This chapter discusses informal institutions like culture, ethics, and norms. It defines culture and identifies its main components as language, religion, social structure, and education. The chapter explores ways to understand cultural differences, such as through context, cultural clusters, and Hofstede's cultural dimensions. It also addresses ethics, corruption, and debates around individualism vs. collectivism and economic development values. The chapter concludes with developing cultural intelligence and implications for operating successfully in other cultures.

1. Chapter 3
Emphasizing Informal Institutions:
Cultures, Ethics, and Norms
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1
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
3-1 define culture and articulate its four main manifestations:
language, religion, social structure, and education.
3-2 discuss how cultures systematically differ from each other.
3-3 understand the importance of ethics and ways to combat
corruption.
3-4 identify norms associated with strategic responses when
firms deal with ethical challenges.
3-5 participate in three leading debates concerning cultures,
ethics, and norms.
3-6 draw implications for action.
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2. or in part.
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INFORMAL INSTITUTIONS
informal institution – institution represented by cultures, ethics,
and norms
ethnocentrism – a self-centered mentality by a group of people
who perceive their own culture, ethics, and norms as natural,
rational, and morally right
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CULTURE
culture – the collective programming of the mind that
distinguishes the members of one group or category of people
from another
? How is your culture unique?

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COMPONENTS OF CULTURE
Language
Religion
Social Structure
Education
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LANGUAGE
lingua franca – a global business language
English-speaking countries contribute the largest share of global
output
Recent globalization has called for the use of one common
language
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4. or in part.
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RELIGION
Religion is a major manifestation of culture
Knowledge about religions is crucial, even for non-religious
managers
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RELIGION (cont’d)
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duplicated, or posted to a publicly accessible website, in whole
or in part.Largest ReligionsChristianity1.7 billionIslam1.6
billionHinduism1 billionBuddhism500 million

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SOCIAL STRUCTURE
social structure – the way a society broadly organizes its
members
social stratification – the hierarchical arrangement of
individuals into social categories (strata) such as classes, castes,
or divisions within a society
social mobility – the degree to which members from a lower
social category can rise to a higher status
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EDUCATION
Education is an important component of culture
Education can be used to maintain social stratification or to
break down social barriers
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CULTURAL DIFFERENCES
Three ways to understand cultural differences
Contact
Cluster
Dimensions
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THE CONTEXT APPROACH
context – the underlying background upon which social
interaction takes place
low-context culture – a culture in which communication is
usually taken at face value without much reliance on unspoken
context
high-context culture – a culture in which communication relies
a lot on the underlying unspoken context, which is as important
as the words used

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Figure 3.1
High-Context versus Low-Context Cultures
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THE CLUSTER APPROACH
cluster – countries that share similar cultures
civilization – the highest cultural grouping of people and the
broadest level of cultural identity people have
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Table 3.1
Cultural Clusters
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Figure 3.2
Hofstede Dimensions of Culture
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THE DIMENSION APPROACH
power distance – the extent to which less powerful members
within a country expect and accept that power is distributed
unequally
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THE DIMENSION APPROACH (cont’d)
individualism – the idea that an individual’s identity is
fundamentally his or her own
collectivism – the idea that an individual’s identity is
fundamentally tied to the identity of his or her collective group
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THE DIMENSION APPROACH (cont’d)
masculinity – a relatively strong form of societal-level sex role
differentiation whereby men tend to have occupations that
reward assertiveness and women tend to work in caring
professions
femininity – a relatively weak form of societal-level sex role
differentiation whereby more women occupy positions that
reward assertiveness and more men work in caring professions
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THE DIMENSION APPROACH (cont’d)
uncertainty avoidance – the extent to which members in a
culture accept or avoid ambiguous situations and uncertainty
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THE DIMENSION APPROACH (cont’d)
long-term orientation – dimension of how much emphasis is
placed on perseverance and savings for future betterment
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CRITICISMS OF HOFSTEDE’S DIMENSIONS
Cultural boundaries are not the same as national boundaries
Hofstede’s own cultural biases
Responses could be unique to the industry or the company
The original data is now 40+ years old
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12. Table 3.2
Some Cross-Cultural Blunders
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ETHICS
ethics – the principles, standards, and norms of conduct that
govern individual and firm behavior
code of conduct – a set of guidelines for making ethical
decision
? Can you think of a recent example in which a firm engaged in
unethical behavior? What happened?
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13. MANAGING ETHICS OVERSEAS
ethical relativism – a perspective that suggests that all ethical
standards are relative
ethical imperialism – a perspective that suggests that “there is
one set of Ethics (with the capital E), and we have it.”
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Table 3.3
Managing Ethics Overseas: Three “Middle-of-the-Road”
Approaches
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Table 3.4

14. Texas Instruments (TI) Guidelines on Gifts in China
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ETHICS AND CORRUPTION
corruption – the abuse of public power for private benefits,
usually in the form of bribery
Foreign Corrupt Practices Act (FCPA) – a US law enacted in
1977 that bans bribery of foreign officials
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Table 3.5
Strategic Responses to Ethical Challenges
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DRIVERS OF ECONOMIC DEVELOPMENT: WESTERN
VALUES VERSUS EASTERN VALUES
Western values: Protestant work ethic
Challenged by Eastern values: Islam and Asian (Confucianism)
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OPPORTUNISM VERSUS INDIVIDUALISM/COLLECTIVISM
Opportunism is a major source of uncertainty
Opportunists are a minority in any population
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OPPORTUNISM VERSUS INDIVIDUALISM/COLLECTIVISM
(cont’d)
in-group – individuals and firms regarded as a part of “us”
out-group – individuals and firms not regarded as a part of “us”
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OPPORTUNISM VERSUS INDIVIDUALISM/COLLECTIVISM
(cont’d)
Individualists may be more opportunistic when dealing with in-
group members
Collectivists may be more opportunistic when dealing with out-
group members
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CULTURAL INTELLIGENCE
cultural intelligence – an individual’s ability to understand and
adjust to new cultures
Three phases of cultural intelligence
Awareness
Knowledge
Skills
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Table 3.6
Implications for Action: Six Rules of Thumb When Venturing
Overseas
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