Transcending Cultural Frontiers: Practices, Challenges, and Strategy for International Business [1st ed.] 9789811544538, 9789811544545

This book focuses on the cultural challenges often faced by international managers and global business operations. In th

428 59 3MB

English Pages XI, 178 [181] Year 2020

Report DMCA / Copyright

DOWNLOAD FILE

Polecaj historie

Transcending Cultural Frontiers: Practices, Challenges, and Strategy for International Business [1st ed.]
 9789811544538, 9789811544545

Table of contents :
Front Matter ....Pages i-xi
Advancing Cultural Frontiers to Champion Global Business in Emerging Markets (Norhayati Zakaria, Asmat-Nizam Abdul-Talib, Andrea Amelinckx)....Pages 1-10
Front Matter ....Pages 11-11
Work in Progress: Organisational and Occupational Identity Work of South African Employees After Firm Acquisition (Nasima Mohamed Hoosen Carrim)....Pages 13-36
“I Am Going Abroad!” Developing Cross-Cultural Sensitivity for Self-initiated Expatriates of Female Registered Nurses in Saudi Arabia (Bibi Noraini Mohd Yusuf, Nasriah Zakaria)....Pages 37-47
Trust and Cultural Preferences of Global Consumers for Airbnb Patronage: A Qualitative Study of MENA Consumers (Heba Abusedou, Norhayati Zakaria)....Pages 49-66
Front Matter ....Pages 67-67
Cultured Crime of Obedience and Fraudulent Financial Reporting in the Time of Crisis (Radiah Othman, Rashid Ameer)....Pages 69-89
The Role of Gig Economy in Supporting SME Internationalisation (Samar Kal Youssef, Arijit Sikdar)....Pages 91-106
Cross-Cultural Collaboration Mechanisms that Facilitate Global Innovation Success for MNCs (Karina R. Jensen)....Pages 107-121
Front Matter ....Pages 123-123
Non-pecuniary Factors Influencing Diaspora Homeland Investment (Mohamed-Abdullahi Mohamed, Asmat-Nizam Abdul-Talib)....Pages 125-139
Muslim Youths’ Satisfaction Toward Muslim-Friendly Hotels: Examining the Effects of Hotel Image, Brand Image and Employee Performance (Samshul-Amry Abdul-Latif, Nur Adilah Adnan)....Pages 141-158
Inside Corporate Innovation: A Study of Team Leader Experiences and Strategies During the New Venture Development Process (David L. Wilemon)....Pages 159-175
Back Matter ....Pages 177-178

Citation preview

Norhayati Zakaria Asmat-Nizam Abdul-Talib Andrea Amelinckx   Editors

Transcending Cultural Frontiers Practices, Challenges, and Strategy for International Business

Transcending Cultural Frontiers

Norhayati Zakaria Asmat-Nizam Abdul-Talib Andrea Amelinckx •

Editors

Transcending Cultural Frontiers Practices, Challenges, and Strategy for International Business

123



Editors Norhayati Zakaria Faculty of Business University of Wollongong in Dubai Dubai, United Arab Emirates

Asmat-Nizam Abdul-Talib Othman Yeop Abdullah Graduate School of Business Universiti Utara Malaysia Sintok, Kedah, Malaysia

Andrea Amelinckx Dhillon School of Business University of Lethbridge Lethbridge, AB, Canada

ISBN 978-981-15-4453-8 ISBN 978-981-15-4454-5 https://doi.org/10.1007/978-981-15-4454-5

(eBook)

© Springer Nature Singapore Pte Ltd. 2020 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Singapore Pte Ltd. The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore

Foreword

I was quite pleased when I discovered that Prof. Zakaria and her colleagues were convening a team of scholars to develop an edited book examining cross-cultural issues in international business, and I was thrilled when I was asked to contribute this foreword to the text. On the surface, it does seem like a strange time to propose a book on cultural boundaries. After a long spell of integration, the world seems tired of globalization. Now, we face a contraction of global interaction, and social pressures have made the world a bit larger due to the increases in nationalism that is prevalent around the globe. However, I would contend that the timing of the book is perfect for just such a setting. Because global business has been the norm, the environment has been if not friendly, at least forgiving, for those entering into the global business arena. Now, in this contracting environment, those entering into international business face additional pressures to get it right. And for some time, the confounding variable in the equation has been the culture. Thus, additional focus from scholars is warranted and welcomed by students entering the world of practice. I believe this book will have a considerable impact because of its timing and alignment with the global milieu. Another reason this book will be impactful and help shape the global business environment is the scope of the challenges we now face. The magnitude and complexity of problems we are encountering now are simply larger than any one organization, or any single culture, can reasonably address. One contemporary example is these challenges is global climate change. While drafting this foreword, I was forced to evacuate my home due to the path of Hurricane Dorian. One evening we expected a brush from a tropical storm, and the next we found ourselves in the path of a Category 5 hurricane. While ultimately veering away from my home in Florida, the storm hit the Bahamas, and they were not so lucky. Dorian was the strongest hurricane to ever strike the island nation and is widely regarded as the worst national disaster in the history of the Bahamas, causing billions of dollars in damage. It will take a truly collaborative international effort and many years to recover from the storm. Having lived in storm-ravaged environments, I can testify that speed is of the essence. Unfortunately, cultural confusion and speed are not often present at the same time. v

vi

Foreword

While many of the challenges we face will be natural, such as mass extinction threats and global health concerns, a considerable number will be man-made in nature. Some, such as geopolitical instability and warfare, fall outside of our discipline, but perhaps the most prevalent will be the challenges to the global economy because of more routine international business trials and tribulations. Conducting business in VUCA environments (those characterized by volatility, uncertainty, complexity, and ambiguity) means that business professionals will face a never-ending stream of disruptive technologies, supply chain interruptions, and shifting labor pools. In a world where VUCA reigns supreme, the comfort of doing business relies on constant innovation and the relative efficiency of economies of scale afforded by international business. While international business can offer a path to success, it is not without its own challenges, with one being the confusion that can come when cultures collide. The editors of this text bring a wealth of expertise in this area, as is evidenced by their choice of topics, and the strength of the experts they have invited to contribute to the book. The combined chapters provide both strategic guidance as well as a focus on operational concerns that may arise in international business including expatriation and human resource mobility. The authors not only correctly identify the oncoming challenges, but also present evidence regarding the likely solutions such as culture and innovation and global change management. The scholarly work of this text will steer the discussion and future research that will not only advance the field of international business, but perhaps lead to solutions that give us hope for our global future. Overall, this book will be a tremendous resource for scholars in the international business field, but I believe the audience will be much wider. The international team of editors and authors bring a wide range of perspective as well as real-world contextual knowledge that will be useful for scholars and practitioners who seek to leverage culture and human capital to advance international business and drive the global economy. I applaud the editors for their vision and leadership in guiding us through one of the most challenging contemporary research areas and through one of the most pressing challenges of our day. Richard L. Griffith, Ph.D. Executive Director of the Institute for Cross Cultural Management at Florida Tech Melbourne, FL, USA

Contents

1

Advancing Cultural Frontiers to Champion Global Business in Emerging Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Norhayati Zakaria, Asmat-Nizam Abdul-Talib, and Andrea Amelinckx

Part I 2

3

4

5

6

Practices, Norms, and Diversity in Multinational Corporations

Work in Progress: Organisational and Occupational Identity Work of South African Employees After Firm Acquisition . . . . . . . Nasima Mohamed Hoosen Carrim “I Am Going Abroad!” Developing Cross-Cultural Sensitivity for Self-initiated Expatriates of Female Registered Nurses in Saudi Arabia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bibi Noraini Mohd Yusuf and Nasriah Zakaria Trust and Cultural Preferences of Global Consumers for Airbnb Patronage: A Qualitative Study of MENA Consumers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Heba Abusedou and Norhayati Zakaria

Part II

1

13

37

49

Challenges and Issues of Global Business

Cultured Crime of Obedience and Fraudulent Financial Reporting in the Time of Crisis . . . . . . . . . . . . . . . . . . . . . . . . . . . . Radiah Othman and Rashid Ameer

69

The Role of Gig Economy in Supporting SME Internationalisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Samar Kal Youssef and Arijit Sikdar

91

vii

viii

7

Contents

Cross-Cultural Collaboration Mechanisms that Facilitate Global Innovation Success for MNCs . . . . . . . . . . . . . . . . . . . . . . . 107 Karina R. Jensen

Part III

Implementing Strategies for Global Businesses

8

Non-pecuniary Factors Influencing Diaspora Homeland Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125 Mohamed-Abdullahi Mohamed and Asmat-Nizam Abdul-Talib

9

Muslim Youths’ Satisfaction Toward Muslim-Friendly Hotels: Examining the Effects of Hotel Image, Brand Image and Employee Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141 Samshul-Amry Abdul-Latif and Nur Adilah Adnan

10 Inside Corporate Innovation: A Study of Team Leader Experiences and Strategies During the New Venture Development Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159 David L. Wilemon Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177

Editors and Contributors

About the Editors Dr. Norhayati Zakaria is an Associate Professor and is currently attached to the Faculty of Business at the University of Wollongong in Dubai, United Arab of Emirates. Dr. Zakaria obtained her Ph.D. in Information Science and Technology and M.Phil. in Information Transfer at Syracuse University and M.Sc. Management at Rensselaer Polytechnic Institute, Troy, New York. Her educational training spans interdisciplinary fields of cross-cultural management, international human resource management, and information science. With her international education and experience as an expatriate, her research expertise is attuned to the culturally related behaviors of global workforces. Under her research expertise, she explores key questions of how to manage the impact of culture on global talents, both face-to-face and virtually by inculcating cultural sensemaking skills among them. She has written more than 150 publications including high impact journal articles, books, book chapters, and conference proceedings and is widely cited by scholars in the field of international business and international management. Her two leading monographs by Taylor & Francis Group entitled: ‘Culture Matters: Decision Making in Global Virtual Teams’ and ‘Making Sense of Culture: Cross-Cultural Expeditions and Management Practices of Self-Initiated Expatriates in the Foreign Workplace.’ Asmat-Nizam Abdul-Talib is an Associate Professor teaching international business and international marketing at the Universiti Utara Malaysia and has recently become attached to the OYA Graduate School of Business. He received his PhD in International Marketing from Aston Business School, Aston University, UK; MBA in International Business from Cardiff University, UK; and a Bachelor’s degree in Business and Economics from Concordia University, Canada. He is also the recipient of Universiti Utara Malaysia Outstanding Research Award and Universiti Utara Malaysia Most Promising Researcher Award. His research interests lie primarily in international marketing and strategic marketing, especially in export market

ix

x

Editors and Contributors

intelligence, and the use of export market intelligence in firms’ export decision processes. He has also been appointed Associate Professor of International Business in Tashkent State University, Uzbakistan, a research fellow at the Honda Foundation, Japan, and Faculty Associate at Aston Business School, UK, teaching international marketing and international business. Andrea Amelinckx is the Director of the International Programs Office, the Chair of the International Management Area and the Director of the First Nations Governance Program at the University of Lethbridge, Dhillon School of Business in Lethbridge, Alberta, Canada. Her research interests are in the areas of cross-cultural management, indigenous studies and virtual global team relations. She currently teaches courses such as, Cross-cultural Study in Malaysia, Cross-cultural Management Practices and Canadian Culture and Management. Currently, she is working with an interdisciplinary team on First Nations, community and corporate relations and involvement in the natural resource sector.

Contributors Samshul-Amry Abdul-Latif International Islamic University Malaysia, Pagoh, Muar, Malaysia Asmat-Nizam Abdul-Talib Othman Yeop Abdullah Graduate School of Business, Universiti Utara Malaysia, Sintok, Malaysia Heba Abusedou University of Wollongong in Dubai, Dubai, United Arab Emirates Nur Adilah Adnan International Islamic University Malaysia, Pagoh, Muar, Malaysia Rashid Ameer School of Global Studies, IPU New Zealand Tertiary Institute, Palmerston North, New Zealand Andrea Amelinckx Dhillon School of Business, University of Lethbridge, Lethbridge, Canada Karina R. Jensen Centre for Leadership and Effective Organisations, NEOMA Business School, Reims, France; Global Innovation and Leadership, NEOMA Business School, Reims, France Mohamed-Abdullahi Mohamed School of International Studies, Universiti Utara Malaysia, Sintok, Kedah, Malaysia Nasima Mohamed Hoosen Carrim Human Resource Management Department, University of Pretoria, Pretoria, South Africa

Editors and Contributors

xi

Radiah Othman School of Accountancy, Massey University, Palmerston North, New Zealand Arijit Sikdar Faculty of Business and Management, University of Wollongong, Dubai, United Arab Emirates David L. Wilemon School of Management, Syracuse University, Syracuse, USA Samar Kal Youssef Faculty of Business and Management, University of Wollongong, Dubai, United Arab Emirates Bibi Noraini Mohd Yusuf University Malaysia of Perlis, Kangar, Malaysia Nasriah Zakaria King Saud University, Riyadh, Saudi Arabia Norhayati Zakaria Faculty of Business, University of Wollongong in Dubai, Dubai, United Arab Emirates

Chapter 1

Advancing Cultural Frontiers to Champion Global Business in Emerging Markets Norhayati Zakaria, Asmat-Nizam Abdul-Talib, and Andrea Amelinckx

Abstract The introductory chapter highlights the trends in global business by taking stock of the past millennium. With such exploration, the chapter projects the promises of the global business opportunities that lie ahead of us across the world and beyond cultural boundaries. The challenges for tomorrow will also be discussed in light of lessons learned observed in the past, as well as organizational accomplishments and best practices that are observed in the current state of business operations based on the following three different sections. Keywords Globalization · Culture · International business · Intercultural competence · Sharing economy

1 Introduction The classic phrase “When East Meets West” is often used in the context of international business. It signifies the impact of cultural connection among people of diverse cultures working together and developing businesses abroad. Buoyed by globalization, cultural transcendence allows international businesses to increasingly expand their operations from one end of the globe to another. Cultural boundaries such as geographical location, time zone, and space become hazier and hazier when new markets are penetrated via numerous modes of entries. With the universal acceptance of global brands, consumers of different cultural backgrounds come together where preferences, tastes, and likings become similar. For instance, consumers who patronize Starbucks in Dubai will look for one when they travel to Thailand, or when N. Zakaria (B) Faculty of Business, University of Wollongong in Dubai, Dubai, United Arab Emirates e-mail: [email protected] A.-N. Abdul-Talib Othman Yeop Abdullah Graduate School of Business, Universiti Utara Malaysia, Sintok, Malaysia A. Amelinckx Dhillon School of Business, University of Lethbridge, Lethbridge, Canada © Springer Nature Singapore Pte Ltd. 2020 N. Zakaria et al. (eds.), Transcending Cultural Frontiers, https://doi.org/10.1007/978-981-15-4454-5_1

1

2

N. Zakaria et al.

they fly into Casablanca or visit London. Thus, the same demands persist within the same condition, though at different locations. At the same time, consumers also seek local brands to understand the culture of the place where they are located, a preferred authenticity because familiarity in any sense, i.e., whether it is local or global, breeds comfort when people travel abroad. The mental image of familiar brands is cemented in consumers’ minds; as such, the more the customers recognize a brand name, the more they will consume it before they decide to switch to other brands (Coelho et al. 2018). It is not easy for businesses to enter new foreign markets and entice people to purchase new products with new brand names. Many factors come into perspective for retailers, suppliers, and businesses to decide what, why, when, and how they will penetrate a foreign and global market. According to Zakaria and Abdul-Talib (2010), market orientation sets the strategies for global retailers to identify a key aspect such as market readiness, cultural acceptance, and marketing strategies. Currently, global businesses are thriving at a phenomenal rate—a trend that will continue to evolve in different patterns, at different rates, and at different speeds in the future. Thus, the key question is, “does cultural transcendence promise a better economic outlook and growth on how global business takes place or does culture become a hindrance to effective international business?” Moreover, with the advancement of information and communication technology, newer technologies will determine on how business is conducted and transform the landscape of business interactions from face-to-face transactions to online commerce. Naturally, this global business phenomenon also creates job opportunities for people beyond cultural boundaries without barriers of time zones and geographical space. By creating such job opportunities, global business could provide wealth to other individuals. In addition, new businesses emerge with the rise of innovative business model, such as providing the best quality products at lowest possible prices, so that people can save their money and have increased access to goods and services. This strengthens the economy of any country across the globe. With globalization, multinational firms certainly need to inculcate cultural competency in their employees, as there is a crucial need to understand the dynamic ways business is conducted in different cultures across the globe (Ang et al. 2018; Pauluzzo and Shen 2018; Zakaria 2017; Cleveland et al. 2016). Moreover, consumer preferences, in terms of their tastes and likings, will determine how they make choices on what to buy, where to buy, and when to buy, with culture no doubt influencing these decisions. Besides cultural competency, global entrepreneurs also need to build creative mindsets and innovative attitudes to capitalize on the thriving and globalized sharing economy. Without the right mindset, the possibility of creating a gamechanging business such as Airbnb would not materialize. In a similar vein, the future of global businesses and the success and sustainability of such businesses will be characterized by an ability to understand the cultural impacts on businesses and to develop innovative mindsets, attitudes, and strategies. Notably, in the last few decades, the world has witnessed major unprecedented economic turmoil and disorder that has altered the political dynamics and sociocultural landscape around the globe and has directly or indirectly affected international business activities. New markets have opened up in every corner of the world. The

1 Advancing Cultural Frontiers to Champion Global Business …

3

emerging markets collectively known as BRIC (Brazil, Russia, India, and China) are the new economic powers, compared to a decade ago with the rise of “Asian Tigers” such as Taiwan, the Philippines, Malaysia, Singapore, Thailand, and Korea. Fifteen years ago, the “Asian Tigers” gave the world a different global economic outlook when China, India, Korea, and Singapore gained political supremacy and competitive edge over other economic blocs. In a similar way, some markets which were well established in the past have now either closed or lagged behind in terms of competitive advantage and economic power. New global players have emerged and assumed dominant roles in shaping global business strategies, replacing more traditional organizations—for example, companies have shifted away from vertical and bureaucratic forms to flattened and empowered management structures to a virtual and borderless work structure such as global virtual teams. Some newer firms bypassed the gradual market expansion stage entirely, emerging as “born global” firms from their inception. With this rapid expansion of international trade, competition has greatly increased. While most consumers and exporting firms within individual nations benefit from relatively free trade, some firms may find themselves competing against foreign firms offering better products and services through technological breakthroughs or improved efficiencies. This has heightened both opportunities and challenges for national and international businesses. Additionally, the April 2017 issue of the Forbes magazine highlighted the timely phenomenon of this “sharing economy,” highlighting 12 pioneers businesses, such as Airbnb (rent a room/home), SnapGoods (rent expensive equipment, such as cameras, kitchenware, or musical instruments), DogVacay (dog-sitter), RelayRides (borrow cars from neighbors), TaskRabbit (hire people to do jobs and tasks), Getaround (rent a car), Liquid (rent a bike), Zaarly (peer-to-peer by creating stores for sellers to market their services), Lyft (ride-sharing), LendingClub (peer-to-peer network for borrowing cash at cheaper rate), Fon (share home Wi-Fi network), and Sidecar (ridesharing startup). All of these business models thrive upon collaborative consumption, where asset owners willingly rent out their space and/or lend or borrow goods and services to or from other consumers. As a result, consumers benefit from these novel business concepts, while global entrepreneurs make the profits. In line with the spirit of “global entrepreneurship,” the sharing economy is a passionate and innovative way of doing business that offers consumers a wider range of products and services with increased convenience. As for the “sharing” entrepreneur, digital platforms mean that a greater number of people can start a business with almost anyone, anywhere, and at any time. In addition, over time, multinational firms will rapidly expand in the emerging markets and are expected to become giants in the foreseeable future. These firms are not only becoming larger players in the global economy but they also need to assume growing responsibilities in a global context. It is thus important that the ways in which business is conducted must also be developed accordingly. In essence, the challenges of businesses not only lie in the issues, but multinational corporations (MNCs) also need to develop strong management strategies with effective teams to combat such challenges. Practices and competencies of the people need to be congruent with values and norms in the organizations. Leaders of today must be socially responsible, and

4

N. Zakaria et al.

they need to have a 360° view of the world looking at multiple stakeholders with the aim of achieving sustainability. Furthermore, global managements need to develop their strategies in human resource management because global businesses require talents with global perspective, diverse skill sets, and multifaceted intelligence, i.e., cultural intelligence, emotional intelligence, and ethical intelligence. Moreover, the acceleration of global business trends across cultural boundaries has also resulted in many governments providing opportunities for global entrepreneurs to start businesses not only within their home countries but also beyond their geographical and cultural borders. For instance, India has recently initiated its first ever startup policy, with the aim of boosting startups in the country and providing momentum to India’s growth. Similarly, with its open-door policy, the economy of China has risen because the government has attracted foreign entrepreneurs to invest in their country as well as boosting China businessmen to take the plunge to penetrate other countries. Evidently, in the world map, notably the Chinese business people has created their Little Chinatown at virtually every corner of the globe with success. Other emerging developing countries such as Malaysia have developed a thriving economy based on small and medium enterprises (SMEs), strongly promoting offline and online entrepreneurship as their main flagships of business. Vietnam, on the other hand, is known for its low-wage labor in the fashion and clothing industries, attracting their neighboring countries to take advantage of the economies of scale. With burgeoning patterns and divergent constructions of business due to digitalization and global collocation, transcending cultural boundaries are imperative to be understood through challenges, opportunities, and practices in the context of international business.

2 The Book Outline and Its Purposes The principal differentiator of this book is that it specifically focuses on understanding how global businesses continue to shape their strategies and operations considering the cultural impacts. This understanding is necessary because the culturespecific challenges that international managers and global business operations often encounter are unique experiences of those who have been successful in the global marketplace and need to be shared widely. We wanted to highlight this perspective because the world continues to be filled with multicultural workforces and global talents across the world; and yet, the cultural elements are often ignored although they are some of the key aspects that need to be emphasized when managing multicultural human behaviors in the workplace. This edited book aims at pushing the frontiers of knowledge of this emerging and important issue in cultural practices and challenges in the international business setup and management through both conceptual and empirical works. We also wanted to gain a better understanding of how globalization is changing the way in which MNCs formulate their business strategies. In summary, the strength of this book encompasses the following:

1 Advancing Cultural Frontiers to Champion Global Business …

5

1. Cover diverse spectrums of business topics; 2. Comprise different expertise of scholars—both Eastern and Western; 3. Involve scholars from different geographic continent, forming a scientific community; 4. Highlight global challenges in terms of business operations and practices; 5. Formulate strategies to overcome business challenges. This book will serve as a key reference for primary and secondary audiences, such as academicians and business executives. Primarily, we have targeted the book for academicians and undergraduate or postgraduate students who require complementary books and other resources to discuss pertinent issues and challenges faced by global business entities based on the topics outlined above. The book is also suited for class discussions because it is customized to meet the topics relevant in courses such as international politics and international business. Secondly, we offer this book as a reference for researchers and business executives as practitioners who need both theoretical and practical elements in understanding the subject matter pertaining to business and political perspectives in addressing globalization challenges. Next, we offer this book as a reference for business executives in need of practical understanding of the subject matter in three areas pertinent to enabling and achieving sustainable global business operations. This book will also serve as a guide for MNCs from all sectors/industries that have a transnational structure comprising heterogeneous teams and diverse workforces. The book is focused mostly on managing multicultural environments in the context of international businesses and management practices. We, therefore, offer original research that provides a basis for understanding current issues and advancing theories in these fields. Some of the following chapters offer strong theoretical foundations and empirical focus on the challenges and opportunities, while others provide conceptual papers that have clear directions. These chapters fall into the following three parts (refer also to the table of contents). This introductory chapter aims to highlight the current trends in global business reviewing the past century. Then, the following chapters discuss the promises of global business opportunities that lie ahead of us across the world. The challenges for tomorrow are also discussed in light of lessons learned in the past organizational accomplishments and the best practices that are observed in current business operations.

3 Summary of the Chapters The introductory chapter highlights the trends in global business by taking stock of the past millennium. With such exploration, the chapter projects the promises of the global business opportunities that lie ahead of us across the world and beyond cultural boundaries. The challenges for tomorrow will also be discussed in light of lessons learned observed in the past, as well as organizational accomplishments and best practices that are observed in the current state of business operations based on the following three different sections. This book includes nine other chapters and

6

N. Zakaria et al.

is divided into three parts. While Part 1 of the book presents key issues of cultural influence on global business practice, Part 2 investigates challenges and issues of global business practice, and Part 3 demonstrates the implementation of strategies for global business practice. Part One: Cultural Influence on Global Business Practices The section begins with a chapter by Nasima Mohamed Hoosen Carrim (University of Pretoria, South Africa). The author focuses on the work behavior of employees after firm acquisitions. Firm acquisitions usually result in low employee identification with the organization involved. Strategically and financially, this places the organization at risk as conflict may increase while performance and motivation may decrease during the post-acquisition phase. This chapter investigates the organizational and occupational identity work of managers, administrative staff, and blue-collar employees during an acquisition. The objective is to establish if organizational and occupational identity work is the same with respect to employees at different levels and to provide insight into the organizational and occupational identity work of employees at different levels during post-acquisition integration. Acquisitions can be especially difficult if a firm operates in a third-world country, such as South Africa, and its top managers are from, for example, a Western country, because there may be a clash of cultures. The author makes concluding remarks by highlighting that acquisition is more difficult in third-world countries due to wide cultural differences. Next, Chap. 3 by Bibi Noraini Mohd Yusuf (University Malaysia Perlis, Malaysia) and Nasriah Zakaria (King Saud University, Saudi Arabia) set out to present the phenomena of self-initiated expatriates among the Malaysian female registered nurses in Saudi Arabia. The main objective of this chapter is to explore the need for building cultural sensitivity as a cultural kit for female nurses who will work in Saudi Arabia by understanding the challenges of Malaysian expatriate female nurse in Saudi Arabia when faced with numerous culturally rooted problems and to understand the process of cultural adjustment and acculturation among Malaysian expatriate female nurses during the period of expatriation, as well as to develop cross-cultural sensitivity based on cross-cultural adjustment theory. The chapter also provides a brief literature review, a theoretical framework, the proposed methodology, and a conclusion of theoretical and practical implications. Finally, under Chap. 4, written by Heba Abusedou and Norhayati Zakaria (Faculty of Business and Management, University of Wollongong in Dubai, United Arab of Emirates), they investigate national culture in terms of the trusting behavior of consumers when adopting a sharing economy or e-commerce as a way of life. It is argued that a sharing economy involves both social and cultural factors; it has become more important to understand the impact of trust in the sharing economy in the context of national culture. Culture has not been extensively studied in e-commerce, either in general or in the sharing economy. Although the sharing economy and other forms of online commerce bypass national and geographical boundaries, trusting behavior differs between cultures. This chapter aims to explore the influence of cultural preferences on the trust inculcated by global consumers when they decide to adopt and embrace the sharing economy as a way of life. The goal of the study is to

1 Advancing Cultural Frontiers to Champion Global Business …

7

understand the effects of two relevant aspects of cultural values (Hofstede’s cultural dimensions of uncertainty avoidance, individualism vs. collectivism, and indulgence vs. restraint on trust). The results show that the trusting behavior of consumers is related to national culture. Moreover, national differences have a significant impact on consumers adopting e-commerce. Part Two: Challenges and Issues of Global Business Practice Chapter 5 which was introduced by Radiah Othman (Massey University, New Zealand) and Rashid Ameer (Institute of the Pacific United, New Zealand) was motivated by the “inability thesis.” The author set out to examine the role of culture and human behavior in the context of fraudulent financial reporting. The chapter shows how culture was used and abused in an environment where ethical decisions were replaced with the need to portray “business as usual” when in fact the corporation was collapsing. In Toshiba’s case, the top management institutionalized various inappropriate accounting treatments directly and indirectly through its subordinates’ understanding (and/or misunderstanding) of what was expected of them, the crime of obedience. The findings suggest that the unspoken language of group mode behavior expedites the instinct for survival. Though cultural limitations and cultural upbringing do not exempt individuals from their responsibilities, the understanding of how the “local” managers place cultural importance on decision-making could offer the “international” managers culturally attuned strategies for managing global corporations, especially in times of crisis. The subsequent chapter by Samar Kal Youssef and Arijit Sikdar (Faculty of Business and Management, University of Wollongong in Dubai, United Arab of Emirates) evaluates the role of the gig economy in accessing resources effectively and internationally. The argument is that small and medium enterprises (SMEs) play a major role in most economies, particularly in emerging countries where SMEs contribute up to 60% of total employment and up to 40% of GDP. One of the consequences of this has been the growing internationalization of SMEs. However, small firms are characterized by a lack of resources in key areas such as financial, managerial, and social capital. Hence, SMEs may not have the prerequisite managerial resources to internationalize nor the luxury of unlimited time in which to acquire such resources. This requires that SMEs access resources swiftly through collaboration with other entities. The gig economy could play a role in providing solutions to the SMEs. The gig economy comprises a set of freelance individuals who typically offer their services for short periods of time. With the dawn of the knowledge economy, the popularity of on-demand and short-term jobs is increasing. Such decisions are not risk-free as the notion of power and dependency plays a critical role in the company–supplier relationship. Using four theoretical lenses (agency theory, resource-based view, resource dependency theory, and transaction cost theory), this paper tries to evaluate the impact of the gig economy on SMEs’ ability to access resources effectively. Lastly, under Chap. 7, by Karina R. Jensen (NEOMA Business School, France), she investigates how an increasingly multicultural and digitally connected business environment requires organizations to successfully orchestrate innovation across countries. The inability of leaders and teams to effectively collaborate and share

8

N. Zakaria et al.

relevant knowledge can affect international market performance. How can organizations address these concerns and optimize multicultural team collaboration in order to strengthen global innovation management capabilities? This chapter presents a framework for facilitating multicultural collaboration in achieving organizational performance and international market success. It identifies the organizational mechanisms and routines that influence knowledge-sharing and collaboration for the planning and execution of global product launches. Key findings are based on a qualitative study on global innovation and cross-cultural collaboration involving 105 global and regional project leaders at 36 multinational corporations with headquarters based in Asia, Europe, and North America. Part Three: Implementation of Strategies for Global Business Practices Under this section, it proceeds with Chap. 8 by Mohamed-Abdullahi Mohamed and Asmat-Nizam Abdul-Talib (Othman Yeop Abdullah Graduate School of Business, Universiti Utara Malaysia, Malaysia), which provides a theoretical outline of the nonpecuniary factors influencing diaspora homeland investment. It presents the findings of previous scholars on non-pecuniary motivational factors that drive diaspora homeland investment decisions. Moreover, the study suggests additional, non-financial motives that nurture homeland investment decisions. To identify the non-monetary motivational factors influencing diaspora homeland investment, a comprehensive literature review on the perspectives of previous scholars was conducted. The chapter presents the analysis and findings of multiple scholars who studied diaspora investment motives. Although studies have suggested altruism, emotional satisfaction, and social status to be the primary motives, little is known about the non-economic motivations of diaspora homeland investment. Therefore, this chapter offers additional motivational factors to help broaden the understanding and provides an overview of the non-pecuniary factors that drive diaspora homeland investment intentions. It offers a comprehensive explanation of the topic, such as the background of diaspora investment, entrepreneurial activities, and general contributions to home countries. The chapter also presents recommendations for future studies. As for Chap. 9 written by Samshul Amry Abdul-Latif and Nur Adilah Adnan (International Islamic University Malaysia, Malaysia), the purpose is to examine the effects of hotel image, brand image, and employee performance on the customer satisfaction of Muslim youth during their leisure stays in Muslim-friendly (MF) hotels in Malaysia. Self-administered questionnaires measuring hotel image, brand image, employee performance, and customer satisfaction on a five-point Likert scale were distributed to tourists in four prominent hotels in Kuala Terengganu. The data was then analyzed by multiple regression using SPSS. The results indicated that hotel image and employee performance were significant factors in predicting Muslim youth’s customer satisfaction with their hotel accommodations and hospitality services at MF hotels. However, brand image was found to be an insignificant predictor of their satisfaction. The sample of this study was limited to only Muslims and mainly students. However, this does not suggest that students should be ignored in terms of their purchasing power and preferences. Future studies may want to include other consumer segments and examine other MF hotels or hotels with similar

1 Advancing Cultural Frontiers to Champion Global Business …

9

concepts in countries interested to tap into the Muslim tourist market, for example, Japan, China, and Korea, among others. Malaysia is known to be an MF destination among tourists from many parts of the world. By understanding Muslim consumers’ expectations, the performance of hotel employees and hotel image can be utilized by hotel operators worldwide to enhance their marketing strategies. The last chapter of this book was written by the late David L. Wilemon. Shortly after submitting the manuscript, Wilemon passed away on August 18, 2019, at age 82, in the comfort of his home in Maypearl, Texas, USA. He served as a professor of business administration at Syracuse University for 43 years up to his retirement in 2010. He won countless awards for his teaching, research, and publishing and served on the board of directors for several organizations, including, most recently, the Cowboy Bank of Texas. Wilemon was a personal mentor and research collaborator of one this volume’s co-editors, and he is dearly missed by all. Wilemon explores an area of new venture management that has received limited research attention. The primary focus centers on how successful new venture team leaders experience the management of their new venture teams. Areas examined include interorganizational relationships between the new venture and the parent organization, managing relationships and expectations with senior management sponsors, challenges encountered during the development of a new venture, and major lessons learned from leading a new venture team. All new ventures studied were considered successful by the CEO or other senior managers in the parent or host organization. To assist the reader in understanding the challenges new venture leaders face, several quotations or “voices from the field” are used to help amplify the findings. Several directions for future research on managing new ventures are presented.

4 Conclusion This is a collection of chapters that address global businesses in the different geographical contexts where time, culture, and space boundaries pose different challenges, issues, and opportunities that require organizations to be agile in their behaviors with proactive measures and strategic management. With national and cultural boundaries becoming less visible due to digitalization and other factors, the management of cultural diversity is becoming more apparent. However, despite it being one of the key subjects in international business, studies on cultural diversity and inclusivity and their elements have not been extensively conducted. This book specifically focuses on cultural challenges and is a collection of chapters that leverage the expertise of different scholars. The aim of the book is to bring about understanding of how culture may have considerable impacts on business around the world. Thus, it is our hope that the book will be a guide for managers to understand some of the current developments and challenges in the current businesses in selected countries presented here and how they might impact their business practices. We also hope that this book will help to spur new research in this area and help scholars to further expand our understanding on the multicultural workforce and how it might impact organizations

10

N. Zakaria et al.

in the future. As global business challenges are confounded due to cultural diversity, globalization takes a new turn, and we need a new generation of workforce that is culturally diverse to face these challenges. But before that can happen, all hands must be on deck, especially among scholars, to solve human capital problems.

References Ang S, Ng KY, Rockstuhl T (2018) Cultural intelligence. In: Sternberg RJ, Kaufman SB (eds) The Cambridge handbook of intelligence (2nd ed). Cambridge University Press, Cambridge, NY Cleveland M, Rojas-Mendez JI, Laroche M, Papadopolous N (2016) Identity, culture, dispositions and behavior: a cross-national examination of globalization and culture change. J Bus Res 69(3):1090–1102. https://doi.org/10.1016/j.jbusres.2015.08.025 Coelho PS, Rita P, Santos ZR (2018) On the relationship between consumer-brand identification, brand community, and brand loyalty. J Retail Cons Serv 43:101–110. https://doi.org/10.1016/j. jretconser.2018.03.011 Pauluzzo R, Shen B (2018) Discussion of research findings. In: Pauluzzo R, Shen B (eds) Impact of culture on management of foreign SMEs in China. Springer Link, Switzerland, pp 215–239 Zakaria N (2017) Culture matters: decision-making in global virtual teams. CRC Press, Florida Zakaria N, Abdul-Talib AN (2010) Applying Islamic market-oriented cultural model to sensitize strategies towards global customers, competitors, and environment. J Islamic Mark 1(1):51–62. https://doi.org/10.1108/17590831011026222

Part I

Practices, Norms, and Diversity in Multinational Corporations

The first part presents the cultural influences on the recruitment of global workforces when they intend to work in a global environment such as multinational organizations. Practices, norms, and values inherent in each culture would present a different dynamic when people and teams work together which thus needs to be underlined under this part.

Chapter 2

Work in Progress: Organisational and Occupational Identity Work of South African Employees After Firm Acquisition Nasima Mohamed Hoosen Carrim Abstract Firm acquisitions usually result in low employee identification with the organisation involved. Strategically and financially this places the organisation at risk as conflict may increase while performance and motivation may decrease during the post-acquisition phase. This chapter investigates the organisational and occupational identity work of managers, administrative staff and blue-collar employees during an acquisition. The objective is to establish if organisational and occupational identity work is the same in respect of employees at different levels and to provide insight into the organisational and occupational identity work of employees at different levels during post-acquisition integration. Acquisitions can be especially difficult if the firm operates in a Third-World country, such as South Africa, and its top managers are from, for example, a Western country because there may be a clash of cultures. Keywords Acquisition · Managers · Administrative staff · Blue-collar employees · South Africa · Occupational identity · Organisational identity · Identity work

1 Introduction South Africa, which has the most varied and advanced economy on the African continent, presents many opportunities that attract international firms focused on investment in Africa (Carrim and Senne 2016). In comparison to other African countries, it has a strong service sector, a large formal sector, a strong industrial base and a sound legal system. It also presents reasonable education, health, lifestyle and housing choices not easily available elsewhere on the continent. For several decades, South Africa has served as a base for foreign firms to explore opportunities such as mergers and acquisitions (Games 2012). During the 1990s, most foreign investment came from the USA, the UK, Japan and Europe, but there has been an increase in investments from Italy, Dubai and France in the past decade (Carrim and Senne 2016; Games 2012). Each country brings with it its own management and leadership styles N. Mohamed Hoosen Carrim (B) Human Resource Management Department, University of Pretoria, Pretoria, South Africa e-mail: [email protected] © Springer Nature Singapore Pte Ltd. 2020 N. Zakaria et al. (eds.), Transcending Cultural Frontiers, https://doi.org/10.1007/978-981-15-4454-5_2

13

14

N. Mohamed Hoosen Carrim

as well as organisational cultures, which local employees have to adapt to during the post-merger and post-acquisition periods. Takeovers, mergers, amalgamations and acquisitions are labels that are used interchangeably to refer to two or more organisations that combine to face industry challenges and achieve synergy (Arora and Kumar 2012, p. 30). According to Gomes et al. (2011), an acquisition takes place when a firm takes ownership of another firm by buying majority shares in it. Acquisitions commonly occur in the corporate environment and have increased tremendously in the past two decades (Gomes et al. 2011). Acquisition success research that focuses on strategic or financial aspects has not provided adequate explanations of the outcomes (King et al. 2004) and has tended not to take into consideration the impact on employees and the post-acquisition integration process (Cartwright and Cooper 1996). These days, however, scholars are increasingly focusing on the socio-cultural aspects of the integration of acquired organisations (Kroon and Noorderhaven 2018; Sarala et al. 2016). Especially human integration, which focuses mainly on generating employee satisfaction, is regarded as a pivotal factor in the overall success of acquisitions (Birkinshaw et al. 2000; Kroon and Noorderhaven 2018). Acquisition is difficult to implement and, if not handled properly, can have a negative impact on employees. When acquisition takes place, companies focus on expansion and ignore the human factor, resulting in a lack of synergy in taking the company forward. Acquisitions are accompanied by feelings of stress, fear and anxiety that envelop the entire organisation (Siehl et al. 1990). Employees in a firm that is undergoing an acquisition are unsure of the implications for their careers and the organisation in general. They become concerned about losing their jobs and are engrossed in thoughts about external employees being brought into do their jobs. It becomes difficult for employees to comprehend that they may become redundant, and they take these threats of change personally (Siehl et al. 1990). During and after an acquisition, employees need to be prepared for the changes that will take place. Over the years, because mergers and acquisitions in South Africa have increased and their economic benefits have become visible (MoneyMarketing 2019), research has been conducted on some aspects of such transactions. However, not much is known about the impact these deals have on local employees, especially on their identification with their job roles and the merged and/or acquired organisational cultures. Although research related to mergers and acquisitions in the South African context is still in its infancy, some research has been conducted from various perspectives. For example, Rossouw et al. (2002) have investigated the role of corporate governance during mergers and acquisitions. Wimberley and Negash (2004) have focused on value creation during mergers and acquisitions, whereas Verhoef (2009) has explored mergers and acquisitions in the South African banking sector. Some of the research conducted on acquisitions has focused on organisational identity in shaping integration (Wei and Clegg 2018), post-merger stress (Panchal and Cartwright 2001), cultural integration (Bijlsma-Frankema 2001) and occupational identity (Empson 2004). However, not much is known about how organisational and occupational identities intersect and how this results in identity work for employees. Moreover, most of the research conducted on acquisitions has involved higher-level managers,

2 Work in Progress: Organisational and Occupational Identity …

15

whereas little attention has been given to lower-level employees. The aim of this chapter is to focus on the intersection of organisational and occupational identities and the concomitant identity work engaged in during post-acquisition integration by employees at three different levels, namely management level, administrative level and blue-collar level. It is also relevant that the study is conducted in an African, more specifically South African, non-Western context.

2 Theoretical Perspective and Literature Review 2.1 Social Identity and Optimal Distinctiveness Theories Social identity theory (SIT) concerns inter-group relations and group processes. A crucial proposition of this theory is that people view the world in terms of social categories. Thus, individuals define themselves in terms of individual characteristics that distinguish them from others (personal identity) as well as in terms of the characteristics of the social group to which they belong (social identity) (Tajfel and Turner 1986). Individuals who are members of a group (the ingroup) have similar characteristics, and they are different from individuals who are not members of that group (the outgroup). Tajfel and Turner (1986) emphasise that the situational salience of different attributes of the self (personal vs. social) can change the types of comparison individuals make; therefore, the subsequent motivation to act can differ considerably. For example, salespeople whose personal identities are salient may try and maximise their sales by approaching more customers, but if their social identities are also salient they may decrease their efforts to increase personal sales to prevent them from outperforming fellow salespeople and to allow them to perform in line with group norms (Giessner et al. 2012). People’s motives for identifying with a particular social group (i.e. choosing a social identity) differ. People want to have a positive self-concept, and they feel good when they compare favourably with others (Tajfel and Turner 1986). Furthermore, they want to identify with a group to decrease their feelings of uncertainty: they dislike feeling unsure of themselves and group affiliation can clarify uncertainties (Hogg 2007). The optimal distinctiveness theory (ODT), on the other hand, outlines two additional motives for identifying with a social group (Brewer 1991), and these are relevant to the analysis of organisational acquisitions. According to this perspective, individuals identify with social groups so that they can achieve equilibrium in respect of two human motives: individuals’ desire to belong and to have their worldview validated; and individuals’ desire to be unique (Giessner et al. 2012). Thus, employees tend to identify with their work groups rather than with their organisation (Riketta and Van Dick 2005).

16

N. Mohamed Hoosen Carrim

2.2 Use of SIT and ODT in the Current Study Previous research indicates that the two main identities that are impacted on during mergers and acquisitions are the pre-merger/pre-acquisition identities and the post-merger/post-acquisition identities. However, there are subgroups that are also affected by mergers and acquisitions, such as the identities of individual employees who resist the change or the identities of those who cope with the change (Giessner et al. 2012). As mentioned earlier, different motives underlie individuals’ reasons for identifying with a specific social group. For example, people desire to have a positive self-concept and they feel good when they compare favourably with others (Giessner et al. 2012). Another reason for identifying with a group is that group membership reduces feelings of uncertainty (Hogg 2007). SIT and ODT are used in the current study as they provide insights into the extent to which employees identify with their organisations and with their occupations in order to acquire a sense of coherence during a post-acquisition phase. Moreover, these theories provide insight into how employees at different levels are impacted on by mergers and acquisitions and what their reactions as a group and as individuals are to changes during the post-acquisition period. Reactions may range from employees who identify themselves as “We are employees of XYZ firm and part of a group of engineers” to an employee who identifies himself as “I am Mr. Tshabalala who does not identify with the organisation nor my job as the change has led to disengagement.” It is clear that only identities belonging to the first kind will provide a basis for a successful organisational acquisition. Thus, SIT and ODT assist in clarifying the extent to which employees are motivated and the kind of motivation they receive after an acquisition to allow them to identify with the organisation and their respective occupations. Two social identities are impacted on by acquisitions, namely the organisational and the occupational identities of employees at different organisational levels. These two identities are discussed next.

2.2.1

Organisational Identity

According to Albert and Whetten (1985, p. 256), “organisational identity involves those aspects of the organisation that meet the criteria of self-referentially claimed central character, distinctiveness and temporal continuity.” Haslam (2004, p. 281) defines organisational identity as a “relatively enduring state that reflects an individual’s willingness to define him- or herself as a member of a particular organization.” An organisation’s identity is an important aspect of the individual; it concerns who we are, and employees form this identity explicitly at a conscious, reflexive level (Kroon et al. 2009). The formation of an organisational identity suggests the

2 Work in Progress: Organisational and Occupational Identity …

17

existence of a cognitive process through which individuals come to feel a sense of belonging to or oneness with the firm and define themselves in terms of the firm (Mael and Ashforth 1992). Organisational identity reflects the relationship between the organisation and employees and can therefore be regarded as relational. An organisation’s culture and values form the foundation of and support the organisation’s identity (Kroon et al. 2009), and employees can draw on their organisation’s culture to make sense of their organisational identities (Ravasi and Schultz 2006); therefore, organisational identity is important and personal to individuals (Reicher 2004). Organisational researchers posit that organisational identity plays a pivotal role in forecasting and comprehending employees’ perceptions, motivations and performance (Giessner et al. 2012). This is supported by the notion that identification with an organisation can have a positive effect in the form of diverse organisational outcomes (Bartels et al. 2006). Organisational identity is positively related to extra-role behaviour and job satisfaction and negatively to turnover intentions (Riketta and Van Dick 2005). During acquisitions, employees have to let go of the “old” pre-acquisition organisational identity and adopt a “new” post-acquisition organisational identity (Bartels et al. 2006). Because of the link between organisational and personal identity, employees can experience an acquisition as threatening. Hence, in the case of an acquisition, during which the previous firm is dissolved and replaced with a new one, the firm should assist employees in reworking their organisational identity. An acquisition can threaten the uniqueness of the pre-acquisition group identity, leading to an increase in subgroup identity instead of to identification with the post-acquisition firm (Van Dick et al. 2006). A result of an acquisition can be that employees decrease their commitment and loyalty during the pre-acquisition phase and their desire to cooperate in the post-acquisition phase (Ullrich and Van Dick 2007). The social identity theory (Tajfel and Turner 1986) advances a noteworthy rationalisation of why employees often react negatively to and resist organisational acquisitions (Hogg and Terry 2000): organisational acquisitions threaten the continuity and stability of employees’ current identities, especially when they threaten current group structures, values and other indicators of intra-group culture (Bartels et al. 2006). Employees, through a process of identification, assume the characteristics of the work group in a self-referential way and align their behaviour with that of the work group (Rouzies and Colman 2012). There are different foci of identification in an organisation—groups nested in the organisation (departments, subsidiary or work groups) all represent such foci. Nested identities are rooted in lower-order identities (work group, job) and in higher-order identities (organisation, division) (Rouzies and Colman 2012). There is also dual identification where employees identify with two organisational levels. Vora and Kostova (2007) created a model of dual organisational identification to conceptualise the identification of employees with a multinational enterprise (group level) as well as with a subsidiary enterprise (local level). Looked at from a social identity perspective, an acquisition threatens an organisation’s identity and hence an individual’s social identification with the organisation. On the other hand, research on social identity has shown that identifying with the post-acquisition entity results in lower levels of absenteeism and turnover and

18

N. Mohamed Hoosen Carrim

higher levels of extra-role behaviours and job satisfaction, especially in the case of employees for whom organisational identity is prescriptive. This then leads to negative consequences for employees’ self-esteem and collective identities (Van Dick et al. 2006). Research indicates that employees’ reactions to acquisitions differ depending on how much the acquisition is perceived to corrupt the pre-acquisition organisation’s identity and pose a threat to employees’ organisational identity. Haslam et al. (2000) point out that organisational identity fulfils the need for affiliation. Thus, collective pride in achieving team goals and peer recognition are key rewards in social-identitybased motivation as they feed back into the self-concept of employees.

2.2.2

Occupational Identity

According to Christiansen (2004), individuals who are in an occupation construct individual identities, and this is a fundamental way in which they communicate their individual identities. Christiansen (p. 199) puts forward four key proposals relating to identity and occupation: identity is an all-encompassing idea that shapes and is shaped through our relationship with others; identities are intimately entwined with what we do and our interpretations of those actions in the context of our relationships with others; identities offer a vital pivotal figure in a life story that allows coherence and meaning in everyday events and life itself; and, since life meaning is obtained in the context of identity, it is an important aspect in promoting life satisfaction and well-being (Phelan and Kinsella 2009). Kielhofner (2008, p. 106) coined the term occupational identity and defined it as “a composite sense of who one is and wishes to become as an occupational being generated from one’s history of occupational participation. One’s volition, habituation, and experience as a lived body are all integrated into occupational identity.” According to Brown (1997), occupational identity formation has to: • be a dynamic process which allows for development and change over time; • have a social aspect that is strong where employees work, learn and network with others; • allow employees to construct their own occupational identity; and • acknowledge the presence of particular and general “communities of practice” connected to specific organisations and firms and recognise that they can function at various levels. Research indicates that employees are to a large extent more committed to their occupational identity than to their organisational identity, the reason being that they have more in common with their work colleagues than with other members in the organisation (Johnson et al. 2006). Important events in an individual’s life, such as job moves, academic qualifications and illnesses, by themselves do not make up that individual’s occupational identity; however, when such experiences form a story together with challenges, triumphs, disappointments and struggles, they become the foundation for a narrative that individuals live out (Sims 2003). Such narratives

2 Work in Progress: Organisational and Occupational Identity …

19

tend to be provisional as they are recreated in minute and in huge ways (Ibarra 1999). These narratives are also reflexive as individuals make sense of past events, create a person living in the present and continue with the story. In this manner, experiences become meaningful and absorbed, and occupational identities change across diverse templates and patterns (Fraher and Gabriel 2014). For instance, Fine (1996) established that the occupational identity of chefs included images of being artists, scientists, surgeons, accountants, handymen and psychiatrists as an expression and complex way of defining their professional selves. These images were temporary, situationally dependent and inconsistent with each other (Fraher and Gabriel 2014). Kitay and Wright (2007) found that management consultants constructed inconsistent and multifaceted occupational identities as prophets, service workers, professionals and business partners. Das (2012) and Johnson et al. (2006) found that employees were less committed to their organisational identities than to their occupational identities. Occupational identities take on an inspirational element as individuals constantly rewrite their life experiences to reach an ideal. Occupational identities are also shaped by organisational and social discourses in that individuals can use them to evaluate where they are located and how long it will take them to get to a position (Fraher and Gabriel 2014). The qualities of an organisation, such as its prestige, power and technical excellence, can also become part of the ego-ideal of an individual, which forms part of the individual’s occupational identity. Through this ideal, an individual’s occupational and organisational identities become intertwined (Fraher and Gabriel 2014). Obodaru (2012) posits that when individuals narrate their stories they are not only referring to past and present experiences but also to possibilities that may have been in their lives and for some reason could not be fulfilled. The effect of these dreams and possibilities may not diminish and may continue to shape and delineate individuals’ occupational identity. Hence, dreams and fantasies are part of the occupational identity of individuals (Obodaru 2012). In the next section, the focus is on identity work as it relates to occupational and organisational identities.

2.3 Identity Work During acquisitions, as individuals move from the pre-acquisition to the postacquisition stage, their organisational identities undergo changes (Vanbeselaere et al. 2002), and deep-structure organisational identities may be ruptured (Hassan 2012). Deep-structure organisational identification is a slow process and occurs when employees’ relationship with their firm changes their mental schema as their participation is incorporated into their self-concept (Rousseau 1998). Situated organisational identification, where the individual feels part of the bigger organisational unit, can also take place. Such identification can occur quickly when cues foster an awareness of shared interests between individuals and the firm, and the employees

20

N. Mohamed Hoosen Carrim

feel they contribute to the organisation (Rousseau 1998). However, during acquisitions employees may not feel valued, and situated organisational identification may be compromised. This will lead to employees engaging in identity work. Occupational identities are formed when individuals incorporate their occupational values into their self-concepts (Carrim 2016; Hassan 2012). Occupational identity is more durable than organisational identity and can increase employees’ self-esteem and guide their attitude and behaviour in the organisation (Ashforth and Johnson 2001). However, despite the importance of the construct of occupational identity, the identity work that employees engage in during acquisitions has been largely overlooked in organisational research. Studies conducted on occupational identity have focused on occupational identity as being dynamic and fluid and dependent on diverse situational factors (Carrim 2016, 2019; Chreim et al. 2007; Pratt et al. 2006). Sveningsson and Alvesson (2003, p. 1164) posit that identity is a fluid concept and that it should not be studied as a static one in identity research. For this reason they have introduced the concept of “identity work,” which allows for a dynamic approach to answering the questions “who am I?” and “what do I stand for?” According to Sveningsson and Alvesson (2003, p. 1165), identity work can be defined as “forming, repairing, maintaining, strengthening or revising the constructions that are productive of a sense of coherence and distinctiveness”. Research relating to the identity work that employees engage in during organisational acquisitions is still in its infancy. Research on firm acquisitions that relate specifically to occupational and organisational identity is limited (Ullrich and Van Dick 2007; Vora and Kostova 2007; Weber and Drori 2011). Arora and Kumar (2012) have called for this gap in organisational studies to be filled: this chapter answers this call. The next section focuses on post-acquisition integration as it relates to organisational and occupational identities.

2.4 Relation Between Post-acquisition Integration and Organisational and Occupational Identities Post-acquisition integration has been studied from an organisational identity and organisational cultural perspective (Kroon et al. 2009). Over the past few decades, research on post-acquisition issues has focused on human factors that relate to the post-acquisition phase (Arora and Kumar 2012). These authors hold the opinion that employees’ acceptance of the acquisition and their cooperation throughout the process are the keys to a successful acquisition. During the post-acquisition phase, issues of organisational identity (Ullrich and Van Dick 2007) and occupational identity are important.

2 Work in Progress: Organisational and Occupational Identity …

21

Employee participation and involvement in decision-making after an acquisition influence growth and performance. Incoming managers can increase the commitment levels of employees in organisations by increasing motivation and satisfaction through policies, compensation and work conditions (Arora and Kumar 2012). At senior management level, firm acquisitions may result in “ego” clashes. At the postacquisition stage, managers may be asked to implement strategies and policies that they are not comfortable with. They may feel powerless and out of control and experience a sense of guilt if they feel that they could have avoided the acquisition if they had done things differently (Siehl et al. 1990). In such situations, managers lose focus and become engaged either in settling matters among themselves or moving on (Arora and Kumar 2012). After an acquisition, the acquired firm continues to exist as a sub-unit of the larger entity (Van Dick et al. 2004). By implication, both the pre-acquisition and postacquisition entities become employees’ foci of identification (Rouzies and Colman 2012). Acquisitions may bring inter-group differences to the fore, leading to huge identity and structural changes and resulting in employees resisting these changes as they feel excluded, angry, stressed, frustrated, disorientated, dissatisfied, frightened and confused (Wei and Clegg 2018). Uncertainty and other negative emotions may result in lowered productivity and commitment, increased disloyalty and dissatisfaction, increased employee turnover, a struggle for leadership and power, sabotage and an increase in dysfunctional behaviours (Arora and Kumar 2012). It takes a considerable amount of effort and time to increase the loyalty of employees towards the post-acquisition firm (Giessner et al. 2012). Often, 50–80% of acquisitions fail partly because the human side has not been considered (Cartwright and Cooper 1996). Bartels et al. (2006) indicate that the failure could be attributed to employees perceiving inter-group differences in the newly formed organisation, incompatibility of organisational cultures, conflict between corporate identities, and threats to employees’ existing identities after the acquisition. There are various foci of identification in the post-acquisition transition phase that explain work-related behaviours in the integration process (Van Dick et al. 2004). Scholars stress that individuals who have multiple identities can easily adapt to changes and complex situations in the workplace (Ashforth and Johnson 2001; Pratt and Foreman 2000; Vora and Kostova 2007). As employees with multiple identities rely upon a variety of self-referential frames they are less threatened by post-acquisition integration (Pratt and Foreman 2000). Some scholars have found a positive correlation between pre- and post-acquisition identities (Bachman 1993; Van Dick et al. 2004; Van Knippenberg et al. 2002). When the work group is pivotal to an individual’s self-identity, such an individual’s experience of an acquisition is especially problematic, and therefore a negative relationship develops between the individual’s pre-acquisition and post-acquisition identifications (Bartels et al. 2006)—the stronger the identification with the organisation, work group or department, the more challenging the post-acquisition phase. After an acquisition, staff re-categorise themselves at super-ordinate levels as members of a “new” organisation (Van Knippenberg et al. 2002). Employees simultaneously identify with the pre-acquisition and the post-acquisition group (Van Dick

22

N. Mohamed Hoosen Carrim

et al. 2004). Their identification is influenced through a sense of continuity (Van Knippenberg et al. 2002), but this sense of continuity may be threatened if elements of the pre-acquisition group are challenged (Rouzies and Colman 2012). Identity transition is therefore achieved by maintaining subgroup identities as long as they are nested within a coherent super-ordinate identity (Hornsey and Hogg 2000). Jetten et al. (2002) confirm the notion in their study that a strong super-ordinate organisational identity (with the organisation instead of with the work group or department) results in positive post-merger identification. Thus, a positive relationship exists between pre- and post-acquisition processes when employees do not experience the impending changes as threats, when their work groups are only indirectly involved in the acquisition and hardly affected by it, or when employees regard their organisational identity as pivotal (Bartels et al. 2006). Bartels et al. (2006) found in their study that organisational identity was especially strong among employees directly involved in an acquisition. Vanbeselaere et al. (2002) in their study on an acquisition in the banking sector found that employees engaged in greater post-acquisition identification when they perceived that their pre-merger firm lived on in their postacquired bank and when their attitudes towards new managers in the post-acquired organisation were more positive.

2.5 The South African Landscape South Africa is not only transitioning politically and economically from apartheid to democracy, but is also increasing its economic growth and competitiveness in a global market (Carrim and Senne 2016). The South African government has welcomed the idea of foreign investment in the country in the form of mergers and acquisitions (Games 2012). South Africa is an economic powerhouse and one of the leading countries in terms of mergers and acquisitions on the African continent (MoneyMarketing 2019). Recently, there has been a steady increase in such transactions between South Africa and Western countries such as the USA and UK (Carrim 2017). Rossouw et al. (2002) reported that South Africa’s merger and acquisition activity increased by 61% in 2000, and the total transaction value was R372 billion. According to a Baker McKenzie analysis of Thompson Reuters data on merger and acquisition trends in South Africa, investors from the USA announced the most deals (14) in South Africa during 2018, whereas the UK announced nine deals (MoneyMarketing 2019). In 2017, South Africa concluded $7.5 billion worth of deals, dropping to $4.3 billion in 2018. The rate of deals is forecast to rise to $6.2 billion in 2019. In terms of deal volume, 182 deals were concluded in 2017, decreasing to 136 deals in 2018. In 2019, the volume of deals is expected to climb to 199 (MoneyMarketing 2019). Nevertheless, the country faces diverse internal challenges that shake the confidence of investors. First, the decrease in merger and acquisition activity reveals that the impact of corruption and sub-optimal governance should not be under-estimated as they result in a decrease in investments especially from the USA and UK. These

2 Work in Progress: Organisational and Occupational Identity …

23

two countries have imposed severe anti-bribery penalties (McKenzie 2019). The issue around state capture has also made foreign investors cautious, and many of them wait for the outcome of the 2019 elections before further investing in the country. Credit rating downgrade, land reform issues, service delivery problems and national health insurance are some of the concerns that have resulted in international investors being reluctant to invest in the country. There are also issues in specific sectors such as the mining industry. Due to regulatory uncertainty, mergers and acquisitions in this sector have declined considerably (McKenzie 2019). Some research has been conducted on the impact of mergers and acquisitions on employees in the South African context. For example, Theron and Dodd (2011) conducted a study on the organisational commitment of employees after a merger. The outcomes of the study indicated that an increase in the number of positive human resource practices decreased employees’ need to breach psychological contracts after the merger. Research conducted by Behar and Hodge (2008) found that mergers and acquisitions in the mining sector decreased labour turnover. Most research in the South African context focuses on local firms acquiring organisations in Africa and also on the mergers of tertiary institutions in this context. However, not much is known about local employees’ experiences during mergers and acquisitions.

3 Methodology In order to gain an in-depth understanding of the identity work relating to the study participants’ occupational and organisational identities, I used a qualitative, interpretivist approach that allowed the participating women to share their life experiences (Ritchie and Lewis 2003). I interviewed seven managers, eight administrators and six blue-collar employees whose ages ranged from 21 to 62 years. The purpose of the study was to gain access to employees at different levels in an organisation that has undergone an acquisition. Participants were selected using a combination of purposive and snowball sampling (Ritchie and Lewis 2003). I gave the participants pseudonyms to maintain confidentiality. Table 1 presents the biographical information of the participants. I am unable to describe the business of the firm as it would identify the participants in the study. However, this firm, which was previously South African owned, was acquired in 2017 by a parent company based outside the continent of Africa. I conducted in-depth, semi-structured interviews with the participants, and I probed into their workplace experiences before and after acquisition. I used probing in order to obtain clarity and to gain a deeper understanding of important aspects relating to the participants’ upward occupational mobility (Lincoln and Guba 1985). The one-on-one interviews lasted one hour each, and I audiotaped them so that it was easy to retrieve and review information and so as to sustain the validity of the study. I made sure that I was thoroughly conversant with each participant’s story.

24

N. Mohamed Hoosen Carrim

Table 1 Biographical information of participants Number

Designation

Age in years

Education level

1

Manager: Human Resources

48

Post-graduate

2

Manager: Procurement

41

Post-graduate

3

Manager: Finance

37

Post-graduate

4

Manager: Sales

55

Under-graduate

5

Manager: Sales

50

Post-graduate

6

Manager: Purchasing

47

Under-graduate

7

Manager: Marketing

39

Post-graduate

8

Administrator

29

Grade 12

9

Administrator

31

Diploma

10

Administrator

36

Grade 12

11

Administrator

45

Grade 12

12

Administrator

21

Grade 12

13

Administrator

36

Diploma

14

Administrator

27

Grade 12

15

Administrator

34

Diploma

16

Blue-collar employee: Kitchen staff

60

Grade 10

17

Blue-collar employee: Cleaner

57

Grade 8

18

Blue-collar employee: Kitchen staff

62

Grade 8

19

Blue-collar employee: Cleaner

40

Grade 10

20

Blue-collar employee: Cleaner

25

Grade 7

21

Blue-collar employee: Cleaner

28

Grade 7

I used thematic analysis for my findings, and my analysis moved from first-order coding of statements relating to specific categories to identifying theoretical categories and dimensions and, ultimately, establishing relationships among dimensions (Pratt 2009), as indicated in Fig. 1.

4 Findings and Discussion 4.1 Organisational Identity Work 4.1.1

Major Uncertainty

The majority of the managers and administrative staff engaged in a great deal of identity work relating to their organisational identities. The vast majority of these

2 Work in Progress: Organisational and Occupational Identity …

25

Fig. 1 Developing sub-themes for organisational identity work

participants indicated that they had been whole-heartedly committed to the organisation before the acquisition but that their loyalty, commitment and identification after the acquisition had diminished due to uncertainties regarding their job security. They engaged in extensive identity work, on the one hand wanting to be part of the organisation and on the other hand contemplating to leave. Kansala and Chandani (2014) point out that during mergers and acquisitions, major restructuring takes place and this leads to employees feeling uncertain about their futures. If these changes are not dealt with by managers, it results in employees becoming demotivated and wanting to leave the organisation. This assertion is supported by the seminal work of Davy et al. (1988). A novel finding of the current study and one which had not been explored in past studies was that participants indicated that their uncertainties were compounded through the current South African situation in which challenges such as crime, skill shortages and political uncertainty abounded. Blue-collar employees expressed a temporary feeling of relief as they could keep their jobs for another five years, and they engaged in less organisational identity work compared to employees in higherlevel positions. Participant 1, a human resource manager, echoed the sentiments of the other managers:

26

N. Mohamed Hoosen Carrim Our uncertain future in this organisation should be seen in the South African context of an already stressed society with many other challenges such as crime, political uncertainties, ineffective government, rand volatility, skills shortages, questionable work ethics, affirmative action, BBEEE requirements, etc. We are not only faced with these issues in the macro environment but now we have to contend with a possibility of losing our jobs as well.

Participant 19, a cleaner, commented as follows: There is a mandate of five years for us to keep our jobs and until then they [current company] cannot retrench us.

Participant 10, an administrator, had the following to say: The company feels that they will bring in graduates at a fraction of the cost and everything will work well. But the graduate lacks experience. The fact that you have a degree, doesn’t mean you CAN do the work. It just means you have the ability. They bring in youngsters—no experience—and expect the business to continue. The responsibility is on the zone to train the youngsters and too much pressure is building. People cannot handle pressure, and then they leave.

4.1.2

Terrorising Employees

Another element that led to many employees having to work and rework their organisational identities was that many were being terrorised by a new set of managers. Research relating to the roles of managers in post-acquisition failures is sparse. One exception is the study of Zhang et al. (2015) that found that authoritarian managers pushed employees out of the organisation. In the current study, participants at all levels indicated that the “wrong” people had been appointed to some managerial posts—they had forced their way into these posts by using bullying tactics or playing the affirmative action card. Participants indicated that most newly appointed managers were disrespectful taskmasters, and employees did not regard them as true leaders as they terrorised people and managed them by instilling fear and publicly humiliating them. The majority of the participants at administrative level complained that disrespectful taskmasters placed more pressure on employees to deliver results. Participants at the managerial and administrative levels commented that technical staff members, such as engineers, scientists, financial specialists and project managers, were treated as pawns to achieve the new targets and objectives. Participant 21, a cleaner, pointed out that blue-collar workers were also being terrorised: I am not always sure who to approach because I fear being victimised for bringing up challenges.

Participants indicated that top management who came from abroad were not approachable and that employees were unable to lodge grievances against bullies in the work environment. Cheng and Seeger (2012) point out that when the acquiring company is foreign, acquired employees may find it difficult to adjust to foreign management styles, resulting in a feeling of decreased motivation among employees.

2 Work in Progress: Organisational and Occupational Identity …

27

Participant 17, a cleaner, expressed her frustration at not being able to raise her concerns with management: Managers have become bullies these days and we can’t even take this issue up with our top managers because they are foreigners who don’t understand our organisation’s culture.

Managers and administrators added that managers did not consider the labour legislation in the South African context. Participant 15, an administrator, pointed out the following: The new company has no focus on equity. It seems as though equity has been thrown out the door. Previously, we would target equity talent, promote black males and females and even track these targets monthly. Leadership teams would be penalised if equity targets were not met via bonus payments. In the new company, it seems as though more white people get promoted. Non-whites are on the back seat. Without a “sponsor” you are unlikely to move forward rapidly. Also, the new company values graduates. They feel, why pay a person for 10 years’ experience when you can hire a grad and mould them. Also, they want to dismiss people willy-nilly, which is not accepted under South African labour laws.

4.1.3

Comparison of Old and New

The majority of the participants indicated that they had been happier under the previous management. They had felt more loyal to the previous organisation, which had felt like “home” to them. The new environment alienated them, and they had to constantly remind themselves to show some loyalty to the firm. This finding is in line with the finding of Van Dick et al. (2006) that employees were negative after an acquisition as they yearned for things to be as they were in the past. Cartwright and Cooper (1996) affirm that changes in the organisational culture result in employees becoming negative towards the acquired firm. Participant 6, a purchasing manager, commented as follows: Under the old management, everything was great and we as employees were generally happy in our roles. However, with the new management we are not as happy as we used to be. I have to remind myself to not go against my company at all times.

Participant 12, an administrator, echoed the same sentiments: I do my best now, but I was happier under the old company.

Managers also complained of a lack of transparency and employees being forced by managers to accept the organisational culture. Participant 5, a sales manager, complained about her struggles to adjust to the new organisational culture: There is a lack of consistency in approach in the new company. In the old company, we thrived on consistency. For example, the company made a rule that no ex-employees can be re-hired into the company. Despite this being communicated, this decision has been overruled by the VP on two occasions! The company has a take-it-or-leave-it attitude. If you are not a “culture fit” you are asked to leave the company.

28

N. Mohamed Hoosen Carrim

4.1.4

Exiting the Organisation

Another reason for participants’ decreased motivation and commitment to the organisation is management’s failure to retain highly qualified individuals and prevent them from leaving the organisation. Research relating to employee turnover in the postmerger and -acquisition stage indicates that in the majority of cases, managers are the ones that exit the organisation (Davy et al. 1988; Napier 1989). In the current study, a novel finding was that participants at the management and administrative levels indicated that graduates were being recruited to take over the jobs of older employees. This increased their anxiety, decreased their loyalty towards the organisation and made them consider leaving the organisation. Participants holding management and administrative positions reported an exodus of qualified and skilled employees. A few hopeful and trusting staff members remained, albeit with disrupted career paths. Participants in administrative and managerial positions indicated that the development of a succession pipeline was being disrupted, resulting in a deepening of the knowledge and skills gap. Participant 7, a marketing manager, expressed his unhappiness at losing talented staff: The new company doesn’t respect the knowledge of older employees, and let people leave, and this loss of talent has been a great challenge. This has left big holes in the company. The new company shows no respect for employees. If you can allow people with years of tenure and knowledge to leave just like that, you don’t respect and value them.

At all three levels (managerial, administrative and blue-collar), there were participants who indicated that they would be exiting the acquired organisation in the near future. This finding is in line with past research that indicates that if employees are not taken care of and handled properly during the post-acquisition period, it results in high labour turnover rates (Das 2012; Zhang et al. 2015). Participant 20, a cleaner, indicated that she would not continue working for the organisation for very long: Especially with the way we are treated and the workload, I do not see myself closing off the year with this company.

4.2 Occupational Identity Work 4.2.1

New Way of Doing Things

The interviews revealed that participants engaged in a great deal of identity work regarding their occupations due to various reasons. Participants at the managerial and administrative levels indicated that new systems, projects and targets were introduced by the new leadership. Existing strategies and projects stagnated or were terminated since new projects had been introduced (without consulting previous project owners about the prioritisation of critical projects). The new systems and projects contributed to further confusion, and an overload of information resulted in ineffective executions. Participants added that new targets set were unrealistic. In addition, they had

2 Work in Progress: Organisational and Occupational Identity …

29

to work extended hours and perform two roles at once (i.e. double hatting) at no extra pay. Previous research indicates that acquisitions affect employees at management levels the most as their job descriptions may change (Krug and Aguilera 2004). However, in the current study, participants at all levels indicated that they had to work longer hours and take on more responsibilities. Participant 9, an administrator, expressed her unhappiness as follows: They have taken things away from us without consultation and that is not fair.

The extensive changes resulted in the occurrence of technical issues, which put more pressure on the already overworked employees. All participants complained about the structural changes, of which they felt the ramifications after acquisition. Both administrators and managers complained that members of staff with know-how were not consulted—the new vice-president implemented decisions and changes unilaterally, which impacted negatively on employees’ occupational identities. Employees were already grappling with new systems, and the lack of consultation increased the extent to which they could not relate to their occupations. Marks and Mirvis (2011) posit that when human factors, such as inclusion, are not taken into account, mergers and acquisitions tend to fail. Evidence of this was obtained in the current study. Participant 3, a finance manager, had qualms about the structural changes that had been introduced: For instance, all employees had to reapply for their positions where grades are not known, nor are the job descriptions provided.

Participants at all levels complained of costs being cut and policies being unfair. For instance, cost cuts resulted in substandard (sometimes unsafe) accommodation being made available to employees and employees having to pay for accommodation upfront and claiming back later (thus carrying the business’s cash flow). Because of cost cuts, travelling became more stressful (e.g. employees had to drive instead of fly to destinations). Additionally, travel claims were cut: a stipend was allowed for petrol but not for the maintenance of own vehicles used for business trips. Participants complained that these arrangements had a negative impact on their occupational identities as they were no longer prepared to travel in order to fulfil their work commitments. This is a significant finding as past research has not taken into account how financial constraints placed on employees after mergers and acquisitions impact on employees’ identity work relating to their occupational identities. The current study illustrates that economic constraints cause employees to resist engaging fully in their jobs. Participant 16, a kitchen worker, related how her section had been affected through budget cuts: Now with the budget cuts, the employees complain, as we are not receiving enough milk and coffee for their refreshments.

30

N. Mohamed Hoosen Carrim

Participant 2, a procurement manager, complained about unfair policies: The old policies and rules were fair. There was consistency, and we could say that what was applied to Tom was applied to Paul. Here in the new company, decision-making is individualised with a lack of transparency and fairness. This means that if you are in the in-crowd, you will grow and prosper. Fairness and consistency are out the window and when decisions are challenged, I am told that we cannot question any decision signed off by the VP. It seems as though the leadership teams are quite great at spin-doctoring and covering up issues.

Participants furthermore indicated that not all positions were filled, and that illequipped personnel were appointed to some positions, which resulted in capable employees having to fulfil the job duties of two to three staff members without additional compensation. Participants at management levels complained that the fear caused by the unrealistic pressures and long work hours had led to an increase in stress-related health issues (e.g. depression, eczema, burnout, high blood pressure) in the company. Makri et al. (2012) found in their study that the uncertainty created by mergers and acquisitions resulted in an increase in employees’ stress levels, which were accompanied by various health issues, including psychological impairment. Matteson and Ivancevich (1990) point out that acquisitions create fear and anxiety, especially among mid-career employees as they may be passed on for younger employees. Participant 4, a sales manager, raised the issue of work pressure as follows: I find myself working extra-long hours. Many times I go to work at 6:00 and only return home at 12:45 the next day. They are really pushing the work, and don’t realise that we are human and developing sicknesses in the process.

4.2.2

Supplier Dissatisfaction

Participants indicated that new ways of working impacted on their occupational identities even further as external parties were dissatisfied with these new ways. Participants at management level indicated that in some areas, such as procurement, the acquisition had negatively affected suppliers. They pointed out that after acquisition, changes in payment terms were forced on suppliers. The new management did not consult suppliers about contracts, and agreements between the two parties were not concluded. These changes were introduced during the period of acquisition, which was a time of disruption and turmoil. Having negative suppliers resulted in managers becoming uncomfortable with post-acquisition corporate policies and starting to question their roles in their respective occupations. Holstrom ¨ (2013) points out that mergers and acquisitions can disrupt the relationships between firms and their suppliers, causing these suppliers to cease dealing with the post-acquired firms (as was experienced by participants in the current study). Participant 13, an administrator, expressed her unhappiness with the treatment of suppliers: Priorities have changed. Now it is all about money, money, money. Now we are unpopular with suppliers, customers and employees that would have done anything for us. For example, I have a friend that is the procurement manager for […]. They made us a priority in the past,

2 Work in Progress: Organisational and Occupational Identity …

31

but now we have secondary space in their store and they don’t care about us. Even the wholesalers aren’t worried about us. Suppliers are messed around—their payment terms have increased without consultation.

4.2.3

Negative Impact on Customers

Participants at the management and administrative levels started questioning their job efficiency due to customer complaints. These participants indicated that the new management had destroyed customer confidence in their product as well, resulting in their feeling that they had no control over their careers and that they did not have an affiliation with the organisation. Kato and Schoenberg (2014) indicate in their study that if the merger/acquisition relationship is not handled correctly, the post-acquired firm can lose its customer base, as was the case in the current study. Participant 11, an administrator, indicated how the acquired firm had lost its vision: The company has lost sight of promoting its products. I used to go to a person and tell them to drink our product, and I won’t do that anymore. I used to be so passionate about our brands that when I saw people drinking competitor products, I used to buy them our products. Now I don’t care.

The participants further indicated that, in many instances, small and medium enterprises did not survive unsustainable business practices and went out of business. Such practices were incongruent with the government’s vision that jobs must be created through the establishment of sustainable small and medium enterprises. Some participants referred to bigger supplier companies being under pressure to survive and requiring more meetings and correspondence, resulting in lower productivity. Participant 8, an administrator, expressed his concerns as follows: Many small enterprises have closed down since we started with new management here. This has placed delivery of business targets/projects at risk, increasing employee stress and lowered productivity.

5 Implications for Management Practices and Theory The outcomes of the current study indicate that employees in the post-acquisition phase undertook extensive identity work relating to their organisational and occupational identities. Although much work has been done in past studies on how social identity and optimal distinctiveness theories can be applied in research on mergers and acquisitions, these studies focused on the belongingness of employees to certain social groups and their motivation to remain part of specific social groups during mergers and acquisitions. The current study, however, takes into account the extent to which employees engage in working and reworking their occupational and organisational identities in the process. The results show that employees at all levels find it difficult to identify with the “new” organisation as they do not feel a valued part of

32

N. Mohamed Hoosen Carrim

it. For example, one employee indicated that she no longer advertised her company’s brands. The results further show that due to job descriptions changing, younger people replacing experienced colleagues, and policies changing without consultation, employees disengaged from their occupations. Another aspect that past research has not taken into account is the sociohistorical–political context of mergers. In the current study, the participants raised elements of employment equity—an important aspect in remedying past injustices in the country that has to be taken cognisance of. In this way, the current study adds to this discourse. The findings of the current study point to some of the implications of management practices. First, it is important that local cultures and legislation have to be taken into account. Before changing policies and procedures, the buy-in of local employees as well as external stakeholders has to be considered so as to retain important suppliers and customers. While communication is key to post-acquisition success, taking cognisance of the culture of local employees and the macro-politicaleconomic-social context of the country, abiding by local laws, and understanding the history of the country are important components in achieving post-acquisition success. Negating such elements indicates arrogance on the part of international leaders and a disrespect for local cultures.

6 Conclusion In this chapter, I focused on the organisational and occupational identity work of employees at managerial, administrative and blue-collar levels in their acquired organisation in the post-acquisition period. The results of the study indicate that participants at all three levels engaged in extensive occupational and organisational identity work. In the post-acquisition phase, managers should take cognisance of how things were done in the past and they should implement changes gradually and obtain the buy-in of various stakeholders.

References Albert S, Whetten DA (1985) Organizational identity. Res Organ Behav 7:263–295 Arora M, Kumar A (2012) A study on mergers and acquisitions—its impact on management and employees. Res J Econ Bus Stud 1(5):30–34 Ashforth BE, Johnson SA (2001) Which hat to wear? The relative salience of multiple identities in organizational contexts. In: Hogg MA, Terry DJ (eds) Social identity processes in organizational contexts. Psychology Press, Philadelphia, PA, pp 31–48 Bachman BA (1993) An inter-group model of organizational mergers. Dissertation, University of Delaware Bartels J, Douwes R, De Jong M, Pruyn A (2006) Organizational identification during a merger: determinants of employees’ expected identification with the new organization. Br J Manage 17(S1):S49–S67. https://doi.org/10.1111/j.1467-8551.2006.00478.x

2 Work in Progress: Organisational and Occupational Identity …

33

Behar A, Hodge J (2008) The employment effects of mergers in a declining industry: the case of South African gold mining. BE J Econ Anal Policy 8(1):1–10. https://doi.org/10.2202/19351682.1945 Bijlsma-Frankema K (2001) On managing cultural integration and cultural change processes in mergers and acquisitions. J Euro Ind Training 25(2/3/4):192–207. https://doi.org/10.1108/030 90590110395807 Birkinshaw JM, Bresman H, Hakanson L (2000) Managing the post-acquisition integration process: how the human integration and task integration processes interact to foster value creation. J Manage Stud 37:395–425. https://doi.org/10.1111/1467-6486.00186 Brewer MB (1991) The social self: on being the same and different at the same time. Pers Soc Psychol Bull 17:475–482. https://doi.org/10.1177/0146167291175001 Brown A (1997) A dynamic model of occupational identity formation. Symposium paper presented at the Journal of Vocational Education and Training Second International Conference on Policy and Practice in Vocational Education and Training, Huddersfield, 16–18 July Carrim NMH (2016) I’m the oddball out!!!! The gender, racio-ethnic and professional identity work of an Indian woman entrepreneur in a South African male-dominated environment. In: Kumar P (ed) It’s my business. Entrepreneurship as an expression of the Indian woman’s identity. Palgrave MacMillan, London, pp 133–153 Carrim NMH (2017) Entering a new world: the identity work of older South African Indian male entrepreneurs in the digital era. In: Zakaria N, Kaushal LA (eds) Global entrepreneurship and new venture creation in the sharing economy. IGI Global, Philadelphia, pp 169–190 Carrim NMH (2019) The in-betweeners: racioethnic and masculine identity work of Indian male managers in the South African private sector. J Men Stud 27(1):3–23 Carrim NMH, Senne Y (2016) Challenges faced by South African human resource practitioners in multinational companies. In: Zakaria N, Abdul-Talib I, Osman N (eds) Handbook of research on impacts of international business and political affairs on the global economy. IGI Global, Philadelphia, pp 133–153 Cartwright S, Cooper CL (1996) Managing mergers, acquisitions and strategic alliances: integrating people and cultures. Butterworth-Heinemann, Oxford. https://doi.org/10.1016/b978-07506-2341-4.50003-5 Cheng SS, Seeger MW (2012) Cultural differences and communication issues in international mergers and acquisitions: a case study of BenQ debacle. Int J Bus Soc Sci 3(3):116–127 Chreim S, Williams BE, Hinings CR (2007) Inter-level influences on the reconstruction of professional role identity. Acad Manage J 50:1515–1539. https://doi.org/10.5465/amj.2007.282 26248 Christiansen C (2004) Occupation and identity: becoming who we are through what we do. In: Christiansen CH, Townsend EA (eds) Introduction to occupation. The art and science of living. Prentice Hall, Upper Saddle River, pp 121–139 Das D (2012) Effects of identity variables and job performance on employee intentions to leave: an empirical study in Indian call centers. Int J Manage 29(1):368–378 Davy JA, Kinicki A, Kilroy J, Scheck C (1988) After the merger: dealing with people’s uncertainty. Train Dev J 42(11):56–62 Empson L (2004) Organizational identity change: managerial regulation and member identification in an accounting firm acquisition. Account Organ Soc 29(8):759–781 Fine GA (1996) Justifying work: occupational rhetoric as a resource in restaurant kitchens. Adm Sci Q 41:90–115. https://doi.org/10.2307/2393987 Fraher AL, Gabriel Y (2014) Dreaming of flying when grounded: occupational identity and occupational fantasies of furloughed airline pilots. J Manage Stud 51(6):926–951. https://doi.org/10. 1111/joms.12081 Games D (2012) South Africa as Africa’s gateway. SAIIA Policy Briefing 46. Available via file:///D:/MNC%20book/South%20Africa/saia_spb_46_games_20120307.pdf

34

N. Mohamed Hoosen Carrim

Giessner SR, Ullrich J, Van Dick R (2012) A social identity analysis of mergers and acquisitions. In: Faulkner D, Teerikangas S, Joseph R (eds) Handbook of mergers and acquisitions. Oxford University Press, Oxford, pp 474–494 Gomes E, Weber Y, Brown C, Tarba SY (2011) Mergers, acquisitions and strategic alliances: understanding the process. Palgrave Macmillan, Basingstoke Haslam SA (2004) Psychology in organizations. Sage Publications, Thousand Oaks Haslam SA, Powell C, Turner J (2000) Social identity, self-categorization, and work motivation: rethinking the contribution of the group to positive and sustainable organisational outcomes. Appl Psychol 49(3):319–339 Hassan S (2012) Employee attachment to workplace: a review of organizational and occupational identification and commitment. Int J Organ Theory Behav 15(3):383–422. https://doi.org/10. 1108/ijotb-15-03-2012-b002 Hogg MA (2007) Uncertainty-identity theory. In: Zanna MP (ed) Advances in experimental social psychology. Academic Press, San Diego, pp 69–126 Hogg MA, Terry DJ (2000) Social identity and self-categorisation processes in organizational contexts. Acad Manage Rev 25(1):121–140. https://doi.org/10.5465/amr.2000.2791606 Holstrom ¨ J (2013) Supplier relationships at stake in mergers and acquisitions. In: Anderson H, Havila V, Nilsson F (eds) mergers and acquisitions. The critical role of stakeholders. Routledge, New York, pp 168–184 Hornsey MJ, Hogg MA (2000) Assimilation and diversity: an integrative model of subgroup relations. Pers Soc Psychol Rev 4(2):143–156. https://doi.org/10.1207/s15327957pspr0402_03 Ibarra H (1999) Provisional selves: experimenting with image and identity in professional adaptation. Adm Sci Q 44:764–791. https://doi.org/10.2307/2667055 Jetten J, O’Brien A, Trindall N (2002) Changing identity: predicting adjustment to organizational restructure as a function of subgroup and super-ordinate identification. Br J Soc Psychol 41:281– 297. https://doi.org/10.1348/014466602760060147 Johnson MD, Morgeson FP, Ilgen DR, Meyer CJ, Lloyd JW (2006) Multiple professional identities: examining differences in identification across work-related targets. J Appl Psychol 91:498–506. https://doi.org/10.1037/0021-9010.91.2.498 Kansala S, Chandani A (2014) Effective management of change during merger and acquisition. Proc Econ Finan 11:208–217. https://doi.org/10.1016/s2212-5671(14)00189-0 Kato J, Schoenberg R (2014) The impact of post-merger integration on the customer-supplier relationship. Ind Mark Manage 43(2):335–345. https://doi.org/10.1016/j.indmarman.2013.10.001 Kielhofner G (2008) Dimensions of doing. In: Kielhofner G (ed) Model of human occupation: theory and application. Lippincott Williams & Wilkins, Baltimore, pp 101–109 King DR, Dalton DR, Daily CM, Covin JG (2004) Meta-analyses of post-acquisition performance: indications of unidentified moderators. Strat Manage J 25:187–200. https://doi.org/10.1002/smj .371 Kitay J, Wright C (2007) From prophets to profits: the occupational rhetoric of management consultants. Hum Relat 60(11):1613–1640 Kroon DP, Noorderhaven NG (2018) The role of occupational identification during post-merger integration. Group Organ Manage 43(2):207–244. https://doi.org/10.1177/1059601116666168 Kroon DP, Noorderhaven NG, Leufkens A (2009) Organizational identification and cultural differences: explaining employee attitudes and behavioural intentions during postmerger integration. In: Finkelstein S, Cooper CL (eds) Advances in mergers and acquisitions. West Yorkshire, Emerald, pp 19–42 Krug JA, Aguilera RV (2004) Top management team turnover in mergers and acquisitions. In: Finkelstein S, Cooper CL (eds) Advances in mergers and acquisitions. Emerald, West Yorkshire, pp 121–149 Lincoln YS, Guba EG (1985) Naturalistic inquiry. Sage, Newbury Park Mael F, Ashforth BE (1992) Alumini and their alma mater: a partial test of the reformulated model of organizational identification. J Organ Behav 13(2):103–123. https://doi.org/10.1002/job.403 0130202

2 Work in Progress: Organisational and Occupational Identity …

35

Makri E, Hantzi A, Antoniou AS (2012) Merger integration patterns, status of pre-merger organizations, stress, and employee health post-combination. J Bus Stud Q 4(2):113–127 Marks ML, Mirvis PH (2011) Merge ahead: a research agenda to increase merger and acquisition success. J Bus Psychol 26(2):161–168. https://doi.org/10.1007/s10869-011-9219-4 Matteson MT, Ivancevich JM (1990) Merger and acquisition stress: fear and uncertainty at midcareer. Prev Hum Serv 8(1):139–158 McKenzie B (2019) Mergers and acquisitions activities decline in South Africa in first six months of the year. https://financialmarketsjournal.co.za/mergers-acquisitions-activity-declinesin-south-africa-in-first-six-months-of-the-year/ MoneyMarketing (2019) M&A deal value down in 2018 but improvement expected in 2019. Economic Investing News, 30 Jan 2019. Available via https://www.moneymarketing.co.za/madeal-value-down-in-2018-but-improvement-expected-in-2019/ Napier NK (1989) Mergers and acquisitions, human resource issues and outcomes: a review and suggested typology. J Manage Stud 26(3):271–290. https://doi.org/10.1111/j.1467-6486.1989. tb00728.x Obodaru O (2012) The self not taken: how alternative selves develop and how they influence our professional lives. Acad Manage Rev 37:34–57. https://doi.org/10.5465/armr.2009.0358 Panchal S, Cartwright S (2001) Group differences in post-merger stress. J Manage Psyc 16(6):424– 433. https://doi.org/10.1108/02683940110402398 Phelan S, Kinsella EA (2009) Occupational identity: engaging socio-cultural perspectives. J Occup Sci 16(2):85–91. https://doi.org/10.1080/14427591.2009.9686647 Pratt MG (2009) From the editors: for the lack of a boilerplate: tips on writing up (and reviewing) qualitative research. Acad Manage J 52(5):856–862 Pratt MG, Foreman PO (2000) Classifying managerial responses to multiple organizational identities. Acad Manage Rev 25(1):18–42. https://doi.org/10.5465/amr.2000.2791601 Pratt MG, Rockman KW, Kaufmann JB (2006) Constructing professional identity: the role of work and identity learning cycles in the customization of identity among medical residents. Acad Manage J 49:235–262. https://doi.org/10.5465/amj.2006.20786060 Ravasi D, Schultz M (2006) Responding to organizational identity threats: exploring the role of organizational culture. Acad Manage J 49(3):433–458. https://doi.org/10.5465/amj.2006.217 94663 Reicher S (2004) The context of social identity: domination, resistance, and change. Polit Psychol 25(6):921–945. https://doi.org/10.1111/j.1467-9221.2004.00403.x Riketta M, Van Dick R (2005) Foci of attachment in organizations: a meta-analytic comparison of the strength and correlates of workgroup versus organizational identification and commitment. J Vocat Behav 67:490–510. https://doi.org/10.1016/j.jvb.2004.06.001 Ritchie J, Lewis J (2003) Qualitative research practice. A guide for social science students and researchers. Sage, London Rossouw GJ, Van der Watt A, Rossouw DM (2002) Corporate governance in South Africa. J Bus Ethics 37(3):289–302. https://doi.org/10.1023/a:1015205511601 Rousseau D (1998) Why workers still identify with organizations. J Organ Behav 19:217–233. https://doi.org/10.1002/(sici)1099-1379(199805)19:3%3C217:aid-job931%3E3.3.co;2-e Rouzies A, Colman HL (2012) Identification processes in post-acquisition integration: the role of social interactions. Corp Reputation Rev 15(3):143–157. https://doi.org/10.1057/crr.2012.8 Sarala RM, Cooper C, Junni P, Tarba S (2016) A sociocultural perspective on knowledge transfer in mergers and acquisitions. J Manage 42:1230–1249. https://doi.org/10.1177/0149206314530167 Siehl C, Smith D, Omura A (1990) After the merger: should executives stay or go? Acad Manage Pers 4(1):50–60. https://doi.org/10.5465/ame.1990.4274705 Sims D (2003) Between the millstones: a narrative account of the vulnerability of middle managers’ storying. Hum Relat 56:1195–1211. https://doi.org/10.1177/00187267035610002 Sveningsson S, Alvesson M (2003) Managing managerial identities: organizational fragmentation, discourse and identity struggle. Hum Relat 56(10):1163–1193. https://doi.org/10.1177/001872 67035610001

36

N. Mohamed Hoosen Carrim

Tajfel H, Turner JC (1986) The social identity theory of intergroup behaviour. In: Worchel S, Austin WG (eds) Psychology of intergroup relations. Nelson-Hall, Chicago, pp 7–24 Theron AVS, Dodd NM (2011) Organisational commitment in a post-merger situation. S Afr J Econ Manage Sci 14(3):333–345 Ullrich J, Van Dick R (2007) The group psychology of mergers and acquisitions: lessons from the social identity approach. In: Finkelstein S, Cooper CL (eds) Advances in mergers and acquisitions. West Yorkshire, Emerald, pp 1–15 Van Dick R, Wagner U, Lemmer G (2004) Research note: the winds of change—multiple identifications in the case of organizational mergers. Eur J Work Organ Psychol 13(2):121–138. https:// doi.org/10.1080/13594320444000038 Van Dick R, Ullrich J, Tissington PA (2006) Working under a black cloud: how to sustain organizational identification after a merger. Br J Manage 17(1):69–79. https://doi.org/10.1111/j.14678551.2006.00479.x Van Knippenberg D, Van Knippenberg V, Monden S, De Lima F (2002) Organizational identification after a merger: a social identity perspective. Br J Soc Psychol 41(2):233–252. https://doi.org/10. 1348/014466602760060228 Vanbeselaere N, Boen F, De Witte H (2002) Intergroup relations after a merger: the relative impact of ingroup prototypicality and satisfaction with ingroup representation. Paper presented at the 5th Jena Workshop on Intergroup Processes, Castle Kochberg, 19–23 June 2002 Verhoef G (2009) Concentration and competition: the changing landscape of the banking sector in South Africa, 1970–2007. S Afr J Econ Hist 24(2):157–197. https://doi.org/10.1080/101134309 09511222 Vora D, Kostova T (2007) A model of dual organizational identification in the context of the multinational enterprise. J Organ Behav 28(3):327–350. https://doi.org/10.1002/job.422 Weber Y, Drori I (2011) Integrating organizational and human behavior perspectives on mergers and acquisitions: looking inside the black box. Int Stud Manage Organ 41(3):76–95. https://doi. org/10.2753/imo0020-8825410305 Wei T, Clegg J (2018) Effect of organizational identity change on integration approaches in acquisitions: role of organizational dominance. Br J Manage 29(2):337–355. https://doi.org/10.1111/ 1467-8551.12226 Wimberley T, Negash M (2004) The value creation effects of mergers and acquisitions: evidence from the JSE Securities Exchange South Africa. Investment Anal J 33(59):31–40. https://doi.org/ 10.1080/10293523.2004.11082457 Zhang J, Ahammad MF, Tarba S, Cooper CL, Glaister KW, Wang J (2015) The effect of leadership style on talent retention during merger and acquisition integration: evidence from China. Int J Hum Res Manage 26(7):1021–1050. https://doi.org/10.1080/09585192.2014.908316

Chapter 3

“I Am Going Abroad!” Developing Cross-Cultural Sensitivity for Self-initiated Expatriates of Female Registered Nurses in Saudi Arabia Bibi Noraini Mohd Yusuf and Nasriah Zakaria Abstract In this chapter, we present the phenomenon of self-initiated expatriates among the Malaysian female registered nurses in Saudi Arabia. The primary objective of this chapter is to explore the need for building cultural sensitivity as a cultural skill for female nurses who work in Saudi Arabia by understanding the challenges of Malaysian expatriate female nurses in Saudi Arabia, who are faced with numerous culturally rooted problems. Additionally, the paper seeks to understand the process of cultural adjustment and acculturation process among Malaysian expatriate female nurses during the period of expatriation and to develop cross-cultural sensitivity based on cross-cultural adjustment theory. The chapter will also provide a brief literature review, theoretical framework, and proposed methodology, and finally the chapter concludes with the theoretical and practical implications of this research.

1 Introduction It is clearly established in the literature that expatriates commonly face severe challenges both before and upon arrival in a foreign country, which have resulted in high failure rates (Adler and Ghadar 1990; Mendenhall and Oddou 1985; Pearce 2013; Albana and Jetlira 2014). Takeuchi et al. (2007) found that difficulty in successfully adjusting to the demands of a foreign culture was one of the primary reasons for the high failure rates of expatriates working abroad. Adjusting oneself to a new environment and culture is difficult and takes time. To successfully adapt to an unfamiliar culture, expatriates must be able to build a repertoire of cultural knowledge. In addition, successful adaptation to the new culture can be achieved by receiving proper emotional and physical support, particularly from family members.

B. N. M. Yusuf (B) University Malaysia of Perlis, Kangar, Malaysia e-mail: [email protected] N. Zakaria King Saud University, Riyadh, Saudi Arabia © Springer Nature Singapore Pte Ltd. 2020 N. Zakaria et al. (eds.), Transcending Cultural Frontiers, https://doi.org/10.1007/978-981-15-4454-5_3

37

38

B. N. M. Yusuf and N. Zakaria

Within the international human resource management (HRM) and cross-cultural management literature (Al-Rajhi et al. 2013), cross-cultural adjustment has been a major topic of research interest. This phenomenon has resulted in the development of several models, namely acculturation, adjustment, adaptation, and cultural shock. Martinen (2011) asserted that cross-cultural adjustment can be measured in terms of the characteristics relevant to effective cross-cultural interactions, including emotional resilience, flexibility/openness, and personal autonomy. Martinen’s model proposes three relatively independent dimensions of cross-cultural adjustment: work adjustment, interaction adjustment, and general adjustment. In the substantive body of research on expatriate adjustment, the assumption is that the greater cultural dissimilarity gaps between the host and home culture, known as “cultural distance” (CD), will increase the difficulties in the cultural adjustment process (Srivastava and Panday 2012). Hence, expatriates need to develop a keen interest in every element of the new culture for the adjustment process to run smoothly. However, research on the adjustment process of self-initiated expatriates (SIEs), in particular, is rather scant. As studies on SIEs are still in the early stages (Froese 2011), more research works should be conducted, particularly on female expatriates. This study will focus on SIEs involving Malaysian female registered nurses in Saudi Arabia because this group of professionals has experienced a high growth percentage in terms of the expatriation process. The overarching research question to be explored is “How did Malaysian expatriate female nurses acculturate themselves in a new environment and inculcate cultural sensitivity?” The sub-questions are: (1) What were the adjustment processes involved? and (2) How competent were they in adjusting themselves to meet the local cultural needs in Saudi Arabia?

2 Background of Study Malaysia has an excellent reputation for developing talented human resources with strong work ethics in the clinical industry. In terms of its global reputation, Malaysia’s healthcare system ranks the 3rd of 24 countries in the 2014 Global Retirement Index Survey (Nursing Schools and Colleges 2014). As a result, Malaysian nurses are highly recognized as healthcare professionals in the Middle Eastern region, and thus they are highly sought after and demanded to provide excellent service in local hospitals. In the Middle East, the Kingdom of Saudi Arabia is keen to hire nurses from Malaysia because of the quality education in nursing they receive and because Malaysia is regarded as a Muslim country. Expatriate nurses from Malaysia who aspire to work in Saudi Arabia must have a valid registered nurse (RN) status, coupled with at least five years of working experience. A registered nurse (RN) is defined as a graduate nurse who has passed a state board qualification examination and, upon being registered, is licensed to practice nursing. He or she can also be categorized as a person trained in the scientific fields of basic nursing, having attained certain standards of healthcare education, and being clinically competent. One way to encourage qualified RNs, locally and internationally, to work in the healthcare sector is by offering an attractive

3 “I Am Going Abroad!” Developing Cross-Cultural Sensitivity …

39

remuneration package. In Malaysia, nurses are paid between RM 800 and RM 1200 a month, whereas in the Middle East they can earn between RM 7000 and RM 12,000 a month (Idris 2007), which is inclusive of overtime (High Salaries Await Registered Nurses Abroad 2015). Since employers typically provide accommodation and transportation, foreign nurses are able to save much of their salary (Malaysian nurses enjoy high salaries in Middle East 2013), which is another attractive feature of the job market. It was reported that approximately 25,000 Malaysian nurses are currently working in other countries, such as in the Middle East (Lee et al. 2011). In 2013, 2000 Malaysian RNs resided in the UAE and between 7000 and 8000 were in Saudi Arabia.

3 Literature Review Who are assigned expatriates (AEs)? “Assigned expatriates” refer to company employees (sometimes referred to as company-assigned expatriates or “CAEs”) who are transferred overseas for specific assignments within certain time periods. The period of assignment normally stretches from a year to five years. Tharenou (2013) defined CAEs as expatriates who are transferred by their employer to work in a foreign subsidiary for a certain period, typically ranging from 1 to 5 years. The entity owning the expatriates is designated the parent company, and the foreign country is referred to as the host country. Major corporations redeploy their skilled CAEs overseas as it allows these corporations total complete control over all activities, conducted in the host country, business or otherwise. Most studies find that CAEs are typically deployed as top managers in the new setup operations, providing absolute control in the early stages. Local employees are needed as well and are more often chosen to assist in running the operations once the corporations have substantial experience in the host country, or upon the subsidiary companies reaching maturity in terms of the establishment in the host country (Tharenou 2013). Who are Self -initiated Expatriates (SIEs)? Over the years, studies have provided SIEs with multiple definitions or at times have been known by other names. The early definition of SIE was “self-initiated foreign work experiences” (Suutari and Brewster 2000), followed by “free travelers” (Myers and Pringle 2005) or people who, of their own volition and initiative, seek and find work overseas (Froese 2011). Others have provided the definition as “individuals who have chosen to work and live abroad on their own initiative,” in contrast to company-assigned expatriates (AEs), who are sent abroad by an organization (Cao et al. 2013; Tharenou and Caulfield 2010). Other researchers have given SIE new names such as “independent internationally mobile professionals” (McKenna and Richardson 2007) or, more recently, “self-initiated expatriates” (Doherty et al. 2011; Muir et al. 2014). Issues are often being raised publicly with regard to why female

40

B. N. M. Yusuf and N. Zakaria

SIEs move abroad? This issue arises principally because the mass exodus of the female expatriates out of the country is increasing and yet studies on this matter, particularly on Malaysian RN, are lacking. Expatriates are home-based workers of a particular country who work in another country for specific duration and tasks. They are either corporate expatriates, who are sent by their employers in the countries of origin to work in their subsidiaries or selfinitiated expatriates (SIEs), who, through their own initiatives, have accepted to work abroad (Froese 2012). Among them are medical practitioners. Therefore, SIEs are clearly distinguished from corporate expatriates based on the intention of the person to be relocated and move to work in another country. For corporate expatriates, they are selected by their organizations and given a period of time to be relocated. On the other hand, for SIEs, they are the ones who opted out to work outside their own country and the length of time depends solely on the individuals who made these decisions. What is culture? Culture refers to the norms, customs, values, and beliefs of specific groups of people. Each country, religion, or race is comprised of multiple cultures. To learn about the culture of one specific group, one needs to learn about that group as a whole. Battle (1998) wrote that culture is not only the “behaviour, beliefs and values of a group of people who are brought together by the commonality,” but also relates to selfperception because we are able to view our own world through language and society. It is not just necessary to understand the way they work, but also to deeply understand about their culture so that people will be more sensitive about their lifestyles. Another definition of culture is defined as the specific learned norms of a group’s attitudes, values, and beliefs (Daniels et al. 2011). Cultural differences may lower the chances of successful adaptation in a foreign country (Banutu-Gomez 2014). Many authors have suggested that the more varied the expatriate’s culture is from that of the host country, the more difficult the adjustment process will be (Srivastava and Panday 2012). Past studies conducted on cross-cultural theory (CCT) so far have not taken into consideration the cultural peculiarities of the foreign countries being studied and the cultural distance between the expatriates and that of the host country (AlMazrouei and Pech 2014). Under the prevailing working environment and social climate in Saudi Arabia, women expatriates must adapt to the rigid cultural norms, and whether they are in complying with norms depends on the cities they live in. However, regardless where they are, female expatriates need to put on an abaya (black robe) and head scarf, cannot stay alone in an apartment without a male (mahram) companion, and cannot drive. Other critical issues in the workplace include the biased treatment of the female expatriates. Recent research suggests that the most promising theoretical explanation of women’s low participation as expatriates is gender stereotyping reinforced within an isomorphic institutional framework (McNulty 2011). As mentioned previously, to adjust well in a new environment, expatriates have to be culturally competent. To be culturally competent is to be aware of cultural differences and similarities, and of how they affect one’s values, learning, and behavior. When expatriates fail to

3 “I Am Going Abroad!” Developing Cross-Cultural Sensitivity …

41

adapt to the new surroundings, they are likely to terminate the employment contract and return to the home country. In the nursing context in Saudi Arabia, the high turnover rate of expatriates coupled with low recruitment of Saudi nationals has led to a severe staff shortage in the nursing professions (Alyami and Watson 2014). To ensure that the expatriates are able to adjust well to the new environment, employers need to understand the factors that contribute to adjustment failure and success. One relevant factor is the training that expatriates receive prior to their departure to a foreign country because training supports expatriates for upcoming international assignment (Kangas 2012). Carsten (2014) recommended that future research on SIEs should focus on training in cross-cultural adjustment. Without such training, are SIEs able to adapt successfully to the foreign culture? And if they do, what processes are involved that make their adjustment successful? While conceptual links between self-efficacy and cross-cultural adjustment have been proposed, little empirical research linking the two constructs has been forthcoming (Palthe 2004). Healthcare workers, such as nurses, demonstrate low cultural competency and require additional educational and orientation programs regarding the culture of Saudi Arabia (AlMutairi 2015). Although the Saudi government provides adequate cultural competency programs for expatriate healthcare workers, cultural competency issues are still rising (AlMutairi 2015). Past empirical studies on acculturation and adjustment processes have been conducted on talented and selected expatriates, which means that this group of expatriates has undergone some crosscultural training before their departure to a foreign land (Alshammari 2012). Since Malaysian female expatriate nurses tend to be SEIs, they may not have such training, although it is reasonable to suggest that they may prepare themselves with some basic knowledge about Saudi culture prior to their departure. In this situation, investigating the level and the kind of cultural competencies that professionals, like nurses, have is a rewarding avenue for research (Ha 2011). Who are Female SIEs? Past studies have demonstrated that most female SIEs work overseas when accompanied by their partners. However, Malaysian female nurses are not allowed to bring their partners along when working in Saudi Arabia. According to Andresen et al. (2015), women are more likely to become SIEs for two reasons: (a) glass ceilings in their home countries and better career opportunities overseas, and (b) family considerations, especially their partners. While studies on self-initiated female expatriates are rapidly increasing, much more needs to be done (Andresen et al. 2015). Many challenges await Malaysian nurses when they bring along their spouse and family members to Saudi Arabia. Firstly, the visa application is a long and tedious process involving lengthy documentation. Visas approved for a family member should not be construed as an opportunity to seek employment in Saudi Arabia. Secondly, Malaysian nurses who bring their spouse along are not allowed to stay together with them at the accommodation provided by the Saudi employers. The other factor is that medical expenses for the spouse are high. Due to these challenges, leaving behind family members is not an easy decision. As Malaysians are known to have strong family bonds, it is imperative that a study is conducted to discover the factors

42

B. N. M. Yusuf and N. Zakaria

that drive them to work abroad. That is, it is timely that a study is initiated to explore the adjustment process of Malaysian female nurses in Saudi Arabia. Earlier studies have explored the motivational factors related to SIEs, but they were not significantly conclusive as the sampling parameters were confined to a small population consisting of 30 British academics, and thus whatever conclusions derived would be biased (Froese 2011). Through blogs posted by existing nurses working in Saudi Arabia, factors that seemed to entice foreign nurses to work in Saudi Arabia include attractive salaries, income-tax exemptions, lucrative allowances, the opportunity to perform pilgrimage, and the chance to learn Arabic, which is the language of the Al-Quran (Menjadi Jururawat di Arab Saudi 2012). However, these factors should be researched further in a systematic and scientific manner to develop theoretical perspectives related to self-initiated expatriates and the challenges and experiences they encounter in pursuing international careers (AlWaqfi 2012).

3.1 Theoretical Framework: Cross-Cultural Adjustment Theory According to Black et al. (1991), cross-cultural adjustment is the development of adaptation strategies to live and work in a foreign country. It also demonstrates the awareness and the psychological comfort an expatriate has in the foreign country. Caligiuri (2000) defined cross-cultural adjustment as the extent to which individuals are psychologically comfortable living outside of their countries of origin. Few expatriates never relocate to a host country because they do not have the capability to fully adjust to the new culture and environment. Thus, negative perceptions of cross-cultural adjustment will make them reject international assignments (Caliguiri et al. 2001). In addition, to adjust well requires that the expatriates are open to new experiences, particularly when interacting with other expatriates from other cultures. Caligiuri (2000) indicated that expatriates have to be able to interact with local people because communication skills affect cross-cultural adjustment. The concepts of cultural sensitivity and cultural competence can aid in understanding a new workplace culture. Cultural sensitivity is an important skill for expatriates as it helps them to successfully adjust to the culture of the host country. Cultural sensitivity refers to the ability of expatriates to make the necessary adjustments required by their new environment. The better they are able to deal with change, the more effectively they can adapt to differences; hence, they become adaptive. If a person cultivates an open atmosphere of curiosity and respectful exchange, he or she will be able to handle intercultural power issues constructively (Reinecke and Bernstein 2013). In cultural adjustment theory, expatriate personality is related to individual behavior and conditional factors, particularly the ability to sustain living in new culture environment. The speed with which expatriates adapt to the new culture of their host country will have either a positive or negative impact on crosscultural adjustment (CCA). CCA has three components: work adjustment, interaction

3 “I Am Going Abroad!” Developing Cross-Cultural Sensitivity …

43

adjustment, and general adjustment. The period of adjustment to the new culture also differs from one individual to another. It is essential to control the host location since previous research has established that female expatriates typically encounter different host national attitudes in different locations (Stone 1991). In line with the previous literature reviewed in their metaanalysis, four work role aspects can be differentiated: role clarity, role discretion or flexibility, role novelty, and lastly role conflict (Kittler et al. 2011; Black and Gregersen 1991a, b). Role flexibility and role clarity are found to be positively associated with work adjustment (Kittler et al. 2011; Bhaskar-Shrinivas et al. 2005). However, according to Koveshnikov et al. (2013), cultural similarity only facilitates general living adjustment and is not considered as interactional or work adjustments. Individual antecedents (IA) are the personal factors affecting the cultural adjustment process, such as the expatriate’s ability to adjust and whether they have previous international work experience (Waxin and Panaccio 2005). Contextual antecedents (CA) refer to the time taken by the SIE for the adjustment process. To fully understand the acculturation process, U-curve theory (Oberg 1960) was employed. According to this theory, expatriates will undergo a process of adjustment with four specific stages: (1) honeymoon, (2) culture shock, (3) adjustment, and (4) mastery. It is an adjustment process for the expatriates where the early stage would be exciting, then faced with conflicts and difficulty, followed by adaptation and feeling adjusted to finally assimilating to the different cultures and values. The period of cultural adjustment may vary depending on the individual. Contextual antecedents include the length of stay in the country, novelty of the culture, and level of spousal support (Reinecke and Bernstein 2013). Organizational antecedents (OA) refer to roles played by employer in helping the expatriate adapt to the new culture. Organizational commitment is particularly necessary in ensuring an expatriate has a thorough understanding of the culture she will be joining. However, time is of essence since adaptation is a lengthy process.

4 Proposed Methodology This study will employ a qualitative method in answering the research questions and meeting the research objectives by using interviews to elicit information from the respondents. This method will assist the researcher to understand a given research topic in an in-depth manner by considering the respondents’ opinions, values, emotions, relationships, and behaviors. There are three types of sampling methodologies to choose from, namely purposive sampling, quota sampling, and snowball sampling. According to Myers (2009), researchers often select the snowball sampling method because it allows them to recruit subgroups of the total population. The snowball sampling method was also deemed to be the most effective for this study because some data are not easily accessible when other sampling methodologies are used. Between 30 and 35 nurses will be recruited using the snowball sampling technique.

44

B. N. M. Yusuf and N. Zakaria

The researcher aims to interview the respondents using either face-to-face or online interviews. The respondents will be selected through their network of friends. In addition, semi-structured interviews pertaining to the process of adjustment and factors that have motivated them to become SIEs will be employed. The respondents could also be selected from nurses who have returned and have years of valuable working experience in Saudi hospitals. The nurses selected are from the three largest cities of Saudi Arabia, Jeddah, and Riyadh. Focus group interviews will also be conducted on the registered nurses who have several years of experience working in Saudi Arabia. This study shall employ content analysis for its data analysis, as it allows the researcher to extract a systematic content’s conclusion, an important aspect in the field of nursing which allows the research objectives to be analyzed and assessed. Content analysis has an established position in nursing research and offers researchers several major benefits (Elo and Kynga 2008). The basic approach of qualitative content analysis is to retain the strengths of quantitative content analysis and against this background to develop techniques of systematic, qualitatively oriented text analysis which allows the textual materials to be processed thoroughly (Mayring 2014).

5 Implications and Conclusion Theoretically speaking, the present study will be significant in terms of the contributions to the field of cross-cultural management by bridging the gaps between the literature on intercultural competence, cross-cultural adjustment, and the process of acculturation of the nursing profession. Such phenomenon arising from SIE nurses who are working in Saudi Arabia and facing a myriad of culturally based conflicts arising from cultural differences would need to be fully explored and understood. Such conflicts could increase the risk of clinical errors due to the lack of cultural competency among the medical teams in the hospital and/or healthcare industries when they face cultural blunders which lead to misinterpretation and miscommunication. Nurses should thus understand and acknowledge the variations that define patients from different cultural settings (Felemban et al. 2014). The cultural sensitivity of nurses thus needs to be greatly enhanced by educating them as part of the development of cultural competencies (Felemban et al. 2014). On the other hand, as for the managerial implications, the findings of the study will contribute significantly to several stakeholders, namely the government (host country, i.e., Saudi Arabia) and those in the healthcare industry in the host country in fine-tuning their strategic plans and human resource staffing policy. For instance, they need to facilitate expatriate nurses during the adjustment period so that the latter could work efficiently in a new environment. By doing so, Saudi Arabia could benefit from the vast experiences of these nurses through the potential knowledge transfer to develop the local nursing profession. In conclusion, to respect those who wish to take advantage of international job opportunities, the study results would provide them insights into what they should

3 “I Am Going Abroad!” Developing Cross-Cultural Sensitivity …

45

expect and need to do so that they can prepare themselves mentally, emotionally, and behaviorally for the new environment. These differences clearly demonstrate that SIEs are important to study as a demographic of its own because it cannot be assumed that what applies to corporate expatriates will automatically apply to SIEs as well (Lidstrom and Laiho 2014, p. 4). Acknowledgements This research is supported by the Malaysian Ministry of Education (MOE) through Fundamental Research Grant Scheme (FRGS/1/2016/SS03/UUM/02/3).

References Adler NJ, Ghadar F (1990) Strategic human resource management: a global perspective. In: Pieper R (ed) Human resource management: an international comparison. Walter de Gruyter, Berlin, pp 235–260 Albana B, Jetlira C (2014) Expatriates’ difficulties and failure in foreign companies operating in Albania. Int J Econ Commer Manage 2(11):1–20 Almutairi KM (2015) Culture and language differences as a barrier to provision of quality care by the health workforce in Saudi Arabia. Sau Med J 36(4):425–431 AlMazrouei H, Pech JR (2014) Expatriates in the UAE: advance training eases cultural adjustments. J Bus Strateg 35(3):47–54 Al-Rajhi I, Bartlett D, Altman Y (2013) Research note: the development of an Arabic cross-cultural adjustment scale. Cross Cult Manage Int J 20(3):449–463 Alshammari H (2012) Self-initiated expatriate adjustment in Saudi Universities: the role of previous experience and marital status. Int J Bus Soc Sci 3(23):184–194 AlYami MS, Watson R (2014) An overview of nursing in Saudi Arabia. J Health Spec 2(1):1–12 AlWaqfi MA (2012) The antecedents and outcomes of expatriate adjustment of expatriates: a theoritical framework. UAEU-FBE-Working Paper Series. ISSN 2079-7141, pp 1–34 Andresan M, Biemann T, Pattie MW (2015) What makes the move abroad? Reviewing and exploring differences between self-initiated and assigned expatriates. Int J Hum Res 26(7):932–947. https:// doi.org/10.1080/09585192.2012.669780 Banutu-Gomez MB (2014) The role of culture, language, and ethics in global business. Eur Sci J. https://doi.org/10.19044/esj.2014.v10n10p%25p Battle DE (1998) Communication disorders in a multicultural populations. Heinemann, Oxford Bhaskar-Shrinivas P, Harrison DA, Shaffer MA, Luk DM (2005) Input-based and time-based models of international adjustment: meta-analytical evidence and theoretical extensions. Acad Manage J 48:257-281 Black JS, Gregersen HB (1991a) The other half of the picture: antecedents of spouse cross-cultural adjustment. J Int Bus Stud 22:461–477 Black JS, Gregersen HB (1991b) When Yankee comes home: factors related to expatriate and spouse repatriation adjustment. J Int Bus Stud 22(4):671–694 Caligiuri PM (2000) Selecting expatriates for personality characteristics: a moderating effect of personality on the relationship between host national contact and cross cultural adjustment. Manage Int Rev 40(1):61–80. https://doi.org/10.2307/40835867 Caliguiri P, Phillips J, Lazarova M et al (2001) The theory of met expectations applied to expatriate adjustment: the role of cross-cultural training. Int J Hum Res Manage 12(3):357–372 Cao L, Hirschi A, Deller J (2013) The positive effects of a protean career attitude for self-initiated expatriates. Career Dev Int 18(1):56–77 Carsten MS (2014) Self-initiated expatriate’s cross-cultural training and adjustment: A closer look at Norwegian engineers. Dissertation

46

B. N. M. Yusuf and N. Zakaria

Daniels JD, Radebaugh LH, Sullivan DP (2011) International business environments and operations, 15th edn. Prentice Hall Doherty N, Dickmann M, Mills, T (2011) Exploring the motives of company-backed and selfinitiated expatriates. Int J Hum Res Manage (22)(3):595–611 Elo S, Kynga SH (2008) The qualitative content analysis process. J Adv Nurs 62(1):107–115. https:// doi.org/10.1111/j.1365-2648.2007.04569.x Felemban E, O’Connor M, McKenna L (2014) Cultural view of nursing in Saudi Arabia. Middle East J Nurs 8(4) Froese FJ (2011) Motivation and adjustment of self-initiated expatriates: the case of expatriate academics in South Korea. Int J Hum Res Manage 23(6):1095–1112. https://doi.org/10.1080/095 85192.2011.561220 Froese FJ (2012) Motivation and adjustment of self-initiated expatriates: the case of expatriates academics in South Korea. Int J Hum Res Manage 23(6):1095–1112. https://doi.org/10.1080/095 85192.2011.561220 Ha Kwong M (2011) Achieving cultural competency in mental health training and practice. J Mental Health Training, Educ Pract 6(2):76–84 High Salaries Await Registered Nurses Abroad (2015) The Borneo post. http://www.theborneopost. com/2012/11/21/high-salaries-await-registered-nurses-abroad/ Idris A (2007) Malaysia’s economic relations with Saudi Arabia. Jati, 12. Retrieved on 10 Mar 2015 at: repository.um.edu.my Kangas L (2012) Expatriation and cross culture training. https://publications.theseus.fi/bitstream/ handle/10024/52832/Kangas_Laura.pdf?sequence=1 Kittler MG, Rygl D, Mackinnon A, Wiedemann K (2011) Work role and work adjustment in emerging markets. Cross Cult Manage Int J 18(2):165–184 Koveshnikov A, Wechtler H, Dejoux C (2013) Cross-cultural adjustment of expatriates: the role of emotional intelligence and gender. J World Bus 49(3):362–371. https://doi.org/10.1016/j.jwb. 2013.07.001 Lee SP, Chitpakdee B, Chontawan R (2011) Factors predicting organizational commitment among nurses in state hospitals, Malaysia. Int Med J Malays 10(2):21–28 Lidstrom J, Laiho J (2014) Self-initiated expatriates—disloyal adventurers or misunderstood heroes? Dissertation, Umeå University Malaysian nurses enjoy high salaries in Middle East (2013) The star online. http://www.thestar. com.my/News/Nation/2013/12/30/Msian-nurses-enjoy-high-salaries-in-Middle-East/ Martinen R (2011) Predicting changes in cultural sensitivity among students of Spanish during short-term study abroad. Hispania 1:121–141 Mayring P (2014) Qualitative content analysis: theoretical foundation, basic procedures and software solution. https://www.ssoar.info Mendenhall M, Oddou G (1985) The dimension of expatriate acculturation: a review. Acad Manage Rev 10:39–47 Menjadi Jururawat di Arab Saudi (2012) http://mumarridhalpakiti.blogspot.my/2012/07/menjadijururawat-di-arab-saudi.html Muir M, Wallace M, McMurray D (2014) Women on the move: the self-initiated expatriate in China. J Glob Mob 2(2):234–254 McKenna S, Richardson J (2007) The increasing complexity of the internationally mobile professional: issues for research and practice. Cross Cult Manage 14(4):307–320 McNulty CY (2011) Why do female expatriates “fit-in” better than males? Cross Cult Manage: Int J 18(2):144–164 Myers B, Pringle JK (2005) Self-initiated foreign experience as accelerated development: influences of gender. J World Bus 40:421–431 Myers MD (2009) Qualitative research in business and management. Sage, New York Nursing Schools and Colleges (2014) http://www.etawau.com/edu/IndexCollegeNursing.htm Oberg K (1960) Culture shock: adjustment to new cultural environment. Pract Anthropol 7:177–182

3 “I Am Going Abroad!” Developing Cross-Cultural Sensitivity …

47

Palthe J (2004) The relative importance of antecedents to cross-cultural adjustment: implications for managing a global workforce. Int J Int Relat 28(1):37–59 Pearce JL (2013) What are the predictors of expatriates success? Center for Global Leadership Research Report. http://merage.uci.edu/ResearchAndCenters/CLTD/Resources/Documents/ [32]Expatriate%20SuccessPredictorsCGLAdvisoryBoard12-4-13.pdf Reinecke K, Bernstein A (2013) Knowing what a user likes: a design science approach to interfaces that automatically adapt to culture. MIS Quar 37(2):427–454 Srivastava DK, Panday M (2012) Dimensions of Indian expatriate adjustment in the USA: an exploratory study. Competitiveness Rev Int Bus J 22(4):320–328 Stone R (1991) Expatriate selection and failure. Hum Res Plan 14:9–18 Suutari V, Brewster C (2000) Making their own way: international experience through self-initiated foreign assignments. J World Bus 35(4):417–436 Takeuchi R, Lepak DP, Marinova SV, Yun S (2007) Nonlinear influences of stressors on general adjustment: the case of Japanese expatriates and their spouses. J Int Bus Stud 38(6):928–943 Tharenou P, Caulfield N (2010) Will i stay or will i go? Explaining repatriation by self-initiated expatriates. Acad Manage J 53(5):1009–1028 Tharenou P (2013) Self-initiated expatriates: an alternative to company-assigned expatriates? J Glob Mobility 1(3):336–356. https://doi.org/10.1108/JGM-02-2013-0008 Waxin MF, Panaccio A (2005) Cross cultural training to facilitate expatriate adjustment: it works! Pers Rev 34(1):51–67. https://doi.org/10.1108/00483480510571879

Chapter 4

Trust and Cultural Preferences of Global Consumers for Airbnb Patronage: A Qualitative Study of MENA Consumers Heba Abusedou and Norhayati Zakaria Abstract As a sharing economy involves both social and cultural factors, it has become more important to understand the impact of trust in the sharing economy in the context of national culture. Culture has not been extensively studied in e-commerce, either in general or in the sharing economy. Although sharing economy and other forms of online commerce bypass national and geographical boundaries, the trusting behavior differs between cultures. This chapter aims to explore the influence of cultural preferences on the trust inculcated by global consumers when they decide to adopt and embrace the sharing economy as way of life. The goal of the study is to understand the effects of two relevant aspects of cultural values (Hofstede’s cultural dimensions of uncertainty avoidance, individualism versus collectivism, and indulgence versus restraint on trust formation) toward Airbnb among global consumers in the Middle East region. An overarching research question is posed: How does culture affect trusting behavior of consumers in the sharing economy in the Middle East and North Africa (MENA) region?

1 Introduction Trust is a multifaceted social concept (Möhlmann 2015; Jones and Leonard 2008). It requires a much subtler understanding of the factors influencing it in the sharing economy (Hawlitschek et al. 2016a; Möhlmann 2015). It is clearly established that the cultural background of individuals impacts on their tendency to trust (Hofstede 1980; Hallikainen and Laukkanen 2016; Yoon and Occeña 2015; Hampton-Sosa and Koufaris 2005; Jones and Leonard 2008; Lim et al. 2004; Yoon and Occeña 2015). It is also evident in the literature that trust is different across culture (Hofstede 1980; Pavlou and Chai 2002; Schumann et al. 2010; Tan and Sutherland 2004; H. Abusedou (B) University of Wollongong in Dubai, Dubai, United Arab Emirates e-mail: [email protected] N. Zakaria Faculty of Business, University of Wollongong in Dubai, Dubai, United Arab Emirates © Springer Nature Singapore Pte Ltd. 2020 N. Zakaria et al. (eds.), Transcending Cultural Frontiers, https://doi.org/10.1007/978-981-15-4454-5_4

49

50

H. Abusedou and N. Zakaria

Hallikainen and Laukkanen 2016). Unfortunately, there has been little research done on cultural influence in online trust formation (Lu et al. 2010; Yoon and Occeña 2015; Hallikainen and Laukkanen 2016). Furthermore, studies on online trust have been limited to Western culture (Cheng 2016; Hallikainen and Laukkanen 2016; Ashraf et al. 2014) with very little research in, or e-commerce-related recommendations for, different cultures (Nguyen and Barrett 2006; Jones et al. 2009). Although online commerce has shown a consistent growth in the MENA region (Arabadvisors.com 2008), it remains a relatively new culture for many users. Understanding the cultural impact on consumers’ trust in the MENA region (in the context of the sharing economy) is crucial. Trust and national culture are also closely related (Hofstede 1980; Doney et al. 1998; Gefen and Heart 2006). It is evident from the existing research that national culture impacts the consumer’s perception of vendor trustworthiness (Dillon and Morris 1996). Trust and cultural impact are much more significant in the context of online commerce because of the importance of nonverbal cues and the lack of personal contact that could possibly hinder the adoption of e-commerce among consumers from different cultural backgrounds (Zakaria 2016). In fact, it is more challenging when cross-cultural beliefs and behaviors are introduced to the trust element (Hofstede and Minkov 2010), which needs to be congruent with consumers’ cultural values. Hence, in the context of the MENA region, the uniqueness of this culture has an impact on online commerce activities. The MENA region has shown a significant increase in Internet penetration in the last four years, along with an increase in smartphone ownership. This has increased the time spent online and increased customers’ willingness to try mobile apps, imposing fewer barriers to entry by online brand owners. The rapid growth in the use of mobile apps has reinforced trust between strangers over online platforms (PwC 2016; Mideastmedia 2016). Moreover, people in the MENA region have shown an increased trend of sharing content over online platforms such as social media (Mideastmedia 2016). The consistent growth of the region’s Internet penetration, as well as the increase in smartphone ownership, demonstrates the potential of the region to adopt new forms of online commerce (such as the sharing economy phenomenon). In this study, we employ Hofstede’s cultural dimensions of uncertainty avoidance, and individualism vs. collectivism to thoroughly understand the impact of culture on trust. The objective of this study is to investigate the impact of national culture in the MENA region on trusting behavior in the sharing economy.

4 Trust and Cultural Preferences of Global Consumers for Airbnb …

51

2 Literature Review 2.1 Trust in the Sharing Economy Trust has been studied extensively in the business-to-consumer (B2C). McKnight et al. (2002) defined a trust-building model that has been used as a basis of many other Internet trust-related researches. It explains the factors impacting on trust in the vendor, including vendor reputation, Web site quality, and Web-associated risks. In their model, they examined the three trusting belief elements in the B2C vendor: integrity, benevolence, and ability. Trust research in the people-to-people (P2P) sharing economy context is based on research from the consumer-to-consumer (C2C) context rather than the B2C (Hawlitschek et al. 2016b). It is more complex in the P2P context of sharing economy (Hawlitschek et al. 2016a; Möhlmann 2015). The products and services in the sharing economy are offered by other individuals and involve temporary exchange without complete transfer of ownership. Hence, the products are expected to be returned to the original owner in the same good condition, which increases the perceived risk involved in the sharing economy (Hawlitschek et al. 2016a, b; Möhlmann 2015). While trust in e-commerce has been studied from the consumer side, in the sharing economy users must trust the platform that facilitates the transactions as well as the peers they are sharing with (Möhlmann 2016). When addressing digital trust, the distinction has not been made between trust in the platform and trust in peers. The repetitive interaction with the platforms does not necessarily impose a repetitive interaction with the same peers on the platform. It is necessary to make this distinction in the sharing economy context because the providers of the platforms are different from the providers of the product or service (Fang et al. 2014; McKnight et al. 2002; Möhlmann 2015). This has a strong theoretical background, as stated in the work of Luhmann (1982), who distinguishes between ‘system trust’ and ‘personal trust.’ System trust refers to the elements of the system environment, while personal trust refers to trust in other individuals and transactions. Thus, trust in this context represents peers and platform targets where consumers and providers are examined separately (Hawlitschek et al. 2016a; Möhlmann 2015). Consumers’ trust in the peer determines describes whether the provider will have the required skills, integrity, and benevolence while carrying out the sharing activity. On the other hand, the platform acts as the middleman coordinating the sharing activities between the peers. The Web site’s quality conveys if the Web site can protect the consumer’s data privacy. Perceptions of the peers and platforms from the product or service consumer have been studied separately in the sharing economy context (Krasnova et al. 2012; Dinev and Hart 2006; Hawlitschek et al. 2016a). The development of the Internet has enabled people from different nationalities and cultures to carry out business transactions globally. The individual’s cultural background is instrumental for forming his or her behavior (Linton 1945). Individuals from different cultures differ in the way they build trust (Hofstede 1980; Pavlou and Chai 2002; Tan and Sutherland 2004; Schumann et al. 2010; Hallikainen

52

H. Abusedou and N. Zakaria

and Laukkanen 2016). Hence, in a globalized virtual world, culture has an impact on an individual’s propensity to trust (Hofstede 1980; Hallikainen and Laukkanen, 2016). Hofstede (2011) defines the cultural backgrounds of individuals by their set of beliefs, ethnicity, and history. Trompenaars and Hampden-Turner (2001) define culture as how people who belong to a cultural group solve problems and settle dilemmas. Spencer-Oatley’s (2004) definition is a bit broader, encompassing the shared attributes, norms, assumptions, and values between the individuals who belong to the culture. Social factors become more prominent in the context of the sharing economy because the personality of the peers shapes the trusting relationship (Zucker 1986; Möhlmann 2015). However, very little research has been done on the possible impact of culture on the consumer’s trust in e-commerce (Gefen and Heart 2006; Hallikainen and Laukkanen 2016). Additionally, cultural impact has mostly been studied in the context of Western culture (Cheng 2016; Hallikainen and Laukkanen 2016; Ashraf et al. 2014; Nguyen and Barret 2006; Jones et al. 2009) and not in Eastern culture (including Middle Eastern culture).

2.2 Impact of Culture on Trust Hofstede’s cultural dimensions (1980) are one of the most acknowledged and established in the field of cross-cultural management. Hofstede and Minkov (2010) identified six cultural dimensions: power distance, uncertainty avoidance, individualism, masculinity, long-term orientation, and indulgence. Several scholars have studied the impact of these cultural dimensions on consumers’ online purchasing behavior. Sabiote et al. (2012a, b) and Ganguly et al. (2010) show that individualism, collectivism, and uncertainty avoidance act as a moderator (positively in individualism and uncertainty avoidance, and negatively in collectivism) between online satisfaction, risk, service quality, and online trust (Cheung and Chang 2009; Zakaria and Talib 2011). For our study, we will employ two of the most relevant cultural dimensions to explore consumers’ perceptions of trust in the sharing economy in the MENA region.

2.2.1

Individualism Versus Collectivism

The dimension of individualism–collectivism deals with whether the culture is centered on the group or the individuals. While there are no cultures that are truly individualistic or collectivist (in that all fall somewhere along the spectrum from individualism to collectivism), some cultures are more individualistic or collectivist than others. Collectivists form trusting relationships with people they already know (Furner et al. 2013) and who are part of their in-group (Hofstede and Minkov 2010; Chong et al. 2003). People in collectivist cultures form trusting behavior based on emotional rather than rational reasons. They rely on their emotions and feelings toward the other party, as well as feelings of security and relationship strength, to

4 Trust and Cultural Preferences of Global Consumers for Airbnb …

53

trust others. This is known as affect-based trust. Cyber-security is the main concern of collectivists (Kim 2005; Washington 2013). To minimize the risk, they refrain from making any new relationships unless the Web site has good safeguards (Yamagishi and Yamagishi 1994; Chong et al. 2003). Collectivists prefer virtual communities where they can interact, share information via word of mouth, receive emotional support, and rely on collective opinion to make trusting decisions (Cheung and Chang 2009; Lee and Joshi 2007; Chong et al. 2003; Madupu and Cooley 2010; Ji et al. 2010; Li and Mantymaki 2011). Individualists are more self-centered and dependent. They tend to trust strangers more than collectivists (who have a higher sense of belonging to their group) (Hofstede 1980, 2011). Individualists form trusting relationships when there is a benefit realized from the interaction (Furner et al. 2013). People in individualist cultures make trusting decisions based on the available knowledge and evidence of trustworthiness of the other party, or what is known as cognitive-based trust. Repetitive interaction strengthens the trusting relationships between individuals (Kim 2005). Individualists have a higher propensity to trust (Chong et al. 2003). They trust others based on their self-interest, good reputation, information received, and Web site quality (Cheung and Chang 2009; Lee and Joshi 2007; Chong et al. 2003; Madupu and Cooley 2010; Ji et al. 2010; Li and Mantymaki 2011). It is interesting to note, however, that some research suggests that online trust intentions are stronger for collectivists than individualists (Xu-Priour et al. 2014). Results from countries in the MENA region show a high collectivism score (FakhrElDin et al. 2013) indicating that people in the MENA region prefer building relationships with their in-groups and have less trust in strangers (Frederick and Bertsch 2013). Trust in the MENA region is relationship-oriented. People form trusting relationships with those who are part of their in-group (Isherwood et al. 2012; Hofstede and Minkov 2010; Chong et al. 2003) such as friends and relatives. This trust is built based on firsthand experience, and in the absence of such experience, trust is transferred from another trusted source through word of mouth, referrals, and the collective opinion of trusted sources (Lim et al. 2004). Additionally, trust in others has an emotional basis, such as feelings of security and relationship strength (Kim 2005; Washington 2013). The MENA region represents a collectivist culture, which indicates that individuals require the forming of a personal relationship or rapport before they can trust others. Fundamentally, online transactions carry more uncertainties than offline transactions (Lim et al. 2004). They lack physical assurances such as body language, as well as lacking verbal cues (Kailani and Kumar 2011).

2.2.2

Uncertainty Avoidance

It is important to understand risk perception level in different cultures. In traditional commerce, risk can be defined as the uncertainty in the outcomes of a particular purchasing decision (Hunter et al. 2004). Hofstede (1980) defined the dimension of uncertainty avoidance as the degree to which people from a culture will avoid (and are threatened by) uncertain situations, and the level of the uncertainty acceptance

54

H. Abusedou and N. Zakaria

(Yildirim et al. 2016; Hofstede 2011). Consumers from high uncertainty avoidance cultures fear the loss of privacy and hence are more cautious when transacting online and lack trust in online providers (Kailani and Kumar 2011; Sabiote et al. 2012a). On the other hand, consumers from low uncertainty avoidance cultures are risk-takers and more tolerant of change (Hofstede and Minkov 2010, Hofstede 2011). This indicates that consumers from both cultures have different perceptions of, and uses for, online commerce (Sabiote et al. 2012b). In online commerce, the risk factors are higher due to the risk of loss of private details such as credit card details (Kailani and Kumar 2011; Sabiote et al. 2012a; Forsythe and Shi 2003). People who subscribe to high uncertainty avoidance culture have higher tendency to avoid online shopping compared to low uncertainty avoidance consumers due to lack of trust (Yildirim et al. 2016). Factors such as perceived loss of privacy, availability of relevant information, and Web site design and experience impact trust in high uncertainty avoidance cultures (Cyr 2008; Ganguly et al. 2010; Singh et al. 2005; Sabiote et al. 2012b). Evidently, the Arab culture in the MENA region subscribes a high certainty avoidance culture (Al-Kandari and Gaither 2011) which indicates that perception of online risk impacts online trust. Trust perceptions are formed at the early stages of the trust thought process. To even consider using an online home-sharing service, people from the MENA region need to receive referrals. The source of the referrals can be a deal-breaker, i.e., if the referral comes from a person who has their best interest in mind. This is used as an assurance as to the reliability and credibility of the transaction. When individuals cannot find anyone whose testimony they can rely on, they base their trust decision on the location of the property and on the amount, richness, and quality of the reviews. They will try to verify the reviews as much as they can by looking at the writers’ online profiles and cultural background. As an additional assurance of personal safety and protection, companionship was a showstopper for most of the women. Those elements were the basis of deciding to use online home-sharing over traditional hospitality services. Physical safety is one of the main concerns of anyone using an online homesharing service and of MENA region customers in particular. The property has to be suitable in terms of its location, proximity to law enforcement entities, and other security measures such as CCTV cameras. While it could be argued that the Web site has to be reliable for people to use the service, the platform acts as a facilitator of the transaction and is not the actual service provider. The service is provided by the homeowners (or their delegates) who need to provide proof of ownership that is expected to be validated by the platform. Therefore, we cannot simply separate trust in the platform from trust in peers (i.e., homeowners) because they are expected to rely on each other to validate their trustworthiness. The Web site can provide tools to serve that purpose by allowing both sides of the transaction to establish a relationship through the various communication channels. People demonstrate cautiousness and vigilance at every step of the trust perception process.

4 Trust and Cultural Preferences of Global Consumers for Airbnb …

55

3 Methodology This study employed an exploratory research design invested to provide insights related to trust in the sharing economy in the hospitality industry in the MENA region. It considered consumers’ trust in both peers and platforms. It also aimed at understanding how people perceive their online experience through the sharing economy Web sites and how their perceptions impact their trust in peers and platforms. The focus of the preliminary study was to better understand cultural influence on trust decisions made by consumers over the digital platforms of the sharing economy in the hospitality industry. This should benefit companies running a sharing economy business by enabling them to better understand the culture. We conducted interviews as the data collection technique for this study (refer to Table 1). The purpose of selecting this technique was to understand each interviewee’s thoughts. The perceptions of consumers cannot be easily captured, and therefore interviewing provides an in-depth understanding of their perceptions, beliefs, and attitudes. A snowballing technique was followed to conduct subsequent interviews. The referral participant passed on the contact details of the researcher to ensure the confidentiality of the participants’ information. We conducted 30–40-min interviews, both face-to-face and via Skype. The interviews were semi-structured to allow researchers to ask probing questions and allow participants to provide follow-up responses. The participants of the study originated from the MENA region with a range of different demographics. The total number of participants who volunteered to be interviewed was fifteen (n = 15), and were all potential consumers of the sharing economy in the hospitality industry. Table 3.1 illustrates the demographic information of the interviewees, including age group, gender, nationality, time lived in the MENA region, time lived outside the MENA region, current place of residence, and highest educational level. The interviews provide narrative, qualitative data to describe the trust issues as encountered by the respondents. The codes were developed based on the cultural values employed in the study. The elements derived from the cultural values were based on participants’ responses and the previous literature on the research topic. The analysis followed a top-down approach, starting from a broad idea of the cultural values and moving toward more specific conclusions about the cultural elements.

4 Results Participants in the study shared similar trust perceptions of, and beliefs about, the subject of a sharing economy in the hospitality industry. They agreed on the importance of unity and reliance on their in-group members when deciding whether to

56

H. Abusedou and N. Zakaria

use online home-sharing services. They also emphasized well-being by discouraging risk-taking behaviors that threatened their safety and showing less tolerance for uncertainty by relying on more reliable, credible, and reputable sources.

4.1 Trust and Airbnb Airbnb is a major player within the sharing economy. It provides an online platform for home rentals for people across the globe. Both the homeowner and the people are looking for short-term rentals. The transaction is done via the online service, but it is highly dependent on the exchange between the peers. Fundamentally, the question of whether to trust someone or not is contextual. Those trusting beliefs are the result of values that individuals grow up with, which have shaped their perceptions of trustworthiness. As a result of how trust is perceived, individuals in the MENA rarely jump into risks. They do not live their lives on the edge, and they do not take risks just for the thrill of it. They take a calculated approach toward risk by weighing benefits against possible unfavorable consequences.

4.1.1

Propensity to Trust

Trust was defined by participants as the willingness to deal with the trustee knowing all the possible risks associated with their actions, while believing that the outcome of the trustee’s behavior or action was acceptable and harmless. This is based on the assumption that the trustee has the trusting individual’s best interest in mind. The trustee is expected to be honest and clear, keep their promises, and provide help. This can be clearly seen in what participant 5 believed to be the definition of trust: Trust is to believe what someone else will do or act, that it will be the right thing, the right way; that doesn’t harm you. It means that their actions will match what they say. This applies to persons, goods, objects, behaviors, or whatever it is.

When trust is established with the other party, trustworthiness applies to financial and non-financial terms such as money, belongings, valuable items, secrets, private information, and personal safety. Participant 10 explained: Trust is to keep secrets and to find the help in need. You don’t only trust others with money; you trust them with everything. You trust them with your kids, money, property, safety, personal secrets, privacy and whatever you have in life.

As all participants originated from the MENA region and thus subscribe to the collectivism and high uncertainty avoidance cultural values, they arrived at the decision to trust the other party through personal interaction or referrals. Participant 14 declared: It’s usually someone you know. Because with people, you don’t sometimes trust people that you don’t already know or it’s just through a referral.

4 Trust and Cultural Preferences of Global Consumers for Airbnb …

57

It is debatable whether trust is a result of nature or nurture (i.e., if is it impacted by culture). It was believed by all participants that everyone is born with this virtue, which comes from nature. However, as people grow up, it is learned through their parents, relatives, colleagues, and personal experiences. Despite the various factors manipulating trusting attitudes, trust remains a universal instinct, as expressed by participant 6: Trust is an instinct that comes by nature. How that trust is formed and the criteria for it is built through nurture. Different cultures value trust differently. However, the suspicion of mistrust itself is a universal instinct that comes by nature.

He argued that in non-trusting cultures where fraud is common, people always seek verifications and assurances. Communities that are materialistic always think of profit and loss in terms of interactions, and this is viewed negatively. With a lack of guidance and regulations, people start losing trust and taking precautions when dealing with each other. On the other hand, cultures that have strong guiding values encourage trust and faith in others. Overall, a good legal system is required to regulate and manage the relationships between people. When asked about trust in companies, the definition of trust remained unchanged, but the means by which individuals arrived at the decision to trust varied. To be trustworthy, companies need to keep their end of the bargain by delivering what is requested with the same agreed-upon terms without taking advantage of the trusting individual. What determines the company’s trustworthiness is their ideology and reputation. Participant 10 stated: Trust in companies is based on the company’s ideology, reputation, or their services. Trust in companies is based on other people’s opinions on the company’s business and how much they trust it.

While most of the participants believed that trust in companies was not based on personal experiences (but rather, on the opinion of others), some of them did believe that trust was based on the firsthand experience. They will initially collect information about the company, try it, and then decide if it is trustworthy. Therefore, trust is initiated through a company’s reputation but is established through experience. Because trust in the sharing economy lacks physical assurances, we aimed at understanding the participants’ perception of digital trust and whether this is different from offline trust. Once again, the meaning of trust did not change, but the means by which trust was verified and realized were different. Real-world human interaction provides additional assurances and cues, such as facial expressions, voice tone, and body language. However, nowadays most companies are online and participants originating from the MENA region understand that they need to employ other tools to verify the trustworthiness of the online services. They emphasized the importance of doing good research and reading reviews from various sources. The reviews are a strong indication of the company’s reputation. Generally, the level of trust established by online companies is lower than that of offline companies, unless they are tested and tried by the consumer themselves or someone they trust. Participant 10 explained the reason for her anxiety toward online services:

58

H. Abusedou and N. Zakaria Human interaction is important and in an online platform, it’s difficult to trust people without the human interaction element. Also, over the web, if any issue arises, you wouldn’t know how to appeal or raise a case with the government. It’s like you are dealing with an anonymous, unknown and virtual entity.

The concept of online home-sharing services is new to MENA culture and, like any other new online service, is expected to face resistance. This study aimed to understand how trusting perceptions and beliefs toward a new online service, regardless of the context, altered the participants’ trust perceptions and beliefs. Participants believed that there was a lot of fraud online and that there is a lack of cyber laws in the MENA region. Thus, it is very difficult to determine trustworthiness. As a result, participants opted for doing research and making minimal investments. Generally, they were willing to try a new online service if it saved them time and money or provided a premium service. Participant 10 justified her anxiety toward new online services by referring to them as being different from her own culture: When it is an online service, the process to complain will be more complex and will take longer. I also think that there aren’t enough specialized digital laws and expertise in the Arab world to protect from fraud and cyber theft. This is still new to our culture and we feel it’s different from companies that are offline that we see and feel.

4.2 Collectivist Culture and Its Impact on Trust Consumers originating from the MENA region are collectivists by nature. They place a huge emphasis on perceptions toward trusted in-group members in the context of the sharing economy in the hospitality industry. Our aim is to capture consumers’ trust perceptions, beliefs, and attitudes in that context. Most of the consumers originating from the MENA region showed a solid attitude against trusting homeowners, because they considered them as strangers. To trust a stranger, they had to establish ties with them, such as building a relationship or staying with people from the same or similar cultures with similar values. They valued companionship, privacy, and protection of their in-group members. As they trust their own group members, they relied on their opinion to make decisions related to using the service. They do not trust strangers because they were raised not to be comfortable with them, especially in situations like sharing a house, because it implies dealing with uncertainties. Some participants had this perception because they believed the situation makes them vulnerable as explained by participant 2: We don’t trust strangers especially if they have the upper hand and are in charge.

The in-group members included both relatives and people from similar cultural backgrounds. Hence, the cultural background of the homeowner impacts the trust perceptions. Participants preferred staying with someone with the same or a similar cultural background due to having similar ways of growing up and thus invoke a feeling of belongingness. They felt safe with people from their own in-group. They

4 Trust and Cultural Preferences of Global Consumers for Airbnb …

59

believed that people coming from the same culture shared the same values, which helped eliminate the friction of adapting to a new culture. Participant 5 explained: It will initially help if I am new in the place to know that the country’s culture and the homeowner’s culture is close to mine. Because at least you eliminate the friction of adapting to a new culture or to a new person.

If the homeowners did not belong to the same culture, participants stated that they needed to have closer but not opposing beliefs. It is interesting to observe that two of the male participants did not mind sharing or renting a house if the homeowner was from a different culture, but they did not want to be exposed to any symbols representing other religious beliefs. The reason given was not resentment toward others’ beliefs, but a desire for their own culture and religion is respected. Participant 15 explained: In terms of religion, I don’t want to see their religious symbols everywhere in the shared house. It won’t make me comfortable … Other than that, I have no restrictions oversharing or renting from someone who has a different religion than mine.

Many of the participants were very concerned with their own privacy while using the service. They refused to initiate any personal interaction with the homeowners or meet them. It is not common in their culture to share with strangers who are outside their family members; thus, they preferred staying in their own room and not having to deal with the homeowner or the other tenants at all. To preserve even more privacy and personal space, and to feel safer, it was more acceptable for most of the participants to rent the whole property rather than share it with others. Participant 1 firmly expressed: I wouldn’t want the owner to be around because I don’t know the owner and I don’t want to deal directly with him. I don’t want any direct contact with the owner.

Many of the male participants showed a strong hesitation toward allowing their female family members to use the service on their own. This was explained by a strong concern for the welfare of their own in-group members whom they perceived as vulnerable. Relative to that belief, some of the male respondents expressed a protective attitude toward their female family members. They would not allow them to use the service on their own. They will also not use the service with their families for the first time, due to safety concerns. It is interesting to note that males in the family would either make the decision based on their behalf based on their own research. Participant 14 stated: I won’t accept that she takes an apartment by herself…This is part of our traditions. There are many restrictions on girls over guys. Hence, regardless of the conditions, we do not allow girls to travel on their own or stay on their own.

What is more noteworthy is that even the female participants preferred to depend on a male companion to protect them, as explained by participant 2: For females, the parents, culture, and society will not support us in this decision; we are females and we’re weak and we don’t know who we are going to face and struggle with.

60

H. Abusedou and N. Zakaria

Having a trusted companion while using the service was one of the main requirements for most of the participants in forming their trust perceptions. They preferred using the service with a friend or relative for personal safety reasons. Two of the women stated that they would like to be accompanied by someone who was physically capable of protecting them in case of any issues. To some of them, not having a companion was a deal-breaker. They also preferred staying in groups rather than alone. Participant 1 explained: If I am going to rent a house or a room for the first time, I wouldn’t go alone. I will go with a family member or a trusted friend.

4.2.1

High Uncertainty Avoidance Culture and Its Impact on Trust

There is particularly a unique challenge for someone from the MENA region when it comes to staying in someone else’s home in a foreign land. The challenge comes from the immaturity of the sharing economy culture within the region and the complex cultural dynamics of trust thought process. The degree to which individuals were willing to take the risk of trusting the homeowner was dependent upon their level of high uncertainty avoidance. This was broken down into several levels: safety, reliability, credibility, reputation, and popularity. Safety was one of the fundamental challenges when it came to staying in someone else’s home. It greatly influenced participants’ willingness to use the service, regardless of the cost-saving benefits. An important question that comes to mind here is: How do individuals determine the safety of the property? The location of the property seemed most relevant. A safe property was considered to be a property that was situated in a safe neighborhood in a central location in the city, close to famous landmarks. Participants also referred to location when they were choosing a country to visit. Countries that have established laws to protect tourists were favored in terms of their safety. People from the MENA region were also concerned about the background of the homeowner. Although all participants subscribed to the high uncertainty culture, some of them believed that there were risks and uncertainties in everything they did and not taking a risk stopped them from doing what they desired in life. Participant 12 confessed: If we are scared of the unknown consequences of everything we do in life, we won’t be able to do anything.

One of the participants swung between being conscious of the associated risks and denying them. She believed that using the online home-sharing service will make her uncomfortable and anxious, yet she was excited about using the service because it was nice to be part of something ‘new and trendy.’ While most of the participants were cautious before using the service, some of them were conscious of the risks associated. Participant 13 elaborated: Before you rent the place, you can’t know if you can trust them or not. You have to give it a try. It’s a risk. Based on that, you would know if you can trust them or not, but I would take the risk.

4 Trust and Cultural Preferences of Global Consumers for Airbnb …

61

Participants were also aware of the psychological consequences of selecting the wrong property or trusting the homeowner; however, they decided to be optimistic about the situation. Participant 13 explained: One of the risks is the risk of ruining your vacation. If something goes wrong, I will try to rent another place. It might ruin the day, but it is not going to ruin the whole vacation.

Interestingly, some of the participants believed that there was no specific risk associated only with online home-sharing services. Risks like theft, they argued, are not specific to this type of service and can be found anywhere. Hence, they perceived no high risk in using the service. Participant 7 explained: I don’t think there’s a theft risk for this specific type of sharing because theft could happen anywhere you rent.

It is noteworthy that the MENA region is a wealthy culture; most of the participants were willing to pay extra or switch to a more certain form of hospitality services for their peace of mind. Therefore, we believe that the availability of financial resources could impact consumers’ decisions if the uncertainty was perceived to be high. As participant 9 explained, ‘I would pay extra money for my peace of mind.’ People from high uncertainty avoidance cultures are risk-averse because they believe being a risk-taker involves a lot of uncertainty. However, one of the participants (who had traveling experience) believed that she could deal with any of these uncertainties. She could live with strangers because she knew she could handle them. However, that belief was based on other certainties such as agreed-upon home-sharing rules. Participant 12 explained: Again, because I can manage the risks and consequences associated. As long as we set the rules for sharing the apartment, I don’t see why I shouldn’t use it.

High uncertainty avoidance was more dominant in the decision-making process. In the case where the uncertainty was perceived to be high, the individualistic attitude did not seem to have an influence on the participants’ decision. For example, participant 14 did not require establishing a relationship with the homeowner presuming that the Web site is reliable in terms of clarity and trustworthiness of regulations, policies, and content. He explained: If the service is clear and there are no additional requirements, I don’t prefer the hassle of calling and confirming or requesting.

Uncertainty avoidance index cultural value was most obvious in the source and quality of information reported in the online reviews. In case of the absence of referrals, and when deciding to rely on online reviews, participants carried out thorough research (i.e., checking multiple resources, reading through a lot of reviews, looking at properties with high rating score and a high number of reviews, and checking the social media profiles of the homeowners). They used the reviews to get an idea of what to expect and to reduce uncertainty levels associated with the decision to use the service. The process of checking the reviews was complex, and participants took an analytical and cautious approach toward reviewing the information available. For example, participant 6 explained:

62

H. Abusedou and N. Zakaria Let’s say there’s a place that has 5 out of 5 rating but there are only two people that gave that rating, then you have another place that has a 3 out of 5 rating but there are a hundred people that gave that rating, so the weight is different. The weight of 3 out of 5 would be more. You can trust that it’s the actual rating because people are opinionated, and they could be biased in their opinion. But when you have a higher number of people, then the distribution is higher and so you would get a fairer value.

The reliability of the service raised many concerns, indicating the complexity of determining the consistency, dependability, and accountability of the service. The governance of the service played a major role in the decisions made by people in the MENA region. They asked questions such as: ‘How regulated are the reviews left on properties?’ and ‘What kind of measures does the service take to evaluate the truthfulness of the reviews?’ Governance was everything when it came to service reliability. In the absence of government regulations, Web site policies and bylaws were evaluated. Although people in the MENA region demonstrated high uncertainty avoidance perceptions and beliefs, there are specific factors that influenced their decision. It would be also difficult to determine if the behavior of an individual was a personal decision, or if was impacted by a higher-ranking member of their in-group such as a father or brother.

5 Implications and Conclusion Theoretically, this study contributes to the field of cross-cultural management and consumers’ trust in the sharing economy in the hospitality industry. It sheds light on the unique effect of cultural values on trusting perceptions and beliefs in the online home-sharing services. Although the impact of the MENA region cultural values on trust in the sharing economy is only supported by a limited number of studies at present, the findings of this study build a more solid foundation toward an understanding of the above-mentioned topic. The study provides an in-depth investigation of the reasons people originating from the MENA region establish trust perceptions, the mental process followed, the conditions and contexts through which they arrive at trust perceptions, and how these are culturally attuned. This builds on studies by Gefen and Heart (2006) and Hallikainen and Laukkanen (2016) on cultural impact on trust in e-commerce. It also supports the validity of Hofstede’s (1980) cultural dimension in the context of the sharing economy. Hence, the study outcomes can be applied to, and validated by, other cross-cultural studies. This study suggests a number of managerial implications for online home-sharing businesses. First, firms should conduct effective culturally focused market research to ensure the appropriateness of the service in the context of cultural values. Second, this study provides insights for online home-sharing Web sites on the importance of rich online content and its role in forming consumer trust. It highlights the essential components of the service platforms that should be studied thoroughly to improve trust perceptions of MENA region consumers and attract more consumers to the

4 Trust and Cultural Preferences of Global Consumers for Airbnb …

63

business. Cultural values have to be incorporated into the design of the platform and the business transaction workflow. Finally, the study provides online homesharing services with a better understanding of the trust relationship between peer, platform, and product. This relationship represents a challenge in sharing economy that is intensified in the context of differing cultures because trust is sensitive to the cultural impact. Thus, such cultural literacy is crucial in any virtual sharing economy business that offers a service to members of collectivist and high uncertainty avoidance cultures. As trust is constructed differently in different cultures, such knowledge will enable service owners to understand what is required for crossgeographical businesses to be successful. In summary, this study offers practical suggestions for improvements to help researchers and service owners explore ways to strategically penetrate MENA region markets. In conclusion, it is clear that the cultural values of the group members of the MENA region impact peoples’ trust in the context of online home-sharing services. Consumers’ willingness to adopt this hospitality service, as well as their trust perceptions, beliefs, and attitudes, was culturally sensitive. The patterns of trust extracted from the study prove that trust in the MENA region is contextual, fluid, and highly dependent on service governance and assurances. In essence, people from the MENA region subscribe to a unique culture of collectivism and high uncertainty avoidance which impacts their trust in online home-sharing services. What is more interesting in the findings of this study is that participants from younger age groups showed a risk-taking attitude toward the service and were more willing to adopt it in the future. It is a real challenge for online home-sharing services to succeed in markets like the MENA region: a market that has high growth potential but is restrained and restricted. Companies must be willing to adapt their business practices to embrace the region’s cultural complexity and fluidity. To be successful, online home-sharing services have to fully understand and be attuned to the cultural differences in the way people form their trust perceptions, beliefs, and attitudes. In this chapter, we assert that culture does matter, as it influences whether or not consumers feel confident in staying at a stranger’s home when they choose to patronize Airbnb. This service is the emergent phenomenon of sharing economy and offers new form of hospitality products and services.

References Al-Kandari A, Gaither TK (2011) Arabs, the west and public relations: a critical/cultural study of Arab cultural values. Public Relat Rev 37(3):266–273 Arabadvisors.com (2008) B2C e-commerce volume exceeded US$ 4.87 billion in Kuwait, Lebanon, Saudi Arabia and UAE in 2007. Available via. http://www.arabadvisors.com/b2c-e-commercevolume-exceeded-us-487-billion-kuwait-lebanon-saudi-arabia-and-uae-2007. Accessed 15 Jan 2018 Ashraf AR, Thongpapanl N, Auh S (2014) The application of the technology acceptance model under different cultural contexts: the case of online shopping adoption. J Int Mark 22(3):68–93

64

H. Abusedou and N. Zakaria

Cheng M (2016) Sharing economy: a review and agenda for future research. Int J Hospitality Manage 57:60–70 Cheung SH, Chang MK (2009) Building trust in online shopping: the moderating effect of individualism and collectivism. Paper presented at the 9th international conference on electronic business, Macau, 30 Nov–4 Dec 2009, pp 127–134 Chong B, Yang Z, Wong M (2003) Asymmetrical impact of trustworthiness attributes on trust, perceived value and purchase intention: a conceptual framework for cross-cultural study on consumer perception of online auction. In: Proceedings of the 5th international conference on electronic commerce, pp 213–219 Cyr D (2008) Modeling web site design across cultures: relationships to trust, satisfaction, and e-loyalty. J Manage Inf Syst 24(4):47–72 Dillon A, Morris MG (1996) User acceptance of new information technology: theories and models. In: Annual review of information science and technology, Information today, Medford Dinev T, Hart P (2006) An extended privacy calculus model for e-commerce transactions. Inf Syst Res 17(1):61–80 Doney PM, Cannon JP, Mullen MR (1998) Understanding the influence of national culture on the development of trust. Acad Manage Rev 23(3):601–620 FakhrElDin H, Skoko H, Cheraghi M (2013) The effect of national culture on entrepreneurs’ networks: a comparison of the MENA region and Denmark. Int J Bus Glob 11(4):353–366 Fang Y, Qureshi I et al (2014) Trust, satisfaction, and online repurchase intention: the moderating role of perceived effectiveness of E-commerce institutional mechanisms. Mis Quar 38(2):407–427 Forsythe SM, Shi B (2003) Consumer patronage and risk perceptions in internet shopping. J Bus Res 56(11):867–875 Frederick Littrell R, Bertsch A (2013) UN millennium development goals and gender equality in employment in the Middle East. For 15(4):249–263 Furner C, Racherla P, Zhu Z (2013) Cultural and review characteristics in the formation of trust in online reviews: a multinational investigation. Paper presented at the Proceeding of 12th Wuhan international conference on e-business, WHICEB, Wuhan, pp 423–433, 25 May 2013 Ganguly B, Dash SB, Cyr D, Head MM (2010) The effects of website design on purchase intention in online shopping: the mediating role of trust and the moderating role of culture. Int J Electron Bus 8(4–5):302–330 Gefen D, Heart T (2006) On the need to include national culture as a central issue in e-commerce trust beliefs. J Glob Inf Manage 14(4):1–30 Hallikainen H, Laukkanen T (2016) Consumer Trust towards an online vendor in high-vs. lowcontext cultures. In: 2016 49th Hawaii international conference on system sciences (HICSS). IEEE, Hawaii, pp 3536–3545, 5 Jan 2016 Hampton-Sosa W, Koufaris M (2005) The effect of web site perceptions on initial trust in the owner company. Int J Electron Commer 10(1):55–81 Hawlitschek F, Teubner T, Weinhardt C (2016a) Trust in the sharing economy. Die Unternehmung— Swi J Bus Res Pract 70(1):24–44 Hawlitschek F, Teubner T, Gimpel H (2016b) Understanding the sharing economy—drivers and impediments for participation in peer-to-peer rental. In: Proceedings Hawaii international conference on system sciences, Kauai, Hawaii, 5–8 Jan 2016 Hofstede G (1980) Culture’s consequences: international differences in work-related values. In: Cross-cultural research, vol 5. Sage Publications, California Hofstede G, Minkov M (2010) Cultures and organizations: software of the mind. Revised and expanded, vol 2. McGraw-Hill, New York Hofstede G (2011) Dimensionalizing cultures: the Hofstede model in context. Online Readings Psycol Culture 2(1):8 Hunter LM, Kasouf CJ, Celuch KG, Curry KA (2004) A classification of business-to-business buying decisions: risk importance and probability as a framework for e-business benefits. Ind Mark Manage 33(2):145–154

4 Trust and Cultural Preferences of Global Consumers for Airbnb …

65

Isherwood D, Coetzee M, Eloff JH (2012) Towards trust and reputation for e-commerce in collectivist rural Africa. HAISA, Greece, pp 108–118, 6–8 June Ji YG, Hwangbo H et al (2010) The influence of cultural differences on the use of social network services and the formation of social capital. Int J Hum-Com Interact 26(11–12):1100–1121 Jones K, Leonard LN (2008) Trust in consumer-to-consumer electronic commerce. Inf Manage 45(2):88–95 Jones K, Leonard LN, Riemenschneider CK (2009) Trust influencers on the web. J Organ Comput Electron Commer 19(3):196–213 Kailani MA, Kumar R (2011) Investigating uncertainty avoidance and perceived risk for impacting Internet buying: a study in three national cultures. Int J Bus Manage 6(5):76–92 Kim D (2005) Cognition-based versus affect-based trust determinants in e-commerce: cross-cultural 39 comparison study. In: Proceedings of the international conference on information systems, ICIS 2005, Las Vegas, Nevada, 11–14 Dec 2005 Krasnova H, Veltri NF, Günther O (2012) Self-disclosure and privacy calculus on social networking sites: the role of culture. Bus Inf Syst Eng 4(3):127–135 Lee K, Joshi K (2007) An empirical investigation of customer satisfaction with technology mediated service encounters in the context of online shopping. J Inf Technol Manage 18(2):18–37 Li H, Mantymaki M (2011) An empirical examination of the relationships between the dimensions of culture and e-service quality perceptions. In Proceedings of the international conference 24th Bled eConference eFuture: creating solutions for the individual organizations and society in Bled, Slovenia, 12–15 June 2011 Lim KH, Leung K et al (2004) Is eCommerce boundary-less? Effects of individualism–collectivism and uncertainty avoidance on internet shopping. J Int Bus Stud 35(6):545–559 Linton R (1945) The cultural background of personality. Greenwood-Heinemann Publishing, Connecticut Lu Y, Zhao L, Wang B (2010) From virtual community members to C2C e-commerce buyers: trust in virtual communities and its effect on consumers’ purchase intention. Electron Commer Res Appl 9(4):346–360 Luhmann N (1982) Trust and power. Wiley, New Jersey, pp 131–138 Madupu V, Cooley DO (2010) Cross-cultural differences in online brand communities: an exploratory study of Indian and American online brand communities. J Int Consum Mark 22(4):363–375 McKnight DH, Choudhury V, Kacmar C (2002) The impact of initial consumer trust on intentions to transact with a web site: a trust building model. J Strateg Inf Syst 11(3):297–323 Mideastmedia (2016) Middle East media use report. Available via: http://www.qatar.northwestern. edu/docs/publications/research-media-use/2016-middle-east-media-use-report.pdf. Accessed 15 Jan 2018 Möhlmann M (2015) Collaborative consumption: determinants of satisfaction and the likelihood of using a sharing economy option again. J Consum Behav 14(3):193–207 Möhlmann M (2016) Digital trust and peer-to-peer collaborative consumption platforms: a mediation analysis. Soc Sci Res Net, pp 1–38 Nguyen TD, Barrett NJ (2006) The adoption of the internet by export firms in transitional markets. Asia Pac J Mark Logistics 18(1):29–42 Pavlou PA, Chai L (2002) What drives electronic commerce across cultures? Across-cultural empirical investigation of the theory of planned behavior. J Electron Commer Res 3(4):240–253 PwC (2016) The sharing economy. Available via: https://www.pwc.com/us/en/technology/publicati ons/assets/pwc-consumer-intelligence-series-the-sharing-economy.pdf. Accessed 25 Dec 2018 Sabiote CM, Frıas DM, Castaneda JA (2012a) The moderating effect of uncertainty-avoidance on overall perceived value of a service purchased online. Int Res 22(2):180–198 Sabiote CM, Frıas DM, Castaneda JA (2012b) E-service quality as antecedent to e-satisfaction: 42 the moderating effect of culture. Online Inf Rev 36(2):157–174 Schumann JH, Wangenheim FV et al (2010) Drivers of trust in relational service exchange: understanding the importance of cross-cultural differences. J Ser Res 13(4):453–468

66

H. Abusedou and N. Zakaria

Singh N, Kumar V, Baack D (2005) Adaptation of cultural content: evidence from B2C e-commerce firms. Eur J Mar 39(1–2):71–86 Spencer-Oatley H (2004) Culturally speaking: managing rapport through talk across cultures. A&C Black, Vancouver, pp 4–70 Tan FB, Sutherland P (2004) Online consumer trust: a multi-dimensional model. J Electron Commer Organ 2(3):40–58 Trompenaars F, Hampden-Turner C (2001) Riding the waves of culture: understanding diversity in global business. Nicholas Brealey Publishing, Boston Washington MG (2013) Trust and project performance: the effects of cognitive-based and affectivebased trust on client-project manager engagements. Dissertation, University of Pennyslvania Xu-Priour DL, Truong Y, Klink RR (2014) The effects of collectivism and polychronic time orientation on online social interaction and shopping behavior: a comparative study between China and France. Technol Forecast Soc Change 88:265–275 Yamagishi T, Yamagishi M (1994) Trust and commitment in the United States and Japan. Motiv Emot 18(2):129–166 Yildirim E, Arslan Y, Barutçu MT (2016) The role of uncertainty avoidance and indulgence as cultural dimensions on online shopping expenditure. Eur Bus Econ J 4(4):42–51 Yoon HS, Occeña LG (2015) Influencing factors of trust in consumer-to-consumer electronic commerce with gender and age. Int J Inf Manage 35(3):352–363 Zakaria N (2016) Emergent patterns of switching behaviors and intercultural communication styles of global virtual teams during distributed decision making. J Int Manage 23(4):350–366 Zakaria N, Talib ANA (2011) What did you say? A cross-cultural analysis of the distributive communicative behaviors of global virtual teams. In: Proceedings of the international conference on computational aspects of social networks (CASoN) 19–21 Oct 2011. IEEE, pp 7–12 Zucker LG (1986) Production of trust: institutional sources of economic structure, 1840–1920. Res Organ Behav 8:53–111

Part II

Challenges and Issues of Global Business

The second part of this book will be addressing the vital business operation in terms of marketing, financial analysis, and foreign direct investment. Key challenges coming from these three aspects need to be highlighted and understood in order to inform and educate businesses and multinational organizations about relevant issues impending them when they decide to penetrate the market across the globe. Moreover, with such understanding, any threats and opportunities to be seized for the global market can be addressed appropriately in terms of formulating winning and competitive strategies.

Chapter 5

Cultured Crime of Obedience and Fraudulent Financial Reporting in the Time of Crisis Radiah Othman and Rashid Ameer

Abstract Motivated by “inability thesis,” this chapter examines the role of culture and human behavior in the context of Fraudulent financial reporting. Our study shows how the culture was used and abused in an environment where ethical decisions were replaced with the need to portray “business as usual” when in fact, the corporation was collapsing. In Toshiba’s case, the top management institutionalized various inappropriate accounting treatments directly and indirectly through their subordinates’ understanding (and/or misunderstanding) of what was expected of them, the crime of obedience. The findings suggest that the unspoken language of group mode behavior expedites the instinct for survival. Though cultural limitation and cultural upbringing do not exempt individuals from their responsibilities, the understanding of how the “local” managers place cultural importance in decision-making could offer the “international” managers culturally attuned strategies in managing global corporations, especially in the time of crisis. Keywords Crime · Culture · Fraudulent financial reporting · Multinational

1 Introduction Most of the organized ways in which people do wrong happen when they go to work (Hamilton and Sanders 1995, p. 85).

The main aim of this chapter is to explain how culture can constrain individuals from abiding by the law because of pressures to conform, and ultimately commit, the crime of obedience. Crimes of obedience refer to acts in which subordinates obey authority by committing acts that the larger community finds illegal or immoral (Kelman and Hamilton 1989). Culture could be a leading risk factor for both the crimes R. Othman (B) School of Accountancy, Massey University, Palmerston North, New Zealand e-mail: [email protected] R. Ameer School of Global Studies, IPU New Zealand Tertiary Institute, Palmerston North, New Zealand © Springer Nature Singapore Pte Ltd. 2020 N. Zakaria et al. (eds.), Transcending Cultural Frontiers, https://doi.org/10.1007/978-981-15-4454-5_5

69

70

R. Othman and R. Ameer

of obedience and the perception of the larger community as to what constitutes as illegal or immoral (Gebler 2006). Obedience to authority occurs within a hierarchical structure in which the actor feels that the person above has the right to prescribe behavior (Hamilton and Sanders 1995). Dishonest employees, especially those in the positions of authority within the organization, will eventually infect a portion of honest ones (Sutherland 1983). We posit that the influence of culture and crime of obedience intensifies during crisis periods when the organizations struggle with deteriorating performance. In this study, we focus on the Japanese culture and a Japanese multinational corporation with a 140-year-old history, Toshiba. The Dow Jones Sustainability World Index removed Toshiba on August 3, 2015, amid Fraud revelations of ¥152 billion (Savage 2015). The market value of Toshiba declined by US$6 billion in just three days (Rodionova 2016). Toshiba’s Fraud started in 2009 but was only discovered in 2015 (IIC 2015). The accounting manipulation included the delay in the recording of material cost in projects that used the percentage-of-completion method, the delay, and improper recording of operating expenses, channel stuffing, and the inappropriate valuation of inventory. Toshiba did not have a risk management structure or the like that could anticipate or prevent such inappropriate accounting treatment from being carried out, so it continued in an institutional way that involved top management. Over an extended period, material misstatements became obvious to the regulators, and, upon discovery, questions were raised as to how such a situation could have arisen (Kenyon and Tilton 2012). Most appalling is that this Fraud occurred when the Japanese corporate sector was undertaking major corporate governance structure reforms aimed at improving regulations for Fraudulent reporting. Aizawa’s (2018) recent survey showed that all Japanese firms’ compliance systems were surprisingly similar. So what had been different in the Toshiba context? Toshiba had been serving as an exemplar of corporate Japan, but what went wrong? This study takes the view of inability thesis, which theorizes that one’s culture can determine one’s behavior so as to make one unable to comply with the law or at least make compliance difficult (Moody-Adams 1994; Tunick 2004). Toshiba is not the only Japanese corporation in which the Fraudulent actions were associated with culture. In 2017, the independent Investigation Committee of Fujifilm Holdings Corporation revealed culture as one of the causes of inappropriate accounting practices (ICO 2017, p. 26). Likewise, in a press conference the chairman of Olympus Corporation announced that they had removed Michael Christopher Wood from the company because Wood was not able to understand the 92-year-old management style and Japanese culture while working for Olympus. However, the Investigation Committee of Olympus Corporation reported that there was a problem in the corporate culture (ICO 2011, p. 180). In the case of Yamaichi Securities and other bankrupt companies, the top management thought that if the large losses by the companies were disclosed the companies would not be able to survive and employees would lose their jobs, so they doctored their financial statements (Kono and Clegg 2001, p. 100). Some have concluded that Japanese cultural traditions might have led to the breakdown in the corporate tone at the top (Zack 2015). According to Kono and Clegg, several Japanese companies went bankrupt as a consequence of overly

5 Cultured Crime of Obedience and Fraudulent Financial …

71

aggressive decision-making by dictatorial presidents such as Fuji Sash, Kojin, Fujita, Aoki Construction, Seiyu, and Eidai. Keys et al. (1994) mentioned a great persistence in the face of difficulty in Japanese culture. Thus, by illustrating how Japanese culture can influence the traditional management practices in times of adversity, we hope to demonstrate how culture can constrain an individual to comply with the law or have difficulty in complying, the inability thesis at play. We do not distinguish between national and organizational cultures; as in Japan, the traditional concept of family life in the national culture extends to organizational culture so much, and it determines the features of Japanese corporations. The workforce is considered as members of a company family with lifetime employment guaranteed. This study contributes to the literature in four ways. First, it promotes the idea that awareness and comprehension of a country’s cultural characteristics are paramount for successful business interactions in MNC located in different countries. Culture remains a primary puzzle for international business managers intending to compete in the global market. A deeper and realistic understanding of how the “local” managers place cultural importance on decision-making could offer the “foreign” managers a better outlook of useful strategies to deliberate on for culturally attuned strategies in managing global corporations, especially in the time of crisis. This understanding would enable the international managers to approach business interactions more effectively and confidently (Stedham et al. 2008, p. 549). Second, our study exposes how culture and crime of obedience are institutionalized and intensified in the time of crisis. In this chapter, we illustrate how the local culture influences subordinates’ collusive behaviors even though the top management did not explicitly direct them to do so (Zack 2015). Third, in their review of Japanese-focused organizational behavior papers, Godkin et al. (1996) observed a conspicuous absence of research on what motivates Japanese people. We look into this aspect but focus on the cultural aspect of motivation in dealing with a crisis situation. Ford and Honeycutt (1992) state that the commitment to survival is a national concern for the Japanese and apparent in the method employed by Japanese companies to compete aggressively in the world markets. Lastly, the indictment of culture as the cause of Toshiba Fraud is echoed by a wide range of media (BBC, CNN) as well as researchers (see Chan et al. 2017; Khondaker and Bremer 2017; Suzuki and Yamada 2016), and this chapter hopes to contribute to the literature on Fraudulent financial reporting and culture alike. The next section summarizes research that considers Japanese culture in Fraudulent financial reporting literature and the theoretical framework used. Section 3 discusses the relevant Japanese cultural characteristics identified in Toshiba context amid Fraud revelation. This is followed by Section 4, which summarizes the discussion. Section 5 highlights normative aspects to be considered by multinational managers in dealing with local culture in the time of crisis. The last section concludes the chapter.

72

R. Othman and R. Ameer

1.1 Japanese Culture in the Fraudulent Financial Reporting-Related Literature Cultural differences within multinational corporations have been well documented (Hofstede 1980; Newman and Nollen 1996). A deeper knowledge of Japanese national culture is imperative to better understanding of Japanese business culture (Ford and Honeycutt 1992, p. 29). Japanese companies expect managers to remain in touch with their own cultural roots even though the business workplace is becoming more globally oriented (Ford and Honeycutt 1992, p. 29). It is widely held that Japanese companies have achieved economic success through collectivism with the core stakeholder groups through relational trading between firms, relational banking long-term relationships between a company and its employees, and between companies and their employees in the pursuit of long-term profit (Davidson et al. 2018). The empirical studies on financial reporting in the Japanese cultural context have mainly focused on earnings management (Yamada et al. 2018; Nakashima and Ziebart 2016; Kimura 2017; Tai-Yuan et al. 2015; Thomas et al. 2004), compliance system (Aizawa 2018), masculinity and unethical behavior (Nemoto 2018), corporate social responsibility CSR (Davidson et al. 2018), adoption of IFRS (Tsunogaya and Chand (2012), and evolution of financial reporting (Cooke 2006). Davidson et al. (2018) explained that the business community had forced many Japanese companies to hastily begin practicing CSR management due to criticism of corporate scandals involving accounting Fraud, false labeling, and bid rigging. Cooke (2006) suggests that it is possible that the shame (culture) of being inferior to foreigners was a potent force for the evolution of financial reporting in Japan. Tsunogaya and Chand (2012) suggest that culture may affect rationalization of the choice and design of accounting systems. Management culture of firms in Japan has influence in the utilization of accrualbased earnings management as compared to real activity-based earnings management (Tai-Yuan et al. 2015; Chen et al. 2015). Kimura (2017) found that the number of listed subsidiaries and the size of subsidiaries may change the ratio of the discretionary accruals between individual financial statements and consolidated financial statements of Japanese companies. Yamada et al. (2018) investigate the direct influence of the geographic distance between the Japanese parent company and its subsidiaries on RM of earnings management. They argued that distance makes it more difficult for RM due to different corporate cultures. Thomas et al. (2004) found that the transactions with subsidiaries are used to achieve the target of parent company’s earnings. Nemoto (2018) reported that Japanese managers rationalized account manipulation as a profit recovery scheme and American workers validated this approach as being self-sacrificing and representative of heroic leadership. Nakashima and Ziebart (2016) report a link between the outside directors’ ratio, the foreign investors’ ratio, higher audit quality, and the ethical culture in the firm. However, these studies are mostly quantitative in nature and infer but do not specifically focus on the traditional culture aspect that promotes or conditions such behavior.

5 Cultured Crime of Obedience and Fraudulent Financial …

73

Japan is the world’s third largest economy and a member of both the G8 and the OECD. Japanese companies are expected to behave fittingly, given the scale and power of influence (Davidson et al. 2018, p. 86). Japanese corporations have received attention due to Fraud revelations in which Japanese business culture has been linked to Fraudulent reporting, e.g., Olympus (Morgan and Burnside 2014) and Toshiba (Dugar and Gujarathi 2018). Generally, there is a lack of studies that examine the cultural aspect that led to Fraudulent accounting and reporting. We contend that the culture has been often blamed for Fraudulent financial statements, but it is not specifically linked to the contexts and managerial hierarchies. Several studies focused on profits and stock prices, the culture of secrets, centralized control, and lack of transparency (Morgan and Burnside 2014). For example, in the case of Olympus, the managers rationalized their unethical behavior by telling themselves that they were acting in the best interests of the company without a proper link to the concept of the group, long-term employment, and company as a family, which is typical in Japanese culture (Investigation Report, ICO 2011). Based on the Olympus case, Japanese cultural themes of wa (peace and harmony), jicho (to respect oneself), kata (way of doing things), shudan ishiki (emphasis on goals of the group over individual goals and responsibilities), on (not do or say anything beyond what is prescribed by his or her position), and giri (service and loyalty to their superiors, and a sense of responsibility and appreciation to subordinates) were also mentioned in general. However, they were not properly linked to the context to help understand how they operate in a real situation. Shover and Hochstetler (2002) summarize that the search for organizational culture generally ignores how it is shaped by organizational hierarchies; strangely, the upper-level managers who inevitably transmit their preferences to organizational subunits and functionaries are missing from examination (p. 9). We argue that our research exposes these organizational hierarchies in organization culture and links it to perpetual and institutionalized unethical behavior at Toshiba Corporation.

2 Theoretical Framework and Research Method We employ a cultural criminology theoretical frame, which is based on cultural, critical, and interactionist foundations (Ferrell 1999). Cultural criminology explores the convergence of cultural and criminal processes in contemporary social life (Ferrell 1999, p. 395; Ferrell and Sanders 1999). Shover and Hochstetler (2002) define an organizational crime as a crime committed by managers or employees of legitimate organizations in which self-interest is of less concern than a desire to “get the job done” for their employers or fellow workers. Organizational crime can have severe repercussions for employees and other stakeholders, financial markets, and national economies. The main premise of our study is that organizations act through human agents (Cressey 1995). The human agents, such as the corporate managers, like street criminals, weigh the potential payoffs from crime more heavily than the estimated risks (Shover and Honaker

74

R. Othman and R. Ameer

1992; Simpson and Koper 1992). This calculation need not and generally is not amoral calculation, but it is a calculation (Shover and Hochstetler 2002, p. 14). The cultural world of an organization is shaped significantly by the nature and consequences of managerial calculations and decisions. This culture is inherently translated into actions of the subordinates to comply or not with the law. Inability thesis holds that one’s culture determines behavior and can make one unable to comply with the law (Tunick 2004, p. 395). Tunick concludes that cultural influences may make an action reasonable that without similar cultural influences would be unreasonable. The opponents of this inability thesis, e.g., Moody-Adams (1994), reject the view that humans are made physically unable to act in certain ways by their cultural upbringing and thus exempted from responsibility. This long-standing and divisive debate about whether the individuals deserve punishment based on cultural defense is beyond the scope of the chapter. Cultural values help members interpret messages from the environment, and cultural norms help members determine what behavior is appropriate or not (Lytle et al. 1995). In a business context, we argue that though all human beings have the capacity to see that certain acts are wrong (or not legally right) in certain circumstances such as during struggle and crisis, the individuals tend to take actions and/or behave as what they seem proper. These actions or behaviors could be culturally motivated or otherwise. While we do not support that people should not be held responsible for violating laws that clash with their culture, we also concede that cultural upbringing does not exempt an individual from responsibility. Tunick (2004) explained that there are ways in which culture may determine one’s actions, even if those actions are not necessary inasmuch as cultural influences could be otherwise or the actions have different consequences under different circumstances (p. 406). In this chapter, we examine the role that culture played in a big multinational Japanese company, Toshiba, which revealed in 2015 that it had issued Fraudulent financial statements for the past seven years. We believe the insights and lessons to be learned from this case would highlight that “the company’s management were not crippled by the disability of their culture but rather they made reasoned choices that are based on different value systems due to their backgrounds” (Chiu 2006, p. 44). According to Chiu, this is not an excuse justification. Thus, it is interesting to examine how inability thesis is at play in the Japanese culture. Kono and Clegg (2001, p. 44) informed that Japan’s traditional culture had three main roots: Shintoism, Buddhism, and Confucianism. Each of these religions made fundamental contributions, but it has always seemed that the essence of Japanese character and Japaneseness was primarily influenced by Bukkyo or Buddhism. The Japanese culture could easily be misinterpreted. De Mente (2004, p. 54) gave an example where in the 1980s, the international community accused the Japanese of being involved in the bid rigging and the Japanese government of using unfair, immoral, and illegal business tactics over the contracts awarded for the construction of the Kansai International Airport. They labeled dango (the collaboration to prevent competition and fix prices) as one of the worst structural barriers facing foreign companies wanting to do business in Japan. These accusations caught the Japanese unprepared as dango had been practiced

5 Cultured Crime of Obedience and Fraudulent Financial …

75

for generations and had been an accepted way of doing business ever since the feudal shogunate government fell in 1868. On the same note, we believe many of the authoritative theories are not necessarily suited to the clarification of the cultural patterns of the Japanese. We hope that by working from the inside out as a strategy to guide our methodology, we would be able to bring insights and analysis based on an insider perspective. As emphasized by Godkin et al., p. 16, a real challenge remains to understand the Japanese gestalt, to see Japanese management in context, and, in our case, in the time of crisis. We contend that this can be captured by constant reflection and interpretation backward and forward on the case and the literature on Japanese culture. This would enrich our understanding of particular institutionally authentic aspects of Japanese culture. Redfield (1968) emphasizes that the values expressed in any culture are to be valued only according to the way the people who carry that culture see things. This qualitative study uses an interpretative case study method to expose the dynamic cultural situations that were drivers of Fraudulent reporting in Toshiba. Our approach echoes Braithwaite (2001), who advocates that qualitative work in organizational crime studies has a thick description of the case, and elicits the contradictory, social constructions of what happened. Braithwaite emphasizes the need to be open to multiple moralities, the need for an appreciative stance toward the offender, to understand the politics of conflict over different conceptions of wrongdoings, and the role of power in it. The main source of our information is Toshiba’s Independent Investigation Committee Report (IIC 2015), which discusses at length the context of the Fraud investigation. The Independent Investigation Committee prepared this report, comprising independent and impartial external experts who did not have any interests in Toshiba. We believe our approach is preferable for examining the organizational crime to get closer to the reality of the level of the crime by relying on self-reports also endorsed by prior studies (Braithwaite 2001, p. 26). IIC (2015) revealed that Toshiba’s corporate culture drove employees toward Fraudulent activities, who could not act contrary to the intent of their superiors as one of the direct causes of the Fraudulent financial reporting. Fonäs (2000) emphasizes that cultural studies cannot escape from interpreting textual meanings, in our case, making sense of the texts in the report into what we understand as Japanese cultural characteristics and inability thesis as the themes. In so doing, we hope to be able to focus on the contextualization as described in the IIC (2015) without neglecting the specific properties of Japanese cultural themes that emerge through the texts in the report. We used inductive coding approach in QSR’s NVivo 11 software. We coded the report, line by line, which represented the Japanese cultural characteristics (hierarchy; consensual decision-making; nonverbal communication; keeping controls, etc.). Both authors independently coded the report to capture the meaning and content of each sentence inductively. We also created new sub-codes automatically as we worked through the report. Through reiterative process, we examined all codes to check the consistency of interpretation to finalize the cultural themes for analysis. The next section provides our analysis of the cultural themes and the inability thesis at play in Toshiba.

76

R. Othman and R. Ameer

3 Culture and Crime of Obedience in Toshiba in the Time of Crisis At the root of Japanese national culture is a concern for the protection and perseverance of the society as a whole (Ford and Honeycutt 1992, p. 30). This uniqueness of Japanese culture translated from family to work or business setting. According to Tetsuro (1988, p. 3), the family or household is the cradle of culture because it exemplifies the basic patterns to be found in social relations where feelings, thought patterns, and behavior are learned by each new generation. According to Ford and Honeycutt (1992, p. 39), Aun no Kokyu is the cultural facility that the Japanese are expected to use in order to conform to all of the attitudes and manners that make up the “the Japanese way.” When new recruits enter Japanese companies, most of the attitudes and behavior they are expected to exhibit are not verbalized or given to them in the form of written instructions. They are expected to pick up these things through their Aun no Kokyu. The concept of shikitari incorporates all the values, standards, and rituals that make up the prevailing beliefs and behavior in a particular Japanese company. A great deal of the personal as well as business communication in Japan is indirect, abbreviated, or not spoken at all, because the intentions and feelings can often be expressed and understood without verbalizing them (De Mente 2004). Figure 1 shows most frequent wording in Japanese culture literature. Much of the company character and behavior of individual Japanese derived from the “never make a mistake” commandment prevents them from making clear, decisive responses and generally precludes them from taking a strong, personal position on any subject (De Mente 2004). This cautious nonverbal behavior reasoning means that in a group orientation such as the Japanese, a mistake made by an individual Fig. 1 Most frequently occurring words of Japanese culture. These words are based on our references in Clark (1988), De Mente (2004, 2012), Doi (1971), Tetsuro (1988), Chie (1988), Kono and Clegg (2001), Thome and McAuley (1992), Dale (1986), Nevins (1988), and Takeshi (1988). These books are some of the special collection on Japanese culture, business, and management in a tertiary institute owned by Japanese

5 Cultured Crime of Obedience and Fraudulent Financial …

77

member of the group reflects badly on the entire group. In addition, there is a term called kaisha (company), which symbolizes the expression of group consciousness in which a single loyalty stands up uppermost and firm (Chie 1988, p. 8). In most cases, the members are expected to follow the requirements of the group, justified by the group logic. This logic not only emphasizes on hierarchy but also prevents subordinates from expressing their opinions, including ethical issues. They tend to obey their superior orders, even if they disagree with them (Taka 1994, p. 69). These characteristics have been encouraged consistently by managers and administrators since the Meiji period. In the Toshiba case,1 it was reported by IIC that there was an increase in material costs following the execution of the contract and it was anticipated that contract losses of JPY 1.2 billion would arise in December 2007, but a provision for contract losses was not recorded (IIC 2015, p. 29). The sales managers for the Thermal Power Plant Division did discuss the possibility of recording a provision for contract losses with Hideo Kitamura CP2 between mid-January to March 2008, but no approval was given. As such, a provision for contract losses was not recorded from the third quarter to the fourth quarter of FY 2007 (IIC 2015, p. 29). Similarly, Hisao Tanaka President and Hideo Kitamura GCEO3 did not give approval to SIS Company to record a provision for contract losses of at least JPY 4.2 billion in FY 2013 (IIC 2015, p. 33).

Japanese corporate decisions are arrived at by consensus and group decisionmaking from the bottom to the top (De Mente 2004; Ford and Honeycutt 1992; Taka 1994). Unlike in other corporations, in Japanese corporations the thin line between the concepts of in-group and reference group (Ting-Toomey and Kurogi 1998) disappears; group interactions are central to determining what is “right” and “wrong” (Stedham et al. 2008). However, the corporate culture in Toshiba was so pervasive that the employees could not go against the intent of their superiors. IIC (2015, p. 69) highlights that the CPs, who were subject to the will of such top management, the business division heads under the CPs, and in turn the employees under the heads continuously engaged in inappropriate accounting treatments to achieve the targets in line with the will of their superiors.

According to Kono and Clegg (2001), the president of a company is a powerful position and has strong control over his subordinates. Because they function as moral exemplars, “signaling behavior” by upper-level management is particularly important in regard to unethical behavior and disregard for legal rules (Shover and Hochstetler 2002). Especially under the lifetime employment system, the senior employees are relatively powerful because subordinates cannot move to another company (Kono and Clegg 2001; Ford and Honeycutt 1992), even if they feel that a superior is being unreasonable and unethical. A shobu (a fight to the finish) concept explains that Japanese businessmen characteristically view their battles in terms of shobu, in that every member of the company 1 The examples are too many to be extracted in this paper. We chose examples that best relate to the

cultural element. President. 3 Executive Officer in charge of business groups. 2 Company

78

R. Othman and R. Ameer

is expected to work as if the company’s survival depends on their efforts. Furthermore, the Japanese do not like to be outdone or lose at anything, and generally, they will go to extremes to prevent that from happening (De Mente 2012). Various alternatives would be attempted to conceal failures, often exacerbating the damage. On p. 68, the Independent Investigation Committee reported that … when it was difficult to achieve a large amount of profit improvement even with a concerted sales effort, a “Challenge” was given to achieve an overstated budget that exceeded the capabilities of the Company… each Company was driven into a situation where it was forced to engage in inappropriate accounting treatments, instead of carrying out accounting treatment reflective of performance at the end of the applicable period… An excessive Challenge was set for that subsequent period as well, and this resulted in Companies being forced to carry out inappropriate accounting treatment in an even larger amount in order to achieve it, the repetition of which caused the inappropriate accounting treatments to continue and expand in scale.

De Mente (2004, p. 22) explains the concept of akiramenai (do or die) in that individuals repress and deny their individuality in service to their families, communities, employers, and country. In the time of crisis, it is very difficult for staff to oppose the top management, especially when sacrifices and solidarity are required for the survival of the company that they belong to. The group is itself familylike, and it pervades even the private lives of its employees, for each family joins in the enterprise extensively (Chie 1988; Ford and Honeycutt 1992). In this closed world of membership, a sense of unity is promoted by means of the members’ total emotional participation (Chie 1988, p. 10) and, in this case, might be inevitable. Consequentially, the manipulated financial statements do not become evident until disaster strikes. Thus, unethical behavior is followed by further unethical behavior (Kono and Clegg 2001, p. 73). The Independent Investigation Committee reported various instances where the top management made the personal challenge mandatory, as they knew that the Japanese would often go into a gaman kurabe mode at the slightest hint of any kind of personal challenge (De Mente 2012). On p. 55, the IIC (2015) reported that For example, in the CEO Monthly Meeting on September 27, 2012, Norio Sasaki P4 strongly demanded an improvement of JPY 12 billion in the operating profit of the PC Business conducted by DS Company within three days, and also demanded a report on the plan of action the next day, September 28, 2012.

In a different subsidiary, IIC (2015) reported that What was fundamentally merely an estimate to be seen as a budget or goal amount from Corporate to the Visual Products Company was transformed into a mandatory profit and loss figure that needed to be achieved within Toshiba at some stage, driving the Visual Product Company to be in the situation where it had no choice but to push forward and achieve those figures (IIC 2015, p. 45).

4 President

5 Cultured Crime of Obedience and Fraudulent Financial …

79

IIC summarizes that From Financial year (FY) 2011 to FY 2012 when inappropriate accounting treatments were carried out broadly, those Companies were required by P to set out strict Challenges (excessive targets) in order to achieve budget. Therefore, the CP of each Company was faced with strong pressure to achieve these targets (IIC 2015, p. 68).

The Japanese people have been programmed to persevere in whatever they set out to do, regardless of the obstacles and hardships they may encounter. Thome and McAuley (1992) view the Japanese as behaving more like as professional soldiers rather than business people. In these circumstances, once a challenge had been set, the only acceptable approach was to follow it to the end. After pressured by one challenge to the other, this conditioning was so thorough that perseverance became automatic. Also, in a group context, their first priority is to protect and strengthen the group as a family, perhaps to rationalize their actions further. As discussed by Kono and Clegg (2001) and Ford and Honeycutt (1992), the traditional concept of family life determined the features of Japanese companies in that the managers refer to the company as “our company” rather than “the shareholders”. While the group seemed to be doing its best to protect the survival of its “family,” its actions tend to be as callous and ruthless as necessary to achieve its goals (De Mente 2004). This might be particularly necessary for the time of crisis where everyone must achieve whatever he or she was organized to do. This is contrary to the typical Japanese decision-making process, which usually is thorough, and involves very detailed research, consideration of as many options as possible, and staff commitment to developing consensus (Thome and McAuley 1992). However, the ringi system is also employed to review documented decisions by all sections and departments to confirm group decisions (De Mente 2004; Ford and Honeycutt 1992; Taka 1994). This consensual and homogenization process contributes greatly to the social harmony, but implicitly, everyone is equally conditioned to obey their superiors and their decisions. In Toshiba’s case, their decisions superseded decisions that should otherwise have been based on the appropriate accounting rules and standards (IIC 2015). These rules and standards are fundamental to any entity in preparing reliable financial statements. As reported by IIC, Finance and Accounting Division, which should have been responsible for ensuring appropriate accounting treatment in the Company, wanted to resolve the overstating profit by way of Channel Stuffing of ODM Parts, but the situation did not allow them to take such action. Instead, they intentionally provided insufficient explanations to the accounting auditors so that they would not be criticized by them, and acted in ways that could be seen to conceal the issues in an institutional manner. In these circumstances, the CFO and Finance and Accounting Division were unable to exercise their internal control function and correct the situation, and they continued to “tolerate” the situation (IIC 2015, p. 57).

The finance and accounting division’s responses to the auditors are what De Mente (2004) described as “masking” their true feelings. In this way, they appeared to keep things under control. The more common practices are to ignore things, simply, to behave as if unpleasant situations did not exist (De Mente 2004). As such, it is natural for them to respond without any consideration for the truth or for real intentions, not necessarily out of any inherent maliciousness, but as a means of self-preservation.

80

R. Othman and R. Ameer

Kono and Clegg (2001) commented that while almost all large corporations have management committees to carry out strategic decisions, the dysfunctional aspects of the corporate governance in Japanese corporations are that there is no one to check the power of the president (CEO). In addition to the finance and accounting division, the governance structure of Toshiba includes an Audit Committee. This committee is one of the various committees that report to the board of directors. The Audit Committee oversees the proper functioning of the internal controls and financial reporting system. IIC reported that Former CFO5 Mr. Tomio Muraoka was the chair of the Audit Committee … and fellow former CFO Mr. Makoto Kubo … they were both aware of the fact of the Channel Stuffing6 of ODM Parts, but no evidence was found to suggest that they took any action, such as making any kind of report by the Audit Committee (IIC 2015, p. 57).

It can be summarized that in Toshiba’s context, the accounting division and the Audit Committee, as the safe guardians of proper and reliable financial reporting systems, failed in their fiduciary duties but, as subordinates, they are expected to coordinate their behavior accordingly (Taka 1994) regardless of their functional duties. These group-oriented behavior modes give priority to common interests over individual interests (Takeshi 1988, p. 33) as harmony overrides all other considerations (Thome and McAuley 1992). Chie (1988, p. 13) explains that in firmly established institutions, such as a long-founded company, the institutional frame fulfills the important function of keeping the members together, whatever factions are found within it. Since members are classified primarily by the institution, whatever internal rivalries they may feel, they realize that they all belong to the same group. Japanese people, in general, have a cultural disposition to avoid disputes (Haley 1978). Tatemae is any rule of conduct, which Japanese accept by unanimous agreement, and they take it seriously as it is like a certificate that secures them membership in a coveted group. In the time of crisis, such as in Toshiba’s case, consensual agreement prompts readiness to act, which weakens the recalcitrant minority. There is an old and famous saying in Japan that warns “the nail that sticks up gets hammered down” (De Mente 2004, p. 279), a reference to the traditional Japanese custom of forcing conformity on anyone who stands out from the crowd. An individual member may harbor his or her own thoughts and beliefs, so long as he or she does not openly challenge the agreement. This situation is highlighted by the IIC, … on January 26, 2015 Audit Committee member Mr Seiya Shimaoka suggested to Makoto Kubo, chairman of the Audit Committee that a thorough examination be conducted regarding the accounting treatment for the restructuring of the PC Business … to review whether or not there was inappropriate accounting treatment and that it should be confirmed that there were no issues with the accounting treatment for the third quarter … Seiya Shimaoka made this request repeatedly to Makoto Kubo, chairman of the Audit Committee, as well as to executive officers including Hisao Tanaka P, but such request was not taken up by the Audit Committee (IIC 2015, p. 57). 5 Chief

Financial Officer. stuffing is a practice that suppliers use to encourage customers to buy extra inventory so as to increase current-period sales (Albrecht et al. 2016).

6 Channel

5 Cultured Crime of Obedience and Fraudulent Financial …

81

My Seiya’s requests, though ethically and morally correct, might be considered un-Japanese. Saving face is important in Japan, while open expression and conflict are discouraged (Stedham et al. 2008). According to Takeo (1988, p. 22), the Japanese hate to contradict or to be contradicted; they simply do not want to have divided opinions. Because supervisor and subordinate work within an arm’s length of each other and enjoy a constant rapport and healthy give-and-take exchange, there is also probably more polite disagreement than critical advice expressed by the Japanese subordinate (Nevins 1988, p. 128). The golden rule is that the junior man should invariably carry out any order from his immediate superior, for this immediate link between these two men is the source of existence of the junior man in the organization (Chie 1988, p. 12). Therefore, hesitation or refusal constitutes a violation of the system. A prompt acceptance of an order by a junior predisposes his senior in his favor, and the accumulation of such give and take contributes to the mobilization of the entire group. Though the decision might never be subjected to logical examination, the group can act on a generally accepted decision. It is common that even if a member pursues his or her own interests in the company, the other members exert social pressures on the member to comply with the group’s aggregate interest (Taka 1994, p. 70). In Japan, responsibility is a collective concept; corporate failure is usually followed by a ritualistic scapegoating, as seen in the resignation of senior executives in the scandals. Japanese guilt is distinct from Western guilt in that it is associated with a sense of betraying one’s group (Dale 1986). Presidents of corporations that are involved in reprehensible behavior are targeted by the news media for a kejime judgment if they do not voluntarily resign on their own (De Mente 2004). As reported by “Toshiba chief executive resigns over scandal” (2015), Toshiba’s chief executive and president Hsiao Tanaka and vice-chairman, Norio Sasaki, resigned amid revelation of Fraudulent financial reporting by overstating its operating profit by a total of 151.8 bn yen ($1.22 bn, £780m). In the same news, Japan’s finance minister, Taro Aso, said the case could undermine confidence in corporate governance in Japan (Toshiba chief executive resigns over scandal 2015).

4 Discussion Our analysis revealed that there are six cultural characteristics that emerged within the context of the Toshiba’s Fraud investigation report. Figure 2 shows that the most frequent theme is “keeping things under control” (37%), followed by hierarchy (28%), and the least frequent is “consensual decision-making” (7%). In Toshiba’s context, the aim was “keeping things under control.” This was generally achieved through “consensual decision-making” in CEO monthly meetings (IIC 2015). These meetings generally served as rituals performed to cement subordinates’ commitment. It is understandable that during the time of crisis, the employee’s sense of belonging to the company has become ever stronger. Japanese makoto means each one of the employees must properly discharge their obligations to ensure that

82

R. Othman and R. Ameer

40% 35% 30% 25% 20%

37% 28%

15% 10% 5% 0%

18% 7%

9%

Personal Consensual Hierarchy Non-verbal Challenge DM

Under Control

Fig. 2 Most frequent cultural themes

everything will flow smoothly and that harmony is maintained (De Mente 2012, p. 460). In Japan, the relations between managers and employees were essentially harmonious. Subordinates loved their superiors, just as they had always done, and superiors preserved their traditionally benevolent attitudes toward those who worked for them. However, in the time of crisis, hierarchical harmony emerged instead. They had to put their trust in the leader to overcome the situation. Trust is a core concept in the gemeinschaft conception of organization, and it is a strong feature of Japanese corporations. Decisions were tasked to one individual in a position of authority and responsibility (Kono and Clegg 2001), in this case, the president. IIC (2015) reported that a de facto rule existed for Toshiba accounting practices, whereby approval from senior personnel was required before making an accounting treatment if it is of a significant amount. IIC (2015) also reported that certain members of top management were aware of the intentional overstating of apparent current-period profits and postponement of recording expenses and losses, or the continuation thereof, but did not give instructions to stop or correct them. In dealing with these situations, the top management, unwilling to deviate from the established way of doing things, would do nothing, but this would only complicate matters (De Mente 2004). However, this “nonverbal” indication was not applied in a situation where strict “challenges” were imposed. The president challenged each subsidiary’s company president to improve their income to the target set by him. He also implied that under-performing companies would have to withdraw from their business if the profit was not improved (IIC 2015). Already operating at losses, each company was driven into a situation where it was forced to engage in recording inappropriate accounting treatment. In an analysis of the texts in the IIC (2015), the word combination of “culture, challenge, and superior” covers 63% of the report. The word challenge is also associated with other words such as sales effort, business strategy, pressure, capability, policy,

5 Cultured Crime of Obedience and Fraudulent Financial …

83

strongly enforced, closer to budget, excessive, initiatives, intent, inappropriate, large amounts, unsubstantiated, and high profit improvement as can be seen in Fig. 3. This indicates the pressures of meeting a challenge and how a challenge is also linked to other strategic initiatives such as policy and business strategy (Fig. 4). In the Toshiba context, the challenges were set by the president of the company. The principles of wa carry forth into the work environment, creating a strong emphasis on seniority and rank where cooperation is expected (Linowes 1994). The vertical relation becomes the actuating principle in creating cohesion among group

Non-verbal communication

Hierarchy

Personnel challenge

Consensual Decision-making

Keeping things under control Fig. 3 Group mode behavior mobilization in the time of crisis

Fig. 4 Words associated with challenge in Toshiba context

84

R. Othman and R. Ameer

members (Chie 1988). Other functional departments such the corporate audit division and Audit Committee, which were supposed to oversee the proper functioning of the internal control systems, including the financial reporting systems, did not do the follow-up for improvements of the situation. It was further exacerbated by having the president of the company in charge of the corporate audit division. Astonishing as it can be, the lifetime employment embedded in the corporation also made this easier. The obligation to the employee is loyalty and diligence, which is not discharged until retirement. This filial piety and loyalty define the individual in accord with the interests of the whole (Tetsuro 1988; Clark 1988), and facilitating the rote obedience led to the crime of obedience.

4.1 Transcending Cultural Boundaries In a world dominated by capitalistic economic systems with many organizations conducting business and competing internationally, the explanatory power of culture needs to be accepted as an enigmatic local economic barrier. The understanding of where cultural limitations would be vulnerable would be useful in devising more appropriate preventative strategies without sacrificing the appreciation of culture and society at large. In regard to dealing with culture and ethical issues, we proposed some recommendations that might be critical for multinational corporations. Though these suggestions are not conclusive, a comprehensive long-term plan should not in any way exclude them. Figure 5 depicts the aim toward an ethical culture of an organization. Tone at the top

Risk assessment (including local culture influence)

Employees Training on Culture and Ethics

Code of Ethics

Working check & balance (including Corporate Governance)

Fig. 5 Toward an ethical culture

Ethical Culture

5 Cultured Crime of Obedience and Fraudulent Financial …

85

Tone at the top. The tone at the top of ethical culture is a must, but ethics cannot be understood independent of the local cultural fabric (Stedham et al. 2008, p. 549). Multinational corporations operating in highly collectivistic cultures need to consider to what extent a decision or a context (such as a crisis situation, operationally or financially) may affect the group. The top management must not ignore the impact of hierarchical influences toward ethical conduct and compliance with the law (Shover and Hochstetler 2002). The culture of conformity disguising itself behind the mask of consensus decision-making, either verbally or not, must be discouraged. Unattainable challenges or targets must be scrutinized, especially when the financial and operational situations are deteriorating. The management of business ethics can provide a basis to institutionalize ethics in global firms to create an internal culture consistent with ethical goals of the corporation (Joseph and Hashmi 2018). Employees training. Okleshen and Hoyt (1996) suggest that training may be a promising avenue for reducing the influence of cultural factors on ethical decisionmaking. An understanding of some of the underlying factors of ethical judgment in a country allows a more strategic approach to assessing and reducing risk from ethical issues. The local employees need to be trained in different aspects of the operation in which there is a conflict between culture and ethics. The areas to be trained must be further specified in those departments that are vulnerable to illegal activities and crime. Typical anti-Fraud programs may not take into account cultural differences that may influence how employees respond to situations that may be indicative of Fraud (Bierstaker 2009). Code of Ethics. As argued by Stedham et al. (2008), members of a different culture will come to different conclusions about the ethical content of a situation. The nature of the ethical topics to be covered must not be “one size fits all” but take into consideration different contexts, layers, and timings, e.g., where indicators show that the companies are heavily pressured in times when the financial performances declined. Provision of the code of ethics may not be sufficient without proper consultation with the local management and employees (Cherry 2006). Risk assessment. In recent years, corporate management is required to develop rigorous anti-Fraud programs. Fraud and corruption risk assessment should be included as part of forensics due diligence process to reduce the risk of future liability and reputation (Bierstaker 2009). Management should also conduct an assessment of specific risks facing their company based on applicable laws, the industry in which the company operates, the amount of interaction with government officials they have, and their geographic location (Bierstaker 2009). Hiring a third-party auditor to conduct due diligence investigation is recommended (Atkinson 2004). Check and balance mechanism. A good working corporate governance is necessary for all culture and countries. Fear of cultural and managerial hostility to whistleblowing is a barrier to effective corporate governance (Verschoor 2003). The whistleblowing system needs to be revised and sufficiently utilized into one that whistleblowers can trust and state their opinions safely. In addition, the internal auditors need to be further trained and educated to help them identify warning signs of Fraud and perform surprise audits when necessary, and on a periodical basis (Ernst and Young 2008).

86

R. Othman and R. Ameer

In summary, the awareness of and sensitivity to culture in an organization are touted as a powerful tool for understanding and harnessing organizational potential (Kilmann et al. 1985). Thus, the lessons learned from Toshiba are not isolated from other corporations in other countries. Corporate culture may be equally or more important than one’s cultural heritage when it comes to guiding ethical behavior and shaping attitudes about Fraud (Watson 2003). However, companies may not put sufficient emphasis on establishing their own corporate culture and risk the local culture filling the void. In this scenario, the C word of culture can be a reason for a C word of crime and, if not prevented, could become the C word of cancer, with no cure.

5 Conclusion The main aim of this chapter is to illustrate how culture can constrain individuals from abiding by the law, due to pressures to conform and ultimately commit the crime of obedience. Our study shows how the culture was used and abused in an environment where ethical decisions were replaced with the need to portray business as usual when in fact, the corporation as a group was collapsing. In Toshiba’s case, the top management institutionalized various inappropriate accounting treatments directly and indirectly through their subordinates’ understanding (and/or misunderstanding) of what was expected of them in the situation through the crime of obedience. The motivation of the president and the subordinates for surviving the situation were cemented based on their understanding of the unspoken language of group mode behavior. Our chapter contributes to the examination of culture in Fraudulent financial reporting literature. This study is not without its limitations. Firstly, we remain ineluctably foreigners to Japanese culture by birth and work. This by definition lacks the power of authoritative introspection into the Japanese culture uniqueness, which, according to the nihonjinron, is the birthright of those born of Japanese blood. In short, we might not be able to eliminate our own perceptual bias of our consciousness. Secondly, analysis is based on one independent investigation report. Though it is common in culture criminologist studies, we are unable to extend our scope of inquiry by taking into consideration other influences of industrial organization and government on the issues investigated. Therefore, we only analyze those relevant cultural characteristics that are pertinent to Fraudulent financial reporting. Even though findings from case studies can be used to generate hypotheses, they are poorly suited for theory testing. For instance, findings gained from case studies of the most egregious incidents and offenders may have limited application to more typical organizational crimes (Shover and Hochstetler 2002, p. 9). Our study is not an exception. Acknowledgements We thank the anonymous reviewers and the participants at the Corruption Parallel Session, Financial Markets and Corporate Governance Conference 2017, in which the idea for this book chapter was first conceived.

5 Cultured Crime of Obedience and Fraudulent Financial …

87

References Albrecht WS, Albrecht CO, Albrecht CC et al (2016) Fraud examination. Cengage Learning, USA Atkinson W (2004) Doing business in and with China: the risks are great, but so are the rewards. Risk Management Magazine, March, pp 24–29 Aizawa A (2018) Institutional isomorphism in Japanese forms’ compliance activities. Ann Bus Admin Sci 17(2):57–68 Bierstaker JL (2009) Differences in attitudes about fraud and corruption across cultures: theory, examples and recommendations. Cross Cult Manag Int J 16(3):241–250. Retrieved from https:// doi.org/10.1108/13527600910977337 Braithwaite J (2001) Conceptualizing organizational crime in a world of plural cultures. In: Pontell HN, Shichor D (eds) Contemporary issues in crime criminal justice. Essays in honor of Gilbert Geis. Prentice-Hall, Upper Saddle River, NJ, pp 17–32 Chan KH, Jiang EJ, Mo PLL (2017) The effects of using bank auditors on audit quality and the agency costs of bank loans. Acc Horz 3(4):133–153 Chen TY, Gu Z, Kubota K et al (2015) Accrual-based and real activity based earnings management behavior of family firms in Japan. Jpn Acc Rev 5:1–44 Cherry J (2006) The impact of normative influence and locus of control on ethical judgments and intentions: a cross-cultural comparison. J Bus Ethics 68:113–132 Chie N (1988) Hierarchy in Japanese society. In: Okimoto DI, Rohlen TP (eds) Inside the Japanese system—readings on contemporary society and political economy. Stanford University Press, Stanford, pp 8–15 Chiu EM (2006) Culture as justification, not excuse. Legal studies research paper series (Paper #06-0043). St. John’s University School of Law, Queens, New York Clark R (1988) The company as a family: historical background. In: Okimoto DI, Rohlen TP (eds) Inside the Japanese system——readings on contemporary society and political economy. Stanford University Press, Stanford Cooke TE (2006) The evolution of financial reporting in Japan: a shame culture perspective. Acc Bus Financ Hist 1(3):251–277. https://doi.org/10.1080/09585209100000038 Cressey DR (1995) Poverty of theory in corporate crime research. In: Geis G, Meier RF, Salinger KM (eds) White-collar crime: classic and contemporary views, 3rd ed. Free Press, New York Davidson DK, Tanimoto K, Jun LG, Taneja S, Taneja PK, Yin J (2018) Corporate social responsibility across Asia: a review of four countries. In: Weber J, Wasieleski DM (eds) Corporate social responsibility, business and society, vol 360, no 2. Emerald Publishing Limited, pp 73–132 Dale PN (1986) The myth of Japanese uniqueness. The Nissan Institute/Routledge Japanese Studies series, London De Mente BL (2004) Japan’s cultural code words. Turtle Publishing, Boston De Mente BL (2012) Japan: understanding & dealing with the new Japanese way of doing business!. Phoenix Books, Essex Dugar A, Gujarathi MR (2018) Toshiba’s creative accounting for construction contracts. Iss Acc Educ 33(3):117–134. https://doi.org/10.2308/iace-52127 Doi K (1971) Amae no Kozo (the structure of reliance). Kobundo, Tokyo Ernst & Young (2008) Corruption or compliance? Weighing the costs: 10th global fraud survey. Ernst & Young, New York, NY Ferrell J (1999) Cultural criminology. Annu Rev Soc 25:395–418 Ferrell J, Sanders CR (1999) Cultural criminology. Northeastern University Press, Boston Fonäs J (2000) The crucial in between the centrality of mediation in cultural studies. Eur J Cult Stud 3(1):45–65. https://doi.org/10.1177/a010862 Ford JB, Honeycutt ED Jr (1992) Japanese national culture as a basis for understanding Japanese business practices. Bus Horizons 35(6):27–34 Fujifilms Holdings Corporation (2017) Investigation report. Available at: https://www.fujifilmh oldings.com/en/pdf/investors/finance/materials/ff_irdata_investigation_001e.pdf. Accessed Oct 2019

88

R. Othman and R. Ameer

Gebler D (2006) Is your culture a risk factor? Bus Soc Rev 111:337–362. https://doi.org/10.1111/ j.1467-8594.2006.00276 Godkin L, Endoh M, Cahill M (1996) Japanese-focused organizational behavior research: contents and concerns 1981–1993. Int J Org Anal 4(1):5–19. https://doi.org/10.1108/eb028839 Haley JO (1978) The myth of the reluctant litigant. J Jpn Stud 4:359–390 Hamilton VL, Sanders J (1995) Crimes of obedience and conformity in the workplace: surveys of Americans, Russians, and Japanese. J Soc Iss 51(3):67–88 Hofstede GH (1980) Culture’s consequences: international differences in work related values. Sage Publications, Beverly Hills Investigation Report (ICO) (2011) Investigation report. Retrieved from https://www.olympus-glo bal.com/en/common/pdf/if111206corpe_2.pdf Independent Investigation Committee (IIC) (2015) Investigation report. Available at: https://www. toshiba.co.jp/about/ir/en/news/20151208_2.pdf. Accessed Aug 2019 Joseph G, Hashmi A (2018) Legitimacy and institutionalization of code of conduct: the management of business ethics. In: Jeffrey C (ed) Research on professional responsibility and ethics in accounting, vol 21. Emerald Publishing Limited, Bingley, UK, pp 53–82 Kelman HC, Hamilton VL (1989) Crimes of obedience. Yale University Press, New Haven Kenyon W, Tilton PD (2012) Potential red flags and Fraud detection techniques. In: Golden TW, Skalak SL, Clayton MM, Pill JS (eds) A guide to forensic accounting investigation. Wiley, Hoboken, NJ, USA, pp 231–269 Keys JB, Denton LT, Miller TR (1994) The Japanese management theory jungle-revisited. J Manag 20(2):373–402 Khondaker and Bremer (2017) The implications of the toshiba accounting scandal for auditor liabilities in Japan. Available at https://rci.nanzan-u.ac.jp/mcenter/shiryou/item/wp1704_.pdf (accessed 28 May 2020) Kilmann RH, Saxton MJ, Serpa R (eds) (1985) Gaining control of the corporate culture. Jossey-Bass, San Francisco Kimura F (2017) Consolidated earnings management in consolidated subsidiaries. Cont Discl Res 16:25–47 Kono T, Clegg S (2001) Trends in Japanese management. Palgrave, New York Linowes RG (1994) The Japanese manager’s traumatic entry in the United States: understanding the American-Japanese cultural divide. Acad Manag Perspect 7:21–38 Lytle AL, Brett JM, Barsness ZI et al (1995) A paradigm for quantitative cross-cultural research in organizational behavior. In: Staw BM, Cummings LL (eds) Research in organization behavior, vol 17. JAI Press, Greenwich, CT, pp 167–214 Moody-Adams M (1994) Culture, responsibility, and affected ignorance. Ethics 104(2):291–309 Morgan AR, Burnside C (2014) Olympus corporation financial statement Fraud case study: the role that national culture plays on detecting and deterring Fraud. J Bus Case Stud 10(2):175–184 Nakashima M, Ziebart DA (2016) Tone at the top and shifts in earnings management: evidence from Japan. J Forens Invest Acc 8(2):288–324 Nemoto K (2018) Global production, local racialized masculinities—profit pressure and risk-taking acts in a Japanese auto-parts company in the United States. Men Masc. https://doi.org/10.1177/ 1097184X18775468 Newman K, Nollen S (1996) Culture and congruence: the fit between management practices and national culture. J Int Bus Stud 27:753–779 Nevins TJ (1988) People management is what it’s all about. In: Okimoto DI, Rohlen TP (eds) Inside the Japanese system—readings on contemporary society and political economy. Stanford University Presss, Stanford Okleshen M, Hoyt R (1996) A cross-cultural comparison of ethical perspectives and decision approaches of business students: the United States of America versus New Zealand. J Bus Ethics 15:537–550 Redfield R (1968) The primitive world and its transformation. Peregrine, Harmondsworth

5 Cultured Crime of Obedience and Fraudulent Financial …

89

Rodionova Z (2016) Toshiba’s record-breaking shares drop wipes $6.5bn off company’s value. Independent. Available at: http://www.independent.co.uk/news/business/news/toshiba-sharedrop-market-value-6-billion-Japanese-technology-company-decline-a7499961.html. Accessed Jan 2020 Savage R (2015) Toshiba’s $1.2 bn accounting scandal and the problem with Japanese corporate governance. Management Today. Available at: https://www.managementtoday.co.uk/toshibas12bn-accounting-scandal-problem-Japanese-corporate-governance/article/1356743. Accessed Jan 2020 Shover N, Honaker D (1992) The socially bounded decision making of persistent property offenders. How J Crim Just 31:276–293 Shover and Hochstetler (2002) A cultural explanation and organizational crime. Crime Law Soc Change 37:1–18. https://doi.org/10.1023/A:1013399001934 Simpson SS, Koper CS (1992) Deterring corporate crime. Criminology 30:347–375 Stedham Y, Yamamura JH, Lai SC (2008) Business ethics in Japan and Taiwan: relativist and utilitarian perspective. Asia Pac Bus Rev 14(4):353–551 Sutherland EH (1983) White collar crime: the uncut version. University Press, Yale Suzuki D, Yamada J (2016) Accounting Fraud and accounting standards: the case of Toshiba’s Fraudulent accounting. In: Proceedings of the 5th international conference on accounting, auditing, and taxation (ICAAT 2016), Atlantis Press, France Tai-Yuan C, Gu Z, Kubota K et al (2015) Accrual-based and real activities based earnings management behavior of family firms in Japan. Jpn Acc Rev 5:21–47. https://doi.org/10.11640/tjar.5.201 5.02 Taka I (1994) Business ethics: a Japanese view. Bus Ethics Q 4(1):53–78 Takeo D (1988) Dependency in human relationship. In: Okimoto DI, Rohlen TP (eds) Inside the Japanese system—readings on contemporary society and political economy. Stanford University Press, Stanford, pp 20–24 Takeshi I (1988) The Japanese will to work. Inside the Japanese system—readings on contemporary society and political economy. Stanford University Press, Stanford Tetsuro W (1988) The family as an ethical system. In: Okimoto DI, Rohlen TP (eds) Inside the Japanese system—readings on contemporary society and political economy. Stanford University Press, Stanford, pp 3–6 Thome K, McAuley IA (1992) A study of Japanese managers in Asia. Longman Singapore Publishers (Pte) Ltd, Singapore Thomas WB, Hermann DR, Inoue T (2004) Earnings management through affiliated transactions. J Int Acc Res 3(2):1–25 Ting-Toomey S, Kurogi A (1998) Framework competence in intercultural conflict: an updated face-negotiation theory. Int J Intercult Relat 22:187–225 Toshiba chief executive resigns over scandal (2015) In BBC news. https://www.bbc.com/news/bus iness-33605638. Accessed Jan 2020 Tsunogaya N, Chand P (2012) The complex equilibrium paths towards International Financial Reporting Standards (IFRS) and the Anglo-American model: the case of Japan. Jpn Acc Rev 2:117–137 Tunick M (2004) Can culture excuse crime? Evaluating the inability thesis. Punishm Soc 6(4):395– 409. https://doi.org/10.1177/1462474504046120 Verschoor C (2003) Will new law result in more whistleblowing? Strateg Finance 84(8):22–24 Watson D (2003) Cultural dynamics of corporate Fraud. Cross Cult Manag 10:40–55 Yamada A, Sakurai Y, Ishida R (2018) Influence of geographic distribution on real activities manipulation within consolidated companies. Available at: http://dx.doi.org/10.2139/ssrn.315 7058. Accessed Jan 2020 Zack G (2015) The link between corporate culture and Fraud. Fraud Magazine, November/December. Available at: http://www.Fraud-magazine.com/article.aspx?id=429499 0480. Accessed Jan 2020

Chapter 6

The Role of Gig Economy in Supporting SME Internationalisation Samar Kal Youssef and Arijit Sikdar

Abstract Small and medium enterprises (SMEs) play a major role in most economies, particularly in emerging countries where SMEs contribute up to 60% of total employment and up to 40% of GDP. One of the consequences of this has been the growing internationalisation of SMEs. However, small firms are characterised by a lack of resources in key areas such as financial, managerial, and social capital. So SMEs may not have the prerequisite managerial resources to internationalise, nor the luxury of unlimited time in which to acquire such resources. This requires that SMEs need to access resources swiftly through collaboration with other entities. “Gig economy” could play a role which is providing solution to the SMEs. The gig economy is comprised of a set of freelance individuals who typically offer their services for a short period of time. With the dawn of knowledge economy, the popularity of on-demand short-term jobs is increasing. Such decision is not risk-free as the notion of power, and dependency plays a critical role in the company–supplier relationship. Using the four theoretical lenses—agency theory, resource-based view (RBV), resource dependency theory and transaction cost theory—this paper tries to evaluate the impact of gig economy on SME’s ability to access resources effectively. Keywords Small and medium enterprises (SME) · Gig economy · Resource dependency · Transaction cost · Internationalisation

1 Introduction It is hard to miss the drastic change that is shaping the standard employment market in the world today. The labour market is being gradually substituted with casual work undertaken by individuals hired on a project-to-project basis, i.e. freelancing or what is known as the “gig economy”. In 2017, more than 57 million adults who were eligible to work participated in the gig economy in the USA alone and contributed more than $700 billion to the national economy (Gleim et al. 2019). According to S. K. Youssef · A. Sikdar (B) Faculty of Business and Management, University of Wollongong, Dubai, United Arab Emirates e-mail: [email protected] © Springer Nature Singapore Pte Ltd. 2020 N. Zakaria et al. (eds.), Transcending Cultural Frontiers, https://doi.org/10.1007/978-981-15-4454-5_6

91

92

S. K. Youssef and A. Sikdar

the CEO of Intuit, Brad Smith, “The gig economy [in the USA] … is expected to be 43% by the year 2020” (Frazer 2019). The increase in on-demand service platforms and e-services has fuelled the gig economy. End-users of those services expect more availability, less time waiting for the service or purchase to be completed or delivered, the frequent introduction of new features and updates that improve the customer experience and the ability to provide instant feedback (James 2018). Examples of these kinds of platforms include Uber, Careem, Talabat and Fetchr. The gig economy provides opportunities for young people who are still attending school and who need additional income. It supplements the unemployed and underemployed workforce with extra revenue and gives the retired workforce a chance to keep sharing their expertise (Gleim et al. 2019). Online outsourcing provides companies with the needed resources to perform certain tasks that require specific talents or skills; it speeds up their hiring processes, and it increases productivity and flexibility within the workforce (Kuek et al 2015). Online open and managed-services platforms have facilitated the coupling of supply and demand in the gig economy. Many of these platforms, such as Freelancer, Upwork and CrowdFlower, have more than 11 million registered users offering their services to potential employers. Kuek et al. (2015) state that the private sector is pushing the demand for the gig economy with 85% of the private companies being small and medium enterprises (SMEs). The gig economy allows start-ups to operate like a large organisation without incurring expensive overheads. Generally, small organisations cannot afford to hire “A class” employees to grow their business, but the gig economy allows them to use skilled labour to complete assigned projects without large payrolls. Moreover, the gig economy allows small organisations to test out candidates before committing to a permanent gigger. Another benefit of the gig economy for small organisations is the accessibility it provides to new markets and international clusters, thus improving the quality of products and services provided to the end-user. Since small organisations rely on better customer engagement to grow their business, the gig economy allows them to hire on-demand, motivated giggers who are genuinely interested in taking the job, especially since giggers are compensated upon job completion and driven by accumulated ratings about their provided services, thus improving their personal brand and authenticity (James 2018). Access to quality manpower is an issue faced by small organisations across the world. SMEs polled in Singapore have two key challenges: hiring the right people (43%) and retaining employees (27%).1 According to Ernst and Young (2018), the growth of SMEs in the Association of Southeast Asian Nations (ASEAN) has been hampered by a lack of quality manpower; 70.2% of companies faced a shortage of quality talent in the marketplace, 66.8% faced increased labour costs and 66.2% faced

1 https://www.humanresourcesonline.net/hiring-and-retaining-talent-are-the-top-challenges-for-

smes-in-singapore/.

6 The Role of Gig Economy in Supporting SME Internationalisation

93

challenges in retaining staff. Organisation for Economic Cooperation and Development’s (OECD) SME Ministerial Conference (2018) has identified management and workforce skills as critical for SME growth. The gig economy is synonymous with outsourcing as it implies giving a part of your tasks as a company to an outsider (Greenwood et al. 2017). Outsourcing has the benefits of reducing costs and focusing a company on its core business. While outsourcing does reduce capital investment, resource dependency and transaction cost (Yilmaz and Bedük 2014), it comes with difficulties, as evident from Deloitte’s (2005) survey in which 70% of the respondents had a negative experience with outsourced work. This is due to the changed nature of requirements within a business that demand flexibility, except that outsourced contracts are usually long term and cannot easily be terminated (Freytag et al. 2012). When switching costs are high, companies prefer to keep the outsourced contracts running instead of backsourcing. Suppliers want companies to face high switching costs related to their operations, staff recruitment and in-house learning in order to keep their outsourcing business running, thus increasing the dependence of the company on the outsourced supplier (Whitten et al. 2010). If outsourcing is a necessity, then it is recommended to outsource complex and interactive services to countries where the culture is similar to the source country in order to minimise transaction costs and to choose countries where the institutional quality is equivalent to one’s country of origin; while less demanding work can be outsourced from anywhere (Liu et al. 2011). Several questions come to mind about the way the gig economy is transforming the way outsourced work is being done, from solopreneurs to freelancers. Will SMEs benefit from the gig economy as a better alternative to traditional outsourcing? And will those short-term assignments that are fulfilled by giggers reduce SMEs’ risk of resource dependency and transactional costs in contrast to long-term outsourced contracts?

2 The Gig Economy 2.1 Definition The term “gig economy” started resonating across the world right after the economic crisis of 2008–2009 when many people lost their full-time jobs and were obliged to take up small tasks. The gig economy is comprised of a set of freelance individuals who typically offer their services for a short period of time under two broad categories, knowledge-based or service-based gigs (Frazer 2019). Giggers (someone who works in the gig economy) or freelancers are not classified as full-time employees and do not receive any employment privileges such as bonuses, sick leave, compensation and medical insurances. There is an ongoing debate about the classification of giggers and whether they are protected by law so that they are not taken advantage of. Ways to ensure protection for giggers include

94

S. K. Youssef and A. Sikdar

providing mandatory training on the gig they sign up for and access to government benefits and treating giggers as part-time employees and not as a permanent or fulltime employees. These changes can be done by adjusting regulations in the working environment (Parigi and Ma 2016). The gig economy occurs predominantly in the Western world as the rate of ondemand workers has outpaced the number of full-time employees across Europe and the USA. It is expected that by 2027, half of the workforce in the USA will be gigger (Pofeldt 2017). The rapid growth in on-demand work is driven by digitalisation and a shift in demographics. A study by PricewaterhouseCoopers (PwC) concluded that the desire to work independently increases with age as individuals look for more flexibility and less pressure (Morgan Stanley 2018). Such a rapid metamorphosis in the working landscape has also reached other parts of the world. In the Middle East, where youth unemployment rates reach 30% of the total workforce and where citizens in war-torn countries need to generate income in order to survive, the gig economy is seeing traction (Wamda 2017). For example, start-ups like Talabat, Careem and Fetchr in the Gulf Cooperation Council (GCC) region rely on the gig economy to lower their operating costs, lower their hiring costs and drive new demands in the market with their innovative offerings (Al Tamimi 2018). The gig economy empowers the gig workers, or giggers, to showcase the skills that they excel in. Workers are no longer forced to attend to tasks that they do not want to do. The gig economy allows workers to take jobs at their own pace, without incurring physical or emotional stress2 . With the digital era, the culture towards work has changed and people no longer aspire to have a job for life. People are seeking work-life balance and mobility. Similarly, the employers’ mentality is changing as the nature of doing business has shifted towards servicing projects and contracts (Arabian Business 2017). With the gig economy, independent contractors can benefit from the flexible lifestyle provided by this new economy. Freelancers can work remotely and can take up as much work as they want. The typical work obligations such as reporting on time, checking in at the office or conforming to a certain work culture are no longer applicable. Such flexibility can reduce frustration and emotional stress for workers (James 2018).

2.2 Platforms Facilitating the Gig Economy With the dawn of the knowledge economy, the demand for science, technology, engineering and math (STEM) skills and creativity in advertising, design, TV, music and film is steadily increasing, as is the popularity of on-demand short-term jobs. Such contract-based labour is facilitated by the rise of online coupling platforms that allow employers to hire freelancers for specific gigs remotely (Popiel 2017). 2 https://theconversation.com/how-gig-economy-gives-a-mental-health-boost-to-workers-new-res

earch-120924.

6 The Role of Gig Economy in Supporting SME Internationalisation

95

Gig platforms are facilitators; they act as sustainable employment opportunity generators. Such platforms help to reduce the gap between the supply and demand for labour across the globe. The major benefits of these platforms include the efficiency in matching workers to client and improving the level of participation within the labour force (Schwellnus et al. 2019). Samasource, CrowdFlower, Mobile Works, oDesk and Elance are examples of global microwork online platforms (Graham et al. 2017b). A rating system ranks the best giggers and allows the giggers to build their reputations on those platforms; in other words, the system creates an online competitive space (Graham et al. 2017a). On the other hand, coupling platforms can create an oversupply of workers, employment insecurity, discrimination, social isolation, overwork, opacity, taxation and sub-intermediaries (Graham et al. 2017a) The gig economy is fuelled by four types of digital platforms: crowdwork, transportation, delivery/home tasks and online freelancing. Such platforms provide giggers with the opportunity to find the tasks that match their skills. The pay is dependent on the level of skill required and the duration of the work at hand. Benefits of gig platforms include allowing job seekers from around the world to compete against each other and reducing the impact of job discrimination and labour requirements within one’s country (Kalleberg and Dunn 2016).

2.3 Types of On-Demand Workforces in the Gig Economy Three main categories of workforces have contributed to the increase in selfemployed ventures: managers, professionals and technical staff (Brinkley 2016). Such jobs include graphic design, video editing, content creation and software development; the lower tier of jobs available in the gig economy includes microworks such as data entry, social media posting, image tagging, reading and checking ratings (Abraham et al. 2016). One of the biggest freelancing online platforms in the USA, “Upwork”, allows companies to browse for freelancers by country and by type of service. Some of the available freelance jobs on the web site fall under categories such as software, web and applications development, IT and networking, data scientists, analytics, engineering and architecture, design and creative writing, translating, legal work, accounting, consultancy, sales, marketing, admin support and customer service.3 Another freelancing coupling platform is “Freelancer”; the web site has more than 32 million giggers registered in its database and offers a vast range of job categories. It even includes product sourcing specialists, manufacturing, transportation, shipping and general labour.4

3 https://www.upwork.com/hire/. 4 https://www.freelancer.com/about.

96

S. K. Youssef and A. Sikdar

3 SMEs’ Growth Hurdles Around the World SMEs are major contributors to any economy because they create jobs, improve the GDP of nations and increase economic activity. The flexible nature of SMEs equips them with the ability to innovate at a faster pace than their larger counterparts (Link and Bozeman 1991). Innovation is crucial for SMEs because it is linked directly with growth, improved performance and creating a sustained competitive advantage. Yet SMEs have unrealised innovation potential due to various hurdles they face. According to the OECD (2017), SMEs face several hurdles at different stages of their organisational life cycles. During the early stage of a start-up, management skills are needed for survival. Once SMEs are fully operational, manpower and innovation become a necessity. Lastly, in order to grow, innovation remains crucial. SMEs reported that market failures, government regulations, labour costs, access to foreign markets and a lack of qualified individuals hampered their growth and innovation potential (Harvie and Lee 2003). A lack of qualified manpower hampering SMEs has been reported from around the world. For example, one of the main hurdles against innovation faced by SMEs in Turkey is the lack of qualified personnel (Demirbas et al. 2011). In Oman, SMEs’ growth has been reported to have been hampered by the lack of human resources (Al Bulushi and Bagum 2017). In India, SMEs in the technology industry reported that they would undertake innovation initiatives if they had adequate skilled manpower (Subrahmanya 2015). This trend is further compounded because these qualified workers are difficult to hold on to. For example, 55% of SMEs in Canada are unable to retain their skilled labour (OECD 2018). In becoming international, SMEs face challenges such as a lack of credibility in foreign markets (Paul et al. 2017), the need to rely on specialised information for decision-making (Nalcaci and Yagci 2014), and the psychic distance barrier to identify and exploit opportunities in international markets (Oviatt and McDougall 2005). Acquiring the knowledge to overcome the challenges in international markets requires investment in human resources in foreign markets. Large firms can do this easily by setting up subsidiaries staffed with expertise to develop knowledge-creation routines and learning regimes, but SMEs lack adequate resources to do the same5 . Thus, the importance of access to quality manpower lies at the heart of SME success. Given that quality manpower might consider working for SMEs under the traditional employment context as risky for their career goals, the gig economy provides an opportunity to access such manpower in foreign markets without making investments like larger firms. As giggers have the requisite skills and are willing to work based on the nature of work and not the organisation, they could help SMEs access quality manpower. However, giggers would pose challenges for SMEs to deal with new issues: temporary contracts, renegotiations and how to control proprietary knowledge6 . Therefore, there is a need to understand to what extent the gig economy could 5 https://www.businesstimes.com.sg/hub/emerging-enterprise-2019/expanding-overseas-still-not-

an-easy-task-for-smes. 6 https://serraview.com/gig-economy-impacting-corporate-workplace/.

6 The Role of Gig Economy in Supporting SME Internationalisation

97

support SMEs’ ability to access quality human resources. Four theories—agency theory, resource-based view (RBV), resource dependency theory and transaction cost theory—provide a useful lens to analyse the effective access and use of resources and can be used to assess the impact of the gig economy on the success of SMEs.

4 Theories Governing Resource Utilisation Outsourcing has been around for quite some time as a method of focusing an organisation on its core competencies while giving away non-core activities to outside stakeholders specialised in those tasks. Outsourcing decisions have shifted in nature from the very first neoclassical approach of outsourcing production for reducing costs and overheads, to managing transactions in the make or buy decision, to the most recent RBV approach that entails keeping the core competencies in-house while outsourcing all other activities. Such decisions are not risk-free as the notions of power and dependency play a critical role in the company–supplier relationship (Caniëls and Roeleveld 2009). Developed countries are adopting offshore outsourcing from emerging markets as a means of counterattacking the increased local and global competition and maintaining a competitive advantage. Companies such as Delta Airlines, HP, Dell and GE adopted this strategy as it allows them to free up capital tied to recurring internal business activities and invest it in the core business (Javalgi et al. 2009). Environmental pressure and efficiency are also reasons for adopting offshore outsourcing. Outsourcing decisions are not easy to make and can have detrimental effects on an organisation; for example, if a company decides to outsource and the performance is poor, the company risks losing its brand image in its home country or even its market share7 . Transactional costs of outsourcing include the increased risk of losing control of the outsourced activities, performance uncertainty and a high dependency on the suppliers (Tate et al. 2009). When deciding if an organisation will opt for outsourced services, management faces the dilemma of what tasks ought to be outsourced, what terms should govern the outsourced work and what tasks should be maintained in-house. Different theories can be applied to understand outsourcing services, and one of them is the transaction cost theory. This theory emphasises three key elements: asset specificity, uncertainty and measurement, and frequency of a transaction. These elements are governed by bounded rationality and opportunism. Asset specificity is key as it dictates how a contract should be drafted and affects the level of investment needed from the company to equip a supplier to do its job. Uncertainty is another element that haunts the company; in the case of complex work, it is difficult to measure the quality of the work done by the outsourced company, which creates uncertainty for the firm. Lastly, the frequency of transactions defines the level of interaction between the firm 7 https://economictimes.indiatimes.com/opinion/et-commentary/outsourcing-can-hurt-your-brand/

articleshow/4497361.cms.

98

S. K. Youssef and A. Sikdar

and the outsourced company. If the transaction frequency is low or a single time, then the firm can accommodate such a transaction within their internal process, but if the transaction frequency is high, then the firm needs to create additional processes (Aubert et al. 1996). Another theory about outsourcing is the RBV theory, which looks at resources that a firm owns or controls. The RBV states that the success of a firm is due largely to its resources. A firm’s tangible and intangible resources create its competitive advantages. It was found that intangible assets such as human resources, corporate structure and reputational assets are important for a firm’s success. Tangible assets contribute the least towards a firm’s competitive advantage (Galbreath 2005). The resource dependency theory is more concerned with the external environment surrounding a firm. Firms are dependent on external elements such as land, the workforce, capital, particular products or services, or information. Their dependency has varying degrees and plays a role in increasing uncertainty, interdependence and control. According to the resource dependency theory, three main characteristics affect the decision to outsource: the importance of the task or the resource, the number of suppliers available and the cost of switching between suppliers (Cheon et al. 1995). Agency theory helps to analyse conflicts between parties who engage in outsourced work. The theory suggests that whenever there is a separation between ownership and control, a conflict of interest will arise. In the context of outsourcing, the principal (firm) and agent (outsourcing entity) enter into an agreement for the sake of specialisation and to reduce the risk from the decision-making. Yet agency problems flourish when the two parties’ goals are different or when control measures become expensive (Logan 2000). Agency cost is a function of the following factors: outcome uncertainty, the risk aversion of the supplier, the programmability of the supplier’s behaviour and outcome measurability (Cheon et al. 1995).

5 How the Gig Economy Impacts SMEs’ Resource Mobilisation Success in foreign markets is a function of the internal capabilities of a firm (Autio et al. 2000; McDougall et al. 1994; Zahra et al. 2000). Born-global companies overcome these challenges through their entrepreneurial and innovative orientation and allow the development of their organisational capabilities to deal with foreign markets (Knight and Cavusgil, 2004). As SMEs lack the internal capabilities of born-global firms, they need to acquire knowledge about international markets by making direct foreign investments. However, SMEs face severe financial constraints for foreign investment as indicated by De Maeseneire and Claeys (2012) in an empirical study of 32 Belgian SMEs. So rather than direct foreign investment, interaction with the

6 The Role of Gig Economy in Supporting SME Internationalisation

99

gig economy would provide SMEs with access to knowledge about foreign markets. The following sections discuss how the gig economy might benefit SMEs’ resource mobilisation efforts.

5.1 Resource Effectiveness SMEs have reported that hiring qualified resources can be an issue. Firstly, job offers at SMEs are not attractive enough for highly qualified staff as small businesses have difficulty in convincing people that the company has robust people processes to measure performance, ensure learning and grow people (Tripathi 2017). Secondly, highly qualified staff need to be paid high compensation for them to stay, which limits the ability of SMEs to hire. According to RBV theory, in order to gain a competitive advantage a company should deploy distinctive capabilities (Kay 1993). Not being able to hire qualified staff prevents SMEs from acquiring distinctive capabilities in foreign markets and gains a competitive advantage. The gig economy can ease the pressure on SMEs in this context since managers, professionals and technical staff use the gig platforms to promote their unique skills (Brinkley 2016). Hiring giggers could help SMEs overcome their inability to hire qualified workers. Also, as giggers specialise within a specific domain, hiring them would provide SMEs with access to specialised skills. From the RBV perspective, the gig economy could help SMEs to access and build the distinctive capabilities required to create a competitive advantage. Being constrained for resources, SMEs tend to invest in experienced staff and save on the time spent to train them. Experienced staff are well versed in established and systematised routines, which constrain their ability to learn new routines and limit their capacity to innovate (Grant 1991). However, success in international markets, as seen from the example of born-global firms, is facilitated by developing innovative capabilities (Knight and Cavusgil 2004). For SMEs to be innovative, they need to diversify their thinking and knowledge. Because a gigger’s work is based on specific tasks and projects, the gig economy would allow SMEs not to be bound to one gigger, but instead tap into a diversity of knowledge and thinking. The flexibility provided by the gig economy to tap into the diversity of knowledge and thinking would allow the development of innovative within the SME. So again, from the RBV perspective, the gig economy helps SMEs to build capabilities to give them a competitive edge. P1 The gig economy could help SMEs to access resources that will prove to be effective in enhancing the competitive advantage of the firm.

100

S. K. Youssef and A. Sikdar

5.2 Resource Flexibility One important hurdle reported by SMEs is staff retention. Because SMEs are small, they are not able to provide opportunities for career growth and adequate monetary compensation, leading to employees leaving them8 . Based on the resource dependency theory, SMEs become highly dependent on those employees who stay longer within the company. This increase in dependency is inversely proportional to the availability of alternatives and leads to an increased cost of operations for the SMEs. The use of the gig economy provides SMEs with an option to access multiple resources of a similar nature. This availability of alternatives reduces their dependency on a particular gigger and brings down their cost of operations. Similarly, the gig economy provides a possibility to the SMEs to switch from one gigger to another based on their performance. Along with staff retention comes the problem of staff mobility for SMEs. When an employee leaves, they move over to competitors and take with them the knowledge of the internal workings of the SME. This mobility of staff to competitors is detrimental to the competitive advantage of the SME. On the other hand, using the gig economy allows the SME to assign subtasks to different giggers, which ensures that each individual gigger is only exposed to their assigned task and not to the overall organisation. From the resource dependence perspective, as the SME is dependent on a gigger for a subtask it faces reduced exposure of its overall organisational knowledge to the external environment due to compartmentalisation (Norman 2001). For entry into international markets, there is a learning curve whereby old capabilities need to be discarded and new capabilities acquired or new combinations identified. The gig economy could provide this type of flexibility to SMEs as they can decide what resource/capability to use when and in what combination without incurring high switching costs. P2 With the support of the gig economy, SMEs would have greater flexibility in accessing resources as per its requirement due to less dependence on any particular resource.

5.3 Resource Assessment Another hurdle for growth reported by SMEs is the shortage of talent. SMEs cannot offer high wages or career growth similar to large organisations and are thus not able to attract qualified manpower. Finding the right talent gets harder for SMEs, especially with the increased demand for the STEM and creative skills (Popiel 2017) associated with innovation and growth, as SMEs are not perceived as innovators. This trend is further exacerbated in the context of internationalisation, as SMEs lack 8 https://blog.capterra.com/why-employees-quit-small-businesses/.

6 The Role of Gig Economy in Supporting SME Internationalisation

101

credibility in foreign markets so less people would be are willing to work for SMEs (Cook 2008). In order to hire from the limited pool of talent available, SMEs face uncertainty over the capabilities of their hired talent and whether their skills are commensurate to their demand for remuneration. This is supported by a SME, which reported that it “tried to hire recently … but turns out that the candidate is not what he/she claimed to be”. Also, a shortage of talent makes the hiring process is lengthy and costly as SMEs have to wait longer to get the right candidate (Kuek et al 2015). SMEs have reported that hiring one candidate takes 6–9 months and therefore most would like to retain their existing staff. These uncertainties increase the cost of assessing the quality of the resource and from the transaction cost perspective, organisations would like to reduce this cost. The gig economy could help to reduce this transaction cost as the gig platform provides access to a variety of giggers; with talented and skilled individuals increasingly joining the gig economy, SMEs could have access to better talent. To be hired, giggers are likely to put more authentic information about their capabilities, which could help prevent SMEs from being deceived in their assessment. The gig platform works like a competitive marketplace and reduces arbitrage between skills and the price sought. Overall, the gig economy provides a large pool of talent at a lower cost. SMEs can hire giggers for short-term projects and test their skills rather than hiring them as full-timers and regretting it later on. From the transaction cost perspective, the gig economy reduces the uncertainty associated with assessing the quality and cost of a human resource being acquired by the SME. Another uncertainty associated with outsourcing tasks/activities is the lack of commitment and opportunism exhibited by the outsourcing provider. This gives rise to higher transaction costs associated with an increased monitoring of the task/activity, and thus, according to transaction cost theory, organisations would integrate such resource within their hierarchy to reduce this transaction cost (Williamson 1989). For SMEs, transacting with the gig economy poses similar uncertainties of opportunism and lack of commitment. However, gig platforms have the nature of a market in which multiple giggers are competing for work. This internal competition reduces the opportunism of the gigger. Thus, from the transaction cost perspective, the gig economy might reduce the uncertainty associated with monitoring the activity. P3 When accessing resources from the gig economy, SMEs would face reduced transaction cost, due to lower uncertainty associated with assessing the potential of the resource.

5.4 Resource Control An important issue in internationalisation is “bounded reliability”, which arises when an international subsidiary cannot make a full effort or reverses their initial commitment due to local subsidiary priorities (Verbeke and Greidanus 2009). Such cases

102

S. K. Youssef and A. Sikdar

give rise to an agency cost associated with monitoring the agent (subsidiary) so that it fulfills the interest of the principal. The lack of control over the agent’s activities forces the firm to devise organisational arrangements to monitor the agent, e.g. using expatriates, making regular visits or creating inviolable contracts (O’Donnell 2000; Doz and Prahlad 1981). For SMEs, having limited resources, the cost of monitoring international subsidiaries could be prohibitively high. Engaging with the gig economy could benefit SMEs by reducing the agency cost of managing international operations. As giggers are free to choose the jobs they want to work on, they could take jobs that are aligned with their interests and expertise. When SMEs want jobs to be done, the gig economy could provide a better match between the SMEs’ needs and the giggers’ resources. As per agency theory, this alignment between the interests of the principal (SMEs) and agent (giggers) could reduce the cost of direct control over the agent. In international markets, SMEs would have to put more effort into higher productivity and increased risk-taking to get themselves established vis-a-vis local companies. However, an agency dilemma would arise between the SME (principal) and its subsidiary employees, as their goals would differ. Research has indicated that due to goal non-alignment, subsidiaries do not comply easily with the headquarters’ control in multinationals (Martin and Beaumont 1999). Likewise, SMEs subsidiary would also have less inclination to comply with the requirements of the SME (principal) to take additional risks or make a greater effort, thus leading to the uncertainty how much is the subsidiary output is beneficial to the SME. Such conditions can be reversed with the gig economy. First, giggers are concerned about their income and know that if they do good work, they will get more work. Second, giggers have free will to choose the jobs they want and would thus have more commitment to the job. And third, giggers are not bound by specific hours of work. These conditions of the gig economy ensure that giggers might put in extra effort as desired by SMEs, leading to a greater alignment between the interests of the SMEs (principal) and the giggers (agent). Thus, according to agency theory, this alignment of interests reduces the cost that SMEs would normally incur to ensure control over the resources deployed through their own subsidiaries. Moreover, giggers work on highly specific tasks in which they are specialised. So, it is easier for an SME to develop a contract with the gigger because the domain and output of the task can be well defined. A well-defined contract with deliverables and expectations is easier to monitor and manage and less open to interpretations that would give rise to opportunism. This facilitates the SME (principal) to reduce the cost of controlling the agent (gigger). P4 SMEs would face lower cost to monitor and control resources accessed from the gig economy due to greater alignment of interests between the SME and the resource provider.

6 The Role of Gig Economy in Supporting SME Internationalisation

103

6 Conclusion Due to financial constraint and a lack of reputation, SMEs face many challenges in hiring qualified employees, retaining employees or having less committed employees. These resource inadequacies act as barriers in the SMEs’ quest for internationalisation, which require SMEs to overcome the liability of foreignness. The gig economy could provide a solution for SMEs. The gig economy is comprised of a set of freelance individual experts who typically offer their services for a short period of time. SMEs could tap into the gig economy to access quality resources needed for their internationalisation efforts. Using the four theoretical lenses related to resource mobilisation—the transaction cost, resource-based view, resource dependency and agency theory—the paper discusses how the gig economy could provide SMEs with access to quality resources as compared to the traditional approach of SMEs developing it on their own (see Fig. 1). The gig economy is a new and developing phenomena, so there is lack of research to understand how it might compare to the traditional concept of long-term ownership of resources. There is some evidence of the application of the gig economy in the business models of born-global firms such as Uber and Airbnb. This paper provides theoretical support for how resource mobilisation through the gig economy could benefit some SMEs, which have organisational challenges different from large

Fig. 1 Impact of gig economy on SME resource mobilisation

104

S. K. Youssef and A. Sikdar

organisations. This context has not been considered while proposing solutions for SMEs. This paper contributes to the understanding of the different contexts of SMEs and how they could be supported effectively by the gig economy. The paper can be viewed as an attempt to augment the rudimentary knowledge about the gig economy’s resource endowments and its potential to satisfy the requirement of organisations in providing value equivalent to alternate resources (internal and external). Further, research could provide a greater understanding of how interactions between the gig economy and SMEs could be designed and structured to extract the maximum value from the gig economy’s resources.

References Abraham K, Haltiwanger JC, Sandusky K, Spletzer, JR (2016) Measuring the gig economy. Available via the society of labor economists annual meetings. https://sole-jole.org/16375.pdf. Accessed on Oct 2019 Al Bulushi BHS, Bagum S (2017) Growth strategies of SME in Oman-Issues and challenges. Int J Sma Bus Entrepreneurship Res 2:21–61 Al Tamimi (2018) The growth of the gig economy. Available via Tamimi. https://www.tamimi.com/ law-update-articles/the-growth-of-the-gig-economy/. Accessed on 31 Oct 2019 Aubert BA, Rivard S Patry M (1996) A transaction cost approach to outsourcing behavior: some empirical evidence. Inf Manag 30(2):51–64 Autio E, Sapienza H, Almeida J (2000) Effects of age at entry, knowledge intensity, and imitability on international growth. Acad Manag J 43(5):909–924S Arabian Business (2017) Rise of the gig economy in the UAE, Nov 15. Available via https://www. arabianbusiness.com/startup/383647-rise-of-the-gig-economy-in-the-uae Brinkley I (2016) In search of the gig economy. Available via the work foundation. http://www.theworkfoundation.com/wp-content/uploads/2016/11/407_In-search-of-thegig-economy_June2016.pdf. Accessed on 31 Oct 2019 Caniëls MC, Roeleveld A (2009) Power and dependence perspectives on outsourcing decisions. Euro Manag J 27(6):402–417 Cheon MJ, Grover V, Teng JT (1995) Theoretical perspectives on the outsourcing of information systems. J Inf Technol 10(4):209–219 Deloitte Consulting (2005) Calling a change in the outsourcing market: the realities for the world’s largest organizations. Available via IT World Canada. https://www.itworldcanada.com/article/cal ling-a-change-in-the-outsourcing-mart/12997.s. Accessed on 31 Oct 2019 De Maeseneire W, Claeys T (2012) SMEs, foreign direct investment and financial constraints: the case of Belgium. Int Bus Rev 21(3):408–424 Demirbas D, Hussain JG, Matlay H (2011) Owner-managers’ perceptions of barriers to innovation: empirical evidence from Turkish SMEs. J Sma Bus Entrepreneurship Dev 18(4):764–780 Dozv YL, Prahalad CK (1981) Headquarters influence and strategic control in MNCs. Sloan Manag Rev 23(1):15 Ernst and Young (2018) Asian SMEs: are you transforming for the future. Available via EY. https://www.ey.com/Publication/vwLUAssets/ey-asean-smes-are-you-transforming-for-thefuture/$FILE/ey-asean-smes-are-you-transforming-for-the-future.pdf. Accessed on 31 Oct 2019 Frazer J (2019) How the Gig Economy is reshaping careers for the next generation. Available via Forbes. https://www.forbes.com/sites/johnfrazer1/2019/02/15/how-the-gig-economy-isreshaping-careers-for-the-next-generation/#2b8399c149ad. Accessed on 31 Oct 2019 Freytag PV, Clarke AH, Evald MR (2012) Reconsidering outsourcing solutions. Euro Mana J 30(2):99–110

6 The Role of Gig Economy in Supporting SME Internationalisation

105

Galbreath J (2005) Which resources matter the most to firm success? An exploratory study of resource-based theory. Technology 25(9):979–987 Gleim MR, Johnson CM, Lawson SJ (2019) Sharers and sellers: a multi-group examination of gig economy workers’ perceptions. J Bus Res 98:142–152 Graham M, Lehdonvirta V, Wood A, Barnard H, Hjorth ID Simon P (2017) The risks and rewards of online gig work at the global margins. Available via Oxford: Oxford Internet Institute. https:// www.oii.ox.ac.uk/publications/gigwork.pdf. Accessed on 31 Oct 2019 Graham M, Hjorth I, Lehdonvirta V (2017) Digital labour and development: impacts of global digital labour platforms and the gig economy on worker livelihoods. Transfer Eur Rev Lab Res 23(2):135–162 Grant RM (1991) The resource-based theory of competitive advantage: implications for strategy formulation. Cali Mana Rev 33(3):114–135 Greenwood B, Burtch G, Carnahan S (2017) Unknowns of the gig-economy. Commun ACM 60(7):27–29 Harvie C, Lee BC (2003) Public policy and SME development, Working Paper 03-18, Department of Economics, University of Wollongong Cook N (2008) Reputation and the war for talent. Corporate Reputation Watch. Available via https:// www.slideshare.net/niallcook/reputation-and-the-war-for-talent. Accessed on 31 Oct 2019 Javalgi RRG, Dixit A, Scherer RF (2009) Outsourcing to emerging markets: Theoretical perspectives and policy implications. J Int Manag 15(2):156–168 James L (2018) Welcome to the gig economy: how can your business benefit? Forbes, Nov 1. Available at https://www.forbes.com/sites/sap/2018/11/01/welcome-to-the-gig-economy-howcan-your-business-benefit Kalleberg AL, Dunn M (2016) Good jobs, bad jobs in the gig economy. LERA for Lib 20(1–2) Kay J (1993) Foundations of corporate success. Oxford University Press, London Knight GA, Cavusgil ST (2004) Innovation, organizational capabilities, and the born-global firm. J Int Bus Stud 35(2):124–141 Kuek SC, Paradi-Guilford C, Fayomi T, Imaizumi S, Ipeirotis P, Pina P, Singh M (2015) Available via the world Bank. http://documents.worldbank.org/curated/en/138371468000900555/ pdf/ACS14228-ESW-white-cover-P149016-Box391478B-PUBLIC-World-Bank-Global-OOStudy-WB-Rpt-FinalS.pdf. Accessed on 31 Oct 2019 Link AN, Bozeman B (1991) Innovative behavior in small-sized firms. Sma Bus Econ 3(3):179–184 Liu R, Feils DJ, Scholnick B (2011) Why are different services outsourced to different countries? J of Int Bus Stud 42(4):558–571 Logan MS (2000) Using agency theory to design successful outsourcing relationships. Int J Log Manag 11(2):21–32 Martin G, Beaumont P (1999) Co-ordination and control of human resource management in multinational firms: the case of CASHCO. Int J Hum Resour Manag 10(1):21–42 McDougall P, Shane S, Oviatt B (1994) Explaining the formation of international new ventures: the limits of theories from international business research. J Bus Ven 9(6):469–487 Morgan Stanley (2018) The gig economy goes global. Available via https://www.morganstanley. com/ideas/freelance-economy Nalcaci G, Yagci MI (2014) The effects of marketing capabilities on export performance using resource-based view: assessment on manufacturing companies. Procedia-Soc Behav Sci 148:671– 679 Norman PM (2001) Are your secrets safe? Knowledge protection in strategic alliances. Bus Hori 44(6):51–60 OECD (2017) Enhancing the Contributions of SMEs in a global and digitalised economy. Available via OECD. https://www.oecd.org/mcm/documents/C-MIN-2017-8-EN.pdf. Accessed on 31 Oct 2019 OECD (2018) Enabling SMEs to scale up, discussion paper. Available via OECD. https://www. oecd.org/cfe/smes/ministerial/documents/2018-SME-Ministerial-Conference-Plenary-Session1.pdf. Accessed on 31 Oct 2019

106

S. K. Youssef and A. Sikdar

O’Donnell SW (2000) Managing foreign subsidiaries: agents of headquarters, or an interdependent network? Strate Manag J 21(5):525–548 Oviatt BM, McDougall PP (2005) Defining international entrepreneurship and modeling the speed of internationalization. Ent Theo Pract 29(5):537–553 Parigi P, Ma X (2016) The gig economy. XRDS: Crossroads, ACM Mag Stud 23(2):38–41 Paul J, Parthasarathy S, Gupta P (2017) Exporting challenges of SMEs: a review and future research agenda. J Wor Bus 52(3):327–342 Popiel P (2017) “Boundaryless” in the creative economy: assessing freelancing on Upwork. Cri Stu Med Commun 34(3):220–233 Pofeldt E (2017) Are we ready for a workforce that is 50% freelance? Available via Forbes. https://www.forbes.com/sites/elainepofeldt/2017/10/17/are-we-ready-for-a-workforcethat-is-50-freelance/#481a78ec3f82. Accessed on 31 Oct 2019 Schwellnus C, Geva A, Pak M, Veiel R (2019) Gig economy platforms: boon or bane? Available via OECD. http://www.oecd.org/economy/economicsdepartmentworkingpapers.htm. Accessed on 31 Oct 2019 Subrahmanya MB (2015) Innovation and growth of engineering SMEs in Bangalore: why do only some innovate and only some grow faster? J Eng Technol Manag 36:24–40 Tate WL, Ellram LM, Bals L, Hartmann E (2009) Offshore outsourcing of services: an evolutionary perspective. Int J Prod Econ 120(2):512–524 Tripathi V (2017) Attracting high quality talent: the challenge for small businesses. Available via Economic Times. https://economictimes.indiatimes.com/small-biz/hr-leadership/people/att racting-high-quality-talent-the-challenge-for-small-businesses. Accessed on 31 Oct 2019 Verbeke A, Greidanus NS (2009) The end of the opportunism vs trust debate: bounded reliability as a new envelope concept in research on MNE governance. J Int Bu Stud 40(9):1471–1495 Wamda (2017) To gig or not to gig that is the question for the MENA. Available via WMANDA. https://www.wamda.com/2017/07/gig-gig-question-mena. Accessed on 31 Oct 2019 Whitten D, Chakrabarty S, Wakefield R (2010) The strategic choice to continue outsourcing, switch vendors, or backsource: do switching costs matter? Inf Manag 47(3):167–175 Williamson OE (1989) Transaction cost economics. Handb Ind Organ 1:135–182 Yilmaz A, Bedük A (2014) Evaluation of the effect of the outsourcing on resource dependency and transaction cost approach: a research in Konya Oiz, Turkey. Procedia-Social Behav Sci 109:737–752 Zahra S, Ireland R, Hitt M (2000) International expansion by new venture firms: international diversity, mode of market entry, technological learning, and performance. Aca Manag J 43(5):925–950

Chapter 7

Cross-Cultural Collaboration Mechanisms that Facilitate Global Innovation Success for MNCs Karina R. Jensen

Abstract An increasingly multicultural and digitally connected business environment requires organizations to successfully orchestrate innovation across countries. The inability of leaders and teams to effectively collaborate and share relevant knowledge can affect international market performance. How can organizations address these concerns and optimize multicultural team collaboration in order to strengthen global innovation management capabilities? This chapter presents a framework for facilitating multicultural collaboration in achieving organizational performance and international market success. It identifies the organizational mechanisms and routines that influence knowledge-sharing and collaboration for the planning and execution of global product launches. Key findings are based on a qualitative study on global innovation and cross-cultural collaboration involving 105 global and regional project leaders at 36 MNCs with headquarters based in Asia, Europe, and North America. Keywords Global innovation · Cross-cultural team collaboration · Organizational mechanisms · Organizational routines · Project collaboration · Knowledge-sharing · Organizational performance · Local market performance An increasingly multicultural and digitally connected business environment has created challenges for leaders and teams in sustaining innovation around the world. A dynamic and evolving global business environment requires organizations to develop integrated innovation capabilities in optimizing a global footprint, collaboration, communication, and receptivity (Doz and Wilson 2012). The capacity to act on consumer insights and reconfigure resources dynamically requires a flexible and responsive network. Recent research has shown that understanding how headquarters and overseas subsidiaries co-create knowledge is a critical issue (Cui et al. 2005; Regner and Zander 2011; Hutzschenreuter and Matt 2017). The growing demand for products and services that meet the preferences of culturally diverse customers places increased pressure on multinational enterprises (MNEs) to capture K. R. Jensen (B) Centre for Leadership and Effective Organisations, NEOMA Business School, Reims, France e-mail: [email protected] Global Innovation and Leadership, NEOMA Business School, Reims, France © Springer Nature Singapore Pte Ltd. 2020 N. Zakaria et al. (eds.), Transcending Cultural Frontiers, https://doi.org/10.1007/978-981-15-4454-5_7

107

108

K. R. Jensen

local market knowledge. Companies face the need to invest in relationship management capabilities in order to avoid cross-cultural challenges and issues that block global network-centric innovation (Nambisan and Sawhney 2008). Organizations therefore need to consider cross-cultural collaboration for building bridges between global and local knowledge in creating innovative solutions across geographies. The purpose of this chapter is to demonstrate how MNEs can optimize organizational mechanisms in order to improve cross-cultural collaboration and global innovation capabilities. It responds to the organizational challenges of sharing local market knowledge for solving problems and creating innovative solutions for international business. Literature has examined the conditions for teamwork and collaboration within the context of new product development (NPD) and research functions; however, there is limited attention to the process of cross-cultural collaboration during the global product innovation cycle, from planning to execution. The existing literature has placed emphasis on global knowledge integration and team collaboration skills; however, there is a lack of focus on the role of crosscultural collaboration and organizational mechanisms when leading global innovation projects. Studying collaboration from a cross-cultural perspective provides value for theory and empirical research by helping practitioners to gain insight that enables them to diagnose and improve collaboration across a variety of cultures and nations (Salazar and Salas 2013; Hinds et al. 2011). This provides a significant opportunity to advance existing theoretical understanding while assisting organizations in the development of cross-cultural collaboration capabilities that respond to global innovation opportunities.

1 The Role of Cross-Cultural Collaboration in Global Innovation Management The emergence of digital platforms and organizational networks has placed increased importance on the reconfiguration and recombination of knowledge resources that respond to customer needs worldwide. Research has shown that understanding how headquarters and overseas subsidiaries co-create knowledge is a critical issue (Cui et al. 2005; Regner and Zander 2011). There needs to be a balance of exploration and exploitation activities with insights to particular knowledge routines and recombination capabilities. When introducing international products and services, there is an interdependent process between teams in headquarters and subsidiaries for bringing new solutions from concept to market. The MNE’s use of subsidiary marketing knowledge is found to directly affect the development of capabilities for other subsidiaries and the global performance of the MNE (Holm and Sharma 2006). Moreover, the higher the headquarters’ capacity to absorb new knowledge, especially market data on customers and competitors, the higher the benefits of reverse

7 Cross-Cultural Collaboration Mechanisms that Facilitate Global …

109

knowledge transfer (Ambos et al. 2006). The organization’s ability to recombine and reconfigure local market knowledge from subsidiaries influences international sales performance.

2 Challenges and Opportunities for Knowledge-Sharing with Cross-Cultural Teams Although MNCs realize the need to create and share knowledge across cultures and functions, it has been difficult to facilitate exchange between geographically distributed team members located at global headquarters and local subsidiaries. In order to understand the cross-cultural collaboration process, it becomes necessary to examine interactions among cross-cultural and geographically distributed team members. When considering innovation systems as social systems, there is a process of ‘social making’ of innovations that can define a socially accepted space determined by cultural interactions including: affective frames of identity and difference, cognitive frames of knowledge, and normative sets of values, norms, and beliefs (Pohlmann et al. 2005). In examining convergent and divergent team processes, geographically distributed teams can be effective in bringing together divergent viewpoints in producing new organizational capabilities which require the recognition and validation of their existence (Baba et al. 2004). Inter-team and intra-team cooperation have been found to serve as significant determinants of knowledge generation by subsidiaries (Mudambi et al. 2007). Cross-cultural collaboration serves an important role in nurturing and sustaining new knowledge and innovation for geographically distributed teams throughout the organization.

3 The Influence of Organizational Mechanisms in Managing Global Innovation Organizational mechanisms and routines may have a role in nurturing knowledgesharing for global projects that involve cross-cultural teams. In order to effectively manage and influence knowledge flow, there is the concept of knowledge governance where the selection of organizational structures and mechanisms can influence the processes of using, sharing, integrating, and creating knowledge (Michailova and Foss 2009). In facilitating communication between geographically distributed teams, Gibson and Gibbs (2006) argue that unique mechanisms can create a psychologically safe communication climate that increases innovation. The ability to optimize multicultural collaboration relies on a safe climate and organizational culture that views culturally diverse knowledge as beneficial to organizational performance. Positive attitudes toward cultural diversity (Bouncken et al. 2008) can increase project, and innovation performance and cross-national learning

110

K. R. Jensen

can enable teams to leverage distance and differences (Cramton and Hinds 2005). The opportunity to facilitate knowledge-sharing strengthens cross-cultural team learning. A corporate emphasis on global integration can lower team learning, but an emphasis on responsiveness and knowledge management norms and procedures can increase team learning (Zellmer-Bruhn and Gibson 2006). Furthermore, international human capital enhancement practices and firm performance are significant for both collaboration and internationalization (Kim et al. 2015). In order to understand how to facilitate cross-cultural collaboration for global product innovation, further research is required concerning the influence of organizational mechanisms and routines.

4 Methodology: Global Innovation and Cross-Cultural Collaboration Study With the intent to create a conceptual model for cross-cultural collaboration, the global study focused on qualitative empirical research using a mixed method approach. Our research is focused on organizational mechanisms that facilitate interactions between the global project leader and the geographically distributed team with the objective of creating and sharing knowledge that contributes to successful product introductions worldwide. This leads to the following research question: How can MNCs facilitate cross-cultural team collaboration to enhance global innovation management capabilities? Applying resource-based (Peteraf 1993) and knowledge-based views (Grant 1996), the theoretical framework that guides this study involves resource-based theory (RBT) where the capabilities by which managers integrate, build, and reconfigure the firm’s internal and external competencies and resources are a source of competitive advantage (Eisenhardt and Martin 2000; Teece et al. 1997). Amin and Cohendet (2008) have argued that a competence or resource-based perspective of the firm opens the scope for exploring how firms learn and adapt in complex and changing business environments. The knowledge-based view emphasizes that knowledge is one of the most critical resources in helping firms gain a competitive advantage in international markets (Grant 1996). Furthermore, knowledge governance mechanisms (Foss et al. 2010) allow for an examination of mechanisms and structures at the organizational or macro-level that influence behaviors of knowledge-sharing at the micro- or individual level. The field research was conducted from 2011 to 2014 through interviews using semi-structured questionnaires with senior managers based in headquarters and responsible for the conceptualization, planning, and project management of global product launches. The research results include interviews with 105 senior managers from 36 MNCs from technology-driven industries, based in Europe, Asia, and the USA. The senior managers responsible for managing global products and teams primarily serve as the knowledge facilitators and liaisons between headquarters and

7 Cross-Cultural Collaboration Mechanisms that Facilitate Global …

111

subsidiaries, thus providing unique insights from the frontline concerning crosscultural collaboration practices. Senior managers and project leaders working for automotive and information communication technologies industries were selected for this study since these sectors face growing competition, increased localization needs, reduced time to market, and a radical and technology-driven innovation focus.

5 Challenges and Opportunities for Global Innovation and Cross-Cultural Collaboration The dynamic and evolving global marketplace demands continuous growth and organizational performance around the world. When asked about global team performance measures, a majority of participants noted that market performance indicators primarily focus on worldwide sales results, market share, and customer use and satisfaction. In meeting these performance measures, most respondents noted organizational pressures in timely market delivery, achieving cost and revenue objectives, and ensuring product quality. In addition, there are growing market pressures for meeting product localization needs, ensuring customer satisfaction, keeping up with local competition, and meeting international sales goals. These performance measures highlight the importance of responsiveness to global and local market demands. The initial framework as shown in Fig. 1 is based upon the findings that have identified organizational mechanisms and organizational routines, including the key

Fig. 1 Organizational mechanisms that influence cross-cultural collaboration

112

K. R. Jensen

phases of planning (ideation, concept validation, strategy), and execution that are linked to the global product launch project. The routines show the influence of knowledge-sharing between the global project leader and local teams during global launch project collaboration. The routines allow evaluation of organizational mechanisms that produce specific outcomes linked to project performance as identified by time to market, product localization, customer demand, and local sales results.

6 Facilitating the Cross-Cultural Collaboration Process In developing the propositions for the cross-cultural collaboration model, the organizational mechanisms are identified and linked to critical incidents that were shared by the study participants concerning project collaboration for the global product launch. Since the intent is to identify mechanisms that influence collaboration and knowledge-sharing, theorizing is applied to knowledge governance mechanisms (Foss et al. 2010) which allow for an examination of mechanisms at the organizational or macro-level that influence behaviors of knowledge-sharing at the microor individual level. In leading the global product innovation process across cultures, the global project leader requires specific competencies to ensure team performance and project success. The global project leader and the geographically distributed team are often challenged by different cultural values for knowledge-sharing which were identified in the global study as structure, power, openness, and initiative. For example, there are challenges to the degree of openness and initiative taken by team members due to the role of management power in the organizational hierarchy. Project leaders and team members need to consider differences in communication as well as conflict management. The findings indicate that cultural differences concerning the knowledge-sharing structure, management power, and initiative should also be considered. Cultural differences and perceptions concerning knowledge, power, and saving face can be mitigated through specific leadership practices involving cultural empathy, collaboration, empowerment, and a common goal for achieving team and organizational success. This leadership style supports the first proposition (P1). P1 Leadership that emphasizes direction, inclusion, empowerment, and communication is positively associated with increased cross -cultural team collaboration. The literature review and global study have shown the importance of organizational mechanisms and routines in facilitating cross-cultural collaboration among geographically dispersed teams based in mature and emerging markets. While a majority of the study participants indicated their organizations’ front-end activities (ideation, planning, validation) are centralized, the findings concerning strategic direction also indicate an increasing focus on decentralization and local market responsiveness. In view of the increased attention placed on local market knowledge, it appears the collaboration and support of local team members and managers

7 Cross-Cultural Collaboration Mechanisms that Facilitate Global …

113

are of increasing importance to the success of the global product launch project. The second proposition (P2) can thus be formulated as follows: P2 A global strategy that is focused on local market knowledge is positively associated with increased cross-cultural team collaboration. The findings from the study participants indicate that a global innovation culture is developed through cultural empathy, creativity, and collaboration. The theme of cultural empathy demands a focus on global teamwork and cultural diversity. Creativity requires idea generation and innovative thinking with an entrepreneurial spirit that nurtures agility and initiative. Collaboration emphasizes transparency and knowledge-sharing with cross-cultural teams across geographies in order to build an inclusive organizational culture. In evaluating this outcome, the following can be proposed: P3 The cultivation of a global innovation culture with an emphasis on cultural empathy, creativity, and collaboration is positively associated with increased crosscultural team collaboration. In addition to an emphasis on live collaboration and interaction, study participants agreed upon the need for a dedicated technology platform for ideation and knowledge-sharing as well as complementary technology tools that can facilitate team and organizational practices. This includes the need for dedicated organizational resources for innovation, learning, and knowledge-sharing. There were many references to enabling innovation through more time, space, and freedom for global team members to create new ideas and concepts that respond to international market opportunities. In addition, the global project leaders acknowledge a need to improve local engagement through increased involvement of local team members in the frontend innovation process. These views show that a knowledge-sharing structure with increased communication for local team members supports the fourth proposition (P4). P4 A knowledge-sharing structure that increases engagement from local team members throughout the front-end innovation process is positively associated with increased cross-cultural team collaboration. In reviewing organizational resources that could facilitate knowledge-sharing from local team members, global project leaders emphasized the need for a collaborative space where global and local team members can meet to share their ideas and knowledge concerning local market opportunities. Communication technologies and tools are important for continued dialogue and weekly project interactions; however, live interaction is most critical for building trust and developing relationships. In addressing knowledge-sharing practices, global project leaders emphasized increased face-to-face interaction and communication with an interest for more travel and visits between the HQ location and local subsidiaries in order to improve cultural understanding and local market knowledge which supports the fifth proposition (P5).

114

K. R. Jensen

P5 Communication vehicles that incorporate both virtual and face-to-face team interactions are more positively associated with cross-cultural collaboration. When examining critical knowledge required for the planning and execution phases of the global launch project, the planning phase is identified as the critical point of interaction between global project leaders and management teams in HQ and the local teams based in subsidiaries. Local market, customer, and product knowledge are sought by the global project leader where customer validation, resource allocation, and local product feature needs are critical for planning. The planning phase relies upon knowledge of local market requirements to determine the level of standardization or adaptation required for a new concept. In order to further explore the opportunities for gaining interest and engagement from local team members, study participants were asked how they feel local teams would be more motivated to increase knowledge-sharing and contribution during the global planning and execution phases. The findings identified five themes that influence motivation—recognition, empowerment, interaction, open communication, and organizational support. It is the ability of the project leader to recognize, respond, and deliver on requests and initiatives in order to facilitate collaboration with local team members. This includes responsiveness and more transparency and feedback concerning initiatives and requests. Thus, the following is proposed: P6 A global project process that involves open communication with team members who recognize and respond to local knowledge needs is positively associated with cross-cultural collaboration. In order to better understand the motivations and challenges that can influence knowledge-sharing and contribution for local team members during the innovation process, an evaluation was made for the motivations, challenges, and critical incidents indicated by global study participants. While challenges were often linked with global or centralized strategy-making and planning, motivation was often linked with local strategy-making, collaboration, and open communication. The lack of local market understanding by senior managers based in HQ was perceived as a challenge to frontend innovation since a lack of cultural and market awareness results in the creation and proposal of customer solutions that do not meet local market requirements. Furthermore, the lack of local involvement in the planning phase does not provide the local team members with an opportunity to share their cultural knowledge and contribute to the creation and validation of concepts that respond to local market opportunities. In view of this finding, the seventh proposition is presented with a focus on global performance results: P7 Project performance as measured by improved time to market, product localization, customer demand, and local sales results is positively associated with increased knowledge-sharing and collaboration for cross-cultural teams.

7 Cross-Cultural Collaboration Mechanisms that Facilitate Global …

115

7 Moving from Local to Global Collaboration As presented in Fig. 1, the propositions identify the specific mechanisms that influence project collaboration routines and performance. The theoretical model further demonstrates the relationships between organizational mechanisms, routines, and project performance that influence collaboration and knowledge-sharing between global project leaders and cross-cultural team members. In examining the many case examples provided by the global project leaders, it is useful to present two case examples that demonstrate how organizational mechanisms can either block or facilitate cross-cultural collaboration between the leader and geographically dispersed teams. The first case will show how the leader is faced with challenges in the planning and execution of a global innovation project resulting in poor project results. The second case demonstrates how the leader is able to facilitate cross-cultural collaboration, from planning to execution, in order to ensure a successful global product introduction and project performance.

8 Organizational Mechanisms for Facilitating Cross-Cultural Collaboration 8.1 The Case for Team Collaboration Issues In the first case, a multinational firm has enjoyed steady growth as one of the world’s leading suppliers of information management software with HQ based in the USA. It expanded into new markets through an aggressive acquisition strategy that demanded continuous development and effective global launch execution of a broad product offering. Front-end innovation activities were primarily centralized with an emphasis on incremental innovation. The firm was facing the challenge of maintaining competitiveness while ensuring quick execution into key geographic markets around the world. The broad and numerous product offerings added to the challenges of conceiving and introducing new products into international markets. In order to integrate operations and maximize execution efficiency, the organization focused on a global strategy with centralized ideation, planning, and validation. This resulted in limited interaction and communication with local team members. Although the organization emphasized collaboration through quarterly or annual planning meetings, the management teams in HQ and the local teams based in subsidiaries were not aligned and brought different expectations to new product initiatives. The lack of communication and trust led to conflicts and disagreements within the cross-cultural and geographically distributed teams. Due to the lack of an integrated knowledge-sharing and communication process, the global project leader and management teams in HQ experienced challenges in obtaining local market requirements and accessing market knowledge from local

116

K. R. Jensen

team members in Europe and Asia. There was frustration for local team members due to the lack of visibility in the global network due to the inability to share knowledge and contribute to the product innovation project process. Since a global strategy was directed from HQ to the subsidiary, the knowledgesharing structure placed the local teams in execution roles where they followed the command of the top management team. There was no recognition of their cultural and market knowledge and no responsiveness to local customer needs. Although the organization used annual planning meetings, there was limited participation and the focus centered on contribution to the global strategy set by the HQ team. In addition, there was inconsistent communication that primarily relied on the use of virtual communications which further reduced the lack of trust and receptivity for contributing and sharing knowledge for the front-end innovation process in launching the new product concept. These causal mechanisms resulted in a directive leadership role for the global project leaders who provided authority and direction for execution. The final outcome resulted in delayed time to market, limited concept localization and variable customer demand, and a decrease in local sales performance.

8.2 The Case for Team Collaboration Success In the second case, the multinational firm is a world leader in healthcare, lifestyle, and lighting products that have used innovation as a key driver for market growth. It offers a broad product portfolio to consumers and businesses with global and local solutions for mature and emerging markets. The organization has expanded into new markets through acquisitions as well as the development and introduction of new product lines. The challenge for this firm is to sustain team transparency and market innovations that continue to deliver timely product introductions to key markets around the world. The organization ensures full participation by all of the cross-cultural team members involved in the conception and introduction of new concepts, including planning, validation, ideation, and execution phases. While emphasizing collaboration, there is also a focus on developing an entrepreneurial spirit through creativity and innovation. The organization’s global innovation culture corresponds with the values found in the study—cultural empathy and an appreciation for cultural diversity, collaboration, and creativity. In order to maintain global team transparency, the company integrates both live and virtual communication. In addition, it holds global communication meetings at key geographic locations in order to involve all of the regional and local team members in discussions to provide them with new insights into the product portfolio. This multinational firm applies a local to global strategy with emphasis on the MNC network to ensure alignment with cross-cultural and geographically distributed teams in any location around the world. This approach creates a global innovation culture that integrates its values of cultural empathy, creativity, and collaboration in order to create a common space for the front-end innovation process. With an open

7 Cross-Cultural Collaboration Mechanisms that Facilitate Global …

117

Table 1 Factors affecting successful cross-cultural collaboration and IB strategies Organizational mechanisms

Project routines

IB strategies

Leadership competency

Planning and execution

Inclusive and collaborative leadership for cross-cultural and geographically dispersed teams

Global strategy

Planning

Local to global strategy-making and participative planning

Organizational culture

Planning and execution

Emphasis on cultural empathy, co-creation, and collaboration

Knowledge-sharing Structure

Planning and execution

Project process with emphasis on knowledge-sharing and collaboration during planning and execution phases

Communication vehicles

Planning and execution

Live and on-site collaboration at project start with online and video communication throughout

and interactive team environment, the use of integrated communications such as virtual communication tools and live meetings build stronger trust and relationships. These mechanisms then help position the global project leader in an inclusive and empowering leadership role. With the opportunity to take initiative and fully engage in the front-end innovation process, the cross-cultural team is motivated to achieve increased success through time to market, localized products, increased customer demand, and sales results. In evaluating organizational mechanisms, findings from Case 1 and Case 2 show that use of a top-down, global to local innovation strategy mostly decreases knowledge-sharing interactions for the innovation project phases where local team members have limited roles. The reduced level of collaboration is determined through the orchestration of organizational mechanisms that focus on an organizational culture with limited collaboration; the emphasis on virtual communication vehicles over face-to-face communication; and an emphasis on a top-down leadership style. A knowledge-sharing structure where local team members are expected to only collaborate on project execution appears to result in a lack of motivation and engagement for the introduction of new product concepts. This leads to poor project performance as demonstrated by delayed time to market, limited product localization, lack of customer demand, and decreased sales results. The second case shows that the use of a participative or local to global strategy can increase knowledge-sharing and collaboration for the global project. The level of collaboration is determined through the orchestration of the following mechanisms: an organizational culture with emphasis on cultural empathy, creativity, and collaboration; face-to-face communication vehicles with virtual communication technologies as support tools for trust and relationship-building; and an inclusive leadership approach. As shown in Table 1, the orchestration of these organizational mechanisms results in increased motivation and engagement through participative planning and

118

K. R. Jensen

execution. The second case also shows the positive impact on global project performance with the introduction of new product concepts that lead to improved time to market, product localization, increased customer demand and sales performance.

9 Implications for Research and Practice Theory and literature have mostly focused on the conditions for global teamwork and collaboration for research and new product development. However, there is a lack of attention to organizational mechanisms and their influence on cross-cultural team performance during the global product innovation process. This chapter provides new insights for knowledge governance mechanisms and micro-foundations which is lacking in the literature (Foss et al. 2010). It presents the firm-level mechanisms that influence knowledge-sharing behavior between the global project leader and crosscultural teams collaborating on global innovation projects. It also brings attention to the organizational resources and routines that influence cross-cultural collaboration and knowledge-sharing during the global product launch. In order to increase success in leading and managing global product innovation projects, the effective facilitation of cross-cultural collaboration may serve as a competitive advantage for multinational firms in achieving organizational performance and international market success. The ability of global and local project teams to effectively share and communicate ideas and solutions may influence project performance linked to product innovation, timely product introductions, and international sales and market opportunities. Cross-cultural team interactions facilitate the sharing of local market knowledge, cross-cultural understanding, and the creation of new ideas. These findings extend research concerning cultural synergy (Adler 1983, Holden 2002) and the role of cross-cultural collaboration and knowledgesharing in global innovation management. The study also uncovers new research for advancing organizational understanding of the role of organizational mechanisms and routines that influence cross-cultural collaboration and global innovation practices in an international and digitally connected business environment. In order to understand how to facilitate cross-cultural collaboration when launching global initiatives, further research is required concerning the influence of organizational mechanisms. In particular, the mechanisms of strategic planning, organizational culture, and knowledge-sharing structure would benefit from further exploration and validation of links to organizational and market performance. New practices combined with rigorous research should bring valuable insights for improving cross-cultural collaboration and global project success.

7 Cross-Cultural Collaboration Mechanisms that Facilitate Global …

119

10 Conclusion Our findings demonstrate the need for increased cultural understanding and collaboration between the global project leader and the geographically distributed teams in order to accelerate innovation and responsiveness to international markets. There is limited engagement of local team members in the planning phase for global projects where cultural and local market knowledge is most critical for the effective execution and success of new concepts and products. As shown in Case 1, the focus on a global innovation strategy and centralized planning with teams at headquarters excludes local teams from initial participation. This places an emphasis on execution roles for subsidiary teams which reduces their motivation to collaborate on the global product introduction. An inability of local teams to share their cultural and market knowledge impacts strategic planning and market performance. Leaders who are aiming for effective cross-cultural team collaboration during the global project process should focus on increased knowledge-sharing and participation throughout all innovation phases. The orchestration and reconfiguration of organizational resources combined with project collaboration routines create frontend innovation process capabilities. As shown in Case 2, organizational mechanisms that interdependently create an open environment for innovation can facilitate crosscultural collaboration and knowledge-sharing. This environment involves the five mechanisms of the cross-cultural collaboration framework, including the global innovation strategy where engagement needs to occur with local teams during the planning phase. There is consideration of the organizational culture with the emphasis of key values such as cultural empathy, creativity, and collaboration. It is supported by a knowledge-sharing structure with participation from local team members, including communication vehicles that emphasize face-to-face interaction to facilitate trust and relationship-building. In order to develop a collaborative dialogue with cross-cultural teams, the global project leader serves an important role through an inclusive leadership style. Sharing knowledge between cultures requires special attention to diverse perspectives and practices in communicating ideas and information through face-to-face and online communication vehicles. In facilitating the ability to share and co-create knowledge, team leaders will be able to influence organizational and market performance through the exploration and identification of market solutions that meet the demands of local customers. The cross-cultural collaboration framework identifies the specific organizational mechanisms that influence collaboration between the leader and geographically distributed team members. Leaders have the opportunity to orchestrate these mechanisms with specific project routines in order to achieve increased performance results through improved time to market, localized products adapted to markets, increased customer demand and sales results for local markets. In this way, MNCs can consider the orchestration and configuration of cross-cultural team knowledge as a resource and competitive advantage when managing innovation across international markets.

120

K. R. Jensen

References Adler NJ (1983) A typology of management studies involving culture. J Int Bus Stud 29–46 Ambos TC, Ambos B, Schlegelmilch BB (2006) Learning from foreign subsidiaries: an empirical investigation of headquarters’ benefits from reverse knowledge transfers. Int Bus Rev 15:294–312 Baba ML, Gluesing J, Ratner H, Wagner KH (2004) The contexts of knowing: natural history of a globally distributed team. J Org Behav 25:457–587 Bouncken RB, Ratzman M, Winkler VA (2008) Cross-cultural innovation teams: effects of four types of attitudes towards diversity. J Int Bus Strat 8(2):26–36 Cohendet P, Amin A (2008) Architectures of knowledge, firms, capabilities, and communities. Oxford University Press, New York Cramton CD, Hinds PJ (2005) Subgroup dynamics in internationally distributed teams: ethnocentrism or cross-national learning? Res Org Behav 26:231–263 Cui A, Griffith DA, Cavusgil ST (2005) The influence of competitive intensity and market dynamism on knowledge management capabilities of multinational corporation subsidiaries. J Int Mar 13(3):32–53 Doz Y, Wilson K (2012) Managing global innovation: frameworks for integrating capabilities around the world. Harvard Business Review Press, Boston Eisenhardt KM, Martin JA (2000) Dynamic capabilities: what are they? Strate Manag J 21(10– 11):1105–1121 Foss NJ, Husted K, Michailova S (2010) Governing knowledge-sharing in organizations: levels of analysis, governance mechanisms, and research directions. J Manag Stud 47(3):455–482 Gibson CB, Gibbs JL (2006) Unpacking the concept of virtuality: the effects of geographic dispersion, electronic dependence, dynamic structure, and national diversity on team innovation. Adm Sci Quar 51(3):451–495 Grant RM (1996) Prospering in dynamically-competitive environments: organizational capability as knowledge integration. Org Sci 7(4):375–387 Hinds P, Liu L, Lyon J (2011) Putting the global in global work: an intercultural lens on the practice of cross-national collaboration. Acad Man Ann 5(1):135–188 Holden NJ (2002) Cross-cultural management: a knowledge management perspective. Prentice Hall, Great Britain Holm U, Sharma DD (2006) Subsidiary marketing knowledge and strategic development of the multinational corporation. J Int Manag 12:47–66 Hutzschenreuter T, Matt T (2017) MNE internationalization patterns, the roles of knowledge stocks, and the portfolio of MNE subsidiaries. J Int Bus Stud 48:1131–1150 Kim KY, Pathak S, Werner S (2015) When do international human capital enhancing practices benefit the bottom line? An ability, motivation, and opportunity perspective. J Int Bus Stud 46:784–805 Michailova S, Foss N (2009) Knowledge governance: themes and questions. In: Snejina M, Foss N (eds) Knowledge governance: processes and perspectives. Oxford Press, UK, pp 1–24 Mudambi R, Mudambi SM, Navarra P (2007) Global innovation in MNCs: the effects of subsidiary self-determination and teamwork. J Prod Innov Manage 24(5):442–455 Nambisan S, Sawhney M (2008) The Global Brain. Wharton School Publishing, New Jersey Peteraf MA (1993) The cornerstones of competitive advantage: a resource-based view. Strat Manag J 14(3):179–191 Pohlmann M, Gebhardt C, Etzkowitz H (2005) The development of innovation systems and the art of innovation management—strategy, control, and the culture of innovation. Technol Ana Strate Manag 17(17):1–7 Regner P, Zander U (2011) Knowledge and strategy creation in multinational companies. Manag Int Rev 51:821–850 Salazar M, Salas E (2013) Reflections of cross-cultural collaboration science. J Org Beh 34:910–917 Teece DJ, Pisano G, Shuen A (1997) Dynamic capabilities and strategic management. Strate Manag J 18(7):509–533

7 Cross-Cultural Collaboration Mechanisms that Facilitate Global …

121

Zellmer-Bruhn M, Gibson C (2006) Multinational organizational context: implications for team learning and performance. Acad Manag J 49(3):501–518

Part III

Implementing Strategies for Global Businesses

The third part aims to broaden and deepen the dialogue about multinational corporation strategies in a dynamic business environment. The focus includes the cultural influence on MNCs’ business and global strategies in different regions and cultures to effectively implement sustainable development goals through sharing economy, Muslim-friendly based hospitality, and innovation.

Chapter 8

Non-pecuniary Factors Influencing Diaspora Homeland Investment Mohamed-Abdullahi Mohamed and Asmat-Nizam Abdul-Talib

Abstract This study attempts to provide a theoretical outline of the non-pecuniary factors influencing diaspora homeland investment. It presents the findings of previous scholars on non-pecuniary motivational factors that drive diaspora homeland investment decisions. Moreover, the study suggests other additional non-financial motives that nurture homeland investment decisions. To identify the non-monetary motivational factors influencing diaspora homeland investment, a comprehensive literature review on the perspectives of previous scholars was conducted. The study presents the analyses and findings of multiple scholars who studied diaspora investment motives. Although studies have suggested altruism, emotional satisfaction, and social status to be the primary motives, little is known about the non-economic motivations of diaspora homeland investment. Therefore, this study offers additional motivational factors to help broaden the understanding and provides an overview of the nonpecuniary factors that drive diaspora homeland investment intentions. It offers a comprehensive explanation of the topic, such as the background of diaspora investment, entrepreneurial activities, and general contributions to their home country. The study also presents recommendations for future studies. Keywords Diaspora · Diaspora investment · Diaspora entrepreneurship · Homeland investment · Investment motivation · Investment interest · Non-pecuniary · Ethnic entrepreneurship

1 Introduction Globalization has not only increased the flow of goods and services around the world but has also greatly influenced the mobility of people across geographical and cultural boundaries (Stalker 2000; Shenkar 2004). The contemporary migration context is affected by the pace of globalization and the transnationalization of the process (Portes and Yiu 2013). Contemporary global processes and globalization M.-A. Mohamed (B) · A.-N. Abdul-Talib School of International Studies, Universiti Utara Malaysia, Sintok, Kedah, Malaysia e-mail: [email protected] © Springer Nature Singapore Pte Ltd. 2020 N. Zakaria et al. (eds.), Transcending Cultural Frontiers, https://doi.org/10.1007/978-981-15-4454-5_8

125

126

M.-A. Mohamed and A.-N. Abdul-Talib

boosted migrations and created a space for ethnic entrepreneurship (Ramadani et al. 2014). Therefore, international migration is rapidly influencing the modern way of conducting international business and economy at large (Elo and Minto-Coy 2019). Diaspora is a multidisciplinary concept with various definitions, and the phenomenon is also relevant to international business. Diasporas shape the global business environment, which has become more transnational and interconnected. The literature has discussed international business activities of diasporas, and they are considered influential global actors associated with globalization. Diasporas have contributed to changes in the global economy and enhanced global connectivity (Adamson 2016). The concept of diaspora originated from the studies on Greek history, and it has now spread to various disciplines. The term “diaspora” refers to a community of people who live outside of their country of origin (COO) but remain to have an active relationship with their homeland. The number of people who move from their home country to various places around the world is large, but these people have different circumstances, such as being refugees, immigrants, asylum seekers, and expatriates (Butler 2001). They have special traits that differentiate them from other immigrants. For example, the word diaspora is used by the home country when referring to their people who live overseas, and the host country may use terms such as immigrants (Constant and Zimmermann 2016). Diaspora members have a strong psychological and economic relationship with their homeland (Sheffer 2006; Brinkerhoff and Brinkerhoff 2011). As a result, they affect the economic development and growth of their home country in many ways, such as engaging in financial transactions through remittance (Cohen 1997) and investment (Nielsen and Riddle 2010; Terrazas 2010).

2 Diaspora Investment The economic contribution to their COO of the diaspora is more important than the sending of remittance or being involved in philanthropic programs. These people play a vital role in the development of their homeland countries by transferring financial and human capital back to their countries of origin. Another way that diasporas contribute to their COO is that they regularly go back and spend a considerable amount of time and make investments (Levitt 2001). Diaspora investors share market information about their host countries, such as competitive intelligence and operational regulations, with other firms in their COO (Riddle and Marano 2008). These investments take place through remittance or direct investment. The objective of any normal investment is the investors’ aim of earning profit and improving their net worth as an investment return, which is a major key factor that decides investments (Makowitz 1959; Miller and Modigliani 1961). The decisions of diaspora investors may be influenced by the home-biased type, which could be their major reason for investing in their COO (Tesar and Werner 1995; Nielsen and Riddle 2009). They have the benefit of homeland advantage, which is their knowledge about the market,

8 Non-pecuniary Factors Influencing Diaspora Homeland Investment

127

customers, and resource information they have (Ivkovi´c and Weisbenner 2005; Zhu and Weyant 2003), and this benefit helps them to gain competitive advantage over rival foreign investors. Diasporas generally invest in an existing business by purchasing equity or create manufacturing facilities, and others engage in direct investment by starting new business ventures (Weidenbaum and Hughes 1996; Riddle 2008; Riddle et al. 2010) in their COO. In some cases, they set up service operations, such as retail chains, tourism enterprises, or consulting companies (Nielsen and Riddle 2010). Riddle (2008) reported that diaspora members contribute to the economy of their COO through investment by returning and setting up new business ventures or making a direct investment without returning. Discussions in the literature on the homeland economic relationships of the diaspora are dominated by remittance, which is the money sent by the diaspora to their family members. However, Diaspora Direct Investment (DDI) is different from and superior to remittance. DDI refers to the establishment of a business entity in the home country by a return migrant (Debass and Ardovino 2009). It is the direct investment conducted by companies associated with the diaspora in the home country (Massey and Parrado 1998). DDI is part of a transnational structure conducting investment in the home country and facilitating interconnections between the homeland and the rest of the world (Orozco and Lapointe 2004). It exclusively focuses on the diaspora investment that positively contributes more to the home country’s economy (Rodríguez-Montemayor 2012). Moreover, it has a considerable influence on economic growth and development (Debass and Ardovino 2009). DDI has various benefits for the home country. According to a report of the United States Agency for International Development, DDI is essential for the home country. Its benefits include resources such as brain gain, technology transfer, stable financial investment, and attracting foreign direct investment.

3 Diaspora Entrepreneurship The literature on diaspora entrepreneurship mainly discusses transnational entrepreneurship and returnee entrepreneurship. Transnational entrepreneurship refers to the “entrepreneurial activities that are carried out in a cross-national context, and initiated by actors who are embedded in at least two different social and economic arenas” (Drori et al. 2009, p. 1001). It deals with immigrant entrepreneurial activities that take place between their country of residence (COR) and COO (Lundberg and Rehnfors 2018). Transnational entrepreneurs import good from their COO to their COR (Aliaga-Isla and Rialp 2013). Returnee entrepreneurship was defined by Akkurt (2008) as the entrepreneurial activities conducted by the people who lived overseas but later returned to their COO to conduct business. In this study, returnee entrepreneurs refer to Somali diaspora returnees who become involved in entrepreneurship. People who migrated overseas and spent some time particularly in the west are presumed to take opportunities

128

M.-A. Mohamed and A.-N. Abdul-Talib

and acquire both human and financial capital, such as vital experience and quality education, which can be utilized for various purposes upon their return to their homeland (McCormick and Wahba 2000; Wickramasekara 2002). The human capital contributions of diasporas can help “bridge the gap between the developing and the developed worlds” (Lowell and Gerova 2004). Diasporas become “reputation intermediaries” by representing their homeland abroad (Kapur and McHale 2003; Riddle 2008). Skilled emigrants are usually called “diaspora knowledge networks” (Kuznetsov 2008). Therefore, diasporas can be influential in many sectors because they can contribute to the economy and transfer cultural and civilization from their respective host countries or political participation (Patterson 2006). Diasporas offer other sources to their home countries, such as modernization consultations, knowledge transfer, and other skills (Dickson 2003; Lowell and Findlay 2002). Moreover, diaspora returnees also offer entrepreneurial spirit to their homeland by starting new businesses using their experiences and creative ideas gained from abroad (Jones and Wadhwani 2007; Riddle 2008).

4 Diaspora Investment and Entrepreneurship Challenges DDI and entrepreneurship are considered genuine methods that unlock untapped investment opportunities (Ojo et al. 2013). They contribute to employment creation and economic development in the home country. Some of the notable countries that have benefited from DDI contribution are China and India (Boly et al. 2014; Chand 2016). However, they face issues in the home country that challenge them, such as unpredictability of the legal and administrative systems and the possible political instability (Ciccone and Papaioannou 2007; Riddle et al. 2010). These obstacles and others such as dysfunctional institutions (Anyaeche 2012) and a poor judicial system (Gray 1997) affect diaspora entrepreneurs when they register and set up their business. Other scholars have suggested other challenges, including mistrust in the business environment (Chrysostome 2014) and corruption that hinders investment (Mauro 1995). The combination of these challenges can hold back the entrepreneurial activities of diaspora entrepreneurs in their home country. Diaspora investment is driven by both pecuniary and non-pecuniary investment interests. Generally, there are three types of investment return expectations that may drive the interest of diasporas in investing in their COO during the post-conflict period: financial, emotional, and social status motivations (Nielsen and Riddle 2009). In terms of economic motives, the potential to make money and improve the net worth of their portfolios is a crucial factor (Makowitz 1959). The maximization of returns gives individuals a specific risk tolerance, which usually governs investment decisions (Beal et al. 2005; van de Laar and de Neubourg 2006). Gillespie et al. (1999) identified two assumptions that are similar to the factors mentioned above. Ethnic advantage and altruism are the motives behind the homeland investment decision of the diaspora. These two suggestions are similar and dissimilar

8 Non-pecuniary Factors Influencing Diaspora Homeland Investment

129

to the investment decisions of multinational firms. According to some researchers, similar motives are the ordinary investment in which investors seek a return on investment, whereas dissimilar factors are the non-economic factors such as altruism and patriotism (Gillespie et al. 1999; Smart and Hsu 2004; Lin 2010). Diasporas that are willing to do business in their COO, especially those driven by financial motives, likely take advantage of their ties with their homeland (Nielsen and Riddle 2007), particularly, ethnic advantage and market knowledge.

5 Home/Ethnic Advantage The home advantage, or ethnic advantage in some cases, refers to the positive investment of diaspora in their homeland as they feel they have a superior hand to their competitors because of their knowledge about their country’s culture, economics, and social status. Gillespie et al. (1999) define “ethnic advantage” as a positive investment performance expectation based on the belief that co-ethnics possess inherent knowledge and social acceptance/access benefits that non-ethnics do not. Diaspora investors have greater access and attention to information to gain competitive advantage in their homeland (Graham 2010). Home advantage is one of the drivers of the diaspora to make homeland investment, and it is based on competitive advantage. The diaspora may enjoy higher levels of trust with co-ethnics because of their understanding of the culture and easier access to information in the homeland (Rauch 2003; Docquier and Lodigiani 2010; Leblang 2010; Javorcik et al. 2011). This concept explains that the diaspora is motivated to invest in their COO because they believe their familiarity with their home country is a boost and an advantage. In contrast with the foreign investors in the county, the diaspora considers ethnic advantage to be a powerful tool that non-ethnics do not have, and thus they consider this as a competitive advantage over rival investors such as foreign firms (Graham 2014). Therefore, diaspora-owned firms are more likely than other international firms to exploit social networks in the homeland to gain competitive advantage (Graham 2012).

6 Market Knowledge The knowledge of the diasporas of their homeland gives them an advantage over their competitors. They have the confidence that they can do better than foreign investors. The level of confidence of diaspora members in the financial success of their investment affects their expectations of investment risk and return (AbdulTalib and Abd-Razak 2012; Nielsen and Riddle 2007). Knowledge of the homeland business environment and their experience in the homeland or the local people may enhance the confidence of the diasporas in the financial success of their homeland investment venture. Developing countries, in general, and states with high levels of political risk, in particular, usually struggle to attract foreign direct investment, but

130

M.-A. Mohamed and A.-N. Abdul-Talib

diasporas see only the opportunity (Ashari et al. 2018; Zamani et al. 2016). Taking advantage of their knowledge on their homeland is essential for making investments and business in general. Several scholars examined the pecuniary and non-pecuniary motivations of the diaspora for homeland investment (Gillespie et al. 1999; Levitt 2001; Saxenian 2006; Terrazas 2010; Kapur 2010; Riddle et al. 2010; Hammond et al. 2011; Mullings 2011; Riddle and Brinkerhoff 2011; Graham 2014; Williams 2018; Park and Chu 2018). Some researchers found that homeland investment motivations of the diaspora at the individual level are not only economic. Non-profit factors such as cultural, social, emotional, and political are among other influencing factors (Zivin and Small 2005; Riddle and Brinkerhoff 2011; Rana and Elo 2017). Non-pecuniary factors, including altruism, patriotism, search for social recognition, and the need to be close to family, are among the motivational factors (Gillespie et al. 1999; Nielsen and Riddle 2009; Newland and Taylor 2010; Lin and Tao 2012; Nkongolo-Bakenda and Chrysostome 2013; Elo and Riddle 2016). Most existing studies on the non-pecuniary investment motivations of the diaspora suggested two common assumptions: altruism and social status (Gillespie et al. 1999; Smart and Hsu 2004; Lin 2010; Terrazas 2010; Riddle et al. 2010; Nielsen and Riddle 2010; Brinkerhoff 2016; Rana and Elo 2017). The literature on diaspora homeland investment is vast, but only a few studies focused on the motivational factors behind it. In the current study, we exclusively examined the non-financial motivations. We gathered and analyzed previous literature on the topic, presented the significant findings, and provided recommendations and future study guidelines. In the following sections, we discuss the literature review of the non-financial motives previous scholars suggested, followed by future research recommendations. The term “non-pecuniary” is derived from pecuniary, which is a Latin word that is equivalent to money, wealth, or property. In this study, it refers to the non-financial investment return that the diaspora obtains from their homeland investment. It represents anything other than money that motivates the diaspora to invest in their COO. This study discusses the following factors: (1) (2) (3) (4) (5)

altruism social recognition or status homeland duty emotional satisfaction political motivation.

7 Altruism Kanungo and Conger (1993) defined altruism as the intention and the will to help others by sacrificing their own welfare without expectation of reward. Altruistic actions are generally driven by compassionate feelings and duties (Van de Laar and De Neubourg 2006). Therefore, the altruistic concept is when the diaspora invests in their COO beyond the non-monetary investment returns. Some diasporas who use their human and financial capital to invest in their COO were inspired by altruistic aims

8 Non-pecuniary Factors Influencing Diaspora Homeland Investment

131

(Gillespie et al. 1999). Altruism is one of the non-pecuniary motivational factors affecting the investment decisions of diasporas (Nielsen and Riddle 2010). According to Gillespie et al. (1999), diaspora communities contributed to the economic development of their COO and invested at a time when attracting foreign investors was difficult. Diaspora investors became an alternative to foreign investors, who perceive investing in countries with a weak economy and security condition to be too risky (Gillespie et al. 1999; Riddle et al. 2010; Smart and Hsu 2004). Terrazas (2010) suggested that the patriotic feelings of diasporas affect their decisions, making them willing to invest in their COO despite the political and economic risks. They perceive their investment as an obligation to help their COO and sometimes accept a below-market rate on their return of investment as a sign of sacrifice to their country (Beal et al. 2005; Zivin and Small 2005). Moreover, diaspora members are likely to invest and contribute to their COO (Graham 2014). They invest even if multinational firms consider their COO to be unsuitable for investing due to security issues or inadequate infrastructure. For example, in a study on the diasporas of Cuba, Iran, Armenia, and Palestine, Gillespie et al. (1999) found that these challenges did not stop the diasporas from investing because of their strong emotional and altruistic feelings. In the same way, Somali diasporas invested in their country during the civil war (Hammond et al. 2011). Despite the existence of enormous risks, uncertainty, and economic risks, they continuously invested in their country (Sheikh and Healy 2009). However, pure altruism does not exist, and every contribution decision is associated with some return for the decision makers (Sesardic 1999; Nielsen and Riddle 2010). Proposition 1 Diaspora homeland investment is motivated by altruistic feelings.

8 Social Recognition or Status The need for social recognition from the family, clan, ethnic community, or professional community is part of human behavior and is therefore a common and normal need. As the need for social recognition is among the higher-level needs of Maslow’s hierarchy of needs, people tend to seek recognition from their family or community. Contributing to the community and investing in their COO result in social recognition. Other members of the community honor the diasporas who contribute. Therefore, they strive for social recognition from the community, clan, or ethnic community, thus contributing back to the society as a way to achieve this desire. For diaspora community members, the need for social recognition from their home country is strong, and therefore, they involve themselves in various developmental programs to contribute to their COO (Michelson et al. 2004; Nielsen and Riddle 2010). Gaining recognition is a significant motivator for contributing, particularly making investments (Aharoni 1966). Sana (2005) examined the Mexican male diaspora living in the USA who send remittance back to their ethnic community. These contributions represent a way of earning or maintaining social status.

132

M.-A. Mohamed and A.-N. Abdul-Talib

Diaspora members believe that they can obtain recognition and a positive status within the diaspora communities and in their homeland through their investment activities (Aharoni 1966; Nielsen and Riddle 2010; Vaaler 2013; Nkongolo-Bakenda and Chrysostome 2013). To receive this recognition, they become involved in various economic activities in their home country, such as sending remittance (Sana 2005) and making investments (Michelson et al. 2004; Nielsen and Riddle 2010). Evidence suggests that these contributions can improve their status in the community and that receiving such recognition gives them a strong sense of identity and satisfaction (Arrow 1972; Ndofor and Priem 2011). Proposition 2 Potential social recognition influences diaspora homeland investment decisions.

9 Homeland Duty and Possible Future Return Homeland duty is another factor that drives the homeland investment of diaspora members. Diaspora members maintain an active relationship (i.e., economic and psychological relationships) with their home country. Economic relationships such as remittance and investment are driven by a sense of responsibility; diasporas regard their investment contributions as a duty (Boly et al. 2014; Nielsen and Riddle 2007). Homeland obligations are socially constructed; diaspora members are influenced by family and peers give assistance to the homeland. This sense of responsibility for their homeland makes them feel obligated to contribute and affects their investment decisions (Saxenian and Sabel 2008; Nielsen and Riddle 2010). Beyond the sense of duty, the possibility of a future return to their homeland and their perceived opportunities for their descendants also trigger investment and contribution decisions. Some diasporas invest in their COO to pave the way for future generations, as investments become a foundation if they decide to return home in the future (Safran 1991; Riddle and Brinkerhoff 2011; Elo and Riddle 2016). Proposition 3 Diaspora homeland investment is motivated by a sense of responsibility and perceived future homeland return.

10 Emotional Connection or Satisfaction People naturally need to interact with others by connecting with groups or organizations, and this need for belongingness is a significant factor of human motivation (Baumeister and Leary 1995). Emotions influence the investment decisions of diasporas (Aharoni 1966; Gillespie et al. 1999). Some diaspora members may be motivated by their emotional attachment to their COO, which inspires them to invest

8 Non-pecuniary Factors Influencing Diaspora Homeland Investment

133

regardless of the potential challenges. This strong emotion serves as an influential factor in homeland contribution (Tung 2008; Lin and Tao 2012; Hartini et al. 2017). Diaspora individuals with higher emotional connections with their COO tend to ignore such challenges and still invest, unlike the non-diaspora investors who do not consider investing because of the imbalance in risk and return (Terrazas 2010). Other studies (Gillespie et al. 1999; Aharoni 1966; Mowen and Sujan 2005) pointed out that altruistic emotional motives play a role in the homeland investment decisions of diasporas. Similarly, Nielsen and Riddle (2007) suggested that the expectation of significant personal emotional satisfaction could be a key motivator of investment decisions. Proposition 4 Diaspora homeland investment is motivated by emotional connection.

11 Political Motivation Diasporas are associated with the politics of their home country, and thus, they engage with their COO through political mechanisms such as lobbying (Fidrmuc and Doyle 2004). They mobilize their influence and sway specific political outcomes in their home country (Constant and Zimmermann 2016). Some of them join advocacy groups and are involved in lobbying for the government of their host country to influence political issues in their home country (Riddle 2008). Scholars suggested instrumental motives as another non-pecuniary factor affecting diaspora investment in their COO. The homeland investment of some diaspora members is driven by their desire to acquire political access (Bandelj 2007; Nielsen and Riddle 2010; Graham 2012; Elo and Riddle 2016). Diasporas seek political influence to avoid government mistreatment and earn protection for their families back home (Graham 2012). Nduom (2018) found a positive relationship between political benefit and the homeland investment motivations of Ghanaian diasporas. Based on the literature, having interest in political influences (e.g., for personal reasons such as the need for protection for families back home) and seeking influence on the home country’s political power through lobbying are evidence that political motivation is positively related to the COO investment intentions of diasporas. Proposition 5 Diaspora homeland investment is motivated by the possibility of gaining political influence.

12 Conclusion and Future Research Recommendations This study aimed to examine the non-monetary factors affecting diaspora homeland investment. Based on the current research on diaspora homeland investment

134

M.-A. Mohamed and A.-N. Abdul-Talib

motivations, specifically the non-financial motives, this study provided a theoretical overview to demonstrate the critical findings of previous scholars. We conducted a comprehensive online search by collecting and reviewing important studies on the topic. The study covered the previous literature on the subject and critically reviewed old and recent studies. The five main non-monetary motivational factors that correlate with diaspora investment decisions were discussed. In the literature, the role of rationality in investment decision making underpins much of the theory on modern finance (Beal et al. 2005). However, in this study, we draw on the theories from psychology and sociology (Bakar and Talib 2013). Previous studies (Baumeister and Leary 1995) argued the possibility of meta-theories of motivation and suggested individual motivations to be influenced by the need for power, involvement, and achievement. We referred to the theories of motivation. Therefore, Baumeister and Leary’s (1995) need to belong theory, which is a fundamental human motivation, was related to the propositions of this study and was the underpinning theory of this work. According to Moreland (1987), the need to belong theory explains the human behavior of being attached to communities and organizations. This study applied it to the context of diaspora homeland investment decisions. After conducting an extensive literature review, we found that the motivations behind the home country investment decisions of the diasporas went beyond economic interests. Scholars suggested factors such as altruistic feelings (Gillespie et al. 1999; Smart and Hsu 2004; Nielsen and Riddle 2009; Riddle et al. 2010; Newland and Taylor 2010; Hammond et al. 2011; Nkongolo-Bakenda and Chrysostome 2013; Graham 2014); the need to be closer to family, the need to earn social status, and the moral responsibility of helping the economic development of the home country (Sana 2005; Nielsen and Riddle 2007; Nkongolo-Bakenda and Chrysostome 2013; Boly et al. 2014), and patriotism (Lin and Tao 2012) are the key motivational factors affecting the investment decisions of diasporas. We presented a comprehensive list of factors affecting diaspora homeland investment intentions. As suggested in previous studies, three main factors affect diaspora investment decisions: altruism, emotional attachment, and social status. Some studies also indicated other factors, such as homeland duty and political influence as influential motives. The non-monetary homeland investment motivations of the diaspora discussed in the literature are mostly psychological factors. So far, most studies, including the recent ones, found altruism, patriotism, seeking social status, and political motives as the main factors. On the basis of the literature, we found that diasporas, who are either politically or economically struggling to attract foreign investors, are driven by psychological factors such as altruism and emotional connections, as they play an alternative role of foreign direct investors. Researchers who examined the non-economic motivational factors found that social and emotional connections are determinant factors of diaspora investment in conflict-affected countries. As Gillespie et al. (1999) argued, diaspora entrepreneurship and investment are a significant contributor to the economy of countries that are deemed less attractive by non-diaspora investors due to numerous reasons, including political issues, poor infrastructure, and weak institutions, because diaspora investors

8 Non-pecuniary Factors Influencing Diaspora Homeland Investment

135

are first-mover investors despite the economic and political uncertainty (Gillespie et al. 2001). This is the reason why many countries have developed diaspora engagement policies to promote diaspora homeland investment (Riddle et al. 2008). As diasporas possess essential resources for the economic development of the home country, they became a target for many governments in the home countries for setting up programs to engage diasporas to harness their entrepreneurial resources (Nkongolo-Bakenda and Chrysostome 2013). In conclusion, despite the current literature on the topic, more research is needed to properly investigate the non-economic factors driving the homeland investment intentions of diasporas. Therefore, future studies should develop a framework to examine the effects of individual-level motivational factors on investment decisions.

References Abdul-Talib AN, Abd-Razak IS (2012) Export market oriented behaviours within the medical tourism industry: a case study. Int J Tourism Policy 4(4):289–301 Adamson F (2016) The growing importance of diaspora politics. Curr Hist 115(784):291–297 Aharoni Y (1966) The foreign investment decision process. Int Exe 8(4):13–14 Akkurt E (2008) Returnee entrepreneurs–characteristics and success factors. LEMEX Res Pap Entrepreneurship 1:4–18 Aliaga-Isla R, Rialp A (2013) Systematic review of immigrant entrepreneurship literature: previous findings and ways forward. Entrepreneurship Reg Dev 25(9–10):819–844 Anyaeche CO (2012) Current challenges to doing business in Sub-Saharan Africa. Modern Ghana (March) Arrow KJ (1972) Gifts and exchanges. Philos Public Aff 1(4):343–362 Ashari H, Yusoff YM, Zamani SNM, Abdul-Talib AN (2018) A study of the effect of market orientation on Malaysian automotive industry supply chain performance. Int J Technol 9(8):1651– 1657 Bakar ARA, Talib AAN (2013) A case study of an internationalization process of a private higher education institution in Malaysia. Gadjah Mada Int J Bus 15(3):221–230 Bandelj N (2007) From communists to foreign capitalists: the social foundations of foreign direct investment in post socialist Europe. Princeton University Press, Princeton Baumeister RF, Leary MR (1995) The need to belong: desire for interpersonal attachments as a fundamental human motivation. Psychol Bull 117(3):497 Beal DJ, Goyen M, Philips P (2005) Why do we invest ethically? J Inv 14(3):66–78 Boly A, Coniglio ND, Prota F, Seric A (2014) Diaspora investments and firm export performance in selected sub-Saharan African countries. World Dev 59:422–433 Brinkerhoff JM (2016) Institutional reform and diaspora entrepreneurs: the in-between advantage. Oxford University Press, Oxford Brinkerhoff DW, Brinkerhoff JM (2011) Public–private partnerships: perspectives on purposes, publicness, and good governance. Public Adm Dev 31(1):2–14 Butler KD (2001) Defining diaspora, refining a discourse. Diaspora J Transnational Stud 10(2):189– 219 Chand M (2016) Leveraging the diaspora for Africa’s economic development. J Afr Bus 17(3):273– 290 Chrysostome E (2014) Diaspora entrepreneurship in Africa: exploring a promising tool of socioeconomic development. In: Building businesses in emerging and developing countries. Routledge, pp 73–96

136

M.-A. Mohamed and A.-N. Abdul-Talib

Ciccone A, Papaioannou E (2007) Red tape and delayed entry. J Eur Econ Assoc 5(2–3):444–458 Cohen R (1997) Diasporas, the nation-state, and globalization. In: Global history and migrations, pp 117–43 Constant AF, Zimmermann KF (2016) Towards a new European refugee policy that works. Available via UNU-MERIT. https://www.merit.unu.edu/publications/working-papers/abstract/? id=6222. Accessed 27 Oct 2019 Debass T, Ardovino M (2009) Diaspora direct investment (DDI): The untapped resource for development. United States Agency for International Development. Available via USAID. http://pdf. usaid.gov/pdf_docs/PNADO983.pdf. Accessed 27 Oct 2019 Dickson D (2003) How networking can help mitigate the brain drain. Available via SciDevNet. https://www.scidev.net/global/migration/editorials/how-networking-can-helpmitigate-the-brain-drain.html. Accessed 27 Oct 2019 Docquier F, Lodigiani E (2010) Skilled migration and business networks. Open Econ Rev 21(4):565– 588 Drori I, Honig B, Wright M (2009) Transnational entrepreneurship: an emergent field of study. Entrepreneurship Theory Pract 33(5):1001–1022 Elo M, Minto-Coy I (2019) The concept of diaspora from the perspective of international business and economy: an introduction to the book. Diaspora networks in international business. Springer, New York, pp 1–14 Elo M, Riddle L (2016) Understanding diaspora investment. Diaspora business. Interdisciplinary Press, Oxford, pp 13–28 Fidrmuc J, Doyle O (2004) Voice of the diaspora: an analysis of migrant voting behaviour. Available via SSRN. https://ssrn.com/abstract=576184. Accessed 27 Oct 2019 Gillespie K, Riddle L, Sayre E, Sturges D (1999) Diaspora interest in homeland investment. J Int Bus Stud 30(3):623–634 Gillespie K, Sayre E, Riddle L (2001) Palestinian interest in homeland investment. Middle East J 55(2):237 Graham BA (2010) Political risk and diaspora direct investment. Presented at the annual meeting of the American Political Science Association, Washington DC, 2 Sept 2010 Graham BA (2012) Capital and chaos: fragile states, political risk and foreign direct investment. Dissertation, Doctoral dissertation, University of California Graham BA (2014) Diaspora-owned firms and social responsibility. Rev Int Polit Econ 21(2):432– 466 Gray M (1997) Russia fights crime and corruption. Trends Organ Crime 2(4):32–33 Hammond L, Awad M, Dagane AI, Hansen P, Horst C, Menkhaus K, Obare L (2011) Cash and compassion: the role of the Somali diaspora in relief, development and peace-building. Available via UNPD. http://eprints.soas.ac.uk/13076/1/Cash_and_compassion_final.pdf. Accessed 27 Oct 2019 Hartini H, Yaakub S, Abdul-Talib AN, Saud MB (2017) The effects of cultural intelligence on international students’ engagement. Int J Bus Econ Law 12(2):18–25 Ivkovi´c Z, Weisbenner S (2005) Local does as local is: Information content of the geography of individual investors’ common stock investments. J Finan 60(1):267–306 Javorcik BS, SpatareanuM ÖC, Neagu C (2011) Migrant networks and foreign direct investment. J Dev Econ 94(2):231–241 Jones G, Wadhwani RD (2007) Entrepreneurial theory and the history of globalization. Bus Econ Hist 5:1 Kanungo RN, Conger JA (1993) Promoting altruism as a corporate goal. Acad Manage Pers 7(3):37– 48 Kapur D (2010) Diaspora, development, and democracy: the domestic impact of international migration from India. Princeton University Press, Princeton Kapur D, McHale J (2003) Migration’s new payoff. Foreign Policy 49–57 Kuznetsov Y (2008) Mobilizing intellectual capital of diasporas: from first movers to a virtuous cycle. J Intell Capital 9(2):264–282

8 Non-pecuniary Factors Influencing Diaspora Homeland Investment

137

Leblang D (2010) Familiarity breeds investment: diaspora networks and international investment. Am Polit Sci Rev 104(3):584–600 Levitt P (2001) The transnational villagers. University of California Press, Berkeley Lin X (2010) The diaspora solution to innovation capacity development: immigrant entrepreneurs in the contemporary world. Thunderbird Int Bus Rev 52(2):123–136 Lin X, Tao S (2012) Transnational entrepreneurs: Characteristics, drivers, and success factors. J Int Entrepreneurship 10(1):50–69 Lowell BL, Findlay A (2002) Migration of highly skilled persons from developing countries: impact and policy responses. Available via International Labour Office. http://www.ilo.org/public/eng lish/protection/migrant/download/skmig-sr.pdf. Accessed 27 Oct 2019 Lowell BL, Gerova SG (2004) Diasporas and economic development: State of knowledge. Available via The World Bank. https://siteresources.worldbank.org/INTPROSPECTS/Resources/3349341322593305595/8287139-1327608098427/LowellDiaspora.pdf. Accessed 27 Oct 2019 Lundberg H, Rehnfors A (2018) Transnational entrepreneurship: opportunity identification and venture creation. J Int Entrepreneurship 16(2):150–175 Makowitz H (1959) Portfolio selection: efficient diversification of investment. Yale University Press, Yale Massey D, Parrado E (1998) International migration and business formation in Mexico. Soc Sci Q 79(1):1–20 Mauro P (1995) Corruption and growth. Q J Econ 110(3):681–712 McCormick B, Wahba J (2000) Overseas employment and remittances to a dual economy. Econ J 110(463):509–534 Michelson G, Wailes N, Van Der Laan S, Frost G (2004) Ethical investment processes and outcomes. J Bus Ethics 52(1):1–10 Miller MH, Modigliani F (1961) Dividend policy, growth, and the valuation of shares. J Bus 34(4):411–433 Moreland RL (1987) The formation of small groups. In: Review of personality and social psychology Vol. 8. Group processes. Sage Publications, Inc, pp 80–110 Mowen JC, Sujan H (2005) Volunteer behavior: a hierarchical model approach for investigating its trait and functional motive antecedents. J Consum Psychol 15(2):170–182 Mullings B (2011) Diaspora strategies, skilled migrants and human capital enhancement in Jamaica. Glob Netw 11(1):24–42 Ndofor HA, Priem RL (2011) Immigrant entrepreneurs, the ethnic enclave strategy, and venture performance. J Manage 37(3):790–818 Nduom NK (2018) Country of origin investment: experience, attitudes, and motivating factors in the Ghanaian diaspora. Dissertation, The George Washington University Newland K, Taylor C (2010) Heritage tourism and nostalgia trade: a diaspora niche in the development landscape. Available via MPI. https://www.migrationpolicy.org/research/heritage-tourismand-nostalgia-trade-diaspora-niche-development-landscape. Accessed 27 Oct 2019 Nielsen TM, Riddle L (2007) Why diasporas invest in the homeland: a conceptual model of motivation. Available via SSRN. https://ssrn.com/abstract=987725. Accessed 27 Oct 2019 Nielsen T, Riddle L (2009) Investing in peace: the motivational dynamics of diaspora investment in post-conflict economies. J Bus Ethics 89(4):435–488 Nielsen TM, Riddle L (2010) Investing in peace: the motivational dynamics of diaspora investment in post-conflict economies. J Bus Ethics 89(4):435–448 Nkongolo-Bakenda JM, Chrysostome EV (2013) Engaging diasporas as international entrepreneurs in developing countries: in search of determinants. J Int Entrepreneurship 11(1):30–64 Ojo S, Nwankwo S, Gbadamosi A (2013) African diaspora entrepreneurs: navigating entrepreneurial spaces in ‘home’ and ‘host’ countries. Int J Entrepreneurship Innov 14(4):289–299 Orozco M, Lapointe M (2004) Mexican hometown associations and development opportunities. J Int Aff 31–51

138

M.-A. Mohamed and A.-N. Abdul-Talib

Park CH, Chu H (2018) Exploration on factors influencing Korean diaspora entrepreneurs’ investment in the homeland: evaluation of the WKBC and the WKBN. Asia Pac J Innov Entrepreneurship 12(3):338–362 Patterson R (2006) Transnationalism: diaspora-homeland development. Soc Forces 84(4):1891– 1907 Portes A, Yiu J (2013) Entrepreneurship, transnationalism, and development. Migr Stud 1(1):75–95 Ramadani V, Rexhepi G, Gërguri-Rashiti S, Ibraimi S, Dana LP (2014) Ethnic entrepreneurship in Macedonia: the case of Albanian entrepreneurs. Int J Entrepreneurship Small Bus 23(3):313–335 Rana MB, Elo M (2017) Transnational diaspora and civil society actors driving MNE internationalisation: the case of Grameenphone in Bangladesh. J Int Manage 23(1):87–106 Rauch J (2003) Diasporas and development: theory, evidence and programmatic implications. Dissertation, University of California Riddle L (2008) Introduction to Part II. In: Brinkerhoff J (ed) Diasporas and development: exploring the potential. Lynne Reinner Publishers, Colorado Riddle L, Brinkerhoff J (2011) Diaspora entrepreneurs as institutional change agents: The case of Thamel. com. Int Bus Rev 20(6):670–680 Riddle L, Marano V (2008) Harnessing investment potential through homeland export and investment promotion agencies: the case of Afghanistan. In: Diasporas and development: exploring the potential. Lynne Reinner Publishers, Colorado Riddle L, Brinkerhoff JM, Nielsen TM (2008) Partnering to beckon them home: public-sector innovation for diaspora foreign investment promotion. Public Adm Dev: Int J Manage Res Pract 28(1):54–66 Riddle L, Hrivnak GA, Nielsen TM (2010) Transnational diaspora entrepreneurship in emerging markets: bridging institutional divides. J Int Manage 16(4):398–411 Rodríguez-Montemayor E (2012) Diaspora direct investment policy: options for development. Available via IDB. https://publications.iadb.org/en/publication/diaspora-direct-investment-pol icy-options-development. Accessed 27 Oct 2019 Safran W (1991) Diasporas in modern societies: myths of homeland and return. Diaspora J Transnational Stud 1(1):83–99 Sana M (2005) Buying membership in the transnational community: migrant remittances, social status, and assimilation. Popul Res Policy Rev 24(3):231–261 Saxenian A (2006) The new argonauts. Regional advantage in a global economy. Harvard University Press, Cambridge, MA Saxenian A, Sabel C (2008) Roepke lecture in economic geography venture capital in the “periphery”: the new argonauts, global search, and local institution building. Econ Geogr 84(4):379–394 Sesardic N (1999) Altruism. Br J Philos Sci 50:457–466 Sheffer GG (2006) Transnationalism and ethnonational diasporism. Diaspora J Transnational Stud 15(1):121–145 Sheikh H, Healy S (2009) Somalia’s missing million: the Somali diaspora and its role in development. Available via UNDP. https://www.so.undp.org/content/somalia/en/home/library/poverty/ publication_3.html. Accessed 29 Oct 2019 Shenkar O (2004) One more time: international business in a global economy. J Int Bus Stud 35(2):161–171 Smart A, Hsu JY (2004) The Chinese diaspora, foreign investment and economic development in China. Rev Int Aff 3(4):544–566 Stalker P (2000) Workers without frontiers: the impact of globalization on international migration. Lynne Rienner Publisher, Colorado

8 Non-pecuniary Factors Influencing Diaspora Homeland Investment

139

Terrazas A (2010) Diaspora investment in developing and emerging country capital markets: patterns and prospects. Available via MPI. https://www.migrationpolicy.org/research/diaspora-invest ment-developing-and-emerging-country-capital-markets-patterns-and-prospects. Accessed 27 Oct 2019 Tesar LL, Werner IM (1995) Home bias and high turnover. J Int Money Finan 14(4):467–492 Tung RL (2008) Brain circulation, diaspora, and international competitiveness. Eur Manage J 26(5):298–304 Vaaler PM (2013) Diaspora concentration and the venture investment impact of remittances. J Int Manage 19(1):26–46 Van de Laar M, De Neubourg C (2006) Emotions and foreign direct investment: a theoretical and empirical exploration. Manage Int Rev 46(2):207–233 Weidenbaum ML, Hughes S (1996) The bamboo network: how expatriate Chinese entrepreneurs are creating a new economic superpower in Asia. Free Press, New York Wickramasekara P (2002) Asian labour migration: issues and challenges in an era of globalization. Available via ILO. https://www.ilo.org/asia/publications/WCMS_160632/lang–en/index. htm. Accessed 27 Oct 2019 Williams N (2018) Mobilising diaspora to promote homeland investment: the progress of policy in post-conflict economies. Environ Plann C Polit and Space 36(7):1256–1279 Zamani SNM, Abdul-Talib AN, Ashari H (2016) Strategic orientations and new product success: the mediating impact of innovation speed. Int Inf Inst (Tokyo) Inf 19(7):2785–2790 Zhu K, Weyant J (2003) Strategic exercise of real options: Investment decisions in technological systems. J Syst Sci Syst Eng 12(3):257–278 Zivin JG, Small A (2005) A Modigliani-Miller theory of altruistic corporate social responsibility. Econ Anal Policy 5(1):1–10

Chapter 9

Muslim Youths’ Satisfaction Toward Muslim-Friendly Hotels: Examining the Effects of Hotel Image, Brand Image and Employee Performance Samshul-Amry Abdul-Latif and Nur Adilah Adnan Abstract This paper aims to examine the effects of hotel image, brand image and employee performance on customer satisfaction of Muslim youths during their leisure stay in Muslim-friendly (MF) hotels in Malaysia. Self-administered questionnaires measuring hotel image, brand image, employee performance and customer satisfaction on a five-point Likert scale were distributed to 300 tourists in four prominent hotels in Kuala Terengganu. The data is then analyzed by multiple regression using SPSS software. The results indicated that hotel image and employee performance were found to be significant factors in predicting Muslim youth’s customer satisfaction of their hotel accommodation and hospitality services in MF hotels. However, brand image was found to be an insignificant predictor to their satisfaction. The sample of this study was limited to only Muslims, and mainly students. However, this does not suggest that students should be ignored in terms of their purchasing power and preference. Future studies may want to include other consumer segments and examine other MF hotels or hotels with similar concepts in countries interested to tap on the Muslim tourists, for example, Japan, China and Korea among others. Malaysia is known to be an MF destination among tourists from many parts of the world. By understanding Muslim consumers’ expectations, the performance of hotel employees and hotel image can be utilized by hotel operators worldwide to enhance their marketing strategies. Keywords Hotel image · Brand image · Employee performance · Customer satisfaction · Muslim youths · Muslim-friendly hotels

1 Introduction The Muslim travel market is a lucrative and fastest-growing market segment in the global travel industry (MasterCard-CrescentRating 2016a, 2018). This market segment grew from 117 million Muslim visitor arrivals globally in the year 2015, S.-A. Abdul-Latif (B) · N. A. Adnan International Islamic University Malaysia, Pagoh, Muar, Malaysia e-mail: [email protected] © Springer Nature Singapore Pte Ltd. 2020 N. Zakaria et al. (eds.), Transcending Cultural Frontiers, https://doi.org/10.1007/978-981-15-4454-5_9

141

142

S.-A. Abdul-Latif and N. A. Adnan

to 121 million in 2016, and subsequently, 131 million in 2017 (MasterCardCrescentRating 2016a, 2018). It is expected that this segment is to grow further reaching 158 million Muslim travelers globally by the year 2020. The segment’s expenditure is on track to reach a total expenditure of US$200 billion in 2020. It is estimated to reach US$300 billion by the year 2026 (MasterCard-CrescentRating 2018). Since the trend of MF tourism has reached across the globe, several countries have recently begun to realize its big potential impact to their economy including Indonesia (Faisal 2015), Japan (Henderson 2016) and Korea (Kim et al. 2015) to name a few. The positive impact from destinations’ commitment and prior investment into the Muslim travel market could now be realized as there are shifts in the ranking (MasterCard-CrescentRating 2018). Malaysia was one of the first few countries to seize the Muslim tourism potential (MasterCard-CrescentRating 2016a). Tourist destination operators, accommodation providers, travel agents, restaurants, among many other travel-related organizations could benefit and profit from the in-depth understanding of Muslim tourists’ unique needs. By enhancing tourism facilities and services, Muslim tourists found that their expectations were met and in accordance with their religious beliefs, especially concerning accommodation-related facilities and conveniences in Malaysia. Likewise, some international hoteliers in Malaysia are adopting the globalization approach in their businesses to appeal to both their international and local customers, taking into account not only the local laws and customs but the local preferences and sensitivities as well. Akin to their non-Muslim counterparts, the Muslim youth segment is a significant expanding market segment (Blanco et al. 2011). This segment holds great potential as it is the largest group with young consumers among all major religious groups with a median age of 23, which is seven years younger than any other religious groups (Lipka 2017). The Muslim Millennial Travel Report 2017 reported that accommodation expenditure ranked third after meals expenditure and miscellaneous expenses for Muslim youths when they travel (MasterCard and HalalTrip 2017). From the total population of 34 million, approximately 61% are Muslims in Malaysia (Abdul-Latif and Abdul-Talib 2017; Census 2011) which indicates a substantial and significant domestic tourism market base. According to Malaysia Department of Statistics (2019), the accommodation component (8.5%) is placed fifth in domestic tourist expenditure after shopping (37.6%), fuel (14.7%), food (13.8%) and visited household (10.6%). Other expenditure components of domestic tourists are miscellaneous activities (5.3%) and tourism tickets and packages (3.2%). Based on both reports, accommodation allocation and expenditure can be considered as a relatively important component.

9 Muslim Youths’ Satisfaction Towards Muslim-Friendly …

143

2 Problem Statement In 2014, Malaysian Association of Hotels (MAH) stated that there are 2724 hotels with a total of 195,445 rooms available to cater to both the local or international tourists which may suggest the industry’s high level of competition intensity in Malaysia. Though there is an increasing number of hotels which have positioned themselves as MF (Samori and Sabtu 2014), hotel managers still need to further differentiate their products and services to set themselves apart which can be strategically done through branding (Kandampully and Suhartanto 2000; Qawasmeh 2016). Moreover with the current access to information via online technology, “consumers are provided with [the] means to literally shop [for] hotels [accommodation] online” (Zhang and Mao 2012, p. 114), making it more competitive than ever before. Consequently, it is essential for hotel managers to strategize to remain competitive in the market. Previous studies suggested that hotel guests’ satisfaction is influenced by internal and external factors including hotel image (Zhang and Mao 2012), staff service quality (Choi and Chu 2001), hotels’ service attributes (Jusoff et al. 2009), service quality (Amin et al. 2013), room rates (Mattila and O’Neill 2003), physical environment (Ali et al. 2013), positive emotions (Ali and Amin 2014; Ali et al. 2013) and many more. Although there are many studies previously done focusing on guest/customer satisfaction within the context of Malaysian hotel industry (Amin et al. 2013; Jusoff et al. 2009; Mey et al. 2006; Poon and Low 2005), there is a very limited (if any) number of studies which examined the Muslim youth market segment. Similarly, there is also a minimal number of studies which examined factors affecting customer satisfaction within the context of MF hotels. The model used in this study focuses on the effects of brand image, hotel image and hotel employee performance (Kim and Kim 2005; Qawasmeh 2016) of Muslim youth customer satisfaction on MF hotels. First, this article begins with a review of the concepts followed by a discussion of the effects of brand image, hotel image and hotel employee performance. Then, the research methodology used in this study is described. The research analysis and empirical findings are presented last. This article concludes with a discussion of the implications of this study and points out the limitations and suggestions for future research.

3 Literature Review 3.1 Muslim Youth Consumer Segment Malaysia is a multiethnic and multicultural society with a total population of approximately 32.4 million (Malaysia Department of Statistics 2018) consisting mainly of

144

S.-A. Abdul-Latif and N. A. Adnan

ethnic Malays (47%), Chinese (21%) and Indians (7%) in the Peninsular (AbdulTalib and Abdul-Latif 2015a, b; Census 2011). Almost 99% of ethnic Malays are Muslims. On the other hand, the Chinese and Indian minorities embrace Buddhism, Tao, Hinduism or Christianity, with a tiny percentage embracing Islam (Abdul-Latif and Abdul Talib 2015a, b). The definition of the youth segment differs according to various countries and contexts. In tourism, the youth segment or young travelers are usually defined as persons aged from 15 to 29 (Khoo-Lattimore and Yang 2018), 15 to 25 (Horak and Weber 2000), 18 to 35 (Arizmendi et al. 2016) and 30 to 35 (Liu 2018) among others. This segment can also be identified as travelers whose mobility is at their greatest level (Horak and Weber 2000). In Malaysia, individuals aged between 16 and 35 years old (Krauss et al. 2006) or even 40 years (Suandi 1991) are considered as youths. Generally, the Muslim consumer segment is a distinctive group with special religious requirements and culture (Battour and Ismail 2016; Battour et al. 2014). Destinations, attractions or services which can satisfy Muslim tourists religious needs are advantageous, as they are preferred by Muslims (Battour et al. 2011).

3.2 Muslim-Friendly Hotels The sources of Halal tourism originated from the Sharia law as described in the Qur’an (Mohsin et al. 2016). “Halal tourism refers to the provision of a tourism product and service that meets the needs of Muslim travelers to facilitate worship and dietary requirement that conform to Islamic teachings” (Mohsin et al. 2016, p. 138), which broadly covers the products and services including accommodation, food and beverages, leisure and transportation, among others. “Halal” in Arabic means “countenanced” or “permissible” for Muslims and relates to permitted forms of behavior (Battour and Ismail 2016; Mohsin et al. 2016). As hotel operators begin to understand the potential of Halal tourism, Sharia compliant and MF hotels begin to emerge to accommodate Muslim travelers and tourists seeking “halal” accommodation (Henderson 2010). While “the term ‘Muslim-friendly’ in tourism industry denotes an attempt to make the tourism experience enjoyable to observant Muslims” (Battour 2018, p. 6), not all hotels are prepared to position themselves as Islamic or to cater to Muslim tastes (Alserhan et al. 2018). As it may be challenging (but not impossible) for non-Muslim countries to have Sharia compliant hotels, MF hotel concept is generally acceptable and friendlier to hoteliers. Battour (2018) listed the criteria of MF hotel room and hotel services that it must include a copy of the Qur’an, Qibla direction, prayer mat, prayer timetable, among others. On the other hand, MF hotel services are required to have certified Halal food/kitchens, well-trained staff to satisfy Muslims, women-only floor/familyonly floor, gender segregation for utilizing hotel facilities and segregated prayer

9 Muslim Youths’ Satisfaction Towards Muslim-Friendly …

145

rooms, among others. Organization such as Salam Standard and Crescent Rating (Alserhan et al. 2018) can be engaged by interested hotels for their MF accreditation and rating.

3.3 Customer Satisfaction Customer satisfaction is a broad construct with several approaches in its definition. It can be defined as “a judgement that a product, or service feature, or the product or service itself, provides a pleasurable level of consumption-related fulfilment, including levels of under or over fulfilment” (Oliver 1997, p. 13). Customer satisfaction can also be understood as “the consumer’s response in a particular consumption experience to the evaluation of the perceived discrepancy between prior expectations (or some other norms of performance) and the actual performance of the product as perceived after its acquisition” (Day 1984; Zakaria and Abdul-Talib 2010). Customer satisfaction is a very complex human process as it involves cognitive and affective processes which can be influenced by psychological and physiological factors (Choi and Chu 2001; Oh and Parks 1997). Over the decades, researchers evaluate customer satisfaction differently. It can be evaluated based on two separate levels of quality which are technical and functional (Grönroos 1984), with three elements comprising product, behavior and environment (Reuland et al. 1985). Satisfaction can also be measured through dissecting product or services attributes into core and secondary types (Lovelock 1985) or splitting the service encounter into essential and subsidiary categories (Lewis 1987). Though the approach and terminology appear to be different, fundamentally, the concept of customer satisfaction is similar across various areas of research (Choi and Chu 2001; Abdul-Talib and Adnan 2017). However, in tourism and hospitality context, the focus is on selling memorable experience (Isa et al. 2018) where the core product describes “what” product the customer receives upon purchase which can be tickets to theme parks, hotel accommodation or airline ticket; and the “how” element describes the situation when the customers receive the product or service, describing its ambience, atmosphere, location, accessibility and interaction among many others (Choi and Chu 2001).

3.4 Hotel Image and Customer Satisfaction Hotel image is one of the most essential elements in developing marketing strategies of hospitality businesses in view to satisfy customers (Kandampully and Hu 2007). Hotel guests formulate their level of satisfaction from the experiences obtained during their stay at a specific hotel implying that “guests’ satisfaction is influenced by the physical environment of the hotel, the processes followed, and their contact with employees and the hotel’s products and services” (Qawasmeh 2016, p. 2).

146

S.-A. Abdul-Latif and N. A. Adnan

Fig. 1 The proposed model of Muslim youth customer satisfaction

When selecting a hotel, customers are likely to be influenced by hotel image (Kandampully and Hu 2007) where customers consider the physical environment of the hotel, the processes and guests’ interaction with hotel employees as well as the hotel‘s products and services (Ali and Amin, 2014). By perfecting service encounters with customers in various departments, hotels are likely to gain high customer satisfaction (Kandampully and Hu 2007). These encounters with customers can be at the hotel reception counter, in-house restaurants, guests’ room or any other hotel facilities. Both tangible and intangible components of hotel services are shaped by the functional and emotional dimensions of hotel image (Zhang and Mao 2012) which includes great atmosphere, cleanliness, comfortable rooms and facilities, safety, politeness, courteous and swift services provided by the employees. All these features are essential links in achieving favorable hotel image and customer satisfaction (Kandampully and Suhartanto 2000). Hence, it can be put forward that the more positive the image, the higher the satisfaction the customers receive from the hotel. Therefore, we hypothesize that hotel image positively predicts customer satisfaction (Fig. 1): H 1 : Hotel Image has a positive relationship with Customer Satisfaction

3.5 Brand Image and Customer Satisfaction Brand image is defined as “perceptions about a brand as reflected by the brand associations held in consumer memory” (Keller 1993, p. 3), hence it is considered as an asset to organizations and can be a source of competitive advantage (O’Neill and Mattila 2004). If used strategically, brands can remain in the memories of customers emotionally and cognitively (Aaker 1996; Martinez et al. 2008). This is because a brand is a “cognitive shortcut” for quality by giving the consumers valuable information about the products/services (O’Neill and Mattila 2004).

9 Muslim Youths’ Satisfaction Towards Muslim-Friendly …

147

As there are many intangible elements within the hotel industry, the usage of tangible cues such as hotel brand name and amenities plays very important roles in shaping and influencing customers’ behavior (Lien et al. 2015). To differentiate itself from other players in a competitive industry, a unique brand image must be developed to communicate the benefits to targeted groups, as consumers are likely to make purchase on recognizable, reputable and well-established brands (AghekyanSimonian et al. 2012). The literature on brand image revealed that this construct is multidimensional in nature, and due to this, there is a lack of consensus on how to empirically measure the construct. There are several measurements for brand image (Lahap et al. 2016; Lien et al. 2015; Martinez et al. 2008). Brand image is communicated to consumers through brand associations which are categorized into three categories; attributes, benefits and attitudes (Martinez et al. 2008). These associations can vary based on their favorability, strength and uniqueness (Keller 1993). The link between brand associations and the brand itself will intensify when it is based on consumers’ own experience or when exposed to communications (Aaker 1996). Therefore, the more favorable brand image a customer has of a hotel, the higher the level of satisfaction the customer has. We hypothesize that brand image positively predicts customer satisfaction: H 2 : Brand Image has a positive relationship with Customer Satisfaction.

3.6 Employee Performance and Customer Satisfaction With the increase of non-traditional hotel accommodation such as bed and breakfast, campgrounds, homestays (Ibrahim and Rashid 2010) and AirBnB (Guttentag 2015; Oskam and Boswijk 2016), hotel employees’ performance is viewed as not only viable, but necessary strategy for hotels to remain competitive by retaining current customers or pinch competitors’ clients (Jones 1996). In tourism and hospitality, employees’ performance is relied on to provide customers with quality services to gain customer satisfaction (Gould-Williams 1999; Bakar et al. 2014) and recommendation (Jones 1996). The increase in positive consumer perception of service quality has been linked with good employee performance. On the other hand, poor employee performance has been linked to customer complaints and brand switching (Zeithaml et al. 1996). Customer’s perceived service is based on the actual service delivery and communication between the service provider and the client. Clients assess their received services which form the perceived service performance and expectation based on elements such as access, communication, competence, courtesy, reliability, responsiveness, assurance and empathy, among others (Manhas and Tukamushaba 2015; Parasuraman et al. 1985).

148

S.-A. Abdul-Latif and N. A. Adnan

There are many ways on how hotel employees’ performance could have a positive influence on the satisfaction level of hotel guests. Hotel employees who are knowledgeable, friendly and helpful are likely to have a positive influence on hotel guests’ level of comfort and happiness (Choi and Chu 2001). Hotel guests are more likely to respond positively when they are being addressed in a responsive, enthusiastic and attentive manner by hotel employees (Berry and Carbone 2007; Berry et al. 2006). Previous studies have also found that hotel guests appreciate politeness and respectfulness, especially during their first welcome arrival. The usage of courteous words and correct pronunciation of guests’ names will make guests feel welcomed (Berry and Carbone 2007). Some hotels even provide extra services to guests with special needs (Wang et al. 2017). Hence, we hypothesize that employee performance positively predicts customer satisfaction: H 3 : Employee Performance has a positive relationship with Customer Satisfaction.

4 Methods The objective of this study is to investigate the effects of hotel image, brand image and employee performance on customer satisfaction of Muslim youths toward MF hotels. The state of Terengganu was selected because it is positioned to be the hub for Muslim-oriented tourism (NST 2018a) and the availability of various tourist attractions ranging from history, culture, heritage and nature-based attractions like beaches, islands, lakes, waterfalls, nature parks and popular local cuisines (NST 2018b). Additionally, Muslims, traveling youths, have the tendencies for destinations where Islam is the predominant religion (Henderson 2016) which fits the state of Terengganu very well. Following a previous study (Suandi 1991), this study defines youth as individuals aged between 18 and 40 years. The survey was conducted at four selected hotels within the Kuala Terengganu city vicinity. These hotels were conveniently selected from a list of hotels available from the official Web site of the Terengganu State Tourism Department.1 These hotels were also listed online on travel Web sites such as Trivago, Booking. com, Trip Advisor and a MF hotel booking Web site—Tripfez.2 A study suggested that the majority of Muslim business travelers prefer hotels which are rated three to four star (MasterCard-CrescentRating 2016b). These hotels offer MF facilities (MasterCard and HalalTrip 2017) such as bidet sprays, proximity to Halal food eateries, Halal FandB, prayer-related facilities and no vice activities (adult entertainment) among others.3 1 http://www.tourism.terengganu.gov.my/eterengganu/images/daerah/dkt.pdf, last accessed on 1 June 2018. 2 In Tripfez, hotels are reviewed under Salam Standard, an independent Halal certification for accommodation. 3 Hotels that have taken into account some faith-based needs of Muslim travelers but not all of their needs (HalalTrip).

9 Muslim Youths’ Satisfaction Towards Muslim-Friendly …

149

The questionnaire was developed based on previous studies and divided into three parts. Part A covered the respondents’ demographic details, namely age, gender, employment status and religion. Part B measured brand image with eight items (Kim and Kim 2005; Lahap et al. 2016), hotel image with five items (Qawasmeh 2016) and employees performances with six items (Qawasmeh 2016). Lastly, Part C dealt with customer satisfaction (Lahap et al. 2016; Qawasmeh 2016). Excluding respondents’ demographic, all items in Part B and C were measured by a five-point Likert type scale from 1 (strongly disagree) to 5 (strongly agree).

4.1 Sampling and Data Collection Following previous studies, non-probability convenience sampling technique was used as the samples were obtained from the selected hotels (Abd-Rahman et al. 2015; Isa et al. 2018). A total of 300 self-administered questionnaires were distributed equally to all selected hotels. Following the recommendation by Tabachnick and Fidell (2007) to determine the appropriate sample size, the formula N > 50 + 8m (where m = number of independent variables used) should be employed. All potential respondents were approached by the researchers at the hotel exits or common areas. The questionnaires were given if the respondents confirmed that they are Muslims residing at the hotels and are willing to participate in the survey. The questionnaires were collected after the respondents’ completion.

4.2 Data Analysis Techniques SPSS version 17.0 was used to analyze the data. The analyses consisted of three sections; the descriptive statistics of all variables were assessed. This is then followed by the factor analysis and Cronbach’s alpha to test the reliability of the scales. The final section involved multiple regression analysis which was performed to analyze the relationship and effects of brand image, hotel image and employees’ performance on customer satisfaction.

5 Results 5.1 Demographic Profile From a total of 300 questionnaires distributed, only 250 were returned. From the total returned questionnaire, 35 were incomplete, while 15 were removed as they

150

S.-A. Abdul-Latif and N. A. Adnan

were international tourists. A total of 21 respondents were also removed as these respondents aged above 40 years. The analysis used 179 completed questionnaires. Based on the results, there were more men (63%) than women (37%) who completed the questionnaires. Generally, most of the respondents were individuals in their youth aged between 19 and 25 (80%). More than half of the respondents categorized themselves as students (59%), while 38% were employed. These respondents are educated, i.e., bachelor degree holders or pursuing tertiary education (80%). Approximately 10% of the respondents are married.

5.2 Construct Validity The correlation matrix revealed the presence of many coefficients scoring 0.5 and above. The KMO value was 0.897, and the Bartlett’s test of sphericity reached statistical significance. All scales were then subjected to principal components analysis with Direct Oblimin method. A total of nine items were discarded from customer satisfaction (3), hotel image (2) and brand image (4). Four components were revealed and found to be unidimensional which explained 65.7% of the variance.

5.3 Reliability Analysis Cronbach’s alpha was used to measure the internal consistency of the scales. The minimum Cronbach’s alpha of 0.70 is considered acceptable (DeVillis 1991; Nunnally and Bernstein 1994). In this study, the Cronbach’s alpha estimated for brand image was 0.688 (four items), hotel image was 0.723 (three items), employee performance was 0.896 (seven items), and customer satisfaction was 0.743 (three items). It is common to obtain Cronbach’s alpha of less than 0.5 of scales with items less than 10 (Pallant 2010). As such, it is recommended by Briggs and Cheek (1986) to report the inter-item correlation for scales with low alpha scores. The inter-item correlation of brand image items was found to be between 0.2 and 0.4 as recommended. All constructs were deemed to have reliability. Refer to Table 1. Table 1 Descriptive statistics

Variables

Mean

Std. deviation

Cronbach Alpha

Customer satisfaction

4.0251

0.57341

0.743

Brand image

3.8066

0.55130

0.688

Employee performance

4.0431

0.59826

0.896

Hotel image

3.7743

0.60856

0.723

9 Muslim Youths’ Satisfaction Towards Muslim-Friendly …

151

Table 2 Correlations Customer satisfaction

Brand image

Employee performance

Customer satisfaction

1.000

Brand image

0.522

1.000

Employee performance

0.776

0.608

1.000

Hotel image

0.642

0.679

0.693

Hotel image

1.000

5.4 Correlations The correlation analysis was used to describe the strength and direction of the linear relationship between two variables. As shown in Table 2, customer satisfaction is strongly positive and significantly correlated (p < 0.000) with all of the independent variables.

5.5 Multiple Regression Multiple regression analysis was conducted to test if brand image, hotel image and employee performance predicted customer satisfaction. The result of the regression indicated the three predictors explained 61.7% of the variance (R2 = 0.617, F (3175) = 96.384, p < 0.000).

5.6 Hypotheses Testing The causal relationship of the constructs was assessed using regression analysis as summarized below: H 1 : Hotel Image has a positive relationship with Customer Satisfaction. The results of this study show that the relationship between hotel image and customer satisfaction is supported, as the result shows that hotel image has a beta value of 0.202 with significant p-value of 0.003. With the significant value of less than alpha at 0.01, H1 is supported and accepted. H 2 : Brand Image has a positive relationship with Customer Satisfaction. The results suggest that the relationship between brand image and customer satisfaction is not supported as the beta value obtained for brand image is −0.003 with p-value of 0.966. Hence, H2 is unsupported and rejected.

152

S.-A. Abdul-Latif and N. A. Adnan

Table 3 Regression analysis results Hypothesis

Standardized parameter est.

H1 : Hotel image has a positive relationship with Customer Satisfaction

0.202

H2 : Brand Image has a positive relationship with Customer Satisfaction

−0.003

H3 : Employee Performance has a positive relationship with Customer Satisfaction

0.637

Sig.

Conclusion

0.006*

Supported

0.966

Not supported

0.000**

Supported

**p < 0.000; *p < 0.05

H 3 : Employees’ Performance has a positive relationship with Customer Satisfaction. The results show that the relationship between employee performance and customer satisfaction is supported. The beta value obtained for employee performance is 0.637 with significant p-value of 0.000. H3 is supported and accepted as the p-value is lesser than alpha at 0.01. In the regression analysis, the beta coefficients are used to explain the relative importance of the three independent variables in terms of contribution to the variance in customer’s satisfaction. Based on the results, employees performance (B3 = 0.637, p = 0.000) carried the heaviest weight, followed by hotel image (B2 = 0.202, p = 0.000). The results are similar to previous research (Qawasmeh 2016). Refer to Table 3.

6 Discussions Two hypotheses examined in this research supported the assumptions that hotel image and employee performance influence Muslim youths’ satisfaction of MF hotels. This finding supports previous studies of hotel image and employee performance on customer satisfaction (Qawasmeh 2016; Zhang and Mao 2012). However, brand image was found to be insignificant in predicting Muslim youths’ satisfaction of MF hotels. These findings can suggest that MF hotels’ brand image does not influence Muslim youths. In this study, we can offer two explanations. First, considering the overall results, we can suggest that in the order of MF hotels to achieve better customer satisfaction, it is essential for the hotels to provide quality services by ensuring excellent employee performance and maintain exceptionally high hotel image. These findings are consistent with previous studies done on conventional hotels (Kandampully and Suhartanto 2000, 2003). Based on the results, we can suggest that Muslim youths are not brand conscious or loyal. This is consistent with previous survey, which reported a decline in consumer

9 Muslim Youths’ Satisfaction Towards Muslim-Friendly …

153

loyalty for hotel brand (Noel 2010; Zhang and Mao 2012). There could be an explanation of why Muslim youths did not consider the brand image factor in their satisfaction assessment. Perhaps the MF hotel concept is still in its infancy stage, and the brands of these hotels are obviously still in the process of being established, widely known and accepted by consumers compared to well-established international hospitality brands such as Hilton, Park Royal and InterContinental. This finding, however, contradicts the results of a similar study done in Malaysia under the context of conventional hotels (Lahap et al. 2016). On the other hand, though the results suggest that Muslim youths do not consider the brand image factor of MF hotels when assessing their satisfaction, this does not mean MF hotels should remain complacent. With these findings, MF hotels should start to invest and build their brands to have a competitive edge in the future. On a broader picture, these findings may also suggest that international hospitality brands or hotels could fare well with Muslim youths provided that their needs are adhered to. Although it may be a challenge to hoteliers to observe all of MF requirements but perhaps being able to cover the necessary ones would suffice. However, the question is which ones? Generally, Muslims worldwide may vary; there are strict ones, while some are moderate. In this situation, it is pertinent for hoteliers to engage local experts to determine requirements that are necessary or optional. Hoteliers can determine and decide through the usage of glocalization strategies—being global but remain in touch with local cultures.

7 Limitations Although the results may have unveiled several essential points, nevertheless there are several limitations to this study which can be considered for future research. As this study used convenience sampling, the results have to be interpreted cautiously and cannot be generalized to other MF hotels in other locations or countries. It cannot also be generalized to other types of tourist accommodation. Perhaps future research could investigate the model under different tourist accommodation contexts such as MF homestays, MF budget hotels or MF bed and breakfast. Since youths are very technologically inclined, perhaps future research should examine how Muslim youths behave when they intend to book accommodation online and how brand image could have impacted their decisions (Chiang and Jang 2007). Also, future research should consider examining the accommodation pricing effects on Muslim youths as they are mostly composed of students, recent graduates or early career professionals where income can be a barrier. The sample of this study was limited to only Muslims. Perhaps future research could examine non-Muslims’ level of satisfaction on MF hotels, as non-Muslims are very significant consumers as well (Abdul-Talib, Abdul-Latif, Abd-Razak 2016). Additionally, future research could examine non-student/employed youth. Researchers may also want to include other Muslim consumer segments and examine

154

S.-A. Abdul-Latif and N. A. Adnan

other MF hotels or hotels with similar concepts in countries interested to tap on the Muslim tourists, for example, Japan, China and Korea among others.

Appendix: Scale Measurement Customer Overall Satisfaction (Lahap et al. 2016; Qawasmeh 2016) 1. 2. 3. 4. 5. 6.

Your reservation was handle very good. You were provided with good welcome and quick check-in handling services. The staff in the hotel were friendly. Your overall satisfaction with your visit to this hotel were excellent. During your stay in the hotel, you felt safe and secure. I found staying in this hotel is not costly.

Brand Image (Kim and Kim 2005; Lahap et al. 2016) 1. 2. 3. 4. 5. 6. 7. 8.

It is comfortable. It has a very clean image. It is luxurious. It is a suitable place for high-classed people. I am treated as special guest when visiting this hotel. The staffs are very kind. It has a long history (about the hotel). It has a differentiated image from other hotels.

Hotel Image (Qawasmeh 2016) 1. 2. 3. 4. 5.

The performance of the hotel’s reception department was good. The performance of the hotel’s restaurant was good. The performance of the hotel’s bar was good. The performance of the hotel’s housekeeping was good. The performance of hotel’s technician services was good.

Employees’ performances (Qawasmeh 2016) 1. 2. 3. 4. 5.

The staff will tell you exactly when services will be provided. The staff are willing to help and guide you. Hotel gives special care to special guests. The staff have knowledge of hotel information (e.g. room types). The staff speaks with you by using an appropriate address forms (e.g. sir/madam/miss). 6. The staff makes you feel safe when staying at the hotel.

9 Muslim Youths’ Satisfaction Towards Muslim-Friendly …

155

References Aaker DA (1996) Building strong brands: building, measuring, and managing brand equity. The Free Press, New York Abdul-Latif SA, Abdul-Talib AN (2017) Consumer racism: a scale modification. Asian Pac J Mark Log 29(3):616–633 Abdul-Latif SA, Abdul-Talib AN (2015a) An examination of the effects of consumer racism and consumer ethnocentrism on willingness to buy products associated with ethnic Chinese. Paper presented at the Australia New Zealand International Business Academy (ANZIBA) Conference, University of Melbourne, Australia, 11–13 Feb 2015 Abdul-Latif SA, Abdul-Talib AN (2015b) Antecedents to willingness to Boycotts among Malaysian Muslims. Emerging research on Islamic marketing and tourism in the global economy. IGI Global, Hershey, Pennsylvania, pp 70–106 Abdul-Talib AN, Adnan MMM (2017) Determinants of consumer’s willingness to boycott surrogate products. J Isl Mark 8(3):345–360 Abdul-Talib AN, Abdul-Latif SA, Abd-Razak IS (2016) A study on the boycott motivations of Malaysian non-Muslims. J Isl Mark 7(3):264–287 Abd-Rahman A, Asrarhaghighi E, Ab-Rahman S (2015) Consumers and Halal cosmetic products: knowledge, religiosity, attitude and intention. J Isl Mark 6(1):108–120. https://doi.org/10.1007/ bf00490177 Aghekyan-Simonian M, Forsythe S, Suk Kwon W, Chattaraman V (2012) The role of product brand image and online store image on perceived risks and online purchase intentions for apparel. J Retail Consum Serv 19(3):325–331. https://doi.org/10.1016/j.jretconser.2012.03.006 Ali F, Amin M (2014) The influence of physical environment on emotions, customer satisfaction and behavioural intentions in Chinese resort hotel industry. J Glob Bus Adv 7(3):249–266. https:// doi.org/10.1504/JGBA.2014.064109 Ali F, Omar R, Amin M (2013) An examination of the relationships between physical environment, perceived value, image and behavioural Intentions: a SEM approach towards Malaysian resort hotels. J Hotel Tour Manage 27(2):9–26 Alserhan BA, Wood BP, Rutter R, Halkias D, Terzi H, Al-Serhan O (2018) The transparency of Islamic hotels: “Nice Islam” and the “self-orientalizing” of Muslims? Int J Tour Res 20(4):1–13. https://doi.org/10.1002/jtr.2197 Amin M, Yahya Z, Ismayatim WFA, Nasharuddin SZ, Kassim E (2013) Service quality dimension and customer satisfaction: an empirical study in the Malaysian Hotel industry. Ser Mark Q 34(2):115–125. https://doi.org/10.1080/15332969.2013.770665 Arizmendi A et al (2016) Global report on the power of youth travel. UNWTO, vol 13. Available via WYSE Travel. https://www.wysetc.org/research/reports/global-report-on-the-power-ofyouth-travel-2016/. Accessed 7 Dec 2019 Bakar ARA, Talib ANA, Hashim F (2014) Restoring service quality, satisfaction and loyalty in higher education institutions through market orientation. J Glob Bus Adv 7(1):88–107 Battour M (2018) Muslim travel behavior in Halal tourism. In: Mobilities, tourism and travel behavior—contexts and boundaries. InTech. doi:10.5772/intechopen.70370 Battour M, Ismail MN (2016) Halal tourism: concepts, practises, challenges and future. Tour Manage Perspect 19:150–154. https://doi.org/10.1016/j.tmp.2015.12.008 Battour M, Ismail MN, Battor M (2011) The impact of destination attributes on Muslim tourist’s choice. Int J Tour Res 13(6):527–540. https://doi.org/10.1002/jtr.824 Battour M, Ismail MN, Battor M, Awais M (2014) Islamic tourism: an empirical examination of travel motivation and satisfaction in Malaysia. Curr Issues Tour 20(1):50–67. https://doi.org/10. 1080/13683500.2014.965665 Berry LL, Carbone LP (2007) Build loyalty through experience management. Qual Prog 40(9):26 Berry LL, Wall EA, Carbone LP (2006) Service clues and customer assessment of the service experience: lessons from marketing. Acad Manage Perspect 20(2):43–57. https://doi.org/10.5465/ AMP.2006.20591004

156

S.-A. Abdul-Latif and N. A. Adnan

Blanco J, Fitzgerald D, Jordan P, Egido L (2011) The power of youth travel. The world youth student and educational travel confederation. Available via UNWTO. https://www2.unwto.org/sites/all/ files/pdf/amreports_vol2_thepowerofyouthtourism_eng_lw.pdf. Accessed 7 Dec 2019 Briggs SR, Cheek JM (1986) The role of factor analysis in the development and evaluation of personality scales. J Perspect 54(1):106–148 Census (2011) Population distribution and basic demographic characteristics 2010. Dept of Statistics, Malaysia. Available via DOSM. https://www.dosm.gov.my/v1/index.php?r=column/ cthemeByCat&cat=117&bul_id=MDMxdHZjWTk1SjFzTzNkRXYzcVZjdz09&menu_id=L0p heU43NWJwRWVSZklWdzQ4TlhUUT09. Accessed 7 Dec 2019 Chiang CF, Jang SS (2007) The Effects of perceived price and brand image on value and purchase intention: leisure travelers’ attitudes toward online hotel booking. J Hospitality Leis Mark 15(3):49–69. https://doi.org/10.1300/j150v15n03 Choi TY, Chu R (2001) Determinants of hotel guests’ satisfaction and repeat patronage in the Hong Kong hotel industry. Int J Hospitality Manage 20(3):277–297. https://doi.org/10.1016/S0278-431 9(01)00006-8 Day RL (1984) Modeling choices among alternative responses to dissatisfaction. Adv Consum Res 11:469–499 DeVillis RF (1991) Scale development. Theory and Applications. Applied social research methods series. Sage Publications, New York Faisal B (2015) Islamic tourism in Indonesia: Country profiles and case studies, UNWTO regional seminar on the contribution of Islamic culture and its impact on the Asian tourism market. Available via UNWTO. http://cf.cdn.unwto.org/sites/all/files/pdf/best_practice_indonesia.pdf. Accessed 15 Jan 2017 Gould-Williams J (1999) The impact of employee performance cues on guest loyalty, perceived value and service quality. Ser Ind J 19(3):97–118. https://doi.org/10.1080/02642069900000032 Grönroos C (1984) A service quality model and its marketing implications. Euro J Mark 18(4):36–44 Guttentag D (2015) Airbnb: disruptive innovation and the rise of an informal tourism accommodation sector. Curr Issues Tour 18(12):1192–1217. https://doi.org/10.1080/13683500.2013. 827159 Henderson JC (2010) Sharia-compliant hotels. Tour Hospitality Res 10(3):246–254. https://doi.org/ 10.1057/thr.2010.3 Henderson JC (2016) Muslim travellers, tourism industry responses and the case of Japan. Tour Recreation Res 41(3):339–347. https://doi.org/10.1080/02508281.2016.1215090 Horak S, Weber S (2000) Youth tourism in Europe: problems and prospects. Tour Recreation Res 25(3):37–44. doi:10.1080/02508281.2000.11014923 Ibrahim Y, Rashid A (2010) Homestay program and rural community development in Malaysia. J Rits Soc Sci Hum 1(2):7–24. https://doi.org/10.1016/j.ijhm.2013.08.006 Isa SM, Chi P, Mohammad NU (2018) Muslim tourist perceived value: a study on Malaysia Halal tourism. J Is Mark 9(2):402–420 Jones KC (1996) Employee performance Cues in a Hotel. J Bus Res 215:207–215 Jusoff K, Ibrahim Z, Zahar MS, Sulaiman M, Othman Z (2009) Travelling pattern and preferences of the Arab tourists in Malaysian Hotels. Int J Bus Manage 4(7):3–9. https://doi.org/10.5539/ ijbm.v4n7p3 Kandampully J, Hu HH (2007) Do hoteliers need to manage image to retain loyal customers? Int J Consum Hospitality Manage 19(6):435–443. https://doi.org/10.1108/09596110710775101 Kandampully J, Suhartanto D (2000) Customer loyalty in the hotel industry: the role of customer satisfaction and image. Int J Contemp Hospitality Manage 12(6):346–351. https://doi.org/10. 1108/09596110010342559 Kandampully J, Suhartanto D (2003) The role of customer satisfaction and image in gaining customer loyalty in the hotel industry. J Hospitality Leis Mark 10(1/2):3–25. https://doi.org/ 10.1300/J150v10n01_02 Keller KL (1993) Conceptualizing, measuring, and managing customer-based brand equity. J Mark 57(1):1–22

9 Muslim Youths’ Satisfaction Towards Muslim-Friendly …

157

Khoo-Lattimore C, Yang ECL (2018) Asian youth tourism: contemporary trends, cases and issues. Asian Youth Travellers. Springer, Singapore, pp 1–13 Kim HB, Kim WG (2005) The relationship between brand equity and firms’ performance in luxury hotels and chain restaurants. Tour Manage 26(4):549–560. https://doi.org/10.1016/j.tourman. 2004.03.010 Kim SS, Im HH, King BEM (2015) Muslim travelers in Asia: the destination preferences and brand perceptions of Malaysian tourists. J Vac Mark 21(1):3–21. https://doi.org/10.1177/135676671 4549648 Krauss SE et al (2006) Exploring regional differences in religiosity among Muslim Youth in Malaysia. Rev Religious Res 47(3):238–253. https://doi.org/10.1007/S13644-01 Lahap J, Ramli NS, Said NM, Radzi SM, Zain RA (2016) A study of brand image towards customer’s satisfaction in the Malaysian hotel industry. Procedia Soc Behav Sci 224:149–157. https://doi. org/10.1016/j.sbspro.2016.05.430 Lewis RC (1987) The measurement of gaps in the quality of hotel services. Int J Hospitality Manage 6(2):83–88 Lien CH, Wen MJ, Huang LC, Wu KL (2015) Online hotel booking: the effects of brand image, price, trust and value on purchase intentions. Asia Pacific Manage Rev 20(4):210–218. https:// doi.org/10.1016/j.apmrv.2015.03.005 Lipka M (2017) Muslims and Islam: Key findings in the U.S. and around the world. Available via Pew Research. http://www.pewresearch.org/fact-tank/2017/08/09/muslims-and-islamkey-findings-in-the-u-s-and-around-the-world/. Accessed 4 July 2018 Liu C (2018) The motivations and experiences of young chinese self-drive tourists abstract. Asian youth travellers. Springer, Singapore, pp 117–134 Lovelock CH (1985) Developing and managing the customer-service function in the service sector. In: The service encounter: managing employee customer interaction in service business. Lexington Books, Lexington, MA Malaysia Department of Statistics (2018) Demographic statistics First Quarter (Q1) 2018, Malaysia. Available via DOSM. https://www.dosm.gov.my/v1/index.php?r=column/ctheme ByCat&cat=430&bul_id=azJaVlY0RjVKWkwwaURWTENxMVBhdz09&menu_id=L0pheU 43NWJwRWVSZklWdzQ4TlhUUT09. Accessed 17 July 2018 Malaysia Department of Statistics (2019) Domestic Tourism Survey 2018. Available via DOSM. https://www.dosm.gov.my/v1/index.php?r=column/cthemeByCat&cat=320&bul_ id=cUJybTRyNWZYd05qY2xlSmJFQXhYdz09&menu_id=b0pIV1E3RW40VWRTUkZoc EhyZ1pLUT09. Accessed 27 May 2020 Manhas PS, Tukamushaba EK (2015) Understanding service experience and its impact on brand image in hospitality sector. Int J Hospitality Manage 45:77–87. https://doi.org/10.1016/j.ijhm. 2014.11.010 Martinez E, Polo Y, Chernatony LD (2008) Effect of brand extension strategies on brand image: a comparative study of the UK and Spanish markets. Int Mark Rev 25(1):107–137. https://doi.org/ 10.1108/02651330810851908 MasterCard-CrescentRating (2016a) Global Muslim travel index 2016. Available via Crescentrating. https://www.crescentrating.com/reports/mastercard-crescentrating-global-muslim-tra vel-index-gmti-2016.html. Accessed 7 Dec 2019 MasterCard-CrescentRating (2016b) Muslim business traveler insights 2016. Available via Newsroom. https://newsroom.mastercard.com/asia-pacific/files/2016/10/Report-Mastercard-Cre scentRating-Muslim-Business-Traveler-Insights-2016.pdf. Accessed 7 Dec 2019 MasterCard-CrescentRating (2018) Global Muslim travel index 2018. Available via Crescentrating. https://www.crescentrating.com/reports/mastercard-crescentrating-global-muslim-travel-indexgmti-2018.html. Accessed 7 Dec 2019 MasterCard & HalalTrip (2017) Muslim millennial travel report 2017. Available via Halaltip. https:// www.halaltrip.com/halal-travel/muslim-millennial-travel-report/. Accessed 7 Dec 2019

158

S.-A. Abdul-Latif and N. A. Adnan

Mattila AS, O’Neill JW (2003) Relationships between hotel room pricing, occupancy, and guest satisfaction: a longitudinal case of a Midscale Hotel in the United States. J Hospitality Tour Res 27(3):328–341. https://doi.org/10.1177/1096348003252361 Mey LP, Akbar AK, Fie DYG (2006) Measuring service quality and customer satisfaction of the hotels in Malaysia: Malaysian, Asian and Non-Asian hotel guests. J Hospitality Tour Manage 13(2):144–160. https://doi.org/10.1375/jhtm.13.2.144 Mohsin A, Ramli N, Alkhulayfi BA (2016) Halal tourism: emerging opportunities. Tour Manage Perspect 19:137–143. https://doi.org/10.1016/j.tmp.2015.12.010 Noel J (2010) Hotel brand loyalty dives. Available via Chicago Tribune. http://articles.chicag otribune.com/2010-11-16/travel/sc-trav-1116-business-class-20101116_1_brand-loyalty-travelforecast-business-class. Accessed 10 June 2016 NST (2018a) Terengganu to promote Muslim-oriented tourism, says MB. Available cia NST. https://www.nst.com.my/news/nation/2018/05/373268/terengganu-promote-muslimoriented-tourism-says-mb. Accessed 7 Dec 2019 NST (2018b) Tourism assets are revenue earners for Terengganu. Available via NST. https:// www.nst.com.my/news/nation/2018/05/373268/terengganu-promote-muslim-oriented-tourismsays-mb. Accessed 7 Dec 2019 Nunnally JC, Bernstein IH (1994) Psychometric theory (3) McGraw-Hill, New York O’Neill JW, Mattil AS (2004) Hotel branding strategy: its relationship to guest satisfaction and room revenue. J Hospitality Tour Res 28(2):156–165. https://doi.org/10.1177/1096348004264081 Oh H, Parks SC (1997) Customer satisfaction and service quality: a critical review of the literature and research implications for the hospitality. Hospitality Res J 20:35–64 Oliver RL (1997) Satisfaction: a behavioral perspective on the consumer. Irwin-McGraw-Hill, New York Oskam J, Boswijk A (2016) Airbnb: the future of networked hospitality businesses. J Tour Future 2(1):22–42. https://doi.org/10.1108/JTF-11-2015-0048 Pallant J (2010) SPSS survival manual: a step by step guide to data analysis using SPSS. Open University Press, McGraw Hill, Berkshire, England Parasuraman A, Zeithaml VA, Berry LL (1985) A conceptual model of service quality and its implications for future research. J Mark 49(4):41–50. https://doi.org/10.2307/1251430 Poon WC, Low KLT (2005) Are travellers satisfied with Malaysian hotels? Int J Contemp Hospitality Manage 17(3):217–227. https://doi.org/10.1108/09596110510591909 Qawasmeh R (2016) Role of the brand image of boutique hotel for customers choosing accommodation, “LE CHATEAU LAMBOUSA” case study, North Cyprus. J Hotel Bus Manage 5(2):1–10. https://doi.org/10.4172/2169-0286.1000147 Reuland R, Choudry J, Fagel A (1985) Research in the field of hospitality. Int J Hospitality Manage 4(4):141–146 Samori Z, Sabtu N (2014) Developing Halal standard for Malaysian hotel industry: an exploratory study. Procedia Soc Behav Sci 121:44–157. https://doi.org/10.1016/j.sbspro.2014.01.1116 Suandi TB (1991) Commitment of 4-B [Malaysia] youth leaders towards volunteerism. Dissertation. The Ohio State University Tabachnick BG, Fidell LS (2007) Using multivariate statistics. PsycCRITIQUES. Pearson Education, Boston, MA Wang YC, Luo CC, Tai YF (2017) Implementation of delightful services: from the perspective of frontline service employees. J Hospitality Tour Manage 31:90–104. https://doi.org/10.1016/j. jhtm.2016.10.006 Zakaria N, Abdul-Talib AN (2010) Applying Islamic market-oriented cultural model to sensitize strategies towards global customers, competitors, and environment. J Is Mark 1(1):51–56 Zeithaml VA, Berry LL, Parasuraman A (1996) The behavioral consequences of service quality. J Mark, 31–46 Zhang JJ, Mao Z (2012) Image of all hotel scales on travel blogs: its impact on customer loyalty. J Hospitality Mark Manage 21(2):113–131. https://doi.org/10.1080/19368623.2011.615017

Chapter 10

Inside Corporate Innovation: A Study of Team Leader Experiences and Strategies During the New Venture Development Process David L. Wilemon Abstract This chapter explores an area of new venture management that has received limited research attention. The primary focus centers on how successful new venture team leaders experience the management of their new venture teams (NVTs). Areas examined include interorganizational relationships between the new venture and the parent organization; managing relationships and expectations with senior management sponsors; challenges encountered during the development of the new venture; and major lessons learned from leading a new venture team. All new ventures studied were considered successful by the CEO or other senior managers in the parent or host organization. To assist the reader in understanding challenges new venture leaders face, several quotations or “voices from the field” are used to help amplify our findings. Several directions for future research on managing new ventures are presented. Keywords Innovation · Global teams · Corporate ventures · Product development · Technological capabilities · Strategic management · Corporate entrepreneurs

1 Introduction The speeds at which new technologies and markets now evolve create the need for more effective approaches to dealing with these strategic challenges. The increasing reliance on open innovation and the impact of disruptive technologies call for more effective change and innovation management strategies. Moreover, as industry observers often note, globalization presents firms with as many problems as opportunities. Organizations continuously wrestle with the challenge of how to compete in this new, highly competitive landscape. Unfortunately, many organizations are encumbered by cultures, mindsets, and practices that defeat even the best ideas for significant new products and new business investment opportunities (Block and D. L. Wilemon (B) School of Management, Syracuse University, Syracuse, USA e-mail: [email protected] © Springer Nature Singapore Pte Ltd. 2020 N. Zakaria et al. (eds.), Transcending Cultural Frontiers, https://doi.org/10.1007/978-981-15-4454-5_10

159

160

D. L. Wilemon

MacMillan 1993). Astute companies, however, often find that new venture teams (NVTs) within companies can be a useful approach for managing technological and market opportunities. This leads to the question: how then, is corporate venturing defined? Shaker Zahra, a renowned researcher in the field, has broadly characterized corporate venturing this way: Corporate entrepreneurship may be formal or informal activities aimed at creating new businesses within established companies through product & process innovations, and market developments. These activities may take place at the corporate, division, functional, or project level, with the unifying objective of improving the competitive position and financial performance of a company. (Zahra 1991).

While new venture management can offer many advantages, researchers frequently note that developing a significant new business idea or a business based on a new business model can be one of the most difficult tasks an organization ever undertake. Two researchers discuss this challenge as follows: “Large diversified companies do not have a good track record in managing discontinuous change and in turning breakthrough innovations into long-term growth and profit engines. Their existing technological capabilities tend to facilitate cognitive inertia, path dependencies, and low levels of experimentation.” (Vanhaverbeke and Peeters 2005). This chapter offers several perspectives on the management of internal corporate ventures. Research notes that there have been more venture failures than successes. Experienced managers understand that the products and services resulting from these new ventures are significantly different from current products and often involve a different set of customers. Furthermore, and as noted, the business model for a new venture may often be very different from the existing business models of the firm. On the other hand, there is positive news about these new ventures. Research has allowed managers to learn from the valuable experiences of numerous companies that have used internal venturing as a major avenue for growth and change. This chapter places particular emphasis on what is required to create and manage new business opportunities within existing organizations using venture teams (Antoncic and Hisrich 2003). Some of the significant challenges that new venture team leader’s experiences in creating new ventures are included in this chapter. The chapter concludes with several suggestions to assist those charged with managing new organizational ventures.

2 Research Intent and Study Questions Much of the research on internal corporate ventures have focused on the following areas: (1) venturing performance, e.g., success and failure of new ventures (Hippel 1977), (2) the new venture processes used by companies, (Kola-Nystom 2008), (3) the advantages and disadvantages of different corporate venturing models (Burgelman 1983), (4) the strategy/corporate venturing relationship (Gupta et al. 2006; Hill and Birkinshaw 2012). Our study used a different lens to examine on the management

10 Inside Corporate Innovation: A Study of Team Leader …

161

of new ventures, focusing on areas which have been mainly ignored in the literature. Specifically, this chapter examines venture team leaders and their experiences managing their teams. A wide range of literature on corporate venturing also was carefully reviewed, including diversification, strategic choice-making, and the management of complex innovation projects. The specific questions used in our interviews were compiled from identified gaps in the literature and informal discussions with venture managers. The overall objective of this research is to more fully understand how new venture teams are created and managed, the challenges encountered in generating new business opportunities, and the roles of both the inter-organizational and intra-organizational relationships. This study examines the experiences of fifteen successful venture team leaders. Each of the executive sponsors or the Chief Executive Officer of their companies considered the ventures to be successful. A new venture was deemed to be successful if it achieved its financial, market, and diversification objectives by the end of the second year of commercialization. To provide additional ideas for questions used in this study, the venture managers attending a seminar on “Managing New Corporate Ventures” were asked about their venture management experiences. The exploratory questions asked of these managers were: • What information, skills, or experiences have been particularly useful in managing your new venture? • What have been your major concerns when you have lead a new venture? • When you have dealt with the parent organization and sponsors of your venture, what would you consider to be your best practices? Based on the literature review and the input received from these managers, several ideas were revealed regarding their needs. They focused on their need for new insights into successful team management, inter-organizational strategies, the politics of new ventures, personal managerial concerns, and the knowledge gaps that existed. Based on the existing research and the responses to the questions noted above, several questions were then created to focus our exploratory research as follows: 1. How would you describe the relationship of your venture team with the parent or host organization? 2. Did your team use an existing process for managing your venture or did you need to create your own process? Was the method used helpful? 3. Did you encounter any significant problems/challenges during the management of your new venture? 4. What challenges were involved in creating a productive relationship with your senior management sponsors? 5. Were there any critical incidents that occurred during the venture’s development that markedly shaped the venture’s outcome? 6. Based on your experiences, what would be helpful for others in the parent organization to understand creating new ventures? 7. What were the most significant lessons you learned about leading your venture team?

162

D. L. Wilemon

3 Research Approach We approached the CEO’s of twenty companies and asked for their company’s participation in our study of venture team leaders. Fifteen CEO’s or their surrogates agreed to participate. The CEO’s nominated fifteen participants for this study, who qualified regarding the definition of venture team success; all agreed to participate. In seeking participation, it was emphasized that the names of their companies, the nature of their ventures, and their names would remain confidential. In the invitation, we stressed that our focus was on the process of venturing and not on the intimate market details or technological information of their company. We did indicate that the participant’s industry affiliation would be noted in our report. All of the interviews were conducted by the author of this study. The group make-up was as follows: Five venture managers developed communication equipment, four developed medical devices, three were involved with creating new agricultural equipment ventures, and three were engaged in the development of new publishing ventures, e.g., new media. Personal characteristics of the team leaders interviewed: • • • •

The ages ranged from 32 to 52 years Ten of the fifteen leaders had technical undergraduate degrees Eight had MBA degrees The average organizational tenure was ten years and ranged from four to twenty years • Their functional backgrounds involved: Engineering/R&D—5, Marketing—4, IT/Operations—3, and Communications—3 • Average team size: seven full-time members. The entire group of venture leaders interviewed led teams that were sponsored by the company’s senior management. Most of the team members and team leaders came from their parent organization. In some cases, however, team members with specialized skills were hired from external organizations to fill the needed team capabilities.

3.1 Interview Questions Personal interviews were viewed as the most appropriate way to gather the venture managers’ experiences. The goal was to gain a clear insight into the many aspects of the experiences, motivations, and perspectives of the venture leaders. Included in this method was to study the complexities of managing an extensive organizational task, namely birthing new ventures. Semi-structured interviews were used which allowed the author to probe more deeply into the interviewees’ responses. This less structured approach gave the interviewer greater flexibility to gather information compared to the use of structured questions. Interview length ranged from one and one-half to two hours. The interviews were content analyzed using qualitative research methods and

10 Inside Corporate Innovation: A Study of Team Leader …

163

the analysis for each question focused on several major themes. Two coders were used independently of each other, to identify the thematic issues that emerged from the interviews. Although several of the differences between the coder’s themes were discussed, the author made the final decision on unresolved coding decisions.

4 Study Findings The findings of the research generally follow the questions asked during the interviews. In presenting the results, we used “voices from the field” or direct quotations from the study participants to help provide field-based insights. The findings derived from the question on venture team relationships with the parent organization major challenges are presented in Table 1.

4.1 Venture Team/Parent or Host Organization Relationships As noted, prior research has found out that new venture teams can have different relationships with their parent organization. Some ventures will be firmly bonded with the parent organization, while other teams may have complete autonomy from the firm (except for financing and supervision). Table 1 presents the different ways that ventures in this study were related to their parent organization: A medical device venture leader his relationship with his parent organization using a metaphor: The biggest problem with heart transplants is rejection. With new venturing, we have similar problems. There will be that group in senior management who see a need for new ventures and want them to succeed. These managers see new ventures as an experiment, and their desire for them is to produce long-term value for the organization. On the other hand, there are those who view new ventures as a competitor for the scarce organizational resources on

Table 1 Venture relationships to parent/host organization Venture relationships to parent/host organization

Responses

• We were an independent entity with no relationship other than financial and managerial oversight from the parent organization

3 responses or 20%

• We were dependent on many of our resources from the parent 6 responses or 40% organization primarily on the need for key people, functional support, and financial support—relations with the parent organization, were often strained • Our relationship was productive—the parent organization strongly agreed with our mission and shared resources for the new venture

3 responses or 20%

• Our relationship with the parent organization was mixed—several senior 3 responses or 20% managers in the parent organization had very different views than we did regarding the primary focus and usefulness of our venture

164

D. L. Wilemon

which they rely. These managers often see new ventures as a threat to what they are doing and sometimes want them to fail. They can do a lot of damage to a fledgling new venture and their actions can be both overt and covert.

Another venture manager of new agricultural technologies discussed his views about his team’s positive relationship with the parent organization as follows: I give our senior management a lot of credit for creating the right environment for new business development. Before we started our venture, management held many sessions explaining why we needed new business development and new ventures. They would put 40–50 managers in a briefing room and tell them what would happen in the future if we had no innovation. It was a great way to set the stage that we were going to begin doing things differently. Most managers did see the need for new businesses, new products, and innovation. It was clear that management was behind these new initiatives.

4.2 New Venture Development Challenges A primary research focus aimed to uncover the most critical challenges that venture team leaders faced. Table 2 presents the findings resulting from this question as noted below: From this question, several issues were noted which shed new light on the challenges faced by venture managers. During the interviews, one of the most frequently noted challenges was that of “gaining a clear definition for their new venture.” Many of the interviewees lamented that a clear definition for the venture was often elusive and changed as learning by the venture team increased. One of our “voices from the field” explained his experience with honing a new venture definition in his publishing venture: A major issue for our team was trying to nail down the venture’s definition or focus. If you don’t have a definition, you can’t get beyond the big picture phase of a new venture. Even though you have a definition of the venture, it is likely to change—not once but multiple times during the venture’s development. Why? Because you are learning and that learning

Table 2 What major problems or challenges were encountered managing your new venture? Major problems or challenges

Number noting

Percent

• Gaining a precise definition of the venture

14

93

• Dealing with venture changes

13

87

• Managing the team

12

80

• Keeping sponsors motivated/interested

12

80

• Creating the marketing program

12

80

• Gaining expert support from parent organization

11

73

• Managing technological issues

11

73

4

27

• Other challenges, e.g., regulations, hiring, rewarding

Note Multiple responses frequently given. Percentage given is rounded

10 Inside Corporate Innovation: A Study of Team Leader …

165

produces more change. Some of the changes are major and can have a severe impact on your venture.

When a venture manager would bring up the importance of having a precise definition for the venture, a follow-up question was often asked about what methods could be used to clarify the venture definition. Many of the responses centered around team meetings which would focus on both the venture’s superordinate goals and specific venture objectives on which the team agreed and disagreed. Another response brought attention to determining where these agreements and disagreements stood with senior management, customers, and those supporting the venture in other parts of the organization. Several of the venture managers stated that managing the variety and frequency of change was a major job challenge. Examples of changes mentioned as problematic included changes in the definition of the market, technological changes, adding or losing team members, development of new competition to the venture, shifts in the targeted customer, and strategy changes. Often mentioned as significant challenges were “keeping sponsors motivated” and “gaining support from the parent or host organization.” The interest and support of sponsors are critical to the success of new venture success. Since many new ventures take considerable time to develop, the interest of supporters must be maintained and even increased on major long-term venture processes. In a somewhat similar vein, “gaining support from the parent or host organization” can also be a significant contributor to success. Two quotes further illustrate the importance of gaining and maintaining sponsor support. One team leader working on medical devices noted the following when asked about challenges: Senior management in the parent organization supplies the funding for our venture. Usually, they are very enthused about new developments. However, that enthusiasm can erode over time. There is also the problem of chair-shuffling at the senior management level. This implies that the sponsors at the start of a new venture often move on or lose interest in your venture. We joke that they have very short attention spans which means we have to cultivate and maintain their attention in several creative ways.

Another venture leader (in agricultural equipment development) noted that he found that following a “customer-value strategy” was helpful in securing and maintaining senior management support and noted the following: What we would do is to ask our customer to come to our status review meetings and briefly discuss the importance of the new venture to them (the customer). This usually worked well at the initial funding and for future funding phases. An important customer often helped make us a credible venture. It was that external voice from a large respected customer that gave our small team a confidence boost in the eyes of our management sponsors.

It is important to note that the venture leaders also stated that the challenges with technological issues and creating the marketing plan were difficult barriers to overcome.

166

D. L. Wilemon

4.3 Venture Management Process Since developing new ventures is often unknown territory for a company, our study wanted to determine whether the venture team leaders used an existing methodology or whether they had to design a process to develop their new ventures. The creation of a new venture is a step-by-step approach that takes time and patience. We found that the most successful procedures were designed to allow teams to change and adjust as the venture and its context changed. About one-fourth of the venture leaders noted that they were able to use an existing process to develop their venture. Nearly half of the venture managers stated that they created their own process. Finally, another fourth of the venture leaders reported that they created a hybrid process which used part of the company’s existing development processes combined their own new venture development process. The following are two typical comments regarding new venture processes from the interviewees: Our company has developed major new products before and thus we were able to use the same process as others had used before. Of course, we had to make some changes to it. Overall, this process we used was helpful and saved considerable time.

Another venture manager (publishing) made this observation about his team’s new venture processes: We had to create our development process as we developed our idea. The lack of a development process at the front-end of our venture made our venture even more complex. Just imagine you are developing what you hope to be a game-changer and you know that it is different from anything you’ve ever done before. So, your idea is evolving which creates the need for a development process totally new to you and your organization.

The question about new venture processes and their source was followed by a question which probed the effectiveness of the process used by the group. Prior research has seldom investigated insights into how useful venture development processes are to companies. Eight or 53% of the venture managers in this study found that their process “was very useful” in creating their new venture. Four noted that their process was “helpful.” Finally, three or 20% noted their process was “somewhat helpful.” Two comments help illustrate how processes are helpful: Our process was very beneficial to our ag venture because it kept us focused on what we needed to do. Without a process, everyone will have diverse ideas about what should be happening which can lead to much wheel-spinning.

Another medical device venture leader reflected on what can happen when there is no venture process: We didn’t really have a new venture process. We had a process for new product development, but it didn’t really fit the major new venture we were developing. The result was that we built our process before we created our venture. Both are complex undertakings.

10 Inside Corporate Innovation: A Study of Team Leader …

167

4.4 Dealing with Venture Sponsors Table 3 illustrates the findings from the question, “What were the challenges and methods used in creating a productive relationship with your senior management sponsors?” The quality of the relationship between those who sponsor a new venture and the venture leader is critical for long-term success. Several comments about this vital team/sponsor relationship were mentioned in several interviews. For example, 100% of those interviewed noted that “achieving a shared understanding of what their new venture could mean for the success of the company was of major importance.” Another issue noted by nine members or 60%, was “dealing with changes in sponsors.” Since new ventures can take months, even years to develop, there is often a change in the manager’s responsible (sponsors) for these new ventures. Therefore, it becomes apparent that maintaining close, productive relationships with all managers who can shape the future of a new venture is critical (Mauer et al. 2011). Two comments from new agricultural equipment venture leaders illustrate the importance of sponsors to the success of new ventures. Senior management sponsors can initially be very interested in what we propose to do with our new venture. However, because they are responsible for many different programs, that interest may wane over time. In fact, it can evaporate. My job is to keep our management sponsors actively involved and focused on our venture. Although this is difficult at times, I do this in a variety of ways. For example, I instituted formal venture review meetings as well as informal sessions of “hall chat.” Both methods work. There are other times when I will ask sponsors to come down to our work area, and we do a brief ‘show and tell’ presentation updating them on the progress of our new venture.

Another agricultural venture manager stated: What I’ve learned in my venture work is to make certain that all of us have the same information about the objectives of the venture, the development plan, our business model, and the marketing plan. I never assume that the ‘nod’ of a sponsor’s head signals agreement. That can backfire very quickly. If everyone involved does not have the full understanding and total agreement about the venture, the team can quickly lose momentum which can lead to the failure of the project.

Table 3 Managing the venture team/sponsor relationship Findings

Number noting Percent

• Gaining a shared understanding of the venture

15

• Meeting the expectations of sponsors

13

87

• Keeping sponsors informed and involved

12

80

• Dealing with changes in the “sponsor mix”

9

60

• Assisting our sponsors deal with other managers in the parent organization who also control resources we need

5

33

• Other sponsor issues, e.g., politics, conflict, and turf issues

3

20

100

168

D. L. Wilemon

Another strategy brought up by the venture managers when dealing with senior management involves the way they acquired funds for their ventures. Most of the managers stated that they had learned to seek funding incrementally versus asking for the entire funding amount at the beginning of the venture. One publishing venture manager shared his approach for securing funding as follows: I learned never to initially ask for the full, forecasted amount for a new venture. That seemed to make our senior sponsors very uneasy. Therefore, at the onset, we select a major venture phase in the and then discuss what we estimate it will cost to achieve that phase. They are comfortable with this approach since they know what we will be doing and what it is likely to cost. As you build credibility with the sponsors, they become more comfortable with costs and relating costs to progress.

As noted earlier, a problem that was noted by several of the venture managers was that the initial sponsors often changed as the new venture was being developed. There were a variety of reasons; some sponsors were promoted, others left the company, and some retired before the completion of the project. When this happens, the result is confusion and uncertainty for the venture leaders and their teams. Another publishing venture leader stated: We began this venture with a strong group of sponsors who were completely supportive of our plans. About a year into the venture, one of our major supporters was promoted to a division manager’s position in a different group. This was a major loss for us. The manager who took his place was generally supportive but very different from the original sponsor.

We spent much time explaining the venture to him, updating him on our present status and the details as to how the venture could benefit the company. Since this new sponsor was relatively new to our company, he did not have a strong network within the company to pull strings for us. We were forced to spend a great deal of time doing what I call “upward coaching” to bring him up to speed. Strong sponsors are invaluable partners; they can clear paths for new ventures. However, if your sponsor is weak, the road can be treacherous, which leaves you with a feeling in your gut that you are on the development path pretty much alone.

4.5 Handling Critical Incidents in Venture Development Another aim of this study was determining if and how “critical incidents” affected the “development path” of the venture. During the interviews, we asked the venture managers if there were any disruptive incidents that occurred which had a significant impact on their initial plan for the venture. There were five major issues noted by the interviewees that forced a change in the original intention of the venture (Table 4). The comments of one venture manager’s (new agricultural equipment) captured the issue of “overestimating market size” well. He stated: We began planning our new venture by doing some informal research on our idea which might interest our potential sponsors. We studied the needs of every industry and came up with a series of crude estimates that seemed credible. Our team and sponsors used these

10 Inside Corporate Innovation: A Study of Team Leader …

169

Table 4 Major issues that forced a change in the original intention of the venture Major issues

Responses

Percent

• Overestimating market size

10 managers

67

• Implementing the wrong marketing approach

8 managers

53

• Technical problems that caused a redirection of the original venture

7 managers

47

• Underestimating competitors

6 managers

40

• Targeted customers changing their strategy

3 managers

20

• Loss of key team members

2 managers

13

crude estimates so often that they eventually they morphed into concrete, solid numbers. However, when we worked out the venture launch plan using these numbers, we realized that our numbers were not accurate. It was difficult ‘walking back’ the estimates with our sponsors. We learned our lesson; now we always understate our market forecasts and hope for surprise outcomes.

This becomes a particularly tricky challenge if it is a “breakthrough venture” with no prior history of use or adoption. Several venture managers noted this challenge at various parts of our interviews. As one manager of a publishing venture noted: Forecasting sales for a brand-new business or product is fraught with danger. It is easy to become so enchanted with a new venture that the early market estimates tend to be based on dreams and not reality. In retrospect, one can look back and reflect with “How did we ever come up with that number.

As noted above, accurate forecasting sales for a new venture can be an overwhelming process since there are so many unknowns involved in forecasting the demand for a new venture. While not a top issue occurrence, “the loss of a key team member” was brought up as an incident that could dramatically change the direction and the pace of the development of a new venture. Many of the studies done on new ventures were technology-based and required high-level skills such as programming or system design. The loss of one key team member can mean the difference between venture success and failure. One manager developing a major medical equipment venture discussed the problem of losing a key team member this way: Our venture involved an advanced patient monitoring device requiring a great deal of sophisticated software. Our key software person received an offer from another company that she said she could not turn down. When she left, we scrambled for two months to find a replacement. We could not buy this software from another company; we had to develop it internally. When we did, it took several weeks to explain our plans and requirements and get him up to speed. Costly!

170

D. L. Wilemon

4.6 Desired Perceptions of Others Regarding New Venture Work In our discussions with new venture managers before our formal study began, we would often hear comments as such as: Our bosses don’t seem to know what is required for success. None of our sponsors have ever managed or worked on a new venture” or “If our sponsors spent one day doing our jobs, their understanding and perhaps the support of our new venture efforts would change dramatically.

We included this question in our interview protocol: “What would you like others in your parent organization to understand about creating new ventures?” Fourteen, or 93%, stated that “others need to understand that new ventures require people who have ‘wide-bandwidth’ thinking.” Several others informally mentioned that staffing venture teams with people who have in-depth experience in new business development, new product development, and new market development is a major advantage. In the interviews, a medical device venture manager elaborated on the importance and sometimes the difficulty of staffing the team with high-quality people this way: When we are ready to build a new team, we discuss our requirements with the functional department heads (marketing, R&D, engineering, management information systems, production) in the parent organization. Why? Most of our venture team members come from these functional groups. The challenge is that the venture team usually wants some of the functional managers’ best people. So, it becomes a challenge of getting the people you want versus the functional managers who want to keep his/her best people. Finally, having a balance of experienced team members along with some fresh thinking, open-minded team members less experienced members often can result in a highly synergistic team.

The second most frequently mentioned area that twelve (12 or 80%) of the venture managers noted was that it was important that others in the parent organization need to understand are the challenges that exist in creating a successful new venture. Several, for example, noted that there was a “lack of a shared experience between those who focused their efforts on creating new ventures and those who had never experienced working on the development of a major new business or product.” A publishing venture manager explained the effect of a disparity of experiences: The difference between creating a major new venture and working in a functional group that has been operating for several years is substantial. Often, when a change takes place in a functional organization that can usually be equated as an incremental change. By contrast, when a change occurs in a new venture; that change is more likely to involve a lot of forethought and a major shuffling of the deck. Therefore, these groups often work in two different cultures.

The third most frequently mentioned issue the venture managers wanted others to understand was categorized as “Ventures are experiments.” Twelve or 80% of the venture leaders wanted others in the parent organization to understand this issue. Several comments about experiments, working on new projects, disruptive change,

10 Inside Corporate Innovation: A Study of Team Leader …

171

and “pushing boundaries” were noted. Another area mentioned by eight or 53% of the leaders noted that they desired others in the parent organization to understand why an “extended network of people and organizations is required for success.” In discussions with new venture managers, they frequently noted that since there are so many unknowns in new venture development, they must seek out advice on problem-solving, needed resources, technical assistance and help from numerous organizations and people. The search for assistance might be inside the parent organization or far beyond the traditional boundaries of the parent organization. The more distant the new venture is from the parent organization’s current business interests, the more likely that entirely new sources of information will be needed. Finally, three or 20% of the managers stated that they “wished others appreciated the time, skill, and resources needed to manage the development of a complex new venture.” One venture manager in medical devices noted the following: As a venture manager, I need to manage many tasks simultaneously. If a manager can only handle one task at a time, then he or she will fall behind quickly. You also need team members who can multi-task; be able to work on marketing, engineering issues, regulations, organizational politics, and customer needs. In a new venture, everything is connected.

4.7 Major Learning from New Venture Management Experiences Another question that came up during our informal conversations was what venture leaders considered to be their primary learning from their experiences with new ventures. In designing the interview protocol, it was felt that answers to this question could be especially useful for managers responsible for new ventures or for those who want to enter the field. “Define the Architecture of the Venture Early” was noted by thirteen or 87% of the venture leaders. Several leaders stressed that unless there is a clearly defined vision for the new venture, there can be little progress. The next issue noted by twelve or 80% of the managers was “Keeping Everyone Informed.” Ten or 67% of the venture managers stated that new venture development required a “communication-intensive environment.” (Schulze and Hoegel 2006). Another seven or 47% stated that their teams met regularly to discuss the activities for the day and what problems remained from the previous day. Six team leaders (40%) noted the importance of “Using Project Management to Drive the Venturing Process.” Five managers or 33% emphasized the importance of creating a special culture for the venture team. Three comments regarding “culture setting” in new venture development follow: A special environment must be created for a new venture. It is essential to create a team culture that people want to be part of. Create excitement and anticipation; if that is missing; interest wanes among the group which will affect the environment for your new venture.

172

D. L. Wilemon

The team needs to clearly communicate that the venture has the potential to change markets and redefine industries.

Another five managers (33%) noted the “Importance of Awareness about the Team and Its Members.” Comments in this category included such statements as: “Placing a high value on excellent teamwork,” “being aware of detrimental stress,” in team members at work and in their personal lives. Finally, two leaders made similar comments about handling disappointments and failure in developing new venture management.

5 Conclusion This chapter explores the experiences of fifteen venture managers who had successfully developed new ventures. This exploratory study should help fill important gaps in the literature regarding the leadership of new ventures. Further, it is hoped that this study can help managers develop organizations that work to improve their functioning and create cultures that value innovation and change. Some of the major findings from the interviews reveal several areas where organizations can improve their innovation performance—especially around creating and developing significant new products and businesses. The interviews revealed that there were several different types of experiences that the venture team leaders encountered when dealing with their parent organization. The range of relationships was from very little engagement to heavy reliance on the parent organization for expertise, financing, and team members. In other cases, managers in the parent organization accepted the new venture units and agreed with the objectives the team was pursuing. Another major objective of this study was to explore the major problems or challenges that venture leaders encounter as they developed their new venture. The most frequently mentioned challenge was “gaining a precise or clear definition of the venture.” Several noted that this was an issue that consumed a considerable about of time particularly at the start of a new venture. Another major challenge was managing the countless changes that occur during a new venture’s development, e.g., technological changes, market changes, personnel changes, and sponsor changes. Several interviewees noted that “managing change effectively” was an area that was not often anticipated or appreciated at the start of a new venture. As one venture manager noted, “the best way to prepare for managing change is to experience it, work through the issue, and then learn from the experience.” Managing change in complex organizational environments is one reason that experienced, high-quality people are so critical in successfully developing new ventures. When the study was in the planning stages, we knew that that had been little research on the venture manager and sponsor (host organization) relationships. Again, the issue of gaining a shared understanding of the venture arose. All fifteen venture managers (100%) agreed that this was the major issue they encountered in dealing with sponsors. The second most frequently challenge faced working

10 Inside Corporate Innovation: A Study of Team Leader …

173

with sponsors was “meeting the expectations of sponsors.” These top two major issues dealing with sponsors are interconnected. Another issue that has seldom been addressed in the literature is dealing with changes in the venture’s sponsor mix. Simply put, the sponsors of a venture may change dramatically over the venture’s life. Another question asked about dealing with “critical incidents” over the life of a venture’s development is, of course, related to some of the previous questions. The purpose was to gain insight into major issues that can have a major impact on the vision and planned direction for the venture. The critical incidents mentioned in the order of their frequency noted were “overestimating market size,” “implementing the wrong marketing approach,” “technical problems which caused a redirection of the original venture,” “underestimating competitors,” and “the targeted customers for our new venture changed their strategy and didn’t need our venture.” Based on earlier informal discussions with several venture managers, the author noted many complaints such as “others in the parent organization don’t understand what we do,” “functional managers in the parent organization assign people to our venture that doesn’t fit our needs,” and “most people in the parent organization don’t understand why it takes us so long to gain progress with our new ventures.” This question resulted in several useful comments which can be used to improve new venture performance. For example, almost all of the interviewees noted that new ventures require wide-band thinking capabilities. Others noted that “in-depth experience in new business development and new ventures would be beneficial for venture teams. Other responses noted that new ventures had many of the same qualities as experiments and that considerable learning occurs during a venture’s development. Few studies, if any, on new venture development have focused on the “significant lessons learned” managing a venture team. It is suggested that responses to this question could be beneficial for training and educating future venture managers. The most frequently noted learning included: “defining the architecture of the venture early,” “keeping everyone continually informed,” “importance of holding regular venture status-review meetings,” and “creating a culture that values innovation and high-quality teamwork.” Finally, it is posited that exceptional competency in managing new organizational ventures can result in higher overall organizational performance, fewer wasted resources in the pursuit of innovation, and will lead to higher personal satisfaction. It is hoped that this study on the experiences of successful new venture managers can lead to improvement in new venture development but the entire innovation field.

6 Recommended Future Research Areas There are several areas recommended for future research. Based on this research and extant research, these areas could provide critical insights into how to improve the venturing process:

174

D. L. Wilemon

1. What interpersonal skills do venture managers need to gain and maintain support for their ventures? This is focused on the need for long-term team support, sponsor support, and assistance from key managers in the parent organization? 2. What background, educational, and organizational experiences help prepare people for venture management assignments? 3. Do venture managers, their sponsors, and customers view venture success differently? Are their views different? If so, implications? 4. What type of organizational culture in the parent organization is most likely to provide an environment conducive to spawning a continuous stream of new ventures? 5. How do exploration and exploitation competencies and strategies support the development of new ventures? 6. How can venture teams help create a parent organization that is more innovative and growth-oriented, even though a venture may not be successful? 7. How can new venture assignments help shape an innovative culture within the parent organization? Acknowledgement We would like to pay our attribute, respect, and gratitude to Professor David Wilemon whom is a distinguished Snyder Professor of Innovation Management in Whitman School of Management, Syracuse University. Months before we were able to submit this book, he passed away peacefully in August, 2019. He was a renowned professor in the field of Innovation Management and we learned tremendously from his contributions in the field and in this book. In his 43 years career as Professor of Business Administration, he has won countless awards for teaching, research and publishing. It is an honor to have his piece of work in this edited book. His spirit and sweet-natured character lives with us and we certainly will have him in our thoughts.

References Altman J, Zacharakis A (2003) An integrated model for corporate venturing. J Private Equity 6(4):68–76 Antoncic B, Hisrich R (2003) Clarifying the intrapreneurship concept. J Small Bus Enterp Dev 10(1):7–24 Block Z, MacMillan IC (1993) Corporate venturing. Harvard Business School Press, Boston Burgelman RA (1983) A process model of internal corporate venturing in the diversified firm. Adm Sci Q 28:223–244 Gupta A, Smith K, Shalley C (2006) The interplay between exploration and exploitation. Acad Manag J 49:693–706 Hill S, Birkinshaw J (2012) Ambidexterity and survival in corporate venture units. J Manag 40(7):1899–1931 Kola-Nystrom S (2008) In search of corporate renewal: focus on corporate venturing. Int J Enterpren Innovat Manag 8(2):196–215 Mauer I, Bartsch V, Ebeks M (2011) The value of intra-organizational social capital: how it fosters knowledge transfer, innovation performance and growth. Organ Stud 32(2):157–185 Miles M, Covin J (2007) Strategic use of corporate venturing. Ent Prac 23(3):47–63 Schulze A, Hoegel M (2006) Knowledge creation in new product development projects. J Manag 32(2):210–236

10 Inside Corporate Innovation: A Study of Team Leader …

175

Vanhaverbeke W, Peeters N (2005) Embracing innovation as strategy: corporate venturing, competence building and corporate strategy making. Crea Inn Manag 14(3):246–257 Von Hippel E (1977) Successful and failing internal corporate ventures: an empirical analysis. Ind Mar Manag 6(3):163–174 Zahra S (1991) Predictors and financial outcomes of corporate entrepreneurship: an exploratory study. J Bus Ven 6(4):259–285

Index

A Acquisition, 13–23, 25–32 Acquisition organisational identity, 17 Adjustment, 38 Airbnb, 56, 63

B Blue-collar employees, 23, 25 Brand image, 141, 143, 146–154

C Challenge, 75 Collectivism, 50, 52, 53, 56, 63 Cross-cultural, 38 Cross-cultural adjustment, 38, 41, 42 Cross-cultural team collaboration, 110, 113, 119 Cultural adjustment, 38, 42, 43 Cultural competence, 42 Cultural competency, 41, 44 Culturally competent, 40 Culture, 2, 4, 6, 7, 9, 40, 49–55, 57–61, 63, 69–77, 82, 84–86 Customer satisfaction, 145–152

D Diaspora, 125–135 Diaspora entrepreneurship, 127 Diaspora homeland investment, 130–135 Diaspora homeland investment motivations, 134 Diaspora investment, 125–128, 133, 134

E Employee performance, 141, 143, 147–152

F Fraud, 70–73, 75, 81, 85, 86 Fraudulent, 86

G Gig economy, 91–104 Global innovation, 107, 108, 110, 111, 113, 115, 116, 118, 119

H High uncertainty avoidance, 62 Homeland investment, 128–130, 132, 133, 135 Homeland investment motivations, 130, 133, 134 Hotel image, 141, 143, 145, 146, 148–152, 154

I Identity work, 13–15, 19, 20, 23–25, 28, 29, 31 Innovation, 159–161, 164, 172, 173 Intercultural, 42, 44 International business, 1–5, 9 Internationalisation, 91 Investment motivations, 130

J Japan, 70–74, 76, 80–82

© Springer Nature Singapore Pte Ltd. 2020 N. Zakaria et al. (eds.), Transcending Cultural Frontiers, https://doi.org/10.1007/978-981-15-4454-5

177

178 K Knowledge-sharing, 109, 110, 112–119 M Malaysian, 37–39, 41, 42 Managers, 13, 14, 21–30, 32 MENA, 50, 52–58, 60–63 MENA culture, 58 Mistrust, 57 Muslim-friendly hotels, 144 Muslim youths, 142, 148, 152, 153 N Non-pecuniary, 125, 130, 131, 133 Non-pecuniary investment interests, 128 O Occupational identity, 14, 18–20 Occupational identity work, 28, 32 Organisational identity, 16–18, 20, 22 Organisational identity work, 24, 25, 32 Organizational mechanisms, 108–112, 115, 117, 118 Organizational mechanisms and organizational routines, 111 Organizational performance, 109, 111, 118 P Project collaboration, 112, 115, 119 R Registered nurses, 37–39, 44

Index Resource dependency, 98 Risk, 51–54, 56, 60, 61, 63

S Saudi, 37–42, 44 Self-initiated expatriates, 40, 42 Sharing economy, 49–52, 54–58, 60, 62, 63 Small and Medium Enterprise (SME), 91, 92 South Africa, 13, 14, 22 South African, 13–15, 22, 23, 25–27 Strategies, 159, 161, 174

T Team, 160–174 Teamwork, 172, 173 Top management, 69–71, 77, 78, 82, 85, 86 Transaction cost, 101, 103 Trust, 49–58, 60, 62, 63 Trusted, 53, 60 Trusting, 50–53, 56–58, 60–62 Trusting cultures, 57 Trustworthy, 57

U Uncertainty avoidance, 50, 52–54, 56, 60, 61, 63 Uncertainty avoidance culture, 54, 60, 61, 63

V Venture leader, 167, 168, 170–172