Culture, Institutions,

and Global Business

“Culture” Something difficult to understand

From ancient times, travelers have noticed that when you go from one place to the next, things you take for granted at home aren’t true any more

Central to life in America is the desire to be a free individual who gets what he or she wants“I know my rights”

In Japan, people took for granted they would do what their group (their company, their family, their school) wanted“The nail that sticks up gets hammered

down”

What is culture?“The collective programming of the mind which distinguishes one human group from another”

- Geert Hofstede

Systems of ideas that constitute a “design for living”

- Zvi Namenwirth & Robert Weber

Why do cultures differ?

Cultures are an ‘evolutionary product’ For thousands of years, human groups

evolved with a good deal of isolationThey’ve struggled with different problems

People can do European-style farming individually

Rice farming calls for great cooperation

There are probably many, many other reasons for differences among cultures

Components of Culture:One standard (incomplete!)

approach Values – basic attitudes about what is important

Norms – social rules

A Society – a group of people who share common values & norms & ways of doing things that is, a common

culture

Values – assumptions about

how things ought to beValues may form the bedrock of a cultureThey provide a context within which a society’s norms are established and justified

They include attitudes toward Individual freedom Democracy Truth Justice Honesty Loyalty Social obligations

Values are also reflected in the political and economic systems

NormsNorms are the social rules that govern people’s actions toward one anotherFolkways – little moral significance

Americans expect you to come on time to appointments

In Italy, people weren’t usually on timeMores

Norms seen as central to functioning of society MarriageHonesty

Examples of Mores – Norms felt as central to

societyU.S. – The winner in an election gets to rule

African nations – an individual is loyal first to his/her tribe

Scandinavia – differences in wealth must not be too great

Japan – elite organizations try to give the people they hire a position for life

Culture vs. ‘a culture’

If “culture” means the “collective programming that distinguishes a human group”…

the phrase, “a culture” refers to a group that shares the same programming

“A society” or “a culture”

Definition: a group that shares the same values and norms (that is, shares same “collective programming”)

We often assume that a society corresponds to a nationWe talk of ‘American society,’ ‘Russian society’

But there is no strict one-to-one correspondence

Nation State: Is a political creation May contain a single culture or several cultures

CanadaIndiaMulti-tribal African nations

Societies contain subcultures

ethnic cultures business or professional cultures

Often (usually?) a company will be known for a particular culture At Ford and Toyota, manufacturing is most important

At General Motors, marketing is most important

youth cultures How do youth cultures vary in the South Bay?

Social Structure

‘Social structure’ is a society’s basic systems of social organization

Two dimensions are particularly important:The extent to which society is group or individually oriented

(‘collectivist’ vs. ‘individualist’)Degree of stratification into castes or classes

‘stratification’ = the separation of the members of a society into hierarchical social categories (‘strata’) based on family background, occupation, or income

How is social structure changing with globalization?

Are technology geeks a new upper class?

Religious and Ethical Systems

Religion: a system of shared beliefs and rituals that are concerned with the realm of the sacred (i.e., things regarded with special respect)

Ethical systems: a set of moral principles, or values, that are used to guide and shape behavior Most of the world’s ethical systems are the product of religions

Among the thousands of religions in the world today, four dominate in terms of numbers of adherents: Christianity with 1.7 billion adherents Islam with 1 billion adherents Hinduism with 750 million adherents Buddhism with 350 million adherents

Language

SpokenLanguage structures our perception of world

English tries to be preciseJapanese

doesn’t discourage vagueness allows more direct expression of emotion

UnspokenBody languagePersonal space

Be alert for unexpected meanings of

‘silent language’Colors

Black symbolizes death in U.S.White indicates death in parts of AsiaPurple indicates death in (some situations in) Latin America

GesturesSideways head movement that means ‘yes’ in Greece and parts of India looks like negative ‘no’ head shake in U.S.

Culture in the Workplace

Geert Hofstede’s four dimensions of culture Power distance – the extent to which people are comfortable

with inequalities of power and wealth Uncertainty avoidance - the extent to which people accept

ambiguous situations and tolerate uncertainty Individualism versus collectivism - this dimension focuses on

the relationship between the individual and his/her fellows within a culture

Masculinity versus femininity - this dimension looks at the relationship between gender and work roles

Work-Related Values for20 Selected Countries

Problems with Hofstede’s ‘dimensions’

Assumes one-to-one relationship between culture and the nation state

Research may have been ‘culturally bound’ Survey was of IBM employees, conducted by

Europeans and Americans

Survey respondents were from a single industry (computer) and one company (IBM)

Other scholars have proposed manyother dimensions of culture

but none have been shown more significant than the first three Hofstede developed

A few cultures have influenced global business enormously

Technological and economic successes of northern Europe and North America from the 18th Century made international business possible

Why? There are many theories, and no consensusBut while the free trade theory that you’ll read about is clearly important, it’s certainly more than that

Something very important happened in northern Europe between the 16th and 18th centuries It clearly continues to affect global business today

Limitations of the concept of ‘culture’

Clearly, societies differ a lot, and ‘culture’ tells why

But how do we think about where cultures come from? Why don’t cultures change more?How do we predict when they will change?How can people change them deliberately?

Because the concept of ‘culture’ is so massive and complicated (“collective programming of the mind”), it is difficult to use it to think about specific, perhaps small, changes.

Thinking about‘institutions’ can be more flexible

Institutions are defined as the “rules of the game” in any human systemAnalogous to rules in a sport

Most elements of culture can be thought of as “rules of the game” in the system of a societyExample: One of rule of the game in our

class is that we speak English

It’s easier to think about ‘changing the rules’ than about ‘changing the culture’

Cultural Change/Institutional

ChangeCulture evolves over timeSince 1960s American values toward the role of women

have changedJapan has moved toward greater individualism in the

workplace

Globalization will continue to impact cultures around the worldAnd global business, especially, is always changing

cultures

Material below this slide is not part of the course

Some Managerial Implications

Cross-cultural literacyYou need to understand differences between cultures

Culture and competitive advantageSome cultures make business easier than others

Culture and business ethicsAs we’ll see in a few weeks, cultural differences create big ethical issues

What is Culture?

• “The collective programming of the mind which distinguishes one human

group from another”• - Hofstede

You’ll always be shocked by new

culturesBut we want to learn how to think about them so we can work with diverse cultures“cross-cultural literacy” – understanding

how cultural differences can affect the way business is practiced

Religious and Ethical Systems

Why did Europe start growing?

3 Theories to consider (of many)

1.It was Protestantism working out its core principles. Protestant breakaway from the Catholic church starting 1517 created ways of life that promoted ‘progress’ (Troeltsch)

• More individualistic, decentralized view of religion

• Taught everyone to read, write to understand Bible

• Promoted universities and secular learning• This theory dominant before 1930

2. It was also the fear Protestantism created. Some theology made believers fear going to hell so much they worked hard in the world while practicing asceticism (renunciation of worldly pleasures). (Weber)

• They started accumulating worldly goods. • When people stopped believing so strongly in

God, they kept an ascetic approach to life • Secular knowledge and riches accumulated

• This theory dominant after 1930

3.It was the success of the rich in throwing people off the land. Owners forced the poor to leave the land so they could use it more efficiently. The poor became available for exploitation in factories. (Grossman and others)

This is a radical theory, but one with real empirical support

Something big happened Whatever the truth, something about north European and North American culture has driven powerful economic growth since the 18th Century. It still plays a big role todayIt’s often hard to understand how people

in other countries can deal with the challenge of the West

A silly exampleWhen I was growing up, Mother said, “Don’t take your shoes off in the house, that’s uncivilized.” In Japan, it’s completely uncivilized to have your shoes on inside the house

A dramatic exampleThe English language is designed to be preciseSpeaking English, you assume the world is

real. You want to describe it preciselyIf you see a beautiful flower, you say,

‘That’s beautiful’

But