THE ETHNOCENTRIC OR GEOCENTRIC GLOBAL CORPORATION: THE PERFORMANCE QUESTION
The Ethnocentric or the Geocentric Global Corporation: The performance question
Mike Minor
University Canada West: MBA 522
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THE ETHNOCENTRIC OR GEOCENTRIC GLOBAL CORPORATION: THE PERFORMANCE QUESTION
ABSTRACT
This study sought to determine if nationally diverse, geocentric global corporations where
non-nationals are well represented on boards and in global top management teams (GTMT)
perform better financially than homogeneous, ethnocentric multinational corporations having
little foreign representations in their upper echelons. It did so by examining national cultural
diversity on boards and in GTMTs of 46 global corporations. The idea that geocentric global
corporations perform better than ethnocentric multinational firms was not completely born out in
the study. However, a positive relation between national cultural diversity in the very largest
global corporations and some financial performance measures was found. Nonetheless, while
ethnocentricity may hurt the financial performance of the largest global corporations, there may
also be a non-linear relation and an optimal level of geo-centricity that if exceeded impacts
negatively the financial performance of global corporations.
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TABLE OF CONTENTS
INTRODUCTION………………………………………..……………………..…………………………7
GENESIS OF STUDY........................................................................................................................................7
INTRODUCTION..............................................................................................................................................9
LITERATURE REVIEW…………………………………………………………….......……..……….16
THE NEW ECONOMIC ORDER.......................................................................................................................16
CORPORATE CULTURAL MINDSETS.............................................................................................................19
NATIONAL CHARACTER AND CULTURAL THEORY......................................................................................23
SYNERGY AND CULTURAL SYNERGY..........................................................................................................25
THE POTENTIAL BENEFITS OF CULTURAL DIVERSITY AND SYNERGY........................................................30
General Benefits..............................................................................................................................30
Enhanced Problem Solving and Decision Making.........................................................................31
Acquiring and Retaining Global Talent..........................................................................................33
Understanding Global Customers..................................................................................................35
Creativity and Innovation...............................................................................................................36
Competitive Advantage...................................................................................................................37
NATIONAL CULTURAL DIVERSITY AND FINANCIAL PERFORMANCE...........................................................38
The Ethnocentric-Geocentric Continuum.......................................................................................38
Corporate Culture, National Cultural Diversity, and Performance...............................................39
National Cultural Diversity on Boards of Directors and Performance.........................................45
National Cultural Diversity in Global Top Management Teams (GTMTs) and Performance…...52
National Cultural Diversity in Global Business Leaders and Performance..................................55
Business Leaders in Regional Headquarters and National Subsidiaries.......................................59
A Final Measure – The Ratio of Foreign Employees to Total Employees.....................................60
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CONCLUSION OF LITERATURE REVIEW........................................................................................................61
RESEARCH METHODOLOGY………………………………………………………………..………62
GENERAL......................................................................................................................................................62
SAMPLE PLAN...............................................................................................................................................66
DATA SETS...................................................................................................................................................68
FINANCIAL DATA – DEPENDANT VARIABLES..............................................................................................69
ETHNOCENTRIC-GEOCENTRIC CONTINUUM – INDEPENDENT VARIABLES..................................................69
General..............................................................................................................................................69
Foreign Employee/Management Variance Score (FEMVS).............................................................70
Corporate Governance and Leadership............................................................................................71
Nationality of Regional Headquarters Leader's Quotient (NRHLQ)................................................73
Corporate Culture and Philosophy Score (CCPS)............................................................................73
VALIDATION AND SIGNIFICANCE TESTING..................................................................................................74
METHODOLOGY AND DATA ANALYSIS........................................................................................................75
FINDINGS AND DISCUSSION .....….…………………………………………………………….……75
GENERAL......................................................................................................................................................75
THE SAMPLE.................................................................................................................................................76
FINANCIAL PERFORMANCE – DEPENDANT VARIABLES...............................................................................78
Global 2000 Rankings.......................................................................................................................78
Return on Assets (ROA)....................................................................................................................80
Return on Equity (ROE)....................................................................................................................81
Overall Performance Measurements.................................................................................................82
GLOBAL/NATIONAL CULTURAL DIVERSITY MEASUREMENTS – INDEPENDENT VARIABLES…….............82
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General Findings...............................................................................................................................83
Foreign Employee/Management Variance Score (FEMVS).............................................................84
Board Cultural Diversity Quotients A (BCDQs a) (National Cultural Diversity)............................87
Board Cultural Diversity Quotients B (BCDQs b) (Psychic Zone Representation)..........................88
GTMT Cultural Diversity Quotient A (GTMT CDQ a) (National Cultural Diversity) ...................90
GTMT Cultural Diversity Quotient B (GTMT CDQ b) (Psychic Zone Representation) ................91
Nationality of Key Leaders Quotient (NKLQ)..................................................................................92
Nationality of Regional Headquarters Leader's Quotients (NRHLQ)...............................................93
Corporate Cultural and Philosophy Score (CCPS)...........................................................................94
DOG SCORE AND THE ETHNOCENTRIC-GEOCENTRIC CONTINUUM – TESTING THE MODEL…..............97
DOG SCORE FINDINGS...............................................................................................................................101
FINDINGS ON RELATION BETWEEN ETHNOCENTRIC AND GEOCENTRIC FIRMS AND FINANCIAL
PERFORMANCE.................................................................................................................................105
Determining Statistical Relevance...................................................................................................105
Relation between Forbes' Ranking and DOG Score.......................................................................106
Relation between ROA and ROE, and DOG Score.........................................................................107
Relation between ROA/ROE and ROA/ROE/Forbes' Ranking, and DOG Score……….…...…....108
Relation between Number of Psychic Zones and Countries Where Firms Operate, and DOG
Score......................................................................................................................................108
Relation between Number of Employees and DOG Score...............................................................109
Relation between Population of Country and DOG Score..............................................................109
Relation between Dependant Financial Variables and Each Independent DOG Variable – A
Deeper Exploration...............................................................................................................111
What is Unique about Sampled Companies in Forbes' Top 100......................................................112
Why National Cultural Diversity May Not Translate into Performance.........................................114
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LIMITATIONS OF THE STUDY………………………………….………………………….....……………115
CONCLUSIONS……………………………………………….……………………………………….118
RECOMMENDATIONS – FUTURE RESEARCH.............................................................................126
REFERENCES.........................................................................................................................................128
APPENDICES………………………………………………………………………...………….……..138
APPENDIX 1 – A SUMMARY OF JOKINEN'S GLOBAL LEADERSHIP COMPETENCIES...................................138
APPENDIX 2 – CORPORATE PERFORMANCE MEASUREMENTS AND CULTURAL DIVERSITY METRICS…...141
APPENDIX 3 – FINDINGS……………………………………………………………………………...…..148
FOOTNOTES….......................................................................................................................................192
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THE ETHNOCENTRIC OR GEOCENTRIC GLOBAL CORPORATION: THE
PERFORMANCE QUESTION
INTRODUCTION
GENESIS OF STUDY
―The ongoing success of any enterprise ultimately rests with the diversity of its human capital.‖ (Coffey & Tombari, 2005)
During an MBA course on global leadership the author wrote a paper on the 2010 crisis at
Toyota. In so doing it was discovered that Toyota, by all accounts a successful global
corporation, was ethnocentric at its core. Its board of directors in 2009 consisted of a
homogeneous group of 26 elderly Japanese gentlemen with an average age of 62, less than a
handful of non-Japanese had ever served as global executives for the firm, and its corporate
culture and business philosophy, the ‗Toyota Way‘, was clearly Japanese-centric—strongly
influenced by Confucianism. When Toyota‘s international production began in earnest in 1998,
they already had a solid global reputation for quality vehicles they exported worldwide,
principally ‗made in Japan‘ using the Toyota Way. The Toyota Way was then dispensed by
Toyota to factories around the world with very little allowances for it to be culturally adapted in
host nations (Fackler, 2007). Takaki Nakanishi of JP Morgan securities in Tokyo said it best—
Toyota is attempting ―to transplant its culture to foreign markets‖ (Fackler, 2007). R. Moran,
Harris & S. Moran (2007) state that the expectation of full assimilation and the creation of a unicorporate culture reflects an ethnocentric philosophy where cultural diversity is seen as a
problem rather than a resource to be harnessed (p. 233).
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Almost immediately after they globalized, Toyota began to experience quality control
problems. Nonetheless, Toyota‘s reputation for excellence shielded it even as quality
deteriorated (Welch, 2008). By 2009 Toyota realized the Toyota Way was not being fully
accepted by its global workforce and consequently serious quality issues where appearing, which
they tried to keep under wraps. Mr. Toyoda, grandson of Toyota‘s founder, was brought in to fix
the problems, but he could not avert the 2010 quality crisis. Even so, Mr. Toyoda‘s reaction in
the build-up to the crisis was to reinvigorate the Japanese-centric Toyota Way rather than reevaluate based on its failures (Soble & Reed, 2010). Drucker (2008) states ―every big,
successful company throughout history, when confronted with… a surprise—[in Toyota‘s case a
problem with quality]—has failed to accept it‖ (p. 86) and the first reaction of those companies
when their business theory falters is to adopt a defensive posture (p. 91). Toyota was no
different, but recently they have begun to acknowledge serious performance problems. In fact,
in 2009 Mr. Toyoda stated the company was ―grasping for salvation‖ and near ―irrelevance or
death‖ (Van Praet, 2009). If Toyota is in danger of failure—Toyota slipped from third to 360 in
the Forbes Global 2000 ranking of leading global companies in 2010—it may be the company‘s
ethnocentricity will have played a role.
This ethnocentricity at Toyota contrasts the culturally diverse, synergistic geocentric
global corporation advocated by many prominent researchers (Moran et al., 2007; DiStefano &
Mazenevski, 2000; Alder, 2002) and global business leaders (Koppel & Sandner, 2008; Taylor,
1991). They contend that true global corporations integrate cultural diversity and leverage
cultural synergy throughout the organization. And Toyota, seemingly now realizing the
consequences of ethnocentricity, is making changes to become more geocentric to improve their
global performance. In June 2010 Frenchman Didier Leroy was appointed as chief of its
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European operations, the first non-Japanese executive to take the post. When his appointment
was announced, Toyota conveyed a tentative move towards geo-centricity stating their ―aim was
to put in place management structures [around the world] in order to understand the local
scenario with greater speed and accuracy [and identify] local needs‖ (RFI, 2010).
At the other end of the spectrum of national cultural diversity are companies like Asea
Brown Boveri (ABB), Nokia, and Unilever. Peter Drucker (2008) in his seminal book
Management states Anglo-Dutch Unilever has ―designed what may be... the most advanced
structure for the multinational corporation.‖ Geocentric Unilever differs significantly from
Toyota in its approach to cultural diversity insofar as it boasts 20 nationalities amongst its top
tier managers (Unilever, n. d.a), has a third-country Swedish Chairman (Sirkin, Hemerling, &
Bhattacharya, 2008, p. 109), and states clearly that national and cultural diversity is a strategic
goal (Unilever, n. d.a). Unilever is purported to be a truly global company, with integrated
worldwide operations, that leverages national cultural diversity and talent wherever it is found—
it is the antithesis of Toyota. But does Toyota‘s ethnocentricity or Unilever‘s geo-centricity
affect their financial performance in today‘s complex global marketplace?
INTRODUCTION
―Ethnocentricity has no role anywhere in this world—especially not in global organizations.‖ (Kets de Vries, 2006, p. 239)
As corporations globalize they encounter enormous diversity in perspectives, structures,
systems, and behaviours of suppliers, customers, subsidiaries, and competitors, (Albrecht, 2001)
as well as unparalleled cultural and technical complexity (Schmidt, Conaway, Easton, &
Wardrope, 2007). It is vital for global firms to expand into new cultural domains ―to increase
markets, gain access to resources, leverage economies of scale,‖ uncover global technology, and
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recruit latent global talent (Caliguiri, Lazarova, & Zehetbauer, 2004, p. 848). To survive in a
diverse global marketplace, Ashby‘s (1963) law of requisite variety suggests companies should
reflect the national cultural complexity of their external environment to effectively confront
challenges and unforeseen contingencies—and identify opportunities—or the environment will
ultimately control the company and the firm will fail (as cited in Thompson, 2007). Caliguiri et
al. (2004) suggested future longitudinal studies seek to determine if increased diversity and
international experience at the top of organizations improves global business success due to the
diverse culture perspectives represented; this is ―something rarely examined in the relevant past‖
(p. 855, 849). This study will do just that.
The number of different nationalities represented on a company‘s board and amongst its
executives is a strong indicator of how global and culturally diverse it really is (Kets De Vries,
2006; Perlmutter; 1969). But this is only true when a corporation seeks genuine nationally and
culturally diverse directors and executives to leverage their unique cultural perspectives, and not
imposters who look different but have the same mores and values as everyone else in the firm.
An increase in national diversity among senior officials in a corporation may signal a shift of
corporate attitudes from ethnocentric to geocentric (Perlmutter, 1969), but advantage can only be
realized if foreign board members or TMT executives truly represent their culture and different
cultural knowledge domains. Literature has very clearly shown values, attitudes, and behaviours
tend to vary with nationality (Hofstede, 1994) and this cultural diversity provides top
management teams (TMTs) with more resources, skill sets, and ―cultural capital‖ (Caligiuri et
al., 2004, p. 851). A nationally diverse TMT of experienced international executives may
provide many diverse knowledge domains and much more synergy potential, which is required
to make effective decisions in a complex global business environment (Zehnder, 1991, p. 48;
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Koppel et al., 2008). While it is not axiomatic that an individual from a certain culture will in
fact be fully representative of that culture‘s mores and values, it is difficult to argue that a North
American or European—someone raised and educated there— on the board of a Japanese
company brings with him a diverse cultural background and unique perspective.
It is also likely that global corporations making more than a token, politically correct effort
to allow foreigners to advance to the highest levels of management, or recruiting foreign
directors while their peers remain homogeneous, do so not because they are compelled but
because they perceive an advantage, perhaps one not recognized by their competitors. As the
research will show, companies make a choice to move beyond ethnocentricity and to become
geocentric. While ethnocentric companies like Toyota attempt to address, at least marginally,
their ethnocentric orientation, purported geocentric corporations like ABB and Unilever remain
resilient performers and absolute leaders in their industries (DeCarlo, 2010).
The purpose of this study is to determine if nationally diverse, geocentric global
corporations, where cultural diversity is considered a precious resource used to create synergy at
all levels of the organization, have a competitive advantage that results in improved financial
performance over ethnocentric global corporations, where barriers and ineffective corporate
cultures and processes prevent cultural diversity from being fully leveraged.
With the increasing presence of competitors from emerging markets and the effort of more
multinational corporations to adopt a geocentric orientation to retain market share by effectively
operating in culturally diverse markets, the author believes the cost to firms mired in
ethnocentricity are finally being felt in ways that should not be ignored. The author supports the
contemporary notion that cultural synergy can be created in culturally diverse organizations to
provide competitive advantage and improve global performance. In addition, he supports the
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theory that distinct national cultures do exist (Hofstede, 1994; Ronen & Shenkar), and the extent
of national cultural diversity at the top of global corporations is an indicator of the degree to
which they are ethnocentric or geocentric.
Moreover, the author posits that in today‘s culturally complex global business
environment, national cultural diversity in governance and executive bodies of geocentric
corporations provides a competitive advantage resulting in better financial performance over
ethnocentric corporations with homogeneous boards and TMTs.
The reason for this improved performance is that increased cultural diversity and cross
cultural competency in geocentric organizations results in increased cultural synergy potential.
If this is cultivated in an appropriate corporate culture and well managed, global talent is
attracted and retained, strategic problem solving and decisions making is enhanced, global
customers are better understood, and creativity and innovation are enhanced. This cultural
competency, hard to emulate, then provides competitive advantage to the global enterprise and
results in better financial performance. With a breadth of global operations sometimes spanning
over 100 countries, all incredibly rich in diverse in talent, ‗cultural capital‘, and professional
experience, it makes no sense for global corporations to remain ethnocentric and not tap into this
significant resource (Plakhotnik, Landorf & Rocco, 2010).
A fundamental question remains unanswered when successful ethnocentric companies like
Toyota are compared to more global ones such as Nokiai and Unilever. Do culturally diverse,
geocentric global firms, signified by cultural diversity at the top of the organization, perform
better than ethnocentric ones? If so, why are not all global companies geocentric? Perhaps
cultural synergy is too hard for some companies to create given linguistic challenges, cultural
differences, political, governmental and legal restraints, and the complexity of creating a
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cohesive, diverse organization, and managing an integrated global system? Or perhaps the
benefits of national cultural diversity are not well understood by global executives who have
known nothing but ethnocentricity; or are under domestic pressure to remain that way?
Literature shows many global firms focus on developing cross-cultural competency within
global leaders to ‗manage‘ and contain rather than ‗leverage‘ cultural diversity, whilst remaining
ethnocentric at the top and ignoring the potential benefits of cultural synergy. To these
companies, globalization is a new form of ethnocentric exploitation based on an inexpensive
global workforce, and an imperial national headquarters whose executives—and shareholders—
reap the benefits cheap labour brings. This has happened, however, at a time when emerging
nations have regained geographic autonomy and now want their markets back—and part of the
markets of developed nations. Global completion from new quarters is growing rapidly. As
well, there is swelling pride in one‘s own culture and more companies are increasingly
specializing products to meet cultural expectations. These expectations are difficult to meet
without substantial cross-cultural acumen throughout the organization. The literature review has
found compelling reasons to systematically diversify at all levels of global organizations, not to
diversify for its own sake, but rather to access the global talent pool beyond ones borders and
generate cultural synergy potential.
To harness this potential there are at least two macro steps global organizations must take.
First, global corporations should not view cultural diversity, today unavoidable, as a problem to
be managed but as a valuable resource to be made an intrinsic part of the organization and
leveraged. This requires a change in cultural mindset and ―culturally fluent managers‖ (Rees &
McBain, 2005) who are aware, knowledgeable, and skilled to effectively integrate cultural
diversity throughout the organization. Clearly this is a necessary first step and cross-cultural
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know-how is vital for global leaders and managers; but if these global managers and leaders
come exclusively from the nation where the corporation is headquartered, this is an ethnocentric
and exploitative approach in the grand tradition. A geocentric corporation goes much further by
ensuring people from diverse cultures are not only effectively managed, but completely
integrated throughout the firm and allowed to reach their full potential within the corporation
(Thomas & Ely, 1996).
Although the subject of managing cultural diversity will be reviewed in the context of high
ranking company executives and directors, the focus of this paper is not on how they go about
managing cultural diversity— a plethora of literature exists on this subject alone. The focus
rather is on the potential cultural diversity affords a global corporation if it is effectively
integrated and allowed to reach the highest levels of the organization, and how this impacts
performance. It is evident that for this to occur, cultural diversity within the organization needs
to be well managed. The scope is also limited in other ways, because the subject of
ethnocentricity and cultural diversity is broad, touching on domestic and international
governmental, non-governmental, and private and public business organizations of all types.
Therefore, while the theories explored in the literature apply to all types of global organizations,
the paper focuses on the highest levels of global corporations rather than other types of global
organizations. This is done to attempt to establish a relation between cultural diversity and
financial performance, which can be empirically measured; such performance measurements
would be more subjective and difficult to acquire in non-business organizations.
As well, national cultural diversity is the focus rather than other prominent areas of
diversity research. This concentration is particularly relevant today because in the realm of
global corporations, of which there are more each day, national cultural diversity is unavoidable,
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at least in the lower and mid levels of companies. In this global context, other kinds of diversity,
such as gender, ethnic, and age diversity may be seen as complex subsets of the assorted national
cultures around the table. Moreover, as will be explained, national cultural diversity offers the
most potential to create synergy, generate value and competitive advantage, and improve global
performance (DiStefano et al., 2000, pp. 45-46).
To ‗tackle‘ the research question, a broad review of literature is conducted, the
methodology used to study global corporations is explained, detailed findings are outlined and
discussed, conclusions are drawn, and recommendations for future research are made.
To begin, the literature review first examines the new global economic order compelling an
increasing number of companies to become more culturally diverse to improve global
performance. It next considers modalities global firms tend to use to manage cultural diversity,
or what is called their cultural orientation or mindset. Cultural diversity and national character
theory, the framework for cultural interaction, is then examined. The review looks next at
cultural synergy theory and the difficulty in achieving it, and the potential benefits to business
performance if cultural synergy is attained. Finally, the core element of the review considers
cultural diversity at the top of global firms—as it relates to business performance—and explores
factors that might be used to determine the degree to which a company is ethnocentric or
geocentric. These include corporate culture, the composition of boards of directors and global
TMTs (GTMT), the nationality of global chairman, presidents, and chief executive officers
(CEOs) or their equivalents, and the nationality of regional and national subsidiary leaders.
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LITERATURE REVIEW
THE NEW ECONOMIC ORDER
―Once social change begins, it cannot be reversed. You cannot un-educate the person who has learned to read.
You cannot
humiliate the person who feels pride. You cannot oppress the people who are not afraid anymore. We have seen the future, and
the future is ours.‖ Cesar Chavez (Thinkexist, n. d.)
Much has been written about globalization and the new emerging economic order.
Friedman (2007) stated the ‗world is flat‘ as a metaphor to describe the levelling of the playing
field where flattening technological, geopolitical, and social forces have changed the global
financial and economic landscape and empowered emerging countries to compete with
developed nations as greater equals. The number of multinational corporations doubled and their
foreign affiliates quadrupled during the 1990s (Plakhotnik et al., 2010, p. 274) and meanwhile
the number of North American companies listed on the Forbes Global 2000 list of largest
companies has fallen by 25 % since 2005 (Decarlo, 2010). American business dominance is
waning with a loss of market share in many industries driving up unemployment at home
(Schmidt et al., 2007, p. 42); and the competition will grow much fiercer. Friedman (2007)
emphasises that young Chinese, Indians, and Poles are not racing us to the bottom, but rather to
the top. ―They do not want to work for us...They want to dominate us... and... be creating the
companies of the future‖ (p. 365). Successful business leaders ―recognize that an organization
that seeks to maintain the status quo is already in decline‖ (Drucker, 2008). The backrooms of
corporate America should take notice. This is a threat to ethnocentric Western corporations set
on ―corporate colonialism‖—and an opportunity to become more geocentric, regain lost market
share, and effectively compete in unimagined markets. Schumpeter‘s process of ‗creative
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destruction‘ has never been stronger. So what should be done in light of this global onslaught?
Some believe a cultural convergence is occurring, particularly among the global ―net
generation‖; and due to the global reach of the Internet, ―young people around the world are
becoming very much alike‖ in their values, norms, and attitudes (Tapscott, 2009, p. 23). Some
global firms thus believe the flat world is a plain of economic sameness. These firms have
developed ethnocentric strategies, products, and business cultures to serve the uniform global
marketplace they perceive (Sirkin et al., 2008, p. 233). They have taken an ethnocentric path.
This ethnocentric mindset is erroneous, however, as cultural identity is stronger than ever
and becoming more so as people see even more clearly the global diversity about them and recoil
to what they know. One result of globalization and an ‗open window‘ on the culturally diverse
world is pluralism. The dissolution of the Soviet Union and Yugoslavia provide examples of
common cultures reuniting autonomously with renewed pride and confidence. The
Balkanization of portions of Canada and in particular the large, homogeneous Asian
communities in Vancouver, as well as prevalent African culturally-based boarder conflict are
others. Within the workforce, as cultures become more visible and society more pluralistic,
people recognize their own uniqueness (Moran et al., 2007, p. 217). Ghandi said ―I want the
cultures of all the lands to be blown about my house as freely as possible. But I refuse to be
blown off my feet by any‖ (Thinkexist, n. d.).
This pride in one‘s own culture means globalization will not likely create a homogeneous
marketplace. In fact, companies are increasingly specializing products to target different
cultures, both domestically and globally. To be successful, they need to understand these
cultures at more than a superficial level, and this comes from having culturally diverse
leadership, managers, and workers (Koppel et al., 2008, p. 36). This allows companies to think
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globally and act locally (Bartlett & Ghoshal, 2003). The flat world is not a desert of sameness
but a highly diverse quilt—a potpourri—of cultures with enormous local and regional variety
and much fewer global trade barriers to cross (Sirkin et al., 2008). This provides endless
opportunity for culturally diverse Western businesses as well as new competitors from emerging
economies. Individuals from emerging economies now have the ability to fulfill their dreams
much as did immigrants arriving in the new world, a land of endless opportunity. Their ‗land of
opportunity‘ is the world and they are eager to seize its riches. Today‘s Rockefellers and Eatons
are Mexico‘s Carlos Slim and China‘s Wang families. Sirkin et al. (2008) describes this
evolving reality as ‗globality‘, a world where companies compete ―with everyone, everywhere
for everything‖ in a horizontal landscape where empires and superpowers no longer sit on vital,
dominating ground.
Konosuke Matsushita of Matsushita Electric Industrial Company of Japan stated:
We are going to win and the... West is going to loose...there is nothing you can do...
because the failure is within yourselves... you are convinced it is the right way to run a
business—getting the ideas out of the heads of bosses and into the hands of labour...for us
management is the art of pulling together the intellectual resources of all employees in
the service of the firm (Black, Morrison, and Gregersen, 1999).
These words were written before ‗globality‘ had taken hold, but no country has been exempt
from the impact of globalization. Japan is no exception and it has had an ethnocentric
comeuppance. ―Cultivating‖ uni-cultural ideas is not enough today and globalization has
humbled equally the ethnocentric West and Japan (Black et al., 1999). What sort of corporation
is best suited to thrive in this culturally competitive chaos?
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CORPORATE CULTURAL MINDSETS
―The more one penetrates into the living reality of an international firm, the more one finds it necessary to give serious weight to
the way executives think about doing business around the world.‖ (Perlmutter, 1969, p. 11)
The preceding section outlines how authentic globalization involving more than European,
Japanese, and American companies has finally arrived, which is causing a paradigm shift in the
international business environment. This section looks at the cultural mindset corporations have
adopted in the past to deal with diversity and globalization; some are likely more appropriate
today than others.
Building somewhat on the work of Perlmutter (1969), Moran, Harris and Stripp (1993)
suggested a typology of four corporate cultural orientations—or mindsets—used by companies
involved in international business. These philosophies have an impact on corporate culture,
structure, governance, and the way the company does business. The first is the ethnocentric
corporation, with a homogeneous GTMT made up of people from the ‗home country‘. In this
type of corporation, parent company nationals dominate operations both at home and overseas.
Running operations from domestic (global) headquarters, these companies have centralized
strategy, policies, and procedures and believe they are ethnically superior in some way to people
from other cultures. Consequently, they promote their way of doing things; ―if it works at home,
it must work overseas.‖ These firms, like Toyota, do not trust local-nationals and tend to
dispatch executives around the world to oversee or prop-up local operations (Moran et al., 1993,
pp. 128-129).
The second philosophy is the decentralized, polycentric organization. This sort of
multinational corporation maintains a domestic global headquarters, but it lets host-nation
national executive teams manage local overseas operations. They believe only local managers
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can understand the cultural and political complexity of a market and, viewed as profit centres,
these relatively independent subsidiaries are allowed to operate with little centralized direction as
long as they are profitable. There is no attempt to understand and leverage cultural differences
and host-nation executive team members have little opportunity to advance to more senior
positions in the corporation. As such, this sort of corporation can be viewed, as well, as
ethnocentric. Pfizer is such a company, with many foreign nationals leading its international
subsidiaries, but no foreign nationals represented on its board or GTMT.
The third organization is the regio-centric multinational corporation. It is essentially a
polycentric entity at the regional level. Regional headquarters are established, often led by
corporate home-country nationals, to manage regional operations. They create synergy by
having common regional functions, where it makes sense, and operations are regionally
autonomous. The corporate headquarters establishes strategy and corporate culture, amongst
other things, so there is more centralization than in the polycentric organization, but no real
integration of global operations and limited opportunity for foreign nationals to advance to the
executive suite.
Finally, there is the authentic global concern, the geocentric global corporation, which has
integrated worldwide operations along the length of its value chain. Its functions and product
lines are interdependent on a global rather than a regional or national level. Their modus
operandi is to work together to solve worldwide problems, leveraging diversity to create cultural
synergy. Their focus is both worldwide and local, with careful collaboration between the global
headquarters and subsidiaries to leverage the best universal practises, while allowing local
freedom where control would add no value (Albrecht, 2001, p. 51). Geocentric also means there
are no real or perceived barriers for personnel advancement within the corporation and to attract
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the best future global leaders, there is ―a clear and viable path to leadership‖ (Sirkin et al., 2008,
p. 106). Kets de Vries (2006) notes that in geocentric corporations, ―the best people everywhere
in the world are developed for leadership positions anywhere in the world...and the culture is
global‖ (p. 22). Nestlé and Unilever are purported in the literature to be such companies.
There are endless departures from these four general cultural orientations that in practise
result in myriad organizational structures, corporate philosophies, and ways of doing business.
For example, Sirkin et al. (2008) suggest the polycentric organization is well suited for a ‗flat
world‘ where the barriers that prevented emerging economies from competing are gone (p. 232234). Nonetheless, their view of the ‗polycentric‘ organization differs markedly from Moran‘s et
al. (1993). Theirs leverages cultural diversity in the leadership of the organization and is more
like Moran‘s geocentric corporation, with functional parts of the corporation‘s value chain
‗pinpointed‘ in optimal locations and integrated globally.ii The conglomerate ABB better
reflects Moran‘s polycentric organization with its federation of over 1200 national companies
and 4500 profit centres, yet they take pains to maintain a geocentric mindset, with an
international board of directors, priority on developing sufficient global leaders, and the creation
of mixed nationality teams to bring diverse cultural backgrounds to bear on complex global
problems (Taylor, 1991). And then there are companies like Toyota—and Ford— regio-centric
with an ethnocentric albeit evolving cultural philosophy. The aim of this paper, however, is not
to focus on how companies organize and operate; it is to examine the cultural orientation that
transcends the organization through the national cultural diversity of top level personnel to
determine if a company has an ethnocentric or geocentric bent, or something in between, and
determine how this relates to performance.
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In reality, there is today good evidence beyond the example of Toyota that the geocentric
corporation is still the exception rather than the rule. Hanson, Ibarra, & Peyer (2010) in
examining the best performing CEOs in the world state ―it is still not a global labour market for
CEOs‖ with only 15 % of the top 100 CEOs being foriegners (p. 2). Doremus, Keller, Pauly, &
Reich (1999) suggested the global corporation is an American myth. Their work examines
American, German, and Japanese corporations. They conclude that globalization has been
prematurely announced several times and that corporate structural convergence that would allow
real globalization is not occurring. They contend corporations fundamentally retain national
corporate governance, financial, and innovation modalities, as well as politicized business
strategies. In particular, they state Germany and Japan will resist a diminishment of national
values and institutions, retaining a clear sense of national identity and expecting the world to
adapt to their approaches (p. 143). They may do so at their peril; clearly these ideas are
ethnocentric in their very nature. Globalization then, to many German, Japanese, and American
companies is all about keeping foreign markets open and adapting corporations at the ―edges‖ as
necessary to cater to local markets (Doremus et al., 1999, p. 144).
Toyota is an example of a relatively successful ethnocentric company and of the ‗global‘
corporate myth. They are not alone. Palmer and Varner (n. d.) contend Asian companies have
globalized by exporting goods and consequently subsidiaries are viewed as extensions of
―national‖ corporations used to open new markets and increase market share. As a result, Asian
companies tend to ―stick to deeply engrained cultural practices and [do not]… look for diverse
points of views,‖ and foreign managers face the preverbal glass ceiling (p. 20). The current
research supports this belief. This does not mean however that ethnocentric firms like Toyota,
amongst others, are not benevolent with their share of culturally fluid leaders. But at their core,
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they are insular and not yet leveraging to the largest extent possible what the rest of the world
has to offer by way of talent and ideas. Kets de Vries and Florent-Treacy (2003) state that ―it
would be foolish to deny... the global organization is the paradigm‖ for future organizations (p.
19). So with ethnocentric companies like Toyota operating in the same global business
environment as more authentically global companies such as ABB or even Nissan, with
Brazilian-French Carlos Ghosn as CEO, which cultural orientation—ethnocentric or
geocentric—is best suited to the new global business environment? Is there really a competitive
advantage in nationally culturally diverse global corporations with geocentric orientations or are
these advantages also myths? Before answering this question, one need understand why there
might be advantages in geo-centricity and culturally diverse organizations.
NATIONAL CHARACTER AND CULTURAL THEORY
―A Hungarian manager and an American one may have a different set of beliefs, but that difference may pale beside the
difference between a production manager and a marketing manager in the same organization.‖ (Markoczy, n.d)
Markoczy (n. d.) claims ―national cultural differences are overrated‖ and cautions us not to
exaggerate national dissimilarities in our minds. This section will briefly examine national
culture to better understand why cultural differences do matter. Literature on culture abounds.
For the purposes of this study, it is not necessary to go into significant detail. Rather, it is
important to establish simply that people from different national cultures provide unique
perspectives, which by creating cultural synergy can be leveraged. Culture is said to exist at
many levels, the more obvious being: regional; national; ethnic, religious or linguistic affiliation;
and organizational (Hofstede, 1994). Culture is learned, not inherited, and can be considered
therefore ―the collective programming of the mind‖ shaped by circumstances—the social
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environment—within which people find themselves (Hofstede, 1994). It touches the whole of
social behaviours, values, attitudes, and beliefs transmitted from one generation to the next
(Moran et al., 2007, pp. 6-7). It is the ideas, customs, and social behaviour of a particular people
or society (Oxford Dictionaries, n.d.). Culture ―is considered the driving force behind human
behaviour‖ (Moran, et al., 2007, p. 6).
These differences in behaviour are reflected in myriad ways and include things like sense
of self, communication, costumes, feeding habits, time consciousness, relationships, values,
beliefs and altitudes, work habits, mental processes, and the way people learn (Moran et al.,
2007, pp. 9-10). Some cultural differences are easily identifiable, such as costumes, whereas
others, such as mental processes, are hidden. Hamayan and Damico (1990) developed the
analogy of culture as an iceberg, with some parts seen and most hidden. Cultural variations can
lead to conflict or, if cultivated in a healthy corporate culture, can be sought out as valuable
resources. Hamayan et al. (1990) place most key differences that might provide an opportunity
for synergy out of sight, ‗below the waterline‘. These include approaches to problem solving,
decision making, notions of logic and validity, and myriad other culturally specific insights.
Since this study considers cultural diversity through the nationality of senior executives
and directors, the link between nationality and culture must be reputable. This link has been
established by many researchers, most notably Hofstede (1994), who found the work attitudes of
people in different countries are dissimilar due to the cultural environment—geography, religion,
and language—within which they work. Since countries are normally associated with a
particular core cultural group, the country becomes a proxy for a national culture. These
countries can also be grouped in regional clusters of similar cultures (Ronen et al., 1985).
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Although this research fails to acknowledge that most countries are in fact heterogeneous,
the concept of national culture has been accepted, and it has been found to be reflected in a
nation‘s citizens at work. And this is justified; one can assume immigrants and their children
working in a particular country take on aspects of the character and culture of the nation. This
does not mean, however, that national culture becomes homogeneous per se, as first generation
immigrants retain profound cultural differences while subsequent generations maintain a
diminishing thread of their culture. Nonetheless, like theories suggesting a global culture is
emerging based on global communication and modernization (Tapscott, 2009; Ronen et al.,
1985), one can assume new cultures within nations fuse to some extent over time with national
culture; thus national culture is changed by them and them by it. Current literature shows
however that the fusion of cultural differences should not necessarily be the goal of progressive
global corporations. The focus rather should be to retain cultural identify and take advantage of
national cultural differences that exist (Sirkin et al., 2008; Koppel et al., 2008).
SYNERGY AND CULTURAL SYNERGY
―Culture is more often a source of conflict than of synergy. Cultural differences are a nuisance at best and often a disaster.‖
—Geert Hofstede (Hofstede, n. d.)
Previous sections examined the culturally complex global business environment where
cultural diversity, at least at the lower levels of global corporations, is unavoidable. The
literature also suggests global corporations have a choice of mindsets to deal with cultural
diversity by being ethnocentric, geocentric, or somewhere in between and confirmed that various
national cultures found within global corporations are significantly dissimilar. This section
examines the complex subject of synergy, and specifically national cultural synergy, and
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confirms that cultural diversity can result in conflict and inefficiency, be contained and
‗managed‘, or be integrated and leveraged to create synergy and competitive advantage.
Many writers suggest cultural synergy provides competitive advantage to global
corporations, the idea being that two heads are better than one; and two culturally diverse heads
seeing global problems through different lenses are even better (Alder & Gundersen, 2008;
Moran et al., 2007). But what is synergy? Definitions abound. The Oxford Dictionaries (n.d.)
states synergy ―is the interaction or cooperation of two or more organizations, substances, or
other agents to produce a combined effect greater than the sum of their separate effects.‖
Whereas ethnocentrism is the tendency for a group to see everything through the same
cultural lenses, cultural synergy is defined as cooperative and combined action amongst
individuals and groups from disparate cultures collaborating for a common cause (Moran et al.,
2007, p. 229). For cultural synergy to occur there must be congruence throughout the breadth
and depth of the organization in its cultural diversity philosophy and values, which need to be
intrinsic in the corporate culture, policies, and processes (Cultural Synergy, 2007).
Heterogeneous groups see things through multiple cultural lenses. Marquardt & Horvath
(2001) found that culturally diverse groups outperform homogeneous ones and generate more
creative solutions due to dissimilar viewpoints. Schmidt et al. (2007) contend global
organizations have ―the potential for exponential growth and financial success if the integration
of cultures can be harnessed and aligned with the strategic goals of the corporation‖ (p. 48).
BP‘s Michael Schmidt believes distinct cultures provide different insights into problems, and
their complex factors, that one‘s own culture might not see (Koppel et al., 2008, p. 34). Synergy,
however, is not automatically created when culturally diverse groups are formed and the
literature suggests two broadly conflicting relationships between diversity and performance.
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Studies have found diversity leads to innovation, creativity, improved decision making, and
competitive advantage, while others suggest it leads to slower decision making, negatively
impacts group cohesion, leads to conflict, and consequently negatively impacts performance
(Erhardt, Werbel, & Shrader, 2003, pp. 103-104). As Hofstede (n. d.) contends, and other
literature attests, the result of diversity is often conflict and the creation of dysfunctional,
destructive groups (DiStefano et al., 2000, pp. 46-47). Thomas et al. (1996) found that
increasing diversity for diversity‘s sake, under the assimilation paradigm—to be fair because
discrimination is bad—often backfires and hurts company performance. Many companies hire a
diverse workforce and then ‗sit-back‘ and wait for ‗the payoff‘ without enabling differences to
transform how the work is accomplished. These firms can subvert differences by their
employment equity policies (pp. 2-4). Often, culturally diverse groups perform worse than
individuals working to the same end when intercultural differences are a focus for conflict rather
than viewed as an asset to strengthen the organization (Moran et al., 2007, p. 246).
There are other challenges. For example, cultural diversity is highly correlated with
language diversity. Cross-cultural communication is much more difficult due to hidden cultural
and obvious linguistic differences, and misunderstandings leading to conflict occur frequently
(Albrecht, 2001,pp. 46-47). But these difficulties can be offset by potential advantages;
language diversity is a potential benefit as increasingly a multi-lingual workforce is a major
resource that can provide competitive advantage (Koppel et al., 2008, pp. 22-23). Stahl,
Maznevski, Voigt, & Jonsen (2007) agree and suggest that while cultural diversity leads to
process loss by creating barriers to communication, thereby increasing the potential for conflict,
this may be compensated by process gains in creativity and increased team satisfaction. They
conducted a meta-analysis of 80 studies that examined over 9000 culturally diverse teams. At
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the end of this extensive research, they determined ―cultural diversity in teams is both an asset
and a liability‖ (Stahl et al., 2007, pp. 27-28).
Dr. Suzanne Justesen refers to differences in culture, profession, and demographics as
―knowledge domains‖ with unique sets of skills and perspectives (Koppel et al., 2008, p. 56).
Borrowing this terminology, all differences being equal—professions, gender, age, etc...—in a
global business environment, different culturally diverse knowledge domains offer an
unparalleled potential source of synergy to global firms. An expert in innovation, Justesen has
found that some diverse groups with up to 40 different knowledge domains make use of as few
as two or three. The consequences are results similar to those expected from a homogeneous
group. Yet smaller groups with much fewer knowledge domains that synergistically use a larger
ratio of these domains, truly leverage diversity and perform much better. She contends three
things can happen in diverse groups. First, groups do not innovate or learn, but become very
homogeneous by allowing one or two knowledge domains to dominate at the expense of
leveraging cultural synergy and achieving innovation. Expatriate management teams at the head
of foreign national subsidiaries often act this way (Koppel et al., 2008, p. 56). Second, groups do
not innovative but learn. Here less prominent knowledge domains learn from more prominent
ones, resulting in a homogeneous group over time. This is akin to diverse groups adopting a
rigid corporate culture, and enormous diversity potential being lost. Third, groups maintain their
diversity and are innovative; they cherish and integrate diverse knowledge domains, which
through effective processes are used to create synergy.
Other research suggests proper training, processes, culture, and climate can mitigate the
risk of conflict. It has been found that culturally diverse teams that are untrained perform worse
on problem solving tasks than homogeneous ones, but when trained, they outperform them by a
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significant margin (Koppel et al., 2008, p. 23). It is also necessary to establish innovative
approaches and processes to overcome the organizational challenge of creating effective crosscultural teams, which, although having more potential, tend to be mediocre or perform worse
than homogenous ones unless they are adequately prepared for and guided through the challenge
(DiStefano et al., 2000).
Leadership and corporate cultural mindset are also extremely important—cultural diversity
must be valued by leaders and promoted overtly in corporate culture to create the healthy
operating climate necessary to develop synergy and help reduce conflict (Tsui & Gutek (1999) as
cited in Stahl et al., 2007, p. 30). Thomas et al. (1996) suggests a fundamental change is
required in the attitudes and behaviours of leaders—they must abandon ―underlying and flawed
assumptions about diversity,‖ recognizing its potential and creating a climate to enable
differences to be leveraged at all levels of the firm. This highlights an important point.
Nationally diverse boards and GTMTs may have superior cultural synergy that in theory might
result in improved firm performance, but this potential may never be realized. In fact, poorly
managed diversity has been shown to hurt performance, and if not well directed would likely
impair financial performance in diverse global corporations.
Ultimately, cultural diversity cannot be avoided in global business today, at least at the
lower levels of the corporation, so the options are to try simply to manage it, or use it to its
fullest potential. Moreover, without diversity, cultural synergy cannot occur. The amount of
potential synergy within a system or organization—as well as conflict—is directly proportional
to the amount of diversity (Centre for Human Systems, n. d.). Viewed as such, a firm has a
quotient of cross-cultural synergy based on its cultural diversity; the more varied, the greater the
synergy potential.
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THE POTENTIAL BENEFITS OF CULTURAL DIVERSITY AND SYNERGY
―I can‘t think of one area – from accounting to marketing – that doesn‘t benefit from diversity.‖ —Michael Schmidt, BP (Koppel
et al., 2008)
General Benefits
―They bring different, important, and competitively relevant knowledge and perspectives about how to actually do work—how to
design processes, reach goals, frame tasks, create effective teams, communicate ideas, and lead.‖ (Thomas et al, 1996, p. 4)
The previous section explained the concept of cultural synergy and challenges in
realizing it. This section identifies the potential benefits to global corporations if cultural
diversity can permeate the entire organization and be leveraged to create synergy. A
Bertelsmann Stiftung study reviewed cultural diversity in global corporations operating in
Germany and interviewed prominent academic and business experts (Koppel et al., 2008). A
striking finding was how little multinational companies operating in Germany understood about
the potential benefits of cultural diversity, so Koppel et al. (2008) compiled case studies of 12
exemplary companies generating and harnessing cultural synergy; a tabulation of the most
prominent benefits they perceived as a result of their diversity efforts is shown below ( p. 12)
(figure 1).
Perceived Benefits
Customer focus and satisfaction (creativity and innovation)
Opening new markets (marketing)
Employee satisfaction and motivation (acquisition and retention of talent)
Target group-specific products (creativity, innovation, and marketing)
Increasing sales (performance)
Larger pool of applicants (resource acquisition – talent)
Number of Companies
11
10
10
9
2
1
Figure 1 – Perceived Benefits of Cultural Diversity
The study suggests global corporations striving for innovation, moving into new global markets,
aiming to appeal to local cultural groups at home, or trying to retain talented people to ensure
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future success should embrace cultural diversity (Koppel et al., 2008, pp. 10-11). It seems
German companies today have a growing awareness that cultural diversity is unavoidable; ―the
next step is to recognize it as a valuable resource and put it to good use‖ (Koppel et al., 2008, p.
52). But is national cultural diversity really valuable and if so, why? Or, as Thomas and Ely
describe, is it all just ―diversity rhetoric? (Legace, 2004).
Almost 20 years earlier than Koppel et al. (2008), Cox and Blake (1991) surveyed
literature and found evidence to support the ―value-in-diversity‖ hypothesise—that there was a
relation between competitive advantage and effectively managed cultural diversity. Specifically,
Cox et al. (1991) confirmed that if cultural diversity was valued as an asset, it could provide
competitive advantage by lowering turnover costs, allowing firms to acquire the best available
talent, providing insight to perceptively market to distinct cultures, improving creativity with
diverse perspectives, improving decision making and problem solving, and creating flexible
systems. Most of these benefits are supported in the current literature described below.
Enhanced Problem Solving and Decision Making
―When making a decision of minor importance, I have always found it advantageous to consider all the pros and cons. In vital
matters, however, such as the choice of a mate or a profession, the decision should come from the unconscious, from somewhere
within ourselves. In the important decisions of personal life, we should be governed, I think, by...our nature.‖—Sigmund Freud
(Quotes.net, n. d.)
Strategic business decisions are extremely important; tremendous opportunities are seized
or lost, and abundant resources wasted or put to good use in their wake (Drucker, 2008). The
profound insight of which Freud speaks, also found deep within each culture, could be valuable
to global business. Harnessing cultural insights will become more important in strategic decision
making as global business becomes even more multifarious. More often global corporations will
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compete fiercely in culturally complex corners of the world with emerging global competitors
for a share of budding markets. In this environment, global corporations face much more
cultural and technological complexity, which can confound decision makers (Schmidt et al.,
2007, p. 49, 53). Given the importance of strategic decision making, cultural synergy is perhaps
more relevant at the highest levels of global business as it is on a factory floor or in design
rooms, and better decisions ought to be made by culturally diverse GTMTs (Caligiuri et al.,
2004, p. 851). The principle of requisite variety previously discussed proposes that a system‘s
survival depends on cultivating differences within the organization to enable it to survive
changes in the external environment; an organization therefore ―must be as diverse as the
environment in which it exists‖ (Schmidt et al., 2007, p. 51).
The more varied the perspectives, the clearer problems will be defined and the more
informed decisions will be. Cultural synergy involves sharing diverse cultural perceptions—one
cultural perspective does not give the whole picture of the problem and therefore limits perceived
solutions—to enhance learning, problem solving, and decision making (Moran et al., 2007, p.
189, 229). Citing several studies, Cox et al. (1991) reported that the ―broader and richer base‖ of
a culturally diverse group improves problem solving and decision making, in part, by minimizing
‗group think‘ present in homogeneous groups, which tend to try to maintain cohesion rather than
challenge existing notions (p. 50). Esser (2001), from the Global Corporate Governance
Research Center, supports this notion, and reports wide consensus of the view that an
―international perspective,... special knowledge of a particular market, [and] ‗different‘ ways to
ask questions and… deal with issues‖ is an tremendously valuable addition.
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Acquiring and Retaining Global Talent
―Talent is the largest challenge we face. When you see businesses faltering, going stale, I attribute that to gaps in talent.‖
—Roger Farah, Polo Ralph Lauren Corporation (Thinkexist, n. d.)
The coming ―battle for talent‖ will get much more intense as everyone competes
everywhere for everything (Sirkin et al., 2008, p. 4; Michaels, Handfield-Jones, & Axelrod,
2001). Global corporations are beginning to realize that ―no matter how talented your own
people are, the majority of talent will always be outside your company‘s borders‖ (Sirkin et al.,
2008, pp. 228-229). With diminishing human capital in developed countries and a growing
supply in undeveloped ones, embracing cultural diversity offers significantly more opportunity to
acquire new talent. In the developing world there is a shortage of skill and education, but no
shortage of talent (Sirkin et al., 2008, p. 92, 104). Talent in a knowledge economy is the most
important factor in a company‘s success and the prime source of competitive advantage
(Michaels et al., 2001). A company can double their pool of prospective executive talent simply
by including women, which has been shown to improve performance (Shrader, Blackburn, &
Iles, 1997). The same benefit can be gained by searching for talent everywhere. Ethnocentric
corporations have historically tended to limit their search to within their country‘s borders,
thereby limiting considerably their potential to find global talent—especially top executive
talent—let alone take advantage of the cultural synergy potential it offers (Moore, 2006, p. 1).
These companies tend to deal with global business complexity by sending potential global
leaders abroad to gain international experience. This is vital to develop global leaders, but if the
pool of potential global executives is limited to domestic middle management rather than the
gambit of managers from all nations where operations occur, a firm will have stopped short.
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Esser (2001) suggests that by embracing national cultural diversity, geocentric companies
can find talent, such as directors for boards, not only abroad but at home through the wealth of
cosmopolitan non-nationals living and working domestically. In fact, looking at home and
abroad for nationally diverse directors significantly ―widens to pool of potential candidates‖,
which has never been more necessary as domestic CEOs and senior management are increasing
unavailable for board membership due to increased demand (Esser, 2011). Moore (2006) found
other reasons to look abroad. Middle power countries like Canada, Switzerland, Belgium,
Singapore, Norway, Sweden, The Netherlands, Denmark, Australia, and Finland proportionally
produce more exceptional top global executives. He posits that this is because middle economic
power leaders are caught between their own and a regionally dominant culture, and therefore
develop a cultural duality and more global view, which is outstanding preparation to become
global managers. More directly, Kets de Vries (2006) states ―people from smaller countries—for
reasons of survival—don‘t have the luxury of ethnocentrism‖ (p. 174). Whereas companies
from economic powers grow very large without ever leaving home, business leaders in Canada
and Finland must work across cultures just to survive. As discussed, more ‗Canadas‘ and
‗Finlands‘ are emerging in global business and it would be wise to search for talent there as well.
Geocentric corporations also realize that to be seen as attractive employers to potential
global talent, they must demonstrate they value and are willing to integrate other cultures into
their workforce by making cultural diversity a ―cornerstone of… corporate culture‖ (Koppel et
al., 2008, p. 28). Moore (2006) states more companies are recognizing that looking within
one‘s own borders for talent produces too narrow an pool of candidates and can have a demotivating impact on high potential foreign employees who view their careers as limited by their
nationality. ―Why bother striving to become an executive at Toyota if one is gaijin and not
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Japanese‖ (p. 1). The right corporate culture and climate can improve a company‘s talent
prospects immeasurably, but it is important that this talent be retained. Acting geocentrically
ensures not only the best talent available is acquired but also retained so a culturally diverse pool
of talent exists within the organization to help solve culturally complex global business
problems, and recognize and seize fleeting opportunities; this talent can also become a firm‘s
global leaders of the future. It is important also to not restrain diverse talent to niche areas of
the company (Koppel et al., 2008, p. 85), but fully integrated it throughout the formal and
informal structure of the organization to transform how work is done, using differences to ―shape
new goals, processes, leadership approaches, and teams [so employees] bring more of
themselves to work‖ (Thomas et al., 1996, p. 2).
Understanding Global Customers
―European business competes for the favour of an increasingly multicultural customer base.‖ (Enterprise for Health, 2008, p.
65)
Schneider (2010) suggests:
Ethnocentric management can substantially weaken companies and undermine their longterm global aspirations. Closely knit national groups simply do not have the cultural
breadth and outside-in perspective required to keep the company relevant to its customers,
employees, and other constituents around the world.
The result is ―global-average‖ products and services that do not address local needs (Schneider,
2010). Being able to empathize with the culture of global customers is increasingly vital
(Moore, 2006, p. 2). A growing body of work that speaks to the idea of ―being local worldwide‖ (Sullivan, 1996; Bélanger, Berggren, & Bjorkman, 2001). It assumes cultures are
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diverging rather than converging. These companies try ―to think global while acting local‖, but
they will fail without an appropriately deep cultural understanding of markets where they operate
(Schmidt et al., 2007, p. 49). This understanding can only come ―from country- and culturespecific insights‖; comprehensive cultural knowledge and technical expertise are vital (Koppel et
al., 2008, p. 52, 68). After failing in an initiative to reach a specific national sub-culture in
Germany because the initiative was designed by ethnic-Germans, IKEA realized that if they
lacked a culturally diverse workforce, they would not have the necessary cultural background
and sensitivity to effectively reach different cultures (Koppel et al., 2008, p. 59). Emergingmarket firms that embrace cultural diversity could soon have a significant and profound impact
on global business as they begin to compete against developed nations at home and in
unexpected places; ethnocentric firms that emerge to become geocentric may also have the same
benefits. Emerging competitors will compete successfully, at least domestically and regionally,
because they have in many cases armed themselves with: Western experience and the best
business education money can buy; culturally diverse GTMTs; knowledge, intelligence,
ingenuity, and resourcefulness; and a profound knowledge of what locals want (Sirkin et al.,
2008, p. 6, 17).
Creativity and Innovation
―Create a marketplace of ideas.‖—Rosabeth Moss-Kanter (Moss-Kanter, 1983, p. 167)
―Diversity is a critical source of ideas‖ and some of the most innovative research today is
happening at the intersection of various fields of science (Ramaswami & Mackiewicz, 2010, p.
2). There is no reason why this synergy should not occur at the intersections of cultures.
Cultural synergy offers enormous potential for innovation and organizations that fail to harness
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―the potent weapon of diversity‖ limit their ―creative potential‖ (Ramaswami et al., 2010, p. 2).
Drucker states that a lack of innovation is the largest reason corporations decline (2008, p. 22).
Moss-Kanter (1983) noted that innovative companies tend to be more egalitarian, progressive,
and have more cultural and gender diversity (p. 32). The most innovative she reports ―create
marketplaces for ideas, recognizing that a multiplicity of points of view needs to be brought to
bear on a problem‖ (p. 167). The connection between innovation and economic growth is well
established and there is a positive correlation between the two (Ramaswami et al., 2010, p. 8,
11). Doz, Santos, and Williamson (2002) after six years of research on cutting edge global
corporations such as Nokia conclude geographically diverse knowledge must be harnessed from
global customers, research and development centres, and national subsidiaries where it is
―imprisoned‖. Ernst &Young‘s 2010 report on innovation through diversity speaks about a
―new global mindset‖ and makes a compelling case for cultural diversity, which creates
―diversity of thinking‖. This then drives innovation by leveraging diverse perspectives at all
levels of global organizations (Ramaswami et al., 2010). The highly cited scholar Nancy Alder
states ―cultural diversity provides the biggest potential benefit to teams with challenging tasks
that require creativity and innovation‖ (Alder et al., 2008, p. 142)—in theory this should apply
to global boards and GTMTs.
Competitive Advantage
―What worked for us and made us successful in the past, will not be what works for us or makes us successful in the future‖.
Penny de Valk (Enterprise for Health, n.d., p. 5)
We have just examined the potential benefits of geo-centricity in global corporations.
Organizations that know how to integrate and leverage cultural diversity systemically will have a
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real source of competitive advantage in the 21st century (Enterprise for Health, n.d, p. 5). All
the companies in the Bertelsmann Stiftung study believe synergy through cultural diversity offers
competitive advantage in the paradigm shift that real globalization has brought (Koppel et al.,
2008, p. 84). The literature shows a theoretical foundation for how competitive advantage might
be acquired by geocentric companies that achieve a high measure of cultural competency. The
right corporate culture and climate is a key enabler, which brings diverse talent to and retains it
in the company, thereby increasing its cultural synergy potential. Culturally diverse and
competent governance, leadership, and management then enable and unleash synergy to increase
and enhance global business competencies and provide the benefits just discussed, resulting in
competitive advantage. How do we recognize this geocentric corporation? The literature
suggests it will have a geocentric corporate culture, be overseen by a culturally diverse board, be
led by a global CEO, and have nationally culturally diverse GTMT drawn from a worldwide
talent base; the result will be better global performance.
NATIONAL CULTURAL DIVERSITY AND FINANCIAL PERFORMANCE
―Diversity – the art of thinking independently together.‖—Malcolm Forbes (ThinkExist, n. d.)
The Ethnocentric-Geocentric Continuum
―The desired transformation requires a fundamental change in the attitudes and behaviours of an organization‘s leadership.‖
(Thomas et al., 1996, p. 4)
The previous section outlines the theoretical benefits of national cultural diversity to
geocentric corporations. In this section we examine how the extent of geo-centricity might be
measured. This differs from previous research, such as Sullivan (1994), which sought to
determine the degree of corporate internationalization based mostly on what activities companies
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did abroad rather than on human aspects, such as cultural diversity. Alder (2002) contends that
management researchers have ignored perhaps more than corporate executives the impact
cultural diversity has on a corporation. The author postulates that there is an ethnocentricgeocentric continuum upon which global corporations rest, much as Perlmutter (1969) contended
that there are degrees of ethnocentric, polycentric, and geocentric mindsets in every firm (p. 11).
Perlmutter (1969) suggests ―no single yardstick...is sufficient to establish a firms multinationality‖ (p. 18). A scan of literature suggests many factors can be measured to determine a
company‘s place on the continuum, including corporate culture and climate; the composition of
boards and GTMTs; the mindset and nationality of corporate leaders and their international
experiences; the nationality of leadership in regional headquarters and subsidiaries; and the
proportional composition of the global workforce compared with diversity at the top of the firm.
These themes and how they relate to performance are explored below.
Corporate Culture, National Cultural Diversity, and Performance
―Strengthening diversity is...essential [in] future orientated corporate culture[s].‖—Deutsche Bank (Koppel, 2008, p. 26)
Global organizations operate in a culturally diverse environment; they can take action to
simply survive in that environment, or they can try to harness diversity and thrive. Kotter and
Heskett (1992) state corporate culture is ―stable over time, but never static‖ and crisis and
challenges can provide impetus for cultural change (p. 7). The challenge and impetus today
comes from globalization that has finally arrived. Cultural diversity should be intrinsic in a
global corporation‘s strategy and culture, permeating the entire organization holistically, from
the boardroom to the factory floor (Koppel et al., 2008, p. 86). Thomas et al. (1996) contend
there are two paradigms used by companies to manage diversity. The first is the assimilation
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paradigm, promoting the idea that everyone is the same. This subverts differences and
employees become detached from the firm and under perform. The second is the differentiation
paradigm, where the firm celebrates diversity without equality, and under represented employees
are pigeonholed into positions that require their cultural perspective. These employees do not
advance into mainstream business and feel exploited. Thomas et al. (1996) propose the two
paradigms be integrated so equal opportunity exists for all workers to advance while diversity is
celebrated and integrated into all aspects of business. This allows their ―different, important, and
competitively relevant knowledge and perspectives‖ about how things should be done to be fully
integrated in all work at all levels of the corporation (p. 4).
Leveraging cultural diversity to create ‗perceptual synergy‘ to improve problem solving,
enhance creativity and innovation, better understand global customers and constituents, and
improve effectiveness and efficiency is as relevant to a polycentric or regio-centric corporation
as it would be to a fully integrated geocentric one. Literature shows successful teams do not
simply tap into the expertise of individuals, but create synergy by developing a new common
culture (Palmer et al. n. d., p. 2). The first step is to genuinely value cultural diversity and
clearly understand the benefits. Creating a global corporate culture is both extremely important
and difficult ( Marquardt ,1999, p. 47). Marquardt (1999) states employee mindsets, values,
thought patterns, beliefs, and behaviours must transform so they become ―world citizen[s]‖
while retaining their national identity (p. 47). Valuing diversity and formally entrenching it in
corporate strategy and culture invites culturally diverse talent through the doors. The goal of
many companies is a workforce demographic mirroring their domestic and global customer base,
and as previously mentioned, the principle of requisite variety suggests this is sensible at all
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levels of the firm. A geocentric corporate culture permeating the organization from top to
bottom allows this to happen (Koppel et al., 2008, p.11, 19).
With national diversity in place, synergy potential is increased. Key to harnessing cultural
diversity to create synergy is creating the right corporate climate to transform how differences
are seen—not as threats, but as opportunities to learn and improve outcomes. Conditions must
be created that enable rather than hinder diversity and enhance creativity and innovation rather
than conflict and friction (Koppel et al., 2008, p. 22, 50). A focus on exchanging diverse ideas
and learning is important. Differences need to be valued not feared to create conditions for
synergy to occur (Centre for Human Systems, n. d.). An open and healthy environment founded
in mutual trust, where diverse opinions are sought and valued, is required; it cannot be a climate
of fear, or far flung ideas that result in ingenuity and innovation will never be uttered. Moran et
al. (2007) write that ―differences are not deficits to be changed and corrected but gifts to be
cherished and enjoyed‖—people want to be valued, not simply tolerated (p. 182, 199). The
culture must therefore prize diversity and allow employees to maximize their potential (Moran et
al., 2007, p. 195). This does not mean abandoning corporate cultural roots, but rather
―intertwining them‖ with other cultures, celebrating diversity (Sirkin, 2008, p. 214) to create ―a
third culture‖, which will then be better able to compete in a culturally complex global
marketplace (Schmidt et al., 2007, pp. 48-49).
By accepting cultural diversity, cultural differences amongst the global workforce and
executive team should be viewed as important intrinsic assets (Moran et al., 2007, p. 144). The
aim of diversifying to create cultural synergy that leads to innovation and other positive
outcomes should be an overt component of corporate strategy and entwined in corporate culture
(Moran, 2007, p. 239). The pursuit of cultural diversity should not be for reasons of corporate
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self-interest, which might be revealed by ‗glass ceilings‘ that prevents cultural diversity from
penetrating into GTMTs or the boardroom (Koppel et al., 2008, p. 74). Diversity cannot be
token; it needs to be about more than respect, tolerance, political correctness, and employment
equity. Without substance, empty diversity initiatives are indicative of an organization simply
trying to conform to legal requirements and ‗manage‘ cultural diversity rather than leverage it for
all it is worth. Significantly, Alder (2002) suggests that cultural differences should not be
ignored or underplayed, but seen as a valuable resource to be highlighted and emphasised; equity
programs can sometimes blur the important cultural differences that exist (p. 107, 111).
Moran et al. (2007) suggest there needs to be a fit between corporate culture and people if
synergy is to occur (p. 134). A lack of strategic and cultural fit is the main reason mergers fail,
often because the major partner seeks to impose its corporate culture rather than develop a new
and shared culture (Cultural Synergy, 2007). Corporate centralization tends to impose ―values,
means and ways on other cultures that may not be appreciated‖—much as Toyota has done with
the Toyota Way (Schmidt et al., 2007, p. 44). This does not to work. Outlining the work of
Andre Laurent, Alder (2002) stresses that corporate culture tends not to temper or eliminate
national culture but amplify it, with Germans becoming more German, and Americans more
American (pp. 68-69). The challenge then is to ensure these deep and magnified differences do
not lead to conflict but are cherished and sought out, and that cultural synergy potential at all
levels of the global firm is released in ways that add value.
Global corporate culture must be inclusive and somewhat malleable. ―New and more
elastic corporate cultural models‖ are being developed to cater to ‗globality‘ and increasingly
these models will try to harness cultural diversity within organizations (Schmidt et al., 2007, p.
59). Dr. Milton Bennett states that when the dominant cultures make an effort to adapt to non-
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dominant ones, a third culture emerges, not a hybrid but a unique one, which is more likely to
generate ―third solutions‖ (Ramaswami et al. , 2010, p. 21). This is echoed by Schmidt et al.
(2007) who state ―the ultimate success for these organizations is when they transform themselves
and essentially metamorphose into a ―third culture‖ in which they mutually share decision
making and capitalize on the synergistic output‖ (p. 49). One can envision large corporations
with a core corporate culture as the underpinning for ‗third cultures‘ around the globe.
Kets de Vries et al. (2003) found a main priority for global leaders was to ―establish and
maintain a corporate culture that transcends cultural differences and establishes beacons—values
and attitudes—that are comprehensible and compelling for employees with diverse backgrounds
and cultural differences.‖ Clearly more than a superficial understanding of national culture is
required for this to occur. Global leaders understand that all human beings have some universal
values and needs, including meta-values for attachment, pleasure, and meaning. Fulfilling these
desires through a corporate culture and climate appealing to cultures everywhere fosters ―loyalty,
motivation, and exceptional performance‖ (p. 30). Workers are more satisfied, have a greater
sense of self determination, competence, belonging and enjoyment, and feel they have an impact
and are valued. In this climate ―cultural barriers fall, and people are more motivated to put their
imagination and creativity to work‖ (p. 30).
Even if the corporate culture and philosophy are right, however, time, resources, and
effective ways must exist to ensure cultural diversity synergy potential is released. Justesen
suggests a process where: cultural knowledge domains available are identified; the group is made
aware of the domains available; and processes ensure knowledge is exchanged (as cited in
Koppel et al., 2008, p. 57). She warns against conventional workplace wisdom promoting
harmony, finding disciplined, culturally diverse groups where everyone is treated nicely, people
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listened quietly, and only one person talks at once, rarely challenge espoused ideas; more often
than not there is widespread agreement leading to far less innovation (Koppel, 2008, p. 57). If
global corporations can develop the appropriate global business culture and cross-cultural
competencies to fully leverage cultural synergy potential, the aforementioned values might be
realized, resulting in improved performance.
There have been two important studies into culture and performance. First, Kotter et al.
(1992) found four types of corporate culture: strong, weak, low performance, and adaptive.
Strong culture is built on durable common values, a commitment to operating by certain
principles, and concern for employees, customers, and suppliers; these cultures are normally well
aligned with corporate strategies. In weak cultures, employees do not relate to corporate goals
and feel distant from its values; consequently there is weaker alignment with corporate strategy.
Low performance culture is unhealthy, and can be harmful to corporate strategy. It is insular
with a lack of trust, fiefdoms, turf wars, careerism, a lack of initiative and innovation, and
myopia. Finally, adaptive cultures adjust to the changing business environment, facing
challenges and seizing opportunities when they occur. The adaptive culture best supports
strategy implementation (Ross, 2000). Nonetheless, at the end of the extensive research, Kotter
et al. (1992) found firms with strong corporate culture can perform poorly, and those with weak
ones can perform well; their conclusion was corporate culture does not improve performance.
More recently, however, Burt, Guilarte, Raider, and Yasuda (1999), found no relation
between culture and performance only when there was little competition; nonetheless, they
exposed strong empirical evidence that a robust corporate culture can be a decided asset in
highly competitive markets, improving considerably performance under these conditions. With
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increased global competition today, a strong, adaptive corporate culture tailored to the culturally
complex global business environment should improve global corporate performance.
In sum, corporate culture creates the climate necessary to attract the best global talent
available and sets conditions for cultural synergy to occur. Since there is general agreement that
corporate culture should be aligned with business strategy, a strong geocentric corporate culture
may indicate a geocentric corporation.
Therefore, corporate culture might be subjectively
measured and used as an indicator of the degree to which a company is geocentric, by
determining if it ignores diversity and differences, tolerates them as obligations, or integrates
diversity system wide and seeks to leverage differences to improve global performance. The next
sections examine the extent to which culturally diverse human capital is represented at the top of
global firms and how this impacts performance. One would expect a larger proportion of foreign
nationals in the upper echelons of corporations with geocentric corporate cultures.
National Cultural Diversity on Boards of Directors and Performance
―One of the indicators that an organization is truly global is the number of nationalities represented on its board.‖ (Kets de
Vries, 2006, p. 191)
Cultural diversity extending to the top of an organization indicates a systemic approach to
it and a business strategy, supported by a corporate culture, attempting to harness cultural
differences throughout the organization. It is national cultural diversity at the top of global
corporations that will be examined next and used in the research as a means to help determine a
company‘s place on the ethnocentric-geocentric continuum.
Echoing Kets de Vries, Schneider (2010) contends a measure of success in becoming a
geocentric corporation is the share of senior executives who joined the company in foreign
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subsidiaries at the national level and have been promoted to the global executive suite; the path
should be wide open to attract the best talent, otherwise talent will rest at home. Conversely, the
mark of an ethnocentric corporation is low international representation at the top of the
organization. In such organizations, barriers exist, both systemic and invisible, that prevent other
nationalities from benefiting from and sharing in power at the top of the organization. For
example, Japanese companies often only allow native Japanese to rise to global executive
positions. This is a considerable disincentive for talented foreign managers to join such
ethnocentric companies. It also inhibits Japanese firms from sources of unique ideas, achieving a
strategic understanding of foreign markets, developing a heterogenic talent pool of human
capital, and benefiting from accompanying cultural synergy potential (Moore, 2006, p. 3).
Moran et al. (2007) contend that ―if diversity...is managed in a system-wide, culturally
synergistic manner...it is...likely...overall employee performance, retention, and morale will show
a significant improvement‖ (p. 232). Thus, diversity should extend to the top of the
organization—system wide. Fundamental change in culture begins at the top of an organization,
so it is evident that to be authentically global, a company‘s board and GTMT should be
multinational (Zehnder, 1991, p. 48). Business leaders from different societies bring different
contributions to the table that should be seen as precious resources; ―skilled global leaders...
recognize the contribution made by managers of other nationalities‖ (Moran et al., 2007, p. 151).
Examining first the boardroom, effective corporate governance depends on board diversity,
and there is wide consensus it is a necessary means to improving shareholder value (Brancato,
1999, p. 14). A culturally diverse group of experienced international executives provides many
diverse knowledge domains and much more synergy potential, which is required to make
effective decisions in a complex global business environment (Zehnder, 1991, p. 48). And the
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globalization of boards is increasing. Esser (2001) reports that cultural diversity at the board
level trails management diversity, but an effort to internationalize boards began in earnest in
1995. Between 1993 and 1995, boards with at least one foreign director rose from 38 to 39 %,
but between 1995 and 1998 this had increased to 60 %; 23 % of these companies had three or
more foreign directors. Foreign directors accounted for 10 % of board composition by 1998
(Esser, 2001). The Esser (2001) study also found European and North American boards are
more diverse than Asian boards. Palmer et al. ( n. d.) confirmed this but found American
boards to be less culturally diverse than European ones, with Asian firms having very little
diversity; they also questioned how homogeneous ethnocentric corporations who derive a major
portion of their revenues from global operations can expect to effectively monitor and direct
global corporate activity (p. 9). They suggest that American corporations ―do not take sufficient
advantage of the potential synergies of cultural diversity on boards of directors‖ (p. 21).
Hansen (2007) found that cultural diversity on American boards ―no longer reflects the global
nature of business and the geographic distribution of the workforce‖ and that when American
boards do have foreign directors, they tend to come from Canada, the United Kingdom, or
Germany.
Palmer et al. (n. d.) also found that although European boards at first glance appear more
culturally diverse, often these boards are filled with other Europeans, habitually from
neighbouring countries, in the case of several Scandinavian countries (p. 22). In other words,
although European and North American companies do have some foreign nationals on their
boards, these members are customarily not that different and do not represent the true global
nature of their operations.
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Ronen et al. (1985) examined eight empirical studies regarding general employee attitudes
towards work, including the research of Hofstede, to cluster countries into what they call psychic
zones. They assumed, as did the studies they examined, that cultures are distinct and that
countries can be used as proxies for culture (p.435). Although their study was meant to help
firms better understand and manage differences between countries, and their global workforce
and worldwide operations, they suggested the research is useful for academicians to generalize
country specific research to other similar countries (p. 435). Based on their synthesis of the
analysis of the eight studies, they divided the world into the following psychological zones
representing culturally similar groups of countries: Anglo, Germanic, Nordic, Near East, Arab,
Far East, Latin America, Latin Independent, and Others. Although the studies examined
excluded African and former communist countries, and they concluded that Far and Middle
Eastern countries have not been studies sufficiently to completely understand their attitudinal
differences towards work, they determined countries can be grouped by similarities on certain
cultural dimensions and the psychic zones described above have strong statistically relevant
clusters ( Ronen et Al., p. 452). Given this and the fact this fusion of studies considered cultural
differences in employee attitudes towards work, it is considered by the author a relevant way to
group cultures for this study. This is because a general grouping of culture in this way is
sufficient to identify different cultural knowledge domains that may be used to create cultural
synergy potential that can be leveraged for competitive advantage; this is a general study of the
influence of diverse cultures on the upper echelons of business and not a micro study of specific
mores and attitudes of business leaders, directors, and global executives.
It is therefore fair to suggest a board containing members from several different psychic
zones would be more culturally diverse than a board with members from the same zone.
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Therefore, when considering cultural diversity, an examination of psychic or regional diversity
may provide insight into the true cultural synergy potential of a corporation. Although Caligiuri
et al. (2004) and others argue against Sullivan‘s use of psychic zones to measure
internationalization, preferring simply to use ―a straight forward count of the number of countries
where a company operates,‖ the current author believes that because Ronen et al.‘s (1985)
psychic zones are directly related to cultural fissures, they may be useful in examining the
breadth of national cultural diversity within GTMTs and boards.
And this is especially relevant to this study given swelling globalization. More recently in
Europe, there is a genuine trend toward national cultural diversity on boards. Rather than simple
national diversification with familiar neighbouring countries, companies are beginning to seek
more directors from outside their regions, in different psychic zones ―with very different cultural
backgrounds and business knowledge‖ (Esser, 2001). For example, 48 % of European firms
sought directors from North America or Asia rather than from fellow European Union countries
(Esser, 2001).
Geo-centricity for its own sake is of no practical use, however, and while legislation or
voluntary charters have contributed to an increase in gender diversity in Norway, Spain,
Germany, and The Netherlands, there is no legislation compelling global boards to
internationalize; companies obviously recognize some benefit in increasing cultural and national
diversity on their boards. What are the potential performance advantages?
Boards have several key functions, principle amongst them to represent shareholders by
monitoring the corporation‘s activities and determine sound policy and strategy by making
effective decisions (Erhardt et al., 2003, p. 104; Palmer et al., n. d., p. 22). The former function
suggests that, with increasing international capitalization, boards, as fiduciaries, should diversify
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to better reflect global shareholders (Brancato, 1999, p. 14). Agency theory suggests outsiders,
like foreign directors, will effectively monitor the company and better represent shareholders,
thereby improving financial performance. Resource dependency theory considers insiders more
valuable because they provide more resources to the board and fulfill many important functions
(Jaskiewicz and Uhlenbruck, n. d., p. 1). Other literature finds that directors with different
knowledge domains also provide important resources that can be tapped (Jaskiewicz et al., n. d.,
p. 5). Resources that culturally diverse boards provide are many. Esser (2001) found the
reasons boards internationalize are to: widen the pool of candidates; be able to effectively
monitor their companies, which have become as culturally diverse as the markets within which
they operate; have more access to foreign capital by gaining the trust of foreign investors; attain
expertise to help deal with complex issues, such as mergers and foreign acquisitions; provide
cultural sensitive advice; and professionalize the board with culturally acumen ―strategic knowhow and specific areas of expertise.‖ Foreign board members may also provide a varied, broader
perspective to shape strategy; assist in acquiring resources such as finances and materials;
provide intangible resources like culturally dynamic professional expertise and knowledge,
which may be used to create new knowledge; provide market intelligence and access into new
markets; and offer relational resources such as information, support, advise, legitimacy, mental
capital, and status (Palmer et al., n. d., pp. 3-4; Hansen, 2007).
Most research into board diversity and performance has examined differences in gender,
national ethnicity, the tenure of board members, functional background, and age (Palmer et al., n.
d., p. 5). The results are mixed.
Dalton, Johnson, and Ellstrand (1999) found no significant
relationship between performance and board composition. Wang and Clift (2009) found no
relationship but noted that more diversity did not lead to poor performance. They also believe
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that there are so few diverse members on boards that they likely acculturate to the board. They
contend that a critical mass of diversity may result in a positive association with performance;
this idea is supported by Carpenter, Sanders, and Gregersen (2001). Other studies have found
board diversity increases creativity, improves decision making, causes more conflict, and
decreases commitment and communication (Palmer et al., n. d., p. 6). A positive correlation
between board of director demographic diversity and the firm financial performance has been
shown by Erhardt et al. (2003). They note a positive association, although not necessarily
causal, between gender and ethnic diversity and the financial return on assets and investment;
thus they contend that diversity within a board seems to impact positively corporate performance
(pp. 107-109). They conclude the oversight function of a board may be positively affected by
diversity due to the more conflict and a broader range of opinions (p. 108). They also highlight
that Enron‘s fall and the well publicised failure of its board to effectively oversee the company‘s
balance sheet activities. Enron‘s diversity consisted of one female on the 17 member board, or a
6 % diversity quotient compared to the 25 % mean for companies considered in their study. This
typifies the problems presented by a lack of diversity, ―namely a lack of [healthy] conflict and
breadth of perspectives‖ (Erhardt et al., 2003, p. 108). Does their study of gender and ethnic
diversity within 112 American companies also apply to national cultural diversity within global
corporations? Cultural synergy theory suggests it would.
Caligiuri et al. (2004) built on Sullivan‘s (1994) previous research into firm
internationalization and added the ratio of national diversity amongst board members as a
potential indicator of internationalization. This ratio might also be used to determine the degree
to which a corporation is geocentric or ethnocentric. Having found a positive relation, however,
they concluded that this simple ratio does not measure the true extent of national diversity
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because a board of six, with three Canadians and three Americans from the same psychic zone,
would have the same ratio as a board with one Indian, Swede, and Singaporean and three
Americans, representing four psychic zones (Caligiuri et al., 2004, p. 855). Therefore, the ratio
of the number of psychic zones represented on a board might be a better indicator than the
simple ratio described above.
In sum, theory suggests national cultural diversity on boards should be beneficial. Indeed
there is some evidence in the literature that this may be so. Based on the current literature
review, the author postulates as well that the extent other nationalities and psychic zones are
represented at the top of a global corporation—in the boardroom—as a proportion of corporate
domestic nationals can be measured and might also a useful indicator of the degree of geocentricity in a corporation. The next section will review diversity amongst the GTMT and how
this relates to performance.
National Cultural Diversity in Global Top Management Teams (GTMT) and Performance
―Global managers are made, not born. This is not a natural process. We are like herd animals. We like people who are like us.‖
Percy Barnvek, ABB (Taylor, 1991)
Carpenter et al. (2001) asked the question, ―shouldn‘t every multinational corporation have
a global top management team?‖ Considering the postmodern global-market cultural
complexity, it will become increasingly difficult for companies to direct global business from a
centralized ethnocentric corporate headquarters isolated from the cultures they serve. Maznevski
and Peterson (1997) state ―the days are passing when...corporations...[can] operate complex,
dynamic industries from the unambiguous cultural base of a home country (p. 61).
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The literature intimates that competitors from emerging markets understand this as they
look beyond their own borders to other emerging and more developed markets in their search for
talent. They ―have tapped into the global talent pools far more aggressively... bringing people
with knowledge and expertise into their companies.‖ In India there are currently 50,000 expats
working in their global corporations, 1000 of whom hold executive positions (Sirkin et al., 2008,
p. 30). Sirkin et al. (2008) writes about Indian company Suzlon Energy, with senior executives
from Denmark, Germany, The Netherlands, North America, and Australia making up its GTMT
(p. 225). Before continuing, GTMT should be defined. It consists of global corporate leaders
and managers having global responsibility for any business function (Jokinen, 2004, p. 201).
For the purposes of this paper, it does not include regional leadership and managers because their
responsibilities are not global.
Recently, there is a growing expectation in global American corporations that GTMTs
have international experience to at least have some cultural insight to better manage global
complexity and understand their international operations (Carpenter et al., 2001, p. 277, 279).
While this trend falls far short of forming a culturally diverse GTMT, it demonstrates recognition
that the global business environment is culturally complex, and an attempt to effectively manage
it. Gregersen, Morrison, and Black (1998) report that executives with international experience
found it to be singularly important in their own leadership development. Nevertheless, a
corporation with an internationally experienced yet culturally homogeneous GTMT is still
ethnocentric.
Literature suggests, however, that Unilever and companies like it embody geo-centricity.
Chairman Michael Treschow, from Sweden, has ―integrated... local leadership teams into their
global succession planning... to effectively bubble-up top talent from around the world‖ (Sirkin
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et al., 2008, p. 109). They have made recruiting, developing, and training global executives a
priority and they draw them from throughout the organization. Gregersen et al. (1998) found
global leaders and executives are in short supply with 29 % of companies reporting they had
―nowhere near enough‖ and 56 % responding they had ―fewer than they needed‖ (p. 22). But
Unilever increases their talent pool and ensures better quality and more quantity by broadening
the search to include the ―worldwide pool of executives in their organization‖ (Bartlett et al.,
2003, p. 9). Bartlett et al. (2003) state as well that ―a company‘s ability to identify individuals
with potential, legitimize their diversity, and integrate them into the organizations corporate
decisions is the single clearest indicator that... the company is a true transnational‖ (p. 9). To
attract top foreign executives, there needs to be ―a clear and viable path to leadership. There
cannot be a real or perceived glass ceiling..., or they will look elsewhere for a career that will
allow them to realize their potential‖ (Sirkin et al., 2008, p. 106).
In addition, literature suggests a critical mass of national diversity is required in the GTMT
for it to be effective—parachuting a lone foreign national is not enough. Carpenter et al. (2001)
found that a CEO‘s international experience had an even more significant impact on company
performance if his GTMT has similar international experience. This shared experience results in
mutual trust and provides an underpinning for communication, essentially creating cohesion that
allows strategy to be effectively executed (Carpenter et al., 2001, p. 280). Similarly, it is
reasonable to expect that a critical mass of executives of several nationalities would improve a
GTMT, and ultimately competitive advantage.
Not all literature supports the idea that national cultural diversity is important in the GTMT
and critics highlight successful ethnocentric companies with CEOs and GTMTs lacking
international experience as proof, suggesting ―international complexity can be managed through
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middle management, expatriates, locals, or consultants (Carpenter et al., 2001, p. 278).
Unfortunately, there is little research today into the impact of national cultural diversity on the
performance of GTMTs—most research has explored middle managers, teams, and employee
diversity (Palmer et al., n. d., p. 2). One might suppose however the advantages and difficulties
associated with diverse boards will apply equally to GTMTs.
Finally, Caligiuri et al. (2004) used the ratio of national diversity in GTMTs as a measure
of diversity and recognized as well that it could be used to measure the degree of geo-centricity.
It seems therefore from the current literature review that national composition and span of
national diversity of GTMTs might also be an indicator of a corporations place on the
ethnocentric-geocentric continuum.
The next section overlaps somewhat with previous two insofar as it examines global
business leaders, who are also members of boards and GTMTs. Nevertheless, given the
importance chairmen, presidents, and CEOs play in shaping strategy and corporate culture,
which in turn decides whether a corporation tends to be ethnocentric or geocentric, the concept
of global leadership and its relation to performance should be considered.
National Cultural Diversity in Global Business Leaders and Performance
―Global leaders are born and then made... they are highly competent and interested... push the frontiers of their own knowledge
and understanding... thrive in a chaotic and ambiguous environment... love people [and] global business... In reality, precious
few... competent global leaders exist.‖ (Black et al., 1999)
There is wide agreement that global leaders are made (Moran et al., 2007, pp. 27-28;
Taylor, 1991, p. 95). But what is the global business leader? Literature suggests the global
leader is a rare and valuable resource for corporations that want to compete globally (Carpenter
et al., 2001; Gregersen et al, 1998). Dr. Taylor Cox contends senior corporate leadership is the
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single most important factor in promoting cultural diversity; these leaders must be diversity
champions and communicate this widely through words and deeds, integrating diversity
management with corporate strategy, and holding people accountable where necessary (Koppel,
2008, p. 24). Little happens if things are left to chance and diversity needs to be effectively
managed throughout the organization (Koppel et al., 2008, p. 70). Chairmen, presidents, and
CEOs or their equivalents must have the intellectual and cross-cultural capacity and ability to
work effectively in a multifaceted global environment of different cultures, languages, politics,
regulations, and culturally complex markets, with ambiguous lines of authority, unorthodox
competitors, myriad suppliers, shifting technology, and global-local tensions (Gregersen et al.,
1998). ―A lack of diversity of thinking as well as senior management global experience [can]
significantly impact global performance‖ (Ramaswami et al., 2010). The international
experience of top executives is important in leveraging what cultural diversity has to offer.
There was a time when a foreign assignment was considered a ―one-way ticket to oblivion,‖ but
increasingly for global corporations it is a requirement to become a senior global executive
(Zehnder, 1991, p. 49).
Jokinen (2004) did a painstaking literature review of global leadership competencies to
provide a foundation for academics to conduct further research (p. 199). He noted a ―scarcity‖
of authentic global leadership literature and that the vast majority of research on global
leadership examined expatriates (expats) operating in foreign countries, or simply put, global
leadership in an ethnocentric context (p. 200). He found almost no consistent longitudinal
research has been conducted, and consequently when the literature is reviewed, there is a long
list of competencies—a mélange of ―traits, behaviours, skills, values and knowledge‖—and little
agreement amongst the autonomous work of researchers (p. 211, 201, 204).
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Jokinen (2004) attempted to identify qualities that enable leaders ―to work across cultures
globally‖ and provide an integrated competency framework that synthesized the work of other
researchers (p. 201). The framework consists of core competencies, mental characterises, and
behavioural competencies and is outlined at appendix 1. A quick scan of these details reveals
that many competencies apply equally to any exceptional leader of a large organization working
in a complex environment; however, Kets de Vries et al. (2003) found that exceptional
leadership qualities are not enough to be an effective global leader. Buried in the myriad
competencies at appendix 1 are several, some mentioned above, that seem specifically relevant
to global leadership in a complex cultural environment. These have been highlighted at
appendix 1, and include the ability to lead culturally diverse teams, acquire and use cultural
knowledge, retain leadership qualities in unfamiliar circumstances, accurately profile other
cultures, and understand global interdependencies, to name just a few (Jokinen, 2004).
Unfortunately, although much effort has gone into identifying these competencies, research
has not directly related these aptitudes to the performance global leaders (Jokinen, 2004, p. 204).
One aspect however has been used to predict the performance of a global leader, and that is
international experience. International experience and participation in global taskforces and
multi-cultural teams with people of diverse cultural backgrounds has been shown to be beneficial
to global corporations and to provide competitive advantage (Jokinen, 2004, pp. 210-211).
Gregersen et al. (1998) contend travel, teams, training and transfers are all important in
developing global leaders, but transfers that resulted in executives living and working in foreign
cultures were the most important. Training and preparation are vital as well. Kets de Vries et al.
(2003) report that international MBA programs and other training and cultural professional
development help develop a cross-cultural mindset and minimize ethnocentricity (p. 26). It is
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also critical that participants in global leader training come from the breadth of the company‘s
global talent pool, not only to ensure a culturally diverse training climate, but to tap into global
talent (Gregersen, 1998). Training and key experiences beget international curiosity and interest,
which foster the development of global competencies (Black et al. 1999).
Carpenter et al. (2001) found international experience was ―surprisingly rare‖ with only 22
% of CEOs and 11 % of the GTMT executives having international experience. Leaning on
resource theory, which suggests resources that are valuable, rare, and inimitable provide
competitive advantages, they developed the hypothesis that the international experience of the
CEO is positively associated with corporate performance. The study examined previously
untested human capital resource theory, finding international experience did predict return on
assets and financial performance. They discovered as well that financial performance improved
when an international CEO was ―bundled‖ with a GTMT having international experience, as
previously mentioned—in other words, global CEOs do better in geocentric, global corporations.
Black et al. (1999) also found a positive relationship between a leader‘s international experience
and a firm‘s return on net assets (as cited by Jokinen, 2004, p. 211).
But having a CEO with international experience does not make a corporation geo-centric.
It only makes sense today for global senior executives to have this sort of international
experience. However, if American managers, for example, are sent abroad to gain international
experience and the best of these return to manage and lead a homogeneous GTMT, to be sure,
they will have a wider range of knowledge and be more effective than they otherwise would have
been if they had all remained at home, but the whole endeavour would still be ethnocentric and
the corporation would not have leveraged the synergy potential of a culturally diverse,
internationally experienced group of senior executives.
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Carpenter et al. (2001) found only four % of CEOs were foreign nationals, who notably
performed at the same level as American CEOs. This highlights that American corporations are
still not tapping into the best available global talent, which can perform equally well. The study
suggests an ethnocentric bent in American global corporations, referring to research that report
American CEOs are a homogeneous bunch, typically white males, long tenured, graduates of
prestigious universities, with financial or law backgrounds. An internationally experienced
global leader, the best available from a nationally diverse international pool of talent, might
afford even more competitive advantage in stark contrast to the norm (p. 494). To realize the
true potential and possible competitive advantage international experience can bring, companies
must attract and retain global talent in national subsidiaries by offering them attractive global
career paths and allowing stars to rise to the top (Zehnder, 1991, p. 49). So, not only is varied
international CEO experience an indicator of a geocentric global firm, so is their nationality. A
true indicator of a geocentric corporation, in addition to an international leader‘s experience,
might be whether a CEO or chairman is a foreign national, particularly if he or she comes from
another psychic zone. Supporting this, Caligiuri et al. (2004) advise that research into the
psychic distance between the corporate leaders and parent country might be a more appropriate
indicator of diversity of attitudes (p. 856).
Business Leaders in Regional Headquarters and National Subsidiaries
―With some exceptions, the wrong people are running U.S. companies. It's been that way for years, and it hasn't gotten much
better.‖ — Carl Icahn (woopidoo, n. d.)
The end of the thread in the national cultural diversity fabric emanating from the top of
geocentric corporations hangs in global national subsidiaries. As previously mentioned,
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ethnocentric companies often reserve top managerial positions in subsidiaries for nationals from
the corporation‘s home country. Although this might be done for other than ethnocentric
reasons—for example, the managerial expertise may not exist in a particular country when a
multi-national corporation enters a new market, or the executive appointed may be bi-cultural
and have the requisite language and cultural knowledge—this can nonetheless severely damage
productivity, morale, and the retention of talent if their appears to be an impenetrable barrier that
prevents qualified and available host-country managers from advancing higher in the corporation
and competing for these jobs (Zeira, 1976, p. 34; Moran et al., 2007). Polycentric companies
also allow and even prefer foreign nationals to fill these top positions, but their subsidiary leaders
will not be permitted to advance higher in the firm. In either case top talent, seeing barriers to
advancement, tend to use ethnocentric or polycentric companies to gain experience before
looking for similar jobs in a geocentric global corporations or an ethnocentric firms from their
own nation (Schneider, 2010; Zeira, 1976, p. 35). Ethnocentric policies like this are ultimately
damaging. A geocentric corporation will use national subsidiaries as ‗breeding grounds‘ for
future global leaders from around the world. The leadership of subsidiaries or regional
headquarters—whether leaders comes from the company‘s parent-country, or the host nation, or
a third country—may therefore be an indicator of a company‘s ethnocentricity or geo-centricity
(Moran et al., 1993).
A Final Measure – The Ratio of Foreign Employees to Total Employees
―Business…only has one true resource: people.‖—Peter Drucker (Drucker, 2008, p. 28)
The ratio of foreign employees to total employees is one of three measures used by the
United Nations Conference of Trade and Development to determine the degree of firm
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internationalization ( Caligiuri et al., 2004, p. 848). This ratio, measuring overall firm national
diversity, can be compared against the ratio of national diversity at the top of global companies
to determine if foreign nationals permeate proportionately to the top of the firm, or if there are
barriers preventing them from being in GTMTs and boards. The literature suggests this is a
good indicator to ascertain if a corporation is ethnocentric or geocentric; in geocentric
corporations the variances between these two ratios will likely be less than in ethnocentric ones.
CONCLUSION OF LITERATURE REVIEW
―Only when managers explicitly recognize the concept of culture can the response to cultural diversity be synergy.‖ (Alder,
2002, p. 113).
The literature suggests a great deal more research should be done to better understand the
impact of national cultural diversity at the macro level—in global corporations within boards and
GTMTs—to complement the substantial research into lower level team diversity. Past macrolevel research has focused on determining the degree of internationalization (DOI) of firms, the
theory being that the more international a company is, the more competitive it will be (Sullivan,
1994; Legace, 2004; Perlmutter, 1969). This research ignores almost completely the human
aspect of cultural diversity within the corporation itself, particularly at the higher levels, and
focuses almost completely on how globally widespread are the various functions of its
operations. This focus on internationalization has conceivably led some firms to internationalize
in an ethnocentric manner, by sending domestic parochial managers around the world to gain
global experience. These managers and those at corporate headquarters have typically employed
strategies to minimize cultural diversity by socializing employees into the dominant national and
corporate culture (Alder, 2002, p. 115). The paradigm shift resulting in widespread
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globalization and tougher global competition means the cost of ethnocentricity is today being felt
and that the ―value-in-diversity‖ notion may no longer be rhetoric. Literature suggests there are
many potential benefits to bringing national cultural diversity into all levels of a global company,
managing it effectively, and synergistically leveraging it to create competitive advantage and
improve financial performance. It also identifies potential qualitative and quantitative ways that
the degree of geo-centricity of global corporations might be measured. Based on this, the next
section outlines the research methodology used to determine if national cultural diversity in the
governance and executive bodies of geocentric corporations provides a competitive advantage
resulting in better financial performance over ethnocentric corporations with homogeneous
boards and GTMTs.
RESEARCH METHODOLOGY
GENERAL
Contemporary business and social science literature posits that national cultural diversity
can be used to create synergy and improve global financial business performance, yet there is
much conjecture and little empirical research to support this premise. Substantial research has
attempted to determine a corporation‘s DOI—how global it is—as it relates to performance.
Sullivan (1994) used nine variables—reduced to six after factor analysis—to measure the DOI of
74 American manufacturers. His model included a mix of quantitative and qualitative variables
as follows: performance, based on what functions companies execute abroad (foreign sales,
R&D, profits, and advertising intensity, and export sales); structural by considering what
company resources are based abroad (foreign assets and the number of subsidiaries); and
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attitudinal by determining the international experience of corporate leaders (leader‘s international
experience and psychic global dispersion) variables. This type of research postulates that global
expansion is good and leads to better financial performance. It seeks to establish a linear
correlation between DOI and financial performance; the results have been ―inconsistent and
inconclusive‖, although there is some evidence there may be a non linear relation (Ruigrok &
Wagner, 2003, p. 64).
With inconsistent results, difficulty in demonstrating cause and effect—it may be that high
performing firms globalize and continue to perform to a high level (Hejazi & Santor, 2005)—
and ever increasing globalization anyway, the question of the DOI-financial performance
relationship may be moot, particularly concerning the largest global corporations. The question
today for an increasing number of corporations is not if or to what extent to globalize—they have
done that over the past thirty years, often out of necessity to spur continued growth—but how
can financial performance be improved in a complex, culturally diverse, global marketplace.
The current study did not intend to determine the extent of internationalization of firms as
it was assumed companies sampled in this study were global given their ranking amongst the
2000 largest corporations in the world; it did however seek to discover the extent to which
companies already internationalized to a significant degree were geocentric or ethnocentric and
how this impacts performance.
In addition to studies on DOI, a superfluity of studies have examined the effects of
diversity on team performance in myriad low to mid-level settings, but little research has been
undertaken to determine the relation between the ethnocentric or geocentric orientation of
corporations as measured by national diversity at the top of the firm and overall corporate
financial performance (Palmer & Varner, n.d., pp. 1-2). This is an emerging field. Between
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1993 and 1998, for example, it was found companies with at least one foreign director had
increased from 39 to 60% (Esser, 2001), yet there was no attempt to establish a relation with
performance. Lublin (2005) found that European corporate boards are internationalizing, with
90 % of the largest companies having a least one foreign director; but the question of the effect
this diversity has on boards and corporate financial performance remains unanswered. Palmer et
al. (n. d.) show that senior executive groups are more diverse than boards of directors, and that
European corporations are more diverse than American and Japanese firms, but again, diversity
is not considered in relation to performance. The current study will do just that.
A central theory in the literature is that national cultural diversity mounts to the highest
levels of geocentric global corporations, but is contained at lower levels by overt policy or
artificial barriers in ethnocentric companies, which prevent foreign nationals from advancing to
the top of corporations. Therefore, a high level of national cultural diversity at the head of a
corporation is likely a strong indicator of geo-centricity within a firm. The literature review
suggests several indicators—taken together—may be used to determine the degree of geocentricity by measuring national cultural diversity at the highest levels of a corporation, amongst
other seemingly important factors. Perlmutter (1969) suggests ―no single yardstick...is sufficient
to establish a firm‘s multi-nationality‖ (p. 18). The methodology described below, therefore,
rather than examining a singular aspect of cultural diversity within a corporation, such as board
of director diversity, attempts to measure all main factors the literature suggests are important
indicators of whether a firm is ethnocentric or geocentric in its prevailing corporate attitudes and
orientation; most factors identified in the literature would measure cultural diversity at the top of
an organization. The current study uses Sullivan‘s (1994) methodology, where he examines
quantitative and qualitative factors to determine a company‘s DOI and relates this to
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performance. His results improved upon previous single-variable research to determine DOI.
His approach supports the notion that a single-item estimator of a construct—rather than a
multiple variable approach—risks distorting the validity of results. Moreover, the use of single
variables does not allow for estimations of reliability, thereby creating further risk of ―biased
data, flawed analysis, and... misleading results‖ (Sullivan, 1994, discussion).iii
The current study therefore examined multiple quantitative and qualitative factors together,
as well as each factor individually, to determine the general extent of geo-centricity in a firm,
and relates this to performance. As it turns out, due to variables that were dropped from the
model after testing, only quantitative measures were used to make what might be considered by
some a qualitative assessment of the degree of geo-centricity of each company studied. Some
have argued that using quantitative measures to determine a qualitative outcome, the degree to
which a firm is ethnocentric or geocentric, is disingenuous. But to be clear, the degree of geocentricity of companies studied is a quantitative and not a qualitative measure based principally
on the amount of national diversity found at the higher levels of a firm. However, accepting the
findings of Hofstede (1994) and Ronen et al. (1985) that qualitative differences exist amongst
people from different cultures and psychic zones, the current study‘s quantitative determination
of the extent to which a firm is geocentric and culturally diverse is a potent link to its qualitative
geocentric corporate orientation, which ensures foreigners with varied national mores and values
are represented at the top. As previously noted, the extent to which a firm opens its leadership
positions, executive suite, and boardroom to foreign nationals—those born and educated, and
with work experience in another country—is indicative of geocentric behaviour and a global
view on the part of a firm. It is accepted that there will be foreign nationals in these positions
that may appear just like home country nationals despite coming from another country, and that
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many likely come from the same psychic zone. Nonetheless, for this reason, executives and
directors from different psychic zones are also considered in determining the degree of geocentricity. Finally, rather than actually measure the mores and values of each director or
executive studied, which is beyond the scope of this paper, the degree of geo-centricity in a firm
is believed to translate directly to diverse more and values, and knowledge domains, of the
leaders, directors, and executives in question based again on the research of Hofstede (1994) and
Ronen et al. (1985), which found there are distinct cultural differences amongst workers from
different nations; this notion is accepted as a foundation of this macro-level research. In theory,
these differences could if well managed lead to competitive advantage.
The current study at last is unique not in its methodology but in its holistic, multivariable
approach to measuring cultural diversity to determine quantitatively the degree to which a
company is geocentric; literature suggests, nonetheless, that the factors to be considered and the
multivariable methodology are both valid. The current research therefore builds on past research
into specific aspects of cultural diversity within corporations, such as board and global senior
executive group cultural diversity (Erhardt et al., 2003), to establish a concrete construct that
measures the extent of cultural diversity in an organization as it relates to financial performance.
Important, the paper also provides a springboard for future research.
SAMPLING PLAN
Forbes publishes the Forbes Global 2000 annually; Forbes data is considered reliable and
is cited frequently by researchers. The Global 2000 is a list of the largest and most powerful
companies in the world ranked in four equally weighted criteria: sales, profits, and asset and
market value. It is accepted by the author that these are reasonable measures of macro global
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performance, particularly recognizing that growth, expected by stockholders, is the ultimate
strategic goal of most companies. The Forbes Global 2000 list for 2010 was used in this study.
Only one year‘s data was used because, as Forbes points out, changes in global ranking tend to
move slowly from year to year, although there are exceptions, such as Toyota‘s dramatic fall in
the 2010 ranking (DeCarlo, 2010).
The list also has a sub-list of 130 Global High Performers, an elite group of companies
with strong fundamentals. This list ranks companies on long-term and short-term sales and
profit growth; return on capital; debt-to-capital; and total return over five years.
A sample of three companies, a top performer, bottom performer, and Global High
Performer, from each of 27 industries in the Forbes Global 2000 ranking was taken. The result
was to be a study sample of approximately 81 global corporations across 27 industries. If there
was difficulty in obtaining data to determine a company‘s place on the ethnocentric-geocentric
continuum, the next company in the ranking, one down for top performers and one up for bottom
performers, was to be studied. In addition, three control companies, Toyota, Nokia, and
Unilever, which were cited in the research as examples of ethnocentric or geocentric companies,
were added.
Although it was assumed sampled corporations would be global because they are amongst
the 2000 largest companies in the world, two of Sullivan (1994) DOI criteria were used to screen
corporations during the analysis. First, a sample corporation needed to have operations
(excluding sales) in at least two psychic zones and, second, subsidiaries or other types of major
operations (such as R&D) in at least five countries. If a company did not meet these criteria, it
was dropped from the sample. This ensured sample companies had global reach that enabled
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them to be geocentric and attempt to leverage the cultural diversity of their global workforce,
should they chose to do so.
Finally, one key aspect of the study was to determine the nationality of directors and
GTMT executives. Secondary sources, Internet websites, were used to do so. Often the place of
birth and/or nationality was available on the company website or other sources, such as
www.nndb.com, www.freebase.com, www.silobreaker.com, and Wikipedia—particularly for
Europeans—which all proved particularly useful at various times. When the information was not
easily obtainable, the full body of available information, given the constraint of time, was used to
make a determination. This principally included their early employment history and education,
as well as the origins of their family name. With this method, there were obviously some errors.
DATA SETS
Two sets of data were collected to support this research. The first set was secondary
financial data collected from Forbes Global 2000 sample companies that measured relative
global performance. Forbes collects their data from: Capital IQ, a Standard & Poor's business;
Interactive Data; LionShares; Thomson Reuters Fundamentals and Worldscope via FactSet
Research Systems; Bloomberg; and Forbes. In addition, Forbes, Standard & Poor‘s, and
Bloomberg where exploited to collect Return on Assets (ROA) and Return on Equity (ROE)
data.
The second set was primary and secondary source data used to determine a company‘s
cultural orientation on the ethnocentric-geocentric continuum. This data was obtained from
corporation websites, official company reports, and direct contact, if required.
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FINANCIAL DATA – DEPENDENT VARIABLES
Five separate dependent financial variables were used during the study. The first was the
Forbes Global 2000 ranking. As mentioned, Forbes uses four financial variables to measure
global competitiveness: sales, profits, and assets and market value. These variables were added
together with equal weight by Forbes to determine a firm‘s Global 2000 ranking. In addition to
this variable, company ROA and ROE were two other dependant variables used to measure
performance. Finally, two total overall performance measures were calculated, as two other
dependent financial performance variables. The first added the relative ranking of each company
amongst the sample group in the three aforementioned performance criteria: Global 2000
ranking, ROA, and ROE. This variable, because it included the Global 2000 measurements
meant the size of the company, as well as ROA and ROE performance, were important in the
outcome to establish a relative numeric ranking amongst the sample. The second variable added
the ROA and ROE real values together. In this case, the size of the company did not matter. See
appendix 2 for the dependent variable financial performance data.
ETHNOCENTRIC-GEOCENTRIC CONTINUUM—INDEPENDENT VARIABLES
General
Combing the literature, eight independent variables were identified and used in the study to
determine a corporations place on the ethnocentric-geocentric scale. Expressed as ratios or
ordinal scores between 0 and 1, the intent was to add these together to determine a corporation‘s
degree of geo-centricity (DOG) score, with 8.0 being geocentric and 0.0 being ethnocentric on
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the continuum. Nunnally (1978) argued that ―validity depends on a rational appeal to an
adequate coverage of important content‖ (As cited by Sullivan, 1994, under research methods).
Therefore details of how independent variables were selected, supported by research, is justified.
Literature suggests the geocentric corporation that uses cultural diversity to create cultural
synergy should be more successful than ethnocentric corporations in the post-American business
environment (Moran et al., 2007; DiStefano et al., 2000; Shirkin et al., 2008; Marquardt et al.,
2001; Schmidt et al., 2007; Maznevski et al., 1997; and Bartlett et al., 2003). It also suggests
there are a number of attributes that indicate whether a company is inherently ethnocentric or
geocentric. The following eight variables expounded upon in the literature review were thought
relevant indicators and used to determine each sample company‘s DOG score.
Foreign Employee/Management Variance Score (FEMVS)
The variance between national cultural diversity within a company‘s workforce compared
to relative national cultural diversity in the firm‘s upper echelons was first examined. This ratio
measured overall firm national diversity compared against the ratio of national diversity at the
top of global companies—on boards and GTMTs—to determine if ethnocentricity or geocentricity permeates to the top of the firm or if there were barriers. In geocentric corporations,
the variances between these two ratios will likely be less than in ethnocentric corporations. First,
the Foreign Employees to Total Employees Quotient (FETEQ) was taken; it is one of three
measures used by the United Nations Conference of Trade and Development to determine the
degree of firm internationalization (Caligiuri et al., 2004, p. 848). Second, the Foreign
Management Quotient (FMQ), the number of foreign directors and GTMT members divided by
the total number of board and GTMT members, was determined. Finally, the FEMVS, which
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measured the variance and determined a score with the equation FEMVS= (–( FETEQ – FMQ)
+ 1), was determined.
Corporate Governance and Leadership
Research suggests foreign representation on boards of directors and amongst global senior
executives is a key indicator of a company‘s cultural philosophical bent, which drives it to be
ethnocentric or culturally multi-centric (Moran et al., 2007; Schneider, 2010; Sirkin et al., 2008;
Bartlett et al., 2003). Admittedly this but one general factor, but when a company is examined
holistically and non-nationals, particularly if they come from different psychic zones, are evident
in vital areas like company leadership, the boardroom, and GTMTs, then something different and
noteworthy is going on, particularly when these companies are compared to homogeneous
counterparts in the same industry. Geo-centricity at the top of a company that emanates from
more nationally homogeneous global subsidiaries, or from global talent that is brought into the
executive suite, is evidence of a profound geocentric mindset among corporate leaders, and a
philosophy and business culture that accepts cultural differences and seeks to leverage them.
ABB‘s former CEO, Percy Barnevik considered the development of the best global leaders from
wherever they came as vital to the company‘s success and sought to leverage their varied
national perspectives to solve tough global business problems (Taylor, 1991). The diverse
national composition of ABB‘s board and GTMT is evidence of this philosophy. This differs
considerably for a company like Honda with no foreign members on its board or GTMT to
leverage. Ethnocentric global corporations are dissimilar. They generally do not believe foreign
nationals can perform as well and have barriers restricting leadership within the corporation and
membership on the board and amongst global senior executives to people from the country
where the corporation is headquartered. Five metrics discussed below were used to measure the
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various aspects of national cultural diversity on boards within GTMTs, and amongst their global
leaders (presidents, CEOs, and chairman).
Board Cultural Diversity Quotients (BCDQs a & b). Quotient a. measures the number of
different nationalities on a board divided by the number of board members. The higher the
quotient, the more likely the company is geocentric and attempting to leverage national cultural
diversity. Having leaders from separate countries tells only part of the diversity tale, however.
If all the executives come from the Anglo psychic zone, for example, the cultural synergy
potential of the group is far less than a company with executives from two or more different
psychic zones. Therefore, quotient b. measures the number of different psychic zones
represented on a board divided by the number board members.
GTMT Cultural Diversity Quotient (GTMT CDQs a & b). Quotient a. measures the number
different nationalities on the GTMT divided by the number of executives in the GTMT. The
higher the quotient, the more likely the company is geocentric and attempting to leverage
national cultural diversity. Quotient b. measures the number of different psychic zones
represented in a GTMT divided by the number of GTMT members.
Nationality of Key Leaders (Chairman, President, CEO) Quotient (NKLQ). Having a
foreign national as chairman, president, or CEO is an indicator that the company is global rather
than ethnocentric. This quotient was determined by dividing the number of foreign nationals in
these key positions by the number of positions considered. Sometimes one executive fills two or
even all three of these positions, so between one and three positions/executives are considered in
this measure.
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Nationality of Regional Headquarters Leader’s Quotient (NRHLQ)
Research suggests that ethnocentric corporations dispatch executives around the world to
be presidents of the company‘s various national and regional subsidiaries—for example, a
Japanese President of Toyota India—rather than one from India (Moran et al, 1993; Schneider,
2010; Zeira, 1976). A company leveraging local talent to lead national subsidiaries may be more
geocentric than one using its own nationals. Therefore, the nationality of leaders of a global
corporation‘s regional headquarters and subsidiaries was a metric.
This quotient measures the
number of national leaders of regional headquarters or subsidiaries that did not come from the
firm‘s home country, divided by the total number of leaders surveyed; a sample of five leaders
was taken for each corporation.
Corporate Culture and Philosophy Score (CCPS)
Research clearly demonstrates the appropriate corporate culture and philosophy are
necessary if a company is to create a geocentric climate open and accepting of new ideas so
cultural diversity is leveraged and synergy potential is effectively brought to fruition (Moran et
al, 2007; Schmidt et al., 2007; Koppel et al, 2008). Based on this idea, formal corporate
literature—annual reports for 2009 and websites—were reviewed to assess the company‘s
ethnocentricity or geo-centricity based on answering the following three questions, which seem
germane based on the literature review:

Is national cultural diversity a strategic goal (0.0 or 0.25)?
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Does the company ignore national cultural diversity, accept cultural differences and seek to
manage them, or specifically seek to integrate and leverage national cultural diversity (0.0,
0.25, 0.50)?

Does the Chairman, President, or CEO speak about leveraging national cultural diversity in
official company documents (0.0 for no; 0.25 for yes)?
The responses will be added up for a score between from 0.0 (ethnocentric) and 1.0 (geocentric).
VALIDATION AND SIGNIFICANCE TESTING
Prior to the research, a pilot test was done to determine the preliminary DOG scores of
Toyota, presumed to be more ethnocentric like many Japanese companies, and Unilever and
Nokia, both widely acknowledged as a geocentric corporations. The results indicated that
Toyota had a DOG score of 1.22 whilst Unilever‘s and Nokia‘s were 4.04 and 4.75, respectively
(appendix 2). This showed that the DOG score may be a good indicator of a company‘s placed
on the ethnocentric-geocentric continuum. Nonetheless, statistical factor validity by analyses of
variance, total-item correlation tests, and other appropriate factor testing was conducted to
determine the statistical significance of each variable and validate the DOG model. Variables
were not retained if they failed various validity tests. As will be discussed in the findings, this
resulted in a DOG model that had six rather than eight variables that explained one factor—
national cultural diversity at the higher levels of a corporation.
It was hoped this study would demonstrate that several variables, each with a unit weight
of one rather than differential weighting, could be combined into a one-dimensional construct
and be reliably used to measure the place of a corporation on the ethnocentric-geocentric
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continuum, and further show a relation between the extent of geo-centricity and financial
performance (Sullivan, 1994).
The detailed testing that was done on the model and variables, and the statistical
significance of the relation between x and y variables is discussed in the findings.
METHODOLOGY AND DATA ANALYSE
X and y variables from the two data sets were finally analyzed to determine association
between the DOG score and each dependent financial variable using the Pearson linear
correlation and polynomial non-linear relations. After this, each independent variable used to
calculate the DOG score was compared independently with each dependent financial variable
using the Pearson linear and polynomial non-linear relations correlation methods.
FINDINGS AND DISCUSSION
GENERAL
―Our workforce spans approximately 25 countries and includes some 41,000 employees working in more than 100 operations
worldwide. This represents a rich assortment of countries and cultures. We believe that the wide-ranging experiences and
perspectives of our varied employees is ... necessity for our success... We want to continue to deliver value to...shareholders as a
global company and to do this we need the broad range of ideas and experiences...this means harnessing the unique differences
of each BHP Billiton individual around the globe. We strive to provide opportunities to all our people who have the talent,
passion, integrity and desire to work within an international organisation that values...them.‖ (BHP Billiton, n. d.)
BHP Billiton with its ―rich assortment of countries and cultures‖ had the sixth highest
DOG score in the study and their message above reflects the thinking of a geocentric
corporation, one that seeks differences to create value. At least half their board and over half of
their GTMT were non-Australians. The literature suggests the number of different nationalities
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represented on a company‘s board and amongst its executives is a strong indicator of how global
and culturally diverse it really is (Kets De Vries, 2006; Perlmutter, 1969). A central idea in the
literature is that national cultural diversity ascends to the highest levels of geocentric global
corporations, but is enclosed in lower levels in ethnocentric companies; this prevents foreign
nationals from advancing to the highest level of these corporations. Therefore, a high level of
national cultural diversity at the head of a corporation is likely a strong indicator of geocentricity and more cultural synergy potential not available in parochial, ethnocentric ones. The
author posited that in today‘s culturally complex global business environment, national cultural
diversity in governance and global executive bodies of geocentric corporations provides a
competitive advantage resulting in better financial performance over ethnocentric corporations
with homogeneous boards and GTMTs. The findings and a discussion of the research into this
hypothesis follows.
THE SAMPLE
―Sorry, your search for diversity did not find any results. No documents were found containing "diversity".‖ —Swire Pacific
Website search conducted by the author (Swire Pacific, n. d.)
Only forty-six of 84 companies identified to be sampled were studied. These companies
were all listed in the top 1000 companies in the Forbes Global 2000 ranking. The author found,
for companies listed in the lower 1000 of the Forbes Global 2000 ranking, there was often
insufficient company information available on their websites to determine their DOG score; this
was particularly true of smaller Asian companies. As well, many corporations in the lower 1000
ranking, for which sufficient data could be obtained, were not was ‗global‘ as one would expect;
after a preliminary examination, most of these companies did not meet the aforementioned
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screening criteria of having operations in more than two psychic zones and five countries. After
wasting time trying to analyze several of these firms, it was decided to limit the study to those
companies ranked in the top 1000 firms.
Swire Pacific, ranked 672nd in the Forbes Global 2000 list, was one of those firms. There
was sufficient data on its website to determine where it stood on the ethnocentric-geocentric
continuum, but the findings were not encouraging. It is ostensibly a global company; however,
the word diversity is not in its lexicon. It is the antithesis of companies like BHP Billiton.
Nonetheless, there were also several firms in the top 1000, like Tim Horton‘s and Canadian
National of Canada, and others from Asia, that had operations in very few countries, and quite
often in only one psychic zone. Accordingly, several other companies in the top 1000 were also
dropped from the study due to insufficient information available to complete the analysis or
because they did not meet the aforementioned selection criteria. Therefore, although the author
previously contended that Sullivan (1994) and others attempts to determine the DOI of firms
might today be moot because all large firms are global, this is not the case and DOI measures are
still relevant. A complete record of the companies identified to be sampled, listing those
excluded and studied, is at appendix 3, Figure 3.1.
Examining the sample demographics of the 46 firms studied, seventeen different countries
were represented (Figure 3.2). There were 19 North American, 19 European, five Asian, one
South American, one Middle Eastern, and one South Pacific firm studied (Figure 3.3). Ten of 14
psychic zones were represented. They included six pan-country zones, the Far East, Nordic,
Germanic, Anglo, Latin European, and Latin America, as well as four independent zones, Brazil,
Israel, India, and Japan (Figure 3.3). No Near East, Arab, African, or Eastern European firms
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where studied, although all these psychic zones were represented by other companies in the
Forbes 2000 Global ranking.
The national populations of firms studied ranged from 1,342 million for China to 5.4
million for Finland. On average, sample companies had 195,345 employees; 51 %, or 99,415, on
average were foreign workers. The company with the fewest employees was Canada‘s Research
in Motion, with 12,000. The largest was Wal-Mart, with 2.1 million employees concentrated in
only 15 countries. The next largest company was United Parcel Service with 408,000
employees. When Walmart is excluded as an ‗outlier‘, the average number of employees was
153,020, with 86,068, or 56 %, being foreign workers. Due to difficulty in obtaining data, only
twenty-four of 27 Industries were sampled. The industry sample plan compared to those
industries studied is at Figure 3.4.
FINANCIAL PERFORMANCE – DEPENDENT VARIABLES
―I always find it very interesting when someone asks me, "What is the business case for diversity?" Successful companies are
ones that satisfy their customer's wants, needs and desires. The data clearly show that if your customer base is global and diverse
and you reflect their perspectives and their knowledge, you're going to have a better chance for success. The closer you get to
their emotional and intellectual roots, the better you're going to communicate with them. So what's the business case for
diversity? ...the only way to satisfy diverse customers is to include their perspectives inside the company.‖ —Alan Mulally, Ford
Motor Company (Ford, n. d.)
Global 2000 Rankings
―I want Infosys to be a place where people of different genders, nationalities, races and religious beliefs work together in an
environment of intense competition but utmost harmony, courtesy and dignity to add more and more value to our customers day
after day.‖ —Narayana Murthy, Infosys Technologies (Wikipedia)
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General. Five financial dependent variables, as described earlier, were used during the
study and each was compared to the DOG scores of sampled firms. The first financial variable
was the company‘s Global 2000 Ranking. The number one company, JP Morgan, was studied.
Infosys from India was the lowest ranked company in the study, at 807th. The Global 2000
ranking of companies in the sample is at Figure 3.5. As mentioned, sample companies ranged
significantly in size, when comparing the four variables—sales, profit, and asset and market
value—used to determine the Forbes 2000 ranking.
Firm Sales. Firm sales ranged between $3.18 at Swire Pacific to $408.21 billion at Walmart. The median and mean sales were $51 and $74 billion, respectively. Goldman and Sachs
was near the median and Procter and Gamble was near the mean (Figure 3.6).
Profit. Profits ranged from a loss of $4.49 billion for Toyota to a profit of $19.8 billion for
Exxon. The median and mean profits were $3.4 and $5.3 billion respectively. Zurich Financial
Group and Rolls Royce were near the median and America Movil was near the mean (Figure
3.7).
Asset Value. Asset values ranged from $4.34 billion at India‘s Infosys Technologies to
$2952.22 billion at France‘s BNP Paribus. The median was $68.8 while the mean was $263.1
billion. Tesco and BASF were near the median while GDF Suez was near the mean (Figure 3.8).
Market Value. Market values ranged from $4.75 billion at Germany‘s Hochtef to
$308.77 billion at Exxon/Mobile. The median was $57.3 and the mean was $84.1 billion.
United Parcel Service was near the median and Goldman and Sachs was near the mean (Figure
3.9).
Because of such a wide variance in the size of companies studied, the author decided to
analyse, when determining the relation between DOG score and financial performance, different
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segments of the total population as follows: the total sample, and the top 500, 250, and 100
companies. This was done to reveal if company size, clearly influential in the Forbes ranking,
also affects how national cultural diversity represented by the DOG score relates to performance.
Return on Assets (ROA)
―Our business accomplishments are a direct result of our diverse employees around the globe—our differences are our strength,
and we will continue to hire and retain the best talent from an increasingly global and diverse labour pool. We believe this... will
ultimately advance Intel's global leadership position...Our strategy is focused on hiring and retaining top talent to ensure
continuous improvement toward our aggressive goal of industry leadership...By doing better with each individual, we do better
as a company. And in the end, we will make our already great company an even better one.‖ (Intel, n. d.)
The second dependent variable considered was ROA. ROA ranged from a low of .31% for
BNP Paribus to a high of 32.37% for Sweden‘s Hennes & Mauritz (H&M). The best performing
companies based on ROA were H&M, Research in Motion, Texas Instruments, Infosystem
Technologies, and Intel, quoted above for their global diversity strategy meant to ameliorate their
global performance. These firms were principally in high tech sectors, the exception being the
retail company H&M. The worst corporations in this financial measure were BNP Paribus,
Credit Swiss, JP Morgan, Allianz SE, and Zurich Financial, all in financial and insurance sectors.
Based on this, it is clear industry differences in ROA can impact overall financial results and
therefore the relation between DOG score and financial performance. Perhaps because of this,
the author found, as will discussed, no relation between ROA and DOG score. Future studies
can correct for these industry differences during the analysis or focus on one or several related
industries at a time. The median ROA was 6.9% and the mean was 7.4%. Hewlett-Packard was
near the median and Teva Pharmaceutical Industries near the mean (Figure 3.10).
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Return on Equity (ROE)
By the time firms adopt global strategies, the impact of cultural diversity becomes extremely important. Global firms must
understand cultural dynamics to formulate their business strategies, to locate [facilities] worldwide, and... design and market
culturally appropriate products...while managing cross-cultural interaction...from the most senior executives to...the shop floor.‖
(Alder, 2002)
Alder (2002) asserts cultural diversity is extremely important to the truly global
corporations (p. 135). But how important is it? The third dependent variable considered was
ROE, which ranged from -1.58% for Ford and to 76.92% for IBM. IBM‘s ROE was 13% higher
than the next highest firm, Boeing, which was found to be a relatively ethnocentric company. It
is noteworthy that Alder (2002) also states multiculturalism is less important for multinational
corporations than integrated global companies; is Boeing a multinational company rather than a
global firm, and does this help explain its strong financial performance even though, as will be
shown, it is relatively ethnocentric? The structure of the companies was not considered in this
study, and perhaps should be in the future. H&M, British American Tobacco, and UPS, a real
mix of industries, rounded up the top five firms with the best ROE. The worst performing
companies, besides Ford, were Rolls-Royce Group, ethnocentric Toyota, geocentric Nokia, and
GDF Suez, again a mix of industries and psychic zones (Figure 3.11). The median ROE was
18.4 % and the mean was 21.1 %; Credit Swiss was near the median and Hewlett-Packard near
the mean. Significant, Toyota whose DOG score ranked it 40 of 46 and Nokia, ranked 5 of 46,
both had a low ROE. Clearly DOG score is not a panacea, but with these exceptions to the
theory, the questioned of a relation between and financial performance remained.
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Overall Performance Measurements
―Ford is a global business. We have a lot of talented people working together, and our performance will be determined
by the breadth and the depth of our inclusion of all of our people. The more we embrace our differences within
Ford...the better we can deliver what the customers want and the more successful Ford will be.‖
—Alan Mulally,
Ford (Ford, n. d.)
As previously described, two overall performance measures were calculated. The first
considered the size of the firm as well as financial performance by adding the relative ranking of
each company in the sample group in the three aforementioned performance criteria: Global
2000 ranking, ROA, and ROE. The top performing companies were IBM, Wal-Mart, BHP
Billiton, Exxon Mobil, and Petrobras-Petroleo Brasil. The bottom five performers were Nokia,
Delhaize Group, Rolls-Royce Group, Hochtef, and Toyota.
The second variable added the ROA and ROE real values together, thereby grouping the
two variables to consider broader financial performance. In this case, the size of the company
did not matter. Here, the top five performers were IBM, H&M, Boeing, Research in Motion, and
McDonalds. The worst performers were BNP Paribus, JP Morgan, Toyota, Rolls-Royce Group,
and Ford, quoted above. A summary of the relative ranking of all five independent financial
variables is at figure 3.12.
GLOBAL / NATIONAL CULTURAL DIVERSITY MEASUREMENTS – INDEPENDENT VARIABLES
―No company can afford not to move forward. It may be at the top of the heap today but at the bottom of the heap tomorrow, if it
doesn't.‖ —James Cash Penny (BrainyQuote, n. d.)
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General Findings
―Creating a diverse, inclusive environment has been an ongoing journey of continuous action for many years. It has been a
journey guided by deeply held values. Today, our diversity vision is one of global proportions. One that requires courageous,
bold actions from many people throughout the world.‖ (Hewlett-Packard, n. d.)
James Cash Penny, founder of J.C. Penny, said companies must move forward. But
today, how many multinational corporations leverage the global talent available to them to
remain ―at the top of the heap?‖ How many are stuck in ethnocentricity? How many are
―moving forward‖ to become geocentric? Examining national cultural diversity, the author
found a wide variety of global companies doing business in as few as three and as many as 14
psychic zones, the mean being 10.27. The corporations operated on average in 56 countries,
with a high of approximately 170 and a low of five. All companies examined can be considered
global corporations, from Research and Motion with only 12,000 employees, 3424 of who were
employed outside Canada and with operations excluding sales in 14 countries, to IBM with
almost 400,000 employees, approximately 284,000 outside the U.S. and with operations in over
170 countries. Nonetheless, the degree to which they are global varied, as did the degree to
which they were geocentric. In some cases the differences were considerable. To determine the
extent of national diversity of each of these firms and find their place on the ethnocentricgeocentric continuum, the following dependant variables were used to calculate DOG scores.
Two of these variables, as outlined below, were dropped as a result of model testing.
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Foreign Employee/Management Variance Score (FEMVS)
―A global company must reflect the diversity of the world it serves. Infosys' employees represent the widest possible variety of
nationalities, cultures…We recruit employees from global talent pools and provide paths for professional growth to all members
of the society. Within such a diverse company, people bring to the workplace contrasting opinions and worldviews. As these
people interact, they develop new ideas, methods and perspectives. Infosys recognizes and promotes this power of diversity to
drive innovation…Today, we have employees from 83 countries.‖ (Infosys)
General. As planned, two quotients were used to calculate the FEMVS and determine if
appropriate proportions of worldwide employees, managers, and business leaders, arise to the
GTMT or are sought as board directors. This measure determines if the boards and GTMTs of a
firm reflects the diversity of their global employees and management. The first factor considered
was the number of foreign employees compared to total employees.
Foreign Employees to Total Employees Quotient (FETEQ). As previously discussed,
the ratio of foreign employees to total employees is sometimes used to determine the degree of
firm internationalization (Caligiuri et al., 2004, p. 848). European firms and those from small
countries stood out as being the most internationalized, based on this measure, with ABB, H&M,
Compass Group, Delhaize Group, Hochtef, and Unilever rounding out the top six. This is not
surprising—companies from smaller countries internationalize their workforce out of necessity
whereas corporations from larger countries have plenty of nationally homogenous domestic
talent to choose from.
Ninety-four % of employees from ABB, ranked first in this measure, were based outside
Switzerland. Hewlett-Packard and IBM, the top U.S. firms at nine and 10, had 78 and 71 %
foreign based employees, respectively. Other countries in the study were far less globalized.
Brazil‘s Petrobras-Petroleo, the least international by this measure, had only 10 % of its
employees based outside the country. Other countries with less than twenty % of their workforce
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outside their borders included India‘s Infosys, United Parcel Services, Boeing, JP Morgan, and
Frances JDF Suez. The mean FETEQ for the study group was 56 %. The FETEQs for each firm
are at Figure 3.13; companies are ordered by the preliminary—eight variables model—DOG
scores.
Foreign Management Quotient (FMQ ). The second measure used to determine the
FEMVS was FMQ. This quotient was the sum of foreign national board and GTMT members
divided by the total number of board and GTMT members. It measured the ratio of national
cultural diversity at the top of the global corporation. Figure 3.14 shows the FMQ distribution of
firms, ordered by preliminary DOG scores. The most diverse firm by far was ABB, with 83 %
of top executives and board members being foreign nationals. Three other Swiss firms were in
the top five, including Zurich Financial Services Groups, Nestlé, and Credit Swiss Group. There
were no US firms in the top 10, although Procter & Gamble was ranked 11th, at 36 %. Fourteen
companies, or approximately 30 % of companies studied, had no more than 10 % foreigners
among directors and top executives; five of these companies had no foreign nationals on their
board or among their GTMT. These include Honda, JP Morgan, Petrobras-Petroleo Brasil,
Texas Instruments, and Boeing; all European firms studied had at least one foreign national on
their board or as part of its GTMT. The mean for the study group was 22 %, indicating that 22
% of directors and GTMT executives in the average global corporation sampled were foreign
nationals. Comparisons of FMQ distribution by country, continent, and psychic zone, Figure
3.15, indicate: Swiss firms have the largest proportion of foreign management; European firms
have the largest range and tend to have more foreign management than American companies; the
majority of US firms fall below the mean for the study group; and Asian firms have the least
number of foreign managers and directors.
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FEMVS Results. The two aforementioned ratios, measuring overall firm national
diversity and the ratio of national diversity at the top of global companies, were compared as an
indicator to determine whether or not a firm was ethnocentric or geocentric. This was done by
examining globally diverse companies with an abundance of foreign employees to determine if
they also had diverse boards and GTMTs, or whether there were barriers preventing foreigners
from advancing within the company. Kets de Vries (2006) contends that an indicator of a truly
global corporation is the number of nationalities represented on its board. And Schneider (2010)
argues that geocentric corporations can be measured by the number of foreign nationals that
began their careers in foreign subsidiaries and subsequently advanced to the global headquarters
senior executive ranks. In theory, in an ethnocentric corporation, the variances between these
two ratios will be less than in geocentric corporations. A variance score of one, using the
aforementioned equation, indicates a corporation where the national diversity of boards and
GTMTs is directly proportional to the national diversity of its global workforce. The FEMVS
are indicated at Figure 3.16. Two companies, Swiss Credit and the French firm GDF Suez, had
a higher ratio of foreign directors and executives to foreign based employees. Nestlé had a
FEMVS of 1.0 with a proportional ratio of 1:1, foreign leaders to foreign employees. BHP
Billiton and Research in Motion rounded out the top five as companies whose management and
board national diversity most closely reflected their global employee composition. The mean for
the study group was .65:1 foreign leaders to foreign employees. The best US companies in this
measure were United Postal Services ranked nine and Wal-Mart at 10, with ratios of .88:1 and
.84:1, respectively. The three most ethnocentric firms under this single variable, surprisingly,
were all European firms; they were Sweden‘s H&M, the UK‘s Compass Group, and Germany‘s
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Hochtef, followed by IBM, McDonalds‘, and Honda. The FEMVS was the first variable used to
determine a company‘s preliminary DOG score.
Board Cultural Diversity Quotient A (BCDQa) (National Cultural Diversity)
"It strikes me as foreign to not have foreigners on a major U.S. corporation's board."
—Paul Anderson, Duke Energy Corp
(Lublin, 2005)
Paul Anderson would be happy to know that foreign membership on boards continue to
increase, but perhaps be disappointed that U.S. companies still lag far behind their European
counterparts. He would be further distressed to find many American global companies still do
not have even one foreign director. In examining this variable, there was a mean of 12.96 board
members per firm, 2.39—or 18 %—of who were foreigners. Significantly, this is eight % more
than Esser (2001) found in his 1998 research, which shows a continued trend to internationalize
boards. Nine of ten companies with the most foreign members on their boards were European
companies. Seventy-four % of sampled companies had at least one foreign board member, up
13% from Esser`s (2001) findings. IBM was the top American company, ranked 12th.
BQDQa measures the national diversity of boards of directors. Results are shown at
figures 3.17 and 3.18 and again, companies are ordered by preliminary DOG score rankings.
European companies tended to have more foreigners on their boards; ABB, Zurich Financial
Services Group, Credit Swiss Group, Nokia, and an exception, Australia‘s BHP Billiton, had the
most nationally diverse boards. Eight-eight % of ABB‘s board were foreign nationals, while
54% of BHP Billiton‘s board came from outside Australia. Twelve companies, including six
American and all three Japanese firms, had no foreign nationals on their boards. North
American companies had an average of 1.34 foreign board members, constituting on average 11
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% of their boards; European companies had on average 3.92 foreign board members, constituting
33 % of their boards; and Asian firms had a mean of .4 foreign board members, constituting on
average only 3 % of their boards. This reflects Esser`s (2001) findings that European and
American boards are more diverse than Asian boards, and confirms Hanson`s (2007) assertion
that American boards tend not reflect the global nature of their business. European boards
standout as being significantly more diverse than their American counterparts, thereby having
more cultural synergy potential due to different national perspectives, but also possibly facing
much larger challenges that come with diversity in creating cohesion, and realizing the synergy
potential that exists. It is reasonable to ask why there is such a difference. Do European boards
internationalize in an overt attempt to diversify because it is good for business, or is it done out
of necessity due to more limited talent pools in smaller countries, or even due to ease given the
close proximity of European counties to one another? The next section examines the extent to
which firms that diversify their boards do so by inviting board members from different psychic
zones, thereby creating still more cultural synergy potential.
Board Cultural Diversity Quotient B (BCDQb) (Psychic Zone Representation)
―These days, many U.S. companies are seeking board expertise on China, as they try to tap that huge market. But not all insist on
giving seats to Chinese nationals who live in China. Some are willing to settle for Chinese expatriates in the U.S. or executives of
any nationality who have worked in China. Yet they still often come up empty-handed.‖ (Lublin, 2005)
Palmer et al. (n. d.) found that European boards that diversified often did so with
culturally homogeneous neighbours, as might be the case if a Swedish board had members from
Norway and Finland. Global corporations should seek to find the most qualified directors from
around the globe, but also find members who offer different cultural insight into the various
markets where they operate. This is not always easy and there is now a scramble as many
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American corporations try to tap a ―small [but growing] pool‖ of foreign candidates (Lublin,
2005). BCDQb measured the percentage of different physic zones represented on a board. On
average, 2.11 psychic zones where represented on boards, which is significant given that on
average there were only 2.39 foreign board members. This means almost one in every two
foreign board members comes from a different psychic zone than that of the parent country,
although this figure is heavily influenced by European rather than American boards. Some
companies are making important strides at ensuring their boards better reflect their global
workforce and operations. For example, ABB and Nokia each had five psychic zones
represented on their boards, and several others, including the American firm Hewett Packard,
had four (Figure 3.17, 3.18). Although European companies ABB, Nokia, and British American
Tobacco held the top three spots, two U.S. firms—Hewlett-Packard and Procter and Gamble—
were fourth and fifth. Japanese and U.S. firms, with the odd European company, had the lowest
psychic zone representation. Eleven companies, or 23 %, had no foreign board members and
thus only one psychic zone represented on their boards. Eighteen companies, including four
European, three Asian, and 11 American firms had only one psychic zone represented on their
board—eight of which had one or two foreign members from the same psychic zone.
Consequently, 39% of firms were culturally homogeneous from a psychic zone perspective.
Several companies had high BDCQa, such as Zurich Financial Group and BHP Billiton, but had
BDCQb numbers close to the mean, indicating that while they had many foreign nationals on
their boards, they normally came from the same psychic zones. Finally, North American,
European, and Asian firms had an average of 1.68, 2.79 and 1.4 psychic zones represented on
their boards, respectively.
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GTMT Cultural Diversity Quotient A (GTMT CDQ a) (National Cultural Diversity)
―We strive to reap the rewards of diversity, drawing from the range of perspectives and cultures represented throughout our
Group. After all, synthesizing different views is the principal means by which we will expand and improve...We value our diverse,
talented workforce... and support them so that they can contribute to their full potential.‖ (Zurich Financial, n. d.)
The GTMT CDQs were examined next. Zurich Financial, mentioned above, ensures
diverse perspectives are inherent not only in their workforce but also in their GTMT. It was one
of the strongest companies in this measure. How did other companies fair? There was a mean
of 15.9 GTMT members per sampled company. These personnel were listed as global
executives on the company websites, although some had responsibilities that were also regional.
There was an average of 3.26 foreigners on GTMTs, almost one more than on boards of
directors, which reflects previous study finding that GTMTs were generally more diverse than
boards (Palmer et al., n. d.). American companies did better here, with five US and four Swiss
companies among the top ten regarding the total number of foreigners that were on their GTMTs.
There were four American firms, however, among 13, who had no foreigners on their GTMTs.
GTMT CDQa measured the proportion of foreign nationals to nationals on GTMTs. Considering
proportional representation rather than actual numbers, again European companies dominated,
holding eight of the top ten positions. Eighty-nine % of Nestlé‘s GTMT were foreign nationals;
ABB, Zurich Financial Group, BHP Billiton, and Credit Swiss Group had 80, 75, 71, and 61 %
foreign nationals, respectively (Figures 3.19, 3.20). The top American firm was Procter &
Gamble and Hewlett-Packard at 41 and 33%, respectively. At first glance, there appeared to be a
strong correlation between GTMT CDQa and a firm‘s DOG score.
As mentioned, 13 companies from North America, Europe, Latin America, and the Far
East had no foreign nationals on their GTMTs (Figure 3.20). This included well known
companies like Honda, Boeing, UPS, Texas Instruments, JP Morgan, and Tesco. Ethnocentric
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companies like these reflect the idea that the complexity of global business can by managed by
proxy—by middle management, locals, and consultants (Carpenter et al., 2001, p. 278).
Nevertheless, American, European, and Asian firms had an average of 3.53, 3.60, and 1.8 foreign
GTMT members, respectively. This represented 16, 31, and 4 % of their total GTMTs.
GTMT Cultural Diversity Quotient B (GTMT CDQb) (Psychic Zone Representation)
―Our commitment to diversity is set right at the top of our business with our Global Diversity Board, chaired by Chief Executive
Officer Paul Polman. We work to embed diversity firmly into our day-to-day business decisions...We have 20 different
nationalities among our top-level group of leaders worldwide. Our Global Diversity Board comprises leaders from all business
functions and is chaired by our CEO, driving our efforts in this area.‖ (Unilever, n. d.)
GTMT CDQb divides the number of psychic zones represented by the number of GTMT
members to give a quotient of psychic zone representation on a GTMT. On average, 2.3 psychic
zones were represented on GTMTs, slightly higher than the 2.11 average for boards. These
numbers, however, can be deceptive. Procter & Gamble, for example, had 17 foreign GTMT
members representing 8.5 psychic zones, although because they had 42 GTMT members, their
GTMT CDQb was not as high as some other firms; nonetheless, these cultural knowledge
domains were available to the company. In hindsight, therefore, it might have been better to
score based on the number of psychic zones represented per company rather than use a quotient
of proportional representation. Seven other companies had four or five psychic zones
represented on their GTMTs. In pure numbers of psychic zones represented, three of the top ten
firms including the top two—Procter & Gamble and Hewlett Packard—where American and the
rest were European, with the exception of the Australian firm BHP. Yet twelve companies, a
real mix from the U.S., Japan, Europe and a number of other regions, had no foreign members on
their GTMTs, indicating quite an ethnocentric bent for these global companies. Another seven
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firms had between one to four foreign GTMT members, all coming for the same psychic zones.
There were therefore a total of 19 firms without one executive from a different psychic zone,
including seven American, eight European, one Chinese, one Japanese, one Brazilian, and one
Mexican company. Considering the proportional representation of GTMT CDQb, with only
seven GTMT members, three of which were foreign nationals from different psychic zones,
Delhaize Group had the highest GTMT CDQ at .43. They were followed by the well know
geocentric companies ABB (.4), Unilever (.4)—quoted above as committed to diversity—Nestlé
(.35), Hewlett-Packard (.33), and E.ON (.33%) (Figure 3.19, 3.20).
These companies all had
solid proportional foreign national representation on their GTMTs. Texas Instruments had the
lowest GTMT CDQb, followed by Honda, Infosys, GDF Suez, and JP Morgan.
Nationality of Key Leaders Quotient (NKLQ)
―P&G leaders at the Vice President level and above come from 35 different countries, with more than half of them originating
from outside the United States...We create opportunities for careers at P&G, not just jobs. One way we do this is by managing
P&G talent globally—starting at mid-levels of management and higher—to enable career development and growth across
businesses and geographies. We identify talent early and groom people through a series of varied and enriching assignments that
will prepare them for future roles.‖ (Proctor & Gamble, 2009, p. 19)
This variable examined foreign nationals that were chairman, presidents, or CEOs of firms.
Often one person filled two or even all three of these functions. The theory previously discussed
is that only geocentric global corporation consider having a foreign national fill these roles.
Surprisingly, 12 companies—26 % of companies surveyed—had at least one foreign national in
one of these positions. Of the top 10 of these companies, all but one had a top 10 DOG score,
evidence that having foreign nationals in these key positions is a strong indicator of a high DOG
score and geo-centricity (Figure 3.21). Carpenter et al. (2001) found that only four % of CEOs
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in American firms were foreign nationals. Amongst the 17 global American companies studied,
two, or 12%, had at least one foreign chairman, CEO or president; this likely reflects a similar
result to Carpenter‘s from ten years ago. Eight of 19 European firms, or 42 %, had a foreigner
filling one of these three positions, which is dramatically higher than the U.S. companies
sampled. Three companies, ABB, Nestlé, and the American company Monsanto, all had NKLQs
of 1.0, meaning foreign nationals filled all the aforementioned top positions. In Monsanto,
however, one person filled all three positions—he was from the UK and therefore from the same
psychic zone. ABB had a German and an American filling the top positions, representing two
psychic zones. Nestlé also had two foreign nationals at the top of the corporation, one from
Belgium and one from Austria. They represented two psychic zones, but both of these—German
and French—are part of the tri-national character of Switzerland, in addition to Italian. Nokia,
Hewlett-Packard, Unilever, Credit Swiss Group, and Tesco all had at least one top company
official from a different psychic zone. NKLQ was another variable used to determine the DOG
score of a company; it appeared initially to have a strong correlation to the overall DOG score.
Nationality of Regional Headquarters Leader’s Quotient (NRHLQ)
―Our employer proposition, known as ‗Bring Your Difference‘, was launched to existing employees in 2009 before being used as
part of our recruitment campaigns. Our employees come from very diverse cultures and backgrounds, and we benefit from the
breadth of new ideas and experiences they bring. We aim to have a 70/30 ratio of local to expatriate senior management team
members at business unit level, not as a ‗quota‘ but because we place a high value on local experience and diversity in our
workplace.‖ (British American Tobacco, 2009)
The NRHLQ also contributed to determining the overall DOG score. Seeking diversity at
the business or subsidiary level, three of five British American Tobacco foreign subsidiary
leaders sampled, 60 %, were foreign nationals. But having a high NRHLQ is not necessarily
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indicative of a geocentric company and might suggest a polycentric organization, unless leaders
in subsidiaries are permitted to advance to higher levels within the corporation.
Ranked 7th in DOG score, British American Tobacco does seem to nurture their global
talent and allow it to ascend to higher levels of the company. Fourteen firms with varying DOG
scores had NRHLQs of 1.0, indicating that all their subsidiaries sampled were led by nationals
from where the subsidiary was located; on average three of five subsidiaries were lead by
nationals from where the subsidiary was located. Nonetheless, there were five firms that had no
foreign nationals leading their sampled subsidiaries, including Ford, BNP Paribus, and Honda.
This clearly indicated strong ethnocentricity, based on the subsidiary/regional headquarters
sample taken. Further, companies with the ten lowest NRHLQs all had DOG scores in the
bottom 50 % of companies ranked (Figure 3.22).
Corporate Culture and Philosophy Score (CCPS)
―What you do speaks so loud that I can‘t hear what you say.‖—Ralph Waldo Emerson (Goodreads, n. d.)
Four companies, three of which were American, were given a top CCPS of 1.0 based on
the subjective score awarded for whether or not the corporate leadership, strategy, and culture
and philosophy ignored national cultural diversity and differences, tolerated it as an obligation,
or integrated it system wide, seeking to leverage differences to improve global performance. The
data obtained to measure CCPS were from secondary sources, principally literature found on
company websites. Interesting, of these four companies—Intel, Goldman and Sachs, BNP
Paribas, and Ford—not one had a DOG score that placed them in the top ten preliminary DOG
scores, and Ford was in the bottom half of companies ranked (Figure 3.23). To borrow the
words of Emerson, what these companies do speaks so loud we cannot hear what they say;
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although they have the right geocentric business culture and philosophy on paper, they remain
more ethnocentric than multicultural at the pinnacle of their organizations. Why is there this
disconnect? In some of these companies, although they stated they sought national cultural
diversity, their focus seemed more on domestic rather than national cultural diversity. It may be,
as well, that recent MBAs graduates are writing the latest policies reflecting the stated academic
benefits of global diversity without real commitment from leaders. There did appear to be in
many corporations an ethnocentric ―glass ceiling‖ that prevented foreign nationals from
advancing through the ranks of the company; their national cultural diversity philosophy seemed
only to extend to the workforce and not the boardroom or GTMT.
To illustrate this point, both Ford and Intel had a CCPS score of 1.0, yet neither company
had a foreign board member and Ford had no foreign GTMT members. Pfizer had abundant
domestic diversity amongst its executives and directors, but had a below average DOG score,
ranked at 33, with no foreign board and only two foreign GTMT members. AT&T, which
earned DiversityInc's 2009 number two spot on their Top 50 Companies for Diversity list, is an
interesting case that may illustrate pressures that conspire against national cultural diversity;
although the company would have likely had a top 15 DOG score rating, it seems to attempt to
conceal the number of actual global employees it has—and their documentation is U.S. centric,
‗playing down‘ their relatively diverse global management (AT&T, n. d.). It was subsequently
one of the largest companies to be eliminated from the study due to insufficient data. With
growing US unemployment and the economies of emerging nations taking off, it may be there is
pressure for national homogeneity in companies like AT&T to keep their workforce at home and
Americans employed. Is Adler‘s (2002) prophecy coming true; are companies from countries
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normally considered victims now being ―viewed as villains, stealing capital and jobs
and...creating inequities by destroying wealth in developed economies‖ (p. 5)?
DiversityInc ranked IBM number one for global diversity in 2010, but the IBM DOG score
was below both the mean and medium for the sample, meaning foreign nationals are not well
represented in the higher levels of the corporation (IBM, n. d.); they are perhaps an example of a
polycentric company. Finally, Boeing had a low CCPS at 0.25, and acted accordingly, having no
foreign directors, executives, or leaders. Yet with a low ratio of foreign to domestic employees,
it cannot be stated unequivocally that Boeing is ethnocentric; it can be said, however, that
companies like Boeing may not be taking full advantage of accessible global talent. Comparing
Boeing to H&M, however, is enlightening. Like Boeing, H&M‘s CCPS is .25, not very
geocentric. Like Boeing, they act accordingly. Nonetheless, H&M has a very large global
workforce yet no foreign board members and only one—or possibly two—foreign GTMT
members, from the same psychic zone; this company seems to be very ethnocentric. The
ethnocentric glass ceiling exists.
The mean CCPS score for the study group was .45. Six companies received a score of
zero, including Japan‘s Canon, China‘s Swire Pacific, Hochtef from Germany, Canada‘s
Research in Motion, Mexico‘s America Movil, and Israel‘s Teva Pharmaceuticals Industry—all
these firms were ranked in the bottom quarter of the preliminary DOG scores, partially based on
these low scores. All companies with top 10 DOG scores, except ABB (ranked first) and Nestlé
(ranked second), had CCPSs of .75 or 1.0; these were strong scores.
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DOG SCORE AND THE ETHNOCENTRIC-GEOCENTRIC CONTINUUM – TESTING THE MODEL
―Any major American company with significant sales abroad needs at least one individual on the board who represents the
views of the rest of the world."
—Paul Anderson, Duke Energy Corp (Lublin, 2005)
The eight independent variables just discussed in detail were identified during the research
as potentially indicative of a firm‘s place of the ethnocentric-geocentric continuum. These
included the Foreign Employee to Management Variance Score (FEMVS), Board Cultural
Diversity Quotients a. and b. (BCDQa and b), GTMT Cultural Diversity Quotients a. and b.
(GTMT CDQ a. and b.), National Key Leader Quotient (NKLQ), Nationality of Regional
Headquarters Leaders Quotients (NRHLQ), and Corporate Culture and Philosophy Score
(CCPS). Nunnally (1978) stresses there are many models that may be used to measure
dependent variables against independent ones, but none is better than the linear model for its
ability to reduce measurement error and improve estimating reliability (As cited by Sullivan,
1994). A standard item analysis was conducted to measure the internal consistency of each
variable—or indicator—within the model used to determine the DOG score. Cronbach's α
(alpha) coefficient of reliability, which examines the reliability of variables used to measure the
―same thing‖, was used. Nunnally (1978) states a Cronbach α of 7.0 is sufficient in early stages
of research (as cited by Sullivan, 1994). The Cronbach α for the eight variables combined was
0.7638 (Figure 3.24). Of note, this was significantly higher than Sullivan‘s (1994) outcome of
0.58 for his nine variable model, which he used to measure a firms DOI.
Although a value of 0.7638 was an acceptable outcome, testing was conducted to refine the
DOG model. Individual variables were excluded one at a time and a reliability analysis was relaunched for each one to determine the effect on the Cronbach's α value. ―If α increases when
you exclude a variable, that variable is not highly correlated with the other variables. If the α
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decreases, you can conclude that the variable is correlated with the other items in the scale (JMP,
2008).‖ Figure 3.25 shows the Cronbach α when two variables, NRHLQ and CCPS, are
eliminated. It shows these two variables may not contribute positively to the greater DOG
model, because when they are eliminated, the model Cronbach‘s α increases to 0.7996 and .7922,
respectively. When both of these variables are removed, Cronbach‘s α for the new model
increases further to 0.8474 (Figure 3.26), and it was found that by eliminating the FEMVS, the α
could be improved again, somewhat, to 0.8680.
Why these variables may not contribute meaningfully to the DOG model, and why they
were removed or retained by the author, is explored hereunder. For several reasons, the author
decided to remove from the model the NRHLQ, which measures the ratio of domestic to foreign
national leaders at the head of foreign subsidiaries. First, a high number of leaders from the
nation where a national subsidiary is located could indicate either a geocentric or a polycentric
corporation. Therefore, this could skew the DOG score by adding geo-centricity points, even
though the motivation of a company to employ host-nation nationals in its foreign subsidiaries
may have been for polycentric reasons. Second, in collecting data for this variable, a sample of
only five regional headquarters, or foreign subsidiaries, were studied from an overall population
that varied significantly based on the size of the various firms and the breadth of their global
operations. This coupled with the difficultly collecting specific data on subsidiary leadership—
often data for only Western subsidiaries could be collected from company websites, likely
causing a sampling bias—perhaps explained the unreliability of this variable. The variable was
therefore tentatively dropped from the model at this stage.
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The CCPS, which measures corporate culture and philosophy and how it promotes and
sustains national cultural diversity, was also tentatively removed from the model at this stage.
This was the only subjective variable in the model and as previously explained, a cursory review
of the raw data found that several companies that scored well on the CCPS had very poor
national cultural diversity ratios in all the other variables—they did not ‗practice what they
preached,‘ or perhaps their focus was more on domestic rather than national diversity.
Finally, although dropping the FEMVS variable, which measured the variance between
national diversity of the entire workforce compared to the top management, also improved
slightly the model‘s reliability, it was retained for further model testing, because dropping the
variable did not improve significantly the Cronbach α. Factor analysis was conducted next to
determine how many factors explained DOG scores.
A review of eiginvalues was conducted as a first step in factor analysis. Eigenvalues
―partition of the total variation in the multivariate sample‖ (Hill & Lewicki, 2006). Eight
eiginvalues, the same as the number of variables, measured the percent of total variance
explained by each of the eight factors. They are expressed from largest to smallest at Figure
3.27. Using the Kaiser criterion, which recommends only keeping factors with eiginvalues of
one or more to determine the number of factors, it was determined that two principle factors
impacted on the eight variable model, one factor accounting for 50% of the total variance of the
eight factors (Hill et al., 2006). Scree plot examination confirmed this. When factor analysis
was conducted on the six variable model, and a five variable model that excluded FEMVS
variable, both the Kaiser criterion and scree plot indicated a single factor was significant,
accounting for 72 % and 63% variance, respectively (Figure 3.28).
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The author also found through factor loading that there were two principle components that
impacted the single factor (Figure 3.29); FEMVS stood out as one whereas all the other variables
were generally grouped together.
Finally, it was found by common factor analyse that the communality for each variable as
they related to the single factor was significant and explained a high portion of the variance
found (Figure 3.30). Thus it was determined that the DOG score in the six variable model was
based on a single factor, national cultural diversity within the highest echelons of a corporation,
comprised of two components—one of five variables measuring national diversity at the top of a
corporation, and a second of one variable measuring the variance between national corporate
diversity at the top of the company compared to its overall employee internationalization.
Although ready at this stage to commit to the six variable model, the author decided to do
one last test with both the six and eight variable models – the goodness of fit test. The JMP
program was used to do the test. The eight variable model R Squared was found to explain 95%
of the variation in the DOG score while the six variable model explained 99 % (Figures 3.31 and
3.32). JMP indicates significant F-values and T-values by placing an asterisk beside the
variable. The Probability>F of .0001 for all variables in the six variable model indicates all six
model variables explain a significant proportion of total variation (JMP, 2008). However, in the
eight variable model, only five of eight variables were significant. Accordingly, with testing
done, author proceeded with the six variable model.
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DOG SCORE FINDINGS
―Our shared Purpose attracts and unites an extraordinary group of people, P&Gers, around the world—the most diverse
workforce in P&G history. Together, we represent around 145 nationalities...Our diversity, our shared culture and our unified
Purpose are the defining elements...We value differences. When P&Gers come together, we create a rich tapestry...Each of us is
truly unique. Beyond the visible differences, we come from diverse traditions, with a wide array of personal experiences and
points of view...P&G brings together individuals from different backgrounds, cultures, and thinking styles providing remarkably
different...perspectives...That‘s why, in our increasingly interconnected world, it is only appropriate that we celebrate everyone‘s
uniqueness, every day...‖ (Proctor & Gamble, 2009)
The results of the preliminary eight variable and the final six variable models are at Figure
3.33.
Henceforth examining solely the six variable DOG scores, at first glance, the scores appear
to reflect well the purported ethnocentricity or geo-centricity of companies. Toyota, considered
in some literature to be an ethnocentric company, was ranked 40 of 46 companies and two other
Japanese companies, Honda and Canon, were ranked 45 and 42 respectively. Companies often
cited in the research as being global and geocentric, such as ABB, Unilever, Nokia, and Nestlé,
all ranked in the top eight DOG scores. These findings, coupled with the analysis of the DOG
score model, seem to lend credence to the DOG score as a measure of a company‘s place on the
ethnocentric-geocentric continuum. Seven of the top ten companies with the highest DOG
scores were European, with Swiss companies in the top four positions; Australia‘s BHP Billiton,
and the United States‘ Hewlett-Packard and Monsanto were ranked sixth, ninth, and tenth,
respectively. Sweden‘s H&M was the worst company, followed by Honda, Texas Instruments,
the UK‘s Compass Group, and Japan‘s Canon. The mean DOG score was 1.56, with 15
companies above the mean score and the rest below, demonstrating results skewed towards
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ethnocentricity—nationally diverse companies like 15th ranked Procter & Gamble, quoted above,
are the exception rather than the rule. The median DOG score was 1.21.
It is worth examining the entire sample population in relation to DOG score, to see where
the hypothetical division between ethnocentric and geocentric companies might be found.
Starting with the 15 companies with DOG scores above the mean, all these firms have a least one
foreign board member, and the majority have more than five. All these companies but one—
Monsanto—have at least two psychic zones represented on their boards, and the majority have
five or more (Appendix 2). These companies also have diverse GTMTs. Each of these
corporations has at least one foreign GTMT member, and the majority have more than five. In
addition, these firms, with Monsanto as the exception, have executives from at least two psychic
zones on their GTMTs, and the majority have over three. All but four of these companies have
at least one foreign chairman, president, or CEO, clearly indicating geocentric leanings. Finally,
all but one firm has a FEMVS of over .5 indicating a ratio of least 1:2 foreign top managers and
directors to foreign based employees. The majority of these companies‘ FEMVS scores were
over .70. Thus the profile of what might be termed a truly geocentric corporation is a firm: that
has at least one foreign chairman, CEO or president; whose directors and top management
represent the composition of their global work force; and that have numerous foreign directors
and GTMT members, many coming from different psychic zones.
Examining next the 15 firms with the lowest DOG scores, these companies have an
ethnocentric profile. All but two of these companies had a DOG score of less than 1.0. All but
two had one or no foreign board members and the majority, 10 firms, had none. With the
exception of two firms, these companies tended to have only one psychic zones represented on
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their boards. All but five of these companies had one or less foreign GTMT members and the
majority had zero. Nonetheless, three of these companies had a significant number of foreign
national on their GTMTs; Wal-Mart had six, Ford had nine, and Toyota—due to their
aforementioned effort to become more geocentric—had four. These relatively strong numbers
however were somewhat offset by the large size of their overall GTMTs, 32, 33, and 49,
respectively. Nonetheless, these different perspectives are, in theory, a move towards more geocentricity providing potential access to culturally distinct knowledge domains and if well
managed, competitive advantage. All but two of these 15 companies had two or less psychic
zones represented in their GTMTs, the majority having only one. Not one of these companies
had a foreign leader in one of the three top positions. Finally, the majority of these companies
had FEMVS scores of less than .60, the bottom five having scores of less than .50. Considering
this, the ethnocentric firm is lead by its own nationals. They have relatively few foreign
directors and GTMT members from different countries, and those present tend to come from the
same few psychic zones. These firms tend to have glass ceilings that prevent foreign nationals
from advancing to higher levels; when this is not the case, proportionally fewer advance higher.
Accordingly, these corporations‘ boards and GTMTs do not proportionally represent the
diversity of their workforce.
In an attempt then to categorize companies based on DOG scores, geocentric firms tend to
have DOG scores of over 1.75 and ethnocentric firms tend to have scores of less than 1.0.
Companies with DOG scores between 1.0 and 1.75 generally have the ‗look and feel‘ of
ethnocentric corporations, normally with at least some redeeming geocentric qualities, such as
nationally diverse GTMTs or a strong FEMVS. These companies like ethnocentric firms also
rarely had a foreign leader as chairman, CEO, or president and tended to have few foreign board
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members. Because of their redeeming qualities, and apparent steps towards becoming more
geocentric, the author called these firms ‗emerging‘ corporations, and for good reason, as will be
explained by briefly discussing the corporations from emerging nations.
So how did companies from emerging markets fair? There was one country each from
India, Brazil, Mexico, and China in the study. Interestingly, all these companies had DOG
scores between 1.0 and 1.50 indicating they leaned towards ethnocentricity; this was certainly
the case for Petrobras-Petroleo Brasil, which had no foreign board or GTMT members and was
ranked as high as it was simply by virtue of its FEMVS.iv
Viewed another way, some of these companies may be beginning to bend away from
ethnocentricity, or emerging from it towards geo-centricity, as seemed to be the case with
China‘s Swire Pacific, India‘s Infosys, and Mexico‘s America Movil. Their DOG scores show
these firms are ‗home grown‘ and managed corporations with principally domestic executives
that have perhaps received remarkable educations and experience in Western corporations.
Nevertheless these firms do have some foreigners on their GTMTs and boards. They are skewed
towards ethnocentricity, but this may indicate a lack of appreciation of the purported benefits of
the geo-centricity in global corporations, or show that they are in the early stages of emerging to
become true global corporations rather than multinational ones.v Finally, it should be noted,
however, that many potential companies from these emerging nations were not studied due to a
lack of data on their company websites, or because they had operations in fewer than two
psychic zones and five countries—many are still not truly global, even although ranked in the
Forbes Global 2000.
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With the analysis of the dependant and independent variables complete, the final stage of
the research was to determine the relation, if any, between these DOG scores and financial
performance.
FINDINGS ON THE RELATIONSHIP BETWEEN ETHNOCENTRIC AND GEOCENTRIC FIRMS AND
FINANCIAL PERFORMANCE
―At TI, we are committed to building a great company customers can count on – one where employees aspire to achieve the
highest possible standards with regard to financial performance, ethical behaviour, business execution and innovation. An
inclusive environment is essential to that, where diversity thrives and every employee, no matter where they are and what job
they hold, is fully engaged in TI‘s business success. I‘m challenging myself and every TI employee to help make an inclusive
environment a global reality at TI.‖
—Rich Templeton, Texas Instruments (Texas Instruments, n. d.)
Determining Statistical Relevance
We are operating in more markets than ever before, which has impacted the cultural fabric of our workforce and ways of
working....We believe that diversity and inclusion in the workplace brings competitive advantage.... Employees from diverse
cultures and backgrounds bring insights into our customer base around the world, adding value to our business. (Nokia, n. d.)
Texas Instruments‘ contention that diversity is ―essential‖ to financial performance and
Nokia‘s, that it provides ―competitive advantage‖, are supported today in a growing body of
literature. In the present global context, both domestic and international diversity are said to be
both directly and indirectly good for the ‗bottom line‘, but what does today‘s research show? In
reviewing the relation between each independent financial measure and a firm‘s position on the
ethnocentric-geocentric continuum, or DOG score, the author first examined the Person
correlation coefficient to determine the correlation. The closer the coefficient to 1.0, the greater
the correlation between x and y. The value of Rsquare was examined next. This was used to
―measures the proportion of the variation around the mean explained by the linear or polynomial
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model. The remaining variation is not explained by the model and attributed to random error.
Rsquare is 1 if the model fits perfectly. An Rsquare of 0 indicates that the fit is no better than
the simple mean model (JMP, 2008).‖ The Prob > F was also reviewed. It ―is the observed
significance probability (p-value) of obtaining a greater F-value by chance alone if the specified
model fits no better than the overall response mean. Observed significance probabilities of 0.05
or less are often considered evidence of a regression effect (JMP, 2008).‖ Finally, the author
looked at t Ratio and the Prob>|t|. ― t Ratio lists the test statistics for the hypothesis that each
parameter is zero. It is the ratio of the parameter estimate to its standard error...Looking for a tratio greater than 2 in absolute value is a common rule of thumb for judging significance,
because it approximates the 0.05 significance level (JMP, 2008).‖ ―Prob>|t| lists the observed
significance probability calculated from each t-ratio. It is the probability of getting, by chance
alone, a t-ratio greater (in absolute value) than the computed value, given a true null hypothesis.
Often, a value below 0.05...is interpreted as evidence that the parameter is significantly different
from zero (JMP, 2008).‖ Using these tests, the analysis was completed.
Relation between Forbes Ranking and DOG Score
―Diversity & Inclusion is a sustained competitive advantage for the continued growth of P&G. It is implicit in the company‘s
Purpose and Values and explicit in the company‘s business strategy for success...It enables P&G to be the ―employer of choice‖
that hires, engages, and retains the best talent from around the world, reflecting the markets and consumers we serve.‖ (Proctor
& Gamble, 2009)
The author found a positive linear correlation between sample companies in the top 500
companies in the Forbes ranking in relation to their DOG score, with companies higher in the
Forbes ranking generally having a higher DOG score. Nonetheless, these finding were just shy
of being statistically relevant, based on F and t ratio tests. Although a cause and effect relation
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was not established, in general terms, this finding might imply that firms having higher sales,
profit, and asset and market value, the Forbes measures, have more nationally diverse boards
and GTMTs. Significantly, the polynomial nonlinear fit for this sample, however, was
statistically meaningful with a Prob>|t| of .03 and a t Ratio of -2.24. This suggests there is a
positive correlation between Forbes ranking and DOG score up to an optimal level after which
the relation becomes negative resulting in a diminished place in the Forbes ranking. Thus, both
ethnocentricity and too much geo-centricity may not be good (figure 3.35).
Relation between ROA and ROE, and DOG Score
―Fred Turner developed the diversity framework and in 1980 the company hired our first head of diversity. Back then, it was the
right thing to do. Today, it is a business imperative. Any company that hopes to serve a diverse customer base across the United
States, and around the world, must reflect same diversity in restaurants and throughout our organization, where we design our
products and services with the distinct wants and needs of our customers in mind. And our business results reflect the validity of
mirroring our customers throughout our System.‖ (McDonalds, n. d.)
Despite McDonalds‘ ―correct‖ words, the diversity they seek ―throughout the organization‖
is not reflected in their boardroom or on their GTMT. But does this really matter when it comes
to financial performance? There was no statistically relevant relation between ROA and DOG
score for the total sample population, nor for companies segmented into the top 500, top 250, and
top 100 companies (Figure 3.36). The author obtained similar results when ROE and DOG
score were compared. Nonetheless, when sample companies that were listed in the top 100 of
the Forbes list where examined, the results were very close the being statistically meaningful,
and showed a linear correlation between ROE and DOG score (Figure 3.37). More important, a
polynomial non-linear relationship was found that was statistically relevant. This again indicated
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there may be an optimal DOG score, which if exceeded, may result in a diminished ROE. More
research is required.
Relation between ROA/ROE and ROA/ROE/Forbes Ranking Sums, and DOG Score
―Never before has Nokia been as diverse of a community [with] 55,000 employees from 115 nationalities...Half of the senior
managers at Nokia are non-Finnish.‖ (Nokia, n. d.)
There was no statistically relevant relation between the two overall general financial
measures and DOG score for the total sample population, nor for companies segmented into the
top 500, top 250, and top 100 companies (Figures 3.38 and 3.39).
Relation between Number of Psychic Zones and Countries Where Firms Operate, and DOG
Score
―It‘s true that global citizenship is one of the best ways to create a culture that employees care about. Remember that employees
come from a certain place and they don‘t want to have to check their values at the door when they go to work.‖—Rosabeth
Kanter (Kurtzman, 1999)
Turning away from comparisons of financial measures and DOG score, the author looked
at the relation between DOG score and the number of countries and psychic zones where firms
had operations. Although there appeared to be no statistically significant relation between DOG
score and the number of countries where a firm operates, a more meaningful relation may exist
between DOG score and the number of psychic zones where a firm operates. Although just shy
of having meaningful F and t Ratios, it appears there may be a linear correlation, where firms
operating in more psychic zones have higher DOG scores (Figure 3.40).
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Relation between Number of Employees and DOG Score
―We make diversity part of our business plan, ensuring we can continue to be a global leader in all aspects of Diversity and
Inclusion. Dedication to Diversity and Inclusion touches every part of our business. Diversity and Inclusion are enduring values
embedded into our culture. From our board of directors to our associates and customers, these values are fundamental to both
our business and mission of saving people money so they can live better.‖ (Wal-Mart, n. d.)
Wal-Mart had the most employees of all companies sampled, but only had operations in 15
countries. Ranked 23rd, with a DOG score of 1.29, it was considered to be a firm emerging from
ethnocentricity to become geocentric. Nonetheless, the relation between the number of
employees and a firm‘s DOG score was found to be statistically meaningful, although the
relation was surprisingly negative. This appeared to show that many large global US companies
were more ethnocentric than smaller but more geocentrically progressive European companies
(Figure 3.41). Interestingly, there appeared to be no significant relation between DOG score and
the number of foreign employees (Figure 3.42); this indicates that both large and small
companies can be ethnocentric or geocentric. In addition, it may mean that a company
remaining ethnocentric or becoming more geocentric is based more on choice than on
circumstances, such as the number of employees it has or where it has its global operations.
Relation between Population of Country and DOG Score
―We are proud to share what we have learned along the way and the aspirations we are actively working to achieve. At HP we
have recognized that creating a diverse, inclusive work environment is a journey of continuous renewal. Each step in the process
has an important significance to remember as we move forward into the 21st century. Together the steps create a diversity value
chain upon which we are building our winning global workforce and workplace. ‖ (Hewlett-Packard, n. d.)
It was evident, when firms from small countries like Switzerland appeared to have the
highest DOG scores, that there might be a relation between the population of a country where a
firm is based and its DOG score. In fact, the author found that a strong statistically relevant
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relation exists (figure 3.43). This is understandable, because with such a preponderance of
global companies, American firms with their enormous population base can find lots of talent at
home; small countries like Switzerland, or those of a moderate size like the Canada and France,
do not have that luxury so they are more likely to search abroad for global talent. In so doing,
however, if the goal of these companies from smaller countries is simply a quest for the closest
available talent —likely from the same psychic zone—rather than an attempt to bring diverging
national perspectives to the fore by becoming more geocentric, they run the danger of not
leveraging the cultural synergy potential they have gained, or not having as much as they should.
There were exceptions to the relation of national population to DOG score; Sweden‘s
H&M, who had the lowest DOG score, appeared to have only one foreign executive, who was
from another Nordic country. With a population of just over nine million, this firm stood-out.
Hewlett-Packard with the ninth highest DOG score stood-out at the other end of the scale. Only
six years ago, it was considered ethnocentric with no non-American directors. Today,
remarkably, it was the U.S. company with the highest DOG score, with three foreign national
directors and five non-U.S. GTMT members. This likely began as a conscientious effort in
2005, when the company is known to have hired a search firm ―to find [its first] non-U.S.
director (Lublin, 2005). Procter & Gamble had the 15th best DOG score with to two board and
17 GTMTs members from outside the U.S.; it is another example of a geocentric American
company.
Relation between Dependant Financial Variables and Each Independent DOG Variable – A
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Deeper Exploration
―Advocates say the broadened geographic reach brings new perspectives to the boardroom. Yet many U.S. companies haven't
gotten the message... That may put U.S. companies at a disadvantage in the global marketplace.‖ (Lublin, 2005)
Having determined that the closest relation that existed in the findings was between the
Forbes ranking and ROE, and DOG score, each variable that constituted the DOG model was
examined first against ROE and second against the Forbes ranking. Three variables—BCDQa
and b, and GTMTb— were found to be the most relevant. In particular, for the 23 companies
sampled that were within the Forbes top 100 ranking, there was a strong, positive, and
statistically relevant correlation between ROE and the ratio of foreign nationals from different
psychic zones on the GTMT(GTMTb) (Figure 3.44). This finding may be important in that it
might highlight the significance in large global corporations of having executives with different
global points of view on GTMTs, and perhaps boards, and that these different perceptions,
providing more cultural synergy potential, may have a positive impact on a company‘s ROE.
This is supported by Alder (2002) who contends cultural diversity at all levels of a firm is less
important for multinational firms but vitally important for large globally integrated companies
(pp. 134-136).
Two variables that measured board composition were the next most relevant. There was a
polynomial nonlinear relation between the ratio of foreign nationals on a board and DOG score,
again suggesting that national diversity on boards is beneficial, but that there may be an optimal
level of internationalization on a board which if exceeded may negatively impact ROE. As well,
it seems that representation of foreign nationals from different psychic zones may have a positive
impact on ROE for companies in the Forbes top 100 ranking, although this was just shy of being
statistically meaningful.
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When the relation of dependent DOG score variables were individually compared to the
Forbes ranking of companies, one interesting relation appeared. For firms ranked in the top 500
companies, there was a strong relation between Forbes ranking and FEMVS—the Foreign
Employee to Management Variance Score. Corporations that best reflected their diverse
workforce in their boards and GTMTs generally placed higher in the Forbes ranking, although
cause and effect has not been determined in this study (Figure 3.45).
What is Unique about Sampled Companies in Forbes Top 100
―"I would rather have a director who ran a business in France who may be American, than someone who just happened to be
born in Paris and has a French surname," says Dennis Carey, a Philadelphia partner at Spencer Stuart. But global-minded
governance advocates disagree.‖ (Lublin, 2005)
Carey‘s pragmatic comment speaks more to the desire to hire competent people and is not
on the face necessarily ethnocentric. It does however show a lack of appreciation for the
potential benefits deep seeded cultural differences—new knowledge domains—can afford to a
global firm; these different perceptions cannot be gained simply by ―running‖ a business as an
expatriate in a foreign land. Nonetheless, it appears a growing number of very large global
corporations have a legitimate appreciation for the benefits of different national perspectives at
the head of their organizations. Throughout the analysis of the data, it appeared that results for
the 23 sampled companies in the Forbes top 100 were much more statistically meaningful than
the results for the total sample. The author examined the differences between companies in this
group and other companies rated lower in the Forbes Ranking. Besides the obvious differences
in the Forbes financial measures—sales, profits, and asset and market value—the findings
indicated that firms in the top 100 were overwhelmingly American and European (21 of 24)
compared to the much broader country and less European/American representation of the lower
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ranked companies (17 of 22). As well, the top 100 companies came from six psychic zones
whereas the lower ranked firms represented nine psychic zones. Therefore, the top 100 firms
were a more homogeneous sample. The top 100 firms on average did business in 10.7 psychic
zones while the lower ranked firms did business in 9.7 psychic zones. The medians were 12.5
and 10.0 psychic zones, respectively (Figure 3.46).
More interestingly, there were stark differences in the number of countries where these
firms operate and the number of employees they had. The top 100 firms conducted operations in
59 countries whereas other firms did business in only 46. Most significant, however, firms in the
top 100 had an average of 246,000 employees, compared with 140,000 for other firms. Relating
this with the previous discussion on the relation between DOG score and the number of
employees in a firm, and the contention that becoming geocentric was a choice firms made, the
findings may show that this choice is an important one the larger and more global a corporation
becomes. In sum, firms in the Forbes top 100 had more employees and a larger global footprint
than other firms and not only performed better by the Forbes financial measures, but geocentricity measured by DOG score was related to their success—although perhaps not with cause
and effect.
Why National Cultural Diversity May not Translate into Performance
―Multiculturalism adds to the complexity of global firms by increasing the number of perspectives, approaches, and business
methods represented within the organization.‖ (Alder, 2002, p. 15)
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Besides the uniqueness of companies in the Forbes top 100, what else might contribute to
the weaker than expected relation between DOG scores and financial performance in the general
population of sampled companies? Wang et al. (2009) found no relation between diverse boards
and performance, but noted that more diversity did not lead to poor performance. This study
found some positive relation between board and GTMT national diversity, but more important,
virtually all results tended towards a positive rather than a negative relation to financial
performance. Although these findings were statistically relevant in only a few occasions, the
positive trend was evident. There was some evidence, however, that there may be an optimal
level of diversity measured by DOG score, which if exceeded, results in a negative relation with
some financial performance measures.
In addition, it could be that the national cultural diversity existing at the top of some global
corporations might not translate into improved financial performance because it is poorly
managed—because synergy potential is not realized and disparate cultural knowledge domains
are not harnessed, but rather are assimilated or marginalized. It is true that with more
nationalities represented, managing complex diversity would be appreciably more difficult.
Thomas et al. (1996) found that increasing diversity for diversity‘s sake often backfires and hurts
company performance; this likely happens as well when national diversity is introduced to
corporate boards and GTMTs. As mentioned, often, culturally diverse groups perform worse
(Moran et al., 2007, p. 246). For diversity and cultural synergy potential to ‗pay-off‘, it must be
well managed. It has been found that culturally diverse teams untrained and prepared for
diversity perform worse on problem solving tasks than homogeneous ones; but when trained,
they outperform them by a significant margin (Koppel et al., 2008, p. 23).
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Wang et al. (2009) also believe that there are so few diverse members on boards that they
likely acculturate to the board. They contend that a critical mass of diversity may result in a
positive association with performance; this idea is supported by Carpenter et al. (2001). During
this study, this critical mass existed in the most geocentric companies, but perhaps not all boards
and GTMTs were cohesive enough due to the complexity of managing diversity, as described
above, to fully leverage the synergy potential that existed.
As well, an appropriate corporate culture creating an open and healthy climate that
promotes differences and has processes to leverage them is necessary to set conditions for
cultural synergy to occur. Without this, culturally diverse management teams will tend to be
mediocre or perform worse than ethnocentric ones (DiStefano et al., 2000). With increased
global competition today, a strong, adaptive corporate culture tailored to the culturally complex
global business environment should improve global corporate performance. Corporations
without this sort of adaptive and inclusive culture will be challenged by increased global
competition and may not be able to harness the national cultural diversity that exists ( Kotter,
1992).
LIMITATIONS OF THE STUDY
―We recruit people with unique experiences and diverse backgrounds because we believe that is a fundamental part of
strengthening our global business capabilities.‖ (JP Morgan, n. d.)
There are of course limitations to this study. One can question the validity of examining
only boards, GTMTs, and a company‘s leadership to determine if a corporation is ethnocentric or
geocentric. Yet many researchers believe national diversity within the board room and executive
suite is a strong indicator of the degree to which a company is geocentric. It has also been
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suggested that the extent to which a company conducts R&D in other countries might be a
measure of a geocentric corporation—off shoring R&D, which is tied to innovation and competitive
advantage, is counterintuitive to an ethnocentric corporation (Doremus, 1999, p. 89; Ramaswami et al.,
2010, p.10). Nonetheless, beyond also examining the corporate culture and climate of a
corporation, which this study attempted to do using secondary data, few other alternatives come
to mind. Actions speak louder than words, and concrete action to form a nationally diverse
corporate hierarchy that leverages its global human resources is indisputably a strong indicator of
geo-centricity.
It can however be claimed that this analysis did not examine the actual attitudes of the
directors and executives in question to determine if they really embody the culture they are
purported to represent. This micro-level research is left for future studies, but it is clear from
examining the data available that the majority of directors studied were born, educated, and
worked in identifiable nations and as such likely represent at some level the cultures from where
they came. Relying then on the work of Hofstede (1994), and Ronan et al (1985) and
contemporaries referenced by them, these cultures can be grouped in psychic zones and the
extent of national cultural diversity present can be measured. Therefore, as a macro examination
of 46 global corporations to determine the existence of varied national cultural knowledge
domains on boards and in GTMTs to determine the degree of geo-centricity, this approach is
valid. Future research might look at whether the attitudes and mores of executives and directors
actually fit the cultural profile to which they belong, but this was outside the scope of this more
general study.
It is acknowledge that how effectively these cultural differences are leveraged or ignored,
are also beyond the scope of the paper. This is left to future research that should, due to increase
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globalization, move beyond the examination of gender and cultural differences in a domestic
scenario, to examine in more detail national cultural diversity in increasingly global boards and
executive suites, with perhaps gender as an important subset.
Another key area not explored in sufficient detail is the impact of national legislation that
impedes national cultural diversity at the top of global corporations. Although legislation exists
that restricts foreign nationals from serving on boards of directors, and there is national policy
that mandates domestic diversity, there is no legislation that implores companies to be national
diverse; this is driven from within. Although there is a trend towards increased national diversity
on boards and GTMTs, in certain countries this growth is likely inhibited by legislation.
Another limitation involves the use of ROA and ROE as financial measures to compare
firms across disparate industries. It is generally acknowledge these measures are best used
amongst comparable firms, particularly those in the same industry. Although previous studies
have corrected ROA, ROE and other dependant variables to account for different industries, this
was not done during this study.
Besides national cultural differences among companies studied, the other dissimilarities—
principally between industry, their DOI, and their size (measured by sales, profit, and asset and
market value)—were in many cases profound; perhaps the study was somewhat limited by
comparing apples to lemons. These differences likely had some influence on the findings
observed in the relation between DOG score and financial performance, accounting perhaps for
the weaker association than expected. For example, a high DOG score could be less important
for a smaller company, one less global than larger firms.
Based on this, there is some merit in repeating the study using more homogeneous
samples from the same industries, or with global corporations of similar size and DOI. For
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example, the author found a more statistically relevant association between the DOG scores of
large companies, those in the top 100 of the Forbes Global 2000 ranking—rather than the total
sample—and financial performance.
Large corporations from emerging markets such as China, India, and Brazil were also not
well represented in the study and a larger sample would have been interesting. Nonetheless, the
study was somewhat limited by the data available for these companies, who were generally
ranked lower in the Forbes Global 2000 ranking.
The study also did not differentiate between the structures of corporations. For example, it
is suggested by Alder (2002) that diversity is less important in multinational corporations than it
is for firms with globally integrated operations. This might explain why many large yet
ethnocentric firms, perhaps multinational rather than global, performed well financially.
CONCLUSION
―The basis for human resource development is putting the Toyota Way into practice...The focus for respect for diversity varies in
different countries and regions; nevertheless, Toyota strives to be a company with a working environment that promotes selfrealization while respecting diversity of values and ideas among its employees.‖ (Toyota, n. d.)
Toyota appears to be a neophyte when it comes to diversity. They impose their Japanesecentric values on global employees while apparently justify divergent global levels of respect for
diversity. They appear to go out on the limb by ―respecting‖ diversity, but this falls far short of
fostering and leveraging it. They are typical of ‗politically correct‘ companies seeking to contain
and manage cultural differences in others while promoting their own parochial ways. Much of
the current literature suggests their ethnocentric approach is inappropriate today and will hurt
their global financial performance. Alder (2002) wrote ―people rarely believe cultural diversity
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benefits organizations (p. 108)‖; this appears to be in-line with the thinking of Toyota and other
ethnocentric companies indentified in this study.
The literature espouses the corporation that allows their best global talent to rise to the
boardroom and executive suite and attracts other worldwide talent as geocentric firms and a
reflection of the global cultural diversity of the company itself. By being geocentric, these firms
have created national cultural synergy potential, and if they effectively leverage these diverse
knowledge domains, they can create competitive advantage leading to better global financial
performance. This theory however is not fully born out in this study. Nonetheless, some of the
key findings are set out below.
First, the Forbes Global 2000 ranking is misleading. Many companies in this ranking,
particularly those ranked lower, between 1000 and 2000, are not as global as might be thought,
often with operations in only one psychic zone and in less than five countries. The DOI measure
used by Sullivan (1994) to determine the ‗globalness‘ of firms is therefore still relevant. In
addition, while companies from emerging markets continue to increase their representation in
and push U.S. and European firms from the Global 2000 ranking, they are still significantly less
global than many firms from the U.S. and Europe.
There also seemed to be a stronger statistical relation between the DOG scores and
financial performance of companies in the Forbes‘ top 100, rather than the greater sample.
These corporations not only performed better by the Forbes financial measures, but geocentricity measured by DOG score was positively related to their standing in the Forbes
ranking—although perhaps not with cause and effect. It appears from the research that national
cultural diversity at the higher levels of companies becomes more important to financial
performance as firms grow and move higher in the Forbes Global 2000 ranking. A high DOG
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score may be essential for large globally integrated companies but less so for smaller less global
firms—or those more multinational than global in their corporate structure—who conceivably
can capitalize on domestic diversity without the need for international diversity in the boardroom
and GTMTs.
The research also shows there is a glass ceiling in ethnocentric companies that prevents
foreigners from advancing to the GTMT or being represented on the board. Very few companies
had a ratio of foreign employees to foreign directors and GTMTs members that was aligned.
Three companies had a ratio of 1:1 or better, but the average was .65 foreign directors and top
executives to foreign employees. Surprisingly, three of the most ethnocentric companies under
this measure were European.
Global corporations continue to increase the national cultural diversity of their boards and
GTMTs. There must today—with once ethnocentric companies like Toyota and HewlettPackard taking concrete steps to become more geocentric—be a perceived advantage in so doing
as these changes are not legislated; far from it, in some countries there is pressure due to
increased global completion from emerging markets to maintain relative national cultural
homogeneity. European boards continue to be more divers than U.S. ones, almost three times so,
with an average of almost four foreigners. European boards have more synergy potential due to
different national perspectives, but may face considerably greater challenges to manage this
diversity. Asian boards are three times less nationally diverse than American ones, with an
average of less than one foreigner represented. There are nonetheless, a significant number of
non-European boards, 26 % of firms sampled, with no foreign presence. For every two foreign
board members, on average one came from a different psychic zone, which may indicate a trend
away from culturally homogeneous boards from the same psychic zones, to genuinely diverse
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boards better reflecting the global operations of corporations. Many companies with very high
DOG scores, including American companies Hewlett-Packard and Procter & Gamble, had more
than four psychic zones represented on their boards. Nonetheless, almost 40% of companies
sampled had only one psychic zone represented; almost half of those companies had foreign
board members, but they all came from same psychic zone.
The trend to internationalize is also reflected in GTMTs, and they continue to be more
diverse than the boards that govern them. American companies did better here, with five
companies ranked in the top ten of companies sampled, when looking at actual numbers of
foreigners represented. Nonetheless, when the proportion of foreigners to nationals was
considered, there were only two U.S. companies in the top ten, and Americans again clearly
lagged behind European companies. Again, ethnocentric companies were quite apparent; 28
firms had no foreign GTMT members. Some companies, such as Procter & Gamble nevertheless
stood out. They had 17 foreign GTMT members from 8.5 different psychic zones, providing
access to an astonishing number of cultural knowledge domains, although proportionally, with
42 GTMT members, they did not score perhaps as high as they should have. Similar to boards,
41% of companies sampled had only one psychic zone represented on their GTMTs.
Surprisingly, 26 % of the sampled corporations had at least one foreign chairman,
president, or CEO. It appears having a foreigner in one of these positions is a very strong
indicator or geo-centricity; of these 12 companies, all but two had a top 10 DOG score.
European firms were four time more likely to have a foreign chairman, president, or CEO as an
American company.
A corporation‘s corporate culture and philosophy were not necessarily good indicators of
how geocentric a firm might be. Several companies said the right things on their websites, but
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did not extend diversity beyond their own borders by bringing in foreigners to their boards or
GTMTs. It may be that corporate websites simply reflect the latest MBA theories. Conversely,
these global companies may be more focused on domestic diversity and have not yet begun in
earnest to diversify in a meaningful way internationally, or they may not have the support of
corporate leadership to realize stated objectives.
The DOG score model reduced to six variables that measured one factor seemed to
genuinely reflect purported geocentric and ethnocentric companies. All three Japanese
companies studied were in the bottom seven companies rated by DOG score. ABB, Nestlé,
Nokia, and Unilever were all in the top eight. Seven of the top 10 firms were European; two
were American. Sweden‘s H&M was the most ethnocentric. There seemed to be three types of
companies: geocentric, ethnocentric, and emerging. The geocentric company seems to be a firm
that has at least one foreign chairman, CEO or president; whose directors and top management
represent the composition of their global work force; and that have many foreign directors and
GTMT members, some of which come from different psychic zones.
The profile of the ethnocentric firm differs significantly. It is lead by one or a group of its
own nationals. They have relatively few foreign directors and GTMT members from different
countries, and those present tend to come from the same psychic zones. Ethnocentric firms tend
to have glass ceilings that prevent foreign nationals from advancing to higher levels; when this is
not the case, proportionally fewer advance to higher ranks. Accordingly, these corporations‘
boards and GTMTs do not proportionally represent the diversity of their workforce.
Finally, there are emerging firms that tend to be ethnocentric, but have at least one or more
redeeming qualities. These formerly ethnocentric firms have taken modest steps towards geo-
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centricity, generally by globalizing their GTMTs with some foreign nationals. Interesting, the
four firms from emerging nations all fell into this category. It may be these rising companies,
whose senior personnel have leveraged the best educations and experience the West have to
offer, return home to conquer their domestic markets. As they globalize, they reach out for some
international expertise, but they have not taken firm final steps to become geocentric.
The relation between the number of employees a company had and its DOG score was
negative, perhaps skewed by large ethnocentric American companies compared to smaller more
progressive European companies. There appeared to be no relation between the number of
foreign employees and DOG score. This finding indicates that both small and large companies
can be ethnocentric or geocentric—it is likely based more on choice than circumstances.
Nevertheless, a very strong relation was found between the population of the country were the
corporation was based and its DOG score. Companies from smaller countries tend to seek out
foreign GTMT members and directors. Some companies from large countries, such as HewlettPackard from the U.S., are beginning to realize they cannot find the desired cultural knowledge
domains within their own borders and a now looking abroad for nascent foreign talent.
Finally, although there does not appear to be a strong relation between geo-centricity and
ethnocentricity, and financial performance for the overall sample population, there were a
number of promising findings. There was, for example, a polynomial nonlinear relation between
companies in the top 500 of the Forbes ranking and their DOG score. It suggests there is a
positive relation between DOG score and Forbes ranking up to an optimal DOG score after
which there were diminishing returns—in other words, geo-centricity may have helped propel
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companies higher in the Forbes ranking, but too much geo-centricity may harm performance as
measured by Forbes.
Although there appeared to be absolutely no relation between DOG score and ROA, there
was much better linear as well as a statistically relevant non-linear relation between the DOG
scores of sampled firms in the top 100 Forbes ranked companies and ROE. Again, this finding
shows there is a positive relation between geo-centricity as measured by DOG score and
financial performance measured by ROE, but there may be an optimal level of geo-centricity at
the top of global companies.
An exhaustive look at the independent DOG score variables as they related to ROE
revealed an interesting finding; amongst the 23 companies that were ranked within the top 100
Forbes firms, there was a positive relation between the proportion of foreign nationals from
different psychic zones represented on GTMTs and ROE. Moreover, there was a positive but
nonlinear correlation between the ratio of foreigners on boards of directors and ROE. Finally,
there was also a promising result for the number of psychic zones represented on boards, but
these were not statistically proven. For firms ranked in the top 500 companies, there was also a
strong relation between Forbes ranking and FEMVS—the Foreign Employee to Management
Variance Score—and the firms ranking. Corporations that best reflected their diverse workforce
in the upper echelons of boards and GTMTs were generally ranked higher in the Forbes ranking,
although cause and effect was not determined in this study.
It is fair to question why the relation between DOG score and financial performance was
not stronger than anticipated. It could be that the national cultural diversity existing at the top of
some global corporations might not translate into improved financial performance because it is
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poorly managed—because synergy potential is not realized and disparate cultural knowledge
domains are not harnessed, but rather are assimilated or marginalized. It is true that managing
this complex diversity would be more difficult the greater the international representation. As
well, although Wang et al. (2009) noted that more diversity on boards did not lead to poor
performance, there may be an optimal level of diversity at the top of a company, before cultural
diversity is too complex to mange. The key may be to seek out top performing executives or
directors from strategically important psychic zones, and carefully leverage their knowledge to
create synergy.
This study has shown that the majority of global companies are still ethnocentric, weighted
heavily by American and other non-European companies. Nonetheless, the balance may be
tipping. Only five years ago, Hewlett-Packard was considered an ethnocentric corporation.
Today it is on its way to being geocentric, and ranked ninth in the Forbes‘ ranking and 17th for
ROE, it is a strong performer. Toyota is slowly increasing foreign representation on its GTMT,
although this may be a band-aid solution based on its enduring ethnocentric corporate
philosophy.
Companies like BHP Billiton and Unilever stand out as geocentric firms whose financial
performance, unlike Nokia‘s, is superior. Global corporations need to develop and internalize the
appropriate global business culture and cross-cultural competencies to fully leverage cultural
synergy potential and improve financial performance. Unilever in particular was highlighted in
the literature and this study as a company who has done just that. With the eighth best DOG
score, Unilever is a geocentric. It has a foreign CEO and Chairman and a strong culture that
seeks to benefit from rather than simply mange diversity. Almost half its board are foreign
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nationals from three psychic zones and half of its GTMT are non-British/Netherlands nationals
from four psychic zones. The leaders and senior managers of the company are nationally
diverse, but not overly so. Their ratio of foreign managers to foreign based employees is a
respectable .63:1. With increased global completion from companies from emerging markets,
perhaps they are a model for the future.
Companies who remain ethnocentric may be confronted with the same sort of surprise that
Toyota faced in 2009. The surprise will likely come from an emerging geocentric corporation
that has drawn together diverse talent from around the globe and fostered it in a climate that not
only manages diversity, but takes the synergy potential available and effectively leverages it at
all levels of the corporation. Faced with this threat, will ethnocentric companies like Honda,
Ford, Boeing or Compass Group adopt a defensive posture as Drucker (2008) suggested they
will (p. 91). Or will they begin to emerge from the stifling confines of ethnocentricity in to the
multicultural world round them?
RECOMMENDATIONS – FUTURE RESEARCH
Sullivan (1994) wrote that the scholarly validity and refinement of his construct to measure
DOI depends on future research from an accumulation of studies that builds upon it (future
research); the same hold true for the current research, which begins to address the gap identified
by Caligiuri et al. (2004), who suggested future longitudinal studies seek to determine if
increased diversity and international experience at the top of organizations improves global
business success due to the diverse culture perspectives represented. The current research into
the relation between DOG score and financial performance was broad in scope. Perhaps because
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of this, the relation between DOG and various financial variables, although somewhat apparent,
was not as strong as the literature suggested it should be.
It is recommend future research build on the DOG score construct but confine the sample
to one industry or several related industries. Future research might also look at a broad range of
global companies, but limit it to firms that are roughly the same size, or have the same global
exposure and competition, or organizational structure (e.g. globally integrated or multinational).
More research should be done into the impact executives and directors from different psychic
zones have on GTMTs and boards, as the findings of the current research suggest a relation with
financial performance; national cultural diversity may be one things, but perhaps it is better to
focus the search for culturally different executives and board members in different psychic zones
in order to significantly increase the cultural knowledge domains available as well as synergy
potential. Subsequent research should also expound on the finding that there may be an optimal
level of national cultural diversity, which if surpassed negatively influences financial
performance. Are companies like ABB, who had the highest DOG score, simply too nationally
diverse? Anyone who has worked in an international organization knows the frustrations and
challenges that arise due to the profound cultural differences that exist amongst the human
animal, but also appreciates those happy moments when cultural synergy creates something of
value that might otherwise never been realized.
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APPENDICES
APPENDIX 1 – A SUMMARY OF JOKINEN’S GLOBAL LEADERSHIP COMPETENCIES
Global Leadership
Competencies
Core Global
Leadership
Competencies
Subsets
Sub-subsets
 Self awareness
 Self insight, listen to others, assess the value of what is said, personal mastery, openness, value diversity,
well developed ego, confidence and courage, understanding one‘s own values and assumptions and strengths
and weaknesses, openness to change
 Engagement in
personal
transformation
 Inquisitiveness
 Entrepreneurial spirit, commitment to personal development and continual improvement, creative
dissatisfaction, drive to keep up-to-date, desire to experience new things, reflective and proactive approach
to learning, open to criticism, sense of adventure, positive attitude, open to change, ability to learn from
experience
 Curiosity, seek knowledge and expertise beyond boundaries, acquire cultural knowledge, willingness to
take risk and enter unfamiliar situations
Desired Mental
Characteristics of
Global Leaders
 Optimism
 Self-regulation
 Social
judgement
skills
 Empathy
 Motivation to
work in
international
 Positive attitude, proactive approach, can-do attitude, ability to manage uncertainty, seeking opportunity, risk
taking, learning from mistakes
 Control disruptive impulses and moods, suspend judgement, think before acting, emotional stability, cope
with distractions, integrity, character, accountability, adaptive capacity, behavioural flexibility,
responding to dynamic social settings, tolerance for ambiguity, ability to handle stress, perseverance,
resilience, hardy personality, ability to retain capabilities even in unfamiliar circumstances, open
minded, avoiding ethnocentricity, self-efficacy, good timing, knowing when to act and when to gather more
information
 See the big picture, accurately profile other cultures, understanding that things happen in a social
context, understanding/monitoring social systems, social perspective, wisdom, self-objectivity, selfreflection, systems perception, awareness of solution fit, judgement under uncertainty, awareness of different
THE ETHNOCENTRIC OR GLOBAL CORPORATION: THE PERFORMANCE QUESTION
environment
 Cognitive skills
 Acceptance of
complexity and
contradictions
139
constituencies, understanding of restrictions, analysis of downstream consequences, coordinate multiple
activities, ability to shift perspectives and understand global interdependencies, political awareness,
social and organizational awareness, long term orientation, understanding of cause and effect
 Ability to interact with others, sensitive to others needs and assumptions, genuine concern for others,
warn-heartedness, respectful, open and flexible approach, goodwill, service orientation, ability to cope with
people in different situations, emotionally connected to people from different backgrounds, listening
skills, ability to understand different points of views, understand people, cross cultural sensitivity, expertise
in hiring, building and motivating and retaining talent in different cultures
 Commitment, motivated to exercise different global leadership competencies, motivate others
 Properly interpret the environment, learn from experience, cognitive complexity competency, divergent
thinking skills, ability to switch focus, pattern recognition, identify key facts, evaluate performance and
strategic options, ability to plan and strategize, ability to make sound decisions, ability to learn and
acquirement skills
 See opportunity in adversity, use diversity to stimulate creativity, an appreciation of cultural diversity,
create opportunities to broaden perspective, manage tension between global and local needs
Desired Behavioural
Competencies of
Global Leaders
 Social skills
 Networking
skills
 Knowledge
 Manages personal relationships, leads changes, takes charge and inspires with vision, visionary leadership,
develops others, manages conflict, builds and leads teams, fosters collaboration, good communication and
listening skills, persuasive, finds common ground and build bonds, moderately extrovert, manages first
impressions, multicultural communicative competence, lead multicultural teams, negotiates conflict,
brings out the best in people, fosters cooperation and team building, attract and develop talent, aligns
people to one vision, emotional intelligence, logical intelligence
 Builds and maintains networks, pursue partnerships, build connections, establish internal networks, build
communities
 Language skills, computer skills, balance global verses local tensions, global knowledge, technical
expertise, professional expertise, understands marketing financial concepts, total organization astuteness,
THE ETHNOCENTRIC OR GLOBAL CORPORATION: THE PERFORMANCE QUESTION
140
understanding of business systems, sees worldwide opportunities, understands global competition and
market trends, understanding of cultural factors on behaviour and communication, establish a
corporate culture that transcends cultural differences and established beacons of values and attitudes,
understands needs and goals different constituents, appreciates cultural differences, manages diversity
and cross cultural ethics, recognizes skills in others; finds, hires and motivates staffs of diverse cultural
backgrounds, creates a safe an positive environment, award systems that are in line with norms and
values of different cultures
THE ETHNOCENTRIC OR GLOBAL CORPORATION: THE PERFORMANCE QUESTION
141
APPENDIX 2
CORPORATE PERFORMANCE MEASUREMENTS
Corporation
Country
Continent
Psychic Zone
Industry
Sales ($BIL)
Profits ($ BIL)
Assets ($ BIL)
Market Value ($ BIL)
Forbes Global 2000 rank
Sample rank
Return on Assets (ROA)
ROA SR
Return on Equity (ROE)
ROE SR
Total Ranking Relative to
Sample Ranking (sum of t,v,x)
Overall Sample Performance
Rank
Total Ranking Relative to real
ROA/ROE date (sum of U,W)
Overall Sample Performance
Rank
Designated A top (T), bottom
(B), or Global High Performer
(GHP)
Number of Psychic Zones
Number of Countries Where
they Operate
Number of Board Members
Number of Foreign National on
Board
Number of Psychic Zones
Represented on Board
Number of GTMT Members
Number of Foreign Nationals on
GTMT
Number of Psychic Zones
Represented on GTMT
Number of Employees
Number of Foreign Employees
ABB
Switzerland
Europe
GE
CG
31.8
2.9
33.68
46.46
143
32
7.21%
22
19.91%
20
74
24
27.12%
19
T&
GHP
14
87
8
7
5
10
8
4
117,000
110,000
Nestlé
Switzerland
Europe
GE
FD
97.08
10.07
105.16
173.67
36
15
7.65%
17
18.25%
25
57
17
25.90%
21
T
14
140
12
5
3
13
12
4.5
280,000
184,800
Credit Swiss
Group
Switzerland
Europe
GE
DF
50.26
6.11
988.91
53.93
44
17
0.59%
46
18.41%
23
86
30
19.00%
30
T
14
55
15
9
4
14
8.5
4
47,600
26,700
Zurich Fin
Services
Switzerland
Europe
GE
IN
70.27
3.22
366.66
34.71
63
20
0.89%
43
10.77%
36
99
38
11.66%
39
GHP
14
49
11
7
2.5
12
9
3.5
60,000
54,000
Nokia
Finland
Europe
NO
TE
58.72
1.28
49.11
49.18
135
30
4.77%
28
7.33%
44
102
43
12.10%
38
control
9
13
9
5
5
10
3
3
123,553
77,867
BHP Billiton
Australia/
Australia
AN
MA
50.21
5.88
74.86
192.45
62
19
14.64%
7
28.76%
10
36
3
43.40%
11
T
5
25
12
6.5
2
7
5
5
40,990
25,293
British Amer
Tabacco
UK
Europe
AN
FD
22.95
4.38
42.41
68.27
133
29
11.43%
10
37.05%
4
43
6
48.48%
6
GHP
10
41
13
8
4.5
11
4.5
3
61,053
48,147
Unilever
NL & UK
Europe
GE & AN
FD
57.05
4.83
52.05
91.33
85
22
8.35%
15
34.79%
8
45
7
43.14%
12
control
12
97
12
5
3
10
5
4
163,000
135,000
HewlettPackard
US
North
America
AN
TE
116.92
8.13
113.62
121.33
35
14
6.80%
24
20.54%
17
55
14
27.34%
18
T
14
170
12
3
4
15
5
5
304,000
236,000
Monsanto
US
North
America
AN
CH
10.77
1.53
17.61
38.87
342
38
7.36%
21
9.50%
39
98
39
16.86%
33
GHP
14
82
11
2
1
12
2
1
22,900
12,600
Allianz SE
Germany
Europe
GE
IN
130.06
6.16
834.04
52.74
23
8
0.76%
44
12.69%
31
83
29
13.45%
37
T
13
70
12
4
3
10
5
3
153,503
104,152
Teva Pharm
Inds
Israel
Middle
East
IN- Israel
DB
14.36
2.07
33.21
56.19
209
36
7.42%
20
13.67%
30
86
33
21.09%
27
GHP
8
16
15
3
3
12
5
3
35,089
28,788
Delhaize
Group
Belgium
Europe
LE
FM
26.5
0.65
13.47
7.81
520
44
5.70%
26
10.78%
35
105
44
16.48%
34
GHP
5
5
12
4
2
7
3
3
141,000
117952
Research in
Motion
Canada
North
America
AN
TE
14.34
2.27
9.7
39.09
384
40
23.99%
2
36.46%
6
48
13
60.45%
4
GHP
6
14
9
1
2
9
1
2
12,000
3424
Procter &
Gamble
US
North
America
AN
HP
76.78
13.05
135.29
187.47
29
12
7.61%
19
17.62%
26
57
18
25.23%
22
T
14
80
10
2
3
42
17
8.5
135,000
95,000
THE ETHNOCENTRIC OR GLOBAL CORPORATION: THE PERFORMANCE QUESTION
142
Corporation
Country
Continent
Psychic Zone
Industry
Sales ($BIL)
Profits ($ BIL)
Assets ($ BIL)
Market Value ($ BIL)
Forbes Global 2000 rank
Sample rank
Return on Assets (ROA)
ROA SR
Return on Equity (ROE)
ROE SR
Total Ranking Relative to
Sample Ranking (sum of t,v,x)
Overall Sample Performance
Rank
Total Ranking Relative to real
ROA/ROE date (sum of U,W)
Overall Sample Performance
Rank
Designated A top (T), bottom
(B), or Global High Performer
(GHP)
Number of Psychic Zones
Number of Countries Where
they Operate
Number of Board Members
Number of Foreign National on
Board
Number of Psychic Zones
Represented on Board
Number of GTMT Members
Number of Foreign Nationals on
GTMT
Number of Psychic Zones
Represented on GTMT
Number of Employees
Number of Foreign Employees
GDF Suez
France
Europe
LE
UT
114.65
6.42
245.95
83.36
24
9
3.04%
34
7.79%
43
86
32
10.83%
42
T
9
30
17
2
1
18
4
1
200,650
21,350
Goldman
Sachs Group
US
North
America
AN
DF
51.67
13.39
849
84.95
25
10
1.40%
40
18.30%
24
74
25
19.70%
28
GHP
12
33
11
2
3
9
1
1
31,701
13,631
Infosys
Technologies
India
Asia
IN-India
SS
4.22
1.17
4.34
32.2
807
47
17.21%
4
28.12%
11
62
19
45.33%
10
GHP
11
28
13
2
2
38
4
2
122,486
23550
Tesco
UK
Europe
AN
FM
77.94
3.1
65.61
51.43
84
21
4.14%
30
16.96%
27
78
26
21.10%
26
T
6
14
16
2
3
8
0
1
364,015
175,341
E.ON
Germany
Europe
GE
UT
117.38
12.05
214.58
68.26
25
11
3.69%
31
22.69%
14
56
16
26.38%
20
GHP
5
14
20
3
3
6
1
2
88,000
52,951
Intel
US
North
America
AN
SC
35.13
4.37
53.1
115.29
100
25
16.80%
5
22.30%
16
46
10
39.10%
13
4
6
10
0
1
32
10
4
78,800
35,460
BNP Paribas
France
Europe
LE
BK
101.06
8.37
2952.22
86.67
11
4
0.31%
47
10.27%
37
88
34
10.58%
43
GHP
13
84
17
6
4
12
1
1
201,100
136,500
Walmart
US
North
America
AN
RE
408.21
14.34
170.71
205.37
14
6
9.15%
11
22.53%
15
32
2
31.68%
14
T
6
15
15
2
1
32
6
2
2,100,000
700,000
General
Electric
US
North
America
AN
CG
156.78
11.03
781.82
169.65
2
2
1.06%
42
9.84%
38
82
28
10.90%
41
T
14
63
17
2.5
1
21
4.5
3
288,000
154,000
PetrobrasPetroleo Brasil
Brazil
South
America
IN-Brazil
OG
104.81
16.63
198.26
190.34
18
7
8.72%
13
18.70%
22
42
5
27.42%
17
GHP
9
28
9
0
1.5
7
0
1
76,739
7,605
Rolls-Royce
Group
UK
Europe
AN
AD
16.82
3.59
24.32
15.57
283
37
4.15%
29
0.82%
46
112
45
4.97%
46
GHP
9
21
14
1
1
18
4
2
38,500
16,500
Caterpiller
US
North
America
AN
CG
32.4
0.9
60.04
36.14
165
35
2.08%
37
19.15%
21
93
37
21.23%
25
T
10
23
16
2.5
2
35
6
3
112,887
59,378
Swire Pacific
China
Asia
FE
CG
3.18
0.76
25.52
16.76
672
45
2.02%
38
20.41%
18
101
41
22.43%
24
GHP
7
21
16
1
2
8
1
2
75,000
32,000
BASF
America
Movil
Germany
Europe
North
America
GE
CH
72.63
2.02
72.06
52.12
97
24
8.03%
16
16.45%
28
68
22
24.48%
23
T
14
86
12
2.5
3
8
0
1
104,779
56,193
LA
TS
30.22
5.4
34.7
72.09
131
28
12.60%
8
34.33%
9
45
8
46.93%
8
GHP
3
18
9
2
2
4
0
1
52,879
36,353
Mexico
United Parcel
Service
US
North
America
AN
TN
45.3
2.15
31.88
58.43
139
31
9.11%
12
36.62%
5
48
12
45.73%
9
T
14
215
11
1
1
12
0
1
408,000
68,000
IBM
US
North
America
AN
SS
95.76
13.43
109.02
167.01
33
13
11.62%
9
76.92%
1
23
1
88.54%
1
T
14
170
13
3.5
3
18
1
1.5
399,409
284,409
Exxon/Mobil
US
AN
OG
275.56
19.28
233.32
308.77
4
3
8.49%
14
19.97%
19
36
4
28.46%
16
T
13
38
10
1
2
5
0.5
1
80,700
50,800
Hochtef
Germany
GE
CN
26.61
0.24
16.53
4.75
786
46
2.51%
36
9.12%
41
123
46
11.63%
40
GHP
12
31
8
2
2
5
0
1
66,000
55,000
Pfizer
US
AN
DB
50.01
8.64
212.95
143.23
40
16
7.63%
18
10.88%
34
68
23
18.51%
31
T
13
44
15
0
1
13
2
2
116,500
50,000
North
America
Europe
North
America
THE ETHNOCENTRIC OR GLOBAL CORPORATION: THE PERFORMANCE QUESTION
143
Corporation
Country
Continent
Psychic Zone
Industry
Sales ($BIL)
Profits ($ BIL)
Assets ($ BIL)
Market Value ($ BIL)
Forbes Global 2000 rank
Sample rank
Return on Assets (ROA)
ROA SR
Return on Equity (ROE)
ROE SR
Total Ranking Relative to
Sample Ranking (sum of t,v,x)
Overall Sample Performance
Rank
Total Ranking Relative to real
ROA/ROE date (sum of U,W)
Overall Sample Performance
Rank
Designated A top (T), bottom
(B), or Global High Performer
(GHP)
Number of Psychic Zones
Number of Countries Where
they Operate
Number of Board Members
Number of Foreign National on
Board
Number of Psychic Zones
Represented on Board
Number of GTMT Members
Number of Foreign Nationals on
GTMT
Number of Psychic Zones
Represented on GTMT
Number of Employees
Number of Foreign Employees
Boeing
US
North
America
AN
AD
68.28
1.31
62.05
48.45
120
26
1.84%
39
63.31%
2
67
21
65.15%
3
T
9
14
13
0
1
11
0
1
159,000
26,877
Ford
US
North
America
AN
CD
118.31
2.72
194.85
41.8
58
18
2.82%
35
-1.58%
47
100
40
1.24%
47
T
10
23
14
0
1
33
9
3
198,000
129,000
JP Morgan
US
North
America
AN
BK
115.63
11.65
2031.99
166.19
1
1
0.74%
45
9.15%
40
86
31
9.89%
44
T
4
60
11
0
1
17
0
1
220,000
40,000
McDonalds
US
North
America
AN
HR
22.74
4.55
30.07
69.05
153
34
15.12%
6
36.35%
7
47
11
51.47%
5
T / GHP
13
117
13
1
1
16
2
2
400,000
264,000
Vinci
France
Europe
LE
CN
44.52
2.23
75.23
28.11
124
27
3.59%
32
15.63%
29
88
35
19.22%
29
T
13
103
13
1
2
14
0
1
145,000
72,000
Toyota
Japan
Asia
IN-Japan
CD
210.84
-4.49
292.73
127.1
360
39
1.17%
41
4.72%
45
125
47
5.89%
45
control
10
26
27
0
1
49
4
3
320,590
148,520
Canon
Compass
Group
Texas
Instraments
Japan
Asia
IN-Japan
BS
34.53
1.46
41.33
55.8
147
33
5.92%
25
8.28%
42
100
42
14.20%
36
T
6
15
17
0
1
13
1
2
168,879
96,261
UK
Europe
AN
BS
21.51
0.94
11.74
13.94
441
43
7.11%
23
22.95%
13
79
27
30.06%
15
GHP
11
50
10
1
1
6
0
1
386,000
323,359
US
North
America
AN
SC
10.43
1.47
12.12
30.59
417
41
19.77%
3
27.63%
12
56
15
47.40%
7
GHP
9
30
11
0
1
30
0
1
27,700
14,800
Honda
Japan
Asia
IN-Japan
CD
102.82
1.41
117.24
63.22
86
23
3.08%
33
12.59%
33
89
36
15.67%
35
GHP
11
23
21
0
1
29
0
1
181,876
98403
H&M Hennes
& Mauritz
Sweden
Europe
NO
RE
14.54
2.35
7.6
50.24
427
42
32.37%
1
54.84%
3
46
9
87.21%
2
GHP
10
38
8
0
1
16
1
1
76,000
71,126
THE ETHNOCENTRIC OR GLOBAL CORPORATION: THE PERFORMANCE QUESTION
144
CORPORATE CULTURAL DIVERSITY METRICS – DOG SCORE DATA
Country
Foreign Employees to Total
Employees Quotient (FETEQ)
Foreign Management quotient
(FMQ )
Foreign Employee/Manager
Variance Score (FEMVS) =(FETEQ - FMQ) + 1
Board cultural diversity quotient
a.
Board cultural diversity quotient
b
GTMT cultural diversity
quotient b
Nationality key leader quotient
(NKLQ)
Nationality of regional
headquarters leader‘s quotient
(NRHLQ)
Corporate culture and
philosophy score (CCPS)
Preliminary DOG Score (With
all Eight Variables)
Preliminary DOG Ranking
New DOG Score (Without
NRHLQ and CCPS)
New DOG Ranking
Adjusted DOG Score
Switzerland
0.940171
0.8333
0.893162393
0.875
0.625
0.8
0.4
1
0.8
0.5
5.8931624
1
4.5931624
1
4.5931624
Switzerland
0.66
0.66
1
0.417
0.25
0.885
0.346
1
1
0.25
5.1474359
2
3.8974359
2
3.8974359
Credit Swiss
Group
Switzerland
0.561
0.6034
1
0.6
0.267
0.607
0.286
0.5
0.6
0.75
4.6095238
5
3.2595238
3
3.2595238
Zurich Fin
Services
Switzerland
0.695652
0.6957
0.795652174
0.636
0.227
0.75
0.292
0.5
1
0.75
4.9509552
3
3.2009552
4
3.2009552
GTMT cultural diversity
quotient a
Corporation
ABB
Nestlé
Finland
0.63
0.4211
0.790821071
0.556
0.556
0.3
0.3
0.5
1
0.75
4.7519322
4
3.0019322
5
3.0019322
Australia/
0.617053
0.6053
0.988210218
0.542
0.167
0.714
0.286
0.25
0.25
0.5
4.1965436
7
2.9465436
6
2.9465436
British Amer
Tobacco
UK
0.789
0.5208
0.732223437
0.615
0.346
0.409
0.273
0.5
0.6
0.75
4.2255801
6
2.8755801
7
2.8755801
Unilever
NL & UK
0.828
0.4545
0.626324596
0.417
0.25
0.5
0.4
0.5
0.6
0.75
4.0429913
8
2.6929913
8
2.6929913
HewlettPackard
US
0.776316
0.2963
0.519980507
0.25
0.333
0.333
0.333
0.5
1
0.75
4.0199805
9
2.2699805
9
2.2699805
Monsanto
US
0.550218
0.1739
0.623694703
0.182
0.091
0.167
0.083
1
0.6
0.5
3.246422
12
2.146422
10
2.146422
Allianz SE
Germany
0.68
0.4091
0.72926088
0.333
0.25
0.5
0.3
0
1
0.5
3.6125942
10
2.1125942
11
2.1125942
Teva Pharm
Inds
Israel
0.82
0.2963
0.475868242
0.2
0.2
0.417
0.25
0.5
1
0
3.0425349
15
2.0425349
12
2.0425349
Delhaize
Group
Belgium
0.836539
0.3684
0.531882046
0.333
0.167
0.429
0.429
0
1
0.25
3.1390249
13
1.8890249
13
1.8890249
Research in
Motion
Canada
0.285333
0.2222
0.936888889
0.111
0.222
0.333
0.222
0
0
0
1.8257778
36
1.8257778
14
1.8257778
Procter &
Gamble
US
0.703704
0.3654
0.661680912
0.2
0.3
0.405
0.202
0
0.6
0.75
14
1.7688
15
1.7688
GDF Suez
France
0.106
0.1714
1
0.118
0.059
0.222
0.056
0
1
0.25
19
1.4542484
16
1.4542484
3.1188238
2.7042484
GEOCENTRIC
Nokia
BHP Billiton
THE ETHNOCENTRIC OR GLOBAL CORPORATION: THE PERFORMANCE QUESTION
0.192267
0.1176
0.925380188
0.154
0.154
0.105
UK
0.482
0.0833
0.601647139
0.125
0.188
0
E.ON
Germany
0.602
0.1538
0.552130245
0.15
0.15
Intel
US
0.45
0.2381
0.788095238
0
0.1
BNP Paribas
France
0.679
0.2414
0.562612528
0.353
Wal-Mart
US
0.333
0.1702
0.836879433
Swire Pacific
China
0.427
0
General
Electric
US
0.535
Brazil
0.111
0
0.4
1
2.7967812
17
1.3967812
17
1.3967812
0.053
0
0.667
0.75
2.8076339
16
1.3909672
18
1.3909672
0.125
0.333
0.2
0.25
1.8224805
37
1.3724805
19
1.2474804
0.167
0.333
0
0.8
0.25
2.4021302
23
1.3521302
20
1.3521302
0.313
0.125
0
1
1
3.3255952
11
1.3255952
21
1.22559523
0.235
0.083
0.083
0
0
1
2.3175145
26
1.3175145
22
1.3175145
0.133
0.067
0.188
0.063
0
0.9
0.25
2.4368794
22
1.28688
23
1.28688
0.615
.0625
0.125
.125
0.25
0
0.5
0
1.5525
40
1.2191666
28
1.2191666
0.1842
0.649488304
0.147
0.059
0.214
0.143
0
0.8
0.25
2.2625135
28
1.2125135
24
1.2125135
0.099
0
0.900897849
0
0.167
0
0.143
0
0
0.25
1.4604217
41
1.2104217
25
0.90089784
UK
0.429
0.1563
0.727678571
0.071
0.071
0.222
0.111
0
0.8
0.75
2.753869
18
1.203869
26
1.203869
Caterpillar
US
0.526
0.1667
0.640671645
0.156
0.125
0.171
0.086
0
0.6
0.25
2.0290645
30
1.1790645
27
1.1790645
BASF
America
Movil
Germany
0.536
0.125
0.588699787
0.208
0.25
0
0.125
0
0.2
0.75
2.1220331
29
1.1720331
29
1.04703312
Mexico
0.687
0.1538
0.466370975
0.222
0.222
0
0.25
0
0.75
0
1.9108154
34
1.1608154
30
1.1608154
United Parcel
Service
US
0.167
0.0435
0.876811594
0.091
0.091
0
0.083
0
1
0.5
2.6419631
20
1.1419631
31
1.058629
IBM
US
0.712075
0.1452
0.4330867
0.269
0.231
0.056
0.083
0
1
0.5
2.5719756
21
1.0719756
32
1.0719756
Exxon/Mobil
US
0.629
0.1
0.470508055
0.1
0.2
0.1
0.2
0
0.6
0.25
1.9205081
33
1.0705081
33
1.0705081
Hochtef
Germany
0.833
0.1538
0.320512821
0.25
0.25
0
0.2
0
0.8
0
1.8205128
38
1.0205128
34
0.8205128
Pfizer
US
0.429185
0.0714
0.642244022
0
0.067
0.154
0.154
0
1
0.25
2.266603
27
1.016603
35
0.949936
Boeing
US
0.169
0
0.830899371
0
0.077
0
0.091
0
0.6
0.25
1.8487315
35
0.9987315
36
0.8308993
Ford
US
0.652
0.1915
0.53997421
0
0.071
0.273
0.091
0
0
1
1.9750391
31
0.9750391
37
0.90361057
PetrobrasPetroleo
Brasil
Rolls-Royce
Group
EMERGING
India
Tesco
Adjusted DOG Score
Infosys
New DOG Ranking
GTMT cultural diversity
quotient a
0.111
New DOG Score (Without
NRHLQ and CCPS)
Board cultural diversity quotient
b
0.273
Preliminary DOG Ranking
Board cultural diversity quotient
a.
0.182
Preliminary DOG Score (With
all Eight Variables)
Foreign Employee/Manager
Variance Score (FEMVS) =(FETEQ - FMQ) + 1
0.720013564
Corporate culture and
philosophy score (CCPS)
Foreign Management quotient
(FMQ )
0.15
Nationality of regional
headquarters leader‘s quotient
(NRHLQ)
Foreign Employees to Total
Employees Quotient (FETEQ)
0.43
Nationality key leader quotient
(NKLQ)
Country
US
GTMT cultural diversity
quotient b
Corporation
Goldman
Sachs Group
145
THE ETHNOCENTRIC OR GLOBAL CORPORATION: THE PERFORMANCE QUESTION
146
Corporation
Country
Foreign Employees to Total
Employees Quotient (FETEQ)
Foriegn Management quotient
(FMQ )
Foriegn Employee/Manager
Variance Score (FEMVS) =(FETEQ - FMQ) + 1
Board cultural diversity quotient
a.
Board cultural diversity quotient
b
GTMT cultural diversity
quotient a
GTMT cultural diversity
quotient b
Nationality key leader quotient
(NKLQ)
Nationality of regional
headquarters leader‘s quotient
(NRHLQ)
Corporate culture and
philosophy score (CCPS)
Preliminary DOG Score (With
all Eight Variables)
Preliminary DOG Ranking
New DOG Score (Without
NRHLQ and CCPS)
New DOG Ranking
Adjusted DOG Score
JP Morgan
US
0.181818
0
0.818181818
0
0.091
0
0.059
0
0.333
0.5
1.8012478
39
0.9679144
38
0.8181818181
McDonalds
US
0.66
0.1034
0.443448276
0.077
0.077
0.125
0.125
0
1
0.5
2.3472944
24
0.8472944
39
0.8472944
France
0.497
0.037
0.540485313
0.077
0.154
0
0.071
0
0.6
0.5
1.9426831
32
0.8426831
40
0.771254543
Japan
0.463271
0.0526
0.589360735
0
0.037
0.082
0.061
0
0.2
0.25
1.2192549
43
0.7692549
41
0.73221787
Canon
Japan
0.57
0.0333
0.463333511
0
0.059
0.077
0.154
0
0.2
0
0.9529263
44
0.7529263
42
0.694102741
UK
0.837718
0.0625
0.224782383
0.1
0.1
0
0.167
0
0.6
0.25
1.4414491
42
0.5914491
43
0.4247823
US
0.534
0
0.465703971
0
0.091
0
0.033
0
1
0.75
2.3399464
25
0.5899464
44
0.465703971
Honda
Japan
0.541044
0
0.458955552
0
0.048
0
0.034
0
0
0.25
0.7910574
46
0.5410574
45
0.45895555
H&M Hennes
& Mauritz
Sweden
0.936
0.0417
0.105798246
0
0.125
0.063
0.063
0
0.2
0.25
0.8057982
45
0.3557982
46
0.2307982
Compass
Group
Texas
Instruments
*
14 PSYCHIC ZONES

Anglo (AN)
INDUSTRIES ( ABVN)

Aerospace and Defence (AD)

Hotels, Restaurants, and Leisure (HR)

Germanic (GE)

Banking (BK)

Household and Personal Products (HP)

Nordic (NO)

Business Services and Supplies (BS)

Insurance (IN)

Near east (NE)

Capital Goods (CG)

Materials (MA)

Arab (AB)

Chemicals (CH)

Media (ME)

Far East (FE)

Conglomerates (CG)

Oil and Gas Operations (OG)

Latin America (LA)

Construction (CN)

Retailing (RE)


Ethnocentric
Vinci
Toyota

Consumer Durables (CD)

Semiconductors (SC)
Latin European (LE)
Ronan (1985) highlighted in his synthesis of country cultural clusters that African countries, South Africa being the only exception, have not been studied adequately to determine where they fit
amongst the established clusters, if at all. For the purposes of this study, African countries will be classified as ―Africa‖, and Eastern European countries were also added as a cluster.

Diversified Financials (DF)

Software and Services (SS)
Independent ((IN) -Japan, Brazil, Israel, India)

Africa (AF)*

Drugs and Biotechnology (DB)

Technology Hardware and Equipment (TE)

Eastern European (EE) *

Food Markets (FM)

Telecommunication Services (TS)

Food, Drink and Tobacco (FD)

Trading Companies (TC)
THE ETHNOCENTRIC OR GLOBAL CORPORATION: THE PERFORMANCE QUESTION
147
CORPORATE CULTURAL DIVERSITY METRICS – DOG SCORE CALCULATIONS
Serial
Company
In what country(ies) is the company incorporated?
In how many psychic zones does it have operations? (must be more than two)
(A) In how many countries does the company conduct operations? (excluding sales and
marketing; must be more than five)
(B) How many board members are there?
What are their nationalities?
(C) How many foreign nationals are on the board
(D) How many psychic zones are represented on the board?
(E) How many GTMT members are there?
What are their nationalities?
(F) How many foreign nationals are on the GTMT?
(G) How many psychic zones are represented on the GTMT?
(H) How many key leaders (chairman, presidents and CEO) are considered?
What are key leader nationalities?
(I) How many key leaders come from a country other than the corporation's home country?
(J) sample of five regional leaders or national subsidiaries?
(K) How many regional leaders are not from the corporation’s home country?
(L) How many employees are there?
(M) How many foreign employees are there?
Foreign Employees to Total Employees Quotient (FETEQ) = M/L
Foreign Management quotient (FMQ ) = (C+F) / (B+E)
Foreign Employees Management Variance score (FEMVS) =-(FETEQ - FMQ) + 1
Board cultural diversity quotient a. (Board CDQa) = C/B
Board cultural diversity quotient b. (Board CDQb) = D/B
GTMT cultural diversity quotient a. (GTMT CDQa) = F/E
GTMT cultural diversity quotient b. (GTMT CDQb) = G/E
Nationality key leader quotient (NKLQ) (Chairman, President, CEO) = I/H
Nationality of regional headquarters leader’s quotient (NRHLQ) = K/J
Corporate culture and philosophy score (CCPS)? Sum of:
• Is national cultural diversity a strategic goal (0.0 or 0.25)?
• Does the company ignore national cultural diversity, accept and value cultural
differences and seek to manage them, or specifically seek to integrate and leverage global
cultural diversity as a strategy as inherent part of its culture (0.0, 0.25, 0.50)?
• Does the Chairman, President, or CEO speak about leveraging national cultural
diversity in official company documents (0.0 for no; 0.25 for yes)?
DEGREE OF GEOCENTRICITY (DOG) score out of eight
DOG Score Out of six (Less NRHLQ and CCPS)
1
Toyota
Japan
10 - AN, NE, FE, LA,
LI, EE, IN x 4
2
Nokia
Finland
9 - FE,NO, GE,
LA, AN, EU, IN x 3
3
Unilever
NL & UK
12 - NO, LE, GE, NE,
AR, FE, AN, LE, IN x 4
26
13
97
27
0
1
49
JP (45); US (1); CA
(1); SA (1); FR (1)
4
3
3
Jp
0
5
1
320,590
148,520
0.463270844
0.052631579
0.589360735
0
0.037037037
0.081632653
0.06122449
0
0.2
9
Finn (4), IN, GE,
SWE, FR, US
5
5
10
CA , Fin (7), US,
Venezuala
3
3
2
Fin, CA
1
5
5
123,553
77,867
0.630231561
0.421052632
0.790821071
0.555555556
0.555555556
0.3
0.3
0.5
1
12
NL(5); SWE, US (3),
UK (2), SA
5
3
10
NL (2); UK (3); FR, IT,
US (2), IN
5
4
2
SWE, NL
1
5
3
163,000
135,000
0.82822086
0.45454545
0.6263246
0.41666667
0.25
0.5
0.4
0.5
0.6
0.25
0.75
0.75
1.219254914
0.769254914
4.751932182
3.001932182
4.04299126
2.69299126
JP
THE ETHNOCENTRIC OR GEOCENTRIC GLOBAL CORPORATION: THE PERFORMANCE QUESTION 148
APPENDIX 3 – FINDINGS
Figure 3.1 – Corporations Identified to be Studied
Corporations Studied
Toyota
Nokia
Unilever
Boeing
Rolls-Royce Group
JP Morgan
BNP Paribas
Canon
Compass Group
ABB
Caterpillar
BASF
Monsanto
General Electric
Swire Pacific
Vinci
Hochtef
Ford
Honda
Goldman Sachs Group
Credit Swiss Group
Pfizer
Teva Pharm Inds
Tesco
Delhaize Group
Nestlé
British American Tabacco
McDonalds
Procter & Gamble
Allianz SE
Zurich Financial Services
BHP Billiton
Exxon/Mobil
Petrobras-Petroleo Brasil
Walmart
Hennes & Mauritz (H&M)
Intel
Texas Instruments
IBM
Infosys Technologies
Hewlett-Packard
Research in Motion
America Movil
United Parcel Service
GDF Suez
Japan
Finland
The Netherlands & UK
US
UK
US
France
Japan
UK
Switzerland
US
Germany
US
US
China
France
Germany
US
Japan
US
Switzerland
US
Israel
UK
Belgium
Switzerland
UK
US
US
Germany
Switzerland
Austrailia/UK
US
Brazil
US
Sweden
US
US
US
India
US
Canada
Mexico
US
France
E.ON
Germany
Corporations Dropped from Study
Miyazaki Bank
ITT Educational Services
Aggreko
Kingboard Chemicals
DCC
Vulcan Materials
Embraer
Acom
Toho Holdings
Metcash
First Pacific
United Health Group
Smith & Nephew
Getinge
Tim Hortons
Autogrill
Kimberly Clark de Mexico
Younger Group
Mercury General
Cameco
PT Bukit Asam
Comcast
Grupo Televisa
Singapore Press
Petronus Dagangan
Inchcape
Infineon Technologies
Autonomy
Foxconn Technology
Hutcheson Telecom (Australia)
Canadian National
Groupe Eurotunnel
OGE Energy
Japan
US
UK
China
Ireland
US
Brazil
Japan
Japan
Austrailia
China
US
UK
Sweden
Canada
Italy
Mexico
China
US
Canada
Indonesia
US
Mexico
Singapore
Malaysia
UK
Germany
UK
Taiwan
Australia
Canada
France
US
THE ETHNOCENTRIC OR GEOCENTRIC GLOBAL CORPORATION: THE PERFORMANCE QUESTION 149
Figure 3.2 – Number of Companies by Country with Continent Indicated
Figure 3.3 – Countries by Continent and Psychic Zone
THE ETHNOCENTRIC OR GEOCENTRIC GLOBAL CORPORATION: THE PERFORMANCE QUESTION 150
Figure 3.4 – Industries Actually Studied Compared to Sample Plan
Note: There were no companies studied from the
industries marked in red.
·Aerospace and Defence (AD) (3 of 21)
·Banking (BK) (3 of 308)
·Business Services and Supplies (BS) (3 of 46)
·Capital Goods (CG) (3 of 68)
·Chemicals (CH) (3 of 62)
·Conglomerates (CG) (3 of 42)
·Construction (CN) (3 of 84)
·Consumer Durables (CD) (3 of 49)
·Diversified Financials (DF) (3 of 153)
·Drugs and Biotechnology (DB) (3 of 44)
·Food Markets (FM) (3 of 32)
·Food, Drink and Tobacco (FD) (3 of 86)
·Healthcare Equipment and Services (HE) (3 of 46)
·Hotels, Restaurants, and Leisure (HR) ( 3 of 20)
·Household and Personal Products (HP) ( 3 of 39)
·Insurance (IN) (3 of 111)
·Materials (MA) (3 of 134)
·Media (ME) (3 of 50)
·Oil and Gas Operations (OG) (3 of 115)
·Retailing (RE) (3 of 72)
·Semiconductors (SC) (3 of 22)
·Software and Services (SS) (3 of 35)
·Technology Hardware and Equipment (TE) (3 of 66)
·Telecommunication Services (TS) (3 of 73)
·Trading Companies (TC) (3 of 22)
·Transportation (TN) (3 of 82)
·Utilities (UT) (3 of 117)
THE ETHNOCENTRIC OR GEOCENTRIC GLOBAL CORPORATION: THE PERFORMANCE QUESTION 151
Figure 3.5 – Global 2000 Ranking of Companies Studied
THE ETHNOCENTRIC OR GEOCENTRIC GLOBAL CORPORATION: THE PERFORMANCE QUESTION 152
Figure 3.6 – Sales of Companies Studied
Sales ($BIL)
Quantiles
100.0%
99.5%
97.5%
90.0%
75.0%
50.0%
25.0%
10.0%
2.5%
0.5%
0.0%
maximum
quartile
median
quartile
minimum
408.21
408.21
385.00
138.08
103.32
50.97
25.61
13.27
3.36
3.18
3.18
Moments
Mean
Std Dev
Std Err Mean
Upper 95% Mean
Lower 95% Mean
N
74.186087
74.677778
11.010638
96.36265
52.009524
46
Figure 3.7 – Profits of Companies Studied
Profits ($ BIL)
Quantiles
100.0%
99.5%
97.5%
90.0%
75.0%
50.0%
25.0%
10.0%
2.5%
0.5%
0.0%
maximum
quartile
median
quartile
minimum
19.28
19.28
18.82
13.40
8.44
3.41
1.47
0.86
-3.66
-4.49
-4.49
Moments
Mean
Std Dev
Std Err Mean
Upper 95% Mean
Lower 95% Mean
N
5.335
5.0892277
0.7503657
6.8463141
3.8236859
46
THE ETHNOCENTRIC OR GEOCENTRIC GLOBAL CORPORATION: THE PERFORMANCE QUESTION 153
Figure 3.8 – Asset Value of Companies Studied
Asset Value ($ BIL)
Quantiles
100.0%
99.5%
97.5%
90.0%
75.0%
50.0%
25.0%
10.0%
2.5%
0.5%
0.0%
maximum
quartile
median
quartile
minimum
2952.2
2952.2
2791.2
838.5
213.4
68.8
31.4
12.0
4.9
4.3
4.3
Moments
Mean
Std Dev
Std Err Mean
Upper 95% Mean
Lower 95% Mean
N
263.1013
543.94092
80.199714
424.63182
101.57079
46
Figure 3.9 – Market Value of Companies Studied
Market Value ($ BIL)
Quantiles
Moments
Mean
Std Dev
Std Err Mean
Upper 95% Mean
Lower 95% Mean
N
84.138696
65.618505
9.6749207
103.62499
64.652405
46
THE ETHNOCENTRIC OR GEOCENTRIC GLOBAL CORPORATION: THE PERFORMANCE QUESTION 154
Figure 3.10 – Return on Assets of Companies Studied
Return on Assets (ROA)
Quantiles
100.0%
99.5%
97.5%
90.0%
75.0%
50.0%
25.0%
10.0%
2.5%
0.5%
0.0%
maximum
quartile
median
quartile
minimum
0.32370
0.32370
0.30904
0.16923
0.09120
0.06955
0.02403
0.00851
0.00359
0.00310
0.00310
Moments
Mean
Std Dev
Std Err Mean
Upper 95% Mean
Lower 95% Mean
N
0.0744478
0.0665813
0.0098169
0.09422
0.0546756
46
Figure 3.11 – Return on Equity of Companies Studied
Return on Equity (ROE)
Quantiles
100.0%
99.5%
97.5%
90.0%
75.0%
50.0%
25.0%
10.0%
2.5%
0.5%
0.0%
maximum
quartile
median
quartile
minimum
0.7692
0.7692
0.7454
0.3675
0.2775
0.1836
0.1065
0.0765
-0.0116
-0.0158
-0.0158
Moments
Mean
Std Dev
Std Err Mean
Upper 95% Mean
Lower 95% Mean
N
0.2114283
0.153081
0.0225706
0.2568877
0.1659688
46
THE ETHNOCENTRIC OR GEOCENTRIC GLOBAL CORPORATION: THE PERFORMANCE QUESTION 155
Figure 3.12 – Sample Ranking of Financial Performance Variables from Best to Worst
THE ETHNOCENTRIC OR GEOCENTRIC GLOBAL CORPORATION: THE PERFORMANCE QUESTION 156
Figure 3.13 – Foreign Employee to Total Employee Quotient (FETEQ) (Mean indicated)
THE ETHNOCENTRIC OR GEOCENTRIC GLOBAL CORPORATION: THE PERFORMANCE QUESTION 157
Figure 3.14 – Foreign Management Quotient (FMQ) (Mean indicated)
THE ETHNOCENTRIC OR GEOCENTRIC GLOBAL CORPORATION: THE PERFORMANCE QUESTION 158
Figure 3.15 – Foreign Management Quotient (FMQ) by Country, Continent, and Psychic Zone
THE ETHNOCENTRIC OR GEOCENTRIC GLOBAL CORPORATION: THE PERFORMANCE QUESTION 159
Figure 3.16 – Foreign Employee/Management Variance Score (FEMVS) by Corporation and Continent
THE ETHNOCENTRIC OR GEOCENTRIC GLOBAL CORPORATION: THE PERFORMANCE QUESTION 160
Figure 3.17 – Board Cultural Diversity Quotients BCDQs a and b, and BCDQa by Continent
Note: There is an error in Swire Pacific‘s
BCDQa and b in this table.
THE ETHNOCENTRIC OR GEOCENTRIC GLOBAL CORPORATION: THE PERFORMANCE QUESTION 161
Figure 3.18 – Board Cultural Diversity Quotients BCDQs a and b
Note: There is an error in Swire Pacific‘s
BCDQa and b in this table.
THE ETHNOCENTRIC OR GEOCENTRIC GLOBAL CORPORATION: THE PERFORMANCE QUESTION 162
Figure 3.19 – GTMT Cultural Diversity Quotients (CDQs) a and b
Note: There is an error in Swire Pacific‘s
GTMT CDQa in this table.
THE ETHNOCENTRIC OR GEOCENTRIC GLOBAL CORPORATION: THE PERFORMANCE QUESTION 163
Figure 3.20 – GTMT Cultural Diversity Quotients (CDQs) a and b Comparison
Note: There is an error in Swire Pacific‘s
BCDQa in this table.
THE ETHNOCENTRIC OR GEOCENTRIC GLOBAL CORPORATION: THE PERFORMANCE QUESTION 164
Figure 3.21– National Key Leader Quotient (NKLQ)
Figure 3.22 – Nationality of Regional HQs Leader Quotient (NRHLQ)
THE ETHNOCENTRIC OR GEOCENTRIC GLOBAL CORPORATION: THE PERFORMANCE QUESTION 165
Figure 3.23 – Corporate Culture and Philosophy Score (CCPS)
THE ETHNOCENTRIC OR GEOCENTRIC GLOBAL CORPORATION: THE PERFORMANCE QUESTION 166
Figure 3.24– Reliability Test with All Variables
Entire set
α
0.7638
Excluded Col
FEMVS
BCDQa
BCDQb
GTMT CDQa
GTMT CDQb
NKLQ
NRHLQ
CCPS
α
0.7524
0.6873
0.7355
0.6800
0.7416
0.7034
0.7996
0.7922
Figure 3.25 – Reliability Test with NRHLQ and CCPS Variables Eliminated
Entire set
α
0.7996
Excluded Col
FEMVS
BCDQa
BCDQb
GTMT CDQa
GTMT CDQb
NKLQ
CCPS
α
0.7953
0.7222
0.7722
0.7213
0.7845
0.7515
0.8474
Entire set
α
0.7922
Excluded Col
FEMVS
BCDQa
BCDQb
GTMT CDQa
GTMT CDQb
NKLQ
NRHLQ
α
0.7941
0.7194
0.7695
0.7083
0.7670
0.7367
0.8474
THE ETHNOCENTRIC OR GEOCENTRIC GLOBAL CORPORATION: THE PERFORMANCE QUESTION 167
Figure 3.26 – Reliability Test with Both NRHLQ and CCPS Variables Eliminated
Entire set
α
0.8474
Excluded Col
FEMVS
BCDQa
BCDQb
GTMT CDQa
GTMT CDQb
NKLQ
α
0.8680
0.7816
0.8315
0.7788
0.8337
0.8207
Figure 3.27 – Factor Analysis – Eigenvalues and Scree Plots for Eight Variable Model
Number
1
2
3
4
5
6
7
8
\
Eigenvalue
3.9554
1.1610
0.9132
0.8387
0.4577
0.3993
0.1835
0.0913
Percent
49.443
14.512
11.415
10.483
5.721
4.991
2.293
1.141
Cum Percent
49.443
63.955
75.370
85.853
91.575
96.566
98.859
100.000
THE ETHNOCENTRIC OR GEOCENTRIC GLOBAL CORPORATION: THE PERFORMANCE QUESTION 168
Figure 3.28 – Factor Analysis – Eigenvalues and Scree Plots for Six and Five Variable Models
Number
1
2
3
4
5
6
Eigenvalue
3.7842
0.9573
0.4906
0.4571
0.2122
0.0986
Percent
63.071
15.954
8.176
7.618
3.537
1.643
Cum Percent
63.071
79.025
87.201
94.820
98.357
100.000
Number
1
2
3
4
5
Eigenvalue
3.6231
0.5395
0.4724
0.2599
0.1052
Percent
72.462
10.790
9.448
5.197
2.103
Cum Percent
72.462
83.251
92.699
97.897
100.000
THE ETHNOCENTRIC OR GEOCENTRIC GLOBAL CORPORATION: THE PERFORMANCE QUESTION 169
Figure 3.29 – Factor Analysis – Two Factor Loading Pattern and Pair-wise Correlation
Rotated Factor
Pattern
FEMVS
BCDQa
BCDQb
GTMT CDQa
GTMT CDQb
NKLQ
0.095659
0.8850155
0.8611378
0.7351011
0.8559481
0.7510236
0.9627379
0.2748429
0.0098781
0.524905
0.0512962
0.2997265
Figure 3.30 – Factor Analysis – Communality Five and Six Variable Models
Final Communality
Estimates
FEMVS
BCDQa
BCDQb
GTMT CDQa
GTMT CDQb
NKLQ
0.93601
0.85879
0.74166
0.81590
0.73528
0.65387
Final Communality
Estimates
BCDQa
BCDQb
GTMT CDQa
GTMT CDQb
NKLQ
0.87249
0.96014
0.91286
0.69606
0.72101
THE ETHNOCENTRIC OR GEOCENTRIC GLOBAL CORPORATION: THE PERFORMANCE QUESTION 170
Figure 3.31 – Whole Model Fits for Eight Variable Model
RSquare
RSquare Adj
Root Mean Square Error
Mean of Response
Observations (or Sum Wgts)
Source
Model
Error
C. Total
Term
Intercept
FEMVS
BCDQa
Figure
BCDQb3.3
GTMT CDQa
GTMT CDQb
NKLQ
NRHLQ
CCPS
Source
FEMVS
BCDQa
BCDQb
GTMT CDQa
GTMT CDQb
NKLQ
NRHLQ
CCPS
DF
8
37
45
Sum of Squares
7698.9715
408.5285
8107.5000
Estimate
Std Error
55.27082
2.389468
-11.36693
2.893261
-10.83263
5.447767
3.9070709
7.939379
Six Variable Model
-11.69576
4.76538
-13.05012
8.544719
-7.814759
2.583309
-14.60648
1.522479
-16.69527
1.948514
Nparm
1
1
1
1
1
1
1
1
DF
1
1
1
1
1
1
1
1
Mean Square
962.371
11.041
t Ratio
23.13
-3.93
-1.99
0.49
-2.45
-1.53
-3.03
-9.59
-8.57
Sum of Squares
170.4246
43.6567
2.6739
66.5093
25.7546
101.0413
1016.2700
810.5882
0.949611
0.938716
3.322847
23.5
46
F Ratio
87.1610
Prob > F
<.0001*
Prob>|t|
<.0001*
0.0004*
0.0542
0.6255
0.0189*
0.1352
0.0045*
<.0001*
<.0001*
F Ratio
15.4352
3.9539
0.2422
6.0237
2.3326
9.1512
92.0425
73.4141
Prob > F
0.0004*
0.0542
0.6255
0.0189*
0.1352
0.0045*
<.0001*
<.0001*
THE ETHNOCENTRIC OR GEOCENTRIC GLOBAL CORPORATION: THE PERFORMANCE QUESTION 171
Figure 3.32 – Whole Model Fits for Six Variable Model
RSquare
RSquare Adj
Root Mean Square Error
Mean of Response
Observations (or Sum Wgts)
Source
Model
Error
C. Total
Term
Intercept
FEMVS
BCDQa
BCDQb
GTMT CDQa
GTMT CDQb
NKLQ
Source
FEMVS
BCDQa
BCDQb
GTMT CDQa
GTMT CDQb
NKLQ
DF
6
39
45
Sum of Squares
39.916555
0.245521
40.162076
Estimate
-0.008733
0.951942
0.9265533
1.1127192
0.989748
1.125968
1.0205902
Nparm
1
1
1
1
1
1
Std Error
0.049924
0.069068
0.129519
0.181862
0.109623
0.180711
0.060995
DF
1
1
1
1
1
1
Mean Square
6.65276
0.00630
t Ratio
-0.17
13.78
7.15
6.12
9.03
6.23
16.73
Sum of Squares
1.1958814
0.3221782
0.2356735
0.5131781
0.2444032
1.7625269
F Ratio
1056.764
Prob > F
<.0001*
Prob>|t|
0.8620
<.0001*
<.0001*
<.0001*
<.0001*
<.0001*
<.0001*
F Ratio
189.9610
51.1767
37.4358
81.5163
38.8225
279.9704
Prob > F
<.0001*
<.0001*
<.0001*
<.0001*
<.0001*
<.0001*
0.993887
0.992946
0.079344
1.585717
46
THE ETHNOCENTRIC OR GEOCENTRIC GLOBAL CORPORATION: THE PERFORMANCE QUESTION 172
Figure 3.33 – Eight and Six Variable DOG Scores
THE ETHNOCENTRIC OR GEOCENTRIC GLOBAL CORPORATION: THE PERFORMANCE QUESTION 173
Figure 3.34 – Six Variable DOG Score Variables
0.3557982
0.5410574
0.5899464
0.5914491
0.7529263
0.7692549
0.8426831
0.8472944
0.9679144
0.9750391
0.9987315
1.016603
1.0205128
1.0705081
1.0719756
1.1419631
1.1608154
1.1720331
1.1790645
1.203869
1.2104217
1.2125135
1.2191667
1.28688
1.3175145
1.3255952
1.3521302
1.3724805
1.3909672
1.3967812
1.4542484
1.7688238
1.8257778
1.8890249
2.0425349
2.1125942
2.146422
2.2699805
2.6929913
2.8755801
2.9465436
3.0019322
3.2009552
3.2595238
3.8974359
4.5931624
46
45
44
43
42
41
40
39
38
37
36
35
34
33
32
31
30
29
28
27
26
25
24
23
22
21
20
19
18
17
16
15
14
13
12
11
10
9
8
7
6
5
4
3
2
1
THE ETHNOCENTRIC OR GEOCENTRIC GLOBAL CORPORATION: THE PERFORMANCE QUESTION 174
Figure 3.35 – Correlation between Forbes Ranking and DOG Score
THE ETHNOCENTRIC OR GEOCENTRIC GLOBAL CORPORATION: THE PERFORMANCE QUESTION 175
Correlation
Variable
Mean
Std Dev Correlation
Final DOG Score (six variable model)
1.541915
0.855852
-0.27069
Forbes Global 2000 rank
124.6098
129.3773
Linear Fit
Forbes Global 2000 rank = 187.70395 - 40.919375*Final DOG Score (six variable model)
Signif. Prob
0.0869
Number
41
Summary of Fit
RSquare
RSquare Adj
Root Mean Square Error
Mean of Response
Observations (or Sum Wgts)
Analysis of Variance
Source
Model
Error
C. Total
DF
1
39
40
0.073272
0.04951
126.1339
124.6098
41
Sum of Squares
49058.61
620481.14
669539.76
Parameter Estimates
Term
Intercept
Final DOG Score (six variable model)
Mean Square
49058.6
15909.8
Estimate
187.70395
-40.91937
Std Error
40.97617
23.30254
F Ratio
3.0836
Prob > F
0.0869
t Ratio
4.58
-1.76
Prob>|t|
<.0001*
0.0869
Polynomial Fit Degree=2
Forbes Global 2000 rank = 216.68407 - 80.020285*Final DOG Score (six variable model) + 43.813874*(Final DOG Score (six variable
model)-1.54191)^2
Summary of Fit
RSquare
RSquare Adj
Root Mean Square Error
Mean of Response
Observations (or Sum Wgts)
Analysis of Variance
Source
Model
Error
C. Total
DF
2
38
40
0.139735
0.094457
123.1155
124.6098
41
Sum of Squares
93557.81
575981.94
669539.76
Parameter Estimates
Term
Intercept
Final DOG Score (six variable model)
(Final DOG Score (six variable model)-1.54191)^2
Mean Square
46778.9
15157.4
Estimate
216.68407
-80.02029
43.813874
F Ratio
3.0862
Prob > F
0.0573
Std Error
43.42485
32.21958
25.57103
t Ratio
4.99
-2.48
1.71
Prob>|t|
<.0001*
0.0175*
0.0948
NOTE: Most statistically relevant result was for run of sample companies in top 500. Polynomial Nonlinear Fit was statistically relevant, possibly
indicating an optimal DOG score or that too much national diversity impacts negatively on Forbes 500 Ranking
THE ETHNOCENTRIC OR GEOCENTRIC GLOBAL CORPORATION: THE PERFORMANCE QUESTION 176
Figure 3.36 – Correlation between Return on Assets and DOG Score
Correlation
Variable
Final DOG Score (six variable model)
Return on Assets (ROA)
Mean
1.538796
0.064858
Std Dev
0.837405
0.050244
Correlation
-0.02403
Signif. Prob
0.8785
Number
43
Linear Fit
Return on Assets (ROA) = 0.0670763 - 0.0014415*Final DOG Score (six variable model)
Summary of Fit
RSquare
RSquare Adj
Root Mean Square Error
Mean of Response
Observations (or Sum Wgts)
Analysis of Variance
Source
Model
Error
C. Total
DF
1
41
42
0.000577
-0.0238
0.050838
0.064858
43
Sum of Squares
0.00006120
0.10596583
0.10602702
Parameter Estimates
Term
Intercept
Final DOG Score (six variable model)
Mean Square
0.000061
0.002585
Estimate
0.0670763
-0.001441
F Ratio
0.0237
Prob > F
0.8785
Std Error
0.016368
0.009368
t Ratio
4.10
-0.15
Prob>|t|
0.0002*
0.8785
NOTE: No statistically relevant results for runs of total sample population, top 500, top 250, top 100
NOTE: A slight error in calculating the DOG scores of Wal-Mart, P&G, and Swire Pacific was found after this table was created. Subsequent
testing showed these errors did not affect the statistical relevance of the calculations
THE ETHNOCENTRIC OR GEOCENTRIC GLOBAL CORPORATION: THE PERFORMANCE QUESTION 177
Figure 3.37 – Correlation between Return on Equity and DOG Score
THE ETHNOCENTRIC OR GEOCENTRIC GLOBAL CORPORATION: THE PERFORMANCE QUESTION 178
Correlation
Variable
Mean
Std Dev
Correlation
Final DOG Score (six variable model)
1.593254
0.93138
-0.08686
Return on Equity (ROE)
0.211428 0.153081
Linear Fit
Return on Equity (ROE) = 0.1900596 - 0.0007244*Final DOG Score (six variable model)
Signif. Prob
0.5660
Number
46
Summary of Fit
RSquare
RSquare Adj
Root Mean Square Error
Mean of Response
Observations (or Sum Wgts)
Analysis of Variance
Source
DF
Model
1
Error
41
C. Total
42
2.831e-5
-0.02436
0.115155
0.188937
43
Sum of Squares
0.00001539
0.54368503
0.54370042
Parameter Estimates
Term
Intercept
Final DOG Score (six variable model)
Mean Square
0.000015
0.013261
Estimate
0.1900596
-0.000724
F Ratio
0.0012
Prob > F
0.9730
Std Error
0.037334
0.021263
t Ratio
5.09
-0.03
Correlation
Variable
Mean
Std Dev
Correlation
Final DOG Score (six variable model)
1.593254
0.93138
-0.08686
Return on Equity (ROE)
0.211428
0.153081
Linear Fit
Return on Equity (ROE) = 0.1085125 + 0.0324183*Final DOG Score (six variable model)
Prob>|t|
<.0001*
0.9730
Signif. Prob
0.5660
Number
46
Summary of Fit
RSquare
RSquare Adj
Root Mean Square Error
Mean of Response
Observations (or Sum Wgts)
Analysis of Variance
Source
Model
Error
C. Total
0.143713
0.102937
0.072016
0.164639
23
DF
1
21
22
Sum of Squares
0.01827887
0.10891146
0.12719033
Parameter Estimates
Term
Intercept
Final DOG Score (six variable model)
Mean Square
0.018279
0.005186
Estimate
0.1085125
0.0324183
F Ratio
3.5245
Prob > F
0.0744
Std Error
0.033456
0.017268
t Ratio
3.24
1.88
Prob>|t|
0.0039*
0.0744
Polynomial Fit Degree=2
Return on Equity (ROE) = 0.0687744 + 0.0693818*Final DOG Score (six variable model) - 0.0312894*(Final DOG Score (six variable
model)-1.59325)^2
Summary of Fit
RSquare
RSquare Adj
Root Mean Square Error
Mean of Response
Observations (or Sum Wgts)
Analysis of Variance
Source
Model
Error
C. Total
DF
2
20
22
0.231402
0.154542
0.069914
0.164639
23
Sum of Squares
0.02943212
0.09775821
0.12719033
Mean Square
0.014716
0.004888
F Ratio
3.0107
Prob > F
0.0719
Parameter Estimates
Term
Intercept
Final DOG Score (six variable model)
Estimate
0.0687744
0.0693818
Std Error
0.041797
0.029662
t Ratio
1.65
2.34
Prob>|t|
0.1155
0.0298*
(Final DOG Score (six variable model)-1.59325)^2
-0.031289
0.020714
-1.51
0.1465
THE ETHNOCENTRIC OR GEOCENTRIC GLOBAL CORPORATION: THE PERFORMANCE QUESTION 179
Figure 3.38 – Correlation between ROA/ROE Sum and DOG Score
NOTE: A slight error in calculating the DOG scores of Wal-Mart, P&G, and Swire
Pacific was found after this table was created. Subsequent testing showed these errors
did not affect the statistical relevance of the calculations
THE ETHNOCENTRIC OR GEOCENTRIC GLOBAL CORPORATION: THE PERFORMANCE QUESTION 180
Correlation of Total Sample
Variable
Final DOG Score (six variable model)
Total Ranking Relative to real ROA/ROE date (sum of U,W)
Mean
1.585717
0.285876
Std Dev
0.944717
0.197687
Correlation
-0.10398
Signif. Prob
0.4916
Number
46
Linear Fit
Total Ranking Relative to real ROA/ROE date (sum of U,W) = 0.2498879 + 0.0056247*Final DOG Score (six variable model)
Summary of Fit
RSquare
RSquare Adj
Root Mean Square Error
Mean of Response
Observations (or Sum Wgts)
Lack Of Fit
Source
Lack Of Fit
Pure Error
Total Error
Analysis of Variance
Source
Model
Error
C. Total
0.000906
-0.02346
0.157919
0.258642
43
DF
40
1
41
DF
1
41
42
Sum of Squares
0.9892250
0.0332562
1.0224812
Sum of Squares
0.0009271
1.0224812
1.0234083
Mean Square
0.024731
0.033256
F Ratio
0.7436
Prob > F
0.7469
Max RSq
0.9675
Mean Square
0.000927
0.024939
Parameter Estimates
Term
Intercept
Final DOG Score (six variable model)
F Ratio
0.0372
Prob > F
0.8481
Estimate
0.2498879
0.0056247
Correlation
Variable
Final DOG Score (six variable model)
Total Ranking Relative to real ROA/ROE date (sum of U,W)
Mean
1.726215
0.219591
Std Error
0.051394
0.029173
Std Dev
0.912293
0.109647
t Ratio
4.86
0.19
Correlation Signif. Prob
0.269386
0.2139
Prob>|t|
<.0001*
0.8481
Number
23
Linear Fit
Total Ranking Relative to real ROA/ROE date (sum of U,W) = 0.1637017 + 0.0323769*Final DOG Score (six variable model)
Summary of Fit
RSquare
RSquare Adj
Root Mean Square Error
Mean of Response
Observations (or Sum Wgts)
Analysis of Variance
Source
Model
Error
C. Total
DF
1
21
22
0.072569
0.028405
0.108078
0.219591
23
Sum of Squares
0.01919389
0.24529881
0.26449270
Mean Square
0.019194
0.011681
Parameter Estimates
Term
Intercept
Final DOG Score (six variable model)
Estimate
0.1637017
0.0323769
F Ratio
1.6432
Prob > F
0.2139
Std Error
0.04908
0.025258
t Ratio
3.34
1.28
Prob>|t|
0.0031*
0.2139
Polynomial Fit Degree=2
Total Ranking Relative to real ROA/ROE date (sum of U,W) = 0.1505749 + 0.04934*Final DOG Score (six variable model) - 0.0202928*(Final DOG
Score (six variable model)-1.72621)^2
Summary of Fit
RSquare
RSquare Adj
Root Mean Square Error
Mean of Response
Observations (or Sum Wgts)
Analysis of Variance
Source
DF
Sum of Squares
Model
2
0.02437826
Error
20
0.24011444
C. Total
22
0.26449270
Parameter Estimates
Term
Intercept
Final DOG Score (six variable model)
(Final DOG Score (six variable model)-1.72621)^2
0.09217
0.001387
0.109571
0.219591
23
Mean Square
0.012189
0.012006
F Ratio
1.0153
Prob > F
0.3802
Estimate
0.1505749
0.04934
-0.020293
Std Error
0.053618
0.03636
0.030881
t Ratio
2.81
1.36
-0.66
Prob>|t|
0.0109*
0.1899
0.5186
THE ETHNOCENTRIC OR GEOCENTRIC GLOBAL CORPORATION: THE PERFORMANCE QUESTION 181
Figure 3.39 – Correlation between Total Financial Performance ROA/ROE/Forbes Ranking
Sum and DOG Score
Correlation
Variable
Final DOG Score (six variable model)
Total Ranking Relative to Sample Ranking (sum of t,v,x)
Mean
1.585717
72.17391
Std Dev
0.944717
25.5954
Correlation Signif. Prob
-0.03761
0.8040
Number
46
Linear Fit
Total Ranking Relative to Sample Ranking (sum of t,v,x) = 74.419933 - 1.505447*Final DOG Score (six variable model)
Summary of Fit
RSquare
RSquare Adj
Root Mean Square Error
Mean of Response
Observations (or Sum Wgts)
Lack Of Fit
Source
Lack Of Fit
Pure Error
Total Error
Analysis of Variance
Source
Model
Error
C. Total
0.002377
-0.02082
26.15123
72.13333
45
DF
42
1
43
DF
1
43
44
Sum of Squares
25082.632
4324.500
29407.132
Sum of Squares
70.068
29407.132
29477.200
Parameter Estimates
Term
Intercept
Final DOG Score (six variable model)
Mean Square
597.21
4324.50
Mean Square
70.068
683.887
Estimate
74.419933
-1.505447
F Ratio
0.1381
Prob > F
0.9898
Max RSq
0.8533
F Ratio
0.1025
Prob > F
0.7505
Std Error
8.138171
4.703249
t Ratio
9.14
-0.32
Prob>|t|
<.0001*
0.7505
NOTE: No statistically relevant results for runs of total sample population, top 500, top 250, top 100
NOTE: A slight error in calculating the DOG scores of Wal-Mart, P&G, and Swire Pacific was found after this table was created. Subsequent
testing showed these errors did not affect the statistical relevance of the calculations
THE ETHNOCENTRIC OR THE GLOBAL CORPORATION: THE PERFORMANCE QUESTION
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Figure 3.40 – Number of Psychic Zones and Countries Where the Firm Operates by DOG Scores
Linear Fit
Number of Psychic Zones = 8.9309742 + 0.8074151*Final DOG Score (six variable model)
Summary of Fit
RSquare
RSquare Adj
Root Mean Square Error
Mean of Response
Observations (or Sum Wgts)
Analysis of Variance
Source
Model
Error
C. Total
DF
1
44
45
0.048768
0.027149
3.358766
10.21739
46
Sum of Squares
25.44838
496.37771
521.82609
Parameter Estimates
Term
Intercept
Final DOG Score (six variable model)
Mean Square
25.4484
11.2813
Estimate
8.9309742
0.8074151
Std Error
0.98937
0.537584
F Ratio
2.2558
Prob > F
0.1403
t Ratio
9.03
1.50
Prob>|t|
<.0001*
0.1403
THE ETHNOCENTRIC OR THE GLOBAL CORPORATION: THE PERFORMANCE QUESTION
Correlation
Variable
Final DOG Score (six variable model)
Number of Countries Where they Operate
Mean
1.593254
52.71739
Std Dev Correlation
0.93138
0.185775
47.78873
Signif. Prob
0.2164
183
Number
46
Linear Fit
Number of Countries Where they Operate = 37.530404 + 9.5320578*Final DOG Score (six variable model)
Summary of Fit
RSquare
RSquare Adj
Root Mean Square Error
Mean of Response
Observations (or Sum Wgts)
Analysis of Variance
Source
Model
Error
C. Total
DF
1
44
45
0.034512
0.01257
47.48744
52.71739
46
Sum of Squares
3546.83
99222.50
102769.33
Parameter Estimates
Term
Intercept
Final DOG Score (six variable model)
Mean Square
3546.83
2255.06
Estimate
37.530404
9.5320578
Std Error
13.98806
7.600559
F Ratio
1.5728
Prob > F
0.2164
t Ratio
2.68
1.25
Prob>|t|
0.0102*
0.2164
THE ETHNOCENTRIC OR THE GLOBAL CORPORATION: THE PERFORMANCE QUESTION
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Figure 3.41 – Number of Employees by DOG Scores (Grouped by Continent)
Correlation
Variable
Mean
Std Dev
Correlation
Final DOG Score (six variable model)
1.502182
0.762298
-0.28568
Number of Employees
143854.4
112304.4
Linear Fit
Number of Employees = 222716.98 - 49447.084*Final DOG Score (six variable model)
Signif. Prob
0.0667
Number
42
Summary of Fit
RSquare
RSquare Adj
Root Mean Square Error
Mean of Response
Observations (or Sum Wgts)
Analysis of Variance
Source
Model
Error
C. Total
DF
1
41
42
0.104868
0.083035
111982.3
149485.7
43
Sum of Squares
6.0233e+10
5.1414e+11
5.7437e+11
Parameter Estimates
Term
Intercept
Final DOG Score (six variable model)
Mean Square
6.023e+10
1.254e+10
Estimate
222716.98
-49447.08
F Ratio
4.8033
Prob > F
0.0341*
Std Error
37524.88
22561.67
t Ratio
5.94
-2.19
Prob>|t|
<.0001*
0.0341*
NOTE: A slight error in calculating the DOG scores of Wal-Mart, P&G, and Swire Pacific was found after this table was created. Subsequent
testing showed these errors did not affect the statistical relevance of the calculations
THE ETHNOCENTRIC OR THE GLOBAL CORPORATION: THE PERFORMANCE QUESTION
185
Figure 3.42 – Number of Foreign Employees by DOG Scores
Correlation
Variable
Mean
Std Dev
Correlation
Final DOG Score (six variable model)
1.535921
0.840012
-0.06474
Number of Foreign Employees
85524.77
77712.41
Linear Fit
Number of Foreign Employees = 90291.94 - 8516.6643*Final DOG Score (six variable model)
Signif. Prob
0.6763
Summary of Fit
RSquare
RSquare Adj
Root Mean Square Error
Mean of Response
Observations (or Sum Wgts)
Analysis of Variance
Source
Model
Error
C. Total
DF
1
40
41
0.009069
-0.0157
68708.04
77498.36
42
Sum of Squares
1728115794
1.8883e+11
1.9056e+11
Parameter Estimates
Term
Intercept
Final DOG Score (six variable model)
Mean Square
1.7281e+9
4.7208e+9
Estimate
90291.94
-8516.664
F Ratio
0.3661
Prob > F
0.5486
Std Error
23654.23
14076.37
t Ratio
3.82
-0.61
Prob>|t|
0.0005*
0.5486
NOTE: A slight error in calculating the DOG scores of Wal-Mart, P&G, and Swire Pacific was found after this table was created. Subsequent
testing showed these errors did not affect the statistical relevance of the calculations
Number
44
THE ETHNOCENTRIC OR THE GLOBAL CORPORATION: THE PERFORMANCE QUESTION
186
Figure 3.43 – Relation between the Population of the Country and DOG Score
Correlation
Variable
Mean
Std Dev Correlation Signif. Prob
Final DOG Score (six variable model)
1.593254
0.93138
-0.27763
0.0617
population
2.064e+8
2.616e+8
Linear Fit
population = 259205342 - 63426966*Final DOG Score (six variable model)
Number
46
Summary of Fit
RSquare
RSquare Adj
Root Mean Square Error
Mean of Response
Observations (or Sum Wgts)
Analysis of Variance
Source
Model
Error
C. Total
DF
1
41
42
0.172776
0.1526
1.181e+8
1.617e+8
43
Sum of Squares
1.1945e+17
5.7189e+17
6.9134e+17
Parameter Estimates
Term
Intercept
Final DOG Score (six variable model)
Mean Square
1.194e+17
1.395e+16
F Ratio
8.5634
Prob > F
0.0056*
Estimate
259205342
Std Error
37887286
t Ratio
6.84
Prob>|t|
<.0001*
-63426966
21674645
-2.93
0.0056*
THE ETHNOCENTRIC OR THE GLOBAL CORPORATION: THE PERFORMANCE QUESTION
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Figure 3.44 – The Correlation of Various Dependent DOG Variables to ROE in Forbes‘ Top 100 Firms
Bivariate Fit of Return on Equity (ROE) By BCDQb
Correlation
Variable
Linear Fit
Return on Equity (ROE) = 0.1073074 + 0.3240675* BCDQb
BCDQa
Return on Equity (ROE)
Summary of Fit
RSquare
RSquare Adj
Root Mean Square Error
Mean of Response
Observations (or Sum Wgts)
0.147625
0.107036
0.071851
0.164639
23
Analysis of Variance
Source
DF Sum of Squares
Model
1
0.01877647
Error
21
0.10841387
C. Total
22
0.12719033
Parameter Estimates
Term
Estimate
Intercept
0.1073074
BCDQb
0.3240675
Mean Square
0.018776
0.005163
Std Error
0.033589
0.169927
t Ratio
3.19
1.91
Bivariate Fit of Return on Equity (ROE) By BCDQa
F Ratio
3.6370
Prob > F
0.0703
Prob>|t|
0.0044*
0.0703
NOTE: A slight error in calculating the DOG scores of Wal-Mart, P&G, and
Swire Pacific was found after this table was created. Subsequent testing showed
these errors did not affect the statistical relevance of the calculations
NOTE: Excludes IBM as an outlier
Mean Std Dev
0.213522 0.199222
0.164639 0.076035
Correlation Signif.
Prob
0.326838 0.1280
Parameter Estimates
Term
Intercept
BCDQa
(BCDQa-0.21352)^2
Estimate
0.1413882
0.1970909
-0.496061
Std Error
0.022695
0.098538
0.41371
t Ratio
6.23
2.00
-1.20
GTMT CDQb
23
Return on Equity (ROE)
Mean Std Dev
Correlation
0.186522 0.11113
0.164639 0.076035
0.552759
Signif.
Prob
0.0062*
Summary of Fit
0.166725
0.083397
0.072796
0.164639
23
Mean Square
0.010603
0.005299
Correlation
Variable
Number
Linear Fit
Return on Equity (ROE) = 0.0940969 + 0.3781983*GTMT CDQb
Polynomial Fit Degree=2
Return on Equity (ROE) = 0.1413882 + 0.1970909*BCDQa 0.4960608*(BCDQa-0.21352)^2
Summary of Fit
RSquare
RSquare Adj
Root Mean Square Error
Mean of Response
Observations (or Sum Wgts)
Analysis of Variance
Source
DF
Sum of Squares
Model
2
0.02120575
Error
20
0.10598459
C. Total
22
0.12719033
Bivariate Fit of Return on Equity (ROE) By GTMT CDQb
F Ratio
2.0008
Prob > F
0.1614
Prob>|t|
<.0001*
0.0592
0.2445
RSquare
RSquare Adj
Root Mean Square Error
Mean of Response
Observations (or Sum Wgts)
0.305542
0.272473
0.064855
0.164639
23
Analysis of Variance
Source
DF Sum of Squares
Model
1
0.03886201
Error
21
0.08832833
C. Total
22
0.12719033
Parameter Estimates
Term
Estimate
Intercept
0.0940969
GTMT CDQb
0.3781983
Std Error
0.02686
0.124422
Mean Square
0.038862
0.004206
t Ratio
3.50
3.04
F Ratio
9.2394
Prob > F
0.0062*
Prob>|t|
0.0021*
0.0062*
THE ETHNOCENTRIC OR THE GLOBAL CORPORATION: THE PERFORMANCE QUESTION
188
Figure 3.45 – The Correlation of Various Dependant Variables to the Forbes Top 500 Firms
Bivariate Fit of Forbes Global 2000 rank by
Bivariate Fit of Forbes Global 2000 rank by BCDQa
FEMVS
Polynomial Fit Degree=2
Forbes Global 2000 rank = 156.71603 - 269.87022*BCDQa +
504.90762*(BCDQa-0.20269)^2
Linear Fit
Forbes Global 2000 rank = 284.43184 - 241.55636*FEMVS
Summary of Fit
Summary of Fit
RSquare
RSquare Adj
Root Mean Square Error
Mean of Response
Observations (or Sum Wgts)
Analysis of Variance
Source
DF
Model
1
Error
40
C. Total
41
RSquare
RSquare Adj
Root Mean Square Error
Mean of Response
Observations (or Sum Wgts)
0.152562
0.131377
119.1294
125.0476
42
Analysis of Variance
Source
DF
Sum of Squares Mean Square
102197.00
102197
567672.91
14192
669869.90
Parameter Estimates
Term
Estimate
Intercept
284.43184
FEMVS
-241.5564
Std Error
62.17389
90.01575
t Ratio
4.57
-2.68
F Ratio
7.2011
Prob > F
0.0105*
Prob>|t|
<.0001*
0.0105*
Model
Error
C. Total
Parameter Estimates
Term
Intercept
BCDQa
(BCDQa-0.20269)^2
2
39
41
0.094453
0.048014
124.715
125.0476
42
Sum of Mean Square
Squares
63270.91
31635.5
606599.00
15553.8
669869.90
Estimate
156.71603
-269.8702
504.90762
Std Error
26.76505
134.2078
364.4451
F Ratio
2.0339
Prob > F
0.1445
t Ratio
5.86
-2.01
Prob>|t|
<.0001*
0.0513
1.39
0.1738
Note: A similar
result was
obtained for
BCDQb.
THE ETHNOCENTRIC OR THE GLOBAL CORPORATION: THE PERFORMANCE QUESTION
189
Figure 3.46 – Comparison of Sample Companies in Forbes Top 100 to Other Firms
Country
Frequencies
Level
US
Switzerland
UK
Germany
France
Japan
NL & UK
Brazil
Australia
Total
Country
Count
11
3
1
3
2
1
1
1
1
24
Frequencies
Level
US
Switzerland
UK
Germany
France
Japan
Sweden
Mexico
Israel
India
Finland
China
Canada
Belgium
Total
Prob
0.45833
0.12500
0.04167
0.12500
0.08333
0.04167
0.04167
0.04167
0.04167
1.00000
Continent
Count
6
1
3
1
1
2
1
1
1
1
1
1
1
1
22
Prob
0.27273
0.04545
0.13636
0.04545
0.04545
0.09091
0.04545
0.04545
0.04545
0.04545
0.04545
0.04545
0.04545
0.04545
1.00000
Continent
Frequencies
Level
North America
Europe
Asia
Australia
South America
Total
Count
11
10
1
1
1
24
Prob
0.45833
0.41667
0.04167
0.04167
0.04167
1.00000
Psychic Zone
Frequencies
Level
North America
Europe
Asia
Middle East
Total
Count
8
9
4
1
22
Prob
0.36364
0.40909
0.18182
0.04545
1.00000
Psychic Zone
Frequencies
Level
Anglo
Germanic
Latin Europe
IN-Japan
Germanic & Anglo
IN-Brazil
Total
Count
13
6
2
1
1
1
24
Prob
0.54167
0.25000
0.08333
0.04167
0.04167
0.04167
1.00000
Frequencies
Level
Anglo
Germanic
Latin Europe
IN-Japan
Nordic
Far East
Latin America
IN- Israel
IN-India
Total
Count
10
2
2
2
2
1
1
1
1
22
Prob
0.45455
0.09091
0.09091
0.09091
0.09091
0.04545
0.04545
0.04545
0.04545
1.00000
THE ETHNOCENTRIC OR THE GLOBAL CORPORATION: THE PERFORMANCE QUESTION
Number of Psychic Zones
maximum
median
minimum
Mean
14.000
12.500
4.000
10.708333
Number of Psychic Zones
maximum
median
minimum
Mean
14.000
10.000
3.000
9.6818182
Number of Countries Where they Operate
Number of Countries Where they Operate
maximum
median
minimum
Mean
maximum
median
minimum
Mean
170.00
46.50
6.00
59.041667
Number of Employees
maximum
median
minimum
Mean
215.00
27.00
5.00
45.818182
Number of Employees
2100000
158251.5
31701
246431.75
maximum
median
minimum
Mean
408000
114944
12000
139614.36
Number of Foreign Employees
Number of Foreign Employees
maximum
median
minimum
Mean
maximum
median
minimum
Mean
700000
75597
7605
119441.17
323359
57189
3424
77568.273
190
THE ETHNOCENTRIC OR THE GLOBAL CORPORATION: THE PERFORMANCE QUESTION
191
NOTES ON STATISTICAL TESTS (JMP, 2005)
―Prob > F is the observed significance probability (p-value) of obtaining a greater F-value by chance
alone if the specified model fits no better than the overall response mean. Observed significance
probabilities of 0.05 or less are often considered evidence of a regression effect.‖
―t Ratio lists the test statistics for the hypothesis that each parameter is zero. It is the ratio of the
parameter estimate to its standard error. If the hypothesis is true, then this statistic has a Student's tdistribution. Looking for a t-ratio greater than 2 in absolute value is a common rule of thumb for judging
significance because it approximates the 0.05 significance level.‖
―Prob>|t| lists the observed significance probability calculated from each t-ratio. It is the probability of
getting, by chance alone, a t-ratio greater (in absolute value) than the computed value, given a true null
hypothesis. Often, a value below 0.05 (or sometimes 0.01) is interpreted as evidence that the parameter is
significantly different from zero.
The density ellipsoid is a good graphical indicator of the correlation between two variables. The ellipsoid
collapses diagonally as the correlation between the two variables approaches either 1 or -1. The ellipsoid
is more circular (less diagonally oriented) if the two variables are uncorrelated.‖
―Correlation is the Pearson correlation coefficient, denoted r , is either the weight of the ith observation
if a weight column is specified, or 1 if no weight column is assigned. If there is an exact linear
relationship between two variables, the correlation is 1 or -1 depending on whether the variables are
positively or negatively related. If there is no relationship, the correlation tends toward zero.‖
THE ETHNOCENTRIC OR THE GLOBAL CORPORATION: THE PERFORMANCE QUESTION
192
FOOTNOTES
i
Nokia is widely acclaimed to be a global corporation
ii
Sirkin et al. (2008) describes pinpointing as thoroughly understanding the advantages and disadvantages of
local areas and siting modularized components of the value chain in optimal locations around the world to take
advantage of cost, talent, labour, etc... ―in a way that makes distance and location seem almost irrelevant‖ (p. 15).
iii
As Ramaswamy, Kroeck, and Renforth (1996) question Sullivan‘s multi-variable construct that he uses to
calculate a uni-dimensional measure of DOI. Sullivan (1996) effectively rebuts criticisms and is supported to that
end by Maritan and Reuer (1995) (as cited by Sullivan (1996) and Kennelly (2000)).
iv
This showed a flaw in DOG model in regards to calculating points for BCDQb and GTMT CDQb. A
company could have only one psychic zone represented on its board and GTMT, all coming from the home country
and in the calculation ―one‖ would be divided by the number of GTMT or board members, thereby giving some
points even though a company had no diversity at all.
v
Alder (2002) writes about the greater import of cultural diversity in global firms, compared to multinational
firms and domestic/multi-domestic ones.