3. Informal institutions MKIB101

informal institutions

unwritten “rules of the game”

govern behaviour through socially shared norms, values, and ethics, supported by normative pillars (social standards), and cultural-cognitive pillars (unconscious behaviours)

compliance is driven by a desire to meet social expectations or being unable to concieve of behaving otherwise

institution-based view

firm success is due to formal and informal “rules of the game” within operating environments

EXTERNAL

resource-based view

focuses on firm-specific resources and capabilities as primary drivers of success

INTERNAL

cultural context theory

high context cultures: (e.g. Asian) - information is conveyed largely through non-verbal cues and shared understanding, personal relationships and trust are more important than contracts

low context cultures: (e.g the US) - information is conveyed primarily through explicit expression, written contracts and formal terms are the priority in business

Hofstede’s cultural dimensions:

Power distance

acceptance of unequal power distribution

high power distance societies are often autocratic or paternalistic

Hofstede’s cultural dimensions:

Individualism vs. Collectivism

is an individual’s identity fundamentally their own, or based on their collective group

Hofstede’s cultural dimensions:

Masculinity vs. Femininity

referred to as ‘motivation towards achievement and success’

measures the preference for assertiveness and material rewards vs cooperation and quality of life

Hofstede’s cultural dimensions:

Uncertainty avoidance

the extent to which a culture feels threatened by ambiguous situations and strives to avoid them through strict rules

Hofstede’s cultural dimensions:

Long-term orientation

emphasis placed on perseverance and savings for future betterment vs a focus on quick results

Hofstede’s cultural dimensions:

Indulgence vs. Restraint

the extent to which a society allows relatively free gratification of natural human desires related to enjoying life

Hofstede’s framework criticisms

prone to stereotyping

relying on old data

assuming that a nation and a culture are identical

Managing cultural differences

develop cultural intelligence

• gaining awareness of one’s own cultural disposition

• knowledge of other symbols and taboos

• skills to immerse oneself in different cultures

managers are encouraged to focus on similarities and create connections that transcend cultural boundaries