Globalization Note Series
Pankaj Ghemawat and Sebastian Reiche
National Cultural Differences and Multinational Business
The eminent Dutch psychologist, management researcher, and culture expert Geert Hofstede, early in his career, interviewed unsuccessfully for an engineering job with an American company. Later, he wrote of typical cross-cultural misunderstandings that crop up when American managers interview Dutch recruits and vice versa: “American applicants, to Dutch eyes, oversell themselves. Their CVs are worded in superlatives…during the interview they try to behave assertively, promising things they are very unlikely to realize…Dutch applicants in American eyes undersell themselves. They write modest and usually short CVs, counting on the interviewer to find out by asking how good they really are…they are very careful not to be seen as braggarts and not to make promises they are not absolutely sure they can fulfill. American interviewers know how to interpret American CVs and interviews and they tend to discount the information provided. Dutch interviewers, accustomed to Dutch applicants, tend to upgrade the information. To an uninitiated American interviewer an uninitiated Dutch applicant comes across as a sucker. To an uninitiated Dutch interviewer an uninitiated American applicant comes across as a braggart.”1 Cultural differences, while difficult to observe and measure, are obviously very important. Failure to appreciate and account for them can lead to embarrassing blunders, strain relationships, and drag down business performance. And the effects of culture persist even in life-and-death situations. Consider the example of Korean Air’s high incidence of plane crashes between 1970 and 2000. As an analysis of conversations recorded in the black boxes of the crashed planes revealed, the co-pilots and flight engineers in all-Korean cockpits were too deferential to their captains. Even in the advent of a possible crash, Korean Air co-pilots and flight engineers rarely suggested actions that would contradict the judgments of their captains. Challenging one’s superior in Korea was considered culturally inadequate behavior.2 The Korean Air example is particularly noteworthy for two reasons. First, if national culture can have significant – not to say existential – consequences among people of the same cultural origin, we need to be very cautious in how we deal with national cultural differences in cross-border interactions. Second, it is interesting to note that the attitudes and behaviors revealed by Korean Air co-pilots and flight engineers persisted in such a highly regulated environment like commercial aviation. National culture shapes behavior and this influence reaches beyond administrative attributes such as governmental policies, laws and public institutions. Therefore, this note focuses on how the influence of culture materializes and how cultural differences affect the operation of firms around the globe. For the purpose of this note, culture shall be defined as a set of shared values, assumptions and beliefs that are learnt through membership in a group, and that influence the attitudes and behaviors of group members. This definition includes three key characteristics: First, culture can be understood as a group phenomenon that distinguishes people of one group from another. From this perspective, cultures exist at many different levels, including organizational functions or business units, occupational groups, organizations, industries, geographical regions, and nations. 3 This note focuses in particular on national culture and the role of cultural differences across countries rather than other cultural groups because this level of culture is particularly relevant for multinational business. Second, the above definition implies that culture is not obtained by birth but rather acquired through a process of socialization. The learning of shared values, assumptions and beliefs occurs through interactions...
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