Power Distance Countries Research Articles

National culture and Islamic bank risk-taking in the Middle East and Asian countries

ABSTRACT This study investigates the influence of the national culture on risk-taking in Islamic banks. The sample comprises 60 Islamic banks in the Middle East, Southeast Asia, and South Asia from 2011 to 2019. Using the random effects generalized least squares model, we find that national culture influences risk-taking in Islamic banks, especially in the power distance dimension. Low power distance incentivizes greater risk. In low power distance countries, Islamic banks tend to adopt a more aggressive approach to their decisions because of the trust and authority of shareholders and depositors, resulting in excessive risk-taking. The findings have implications for regulators and Islamic bank managers to consider national cultural elements when developing bank risk management policies.

Chief Executive Officer's national culture and bank risk‐taking behavior: International evidence

AbstractThis paper examines the effect of the national culture of the chief executive officers (CEOs) on their risk‐taking behavior in managing the banks, leading to banks' instability using a sample of 805 CEOs for 517 commercial banks in 33 countries from 2011 to 2017. Our empirical results confirm that bank risk‐taking behavior is negatively associated with the national culture of the CEOs who score high on the individualistic culture dimension. We also find that bank risk is likely to increase under the management of CEOs coming from high power distance countries. These results have largely remained unchanged across different settings.

Human resource management system strength in times of crisis

In times of crisis, employees turn to their managers for information and guidance. When managers share distinctive, consistent, and consensual information (also known as human resource management [HRM] system strength), it is easier for employees to make sense of the information and understand what is expected from them. To date, research has mainly focused on the outcomes of HRM system strength but has remained silent on its antecedents. Thus, we know little about the factors that influence managers when sharing information with their employees. Drawing on insights from research on HRM system strength, attribution, and cross-cultural fields, we suggest that the interaction between managers’ motivation (i.e., the severity of a crisis and an organization’s reputation) and their general beliefs (i.e., national cultural values: uncertainty avoidance and power distance) can explain HRM system strength in times of crisis. To test our hypotheses, we used HLM to analyze a three-level sample of 368 bi-weekly observations nested in 34 universities within 15 countries. Results show that the positive effects of crisis severity and an organization’s reputation on the employment of HRM system strength were stronger in high uncertainty avoidance countries, but weaker in high power distance countries. Theoretical and practical implications are discussed.

New Evidence on National Culture and Corporate Financing: Does Institutional Quality Matter?

The purpose of this paper is twofold. First, to examine the dynamic impact of national culture on corporate financing in the context of seven Asian countries using a two-step GMM model, and second, to assess the moderating role of institutional quality on the relationship between culture and corporate financing. To achieve these objectives, a unique sample of seven Asian countries from the period of 2002 to 2018 was employed. The empirical results reveal that firms operating in countries that encourage individualism, masculinity, and uncertainty avoidance tend to use higher leverage in their operations. Individualism encourages autonomy in decision making and managers from such cultures engage in more risky decisions, while masculinity focuses on competition and suggests that males have a higher tendency for risk preference than females when undertaking financial decisions. In addition, firms from high uncertainty avoidance societies are more driven to engage in the use of leverage to obtain benefits via tax saving, whereas firms in higher power distance countries are less reliant on leverage. Our findings are consistent with our expectations, as well as supporting the existing literature on the issue. Further, the positive culture–leverage nexus is significantly and positively moderated by institutional quality. The findings are robust to alternative procedures (i.e., alternative proxies for culture and corporate financing, reduced sample size, and alternative estimation model), contribute to the existing literature, and have implications for potential policymakers.

INSTITUTIONS, CULTURE, AND ENTREPRENEURSHIP: DIRECT, TOTAL, AND COMPLIANCE BURDEN EFFECTS

Empirical research on the effects of culture on national entrepreneurship rates has been inconclusive, leading to contradicting theories to explain these mixed results. Results have also been sensitive to which covariates are in the empirical analysis. Given that culture might affect entrepreneurship directly and indirectly through institutions, we model the Direct and Total Effects of culture on entrepreneurship accounting for possible endogeneity effects. We use recent innovations in econometrics that are robust to model selection errors to estimate the direct and Total Effects of culture on entrepreneurship across countries. Using GLOBE’s nine dimensions of culture on an expanded sample size, we find that Future Orientation, Gender Egalitarianism, Assertiveness, and Institutional Collectivism have robust positive Total Effects on national entrepreneurship. In contrast, Uncertainty Avoidance has a robust negative Total Effect on entrepreneurship. We also find that the Total Effect is greater than the Direct Effect for Assertiveness, Institutional Collectivism, and Uncertainty Avoidance and smaller than the Total Effect for the remaining—Performance Orientation, Future Orientation, Humane Orientation, In-Group Collectivism, Gender Egalitarianism, Power Distance. This suggests strong institutions that serve as a catalyst that engenders entrepreneurship in high Assertiveness, high Institutional, and high Uncertainty Avoidance cultures. Conversely, in high-Performance Orientation, Future Orientation, Humane Orientation, In-Group Collectivism, Gender Egalitarianism, and Power Distance countries, strong institutions can sometimes impose significant compliance burdens that dampen the natural cultural proclivity that supports institutions and entrepreneurship.

Informal authority and economic outcomes of family firms: An issue of national power distance

This paper delivers empirical evidence of how the informal authority of owner families determines the extent to which these can extract private benefits and secure preferential resource access. We argue that owner families in high power distance cultures enjoy increased informal authority. Consistent with our predictions, family firms in higher power distance countries display lower operating performance and are less likely to underinvest. Both effects are moderated by family ownership, family management involvement, and formal country-level governance mechanisms. Moreover, family firms in higher power distance countries are more commonly led by family members and pay lower costs of debt. Overall, our results emphasize the relevance of informal institutions for the economic outcomes and governance situation of family firms.

A Meta‐Analysis of the Government Performance—Trust Link: Taking Cultural and Methodological Factors into Account

Abstract The performance‐trust link constitutes an important issue, but the public administration and political science literature has been equivocal regarding how it is influenced by cultural and methodological factors. Meta‐analyzing 72 empirical studies, this article finds that the link is stronger in low power distance countries, when outputs are used to measure government performance, or when the focus is on local government. In addition, the performance‐trust link holds true regardless of whether performance data are subjective or objective, or whether the studies focus on performance of government as a whole or specific agencies. The results imply that in order to nurture and sustain trust in government, we should pay more attention to societal cultures and the way government performance information is provided. Trust in government studies should become both more scientific and more culturally sensitive.

Investigating tolerance of uncertainty, COVID-19 concern, and compliance with recommended behavior in four countries: The moderating role of mindfulness, trust in scientists, and power distance

Consumers' compliance with recommended behavior during the COVID-19 pandemic helps contain the spread of the virus and positively impacts marketplace outcomes. This study investigates the effect of consumers' tolerance of uncertainty on COVID-19 concern, compliance with recommended behavior, and panic buying intentions, across four countries (Germany and USA with a low power distance index; India and The Philippines with a high power distance index; N = 1272). We test the moderating role of power distance, mindfulness, and trust in scientists, among these relationships. Our results show that tolerance of uncertainty is negatively associated with COVID-19 concern, and COVID-19 concern is positively associated with compliance and panic buying intentions. In high power distance countries, tolerance of uncertainty is negatively associated with compliance. The negative association of tolerance of uncertainty with COVID-19 concern is more pronounced at low levels of mindfulness, and consumers with high COVID-19 concern and high trust in scientists demonstrated the highest compliance. Our findings reveal that stressing the importance of mindfulness, though positive overall, might not yield more compliance. Interventions to make consumers more concerned about the consequences of the pandemic and, at the same time, enhancing their trust in scientists, can lead to higher levels of compliance.

Cross‐Cultural Analysis of Trolling Behaviors

AbstractThe online disinhibition effect allows trolling to spread widely. As it is possible that trolling behaviors are more frequent in some countries than others, this paper compares the extent and type of trolling in India and the USA. Through a comparative content analysis of 3,000 Twitter posts, we found that trolling varies significantly between the two countries. Specifically, we found that individuals in the USA were trolled significantly more frequently than individuals from India. Almost all trolling behaviors have been at least three time more common in the USA. We argue that the variations in trolling can be attributed to socio‐cultural differences between the two countries, as trolling is more acceptable in low power distance countries.

How Does Culture Impinge Upon Managers’ Demeanor of Earnings Management? Evidence from Cross-Country Analysis

We examine the impact of national culture on earnings. Specifically, we examine managers’ likelihood of using accrual or real earnings management (REM) and the role of culture on various attributes of earnings (accruals quality, persistence, smoothing, and predictability). We measure national culture using Hofstede’s six dimensions of culture (1984, 2001, 2010). Using data from 36 countries during 1997–2018, we find that managers are likely to use both accruals and REM in high power distance (PDI) countries. In long-term-oriented countries, managers are more likely to use REM. In uncertainty avoidance (UAI) countries, in high individualist countries, and in higher indulgent versus restraint countries, managers are less likely to use either type of earnings management. In masculine countries, managers tend to use lower accruals management and rely on production cost REM. We also find the use of accruals management and the use of REM are substitutes for each other. In addition, we are able to classify countries into four earnings quality groups based on the culture impact on the earnings attributes (primarily driven by accruals quality, predictability, and smoothing). Persistence is generally not significant in classifying countries by earnings attributes. Our findings indicate that a universal set of accounting standards is a challenging goal to achieve given the cultural diversity across countries. To improve the existing corporate governance framework and to ensure high quality and uniform financial statements, the enforcement of standards should be tailored to specific cultures, or at a minimum, corporate boards need to be more culturally diversified.

Teaching MBA and EMBA Students in Asia: Using Case Method and Online Education Software for Strategic Management

Aims: MBA and EMBA students in higher power distance countries such as Taiwan used to listen lectures, not to express their opinions and discuss issues at classes openly. We used case method and online education software for teaching David's (2015) Strategy-Formulation Analytical Framework at the course of Strategic Management. MBA and EMBA students in Taiwan were pleased to submit their opinions by the on-line software; therefore, teachers can lead them to solve problems by discussing cases.
 Study Design: We used the case method and online educational software to teach Strategy-Formulation Analytical Framework for MBA and EMBA students in a university in Taiwan.
 Place and Duration of Study: Studies carried out at one university in Taiwan between 2016 and 2017.
 Methodology: Our sample came from around 40 MBA and EMBA students who attended Strategic Management courses in a university in Taiwan.
 Results: At the end of the courses, MBA and EMBA students can use the David’s Strategy-Formulation Analytical Framework in other industries such as tourism and higher education industries.
 Conclusion: Teaching in higher power distance countries are quite difficult to use case method since most students has been trained to listen teachers' lectures from primary schools. Although some students would be asked to answer questions, but most of the students in class felt it's not their business. Combining case methods and online education software may allow all students in class to submit their opinions and listen to other's opinions. We recommend teachers in Asian countries with high power distance and low individualism, such as China, Japan and Korea use this teaching method.

Innovation in Isolation? COVID-19 Lockdown Stringency and Culture-Innovation Relationships.

In a bid to curb the spread of COVID-19 in 2020, several countries implemented lockdown procedures to varying degrees. This article sought to examine the extent to which country-level strictness, as measured by the Government Response Stringency Index (2020), moderated the relationship between certain cultural dimensions and estimates of national innovation. Data on 84 countries were collated for Hofstede’s cultural dimensions (2015), and from the Global Innovation Index (2020). Owing to the robust relationships between innovation and the dimensions of uncertainty avoidance, power distance, and individualism, these were used in moderation analyses. In general, power distance was inversely related to innovation, whereas individualism was directly related to it. Results indicated that collectivist and high power distance countries showed lower innovation, irrespective of levels of government stringency as a response to COVID-19. On the other hand, among individualistic and low power distance countries, lower innovation was associated with increased stringency (e.g., blanket restrictions on movement). Higher innovation was observed when such countries had a less severe government response. The dimension of uncertainty avoidance was not significantly associated with innovation at the country level. The implications of lockdowns on general innovation, its inputs, and outputs are discussed in the context of cultural dimensions and country-level policies.

Organizational Dehumanization and Emotional Labor: A Cross-Cultural Comparison Between Vietnam and the United Kingdom

This study examined cross-cultural differences in the relationships between organizational dehumanization and both job satisfaction and turnover intentions through emotional labor (i.e., surface acting). In particular, we expected that power distance, that is, a critical value usually discussed as part of the national culture, would mitigate the deleterious effects of both organizational dehumanization and surface acting on job satisfaction and turnover intentions. Data were collected from employees in two countries that differ in power distance, namely Vietnam ( N = 235) and the United Kingdom ( N = 334). First, we found that perceptions to be dehumanized by one’s organization were indirectly related to poor job satisfaction and more turnover intentions through surface acting, regardless of the country. Second, our results showed that the deleterious effects of both organizational dehumanization and surface acting on work-related outcomes were weaker in Vietnam (a high power distance country) than in the United Kingdom (a low power distance country). Theoretical and practical implications are discussed from the perspective of organizational dehumanization and emotional labor literature.

Frontline employee age and customer mistreatment: a meta-analysis

PurposeThe purpose of this paper is to provide a comprehensive meta-analytic examination of the relationship between employee age and customer mistreatment. Drawing on socioemotional selectivity theory and taking the cross-cultural and cross-sectoral differences into account and making the country-level and occupation-level comparisons possible for uncovering when age matters, the role of employee age on decreasing customer mistreatment is examined.Design/methodology/approachThe data comprises of 103 independent samples collected from 48,067 frontline employees. Random effects individual correction meta-analysis procedure is used to aggregate correlation coefficients and correct them for sampling, measurement and range restriction errors. Meta-regression is used for examining the impact of key moderators.FindingsResults consistently show that frontline employee exposure to customer mistreatment is decreased with age. Regarding national differences, negative associations are stronger in low power distance countries. Age has more potential to provide high-quality relations with customers in healthcare, banking, compared to call centers and hospitality sectors.Practical implicationsHealthy customer relations with fewer customer mistreatments come with employee age. However, results warn service managers about cultural and industry-related boundary conditions such as power distance and service orientation expectations.Originality/valueThis study is the first meta-analysis on the relationship between two contemporary challenges in organizational frontlines: the aging workforce and customer mistreatment. By conducting comprehensive data collection and analyses, this study concludes that older employees, especially in low power distance cultures, bring wisdom to service environments.

Demographic Correlates of Acculturation and Sociocultural Adaptation

A cross-sectional survey study of international (n=207) and domestic (n=173) students revealed, as expected, that international students had higher acculturative stress than domestic students, but this difference did not vary by marital status or length of stay. Also, women from high Uncertainty Avoidance (UA) and high Power Distance (PD) countries (vs. low UA and high PD countries) had greater social interaction acculturative stress (e.g., difficulty making friends). Thus, cultural background plays an important role in students’ adaptation and university counselors might need to collaborate with academic staff to help international students adjust. Female students from high UA and high PD countries may be especially in need of assistance to cope with acculturative stress.

Understanding the effects of empowering, transformational and ethical leadership on promotive and prohibitive voice

PurposeThe purpose of this paper is to compare the direct and indirect effects of transformational, ethical and empowering leadership (EL) on promotive and prohibitive voice behavior. The study also explores the mediating effects of leader-member exchange (LMX) and moderating effects of individual power distance orientation (IPDO) in the hypothesized model. The research conducted attempts to identify the most suitable leadership style for encouraging promotive and prohibitive voice behavior in service sector organizations in India.Design/methodology/approachPurposive and snowball sampling was used for data collection. Necessary condition analysis (NCA) was conducted to identify the most suitable style for encouraging promotive and prohibitive voice behavior. The results NCA were later verified using the structural equation modeling technique.FindingsResults of the study displayed the supremacy of EL style in promoting high-quality LMX and “promotive and prohibitive” voice over transformational and ethical leadership in Indian service organizations. Considering the overall results of the study, EL appears to be the most suitable style for encouraging promotive and prohibitive voice in a high power distance country like India.Research limitations/implicationsSelf-reported measures utilized in the study might have affected the findings and hence, should be interpreted with caution.Practical implicationsResearchers propose the adoption of EL style for encouraging promotive and prohibitive voice in Indian service sector organizations. The researchers also highlight the noteworthy impact of LMX and IPDO on promotive and prohibitive voice behavior, which makes it a point for the leaders to work toward lowering IPDO amongst followers to promote both promotive and prohibitive voice behavior for the growth of an organization.Originality/valueThe study is the first one to conduct a comparative moderated mediated examination to analyze the effects of transformational, ethical and EL in encouraging promotive and prohibitive voice behavior in Indian organizations.

Informal Authority and Economic Outcomes of Family Firms: An Issue of National Power Distance

This paper delivers empirical evidence of how the informal authority of owner families determines the extent to which these can extract private benefits and secure preferential resource access. We argue that owner families in high power distance cultures enjoy increased informal authority. Consistent with our predictions, family firms in higher power distance countries display lower operating performance and are less likely to underinvest. Both effects are moderated by family ownership, family management involvement, and formal country-level governance mechanisms. Moreover, family firms in higher power distance countries are more commonly led by family members and pay lower costs of debt. Overall, our results emphasize the relevance of informal institutions for the economic outcomes and governance situation of family firms.

Unlearning at the Individual Level: An Exploratory Case Study in a High Power Distance Country

This paper presents a case study that addresses factors that influence unlearning at the individual level. These factors were studied in a public sector organization located in a country characterized by high power distance. The case organization went through a change process of a daily routine caused by the introduction of a new technology. Data were collected through semi structured face-to-face interviews with shop floor agents in the state of Santa Catarina/Brazil. The results highlight the strong influence of the support of formal leaders on the unlearning process of individuals, suggesting that managers operating in a high power distance environment have to make bigger efforts compared to their counterparts in small power distance settings to promote unlearning processes of employees. The study advances the limited body of knowledge regarding unlearning in general and unlearning at the individual level in particular. It also stresses the influence of the national cultural dimension on the unlearning process of individuals.

Unlearning at the Individual Level: An Exploratory Case Study in a High Power Distance Country

This paper presents a case study that addresses factors that influence unlearning at the individual level. These factors were studied in a public sector organization located in a country characterized by high power distance. The case organization went through a change process of a daily routine caused by the introduction of a new technology. Data were collected through semi structured face-to-face interviews with shop floor agents in the state of Santa Catarina/Brazil. The results highlight the strong influence of the support of formal leaders on the unlearning process of individuals, suggesting that managers operating in a high power distance environment have to make bigger efforts compared to their counterparts in small power distance settings to promote unlearning processes of employees. The study advances the limited body of knowledge regarding unlearning in general and unlearning at the individual level in particular. It also stresses the influence of the national cultural dimension on the unlearning process of individuals.

National Culture and Corporate Rating Migrations

The informal constraints that arise from the national culture in which a firm resides have a pervasive impact on managerial decision making and corporate credit risk, which in turn impacts on corporate ratings and rating changes. In some cultures, firms are naturally predisposed to rating changes in a particular direction (downgrade or upgrade) while, in other cultures, firms are more likely to migrate from the current rating in either direction. This study employs a survival analysis framework to examine the effect of national culture on the probability of rating transitions of 5360 firms across 50 countries over the period 1985–2010. Firms located in long-term oriented cultures are less likely to be downgraded and, in some cases, more likely to be upgraded. Downgrades occur more often in strong uncertainty-avoiding countries and less often in large power distance (hierarchy) and embeddedness countries. There is some evidence that masculinity predisposes firms to more rating transitions. Studying culture helps enrich our understanding of corporate rating migrations, and helps develop predictive models of corporate rating changes across countries.