Doktorarbeit / Dissertation, 2021
57 Seiten, Note: 70
ACKNOWLEDGMENTS
ABSTRACT
LIST OF TABLES
CHAPTER 1
1.1. Introduction
1.2. Research Aim, Research Questions, Objectives, and Hypothesis
CHAPTER 2
2.1. Literature Review
CHAPTER 3
3.1. Research Design and Methodology
3.2. Limitations
3.3. Ethical Considerations
CHAPTER 4
4.1. The Italian Industry
4.2. The GLOBE Framework and Italy
4.2.1. Uncertainty Avoidance
4.2.2. Future Orientation
4.2.3. Power Distance
4.2.4. Institutional and In-group collectivism
4.2.5. Human Orientation
4.2.6. Performance Orientation
4.2.7. Gender Egalitarianism
4.2.8. Assertiveness
4.3. The GLOBE Framework and Trade Analysis
4.4. Cultural Distance indexes: KS and CA
CHAPTER 5
5.1 Analysis of the results
5.2 Italian trends and challenges
CHAPTER 6
6.1 Conclusions
REFERENCES
TABLE 1 - Italy’s outward foreign direct investment stock
TABLE 2 - Italy’s inward foreign direct investment stock
TABLE 3 - Italy’s outward foreign direct investment flows
TABLE 4 - Italy’s inward foreign direct investment flows
TABLE 5 - Italy’s export
TABLE 6 - Italy’s import
TABLE 7 - Comparison between Italy and GLOBE average scores
TABLE 8 - Countries having business with Italy and global reports
TABLE 9 - KS Practice Index and data related to countries having business with Italy
TABLE 10 - KS Values Index and data related to countries having business with Italy
TABLE 11 - CA Index and data related to countries having business with Italy as HOME
TABLE 12 - CA Index and data related to countries having business with Italy as HOST
TABLE 13 - Worldwide outward foreign direct investments flows and cultural indexes
TABLE 14 - Worldwide Inward foreign direct investments flows and cultural indexes
TABLE 15 - Worldwide Export and cultural indexes
TABLE 16 - Worldwide Import and cultural indexes
TABLE 17 - GLOBE practice scores difference between top countries, Italy and GLOBE average
TABLE 18 - GLOBE values scores difference between top countries, Italy and GLOBE average
TABLE 19 - Cultural indexes and dimensions versus internationalization variables for Italy
TABLE 20 - Differences between top countries in each internationalization variable and Italy according to the specified index
TABLE 21 - Differences between GLOBE average practice scores of the top countries included in the 41 internationalization rankings and Italian GLOBE practice scores
TABLE 22 - Differences between GLOBE average values scores of the top countries included in the 42 internationalization rankings and Italian GLOBE values scores
Special thanks go to the teachers of this GLOBAL MBA course and to my supervisor, Professor Oliver Buxton, who provided me with extremely valuable inputs to complete my task.
In addition, I would like to thank my wife and my family who accompanied my journey with their suggestions and, above all, patience.
This research aims to analyse the influence of cultural dimensions on the internationalization of Italian firms.
While there has been much research on international business and cultural aspects, few researchers have taken into consideration the peculiarities of the Italian culture and their influence on internationalization.
To test the hypothesis that Italian firms are influenced by the cultural dimensions identified by the GLOBE study (House et al., 2004), by the cultural distance indexes, and, eventually, by specific economic indexes, we have selected two dependent variables that express the most relevant modes through which firms enter a foreign country, namely foreign direct investments and trades.
Through an in-depth assessment of secondary data mainly available online, we have ranked the countries according to the foreign direct investment and trade performances. Results have been compared with cultural scores inferred from GLOBE and with competitiveness indexes devised by Schwab (2019), UNDP (2020), and IMD (2019). A cultural distance comparison based on differences between Italy and other countries has been made.
The outcomes show the Italian industry’s systemic weakness derived from the current competitiveness reports and record significant cultural gaps in relation to the top performer countries. Italy’s low score in GLOBE’s dimensions like performance orientation, future orientation, individualism, and uncertainty avoidance together with relatively high power distance put the country quite far from the cultural scores exhibited by the top performers. The results prove undoubtedly that the weakness of Italian internationalization strategy requires a new set of reforms aiming to increase the competitiveness of the country, resolve the eternal dilemma between North and South, and educate the future managers propelling a new international mentality in place of the “parochial” one typically affecting Italian Small and Medium Enterprises.
This research aims to explore the connections existing between national and organizational cultural aspects inferred from GLOBE study (House et al., 2004) and internationalization dimensions of Italian firms. In this regard, foreign direct investments, FDI from now on, and trades will be the variables adopted throughout the text as terms of comparison. According to the definition provided by UNCTAD (2007 p. 245) FDI is defined "as an investment involving a long-term relationship and reflecting a lasting interest and control by a resident entity in one economy (foreign direct investor or parent enterprise) in an enterprise resident in an economy other than that of the foreign direct investor". FDI stock is the accumulated value of the shares of the firms' capital, whereas FDI flows include equity, reinvested earnings, and intra-company transactions. On the other side, trade in this text stands for import/export without distinguishing between the potential forms of trades available for the companies when entering a foreign country.
This research explores the connections spotlighting differences and affinities between organizational/national cultural aspects and Italian firms' internationalization dimensions.
The research question that we would like to address in this work is:
to what extent do national cultural dimensions influence the internationalization level of Italian firms?
Research objectives aim to:
- depict the typical traits of the Italian organizational culture according to GLOBE study (House et al., 2004) and most recent cultural and economic indexes to confirm GLOBE postulations;
- analyse the internationalization performance of the Italian firms;
- rank countries with whom Italy has business considering FDI and trade performances as proxies for measuring the firms' internationalization level and compare them with cultural dimensions and indexes inferred from GLOBE and relevant literature;
- recognize future challenges and opportunities for Italian managers to cope with globalization and cultural challenges.
The hypothesis predicts that Italian firms are influenced by the cultural dimensions identified by the GLOBE study, by the cultural distance indexes, and, eventually, by specific economic indexes drawn by prominent institutions.
While there has been much research on international business and cultural aspects, as asserted by Srivastava, Singh, and Dhir (2020), few researchers have taken into consideration the peculiar features of the Italian culture and their influence on internationalization.
Tavanti (2012), for instance, provides an analysis of the Italian leadership style based on selected Hofstede dimensions. Calza, Aliane, and Cannavale (2010) assess cultural differences between Italy and Algeria, but seemingly, no researchers dug into the Italian firms' performances compared to cultural dynamics.
Many researchers have studied bonds between culture and internationalization over the years, recognizing the importance of culture at all levels as one of the most critical determinants affecting companies' decisions.
However, notwithstanding its recognition, most international business managers do not deepen cultural dynamics and struggle to transfer into their daily activities the precious insights provided by their knowledge, thus implementing strategies and making decisions in the opposite directions. Providing a sound explanation as to why cultural topics are not studied enough by managers could be challenging, but culture is a tangle of elements not easily enclosed in clear boundaries as it encompasses many different areas. For this reason, managers prevalently adopt tangible criteria like market attractiveness, costs, and scalability when deciding to internationalize, causing culture to be pushed back in the ranking. Unfortunately, culture presents the bill when trying to explain why numerous international relations end with unsatisfactory results forcing the investors to back off.
Cross-cultural management and internationalization are two broad disciplines predominantly studied separately. It would be dispersive mentioning all theories developed over the years. Conversely, we will focus on pieces of the literature treating them jointly and posing adequate attention to the cultural dynamics affecting internationalization that, ultimately, remains the purpose of this work.
Cross-cultural management theories rely on researchers like Hofstede, Shein, Hall, Adler, Shenkar, Gullestrup, and Trompenaars, who laid the groundwork for a comprehensive view of the organizational culture and its relation with management (Browaeys and Price, 2015). However, in this work, our attention will be posted on the seminal study devised by GLOBE representing a masterpiece traditionally used in the literature to illustrate and explain managers' behaviors and attitudes when operating in the international landscape.
GLOBE was launched for the first time in 2004 covering 62 countries and involving, in an extensive survey, more than 17.000 managers. Afterward, the research was boosted in 2014, collecting data from CEOs and executives focusing on strategic leadership. Nowadays, GLOBE is developing an additional gigantic study, called GLOBE 2020, with interviews carried out in more than 160 countries and 33000 responses collected at the end of December 2020 (Globe Project, 2020)
For a long time deemed an extension of Hofstede's study, GLOBE delves more into the complexity of cross-cultural management introducing a dynamic vision of the discipline through nine dimensions measuring cultural values and practices in each country, namely: Uncertainty Avoidance (UA), Future Orientation (FO), Power Distance (PD), Gender Egalitarianism (GE), Assertiveness (AS), Human Orientation (HO), Institutional Collectivism (IC), In- group collectivism (IGC), Performance Orientation (PO). Six additional dimensions and 21 primary features were added to reflect the underlying construct of the cultural endorsed leadership theory (CLT) exhibiting various leadership styles like charismatic, team-oriented, participative, human-oriented, autonomous, and self-protective. Scores were assigned to meter the attributes mentioned above separating them between values (should be) and practices (as is) embedded into national culture and organizations. Outcomes allowed researchers to divide the panel of countries into cultural clusters having typical traits in common. Eventually, each dimension was associated with universal leadership attributes typically illustrating the ones deemed more desirable and motivating why certain countries (or organizations) consider specific qualities more acceptable than others.
Notwithstanding the relevancy of the above theories, it is necessary to mention recent interpretations holding that only through a joint revision of Globe and Hofstede studies is possible to gain clarity and widely analyse their dimensions to obtain a more articulated overview of the cross-cultural dynamics (Tung and Verbeke, 2010).
As highlighted by Browaeys and Price (2015), attention to the diverse cultural environments and appropriate leadership styles are required to streamline relations and facilitate the company's adaptation in different contexts.
Managers need to be emphatic to understand the importance of communication and smart enough to question themselves. They need to dedicate attention to all nuances in a continuous learning process that contribute to personal and company growth.
In a boundless and globalized world, traditional managers are being replaced by experts in international markets whose knowledge must embrace culture, sustainability, and ethical business in addition to the managerial skills required for professional acting in the global framework (Lewis, 2016).
Managers need to guide companies to seize the right opportunities and embrace global challenges transforming them into opportunities to gain a tangible competitive advantage.
Like cross-cultural management, also internationalization attracted over the years the interests of many researchers who delved into determinants underlying the internationalization process of firms. However, as indicated by Calvelli and Cannavale (2019), cultural compatibility is ignored when making the strategic decision to internationalize, leading to dramatic failures. Researchers like Vernon and Hymer concentrate their analysis mainly on growth, neglecting in most of the cases the goal for the firms to acquire new knowledge. On the other side, Dunning's eclectic paradigm highlighted the importance of external factors like the selection of the location when undertaking a new venture.
The resource-based approach focused on exploiting new and existing resources to expand international presence, diversify the business, and adjust the position retracting from hostile markets or from those that cannot be developed with existing skills and resources. Even market entry strategy has been a matter of debate confronting those who emphasized external factors against the ones underpinning the importance of elements residing inside the firm as a key factor to successful internationalization.
Nowadays, a more comprehensive approach focussing on endogenous and exogenous factors is adopted by the companies that start to recognize culture as one of the essential determinants influencing pivotal decisions.
In this regard, inspiration is taken from the incremental learning approach devised by Uppsala. His approach banked on the importance of experience through which skilled managers act to reduce uncertainty and overcome hurdles posed by cultural barriers.
Critics of this model questioned the sequential process favoring a broader perspective encompassing determinants like innovation, experience, and investments.
To conclude, it is not very easy to identify a unique model valid for all instances. Vernon's theory built on the step-by-step approach through which the internationalization process starts from export and concludes with foreign direct investment (from now on FDI) does not seem to apply to all organizations, especially small and medium enterprises (hereinafter SME) whose patterns frequently follow unpredictable pathways. Current internationalization trends rest on more complex models based on networks, relations, and the new generation of "global born" entrepreneurs who initiate their ventures with an evident and remarkable competitive advantage.
The common ground between internationalization and cross-cultural management can be found in the literature introducing concepts like cultural distance, psychic distance, and culture attractiveness.
According to Vveinhardt and Dabravalskyte (2014), the Uppsala model's evolution can be explained with the cultural distance construct that affects a company's decision to enter foreign markets, preferring countries sharing similar values instead of the more culturally distant ones.
Cultural distance was introduced long back ago in 1988 by Bruce Kogut and Harbir Singh in the work "the effect of national culture on the choice of entry mode" (Cuypers et al, 2018), giving birth to one of the most popular indexes used over the years, namely K-S index (or KS). The concept, purposely created to quantify and gauge the distance between cultures, took its origin from the pioneering work of Geert Hofstede and, in fact, for many years, Hofstede's dimensions have been adopted to compute K-S index in different economic and management studies. This construct, usable also with GLOBE's nine dimensions, is an attempt to near a qualitative concept like culture to traditional quantitative areas like trades, foreign direct investments, and acquisitions contributing to the growing interest in cultural aspects derived from increased globalization.
As this work aims to analyse intra-countries relations dwelling on Italy's figures in terms of trades and foreign investments, we consider K-S index one of the most relevant indicators to assess such interactions notwithstanding certain exceptions that will be presented at a later stage.
The theoretical underpinning of the cultural distance, or CD, is not exempt from flaws. One of the most relevant weaknesses resides in the fact that the index does not take into account the asymmetry between countries (i.e., Italy may have a perception of Germany that is not the same of Germany towards Italy). In this regard, the CD construct will be flanked by the cultural attractiveness index (Li et al, 2016) whose definition serves to overcome the aforementioned limitation matching the observed country's values, in our case Italy, with the destination countries' practices. In so doing, from an internationalization perspective, we will be able to verify the theory according to which companies' decisions to enter a foreign market are based on the idea that preference is given to countries sharing similar values rather than the ones psychologically distant (Vveinhardt and Dabravalskyte, 2014).
As far as psychic distance, the construct, although conceptualized to capture broader dimensions than just the cultural ones like differences in education, language, industries, and other crucial determinants, did not offer a valid metric letting CD flourish when it comes to quantitatively test specific areas of business in relation to cultural aspects (Tung and Verbeke, 2010; Cuypers et al, 2018).
To add more to this, Hakanson and Ambos (2010) find that cultural distance is not correlated with psychic distance measures, indicating that they are different concepts.
Stemming from the distance notion, the literature offers many insights likely influencing the internationalization process. Aspects like attraction, cultural changes, and differences between societal and organizational culture need to be elaborated further to analyse the possible implications.
As expressed by most of the literature, cultural differences generate frictions that cause high transaction costs. The managers' ability resides in their experience and capability to streamline as much as possible such differences. According to Cuypers et al. (2018), entry mode choice is correlated to the firms' experience that contributes to facilitating the comprehension of the cultural difference, significantly diminishing the barriers plotted by the lack of knowledge when approaching new foreign markets.
Traditionally built on the concept that cultural similarities enhance the creation of stable relations between firms located in different countries, this statement has been lately refuted looking at differences inasmuch harbinger of new stimuli between individuals.
In this respect, Sarala and Vaara (2009) argue that cultural divergence and convergence can stimulate relations and generate benefits streamlining the impact of national cultural differences. For this reason, cultural differences have to be reconsidered, looking at them as potential resources to pave the way toward the consolidation of business relations if exploited adequately by managers.
According to this view, brainstorming and combination between people with different backgrounds facilitate new ideas fostering innovation, communication, and harmony.
To support the above statement, Beugelsdijk et al. (2018) hold that western companies are internationalizing at unprecedented levels and are often expanding into somewhat "distant" developing and emerging host countries.
Following GLOBE premises, we will not consider, in this work, cultural changes as significant elements affecting the outcome of the analysis. Although it would be fascinating to assess cultural changes in the new so-called "GLOBE 2020" project (Globe Project, 2020), the literature agrees that cultural aspects are relatively stable over time, unlike other economic and social variables (Cuypers et al, 2018). This is also quite intuitive particularly because cultural traits and attitudes are firmly rooted in individuals' daily lives and reflected in their private and working environments. In their work focussed on Hofstede dimensions, Beugelsdijk, Maseland, and Van Hoorn (2015) empirically demonstrated that, although absolute scores may vary over time, the distance between countries remains quite similar. However, the influence of disruptive processes like digitalization and new technologies cannot be ignored when exploring individual cases rather than performing a generic analysis. As a result, digitally natives may display different attitudes towards individualism or power distance, unlike the same generation of youngsters living twenty years ago. This potential bias could probably be captured in new studies due to the slow but inexorable mutation of the conditions.
All in all, we believe that relying on currently available information and literature about consistency over time of Hofstede values would allow us to consider the same stability of GLOBE scores unless differently proven by future studies.
A third element to be addressed is the level of the analysis based on which cultural scores are obtained deriving data from surveys at firm level, like happened for IBM in Hoftsede seminal work, and applying them extensively to the upper level, notably country. As far as GLOBE analysis, the study embraces a large number of companies and managers belonging to various organizations. Although it is not possible to discern individual attitudes differing from general values and practices at country level, it has been taken for granted that individuals' behaviours are the results of a cultural background handed down over the years, thus permitting the use of data at country level even with a very small statistical error.
Ceteris paribus, GLOBE (House et al, 2004) spots a consistent correlation between societies and organizations, permitting us to conclude that companies incarnate the same values and practices as found in the society. This postulation confirms the significance of culture as a trigger for the entire economy and the relevance to dig into cultural changes as much as possible in light of the growing migration trends, possibly creating new subsets whose influence cannot be ignored. In the near future, big data availability would allow researchers to track cultural changes on an ongoing basis inferring precious information to be used as cultural guidelines for entrepreneurs and managers undertaking new international ventures, thereby boosting success.
On account of the above, as postulated by Cuypers et al (2018), the popularity of the cultural distance between countries resides in its capability to provide a measurable dimension suitable for evaluating effects on trade, FDI, and firms' behaviour working across the globe. For this reason, we believe that combining the use of cultural distance and cultural attractiveness will better suit our need to assess the correlation between GLOBE cultural scores and trade figures.
However, to do so, it is necessary to delve into the possible entry modes through which companies internationalize and refer to the examples in the literature where the combination between cultural dimensions and internationalization forms is described.
As indicated by Calvelli and Cannavale (2019), exporting remains the easier way to enter a foreign market. Among the internationalization modes of entry, export has fewer risks and no investments in the foreign country. This method can be used to explore an unknown market and for countries where the trade-off between risk and return on investment is unbalanced. In this backdrop, culturally speaking, as most of the activities are focused on marketing and promotion, firms need to have an in-depth knowledge of local tastes in order to convey appropriate messages not conflicting with local traditions and habits. Cultural understanding is also required when it comes to negotiation with local buyers. As an example, countries with high uncertainty avoidance would require firms to be extremely detailed when submitting proposals to reduce personal interpretations and avoid misunderstanding.
Foreign direct investment (FDI) is the way through which firms decide to enter a foreign market by, merely saying, investing money. Nowadays, unlike traditional models that envisaged FDI as a sequential process, many companies, regardless of the dimensions, are inclined to enter foreign markets without starting with an exploratory phase.
FDIs are classified according to the degree of ownership, notably foreign branch, joint venture subsidiary, and wholly-owned subsidiary. Additionally, they can be further separated between brownfield and greenfield investments (Wach, 2014). Moreover, subsidiaries can be established either for trading/marketing or for sales/production purposes. Preceding macro-distinctions are crucial since they indicate how strong the investor's presence in the destination market is.
To conclude, we need to recognize a third subset, notably the contractual mode. We can find contract manufacturing, alliances, licensing, franchising, outsourced operations, and turnkey operations in this macro category. Notwithstanding their relevancy, we will not consider these forms in our analysis due to the high number of possible variants not easily retrievable in a research-based on secondary data. Moreover, culturally speaking, increasing our work's granularity would probably influence the analysis' reliability providing conflicting information.
The relevancy of the cultural distance concept and its impact on internationalization choices pushed researchers to elaborate further on this link.
An example is offered by Novais and Joao (2016), who provided an overview of the cultural influences on firms' entry mode choices in international business. According to their work, investment decisions are inversely proportional to the uncertainty avoidance cultural dimension studied by Hofstede. Depending on the country's perceived risk, firms may decide to stay away, enter the market by exportation process, invest in joint ventures, or open a wholly-owned subsidiary.
Beugelsdijk et al (2018) hold that "international management is management of distance" where distance is broadly intended as a concept affecting multiple areas like organizational process and strategic decisions. According to the authors, the cultural distance between countries as a source of friction should be reassessed in view of the internationalization streams that exhibit how advanced economies target emerging distant countries regardless of cultural similarities. The research provides an accurate appraisal on how cultural distance influences pre and post internationalization of multinational enterprises, demonstrating its relevancy on decisions like location choice, even though outweighed by other factors like market size and potential growth, degree of ownership, entry, and establishment mode. Concerning the last two elements, the literature does not agree that the more the distance, the higher the probability of entering a foreign country with a joint venture with a local partner. Conversely, it is reported that full ownership would be the preferred mode to streamline cultural distances and avoid contrasts between two opposite mentalities.
Regarding establishment mode, greenfield investments are favoured if the cultural distance is significant . Once the investment is completed, the authors reveal a positive correlation between the transfer of "home country practices" and cultural distance, even acknowledging more difficulties when this transfer is effected between countries with large cultural distances. Interestingly, according to modern theories, increased levels of autonomy even in high cultural distant environments contribute positively to the growth and the success of the investment. Lastly, subsidiary performance turns out to be worse with the increase of cultural distance to demonstrate how cultural barriers intensify resistance and friction, upsetting the subsidiary's overall results.
The concept of cultural distance persistently residing in the use of K-S index, with its limits, pushed researchers to consider the introduction of other distances to effectively measure the impact of culture on other dimensions. To this extent, Li et al (2016) coined the cultural attractiveness index revolutionizing the concept of distance based on friction to make room for the positive notion of attractiveness.
Authors' findings show a correlation between culture attractiveness and FDI intensity. It relies on the construct that the more the host country shares practices adherent to the home country's values, the more the destination market is attractive and stimulating. However, all of this does not resolve the ambiguity about the index to be used. As stated by Beugelsdijk et al (2018), it has to be noticed that cultural distance effect on internationalization and other dimensions may vary depending on the adopted framework. This would give rise to questionable outcomes typically following the researcher's stance.
Finally, it can be asserted that culture is a qualitative aspect that needs various indicators to permit meaningful considerations without pretending to be conclusive.
This work aims to dig into an unexplored area drawing from GLOBE (House et al, 2004) ground theory to build a conceptual framework based on traditional home – host country conceptualization of cultural distance as well as on the introduction of the cultural attractiveness index used to compensate the limits the traditional approach. The recent editions of the competitiveness reports would help create a temporal parallelism to ascertain the traditional data's validity and relate them to Italian firms' internationalization in a new and original approach. Due to the countless variants, as illustrated in this section, only FDI and trades as broad statistics will be considered for this research without disaggregating data to catch all possible forms.
Due to the plentiful literature available, we have not envisaged conducting a dedicated survey. Preference has been given to secondary data mainly available online and extrapolated from valuable web resources. The reliability and validity of data have been ascertained to ensure that the research's content matches this work's objectives. As most of the secondary data have been published for other purposes (Saunders et al., 2016), it will be necessary to use them and triangulate results using multiple sources cautiously.
Additionally, it has to be noted that institutions collecting information may use different criteria in gathering data, thus requiring appropriate comparison to ensure consistency.
Due to the research's nature, we have opted for a sequential explanatory method combining qualitative with quantitative approaches. The mixed method helps to illustrate qualitatively the hints delivered by the statistical analysis and the tables typical of the quantitative approach. Data will be collected and analysed to test the hypothesis.
As far as internationalization is concerned, we will consider dimensions like FDI and trades as dependent variables to produce a ranking of the countries with which Italy has business.
As far as independent variables, analysis will be carried out typically on three subsets:
1 - indexes included in reports like Global Competitiveness Index, or GCI, (Schwab, 2019), Human Development Report, or HDR, (UNDP, 2020), and World Competitiveness Yearbook, or WCY (IMD, 2019), to replicate the use of the same reports previously adopted by GLOBE (House et al., 2004);
2 - cultural distance indexes like KS (Cuypers et al, 2018), and CA (Li et al, 2016);
3 - GLOBE dimensions as reported by House et al. (2004).
Regarding point 1, it has to be noted how GLOBE contemplated additional two reports, notably the world values survey and the world development indicators. As these reports do not provide specific rankings, we have opted for the selected ones that conversely provide specific classification, thus facilitating comparisons.
Although both GCI and WCY provide a measure of competitiveness, the former takes into account 141 countries, whereas the latter only 64. Moreover, GCI is mainly based on the survey method, whereas WCY is built largely on statistics (IMD, 2014). Considering the above, both instruments are conceptually useful for determining correlations and bonds between the variables object of our research.
The second subset foresees the computation of the cultural distance indexes whose constructs will be seen later in this work. The first one, namely Kogut and Singh, or K-S index (Sarala and Vaara, 2009), calculates the distance between Italian Globe cultural dimensions and the other countries included in the FDI and the trades rankings. The second one, defined cultural attractiveness index, or CA Index, computes the difference between the home country's GLOBE scores values and the host country's globe scores practices.
In the last subset, we include the GLOBE scores without any elaboration and compare them with the selected dependent variables.
Two techniques are used to satisfy the research questions. Pearson correlation method is adopted to establish the presence of significant statistical relations between the variables. Outcomes are verified though the Student t-test to exclude the statistically irrelevant data.
The second method will merely consider the differences between Italy and the top countries combining GLOBE dimensions, indexes, and cultural distance calculations. The purpose of this method is to assess the presence of a pattern that explains such differences.
For clarity, all the tables relating the performance of Italian firms to cultural indexes and scores will consider a limited panel of countries typically accounting for a significant portion of the dimension being analysed. This is consistent with the research's ultimate purpose to evaluate the impact of culture on the internationalization of the Italian firms and not the impact of GLOBE countries alone. Furthermore, not all GLOBE countries are relevant for our study due to the lowest level of interaction they have with Italian firms dwelling on the selected dependent variables.
The last remark related to GLOBE's original study pertains to GERMANY, formerly divided between WEST and EAST (House et al., 2004). In our research, we have taken the initiative to calculate the average scores to obtain only one measure.
Inferred data have been processed to develop the conclusions of our research. Leaders' managerial qualities, when acting in diverse cultural contexts, will be also mentioned drawing on culturally endorsed implicit leadership theory devised by the GLOBE study (House et al., 2004; Moore, 2018).
To complete the analysis, we will assess Italian firms' challenges: are they strategically and methodically planning entry in new markets, or are they following an opportunity-related approach? Based on the previous outcomes, we will investigate the critical paths of the Italian enterprises.
As mentioned, we will follow an explanatory method (Saunders et al., 2016), delving into the relations between culture and internationalization variables.
Concerning the research method, we consider that a case study is the best way to answer the research question.
Through an in-depth analysis of Italian industry and internationalization of firms, we would expect to:
- analyse the cultural influence on international business comparing Italy to the main commercial partners;
- assess the global presence of Italian firms and evaluate the effectiveness of their internationalization business model focussing on the most relevant cultural traits;
- identify the new role of the adaptive manager whose leadership style and attitude need to reflect the peculiarities of the context;
- determine the sustainability of the business model put in place by Italian firms and assess future opportunities, trends, and challenges from a cultural viewpoint.
Considering the broadness of the disciplines treated in this work, the following limitations and exclusions apply for the sake of clarity and simplicity.
Cross-cultural management literature encompasses various theories drawn up by many researchers. The purpose of this work is not to describe each of them on a theoretical level but to interpret key traits of the selected one, notably GLOBE, as a function of the internationalization strategies of the Italian firms cognizant that cultural component is just one fraction of the elements influencing international business.
Cultural dimensions alone cannot trigger any international business relation as well as any managerial decisions to expand firms' activities in a foreign country (Tung and Verbeke, 2010). Based on that, we feel it is necessary to point out a few crucial assumptions.
Primarily, what is gleaned from Italian organizational culture analysis remains unidirectionally applicable to the other countries and not the other way around.
This research aims to take a static picture of the situation without considering substantial cultural dimension variations. For this reason, we still believe that GLOBE study (House et al., 2004) remains a valuable, inspiring tool for a thorough cross-cultural analysis. However, it has to be acknowledged the constant evolution of the discipline potentially represented by cultural crossvergence and third cultures that could be generated thanks to the continuous interactions between organizations at all levels in the international setting (Sarala and Vaara, 2009). Another limitation pertains to the level of analysis. The research has been necessarily done at a macro level (i.e. nation), on whose basis cultural dimensions are built, assuming intra-country "spatial homogeneity". However, differences at the regional level cannot be ignored as we can distinguish many "Italys" each of these with their own typical traits (Perlitz and Seger, 2014). Inspiration for future research could yield to deeply assess the cultural differences featuring Italian regions, possibly through extensive primary data work to fully grasp the actual frame.
To conclude, it is essential to highlight the potential inconsistencies between different cross-cultural frameworks. As asserted by Beugelsdijk et al (2018), among the multitude of studies performed over the years, various interpretations are given to the same variables. It is beyond our scope to pursue such an analysis, but it has to be recognized the importance of consistently using the selected study without clearly stating that specific conclusions are related to that choice. As this work aims to evaluate specific cultural dimensions and verify their impact on Italian firms' internationalization modes, we do not need to build a unique cultural distance index as done by the author. In such a way, we can justify the use of a specific study (i.e. GLOBE) instead of a combination thereof which would serve to explore "a general cultural-distance effect and not the effect of distance on specific dimensions " ( Beugelsdijk et al., 2018, p.122).
For the sake of clarity, due to the pandemic outbreak, we have purposedly excluded 2020 data to avoid biased results due to the disastrous impact on the economy. All statistics take into account the year 2019 as the latest reliable source. Where specified, average figures of the last five years have been considered to rely on more consistent data.
The last remark pertains to the GLOBE's cultural endorsed leadership theory (House et al, 2004). Due to this discipline's magnitude, further deepening could involve the analysis of leadership traits that more successfully contribute to Italian firms' internationalization. In this work, we have not touched in details this topic that would require a separate elaboration.
All ethical implications will be carefully taken into account even though the use of secondary data extrapolated from public sources does not entail the necessity to seek additional authorization to use the data if sources are properly cited (Saunders et al., 2016). In all cases, for the sake of clarity, the following considerations apply:
- privacy of people will be preserved. Even personal experiences will be presented in an anonymous form like "an Italian manager" or "an American employee";
- anonymity of organizations will be guaranteed unless publicly available;
- if material originates from private sources or with limited access but not publicly available, an authorization will be sought;
- internet sources will be carefully assessed to ensure that data and authority are correctly identifiable. (Saunders et al., 2016). Printed publications (even in the online form) will be preferably used.
Italy is the second-largest manufacturing in Europe and the seventh in the world (Richter, 2020). What is impressive and unique about Italy is the multitude of small and medium enterprises, or SMEs, that make up the majority of the national industrial fabric. According to the OECD (2020a), Italy is the second country globally by number of SMEs, notably employing up to 49 persons. However, the first one, Turkey, is far behind Italy when it comes to the manufacturing level. If we look at the first 10 top countries of the ranking, Italy's closest country is Japan that boasts almost 30.000 SMEs less than Italy.
As far as the Italian firms' international activity, the following tables provide an indication about trades and investment volumes ranked by country according to the average data from 2015 to 2019.
Table 1 – Italy’s outward foreign direct investment stock (Mln Euro)
Abbildung in dieser Leseprobe nicht enthalten
(Modified from source: Banca d’Italia, 2020)
Table 2 - Italy’s inward foreign direct investment stock (Mln Euro)
Abbildung in dieser Leseprobe nicht enthalten
(Modified from source: Banca d’Italia, 2020)
Table 3 - Italy’s outward foreign direct investment flows (Mln Euro)
Abbildung in dieser Leseprobe nicht enthalten
(1) Include also negative values whose total average in the same period is -6798
(Modified from source: Banca d’Italia, 2020)
Table 4 - Italy’s inward foreign direct investment flows (Mln Euro)
Abbildung in dieser Leseprobe nicht enthalten
(1) Include also negative values whose total average in the same period is -1849
(Modified from source: Banca d’Italia, 2020)
Table 5 - Italy’s export (Mln Euro)
Abbildung in dieser Leseprobe nicht enthalten
(Modified from Source: Esteri, 2020;)
Table 6 - Italy’s import (Mln Euro)
Abbildung in dieser Leseprobe nicht enthalten
(Modified from Source: ICE, 2020)
It is precisely from here that originates the rationale of this study that is driven by the peculiarities characterizing the Italian industry like:
- family companies at a second or third generation with a long and consolidated history in the business;
- ambition to expand the business outside the borders but, at the same time, a cultural approach not always suitable for the global environment;
- presence of the owner in the critical decisions.
The small dimension of the Italian firms requires the entrepreneur's active presence in the daily business, quicker decision chain, and presupposes more extensive interactions between individuals working in the company. Informal communications prevail over bureaucracy and, at the same time, private and business relations are intertwined.
[...]
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