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Culture and Congruence: The Fit between Management Practices and National Culture Author(s): Karen L.

Newman and Stanley D. Nollen Source: Journal of International Business Studies, Vol. 27, No. 4 (4th Qtr., 1996), pp. 753-779 Published by: Palgrave Macmillan Journals Stable URL: http://www.jstor.org/stable/155511 . Accessed: 30/09/2013 16:19
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THE FIT BETWEENMANAGEMENT CULTUREAND CONGRUENCE: PRACTICESAND NATIONALCULTURE KarenL. NewmanandStanleyD. Nollen*
Georgetown University

Abstract.The financial of European performance andAsianworkunitsof is examinedas a functionof the congruence one multinational company betweenmanagement practicesand nationalculture.Using Hofstede's five nationalculturedimensions and analogousmanagement practices, we findthatworkunitfinancial is higherwhenmanagement performance in the workunitare congruent practices withthe nationalculture. Until recently,the dominance of American managementtheory led to the belief that "one size fits all," that a good managerin the U.S. will also be a good managerin othercountries,and that effectiveU.S. management practices will be effective anywhere.This view is now being supplanted with the knowledge that managerialattitudes, values, behaviors,and efficacy differ across national cultures. There is no one best way to manage a business. Differences in nationalculturescall for differences in management practices. This simple idea is surprisingly difficultto accept. The currentdrive toward globalization makes it harder. Globalization leads to standardization.Big Macs are the same aroundthe world, but McDonald'smanagement practices should not be. Just as Big Macs in Moscow are status and luxurywhile Big Macs in New Yorkare utilitarian, requisitemanagement practicesdifferacross cultureseven whenproductsdo not. The fact that managementpracticesshould not be universalis illustratedby examples with which most managers are familiar. Pay-for-performance schemesarepopularand workquitewell in the U.S. and U.K. but are less used
*KarenNewmanis Professorof Management at GeorgetownUniversity's School of Business. Her researchinterests include organizationalchange in Central and East Europe, ethical work climates,high performancework groups, and managerialcareers.Her work has been
published in such journals as the Academy of Management Journal, Industrial Relations, Public Administration Review, and Human Relations. Professor Newman earned her Ph.D.

from the Universityof Chicago,GraduateSchool of Business.StanleyNollen is Professorof Managementat the GeorgetownUniversitySchool of Business.His researchincludeswork on the problemsand prospectsfor businessin emergingmarketeconomiesof CentralEurope and Asia; high performance work groups;and studiesof the processof forminginternational trade policy in the U.S. Congress.His articles have appearedin IndustrialRelations,International Organization, Human Relations, the Journal of Labor Research, and JIBS. This research was supportedby the participating companyand by the Georgetown UniversitySchool of Business, whosecooperation and assistance we gratefully CarlaInclan,KasraFerdows, acknowledge. Rob Grant, and JohnyJohanssonprovidedvaluablefeedbackon early drafts.Dawn Brand,Byron Crossen, andSoominOmprovided research HollyKramer, Twoanonymous assistance. reviewers invaluable provided All viewsexpressed as well as errorsof fact or interpretation guidance. are the authors'responsibilities.
Received: November 1995;Revised: May & September 1996; Accepted: September 1996. 753

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and not so successfuloutsidethe Anglo countries.This is not just an issue for Americancompanies.It worksboth ways.Qualitycirclesare widelyused and effectivein Japanbut have not deliveredthe same performance resultsin the U.S. despiteno lack of trying.
The thesis of this research is that multinational enterprisesneed to adapt their managementpractices to the national cultures in which they operate in order to achieve high business performance. Work units that are managed consistent

with nationalculturalexpectationswill be betterperforming than work units whose management practicesdo not fit the nationalculture. There has been no definitiveempiricaltest of this thesis to date. The main limitationof the literatureis that it contains only a few studiesthat actually measuredperformance outcomesobjectively. Those studiesthat did wereable to consideronly one or two differentmanagement practicesand one or two cultural dimensionsin two or three countries.In this study we attempt to providea more completeempiricaltest. We analyzefinancialperformance outcomesfor work units in eighteencountries on threecontinents.We describethe fit betweena varietyof management practicesin theseworkunits and severaldimensionsof the nationalculturesin whichthey operate.Wefind that in most cases,workunitswhosemanagement practicesfit betterwith the nationalculturehavehigherfinancialperformance than workunits wherethe fit is not as good. The messageto managers is clear: Adapt your managementpractices away from the home country standard towardthe host countryculture- Whenin Rome,do as the Romansdo.
NATIONAL CULTURE AND MANAGEMENT PRACTICES

National cultureis definedas the values, beliefs and assumptionslearnedin earlychildhoodthat distinguishone group of people from another[Beckand Moore 1985, Hofstede 1991]. This definition is consistent with Hofstede's notion of national culture as softwareof the mind [1991]and with Jaeger's "commontheories of behavioror mental programsthat are shared"[1986: 179]. National culture is embeddeddeeply in everydaylife and is relatively to change. impervious Child's[1981]observationthat nationalculturewas woefullyunderdeveloped in recentyearswith for comparative research has been addressed conceptually in culturesamong severalattemptsto conceptualizeand measuredifferences in management to differences nations and to relateculturaldifferences practices. The most well-knownexamplesincludethe international surveyresults reportedin Trompenaars [1993],Hofstede [1991, 1980],Laurent[1983, 1986], and Haire,Ghiselliand Porter[1963].Thereis ampleempiricalevidencethat nationalculturesvary and that a varietyof management practices,including strategic decisionmaking[Schneiderand DeMeyer 1991], leadership style [Dorfmanand Howell 1988;Puffer 1993],and human resourcemanagement

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[Luthans,Welshand Rosenkrantz1993]differby nationalculture.The question is whetherthese differencesamong managementpracticesand national culturesmatterto workplaceperformance. We arguethat they do. National cultureis a centralorganizing principleof employees'understanding of work, their approachto it, and the way in which they expectto be treated. National culture implies that one way of acting or one set of outcomes is preferable to another.Whenmanagement practicesare inconsistentwith these deeply held values, employees are likely to feel dissatisfied,distracted,unand uncommitted. As a result,they may be less able or willingto comfortable, nationalculturalvaluesare performwell. Management practicesthat reinforce more likely to yield predictablebehavior [Wrightand Mischel 1987], selfefficacy[Earley1994]and high performance [Earley1994]becausecongruent and management practicesareconsistentwith existingbehavioral expectations routines that transcendthe workplace.Employees are not distracted from work performance by management practicesthat ask them to behavein ways that are consistentwith extantnationalculturalvalues. The competitive advantage derived from correctly adapted management practicescomes from alignmentbetween key characteristics of the external environment(national culture in this case) and internal strategy,structure, systems, and practices [Burns and Stalker 1961; Chatman and Jehn 1994; Powell 1992; Prescott 1986]. No single managementpractice is superior to another with respect to performanceoutcomes. Instead, the congruence betweenmanagement of the nationalculture practicesand the characteristics produce better performanceoutcomes. (See also Wilkins and Ouchi [1983], Denison [1990],Kotter and Heskett [1992],Denison and Mishra [1995] for relateddiscussionsof the economicvalue of corporateculture.)For managers of multinationalcorporations,the implication is that adaptation to local culturalconditionsis necessaryto achievehigh performance outcomes. In this research,we examine empiricallythe effect of congruencebetween Hofstede's [1980, 1991] five national culture dimensions and analogous managementpractices.Hofstede [1980],and Hofstede and Bond [1988]have identifiedwork-related dimensionsalong whichnationalculturesvary:power distance, uncertaintyavoidance,individualism,masculinity,and long-term orientation.Hofstede'sempiricalresultshave been replicatedat the national level [Shackleton and Ali 1990;Chow,Shieldsand Chan 1991]and his cultural frameworkhas been accepted as important and reasonablefor describing differencesamong nations [Triandis1982].At the same time, little empirical research has used the Hofstede dimensions to investigate the efficacy of differentmanagementpractices on performancein differentculture groups [Sondergaard 1994].We addresseach dimensionin turn.
Power Distance

Powerdistanceis the extentto whichpeople believethat powerand statusare

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distributedunequally and accept an unequal distributionof power as the proper way for social systems to be organized. In organizations,power the degreeof centralizadistanceinfluencesthe amount of formal hierarchy, in decisionmaking. Companiesin high tion, and the amount of participation powerdistancecountries,such as those in East Asia and Latin Europe,tend to be more centralized and have less employee participationin decisionmaking. is an importantdimensionof work unit management.Denison Participation and Mishra [1995] found among firms in the U.S. (which has low power distance) that "involvement"was one of four cultural dimensions that delineatedorganizationsand that those organizationswith more employee involvementwere more efficient and faster growing than others. Similar results are found in other large-scalestudies of managementpracticesand financial performance among U.S. firms [Hansen and Wernerfelt 1989; Denison 1990]. The efficacy of participationin high power distance cultures is doubtful. Employeesin high power distance cultures are likely to view participative managementwith fear, distrust and disrespectbecause participationis not in consistentwith the nationalculture.Managers who encourage participation these countries are likely to be seen as weak and incompetent.Morris and Pavett [1992], for example, found participativemanagementto be related in the U.S. but not in Mexico. More authoritarian positivelyto performance managementpractices were effective in Mexico but not in the U.S. Jaeger [1986] argues that managementinitiatives such as team building are not effective in high power distance cultures because employeesfrom different levels in the organizationare not comfortableinteractingface-to-face in a group. work units HI: In low power distancecountries,more participative work units. In will be higherperformingthan less participative work units will high powerdistancecountries,less participative workunits. be higherperforming than moreparticipative
UncertaintyAvoidance

Uncertaintyavoidanceis the extent to which people are threatenedby uncertain, unknown, or unstructuredsituations.In organizations,uncertainty avoidance is manifested by the clarity of plans, policies, procedures,and and well-underwell-knownstrategies, systems.Relianceon clearprocedures, and cope with theirdiscomfort stood ruleshelpsemployeesreduceuncertainty with unknownsituations. beencriticized morethan any otherof Hofstede's This dimensionhas probably dimensions.Some have arguedthat it may be an artifactof the time during whichit was developed(the 1960sand 1970s).Hofstedehimselfacknowledged

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that the linearnotions of right,wrongand truthimplicitin the dimensionare characteristicof Westernthought and are not seen as strongly in Eastern philosophies[Hofstede 1991].Nevertheless,the dimensionis consistentwith the workof others. Laurent[1986]reporteda nearlymonotonicrelationship betweenuncertainty that agreewith the statement,"It is avoidanceand the proportionof managers important for a manager to have at hand precise answers to most of the questionsthat his subordinates may raise about their work."He also found from that managers the high uncertainty avoidancecountriesof LatinEurope are more likely to see the organizationas an authoritystructurethan others [Laurent1983]. Denison and Mishra's [1995] "consistency"and "mission"diniensions of the formerwith respect corporatecultureare relatedto uncertainty avoidance, to predictability and the latterwith respectto vision and direction.However, they reported a weak but positive relationship between consistency and in U.S. firmsand a strongpositiverelationship performance betweenmission in U.S. firms,contraryto the expectedcongruenceeffect(the and performance low U.S. is a avoidancecountry). uncertainty Schneider and DeMeyer[1991]found LatinEuropeanmanagers, comparedto those from lower uncertaintyavoidancecountries,tended to respond more forcefullyand extremelyto environmental uncertaintyand threat, and were more likelyto respondto such threatswith majororganizationredesignsand large-scaletraining programs.Uncertainty was perceived as a crisis more among these managersthan others, their responseswere more extreme,and their proposed solutions tended to involve a structuringthat would reduce uncertainty. Crozier's is illustrative of the effect [1964]classicstudyof Frenchorganizations of uncertainty avoidanceat the organizational level. Croziernoted that French firmsare more hierarchical and more rule-governed than Americanfirms,yet no moreor less effective. This is the congruence argument. Whatworkswell in France,a high uncertaintyavoidancecountry,does not work as well in the U.S., a loweruncertaintyavoidancecountry.Rules,as integrating and control are more efficaciousin Francethan in the U.S. [Slocumand Lei mechanisms, 1993].WhileFrenchemployeespreferthe certaintyof rules,Americansprefer the discretionthat goes with ambiguity. H2: In high uncertaintyavoidancecountries, work units in which rules and direction are well-definedwill be higher performing than work units in which rules and direction are not welldefined. In low uncertaintyavoidancecountries,work units in which rules and direction are not well-definedwill be higher performingthan work units in which rules and direction are well-defined.

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Individualism-Collectivism

is the extentto whichidentityderivesfromthe self Individualism-collectivism dimension is an versus the collectivity. The individualism-collectivism important way of differentiatingamong national cultures [Kluckholnand Strodtbeck 1961; Triandis 1989]. Individual cultures are loosely coupled. Individualsare expected to look out for themselves and their immediate Collectivecultures families.Status derivesfrom individualaccomplishment. religions, or communities, classes, social groups rely on membershipin extendedfamilies- for identityand status.People are protectedby the group and are expectedto act in the group'sbest interests.The Anglo countriesof Britain, Australia, New Zealand, Ireland, Canada, and the U.S. are very individualistic cultures. East Asian countries such as Taiwan, Korea, and Hong Kong are verycollectivecultures. Singapore, In organizations,individualismis manifested as autonomy, individual rerewards.Collectivemanagement sponsibilityfor results,and individual-level rewards. practicesemphasizeworkunit solidarityand team-based of this dimensionat work. Thereis some empiricalsupportfor the importance is the dimension most likely to be replicatedin Individualism-collectivism 1994].Though Denison studiesby people other than Hofstede [Sondergaard and Mishra [1995] did not identify an analogous dimension, their sample contained only U.S. companies, so they might not have found enough variabilityon the dimension for it to discriminateamong U.S. companies. attitudesincreased Morris,Davis and Allen [1994]found that entrepreneurial was in the U.S. (up to a point) whilejust the reverse increased as individualism found in Portugal,a more collectivesociety.Earley's[1994]study of training is particularly instructive. Comparingthe U.S., Hong Kong and performance and China, he found that individuallybased trainingled to improvedselffor U.S. managers whilegroup-based training efficacyand higherperformance for Chinesemanagers. and higherperformance led to improvedself-efficacy H3: In individualisticcountries, work units in which individual responsibilityis emphasized will be higher performingthan is not emphasized. workunits in whichindividualresponsibility in which individual units responsiwork In collectivistcountries, bility is not emphasizedwill be higher performingthan work is emphasized. units in whichindividualresponsibility
Masculinity-Femininity

Masculine cultures are characterizedby doing and acquiring rather than dimension towardactivity" thinkingand observing,similarto the "orientation value cultures Masculine and Strodtbeck Kluckholn [1961]. identified by achievementand abhor failure while feminineculturesvalue affiliationand view failureas much less important.MasculinecountriesincludeJapan,the

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U.S. and the Germaniccountries.Femininecountriesare typifiedby Nordic countriessuch as Denmark,Norwayand Sweden. In the workplace,this dimensionis reflectedin merit-basedopportunitiesfor and rewards, characteristics almost high earnings,recognition,advancement, takenfor grantedin the U.S. More femininemanagement practicesemphasize the quality of interpersonalrelations and quality of working life issues commonlyassociatedwith Scandinavian companies. rewardsin the U.S. is indicativeof The researchon performance-contingent the efficacy of congruencebetween managementpracticesand a masculine national culture. There is no doubt that performance-contingent rewards, properly allocated, produce higher performancein U.S. work units. (See Lawler[1990]for a thoroughdiscussionof performance-contingent rewards.) Managementby objectivesis another managementtechnique that is better suited to masculinecultures than feminine cultures [Jaeger1986; Hofstede
1991].

H4: In masculine countries, work units with more merit-based rewardpracticeswill be higherperforming than workunits with less merit-basedrewardpractices.In feminine countries,work units with less merit-based reward practices will be higher performing than work units with more merit-based reward practices.
Long-Term versusShort-Term Orientation

Hofstede'slast dimensionrefersto a country'stime orientation,long term or short term [Hofstede and Bond 1988; Hofstede 1991]. This dimension was added after Hofstede'soriginalIBM researchin an effort to capturedimensions that might be particularly relevantin Asia. It is also noteworthy that the studythat yieldedthis dimensionalso yieldedthreeof the otherfour.The only one that was not found was uncertainty avoidance. Long-term-orientedcultures are characterizedby patience, perseverance, respect for one's elders and ancestors, and a sense of obedience and duty towardthe largergood [Hofstede1991].This dimensionis similarto the "time orientation" culturedimensionidentified by Kluckholnand Strodtbeck [1961]. Long-term countries are found in Asia, including Hong Kong, Singapore, Taiwan,and Japan. consistentwith a long-termculturalorientationinclude Management practices providing long-term employmentand solving problems for the long term ratherthan making "quick fixes."Because this dimension is relativelynew, there is no empiricalevidence of the efficacyof a long-term orientationon performance. Nevertheless,we expect the congruencehypothesisto apply to this dimensionas with the others.

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H5: In long-term-oriented countries,work units with a longer term outlook will be higher performing than work units with a shorter term outlook. In short-termoriented countries,work than units with a shortertermoutlook will be higherperforming workunits with a longerterm outlook.
METHODS AND DATA

Data for this study come from 176 work units of one large U.S.-based corporation.The work units are located in eighteen European and Asian countries.Most workunitshavebetweenten and one hundredemployees, with a mean size of fifty-five. The functionsof the workunits are sales,serviceand units. Product lines range from highsupport;there are no manufacturing technology computers and integrated systems to routine office products. Customersrange from large banks and governmentagenciesto small retail who call on customersto shops.Someemployeesaremarketing representatives who provideserviceand sell products,some employeesaretechnicalspecialists repairs to customers at their place of business, and others are systems engineerswho create solutions to potential customers' problems.No employeesin staff functionssuch as financeor humanresourcesare in the study. Nearlyall of the employeesarecitizensof the countryin whichthey work,not from the U.S. The only position routinelyheld by U.S. expatriates, expatriates and only in largecountries,is Directorof Finance(not includedin this study).
Defining Work Units

at a meaningful The workgroupthat is the unit of analysismustbe aggregated level to measure perceptions of management practices and work unit in a workunit shouldbe ableto interact performance [Glick 1985].Employees outcomesin with each other,identifywith the unit, and hold some meaningful common. Our work units are geographically proximate(everyonein a work in works the same unit place), functionallyhomogeneous,and have five or or sections of a departmore employees.In most cases they are departments ment. Examples are field engineering,systems engineeringand marketing. Membersof a workunit reportto a bonus-eligible managerwho is the lowest for financial head. accountable level manager results,usuallythe department for workunit level of aggregation is informed The methodological justification Two Glick criteriaare Jones and James and Blalock by [1979], [1979] [1985]. withinworkunits.On both used:differences amongworkunits,and similarity is supported. criteriaworkunit aggregation
Measures of Work Unit Performance

Work unit performanceis measured in three ways. Two of the ways are returnon assets (ROA),and returnon sales measures: financialperformance (ROS).ROA is net income beforetaxes dividedby assets.ROS is net income and beforetaxes dividedby revenue.These are both measuresof profitability

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efficiency. The third performance measure is the work unit manager's performancebonus as a percent of base salary.The bonus is based on the degreeto whichthe managermeetsROAand revenue goals (40%each) and on the degree to which the manager meets individual performanceobjectives other than ROA and revenue(20%).Bonus is more subjectivethan ROA and that the purelyfinancialperformROS and takes into account circumstances ance measuresdo not. These data are taken from the company'sfinancial reportingsystem. All threemeasuresof performance are normed againstthe of the workunit'sfunctionin the companyoverallby subtracting performance the function'smean performancefrom each work unit's performance.All measuresreferto 1989. performance
Measures of Management Practices

Weuse datafromthe firm'sregularemployeeattitudesurvey,aggregated at the work unit level, to measuremanagement The was practices. survey developed for the firm's needs, not these research questions, so measurement of management practicesis sometimesless than ideal. Each unit in the studyhad a survey response rate exceeding 65%. The anonymous surveys were in 1988 and early 1989 and thereforeoccur in time before the administered measureof performance, lending credibilityto causal arguments.Questions wereaskedin a modifiedLikertformatwith a five-pointscalerangingfrom (1) very positive,or stronglyagree,to (5) very negative,or stronglydisagree.We reversed the attitudescalesso that higherresponsevaluesalwaysindicatemore Differentmanagement to correspond positiveattitudes. practicesaremeasured to each of Hofstede'sfive cultural dimensions.The survey instrumentwas culled for items that reflectedHofstede'sdimensions,based on his conceptual and relatedwork of others. arguments in decisions is the managementpracticewe use that Employee participation to powerdistance.Hofstede'sconstructionof the powerdistance corresponds dimension itself depended in large part on employees' perceptions of managers' decisionmaking styles. Others have studied participation as a management practicethat might differin efficacyacrosscultures[Morrisand Pavett1991].We measureparticipation with a two-itemscale:How would you
rate the effort made by management to get the ideas and opinions of employees like yourself, and, Employees where I work can get a fair hearing for their

The reliability complaints. coefficientfor this scale is .91.


Clarity about policies and direction corresponds to uncertainty avoidance (e.g.

Laurent[1986];Slocum and Lei [1993]).Clarity about policies is measured


with a two-item scale: I understand promotionpolicies and practices . . ., and, I understand salary policies. . . . Reliability for this scale is .86. Clarity about

directionis measuredwith another two-item scale: How wouldyou rate this


companyon having a clear sense of direction?and How wouldyou rate your work

uniton havinga clearsense of direction? Reliability for this scale is .79.

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Emphasis on individual contributions in the work unit is relevant to the

culturaldimension(e.g. Earley [1994]).Emphasis individualism-collectivism on individualcontributionis measuredwith a single item, We respect the
individuality of each employee andfoster an environmentin which employees' creativity and productivity are encouraged, recognized, valued, and rewarded

This item is taken verbatim from the company'smission (agree-disagree). statement.It is noteworthythat the mission of this U.S.-basedfirm included in the U.S. the high level of individualism such a statement,reflecting Use of merit-basedrewardsin the work unit is relevant to the masculinefeminine cultural dimension. In Hofstede'sconstructionof this dimension, were key components.We opportunitiesfor high earningsand advancement measure merit-based rewards with a three-item scale: The better my
performance, the larger my salary increase will be, The better my performance, for promotion to a betterjob, and, How would the greater will be my opportunity you rate . .. your opportunityfor advancement to higher leveljobs? Reliability

for this scale is .85.


Long-term problem-solving and employment security are relevant to the long-

term versus short-term culture dimension [Hofstede 1991]. Long-term is measuredwith a single item: Whena problemoccurswhere problem-solving
I work, we try tofix it in a way thatprevents it from occurringagain (rather than just using a temporary 'quickfix'). Employment security is measured with a single item: This company makes a genuine effort to keep people employedeven underadverse business conditions. Measure of National Culture

Using the culture dimensions identified by Hofstede [1980], countries are dichotomized at theoretically meaningful points, based on the analysis reportedby Hofstede[1980, 1991]and others[Ronenand Shenkar1985].For example,long-termversusshort-termorientationis dichotomizedso that the high (long-term)groupcontainsAsian countriesonly,all of whichhavescores countriesonly, of 48 or greater. The low (short-term) groupcontainsEuropean all of which have scores of 44 or less. This yields a smallerlong-termgroup than short-term groupbecauseof the compositionof our sample.If we wereto make the two groups more equal in size, we would have to include the Netherlandsin the long-termgroup.This wouldnot be consistentwith extant theoreticalwork on this dimension[Hofstede1991;Hofstedeand Bond 1988] and would make the long-term group less homogeneous. Table 1 gives statisticsfor the workunits in the study,includingthe dichotomies descriptive for each culturedimension.
Control Variables

Factorsaside from managementpracticesdeterminework unit performance, especially the resources availableto the work unit and the nature of the

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PRACTICES

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marketplace it faces. Three such variables are included in the analysis as controls. Labor resources are measured as the amount of experience in the work unit, specifically the proportion of the work unit's employees with four-to-twenty years of experience with the company. This variable comes from a categorical response question on the attitude survey. We use four-to-twenty years to capture a work force that is fully trained but not yet retiring. We expect that work units with an experienced work force will have higher performance than work units with either an inexperienced or an aging work force. Capital resources are indicated by capital productivity, measured as revenue divided by assets. These data are taken from the firm's financial reporting system. Work units that have higher capital productivity, given labor resources, should have superior financial performance. Market conditions are measured by the rate of change of gross domestic product (GDP) in the country in which the work unit is located for the industry in which the work unit operates. For example, for work units whose customers are banks, we use change in GDP originating in the financial institutions industry. For work units with customers in many industries, we use overall country GDP growth. Work units in more rapidly growing markets are more likely to increase their revenue, and in turn to earn higher net income and achieve higher profitability. Sources for these data are official statistics from the OECD and the Asian Development Bank. Unobserved Variables.In cross-sectional analysis, the value of the dependent variable may be affected by unobserved, unmeasurable, or omitted independent variables. If omitted variables are correlated with included independent variables, then the estimated effects of those variables on the dependent variable will be biased [Jacobson 1990; Mauro 1990]. To account for the effects of omitted variables on the relationship between management practices and work unit performance, we include prior work unit performance as a control variable. Prior performance is measured as return on assets in 1987, return on sales in 1987, and manager's bonus in 1987, two years prior to current performance and one or more years prior to the measurement of work unit climate. Means, standard deviations, reliability coefficients (Cronbach's alpha), and zero-order correlations among continuous variables are shown in Table 2. We use analysis of covariance to test our hypotheses. For each national culture dimension, countries were placed in either a high or low category as described above. Management practices were dichotomized at the mean value of the variable for all work units. An F-test indicates whether the interaction of national culture and management practices affects performance significantly overall. T-tests are used to test each hypothesis explicitly.

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RESULTS The results for each culture dimension are shown in Tables 3 through 8. Mean performance figures, adjusted for the effects of the control variables, are shown in the top half of each table. Results are also graphed in the bottom half of each table with the exception of uncertainty avoidance (Table 8). If the congruence hypothesis is supported, the graphs will resemble an inverted "U". The congruent cells in the tables are the top right and bottom left cells. Performance is hypothesized to be highest in these cells. The hypotheses that work unit performance is higher when management practices are congruent with national culture are supported for four of the five culture dimensions. Work units in which managers fit their practices to the values of the country's culture in which they operate had higher returns on assets, higher returns on sales, and in some cases higher bonuses than work units in which the fit was lacking. The exception to this finding occurs in the case of uncertainty avoidance, where the hypothesis was only partially supported (discussed below). In particular, work units in low power distance cultures were higher performing if they were more participative (Table 3). Conversely, work units in high power distance cultures were higher performing if they were less participative. The effect of fit on financial performance was stronger in high power distance work units than in low power distance work units. This finding is consistent with previous empirical results from studies in the U.S. (which is a low power distance country) in which the effect of participation on performance is equivocal [Miller and Monge 1986; Wagner and Gooding 1987, Dyer and Reeves 1995]. Among individualistic national cultures, performance was higher when managers emphasized individual employee contributions (Table 4). In collectivist cultures, however, performance was higher in work units with less individual employee emphasis. The importance of fit between management practice and national culture was greater in collective national cultures than in individual national cultures. The congruence hypothesis also was supported for the masculinity-femininity dimension of national culture (Table 5). Work units in more masculine cultures were higher performing if they made more use of merit-based rewards for pay and promotion, and conversely, work units in more feminine cultures had higher performance if they made less use of merit-based rewards. For this culture dimension, the importance of fit with management practices is roughly the same for both masculine and feminine national cultures. Congruence between long-term versus short-term orientation in the national culture and management practices also was important to good financial performance (Tables 6 and 7). In particular, in short-term-oriented cultures,

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TABLE3 Effect of Congruence between Power Distance and Participation


Power Distance (PD) Low High

Low
0

ROA = -10.28 ROS = - .72 Bonus = - 2.03


(n = 37)

ROA = 6.24 ROS = 2.44 Bonus = 1.48 (n = 62)

ROA = High

2.20 .49 .69

ROA

= -14.17

ROS = =Bonus (n 76)

ROS =- 3.41 Bonus = - .65 (n = 15)

tl,2 ROA = 1.36* tl,2 ROS = .13 tl,2 Bonus = 1 35*

t3,4 ROA

t3,4 ROS = t3,4Bonus =

= 2.26** 2.22***

1.48*

= 6.94*** FROS = 3.68* = 3.95** FBonus


FROA

Y1 10-

Power Distance and Participation ---

Y2

.. . . . . . . . . . . . . . . .... . . . . ...XA
5 -

. . . . . . . . . .- 2 0t

10 g - : .-.-.-.-..-5 ------/

--

--- ---- ----

- - - -- --

0 --1 --2

-10_ . -15 -

1
ROA (Y1)

---

-3 -4

PD Lo Partic Lo PD Lo Partic Hi PD Hi Partic Lo PD Hi Partic Hi ---ROS (Y2)

Congruence occurs in the top right and bottom left cells which are hypothesized to have higher performance than the other cells. The number of observations in each cell (n) applies to the Bonus analysis; n varies slightly for the other performance variables because of missing data. The F-statistic tests the overall hypothesis that performance is affected by congruence between culture and management practice; the t-tests refer to differences between performance means for work units within the same culture group.

*p <.10; **p <.05; *** p <.01

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JOURNAL OF INTERNATIONALBUSINESS STUDIES, FOURTH QUARTER 1996

TABLE4 Effect of Congruence between Individualism-Collectivism and Individual Emphasisa


Individualism-Collectivism
Individual Collective

uW ROA = -18.35 E
)

ROA = 8.44

Low

Bonus = - 2.32 (n 37)

ROS =-

1.15

ROS = 3.87
Bonus = 1.64 (n=47)

CsL

E
i

_ High

(nc

ROA = - 7.74 .61 ROS =Bonus = - 1.73 =22)

ROA = - 6.72 ROS =- 2.67 Bonus = - 1.52 (n = 56)

tl,2 ROA = 1.46* tl,2 ROS = .26 tl,2 Bonus = .44

t3,4 ROA = 2.74*** FROA = 7.82*** = 7.54*** t3,4 ROS = 4.20*** FROS FBonus = 5.02 t3,4 Bonus = 3.22***

Individualism-Collectivism and Individual Emphasis Y2 Y1 10-

-4

O----.---.-

-.-

-X,

--

........

-- 2

0O -5

- - - ----

----

----

-2\

ROA(Y1)

- -- ROS(Y2)

aAustralia and New Zealandare excluded because questions were not asked on theirsurveys. Congruence occurs in the top right and bottom left cells which are hypothesized to have higher performancethan the other cells. The numberof observations in each cell (n) applies to the Bonus variablesbecause of missing data. The F-statistic analysis;n varies slightlyfor the other performance tests the overall hypothesis that performance is affected by congruence between culture and management practice; the t-tests referto differences between performancemeans for work units withinthe same culturegroup.

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CULTURAL FIT WITH MANAGEMENT PRACTICES

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TABLE5 Effect of Congruence between Masculine-Feminine and Merit-Based Rewards


Masculine-Feminine Masculine Feminine

e Low 3I.O.

ROA = - 8.64 ROS = - .73 Bonus = - .97 (n = 57)

ROA = 2.55 ROS = 1.46 Bonus = 1.02 (n = 39)

m X) s

High

ROA = ROS = Bonus = (n= 62)

3.77 .86 .95

ROA =- 8.74 ROS =- 1.63 Bonus = - 2.25 (n =32)

tl,2ROA tl,2 tl,2 Bonus=

=2.28** 2.11 **

t3,4ROA t3,4 ROS t3,4 Bonus

ROS =

.98

= 1.42* = 1.33* = 2.66***

FROA

6.02**

FROS= 2.74* FBonus = 11.52***

Y1 4-

and MeritRewards Masculinity-Femininity ...Y2 1.5

20

-/\0.5 ' \%
$0O 0 ~~~~~~~~~~~~~~~~~~CD

<
cc

-2-

-6 -8- /

\~
-1.5

-1 0l-2 Masc-LoMerit Masc-Hi Merit Fem-LoMerit Fem-Hi Merit -ROA(Y1) --ROS (Y2)

Congruence occurs in the top right and bottom left cells which are hypothesized to have higher performancethan the other cells. The numberof observations in each cell (n) applies to the Bonus analysis;n varies slightlyfor the other performancevariablesbecause of missing data. The F-statistic tests the overall hypothesis that performance is affected by congruence between culture and management practice; the t-tests refer to differences between performancemeans for work units
within the same culture group.

*p<.1O;**p<.05; ***P< .01

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JOURNAL OF INTERNATIONALBUSINESS STUDIES, FOURTH QUARTER 1996

TABLE6 Effect of Congruence between Long-Term Orientation and Approach to Problemsa


Long-TermOrientation
Long-term Short-term

CO
X .0

Quick fix

0.
0)
C3

ROAa = 3.05 ROS = 3.70 Bonus = 1.04 (n = 18)

ROA = 10.51 ROS = 1.79 .54 Bonus = (n = 19)

C'

__

._

__

__

co 0

Perma- ROA = 14.39


Q

Perma-

CL

en fix

ROS

Bonus = 1.94 (n = 10)

6.63

Bonus = - 1.76 (n = 45)

ROA = - 9.50 ROS =- 1.93

tl,2 ROA tl,2 ROS

= 1.20 =1.14

t3,4 ROA t3,4ROS

= 2.79***
=

FROA =

t1,2 Bonus =

.51

t3,4 Bonus =

1-97** 1 90**

7.09** FROS =4.43** FBonus= 2.30

15 -

Y1 Long-TermOrientation and Problem Solving Y2


-8

10 t-\

-5--

-0

Long-Quick

Long-Permanent ROA (Y1)

Short-Quick Short-Permanent --ROS (Y2)

aHomogeneity of variance assumptions are met (p > .05) using Cochran's C except for here. Congruence occurs in the top right and bottom left cells which are hypothesized to have higher performance than the other cells. The number of observations in each cell (n) applies to the Bonus analysis; n varies slightly for the other performance variables because of missing data. The F-statistic tests the overall hypothesis that performance is affected by congruence between culture and management practice; the t-tests refer to differences between performance means for work units

withinthe same culturegroup

* .10;**

05;*P<.01

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CULTURAL FIT WITH MANAGEMENT PRACTICES

771

TABLE7 Effect of Congruence between Long-Term Orientation and Employment Security


Long-Term Orientation Long-term Short-term

Low

ROAa = 6.39 ROS = 5.02 Bonus = 1.85 (n=20)

ROA = 5.29 ROS = 2.47 Bonus = -1.05 (n=20)

'&
E u Hh Hgh

ROA = 19.84 ROS = Bonus = (n =) 7.58 1.37

ROA

=-1 0,01

ROS = - 2,65 Bonus = - 1,02 (n =44)l

tl,2 ROA tl,2 ROS tl,2

=.78 = .82

Bonus=.25

t3,4 ROA = 2.46** t3,4 ROS = 3-32* t3,4 Bonus= .02

= 4.62* FROS = 5.1 2* = .05 FBonus


FROA

Orientation and Employment Long-Term Security Y1 Y2 Is I---

.......
.......... -. ..8 ..... L.............

--

-------------

-- 6

10
<A5

,/

-- - - - - - - 4

-10

......- --

--

I.........

. .......

.............

. .... ..........0

within ae~ utregop -10Y -N


*P <.10 ** < 205;**

Y2 0

-15l1l-4 Secure Long-Hi Secure Short-Lo Secure Short-Hi Secure Long-Lo EROA -7.5 (Y1) ROS (Y2)

1 of varianceassumptions are met aWomogeneity >.05) using Cochran'sC except for here. Congruence occurs in the top right and bottom left cells which are hypothesized to have higher performancethan the other cells. The numberof observations in each cell (n) applies to the Bonus variablesbecause of missing data. The F-statistic analysis;n varies slightlyfor the other performance tests the overall hypothesis that performance is affected by congruence between culture and management practice; the t-tests refer to differences between performancemeans for work units

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JOURNAL OF INTERNATIONAL BUSINESS STUDIES, FOURTH QUARTER 1996

TABLE8 Effect of Congruence between Uncertainty Avoidance and Management Practices


Uncertainty Avoidance High Low

ROAa = -7.22
= -1.56 Unclear ROS .02 Unclear Bonus = C(n=48)
0.
0

ROA (n=44)

=
-

1.24
3.53 .31

ROS = Bonus =

RA
Clear
(n=45)

=
-

2.44 .66
.04

ROA
ROS (n=52)

ROS = Bonus =

Bonus =-

.32 .27

.04

tl,2 ROA = .86 tl,2 ROS =1.01 tl,2 Bonus = .63

t3,4ROA = .28 FROA = .66 t3,4ROS = 2.34*** FROS = 5.63** t3,4Bonus = .25 FBonus = .40

Uncertainty Avoidance High Low

Unclear

ROAa = -6.75 ROS = -2.01

?
0 a Z6W
__ _

Bonus = - .36 (n = 61)


.__ _ _ _ _

Bonus = - .16 (n = 33)


_ _ _ _ _ _

ROA = -2.80 ROS = 2.44

o
Clear

ROA = - 1.08 ROS = 1.54


Bonus = .39

ROA = ROS =
Bonus =
-

2.18 .77
.27

(n =32)

(n = 63)

tl,2 ROA tl,2 ROS tl,2

.89

t3,4ROA

= 1.86**

= 1 95** t3,4 ROS = 1.02 t3,4Bonus = .10 Bonus = .02

= .01 FRoS = 4.44** FBonus= .00 FROA

variablesbecause of missing data. The F-statistic analysis;n varies slightlyfor the other performance tests the overall hypothesis that performance is affected by congruence between culture and management practice; the t-tests refer to differences between performancemeans for work units withinthe same culturegroup.

aHomogeneity of variance assumptions are met (p > .05) using Cochran's C except for here. Congruence occurs in the top right and bottom left cells which are hypothesized to have higher performance than the other cells. The number of observations in each cell (n) applies to the Bonus

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CULTURAL FIT WITH MANAGEMENT PRACTICES

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work units that stressed"quickfixes"to problemsoutperformed work units that adopted a more permanentsolution to problems.Furthermore,work units with less employment security outperformedwork units with more employmentsecurityin these short-termoriented cultures.Our results also suggestedthat work units in long-termorientedcultureswerebetterperforming if they had the opposite managementpractices- permanentsolutions to problems,and a stress on employmentsecurity- but the performance differenceswerenot statistically significant, perhapsbecauseof smallsamplesizes in these cells. The hypothesisthat congruence betweenuncertainty avoidancein the national cultureand the clarity of managementpracticesis importantfor high work unit performanceis only partiallysupported(Table 8). Work units in high uncertaintyavoidancecultureswhose employeesreporta more clear sense of directionor more clear policies have better financialperformance than work units in these cultures with a less clear sense of direction. However, the expectedresultsare not found in low uncertaintyavoidancecultures.In such culturesthere are no consistent performancedifferencesbetween congruent and noncongruent workunits. DISCUSSION AND CONCLUSIONS We find supportfor the thesis that businessperformance is betterwhen management practicesarecongruentwith nationalculture.Workunitsthat are managedconsistentwith the valuesof the externalcultureare more profitable than work units in which the fit is less well achieved.These resultscontribute to the small body of empiricalevidence supportingthe importanceof congruencebetweenmanagement practicesand nationalculture.This studybuilds on the work done by Hofstede,whose analysiswas also based on marketing, sales and customerserviceemployeesof one largecompany(he also collected data from manufacturing plants, but did not use them in his cross-country comparisons[Hofstede 1980, p. 41]). Our study is more comprehensive than other recentempiricalworkbecausewe examineall five of Hofstede'scultural dimensions(not just one or two), using data fromeighteencountries(not just two or three),and we controlfor priorperformance and exogenouseconomic factorsthat could accountfor differences in performance. The findingshave an importantimplicationfor managers: managementpractices should be adaptedto the local cultureto be most effective.Managers' effortsto encourageemployeeparticipation might improvethe profitability of workunits in countrieswith a cultureof low powerdistance,such as the U.S., but more employeeparticipation is likelyto worsenprofitability, not improve it, in countrieswith high power distance,such as Latin Europeanand East Asian countries.An emphasison individualemployeecontributions is likelyto improve profitabilityin individualisticcountries, such as the U.S., but to worsen profitabilityin collective countries, including those in East Asia.

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JOURNAL OF INTERNATIONALBUSINESS STUDIES, FOURTH QUARTER 1996

use of merit-based pay and promotionshouldimproveprofitability Substantial in masculinecountries,such as Anglo and Germaniccountries,but worsenit in feminine countries,such as Nordic countries.A short-termapproachto problem-solvingand a small sense of employmentsecurity apparentlyare in short-termorientedcountries,such as the U.S., while good for profitability countries, such as long-term approacheswork better in long-term-oriented those in East Asia. and promotedworldwide initiatives that arecreatedat headquarters Corporate run the risk of conflictingwith unreceptivenational cultures.In particular, management practices that are favored in the U.S., such as employee merit-basedrewards,and short-term participation,individualresponsibility, in othercountriesthat are culturally are to unwise some likely be approaches, unlike the U.S. A mismatchbetween work unit managementpracticesand The issue of fit is especially national cultureis likely to reduceperformance. salient for U.S. managersbecausethe U.S. has quite extremevalues for both and long-termorientationculturaldimensions.By implication, individualism the more different the host country culture is from the company'shome countryculture,the more the companywill need to adapt.If we take national the onus is on managersto adapt. immutable, cultureto be relatively to The companyfromwhichthese data weretakenis not generallyconsidered havea strongcorporateculture.In fact, one of the reasonsfor the surveywas to assessa recentattemptto developa strongercorporateculture.If the company in question had a strong corporate culture, the congruence effects betweennationalcultureand management practicesmightbe weaker.Perhaps but not eliminate,the influence the strongcorporateculturewould attenuate, Adler's with consistent [1997]observationthat organizaof nationalculture, and tional culturedoes not erasenationalculture.Unless hiring,development to reinforce a national culture very all transcend can promotion practices strong corporateculture [Evans 1992], companiescan raise performancein foreign affiliates by adapting their management practices to the affiliate country'snationalculture. Ourresultssuggestthat companiesare well advisedto takenationalcultureas This also meansthat American a given and adjusttheirpracticesaccordingly. firms, for example, should not try to become more like Japanesefirms or management Germanfirms.Whilethereis muchto be learnedfromexemplary betweencultureslimit the transferpracticesin other cultures,the differences ability of managementpracticesfrom one to the other. The more collective, long-termorientationof Japanesenationalculturearguesin favorof management practicesthat are very effectivein Japanbut that havenot achievedsuch resultsin the U.S. high performance In our results the uncertaintyavoidancedimension is a special case. Our findingswere not consistent:clarity of directionand policies aided perform-

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ance in high uncertaintyavoidancecountries,though some effects were not statisticallysignificant.In low uncertaintyavoidancecountrieswe found no discernable patternof results. These equivocalresultsmay be understoodin three ways. First, uncertainty avoidance may be an artifact of the time during which Hofstede did his originalresearch.He measuredit in part as the amount of stressexpressedby the dimensionas "thelevel of anxiety. . . in a partiemployees.He interprets cular society in the face of an uncertainfuture"[1991:112].This definitionis differentfrom the other definitionsof his dimensionsbecause it contains an implicit reference to time - an uncertain future. Measuring uncertainty avoidance in the late 1960s and early 1970s may have resulted in higher uncertaintyavoidancein Europebecause of the cold war and the still-vivid memoriesof WorldWarII than might be the case today.Second,uncertainty avoidancemay simply be irrelevantas a concept in countrieslabeled as low uncertaintyavoidance.It could be that clarity of policies and directionis a good managementpractice, regardlessof national culture, consistent with Denison and Mishra's[1995]findings.Third,Hofstedeand Bond [1988]found that uncertaintyavoidancedid not emergeas a dimensionthat discriminated among countries,using a new instrumentbased on a Chinese values study. Perhapsthe dimensionis not relevantfor Asians [Hofstede1991].Our results, taken together with Hofstede and Bond's results, suggest that uncertainty avoidancemay not be a usefuldimensionfor comparative research. this study benefitsfrom having independentdata sources Methodologically, for managementpracticesand work unit performance. Performance is not a subjectiveperception,colored by individuallikes and dislikes.The study also of management benefitsfromthe measurement practicespriorto the measurement of workunit performance. This lends credibilityto causal arguments by allowingchangesin management practicesto affect subsequentperformance. If managementpracticespersist over time, the lag is not criticalempirically. However, if work unit management turns over, then the timing of data collectionis important. This studyis weakenedby less-than-perfect measuresof independent variables. The items we used to measuremanagementpractices came from a survey in the empiricalliterature. designedfor anotherpurposeand are not replicated The findingsare consistent,the independentvariableshave face validity,and the scales haveconvergent validityand acceptableinter-itemreliability. However, a better study design would include items designed for the purpose of measuringthe managementpracticesimplied by Hofstede'sdimensionsand anchored in existing empirical literature.While mindful of Dorfman and Howell's [1988] admonition that management practices should not be measuredwith the sameitems Hofstedeused to derivehis culturedimensions, to guidethe measurement thereis ampletheoreticaland empirical of literaturetg appropriate management practices.

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For example,powerdistanceshould be matchedwith employeeparticipation and decentralization. We accomplished the formerbut not the latter.Managedimension ment practicesthat are congruent with the individual-collective might include relianceon group incentive and performancesystems;group decisionmaking; and family-likeemploymentpracticessuch as employment for life and the extentto whichthe companyis the sourceof socialand cultural dimensionis activitiesfor employeesas well as work.The masculine-feminine nicely capturedby practicessuch as individualgoal-setting,merit-basedpay, merit-basedpromotion, and opportunity for feedback. Finally, long-term orientationis the most difficultbecauseit is the newestof the dimensionsand the least familiarto Westernresearchers. identifiedfour prinHofstede [19911 ciples of Confucian teaching that form the foundation for the long-term dimension.These are acceptanceof unequal relationships(power distance); the family as prototypefor all organizations treatingothers as (collectivism); you would want to be treated(the Golden Rule);and a collection of virtues including working hard, being thrifty, being patient, and persevering.Perseveranceand patienceare probablythe key characteristics of the long-term orientationthat are differentfrom all other dimensions.These are the virtues we measured,thoughnot as well as we would haveliked. A final limitationof this study is its relianceon data from employeesof one company.While this usefullycontrols for both some companyand industry of the findings.A multiplecompanystudy effects,it limits the generalizability Sucha studycould includingmanufacturing employeeswould add robustness. were also addressLaurent's[1983]surprising findingthat culturaldifferences more pronounced among foreign employees working in the same multinationalcompanythan among employeesworkingfor differentcompaniesin theirhome countries. also might explorethe simultaneous Futureresearch relationships among two or more Hofstede dimensions and managementpractices.Hofstede often of two dimensions. In his 1991 discussesnationalcultureas a cross-tabulation a whole set of management book, he hypothesizes practicesthat ought to be in fourcountryclustersdefinedby the cross-tabulation of moreor less prevalent avoidance. tests of his impliedinterpowerdistanceand uncertainty Empirical actions are an important next step in our understandingof cross-cultural avoidin the efficacyof management differences uncertainty practices. Perhaps with powerdistance. anceis a usefuldimension whenconsidered simultaneously will contribute to a moresophisticated on theseand otherinteractions Research base for companiesas they try to matchtheirmanagement practices knowledge with the demandsof the extantnationalculturesin whichthey operate.
NOTES test 1. Differencesamong units are tested with analysisof varianceusing the Kruskal-Wallis because we have unequal work unit sizes and variances.Results indicatedifferencesamong

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work units in mean ratingson the managementpracticesvariables.The strengthof withinunit characteristics is ascertainedin three ways: agreementwithin group on perceptionof management practices (eta2), reliability of group mean (Spearman-Brownformula for intraclasscorrelations,unequal variancesnotwithstanding),and averagestandarderrorsof the means for managementpractices variables.The intraclass correlations are small, as intraclasscorrelationsare between expected,rangingfrom .08 to .20. The Spearman-Brown .74 and .92, an acceptablerangeaccordingto Glick [1985].The standarderrorsare in the .20 to .40 range.

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