Rules of Particularism in Russian Business System

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Rules of Particularism in Russian Business System

Aleona Gad

Master Thesis Entrepreneurship

Under supervision of Dr. Marco van Gelderen

Student number: 11766735/2615985 Date: 13.07.2018

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This document is written by Student Aleona Gad, who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document are original and that no sources other than those mentioned in the text and its references have been used in creating it.

The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

Abstract

The following research examines various rules used by particularists when making business related decisions. This work enables a deeper understanding of particularistic behavior on the example of Russia. This research had two stages – a preliminary stage, which was necessary due to the absence of any prior research on the following topic, and the final stage. Eventually, 54 Russian entrepreneurs were contacted and asked to fill out a questionnaire, the aim of which was establishing the above-mentioned rules. As a result, it has been discovered that particularists put personal trust and relationship above all, even in the business setting. However, they only tend to trust the closest people, such as close family members and friends. When making a decision, they take a very wide range of factors into account and one small detail can change the whole outcome. Lastly, first impression and the importance of the business partner can also highly affect the final decision.

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1. Introduction

1.1 Background

The Russian Federation is the biggest country in the world by landmass, and is number nine when it comes to its population (U.S. Census Bureau, 2018). Russia also has a high number of operating enterprises – according to SPARK Interfax, there currently are 29.5 million operating entities, with approximately 3200 new entries a day. Apart from that, Russia Economic Report published by The World Bank (2018) states that Russia is still undergoing an economic recovery – the economic growth is modest, constantly fluctuating due to the oil prices. This indicates that the economy is gradually

stabilizing, allowing the country to further develop. Apart from that, the country is full of various natural resources, and with the further growth of the country, these resources could bring endless possibilities. All of this, however, does not change the fact that for a long time Russian business leaders were perceived as very harsh individuals, or, how Puffer et al. referred to them back in 1994 – bears. These people are said to be hard to work with. A good reason for such radical distinction between the Western and the Eastern worlds can be cultural differences between these countries. One of such distinctions was made by Hampden-Turner and Trompenaars in 1997. Among other divisions, the authors split countries into universalist and particularist, where Russia remains a country with stronger particularistic traits. However, it is not only Russia, which falls under this division – Eastern Europe in general, as well as Latin America, is considered particularist. In their work, the authors describe universalism as a rule-based and abstract behavior, while particularistic behavior is rule-based on circumstances and relationships rather than rules.

1.2 Problem Statement

There have been various researches conducted in the field of universalism and particularism (Hampden-Turner and Trompenaars, 1997; Wallensteen, 1984; Zamzow, 2015; Wallack, Gaviria, and Stein, 2003; Gaviria, Panizza, Seddon and Stein, 2000; and others). These works, however, do not provide the reader with sufficient amount of practical contributions. Many of these works solely define the concept of particularism in a theoretical way rather than describe the mechanisms of how particularism works. There is a common pattern in all of these works, which shows that particularists tend to rely more on interpersonal relations rather than rules. This, however, does not indicate a total absence of rules – they are rather more complex, as they depend on a wide range of factors. These specific factors are not described in prior literature and are the ones to be investigated in this research.

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There have, however, been various works that have already stressed out the patterns of particularistic behavior in Latin America (e.g. Sanchez, Gomez and Wated, 2007; Mejia-Acosta, Pérez Liñán and Saiegh, 2006). These researches are important for understanding the culture – work of Sanchez et. al., for example, attempts to explain why bribery is tolerated in Latin America. On the other hand, there is a very little amount of work focusing on particularism specifically in Russia. For instance, Slezkine (1994) is focusing on the whole USSR. While this information is relatable to Russia and is certainly good for general understanding of the USSR mentality, this work is too outdated to be applied directly to present day Russia. There is even less literature, if any, that touches upon particularism in Russian business sector, which is why this research will concentrate specifically on this topic. However, it will not solely talk about principles of particularism using the example of Russia – there are no exact rules that particularists use. As stated by Hampden-Turner and Trompenaars (1997), in particularism, every situation has unique factors that can change the outcome of a situation completely.

Hence, this research is aiming to discover behavioral patterns in Russian businesses, focusing on interpersonal relations – find out, which factors are relevant for a particularist when making a decision. It will focus on entrepreneurs specifically, as they are the ones to make the first step towards the establishment of an enterprise and its further development.

1.3 Research Questions

The main research question this paper is aiming to answer is: ‘What rules do particularists take into account when making business-related decisions?’ In order to answer this question, there have to be answers to two sub-questions: 1) ‘What does particularism mean in a business context?’; 2) ‘What are the most relevant factors to particularists in the decision-making process?’

1.4 Contributions

As it has been stated earlier, there are many literature gaps in the field of business particularism. Therefore, this research is also aiming to bring various practical and theoretical contributions. 1.4.1 Practical

The results of the following research may help the entrepreneurs doing business with Russian

individuals to better understand their mentality and avoid potential cultural misunderstandings. This may also help to bring the business relations between countries onto the next level and potentially develop communication between universalists and particularists.

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1.4.2 Theoretical

This research also provides with a deeper understanding of the specific operation of particularism in relation to the business sector. Particularists make decisions, just like universalists do. Their decision rules are just more complex and context specific. A first contribution of this study is to uncover the factors that particularists take into account. Apart from that, it also gives a broader overview of

specifically Russian mentality, which is an important contribution due so far unknown Russian way of thinking. This work will provide a good basis for further analysis of the seven cultural dimensions that Trompenaars and Hampden-Turner (1997) described in their work.

1.5 Overview

Based on this information, this paper will be structured as follows: first of all, the reader will be

provided with an extensive literature review, discussing previous works, upon which the whole research will be based – starting with a general definition of particularism, followed by business particularism and its established rules. Thereafter, the reader will be faced with methodology, a preliminary research, which will describe preliminary methods and results. Based on these results, the final methodology section will be adjusted, followed up with the final results of the research. That section will be continued with a discussion, which will also include the problems and limitations of this research, as well as with recommendations for the further research. Lastly, a conclusion will be drawn. In the end of the paper, apart from the references, an appendix can be found, which will also include the questionnaire that was used for collecting the data.

2. Theoretical Background

The following chapter will introduce the reader to previous works – both, theoretical and empirical – upon which this paper is built. It will first describe the general concept of particularism, gradually leading to particularism in the business sector. Thereafter, several rules of particularism found in the discussed literature will be presented. Finally, several rules of particularism found in the presented literature will be presented.

2.1 Particularism

The two authors - Trompenaars and Hampden-Turner – wrote a book in 1997 called ‘Riding the Waves of Culture: Understanding Cultural Diversity in Business’. This book was the one to analyze seven cultural dimensions, among which was a comparison of particularism and universalism. The following

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universalism has to be made: the biggest difference between the two is that the latter one focuses on equal rights and freedom – making laws apply to everyone without any exceptions. Particularism, on the other hand, focuses on personal relations between people. Everything in particularism is intimate, focusing on unique qualities of individuals and their relations.

The authors provided the reader with an interesting example of a car accident in order to illustrate the differences in the mentality. The two groups were presented with a hypothetical situation, in which their friend was driving a car and hit a pedestrian. The question was whether the interviewee would lie in the court to protect his friend from having serious consequences. In this situation, most of North-American and European respondents would most likely not protect their friend, while among Venezuelan

respondents 2/3 would help their friend out. Remarkably, when the two groups were faced with the same question, but the severeness of the accident increased, the chance of helping a friend highly increased by particularists. The outcome was opposite for universalists. This dilemma causes a misunderstanding between the two parties. Universalist’s way of thought is: ‘How can I trust particularists – they will only help their friends’, while for particularists it is ‘How can I universalists – they will not even help their friends’.

In his analysis, Peter Wallensteen (1984) also closely compares universalism to particularism, and mainly – their differences, results and lessons learned. According to Wallenstein, the world order policies are more universalistic rather than particularistic. In the same way, there have been many

attempts to make the relations between the major powers universalist. The author states that universalists organize the relations between the individuals in order to define the rules of behavior, while

particularists ‘emphasize the special interest of a given power, even at a price of disrupting existing organizations or power relationship’ (p. 243). Such radical difference between two types of countries may make it hard for them to understand each other due to various differences in mentalities. This does not only affect the everyday life of individuals – Wallack, Gaviria and Stein (2003) analyzed

particularism in 158 countries and came to the conclusion that it also has a big effect on political system, as well as on the economy of a country. For instance, there is a positive correlation between

particularism and fast recovery from a crisis (Gaviria et al, 2000).

Based on this information, it is important for these different types of mentalities to understand each other, especially when it concerns business. Russian writers, such as Gromova, Rener and Skopova (2013) and Mikhelson (2016), have written various works that concern this topic. Mikhelson is

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linguistic misunderstandings can cause severe problems and negatively influence international business-related activity. Gromova, Rener and Skopova state the problem in a similar way – also emphasizing the number of intercultural misunderstandings happening on a daily basis simply due to the cultural

differences. The importance of personal networking is also highly stressed out my Michailova and Worm (2003), who conducted 54 interviews with Russian and Chinese individuals from various industries. The authors emphasized the importance of cultural understanding between Eastern and Western worlds – preferably even incorporation of some cultural elements into the business strategies. This is why it is so important to analyze the country, with which one is doing business.

Of course, there are many other authors discussing particularism, however, most of them are discussing it from a general rather than business perspective. For instance, in his work, Jonathan Dancy (1983) used particularism itself to conclude that that moral principles do not exist. This conclusion emphasized that every situation is case-sensitive. In the same way, Zamzow (2015) has analyzed various literature on moral principles and decision-making; she argues that moral thinking for particularists does not necessarily need any moral rules. She states that, on the contrary – any rules and limitations can get in the way of making a moral decision. Particularists argue that such rules are rather guidelines in the process of decision making and there can be many other factors, which can shift this decision in favor of a different outcome. The reason behind such opposition to following the guidelines is that guidelines neglect important details, which could have played a deciding factor in the outcome.

Zamzow’s article (2015) is very useful, as she outlined two biggest reasons why particularists think that following principles will lead to bad decision-making: people are too rigid in their decision-making and they neglect relevant details in the situation. Hence, particularists find the need to focus on sensitivity, because morality is not only about outcomes.

2.2 Particularism in Business

Apart from everyday life situations, Trompenaars and Hampden-Turner (1997) also discuss behavioral differences of universalists and particularist specifically in the business setting. More precisely, they discuss four settings, in which the differences between universalism and particularism are visible: contract, business trip, role in the head office, and job evaluations/rewards. Before discussing the results of the study, it is important to emphasize that particularism does not imply the absence of rules rather their complexity and a wide range of depending factors, as well as a need for flexibility. There is no directly applicable model or a general rule for decision-making, especially if there are more than one

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That being said, the results of this observation are as follows: when talking about a contract, universalists see it as a regular way to state the promises of each party that they ought to fulfill.

Particularists, on the other hand, see it differently – they see less a need in a contract, because they rely more on their business partner and the relationship between the two parties. The need of an official contract here tends to impose suspicion. Moreover, in the case of particularists, the agreement between two parties would involve more action and details than stated in the contract – for them the relationship is more than the list of things they are obliged to do. Next to that, business trip timing is also a point of arguments. When visiting particularistic countries, more time is needed. This is because particularists take their time to establish a relationship with their partner and are not eager to rush things. Sokolskaya (2015) wrote a paper on high-context cultures, specifically describing Russia as one. High-context communication is seen as a way of communicating with less amount of linguistic meaning enclosed and rely more on the prior knowledge of the other individual. According to the author, Russia fits the

description of a high-context culture, and in this situation, more time has to be devoted into the development of a relationship with such way of communication.

Thereafter, from the work by Hampden-Turner and Trompenaars (1997) comes the role of the head

office – whilst in universalist culture the head office is seen as something operating on a global level, in

particularistic countries it is operating on a local level. This also applies to the business world – the head office ‘shapes local ways of operating’ (Trompenaars & Hampden-Turner, p. 41). This is also connected to the interpersonal relations – the head office knows its employees, trying to establish good connection with them and providing them with what they need. Lastly, job evaluations and rewards. In universalist countries, the employee should have the specific qualifications listed when applying for a job –

everything is documented. No more, no less. Same counts for the performance. This is the way the candidates for a job position are evaluated – simply, the best fit based on the requirements. In

particularistic countries, however, the process of choosing an employee goes on a more intuitive level – the person might be not as experienced as expected, for example, but if the feeling about that person is good, they will be given a chance. Similarly, no matter how experienced a person might be, if the boss does not like the potential employee on an intuitive level, this person will not be hired.

As mentioned previously, there is not much literature, which focuses on particularism in the business world. The work by Luthans et al. (1995), even though it is slightly old, contains some relevant for this research information, as the authors describe, among other things, doing business in Eastern Europe, which includes Russia. The authors incorporate political, economic and cultural aspects. All of them are

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relevant, as these aspects are interconnected. First of all, when talking about Russia as it is today, it is important to mention that it was under the communist regime for a long time. This means that there was a centrally planned economy – the government owned the production. Hence, the competition was not as high as in capitalist countries, where it was encouraged. The control of banking, communications etc. was centralized, the education and healthcare were free. This life, of course, affected the mindset of the citizens and made Russian people what they are now – their mentality, their moral principles, their behavior. And even though the Soviet Union fell apart, the years of such life do not leave unnoticed. Luthans et. al. (1995) also closely discusses what happened to Russia after the fall of the Soviet Union. The economy became more liberal, the government does not have ownership of completely all the production. Enterprises became more liberal and not highly dependent on the government. Overall, Russian economy moved towards more competitive market economy. Even though the authors wrote the following work in 1995, the situation remains the same – Russia has not moved back to the communist regime and remains at the competitive stage. Taking this information into account, the authors start the discussion of Trompenaars’ model in relation to Eastern Europe. They indicate that particularism, and namely valuing personal relationships higher than rules, is highly developed in Russia. However, the only rule they found is that ‘business partners would avoid formal contracts and would rely on building trusting relationships over time’ (p. 14). Hence, this work supports the work of Trompenaars and Hampden-Turner (1997) and contributes with the discussion of Russia’s past.

A newer work by De Massis et al. (2014), also analyzes particularistic behavior in business by

comparing various models explaining family business behavior. Focusing the article on family business, the authors found out that the behavior is supposed to be based on certain values, desires, and motives of the family itself. Only then, will the company be seen as their own business. That implies that the family members should behave altruistically towards each other. However, assuming that the authors do not focus just on particularistic countries, this is a general particularistic behavior a firm can take up. Nonetheless, as Russia is a particularistic country, it is safe to assume that most of the firms will take this behavior up, again leading to the assumption that businesses are very dependent on relationships. Lastly, the work of Pearce et al. (2000) goes along with all the previously-mentioned works and states that too little research has been done on particularistic behavior within the company, which is why they wrote a paper concerning trust and commitment in particularistic organizations. When talking about trust, the authors found out that in a universalistic organization people are inclined to trust one another,

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practice, people tend to trust people they already know and believe in – not because of any rules, but because of an established relationship. Thereafter, they discuss the complaints – universalistic

employees are very likely to report any problem they encounter in a workplace, as they believe, it will be fixed faster. In a particularistic society, this is less likely to happen, as people would not want to betray their colleagues by telling on their mistakes. Commitment to the organization, as well as investment in it, on the other hand, would be higher by universalists, as particularists would favor the relationship with employees and colleagues more than the organization itself.

The points that Pearce et al. (2000) discuss are perfectly explainable. Luthans et al. (1995) were right – Russian mentality does depend on Russia’s history. The fear of telling on someone, for instance, comes from the many fears of the USSR times, like the fear of secret police, for instance, which is closely discussed in the book by Bramstedt (2013). People were so afraid telling secrets back in the days, because they never knew who their friend is, and who is not. Eventually, this has merged with the mentality itself as it can be seen today.

2.3 Rules

Based on the previous works discussed in this chapter, which include empirical and theoretical findings, it is clear that there are general guidelines that particularists tend to follow when it comes to business. Hence, there are rules, but they are flexible and have various influencing factors.

1. Focus on relationships rather than rules. This rule seems to be the core rule of particularism and

is straightforward. However, there are many factors influencing this ‘relationship’. Therefore, it is important to distinguish the types of relationships. It can be an old relationship and a new relationship. Weak ties versus strong ties. It can be an intimate relationship, family relationship, friendship. Friendship can be split into friends, best friends, acquaintances, old school friends, Linked-in friends, etc. According to Güroğlu (2008) and Riggio (2014), gender also plays a role in friendship – female friendships are more based on emotions and talking, while male

friendships are based on activities rather than talking.

This is the most important and complex rule of particularism so far. In order to break down the complexity of the following phenomena, it is useful to first analyze what kinds of relationships and rules there are in the business world. In business setting, there are two types of relationships: relationships between both – internal and external – business partners and between employees (including vertical relationships). The ‘rules’ would be regular moral rules. However, as

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mentioned previously, these relationships depend on how close they are. While it is clear that they are discussed in the business setting, the individuals can also have stronger ties than solely business partnerships. The work by Furman and Rose (2015) closely discusses various types of friendships and romantic relationships, some of which are incorporated into the scheme below. Hence, here are the types of relationships that may affect the decision-making:

These relationships, as well as simple business relationships, should also be divided into 2 parts: new and old, the latter one being dependent on how good it was, and the first one dependent on the first impression. Apart from that, derived from the literature (Güroğlu, 2008), gender also plays a role.

2. Legal contracts, as well as informal agreements, are readily modified. This rule concerns signing

of contracts and trust. However, here a distinction shall be made too – the relationship between business partners and the length of their collaboration. It should be clear whether there is a past relationship between them. Perhaps, they are friends, or, perhaps, they had a history of mistrust, because one had already failed another.

3. Investing time and effort in the partnership is of a high importance. The following rule was

drawn upon business trip timing. This also is based upon a relationship with business partner, same as in the previous rule.

4. There are several perspectives on reality relative to each participant. These perspectives can

also be based on emotions. For instance, this can be a belief in a person or instant personal dislike. Where universalists would apply rules, particularists will rely on their gut feelings. For example, when hiring an employee, this feeling may play a big role. The same applies for to a prior relationship – most likely, a particularist will make a different choice when hiring their

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5. The trust towards most of colleagues is usually low. It has already been discussed why the trust

can be low. Another reason for low trust can be mistrust to oneself (Russell, 2012). However, this does not apply to everyone. Same as in the first rule, trust depends on the type of relationship and history. Interestingly, trust towards a female colleague with a secret would be somewhat lower than towards a man, as, again, women tend to talk, share and gossip more than men (Riggio, 2014; Kelly, 2011). However, it also depends on what kind of information is to be shared. For instance, when it comes to monetary issues, many people in general, not only particularists, would prefer to keep this information to themselves (Luster, 2015).

This point leads to an interesting discussion, because it is highly connected with ‘telling on colleagues is seen as betrayal’. There are many different points of view, from which this

phenomena can be seen. First of all, it is the matter of trust towards a person, to whom the secret is disclosed. Secondly, if something were to happen, it is a matter of question whether this action remains a secret or not. This leads to the third question of who will eventually find out about this secret.

However, it is important whose secret it is and to whom it is being told.

6. Telling on colleagues is considered a betrayal. Lastly, betrayal is also concerning trust.

However, telling on a colleague can have various reasons and consequences. A situation can be very severe, harmful. Thus, when talking about betrayal – betrayal of employees or business partners – it is important to measure the severeness of the situation by the harm or benefit done. Elliston (1982) is talking about what is seen as ‘harm’ – harm is usually a phenomenon that brings damage and violates human rights. However, this is also a subjective matter. People see harm differently – harm can also mean simply putting others at risk. Here are three main categories of harm, which would be the same for the benefit. However, this scheme is

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interconnected with a person, to whom the harm is done. This can also be oneself, as well as a company.

2.4 Opportunities for Conceptual and Empirical Development

From the literature review presented above, the reader can derive various information about

particularism in the everyday life, as well as see general behavioral patterns applicable to particularists. However, there is a lack of empirical work in the field of particularism, but especially business

particularism. While it is possible to derive general behavioral guidelines, previous literature does not provide any specific factors, which can influence particularistic decision-making process.

3. Methods

3.1 Research Design

Taking into account the fact that Russian particularistic mentality is very complex and based on emotions as well as a wide variety of contextual factors, every situation is different and different individuals will behave differently in it. Therefore, in order to investigate the patterns mentioned in the previous part, an appropriate design is required. First of all, knowing that there is a big lack of literature on particularistic behavior within the business sector, an exploratory phase is necessary in order to be more certain in the outcome of the following research. The rules that are mentioned in the previous chapter will validated and expanded by means of an exploratory study, in order to construct a questionnaire, which will be used in the main study of the research.

3.2 Exploratory Study

3.2.1 Sample and Measures

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The exploratory study aimed to arrive at a final questionnaire used in the main study in order to reveal the importance to particularists of various decision-making factors. Based on these schemes, rules and situations in section 2.3 of this thesis, a preliminary questionnaire has been designed. In order to distribute the questionnaire and see how complete it is, five Russian people working in the flower

industry were faced with the situations described above. These individuals were not entrepreneurs – they were found though the personal connections of the author and were kind enough to devote

approximately one hour of their time to this interview. In order to avoid any misunderstandings, the following questionnaire was translated to Russian language and double-checked by another Russian-speaking person by translating it back to English. All the respondents were assured that they would remain anonymous.

In the survey, a situation was simulated and presented to interviewees. Hence, each respondent was faced with a hypothetical situation, similar to the ‘car accident’ situation in the work by Hampden-Turner and Trompenaars (1997). By means of an open question, they had to first tell the interviewer how they would behave in that situation and why, in order to reveal potentially important factors. Thereafter, they were faced with a multiple choice of the course of action and, eventually, they had to rank the ‘relationship’ and ‘harm/benefit’ factors (see the visuals from section 2.3) when applicable from ‘1’ to

‘5’. Here, ‘1’ stood for ‘irrelevant to this situation factor’ and ‘5’ for ‘very important’.

I. Focusing on relationships rather than rules, which also incorporates rule 6 – ‘telling on colleagues is seen as betrayal’.

In order to reveal relevant actions, as described above, respondents were faced with the following situation: ‘You are searching for a new investor. After long time searching, you happen to have several options. Which investor will you choose – the one you already know or a new person?’

Multiple choice here was: a) Known person; b) New person. II. Legal contracts are readily modified.

Hypothetical situation: ‘You and your business partner had a meeting discussing the terms of your collaboration. At the end of the meeting, your partner reaches out for a pen and offers to seal the deal by singing a contract.’

The choices in this situation were: a) Sign the contract, as your agreement would be legally binding; b) Think it is suspicious to do so, because you believe it is implied that both of the parties would fulfill

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their obligations. Nonetheless, you sign the contract; c) Find it too suspicious from your partner’s side and cancel the deal; d) Other.

III. A trustworthy person is the one who honors changing mutualities.

Hypothetical situation: ‘Your business partner is traveling from faraway to have a meeting with you and discuss the business.’

The multiple choice in this case was: a) Schedule the meeting and limit it on that. Further on, they can either go home or explore the city themselves; b) Organize a business lunch to discuss the business in an informal setting; c) First discuss the business and then organize an informal event for the both parties to get to know each other better and have a good time; d) Other.

IV. There are several perspectives on reality relative to each participant.

According to all the literature on particularism used in this paper so far, particularists tend to rely on their emotions and gut feeling much more than on the rules and principles. A good situation to test would be hiring a new employee. There are various requirements for a potential employee to get a job. However, meeting all of them might not be a deciding factor. This case was split in two slightly different scenarios:

1. ‘You are about to hire a new employee and you have a list of candidates for the position. A young ambitious person comes in and they strike you with their confidence and knowledge of the company. You really like this person, but they are not qualified enough to get the position.’ 2. ‘You are about to hire a new employee and you have a list of candidates for a certain position. A

young ambitious person comes in. They are highly qualified for the position, however, you really dislike them and have a bad feeling about them.’

The multiple choice for both situations was the same: a) Reject them and proceed with other applicants; b) Give them a trial period and see what happens regardless of your feeling; c) Give them the job, because you believe they will do good; d) Other.

In such a way, the situation allowed to test both – negative and positive impressions regardless the experience a person has.

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The ‘trust’ phenomena is very complex – it has the widest range of potentially influencing factors, such as the relationship between people, the nature of the secret (section 2.3), potential harm or benefit the disclosure of the secret could bring. Therefore, the following question did not entail any multiple choice options. The situation was as follows: ‘You happen to have a secret. One of your colleagues found out about it. Would you expect them to keep your secret? Who will find out about it? What would have an influence?’

3.2.2 Results of the Exploratory Study

The results of the following questionnaire happened to be very useful and lead to a modification of the final questionnaire, which was used for the second round of interviews. First of all, after questioning all the five respondents, it became clear that the division of ‘friends’ should be left out. The interviewees only saw the importance of three groups falling under friends: acquaintances, friends and friends, who ended on bad terms. The intimacy or past intimacy in the relationship seemed like an inappropriate question to ask as well, which was an indication that it has to be neglected.

1. The first question showed that the most important reason to stop or not to stop the contract, is the reason why the product was not delivered. All the respondents indicated that a conversation is required to come to such decision. According to one of the respondents, anything can happen, even if there is a big financial harm. However, the importance of the order that was failed to be delivered would still play a big role. Another person indicated, however, that if the financial

harm was way too high, it could be a reason for breaking a contract. This would happen less

likely with an old and trusted business partner, whereas it would be easier to break the contract with a new business partner. When the question concerned friends and family, the outcome would be more plausible, however, one of the respondents was strictly negative about combining family and friendships outside work with business.

2. The answer to the second question was similar among all the respondents. If the fraud would bring financial harm to the company, the employee would be fired and the reason would be disclosed to the whole office, unless the fraud was a mistake. In fact, even if the harm was not big, there would be a high chance of firing the employee. The only difference in the decision would be the personal relationship between the employee and employer – if it was family or a

friend/acquaintance (with ‘friend’ having a bigger weight), they would still be fired, however,

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3. The answer to the third question is highly contradicting with the literature, which states that Russian people tend to be suspicious when it comes to signing a contract. On contrary, all the respondents indicated that they would gladly sign the contract. However, the answers varied when it came to family – some emphasized that they would especially sign it if it were with a family member, while others indicated that there would be no need to do so. There was also a remark that in flower business in Russia contracts are seldom needed – this also includes old

business partners. Lastly, one interviewee indicated that unwillingness to sign a contract could

indicate potential financial problems with that partner and hence, rise suspicion.

4. As for timing business trips, the interviewees indicated a need of a business lunch. However, if the business partner would be a friend or family member, that part could be neglected. Having a

new business partner visiting does imply a need for such interaction, which also counts for an old good business partner. However, all the respondents emphasized the importance of a

business partner coming – if they were a very important for the business person, then meeting them to construct a better relationship would be inevitable. On contrary, if it is not such an important person, this part can be skipped.

5. Hiring an employee, who is not sufficiently qualified but does show high potential is definite. Four out of five respondents would hire them. All the interviewees agreed that the first

impression is very important. However, four out of five would not hire a friend or family member. The other respondent would give that person a trial period and would gladly hire a

friend and, preferably, a male.

6. As for a person who is highly qualified, but does not come across good, none of the respondents would give them a job. Everybody stressed out that interpersonal relations within the company are very important and, if the person is not nice to work with, they do not fit in the team. Nonetheless, they would still hire them, if they did not have to work together (e.g. person working in a different department).

7. Thereafter, after some doubts, all the interviewees indicated that if their colleague found out about their secret, there is a very big possibility others would know about it too. Namely – the whole company. They did trust their friends and family to keep the secret much better, however, they also indicated it could be tricky and depended on the person. Three out of five people indicated that they would trust a women with a secret much less than a man, but indicated that men cannot be highly trusted either. If revealing a secret would do financial harm to a person, it

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secret which could lead to physical harm is believed to be kept. Lastly, if a secret would concern

work, and especially relationships, it would have a much higher chance to be told, whereas

monetary and health secrets would stay more private. Family remained debated. All the respondents indicated that this question is hard to answer, as it has many small nuances that could affect the decision.

8. All the respondents, even the ones who would not want to work with family and friends, indicated that, when it came to choosing an investor, they would choose for a closer person. Namely, a family member, a friend, or an acquaintance. One respondent indicated a preference in a male investor.

The harm or benefit of the situation was only considered in question seven, as the respondents found it inapplicable in other questions.

3.3 Main Study

In order to proceed with the research, the findings from the preliminary results were incorporated into the questionnaire for the main study. This time, the interviewees were not interviewed in person, but though a questionnaire composed via Qualtrics. The final version of the following questionnaire was composed in Russian – this provided the respondents with a clear understanding of each case they were presented with.

3.3.1 Sample

Potential respondents were approached via social networks, such as WhatsApp, Instagram, Telegram, Facebook, and Russian social network VK. The message about the following research was spread across these channels via chats and groups, asking people with an entrepreneurial experience to fill in the following questionnaire. In the end of the questionnaire, the respondents also had an option to receive the results of the research by sending an e-mail. Apart from that, several professors from university of St. Petersburg were approached and asked to spread the message among their MBA students.

In total, 54 responses were obtained, out of which 29 respondents are men and 25 – women. The youngest respondent is 20 years old and the oldest is 57, with the mean being 38 years. 45 respondents currently are entrepreneurs, while five of them used to be such in the past – only one responded claimed to be unsuccessful. However, the majority of people owned a small business (1-10 employees). For more detailed information, see Tables 1 and 2 below. The industries, in which these entrepreneurs are

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operating, are very different from each other, with only very few of them repeating. This information shows that the audience varies a lot, providing the reader with higher external validity of the research.

Sample Summary

Feature Minimum Maximum Mean SD Count

Age 20 57 37.5 8.5 54

Male - - - - 29

Female - - - - 25

Entrepreneur - - - - 49

Entrepreneur in the past - - - - 5

Successful experience - - - - 28

Unsuccessful experience - - - - 1

Successful & unsuccessful experience - - - - 25

Enterprise sizes

Number of employees 1-10 11-50 51-200 201-500

37 9 6 2

3.3.2 Measures

In this stage, the interviewees were again faced with the same situations as in the preliminary stage, with the first question being how they would react in a particular situation, what the relevant factors when assessing the situation would be. Thereafter, they were again presented with a list of factors, which had to be ranked from one (being an unimportant factor) to five (very important factor) – same as in the preliminary interviews. This time, however, the list of factors was cut due to the irrelevance of factors found in the preliminary stage. This left the relationships category with: close/far family, new/old partner, friends, ex-friends, and, lastly, gender. Some new factors were added where applicable: importance of the partner, interaction with a partner.

Table 1

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However, before facing the respondents with the following situations, they were faced with simple questions, such as their age and their gender. Age is important, because the older generation is more influenced by the Soviet Union behavioral models, hence, the responses can vary depending on the age of a respondent (Mishanova, 2003). Then, in order to sort out irrelevant respondents, they were also asked to indicate whether they are/were entrepreneurs and whether they had good or bad entrepreneurial experience. Lastly, they were asked how big their business is (in terms of employees) and what industry they work in. The last question is useful to reduce potential bias, because it has been indicated in the preliminary research that in the flower industry contracts tend to be skipped – this raises the question if it is different in other industries. Hence, having entrepreneurs from a wide range of industries is useful to avoid a bias.

The Russian version of the questionnaire can be found in the Appendix. 3.3.3 Analysis

In order to analyze the obtained information, all the answers to the open questions were reviewed separately from each other. Thereafter, the answers for the multiple choice questions were put together and each block of questions and answers was analyzed separately. The majority of questions were answered, however, the last questions were in some cases neglected by the respondents – these respondents, thus, did not finish the questionnaire. Nonetheless, the available answers obtained from these respondents were still used in the analysis. Based on this information, the findings were derived.

4. Results

The following chapter will present the reader with the findings derived from the questionnaire. It will go through every question from the form that was filled in by 54 respondents. Each section below will outline the factors, which are considered the most important by particularists when making a business-related decision. Moreover, the reader will see the summary of each question in a table devoted to it.

1. The very first situation the respondents were faced with, concerned the relationship between the head of the company and their business partner – in the situation the interviewee was presented with, a business partner fails to deliver the product on time. Here, none of the respondents indicated that this action would be sufficient to permanently stop the contract with the

abovementioned business partner and find a new one. Eleven people stated that they would give the guilty party a one-time warning, while one person said that the issue would not be

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problematic at all. The rest of the respondents stated that they would like to hear the other party’s explanation before making any harsh decisions.

In this situation all the respondents were very understanding. The open question revealed the most intuitive factor – ‘communication and talking are very important’, as stated by one on the questionnaire participants. However, many respondents have also emphasized the importance of the business partner and the importance of the deal itself (in other words, the degree of financial harm done). This is also very visible from the ranking section (Table 3) – the factors with the highest influence in this situation were: the length of the partnership, strong family ties,

friendship, and the negative friendship experience. The rest of the factors were not of a high

importance – for instance, the least important factor was the gender of the business partner, but, surprisingly, three people gave it weight ‘3’ and six people gave it ‘2’. These are not the highest influencing factors, however, the impact of gender was not expected to be found in this question.

Descriptive statistics of question regarding failure to act in time

Question 1 2 3 4 5 Total

Your business partner is your distant relative

27 12 6 2 5 52

Your business partner is your close relative

15 9 8 7 13 52

This is your new business partner

19 6 14 5 8 52

This is your old business partner

5 3 9 14 21 52

You are acquaintances 18 10 15 4 5 52

You are friends 11 9 9 11 12 52

You are friends who ended on bad terms

19 9 5 6 13 52

Gender of your business partner 43 6 3 0 0 52

Note. 1=unimportant for the decision factor; 5=very important for the decision factor

2. The second situation was concerning financial fraud committed by an employee. Despite the fact that this is a very serious issue, far not all of the respondents have chosen to fire that employee. Table 3

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teach them a lesson, while other eight would fire them, however, keep the reason a secret in order not to make a big problem out of it. Nine people would not fire that employee, and the rest would first try to understand the reason behind the fraud. Several people have specifically

emphasized the importance of the employee – if the individual is of a high value to the company, they would, perhaps, not be fired. Here (see Table 4), the core influencing factors were the harm

to the company, the strong family ties and friendship. However, even though it was of a slightly

smaller importance, an old employee would have same chances of remaining in the corporation as the new employee. Interestingly enough, six people have again assigned a slight importance to the gender of the employee – this, again, was not expected.

Descriptive statistics of question regarding financial fraud

Your employee is your distant

relative 33 4 5 2 5 49

Your employee is your close

relative 23 5 4 6 11 49

This is your new employee 30 2 7 2 8 49

This is your old employee 20 5 11 5 8 49

You are friends ₁₉ ₆ ₇ ₇ ₁₀ ₄₉

You are friends who ended on

bad terms 30 6 4 4 5 49

Gender of your employee 43 5 1 0 0 49

The fraud caused severe harm

to the company 10 1 3 2 33 49

The fraud did not cause severe

harm to the company 18 8 10 3 10 49

3. Despite the statement made by Trompenaars and Hampden-Turner (1997) in the literature review that particularist are inclined not to sign a contract, the majority of the respondents claimed that they would not hesitate and actually do so. However, six people claimed that they would find the offer to sign a contract somewhat suspicious; nonetheless, they would still sign it. Some people have specifically indicated that before signing, they would first prefer to discuss the contractual obligations with a lawyer. This question did not reveal any extraordinary information in terms of Table 4

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factor relevance (Table 5) – the most important factors were the past relationship with the business partner, strong family ties and negative friendship experience. The remaining factors were mainly considered irrelevant, however, in the open question section, one person

emphasized the importance of the deal as a relevant factor. The gender here was again found slightly important by five people and very important by one person.

Descriptive statistics of question regarding signing a contract

Your business partner is your

distant relative 36 3 2 2 3 46

close relative 26 5 7 2 6 46

This is your new business

partner 25 6 7 4 4 46

This is your old business

partner 15 2 13 8 8 46

You are acquaintances ₃₀ ₅ ₈ ₂ ₁ ₄₆

You are friends ₂₂ ₄ ₉ ₆ ₅ ₄₆

bad terms 28 3 5 2 8 46

4. Thereafter, each interviewee was faced with the timing a trip situation. Only one person has indicated that solely a business meeting would be sufficient. Nine people preferred having a business lunch, while the rest of the respondents wanted to have a formal meeting with an informal event afterwards. In this situation, the respondents showed highly particularistic traits and preferred to spend quality time with their business partners. They did, however, state that this would happen only after taking the other person’s plans and wishes into consideration. The majority of the respondents also claimed that their decision would highly depend on the

importance of the business partner visiting. They intended doing less for a person, who was not of a high importance. In this situation, nearly all of the provided factors had higher than middle importance (Table 6) – strong family ties, whether it is a new or old business partner, a friend, or an important for business person. As of the negative influence, people were less inclined to Table 5

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organize an informal event for their ex-friends or unimportant partners. The gender factor has again come up – six people have emphasized the importance of this factor.

Descriptive statistics of question regarding business trip timing

This is your new business

partner 12 4 7 5 14 42

This is your old business

partner 9 3 6 8 16 42

You are acquaintances ₁₇ ₅ ₁₂ ₃ ₅ ₄₂

You are friends ₁₀ ₃ ₃ ₇ ₁₉ ₄₂

bad terms 23 4 4 2 9 42

Your business partner is very

important 6 0 3 3 30 42

Your business partner is not

important 22 4 5 2 9 42

5. This section will cover two situations directly: in the first one the respondent was faced with a decision whether they should hire an underqualified person, who made a very good first

impression; while in the second situation the person is qualified but the respondent does not like the potential employee personally. The result was fully consistent with expectations – only one respondent has chosen the option not to hire an underqualified employee. In fact, ten respondents would give them job without any hesitation – the rest would give the potential employee a trial period. The respondents have highlighted the importance of a person’s ambitions, attitude and

the first impression on them above the rest of the factors. Friendship, bad friendship and strong family ties were also seen as strong influencing factors. Six respondents have indicated a mild

importance of gender (see Table 7). Table 6

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Descriptive statistics of question regarding hiring a new employee

Your potential employee is your

You are acquaintances ₂₄ ₇ ₅ ₁ ₃ ₄₀

bad terms 24 2 4 2 8 40

Gender of your potential

employee 36 4 2 0 0 42

On the other hand, regardless of the experience of a potential employee, only two individuals would hire the one, whom they dislike on a personal level. Fifteen respondents claimed that they might want to give a person a chance, but the majority would certainly decline the candidate – they stated that good personal relations are very important at work and that intuition should be taken into account. Nonetheless, some individuals would reconsider their decision, if they would

not have to face that employee every day (Table 8).

Descriptive statistics of question regarding hiring a new employee

You are acquaintances ₃₄ ₄ ₀ ₁ ₃ ₄₂

bad terms 30 2 4 2 4 42

Gender of your potential

employee 39 2 1 0 0 42

You will not have to face this

person every day 27 0 7 2 6 42

6. ‘Was wissen zwei, wisst Schwein’ – unknown respondent. This is a famous German saying,

translating into ‘what two know, the pig knows’. The general meaning of the following Table 7

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The most complicated situation presented of all, is about a secret disclosure, as it has a great amount of influencing factors. There were only 36 responses to this question. Only three respondents expected their colleagues to keep a secret, which shows a high level of mistrust among the employees. The rest was certain that if a secret was overheard, the whole office would know. The influencing factors would include the trusting relationship between the respondent and the colleague and his personal qualities. The results from Table 9 show that the past

relationship (e.g. friendship, bad friendship etc.) with a colleague and them being a close relative, are the most important relationship factors. Also, surprisingly, the gender of a

co-worker does not seem to play as big of a role as initially expected.

The nature of the secret, on the other hand, is still unknown – the importance of each of them is split between ‘1’ and ‘5’, not allowing for the right conclusion do be drawn, however proving the complexity of the decision and its dependence on a wide range of factors.

Descriptive statistics of question regarding secrets

Your colleague is your distant relative

19 5 6 1 6 37

Your colleague is your close relative

12 3 6 5 11 37

This is your new colleague 21 3 5 3 5 37

This is your old colleague 15 2 7 4 9 37

You are friends who ended on bad terms

19 5 1 1 11 37

Your colleague's gender 29 2 4 1 1 37

Disclosure of this secret will cause you financial harm

10 1 7 6 13 37

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7. Lastly, when it came to choosing investors, only four people would choose an unknown investor, while the rest of the respondents would rather choose somebody they know. The big factor here, as stated by one of the respondents, was the amount of money to be invested – ‘I will choose the

one, who offers more’. Hence, the most important factors here are the importance of the deal, past relationship (friendship and bad friendship) and strong family ties. Again, five people have

indicated a mild to high importance of gender in this situation (Table 10).

Descriptive statistics of question regarding business trip timing

Your investor is your distant

relative 18 3 7 7 6 41

Your investor is your close

relative 11 3 5 8 14 41

You are acquaintances ₁₂ ₄ ₉ ₇ ₉ ₄₁

You are friends ₆ ₅ ₇ ₇ ₁₆ ₄₁

bad terms 18 3 2 4 14 41

Gender of your investor 37 1 2 1 0 41

The deal is very important 10 0 3 8 20 41

The deal is not very important 21 9 5 3 3 41

Disclosure of this secret will cause you physical harm

10 0 6 7 14 37

Disclosure of this secret will cause you psychological harm

11 0 6 6 14 37

The secret concerns your family 10 0 6 6 15 37

The secret concerns work 10 4 3 6 13 37

The secret is about health 13 1 5 7 11 37

The secret is about money 13 0 4 7 13 37

The secret is about personal relationships

12 2 4 5 14 37

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Lastly, age and gender were asked in the beginning of the questionnaire. Despite the initial suggestion that the age would make a difference in answers, this was not the case. During the analysis, it was revealed that age does not play a big role in decision making, however, nor does the gender.

5. Discussion and Conclusion

Considering the fact that particularistic behavior within the business sector has not been extensively discussed in the previous literature, the findings of this research are important. The results of the

following study have revealed various factors, not all of which are consisted with the literature discussed in the theoretical section of the research. However, Trompenaars and Hampden-Turner (1997), as well as all other authors on particularism, were correct in their assumptions. The results of the following research support the fact that particularists do give the highest priority to personal contact in every ongoing situation. The particularistic mentality is, indeed, very complex – there is a great amount of influencing factors, which might easily change the final decision of a person.

The results have shown that Trompenaars and Hampden-Turner (1997), as well as Luthans et al. (1995) were not entirely correct claiming that particularists tend to avoid contracts, as they would find those suspicious. It is, indeed, true in some situations – some respondents claim the desire to read the contract with the lawyer, for instance. Nonetheless, such generalization cannot be made in this research, as in the first round of interviews, four out of five interviewees would sign the contract without any hesitation, and in the second round only six individuals would be suspicious, but still sign it. Possibly, this has something to do with the past USSR mentality Luthans et al. discussed. Assuming the two

abovementioned works were written in 1997 and 1995 respectively, that mistrusting USSR mentality could have had much bigger influence on the decision-making process that nowadays. Apparently, the contracts are now seen as a simple formality between the two parties. Hence, the issue with contracts is not as severe, as it seems from the past literature, but there are still exceptions, such as close family and friends, and the past experience in general. However, this may raise an issue in contractual obligations when it comes to the court systems, because with contract being seen less important in particularistic countries than in universalist, following obligations is less important, thus, the obedience is lower. The same counts for secret disclosure. A statement made by Bramstedt (2013) that Russian mentality is highly influenced by USSR, is, perhaps, more applicable to the older generations and is slowly fading away. In fact, the question regarding secrets shows that people are actually inclined to tell them. Even though the question was whether a person expected others to tell their secret, people expect the truth to

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be revealed. This can be based on to past experience of the person – some of the respondents are much more positive about their colleagues than others. Nonetheless, it may also be because they would have done it themselves – simply, mistrust to ourselves may be leading to mistrust towards others (Russell, 2012). Respondents are still found to trust their close ones, such as friends and family. Far relatives do not, however, seem to receive a big amount of trust.

It is still interesting, however, how the gender does barely play any role in the secret disclosure.

Therefore, opinions of journalists such as Riggio (2014) and Kelly (2011) seem to be inconsistent with the result in this situation. It is also surprising that gender did play a role in nearly every situation – this means that the gender stereotypes still have an influence in the decision-making process.

In the rest of the situations, such as timing a business trip and hiring a new employee, as well as personal relations within the office, seem to be consistent with literature. Establishing a personal contact is the most important implication of all – and, as Trompenaars and Hampden-Turner (1997) assumed, the hierarchy in the workplace is important, but the head office still is highly concerned about the

connection with employees. This is clearly visible from this research, as the entrepreneurs, who filled out the questionnaire are the heads of their enterprises, and they would still, for instance, not hire a person who they do not seem to like. Hence, another important factor is the initial feeling.

Therefore, no matter what setting an entrepreneur is put in, the first rule of particularism in the business setting is the same as in everyday life – personal trust and relationships are above everything else. The

second rule is that there is a great deal of influencing factors, and the judgment cannot be based solely

on one perspective – there is a reason behind everything. Third rule is that close family and friends, as well as an old and trusted partner, have a very big influence when coming to a business-related decision.

Fourth rule is that the first impression is very important and should not be neglected. Fifth rule is that an

unknown person cannot be highly trusted, however, it is very important to establish a meaningful relationship with them, especially if it is expected to be of a high value.

5.1 Problems and Limitations

Assuming that this research has not been previously conducted and there was a lack of theoretical and empirical literature on the issue of business particularism in business contexts, this research still has various problems and limitations.

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Another limitation can be the way the data was collected – the questionnaire had some influencing factors, which might have affected the respondent’s way of thinking. Given that they were presented with nearly the same set of factors in each question, they might have neglected other important factors that could have influenced their decisions. Apart from that, even though the importance of various factors was indicated, the effect is not certain. It is clear which factors can influence the decision of an entrepreneur, but it is not clear whether it would have a positive or negative influence.

Another limitation of this research is the time framework and the amount of connections – these two factors restricted from finding a big amount of Russian entrepreneurs to fill out the questionnaire in time. Hence, the access to the entrepreneurial assassinations was very limited as well, due to the author not residing in Russia.

Lastly, not all of the respondents have completed the questionnaire fully. In this situation, personal interviews, such as in exploratory phase, would have been more useful, as more information and elaboration on the answers could have been provided.

5.2 Recommendations for further research

This research is built up on previous literature on particularism in general, but is applied to the country with one of the most highly developed particularistic traits in the world. This allows to get a much deeper insight into Russian business system, as well as to understand the general business behavior in other particularistic countries, such as post USSR or Latin American countries. Assuming that the patterns start becoming much clearer, new factors can be added, such as a mild influence of the gender. Next to that, this research has revealed the factors that affect the decision-making, however, it is still unclear, based on both – preliminary and final studies, how exactly they may affect the decision. For instance, friendship is an important factor for the majority of respondents. However, while some individuals would like to work with their friends, others think that combining friendship and work can be destructive and prefer keep the two separated.

Apart from that, this research has only researched one of the seven cultural dimensions discussed by Hampden-Turner and Trompenaars in 1997. Therefore, this creates a possibility to build bridges between these dimensions in further researches.

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Therefore, the advice for the further research would be a bigger group of respondents, preferably interviewed in person, and a wider range of questions, which could allow for finding out the nature of the influencers – whether they are positive or negative.

5.3 Conclusion

Among other categories, the world is split into universalist and particularist countries, the mentalities of which are incredibly different, which does not allow for good communication between the two. The majority of countries are universalist, however, there are many other countries, such as Russia and Latin American countries, which are particularist. The understanding between the two parties is crucial not only on everyday basis, but also when it comes to business, politics, culture. The findings of this research are very important in the field of business particularism, as they have empirically established the importance of particular interpersonal relations in decision-making, as well as the importance of friends and family in this sphere. It has also shown that, unlike previously stated by several authors, particularists do follow general rules, but those are much more complex, situation- and emotion-based than the ones of universalists.

Hence, the importance of understanding particularistic behavior is high and, therefore, this study builds a bridge to potential understanding and further development of communication between these two different from each other worlds.

Rules of Particularism in Russian Business System