Binod Sundararajan, Oksana Shkurska, Shannon Lin - Cross-Cultural Practices in Business and Finance - Frameworks and Skills-Palgrave Macmillan (2023)

Frameworks and Skills
Binod Sundararajan
Oksana Shkurska & Shannon Lin
Cross-Cultural Practices in Business
and Finance
Binod Sundararajan · Oksana Shkurska ·
Shannon Lin
Cross-Cultural Practices
in Business and Finance
Frameworks and Skills
Binod Sundararajan Oksana Shkurska
Dalhousie University Dalhousie University
Halifax, NS, Canada Halifax, NS, Canada
Shannon Lin
Dalhousie University
Halifax, NS, Canada
ISBN 978-3-031-06439-5 ISBN 978-3-031-06440-1 (eBook)

https://doi.org/10.1007/978-3-031-06440-1
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Acknowledgments
Binod Sundararajan’s Acknowledgments
I would like to first acknowledge both my co-authors Dr. Oksana Shkurska and
Dr. Shannon Lin, for agreeing to take this journey with me and help co-create
a one-of-a-kind, from the scratch textbook aimed at the International & Inter-
cultural Management and International Business practices space. Their talent and
knowledge have helped enhance this work and has resulted in the creation of a
unique book, by immigrant academics to Canada, diverse perspectives of people
who have lived, traveled, and worked in multiple countries and bring their rich,
lived experiences into this textbook.
I would like to thank our Faculty of Management that has helped nurture a
fertile and nurturing environment to enable such efforts. A huge thank you to
Marcus Ballenger and Geetha Chockalingam of Palgrave Macmillan for their help
and support during the writing process.
I would like to thank my wife Dr. Alamelu Bharadwaj, a renowned Cancer
researcher in her own right, and my two children Lara and Mithra, for giving me
the love and the space to forego spending time with them and allowing me to
take these leaps of creative endeavor. I would like to thank my father, late, Mr.
Sundararajan Parthasarathy, my mother Komala Sundararajan, sister Dr. Malavika
Sundararajan, brother Sharad Sundararajan, and sister-in-law Shreya Amin, for
their constant support and cheerleading.
Oksana Shkurska’s Acknowledgments
I would like to acknowledge Kim Brooks, the Dean of the Faculty of Management
(now an Acting Provost and Vice-President Academic at Dalhousie University),
and Mike Smit, the Acting Dean of the Faculty of Management, for their contin-
uing support and encouragement. Special thanks go to Linda Macdonald, a very
good colleague and friend who is always full of innovative teaching ideas and
inspiration.
I also wish to thank Marcus Ballenger, a senior editor, and Geetha Chock-
alingam from Palgrave Macmillan for their patience and guidance during the whole
writing process.
v
vi Acknowledgments
Finally, I would like to thank my husband Serge and my daughter Dasha who
never fail to support and push me to move forward.
Shannon Lin’s Acknowledgments
I would like to thank my co-authors Dr. Binod Sundararajan and Dr. Oksana
Shkurska for their intellectual contributions, as well as support and patience
throughout the writing of this book. I also wish to thank my husband Dr.
Lorn Sheehan and my daughters Caroline and Linnette for their love and
encouragement.
Contents
1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PESTLE (STEEPLE, PESTEL, PESTLIED, SLEPT,
LONGPESTLE) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Political Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Economic Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Sociocultural Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Hofstede’s Cultural Dimensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Technological Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Legal Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Environmental Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Waterbody Innovations and Technologies Inc. (WITI) . . . . . . . . . . . . . . . . 12
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2 Political, Economic, and Cultural Climate of International
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Perceptions of Business Across Cultures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Types of Economies that Have Flourished Across Cultures . . . . . . . . . . . 17
Market Economies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
State Capitalism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
State Run . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Distributed Economies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
National Culture vs. Organizational Culture . . . . . . . . . . . . . . . . . . . . . . . . . . 23
National Culture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Organizational Culture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Does Culture Override Business Strategy? . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Cultural Sensitivity, Diversity Training, and Truly Benefiting
from a Culturally Diverse Workforce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Unconscious Biases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Affinity Bias . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Confirmation Bias . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Attribution Bias . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Conformity Bias . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
The Halo Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
vii
viii Contents
The Horns Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Contrast Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Gender Bias . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Ageism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Name Bias . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Beauty Bias . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Height Bias . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Gaslighting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Micro-aggression . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3 Culture Shock, Work, and Study Abroad . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Read and Reflect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
What Is Culture Shock? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Oberg’s Culture Shock Theory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Kim’s Adaptation Theory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Bennet’s Developmental Model of Intercultural Sensitivity (DMIS) . . . 43
Berry’s Acculturative Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Cultural Intelligence and Intercultural Adaptation . . . . . . . . . . . . . . . . . . . . 44
Coping with Culture Shock and Stress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Practical Recommendations/Survival Tips . . . . . . . . . . . . . . . . . . . . . . 48
Culture Shock and Business Jargon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Online Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
4 Ethics and Ethical Dilemmas Across the Globe . . . . . . . . . . . . . . . . . . . . . 53
Globalization and Ethics of International Business . . . . . . . . . . . . . . . . . . . 55
Cultural Differences in Ethics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Guidelines for Ethical Decision-Making Across Cultures . . . . . . . . . . . . . 57
Corporate Social Responsibility (CSR) and Sustainable
Development Goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
5 The Role of Technology in Doing Business Across Cultures . . . . . . . . . 67
What Is Technology? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Connected Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Social and Professional Networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Distributed Networks and Virtual Teams . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Challenges to VTs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
The ConnecT Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Dealing with Complexities and Contexts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Types of Leaders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Types of Tasks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Integrate Culture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Creating a Sense of Community . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Contents ix
Types of Conflict Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79

Co-activate Leaders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Disruptive Technologies and Adoption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
6 Accounting Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Accounting: The Language of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
A Brief History of the Double-Entry Accounting System . . . . . . . . . . . . . 95
The Usefulness of Accounting Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
The Role of Financial Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Types of Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
What Is Accounting Fraud? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Types of Fraud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Infamous Past Scandals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Enhanced Regulation: The Sarbanes-Oxley Act . . . . . . . . . . . . . . . . . . . . . . 100
Why Accounting Frauds Matter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Current Accounting Practice and GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
One Common Standard: IFRS Adoption Around the World . . . . . . . . . . . 103
Accounting, Legal Structure, and Tax Considerations
for Operations Abroad . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Recent Trend Away from Globalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
7 Banking and Financial Markets Around the Globe . . . . . . . . . . . . . . . . . 109
Brief History of Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Equity and Bond Markets Around the Globe . . . . . . . . . . . . . . . . . . . . . . . . . 110
What Is a Bond? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
What Is Equity? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Why Banking Regulation Is Necessary . . . . . . . . . . . . . . . . . . . . . . . . . 112
Regulation Full Disclosure (Reg FD) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
Technological Disruptions to Banking and Financial Markets . . . . . . . . . 113
Cryptocurrencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
Central Bank-Issued Digital Currency (CBDC) . . . . . . . . . . . . . . . . . 116
Global Financial Contagion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
Listing a Business Abroad . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
8 Negotiating Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
Who Is Involved in Negotiations? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
Steps in Intercultural Negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
Communication Style . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
Survival Tips . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
Long-Term Versus Short-Term Orientation . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
Negotiation Tactics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
Forms of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
x Contents
Team Building and Decision-Making . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135

Approaches to Conflict and Conflict Management Strategies . . . . . . . . . . 136
Approaches to Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
Developing Intercultural Negotiation Skills . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144
9 International Organizational Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
International Organizational Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
Multinational Corporations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
How a Multinational Corporation (MNC) Works . . . . . . . . . . . . . . . . . . . . . 147
Foreign Investment (FDI—Foreign Direct Investment) . . . . . . . . . . . . . . . . 148
Mergers and Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
Joint Ventures (JV) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
International Market Entry Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
Potential Export Challenges and Factors . . . . . . . . . . . . . . . . . . . . . . . . 151
Planning to Enter International Markets . . . . . . . . . . . . . . . . . . . . . . . . 151
Other Modes of International Market Entry . . . . . . . . . . . . . . . . . . . . . 152
Emerging Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152
Cultural Considerations in Advertising . . . . . . . . . . . . . . . . . . . . . . . . . 154
People—Expatriates, Host-Country Nationals,
Third-Country Nationals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154
International Business Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156
Incoterms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160
10 Bringing It All Together . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161
Together, From Aways© . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162
Core Principles from Around the World . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163
Themes of Christian Social Teachings (Estimated at About
2.4 Billion Followers) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163
The Five Pillars of Islam and Social Teachings (Estimated
at About 1.9 Billion Followers) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163
Basic Tenets of Hinduism (Estimated at About 1.2 Billion
Followers) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164
Principles of Buddhism (Estimated at About 0.5 Billion
Followers) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164
The Seven Principles of Kwanzaa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
Principles of Ubuntu . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
Cultural Practices Around the World . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166
Flowers to a Russian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166
Gifts to Chinese Classmates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166
Avoid Salt While Dining in Egypt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166
Concept of Punctuality in Many States . . . . . . . . . . . . . . . . . . . . . . . . . 167
Contents xi
Table Manners in Norway . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167

Using Sharp Items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167
Losing a Tooth in Greece . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167
Avoid Clinking Glasses but Say Cheers in Hungary . . . . . . . . . . . . 167
Avoid Discussing Business in the Events in Bolivia . . . . . . . . . . . . 168
Don’t Try to “Go Dutch” in Turkey . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168
Avoid Using Red Ink . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168
A Trip to the Sauna in Finland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168
Sitting Seat in the Taxi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168
Greeting a Magpie in the UK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169
Birthday Greetings in the Netherlands . . . . . . . . . . . . . . . . . . . . . . . . . . 169
Greeting People in Japan and Germany . . . . . . . . . . . . . . . . . . . . . . . . 169
The Finger-Pulling Tradition in Austria . . . . . . . . . . . . . . . . . . . . . . . . 169
The Tradition for Unmarried People in Germany . . . . . . . . . . . . . . . 169
Face on a Birthday Cake . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169
Wife-Carrying as a Competitive Sport . . . . . . . . . . . . . . . . . . . . . . . . . . 170
Durga Puja in Bengal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170
Lucia Festival of Sweden . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170
Yi Peng in Thailand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170
Fasching Parade in Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170
Shinbyu in Myanmar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
How Does One Acquire Cultural Sensitivity? . . . . . . . . . . . . . . . . . . . 171
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173
Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183
About the Authors
Dr. Binod Sundararajan, Ph.D. is a Professor of Management at the Rowe

School of Business, Dalhousie University. He received his doctorate from Rens-
selaer Polytechnic Institute, NY in Communication & Rhetoric. He has an M.S.
in Electrical Engineering and B.E. in Electronics & Communication Engineering.
His research interests lie in organizational, professional, and business communica-
tion; computer-mediated communication; CSCW, CSCL, social network analysis,
sensitivity training around EDI, and intercultural and international management
practices. He conducts research in adoption and diffusion of mediated technolo-
gies, use of CMC in such diverse areas as entrepreneurship, justice, teaching,
collaborative work and learning and management education, and historical data
analysis. He has 30 publications (peer-reviewed journals, peer-reviewed book
chapters & conference proceedings), over 60 national and international conference
presentations, several research grants, and has authored a textbook, Lean, Eth-
ical Business Communication. He teaches Business Communication, Corporate
Communication, International & Intercultural Management, Management Skills
Development at the undergraduate level, and Managing People and Sustainable
Leadership at the Graduate M.B.A. level. He has over 10 years of industry experi-
ence and over 13 years of academic experience, as a researcher, teacher, and about
seven years in administrative roles.
Oksana Shkurska, Ph.D. is an Assistant Professor at Rowe School of Business,

Dalhousie University, with a Ph.D. in Linguistics and Master’s in Education. She
has 18-year experience teaching a variety of courses at a university level, including
Business Communication, Intercultural and International Management, Intercul-
tural Communication, and Business Ethics & CSR. Her research interests focus
on overcoming barriers to effective intercultural communication, in particular, the
role of politeness strategies in establishing trust with culturally diverse stakehold-
ers, successful intercultural transition and adaptation, ethical communication, and
negotiation across cultures. In addition to teaching and conducting research, Dr.
Shkurska has industry experience in managing human resources in a multinational
company.
xiii
xiv About the Authors
Shannon Lin , Ph.D. is an Associate Professor of Accounting at the Rowe School

of Business, Dalhousie University. Dr. Lin obtained her Ph.D. from the Queen’s
School of Business at Kingston, Ontario. She has an undergraduate degree in
Commerce and a Master of Science degree in Finance. She is an award-winning
researcher, with current research interests primarily in financial accounting and
corporate finance. Her work has been published in outlets such as the Journal of
Banking and Finance, the Canadian Journal of Administrative Sciences, the Finan-
cial Review, the Global Finance Journal, and the Journal of Economics and Business.
She has taught corporate finance and financial accounting courses at undergradu-
ate and graduate levels. Dr. Lin’s industry experience includes working at Toronto
Hydro Corporation and State Street Corporation in Boston.
List of Figures
Fig. 1.1 PESTLE variants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Fig. 1.2 Competing values framework—Quinn and Rohrbaugh
(1983). https://www.artstrategies.org/2012/12/the-compet
ing-values-framework/ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Fig. 1.3 EDC’s trade confidence Index on key markets to export
to—https://www.edc.ca/en/article/trade-confidence-index.
html . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Fig. 1.4 WITI top management organization chart . . . . . . . . . . . . . . . . . . . . . 13
Fig. 2.1 MSCI classification of markets—https://www.msci.com/
our-solutions/indexes/market-classification . . . . . . . . . . . . . . . . . . . . 18
Fig. 2.2 United Nations Sustainable Development Goals—UN
SDGs (https://sdgs.un.org/goals) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Fig. 2.3 Deal and Kennedy—corporate culture—macho & work
hard/play hard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Fig. 2.4 Deal and Kennedy—corporate culture—bettering
and process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Fig. 2.5 Handy—organizational culture—power and role . . . . . . . . . . . . . . 26
Fig. 2.6 Handy—organizational culture—task and person . . . . . . . . . . . . . . 27
Fig. 2.7 Durier-Copp, Sundararajan, Makani, and Mechoulan
(2019)—integrating culture with the Ts—team, task,
timeline, and technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Fig. 2.8 Types of diversity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Fig. 3.1 Oberg’s U-Curve model (Source Based on Oberg [1960]) . . . . . . 40
Fig. 3.2 W-curve adaptation model (Source Based on Oberg
[1960] and Gullahorn and Gullahorn [1963]) . . . . . . . . . . . . . . . . . 41
Fig. 3.3 Kim’s Stress-Adaptation-Growth Theory (Source Based
on Kim [2001]) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Fig. 3.4 Bennett’s developmental model of cultural sensitivity
(DMIS) (Source Based on Bennet [2013]) . . . . . . . . . . . . . . . . . . . . 43
Fig. 3.5 Berry’s acculturation model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Fig. 3.6 Cultural intelligence components (Source Based
on Thomas [2006]) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Fig. 3.7 The development of CQ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
xv
xvi List of Figures
Fig. 4.1 Consequences of corruption (Comte et al., 2005) . . . . . . . . . . . . . . 58

Fig. 4.2 Donaldson’s (1992) moral languages (Source Cullen
and Parboteeah [2014]) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Fig. 4.3 Carroll’s pyramid of CSR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Fig. 5.1 The ConnecT framework (Durier-Copp et al., 2019) . . . . . . . . . . . 76
Fig. 5.2 ConnecT framework—dealing with complexities
and contexts and the Ts (Durier-Copp et al., 2019) . . . . . . . . . . . . 77
Fig. 5.3 ConnecT framework—integrating culture with the Ts
(Durier-Copp et al., 2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Fig. 5.4 ConnecT Framework—managing conflict and the Ts
(Durier-Copp et al., 2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Fig. 5.5 ConnecT Framework—effective communication
with the Ts (Durier-Copp et al., 2019) . . . . . . . . . . . . . . . . . . . . . . . . 81
Fig. 8.1 Engagement in negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
Fig. 8.2 Steps in intercultural negotiations (Based on Cullen &
Parboteeah [2014]) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
Fig. 8.3 Factors that influence intercultural negotiations . . . . . . . . . . . . . . . 126
Fig. 8.4 Differences between high-context and low-context
cultures based on Hall (1976) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
Fig. 8.5 Eye contact across cultures (Samovar et al., 2013) . . . . . . . . . . . . 128
Fig. 8.6 Touching across cultures (Axtell, 1998 as cited
in Suderman, 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
Fig. 8.7 Nonverbal communication and the use of “no”
in Japanese, American, and Brazilian cultures . . . . . . . . . . . . . . . . . 129
Fig. 8.8 Long-term versus short-term orientation cultures
(Hofstede, 1980) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
Fig. 8.9 Commonly used ploys during negotiation (Cullen &
Parboteeah, 2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
Fig. 8.10 Differences in forms of agreement across cultures
(Hall, 1976) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
Fig. 8.11 High-power distance versus low-power distance societies
(Hofstede, 1980) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
Fig. 8.12 Approaches to conflict (Samovar et al., 2013) . . . . . . . . . . . . . . . . . 137
Fig. 8.13 Differences in Conflict Management Strategies
(Ting-Toomey & Kurogi, 1998) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
Fig. 8.14 Preferences in conflict management strategies . . . . . . . . . . . . . . . . . 138
Fig. 8.15 Monochronic versus polychronic cultures (Hall, 1976) . . . . . . . . . 139
List of Tables
Table 5.1 Managing individual and corporate identities on social

networking sites (Sundararajan & Macdonald, 2016) . . . . . . . . . . 72
Table 5.2 Managing individual and corporate identities
on professional networking sites (Sundararajan &
Macdonald, 2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Table 9.1 Expatriates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154
Table 9.2 Host-country nationals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155
Table 9.3 Third-country nationals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156
xvii
Introduction
1
The Introduction section will lay out broadly, not only the scope of the textbook,
but also provide instances of the complexities and uncertainties that can develop
when people do business across borders and across cultures. For example, what
can businesses do when there is a potential for a global pandemic to which gov-
ernments do not yet have an organized response? Would technology be able to
come to the rescue? Possibly, at the least for meetings across time zones. How-
ever, what about supply chain-related issues? Movement of goods across borders
can be affected, resulting in shortages in goods or other equipment and resources
to make goods. If the movement of people is affected, even for a few months, the
tourism industry, a lifeline for many smaller countries with little else to produce
or offer to the world, can be seriously affected. Financial markets are very sensi-
tive to global events, political events, and force majeure (acts of God) are part of
all international contracts for trade. The trickle-down effect of even a few months
of downturn in businesses can be devastating for many small and medium-sized
(SME) businesses.
People generally want a peaceful and predictable life. But local and global
events often tend to make people nervous and very quickly they revert to type, i.e.
protective of the local and shunning of the global. Backlash occurs when domi-
nant cultures, usually ignorant, misinformed, or misled, start openly antagonizing
minority populations, often ascribing blame for their country’s misfortunes (slow-
ing down of global trade affects imports and exports alike) on the presence of the
minorities amidst them. In one fell swoop, all the good work done to integrate
newcomers to countries will be wasted and people must start all over again.
Moving beyond just posing these questions, the introduction will aim to pre-
pare the students, specifically, to understand cross-cultural nuances beyond just the
usual discussions of high vs. low contexts, power distance, uncertainty avoidance,
and such dimensions of cross-cultural interactions. These cultural dimensions,
introduced in this Chapter, but treated more thoroughly in Chapter 3, will be
© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 1

B. Sundararajan et al., Cross-Cultural Practices in Business and Finance,
https://doi.org/10.1007/978-3-031-06440-1_1
2 1 Introduction
woven across the textbook and will form the background for presenting and dis-
cussing chapter concepts. Broadly, the textbook will also aim to equip students
and readers with very useful and practical information that will allow them to use
this knowledge and build towards proactive behaviors when doing business across
cultures.
Each chapter will discuss broadly major cultural aspects of business practices
in the different regions around the world but provide specific examples and sce-
narios involving different types of businesses in specific countries and specifically
treat the aspect of accounting and international finance and banking practices in
Chapters 6 (Accounting Practices) and 7 (Banking and Financial Markets around
the globe). It would be a steep challenge to discuss every country in the world,
but there would be sufficient information provided to allow students to begin ask-
ing the right questions when faced with the opportunity to work with people from
other cultures, be it in their home countries or in a host country halfway around
the world. Using both theories to provide context and allowing for current research
in the topics to inform the students, and with real examples from several cross-
cultural business operations, the content in each chapter will lead and scaffold
students towards a better understanding of the need for such an approach and help
create a mindset that takes into account, adaptability, awareness of complexities,
uncertainties, and an openness and eagerness to learn about the different cultures
and making working globally and locally, a richer experience.
In this book we will explore and lay out business, financial, cultural, and media
use practices across different countries and cultures. Similar ideas have been
made available to the academic and practitioner communities via textbooks on
International and Intercultural Communication & Management, Global Business
Practices, and online articles on how to do something or how not to do some-
thing when interacting with people across cultures, particularly in the context of
a business meeting or collaboration. These books make an excellent case for the
ideas professed, using established and not so well-established theories about high-
context and low-context cultures, collectivist and individualist cultures, cultural
norms, practices, and expectations. However, while we will discuss these aspects
and frameworks in the earlier chapters, our purpose in writing this book is to
provide very practical and situational examples involving countries and regions
around the world that will serve as a starting point for business professionals,
academics, and students (on exchange, new job opportunities etc.) to learn about
the cultural and business practices of people from different backgrounds, ethnici-
ties, diversities, educational levels, and social strata and hierarchies. Towards this
effort, we will integrate the discussion of chapter concepts within the context of
these cultural frameworks. We will include discussions on how academics can be
supportive and encouraging of the international students in their classrooms and
how practitioners can help their international recruits/employees (in house or as
part of their global teams) feel that they belong to the team and the organization.
As we write these chapters, the world entered the second year of being gripped
by the pandemic, COVID-19 variants are causing several waves of infection surges,
the world’s supply chains have been disrupted, and global and national businesses
PESTLE (STEEPLE, PESTEL, PESTLIED, SLEPT, LONGPESTLE) 3
and governments are dealing with new realities and new ways of doing things,
particularly, transacting business across countries and continents. While saving the
lives of citizens of every country is the topmost priority of every government on
the planet, these governments also need to ensure that their country’s economic
engines, businesses, continue to operate and survive disruptions and continue to
contribute to national GDP’s (Gross Domestic Product). Additionally, as the book
has neared publication, we have emerged from the pandemic, but the threat of
variants still looms over people and nations, and travel across and between coun-
tries has been plagued by airline fare hikes, increases in the prices of gasoline,
commodities, and goods, coupled with surging inflation and recession in many
countries.
In our treatment of the various aspects of cross-cultural business and financial
practices, we will adopt the following approach:
1. At the broad level, we adopt PESTLE (variously PESTEEL, LESTEEP etc.

which we will shortly elaborate upon).
2. Consider mini cases and follow the progress of a fictitious North American
multinational company (MNC) that has plans to enter several global, devel-
oped, and emerging markets. Where suitable, some of the chapters have mini
scenarios or cases, involving other fictitious events, companies, and people.
These are based on real life events, characters, and multinational organizations.
3. Use fictitious characters, employees of the N. American MNCs, as they navigate
cross-cultural business and financial practices and the lessons they learn.
4. And, have the COVID19 Pandemic as a backdrop to the changing global
dynamics, but also touch upon key global issues like Climate Change, Equity,
Diversity, and Inclusion (EDI), Corporate Social Responsibility (CSR), the
United Nations Sustainable Development Goals (UN SDGs), Carbon Trad-
ing/Offset, Cryptocurrencies, use of Blockchain (distributed ledger systems)
in shipping, logistics, and many organizations, the increasing use of Artificial
Intelligence (AI or Machine Learning) in business processes, and many such
future trends and cycles that are interconnected with doing business anywhere
on the planet.
PESTLE (STEEPLE, PESTEL, PESTLIED, SLEPT, LONGPESTLE)
Among the many assessments or analyses of markets, whether they are domestic or
international, the PEST or PESTLE approach has allowed organizations to consider
the broadest possible set of factors to consider when they plan to expand the orga-
nizational footprint into these markets. Figure 1.1 describes some of the variants of
this approach—that consider Political, Economic, Sociological (or Sociocultural),
Technological, Legal, Ethical/Environmental (PESTEL or PESTEEL) factors in a
bid to aid the organization in long-range planning and adapting the business to the
potential new market or environment. These factors play an even more important
4 1 Introduction
Fig. 1.1 PESTLE variants
role when the organization wishes to conduct business in international markets

where business practices intertwine with the cultural norms of that country.
Strategists have also regularly conducted a SWOT (Strengths, Weaknesses,
Opportunities, and Threats) analysis of their organizations to assess how the orga-
nization is positioned with respect to the market, the industry in which it operates,
the competitors, and other factors. Typically, the Strengths and Weaknesses are
internal to the organizations, while Opportunities and Threats are external to the
organization. Both these approaches (SWOT and PESTLE) have different areas of
focus. While the PESTLE approach looks at factors that might influence or impact
a business decision, a market entry option, or even whether to start a new business,
the SWOT typically is used to look at factors that influence or impact a specific
business, product line, or product level. Since they complement each other, they
are often used together to allow a business to consider a broad range of factors as
they plan to expand their footprint.
The Corporate Finance Institute (corporatefinanceinstitute.com) defines PES-
TEL as a strategic framework used to evaluate the external environment of a
business by breaking down the opportunities and risks into Political, Economic,
Social, Technological, Environmental, and Legal factors. PESTEL Analysis can
be an effective framework to use in Corporate Strategy Planning and for identi-
fying the pros and cons of a Business Strategy. The PESTEL framework is an
extension of the PEST strategic framework, one that includes additional assess-
ment of the Environmental and Legal factors that can impact a business. We will
now explore each of the components of the PESTEL.
5
Political Factors
When considering doing business in an international setting, some of the early

inputs required by organizations will be around the geopolitical environments
between the home country (where the business is currently situated) and the des-
tination country (our countries). The answers to the following sets of questions
will then provide the necessary inputs for the business decision to expand to the
desired international market.
. When is the country’s next local, state, or national election? How could this
change government or regional policy?
. Who are the most likely contenders for power? What are their views on business
policy, and on other policies that affect your organization?
. Depending on the country, how well developed are property rights and the rule
of law, and how widespread are corruption and organized crime? How are these
situations likely to change, and how is this likely to affect you?
. Could any pending legislation or taxation changes affect your business, either
positively or negatively?
. How will business regulation, along with any planned changes to it, affect your
business? And is there a trend towards regulation or deregulation?
. How does government approach corporate policy, corporate social responsi-
bility, environmental issues, and customer protection legislation? What impact
does this have, and is it likely to change?
. What is the likely timescale of proposed legislative changes?
. Are there any other political factors that are likely to change?
Economic Factors
Economic Factors consider the various aspects of the economy, and how the out-
look on each area could impact your business. These economic indicators are
usually measured and reported by Central Banks and other Government Agencies.
. How stable is the current economy? Is it growing, stagnating, or declining?

. What is the unemployment rate? Will it be easy to build a skilled workforce?
Or will it be expensive to hire skilled labor?
. Are there any other economic factors that you should consider?
. Are key exchange rates stable, or do they tend to vary significantly?
. Do consumers and businesses have easy access to credit? If not, how will this
affect your organization?
. Are customers’ levels of disposable income rising or falling? How is this likely
to change in the next few years?
. How is globalization affecting the economic environment?
6 1 Introduction
Sociocultural Factors
Are concerned with the cultural and demographic trends of society. Social and
cultural norms and pressures are key to determining consumer behavior, i.e. what
do people in that country prefer, how do they prefer things, what sociocultural
practices determine buying and adopting behaviors for products produced in other
countries, etc.
. What is the population’s growth rate and age profile? How is this likely to
change?
. Are generational shifts in attitude likely to affect what you’re doing?
. What are your society’s levels of health, education, and social mobility? How
are these changing, and what impact does this have?
. What employment patterns, job market trends, and attitudes toward work can
you observe? Are these different for different age groups?
. What social attitudes and social taboos could affect your business? Have there
been recent sociocultural changes that might affect this?
. How do religious beliefs and lifestyle choices affect the population?
. Are any other sociocultural factors likely to drive change for your business?
The Competing Values Framework—1983 was created by R.E. Quinn and

J. Rohrbaugh, from their research into organizational culture and leadership
(Fig. 1.2).
. The CVF was created to help an organization understand its culture, and to
determine what makes it truly effective.
. The model is based on the finding that most organizations can be described
using two dimensions, represented by a horizontal and vertical axis each
running between opposite or “competing” values.
. In practice, this means that even the most transformational and innovative
companies have somewhat predictable patterns.
. What’s great about the CVF is that it helps organizations to locate their start-
ing point, and to predict what tensions and trade-offs they can expect when
implementing change.
Hofstede’s Cultural Dimensions
In 2001, Geert Hofstede proposed one of the most comprehensive studies on how
values in the workplace are influenced by culture. While revisions of this approach
are ongoing, it is important to understand that any measure of values is a snapshot
Sociocultural Factors 7
Fig. 1.2 Competing values framework—Quinn and Rohrbaugh (1983). https://www.artstrategies.

org/2012/12/the-competing-values-framework/
in time and constantly evolves. Hofstede defines culture as “the collective program-
ming of the mind distinguishing the members of one group or category of people
from others” and proposed a six-dimension model, with a caveat that all individual
members of a society are unique and so the country scales are only meaningful
for comparison purposes and as a first step towards a broad understanding of the
major cultural aspects of a country. The second caveat is that even if a certain
country’s characteristics can be assessed on a broad scale, there are likely to be
many within-country differences in regions, dialects, ways of doing things, and
behavior. We provide this here as a brief introduction and the cultural aspects are
treated more thoroughly in Chapter 3. Hofstede’s six cultural dimensions are:
. Power distance—the extent to which the less powerful members of institutions

and organizations within a country expect and accept that power is distributed
unequally
. Individualism—the degree of interdependence a society maintains among its
members
. Masculinity—The fundamental issue here is what motivates people, wanting to
be the best (Masculine) or liking what you do (Feminine)
. Uncertainty Avoidance—The extent to which the members of a culture feel
threatened by ambiguous or unknown situations and have created beliefs and
institutions that try to avoid these
8 1 Introduction
. Long Term Orientation—Describes how every society has to maintain some

links with its own past while dealing with the challenges of the present and
future
. Indulgence—The extent to which people try to control their desires and
impulses.
The website Hofstede-Insights (https://www.hofstede-insights.com/product/com

pare-countries/) allows as to perform broad, country level comparisons, again as
an initial step towards gaining a much deeper understanding of the various aspects
of that country. One can also view these dimensions in comparison to their most
likely opposites.
. Power Distance Index (high versus low).

. Individualism Versus Collectivism.
. Masculinity Versus Femininity.
. Uncertainty Avoidance Index (high versus low).
. Long- Versus Short-Term Orientation.
. Indulgence Versus Restraint.
– Countries with a high IVR score allow or encourage relatively free gratifica-
tion of people’s own drives and emotions, such as enjoying life and having
fun.
– In a society with a low IVR score, there is more emphasis on suppressing
gratification and more regulation of people’s conduct and behavior, and there
are stricter social norms
We will discuss these aspects of cultural and cultural intelligence in the next
chapter.
Technological Factors
Technological factors are linked to innovation in the industry, as well as innovation

in the overall economy. Not being up to date to the latest trends of a particular
industry can be extremely harmful to operations. Technological factors include the
following:
. Research and Development Activity

. Automation
. Technological Incentives
. The Rate of change in technology
Environmental Factors 9
Legal Factors
There is often uncertainty regarding the difference between political and legal
factors in the context of a PESTEL analysis. Legal factors pertain to any legal
forces that define what a business can or cannot do. Political factors involve the
relationship between business and the government. Political and legal factors can
intersect when governmental bodies introduce legislature and policies that affect
how businesses operate.
. Consumer law.
. Employment law.
. Discrimination law.
. Fraud law.
. Copyright law.
. Pyramid scheme legality.
. Health and Safety law.
. Import/Export law.
Environmental Factors
Environmental factors concern the ecological impacts on business. As weather

extremes become more common, businesses need to plan how to adapt to
these changes. Additionally, there is increasing importance for businesses to be
environmentally friendly with their operations, as evidenced by the rise of Corpo-
rate Sustainability Responsibility (CSR) initiatives. Examples of CSR initiatives
include carbon footprint reduction efforts and transitions into renewable material
and energy sources.
. Environmental Policies. Environmental policies are considered the major exter-

nal factor that can impact the strategy of a business. …
. Climate Change. …
. Green Agenda. …
. Pollution. …
. Availability of natural resources. …
. Recycling. …
. Waste Disposal.
Sustainable Action for Org Initiative—Change, Sustainability, etc.—Depending on

the stakeholder.
. Internal stakeholders—evidence-based case for change, persuasive communica-

tion, empathetic communication, consistent communication, small wins
. External stakeholders
10 1 Introduction
– Supply Chain—more power—so a different strategy—context cues, again

depending on power of the supplier
– Partners—equal footing/power—so a different strategy—collaboration
– Competitors—important depending on where the primary org is situated in
the competitive landscape—industry leader, no ranking, but aspirational
– Government—building partnerships, urging change, limiting bureaucracy,
ensuring regulations are doing what they are supposed to do vs. strangling
innovation, advocacy
– NGOs—strategic alliances, lead-follow-lead, partnerships and exchanges,
advocacy.
This broad overview of the PESTEL allows a business to consider as many fac-
tors as possible when they contemplate growing their businesses into international
markets. International markets are typically classified as mature markets, emerg-
ing markets, and transitioning markets (no longer emerging, but must become a
fully mature market). They are also classified as Frontier, Emerging, and Devel-
oped (MSCI Market Classification Framework—www.msci.com). Peter G. Hall,
Vice President and Chief Economist at Export Development Canada (EDC), in his
last commentary of the previous decade (December 19, 2019—https://www.edc.ca/
en/weekly-commentary/surprise-of-the-decade.html), indicates that doing business
in international markets (foreign operations) is a great way strengthen domestic
employment and operations, provides opportunities for domestic companies to be
more competitive, increase both profits and market share, and allows for prod-
uct and business diversification leading the way for strategic growth. Of course,
in retrospect, no one expected the pandemic and the effects it has had on global
economies and EDC’s Trade Confidence Index (TCI—https://www.edc.ca/en/art
icle/trade-confidence-index.html#) a biannual index arrived at by surveying over
900 Canadian companies, “showcases the concerns and expectations of Canadian
exporters for the future and their evolving international strategies”. From a Cana-
dian perspective, the TCI provides information on the key markets for businesses
planning to start export operations and Fig. 1.3 provides this information.
When considering international markets from a North American perspective,
Canada, Mexico, and the United States are key trading partners of one another,
with the NAFTA—North American Free Trade Agreement (that came into effect
on January 1, 1994) becoming the USMCA (that came into effect on July 1,
2020). From Fig. 1.3, we can see that the US, Canada, Mexico, the UK, Aus-
tralia, Germany, Spain, France, the Netherlands, and Japan can all be classified as
developed markets based on economic development, size and liquidity criteria, and
market accessibility criteria, which looks at openness to foreign ownership, ease
of capital inflows and outflows, efficiency of the operational framework, availabil-
ity of investment instrument, and stability of the institutional framework. Brazil
and India have long been considered emerging markets but have steadily also been
transitioning to mature or developed markets. While the different classifications of
international markets exist, companies can always make decisions around which
markets to enter or expand into, based on their product or service offerings and
Environmental Factors 11
Fig. 1.3 EDC’s trade confidence Index on key markets to export to—https://www.edc.ca/en/art
icle/trade-confidence-index.html
other growth strategies that best suit the company. We now look at a fictitious
N. American company with existing business operations in the US, Canada, and
Mexico (so they can be considered a multi-national company or MNC) and now
looking to expand into other international markets.
In the next section, we introduce one of the fictitious multinational companies
that we will follow in some of the subsequent chapters. This company has been
created for the purpose of this book and allows us to see and play out various
scenarios that MNCs and its organizational members are likely to face as they
12 1 Introduction
consider entry into various global markets. Coupled with the discussion earlier of
the Trade Confidence Index (TCI) that serves to guide students in their understand-
ing of global markets and international business practices and decisions that need
to be taken when faced with PESTEEL-related challenges.
Waterbody Innovations and Technologies Inc. (WITI)
Waterbody Innovations and Technologies Inc. (WITI), is an ocean technology com-

pany that designs, builds, manufactures, and distributes its cutting-edge software
and hardware marine products to three main markets in the United States, Canada,
and Mexico. Based in Ocean City in Middle Coastal State, WITI was founded in
2012. Stanley Bhargav, Stella Liang, Olga Shevchenko, and Farhad Nillson, four
friends and collegemates, decided to combine their various backgrounds, interest
in creating sustainable technology solutions, love of the ocean and marine life,
and many collective decades of experiences in international markets and launched
the start up. After nearly two years of hard work, perseverance, and patience, they
were able to find funding for their venture and ten years later, they were the proud
Founding Partners of a company that had over 75 employees and a revenue of
around $35 million. While each of the four founding partners had different back-
grounds and international experiences, they were clear that having the headquarters
in the United States would serve them well and with NAFTA (which later became
the USMCA), the company, if it became successful, will be well positioned to do
business in all three countries, US, Canada, and Mexico.
All four were focused on creating sustainable products and business operations
and believed in the quadruple bottom line of society, economy, environment, and
culture and increasingly towards another extension to the quintuple bottom line
that focuses on sociocultural aspects, environment, economy, ethics, and equity.
With this core organizational culture in mind, Bhargav, Liang, Shevchenko, and
Nillson built a strong team of senior management (Vice Presidents and Direc-
tors), who in turn were entrusted with leading by example and walking the talk.
WITI was culturally diverse and there was gender parity across the entire organi-
zation, which also ensured that people of all dispositions, orientations, ethnicities,
cultures were welcomed and celebrated. The work culture and environment were
dynamic and, while not devoid of conflict, still afforded everyone to be heard in
the decision-making processes be they strategic or operational. Figure 1.4 provides
the organization chart of the top management team at WITI.
Bhargav, Liang, Shevchenko, and Nillson had been discussing WITI’s strategic
directions and had meetings with the country VPs Jennifer Howe (USA), Latisha
Johnson (Canada), and Pedro Pascales (Mexico) about how the business was doing
in the three countries. Birgitte Sultan (VP International) was also present at these
meetings and had indicated to the Top Management Team (TMT) that it was time
that WITI started looking at other international markets. The idea appealed to
everyone, considering that competition in the three markets that WITI operated
Waterbody Innovations and Technologies Inc. (WITI) 13
Fig. 1.4 WITI top management organization chart
in—USA, Canada, and Mexico, had been steadily increasing and revenue projec-
tions were moderate, and the pandemic had an impact on global shipping and
supply chains, this may be the right time for WITI to look to enter other interna-
tional markets. Birgitte Sultan was to make a presentation at an upcoming meeting
about possible markets that WITI could explore, prior to entering, the geographi-
cal, economic, cultural, and market barriers to entry, and the best options for WITI
in the short, medium, and long term for such strategic global expansion.
End-of-Chapter Assignments and Exercises-Case Scenarios
Your assignment is to be in the shoes of Brigitte Sultan and select three potential
global markets for WITI to enter. Once you have selected the three countries,
you need to go to the Hofstede’s Insights’ website and enter the names of the
countries and compare them with the US/Canada.
Based on the cultural insights you find on the six dimensions, make a short
report recommending the best country to start exploring possible business oper-
ations with. Once you have done the cultural analysis, respond to the following
questions:
1. Why did you choose the country to start business operations with? Remem-
ber, you are Birgitte Sultan.
2. Support your recommendation with a short PESTEL analysis.
14 1 Introduction
3. While actual market entry will probably require more time, make a recom-
mendation to the founding partners on what the initial steps should be? For
this you will need to use your knowledge from the Introduction to Marketing
or other Marketing courses.
References
EDC. Export Development Canada. https://www.edc.ca/en/article/trade-confidence-index.html

Hofstede’s Insights. https://www.hofstede-insights.com/product/compare-countries/
MSCI. Retrieved from www.msci.com
Quinn, R., & Rohrbaugh, J. (1983). A spatial model of effectiveness criteria: Toward a competing
values approach to organizational analysis. Management Science, 29, 363–377. https://doi.org/
10.1287/mnsc.29.3.363
Political, Economic, and Cultural
Climate of International Business 2
The purpose of this chapter is to highlight the key issues that businesses face when
planning to do business with organizations in other countries and conversely, the
issues faced by people in other countries when having to work in multinational cor-
porations, with coworkers from different countries or be part of virtual teams that
consist of people with diverse backgrounds (whether in-country or abroad). These
issues both converge and diverge, depending on who is having a vantage position,
who is in a position of authority in the organization, what levels of autonomy are
given to coworkers, managers, or senior management, and would cultural faux pas
be the end of the business deal or be a key determinant of the survival of the orga-
nization in the foreign country. Many things in the business world are dependent on
the trade-offs that businesses make when negotiating deals, contracts, or business
collaborations or even non-governmental operations (charity and volunteer work).
These trade-offs or Gets-Gives are a part of doing business, and students can learn
whether these trade-offs have a cultural context or a purely business context. What
that means is, would people in a foreign country be offended by a seeming lack
of appreciation of the local cultures and practices by the employees and managers
of the visiting multinational corporation, but look the other way, because doing so
would make the country lose potential tax revenues, employment opportunities for
its citizens, and possible outlets and customers for its local trades and businesses?
Alternatively, would a North American company not do business with, say, a
Caribbean or other country, that has undocumented financial practices, where the
word is the bond? Understanding the contexts where each organization, currently
doing business in different countries or with aspirations to do business in different
countries, determines whether its business objectives of entering new markets is
of priority over the cultural nuances of the foreign market or that the cultural
sensitivity to both its own employees (in-country) and those of the people in the
foreign country are a priority and is part of a mature globalization strategy? This
begets the discussion around national culture (of the host country and the origin
country of the MNC) vs. the organizational culture of the MNC, which will have

https://doi.org/10.1007/978-3-031-06440-1_2
16 2 Political, Economic, and Cultural Climate of International Business
employees belonging to both the host country and the origin country. Additionally,
we will begin the discussion around cultural sensitivity and diversity training in
organizations, often a reasonable reflection of the communities they exist in. In this
discussion, we will discuss racism, bigoty, gaslighting, micro aggressive behavior
in organizations as they rally to create culturally inclusive environments in the
organization and truly benefit from cross-cultural collaboration.
Learning Objectives—This chapter will
1. Provide descriptions of different types of economies prevalent around the

world.
2. Introduce the United Nations Sustainable Development Goals—UNSDGS.
3. Provide an overview of important aspects of organizational culture.
4. Introduce the concept of unconscious biases and describe aspects of diversity
training.
5. Suggest ways for managers to create an organizational culture that is wel-
coming, supportive, embracing, and celebratory of all forms of diversity,
particularly in cross-cultural workplaces.
Perceptions of Business Across Cultures
Business or doing business is the mainstay of most, if not all, economies around
the world. People need essential goods and services and want the non-essential
ones, regardless of where they live and how much they can afford to pay for these
goods and services. While the main functions of governments (local, municipal,
state/provincial, regional, or national) are to provide the infrastructure, roads, util-
ities, security, and regulations for communities to live in, these functions allow
small, medium, and large companies to operate, trade, manufacture, and supply
these goods and services and by doing so, provide employment for the people in
the communities these businesses are located in. These businesses though need
to operate under the umbrella of the laws, statutes, and regulations of the coun-
tries/regions they operate in, including the payment of business or corporate taxes.
When it comes to businesses or other types of organizations, every country needs
these organizations to be able to perform their functions to the best of their abili-
ties and the governments provide the frameworks and guidelines for the effective
operations of these organizations. In this chapter, we will first look at the different
types of economies that have existed and exist currently and what cultural norms
they operate under in their respective nations. Organizational strategies are built
around the need for effective functioning, the culture within the organization, the
cultural in the broader society and they intertwine in practices that can at times
seem puzzling to those viewing from the outside but make perfect sense in the
context of a nation and its cultural norms and organizational practices.
Types of Economies that Have Flourished Across Cultures 17
Types of Economies that Have Flourished Across Cultures
The OECD—Organization for Economic Cooperation and Development, states

that it is “an international organization that works to build better policies for bet-
ter lives” (https://www.oecd.org/about/#). It consists of 38 member countries, but
many OECD candidates, key partners, and several regional initiatives around the
world. There are many definitions of economies, but one common understand-
ing of an economy, as defined by Investopedia, is “An economy is the large set of
inter-related production and consumption activities that aid in determining how
scarce resources are allocated. In an economy, the production and consumption
of goods and services are used to fulfill the needs of those living and operating
within it”. How decisions are arrived at by the entities that are engaged in this
production and consumption of scarce resources, determines the type of economy
and while there are several, a few are most prevalent around the world, and we
will look at a few of them. Broadly speaking there are generally three types of
economies—command (also known as State Run or Government Run, Centrally
Planned), traditional (typically found among indigenous communities around the
world—simple exchange or barter-system based), and market (variously known as
capitalism, consumer economy, free or private enterprise, or free market). A mixed
economy can have each of these types operating at various levels with the govern-
ment and individuals (or communities) involved in making economic decisions,
while a transition economy occurs when a country is moving from one type of
economy to another, typically from a command to a market economy. Often the
political system extant in a country determines the types of business organizations
that can be found in that country and the levels of autonomy for these organizations
are regulated by the political system and how much is owned by the government
(public sector) and how much is left in the private sector.
In addition to classifying economies around the world, to facilitate global
trade, many organizations look at these countries as markets of opportuni-
ties. To aid that effort, financial institutions such as Morgan Stanley Capital
Investments (MSCI), an American company headquartered in New York City,
provide knowledge of equity, fixed income, real estate indexes, multi-asset portfo-
lio analysis tools, ESG (Environment, Social, & Governance) and climate change
products (www.msci.com). They operate as MSCI World, MSCI All Country
World Index, and MSCI Emerging Market Indexes. Every year, MSCI releases a
report on the Global Market Accessibility Review and the Annual Market Classi-
fication Review (found at this link—https://www.msci.com/our-solutions/indexes/
market-classification). Figure 2.1 illustrates the currently effective classification of
markets (as of January 2022) and consists of information received and analyzed
on 84 countries around the world.
Some of the key drivers of organizations and companies wishing to do business
in different countries are employment, wages, competitiveness, strategic growth,
and diversification (EDC—Export Development Canada).
Fig. 2.1 MSCI classification of markets—https://www.msci.com/our-solutions/indexes/market-

classification
. Employment—foreign affiliates strengthen Canadian employment and domes-

tic operations: most firms are hiring more at home because of their foreign
operations.
. Wages—foreign affiliates enhance the ability of Canadian companies to aug-
ment compensation for Canada-based employees: most firms are hiring more
at home because of the increased demand that comes from foreign operations,
and that hiring is increasingly specialized with higher wages.
. Competitiveness—foreign affiliate activity makes Canadian companies
stronger: they have better sales, more customers, more profits, and increased
market share.
. Strategic Growth—the main driver of foreign affiliate activity is strategic rev-
enue growth and improved access to global markets: reducing production costs
is not a prime motivator for Canadian companies when setting up operations
abroad.
. Diversification—foreign affiliates allow Canadian companies to diversify their
client base and business model: Canadian companies are increasingly shifting
their investments towards emerging markets like China, India, and Brazil at a
much greater pace than direct exports.
While this information is from Export Development Canada, it holds true for most
countries around the world where some or all these drivers are at play, motivating
organizations to expand to markets outside their home countries. To elaborate more
on the various opportunities, it will be good to understand these markets first and
then discussing them in the context of the different types of economies. According
to MSCI, countries are classified as Frontier, Emerging, or Developed based on
the following three criteria:
. Economic Development—sustainability of economic development.

. Size and Liquidity Requirements—number of companies meeting a standard
index criterion.
. Market Accessibility Criteria—includes factors such as openness to foreign
ownership, ease of capital inflows and outflows, efficiency of operational frame-
work, availability of investment instrument, and stability of the institutional
framework.
Another source of data on the various international markets and countries is the
United Nations Conference on Trade and Development—UNCTAD and the statis-
tics they gather and disseminate for free for individuals and organizations to use
as they plan their global market entry strategies (https://unctadstat.unctad.org/EN/
About.html). UNCTAD also releases an SDG Pulse that provides an update on
the evolution of a selection of official SDG indicators and complementary data
and statistics; provide progress reports on the development of new concepts and
methodologies for UNCTAD custodian indicators; and to also showcase, beyond
the perspective of the formal SDG indicators. While we will discuss the SDGs
a little later, to provide context in this section, we will explore it briefly. In the
context of doing business across cultures and understanding cultural and financial
practices around the world, the United Nations Sustainable Development Goals
(UN SDGs—https://sdgs.un.org/goals) are a critical aspect that needs to be under-
stood. Figure 2.2 illustrates the 17 SDGs and the link above provides more detailed
information on each of the goals and what has been achieved so far with these
goals.
The United Nations Sustainable Development Goals is a collection of 17 global
goals to transform our world by 2030 published and adopted by the United Nations
in 2015.
1. No Poverty: End poverty in all its forms everywhere.

2. Zero Hunger: End hunger, achieve food security and improved nutrition, and
promote sustainable agriculture.
3. Good Health and Well-being: Ensure healthy lives and promote well-being for
all at all ages.
4. Quality Education: Ensure inclusive and equitable quality education and
promote lifelong learning opportunities for all.
5. Gender Equality: Achieve gender equality and empower all women and girls.
Fig. 2.2 United Nations Sustainable Development Goals—UN SDGs (https://sdgs.un.org/goals)
6. Clean Water and Sanitation: Ensure availability and sustainable management

of water and sanitation for all.
7. Affordable and Clean Energy: Ensure access to affordable, reliable, sustain-
able, and modern energy for all.
8. Decent Work and Economic Growth: Promote sustained, inclusive, and sus-
tainable economic growth, full and productive employment, and decent work
for all.
9. Industry, Innovation, and Infrastructure—Build resilient infrastructure, pro-
mote inclusive and sustainable industrialization, and foster innovation.
10. Reduced Inequalities: Reduce income inequality within and among countries.
11. Sustainable Cities and Communities: Make cities and human settlements
inclusive, safe, resilient, and sustainable.
12. Responsible Consumption and Production: Ensure sustainable consumption
and production patterns.
13. Climate Action: Take urgent action to combat climate change and its impacts
by regulating emissions and promoting developments in renewable energy.
14. Life Below Water: Conserve and sustainably use the oceans, seas, and marine
resources for sustainable development.
15. Life on Land: Protect, restore, and promote sustainable use of terrestrial
ecosystems, sustainably manage forests, combat desertification, and halt and
reverse land degradation and halt biodiversity loss.
16. Peace, Justice, and Strong Institutions: Promote peaceful and inclusive soci-
eties for sustainable development, provide access to justice for all and build
effective, accountable, and inclusive institutions at all levels.
17. Partnerships for the Goals: Strengthen the means of implementation and
revitalize the global partnership for sustainable development.
When we see how the UN SDGs have been created and how they are crucial for
all markets and all economies for they impact every aspect of humans engaged in
productive work and organization for the betterment of their lives, their societies,
the environments in which they live in, and their nations. With this context, we
now explore the different economies prevalent around the world.
Market Economies
As we presented earlier, a market economy is one in which individuals answer the

economic questions and market forces are allowed to operate; also called capital-
ism, capitalist economy, consumer economy, free enterprise, free market economy,
and private enterprise. While no country is a truly free market economy, in a
general free market economy individuals and companies buy and sell with a rel-
atively little, but enough governmental regulations. We will discuss regulations
subsequently, but at this point it is good to be aware that a certain amount of
regulations are required in order to provide for some level of standardization and
boundaries within which organizations can operate and individuals and companies
can have protection and recourse for legal action.
The World Population Review (www.worldpopulationreview.com) defines a
market economy as, “a system driven by self-interest in which economic deci-
sions (investment, production, and distribution) are guided by the pricing of goods
and services, which are determined by individuals and businesses and which rely
on the forces of supply and demand to determine the prices and the quantities
of goods and services that need to be produced”. They list six characteristics of
market economies:
1. Private property
2. Freedom of choice
3. Motive of self-interest
4. Competition
5. System of markets and prices
6. Limited government.
However, most countries have mixed economies, where some element of the econ-
omy is owned and operated by the government, while many other enterprises
are privately owned by individuals or publicly traded corporations and with the
central government having little interference or interventions with these enter-
prises, other than taxation and possibly providing some benefits in the form of
reduced taxes and broad regulations. Some of the top free market economies
in the world are Hong Kong, Singapore, New Zealand, Switzerland, the United
States, Ireland, United Kingdom, Canada, Australia, and Mauritius (holding the
top ten spots according to the Fraser Institute’s Economic Freedom of the World
Rankings—https://www.fraserinstitute.org/economic-freedom/).
State Capitalism
The World Population Review defines capitalism as “an economic ideology in

which the means of production is controlled by private business”. This means
that individual citizens run the economy without the government interfering in
production or pricing. Instead, pricing is set by the free market. This means that
value is based on supply and demand and the relationship between producers and
consumers.
Capitalism is very different from socialism and communism, in which the gov-
ernment maintains tight control of the economy. On the contrary, State Capitalism
is when the government or the State, decides to own and operate businesses (for
profit) or capital accumulation and the means of production and distribution of
resources, goods, and services are nationalized as state-owned businesses. So, it
can be considered as a socialist system that combines a capitalist approach with
state ownership of the economy and acts as a giant corporation. There is a general
agreement that the former Soviet Union and even China and Singapore today have
some form of State-Capitalistic approach, but are closer to being mixed economies,
where private individuals and some corporations also have access to resources and
engage in the production and distribution of goods and services, with some say in
pricing as well.
State Run
If free market or purely capitalistic economies occupy one aspect of the world eco-
nomic spectrum, where there is economic freedom with little interventions from
the State, then State Run economies occupy the other end of that spectrum, where
the State owns and operates all the businesses, uses the labor force towards max-
imizing the production and distribution of goods and services, and any profits are
accrued towards the production and the national economy. Such a system is also
called a command economy or a centrally planned economy. Many totalitarian
states, where the authority for governing rests on one individual (the leader) have
State Run economies, with Cuba, North Korea, and other such countries being
examples. There is little to no economic freedom, the state determines the prices
and wages, there is no competition, and international trade is restricted to those
countries who would trade with them. The culture of such countries, while pre-
cious, is determined by what the State determines will be the cultural norms that
are to be celebrated.
Distributed Economies
Allan Johansson and co-authors Kisch and Mirata (2005), coined the term
“Distributed Economies” as a way of organizing economic activity to spur inno-
vation, particularly among small and medium-sized companies and with a focus
National Culture vs. Organizational Culture 23
on sustainable development and business practices. This concept allows for a net-
worked economy to emerge, enabling companies and organizations in the network
to work more closely near the sources of finance, labor, data, knowledge, technol-
ogy, and local, regional, and national resources. Such an economy also provides
the flexibility to organizations to respond to market needs, change in market forces,
and can drive innovative changes to the business is conducted. Additionally, orga-
nizations can also respond to the changing needs of the society they operate in, pay
heed to cultural and consumer needs and behaviors, as well as the attention needed
to the environment, ever moving towards sustainable production, distribution, and
consumption. Pre-industrial economies operated in this fashion but were probably
more localized. With the rapid onset of the information era, this approach is being
adopted in many countries and certain industries.
National Culture vs. Organizational Culture
National Culture
LibreTexts (2021) states that according to anthropologists, there are generally three
types or levels of culture: international, national, and subculture. They however
caution that such a broad classification can result in, and has resulted in, gener-
alizations and stereotyping of entire groups of people and nations. However, for
the purpose of gaining an understanding, it is always to start at some level and
delve deep into the nuances and variations that any cultural norm can afford. For
example, take the three North American countries Canada, the United States of
America, and Mexico. At the surface level, one would rush to assume that Canada
and the US were mainly English speaking and Mexico was mainly Spanish speak-
ing. At the surface level, for those who would be somewhat aware, these three
are Christian countries and because they are Western countries all three are devel-
oped countries. Again, from the broad view, based on the popular media, movies,
and TV, we would only assume that these countries are mostly inhabited by Cau-
casian origin, with some mix of other subcultures like African American, African
Canadian, and possibly some African Mexican. Based on the same diet of popular
culture, people from other parts of the world could assume that everyone carries
guns in the US, Canadians are mostly polite, and those from Mexico only want to
go to the US.
All of these are generalizations and while they have a semblance of truth, the
actual reality is that each of these three countries is extremely diverse. All three
North American countries have a long history of diverse migrations of people
from different parts of the world. Canada has significant populations of French-
speaking (Francophone) people, settled not only in the Province of Quebec, but in
New Brunswick, Nova Scotia, parts of Ontario, and several provinces. In fact, New
Brunswick is the only bi-lingual (French and English) province in Canada, while
Quebec is French or French Quebecois. Also, all three countries have large num-
bers of Indigenous Peoples, variously called Native, First Nations, and by their
actual First Nation names, like Mi’k Maq, Cree, Anishinaabe, Navajo, Ojibwe,
and several hundred others. These were the original settlers in the North Ameri-
can continent and with treaties signed over centuries have shared their land with
the immigrant white and other settlers who came looking for land and oppor-
tunity to the New World in the 1400s. Mexico has for long been the home of
Aztec, Toltec, Olmec, Maya, and Zapotec civilizations, during the pre-colonial era.
Today, they are home to several indigenous groups, chief among them being, Náhu-
atl (22.7% of indigenous language speakers), Maya (13.5%), Zapoteco (7.6%),
Mixteco (7.3%) Otomí (5.3%), Tzeltal (5.3%), Tztotzil (4.3%), Totonaca (3.9%),
Mazateco (3.2%) and Chol (2.4%). (3). The larger languages include several very
distinct variants (https://www.culturalsurvival.org/publications/). When you over-
lay the Spanish culture, post colonization, Mexico has evolved into a very rich and
diverse country where many long-held cultural and sub-cultural traditions are kept
alive, along with the dominant Catholic religion and a rich and vibrant country
emerged and continues to evolve.
The United States too, has benefited by centuries of migration from Europe, and
while the early years were not kind to the indigenous peoples of the continental
US, particularly because of wars and battles between competing colonial powers
like England, France, Spain, the Dutch, Germany, and others, after independence
from England, the US began in earnest setting up a democratic republic. That the
early US economy was built on the backs of enslaved Africans and land taken
away from indigenous peoples must not be forgotten. That the early European
settlers, mainly from the above-mentioned countries, did not treat new migrants
from Ireland, Scotland, Italy, and other parts of Europe well, must also not be
forgotten. That the later Americans, building the infrastructure of a vast geograph-
ical land, exploited Chinese and Japanese workers, must not be forgotten. Waves
of immigrants have come to North America for centuries and slowly, but surely,
the immigrants become part of the National Culture and embellish their beliefs,
norms, and values on the national psyche. These are always enriching, but can be
polarizing and every so often, a nation has to look within itself to realize what it is,
what culture and beliefs it espouses and lives, and what it needs to do to continue
to evolve. The key piece of such a reflection is not to forget what happened and
erase the memory of such events, but to create narratives that retain all aspects
so future generations can know and learn. Then any polarization can be slowly
resolved. The polarization is also part of the renewal and evolution of the national
culture as it seeks to become something more meaningful to the people that inhabit
that nation and therein is the pride or national pride that a culture gives to a citi-
zen. These aspects of national culture that involve rituals, practices, and ways of
doing things, the clothing that is worn on special occasions, seeks to exemplify
not only the dominant cultural aspects of that nation, but all subcultures get to
partake at various levels. While the Hofstede’s Insights site can give a great deal
of information about a national culture, it takes a long time for anyone interested
in learning about different cultures to properly understand them and then use this
knowledge when interacting across cultures whether to do business or just learning
about them.
25
Organizational Culture
Organizational culture has generally been described in the following ways, one
less formal than the other.
. “the way we do things around here”

. “It is manifested in the rituals of an organization, in its people, dress, habits,
working times and styles, attitudes, office layout, almost every intangible aspect
of its being. It is also perpetuated by stories, office gossip, heroes and hero-
ines, décor, social life, and the language that various parts of the organization
regularly use at work”.
These specifically play out in different ways within the organization and while not
every member of an organization will exhibit these traits, many are quite common.
Deal and Kennedy (1982) describe four types of organizational or corporate culture
and these are summarized in Figs. 2.3 and 2.4.
Charles Handy (1981) on the other hand, adapting the work of others, typi-
fies organizational cultures into four categories, Power, Role, Task, and Process,
resembling Deal and Kennedy’s in some way, and focusing on traits behaviors,
habits, etc. involving these aspects of an organization (Figs. 2.5 and 2.6).
Fig. 2.3 Deal and Kennedy—corporate culture—macho & work hard/play hard
Fig. 2.4 Deal and Kennedy—corporate culture—bettering and process
Fig. 2.5 Handy—organizational culture—power and role
Does Culture Override Business Strategy?
It has been generally accepted that the key aspects of creating and maintaining a
positive org culture involve the following in some way or degree, with a focus on
what managers and leaders need to do.
27
Fig. 2.6 Handy—organizational culture—task and person
. Communication is key—internal communication by leaders.

. Stay on message, be consistent.
. Carry employees with you.
. All managers are empowered to deliver powerful/persuasive messages—may
not always be welcome.
. Take culture into account to be more effective.
. Lead by example.
. Respect established processes/policy, change with consensus where and when
possible.
. Defining and using corporate culture, while predominantly an internal discipline
designed to assist strong and relevant communication, can also be used exter-
nally to create, and sustain a corporate image without which an organization
might have a negligible chance of success (Fig. 2.7).
Durier-Copp et al. (2019) in their ConnecT framework, describe steps to help

leaders, particularly those that lead virtual teams, how to integrate culture when
leveraging Technology to empower Teams, to focus on the Tasks, and accomplish
these in the stated Timelines. One key element in this process is to always look
for a “culture add” from diverse team members, as opposed to a “culture fit”. We
will discuss these a bit more when we discuss biases in the next section.
Fig. 2.7 Durier-Copp, Sundararajan, Makani, and Mechoulan (2019)—integrating culture with
the Ts—team, task, timeline, and technology
Cultural Sensitivity, Diversity Training, and Truly Benefiting

from a Culturally Diverse Workforce
Understanding the national culture and subculture of any country forms the basis of
understanding how people from these cultures work together, navigating their dif-
ferences, and working on the commonalities as they achieve organizational goals.
This is particularly important for the following reasons.
. Changing demographics in society and the workplace

. Need to increase population in response to an aging citizenry.
. Increased multiculturalism within existing citizenry.
. Societal attitude changes not keeping pace with the rate of diversity change.
. This creates a gap for the societal unit under analysis, in terms of gaining the
desired level of productivity and of reaping the economic benefits attributed to
having diverse workforces.
. Racial diversity is associated with increased sales revenue, more customers,
greater market share, and greater relative profits.
. Gender diversity is associated with increased sales revenue, more customers,
and greater relative profits. Herring (2009).
However, what we also as being prevalent in organizations is the marginalization

and social exclusion of people who exhibit differences and they end up being
harassed, directly or indirectly through reduced opportunities for growth and pro-
motion, conflicting with coworkers, being the target of micro aggressions and
Cultural Sensitivity, Diversity Training, and Truly Benefiting from a Culturally … 29
incivility in the workplace, undergo distress and as a result affecting their per-
formance, and being the receivers of unkind language. Many organizations have
recognized this and have begun putting in place several orientation and cultural
sensitivity training opportunities to allow employees and leaders to better under-
stand one another, one another’s cultural differences, and improve organizational
effectiveness. This holds true particularly for organizations that conduct business in
different countries and have employees of different backgrounds working together.
Many of these training sessions often start with an awareness of biases, con-
scious, unconscious, and even subconscious biases. We discuss a few here and
point to a few ways in how employees, managers, and leaders can have better
hiring, retention, and cultural practices.
Unconscious Biases
Unconscious biases, also known as implicit biases, are the underlying attitudes
and stereotypes that people unconsciously attribute to another person or group of
people that affect how they understand and engage with a person or group. We
will go over some of the more common biases we see at the workplace.
Affinity Bias
. Affinity bias, also known as similarity bias, is the tendency of people must con-
nect with others who share similar interests, experiences, and backgrounds. It
is also called homophily or “birds of a feather, flock together”.
. Culture fit is a common euphemism for affinity bias. Similarities are good but
can result in homogeneity in the group and in the long term resist any changes.
. To avoid affinity bias, one must actively note the similarities, but also look for
differentiators that can be a “culture add” instead of a “culture fit”.
Confirmation Bias
. Confirmation bias is the inclination to draw conclusions about a situation or

person based on your personal desires, beliefs, and prejudices rather than on
unbiased merit.
. Happens early on and results in opinions being formed about a person, based
on inconsequential attributes like names, ethnicity, where they went to school,
etc. and can determine the questions, the answers to which, confirm the initial
bias.
. To avoid this, it is good to ask standard questions, neutral even, and allow the
person a fair chance to state their case.
Attribution Bias
. Attribution bias is a phenomenon where you try to make sense of or judge a

person’s behavior based on prior observations and interactions you’ve had with
that individual that make up your perception of them.
. The biggest problem here is that we assume something based on something we
heard or saw. If the assumption is going to determine the outcome, the best
way is to ask clarifying questions and give the person a chance to say why
something is presented in a certain way.
Conformity Bias
. Conformity bias is the tendency people have, to act like the people around them
regardless of their own personal beliefs or idiosyncrasies—also known as peer
pressure.
. The majority may not always be right. Groups can fall prey to groupthink,
silence the naysayers, and proceed to decide on something or someone, because
their minds are already made up.
. Actively seek impartial opinions and create an environment where people feel
free to express their opinions.
The Halo Effect
. The halo effect is the tendency people have, to place another person on a
pedestal after learning something impressive about them.
. This reflects our innate tendency to view the shiny object as possessing great
value but learning later that it is glass and not a diamond.
. Need to ensure that all seemingly gleaming attributes (say, Harvard education),
need not necessarily mean that the person will be a real, meaningful “cul-
ture add” to your organization. Someone else, with a similar, but not such a
glamourous brand, can also be equally effective.
The Horns Effect
. The horns effect is the tendency people have, to view another person negatively
after learning something unpleasant or negative about them. (Opposite to The
Halo Effect).
. For example, you found out that someone new to the organization worked in
Microsoft, but you have always been an Apple fan. This can cause you to
behave differently towards them.
. Actively seek to find out more about their former organizations or associations
and ask others for their opinions as well before arriving at a decision.
Contrast Effect
. The contrast effect is when you compare two or more things that you have
met—either simultaneously or one-after-another—causing you to exaggerate
the performance of one in contrast to the other.
. This is very common, particularly during selection processes, performance
reviews, and assessments. When you see a very good performer and then you
begin to compare everyone else based on the “good performer”, it can cause
errors in judgment.
. Actively try to assess each candidate or employee based on a standard set of
criteria and see how each measures up to the stated criteria.
Gender Bias
. Gender bias is the tendency to prefer one gender over another gender.
. One study found that men and women both prefer male candidates (Steinpreis
et al., 1999). This study is dated, but in the 20 years since this article has been
published, the change has been slow.
. The suggestion would be to focus on merit and skills. However, when you
compare historically marginalized communities, there will always be a merit
and skills gap.
. One must therefore go the extra mile and give someone, with potential, even if
they lack skills or merit, the chance to prove themselves.
Ageism
. Ageism in the workplace is the tendency to have negative feelings about another
person based on their age.
. Alternatively, it can also mean that someone older is wiser, because of their
experience, but it may not hold true in every situation.
. That said, actively training everyone in the organization to not hold biases
against coworkers or peers who are older, will lead to a better and more
productive work environment.
Name Bias
. Name bias is the tendency people have, to judge and prefer people with certain
types of names—typically names that are of Anglo origin.
. The flip side is when people of different names join the organization, you can
commonly hear comments like—“oh, that’s too hard to say or pronounce”, or
“goodness, that is quite the tongue twister”, or worse.
. While you can blind candidate info in selection processes, in other cases, it
is harder to do when conducting performance evaluations of peers or direct
reports. Create a culture where people can learn to pronounce names, ask how
it is done correctly, and practice.
Beauty Bias
. Beauty bias is a social behavior where people believe that attractive people are
more successful, competent, and qualified.
. This is because of the perception that attractive people are viewed as more
social, happy, and successful.
. While this could be true, so can the opposite. There are enough situations where
someone is quite attractive, but very mediocre at their job, skills, and abilities.
They tend to get by using their looks. Again, a standardized set of assessment
criteria can help mitigate this bias.
Height Bias
. Height bias or heightism is the tendency to judge a person who is significantly

shorter or taller than the socially accepted human height.
. Taller people perceived to be more competent, employable, healthy, and attrac-
tive. Conversely, shorter people are not given much credit for their abilities or
successes. Their successes are attributed to their being short and hence they
work harder.
. Being aware of this bias will make people behave differently when evaluat-
ing/assessing people.
Gaslighting
Gaslighting takes place when an individual openly minimizes the success of

another based on their religion, ethnicity, accessibility issue, or other visible or
invisible differences. For example, if a person who identifies as First Nations,
Black, visible minority, LGBTQ++, or other, then any promotion they get will be
attributed to their belonging to that group, as opposed to the hard work, talent,
perseverance, or other measures of successful people. This ends up diminishing
or marginalizing the person who received that success and makes them question
their self-esteem. Some common gaslighting phrases are, “you are overreacting”,
“you are so dramatic”, “it didn’t happen that way”, “it was a joke, have a sense of
humor”, “you are so insecure”, “I never said that”, and “your emotions are your
responsibility”, to name a few.
Micro-aggression
Microaggressions are “brief and commonplace daily verbal, behavioural, and

environmental indignities, whether intentional or unintentional, that communicate
hostile, derogatory, or negative slights and insults”—Microinsults, Microinvalida-
tions, and Microassaults (www.acepnow.com). Some common micro aggressive
statements are, “you speak excellent English, where are you from?”, “you are so
articulate, you must have grown up here”, “are there any doctors from the US
here?”, “all lives matter”, and “you don’t seem to act like a visible minority, huh”.
So, what can organizational leaders when faced with such issues at the work-
place, particularly if they are an organization that looks to do business across
different cultures and countries?
. Managers and leaders need to arrive at a common understanding with employ-

ees that diversity is varied (as shown in Fig. 2.8), that equity is giving everyone
the right opportunity, tools, skills, and training that best fits their needs, and
inclusion is more than getting a seat at the table, but having one’s voice heard,
listened to, and acted upon. Research suggests that by moving away from the
traditional role of managing the organization (the action of authority through
a hierarchical structure), leaders affect cognitive processes in the workplace
(Krause, 2004; Pink, 2009).
. Others have stressed the importance of a more conscious leader (probably
conscientious too) and suggest that strategic leaders play a pivotal role in
shifting the organization to the “edge of chaos” and aid organizational learn-
ing and attuning by influencing the structural processes of interaction among
organizational agents.
. Recent studies suggest that a shift in formal leadership roles requires new levels
of conscious self-awareness and leadership competencies (Lynch & McFetridge,
2011; McDonald, 2009)
. When we seek to co-inspire transformational change within organizations that
shift individuals and collectives towards embracing and celebrating diversity
and cross-cultural differences, and effect the behavior and mindsets change of
leaders and employees for organizational effectiveness.
Fig. 2.8 Types of diversity
End-of-Chapter Assignments and Exercises-Case Scenarios, MCQS, Short Answer

Questions
Consider the scenario from Chapter 1 and WITI. For the country you
recommended as Birgitte Sultan and did the PESTEL analysis, you now
need to assume that WITI has set up operations in that country. You have
been chosen to head that division till it is firmly established. You are
still Birgitte Sultan, but along with you, Carmella Kishen, Director of
Manufacturing, Daniel Dubois, Director of Marketing & Sales, Giselle
Tran, Director of Research & Development, and Karim Meyer, Director,
Supply Chain, have also traveled with you to the chosen global market
(country). You are now in the process of meeting several local companies
in the country to look at potential partnerships and collaboration. Using
the knowledge in this chapter, answer the following questions.
1. What assessments will you make when you visit offices of these local
companies in the country chosen for global expansion for WITI?
References 35
2. What aspects of national and organizational culture will you and your team
seek to understand?
3. What will be the make-or-break aspect of a potential partnership with a local
company, the business/profit aspect, or the organizational culture aspect?
Why?
4. What aspects of the political and economic climate in a country can impact
national and organizational culture and add to stereotypes and unconscious
biases? How will knowing this help Sultan and her team make the right
decisions on international expansion?
References
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(p. 126). Addison Wesley Publishing Company.
Durier-Copp, M., Sundararajan, B., Makani, J., Mechoulan, S., & Falvey, C. (2019, October 8–
10). Leading virtual teams. Presented at online learning 2019, organized and hosted by Contact
North | Contact Nord in Toronto, Canada.
Handy, C. (1981). Understanding organizations (2nd ed.). Penguin Books.
Herring, C. (2009). Race, gender, and the business case for diversity. American Sociological
Review, 74(2), 208–224.
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Johansson, A., Kisch, P., & Mirata, M. (2005). Distributed economies—A new engine for innova-
tion. Journal of Cleaner Production, 13(10–11), 971–979. ISSN 0959-6526. https://doi.org/10.
1016/j.jclepro.2004.12.015
Krause, D. E. (2004). Influence-based leadership as a determinant of the inclination to innovate and
of innovation-related behaviors: An empirical investigation. The Leadership Quarterly, 15(1),
79–102.
LibreTexts. (2021). Levels of culture. https://socialsci.libretexts.org/Courses/HACC_Central_Pen
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Lynch, M., & McFetridge, N. (2011). Practice leaders programme: Entrusting and enabling general
practitioners to lead change to improve patient experience. The Permanente Journal, 15(1), 28.
McDonald, P. (2009). Neurological correlates to authentic leadership. Victoria Management
School.
Mirata, M., Nilsson, H., & Kuisma, J. (2005). Production systems aligned with distributed
economies: Examples from energy and biomass sectors. Journal of Cleaner Production, 13(10–
11), 981–991.
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exes/market-classification
Pink, D. H. (2009). Drive: The surprising truth on what motivates us. Penguin Group.
Steinpreis, R. E., Anders, K. A., & Ritzke, D. (1999). The impact of gender on the review of the
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Culture Shock, Work, and Study
Abroad 3
Culture shock is an emotional reaction that people have when they encounter
a change, or new experiences, because of which their long-held beliefs get chal-
lenged. Culture shock can be experienced by people who stay in their own country
and can be even more challenging to deal with when they move to another country
or meet people from other countries/cultures. Culture shock has stages of adapta-
tion and understanding of how individuals go through all these stages is crucial
to their success in dealing with the representatives of other cultures. Developing
cultural sensitivity and cross-cultural awareness is also an important factor that
contributes to success in a new country.
1. Define and explain culture shock.

2. Look at the characteristics of culture shock and the periods of adaptation to
a new cultural environment.
3. Introduce the cultural frameworks that are used to understand how a cul-
ture shock influences business relationships, a sense of belonging, employee
productivity, and job satisfaction.
4. Give practical recommendations about overcoming culture shock.
Read and Reflect
Mini-case study
Janet Craig and her family moved from Canada to Malaysia for three years,
as she received an international assignment from the insurance company she
was working for. It looked like a great opportunity, as Janet could receive an

https://doi.org/10.1007/978-3-031-06440-1_3
38 3 Culture Shock, Work, and Study Abroad
international experience that, as she thought, would benefit her career when she
comes back.
Janet’s family welcomed a relocation idea, and her husband Craig and her
two daughters, Emily (11 years old) and Abbie (16 years old), were excited to
experience another culture, make new friends, and learn a new language. The
girls were so thrilled that they started planning their trip to Malaysia right away.
After Janet and her family arrived in a new country, they liked it right away.
Janet was impressed with her new team and felt very welcomed in her new
office. Everyone was so friendly and open with her! She even thought that
Malaysians were the most welcoming people she had ever met. James worked
at a building industry in Canada, so with his experience, he quickly found a sim-
ilar job in Malaysia as well. Emily and Abbie went to an International School
and took Mali lessons after their regular lessons. Everyone seemed happy and
satisfied with their new experience.
One day, however, everything changed. Janet felt that she became annoyed at
how her team handled conflicts and communicated with her. She would prefer
them to be more direct in the meetings and show more initiative. She knew that
there was a power distance between managers and subordinates in Malaysia,
but she did not expect this distance to be so huge, especially with more senior
employees.
Each time when Janet expected her team to contribute their ideas during
meetings, they were hesitant to do so, expecting her to give them a clear direc-
tion and tell them what to do. As their expectations were different, this in turn,
created misunderstandings. At some point, they started to consider her a weak
leader who could not make decisions and even told another manager about this.
The workplace environment was becoming more and more tense.
“I really want to go back home”, Janet told her husband when she came
home disappointed again. “I do not want to stay here even for one more week.
The company should find someone else who will agree to this torture. Enough
is enough”, she said abruptly. James was ready for this conversation but was
not ready to go back just after three months after their arrival. What should they
do now?
Discussion Questions
1. Why did Janet want to go back to Canada?

2. What made her disappointed in her work in Malaysia?
3. .What should Janet and her family do now?◄
What Is Culture Shock? 39
What Is Culture Shock?
If you have an experience living in another country for more than three months,
think about your experience. What did you see in that country? Did you see there
what you expected to see? Or did you see something that made you frustrated, lost,
disorganized, and in the end, very unhappy? In other words, was your experience
like Janet’s? If your answer is yes, you went through a culture shock.
Culture shock is defined as “Psychological (and physical) consequences of
changes in circumstances” (Spencer Oatey & Franklin, 2009) and as “The trau-
matic experience that an individual may encounter when entering a different
culture” (Rogers & Steinfatt, 1999). So, we can say that culture shock is a psy-
chological condition characterized by a high level of anxiety, annoyance, and
feeling lost in new cultural surroundings leading to stress and (sometimes) negative
physical consequences.
So, what is exactly culture shock? It is a common experience. It is not a disorder.
It has stages and characteristics, and it is experienced in a different way by differ-
ent individuals. The intensity of culture shock depends on our cultural background,
age, and previous experience (Berry et al., 2010). However, though culture shock
is usually a traumatizing experience, it can be relieved with other people’s help
and support (Berry, 2006). That is why it is important for organizations that send
expatriates abroad to provide enough support for their adaptation in a new cultural
environment. Also, the countries that have well-developed immigration programs,
should include the cultural adaptation component into their pre-arrival and post-
arrival training, as well as schools/universities should deliver cultural adaptation
courses to international students.
So, what are the characteristics of culture shock? How can we recognize that
we have it? What signs of culture shock did Janet have in Malaysia? Spencer-
Oatey and Franklin (2009) state that those who go through a culture shock usually
experience:
1. Sense of loss and feeling of deprivation

2. Feeling of helplessness
3. Irritation/anger about “foreign” practices
4. Feeling of isolation and rejection
5. Confusion in role, values, and self-identity
6. Frustration, depression, and self-pity.
People ask themselves, “Who am I? What do I value now?” Also, people have
numerous why-questions: why are the people’s values in this culture different from
mine? Why do they have other priorities? These questions led Janet to frustration,
depression, and self-pity. She was totally confused and did not know what to do
next.
Research shows that the rates of expatriate failure can reach 30–40% with the
estimated cost of one failure is $1,000,000 (Copeland & Griggs, 1985; Tung, 1981
as cited in Tung, 1993). Cullen and Parboteeah (2014) state that 21% of US expa-
triates return home in the middle of the assignment, which results in high financial
losses (sometimes up to $100,000,000). One of the reasons of these failures is an
inability to recognize and overcome culture shock. So special training as well as
predeparture and post-arrival support would help to prevent the issues associated
with an intercultural transition and adaptation.
Oberg’s Culture Shock Theory
Culture shock has been studied for decades, and the first fundamental model of
culture shock was proposed by Oberg (1960). Oberg identified four stages of the
culture shock, trying to explain what people usually experience when they move to
a different country. This model was called a U-Curve Adaptation Model (Fig. 3.1).
Oberg called the first stage a “honeymoon”. This stage occurs when people
arrive at a new place. They are curious about differences but usually notice only
positive things. This stage is characterized by happiness and satisfaction. You can
compare it to a marriage honeymoon when newlyweds see only positive things in
each other. There are no disappointments at all!
The first stage of culture shock is very similar to this experience. People are
full of euphoria, enchantment, fascination, and enthusiasm. This is exactly what
Janet and her family experienced when they arrived in Malaysia. They had only
positive impressions and liked everything they saw in the new country.
However, with time, those who move to another place start to feel disappointed,
and a crisis occurs. This is the second stage, according to Oberg (1960). The
crisis is characterized by feelings of inadequacy, frustration, anxiety, and even
anger. Expatriates, immigrants, and international students start asking themselves
questions. Why do people handle issues in this way? Why do professors teach in
such a way? Why do doctors treat with such “weird” methods? Why do they give
Fig. 3.1 Oberg’s U-Curve model (Source Based on Oberg [1960])

Oberg’s Culture Shock Theory 41
such prescriptions or advice that “do not make sense”? This is what people may
think, as this is what contradicts their prior experience in their country.
Others may also think that people in a new country do not know how to do
business and how to communicate. They do not know how to deal with people, and
their clothes are not right for occasions. When people have these thoughts, it means
that they are going through a crisis, which can even result in anxiety and anger.
This stage is very challenging, as it will require flexibility, open-mindedness, and
cultural learning. The good news is that, according to Oberg (1960), this period
will soon be over, and people will recover as a result of cultural learning and
adaptation.
In such a way, people will move to the last, adjustment, stage. At this stage, the
mood will improve, productivity will increase, and the overall level of happiness
and satisfaction will rise.
It is important to know, though, that not all people start with a honeymoon and
move through the stages sequentially. Some people get disappointed as soon as
they land in another country, and everyone’s reaction may be different.
Gullahorn and Gullahorn (1963) argue that people also have a culture shock
when they come back home, so they extended Oberg’s model with the “back
home” stages. The scholars suggest that when people return home after living
abroad, they experience the same culture shock as they would experience in a
new country. This stage is called the crisis-at-home, or re-entry shock, or reverse
culture shock. The reverse culture shock happens because of all the changes peo-
ple go through while living in a new country. Though they went through multiple
changes, other people living in their home country have not changed, so it causes
internal and external conflicts.
Usually when people come back home after living in another country, they feel
elated, as they are happy to be in the surroundings they were raised in and enjoy
seeing their relatives and friends. However, with time, everything changes, and
Fig. 3.2 W-curve adaptation model (Source Based on Oberg [1960] and Gullahorn and Gullahorn
[1963])
they go through a disappointment stage and then through the readjustment period
again. So, people experience a similar culture shock that they had in a new country
when they come back, but this culture shock is more intense and therefore, more
difficult. This model is called a W-Curve Adaptation Theory, as it combines two
‘U’s in one (Fig. 3.2).
Kim’s Adaptation Theory
Though Oberg’s adaptation theory is still well accepted and extensively cited, new
adaptation models have recently emerged. Kim (2001), for example, suggested
another model that shed light on the role of stress and adaptation in a growth
process. This model aimed to answer two questions:
. How does the cross-cultural adaptation process unfold over time?

. Why does the rate of speed of the cross-cultural adaptation process vary across
individual cases?
Kim (2001) argues that culture shock is not harmful; on the contrary, it is useful,
as it helps a newcomer to grow due to the stress they experience. As you can see
in Fig. 3.3, all the elements in Kim’s model are interdependent, and each stressful
experience leads to drawing back and then to releasing adaptive energy to leap
forward. So according to Kim, acculturation stress helps people to adapt to a new
environment, and as a result, to grow.
This model, however, raised other questions. Is it possible to completely adjust
to a new culture? As Kim (2001) argues, even if people think that they have already
adapted to a new culture, at some point, they encounter something new that makes
them disappointed again, and the whole process starts over again. So the adaptation
process is a cycle, a constant process that never stops.
Fig. 3.3 Kim’s

Stress-Adaptation-Growth
Theory (Source Based on
Kim [2001]) growth
adaptation stress
Bennet’s Developmental Model of Intercultural Sensitivity (DMIS) 43
Bennet’s Developmental Model of Intercultural Sensitivity

(DMIS)
Another important model that explains intercultural adaptation is Bennet’s Devel-

opmental Model of Intercultural Sensitivity. According to Bennet (2013) who
conducted extensive research on intercultural transition, adaptation is not possi-
ble without developing intercultural sensitivity and modification of behavior. This
means that when a person comes from a native cultural context to a new one,
to become more appropriate for this new environment, they need to modify their
behavior. In this regard, adaptation means a simulation that can be done in two
ways: re-enculturation and simple emulation.
Re-enculturation is a process of adopting a new culture because of which a per-
son’s original worldview is changed into a new one. Emulation involves observing
other people’s cultural behavior and copying it. For example, if I see someone
holding a door for me, even if I do not observe it in my culture, I will follow this
behavior pattern, as I will also want to appear polite. So first, I will be surprised
that people do this but then I will understand that this is what I am expected to
do in a new society as well. So, I will start holding doors for others as well. My
worldview will still be the same, but my behavior will change.
Bennet (2013) argues that cultural adaptation involves six stages (Fig. 3.4).
The first stage in this model is “denial of difference”. At this stage, people
usually say, “There are no differences between us, so people in a new country
are the same as in my home country”. However, at the next stage, people start to
notice these differences and defend against them. They can even become angry and
annoyed at foreign practices. You can hear from them such questions as, “Why is
everything so slow in this country? Why do doctors prescribe a different treatment
here? Why is coffee always served cold in all coffee shops around the city? Why
are people so rude? (Or the opposite), why are people so insincere?”
Nevertheless, with time, people eventually start to understand that they should
adapt to their new environment, so they move to the adaptation stage, and at this
point, a minimization of differences comes into play. Newcomers recognize that
the differences exist, but they are not very dramatic, so they move to the next
6. Integration
of difference
5. Adaptation
to difference
4. Acceptance
of difference
3.
Minimization
2. Defence of difference
against
1. Denial of difference
difference
Fig. 3.4 Bennett’s developmental model of cultural sensitivity (DMIS) (Source Based on Bennet
[2013])
stage and accept this difference. Then they adapt to this difference and successfully
integrate into a new society. At this stage, people’ s level of satisfaction with their
life in a new environment grows; they become productive in the workplace and
more successful in their academic study.
Though Bennet’s theory explained very well how people moved from one stage
to another during culture shock, there were questions that this theory did not
answer. For example, it is not clear if people usually move sequentially through
each stage, or they can skip stages in this model. Also, can people go back to the
stages they have already gone through?
Another important question that Bennet’s theory did not answer was about the
connection between culture? This process may be different depending on the cul-
ture people come from and their willingness to adopt new values and/or maintain
their cultural values.
Berry’s Acculturative Model
So new theories that aimed to fill in the gaps in previous theories were put forward
by other scholars. Berry (2006) argues that the success of intercultural adaptation
depends on a person’s willingness to retain or drop his native culture and adopt
a new one. So he suggests a model that involves four acculturation strategies:
integration, assimilation, separation, and marginalization (Fig. 3.5).
Scholars believe, however, that these are not the only factors that influence
the adaptation process. Other important determinants are the context of reception;
class and “colour”; the ethnic background; the immigrant cultures, and networks
of support and control (Zhou, 1997).
Studies of an expatriate adaptation also show that social interaction and
social support (Caligiuri & Lazarova, 2002; Tung, 2004), work-life balance (Fis-
chlmayr & Collinger, 2010), and the spouse’s orientation towards income versus
career (Cole, 2011) are strong contributors to expatriates’ and newcomers’ success.
Cultural Intelligence and Intercultural Adaptation
A number of studies also proved that cultural intelligence (CQ) plays a vital
role in a successful intercultural adaptation (Chen et al., 2011; Presbitero, 2016;
Presbitero & Toledano, 2016). According to Thomas (2006), cultural Intelligence
involves mindfulness, knowledge, and behavior and can be defined as an ability to
interact effectively with people who are culturally different (Fig. 3.6).
Mindfulness is the main component of CQ, and it means:
. Being aware of our own assumptions, ideas, and emotions

. Viewing the situation from several perspectives (having open mind)
. Referring to the context to objectively interpret the situation
Cultural Intelligence and Intercultural Adaptation 45
Process Description Acculturation

stress level
Integration If it is important for a person to keep their Low
heritage culture, but at the same time they
want to build relationships with a new
society, this individual easily integrates into a
new society.
Assimilation If it is not important for newcomers to keep Moderate
their heritage culture, but they are willing to
accept a new culture, they assimilate.
Separation If newcomers want to keep their heritage High
culture and are not willing to build
relationships with another culture, it leads to
separation. People try to avoid interactions
with the representatives of a new culture and
do not usually engage with a new culture.
Marginalization If newcomers are not interested in either Extremely high
keeping their native culture or accepting
their new culture, they experience
marginalization. People do not feel that they
belong to a new society, and they are totally
withdrawn. If these are students, they fail in
their studies. If these are immigrants or
expatriates, they are not engaged in their
workplace and are completely disappointed.
Fig. 3.5 Berry’s acculturation model
Fig. 3.6 Cultural

intelligence components
(Source Based on Thomas
[2006])
Mindfulness
Knowledge
Behaviour
CQ
. Creating new mental maps of peoples’ personality and cultural background to

be able to respond appropriately to them
. Looking for fresh information to confirm or disconfirm our new maps
. Using empathy and putting ourselves in other people’s shoes to look at the
situation from their cultural perspective (Gardner, 1995; Langer, 1989 as cited
in Thomas, 2006).
Thomas (2006) states that cultural intelligence can be developed through five
stages (Fig. 3.7).
People of higher levels of CQ have a cognitively complex understanding of
their environment. They can make connections easily and evaluate the environ-
ment, others’, and their own behavior. People with a high level of CQ can drop
stereotypes and see a big picture (Thomas, 2006). Such individuals can con-
nect cultural practices with history, social structures, natural environment, and a
religious/philosophical context.
What About You?

. Have you ever experienced culture shock? Or are you still experiencing
culture shock after moving to a new country?
. What stage of the culture shock are you at now if you are experiencing it?
. What helps (helped) you to adapt to a new culture?
Coping with Culture Shock and Stress
As we can see, culture shock can be a painful experience. How can we help our-
selves and others to go smoothly through all its stages? Matsumoto et al. (2007)
concluded that there are four important factors that predetermine people’s success
when they experience culture shock:
. emotional regulation
. openness
. flexibility
. critical thinking.
This means that to successfully adapt to a new culture, one should learn how to
regulate their emotions, to be open and flexible, and to think critically about not
only the culture that an individual has moved to, but also about their own culture.
This is important because without reflecting on their own culture, people will not
be able to learn, understand, and accept a new culture.
Coping with Culture Shock and Stress 47
Stages Description Characteristics

1 Reactivity to external stimuli. People at this stage may say,
“I don’t see cultural
differences, and I treat all
people the same”.
2 Recognition of other people’s cultural norms and People at this stage struggle
motivation to learn more about them. to understand the complexity
of cultural environment. They
search for simple rules to
understand other people’ s
behaviour and guide their
own one.
3 Accommodation of other cultural norms and rules People demonstrate a better
in one’s own mind. understanding of a cultural
variation. Other cultural
norms start to make sense.
People at this stage know how
to behave in different cultural
situations, but they have to
think about the rules, so their
behaviour does not look
natural.
4 Assimilation of diverse cultural norms into At this stage, people find it

alternative behaviours. easier to adjust to new norms,
so they bravely experiment
with a new behaviour.
Representatives of other
cultures perceive them as
culturally sensitive and
knowledgeable and feel
comfortable interacting with
them. They feel at home
almost anywhere.
5 Proactivity in cultural behaviour based on The level of cultural

recognition of changing cues that others do not intelligence at this stage is
perceive. very high. People can easily
understand and predict
cultural changes and other
people’s behaviour. There is
an impression that they
intuitively know what
behaviour is expected and
easily demonstrate it.
Fig. 3.7 The development of CQ

Research shows that resilience, coping, spirit of adventure, and inner purpose
also help to survive in a new culture and adapt quickly. So, when individuals
have an ability to cope with stress and bounce back after making mistakes, they
adapt more easily. Building local support networks and using humor to relieve
tensions are also very important. This is the reason why people who come to a
new country and immediately find friends can adapt more easily, and as a result,
start to understand a local culture faster. Other important contributors to a person’s
success are an inner purpose (includes an inner strength, personal values, and
determination) and a spirit of adventure (WorldWork, n.d. as cited in Spencer-
Oatey & Franklin, 2009).
Practical Recommendations/Survival Tips
1. After arriving in a new country, find friends as soon as you can to under-
stand local values, a preferred way of communication, and norms of behavior
in different contexts (including a business environment).
2. When you go through a culture shock and feel frustrated because of the foreign
practices, try to perceive this experience as an adventure. It will help you to
avoid disappointments and worries about all the differences that you see and
the misunderstandings you encounter.
3. When you are going through hard times, sit and think why you are here. In
other words, think about a goal that you are trying to achieve. Inner pur-
pose is extremely important, as it will help you to stay focused and to avoid
disappointment.
Culture Shock and Business Jargon
Culture shock can be worsened by such factors as differences in communication

style or encountering new realia that people do not understand. These realia are
reflected in the language individuals use in the workplace or/and in a business envi-
ronment. In Canada, such words as sustainability, corporate social responsibility
(CSR), CPP (Canada Pension Plan), and RRSP (Registered Retirement Savings
Plan) are used on a regular basis but can become a cause of frustration due to
misunderstanding and/or not knowing their specific to this country meaning.
Exercise
So, it is important to know how culturally specific concepts and values are
represented in the business jargon to avoid misunderstandings during commu-
nication. To learn more about a culturally specific business jargon, we suggest
the following exercise.
Culture Shock and Business Jargon 49
Go to https://www.talktocanada.com/blog/business-lingo-whats-new-in-
the-world-of-business-language-jargon and look through the words and
idioms on the list.
1. Are there any new to your concepts/idioms on the list?

2. How are their meanings different from the meanings you assumed?
3. Highlight the words/idioms that are new to you.
4. Study the examples to know how these words/idioms are used in a
sentence.
This exercise will help you to remember the words from Canadian Business
Jargon and will reduce your culture shock.◄
Chapter Questions
1. What is culture shock and what are its characteristics?

2. What factors do you think can make a culture shock worse?
3. Why was Oberg’s U-Curve Model criticized? What improvements to the
model did other scholars suggest??
4. How does Kim’s (2001) research prove that culture shock is not harmful?
5. What stages of intercultural transition did Bennet suggest? How are they
different from Oberg’s stages?
6. What questions did Berry’s acculturation model aim to answer? How does
this model explain acculturation?
7. What effect does culture shock have on study and work abroad?
8. Based on the theories covered in this chapter, what can help newcom-
ers/expatriates/international students overcome a culture shock and more
easily adapt to a new culture?
Activities
1. Watch the My Name is Yu Ming short film and answer the questions:
. Why do you think Yu Ming felt so lonely?
. What characteristic of culture shock did he have?
. What caused his culture shock?
. Did he overcome his culture shock? If yes, how did he do this?
. What could help Yu Ming to avoid culture shock in a new country?
2. Watch Why we need to embrace culture shock TED Talk and answer the
questions:
. How does the speaker explain culture shock?
. What characteristics of culture shock does he describe?
. Why does he think we should “embrace culture shock”?
3. If you have had a culture shock before, reflect on your experience. Take a
piece of paper and draw a picture of what you expected to see before you
came to a new culture. Then take another piece of paper and draw what you
actually saw.
. Is this picture different?
. If yes, why do you think it is so?
. How did your perception of the new country change with time?
4. One of the reasons of culture shock is differences in values between a
home and a new country. This activity will teach you how to analyze these
differences based on Geert Hofstede’s research results.
. Go to Hofstede Insights to compare your country with another country
you choose.
. Type these two countries (e.g., China and Canada) in the ‘Type a country’
line.
. Read the information about the two cultures you have chosen.
. How do you think these differences can contribute to your culture shock
if you relocate to this country (even if you move there for a short period
of time to work or study)?
Online Resources
1. Culture Shock and The Cultural Adaptation Cycle [What It Is and What to
Do About It] [YouTube Video]: https://www.youtube.com/watch?v=g-ef-xhC_
bU&ab_channel=TheGlobalSociety.
2. The Developmental Model of Intercultural Sensitivity (DMIS) by Dr. Mil-
ton Bennett, 1993. [YouTube Video]: https://www.youtube.com/watch?v=uyY
kYRrINrI&ab_channel=WiekeGur.
3. Hofstede Insights (a tool for comparing countries): https://www.hofstede-ins
ights.com/product/compare-countries/.
4. Berry’s Model of Acculturation [YouTube Video]: https://www.youtube.com/
watch?v=3x_6VOlQ1J4&ab_channel=GabrielChisholm.
5. Canadian Identity and Society: https://www.canada.ca/en/services/culture/can
adian-identity-society.html.
6. Statistics Canada. Ethnic and cultural origins of Canadians: Portrait of a rich
heritage: https://www12.statcan.gc.ca/census-recensement/2016/as-sa/98-200-
x/2016016/98-200-x2016016-eng.cfm.
7. Glossary of Business Jargon (Business Dictionary): https://www.sfu.ca/~mvo
lker/biz/glossary.htm.
8. What is Culture Shock? [YouTube Video]: https://www.youtube.com/watch?
v=N7IaSmP2ohk&ab_channel=SocialScienceSchool.
9. Studying Abroad: Culture Shock [YouTube Video]: https://www.youtube.com/
watch?v=z5EEz_R_RiE&ab_channel=INTOStudy.
10. How Culture Drives Behaviours by Julien S. Bourrelle (TED Talk): https://
www.youtube.com/watch?v=l-Yy6poJ2zs&ab_channel=TEDxTalks.
References 51
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Ethics and Ethical Dilemmas Across
the Globe 4
Multinational companies (MNCs) are often under fire for following unethical
principles in business. It affects their relationships with stakeholders, including
investors and consumers, and significantly damages their reputation. As a result,
these companies lose stakeholders’ trust and profound goodwill.
Managers at all levels in all companies face ethical dilemmas every day; how-
ever, the managers of multinational companies must deal with more ethical issues
due to cultural, political, economic, and judicial system differences in other coun-
tries. Current research suggests that ethical norms are different across the globe,
and even when they are similar, not all the governments have enough power or
willingness to control multinational companies’ activity in their countries. Such
lack of control often leads to unethical decisions to gain more profit. Another
challenge is the corruption of social and political institutions in other countries,
which makes international companies’ expansion more difficult. It often leads to
MNC’s breaking the ethical code of conduct by getting involved in corruption
scandals and losing stakeholders’ trust.
1. Examine the role of globalization in changing the perception of moral

responsibility across the globe.
2. Explain the historical and philosophical factors that influence the perception
of ethics around the world.
3. Explore cultural differences in the perception of ethics.
4. Give the guidelines to dealing with global ethical dilemmas.
5. Look into corporate social responsibility and sustainability.

https://doi.org/10.1007/978-3-031-06440-1_4
54 4 Ethics and Ethical Dilemmas Across the Globe
Mini-Case Study
In 2016, Apple came under fire for breaking ethical laws. The European Com-
mission accused the company of an illegal deal with the government of Ireland
that allowed Apple to have a special corporate tax rate. The European Commis-
sion claimed that Ireland gave Apple up to $14.5 billion in unpaid taxes from
2003 to 2014 as “preferential tax treatment”. According to European Union’s
(EU) State Aid rules, it is considered illegal.
As most of Apple’s subsidiaries are in Ireland, Apple allegedly took advan-
tage of US and Irish tax regulations, as Ireland has a lot of loopholes in its
tax law to attract more investments. While the European Commission has clear
rules that taxes should be paid where the revenue is generated, Ireland allows
them to be paid in the country where the subsidiaries are located.
At the same time, though the US tax law requires that US corporations pay
taxes on their global income, it “allows domestic corporations to defer taxes on
their income until it is returned to the US”. In other words, if a company keeps
its income abroad, this loophole in the tax law allows it to avoid paying taxes
in the US. In Apple’s case, it was a tax on $44 billion offshore income between
2009 and 2012. Though it is still unclear if the European Commission has a
right to make such claims, they undoubtedly affected Apple’s stakeholders in
terms of sales and revenue, as it damaged the company’s reputation (Barrera &
Bustamante, 2017).
What do you think?

1. If tax law is different across the globe and there are different reg-
ulations in different parts of the world, which regulations should a
multinational company follow?
2. There are numerous ethical implications in Apple’s case. Some of them
are given below. What do you think are other implications? Can you
add more implications to this list?
. Reputation damage. Apple stocks lost 2% after European Com-
mission’s announcement.
. Impact on education, infrastructure, and health care in develop-
ing economies throughout the world. The e13 billion that Apple
owes is “the equivalent of the annual budget for Ireland’s health
service”.
. Negative impact on job opportunities in Ireland, as country’s rep-
utation as “tax heaven” has suffered. As a result, Ireland (as well as
Europe overall) may become less attractive for investors (Barrera &
Bustamante, 2017).
Globalization and Ethics of International Business 55
Ethical understanding of what is right and wrong is different across the globe.
Before we move on in this chapter, think about other international companies
that acted unethically. What companies come to your mind? Why is their behav-
ior considered unethical? What are the consequences of such behavior (if there
are any)?◄
One of the examples of the companies that found themselves in ethics violation
scandals can be Alibaba. It was discovered that in 2009, about 100 out of 5000 of
its employees were engaged in fraud. As you may know, Alibaba does not charge
commissions on sales like other companies, but it gets commissions when award-
ing a gold status to merchants. It was determined, however, that around 2300
Alibaba sellers out of 140,000 had fraudulent credentials, and sometimes they
received them with the help of Alibaba. As a result, these merchants received a
gold status, and a high number of buyers paid for goods that they never received,
without knowing that they dealt with fraudulent companies. The company took
these allegations seriously, as it was important for it to develop trust in relation-
ships with customers. As a result, David Wei, the CEO of the company, had to
resign (Branigan, 2011).
Another example is Alcatel, a well-known communications company. The for-
mer CEO of Alcatel, Christian Sapsizian, was accused of bribing senior Costa
Rican government officials to receive a mobile telephone contract with the Costa
Rican state-owned communications company. “US authorities alleged Alcatel sub-
sidiaries paid $14m in phony consulting contracts as part of the bribery scheme.
Of the $14m, roughly half went to Costa Rican officials to win and maintain
three telephone contracts valued at $303m” (Scannel, 2010, para. 2). Alcatel is
not an American company, but as it is listed on the New York Stock Exchange,
its behavior violated the Foreign Corrupt Practices Act. As a result, Sapsizian was
sentenced to 30 months in prison, and the company had to pay $10 million to the
Costa Rican government in response to corruption allegations.
These are only some examples, but they show that international business ethics
is much more challenging due to the unique ethical problems multinational compa-
nies face. It looks like everything should be clear. If you work for a multinational
company, and your headquarters are in Canada or in the United States, for example,
can you follow the laws of the original country to avoid ethical mishaps? Unfortu-
nately, managing subsidiaries in other countries is not as easy as it seems. Even if
these are legal actions in these countries, we should ask ourselves a question: are
these actions ethical?
Globalization and Ethics of International Business
Many of the issues international business face these days are related to globaliza-
tion. Globalization can be defined as a process of building new relations between
people, businesses, and governments of various countries because of increasing
international investments, trade, and information exchange.
Pros of globalization Cons of globalization

1. Falling borders 1. Depletion of natural resources
2. Growing cross-border trade and investment 2. Environmental pollution
3. Rise of global products and customers 3. Increased gap between rich and poor
4. Lower prices in many countries countries
5. Encouraging local productivity through 4. Increased interdependence of the world’s
competition economies
6. Greater availability of jobs and better access
to technology for the countries with emerging
7. Transferring technology to less developed
countries
8. Most efficient production as a result of
enabling countries to specialize in producing
particular goods
Source Cullen and Parboteeah (2014) and Mele (2020)
As we can see, globalization has both advantages and disadvantages, and most
of them are the result of the work of Multinational Companies (MNCs). Due to
globalization, however, the companies should also solve numerous problems con-
nected with operating in the countries where government, institutional, and law
systems may be different from those in the home countries. With fewer resources
and less developed technology in some countries, managers’ decisions can more
negatively affect people. For instance, in case of lay-offs or sickness, people can
find themselves and their families on the street, dying of hunger or illness if they
lose a job, as there are no employment insurance and sick days in many developing
countries. What should the managers at MNCs do to prevent these consequences?
Cultural Differences in Ethics
One of the main differences in ethics around the globe is the perception of cor-
ruption. As an example, take an accepted amount of gift-giving and entertainment
that vary around the world to a great extent. Think about Canada’s prime minister
Justin Trudeau who paid 100 dollars fine for failing to declare a gift worth more
than 200 dollars within 30 days of accepting it. According to Canadian laws, if a
prime-minister or another government member accepts a gift that is worth more
than 200 dollars, they should declare it (CBC News, 2018).
In contrast, in Japan, university professors, for academic research grants budget
as a legitimate expense 20% of the grant for entertainment costs. It is almost
impossible to have business relationships with Japanese without gifts, and you are
expected to give, receive, and accept gifts (known as omiyage). Sometimes these
gifts can be very expensive, and they are not considered as a form of bribery in
Japan.
Several studies attempted to establish a connection between cultural values
(Hofstede’s dimensions, in particular) and ethical policies, or codes. Vitolla et al.’s
(2021) study of 191 international companies in 29 countries concluded that there
is a greater orientation towards control in high uncertainty avoidance and restraint
Guidelines for Ethical Decision-Making Across Cultures 57
cultures, so there are higher quality ethical codes in these countries. After conduct-
ing research in 2,700 companies in 24 countries, Scholtens and Lammertjan (2007)
also found that individualism and uncertainty avoidance are “positively associated
with firms” ethics’ while “masculinity and power distance tend to be negatively
associated” (p. 281).
Seleim and Bontis (2009) established that countries that have a high score
on future orientation (they focus more on strategic planning and creating vision
statements) have a low level of corruption, and societies high on in-group versus
institutional collectivism have high levels of corruption, as people are involved in
actions that will benefit their friends or relatives. In this situation, employees are
more concerned with relationships than with the work efficiency and fair decisions,
which may lead to unethical practices.
So, differences in the perception of corruption are often related to the differ-
ences in the perception of nepotism. These differences are based on cultural values,
as people from collectivistic cultures that place value on long-term relationships
versus short-term revenues, prefer to hire those who they know and trust. In these
countries, doing business with those people who are barely known to business
owners and managers carries a high risk, so hiring relatives and friends as well
as looking for business partners among those who they know at a personal level
helps to mitigate this risk.
In Asian countries, this approach comes from Confucianism and partially Bud-
dhism (Withey, 1994) while in Middle Eastern cultures, it traces back to the
historical past when people lived in tribes and did not trust outsiders. So, it is
important to know that what is considered to be a conflict of interests or nepo-
tism and is frowned upon in Western and North American cultures due to their
individualism may be an accepted business practice in other parts of the world.
For international business owners and MNC’s managers, it is always important
to remember, however, that corruption negatively affects both the company and
the society as a whole (Fig. 4.1). So, they should avoid any harmful practices
associated with bribery and corruption.
Research on corruption is very challenging, as the required information is not
always open. However, transparency.org found the methods to research the percep-
tion of corruption around the world. Based on the research results, transparency.org
put forward a corruption perception index (CPI) for rating corruption perception.
In this rating, a highest CPI indicates the least corrupted country.
Guidelines for Ethical Decision-Making Across Cultures
As we learned in this chapter, international business ethics is complicated due to

the differences in cultural values. So, managers should be aware of these differ-
ences to be able to predict possible challenges and find ethical solutions. There
are two main approaches to ethical decision-making: teleological and deontolog-
ical ethical approaches. The first approach comes from a traditional philosophy,
and the second one is a contemporary view. Teleological approach is based on a
•High prices in developing countries
.Inefficient allocation of resources
.Undermined competition
.Poorer products and materials
Discouraged entrepreneurship (bribery becomes a form of taxation)
Fig. 4.1 Consequences of corruption (Comte et al., 2005)
belief that the morality of act or practice proceeds from its consequences. In other
words, if the consequences are harmful, it is an unethical act. If the consequences
are good, the act is ethical. As an example, stealing medicine in a drug store for a
dying parent is ethical because it is crucial to the parent’s survival.
Utilitarianism is a good example of a teleological ethical approach. Multina-
tional companies usually do the cost and benefit analysis, which is one of the
applications of utilitarianism. Utilitarianism argues that what is good and moral
comes from acts that produce the greatest good for the greatest number of people.
So, when the benefits outweigh the cost of something, this act is considered ethical
according to the teleological ethical approach.
In contrast, deontological ethical theory is based on the belief that the morality
of an act of practice is based on the act of practice itself. So, the outcomes are not
important in this situation. A person, for example, chooses not to steal medicine
in a drug store because stealing itself is immoral regardless of the health condition
of their parent. So, this individual behaves ethically according to a deontological
argument when they refuse to steal. Another example: closing the plant is unethical
because workers are not treated with dignity.
Some deontologists argue that morality is intuitive. Others say that we can’t
rely on intuition and instead, we should follow the essential moral principles like
the Golden Rule, Bible, or Qur’an that can be the guidelines for us in this life
(Buchholz, 1989 as cited in Cullen and Parboteeah (2014).
If the laws in the original country of the company are different, would you act
ethically by breaking those laws and following the laws of the host country? This
is a very important question to answer, as it may become a trap that most managers
find themselves in.
Guidelines for Ethical Decision-Making Across Cultures 59
If you are in favor of ethical relativism, a theory that argues that each society’s
view on ethics must be considered legitimate, you may decide to follow the laws of
the country you are in though they may be considered unethical in the company’s
original country. Those who make decisions according to ethical relativism believe
that as cultures across the globe are different, ethics is different as well. This
means that there cannot be agreements on moral principles across cultures. Even
if these agreements exist, understanding of moral principles is different, as ethical
relativists argue.
Others believe that expatriates working in other countries should follow the
principles of ethical universalism that argue that moral rules are universal, so
they cannot differ across the cultures. Many argue that companies cannot follow
either of these philosophies, as they have higher moral responsibilities than cultural
relativism. Another argument is that ethical universalism leads to ethnocentrism,
which means that companies cannot follow ethical universalism due to the reason
that some cultures will always be dominating and imposing their ethical views on
others. This approach is known as convenience relativism.
It is hard to reconcile ethical universalism and relativism. One of relatively
successful attempts to do so was made by Donaldson (1992) who argues that
international business ethics is better understood by focusing on the moral lan-
guages of international business ethics. He believes that these languages clearly
describe how people think about ethical decisions. Figure 4.2 shows the list and
descriptions of these languages.
Ethical languages provide a framework for thinking about ethical decisions and
dilemmas more structurally. They help managers understand the philosophy behind
the company’s ethical or social responsibility policies to guide them through the
decision-making process.
In addition to ethical languages, Donaldson offered an “algorithm” that would
help to make ethical decisions. According to Donaldson (1989), “The practice is
permissible for the multinational companies if and only if the members of the
home country would, under conditions of economic development similar to those
of the host country, regard the practice as permissible” (Donaldson, 1989, p. 103).
Donaldson and Dunfee (1999) also suggested that the managers of multinational
companies should rely on hypernorms that are universal across the globe, as they
deal with universal norms and are based on common ethical values (e.g., human
dignity), human rights (e.g., right for just treatment), and welfare norms (e.g.,
prohibition of child labor or human exploitation).
Despite all the attempts to reconcile universalism and relativism, it is still
unclear what guidelines multinational companies should use to make ethical deci-
sions. As a result, there is a growing pressure for multinational companies to
follow the same rules in managing ethical behavior and social responsibility due to
the differences in ethics we examined in this chapter. Ethical convergence theory
argues that there should be a code of conduct for all the multinational companies.
There is a long list of documents that could be included in the code of conduct.
These documents are excellent guidelines to ethical decision-making across the
globe:
Moral Language Description
Virtue versus vice Virtues are contrasted to vices. People who

exhibit positive characteristics (virtues) are
considered ethical. The results of the action
are not important.
Self-control Focuses on achieving control over evil

thoughts and actions such as passion
(Buddhism, Hindu, Plato in Western
philosophy).
Maximizing human welfare Focus on utilitarianism (focus on the greatest
good for the greatest number of people).
E.g., exposing a few people to dangerous
substance is acceptable if other people in the
society can benefit from it.
Avoiding harm Focus on consequences, but from another

perspective than maximizing human welfare.
Here, it’s “if it doesn’t hurt anybody, it is ok”.
Rights and duties Emphasis is on duties and rights. (E.g., duties

of parents to take care of their children and
the right to free speech.) This language fits
well in a legal context.
Social contract The social contract language defines ethics as

a form of agreement among people. These
agreements may not be written but may be
taken for granted by all parties. In this case,
what people in our culture and organization
agreed to consider ethical is ethical.
Fig. 4.2 Donaldson’s (1992) moral languages (Source Cullen and Parboteeah [2014])
1. European Convention of Human Rights

2. Universal Declaration of Human Rights
3. International Labour Organization’s (ILO’s) Standards
4. World Trade organization’s (WTO’s) Standards
5. ICC Guidelines for International Investment
6. Conference on Security and Co-Operation in Europe Final Act
7. Global Principles of Ethical Practice in Public Relations and Communication
Management
8. UN’s Guiding Principles on Business
9. Fair Labour Code
10. The United Nations Code of Conduct on Transnational Corporations.
Corporate Social Responsibility (CSR) and Sustainable Development Goals 61
What do you think?
. Do you agree with the following statement: when in Rome, do as Romans

do?
. Should multinational companies follow the principles of ethical relativism
or universalism when making ethical decisions?
. Can a manager behave ethically just by following the host countries laws?
Corporate Social Responsibility (CSR) and Sustainable

Development Goals
In addition to ethical responsibilities, many believe that companies have obliga-

tions toward society. These obligations are called corporate social responsibility
(CSR). The concept of CSR was popularized by Carroll (1991) who created a
pyramid of CSR (Fig. 4.3).
This pyramid represents the stages a company should move through to meet all
responsibilities towards a society. Though there are still debates about what partic-
ular responsibilities companies should have (e.g., it is still debatable if all business
organizations have a responsibility to donate to charities), it is clear that ethical
actions are a core obligation each business organization should fulfill.
With a recent shift from shareholder to stakeholder approach in corporate gov-
ernance (Rahim et al., 2011), there is more pressure on the companies to take
responsibility for their actions. This responsibility means accountability to all
groups of stakeholders, including customers, employees, suppliers, and commu-
nity at large. It also means responsibility for deteriorating natural environment
Fig. 4.3 Carroll’s pyramid of

CSR
Philanthropic
responsibilities
Ethical responsibilities
Legal responsibilities
Economic responsibilities
and depletion of resources. As a result, many business organizations shifted to the

ethics of care, ecological responsibility, and sustainable development that focus on
saving resources and taking care of the planet for future generations. Following
this change, the UN took sustainable development as a broad idea and suggested
Sustainable Development Goals (SDGs) that responsible governments and business
organizations should meet. We presented this in Chapter 2 and revisit them again
as a refresher and to provide context.
1. No poverty: end poverty in all its forms everywhere.

2. No hunger: end hunger, achieve food security and improved nutrition, and
promote sustainable agriculture.
3. Good health and well-being: ensure healthy lives and promote well-being for
all at all ages.
4. Quality education: ensure inclusive and equitable quality education and
promote lifelong learning opportunities for all.
5. Gender equality: achieve gender equality and empower all women and girls.
6. Clean water and sanitation: ensure availability and sustainable management
of water and sanitation for all.
7. Affordable and clean energy: ensure access to affordable, reliable, sustain-
able, and modern energy for all.
8. Decent work and economic growth: promote sustained, inclusive, and sus-
tainable economic growth, full and productive employment, and decent work
for all.
9. Industry, innovation, and infrastructure: build resilient infrastructure, pro-
mote inclusive and sustainable industrialization, and foster innovation.
10. Reduced inequalities: reduce inequality within and among countries.
11. Sustainable cities and economies: Make cities and human settlements inclu-
sive, safe, resilient, and sustainable.
12. Responsible consumption and production: ensure sustainable consumption
and production patterns.
13. Climate action: take urgent action to combat climate change and its impacts
14. Life below water: conserve and sustainably use the oceans, seas, and marine
resources for sustainable development.
15. Life on land: protect, restore, and promote sustainable use of terrestrial
ecosystems, sustainably manage forests, combat desertification, and halt and
reverse land degradation and halt biodiversity loss.
16. Peace, justice, and strong institutions: protect, restore, and promote sus-
tainable use of terrestrial ecosystems, sustainably manage forests, combat
desertification, and halt and reverse land degradation and halt biodiversity loss.
17. Partnerships for the goals: strengthen the means of implementation and revi-
talize the Global Partnership for Sustainable Development (United Nations,
n.d.).
In a globalized world where MNCs operate, SDGs have become the main oper-
ating principles for ethical decision-making. No matter where the company’s
Corporate Social Responsibility (CSR) and Sustainable Development Goals 63
subsidiaries are located, employers have obligations to provide fair wages and
safe working conditions for employees. Both supply chain and outsourcing require
that companies that order raw materials or build factories in developing countries
do not ignore the issues of sweatshops and unsafe working conditions despite
their desire to increase profits. Low wages often make people in the countries
with poorly developed economies constantly work overtime to feed their fami-
lies. Difficult economic conditions also push children to leave school and do hard
labor work to help their families to feed themselves. MNCs are aware of these
issues, but they often put the responsibility to handle them onto the government
and factory management in those countries. Should they also take responsibility
for exploitation, child labor, and workplace safety?
The answer is certainly yes. Providing fair wages and following high labor stan-
dards should be a responsibility of MNCs that generate profits while outsourcing
or using supply chains. This can be done through a reliable auditing of working
conditions in all links of the supply chain and providing certification that would
guarantee that there is no abuse of working conditions and violating ethical norms
in supply firms (Mele, 2020).
In addition, companies are obligated to effectively manage ecosystems to
prevent or reduce:
. Resource depletion (forests, water, and sources of energy)

. Global warming
. Radioactive contamination
. Biodiversity loss
. Waste disposal (recycling and using biodegradable materials)
In the past, MNCs often failed to avoid harming the environment when operating
overseas, which resulted in ecological issues, particularly in developing countries
and in traditionally black and indigenous communities. It is important to stop
MNCs’ detrimental practices even if such actions (e.g., dumping waste in rivers
or burying toxic waste in landfills) are legal in those countries. Multinational busi-
nesses are also responsible for bringing new technologies to improve a production
process, make it safer, and reduce undesirable environmental impact.
End-of-Chapter Assignments and Exercises-Case Scenarios, Short Answer Ques-

tions
1. What challenges and ethical dilemmas does globalization bring to multina-

tional companies?
2. What MNC’s unethical practices are linked to globalization? How can they
be avoided?
3. What are the harmful effects of corruption? How is the perception of
corruption different across the globe?
4. What are the differences between teleological and deontological approaches

in ethics?
5. How does the algorithm proposed by Donaldson (1989) help MNCs to make
ethical decisions? Do you agree that this algorithm is effective? (Explain and
provide examples.)
6. How is corporate social responsibility (CSR) related to international man-
agement? What ethical challenges do MNCs have after a recent shift to the
stakeholder versus shareholder approach in business?
7. Why is sustainability in international business important? How can multina-
tional companies meet UN’s sustainable development goals (SDGs)?
Activities
1. Cultural differences in ethics

Go to https://www.youtube.com/watch?v=hmyfjKjcbm0&ab_channel=
TEDxTalks and watch “Riding the waves of culture: Fons Trompenaars at
TEDxAmsterdam” TED Talk. What cultural differences in ethics does the
speaker discuss in his talk? How does he explain these differences?
2. Corruption Perception Index Activity
. In small groups, go to Transparency International Website
. Find information on Corruption Perception Index (CPI). How is it mea-
sured? What is the logic for including the various indicators in measuring
CPI?
. What are some essential characteristics of countries that score highly on
the CPI? How are they different from countries that have low CPI scores?
. Share your findings with the whole class.
3. According to ethicalconsumer.org, below is the list of the most unethical
companies based on consumers’ voting. In small groups, research these com-
panies and summarize their unethical practices. Share your findings with the
whole class.
. Nestlé
. Monsanto
. Amazon
. Shell
. Tesco
. Barclays
. Exxon
. Wal Mart
. Coca Cola
. Primark
4. Watch Auret van Heerden’s TED talk “Making Global Labour fair”. How
can the speaker’s ideas help the companies mentioned in Activity 2 improve
their ethics?
References 65
Online Resources
1. The ethics of offshoring: How to choose vendors that align with your values
2. Foreign Corrupt practices Act
3. 4 companies who succeed by focusing on ethical sourcing and manufacturing
4. What makes a company ethical?.
References
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Branigan, T. (2011, February 27). Alibaba.com chief executive resigns. The Guardian. https://
www.theguardian.com/business/2011/feb/21/alibaba-chief-resigns-over-frauds
Buchholz, R. A. (1989). Fundamental concepts and problems in Business Ethics. Prentice Hall.
Carroll, A. (1991). The pyramid of corporate social responsibility toward the moral management
of organizational stakeholders. Business Horizons, 34, 39–48.
CBC News. (2018, June 22). Throwing shade: Trudeau fined $100 over gift of sunglasses. https://
www.cbc.ca/news/politics/trudeau-fine-sunglasses-pei-1.4718338
Comte, O., Lambert-Mogiliansky, A., & Verdier, T. (2005). Corruption and competition in procure-
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Donaldson, T., & Dunfee, T. W. (1999). Ties that bind. Harvard Business School Press.
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Mele, D. (2020). Business ethics in action: Managing human excellence in organizations (2nd ed.).
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https://www.ft.com/content/1b7b2e22-1211-11e0-92d0-00144feabdc0
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Vitolla, F., Raimo, N., Rubino, M., & Garegnani, G. M. (2021). Do cultural differences impact
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vinus.hu/459/1/Boda_Int_ethics_2011.pdf
The Role of Technology in Doing
Business Across Cultures 5
Adapting to technological change is a continually evolving organizational priority

and connecting across borders to ensure that intra and inter organizational virtual
teams (geographically not co-located) are prepared, engaged, and trained suffi-
ciently to perform to expectations is still an elusive organizational objective. In
this chapter, we will focus on how cultural sensitivity (or lack of) adds an addi-
tional layer of complexity to team dynamics in a virtual environment, laden on top
of logistical challenges and language barriers. Additionally, when organizations
move to adopt new technologies like blockchain (distributed ledger systems) and
artificial intelligence (AI) based processes for competitive advantage, how can
organizational employees be prepared to address the challenges of navigating both
cultural and technological challenges? This chapter is even more relevant now, in
the time of the COVID-19 Pandemic and how people have resorted to technology
to continue to work and meet others (far and near) in the era of social distanc-
ing and extraordinary restrictions on travel. The approach will also help students
understand the various stakeholder (internal and external) engagement platforms
and how best to use the available technologies to engage and interact with these
stakeholders and not let the technologies be barriers to effective and empathetic
communication.
Learning Objectives—This Chapter Will
1. Introduce the concepts of technology use and adoption across cultures.

2. Provide information about networking and distributed technologies.
3. Introduce the concept of the ConnecT Framework for working in and leading
virtual teams and how they can help work in remote, cross-cultural teams.
4. Introduce the concept of disruptive technologies and how they permeate
across cultures.

https://doi.org/10.1007/978-3-031-06440-1_5
68 5 The Role of Technology in Doing Business Across Cultures
What Is Technology?
As per the Merriam-Webster dictionary, technology is the “capability given by

the practical application of knowledge”. This can be across any field or area of
activity. Alongside technology the concept of innovation is also brought up and
the dictionary defines innovation as, “a new idea, method, or device, and/or the
introduction of something new”. Innovation and technological improvements have
been occurring across cultures and civilizations. Ancient Greece had central heat-
ing, the Indus Valley civilizations of Harappa and Mohenjo-Daro (3000 and 2600
BCE) had excellent innovations and technologies in irrigation, agriculture, food
production, mathematics, metallurgy, metrology, etc., as did the ancient Chinese,
Egyptian, and Mesopotamian civilizations. Other such innovations include the bat-
tery by the Parthian or Sasanian empires in the third century AD, the steam turbine
in first century Greece, the alarm clock in third century Greece, and the Viking pre-
compass maritime navigational aids. Wars and defense agencies have also allowed
the creation of many technologies and innovations in weaponry, engineering, sci-
entific advances, and the most impactful technological innovation of the twentieth
century, the Internet, which evolved from ARPANET. Vint Cerf (also credited with
the first use of the word “internet”) and Bob Kahn, two American Scientists, cre-
ated the first TCP/IP (Transmission Control Protocols/Internet Protocols), which
determined how data moved through a network.
When one looks at technology and innovation, the originators, creators, or
inventors, may have been inspired by a clear need for a certain type of action
or service that the technology could help achieve or solve a problem. While the
technologies do end up providing such solutions, the adoption of the technology by
lay persons and others, often takes on different forms, befuddling the creators, but
creating new opportunities for the adopters and users. For example, when YouTube
was created by Google (now Alphabet), it was mainly for people to share videos of
pets and possibly other such events in their lives. Today, YouTube has become the
preferred platform for people launching singing and acting careers, social media
influencers, K-Pop bands, sports reviews, organizational brand management initia-
tives, and of course the continued proliferation of cat videos. YouTube is not the
only technology that has taken on unimagined proportions. Across cultures, pre-
pandemic, people figured out ways to connect and collaborate with one another
using Facebook, Twitter, Instagram, WhatsApp (the popular four), along with Dis-
cord, Tik Tok, Sina Weibo, Snapchat, Reddit, and LinkedIn (for professionals to
network). According to Kemp (2022), over 5 billion people around the world use
the internet, which is about 63% of the world’s populations (7.93 billion at the
time of data collection). Additionally, the report indicates that there are around
5.32 unique mobile phone users and about 4.65 billion active social media users.
So, what are people using the internet and social media platforms for. Kemp
(2022) reports that the digital empowerment has allowed people to find informa-
tion, keep in touch with family and friends, keep up-to-date with news and events,
stream videos, movies, or shows, for research, find new ideas, listen to music, learn
online and take certificate courses, travel and tourist information, generally browse
Connected Technologies 69
and pass time, research health issues, products, and services, find information on
things to buy, manage finances and savings, gaming, business-related searches, and
find new ways to collaborate for work or other activities. With the recent boom in
cryptocurrency like Bitcoin, Ethereum, has resulted in many users seeking to invest
and trade in cryptocurrencies. Online education has seen a boom during the pan-
demic when K-12 and Higher Education institutions needed to provide education
to their students. Education portals, supplemented by connection and collaboration
technologies like Zoom, Microsoft Teams, Adobe Connect, CISCO Webex, Citrix,
Google Classroom, and many others, jostled for internet space to provide syn-
chronous learning opportunities for students stuck at home and employees working
remotely from home.
While these numbers in themselves are quite large and impressive, in the
thirty-two years since the internet as we know it was discovered (1991), there
are still vast populations yet to connect to the internet, particularly in emerg-
ing economies and low-income economies in Asia and Africa. These countries
also show a gender imbalance with more males having access to the internet than
females (Kemp, 2022). While more people are getting access to the technologies
and innovations of our time, there is still a growing digital divide. As we look at
the various types of technologies used across cultures, we will do so with an eye
to the United Nations Sustainable Development Goals (UNSDGs—https://sdgs.un.
org/goals), particularly Goal #3—Good Health and Well-Being, Goal #4—Qual-
ity Education, Goal #5—Gender Equality, Goal #8—Decent Work and Economic
Growth, Goal #9—Industry, Innovation, and Infrastructure, Goal #10—Reduced
Inequalities, Goal #11—Sustainable Cities and Communities, and Goal #12—
Responsible Consumption and Productions. While all the goals are important, we
will be well served if we look at technology and innovation as potential solutions
to many of the world problems that these UNSDGs seek to address, and how cul-
tural adoption of technologies can determine how these problems are addressed
and eventually solved.
Connected Technologies
Gartner’s Hype Cycle (www.gartner.com) is a graphic representation of innova-

tions and emerging technologies in different domains, allowing individuals and
organizations to track how a new or emerging technology or innovation matures
and provides an indication of future potential. In October of 2021, indicated that
Generative Artificial Intelligence (AI), Data Fabric, Distributed Enterprise, Cloud-
Native Platforms (CNPs), and Decision Intelligence (DI), Autonomic Systems,
Composable Applications, Hyperautomation, Privacy-Enhancing Computation
(PEC), Cybersecurity Mesh, AI Engineering, and Total Experience were the tech
trends to watch and track (https://www.gartner.com/en/newsroom/press-releases/
2021-10-18-gartner-identifies-the-top-strategic-technology-trends-for-2022).
While many of these emerging innovations and technologies find ready appli-
cations in industry and enterprises, many still are applicable to individuals and
communities. Connected technologies like smart homes (where devices are con-
nected and can monitor and manage ambient temperature, appliances, mobile
devices, computers etc.), allow for immersive experiences using augmented
reality (AR) wearables, monitor the health of people in homes or other orga-
nizations, and even manage motor vehicles, are already quite common in many
modern households that can afford them. As with all products or services, till
economies-of-scale is reached, many of these will remain out of reach for individ-
uals and households that have lower socio-economic statuses and are historically
marginalized.
Epstein (2018) writes that there is an “interconnected relationship between
humans and technology” and “technology influences everyday life and has a strong
influence on culture”. For example, emerging economies that did not have the
means to deploy huge communication infrastructures like telephone cables and
such in the later twentieth century, leapfrogged into the twenty-first century with
the swift adoption of mobile phones and mobile technologies, allowing the people
in these countries to begin joining their counterparts in the developed countries in
the race for internet and social media usages. This is evidenced by the low cost
of mobile data plans and internet usage in countries like India and China. The
large populations in these and other emerging economies allow for the advent of
economies-of-scale and allow internet and mobile service providers the revenue
and profit margins to provide low-cost services.
The other aspect where connected technologies and technologies that connect
people can converge is when people across cultures come to have a better under-
standing of one another and begin to declutter their biased opinions of other
cultures and forge new ties that can allow people to collaborate and contribute to
individual, organizational, communal, and societal growth. Combi (2016) writes
that the youth of the past decade, while being technologically savvy, know little
about youth in other parts of the world and still rely on stereotypes and myths that
pervade the internet. She advocates the cross-pollination of local cultures, indige-
nous cultures, and societal cultures to participate in global creativity and allow
people to move beyond just the colonial, Euro-centric cultural norms that have
permeated across all societies. The confluence of cultural anthropology and tech-
nological advances can allow for such a melding of cultural elements across vast
working populations, as people work to connect, do business, grow economically,
and thrive, while overcoming societal shortcomings of poverty, lack of hygiene,
limited access to education, and resources.
Social and Professional Networks
While all the channels discussed in this chapter are in one way or another social
networking sites, some of these are specifically meant only for socializing and con-
necting socially with friends, families and extending one’s circle of friends. Most
people go on these sites to catch up with old school mates, current friends, and
acquaintances and even coworkers and share their likes, dislikes and preferences
Social and Professional Networks 71
for events, things, humor, and a range of topics. Nothing is considered taboo for a
share or dislike, though friends and family often chide their network connections
for inappropriate behavior or posts. Considering that so many people, especially,
young adults and even teenagers, are on these sites, many teachers in secondary
schools, colleges, and universities have resorted engaging their students directly
on these sites, particularly, Facebook, Twitter, Tumblr, and Instagram (now owned
by Facebook).
While students need to keep and maintain their personal identities on these
sites, so too will teachers and educators and corporations. Most people are asso-
ciated with either a school or college or an organization (private or government).
It would be equally inappropriate for a teacher to teach professionalism in their
face-to-face or online classes and then post silly comments or pictures of them-
selves or others in their social media accounts. They will soon be exposed and will
likely face a dent to their reputation and credibility, and they could also be fired
from their jobs (Huffington Post, November 17, 2014). Organizations like schools
or companies also need to be wary of how they represent themselves and how
their employees represent themselves as individuals and as representatives of the
organization. A misstep by one invariably affects the image and reputation of the
other, like the “Blackface” controversy at Mayfield Secondary School in Caledon,
Ontario (Karstens-Smith and Rushowy, November 12, 2013).
In Table 5.1, we present some strategies and concepts that will help individ-
uals and corporations (private or government organizations) better manage their
online presence and identities. In the Channel column, we list a few of these social
networking sites. The next two columns list the strategies and approaches with spe-
cific attention to audiences, image, identity, brand, reputation, reach, frequency and
whether it is push or pull. The last column lists a few ways to track the impact
of the activities of these entities (individuals or corporations). The approaches
and strategies listed here are not meant to be exhaustive, but they do cover a
broad set of actions and for the most part hold true, regardless of the channel
(Sundararajan & Macdonald, 2016).
Linkedin is probably the most popular professional networking site that allows
organizations and individuals to connect to one another in a very professional envi-
ronment. A high level of professionalism is expected from everyone inhabiting
the site. This means that information about previous work experiences, education,
skills, and achievements need to be accurate and verifiable. Other professional
networking sites require similar levels of professionalism and accuracy in profile
descriptions. Though other such sites, like Plaxo, Zerply, Branchout, or Meetup
work a little differently, all of them aim to allow professionals and organizations
to connect to one another to facilitate recruitment of talent & vendors, provide
referrals for projects, promote products and services, and look to enhance individ-
ual and organizational profiles and image. The focus here will be the managing
of individual and organizational identity in a professional networking environ-
ment. In Table 5.2, we present a way to manage individual and corporate identities
(Sundararajan & Macdonald, 2016).
72
Table 5.1 Managing individual and corporate identities on social networking sites (Sundararajan & Macdonald, 2016)
Audience-identity-image-brand-reputation-reach-frequency-consistency-push & pull
Channel Individual Corporate Tracking impact
Social Networking – Friends and family – Current and potential stakeholders – Look to create social and cultural
Facebook – Maintain self-Identity and enhance – Creative freedom needs to be exercised change
Baidu/Weibo self-image with caution – Track number who repeat behavior
Twitter – Individual is the brand – Never make claims based on the – Track number who behave as desired
MySpace – Full creative freedom assumed superiority of product or – Track number who change attitudes
Foursquare Snapchat – Actions impact reputation service – Track number who change opinions
– Temptation to write or say or upload – Do not take brand loyalty for granted – Track number who learn message
anything – Use emotional messages appropriately content
– Typically reaches almost everyone in the – Make only claims that can be supported – Track number who attend to messages
individual’s network by real and verifiable evidence and activities—repost/retweet
– Frequent posts or comments can be – Participate with the intention to engage – Track number who receive messages
considered a nuisance unless content is with followers and interested patrons and activities
funny or useful or relevant and of course – To extend reach, users would need to
appropriate repost or retweet about the brand or
– May work as a pull strategy for a while, company
till people get tired – Be consistent in the messaging
– Most in-network friends/family are – Do not try to push too much marketing
forgiving information
– Try and avoid getting tagged too often – Create policies that employees can
– Use emotional messages, but try never follow with respect to online behavior
to insult, flame, or shame anyone both as individuals and as
– Never bully or tease anyone and also representatives of the organization
watch out for other cyberbullies in your
network and if necessary, take action to
stop such activities
5 The Role of Technology in Doing Business Across Cultures
Distributed Networks and Virtual Teams 73
Table 5.2 Managing individual and corporate identities on professional networking sites (Sun-
dararajan & Macdonald, 2016)
Audience-identity-image-brand-reputation-reach-frequency-consistency-push & pull
Channel Individual Corporate Tracking impact
Professional – Audience is typically – Audience is typically – Track number of new
Networking professionals, other other organizations, introductions
LinkedIn network contacts, competition, vendors, – Track number of
Meetup potential employers potential employees, résumé submissions
Branchout – Maintain a and new business for posted jobs
Zerply professional connections – Track number hired
Plaxo appearance – Ensure professionalism through applications
– Only contact others and consistency in from these sites
through network messaging – Track number of
introductions – Use clear, people discussing the
– Research well before evidence-based company
contacting network information to support – Track number of
members claims about interview calls
– Do not make your organizational received
connections do extra achievements – Track number of new
work – Cultivate and nurture business
– Ensure that network network contacts by opportunities
members trust you responding quickly to – Track number of new
enough so that they queries contacts into
can introduce you to – Employ people skilled community networks
their contacts in writing to manage the – Track impact of
– Do not misuse or profile page and community relations
abuse network producing content on community and in
relationships – Ensure all links to turn on the employee
– Check with network company website work morale
members if they are – Feel free to engage with – After product launch,
willing to help before in and out network track visits to profile
introducing new participants
contacts – Ensure that hiring firms
– The new contacts you do not convey false or
introduce will either misleading information
enhance or damage – Tap into community
your reputation networks to establish
– Do not overuse community relations
network contacts – Tap into product and
– Return the favor service user groups to
– Write clearly and provide support
promptly thank
network contacts for
their introductions
Distributed Networks and Virtual Teams
Distributed networking is a distributed computing network system where compo-

nents of the program and data depend on multiple sources. In a supply chain, a
distribution network is an interconnected group of storage facilities and transporta-
tion systems that receive inventories of goods and then deliver them to customers.
It is an intermediate point to get products from the manufacturer to the end cus-
tomer, either directly or through a retail network. According to Technopedia, a
distributed network is a type of computer network that is spread over different
networks. This provides a single data communication network, which can be man-
aged jointly or separately by each network. Besides shared communication within
the network, a distributed network often also distributes processing.
Being aware of such networks, which are ubiquitous today around the world,
present in all forms of organizations, will allow students of international and
intercultural business, to better understand how such networks help organizations
function and go about their modern workday, transact business, communicate
across time zones and international borders, learn about different cultures and
participate in collaborative efforts. Such networks form the basis of social and
organizational networks that allow people to work together in virtual teams that
are geographically, temporally, and even spatially distributed.
Challenges to VTs
The concept of virtual teams has now existed for at least two to three decades
and while many organizations in the world were partially having people work in
virtual teams, the pandemic brought to the fore the need to have better trained
people to effectively work in, manage, and lead virtual teams. Govindarajan and
Gupta (2001) mention the several challenges faced by people working in virtual
teams. Chief among them being the following:
. Cultivating trust
. Overcoming isolation/lack of face-to-face contact
. Overcoming communication (language and cultural) barriers
. Aligning goals of individual team members
. Obtaining clarity regarding team objectives
. Ensuring that the team possesses necessary knowledge and skills
. Ensuring the availability of sufficient/appropriate technology resources
. Dealing with role uncertainty because members are on too many virtual teams,
multiple reporting lines
. Virtual team interactions are different from face-to-face
. There is a need to utilize virtual team building techniques, and technology to
increase media richness.
Twenty years later, Puranam and Minervini (2020), identify very similar chal-
lenges to virtual teams today, exacerbated by the pandemic and work-from-home
ethos, leading to more social isolation, less cultural and workplace sensitivity, and
untrained leaders and managers. They urge that virtual teams today, need to focus
on the following:
The ConnecT Framework 75
. Employees may not have access to effective workspaces at home—so balance

asynchronous with synchronous—more asynchronous and targeted synchronous
events
. Create synch sessions only for socializing—to combat social isolation—video
calls with no agenda
. Managers can see the current crisis as an opportunity to improve their writ-
ten communication skills—concise, unambiguous writing is critical for remote
collaboration—and virtual team management skills.
. Use data to understand how your org really works.
Karen Lojeski’s Virtual Distance Model-VDM (2010) highlights the need for
people to understand the various distances that people will have to traverse while
working in virtual teams. She describes the three distances in the VDM, Affin-
ity Distance that determines cultural relationships and social interdependence,
the Physical Distance that determines the geographical, temporal, and organiza-
tional separation for people in virtual or remote teams, and finally the Operational
Distance, that determines, the effectiveness of organizational communication,
organizational readiness, and fatigue caused by multi-load work expectations.
The ConnecT Framework
The ConnecT Framework for leading and managing virtual teams, developed by
Durier-Copp et al. (2019), seeks the Integration of Culture, understanding of
Complexities and Contexts, management of Conflict, and effective and consis-
tent Communication. These Cs need to be carried through consistently across
the various Ts, Empowering Teams, Completing Task, Utilizing Timeline, and
Leveraging Technology, that form the basis of the success of teams, and in this
case, virtual teams. The ConnecT framework seeks to enable e-Leaders to manage
the Cs to achieve the teams’ competencies and gain the trust of their team mem-
bers. This will allow team members to maximize their potential and help attain
team goals. By design, it needs to be iterative, and constantly closing the loop.
Figure 5.1 we briefly describe the various quadrants of the ConnecT framework.
Fig. 5.1 The ConnecT framework (Durier-Copp et al., 2019)
Dealing with Complexities and Contexts
Complexities and contexts are constants in the business environment, and these
can get exacerbated in cross-cultural work practices, either when doing business
internationally or with people from different backgrounds working in the same
organization. Virtua Team (VT) members need to learn to quickly identify the cur-
rent contexts (i.e., contextual awareness), and then locate the nature of the task or
process and determine the level of complexity involved. Once this is understood,
they can marshal the resources available to the team and the expertise present
in the team to tackle the complex problem at hand. The team manager or leader
can adopt a leadership style that is adaptive, enables the free expression of ideas
and thoughts, and seeks to have a shared leadership approach to solve the com-
plex problem. Such an approach will allow for trust to develop and help the team
complete the task at hand (Fig. 5.2).
Creating context is a main characteristic of the leaders interviewed by Lojeski
(2010). Context helps employees understand where they are and what their role
is. Understanding complexity requires the e-Leader to understand and recognize
the contexts, before rushing to prescribe quick fixes. Virtual teams are not one
size fits all. There are many variables to consider, and the issues are complicated.
Complexity can be related to team composition, resources available, task specific,
or timeline related. The contexts for each can again be different, and the effective
e-Leader recognizes these differences, adapts their leadership style accordingly,
works, listens to team feedback, and explains how, why, and when decisions are
being made.
Types of Leaders 77
Fig. 5.2 ConnecT framework—dealing with complexities and contexts and the Ts (Durier-Copp
et al., 2019)
. Structural supports, for vertical leadership, such as built-in reward systems,

regular communication or feedback, and methods for information sharing are
effective to foster hierarchical leadership.
. Shared leadership is most successful when teams evenly distribute the work and
when tasks are independent.
Types of Leaders
A recent review of leadership literature purposes four sources of leadership, broken

down into two structural dimensions; focus of leadership (internal vs. external) and
formality of leadership—informal vs. formal (Morgeson & DeRue, 2006).
Informal Leader—is more of an advisor who is not directly assigned to lead.
Feedback—informal internal leadership is best.
Formal Leader—an advisor who has been assigned to lead.
External leaders—are not involved in the day-to-day operations of the project.
Morgeson et al. (2006) suggest that training team members is more effective when
it originates from an external-informal source rather than a internal-informal.
Internal Leader—is and is seen as an equal in the group. Shared teams who
evenly distribute the tasks will be more successful than those who do not.
. training team members are more effective when it originates from an external-
informal source rather than a internal- informal.
. Feedback—informal internal leadership is best
Types of Tasks
Collaborative vs. Interdependent

Leading teams which work interdependently vs. collaboratively requires a deep
understanding of the need for each task type. It is particularly important since the
interaction and exchange of information has been positively linked with virtual
team trust (Dirk & Ferrin, 2002).
High task interdependency results in increased needs for adjustments, commu-
nication, and coordination (Guzzo & Shea, 1992) and creates an environment that
facilitates trust development (Wilson et al., 2006).
Integrate Culture
Having an extensive and diverse community network allows leaders to better span
cultural, geographical, and age boundaries and identify the right people for jobs
and or issues. Diversity and conflict are a component of teamwork and can facil-
itate innovation. Diverse teams need to negotiate how they are going to work
together. Teams will benefit from learning, sharing, and questioning personal
and cultural norms for work ethic and decision-making is important for teams
(Fig. 5.3).
. Leverage team differences to facilitate innovation

. Diverse teams need to establish how they will work collaboratively together.
Fig. 5.3 ConnecT framework—integrating culture with the Ts (Durier-Copp et al., 2019)
Integrate Culture 79
Creating a Sense of Community
Lojeski (2010) discusses creating community in her book Leading the Virtual Work-
place. She explains that while some teams stay together for longer periods of time,
many will come teams will together to accomplish a project or task and then move
on to work in another team project. Being a well-connected leader to a diverse
group of professionals outside of one’s team will enhance one’s ability to recruit
the right people and keep good relationships. Teams that share common values and
can find common interests will likely build trust and stronger relationships. These
relationships can play a vital role in engagement and commitment to their work,
both in and outside of their designated job functions the team may require mentor-
ship or advice from people with a specific skill set outside of their own team. This
network building and often voluntary assistance creates a sense of organizational
citizenship and community.
. Build a diverse network of professionals

. Leverage diversity and similarities. Find common interests and values that alight
with the group and organizations to create a sense of community.
Managing Conflict
Conflict is a part of teams. It is important of course to not think of conflict as
solely negative. Conflict can be addressed as challenges that present opportuni-
ties for improving innovation, cohesiveness, creativity, and problem-solving skills.
Some have argued that it can contribute to organizational effectiveness (De Drue &
Vliert, 2003). However, it is still best to mitigate conflict as much as possible
(Fig. 5.4).
Types of Conflict Resolution
When finding methods for working with diverse teams consider the fact that the-
ories pertaining to conflict, which cannot be applied to multiple cultures may
be irrelevant. For example, researchers have studied how parts of Asia tend to
use avoidance and other accommodative approaches to deal with conflict (Chung,
1998; Graham et al., 1988). A cooperative style has been found to be useful in
culturally diverse teams.
Culture Turning Conflict Resolution

Leung et al. (2003) proposed cultural turning as a broad approach for dealing
with barriers that can lead to misunderstanding and miscommunication. Its three
principles include:
The holistic rule that diverse people should consider the norms, motives, and
cognitive processes of all participants’ cultures, as they work together.
Fig. 5.4 ConnecT Framework—managing conflict and the Ts (Durier-Copp et al., 2019)
The synergistic rule suggests that cultural groups must work together to
overcome difficulties and strengthen their relationship.
The learning rule suggests that they reflect upon and learn from each inter-
cultural encounter. Individuals and situations differ on many dimensions, and it
is only realistic to expect miscalculation and misunderstanding. Through experi-
ence, diverse people need to experiment and develop effective mechanisms for
collaboration.
. Understand that conflict can be positive

. Consider using a Cooperative Communication
. Consider using Cultural Turning to Resolve Challenges.
Building Trust to Mitigate Conflict

The literature commonly emphasizes the early stages in the team process as being
critical for building trust and mitigating conflict. Teams must rely on some sort of
team building process to create trust, shared vision, effective decision-making.
The structure and goal setting associated with directive leadership in the early
stages of group interactions is to establish shared values, norms, and practices to
enable trust (Weisband, 2002). Hunsaker and Hunsaker (2008) suggest that estab-
lishing clear ground rules is the most important part of a team’s life cycle. They
acknowledge that this stage takes time and is rarely deployed despite its success
in developing trust. They also suggest that restricting team size to fewer than ten
will help mitigate challenges (Hunsaker & Hunsaker, 2008).
Hassan (2005) suggests that trust can be built on likability and reliability. Again,
this deals with the people and task focus within the team. Trust can be built when
the leader or team member completes tasks on time and as expected (or beyond
expectation) and if they are friendly to work with.
. Create teams that are fewer than ten

. Take the time in the early developmental stages to establish clear ground rules
and group norms (Consider using a Team Charter in the welcoming stage)
. Be likable and reliable.
Effective and Consistent Communication

Communication is everything! The following chapter on communication is from
Hassan (2005) online book Influencing virtual teams: 17 tactics to get things done
with your remote employees. He suggests that misunderstanding is common in vir-
tual teams and leads to increased confusion, frustration, and wasting time. Creating
context for the team is important (Fig. 5.5).
A mobile or virtually disperse workforce does not see the same people at the
office everyday. They may not how they fit into an organization or how they can
create a career path within the organization. They may not have an opportunity to
share with or check-in with coworkers about personal life and personal interests.
A virtually disperse teammate may never meet their boss or see them face to face.
These personal interactions are very important to most people and need to be
available somewhere in their work life.
. It is important to dismiss the idea that these personal human interactions are no
longer necessary and understand that they still are.
. Lack of information regarding the context leads to ineffectiveness.
Fig. 5.5 ConnecT Framework—effective communication with the Ts (Durier-Copp et al., 2019)
. Being the anchor or constant for the team to help everyone stay connected and
informed
Meetings
Before the meeting—define the objective—i.e., “make a decision on…, make
plans for…, generate ideas for…”, determine the attendees—limit numbers, draft
an agenda, send invitations and agenda reminders, keep consistent meeting times
to balance every ones’ schedule, if you want to hear from everyone—keep it brief,
give everyone a set amount of time, anything beyond that can be discussed outside
of the meeting.
During the meeting—Delegate a facilitator, go through the agenda, capture
minutes, close and review.
After the meeting—do not rely on verbal requests, put everything in writing,
send out meeting minutes, and include a short summary of action items to make
visible in the email.
Having Clear Deadlines and Expectations Will Help the Team
. avoid procrastination
. hold team members accountable
. determine priorities
. create a sense of accomplishment,
. get things done
. Use deadlines. Be reasonable and clear with deadlines
. Do the appropriate work before, during, and after meetings to manage team
activity
Feedback
Feedback is best shared as face-to-face as possible. It is suggested that leaders give
feedback in collocated areas within the distributed teams. If this is not an option-
low virtuality is most socially appropriate.
. Give feedback using media rich technology, such as the telephone or video,
when face-to-face communication is not available.
Empower and Manage Team

Team Charter—Mission, Vision, Values, and Goals
The Team Charter is not consistently referenced to throughout virtual team leader-
ship literature; however, all the critical components that it addresses are. The Team
Charter can be designed to address many potential challenge areas in the early
stages of a project including; team expectations, goals, roles and responsibilities,
values, mission statement, how decisions are made, time availability, communica-
tion norms, preferences, dislikes, team building, and learning team members skills
sets, any other concerns or points of interest members may want others to know
about. Because the whole team is involved in creating the rules of conduct, it helps
to ensure needs are met and builds trust early on. Byrd and Luthy (2010) provide
the following outline for what to include in a team charter.
Personnel
The objective of this section of the Charter is to enable team members to become
acquainted quickly as well as exchange contact and other significant information.
. Members’ names, phone numbers (work and home), and addresses

. Communication preferences (to make certain that the method(s) documented are
ones that all team members have access to, i.e., teleconferencing, smartphones,
email, etc.)
. Personal Biography (on the individual, their family, hobbies)
. Present and past work experiences
. Personal resources and skills (e.g., typing, writing, computer/technology, soft-
ware)
. Strengths and weaknesses (professional and personal)
. Why did you choose the job?
. Expected job projects, travels, and vacations scheduled throughout the length
of the term
. Family and other personal commitments that could impact meeting or team
activities
Processes
The objective of this section of the Charter is to foster direct discussions regarding
how to best work through issues which will typically arise. When fully realized,
the Team Charter becomes the cognitive map for teams to understand the processes
that occur in all groups when interacting to achieve organizational goals.
. Purpose of the team (Mission)

. Policies on meetings and frequency
. Division of labor/tasks
. Team Roles and tasks (e.g. team leader, secretary, meeting, minutes, and
schedule for revising the charter)
. Decision-making (method for making decisions, i.e., consensus, majority, secret
ballot, etc.)
. Discipline (how this will work if discipline problems arise)
. Communication and coordination issues
. Emergencies (how will communication or responsibilities be handled if a team
member has a family emergency or other event that affects their participation
in team activities)
– Consider creating a Team Charter in the early stages of your team’s
development.
Co-activate Leaders
Providing opportunity for growth and leadership motivates the team. Lojeski
(2010) discusses co-activating leaders in her book Leading the Virtual Workplace.
Co-activating leaders is in line with the idea of “shared leadership”. Shared leader-
ship is common among virtual teams where each member plays a leadership role
at different times in the project life cycle. Each utilizes the specific skills they
have.
. Encourage team members who are naturally drawn to specific aspects of the
project.
. Notice and reward leadership behavior
Types of Tools
There are several tools available. It is the team leader’s responsibility to research
or delegate someone to research what tools are available and best suited to the
task. They are responsible to familiarize themselves and train the team to use new
tools. Utilize Timeline The life cycle phases are based on Hunsaker and Hunsaker’s
(2008).
4 Project Lifecycle Phases

Preparation Phase
Purpose—The preparation phase is to ensure the availability of appropriate
technology resources, training, and appropriate team selection.
Leaders Tasks to Facilitate—Create a mission statement, select personnel, task
design, determine the level of virtuality and what tools to use, receive appropriate
training.
Initiation or Welcome Phase
In this stage the team would also raise and legitimize any interpersonal con-
cerns, encourage open communication, and capitalize on the diverse perspectives
and skills in the group. They suggested ways to mediate main challenges that arise
in virtual teams by restricting the team size to ten or less, that an initial face-to-
face meeting, if possible, is essential to building trust, they suggest holding regular
meetings, encourage openness to cultural difference, define clear goals and roles,
and provide regular feedback.
Purpose—Focus on goal alignment, relationship building, relationship and task
definition, cultivate trust, ensure team has appropriate knowledge and skills.
Leader’s Task to Facilitate—Align team with the bigger purpose, clarify roles
and goals, discuss specific project objectives in relation to organizational goals
(consider cultures differences within the organization), review time zones and
when the team is available to work, discuss delays and expectations, identify indi-
viduals unique skills and needs or concerns, encourage open dialogue, discuss how
the and how often the team will communicate, establish means for evaluation and
conflict management, provide time to socialize, ensure training where necessary.
Members’ Tasks—Build relationships, map out tasks and interpretation and
objectives, ask questions.
Tools—Team Charter, work plan, medium for face-to-face communication.
Midstream Working Phase
Purpose—Overcome lack of face-to-face communication, keep on schedule,
maintain motivation, effective creation of infrastructure systems and coordination.
Leaders Task to Facilitate—Provide positive transformational feedback, enable
knowledge transfer, determine rules for decision-making, monitor interactions,
communicate a common sense of effort and vision, be available via tools of
choice, give direction, support, know the team member’s capabilities and align
them with tasks, continue to provide clarity, facilitate processes and interactions,
specify communication and decision-making means.
Members Tasks—Communicate/ Share own knowledge and capabilities, estab-
lish communication and decision-making tools.
Tools—Chat, email, phone, video, written performance reviews.
Disbanding Phase
Purpose—Review the process and outcomes.
Leaders Tasks to Facilitate—Analyze the work, promote learning, promote
competence development, critical analysis, understand what motivated or dis-
couraged the team, how were goals met, how was conflict mediated, recognize
achievement, and end smoothly by reinforcing positive achievements.
Members Tasks—Reflect on personal development, team’s development, and
on effectiveness of leadership.
Tools—Video-conferencing or written evaluation.
. Consider the importance and responsibilities within each phase of the project
lifecycle (the preparation, welcome, midstream, and wrap-up)
Completion of Tasks
Seamless Work
One of the best ways to effect seamless work is to manage expectations. Manag-
ing resources, capital, people, all come second to the management of expectations.
The skilled E-Leader will have a clear idea of what needs to be done to achieve
the targeted team goal, what would constitute par performance, what would con-
stitute above par, and what the benchmarks need to be achieved by the team. To
this extent, the skilled E-Leader will gauge expectations, set expectations, work
towards meeting expectations, and then exceeding them.
Gauging Expectations—There can never be a standard template for success,
only frameworks, and schemas, that can be adapted to changing contexts and
needs. The skilled E-Leader will go about understanding the concepts, the contexts,
the needs of the project, the needs of the project team, the needs of management,
and the needs of the client for the team’s output. This will allow the E-Leader to
get a clear idea of the expectations from each of the vested stakeholders, and make
the distinction between needs and wants, between must haves, and nice to haves.
Setting Expectations—Having successfully gauged expectations, the skilled
E-Leader now needs to go about setting the expectations, i.e., what can truly be
achieved given the resource, capital, and technological constraints. The needs will
be attended to first, while the wants (nice to haves, or bells and whistles) will
be earmarked and weighted so that if resources get freed up, these can be added
one at a time. The E-Leader then gets in writing, from each team member, what
can be expected from them, and when. This is then interwoven with the timeline
utilization plan. The successful E-Leader will also plan to have a factor of safety
built into each plan, either as a percentage of error, or lag or delay, or over cost,
to allow room for unforeseeable circumstances.
Meeting Expectations—Inherent in the ConnecT framework design, is the iter-
ative feedback loop. The successful E-Leader will seek to follow up with each team
member, using the most appropriate technologies available, to ensure that each VT
member is meeting expectations. This is critical, because what was promised by
the team as a sure deliverable, must be delivered, and that can only happen if
everyone is performing to their optimal levels. When such a state is ensured, the
E-Leader can then work towards exceeding expectations.
Exceeding Expectations—Here the successful E-Leader, uses encouragement,
praise, recognition, reward even, to coax superior performances from each VT
member. At this stage, the VT should be performing at optimal levels, the VT
members trust one another and their leader, and there is now a pride associated
with the collective effort. They all will share in the success and are more likely to
now exceed individual and team expectations, resulting in a higher quality product,
possible on-time completion, and more importantly, repeat business. Each member
will emerge as a strong team player, as a domain expert, and a potential leader
themselves.
Information Sharing
Information sharing—information is the lubricant of any team or organization.
The following information sharing categories are from Charlene Li’s book Open
Leadership (2012) as an Openness Audit for Information Sharing. These categories
address an organization at large, however, have been adapted to reflect project
teams as well as organizational sharing.
Explaining:
Explaining, much like creating context, the team leader or executive’s way of keep-
ing people informed about what, how, and why things are operating. Explaining
involves:
. leaders taking the time to explain how and why decisions are made.
. providing enough information that partners and interested parties outside of the
organization or team project and understand why and how decisions are being
made.
. explaining what information is confidential so people in and outside of the
organization or project feel secure sharing sensitive information.
Updating:
Providing current updates is common practice in the virtual world. It helps reduce
feelings of isolation and keeps members connected to the project and organization.
Virtual leaders, both within their teams and organizations, can experiment with
ways to engage their team by sharing regular updates. Updating is an important
way to keep the team engaged, connected, and motivated.
Updating involves:
. having technology and processes like community and collaboration tools are in
place to facilitate information sharing and collaboration.
. executives and employees frequently using social technologies such as blogs,
videos, and collaborative platforms to provide updates
. Shared updates are perceived as useful and not seen as human relations sole
responsibility.
Conversing:
Conversing is the idea that information and ideas must be shared through multi-
ple channels and directions to create richer and deeper meaning. If a virtual team
project is of interested to the greater public, they will likely be conversing using
social media, blogs, and websites. Conversing also happens between team mem-
bers and leaders privately. As mentioned previously, considerations need to ensure
the appropriate technology tools and processes are in place for team members to
converse and share ideas in a comfortable, efficient, and timely manner.
Conversing involves:
. Employees and executives feeling free to blog and participate in social media.
. An organization or team project that is committed to hearing from and talking
to interested parties, and employees even when it is negative.
. Having community tools that engage users, customers, and partners to talk with
each other and to engage with the project team or organization.
Open Mic:
Like conversing, the open mic concept encourages participation from employees
and outside interest. It is another way to open a team up to sharing information
for the interest of the team, project, and or organization. This may be encouraged
through email or a shared chat room as well as in the public domain. Open mic
involves:
. Having channels in place through for employees and outside interest to

contribute ideas and content.
. Having an organization or team leaders that are actively encouraging employ-
ees, users, and or costumers to contribute their ideas and best practices.
. Having employees, outside interested parties, and or partners frequently
contribute ideas and suggestions that are adopted by the team project or
organization.
Disruptive Technologies and Adoption
Most times innovation and technologies occur when processes get old or even if
not old, become ineffective in what they had sought to accomplish. These inno-
vations are often incremental and help move things along, but they don’t really
change the core process much. Disruptive innovations and technologies completely
change the thinking on these processes, the paradigms they have been operating
under, and totally replace existing processes in a bid to provide not just efficiencies,
but improved effectiveness for the tasks or goals at hand.
SYDLE (2022) lists some examples of disruptive technologies in recent times,
particularly in the digital space. These include, but are not limited, video streaming
(revolutionized by Netflix and Amazon Prime, followed by a host of other sim-
ilar services), digital transport services like Ola, Uber, and existing cab services
moving to the digital domain, virtual reality (VR), augmented reality (AR), mixed
reality (MR), music streaming from early days of peer-to-peer networks to profes-
sional streaming services like Spotify, opportunities to do small gigs (Fiverr and
such), online housing and lodging services like AirBnB, messaging apps that work
across platforms (WhatsApp) and provide text, voice, and video capabilities, online
knowledge repositories available for free (Wikipedia, Investopedia, etc.), crypto or
digital currencies, with non-fungible tokens (NFTs) for added security, 3D print-
ing, collaborative e-commerce, online education and education portals from K-12
to higher education, and finally, voice activated digital assistants to guide users and
learners while providing AI enabled safe learning environments, Merlyn Mind.
Two other recent phenomena have already become regular features in organiza-
tions across countries and continents: Crowd sourcing and Cloud-based platforms,
with Software As A Service (SAAS) approaches to providing value to individual
and enterprise customers. These are providing opportunities for people across the
organization in different geographical locations to communicate and collaborate
effectively and can be used as discussed below.
Crowd Sources:
Crowd sourcing is becoming more common and trusted to compile large amounts
of data in less time. Not all teams or organizations will have a need for crowd
sourcing, however, when applicable it can be very useful way of gathering needed
information. On a smaller scale teams may consider things like needs assessment
Conclusion 89
surveys or consultation meetings as crowd sourcing information. Crowd sourcing

includes:
. Having a platform for large groups of people to be able to contribute ideas,

innovations, and solutions.
. Having a proactive process in place to seek out and try new sources of ideas
and innovation.
. Having ideas from outside the project or organization incorporated into prod-
ucts, services, and processes.
Platforms:
Whether the team or organization shares information solely through social media
or through several information sharing and storing platforms, it is important to
consider the need and the accessibility for users. Widespread access may include
the team, leaders, and partners or it may include the public at large. It takes time
upfront to ensure the right platform use for a team and or organization. Platform
open sharing includes:
. Architecture and data platforms that are available for widespread access
. Open platforms that are seen as a strategic and competitive advantage
Consider the processes and sharing platforms in place for your team to receive
updates, converse, contribute to projects, share ideas and feedback, share with,
and hear from outside interest and partners.
Conclusion
When it comes to technologies and the adoption of these technologies by individu-

als and organizations, the rate at which adoption occurs can vary from individual to
individual, organization to organization, culture to culture. While individuals and
some organizations across cultures can be innovators or early adopters, most indi-
viduals and organizations fall under the category of early majority or late majority,
with a few coming in at the tail end of that innovation and are called laggards.
This classification was conceived by E. M. Rogers (1962), primarily in the Pub-
lic Health domain and has been used to study behaviors of people over the last
six decades. This model has also been used to explain the adoption of technolo-
gies and innovations in the general space and while there are limitations to this
approach, because individuals, organizations, and cultures vary significantly, most
people and organizations adopt technologies because it suits their current needs
of connecting to one another, becoming more effective in the things they do, pro-
vide entertainment and socialization, and generally tend to improve the quality of
life for those who can access these innovations and technologies. It is therefore
important to remember that access to technologies and innovations is key to the
betterment of individuals, organizations, and societies and our work is to continue

to provide people with the access and capabilities.
End-of-Chapter Assignments and Exercises-Case Scenarios
Why has Netflix not been able to crack the Indian market?—Krishna Veera
Vanamali | New Delhi. Last Updated at January 25, 2022 08:15 IS
Netflix Chairman Reed Hastings recently expressed ‘frustration’ over the
company’s lack of success in the Indian market. What prompted Hastings to
make such a statement? Let’s find out in this report.
Shares of the world’s largest streaming service Netflix plunged 22% last
Friday, after fourth-quarter subscriber addition fell slightly short of its own
target. It added 8.28 million customers in the October–December period, ending
the year with nearly 222 million subscribers.
In its home turf of the US, Netflix’s growth has been stagnant for a long
now. And it has been eyeing other big markets.
Netflix was launched in India in January 2016. And after over six years of
streaming, it is a distant third in the country. Although the streaming company
doesn’t reveal the number of subscribers, a research firm recently claimed that
it has around 5.5 million subscribers in India.
Its competitors, Amazon Prime and Hotstar, are way ahead with 22 million
and 46 million subscribers respectively, the firm claimed.
Netflix co-CEO Reed Hastings highlighted the company’s struggle in the
Indian market, whose 1.3 billion population offers a huge growth potential.
This is what he said.
Analysts say Netflix did not get its content strategy right. Going by the
Ormax Media data of the top 15 series on subscription-driven streaming video
brands, only one is from Netflix.
Of the top 100 theatrical films based on domestic box office in Hindi since
2018, Amazon Prime Video bought 48 while Netflix picked up only 20. In
Telugu, Netflix bought just nine titles, against 40 by Amazon Prime Video.
Zee5 bought twice that number. For some years now, analysts have been
questioning Netflix’s strategy about non-Hindi programming. While content is
only one aspect, Netflix had failed to hit the mark on pricing and distribution.
A week ago, Netflix raised prices in the US. But in December, it slashed
prices in India by up to 60% across plans as it tries to catch up with its rivals
in a price-sensitive geography. It has already invested $400 million in Indian
content.
Hastings compared India to the Brazil market where, according to him, it
was brutal in the first couple of years. A country where he thought Netflix
would never break even, it is now its second biggest market with around 18
million subscribers.
The competitive intensity in the Indian OTT market is also heating up.
Regional streaming platforms have been giving tough competition to the big
players. Yet, Netflix says the Indian market isn’t that difficult to figure out and
References 91
hopes it can do another Brazil here. Pandemic helped Netflix gain a foothold in
India and several other countries too. The streaming giant now stares at a tough
road ahead, where quality content and reasonable prices will decide its fate.
1. What appears to have been the problem with Netflix’s approach to marketing
their products in India?
2. What cultural and national elements should Netflix have considered if they
truly wished for potential consumers in India to accept and welcome the
streaming products and offerings and grow the market share?
3. Do you think this reflects the lack of understanding of the Indian market by
Netflix and what consumers prefer watching? Explain.
4. Do you think this reflects the lack of ability by Netflix to understand the
competition—domestic and foreign in the streaming space?
5. Do “first world” organizations approach emerging markets from a colonial
standpoint, where economic analysis and profits, appear to override cultural
aspects of doing business in these markets? Synthesize your answers based
on cultural dimensions and comment on how broadly or narrowly these
dimensions can help companies when they enter emerging markets.
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Accounting Practices
6
This chapter begins with a brief history of the double-entry accounting system used
widely today. The system for keeping financial records was popularized by the so-
called father of accounting Luca Pacioli,1 an Italian mathematician and educator.
His 1494 book entitled “Particularis de computis et scripturis” (About accounts
and other writings) is the first published book on present-day double-entry book-
keeping. The chapter then describes the GAAPs used in major economies of the
world discussing their similarities and differences as some countries favor rules-
based accounting and others prefer principle-based accounting. With globalization
happening around the glove over the past few decades, there has been a desire
and need to create a common set of rules for financial reporting. The IFRS (inter-
national financial reporting standards) is the attempt made at unifying accounting
practices around the globe. However, because not everyone could agree that the
IFRS is better than their country’s accounting practices (given different economic
drivers and sectors in each country), not every country has adopted the IFRS in
its entirety or partially. It is very much an evolving situation as countries could
elect to adopt it or choose to move away from it. Recent trends to de-globalize the
world will also have no doubt an impact on the popularity of IFRS.
1. Introduce international accounting concepts.

2. Define terms like GAAP, IFRS, SOX, SEC, OSC, etc., relevant to interna-
tional accounting practices.
3. Provide a refresher and overview of accounting practices like balance sheets,
double-entry systems, financial statements, financial reporting practices,
income statements, and financial audits.
1 For more about Pacioli (coined father of accounting) see Rabinowitz (2009).

https://doi.org/10.1007/978-3-031-06440-1_6
94 6 Accounting Practices
4. Introduce concepts of accounting fraud and the importance of internal

control systems
Accounting: The Language of Business
Accounting is an information system designed to capture activities affecting an

organization’s financial condition and performance, and subsequently communi-
cates results to stakeholders. In other words, financial reporting, whose main
objective is to produce useful information that supports investment and manage-
ment decisions, is not possible without accounting. It is, then, not surprising that
financial accounting has been coined the language of business, as the financial pic-
ture of organizations cannot be communicated without financial statements. The
primary user groups include, but are not limited to, investors, lenders, and com-
pany managers—who, for one reason or another, need to know where a business
stands.
The accounting system commonly used today is a double-entry system—which,
as the name suggests, makes two entries for each transaction, a debit and a credit.
By recording two aspects of each transaction, the double-entry system creates an
equilibrium within the records. This is important because it better allows for the
detection of errors as well as omissions. The system is the most advanced and
practical way to maintain accurate accounting records. It is a highly systematic
and methodical way of recording and managing information, something that every
business needs. The accounting cycle starts with the analysis of business transac-
tions and ends with the preparation of financial statements, which are necessary to
evaluate past performance and as well make business decisions going forward.
Most companies exist to earn profit for their owners or for a publicly traded
company, their shareholders. This is typically achieved through the sale of products
or services at prices that are higher than what they cost the company. Periodi-
cally, companies have the need to evaluate how they are doing financially through
proper income measurement so that stakeholders are aware of whether company
management is doing a good job at running the business. The most recent com-
pany performance would also help management make important business decisions
going forward. For example, for a manufacturer, its financial statements would be
able to inform them of what products are profit-generating, and what items are not
wanted so they can focus on delivering what customers want. Companies produce
financial statements adhering to principles described by the Generally Accepted
Accounting Principles or GAAP2 for short. GAAP are, in a nutshell, the rules of
accounting approved by the Canadian Institute of Chartered Accountants for use
in Canada.
2GAAP is a name for a set of rules that is common in various countries. For example, Canadian
GAAP is not the same as US GAAP.
A Brief History of the Double-Entry Accounting System 95
The main purpose of this chapter is to shed light on the importance of account-
ing in an international business and communications context. It informs the reader,
who is interested in doing business abroad, of the accounting considerations that
should be included in the decision to do international business. To give better
context to our reader, we extend the discussion to include descriptions of what
accounting attempts to accomplish, some of the challenges that are encountered,
and provide insight on why the reporting standards across the globe are where
it stands. It is important to keep in mind that this is not a chapter about how to
account, as there is no shortage of good accounting books in the marketplace.
We presume that the audience of this book has little to no prior knowledge of
accounting.
A Brief History of the Double-Entry Accounting System
The double-entry accounting system widely used throughout the world today dates
to 1494 and is well over 500 years old. The system is connected to Fra Luca
Pacioli, an Italian monk and mathematician, and his more famous, close friend,
Leonardo da Vinci. The book entitled “Summa de arithmetica, geometria, propor-
tioni et proportionalita” which was first published in Venice, was written by Pacioli
and illustrated by da Vinci. The book outlined and described the concept of the
double-entry system, journals, trial balance, balance sheet, income statement, and
other tools and techniques that were subsequently adopted by accountants and
traders. Despite being considered the father of accounting, Pacioli did not claim
to be the inventor of this system. In fact, there is an indication that some aspects
of the double-entry system were already used in practice in businesses prior to the
publication of the book. While the true origin of the system remains a little bit
of a mystery, there was little doubt that it was Pacioli’s book that popularized the
system (also coined “the method of Venice”) in Europe and the rest of the trading
world.
The double-entry system spread throughout Europe following Pacioli’s work
and was translated into English in 1543 and further developed in England. By the
early eighteenth century, the concept of a joint stock company had developed to
include permanent existence, limited liability of shareholders, and transferability
of shares. While all these are important features of a joint stock company, it is
the transferability of shares that led to the development of a stock market, where
shares could be bought and sold. Naturally, investors required financial information
about the firms whose shares they were trading, and this need forced financial
accounting to change from a system enabling a merchant to control his operations
into a system that informs investors who were not involved in the operations of
the firm.
Both the firm and the investors had a common interest in having trustworthy
company financial information. This laid the foundation for both audits as well
as government regulations. Later in the twentieth century when the United States
gained substantial economic power, the corporate income tax in the United States
was introduced in 1909 and provided a major impetus to income measurement.

In the years that followed, accounting continued to be relatively unregulated with
largely voluntary financial reporting and auditing. It wasn’t until the stock market
crash of 1929 and the subsequent great depression that led to major changes by
the US government. Of those changes, the most important was the creation of
the Securities and Exchange Commission or SEC by the Securities Act of 1934.
The focus of the organization was primarily to protect investors by mandating
disclosure from companies. As part of this mandate, the SEC was assigned the
responsibility to ensure that investors and potential investors are provided adequate
information about companies.
The Usefulness of Accounting Numbers
The accuracy and information content of accounting numbers are paramount

because in an ideal setting the numbers should be an accurate reflection of the
underlying economic realities. Imagine looking at a map and then visiting the
corresponding actual geographic location. How close the map matches economic
reality is essentially the quality of the information provided by the map. Some
readers may be young enough such that they didn’t grow up with paper maps, but
simply imagine your car GPS instructing you to “keep straight ahead and cross the
bridge” when you arrive near the water but are not seeing a bridge you can cross.3
Similarly, imagine that your records indicate that there are 50 portable air condi-
tioning units inside your warehouse. What would happen if customers have placed
orders for all 50 units on a scorching summer day but when you do a physical
inventory count, you find that the number of units available for sale is actually 40?
For accounting information to be useful, it needs to have two desirable
fundamental characteristics: relevance and faithful representation. Unfortunately,
relevance and faithful representation cannot be achieved simultaneously. In other
words, to gain more relevance you must sacrifice verifiability and vice versa. The
easiest way to see this is to consider an asset like land. Land is a special asset that
does not depreciate like most assets, and under GAAP, land is recorded at cost,
or what you paid at the time of purchase. Now envisage a company like Hudson’s
Bay’s balance sheet. The company owns land that has been sitting on its balance
sheet from over a century ago, at the historical price of what was paid for it back
then. What was paid for it in the purchase transaction is easy to verify, so the item’s
value would rank very high in terms of its verifiability. It, however, ranks low on
relevance because the price paid at the time is no longer applicable (or indica-
tive of what current prices are) today and therefore the number recorded next to
the account on the balance sheet is no longer relevant. As one can see, there are
3 Cars are usually kept longer than phones and thus may have software technology that are more
dated than cellular phones. Older GPS technology also required periodic updating of location maps
that reflect changes such as new construction. In this case, the rental car I was driving clearly did
not have an up-to-date map.
Types of Audits 97
issues with leaning too much towards either relevance or verifiability, and overall,
a balance between these two qualities can maximize our goal of providing useful
accounting numbers.
The Role of Financial Audits
The purpose of a financial audit is to conduct an independent and objective exam-

ination and evaluation of the financial statements of an organization to ensure that
financial records fairly and accurately represent the underlying economic activ-
ities of the firm. More specifically, it is to ensure that the financial statements
are prepared in accordance with financial reporting frameworks such as the Gen-
erally Accepted Accounting Principles or the International Financial Reporting
Standards.
All properly prepared financial statements will clearly state the time frame cap-
tured by the documents (for example, “For the year ended December 31, 2021”).
December 31st is commonly used because (conveniently) it is the last day of the
calendar year, but a company’s year-end could be any date of the company’s choos-
ing. The accounting cycle is completed within every period (for public companies
usually every fiscal quarter, as well as once a fiscal year). When company accoun-
tants have completed the preparation of financial statements, external auditors must
be employed to audit or check the work in a systematic matter. To decrease the
chances of low-quality accounting numbers or numbers that are incorrect or mis-
leading, third-party neutrals are brought in. This is essentially the role played by
the big four accounting firms across the globe that you may have heard about.
Once your financial statements pass audit and you have made any changes that are
necessary for the auditor to sign off on your financial statements, they are ready for
distribution to external stakeholders and other regulatory filings. Users could then
have greater confidence about the use of these numbers in their decision-making.
It is important to note that while the act of auditing a set of financial state-
ments has the goal of catching mistakes and incorrect accounting treatment that
does not conform to GAAP, it is in no way a thorough check for errors or non-
conformities or is meant to be comprehensive. It is impractical for an external
third party to check every single transaction and journal entry. Typically, they will
strategically select sample items and look for weaknesses in internal control, etc.,
and other red flags. The auditor’s opinion simply states they have not found sig-
nificant misstatements and is not a guarantee that all statements are correct and
accurate.
Types of Audits
There are generally three types of audits: internal audits, external audits, and IRS
(Internal Revenue Services in the United States or the Canada Revenue Agency
in Canada) audits from the government. Internal audits serve as mostly a man-
agerial tool to make improvements to existing processes and are part of the
company’s internal control system. External audits are performed by Certified Pub-
lic Accounting firms for a fee and will produce an audit opinion included in the
audit report. An unqualified audit opinion indicates that the auditor has not identi-
fied any material misstatements because of his review of the financial statements.
Audits typically consist of the gathering of financial documents, examining record
keeping, reviewing the accounting system, reviewing the internal control policies,
comparing internal and external records, and reviewing the company’s tax records.
At the risk of stating the obvious, external audits serve to enhance the credibility
of financial statements to external parties such as lenders and investors.
What Is Accounting Fraud?
The accounting system is used to record and communicate important information

about a company or organization to all its stakeholders. This is true for for-profit
businesses, as well as for not-for-profit organizations such as charities, universi-
ties, hospitals, or governments. Since this is an international business textbook, we
will focus our discussions on for-profit businesses, though readers should be aware
that the usefulness of accounting is not limited to for-profit businesses. All organi-
zations are required to, at a minimum, keep financial records and stay financially
afloat if they want to be a going concern.4
While most businesses intend to communicate and disclose correct and accurate
information, there will, unfortunately, always be a few firms engaging in fraudulent
accounting activities. Fraud is the intentional misrepresentation of information to
mislead stakeholders. This is separate and distinct from unintentional errors that
occur in the record keeping and financial statement preparation process, which also
inevitably happen. Mistakes that are caught during an audit are typically corrected
before the auditor will sign off on the statements, while errors that are caught
past auditing and publication of financial statements are typically done through
accounting re-statements.
Just about any kind of organization can commit financial fraud, whether it be
publicly traded, privately held, for-profit companies, or not-for-profit organiza-
tions.5 For example, companies interested in securing investments from potential
investors, or in obtaining bank financing require a favorable financial standing and
a promising future. It is certainly not difficult to see how there would be incen-
tives and pressures to make the financial picture of one’s business look rosier than
it truly is. This desire to look better is also especially strong when a company
4 Going concern is defined as financially stable enough to meet its obligations and continue its
business for the foreseeable future.
5 In fact, not-for-profit organizations are especially susceptible to fraud due to a host of reasons
such as small size, lack of expertise, lack of internal control, and lack of suspicion because they
exist to do good deeds for society.
Infamous Past Scandals 99
is experiencing a decline in terms of financial performance. Once an incentive is

present, identifying opportunities for fraud would be the logical next step. Typ-
ically, companies that have weak internal control systems6 are more susceptible
to fraud, as they present more opportunities for wrongdoing. Last, but not least,
once the motivation exists and opportunities have been identified, one’s attitude or
rationalization would be the final criterion to commit fraud. This is typically easy
to fulfill as people who are desperate enough usually have no difficulties justifying
the means to an end. Some common methods of financial fraud involve improper
revenue recognition, period-end stuffing, fraudulent post-closing entries, improper
asset valuations, and misleading non-GAAP financial measures.
Types of Fraud
Broadly speaking there are two types of fraudulent activities in corporations. The
first is the misappropriation of company assets by company insiders such as the
theft of assets by an employee. The second is fraudulent financial reporting, which
is defined as the intentional manipulation of accounting policies or accounting esti-
mates to improve financial statements. It is important to note that accounting fraud
is not actually an accounting problem, but a social phenomenon. Criminology is
typically studied under the umbrella of sociology and is not particularly closely
tied to the discipline of accounting, but the lack of transparency in financial trans-
actions and records potentially makes accounting an ideal method to hide fraud. If
there is poor management of information where financial results are not produced
in an accurate and timely manner, then warning signs would be difficult to detect.
Infamous Past Scandals
In 2001, Enron, one of the largest integrated natural gas and electricity companies
in the world, unexpectedly declared bankruptcy. At the time it was the largest
bankruptcy in history, leading to major job losses and destroying life savings for
some. The company concealed billions of dollars in debt from failed deals and
projects. Investors in turn lost billions of dollars, and one of the reasons why
audits never detected the accounting irregularities is because of off-balance sheet
instruments. The fall of Enron was one of the worst corporate crimes in history.
Company founder and former CEO Bernard Ebbers was sentenced to 25 years in
6 Internal control is defined by the Merriam-Webster dictionary as a system or plan of accounting

and financial organization within a business comprising all the methods and measures necessary
for safeguarding its assets, checking the accuracy of its accounting data or otherwise substantiat-
ing its financial statements, and policing previously adopted rules, procedures, and policies as to
compliance and effectiveness.
prison for his involvement. Enron exploited accounting loopholes and used special-
purpose vehicles to make their financial picture look good to the outside world.7 Its
eventual collapse raised concerns about this type of activity hidden from common
financial statements. The accounting scandal that destroyed the company was so
damaging in terms of reputation also that it took down its auditor, Arthur Andersen
which, at the time, was one of the top five large auditors in the world. This is not
unexpected because in the banking and financial world, credibility is paramount
because the information that people do not believe to be reliable is worthless8 and
even counterproductive to its users. Arthur Andersen failed in its responsibility to
properly audit and could not recover from the reputational damage.9 In fact, even
the non-auditing arms of its business such as consulting had to be rebranded to
survive.
Enhanced Regulation: The Sarbanes-Oxley Act
The Sarbanes-Oxley (SOX) act of 2002 mandated strict reforms to existing securi-
ties regulations and imposed tougher new penalties on those who violated the act.
In the United States, the Securities and Exchange Commission (SEC) is the federal
agency in charge of regulating securities exchanges and institutional players in the
market. In short, their purpose is to protect the public from financial fraud while
ensuring the smooth running of capital markets. The latter goal requires sufficient
confidence in the market system because participation in the market is entirely
optional. That is, if the public views the financial markets as a rigged or unfair
game where the odds are stacked against them, then few people would want to
participate in it. For this reason, if a country wants to grow the size of its capital
markets, it is important to establish and enforce strict rules that will ensure fairness.
Fairness in this context means company news (which inevitably impacts the com-
pany’s current or future profitability) must be disclosed to the public at the same
time as institutional investors, large and small. In other words, there cannot be
parties who can access privileged information ahead of other market participants.
In Canada, the equivalent regulatory bodies fall under provincial jurisdictions, and
the Ontario Securities Commission has the biggest job in the country in overseeing
the markets and institutional investors in the province of Ontario.
7 Special purpose vehicles (SPV’s) are separate legal entities (usually limited partnerships) created
specially to achieve specific or temporary goals. The idea is to protect the company that is using it
by isolating the financial risk within the SPV. This way, the entire company is not at risk.
8 When other goods are less than desirable, usually discounting will increase their appeal to cus-
tomers (e.g., overripe bananas).

9 Arthur Andersen was found guilty of crimes in the auditing of Enron, a verdict that was later over-
turned because of flaws in the judicial process (serious errors in the judge’s instructions to the jury).
Nevertheless, the reputational damage had been done and the firm voluntarily exited the auditing
business.
Why Accounting Frauds Matter 101
In short, SOX was introduced in direct response to the high-profile financial

scandals in the early 2000s involving large public companies such as Enron Cor-
poration, Tyco International, and WorldCom. In each case, the accounting scandal
was so large in scale and damaging that the company did not survive the event.
The Enron bankruptcy in 2002 was the largest bankruptcy of its kind at the time.
The company was an enormous energy trading company that got involved in heav-
ily trading energy derivatives. Large losses were hidden. The company also had
mountains of debt and toxic assets hidden from investors and creditors using Spe-
cialized Purpose Vehicles. The price of Enron’s shares slid from $90.75 at its peak
to just $0.26 at bankruptcy, and the scandal even inspired a comedy entitled “Fun
with Dick and Jane”. In real life, of course, nothing is humorous about a scandal
that ruined the lives of people and lessens public confidence in the financial mar-
kets. It is reported that collectively, Enron shareholders lost 74 billion USD in four
years leading up to its bankruptcy.
The act mandates that senior officers guarantee in writing that the company’s
financial statements “comply with SEC disclosure requirements and fairly present
in all material aspects the operations and financial condition of the issuer”. Those
who sign off on financial statements that they know to be inaccurate are per-
sonally subject to criminal penalties, including prison time. The act also requires
management and auditors to establish internal control and the appropriate report-
ing necessary to ensure the adequacy of those controls. The SOX act even includes
details regarding the destruction and falsification of records, defining the retention
period for which specific records are kept, including electronic communications.
In summary, the SOX significantly raised disclosure requirements for companies.
It is worth noting that when it comes to disclosures, a balance is sought between
the benefits and costs of revealing the information.
Why Accounting Frauds Matter
Large corporate scandals such as Enron and WorldCom are so egregious that they
often brought down the entire organization and destroyed jobs, wealth, and the
lives of stakeholders. It was clear that the old regulatory standards were in dire
need of an update. Throughout the world, financial regulation falls into three main
domains: banking, financial markets, and consumer market. A country’s banking
system is fundamental to its credit market. If the public does not trust banks, then
money will not be deposited into banks or subsequently lent out to an entrepreneur
with a great business idea. Indeed, if the act of depositing money in a bank account
is not viewed as safe, then you might as well “stuff your money under a mattress”
for safekeeping. For the public to have trust in the banking system, banks need to
be tested for safety and soundness. Banks also need to meet adequate capitalization
requirements and insure deposits. Financial market regulations extend to include
rules regarding any party who participates in financial markets. Finally, consumer
market regulations prevent consumer products such as credit cards, mortgages, and
insurance from charging too high interest, exposing consumers to too high risk, etc.
Overall, financial regulation is present around the globe because it is necessary to

safeguard the integrity of the financial system.
Current Accounting Practice and GAAP
GAAP stands for the Generally Accepted Accounting Principles and can be
thought of as a set of accounting rules, standards, and practices used to pre-
pare and standardize financial statements, paying special attention to consistency,
transparency, and ethics. Different countries have different GAAPs. Each country
typically has a regulatory accounting body that comes up with the GAAP used
in that nation. Canadian GAAP has been a principle-based approach. US GAAP,
in contrast, is largely rules-based, likely due to the country’s extremely litigious
business environment. Singapore, as another example, has the Singapore Financial
Reporting Standards (SFRS) which is also principle-based.
At the present time, the Chartered Professional Accountants of Canada (CPA
Canada) is primarily responsible for setting the rules of accounting in Canada. The
Accounting Standards Board (AcSB) is an independent body supported by CPA
Canada to develop and establish the standards and guidelines that govern financial
accounting and reporting in Canada. These standards and guidelines essentially
come from the International Accounting Standards Board (IASB). In Canada, pub-
licly listed companies (and those entities that act as fiduciaries such as banks) must
report under IFRS, whereas private enterprises can choose to follow either IFRS
or Canadian Accounting Standards for Private Enterprises (ASPE10 ). Both these
standards are GAAP. In short, companies that are held to a higher standard in
terms of accountability to the investing and public are required to use IFRS, while
those that do not, can simply avoid the trouble and cost of disclosures and com-
plex accounting treatment. Either way, the overall objective of GAAP (regardless
of which country’s GAAP) is to ensure that companies produce financial infor-
mation that is useful to their potential and existing investors, lenders, and other
creditors in decision-making.
In the United States, the Securities and Exchange Commission (SEC) is the
federal regulator responsible for publicly traded firms adhering to GAAP, though
the SEC does not set the standards associated with GAAP. Instead, it is the Finan-
cial Accounting Standards Board (FASB) that actively influences any changes in
financial reporting standards used by corporations.
Canada adopted the International Financial Reporting Standards (IFRS)—for
publicly traded companies back in 2011, replacing Canadian GAAP, which were
Canada’s long-time national accounting standards up until that time. Canadian reg-
ulators, at the time of the switch, believed that the United States would also move
to adopt IFRS rules so that companies in both countries would have the same
10ASPE is basically “old” Canadian GAAP prior to the adoption of IFRS for publicly traded
companies. It could be viewed a pared-down version of reporting standards.
103
accounting systems. Fast forward a decade and the US regulators are still resist-
ing its full adoption in 2021. The SEC has signaled intentions to move towards
IFRS, but the reality remains that there are considerable differences between US
GAAP and IFRS. Specifically, the former is largely rules-based whereas the lat-
ter is principle-based. At the present time, in the United States, firms must report
using US GAAP.
One Common Standard: IFRS Adoption Around the World
Globalization has been a major force in the past few decades, the outcome of which
is a more connected and economically intertwined world. To function better as one
world, it is clearly important that we are able to communicate effectively or speak
the same language. The English language has become the dominant language that
business is conducted in, but English itself is not enough for business communi-
cation needs. For business and financial information about firms to be useful to
decision-makers, including those decision-makers who are in another country, it is
helpful if the same reporting standard is used. In short, a more connected world
means that there is often the need to understand a foreign company and its finan-
cial statements. A common standard also allows for easy comparisons to be made
across countries.
The International Financial Reporting Standards (IFRS) is the answer to that
call. The International Accounting Standards Board (IASB), headquartered in Lon-
don, is the accounting standards body for the IFRS Foundation. The predecessor
to the IFRS Foundation, the International Accounting Standards Committee, was
formed in 1973. Initial members were accounting bodies from Australia, Canada,
France, Germany, Japan, Mexico, the Netherlands, the United Kingdom, and the
United States. Today, the IFRS has become the global standard for the prepara-
tion of financial statements for public companies with 144 out of 166 jurisdictions
requiring IFRS standards. Generally speaking, and at a broad level, IFRS and
US GAAP are generally more alike than different for most transactions. This is
because both use accrual accounting and utilize similar conceptual frameworks.
It is worth noting regardless of the accounting standard used in your country,
at your own cost and discretion, it is always possible to prepare a second set of
statements conforming to the accounting requirements of a foreign country your
firm conducts business in. The cost and effort of going through this can be pro-
hibitive, especially for a small company, and is a matter of balancing cost and
benefit. Clearly, the most efficient way is for all countries to conform to IFRS, but
given the varying interests of countries, and an increasingly divided world, this
is harder to achieve than previously thought. Finally, it is important to keep in
mind that the adoption of a new reporting standard would require significant work
throughout the organization including updates to its technology infrastructure as
well as changes to internal processes and statutory reporting.
Accounting, Legal Structure, and Tax Considerations

for Operations Abroad
Maintaining company books in different countries of operations is often a nec-

essary part of doing business in that country. The decision to go “international”,
therefore, is not only an important business strategy question, but comes with
a whole set of operational demands—including legal, taxation, and accounting
challenges. Some companies pursue international growth because the owners are
ambitious, but others can end up in a position where they are forced to grow in
order to survive (i.e. staying the same size is not sustainable). One of the charac-
teristics of internationalization and globalization is that scale is often necessary
for competitive advantage. It is worth noting that sometimes going outside of
one’s home country is necessary, especially when your domestic country is on
the smaller side, and you have unfulfilled growth goals. Finally, a company could
find itself in a position where it needs to merge with a foreign entity, which is a
more complex situation. In summary, though the complexities of operating abroad,
including the accounting aspects, are sometimes unforeseeable and the going inter-
national decision, not necessarily by choice, companies must be ready to deal with
everything that comes with the territory.
Ideally, legal business structure, tax outcomes, and accounting challenges
should be considered as part of the initial decision to expand outside of the home
country. At a minimum, companies need to adhere to new country regulations
and taxation regimes, in addition to different and fluctuating currencies. Further
accounting complexities can include the accounting for impairments in invest-
ments in foreign subsidiaries, especially for those money-losing ventures, as well
as transfer pricing optimization.11
Ultimately, there are two main aspects of a foreign business that the government
is most interested in. The first is the government wants to ensure that the foreign
business is following all the regulations that apply to similar domestic businesses,
and second, it wants to ensure the proper collection of taxes on profits.
One common method of going abroad as a business is to establish a sub-
sidiary—which is a separate legal entity from the parent. The parent owns
anywhere from 51 to 100% of this subsidiary. The accounting books of the sub-
sidiary are kept separately and usually are done following their parent’s accounting
standards at home, so that the eventual combining, or accounting consolidations
process is made easier. For example, Apple Inc. is an American company that
trades on the Nasdaq, but it has stores in Canada operated through its subsidiary
Apple Canada Incorporated, headquartered in Ontario. Apple Canada Inc. follows
US GAAP—used by its parent, Apple Inc. Periodically, Apple would combine
11Transfer pricing involves the setting of prices among divisions within an enterprise and can be
used as a profit allocation method to attribute a multinational corporation’s net profit or loss before
calculating tax to countries where it does business.
Recent Trend Away from Globalization 105
Apple Canada’s financial statements with its own along with all its other sub-
sidiaries around the globe. This is not a simple task and the parent is obligated to
present consolidated statements to the regulating authorities overseeing the parent
company.
For a business, there are a couple of corporate decisions that would trigger
volumes of accounting work. The first is deciding to become a publicly traded cor-
poration (being listed on a public stock exchange), which requires major financial
disclosures and significant compliance. That is, public listing requires substantial
effort and is expensive. This is true for domestic companies, and it is especially
true for foreign companies (listing abroad—more on this in the next chapter). The
other decision is when a company decides to merge with another firm, especially
if the two companies being merged are from different countries. Such a merger
would require an understanding of accounting and government rules of at least
two countries. In summary, conforming to one’s domestic country’s GAAP is the
minimum amount of accounting work necessary and the decision to do business
beyond country borders will no doubt create additional work, complexities, and
expense. It is not a decision to be taken lightly as these accounting and regulatory
compliance complexities are on top of the challenges of foreign operations.
Recent Trend Away from Globalization
From the time that this book was conceived to the time of its first draft, the anti-
globalization trend has strengthened considerably worldwide and shows no signs
of slowing down. The world’s dominant power, the United States, started this
trend to block China from potentially dethroning it from its current position. The
struggle for power between these two giants means that after four decades of
globalization, a reversal of this trend will likely unfold for the foreseeable future.
It is not unexpected that the United States would target whichever country has the
potential to challenge its dominant position in the world. While this is not a book
about politics, it is a topic that is hard to avoid when we talk about globalization.
The 2016 election in which Donald Trump won clearly marked the beginning of
a shift in policy towards China. Near the end of the Trump presidency, the world
strangely morphed into a situation where the US refused to lead the world any
longer, and no other country was in a position to lead. The recent political term
begun by Joe Biden seems to have restored some normalcy in the country and
diplomacy in the world, but one thing is clear. All signs indicate that we will
continue down the path of nationalism and protectionism. If anything, the current
Novel Coronavirus-19 pandemic has fully demonstrated that even in the face of an
issue that is clearly global in nature, countries around the world are showing strong
nationalism when it comes to approaches to handle it (ranging from vaccines, to
lockdowns, to testing, to masking, etc.). The closing of country borders during this
Covid period has been an effort to help slow the spread of the virus (which is a
legitimate public health reason), but it gave the world a taste of closed country
doors. In locking away vaccines that America does not need, President Biden has
once again demonstrated his predecessor’s famous “America First” slogan. No one
knows how much farther down this path we will go, or which parts of the world
will be able to detangle while other parts stay intertwined. Businesses, especially
those that operate in more than one country, will have to carefully navigate the
national climate of the countries in which they operate to be successful. It is a
very delicate game, as one wrong move could mean you don’t do business in that
country anymore.
Companies must embrace these realities and be ready to navigate macrolevel
changes that are expected to happen in our soon-to-be semi-integrated world. They
need to be nimble and seek flexible strategies that can swiftly adapt to changing
political environments. For instance, supply chain disruptions have fundamentally
altered companies’ ability to both access markets in a timely fashion and their
ability to control costs. In 2021, apparel firms such as H&M and Nike (with supply
chains in China to lower cost on the production side while simultaneously gaining
access to the domestic customer market) have made statements about human rights
and working conditions in the textile industry. Unsurprisingly, these firms suffered
a severe backlash from the government as well as the boycotting of their brands
from Chinese customers. H&M, for example, self-reported that they had quarterly
sales decline of 23% from the same quarter sales a year ago following the boycott
in China.
Going forward, firms committed to pursuing global markets are having to seek
national production and transportation strategies that can function independently to
align with those countries’ changing policies and trade restrictions. This is mostly
observed in large countries such as the United States, China, and Russia—where
the country has the size and scale to merit its own supply chains. While these
issues are not new, as countries have always sought to protect domestic jobs and
economic output, they have been exacerbated in the current environment. Each
country’s strong desire to put its own interests first creates an unpredictable island-
like economic mentality. Finally, information sharing through social media has
made it possible for public opinions to be increasingly unpredictable and possibly
explosive, and if a certain voice is loud enough, then politicians will likely have
to factor that into their next move.
In summary, the political risks of operating in a foreign country have always
existed. For instance, companies around the globe entered China four decades ago,
being aware of the geopolitical risks such as appropriation or extortion. Overtime,
operations were successful, and these risks have largely been forgotten. Recent
developments are a good reminder that the underlying risks have never truly gone
away, and things can change at a moment’s notice.
End-of-Chapter Assignments and Exercises-Case Scenarios, Short Answer Ques-

tions
Question 1: You are an accounting major who has been placed with a large
accounting firm after graduation. Your non-accounting friends ask you about
your job in auditing and the purpose of an audit.
Recent Trend Away from Globalization 107
Question 2: Explain to your roommate, who has a science background, why

accounting information is useful not only for for-profit businesses but also
for not-for-profit organizations. Give examples of these organizations and
the types of decisions that depend on accounting information.
Question 3: Looking at infamous past accounting scandals, it is not diffi-
cult to see that many stakeholders are negatively affected by financial fraud.
Explain how is accounting fraud harmful to society at large, and what the
costs would be if regulations do not keep fraud at bay.
Question 4: Financial markets and banks are regulated throughout the world.
That is, its functions and soundness of the system are too important to leave
to the free markets. Explain why this is so.
Question 5: Explain why relevance and faithful representation are both
important characteristics in accounting information.
Question 6: Given current anti-globalization sentiments, is doing business
abroad still worth pursuing? Why or why not?
Mini Case 1
The Covid-19 pandemic highlighted the need for national self-sufficiency and
preparedness for the next pandemic. Due to the interconnected nature of
the world through commerce and transportation, any future pandemic can be
expected to simultaneously hit all countries. This means that as a country, self-
sufficiency is key to a timely response. The need for a reliable within-country
response is seen as strategically sound, especially in light of rising nationalism
seen around the globe.
Innocuease, a global pharmaceutical giant from Germany plans to set up a
manufacturing plant in Canada, with the support of the Canadian Federal gov-
ernment. The plant is to be constructed in Winnipeg, Manitoba, a city selected
for its central location and reasonable manufacturing costs. The facility will be
creating local research, analysis, and manufacturing jobs and will also be work-
ing closely with its headquarters in Munich. The choice of location is largely in
response to the many logistical challenges encountered during the current pan-
demic, and the Canadian government hopes that the new strategy will increase
the country’s preparedness for the next virus. The company also conducts man-
ufacturing in the personal protective equipment category, producing items such
as medical-grade masks, gloves, and gowns. Target customers include hospitals
and other care institutions, as well as retail distribution. The aim of the facility
is to meet the demands of the domestic market.
Discuss the accounting rules applicable to the preparation of financial
statements for Innocuease.◄
Mini Case 2
A Canadian company Great North trades on the Toronto Stock Exchange under
the ticker GN.TO. It is currently in merger talks with a US firm traded on the
NYSE. Both companies currently produce financial statements complying with

their own country’s disclosure requirements prior to the merger. What are the
financial disclosure considerations for the impending merger (assuming that the
surviving firm will be the US parent and GN.TO will cease to trade on the
TSX)?◄
References
Ontario Securities Commission website: www.osc.ca

Rabinowitz, A. M. (2009). Who was Luca Pacioli? The CPA Journal, 79(2), 12.
Sarbanes-Oxley act of 2002: https://sarbanes-oxley-act.com/
Securities and Exchange website: SEC.gov
Securities exchange act of 1934 accessed at: https://www.nyse.com/publicdocs/nyse/regulation/
nyse/sea34.pdf
Banking and Financial Markets
Around the Globe 7
We begin by looking briefly at the history of banking systems around the globe. It
is well known that the banking industry is regulated by each country’s government
and for good reason. A failure in banking and financial markets has detrimen-
tal effects on a country’s economy and thus standard of living. We then describe
how the systems are similar and different in each major economy and the implica-
tions of these differences. We then explore the equity and debt markets, how they
developed in various centers, and how they have become closely linked across
the globe. The freeing of capital flow between countries coupled with the avail-
ability of the internet and instantaneous information, in addition to cheap trading
has made financial markets accessible to more investors than it ever has. Unfortu-
nately, high volatility and financial bubbles are consequences of active trading and
(relatively) free money flows around the globe and will be here to stay. Finally,
we will also discuss how technology has profoundly impacted the way banking is
done.
Learning Objectives—This Chapter will
1. Introduce concepts of international banking, basic aspects of international

finance, bonds, capital financing, equity, and diversification.
2. Provide information about Fintech, cryptocurrencies, and digital currencies.
3. Introduce and discuss aspects of financial contagion, financial market
bubbles, and international financial regulatory practices.
https://doi.org/10.1007/978-3-031-06440-1_7
110 7 Banking and Financial Markets Around the Globe
Brief History of Banking
Banking dates to around 2000 BC in many parts of the world where trading activ-
ities occurred. It is not difficult to see that banking was necessary for lending and
other daily business transactions. The topic of banking is vast and could easily fill
up not one, but many books, so we will not attempt that task in this chapter. In
brief, banking is so essential to a business that it has independently and separately
developed in many parts of the world. For example, in the Roman Empire, coin
minting, as well as deposits initially took place in temples. Eventually, the practice
moved into private depositories. In fact, banking is so essential that there is not
an ancient civilization around the world that did not have some sort of currency
and banking in place. Modernized banking remains an important part of society
today and has been evolving to meet the needs of society. Currently, banking is
still undergoing digitalization as most banking needs can now be met by going on
the internet and digital currencies are born.
Equity and Bond Markets Around the Globe
The largest and most developed capital markets of the world exist in cities that are
just as famous and influential. Cities that come to mind immediately include New
York, London, Tokyo, Shanghai, and Hong Kong. Studies have shown that robust
financial markets have the power to grow and enrich the city in which they reside.
It may be hard to believe that physical geography matters to financial markets in an
age where information could travel so easily over the internet, but it is important
to remember that people are social creatures, and that distance is far from “dead”.1
Also bear in mind that not that long ago, financial trades used to be executed on
the physical trading floor, as opposed to electronically. For those of you who have
further interest in this topic, there is a large literature in the field of geographic
economics on the continuing relevance of geographic location to financial markets
despite technology that overcomes physical distance.
When it comes to capital markets, the two main categories of capital financing
are bonds and stocks. While the former is larger and far more predictable than the
latter, the latter is more attention commanding due to its ownership characteristics
and uncertain nature. In other words, news about a company’s prospects will be
reflected in the share price of the stock, which makes it a more interesting thing
to follow.
1There is a large literature on the economics of geography supporting this. For example, see
Leamer and Storper (2014).
Equity and Bond Markets Around the Globe 111
What Is a Bond?
A bond is a fixed-income instrument that represents a loan from the lender to

the borrower. The bond issue specifies the amount borrowed (usually in 1000s of
dollars) and the coupon interest rate of the bond to be paid throughout the life of
the loan. In other words, bonds are quite explicit about what the future cash flows
look like at the time of the bond issuance, and both the borrower and the lender
know exactly what to expect (unless the bond defaults, in which case the lenders
do not get their interest payments/loan amount back and there is usually some
other legal resolution to the bond contract where the lender settles for a lesser
amount—whatever the borrower could afford).
According to the Securities Industry and Financial Markets Association, the
total size of the bond market, as measured by total debt outstanding, is estimated
to be at $119 trillion worldwide and $46 trillion for the US market in 2021.
What Is Equity?
The other major form of financing is equity financing—also known as shares

or company stock ownership. Equity financing represents partial ownership in a
company in exchange for their cash investment. Being part owner of a company
means that your fortunes are essentially tied to the future of the company and
how much profits it can generate in the future—as shareholders own a portion of
the company’s future profits or losses. Shareholders’ claim on the company is a
residual claim (meaning bond holders and other debtors will be paid what they are
legally owed first) and could be of an amount smaller, the same as, or greater than
their initial investment. In other words, the financial payoff of being a shareholder
is highly uncertain compared to that of a bondholder. If you wish, you can simply
think of stock ownership in a business as owning a portion of the company’s future
profits (or losses). At the core, it is the company’s future profits and cash flows
that determine how much it is worth today.
In contrast to shareholders, bondholders are legally entitled to interest payments
and the repayment of the borrowed amount, whereas shareholders can stand to lose
all their investments, or potentially double or triple their investments. Because the
theoretical maximum of any given stock is unlimited, the potential gains of being a
shareholder are not bounded by a maximum number. Moreover, the most a share-
holder could lose is their total initial investment. That is, creditors to the company
cannot go after the personal assets of the shareholders if the company itself defaults
on its debt obligations. This limited liability characteristic is a very desirable trait
of share ownership, as it is not always true with all forms of investing.
The oldest and first stock exchange was established more than 400 years ago
in the Netherlands. The world’s largest stock exchange is currently the New York
Stock Exchange (NYSE) located in, of course, New York City—the capital of the
world. Founded in 1792, it has been nicknamed the “big board” and lists 2400
firms valued at a total of 26.2 trillion dollars in 2021. Between the NYSE and
the Nasdaq, the top two equity exchanges in the world is 46% of the world’s
global stock value—or over 40 trillion US dollars. An active capital market that
participants view as a “fair” game allows supplies of capital to meet the demands
of funds. It is important to stress the perceived fairness and reasonableness of the
investing game as researchers have found that countries that have strongest investor
protection have largest capital markets and countries with the weakest investor
protection have the smallest capital markets. That is, the size of the market is a
direct reflection of how many willing participants it can attract.
The market value of both the bond market, as well as equity markets, are con-
stantly changing, as trading in the market will move prices to reflect the latest
information about the prospects of the company and the state of the world. Though
economists build models and theories about the high efficiency of financial mar-
kets as well as the objective aspects of business valuation, it is nevertheless driven
by investors who are human beings with emotions. As such, the markets, over
the long run, reflect economic realities in an objective manner, but its day-to-day
movements include an efficient “pricing” action as well as the overall sentiments
of the day. Indeed, market bubbles have increased in frequency as well as size in
recent decades. This is due to both the fact that financial markets are interlinked
due to globalization (think financial contagion from one market to another), as
well as the easy access to trading that the public has thanks to technology (think
low-cost or no-cost trading platforms).
Why Banking Regulation Is Necessary
A brief look at any banking activity in history shows the prevalence of bank runs
and the damage that will ensue. This is essentially the reason why banking is a
regulated industry anywhere in the world. A bank run or a run on the bank occurs
when depositors simultaneously withdraw their money from a bank because they
believe the bank will fail and that if they don’t get their money now then they will
lose their money. Most depositors realize that the money deposited into a bank
account doesn’t “stay” at the bank, as the bank will turn around and lend this
money to parties who wish to borrow funds. The need to borrow money can arise
out of a multitude of life reasons and situations, both business and personal. For
example, there are business loans intended for an entrepreneur who has a business
idea but no funds to execute his idea. There are business loans that are necessary
for existing small businesses to grow. There are mortgages for those who wish to
purchase a house or student loans for those who wish to pursue post-secondary
education.
Because the bank pays very low interest on your deposits and charges much
higher interest on its loans, the difference in interest rate and payment is essentially
the business model that allows the bank to generate profit. When many banks in
the system have a bank run simultaneously, you will have a bank panic—or a crisis
in the financial system. And a systemic banking crisis is one where all or almost
all the banking capital in a country is wiped out. We have grown accustomed to
Technological Disruptions to Banking and Financial Markets 113
easy and effortless banking that we take the system for granted. But the reality
remains that banking is essential for modern commerce, trade, as well as everyday
life. The easiest and most obvious way is to require banks to hold higher reserve
(keep more deposits on hand and lend out less money).
Bank runs are basically self-fulfilling prophesies because even for a bank in
excellent financial health, if many depositors simultaneously attempted to with-
draw their deposits, they would be in financial trouble. Banks pay careful attention
to how they are perceived and manage their image of credibility and success
strategically. Therefore, bank headquarters often occupy expensive real estate with
lavish and stately buildings to demonstrate to the public that their money is safe
with them.
Regulation Full Disclosure (Reg FD)
Regulation Full Disclosure was introduced by the SEC in the year 2000 to level
the playing field in the securities market in the United States. In particular, the reg-
ulation was put in place to remove any advantages that institutional (often large)
investors had over retail/small investors. The purpose and goal of such a rule are
primarily to prevent a loss of confidence in the markets, which would deter market
participants if they viewed the game as being rigged. Reg FD prohibits publicly
traded companies from disclosing previously nonpublic, material information to
certain parties unless the information is distributed to the public first or simultane-
ously. This means public firms that conduct earnings and forecast calls to update
stock analysts must simultaneously issue a press release to make that information
available to the public at the same time.
Technological Disruptions to Banking and Financial Markets
Advances in computer capabilities and the widespread use of the internet mean an
increasing part of modern life has become technologically driven. Technology has
invaded just about all aspects of life and the financial industry is no exception. The
term Fintech stands for financial technology and refers to any computer programs
and other technology used to support or enable banking and financial services.
Today, Fintech is one of the fastest growing areas for venture capitalists, so it is
no wonder that it is all over the business news.
When we hear the term Fintech, what immediately comes to mind is the use
of smartphones for mobile banking, investing, borrowing services, as well as cryp-
tocurrencies. These are obvious examples of technologies aiming to make financial
services more accessible and convenient to users. It is at least a bit ironic that a
parent is more likely to see physical play money in a kids’ shopping game than to
encounter physical cash in an actual store.
Fintech has gotten so hot in the world of business that it is even getting a
lot of press in mainstream media. So much so that we feel that the omission of
such a topic in this book would leave readers wondering. Chances are, you have
heard the term Fintech before, and like everyone else, you probably are aware that
you don’t know everything about it because it is rather new. A quick investigation
reveals that it is not a well-defined term. One definition for it is “the new appli-
cations, processes, products, or business models in the financial services industry,
composed of one or more complementary financial services and provided as an
end-to-end process via the internet”.2 In a separate definition, Leong and Sung
(2018) call Fintech “any innovative ideas that improve financial service processes
by proposing technology solutions according to different business situations, while
the ideas could also lead to new business models or even new businesses”. As one
can see, the list is quite broad, and there is really nothing limiting innovation and
growth in finance. While there is an element of competition between Fintech and
traditional finance, technology increasingly changes the way we bank by making
the traditional way obsolete. Going to the bank used to mean long lines and hours
at the bank whereas today, an individual can do a lot of “banking” on the phone
or computer. In fact, it is accurate to say that many everyday banking needs can
now be handled completely remotely at low or no cost at all.
Cryptocurrencies
One example of financial innovation that both expands and competes with tradi-
tional finance is cryptocurrencies. The oxford dictionary defines cryptocurrencies
as a digital currency in which encryption techniques are used to regulate the gener-
ation of units of currency and verify the transfer of funds, operating independently
of a central bank. The best-known of these is Bitcoin, which is the first and most
famous cryptocurrency. Bitcoin is famous for its safety features achieved through
blockchain technology and design and lacks personally identifiable information.
While the technological aspect of it is beyond most investors, even those in the
business of valuation can’t quite put their fingers on it.
In February of 2021, Tesla, the electric vehicle maker, purchased about $1.5
billion worth of Bitcoin, and according to its CEO Elon Musk, you can soon
purchase a Tesla using Bitcoin.3 The company supposedly made the purchase to
have “more flexibility to further diversify and maximize returns on our cash”.
Musk, a vocal supporter of Bitcoin, later warned that he does not think the average
investor should invest their lifesavings in cryptocurrencies as it is too volatile. In
May of 2021, Musk surprised the world with the announcement that Tesla would
not accept bitcoin as a currency in a car purchase, citing the environmental impact
of bitcoin. Because the mining of cryptocurrencies has a large carbon footprint, it
2 Sanicola, Lenny (February 13, 2017). “What is FinTech?”. Huffington Post. Retrieved August
20, 2017.
3 This represents a sizable about of the company’s cash holdings which stood at around 19 billion.
Technological Disruptions to Banking and Financial Markets 115
would be ironic to allow such currency to be used to purchase an environmentally

friendly vehicle.
Influential critics of Bitcoin also exist. Legendary investor Warren Buffet is one
of them, and his right-hand man, Charlie Munger, went as far as stating that bitcoin
is “disgusting and contrary to the interests of civilization”. Bitcoin has some desir-
able features that attract organized crime, though cryptocurrency fans will point
out that the US $100 bill is the favorite medium of exchange for criminals. It was
reported in 2021 that $90 million worth of bitcoins were collected by cybercrim-
inals for first hacking of, and then the return of access to the colonial pipeline in
the United States.
As of January 2021, there are over 4000 cryptocurrencies. Some of these cryp-
tocurrencies have little following or trading volume, while others have enthusiastic
backers who believe in digital currencies one day dominating the world. There is
a wide held belief that cryptocurrencies could become a common form of cur-
rency or payment of the future, but at the present time, it is largely speculative
and highly controversial. Believers view them as a breakaway digital currency that
is not constrained and controlled by any government, and another currency that
competes with traditional currencies as a store of value. While there is no agree-
ment on what the future of crypto may look like, most people believe there needs
to be some form of regulation to protect the public. Part of the difficulties lies in
the fact that governments around the globe are witnessing a shifting in power as
rulers of their countries. The multinational corporations of the world, especially in
the technology arena, have gained tremendous wealth and power, so much so that
the governments need to come up with new rules of engagement with them. For
example, Apple, Amazon, Google, and Facebook together dominate the market
and suppress competition in unhealthy ways in their industries that anti-trust laws
are struggling to keep up with them. In a survey by politico, most employees in the
high-tech industry believe that these large firms are too powerful for the world’s
good.
Their superb financial position allows them to acquire smaller firms to stifle
competition. Examples include Facebook’s acquisition of startups such as Insta-
gram and WhatsApp. The company paid one billion dollars for Instagram, but for
a company in Facebook’s financial position, this is literally peanuts (the company
is worth roughly $900 billion in market valuation and earned more than 18 billion
in profits last year). Amazon used data from third-party sellers against them. The
concerns discussed thus far do not even consider the sheer amount of personal data
that is collected by these firms or the potential to extract profits from them.
In closing, attitudes towards cryptocurrency vary greatly throughout the world.
It is observed that Bitcoin, for example, is most widely used in Turkey—not sur-
prising given the country’s high inflationary environment, as well as a lack of trust
in the local currency. Meanwhile, Bitcoin as well as bitcoin mining is increasingly
banned in certain countries, such as China. However, mining activity is so prof-
itable that such activity has picked up in other parts of the world. In the years to
come, we will continue to witness the changes triggered by technology in the real
world, as well as the virtual world, metaverse, and beyond. It needs to be noted
that by the time this book is released, much time would have passed and even
one year is enough to see a dramatic change in volatility in bitcoins. People are
still unsure and the values of cryptocurrencies could change dramatically and no
system is immune from scandals and theft.
Central Bank-Issued Digital Currency (CBDC)
While the future of cryptocurrencies remains to be seen, traditional fiat curren-

cies issued by governments are being impacted by digitalization. One option for a
government to manage the future of its currency is to create a digital version of
its current currency. We refer to these as central bank-issued digital currency or
CBDC. For instance, even though cryptocurrency mining and trading are outlawed
in China, the Bank of China is taking charge of the future of digital currency by
developing the digital Renmingbi (RMB) with the goal of replacing the physi-
cal version. The initiative was started in 2014 and it was recently announced that
the digital RMB will mainly be used for domestic retail payments. The design
includes a double offline payment system, high security, multi-terminal selection,
multi-information intensity, point-to-point delivery as well as high traceability.
Meanwhile in Europe, the development of the digital Euro is also underway.
The digital euro is issued by the European central bank which has specified
that the digital euro will only complement and not replace, the physical Euro.
This is because the use of the physical Euro is still substantial in many parts
of Europe. The US Federal reserve is reportedly working with researchers at the
Massachusetts Institute of Technology to build and test a digital dollar, but the
important question of whether there will be a digital US dollar remains unan-
swered. Some of the concerns cited include privacy and disrupting the banking
system, especially given that the US dollar is the world’s reserve currency.
Each country will need to evaluate its own digital currency strategy and decide
whether a digital version of the country’s home currency is a suitable addi-
tion/substitution of its paper currency. While the United States is still on the fence
about a digital dollar, both China and Europe have already made their moves and
are taking a cautious approach to embrace the digital future of currency under
government supervision. Compared to letting the free market run its course with
cryptocurrencies, and not having a digital currency, this early move appears to be
an acceptance of the digital age while maintaining control over the currency used
within a country. Ironically, it is precisely this lack of government control, the
lack of international borders, and the government’s inability to control the money
supply that is viewed as desirable qualities of cryptocurrencies.
Global Financial Contagion 117
Global Financial Contagion
The result of a more connected world is also a more intertwined financial world.
What used to be separate banking systems in different countries are more inter-
twined than in the past. The interconnectedness of the world’s banking systems
undoubtedly facilitates international business as well as international travel, but
there are also some major downsides that resulted from this development. For
instance, due to the relatively free flow of capital, you can see money leaving
countries and going to certain safe havens where privacy is better protected for
the money you don’t necessarily want others to know about (i.e., Suisse bank
accounts). The same kind of connectedness also exists in capital markets (such
as the stock market) in general. The financial markets can be viewed as a place
where demand and supply for financial products meet to form a price based on the
riskiness of the products.
One of the most important concepts in modern finance is the benefits of diver-
sification. The core idea behind diversification is quite simple: do not put all your
eggs in one basket because you do not want to risk losing everything. By putting
all your investment in one asset, you are taking an excessive risk because there’s
no such thing as a completely safe stock. By design, stocks do not and cannot
guarantee a certain amount of financial return. Similarly, just as hindsight is often
20/20, the future is always uncertain, which is why there’s that saying that you
should never invest money that you can’t afford to lose.
By looking at the trading volume on major stock markets today, one would
never guess that the original idea of stock ownership was never intended for trad-
ing, and certainly not trading the high frequencies seen today. The cross-listing of
stocks on multiple exchanges, and the speed at which information travels over the
internet means that diversification benefits are much harder to achieve than in the
past. In other words, the correlation or co-movement of stocks around the globe
has gone up overtime. This is primarily due to how quickly and cheaply informa-
tion travels, as well as increasingly free-flowing capital. Thanks to technology and
deregulation regarding capital flows, money around the world can be seen chas-
ing financial returns with far fewer locational constraints. When too much money
is chasing too few goods or investment products in this instance, prices can rise
quickly to a level that is not rational or sustainable overtime. The result is the quick
formation of financial bubbles, whether it is in the financial markets or any other
market (real estate, for example). Without doubt, we now live in an era where the
formation of bubbles happens quickly with a higher frequency of such bubbles.
To make matters worse, the magnitude of these bubbles is also larger than they
were in the past. We have currently entered a period of global capital superabun-
dance, which means there is more money chasing fewer investments. This at a
macrolevel dictates that the returns generated by capital must drop compared to
historical standards.
Finally, it is worth noting that all these realities discussed above regarding
financial capital and the financial markets were already present before the Covid-
19 pandemic4 —which unfortunately is still ongoing two years after its initial
outbreak in 2019. The public health significance of this event is that probability-
wise, it is a once-in-a-century event in which humanity suffers through disease
and mortality. The economic consequence of this latest pandemic is not entirely
clear now and can only be properly summarized in the future when we look back
at these years retrospectively. What we already know for certain is that due to
the fiscal stimulus provided by governments around the globe, there is even more
money floating around in the world, looking for a place to go. Perhaps when we
look back in the future it will seem obvious, but one would never have guessed
that COVID had a negative effect on the world by looking at financial market
movements during the pandemic.
Societies around the globe went through at least a couple of rounds of shut-
downs where the public was ordered to stay home. Entire sectors such as the travel
industry and the restaurant industry simply were not allowed to do business and
had to be kept on life-support with government handouts. This is all in addition
to the expenditures and resources needed on the public health front (think “free”
vaccines, drugs, tests, consultation, medical services, etc.).
Listing a Business Abroad
While far from a common business move, some businesses may wish to raise
equity or source capitalization abroad—by selling company shares abroad. This
could happen for several reasons and could be in addition to the company’s home
country listing. It is a complex and expensive process and is only feasible for
large companies with resources. This topic is one reserved for an advanced finance
course and an accounting consolidation course, but here we briefly discuss some
accounting implications to give the reader an idea of the accounting complexities
to be expected.
As discussed in the previous chapter, when companies go abroad, accounting
books of foreign operations are kept separately and usually are done following
their parent’s accounting standards at home, so that the anticipated combining,
or accounting consolidations process is made easier. When a company operates
in two countries and its shares are publicly traded in both these countries, things
get even more complex as two securities commissions are involved. Fortunately,
between Canada and the United States, the countries’ securities commissions have
4Interestingly, of the recorded pandemics in history, this is the first and only pandemic that we
have been able to do something about while it is still unfolding. Our medical and technological
advancements have enabled us to genetically sequence the virus, track its mutations, develop and
deliver effective vaccines to prevent death and severe disease. These are incredible achievements,
and many lives were saved, but at the same time the financial burden will be with us for years to
come.
Global Financial Contagion 119
a bilateral agreement for allowing a foreign subsidiary to follow the accounting

rules of their home country. This greatly simplifies the situation, though readers
should be mindful that most countries do not have such an agreement.
End-of-chapter assignments and exercises–case scenarios, short answer ques-

tions
1. Your roommate who is a science major knows that you study in the school
of business. She asks you to describe the general idea behind investment
diversification. Why is it important?
2. Summarize why financial markets are typically regulated. What happens
when the markets are widely perceived as being unfair?
3. Describe how a financial bubble can form when there are few controls over
the international flow of money versus strict capital controls surrounding
national borders.
4. Which is a safer investment? To own a company’s corporate bonds or the
company’s common shares? Why?
5. What is the mandate of the SEC? What goal does the SEC ultimately aims
to accomplish?
6. Describe how no cost trading platforms can contribute to bubble formation
in the stock market.
Mini Case 1
As a result of world equity markets being at multi-year highs, many private

companies are choosing to go public, or sell equity shares via a public stock
exchange in a process called an Initial Public Offering (or an IPO). EZride is a
privately owned car-sharing service with 20 locations across Canada. Their fleet
of cars is entirely electric and hybrid vehicles. Business is booming due to the
rising cost of car ownership and the company has plans to further expand the
number of locations in the country. They have been approached by investment
bankers who advise the company to consider going public. Discuss the financial
reporting implications related to this decision.◄
Mini Case 2
Sam Co headquartered in Toronto trades on the Toronto Stock Exchange. The

company acquires small businesses around the globe and maintains them as sub-
sidiaries. In other words, the company is a holding company of other businesses
and tends to buy businesses when they perceive good value in the price. Some
companies that are struggling financially have the potential for re-organization
and efficiency gains. The company, in order to comply with the Ontario secu-
rities commission prepares its financial statements in accordance with IFRS.
Discuss the financial reporting implications related to domestic and foreign pur-
chases of Sam Co. (assuming that purchases are always of the entire company
or controlling stake).◄
References
Leamer, E. E., & Storper, M. (2014). The economic geography of the internet age. In Location of
international business activities (pp. 63–93). Palgrave Macmillan.
Regulation full disclosure: https://www.investor.gov/introduction-investing/investing-basics/glo
ssary/fair-disclosure-regulation-fd
Sanicola, L. (2017, February 13). What is FinTech?. Huffington Post. Retrieved August 20, 2017.
Leong, K., & Sung, A. (2018). FinTech (Financial Technology): What is it and how to use tech-
nologies to create business value in fintech way? International Journal of Innovation, Manage-
ment and Technology, 9(2), 74–78.
Survey of tech workers accessed at: https://www.protocol.com/policy/tech-employee-survey/tech-
employee-survey-2021
Negotiating Practices
8
Negotiation is an initial step of multinational projects, so effective negotiation

ensures successful international relationships and business transactions across the
geographical and cultural boundaries. It is a process of reaching an agreement
and making business deals with the representatives of other countries and cultures.
The negotiation process is always challenging, as each side has its own inter-
ests, goals, and outcomes. This process becomes harder, however, when it involves
intercultural communication. Knowing how differences in communication styles,
cultural values, and negotiating behavior affect negotiation results contributes to
less stressful negotiations, trustful business relationships, and reduced costs.
Learning Objectives—This Chapter will
1. Explain approaches to negotiation.

2. Look into the challenges of intercultural communication during the negotia-
tion process.
3. Examine factors that influence negotiation outcomes.
4. Explain cultural differences in communication styles.
5. Uncover differences in basic negotiation tactics and decision-making.
Mini Case
Canadians in South Korea

A team of managers from a Canadian retail company went to South Korea to
negotiate with a well-known Korean clothing brand. The team was led by Sheri
West, an experienced manager, who was sure that the negotiation would be a
success. She did not foresee any difficulties at all.
The Canadian team expected that the negotiations would take a maximum
of three weeks and would end up bringing back to Canada a win–win contract.
So, they were very surprised to see that the South Korean side did not have
https://doi.org/10.1007/978-3-031-06440-1_8
122 8 Negotiating Practices
the intention to finish the negotiations so fast. They preferred to spend time
together, show Canadians their factory, and talk about the history of their brand
instead of starting to discuss the conditions of the agreement right away.
When the time came to discuss the contract, the Canadian team was surprised
to see that the discount that the Korean side offered was intentionally made
“unfairly low”. Instead of receiving 10% off (this is what they hoped for), the
Korean negotiators offered only a 3% discount. What a disappointment it was!
Sheri discussed the offer with his team, but they did not reach a consensus.
She called her manager and heard back that this offer was totally unacceptable.
The Korean team discussed it with their management as well only to hear that
what the Canadian side offered was unreasonable, as they aimed to receive
such a “good deal” even without proving first that they were committed to a
long-time partnership with them.
As a result, the negotiation process took twelve weeks. The South Korean
side insisted on the initial 3% with increasing the offer to 4% in six months
and then to 6% in a year. They agreed to reopen the contract for negotiation in
a year if all the conditions were met.
Both teams were exhausted and not satisfied with the result; however, they
felt relieved after they were able to reach an agreement. The Korean negotiators,
however, were not sure if they wanted to continue their relationships with their
Canadian partners, as they were disappointed with how “short-sighted” and
“rude” they were. The Canadian team did not know if they would continue
their partnership with the Korean brand either, as they did not feel that they
won in this negotiation. What should both sides do now?
Case Questions
1. What was the expectation of both teams when they started the
negotiations?
2. What went wrong in the negotiations?
3. What could have been done differently to achieve a better result?
4. What should both sides do to achieve desirable outcomes when they
re-enter the negotiations in a year?◄
What is intercultural negotiation and what are the steps in intercultural negotia-
tions? You may have heard that negotiation is often compared to a pie and that the
purpose of negotiation is getting your slice of the pie. However, does negotiation
mean obtaining the biggest slice of the pie?
123
There are three approaches to negotiation:
1. One of the approaches is a win–lose distribution of the pie, which basically

means that if one person takes a bigger slice or one side takes a bigger slice of
the pie, the other side will lose.
2. Another approach is a lose–lose approach. If negotiators have this approach,
the pie becomes smaller.
3. However, you can make the pie bigger, and it will be a win–win situation. This
is what successful negotiators aim for.
Both cultural and personal preferences affect the choice of negotiation approach.
At the same time, depending on their approach, teams either cooperate with each
other looking for mutually beneficial solutions, or use such negotiation tactics that
help them to dominate during negotiations.
Reflect and Connect

Which approach to negotiation did each side in the chapter mini case use?
Did both teams use the same approach, or were their approaches different?
Who Is Involved in Negotiations?
Negotiations can involve separate individuals or teams depending on their purpose.

There are several possible configurations (Fig. 8.1).
Intercultural negotiation is a process initiated by individuals, groups, or
organizations from different cultures that enables them to:
. Jointly define the form of the relationships.

. Clarify individually and together the goals and outcomes to be achieved.
. Communicate about issues of individual or common concern.
. Educate each other about shared and differing issues, interests, or needs.
. Develop options that address their interests, needs, issues, problems, or conflicts.
. Influence and persuade each other.
. Reach mutually acceptable decisions and agreements.
. Implement agreements reached (Moore & Woodrow, 2010).
Intercultural negotiations bring numerous opportunities. However, studies show

that they are more complex than domestic negotiations (Cullen & Parboteeah,
2014; Moore & Woodrow, 2010). Do you agree with this? Why do you think
it is so?
1.Individual
1.Multiple individuals,
negotiators, each
each representing
representing groups,
groups, communities,
communities,
countries, or
countries, or
organizations
organizations
1.Two teams of two

1.Individual or more people, each
negotiators, each representing their
representing group, community,
themselves country, or
organization
1.Multiple teams,
1.Multiple individuals, each representing
each representing
themselves
Negotiations their group,
community, country,
or organization
Fig. 8.1 Engagement in negotiations
Steps in Intercultural Negotiations
Intercultural negotiations involve the same steps as domestic negotiations, but

they are different because they are more complex. The main reason is that we
encounter numerous cultural differences during intercultural negotiations. In addi-
tion, political, social, and economic systems across the globe differ as well, and
these three factors come into play when we deal with intercultural or international
negotiations.
Intercultural negotiations usually involve seven steps (Fig. 8.2).
It is important to understand, however, that all these steps are perceived differ-
ently by the representatives of other cultures. The success of the negotiator will
depend on how well they are aware of these differences in perceptions and how
much they are willing to take them into consideration at all the steps of the negoti-
ation process. Let us now dig dipper into these differences. Figure 8.3 shows what
cultural dimensions and components of culture should be taken into consideration
when preparing for negotiations.
Communication Style
Differences in communication style play a very important role in negotiations.

Edward Hall (1976) argued that all cultures can be divided into two groups: high-
context and low-context style. You can see the differences between these two
cultures below (Fig. 8.4).
Communication Style 125
Fig. 8.2 Steps in

intercultural negotiations
(Based on Cullen &
Parboteeah [2014])
1.Preparation
1.Building
relationships
1.Exchanging
information &
first offer
1.Persuasion
1.Concession
1.Agreement
1.Post-
agreement
Hall’s research of communication styles is closely connected with research on

“face” and “facework”. Face is defined as a public self-image, an impression that
people want to make on others in a particular social context, or “your public iden-
tity” (Samovar et al., 2013). This means that all people care about this public
self-image, and as a result, everyone is afraid to “lose face”. This “fear to lose
face” encourages people to get involved in “facework”.
Other Negotiation
Factors Style
Fig. 8.3 Factors that influence intercultural negotiations
High-context Style Low-context Style
• Most of the information is in the . Most of the information is delivered in

context and nonverbal signs words rather than nonverbal signs
(expressed implicitly) (expressed explicitly)
. Avoiding “threatening” the face of . No or little concern about another
another person is extremely important person’s face
. Indirectness and subtleness in . Directness in communication
communication
. Extreme politeness
. Silence is encouraged . Open expression of reactions
. What is not said may be more . Silence is avoided
important than what was said . Clear and to the point conversation
“leaves little for imagination”
Fig. 8.4 Differences between high-context and low-context cultures based on Hall (1976)
Facework is defined as “a set of coordinated practices in which communica-

tors build, maintain, protect, or threaten personal dignity, honor, and respect”
(Dominici & Littlejohn, 2006). According to this theory, all people do facework.
However, what is important to understand is that in low-context (and collectivis-
tic) cultures, individuals are more concerned with losing their own face while in
high-context (collectivistic) cultures, people show concern about others. So, their
facework will be directed towards saving other people’s “face”. As a result, we
can see that in these cultures, people are extremely polite and care about other
people’s feelings. In such cultures, “no” is hard to say directly, as people try not
to offend others.
Consider an example of Japanese negotiators. When the Japanese participate
in negotiations, they rarely say no. They can say, for example, “very difficult”,
meaning almost impossible. If the negotiators from the other side come from a
low-context culture, they may think that the other side is indirect because they are
hiding something. However, this indirectness is explained by the negotiators’ care
about other people’s feelings. Japanese negotiators are often indirect when they do
not want to offend others, or they need more time to think about the offer.
Another important characteristic of the high-context cultures is that negotiators
often return to the points that they have already discussed, which makes the nego-
tiators from low-context cultures confused. The representatives from low-context
cultures, on the opposite, usually expect that if the negotiation moved to another
point, no return to the previously negotiated points should be done (Cullen &
Parboteeah, 2014).
These differences in communication styles can bring misunderstandings and
handling them ineffectively can even jeopardize negotiations. If the negotiators
come from a low-context culture, it is important for them to change their commu-
nication style to make it less direct. Otherwise, they may be perceived as rude and
too demanding.
What do you think?
1. Based on Hall’s theory, which cultures do you think are high context?
Which cultures are low-context?
2. What about your culture? Is it high-context or low-context? Why do you
think so?
3. Do you think all cultures can be put under these two categories? Why do
you think so?
4. How do these differences influence negotiations? At what stages of the
negotiation process do they come into play?
5. What can be done to avoid misunderstandings because of differences in
communication styles and face-saving strategies?
One important nonverbal clue during negotiations is eye contact. The intensity
of an eye glaze differs significantly and has different meanings across cultures
(Fig. 8.5). For example, while in the North American cultures, lack or not enough
eye contact may be interpreted as dishonesty or an attempt to hide something, in
Asian cultures, it is perceived as a sign of respect.
In the same way as the intensity of eye contact may communicate different
messages depending on the culture negotiators come from, touching is another
indicator of emotions during communication. While there are countries where peo-
ple try to avoid touching others at all costs, in other cultures, touching others is an
essential part of any conversation, including negotiation. So, while participating
DIRECT EYE CONTACT CULTURES NOMINAL EYE CONTACT CULTURES
Middle Eastern Korean

French Japanese
German African
Dominant US East Indian
Fig. 8.5 Eye contact across cultures (Samovar et al., 2013)
DON’T TOUCH MIDDLE GROUND TOUCH
Japan Australia Latin American countries

United States Estonia Italy
Canada France Spain
England China Portugal
Scandinavia Ireland Greece
Other Northern European India Russia
countries
Middle Eastern countries
Fig. 8.6 Touching across cultures (Axtell, 1998 as cited in Suderman, 2008)
in negotiations with the representatives of such countries like Brazil, Mexico, and
Italy, you should be prepared that people will touch you to show their friendliness,
sincerity, and trust (Fig. 8.6).
Graham’s (1985) study of negations that involved Japanese, Brazilians, and
Americans found significant differences in the amount of eye contact, touching,
silence, and the use of the word “no” (Fig. 8.7).
The role of emotions in communication is also an important element of the
negotiators’ communication style. In some cultures, emotions are more vividly
expressed while in others, they are very subtly shown or not expressed at all. For
example, people from Asian cultures, such as China, Thailand, the Philippines,
Japan, and Indonesia, value maintaining harmonious relationships, so they prefer
to avoid direct emotional confrontation.
On the opposite, for negotiators from Russia, it is common to show their disap-
pointment, satisfaction, or confusion openly, and if the other side is too reserved in
their emotions, it may seem suspicious to Russians. They may think that the other
side is hiding something, which may decrease trust between partners, increase
tensions, and lead to undesirable outcomes.
Japanese Americans Brazilians

Silent periods (number of silent periods 5.5 3.5 0
longer than 10 seconds per 30 minutes)
Conversational overlaps 12.6 10.3 28.6
(number of interruptions per 10 minutes)
Facial gazing (number of minutes of eye 1.3 3.3 5.2
contact per 10 minutes)
Touching (number of touches per 30 5.7 9 83.4
minutes; handshakes not included)
Number of ‘NOs’ (number of times the 0 0 4.7
word ‘no’ used per 30 minutes
Fig. 8.7 Nonverbal communication and the use of “no” in Japanese, American, and Brazilian
cultures
Such differences in emotional reaction often led to misinterpreting business

partners’ behavior. For example, the Japanese are often silent when they are sat-
isfied with the offer, which may be interpreted by North Americans or Europeans
as dissatisfaction due to a lack of emotional reaction. As a result, they may
make another concession to “please the other side” though it may be unnecessary
(Cullen & Parboteeah, 2014).
Ekman (1999) argues that there are seven universal (recognized all over the
world) facial expressions that express emotions: anger, disgust, fear, happiness,
sadness, surprise, and contempt. However, Richmond et al. (2012) state that con-
tempt is not expressed universally, but instead, interest is. They expanded on
Ekman’s theory and proposed a new list of universal facial expressions that they
called SADFISH: sadness, anger, disgust, fear, interest, surprise, and happiness.
Matsumoto’s (1993) research, however, found that there is a difference in the
meaning of a smile between Asian and mainstream American cultures. He argues
that people from Asian cultures usually smile when they feel embarrassed while
Americans smile when they are happy. This misinterpretation of a smile causes
misunderstandings during negotiations, as the representatives of the mainstream
American culture may consider that the other side is satisfied with the offer and
move to another stage of the negotiation. They may be surprised and feel “offend-
ed” that the other side brings to the negotiation the conditions that they think have
already been accepted.
Nevertheless, emotional reactions often depend on an individual’s preference, so
do not assume that all representatives of a particular culture will express emotions
similarly. Be careful with interpreting other people’s emotions because you cannot
always rely on them.
Survival Tips
Negotiators from low-context cultures Negotiators from high-context cultures

1. Try to adapt your communication style, 1. Make sure your answers are clear and leave
focusing less on talking, and more on listening nothing for imagination. In such a way, you
to others. In such a way, you will make a will make communication easier and will
positive impression on your high-context impress your counterparts with quick and
counterparts efficient decision-making
2. Assume that the message from the 2. When the other side asks you for more
high-context partners may potentially have information, assume that they require more
more than one meaning and ask questions to clarity
make sure that you understand it correctly 3. If you find your partners to be too direct
3. In addition to a verbal message, look for with you, assume that they appreciate clear and
nonverbal signs to make sure you understand straightforward responses
the message correctly. Do not assume that 4. Do not rely on the nonverbal clues if the
people are hiding something when they are negotiators come from a low-context culture.
indirect with you Look for the clues in their verbal expressions
4. Try to match your nonverbal behavior to
those of the culture you are interacting with
Long-Term Versus Short-Term Orientation
The mini case at the beginning of this chapter involved a typical misunderstand-
ing of each other’s cultural values and orientations. To be more specific, the
teams did not take into consideration a difference in expectations regarding long-
term versus short-term orientations (Fig. 8.8). If they had shown their interest in
developing long-term business relationships through negotiating the dates of the
contract re-evaluation based on the level of the partnership success, they would
have successfully closed the negotiations.
Long-term oriented societies Short-term oriented societies

Orientation towards future rewards Orientation towards short-term goals
Organizational loyalty and self- Short-time organizational loyalty

discipline
Leisure time is not important Personal freedom and leisure time are
important
The focus is on obtaining market share The focus is on short-term profits
Decisions are based on a logical analysis Decisions are based on synthesis with the
of problems goal to reach consensus
E.g., China, South Korea, Japan. E.g., Mexico, the USA, Egypt.
Fig. 8.8 Long-term versus short-term orientation cultures (Hofstede, 1980)

Long-Term Versus Short-Term Orientation 131
Studies show that in long-term oriented societies, business partners are commit-
ted to building relationships and are interested in maintaining them for a long time
(Hofstede, 1980). This is the reason why they always spend time on getting to
know their partners and testing their relationship. As short-term oriented societies
are more oriented to “making a deal”, the focus of negotiation for them is often
on getting a better “piece of a pie”. This may be perceived as an offensive behav-
ior by long-term oriented partners who may feel that they are pressed to make a
concession without having an opportunity to make sure that they can trust their
partners.
High-context and collectivistic cultures are usually long-term oriented, so
they spend more time in getting to know each other to build relationships. On
the contrary, negotiators from low-context cultures often overlook this stage in
negotiations, moving to the exchanging of information and the first offer right
away (Cullen & Parboteeah, 2014). However, such negotiators put their potential
partnerships with the representatives of high-context cultures at risk.
Asian cultures, for example, are very often slow to sign a contract, as they want
to develop relationships. So, when you are in a rush to sign a contract with them,
they may think that you are hiding something. If they expect you to slow down,
as they want both sides to learn more about each other, you should give them this
opportunity. You should plan enough time for developing these relationships.
Negotiators can build relationships in different places and under various circum-
stances. For example, the Japanese prefer to drink tea with their potential partners
before they even start a conversation about a potential agreement. Drinking tea
in Japan is not just about spending time together. The Japanese can learn every-
thing they need to know about the other side during this ceremony. They will look
for things and how you behave, how you address them, and what you are talking
about during this ceremony. They will pay attention to several small details to get
to know you better and decide whether they want to have business with you and
your company even before you officially start the negotiation process.
The word “nemawashi” which means “laying the groundwork” is used to show
how important it is for Japanese businesspeople to know each other first and
exchange information long before decisions are made. Japanese meetings are full
of ceremonies; they are slow, so patience is a key to success. It is inappropri-
ate to start a meeting talking about business unless your Japanese partners start
this conversation first. You will appear polite if you start with a small talk about
the weather, your appreciation of a chance to deal with this company, and the
good words that you heard about it. As Japan is a collectivistic culture, it is not
appropriate to focus on separate individuals during a meeting (Withey, 1994).
Russians prefer to have dinner at an expensive restaurant (preferably with alco-
holic drinks) not only to develop closer relationships with their negotiation partners
but to impress their guests as well. When you are invited to Russia as a potential
business partner, be ready to be treated like royalty but do not expect that you will
close negotiations soon.
Italians also spend much time in building relationships with their potential
business partners and often invite them to restaurants for lunches and dinners.
However, unlike Russians, they prefer to keep business conversations outside of

restaurants, so they talk about food, travel, and art while eating.
In Greece, you should expect to meet with your partners at least three times
before you start negotiations. The first meeting is usually for laying the foundation,
the second meeting will help you to build trust and respect, and only in the third
meeting, the negotiation process will start (Sabath, 1999).
Negotiation Tactics
Each side attempts to get the other side to agree to their position during
negotiations. However, though negotiators use similar tactics (e.g., promises, rec-
ommendations, rewards, etc.), the mix and use of these tactics can be different
depending on the negotiators’ cultural norms. In addition, ethical systems across
the globe are different, so there may be differences in perception of which tactics
are appropriate.
Figure 8.9 shows examples of commonly used ploys during negotiations and
the recommendations on how to deal with the partners who use them (they may
not even realize that their tactics may be perceived as “dirty tricks” by others, as
norms are different across the globe).
Forms of Agreement
As you may know, in individualistic cultures, people prefer to sign contracts while
in collectivistic cultures, individuals prefer other types of agreement. So, if you
deal with a collectivistic culture, do not expect people to be very enthusiastic about
signing a contract. In such countries, negotiators may come to the negotiation
process even without an idea of how they would like their contract to look like.
Another important thing here to consider is the differences in terms of the
formal versus informal communication styles. If you address people not in a
proper manner, they may feel that you are disrespectful, and if the negotiators
are from a high-power distance and collectivistic culture, they may stop all types
of negotiations with you only because they will feel that you are not polite enough.
Another important thing is general versus specific forms of agreement. Overall,
high-context cultures prefer general contracts while low-context cultures appre-
ciate specific contracts with detailed terms and conditions (Fig. 8.10). There are
countries where people do not like specific forms of agreement because they think
that others include so many details in the agreement because of a lack of trust. It
can ruin negotiations and will not bring a desirable outcome.
If you deal with Middle Eastern countries, a contract may be an issue, as they
mostly prefer either very general written contracts or oral agreements. In many
cases, your potential partners from Arab countries may be offended if you require
a detailed contract with all terms and conditions, as it will mean to them that you
do not trust their word.
Japanese also prefer a general agreement. As Japan is a high uncertainty avoid-
ance culture (Hofstede, 2011), the Japanese believe it is impossible to foresee
Forms of Agreement 133
Tactic Description Recommendation

1. Deliberate Negotiator present Point out directly what
deception or untruths either in facts you believe is happening.
buffing or intentions (e.g. one
foreign company spent a
week in a hotel just to
know that the local
company was already
negotiating with another
company and brought
the third company only
to scare the negotiators)
2. Stalling Negotiators wait until Do not reveal when you
the last minute before are going to leave and
the international team say that you are going to
plans to go home and stay as long as needed.
then starts to push the Moreover, if you will
concession. have to leave, you will
leave without an
agreement.
3. Escalating Negotiators make an Clarify decision-making
authority agreement, but then authority early in the
reveal that it should be negotiation process.
approved by the senior
management or the
government. Objective:
put you under stress to
get more concessions
from you.
4. Good-guy, bad-guy One negotiator acts Do not make any

technique agreeable and friendly concessions. Ignore this
while a partner makes game and focus on the
outrageous and mutual benefits.
unreasonable demands.
The good guy suggests
that only a small
concession can satisfy a
bad guy.
Fig. 8.9 Commonly used ploys during negotiation (Cullen & Parboteeah, 2014)
5. You are wealthy, Used by negotiators from Ignore this game and
and we are poor developing countries to focus on the mutual
get more concessions benefits.
from rich countries.
Small companies use this
tactic when dealing with
big companies.
6. Old friends Negotiators act as if the Keep a psychological
companies and their distance that reflects the
negotiators have long- true nature of the
enduring relationships. relationships.
They show hurt feelings
if their counterparts
disagree or do not agree
to their requests.
Fig. 8.9 (continued)
High-context countries Low-context countries
A contract focuses on building Contract focuses on making a deal

relationships (including family,
tribe, and clan connections)
Not very detailed, as there is no Very thorough with a great
necessity to write down everything number of details
(people trust each other, so mutual
understanding, oral agreement, and
handshake are enough)
The terms are vague; there is room No or very little flexibility in terms
for changes and conditions
The parties rely on relationships The legal system is expected to
more than on a legal system in enforce compliance
terms of compliance
Fig. 8.10 Differences in forms of agreement across cultures (Hall, 1976)
everything. So, when the circumstances change, general contracts allow changes
as well. Japanese also believe general contracts demonstrate more trust to partners,
so American detailed contracts that cover all the legal aspects are perceived as a
lack of trust and are frowned upon.
Russians will be surprised to see a detailed contract that explains all the respon-
sibilities and sets expectation that both sides comply. It is very common that not
all the terms of the contract are met, as Russians do not usually hesitate to modify
the contract details after it was signed by all parties (Sabath, 1999).
Team Building and Decision-Making 135
On the other side, the Swedes, Germans, English, and Austrians favor very
detailed agreements and expect the other side to meet all the terms. You can count
on them to take their responsibilities seriously as well.
Team Building and Decision-Making
Moore and Woodrow (2010) argue that the team composition is one of the most
important factors that contribute to negotiation success. They believe that team
structure should involve both cultural and strategic considerations and take into
consideration the following characteristics:
1. The formal position and status of team members.

2. The personal or professional reputation and credibility of members.
3. The areas of expertise needed for the negotiations.
4. The personal style and perceived ability of individual members to promote
agreements.
Cultural differences in team building are often connected with power distance or
hierarchy. According to Hofstede’s research on cultural dimensions, all cultures
can be divided into high-power distance and low-power distance societies, in other
words into hierarchical and egalitarian cultures (Fig. 8.11). Negotiations between
teams that are at opposite poles on this dimension are probably the most difficult
ones; however, it does not mean that they are impossible. With proper preparation
and the right expectations, such negotiations can be and should be successful.
High power distance (hierarchical) societies Low power distance (egalitarian)

societies
. Individuals accept power as part of . Inequality in society should be

society minimized
. Belief that “power and authority are . Special laws, norms, and behaviors
facts of life” should “make power distinctions
as minimal as possible”
. Greater “centralization of power” . Superiors and subordinates are
considered equal
. More recognition of rank and status . People in power do everything
possible to look less powerful than
they are
E.g., Malaysia, the Philippines, Mexico, Arab E.g., Australia, Israel, New Zealand,
Countries, Indonesia. Scandinavian Countries.
Fig. 8.11 High-power distance versus low-power distance societies (Hofstede, 1980)
In high-power distance cultures, the preference is team negotiation with the

leader making the most important decisions. Decision-making will be more cen-
tralized, so the leader will expect a leader from the other side to communicate
directly with them.
Teams from low-power distance societies are organized differently. Their orga-
nizational structure is usually flat with a facilitator/spokesperson innated of a
traditional leader. Decision-making is collective and represented by a spokesper-
son.
In extreme situations, the leaders from high-power distance societies may refuse
to deal with people who have a lower rank or status, which can create difficulties
for egalitarian teams. In this regard, preparation and strategic team formation are
key to successful negotiations.
Such teams practice a shared leadership approach, which often makes high-
power distance teams confused. It can create difficulties for hierarchical teams,
as they will not know who makes decisions and who will have the authority to
approve or reject their proposal. They may find it strange that instead of deciding
right after the offer, the other side’s spokesperson has several discussions with the
team until they reach a consensus or can even initiate voting. It may cause extra
stress for hierarchical teams during negotiations and make the process look longer
and more tiresome.
In some cases, negotiators are confused when the decisions are made by the
top leaders who are not even part of the negotiating team. For example, Dan-
ish, French, and Finnish teams can express their opinions, but the decisions are
made by managing directors, anyway. In Germany, the negotiation teams are rarely
updated about the decision that is made by the top management.
Approaches to Conflict and Conflict Management Strategies
Another important consideration during the negotiation process should be given to

differences in approaches to conflict (Fig. 8.12) and conflict management strategies
(Fig. 8.9). Conflicts often occur during negotiations due to differences in values,
perceptions, and expectations, but if left poorly managed, they can lead to disap-
pointment. As a result, parties may leave the negotiation table without closing the
deal.
Samovar et al. (2013) argue that an individual’s approach to conflict depends
on their culture to a great extent. In some cultures, conflicts are perceived as an
opportunity while in others, they should be avoided at all costs. In those countries,
where people prefer not to engage in conflicts, pacifism and harmonious relation-
ships are valued and confrontations are frowned upon. As a result, individuals
do not openly express their dissatisfaction but either keep silent or try to find an
intermediary to help to solve their disagreement.
In those societies where conflict is regarded as an opportunity, individuals do
not usually keep silent when they do not agree. On the opposite, they use this
situation as an opportunity to renegotiate and change the situation. Most of the
Approaches to Time 137
Conflict as Opportunity Conflict as Destructive
1. Conflict is a normal, useful process. 1. Conflict is a destructive disturbance of

the peace.
2. All issues are subject to change 2. Everyone should adapt to established
through negotiation. values.
3. Direct confrontation and conciliation 3. Confrontations are destructive and
are valued. ineffective.
4. Conflict is a necessary renegotiation of 4. Disputants should be disciplined.
an implied contract—a redistribution
of opportunity, release of tensions,
and renewal of relationships.
Fig. 8.12 Approaches to conflict (Samovar et al., 2013)
conflicts are solved by the parties themselves, and there is no need to look for a
third party’s help.
Overall, as high-context cultures aim to maintain harmonious relationships,
their representatives view a conflict as destructive. On the opposite, low-context
cultures are known for their conflict as an opportunity approach.
These preferences combined with differences in power distance can explain
a choice of various conflict management strategies across the world (Fig. 8.13).
Though these differences are well explained in the table below, it is always
important to remember, however, that these strategies may vary due to individual
preferences as well.
During negotiation, the preferences in conflict management strategies are often
obvious (Fig. 8.14) and require both sides to work towards mutual agreement and
find solutions that would suit both sides.
Approaches to Time
Low versus high sensitivity to time is another important thing to consider. Accord-
ing to Hall’s research, cultures can be divided into polychronic and monochronic
(Fig. 8.15). These two approaches are completely different, so when looking for
potential partnerships between the companies from the opposite cultural groups,
negotiators should take these differences into consideration.
So, individuals from monochronic cultures when preparing a contract for their
partners from a polychronic culture, instead of requiring strict deadlines, should
seek for other solutions. For example, they can negotiate the deadlines to make
their polychronic partners feel more comfortable with their conditions. It will help
to manage expectations and develop trust between business partners.
Also, make sure you have the right expectation about the beginning of sched-
uled meetings in different countries. In Greece, the Czech Republic, Turkey, India,
Low-power distance & Low-context High-power distance & High-context

(individualistic) cultures (collectivistic) cultures
Verbally direct face-work strategies (criticism, Verbally indirect face-work strategies, e.g.,
reprimands, threats, orders) hints, indirect questions, etc.
The use of self-defensive strategies (e.g., The use of apology and self-criticism (e.g., via
justification) by subordinates self-reflection) by subordinates
Dominating strategies are often used by both Shaming strategy is often used by a high-
parties in conflict status party. Avoiding and obliging are used
by a low-status member
Individual rights and duties are defined by Individual rights and duties are defined by
contracts and laws ascription (status)
Conflict is often solved by the disputants High-status mediator who would help to save
themselves both disputants’ face is needed
Fig. 8.13 Differences in Conflict Management Strategies (Ting-Toomey & Kurogi, 1998)
Fig. 8.14 Preferences in

conflict management High-context Low-context
strategies
cultures cultures
Avoiding Dominating
Compromising Integrating
Accommodating
Developing Intercultural Negotiation Skills 139
Monochronic Time Cultures Polychronic Time Cultures
View time as linear View time as a cycle
Do one thing at a time Do many things at a time
Believe that they control time Do not believe that they control time
Strict adherence to deadlines and agendas No adherence to deadlines and agendas
Coming on time is important Being late is acceptable
Examples: Dominant North American,

Scandinavian, German, Dutch
Examples: Arabic, Latin-American, Spanish
Fig. 8.15 Monochronic versus polychronic cultures (Hall, 1976)
Romania, and Spain, for example, be prepared to wait if you come to the meeting
on time. On the contrary, in Finland, Sweden, Denmark, England, and Austria,
your business partners will appreciate it if you come earlier. If you come from a
monochronic time culture, though, and your partners are late for a meeting, never
tell them about it. It is considered rude and inappropriate.
Developing Intercultural Negotiation Skills
Acquiring negotiating skills requires time and patience. Samovar et al. (2013) give
helpful advice on how to become a successful negotiator:
1. Be prepared. Learn as much as you can about the other culture regarding the
level of formality, status, approaches to negotiation and conflict management,
communication style, etc.
2. Develop sensitivity to the use of time. This means dealing patiently with those
whose time orientation is different and adapting to their pace.
3. Listen carefully. Even if you are uncomfortable with silence, it is important to
know how important that in many cultures, silence is used to communicate a
message.
4. Learn to tolerate ambiguity. It is important to be open-minded and curious
instead of furious when you encounter something in other people’s behavior
that you do not understand. It will help you to find a common ground and
avoid misunderstandings.
5. Try to locate areas of agreement. As both sides in a negotiation aim to get a
better “piece of a pie”, a win–win situation is possible only when both sides
locate areas of agreement. When you learn to easily identify these areas and
show them to your partners, both sides will win.
1. Why is negotiation across cultures more difficult than domestic negotia-

tions?
2. How important is eye contact to you during a conversation? How would
you interpret lack of eye contact? How would you interpret “too much”
eye contact?
3. According to Moore and Woodrow (2010), one of the opportunities negoti-
ations give is educating others about influencing and persuading each other.
What is a preferable way to influence others in your culture? What is your
individual preference?
4. What steps in intercultural negotiations do you think are the hardest? Why
do you think so?
5. How important are differences in communication style across cultures?
Have you ever experienced difficulties communicating with someone com-
ing from a culture with a different communication style (low-context versus
high-context)?
6. How is research on “face and facework” connected with Hall’s research on
communication style?
7. Are you good at decoding people’s nonverbal behavior? Why is the under-
standing of cultural differences in nonverbal communication important for
negotiators?
8. What difficulties can teams from long-term and short-term orientation
cultures have during negotiations? What can they do to avoid these
difficulties?
9. How are difficulties in power distance connected with decision-making and
conflict management?
10. What should negotiators know about the other team’s cultural values and
preferences to avoid mistakes in negotiation?
Activities
Activity 1
Behaviors of a Successful Negotiator
In the left column below, list the behaviors that, in your opinion, an effective
negotiator would utilize in your country. In the right column, list the behaviors
an effective communicator should avoid. Share your views in your small group.
Developing Intercultural Negotiation Skills 141
Behaviors to utilize Behaviors to avoid

1 1
2 2
3 3
4 4
5 5
Activity 2. Reflection
Think about a situation when you had to negotiate with a person (people) from
a different cultural group.
. What goals did both parties have?

. Did the parties have a different approach to negotiation?
. What challenges did you have?
. What negotiation strategies did each party use?
. Was your negotiation strategy right for the situation? If not, what could you
have done differently to achieve better results?
Activity 3. “Bridging Differences”
We often have misunderstandings when we communicate interculturally due to

the lack of cultural knowledge and/or cultural sensitivity. Even when negotiators
prepare well and think that they know what to expect during negotiations, they
can go wrong, resulting in one team leaving the negotiations without a positive
result.
To avoid such situations, it is important to assume that the other side has a
positive intent and to look for positive explanations for their behavior. Also, if
you do not understand something, asking questions to understand other people’s
intentions is usually very helpful.
This activity will help you to develop techniques that you can use during
negotiations in the future to avoid anger, disappointment, and misunderstand-
ings during negotiations.
Your Task
In a small group, discuss the following situations. How can you (positively)
explain other people’s behavior? What assumptions about each situation would
be wrong? What can you say (politely) in response to the other side’s behavior
to find out what their real intentions are?
1. You are the only woman in your team. You noticed that no one from the
other team of negotiators speaks with you, and when you ask a question,
they either ignore it or answer it while looking at other team members (not
you). You are frustrated.
2. Your team came to the negotiations on time and was asked to wait for half an
hour before you were let in. You all think that such behavior is unacceptable!
3. You are a top manager at a clothing retail company. The company changed
its strategy and started to look for new suppliers in other countries. You were
sent to the negotiations alone and were treated like a king/queen. You have a
personal driver who drives you around the city and shows you all the places
he is proud of. However, each time when you ask when the negotiations
start, there is no direct answer from the driver. You feel you start losing
patience.
4. Your team is in the middle of negotiations, and you all think that everything
is going well. However, at that point when you feel the other side is ready to
sign a contract, they say that they are in negotiations with another team (from
another country) who make better concessions, so they are more inclined to
work with them. Your team is disappointed and annoyed.
5. Your manager sent a team of three employees who have experience in inter-
cultural negotiations to negotiate a new contract in another country but was
not able to join you. When you came to this country, you were met at the air-
port and treated very well. However, when you were introducing yourself to
the team of the company’s negotiators, you noticed that their positions/ranks
within their company were higher than yours. The next day, you received a
message from the other team that they would like to wait for your manager
to join you. Your team is frustrated.
Online Resources
1. Science Brief: Reading facial expressions of emotion

2. Negotiating: The Top Ten Ways that Culture Can Affect Your Negotiation
3. Communication in Cross Cultural Negotiations [YouTube Video]
4. The Hidden Challenge of Cross-Border Negotiations
5. Cross cultural communication |Pellegrino Riccardi [TED Talk]
6. Compare countries
7. 3 steps to getting what you want in a negotiation [TED talk]
8. Cultural difference in business | Valerie Hoeks [TED Talk]
Appendix 143
Appendix
Cultures Arranged Along the High-Context and Low-Context Dimension
Source Samovar L. A, Porter, R. E. & McDaniel, E. R. (2013). Communication

between cultures (8th ed.). Wadsworth: Cengage Learning.
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Competence in interpersonal conflict (pp. 120–147). McGraw-Hill.
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Withey, J. (1994). Doing business in Japan: An Insider’s guide. Key Porter Books.
International Organizational Forms
9
This chapter will introduce students to various international organizational forms

and the market entry strategies large enterprises (and sometimes small & medium
enterprises—SMEs) use when they begin to grow the market for their products
and services. The choice to conduct business in different parts of the world is a
very conscious and deliberate one and part of the growth strategies that many firms
do. As we introduce different organizational forms for international business, the
clash of business and financial practices between the host country and the multi-
national corporation becomes even more evident and requires careful navigation
of political, finance, accounting, and cultural norms. Students will be able to apply
concepts learned in previous chapters as they look to understand the role of orga-
nizational culture meshing with national cultures whether the organizational form
is simply doing business with a dealership or franchisee in another country or in
a much more complex organizational market entry forms like collaborations, joint
ventures, and mergers/acquisitions.
1. Introduce the various international organizational forms.

2. Discuss concepts of mergers and acquisitions, joint ventures, and different
ways for international market entry.
3. Introduce the concept of global and emerging markets and discuss interna-
tional trade treaties.
4. Provide an overview of commonly used international trading and shipping
terms.
https://doi.org/10.1007/978-3-031-06440-1_9
146 9 International Organizational Forms
International Organizational Forms
According to the Union of International Associations (UIA—https://uia.org/arc

hive/types-organization/cc), there are three main types of international organi-
zations: (international or) inter-governmental organizations (IGOs), international
non-governmental organizations (NGOs), and multinational enterprises (MNCs or
Global Enterprises). While there is an ongoing debate about the exact definitions
for each of these three categories of international organizations, there is broad
recognition of what each of these organizations can generally do, within their
home country borders and across borders.
International Governmental Organizations (IGOs), broadly purport to estab-
lish working relationships among governmental entities in bilateral, trilateral, even
multilateral agreements to achieve some stated purpose: trade, defense, cooper-
ation for specific goals around conservation, climate change, reducing poverty,
technology exchange, educational, or other resources. Some examples include the
USMCA (CUSMA, the former NAFTA) between the United States, Mexico, and
Canada to create a free trade zone. Many such entities exist as described in pre-
vious chapters. There are other IGOs, often under the United Nations, to focus on
refugees, children, the planet’s wildlife, justice, etc. The creation of the UNSDGs
also spurred the formation of many formal and informal IGOs, each created by
agreement and treaty, to create cross-national, collaborative partnerships to achieve
the goals (UNSDG #17).
International Non-Governmental Organizations (NGOs), based on the aims,
structure of the organization, its members and officers, the level of autonomy
(particularly across international borders), and the range and scope of activities,
can assume roles where governments or private enterprises could be restricted.
Many charitable organizations like the Red Cross (International Committee of the
Red Cross—ICRC), Oxfam International, World Vision International, and BRAC
(Bangladesh Rehabilitation Assistance Committee), reputably the largest NGO in
the world, are some examples of true NGOs.
Multinational Enterprises, multinational corporations (MNCs), or transnational
enterprises, are typically, for-profit organizations transacting business and trade
across countries, in many countries and the truly global giants like IBM, Microsoft,
Google, Apple, Amazon, Deloitte, Unilever, Proctor & Gamble (P&G), many auto-
motive brands, many pharmaceutical companies, are all some examples of MNCs.
In the next sections, we will discuss in a little more detail about MNCs, how
they expand into many countries, by investing (Foreign Direct Investment—FDI),
merging with local corporations or acquiring them (M&A), creating joint ven-
tures (JVs), or using agents and distributors (channels for distributing products
and services), and discuss emerging global markets. Finally, we will round up
the chapter by introducing some common terms used in international trade and
business.
How a Multinational Corporation (MNC) Works 147
Multinational Corporations
According to Investopedia, a multinational corporation, typically has assets in its

home country and at least one other country, participates in business across at least
two or more countries, can even include some foreign government enterprises as
partners, does tend to bring economic benefit to home and host countries, and
offers a range of products and services to the countries it operates in.
How a Multinational Corporation (MNC) Works
A multinational corporation, or multinational enterprise, is an international cor-

poration whose business activities are spread among at least two countries. Some
authorities consider any company with a foreign branch to be a multinational cor-
poration; others limit the definition to only those companies that derive at least a
quarter of their revenues outside of their home country.
Many multinational enterprises are based in developed nations, and this has
tended to have a colonialism aspect, where many in developing and emerging
economies feel exploited and there are instances where such corporations tend to
wield enormous power and even political influence in the countries, they operate
in. One example is the British East India Company which started as a trading
outpost for tea and textiles, leading to the eventual British rule of India. Other
such examples tea wars in China, the Hudson Bay Company of Canada, and the
Swedish Africa Company, leading to European colonial expansion in the fifteenth,
sixteenth, and seventeenth centuries. In the modern era, MNCs do assume similar
influence, politically and economically, though the capture of the emerging markets
is by having the people consume products and services provided by the MNCs, to
the detriment of local companies and enterprises.
Investopedia lists four types of multinational corporations (Investopedia, n.d.):
. A decentralized corporation with a strong presence in its home country.

. A global, centralized corporation acquires cost advantage where cheap
resources are available.
. A global company that builds on the parent corporation’s R&D.
. A transnational enterprise that uses all three categories.
MNCs do provide benefits to home and host countries by providing products and
services at cost-effective prices, while maintaining the quality and meeting local
demand for these goods and services. They also provide for the international trade
balances between nations and help the economies and job growth of the trading
nations. There are side effects in the larger corporations can withstand market
forces, which can drive out smaller companies and give rise to monopolies. How-
ever, governments do watch and regulate the scale and scope of operations of
MNCs, so that local businesses can co-exist, in a somewhat tenuous manner.
We should note that it is not always easy to be an MNCs. There are considerable
risks for an organization seeking to do business abroad and they can be exposed
to several risks due to currency manipulation, foreign financial practices, political
uncertainty (having governments favorable to foreign presence), legal risks, and
misunderstood cultural and business norms, leading to poor reception of the MNCs
products. One recent example is the failure of Netflix to gain sufficient market
share in India (Vanamali, 2022).
Foreign Investment (FDI—Foreign Direct Investment)
Among the many ways MNCs enter into trade agreements and partnerships with
companies in other countries is to either have a joint venture (which we will
describe shortly) and/or through foreign direct investment in the partner country.
This involves capital flows and expenditures in domestic companies by a foreign
investor seeking to expand their investments or grow markets for their products
and/or services. The investment is a commitment to the partnership and can take
on several forms, ranging from just providing the capital, to opening local offices,
manufacturing plants, distribution channels, and issuing Initial Public Offerings
(IPOs) to the public in the host country to generate additional capital. These large-
scale investments require the participation of local companies, regulators, the stock
exchange, local and international banking/financial institutions, and local, regional,
and provincial/state governments.
These investments can be of two broad types, Direct and Indirect. Foreign
Direct Investments (FDIs) involve physical investments and purchases made by
a company in a foreign country, typically by opening plants and buying buildings,
machines, factories, and other equipment in the foreign country. These types of
investments find a far greater deal of favor, as they are generally considered long-
term investments and help bolster the foreign country’s economy (Hayes, 2022).
Countries like Brazil typically prefer FDIs, as this way they can also protect the
local companies and their interests.
Foreign indirect investments involve corporations, financial institutions, and pri-
vate investors buying stakes or positions in foreign companies that trade on a
foreign stock exchange. In general, this form of foreign investment is less favor-
able, as the domestic company can easily sell off its investment very quickly,
sometimes within days of the purchase. This type of investment is also sometimes
referred to as a foreign portfolio investment (FPI). Indirect investments include
not only equity instruments such as stocks but also debt instruments such as bonds
(Investopedia, May 31, 2022).
Funding for many of these investments comes from international banks or ded-
icated financial institutions in either the home country of the MNC, the World
Bank (for countries who apply for infrastructure development projects), or multi-
lateral development banks (MDBs), all of whom provide commercial loans and on
occasion official flows.
Joint Ventures (JV) 149
Mergers and Acquisitions
Another way MNCs can enter foreign markets (domestic as well) is through a
process of mergers (when they merge operations with a large corporation in the
host country) or by acquisition (when the MNC buys outright the entire operations
of a small to medium or large company operating in the host country). Depending
on the need, the market share intended by the Merger or Acquisition (M&A),
the reach of the host-country company, and the distribution channels required for
market penetration, the MNC can choose one or the other of the two options of
merging or acquiring.
As with any type of arrangement or business deal, M&As in foreign countries
require the involvement of multiple governmental and non-governmental actors,
regulators, and financial institutions. Depending again on the scale of operations
and the possibility that the M&A between two large corporations could lead to
monopolies, there are political and financial risks that need to be assumed by all
parties. Many M&As succeed, while many also fail, partly due to a lack of under-
standing of local cultures and customs, partly because of the overestimation of the
market potential, partly because of bad management decision-making, other pos-
sible legal and political risks, and competition from local and other international
players. Puma’s success in India (Puri & Krishna, 2016).
In addition to mergers and acquisitions, MNCs can also enter into consoli-
dation agreements with potential host-country (foreign country) companies, use
tender offers, or acquire some assets, instead of outright purchase of all assets.
There can also be horizontal mergers (when competitors merge), vertical mergers
(acquiring a supplier or distributor in the foreign country), or mergers can that
extend a product line (two companies with slightly different, yet related, offerings
in the same market), mergers that extend markets (two companies with similar
offerings in different markets), or form a conglomeration, where two companies
with unrelated offerings decide to merge to utilize resources, distribution channels,
customer base, etc.
Once two companies in the same country or different countries begin the pro-
cess of M&A, financial institutions are lined up to exploring financing options.
For this to proceed, both companies need to be evaluated for performance, pos-
session of liquid and other assets, debts accrued, market capital, and financial
performance, and performance forecasts are assessed using the Price-to-Earnings
Ratio (P/E Ratio), Enterprise-Value-to-Sales Ratio (EV/Sales), Discounted Cash
Flow (DCF), and Replacement Cost.
Joint Ventures (JV)
According to Investopedia, a joint venture (JV) is a business arrangement in which

two or more parties agree to pool their resources for the purpose of accomplishing
a specific task. This task can be a new project or any other business activity. In a
JV, each of the participants is responsible for profits, losses, and costs associated
with it. However, the venture is its own entity, separate from the participants’ other
business interests.
Joint ventures can be formed by any two types of organizations regardless of
size or scope and can be for ongoing continuing partnerships and collaborations or
just a few projects. The effort is to combine or pool resources, combine expertise,
provide cost savings, and give a potential MNC a chance to enter a new mar-
ket, in the home country or in a foreign developed or emerging market. One key
aspect of JVs is how taxes are assessed on profits and assets in both countries
and who pays what. Examples of some famous joint ventures are Sony Ericsson,
Alphabet (Google’s parent company), Glaxo-Smith (Glaxo-Smith-Kline—GSK are
a giant pharma corporation), UBER and Volvo, NBC Universal, and Disney ABC
Television to jointly create a streaming platform called “HULU”, and Kellogg
International and Wilmar International to enter China to distribute breakfast cereals
and other products. With the cryptocurrency boom and burgeoning AI companies
with many industrial and commercial applications, many such M&As, and JVs
are likely to happen as companies look for new markets for existing products or
expand in current markets for new products.
Now that we are familiar with some of the types of international organizations,
we can now focus on what strategies many firms use to enter international markets,
both developed and emerging.
International Market Entry Strategies
Global market entry strategies usually fall under three broad categories of export-
ing, partnerships, or direct investment. A firm’s decision on which entry strategy
to pursue is based on a combination of several factors. Think about it as a con-
tinuum, based on the level of involvement and cost associated with each strategy.
Export selling involves selling the same product, at the same price, with the same
promotional tools in a different place. Export marketing tailors the marketing mix
to international customers.
For any market, a company needs to understand the target market environ-
ment and needs to use market research to identify the market potential. Decisions
concerning product design, pricing, distribution and channels, advertising, and
communications will also need to be taken and the company will need to assess
where it stands with respect to entering or even exporting to international markets.
Some factors that a company will need to consider are:
. If the firm is unwilling to export; it will not even fill an unsolicited export order.
. If the firm fills unsolicited export orders but does not pursue unsolicited orders.
Such a firm is an export seller.
. The firm explores the feasibility of exporting (this stage may bypass Stage 2).
. The firm exports to one or more markets on a trial basis.
International Market Entry Strategies 151
. The firm is an experienced exporter to one or more markets.

. The firm pursues country- or region-focused marketing based on certain criteria.
. The firm evaluates the global market potential for the “best” target markets.
Potential Export Challenges and Factors
In considering these factors, the firm/company needs to think about potential issues
in logistics—transportation, distribution, financial terms of sales/purchases, insur-
ance, freight, and shipping, government regulations, customs, or tariffs (duties),
and other agreements related to the export. Additionally, the firm needs to ensure
that the supply chain for any products is firmed up with availability of parts and
service (where applicable), trained technicians (where applicable), national and
international policies that govern exports and imports, tax incentives, monetary
policies, currency fluctuations, banking rules and regulation for expatriation of
funds, and market intelligence about local demand for the products or services
and competition.
The firm also needs to get a good understanding or at least guidance from
experts about the Harmonized Tariff System, developed by the World Customs
Organization in 1989 and adopted by most trading nations. This system allows
Importers & Exporters to determine the classification number for any product
moved across borders. These follow a two-tier system—Single-column tariff,
where the Schedule of duties has a rate that applies to imports from all countries
on the same basis, and the Two-column tariff, where General duties plus special
duties apply. The purpose was to simplify the tariff system, but as with any sys-
tem, problems persist, and efforts are continuously underway to resolve disputes
and confusion.
Many countries award certain other countries the “Most Favored Nation” status
and form agreements, like the USMCA, where the trade treaties are bilateral, tri-
lateral, or multilateral. The purpose is to protect certain markets, certain products,
and services, and provide for reduced tariff. The General Agreement on Tariffs and
Trade (GATT) organization allows reduced tariff rates where, Historical preference
arrangements already existed, Preference is part of formal economic integration
treaty, and Industrial countries are permitted to grant preferential market access to
lower developed or developing economies.
Planning to Enter International Markets
Once a firm has decided to enter an export arrangement with a trading/export

partner in another country, it needs to identify the key players, such as purchasing
agents, export/import brokers and merchants and management companies, shipping

companies, financial and insurance institutions, and freight forwarders.
After such companies have been identified in the target export market, the
exporting firm needs to get a good understanding of trade financing and methods
of payments for goods and services sold to the export market. There are several
financial instruments used in international trade, such as letters of credit (closed
or open L/C for revolving orders), bills of exchange, international bank transfers,
sight drafts, and time drafts, all to ensure effective payment from the buyer (in a
foreign country) to the seller (the MNC wishing to enter the international market).
As part of the export process, the MNC needs to ensure delivery terms where
goods are concerned. These are also conducted in an agreement between the buyer
and seller and rates for shipping are provided by shippers or freight forwarders.
Typically, the exporting company can quote the products priced Ex Factory, so
shipping and insurance charges for the goods from the manufacturer’s factory or
yard to the buyer’s yard are borne by the buyer. Another option is Cost and Freight
(C&F) or Cost, Insurance, and Freight (CIF), where the shipper/exporter provides
a price for the goods exported to be delivered to the buyer’s yard. These tend to
happen when there are no risks of huge currency fluctuations.
Other Modes of International Market Entry
In some cases, exporting may not be the best option for a company wishing to enter
an international market. In such cases, they can consider licensing, contract man-
ufacturing, or franchising. Each of these has both advantages and disadvantages.
The advantages rest with a relatively lower cost market entry to test the market and
the distribution channels and the disadvantages usually revolve around lack of or
limited market control, the licensee could move to a competitor or become a com-
petitor, the agreements may not last, or the returns may not last. Each firm needs
to decide the best option for its products and services, the vision it has for going
to international markets, a clear understanding of the cultural nuances of doing
business in specific foreign markets, and the level of commitment it will have
to be a true multinational company. Companies can use a combination of these
modes of international market entry to acquire both market and cultural intelli-
gence before committing to long-term presence in any international market. Once
the firm has decided on its vision and long-term goal, it can consider other market
entry strategies like M&As, JVs, Equity-stake partnerships, FDIs, etc.
With this brief discussion of modes of international market entries, we will
discuss emerging markets and why they are so attractive to many MNCs.
Emerging Markets
Emerging markets, often in developing nations usually have lower than average
per capita income, are characterized by high volatility, which can result from a
Emerging Markets 153
variety of factors including internal policy instability, natural disasters, or price

fluctuations, and have been susceptible to currency fluctuations. However, they
have also seen rapid economic growth with GDP (Gross Domestic Product) growth
rates often outpacing more developed nations. As a result, millions of people have
been lifted out of poverty and created a new middle class and a new market for
consumer products and services. These markets also have large, low-cost, and
increasingly educated labor pools, giving a competitive advantage in production.
According to the World Economic Outlook that came out in April 2022, the
war in Ukraine has set back global recovery from the losses incurred during the
2020–2022 pandemic, and global growth is projected to slow from an estimated
6.1% in 2021 to about 3.6% in 2022 and 2023 (World Economic Outlook, April
2022). The World Bank is more conservative in their projections and see the drop
from an estimated 5.7% in 2021 to about 2.9% in 2022 and 2023 (World Bank,
2022).
The Conference Board World Economic Outlook provides Real GDP Growth
Rates for developed and developing (emerging) economies for the 2011–
2031 period (https://www.conference-board.org/topics/global-economic-outlook).
We see that the emerging economies of India, China, Turkey, and the Middle East
region countries’ projected growth rates have dropped to between 1.5 and 4.6%
for 2023 and appear to hold those levels for the next seven years till 2031. The
projected growth rates for developed economies are bleaker and only time will
tell if there is a reversal. These will likely change and be revised, but with cur-
rent global inflation and prospects of a global recession, developed and emerging
markets expect to have sluggish growth rates for the near future.
What this requires is for organizations that wish to start international business
operations, is to continue keeping a global mindset, increase their cultural sensi-
tivities and intelligence about emerging market economies, and gain knowledge
of the Cultural Intelligence of others provides insights about how best to interact
with others in multi-cultural situations, engage in cross-cultural interactions appro-
priately, and perform effectively in culturally diverse work groups. Businesses can
train their employees to adopt a strategy, to gain this cultural knowledge and moti-
vate employees to adopt behaviors that will be culturally acceptable when doing
business in international and emerging markets.
As discussed previously, MNCs and firms wishing to enter emerging markets
should also be attuned to rising trade barriers, fluctuations in capital flows, finan-
cial volatility, and spillovers from industrialized countries’ monetary policies. They
should look for heterogeneity in openness, production structure, trade linkages, and
factor supplies that often lead to large differences between the impacts of trade bar-
riers on advanced and emerging markets, decline in the relative price of tangible
tradable capital goods, currency exchange rules (or lack thereof), and bilateral trade
surpluses, possibly due to currency manipulations (Alfaro & Mendoza, 2020).
Cultural Considerations in Advertising
As companies begin their process of entering new international and emerging mar-
kets, it would serve them well if they were sensitive to the local cultures and
customs, when creating messaging around brands and products. Some common
cultural knowledge and practices are listed below, as a sample, but there are always
several cultural nuances that only those native to the cultures would be most aware
of and can be used as consultants to guide the messaging process.
. Images of male/female intimacy are in bad taste in Japan, illegal in Saudi Arabia
. Wedding rings are worn on the right hand in Spain, Denmark, Holland, and
Germany
. European men kiss the hands of married women only, not single women
. In Germany, France, and Japan, a man enters a door before a woman, no ladies
first!
. American celebrities like Brad Pitt and Arnold Schwarzenegger are seen as
pitch men in Japan but not in the United States.
. Copywriters who can think in the target language and understand consumers
will create the most effective ads and avoid problems like these:
. In China, Citicorp’s “Citi Never Sleeps” was taken to mean that Citi had a
sleeping disorder, like insomnia
. McDonald’s does not use multiple 4’s in advertising prices in China; “four”
sounds like the word “death”
. Humorous or irritating ads may be perceived differently in other countries
. North American ads with direct comparisons and spokespeople use logic to
appeal to the viewer’s sense of reason; Japanese ads rely on implied sentiment
. Partial nudity and same-sex couples are featured in Latin America and Europe
. Food is the most culturally sensitive category
People—Expatriates, Host-Country Nationals, Third-Country

Nationals
When hiring people for their foreign offices, MNCs can consider hiring expatri-
ates, host-country nationals, or third-country nationals. Each has its own set of
advantages and disadvantages as presented below (Table 9.1).
Table 9.1 Expatriates

Advantages Disadvantages
Superior product knowledge Higher cost
Demonstrated commitment to Higher turnover
service standards Cost for language and
Train for promotion cross-cultural training
Greater H Q control
Emerging Markets 155
Table 9.2 Host-country

nationals
Economical Needs product training
Superior market knowledge May be held in low esteem
Language skills Language skills may not be
Superior cultural knowledge important
Fast implementation Difficult to ensure loyalty
Maintaining expatriate sales personnel is extremely expensive; the average

annual cost to US companies of posting employees and their families overseas
exceeds $250,000. In addition to paying expat salaries, companies must pay mov-
ing expenses, cost of living adjustments, and host-country taxes. Despite the high
investment, many expats fail to complete their assignments because of inadequate
training and orientation prior to the cross-border transfer.
Locals offer several advantages, including intimate knowledge of the market
and business environment, language skills, and superior knowledge of local cul-
ture. The last consideration can be especially important in Asia and Latin America.
In addition, because in-country personnel are already in place in the target coun-
try, there is no need for expensive relocations. However, host-country nationals
may possess work habits or selling styles that do not mesh with those of the
parent company. Furthermore, the firm’s corporate sales executives tend to have
less control over an operation that is dominated by host-country nationals (Table
9.2). Headquarters executives may also have trouble cultivating loyalty, and host-
country nationals are likely to need hefty doses of training and education regarding
both the company and its products.
A third option is to hire persons who are not natives of either the headquarters
country or the host country; such persons are known as third-country nationals
(Table 9.3). For example, a US-based company might hire someone from Thai-
land to represent it in China. This option has many advantages in common with the
host-country national approach. In addition, if conflict, diplomatic tension, or some
other form of disagreement has driven a wedge between the home country and the
target sales country, a sales representative from a third country may be perceived
as sufficiently neutral or at “arm’s length” to enable the company to continue its
sales effort. However, there are several disadvantages to the third-country option.
For one thing, sales prospects may wonder why they have been approached by
someone who is neither a local national nor a native of the headquarters country.
Third-country nationals may lack motivation if they are compensated less gener-
ously than expats or host-country sales personnel; also, they may find themselves
passed over for promotions as coveted assignments go to others.
Table 9.3 Third-country

nationals
Cultural sensitivity May face identification
Language skills problems
Economical May be blocked for promotions
Allows regional sales Income gaps
coverage Needs product and/or company
training
Loyalty not assured
International Business Terms
We will now look at a few common terms used in international business and trade.
Amélie Manseau, Senior Export Help Advisor Export Development Canada, writes
about the most common trade terms (Manseau, 2018).
Incoterms
Incoterms, short for International Commercial Terms, are important to know and
be aware of for companies wishing to participate in international trade. They were
created as easy-to-remember codes of conduct and contract and are regulated by
the International Chamber of Commerce for international trade. The incoterms
decide the liabilities and responsibilities of the buyers and sellers, particularly
around shipments, payments, damage to goods in transit, and even items lost
during shipment.
The 11 Incoterms can be roughly divided into three groups:
. EXW (ex-works or ex-factory), FCA, FAS (free alongside ship), and FOB (free
on board): With these, the buyer pays for the shipping costs.
. CFR (cost and freight—C&F), CIF (cost, insurance, and freight), CPT (carriage
paid to), and CIP (carriage and insurance paid to): These are the terms under
which the sellers pay the main shipping costs and include them in their price.
Note that while the seller pays for shipping, the goods travel at the buyer’s risk,
so the buyer will want to investigate insurance.
. DAT (delivered at terminal), DAP (delivered at place), and DDP (delivery and
duty paid): Here, the shipping costs are paid by the seller and the seller also
pays for duties and other costs, while the buyer needs to unload goods at the
destination.
Other shipping-related terms relate to trailer and container loads, like TL/FTL
(trailer load or full-trailer load) or an LTL (less than a trailer load). Ocean carriers
will ask about a full container load (FCL) or less than a container load (LCL).
Other international business terms revolve around cargo insurance and vary for
freight shipped via road, rail, air, and sea and are governed by Institute Cargo
Conclusion 157
Clauses (A, B, or C). Some cover loss, theft, and damage during shipment, but
there are also Force Majeure (Acts of God) clauses.
Sellers are expected to provide commercial and/or proforma invoices for goods
shipped/sold, provide bills of lading (loading on to the transport), a packing list,
certificates of origin, and payment terms (which we discussed earlier).
Conclusion
In this chapter, we covered a range of technical terms that included how com-
panies can become multinational corporations, how they can enter into different
international markets (developed and developing/emerging), the business language
of international trade that covered financial transactions, shipping, and logistics,
and how knowing the local market, its people, and the cultural intelligence of
the country can allow MNCs to transact successfully with international trading or
business partners.
End-of-Chapter Assignments and Exercises–Case Scenarios
Read the following news article and respond to the questions.

https://www.cnbc.com/2022/04/06/global-government-debt-set-to-soar-to-
record-71-trillion-this-year-research.html?&qsearchterm=Emerging%20mark
ets%20updates
Global government debt set to soar to record $71 trillion this year, new
research says
Published Wed, Apr 6, 2022:49 AM EDT Updated Wed, Apr 6, 2023, 07
AM EDT.
Elliot Smith@ElliotSmithCNBC
. In its second annual Sovereign Debt Index, published Wednesday, British

asset manager Janus Henderson projected a 9.5% rise in global government
debt.
. New sovereign borrowing is expected to reach $10.4 trillion in 2022, almost
a third above the average prior to the Covid-19 pandemic, according to a
report from S&P Global Ratings.
LONDON—Global sovereign debt is expected to climb by 9.5% to a record

$71.6 trillion in 2022, according to a new report, while fresh borrowing is also
broadly set to remain elevated.
In its second annual Sovereign Debt Index, published Wednesday, British
asset manager Janus Henderson projected a 9.5% rise in global government
debt, driven primarily by the United States, Japan, and China but with the vast
majority of countries expected to increase borrowing.
Global government debt jumped 7.8% in 2021 to $65.4 trillion as every
country assessed saw borrowing increase, while debt servicing costs dropped to
a record low of $1.01 trillion, an effective interest rate of just 1.6%, the report
said.
However, debt servicing costs are set to rise significantly in 2022, climbing
around 14.5% on a constant-currency basis to $1.16 trillion.
The United Kingdom will feel the sharpest effect on the back of rising inter-
est rates and the impact of surging inflation on the substantial quantities of U.K.
index-linked debt, along with the costs associated with unwinding the Bank of
England’s quantitative easing program.
“The pandemic has had a huge impact on government borrowing—and the
after-effects are set to continue for some time yet. The tragedy unfolding in
Ukraine is also likely to pressure Western governments to borrow more to fund
increased defense spending”, said Bethany Payne, portfolio manager for global
bonds at Janus Henderson.
Germany has already vowed to ramp up its defense spending to more than
2% of GDP in a sharp policy shift since Russia’s invasion of Ukraine, along
with committing 100 billion euros ($110 billion) to a fund for its armed
services.
New sovereign borrowing is expected to reach $10.4 trillion in 2022, almost
a third above the average prior to the Covid-19 pandemic, according to the
latest global borrowing report from S&P Global Ratings published on Tuesday.
“We expect borrowing to stay elevated, owing to high debt-rollover needs,
as well as fiscal policy normalization challenges posed by the pandemic, high
inflation, and polarized social and political landscapes”, said S&P Global
Ratings credit analyst Karen Vartapetov.
The ongoing conflict’s global macroeconomic repercussions are expected to
exert further upward pressure on government funding needs, while tighter mon-
etary conditions will increase government funding costs, the report highlighted.
This poses a further headache for sovereigns that have thus far struggled
to reignite growth and cut reliance on foreign currency financing, and whose
interest bills are already substantial.
In advanced economies, borrowing costs are expected to rise but likely
remain at a level that will allow governments time for budget consolidation,
S&P said, offering governments time for budget consolidation and focus on
growth-stimulating reforms.
Opportunities for Investors
Convergence of monetary policy emerged as a theme during the first couple of
years of the pandemic, as central banks cut interest rates to historic lows to help
support ailing economies.
However, Janus Henderson noted that divergence is now emerging as a key
theme, as central banks in the United States, United Kingdom, Europe, Canada,
and Australia look to tighten the policy strings to contain inflation, while China
continues to try to stimulate the economy with a more accommodative policy
stance.
Conclusion 159
This divergence offers opportunities for investors in short-dated bonds that

are less susceptible to market conditions, Payne suggested, highlighting two
locations in particular.
“One is China, which is actively engaging in loosening monetary policy, and
Switzerland, which has more protection from inflationary pressure as energy
takes up a much smaller percentage of its inflationary basket and their policy is
tied, but lagging, to the ECB”, she said.
Janus Henderson also believes shorter-dated bonds look attractive at present
relative to riskier long-term ones.
“When inflation and interest rates are rising, it is easy to dismiss fixed
income as an asset class, particularly since bond valuations are relatively high
by historical standards”, Payne said.
“But the valuation of many other asset classes is even higher and investor
weightings to government bonds are relatively low, so there is a benefit in
diversifying”.
What’s more, she argued, the markets have mostly priced in higher inflation
expectations, so bonds bought today benefit from higher yields than they would
have a few months ago.
Now that you have read the short article, answer the following questions,
keeping in mind that WITI and Brigitte Sultan have been looking at other
international and emerging markets like India, Brazil, Chile, and even if
WITI is operating in Mexico, they could look at expanding their market
share. Use these emerging markets or other international markets of your
choosing to compose answers to the following questions.
1. An overall Executive Summary statement outlining the response and

suggestions for organizational decision-makers on pursuable courses of
action
2. For the international/emerging market you have been considering, what
do you think will be the direct and indirect effects of this soaring global
debt, particularly with respect to the economy of the emerging market?
Can the emerging market withstand this debt increase with domestic
consumption alone? What would you recommend to Brigitte Sultan?
3. For your international/emerging market, what will be the implication
for trade—exports and imports? Will the governments of the emerging
markets need to resort to measures—fiscal or protectionist, to ease the
burdens on their economies? Explain.
4. For your international/emerging market, what could the cultural impli-
cations be, if they are to choose restraint vs. spending? Explain. What
would you recommend to Brigitte Sultan?
5. Would your international/emerging market be directly or indirectly
impacted by the geopolitics currently at play in the world, war, increase
in fuel prices, increase in commodity prices, an unstable/unreliable sup-

ply chain, and changing shipping and logistics landscape? Explain. What
would you recommend to Brigitte Sultan?
6. Based on what you have learned so far, the cases/situations you have
analyzed, if you were an advisor to the Trade Commissioner of your
international/emerging market, what would your advice be around trade
and fiscal policies, market entry policies, and the need to be aligned or
non-aligned on the world stage and the impact on your emerging mar-
ket’s foreseeable future—5–10-year timeline? And, again, what would
you recommend to Brigitte Sultan?
References
Alfaro, L., & Mendoza, E. (2020). Current policy challenges facing emerging markets. IMF Eco-
nomic Review, 68(2020), 453–455.
Hayes, A. (2022). Direct Foreign Investment (FDI): What it is, types, and examples. September 02,
2022.https://www.investopedia.com/terms/f/fdi.asp
Manseau, A. (2018, February 13). 11 common terms used in international trade. Build
an export plan. https://www.edc.ca/en/blog/common-terms-used-in-international-trade.html.
Retrieved from the web on June 19, 2022.
Puri, S., & Krishna, S. (2016). Puma’s challenge to maintain leadership in India. Case study, 2016.
Ivey Publishing, Richard Ivey School of Business Foundation.
The Conference Board. (2022). The Conference Board World Economic Outlook—2011–2031.
https://www.conference-board.org/topics/global-economic-outlook. Retrieved from the web on
June 12, 2022.
Union of International Associations. (n.d.). UIA—Types of organizations—https://uia.org/archive/
types-organization/cc
Vanamali, K. V. (2022). Why has Netflix not been able to crack the Indian market? https://www.
business-standard.com/podcast/companies/why-has-netflix-not-been-able-to-crack-the-indian-
market-122012500081_1.html. Retrieved from the web on Feb, 8, 2022.
World Bank. (2022). Stagflation risk rises Amid sharp slowdown in growth. Global economic
prospects. https://www.worldbank.org/en/publication/global-economic-prospects. Retrieved
from the web on May 31, 2022.
World Economic Outlook. (2022). World Economic Outlook, April 2022: War Sets Back The
Global Recovery. https://www.imf.org/en/Publications/WEO. Retrieved from the web on May
31, 2022.
Bringing It All Together
10
In this chapter, we summarize all the concepts from previous chapters. However,
more than just being a summary, this chapter will aim to provide key takeaways
to students and faculty members about the best ways to really see the benefits
of having an engaged, diverse workforce. We will provide a series of simple-to-
follow tips and tricks, specific active listening techniques, and methods to develop
an open mindset that will allow students to apply them immediately. These will
again be provided in the context of scenarios and easy-to-remember examples and
hopefully stay with them as they prepare to navigate their workplaces, either as
interns or full-time employees.
1. Provide a summary of many of the concepts discussed in all the preceding

chapters.
2. Introduce some of the various religious and theological views from around
the world.
3. Weave in examples of various cross-cultural examples from around the
world.
4. Provides tips to be more culturally aware and sensitive to various interna-
tional and cross-cultural practices.
https://doi.org/10.1007/978-3-031-06440-1_10
162 10 Bringing It All Together
Together, From Aways©
The Halifax Wanderers Football Club (FC) have on their website, the short, but
powerful and impactful statement, “Together, From Aways” (https://hfxwander
ersfc.canpl.ca/). This football club has its home in Halifax, Nova Scotia, Canada, a
city like many North American cities, with people from multiple backgrounds, eth-
nicities, cultures, ways of being, and being a port city in Eastern Canada, has been
the center point for trade for several centuries. Halifax, Nova Scotia, is known
to the Mi’kmaq as Chebucto “Kjipuktuk” or “Great Harbor”. The Nova Scotia
mainland is known to the Mi’kmaq as Pictou and the province is Mi’kma’ki, the
ancestral and unceded territory of the Mi’kmaq. The Halifax Wanderers FC, in
consultation with the Mi’kmaq, have created a motto that also addresses the diver-
sity of this growing city and their motto, in Gaelic, reads Ar Cala, Ar Dachaigh, Ar
N-Anam (Our Harbor, Our Home, Our Soul). Such an approach is celebratory of
the First Nations communities, the settler communities from the time Halifax was
founded (circa 1745), consisting of British, Scottish, and Irish peoples, the African
Canadian people who have lived in the Canadian Maritimes for over 400 years,
and the modern-day settlers from different parts of the world, is the essence of
a community truly embracing and welcoming multiple perspectives and cultural
backgrounds.
Elder Albert Marshall of Eskasoni First Nation in Unama’ki—Cape Breton,
NS, introduced the world to the concept of Two-Eyed Seeing, Etuaptmumk, a
guiding principle, which indicates the benefits of seeing the world with one eye
with the strengths of Indigenous Knowledge and ways of knowing, and from the
other eye with the Western knowledge and ways of knowing. But at its heart,
Etuaptmumk is the gift of multiple perspectives treasured by many Aboriginal
Peoples and forms the basis of integrative and collaborative work we must all
do now and in the future, safeguarding all cultural values and perspectives, yet
be guided by the foresight and hindsight provided by indigenous cultures across
millennia.
Cull et al. (2019) present an “Indigenous Wholistic Framework” that has the
individual at the center, with three concentric circles surrounding the individual.
The innermost circle connects the individual to their family, while the next upper
circle connects the individual and the family to the community, the nation, the
provincial, and the federal entities. The outermost circle envelops all of them with
the concepts of Respect, Reciprocity, Relevance, and Responsibility. The individ-
ual receives spiritual, intellectual, emotional, and physical inputs from the external
world, as these inputs pass through the lenses of Respect, Reciprocity, Relevance,
and Responsibility.
Such an approach to knowing and being will serve all of us well as we nav-
igate our post-pandemic years, learning to redo things we took for granted, look
at situations, contexts, and people with fresh perspectives, free of biases, and be
open to embracing and celebrating the differences and seeking to enhance our
commonalities. To this effort, the next section will briefly highlight the core prin-
ciples of some of the world’s leading religions and cultures, so we can see the
Core Principles from Around the World 163
differences and the commonalities, become aware of the cognitive and emotional
lenses these principles afford us, and put into practice our cross-cultural awareness
in our individual, organizational, business, communal, and societal ways of doing
and being.
Core Principles from Around the World
This section is intended more as a primer to allow the learner to locate their
own starting place, but with a view to gathering perspectives that can help them
progress towards collaboration cosmopolitanism (Wang et al., 2019). In each of
these subsections, we list the concepts and principles as presented by the teach-
ings or the religion/culture, with minimal exposition where required. Being aware
of the differences and the commonalities is often the first step towards a better
understanding of different perspectives, be these in the boardroom with senior
executives, conferences or events, serendipitous meetings in random locations, or
specific seminars intended to provide cultural and sensitivity training.
Themes of Christian Social Teachings (Estimated at About 2.4

Billion Followers)
. Sacredness of life and dignity of the human person

. Human rights and responsibility to protect them
. Dignity of work and the rights of workers
. Call to family, community, and participation
. Preferential option for the poor and vulnerable
. Solidarity with all people as one global family
. Stewardship and care for God’s creation
The Five Pillars of Islam and Social Teachings (Estimated at About

1.9 Billion Followers)
. Declaration of faith
. Obligatory prayer
. Compulsory giving
. Fasting in the month of Ramadan
. Pilgrimage to Mecca
. Clear, ethical thoughts followed by words, actions, and behaviors
. Collective morality is also addressed in terms of equality, justice, fairness,
brotherhood, mercy, compassion, solidarity, and freedom of choice.
Basic Tenets of Hinduism (Estimated at About 1.2 Billion

Followers)
The lotus flower is the symbol of purity, truth, and divine power. The petals of the
lotus flower represent the eight principles of Hindu philosophy (with simplified
translations).
. Karma—Action
. Dharma—Duty/Obligation (to self, family, community, society, and nation)
. Bhakti—Prayer/Faith/Devotion
. Gyana—Knowledge (to seek, learn, understand, and disseminate)
. Dhyana—Meditation/Contemplation
. Advaita/Dvaita—Non-duality/Duality
. Atma—Soul/life
. Moksha—Liberation/Nirvana/Salvation
Principles of Buddhism (Estimated at About 0.5 Billion Followers)
Follow the four noble truths.
. All life is suffering

. Suffering is caused by desire
. One can be freed from desire
. One is freed from desire by following the Eight-Fold Path
The Eight-Fold Path.
. Right Views
. Right Conduct
. Right Mindfulness
. Right Aspirations
. Right Livelihood
. Right Speech
. Right Endeavor
. Right Meditation
165
The Seven Principles of Kwanzaa
Dr. Maulana Karenga, Professor and Chair of the Department of African Studies
at California State University, Long Beach, is internationally known as the creator
of Kwanzaa, an African American and Pan-African holiday celebrated throughout
the world.
African community on every continent in the world. He lays out Nguza Saba,
the Seven Principles of Kwanzaa.
. Umoja—Umoja means unity in Swahili. Karenga defines this on his Kwanzaa

website as: “To strive for and maintain unity in the family, community, nation
and race”.
. Kujichagulia—Or self-determination. This principle refers to defining, naming,
creating, and speaking for oneself.
. Ujima—Translated as “collective work and responsibility”, ujima refers to
uplifting your community. “To build and maintain our community together
and make our brother’s and sister’s problems our problems and to solve them
together”, Karenga writes.
. Ujamaa—Cooperative economics. Similar to ujima, this principle refers to
uplifting your community economically. “To build and maintain our own stores,
shops and other businesses and to profit from them together”, he writes.
. Nia—Nia means purpose. Karenga expands on this principle with, “To make
our collective vocation the building and developing of our community in order
to restore our people to their traditional greatness”.
. Kuumba—Meaning “creativity”, Karenga defines this principle as “To do
always as much as we can, in the way we can, in order to leave our community
more beautiful and beneficial than we inherited it”.
. Imani—The final principle translates to “faith”. Karenga defines this as faith in
community, writing, “To believe with all our heart in our people, our parents,
our teachers, our leaders and the righteousness and victory of our struggle”.
Principles of Ubuntu
The three moral values crucial to the establishment of ubuntu in social order are
the respect for human dignity, compassion, and justice. Of particular importance
is the value of respect for human dignity as a major element of ubuntu ethics
(Ujomudike, 2016). Ujomudike proposes Ubuntu as a “value system built upon
the application of some key moral and democratic values for liberation and trans-
formation”. Specifically, ubuntu ethics is defined as a set of values central among
which are reciprocity, common good, peaceful relations, emphasis on human dig-
nity, and the value of human life as well as consensus, tolerance, and mutual
respect. These features are to operate at the national level. We also argue for a
possibility utilizing ubuntu ethical correlates as materials for establishing stable
and viable human relations within the international system or global order.
Cultural Practices Around the World
These are only a few of the various guiding principles that govern the lives of and
give meaning to people on this planet. The number of established formal religious
belief systems and folk/nature-based belief systems several, with followers in the
few million to 10s or 100s of millions. Through these belief systems, people make
sense of their lives, livelihoods, reasons for existing and living in communities
that support these belief systems, cultural practices emerge, often revolving around
these isms, but also connecting the individuals and the communities to nature, the
planet, the environment, their fellow human beings, and a connection to the define.
We now look at a few such cross-cultural practices because these practices and
belief systems do play an integral part of business practices as well. Ma (2021)
has provided an inkling of some of these cultural traditions and practices from
around the world, but notes that these are only some and not meant in anyway
to be exhaustive. The article appearing in LinkedIn, suggests that many organiza-
tions doing business around the world have also compiled similar lists and adviced
their employees to pay attention to these cultural aspects, to have better-working
relations with people from these cultures who they wish to do business with.
Flowers to a Russian
It is the tradition in Russia that one must be careful in giving flowers to a Russian.
For instance, you should avoid giving red and yellow flowers as they represent the
deceased and experts who survived the war. They also represent a termination of
a relationship and friendship.
Gifts to Chinese Classmates
Chinese civilization is one of the oldest around the globe. Additionally, Chinese
is a symbolic language. For instance, you should avoid giving white flowers to a
friend as it depicts death or funerals and is also a color of ghosts. Similarly, clocks,
handkerchiefs, umbrellas, green hats, and straw sandals, or shoes are all bad gifts
to give in China.
Avoid Salt While Dining in Egypt
In several traditions and cultures, it is not bad to ask or add salt to a meal. But there
is an exception to this case in Egypt. Meaning thereby, asking for salt represents
insulting a host in Egypt. Additionally, to some locals, it also means that you did
not like the taste of their food.
Cultural Practices Around the World 167
Concept of Punctuality in Many States
Being punctual is known as a wonderful gesture and quality in many countries but
not in all countries. For instance, in Venezuela, it is a trend to be late for parties,
dinners, and functions. It is a very common practice to be 10–15 minutes late and
is abnormal to be on time. But in countries such as Germany, United States, Japan,
and South Korea being late is a bad habit. Similarly, in Malaysia, it is normal to be
5–60 minutes late. However, in China people encourage punctuality. Furthermore,
in Greece and Mexico, it is ok to be late.
Table Manners in Norway
There is a tradition in Norway to avoid using utensils or cutleries while eating.

For instance, in other cultures where it is a good thing to use chopsticks, spoons,
knives, and forks while eating, people of Norway find it unethical. So, it is a
unique tradition one must know for the sake of knowledge.
Using Sharp Items
Another unique trend is using sharp items in different countries gives different
meanings. For instance, in China using or gifting sharp items is a good gesture.
It is because sharp items represent the cutting of ties between them and bring
each other close. And in Dutch, on the other hand, sharp objects bring bad luck.
Furthermore, to the people of the Netherlands and China, an unwanted gift brings
them close. Above all, gifting sharp items, knives and scissors is a good gesture
in China.
Losing a Tooth in Greece
Unlike other cultures or countries where losing milk teeth will bring money to
children by the tooth fairy, in Greece it’s a different story. The children in Greek
go to their roofs and toss their teeth traditionally. To them, the child who has tossed
his teeth on the roof will live a healthy life and bring happiness to their family.
Avoid Clinking Glasses but Say Cheers in Hungary
In Hungary, it is unethical to clink glasses while having a drink together. But

you can say cheers as it is a good gesture and a symbol of happiness. When a
Hungarian sees someone clinking their glasses, it reminds them of the war with
Austria in 1849. In this war, Hungarians were badly defeated. Furthermore, the
people of Hungary know that Austrian generals celebrate their events by drinking
beer and clinking their glasses. Therefore, they hate to clink their glasses while
having a drink.
Avoid Discussing Business in the Events in Bolivia
There is a famous tradition in Bolivia not to make any business talk at family
events or occasions. It is because the people of Bolivia believe that family dinners
are for developing personal relationships. But if the host gives you any business
topic for discussion you can go for it. In short, it is wise to avoid business talks
on occasions in Bolivia.
Don’t Try to “Go Dutch” in Turkey
In Turkish culture, proposing to make half payment of the meal will end up offend-
ing your host. In other words, it will be smart and wise to invite the host to some
other dinner party. And at that party, you should make the whole payment.
Avoid Using Red Ink
While it is entertaining to use different-colored pens for many people, using them
is different in South Korea. It might be insignificant to use red, blue, or green ink
elsewhere. But in South Korea, if you are writing the name of a Korean, make
sure not to use red ink as it symbolizes death in the Korean tradition.
A Trip to the Sauna in Finland
A sauna is considered a place for relaxation and unwinding. In Finland, it is

more than just for relaxation. Inviting a client to the sauna means successfully
terminating a business or starting a new one.
Sitting Seat in the Taxi
Most people opt for sitting in the backseat of a taxi as it is considered a sign
of refinement. However, in Australia, this behavior is considered snobbish and
arrogant. Therefore Australians often sit beside the taxi driver.
Greeting a Magpie in the UK
To avoid bad luck, it is a custom in the United Kingdom to greet a lone magpie.
Therefore, you should not forget to stick to this traditional act.
Birthday Greetings in the Netherlands
An interesting tradition in the Netherlands is birthday greetings. In the Nether-

lands, there is a tradition of greeting the person celebrating the birthday in addition
to greeting the family and relatives as well.
Greeting People in Japan and Germany
The tradition of greeting differs from country to country. For example, in Germany,
as well as in many other countries, people shake hands with everybody in the room.
On the other hand, the greeting tradition is more formal in Japanese culture. People
in Japan greet and thank someone by bowing. In Argentina, France, and Brazil,
it is a tradition to kiss a person on the cheek when greeting him. While only one
kiss is enough in Argentina, in Brazil and France, two or three kisses are often
exchanged.
The Finger-Pulling Tradition in Austria
In Austria and Bavaria, there is a finger-pulling tradition in which the objective of

the game is to drag the rival’s finger across the table.
The Tradition for Unmarried People in Germany
The cultural traditions surrounding marital status often differ across cultures, but
there are rarely any customs for single people. In Germany, a single person is
showered with cinnamon powder or pepper, depending on their age. On the other
hand, people buy funny hats for their 25-year-old friends on Saint Catherine’s Day
as a tradition.
Face on a Birthday Cake
This tradition is quite common across the world. In Mexico, as the celebrating
person takes a bite of the cake, his friends shove his face on the birthday cake.
Wife-Carrying as a Competitive Sport
An interesting competition in Finland is about carrying one’s wife. This tradition

has been around in Finland since 1992 and is called the Wife Carrying World
Championship. The prize is beer, and the amount varies with the weight of the
wife.
Durga Puja in Bengal
Every year, the festival of Durga Puja (also called Durgotsav) is organized in West
Bengal. The festival marks the victory of the goddess Durga in a battle. This means
that the festival represents the victory of good over evil and is celebrated zealously
across the state.
Lucia Festival of Sweden
In Sweden, there is a popular Christmas tradition which is celebrated on the 13th

of December. Although a few people have an idea of why it is celebrated, it is
termed Saint Lucia’s feast day. In addition, it is also the darkest night in Sweden
according to the old almanac.
Yi Peng in Thailand
Yi Peng is a popular Buddhist festival celebrated in Northern Thailand featuring

a ritual of lighting paper lanterns termed as khom lai. The Buddhists believe that
this act of releasing lanterns frees them of bad luck. As this festival is based on the
Thai lunar calendar, the exact dates shift every year, and therefore it commonly
falls on the full moon in November.
Fasching Parade in Germany
In case you plan to travel to Germany in January/February, be sure to check out

the famous Fasching parade. This parade, also known as Karneval, is an entire
week of festivals and parties that end with a huge parade with masked creatures,
bands, and magic tricks. In addition, this festival is associated with the festivals of
the Christian church where entertainment is welcomed before the arrival of Lent.
Shinbyu in Myanmar
The Shinbyu Ceremony is an interesting one, where young boys are presented
to the local monastery so they could become novice monks. This is a part of
the Theravada Buddhist tradition, which brings good luck and is significant to
the Burmese culture. The tradition involves a procession by the boys where they
endure the ceremonious shaving of the head and trade in their silk robes.
How Does One Acquire Cultural Sensitivity?
These are only a few of the several cultural traditions from around the world. No
list can be exhaustive, and no one can be expected to know everything about every
culture or sub-culture and the various traditions that abound in each. Organiza-
tional culture is no different and often takes on the practices predominant in the
societies and communities that the organizations exist in.
Throughout the textbook, we have addressed various concepts and practices
used by people interacting with one another in business settings. We encountered
specific business terms in the international trade space, in the market entry strate-
gies, in the types of businesses that exist in this space, the financial practices, and
the technologies that individuals and organizations use across nations and cultures.
The underlying theme though, has always been the cultural underpinnings in all
these interactions and transactions, be they in the boardroom for negotiations or in
the shipping yards for discussions around freight and insurance, or in discussions
on mergers and acquisitions, or simply coworkers from different backgrounds sit-
ting together to share their lunches in the office, via Zoom, or at the park near
their workplace.
So, how should the early interactions between new coworkers or new busi-
ness partners commence? One simple approach is to start with some preliminary
research prior to the meeting (if there is a scheduled meeting), respectfully observe,
listen politely, and wait to take a turn while speaking, though in some cultures
interrupting another speaker is not considered rude. As the conversation pro-
gresses, reciprocate as appropriate, acknowledge hierarchy, convey firmness and
strength, keep open lines of communication, and indicate willingness to negotiate,
BUT Clearly Outline Ethical Concerns.
Other ways to ensure a successful engagement/interaction in cross-cultural
situations.
. Be prepared to give and take time to respond to queries around the business
and the cultural practices (in the organization and in your country/culture).
. Since most people cannot be expected to know everything, learn to detect
whether the question asked about the culture is based on ignorance or a
stereotype and a genuine desire to learn about your culture.
. Try not to take offense even if there are stereotypes brought into the conversa-
tion. Treat these as teaching and learning moments and respond with kindness,
but do not hesitate to correct the wrong assumption or stereotype.
. Be prepared that culture shock is true, and all manners and kinds of people
experience it. Again, be patient and respond with kindness.
. Understand that technology can be an aid, instead of a barrier. Asynchronous
messages can allow people to compose their thoughts and provide a voice for
their opinions. This applies even to people of the same cultural/ethnic back-
ground, as many people are anxious about social interactions, and may not be
able to disclose their fears, mental health issues, gender orientation issues, fear
of backlash, etc.
. All the aspects of the ConnecT framework will allow you to establish trust
and convey genuine mindfulness and interest in learning about the background
of your coworkers and business partners. The approaches discussed in the
framework will help navigate workplace complexities, contexts, understand and
integrate culture into the business decisions, and resolve conflicts using effective
communication approaches.
. Invite people to your home, even if they are from away.
. Try different cuisines to be open to new tastes and experiences. Some people
are uncomfortable with some foods eaten around the world. Be honest about
your discomfort and people will respect that.
. Moving out of your own comfort zone will allow others to do so as well.
Remember, your coworkers may also be equally nervous about being welcomed,
accepted, embraced, and wish to belong.
. Your coworkers have been hired because of their skills, abilities, competence,
and record of contribution to the organizations they have worked in.
. Don’t let someone’s accent when they are speaking in a language not native
to them, be an impediment in your interactions, nor should the accent while
speaking be an indication of the level of competence or ability of the speaker.
Remember, someone from another country has already left their shores, native
country, and the comfort zones of their culture. That is courageous and should
be commended.
Conclusion
Be open to ideas and thoughts and soon you will realize that people are the same
everywhere. They want to be loved, accepted, belong, raise, and protect their fami-
lies, wish to have good friends, celebrate their successes with friends and families,
share their joys and sorrows with friends, coworkers, and families, and make mean-
ingful contributions to the organizations they work in, the communities they live
in, the nation they are citizens of or have acquired citizenship of, and the society
that reflects their hopes, ideals, and aspirations. Review the various belief systems
and some of the cultural traditions discussed in this chapter and use them as a
References 173
starting point of your journey to learn, discover, grow, and enjoy the true collabo-
rative benefits of working with people from different cultures and mores. Practice
two-eyed seeing, look to the principles of Kwanzaa and Ubuntu, recognize the
dignity that every human being deserves, interact with respect, make relevant and
responsible contributions, and practice reciprocity and altruism and work to make
the world a better place for all humanity.
End-of-Chapter Assignments and Exercises–Case Scenarios
The following set of questions again follows Brigitte Sultan as she sets
up business operations in an international, emerging market. Following the
PESTLE-related advice you gave her from the previous chapter, the following
would involve cultural advice in the early days of the new business operations
in Brazil, Chile, India, Mexico, or other markets of your choosing. Once you
have decided on the market that Brigitte and WITI will set up new business
operations, you can respond to the following questions.
1. What would you recommend as the first steps to Brigitte on who she should
hire for the local business operations in the emerging market? Explain.
2. While WITI has its established organizational culture as a North American
entity, how would you recommend Brigitte and her WITI team to approach
new hires (across the organization)?
3. What would your recommendations be to the team regarding market
intelligence and potential clientele/customers for WITI products?
4. What things about the local cultural practices around sustainability, ESG,
preservation, and relationships with indigenous communities and other
community groups would your advice to Brigitte be about?
5. Coming from a North American perspective and WITI being a welcoming
organization to members of the 2SLGBTQIA + community, how will you
ensure that this continues to be part of the organizational culture in the new
market, but also be careful about local sensitivities to this?
References
Cull, I., Hancock, R. L. A., McKeown, S., Pidgeon, M., & Vedan, A. (2019). Indigenous ways of
knowing and being from pulling together: A guide for front-line staff, student services, and
advisors. This book is licensed under a Creative Commons Attribution-NonCommercial 4.0
International License, except where otherwise noted. https://opentextbc.ca/indigenizationfron
tlineworkers/
Halifax Wanderers FC. (2022). https://hfxwanderersfc.canpl.ca/
Institute for Integrative Science and Health. (n.d.). Two-eyed seeing. http://www.integrativescience.
ca/Principles/TwoEyedSeeing/
Ma, M.S. (2021). Top 26 cultural traditions around the world. https://www.linkedin.com/pulse/top-
26-cultural-traditions-around-world-maxim-ma. Retrieved from the web on July 3rd, 2022.
Ujomudike, P.O. (2016). Ubuntu ethics. In Ten Have H. (eds.). Encyclopedia of global bioethics.
Springer. https://doi.org/10.1007/978-3-319-09483-0_428
Wang, Q., Jung, J., Bozeman, B., et al. (2019). Collaboration cosmopolitanism: What are the
effects on the “overlooked majority” of scientists and engineers? Higher Education 78(2019),
1011–1034 (2019). https://doi.org/10.1007/s10734-019-00385-5
Glossary
Chapter 1
EDC Export Development Canada

MNC Multinational Company
PESTEEL Political, Economics, Socio-Cultural, Technological, Ethical, Eco-
logical, and Legal
SWOT Strengths, Weaknesses, Opportunities, and Threats
TCI Trade Confidence Index (from Export Development Canada)
WITI Waterbody Innovations and Technologies Inc.—Fictitious MNC,
created for the purpose of this textbook.
Chapter 2
Distributed Economies a way of organizing economic activity to spur innova-

tion, particularly among small and medium-sized com-
panies and with a focus on sustainable development and
business practices.
ESG Environmental, Social, and Governance
Market Economy one in which individuals answer the economic questions
and market forces are allowed to operate; also called
capitalism, capitalist economy, consumer economy, free
enterprise, free market economy, and private enterprise
MSCI Morgan Stanley Capital Investments
OECD Organization for Economic Cooperation and Develop-
ment
State Capitalism when the government or the State, decides to own
and operate businesses (for-profit) or capital accumu-
lation and the means of production and distribution
© The Editor(s) (if applicable) and The Author(s), under exclusive licence to Springer 175
Nature Switzerland AG 2023
https://doi.org/10.1007/978-3-031-06440-1
176 Glossary
of resources, goods, and services are nationalized as

state-owned businesses
UNCTAD United Nations Conference on Trade and Development
UNSDG United Nations Sustainable Development Goals
Chapter 3
Assimilation If it is not important for newcomers to keep

their heritage culture, but they are willing to
accept a new culture, they assimilate.
Bennet’s DMIS Developmental Model of Intercultural Sen-
sitivity—Six Stages—Denial of Difference,
Defence against Difference, Minimization of
Difference, Acceptance of Difference, Adap-
tation to Difference, and Integration of Differ-
ence
Berry’s Acculturation Model Integration, Assimilation, Separation, and
Marginalization
Cultural Intelligence CQ—involves Mindfulness, Knowledge, and
Behavior
Culture Shock an emotional reaction that people have when
they encounter a change or new experiences,
because of which their long-held beliefs get
challenged.
Emulation involves observing other people’s cultural
behavior and copying it.
Honeymoon This stage occurs when people arrive at a new
place. They are curious about differences but
usually notice only positive things.
Integration If it is important for a person to keep their her-
itage culture, but at the same time they want
to build relationships with a new society, this
individual easily integrates into a new society.
Kim’s Stress-Adaptation-Growth Eight stages—Honeymoon, Culture Shock,
Theory Recovery, Adjustment, Honeymoon at Home,
Crisis at Home, Recovery at Home, and
Adjustment at Home
Marginalization If newcomers are not interested in either keep-

ing their native culture or accepting their new
culture, they experience marginalization. Peo-
ple do not feel that they belong to a new
Glossary 177
society, and they are totally withdrawn. If

these are students, they fail in their studies.
If these are immigrants or expatriates, they
are not engaged in their workplace and are
completely disappointed.
Mindfulness Being aware of our own assumptions, ideas,
and emotions.
Oberg’s Culture Shock Theory Four Stages—Honeymoon, Crisis, Recovery,
and Adjustment
Re-enculturation is a process of adopting a new culture because
of which a person’s original worldview is
changed into a new one.
Reverse Culture Shock happens because of all the changes people
go through while living in a new country.
Though they went through multiple changes,
other people living in their home country have
not changed, so it causes internal and external
conflicts.
Separation If newcomers want to keep their heritage cul-
ture and are not willing to build relationships
with another culture, it leads to separation.
People try to avoid interactions with the repre-
sentatives of a new culture and do not usually
engage with a new culture.
W-Curve Adaptation Theory Combines two U’s—adding the four stages to
“at home” as well.
Chapter 4
Convenience Relativism argument is that ethical universalism leads to eth-

nocentrism, which means that companies cannot
follow ethical universalism due to the reason that
some cultures will always be dominating and
imposing their ethical views on others.
Corruption Perception Index high CPI indicates the least corrupt country.
(CPI)
CSR Corporate Social Responsibility—Company
focuses on Economic, Legal, Ethical, and
Philanthropic Responsibilities
Deontological based on the belief that the morality of an act of
practice is based on the act of practice itself.
178 Glossary
Ethical Convergence Theory argues that there should be a code of conduct for
all the multinational companies.
Ethical Relativism a theory that argues that each society’s view on
ethics must be considered legitimate, you may
decide to follow the laws of the country you are
in though they may be considered unethical in the
company’s original country.
Ethical Universalism argues that moral rules are universal, so they
cannot differ across the cultures.
Globalization a process of building new relations between peo-
ple, businesses, and governments of various coun-
tries because of increasing international invest-
ments, trade, and information exchange.
Hypernorms universal norms and are based on common ethical
values (e.g., human dignity), human rights (e.g.,
right for just treatment), and welfare norms (e.g.,
prohibition of child labor or human exploitation)
Teleological based on a belief that the morality of act or
practice proceeds from its consequencesif the
consequences are harmful, it is an unethical act.
Utilitarianism argues that what is good, and moral comes from
acts that produce the greatest good for the greatest
number of people.
Chapter 5
AI Artificial Intelligence or machine learning

AR Augmented Reality
CNP Cloud-Native Platforms
DI Decision Intelligence
Gartner’s Hype Cycle a graphic representation of innovations and emerging
technologies in different domains, allowing individuals
and organizations to track how a new or emerging tech-
nology or innovation matures and provides an indication
of future potential
PEC Privacy-Enhancing Computing
VT Virtual Teams
VDM Virtual Distance Model—Karenl Lojeski (2010)
Glossary 179
Chapter 6
Accounting Fraud Fraud is the intentional misrepresentation of

information to mislead stakeholders, particu-
larly around the company’s operations, reported
and actual revenues, costs and expenses
incurred, and reported profits or losses.
Balance Sheet a statement of a company’s holdings, assets,
liabilities, and equity at a given date.
Double-Entry System makes two entries for each transaction, a debit,
and a credit
Financial Audit conduct an independent and objective exam-
ination and evaluation of the financial state-
ments of an organization to ensure that finan-
cial records fairly and accurately represent the
underlying economic activities of the firm
Financial Reporting the main objective is to produce useful infor-
mation that supports investment and manage-
ment decisions, which is not possible without
accounting
Financial Statements are necessary to evaluate past performance and
as well make business decisions going forward
GAAP Generally Accepted Accounting Principles or
GAAP—name for a set of rules that is common
in various countries. For example, Canadian
GAAP is not the same as US GAAP.
Income Statement a statement that shows an organization’s (com-
pany, government department, etc.) income or
revenues, costs of operations and expenses, and
profitability (where relevant) over a period.
IFRS International Financial Reporting Standards
OSC Ontario Securities Commission
SEC Securities and Exchange Commission
SOX Sarbannes-Oxley
Weak Internal Control Systems defined by the Merriam-Webster dictionary as
a system or plan of accounting and financial
organization within a business comprising all
the methods and measures necessary for safe-
guarding its assets, checking the accuracy of
its accounting data or otherwise substantiating
its financial statements, and policing previously
adopted rules, procedures, and policies as to
compliance and effectiveness.
180 Glossary
Chapter 7
Banking a process where a financial institution can receive

deposits of money or other valuables (jewelry, gold,
art, etc.) and provide loans to individuals, organiza-
tions, and even governments.
Bond a loan from an investor to a borrower—govern-
ments issue bonds when they borrow from banks
or the public. It is a fixed-income instrument that
represents a loan from the lender to the borrower
Capital Financing the way an organization issues bonds or shares
(equity) to borrow money to manage its expenses
and operations. The return is a percentage of profit
and the capital is returned to the lender.
CBDC Central Bank Issued Digital Currency
Cryptocurrency a digital currency in which transactions are verified
and records maintained by a decentralized system
using cryptography, rather than by a centralized
authority.
Digital Currency a currency that is available exclusively in an elec-
tronic form
Diversification with respect to financial portfolios, the concept of
spreading the money into different types of invest-
mentsstocks, bonds, mutual funds, depending on the
ability of the investor to absorb risk.
Equity shares or company stock ownership
Financial Contagion the spread of market disturbances from one country
to another.
Financial Market Bubbles real or perceived increase in value and valuation of
goods, commodities, real estate, and organizations,
based on the potential to return high profits.
Fintech technology companies that provide technologies for
automating many financial transactions and activi-
ties
NYSE New York Stock Exchange
Regulation Full Disclosure Reg FD—regulation was put in place to remove any
advantages that institutional (often large) investors
had over retail/small investors. The purpose and
goal of such a rule are primarily to prevent a loss of
confidence in the markets, which would deter mar-
ket participants if they viewed the game as being
rigged.
Glossary 181
Chapter 8
Collectivistic Culture where it is the cultural norm to think about everyone

in the community
Face public self-image, an impression that people want to
make on others in a particular social context, or “your
public identity”.
Facework a set of coordinated practices in which communi-
cators build, maintain, protect, or threaten personal
dignity, honor, and respect.
High-Context cultures have a communication style based on body
language, tone, and overall context.
Individualistic Culture where it is the cultural norm to think about the
individual self and benefits for the self.
Intercultural Negotiation a process initiated by individuals, groups, or organi-
zations from different cultures.
Long-Term Orientation orientation towards future rewards
Low-Context cultures are more straightforward, direct, and explicit
in communication.
Nemawashi laying the groundwork.
Monochronic Culture view time as linear
Polychronic Culture view time as a cycle
Short-Term Orientation orientation towards short-term goals and gratifications
Chapter 9
FDI Foreign Direct Investment

ICRC International Committee of the Red Cross
IGO Intergovernmental Organizations
Incoterms International Commercial Terms
JV Joint Ventures
M&A Mergers and Acquisitions
NAFTA North American Free Trade Agreement
NGO Non-Governmental Organization
USMCA—CUSMA United States, Mexico, and Canada Free Trade Agreement
Index
A E
Accounting fraud, 98 Ecological responsibility, 62
Adjustment, 41 Emulation, 43
Artificial intelligence (AI), 67 Environment, Social, & Governance (ESG), 17
Assimilation, 44 Equity financing, 111
Augmented reality (AR), 70 Ethical convergence theory, 59
Ethical relativism, 59
Ethical universalism, 59
B
Balance sheet, 95 Ethics of care, 62
Banking, 110
Bennet’s Developmental Model of
Intercultural Sensitivity, 43 F
Bonds, 110 Face, 125
Facework, 125
Faithful representation, 96
C Financial audit, 97
Capital financing, 110 Financial capital, 118
Central bank-issued digital currency (CBDC), Financial Contagion, 117
116 Financial market bubbles, 109
Cloud-Native Platforms (CNPs), 69 Financial reporting, 94
Convenience relativism, 59 Financial statements, 94
Corporate social responsibility (CSR), 61
preparation of, 94
Corruption perception index (CPI), 57
Fintech, 113, 114
Crisis, 40, 41
Foreign Direct Investment (FDI), 146, 148
Crisis-at-home, 41
Cryptocurrencies, 114
Cultural intelligence (CQ), 44, 46
G
Culture shock, 37, 39
Gartner’s Hype Cycle, 69
Generally Accepted Accounting Principles
D (GAAP), 94, 97, 102
Decision Intelligence (DI), 69 Globalization, 55
Deontological ethical decision-making, 57
Deontological ethical theory, 58
Digital currency, 114 H
Distributed Economies, 22 High-context style, 124
Diversification, 117 Honeymoon, 40
Double-entry system, 94, 95 Hypernorms, 59
© The Editor(s) (if applicable) and The Author(s), under exclusive licence to Springer 183
Nature Switzerland AG 2023
https://doi.org/10.1007/978-3-031-06440-1
184 Index
I P
Income statement, 95 Polychronic culture, 139
Incoterms, 156 Privacy-Enhancing Computation (PEC), 69
Integration, 44
Intercultural negotiation, 123
International Committee of the Red Cross R
(ICRC), 146 Re-enculturation, 43
International Financial Reporting Standards Re-entry shock, 41
(IFRS), 97, 102 Regulation Full Disclosure, 113
International Governmental Organizations Relevance representation, 96
(IGOs), 146 Reporting standards, 95
Reverse culture shock, 41
J
Joint ventures (JVs), 146 S
Sarbanes-Oxley (SOX) act, 100
Securities and Exchange Commission, 96
K Separation, 44
Kim’s Stress-Adaptation-Growth Theory, 42 Short-term orientation cultures, 130
Simple emulation, 43
Stakeholder approach, 61
L
State Capitalism, 22
Long-term orientation cultures, 130
Supply chain, 63
Low-context style, 124
Sustainable development, 62
Sustainable Development Goals (SDGs), 62
M
Marginalization, 44
Market economy, 21 T
Merging with local corporations or acquiring Teleological ethical decision-making, 57
(M&A), 146
Mindfulness, 44
Monochronic culture, 139 U
Moral languages of international business U-Curve Adaptation Model, 40
ethics, 59 United Nations Conference on Trade and
Morgan Stanley Capital Investments (MSCI), Development (UNCTAD), 19
17, 19 United Nations Sustainable Development
Goals (UNSDGS), 16
USMCA (CUSMA, the former NAFTA), 146
N Utilitarianism, 58
Nemawashi, 131
Non-Governmental Organizations (NGOs),
146 V
Virtual Distance Model (VDM), 75
Virtual teams, 67
O
Ontario Securities Commission, 100
Organization for Economic Cooperation and W
Development (OECD), 17 W-Curve Adaptation Theory, 42
Outsourcing, 63 Weak internal control systems, 99

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Frameworks and Skills

ISBN 978-3-031-06439-5 ISBN 978-3-031-06440-1 (eBook)

Cover illustration: © Arthimedes/shutterstock

Binod Sundararajan’s Acknowledgments

Oksana Shkurska’s Acknowledgments

Shannon Lin’s Acknowledgments

The Horns Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Types of Conflict Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79

Team Building and Decision-Making . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135

Table Manners in Norway . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167

Dr. Binod Sundararajan, Ph.D. is a Professor of Management at the Rowe

Oksana Shkurska, Ph.D. is an Assistant Professor at Rowe School of Business,

Shannon Lin , Ph.D. is an Associate Professor of Accounting at the Rowe School

Fig. 1.1 PESTLE variants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Fig. 4.1 Consequences of corruption (Comte et al., 2005) . . . . . . . . . . . . . . 58

Table 5.1 Managing individual and corporate identities on social

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 1

1. At the broad level, we adopt PESTLE (variously PESTEEL, LESTEEP etc.

PESTLE (STEEPLE, PESTEL, PESTLIED, SLEPT, LONGPESTLE)

Fig. 1.1 PESTLE variants

role when the organization wishes to conduct business in international markets

When considering doing business in an international setting, some of the early

. How stable is the current economy? Is it growing, stagnating, or declining?

The Competing Values Framework—1983 was created by R.E. Quinn and

Hofstede’s Cultural Dimensions

Fig. 1.2 Competing values framework—Quinn and Rohrbaugh (1983). https://www.artstrategies.

. Power distance—the extent to which the less powerful members of institutions

. Long Term Orientation—Describes how every society has to maintain some

The website Hofstede-Insights (https://www.hofstede-insights.com/product/com

. Power Distance Index (high versus low).

Technological factors are linked to innovation in the industry, as well as innovation

. Research and Development Activity

Environmental factors concern the ecological impacts on business. As weather

. Environmental Policies. Environmental policies are considered the major exter-

Sustainable Action for Org Initiative—Change, Sustainability, etc.—Depending on

. Internal stakeholders—evidence-based case for change, persuasive communica-

– Supply Chain—more power—so a different strategy—context cues, again

Waterbody Innovations and Technologies Inc. (WITI)

Waterbody Innovations and Technologies Inc. (WITI), is an ocean technology com-

Fig. 1.4 WITI top management organization chart

End-of-Chapter Assignments and Exercises-Case Scenarios

EDC. Export Development Canada. https://www.edc.ca/en/article/trade-confidence-index.html

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 15

Learning Objectives—This chapter will

1. Provide descriptions of different types of economies prevalent around the

Perceptions of Business Across Cultures

Types of Economies that Have Flourished Across Cultures

The OECD—Organization for Economic Cooperation and Development, states

Fig. 2.1 MSCI classification of markets—https://www.msci.com/our-solutions/indexes/market-

. Employment—foreign affiliates strengthen Canadian employment and domes-

. Economic Development—sustainability of economic development.

1. No Poverty: End poverty in all its forms everywhere.

Fig. 2.2 United Nations Sustainable Development Goals—UN SDGs (https://sdgs.un.org/goals)

6. Clean Water and Sanitation: Ensure availability and sustainable management

As we presented earlier, a market economy is one in which individuals answer the

The World Population Review defines capitalism as “an economic ideology in

National Culture vs. Organizational Culture

. “the way we do things around here”