4 characteristics of Chinese management
- Paternalistic leadership
- Management through relationship
- Centralized authority
- Bureaucratic or entrepreneurial management
3 elements of paternalistic leadership
- Autoriteit
- Welwillend leiderschap
- Morele integriteit
Characteristic of management through relationship
Good conduct more important than objective performance criteria. Informal, direct, face-to-face.
Guanxi
Describes a individual’s social network of mutually beneficial personal and business relationships.
Renqing
The emotional distance between people.
Characteristics of centralized authority
- Simple reporting system preferred (reporting to the top)
- Highly centralized and often arbitrary, ad-hoc decision making
- The authority is not easily delegated
Two contrasting observations in Chinese management
- Remarkable continuity of Chinese culture
- Massive changes in Chinese institutions
4 Important elements of Confucianism
- Respect for hierarchy
- Mutual kindness (welwillendheid)
- Harmony
- Hard work, integrity, respect for tradition
Ganqing
Feeling, affection, emotion
Xinren
Interpersonal trust of one’s integrity and kindness to deliver one’s promises.
Paternalistic leadership and centralized authority are supported by:
- Traditional large power distance
- Confucianism
Management through relationships is supported by:
- Uncertainty of massive institutional changes
- Collectivism
- Confucianism as relation-based moral philosophy
- Importance of “face”
Feng shui
The layout of the physical environment influences good and bad luck
On which aspects does country distance have an effect?
- Location choices
- Entry mode
- Standardization of practices
- Transfer of knowledge
- Performance
What does a larger cultural distance means?
- Higher anticipated communication, coordination and control costs
- Higher uncertainty
- Entry in that country less likely
Cultural distance and internalization: External risk/uncertainty
- Lies in the environment of a foreign venture
- Unpredictability of market, customers, suppliers, competitors
- Risk dealing with governments
Cultural distance and internalization: Internal risk/uncertainty
- Lies within the foreign venture (e.g. partner)
- Managing employees
- Behavior of your partner
- Communication with the local partner
What do we know about the effect of cultural distance on firm internationalization?
- Firms tend to avoid countries at a large cultural distance
- Firms tend to avoid acquisitions in countries with large cultural distance
- If subsidiaries in culturally distant countries are more integrated this pays off.
-Subsidiaries in countries with large cultural distance tend to perform less.
Why need MNCs to adapt to local environments of international subsidiaries?
Due to:
- Cultural and institutional variance
- Resource endowment of local firms and economy
4 Different ways of allowing how diversity enters into the corporation
- Internal embeddedness (No adaptation to local context)
- External embeddedness (Subsidiaries adapt to local context but HQ not)
- Dual embeddedness (HQ embedded in both countries. MNE adapt strategies and practices subject to local institutional and resource conditions)
- Multiple embeddedness (Some subsidiaries are fully embedded in host context, others in MNE context.)
Look for the pictures in summary.
The type/degree of embeddedness depends on
The product/service and the motivation for internalization
But also on:
- History
- Size
- Growth path
- Cultural homogenity of the home country
