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
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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
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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.
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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.
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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
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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
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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
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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
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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
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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).
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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.
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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”.
Further Readings
At the end the chapter, suggested further readings are provided. The primary aim is to
provide students a starting point for further work, for example when preparing a class
assignment or dissertation. These references also are recommended for instructors not
familiar with the topic and wishing to ‘get ahead of the students’ before lecturing on a topic.
N.A. Boyacigiller, R.A. Goodman & M.E. Philips, eds, 2003, Crossing Cultures: Insights from the Master
Teachers, London: Routledge A collection of teaching materials for practical learning about the
challenges of cross-cultural management.
For use with Peng and Meyer, International Business 3e, 9781473758438, © Cengage Learning
EMEA 2019
J. Henrich, S.J. Heine, & A. Norenzayan, 2010, Most people are not WEIRD, Science, 466: 29 a short
article by psychologists explaining why generalizations on human behaviour are problematic; the
intellectually curious may read the same authors’ article in Behavioral and Brain Sciences (2010).
G. Hofstede, 1997, Cultures and Organizations, New York: McGraw-Hill introduces and explains
Hofstede’s five dimensions of culture and their implications for business.
J. Hooker, 2003, Working Across Cultures, Stanford: Stanford University Press Explores and explains the
multifaceted phenomenon of culture and its implications for businesspersons.
R. House, P. Hanges, M. Javidan, P. Dorfman & V. Gupta, eds, 2004, Culture, Leadership, and
Organizations: The GLOBE Study of 62 Societies, Thousand Oaks, CA: Sage. a very comprehensive
study developing new constructs to measure cultural variations with focus on leadership styles.
E. Meyer, 2015, The Culture Map: Breaking Through the Invisible Boundaries of Global Business, New
York: Public Affairs Develops a novel framework to explain national differences in the inner workings
of business organizations
T. Khanna, 2014, Contextual Intelligence. HBR, 95 (September): 58-66 a concise statement as to what is
needed be a successful manager in a culturally diverse world.
G. Stahl & R. Tung, 2015, Towards a more balanced treatment of culture in international business, JIBS, 391
414 Critically evaluates scholarship on cultural differences in international business, highlighting the
potential positive effects and cultural diversity
Note: I found the Boyacigiller et al. book a very useful resource for teachers thinking of
creative new ways to engage students in exercise through which they can learn to appreciate
and manage cultural diversity.

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