1.1 The Cultural Side of Globalizing Business
Global business shapes the context in which cross-cultural social contact takes place. It is determined by a number of interrelated globalization processes. Economic, governmental, legal, political, and cultural integration are all important aspects of global business. Managers must understand the influence on their worldwide operations and workforce of increasing economic integration among countries. Economic integration addresses the removal of trade barriers between at least two nations and the establishment of greater cooperation and coordination between them. Forms of economic integration include free trade, custom union, common market, economic union, and political union. International economic relations are governed by a variety of institutions such as the International Monetary Fund (IMF), the World Trade Organisation (WTO), and World Bank. These organizations facilitate global business at the macro-economic level. The more a nation-state has an open economy, the more industries and companies operating in their boundaries are exposed to globalization processes and global business developments. A nation-state’s openness refers to the extent to which its national economy is linked to world economics through the inflow and outflow of resources, goods, services, people, knowledge, skills, technology, capital, and information. A multinational company’s financial position is also influenced by global money markets, bond markets, equity markets, and loan markets. This is a highly uncertain and volatile environment that can have sudden and unpredicted impacts on corporate profitability. The Asian Tiger crisis that first afflicted Thailand in June 1997 and subsequently spread to other Southwest and East Asian countries, and the Western financial and economic crisis, precipitated by the bankruptcy of Lehman Brothers in 2008, demonstrate that global and local companies can be seriously affected by many economies through global financial and economic connectivity. Economic growth and stability can only be sustained within the context of wider political and social stability. Therefore, a sound governmental, legal, and political system is essential. The relationship between governments in its host and home countries is probably the most important influencing factor for a multinational company. Governments affect the economic and legal environment in which those companies operate. Governmental actions also influence a nation-state’s competitiveness in relation to national productivity and trade liberalization. Through policy-making and intervention, governments can impact investment, savings, and trade of domestic as well as foreign companies. Examples of trade barriers as a reflection of national protectionism are import tariffs, quotas, voluntary export restraints, commodity inspection standards, and so on. The multinational company is subject to the laws of both its home and host countries. Therefore, a sound legal context within which to conduct business activity is essential to maintaining a nation-state’s competitiveness on a macro-economic level and to ensure domestic and foreign companies continue to invest in local productivity and labor.
Another important aspect of global business is culture, or more precisely, the tangible and intangible manifestations of the social structure in a country or area. Historically, international trade was dominated by Western nations and further propelled by the United States after World War II. Some people refer to these modernization processes as “Americanization,” “McDonaldization,” or “modern colonization” to suggest the destruction of pre-existing cultures and local self-determination. Although new developed countries (especially Asian nation-states) have entered the global business arena successfully, many social groups such as anti-globalists still attach negative connotations of global business and globalization to Western nation-states.
Historical relationships between countries may also influence global business. The familiarity theory explains that companies would rather invest in host countries that are culturally relatively close to their own. Affinity between nations can be closely based on both history and political reality. One example is the relationship between the United States and United Kingdom. Another is that between France and its former colonies in West Africa. These nation-states still import many of the things they need from France. A low familiarity or an animosity between nation-states might influence corporate internationalization strategies and the modes of entry to foreign markets. Researchers from Uppsala University in Sweden developed a model to explain how companies expand operations overseas. The Uppsala model views international expansion as a process involving a series of incremental decisions during which companies develop international operations in small steps. The sequence and size of these steps are influenced by the company’s knowledge of other markets and cultures. The necessary knowledge can be acquired through experience with international operations over time. Accumulated knowledge about country-specific markets, practices, culture, political systems, and governance will reduce a firm’s uncertainty and will also increase its local commitment. In literature, differences in language, culture, political systems and such like, disturbing the flow of information between the company and the market, are often defined as cultural distance. When cultural distance is relatively low because environmental conditions are easy to understand and operational risks can be satisfactorily controlled, companies may start internationalization in those markets. The consequence of having a physical presence in a host country is exposure to foreign legal, governmental, and societal influence, such as the local labor market and national and local cultural characteristics.
International business encompasses a higher cross-cultural element than domestic business, although domestic business may involve cross-cultural competence as well. For historical, geopolitical, and other reasons, nations may accommodate people with a large variety of cultural backgrounds. In some countries, multiculturalism because of a large number of people from ethnic minority groups has reached such a level that it influences intergroup communication and society. People who are originally non-nationals may provide business opportunities that can be achieved by considering the needs of these groups from a multicultural perspective. Global business requires a yet higher cross-cultural competence than international business. This is because of an increased complexity of transworld social relations as a result of multiculturalism and the geographical dispersion of a company’s workforce. To understand the differences between domestic and global business, it is necessary to understand the primary ways in which cultures vary around the world. The current corporate environment is a blend of global competitors, multiple nation-states, many cultures and languages, and societies with different legal, social, and political characteristics. It is also characterized by an increase in social relationships that are facilitated by technology. To conclude, the global business arena is shaped by many structures, cultures, processes, governments, and organizations.
1.2 Leading Effectively with a Global Mindset
Globalization enables people with many different cultural backgrounds to build new social relationships no longer restricted by national borders. Globalization does not erase traditional cultures but connects local and global ways of living, although the effects of globalization differ between nation-states (e.g. Western Europe and USA versus countries such as Zimbabwe or North Korea). Globalization does not entail a loss of sovereignty or Western civilization swallowing traditional cultures. In the last decades of the twentieth century, as a consequence of globalizing business, managing a geographical and multicultural workforce became a business challenge. In the twenty-first century, the ability to mobilize, align, inspire, and motivate cultural diversity in a company has become a competitive advantage. In this book, we discuss culture and its relationship to differences in values, attitudes, and behaviors from a global leadership perspective. Cultural differences are associated with different ways of managing and approaching situations in different parts of the world. To manage a multicultural global workforce effectively, companies need leaders with global mindsets. A global mindset is considered as a set of managerial attitudes toward globalization processes that is positively related to balancing global and local developments in the business environment, organizational processes, cultural differences, and time zones. One of the dimensions of global mindset is culture. In our previous publication, we analysed the concept and dimensions of global mindset extensively (Den Dekker 2013). In this book, we elaborate on our initial findings by focusing on the cultural dimension of global mindset, which we call the intercultural global mindset, in more detail. The intercultural global mindset addresses attitudes toward cultural aspects of globalization and is assumed to be a specific dimension of the broader global mindset concept. An intercultural global mindset entails the ability to integrate knowledge of different cultures, intercultural interaction, and motivating and influencing followers into a set of attitudes concerning cross-cultural behavior. It is also the ability to guide cross-cultural leadership behavior to remain effective as a manager in the global business environment. The intercultural mindset refers to one’s awareness of operating in a broader cultural context. It can be conceptualized in the context of the increased cultural diversity, intercultural interaction and relationships, and cross-cultural motivation of followers working in many countries, associated with globalization. The intercultural global mindset refers to an awareness of cultural diversity, an ability to integrate knowledge of other cultural values, an increased understanding of intercultural interaction, and an improved knowledge of motivating followers from other cultures. Based on these knowledge structures (or beliefs in terms of attitude theory), the manager develops positive attitudes toward multiculturalism (as part of globalization).
Globalization shapes the role of managers in terms of broader geographical and functional responsibility as a result of a worldwide expansion of business activities. It also shapes the degree of intercultural interaction and how best to motivate a globally dispersed multicultural workforce. To operate successfully as a global leader, managers need to integrate into their worldview multiple perspectives of people with other cultural backgrounds. They must be able to shift mindsets from ethnocentric attitudes to a set of attitudes that is positively related to the values and norms of their home country, as well as cultural norms and values based on other cultures. In addition to an appreciation of cultural diversity and an integration of different cultural perspectives, managers need to demonstrate effective cross-cultural leadership skills and have the ability to motivate and inspire culturally different followers. An intercultural global mindset is essential in order to succeed as a manager with global responsibilities.
1.3 This Book’s Rationale
This book addresses an important but rarely examined aspect of global mindset: the question of how intercultural mindsets influence cross-cultural leadership behavior via behavioral intentions. Very little research exists to address this question, which is a salient issue for managers faced with a culturally diverse workforce. The essence of the study in this book is to predict cross-cultural behavior from attitudes (mindsets) toward this behavior. We use an attitude-behavior model to explain the relationship between cross-cultural behavior and behavioral intentions, based on the intercultural global mindset concept. To our knowledge, there are at present no studies available that address the relationship between global mindset and cross-cultural leadership behavior via behavioral intentions. We also examine the relationship between cross-cultural behavior as an outcome of intercultural global mindset and leadership effectiveness.
The context of our study is shaped by globalization. It is not the purpose of this book to define globalization or to explain this phenomenon in detail. However, a certain notion of the background and processes of globalization and the ways they shape the context of today’s leadership, especially in intercultural leadership situations, is important to understand how to remain effective as a manager working in the global business arena. For global HR departments, it determines what policies, instruments, and actions will have the highest impact on performance management, learning and development, expatriation, and other HR priorities in their companies.
To give a few remarks about the terms used in this book. We do not make a distinction between manager and leader. In our opinion, leadership is one of the behaviors of managers. When we talk about he or his, this could also be she or her. When we refer to culture, we mean that this is distinctive to a particular society, unless we indicate otherwise. For example, we do not refer to a society when we describe organizational culture. Values are preferences for certain states of affairs, either in one’s own life, in one’s society, or in the world in general. With beliefs we refer to understandings about cause and effect relationships.
1.4 The Audience
An important audience of this book is academics and scholars in the field of international management and cross-cultural studies. The relationship between global mindset and cross-cultural behavior is rarely examined, especially when related to criteria of leadership effectiveness. We propose an attitude-behavior model to predict cross-cultural behavior from global mindset. Researchers in the field of organizational behavior will probably appreciate the use of Fishbein and Ajzen’s behavioral intention model. This model has been applied in many studies to explain behavioral intentions related to a large variety of subjects.
Another target group is HR professionals working in a global business context. By HR professionals we mean HR consultants, HR advisors, management development specialists, and other officials working in human resources management roles. HR professionals in multinational companies in search of effective staffing strategies for the implementation of a global business plan will benefit from the analysis of the literature and the outcomes of the empirical research described in this book, especially when they are involved in strategic alliances and cross-border mergers and acquisitions. This book provides theoretical building blocks and practical insights for HR professionals and HR departments to develop a cadre of global managers who are able to manage the increasing complexity of running multinational companies.
Managers with global responsibilities will benefit from the guidelines this book offers for intercultural interaction when traversing between cultures as a part of their daily work. They will learn more about the necessity of realizing a mindset—organization in order that they are fit to remain successful as a leader when they are working for global companies. Do their mindsets fit within the global companies for which they are working? Is there a match between the way they think about effective global leadership and the prevailing perspective of executive management concerning global leadership effectiveness? In the global business arena, an individual’s global mindset with regard to positive attitudes towards people with other cultural backgrounds, and intercultural competence in the form of personal attributes such as effective skills and appropriate intercultural behavior, can be associated with global career success. One of the benefits of this book for global managers is that it will help them to find out what is essential in terms of mindset and cross-cultural behavior to make successful careers in the “right” global firm.
For multinational companies, selecting and developing global leaders with a positive orientation towards cultural diversity and in possession of effective intercultural capabilities can be related to a higher pace of expanding global business operations and a higher share of overseas turnover and profit in relation to the total turnover and profit. Due to the simultaneous need for an integration of global standardized processes and local responsiveness, multinational companies need global leaders who understand business from an integrated worldwide perspective.
1.5 The Structure
After this first, introductory chapter, the structure of this book is as follows. The second chapter addresses the context in which global intercultural mindsets and cross-cultural behavior are studied. This context is described in terms of globalization processes and leadership challenges in an increasingly global business arena and in relationship to leadership effectiveness. This chapter provides a broad overview of globalization processes and the globalization of culture, the demands of working in a global business, and global leadership.
Chapter 3 is heavily based on the research findings described in our previous book, Global Mindset and Leadership Effectiveness (Den Dekker 2013). To ensure a thorough understanding of the cultural domain of global mindset and the relationship with cross-cultural leadership behavior, it is necessary to provide the theoretical background of the concept of global mindset first. We also describe our mindset typology, which consists of a global mindset, a universal mindset, and a local mindset. This mindset typology is based on globalization theory and attitude theory.
Then chapter 4 addresses the cultural domain of global mindset. We start by explaining the theoretical building blocks of the intercultural global mindset, using concepts from social cognition and attitude literature. Then we describe the structure of the intercultural mindset concept. We make a distinction between managerial attitudes apropos cultural diversity, cross-cultural interaction, and cross-cultural motivation. In the remainder of the chapter we systematically explain the cultural dimensions of the global intercultural mindset, the universal intercultural mindset, and the local intercultural mindset.
The fifth chapter involves the concept of leadership from a cross-cultural perspective by presenting theories and their cross-cultural application. Elements of transformational leadership, such as visionary leadership, inspirational leadership, and excellence-orientation are perceived as culturally endorsed. We also describe other culturally endorsed leadership styles. Team-oriented leadership entails the motivation and performance of teams by leadership behavior. We focus on two important elements of team-oriented leadership: group cohesiveness and group focus. We apply these concepts to four different types of global teams. We also outline participative behavior as reflected in consultation, delegation, and empowerment.
The relationship between global intercultural mindset and cross-cultural behavior is discussed in chapter 6. We start by introducing an attitude-behavior model to explain cross-cultural leadership behavior through behavioral intentions. According to attitude theory, behavior can be predicted better by measuring attitudes toward the behavior itself. Then we propose a “mindset-organization fit” to explain how managerial intentions are influenced by the manager’s superiors, followers, and peers through subjective norms and behavioral control. We aim to demonstrate that the manager’s intercultural mindset must meet the corporate mentality to be perceived as effective. The second half of the chapter is devoted to field research, based on interviews with HR directors working in global companies. From the empirical results we develop three mini cases to apply the research model in practice. The cases are fictional, but based on real-life experience from the HR directors and the author, who is working in global companies on a daily basis.
The final chapter reflects on this study and provides direction for future research. We present a “holistic mindset concept,” that is, we provide a...