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Journal of International Business Studies, 1–15 & 2005 Academy of International Business All rights reserved 0047-2506 $30.00www.jibs.net Cross-national differences in cooperativedecision-making in mixed-motive businesscontexts: the mediating effect of vertical andhorizontal individualism AbstractBased on the institutional vs the individual view of culture and the theory of 1Department of Management and Organization, individualism–collectivism in explaining the in-group–outgoup distinction that School of Business, University of Washington, people make in different cultures, we predicted that Chinese people would Seattle, USA and 2Center for Social & Economic make less cooperative decisions than Australians in mixed-motive business Behavior, Institute of Psychology, Chinese situations in which no formal or informal sanction systems were in place. We also predicted that Chinese would be less cooperative with foreigners than withfellow Chinese when they were in a foreign territory, whereas Australians would Correspondence:X-P Chen, Department of Management and be equally cooperative with members of both groups. Data from two cross- national experiments provided general support for these predictions. More- over, the results of Study 2 showed that the nation effects on cooperative decision-making were mediated by individual cultural orientation on vertical and horizontal individualism. The theoretical and practical implications of these findings are discussed in the context of cross-cultural business settings.
Journal of International Business Studies (2005), doi:10.1057/palgrave.jibs.8400169 Keywords: cross-national difference in cooperation IntroductionIn recent years, researchers have come to discover systematic cross-national differences in many fundamental psychological effects,such as the construal of the self (Markus and Kitayama, 1991), thefundamental attribution error (Morris and Peng, 1994), intrinsicmotivation (Iyengar and Lepper, 1999), confidence judgment (e.g.,Yates et al., 1996, 1997, 1998) and risk preference (Weber and Hsee,1998; Weber et al., 1998; Hsee and Weber, 1999; Rohrmann andChen, 1999). However, little is known about whether people indifferent cultures differ in their decision-making in mixed-motive Advance online publication citations for this
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situations where individual interest is in conflict with the ‘article title’, Journal of International Business collective interest. Even less is known about decision-making Studies, doi’’. as in ‘‘Werner S. and Brouthers involving members of different cultures (Leung, 1997). In the L.E. (2002) ‘How international is manage- present study, we developed hypotheses contrasting the coopera- ment?’, Journal of International Business Stu-dies, doi:10.1057/palgrave.jibs.9201234’’.
tive decision-making of Chinese and Australians when facingbusiness partners from the same culture and from different cultures. We also proposed an underlying psychological mechan- ism explaining how culture might exert its influence on individual decision-making. We tested these hypotheses in two cross-national studies in which the participants were asked to once the public good is established; the extent to make an investment decision in mixed-motive which an equality rule is accepted is also related to cultural beliefs and norms (e.g., Leung and Bond, The purpose of this research was to determine how Chinese and Australian decision-makers differin their tendency to cooperate with others, and to Cultural individualism–collectivism and determine the cultural explanations for such differ- ences. We chose business contexts that contained One of the dimensions that differentiates the the primary features of the mixed-motive games for Chinese and Australian cultures is individualism– the present study. A mixed-motive game is a collectivism (Hofstede, 1991; Schwartz, 1994).
situation in which an individual faces a conflict Collectivism can be defined as a social pattern that between maximizing personal interests (defection) consists of closely linked individuals who see and maximizing collective interests (cooperation).
themselves as parts of one or more collectives, It is generally more profitable to defect, but if all do and individualism can be defined as a social pattern so, all are worse off than if all choose to cooperate.
that consists of loosely linked individuals who view One example of the mixed-motive game is the themselves as independent of collectives. Accord- prisoner’s dilemma game, in which one prisoner’s ing to Triandis (1995), individualism and collecti- unilateral confession of a crime will lead to the vism are cultural syndromes that consist of many freedom of this person but a 10-year sentence for defining attributes. One such defining attribute is the other prisoner, whereas a bilateral confession the degree to which individualists and collectivists will lead to a 5-year sentence for both but a bilateral distinguish between in-group and out-group mem- non-confession leads only to a 1-year sentence for bers in social interactions. In-groups are usually both. Another example of the mixed-motive game characterized by similarities among the members, is the public goods dilemma, in which voluntary and individuals have a sense of ‘common fate’ with contribution is called from group members to members of the in-group. Clear out-groups are establish or maintain a public good; once in groups that disagree on valued attributes, or groups existence, all have equal access to it, regardless of with which one is in conflict. However, the their contributions. In this case, if one contributes boundaries between in-group and out-group are little but the majority of others contribute a lot, this not always clear, and there could be much elasticity person can then enjoy the benefit associated with involved in such categorizing (e.g., Buchan et al., the public good at minimal cost. On the other 2002). For example, two strangers from the same hand, if everyone thinks and acts this way, the country who meet in a foreign city may suddenly public good will not be there and all will be worse see each other as in-group, whereas they might not talk to each other in their home country.
A mixed-motive game is particularly appropriate To predict how cooperative Chinese and Austra- for studies of cross-cultural comparisons on coop- lians will be in mixed-motive games with business eration because the individual vs collective dilem- partners of their own cultural heritage (compa- ma embedded in these games puts the target person triots) or not (non-compatriots), two sets of litera- in tension. This tension makes cultural beliefs (e.g., ture are relevant: the literature on individualism– individualism–collectivism) more salient in one’s collectivism (cf. Triandis, 1995) and the literature decision-making. Furthermore, the high level of on the institutional vs the individualistic view of interdependence involved in the mixed-motive culture (Yamagishi, 2003). These two theoretical games forces people to think about the conse- accounts will help us predict whether the Chinese quences of their own choices for the group and will be more or less cooperative than the Austra- other members. And the propensity to relate lians in general, and whether the Chinese’s and UNCORRECTED PROOF
oneself with others is also culturally cultivated Australians’ cooperative decisions will be more or (e.g., Markus and Kitayama, 1991). Moreover, there less influenced by the extent to which their is a great deal of uncertainty in these situations, business partners share the same cultural heritage.
because the participants do not know what choicesothers might make. This uncertainty makes the individual’s characteristics play an important role in his or her decision-making. Finally, in public Because few cross-cultural studies included Austra- goods games, an equality distribution rule is used lians in their sample, we have to rely on general Journal of International Business Studies conclusions made from cross-cultural research with consisted of complete strangers, people’s behavior regard to individualism–collectivism to infer the is no longer confined or constrained by concerns of extent to which the Australians, who are more others, and they become more willing to reveal individualistic, will behave in mixed-motive games their egoistic sides and behave accordingly. In other in comparison with the Chinese, who are more words, the institutional view of culture assumes an collectivist. Previous research on the social loafing external incentive for collectivists’ cooperation phenomenon – individuals tending to exert less with groups. The long-term conditioning of the effort when working with others than when work- externally driven cooperative behavior therefore ing alone (Latane et al., 1979) – has shown that becomes more vulnerable to, or less likely to endure loafing occurs in individualistic groups, but not in in, situations where such external incentives are collectivist groups (e.g., Gabrenya et al., 1983; removed than in situations where such incentive is Earley, 1989). For example, Matsui et al. (1987), absent in the first place (Pillutla and Chen, 1999a; using Japanese students (collectivists according to Chen and Yao, 2003). That is why the Japanese Hofstede, 1991; Schwartz, 1994) as participants, participants in Yamagishi’s (1988a, b) studies were found that individuals’ performance in groups was more likely to leave a group when there was free superior to their performance alone.
riding than their American counterparts, and why The above findings seem to suggest that collecti- the Japanese contributed less to provide for the vists work better with others and are more coop- welfare of the other group members than did the erative than individualists. However, Yamagishi’s findings from a series of cross-societal experiments The institutional view of culture provides us with using trust games, public goods dilemmas, and a new perspective with which to interpret the social dilemmas in the United States and Japan results of the cross-cultural social loafing studies (Yamagishi, 1988a, b; Yamagishi and Yamagishi, described earlier. The reason why the Chinese 1994) suggest something of a different nature. For managers in Earley (1989), the Taiwanese school example, in his experiment on free riding and exit children in Gabrenya et al. (1983), and the Japanese from the group (Yamagishi, 1988a), he compared participants in Matsui et al. (1987) did not exhibit the tendencies of American and Japanese partici- social loafing was not that the collectivists were pants to leave a group that contains free riders in a more cooperative with others by nature. Instead, it public goods dilemma. In contrast to a simplistic was because these subjects were no strangers to one another: they had interactions with one another Japanese were collectivist, so that they would have prior to the experiment, and might have viewed a stronger preference for staying in the group, he their experimental group as an in-group, and found that the Americans exhibited a much therefore informal mutual monitoring and sanc- stronger tendency to remain in the group than tioning for loafing might be in place.
the Japanese. In another cross-societal experiment This explanation seemed to receive support from comparing cooperative tendencies in social dilem- the findings of several cross-cultural experiments mas in the United States and Japan (Yamagishi, that distinguished between in-group and out-group 1988b), he again found that Japanese participants contexts. For example, Earley (1993) examined the cooperated less than Americans, in contrast to what implications of group membership for individuals’ would have been predicted by the view that performance in a group setting and found that the Japanese individuals value group interests over performance of Americans was higher when work- individual interests more than Americans do.
ing alone than when working in an in-group or an Therefore Yamagishi proposed an ‘institutional out-group, whereas Chinese performance was high- view of culture’ (Yamagishi, 2003) to explain the er in an in-group context than in an individual or out-group context. In a negotiation study con- The UNCORRECTED PROOF
institutional view of culture posits that the ducted in Hong Kong and the United States, Chan Japanese often ‘prefer’ to belong to groups, and (1991) found that negotiation between friends (in- place group interests above their own individual group) was more cooperative and led to higher interests, not because of an intrinsic tendency, but mutual outcomes in Hong Kong than in the US, but because there exists a system of formal and the opposite pattern was found between strangers informal mutual monitoring and sanctioning in the group. Once such a system is absent, as in the According to Triandis’ theory of individualism– case of Yamagishi’s experiments in which groups collectivism, one important attribute is the extent Journal of International Business Studies to which people make distinctions between in- among individualists who interacted with either in- group and out-group members. Whereas individu- alists make little distinction between the two, In the present study, we were interested in collectivists make a sharp distinction. It appears exploring cross-national differences in cooperative that Yamagishi’s institutional view of culture decision-making with members of the same or provides a plausible explanation as to why it is so different cultures. Because in-groups are formed for collectivists; it explains the motivation behind through long-term interaction and history, it is collectivists’ behaviors. These two theoretical practically impossible to ‘create’ in-groups in accounts are therefore consistent in that one experiments using hypothetical business situations.
describes whom collectivists will be more or less However, we could create situations that involved cooperative with, and the other explains the different degrees of ‘in-groupness’ through experi- underlying mechanisms for such tendencies.
mental manipulation. The creation of the same- Based on this discussion, we hypothesize that: culture vs different-culture member as businesspartner was our means to achieve that end. A Hypothesis 1: When complete strangers are stranger compatriot would be viewed as more ‘in- involved in a mixed-motive game, Chinese will be group’ in a foreign land than in one’s home less cooperative than their Australian counterparts.
territory; and a stranger non-compatriot would beviewed as more ‘out-group’ in one’s home territorythan in a foreign territory.
Who cares more about whether the business To examine how elastic the notion of ‘out- partner is of the same or different cultural groupness-vs-in-groupness’ was, and how it affected individual cooperation in mixed-motive games, we Whereas the institutional view of culture provides a created ‘compatriot’ and ‘non-compatriot’ business plausible explanation for the sharp distinction partners. Whereas non-compatriots may be viewed collectivists make in their in-group-vs-out-group as outsiders regardless of the geographical location, behavior, the individualistic view of culture (Yama- and a stranger compatriot at home may be viewed gishi, 2003) offers a reasonable explanation for the as an outsider, two complete stranger compatriots individualists’ rather identical behavior in either in- may see each other as belonging to an ‘in-group’ group or out-group contexts. The individualistic when they meet in a foreign territory. Meanwhile, view of culture states that individualists value stranger compatriots in a foreign land possess some individual interests over group interests, consis- informal sanctioning power for the Chinese for tently so across group contexts. If individualists several reasons. First, the number of compatriots in choose to cooperate in a mixed-motive game with a foreign country is usually few, and some guanxi people they know, they are likely to do the same bases (for a review, see Chen and Chen, 2004) with people they are not familiar with. In other might be discovered after some interactions. The words, individualists are more independent of recognition of a guanxi network may impose some social influence. There is much empirical support sanctioning power between the compatriots. Sec- ond, because of the ‘strangeness’ of the foreign implied in the individualistic view of culture. For land, the original stranger compatriot may look example, cross-cultural research has established much more like oneself than before. In other that individualists are less susceptible to the words, the physical similarity, the speaking of the influence of social norms in determining their same mother tongue, and other readily identifiable behavior than are collectivists (Bontempo and cultural traits would suddenly become salient in Rivero, 1992; Suh et al., 1998; Suh, 2002). They light of the foreign land. Finally, shared identity rely more on their own beliefs, attitudes, or may emerge as a result, and psychological connec- UNCORRECTED PROOF
personal needs in deciding what to do (Davidson tion is likely developed. This connection could et al., 1976; Miller, 1984). Cross-cultural experi- then serve as an informal sanctioning system. In ments on cognitions have also shown that indivi- their home country, however, they are much less dualists experience more cognitive dissonance than likely to develop such identity and connection.
Therefore it is more likely for the Chinese to between attitudes and behavior (Markus and cooperate with a compatriot in a foreign territory Kitayama, 1991; Triandis, 1994). Therefore we than in their home country. Based on this reason- predicted that little distinction would be made Journal of International Business Studies Hypothesis 2: Chinese will be more cooperative prevalent. For example, to motivate students to with stranger compatriots in a foreign territory achieve, schools (from elementary school to uni- than with stranger compatriots in their home versity) widely adopt the ranking system: that is, country, or with non-compatriots regardless of students are ranked every time an exam or a test is the geographic location, whereas Australians will conducted, and such ranking is always publicized.
If the ranking itself represents the formal sanction-ing, the publicizing of this information is relatedmainly to informal sanctioning. It is evident that How does culture exert influence on individual such a system is more likely to enhance the social comparison process and ‘nurture’ people to become Culture affects individual decision-making through ‘vertically’ oriented. On the other hand, the its influence on individual values. The strong individualistic culture emphasizes focus on oneself institutional (formal or informal sanction system) in terms of reaching goals or self-achievement. In influence on Chinese behavior is likely to direct school, teachers always encourage students to Chinese’s thinking and attention to others’ exis- challenge themselves and to reach their own tence and behaviors in determining what one potential. All information regarding one’s academic ought to do in a given situation. On the other record is private. Obviously this culture is more hand, the individualistic view held by Australians likely to produce people who are ‘horizontally’ will direct their attention to self-needs, self-inter- oriented. In other words, we hypothesize that: ests, personal values and attitudes rather than thoseof others. The horizontal and vertical aspect of Hypothesis 3: Chinese and Australians will differ individualism–collectivism seems to address this on cultural values such that Chinese will score difference between Chinese and Australians.
higher on the vertical dimension of individual- According to Markus and Kitayama (1991), there ism–collectivism whereas Australians will score are four kinds of self: independent or interdepen- higher on the horizontal dimension of individu- dent, and same or different. The combinations of these four types can be categorized as horizontalindividualism (independent/same) and horizontal The notion of horizontal–vertical individualism– collectivism (interdependent/same), vertical indivi- collectivism has received some empirical support dualism (independent/different) and vertical col- in decision-making research. One notable study was by Probst et al. (1999), in which they examined horizontal dimension emphasizes the ‘same self’, how individual cultural values in terms of horizon- maximizing self-interest or self-goal without much tal – vertical individualism–collectivism predicted comparison with others. Horizontal individualists cooperative behavior in social dilemmas. Using are less likely to be interested in distinguishing both single-group and inter-group prisoner’s dilem- themselves from others, to pay attention to infor- ma paradigms, the authors found support for the mation about how others are doing, or to be eager prediction of the vertical individualists, whose to win. They behave more consistently across cooperation varied in the two types of dilemma as situations. In contrast, the vertical dimension a function of the extent to which their personal emphasizes a ‘different self’ and winning over outcomes would be maximized, and the prediction others. To establish ‘different’ and ‘better’ self, of the vertical collectivists, whose cooperation varied vertical individualists must pay more attention to in the two dilemmas as a function of the extent to others, be more sensitive to whom they are dealing which their group outcomes would be maximized.
with, and the context in which they take actions.
These findings suggest that individual cultural As a result, they behave less consistently across orientation is a powerful predictor of cooperative UNCORRECTED PROOF
Therefore a parallel can be drawn between the One problem with the study of Probst et al. (1999) horizontal and vertical individualism–collectivism was that it was not cross-cultural (their sample values and the characteristics of the institutional comprised students at the University of Illinois): and individualistic cultures. The institutional cul- therefore it could not address how individual ture emphasizes the use of formal and informal cultural values would explain the culture-level sanctioning systems to guide people’s behavior. In China, the use of such a system is especially studies in other areas have demonstrated that Journal of International Business Studies individual cultural orientation often mediates the 40 countries, the Western countries (e.g., US, relationship between culture and individual beha- Australia, Canada) are higher on individualism vior (e.g., Chen et al., 1998; Lam et al., 2002). For than countries with populations of Chinese back- example, Chen et al. (1998) found a stronger in- ground (e.g., Hong Kong, Taiwan, Singapore). In group favoritism among the in-group Chinese than particular, on a 100-point scale, Australians scored among the in-group Americans. Their further 90 (US scored 91) on individualism, whereas analysis revealed that the individual-level indepen- Chinese had an average score of 21. In this study, dent or interdependent self-construal was a med- we used country as a proxy for culture.
iator between culture and in-group favoritism.
Participants were 98 Chinese students from Similar mediating effects were found in Lam Zhejiang University in the People’s Republic of et al.’s (2002) study in which they examined the China and 86 Australians students from the Uni- relationship between participative decision-making versity of New South Wales in Australia. Both and employee job performance in a multinational universities were among the top five in their home commercial bank. They found that, for the Amer- countries. Most students were majoring in psychol- ican employees, participative decision-making had ogy and volunteered to participate in the experi- a positive effect on individual job performance only ment. The mean age of the students for both when they had high level of self-efficacy, whereas samples was 18–19 years, and about two-thirds of for the Hong Kong Chinese employees participative decision-making had positive effects on groupperformance only when members had high levels of collective efficacy. Furthermore, this cultural In this study, the stimuli were presented in book- effect was fully mediated by employees’ cultural lets. We used the English version for both samples for three reasons. First, the stimulus material was Based on the above discussion, we hypothesize relatively simple and easy to understand, and the crucial information (i.e., the payoff matrix) waspresented in numbers, which did not involve Hypothesis 4: The country-level effects on Chi- language issues. Second, the college students in nese and Australian cooperative decision-making China have all been studying English for more than in mixed-motive contexts will be mediated by 10 years and have passed the national entrance individual cultural value orientation.
exam in English before getting into college. Third,using the same version for both samples eliminatespotential problems with translation. Given that both groups understand the material equally well, Two cross-national studies were conducted to test the differences observed in their responses would our hypotheses. Study 1, using country as proxy for be more likely to be attributed to cultural rather culture and a two-person prisoner’s dilemma game as the decision-making context, put participants in The prisoner’s dilemma scenario and matrix used a foreign territory with either compatriots or non- by Bolle and Ockenfels (1990) was adopted in compatriots, and tested Hypotheses 1 and 2.
almost its original form. The only difference was Building on the results of Study 1, Study 2 that the participants were asked to make two measured each participant’s cultural orientation decisions (instead of one) using the same payoff and further tested hypotheses related to how matrix as offered by the original problem. One individual cultural values influenced cooperative decision had to be made in a hypothetical situation decision-making in a step-level public goods dilem- in which the other player was a compatriot, whereas the other decision was made in the samehypothetical situation but with the other player anon-compatriot. The location of the investment Study UNCORRECTED PROOF
was in a foreign country: that is, for the Chinese, they were making this investment decision inAustralia, whereas for the Australians, they were Based on the findings of Hofstede’s (1980, 1991) The problem presented to participants concerned large-scale survey of beliefs and values in more than a choice between ordering a large size or a small size Journal of International Business Studies of bottle-filling machine. Essentially, the partici- Country (F1,182¼9.96, Po0.01, and a significant pants were told that if both producers ordered the interaction effect of Country  Other Player’s Heri- large bottle, both would receive a payoff of 10, tage (F1,182¼4.29, Po0.05). Other effects were not whereas if both ordered the small bottle, both would receive a payoff of 50 (the larger number A closer look at Table 1 indicates that these results indicates a bigger payoff). On the other hand, if one provided support for both Hypotheses 1 and 2 in ordered a small bottle, but the other a large one, then the one who ordered the small bottle wouldreceive nothing whereas the one who ordered the large bottle would receive a payoff of 75. They were then asked to indicate on a nine-point scale the extent to which they would like to order a large (2) in the foreign territory, the Chinese made a bottle-filling machine (1, definitely small bottle; 5, more cooperative choice when the other player indifferent; 9, definitely large bottle). The reason was a compatriot (mean¼6.63) than when the why we used a nine-point scale instead of a dichotomous choice was that we were mostly (mean¼7.51), whereas the Australians were interested in their tendencies to cooperate, in equally cooperative when the other player was addition to the benefit of making our dependent a compatriot (mean¼6.05) or a non-compatriot The results of Study 1 provide initial support for The experimental design was 2 (Country: Australia our hypotheses, and suggest that there are con- vs China)  2 (the Other Player’s Cultural Heritage: siderable differences between Chinese and Austra- same or different, nested within participants) lians in terms of their cooperative tendencies in between-subjects repeated factorial. The order of making investment decisions with compatriots and the question presentation was counterbalanced for non-compatriots in foreign territories. There are both Chinese and Australian participants. About two potential problems with this study, however.
half the Chinese (Australian) participants received First, the comparison of same- vs different-culture the compatriot/non-compatriot order while the business partner was made within subjects; social other half of the Chinese (Australians) received desirability might lead to the obtained patterns of the non-compatriot/compatriot order.
responses. The participants were clearly aware ofthe key differences in the two scenarios. In the Australian culture, which emphasizes self-consis-tency, it might be socially desirable to make similar Table 1 presents the results of Study 1. The numbers decisions regardless of the ethnic background of the on the nine-point scale participants circled in the business partner, whereas in the Chinese culture, two situations were used as indices of their which emphasizes differential treatment of people cooperativeness in decision-making (the larger the of different relationships, the socially desirable number, the less cooperative). A two-way ANOVA answer might just be the opposite. To overcome with repeated measures on Other Player’s Cultural this problem, in Study 2 we used a between-subjects Heritage was conducted to test Hypotheses 1 and 2.
design to examine whether the same pattern of The analysis revealed a significant main effect of The second problem with Study 1 was related to the inference of ‘culture’. Although we referred theobserved differences as ‘cultural’, Study 1 did not Table 1 Mean competitiveness of Australians (n¼86) andChinese Business UNCORRECTED PROOF
provide any empirical evidence to support such an assertion because country was used as proxy for culture. To uncover the process of how culture (a nation-level variable) influences individual beha-vior (an individual-level variable), in Study 2 we measured each participant’s cultural value orienta- tion and examined whether it mediated the cultural effects on individual decision-making.
Journal of International Business Studies ProcedureUpon arrival at the laboratory, participants were given the questionnaire booklet to complete.
English versions of the scenario were used in bothcountries for reasons discussed earlier. Participants One hundred and fifty-one Chinese (42 male and were asked to read the scenario carefully before 109 female) and 122 Australians (31 male and 91 making decisions, and were allowed to ask any female) volunteered to participate in the experi- questions they had. Participants were randomly ment. The Chinese were students from a major assigned to one of the four experimental condi- university in Hong Kong, China, who enrolled in tions. All participants were asked to make a choice an introductory organizational behavior course.
regarding the step-level public goods dilemma by The Australians were students from the University indicating the extent to which they would like to of New South Wales in Australia, who enrolled in a invest the $10,000 on a nine-point scale (1, social psychology course. The majority of the definitely invest; 5, indifferent; 9, definitely not students from both countries were in their second invest), and then were asked to complete a 32-item year of study and were majoring in engineering, social sciences, or business. The mean age of the questionnaire (Singelis et al., 1995). After finishing Chinese was 20.23 (s.d.¼1.44) and the mean age of all these questions, they were debriefed and the Australians was 20.93 (s.d.¼5.66). All students received course credit for their voluntary participa-tion.
MeasuresVertical and horizontal individualism–collectivism.
We used the 32-item scale of Singelis et al. (1995) The experimental design was 2 (Country: China or to measure Horizontal Individualism (HI), Vertical Australia) Â 2 (Territory: home or foreign) Â 2 (Part- Individualism (VI), Horizontal Collectivism (HC), ner: Compatriots or non-compatriots) factorial, and Vertical Collectivism (VC). Each type of I-C was resulting in four experimental conditions in each measured with eight statements to which the culture. Because we later learned that the bottle participants responded on a nine-point Likert scale problem used in Study 1 might suggest collusion – to express their degree of agreement (1, strongly something that is viewed differently across coun- disagree; 9, strongly agree). To establish the con- tries (Trompenaars and Hampden-Turner, 1998) – struct validity of the measure in both cultures, we we created a scenario in which a typical five-person first conducted a principal component factor step-level public goods dilemma was embedded.
analysis on the combined data set from the two Specifically, participants were told that they had samples, which resulted in a four-factor solution $10,000 that could be used to build a wind power that explained 46.38% of the variance. The analysis station, which was made up of a number of also indicated that some items loaded more highly individual wind-driven generators. Another four on an inappropriate factor. A decision was made to people were also interested in this project and had drop three items from each of the original HI and $10,000 to invest. The money each person had was VI subscales, and drop five items from each of the just enough to buy one electric generator, and original HC and VC subscales to improve discrimi- everyone knew that at least three generators were nant validity. This resulted in a five-item HI scale, a needed for the power network to work well. If less five-item VI scale, a three-item HC scale and a than three generators were built – that is, less than three-item VC scale with alphas of 0.86 (on HI), $30,000 was invested – the power supply would be 0.77 (on VI), 0.70 (on HC), and 0.77 (on VC) for the unstable and useless, and the money (invested) Australian sample and alphas of 0.83 (on HI), 0.72 would UNCORRECTED PROOF
(on VI), 0.66 (on HC), and 0.70 (on VC) for the invested, however, there would be a workable wind Hong Kong Chinese sample. A simultaneous con- power station and everyone would receive $20,000 firmatory factor analysis (van de Vijver and Leung, worth of benefits from the business done in the 1997) for the two samples revealed that the four- remote area S, in addition to the money they kept factor model showed a good fit (w2¼306.1, for themselves. Four versions were developed to d.f.¼196, CFI¼0.90, TLI¼0.88, RMSEA¼0.046).
match the four experimental conditions for each Moreover, when equal loadings were imposed on the four-factor model, there was an adequate fit Journal of International Business Studies izontal individualists (Triandis, 1995; Triandis et al., RMSEA¼0.046), and the increase of w2 was not On the other hand, the finding that Australians P40.05). These results suggest that there is a and Chinese were equally collective came as a reasonable construct equivalence of the HI, VI, complete surprise. We shall discuss possible expla- HC, and VC measures across the two samples.
nations for this finding in a later section.
Cooperativeness. The likelihood (number on the nine-point scale) that the participants would invest Cooperative tendency of Australians and Chinese in the wind power station was used as an index of Participants were asked to indicate their choice by cooperative tendency: the larger the number, the circling a number on a nine-point scale as to what extent they would not like to invest their $10,000 tobuild the wind-power station. This number wasused as the index of their cooperative tendency (the larger the number, the less cooperative). The meancooperativeness of the two samples is presented in Cultural orientation of the australians and thechinese Table 2. A 2  2  2 three-way ANOVA revealed asignificant main effect of Country (F We first report the results of the cultural orientation Po0.001), and a significant interaction of Part- profiles of the two samples. Consistent with Hypothesis 3, Chinese scored higher on the vertical  Territory (F1,281¼4.94, Po0.05). None of the other effects was significant at the 0.05 level.
dimensions of individualism–collectivism than did A closer examination of Table 2 indicates that in Australians (t287¼5.39, Po0.001), and Australians general the choices made by Chinese were less scored higher on the horizontal dimensions than rated the four types of values and found that the we found in Study 1 and providing further support Australians scored higher on HI (mean¼7.54) than for Hypothesis 1. To further test Hypothesis 2, that the Chinese (mean¼6.33) (t287¼8.40, Po0.001), Chinese will be more cooperative with their compatriots in a foreign territory than with compa- (mean¼5.82) than the Australians (mean¼4.68) triots in their home territory or with non-compa- (t287¼7.50, Po0.001). However, the two samples triots regardless of territories, whereas Australians did not score significantly differently on HC will not differ across conditions, we grouped (mean¼7.07 vs 6.89 for Australians and Chinese, participants’ decisions in the three conditions respectively) or on VC (mean¼6.55 vs 6.61 for (compatriot in home territory and non-compatriot Australians and Chinese respectively).
in both home and foreign territories) together and These results suggest that the cultural orienta- compared this with their decision in the compatriot tions of Australians and Chinese are more compli- – foreign territory condition for the two samples cated than as suggested by previous findings from separately. T-tests showed a significant difference Hofstede (1980, 1991). In this study, Australians were found more horizontally individualistic than sample, whereas for the Australian sample the Chinese, whereas Chinese were actually more difference was not significant at the 0.05 level vertically individualistic than Australians, indicat-ing that Australians tend to maximize the indivi-dual outcome without really considering whether Table 2 Mean competitiveness of Australians (n¼122) and they gain more than the others, whereas Chinese are more inclined to win over others. In other
words, UNCORRECTED PROOF
whereas Australians are more likely to have a ‘self-interest’ mindset, Chinese are more likely to have a ‘competition’ mindset. Initially these resultsseemed inconsistent with prior measures of value orientation in these cultures (Hofstede, 1980, 1991; Hui, 1988), but further analysis suggested that they demonstrated face validity and consistency with some previous findings that Australians are hor- Journal of International Business Studies Results of regression analysis on mediating role of cultural value on country effects on individual cooperative On the other hand, the significant interaction effect of Partner  Territory and the insignificant effect of the three-way interaction (i.e., Coun- Chinese were more cooperative with compatriots in foreign than in home territories (mean¼5.03 vs 5.78), they treated non-compatriots equally competitively in both home and foreign locations (mean¼5.90 vs 6.08). The opposite pattern was found for Australians. Specifically, they were more cooperative with non-compatriots at homethan in a foreign territory (mean¼3.85 vs 5.11), but treated compatriots equally cooperatively in both home and foreign locations (mean¼4.68 Meanwhile, it is worth noting that both cultural groups were most competitive in the condition with non-compatriots in a foreign location. This behavior may be driven by the stronger need to protect oneself and to survive in a foreign land, or a reaction to the so-called ‘culture shock’, which might be universal for members of both cultural These results, however, were not completely consistent with the general assumption behind H2 that Australians would be equally cooperative with all others, regardless of their cultural heritage or business locations. Later, possible explanationswill be discussed.
To examine the mediating effect of individual mechanism of how culture influences individualdecision-making, we did the three-step regression (2) Country was a significant predictor of HI and VI analyses suggested by Baron and Kenny (1986).
(b¼À0.45 and 0.40 respectively, Po0.05), but Results of this analysis are presented in Table 3. In step 1, we regressed the three independent variables (b¼À0.10 and 0.03 respectively, NS). Further- (Country, Territory, and Partner) on the individual more, both HI and VI were predictors of the decision. In step 2, two regression analyses were performed: one with Country as IV, and the four respectively, Po0.01), whereas neither HC nor cultural values as DVs; the other with four cultural VC was significant in predicting the mean values as IVs, and the mean cooperativeness as DV.
cooperativeness (b¼À0.01 and À0.05 respec- In step 3, we entered all three independent tively, NS). HC and VC were thus dropped from variables and the four cultural values simulta- UNCORRECTED PROOF
neously as predictors of the individual decision.
(3) We found that the effect of Country became In addition, the two demographic variables (age insignificant (b¼0.09, NS) once HI and VI were and sex) were always entered first as control entered simultaneously, whereas the effects of variables in all the regression analyses. These HI and VI remained significant (b¼À0.16 and (1) Country had a significant effect on mean These results suggest that horizontal and vertical individualism fully mediated the relationship Journal of International Business Studies between Country and individual cooperativeness, although both Americans and Chinese predicted that the Americans would be more risk-seeking, A closer examination of the b weights of HI the Chinese were actually significantly more risk- (b¼À0.16, Po0.05) and VI (b¼0.15, Po0.05) indi- seeking in the context of financial decisions than cated that VI had a negative effect on individual were the Americans. Similarly, contradictory to the cooperative decision-making whereas HI had a lay expectation that Chinese would be more positive effect . A median-split ANOVA showed humble than the Americans, Yates et al. (1996, that people who scored high on VI tended to make 1997, 1998) found that the Chinese were more less cooperative decisions (mean¼5.42) than those overconfident about their answers to general knowledge questions and other judgments. On Po0.05), whereas people who scored high on HI the other hand, we suggest caution in generalizing made more cooperative decisions (mean¼4.74) the ‘Chinese are less cooperative’ finding to situa- than those who scored low on this dimension tions of different characteristics. Several conditions (mean¼5.45) (F1,271¼5.26, Po0.05). These results seem to be necessary for this phenomenon to provide empirical support for the distinction between horizontal and vertical dimensions of (1) cooperation must be voluntary – there is no individualism–collectivism, and suggest the direct formal or informal sanction for non-coopera- influence of cultural values on individual decision- (2) the business partners should be strangers to each other – there are no prior ties/relationships The results of the present study are intriguing. First, (3) the business situation involves a great deal of consistent with the institutional view of culture, we social uncertainty – no communication is found that Chinese made less cooperative decisions permitted, and the information about what in mixed-motive business situations than did other business partners might do is extremely Australians. These results suggest that, when moved out of the ‘group’ boundary or context where noformal or informal sanction is present, Chinese The discrepancy between our finding and others’ tend to focus more on egoistic interest and act regarding cultural values of the Chinese and accordingly. Second, somewhat unexpected, we Australians is intriguing. Three explanations seem found that Chinese actually scored higher on to be plausible. The first is related to the notion of vertical individualism than Australians, who scored cultural ‘transmission’ (Triandis, 1994). Modern higher on horizontal individualism than Chinese.
communication results in cultural diffusion via Third, the Chinese seemed to treat stranger compa- films and television. Tourism, commerce, and other triots more cooperatively in a foreign territory than factors also facilitate cultural transmission. Assum- they treated non-compatriots or stranger compa- ing that previous findings are valid, the emphasis triots at home. Finally, we found that these on teamwork in the West in the past two decades or observed national differences in decision-making so might have had a gradual influence on Austra- were fully mediated by individual cultural values: lian culture. Following the same logic, the Chinese more vertical individualism was associated with less culture may have become more individualistic and cooperative decisions whereas more horizontal less collective than it was after two decades of the individualism was associated with more coopera- ‘open and reform’ policy and its increasing eco- nomic development, because cultures evolve and The finding that the Chinese are less cooperative change, especially under the influence of economic is somewhat contradictory to the broad view of UNCORRECTED PROOF
Chinese that they are generally more collective and The second explanation comes from the idea of cooperative than people in individualistic cultures.
value trumping (Osland and Bird, 2000). Osland It nevertheless echoes some other recent counter- and Bird’s sense-making model of culture states intuitive cross-cultural research findings on deci- that, in a specific context, certain cultural values sion-making. For example, in exploring whether take precedence over others. This idea of value there are systematic cross-national differences in trumping seems to be consistent with Cialdini choice-inferred risk preferences between Americans et al.’s (1990) idea of norm salience, and also with and Chinese, Hsee and Weber (1999) found that Pillutla and Chen’s (1999b) finding of the interac- Journal of International Business Studies tion effect of norm and context on individual family. Future studies may examine this trust cooperative decision-making. We explicate that, as hypothesis in explaining the in-group–out-group many values and norms exist simultaneously in an individual’s mind, the context in which he or she isinvolved is likely to activate a specific set of valuesand norms. In our experiment, the mixed-motive business context might be more likely to activate The present study has several limitations. First, it the individual’s awareness of competition and was conducted in a laboratory in which many make the competitive value salient, and the effect factors were manipulated and the situation was was more pronounced for Chinese than for Aus- overly simplified. Second, our participants were university students, who might be more competi- The third explanation is that different measures tive and individualistic than the general popula- of individualism–collectivism were used in previous tion. This is especially so in China, where only a research from the ones used in the present study.
small percentage of the population gets admitted Most previous measurements excluded the vertical into college. Third, hypothetical business scenarios dimension. For example, in Hui’s (1988) INDCOL were used; participants might not be as engaged as scale, only one item reflects the meaning of in real business situations. Finally, we did not check ‘vertical individualism’. Triandis et al.’s (2001) whether our experimental manipulations achieved recent study also shows that participants’ endorse- the intended effects on participants’ perception.
ment of the horizontal items on Singelis et al.’s These features of the present study arouse some (1995) scale corresponded to Hofstede’s ranking of concerns regarding the external validity of the culture on individualism–collectivism, suggesting that most of the items used in Hofstede’s studies On the other hand, there are certain features of that measured individualism–collectivism in fact the experimental task and our research participants measured only the horizontal dimension of the that reflect the global business reality. Our participants were students with part-time work Whereas both the institutional vs individualistic experience, and the experimental task reflected view of culture (Yamagishi, 2003) and the indivi- certain key features of an international business dualism–collectivism theory (Triandis, 1995) made situation. Furthermore, it is also clear that we similar predictions regarding Chinese and Austra- could not ever simulate the psychological processes lians’ cooperative tendencies in mixed-motive involved in real international business situations business contexts with in-group vs out-group in a laboratory setting. Although the consequences members, the institutional view of culture provided of decisions for our research participants were a deeper understanding of why the Chinese would not as dramatic as they would be in real business, be less cooperative in situations where no formal or informal sanction systems were present. A deeper assumption behind this view rests on the general There is always a tradeoff between an experiment trust level of the two groups of people. As and a natural setting field study, but we believe that Yamagishi discussed in his 2003 article, it was the the experimental manipulation and design allowed lack of general trust that led the Japanese to want to us to rigorously test our hypotheses and to draw establish sanction systems before making their causal linkages between the variables of interest, contribution to public goods. Following the same which often cannot be achieved by adopting other line of reasoning, we contend that it is the lack of research methods (e.g., field survey). However, ‘a general trust of the Chinese that led them to be less strong case can be made that external validity is likely to cooperate with ‘strangers’ in our experi- enhanced more by many heterogeneous small UNCORRECTED PROOF
The lack of general trust in Chinese society experiments than by one large experiment employ- has been discussed by some insightful social ing random selection of subjects, tasks, and times’ observers such as de Tocqueville (1945) and Fukiya- (Cook and Campbell, 1979: 80). Thus we hope that ma (1995), who have characterized American the generalizability of the findings reported in this society as having a high level of general trust, and study will become evident as other researchers have argued that the strong family ties in societies replicate this study with other small experiments such as China, France, and southern Italy prevent using different samples and tasks, and conducted at trust from developing beyond the confines of the Journal of International Business Studies foreigners to establish relationships with the Chi- The current research shows that cooperative deci- nese before doing business (as a way to build the sion-making in mixed-motive situations is among informal system), especially when formal systems the variables that seem to have consistent cross- national variations. In addition, these variations The mediating effect of horizontal and vertical seem to be consistent with both the institutional vs individualism found in the present study also individualistic view of culture and the theory of indicates the importance of understanding people individualism–collectivism. We hope that this work at the individual level. Individuals from the same country may have different cultural values, asdemonstrated by studies that investigated within- (1) to examine whether the institutional vs indivi- culture variances (e.g., Triandis, 1995; Vandello and dualistic view of culture is indeed the under- Cohen, 1999). It is the individual-level values that lying mechanism that explains the in-group vs directly influence one’s cooperative tendency, not out-group phenomenon of the collectivist cul- where the individual comes from. Identifying individual values will help collective members to (2) to clarify which of these two theoretical achieve optimal solutions, because one can then accounts provides a better explanation of indi- more effectively incorporate structural and motiva- vidual differences in intra- vs-inter-cultural tional mechanisms (for detailed discussion see Yamagishi, 1986) to induce cooperation. Our find- (3) to determine the antecedents and consequences ings suggest that, in order to get maximum benefit of cross-national differences in cooperative from business and cultural exchanges between nations and individuals, people need to be aware At the same time, we hope that our findings will of both cultural and individual differences, and help decision-makers in practical applications. For that predictions based on stereotypes can be example, after knowing that Australians tend to be cooperative with non-compatriots in their homeland, a foreign person who does business in Australia should probably adjust his/her natural We thank Harry Triandis, Chris Earley, the three competitive tendency and be more willing to anonymous reviewers, and the departmental editor cooperate so that a long-term cooperative and Kwok Leung for their constructive and thoughtful trusting relationship can be built. Moreover, as comments on earlier versions of the paper. This paper formal or informal sanctioning is one of the major was presented at the Academy of Management meet- forces for Chinese to cooperate, it may be useful for ReferencesBaron, R.M. and Kenny, D.A. (1986) ‘The moderator-mediator lished master’s thesis, Department of Psychology, University of variable distinction in social psychological research: concep- tual, strategic and statistical considerations’, Journal of Chen, C.C. (1995) ‘New trends in rewards allocation prefer- Personality and Social Psychology 51(6): 1173–1182.
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of Management Review, Academy of Management Yates, J.F., Lee, J.W. and Bush, J.G. (1997) ‘General knowledge Journal, and Organizational Behavior and Human overconfidence: cross-national variations, response style, and ‘reality’’, Organizational Behavior and Human Decision Processes70: 87–94.
Yates, J.F., Lee, J.W., Shinotsuka, H., Patalano, A.L. and Sieck, Shu Li (Ph.D. UNSW) is currently a Professor at the W.R. (1998) ‘Cross-cultural variations in probability judge- Center for Social and Economic Behavior, Institute ment accuracy: beyond general knowledge overconfidence?’Organizational Behavior and Human Decision Processes 74: of Psychology, Chinese Academy of Sciences. His research interests are in the area of behavioraldecision-making. His research has appeared in over three-dozen journals, such as Ergonomics, Journal of Xiao-Ping Chen (Ph.D., UIUC) is Associate Profes- Behavioral Decision Making, and Organizational Beha- sor in the Department of Management and Orga- Accepted by Professor Kwok Leung, Departmental Editor, 28 February 2005. This paper has been with the author for two revisions.
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Journal of International Business Studies

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