Exploring the influence of national values

The internationalization of small and medium-sized businesses typically involves negotiation, agreement and exchange between business leaders from different national cultural values and traditions. Explores whether, and how, national values affect the strategic aims of business leaders, the content of their strategic deliberations, and the processes they follow to develop those ways of thinking into enacted strategies. The two business leaders studied were operating within the Standard Industrial Code 33.20/1, developing and combining electronic hardware and software technologies to address the needs of industrial customers world-wide, but were from countries with different national values. The aims of the business leaders, and the processes they used to develop strategies differed, in ways which reflected their national backgrounds. The contents of the strategic issues they considered, however, were more similar, largely reflecting industry norms and demands, in these cases expressed on a global scale. Introduction Linkages with firms in other countries, possibly through networks of business relationships, help small and medium-sized businesses which are addressing international markets to overcome hurdles of market and cultural differences (Axelsson and Easton, 1992; Buckley and Casson, 1997; Child et al., 1997; Johanson and Mattsson, 1992). In comparison with larger firms, however, the implications of internationalization and of the development of these linkages for management processes within smaller businesses have received little attention. The more important the international linkages between firms, the more that strategy formation involves negotiation, agreement and exchange between business leaders from different national cultural values and traditions. Such international business strategy formation requires effective interaction between individuals from different national backgrounds, each with their own aims and goals, over complex issues. The high quality interaction needed to generate appropriate levels of trust requires shared language, beliefs and understandings (Ghauri and Usunier, 1996; Griffin, 1967; Powell, 1996; The research register for this journal is available at http://www.mcbup.com/research_registers/mkt.asp The current issue and full text archive of this journal is available at http://www.emerald-library.com This research was supported by UK-Dutch Joint Scientific Research Grant JRP324 from the British Council and the NWO. File nameg:/EJM (Q)/2000_Vol_34/1_2/Harris/Harris.3d 12:40 ± 14/1/00 ± Total page(s) 17 Strategy formation by business leaders 127 Worchel, 1979). Successful cross-border alliances, for example, require fundamental behavioural and cognitive learning, and the formation of appropriate trust, power, co-operation and social relationships on an international scale (Doz, 1996; Grabher, 1993; Hakansson, 1987). This strategy formation process is increasingly seen as the interplay and adaptation of individual `̀ perceptions'', `̀ cognitions'', or `̀ ways of thinking'' through `̀ argumentation'' within an industry environment, an organisational setting, or an informal international network (Calori et al., 1992; Eden, 1992; Hellegren and Melin, 1993; Sillince, 1995). From an in-depth longitudinal study of business leaders, Hellgren and Melin (1993, p. 66) conclude: Whether [strategic] change is initiated or not is a matter of the degree of similarity (or difference) between a top leader's way-of-thinking and the dominating opinions and values expressed in other cognitively loaded spheres of importance. . .(Hellgren and Melin, 1993). Ways of thinking appear to be stable over time and impervious to pressure or change. They influence both the purposes and content of strategic discussion, and the backdrop against which argumentation with others takes place. Influences on strategic thinking Hellgren and Melin found the main `̀ spheres of influence'' affecting business leaders' ways of thinking to be their individual personalities, their core beliefs, and their early industrial experiences. Other influences are also associated with strategic perceptions (Sims and Gioia, 1986; Huff, 1990; Reger and Huff, 1993; Eden, 1992; Ghauri and Prasad, 1995). These include the organisational culture (Johnson, 1987; Daniels et al., 1994), functional experience (Bowman and Daniels, 1995), and professional background (Hodgkinson and Johnson, 1994). Membership of an industry or of a competitive group, however, has consistently been identified by strategic cognitions research as a strong influence on individual perceptions (Huff, 1982; Porac et al., 1989), by presenting an `̀ industrial wisdom'' or `̀ industry recipe'' (Gordon, 1991; Hellgren et al., 1993; Spender, 1989). In industries with global competition, technical standards, and technologies, assumptions with regard to practices of management, and therefore about strategy formation, might be shared wordwide. Helped by the use of English as a global technical language, and the `̀ normative strategy'' approach disseminated by business schools, it has been argued that managerial cultures and perceptual bases in international sectors are becoming increasingly alike (Burrell and Morgan, 1979; Cohen, 1988; Lammers and Hickson, 1979; Lammers, 1990). Two studies, by accident, have found national values influencing strategy formation. In an examination of managers' perceptions within France and the UK, Calori et al. (1992) found industry, organisational and national influences to be significant. They note: This research did not set out avowedly as a study in comparative management from a cultural point of view [. . .] It is therefore the more interesting to note that, even given the File nameg:/EJM (Q)/2000_Vol_34/1_2/Harris/Harris.3d 12:40 ± 14/1/00 ± Total page(s) 17 European Journal of Marketing 34,1/2 128 individual manager as the unit of analysis, systematic differences between French and British managers are found: and these differences bear out many of the observations of researchers in comparative management. . . (Calori et al., 1992, p. 72). Hofstede et al. (1990, p. 301) studied organisational culture and behaviour in two culturally close nations and noted: all in all, having gone out to study organisational value differences and having done this in two countries for reasons of convenience, we seem to have mainly caught national value differences. Strategic management research has paid little attention, however, to the potential influence of national, rather than industry background on strategic management processes, even though strategic cognition's research indicates that it could be an equivalent influence as industry background, as hypothesised diagrammatically in Figure 1. The potential influence of national values on strategy formation `̀ Artefacts and norms'' have been distinguished from more fundamental shared `̀ values and basic assumptions'' in societies (Hofstede, 1980; Lundberg, 1985; Schein, 1985). Artefacts and norms include behaviours (such as rituals) and observable tangible manifestations such as business practices (Lundberg, 1985; Hofstede 1991). These may respond to new environmental and organisational contexts, strategies and interventions, and may be learned at the workplace (Schein, 1985; Isabella, 1990). Business practices may therefore be influenced by dominating ways of thinking in individuals' environments, such as industry norms and `̀ recipes'', professional practices, and organizational traditions. By contrast, values and basic assumptions, normally unconsciously, govern how realities are perceived and how behaviour is assessed. They lie at the core of behaviour. As Hofstede et al. (1990, p. 291) note: The core of culture . . . is formed by values, in the sense of broad, non-specific feelings of good and evil, beautiful and ugly, normal and abnormal, rational and irrational ± feelings that are often unconscious and rarely discussible, that can't be observed as such but are manifested in alternatives of behaviour. These values originate from individuals' learning during their earliest years, and the physical, social, and emotional environment within which it takes place Figure 1. Influences on business leaders' `̀ ways of thinking'' File nameg:/EJM (Q)/2000_Vol_34/1_2/Harris/Harris.3d 12:40 ± 14/1/00 ± Total page(s) 17 Strategy formation by business leaders 129 (Lundberg, 1985). Unlike norms and artefacts, these underlying beliefs and values, the `̀ software of their minds'' are resistant to change (Schein, 1985). They have been found to differ between nations, and to be stable within nations (Hofstede, 1980, 1991). Business leaders of different national backgrounds can be expected to hold different underpinning values, different assumptions regarding the environment, and different expectations about relationships among people (Schein, 1985). How, in detail, these different values will influence strategy formation depends on the values of the individuals involved. Overall, however, national values might be expected to influence three aspects of their strategic management processes: their strategic aims, the content of their strategic deliberations, and their strategic processes. These are considered in turn. Strategic management has long been seen as a process which sets the direction of the business to meet the underlying expectations or purposes of stakeholders, which might be expressed as visions or goals. The individual business leader may be viewed as the primary stakeholder in entrepreneurial organizations, though such a leader may regard others as stakeholders as well, depending on his or her beliefs and expectations about relationships with others in society. The purposes pursued will reflect values in life itself, whether concerned with, for example, wealth, love and friendship, or religious values. The first aim of the study, therefore, is to explore how national values of business leaders may influence the overall aims business leaders have for their businesses. Strategic management thinking involves the consideration of issues which the individuals involved have not only become aware of, but also consider to be important for the future of their businesses. Different groups have been shown by cognitions research to consider different issues in their strategy formation processes. Different values about what is of worth in life and what is not, and different assumptions regarding the environment, may be expected to result in a different range of issues when considering strategies, and to influence what business leaders believe is important and unimportant to consider. The second aim of this study is to explore how national values of business leaders may influence the content of their strategic deliberations. Strategic management research has shown different processes which may be used by individuals and organizations to formulate strategies, for example, rational analysis by individuals, and political negotiation between interest groups. Different individuals can be involved in the strategy formation process, different roles may be played by individuals, and those involved may hold different models or paradigms when considering and discussing strategic issues. Different expectations about relationships among people in different nations may be expected, therefore, to influence what is believed to be the appropriate process for forming strategies, for example, who might and might not be involved in the strategy formation process, and how. The third aim of this study is to explore how value differences between nations may affect the processes by which these business leaders develop strategies, in particular, whom they involve in them and how they involve others in them. File nameg:/EJM (Q)/2000_Vol_34/1_2/Harris/Harris.3d 12:40 ± 14/1/00 ± Total page(s) 17 European Journal of Marketing 34,1/2 130 Research methodology As this study is exploratory, in-depth case examination and analysis of relevant comparable business leaders were considered to be the best way to enable development hypotheses, and refinement of conceptual linkages which might be then subject to empirical testing. Indicative in-depth case study research provides `̀ a means of generalising about processes managers get involved in'' (Watson, 1994, p. 7), where generalization comes from the theoretical developments enabled by the study (Yin, 1994). Data collection Data were gathered by means of structured interviews of two founders and chief executives of medium-sized businesses, one Dutch (NL) and one Scottish (SC). A significant problem in research in larger businesses is identifying and accessing strategic actors (Pettigrew, 1985), but this is avoided in studying entrepreneurial leaders. Organisational culture has been found to be a major influence on managers' thinking processes (Hofstede et al., 1990; Johnson, 1987; Daniels et al., 1994), but this is also directly linked to the underlying beliefs and values of the founder (Hofstede et al., 1990). The interviewees were considered to be the prime architects of the strategies, the organisation, and the culture of their respective businesses. In order to distinguish between the influences of national values, the focus of this study, and industry influences (Figure 1), the businesses selected operate in industry sub-segments which, though different, are technologically and globally determined. Both are within the Standard Industrial Code 33.20/1, developing and combining electronic hardware and software technologies to address the needs of industrial customers world-wide, with a small proportion of their sales in their own national markets. The use of directed questions derived from strategy theory, as employed by Schneider and de Meyer (1991), would preclude access to underlying beliefs and perceptions. Instead, the interviews followed Calori et al. (1992; 1994), in using in-depth conversations based around non-directive questions to access the interviewees underlying considerations and beliefs, and uncover influences of a consistent national nature. To avoid, as much as possible, the researcher's own a priori hypotheses, framed within a particular culture, influencing the data, the interview structure attempted to access the interviewees' own `̀ native categories'' of data by enabling the respondents to express their own underlying beliefs (Buckley and Chapman, 1997). To do this, no prompts were used to pursue issues not raised by the interviewee, and no clue was given as to the areas of interest of the interviewer (Strauss and Corbin, 1991). The danger of misunderstandings from different interpretations of complex ideas in different national settings was minimised by the use of straightforward, everyday language. The overt focus for the discussion was `̀ the future of the business''. The words `̀ strategy'', `̀ strategic'', and other management jargon were never used by the interviewer. Interviews were conducted in English at the interviewees' business premises, and they were tape recorded and transcribed. A reassurance of full confidentiality was given with each interview. File nameg:/EJM (Q)/2000_Vol_34/1_2/Harris/Harris.3d 12:40 ± 14/1/00 ± Total page(s) 17 Strategy formation by business leaders 131 To enable comparison, a strict interview regimen was followed in which the interviewee addressed the same questions in the same order, diverting from this regimen only to obtain clarification or explanation of an issue raised by the interviewee. Any perceived pressure to rationalise responses was reduced by an explicit declaration that reasons for perceptions or processes would not be explored (Ericsson and Simon, 1985). To assess the interviewee's frame of reference more accurately, the study used four criteria: spontaneity, priority, length of discussion on theme, and explicit mention of importance to record the importance of each answer from the perspective of the interviewee (Calori et al., 1992). Data analysis Protocol analysis was used as a means of analysing the transcribed interviews of the two case companies (Ericsson and Simon, 1985). Previous research by Hofstede (1980, 1991) has differentiated between national values in a large number of countries, based on socio-psychological research among IBM employees. Table I shows Hofstede's five discriminating criteria of culture, and the index values and world ranks (from Hofstede's study of 44 countries) for the UK and The Netherlands. Though subject to some criticism (Tayeb, 1988; Whitley, 1992), this research provides the most widely used basis for standardised examination of national values, and has received substantial corroboration (Sondergaard, 1994). From it, criteria can be drawn for evaluating the transcribed data. In the `̀ power distance'' and `̀ individualism/collectivism'' criteria, individuals in the two nations appear to share similar values, and in `̀ uncertainty avoidance''; while the UK welcome of uncertainty is not fully shared in The Netherlands, the differences are not great. Individuals in The Netherlands, however, show one of the strongest orientations, worldwide, to values consistent with what Hofstede (1980, 1991) calls a `̀ feminine'' society, whereas individuals in the UK show strong values associated with `̀ masculine'' societies. The masculinity and femininity dimension is a label which encompasses a range of social and interpersonal interactions and values. In `̀ feminine'' societies, people are expected to be concerned with people and relationships, and work for life in its widest sense, whereas in `̀ masculine'' societies, value is The Netherlands The UK Dimension of values Index score Rank Index score Rank Masculinity/feminity 14 51 66 9/10 Uncertainty avoidance 53 35 35 47/48 Power distance 38 40 35 42/44 Individualism/collectivism 80 4/5 89 3 Long-term/short-term (study of 22 countries 44 10 25 18 Table I. Index scores and values ascribed by Hofstede (1991) to The Netherlands and the UK File nameg:/EJM (Q)/2000_Vol_34/1_2/Harris/Harris.3d 12:40 ± 14/1/00 ± Total page(s) 17 European Journal of Marketing 34,1/2 132 placed on ambition, performance, and achievement, specifically of money and things. Business leaders in `̀ masculine'' nations might be expected to be goal focused, and seek material success. Feminine societies emphasise equality between people and consensus through negotiation and compromise. This can be expected to lead to more participative and inclusive strategy formation processes than in `̀ masculine'' societies, where managers are expected to be decisive, assertive, ambitious and tough. They are also more likely to reflect broader and more intuitive approaches than in `̀ masculine'' societies, where decisive `̀ logical'' approaches, perhaps akin to the `̀ normative'' strategy model, may be more favoured. The short-term and long-term orientation dimension was discovered in later work by researchers working with managers in South East Asia. The data set includes few data for European countries. The Netherlands, however, displayed the longest-term orientation within Europe (though not worldwide), whereas the UK displayed the most `̀ short-term'' values within Europe, and one of the most short term of orientations world-wide. An outcome focus and the speedy achievement of wealth would be the `̀ shorter-term'' orientation, this achieved through radical change, requiring external finance and, if possible, the securing of good deals with other businesses. `̀ Longer-term'' goals reflect a desire for personal growth in its broadest sense, the fostering of valuable relationships, and an aversion to radical change. Business development reflects patience, and is through the gradual and steady acquisition of internal skills, capabilities and resources. The different values found by Hofstede (1980, 1991) might therefore be expected to lead to differences in the strategic aims, strategic content and strategy formation processes of the two business leaders. Hypotheses can be derived from Hofstede's research summarised above, concerning the strategic aims of business leaders, the content of their strategy deliberations, and their strategy formation processes, and these are presented in Table II. These can be viewed as `̀ national typologies'' for the two nations, and become the criteria used to analyse the data and explore each of the three research questions within the businesses examined. Findings Overall, the Dutch business leader (NL) yielded data on nine of the 12 evaluative criteria shown in Table II, six corresponding to the `̀ Dutch'' typology, one to the `̀ UK'' typology, and three to both typologies. The Scottish business leader (SC) yielded data on ten criteria, six corresponding to the UK typology, and four to both typologies. Correspondence between the national typologies, however, differed between the aims, the content, and the processes of strategy. Strategic aims SC first emphasised his goals and aspirations for the business, and these were directly and explicitly related to his own ambitions for himself (Table III). File nameg:/EJM (Q)/2000_Vol_34/1_2/Harris/Harris.3d 12:40 ± 14/1/00 ± Total page(s) 17 Strategy formation by business leaders