Cultural Distance and its Impact on Expatriation


Seminar Paper, 2015
23 Pages, Grade: 1,0

Excerpt

Table of Content

1. Introduction

2. Expatriation

3. Culture
3.1 Definition
3.2 GLOBE Culture Construct

4. Cultural Dimensions
4.1 Conceptual Elaboration
4.2 Cultural Distance
4.3 Direction of Assignment
4.3.1 Analysis of Cultural Dimensions
4.3.2 Evaluation of Reciprocal Transfers
4.4 Discussion

5. Conclusion

List of References

1. Introduction

As the business world is becoming increasingly global, cultures of the world interconnect and hence cultural barriers present new challenges and opportunities. In the field of international business research cross-cultural analysis continuously gains in importance. Hofstede’s systematic study on cross-national cultures in the 1980s is considered one of the most influential contributions to cross-cultural research. (Tung and Verbeke, 2010) Capturing several of Hofstede’s cultural dimensions, the project Global Leadership and Organizational Behavior Effectiveness (GLOBE) presents a more up-to-date research program dealing with the effects of cultures on organizational processes. Project GLOBE offers additional insights into the relationship between cultural distance and expatriate adjustment by introducing the dimensions Performance Orientation, Humane Orientation and Assertiveness. The GLOBE authors House et al. (2004) performed a large-scale cross-cultural study in 62 societies across the world during the 1990s. The methodological approach included a survey of approximately 17,000 middle managers. The results were published and edited by House et al. in 2004. The most salient finding was that there exist nine cultural dimensions. Moreover, the authors subdivided each of the dimensions into 2 facets: society as it is and society as it should be, meaning a description of some prevalent practices and personality traits in the society and a concept of an ideal society, according to the respondent. Hence, Project GLOBE results in 9x2=18 dimensions. The GLOBE insights have initiated “one of the most heated and controversial debates on contemporary cross-cultural management research” (Fischer, 2009, p.26). This ongoing debate emphasizes the importance of GLOBE’s indications for research and practice.

2. Expatriation

The increasing internationalization of business in the form of international subsidiaries, joint ventures, and strategic alliances, leads to a growing number of people working abroad (Gregersen et al., 1998). In other words, globalization induces a strategic and organizational realignment of numerous multi national enterprises (MNE). In this context, it is crucial to identify the expatriate’s strategic function within MNEs. Bartlett and Ghoshal (1992) argue that MNEs typically have three objectives in common. Firstly, MNEs should response to local markets by differentiating their product based on the preferences of their clients and the cultural and legal characteristics of the national market in which they operate. Secondly, MNEs should globally integrate their operations as to achieve economies of scale and leverage nation factors of production. Thirdly, MNEs should promote innovation and continuous learning by enhancing exchange and communication within the organization. To pursue these objectives, it necessitates assigning personnel to different locations. Thus, expatriates control local adaption, coordinate globally integrated units, and transfer and acquire knowledge and experience. (Bonache et al., 2001) A fundamental desirable quality for an international manager is the ability to appreciate and respect beliefs, values, behaviors and business practices of partners and clients from other cultures (Marquardt and Engel, 1993). Technical skills are crucial, but to further augment effectiveness abroad, the capability to work with diverse individuals and groups who follow different business norms is particularly salient for expatriates (McDonald, 1993). Therefore, successful expatriates feature international competency and cultural empathy.

3. Culture

As indicated above, globalization rapidly increased in the last century, bringing into focus the aspect of cultural diversity. The continuous increase in accessibility and global exchange of human beings, due to the advances in communication technology and in the means of transportation, poses new challenges for all parties involved. With focus on today’s business world, this paper aims at elaborating the significance of cultural distance on organizational processes. This chapter therefore provides a definition of culture and an overview of the culture construct by House et al. (2004).

3.1 Definition

Culture has been defined in various manners. Kroeber and Parsons outline a cross-disciplinary definition of culture as “transmitted and created content and pattern of value, ideas, and other human behavior and the artifacts produced through behavior.” (Kroeber and Parsons, 1958, p.583) Triandis defines “subjective” culture as “a cultural group’s characteristic way of perceiving the man-made part of its environment” and differentiates “subjective” culture from its expression in “objective” artifacts. (Triandis, 1972, p.4) Hofstede considers culture as “the collective programming of the human mind that distinguishes the members of one human group from those of another.” (Hofstede, 1981, p.24) Moreover, Hofstede proposes a model of culture containing five independent dimensions of national culture differences: power distance, uncertainty avoidance, individualism versus collectivism, masculinity versus femininity and long-term versus short-term orientation. It aims at comparing cultures by the means of predefined dimensions of values. Hofstede’s dimensions of culture build the basis for several of the core GLOBE cultural dimensions (House et al., 2004).

For project GLOBE, culture is defined as “shared motives, values, beliefs, identities, and interpretations or meanings of significant events that result from common experiences of members of collectives that are transmitted across generations.” (House et al., 2004, p.15)

3.2 GLOBE Culture Construct

Table 1 provides a brief description of each of the GLOBE cultural dimension. These dimensions build the basis for the subsequent comparative analysis by House et al. (2004).

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Table 1: Culture Construct Definitions

Source: House et al., 2004, p.30.

4. Cultural Dimensions

This chapter includes three analytical approaches to GLOBE’s cultural dimensions. Initially, a conceptual procedure is chosen to introduce into the field of cultural dimensions and expatriation. At the example of Power Distance, the connection between culture and expatriation is clarified. In a second step, the significance of cultural distance is discussed. Then the question whether the impact of cultural distance is contingent on the direction of assignment is discussed. In a final subsection, the validity of the GLOBE cultural dimensions is tested by the means of nomological networks.

4.1 Conceptual Elaboration

This section aims to conceptually elaborate GLOBE’s societal dimensions at the example of Power Distance. This dimension was chosen as it reveals fundamental insights into an organization’s culture and hence into the phenomenon of expatriation.

Power distance “reflects the extent to which a community accepts and endorses authority, power distance and status privileges.” (House et al., 2004, p.513) It is therefore traditionally linked to the perception of social inequality. The latter originates in differences in resources such as wealth, education, and physical characteristics, which enable people to exert social influence that is disproportionate to the social benefits generated. (House et al., 2004)

Social beliefs, values and practices within societies are often transferred to their organizations and their informal code of conduct (Meyer and Rowan, 1977). In this respect it is necessary for expatriates to be informed of the cultural and social climate he/she is dispatched to.

An expatriate must be prepared that employees often support their entrenched interests instead of assisting their clientele and higher officials. The formation of dominant coalitions within an organization and the means by which their power is balanced is also partially determined by culture. The analysis of power dynamics can yield essential insights into the ontology of the organizational culture. As indicated above, organizations often reflect the culture of power distance in their society to attain legitimacy and acceptance from the host society. (House et al., 2004)

GLOBE’s descriptive statistics on societal Power Distance reveal an interesting notion. Of all nine dimensions, Power Distance societal practices have the highest mean of 5.17 on a scale from 1 to 7. In contrast, the Power Distance societal value has the lowest mean of 2.75 of all nine dimensions. (House et al., 2004, p.540, Table 17.5a) The means represent the worldwide sample averages of the aggregated society scores. The results imply a strong perception of power structures that is universally disliked. (House et al., 2004)

Table 2: Descriptive Statistics for GLOBE Power Distance-Society

Source: House et al., 2004, p.540, Table 17.5a

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The managerial relevance of the above mentioned notion depends on the extent to which the Power Distance society influences the culture of the organization. The organizational mean of Power Distance practice equals 4.01, and the Power Distance value equals 3.56 (House et al., 2004, p.542, Table 17.5b), implying a moderate degree of power hierarchy and the preference of a slight reduction in power control.

Table 3: Descriptive Statistics for GLOBE Power Distance-Organizations

Source: House et al., 2004, p.542, Table 17.5b

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An aggregation of organizational scores of societal Power Distance practices and values reveal that higher reported Power Distance practices in societies tend to be accompanied by higher practices of Power Distance in the organization (r = .48, p < .01, N = 225). (House et al., 2004, p.542) The same applies for Power Distance values. All in all, the GLOBE theoretical model postulates that societal practices and values affect organizational practices and values. Organizations therefore reflect the culture in the society in which they are embedded. This is definitely valid for Power Distance but also applies for several other dimensions. (House et al., 2004)

Minkov and Blagoev (2012) indicate that the nomological network, representing external variables that correlate with the construct of interest, is a reliable tool for the empirical analysis of cultural dimensions. In addition, it can reveal significant insights for expatriation. As an expatriate it is crucial to be informed about cultural gaps between the home and host country. In order to determine these gaps, it might be helpful to look at the countries’ social and economic performance. The performance, in turn, is measurable through a number of related indices. If these indices are correlated, either positively or negatively, with the cultural dimension of interest, the expatriate can reveal essential insight for his/her occupation abroad.

The GLOBE authors Carl et al. (2004) have done so and compared GLOBE’s Power Distance with other measures of cross-cultural and comparative studies. In terms of economic health, the following aspects were reflected: economic prosperity referring to consumption and growth; government support for prosperity which pertains to the public sector’s support for economic progress; societal support for competitiveness; the Global Competitiveness Ranking reporting the Competitiveness Index; success in basic science; life expectancy; and the Human Development Index (HDI) published by the United Nations Development Program. Table 3 displays the correlations of GLOBE’s Power Distance with the various measures mentioned above. It indicates that societal Power Distance practices are accompanied by lower economic prosperity, less social and public support for business, lower national competitiveness and less success in basic science. Furthermore, Power Distance practices correlate with lower life expectancy and lower HDI scores, describing health, education and standard of living. (Carl et al., 2004)

Table 4: Relationship between Power Distance and Socioeconomic Health

Source: House et al., 2004, p. 557, Excerpt from Table 17.12 * Correlation is significant at the .05 level (2-tailed) Note: Each correlation remained significant, even when per capita GNP was controlled.

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4.2 Cultural Distance

This section examines the significance of the absolute cultural distance between the expatriate’s home and host country. The literature on cultural distance suggests two competing hypotheses – the Cultural Distance Hypothesis and the Cultural Distance Paradox.

Cultural Distance Hypothesis. The Cultural Distance Hypothesis describes the intuitive perception that greater differences between home and host cultures are related with poorer outcomes (Johnson et al., 2006). In the light of expatriation, it is traditionally believed that the greater the cultural novelty of the assignment destination, the more difficult the expatriate’s adjustment (Black et al., 1991). In the context of cultural distance and expatriate adjustment, Selmer (2007) has detected a phenomenon he refers to as the self-fulfilling prophecy. By this term he aims to express that the stress and anticipation of transferring to a culturally novel location can have a negative impact on expatriate adjustment, including the willingness to relocate. Jenkins and Mockaitis (2010) took another interesting approach towards conceptualizing distance as both an objective and a perceptual construct. By measuring the accuracy of these perceptions, they include the expatriate’s mindset. Their study on New Zealand business expatriates reveals that greater perceptual distance inhibits adjustment and ultimately impacts expatriate performance. In summary, the Cultural Distance Hypothesis suggests a negative relationship between cultural distance and expatriate adjustment and performance (Hemmasi and Downes, 2013).

Cultural Distance Paradox. The Cultural Distance Paradox is the counter-intuitive assertion that greater differences between home and host cultures are associated with more desirable outcomes. According to this, initial expansion in culturally proximate markets might not always be the most fruitful strategy. (O’Grady and Lane, 1996) This is explained by the fact that assumptions of similarity can impede companies and managers from learning about cultural differences. The aggregated sense of confidence hinders firms from preparing for the new host environment and results in a disadvantage vis-à-vis competitors from more culturally distant parent locations. This state may be exacerbated by strong self-reference criteria, implying that expatriates perceive their own culture as “normal” and proceed from this vantage point. Such ethnocentric tendencies further inflate organizational confidence and dissuade firms from preparing their expatriates with prior cross-cultural trainings. Generally, firms are more conscious of cultural gaps when they are clearly pronounced. Furthermore, entrants with a similar cultural background may receive less assistance and are treated with less patience than their counterpart from more dissimilar cultures. To conclude, the Cultural Distance Paradox implies a positive relationship between cultural distance and expatriate adjustment and performance. (Hemmasi and Downes, 2013)

The Cultural Distance Paradox contributes to the existing literature by offering a competing vantage point to what has previously been theorized. It suggests that intuitive logic is not applicable to the relationship between cultural distance and expatriate adjustment. Moreover, it indicates, “(…) that not all cultural differences are disruptive and dysfunctional and that (…) some could be, in fact, complementary and conducive to performance.” (Shenkar, 2012, p.13). In conclusion, both presented theories have their ‘raison d’être’ in the field of expatriation since both are supported by profound empirical research. Nonetheless, further investigation on these theories is required since both contain crucial implications for global competition.

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Details

Title
Cultural Distance and its Impact on Expatriation
College
University of Paderborn  (International Business Prof. Dr. Rüdiger Kabst)
Course
Exzellenzseminar Management
Grade
1,0
Author
Year
2015
Pages
23
Catalog Number
V300639
ISBN (eBook)
9783656975625
ISBN (Book)
9783656975632
File size
458 KB
Language
English
Tags
Cultural Distance, Expatriation, GLOBE Culture Construct, Hofstede's Cultural Dimensions, Project Global Leadership and Organizational Behavior Effectiveness (GLOBE), International Business, Internationalization, Globalization, Culure, Power Distance, Uncertainty Avoidance, Humane Orientation, Collectivism, Assertiveness, Gender Egalitarianism, Future Orientation, Performance Orientation, Cultural Distance Hypothesis, Cultural Distance Paradox, Symmetry Hypothesis, Asymmetry Hypothesis, Society, Organization, Multi National Enterprise
Quote paper
Nina Schwenniger (Author), 2015, Cultural Distance and its Impact on Expatriation, Munich, GRIN Verlag, https://www.grin.com/document/300639

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