Cultural aspects

Culture plays a crucial role regarding the transfer of a COC (Blazejewski, 2006; Barmeyer

& Davoine, 2011a). Different ways of understanding the content of a COC complicate the

transfer process (Gertsen & Zølner, 2012). While some countries, such as the US, standardize guidelines about behavior (Krumsiek, 2004), others, including France and Germany, resist mandatory behavior. This can partly be linked to the national culture of a country (Barmeyer & Davoine, 2011a; Hofstede, 2011). However, if such guidelines are resisted, they are disparaged at the same time (Barmeyer & Davoine, 2011a). This means that one culture might be granted specific values which have to be explicitly mentioned in a COC in a different culture, as in the example of a German headquarters with a subsidiary in Japan. Respect for others forms part of the company’s COC, which might lead to conflicts, since this value is deeply rooted in the Japanese culture. This can be interpreted negatively by the subsidiary as if they would not behave according to this value and therefore, receive guidelines from headquarters (Blazejewski, 2006). Evidently, it is essential to adapt COCs to local behavior in order to guarantee a meaningful content of the code to employees regardless of the subsidiary’s nation (Tréguer-Felten, 2017).

However, transferring a COC internationally requires a high degree of willingness to accept diversity from both headquarters and subsidiaries. It is the headquarters task to formulate and adapt a COC to national requirements of the subsidiaries, and however, the subsidiaries need to be willing to accept the COC (Helin & Sandström, 2008).

The following is an example of a US-based company with subsidiaries in France and Germany: The code contains guidelines about behavior including that it is not allowed to talk about business in a private setting. Such requirements may be appropriate in the US culture. However, they are perceived negatively in other countries such as Germany, which displays this behavior regardless of the COC and interpret them as very demanding and impolite on behalf of the sending institution (Barmeyer & Davoine, 2011a).

Nevertheless, there is a difference in answers if employees have had an expatriate contract or generally had worked at the US branch for a specific time frame. These people were less surprised about the content of the COC as they have lived and worked in the US and are familiar with the culture. Thus, these managers play a crucial role in the transferring process, because they can introduce the COC and its original meaning to the employees at the subsidiaries (Barmeyer & Davoine, 2011a). Furthermore, the position within the company, or more specifically within the subsidiary, can also be linked to the way a COC is perceived. Employees in leading positions or employees in frequent contact with (international) clients tend to be more relaxed about signing a COC. However, more

The content of the COC needs to be highlighted. It might affect the receiving institution’s behavior to adapt to, adopt or resist to the COC (Nakhle & Davoine, 2016; Ciuk & James, 2014).

Figure 2 Reception patterns of corporate values

(Barmeyer & Davoine, 2006, p. 231)

Research has shown that employees of subsidiaries typically react in three patterns (Figure 2) when receiving corporate values. These three patterns are:

▪ Resistance: Employees refuse the transferred values and do not integrate them.

▪ Adaption: Employees accept the transferred values but only implement them after modifications in line with their national culture.

▪ Acceptance & integration: Employees accept and integrate values without adaptations (Barmeyer & Davoine, 2006).

These patterns are inter-active, which means that the subsidiary’s reaction to the COC might change depending on the stage of the COC transfer process, e. g. employees might resist values during the first stage but adapt or even accept them, depending on the context, at a later stage (Barmeyer & Davoine, 2006). Therefore, the COC should contain guidelines that are universal, i. e. comply within the cultural setting of the whole corporation without focusing too much on national practices (Barmeyer & Davoine, 2011a).

Although universal values are necessary for a COC’s effectiveness (Barmeyer & Davoine, 2011a), local adaptations are essential for individual countries and cultures, as the

following case of a German headquarters and a Japanese subsidiary describes (Blazejewski, 2006). In this case, integrity is part of the company’s COC and stands for eliminating corruption and enhancing fair trade. Generally, the term prohibits any illegal activities or actions that are against the stated value. This value, however, provoked conflicts in the Japanese subsidiary, since some of their employees’ habits are deeply rooted in their business culture. Exchanging expensive gifts is part of Japanese business culture. Consequently, this action is not illegal in Japan, as it is a sign of politeness and necessity to enhance a business relationship (Blazejewski, 2006). Especially in Asian countries, notably in China, gift-giving is part of forming business relationships.

Nevertheless, it takes much more than gifts to establish contacts in Chinese business environments. A main part of many Asian business relationships is guanxi, which focuses on rather “personal than organizational relationships” (Perryera & Tsahuridub, 2013, p. 346). Some researchers argue that guanxi hinders fair trade and increases corruption, which requires clear boundaries in gift-giving (Snell & Tseng, 2001). On the contrary, others emphasize the importance of local adoptions in terms of accepting gifts when doing business in China (Leung, Heung, & Wong, 2008).

Within a Japanese context, refusing gifts might lead to a two-sided conflict for the subsidiary: If the employees commit to the company’s COC, a conflict among the Japanese clients will ensue, and the subsidiary will consequently risk losing important business partners. Japanese business partners consider it rude to refuse gifts, which impedes the business relationship. However, if the subsidiary applies traditional Japanese business habits, corporate norms will clash, and the subsidiary will deal with consequences on behalf of the company’s headquarters. What is more, this will negatively affect a Japanese employee’s career path within the MNE (Blazejewski, 2006).

An analysis of COCs of US and European companies presents major differences in employee conduct, supplier and contractor relations as well as political interests. Topics regarding political interests differ particularly because of socio-political norms. While the US explicitly involves political matters within COCs, European companies ignore such topic. Such differences do not only occur across continents. The content of COCs differs on country level. While German COCs focus on innovation and technology, French companies lay emphasis on customer relations (Langlois & Schlegelmilch, 1990). These differences between COCs on country level complicate the international transfer process

may facilitate the transfer process. However, it does not guarantee a transfer without complications (Gertsen & Zølner, 2012).

A solution for these challenges would be to adapt the COC to local standards (Blazejewski, 2006). This means, that gifts of a pre-defined value should be allowed only if they are not for personal use. All gifts could be collected and sold at an annual lottery within the subsidiary. Furthermore, an independent law firm could be introduced as a third-party consulter. Therefore, employees could anonymously call and ask for advice in case of uncertainties (Blazejewski, 2006).

Standardized rules which are not adapted to the subsidiary’s national culture can decrease the level of tolerance of other cultures (Helin & Sandström, 2008). It can result in people developing a stronger sense of national identity and accepting cultural values of different cultures less frequently. Consequently, the code is perceived from the subsidiary as for instance American code (in case US headquarters) instead of a corporate code.

This suggests that national identity exceeds corporate identity, thus placing a country’s culture on a high level. Consequently, employees define themselves as e. g. Swedes instead of members of the subsidiary. Interestingly, employees of the subsidiary may not know the national identity of employees of the headquarters. It could be that the COC was formulated by an international team based at headquarters. Nevertheless, they still categorize them as e. g. American instead of focusing on the organizational structures, such as headquarters (Helin & Sandström, 2008). This shows, how national identity influence cross-cultural processes.

A top-down transfer of the COC disregards the national identity of the receiving institution regardless of the COC’s content. Certainly, this statement is case-specific and cannot be generalized. Nevertheless, a high degree of employee participation is required when dealing with business ethics. It is argued that business ethics topics should be handled carefully as they cannot be arranged top-down (Palazzo, 2002).

To sum it up, it is vital to address conflicts by adapting, re-interpreting and re-formulating local behavior patterns to corporate core values (Blazejewski, 2006). The extent of local adaptations is also crucial, since gift giving in a cultural context and actual bribery may overlap (Steidlmeier, 1999). Considering similar characteristics of local norms and bribery, the intention of the actors involved becomes essential when classifying specific situations

of gift-giving (Fan, 2006). The theoretical difference between gifts and bribes is that bribes aim at influencing the behavior of the receiver while gifts do not. The practical execution of the terms shows that gifts often result in a similar or higher pressure of the receiving party compared to a bribe, because it creates indirect pressure to give something in return.

Thus, a gift in practice influences personal motivations and results in an unfair advantage (Perryera & Tsahuridub, 2013).

Since monitoring and auditing are part of the transfer process, as they measures a code’s effectiveness, interviews can assist in analyzing the progress of the code’s implementation (Sethi, 2002). The tools for measuring effectiveness might differ country-wise, and the person who holds the interview should be chosen carefully, since culture may influence the results. In other words, people from collectivist countries with a high score in power distance accept unevenly distributed power. Furthermore, they are less likely to share complains with higher-ranked colleagues to save face (Hofstede, 2011). Therefore, it is doubtful that valuable results will be achieved with this method. People may not share the truth fearing a face and job loss (Yu, 2008).

Scholars argue that cultural distance between headquarters and subsidiaries complicates the transfer process of COCs (Kostova & Roth, 2002). Instead of blaming cultural differences attention should be linked to distinct structures of significations in each subsidiary. Within such structures, subordinates receive corporate values and interpret them according to their personal understanding within a given context. Gaining or having knowledge about these structures supports the transfer process, since managers can actively respond and adapt to such different ways of interpreting and consequently accept or reject corporate values (Gertsen & Zølner, 2012).

Research also shows that there are cultural proximity patterns. Thus, transferring values exclusively within Anglo-Saxon/German-speaking countries or among Romance languages facilitates the process. To be more precise, transferring COCs from the US to France reveals more cases of resistance or conflict than the transfer from the US to Germany (Barmeyer & Davoine, 2006).

Hence, culture influences the way COCs are interpreted. The commitment of expatriates supports the implementation process of a COC and provides essential information about

the content of a COC. While local adaptations of cultural norms improve the overall effectiveness of a COC, these adaptations should only be introduced to a small extent.