The impact of differences in employees’ work-related attitudes, which are the result of cultural differences, on the operations of German multinational enterprises in China and India

(1)

UNIVERSITY OF AMSTERDAM

FACULTY OF ECONOMICS AND BUSINESS MSc. In Business Administration - International Management

Supervisor: MSc. Francesca Ciulli Second Reader: Dr. Ilir Haxhi

Master Thesis

The impact of differences in employees’ work-related attitudes, which are the result of cultural differences, on the operations of German multinational enterprises in China and

India

Submitted by: Yannick Walter - 10825622 Word count (tables included): 19961 Word count (tables excluded): 16133

(2)

Statement of originality

This document is written by Student Yannick Walter who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document is 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.

(3)

Abstract

This paper investigates the relationship between cultural differences and the operations of multinational enterprises (MNE) in foreign countries. In this context, Hofstede’s (1994) cultural framework is used as foundation to explore the impact of cultural differences in five dimensions of national culture. The main object of investigation is the impact of differences in employees’ work-related attitudes, which are the result of cultural differences, on the operations of MNEs in foreign countries and how MNEs manage these differences. While the large majority of International Business studies have identified a negative relationship between cultural differences and the operations of MNEs in foreign countries, this study explores the topic in a new light and treats cultural differences not merely as drawbacks, but also as an opportunity for MNEs to create the operations in foreign countries more effectively. To explore the subject and fulfill the research objective the operations of three German MNEs in China and India are investigated. This study applies a case study design and uses semi-structured in-depth interviews with managers or the chief executive officer of the three MNEs to acquire qualitative data. The findings of this research show that cultural differences can have a far greater positive impact on the operations of MNEs in foreign countries than most often presented in the existing literature. Furthermore, the perfect mixture and interplay of the positive characteristics of both cultures, the ones of the home country and the ones of the host country, turn out to be the most appropriate strategy to design the operations in China and India as effectively as possible.

Keywords: Multinational Enterprises, National Culture, Impact of Cultural Differences, Work-related Attitudes, Management of Cultural Differences

(4)

Index of Tables

Table 1: Cultural Dimensions of Hofstede and Definitions... 11#

Table 2: Values of national culture based on Hofstede’s framework (Hofstede, 2015) ... 22#

Table 3: Overall cultural distance based on the Kogut and Singh Index (1988) ... 23#

Table 4: Total revenues in emerging markets of each business unit in 2013 (Merck, 2014) .. 25#

Table 5: Key facts about the German MNEs ... 29#

Table 6: Interviewees and their position in the company ... 30#

Table 7: Main characteristics of the society in China and India ... 31#

Table 8: Interview questions (Part 1)... 32#

Table 9: Interview questions (Part 2)... 34#

Table 10: The impact of cultural differences in Hofstede's cultural dimensions (Merck)... 41#

Table 11: Advantages vs. Disadvantages and management of cultural differences (Merck) .. 44#

Table 12: The impact of cultural differences in Hofstede's cultural dimensions (Messer)... 48#

Table 13: Advantages vs. Disadvantages and management of cultural differences (Messer) . 51# Table 14: The impact of cultural differences in Hofstede's cultural dimensions (Schenck).... 55#

Table 15: Advantages vs. Disadvantages and management of cultural differences (Schenck)58# Table 16: Impact of cultural differences in China/India (Power Distance) ... 59#

Table 17: Impact of cultural differences in China/India (Individualism) ... 60#

Table 18: Impact of cultural differences in China/India (Masculinity) ... 61#

Table 19: Impact of cultural differences in China/India (Uncertainty Avoidance) ... 62#

Table 20: Impact of cultural differences in China/India (Long-term orientation) ... 63#

(6)

Index of Figures

Figure 1: National culture, employees' work-related attitudes, and the operations of MNEs ... 9# Figure 2: Comparison of the cultural dimensions (Hofstede, 2015)... 23# Figure 3: Revenues of Merck in different regions (Merck, 2014) ... 26# Figure 4: Parent themes and sub-themes... 36#

(7)

1. Introduction

Since institutions represent the rules of the game of an institutional environment and therefore shape the behavior of organizations, they have a crucial influence on the operations of organizations (North, 1991; Pache & Santos, 2010). Several scholars have recognized the importance for organizations to deal with institutions and have given increased attention to this topic (Pache & Santos, 2010). In this context, the existing literature provides an insight into the embeddedness of organizations in institutional environments, the need of organizations to respond to specific institutional demands, and the different response strategies, which are used by organizations to deal with institutional pressures (e.g. Pache & Santos, 2010; Dhalla & Oliver, 2013; Oliver, 1991; Kraatz & Block, 2008). A national institutional context generally consists of three institutional pillars: the regulative, normative, and cognitive pillar (Scott, 1995). With respect to the International Business (IB) context, especially cultural differences, which are part of the cognitive pillar, are a major factor influencing the operations of Multinational Enterprises (MNEs) and fundamentally determine the success or failure of MNEs in foreign countries (Hofstede, 1983a). In this regard, Hofstede’s cultural framework is the most widely used measurement of national culture in the literature and serves as the basis for the assessment of the cultural distance between countries (Haxhi & Van Ees, 2010; Kogut & Singh, 1988).

The national culture determines, among others, the way employees think, what they feel, and how they act at work and therefore defines the work-related attitudes of employees, which have a crucial influence on the operations of organizations. Since the national culture differs across countries employees’ work-related attitudes are also different, which can have a significant influence on MNEs and their operations in foreign countries (Hofstede, 1994; Yi et al., 2015; Najera, 2008; Evans & Mavondo, 2002).

(8)

Although the impact of cultural differences on the operations of MNEs is extensively examined in the existing literature, two main questions in respect to this topic remain.

First, the existing literature provides contradicting findings on whether cultural differences influence positively or negatively the operations of MNEs in foreign countries. While the large majority of IB studies have identified a negative relationship between cultural distance and the operations of MNEs (e.g. Ghemawat, 2001; Luo & Peng 1999; Li, 1995; Yi et al., 2015), scattered studies have identified a positive effect (e.g. Morosini et al., 1998).

Second, previous institutional literature does too readily assume that the only option for organizations is to comply with institutional pressures (Oliver, 1991) or, more specifically, with cultural requirements.

Based on these limitations, this paper explores the following research question through a comparative case study (Eisenhardt, 1989) of three German MNEs, which are active in China and India: How do differences in employees’ work-related attitudes, which are the result of cultural differences, affect the operations of German MNEs in China and India and how do these MNEs manage them?

In this study Hofstede’s (1994) cultural framework is used as foundation to explore the impact of cultural differences and the related differences in employees’ work-related attitudes in five main dimensions of national culture.

In contrast to the large majority of IB studies, the findings of this study reveal that cultural differences can have a far greater positive impact on the operations of MNEs in foreign countries than most often presented in the existing literature. Especially cultural differences in the dimensions power distance, individualism, and uncertainty avoidance and the related differences in employees’ work-related attitudes prove to be beneficial for the examined MNEs and their operations in China and India. Furthermore, the findings of this research emphasize that neither the total adoption of German cultural characteristics in China

(9)

operations in these foreign countries most effectively, but the perfect mixture and interplay of the positive characteristics of both cultures.

This paper is structured as follows. The next section provides an overview of the existing literature about the relationship between MNEs and institutions. It particularly highlights the previously determined impacts of institutional differences on MNEs by emphasizing the impacts of cultural differences. The third section discusses the method, which is adopted in this study to answer the research question. In particular, this section illustrates the research design, case selection, data collection, and data analysis strategy. The fourth section represents the findings of the case studies and the fifth section discusses the significance of the study’s findings. Finally, the last section serves as conclusion of this paper, states limitations to the approach of this study, summarizes the implications of the findings for practice, and provides recommendations for future research.

(10)

2. Literature review

This chapter provides an overview of the existing literature about the relationship between MNEs and institutions. It particularly discusses the role of cultural differences between countries in IB. In doing so, it aims to clarify the impact of institutions on MNEs and highlights how cultural differences influence the operations of MNEs in foreign countries. It further discusses the role and applicability of Hofstede's cultural framework and provides a critical assessment of how the impact of cultural differences is represented in the existing literature.

2.1 Multinational Enterprises and the role of institutions

“Institutions directly determine what arrows a firm has in its quiver as it struggles to formulate and implement strategy”

(Ingram & Silverman, 2002, p.20) While long time predominating literature on IB, like the positioning school of Porter (1979) or the resource-based view of Barney (1991), fail to give enough attention to the institutional context, the institution-based view provides an important progress in explaining the success and failure of organizations (Peng et al., 2009). In the IB literature the effect of institutions on the operations of organizations has become increasingly important. Based on this, this section emphasizes the high relevance of this subject for MNEs.

MNEs can be defined as organizations, which operate in two or more countries (Kostova & Zaheer, 1999), whereby each country possesses specific institutions. Since MNEs compete internationally, these organizations face a multiplicity of different institutions, which affect their operations (Kostova & Zaheer, 1999)

North (1991) is one of the first scholars who emphasize the effect of institutions on organizations. He argues that institutions set the rules of the game and therefore shape the organizational behavior. Institutions can be described as “humanly devised constraints that

(11)

institutional context consists of formal and informal institutions (North, 1991). Formal institutions are laws, regulations, and rules, whereas informal institutions include norms, cultures, and ethics (Peng et al., 2009). Accordingly, institutions affect organizations through regulations and rules, social expectations, and normative prescriptions (Scott, 2001). With respect to the institutional perspective, organizations need to conform to institutional demands to secure legitimacy, the flow of crucial resources, and, in general, to be successful in a specific institutional context (Dhalla & Oliver, 2013). Since MNEs operate internationally, a high plurality of diverse institutional pressures affect these companies’ business. In this regard, Kostova and Zaheer (1999) emphasize the enormous challenge for MNEs to establish and maintain legitimacy in multiple host environments, which are characterized by different institutions. “Legitimacy can be understood as the social acceptance of actions or institutions and is ascribed to corporations in processes of social construction“ (Scherer et al., 2013, p. 262).

It becomes apparent that due to their broad international operations, MNEs face and have to deal with multiple legitimacy challenges (Scherer et al., 2013). While organizations, which operate only in one country, merely have to deal with one institutional context, MNEs have to deal with more than one.

In general, a national institutional context consists of three institutional pillars: the regulative, normative, and cognitive pillar (Scott, 1995). The regulative pillar is part of the formal institutions and includes laws, regulations, and rules of a country. The normative pillar comprises the norms of a country and is part of the informal institutions. Finally, the cognitive pillar is also part of the informal institutions and mainly represents the culture and ethic of a country (Peng et al., 2009). These three pillars are not necessary independent but interconnected and affect each other at various levels. For example, norms could affect the cognitive categorization, which is further affected by and affects regulation (Kostova & Zaheer, 1999). Each institutional pillar represents a source of institutional pressure

(12)

organizations have to deal with and can be seen as a basis for legitimacy. Based on this, the term legitimacy is used as a synonym for cultural alignment and normative support, as well as for accordance with relevant rules and laws (Farashahi et al., 2005).

The existing literature provides different strategies organizations can apply to respond to institutional demands. However, an agreement on the perfect way how to deal with institutional pressures does not seem to exist. For example, Oliver (1991) argues that previous institutional literature and research about the impact of institutions does too readily assume that the only option for organizations is to comply with institutional pressures (Scott, 1995). In response, Oliver (1991) has developed five strategies organizations can apply to deal with the institutional demands in a country. These strategies are acquiescence, compromise, avoidance, defiance and manipulation.

The acquiescence strategy can be seen as a strategy of conformity and is emphasized by most of the institutional theorists in the literature. Organizations adopting this kind of strategy deal with institutional demands by balancing, placating, and negotiating with the institutional environment (Pache & Santos, 2010).

In the case of the compromise strategy organizations seek to achieve partial conformity with the requirements of all institutional domains. In doing so, the aim of organizations is to satisfy partially all demands, whereby balancing competing expectations, conforming merely to the basic institutional requirements, and attending resources and energy to pacify the resisted constituents play a central role (Pache & Santos, 2010).

The avoidance strategy is adopted when organizations attempt to prevent the exigency to conform to institutional pressures or the requirements underlying such conformities (Pache & Santos, 2010).

The most aggressive one of Oliver’s (1991) strategies is the defiance of institutional demands. Such a strategy is characterized by the rejection of one or more of the institutional

(13)

strategy can be executed through ignoring institutional prescriptions, challenging the norms enjoined, or directly attacking them (Pache & Santos, 2010).

The last strategy is the manipulation strategy. In this case organizations seek to change the matter of institutional requirements and to influence the mediators determining these requirements. To do this, “organizations may attempt to co-opt the sources of the institutional pressures to neutralize institutional divergences, to influence the definition of norms through active lobbying or, more radically, to control the source of pressure” (Pache & Santos, 2010, p. 21).

Pache and Santos (2010) argue that the choice of strategy depends on the type of demands and the internal representation within the organization. In general, Oliver’s (1991) strategies can be applied to deal with institutional pressures of each institutional pillar and organizations generally use different strategies to manage the different types of institutional pressures (Pache & Santos, 2010).

It becomes apparent that institutional differences have a substantial influence on the operations of MNEs in foreign countries. The following section focuses on the cognitive pillar. In particular, it highlights the impact of cultural differences on the operations of MNEs and clarifies why especially cultural differences have a crucial influence on the operations of MNEs in foreign countries.

2.2 Multinational Enterprises and the impact of culture

As already mentioned, MNEs operate in multiple countries. Such organizations face a high number of challenges in foreign countries, which are the result of environmental differences. To be successful in each country MNEs need to understand and deal with these issues. An essential factor of environmental differences among countries is the national culture (Hofstede, 1983a).

In the literature different definitions of culture have been developed. Dodor and Rana (2007, p.77) define culture as the “whole complex of distinctive spiritual, material,

(14)

intellectual and emotional features that characterize a society or social group“. According to Chiang (2005, p.1543), “culture is said to be reflected in an individual’s most basic, consciously and unconsciously held assumptions, beliefs, norms, and values”. Finally, Hofstede (1980a, p. 25) defines culture as “the collective programming of the mind, which distinguishes the members of one human group from another”. Independent of the different definitions in the literature, all views share four basic characteristics about culture: the various aspects of culture are coherent, culture is learned, culture is shared, and culture determines the boundaries of different groups (Ball et al., 2010).

In general, culture describes the characteristics of a society, which include customs, opinions, beliefs, morals, and superstitions of a specific institutional context (Dodor & Rana, 2007). These cultural characteristics differ among countries, what is described as cultural distance in the literature. The cultural distance between countries plays a central role in IB and can have a substantial impact on the operations of MNEs (Drogendijk & Slangen, 2006). The impact of cultural differences is a broad topic in the existing IB literature, which has been investigated in regard to a large number of different fields, e.g. leadership, entry modes, work-related attitudes (Kirkman et al., 2006). Later on, this study especially stresses the relationship between national cultural differences, employees’ work-related attitudes, and the resulting impacts on the operations of MNEs in foreign countries. The national culture is an important factor in MNEs’ IB, because it determines, among others, the work-related attitudes of employees in a specific country. Employees’ work-related attitudes describe the feelings of employees, what they belief, and how they behave towards various aspects of their job, their work environment and the people involved and therefore have a crucial influence on the operations of organizations (Yi et al., 2015; Najera, 2008; Evans & Mavondo, 2002). Since the national culture differs across countries the work-related attitudes of employees are also different, which can have a significant influence on MNEs and their operations in foreign

(15)

countries (Yi et al., 2015; Kirkman et al., 2006). Figure 1 illustrates this relationship, which will be investigated later in this paper.

Figure 1: National culture, employees' work-related attitudes, and the operations of MNEs

It becomes apparent that cultural differences are one of the most crucial problems MNEs have to deal with in foreign countries and managers of MNEs need to deal with the cultural system in a foreign country to be successful (Hofstede, 1983a). In this context, to be aware of national cultural values in foreign countries is extremely important.

The currently major research projects to measure the national culture of a country are the GLOBE project (House et al., 2004), the study of event management (Smith et al., 2002), the World Values Survey (Inglehart et al., 2004), the survey of values (Schwartz, 1999), and Hofstede's cross-cultural dimensions (Hofstede, 2003). Overall, Hofstede's cultural framework is the most often used tool to measure the national culture of countries (Haxhi & Van Ees, 2010). Hofstede (1980a, 1980b, 1983b, 1986, 1991, 1994) and Hofstede and Bond (1984, 1988) analyzed IBM subsidiaries in 64 countries and students in 10 and 23 countries in terms of national culture. Based on the findings of this research five dimensions of national culture, which are rated on a scale from approximately 0 to 100, have been developed (Hofstede, 1983c). These five cultural dimensions are power distance, uncertainty avoidance, individualism, masculinity, and long-term orientation (Hofstede, 1994).

The power distance dimension indicates to what extent members of organizations or, more in general, citizens of a country accept unequal distribution of power and wealth. With respect to the business context, the degree of power distance describes the level of centralization of authority and the degree of autocratic leadership (Hofstede, 1994).

(16)

The dimension uncertainty avoidance represents the people’s attitude towards unknown, uncertain, or unstructured situations. The higher the score in this dimension for a specific country, the more the people of this culture seek to avoid unknown, uncertain, and unstructured situations and vice versa (Hofstede, 1994).

The third dimension, individualism, illustrates to which extent people in a society see themselves as part of a group or as individuals. While people in individualistic cultures generally care only about his or her wellbeing, in collectivistic cultures people are much more integrated into groups (Hofstede, 1994).

The fourth dimension of national culture is masculinity. “Measurements in terms of this dimension express the extent to which the dominant values in society are “masculine” – that is, assertiveness, the acquisition of money and things, and not caring for others, the quality of life, or people” (Hofstede, 1980b, p.46). The higher the score in this dimension the more masculine the culture (Hofstede, 1994).

The last dimension of national culture illustrates the distinction between long-term and short-term oriented cultures. Cultures with a long-term orientation put high values on “thrift and perseverance”, whereas short-term oriented cultures emphasize values such as “respect for tradition, fulfilling social obligations, and protecting one’s face” (Hofstede, 1994, p.5).

As already mentioned, the main object of this paper is to investigate the impact of differences in work-related attitudes of employees, resulting from cultural differences, on the operations of MNEs in foreign countries. In this context, the relationship between Hofstede’s five cultural dimensions and work-related attitudes has been partially examined in the existing literature. For example, Bochner and Hesket (1994) argue that employees in collectivistic cultures have more informal contact with colleagues and emphasize more teamwork and that employees in countries with a high degree of power distance are associated with a good relationship to their superiors, frequent contact with them, and a high task-orientation.

(17)

negatively related to work-related attitudes such as human development. However, how differences in work-related attitudes, resulting from cultural differences in Hofstede’s five cultural dimensions between countries, ultimately affect the operations of MNEs in foreign countries has been slightly neglected.

Table 1 provides an overview and a short description of Hofstede’s cultural dimensions. Cultural Dimensions of Hofstede

(1994) Definition

Power Distance Describes the acceptance of the people in a specific _{culture to unequal distributed power and status}

Uncertainty Avoidance Indicates the peoples’ attitude towards unstructured, _{uncertain, or unknown situations}

Individualism

Indicates to which degree people of a specific culture see themselves and act as individuals or as part of a group

Masculinity

Masculine cultures are associated with values such as competitiveness, assertiveness, achievement, ambition, and performance, while feminine cultures are more associated with values such as nurturing, helping others, putting relationships with people before money, solidarity, and stress on the quality of life

Long-term Orientation

Long-term oriented cultures put high values on thrift and perseverance, whereas short-term oriented cultures are more associated with respect for tradition, fulfilling social obligations, and protecting one’s face

Table 1: Cultural Dimensions of Hofstede and Definitions

It already became apparent that the cultural distance between countries plays a central role in IB, because it is an useful indicator for the degree of cultural challenges MNEs have to deal with when operating in foreign countries. To measure the cultural distance between countries the Kogut and Singh (1988) index is the most widely used measurement tool in the literature, which is originally based on the first four cultural dimensions of Hofstede’s framework (Drogendijk & Slangen, 2006).

(18)

This index uses the differences in the scores on Hofstede’s first four dimensions between the foreign country and the home country. These differences are further divided by the variance of the score for each dimension and then arithmetically averaged (Kogut & Singh, 1988).

Beside the Kogut and Singh index alternative methods to measure the cultural distance are the Euclidean Distance Index and the measurement of cultural distance due to managerial perceptions (Drogendijk & Slangen, 2006).

2.3 Applicability of Hofstede’s cultural dimensions

Despite its widespread application in the literature, Hofstede’s cultural dimensions have been challenged and questioned in several studies (e.g. McSweeney, 2002; Ailon, 2008; Kwok & Tadesse, 2006; Schwartz, 1994).

A major point of criticism has been considered the lack of consideration of cultural changes over time (Kirkman et al., 2006). Furthermore, the quality of method in Hofstede’s work has been criticized. It has been argued that Hofstede misses to address further relevant questions to justify and corroborate his dimensions (Schwartz, 1994). Moreover, it has been argued that the collection of data, in which Hofstede mostly surveys IBM employees, seems not representative of the common population. Furthermore, McSweeney (2002) brings forward the argument that the application of fundamentally flawed assumptions of Hofstede’s cultural framework is questionable. In this context, he focuses his critique on five disputable assumptions upon which Hofstede’s measurements are based: every micro-location is representative for a nation, the respondents of Hofstede’s survey are already mentally programmed with non-interacting cultures, the main dimensions of national culture can be

€

CD

_J

=

{

(I

_ij

− I

_iN

)

2

/V

_i

}

/4

i=1

4

(19)

and national culture creates questionnaire response differences. McSweeney (2002) further challenges the fact that Hofstede merely uses the average of situational specific opinions of IBM employees to define the dimensions of national culture. An additional critique is that the cultural dimensions of Hofstede are too vague and other potentially important dimensions are excluded (Kwok & Tadesse, 2006). Finally, it has been posited that the methodology of Hofstede’s framework is invalid, in particular, because Hofstede’s dimensions are based on an organizational perspective rather than on a country level perspective (Ailon, 2008).

In summary, the four major points of critique on Hofstede’s cultural framework are the limitation of the sample to only one MNE, the non-consideration of the change of culture over time, the reduction of culture to only five dimensions, and the inobservance of cultural heterogeneity within a country (Kirkman et al., 2006; Sivakumar & Nakata, 2001).

Although the applicability of Hofstede’s cultural dimensions has been challenged and questioned in several studies, many authors apply Hofstede’s model in their research, e.g. Chui and Kwok (2008), Kwok and Tadesse (2006), and Haxhi and Van Ees (2010). Despite the critique on its methodological weakness and cultural bias, Hofstede’s cultural framework is still the most widely used measurement for national culture in the literature (Haxhi & Van Ees, 2010). This suggests that it is still a valuable framework. The Social Science Citations Index (SSCI) supports this argumentation. This index illustrates that Hofstede’s work is the most widely cited measurement tool of national culture in the literature (Hofstede, 2001). This underlines the predominant agreement in the literature that Hofstede’s dimensions are probably more appropriate than any other measurement tool of national culture (Tang & Koveos, 2008). The fact that Hofstede’s values are the most widely used ones in the existing literature further “helps to develop a commonly acceptable, well-defined and empirically based terminology to characterize culture and facilitate systematic comparison” (Haxhi & Van Ees, 2010, p. 712).

(20)

Trompenaars (1993), who has developed another framework to measure the national culture, praises Hofstede for the development of his cultural framework and “credits Hofstede for opening management’s eyes to the importance of the cross-cultural management subject” (Kirkman et al., 2006, p.285). This statement demonstrates that even scholars, who have created different tools to measure the national culture of a country, accept and respect Hofstede’s cultural framework. Furthermore, the fact that IBM subsidiaries in 64 different countries provide the main basis of Hofstede’s research supports the applicability of Hofstede’s framework for research in IB (Sivakumar & Nakata, 2001). Finally, the literature agrees that Hofstede’s framework and its cultural dimensions are the most useful method to measure national culture and to conduct cross-cultural research “because of its clarity, parsimony, and resonance with managers” (Kirkman et al., 2006, p.286).

In conclusion, despite Hofstede’s framework has been questioned in several studies, it is still the most accepted measurement tool of national culture, it is validated in many existing literatures and studies, and it is the most useful tool for cross-cultural values in respect to the business context (Brouthers & Brouthers, 2001).

With respect to the IB context, the advantages for the application of Hofstede’s cultural dimensions outweigh the disadvantages. This supports the adoption of Hofstede’s framework for research in IB. For this reason this study adopts Hofstede’s cultural framework as foundation to investigate how cultural differences affect the operations of MNEs in foreign countries.

2.4 Theoretical construct and working propositions

It already became apparent that the national culture significantly influence employees’ work-related attitudes; therefore, cultural differences have a fundamental impact on MNEs’ operations in foreign countries (Yi et al., 2015). Although existing literature clarifies that cultural differences affect the operations of MNEs in foreign countries in multiple ways (La

(21)

2009; Ichino & Maggi, 2000) and the framework of Hofstede has been used in many IB studies to investigate the impacts of cultural differences on a multiplicity of different organizational business units and business decisions (Kirkman et al., 2006), two main limitations in respect to this topic remain.

The first drawback concerns the management of cultural differences. Yet, inefficient management of cultural differences in foreign locations is assumed to be the source of “negative employee outcomes such as turnover, low commitment and counter-productive behaviors, as well as undesirable organizational outcomes” (Yi et al., 2015, p.67). However, previous institutional literature does too readily assume that the only option for organizations is to comply with institutional pressures or, more specific, with cultural requirements (Oliver, 1991; Pache & Santos, 2010; Scott, 1995)

Based on this, this study seeks to explore which of and to what extent the response strategies of Oliver (1991) have been applied by MNEs to manage cultural differences in the five cultural dimensions of Hofstede in foreign countries. Since organizations generally use different strategies as response to multiple institutional pressures (Pache & Santos, 2010), MNEs probably apply different strategies to manage the cultural differences in each of Hofstede’s five cultural dimensions. This proposition is further supported by the fact that the cultural distance between two countries for each dimension differs in its amount, e.g. the power distance between Germany and China is 45, while the cultural distance between the same countries for the dimension long-term orientation is 4 (Hofstede, 2015), which leads to a different significance each dimension has to the organization and therefore to differences in the internal representation of the impact of cultural differences for each dimension (Pache & Santos, 2010; Hofstede, 1984). Therefore, MNEs may use different response strategies to deal with the cultural differences in each dimension. Based on this argumentation the first working proposition of this paper is developed:

(22)

Working Proposition 1: Since the amount of cultural distance between two countries for each of Hofstede’s dimensions is different, the cultural distance in each cultural dimension has a specific significance to and is represented in different ways within the organization. Therefore, MNEs may adopt different response strategies to manage the cultural differences in each dimension.

A further relevant limitation in the IB literature is the fact that cultural differences are predominantly represented as constraints to MNEs. For example, Ghemawat (2001) uses the so-called ‘CAGE-Framework’ to illustrate that distance between countries leads to disadvantages for the operations of MNEs in host countries. The components of this framework are the cultural distance, which is the subject of this paper, the administrative distance, the geographic distance, and the economic distance. The main statement of this framework is: the higher the distance in these four divisions between a MNE’s home country and a potential host country, the more difficult it is for a MNE to do business in the latter.

This statement is supported by the findings of Luo and Peng (1999), who investigate the relationship between experience, environment, and firm performance at the subsidiary level. The findings show that a higher cultural distance leads to a lower firm performance of MNEs in host countries. A second example is the study of Li (1995) who identifies a negative relationship between cultural differences and the survival of subsidiaries in host countries.

As already mentioned, the main object of investigation in this study is the impact of differences in employees’ work-related attitudes, which are the result of cultural differences, on the operations of MNEs in foreign countries. In this context,Yi et al. (2015) emphasize the negative impact of cultural differences on the operations of MNEs due to the increasing number of workplace cross-cultural conflicts, which are directly linked to differences in employees’ work-related attitudes.

(23)

However, although the large majority of IB studies have identified a negative relationship between the cultural distance and the operations of MNEs in foreign countries, differences among countries may also provide a chance for MNEs to generate institutional arbitrage and therefore have a positive impact on the operations of MNEs in foreign countries (Jackson & Deeg, 2008). According to Ghemawat (2008, p.198) “differences between countries can be a source of rather than a constraint on value creation”. Furthermore, Jackson and Deeg (2008), who investigate the role of institutions within the field of IB studies, also challenge the dominant pessimistic view of cultural differences in the literature. They argue that “institutions endow firms with different capabilities and fundamental diversity” (Jackson & Deeg, 2008, p. 550) and MNEs are able to benefit from institutional differences by explicitly seeking out countries with a high institutional distance and applying preferred sets of activities or firm capacities in these cultural distant countries. In this context, Morosini et al. (1998) are some of the few scholars who identify a positive relationship between the national cultural distance and the cross-border acquisition performance. These findings are justified by the fact that “national cultural distance between countries has, in turn, been linked to significant differences between these countries' norms, routines and repertoire”, which have the ability to have a positive impact on the operations of MNEs (Morosini et al., 1998, p.153). It becomes apparent that the existing literature provides contradicting findings on whether cultural differences have a positive or a negative effect on the operations of MNEs in foreign countries. While the large majority of IB studies have identified a negative relationship between the cultural distance and the operations of MNEs (e.g. Ghemawat, 2001; Luo & Peng, 1999; Li, 1995; or Yi et al., 2015), scattered studies have identified a positive effect (e.g. Morosini et al., 1998). Based on this debate, this paper uses the argumentation of Ghemawat (2008) and Jackson and Deeg (2008) about the possibility to generate institutional arbitrage and views cultural differences, which are part of an institutional environment, not only as constraints to MNEs, but also as an opportunity for MNEs to benefit from these

(24)

cultural differences. As already mentioned, national cultural differences are likely to lead to differences in work-related attitudes of employees across countries, which further have a crucial influence on the operations of MNEs in foreign countries (Yi et al., 2015; Najera, 2008; Evans & Mavondo, 2002). Indeed, the relationship between national cultural values and work-related attitudes has been partially examined in the existing literature (e.g. Bochner & Hesket, 1994; Benneth, 1999), but how the resulting differences in employees’ work-related attitudes ultimately effect the operations of MNEs in foreign countries has not been analyzed in any great depth.

Hence, this study aims to investigate how differences in employees’ work-related attitudes, which are the result of cultural differences, affect the operations of MNEs in cultural distant countries. Based on the argumentation above, we posit that cultural differences and the related differences in employee’s work-related attitudes may influence positively the operations of MNEs in foreign countries. In keeping with this, the second working proposition of this paper is the following:

Working proposition 2: Differences in employees’ work-related attitudes, which are the result of cultural differences, might influence positively the operations of MNEs in foreign countries.

Since the degree of the cultural distance between two countries is different for each of Hofstede’s five cultural dimensions, each dimension probably has a different significance to and therefore a different effect on the operations of MNEs. Therefore, the second working proposition is split into five sub-propositions:

Working Proposition 2.1: Differences in employees’ work-related attitudes, which are the result of a high cultural distance in the dimension power distance, might influence positively the operations of MNEs in foreign countries.

(25)

Working Proposition 2.2: Differences in employees’ work-related attitudes, which are the result of a high cultural distance in the dimension individualism, might influence positively the operations of MNEs in foreign countries.

Working Proposition 2.3: Differences in employees’ work-related attitudes, which are the result of a high cultural distance in the dimension masculinity, might influence positively the operations of MNEs in foreign countries.

Working Proposition 2.4: Differences in employees’ work-related attitudes, which are the result of a high cultural distance in the dimension uncertainty avoidance, might influence positively the operations of MNEs in foreign countries.

Working Proposition 2.5: Differences in employees’ work-related attitudes, which are the result of a high cultural distance in the dimension long-term orientation, might influence positively the operations of MNEs in foreign countries.

This paper seeks to expand the existing literature. It analyzes the impact of cultural differences in a new light by investigating to what extent cultural differences do not only have a negative impact on the operations of MNEs in host countries, but also a positive one and how MNEs deal with cultural differences after entering a country with a high cultural distance.

(26)

3. Methodology

Since the large majority of IB studies have identified a negative relationship between the cultural distance and the MNEs’ operations (e.g. Ghemawat, 2001; Luo & Peng, 1999; Li, 1995; Yi et al., 2015), this study aims to investigate to what extent differences in employees work-related attitudes, which are the result of cultural differences, have a positive impact on the operations of MNEs in foreign countries. In this context, it seeks to determine the actual impacts of differences in cultural characteristics, which become noticeable in different employees’ work-related attitudes, on the operations of MNEs and how these MNEs manage cultural differences in real world. Therefore, this study applies an interpretive research philosophy and uses semi-structured in-depth interviews to investigate the topic. The following section describes the research design, the selected cases and the related criteria for their selection, the type of data collected, and the data analysis strategy of this study.

3.1 Research Design

In this study a qualitative method is applied. In this context, a multiple case study is conducted to answer the research question and fulfill the research objectives. This choice is justified by three main reasons. First, this study seeks to investigate the contemporary impact of differences in employees’ work-related attitudes, which are the result of cultural differences, on the operations of MNEs in foreign countries within its real-life context. Second, this relationship is not clearly evident in the existing literature. Third, work-related attitudes of employees are often covert in nature and they are therefore difficult to evaluate in quantitative terms (Yin, 2013). According to Eisenhardt (1989), this approach ensures quality of content and most often lead to testable, novel and high quality findings.

Case study research generally faces issues of generalization (Saunders & Lewis, 2012). Therefore, this research tries to guarantee a broad sectoral focus by adopting a multiple case study design through analyzing the impact of cultural differences on the operations of

(27)

foreign countries for a long time. In particular, the impact of cultural differences on the operations of the German MNEs in China and India, the actual largest emerging economies (Gubbi et al., 2010), is explored. Using the cultural differences between China/India and Germany is enormously appropriate, which is discussed more in detail in chapter 3.2.1.

This study further applies a holistic research approach by analyzing the impacts of differences in employee’s work-related attitudes, which are the result of cultural differences, on the MNEs’ operations in China and India as a whole.

Finally, this paper uses a deductive approach by testing to what extent cultural differences have a positive impact on the operations of MNEs and to determine whether the working propositions are supported or rejected.

3.2 Case criteria and selection

First of all, the examined companies in this research are all German MNEs. These German MNEs have been selected based on two main criteria. First, since all MNEs are from Germany, a key requirement for a company to be appropriate for this study consists in having had operations in China and India for a long time to provide conspicuously clear and sufficient information. The choice to use the operations in China and India as foundation of this research is discussed more in detail in the next section. Second, as already mentioned, the three MNEs should be active in different industries to ensure a broad sectoral focus. This avoids that findings are merely resulting from specific industry characteristics and hence enables the study to achieve higher generalization when findings are similar in all three cases. The selected German MNEs are the Merck KGaA, the Messer Cutting System GmbH, and the Schenck Process GmbH. All three MNEs are medium-sized to large-sized companies, operate in different industries, and are active in multiple countries. Also importantly, all three MNEs operate in China and India (Merck KGaA, 2013; Messer Cutting System GmbH, 2015; Schenck Process GmbH, 2015d; Schenck Process GmbH, 2015e). China and India and the

(28)

German MNEs’ operations in these countries are used as foundation to identify the impact of cultural differences.

Based on these facts, these firms meet all the conditions to be appropriate for this study and to ensure a high comparability of the three cases. This high comparability increases the possibility of having a sufficiently clear outcome, which enables to answer the research question reliably.

3.2.1 Country selection

This section justifies and supports the selection of China and India and the operations of the German MNEs in these countries to investigate the impact of cultural differences on the operations of MNEs. To do this, Hofstede’s assessment of the cultural distance between these countries is used. Table 2 represents the assessed values of Hofstede’s cultural dimensions for each country and further illustrates the cultural distance in each dimension between China/India and Germany (Hofstede, 2015).

Country Dimensions of National Culture

Power

Distance Individualism Masculinity Uncertainty Avoidance

Long-term vs. Short-term Germany 35 67 66 65 83 India 77 48 56 40 51 Cultural Distance to Germany 42 19 10 25 32 China 80 20 66 30 87 Cultural Distance to Germany 45 47 0 35 4

(29)

Figure 2: Comparison of the cultural dimensions (Hofstede, 2015)

To illustrate the overall cultural distance between Germany and China/India the Kogut and Singh index is used as a measurement tool. Since the Kogut and Sing index is only based on the first four dimensions (Drogendijk & Slangen, 2006), the variance for the dimension “long-term orientation” is not available. Therefore, this dimension is not included. The overall cultural distance between Germany and India is approximately 1,36 and between Germany and China it amounts 2,40. In order to appreciate the scale of the cultural distance between the two emerging countries and Germany, the overall cultural distance between Germany and Switzerland, a neighboring country with a more similar culture to Germany, is also calculated. This value is approximately 0,03. As expected, comparing the cultural distance between Germany and Switzerland with the cultural distance between Germany and China/India emphasizes the enormous cultural distance between Germany and China/India. Based on this awareness, the choice to use the operations of the German MNEs in China and India to investigate how cultural differences, resulting in differences of employees’ work-related attitudes, affect the operations of German MNEs are most likely to provide a sufficiently clear outcome.

Countries Cultural Distance

Germany – India 1,357047943

Germany – China 2,401578681

Germany – Switzerland 0,033471636

Table 3: Overall cultural distance based on the Kogut and Singh Index (1988)

0#

20#

40#

60#

80#

100#

PD#

IND#

MA#

UA#

LTO#

Germany#

China#

India#

(30)

With respect to the cultural distance between the countries in each dimension, Figure 2 shows that China and India possess a much higher degree of power distance, a lower degree of individualism, and a lower degree of uncertainty avoidance compared to Germany. For the dimensions masculinity and long-term orientation the cultural distance of China and India to Germany is not as concordant as in the dimensions described above. India possesses a slightly lower degree of masculinity and a much lower degree of long-term orientation than Germany, whereas China possesses the same degree of masculinity as Germany but a slightly higher degree of long-term orientation. The values of each dimension and its differences between the countries are used as basis to develop the interview questions.

(31)

3.2.2 Case description

This section supports the selection of Merck, Messer Cutting System, and Schenck as cases for this study.

Merck is a market leader in innovative and high quality high-tech products in the pharmaceutical and chemicals industry. In 2013 Merck employed approximately 38000 employees in 66 countries. The business of Merck is divided into four main business units: Merck Serono, Consumer Health, Performance Materials, and Merck Millipore. The total revenues of the company in 2013 were about 10.7 Billion € worldwide. A remarkable amount of these revenues was generated in emerging countries, which amounted 35,48% of the total revenues (Merck KGaA, 2014).

Business Unit Total revenues Revenues in

Emerging Markets Percentage

Merck Serono 5.953.594.110 € 1.785 Mio € 30%

Consumer Health 476.915.464 € 132 Mio € 28%

Performance Materials 1.642.092.500 € 1.237 Mio € 75%

Merck Millipore 2.627.506.602 € 642 Mio € 24%

Total 10.700.108.680 € 3.796.000.000 € 35.48%

Table 4: Total revenues in emerging markets of each business unit in 2013 (Merck, 2014)

These key figures (Table 4) signal the enormous significance of Merck’s operations in emerging markets to the company’s business.

(32)

Figure 3: Revenues of Merck in different regions (Merck, 2014)

In recent years the market presence of Merck in emerging markets has increased. To sustain profitable growth Merck especially focuses on expanding its strong market position in emerging markets and the company’s management projects a continuing positive growth in these markets for the next years. In particular, the operations in China and India are key performance drivers and the company owns large manufacturing facilities and market shares in both countries (Merck KGaA, 2014).

In China Merck employs approximately 2000 employees in 40 locations. Since 1933, when Merck entered China, the operations in China have become increasingly important to Merck’s business (Merck KGaA, 2015 a; Merck KGaA, 2015 b). Therefore, Merck seeks to make additional investments in China in the future. In the past three years Merck has invested approximately 100 million € in China. The latest investment of Merck is an 80 million € investment in the company’s new pharmaceutical manufacturing facility in Nantong, which will be Merck’s second-largest pharmaceutical manufacturing facility worldwide from 2017 (Merck KGaA, 2015 a). Since Merck’s market entry in 1967 also the performance in India has shown positive results and organic growth in sales and is expected to be an essential

36%$ 37%$ 19%$ 8%$

Revenues$(in$percent)$

Emerging#markets# Europe# North#Amerika# Rest#of#the#world#

(33)

performance driver for Merck in the future (Merck KGaA, 2015 c). Since 2011, the annual growth rate in India has been approximately 20% (Merck KGaA, 2014).

Messer Cutting System is an associated company of the Messer Group. It is a global company and one of the market leaders in thermic cutting. The company’s systems, products and services are part of the metal working industry and the company focuses on continuously improving its profitability by developing new products and service features. Messer Cutting System employs approximately 1000 employees and is present in five locations in the world: Germany, Brazil, United States, India, and China. Since 1995 Messer Cutting System has been active in the Chinese market and in 1997 the company also entered India, whereby it owns manufacturing facilities and market shares in both countries. In India, Messer employs around 105 employees. Unfortunately the exact number of employees in China is unknown. After entering these markets the performance in China and India has become a core component to Messer’s business (Messer Cutting System, 2014). Furthermore, the expansion of the manufacturing facilities in these countries in 2008 and 2013 signals the importance of the operations in China and India to Messer’s business in the long-term (Messer Cutting System, 2015). In addition, in 2013 the locations in China and India were the only two of five locations with profitable growth (Messer Cutting System, 2014).

Schenck is the world’s leading company of process technologies in industrial weighing, feeding, measuring, conveying, filtration, and automation and solutions in measuring. The company employs approximately 3000 employees worldwide and is settled in 22 countries in all continents. Schenck’s revenues in 2013 were about 620 million € by a compound annual growth rate of 12,9% for the years between 2005 and 2013 (Schenck Process Group, 2015 a; Schenck Process Group, 2015 b). About 26% of the total revenues were generated in the Asian market (Schenck Process Group, 2015 c). Especially the locations in China and India are main performance driver of Schenck’s business in Asia. In both countries the company owns large manufacturing facilities and market shares. In 1993

(34)

Schenck entered the Chinese market. Today the company employs over 500 employees in China, the company’s headquarter is settled in Beijing, and it has further locations in Shanxi, Shaanxi, Jiangsu, Inner Mongolia, Shanghai and Guangzhou. In this context, about 16,67% of Schenck’s employees are engaged in China (Schenck Process Group, 2015 d). In 1994 Schenck entered the Indian market. Today the MNE’s headquarter in India is in Ranchi. Next to this location the company is present also in Gurgaon and Bangalore. In India Schenck employs approximately 350 employees, which is about 12,67% of the total number of employees employed by Schenck (Schenck Process Group, 2015 e). In sum, approximately 28,34% of Schenck’s employees are employed in China and India.

In summary, the three German MNEs are appropriate for this study, because of their high dependence to and extensive operations in China and India. This can be justified by three main reasons:

1) The performance and the amount of revenues generated in China and India is crucial to the MNEs’ business.

2) Further expansions of the MNEs’ plants in China and India in recent years underline the importance of the operations in these countries to the business of the German MNEs in the long-term.

3) A large number of employees are employed in China and India signaling the enormous size of the locations in these countries

These facts emphasize the central role of the operations in China and India to the business of the three German MNEs and show that cultural characteristics, which are, as it already became apparent, substantially different to the German culture, have to be handled. Therefore, these organizations are most likely to provide sufficient and profound information to reliably answer the research question.

(35)

Company Industry Performance Number of employees engaged

Merck - Pharmaceutical and _{chemicals industry}

- Total revenues: 36% in emerging markets.

- China and India are key

performance drivers

- High in China and India

Messer - Metal working industry

- China and India are key performance driver

- 2013: The locations in

China and India are the only two of five

locations with profitable growth

- High in India

- Unknown in China

Schenck

- Provider for process technologies and solutions for different industrial sectors

- Total revenues: 26% in the Asian market. - China and India are key

performance driver

- High in China and India

Table 5: Key facts about the German MNEs

3.3 Data Collection

The data collection in this study is based on primary data and it applies an interpretive approach in form of semi-structured in-depth interviews with managers or the Chief Executive Officer (CEO) of the MNEs to investigate the subject. Interviews can be either structured, unstructured, or semi-structured. Structured interviews are “a method of data collection using a questionnaire in which each person is asked the same set of questions in the same order by an interviewer who records the responses” (Saunders & Lewis, 2012, p.141). In contrast, unstructured and semi-structured interviews are more flexible methods of interview data collection. By using unstructured interviews the interviewer has a clear idea about the subject but does not prepare a foregone list of questions. A semi-structured interview is characterized by using some predetermined questions but it further enables the interviewer to skip topics of or to add additional questions to the interview as required (Saunders & Lewis, 2012). On the one hand, this type of interview possesses a clear guiding idea about the process of the interview. On the other hand, it offers the possibility to inquire or ask more specific questions as necessary. The adoption of a semi-structured interview as data collection method in this study is justified by two main reasons.

(36)

First, the interpretive approach in form of semi-structured in-depth interviews has the ability to gather detailed information about the impact of cultural differences on and the activities of the three German MNEs in China and India from the perspective of managers or the CEO who are all experts and directly involved in the specific topic.

Second, as already mentioned, the usage of a semi-structured interview allows the interviewer to intervene as necessary and offers a more distinctive type to collect data due to its typical spontaneity. The object of investigation in this study is a complex topic, the interviewees are probably not familiar with Hofstede’s five cultural dimensions, and the questions to some extent are quite complicated; accordingly, the usage of a semi-structured interview is most appropriate, because it allows clarifying or correcting possible ambiguities as necessary.

In this study managers of Merck and Schenck and the CEO of Messer are interviewed to investigate the research topic. Table 6 represents the interviewees of the three German MNEs and their positions.

Company Interviewee Position

Merck Manfred Fischer Vice President Global Distribution

Messer Cutting System Peter Schaaf Chief Executive Officer

Schenck Edgar Blum President Business Unit After Market

Table 6: Interviewees and their position in the company

To provide a solid foundation for the formulation of the interview questions a consultant of Itim International (Itim, 2015), Brigitte Opel, whose consultancy focuses on Hofstede’s cultural dimensions, identifying and providing information about cultural differences at work, and how to compose synergies from these cultural differences, is met to identify the main societal characteristics of China and India in relation to Hofstede’s five cultural dimensions. Furthermore, this meeting serves to develop more specific areas or characteristics of employees’ work-related attitudes and therefore ensures a strong basis to

(37)

determine the interview questions. This increases the quality of this research and enables to reliably answer the research question. It becomes apparent that China and India are similar in most of Hofstede’s cultural dimensions with exception of the dimension long-term orientation (Table 7). Based on these findings the interview questions are developed.

Dimension China India

Power Distance

1) Less demanding

2) Relationship to superior and colleagues comes before money 3) Less Dissatisfaction

4) High tolerance

1) Less demanding

2) Relationship to superior and colleagues comes before money 3) Less Dissatisfaction

4) High Tolerance

Individualism

1) Group membership is important 2) Importance of teamwork 3) Care about others wellbeing 4) Trust plays a crucial role 5) Increased familiar mind – It is

not only about the private success, it is about the success of the whole company

1) Group membership is important 2) Importance of teamwork 3) Care about others wellbeing 4) Trust plays a crucial role 5) Increased familiar mind – It is

not only about the private success, it is about the success of the whole company

Masculinity 1) High ambition 2) Greedy 1) High ambition 2) Greedy Uncertainty Avoidance

1) Low risk aversion 2) Pursuit of knowledge

3) Much more open to innovation 4) Different opinions more likely to

be accepted 5) Low nervousness

1) Low risk aversion 2) Pursuit of knowledge

3) Much more open to innovation 4) Different opinions more likely to

be accepted 5) Low nervousness

Long-term Orientation

1) Education is important 2) Pursuit of knowledge 3) Seek to improve things in the

future – do not worry about past events

1) Strongly adhere to past events 2) Importance of education lower

compared to Germany and China

Table 7: Main characteristics of the society in China and India

All interviews are done through 45 to 60 minutes one-on-one meetings. The questions in this study are used to support or reject the working propositions designed in chapter 2.4. The interview questions and the related working propositions are represented in table 8 and 9.

(38)

!

Table 8: Interview questions (Part 1)

The following six questions serve to investigate the impacts of differences in employees’ work-related attitudes, which are the result of cultural differences in Hofstede’s five dimensions, on the operations of the German MNEs in China and India.

Question WP1 WP2 WP2.1 WP2.2 WP2.3 WP2.4 WP2.5

With respect to the dimension power distance, do you see differences in China and India (e.g. degree of tolerance, degree of demands, degree of dissatisfaction, and importance of a good relationship to the superior and colleagues) compared to Germany? Follow-up questions:

To what extent and how these differences become noticeable in employees’ work-related attitudes? How do these differences affect the company’s operations in China and India?

With respect to the dimension individualism, do you see differences in China and India (e.g. importance of group membership, importance of teamwork, care about others

wellbeing, importance of trust, and the familiar mind) compared to Germany? Follow-up questions:

With respect to the dimension masculinity, do you see differences in China and India (e.g. ambition and the pursuit of success) compared to Germany?

Follow-up questions:

(39)

With respect to the dimension uncertainty avoidance, do you see differences in China and India (e.g. risk aversion, the pursuit of

knowledge, openness to innovation, degree of acceptance of different opinions, and degree of nervousness) compared to Germany?

With respect to the dimension Long-term/Short-term orientation, do you see differences in China (e.g.

importance of education, the pursuit of knowledge, and the aim to improve things in the future and do not worry about past events) compared to Germany?

To what extent and how these differences become noticeable in employees’ work-related attitudes? How do these differences affect the company’s operations in China?

With respect to the dimension Long-term/Short-term orientation, do you see differences in India (e.g. adhere to past events and the importance of education) compared to Germany? Follow-up questions:

To what extent and how these differences become noticeable in employees’ work-related attitudes? How do these differences affect the company’s operations in India?

(40)

Table 9: Interview questions (Part 2)

The following questions serve to receive an overall picture on how the cultural differences influence the company’s operations in China and India due to differences in employees’ work-related attitudes and how the company manages these cultural differences.

Question WP1 WP2 WP2.1 WP2.2 WP2.3 WP2.4 WP2.5

After discussing many cultural characteristics of the Chinese and Indians society, are there any

additional cultural differences in China and India compared to Germany, which lead to differences in employees’ work-related attitudes? How do these differences affect the company’s operations?

With respect to the cultural

characteristics of these countries, how would you describe the overall impact of differences in employees’ work-related attitudes, which are the result of cultural differences, on your operations in China and India? To what extent these differences have led to advantages and disadvantages for the company in China and India?

How do you manage cultural differences?

Follow-up Question:

Do you have specific dimensions or cultural aspects you focusing on? To what extent do you adopt characteristics of the German culture in the locations in China and India?

!

The impact of differences in employees’ work-related attitudes, which are the result of cultural differences, on the operations of German multinational enterprises in China and India

UNIVERSITY OF AMSTERDAM

Master Thesis

Statement of originality

Abstract

Table of Contents

Index of Tables

Index of Figures

1. Introduction

2. Literature review

2.1 Multinational Enterprises and the role of institutions

2.2 Multinational Enterprises and the impact of culture

2.3 Applicability of Hofstede’s cultural dimensions

€

CD

=

{

(I

− I

)

/V

}

/4

2.4 Theoretical construct and working propositions

3. Methodology

3.1 Research Design

3.2 Case criteria and selection

3.2.1 Country selection

0#

20#

40#

60#

80#

100#

PD#

IND#

MA#

UA#

LTO#

Germany#

China#

India#

3.2.2 Case description

Revenues$(in$percent)$

3.3 Data Collection