ITLS

WORKING PAPER ITLS-WP-09-17 A framework for strategic decision-making and performance among Chinese managers
By Peter Lok, Jo Rhodes1 and Vincent Cheng2
1

Macquarie Graduate School of Management Macquarie University 2 International Graduate School of Business University of South Australia

July 2009 ISSN 1832-570X

INSTITUTE of TRANSPORT and LOGISTICS STUDIES
The Australian Key Centre in Transport and Logistics Management The University of Sydney
Established under the Australian Research Council’s Key Centre Program.

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Working Paper ITLS-WP-09-17 A framework for strategic decision making and performance among Chinese Managers This study develops an integrative model that explains the relationship between Chinese culture, managers’ strategic decision making (SDM) processes, and organizational performance. 1200 participants were randomly selected from a business club’s company register, resulting in 204 valid respondents. The results highlighted two significant SDM paths used by managers: (1) The cognitive-speed path, which suggested that Overseas Chinese managers (the Chinese who live outside of Mainland China ) focus on the big picture, draw analogies from past experiences, and use extensive networks to reduce the duration of the decision process. (2)The social-political path which shows that Overseas Chinese managers focus on collective interests, strive to maintain harmony, and to save face whilst using a collaborative style to handle conflict; this approach reduces dysfunctional political behavior, while reinforcing the decision team’s focus on common goals. From these results we concluded that a speedier decision making process (based on intuition, experience and networks) accompanied by the appropriate use of political behavior (that created harmony, through a hierarchical structure, during conflict management) in the Overseas Chinese managers’ strategic decision making process could positively influence organizational performance. Chinese culture, cognitive-speed path, organizational performance, social-political path, strategic decision making processes (SDM) Peter Lok, Jo Rhodes and Vincent Cheng Institute of Transport and Logistics Studies (C37) The Australian Key Centre in Transport Management The University of Sydney NSW 2006 Australia Telephone: Facsimile: E-mail: Internet: +61 9351 0071 +61 9351 0088 itlsinfo@itls.usyd.edu.au http://www.itls.usyd.edu.au

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July 2009

whilst others argue to the contrary (Fukada 1983. Hong Kong.. Singapore. nor a comprehensive theory to explain the critical cultural factors involved. 1996). cognitive diversity. The understanding of the similarities and differences between Chinese and Western SDM models can improve business transaction activities. the surprisingly systematic approach in the US. Since there is a significant difference in thinking. In the last two decades around 20 studies have included the topic of Chinese SDM. For example: the German emphasis on a small top professional team. Nakamura (1994) posits that Chinese strategic management is similar to the Japanese.g. Quer et al. national culture or values. 2000. 2001. on investment decisions lacks empirical research to explain its impact on organizational performance. Hayley’s findings are insufficient for determining the effect of cultural factors on the Chinese strategic decision making process. the impact of one significant factor. Martinsons et al. 2002). in the future. and the pragmatic. in the automotive component business. Britain. and cognitive diversity. it is the intention of this empirical study to focus on Overseas Chinese managers experience in order to establish an integrative framework that explains the impact of key Chinese cultural factors on the SDM process and the impact on these factors on organizational performance. the need for further exploration of the influence of cultural values on strategic decision processes with Chinese managers is well established (Papadakis and Barwise. In recent years research studies addressed the influence of cognitive diversity. PRC managers incorporate the central and provincial government’s goals and desires into their planning. and performance through providing management (both East and West) with enhanced insights into the Chinese SDM process. (2004) highlighted certain Chinese decision making characteristics (such as own experience and network support) and notes that in addition. when comparing the strategic investment decision style of companies from Germany. Said. and experience between Overseas Chinese managers (e. East Asia Analytical Unit 1995. those from Taiwan. from the Peoples Republic of China (PRC). This gap is significant because of the growing volume of investment decisions made by Chinese and other nonChinese managers in the growing PRC economy.. there is limited evidence regarding the impact of cultural values. 2007). Brouthers et al. Early studies focused on the influence of the political and economic environment on the process (Child and Lu. 1998. and strategic positioning and alliances. 2. Haley et al. Warner. 2007). Literature review As most cross-cultural studies on strategic management pursue comparisons between the United States. 1999) future studies could compare the SDM process between Overseas and Mainland Chinese and Western and Chinese investors. Rhodes & Cheng 1. onto the global stage has been propelled by the business investment boom in mainland China. shallower approach of the British. and that the Overseas Chinese have substantial investment in the PRC. Indonesia. nor an explanation as to how they function in the SDM process (Peng et al. 2007). Hofstede 2001. Whilst the link between cultural diversity. and Mainland Chinese managers (Haley et al. such as the expectation of higher shareholders returns. 1990. However. Malaysia. McGaughery et al. Introduction The rapid expansion of Chinese firms. However.. Whilst there are numerous factors influencing investment decisions in the PRC. Different national cultures exhibit different approaches to decision making (Hofstede. Child 1981). strategy.. the literature provides sparse evidence.. Japan and European countries. on the Chinese SDM process for investment decisions. Japan. US and Europe). and the US.A framework for strategic decision making and performance among Chinese managers Lok. render the Mainland Chinese investment decision making process as similar to that of the Overseas Chinese (Von Glinow et al 2005.. market expansion. EasterbySmith and Gao. 2006). 2000. 2004. concluded that divergence in national values had a significant impact on investment decision style. Although it can be argued that global convergence of managerial best practices could.. 1994.. and strategic decision quality outcomes has been demonstrated (Olson et al. 1 . differences in regional decision making styles may be important. the extensiveness of consultation practices in Japan. Carr and Harris (2004). production efficiency. In addition.

2007. and secondary control. Most studies on the Overseas Chinese examine their entrepreneurial spirit. 2007) indicates that the locus of control can also be classified as primary control. (1999).. Asians might rely more on socio-instrumental control that is also a form of primary control. 2004). Hofstede (2001). Though these societal and psychological changes may precipitate modernization. decision style and mode. and conflict avoidance styles that could influence managers’ decision making process. 2004). group orientation. 2006). 2002. 2 . Recent research (Aube et al. Research on the locus of control generally classifies people as either internal or external types. 2007). 2006). and importance to the study of the SDM process. Olson et al. the external type tends to view rewards as resulting from external factors such as luck or fate. The internal type tends to view rewards as dependent on individual behavior. In contrast. 3.1 Locus of control The locus of control impacts on organizational decision making (Boone et al. and hierarchy. Consequently the influence of Chinese culture on Overseas Chinese investment decision making is a significant area for further exploration. The first two correspond with the decision maker’s personal cognitive elements. 1996).A framework for strategic decision making and performance among Chinese managers Lok. Haley and Haley (2006). and their networks with trusted family and friends (Redding.. Yan and Sorenson 2004. while the latter two relate to the vertical and horizontal social relationships of the decision maker within the decision team. Haley and Haley. Chinese cultural factors Whilst cultural values are incorporated into the many different models of cultural diversity not all have an equal impact on. Studies such as Martinson and Davison (2007). Jaw et al. The majority of these cultural factors can be grouped under four categories: the locus of control. and Lu (1998) discuss critical Chinese cultural factors such as collectivism. 1997. ignored in Western measures.. House et al. Tsang (2004). ‘Socio-instrumental’ control is the ‘active attempt to influence the environment through social means’ (Spector et al. Olson et al... Table 1 provides the link between these cultural factors and their possible influence on the SDM process. 1980) with a strong focus on the effect of cultural factors on the SDM process (Haley. 3. Spector et al. While acknowledging that Overseas Chinese managers are influenced by Western management practices. Chinese values still display significant similarities that can be traced back to their common root (Leong et al. Chen and Li (2005).. (2007). 2007. Rhodes & Cheng and decision style. long term orientation. it is known that cultural change requires a relatively long time (Carr and Harris. on the decision process of Overseas Chinese (Martinsons and Davison.

Cultural Factors Locus of control Impact on SDM process Low control to environment lead to longer planning horizon (+) but passive and less innovative (-) Low control to environment leads to risk averse (-) Rely on Socio-instrumental control lead to longer decision process (-) The uncertainty avoidance leads to longer decision time (-) and less rational approach (-) Chinese prefer to use rule-based folk precedent matching mode to speed up decision process (+) Less preference on analytic mode may lead to use of wrong precedent (-) Processing information with a holistic view enable the big picture to be seen (+) Acceptance of multiple truths widens strategic options (+) Chinese reliance on qualitative and personal source data in uncertain situations (+). Haley and Tan 2004). Non-analytic approach causes problematic decisions in certain situations (-) Patience in making decisions (+) but insensitivity to time frame (-) Putting group’s interest before self interest helps focus on common goal. (+) Focus on collective interest leads to high commitment to decision (+) To achieve group consensus would length the decision process (-) Maintaining guanxi leads to avoidance style conflict resolution. Haley. (-) Rational thinking may give way to maintaining guanxi. they would be more likely to use rules that originated from folk history because the Chinese are accustomed to 3 . 1996) which explain the adoptability of and perceived risk in making strategic decisions (Nutt. lack a sense of urgency. (-) Decision could be very fast if it get top administration’s attention (+) Decision style and mode Group orientation Hierarchy 3. 1986). is directly related to the SDM process. which is a preferred way of making decisions. roles and case-based decisions. Decision mode refers to the decision making mechanism. the Chinese have specific characteristics in this area (Yates and Lee. (-) Guanxi enables decision makers to save time in getting information (+) Hierarchy moderate conflict in the SDM process (+) Low transparency of decision making process (-) The respect of hierarchy leads to centrally monitored decision making that is slow due to provisional review with supervisors.A framework for strategic decision making and performance among Chinese managers Lok. Some researchers suggest that the Chinese place more emphasis on rules.2 Decision style and mode Decision style and mode. Chinese managers exhibit patience in making decisions. Rhodes & Cheng Table 1: Link between cultural factors and possible influence on SDM process. Consequently their behaviour could be categorized as ‘uncertain avoidance’ (Hofstede 2001. 2004). and can be informal and insensitive to time in the decision process (Wengrowski.

The folk-precedent matching decision style can be considered as a variant of category-based or case-based decision making whereby decision making is based on ‘qualitative and personal data’. An important part of the Chinese collectivist culture is ‘guanxi’ (a form of social networking and relationship building) which plays a major role in doing business (Chow and Ng.. have had a collectivist culture that is characterized by participation in intensive social interaction. Furthermore. If no match can be found in the ‘recognition mode’. 1991). 1988). 1998). The strategy process variables such as the ability to consider alternatives simultaneously. Extensiveness is defined as ‘the extent to which an upper-echelon executive group utilizes a substantial planning process to formulate long term goals and strategies for the firm’ (Miller et al. and Lu (1998) included other factors (such as ritual.. 1993). Comprehensiveness is defined as ‘the extent to which organizations attempt to be exhaustive or inclusive in making and integrating strategic decisions (Fredrickson and Mitchell. 4. Tan and Haley (1998).A framework for strategic decision making and performance among Chinese managers Lok. trust.. 1986). 1998). subordinates decide in accordance with those wishes. 3. (2007). 3. a sporadic SDM process has a longer process time when compared with a fluid process (Hickson et al. 4. 1982). although face is a universal phenomenon. the person with the highest status makes the decision. consequently the Chinese prefer clear distinctions between managers and subordinates. throughout their long history. 1986). 2005). In a collective society (group orientation) the interests of the collective are more important than those of individuals. studies by Martinson and Davison (2007). and the industry context are important in determining the speed of the SDM process (Judge and Miller. Chen and Li (2005). the size of the organization.. Jehn and Weigelt (2001). it is particularly salient in Chinese culture (Redding and Ng. That is. In this study these 4 SDM process factors have been adopted to measure the linkage between SDM and performance. and participation and involvement. However.3 Group orientation The Chinese. 4 . degree of rationality. Individual effort and achievements are expected to contribute to the collective good (Laaksonen. which affords little privacy (Tang and Ward.’s (1993) four key SDM characteristics capture the meaning of the other factors.2 Degree of rationality Comprehensiveness and extensiveness are used by most researchers as the indicators of rationality (Rajagopalan et al. SDM process characteristics Rajagopalan et al. Haley et al. 1991). Olson et al. (2004).. essentially as the superior’s agent (Xu and Wang. (1993) in examining past SDM studies noted four key characteristics in the SDM process: speed of decision making. Rajagopalan et al. In recent years. Haley.. Chinese decisions are made. or. then the analytic mode will be used (Weber et al. 2004). 2003). centrally. 1984). or at least monitored. Understanding ‘face’ is another important aspect in the management of guanxi.... political behavior. Tsang (2004). harmony) that influence the strategic decision making process among Chinese managers. Rhodes & Cheng tradition and antiquity. Scholars note that a major feature of Chinese culture is respect for age and hierarchy (Lockett. 1988).1 Speed The effect of the speed of the SDM process on organizational performance has received more attention in recent research because the business environment is more dynamic and the rate of change faster. Haley and Haley (2006). 4.4 Hierarchy Hierarchy is identified as one of the important variables in the analysis of SDM processes that influence the politicality of the process (Hickson et al. if the superior’s wishes are clear. Use of intuition is also included as a measure of rationality as it is recently receiving more attention in the study of the SDM process (Miller and Ireland.

for the purpose of this study. Organizational performance Although the measurement of organizational performance traditionally uses financial metrics. and are better informed about the market conditions. the balanced scorecard framework is used in this study to capture the effectiveness of both financial and non-financial measures of organizational performance (Kaplan and Norton.A framework for strategic decision making and performance among Chinese managers Lok.1 Research questions This research addresses the area of the effect of Chinese cultural factors on the SDM process from a holistic view using an integrative framework. Gandz and Murray. the term Hong Kong Chinese as Overseas Chinese may not be considered politically correct. 1990). or.4 Participation/Involvement Participation refers to the involvement of middle managers in the SDM process which can achieve higher strategic consensus to then improve the implementation of the strategic decision choices. 5.3 Political behaviour Political behavior is defined as ‘behavior by individuals.. Improvements in areas such as quality. 1998). However. that include intangible assets. Hong Kong. Singapore and Taiwan). However political behavior may be necessary in some situations to drive and implement strategic changes (Mintzberg. Whether political behavior is beneficial or harmful to organizations depends on the way it is used. supplement financial measures (Ittner and Larcker. 1976. the main contribution of participation to the SDM process is to improve the quality of the decision rather than facilitating implementation (Wooldridge and Floyd.g. 1990). 1980). customer and employee satisfaction. 1991). the Hong Kong Chinese are included in the Overseas Chinese definition. The study concentrates on Chinese cultural factors that have a critical effect on the SDM process resulting in the following research questions: 1) 2) 3) 4) What cultural factors are critical to the SDM process of Overseas Chinese? How do these cultural factors affect Overseas Chinese managers in making strategic decisions? How do these cultural factors affect organizational performance through the SDM process? What are the limitations of these cultural factors? What are the managerial implications for both Western and Chinese companies? To avoid ambiguity in this study. 1973). the Chinese who live outside of Mainland China are identified as Overseas Chinese (e. Political behavior has a negative effect on organizational performance because it is inefficient. The generic term ‘Chinese’ is used when the discussion refers to common issues that address both groups of Chinese people. with directions from top management (Andersen. However. Collectively. the Overseas and Mainland Chinese form the Chinese people. At a lower level. As non financial measures. Since the 1997 return of Hong Kong to Mainland China. by sub-units within an organization. are in a better position to generate and assess the alternatives. businesses have recognized that a dynamic business environment requires the use a broader set of measures (Eccles. 5 . and innovation are not fully captured using financial measures. 4. that make a claim against the resource-sharing system of the organization’ (Pettigrew. 5. in collective terms. The Chinese living in China (PRC) are identified as Mainland Chinese. 1992). unpleasant and causes disruption in information flow (Mintzberg et al. 2004). middle managers that are closer to day-to-day business operations. Rhodes & Cheng 4.

By looking at the big picture. Dane and Pratt (2007) further suggested that intuition can facilitate fast and accurate decisions in organizations. Park and Luo. 2004). and their competitors’ moves. characterized as less willing to take risks. Uncertainty avoidance is usually dealt with by gathering more information which then lengthens the SDM process (Schneider. Chinese managers also rely on socio-instrumental control to change the environment (Spector et al. Rhodes & Cheng 6. and to psychologically reduce the feeling of uncertainty. 2004).. This reduces the degree of rationality of the analysis. 1996). the degree of rationality. This type of control requires more time to achieve objectives. and tending towards uncertainty avoidance (Lau and Woodman. Hypothesis 2b: The use of the recognition-based decision mode and the use of qualitative and personal data will negatively (-) associate with the degree of rationality. This leads to the following hypotheses: Hypothesis 1a: The uncertainty avoidance and use of socio-instrumental control will increase (+) the duration and reduce the ‘speed’ of strategic decision making among Overseas Chinese. The Chinese consider Guanxi important for conducting business (Xin and Pearce. 2004). Decisions are made intuitively by managers with extensive experience and knowledge of the subject matter (Haley and Haley. The collectivist nature of Chinese culture leads to longer process duration as time is spent on reaching a group consensus. Locus of control influences both the speed and degree of rationality of the SDM process. 1998. which fits this type of information gathering. 1996. Chinese decision makers also make use of guanxi to acquire first hand information regarding government regulations. the following hypotheses are expected.1 Hypotheses The relationships between cultural factors and the SDM process There are four groups of hypotheses that demonstrate the relationships between the four cultural factors and the SDM process. 2004. where there are no clear and transparent channels to acquire data for formal analysis (Haley and Haley. To alleviate the anxiety of making important decisions. Chinese managers are typically classified as external types. or intuition. The decision style and mode of Chinese managers will influence both decision ‘speed’ and ‘degree of rationality’. 1995). and political behavior. 1989). building and maintaining guanxi can be a high priority in making managerial 6 . Chinese managers rely on social norms or rituals like ‘Fung Shui’ (Tsang. bits and pieces of qualitative and personal information can be combined to solve the business puzzle. 2006).. 6. may improve the speed and effectiveness of the decision-making (Weber et al. These superstitious actions reduce the rationality of decision making and may cause problematic consequences such as distracting the managers from the normal SDM process (Tsang. Haley et al. 1996). the Chinese information processing style focuses on using qualitative and personal data. 2001). Leung. Group orientation affects speed. Hypothesis 2a: The use of the recognition-based decision mode and the use of qualitative and personal data will decrease (-) with the speed of the SDM process. Chinese managers placing emphasis on recognition-based decision making. relying on secondary control. Therefore. 2004).A framework for strategic decision making and performance among Chinese managers Lok. Hypothesis 1b: Relying upon social norms and rituals to avoid uncertainty will negatively (-) associate with ‘degree of rationality’ in strategic decision making among Overseas Chinese. When insufficient hard data is available. Research shows that the Chinese consider problem situations holistically (Yates and Lee.

by the preference of the top management team. they can be decided quickly (Yates and Lee. 7 .. because these are viewed as a threat to the collective interest. This leads to the following hypothesis: Hypothesis 3a: Group orientation that requires more effort and time to achieve consensus in decision making will increase (+) duration (or decrease speed). Hierarchy also means that strategy decisions are mostly limited to those at the top. The single belief underlying Chinese group orientation is that the future of the individuals from the same group are inter-related. Managers must pay attention to saving and giving face to team members.e. middle managers will not publicly express their opinion. Because of hierarchy. 2000). and avoid conflict. In making decisions. Even if the chief executive does not intervene or make the decision himself. rationality in decision making is irrelevant because the final decision is made by the top hierarchy. rational analysis may give way to maintaining guanxi with business partners and/or among the decision making team members. However. managers will not question the chief executive’s rationale for the decision. Chen and Chen. Unless the top management team explicitly makes it clear that someone from below is allowed to take part in the process. It is important to maintain harmony. and will accept and execute the chief executive’s choice. which could then lead to a reduction in comprehensiveness by avoiding challenges or questioning of the options put forward by different team members (the problem of groupthink). if his preference is known the management team may conform to the chief executive’s choice. On the other hand. Chinese managers have a higher level of commitment to teamwork (Chen et al. as well as influenced. this reduces the degree of rationality. Hence. the time for strategic decision making is quicker when top level hierarchy is involved rather then filtering up the chain of command). Big decisions are made or at least monitored. which may be more effective in rectifying derailed situations. if these decisions get the attention of the person with the highest authority. Hypothesis 3c: The restraint of self-interest for the greater interest of the group in maintaining harmony.. Rhodes & Cheng decisions. and that each person’s well-being depends upon the results of the collective effort (Leung. This leads to the following hypotheses: Hypothesis 4b: Top hierarchy decision making will negatively (-) associate with the degree of rationality. and avoiding conflict will negatively (-) associate with political behavior. Hypothesis 3b: The concern of face and guanxi will negatively (-) associate with degree of rationality. Since strategic decisions are important decisions. extensive effort may be spent in avoiding conflict. or voluntarily give input to the SDM process. Hypothesis 4a: The speed of the SDM process will positively (+) associate with top level hierarchy (i. they should attract the attention of the top management team. 1996. 2004). 2005). This is a reflection of being less dependent on formal procedures (Wang et al. Hypothesis 4c: Top hierarchy decision making will positively (+) associate with political behavior. the chief executive may more easily be able to resolve conflict and re-establish harmony using superior position. 1996). The intervention of the chief executive distracts managers from the normal rational process. Hierarchy has a relationship with all the SDM process characteristics.A framework for strategic decision making and performance among Chinese managers Lok.

shown to have an impact on organizational performance. both have a negative impact on the degree of political behavior and conflict. Although locus of control and group orientation will lengthen the process duration. it is expected that: Hypothesis 8: The participation/involvement of the SDM process will associate negatively (-) with organizational performance. 1987). Atuahene-Gima and Li. Klein. the reduction in the degree of rationality should lead to improved organizational performance in a turbulent business environment. 1997. and establishing stability through a hierarchical structure. Hypothesis 6: The degree of rationality of the SDM process will associate negatively (-) with organizational performance in a turbulent business environment. Chinese cultural factors while decreasing political behavior and conflict also attends to the latter case by focusing on maintaining harmony within a group. or his/her intention is made known in the SDM process. 6. steps in. the following hypothesis is expected: Hypothesis 7: The political behavior of the SDM process will associate positively (+) with organizational performance. the recognitionbased/intuition decision mode may take precedence in the SDM process over the analytic mode. Additionally the use of intuition has a positive effect on organizational performance in turbulent business environments (Sadler-Smith and Shefy.2 The relationship between the SDM process and organizational performance Speed. A (+) sign indicates a positive influence and a (-) sign indicates a negative relationship between the two variables. 2004. as well as on the organizational information environment (Goll and Rasheed. 1988). Since participation/involvement is found to have a positive relationship with organizational performance. 2003). Furthermore. is moderated by the business environment. Political behavior is influenced by group orientation and hierarchy. In a turbulent environment. Hierarchy limits the participation of middle and lower level managers thereby reducing the effect of upward influence where these managers may attempt to progress options that may favor themselves (Schilit and Paint. depending on the external business environment.A framework for strategic decision making and performance among Chinese managers Lok. it will significantly reduce the time required to reach consensus. this is a characteristic of emerging markets. Hough and White. Taking these into account. when moderated by the business environment. A longer planning period corresponding to the extensiveness of the SDM process (hypothesis 2b) improves firm performance in turbulent business environments. Figure 1 summarizes the hypotheses within the conceptual framework of this study. 2004). and the attention received by the boss or the chief executive. Comprehensiveness will have a different impact on organizational performance. Rhodes & Cheng Hypothesis 4d: Top hierarchy decision making will negatively (-) associate with participation. Therefore. Chinese cultural factors will mostly lead to faster decision speed because of the decision style. if the chief executive intervenes. Therefore. 8 . 2004. the following hypothesis is expected: Hypothesis 5: The speed of the SDM process will associate positively (+) with higher organizational performance in a turbulent business environment. it needs to be managed carefully. Most of the literature points out that political activity is harmful to organizational performance (Eisenhardt and Bourgeois III. Although it has been suggested that some level of politics is necessary in certain activities.

204 valid questionnaires were returned (i. 2001. 7. 9 . the club encouraged members’ participation in this study. It is not uncommon to have a response rate of less than 10%. Hong Kong. confidentiality was ensured via the anonymously returned questionnaire. Taiwan.1 Research design Sampling and data collection Cross-cultural management research on the value similarities and differences of various Chinese societies such as China. Also. thus invalidating meaningful analysis (Westwood and Lok. Although only Hong Kong Chinese managers are sampled in this study.. A second round of the survey was sent out again to the total sample four weeks after the initial one as a reminder to the non-returns. and Cooper 1999) and selected the Lion’s club to represent the Chinese businesses in the city. SMEs to MNCs. In total. 2000). and is known to have a low survey response rate (Harzing. 2006). The Lion’s Club company register has a well balanced representation from various industries with different sizes ranging from small family owned. and a covering letter stating the purpose. A structured questionnaire was mailed with a self-addressed return envelope.A framework for strategic decision making and performance among Chinese managers Lok. Ralston et al. 7. Lu. 2003). Rhodes & Cheng The business environment has a moderating effect on the speed of decision making and the degree of rationality affecting organizational performance. To address this problem. 17% response rate) for this study. this study followed previous established studies based on convenience sampling method (Siu. and Singapore provide evidence that economic development leads to a convergence of value orientation among these societies (Inglehart and Baker.e. they are considered as representative of the Overseas Chinese in strategic decision making behaviour. 1200 participants (firms) were randomly selected from the Club’s total 2401 firms. Hong Kong has a resistance to questionnaire surveys.

1999. (1998). First. A recommended two step model-building approach was adopted (Anderson and Gerbing. (1973). based on a total of 1200 questionnaires. (2006). This was equal to a response rate of 17%. Items for ‘participation’ were obtained from Pettigrew. Chen and Chen (2004). organizational performance was assessed based on the balanced scorecard principle (Kaplan and Norton 2008). The SEM model was separated into a measurement model.2 Instrument design A five point Likert scale ranging from strongly agree (5) to strongly disagree (1) was used in all questions. The measurement model consisted of relationships between the latent variables and their indicators. 2000).. A final aggregated index was used as the outcome/dependent variable for organizational performance. Items for ‘hierarchy behavior’ were obtained from Xu and Wang (1991). items for ‘speed’ were obtained from Miller et al. 8. a structural equation modeling (SEM) technique was used to analyze the data collected from the survey. Items were translated into Chinese using the standard backward approach. 2003). proposed by scholars. and a structural model. This rate was comparable to other similar survey studies on Chinese subjects using structural equation modeling as the analysis tool. Items for ‘rationality’ were obtained from Eisenhardt and Zbaracki.. 1987. sales growth. The scales used to measure the four Chinese cultural factors of SDM were obtained from previous cultural surveys. 1988).. Since most participants were associated with privately owned SMEs. Items for ‘decision style’ were obtained from Schneider (1989) and Nisbett et al. To achieve this. (1988) and Amason. 1998). Consequently the survey response in this study should be seen as acceptable. and Eisenhardt and Bourgeois III. In the SDM process. In this case organizational performance data has previously been measured using perceptual scales. The results of the study provided empirical support to some of the Chinese SDM characteristics proposed in the literature. as reported by various researchers (Harzing. (2003) and Kaplan and Norton (2008) and data obtained were perceptual responses from all four factors (financial. and return on investment that are commonly used and available in measuring the organizational performance of listed public companies is problematic.. In this study. extracting exact financial figures such as. Items for ‘locus of control’ were derived from Lau and Woodman (1995). Items for ‘decision mode’ were obtained from(Yates and Lee (1996). No modification was required after their feedback. 7.1 Results Descriptive statistics A total of 204 valid returned questionnaires were used. (1998) and Frishammer (2003). Powell. Papadakis. Isobe et al. The questionnaire was administrated in Chinese since it was the native language of Overseas Chinese managers. All items in this questionnaire were reviewed by 8 owners/managers to establish clarity with the questions. (2004). and used in various studies when objective data are not available in research (Dess. 1997.A framework for strategic decision making and performance among Chinese managers Lok. 1996. (1992) and Said. Delaney and Huselid.. The response rate was better than the average of around 12% of surveys in Hong Kong. Entrekin and Pearson. Hofstede ( 2001) and Wang et al. 1992. (2005). for primary control Spector et al. 8.3 Data analysis This study focuses on the establishment of an Overseas Chinese SDM process model derived through testing of the causal relationships hypothesized in the research framework (Figure 1) of multiple independent and intervening variables. Rhodes & Cheng 7. and Tsang (2004) for secondary control. Items for ‘political behavior’ were derived from Eisenhardt and Bourgeois III. 1997. nearly 20% of the strategic decision processes were completed within 10 . (2001). profit figures. processes and learning/innovation) of the balanced scorecard. customers. Goll and Rasheed. Klein (1999).0 software package. while the structural model showed the causal relationships among the latent variables (Williams et al. The data analysis was conducted using SPSS 15 and AMOS (Analysis of Moment Structure) 7. Items were derived from Marr and Schiuma. (1988).

70 is an acceptable threshold for composite reliability (Fornell and Larcker.4 months in Hickson’s study (Hickson et al. Second. 37% (n = 77) of the remaining returns were from medium to large enterprises with a larger top management team. and new plant and process re-engineering (about 70%).717 0. If the model was a poor fit.909 0. Haley and Haley 2004). After satisfying the prerequisite of uni-dimensionality. Principal factor analysis was applied to establish the right construct that could reflect the true meaning of the variables used in the study. Haley and Tan 1996. 22% (n=45) were controlled by a professional CEO (with a small management team – owner presence is not known). As a whole. The combination of this empirical evidence provides an elucidate description that small Chinese companies can make quick decisions with a small decision making team or just by the owner. Items with low loading were discarded.671 0. The results of this analysis supported the discarding of the locus of control and hierarchy variables.653 0. The Cronbach’s Alpha values for different constructs are shown in Table 2.27. Confirmatory factor analysis was used to determine a plausible representation of the causal structure of the variables. Haley and Haley 2004). This finding supports other Chinese SDM characteristics.762 0. or a few trusted top managements or advisors. The hypothesized model was first tested with goodness of fit statistics.628 0.2 Analysis of measurement model This part of the analysis examines the uni-dimensionality and reliability of the measurement scales. Table 2.522 0.713 0. the structural analysis could not be used to test the moderating effect of the business environment.055. 80% of the SDM processes were completed within 120 days.616 * Discarded * A popular rule of thumb is that 0. 1981). with the owner as the chief executive officer. The 11 . This finding supports the description in the literature relating to quick. action driven decision making as a characteristic of the SDM process in Chinese businesses (Redding. this resulted in a model with Chi-square = 198. 1990. namely that the owner.. Rhodes & Cheng 20 days and another 28% completed within 30 days. The content of the SDM process largely involved considerations of new product and services. the returned data showed that 41% (n=82) of the returned survey were small family owned businesses. Because of this.774 0. 1986). this is significantly shorter than the mean duration of 12. This position enabled the decision makers to accumulate the rich domain knowledge that supported their decision characteristics. these selected indicators were then subjected to reliability analysis. the analysis then proceeded in an exploratory fashion to determine which parameters in the model were mis-specified. Therefore. are involved in making strategic decisions (Haley and Tan 1996.A framework for strategic decision making and performance among Chinese managers Lok. over 60% of the decisions were made with a team size of three or fewer people. 8. the indicators for the business environment were considered not reliable and were discarded in subsequent analysis. Composite reliability analysis using Cornbach’s Alpha Latent variable Business environment Organizational performance Speed Degree of rationality Political behavior Participation/Involvement Locus of control Decision style and mode Group orientation Hierarchy Cornbach’s Alpha 0. This confirmed that most Chinese companies were engaged in niche markets. p = 0.

958.041. CFI = 0.064. the political behavior to degree of rationality path was not included in the final structural model that is shown in Figure 2. The testing of the structural model employed a model development methodology that combined the confirmatory and exploratory approach. TLI = 0.3 Analysis of structural model The resulting measurement model was then used to construct the structural model tested using maximum likelihood estimation and Bayesian analysis. political behavior to organizational performance (Beta = 0. A summary of the result of testing of hypotheses is shown in Table 3. speed to organizational performance (Beta = 0. TLI = 0. However.977. the results reveal only three significant relations among the seven constructs.26). CFI = 0. 8. The goodness of fit measures (RMSEA = 0.036.25). group orientation to political behavior (Beta = 0. 1989. CFI = 0. the moderating effect of the business environment could not be included. *the term duration and speed is interchangeable in Fig. Following this approach.969 and CMIN/DF = 1. five were supported with statistical significance based on the structural equation modeling analysis results.49).130) consisting of: decision style and mode to duration/speed (Beta = 0. Since data for the business environment construct were not used in the subsequent structural analysis stage for reliability reasons.20) and political behavior to degree of rationality (Beta = -0. 12 . the intervening variable.A framework for strategic decision making and performance among Chinese managers Lok. eliminating insignificant relationships is carried out to improve the model (Bollen.705 and CMIN/DF = 1.2 The research framework has a total of 8 hypotheses representing the causal relationships among the 4 independent variables.042. TLI = 0. 2002). Hypothesis 4 (a to d) that links ‘hierarchy’ to the process characteristics cannot be tested because indicators of ‘hierarchy’ were rejected due to low reliability. and the 4 dependent variables.928. five hypotheses were found to be significant in the final good fit structural model (RMSEA = 0. the degree of rationality had no significant influence on organizational performance.180) suggested that it could be considered as a good fit model. Rhodes & Cheng goodness of fit measures (RMSEA = 0.945 and CMIN/DF = 1. degree of freedom = 158 and p = 0.958.177) suggest that the model is a good fit.22). However. The initial model has Chi-Square = 189. For the remaining hypotheses. Ulf et al. Since the analysis purpose is to arrive at a model of specified relationships.

49 that corresponds to the hypothesis 2a.45.1 Discussion The Chinese SDM process model The development of an integrative Chinese SDM process model incorporates the results of the survey data and reveals several important findings.A framework for strategic decision making and performance among Chinese managers Lok. Hypothesis 1a was rejected. with a regression weight of 0. (2004) proposition that recognition-based decision making. the result from this study showed that ‘locus of control’ did not have any significant influence on strategic decision making. Second. 9. With hypothesis 1b.39. Thus. First. Hence. it suggests that the Chinese style and mode of decision making will shorten the duration of the process. This finding is compatible with Weber et al’s. with a regression weight of 0. Rhodes & Cheng Table 3 Summary of paths and hypotheses in the analysis Path Locus of control  Speed Decision style/mode speed Group orientation  speed Hierarchy  speed Locus of control  Degree of rationality Decision style/mode  Degree of rationality Group orientation  Degree of rationality Hierarchy  Degree of rationality Locus of control  Political behavior Decision style/mode  Political behavior Group orientation  Political behavior Hierarchy  Political behavior Locus of control  Participation/involvement Decision style/mode  Participation/involvement Group orientation  Participation/involvement Hierarchy  Participation/involvement Speed  OP Degree of rationality  OP Political behavior  OP Participation/involvement  OP indicate that these paths are not included in the hypotheses Hypothesis 1a 2a 3a 4a 1b 2b 3b 4b * * 3c 4c * * 3d 4d 5 6 7 8 Not supported Not tested Supported Not supported Supported Not supported Result Not supported Supported Not supported Not tested Not supported Supported Not supported Not tested Not tested Not tested Supported Not tested Not tested Not tested 9. the ‘decision style and mode’ has a strong positive influence on ‘speed’ with a regression weight of 0. hypothesis 1b was rejected. resulting in improved organizational performance. or intuition. may improve the speed 13 . relying upon ‘social norms’ to avoid uncertainty did not show significant impact on the ‘degree of rationality’ in strategic decision making. The hypothesis that ‘speed’ had a positive relationship to organizational performance was also supported. When these two findings are combined. Hence. ‘uncertainty avoidance’ and the use of ‘socialinstrumental control’ had a weak link with reducing the ‘speed’ of strategic decision making.

1993). the effect of cultural factors is considered to be significant in studying the SDM process. that is.. Comparing this with other similar studies on strategy process and organizational performance (Priem et al. Combining these two support hypothesis leads to another path: “Group orientation’ -> ‘political behavior’ -> organizational performance” link and is labeled as the social-political path.1 The cognitive-speed path This research provides some evidence that in the SDM process. 2001. Organizational performance. The combination of the two paths explains more than 9% of the variance of organizational performance. Haley and Haley. 9. even if the number of managers forming a coalition or lobbying during the process increases. bits and pieces of qualitative and personal information can be combined to solve the business puzzle. however. speed. ‘Political behavior’ has a positive influence on organization performance and supports hypothesis 7. The structural equation model appears to substantiate that this Chinese decision style and mode will shorten the duration of the SDM process and consequently lead to improved organizational performance. a careful examination of the respondents’ answers reveals that ‘group orientation’ can contribute to the improvement of the management of politics in the political model. An examination of the structural equation model shows that the cultural factors explain 22% of the variance of ‘speed’ and 13% of the variance of ‘political behavior’. Therefore. 1995). The ‘group orientation’ will lead to better organizational performance through the mediation of ‘political behavior’. and political behavior are shown to be affected by many other external factors in the study of SDM (Rajagopalan et al. This finding is supported by the notion of ‘guanxi’. To focus 14 . A summary of the different paths in the Chinese SDM process model is provided in Figure 3.26 that corresponds to hypothesis 3c. the trusted group circle and partner relationships (Park and Luo. The latter finding seems to be contradictory to the view that ‘political behavior’ will lead to deteriorating performance. the positive relationship between ‘group orientation’ and ‘political behavior’ does not focus on more politicizing but on the effort to reduce the dysfunctional effects through the focus on common goals and the presence of a fair process. the Overseas Chinese manager tends to focus on the big picture and adopt a holistic view using previous experience in drawing analogies to make decisions. ‘group orientation’ has a positive influence on ‘political behavior’ with a regression weight of 0. Third. and harmony and respect of ‘face’ (Chen and Chen.1. 2004) are some of the forms of political behavior that exert a positive effect on organizational performance. This is the first path identified in the structural model described as “decision style and mode’ -> ‘speed’ -> organizational performance” link and is labeled as the cognitive-speed path. 2006).A framework for strategic decision making and performance among Chinese managers Lok. This finding is compatible with Yates and Lee’s (1996) proposition that the Chinese tend to consider problem situations holistically. Rhodes & Cheng and effectiveness of decision making. By looking at the big picture. a business network.

. For example. instead. Most of the literature in SDM contended that speed of decision making leads to higher organizational performance in turbulent business environments. However. The tacit knowledge. the inner social network. The focus on the collective effort and the organization’s interest in a Chinese company tends to align decision team members towards a common goal that reduces dysfunctional political behavior. 15 . the issues that make politics dysfunctional may be different and some of the Western shortcomings may rarely occur under the Chinese SDM context. Group orientation is underpinned by values such as putting the group’s interest before individuals and maintaining good guanxi among members. 1998). and rules synthesized from experience. and this network of relationships are significant social political forces among Chinese managers seeking higher organizational performance. The cognitive –speed path and the social-political path may seem nonconventional to Western practices. et al. or in studying multidimensional constructs (White. face. concern for a relationship or guanxi.. They also emphasize good relationships by maintaining harmony.A framework for strategic decision making and performance among Chinese managers Lok.2 The social-political path While research has shown that ‘political behavior’ is influenced by decision specific and organizational characteristics (Papadakis et al. 2009) have shown that nonconventional thinking capabilities may be adopted by strategic decision makers in conditions of uncertainty. a potential tradeoff might be the overlooking of details which could be important to the making of effective decisions (Haley et al. Experience can be considered as a type of information to address this deficiency. 9. The recognizing of non obvious patterns might reduce the danger of overlooking some trivial but important hints or traits that are difficult to spot even with sophisticated analysis tools. These two approaches of adopting Chinese culture to improve the constructive management of political behavior are the major contributions to organizational performance from the social-political path. interpersonal norms and collective interests will influence the handling of conflict using an avoidance and collaboration style (Yan and Sorenson. such as sub-optimization. The results from this empirical study confirmed that collective behavior. and avoiding conflict during the process. These two measures will reduce dysfunctional politicizing activities while reinforcing good practice in the management of politics. the handling of conflict in a collaborating style is necessary to achieve an effective decision process. for local solutions. This is different from the Western value system (such as the United States) that focuses on individualism where the relationship between employers and employees is mostly contractual (Hofstede. To foster a working environment that focuses on maintaining harmony. there is little indepth investigation as to why speed can improve business performance. in a Chinese company.1. and group dynamics. care must be taken to maintain and protect face. 2002). 1997). these may not be viewed as shortcomings that cause ineffectiveness to the SDM process. Rhodes & Cheng on the ‘big picture’ can be described as an approach to examine issues in an integrative way instead of studying factors in a discrete. Therefore. holistic style may have an advantage in assessing complicated situations that reduce problems. However. 1994). 2004). In Chinese companies. independent fashion which ignores the interactions of the factors. 2004). they are viewed as necessary behaviors of the members of the SDM team to make the process work effectively. most studies in politics or political behavior are essentially based on a Western perspective of the notion of power. The common explanation for this is that as business environments or dynamics change rapidly. companies need to change at a faster speed to match with the environment to maintain their competitive advantage. a recent study (McKenzie. might be utilized to fill the voids in this process. This empirical research has provided support for the notion that the Chinese tend to put the interest of the organization (collective interest) in front of self-interest in the decision process. ambiguity and contradiction. hierarchy. While focusing on the big picture. Scholars have emphasized the importance of this approach in order to derive comprehensive models for business strategy for performance (Stimpert and Duhaime. These two features lead to fast decision making that allows Chinese managers to seize opportunities as they arise. J.

for example. Due to the convergence of managerial and best practices globally. These two are important characteristics of Chinese decision makers. and the decision context is complicated (Sterman. The sample size makes it impractical to carry out further inter group analysis and model building using the same technique among different respondent categories. However. such as maintaining harmony and collaboration. This research focuses on Overseas Chinese managers’ strategic decision styles. This decision style and mode works well in certain situations such as: where little data is available. It works effectively only if it is in a fast changing environment. future studies could use a longitudinal design to study the dynamics of Chinese SDM as it unfold over time (Van de Ven. differences between Westerns and Chinese in strategic making styles could be investigated. The strength of the Chinese SDM process comes from invisible root. First. While Western companies may find it difficult to directly replicate or adopt all elements of the model (Elbanna and Child 2007).4 Limitation of the study and future research The contributions and implications of this study are subject to several limitations. 2000). Finally. combined with a ‘guanxi’ network has a positive relationship with organizational performance. this could result in higher organizational performance. For example. Furthermore.A framework for strategic decision making and performance among Chinese managers Lok. the link between Overseas Chinese strategic decision making style and investment decisions in China could be further investigated. 16 . relying on experience and intuitive styles requires time to accumulate and synthesis. Secondly.Chinese values. there is no time to collect data. First. the owner) makes the decisions. Rhodes & Cheng In summary.3 Management implications The Overseas Chinese SDM process model leads to the generation of several important implications for practitioners in strategic management. It is most suitable for managing uncertainty and complexity. there are two significant and related contributions from this empirical study: that for Chinese managers. This effectively minimizes the conflicts between group members and focuses on a common goal. this association needs empirical testing to conclude its relationships. age. positive political behavior. This is supported by Martinsons and Davidson (2007). to what extent do team members put an organization’s interest in front of their own interest when conflict arises? This study did not analyze the strategic decision making process from the various groups perspective (i.1. large management team) to determine how top hierarchy decisions could have influenced the firm’s performance. A comparative study could be included in future studies. Bigger sample sizes in future studies could make it possible to perform the above analysis. the group orientation aspect lets the decision focus on collective interests and concern for the relationships of group members. Said. and this is likely to be environmentally bounded. education level or industry type. However. 9. the limitation of this resides in the strength of the model. improvements in the speed of strategic decision making. Second. the cognitive-speed path provides support for the focus on the big picture. they are likely to benefit from understanding the Overseas Chinese SDM process model. small top management team. 2006). These consist of quick decision making by the owner or leader of the firm. owner. This could also produce a better understanding of the detailed interaction of the high performance factors identified in the research. This research uses cross sectional data. and the use of experience can speed up decision making. group consensus may restrict the emergence of new ideas or alternatives that might be better than the one favored or put forward by the top decision makers.e. the decision involves poorly structured problems. and the traditional value system among Chinese. there could be strong links between Mainland Chinese and Overseas Chinese in their strategic decision making style.1. 9.g. the top of the hierarchy (e. 1992.

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