Effects of Cultural Dimensions in Business Transactions - An Investigation of Chinese Investment in Nigeria

1. Intercultural/International Management
Topic: Effects of Cultural Dimensions in
Business Transactions - An Investigation
of Chinese Investment in Nigeria
Presenter: Henry Mmeje
Summer 2021
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2. Introduction
Means of World’s Business Connection:
 Internationalization,
 Globalization and
 Technology Advancement
Companies involved in negotiations with
other culturally diverse organizations is an
understanding of the characteristics of the
cultural orientation of those they engage
which is mostly via
 Intercultural Management
 International Management
Through all these, companies continue to
negotiate across cultures despite different
cultural
orientations.
Culture
"the collective programming of the mind which
distinguishes the members of one group or category of
people from another (Geert Hofstede, 1991).“
Scholars cultural diversity research and different
perspectives:
 Styles,
 Leadership,
 Organizations,
 Negotiations, and
 Dimensions
Need for Intercultural Research
 Provide concept and Terminology about culture
 Helps to be aware, measure and acknowledge
different value systems
 Helps to understand practise found in human culture
 Understand the similarities and differences among
human cultures – (Grove 2005)
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3. Geert Hoftstede 5 dimensions of culture
after his interview with IBM staff from 53
countries
 Power-distance;
 Collectivism vs. Individualism;
 Femininity vs. Masculinity;
 Uncertainty avoidance and
 Long-vs. Short-term orientation.
(Tallin University, 2014).
The GLOBE project usefulness
Investigated how cultural values are related to
 Organizational practices,
 Conceptions of leadership,
 The economic competitiveness of societies,
 The human condition of its members
(Tallin University, 2014).
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9 basic cultural dimensions from the Globe project
 Power distance
 Institutional collectivism
 In-group collectivism.
 Gender Biasness
 Assertiveness
 Future orientation
 Performance orientation
 Human orientation
 Future orientation.
(Kreitner & Kinicki, 2013).
The GLOBE project (Global Leadership
and Organizational Behavior
Effectiveness).
 A study of 62 countries involving 172
researchers,
 with over 17,00 participating manager.
 Took more than 11 years to complete.

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Considering Nigeria from most studies conducted
 high on individualism and low on collectivism: still open to
further studies
 multicultural country comprising over 200 ethnic cultures
 Population of over 208M: can’t be seen as monoculture
entity.
 African countries have a multiplicity of ethnicity
 Different cultural backgrounds and orientation
Business Investment negotiation between a Chinese
company and two Nigerian organizations
1. Imo State Investment Company (ISIC) - SE Nig
2. Ogun State Property Development Company (OPIC) - SW Nig.
3. Xinguang Group of Guangdong (XGG), China
Aim/ Budget
 Development of a Free Trade Zone in Nigeria
 Under the trade and investment portfolio of the Company
 A project value of about $1 billion.
Places with highest degree of individualism
 Israel,
 Romania,
 Nigeria,
 Canada, and
 the United States
Places with highest degree of Collectivism
 Mexico,
 Japan
 Brazil,
 China,
 France
 India, Egypt, Nepal Etc
A worldwide survey of 30,000 managers by
Trompenaars and Hampden- Turner (Kreitner & Kinicki,
2013).

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The Igbo Culture vs. Chinese Culture
 Igbo: Individualistic: ‘’I’’ and ‘’Me’’ cultures
 Chinese: Collectivistic: "we" and "us" cultures
The Nigerian and Chinese Disagreement over the Imo Guangdong Free Trade Zone project
Shortly after project commencement, dispute arouse between ISIC (20% stake) and the Guandong group.
The group decided to abandon the project due to:
 Cultural differences in decision makings
 Issue of brokerage
 Security challenges (militancy and kidnapping)
Court Case
 ISIC accused the group of breach of contract/termination of agreement
 An order restraining the group from investing/promoting similar projects in Nig.
 Sum of N700M for damages for breach of contract
National Cultural Backgrounds of the Partners
- Nigerians are all Individualistic: Is this a wrong impression?
- Population of over 210M people with 3 major ethnic groups
- Igbos(East), Yoruba (West), Hausa (North)

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Key Business characters of the Igboman (Easterners)
 Good business negotiator
 Have deep knowledge of local and international trade
 Understands investment strategies
 Very much Individualistic
 Short term financial gain oriented
Note: Some other ethnic groups shares culture similarities with the Chinese such as collectivism, Long
term orientation, power distance and uncertainty avoidance.
Individualism vs. Collectivism
 Igbo culture is an individualistic one: self achievement, individual wealth, individual education
attainment
 Chinese are collectivistic: children grow up in groups, loyalty and equality prevails, team spirit in
Chinese company, organization needs harmony and accord.
 The ISIC CEO insisted on being paid brokerage fee to fast-track the negotiations, the Chinese
negotiator needs to show his home office a successful business closing and always have the
general interest of the company at heart.

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Long term vs. Short term Orientation
 Chinese showed extreme patience during negotiation and sustained efforts
towards slow and steady result.
 ISIC officials shows tendencies of seeking for quick result
 Chinese still kept the doors open for negotiations even when the negotiation was broken down
 Chinese invited a third party mediator The Nigeria Investment Promotion Commission (NIPC)
 Invited the NIPC and ISIC officials to meet the XGG management
 Chinese Intended to stay long in Nigeria and looked forward to long term while the ISIC officials
needed short term financial benefit
Power Distance
 Chinese has more power distance than the Igbos.
 Igbos teach their children equality, while Chinese teach their children obedience
 Igbo child has to prove himself by his achievement
 Chinese respect older relatives, Igbos treat parents and older ones as equals
 In Igbo popularity is power, Chinese power is centralized
 Igbos expects to be consulted, Chinese waits for instructions on what to do.
 For an Igbo man, power is ability to influence, motivate and expertise, Chinese power is family
and tradition

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Uncertainty Avoidance
 Chinese Negotiators shows lots of anxiety because closing the deal will mean to his boss that he was
successful, while failure to do so will mean he has failed his boss.
 The ISIC officials didn’t attach any importance to the closing of the deal, they are interested in the short
term financial gains, hence had little or no stress or anxiety
Masculinity vs. Femininity
In this case, both groups showed masculinity. Chinese only used female interpreters, the Igbos utilized no
woman in the negotiating team
Challenges due to Cultural differences
 The Igbo ISIC official’s failure to understand the basic Chinese power and it’s collectivistic characters
 The Igbo ISIC officials were more of political appointees who wants to close the deal quickly and
successfully before their tenures expires and to earn some brokerage
 Hence, didn’t care about the Chinese adaptability and need to close the deal with time
Propounding Solution - Meeting at NIPC
 Nigeria Investment promotion Commission acted as a mediator in this case
 Lots of meetings were held as from 2017
 Both two parties were present and all issues addressed
 NIPC encouraged them to resolve all issues peacefully and continue the project execution

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Meetings at Imo State Government house
 Lawyers of the XGGAs were present
 Chinese delegations were present
 Nigeria Export Processing Zones Authority were
present
 Imo state governor and State Council were present
 Meeting ended in deadlock: All parties retreated to
their lodges
 Chinese held a close door meeting with the
governor
Meeting at Guangzhou China
 The governor was invited at the XGGA headquarters
 Various meetings/negotiations took place
 No agreement was reached: both parties maintained
their stands
 Chinese maintained to continue new project in Ogun
state (SW)
pending when the Imo state issue is addressed.
 Chinese tried to look for other investment opportunities
in Imo state rather than the Free trade Zone
Dispute at Owerri High Court, 2018
Attorney of the State obtained Injunctions to:
 Restraining the Chinese from negotiating or signing similar agreement within Nigeria until the case is settled
 Restraining the Chinese from establishing free trade zone in Ogun state
 ISIC will write an undertaking to compensate the Chinese any damages it may suffer as a result of the injunction
 The Chinese were Guangdong group was unsatisfied and filed for an appeal at the court.

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Main Takeaways
1. Need to know the cultural dimensions of other party before negotiation
2. Nigeria is Multicultural and not monocultural: Potential Investors should be aware
3. NIPC advised that for there to be a continuous inward investment inflow from China, there is a need
for both parties to resolve their issues
4. Need to understand and respect the Chinese culture
5. Guarantee of the security of the Chinese business men
6. Government assurance of the safety of the Chinese group’s investment
7. Resolution on the issue of brokerage
8. NIPC and ISIC agreed to visit China to show trust, friendliness and commitment to the project
9. ISIC lost $500M investment inflow as a result of the negotiation breakdown

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Sources Utilized
 Hofstede, G. (1991). Cultures and organizations: Software of the mind. London: McGraw-Hill.
 Grove , C. N. (2005). Professional Knowledge Center. Retrieved November 24, 2014, from Grovewell
LLC Website: http://www.grovewell.com/pub-GLOBE-dimensions.html
 Kreitner, R., & Kinicki, A. (2013). Organisational Behavior (10th Edition ed.). New York: McGraw-
hill/Irwin.
 Tallin University. (2014). Leadership Dimensions: Culture and Leadership. from Tallin University
Website: Geert Hofstede, a widely known Dutch researcher of culture, has defined culture as "the
collective programming of the mind which distinguishes the members of one group or category of
people from another.“ (1991, p.5).
 SESAN KIM SOKOYA (1998). Hofstede’s Cultural Dimensions of Values and Personal Value
Orientation of Nigerian Managers: Implications for Management Practice. Department of
Management and Marketing, Middle Tennessee State University

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