the internationalization of italian firms towards smcs. a cultural
TRANSCRIPT
The internationalization of Italian Firms towards SMCs. A cultural perspective
By
Francesco Calza, Nadir Aliane, Chiara Cannavale
A paper submitted to the CMS5 Conference – Critical views across cultures, Manchester Business School, 11-13 July 2007
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Authors’ particulars: Francesco Calza, Full Professor of Business Management Università degli Studi di Napoli Parthenope E-mail: [email protected] Nadir Aliane, Associate Professor of Management Université d’Alger E-mail: [email protected] Chiara Cannavale, Assistant Professor of Business Management Università degli Studi di Napoli “Parthenope” E-mail: [email protected]
Abstract As soon as interest towards South Mediterranean Countries (SMCs) is increasing, economic and managerial literature doesn’t present many contribution on this topic. Some scholars have analysed the effect of a higher liberalisation process in the Mediterranean on the European economies, but only a few have analysed in-depth what operating in the SMCs represent for Western (European or American) firms and the impact of cross-cultural differences (El-Said & Harrigan, 2006; Kuran, 2005; Cone, 2003; Akacem and Gilliam, 2002). Moreover these Authors have concentrated more on banking and financial matters than on the effect that Muslim culture can have on managerial practices, organisational procedure, communication and inter-firms relationships. What is surprising to us by these contributions is the non homogeneous picture of Arabs’ entrepreneurial cultures. According to some research it looks very similar to western culture for what concerns organisation and leadership. On the other hand many authors give a very different idea of Arabic culture concerning with social, political and even economic matters and they suggest a strong impact of religion on every kind of social life. However cultural differences are strongly perceived by Italian managers and entrepreneurs operating in the SMCs, that’s why the aim of our research is to study the internationalisation process of Italian firms to SMCs, in order to investigate the cultural values which deeply impact on the business relationships between Italian investors and local actors. A case study analysis of Italian Multinational Company has been conducted in order to evaluate the cultural obstacles and facilities that has been faced in the internationalisation process to Algeria. Keywords: SMCs, internationalisation, cultural dimensions
Introduction The South Mediterranean Countries (SMC) don’t represent an homogenous whole of territories, on the contrary they are countries characterised by different traditions, religions, languages, customs, degree of democracy and liberalization. Even looking at the Maghreb, that is the westernmost part of the Arab world, the differences existing between the SMCs are easy to note. Drake (2006) explores actually the diversity existing between Morocco, Tunisia and Libya highlighting how these Countries differ in terms of socio- economic development and cultural background. Even if in the international statistics Libya is the most developed Country, reality shows that the conditions of life are much better in Morocco and Tunisia than in Libya. The economic structure is very different too. Libyan economy is much more based on the energy sector, while in Morocco and Tunisia agriculture is still very important. Moreover, the socio-political structure of those countries and the educational systems are influenced by their historical background: Libya and Tunisia were part of the Ottoman Empire and not Tunisia and, during the Colonial period, Tunisia and Morocco came under French control, while Libya under the Italian one. All SMCs, however, are involved in project of the European Union aimed to enlarge the free trade zones and to promote a gradual economic and social rapprochement of these Countries and the European Union. EU enlargement poses big opportunities, but also big challenges for European firms. On one side there is the possibility to exploit a big market and a cheaper access to many production factors; on the other side, for firms operating in traditional labour-intensive sectors, the enlargement favours an increasing competition with firms advantaged by low labour cost and lower environmental and social restrictions. As soon as interest towards South Mediterranean Countries (SMCs) is increasing, economic and managerial literature doesn’t present many contribution on this topic. Some scholars have analysed the effect of a higher liberalisation process in the Mediterranean on the European economies, but only a few have analysed in-depth what operating in the SMCs represent for Western (European or American) firms and the impact of cross-cultural differences (El-Said & Harrigan, 2006; Kuran, 2005; Cone, 2003; Akacem and Gilliam, 2002). Moreover these Authors have concentrated more on banking and financial matters than on the effect that Muslim culture can have on managerial practices, organisational procedure, communication and inter-firms relationships. economic matters and they suggest a strong impact of religion on every kind of social life. However cultural differences are strongly perceived by Italian managers and entrepreneurs operating in the SMCs, that’s why the aim of our research to study the internationalisation process of Italian firms to SMCs, in order to investigate the cultural values which deeply impact on the business relationships between Italian investors and local actors. The cultural dimensions will be explored both testing those reported in the main studies on the topic, and trying to highlight some other cultural factors which can properly explain the difficulties Italian investors meet in their entry process into the Region. It will also highlight the existence of some cultural attitudes due to guarantee the effectiveness of organizational relationships. A case study analysis of Italian Multinational Company has been conducted in order to evaluate the cultural obstacles and facilities that has been faced in the internationalisation process to Algeria. 1. Italian presence in SMCs Italian firms’ interest towards SMCs is increasing for the big opportunities they present as potential markets of Italian products and as destination of important foreign direct investment in the Energy, in the agro food and in the textile sectors.
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Italy is actually in first positions of the commercial partners’ list in many SMCs1 and particularly it is the second commercial partner of Egypt, Tunisia and Algeria, third in Turkey and fourth in Morocco. However, for what concerns Foreign Direct Investment, Italia doesn’t have a similar position and it is at the first places of the relative lists only in Tunisia (where it is the second investor after France), Turkey (after Germany, Netherlands and France), Algeria (after United States, Egypt, France and Spain). These data confirm Italian firms’ low propensity to complex modes of internationalization, also due to the low degree of internationalization of Italian banking system, and to the small dimensions of Italian firms, which implies restricted financial and market knowledge. The main Italian investors in SMCs are actually large Italian firms - such as Fiat, Menarini, Cementer and Bialetti in Turkey, Benetton, Fiat, Ansaldo, ENI in Tunisia and Italcementi and STMicroelectronic in Morocco2 . These firms thanks to the consistency of their investment, can exploit local government interest in increasing employment and developing industrial sectors and that are less affected by cultural diversities, thanks to a higher standardization of organizational practices and a higher capacity to get information and to reduce information asymmetry. At the same time, data show a similar industrial specialization of Italy and SMCs, thus highlighting the importance for Italian firms to defend their competitive positions by intensifying co-operative relationship with these Countries that are becoming important partners of Italian competitors, such as Spain and France, and that can still be preferential markets for Italian products, above all in the machinery, textile and agro food sectors, characterized by a high percentage of SMEs. 2. The importance of cross-cultural issues As emerging Country, Algeria is characterised by a high degree of risk related to unstable financial, political and economic conditions. Strategic Alliances can consequently become the best way to enter the country for the opportunity they offer in terms of risk reduction and overcoming of information asymmetry and uncertainty. But international strategic alliances are deeply influenced by cross-cultural differences, culture acting as a barrier to knowledge transfer and to trust building. In a managerial perspective, the embedness is necessary to overcome the closure towards diversity and the difficulties to interact with local institutions and to optimise the relationship with local actors (firms, employees and customers). Co-operations between Italian and SMCs firms require consequently a common understanding among the partners, which has to be based on a deep respect of reciprocal diversity. That is, to have success in SMSc foreign investors have to develop a deep knowledge of local culture and traditions, in order to avoid the possibility that the strong values and norms of these contexts can become a barrier to international relationships. This necessity becomes even clearer if we look at Islam influence on business and globalization. For what concerns business, Al-Khatib et al. (2002) have analysed in depth the influence Muslim values have on business ethic, finding out the importance of interpersonal relationships and a strong feeling of loyalty towards the group and the colleagues more than to the authority and to the law. That is people within the organization are important because of their individuality more than as a part of the organization. Local workers find more comfortable in family owned and family staffed businesses because they are more common in Arabic Country and they better represent the paternalistic feeling characteristics of those Countries. Moreover, the Arab culture places a strong emphasis on trust as the focal point in forming interpersonal and social relationships: people find more comfortable in manipulating rules than co-workers for example, that is moral obligations are more effective and more important that legal or formal obligation. 1 All economic data derive form Mincomes, that is Italian Ministry for International Trade. 2 Data have been collected by the different Country Guides of Italian Chamber of Commerce, published in 2006.
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Moreover, Najjaar (2005), analysing the reasons of some Arab’s prejudice towards globalization, underlines that they can be found in the Arab perception of Globalization as a threat of economic and social imperialism of Western Countries. That is economic integration and the deriving tendency towards homogeneity are seen as a danger because they undermine the distinctive personality, the heritage, the authenticity and believes of national cultures. What does all this mean for foreign investors entering SMCs? According to us, the Authors highlight two important thing: on one side a different business code can avoid local workers to develop a feeling of belonging in the foreign organization or, however, it can reduce local people degree of acceptance of rules and norms if they appear difficult to understand. Thus means, foreign firms should well clarify their ethic code and the reasons of their rules. At the same time, the choice of local managers can simplify the adaptation of local workers to organizational norms, above all if managers are able to establish personal relationship, allowing the rise of moral obligations. On the other side, the importance of national culture’s heritage and of authenticity as a value confirm the necessity of embedness: foreign investors have to learn local cultures in order to understand the main believes and to respect them within their managerial practices and organizational rules. Empirically, these theoretical suggestions are actually confirmed by our case studies analysis, given that the most successful Italian firms are those aware of the importance of local culture and those which have preferred to involve local managers in order to avoid cultural misunderstandings, facilitating the understanding and respect of local customs and overcome linguistic barriers. 2.1. The state of the art According to Cox and Blake’s classification (1991), Calvelli (1998) applies the concepts of monolithic, pluricultural and multicultural contexts to the external environment, in order to understand the relations among organizations coming from different national contexts. The typologies of national cultural contexts are identified according to: a) the cognitive process adopted by the dominant culture in a given area, and b) the level of interaction among different cultural groups within the same area. A Monolithic context is characterized by a strong homogeneity within itself and by a low propensity to accept different cultural models. The cognitive process is based on self-identity and self-categorization theories, according to which people are accepted, or not, more on the basis of physical characteristics, like the race, the skin colour and the spoken language, than on values and believes. On the contrary, multicultural contexts are characterized by an effective dialogue among different cultures and by the absence of any discrimination and prejudices. Within these contexts both pluralism of ideas and different managerial behaviours are fostered; the cognitive process is addressed to the interpretation of cultural diversities to deep understand their characteristics and in order to identify homogeneity among them. Between the two described typologies there are the pluricultural contexts, characterised by the presence of different cultures. The lack of an effective interaction among the cultural minorities can generate cultural conflicts. Without considering the possibility of cultural changes time by time, some examples of monolithic contexts are given by some South-Mediterranean countries: one case is that of the internal areas of Turkey, where the small firms coming from Anatolia have strong traditions and religious beliefs, and are not open to cooperation. In this kind of context, the complete refusal of diversities can be a strong barrier to entrepreneurship development, because of people’s reluctance in accepting changes and taking managerial responsibilities (Calvelli, 1998). Examples of pluricultural contexts can be found in some Central and Eastern European Countries, in Russia (Cannavale, 2002), in the ex-Yugoslavia or in Algeria (Calvelli, 1998). These countries are characterised by the presence of different ethnic groups, but a real integration among them is not always possible. The lack of an effective interaction among
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people some times leads to social conflicts between the cultural minorities and the dominant group and there is a tendency, within the firms, to select workers coming from the same ethnic group. Even if the SMCs cannot be considered as an homogenous whole, they seem to present many characteristics of the monolithic and pluricultural contexts, for their tendency to self- identity and self-categorisation and consequently their avoidance to cooperate and to relate with people coming from different cultural contexts, more properly non Muslim areas. Many important cross-cultural studies have analysed some Arabic countries and particularly SMCs. First of all, Hofstede (2001) encloses in his study Turkey, Pakistan, Iran and what he collect under the name Arab Countries, that is Egypt, Iraq, Kuwait, Lebanon, Libya, Saudi Arabia, United Arab Republic. According to his funding, with respect to Italy, Turkey shows a high degree of Uncertainty Avoidance (85 – 75), a low degree of individualism (37 - 76) and masculinity (45 - 70), a high level of power distance (60 - 50) 3. Consequently, Turkey is located in the same cluster as Italy for what concerns the combination large power distance – strong uncertainty avoidance, but not in the others. They differ actually in the combination uncertainty avoidance-individualism because Italy is more individualistic than Turkey and the other Arabic countries. They differ also in the combination masculinity-individualism - because Italy is in the cluster individualistic-masculinity, while Turkey and the other Arab countries are in the cluster collectivist feminine – and in the one power distance-masculinity – because Italy is in the cluster large power distance-masculine, while Turkey is in the large power distance-feminine one, even if the distance from the mean is very low-. Finally, Italy and Turkey differ in the combination uncertainty avoidance-masculinity because they both show a strong uncertainty avoidance, but Turkey is more feminine than Italy. In conclusion, Italy and Turkey look to be very different, even if some similarities concern the tendency towards uncertainty avoidance and power distance. Things change if we consider other studies. Trompenaars (1993) considers different Arabic countries, even if data are not collected for each dimension of his study. Looking only at Turkey, this country seems to be very similar to Italy, because they both show a middle-high degree of universalism, a high degree of specificity, a low degree of individualism, a tendency toward ascribed status and a tendency toward external locus of control. Another study comparing Italy (as a part of Latin Europe) and some Arabic countries (as Middle East) is the GLOBE project. In The “As is” scores, the two regions are both among the mid-score clusters for what concern Performance orientation, Assertiveness and Power Distance. On the contrary, they are different for what concern Future orientation (Latin Europe is among the mid-score clusters, Middle East among the low-score clusters), Human orientation (Latin Europe is among the low-score clusters, Middle East among the mid-score ones), Institutional collectivism (Latin Europe is among the low-score clusters, Middle East among the mid-score ones), In-group collectivism (Latin Europe is among the mid-score clusters, Middle East among the high-score clusters), Gender egalitarianism (Latin Europe is among the mid-score clusters, Middle East among the low-score clusters), Uncertainty Avoidance (Latin Europe is among the mid-score clusters, Middle East among the low-score clusters). Similarities decrease in the “Should be” scores, because they show a similar score only for Performance orientation (Mid-score clusters) and their position change according to many dimensions:
• Assertiveness: Latin Europe mid-score; Middle East low-score; • Future orientation: Latin Europe mid-score, middle east high-score; • Human orientation: Both mid-score; • Institutional collectivism: Latin Europe mid-score, Middle East high-score; • In-group collectivism: Both Mid-score;
3 The scores of the other countries are: a) Uncertainty Avoidance: Pakistan 70, Arab Countries 68, Iran 58; b) Individualism: Pakistan 14, Iran 41, Arab Counties 38; c) Masculinity: Iran 43, Arab Countries 53, Pakistan 50; d) Power Distance: Iran 58, Arab Countries 80, Pakistan 55.
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• Gender Egalitarianism: Latin Europe high-score; Middle East low-score; • Power distance: Latin Europe mid-score; Middle East high-score; • Uncertainty Avoidance: Latin Europe mid-score; Middle East high-score
The review of the main literature poses some important issues: According to many cultural dimensions, Italy and Turkey or Latin Europe and Middle East look to be similar, however cultural differences are strongly perceived by Italian managers and entrepreneurs operating in the SMCs, that’s why the aim of our research has been to investigate cultural differences in a qualitative way and to support this analysis by testing some Globe’s dimensions in order to verify their scores in the SMCs. According to the sociological theory of collective identity formation, this can be explained by the fact that European and Arabic people feel to be much more different than they really are, thus depending on the different socio-political systems prevailing in the two areas and on the tendency to protect cultural identity through the differentiation from others. In the mutual relationship between European and SM Countries historical heritages, different degrees of economic development and different socio-political structures facilitate the rise of relationships based on conflict even if Europe can play as a bridge between the Arabic World and the West (Haller, 2003). Our research is still in progress and the data are not still representative from a statistic point of view even if some interesting observation already emerge. Moreover, the analysis has focused on two dimensions (Performance Orientation and Assertiveness), in the future even others will be investigated. According to the aim of our research, Performance orientation and Assertiveness seem to be the first dimensions to investigate because they can have a strong impact on inter-organizational co-operation and they have not been analysed in depth in the managerial literature. On the contrary many authors have analysed the impact of individualism and collectivism (Salk and Brannien, 2000; Tiessen, 1997, Calvelli, 1998), masculinity and uncertainty avoidance (Steensma et al., 2000). An interesting starting point derives also from the different scores Latin Europe and Middle East have in the “As is” and “Should be” scores, according to these two dimensions. Performance orientation “Performance orientation reflects the extent to which a community encourages and rewards innovation, high standards, and performance improvement” (Javidan, 2004, pag. 239). Performance orientation impacts, consequently, on societal and organizational propensity to innovation and to the importance ascribed to goal attendance. In this sense, it impacts on firms’ propensity to internationalization, that involving foreign countries has a certain degree of risk, and it impacts even on firm’s propensity to inter-organizational co-operation if we consider it as a way to improve firms’ capacity to absorb and to create new knowledge (Cohen, Levinthal, 1990; Bartlett and Goshal, 1993; Hedlund, 1994), that is to get innovation, to reach higher standards and to enable performance improvement. The concept of performance orientation is not new in managerial and cross-cultural studies, even if Javidan underlines the innovativeness of the GLOBE project in recognising it as an independent cultural dimension. Performance orientation has been recognised as an important part of leadership (Fleishman, 1953; Halpin & Winter, 1957; Hempill &Coons, 1957, House &Adyta, 1957) and some international researches have showed it is recognised as an important managerial characteristics in many countries (Haire et al., 1966; Bass et al, 1979). From a cultural perspective, this dimension poses its basis in Weber’s study (1904) “The Protestant Ethic and the Spirit of Capitalism” and the relationship between religion and performance orientation has been analysed in-depth by McClelland (1955), Kahn (1979),
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Hofstede and Bond (1988)4. Other scholars have focused on some aspects of performance orientation, such as external adaptation (Schneider &Barsoux, 1997), internal vs. external locus of control (Trompenaars, 1993; Trompenaars & Hampden-Turner, 1998), high-context vs. low-context language (Schneider &Barsoux, 1997), achievement vs. ascription (Trompenaars, 1993; Trompenaars & Hampden-Turner, 1998). According to Javidan, some attributes of this dimension can be included in Hofstede’s dimension masculinity vs. femininity and particularly challenge and job recognition, advancement, importance of money, stress on equity and so on. According to us, however, some other important attributes of performance orientation can be included in another Hofstede’s dimension, that is Uncertainty Avoidance, assumed that, on the same hand of Cyert and March (1953, p. 119), the Author write:
“organizations that avoid uncertainty impose plans, standard operating procedures, industry tradition, and uncertainty-absorbing contracts on that situation by avoiding planning where plans depend on prediction of uncertain future events and by emphasizing planning where the plans can be made self-confirming by control device (Hofstede, 2001, p. 147).
According to this assumption, it seems possible to affirm that Uncertainty Avoidance is inversely related to innovativeness. Van Den Bosh and Van Proijen (1993) get actually to the same conclusion when they affirm that Uncertainty Avoidance impacts on a country’s competitiveness because it strongly influences the openness towards changes. Assertiveness In the GLOBE Project, according to the definition of House et al. (1999), Assertiveness is defined as the degree to which individuals in organizations and societies are assertive, tough, dominant and aggressive in social relationship (Den Hartog, 2004). From a cross-cultural perspective, assertiveness is important because, as a cultural dimension it explains how the members of a community interact and how they adapt to the external environment. At an organizational level, more assertive organization will tend to impose their decision and to control partners’ behaviour. Assertive individual think of others as opportunist and seen that societal scales are quite confirmed even at organizational level, organizations coming from assertive society will probably assume such a behaviour. Den Horteg underlines indeed some similarities among assertiveness and other cultural dimensions, such as internal vs. external focus (Trompenaars, 1993), high context vs. low context (Schneider and Barsoux, 1997). More assertive societies are expected to be internal focused - that is to have a tendency to dominance even in the relationship with the environment - and low-context – that is people tend to adopt a low-context language, more direct and less ambiguous. They tend to be more neutral and achievement-oriented, too – that is they present lower degree of power distance as meant in the GLOBE project. The Globe project show a generalised managers’ tendency toward assertiveness and in contrast with Hofstede (2001) it considers Assertiveness as an autonomous cultural dimension. GLOBE is actually the first cross-cultural study to investigate the impact assertiveness has on leadership and to measure how societies differ in assertiveness practice and assertiveness values. Assertiveness has been studied in the psychological literature in two ways: as a style of responding that people develop in certain societies where the tendency to dominate, even in the language, to tough and self-affirming is particularly accepted. According to this perspective,
4 While McClelland analyses the relationship between protestant educations and son’s need for achievement, confirming Weber’s observation; Kahn, Hofstede and Bond focus on the relationship between Confucianism and the economic growth of Southeast Asian Countries, finding a strong relationship between some Confucian teachings such as patience and perseverance and Southeast Asian people tendency to hard working, acquisition of new skills and consequently economic growth.
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assertiveness is not a cultural dimension itself, but a consequence of the social and cultural context in which individuals grow up and live. On the same hand, Hofstede sees assertiveness as a characteristic of masculine societies (high importance is attached to earnings, recognition, advancement, challenge), moreover, some feature of assertiveness can be connected to individualism (competition, self-decision taking…, taking responsibility and initiative…). Other psychologists consider assertiveness as a personal trait and particularly as part of extraversion – that has been evaluated as positively related to career possibility and leadership achievement – and but even in this case it can be considered as a consequence of the five factors that, according to them, build up individuals’ personality (Goldberg, 1990). According to GLOBE’s findings, in the society practices, assertiveness has a midlevel average rating of 4.13 and the most assertive society is Albania (4.89) and the lowest one Sweden (3.38). In the society values scale, the lowest assertive society is Turkey (2.66) and the most one is Japan (5.56).
Table 1. Assertiveness
Society practices* Society values* Country Score Country Score Turkey 4.53 Iran 4.99 Morocco 4.52 Italy 3.82 Italy 4.07 Morocco 3.44 Iran 4.04 Egypt 3.28 Egypt 3.91 Turkey 2.66
* The scale is 1 to 7. For the first scale the mean is 4.14, for the second one it is 3.82.
Source: The Globe project, 2004 What looks to be interesting is the negative correlation between the society practices and society values scores and even the correlation between Assertiveness and the other GLOBE’s dimensions. Some surprising results (such as the negative correlation between assertiveness practice and power distance values, the negative, even if low, correlation between assertiveness and performance orientation values and the positive correlation between assertiveness and Collectivism - particularly between assertiveness values and Institutional and In-group collectivism practices and assertiveness practices and Institutional collectivism values and in-group collectivism practices) pose some doubts about the possibility to correctly measure this dimension, above all independently. Probably some problems arise from the term assertiveness which recall different kinds of behaviours and consequently different judgement by people that are strongly influenced by the social and cultural environment in which they live. Cultural affiliation is actually very important to explain people propensity to assertiveness as confirmed by many studies (Furnham, 1979; Fukuyama and Greenfield, 1983; Linebergen and Calhoun, 1983), that show how different cultures differ in the acceptation and in the evaluation of assertiveness and how self-assertive behaviour is affected by the social context of the interaction. 2.2. The role of religion and family structure The importance of cultural affiliation highlight some crucial aspects of our research. The recalled dimensions are not sufficient to understand SMCs’ and the inquiry has to deeper trying to understand some other cultural factors that can explain cultural differences or similarities between Italian and SMCs cultures. In this sense, Florian and Zernitsky-Shurka’s study (1987) on “The effects of culture and gender on self-reported assertive behaviour” is particularly interesting.
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The authors analyse the relationship between cultural affiliation, gender and assertive behaviour in two distinct socio-cultural groups: Istraeli-Arab and Israeli-Jewish students of the University of Haifa in the Northern Region of Israel and pointed out a strong influence of the ethnic group on individual assertiveness. Israeli-Arab students appears indeed less assertive than their Jewish counterpart, thus reflecting a different cultural background. While Israeli-Jewish way of life and social interaction is pluralistic and in many way similar to Western countries, Israeli-Arab population is still very traditional and homogeneous, as Sharabi noted in 1975. The Arab family is an authoritarian, extended family system, in which the family members’ role are clarified and children are taught to respect adults, leaders and traditions. Recalling Patai’ sociological work (1973), the authors underlined some common values of Arab societies: courage – bravery (courage refers to the ability of self-control in situations of physical and emotional stress and bravery to the individual readiness to take risks in order to save his fellowmen), hospitality-generosity (hospitality is required to take others’ respect, while generosity refers to give others even through personal and family sacrifices), honour-dignity (they both imply unlimited loyalty to the family, defence of the honour , defence of the individual social-image and respect of traditions), and the Islamic identity (it is related to the belief that God is anywhere and to the implication of this belief in terms of doing-well and fatalism, that is the pessimistic view of the individual’s ability to change life condition and the avoidance to take responsibility for one’s behaviour and faith (Florian and Zarnitsky-Shurka, 1987). The role of religion is fundamental even to understand the scores SMCs and Italy reach in the Performance Orientation scales. The linkage between religion and performance orientation is particularly interesting to investigate SMCs where religion has a so strong influence. Italy and the Arabic countries involved in the Globe project show different scores in Performance orientation for what concerns the “society practices” scale, but their scores become very near in the “society values scale”.
Table 2. Performance Orientation
Society practices* Society values* Country Score Country Score Iran 4.58 Iran 6.08 Egypt 4.27 Italy 6.07 Morocco 3.99 Egypt 5.90 Turkey 3.83 Morocco 5.76 Italy 3.58 Turkey 5.39
* The scale is 1 to 7. In the Society practices, Switzerland has the highest score (4.94) and Greece the lowest (3.20). In the Society values scale, El Salvador has the highest score (6.58) and South Africa the lowest (4.92).
Source: The Globe project, 2004 In the Society practice scale, the low score of Italy is coherent with the hypothesis that Catholicism has a negative impact on performance orientation. Probably this relationship between religion and performance orientation is effective even in explain the low scores of many Arabic countries. Islam’s focus on charity and richness sharing as essential values is actually very similar to Catholic solidarity5. On the other hand, the higher scores all these countries have in the society values scales seem to reduce the strong relationship between religion and performance orientation. Maybe, other
5 The main teaching and principles of Muslim religion have been studied in Gaardner et al., 1999 and Filoramo et al., 1998.
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aspects of Catholicism and Islam, such as “God’s evaluation” and “doing well” can work as strong motivation to improvement and to goal achievement. 3. The empirical analysis The empirical qualitative analysis has been conducted through a multiple case-studies analysis involving 78 firms operating in different sectors (Energy, Industrial plants, agro-food, building and infrastructure). Information on these firms have been collected through the National Chamber of Commerce, the databases of the firms, The Algerian national Agency for Development and Investment. A short questionnaire investigating the development of the activities in the SMCs and the impact of cultural differences has been sent to these firms. Unfortunately, until now, only 17 firms have accepted to give an interview and to answer the questionnaire, but the analysis is still in progress. Questionnaire has been structured in this way because it is part of an interview, so many information can be get during the colloquium and above all because the contacted firms expressed the desire of a quick contact. However, the collected information will be improved in the future. The role of cultural differences has been investigated through questions concerning the relationship with local employees, Italian firms’ tendency to delegate managerial activities to local managers, the feeling of belonging of local employees and recalling some questions reported in the GLOBE project to investigate the foreign investor’s perception of performance orientation and assertiveness of local people (See appendix 1). Until now, only Saipem as allowed to pose these questions to Italian and local managers in order to compare their answers and develop some hypothesis about their different perceptions and attitudes. The results are variegated. We present first the results deriving from the 17 interviews to Italian managers and then those deriving from Saipem case study. For what concerns the first 17 interviews, the most of Italian firms seem to prefer a strict control of their activities and employ Italian or foreign managers. They find that the biggest problems derive from bureaucracy and language barriers even if some of them talk more generally of communicational problems, nominating work attitudes and behaviour and different values (All data are reported in the appendix). All the managers underline that even if the organizational culture is strong performance oriented, local people don’t show a strong performance orientation and they also show a low degree of assertiveness. At the same time, all the firms suggest that foreign investors should adopt an assertive behaviour in managing activities in these Countries (See table 3 and table 4). Of course all results are influenced by Italian perception, that is Italian managers have expressed their judgement about local people’s performance orientation and assertiveness. The data have been collected through interviews to Italian managers of Italian firms operating in different Nord Africa Countries (see tables 6 and 7 in the appendix).
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Table 3. Some results concerning Performance Orientation *
The pay and bonus system in this organization
The economic system in the host society In this organization, employees
Is designed
to maximize
Should be designed to maximize
Is designed to
maximize
Should be designed
to maximize
Are encouraged to
strive for continuously
improved performance
Shoud be encouraged to
strive for continuously
improved performance
Individual vs. collective interest
Individual vs. collective interest
Strongly agree vs. Strongly disagree
Firm 1 5 7 2 6 3 1 Firm 2 6 7 2 7 2 1 Firm 3 5 7 3 6 5 2 Firm 4 6 7 3 7 4 1 Firm 5 5 6 3 7 5 7 Firm 6 6 7 3 6 2 1 Firm 7 5 7 3 6 6 7 Firm 8 5 7 3 6 3 2 Firm 9 5 7 3 6 2 1 Firm 10 5 7 4 6 2 2 Firm 11 5 7 3 6 2 1 Firm 12 6 6 2 6 2 1 Firm 13 6 7 3 6 2 1 Firm 14 5 7 2 6 3 1 Firm 15 5 7 3 6 5 2 Firm 16 6 6 3 6 2 1 Firm 17 5 7 4 6 2 2
* The scale is 1 to 7 for all variables. For the former two, it is 1 for maximum individual vs. 7 for maximum collective interest; for the latter, it is one for strongly agree vs. 7 for strongly disagree and 4/5 for neither agree nor disagree.
Source: our empirical inquiry
While data concerning performance Orientation seem to be enough homogeneous, what is surprising to us is the lack of homogeneity in the following tables, concerning Italian managers perception of local people assertiveness. Maybe results depend on the low attention some of the interviewed managers paid to the question, but they can even depend on the different activities they exploit and on the subjective experiences which always influence this kind of analysis. Moreover results can be affected by the educational level of the local employees or local partners to whom Italian managers refer, and by the hierarchical position they have in the Italian firms or in the organizations with whom Italian firms co-operate.
That’s why, according to us, the analysis is still limited and should be completed through other data and even through other interviews with the same managers.
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Table 4. Some results about Assertiveness *
In the host society, people are generally:
In the host society, foreign people should be encouraged
to be:
Assertive Vs.
Nonassertive
Tough Vs.
Tender
Assertive Vs.
Nonassertive
Tough Vs.
Tender
Firm 1 5 4 2 1 Firm 2 2 4 1 2 Firm 3 7 5 2 1 Firm 4 5 4 2 2 Firm 5 5 3 2 2 Firm 6 4 5 2 2 Firm 7 5 4 2 2 Firm 8 4 4 2 2 Firm 9 4 4 2 2 Firm 10 3 3 2 3 Firm 11 3 4 2 2 Firm 12 4 5 2 2 Firm 13 2 3 4 4 Firm 14 5 4 2 2 Firm 15 7 5 2 1 Firm 16 4 4 2 2 Firm 17 3 3 2 2
* The scale is 1 to 7 for all variables. Each statement is repeated twice with different adjective. Either for the first statement and the second one, in the first column 1 refers to maximum assertive and 7 to maximum non-assertive, and in the second column, 1 refers to maximum tough and 7 to maximum tender.
Source: our empirical inquiry
3.1 The experience of Saipem Saipem SpA (Saipem) is a subsidiary of Eni, an Italian integrated oil and gas company. The company is an integrated engineering, drilling and construction entity, engaged in land, and offshore, oil and gas exploration. Saipem also constructs oil and gas pipelines, refineries, and chemical, petrochemical and industrial plants. The company primarily operates in Africa and Europe and it is headquartered in Milan, Italy6. Saipem is a world leader in the oil & gas contracting services sector, both onshore and offshore. The new Group is a truly global contractor, with strong local presence in strategic and emerging areas such as West Africa and FSU, Central Asia, Middle East, North Africa and South East Asia. Its main subsidiaries are actually located in Algeria, Iran, Libya, Nigeria, United Arab Emirates, Georgia, Kazakhstan, Russia, Argentina, China, India, Canada, Luxembourg, and United States. It employs over 30,000 people comprising more than 100 nationalities. Along with its strong European content, the major part of its human resource base comes from developing countries. The company recorded revenues of E4,539 million during the fiscal year ended December 2005, an increase of 5.2% over 2004. The net profit was E259 million in fiscal year 2005, an increase of 8.8% over 2004. Saipem generates revenues through seven business divisions: offshore construction (57.9% of the total revenues during fiscal year 2005), onshore construction (16.5%), maintenance 6 Economic data are taken from Saipem Datamonitor, Reference Code: 14977, Publication Date: July 2006.
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modification and operation (7.1%), offshore drilling (6.7%), liquefied natural gas (6.6%), onshore drilling (4.6%) and leased FPSO (0.6%). From a geographical perspective, West Africa, Saipem’s largest geographical market, accounted for 31.3% of the total revenues in the fiscal year 2005. Revenues from West Africa reached E1,416 million in 2005, a decrease of 11.4% from 2004. North Africa accounted for 10.6% of the total revenues in the fiscal year 2005. Revenues from this area reached E482 million in 2005, a decrease of 28.7% from 2004. For what concerns the other emerging markets: CSI accounted for 16.7% of the total revenues in the fiscal year 2005. Revenues from CSI reached E758 million in 2005, an increase of 30.5% over 2004. Rest of Asia accounted for 14.3% of the total revenues in the fiscal year 2005. Revenues from Rest of Asia reached E647 million in 2005, an increase of 38.5% over 2004. Europe accounted for 17.1% of the total revenues in the fiscal year 2005. Revenues reached E774 million in 2005, an increase of 42.8% over 2004. Particularly, Italy accounted for 4.4% of the total revenues in the fiscal year 2005 and revenues reached E198 million in 2005, an increase of 31.1% over 2004. Americas accounted for 4.4% of the total revenues in the fiscal year 2005; revenues reached E198 million in 2005, an increase of 33.8% over 2004. Last but not least, Australia, Oceania and rest of the world accounted for 1.2% of the total revenues in the fiscal year 2005. Revenues from Australia, Oceania and rest of the world reached E55 million in 2005, a decrease of 61.5% from 2004. The Offshore operations in the Mediterranean began in the early 1960s when the Company started offering its services to customers outside the Eni group. Saipem has led the trend in boosting local content by developing impressive facilities West Africa and the FSU. As a result, Saipem’s fleet and facilities are perhaps the most technologically advanced and efficient in the industry. While developing its vessels, equipment and facilities for the strong ‘frontier’ market trend, in 2001, the Company started to reinforce its engineering & project management capabilities to cope with the other important market trend towards large EPIC projects. This was achieved principally through a number of acquisitions, culminating in the acquisition of Bouygues Offshore s.a. in 2002. This was the largest cross-border acquisition in Europe in the oil services sector and created a formidable international EPIC contractor with a strong offshore bias and a very wide, mainly international, oil company client base. Responding to the recent industry trend towards large onshore EPC projects, including those related to gas monetisation, exploitation of difficult oil (heavy oil, tar sands, etc.), and in order to strengthen its position in the Middle East and its national oil company. According to its experience in Africa and particularly in Algeria, Saipem has successfully overcome cross-cultural differences, establishing a good work climate and developing a deep capacity to interact with local institutions and firms. Its experience can offer a key to an understanding of the complex socio-political entity which constitute SMCs. According to Saipem’s experience, the involvement of local people at managerial level is very important. Local managers can help to overcome the problems deriving from a different work philosophy and are more able to cultivate personal relationship that are so important to create a good work climate within the organization. At the same time, the involvement of local managers is a symbol of equality between Italian and local employees. It is crucial to motivate local employees not only with good revenues but communicating them the importance of their involvement for the success of the activity, in order to improve local employees’ orientation to results. Actually Saipem has been recognised by local stakeholder and particularly by Algerian managers as a firm respecting cultural diversity, thus improving the consideration of Italians with respect to other European Countries. Some results of the interviews are reported in the following table.
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Table 5. Some results from Saipem
Some questions about performance Orientation
The pay and bonus system in this organization
The economic system in the host society In this organization,
employees
Is designed to maximize
Should be designed
to maximize
Is designed
to maximize
Should be
designed to
maximize
Are encouraged to strive for
continuously improved
performance
Shoud be encouraged to strive for
continuously improved
performance Individual vs. collective
interest Individual vs. collective
interest Strongly agree vs. Strongly
disagree
Italian Managers Top manager
6 7 4 6 1 1
middle man. 1
5 7 5 7 3 1
middle man. 2
4 7 4 7 3 1
middle man. 3
3 7 3 7 3 1
Algerian middle managers A 2 7 2 7 4 1 B 2 7 1 7 5 1 C 1 7 2 7 5 1 Some questions about Assertiveness
In the host society, people are generally:
In the host society, foreign people should be encouraged to be:
Assertive Vs.
Nonassertive
Tough Vs.
Tender
Assertive Vs.
Nonassertive
Tough Vs.
Tender Italian managers top manager
4 5 1 2
middle man. 1
5 3 3 3
middle man. 2
4 3 2 2
middle man. 3
4 2 2 3
Algerian middle managers A 5 2 4 4 B 4 1 4 5 C 5 1 4 6 Some questions posed to Algerian middle managers Do you think the Italian
partner can transfer Which partner do you prefer among French, Italian,
german and US and why?
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something usefull for the local community?
A Yes technology Italian Innovativeness and reliability B Yes knowledge Italian Competence and respect of
diversity C Yes Know-how German Accuracy and organization
Source: Our empirical inquiry Conclusion Italian firms’ interest towards SMCs is increasing for the big opportunities they present as potential markets of Italian products and as destination of important foreign direct investment in the Energy, in the agrofood and in the textile sectors. Italy is actually in first positions of the commercial partners’ list in many SMCs7 and particularly it is the second commercial partner of Egypt, Tunisia and Algeria, third in Turkey and fourth in Morocco. However, for what concerns Foreign Direct Investment, Italia doesn’t have a similar position and it is at the first places of the relative lists only in Tunisia (where it is the second investor after France), Turkey (after Germany, Netherlands and France), Algeria (after United States, Egypt, France and Spain). However Italian investors, above all SMEs, face huge problems when they decide to enter SMCs. These countries are actually still characterised by unstable economic and political situation and big problems derive from the low transparency of the institutional context. To overcome uncertainty strategic alliances can be very useful: they offer the opportunity to share the risks deriving from the entrance into turbulent contexts and they offer the possibility to reduce the investment of financial resources. Particularly, relationships with local players can be very useful to overcome the lack of information and the difficulties deriving from the institutional context. However, cultural differences can play an important role in favouring or reducing the establishment and the longevity of inter-organizational relationships, that’s why investigating SMCs cultural standards and the impact of Arabic culture on business looks to be very important. From a cultural perspective, according to former studies, even if the SMCs cannot be considered as an homogenous whole, they seem to present many characteristics of the monolithic and pluricultural contexts, for their tendency to self- identity and self-categorisation and consequently their avoidance to cooperate and to relation with people coming from different cultural context, more properly non Muslim contexts. In a managerial perspective, the embedness is necessary to overcome the closure towards diversity and the difficulties to interact with local institutions and to optimise the relationship with local actors (firms, employees and customers). Co-operations between Italian and SMCs firms require consequently a common understanding among the partners, which has to be based on a deep respect of reciprocal diversity. That is, to have success in SMSc foreign investors have to develop a deep knowledge of local culture and traditions, in order to avoid that the strong values and norms of these contexts can become a barrier to international relationships. Cultural understanding is of course easier when a compatibility among different cultures exist. Looking at the most important studies on this topic, a cultural compatibility among Italy and many SMCs should actually exist, given they present similar scores in many cultural dimensions. However Italian entrepreneurs’ perceptions look to be very different. On one side this gap between literature and empirical evidences can be explained by the fact that perception is something different from reality. On the other side, the main studies on the topic do not consider all SMCs.
7 All economic data derive form Mincomes, that is Italian MInistry for International Trade.
15
Our research has a double aim: first of all we want to investigate cultural standards of SMCs because they become more and more important as destination of European and Italian investment. Secondly we want to investigate the factors that can impact on the misperception Italians and Nord African people have of each other. This paper explains the results of a first step of our research. First of all, the empirical analysis has highlighted that two GLOBE’s cultural dimensions are not perceived in the investigated SMCs with the same score they have in the countries analysed in the GLOBE project. This divergence looks to be strongly dependent on the perception Italian managers have of local people’s attitude to performance orientation and assertiveness. Secondly, the analysis in depth of the western and Arabic literature on the topic, together with the interviews has confirmed the importance of religion and family structure in explaining some difficulties Western firms can find in managing their operation in SMCs. At the same time, some point of contact between Italian prevalent religion and Muslim, together with some similarities of the social structure, deeply based on the family and on paternalistic attitudes, could explain some facilities Italian entrepreneurs and managers meet in co-operating with local people, with respect to Northern European Countries. The analysis is not consistent from a statistical point of view. Until now, it represents an exploratory study and it will go on in the future according to two directions: the qualitative analysis will be forwarded to reach a significant number of case studies, much more data will be collected to apply a quantitative analysis on the two investigated and on the other GLOBE’s variables.
16
Appendix An extract of the proposed interview is reported below.
CHARCATERISTICS OF THE FIRM AND INTERNATIONALIZATION PROCESS
1) Which is your main business?
2) In which South Mediterranean Countries have you invested?
3) Since when?
4) Which kind of activity have you delocalised?
5) Are you satisfied?
6) What do you think about local and foreign manager?
7) Do you strictly control your activity in the host country?
− If yes, why?
− If not, how do you co-ordinate the local activities?
CO-OPERATIVE RELATIONSHIPS
8) Have you met some difficulties in building relationships with local actors?
9) Do you think local actors find problems in co-operating with foreign partners and particularly form your country?
10) Do you think local partners share your firm’s mission?
− If not, why?
CULTURAL DIMENSIONS
12) The pay and bonus system in this organization is designed to maximize:
1 2 3 4 5 6 7 Individual interests Collective interests
13) The pay and bonus system in this organization should be designed to maximize:
1 2 3 4 5 6 7 Individual interests Collective interests
14) The economic system in the host society is designed to maximize:
1 2 3 4 5 6 7 Individual interests Collective interests
15) The economic system in the host society should be designed to maximize:
1 2 3 4 5 6 7 Individual interests Collective interests
16) In this organization, employees are encouraged to strive for continuously improved performance
1 2 3 4 5 6 7 Strongly agree Neither agree Strongly disagree
nor disagree
17) In this organization, employees should be encouraged to strive for continuously improved performance
17
1 2 3 4 5 6 7 Strongly agree Neither agree Strongly disagree
nor disagree
18) In the host society, people are generally.
1 2 3 4 5 6 7 Assertive Nonassertive
19) In the host society, people are generally:
1 2 3 4 5 6 7 Tough Tender
20) In the host society, foreign people should be encouraged to be:
1 2 3 4 5 6 7 Assertive Nonassertive
21) In the host society, foreign people should be encouraged to be:
1 2 3 4 5 6 7 Tough Tender
Firms’ responses are summarized in the following tables: Table 6. Information concerning the first 10 firms
Firm 1 Firm 2 Firm 3 Firm 4 Firm 5 Firm 6 Firm 7 Firm 8 Firm 9 Firm 10Country
Sector
Managers
Tunisia, Libya
Control vs. Corrdination
Main difficulties
Perception of Italians
Machines for agri-food
PlantsEnergy plants
Agro-food Cateing Water Plants
Libya, Algeria
Tunisia, Morocco
Libya, Egypt Tunisia Many
countries Tunisia Tunisia, Morocco
General contractor
(Building and water
infrastructure)
Machines for energy plants
Many countries Tunisia
Foreign and local
Foreign Italians Foreign LocalItalians and local
Infrastructure
Building
Foreign
Control Control Control
Not so good
Foreign ForeignForeign and local
Co-ordination control Control
Very good Good Good Not specified
Culture, language
Not specified
Co-ordination
Good, culture is important
Not specified
Not so good
Not specified
Low Control Control Low control
High High
Communication and quality
Language, bureacracy
Financial services
Low competencies
Culture, bureaucra-cy
Communication,
bureacre-acy
Cultures, langua-
ges
Language communi-
cation
High High
Communi-cation
Local peopole involvement
High Not so high Should improve Very high High Not so high
Source: Our empirical inquiry
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Table 7. Information about the other 7 firms
Firm 11 Firm 12 Firm 13 Firm 14 Firm 15 Firm 16 Firm 17Country
Sector
Managers
Main difficulties
Perception of Italians
Control vs. Corrdination
Liybya, Egypt Many countries Tunisia Libya
Industrial plantsGeneral
contractor (oil and water)
Agri-food plants
Morocco, Tunisia Libya Tunisia
Electricity plants
Environmen-tal protection
Milk transfroma-tion plants Building
Control Low control Low control
Italian and local
Foreign Local Foreign Italian Foreign and local Local
Control Control Co-ordinationDelegation and results
control
Culture, bureaucracy
Low competencies
and information
Culture, bureaucracy
Not specified Not specified Not specified Not so good Not so good Not specified Not so good
Security and managerial practices
Bureaucracy Bureaucracy Prejudice of local people
Not so high High, but opportunistic Not so high HighLocal peopole
involvementHigh Low High
Source: Our empirical inquiry
19
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