978-1473758438 Chapter 3

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Instructor Manual

Chapter 3: Informal Institutions: Culture, Religion and

Languages

(Prepared by Klaus E. Meyer, March 2019)

Introduction to the Topic

Learning Objectives

1. Discuss how cultures systematically differ from each other

2. Explain how language competences shape intercultural interactions

3. Explain how religions shape cultures

4. Explain why ‘acting ethically’ is sometimes very challenging in international business

5. Participate in leading debates on variations in cultures

6. Draw implications for action

General Teaching Suggestions

One way to help students appreciate the importance of others’ cultures and their ethics and

norms is to ask them if they have ever observed any violation of what is acceptable behaviour

in their own country by someone from a different country. If they have not, identify a

common practice such as standing in line at a bank and ask them how they would feel if

someone went ahead of everyone else. What if it was okay to do that in their country, should

they be aware of practices in their own country? If others should be aware of how things are

done here, should we be aware of how things are done elsewhere?

Opening Case Discussion Guide

This opening case describes very personal experiences of expatriates working abroad, in

Saudi Arabia and China respectively. Stories are often more powerful than theories to convey

the substance of cultural differences. The opening case draws on a Swiss research project that

has gathered stories from ALSTOM expatriates (mostly frequent project workers) as a source

of knowledge for other expats, and from that study these two quotations have been taken. The

stories set the stage for a discussion of the students’ own experiences reaching out across

cultural boundaries.

Ask your students, how many have been invited to the party with colleagues or classmates

who come from different countries? Let them talk about their experiences: how to interact

with people with different culture background.

You can also start the discussion from the photo, which depicts a Karaoke session typical for

what business people are likely to experience in places like Japan, Korea and China: Few

European students will know or appreciate Karaoke, and certainly not associate it as a

workplace entertainment. What are they doing? How are they? Why are they doing it?

Chapter Outline, Section by Section

Section 1: Cultures

Key Ideas

This section introduces different perspectives on the notion of culture, perhaps the most

important concept in international business, but also the most difficult to define. We use

Hofstede’s definition as our main base (as is common in the IB literature and textbooks) but

we contrast it with other definitions and concepts.

I suggest to introduce the concept of culture by showing students the photo of a postcard

stand in Valencia, Spain (I have taken this during the EIBA 2009 conference, so many

instructors may know the city and its cultural context). The photo is reproduced in full at the

end of this document. Ask, ‘what do tourist postcards tell us about culture’? The initial

answer will relate to what is evident: architecture, artwork, foods, sports – not only traditional

but also modern, as illustrated by the football stadium. Yes, but, what is below these first

impressions? This way you will be able to guide the discussions from ‘artefacts of culture’ to

the underlying traditions, norms and values.

Note: following user feedback suggesting to reduce the emphasis on Hofstede relative to

more recent empirical work, in the 3rd edition the Tables with the Hofstede data are

considerably reduced. For class assignment instructors may refer student to www.hofstede-

insights.com/product/compare-countries/ to obtain fuller datasets.

Key Concepts

informal institutions

Rules that are not formalized but exist in for example norms, values, and ethics

artefacts of culture

Physical objects that represent the visible surface of culture

culture

The collective programming of the mind that distinguishes the members of one group or category of

cluster

Countries that share similar cultures together.

civilization

The highest cultural grouping of people and the broadest level of cultural identity people have.

Western culture

An aggregate term for European, North American, Australian and New Zealand Cultures.

power distance

The extent to which less powerful members within a country expect and accept that power is

distributed unequally.

individualism

The perspective that the identity of an individual is fundamentally his or her own.

collectivism

The idea that the identity of an individual is primarily based on the identity of his or her collective

group.

masculinity

values traditionally associated with male role, such as assertive, decisive and aggressive

femininity

values traditionally associated with female role, such as compassion, case and quality of life

uncertainty avoidance

The extent to which members in different cultures accept ambiguous situations and tolerate uncertainty.

long-term orientation

a perspective that emphasizes perseverance and savings for future betterment.

low-context culture

A culture in which communication is usually taken at face value without much reliance on unspoken

context.

high-context culture

A culture in which communication relies a lot on the underlying unspoken context, which is as

important as the words used.

stereotype

A set of simplistic often inaccurate generalisations about a group that allows others to categorise them.

Section 2: Languages

Key Ideas

Often overlooked, but essential for doing business in Europe and beyond, are language

competences. Languages are carriers of culture, and thus we included them here (or, frankly,

there was no better place given that they are important). You may want to discuss with your

students how far you / they would get with speaking only English, or only their mother

tongue. The essential conclusion is that English is essential for doing business – and to really

engage with local suppliers or employees one needs to have some understanding of their local

language and culture.

The discussion of culture has been substantially extended in the 2nd edition, including the new

Table 3.3 with practical ideas how to handle language differences. The career aspect is

emphasized in In Focus 3.2 on Kone Elevator.

Key Concepts

language

A system of shared meanings that enables people to effectively communicate.

language barriers

Communication barriers between people who speak different mother tongues and lack a shared

language in which all are fluent.

corporate language

The language used for communications between entities of the same MNE in different countries.

lingua franca

the dominance of one language as a global business language.

Section 3: Religions

Key Ideas

Religion may be the most sensitive subject to discuss for many instructors. Yet, it is

important for business (and politics), and structuring the discussion may help taking out some

of the sensitivities and encouraging tolerance. In this spirit we have written this section.

Key Concepts

holy

an item or activity that is treated with particular respect by a religion

taboo

an item of activity considered unclean by a religion

secular society

a society where religion does not dominate public life

Section 4: Ethics

Key Ideas

Ethics is essentially about what is right and what is wrong, and it is closely aligned to the

notion of culture and its underling norms of values. Ethics, however creates challenges when

engaging in business overseas as adapting to local standards of ethics may be seen as

unethical by folks back home, and vice versa.

This section introduces the tensions arising from such conflicting standards. When managing

ethics overseas, two schools of thought are ethical relativism and ethical imperialism. Three

“middle-of-the-road” principles help guide managers to make ethical decisions. The topic of

corruption is used to illustrate these issues (also see In Focus 3.4).

Key Concepts

ethics

the principles, standards, and norms of conduct governing individual and firm behaviour.

code of conduct

a set of guidelines for making ethical decisions.

ethical relativism

A perspective that suggests that all ethical standards are relative.

ethical imperialism

The absolute belief that “there is only one set of Ethics (with the capital E), and we have it.”

corruption

The abuse of public power for private benefits, usually in the form of bribery.

Section 5: Debates and Extensions

Key Ideas

The first debate concerns group-level culture: culture exists not only at national level (though

that’s what we most discuss in IB) but also in much smaller entities. The constructs

introduced in this chapter thus can also be applied to variations in countries.

The second debate concerns limits to generalisation. The impact of different culture and

language suggests that there are no universal management theories. Central in this debate

session is the critique by Henrich et al. that most social science research has been conducted

on ‘WEIRD’ people (actually, on undergraduate students in the USA), and it is not clear how

much insights from especially experimental research actually apply beyond the rather specific

culture.

The third debate concerns the important distinction between in-group and out-group in

collectivist societies. The collectivist attitudes of trust and mutual support normally apply

only to people considered part of the same in-group, but not to strangers. This fact is

important to understand about collectivist societies, else visitors may be very confused!

Note: In the 3rd edition, more concepts are developed within the section.

Key Concepts

subcultures

groups within a nation sharing a culture that substantially varies from the national average.

cultural convergence

the idea that cultures around the world are becoming more similar.

organizational culture

Culture shared by people working in the organization.

in-group

Individuals and firms regarded as part of “us.”

out-group

Individuals and firms not regarded as part of “us.”

Section 6: Implications for Practice

Key Ideas

The implications for practice section focuses on the concept of cultural intelligence, and how

different people vary in their ability to understand and appreciate foreign cultures (see Table

3.5). Developing cultural intelligence and thus cultural literacy is an important – often tacit –

capability of international managers.

Key Concepts

cultural intelligence

An individual’s ability to understand and adjust to new cultures.

Review Questions

Review questions are provided to students on the website accompanying the book. They

directly ask to summarize the material provided in the text. Instructors may also use the

questions to structure their lectures or review sessions.

Review Questions

(as provided to students on the website)

Material in the Book

1. What are informal institutions?

2. What is culture?

3. What is the distinction between high-context and

low-context cultures?

4. How can countries be clustered by their culture?

5. According to Geert Hofstede, what are the key

dimensions by which cultures vary?

6. What are the limitations of Hofstede’s approach?

Page 59-60

Page 60-62

Page 66, incl Fig 3.1

Page 61-62, incl Table 3.1

Page 63-65

In Focus 3.1

7. Are stereotypes useful to an international manager?

8. How do language differences affect international

business?

9. How do religious differences across societies affect

international business?

10. What is ethics?

11. How can businesses act ethically abroad?

12. Why does corruption vary across countries, and

how should MNEs deal with that?

13. When is the nation state not the appropriate unit to

identify cultures?

14. How can MNEs facilitate internal communication

when their employees speak many different native

languages?

15. Why is the in-group out-group distinction

important in collective societies?

16. What are five level of cultural intelligence that

international businesspersons may develop?

Page 68

Page 68-71, incl In Focus 3.2

Page 71-73

Page 74-75

Page 76

Page 75-76, In Focus 3.3

Page 77-78

Page 70-71

Page 78-79

Page 80-81

At the end the chapter, we provide discussion questions that aim to stimulate students

thinking beyond memorizing the material learned in the chapter. They are designed to be

used at a basis for in-class discussions, group work, or individual assignments. Below, we

provide some indicative answers of issues that may be raised in response to these questions.

Discussion Questions

(as provided in the book)

Indicative Responses

1. When you take an airline flight, the

nice, but don’t want to give too much

1. The key point here is to find out differences

between western culture and eastern culture,

proud of their the groups or organizations

question? A typical US manager may say:

“I am a marketing manager”—without

mentioning the employer. A typical

Japanese manager may say: “I work for

Honda.” Why are there such differences?

culture? Would that be issues related to

(page 61). Do they represent the culture of

Valencia like to be associated with these

images? How can local people and tourist

colleagues or clients because his religion

contact) with women. How do you react?

6. Assume you work for a Norwegian

in clearing your container through

2. The main challenge here is to find out what

the other person does not know. People who

have been abroad may find some insightful

answers, while other struggle. The main

learning point here is that, you may have to

learn about the other person’s country first,

describe.

3. These images reflect what foreigners find

representative of what they stand for. This

leads into a discussion how tourist

like to experience it but can’t because they

don’t understand (for example) the meaning

(in fact, the constitution, in Germany).

Hence, this behaviour is not acceptable, and

in fact highly offensive to many customers.

shake hands with anyone.

5. This question challenges students to fit

customs, and it may last a month.

However, if you are willing to pay an

“expediting fee” of €200, he will try to

make it happen in one day. What are you

going to do?

6. There are subtle differences between bribes

and so-called “grease payments.” In essence,

in such a case it would be legal to pay the

official to do his or her job but it would not

be legal to pay the official to let something

into the country that was prohibited or allow

a lower valuation than is proper. However,

what is legal and what is ethical are not

always the same thing and thus students may

have different opinions.

Closing Case

The closing case provides further opportunities to apply ideas and concepts learned in this

chapter in a real world setting. The Closing Case for this Chapter is “what is in a (Maasai)

name?” It illustrates the complexities of cultural identity, intertwined with a question of

intellectual property rights.

Below are some indicative responses to the case discussion questions.

Case Discussion Questions

(as provided in the book)

Indicative Responses

1. Assuming you can

afford (and are

interested in) some of

the “Maasai” products,

would you like to pay

more for these products

if royalties are paid to

the Maasai?

2. As CEO of one of the

Different students likely give quite different advice on

this set of issues. It is important, however, that students

reflect and explain their suggested actions.

1. It is likely that many students reply ‘yes’ on this

question, at least if the amount is small.

Experimental research shows, however, that

people act differently than how they respond to

survey questions (especially with their friends

watching).

3. If you were a judge in

the home country of any

of these firms named,

how would you proceed

with the legal dispute

(assuming MIPI can

represent the tribe and

press legal charges)?

cite other examples of names of countries,

regions, or ethnic groups being incorporated in

brands. They may then go on to introduce some

‘CSR’ measures aimed to help local communities

in Kenia or Tanzania – but usually paying much

less than Ron Layton’s initiative might generate.

3. The job of a judge is to implement the law of the

country, not to pass moral judgements. Hence,

since no one appears to ‘own’ the rights to the

Maasai name in the country of the dispute, it will

be difficult to make claims on past actions.

Therefore, the legal advice likely focuses on

registering the rights to the name as trademark,

which may give the Maasai rights to future

revenues.

Further Learning Activities

In addition to the cases and discussion questions provided in the book, instructors may want

to use any of the following activities to further engage students with the material.

1. The Integrative Case “Xiaomi Challenges Global Smartphone Leaders” has been

written specially to discuss the fast-paced development of firms in emerging

2. The Integrative Case ‘German Chamber of Commerce Develops Social

Responsibility in China’ has been designed as a real world scenario in which the

Chamber as representation of German business is trying to encourage and coordinate

CSR initiatives. It is based on an initiative that I myself have been involved in.

because the actors in the case are mostly representing Shanghai-based subsidiaries of

firms headquartered in Germany.

3. The Integrative Case “Tackling Corrupt Practices: GSK in China” brings together

the themes of corruption (Chapter 3), social responsibility in foreign countries

(Chapter 10) and headquarter-subsidiary relationships (Chapter 14). GSK has globally

announced high standards of social responsibility, but appears to have failed to

implement these policies in China. The case details the complex demands on the

pharmaceutical sector in China that create strong incentives to be inventive in ‘cutting

corners’.

4. The Integrative Case ‘Just Another Move to China?’ has been written to discuss the

challenges faced by expatriates and their families as they cope with unfamiliar

environments, and have to make decisions over their international careers (Chapter

16). It also allows to further deepen the discussion on how and why differences in

formal and informal institutions (Chapters 2 and 3) matter for international business.

5. There are many fun ways to introduce culture in a classroom. One style is to use the

icons created by Yang Liu, A Chinese Artist living in Berlin, under the title of ‘The

Design of Cultural Difference,

http://blog.sina.com.cn/s/blog_5d20abc20100hkwy.html to illustrate some Europe and

China differences. After introducing these icons, you can do a group work (or pair and

share) to design icons illustrating cultures within your class. I did this for example in

West Africa and challenged students to compare Ghanaians and Nigerians. Many

focused on the loudness of their speech – as the Nigerians were shouting through the

class.

6. A second group (or pair) work I do is a caption competition on a cartoon with two

very distinctly differently dressed persons: what are the two thinking about each

other. This exercise then leads into a discussion of stereotypes and of people

unconsciously making assumptions about other peoples’ motives for behaving the

way they do. In the example, the women are thinking: “[Nothing/everything] covered

but her eyes, what a cruel male dominated culture”.