explained in the previous chapters affect two

important areas at the micro level of the organization. In particular, Chapters 5 and 6

explain how nationally speciﬁc institutions and national culture shape human resource

management and corporate governance in organizations in different countries. As such,

they are important in their own right.

As mentioned above, Chapter 7 explores how the societal environment shapes pro-

duction systems and management in different countries. It concentrates on the major

production systems – that is, on mass and ﬂexible production systems, and the forms they

take in different countries. Chapter 8 discusses the relationships between the societal

environment and national systems of innovation. By means of examples of US, Japanese,

German and French innovation systems, it clariﬁes these relationships.

Chapter 9 concentrates ﬁrst on explaining the internationalization process of multi-

national corporations (MNCs). It discusses issues of coordination and control, and of

learning. It also deals with the MNCs’ responses to cultural and institutional differences.

Chapter 10 analyses the inﬂuence of the societal environment on corporate strategy.

Since this is a rather new and so far under-researched topic, there is scant literature avail-

able. The chapter concentrates on the major existing studies in the ﬁeld. To a greater or

lesser extent, all chapters of this book can be applied to and are useful for both MNCs and

small and medium-sized organizations – since they also operate in an increasingly inter-

national and multicultural context. In view of the special position of MNCs in an

international context, Chapters 9 and 10 are devoted to them. More than any other

organization, these corporations have to decide how to deal with cross-national diversity

in management and organization. They can adapt to local circumstances, but this means

that the diversity is internalized. Alternatively, they can choose one particular approach

CHAPTER TITLE XIX

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in all countries, but that gives rise to the question of how effective local operations will be.

Moreover, individuals who move from one country to another as expatriates will have to

be aware of differences in rules and values.

Most chapters of this book take the organization as the core unit of analysis or

examine how the macro inﬂuences the micro. Over the past ten years, however, networks

and clusters have been a growing focus of attention in international business. From this

literature it is clear that different types of network and cluster develop in different national

contexts. To date, however, these topics have hardly been addressed in international man-

agement textbooks. In view of the growing importance of this research and management

ﬁeld, we felt it essential to dedicate a chapter – Chapter 11 – to these topics, in order to

offer some background knowledge.

Chapter 12 concludes the book by trying to answer the question of whether differ-

ences in cross-national management and organization practices are likely to disappear or

to persist in the future. In order to be able to answer this question, the chapter concen-

trates on developments in human resource management, labour relations and corporate

governance in the two major capitalist models: the Anglo-Saxon and the Rhineland

models. We concentrate on these two since, to a greater or lesser extent, the models of

most countries – including countries in transition – tend to be variants of these two main

models.

References

Shenkar, O. (2004) One more time: international business in a global economy.

Journal of International Business Studies 35, 161–71.

Vernon, R. (1994) Contributing to an international business curriculum: an approach

from the flank. Journal of International Business Studies 25, 215–27.

Zaheer, S. (1995) Overcoming the liability of foreignness. Academy of Management

Journal 38(2), 341–63.

XX COMPARATIVE INTERNATIONAL MANAGEMENT

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