Summary lecture 4, Introduction to IB

Lecture 4:

Video 7:

4 dimensions of distance (Gemhawat):

1. Cultural, like language
2. Administrative, like government policies
3. Economic, like cost of labour
4. Geographic, like time zones

The greater the distance, the more complicate it is to transfer non-location bound Fsa’s

Limitations of Ghemawat’s distance:

1. Macro level distance, does not always hold for all firms
2. A firm’s FSA can be that it is able to deal with these distances
3. Impact of distance differs for part of the value chain
4. Assumes that Fsas are developed in the home market, but firms may also develop Fsas in host country
5. Does not discuss cooperative entry modes

Video 8:

Many people experience language difference, what one finds normal, the other one can find offensive, multiple models for cultural difference like, Hofstede(measured them as first in large sample) and Schwartz.

Six dimensions of Hofstede (first 4):

1. Individualism (not selfishness)-collectivism
2. Power distance, scoring high, team members like to be guided to complete a task. If the manager does not take this, they might think that the task is irrelevant.
3. Uncertainty avoidance
4. Masculinity, feminism does not have much hierarchy
5. Long term orientation
6. Indulgence versus restraint

Globe-looks at leadership and is theory driven. Often presented as an updated culture framework.

Video 9:

Cultural difference refers to the difference in cultural background between people, managers form home and host country

Kogut and Singh, developed a CD-index in their article. For exact formula see slides

If cultural difference it is more complex to deal with foreign workforce, but they also may need  a local partner to help with the cultural difference

If CD increases

1. Level of investment in culturally distant country decreases
2. Investments  form high to low commitment
3. Investing firm does not want to corporate with local partner, contra argument, they might need to (see above)

The illusion of symmetry: assumes that CD between country A and B is the same, but does not have to be the other way around

The illusion of stability: CD measured at single point, but CD is constant over time

The illusion of linearity: effect of CD may depend on a firm’s learning curve and is not linear

The illusion of causality: distance should be studied together with geographical distance

The illusion of discordance: all aspects of cultural distance matter equaly, doesn’t have to be the case

The assumption of corporate homogeneity: also looking at a variance on corporate/organizational

The assumption of spatial homogeneity: potential intra variation is excluded