Cross cultural management 3e by cullen ch03

• Understand how social institutions influence both people and organizations • Understand the national context and how it affects the business environment • Understand the influence of t

Chapter 3

The Institutional Context of

Multinational Management

• Understand how social institutions influence both

people and organizations

• Understand the national context and how it affects the business environment

• Understand the influence of the institutional context of countries

• Understand how social institutions influence both

people and organizations

• Understand the world’s basic religions

• Develop an understanding of education

• Understand the basic economic systems and influence

on multinational operations

• Understand industrialization and implications for

multinationals

• Understand the world’s basic religions

• Develop an understanding of education

Institutional Context

• Includes other elements besides national culture that can produce important differences

• Understanding the institutional context is therefore

extremely important for better multinational

management

• Includes other elements besides national culture that

can produce important differences

• Understanding the institutional context is therefore

extremely important for better multinational

management

Social Institutions

• Complex of positions, roles, norms, and values

organizing stable patterns of human resources to

sustain important societal structures

• Three key social institutions

• Economic systems

• Level of industrialization

• Religions

• Complex of positions, roles, norms, and values

organizing stable patterns of human resources to

sustain important societal structures

• Three key social institutions

• Economic systems

• Level of industrialization

• Religions

Social Institutions and Influence on Society

• Regulative social institution: constrains behaviors

through rules

• Cognitive social institution: widely shared knowledge

regarding how things are done

• Normative social institution: values and norms

promulgated by the social institution

• Regulative social institution: constrains behaviors

through rules

• Cognitive social institution: widely shared knowledge

regarding how things are done

• Normative social institution: values and norms

promulgated by the social institution

Social Institutions and Influence on Organizations

• Organizational isomorphism: pressure to follow similar paths in management practices

• Organizational isomorphism: pressure to follow similar paths in management practices

Organizational Isomorphism

• Coercive isomorphism: forces that coerce

organizations to adopt certain practices

• Mimetic isomorphism: organizations purposefully copy the strategies of the most successful organizations

• Normative isomorphism: conformance to professional and technical norms

• Coercive isomorphism: forces that coerce

organizations to adopt certain practices

• Mimetic isomorphism: organizations purposefully copy the strategies of the most successful organizations

• Normative isomorphism: conformance to professional and technical norms

Economic Systems

• Economic systems: system of beliefs, activities,

organizations, and relationships that provide the goods and services of a society

• Important implications based on

• Type of economic systems

• Market transitions

• Privatization

• Economic systems: system of beliefs, activities,

organizations, and relationships that provide the goods and services of a society

• Important implications based on

• Type of economic systems

• Market transitions

• Privatization

Economic Systems

• Capitalist/market economy: production is decentralized

to private owners

• Owners perform activities to make profits

• Socialist/command economy: production resources are owned by the state

• Production decisions centrally coordinated

• Mixed economy: combines aspects of capitalist and

socialist economies

• Ex., Sweden, France, Denmark, Italy, and India

• Capitalist/market economy: production is decentralized

to private owners

• Owners perform activities to make profits

• Socialist/command economy: production resources are owned by the state

• Production decisions centrally coordinated

• Mixed economy: combines aspects of capitalist and

socialist economies

• Ex., Sweden, France, Denmark, Italy, and India

Economic Systems:

Implications

• Decisions to operate in a country can be made based

on the dominant economic type

• In mixed economies, multinationals should expect to

subordinate its economic goals and respect social

objectives

• Decisions to operate in a country can be made based

on the dominant economic type

• In mixed economies, multinationals should expect to

subordinate its economic goals and respect social

objectives

Economic Systems:

Implications (cont.)

• Multinationals should expect to develop more formal

relations with the government in mixed economies

• Index of economic freedom can be used to determine the extent of governmental intervention

• Multinationals should expect to develop more formal

relations with the government in mixed economies

• Index of economic freedom can be used to determine the extent of governmental intervention

Exhibit 3.2: Selected Country

Scores on Index of Economic

Freedom

Economic System: Market Transitions

• Changes societies experience as they move from

socialism to a market-based economy

• Multinational implications

• Need to turn around inefficient, formerly

state-owned companies to perform business functions

• Motivational issues with workers

• Changes societies experience as they move from

socialism to a market-based economy

• Multinational implications

• Need to turn around inefficient, formerly

state-owned companies to perform business functions

• Motivational issues with workers

• Significant opportunities to invest in companies

• Opportunities to access new markets and cheap

labor

• Privatization: transfer of state ownership to private

individuals

• Implications

• Significant opportunities to invest in companies

• Opportunities to access new markets and cheap

labor

Exhibit 3.3: Selected Countries

and the Amount of Money Raised

by Privatization

Exhibit 3.4: Distribution of Production

Activities by Sectors

Implications of Industrialization

• Direct correspondence between industrialization and

economic development

• Industrial societies favor growth and innovation

• Favorable environment for business

• Industrial societies present significant market size

and growth

• Direct correspondence between industrialization and

economic development

• Industrial societies favor growth and innovation

• Favorable environment for business

• Industrial societies present significant market size

and growth

Exhibit 3.5: Materialist Scores of

Selected Countries

Exhibit 3.6: Post-materialist

Scores for Selected Countries

• Shared set of beliefs, activities, and institutions that

have basis upon faith in supernatural forces

• Forms the foundation of human society

• Provides individuals with guidelines to deal with issues

• Christianity, Islam, Hinduism, and Buddhism are

followed by almost 71% of the world’s population

• Shared set of beliefs, activities, and institutions that

have basis upon faith in supernatural forces

• Forms the foundation of human society

• Provides individuals with guidelines to deal with issues

• Christianity, Islam, Hinduism, and Buddhism are

followed by almost 71% of the world’s population

Exhibit 3.7: Distribution of

Religions Around the World

• Religion based on the life and teachings of Jesus

• The most practiced religion around the world

• Protestantism emphasizes wealth and hard work for the glory of God

• Ten commandments provides the basis for ethical

behaviors

• Religion based on the life and teachings of Jesus

• The most practiced religion around the world

• Protestantism emphasizes wealth and hard work for the glory of God

• Ten commandments provides the basis for ethical

behaviors

• Religion based on the submission to the will of Allah

(God)

• The second largest of the world’s religions

• Muslims live according to Islamic laws or Shari’ah

• Based on five pillars

• Religion based on the submission to the will of Allah

(God)

• The second largest of the world’s religions

• Muslims live according to Islamic laws or Shari’ah

• Based on five pillars

Islam (cont.)

• Implications for multinationals

• Accommodate praying five times a day

• The Ramadan: a month of fasting

• Natural concern with social justice

• Prohibits the payment or receipt of interest

• Gender roles

• Implications for multinationals

• Accommodate praying five times a day

• The Ramadan: a month of fasting

• Natural concern with social justice

• Prohibits the payment or receipt of interest

• Gender roles

• Acceptance of the ancient traditions of India that are

based on the Vedic scriptures

• Currently 760 million Hindus living around the world

• Belief in reincarnation

• The caste system

• Ethical behaviors; respect for parents

• Acceptance of the ancient traditions of India that are

based on the Vedic scriptures

• Currently 760 million Hindus living around the world

• Belief in reincarnation

• The caste system

• Ethical behaviors; respect for parents

Hinduism (cont.)

• Implications for multinationals

• Spiritual achievement is an important value for most Hindus

• Caste system is very pervasive

• Need to be aware of caste system, e.g lower caste supervising higher caste can be a problem

• Implications for multinationals

• Spiritual achievement is an important value for most Hindus

• Caste system is very pervasive

• Need to be aware of caste system, e.g lower caste supervising higher caste can be a problem

• Religious tradition that focuses on the reality of world suffering and the ways one can be freed from suffering

• Craving and desires produce suffering

• Dominant religion in Asia

• Religious tradition that focuses on the reality of world

suffering and the ways one can be freed from suffering

• Craving and desires produce suffering

• Dominant religion in Asia

Buddhism (cont.)

• Implications for multinationals

• Encourages hard work; laziness is seen as negative

• Emphasizes teamwork; all beings are

interconnected

• Emphasis on compassion and love

• Implications for multinationals

• Encourages hard work; laziness is seen as negative

• Emphasizes teamwork; all beings are

interconnected

• Emphasis on compassion and love

Exhibit 3.8: Religiosity of Selected

Countries from the World Values

Survey

• Education: organized networks of socialization

experiences that prepare individuals to act in society

• Central element in organization of society

• Helps construct competencies, professions, and

professionals

• Education: organized networks of socialization

experiences that prepare individuals to act in society

• Central element in organization of society

• Helps construct competencies, professions, and

professionals

Education: Implications

• Gives an idea of the skill level of workers in any

society

• The more educated, the more skills workers have

• Multinationals can look at educational attainment

scores to determine the nature of the workforce

• Gives an idea of the skill level of workers in any

society

• The more educated, the more skills workers have

• Multinationals can look at educational attainment

scores to determine the nature of the workforce

Exhibit 3.9: Educational

Attainment Scores for a Selected

Number of Countries

Exhibit 3.10: Mathematics

Scores for Top 10 Countries

Exhibit 3.11: Science Scores for

Top 10 Countries

Organizations Alike:

Globalization and Convergence

• Globalization is pushing organizations to be more

similar

• Global customers and products

• Growing levels of industrialization and economic

development

• Global competition and global trade

• Globalization is pushing organizations to be more

similar

• Global customers and products

• Growing levels of industrialization and economic

development

• Global competition and global trade

Globalization and Convergence

• Other convergence forces

• Cross-border mergers, acquisitions, and alliances

• Cross-national mobility of managers

• Internationalization of business education

• Other convergence forces

• Cross-border mergers, acquisitions, and alliances

• Cross-national mobility of managers

• Internationalization of business education