National culture and management control,
an exploratory study on Dutch expatriates
in Bangladesh.
Master Thesis Paul A.M. Schrooten
1777378 p.a.m.schrooten@gmail.com
University of Groningen Faculty of Economics and Business MSc BA Organizational & Management Control
Table of content 1. Abstract……….2 2. Preface………3 3. Introduction………4 4. Research Design………..6 4.1 Research question……….6
4.2 Research sub questions……….6
4.3 Conceptual Model……….7
4.4 Research context………8
5. Literature Review……….10
5.1 National culture………10
5.2 Management control………14
5.3 National culture and management control………..15
5.4 Expatriate theory………16
6. Methodology………..21
6.1 Theory development………21
6.2 Method of data collection………21
6.3 Method of data analysis……….22
6.4 Quality of research methods………..23
7. Empirical research………25
7.1 Background……….25
7.2 National culture descriptive………25
7.3 Business culture descriptive………27
7.4 Findings for sub questions………30
8. Discussion………..39
8.1 National culture………39
8.2 Management control………43
8.3 National culture and management control………..43
8.4 Expat theory………43
8.5 Considerations………..46
9. Conclusion……….48
9.1 Summary of results………48
9.2 Limitations.……….49
9.3 Implications for future research………..49
1. Abstract
Purpose – The purpose of this paper is to explore the relationship between national culture
and management control from the perspective of Dutch expatriates in Bangladesh. This paper seeks to understand the dynamics of management control abilities of expats and how they are influenced.
Design/methodology/approach – The research is conducted during a field trip in Bangladesh,
where 8 Dutch expats and 8 directly related local colleagues where interviewed upon their cooperation through semi-‐structured interviews.
Findings – It was found that national culture might be less important considering the
management control ability of an expat. Rather having a positive attitude, experience and knowledge of the language might be more important for effective management control. Next to this, the cultural distance between the Netherlands and Bangladesh is larger from the perception of the expat and smaller from the perception of the counterpart.
Research Limitations/implications – The interviews were all conducted with expats and locals
that were working together at that moment, therefore failed expats or failed cooperation might be underexposed. The implications suggest that more attention should be paid to factors as language, experience and attitude, when considering future research in management control abilities of expats, expatriate training and expatriate selection.
Originality/value – The paper contributes by performing exploratory research into the
relationship of national culture and management control considering the Netherlands and Bangladesh. Especially evaluation of the role effectiveness of expatriates as a system for management control adds to the originality of this research. Since this relationship is still underdeveloped, this paper tries to provide understanding of the relationship upon which more research can be based.
2. Preface
This paper represents the final assignment in my life as a student and I consider myself proud to have achieved this. Since I was a young boy, different countries and their cultures, languages, manners and businesses have always fascinated me. During my educational career, discussions concerning national culture increasingly gained my interest as the approach towards understanding culture became more scientific. Therefore my Bachelor Thesis considered globalization and time, a literature review on subsidiary adaptations of Toyota in Europe and BMW in China, which was supervised by Prof. Dr. Luchien Karsten. When the chance presented itself to me regarding research in national culture and management control for my Master Thesis, I knew this was a great opportunity. However, at that time I was unaware and could not have expected how this process would unfold itself.
Now, being at the end of the process of writing my Master Thesis, I can say that I have learned many things along the way. The choice to conduct qualitative research and perform fieldwork in Bangladesh has increased the degree of difficulty of this scientific research. However it has made this research highly interesting, motivating and an extraordinary learning experience. Especially during my three-‐week stay in Bangladesh, I have learned many things about the dynamics of the society and the country. I have conducted 16 semi-‐structured interviews and experienced an indication of what it would be like to live in Bangladesh. It has become evident to me that the need for this research is great, not only because there is a lack of research, but also because Western companies are required to cope with the dimensions of doing business in Bangladesh in order to be successful. The majority of the participants confirmed the need for scientific research in Bangladesh and I personally hope more research will be done in the future.
Regarding the result of this Master Thesis, I would like to say special thanks to my supervisor dr. Coen Heijes, for keeping me on track and guiding me through this project with his advice and support. I want to express my gratitude to Mr. Ruben, Mr. Abed and Mr. Rohel for arranging my stay in Bangladesh, giving me guidance and providing me with the presence of warmth and kindness. I would like to thank all the participants in this research, for sharing time, experiences and insights into the cultural differences of the Netherlands and Bangladesh. Moreover I would like to thank my parents, my family and friends for their unconditional support during my studies.
Hopefully you will enjoy reading this thesis.
Paul Schrooten, June 2013
3. Introduction
Bangladesh is one of the poorest countries in the world with an average GDP of 780 US Dollar per capita per year in 2012 (World Bank, 2012), it has very low wages and businesses involving high-‐labor intensity e.g. textiles are attracted by this condition (Financial Times, 2012). Paik and Sohn (2004) state that as the operations of a multinational firm become increasingly globalized, the variety and complexity of international control tasks make it increasingly difficult to rely on the existing standardized bureaucratic means of control, e.g., rules and regulations, auditing, or formal performance evaluations. The overall performance of an organization may deteriorate if specific host country factors such as culture, or government regulations are ignored (Ghoshal & Nohria, 1989). Contingency theory maintains that the optimal functioning of a management control system depends on the particular elements of a firm’s context (Otley, 1980). When a MNC is strategically dependent on a subsidiary, it is more likely that for control purposes, an expatriate is appointed as the subsidiary’s manager (Fatehi, 2007). A survey among MNC’s concluded that over the next decade it is expected that the amount of expatriate managers will slowly rise (GMAC/SHRM, 2006). Aycan and Kanungo (1997) define expatriates as: employees of business and government organizations who are sent by their organization to a related unit in a country which is different from their own, to accomplish a job or organization-‐related goal for a predesignated temporary time period of usually more than six months and less than five years in one term. Bangladesh has a highly dense population of 160 million people and thereby a lot of economic potential, currently Western brands like H&M, Wal-‐Mart and Primark are using cheap labor for production of textiles (Financial times, 2012). I choose the Netherlands in relation to Bangladesh, because there has not been previous research regarding the management control abilities of Dutch expats in Bangladesh. With my background as a Dutch citizen, it will be interesting to consider what the effect is of national culture on management control from the perspective of Dutch expatriates in Bangladesh.
Hogue and Hopper (1994) studied management control in a Bangladeshi jute mill, their most important finding was congruent to existing theory: the wider social, economical, political and institutional contexts govern the way management control operates in the organization. Because there are no scientific studies available considering expatriates as form of management control in Bangladesh and the effect of national culture, it will be interesting to conduct exploratory research, trying to gain in-‐depth knowledge, rather than performing quantitative analyses. It will be a challenge, finding to what extent perceptions in national culture influence expatriates operating as a management control system. The current theory available is mainly based upon other geographic areas and makes use of different research methods (Harrison and McKinnon, 1999), while many have written about expatriates versus local nationals, few have based their statements on empirical evidence (Robinson, 1978; Robock and Simmonds, 1983; Ronen, 1986; Boyacigiller, 1990). I think it is possible to add new knowledge by conducting in-‐depth exploratory research regarding Dutch expatriates and their local colleagues, working in the Bangladeshi culture and functioning as a management control system. From this perspective, specific situations can be examined and reflections can be made towards current available theories. By performing interviews, conducting small questionnaires and making direct observations, I will try to develop new theory.
cultural influences generated by the Netherlands and Bangladesh for other countries, there still might be interesting knowledge for international managers considering expatriates as a controlling mechanism. The culture of Bangladesh is different from the Dutch culture, according to Hall (1990) each cultural world operates according to its own internal dynamic, its own principles, and its own laws, written and unwritten. Many firms have faced considerable problems when trying to do business with less developed countries, according to Brunetti, Kisunko and Weder (1998) firms in less developed countries generally consider the institutional obstacles of doing business more burdensome than countries from the OECD. Especially when setting up a new business, or when one tries to use expatriates as a form of management control, the information in this paper might prevent problems from occurring and could explain why certain aspects of business need to be handled with care. Expatriate adaptation, training and selection are important aspects of successful expatriate assignments, this paper will try to provide knowledge considering these processes for Dutch expatriates in Bangladesh.
This leads to the research question: What is the influence of national culture on
management control in Bangladesh from a Dutch expatriate perspective?
4. Research design
This section of the paper contains the research design. The research question and sub questions derived from the research question are presented below. This section also presents the conceptual model and general information about the research context of Bangladesh, as this is the place where the research is situated.
4.1. Research Question: What is the influence of national culture on management control in
Bangladesh from a Dutch expatriate perspective?
4.2. Sub questions:
4.2.1 How are Dutch expatriates dealing with and accounting for Bangladeshi culture? And
vice versa?
4.2.2 What are the mutual perceptions from AB and from BA on their cooperation?
4.2.3 What is the perception of A on itself and what is the perception of B on itself, do they
match? What are the differences in perception? How do they influence cooperation?
4.2.4 How is the data that I collect comparing to Hofstede, Lewis? Are there obvious
discrepancies?
4.2.5 What are the main problems encountered considering expatriate adaptation?
4.2.6 How are the expatriates being selected?
4.2.7 How are the expatriates being trained and prepared? Is it useful?
4.2.8 To what degree do people see culture as a problem, an excuse, or as a motivator?
4.2.9 What are the troubles when doing business? Are they culture related? How are
problems being dealt with?
4.2.10 Are expatriates as a control mechanism effective? How could this be improved?
4.3 Conceptual model
This conceptual model indicates my research in its broadest sense, and has the purpose to represent a clear overview of where the research will take place conceptually. It is not meant to be a conceptual model with the purpose of showing which hypotheses will be tested, rather it is to demonstrate which aspects are being researched. When the research is finished, the purpose is to deliver knowledge and insights for future research that can be transformed into propositions and a conceptual model.
National Culture Management control
in Bangladesh
Data interviews Hofstede
Perception of Bangladeshi Perception of Expatriates - Adaptation - Training - Selection - Motivation - Problems
Theory Hofstede Expatriates
Current theory
4.4 Research context
To be able to have a better understanding of this research, a short overview of the research context and the background of the country will be presented. According to Van Schendel (2009), during its early history several Indian empires passed in the area, which is now called Bangladesh, and around the 16th century the area started to trade, because the location of the Delta was appropriate for trade and exports of rice. In 1757 the British East India Company established itself as the facto ruler of the Bengal area, Pakistan was established in 1947, when it separated from colonial India and thereby the British Crown (Van Schendel, 2009). This was the creation of East Pakistan (Bangladesh) and West Pakistan, the state of Bangladesh was established in 1971 when independence was declared from Pakistan (Van Schendel, 2009).
In figure 2, a geographical overview of Bangladesh is presented (CIA, World Factbook, 2013). The borders of Bangladesh were established in 1947 when it became East Pakistan, part of the Islamic state of Pakistan, however it is geographically distant from Pakistan and almost entirely enclosed by India (Van Schendel 2009). After the Bengali liberalization war in 1971, Bangladesh became independent and the official language spoken in Bangladesh changed from Urdu into Bengal, next to that English is still being used in educational and governmental affairs as a legacy of the British colonization (Van Schendel, 2009).
According to Van Schendel (2009), in its early days, the main religions in the area of Bangladesh were Buddhism and Hinduism, around the 8th century the Islam entered the society as well. Currently the main part of the population is Muslim (90%), the other substantial part of the population is Hindu (9,8%) (Van Schendel, 2009).
Bangladesh has around 160 million inhabitants and is one of the most densely populated areas of the world, but it is also one of the poorest (Van Schendel, 2009). The industry in the country is developing, it is mainly based on textiles and to a much smaller extent shrimps, fish and leather, still over sixty percent of the entire population works in agriculture (Van Schendel, 2009).
5. Literature Review
This section of the paper contains an overview of the current state of the literature that is regarded relevant for this research. The literature presents the knowledge that has already been presented and published by other researchers considering the topic of this paper. Especially literature concerning national culture, management control and expat theory is combined. The body of literature will be used as a basis for confrontation with the empirical research findings, this confrontation will be presented in section 8, the discussion.
5.1 National Culture
5.1.1 Hofstede Dimensions
When examining existing literature regarding national culture, the first comprehensive theory can be found in the Hofstede cultural dimensions (Hofstede, 1983; 1991; 1993; 2001). The Hofstede dimensions are widely accepted (Sondergaard, 1994; Steenkamp, 2001), and focus on 5 cultural factors per country: power distance, masculinity vs. feminism, individualism vs. collectivism, uncertainty avoidance and long-‐term orientation. These factors give a comprehensive approach to get an idea about the cultural differences among countries. The Hofstede studies contain information about the average cultural values according to the five dimensions. The dimensions might differ across regions and across people, therefore a comparison will be made with the average scores of the sample interviewees later in this paper.
Figure 3 indicates the cultural dimensions established by Hofstede for Bangladesh in comparison to the Netherlands. By analyzing these values the main cultural differences between the countries will become visible.
Power Distance is defined as the acceptance and the extent to which the less
powerful members of institutions and organizations within a country expect and accept that power is distributed unequally. When regarding power distance, Bangladesh scores high, this means that people accept certain hierarchical orders in which all people have there own
place, without further need for justification. In organizations inequalities are normal and employees prefer to be precisely instructed.
The Netherlands scores relatively low on power distance, this indicates the importance of independence and the acceptance of hierarchy solely on a functional basis. Dutch require equal rights, accessible superiors and leadership in the form of coaching rather than coercive top down management. The communication style is open, direct and participative, employees expect to be consulted and have informal contact with superiors, strict forms of control are disliked.
Individualism is the degree of interdependence a society maintains among its
members. Bangladesh has a very low value in this dimension. A low degree of individualism indicates a high degree of collectivism, this implies that people are not self-‐centered, but they are oriented towards groups. The group orientation involves high degrees of trust and loyalty that override all other societal rules and regulations. The society has a strong focus on fostering of relationships where everybody takes responsibility for the group as a whole, offence leads to shame and loss of face. The relation between employer and employee can almost be characterized as family, therefore decisions about promotions and management are very group oriented.
In the Netherlands individualism is rated high, this means that there is a preference among people to have a loosely knit framework of friends, however people are expected to take care of themselves and there are only responsibilities to closely related family. In this society offence will cause guilt and loss of self-‐esteem, this makes people sensitive to these matters. Management comes down to management of individuals instead of groups, performance and bonus measures should therefore be measured at the individual level. The relationship between employer and employee is based on contracts and promotions need to be earned.
When regarding Masculinity, being the best is the fundamental issue underlying this concept, in contradiction to feminism, which implies doing what you like. Bangladesh has a medium-‐high score on this dimension, which indicates that the society is substantially driven by competition, success and achievement. Managers are expected to be decisive and assertive with a focus on performance, conflicts are being resolved by fighting them out. The Netherlands has a low value of masculinity and therefore this society can be considered as feministic. This implies that in this society it is very important to do what you like and have a proper balance between work and life. Effective management is based upon empowerment, decentralization, supporting employees and involving subordinates in decision-‐making. People seek equality, solidarity and quality of working life, conflicts are being resolved by reaching a consensus through long discussions, the Dutch ‘Poldermodel’ is a typical example of compromise from two parties to reach an agreement.
Uncertainty Avoidance is defined as the extent to which members of a culture feel
and punctuality are important, however innovation might be resisted. Security is regarded as important factor for individual motivation.
The Netherlands score medium on the uncertainty avoidance dimension, the difference with Bangladesh is not very substantial. Therefore the same arguments are also applicable for the Dutch society. However, the Dutch society has a slightly lower score than Bangladesh, thus it can be said that the effects of the dimension are stronger in Bangladesh. For management it implies that employees do not like role ambiguity and rather receive clear goals or instructions to fulfill a specific task.
Long-‐term Orientation is defined as the extent to which a society shows a pragmatic
future-‐oriented perspective rather than a conventional historical short-‐term point of view. The dimension was later added by Hofstede and is related to Confucian dynamism referring to long-‐term relationships and friendships with honor and trust. Bangladesh has a medium-‐ low value on long-‐term orientation, this indicates that the society is short-‐term minded. People have a great deal of respect for traditions, however there is also pressure for ‘keeping up with the joneses’. There is impatience for achieving quick results and there is a low propensity to save money.
The value for long-‐term orientation in the Netherlands is also medium-‐low, the value is slightly higher than the value of Bangladesh, which implies that the forgoing arguments are also applicable for the Netherlands, however the effect is a little less strong than in Bangladesh.
5.1.2 Lewis (2006) qualitative cultural theory
According to Lewis (2006), in the culture of Bangladesh truth is situational and contextual, words are often more important than written contracts. In his book, Lewis also provides a list of values, necessary knowledge and behavior that should be avoided, a table of values will be presented later in this section. Overall, this section will present a short piece of qualitative knowledge by Lewis (2006), to have a better understanding of the culture of Bangladesh.
Religion in Bangladesh as mentioned in the research context, is divided in the
proportion of around 90% Muslim, this makes it the fourth biggest Muslim population in the world. The other substantial part of the society 9,6%, is Hindu and accounting for less than 1 percent of the population are Buddhists and Christians (CIA, Factbook, 2013). Lewis (2006) continues by explaining that a century ago the population of Hindus was around 35%, so there have been significant changes in these percentages. The reason for the decrease of Hinduism in Bangladesh is related to the incursions by the Pakistani army in the 1960’s, at this time many Bengali Hindus fled to India and after the independence in 1971 the relation between the Hindus and Muslims improved (Lewis, 2006). The majority of the Muslims are Sufis who are followers of a branch of Islam from central Asia, Sufism is a mild form of Islam (Karolia, 2011).
Regarding business, decision-‐making is done by debate, however the most powerful person will determine in the end. Female leadership is widely accepted when the woman has certain expertise or has earned respect in previous positions (Lewis, 2006).
When considering Space and time, Bangladeshi like proximity and warmth, standing and sitting close to each other can gain empathy and as in many tropical areas there is a lot of flexibility and a low degree of punctuality (Lewis, 2006). However this is changing for the younger generation, because the ICT business is developing quickly. In India the ICT-‐sector is already booming and Bangladesh wants to emulate this industry and become a basis, as outsourcing location for Western industries, increasing punctuality is therefore an aspect that requires change (Lewis, 2006).
Regarding Communication patterns of Bangladeshi, Lewis explains that initial contact can be perceived as somewhat abrupt and unsophisticated, this originates from the rural traditions and characters of most inhabitants. When showing empathy, Bangladeshi are quickly warm, hospitable, helpful, almost to the point of embarrassment. Traditional interest in literature and poetry can make them eloquent and at times oratorical, flattery is common and courteousness is important (Lewis, 2006). Bangladeshi avoid making strong affirmations and statements, in this sense the way of communication is indirect and arguments are brought elegantly. However this delicate way of courteous conversation is not holding them back pursuing arguments. Body language is similar to the rest of the Asian subcontinent, waggling the head from one side to the other implies ‘no’ or ‘I am not sure’ whereas a single tilt to one side means agreement. The Listening habits of Bangladeshi are based upon courtesy, they listen careful and have a thirst for knowledge, which makes them good listeners (Lewis, 2006).
Behavior at meetings and negotiations is quite formal, manners and dress codes are
important. Conversation exchanges start with small talk, which might consume some time when it proves interesting. During this time Bangladeshi are becoming relaxed and increasingly open to fruitful business negotiations, starting with business talk is perceived as unsophisticated. When coming down to business the process should not be rushed, it is important that there is room for a long discussion. No matter what the result or content of a negotiation, the conversation should always end with a pleasant character. During meetings Bangladeshis will often deviate from the agenda and talk to each other in Bengali, one should embrace this fact and not feel offended (Lewis, 2006).
Regarding Manners and Taboos, most exist out of traditions from Islam and Hinduism. With respect to women Bangladeshi have a conservative point of view, they should not expose too much flesh and be dressed modest. In business meetings one should only shake a women’s hand when she initiates the handshake. Next to this common taboos exist, Muslims do not eat pork, Hindus do not eat beef and alcohol is normally not available, only with the exception of 4 and 5 star hotels and restaurants (Lewis, 2006).
Bangladesh has the tendency to follow the lead of India’s modernization and expertise or knowledge strongly leads to respect. In a conversation it is important to avoid talking down with brute force to Bangladeshi, just as avoiding indelicate use of humor. Modest behavior and demonstration of understanding their situational perspectives can lead to good relationships (Lewis, 2006).
Bengali language and literature Muslim tenets
“Home village” roots Islamic rule
Respect for elders Abstinence
Extended family Warmth
Pride in ancestry Courtesy
Secularism Hospitality
The table above presents an overview of the values that are of importance for the society of Bangladesh, the values might also be important in other countries however the combination of the values is characteristic for Bangladesh, especially the language has an extra important dimension as this contributes to the Bangladeshi identity.
5.2 Management control
There are many definitions of management control and multiple classifications of the components or elements of management control systems (MCS). In this paper management control is regarded as the set of mechanisms designed to assist an organization in completing its objectives. These mechanisms may be formal and deliberately chosen, however they also might be informal and naturally occurring, (Hopper, Scapens and Northcott, 2007).
Building upon transaction cost economics (TCE) theory, Birnberg, Turopolec and Young (1983) present an organizational context of accounting by combining Perrow’s (1970) technology variables with the Thomson-‐Tuden (1959) model concerned with goals and decision-‐making. Combining these models leads to the relationship between task characteristics and control, when task analyzability is high, control must be exercised by standards, when task analyzability is low, control needs to be exercised by targets. Ouchi (1979) continues by building upon the notion of goal agreement, consequently he combines the ability to measure outputs with the knowledge of the transformation process. When measurability and process knowledge are high, output and behavioral control will be sufficient. When measurability is high and process knowledge is low output control will be sufficient and when measurability is low and knowledge of the process is high, behavioral control is necessary. When measurability is low and process knowledge is low, clan control is necessary, clan control is also known as personnel control (Ouchi, 1980; Govindarajan & Fisher, 1990) or social control (Merchant, 1985) or professional control (Abernathy & Stoelwinder, 1995).
According to Abernathy and Stoelwinder (1995) professional control is based upon social and self-‐control processes, it is assumed that this is functional because of supplementation by training and socialization strategies implemented by management to create and reinforce congruence between the goals and values of individuals and those espoused by the organization. Abernethy and Brownell (1997) investigated control in R&D corporations, it was found that when uncertainty is high, personnel forms of control lead to
a significant positive effect on performance. This paper is not considering R&D corporations, however the previous sentence proofs the effectiveness of personnel controls in situations with high uncertainty. Bangladesh can also be regarded as a country with a high degree of uncertainty, consisting out of institutional deficiencies, uncertainty of resource flows and the disbursement of funds (Ahmed & Karim, 2006), therefore personnel control in the form of expatriates might be a logical choice for businesses trying to control international contexts.
Paik and Sohn (2004) state in their research, as the operations of a multinational firm become increasingly globalized, the variety and complexity of international control tasks make it increasingly difficult to rely on the existing standardized bureaucratic means of control, e.g., rules and regulations, auditing, or formal performance evaluations. These bureaucratic or standardized output-‐based control mechanisms are often too rigid to cope effectively with the increasing number of its separate and yet interdependent international operations (Barlett & Ghoshal, 1988, 1989; Doz & Prahalad, 1988). The overall performance of an organization may deteriorate if specific host country factors such as culture, or government regulations are ignored (Ghoshal & Nohria, 1989).
When considering the limitations of output-‐based control, researchers have paid increasing attention to behavioral control by assigning expatriates to key positions in the subsidiaries as a possible answer to this challenge (Paik and Sohn 2004). Although expatriates could be sent for other purposes than control, such as e.g., training and development, effective control still represents one of the major reasons for using expatriate managers particularly at the initial stage of establishing overseas subsidiaries (Edstrom & Galbraith, 1977; Evans et al., 2002; Harzing, 2001b). Harzing (2001b) proved that expatriates were used to effectuate personal and cultural control both explicitly and implicitly, in general this indicates that expatriate managers enhance the MNC’s control over overseas subsidiaries and reduce the MNC’s reliance on the rigid, bureaucratic control mechanisms which have become less suitable to meet the diversity and complexity of the global operations. In this paper the focus will lie particular on expatriates as form of a management control mechanism.
5.3 National culture and management control
Research in the field of management control in combination with national culture has been gaining increasing interest considering globalization and the increase of international business over the last decades. However the research available regarding this topic has not matured. In 1999, Harrison and McKinnon (1999) wrote an article about the current state of the research concerning management control and national cultures and said it was in its infancy. Harrison and McKinnon (1999) determined that there were serious shortcomings to most of the papers written about the relationship. ‘It was noted earlier that the predominant, almost exclusive, method employed to date has been the mail survey questionnaire. While the mail survey questionnaire has allowed cost efficiencies in the conduct of cross-‐cultural MCS research, we may have paid a price in its having yielded a lower level of understanding of the phenomena than we might have obtained with other methods or, at least, with multiple methods’ (Harrison and McKinnon, 1999). Most of the research was focused on Asian economically developing countries (Taiwan, Singapore, China) and economically mature countries (Australia, Japan and the USA).
the corporate management control and incentive systems (MCIS) to fit local business-‐unit circumstances. Van der Stede (2002) found weak effects of national culture at the business-‐ unit level and significant influences of the parent company on the MCIS observed in the business units, this indicates that the management practices of foreign business units converge with those of the parent company, rather than circumstances of the local business-‐ units (Van der Stede, 2002). A common approach for MNE management to achieve its desired level of organizational and individual performance is through increasing emphasis on cultural control, defined as a combination of personnel control and control by socialization (Baliga and Jaeger, 1984).
Harzing (2008) states that the notion of cultural differences as a significant barrier to doing business is now commonly accepted, however this ordinary acceptance might have blinded researchers to a more basic country characteristic with the same impact: language. The work of Hofstede (1980) has dominated cultural research for the past decades and has been developed into a comprehensive and practical system for measuring cultural distance. However, the dimensions of Hofstede (1980) have received a lot of criticism over time and it has been argued by Harzing, (2004) that the exclusion of language differences is particularly inappropriate when considering management of overseas subsidiaries.
5.4 Expatriate theory
5.4.1 Control abilities of expatriates
For the definition of the expatriate, Aycan and Kanungo (1997) are followed, expatriates are: employees of business and government organizations who are sent by their organization to a related unit in a country which is different from their own, to accomplish a job or organization-‐related goal for a predesignated temporary time period of usually more than six months and less than five years in one term. In a study by Colakoglu and Caligiuri (2008), the authors state that there were at that time 850.000 subsidiaries of multinational corporations operating globally. As mentioned earlier, the GMAC (Graduate Management Admission Council) global relocation survey found that 65% of MNCs surveyed, are expecting expatriate manager numbers to rise steadily over the next decade (GMAC/SHRM, 2006), this gives an extra indication for the relevance of this study.
Theoretical and prescriptive literature has proposed many company, host country, and individual factors to consider when determining whether to staff an overseas position with a home or host country national (Ronen, 1986). Boyacigiller (1990) found that in settings where control is a potential problem either due to the complexity inherent in the business or because of the difficulty of the business environment, parent nationals can provide an unobtrusive mechanism for increasing control over subsidiaries located in foreign countries, where parent nationals can be interpreted as expatriate managers.
successful adaptation. According to Caligiuri (2000b) contact with host nationals, sociability and the personality trait ‘openness’ are important. Hailey (1996) researched mutual perception of expatriates managers and local Singaporean managers, it was recognized that the relation lacked research and it was found that the emerging group of local Singaporean managers felt growing resentment towards expatriate managers. The locals felt that their expertise was underappreciated and not recognized, next to that Hailey (1996) found that the local managers even regarded the expatriate managers insensitive regarding culture and thereby ineffective, harming the performance of the company. It will be interesting to see how expats experience the Bangladeshi culture and what their visions are upon management control abilities of expatriates under the influence of the national cultures.
5.4.2 Expatriates and adjustment
Cross-‐cultural adjustment is defined as the process of adaptation to working and living in a foreign culture, it is perceived as the psychological comfort and familiarity an individual has in getting acquainted with the new culture (Black, 1988; Black et al., 1991; Okpara and Kabongo, 2011). Black (1988) distinguishes three types of expatriate adjustment: work adjustment, referring to performance, supervision and responsibilities in the work environment; relational adjustment, the process of socialization with the community; general adjustment, includes the adaptation to life in a different country. The typology is valuable because it contains individual, contextual and organizational variables, several researchers have confirmed this typology (Black and Stephens, 1989; Black and Gregersen, 1991; Parker and McEvoy, 1993; Cerdin, 1996;).
By now it has been indicated that cultural adaptation is a severe challenge for many expatriates, therefore it is surprising to find that some MNCs try to prevent expatriates from failing by increasing the number of expatriates to control the overseas subsidiary (Boyacigiller, 1990; Harzing, 2001b; Paik and Sohn, 2004;). However it is not clear how the increase of the number of expatriates might increase the performance, because it is not the technical competence of the expatriates that is lacking, however it might be the lack of cultural training the expatriate managers are suffering from. In social psychology literature, it is established that self-‐efficacy is a crucial element in successfully achieving behavioral change, such as adaptation or acculturation (Bandura, 1977). Self-‐efficacy is defined as the belief in one’s capabilities to mobilize the motivation, cognitive resources, and courses of action (Bandura & Wood, 1989).
Expatriates with a high degree of knowledge about the culture of the country they are operating in, will have a higher degree of self-‐efficacy and confidence to control the local organization with its employees. The ability to understand ways of communication and cultural backgrounds is crucial when interpreting behavior, verbal and non-‐verbal communication. For example, Jansen, Merchant and Van der Stede (2009), found that incentive compensation in the Netherlands has a different effect than in the USA. Dutch people value a steady basic income over a high probability of a bonus with a lower basic income, it was established that bonus structures have a negative effect on organizational performance and a negative effect on pay satisfaction in the Netherlands. On the contrary, American managers and employees believed that bonus structures would enhance performance and inherently, in the USA, bonus structures have a positive significant effect on pay satisfaction. Another example includes Milliman, Kim and Von Glinow (1993), Japanese and Korean managers were found to have a high value for recognition and titles, managers could use this knowledge to their advantage by providing promotions and rewards for the purpose of controlling the organization and getting employees on their side by satisfying them. These previous situations indicate multiple perspectives of different cultural mindsets that expatriate managers have to deal with.
Without a proper understanding of local behavioral patterns, or the meanings they represent, these expatriates may behave in ways that may unintentionally offend and disturb local personnel (Bird & Mukuda, 1989; Tung, 1993). Not being able to cope with local employees might even cause a negative effect on the total control over the subsidiary when expatriate managers deter qualified local managers.
5.4.3. Expatriate training
example hardness of culture and communication, duration of stay, function and role of the manager etc. (Okpara and Kabongo, 2011).
Tung (1981) argued there are five basic ways of training cross-‐cultural adjustment. He refers to, didactic training, culture assimilator, language training, sensitivity training and field experience. Tung (1981) suggests that the type of training to be received is dependent on the purpose of the expatriate assignment, two important factors to consider are the degree of cultural distance or similarity and the degree of interpersonal interaction with local inhabitants.
When evaluating the body of literature concerning expatriate training there are various perspectives. On the one hand there is a group that considers cross-‐cultural training effective and on the other hand, there is literature proving insignificant support for the success of cross-‐cultural training. Black and Mendenhall (1990) and Black et al. (1991) examined the relationship between cross-‐cultural training and cross-‐cultural efficiency and found that the training is associated with feelings of well-‐being and confidence in the development of appropriate adjustment of behavior to the context of the new culture and thereby the improvement of relationships in the host-‐country. Deshpande and Viswesvaran (1992) drew the same conclusion in a similar study, therefore there is indication that there is a positive relation between cross-‐cultural training and cross-‐cultural efficiency. Next to this Earley (1987) found that cross-‐cultural training had a positive effect on the cultural adjustment process of the expatriate as well as on their managerial performance, Hammer and Martin (1992) drew the same conclusions from a similar study.
However there is also literature stating that expatriate cross-‐cultural training is ineffective, Cerdin (1996) found that cross-‐cultural training had no influence on the three facets of adjustment identified by Black (1988), while his sample consisted out of 293 French managers that expatriated to 44 different countries. In general MNCs do not provide enough training, preparation and support to expatriates (Okpara and Kabongo, 2011).
Brewster and Pickard (1994) find that expatriates and their partners have a positive attitude towards formal training, they believe that training enhances the ability to adapt to the new environment. Their belief in the training is not significantly related to their age, previous experience, destination or type of organization. Brewster and Pickard (1994) suggest that the expatriate community in the host country has a significant influence on the adaptation of the expatriate. Having received knowledge and thereby information about the host country makes the adaptation easier, however an expatriate community has an even stronger effect. Therefore it is recommended that expatriates with a destination that has a limited expatriate community, receive more training to overcome the adaptation process easier (Brewster and Pickard, 1994). From the previous literature indicated the conclusion can be drawn that there are various meanings towards expatriate training.
5.4.4. Expatriate selection
