Box A: Using an appropriate model of cultural values, contrast two cultures then discuss what

potential problems might arise for people from these two cultures doing business with one

another.

Box A: Compulsory Question

The essay seeks to explore the capital budgeting decision-making of Canadian and

Mexican entrepreneurs. Specifically, the objective is to explore how national culture could

help to explain differences in the entrepreneurs’ capital budgeting decision-making processes

within different national contexts. Assuming that the entrepreneur is responsible for the

decision-making in most smaller businesses, considering that entrepreneurship is a behavioral

function (Schumpeter, 1961), and that behavior is a visual manifestation of culture (Hofstede,

1980; Hofstede, 2001), it is a fair assumption that national culture might have an impact on

the entrepreneurs’ capital budgeting decision-making. This further suggests that an

entrepreneurs’ patterns and the rule of thumbs could vary between countries. Despite the

significance that capital budgeting decision portrays, little has been done to understand the

role of national culture in capital budgeting decision-making. Breuer & Quinten (2009)

suggest a need to further explore the national culture and capital budgeting decisions at the

corporate level. This essay responds to this recommendation with a focus on entrepreneurs

and their capital budgeting decision-making. The study will examine existing research and

attempt to establish a theoretical explanation of the difference and similarities in capital

budgeting decision-making by relating the research findings to Hofstede (2001)’s dimensions

of national culture.

One of the more influential scholars in the area of cross-cultural studies is Hofstede

(1980, 2001). In his book, Culture’s Consequences, he identified cultural aspects of

masculinity/femininity; uncertainty avoidance; power distance; and

individualism/collectivism. Hofstede then later included long-term/short-term orientation as a

fifth element. Indulgence/restraint was recently added as a sixth element (Hofstede, 2011).

The first four cultural dimensions were first identified by Inkeles and Levison (1969).

However, the importance of Hofstede’s work is that he identified these dimensions

empirically. Hofstede (1980) based the conclusion on the data collected from the application

of two international employees’ attitude surveys to IBM employees, which took place

between 1968 and 1972, compiling a total of 116,000 responses, which could be matched by

occupation, age, and gender. His survey was applied in 72 countries and translated into 20

different languages. Hofstede (2001) operationalizes culture through the measure of values

and equates culture to national culture (2001, p. 1).

Table 1: Hofstede’s dimensions

Table1: Source: Hofstede (2001)

Table 2: Comparing Hofstede's dimensions’ indexes between Mexico and Canada

According to Hofstede (2001), in countries with low individualism, individuals are

conscientious about trusting other individuals, even family, when making decisions. With

Mexicans (30) scoring far lower in individualism than Canadians (80) it could be assumed

that Mexicans are less likely to trust non-family members’ employees. Mainly, this in line

with Warnock (2010), who argues that individualism-collectivism orientation impacts trust

building between the family-member chief financial officer and non-family chief financial

officer. The literature suggests that in countries high in individualism, employers place more

trust on employees. This is supported by Thompson et al., (2012) who argues that engaging

and building trust may bring higher results to organizations. Considering the low

individualism of Mexicans, it can be assumed that Mexicans are less likely to engage

employees than Canadians. Seijts and Crim (2006) agree to this when they found that 66

percent of Canadian employees were engaged in the workplace. While there is evidence of

low participation in non-family member employees, Mexican entrepreneurs do involve

family, particularly male members in the decision-making process. According to Hofstede, in

collectivist countries, like Mexico, people prefer group decisions and keeping harmony

among family members is important (2001, p. 306). Canadians believe that individual

decisions are better and they do not see any difference between employee who are non-family

members and those who are members of the family in the organization when involving

employees in the evaluation process.

 Compared to Canada (48) on uncertainty avoidance, Mexico shows a very high

preference for avoiding uncertainty (82). As this dimension has also been related to trust and

security (Yoon, 2002), the trust would be more of a concern to uncertainty-avoiding Mexican

entrepreneurs compared to Canadian entrepreneurs. Despite the growing practice of using the

internet to research and identify capital investment alternatives, Mexican entrepreneurs were

found to rely heavily on supplier’s knowledge. Both corporations are representing national

brands and small local businesses. These findings agree with Hofstede’s (2001, p. 160) view

that trust, relationships, and loyalty are characteristic of societies high in uncertainty

avoidance. Such societies find it difficult to trust non-family members, and may even have

difficulties trusting family, and therefore consider loyalty a virtue (2001, p. 160). As a result,

when trust is established between the entrepreneur and the suppliers, this relationship lasts for

a long time. Hofstede (2001, p. 160) argues that in countries with low uncertainty avoidance,

members of these societies believe that most “people can be trusted” which reflects Canadian

entrepreneurs.

According to Hofstede (2001, p. 226), in countries low in long-term orientation,

individuals expect immediate gratification of needs and pay relevance to the bottom line. This

is supported by Moon, Franke (2000), who argue that ethical perceptions would be affected

by long-term orientation. It could be assumed that Mexicans are less likely to have a long-

term view than Canadians when evaluating alternatives (Dorfman, & Howell, 1997). This

would suggest that the rapid return on the investment will take the evaluation of the capital

budgeting alternatives in Mexico. This is supported by the research insights which

highlighted how Mexican entrepreneurs evaluated decisions based on financial analysis that

supported a quick recovery of the investment. While there is evidence that Mexican

entrepreneurs also rely on cost-benefit analysis when evaluating alternatives, this type of

analysis may be affected by uncertainty avoidance and individualism-collectivism (Howell et

al., 2007). In contrast, Canadian entrepreneurs are more strategic when evaluating capital

budgeting alternatives (Etemad, 2004). According to Hofstede (2001) it a common

characteristic in countries with long-term orientation for individuals to be more strategically

oriented. This is supported by Mazon and Strak (2004) who argue that business plans are a

key document for bankers, venture capitalist and business angles in Canada. This suggests

that business plans have a significant role in the evaluation stage in Canada.

The implications of power distance are present in the evaluation of the alternatives.

According to Hofstede (2001), countries high in power distance centralize decisions. This is

supported by Lee et al., (2000) who suggests the evaluation is affected by power distance.

With Mexicans (81) scoring higher in power distance than Canadians (39) it could be

assumed that Mexicans tend to centralize the evaluation decisions more than Canadians

(Loane & Bell, 2006). This would suggest Mexicans have a more authoritarian approach to

decision making. This is supported by the view that in countries with high power distance,

employees are not involved in purchasing decisions (2001, p. 105), or have less input into the

decision and “they expect to be told” (2001, p. 103). In contrast, Canadian “employees are

expected to be consulted before decisions are made that affect their job” (2001, p. 103).

According to Hofstede (2001), in countries high in masculinity, male individuals have

stronger participation in decision making than females. This is supported by Chang (2006)

who suggest that the evaluation of advertising appeals to be affected by masculinity-

femininity. With Mexicans (69) scoring higher than Canadians (52) on masculinity, it could

be assumed that Mexicans are more likely to rely on males during the evaluation compared to

Canadians (Dorfman, & Howell, 1997). This would suggest that the evaluation of the capital

investment alternative in Mexico will be more centered on male individuals (Stephens, &

Greer, 1995). In contrast, Canadians are more inclusive of the employees in the evaluation,

regardless of the employee’s gender. This is supported by the view that countries low in
masculinity, see little difference between the value of men and women (2001, p. 298) and

where women have more participation in decision making (2001, p. 312), than in highly

masculine countries. The low power distance and the low uncertainty avoidance of Canadians

allow them to “trust” employees and engage them in decision making, allowing the

entrepreneur to focus on the more strategic decision.

Finally, in Canada, insight from this study could help practitioners and immigrant

entrepreneurs to learn that employees and other entrepreneurs may be a source of valuable

experience in capital budgeting decision making. In Mexico, practitioners often follow

translated Western textbooks that do not take into consideration the Mexican traditions

(Martinez & Dorfman, 1998). It is common to see that business textbooks encourage the need

for long-term planning. This might be possible in large organizations but less likely in the

small business, especially in countries high in uncertainty avoidance. The insights from this

research encourage bringing to the classroom a more holistic approach to capital budgeting

decision making. It was shown that Western views are not necessarily applicable in other

national cultures where the economics and values are different. Mexican entrepreneurs may

use the insights from this study to learn about new approaches to capital budgeting decisions.

However, contextual factors may facilitate or prevent the implementation of these

approaches. It seems that the Canadian government provides additional support to

entrepreneurs by teaching them how to prepare business plans. The Mexican government

could be more supportive of entrepreneurs by providing more contextualized training and

providing a safer and supportive entrepreneurship environment.

Box B: How much responsibility should an organisation take for helping its employees

manage work and family interface? Discuss with examples

Box B: Work and Family Interface

The study seeks to discuss the responsibilities organization need to take in assisting

workers to establish a work-family balance. According to Strack, Booker, Von Der Linden,

and Strohmayr, (2014) employees are demanding a work-family interface. Work-life balance

issues have generated global debate on the responsibilities of organizations in helping

workers attain a work-family balance (Valcour et al., 2011; Sandberg, 2013). Specifically,

organizations are tasked with the role of implementing work-family programs such as flexible

scheduling, telecommuting and developing an environment that recognizes employees’

family role (Kossek, Lewis, & Hammer, 2010). The essay will use the Conservation of

Resource Theory (COR) and the Work Home Resource theory (WHR) to demonstrate the

correlation between demand, resources, and work-life balance. While the COR theory allows

for the understanding of employees’ reaction to stress, it believes that people are in a constant

quest to gain wealth which results to stress (Hobfoll, 2000). The WHR theory incorporates

the idea of COR theory to propose that relationship between resources and demand from one

domain result in the work-family experience. Specifically, the WHR theory argues that

contextual resources from work or home are related positively to the individual’s resources,

and contextual demands have a negative relation to personal resources. The main argument

for the study is that work-family resources from organizations enable employees to develop

the personal resource of balanced self-efficacy.

Hobfoll’s COR framework avails a useful approach to which organizations can use

resources to manage work-life interface. Hobfoll first recommended COR in 1989 to model

the concept of stress. The primary notion is that people struggle to attain, sustain and

accumulate resource and that strain is the consequence of either the risk of losing or the
definite loss of valued resources (Hobfoll, 2002). Resources can either be personal or

contextual depending on their source (Hobfoll, 2002). Personal resources are specific to

people and consist of personal energy and traits. For instance, self-efficacy (self-efficacy the

believe about one’s ability to sustain resources, demands and stakeholders from the work and

family domains) and time are considered personal resources (Hobfoll, 2002; Wayne, Casper,

Matthews, & Allen, 2013). Contextual resources exist in the working environment and are not

specific to the self. For example, support activities provided in a family-supportive work

climate. For employees to undergo stress when their resources are threatened, they have to

value the resource. Some employee values resources when they are provided as a way to

attain other valued resources (Hobfoll, 2002, p.515). For example, the existence of valuable

working hours is a contextual resource that is not valued by itself. However, it enables

employees to develop more valued proximal resources such as spending time with family.

The Conservation of Resource (COR) believes that people can go through the cycle of

loss and gain spirals. Specifically, loss spiral happens when stress increases and the resources

are decreased to limit the effect of the stressors (Hobfoll, 2001). A stressful event in the work-

family interface could trigger a loss spiral. For example, an employee rushing to his

workstation receives a call to pick up his daughter from daycare. He now has to call his

workmate to cover for him and use the resources of social support. He also has to pick up his

daughter and use his work time for family benefits. As such, two resources have been utilized

to deal with the emerging conflict situation: work time and social support (Mathis, & Brown,

2008; Sandberg, 2013; Siu et al., 2010). Specifically, this event can be stressful for employees

when their organizational culture fails to accommodate arrangement for family emergencies.

Grandey and Cropanzano (1999) have used the concept of loss spiral in their study.

According to their research, Conservation of Resource theory avails a useful model for

understanding how certain aspects from work or family context such as work overload impact
the elements from family (work) such as time with family. They believe that intra-role

conflict results to stress since the resource are limited in the process of managing between the

role of work and family (Grandey & Cropanzano, 1999; p. 357). The actual or probable loss

of resource generates an adverse state of existence (Grandey & Cropanzano, 1999).

Therefore, the lack of a supportive organizational culture could make the employees feel

unable to manger their conflicts. They will feel less confident in their in their capacity to

handle the emerging situation which will cause them to consider their work and family as a

conflict.

Although scholars have given the Conservation of Resources’ aspect of gain a spiral

limited attention in the behavioral literature, it is applicable in the work-life balance literature

(Salanova, Schaufeli, Xanthopulou & Bakker, 2010; Matthews, Barnes-Farrell, & Bulger,

2010). The concept of gain spiral happens when there is limited demand for resources which

can be directed in the development of other valued resources (Hobfoll, 2002). For example,

people who have access many resources may take risks by investing their resources towards

the generation of more valuable resources which will make them go through gain spiral

which is the phase of resources compilation (Bakker & Demerouti, 2008; Kline, 2010). The

basic concept of gain spiral focuses on the significance of employees having access to

contextual resources. In the organization, access to a supportive family climate will enable

the workers to generate more proximal resources.

The Work-Home Resources theory portrays the connection between organizational

work-life resources and the personal resources development. The approach utilizes the

concept of COR to make an argument that the interface between work and home is a process

which consists of demand and resource sequence that affect the outcomes from each context

(Kossek, Lewis, & Hammer, 2010). The Work-Home Resources implies that resources and

demand from work (home) context relate to outcomes from the home (work) context only
through depletion or attainment of personal resources (Lambert, & Haley-Lock, 2004). Base

on the concept of the gain spiral, domain resources initiate the growth of personal resources

that are in the individual’s control and can be mobilized between the two context (ten

Brummelhuis and Bakker, 2012).

In stressful events, culture also alleviates the pressure on other significant resources.

Workers can benefit from the availability of support in their organizations to limit the work-

family interface conflicts (Feldman, & Hall, 2013; Gurbuz, Turunc, & Celik, 2012). For

example, employees who request accommodation for family reasons in a non-supportive

organization culture are putting pressure and threatening their job security and reputation. In

such event, the nonexistence of supportive culture amplifies the conflict between work and

family (Lepine, Podsakoff, & Lepine, 2005). Therefore, employees who report low levels of

family-supportive culture will report high degree of work-family conflict. In an incident

where employees request for family accommodation in family-supportive culture invest that

culture towards less conflict between work and family risking other valuable resources

(Hayes, 2013). Therefore, workers who report high standards of family-supportive culture

will depict low levels of work-family conflict since it is a contextual resource that can be

directly utilized toward attenuation of conflict. Allen (2001) supports this when he founts that

employees’ perception of family-supportiveness negatively relates to work-family strife even

after regulating the use of benefits related to work-family balance.

In conclusion, organizations should take responsibilities in implementing work-family

programs to the extent that all the employees understand of the organization’s support for

family matters. The extent to which steps that are applied are made visible to the employees

enhances the positive evaluation of the organizational culture which allows the employees to

perceive their pool of resources.The assessment of the work-family interface recognizes both

contextual resources and demand. The Work-Home Resources theory argues that both
resources and demand impact the work-family balance. Contextual resources allow

employees to generate personal resources while there are role stressors that place demands

over the employees’ time. The theory of COR argues that stressors such as role overload

trigger the use of resources towards attenuation of the stressful situation. In the case of COR,

personal resources are utilized to help deal with stressful situations which limit the use of

resources towards the development of other resources. As such, the enrichment process which

relies on resource development is affected negatively. Therefore organizations developing

pamphlets on how to benefit from flexibility at work and how to negotiate flexibility with

supervisors will enable workers to acknowledge access to resources.