Context

I. BACKGROUND & CULTUREII. RESOURCES

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I. Background & Culture

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Culture

People’s behavior determined by:• Human Nature - Universal• Personality - Individual• Culture - Local

– View of the world– Habits of action– Emotional response

Hofstede “Cultural Dimensions” Theory

Assess by measuring values through surveys

Care with National Culture

• Avoid stereotypes – Whatever the truth of national cultural tendencies, individual character and human nature important too.

• Avoid lazy thinking – Culture imperfectly understood, tempting to attribute everything not understood to cultural differences.

World Values Survey• WVS conducts international surveys to discover

attitudes and values at country level.

Ex. Link to Example QuestionaireLink

Factor Analysis

• Many questions will be answered in similar ways across questionaires. (i.e. people who answer “Mentioned” to V13 will answer “Mentioned” to V18, etc.)

• Statistical Theory: There are a small number of independent factors which determine systematic correlations in answers to multiple questions. (plants/chlorophyll) .

• Use statistics to construct clusters of questions and related answers which can be predicted by these factors.

• Use theory to interpret the dimensions

LinkCultural Values have two dimensions1. Traditional vs. Secular2. Survival vs. Lifestyle

Atlas ofCulturalValues:Country Averagesof Dimensions

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• Show that factors are associated with identifiable social outcomes.

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Theory of National Culture

Common Cultural IssuesInkeles & Levinson, 1954

• Relationship to Authority• Conception of Self

– Relationship of Individual to Society

– Conception of Masculinity and Femininity

• Modes of Conflict Resolution

• Used to form theoretical foundation of factors for internal IBM study of values of employees in many countries.

• Additional work develops additional dimensions.

Cultural Dimensions Theory• Business researchers more likely to use Hofstede

“Cultural Dimensions” which looks at 5 dimensions of national culture.

1. Power Distance (PDI)- Society’s comfort with inequality or preference for hierarchy.

2. Individualism versus Collectivism (IDV) Preference for Self-sufficiency vs. Group loyalties.

Cont. 3. Masculinity versus Femininity (MAS)

Value of Assertiveness vs. Nurturing.4. Uncertainty Avoidance (UAI) s

‘threatened by uncertainty and ambiguity and try to avoid these situations’

5. Long-Term Orientation (LTO) Present vs. Future

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Cultural Dimension of Asia

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Culture and Business

• Implications for Human Resources Management.• Implications for Marketing• Implications for Accounting

Power Distance Small Power Distance LargeWorkers Take Responsibility Discipline

Collectivism IndividualismEmployee Commitment Management Mobility

Femininity MasculinityPersonal Services Heavy Industry

Uncertainty Avoidance Weak Uncertainty Avoidance HeavyBasic Innovations Precision

Potential for Competitive Advantages

Setting Job Targets

Set unilaterally, Subject to Renegotiation

Set by Consensus, Subject to Renegotiation

Set unilaterally, No Renegotiation

Set by Consensus, No Renegotiation

Mas

culin

ity v

s. F

emin

inity

High Power Distance vs. Low Power Distance

US,UK

Nordic

France, Italy

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Assessment & Management

Direct Feedback perceived as rude, Talent management loyalty/paternalism based

Frank, direct, immediate feedback

Individual assessment, performance based

Indi

vidu

alis

m V

s. C

olle

ctive

High Power Distance vs. Low Power Distance

US,UK

Latin America

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Culture and Branding

Successful Brands associations: • In high PDI cultures, “Prestige,”; • in high UA cultures, “Trustworthy,”;

• Individualistic cultures: brands associate with abstract concepts, individual products emphasized.

• Collectivist cultures: brands associate with concrete people, corporate identities emphasize.

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Cultural Values and Accounting SystemsAccounting Values• PRO: Professionalism vs. Statutory Control: Judgement

vs. Legal control.• UNI: Uniformity vs. Flexibility• CON: Conservatism vs. Optimism- Prudence• SEC: Secrecy vs. Transparency. S.J. Gray, 1988, Towards a Theory of Cultural Influence on

the Development of Accounting Systems Internationally

PRO UNI CON SEC

PDI - + ? +

UAI - + + +

IDV + - - -

MAS ? ? - -

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II. Resources

A. Natural ResourcesB. Human ResourcesC. InfrastructureD. Technology

A. Natural Resources

Income from resource extraction can technically lead to higher GDP per hour…..

Productivity per Hour2010

Luxembourg78.60

Norway 70.52 United States

60.50 Netherlands

59.39 Belgium 59.34 France 56.03

Germany 53.61

Link to CIA Factbook

Oil ReservesLink to BP Statistical Review of World Energy 2012

Resource Curse• Some scholars argue that countries “blessed”

with large endowment of mineral resources suffer slow growth.– Creates social conflict over control of natural

resources.– Leads to unaccountable government.

• Ex 1. Conflict Diamonds Link

• Ex. 2 Nauru (pop. 8000) Link Significant deposits of phosphates and small population made this one of the wealthiest societies in world in 1970’s. But phosphates ran out.. – Country never developed internal

sources of productivity unemployment rate 90%

– National gov’t corrupt and wasteful, bankrupt and completely dependent on multinational aid

Is the resource curse true?

• Recent studies question these results, but findings suggest that positive productivity spillovers to non-resource industries are questionable. (Link Requires registration)

B. Human Capital

• Measures skill, education level of the work force.

• General (broad primary & secondary education & health) or specific skills (technical skills obtained at tertiary level).

By 2005, average in 25-29 cohort was 12.2 yrs compared with 13.4 years in USA

Average Years of Schooling

0

2

4

6

8

10

12

14

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Yea

rs

USA Singapore

http://www.barrolee.com/

Education• Literacy Rates: WDI• Years of Education Barro-Lee Dataset Link • Quality of Education: OECD Programme for

International Student Assessment (PISA) Link Summary Data

Completed Tertiary Education 25-29 Yo

0

5

10

15

20

25

30

35

USA Singapore

%

http://www.barrolee.com/

Aging Population Structure

0 - 4 9-May

14-Oct

15 - 19

20 - 24

25 - 29

30 - 34

35 - 39

40 - 44

45 - 49

50 - 54

55 - 59

60 - 64

65 - 69

70 - 74

75 - 79

80 - 84

85 - 89

90 - 94

95 - 99

100 +

0

2000000

4000000

6000000

8000000

10000000

12000000

Age Distribution Japan

201019901970

Peop

leLink Population by age, sex and urban/rural residence

Population Structure and Employment

19561958

19601962

19641966

19681970

19721974

19761978

19801982

19841986

19881990

19921994

19961998

20002002

20042006

20082010

46.00%

47.00%

48.00%

49.00%

50.00%

51.00%

52.00%

53.00%

54.00%

Japan: Employment to Population Ratio

The Classic Demographic TransitionModel

Stage 1 Stage 2 Stage 3 Stage 4

Time

Naturalincrease

Birth rate

Death rate

Note: Natural increase is produced from the excess of births over deaths.

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Stages of Demographic Transition

1. Low Population Growth. High Birth Rates, High Death Rates

2. Population Growth Explosion. Medical Advances slow mortality rates, high population growth.

3. Slowing Population Growth. Educational Advances slow birth rates.

4. Low Population Growth. Low Birth Rates, Low Death Rates

Japan

1950 1960 1980 2000 2005 2010 2015 2020 2040 2060 2080 21000

5

10

15

20

25

Final Stage of Demographic Transition

Birth RatesDeath Rates

per 1

000

World Population Prospects, the 2010 RevisionVolume II – Demographic Profiles Link

Fertility Rates• Age-specific fertility rate: Number of Births to

women of a specific age per women of that age.

• Total Fertility Rates: Sum of Age-specific fertility rates from 15-49

• Longer-term ratio of average number of children

• Replacement Ratio: – 2.1 Developed Economy, – 2.3 Developing Economy

Country 15-19 20-24 25-29 30-34 35-39 40-44 45-49

Japan 1.27 5 36 82 86 38 5 0 1.26795

Total fertility

Age-specific fertility rates

C. Infrastructure

Air transport, freight

4000

5000

6000

7000

8000

9000

10000

11000

12000

13000

14000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

(mill

ion

to

n-k

m)

Singapore Hong Kong SAR, China

http://data.worldbank.org/data-catalog/world-development-indicators

Secure Internet servers

0

100

200

300

400

500

600

2003 2004 2005 2006 2007 2008 2009 2010

(per

1 m

illio

n p

eop

le)

Singapore Hong Kong SAR, China

http://data.worldbank.org/data-catalog/world-development-indicators

Link

D. Technology Capacity

• Capacity for scientific advance measurable along a number of dimensions. UNESCO Data

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100

0.5

1

1.5

2

2.5

3

Expenditure on R&D as % of GDP

Hong Kong Singapore

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Technical Workforce

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100

0.2

0.4

0.6

0.8

1

1.2

Technicians per 1000

Hong Kong Singapore

Link

http://www.uspto.gov/web/offices/ac/ido/oeip/taf/reports.htm

Utility Patents by Year

0

100

200

300

400

500

600

700

1963

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

SINGAPORE CHINA,HONG KONG S.A.R.