Chapter 2: THE CULTURAL CONTEXT OF IHRM
Learning objectives
Chapter 1 observed that international HRM differs from nationally-oriented HRM
predominantly in the complexities that result from employees of various national origins
working in different countries. People who work in internationally operating companies, as
well as customers, suppliers, or representatives of government institutions in the host country,
often face very different cultural and institutional environments due to differing socialization
experiences. In this chapter we systematically review the environment of international HRM
decisions so that the complexity of these decisions can be better understood and adequate
solutions developed. This chapter has been designed in order to enable students to learn
about the key findings of intercultural comparative research on:
• Definitions of culture
• Cultural concepts
• Results of intercultural management studies such as Hofstede’s research, the
GLOBE study and others
• Reflections on cross-cultural management research
• Discussion of the development of cultures
These concepts are highly relevant to developing a more comprehensive understanding and
explanation of the complexity of international HRM.
Chapter Summary
In this chapter, we outline how the cultural environment may influence HRM. In summary it
can be concluded that an adequate understanding of the cultural context, as it impacts on the
behavior of an organization’s employees, is of critical importance. Thus, the results of cross-
cultural comparative research may provide valuable hints to managers about how to cope with
employees from foreign cultures.Furthermore, these research results can form the basis for
the development of intercultural training measures. These results could also be of great use to
HRM in an international firm, because they could assist in undertaking a structured analysis of
the transferability of specific elements of a parent firm’s existing HR policy to foreign
subsidiaries. In this context, it would be conceivable to decide whether incentive systems for
groups or for individuals would be effective in a specific culture.
Table 2.1 in the text summarizes these ideas about the cultural context and gives examples of
environmental differences which could lead to problems when MNEs attempt to introduce
worldwide standardized HRM practices. Within this context, it is important to recall the
discussion on the convergence and divergence of HRM and work practices, as mentioned in
the first chapter.
Links to other chapters and cases:
This chapter provides important information on one of the key contextual issues for
international human resource management. The importance of the cultural environment has
already been introduced in Chapter 1 and will be addressed in many chapters again or linked
to topics such as the cultural adaptation process (Chapter 5), international performance
management (Chapter 6), and intercultural training (Chapter 7).
Cases that provide the basis for a cultural discussion include Case 3 on transnational
compensation, where, for example, risk aversion (which could be linked to uncertainty
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avoidance) plays an important role. A more general discussion on cultural values could be
included in Case 7, which examines balancing values between Scandinavia and India.
Discussion Questions
1. Define culture. How can culture be conceptionalized?
This question addresses material found in ‘Definition of culture’ (p. 24) and ‘Schein’s
concept of culture’ (pp. 24-25).
To date, there is no predominant consensus on the exact meaning of culture:
• ‘Culture consists of patterned ways of thinking, feeling, and reacting, acquired and
transmitted mainly by symbols, constituting the distinctive achievements of human
groups including their embodiments in artifacts; the essential core of culture consists
of traditional […] ideas and especially their attached values…’ (Kluckhohn and Kroeber,
1950s).
• ‘[Culture is] mental programming’ or ‘software of the mind’ (Hofstede, 1991).
• Culture includes the customs of a community that are practiced by a majority and are
based on four basic elements: standardization of communication, thought, feeling, and
behavior (Hansen).
Culture can be conceptualized on various levels (Schein, 2004):
1. Artifacts or creations (conscious): visible organizational structures and processes;
easily measurable, but hard to interpret variables such as, for example, the economic
growth of a country or its political system.
2. Values (partly conscious and partly unconscious): values of a company or culture,
found in the intermediate level of consciousness; based on underlying assumptions,
for example they are the basis for national legislation or attitudes towards abortion.
Hofstede’s study can be positioned on this level.
3. Underlying assumptions (invisible and unconscious): includes convictions, perceptions,
thoughts, and feelings concerning, for example, the nature of reality and the nature of
truth, time dimensions, the effect of spatial proximity and distance, the nature of
being human, types of human activity, the nature of human relationships through
religions, the basic understanding of democracy, and capitalist market organizations.
Influences from artifacts, through values to underlying assumptions, are much weaker
than those leading in the opposite direction, because the influence of underlying
assumptions on values and artifacts is stronger than vice versa.
2. Outline Hofstede’s cross-cultural management study and discuss it accordingly.
This question is addressed under ‘Hofstede’s cross-cultural management study’ (pp.
26-33).
• It was the first major study in cross-cultural comparative research.
• It can be positioned on the values level (according to Schein).
Original study at IBM (1967-1973):
• N=116,000 questionnaires which were completed by IBM employees at all hierarchical
levels and with various qualifications.
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• Four dimensions of country cultures were identified: power distance, uncertainty
avoidance, femininity vs. masculinity, and individualism vs. collectivism.
• These dimensions imply consequences for the structures of organizations.
Chinese Value Survey
• N=100 people from 23 countries.
• The results reflected three dimensions similar to power distance, individualism vs.
collectivism, and masculinity vs. femininity and one new dimension: Confucianism
dynamics, which could not be related to the results of the original IBM study.
Dimension Definition Examples of Country Characteristics Major Difference
lies in…
Power
Distance
The acceptance of
members of a culture
that power is not
distributed equally in
institutions expresses
the emotional distance
between employees and
superiors
High: acceptance of a
hierarchical organization
structure, in which every
individual can occupy their
place without any need for
justification
Many South Asian countries,
South America
Low: aspiration to equal power
distribution, demand for
explanations for any instance
of formalized power inequality
US, Anglo Saxon countries
… how power
inequality is dealt
with
Uncertainty
Avoidance
Extent to which the
members of a culture
feel threatened by
uncertain, ambiguous
and/or unstructured
situations and try to
avoid them
Strong: strict beliefs and
behavioral codes, no tolerance
for people and ideas that
deviate from these
Some Asian Cultures, e.g.
Singapore, Hong Kong,
German-speaking countries
Weak: significance of practice
exceeds the significance of
principles; high tolerance of
deviations
Scandinavia
… the reaction of
individuals to time
pressure or
uncertainties in the
future
Femininity vs.
Masculinity
Based on the
assumption that values
can be distinguished as
more masculine or more
feminine
Masculine orientation:
comprises the pursuit of
financial success, heroism and
a strong performance
approach; role flexibility is less
clear-cut
German-speaking countries
Feminine orientation:
preferences for life quality,
modesty and interpersonal
relationships; role flexibility is
more clear-cut
Scandinavia
… the form of
social roles
attributed to
gender by the
relevant society
Individualism
vs. Collectivism
Extent to which
individual initiative and
caring for oneself and
one’s nearest relatives
are preferred by a
society as opposed to,
for example, public
assistance or the
concept of extended
family
In more individualist cultures,
there is merely a casual
network of relationships
between people. Each person is
primarily responsible for
himself
US, Anglo Saxon countries
More collective cultures have
closer, more clearly defined
systems of relationships. This
applies both to extended
families as well as companies
Many South Asian countries,
South America
… the predominant
self-sufficiency
among individuals
in a society (private
& professional)
Confucianism
or Long-term
Orientation
Basic orientation in the
life of people, which can
be either more long-
term or short-term in
nature
Long-term: great endurance
and/or persistence in pursuing
goals, position of ranking based
on status, adaptation of
traditions to modern
conditions, respect for social
and status obligations within
certain limits, high savings
rates and high investment
Short-term: personal candor
and stability, avoiding loss of
face, respect for social and
status obligations without the
consideration of costs, low
savings rates and low
investment activity,
expectations of quick profit,
respect for traditions, and
x…the attitude
towards time
(short-long; past-
present-future)
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activity, readiness to
subordinate oneself to a
purpose, and the feeling of
shame
future-oriented, dynamic
Asian Countries
greetings, presents and
courtesies based on reciprocity
present-oriented or past-
oriented, relatively static
US
Discussion (see pp. 33-34 ‘A reflection on the Hofstede study’):
Pro:
• Historical prominence—an important contribution to cross-cultural management
research.
• Could be repeated at different points in time.
• Results could serve as guidelines for explaining behavior, at least in initial orientation.
Contra:
• Deterministic and universalistic concept of culture (see discussion question 6).
• Reductionist approach.
• Lacking theory—limited validity
o Dimensions were mainly derived a posteriori
o As Hofstede’s study is placed on the value level—the intermediate level of the
Schein concept—it is questionable how far standardized questionnaires can
capture the unconscious and therefore the underlying motives of actions
o No line between practices per se and perceived practices
o Lack of separation between values and behavior
o Potential distortion of the Western perspective (the 2nd (Chinese Value) study
took place because the risk that the cultural identity of researchers from
Western industrial countries might influence the form of the questionnaire
could not be ruled out.
• Countries rather than cultures are delimited
o E.g. Yugoslavia in the 1990s and multicultural societies like Belgium show that
national borders do not necessarily contain homogeneous groups It should
be assumed that national cultures are not the only influencing factors of
behavior.
• Data is not representative—limited validity
o Data from only one company (IBM) —although this helps to keep many factors
constant—with a strong corporate culture and corresponding selected
employees (no typical national citizens)
o Mainly limited to middle-class males in marketing and service positions
o Future research should imply cross-level studies, intra-cultural differences,
moderator variables, and the effects of interactions between culture variables.
• Static and outdated
o Although it is assumed that cultures do not change fundamentally over 40-50
years, changes can be seen, for instance, through strong economic growth and
significant system changes.
3. Outline the methodical procedure and the results of the GLOBE study.
Methodical procedure (material covered on pp. 35-36 in the text):
• Phase I (1993/1994): the development of underlying research dimensions (new social
and organizational cultural dimensions and six leadership dimensions).
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• Phase II: gather data on these dimensions.
• Phase III: analyze the effects of leadership behavior on the performance and attitudes
of employees.
• Sample: 62 countries, 17, 370 people from middle management, 951 organizations,
and three industries.
Goal:
• The GLOBE research tries to study the complex relationships between culture,
leadership behavior, organizational effectiveness, social co-habitation conditions, and
the economic success of societies.
Dimensions:
• Institutional collectivism, in-group collectivism, uncertainty avoidance, power distance,
gender egalitarianism, assertiveness, performance orientation, and humane
orientation.
• Partly based on Hofstede’s dimensions.
• Distinction in the questions between practices (as is) and values (should be).
Results (p. 36)
• Separation of countries based on a literature analysis carried out in ten clusters: South
Asia, Latin America, North America, the Anglo cluster, Germanic and Latin Europe, Sub-
Saharan Africa, Eastern Europe, the Middle East, and Confucian Asia.
• These cultural regions have different characteristics within the respective cultural
dimensions. Unique profiles emerge when combining cultural dimension
characteristics with different cultures.
4. Compare cross-cultural management studies and list their advantages and disadvantages.
This question addresses mainly covered material in ‘A reflection of the Hofstede
study’ (p. 33), ‘A reflection on the Globe study’ (p. 36), ‘The Trompenaars and
Hampden-Turner study’ (pp. 36-37), and ‘Cultural dimensions by Hall and Hall’ (p. 38).
Studies (start) Data Basis Advantages Disadvantages
Hofstede (1960s) Quantitative
N= 116,000
62 countries
1 industry
Historical prominence;
Could be repeated at
different points in time;
Results could serve as
guidelines for
explaining behavior
Western research team;
Limited industry focus
(only 1);
Equivalence of culture to
nation;
Level of analysis
GLOBE (1990s) Quantitative
N= 17,370
62 countries
3 industries
Distinction between
practices and values;
Multinational research
team;
Various culture levels
(individual,
organizational, social)
and distinctions in the
sample in some
countries (e.g. South
Africa, Switzerland,
Limited industry focus
(only 3);
Equivalence of culture to
nation (subcultures are
not sufficiently
reflected);
Still: level of analysis
(intra-national
subcultures are not
considered)
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Germany);
Refined dimensions
(p.36)
Trompenaars &
Hampden-Turner
(1980s -?)
Quantitative
N= 30,000
55 countries
(2002)
Practical template to
monitor behavior
Operationalization and
genesis of dimensions
remain unclear (p.37)
Hall & Hall Qualitative Relationship between
culture and
communication;
Practical template to
monitor behavior
Dimensions may be
incomplete, closely
related, and overlapping;
Cultural regions are
represented in a macro
sense
5. To what extent do cultures undergo changes? Illustrate your statement with an example.
This question is best answered via direct reference to the text ‘The development of
cultures’ (p. 39).
• This discussion is closely related to the convergence (cultures are becoming more and
more similar)-divergence (specific cultural characteristics remain) debate.
• The extent depends on the level of analysis:
o on the macro-level of culture (organizations) change takes place
convergence, because organizations are embedded in institutions that are also
subject to convergence (e.g. joining the EU);
o but on the micro level (behavior) differences are enduring divergence.
• Hybridization of once distinct cultures occurs due to growing interdependence and
migration.
• Intra-cultural changes due to, for example, demographic changes (beyond cultural
borders), strong economic growth (e.g. PRC), and system changes (e.g. joining the EU)
(see p. 34, 39).
6. What do you think about the statement: ‘Cultures in Europe are becoming more similar?’
This question addresses material on p. 25 and p.39.
In short: On the surface, cultures in Europe are becoming more similar (convergence),
but not in depth (divergence).
According to Scholz, Messemer, and Schröter (1991) there are great similarities on the
artifact level of European states, which evokes the impression that there are no major
differences between countries. However, the consensus is much lower on the levels of
values and basic assumptions, which means that Europe is a culture corridor with
major similarities and differences on the levels of basic assumptions, values, and
artifacts.
Example:
• Artifacts: laws and guidelines that are initiated at the European level.
• Values: national legislation on abortion.
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• Underlying assumptions: Christianity, the basic understanding of democracy, and
capitalist market organizations (p.25).
References:
Homepage of Geert Hofstede http://www.geert-hofstede.com.
Website of the GLOBE Project: http://www.thunderbird.edu/-wwwfiles/ms/globe.