Chapter The Institutional Context of Multinational Management Copyright© 2004 Thomson Learning All rights reserved Learning Objectives •• Understand Understand the the national national context context and and how how itit affects affects the the business business environment environment •• Understand Understand the the influence influence ofof the the institutional institutional context context ofof countries countries •• Understand Understand how how social social institutions institutions influence influence both both people people and and organizations organizations Copyright© 2005 South-Western/Thomson Learning All rights reserved Learning Objectives •• Understand Understand the the basic basic economic economic systems systems and and influence influence on on multinational multinational operations operations •• Understand Understand industrialization industrialization and and implications implications for for multinationals multinationals •• Understand Understand the the world’s world’s basic basic religions religions •• Develop Develop an an understanding understanding ofof education education Copyright© 2005 South-Western/Thomson Learning All rights reserved Learning Objectives •• Understand Understand the the convergence convergence perspective perspective on on organizations organizations •• Understand Understand the the importance importance ofof the the national national context context and and its its connection connection with with other other international international management management areas areas Copyright© 2005 South-Western/Thomson Learning All rights reserved Institutional Context •• Includes Includes other other elements elements besides besides national national culture culture that that can can produce produce important important differences differences •• Understanding Understanding the the institutional institutional context context isis therefore therefore extremely extremely important important for for better better multinational multinational management management Copyright© 2005 South-Western/Thomson Learning All rights reserved Social Institutions •• Complex Complex ofof positions, positions, roles, roles, norms, norms, and and values values organizing organizing stable stable patterns patterns ofof human human resources resources toto sustain sustain important important societal societal structures structures •• Three Three key key social social institutions institutions •• Economic Economic systems systems •• Level Level ofof industrialization industrialization •• Religions Religions Copyright© 2005 South-Western/Thomson Learning All rights reserved Social Institutions and Influence on Society •• Regulative Regulative social social institution: institution: constrains constrains behaviors behaviors through through rules rules •• Cognitive Cognitive social social institution: institution: widely widely shared shared knowledge knowledge regarding regarding how how things things are are done done •• Normative Normative social social institution: institution: values values and and norms norms promulgated promulgated by by the the social social institution institution Copyright© 2005 South-Western/Thomson Learning All rights reserved Social Institutions and Influence on Organizations •• Organizational Organizational isomorphism: isomorphism: pressure pressure toto follow follow similar similar paths paths inin management management practices practices Copyright© 2005 South-Western/Thomson Learning All rights reserved Organizational Isomorphism •• Coercive Coercive isomorphism: isomorphism: forces forces that that coerce coerce organizations organizations toto adopt adopt certain certain practices practices •• Mimetic Mimetic isomorphism: isomorphism: organizations organizations purposefully purposefully copy copy the the strategies strategies ofof the the most most successful successful organizations organizations •• Normative Normative isomorphism: isomorphism: conformance conformance toto professional professional and and technical technical norms norms Copyright© 2005 South-Western/Thomson Learning All rights reserved Economic Systems •• Economic Economic systems: systems: system system ofof beliefs, beliefs, activities, activities, organizations, organizations, and and relationships relationships that that provide provide the the goods goods and and services services ofof aa society society •• Important Important implications implications based based on on •• Type Type ofof economic economic systems systems •• Market Market transitions transitions Privatization Privatization Copyrightâ 2005 South-Western/Thomson Learning All rights reserved Islam •• Religion Religion based based on on the the submission submission toto the the will will ofofAllah Allah (God) (God) •• The The second second largest largest ofof the the world’s world’s religions religions •• Muslims Muslims live live according according toto Islamic Islamic laws laws or or Shari’ah Shari’ah •• Based Based on on five five pillars pillars Copyright© 2005 South-Western/Thomson Learning All rights reserved Islam (cont.) •• Implications Implications for for multinationals multinationals •• Accommodate Accommodate praying praying five five times times aa day day •• The The Ramadan: Ramadan: aa month month ofof fasting fasting •• Natural Natural concern concern with with social social justice justice •• Prohibits Prohibits the the payment payment or or receipt receipt ofof interest interest •• Gender Gender roles roles Copyright© 2005 South-Western/Thomson Learning All rights reserved Hinduism •• Acceptance Acceptance ofof the the ancient ancient traditions traditions ofof India India that that are are based based on on the the Vedic Vedic scriptures scriptures •• Currently Currently 760 760 million million Hindus Hindus living living around around the the world world •• Belief Belief inin reincarnation reincarnation •• The The caste caste system system •• Ethical Ethical behaviors; behaviors; respect respect for for parents parents Copyright© 2005 South-Western/Thomson Learning All rights reserved Hinduism (cont.) •• Implications Implications for for multinationals multinationals •• Spiritual Spiritual achievement achievement isis an an important important value value for for most most Hindus Hindus •• Caste Caste system system isis very very pervasive pervasive •• Need Need toto be be aware aware ofof caste caste system, system, e.g e.g lower lower caste caste supervising supervising higher higher caste caste can can be be aa problem problem Copyright© 2005 South-Western/Thomson Learning All rights reserved Buddhism •• Religious Religious tradition tradition that that focuses focuses on on the the reality reality ofof world world suffering suffering and and the the ways ways one one can can be be freed freed from from suffering suffering •• Craving Craving and and desires desires produce produce suffering suffering Dominant Dominant religion religion ininAsia Asia Copyrightâ 2005 South-Western/Thomson Learning All rights reserved Buddhism (cont.) •• Implications Implications for for multinationals multinationals •• Encourages Encourages hard hard work; work; laziness laziness isis seen seen as as negative negative •• Emphasizes Emphasizes teamwork; teamwork; all all beings beings are are interconnected interconnected •• Emphasis Emphasis on on compassion compassion and and love love Copyright© 2005 South-Western/Thomson Learning All rights reserved Religiosity •• Indication Indication ofof the the importance importance ofof acceptance acceptance ofof the the core core philosophies philosophies ofof religion religion inin one’s one’s life life •• Gives Gives an an idea idea ofof the the degree degree ofof responsiveness responsiveness needed needed toto accommodate accommodate religion religion Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 3.8: Religiosity of Selected Countries from the World Values Survey Copyright© 2005 South-Western/Thomson Learning All rights reserved Education •• Education: Education: organized organized networks networks ofof socialization socialization experiences experiences that that prepare prepare individuals individuals toto act act inin society society •• Central Central element element inin organization organization ofof society society •• Helps Helps construct construct competencies, competencies, professions, professions, and and professionals professionals Copyright© 2005 South-Western/Thomson Learning All rights reserved Education: Implications •• •• •• Gives Gives an an idea idea ofof the the skill skill level level ofof workers workers inin any any society society The The more more educated, educated, the the more more skills skills workers workers have have Multinationals Multinationals can can look look atat educational educational attainment attainment scores scores toto determine determine the the nature nature ofof the the workforce workforce Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 3.9: Educational Attainment Scores for a Selected Number of Countries Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 3.10: Mathematics Scores for Top 10 Countries Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 3.11: Science Scores for Top 10 Countries Copyright© 2005 South-Western/Thomson Learning All rights reserved Organizations Alike: Globalization and Convergence •• Globalization Globalization isis pushing pushing organizations organizations toto be be more more similar similar •• Global Global customers customers and and products products •• Growing Growing levels levels ofof industrialization industrialization and and economic economic development development •• Global Global competition competition and and global global trade trade Copyright© 2005 South-Western/Thomson Learning All rights reserved Globalization and Convergence •• Other Other convergence convergence forces forces •• Cross-border Cross-border mergers, mergers, acquisitions, acquisitions, and and alliances alliances •• Cross-national Cross-national mobility mobility ofof managers managers •• Internationalization Internationalization ofof business business education education Copyright© 2005 South-Western/Thomson Learning All rights reserved ... context and and its its connection connection with with other other international international management management areas areas Copyright© 2005 South-Western/Thomson Learning All rights reserved... extremely extremely important important for for better better multinational multinational management management Copyright© 2005 South-Western/Thomson Learning All rights reserved Social Institutions... social social institution: institution: values values and and norms norms promulgated promulgated by by the the social social institution institution Copyright© 2005 South-Western/Thomson Learning