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 isolation
 They’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 be
 Values may form the bedrock of a culture
 They 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
Norms
 Norms are the social rules that govern
people’s actions toward one another
 Folkways – little moral significance
 Americans expect you to come on time to
appointments
 In Italy, people weren’t usually on time
 Mores
 Norms seen as central to functioning of society
 Marriage
 Honesty
Examples of Mores –
Norms felt as central to society
 U.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
nation
 We 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
 Canada
 India
 Multi-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
 Spoken
 Language structures our perception of world
 English tries to be precise
 Japanese
 doesn’t discourage vagueness
 allows more direct expression of emotion
 Unspoken
 Body language
 Personal space
Be alert for unexpected meanings of
‘silent language’
 Colors
 Black symbolizes death in U.S.
 White indicates death in parts of Asia
 Purple indicates death in (some situations in)
Latin America
 Gestures
 Sideways 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 for
20 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 many
other 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 consensus
 But 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 system
 Analogous to rules in a sport
 Most elements of culture can be thought of as “rules of
the game” in the system of a society
 Example: 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
Change
 Culture evolves over time
 Since 1960s American values toward the role of women
have changed
 Japan has moved toward greater individualism in the
workplace
 Globalization will continue to impact cultures
around the world
 And global business, especially, is always changing
cultures
 Material below this slide is not part of the course
Some Managerial Implications
 Cross-cultural literacy
 You need to understand differences between
cultures
 Culture and competitive advantage
 Some cultures make business easier than others
 Culture and business ethics
 As 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 cultures
 But 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 today
 It’s often hard to understand how people in other
countries can deal with the challenge of the West
A silly example
When 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 example
 The English language is designed to be precise
 Speaking English, you assume the world is real. You
want to describe it precisely
 If you see a beautiful flower, you say,
‘That’s beautiful’
 But