Ursula F. Ott 47
dependent on the effort levels of both partners. We can show the following pairs of value (100−x; 100−x), (x; x), (x; 100−x) and (100−x; x). The success of the joint venture depends on the Nash equilibrium of both players learning in an IJV.
Incentive schemes are based on the output I[q(eLoc, eFor)] and are therefore connected to the effort levels of local and foreign players. Since sabotage was related to jobs and cultures with high points of the grid as a response to hierar- chical structures, it is important to consider incentives based on the cultural effort to bridge gaps or differences in power distance eCC=(eHPD, eLPD). Ideally, IJV success is connected to learning instead of cheating which is related to cultures with a lower power distance score.
It is considered human to look for the best outcome within relationships, whether this means to adhere to a group consensus, to play fair, to look out for benefits in order to maximize individual profits or to enjoy the pleasure of manipulating hierarchical structures. The culturally implied moral hazard can be avoided by the appropriate incentive schemes. It is important to distinguish between the cultures which are prone to shirking, embezzling and sabotaging and to target incentive schemes according to the underlying cheating concepts.
host country representatives. The incentive schemes should be targeted to the national cultures involved and the likelihood of culturally implied cheating after signing the contract. It is important to note that, in reality, this is not a one-shot game; contracts will have to be updated periodically in order to adjust them to actual behaviour and its impact on the success of the IJV. This kind of repeated moral hazard scenario merits further investigation.
Conclusion
This chapter aimed to show the tension associated with multi-person decision- making in an IJV setting. It considered information asymmetries based on the distance between the players in both geographic and cultural terms. The complex- ities of the IJV as an organizational form were analysed and related to the presence of a variety of groups in an IJV. This research suggests that the literature on IJVs needs to focus much more on solving complex strategic issues rather than concentrating as heavily on the motives for founding IJVs as it has in the past.
First, the problem was analysed and the link between the real life scenario and the theoretical framework was developed. Based on the moral hazard problem of cheating after signing the contract, it was shown that the behav- iour of players in an IJV is related to culturally implied cheating behaviour. The corruption perception index and the bribe payers’ index were considered as measures for the actual perception of the proneness to cheating of a selection of national cultures. This was conceptualized in four groups (tight work groups, loose work groups, isolated subordination and the individual entrepre- neurialism) and embedded in Hofstede’s cultural dimensions of power distance, individualism and masculinity to show the relevance of hierarchical structure and group behaviour for cheating.
Second, the chapter showed the importance of using an abstract approach to help understand the complexities of IJVs and, in particular, the culturally implied moral hazard problems. The tools applied in the chapter, based on economic theory, were introduced and the theoretical perspective on incen- tives was related to earlier literature.
Finally, drawing on the introductory sections, a variety of mechanisms were provided to apply to the various problems of moral hazard within an IJV. Hidden action and the problem of free-riding were linked to the type of player and incentive schemes were developed to discourage such behaviour. The analysis of optimal contracts showed the importance of incentives in which effort was linked to the above-mentioned culturally implied moral hazard problems.
Further research could help in refining the choice of incentive schemes, but the results discussed here provide useful pointers to dealing with cheating in its various forms in IJVs.
Ursula F. Ott 49
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4
Managerial Perspectives on Business Purpose: Values, National Values and Institutions
Simon Harris and Chris Carr
Introduction
Doing business internationally always involves developing business relationships with people in other nations. The cultural differences faced in forging cross- national links are well known but the development of satisfactory business relationships is a prerequisite for successful international mergers, alliances and joint ventures, or even for effective overseas distribution deals. This chapter explores whether the purposes (‘strategic intents’) of managers differ between nations and, if they do, whether these differences are in line with previously ascertained and popularly known cultural values. It explores the relevance of national values research in predicting the beliefs that managers in different countries hold about the purpose of their businesses. The specific aspects examined here are the stakeholders which managers recognize as important, the aims that are pursued for the benefit of these stakeholders, and the time frames within which the managers expect their strategic decisions to be realized. Institutional structure can have an important influence on these elements, so the empirical work in this study is based on data collected in two different types of firm, which allows the impact of the structural differences to be explored. The findings have implications for managers trying to develop business relationships abroad and suggest the possible dangers of making assumptions about the purposes of overseas firms based purely on nationality.
Management styles in different countries have been widely compared – for example, paired comparisons have been made between the US and Japan and between the UK and Germany. Typically, the outcomes are generalized statements concerning managerial approaches, which have sometimes been absorbed into conventional wisdom in the form of stereotypes (for example,
Simon Harris and Chris Carr 51
Pascale and Athos, 1981; Hickson, 1993; Lawrence and Edwards, 2000). For instance, it is suggested that business decisions in the US tend to be ‘shorter term’ than is typical in Japan and in some European countries (Jacobs, 1991).
Managers in Germany and Japan are supposedly far more concerned with product attributes and quality in comparison to managers in the UK and US, where there is more focus on marketing aspects (Hayes and Abernathy, 1980;
Hayes and Limprecht, 1982).
One of the few variables available to explore reasons why such differences exist is based on the notion of national values. Though national values are well researched, the possible causal linkages between such values and different management practices have received considerably less attention, except in the area of human resource management (Laurent, 1986; Schneider, 1988). There are strong grounds, nonetheless, for believing that national values, as usually studied under the umbrella of ‘cultures research’, may well influence the way that strategic decision makers think in different countries; these are examined in the next section. Another possibly more important explanation for differ- ences in managerial practice, however, is institutional structure (Carr and Tomkins, 1998; Whitley, 1999). Ownership structures differ between countries for historical reasons (Pedersen and Thomsen, 1997), and these alter the owner-manager agency relationships and can influence behaviour (Pedersen and Thomsen, 2003). There is some empirical support for the view that ownership and governance structures influence management practice (for example, Schulze et al., 2003; Wright et al., 2002).
This study examines these explanations empirically through case studies carried out in two contrasting institutional contexts. One set of respondents were professional executives of multinational companies, subject to international capital markets, in the worldwide vehicle components industry in Germany, Japan, the United Kingdom and the US. The second set of respondents were owner managers of medium-sized, young electronics firms, who were also addressing global markets, but as they did not have agency relationships with outside shareholders, they were not directly subject to international capital markets.