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1 Intercultural Differences in Business Meetings and Negotiations with Chinese
Helena M. Lischka, Jennifer Rathmann
1.1 Introduction
Since 1978 China has practiced an opening and reforming policy, which led to its membership in the World Trade Organisation in 2001. Up to this time, China – as the biggest emerging market – has played an important role in world trade. In 2016, China overturned the United States and – for the first time – became Germany’s most important business partner globally. The German-Chinese trade volume increased by 4.1 percent to 170 billion Euro. Within one year, Chinese bought 76.1 billion EUR worth of German goods and sold 93.8 billion worth of goods on the German market. Cooperation in trade, investment, research and development form the dynamic relationship between China and Germany.7 However, examples of failed transactions, deals and negotiations as well as resulting frustration on the part of German businesspeople are numerous. Despite all gained expert knowledge and experiences, negotiation with Chinese remains a challenge. Managers have long since realised that business meetings and negotiations with Chinese require patience, endurance and a profound preparation. Chinese people have a different language, different business conducts, different rituals, different attitudes, a different understanding of time, a Communist bureaucracy and a very old culture. All these factors – directly or indirectly – influence the process of negotiation and must be considered when doing business in China. If businessspeople face different organisational and environmental challenges in different cultures, they are also likely to need different ways of handling their business practices. To gain a deeper understanding of these practices and to provide initial insights into the research area of intercultural differences, the aim of this chapter is to investigate distinct characteristics of Chinese business and negotiation style with regard to Hofstede’s Six Dimensions of Culture. In order to apply these dimensions to the business context, at first, the development of these dimensions will be described shortly. The next section pictures the six dimensions in detail. There will be a table at the beginning of each chapter helping to classify China and Germany within the particular dimension. Every dimension then is interpreted according to the business context in China. The chapter concludes with a résumé, summarising how the findings can be transferred into managerial implications when dealing in a Chinese-German business and negotiation setting. 1.2 Development of Hofstede’s Six Dimensions
According to Hofstede et al., culture is “the collective programming of the mind, which distinguishes the members of one group from another”8. The incorporated idea in this definition is that cultural values affect people’s thinking. Hofstede aimed to show that the various ways of thinking, acting and feeling within different cultures are based on underlying fundamentals. He relied on the assumption that these fundamentals manifest themselves in the constant and central element of values.9 Consequently, shared cultural values lead to shared behavioural patterns, as they similarly influence the underlying cognitive constructs and cognitive processing.10 In the 1970s Hofstede was provided with a large quantity of survey data about the cultural values of IBM-employees from more than 50 countries. He processed the data, hoping to find a culture-specific underlying represented by the answers of IBM-employees. The results showed that the respondents – apart from their nationality – had certain things in common. It turned out that they all had equal fundamental issues to deal with, e.g. social inequality, relations to authority or the relation between individual and group. Nevertheless, they had different ways to handle these issues. Hofstede declared these common issues to be central dimensions of a culture. Within these dimensions, cultures could be compared among each other. Although Hofstede’s study has faced widespread justified criticism11, these dimensions have also been confirmed by several replicating studies.12 Later, Michael Harris Bond, a social psychologist with a cross-cultural focus, especially concerning China, developed a questionnaire, which was oriented towards Chinese culture. Until now, the Chinese Value Survey has been released in 23 countries, where Eastern life values are pre-eminent. In that survey Bond basically found the same dimensions as Hofstede did. Additionally, he found a new one, which he named Confucian Dynamism, because it reminded him of the teachings of Confucius including the future-oriented and the past-oriented values.13 Hofstede adopted it as a fifth dimension to his work and named it long-term vs. short-term orientation (LTO).14 In 2010, Hofstede added a sixth dimension called Indulgence vs. Restraint (IND). Moreover, he installed the dimension Pragmatic vs. Normative (PRA), which replaced the former LTO dimension. This was due to the results of an extensive survey by Michael Minkov, covering 93 countries. On the whole, Hofstede defines six dimensions of culture. These dimensions are:15 • Power Distance Index (PDI), • Individualism vs. Collectivism (IDV), • Masculinity vs. Femininity (MAS), • Uncertainty Avoidance Index (UAI), • Long-term Orientation (vs. Short-term Normative Orientation) (LTO) (also related to as PRA) and • Indulgence vs. Restraint (IND). Each of the six dimensions is based on a scale that ranges from 0-100, with some countries being outliers and exceeding the scale (scores above 100). Below the midlevel of about 50, the scores are to be interpreted as low, above 50 they are interpreted to be high. For the IDV scale as an example, the midlevel represents the mark, whether a country is individualistic or collectivistic. The higher (lower) the score is, the more individualistic (collectivistic) the country. Accordingly, for the MAS index score 0 stands for a strong feminine country, whereas 100 stands for a strong masculine country16 ( Appendix for the overall country scores and indices). To assess the first five cultural dimensions, the CVSCALE17 has been established as a measurement with good reliability and validity as well as cross-cultural invariance. The dimension scores for Indulgence versus Restraint reported by Hofstede et al.18 are based on World Values Survey ( Ch. 2) items. The Appendix presents the questionnaire items to measure the six cultural dimensions ( Appendix). Hofstede’s cultural dimensions framework, however, is an unclassified multidimensional construct. This implies that each dimension should not be examined in isolation, since culture is characterised by a combination of these dimensions. High uncertainty avoidance can, for example, either go along with high power distance or with low power distance, with high masculinity or high femininity, etc.19 The following sections address each dimension taking the example of China. Beyond that, the focus lays on negotiation style and management issues. Each section begins with a definition of the specific dimension. In order to illustrate the range of the countries scoring in each dimension, a table reports the scores of China, Germany and the countries that scored highest and lowest. The impact of the respective dimension on the business and negotiation context is then explained by two exemplary manifestations. 1.3 Power Distance
“The extent to which the less powerful members of society accept that power is distributed unequally.”20 The PDI reflects how people handle and accept an unequal distribution of power, for example in family or companies. Societies in countries high on PDI are usually characterised by distinct hierarchical orders, while countries with low PDI scores strive for equality. In countries with high PDI personal status is defined by the position, which one obtains within the hierarchy. Status difference is then to be displayed visibly, so that one can conclude the superior’s authority from his appearance. Thus, status goes hand in hand with wealth, ancestry and rank. How this status is actually achieved is mainly irrelevant.21 Table 1: Scores on Power Distance (Source: Hofstede, G. (2015a), 30.09.2015) With a score of 80 on the Power Distance Index scale, China scores relatively high on that dimension, i.e. that Chinese tend to accept the hierarchical position of a person without questioning.22 Since childhood, they have been taught that elder people and parents are people of authority who have to be respected. In business life this position is transferred to the superior. As a result, Chinese prefer a patriarchal and autocratic superior. Elder persons and authorities are said to be of more competence and therefore to be treated with particular respect. This respect can be expressed by a very polite and formal handling. Chinese avoid...
