The role of culture and nationality in ethical business decisions

Bachelor Thesis, 2017

36 Pages, Grade: 1,3


Confucian-influenced business culture ... 2
Anglo-American business culture ... 4
Towards global business ethics ... 5
Measuring culture: Hofstede and GLOBE ... 7
Confucian-influenced countries ... 8
Anglo-American countries ... 10
Research frameworks and operationalization of CSR ­ dependent variable
conception and measurement ... 13
The effect of national culture on firms' CSR behaviour ... 16
Corporate Social Responsibility
Indulgence Versus Restraint
Long-Term Orientation
People's Republic of China
Power Distance
Uncertainty Avoidance
Table 1:
Confucian-influenced countries based on Hofstede's Index Scores...8

Table 2:
Confucian-influenced culture scores based on GLOBE's society practice and society
value scores...9
Table 3:
Anglo-American countries based on Hofstede's Index Scores...10
Table 4:
Anglo-American culture scores based on GLOBE's society practice and society
value scores...11
Table 5:
Comparison of research findings on the effect of Hofstede's and GLOBE's cultural
dimensions on CSR of firms...24

Culture is a concept that has been widely used as an independent variable to explain
various aspects of individuals' business and organisation's behaviour. A widespread
assumption is that the cultural context in a company's home country influences its
ethical business decisions, and as such also its Corporate Social Responsibility
(CSR) behaviour. Culture's impact on behaviour and decisions bears implications for
both, research and practice especially in an increasingly globalising business
environment. In this respect, multiple researchers have tried to explain differences in
ethical business behaviour, especially Corporate Social Responsibility (CSR)
behaviour, through operationalizing culture ­ or "national culture" ­ in their analysis
(Vitell/Patwardhan 2008; Singh/Vitell/Al-Khatib/Clark 2007; Douglas/Wier 2005)
through different measurements (Hofstede 2010, 1980; House et al. 2004).
This thesis summarises how descriptive ethical research has so far treated cultural
differences between Confucian-influenced
and Anglo-American
countries as well
as globally in its analysis of ethical business decisions by looking at firms' CSR
behaviour. It analyses empirical studies and summarises how and to what extend
national culture was found to influence firms' CSR practices. It tries to answer the
following questions: What is Confucian-influenced and Anglo-American business
culture? How was culture measured? Which cultural dimensions affect CSR
behaviour and how? Are there contradicting findings? Can a prescriptive conclusion
be drawn?
It starts by outlining cultural aspects of Confucian-influenced and Anglo-American
(ethical) business culture. The third chapter summarises the designs,
operationalization of variables and findings of cross-cultural studies and the fourth
chapter critically discusses these studies and their findings to derive suggestions for
practitioners. The fifth chapter draws a conclusion.
Culture in descriptive business ethics
The focus of descriptive ethical research is on the prediction and explanation of the
actual behaviour of individuals, hence leaves out the normative aspects of moral
philosophy and is not answering the question of how individuals should behave
This includes the People's Republic of China (PRC), Taiwan, Hong Kong, Macao, and Singapore.
This includes the United States of America, United Kingdom, Canada.

(O'Fallon/Butterfield 2005: 375). Ethical decision making can be defined as
decision-making behaviour that is discretionary and "determin[es] how conflicts in
human interests are to be settled and ... optimis[es] mutual benefit...[for] people
living together in groups" (Rest 1986: 1). Culture has been defined in various ways.
The most complete definition found is the following:
"Culture consists of patterns, explicit and implicit, of and for behaviour acquired
and transmitted by symbols, constituting the distinctive achievement of human
groups, including their embodiment in artefacts; the essential core of culture consists
of traditional (i.e., historically derived and selected) ideas and especially their
attached values; culture systems may, on the one hand, be considered as products of
action, on the other, as conditioning elements of future action." (Kroeber/Kluckhohn
1952: 181). As a legal term, "nationality" is referring to the citizenship of individuals
indicating which country's national or citizen they are (Merriam-Webster) and has to
be differentiated from culture, ethnicity, and socialisation. This is increasingly
important in a globalising world where nationality is less and less synonymous with
culture. This seems especially relevant when addressing "Confucian-influenced
business culture" since the Greater China region has seen considerable numbers of
outbound migrants in the last 30 years (Gu/Hung/Tse 2008). Ethnicity refers to a
"large groups of people classed according to common racial, national, tribal,
religious, linguistic, or cultural origin or background" (Merriam-Webster) while
socialisation addresses "the process by which a human being beginning at infancy
acquires the habits, beliefs, and accumulated knowledge of society through
education and training for adult status" (Merriam-Webster). All of these concepts
are intertwined and connected, making a clear-cut separation, or even a statement
revealing which concept has the strongest influence, difficult (Tan/Chow 2009;
Whitcomb et al. 1998).
Confucian-influenced business culture
The Greater China region, as well as other regions with substantial Chinese
population such as Singapore, is mostly populated by ethic Chinese, who can be seen
as rooted in Chinese culture (Chan/Ip/Lam 2009). This rootedness might also be
given in the case of Chinese-socialised overseas Chinese (Chan/Ip/Lam 2009). It is
only through broad generalisations that this culturally heterogeneous region and its
business cultures can be summarised under the term of Confucian-influenced

business culture (Law, 2017). Nevertheless, such a generalisation is meaningful to
gain insight into decision frames that cause moral awareness and hence lead to moral
or ethical
business decisions and finally also to firms' CSR behaviour.
Traditional Chinese culture is also influenced by Taoism and Buddhism
(Opdebeeck/Habisch 2011), even though Confucianism is seen as the major
traditional influencer (Whitcomb/Erdener/Li 1998; Yeung/Tung 1996).
Confucianism advocates a set of rules individuals shall follow to lead a life in line
with virtue mainly cultivating "patience, sincerity, obedience, and knowledge"
(White/Taft 2004: 468). It further stresses the importance of humanness (ren)
towards others and employs a Golden Rule: "Do not unto others as you would not
have them do unto you" (ji suo bu yu, wu shi yu ren; Mencius VII.A.4). Etiquette (li)
is a central concept in Confucianism that stresses the importance of harmony within
one's own relationships and the overall society that is to be achieved through social
hierarchy, fulfilling one's role(s) as a child, parent, employee, employer and so on
(Whitcomb/Erdener/Li 1998;
Redding, 1990
Chinese culture, as well as business culture, are deeply influenced by guanxi
(Liu/Wang/Wu 2011; Hwang/Baker 2000; Lovett/Simmons/Kali 1999). Guanxi is
not only a social network and the benefits that come with it but can be defined as
"the activities directed toward establishing, developing and maintaining mutually
successful business activities." (Berger/Herstein 2014: 779). Guanxi has been
measured through the four dimensions of investment in affection (ganqing),
exchange of favours (renqing), management of face (mianzi), and trust building
(xinyong) (Law 2017; Wang/Wang/Zheng 2014; Yen/Barnes/Wang 2011). While
ganqing is involved in the establishment and enhancement of relationship ties,
renqing shows the major difference between guanxi and Western relationship
networks: the obligatory nature of reciprocity in that the giver will receive equally
from the receiver in the future (Wang/Wang/Zheng 2014). Face is crucial for guanxi
maintenance and refers to others' perceptions of a person's image
(Wang/Wang/Zheng 2014). Causing a person to lose face can have terminating
consequences for relationships. Guanxi has been shown to reduce behavioural
uncertainty between business partners (Tam, 2002) and environmental uncertainty
(Barnes et al. 2011; Hwang et al. 2009; Tsang 1998; Yeung/Tung 1996), therefore
This thesis treats moral and ethical as synonyms.

increasing business success (Berger/Herstein 2013; Fan 2002; Guthrie 1998).
Negative influences of guanxi are its close link to corrupt practices, hiring of
unsuitable candidates to return favours and other business behaviour that is perceived
as unethical from a Western perspective (Berger/Herstein 2012; Barnes et al. 2011).
Guanxi has been meaningfully examined through the lenses of social network and
transaction cost theory that demonstrated its effectiveness to decrease transaction
costs (Berger et al. 2014; Gu et al. 2008) and realise information advantages that
come with it (Berger/Herstein 2013; Yang 1994). In this respect, the understanding
of Confucian-influenced business cultures as relation-based (Li/Filer 2007), as
opposed to Western rule-based business cultures (Sue-Chan/Dasborough 2006),
gains further credibility. Amber's (1994) findings that relationship practices are
leading to business opportunities in Chinese culture, whereas it is the other way
round in Western culture further support this finding.
Etiquette and Face (mianzi) help to understand conflict-avoidance strategies
observable in Chinese society: starting from the absence of "no" in Standard Chinese
(Putonghua) all the way to the overall quest for building a "harmonious society
(hexie shehui)" under the Chinese Communist Party's leadership (Tomba 2009).
Anglo-American business culture
The USA, Canada and the UK are often addressed as a cluster for their shared history
and cultural heritage (Hofstede 2010; Ardichvili/Jondle/Kowske 2010). This is why
this thesis summarises them under Anglo-American cultures.
Anglo-American ethical business culture is enforced through organisational
structures and processes as well as employee training and management's authentic
commitment to ethical company goals. Compliance of ethical codes and other
programs plays an important role as well as the creation of structures to report
violations against these. Relying on a representative and demographically diverse
sample of employees from various industries and countries, including Anglo-
American countries and China, Ardichvili et al. (2010) found that senior
management's ethical behaviour is more important in Anglo-American than in
Confucian-influenced countries when it comes to encouraging such behaviour with
employees. Inclusion of stakeholders in the decision-making process was found to be
more important in Anglo-American business culture and processes to report

unethical conduct were in place in Anglo-American but absent in Confucian-
influenced countries (Ardichvili et al. 2010).
Cross-cultural studies found that cultural values have an impact of the rationales
rather than the ethical decisions themselves (Whitcomb et al. 1998). When testing
Chinese and US-American business students through five vignettes describing
ethically ambiguous situations, it was found that decisions differed in two situations,
namely with respect to buying into a lucrative market through bribing and
publicising instructions for building an atomic bomb. Chinese respondents indicated
high likelihood to take the first decision to buy into the market, not seeing it as
unethical behaviour while for the atomic bomb they were much more concerned
about world safety implications than US students (Whitcomb et al. 1998). The
"payment for market entry"- scenario vignette was identified as bribery by US-
American students. Institutional differences significantly influence decision making
as well: since Anglo-American countries have a long tradition of legal enforcement
with product safety lawsuits posing an expensive threat for companies, situations that
could lead to them are realised as ethically ambiguous and decisions are made to
avoid them (Whitcomb et al 1998). In Anglo-American countries, institutions tend to
encourage ethical behaviour through linking them to corporate codes and
encouraging them through companies' incentive systems (Ardichvili et al. 2010).
Changes in Chinese business culture are assumed to have lead to a motivation
through profit that is equally prevalent in Anglo-American cultures (Whitcomb
Major problems with cross-cultural studies are the samples, mostly business students,
and the limited way in which culture is taken into account and conceptualised. Large-
scale cultural studies like Hofstede (1980, 2001, 2010) and House et al. (2004) found
results that are more reliable through their representative sample selection and
reliable application in various research scenarios.
Towards global business ethics
Cultural ethical relativism rejects the concept of global (business) ethics. These
scholars argue that the variety of experiences made by humans lead to fundamentally
different morals among cultures (Gowans 2012). The questionable nature of this
point of view becomes especially prevalent when looking at empirical studies that
show people's ability to differentiate gifts from bribes (Leung 2000) or independence
Excerpt out of 36 pages


The role of culture and nationality in ethical business decisions
University of Cologne
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Business ethics, Culture, CSR, Corporate Social Responsibility
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Eva Lena Richter (Author), 2017, The role of culture and nationality in ethical business decisions, Munich, GRIN Verlag,


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