Methodological Instructions for Elaborating the Dissertation Thesis
Title-page
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, OCTOBER 2019
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. I believe the binary model –by Hofstede (1993) and Trompenaars (1996) - to analyze cultural dimensions, which 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?
Competitiveness is the analytical tool the author used to complete her research project.
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 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.
We conceive a firm as a system of relationships that comes into existence while being directed by a manager who assigns responsibilities, allocates resources and defines strategies. Strategies set the way the company will achieve its objectives and orients people around the organization’s goals. Culture, however, 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 it is a leading economic power and an international player in the global market. 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 borrowing American practices and business ideals.
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, we can consider that if we question our paradigms, it will lead us to reframe and redefine categories, relationships and we will process meaning and order information differently. Therefore, I envision to rethink a model for analyzing cultures and organizations that incorporate the studied theories and consider current challenges.
Financial, market, political and technological environments are transactional. Culture, though, is the contextual environment around it all; it 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 versus Collectivism, 3- Masculinity versus Femininity, 4- Uncertainty Avoidance, 5- Long Term Orientation, and 6- Indulgence versus Restraint.
Besides cultural dimensions, other methods are available for use in analyzing an organizational system, including a broader perspective a nation's system. As we 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 that are most relevant for leaders: economic, marriage and family, educational, legal and political, religious, and artistic. (Livermore, 2015) Czech cultural systems differ from the Argentinean ones, as the author discuss in detail below.
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 take may differ from place to place. Thus, the author, Livermore (2015), insists it’s 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.
Facts about the Czech Republic and Argentina, and information appearing further on in this thesis will be analyzed through in detail through the lenses of different theories, such as cultural standards and cultural systems. Complemented with quantitative data from the World Bank reports and from the GLOBE Report, 2004.
The Czech Republic opened its society to capitalism just 20 years before my arrival, whereas Argentina has abided by this economic philosophy continuously since Independence over more than a century ago, subject to varying degrees of government manipulation.
Argentina and the Czech Republic are relatively "middle-sized" economies on two very different continents. While in Prague, the author took note of, and extensively used the Czech capital's vaunted transportation system and marveled at the industry, which made it work so incredibly well. I began the research with a focus on the macroeconomics of both countries. However, my focus is on the microeconomic approach as an economic booster, leading to companies’ growth and higher exports.
I started with the premise that the Czech Republic was an industry-based economy, which heavily relies on neighboring Germany, for both imports and exports. Argentina is also similarly situated but here the comparisons end. This Southern Cone country is mainly a commodity exporter, primarily to China, and an importer of industrial goods.
Transportation is key to making Argentine economy work. While blessed with tremendous resources, the country still struggles with widespread corruption, and the need of lacking advance infrastructure and better transportation systems. The Czech Republic has a long tradition in producing the highest percentage of science and technical graduates in the world1. In fact, this tradition continues there through the preceding decade. The proportion of university degrees awarded in science related fields (engineering, manufacturing, construction) was among the highest in Europe. The government is committed to sustaining this by maintaining or increasing funding in these areas. The Czech government obtains financial support in no small part from the European Union. This is a more socialistic form of capitalism that characterizes European countries, unlike the Western capitalistic style.
Subsidies and protectionist measures aim to maintain in Europe 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.
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. As a consequence, the country suffers from transportation deficiencies. 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.
1 Business info.2015.Available from www.businessinfo.cz/en/psc/start-your-business/step-by-step-guidelines-for- starting-a-business/education.html
The Czech Republic and Argentina belong to different civilizations. The former adheres to the Slavic-Orthodox (with a Germanic influence), whereas Argentina is very much part of Latin American. Other civilizations are: Japanese, Islamic, Hindu, Western, Confucian, and African. According to Salmon and De Linares (1999) who clearly state that differences between civilizations are fundamental, because they concern history, language, traditions, religion, feelings, core values, and beliefs. Argentina is presently one of the Czech Republic’s key partners in Latin America. Automobiles manufactured by the firm Skoda, originally created by the Czech, but currently owned in its majority by a German private company, enjoyed good reputation in the post-World War period, helping other Czech companies penetrate the Argentine market.
Argentina’s proximity within South America allows it to enjoy direct access to a regional population of 240 million, in addition to its own 40 million inhabitants.
It is also necessary to acknowledge, based on several studies that the world economic output will no longer be generated by today’s high-income economies, which consume 77 percentage of global GDP. The emerging economies of South America will become more important economic players, and they will seriously need to address their transportation systems and infrastructure.
The Czech transportation industry has the experience and gravitas necessary to export its successful machinery and technical knowledge to this region, whose potential in the global economy is still being recognized.
Connectivity nowadays is no longer quarterly or physical. It is continual and virtual.
The goal of this project is the recreation of a model that conceives change as a key ingredient to fit in the digital era requirements under the new capitalist structure (Altamonte, et. al. VOL. XVII).
The world is becoming a smaller place, the trend toward increasing interaction between civilizations is becoming increasingly pronounced. Therefore, analyzing the two countries cited above, which represent different civilizations, will lead to improve paths for negotiation and foster more effective and sustainable business interactions between the two.
Because the degree of disparity and incompatibility would diminish, fewer conflicts would arise. The in-depth analysis of these dimensions and managerial styles would lead to diminish the degree of disparity and incompatibility unleashing a smoother process for negotiations and fewer conflicts. At the same time, these countries will be compared to the American style to include another approach for boosting competitiveness at the micro-level, within companies.
Furthermore, firms can obtain a superior financial performance, within a microeconomic context, by choosing and implementing a valuable organizational strategy (Ouchi, 1986)
The thesis aims to respond the following:
Main Research Questions
1. Are the managerial styles of CZ and AR different?
Hypothesis: Yes, because they have different histories and locations. They belong to different civilizations.
2. Do the Czechs and the Argentines embrace a culture of innovation?
Hypothesis: Argentines more than Czechs, because the AR is less prone to rely on formalized policies and procedures.
3. Are Czechs or Argentines prone to accept and incorporate change in their organizations?
Hypothesis: Middle point for both. Although AR has more tolerance for breaking rules, there are fewer systems to formalize new procedures. The emphasis is more on people than results.
4. Which are the areas for potential conflicts between the Czechs and the Argentines?
Hypothesis: CZ is more into following rules and procedures, whereas AR is more into improvisation. AR view feedback as necessary for improvement.
5. Which are the main American managerial styles and how does it differ to the Czech and Argentine style?
Hypothesis: Americans are more result-oriented and are higher risk takers
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.
The 80’s and 90’s were more characterized by the Functional and Divisional types, whereas in the 2000’s and current decades there is a stronger need for matrix and flatarchy enterprises.
1- Functional: the bureaucratic organizational structure, the functional structure divides the company based on specialty. E.g.: traditional business with a sales department, marketing department, customer service department, etc. The advantage of a functional structure is that individuals are dedicated to a single function. It defines roles and expectations. The downside is that it is challenging to facilitate strong communication between different departments.
2- Divisional: refers to companies that structure leadership according to products or projects.
3- Matrix: Employees have multiple bosses and reporting lines. Not only do they report to a divisional manager, but they also typically have project managers for specific projects.
4- Flatarchy: It is becoming increasingly common to see flatarchies in smaller businesses and new startups. 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).
It overcomes the downside of the functioning type where it overcomes the challenge of facilitating strong communication between different departments. Communication flow and collaboration are prioritized under this structure.
There is an interesting case study from Chrysler2 ,where they have implemented the knowledge system based on communities of practice3 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. They were cross-functional structures focusing on the type of vehicle.
Each platform was responsible for all phases of development of whole vehicle.
Brakes engineers were no longer with the brakes department, but with a platform, such as small cars or minivans.
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-
2Dyer, J. H. (1996). How Chrysler Created an American Keiretsu..December 2, 2018.Available from:
www.hbr.org/1996/07/how-chrysler-created-an-american-keiretsu
3Wenger, E.C.Synder,W.M.(2000).Communities of Practice: The Organizational Frontier.December 2, 2018.Available from:
www.hbr.org/2000/01/communities-of-practice-the-organizational-frontier
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 managerial practices with the Argentine managerial practices. 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
Individualism 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
I additionally present the works of other scholars and their theories of correlation between power distance, entrepreneurship, and national wealth.
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): Having the interest, Confidence, and Drive to Adapt Cross- Culturally.
2. CQ Knowledge (Cognition): Understanding Intercultural Norms and Differences.
3. CQ Strategy (Metacognition): Making Sense of Culturally Diverse Experiences and Planning Accordingly.
4. CQ Action (Behavioral): Changing Verbal and Nonverbal Action Appropriately When Interacting Cross-Culturally.
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).
I conclude that firm productivity growth 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.
Trade and innovation are not independent and interact in significant ways (Altamonte, Aquilante, Ottaviano, 2012. A reduction in trade costs may stimulate
innovation, allowing firms to grow and more easily bear research and development costs.
Innovation and export decisions also interact. Consider what happens to two identically productive firms, in which one exports while the other sells domestically only.
The exporter will outgrow the firm with solely local sales and better bear innovation’s fixed costs. The United Kingdom has the lowest cost of innovation; Germany, France, Spain and Hungary follow. Costs in Italy and Austria are highest. Most of these values are expected; some are a surprise.
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, so their attitudes are not immutable.
In this internet age, we need to rethink bureaucracies so as to not stop initiative and exhibit risk. On the contrary, we need to generate more opportunity for personal development. We need to rethink the organizational model inspired by the architecture of the internet where small, diverse, and interconnected, yet coherent pieces (pieces can refer to services, products, and professional skills) can readapt as to be more competitive in the local and international market.
In this global age, free trade, outsourcing, and communications are the main drivers of globalized capitalism. In this global age, there are more opportunities for global trade.
Communication tools such as the Internet have allowed for new economical opportunities at the international level. Internet and tools. In this globalization capitalism Allows for Thus, communications have greased the wheels of international commerce. This explosion in communication relates to global proximity promoted by Garelli Technology helps diminish risk. Time is reduced. Decisions and business negotiations can be made quicker. The key concepts among others of proximity, globality, and risk taking developed by Garelli are critical for a country and its organizations competitiveness level. (Hamel, Zanini, 2018) Hamel, G., Zanini, M., The End of Bureaucracy, Harvard Business Review.
