What cultural challenges relating to leadership do organisations face when doing business in foreign countries?

TABLE OF CONTENTS

ACKNOWLEDGEMENTS

ABSTRACT

LIST OF ABBREVIATIONS

LIST OF FIGURES

LIST OF TABLES

LIST OF APPENDICES

1. INTRODUCTION
1.1. Definition of the Problem
1.2. Research Gap
1.3. Research Aim and Objectives
1.3.1. Aim
1.3.2. Objectives
1.4. Structure

2. LITERATURE REVIEW
2.1. Definition
2.1.1. Internationalisation
2.1.2. Culture
2.1.2.1. National Culture
2.1.2.2. Organisational Culture
2.1.3. Leadership
2.2. Cross-cultural Leadership within the Internationalisation
Process
2.2.1. Models of Culture
2.2.1.1. Hofstede’s Cultural Dimensions
2.2.1.1.1. Power Distance
2.2.1.1.2. Uncertainty Avoidance
2.2.1.1.3. Individualism vs. Collectivism
2.2.1.1.4. Masculinity vs. Femininity
2.2.1.1.5. Long-term Orientation
2.2.1.1.6. Indulgence vs. Restraint
2.2.1.1.7. Hofstede’s Model in Relation to Leadership
2.2.1.1.8. Critical Evaluation of Hofstede’s Model
2.2.1.2. Globe’s Cultural Dimensions
2.2.2. The Leader’s Role
2.3. Germany vs. Sweden
2.3.1. Culture of Germany
2.3.2. Culture of Sweden
2.4. Literature Conclusion

3. RESEARCH METHODOLOGY
3.1. Research Process
3.1.1.1. Philosophy
3.1.1.2. Approach
3.1.1.3. Strategy
3.1.1.4. Choices
3.1.1.5. Time Horizon
3.2. Data Collection Method
3.2.1. Secondary Data Collection
3.2.2. Primary Data Collection
3.2.2.1. Semi-structured Interview Guide Line
3.2.2.2. Sampling of the Research Data
3.2.3. Research Ethics
3.3. Data Validity, Reliability, Generalisability and Limitations

4. ANALYSIS AND FINDINGS
4.1. Construction Supply Industry
4.2. Cultural Dimensions
4.2.1. Germany
4.2.1.1. Power Distance
4.2.1.2. Uncertainty Avoidance
4.2.1.3. Individualism vs. Collectivism
4.2.1.4. Masculinity vs. Femininity
4.2.1.5. Long-term Orientation
4.2.1.6. Indulgence vs. Restraint
4.2.2. Sweden
4.2.2.1. Power Distance
4.2.2.2. Uncertainty Avoidance
4.2.2.3. Individualism vs. Collectivism
4.2.2.4. Masculinity vs. Femininity
4.2.2.5. Long-term Orientation
4.2.2.6. Indulgent vs. Restraint
4.3. Leadership
4.3.1. Germany
4.3.2. Sweden
4.3.3. Germany vs. Sweden
4.4. Discussion

5. CONCLUSION AND RECOMMENDATIONS
5.1. Conclusion
5.2. Future Research Recommendations

6. BIBLOGRAPHY

APPENDIX

ACKNOWLEDGEMENTS

I offer my enduring gratitude to the faculty, staff and my fellow students at the Buckinghamshire New University, who have inspired me to continue my work in Leadership and Management. I owe a particular thanks to my supervisor Mr. Ian Bracey who taught me in Strategic Leadership and whose expertise, support and guidance made it possible for me to work on this thesis.

I would like to thank Kinga Smolen for her encouragement and input throughout the duration of my degree.

I would also like to especially thank the study participants from Germany and Sweden. This project would not have been possible without you.

Special thanks are owed to my family, which has supported me throughout my years of education. Especially, I would like to thank my beloved wife Sarah and my wonderful son Noah. You are my inspiration and motivation!

Kamp-Lintfort, 2017-04-30 Jann Guzikiewitz

ABSTRACT

Globalisation and decreasing trade barriers reinforce the ever-growing global competition in business. Organisations are forced to leave their domestic market for foreign markets. As a result, these organisations need to develop leadership skills and strategies to stay competitive in an international environment. Internationalisation has become a central aspect within cross-cultural management activities. To successfully implement the internationalisation process, organisations need to ensure their leaders are culturally aware.

The aim of this study is to identify and evaluate the cultural challenges within organisational leadership imposed by their internationalisation activities. This dissertation aims to create an understanding for the relevance of cultural differences within the internationalisation process. It does so by analysing the cultural differences between the German and Swedish construction supply industries.

The research question is; what are the cultural challenges related to leadership that organisations face when doing business in foreign countries. I discuss this question based on the analysis of the contemporary academic literature, whereby Hofstede’s cultural model is considered. Semi-structured expert interviews were used to analyse the current cultural situation in both industries as well as to evaluate the findings of the theory.

In conclusion, the analysis of the German and Swedish construction supply industries showed a significant difference between the contemporary literature and the primary findings of this thesis. Certain aspects of the cultural dimensions of both industries did not correspond to the literature’s view of each country’s culture. Although both industries are similar they show differences, which are recognised within the approach to leadership. Cultural changes are recognised in both countries and industries, as transformation in structure, resources, and expertise are being accelerated by the internet, disruptive technologies, tourism, media and migration. As technology and human migration progress, further cultural research is necessary.

LIST OF ABBREVIATIONS

illustration not visible in this excerpt

LIST OF FIGURES

Figure 1: Reasons for the Internationalisation of Companies

Figure 2: Most Common Forms of Market Entry

Figure 3: Three Levels of Uniqueness in Mental Programming

Figure 4: Culture as an Iceberg

Figure 5: Manifestations of Culture at Different Levels of Depth

Figure 6: Studies on National Culture

Figure 7: Criticism on Hofstede's Cultural Model

Figure 8: Cultural Characteristics of Germany

Figure 9: Cultural Characteristics of Sweden

Figure 10: The Research Onion

Figure 11: Summary of the Research Structure

Figure 12: Deductive and Inductive Approaches

Figure 13: The Process of Deduction

Figure 14: Methodological Choice

Figure 15: Research Ethics Checklist (Page 1)

Figure 16: Research Ethics Checklist (Page 2)

Figure 17: Research Ethics Checklist (Page 3)

Figure 18: Document to Give Interview Respondents

Figure 19: Informed Consent Form

Figure 20: Sample Signed Informed Consent Form

LIST OF TABLES

Table 1: Methodology of the Theoretical Review

Table 2: Classification of Culture

Table 3: Attributes of Culture

Table 4: Organisational Culture

Table 5: Leadership-Theories

Table 6: The Approaches of Culture

Table 7: Hofstede's Cultural Dimensions

Table 8: Objectives and Consequences of IR

Table 9: GLOBE's Cultural Dimensions

Table 10: Global CLT Leadership Dimensions

Table 11: Essentials of Research Design

Table 12: Advantages and Disadvantages of Primary and Secondary Data

Table 13: Different Interview Techniques

Table 14: Coding of the Semi-Structured Interview

Table 15: Function of the WU Section

Table 16: Function of the NOCL Section

Table 17: Function of the CD Section

Table 18: Function of the GS Section

Table 19: Function of the CL Section

Table 20: Overview of the Interview Participants

Table 21: The German PD Dimension

Table 22: The German UA Dimension

Table 23: The German IC Dimension

Table 24: The German MF Dimension

Table 25: The German LO Dimension

Table 26: The German IR Dimension

Table 27: The Swedish PD Dimension

Table 28: The Swedish UA Dimension

Table 29: The Swedish IC Dimension

Table 30: The Swedish MF Dimension

Table 31: The Swedish LO Dimension

Table 32: The Swedish IR Dimension

Table 33: The Cultural Dimensions Compared

Table 34: Leading the Internationalisation Activities to Success

Table 35: WU Coding Table

Table 36: NOCL Coding Table (Part 1)

Table 37: NOCL Coding Table (Part 2)

Table 38: CD Coding Table (Part 1)

Table 39: CD Coding Table (Part 2)

Table 40: CD Coding Table (Part 3)

Table 41: CD Coding Table (Part 4)

Table 42: CD Coding Table (Part 5)

Table 43: CD Coding Table (Part 6)

Table 44: GS Coding Table (Part 1)

Table 45: GS Coding Table (Part 2)

Table 46: CL Coding Table

LIST OF APPENDICES

Appendix I: Guideline for Semi-structured interviews

Appendix II: Coding Table

Appendix III: Research Ethics Checklist

Appendix IV: Information Document

Appendix V: Informed Consent Form

Appendix VI: Cultural Dimensions of Germany

Appendix VII: Cultural Dimensions of Sweden

Appendix VIII: German Leadership Characteristics

Appendix IX: Swedish Leadership Characteristics

Appendix X: Swedish and German Leadership Comparison

Appendix XI: Adapting to a different culture

1. INTRODUCTION

1.1. Definition of the Problem

Today’s organisations are facing the challenges of the 21st century. Globalisation as well as a radical transformation in structure, resources, and expertise is accelerated by the internet, disruptive technologies, tourism, media and immigration. (Trimble, 2015) As a result, the term of “the global village” has been coined by Hofstede, Hofstede and Minkov (2010). This term refers to the ever-shrinking world and its trade barriers.

Many people fear globalisation and its consequences. Recent global events, such as BREXIT and the election of Donald Trump as the United States of America president show that not everyone supports the consequences of globalisation. (Piketty, 2016). A study by the Bertelsmann Stiftung reveals that almost 45% of all European citizens view globalisation as a threat. (de Vries and Hoffmann, 2016) In 2017, Koch (2017) emphasises that globalisation covers both opportunities and threats for countries, groups, organisations and the individuals.

However, not all developments are directly triggered by globalisation. More often economic effects are only reinforced by globalisation like the increasing global competition of business. (Koch, 2017) Manyika et al. (2016) suggest that the world is more connected than ever before. As a result, growing global interdependence of economy, science and society lead to an increased level of competition in industry. Hence, organisations are forced to leave their domestic market for foreign markets. Baba (2015) depicts that internationalisation of business is crucial for large multinational organisations as well as for smaller sized companies to generate future competitive advantages, sustainable growth and to satisfy the profit expectations of all stakeholders.

It is worth noting that internationalisation of business is associated with various challenges and can lead to failure. Organisations need to develop certain leadership skills and tools to succeed in an international environment. In 2008, Jackson and Parry (2008, p.63) emphasised that “leadership is essentially a cultural activity – it is suffused with values, beliefs, language, rituals and artefacts.” This makes leadership a central aspect within cross-cultural management activities. A study by the Akademie für Führungskräfte reveals that 80% of the survey participants, exclusively leaders from Germany, think that intercultural development for leaders is essential to improve cooperation between distant collaborators. (Akademie für Führungskräfte der Wirtschaft GmbH, 2015) To successfully implement the internationalisation process, organisations need to ensure their leaders’ cultural awareness. The development of leader’s multicultural interactive skills will sustain the leadership effectiveness across cultural boarders. (Trompenaars and Hampden-Turner, 1997) Being able to deal with different cultures requires an understanding of the impact of cultural differences. Thus, successful leaders need to be aware of the following question in the future:

What cultural challenges relating to leadership do organisation face when doing business in foreign countries?

1.2. Research Gap

Studies about culture and internationalisation are often discussed (Piepenburg, 2011; Swoboda, 2016), but only a few of these studies consider the leadership issues. (Swoboda, 2016) Leadership is a crucial success factor, so it is important to consider leadership aspects within the scope of culture and internationalisation.

Analysing a relevant industry of two different countries will lead to a comprehensive view on two specific cultures. Therefore, this study will focus the German construction supply industry (GCSI) and Swedish construction supply industry (SCSI) for the following reasons.

According to Elter and Glunz (2016) a significant portion of German family businesses will change leadership for reasons of age within the next five years. The next generation of leaders will be more globally educated then current executives. Internationalisation is seen as an opportunity to broaden operating activities and become independent from single markets. (Elter and Glunz, 2016) The trend towards internationalisation of business will increase in Germany. Specifically, organisations located in markets with a high competitive intensity will be affected most by this development. For instance, Germany is the largest European construction market. (Barston, 2016) The construction supply industry is a highly competitive sector. (Dr. Wieselhuber & Partner GmbH, 2016)

Furthermore, Germany and Sweden have a significant trade relationship. Most of Sweden’s import products are German. While Swedish products have a high acceptance in Germany. (Auswärtiges Amt, 2016) Moreover, Sweden is northern Europe’s largest economy and attracts the most foreign direct investment within Scandinavia. (Steinacher and Bozoyan, 2014) Swedish and German organisations have engagements in both countries and are economical integrated as a result. (Auswärtiges Amt, 2016) According to Barston (2016) the development of the Swedish construction industry is encouraging. Big construction and infrastructure development projects led to high investments in this industry.

Hence, cultural challenges are highly relevant for organisations from both sectors SCSI and GCSI. This interdependence requires a deep understanding of each other’s values, beliefs, language, rituals and artefacts – particularly in terms of leadership.

1.3. Research Aim and Objectives

1.3.1. Aim

The aim of this study is to identify, analyse, and evaluate the cultural challenges within organisational leadership imposed by their internationalisation activities. This dissertation aims to create an understanding for the relevance of cultural differences within the internationalisation process. It will develop recommendations for action to ensure the cultural awareness of organisational leaders and to maintain the future sustainable leadership effectiveness that leads to successful business activities in foreign countries.

What cultural challenges relating to leadership do organisation face when doing business in foreign countries?

To address this question, this dissertation will consider findings of the current academic literature by analysing theoretical basics in relation to culture and leadership. The second part of this dissertation will provide a primary research, which will show new findings of the impact of national cultural differences and leadership aspects within a specific industry, of two different countries.

Further subdivision of the research question will help to structure the objectives of this research. The theoretical part of this study will focus the following question:

What impact do national cultural differences have on the leadership approach of organisations that expand their business activities beyond national borders? What do these organisations need to consider to lead their internationalisation activities to success?

In this context, this dissertation will verify or falsify the following hypothesis:

H1: “The national culture of a country is directly affecting the leadership approach of an organisation and the disregard of this issue will instantly lead to failure of the internationalisation activities.”

The theoretical part of this study will therefore analyse the hypothesis systematically by answering the following questions:

- What is the definition of culture, leadership and internationalisation?
- What are the contemporary cultural models and what is their view on leadership?
- What is the leader’s role within the internationalisation process and to what extend does the cross-cultural management of an organisation benefit from the leader’s cultural awareness?
- What is the contemporary view of the academic literature on the culture of Germany and Sweden and what conclusions regarding the general leadership approach of each country can be drawn?

The second part of this dissertation will contain the primary research. By another subdivision of the general research question, the practical part of this study will answer the following question:

Do the GCSI and SCSI differ culturally from one another? Is there, and if so what is the difference between the leadership approaches of both industries?

In this context, this dissertation will verify or falsify the following hypothesis:

H2: “The cultures of the SCSI and GCSI do not differ and show a significant difference from the contemporary cultural theory and accordingly the leadership approach within both sectors is represented.”

The research part of this study will therefore analyse the hypothesis systematically by answering the following questions:

- What are the present cultural differences of the GCSI and SCSI in relation to the leadership context?
- Do the findings of the primary research fit to the analysed findings of the contemporary cultural models?
- What are the recommendations of action for a successful consideration of leadership aspect within the internationalisation process of a firm?
- What are the recommendations of improvements for future research and cultural leadership studies?

1.3.2. Objectives

1. To define the terms internationalisation, culture and leadership.
2. To analyse contemporary cultural models and identify as well as review the leadership aspect of these studies.
3. To identify the role of a leader within the internationalisation process and to what extend leaders can benefit from cultural awareness to support the cross-cultural management strategy of their organisations.
4. To analyse the contemporary cultural view of the academic literature with regards to Sweden and Germany and to identify the general leadership approaches of each country.
5. To analyse and investigate the present cultural differences between the GCSI and SCSI regarding the leadership context.
6. To compare the findings of the primary research and the contemporary academic literature.
7. To be able to recommend action plans for a successful implementation of cultural characteristics in the organisation’s leadership approach.
8. To be able to recommend improvements for cultural leadership studies and future research.

1.4. Structure

The assignment is divided into four main sections. First, this study will give a general overview about the terms internationalisation, culture and leadership. After that, it will describe the contemporary cultural models and will focus on Hofstede’s cultural dimensions. Further, GLOBE‘s cultural model will be analysed as the continuation of Hofstede’s dimensions and the role of a leader within the internationalisation process will be examined. Afterwards, the contemporary theoretical view on Germany and Sweden’s culture will be explained. Second, it will describe the research methodology in detail. Therefore, the research process will be divided into the used research philosophy, approach, strategy, methodological choices and time horizon. Furthermore, it will consider the data collection method and the data validity, reliability and generalisability. Third, the data analysis will briefly define the term construction supply industry (CSI) and then evaluate the research findings by examine the cultural dimensions of the GCSI and SCSI. Further, it will explore the leadership within both industries. Afterwards, the findings will be discussed. Finally, some conclusions will be drawn that results into recommendations for future research.

2. LITERATURE REVIEW

The aim and purpose of the theoretical review is to analyse and to maintain relevant and well-founded background knowledge in relation to internationalisation, culture and leadership. The contemporary level of knowledge in the academic literature will be presented in chapter 2. This leads to a solid and strong theoretical foundation for this study. The theoretical structure from general to specific will ensure the scientific relevance throughout. Thereby findings from today’s as well as from historical research will be presented in detail and critically analysed. The review of the culture and leadership of Sweden and Germany by the end of the theory will therefore establish a relationship between theory and practice.

The methodology of the theoretical review is illustrated in Table 1.

Table 1: Methodology of the Theoretical Review

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Source: Own presentation.

This research focuses books from public and private libraries, e-books from online media sources and general internet sources, including journals and newspapers. During this process, 194 sources were spotted, 53 sources were assessed as unsuitable, and finally 141 sources were examined more intensely.

2.1. Definition

2.1.1. Internationalisation

Internationalisation is defined as the act “to become or make something become international.” (Cambridge Business English Dictionary, 2017) Although general, this definition embraces a broad range of processes and actions. Often, the term is used inaccurate and functions as a general heading for a vast number of activities and processes. (Bode, 2009) This thesis will focus on the internationalisation of a firm.

In Chryssochoidis, Miller and Clegg’s (1997) view, internationalisation requires business activities in different countries. Although a one-sided approach, it contains an essential factor of internationalisation. No matter what kind of activities take place they are happening in an international setting. However, internationalisation embraces multitude of business activities. According to Cairns and Śliwa (2008) internationalisation is about the establishing relationships, transaction linkages, or operations. It is a dynamic process, which contains different dimensions like culture, internal structures and processes. (Swoboda, 2016; Kraus et al., 2016) Internationalisation has a broad range (Pellegrino and McNaughton, 2015), which makes internationalisation a critical challenge for organisations, especially for SMEs. (Swoboda, 2016) Grünig and Morschett (2017) showed that there is no comprehensive theory to reveal this phenomenon, as illustrated in Figure 1.

Figure 1: Reasons for the Internationalisation of Companies

illustration not visible in this excerpt

Source: Own presentation. Following: (Grünig and Morschett, 2017, p.30)

Different drivers and conditions trigger internationalisation decisions of a firm, like finding new customers in foreign markets, creating additional turn over or receiving cost economies etc. (Kraus et al., 2016) All these internal drivers are affected by external developments in communication, logistics and / or legal conditions. (Grünig and Morschett, 2017)

Hence, Cerrato and Piva (2012) view internationalisation as one of the most common strategies of organisational growth. Porter (1990) believes that adopting a global approach to a firm’s strategy leads to the achievement of international competitive success. His Diamond-Approach became a key model of international business activities and contributed a high of contemporary understanding of the importance of internationalisation.^[1] (Cairns and Śliwa, 2008) In Porter’s (1990) opinion organisation can only compete in foreign markets by innovating continuously. According to Kuivalainen et. al. (2010) internationalisation is assimilated by a tremendous innovation effort. Therefore, financial resources are crucial for the success of the internationalisation process. (Pellegrino and McNaughton, 2015)

But there are different ways to enter a market. Each one requires a different set of capital and management performance whether in the domestic or in foreign market. The current literature often describes this process as the steps of market entry, as shown in Figure 2. (Moflih, 2015)

Figure 2: Most Common Forms of Market Entry

illustration not visible in this excerpt

Source: Own presentation. Following: (Moflih, 2015, p.24)

An individual market entry process ensures the fit to the market and considers the relevant market entry form. Furthermore, it fills the operative gap between the corporate strategy and the planned objectives in the foreign market. (Neubert, 2013)

2.1.2. Culture

There is no single definition for the term culture. (Fijalkowska, 2009) Different academic disciplines have a different perspective on the greater cultural context. (Brück, 2002) By comparing 164 different definitions of culture, Kroeber and Kluckhohn (1952) classified six different approaches, as shown in Table 2.

Table 2: Classification of Culture

illustration not visible in this excerpt

Source: Own presentation. Following: (Kroeber and Kluckhohn, 1952, pp.81-140)

In 1952, the different classifications led to a universal and still common definition of culture:

“Culture consists in patterned ways of thinking, feeling and reacting, acquired and transmitted mainly by symbols, constituting the distinctive achievements of human groups, including their embodiments in artefacts; the essential core of culture consists of traditional (i.e., historically derived and selected) ideas and especially their attached values.” (Kroeber and Kluckhohn, 1952, p.357)

This definition implies that a group of human beings creates a culture, which influences people’s behaviours. (Fijalkowska, 2009) Warner and Joynt (2002) view culture as the product of human activities. In this context, Hofstede (2001) calls culture a “mental program” or “software of minds”. Thus, people learn certain patterns of thinking, feeling and acting from those around them. Human’s social environment influences people culturally. It is for this reason that culture is invariably a mutual experience, which separates different groups from another. (Minkov, 2011) Therefore, Schein (2010) emphasises that the being of culture depends on both the culture itself and the relationship to its existing environment. Culture is the nature of a group, which leads the group member’s behaviours through the group’s common rules and patterns. (Schein, 2010) Culture is the key driver for people’s behaviour. (Moran, Harris and Moran, 2011)

Hofstede, Hostede and Minkov (2010) distinguish culture from human nature and human’s personality. Human nature is what all humans have in common such as the ability to feel fear, anger, love etc. The individual personality, however, is the exceptional mental program of an individual person. Hence, Vance and Paik (2011) emphasise that culture affects and influences both the society and the individual personality, as shown in Figure 3.

Figure 3: Three Levels of Uniqueness in Mental Programming

illustration not visible in this excerpt

Source: Own presentation. Following: (Hofstede, Hofstede and Minkov, 2010, p.6)

In 2003, Hodgetts and Luthans (2003) could identify six attributes of culture as shown in Table 3.

Table 3: Attributes of Culture

illustration not visible in this excerpt

Source: Own presentation. Following: (Hodgetts and Luthans, 2003)

Point 6 implies that culture is dynamic and can change within time due to technological and communicational advances. The change of a culture is a slow process and an open-minded society can change faster than a closed one. (Hodgetts and Luthans, 2003; Guffey, Rogin and Rhodes, 2010) The slow changing attitude of culture can be explained by its powerful foundation, which is not visible to everyone. (Martinelli and Taylor, 2007; Peterson, 2004) This means that culture has both visible and invisible elements, resulting in culture often being compared to an iceberg. (Brett, 2007) The iceberg model focuses elements that define culture, as shown in Figure 4.

Figure 4: Culture as an Iceberg

illustration not visible in this excerpt

Source: Own presentation. Following: (Brett, 2007, p.28)

The visible tip of the cultural iceberg considers elements like music, language, architecture, etc., while the invisible part forms the powerful foundation of culture like norms, values, religious beliefs, worldviews etc. (Rothlauf, 2012) According to Peterson (2004), only 20% of the iceberg is visible. The biggest threat of the iceberg is the invisible part, what lies under the water line. A collision may lead to major complications within international mergers and acquisitions, joint ventures, alliances or other interactions. (Hofstede, Hofstede and Minkov, 2010)

Cultural differences exist. According to Hofstede, Hodfstede and Minkov (2010) cultural differences become obvious by considering symbols, heroes, rituals and values. Hofstede (2001) compares the different manifestations of culture with an onion and its many layers. Symbols are the most trivial parts of culture, whereas values are the deepest part or the core of culture, as illustrated in Figure 5.

Figure 5: Manifestations of Culture at Different Levels of Depth

illustration not visible in this excerpt

Source: Own presentation. Following: (Hofstede, Hofstede and Minkov, 2010, p.8)

Symbols such as words, gestures or pictures transmit a certain sense within a cultural group. Other cultural groups often copy symbols and adapt it, making symbols trivial. Heroes, however, unite characteristics that are highly regarded within the cultural context of a group. They project a certain picture of the cultural society. Therefore, it does not matter if the heroes are real or imaginary, dead or alive. Rituals are patterns of behaviour that are socially essential within a culture. All these manifestations are summarised under the term practices. People that are not part of a certain culture are only able to observe the different practices, but they do not understand the cultural meaning behind it. (Hofstede, Hofstede and Minkov, 2010)

2.1.2.1. National Culture

National culture is one of the most important topics in today’s management research. (Chen, 2006) Thus, many definitions of national culture exist. (Nikčević, 2014)

In 2014, Papademetriou and Masouras (2014) point out that nationality is a crucial part of the human’s identity. Nations are having their own history, institutions, government, which differs one nation from another and ensures national roots for its society. The own nationality accompanies a person the whole life. As a result, people are psychologically connected with their national culture, which is deeply ingrained within a society.

In this context, Piepenburg (2011) depicts that national culture is the broadest form of culture a human being can be a part of. According to Jensen and Beheshti (2011) it represents the majority of a country and is therefore the country’s dominant culture. Thus, Thomas (2005) calls national culture the collective consciousness of a population. People of the same national culture share the same values, norms and patterns of behaviour, which they learn from the very beginning of their lives. (Hofstede, 2001) Furthermore, people are constantly building and developing their own national culture. (Thomas, 2005) Hence, national culture is dynamic and changes over time. (Fijalkowska, 2009)

Nikčević (2014) stated that the interaction of society members creates the content of national culture, like assumptions, values, norms, attitudes and symbols and leads to a certain world view. Therefore, differences do exist among different countries. In Kogut and Singh’s (1988) view is the degree to which norms differ between different countries determines the so called “national cultural distance”. This point of view is indeed very simple and does not fit to the complex world of the 21st century. Hofstede (1983), however, sees the reason for national cultural differenes on three different levels: political, socialogical and psycological as previously discussed.

According to Brooks (2009) does the national cultural background of a manager or leader have a great impact on his or her way of thinking. Thus, the national culture influences the organisational culture, which will be discussed in chapter 2.1.2.2. However, this aspect is discussed controversically in today’s literature. (Minkov, 2013) The GLOBE project, which is one of the best known publications, deducts that the culture of the encompassing society has a crucial affect on the organisational culture. (House and Hanges, 2004) Whereas, in Gerhart’s (2009) analysis the effect proved to be not as relevent as expected. Still another opinion is that the whole issue is not fully understood, yet. (Kwantes and Dickson, 2011) Anyway, in times of the increasing development of international business the interface between national and organisational culture is becoming more and more important. (Minkov, 2013) A modern organisation, therefore, needs to develop management systems and methods around its national cultural context. (Nikčević, 2014)

2.1.2.2. Organisational Culture

In 2013, Watkins (2013) started a discussion about organisational culture on a social media platform. Even if this is not an empirical study, it showed the variety of understanding of organisational culture. Hundreds of people joined the discussion to share different perspectives. This discussion showed that organisational culture is still an important but controversial topic.

Organisational culture is not clearly defined. Janićijević (2011) stated that both operational as well as comprehensive definitions exist. He defines organisational culture as “a system of assumptions, values, norms and attitudes, manifested through symbols, which the members of an organization have developed and adopted through mutual experience and which help them determine the meaning of the world around them and how they behave in it.” (Janićijević, 2011, p.72)

Shared experience leads to the exchange of personal values, beliefs and behaviours. This creates a shared identity within an organisation. (Barclay, 2015) In Barcley’s (2015) view, organisational culture is the common personality of the organisation’s leadership and its employees. Schein (2010) supports this view by associating organisational culture with the consequences of leadership activities and mutual experiences.

In this context, terms like “corporate values” are inherent parts of today’s business life. Company symbols, rituals, norms and practices express these values distinguish one company from another. (Minkov, 2013) However, Hofstede (2001) states that it is the company’s leaders whom express corporate values and not employees. Therefore, organisational culture is the universal way of understanding the corporate environment (Francesco and Gold, 2005)

In 2010, Hofstede, Hofstede and Minkov (2010) illustrated six different aspects of organisational culture, as shown in Table 4.

Table 4: Organisational Culture

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Source: Own presentation. Following: (Hofstede, Hofstede and Minkov, 2010, p.344)

2.1.3. Leadership

Professor John P. Kotter coined the term Leadership. In 1982, he emphasised the visionary character of a leader. Kotter viewed a leader as proactive, inspiring, and motivating person building the foundation for innovations, creativity, and change within an organisation. (Hegele-Raih, 2004) Leadership is about inventing the future. (Cameron and Green, 2012) Unlike management, that is serving the current needs.

According to Lee and Liu (2012) a leader has a clear agenda by selecting people carefully and guiding them into a certain direction. Thus, Conger and Kanungo (1998) view leadership as an explicit procedure, an ideology, sustainable relationships and worldliness. By uncovering and implementing new solutions for an organisation, leadership is developing customer-oriented change processes to generate new values and satisfy all stakeholders. Therefore, leadership needs to be performed by leaders that can lead people into a certain direction to achieve the overall organisational goal. (Lee and Liu, 2012) Accordingly, leadership is an instrument of power. But power does not automatically mean effective leadership. (Lee and Liu, 2012) Good leadership needs attributes like values, vision, engagement, communication, caring and stewardship (Thomas, 2011). This makes leaders the centre of emotions, interests, and results within their organisations.

Leadership is a pluralistic and dynamic process due to the collaboration of different people. (Kanji, 2008) Leader and follower actively anticipate changes in their organisation, what gives leadership a transformational character. It is important to pay attention to the people at the company’s receiving end, because they determine the success of the outcome of change. By constantly developing certain skills and capabilities of its followers, a leader pursues the positive change results. (Keller, 2006) In this context, Hinterhuber and Krauthammer (2015) describe the three-pillars of leadership as illustrated in Figure 6.

Figure 6: The three-pillars of leadership

illustration not visible in this excerpt

Source: Own presentation. Following: (Hinterhuber and Krauthammer, 2015, p.11)

These pillars should ensure trust between a leader and its follower to improve the future competitiveness of the company. Leaders are creating stability within the organisation’s social environment, while satisfying the profit expectations of their strategic partners. (Simon, 2009)

Moreover, Barclay (2015) emphasises that leadership style and organisational culture have a direct connection. Leadership styles split into traditional and modern approaches. (Aretz, 2007) Characteristic, behavioural and situational theories of leadership belong to the traditional approaches, which are focusing certain attributes of successful leaders. Modern approaches are charismatic, transformative and emotional leadership, by taking the end-users into account. (Brodbeck, 2016) The evolution of these approaches is based on the needs of the time. For instance, environmental changes led to different leadership styles. Bolden et al. (2003) illustrate this concept in „ Great Man to Transformational Leadership “, Table 5.

Table 5: Leadership-Theories

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Source: Own presentation. Following: (Bolden et al., 2003, p.6)

2.2. Cross-cultural Leadership within the Internationalisation Process

2.2.1. Models of Culture

Several cultural approaches do exist in current literature. Emrich (2014) distinguishes between coherence-orientated, cohesion-orientated and cross-cultural approaches, as shown in Table 6.

Table 6: The Approaches of Culture

illustration not visible in this excerpt

Source: Own presentation. Following: (Emrich, 2014, pp.29-99)

Traditional cultural models belong to the coherence-orientated approaches. The researches in this field focused on the national cultures in international organisations (Figure 6).

Figure 6: Studies on National Culture

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(Kutschker and Schmid, 2011, p.695)

These studies identified several dimensions of national cultures. Hofstede and Hofstede (2011) view a dimension as a characteristically guidance system for its members.

Hofstede’s work on cultural dimensions is highly regarded and most cited studies and have become crucial for organisations’ daily business life. (Lee and Liu, 2012; Piepenburg, 2011; Jones, 2007; Bhagat and McQuaid, 1982) As a result, the following sections will focus his work. Furthermore, the GLOBE study will be analysed as the extension of Hofstede’s approach.

2.2.1.1. Hofstede’s Cultural Dimensions

In 1980, Geert Hofstede, a Dutch social psychologist, published a pioneering study about cultural differences: Cultural Consequences – International Differences in work related values. (Hofstede, 1980) Within his study, he could refer to a huge number of data and identified four, later six, cultural dimensions. (Francesco and Gold, 2005)

In 1967, Hofstede started his study at IBM. Until 1978, his work contained about 116.000 questionnaires that were responded by more than 60.000 people from 50 different countries. (Jones, 2007) By providing a factor analysis of 32 questions in 40 different countries, Hofstede (1980) discovered cultural differences within four dimensions. Later, he added two more dimensions due to criticism of his model, as shown in Table 7.

Table 7: Hofstede's Cultural Dimensions

illustration not visible in this excerpt

Source: Own presentation. Following: (Evans, 2015, p.139)

Jones (2007) emphasises that the cultural dimensions represent the nature of a culture in each country.

2.2.1.1.1. Power Distance

PD is about power and the social interaction concerning the inequality of people from the same society. (Papademetriou and Masouras , 2014) It is defined as “the extent to which the less powerful members of institutions and organizations within a country expect and accept that power is distributed unequally.” (Hofstede, Hofstede and Minkov, 2010, p.61) Hence, PD contains the organisational levels of hierarchy as well as the gap and tolerance between social classes. (Lee and Liu, 2012; Jones, 2007) People are not equal in any society. (Papademetriou and Masouras , 2014) Measuring the equality and inequality in a society leads to an understanding about the acceptance and the respect of leadership.

In societies with a high level of PD, inequalities and wealth were able to grow. (Lee and Liu, 2012) In Papademetriou and Masouras‘ (2014) view, are relationships, despite the inequality, in societies with high PD more harmonious than in others. Thus, societies with low PD are coined by conflicts and mistrust among people.

Hofstede was criticised for classifying PD into modern (low) and traditional (high) PD, which intends to mean that modern PD is better than traditional PD by supposing to be a more contemporary, democratic, fair, and educated approach. (Fougère and Moulettes, 2006) Hofstede, however, views the cultural dimensions as a possibility to discuss culture. His dimensions are value-free and it is no advantage to be on one side or the other. (Powell, 2006)

2.2.1.1.2. Uncertainty Avoidance

UA is about the way people face uncertainty and ambiguity. (Lee and Liu, 2012) It is defined as “the extent to which the members of a culture feel threatened by ambiguous or unknown situations.“ (Hofstede, Hofstede and Minkov, 2010, p.191) By measuring the threat level, the degree of tolerance for uncertainty within a society or organisation is assessable (Lee and Liu, 2012), as well as, predicts how a society will face future uncertainty. (Schmitz and Weber, 2014)

A culture with high UA has low tolerance for uncertainty and ambiguity. Such societies have a high esteem for regulatory institutions that require conformity. (Brück and Kainzbauer, 2006) The creation of a rule-orientated society claims laws, rules, regulations and control and leads to reduction of conflict potential, rivalry and uncertainty. (Lee and Liu, 2012; Konopaske and Ivancevich, 2004) People feel uneasy if confronted with an unexpected situation. (Jensen and Beheshti, 2011) While a society with low UA takes risks and is more comfortable with uncertain situations. (Lee and Liu, 2012; Francesco and Gold, 2005) People are even more tolerant to differing opinions and appreciate a society with low regulations. (Jensen and Beheshti, 2011)

However, Schmitz and Weber (2014) claimed that UA is not a valid construct beyond Hofstede’s IBM study due to several reasons such as questionable questionnaire design, interdependency between all dimensions and doubtful formulations within Hofstede’s IBM survey. Schmitz and Weber (2014) emphasise that it is neither usable to compare different nationalities, nor to function as a foundation for a universal characterisation of whole countries.

2.2.1.1.3. Individualism vs. Collectivism

The IC dimension defines the manner of cohabitation within a society. (Papademetriou and Masouras , 2014) This contains the degree of individual independency or collectivism by measuring the degree of social integration within a culture. (Jones, 2007) Hence, “individualism pertains to societies in which the ties between individuals are loose: everyone is expected to look after him- or herself and his or her immediate family. Collectivism as its opposite pertains to societies in which people from birth onward are integrated into strong, cohesive in-groups, which throughout people’s lifetime continue to protect them in exchange for unquestioning loyalty.“ (Hofstede, Hofstede and Minkov, 2010, p.92)

Individualism and collectivism are different. (Nikčević, 2014) In individualistic societies, a social independence is recognisable at an early age. (Jones, 2007) Such cultures have few social networks and emphasise the importance of liberty and autonomy. Self-determination and self-responsibility play a very important role, whereas the loyalty to a certain group is less pronounced. (Fijalkowska, 2009) The foundation of collectivistic cultures, in contrast, is a strong social framework. (Nikčević, 2014) The identification with the society is important for an individual. Terms like honour, respect and social duties are essential characteristics in collectivistic societies. Thus, social perception takes place on different levels as its members use an indirect communication style. (Piepenburg, 2011) The level of individualism and collectivism will therefore determine the degree to which employees comply with organisational requirements.

Voronov and Singer (2002) points out that the IC dimension is inadequate to assess cultural characteristic due to its simplicity and reductionist view on culture. In their opinion, IC does not consider the complexity of human behaviour and is unable to consider the socioecological context. Nevertheless, Hofstede argues that due to the dimensions, a tangible approach is provided, which enables a discussion about culture. (Powell, 2006)

2.2.1.1.4. Masculinity vs. Femininity

MF is about the predominant characteristics of a culture, and thus relates to the gender roles. (Schmitz and Weber, 2014; Lee and Liu, 2012) This dimension illustrates the cultural preferences of its members by assessing the social gender equality. (Jones, 2007)

“A society is called masculine when emotional gender roles are clearly distinct: men are supposed to be assertive, tough, and focused on material success, whereas women are supposed to be more modest, tender, and concerned with the quality of life. A society is called feminine when emotional gender roles overlap: both men and women are supposed to be modest, tender, and concerned with the quality of life.” (Hofstede, Hofstede and Minkov, 2010, p.140)

Masculine societies emphasise gender specific differences more than feminine societies. (Schmitz and Weber, 2014) Men are dominating masculine cultures and controlling women as the majority in social and power structures. (Lee and Liu, 2012) Whereas, societies with low levels of masculinity genders are socially equal. This leads to less discrimination and differentiation and equal opportunities among the sexes.

The MF dimension is the most criticised dimension over time. (Piepenburg, 2011) It was discredited as being inaccurate and inconsistent due to its insufficiency and gender distribution. (Fougère and Moulettes, 2006) However, Hofstede states that the dimension is not about being a certain type of gender, but about behaving in a masculine or feminine manner. (Powell, 2006) As a result, many researchers have misunderstood this dimension and have had a problem to accepting the merging of social gender roles. (Hofstede, 2001)

2.2.1.1.5. Long-term Orientation

The LO dimension is based on a research by Michael Bond. (Minkov, 2013) Originally named the Confucian work dynamics, he wanted to identify cultural values of the Chinese society and its effect on Chinese’s daily work life. (Mullins, 2016) Hofstede adopted this dimension, due to the novel and non-western perspectives. (Hofstede, Hofstede and Minkov, 2010)

The LO dimension of culture embraces the extent to which a society stick to traditions and focuses on long-term perspectives. (Landy and Conte, 2013) Hence, LO “stands for the fostering of virtues oriented toward future rewards - in particular, perseverance and thrift. Its opposite pole, short-term orientation, stands for the fostering of virtues related to the past and present - in particular, respect for tradition, preservation of “face,” and fulfilling social obligations.“ (Hofstede, Hofstede and Minkov, 2010, p.239) Moreover, Minkov (2013) emphasised that LO predicts the economic development and the average achievements in education within a culture.

In this context, Lee and Lui (2012) depict that the dimension represents the cultural balance between long-term possibilities and short-term fulfilment. Cultures with a high long-term orientation are coined by characteristics like persistence, status focus, consistent avoidance of loss of face, respect of hierarchy, conscious in tradition, diligence, sense of shame, thrift, sense of duty and the exchange of gifts and favours. (Emrich, 2014) Thus, these cultures focus on long-term benefit and business development can be a protracted process. Especially for people from abroad, as long-term cultures are sensitive in terms of relationships. (Lee and Liu, 2012) Short-term cultures, in contrast, are more changeable and adapt transformation faster. The focus is on tactical and operational issues. (Fijalkowska, 2009)

Emrich (2014) criticised Hostede’s LO dimension indirectly by questioning the comparability and research penetration of the Chinese approach in relation to the origin study. However, Hofsetde is constantly working on his approach, by intensifying his research, considering and integrating new aspects. (Powell, 2006) Even adopting the LO dimension was an extension of his original approach, that ensures a continually development of his approach.

2.2.1.1.6. Indulgence vs. Restraint

IR is the latest of Hofstede’s dimensions that he added to his model of culture. It was developed within a re-analysis of the World Value Survey (WVS).^[2] (Piepenburg, 2011)

IR’s central aspects are about happiness and the control of life. Thus, Indulgence is “a tendency to allow relatively free gratification of basic and natural human desires related to enjoying life and having fun. Its opposite pole, restraint, reflects a conviction that such gratification needs to be curbed and regulated by strict social norms.” (Hofstede, Hofstede and Minkov, 2010, p.281) Enjoying life and satisfying needs is highly appreciated in indulgent cultures. People are optimistic, but have low moral discipline. (Boga and Efeoğlu, 2016) In contrast, reluctance is required from members of a restraint society. (Emrich, 2014) People are cynical, pessimistic and have a strong moral discipline. Friends and spare time are secondary as well as referring to positive memories. (Hofstede, Hofstede and Minkov, 2010)

The differences between indulgent and restraint cultures are illustrated in Table 8.

Table 8: Objectives and Consequences of IR

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Source: Own presentation. Following: (Müller and Gelbrich, 2015, p.118)

According to Müller and Gelbrich (2015) is the adaption of the IR dimension into Hofstede’s present cultural model highly problematic for methodological reasons. As IR is based on two pillars, the subjective happiness research and re-analysis of the WVS, individual cultural differences in life satisfaction are stable over time and predominantly invariant. This implies that the individual cultural background has a stronger impact on life than the current social environment. (Müller and Gelbrich, 2015) Indeed a critical point. Even though Hofstede, Hofstede and Minkov (2010) state that this dimension need more research. Anyway, IR considers new cultural aspects, like happiness and satisfaction that help to understand even paradox issues.

2.2.1.1.7th Hofstede’s Model in Relation to Leadership

PD classifies the cultural extent of equality and inequality. The level of equality and inequality, results from the leadership style within a culture, the degree to which someone is willing to disagree with leaders, educational background and cultural status. (Mullins, 2016) Both the followers and the leaders equally recommend the degree of inequality within a society. (Hofstede, 2011) In this context, Lee and Lui (2012) draw a comparison to McGregor’s X and Y-Theory. People from a high PD culture prefer not to work (X-Theory), which is why subordinates are striving for guidance and direction. Hence, leaders are using an authoritarian leadership style. As a result, leaders are taking fast decisions by themselves. (Hofstede, 1980) Low PD cultures in contrast imply that people are willing to work (Y-Theory). As a result, people are less different in relation to power; focussing a decentralised leadership approach, while the rewarding system is based on performance. (Lee and Liu, 2012)

Feminine cultures are focussing the same rewarding values. Leaders in feminine societies adopt a participative leadership style. (Lee and Liu, 2012) Therefore, leaders are tending to establish trust and good relationships within their organisation. (Hofstede, Hofstede and Minkov, 2010) However, masculine cultures are more competitive. Leaders are participating in a competitive society. Thus, leaders are dominant and assertive and execute an authoritarian leadership style. (Paustian-Underdahl, Walker and Woehr, 2014)

The IC dimension considers the degree to which a culture is individualistic or collectivistic engaged. Employees from collectivistic cultures are strongly committed to their organisation and subordinate their own interests for the organisational welfare. (Cullen and Parboteeha, 2014) Leaders are using a cooperative leadership approach, due to the members’ group identification, loyalty and responsibility for their organisation. Whereas, people from an individualistic society search for independency and self-management. Leaders need to capacitate the organisation members to become more independent, while they become more flexible over time. (Hofstede, Hofstede and Minkov, 2010) Therefore, leaders can adopt a situational leadership approach or a laisser-faire leadership style.

The dimension of UA reduces uncertainty by providing certain guidelines for people. Hence, people need rules and thresholds to be able to cope with uncertainty. In cultures with a high uncertainty, leaders need to provide a framework of rules and pretend a strict path for the followers. Thus, leaders are using an authoritarian leadership style, which provides less fairness and flexibility. (Hofstede, Hofstede and Minkov, 2010) Cultures with low uncertainty, however, are more comfortable with unpredictable, uncertain and ambiguous situations. (Francesco and Gold, 2005) As leaders are flexible, tolerant to different cultures and opinions and like to take risks, they adopt a participative or situational leadership style.

In long-term oriented cultures, leaders develop and train employees to ensure required capabilities and efficiency in the future. This leads to employees’ long-term commitment. Furthermore, the development of social relationships and creation of long-term engagement is a crucial task for leaders. Hence, leaders prefer long-term opportunities against short-term revenues. (Lee and Liu, 2012) As a result, leaders are adopting a transactional leadership approach. Short-term oriented cultures, in contrast, have a particular thought process. Leaders are not able to respond flexible to the given situation. As these cultures honour traditions and focus immediate results, leaders like to have power and control. (Hofstede, Hofstede and Minkov, 2010) As a result, leaders are adopting an authoritarian leadership style.

Hofstede (2011) emphasises that restraint societies control and regulate its members’ satisfaction of needs by means of strict social norms. As a result, leaders are using an authoritarian leadership style. However, an indulgent society allows its members to express themselves and satisfy their needs freely to enjoy life and having fun. (Hofstede, 2011) In this context, leaders are using a laisser-faire leadership style.

2.2.1.1.8. Critical Evaluation of Hofstede’s Model

Hofstede’s cultural model is the most famous study on cultural differences, as a result, it was criticised and discussed over the past decades. (Shaiq et al., 2011; Jones, 2007) Criticism ranges from the use of an inappropriate research methodology to the lack of complexity. Some criticisms are in-principle against Hofstede’s model, while others are using empirical data to prove the points of criticism. (Hanna, 2005) This chapter will contrast and compare the major arguments for and against Hofstede’s approach.

First point of criticism is Hofstede’s research methodology. Schwartz (1999) depicts that a survey is an inappropriate tool for the determination and assessment of cultural differences. Especially when measuring culturally sensitive and subjective variables. Hanna (2005) emphasises that Hofstede’s study is based on group data. As a result, the use of group level data can lead to wrong assumptions about individual characteristics in relation to culture. Knudsen and Froholdt (2009) criticise the cultural bias of Hofstede’s model. The dimensions solely consider western perspectives and do not respect any other aspects of culture. Further, the statistical integrity of Hofstede’s approach is questionable, due to the cursory examination of 40 subjects. (Jones, 2007)

Another point of criticism is the lack of cultural complexity. (Jones, 2007) Hofstede (1980) views the domestic population as homogenous. This implies that different ethnic groups do not exist within a nation. Yet, the opposite is true. (Spickard, 2005) Jones (2007) stresses the restricted view and arbitrariness of Hofstede’s model. Hofstede views nations as the only cultural entity. Culture, however, is spread across borders, groups and national context. (Baskerville, 2003; DiMaggio, 1997) Jones (2007) emphasises that Hofstede’s approach in general considers too few dimensions, which is even affirmed by Hofstede himself.

The next critique focused on the single cohort aspect. The study is based on data, which was collected from one company - IBM. Jones (2007) argues that a single-company approach cannot provide all required information to understand the cultural system of an entire country. Moreover, McSweeney (2002) emphasises that Hofstede only focused work-related questions in his survey, but he had drawn conclusions about non-work related issues. Baskerville (2003) additionally argues that the survey results were influenced by the organisational American culture of IBM.

Another point of criticism occurs in terms of globalisation, internationalisation, convergence and rapid change. Many researchers view Hofstede’s study as out-dated. (Shaiq et al., 2011; Piepenburg, 2011; Jones, 2007; Baskerville, 2003; McSweeney, 2002) Radical global transformation in structure, resources, and nature of expertise may have the result that Hofstede’s almost 40 years old study is not representative anymore in today’s globalised world. As the world is more connected, even the cultural dimension may be misrepresentative. (Piepenburg, 2011) Even though Hofstede (2001) states that national culture is stable and does not change fundamentally within a short period. McSweeney (2002) argues that culture is dynamic and does not stand still.

The summarised points of critique are illustrated in Figure 7.

Figure 7: Criticism on Hofstede's Cultural Model

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Source: Own presentation.

Despite all the criticism, Hofstede’s work is still the most cited study on cultural differences. (Nakata, 2009) Nakata (2009) argues that Hofstede’s work offers a unique and comprehensive analysis of cultural differences, by referring to a tremendous broad survey, which considers a huge number of respondents from different cultures. This grants a vast range of assumptions within the cultural context and for daily business life.

Next, Hofstede’s study was executed at a time where only a little knowledge about culture exists. (Jones, 2007) In those days, many companies started to internationalise and clashing cultures complicated the daily business routines. (Hofstede, Hofstede and Minkov, 2010) According to Nakata (2009) the need for a cultural approach, which could explain cultural interdependencies was undeniable. Hence, Søndergaard (1994) emphasises the pioneer attitude of Hofstede’s work, which was the first serious approach drawing attention to cultural differences and thus a highly relevant approach.

Furthermore, Hofstede provides an accurate research design, including a systematically data collection and a cohesive theoretical framework. (Jones, 2007) Nakata (2009) depicts that a comparable approach was not available before.

Additionally, Hofstede’s cultural dimensions are also relevant and accurate as proved by several researchers and studies. (Piepenburg, 2011) The great use and citation of Hofstede’s cultural work illustrates the great significance of this approach. (Søndergaard, 1994) Hofstede (2001) emphasises that about 200 different studies are supporting his finding.

The success of Hofstede’s approach is based on its comprehensibility. (Knudsen and Froholdt, 2009) Due to the reduction of complexity culture had become discussable. (Powell, 2006) Therefore, Jones (2007) assesses Hofstede’s cultural model as understandable and adoptable for everyone.

Overall, the arguments for and against Hofstede’s approach were wide-ranging and drew a lot of attention not only in the academic, but also in business world. It is obvious why his model gained great influence on cultural research. Nevertheless, the high quantity of collected data might have impressed some researchers and led to a general acceptance of his model. (Piepenburg, 2011) Although the major critique is of Hofstede’s methodology. (Søndergaard, 2011) Hence, many critics view his cultural model as invalid and unreliable. In fact, there are no signals that the approach is becoming less important. Evolving culture need to be assessed with respect to Hofstede’s work. (Bergiel, Bergiel and Upson, 2012) Even though, Hofstede never claimed his approach to be the one and only way of analysing culture. (Hofstede, Hofstede and Minkov, 2010) Despite the greater number of arguments against Hofstede’s cultural model, the arguments in support of his approach are qualitatively convincing. It is for this reason that Hofstede’s study is a firm and proper method to explore cultural difference. Even if there are still some shortcomings, the continuous development of Hofstede’s work guarantees the fast adaptability on new insights in the future.

2.2.1.2. Globe’s Cultural Dimensions

In 1993, the Global Leadership and Organizational Behaviour Effectiveness (GLOBE) project was initiated by 170 scientists from 62 different cultures. (Lumpé, 2008) Nowadays, it is the broadest contemporary approach in cultural research, beside Hofstede, with more than 17.000 surveyed members from 951 organisations. (Chhokar, Brodbeck and House, 2008)

The study is based on an idea from Robert House, an American researcher of culture. The purpose of the GLOBE project is to identify and analyse cultural influences on leadership, organisational processes and effectivity. (Emrich, 2014) It is an extension of Hofstede’s approach, which attempts to replicate and improve the recent findings. (Nakata, 2009; Lumpé, 2008) Hence, GLOBE aspired to overcome Hofstede’s shortcomings. (Shaiq et al., 2011)

Consequently, there are overlaps with Hofstede’s cultural dimensions. The GLOBE project identified nine different dimensions in total, whereas three of those were directly adopted from Hofstede – PD, UA and LO. At least another four dimensions were derived from Hofstede’s cultural dimensions. (Fijalkowska, 2009) Seventy-eight survey questions led to GLOBE’s nine different dimensions as illustrated in Table 9. Half of the questions targeted the current being of culture and the other half targeted the desired being of culture. (Hofstede, Hofstede and Minkov, 2010)

Table 9: GLOBE's Cultural Dimensions

illustration not visible in this excerpt

Source: Own presentation. Follwing: (Schlaile, 2012, p.10; Piepenburg, 2011, p.27)

Nevertheless, Hofstede, Hofstede and Minkov (2010) criticise the GLOBE’s approach for choosing an inaccurate way of addressing their questions. As the questions were asked in researcher’s language, the problems of the largely participating managers were not adequately considered. Further, Hofstede (2006) questions the general validity of GLOBE, due to the doubtful fact that interviewing managers only would obtain an independent view on the cultural issues.

2.2.2. The Leader’s Role

According to Cotae (2013) the strategic decision to internationalise is based on the organisation’s leadership approach, which needs to develop a global mind-set regarding its business activities.

Thus, a global mind-set is a crucial core competence for leaders within an internationalisation process. In this context, leaders need to have the capability to cope with both the increasing strategic complexity and cultural diversity within a global environment. (Schlaile, 2012) As the GLOBE project analysed cultural differences and similarities of effective leadership behaviour, it developed the culturally endorsed implicit leadership theory (CLT). (Schlaile, 2012) The study could identify leadership dimensions, which contain leadership skills to develop a global mind-set, as shown in Table 10.

Table 10: Global CLT Leadership Dimensions

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Source: Own presentation. Following: (Schlaile, 2012, p.22)

Today, it is necessary to have the capability to activate, coordinate, inspire and motivate cultural diversity within an organisation to gain competitive advantages. (den Dekker , 2016) Leaders need to initiate positive change within the organisation, as they develop relationships and establish new networks inside and outside the organisation. By creating new organisational structures and processes across organisational borders, leaders can involve different stakeholders, external authorities and cultures considering temporal, geographical and cultural aspects. (Mendenhall, 2008) Barclay (2015) emphasises that an organisational transformation starts with the leaders’ personal transformation. The people need to change and not the organisation. Authenticity and adherence of own values in leadership enables leaders to generate trust and powerful relationships within their organisation, which results in increasing productivity. Hence, leadership within an internationalisation process is about interacting and sharing ideas across different cultures. (Adler, 1997) Consequently, leaders need to have certain skills, which enable them to exert influence across cultural boarders. (Schlaile, 2012) Such capabilities are especially required, when groups, individuals, organisations and systems are quite different from the leader’s cultural background. (Javidan and Teagarden, 2011) The development of essential cross-cultural and cross-national leadership attributes becomes a central aspect of successful internationalisation strategies. Furthermore, leaders need to accompany the internationalisation process by the regular assessment of forecasts, design strategies for growth and support of operational level. The leadership style must consider aspects of sustainability, relationships and ethical traits to meet the internationalisation goals of a company. This requires atypical skills from leaders that need to solve complex problems as well as adapt the required changes. (Cotae, 2013)

2.3. Germany vs. Sweden

2.3.1. Culture of Germany

The German culture was analysed by Hofstede within his model of cultural dimensions. Hence, he could identify the cultural drivers of the German society. Figure 8 illustrates the different scores of the cultural dimensions of Germany.

Figure 8: Cultural Characteristics of Germany

illustration not visible in this excerpt

Source: (Hofstede, 2017a)

Germany scores a low PD score of 35. The society is based on a very strong middle class and is decentralised. Employees want to be involved in decisions and leaders need to respect and be aware of this fact. (Hofstede, 2017a) Employees are stakeholders and a participative leadership style is required to convince, motivate and grant individual freedoms. (Kavalchuk, 2011) Furthermore, Germans do not like to be controlled. Leadership need to cope with this situation, as leaders must show certain knowledge and skills to be accepted. (Hofstede, 2017a)

The German IC score of 65 is high. The society is a highly individualistic one. Small families are common with a strong parent-child relationship. Germans grasp at personal fulfilment, resulting in own decisions according to own preferences. (Hofstede, 2017a) The development of the individual potential is a highly motivating factor in Germans business life. (Kavalchuk, 2011) Loyalty is affected by individual perceptions of duty and responsibilities, which is regulated by the contract of employment. (Hofstede, 2017a) Moreover, Germans belief that only individual success contributes to the success of the whole society. (Löwgren, 2013) The German communication is known by a direct and immediate communication style. (Kavalchuk, 2011) It is important that leaders are able to give and receive instructions clearly. (Tomalin, 2010) The way of communication leads to an effective and evident work environment. (Paul, 2015) Even if it is a very uncomfortable situation, the communication is based on truth and thus the belief to learn from mistakes is supported. (Hofstede, 2017a) However, information is not shared with everybody, as Germans view information as an indication of power. An information advantage is a strategically and tactically tool that is used with great caution. (Löwgren, 2013)

Germany reached a high MF score of 66. (Hofstede, 2017a) Germans like competition, ambition and assertiveness is highly regarded. (Achour, 2012) German professionals are goal-orientated, assertive and persistent. (Kavalchuk, 2011) They often express their status by material possession. (Hofstede, 2017a)

The German UA score of 65 is also strong. Germany is often named the nation of poets and philosophers. Germans prefer deductive approaches that give them a systematic overview of the reality. (Hofstede, 2017a) As Germans like to avoid uncertainty, authorities regulate almost everything. As a result, German industries have a close relationship to governments and create certainty by a regulating expertise of norms, policies and standards. (Schroll-Machl, 2016) This ensures a high-quality standard of German products and services. (Kavalchuk, 2011)

The overall highest dimensional score of 83 was reached by the LO dimension. Germany is viewed as a pragmatic country, which recognises the truth as something that depends on the current situation, time and context. (Hofstede, 2017a) Kavalchuk (2011) emphasises that the pragmatic attitude of Germans is also manifested in the German negotiation style. Furthermore, Germans are able to adapt changes of their environment and align it with their traditions. However, German culture focuses a save and invests mentality, as Germans are thrifty and perseverant to accomplish their future goals. (Hofstede, 2017a)

The dimension of IR reached a quite low dimensional score of 40. Thus, Germany is a restrained culture, which tends to be cynical and pessimistic. (Hofstede, 2017a) This is supported by the fact how Germans cope with conflicts in their business culture. (Kavalchuk, 2011) They are aware of and aligned by social habits, which is ingrained in their social life. (Tomalin, 2010)

2.3.2. Culture of Sweden

The Swedish culture was analysed by Hofstede within his model of cultural dimensions. Hence, he was able to identify the cultural drivers of the Swedish society. Figure 9 illustrates the different scores of the cultural dimensions of Sweden.

Figure 9: Cultural Characteristics of Sweden

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Source: (Hofstede, 2017b)

Sweden’s PD score of 31 is very low. Swedish people like to be independent and dislike control. The relationship to superiors is informal by addressing everybody by the first name. Hierarchy does not have any meaning to Swedish employees, due to a decentralised organisation. (Hofstede, 2017b) Accordingly, titles are not important to Swedish employees. (Löwgren, 2013) Leaders are viewed as coaches that encourage and develop subordinates to act independently. Swedish people strongly insist on equal rights. (Hofstede, 2017b) Thus, leaders involve their subordinates into any decision. By doing so leaders are able to count on their subordinates’ experience and use a participative and direct communication style. (Hofstede, 2017b)

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^[1] Porter’s Diamond is one of the leading internationalisation strategies in today’s literature. For a more detailed description, see (Porter, 1990).

^[2] The WVS started in 1981 and is today the largest non-commercial and cross-cultural research of human beliefs and values, which covers the full range of global variations. For more information see: (World Values Survey, no date)