Cultural Values and International Differences in Business Ethics - Literature review Example

A Critique of an Academic Research Article on Business Management By Scholtens B & Dam L (2007) Cultural Values and International Differences in Business Ethics. Journal of Business Ethics, 75(3): 273-284. Relevance of the research Ethics is a very important consideration for most people when they have to take decisions on long term associations in personal and business lives. In the current global business scenario, a business professional has to deal with many companies headquartered in different countries and cultures. The article by Scholtens and Dam (2007) seems relevant because a study of how the business ethics codes are related to the culture of the native country will help us understand and accept the behaviour of business professionals from other cultures and also adjust our response to foster better relationship. Summary The paper “Cultural Values and International Differences in Business Ethics” by Scholtens and Dam provides a limited and preliminary analysis of the ethical policies of industries in different countries in relation to the cultural differences prevailing between countries. The analysis, covering around 2700 firms in 24 countries, suggests significant country specific variations in ethical policies. As for the dependence of country culture in the shaping of ethical policies, some pattern does seem to emerge. The analysis indicates that the cultural dimensions of individualism and uncertainty avoidance tend to impact a firm’s ethical policies positively. Masculinity and power distance on the other hand, seem to have a negative effect on the shaping of ethical policies (pp.273, 276). Research questions The research questions are, firstly, whether there are any significant differences in the ethical policies between industries belonging to different countries, and secondly, how the ethical policies are related to typical cultural values in a country. The underlying reasons for some countries consistently outperforming many other countries all over the world may be inherent in their cultures. This analysis is aimed at exploring the existence of such associations and the extent of their impact. Review of literature and theories The analysis does not use any questionnaire but uses other sources which have compiled data using questionnaire and survey techniques. It builds on the findings of Langlois and Schlegelmilch (1990), Hood and Logsdon (2002), Kaptein (2004), and Singh et al. (2005). The analysis also uses Hofstede’s (1980,1991) dimensions of culture. The authors feel that this paper may be the first to do quantitative analysis of the relationship between culture and business ethics (Scholtens and Dam, p.279). Data gathered on the basis of questionnaire and survey of firms in various areas by Ethical Investment Research Service (EIRIS) is used to derive data on codes of ethics. Five items identified for codes of ethics are: 1) governance of bribery and corruption; 2) Systems of codes of ethics: 3) Implementation of the codes of ethics; 4) Communication of the codes of ethics; 5) Human rights policy (p. 281). The scores for how each firm complies with these requirements is given on a scale of -3 for the worst to +3 for the best with scores of -2, -1, 0, +1, and +2 for intermediate performances. This provides the basic quantification for ethical dimensions. The cultural dimensions are represented by Power distance (PDI), Individualism (IDV), Masculinity (MAS) and Uncertainty Avoidance (UAI) (p. 276). Power distance indicates the extent of inequality in society (the rich-poor divide). Individualism is a measure of how much a country leaves it to the individuals to fend for themselves without any help from society or government. Masculinity is an indicator of the extent to which assertive behaviour is accepted and tolerated. Uncertainty avoidance is the extent to which the members feel threatened by uncertain or unknown situations. These are the cultural indicators defined by Hofstede (1980). The numerical values forming part of Hofstede’s survey data on values of people working in the subsidiaries of IBM in 50 countries were taken as rough estimates to represent the culture scores of different countries (pp. 275-276). Evaluation of arguments and evidences In the first part, the country average score and overall average score for all the countries are computed for each ethical dimension. If there are no country specific influences, the country averages will not be significantly different from the overall averages and will remain within statistical errors. To check whether this is indeed the case, the authors use ANOVA (Analysis of Variance) to test the null hypothesis (H0) that all population means are identical. As indicated by the probabilities for the F-statistic at a confidence level of 1%, there are significant variations for all the ethical dimensions across different countries. Therefore the null hypothesis has to be rejected (p. 278). In the second part, the authors start by using a linear mathematical model to represent the relationship between ethical dimension and cultural dimensions. Each ethical dimension (dependent variable) is represented as a linear combination of the cultural dimensions (independent variables) defined above. Regression analysis is used to estimate the values for the constants and coefficients in the equation. The results, according to the authors, indicate that the mathematical model adequately captures the relationships between ethical policies and culture. It is seen that masculinity and power distance have negative impact on the importance given for ethics, whereas individuality and uncertainty avoidance have positive impact on ethics. Scholtens and Dam conclude that the location of a firm’s headquarters has a significant influence on its performance in communication, implementation and installation of the systems of the code of ethics, its governance of bribery and corruption and its human rights policies. Firms in US, Australia and Scandinavia perform much better than the average, whereas those from Luxemburg, Singapore and Hong Kong perform relatively poor. The authors also caution that only ethical policies have been discussed. The actual ethical performance may be very much different. Contribution to knowledge and management practice The analysis largely pertains to how industries behaved in the past. How far the results are valid to describe future trends is questionable. This is especially so considering the tremendous changes in global business scenario in the last ten years. With the use of internet communication technology, geographical borders are becoming insignificant. Most businesses are compelled to work 24x7 to cater to customers in global markets. Dispersed teams, virtual meetings and rotating shifts have changed the nature of interactions between team members and managers. The net result is that the present day businesses have evolved distinct corporate cultures which may not reflect the essence of any regional or ethnic culture. Actually, modern managements consciously endeavour to cultivate values in line with its policies and objectives, as a strategic move. In the current economic scenario, any multinational company has to employ people from various, vastly differing cultures. The attitudes of the individual employees may actually depend on the culture and value system within which they have been brought up. Interpretation of instructions and the extent to which they are complied with will largely depend on the employee’s cultural personality. But the company must be able to integrate the work force from various cultural backgrounds into the mainstream of its corporate culture. The company has to make conscious efforts to ensure that its corporate values and ethics are communicated to all levels and sufficient training is imparted. As the authors themselves admit, the data used for the cultural parameters is more than 30 years old. At best the results can only be taken as a rough indication that some relationship does exist between culture of a country and the business ethics followed by industries in that country. However, the fact that there are significant differences in the practice of business ethics by industries in different countries has been clearly brought out. So it appears that country specific factors do influence the practice of good business ethics. But the analysis is not able to establish that culture is most significant factor of the country specific influences. More extensive research is required to identify the components of country specific influences like education, health care, social security, political will and colonial rule. The paper has not made any reference to the possibility of various other factors likely to influence the ethical dimensions. The analysis of individual cultures in relation to business may be more relevant from an entirely different perspective. Since the present day businesses have customers spread all over the world, they have to interact with people from different cultures. It is necessary to build long term associations based on trust and mutual co-operation. In this context, understanding how the culture of a country influences the ethical conduct of its citizens may be worthy of consideration. It must also be noted that culture, in the current context is highly dynamic, and not evolving gradually as assumed by the authors. The authors have managed to use available data effectively and applied statistical tools logically to arrive at the conclusions. However, the analysis itself is out of step with the requirements of businesses in the current context. The analysis certainly helps to gain an understanding of various influences affecting business ethics. It also introduces quantitative tools for analysis. These techniques can form the basis for extensive research to understand consumer behaviour and consumer preferences and help businesses to formulate strategies to meet customer aspirations. References Scholtens B & Dam L (2007) Cultural Values and International Differences in Business Ethics. Journal of Business Ethics, 75(3): 273-284. Read More