Globalization and Ethics - China15

Samantha HallInternational Business - IMS 3310S. CarraherApril 30, 2015

Globalization and Ethics-A glance at the past, present, and future-Unites States of America and China-how cultural differences impact business ethics between these countries.

AbstractPurpose In order for companies to succeed and dominate in todays world, global expansion is crucial. Some challenges companies may face when expanding globally is aligning their company values and mission within the cultural values and ethics of the countries they are seeking to expand to. It is important to have a grasp on these differences in order for the company and its employees to be successful. With globalization on the rise and the need for businesses to maximize cost savings, this is a trend that is not slowing down any time soon. The purpose of this paper is to examine past, present and future attitudes regarding business ethics in the United States and China and how cultural differences between these two countries may influence ethical decisions within the present and future. These differences and similarities may include government, money, language, meal times, and even day to day activities. This paper also assesses how individuals live within both of these countries throughout their lives while realizing how ethics and values impact their daily decisions and ultimately impact the overall success of their own lives.

Design/methodology/approach The data obtained for this research paper was found by researches within the Hofstede model, questionnaires, The European Journal of International Management, and publications posted on Emerald Insight discussing the differences between China and the United States.

Findings The major differences between culture, ethics and values between China and the United States can significantly impact and highly influence how a company perceives and commits to its ethical practice. From the study, we saw that undergraduate and graduate US and Chinese students did not perceive the fundamentals of the importance of business ethics that differently. In fact it seems that on most topics the gap is shortening.

Originality/value As each country is extremely unique in their own way, there are many different findings between the two countries which show that individualism and ethics are very unique as well.

Keywords Cross-cultural differences, Hofsteade, Business ethics, Forsythe Ethics Questionnaire, Managers, China, United States of America, Culture, Ethics, Values, Project GLOBE Model, Guanxi

Paper type Research paper

IntroductionMore and more United States (USA) based companies are realizing the cost savings of outsourcing to foreign countries and with outsourcing to other countries comes with a number of risks. As a manager working for a multi-national company, it is important to understand differences and similarities between cultures and how to adapt. Culture plays a huge impact on the ethical standards of countries and how businesses view their code of ethics. Ethical standards, reputation and corporate social responsibility recognition within the business community is becoming more and more prevalent and required for a business to be successful these days. It is also, however; equally important to maximize profits and efficiencies. In the last couple of decades outsourcing to China has become more and more common. With a yearly economic growth rate of ten-plus per cent over the past three years (World Economic and Financial Surveys, 2007), outsourcing to China does not seem to be slowing down anytime soon. Both the USA and China have historys and reputations of bribery, conspiracy and other clandestine activities. The embedded cultural differences between the East and the West are vast. In this paper, we will take a look at, past, present and future and how differences among these two cultures influence the ethical actions of businesses in these countries and the ethical attitudes of future business leaders.

Cross-cultural differencesEvery country has a very unique and precise way of living and doing just about everything through their culture. Although there is not just one way to define culture, culture has been defined several different ways by several different authors, such as (Ying Fan, 2000) all the historically created design for living, explicit and implicit, rational, irrational, and non-rational, which exist at any given time as potential guides for the behavior of men (Kluckhohn and Kelly, 1945) the man made part of the environment (Herskovits, 1955) the integrated sum total of learned behavioral traits that are shared by members of society (Hoebel, 1960) a mental map which guides us in our relations to our surroundings and to other people(Down, 1971)The most current and latest definition of culture was made by the Social Psychologist, Geert Hofstede in 1980. Hofstedes definition reads, the interactive aggregate of common characteristics that influence a groups response to its environment which was then later redefined by Hofstede as, the collective programming of the mind which distinguish one group of people from another. The word culture was derived from the Latins which is closely related to the word cultus and also referred to as cult or worship. Cults around the world are very well known in doing things their own certain ways and worshipping their own specific people, which results in having their own special beliefs and culture is summed up in just about the same way. With all the above definitions, culture is collectively behaviors, beliefs, customizations, attitudes, and values based on a society originated by people who believe in all these different ideas and beliefs as a whole (Ying Fan, 2000). Cultures between the United States and China differ in an extreme amount of ways. With the help of the nine dimensions according to the GLOBE model and the five dimensions according to the Hofstede model, both of these models provide explanations and a better understanding of cross-cultural differences between these two countries (Garcia, Mendez, Ellis, Gautney, 2014). The nine dimensional culture studies based on the GLOBE model is below in Table 1.Table 1: Nine dimensional measurement of culture based on GLOBE ModelPower distanceDegree to which a cultures people are (should be) separated by power, authority and prestige

In-group collectivism Degree to which a cultures people (should) take pride in and (should) feel loyalty toward their families, organizations and employers

Institutional collectivismDegree to which individuals are (should be) encouraged by institutions to be integrated into broader entities with harmony and cooperation as paramount principles at the expense of autonomy and individual freedom

Uncertainty avoidanceDegree to which a cultures people (should) seek orderliness, consistency and structure

Future orientationDegree to which a cultures people are (should be) willing to defer immediate gratification for future benefits

Gender egalitarianism Degree to which a cultures people are (should) support gender equality

AssertivenessDegree to which a cultures people are (should be) assertive, confrontational and aggressive

Humane orientationDegree to which a cultures people are (should be) fair, altruistic, generous, caring and kind toward others

Performance orientationDegree to which a cultures people (should) encourage and reward people for performance

Source: Shi and Wang (2011) Table 2: Cultural dimensions between China and USA using GLOBE ModelAOICIGCFOGE

PVPVPVPVPV

CHINA3.775.524.674.525.865.123.684.73.033.73

USA4.504.364.214.204.225.794.135.343.365.03

HOPOPDUA

PVPVPVPV

CHINA4.295.344.375.725.023.014.815.34

USA4.185.514.456.144.922.884.153.99

Notes: AO = assertiveness orientation; IC = institutional collectivism; IGC = in-group collectivism; FO = future orientation; GE = gender egalitarianism; HO = humane orientation; PO = performance orientation; PD = power distance; UA = uncertainty avoidance; P = practice; V = value; M = meanSource: Shi and Wang (2011)Based on the data provided above on Table 2, China differs significantly between practice and value showing that China practices a low level of assertiveness (AO) but values a much higher level whereas, the United States (USA) practices and values are about average levels of AO. Based on the information in table 2, it is determined that cultures within the USA have high levels of aggressiveness, confrontation, and assertiveness whereas China shows a much lower level within their cultures. Based on the data provided above in Table 2, China practices a higher level of institutional collectivism (IC) than the USA. Based on the definition of IC in Table 1, those cultures that have a higher level of IC are shown to be more interdependent within their organization, decisions are based on groups, and rewards are mainly driven by groups and equality rather than individual success and freedom. Therefore, the table displays a lower level of IC within the USA which results in less group activities and success and more individuality and personal success. The Chinese culture practices group success and equality rather than individual success and is willing to give up their own personal success in order to have success for the group.Based on the data provided above in Table 2, China practices on a significantly higher level of in-group collectivism (IGC) over their lower level of IGC values. The USA practice levels of IGC are extremely lower compared to the culture values and based on the definition of IGC in Table 1; the USA displays a low level of pride and loyalty toward their families and organizations and is more individualistic in many ways. China has significantly high levels of pride and loyalty to their families and employers. Based on the data provided above in Table 2, the Chinese culture displays very low levels of future orientation (FO) in both practice and value. Having low levels of FO displays that China is not willing to defer immediate gratification for future benefits whereas, the USA scored a little higher for both practice and value. Every culture emphasizes on a different level with accordance to the past, present, and future and by having higher levels with FO, the USA is willing to look towards the future.Based on information in Table 2, both Chinese and the USA cultures practice on average about the same level of gender egalitarianism (GE), meaning both countries have about the same level of gender equality with USA being a little higher than China. Although USA values GE on a much higher level, their practice levels are still much higher than China which result in much more equality throughout their culture. Based on Table 2, although China and USA value about the same levels of humane orientation (HO), both countries practice at a significantly lower level with USA being lower than China. According to the HO definition in Table 1, USA is less fair, generous, caring, altruistic and kind towards others within their society and culture.Based on the information provided in Table 2, USA has a higher level of performance orientation (PO) over China, which means the USA encourages and provides rewards for individuals with high performance levels. Although, the USA values a significantly higher level of PO, they are still showing encouragement at a higher level than China. Based on Table 2, both countries value an extremely low level of power distance (PD), meaning these cultures are separated by power, authority and prestige. China is scored at a higher level over USA showing that they display a higher level of PD. PD is defined as the difference between the extent to which supervisors can determine the behavior of subordinates and the extent to which subordinates can determine the behavior of supervisors (Chang, 2011).Based on the data provided in Table 2, the Chinese scored much higher within practice and value category of uncertainty avoidance (UA) whereas, USA scored at a significantly low degree of value and much higher in practice. This information shows that the Chinese culture seek orderliness, consistency and structure. While comparing the differences and similarities of culture between China and the USA while utilizing both the GLOBE and Hofstede model, there are a few consistencies as well as inconsistencies between the two countries as noted above. Culture is believed to shape beliefs, values and behaviors of individuals and their future (Ying Fan, 2000). Culture is highly influenced which can define ones behavior and attitude towards their own personal day to day lives. Based on analyses between China and the USA, it is quite obvious that each country has a significant culture difference between each category provided. It is quite obvious that both Chinese and American cultures are very rich, dynamic and unique and both cultures are continuously changing every single day.

EthicsCompanies need a code of ethics to thrive as a business. As J. Singh et al. (2005) have confirmed, two important and interrelated issues in businesses are globalization and ethics. Reports have shown there is a strong correlation between having a strong code of ethical standards and the success of a business. More and more US based companies are realizing the cost savings of outsourcing to foreign countries, and with outsourcing to other countries comes with a number of risks. As a manager working for a multi-national company, it is important to understand differences and similarities between cultures and how to adapt. A successful company typically has a high reputation of integrity and loyal customer base. In the US especially, a legal system is in place to protect businesses and consumers. Beyond borders, however, the integrity of a company becomes more and more risky because of the lack of consistency with laws and consequences. Studies on international co-operative relationships, such as reported in Zakhem (2008), Yen and Barnes (2011), Berger and Herstein (2012), have shown that the uncertainty of whether the other party will fulfill obligations, commitments and expectations is a major issue in countries where the legal infrastructure is weak and unpredictable, as is the case in China (Ron, 2014). With more and more US companies infiltrating China, this is something they should be aware of and take action on.

The history and perceptions of business ethics in both countries have had a shaky past and continues to be under constant scrutiny. A National spotlight on the ethical practices of American businesses began with the Watergate scandal in the 1970s. After that debacle, businesses and their practices were being closely watched more closely by the American people. Not to say that the exposure of Watergate resolved all issues of unethical behavior by American companies. In 2002, the Enron scandal proved that US companies were still capable of clandestine activities in the quest of the almighty dollar. Scandals such as these and others, however; paved the way for several laws such as The Foreign Protection Act and the Sarbanes-Oxley Act overall strengthening the US law system and the consequences of mal actions by US companies. China does not have an advanced legal system like the US does and that can put US companies at risk of potential malpractices when partnering with China. In recent years, 2005, the National Corporate Responsibility Index ranked China 66 out of 80 countries in terms of corruption, environmental management, and corporate governance and in 2006, Transparency International ranked China second worst in terms of engaging in bribery in developing nations (The Economist Intelligence Unit, 2006). That statistic is alarming. US Companies, in their worldwide operations, are forbidden to engage in activities that are illegal in the US (Dennis, 1999). Bribery to obtain business, particularly, is strictly forbidden for a US company no matter where it takes place (Dennis, 1999). But, in some countries, bribery is a part of life and business cannot be transacted without it (Dennis, 1999). We can assume that the cultural differences between these two countries attribute to how companies in those countries view ethics within the business. Highlighting differences between the USA and China, Leung (2004) suggested that trust, equity, responsibility and commitment are the basis of ethical judgment in the USA. On the other hand, in China, ethics values and decisions are based on the relational constructs of jen (moral excellence), guanxi (networks of informal relationships and exchanges of favors that dominate business activity), xinong (personal trust) and face (Spero, 2009). The same goals essentially just interpreted in different contexts. The Chinese, for example, do not interpret bribery in the same context as in the US. It is these differences that can make it challenging doing business beyond borders. The question remains to be unseen of where the future of business ethics between US and China is headed. How has time and revelations about business practices over the years impacted the next generation of future business leaders.

We will look at a survey which was conducted and given to traditional and non-traditional business students enrolled in graduate and undergraduate programs in a private university in the Southeastern USA and in two public universities in eastern China (Spero, 2009). The survey consisted of a paragraph and seven statements. They asked the students to pretend an Ethical Practices code had been implemented where they work and they were asked what the code would accomplishment if consequences for not following the code would be implemented. The students were asked to rate the following statements below on a scale of 1 to 5, with 1=disagree and 5=agree.

. The code would raise the ethical level of business in this industry.. The code would be easy to enforce.. In situations of severe competition, the code would reduce the use of unethical practices.. Individuals working in this industry would welcome the code when looking for a way to diplomatically refuse an unethical request.. The code would protect inefficient firms and retard the growth of businesses in this industry.. The code would help business people by clearly defining the limits of acceptable conduct.. People would violate the code whenever they thought they could avoid detection.

According to the statistical results, both the Chinese and USA groups believed that an ethical practices code would raise ethical levels and that individuals would welcome a code when looking for a way to diplomatically refuse an unethical request (Spero, 2009). Both groups were in agreement that a code would help by clearly defining the limits of acceptable conduct, would not protect inefficient firms, and would not retard the growth of businesses in the industry (Spero, 2009). The groups tended toward the middle of the scale with regard to whether, in situations of severe competition, the code would reduce the use of unethical practices (Spero, 2009). Interestingly, both groups believed that the code would not be easy to enforce and that people would violate the code if they thought they could avoid detection. Table I (below) presents the results in more detail (Spero, 2009). Survey Responses (%)Ethical Practices code statementNationalityMeant-valueSignificance1=Disagree2345=Agree

1. The code would raise the ethical level of business in this industry.ChineseUS3.483.430.3770.706371010363136371515

2. The code would be easy to enforce.ChineseUS2.672.620.4350.664101237373134201225

3. In situations of severe competition, the code would reduce the use of unethical practices.ChineseUS3.152.961.4930.137813202132312827128

4. Individuals working in this industry would welcome the code when looking for a way to diplomatically refuse an unethical request.ChineseUS3.914.01-0.8730.3841433271542442234

5. The code would protect inefficient firms and retard the growth of businesses in this industry. *ChineseUS2.892.314.5500.0001326263425253013

62

6. The code would help business people by clearly defining the limits of acceptable conduct.ChineseUS3.593.77-1.6930.0912368361941501520

7. People would violate the code whenever they thought they could avoid detection.ChineseUS3.253.160.6740.501761721343426271612

Note: *Significant at the 0.05 level of significance.

We can conclude from this survey that both, US and Chinese future business leaders can agree on the fact that a code of ethics, if not in the right hands can impact the financial success of a business. I think it is safe to assume that these codes of ethics are headed in the right direction. Undoing centuries of outlooks and opinions when it comes to business dealings are hard to undo. But with time, I feel the language of business, which is becoming more and more universal, will prevail from centuries of old outlooks and traditions. Because business is just that, business! nothing personal. How can we maximize profits and minimize costs? Those are truly the brass tacks subjects that should drive a company. It is a strategic game, an analytical game. Hopefully one day a universal code of business will exist; an equal playing field for all companies to use strategy to get ahead in the business world instead of bribery and corruption.

Suggestions for future researchResearch will always be a never ending task between all sorts of information throughout the world. With two of the largest countries continuously growing not only in size but in number of people as well, these countries will continue to rapidly change including their nations cultures, ethics and values. Future research needs to focus on evolution of these specific cultures and values and what makes these countries so vastly different. Although culture is only one factor in explaining the differences between these two countries, culture is one of the most highly significant reasons as to why they are so different. Within the next 50 years there will be a whole new generation in charge of the market economy. It would be interesting to analyze the mindsets of well-known corporations Chief Executive Officers that are engaged in international business with China from those mindsets of their elders. Focusing specifically on technological advances over the last half century and how that has influenced cultures during that time and whether that has an impact on current trends in business ethics. The study would need to be conducted every decade to have a good sense on the different ethical outlooks 50 years down the road.Gender equality has been and continues to be a hot button issue. Should males and females be treated equally in the business sense? Are they both equally capable of producing the same output if given the same task? Further research of gender equality in China and the US and how gender impacts business ethics and the ethical decisions of large corporations in each country ultimately impact the success of a business in both a qualitative and quantitative sense. Do business ethics have a strong correlation between the financial successes of a business? This study would need to monitor the deployment and implementation of a specific universal developed code of ethics within two large corporations within the US and China. Financial records of each company would need to be analyzed over the course of a decade to determine if a universally implementation of a code of ethics has an impact on financially successful a company can be.Education is said to be vital to the success of a person, mentally, emotionally and financially. A study on how education impacts business ethics within the US and China could draw a further conclusion on why business ethics vary between these two countries. An interesting variable to analyze would be the relationships between a traditional US student attending business school in the US, US Student attending business school in China, Chinese student attending business school in the US and Chinese student attending business school in China. Taking a look at these four variables may also identify education gaps between different countries and how that may impact future ethical decisions in multinational companies.

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Additional ReadingsShi, X. and Wang, J., (2011), Cultural distance between China and US across GLOBE Model and Hofstede Model, International Business and Management, Vol. 2 No. 1, pp. 11 17