culture and international business: recent advances and their implications for future research

PERSPECTIVE

Culture and international business: recent

advances and their implications for future

research

Kwok Leung1, Rabi SBhagat2, Nancy R Buchan3,Miriam Erez4 andCristina B Gibson5

1Department of Management, City University of

Hong Kong, Kowloon, Hong Kong; 2University of

Memphis, Memphis, TN, USA; 3University ofWisconsin, Madison, WI, USA; 4Technion-Israel

Institute of Technology, Haifa, Israel; 5University

of California, Irvine, CA, USA

Correspondence:Dr K Leung, Department of Management,City University of Hong Kong, Tat CheeAvenue, Kowloon, Hong Kong.Tel: þ852 2788 9592;Fax: þ852 2788 9085;E-mail: [email protected]

Authors’ note: This paper is based on asymposium organized by Kwok Leung withthe co-authors as participants in the FirstAnnual Conference on Emerging ResearchFrontiers in International Business at DukeUniversity in March 2003. The co-authorshave contributed equally to thedevelopment of this paper.

Received: 13 August 2003Revised: 20 December 2004Accepted: 25 February 2005Online publication date: 2 June 2005

AbstractThe paper provides a state-of-the-art review of several innovative advances in

culture and international business (IB) to stimulate new avenues for future

research. We first review the issues surrounding cultural convergence and

divergence, and the processes underlying cultural changes. We then examinenovel constructs for characterizing cultures, and how to enhance the precision

of cultural models by pinpointing when cultural effects are important. Finally,

we examine the usefulness of experimental methods, which are rarely used byIB researchers. Implications of these path-breaking approaches for future

research on culture and IB are discussed.

Journal of International Business Studies (2005) 36, 357–378.

doi:10.1057/palgrave.jibs.8400150

Keywords: culture and international business; convergence and divergence of cultures;cultural change; cultural dimensions; cross-cultural experiments

IntroductionIn this new millennium, few executives can afford to turn a blindeye to global business opportunities. Japanese auto-executives moni-tor carefully what their European and Korean competitors are up toin getting a bigger slice of the Chinese auto-market. Executives ofHollywood movie studios need to weigh the appeal of an expensivemovie in Europe and Asia as much as in the US before a firmcommitment. The globalizing wind has broadened the mindsets ofexecutives, extended the geographical reach of firms, and nudgedinternational business (IB) research into some new trajectories.

One such new trajectory is the concern with national culture.Whereas traditional IB research has been concerned with econom-ic/legal issues and organizational forms and structures, theimportance of national culture – broadly defined as values, beliefs,norms, and behavioral patterns of a national group – has becomeincreasingly important in the last two decades, largely as a result ofthe classic work of Hofstede (1980). National culture has beenshown to impact on major business activities, from capitalstructure (Chui et al., 2002) to group performance (Gibson,1999). For reviews, see Boyacigiller and Adler (1991) and Earleyand Gibson (2002).

The purpose of this paper is to provide a state-of-the-art review ofseveral recent advances in culture and IB research, with an eye

Journal of International Business Studies (2005) 36, 357–378& 2005 Academy of International Business All rights reserved 0047-2506 $30.00

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toward productive avenues for future research. It isnot our purpose to be comprehensive; our goal is tospotlight a few highly promising areas for leapfrog-ging the field in an increasingly boundarylessbusiness world. We first review the issues surround-ing cultural convergence and divergence, and theprocesses underlying cultural changes. We thenexamine novel constructs for characterizing cul-tures, and how to enhance the precision of culturalmodels by pinpointing when the effects of cultureare important. Finally, we examine the usefulnessof experimental methods, which are rarelyemployed in the field of culture and IB. A schematicsummary of our coverage is given in Table 1, whichsuggests that the topics reviewed are loosely related,and that their juxtaposition in the present paperrepresents our attempt to highlight their impor-tance rather than their coherence as elements of anintegrative framework.

Cultural change, convergence anddivergence in an era of partial globalizationAn issue of considerable theoretical significance isconcerned with cultural changes and transforma-tions taking place in different parts of the world. Infact, since the landmark study of Haire et al. (1966)and the publication of Industrialism and IndustrialMan by Kerr et al. (1960), researchers have con-tinued to search for similarities in culture-specificbeliefs and attitudes in various aspects of work-related attitudes and behaviors, consumption pat-terns, and the like. If cultures of the various localesof the world are indeed converging (e.g., Heueret al., 1999), IB-related practices would indeedbecome increasingly similar. Standard, culture-freebusiness practices would eventually emerge, andinefficiencies and complexities associated withdivergent beliefs and practices in the past era woulddisappear. In the following section, we review the

evidence on the issue and conclude that such anoutlook pertaining to the convergence of various IBpractices is overly optimistic.

Evolution of partial globalizationGlobalization refers to a ‘growing economic inter-dependence among countries, as reflected in theincreased cross-border flow of three types ofentities: goods and services, capital, and know-how’ (Govindarajan and Gupta, 2001, 4). Few spokeof ‘world economy’ 25 years ago, and the prevalentterm was ‘international trade’ (Drucker, 1995).However today, international trade has culminatedin the emergence of a global economy, consisting offlows of information, technology, money, andpeople, and is conducted via government interna-tional organizations such as the North AmericanFree Trade Agreement (NAFTA) and the EuropeanCommunity; global organizations such as theInternational Organization for Standardization(ISO); multinational companies (MNCs); andcross-border alliances in the form of joint ventures,international mergers, and acquisitions. Theseinter-relationships have enhanced participation inthe world economy, and have become a key todomestic economic growth and prosperity (Druck-er, 1995, 153).

Yet, globalization is not without its misgivingsand discontents (Sassan, 1998). A vivid imageassociated with the G8 summits is the ferventprotests against globalization in many parts of theworld, as shown in television and reported in thepopular media. Strong opposition to globalizationusually originates from developing countries thathave been hurt by the destabilizing effects ofglobalization, but in recent times we have also seenheated debates in Western economies triggered bysignificant loss of professional jobs as a result ofoffshoring to low-wage countries. Indeed, workers

Table 1 A schematic summary of the paper

Section focus Key conceptual question Key implication for IB research

Cultural convergence and divergence Are cultures becoming more similar

under the force of globalization?

Whether standard business practices will emerge

Cultural change What are the dynamics of cultural

change?

How will business practices change over time?

Novel constructs of culture What is new about culture? New concepts for understanding cultural

differences in business practices

Moderating effects of culture When is culture important? When to adopt standard business practices

Experimental approaches How to test the effects of culture

experimentally

Causal inferences about the effects of culture on

standard business practices

Advances in culture and international business Kwok Leung et al

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Journal of International Business Studies

in manufacturing and farming in advanced econo-mies are becoming increasingly wary of globaliza-tion, as their income continues to declinesignificantly. In parallel to the angry protestsagainst globalization, the flow of goods, services,and investments across national borders has con-tinued to fall after the rapid gains of the 1990s.Furthermore, the creation of regional trade blocs,such as NAFTA, the European Union, and theAssociation of Southeast Asian Nations, havestimulated discussions about creating other tradezones involving countries in South Asia, Africa, andother parts of the world. Although it is oftenassumed that countries belonging to the WorldTrade Organization (WTO) have embraced globali-zation, the fact is that the world is only partiallyglobalized, at best (Schaeffer, 2003). Many parts ofCentral Asia and Eastern Europe, including theformer republics of the Soviet Union, parts of LatinAmerica, Africa, and parts of South Asia, have beenskeptical of globalization (Greider, 1997). In fact,less than 10% of the world’s population are fullyglobalized (i.e., being active participants in theconsumption of global products and services)(Schaeffer, 2003). Therefore, it is imperative thatwe analyze the issues of cultural convergence anddivergence in this partially globalized world.

‘Universal culture’ often refers to the assump-tions, values, and practices of people in the Westand some elites in non-Western cultures. Hunting-ton (1996) suggested that it originates from theintellectual elites from a selected group of countrieswho meet annually in the World Economic Forumin Davos, Switzerland. These individuals are highlyeducated, work with symbols and numbers, arefluent in English, are extensively involved withinternational commitments, and travel frequentlyoutside their country. They share the cultural valueof individualism, and believe strongly in marketeconomics and political democracy. Althoughthose belonging to the Davos group controlvirtually all of the world’s important internationalinstitutions, many of the world’s governments, anda great majority of the world’s economic andmilitary capabilities, the cultural values of theDavos group are probably embraced by only a smallfraction of the six billion people of the world.

Popular culture, again mostly Western Europeanand American in origin, also contributes to aconvergence of consumption patterns and leisureactivities around the world. However, the conver-gence may be superficial, and have only a smallinfluence on fundamental issues such as beliefs,

norms, and ideas about how individuals, groups,institutions, and other important social agenciesought to function. In fact, Huntington (1996, 58)noted that ‘The essence of Western civilization isthe Magna Carta, not the Magna Mac. The fact thatnon-Westerners may bite into the latter has noimplications for their accepting the former’. Thisargument is obvious if we reverse the typicalsituation and put Western Europeans and Amer-icans in the shoes of recipients of cultural influ-ence. For instance, while Chinese Kung Fudominates fight scenes in Hollywood movies suchas Matrix Reloaded, and Chinese restaurants aboundin the West, it seems implausible that Americansand Europeans have espoused more Chinese valuesbecause of their fondness of Chinese Kung Fu andfood.

A major argument against cultural convergence isthat traditionalism and modernity may be unre-lated (Smith and Bond, 1998). Strong traditionalvalues, such as group solidarity, interpersonalharmony, paternalism, and familism, can co-existwith modern values of individual achievement andcompetition. A case in point is the findings thatChinese in Singapore and China indeed endorsedboth traditional and modern values (Chang et al.,2003; Zhang et al., 2003). It is also conceivable that,just as we talk about Westernization of culturalvalues around the world, we may also talk aboutEasternization of values in response to forces ofmodernity and consumption values imposed byglobalization (Marsella and Choi, 1993).

Although the argument that the world is becom-ing one culture seems untenable, there are someareas that do show signs of convergence. Weexplore in the following the role of several factorsthat simultaneously cause cultures of the world toeither converge or diverge, in an attempt to identifyseveral productive avenues for future research.

Role of international tradeClyde V Prestowitz Jr., President of the EconomicStrategy Institute, Washington, DC, observed thatmost international trade negotiations are in trouble(Leonhardt, 2003). These negotiations were success-ful in the last decade, but complex issues haveemerged that have the potential to derail thegrowth of international trade in the future. Forinstance, many representatives of large agriculturalcountries, such as Brazil and Argentina, notice littlesignificant progress in the area of trade in interna-tional exports. Similarly, countries in East andSoutheast Asia specializing in exporting complex


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technological products to the West have undergonesignificant declines in international trade as a resultof fiscal crises. They are beginning to questionwhether globalization will bring benefits greaterthan regionalization of trade. In recent years,Japan, for example, has expanded trade activitieswith China and other East Asian countries ratherthan with the West. Our review and analysis of theliterature suggests that because globalization tendsto redistribute economic rewards in a non-uniformmanner, a backlash against globalization may occurin countries often confronted with unpredictableand adverse consequences of globalization, causingthem to revert to their own cultural-specificpatterns of economic growth and development(Guillen, 2001). These trends might indicate thatglobalization is being impeded by tendenciestowards country-specific modes of economic devel-opment, making the convergence of IB-relatedvalues and practices difficult to achieve. We donot know much about these dynamics, whichdefinitely need to be explored in future research.

Role of computer-mediated communicationTechnology, particularly computer-mediated com-munication, has been hailed as a major force increating cultural convergence around the worldand facilitating the spread of IB. Autonomousbusiness units of global corporations are continu-ously connected, not necessarily in large physicalstructures, but in global electronic networks func-tioning interdependently. Some authors even claimthat physical distance is no longer a major factor inthe spread of global business (Cairncross, 2001;Govindarajan and Gupta, 2001). Computer-mediated communication enables users to access ahuge amount of factual information globally;however, it does not necessarily increase theircapacity to absorb the information at the same rateas the information is disseminated or diffused. Inaddition, information and knowledge are inter-preted through cultural lenses, and the transfer ordiffusion of organizational knowledge is not easy toaccomplish across cultural boundaries (Bhagatet al., 2002).

Hofstede (2001) observed that not only willcultural diversity among countries persist but alsonew technologies might even intensify the culturaldifferences between and within countries. As wasnoted earlier, the spread of information aboutpeople’s lives in different parts of the world hasaffected some minorities who compare their fate inlife with that of others with a higher standard of

living. Ethnic groups around the world observe thelifestyles and cultural values of other countries, andsome are interested in adopting part of the lifestyleand values, but others reject it completely. Theeffects of new technologies on improving efficien-cies of multinational and global corporations arewell known, but it is not known how these newtechnologies, especially computer-mediated com-munication and the Internet, might create signifi-cant shifts in the cultural patterns of differentethnic groups.

To summarize, computer-mediated communica-tion has the simultaneous effects of increasing bothcultural convergence and divergence. We need toexplore how its spread is affecting the progress ofglobalization in different parts of the world byincorporating the role of cultural syndromes,organizational cultures, and other processes, whichhas recently been attempted by scholars suchas Bhagat et al. (2003) and Gibson and Cohen(2003). Unfortunately, empirical work on theseprocesses is scanty, and more research is neededbefore comprehensive theoretical statements canbe formulated.

Role of multiculturalism and cultural identityThe broad ideological framework of a country,corporation, or situation is the most importantdeterminant of the cultural identity that peopledevelop in a given locale (Triandis, 1994). The‘melting pot’ ideology suggests that each culturalgroup loses some of its dominant characteristics inorder to become mainstream: this is assimilation, orwhat Triandis (1994) calls subtractive multicultural-ism. In contrast, when people from a cultural groupadd appropriate skills and characteristics of othergroups, it may be called integration, or additivemulticulturalism.

Both of these processes are essential for culturalconvergence to proceed. However, if there is asignificant history of conflict between the culturalgroups, it is hard to initiate these processes, as inthe case of Israelis and Palestinians. In general,although there has been some research on thetypology of animosity against other nations (e.g.,Jung et al., 2002), we do not know much about howemotional antagonism against other culturalgroups affects trade patterns and interculturalcooperation in a business context. The issues ofcultural identity and emotional reactions to othercultural groups in an IB context constitute asignificant gap in our research effort in this area.


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Implications of convergence and divergenceissuesOne message is clear: while convergence in somedomains of IB activity is easily noticeable, espe-cially in consumer values and lifestyles, significantdivergence of cultures persists. In fact, Hofstede(2001) asserts that mental programs of peoplearound the world do not change rapidly, butremain rather consistent over time. His findingsindicate that cultural shifts are relative as opposedto absolute. Although clusters of some countries ingiven geographical locales (e.g., Argentina, Brazil,Chile) might indicate significant culture shiftstowards embracing Anglo values, the changes donot diminish the absolute differences between suchcountries and those of the Anglo countries (i.e., US,Canada, UK). Huntington, in his The Clash ofCivilizations (1996), presents the view that there isindeed a resurgence of non-Western culturesaround the world, which could result in theredistribution of national power in the conduct ofinternational affairs. The attempt by the Davosgroup to bring about uniform practices in variousaspects of IB and work culture, thereby sustainingthe forces of globalization, is certainly worthwhile.However, our analysis suggests that there is noguarantee that such convergence will come abouteasily, or without long periods of resistance.

IB scholars need to understand that althoughsome countries might exhibit strong tendenciestoward cultural convergence, as is found in Westerncountries, there are countries that will reject globa-lization, not only because of its adverse economicimpacts (Greider, 1997) but also because globaliza-tion tends to introduce distortions (in their view) inprofound cultural syndromes that characterize theirnational character. Furthermore, reactions to globa-lization may take other forms. Bhagat et al. (2003)have recently argued that adaptation is anotherapproach that could characterize the tendencies ofsome cultures in the face of mounting pressures toglobalize. Other approaches are rejection, creativesynthesis, and innovation (Bhagat et al., 2003). Thesedifferent approaches highlight once again the com-plex dynamics that underlie cultural convergenceand divergence in a partially globalized world. Also,in discussing issues of convergence and divergence,it is necessary to recognize that the shift in values isnot always from Western society to others, but canresult in the change of Western cultural values aswell. For example, the emphasis on quality andteamwork in the West is partly a result of the popu-larity of Japanese management two decades ago.

Scholars of IB should recognize that the issue ofconvergence and divergence in this era of partialglobalization will remain as a persistent and com-plex issue whose direction might only be assessedon a region-by-region basis. It is also wise to adoptan interdisciplinary perspective in understandingthe forces that create both convergence and diver-gence of cultures in different parts of the world. Forinstance, in Understanding Globalization, Schaeffer(2003) has provided an insightful discussion of thesocial consequences of political, economic andother changes, which have significant implicationsfor IB. The cause–effect relationships of globaliza-tion and its various outcomes, especially thecultural outcomes, are not only characterized bybi-directional arrows, but are embedded in acomplex web of relationships. How these complexrelationships and processes play out on the stage ofIB remains to be uncovered by IB researchers.

Processes of cultural changesIn the previous section, we make the point that,through the process of globalization, culturesinfluence each other and change, but whether ornot these changes will bring about cultural con-vergence is yet to be seen. In this section, wedelineate a general model that describes andexplains the complex processes underlying culturalchanges. As explained before, IB is both an agentand a recipient of cultural change, and for interna-tional business to flourish it is important to under-stand its complex, reciprocal relationships withcultural change.

In line with the view of Hofstede (2001) thatculture changes very slowly, culture has beentreated as a relatively stable characteristic, reflect-ing a shared knowledge structure that attenuatesvariability in values, behavioral norms, and pat-terns of behaviors (Erez and Earley, 1993).

Cultural stability helps to reduce ambiguity, andleads to more control over expected behavioraloutcomes (Weick and Quinn, 1999; Leana andBarry, 2000). For instance, most existing models ofculture and work behavior assume cultural stabilityand emphasize the fit between a given culture andcertain managerial and motivational practices (Erezand Earley, 1993). High fit means high adaptationof managerial practices to a given culture and,therefore, high effectiveness. The assumption ofcultural stability is valid as long as there are noenvironmental changes that precipitate adaptationand cultural change. Yet, the end of the 20thcentury and the beginning of the new millennium


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have been characterized by turbulent political andeconomical changes, which instigate culturalchanges. In line with this argument, Lewin andKim (2004), in their comprehensive chapter onadaptation and selection in strategy and change,distinguished between theories driven by theunderlying assumption that adaptation is themechanism to cope with change, and theoriesdriven by the underlying assumption of selectionand the survival of the fittest, suggesting thatineffective forms of organization disappear, andnew forms emerge. However, although organiza-tional changes as a reaction to environmentalchanges have been subjected to considerable con-ceptual analyses, the issue of cultural change at thenational level has rarely been addressed.

There are relatively few theories of culture thatpertain to the dynamic aspect of culture. Oneexception is the ecocultural model by Berry et al.(2002), which views culture as evolving adaptationsto ecological and socio-political influences, andviews individual psychological characteristics in apopulation as adaptive to their cultural context, aswell as to the broader ecological and socio-politicalinfluences. Similarly, Kitayama (2002) proposes asystem view to understanding the dynamic nature ofculture, as opposed to the entity view that seesculture as a static entity. This system view suggeststhat each person’s psychological processes areorganized through the active effort to coordinateone’s behaviors with the pertinent cultural systemsof practices and public meanings. Yet, concurrently,many aspects of the psychological systems developrather flexibly as they are attuned to the surround-ing socio-cultural environment, and are likely to beconfigured in different ways across different socio-cultural groups.

These adaptive views of culture are supported byempirical evidence. For example, Van de Vliert et al.(1999) identified curvilinear relationships betweentemperature, masculinity and domestic politicalviolence across 53 countries. Their findings showedthat masculinity and domestic violence are higherin moderately warm countries than in countrieswith extreme temperatures. Inglehart and Baker(2000) examined cultural change as reflected bychanges in basic values in three waves of the WorldValues Surveys, which included 65 societies and75% of the world’s population. Their analysisshowed that economic development was associatedwith shifts away from traditional norms and valuestoward values that are increasingly rational, toler-ant, trusting, and participatory. However, the data

also showed that the broad cultural heritage of asociety, whether it is Protestant, Roman Catholic,Orthodox, Confucian, or Communist, leaves anenduring imprint on traditional values despite theforces of modernization.

The process of globalization described before hasintroduced the most significant change in IB, withits effects filtering down to the national, organiza-tional, group and individual levels. Reciprocally,changes at micro-levels of culture, when shared bythe members of the society, culminate into macro-level phenomena and change the macro-levels ofculture. In the absence of research models that canshed light on this complex process of culturalchange, Erez and Gati (2004) proposed that thegeneral model of multi-level analysis (Klein andKozlowski, 2000) could be adopted for understand-ing the dynamics of culture and cultural change.

The dynamics of culture as a multi-level,multi-layer constructThe proposed model consists of two buildingblocks. One is a multi-level approach, viewingculture as a multi-level construct that consists ofvarious levels nested within each other from themost macro-level of a global culture, throughnational cultures, organizational cultures, groupcultures, and cultural values that are represented inthe self at the individual level, as portrayed inFigure 1. The second is based on Schein’s (1992)model viewing culture as a multi-layer constructconsisting of the most external layer of observedartifacts and behaviors, the deeper level of values,which is testable by social consensus, and thedeepest level of basic assumption, which is invisibleand taken for granted. The present model proposesthat culture as a multi-layer construct exists at alllevels – from the global to the individual – and thatat each level change first occurs at the mostexternal layer of behavior, and then, when sharedby individuals who belong to the same culturalcontext, it becomes a shared value that charac-terizes the aggregated unit (group, organizations, ornations).

In the model, the most macro-level is that of aglobal culture being created by global networks andglobal institutions that cross national and culturalborders. As exemplified by the effort of the Davosgroup discussed earlier, global organizational struc-tures need to adopt common rules and proceduresin order to have a common ‘language’ for commu-nicating across cultural borders (Kostova, 1999;Kostova and Roth, 2003; Gupta and Govindarajan,


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2000). Given the dominance of Western MNCs, thevalues that dominate the global context are oftenbased on a free market economy, democracy,acceptance and tolerance of diversity, respect offreedom of choice, individual rights, and opennessto change (Gupta and Govindarajan, 2000).

Below the global level are nested organizationsand networks at the national level with their localcultures varying from one nation, or network toanother. Further down are local organizations, andalthough all of them share some common values oftheir national culture, they vary in their localorganizational cultures, which are also shaped bythe type of industry that they represent, the type ofownership, the values of the founders, etc. Withineach organization are sub-units and groups thatshare the common national and organizationalculture, but that differ from each other in their unitculture on the basis of the differences in theirfunctions (e.g., R&D vs manufacturing), theirleaders’ values, and the professional and educa-tional level of their members. At the bottom of thisstructure are individuals who through the processof socialization acquire the cultural values trans-mitted to them from higher levels of culture.Individuals who belong to the same group sharethe same values that differentiate them from othergroups and create a group-level culture through abottom-up process of aggregation of shared values.For example, employees of an R&D unit are selected

into the unit because of their creative cognitivestyle and professional expertise. Their leader alsotypically facilitates the display of these personalcharacteristics because they are crucial for develop-ing innovative products. Thus, all members of thisunit share similar core values, which differentiatethem from other organizational units. Groups thatshare similar values create the organizationalculture through a process of aggregation, and localorganizations that share similar values create thenational culture that is different from othernational cultures.

Both top-down and bottom-up processes reflectthe dynamic nature of culture, and explain howculture at different levels is being shaped andreshaped by changes that occur at other levels,either above it through top-down processes orbelow it through bottom-up processes. Similarly,changes at each level affect lower levels through atop-down process, and upper levels through abottom-up process of aggregation. The changes innational cultures observed by Inglehart and Baker(2000) could serve as an example for top-downeffects of economic growth, enhanced by globaliza-tion, on a cultural shift from traditional values tomodernization. However, in line with Schein(1992), the deep basic assumptions still reflect thetraditional values shaped by the broad culturalheritage of a society.

Global organizations and networks are beingformed by having local-level organizations jointhe global arena. That means that there is acontinuous reciprocal process of shaping andreshaping organizations at both levels. For exam-ple, multinational companies that operate in theglobal market develop common rules and culturalvalues that enable them to create a synergybetween the various regions, and different parts ofthe multinational company. These global rules andvalues filter down to the local organizations thatconstitute the global company, and, over time, theyshape the local organizations. Reciprocally, havinglocal organizations join a global company mayintroduce changes into the global companybecause of its need to function effectively acrossdifferent cultural boarders.

A study by Erez-Rein et al. (2004) demonstratedhow a multinational company that acquiredan Israeli company that develops and producesmedical instruments changed the organizationalculture of the acquired company. The studyidentified a cultural gap between the two compa-nies, with the Israeli company being higher on the

Figure 1 The dynamic of top-down–bottom-up processes

across levels of culture.


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cultural dimension of innovation and lower on thecultural dimension of attention to detail andconformity to rules and standards as comparedwith the acquiring company. The latter insisted onsending the Israeli managers to intensive courses inSix-Sigma, which is an advanced method of qualityimprovement, and a managerial philosophy thatencompasses all organizational functions. Uponreturning to their company, these managers intro-duced quality improvement work methods andprocedures to the local company, and causedbehavioral changes, followed by the internalizationof quality-oriented values. Thus, a top-down pro-cess of training and education led to changes inwork behavior and work values. Sharing commonbehaviors and values by all employees of the localcompany then shaped the organizational culturethrough bottom-up processes. The case of culturalchange via international acquisitions demonstratedthe two building blocks of our dynamic model ofculture: the multi-level structure explains how alower-level culture is being shaped by top-downeffects, and that the cultural layer that changes firstis the most external layer of behavior. In the longrun, bottom-up processes of shared behaviors andnorms shape the local organizational culture.

Globalization and self-identityTop-down processes from the global culture to theindividual level may lead to changes in the self ascultural values are represented in the self. The self isa multi-facet construct that consists of self- andsocial identities. Self-identity differentiates oneperson from another, whereas social identity isbased on the groups in which one participates(Tajfel and Turner, 1979). Social identity theory hascommonly been examined in relation to member-ship in social groups and national cultures. How-ever, the global environment creates a newcollective and impersonal entity that affects peo-ple’s identity. Global identity means that peopledevelop a sense of belongingness to a worldwideculture, by adopting practices, styles, and informa-tion that are part of the global culture (Arnett,2002). However, in parallel, people continue tohold their local identity as well, based on theirsocialization to their local culture. Arnett (2002)defines these two facets of self-identity as a bi-cultural identity, in which part of the self-identity isrooted in the local culture, while another partdevelops in relation to the global culture. Thus,people all over the world wear jeans, enjoy friedrice, eat at McDonald’s, listen to Discmans, and surf

on the Internet; yet, at the same time, they keeptheir own cultural values, their social group, andtheir national identity, drawing on each identityaccording to what they deem necessary in a givencontext. Through a top-down process, the globalenvironment – a macro-level construct – affects thedevelopment of a bi-cultural identity at the indivi-dual level, by shaping the individual’s globalidentity, and thus facilitating adaptation to theglobal world. As discussed before, however, theextent to which a bi-cultural identity developsdepends on whether subtractive or additive multi-culturalism is encouraged. This dual nature ofidentity presents a challenge to the operation ofmultinational firms, as we know little about howcomplex self-identity processes are related to beha-vior and performance in an IB setting.

Factors that facilitate cultural changeCulture itself influences the level of resistance oracceptance of change. Harzing and Hofstede (1996)proposed that certain cultural values facilitatechange, whereas others hinder it. The values oflow power distance, low uncertainty avoidance,and individualism facilitate change. Change threa-tens stability, and introduces uncertainty, andresistance to change will therefore be higher incultures of high rather than low uncertaintyavoidance (Steensma et al., 2000). Change alsothreatens the power structure, and therefore will beavoided in high power distance cultures. Finally,change breaks the existing harmony, which ishighly valued in collectivistic cultures, and there-fore will not be easily accepted by collectivists(Levine and Norenzayan, 1999).

A recent study by Erez and Gati (2004) examinedthe effects of three factors on the change processand its outcomes:

(1) the cultural value of individualism–collecti-vism;

(2) the reward structure and its congruence withthe underlying cultural values; and

(3) the degree of ambiguity in the reward structure.

The change process examined was a shift fromchoosing to work alone to a behavioral choiceof working as part of a team, and vice versa.Working alone is more prevalent in individualisticcultures, whereas working in teams dominates thecollectivistic ones. Two sub-cultures from Israelparticipated in the study: Arab Israeli citizens,who scored high on collectivism; and Jewishcitizens, who grew up in big cities and scored


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significantly lower on collectivism than did theArab participants. Results showed that the beha-vioral choices of the Arab participants remainedmore or less unchanged despite different manipula-tions of reward congruence and ambiguity, suggest-ing that collectivism was related to resistance tochange. In addition, resistance to change was higherwhen the rewarded alternative was incongruentwith their underlying cultural values, and whenthe level of ambiguity was high rather than low.

This study demonstrated that the top-downeffects on cultural change are moderated by cultureitself, and by the reward system. Changes are morelikely to occur in individualistic cultures when thereward structure is clear, and when the rewardedbehavior does not conflict with the dominant valuesystem. Change is first observed in people’s beha-vior, as shown in Erez and Gati’s (2004) study. Inthe long run, when the new behavioral norms arebeing shared by all group members, they filterdown to the deeper level of cultural values as theyare represented in the self. The representation ofnew values in the self may subsequently shape amore collectivistic (or individualistic) society. Tosum up, this study tested the dynamic nature ofculture by integrating two constructs, multi-leveland multi-layer views of culture, into one dynamicmodel. The multi-level construct helps us under-stand how culture is being shaped and reshaped bythe dynamic top-down, bottom-up processes,which transmit the effect of one cultural level toanother. The multi-layer construct provides aframework to describe the nature of the culturalchanges.

In summary, the proposed multi-level, multi-layer model is useful to IB researchers who areinterested in modeling and studying the process ofcultural change along two continua: from theglobal to the individual level, and from the externallayer of behavior to the internal layer of basicassumptions and axioms. Understanding theseprocesses is obviously crucial to the effectiveoperation of multinational business operations.

Novel cultural constructsIn addition to rethinking our general conceptuali-zation of culture and cultural processes, we encou-rage researchers to re-examine the specific culturalconstructs utilized in theory and research. A majorapproach in the literature has been to relate IBphenomena to special cultural characteristics, andto improve upon this approach it is important toexpand our conceptualization of culture. In this

section, we focus on novel conceptualizations ofculture that are emerging in the literature.

There are two interesting directions for identify-ing novel cultural constructs in the literature,which are almost diametric in their orientation.The first development follows in the footsteps ofHofstede in the search of novel trait-like, staticcultural dimensions, whereas the second develop-ment is inspired by breakthroughs in cognitivepsychology, which increasingly portray the humanmind as dynamic, elastic, and situated.

Novel cultural dimensionsThe classic work of Hofstede (1980) has revolutio-nized the research on culture and IB. Subsequent tohis original work, Hofstede (2001) has added onemore dimension to his framework: Confucian WorkDynamism or short- vs long-term orientation, basedon the work of the Chinese Culture Connection(1987). The validity of the cultural dimensionsidentified by Hofstede has been controversial (for arecent debate surrounding individualism–collecti-vism, see Oyserman et al., 2002a), but they haveprovided a broad framework that has inspiredmuch IB research.

Subsequent to the work of Hofstede, a few globalprojects have attempted to search for new culturaldimensions. Schwartz (1994) has identified sevenculture-level dimensions of values: Conservatism,Intellectual Autonomy, Affective Autonomy,Hierarchy, Egalitarian Commitment, Mastery, andHarmony. These dimensions have been used topredict cultural differences, including locus ofcontrol (Smith et al., 1995) and work-related issues,such as the sources of guidance that managersrelied on (Smith et al., 2002), and capital structure(Chui et al., 2002). Smith et al. (1996) have identi-fied two culture-level dimensions from an analysisof managerial values: Egalitarian Commitment vsConservatism, and Utilitarian Involvement vs LoyalInvolvement. Smith and Bond (1998, Chapter 3)have concluded that these different value surveyshave produced convergent results, lending supportto the validity of the cultural dimensions originallyidentified by Hofstede (1980).

Recently, in an attempt to understand leader-ship behavior around the world, House and hisassociates have identified nine culture-level dimen-sions: Performance Orientation, AssertivenessOrientation, Future Orientation, Humane Orienta-tion, Institutional Collectivism, Family Collecti-vism, Gender Egalitarianism, Power Distance, andUncertainty Avoidance (Gupta and House, 2004;


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House et al., 2004). The GLOBE project adopted atheory-based approach, and a priori dimensionswere formulated based primarily on Hofstede’sdimensions, values described by Kluckhohn andStrodtbeck (1961) and McClelland (1961), and theinterpersonal communication literature (Sarros andWoodman, 1993). Thus, despite the use of differentitems to identify cultural dimensions, the resultsare consistent with previous results, and most ofthe cultural dimensions identified are relatedconceptually and correlated empirically with Hof-stede’s dimensions. Assertiveness Orientation andGender Egalitarianism are related to Hofstede’sconstruct of Masculinity–Femininity, InstitutionalCollectivism and Family Collectivism to Individu-alism–Collectivism, Power Distance and Uncer-tainty Avoidance to the two Hofstede dimensionswith the same labels, and Future Orientation toLong-term Orientation. The usefulness of a morerefined typology of the Hofstede dimensionsremains to be demonstrated. Two dimensions areindependent of the Hofstede dimensions. Perfor-mance Orientation seems conceptually related toMcClelland’s (1961) concept of need for achieve-ment, and Humane Orientation seems concep-tually related to the Human Nature is Good vsBad dimension of Kluckhohn and Strodtbeck(1961). Although these dimensions are not new,they may prove useful for understanding some IBphenomena. Take leadership as an example: weknow that leaders vary in their task orientation,and Performance Orientation may be related to ageneral emphasis on task orientation. Leaders alsovary in their supervisory style, and HumaneOrientation may be negatively related to closesupervision. Obviously, relationships with othervariables are also possible, and hopefully futureresearch will yield theoretically interesting corre-lates of these two dimensions.

The most recent large-scale attempt to expandthe dimensional map of culture is the global studyon social axioms orchestrated by Leung and Bond.Social axioms are general beliefs that may beconceptualized as generalized expectancies, a conceptintroduced by Rotter (1966) to characterize locus ofcontrol. Leung et al. (2002) have created a socialaxiom survey based on items culled from thepsychological literature as well as from qualitativeresearch conducted in Hong Kong and Venezuela.Factor analysis of these items has unearthed a five-factor structure within each of five cultures: HongKong, Venezuela, the USA, Japan, and Germany. Asubsequent round-the-world study has confirmed

the robustness of this structure in over 40 culturalgroups (Leung and Bond, 2004), and this five-dimensional structure at the individual level hasalready been applied to the investigation of influ-ence tactics in an IB context (Fu et al., 2004). Aculture-level factor analysis based on 41 culturalgroups has yielded only two factors (Bond et al.,2004). Dynamic Externality refers to beliefs in fate,the existence of a supreme being, positive functionsof religion practice, which give rise to the label‘externality’. However, the content also suggestsbeliefs in effort and knowledge, as well complexityin the social world, which gives a dynamic slant tothis construct. Societal Cynicism reflects a negativeview of human nature and a mistrust in socialinstitutions. Correlations with a wide range ofcountry-level indexes support the interpretationof these two dimensions given before. Furthermore,dynamic externality is related to collectivism andhigh power distance, but Societal Cynicism isrelatively distinct from previous cultural dimen-sions. These two dimensions may have significantimplications for IB research. For instance, across awide variety of cultures, dynamic externality isrelated to the reliance on superiors as a source ofguidance, and Societal Cynicism to job dissatisfac-tion. Future research may reveal interesting rela-tionships between these two cultural dimensionsand other IB phenomena.

The global projects reviewed above suggest thatthe Hofstede dimensions are robust, althoughsubsequent work has led to some important refine-ment and clarification. More importantly, at leastthree novel dimensions have been identified:Performance Orientation, Humane Orientation,and Societal Cynicism. We do not know muchabout these cultural dimensions, and their impor-tance for IB research is obviously an important areafor future exploration.

A dynamic view of cultureCurrent research in cognitive psychology showsthat the human mind is fluid and adaptive, and isengaged in active, dynamic interaction with theenvironment. This conception of the human mindgives rises to a dynamic view of culture, whichcontrasts sharply with traditional views that regardculture as more or less stable and static. Thisdynamic view of culture argues that culture isrepresented by cognitive structures and processesthat are sensitive to environmental influences. Forinstance, Tinsley and Brodt (2004) have provided acognitive analysis of cultural differences in conflict


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behaviors. Frames direct attention to certain aspectsof the environment; schemas are knowledge struc-tures that give meaning to encoded information;and scripts are a special type of schema that involvea temporal sequence and are most relevant forevents and actions. These constructs are dynamic inthe sense that their content and salience aresensitive to environmental influences. Tinsley andBrodt suggest that these cognitive constructs areuseful in understanding cross-cultural differencesin conflict behaviors. As an example, whereasconflict frames that emphasize self-interest andmutual interest are appropriate for Americans, adifferent conflict frame that emphasizes a collectiveor community orientation is more useful indescribing the conflict behaviors of Asians. Anotherexample comes from a connectionist approach toleadership and culture proposed by Hanges et al.(2000). In this framework, leadership behaviors areinterpreted with schemas, which involve compo-nents such as scripts and beliefs. These componentsare under the influence of higher-order compo-nents such as values, affect, and self-image. Hangeset al. proposed that this complex, distributed viewof schemas captures the essence of cultural mean-ing systems. Given that the components of aschema and their associations can change overtime as a function of experience and situationalinfluence, this model does not assume static effectsof culture, and is well suited for the analysis of itsdynamic effects.

An important implication of this dynamic view ofculture is that cultural changes are more frequentthan previously assumed. A good example isprovided by the research of Hong et al. (2000). Itis well known that, compared with people fromindividualist cultures, people from collectivist cul-tures are more likely to attribute the cause of otherpeople’s behaviors to external causes such assituational demands (as opposed to internal causessuch as personality traits) (e.g., Morris and Peng,1994). Hong et al. (2000) argued that a dynamicview of culture is indeed valid: a priming techniqueshould be able to alter the mindset of people and asa result change their attributional style. To testthis notion, Hong Kong Chinese, who were collec-tivists and inclined to make external attributionsfor others’ behavior, were randomly exposed to oneof two sets of experimental stimuli: one setincluded American icons such as Superman, andthe other set contained Chinese icons such as theMonkey King (Hong et al., 1997). Consistent withthe dynamic view of culture, compared with the

Chinese primes, the American primes were able toshift the attribution of the Chinese participants inthe internal direction. In other words, the Amer-ican primes caused the Chinese participants to actmore like Americans in their attributional style.Peng and Knowles (2003) replicated these findingswith Asian Americans. When they were asked torecall an experience that highlighted their Amer-ican identity, their attributional style was more inthe internal direction than when they were asked torecall an experience that made their Asian identitymore salient. In fact, Oyserman et al. (2002a)concluded after their meta-analysis of the indivi-dualism–collectivism literature that priming experi-ments such as those described above provide apromising tool to examine the dynamics of culturalinfluence. However, future research needs toexplore whether priming results are too transientto be robust in the real world, and what theprocesses are that underlie these priming effects.

The implications of a dynamic view of culture forIB have not been explored. One intriguing possibi-lity is that cultural differences may be easier toovercome than previously assumed, if mentalprocesses associated with national culture arerelatively fluid, and can be changed and sustainedby appropriate situational influences. For instance,Leung and his associates (Leung et al., 1996, 2001b)have found that local employees in internationaljoint ventures in China reported more positive jobattitudes working with Western expatriate man-agers than with overseas Chinese and Japaneseexpatriate managers. These findings contradict thecultural distance argument, which suggests thatpeople from very different cultures have moreproblems working together than people fromsimilar cultures. Undoubtedly, this new perspectivewill provide the basis for some exciting work onculture and IB in the future.

Understanding when culture matters:increasing the precision of cultural modelsBeyond exploring new cultural constructs and thedynamic nature of culture, we also argue for theimportance of examining contingency factors thatenhance or mitigate the effect of national culture.Consider the following scenario. A senior humanresource manager in a multinational firm is chargedwith implementing an integrative training programin several of the firm’s subsidiaries around theglobe. Over the term of her career, the manager hasbeen educated about differences in national cultureand is sensitive to intercultural opportunities and


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challenges. At the same time, she understands thestrategic need to create a unified global programthat serves to further integrate the firm’s basicprocesses, creating efficiencies and synergies acrossthe remote sites. She approaches the implementa-tion with trepidation. A key challenge is todetermine whether the program should be imple-mented in the same manner in each subsidiary ormodified according to the local culture at each site.Put another way, in this complex circumstance,does culture matter?

The dilemmaA review of the IB literature, as well as ourexperience in working with managers in multi-national organizations, suggests that there are veryfew instances where culture does not matter at all.Likewise, few people would argue to ignorenational culture. Research has demonstrated thatnational culture impacts on many different indivi-dual-level outcomes such as perceptions, beliefs,and behavior (Harrison and Huntington, 2000;Hofstede, 2001; Kirkman et al., in press). For exa-mple, in their comprehensive review of 181 articlespublished in top-tier journals between 1980 and2002 that empirically assessed the five dimensionsof cultural values identified by Hofstede (1980),Kirkman et al. (in press) documented 61 studies thatdemonstrated a direct effect of culture on indivi-dual outcomes. The authors reviewed relationshipsbetween cultural values and 10 categories of indi-vidual outcomes: change management behavior,conflict management, negotiation behavior, rewardallocation, decision-making, human resource man-agement, leadership, individual behavior in groups,personality, and work attitudes/emotion.

Yet, research and practice provide numerousexamples of instances in which the impact ofculture was overshadowed by unique personalities,strong leadership, or uniformity of practices (e.g.,Wetlaufer, 1999; Maznevski and Chudoba, 2000;Earley and Gibson, 2002). Furthermore, in manystudies culture demonstrates a statistically signifi-cant relationship with individual outcomes, but thestrength of the relationship (i.e., the size of thecoefficient) is relatively weak in practical terms,indicating that culture does not explain a largeamount of variance in those outcomes, and that, infact, other variables must be considered as impor-tant predictors alongside culture (e.g., Petersonet al., 1995; Brett and Okumura, 1998; Gibson,1999; Clugston et al., 2000; Mitchell et al., 2000;Kirkman and Shapiro, 2001). While researchers are

able to draw implications for managers, theycannot reach a high level of precision regardingthe specific impacts and the circumstances inwhich culture should be a central focus, or whenit might be less critical (Gibson et al., forthcoming).For example, several studies have found relation-ships between collectivism and individual attitudestoward teamwork (e.g., Bochner and Hesketh, 1994;Casimir and Keats, 1996; Eby and Dobbins, 1997;Earley et al., 1999; Kirkman and Shapiro, 2000;Gibson and Zellmer-Bruhn, 2001). However, dothese cultural proclivities come into play in everycircumstance? Might there be situations, such as intimes of crisis, when members of organizationshave fairly universally positive attitudes towardteamwork?

The field of international management, there-fore, is faced with a dilemma. On the one hand,researchers and managers need to understandpatterns of individual-level outcomes associatedwith different national cultures in the world. Onthe other hand, research examining relationshipsbetween culture and individual outcomes has notcaptured enough variance to make the specificrecommendations that managers need with con-fidence (Gibson et al., forthcoming). Thus, recently,scholars have argued that, instead of addressingwhether or not national culture makes a difference,it is more useful to address the issue of how andwhen it makes a difference (Leung et al., 2001a;Earley and Gibson, 2002; Oyserman et al., 2002b;Gibson et al., forthcoming; Kirkman et al., in press).

Determining when cultural effects occurSuppose for the moment that our focus is onassisting the multinational human resource man-ager (mentioned earlier) in terms of understandinghow certain individual-level outcomes change as afunction of cultures. An important question thenbecomes, ‘What are the conditions that increase anindividual’s propensity to think, feel, or behave inaccordance with cultural prescriptions?’ Answeringthis question requires identifying possible moder-ating conditions. This in itself is a critical task forfuture theory and research, because the stronger theimpact of the moderating conditions, the lesspredictive culture will be of individual outcomes.Gibson et al. (forthcoming) identified a set of mode-rating conditions operating across three differentcategories – individual, group, and situationalcharacteristics – that serve to moderate the impactof national culture on individual perceptions,beliefs, and behavior. Understanding the extent to


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which the factors are present in any given circum-stance thus provides clues as to whether (or not)national culture will matter in those circumstances.So, although by no means exhaustive, their frame-work is a useful foundation in the quest for greaterprecision in cultural theoretical models.

For example, an important individual amplifier ofthe impact of national culture on beliefs is thedegree to which an individual identifies with theculture (Gibson et al., forthcoming). Based on socialidentity theory (Turner, 1987) and theories of theself-concept (Markus and Kitayama, 1991), it seemslikely that, when a person views him or herself as amember of the national culture, and the culture is alarge component of his or her self-concept, culturewill have a strong and pervasive impact on his orher beliefs. In every culture, there are people whohold beliefs different from those typical. Instead,other sources of self-identity such as educational orprofessional affiliation may play a much strongerrole in defining who they are, what motivates thempersonally, and which values they hold. So, culturematters more when a person identifies with theculture; for those who do not, culture is a less potentpredictor of their values. Along these same lines,researchers such as Van Dyne et al. (2000) haveuncovered evidence that collectivism is positivelyrelated to organizational citizenship behavior, butcertain individual-level factors such as self-esteemmoderate this relationship. Thus, self-esteem is anelement that moderates the impact of culture on animportant set of individual behaviors.

Beyond individual-level factors, an example of agroup-level moderator is the stage of group devel-opment that a group is at, powerfully amplifying ormitigating the impact of national culture on groupmember behavior (Gibson et al., forthcoming).National culture is often a more readily detectableattribute, and therefore is a potent influence earlyon when the group is just beginning to take shape(Watson et al., 1993; Chatman and Flynn, 2001).Once group members understand the contributionof other attributes, culture may play less of a role.For example, national culture is likely a strongerpredictor of group member communication beha-vior during the early stages of a group’s tenure,before members come to understand how deepattributes such as expertise will impact on thegroup. Indeed, research conducted by Zellmer-Bruhn et al. (2002) provides some evidence of thisphenomenon. Information exchange betweengroup members was more strongly related tonational cultural heterogeneity in young, rather

than old, teams in their large sample across fivemultinational firms. Likewise, Eby and Dobbins(1997) found that, although collectivism relates toperformance in teams, the level of team coopera-tion – an important group-level factor – moderatesthis relationship. Thus, culture matters for teamperformance, but certain group-level characteristicscan increase or decrease the impact of culture.

Finally, in addition to individual and groupcharacteristics, Gibson et al. (forthcoming) identi-fied several situational characteristics that moder-ate the impact of culture. An example in thesituational category is the impact of the technolo-gical environment – specifically, technologicaluncertainty. Research has demonstrated that peopletend to respond in accordance with culturalprescriptions under conditions of uncertainty andambiguity (Meglino et al., 1989; Ravlin et al., 2000),and, more generally, that uncertainty provokesrigidity (Staw et al., 1981). Thus, technologicaluncertainty likely amplifies the impact of cultureon individual perceptions. When there are veryspecific rules, procedures or equipment for com-pleting a task (such as tools for manufacturing andassembly or rules for quality assessment), nationalculture will have less impact. When the tasktechnology is ambiguous, culture is more likely tobe the default. This occurred in an aerospaceproduct development team that Gibson and Cohen(2003) worked with. The team was multicultural,and the most substantial cultural clashes occurredwhen the team confronted implementation ofnew technology. Members retreated to culturallyprescribed scripts and preferences, and these wereat odds. Once the technology had been adopted,and through trial and error the clashes wereresolved, cultural proclivities were less of a factorin provoking conflict.

ImplicationsAdmittedly, individuals’ perceptions, beliefs, andbehavior are influenced by more than one aspectof culture at any given time, and the moderators(or amplifiers) likely work in concert rather thanisolation. For example, three of the moderators ofcultural impacts described above – social identifica-tion, stage of group development, and technologicaluncertainty – can all simultaneously characterize agiven cause–effect relationship between culture andindividual outcomes. Consider again the scenariothat opened this section – the senior humanresource manager challenged with implementingthe global training program. If aware of potential


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conditions that amplify the impact of culture, shemight then be able to conduct a more precisediagnosis of the circumstances in each subsidiary.For example, in the North American subsidiary,teams may comprise many expatriates who do notidentify as much with the local national culture, theteam may have been in existence for several yearsand thus be very well developed, and the team mayhave familiarity with the program. Based on theprior research reviewed here, these factors wouldimply that culture will have less impact in thissubsidiary. In the Indian subsidiary, the humanresource manager may find a very different set ofcircumstances, in which all team members identifywith the Indian national cultural characteristics, theteam is early in its stage of development, and thetechnology is ambiguous (i.e., they have no famil-iarity with the program). In these circumstances,culture will likely matter a great deal, and themanager would do well to implement the programin a manner sensitive to the local culture. In ourexperience, most managers are entirely unaware ofthe impact of culture. The general models developedby Adler (1997) and Earley and Erez (1997) areextremely helpful in alerting us to the importantrole that culture plays. However, examination of thecontingencies mentioned here can add much moreprecision to those recommendations.

Along these same lines, Leung et al. (2001a, b), forexample, caution against two types of attributionerror that managers can make: universal attribu-tions and cultural attributions. The universal attri-bution error assumes that all workers share the sameorientations, and will respond similarly to manage-rial practices. The cultural attribution error involvesestablishment of stereotypes based on nationality,and the assumption that all members of a particularnation will behave in accordance with that stereo-type. Leung et al. argue that neither extreme isproductive, and instead suggest that mangers needto be aware of the dangers associated with each typeof error. Although it is important to be aware that amisunderstanding may be explicated by biculturalexperience, at the same time it is always advisable toobtain input from others who share the same cultureas each party, in order to untangle cultural effectsfrom other factors such as personality, group-levelphenomena or situational elements.

To help increase the precision of our culturalmodels, then, future research must identify themost critical set of moderators, together withcultural orientations and outcomes, for particularfocus in managerial diagnosis, implementation,

and change programs. The scenario above impliesthat future research must, whenever possible, in-clude multiple potential moderators at various levelsof analysis. We are aware of very few past researchefforts that have done so, although it seems clearthat moderators may interact in interesting ways.For example, a situational moderator – technologicaluncertainty – may interact with personality char-acteristics, such that it drives only certain indivi-duals to behave in ways more consistent withcultural proclivities; other individuals (with a differ-ent configuration of personality characteristics) maybehave in ways less consistent with culture underconditions of technological uncertainty. Futureresearch should address this issue to provide moreprecise guidance for theory development and prac-tice. Equally important, a single cultural character-istic does not influence individuals in isolation fromother characteristics (e.g., both universalism andcollectivism likely work simultaneously to influencea given behavior or reaction). Thus, it is also criticalthat future research include configurations of cul-tural characteristics, rather than a single predictor.Practically speaking, these suggestions must ofcourse be balanced with constraints around samplesize, survey length, and analytical techniques forcomplex models.

Still, the point remains that we are in dire need ofmore comprehensive specification in our models ofcultural impacts. Yes, culture does matter. However,there will be certain circumstances when it mattersmore, and others when it matters less. Includingmoderators of the impact, such as those high-lighted here, helps us become much more precise inour theories. Investigation of these models, some ofwhich is already under way, will help us understandand advise when culture must be considered inmanagerial initiatives.

Experimental approaches to the study ofcultureThe previous sections are concerned with concep-tual and substantive issues of culture and IB, butthe focus of this final section is methodological.Specifically, we discuss experimental methodology,which is sorely underrepresented in IB research, butwhich has a unique capacity to provide thecomprehensive specification in models of culturecalled for above. As evidence of the scarcity ofexperimental research in our field, an analysis ofthe research methodologies used in manuscriptspublished in the Journal of International BusinessStudies shows that the ratio of survey- or case-study-


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based research to experimentally based research isgreater than 10 to 1.1 Certainly every researchmethodology has its weaknesses and strengths, butthe narrow focus on survey, ethnography or casestudies to understand cultural phenomena to theexclusion of experiments is denying our field thebalance inherent in a multi-method approach, onein which the strengths and weaknesses of onemethod are compensated for by another (Leungand Su, 2004). The unique contribution that experi-mentation provides comes from its superior abilityto demonstrate causality: that is, whereas othermethodologies may infer covariation or even spur-ious correlation between variables, experimentationprovides for the controlled manipulation of ahypothesized variable, protecting results from suchinterpretations (Leung and Su, 2004).2 The goal ofthis section is to discuss the contribution thatexperimental research can make to more clearlydefine the individual, group, and situational factorsthat moderate the influence of culture on thoughts,feelings, and behaviors, and to more preciselypinpoint the boundary conditions where culture(or culture alone) is not likely to have an effect.

Investigating the moderating influenceof individual, group, and situationalcharacteristicsThe essence of experimentation is the ability tocontrol and manipulate variables in a systematicmanner. Furthermore, the analysis and manipula-tion may be of a single variable, or of multiplevariables in conjunction: that is, the experimentsmay be univariate or multivariate in eitherthe dependent or independent variables (Winer,1991). This quality makes experimentation particu-larly suited to deepen understanding of the indivi-dual, group, and situational characteristics (singly orin conjunction) that moderate culture’s influence.

The moderating influence of individualcharacteristicsCross-cultural experimental literature examiningthe influence of individual characteristics hasevolved, yielding greater sophistication and speci-fication to our understanding of culture’s influence.Much early cross-cultural work tested only for themain effects of culture – often using nationalculture as a proxy variable for a given culturalorientation. That work, exploring the influence ofthe presence (a main effect) of a given culturalorientation, laid the groundwork for more complexexperiments to follow, which test how differences

in the levels (a moderating influence) of a culturalorientation (even a primed, temporary one) influ-ence behaviors or perceptions.

The research of Gelfand et al. (2002) examinedboth the main effects and the moderating effects ofindividual characteristics on the presence of ego-centric perceptions of fairness in negotiationswithin Japan and the US. Using national cultureas proxy for cultural orientation, their resultssupport robust findings of self-serving biases inindividualist cultures (Thompson and Loewenstein,1992), where ‘the self is served by enhancing one’spositive attributes to stand out and be better thanothers’, but find relatively less bias in a collectivisticculture, in which ‘the self is served by focusing onone’s weaknesses to blend in and maintain inter-dependence with others’ (p 847). However, theyalso measured individual self-construals (Markusand Kitayama, 1991), and demonstrate that inde-pendent self-construals are higher in the UnitedStates and are positively related to self-servingbiases. Thus, not only is a main effect of nationalculture on egocentric biases demonstrated, but theexamination of individual self-construals helps toexplain why such an effect exists.

Research of this type is especially valuable giventhat much of the theory underlying businessresearch has been developed and tested exclusivelyin Western contexts. Experimental research focus-ing on the moderating influence of individualcharacteristics contributes to this literature becauseit directly tests whether these processes, biases, andbehaviors are indeed universal phenomena, orwhether they are specific to Western populations.

As Oyserman et al. (2002b) point out in theirmeta-analysis of research on collectivism/indi-vidualism, cultural priming is one of the mostpromising areas of cross-cultural research.The theoretical underpinnings of priming stemfrom social cognition research, which shows thataccessible knowledge influences behavior, and thattemporarily accessible and chronically salientknowledge produce equivalent effects in the labora-tory. Thus, priming techniques ‘create an experi-mental analogue of chronic differences betweencultural groups by temporarily focusing partici-pants’ attention on different cultural content orvalues’ (p 7). Examples of this research would be theHong et al. (2000) study mentioned in an earliersection, as well as Kuhnen and Oyserman (2002)and Aaker (2000), which primed participants withcues that were or were not congruent with theircultural orientation (e.g., using pronouns such as ‘I’


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and ‘me’ for an independence priming or ‘we’ and‘our’ for an interdependent priming) and examinedthe influence on factors such as cognitive speed andaccuracy, memory, and attitudes. Results across allthe experiments indicate the existence of a chroniccultural orientation, and one that is more malleablein the face of a primed orientation.

The moderating influence of group characteristicsPreviously in this paper the importance of under-standing group characteristics, such as the level ofgroup development, was discussed. Furthermore, itwas suggested that, to the extent possible, researchthat can simultaneously examine the moderatinginfluence of both individual and group character-istics should be encouraged. The following is anexample of such research.

Buchan et al. (2002) demonstrated that differ-ences in the definition and method of groupformation prompt variance across cultural orienta-tions in terms of response to ingroup/outgroupmanipulations. In support of research using theminimal group paradigm (Tajfel and Turner, 1979),participants with an individualist orientation wereexpectedly biased toward the experimentallymanipulated ingroup in terms of trust and recipro-city; however, collectively oriented participantswere not (thus a statistically significant interactionbetween cultural orientation and group manipula-tion emerged). For individualists, groups are seen astemporary and flexible to allow entry and exit inthe pursuit of self-interest; for collectivists, groupsare permanent, based on personal characteristics,and preservation of the group takes priority overindividual goals (Triandis, 1995). These resultsdeepen understanding of the complex relationshipbetween culture and group relationships, andindicate when culturally influenced group biasesare likely to be present.

The moderating influence of situationalcharacteristicsExperimental research examining the influence ofsituational characteristics proves especially valuablein clarifying the influence of the ‘other’ on one’sthoughts, feelings, and behavior, thus promotingunderstanding of the interaction between indivi-dual and situational characteristics. For example,Adair et al. (2001) examined intra- and interculturalnegotiations among Japanese and American man-agers. They demonstrate behavioral differencesacross cultures in negotiation (main effects), and,perhaps more significantly, support the conjecture

that intercultural negotiations are more difficultand less successful than intracultural negotiations(Graham, 1985; Brett and Okumura, 1998) owing tothe interaction of individual cultural characteristicsand the bi-cultural context of the negotiation.

An interesting twist on priming research ispresented by Chatman and Barsade (1995). Theymeasured participants’ levels of cooperativenessand agreeableness, and manipulated a businessenvironment to reflect goals typically associatedwith collectivism or individualism. Results demon-strate that highly cooperative individuals weremore responsive to the norms characterizing theirorganization’s culture, such that they exhibitedgreater differences in behavior across the twocultural environments. Like research priming indi-vidual characteristics, this research demonstratesthat people may behave or think differently whenfaced with situations exhibiting differing culturalvalues – and indeed, may modify their own values –thus rendering a whole new set of complex, buttheoretically rich, issues to be studied throughintercultural experiments.

Experimentation as a tool to understand thelimits of culture’s influenceExperimentation provides a powerful tool foridentifying the limits of the influence of culture –that is, understanding when cultural values willhave an influence, and when they will not, a topicthat we have already discussed in a previoussection. Currently, much of the experimentalresearch in this direction is couched in the contextof economic games in which the pull of self-interestis pitted against the interest of the collective. Forinstance, Roth et al. (1991) conducted two differenteconomic games in four countries, and highlightedthe importance of situational characteristics inmaking salient the influence of cultural values.They demonstrate that behavior in all countriesconverged to the equilibrium in a four-personmarket game (a situation similar to an auction),while behavior in a two-person ultimatum game (aresource allocation problem) deviated from equili-brium and, furthermore, differed across the coun-tries. This pattern of results suggests the influenceof differing culturally influenced values regardingwhat is fair in allocation: because of the structure ofthe economic interactions, fairness concerns werenot salient in the four-person market game, butwere quite salient when bargaining with a partnerin the ultimatum game.


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Similarly, Buchan et al. (2004) actually demon-strate divergent perceptions of fairness in a repeatedultimatum game in Japan and the US and differingbehavior across the two countries, but show thatculturally influenced perceptions of fairness (suchas those that may dictate more generosity to thepartner) do not influence behavior once the pull ofself-interest in the game becomes too strong.

Kachelmeier and Shehata (1997) investigated theinfluence of individual cultural orientation on theeffectiveness and demand for auditing. Their resultsshow that collective cultural values are most likelyto challenge self-interest in conditions of lowanonymity. That is, only when a reporting systemcould identify the actions of group members wereparticipants from Hong Kong and China morewilling than participants from Canada to forgoself-interest. When anonymity was high, partici-pants from all countries pursued self-interest withequal intensity.

In sum, these experimental studies echo ourearlier conclusion that there are times whencultural orientation does not matter. The questionof the limits of cultural influence represents achallenge to cross-cultural research, and experi-mentation can play a major role in resolving manyof the complex issues involved.

Broadening our understanding of cultureRecent research highlights the need to broaden ouranalysis of culture – to perhaps take a closer look atmanifestations of culture such as folklore, themanner in which we are educated, political sys-tems, and methods of economic exchange – inorder to fully assess the influence of culture on anindividual. Examples of experimental studies thatplay a role in this broadening are given below.

Weber and Hsee (1998) demonstrated thatrespondents from China are significantly less riskaverse than those in the US in financial decisionsbut more risk averse in social decisions. Todetermine whether these differences were trulycultural, or instead resulted from current economicor political circumstances, Weber et al. (1998)undertook a study in which participants fromChina, Germany and the US rated the risk-takingadvice imparted in Chinese and American proverbs.Their results support earlier findings, and suggestthat the interpretation of proverbs revealed ‘long-standing cultural differences in social cohesion andcooperation’ that contributed to the explanation ofthese differences in risky behavior (p 183).

Yates et al. (Yates et al., 1989, 1998) have shownthat Chinese respondents exhibit extreme over-confidence in probability judgments as well as ingeneral knowledge, as compared with those in theUS and Japan. They suggest that there may beimportant differences in culturally influenced ‘cog-nitive customs’ that account for the cross-culturalvariations such as ‘rules’ (such as memorization)that Chinese children are taught for approachingcognitive tasks (Liu, 1986), the rareness with whichChinese culture demands that people generatemultiple arguments on both sides of an issue, andthe typical characterization of decision problemsbased on the logic of historical precedence ratherthan on the logic of the decision tree. Thesecognitive customs, born out of cultural values andreinforced throughout education, may be at thecore of cross-national variations in overconfidence.

An anthropologist-led study in economics exam-ined bargaining behavior in 12 small-scale cultures(e.g., Peru’s Machiguenga farmers and Paraguay’sAche headhunters). This study reveals stark differ-ences in behavior across cultures, and addresses theinfluence of market development on cooperativebehavior (Henrich et al., 2001). Two variablesaccount for 68% of the variance in offers acrosscultures; cultures with more cooperative activity(e.g., collective hunting of whales) and marketintegration (an index combining the existenceof a national language, of a labor market for cashwages, and farming of crops for cash) have sharingnorms closer to equal splits. These results arestartling to some theorists in that they suggestthat real-world, ‘enculturated’ market experiencetempers rather than amplifies the pursuit ofself-interest. As researchers are interested inunderstanding the full influence of culture, thiswork indicates that we need to take into accountthe interplay of more traditional measures ofculture such as collectivism–individualism withthose that measure market development and levelof integration.

As shown by this research, broadening ouranalysis of culture has enormous potential forincreasing understanding of the manner, and themultiplicity of ways, in which individuals areinfluenced by their environment. An appropriatesummary of this section may be to discuss thepublic goods research of Yamagishi and colleagues(see, Yamagishi, 2003, for a summary), whichpresents a perfect and pressing example of the needto gain a broader understanding of the influencesand implications of culture and the potential that


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experimental research has to do so. Yamagishi’sresearch consistently demonstrates that Americansare more cooperative than Japanese in public goodsituations, and that Japanese are only more coop-erative when a system of sanctions and monitoringis in place to assure the cooperation of the othermembers of the group. On the one hand, Yamagishi(2003, 367) suggests that ‘the commonly heldnotion of cross-cultural differences between Japa-nese and Americans – the former being collectivistsand the latter individualists – cease to exist once alltheoretically relevant factors are experimentallycontrolled’. On the other hand, he also suggeststhat the system of social sanction and monitoringmay be a particularly collectivist solution to theproblem of fostering cooperation among a group(Yamagishi et al., 1998). Thus this issue is multi-faceted. Not only are there likely influences ofindividual, group, and situational characteristicsthat moderate cultures’ impact on thoughts andbehavior in this context. There likely are factorssuch as economic and legal constraints, andembedded social networks in each society, thatthemselves are influenced by cultural norms and inturn are directly or indirectly influencing theindividual.

Through careful construction of experiments,through precise manipulation of each of thesuspected influences, and by drawing on fieldssuch as economics, sociology, and anthropology tobroaden our understanding of culture, we can beginto tease out the multiplicity of effects in thisproblem, and others. Essentially, we shall berefining our knowledge of the dynamics of thetop-down–bottom-up processes involved in cultureshown in Figure 1. In doing so, we shall be gaininga deeper and richer understanding of the nature ofcultural differences, why and when they occur.

ConclusionResearch on culture and IB is definitely a ‘growth’area, because the business world is in many waysbecoming one. At least four themes are apparent inour state-of-the-art review of current researchtrends in this area. First, much of previous researchon culture and IB has adopted what we view as asimplistic view of culture, which tends to examinethe static influence of a few cultural elements inisolation from other cultural elements and con-textual variables. For instance, much of the researchinspired by the Hofstede dimensions falls into thiscategory, which, in our view, was instrumental inkickstarting the field. However, the advances

reviewed here are able to provide the conceptualand empirical basis for moving into more complexconceptualizations of culture. The several newperspectives on culture reviewed in this paper allpoint to multi-layer, multi-facet, contextual, andsystems views of culture. These views converge tosuggest that culture entails much more thancultural dimensions, and culture manifests itselfin many levels and domains. Some cultural ele-ments are stable, whereas others are dynamic andchanging. Sweeping statements about cultures areuseful to the extent that they provide an abstractframework for organizing more situated descriptionof the effects of cultures. A major challenge for thefield is to develop mid-range, dynamic frameworksof culture that are sensitive to their nuances indifferent contexts.

Second, a more complex conceptualization ofculture will necessarily give rise to a more complexview of its effects. Culture can be an antecedent, amoderator or a mediator, and a consequence, andits effects may be domain-specific and are subjectedto boundary conditions. Much of the research onculture and IB tends to focus on main effects ofculture. The immediate challenge for the field is tomap out other more complex effects of culturesystematically and integrate these effects routinelyinto substantive theories, so that cultural elementsconstitute a major type of building block fortheoretical models in IB. A recent, highly visibleattempt in this direction is the GLOBE projectdiscussed before, which attempts to build a modelof leadership with cultural elements as integralelements of the model.

Third, the plea for studying the effects of culturein conjunction with socio-economic-politicalvariables is not new, but our review has providedspecific theoretical rationale and concrete direc-tions for such research efforts. We have shownthat cultural change is intertwined with socio-economic-political variables, and that thesecontextual variables may also add to, moderate,and/or mediate the effects of culture. Fortunately,there is a long tradition in IB research to take theeffects of such variables into account, and futureresearch needs to evaluate the effects of culture inconjunction with the impact of socio-economic-political conditions. Culture may relate to socio-economic-political variables in complex ways, anda simple consideration of their joint effects isinadequate. A more complete picture of the forcesimpinging upon IB calls for a precise description ofthese complex relationships.


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Finally, a multi-method approach to research hasbeen advocated for decades, and for research onculture and IB, its importance cannot be exagger-ated. Most research in IB research is correlational innature, and we are more or less ignorant when itcomes to the causal processes involved. Experi-mentation provides a powerful tool for probingcausal relationships, and we need both correla-tional and experimental approaches to enrich ourunderstanding of IB phenomena, and to developeffective practical advice for international man-agers. Culture is such a fuzzy concept that we needto probe it with all the tools we have at ourdisposal, and we look forward to the bloom ofmulti-method approaches for moving the field ofinternational business research forward by leapsand bounds.

Notes1Evidence from three databases supports this argu-

ment. A search of the methodologies as they aredescribed in the full citation of JIBS articles (1987–present) as listed in ABI/INFORM results in the ratio of13.62:1. A search of JIBS abstracts (1970–2000)appearing in JSTORE provides the ratio of 11.5:1.Finally, a search within the JIBS website gives the ratioof 12.66:1.

2See Leung and Su (2004) and Buchan (2003)for comprehensive discussions comparing cross-cultural experimentation with other research meth-odologies, and concerning the specific controlsemployed in experimental research to strengthencausal inferences.

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About the authorsKwok Leung is Professor of Management at CityUniversity of Hong Kong. His research areas includejustice and conflict, international business, andcross-cultural psychology. He is a departmentaleditor of Journal of International Business Studies,and a consulting editor for several journals, includ-ing Journal of Applied Psychology, Organizational

Research Methods, and Journal of Management. He isthe Chair-Elect of the Research Methods Division ofthe Academy of Management.

Rabi S Bhagat (Ph.D. University of Illinois atUrbana-Champaign) is Professor of OrganizationalBehavior and International Management at theFogelman College of Business at the University ofMemphis. His research interests include interna-tional and cross-cultural variations in the creation,diffusion, and transmission of organizationalknowledge, human stress and cognition in organi-zations, and developing global mindset.

Nancy Buchan is an Assistant Professor of Market-ing at the University of Wisconsin, Madison. Herresearch focuses on the influence of national,cultural, and gender differences on trust andreciprocity, and has appeared in the AmericanJournal of Sociology, the American Economic Review,the Journal of Consumer Research, and the Journal ofEconomic Behavior and Organization.

Miriam Erez is the Mendes France Professor ofManagement and Economics, the Faculty of Indus-trial Engineering and Management, Technion,Israel. Her research focuses on cross-cultural man-agement, work motivation, and innovation. Shestudies the moderating effect of culture on therelationship between managerial practices andperformance, and the interplay between the globaland local cultures in global companies.

Cristina B Gibson, Ph.D., is currently AssociateProfessor at the Graduate School of Management,University of California, Irvine. Her research inter-ests include collective cognition, interaction, andeffectiveness in teams; the impact of culture onwork behavior; and international management.Her research has appeared in journals such asAdministrative Science Quarterly, Academy of Manage-ment Journal, Academy of Management Review, Journalof Management, Journal of International BusinessStudies, and Journal of Cross-Cultural Psychology.She is co-author with P Christopher Earley of NewPerspectives on Multinational Teams (Lawrence Erl-baum Associates, 2002) and co-editor with Susan GCohen of Virtual Teams That Work: Creating Condi-tions For Virtual Team Effectiveness (Jossey-Bass,2002).

Accepted by Arie Y Lewin, Editor-in-Chief, 25 February 2005. This paper has been with the author for one revision.


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culture and international business: recent advances and their implications for future research

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