Understanding National Culture and Ethics in Organizations

A Study of Eastern and Central Europe

Iulian Warter, Liviu Warter, Iulian Warter, Liviu Warter

• Publisher: Emerald Publishing Limited
• Year: 2020
• ISBN:
  9781838670245
• Topic: Betriebswirtschaft
• Subtopic: Business allgemein

Understanding National Culture and Ethics in Organizations: A Study of Eastern and Central Europe explores the nexus between ethics and national culture, with a special focus on Eastern European countries. Understanding the nuances of these cultural differences as well as different perceptions of business ethics allows a finer understanding of the differences in business styles between Western and Eastern European countries.
Intended primarily for managers, ethics and intercultural management scholars and business owners, this book reveals some leading questions in business research, linking ethics and national culture, with a particular emphasis on Eastern European countries. The main questions that should be answered are: 'Which are the cultural particularities in Eastern European countries?' & 'What is the relationship between ethics and national culture in Eastern European countries?' and 'How to be successful in business in Eastern European countries?'
The volume's approach to culture and ethics leads to unique and new perspectives on the Eastern part of Europe. By improving our understanding of the relationship between business ethics and national culture, the book contributes to the integration of theories, concepts and results from different research traditions and in this way helps to better our understanding of management.

Chapter 1

Cultural Hybridization in the Russian Car Industry

Vincent Montenero and Philippe Very

Abstract

How should foreigners manage a partnership or an acquisition in Russia? We know a lot about Russian culture per se, but research on foreign companies having to deal with Russia remains scarce. To answer our question, we used the concept of nationally bound administrative heritage to identify how foreign practices are efficiently implemented in Russia in the context of partnerships and acquisitions. We interviewed 16 Russian managers working in the car industry about their perception of foreign practices and how things ought to be done. Our investigations show the maintenance of a strong national culture that generates a need to cope with uncertainty for foreign firms. For local people, Russia is a particular country, not comparable to others. When transferring practices, foreign managers need to organize hybridization processes in order to successfully import these practices. Hybridization means transferring but adapting in order to impregnate them with the Russian specificity. Such hybridization requires foreign managers to work and network locally for the implantation of practices.

Keywords: Culture; administrative heritage; Russia; hybridization; car industry; localization

Introduction

How should foreigners manage a partnership or an acquisition in Russia? Russia has a long history linked to communism and planned economy. Despite its opening to the world economy after the fall of the Berlin wall in 1989, administrative traditions remain strong in a nation where natives think of being ‘a different country’ (Ivancevitch, DeFrank, & Gregory, 1992).

The concept of national culture is used in most studies about international alliances or acquisitions in order to identify issues faced by partners or acquirers when entering a new country. This concept has become the classical basis for accounting for differences in attitudes and behaviours between managers from different countries. Culture refers to values and attitudes: ‘how things ought to be’ (Schein, 1985). But culture, whether national or organizational, is of limited help for international managers: it does not inform about the actual practices at work. When these managers plan to invest and manage operations abroad, they want to understand not only the culture of the country and/or partnering organization but also the managerial practices implemented abroad. Research in this direction has been rare. Consequently, our study seeks for exploring these practices in the Russian car industry context. For that purpose, we reintroduced an old concept, called ‘administrative heritage’, and conducted interviews with 16 Russian managers involved in the car industry.

Our findings show that the implementation of Western managerial practices in Russia needs to rely on hybridization, a process by which new practices are introduced, but with a visible ‘Russian difference’. Such a hybridization requires foreign managers to work and network locally for the implantation of the practices.

Administrative Heritage

The members of a firm develop over time a set of shared beliefs as to ‘how things ought to be done’ (Bjur & Zommorrodian, 1986). These shared beliefs legitimize managerial practices, like the ways of organizing and controlling that constitute the firm administrative heritage (Bartlett & Ghoshal, 1995). This administrative heritage partially reflects the culture and institutional routines of the company's country of origin. For example, Calori, Lubatkin, Very, and Veiga (1997) show that a nation's educational system may shape the beliefs about ‘how things ought to be done’, like managerial preferences toward centralization or decentralization in decision-making.

A firm's administrative heritage is also characterized by path dependency. Bartlett and Ghoshal (1995, p. 195) state that companies are ‘captives of their past’, and any organizational change is influenced by the company history. Consequently, a firm's administrative heritage may act as a constraint on the strategic choices that firms make about how to compete (Bartlett & Ghoshal, 1989; Collis, 1991).

A few researchers have explored the administrative heritage of organizations. Comparing managerial practices of French and British companies, Calori et al. (1997) and Lubatkin, Calori, Very, and Veiga (1998) show how a nationally bound administrative heritage influence the integration practices of acquirers from each country. Zalan and Lewis (2006) have studied the international development of Australian firms and confirm the proposition of Bartlett and Ghoshal (1995): internationalization success is partially explained by company administrative heritage developed in the domestic market because this heritage restrains strategic choices. Dixon and Day (2007) identify critical success factors for the management of change in transition economies. Their analysis of four longitudinal case studies of Russian oil companies after 1995 highlights the importance of a Russian-based administrative heritage as an initial obstacle to change. They find that organizational change occurs when the top management team brings radically different mindsets than the traditional Russian ones, when it has an entrepreneurial orientation and a capability to monitor change.

This bunch of research helps us elaborate a framework for answering our research question: how should foreigners manage a partnership or an acquisition in Russia? First, the study by Dixon and Day (2007) indicates the pertinence of using the ‘administrative heritage’ approach for examining managerial practices in the Russian context: the inheritance from the planned economy seems to slow down or impede organizational change processes. It means that good managerial practices by foreigners in Russia should consider a Russian-bound administrative heritage.

The other studies (Calori et al., 1997; Lubatkin et al., 1998; Zalan & Lewis, 2006) show that internationalization, and particularly cross-border partnerships, represents a particularly relevant phenomenon for examining the role played by administrative heritage in the strategic development of companies. Lubatkin et al. (1998) explain that, in the context of cross-border acquisitions, the members of the acquired company are confronted with a new set of practices that increases their awareness of their own practices. When foreign firms invest in Russia through partnerships, their managerial practices represent their beliefs about ‘how things ought to be done’ in partnerships. Any misalignment between partner's managerial practices is likely to exacerbate the consciousness of each one about its company administrative heritage. Consequently, in the course of acquisitions or partnerships, a firm administrative heritage should be best captured by surveying the perceptions of its own members. Similar arguments have been developed for studying the organizational culture in the context of acquisitions (Sales & Mirvis, 1984).

Russian Work Practices

Russia was marked in the early 90's by the brutal passage from a centrally planned economy to capitalism. The Soviet system has been described as highly bureaucratic and centralized, emphasizing top-down management. At the centre of the organization, we found the various ministers relayed at local level by the enterprises' directors who concentrated a lot of power in their hands, issuing orders and bearing responsibility for the firms' results (Ivancevitch et al., 1992). This centralized and autocratic system generated the emergence of several attitudes, such as the fear to talk openly or the preference given to information received from unformal channels to those of any official media (Alas & Vadi, 2004). The socialist system was the cumulation of a century-long history of forces which discouraged participative decision-making and risk-taking (Ivancevitch et al., 1992).

Another important characteristic of the Soviet society was the existence of a vast and ramified system of privileges for the members of the nomenklatura which split into two major segments after the fall of socialism: the political elite and the economic elite (Kryshtanovstaia, 1996). The latter group derives its legitimacy from the amount of money they have and the way they spend it. In any case, the reproduction of elites has been much stronger than in countries such as Poland and Hungary (Hanley, Yershova, & Anderson, 1995). At operating level, the former system disregarded the interest of customers, with consequently little concern for quality issues and scarce culture of performance (Grachev, 2009, p. 5).

The transition from a central planned economy to a market economy was considered a great challenge because it required changing attitudes and values (Alas & Vadi, 2004). While transferring technologies and modifying structures is feasible without too many problems, this is far from being the case for culturally embedded practices (Clark & Geppert, 2002; Soulsby & Clark, 2012). This phenomenon, which has been recognized and monitored in many postsocialist countries, has apparently been slower in Russia, where the changes undertaken have not been able to generate enough ‘new cultural patterns in business relations’ (Kuznetsov & Kuznetsova, 2005, p. 30).

Scholars recognize that the different and numerous reforms implemented by the Russian government have failed to bring Russian capitalism into the modern age (Kuznetsov & Kuznetsova, 2003), speaking even in some cases of the failure of the country modernization (Inozemtsev, 2016). The institution deficiency has led to the surge of corruption and poor contract enforcement (Blanchard & Kremer, 1997). Many Russian economic agents' behaviours, repeatedly considered senseless, are often rational reactions in front of the uncertainty and the challenge caused by institutional distortions.

The weakness of local institutions has led experts to use such phrases as ‘institutional void’ (Puffer, McCarthy, & Boisot, 2009) or ‘path dependency’ (Schwartz & McCann, 2007). This explains in large part the citizens' lack of trust for everything done by the government (Shlapentokh, 2006), which conducts actors to rely more on the cognitive aspects resulting from the combination of values, beliefs and local customs (Puffer & McCarthy, 2007). The absence of strong institutions has led to an increase of games of powers, which have become essential to survive and prosper in a situation perceived as instable and opaque. Consequently, business actors try to take control of situations whenever they feel endangered, prioritizing interpersonal trust over rules and norms (Thelen & Zhuplev, 2002).

The Russian contemporary civil society is associated with different attributes compared to what we know in Western countries: an informal network with social and cultural capital, strong ties among actors, a diffuse focus on the collective actions, particularized social capital and a weak state. In this model, citizens are marginalized and characterized by politicians as either a receiver of benefits or a degraded mass (Urban, 2010).

The long Soviet history had another consequence in the fact that it cuts off the country from a large part of the world. As the nerve centre of the Socialist World, Russia created and developed its own approach of business practices, using many inputs from the West that it highly transformed before processing. Remains of this period can be found in the persistence of the notion of the ‘near abroad’ (Shashenkov, 1994), as well as in the idea that Russia would be following a ‘unique path’ different from what exists in Europe (Dubin, 2002). Highly cultivated by the current Russian po...