CULTURAL AND INSTITUTIONAL DIFFERENCES 1

MAJOR CULTURAL AND INSTITUTIONAL DIFFERENCES SEPARATING USA

AND CHINA

Student’s name

Institution

Professor

Course

Date
 CULTURAL AND INSTITUTIONAL DIFFERENCES 2

Table of Contents
Abstract......................................................................................................................................................3

Meaning of a Joint Venture......................................................................................................................4

Backgrounds of Amazon and AliExpress................................................................................................4

Cultural Differences Separating USA and China and Their Influence in the Joint Venture.....................5
Criticism of Hofstede’s Model with a Recommendation........................................................................8

Major Institutional Perspectives............................................................................................................11

Neo-Liberalism......................................................................................................................................11
Neo-Corporatism...................................................................................................................................12
Marxism................................................................................................................................................12
Significant Institutional Differences That the Separate USA and China............................................13

Different Political Systems....................................................................................................................13

Different Roles of the Government........................................................................................................14
Capitalism, Socialism, and Communism...............................................................................................14
Mechanisms for Developing Staffs.........................................................................................................15

Global Work..........................................................................................................................................15
Recruitment and Selection.....................................................................................................................15
Training and Development....................................................................................................................16
Employee Retention..............................................................................................................................16
Career Progression.................................................................................................................................16
Role of Expatriate’s Cross-Cultural Training.......................................................................................16

Cross-Cultural Training in Facilitating Cross-Cultural Adjustment..................................................17

Cross-Cultural Training and Improvement of Horizontal Communication.......................................17

Recommendations....................................................................................................................................17

Conclusion................................................................................................................................................18

Personal Reflection..................................................................................................................................18

My Strengths and Weakness...................................................................................................................19

References................................................................................................................................................21
 CULTURAL AND INSTITUTIONAL DIFFERENCES 3

Abstract

This report aims to critically analyze cultural and institutional differences in establishing

multinational organizations. The analysis entails a critical evaluation of the relevant literature

about the theoretical debate on institutional approach, cross-cultural management, and IHRM. To

research these concepts, the case study of Amazon, the multinational organization, and

AliExpress firm will be the company in this context. The institutional and cultural differences to

be exhaustively discussed in this report include the barriers which will inhibit the strategic

implementation of specific mechanisms and measures such as cross-cultural training by the

parent country. Additionally, the potential obstacles dealing with the formation of multinationals,

such as language barriers and management issues, will be discussed in detail.

Additionally, I will discuss relevant theories such as Hofstede's dimension model and

Trompenaars' cultural dimension model. Besides, I will discuss the role of both countries'

corporate and national corporate and national cultures in creating a new organizational culture of

the international joint venture. Furthermore, I make recommendations regarding the critical

approach to IHRM in matters concerned with recruitment, cross-cultural training, and cross-

cultural communication of international teams will be drawn. Additionally, the report will

incorporate a personal reflection on the process of working in a multinational and multicultural

organization.
 CULTURAL AND INSTITUTIONAL DIFFERENCES 4

Meaning of a Joint Venture

Venturing the global market through international joint venture has considerable

advantages in comparison to entering as a subsidiary (Barkema and Vermeulen, 1997). Forming

a joint venture allows companies to distribute equally the cost and risks associated with

venturing international markets. (Barkema and Vermeulen, 1997). In addition, it allows sharing

of knowledge about institutional frameworks, local consumer’s preferences and business

practices. (Barkema and Vermeulen, 1997) According to Ali (1995), a joint venture can be

equated to a Strategy of direct investment, enabling a business to expand and grow due to

splitting resources and creating innovation. Kogut and Yan (1999) argue that joint venture lays

the foundation for multinational corporations since it offers a platform for global marketing.

However, establishment of joint ventures has its share of downsides including cooperation

problems with the partners, different cultural dimensions which may create ambiguities

consequently leading to termination of the joint venture (Barkema and Vermeulen, 1997). The

objective of this discussion is establishing the major cultural and institutional differences

between USA and China which will influence joint venture between Amazon and AliExpress

companies.

Backgrounds of Amazon and AliExpress

The two corporations are electronic trading platforms that enable communication of the

producer and the consumer via the internet. Amazon is a multinational corporation specializing

in e-commerce, cloud computing, and digital streaming and has its headquarters based in Seattle,

Washington, United States. The corporation was developed in 1994 by Jeff Bezos, and the

corporation has considerably contributed to eCommerce development. Hall (2020) believes that

Amazon is a technology-based organization that has made business easier for consumers by
 CULTURAL AND INSTITUTIONAL DIFFERENCES 5

introducing online transactions. The organization has experienced a growth trajectory with sales

amounting to over 300million.

Furthermore, the organization offers a variety of products from various categories.

Amazon has adopted globalization, thus introducing international shopping allowing global

customers to access over 45 million products (Sameh, 2020). The statistics have revealed that

Amazon's net sales in the fourth quarter increased by 9 %, thus escalating revenues (Amazon,

2021). Though there was a slight decrease in sales due to the omicron virus and coronavirus

pandemic, Amazon has continued to expand and experience growth, with a 40% year-over-year

growth recorded (Amazon, 2022). On the other hand, AliExpress is a Chinese-based website

dealing with various products such as clothing, electronic accessories, and sports products.

The company was developed in 2010 by the Alibaba Group to connect a considerable

proportion of producers with their customers globally. Through the development of web-based

technologies and financial technologies, the company has expanded its utility services. As per

2019 statistics, the company had 180 million customers spread globally and 780 million Chinese

customers, thus increasing revenue for the organization (Alibaba, 2020). A comparison of the

performance statistics of the two corporations reveals that they would be perfect partner’s

information of a joint venture. However, the joint venture is bound to cultural differences. There

exist cultural differences between USA and China which influence joint ventures.

Cultural Differences Separating USA and China and Their Influence in the Joint Venture

When approaching AliExpress for a joint venture, Amazon HR should consider global

strategies and a deeper understanding of the significant cultural difference between the USA and

China. To understand cultural differences, Hofstede's cultural dimension theory is essential for

measuring cultural dimension from a global perspective. Hofstede's cultural dimension theory is

made up of the following components cultural dimensions, including power distance index,
 CULTURAL AND INSTITUTIONAL DIFFERENCES 6

individualism, collectivism, and uncertainty (Hofstede, 2001). The model is essential for MNC

organizations intending to engage in a joint venture. It raises cultural awareness for organizations

planning a joint venture in a foreign country.

Kerzner (2009) posits that Amazon being a US-based company, management styles are

determined by horizontal organizational structure. A horizontal organizational structure involves

an authoritative system and allows communication within an organization to be more effective

and fluid, which would affect the joint venture between Amazon and AliExpress. On the other

hand, the organizational structure in China embraces a vertical management structure that is

consisted of a special superior-subordinate relationship. According to Hofstede (2001), the

vertical organizational structure is considered polarized and dominated by abuse of power by the

superiors. His argument is consistent with that of Ray (2011), who argues that abuse of power by

leaders in China is tolerated and considered a norm within the Chinese workplace. Therefore, HR

managers would require adopting a strategy that can facilitate the exchange of knowledge on

how Amazon would match with AliExpress. The vertical organizational in China will negatively

affect the employees’ relationships hence negatively affecting joint formation between Amazon

and AliExpress.

According to Andersen (2003), the managers in the US are task-oriented. However, status

and power are significant in China, and respect is shown to those in hierarchical positions. This

is strongly portrayed in Hofstede's cultural dimension study comparing the USA and China's

power distance relationship (Hofstede, 2001). The power distance in this scenario is described as

a level in which people are comfortable with influencing upward; and the acceptance of

inequality in the distribution of power in society (Hofstede, 2001). The power distance

relationship was higher in China at 78 than in the USA at 40. This emphasizes that inequality is
 CULTURAL AND INSTITUTIONAL DIFFERENCES 7

more prominent and acceptable in Chinese culture. In addition, power and status are enormously

valued in China (Itim, 2009). Power distance and inequalities in china will negatively affect joint

venture between Amazon and Aliexpress as there is more of physical abuse and social exclusion.

Criticism of Hofstede model

McSweeney (2002) faulted Hofstede’s model on the basis that national culture is

implausible cause for behaviour change. In addition, he argues that the theory is too simplistic,

lacks clarity due to misguided intention of measuring the immeasurable and an enriched

conception of culture (McSweeney, 2002). Therefore, it can be deduced that relying on

Hofstede’s model in describing the cultural differences between USA and China will not give

conclusive results. Some of the information may be misleading hence negatively affecting joint

venture between AliExpress and Amazon.

Trompenaars seven dimensions of culture

The model is comprised of universalism versus particularism which is concerned with

whether culture is based on rules and standards of relationship and trust in government and

business (Lloyd and Trompenaars, 1993). USA is a particularism where obligations and

relationships are important than rules and laws (Scull, 2018). On the other hand, China is a

universalism hence strict adherence to rule of law (Scull, 2018). The universalism culture in

China will affect joint formation between Amazon and Aliexpress as Amazon will have to

comply with too many rules and regulations. Similarly, individualism versus collectivism is

concerned with if the culture considers more on the group or an individual (Lloyd and

Trompenaars, 1993). Neutral versus effective is another dimension which is concerned with if

the person is limited from openly expressing their emotions or not (Lloyd and Trompenaars,

1993). Specific versus diffuse is a dimension concerned with identification of any connection
 CULTURAL AND INSTITUTIONAL DIFFERENCES 8

between public life and private life (Lloyd and Trompenaars, 1993). The other dimension is

achievement versus ascription which focuses on establishing if culture rewards individuals

according their performance, age, or gender. The final dimension is time in terms of sequential

versus synchronous which is concerned with whether people tend to do one thing at a time or

several things at once (Lloyd and Trompenaars, 1993). However, criticism of this theory stem

from Hofstede model (1996) who claims the theory is not supported by database. Additionally,

the theory does not establish the impact of personal characteristics behaviour. People’s behaviour

will strongly affect the development joint venture between USA and China. The Chinese holds

different beliefs from the Americans hence affect the joint formation between Amazon and

AliExpress.

Edward Twitchell Hall theory

This model is a high-context and low context cultural dimension which considers the

cultural communication including verbal and non-verbal messaging, unity of people and

flexibility of time. The model highlights the characteristics of high-context culture as possession

of inner locus control and personal acceptance for failure, presence of nonverbal communication.

In addition, the culture demonstrates cognitive dissonance, strong affiliation to family and

community and high commitment to long-term relationships. Consequently the process is

considered more important than the product. China is a high-context country (100%), while USA

is a low context country (20%) where there is less commitment to relationships and task is more

important than relationships. As a result of China being a high-context country, it will affect the

formation of the joint venture between Amazon and AliExpress. The managers at China will

consider the product more important than the process. However, the theory is criticised for

failure to account the reason why people engage in behaviours that does not reduce drives for
 CULTURAL AND INSTITUTIONAL DIFFERENCES 9

instance the reason why people eat and drink while they are neither hungry nor thirsty. Another

major criticism is that secondary reinforces do not directly reduce physiological and biological

needs. For instance, money allows people to buy primary reinforcements but money itself cannot

reduce drives. Therefore, this may affect joint formation between China and USA since the

Chinese will at sometimes seek activities that do not fulfil biological needs. This strongly

indicates that the Hull theory does not account for such behaviours which may negatively affect

the joint venture between Amazon and AliExpress.

Major Institutional Perspectives

Significant Institutional Differences That the Separate USA and China

The institutional arrangements are regarded as the hardware for the underlying systems for HRM

and the cultural stereotypes. The major institutional perspectives surrounding the joint venture

between China and USA include neo-liberalism and Neo-corporatism

Neo-liberalism

Liberalisation promotes free competition where market forces prevail to determine the force of

demand and supply. Additionally, there is expensive deregulation of economic structures to

reduce the role of law and state intervention. Furthermore the system is marked with the

privatisation and internalisation and trade unions exists to safeguard the rights of the workers.

The USA is a perfect example of neo-liberal ideology whereby its 85% of its workforce is non-

unionised. The relationships between the organization management and the workers unions have

had trust issues.

 CULTURAL AND INSTITUTIONAL DIFFERENCES 10

Neo- corporatism

In this system, the state is regarded as the mediator between the interests of capital and labour

and therefore, balances the completion and cooperation. The state is expected to protect the core

economic sectors and finances the social investment through taxation. The market forces

contribute to the unforeseen results and social inequalities.

Different Roles of the Government

Mechanisms for Developing Staff

Global Work

Recruitment and Selection

Training and Development

Role of Expatriate’s Cross-Cultural Training

Cross-Cultural Training in Facilitating Cross-Cultural Adjustment

Cross-Cultural Training and Improvement of Horizontal Communication

Recommendations

Conclusion

To sum up, joint ventures are essential instruments for the expansion and growth of an

organization. Forming joint ventures ensures maximum utilization of resources and an increase

in clients, thus revenues. However, joint ventures are prone to challenges such as cultural

differences and institutional differences. A joint venture involves dealing with people of different

cultures and governments. Some cultures and government policies may not favor setting up joint

ventures. Subjecting expatriates to cross-culture training enables them to adopt a new culture.
 CULTURAL AND INSTITUTIONAL DIFFERENCES 11

Cross-cultural training is essential in preparing the expatriates for the kind of culture to expect

and how to relate with the local staff and local clients.

Personal Reflection

I have developed a detailed understanding of the significance of cross-cultural training

and cultural diversity from studying the international HRM module. For instance, through

watching videos, I have gained an in-depth knowledge of the importance of multicultural teams.

In the TED talk, Chimamanda’s roommate was surprised to learn that she articulated and was

eloquent in English despite being an international student from Nigeria. Stereotyping leads to a

wrong perception of a person. I was surprised during 305 HRM seminars to find out that the

Chinese internationals were eloquent in English. I only thought they spoke Chinese only.

However, I have learned and can appreciate other cultures and languages through this module.

Additionally, Hofstede's cultural dimension model confirms the existence of cultural

differences, which in one way or another, influence the formation of joint ventures with different

countries (Hofstede, 2001). I have learned that it is crucial to impart the expatriates with cultural

knowledge through cross-cultural training, enhancing their understanding of different cultures.

Additionally, cross-cultural training informs them on how to relate with the local staff and the

customers. I have gained insights into how to manage global cross-cultural teams and how I may

apply this in my future career as a human resource manager. Finally, this module has helped

shape and fine-tune my communication and listening skills since this was core when working in

multicultural teams. Appropriate communication skills promote group interaction, thus positive

results.

My Strengths and Weakness

Attending lectures and reading the provided materials have enhanced my strengths in

understanding our culture and the various concepts from different from my culture. Through
 CULTURAL AND INSTITUTIONAL DIFFERENCES 12

models suggested by Hofstede, Trompenaars, and Hall, I have mustered a detailed understanding

of applying culture in an organizational setting and how understanding culture would lead to a

successful joint venture. I equate this to measuring my strength since I gained confidence in and

demonstrated exemplary leadership skills while working in groups during seminars. I

accommodated ideas from all members. Thus, I had good listening skills, significantly shaping

my career goals. These skills equipped and prepared me for my future career. However, my

weakness is stereotyping, which I have to root out. I thought Chinese only speaks Chinese; thus,

I was shocked when I learned they speak English fluently.

Additionally, I faced some challenges in understanding and connecting institutional

aspects of Neo-liberalism and Neo-corporatism to USA and China. It was difficult linking how

these ideologies would affect the two countries from forming a successful joint venture.

However, to overcome these challenges, I enlisted the help of a teacher and requested

clarification that I did not understand.

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