International Journal of Operations & Production Management
Emerald Article: The importance of national culture in operations
management research Mark Pagell, Jeffrey P. Katz, Chwen Sheu Article information: To cite this document: Mark Pagell, Jeffrey P. Katz, Chwen Sheu, (2005),"The importance of national culture in operations management research", International Journal of Operations & Production Management, Vol. 25 Iss: 4 pp. 371 - 394 Permanent link to this document: http://dx.doi.org/10.1108/01443570510585552 Downloaded on: 15-09-2012 References: This document contains references to 52 other documents Citations: This document has been cited by 28 other documents To copy this document: permissions@emeraldinsight.com This document has been downloaded 8940 times since 2005. * Users who downloaded this Article also downloaded: * Hui Chen, Miguel Baptista Nunes, Lihong Zhou, Guo Chao Peng, (2011),"Expanding the concept of requirements traceability: The role of electronic records management in gathering evidence of crucial communications and negotiations", Aslib Proceedings, Vol. 63 Iss: 2 pp. 168 - 187 http://dx.doi.org/10.1108/00012531111135646 Franois Des Rosiers, Jean Dub, Marius Thriault, (2011),"Do peer effects shape property values?", Journal of Property Investment & Finance, Vol. 29 Iss: 4 pp. 510 - 528 http://dx.doi.org/10.1108/14635781111150376 Charles Inskip, Andy MacFarlane, Pauline Rafferty, (2010),"Organising music for movies", Aslib Proceedings, Vol. 62 Iss: 4 pp. 489 - 501 http://dx.doi.org/10.1108/00012531011074726 Access to this document was granted through an Emerald subscription provided by GUANGDONG UNIVERSITY OF FOREIGN STUDIES For Authors: If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service. Information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.com With over forty years' experience, Emerald Group Publishing is a leading independent publisher of global research with impact in business, society, public policy and education. In total, Emerald publishes over 275 journals and more than 130 book series, as well as an extensive range of online products and services. Emerald is both COUNTER 3 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. *Related content and download information correct at time of download. The importance of national culture in operations management research Mark Pagell College of Business, Oregon State University, Corvallis, Oregon, USA Jeffrey P. Katz and Chwen Sheu Department of Management, Kansas State University, Manhattan, Kansas, USA Abstract Purpose The purpose of this study is to test the validity of national culture as an explanatory construct for international operations management decision-making. Design/methodology/approach National culture is multi-dimensional thereby allowing for much ner grained comparisons than are possible when examining differences based purely on geography or the level of industrialization. This proposition is examined from the theoretical standpoint then empirically investigated using an existing database. Findings This article nds that national culture signicantly explains international operations management behaviors among similar manufacturing plants in the same industry located in different cultures. Originality/value This study represents a rst attempt at using national culture to explain differences of operations decision-making. Keywords Globalization, Culture, Operations management Paper type Research paper 1. Introduction One of the most important trends facing managers is the ever-increasing emphasis on globalization. In the past, many organizations competed mainly within their home country or region. Today rms purchase materials and services, develop alliances, and sell their products all over the world. It is an unusual company that is not directly impacted by globalization, and a rare manager who does not have to make decisions in a global context. There have been numerous calls for operations management research to take a more global focus in order to remain relevant to the changes impacting industry (Chakravarty et al., 1997; Frohlich and Dixon, 2001). In this paper we argue one of the ways to ensure the relevance of the eld and move to a more international research perspective is to expand the constructs used to explain international differences in operational decision-making. Specically, we argue that operations management research that has examined international issues has primarily focused on differences between countries or regions (for example, Pagell and Sheu, 2001) while generally over-looking the importance of national culture as a means to explain and predict operations management in a global context (Govindarajan and Gupta, 2001). We argue, consistent with Burgess (1995), that national culture is an equally relevant lens through The Emerald Research Register for this journal is available at The current issue and full text archive of this journal is available at www.emeraldinsight.com/researchregister www.emeraldinsight.com/0144-3577.htm The importance of national culture 371 International Journal of Operations & Production Management Vol. 25 No. 4, 2005 pp. 371-394 qEmerald Group Publishing Limited 0144-3577 DOI 10.1108/01443570510585552 which the viewing of these systematic differences makes sense to advance the eld of operations management and related research. This research attempts to increase our understanding of the systematic differences that national culture may create in regards to operational decision making. The purpose of this study is to test the validity of national culture as an explanatory construct for international operations management decision-making. Such understanding is of paramount importance as rms globalize, because senior managers need to better understand plant managers preferences for certain operational structures and infrastructures. These preferences may be based on the culture the plant manager is operating in, which may differ signicantly from the culture of senior management (see for example, Hofstede et al., 1993). Therefore, in the present study we link dominant models of national culture to an existing database and provide evidence regarding how national culture affects operational decision-making at the plant level. Our paper is organized as follows. First, we review the way that international research has traditionally been conducted in the eld of operations management. Second, we examine conducting research through the lens of cultural differences as opposed to examining differences between countries or regions. Third, we introduce an existing measure of culture that has a long history of use in other organizational elds. Fourth, we examine an existing database to examine the macro inuence of culture on operational decisions. Finally, we discuss the importance of cultural distinctions to operations management research. 2. Traditional international research in operations management The amount of research in international operations management has increased dramatically in the last decade. The purpose of this section is to identify and discuss research designs used in the majority of international operations management research. In the following paragraphs we draw from recent research for two reasons. First, Prasad and Babbar (2000) provide a comprehensive review of the content of international operations management research published between 1986 and 1997. Therefore, more recent work may be less familiar to the reader. Second, and of greater import, our aim is the further development of the eld and recent publications give the clearest indication of the present state of development. Based on the work of Prasad and Babbar (2000), and our own review of the literature, the majority of international operations management research falls into one of three categories; single country studies, country comparisons, and regional comparisons. Implicit in many single country designs is the assumption that research is international if it investigates entities outside of North America. For instance the Journal of Operations Management uses the keywords, international issues, to describe Song and Parrys (1999) study concerned with product development in Japan. Similarly, articles by Badri et al. (2000) and Ward et al. (1995) are regarded as international studies because they tested the same theory using data collected in the United Arab Emirates and Singapore, respectively. In general, the purpose of such single country studies is to test the generalizability of a theory in a new or different setting, with an underlying supposition that there are likely to be differences between countries. IJOPM 25,4 372 Country comparisons are an explicit attempt to test the generalizability of a theory by applying the same survey or protocol in multiple settings. The majority of such studies make comparisons between two countries; often the USA and another industrialized country. For instance, Klassen and Angell (1998) compare environmental management in the USA and Germany and conclude that regulatory differences between countries inuence the ability of manufacturing exibility to support environmental management. Ichniowski and Shaw (1999) examine human resource practices in American and Japanese steel plants, with an explicit intent to test the supposition that cultural differences make it difcult to import Japanese human resource policies into American plants. Sheu and Wacker (2001) study the relationship between planning and control systems and manufacturing competitiveness in the USA and Japan. Overall, country comparisons and single country studies share the same generalizability goal. But they also share a supposition that crossing borders automatically means a substantive change in business practices, decision-making strategies, and outcomes. Regional comparisons serve the same purpose as country comparisons, but are often done on a larger scale. Regional comparisons propose that the proximity of geographical locations can be a key explanatory factor in operations management decisions. For instance, Whybark (1997) suggests that North American rms are very different from European rms regarding patterns of international expansions. Ettlie (1997) reports regional differences (European, Asia, North America and South America) in the performance of quality management. Many studies focusing on regional differences were the result of few large-scale survey efforts conducted through the Manufacturing Future Projects, Global Manufacturing Research Group (GMRG), World Class Manufacturing Project, and Vision in World Class Manufacturing Project (Roth et al., 1997). For example, Pagell and Sheu (2001) use GMRG data to examine differences in supply chain practices and performance, splitting the globe into three regions; North America, Europe, and Asia. Comparing differences between regions of the world tends to have similar limitations to conducting comparisons between countries, with two additional important limitations. First, such comparisons assume that all countries in a region are somehow similar in terms of culture and level of industrialization, an assumption that is difcult to support in most regions of the world. Second, the identication of regions tends to be judgmental, and therefore somewhat subjective. For instance, the GMRG data set contains a number of Eastern European countries such as Poland and Hungry. Pagell and Sheu (2001) considered these plants part of the European region, but they could just as easily have been categorized into their own Eastern European region. Similarly categorizing a country like Australia, geographically close to Asia but with cultural roots in Europe, will be problematic in a study assessing regional differences. These works, whether addressing one country outside the US or a number of global regions, attempt to generalize theory from a single country to the entire world. However, all of these international operations management studies failed to consider international differences from the cultural perspective, a perspective that has been studied in other areas of international business (see for example, Fernandez et al., 1997; Kogut and Singh, 1988). The importance of culture in operational decision-making has been noted but not empirically validated (Burgess, 1995; Starr, 1997). The following section advances our key argument that comparisons of international operations The importance of national culture 373 management should consider cultural differences in addition to geographic boundaries. 3. Cultural differences Simply describing differences in the behavior of rms by country of origin suggests that each individual country maintains a unique set of characteristics that will affect decisions made within the rm. While this may be true in some situations, many countries and their workers also share common factors such as language, religion, customs, borders, beliefs, rules, and ethnic heritage. Therefore, calculating the number of miles between countries, or manufacturing plants, to infer the magnitude of their differences would be a critical error in logic that fails to systematically consider that perceptions and actions of managers in each country differ (Bonvillian and Nowlin, 1994; Ronen and Shenkar, 1985). For senior-level managers responsible for global manufacturing operations, the important question to ask is: why might resident managers based in different countries pursue signicantly different approaches when faced with the same set of decisional factors? While neo-classical economists would prefer that we assume all managers are motivated by maximizing prots, international business researchers have suggested a variety of possibilities beyond the classic prot-maximization that includes interest in the protection of national culture, exploitation of unique products or resources, unique approaches to internationalization, or development of national infrastructures (Anderson and Coughlan, 1987; Hofstede, 1980; Keegan, 1984; Porter, 1990). That is, over the past 20 years international management research has successfully linked national culture to the bases for many of the cross-national differences in business behaviors (Trompenaars and Hampden-Turner, 1998). More recently, the GLOBE project has again focused attention on the role of culture and decision-making in terms of nine dimensions with particular attention on leadership (House et al., 2002; Javidan and House, 2001). The expanding base of the related literature on national culture offers a number of explanations for the differences that extend beyond the existence of borders. These studies have sought to examine corporate strategies, such as international expansion, business strategies, such as product low cost leadership versus differentiation, and functional strategies, such as differences in the way the rm chooses to structure its workers, their compensation, and the rms nances. For example, some of the earliest studies suggested that differences in how managers make decisions based on their locations was due to a combination of the home country of the company and the physical location of the manager (Dunning and Pearce, 1982). Kogut and Singh (1988) argued the way rms expand their base of operations is related to national culture. Porter (1990) suggested that in addition to culture, the location of plants and resource-based advantages related to the industry help explain patterns of global competition within specic industries. And nally, Sekely and Collins (1988) posited that cultural differences inuence the capital structure of rms. All of these researchers and their studies seem to agree that the decision-making of managers varies from culture to culture as opposed to being based simply on geographical boundaries. Several studies suggest the importance of cultural values in explaining the differences in overall performance of the rm (Hofstede, 1980; Shane, 1993; Tse et al., 1988). However, it has been suggested that performance differences at the rm level are IJOPM 25,4 374 partially due to different cultures dening desirable corporate performance in different ways. For example, the business culture in the USA tends to focus on short-term protability, while Japanese rms have been more focused on building market share over the long term. As partial evidence of different cultures dening performance differently it has been empirically demonstrated that cultural differences explain more than half of the cross-national difference in corporate growth patterns (Franke et al., 1991). More recent research has suggested that examining the underlying functional decisions made within the rm will provide greater understanding of how national culture affects the way managers make specic decisions intended to implement the goals of the rm (Katz et al., 1999). For example, Nakata and Sivakumar (1996), in their review of the literature regarding the role of national culture on new product development, called for more empirical research examining the effects of national culture on functional business strategies, such as operations. The authors cited the lack of adequate research to properly assess the role of national culture on the decisions made by managers in their respective operational functions. Following this call for the initiation of research in the area of operations and related decisions, the current study is an exploratory investigation of the link between national culture and operations management. We focus on providing evidence that expanding international research in operations management to include a cultural perspective will increase our understanding of operations management decisions in a more systematic global context. We argue that national culture may be a more effective way to assess operational decisions than considering cross-border or regional differences based on geographical boundaries. The following section describes the research documenting differences in national culture with a particular focus on how national culture is measured. The strong construct and predictive validities of measures of national culture, combined with data on plant-level decisions, provide an excellent opportunity to begin assessing the impact of national culture on the eld of operations management. 4. National culture: measures and models Hofstede (1980) denes national culture as the collective mental programming of the people in a national context. Through an empirical study examining more than 10,000 managers in over 50 countries, Hofstede developed a quantitative classication scheme for measuring differences and similarities between national cultures. Hofstede conducted a factor-analysis of responses to questions relating to work-place issues and proposed that attitudes, beliefs, and behaviors could be categorized into four dimensions. Each dimension provides a numerical score, generally between 0 and 100. The four cultural dimensions that emerged from his study are individualism-collectivism, masculinity-femininity, power distance, and uncertainty avoidance. Recent research has reconrmed the construct validity and workplace relevance of Hofstedes four dimensions of national culture. For example, Merritt (2000) reports the results of a survey of 9,400 workers in 19 countries conrming the predictive validity of the measures. The author concludes that the successful replication conrms that national culture exerts a signicant inuence on senior-level workers within a specic industry that impacts their behavior beyond the level of professional factors that The importance of national culture 375 would typically affect their behavior in the workplace. Specic descriptions of the dimensions follow. 4.1 Power distance The power distance dimension as dened by Hofstede (1980) reects human inequality in the areas of prestige, inuence, wealth, and status in each culture. According to Hofstede, the extent to which people accept unequal power is culture-based. Power distance reects the desirability or undesirability of inequality and of dependence versus interdependence in society. Although both low and high power distance countries have hierarchical power relationships, they can be interpreted differently. For instance, in high power distance societies, such as India and France, power needs less legitimization than in low power distance societies, such as Israel and Denmark. Moreover, high power distance societies tend to use more coercive and referent power, while low power distance societies use legitimate power more through reward systems based on expertise. Conversely in low power distance cultures, a latent conict and basic mistrust between the powerful and powerless seems to prevail, whereas high power distance cultures have relationships with higher levels of internal harmony (Hofstede, 1980). 4.2 Uncertainty avoidance Coping with the inevitable uncertainties in life is partly a non-rational process that different individuals, organizations and societies resolve in different ways, including the application of law, religion, rituals, rules, and uses of technology. All these cultural inventions can make life seem more predictable or less uncertain. Uncertainty avoidance measures the extent to which countries deem the pursuit of certainty important. We expect cultures with high uncertainty avoidance scores to reveal a preference for long-term predictability of rules, work arrangements, and relationships as well as an avoidance of risk taking. On the other hand, a low uncertainty avoidance score suggests a higher tolerance for uncertainty and, therefore, an acceptance of more informal actions such as ad hoc negotiation for the settlement of disputes (Hofstede, 1980; Trompenaars, 1994), and a willingness to take risks. High uncertainty avoidance cultures include Germany, Japan, and Spain while low uncertainty avoidance cultures include Denmark and the UK. 4.3 Individualism Individualism describes the relationship between the individual and the collective. This relationship is not only a matter of ways of living together, such as in nuclear or extended families, but it is closely linked with societal norms. Thus, individualism will affect not only the functioning of families, but also education, religion and politics. A given societys norm for individualism versus collectivism will strongly affect the nature of the relationship between a person and the organization to which they belong. More collectivist societies, such as Japan, demand greater emotional dependence from members, while organizations in more individualistic societies, such as the USA and Canada, assume employees have broad responsibility for individual actions and, are rewarded accordingly. Furthermore, the level of individualism or collectivism will affect members reasons for complying with organizational requirements, as well as affect the type of people admitted into positions of special inuence. IJOPM 25,4 376 4.4 Masculinity Different societies cope in different ways with differences in gender roles. A higher level of masculinity is the dominant role pattern in the majority of societies. Although biological differences between men and women are the same for all societies, the actual division of labor between women and men varies widely. This gender pattern is transferred to each society through families, schools, peer groups, and the media. The predominant socialization pattern is for men to appear autonomous, aggressive, and dominant. Conversely, it is common in many societies for females to appear nurturing, helpful, humble, and afliating. These social patterns seem to be projected onto cultural perceptions of organizations. Business organizations are oftentimes perceived to be more masculine while organizations, such as hospitals, tend to be perceived as more feminine. In countries with lower masculinity (higher levels femininity) indices, such as Norway or Sweden, life satisfaction of workers tends to take precedence over job success. The opposite is true in countries such as the US that score higher on the masculinity index. It is not surprising that cultures having lower levels of masculinity (higher levels of femininity) encountered afliated work activities in the form of work teams earlier than countries with cultures displaying higher levels of masculinity. For example, in the automobile manufacturing industry, the rst modern use of autonomous work teams occurred in Sweden while the USA favors primarily assembly line production methods. However, recent criticisms of Hofstedes dimensions suggest that they have lost relevance because the data they are based on was collected over 20 years ago (Fernandez et al., 1997). Work by Verbeke (2000) and others (Spector et al., 2001) have called into question the modern-day validity of Hofstedes (1980) original work. Despite the debate over whether Hofstedes original work continues to remain valid, many recent studies continue to cite the value of the original four dimensions of national culture in decision-making research (see for example, Merritt, 2000; Dugan et al., 1998) 4.5 Complementary models of national culture The work of two additional research groups should also be acknowledged because they support the notion that national cultures, or clusters of countries with similar cultural tendencies, are more appropriate for understanding business behaviors than merely considering individual country differences. Ronen and Shenkar (1985) integrated the literature on differences in how people of a country hold beliefs and values. The authors suggested that eight country clusters, rather than individual country differences, exist. The clusters are not created through geographic proximity but rather they are derived based on similarities with regard to cultural factors such as religion, language, legal systems, and historical contact. As the authors note: As multinational companies increase their direct investment overseas, especially in less developed and consequently less studied areas, they will require more information concerning their local employees in order to implement effective types of interactions between the organization and the host country (Ronen and Shenkar, 1985, p. 452). A more recent examination of national culture was accomplished by Trompenaars (1994) reporting a ten-year study examining the responses of over 15,000 managers from 23 countries. His research approach, similar to Hofstede (1980), identied ve relationship orientations that address how people in different cultures relate in the work place. These polar dimensions are: The importance of national culture 377 . universalism vs particularism; . individualism vs communitarianism; . neutral vs emotionalism; . specic vs diffuse; and . achievement vs ascription. Trompenaars and Hampden-Turner (1998) also examined the relative cultural differences between societal views regarding time, and perceived control over the environment. In addition, the GLOBE project has begun citing results of a wide-scale study by more than 150 researchers collecting information on more than 18,000 middle managers in 62 countries (Javidan and House, 2001). The global leadership and organizational behavior effectiveness study focuses on leadership behaviors and the role of national culture. Regardless of the operationalization, all of the research efforts reach similar conclusions. Specically, culture is multi-dimensional and can explain some of the variance in managerial behaviors and decision-making. 5. Empirical evidence of national culture impact on operations management decisions The following analysis is provided to demonstrate the impact of national culture on operational decisions at the plant level of analysis. We are interested in testing a macro-level theory related to the inuence of culture on operational decision making. The literature is clear that culture matters in other settings. Our goal is to determine if culture is also an important explanatory construct for operations management research. This research effort is not a denitive test of the specic role culture plays in individual operational decisions. Rather our aim is to use an existing data set that includes a signicant number of countries from various cultures to demonstrate that culture can explain a signicant portion of the variance in items that reect operational decision areas. That is, culture can be used to help explain some of the decisions made by managers in a global context. Toward this aim we used a sub-set of the data collected for the Global Manufacturing Research Group (GMRG) manufacturing practices survey. GMRG is a multi-national community of researchers dedicated to the study of international operations management. Its primary goal is to promote an understanding of differences in manufacturing practices across international boundaries through joint research efforts. The GMRG data were primarily collected from two industries: non-fashion textiles and machine tools. Survey questions cover key categories of manufacturing activities such as sales forecasting, production planning and scheduling, shop oor control, purchasing and materials management, and manufacturing performance. The survey questionnaire has been previously validated in other studies. Full details about its development and the administration of the survey are available in Whybark and Vastag (1993) and Whybark (1997). We examine the responses from778 plant-level managers in the GMRG database for whom industry data existed. These 778 plants represent 21 different countries in most regions of the world. In addition, both developed and developing nations are represented. Finally, some of the plants are state owned. Table I details the breakdown IJOPM 25,4 378 of the sample, as well as the scores each country received on Hofstedes cultural dimensions. In order to test the ability of culture to explain a signicant amount of variance in operations decisions we examine the role that national culture plays on: . decisions to export products; . sales forecasts; . the number of outsource relationships; and . the purchase of productions inputs rather than the manufacture of them. Our discussion of the constructs examined follows. 5.1 Constructs examined As noted above, our aim was to show that culture is an important construct in operational decision-making. If culture explains a signicant portion of the variance in operational decisions, then future studies of international operational decision-making could be expanded from country and regional comparisons, to explicitly consider culture. Therefore, we selected a subset of items from the GMRG database to examine the impact of culture on operational decision-making. Two other criteria inuenced the choice of items used in the analysis as well. First, all items are objective measures, rather then perceptual measures as reported by plant managers, which reduces some concerns with validity and measurement bias. Second, the items chosen were those likely to result in consistent interpretations by respondents. For example, we did not Country Number of plants Uncertainty avoidance Power distance Masculinity Individualism Australia 24 51 36 61 90 Bulgaria 32 N/A N/A N/A N/A Canada 92 48 39 52 80 China 17 N/A N/A N/A N/A Ireland 8 35 28 68 70 Germany 18 65 35 66 67 Hungary 73 N/A N/A N/A N/A Israel 4 81 13 47 54 Japan 91 92 54 95 46 Mexico 52 82 81 69 30 New Zealand 18 49 22 58 79 Northern Ireland 7 35 28 68 70 Poland 29 N/A N/A N/A N/A Portugal 27 104 63 31 27 Russia 93 N/A N/A N/A N/A Spain 20 86 57 42 51 Sweden 18 29 31 5 71 Taiwan 10 69 58 45 17 US 120 46 40 62 91 Wales 7 35 35 66 89 UK 18 35 35 66 89 Note: N/A = not available due to non-inclusion in original Hofstede (1980) study Table I. Measures of national culture and number of plants in the sample The importance of national culture 379 select frequency of forecast modication as a variable of interest since respondents could potentially interpret the meaning of the item differently. Table II describes the four constructs that were examined, as well as the manner in which they were measured in the GMRG database. The hypothesis we are testing is: H0. The elements of culture are not signicant predictors of operational decisions in a global sample. Rejection of H0 would indicate that the elements of culture might be able to explain differences in decision-making patterns globally. This aim is obviously limited to testing the macro level theory that culture can predict a signicant amount of variance in operational decisions. There is no attempt to test more specic theory surrounding the role of culture in individual operational decisions because such theory rst needs empirical evidence that culture matters in general. If the effect of national culture is conrmed, future research certainly should incorporate cultural variables to measure operational decision making more thoroughly. The rst two constructs examined, suppliers per part and percentage of purchasing cost, are important to supply chain decisions. Many authors have noted that the eld of operations management has expanded from examining decisions within a single function at a single rm, to trying to simultaneously optimize across an entire supply chain (e.g. Frolich and Westbrook, 2001). By examining the inuence of culture on a pair of important supply chain decisions we are really attempting to combine two trends in the eld: an increased emphasis on globalization and an increased emphasis on managing the entire supply chain. Evidence that one or more of the elements of culture inuenced either of these supply chain decisions would indicate that as research in supply chains (especially global supply chains) moves forward, more variance will be explained if culture is explicitly considered in research efforts. Forecasting has long been a fundamental activity for operations managers hence it has a long history of study within the eld of operations management (e.g. Winters, 1960). Forecasts are fundamental to all planning activities. Forecast horizons inuence the forecasting tools used, as well as the types of planning that can be done. Because of the importance of forecasts to various planning functions, evidence that culture inuenced forecast horizons would suggest that culture could have either a direct or indirect inuence on many other planning decisions from the timing of production to the types of inventory systems used. Finally, we examined the affect of culture on the level of exports because this decision is fundamental to international operations. The decision to sell in other Construct Measure/item Suppliers per part About how many suppliers does the company have, on average, per part (objective measure) Purchased as percent of costs What percent of the companys total manufacturing cost is for purchased material (objective in percentage terms) Horizon How far into the future does the companys sales forecast extend (objective measured in months) Exports Export sales as a percentage of total sales (objective in percentage terms) Table II. Constructs examined IJOPM 25,4 380 countries, as well as the decision regarding the amount of sales coming from global customers, will inuence operations in a number of different ways including the potential for more part and product variety, and increased logistical complexity. Overall, the four constructs used in our study underpin important operational decisions. While there is evidence indicating the differences of their practices across various countries (Whybark and Vastag, 1993), the relationship between those four constructs and culture has never been studied. 5.2 Analysis To analyze the impact of culture on each of these constructs we used hierarchical regression with industry and employment entered as controls in the rst step, and the cultural measures entered in the second step (Pedhazur and Schmelkin, 1991). Hierarchical regression was chosen for two main reasons. First, it is a straightforward method that focuses on control variables. Second, and of greater importance, hierarchical regression provides a clear picture of the additional explanatory power created by adding elements of culture to a base model. All of the tests were performed using Hofstedes dimensions of national culture. Hofstedes dimensions were chosen for the initial tests based on their widespread use in other elds. As noted in Table I some of the countries which we had data for were not included in Hofstedes study. Therefore our effective sample size for the analysis conducted using these measures was 556 plants in 16 countries. Our aim is to demonstrate that culture is a valid explanatory construct in operations management research, not that any one set of cultural measures is preferred. Therefore, we also performed tests using Trompenaars (1994) dimensions of culture as a secondary analysis. While not as widely cited in academic research, these dimensions provide the dual benets of having been derived from more recent data and of providing greater coverage, especially of Eastern Europe and China. The primary results using Hofstede are discussed in the following sections while the results of the analysis using Trompenaars dimensions (n 778) are presented in Appendix 1. The rest of this section presents the primary statistical results of the effect of culture on four operational decisions. More detailed discussion of the results is presented in the next section. 6. Statistical results 6.1 Suppliers per part Much of the recent literature in supply chain management, especially the literature with a focus on purchasing processes, has noted that in order to create integrated supply chains a company needs to optimize the supply base (Monczka et al., 2002). Optimization usually includes a reduction in the number of overall suppliers, as well as a move to use single sources for the majority of inputs, especially strategic inputs (Venkatesan, 1992). However, the relationships created between buyers and suppliers in single sourcing environments differ greatly from traditional arms-length relationships. Therefore, culture may play a key role in determining a companys willingness and ability to move to strategic supply chain management. The results in Table III suggest that culture plays a signicant role in decisions surrounding the number of suppliers per input, and by extension the types of relationships companies have with their suppliers. Adding culture to the regression The importance of national culture 381 model increased R-squared from 0.002 (p 0:173) to 0.022 (p 0:009). More importantly given our hypothesis, Uncertainty avoidance and individuality are signicant predictors of suppliers per input, even when controlling for industry and rm size. Thus, there is evidence to reject HO. Culture does explain some of the variance in this decision. 6.2 Purchasing percentage A key operational decision is the make-buy decision. Theory suggests that rms should focus the majority of their resources of their own core competencies and outsource processes that do not make use of these competencies (Venkatesan, 1992). However, there may be cultural elements that will make a company more or less likely to allow other companies to be responsible for some of the value created. The results in Table IV suggest that culture does play a role in deciding how much outsourcing occurs. Adding culture to the regression increases R-squared from 0.058 Step Construct Coefcient (standardized) F/T value P Adjusted R 2 1 Model 1.760 0.173 0.002 Constant 4.179 0.000* Industry 0.018 0.483 0.629 Employment 0.067 1.789 0.074 2 Model 2.870 0.009* 0.022 Constant 3.591 0.000* Industry 20.025 20.515 0.607 Employment 20.009 20.189 0.850 Uncertainty avoidance 20.429 23.741 0.000* Power distance 0.020 0.254 0.8 Masculinity 0.094 1.694 0.091 Individuality 20.338 22.779 0.006* Note: * P , 0.05 Table III. Average number of suppliers per input Step Construct Coefcient (standardized) F/T value P Adjusted R 2 1 Model 22.873 0.000* 0.058 Constant 42.618 0.000* Industry 20.245 26.702 0.000* Employment 0.045 1.234 0.218 2 Model 14.073 0.000* 0.138 Constant 2.167 0.031* Industry 20.293 26.508 0.000* Employment 0.059 1.402 0.162 Uncertainty avoidance 20.039 20.375 0.708 Power distance 0.270 3.605 0.000* Masculinity 20.106 22.042 0.042* Individuality 0.203 1.870 0.062 Note: * P , 0.05 Table IV. Purchasing percentage IJOPM 25,4 382 (p 0:000) to 0.138 (p 0:000). In addition, power distance and masculinity are signicant predictors of outsourcing, once more providing empirical evidence to reject H0. 6.3 Exports While the decision to sell products in other countries may be a strategic one, it has signicant implications for operations and the overall supply chain. Selling in other countries increases a plants potential market, but selling across borders also entails greater risk, an increase in logistical complexity, and often a need for customizing products for specic markets (Ferdows, 1997). Therefore, it is possible that some or all elements of culture would impact the decision to export, as well as the amount of exporting actually done. We would also suggest that companies that have plants located in certain cultures might nd it harder to create products for export or to use foreign sources. The results in Table V indicate that culture does play a major role in decisions surrounding the level of exports. Adding culture to the regression increases the adjusted R-squared from 0.005 (p 0:075) to 0.19 (p 0:000). And all four of the cultural dimensions are signicant predictors of exports, once more providing evidence to reject H0. 6.4 Forecasting horizon Forecasting is one of the most fundamental operational activities. All other planning activities and the majority of operational decisions are based on the forecast. Companies with operations in multiple cultures, or using suppliers from other cultures will have difculty planning if they blindly assume that time horizons for forecasts are stable across all cultures. The results in Table VI suggest that culture does indeed inuence the time horizon of forecasts within our sample. Adding culture to the regression model increases R-squared from 0.000 (p 0:402) to 0.092 (p 0:000). In addition, masculinity and individualism are signicant predictors of forecasting horizon, once more providing evidence to reject H0. Step Construct Coefcient (standardized) F/T value P Adjusted R 2 1 Model 2.606 0.075 0.005 Constant 11.319 0.000* Industry 0.087 2.280 0.023* Employment 20.009 20.225 0.822 2 Model 19.758 0.000* 0.190 Constant 0.191 8.427 0.000* Industry 0.144 3.252 0.001* Employment 0.096 2.328 0.02* Uncertainty avoidance 20.595 25.158 0.000* Power distance 20.298 24.079 0.000* Masculinity 20.147 22.822 0.005* Individuality 20.721 25.989 0.000* Note: * P , 0.05 Table V. Exports as a percent of overall sales The importance of national culture 383 6.5 Alternative operationalization of culture The purpose of this study is to test the validity of culture as an explanatory construct. Therefore, we performed the same analysis detailed in sections 6.1-6.4 using Trompenaars dimensions of culture. As previously noted these dimensions were derived using more recent data and include more countries in the study. In this secondary analysis using Trompenaars dimensions we nd signicant results for all of the constructs examined (see Appendix 1). There is, once again, overwhelming evidence that each of the individual dimensions of culture has an effect on one or more of the constructs examined. The secondary analysis demonstrates that cultural dimensions are signicant predictors of operational decisions. This is additional empirical evidence to reject H0 and supports our claim that the cultural construct is important to operations management research. 7. Discussion The purpose of our analysis is to demonstrate the validity of culture as an explanatory variable in operations management research. The tests are far from comprehensive. In the interest of parsimony we did not examine the entire GMRG database. Rather, we examined a sub-sample that seemed to include a broad range of operational topics at a number of different levels of analysis. The results are unambiguous: culture is an important explanatory variable for operations management research. Both sets of analysis provide clear empirical evidence that national culture is a predictor of the operations management variables chosen. More importantly, individual dimensions of national culture are signicant predictors of the variables examined. 7.1 Cultural differences compared to regional differences The results demonstrate that culture can explain a signicant amount of the variance in the operational decisions we examined, leading us to reject H0. However, an additional important contribution would be to demonstrate that national culture can provide information not available if the analysis had been performed in a more traditional manner. Therefore, we split the sample into four (arbitrary) regions; Europe, Step Construct Coefcient (standardized) F/T value P Adjusted R 2 1 Model 0.912 0.402 0.000 Constant 18.3 0.000* Industry 0.044 1.188 0.235 Employment 20.026 20.692 0.489 2 Model 9.618 0.000* 0.092 Constant 1.865 0.063 Industry 20.024 20.541 0.589 Employment 0.061 1.437 0.151 Uncertainty avoidance 20.01 20.095 0.924 Power distance 20.069 20.926 0.355 Masculinity 20.101 21.931 0.054 Individuality 0.208 1.920 0.055 Note: * P , 0.05 Table VI. Forecast horizon IJOPM 25,4 384 Asia Pacic, Asia, and North America and performed some additional analysis to expand the discussion. Table VII shows how the countries were grouped, as well as the country scores along Hofstedes dimensions. Table VII reinforces the limitations of any type of regional grouping. Beyond the arbitrariness of our groupings, it is also clear that countries within the same region differ greatly on some or all of the cultural elements. In the North American region, Mexico differs greatly from the USA and Canada along uncertainty avoidance, power distance and individuality. However, Mexico is closer to the USA than Canada is in terms of the masculinity dimension. Europe is equally inconsistent: Sweden is very similar to the Anglo countries across the majority of the dimensions, with the exception of masculinity where Sweden is very different. Within Asia, Japan and Taiwan are both low on individuality, but Taiwan scores much lower than Japan. Even countries such as Spain and Portugal, that share borders and levels of industrialization, differ along some of the dimensions. Table VII strongly suggests that any type of regional grouping will ignore cultural differences within a region. Finally, Table VII makes it clear that some countries not located near each other will share some or all of the cultural elements. The data also indicates that when rms are grouped via region, sample composition effects will probably have a great inuence on the results (see Table VIII). For instance the North American composite score on globalization is 18 percent. But the average scores on globalization for Canada, Mexico, and the USA are 33 percent, 6 percent, and 11 percent respectively. If the sample had been more weighted to plants from the USA Country Number of plants Uncertainty avoidance Power distance Masculinity Individuality Europe 123 Ireland 8 35 28 68 70 Germany 18 65 35 66 67 Northern Ireland 7 35 28 68 70 Portugal 27 104 63 31 27 Spain 20 86 57 42 51 Sweden 18 29 31 5 71 Wales 7 35 35 66 89 UK 18 35 35 66 89 Asia Pacic 42 Australia 24 51 36 61 90 New Zealand 18 49 22 58 79 Asia 101 Japan 91 92 54 95 46 Taiwan 10 69 58 45 17 North America 264 Canada 92 48 39 52 80 Mexico 52 82 81 69 30 USA 120 46 40 62 91 Table VII. Culture by region The importance of national culture 385 or Mexico the regional average would have dropped, while an increase in the Canadian composition of the sample would have increased the regional average. To move beyond the hypothetical discussion raised by Table VII we conducted regression analysis by entering region, as opposed to dimension of culture, as the second step of the hierarchical regression. Appendix 2 details the analysis using region as a predictor. The test performed using Hofstedes cultural dimensions explained more variance than region for three of the four constructs examined (see Table IX). In the case of suppliers per part, the regional model is not signicant, while Hofstedes cultural model is signicant. Trompenaarss cultural dimensions explain more variance than region for all four of the constructs examined. Finally, the model for number of suppliers per part is signicant for culture even though it is not for region. The cultural models also give us greater insight. The regional model of horizon indicates that European countries forecast horizons are not signicantly different from those of the North American countries. A typical regional study trying to explain this result would probably discuss similar cultures and levels of industrialization as an explanation for this result. In our study we are able to be much more specic. The cultural dimension that these two regions are most similar on (in aggregate) is masculinity which based on the results presented in Table IV is a signicant predictor of forecast horizon. The use of cultural variables allows us to empirically demonstrate what aspect of culture is most responsible for this similarity. It also allows us to suggest that countries such as Sweden would not follow the European norm. The results of a cultural examination are then useful because of the level of specicity they engender. Our work strongly supports the assertions by Hofstede (1980), Ronen and Shenkar (1985) and Trompenaars (1994) that national culture provides researchers the opportunity to explain and predict how managers in different parts of the world will make their operational decisions based on their perceptions, Construct R 2 control R 2 Hofstede R 2 Trompenaars R 2 region Exports 0.005 0.19 ** 0.307 ** 0.185 ** Horizon 0.000 0.092 ** 0.117 ** 0.07 ** Suppliers 0.002 0.022 ** 0.017* 0.001 Percentage 0.058 0.138 ** 0.189 ** 0.183 ** Notes: All R 2 are adjusted to account for differences in the number of dimensions; * p , 0.05; ** p , 0.01 Table IX. Comparisons Region Exports (as percentage of total sales) Forecasting horizon (in months) Purchased as percentage of costs Suppliers per part Europe 41 12.18 37 5.6 Asia Pacic 12 16.17 47 3.6 Asia 7 6.48 26 4.9 North America 18 11.43 40 5.5 Table VIII. Regional means IJOPM 25,4 386 values, goals, and attitudes. Our examination of national culture and plant-level outcomes provides a strong link between the literatures on national culture and the emerging eld of international operations management. 8. Conclusions Traditionally, the OM eld has examined international issues by making comparisons between countries or regions. The purpose of this research was to show that national culture is a valid way to explain differences in international operational decision-making. Country comparisons may be of value if the countries are truly different. But, culture is not a uni-dimensional construct. Countries may differ on one element of culture but not on all. Blanket comparisons obscure a level of specicity making it harder to explain and generalize results. Considering entire regions as the basis for analysis can also be misleading. The culture of the UK is much closer to the culture of the USA than the culture of its European neighbors such as France. Yet most studies include a European region that matches the UK with France. Similarly, the manufacturing practices in Hong Kong are very different from Taiwan or even China even though they are all located in the same geographical region. Other studies also indicated the distinct cultural differences between US and Mexico, which are located just across the border (Plenert, 2002). Cultural differences affect the way managers communicate, which in turn affect their decisions of new product introduction, forecasting and scheduling, and quality management (Flaherty, 1996). In other words, managers manage their resources and production processes in a manner that reects the culture of the country. This is why in many international management studies, Ireland, Northern Ireland, New Zealand, Wales, and England are combined because they exhibit the same cultural tendencies (Ronen and Shenkar, 1985). To successfully manage an international supply chain, it takes more than knowing that operations decisions are made differently in different countries or regions. Managers must realize what issues make international operations management different and challenging. Specically, managers must understand how and what dimensions of national culture inuence operations decisions. Such understanding will better prepare multi-national companies to more effectively manage the global supply chain. Based on the cultural dimensions suggested by Hofstede (1980) and Trompenaars (1994), this study shows that culture allows us to understand decision-making in manner which is not possible with regional comparisons. This study represents a rst attempt at using national culture to explain differences of operations decision-making. While the results have clearly indicated the signicant relationship between cultural dimensions and operational decisions, several data and research limitations need to be reconciled in future research to conrm our ndings. First, we assume that national culture is the same for all plants within the country. It is possible that managers of foreign-owned plants could make different decisions than their colleagues in strictly domestic operations, although no signicant confounding effects of plant ownership has been identied in the GMRG data (Whybark and Vastag, 1993). A second issue revolves around testing the inuence of country as opposed to region. We did not compare the predictive power of country to the predictive power of culture for three main reasons. First, our purpose was to show that culture was a valid predictor, not to show its superiority. To properly compare culture to country and The importance of national culture 387 region would require a data collection effort specically structured for such a purpose. Second, a proper test that included all of the countries in the sample would have created power issues. Related to the second issue is one of sub-sample size. Most of the countries are represented by a fairly low number of plants making meaningful tests impossible. Given this limitation future studies need to compare the predictive ability of cultural variables to country-by-country comparisons. Finally and most importantly, future studies need to move beyond the macro level theory that focuses on whether culture matters, to the more micro level question focusing on how culture matters. Our initial analyses indicate that culture inuences all four operational decision areas we examined. Theory must now be proposed and tested to examine how and why culture inuences individual operational activities. 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(1983), The cultural relativity of organizational practices and theories, Journal of International Business Studies, Vol. 14 No. 2, pp. 75-89. Narasimhan, R. and Jayaram, J. (1998), Casual linkages in supply chain management: an exploratory study of North American manufacturing rms, Decision Sciences, Vol. 29 No. 3, pp. 579-605. IJOPM 25,4 390 Appendix 1. Results using Trompenaarss dimensions Step Construct Coefcient (standardized) F/T value P Adjusted R 2 1 Model 2.606 0.075 0.005 Constant 11.319 0.000 Industry 0.087 2.280 0.023 Employment 20.009 20.225 0.822 2 Model 24.071 0.000 0.307 Constant 21.888 0.060 Industry 0.093 2.179 0.030 Employment 0.006 0.151 0.880 Universalism 0.721 4.023 0.000 Individualism 20.501 25.938 0.000 Emotionalism 20.454 26.639 0.000 Specic 0.488 6.925 0.000 Achievement 0.641 6.385 0.000 Time horizon 20.085 21.106 0.269 Control 21.164 25.971 0.000 Table AI. Exports as a percent of overall sales Step Construct Coefcient (standardized) F/T value P Adjusted R 2 1 Model 0.912 0.402 0.000 Constant 18.3 0.000 Industry 0.044 1.188 0.235 Employment 20.026 20.692 0.489 2 Model 8.343 0.000 0.117 Constant 2.056 0.040 Industry 0.017 0.376 0.707 Employment 20.009 20.212 0.832 Universalism 0.742 3.538 0.000 Individualism 0.107 1.169 0.243 Emotionalism 20.029 20.387 0.699 Specic 20.006 20.087 0.931 Achievement 20.157 21.336 0.182 Time horizon 20.162 21.959 0.051 Control 20.373 21.729 0.084 Notes: Universalism represents universalism vs particularism; individualism represents individualism vs communitarianism; emotionalism represents neutral vs emotionalism; specic represents specic vs diffuse; achievement represents achievement vs ascription; time horizon represents societal views; and control represents perceived control over the environment Table AII. Forecast horizon The importance of national culture 391 Appendix 2. Regional comparisons Regional comparisons made using dummy variable regression with North America as the reference group. A signicant beta for one of the regional variables indicates that this region differs signicantly from the North American reference group. Step Construct Coefcient (standardized) F/T value P Adjusted R 2 1 Model 1.760 0.173 0.002 Constant 4.179 0.000 Industry 0.018 0.483 0.629 Employment 0.067 1.789 0.074 2 Model 1.934 0.045 0.017 Constant 0.455 0.650 Industry 0.013 0.268 0.789 Employment 20.025 20.514 0.607 Universalism 20.209 20.964 0.336 Individualism 20.083 20.832 0.406 Emotionalism 20.135 21.697 0.090 Specic 0.116 1.442 0.150 Achievement 0.329 2.671 0.008 Time horizon 20.167 21.876 0.061 Control 20.245 21.068 0.286 Table AIII. Average number of suppliers per input Step Construct Coefcient (standardized) F/T value P Adjusted R 2 1 Model 22.873 0.000 0.058 Constant 42.618 0.000 Industry 20.245 26.702 0.000 Employment 0.045 1.234 0.218 2 Model 13.132 0.000 0.189 Constant 3.083 0.002 Industry 20.239 25.193 0.000 Employment 20.027 20.624 0.533 Universalism 0.572 2.863 0.004 Individualism 0.367 4.051 0.000 Emotionalism 20.039 20.532 0.595 Specic 20.128 21.745 0.082 Achievement 20.012 20.107 0.915 Time horizon 20.168 22.058 0.041 Control 20.725 23.413 0.001 Table AIV. Purchasing percentage IJOPM 25,4 392 Step Construct Coefcient (standardized) F/T value P Adjusted R 2 1 Model 2.606 0.075 0.005 Constant 11.319 0.000 Industry 0.087 2.280 0.023 Employment 20.009 20.225 0.822 2 Model 22.58 0.000 0.185 Constant 6.4 0.000 Industry 0.118 2.575 0.01 Employment 0.087 2.086 0.037 Europe 0.330 7.45 0.000 Asia Pacic 20.029 20.653 0.514 Asia 20.178 23.875 0.000 Table AV. Exports as a percent of overall sales Step Construct Coefcient (standardized) F/T value P Adjusted R 2 1 Model 0.912 0.402 0.000 Constant 18.3 0.000 Industry 0.044 1.188 0.235 Employment 20.026 20.692 0.489 2 Model 8.579 0.000 0.07 Constant 14.63 0.000 Industry 0.072 1.53 0.126 Employment 0.069 1.59 0.113 Europe 20.009 20.201 0.841 Asia Pacic 0.152 3.342 0.001 Asia 20.232 24.91 0.000 Table AVI. Forecast horizon Step Construct Coefcient (standardized) F/T value P Adjusted R 2 1 Model 1.760 0.173 0.002 Constant 4.179 0.000 Industry 0.018 0.483 0.629 Employment 0.067 1.789 0.074 2 Model 1.11 0.355 0.001 Constant 8.016 0.000 Industry 20.103 22.045 0.041 Employment 20.013 20.283 0.777 Europe 0.001 0.017 0.986 Asia Pacic 20.076 21.576 0.116 Asia 0.008 0.160 0.873 Table AVII. Average number of suppliers per input The importance of national culture 393 Step Construct Coefcient (standardized) F/T value P Adjusted R 2 1 Model 22.873 0.000 0.058 Constant 42.618 0.000 Industry 20.245 26.702 0.000 Employment 0.045 1.234 0.218 2 Model 22.932 0.000 0.183 Constant 33.036 0.000 Industry 20.264 25.914 0.000 Employment 0.062 1.507 0.133 Europe 20.110 22.514 0.012 Asia Pacic 20.029 20.658 0.511 Asia 20.289 26.447 0.000 Table AVIII. Purchasing percentage IJOPM 25,4 394
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