Methodological Instructions for Elaborating the Dissertation Thesis
UNIVERSITY OF ECONOMICS, PRAGUE
FACULTY OF INTERNATIONAL RELATIONS
Title of the Dissertation
Summary of the Dissertation Thesis
PhD Student: Mariela Farhi-Zimmerman, Ph.D.
Supervisor: Prof. Ing. Dana Zadražilová, CSc
.
.Degree Programme: International Economic Relations
Prague, August 2020
Introduction
Companies are facing big challenges because we are currently living in a world where
technology is enabling almost everything. As a result, it is necessary to propose a new model for analyzing cultural standards. The binary model –by Hofstede (1993) and Trompenaars (1996), which analyzes cultural dimensions, relies on measuring bipolar divergence values that fall into a continuum between two extremes needs to encompass other factors.
How can a country become more competitive?
This research investigates the relationship between cultural dimensions and the implications for national competitiveness.
Competitiveness is the analytical tool the author used for this dissertation. The author is presenting a new model, based on the comprehensive study, which entails the “new rules” of capitalism. An increasingly globalized world forces business actors to respond to the demands and challenges in ways that differ from approaches taken in the middle of the 1990’s. At that time, cultural dimensions theory was developed by the Dutch Professors’ Hofstede and Trompenaars.
The author follows the microeconomic approach that assumes that economic value is created solely by enterprises. This theory is explained by Porter and Garelli (2016), among other
scholars, and complemented by data from the Efige report (Altamonte, et. al 2012), which states that countries’ firms exchange goods and services, promoting the countries’ wealth. Nations play an important role in establishing an environment that supports and fosters trade, or hinders companies’ activities by policies, which discourage the ease of doing business internally and internationally. Even though they play a key role in setting the rules, nations do not directly generate economic added value (Garelli, 2016).
The theory of Competitiveness of Nations (Porter, 1990) analyses policies and facts to enable a nation to create and maintain an environment that engenders and sustains more value creation for its enterprises and more prosperity for its people.
A firm is conceived as a system of relationships that comes into existence, when a manager assigns, while responsibilities, allocates resources and defines strategies. Strategies are vital for a company to achieve its objectives, and to orient people around the organization’s goals. Culture is embedded in every single relationship within the organizational system.
As stated previously, the main goal of this thesis is to analyze the cultural dimensions and business practices of these two nations. Why is the main goal to focus on cultural dimensions?
Because, culture standards work as powerful influences on economic development. Additionally, because cultural values produce effective norms, and not the contrary (Schein, 2004). In fact, knowledge and power are highly influenced by culture. As a sub-goal, these dimensions will also be analyzed in regards to the United States. Because the United States has a multitude of
international markets and is seen as a strong global industrial power, their model is enviable to the other two nations that could benefit from learning American practices and business styles.
Culture constructs reality. It influences and defines the essence of the relationships between organizations and environments.
From the cognitive theory perspective, culture is understood as shared values and beliefs that define categories, relationships, process meanings, and order information.
From this perspective, it is necessary to question our paradigms, which will lead us to reframe and redefine categories and relationships. It will then enable us to process meaning and order differently. Therefore, the researcher has envisioned to revisit, and reformulate, the model for analyzing cultures and organizations, by incorporating other theories and current challenges.
Financial, market, political and technological environments are transactional, though culture is the contextual environment around it all. Culture affects all the transactional process
(Trompenaars, 1993). In brief, culture governs the decision-making processes, on the level of companies and businesses, and on the level of government policies and procedures.
Hofstede (1994) calls culture “the collective programming of the mind, which distinguishes members of one group or category of people from others.” He developed 6 main dimensions of national culture: 1- Power Distance, 2- Individualism/Collectivism, 3- Masculinity/Femininity, 4- Uncertainty Avoidance, 5- Long/Short Term Orientation, and 6- Indulgence/Restraint.
In addition to cultural dimensions, other methods help to examine an organizational system, including a broader perspective of a nation's system. As discussed beforehand, cultural systems are the ways a society has organized itself in terms of meeting basic needs and the structures required for order. There are six cultural systems (Livermore, 2015) that are most relevant for leaders: economic, marriage and family, educational, legal and political, religious, and artistic.
Czech cultural systems differ from the Argentinean ones, as the author discusses in detail below.
Differences in civilizations are fundamental, according to Salmon and De Linares (1999), because they concern history, language, traditions, religion, feelings, core values, and beliefs.
Due to history, geographic location, political, and legal environment, the cultural systems in both countries have great variance. As a result, the type of decisions a manager is prone to make may differ from place to place. According to Livermore (2015), it is impossible to separate culture and leadership. Schein (2004) says cultural norms significantly influence how you define leadership and the decisions about whom to promote, how to define success, and ways to motivate employees.
Czech Republic has been an industry-based economy, which heavily relies on neighboring Germany, for both imports and exports. Argentina, on the other hand, has been an agriculture- based economy. This Southern Cone country is mainly a commodity exporter, primarily to China, and an importer of industrial goods. While blessed with tremendous resources, the country still struggles with widespread corruption, weak institutions, and a lack of advanced infrastructure and better transportation systems.
The industrial-based Czech economy had been made possible due to the skilled labor force of the former Bohemian region. The Czech Republic has a long tradition in producing the highest percentage of science and technical graduates in the world, and has continued to do so
throughout the preceding decade. The government sustains this by providing funding in these areas, which they obtained largely from the European Union. This could be interpreted as a more socialistic form of capitalism that characterizes European countries, unlike the Western
capitalistic style. Subsidies and protectionist measures aim to maintain the European high living standards.
For its part, Argentina has a strong tradition in the fields of agriculture, architecture and design. This might be a legacy of its population’s heavily Italian heritage. During the last decade, Argentine had been modernizing their agricultural methods to take advantage of the boom in
commodity exports, which took place at that time. This industry works closely with the
transportation and infrastructure industry that urges for maintaining and improvement. Since the country highly values the wine industry, it has invested in modern irrigation systems. Advanced hydrodynamic techniques had enabled higher volumes of productivity.
There is a potential opportunity for the Czech business sector to enter the South American market and sell transportation equipment, industrial machinery, and Czech products. Czech business people would find profitable markets in South America’s Southern Cone region, including Argentina, which used to have a solid railway infrastructure, but no longer does.
Czechs are outstanding tram manufacturers and could probably sell the tram concept to the Argentine’s cities.
Since mass transportation- trams/trains/buses, is clearly an industry mastered by the Czechs, Argentina could benefit from importing their equipment, machines and receiving training on how to operate them.
Argentina is presently one of the Czech Republic’s key partners in Latin America. Czech companies, such as Skoda, (currently owned mostly by a German company), had penetrated the Argentine market, with automobile parts.
Argentina’s proximity within South America will enable direct access to a regional
population of 240 million, in addition to its own 40 million inhabitants. This would make trading with Argentina an attractive opportunity for South America.
Today’s high-income economies, which consume 77 percentage of global GDP, will no longer be the ones that generate highest outputs; It will be the emerging economies of South America, according to the studies presented in Standing on the Sun (Meyer, 2012:19)
The thesis focuses on the microeconomic approach. In addition, it presents a broad macroeconomic analysis of both countries as a general framework.
Facts about the Czech Republic and Argentina, and information appearing further on in this thesis will be analyzed thoroughly, through the lenses of different theories, such as cultural standards and cultural systems. The quantitative research, comprised of 100 surveys and 30 interviews, will be completed with qualitative data from the World Bank reports and from the GLOBE Report, (2004), Harvard Business Publications, among other respected publications.
This thesis conducts a cross-cultural study based on cultural dimensions, comparing the Czech Republic, Argentina, and presenting United States as a baseline to show how culture influences competitiveness of a nation. The research further provides methods for introducing change in organizations aiming for a higher degree of competitiveness. The goal is to strengthen the performance of a company, following the microeconomic approach of competitiveness.
With that goal in mind, the author has revisited and recreated the Trompenaars model of cultural dimensions for one that conceives change as a key ingredient under the new capitalism rules and challenges.
The in-depth analysis of these cultural dimensions and managerial styles could diminish the disparity level and incompatibility between the two countries, to unleash and foster a smoother process for negotiations and fewer conflicts. At the same time, the American Cultural
dimensions and managerial styles are analyzed as a baseline for conducting businesses, as America is the homeland of some of the most profitable and innovative companies in the world.
The thesis aims to respond the following:
Research Questions
As mentioned in the introduction, the aim was to continue in the research of other works which qualitatively examined cultural standards, namely the concepts of Hofstede, Trompenaars, Martin (1992), Schein (2004), Cabrera, Kotter, Kim, and Mauborgne and, if possible, to add findings of this context-specific case study to the already existing literature.
Main Research Questions:
1. How do the cultural dimensions of firms in Argentina and the Czech Republic compare?
Hypothesis: They are very different because they belong to different civilizations. Argentines are more prone to deal with uncertainty than Czechs. Czechs are more prone to follow formalized procedures.
2. What do the cultural dimensions of Argentina and the Czech Republic indicate about the competitiveness of these countries, and how do they compare to the United States as a benchmark?
Hypothesis: The United States is very performance oriented, prioritizing results rather than processes and relationships. Low power distance, placing an emphasis on individual
achievements, and medium-high tolerance for uncertainty, are necessary for competitiveness.
Additional Questions:
1. Are the managerial styles of CZ AR, and U.S. different?
How are the cultural standards manifested?
Which are the historical connections with each country's cultural standards?
2. Do the Czechs and Argentines embrace a culture of innovation, and are they likely to accept change in organizations?
3. Which are the areas for potential conflicts between the Czechs and the Argentines?
How to reconcile differences?
4. How does corruption influence the development of new businesses?
Thus, the aim of this thesis is:
Goal: This research explores and compares the relationship between cultural dimensions and the implications for national competitiveness for Argentina and the Czech Republic.
Objectives: The research will provide an analytical framework to help understand the competitiveness of firms in specific countries.
Research method: Surveys and interviews were conducted to measure the cultural dimensions of firms and managerial practices in Argentina, the Czech Republic, and the US. The research had shed light on the cross-cultural differences on these 3 groups in terms of strategic decisions, planning, executing, leading and controlling—the managerial phases-- and how prone a company can be to innovate and embrace change.
Main topics
National cultures can slowly change with time and be understood and treated as assets. Since cultural values produce effective norms, it is essential to understand those values and to reconcile the opposing mental models and cultural predisposition.
Together with cultural dimensions the organizational structure plays a role in the way decisions are made, how they are passed on, and how power is handled. As Alton (Dyer, 1996) explains, there are four types of organizational cultures: functional, divisional, matrix, and flatarchy.
Back in the 80’s and 90’s the functional and divisional types were the typical structures in organizations; whereas in the 2000’s and current decades there is a stronger need for matrix and flatarchy enterprises.
The functional organizational structure, was more bureaucratic, divided based on specialty, such as a sales department, marketing department, customer service department, etc. Employees were mostly dedicated to a single function, with defined roles and expectations. The downside, though is that it is challenging to facilitate strong communication between different departments.
The divisional type, heavily relies on a strong leader for orchestrating plans and projects. The Matrix type, has multiple bosses and reporting lines. In this case, not only do the employees report to a divisional manager, but they also typically have project managers for specific
projects. On the other side, the flatarchy organizations, have a less hierarchical line of authority.
Unlike the traditional hierarchy which typically sees one-way communication and everyone at the top with all the information and power, a “flatter” structure seeks to open up the lines of communication and collaboration while removing layers within the organization. (Forbes, Jacob Morgan). This is becoming the most welcome and adaptive type of organization that better responds to current challenges, and is seen in smaller businesses and new startups. The strongest advantage, in comparison to the functional one, is that it facilitates and embraces strong
communication between different departments.
There is an interesting case study from Chrysler, where they have implemented the knowledge system based on communities of practice to reduce the product cycle development process.
Previously, they were based on a functional structure: design, engineering, manufacturing, and sales where they experienced duplication and slowness which called for reorganizing the unit. As a result, they created “car platforms.” which were product-oriented, and each platform was responsible for all phases of development for each vehicle.
This change in management to car platforms succeeded in reducing the product-development cycle from five to two and a half years, with a corresponding cut in research and developing costs. Communication across platforms became more important, fostering colleagues to meet informally.
As shown by this case study, it is imperative that businesses implement change in order to enable faster adaptation to today’s business demands.
Trompenaars suggests reconciliation for handling different organizational cultures. This approach could be aligned with the concept of cooperation between firms and nations, even though the main framework of this thesis is based on the theory of competitiveness of nations, we will see how collaboration among professionals and different sectors, such as public and private are the new rules of the current, and modern type of capitalism.
The two opposing views can come to fuse where the strength of one extreme is extended by considering and accommodating the other.
Cultures are similar in regard to the dilemmas they confront, yet different in the solutions they find.
The better managers and employees understand the culture in which they operate, the more effective negotiations they would achieve, thus benefiting from higher profits.
New approach for current challenges and well-adapted firms: The structure of this type of firms is simultaneously centralized and decentralized, bureaucratic and non-bureaucratic, differentiated and undifferentiated. Concept aligned with the Systems Thinking Theory (Cabrera, 2015).
Furthermore, the broad theory of neuroplasticity of the brain is also presented in this research project, as a baseline demonstrating that change can happen. What occurs in the human brain can also happen in an organization. Several managerial theories and steps are presented throughout the paper to achieve various organizational goals for sustainable development and facing current challenges.
The goal is to compare primarily Czech to Argentine cultural dimensions and managerial practices to achieve higher levels of competitiveness. Sub-goal: to a lesser extent, to compare them with the American managerial styles.
Intercultural Competence is relevant because it:
Enables professionals to work effectively: to accomplish mission goals; appropriately:
within cultural norms; and genuinely: aligned with values.
Enables to resolve intercultural conflict resulting in completed projects/meeting project objectives/resolving long-standing issues/creating new methods.
Applies theoretical knowledge and empirical from cases studies to solve specific organizational challenges.
Fosters adaptive behavior for audiences/participants/subordinates with different cultural norms/expectations.
Leads to perform quantitative and qualitative analysis of international events/trends/policies.
Helps to recognize for deep substantive knowledge of global economic/political/educational and social issues.
Allows creating a larger international vision. Mobilize global commitment to execute projects.
This thesis is structured in seven chapters, going from the general to the details. It starts with a broad analysis of the evolution of a nation, its changes, and particularly which elements make them more competitive than others. The competitiveness theory provides the broader framework for this analysis. In addition, this thesis also explains the relevance of having
institutions, highlights how rules and corruption affect the economy, compares data from various countries, and contrasts the scores of AR, CZ. The U.S. is used as a reference group because their managerial behavior are known as the most standards.
It also presents the microeconomics mandates from Harvard Business School - Institute for Strategy and Competitiveness (ISC). This thesis emphasizes that the active creation of wealth and prosperity is the key role of entrepreneurs, companies, and organizations.
Other drivers of microeconomic tools are also explained, such as clusters, innovation, regional innovation systems, trust, and risk-taken.
The next chapter presents the analysis in depth of the cultural dimensions theories, based on secondary data from Hofstede (1993) and Trompenaars (1996).
Figure No. 1- Comparing Trompenaars Cultural Dimension Values of 3 Countries Country Power
Distance Individualis
m Masculinity Uncertainty
Avoidance Long-Term
Orientation Indulgence/
Restraint
AR 49 46 56 86 20 62
Czech Republic
57 58 57 74 70 29
United States
40 91 62 46 26 68
Source: Farhi-Zimmerman, adapted from Trompenaars,2003
This research project extends beyond the description of the cultural differences between the focus of studying the two countries, and then comparing them to the American managerial style.
Chapter 3 presents case studies in which major organizational cultural changes have been successfully implemented. Several theories support this change management approach. A few interesting cases presented illustrate how to implement change, appeal to the systems thinking approach, and the Theory of E and O, as well as the Logical Types (Watzlawick, Weakland, Fisch, 1974).
In brief, “systems-thinking” holds that the real world works in systems—complex networks of many interacting variables. Systems-thinking (Cabrera, Cabrera, 2015) is about increasing the probability of getting the “mental model” right. A manager having success here could lead to the development of effective strategies, conquering new territories, increasing the market share, and most importantly, a better understanding of employee values, beliefs and behavior. This concept also urges us, as managers, to change our thinking from the binary, linear, and categorical kind to a new form of thinking- systems thinking, in order to solve the issues facing humanity.
Cases that accentuate the value of systems thinking are the New York Police Department (Kim, Mauborgne, 2011: 79-98) International Business Machines (IBM), and Silicon Valley’s competition with the Boston area’s high-technology business corridor along Route 128.
The Silicon Valley (Saxenian, 1994) exemplar illustrates how cultural dimensions have fostered and created an industrial information technology (IT) leader in an industrial and sustainable region.
As newcomers to a region that lacked prior industrial traditions, Silicon Valley’s pioneers had the freedom to experiment with institutions and organizational forms as well as with technology.
Perhaps because they left behind families, friends, and established communities, these
transplants (mostly young and male) were unusually open to risk-taking and experimentation.
Along this line, the environment primarily plays a selective role in rewarding choice of viable strategies.
Culture matters because it is a powerful, latent, and often unconscious set of forces that determine both our individual and collective behavior, ways of perceiving, thought patterns, and values.
This decentralized and fluid environment accelerated the diffusion of technological capabilities and know-how within the region.
Not only was risk-taking glorified, but failure was also socially acceptable. There was a shared understanding that anyone could be a successful entrepreneur: with no boundaries of age, status, or social stratum that precluded the possibility of a new beginning: and there was little embarrassment or shame associated with business failure.
Aligned with Porter’s theory and his microeconomic approach that is based on promoting organizations to be more competitive and emerge in new markets, it is necessary to implement change in management. If not, organizations will not be able to adapt to challenges and new demands, there needs to be more change. That is why I chose to study change management and will be presented in chapter 3. These are case studies
Details and tips for overcoming the knowing-doing gap are also presented.
Chapter 4 explains the methodology followed by this research project: why the qualitative method was chosen, and the number of interviews and surveys conducted to achieve the sought goals of this work. Time of the research project and timeframe of field research is also
explained.
Chapter 5 presents the new rules of capitalism and the necessity of creating a model for analyzing cultures and applicable to managerial practices. There are new imperatives to fulfill for companies to succeed in the both the domestic and international marketplace. In fact, the fates of both nations and companies are sometimes intertwined, a phenomenon that has been enhanced by globalization, social media, and other technologies. The frontier between nations is being reduced in importance, while ideas, values and practices are moving and having more impact from one nation to the other. Competitivity rests on the free flow of knowledge inside a business or corporation.
For these reasons, cultural intelligence (CQ) is key for a thriving organization and leadership. CQ picks up where these other forms of intelligence leave off. It gives us the practical and interpersonal skills needed when cultural contexts change.
Leading with cultural intelligence opens up a number of promising opportunities, including the four Capabilities of Culturally Intelligent Leaders (Livermore, 2015): 1. CQ drive (motivation), 2. CQ knowledge (cognition), 3. CQ strategy (metacognition), and 4. CQ action (behavioral).
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Chapter 6 presents the findings of the qualitative research and complements them with the quantitative data from the Globe.
Martin’s theory (1992) of organization is beneficial for understanding this complex reality facing businesses. Even though she refers more to the complexity within one organization, this can be extrapolated to a greater complexity when dealing with two or three different outcomes.
Martin defines three social scientific perspectives: integration, differentiation, and fragmentation.
The latter focuses on ambiguity. Members who do not agree on clear boundaries, cannot identify shared-solutions, and do not reconcile contradictory beliefs and multiple identities.
In short, the integration perspective of culture emphasizes the establishment, maintenance, collapse, and re-establishment of cultural unities. No superior method exists and no cultural standard outperforms another. Instead, culture responds to the place and time when is being implemented, such as the natural selection theory hypothesis described by Darwin (1859), which explains that physical traits adapt in order to face and cope to their environment. The challenge in management is to implement changes and find balance when dealing with other companies.
Firms enjoying the appropriate balance of these characteristics are able to grow and become successful internationally.
Managers constantly struggle with weighing economic imperatives against social and organizational realities (Barney, J. B., & Ouchi, W. G. 1986).
The author concludes that a firm’s productivity is triggered by the combination of a precise set of characteristics relating to innovation, finance, human resources, management and
ownership, rather than by the industry’s structure or a definite strategy.
In reality the market is not deterministic. Policy shapes the environment in which firms operate and firms react to policies (as their incentives are changed) by re-optimizing their behavior, and redesigning their strategies so their attitudes are not immutable.
In this internet age, it is necessary to rethink bureaucracies from the perspective of the architecture of the internet where small, diverse, and interconnected, yet coherent pieces (pieces can refer to services, products, and professional skills) can readapt and be nimble in the
competitive local and international market.
In this global age, there are more opportunities for global trade. Communication tools such as the Internet have allowed for new economic opportunities at the international level. Internet and communication platforms enable business negotiations to be much quicker.
