A KEY DETERMINANT IN INTERNATIONAL CORPORATE STRATEGY FORMULATION
-: Ethnocentrism :-
Organizational Behaviour in Global Work Culture
Abstract
In sociology and psychology, the concept
of "ethnocentrism" is widely used to explain human behavior in and
between different cultural entities. Since international management can be
characterized by high levels of interaction between individuals from diverse
cultures, we think ethnocentrism is worth being considered a determinant in
this field. Especially, individual ethnocentrism might shape and influence the
relation between international companies, their strategy formulation and
different stakeholder groups.
This workshop paper targets the conceptual
identification of different areas of corporate strategy formulation which are
assumed to be influenced by varying levels of ethnocentrism. A brief review
focuses on the theoretical underpinnings of ethnocentrism and possibilities for
measuring the construct. Finally, a research design is developed which will be
used to determine the influence of manager ethnocentrism on corporate strategy
formulation.
Introduction
The globalization of business [Levitt,
1983] leads to exposure of managers on almost every organizational level to
other national cultures [Bartlett, Ghoshal, 1992]. Individual sentiments
towards other cultures might influence the manager or management as a whole in
terms of certain cross-cultural decisions. In other words, the level of
ethnocentrism might determine how companies act in certain countries. On the
other hand, the prevailing ethnocentrism in a country might influence the
foreign strategy formulation.
The term ethnocentrism refers to a
traditional concept in social sciences. It has been widely used in psychology
and sociology to investigate ingroup vs. outgroup conflicts and segregation
between members of different cultural entities. Except for ethnocentrism
research in consumer behavior, however, this basic concept has not yet been
applied to international management research.
The relevance of the
ethnocentrism concept in various fields of international corporate management
is obvious when considering social interactions. There is a necessity for
highly efficient social exchange
relations between individuals and/or groups in cross-border management
processes. If we have to cooperate or negotiate with people from another
culture and if we are to act as advisers, superiors or partners, what we need
to know is what makes our counterparts tick. One important aspect of individual
behavior and, as a consequence, group behavior in organizations is the
prevailing level of ethnocentrism.
Depending on the level of ethnocentrism
within several stakeholder groups, international corporations will have to
develop specific business strategies. Possibly the concept of ethnocentrism is
also appropriate for the assessment of specific foreign market conditions and
can contribute to the standardization of single corporate strategies on a
global basis.
The current relevance of the ethnocentrism
problem can be clearly seen when looking at the emerging nationalistic and
xenophobic sentiments in many countries and regions of the world. This process
is especially true for the formerly centrally-governed countries of eastern
Europe. For this reason, it seems advisable to integrate ethnocentrism in the
international corporate strategy development process.
The Ethnocentrism Concept
The term "ethnocentrism" stems
from a more general concept developed by Sumner [1906]. In the beginning,
ethnocentrism was a purely sociological construct, describing ingroup vs.
outgroup conflicts. Sumner defines ethnocentrism as: "[The] view of things
in which one´s group is the center of everything, and others are scaled and
rated with reference to it. Each group nourishes its own pride and vanity,
boasts itself superior, exalts its own divinities and looks with contempt on
outsiders." [Sumner, 1906].
Later studies dealt with ethnocentrism as
a psychological construct, describing the tendency of an individual to identify
strongly with her own ingroup and culture, the tendency to reject outgroups or
the tendency to view any economic, political, or social event only from the
point of the ingroup. Psychologist Donald Campbell and his associates [Brewer
& Campbell, 1976; Campbell & LeVine, 1968] have shown that all people
have tendencies to
•
define what goes on in their own cultures as
"natural" and "correct" and what goes on in other cultures
as "unnatural" and incorrect";
•
perceive in-group customs as universally valid;
that is, what is good for us is good for everybody;
•
think that in-group norms, roles, and values are
obviously correct;
•
believe that it is natural to help and cooperate
with members of one´s ingroup;
•
act in ways that favor the in-group;
•
feel proud of the in-group; and • feel
hostility toward out-groups.
Lately, much emphasis has been placed on
the investigation of "consumer ethnocentrism," the first attempt to
transfer and use the socio-psychological concept of ethnocentrism in a business
context. Based on the individual point of view of supporting the domestic
economy by favoring domestic products over foreign products, consumer
ethnocentrism expresses the wish to contribute to economic growth, and thus the
domestic political, social, and economic welfare. Shimp, Sharma, Shin [1992,
p.5] state the characteristics of consumer ethnocentrism as follows:
•
Consumer ethnocentrism results from the love and
concern for one´s own country and the fear of losing control of one´s economic
interests as the result of the harmful effects that imports may have on oneself
and countrymen.
•
It contains the intention or willingness not to
purchase foreign products. For ethnocentric consumers, buying foreign products
is not only an economic issue but also a moral problem. This moral aspect
causes consumers to purchase domestic products even though, in extreme cases,
the quality is below that of imports. Not buying foreign imports is good,
appropriate, desirable, and patriotic; buying them is bad, inappropriate,
undesirable, and irresponsible.
•
It refers to a personal level of prejudices
against imports, although it may be assumed that the overall level of consumer
ethnocentricity in a social system is the aggregation of individual tendencies.
Up to now consumer ethnocentrism is the
only extension of the general ethnocentrism concept. The focus is on patterns
of attitudes that might hamper the internationalization or globalization of
companies from a consumer´s point of view. We think that, in order to capture
the full frame of restrictions which determine globalization and internationalization
strategies of businesses, other special ethnocentrism concepts should be
investigated.
As with the consumer ethnocentrism
concept, it should be possible to develop specific concepts of ethnocentrism
for different stakeholders of a company. Using such specific ethnocentrism
concepts, more refined insights for strategy formulation in international
business may be gained.
Supposed Impact of Ethnocentrism on Strategy
Formulation
Taking the general stakeholder concept
(see Figure 1) as a basis for an analysis, it becomes clear that corporate
strategies are influenced by numerous different interest groups and/or
different strategies are adapted to distinct groups. In the context of
international corporate management, it can be assumed that exchange relations
between these corporations and specific stakeholder groups are - besides other
factors characterized by the corporation-wide ethnocentrism and ethnocentrism
of stakeholders in different target countries.
Figure 1: Stakeholder concept [see Ward, 1992, p.5]
Many comments on the importance of
cultural aspects in international companies´ strategies can be found in
management literature. Adler [1991, p.19] for example differentiates cultures
according to the following basic dimensions:
•
people´s qualities as individuals (Who am I?)
•
their relationship to nature and the world (How
do I see the world?)
•
their relationship to other people (How do I
relate to other people?)
•
their primary type of activity (What do I do?)
•
their orientations in space and time (How do I
use space and time?).
The core focus of all these cultural
aspects is inward oriented, which means intracultural aspects are in the
forefront of the analysis. This implies that cultural determinants regulate how
people interact within a cultural entity, and which common moral concepts,
norms, ideal behavior, etc. prevail. Attitudes concerning the relationship
between nations are not included herein, but from our point of view, these
determinants are of special significance to international corporate management.
Ethnocentrism is a concept which reflects such intercultural relations;
therefore, it seems appropriate to investigate the relevance of this phenomenon
in international business.
The research results in the area of
consumer ethnocentrism [Shimp, Sharma, Shin, 1987; Netemeyer, Durvasula,
Lichtenstein, 1991; Hadjimarcou, Hu, Bruning, 1993] suggest that it is necessary
to develop differentiated measurement concepts of this sociopsychological
phenomenon for each stakeholder group of an international corporation.
Applying the frame of the stakeholder
concept in Figure 1, it becomes clear that different patterns of business
strategy formulation arise from more or less important ethnocentric attitudes
within a single group. Strong xenophobic attitudes of people working in
governmental institutions may result in distortion of competition between
foreign and local businessmen or companies, and even discrimination against
foreign firms might occur. In this case, cooperation with local partners is
advisable, as well as selective lobbying against ethnocentric attitudes of
persons working in governmental institutions. Also, little emphasis should be
put on foreign origin of the firm. If firms, however, face obvious
ethnocentrism in the public at large, this might lead to image problems, or
opposition concerning general management tasks (e.g., getting approval to build
a plant). Company strategies against general negative sentiments could be
specifically tailored public relations activities, like setting up good
contacts with the press, sport and social sponsoring, etc.
The picture concerning local shareholders
or prospective investors might be completely different. If there is no
noticeable ethnocentrism, foreign companies should use their international
reputation as a key feature when approaching this target group. In cases where
they face high ethnocentrism in the financial market, it might be necessary to
use funds from abroad or foreign investment institutions. Similar
recommendations might be made with respect to different local debtholders.
Local suppliers may also be influenced by
different levels of ethnocentrism and therefore act differently towards local
or international customers. International companies could be forced to change
their sourcing strategies and adapt them to specific cultural conditions.
Well researched is the
area of consumer ethnocentrism, established by Shimp etal. [1987, 1992]. Their
findings indicate that high levels of consumer ethnocentrism are negatively
related to consumers´ attitudes towards foreign products. This means that with
higher levels of consumer ethnocentricity tendencies, consumers´ willingness to
purchase foreign manufactured products decreases. The findings provide
marketing managers with a useful concept for understanding consumer decision
making as it relates to buying domestic versus imported products, and
especially why certain segments of consumers prefer domestic goods while others
do not care about the distinction between domestic and imported products
[Sharma, 1992, p. 20]. For corporations this provides several strategic and
tactical options. For instance, regional marketing and geographic segmentation
may be based on ethnocentrism levels of consumers. Furthermore, international
corporations can build location decisions or product development and
advertising decisions on ethnocentric tendencies.
According to the consumer ethnocentrism
research literature, it is possible to transfer the ethnocentrism concept to
other stakeholder groups. The ethnocentrism concept seems to be of particular
importance for managers and employees as stakeholders.
A high level of ethnocentrism among
employees may force companies to hire domestic rather than foreign workforce,
irrespective of qualification criterions. Problems of acceptance may arise when
already-hired, highly ethnocentric personnel are confronted with foreign
working routines of coworkers. In the same way, the interaction and acceptance
of foreign foremen or coworkers might be strongly influenced by the given
ethnocentrism of employees. Thus, companies might be forced to develop specific
recruiting practices or training programs in order to cope with ethnocentrism.
On the management levels, ethnocentrism of
local personnel could shape the interaction between local subsidiaries and
headquarters or influence the local acceptance of management techniques brought
in from abroad. As with the recruiting process for workers, ethnocentrism might
bias the recruiting of managerial personnel. Depending on the given level of
ethnocentrism in the management, international companies would have to adapt
their hiring strategies and the respective management training programs.
The hypothesized situations mentioned above are plausible, but
have to be validated by an empirical examination of the real importance of
ethnocentric sentiments.
How to Measure Ethnocentrism
Ethnocentrism is a socio-psychological
concept which could be assessed like attitudes. It is a theoretical construct,
unobservable in a direct manner, and thus has to be measured by
socio-psychological instruments. Our proposition would be an operationalization
via questionnaire technique. Following Churchill´s [1979] paradigm for
developing marketing constructs, the proposed procedure includes:
•
specification of the ethnocentrism construct and
generation of a sample of items, measuring the construct;
•
data collection and construction of scales for
the different concepts of ethnocentrism along the stakeholder concept, using
exploratory factor analysis and reliability tests;
•
several steps of purification (assessment of
reliability and validity of the measurement instrument) using confirmatory
factor analysis.
Figure 2: Paradigm for developing ethnocentrism constructs
[see Churchill, 1979]
To develop a scale that measures manager
ethnocentrism, we must start the process by looking at earlier research on
patriotism and antisemitism [Adorno et al., 1950] as well as consumer
ethnocentrism [Shimp et al., 1991; Netemeyer et al., 1991]. In order to capture
the domain of the construct correctly, it will be necessary to perform an
exploratory qualitative analysis. This means asking managers of multinational
corporations to answer statements of the following type:
•
Please describe your views on being part of a
foreign company.
•
What do you think about working for a
multinational corporation?
•
How do you feel about working together with
foreign managers?
•
How would you feel if your supervisor blew his
nose in public? (Country specific)
•
How would you react to your supervisor´s
accusation of being a drunkard, because you had a beer for lunch?
•
You are forced to participate in time-consuming
brainstorming activities, although you already provided extensive discussion
material. Your reaction?
The respondents´ statements may be used to
form qualitative categories of different mental predispositions towards
international corporations and their managemental environment. The categories
can be used to generate specific items related to, for example, manager
ethnocentrism. Together with more general ethnocentrism items by Adorno et al.
and Shimp/Sharma these items could then be merged into a new Likert-style
questionnaire.
Items for capturing manager ethnocentrism
could be:
•
I would rather work in a local company but don´t
really have a choice.
•
I find it hard to adapt to the Japanese
management style.
•
Working in an international corporation is okay,
but I would not like to be forced to work abroad. • Working in an international
corporation with only foreign colleagues would be too tough for me.
•
I dislike the management style of corporations
which just do not care about local habits and culture and think money can buy
everything.
Data should be collected from selected
managers working in international corporations. The next step includes
exploratory factor analysis to identify relevant measures for manager
ethnocentrism. Confirmatory factor analysis, as suggested by Anderson and Garbing
[1988], can also be used to assess one-dimensionality of the construct.
In a similar way this procedure could be
used in connection with other stakeholder groups. By finding empirically valid
measures for ethnocentrism in different stakeholder groups, it will be possible
to assess the actual importance of the consideration of ethnocentrism in
corporate management and international strategy formulation. In a final step of
research, the significance of the ethnocentrism concept could be transferred to
interorganizational processes and behaviors.
Intended Research Design
The purpose of this research project is
the development of measurement instruments for ethnocentrism in specific
stakeholder groups. Analogous to the recent research endeavors in consumer
ethnocentrism, our first aim is to develop reliable and valid scales for the
"manager ethnocentrism" construct. We then build a first conceptual
model, as shown below.
Figure 3: Conceptual model for nomological validation of
manager ethnocentrism construct
This model helps us to nomological
validate our manager ethnocentrism scale. It is evident that manager
ethnocentrism is highly correlated with antecedents such as openness to foreign
cultures, patriotism, dogmatism, etc. (see Figure 3). On the other hand,
manager ethnocentrism is hypothesized to influence the efficiency of subsidiary
headquarter communications, willingness to work in an international, centrally
governed business, mobility, and acceptance of foreign management techniques.
The relationships shown in Figure 3 can be transformed into
research hypothesessuch as those listed below. These might be
tested empirically within the different stakeholder groups of a corporation, in
order to determine their relevance for international business
.
H1: Managers who are familiar with and
open to foreign cultures will show fewer (manager) ethnocentric tendencies than
those who are not.
H2: Patriotic managers will show
stronger ethnocentric tendencies than less patriotic individuals.
H3: Conservative individuals will show
more ethnocentric tendencies than less conservative managers.
H4: People with collectivistic goals
will reveal more intensive ethnocentric tendencies than those with
individualistic goals.
H5: The acceptance of foreign management
techniques will increase with a lower level of managerial ethnocentrism.
H6: The willingness to work in an
international corporation, with headquarter oriented planning and decision
making will be determined by a manager´s personal level of ethnocentrism.
H7: The higher the personal level of
ethnocentrism, the lower the efficiency in subsidiary-headquarters
communications.
H8: A manager´s international mobility
will be higher when the personal level of ethnocentrism is lower.
H9: Older age cohorts will exhibit
stronger manager ethnocentric tendencies than younger cohorts.
H10: Manager ethnocentric tendencies will vary
depending on sex.
H11: Manager ethnocentric tendencies
will decrease with greater levels of educational achievement.
H12: Income will be negatively related to
ethnocentric tendencies.
It seems that manager ethnocentrism and the effect it has
on the acceptance of foreign management techniques, etc. is moderated by
factors like current position within the organization, threat of losing a job
to a foreigner, etc. These moderating variables should be included at a more advanced
step of research.
Outlook
As outlined in this workshop paper, the
ethnocentrism concept should be extended to include other stakeholder groups of
a company. The research design we propose is oriented towards an empirical
identification and validation of a scale for manager ethnocentrism. By
following the proposed procedure, we will be able to provide a foundation for
integrating the ethnocentrism concept in the explanation of international
corporate strategy formulation.
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