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LIST OF EXHIBITIONS AND TABLES
Title
Page
Source
Exhibit 1
Confucian Dynamism values
6
Hofstede & Bond
(1988, p. 16)
Exhibit 2
Theoretical model linking long-term
orientation and national innovativeness
15
own development
Exhibit 3
Revised model linking long-term
orientation and national innovativeness
28
own development
Table 1
Long-term orientation scores and ranks
by country
20
Hofstede (1991, p. 166)
Table 2
Means, standard deviations, and
correlations for the studied variables
24
own development
Table 3
Results of regression analysis model 1
25
own development
Table 4
Results of regression analysis model 2
27
own development
Table 5
Summary of empirical results
28
own development
LIST OF APPENDICES
Title
Page
Source
Appendix 1
Regression results excluding year
dummies model 1
40
own development
Appendix 2
Regression results for control
variables model 2
40
own development
Appendix 3
Literature overview
41
own development
iii
LIST OF ABBREVIATTIONS
Abbreviation
Full word
BC
CD
Before Christ
Confucian Dynamism
FDI
GDP
HDI
IB
IP
Log
R&D
SD
CCC
US
Foreign Direct Investment
Gross Domestic Product
Human Development Index
International Business
Intellectual Property
Logarithmic value
Research and Development
Standard Deviation
Chinese Culture Connection
United States
WIPO
World Intellectual Property Organisation
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1.
INTRODUCTION
A country's rate of technological change and advancement is a major determinant for its
economic development (Freeman, 1994; Romer, 1990; Solow, 1957). Therefore, policy-
makers need to understand what drives the technological change and advancement of the
countries they administrate. Of the many factors that affect a society's ability to invent and
advance, one that has yet received limited attention is national culture.
Furthermore, managers of multinational firms implicitly face the selection of a cultural
context when selecting favourable locations for their business activities. If national culture had
a positive influence on innovative activities, it should be considered in location decisions for
innovative activities.
To succeed in a given environment, members of a society adopt the necessary behaviours.
Over time, these adopted behaviours transform into different cultural values across societies.
Hofstede (1980, p. 25) refers to cultural values as "the collective programming of the mind
that distinguishes one human group from another". While culture exists at many levels, this
study uses the concept of national culture. Albeit imperfect, the nation as criteria to
distinguish between cultures has been widely accepted amongst researchers and practitioners
(Kirkman, Lowe, & Gibson, 2006). Therefore, the terms culture and national culture are used
interchangeably in this study. Furthermore, the term nation and its geographical counterpart,
the country, are used interchangeably. Most of the research about cultural influences on
business and management during the past three decades has been based on Hofstede's five-
dimensions framework (Hofstede, 1980; Hofstede & Bond, 1988). Despite of some criticism,
researchers have preferred this framework because of its "clarity, parsimony, and resonance
with managers" (Kirkman, et al., 2006, p. 286). On the national-level, the framework has been
used to study the consequences of culture on conflict management (e.g. Smith, Dugan,
Peterson, & Leung, 1998), human resource management (e.g. Newman & Nollen, 1996),
leadership (e.g. Shenkar & Zeira, 1992), work-related attitudes (e.g. Jaw, Ling, Wang, &
Chang, 2007), entrepreneurship (e.g. Hayton, George, & Zahra, 2002), entry modes (e.g.
Kogut & Singh, 1988), FDI (e.g. Benito & Gripsrud, 1992), societal outcomes (e.g. R. H.
Franke, Hofstede, & Bond, 1991), amongst other topics.
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When referring to innovation, this study mainly refers to the notion of invention, meaning
novelty, rather than the notions of commercialisation and implementation which are also
inherent to the term. Novelty, in turn, is viewed relative to the unit of observation, that is the
nation, since absolute novelty is nearly impossible to justify (Anderson, de Drew, & Nijstad,
2004). Therefore, national innovativeness is treated as the rate of innovation in a country.
Economists have traditionally argued that differences in national innovativeness can be
explained by rather tangible factors such as industrial structure, economic wealth, research
and development (R&D) intensity, infrastructure, industry- and market structure, resource
endowments, and country size (Freeman, 1994; Nelson, 1993; Romer, 1990). However,
international business research has indicated that national culture also influences a nation's
rate of innovation. Jones and Teegen (2001) have shown that national culture partly explains
the selection of location for multinational firm R&D activities. It has also been shown that
some cultural profiles accomodate innovative activities better than others (Shane, 1992, 1993).
These studies have focused on Hofstede's (1980) initial four dimensions of national culture
neglecting the fifth dimension that was later added to the framework through the combined
effort of the Chinese Culture Connection (1987), and Hofstede and Bond (1988).
The Confucian Dynamism (CD) dimension, also called long-term orientation, is an
appealing and, since it indicates a society's attitude towards novelty, arguably the most
suitable dimension to study culture's impact on innovation. Long-term orientated cultures can
be characterised by emphasis on action and future possibilities, while short-term orientated
cultures tend to preserve present and past realities and structures (Hofstede & Bond, 1988).
Another reason why CD seems to be the most suitable cultural dimension to study innovation
on the national level are the findings of Franke, Hofstede and Bond (1991). These researchers
found a significant positive relationship between CD and economic growth for 20 countries,
but no relationship for any of the other four dimensions. Considering that national
innovativeness is a major driver for economic growth (Freeman, 1994; Romer, 1990; Solow,
1957), a relationship between CD and national innovativeness seems most reasonable. Yet
another argument why CD is the most suitable dimension to study the impact of culture on
national innovativeness is its consistent impact on the innovation process. The innovation
process can be roughly distinguished in two major stages: initiation and implementation. The
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initiation stage refers to the generation of novel ideas, while the implementation stage refers to
the exploitation of these ideas. Conceptual papers have argued that CD is the one dimension
with consistent positive impact on innovation, regardless of the stage of the innovation
process (Jones & Davis, 2000; Nakate & Sivakumar, 1996). Therefore, CD seems to be the
most suitable cultural dimension to study the impact of cultural values on national
innovativeness.
In summary, understanding the impact of national culture on a society's ability to
innovate is important to both managers and policy-makers. Academic scholars have conducted
some, but not enough, research on the impact on national culture on national innovativeness.
In particular, the empirical literature lacks to explain how long-term orientated cultural values
impact national innovativeness. Since the conceptual and related empirical literature strongly
indicates this link, this paper seeks to contribute to the broader field of cross-cultural research
by answering the following research question:
How does long-term orientation influence national innovativeness?
To answer this research question, I propose how CD could be linked to national
innovativeness. Furthermore, the proposed links are tested with macro-level data from 19
countries for the years 1996-2006. Lastly, in order to answer the "how" in the research
question, I introduce some relevant micro-level literature to discuss the statistical results.
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2.
LITERATURE REVIEW
To propose how CD could influence a society's innovativeness, the philosophical
principles underlying the dimension as well as relevant research employing the dimension is
reviewed in the first part. In the second part, relevant macro-level literature on innovation is
reviewed to identify major determinants of a nation's innovativeness. Attempting to include
elements of the systematic review process but stopping short of claiming comprehensiveness,
a systematised review is conducted (for a literature overview see appendix 3). Therefore, the
limitations of systematised reviews need to be noticed. Such reviews tend to be more biased
than full systematic reviews. While basic systematicity is applied, the quality assessment and
synthesis of included articles does not follow a modelled process (Grant & Booth, 2009). This
compromise is necessary due to the fact that this study is conducted in the context of a ten-
week postgraduate dissertation and cannot draw upon the resources required for a full
systematic review such as a second researcher reviewing the literature.
2.1
Confucian Dynamism
2.1.1
Confucian teachings
Kng Fz, whom Christian missionaries renamed Confucius, was a Chinese civil servant
and philosopher living from 551-478 BC. Known for his wisdom, he was constantly
surrounded by disciples who recorded what is known as his teachings. Confucian teachings
constitute lessons and practical ethics about humanity without religious connotation. Different
from ancient Western philosophy, Confucianism puts greater emphasis on extensional truth.
Containing the scientific truth, such as mathematical or empirical knowledge, the extensional
truth adds a form of intentional truth, such as sensible feelings and bounded rationality (Mou,
1983). Thus, in Confucianism truth is dependent on the subject and therefore always relative,
never absolute or exclusive. In essence, the Confucian teachings can be outlined in four key
principles (Hofstede & Bond, 1988; Tweed, 2002).
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1.
Social stability is based on hierarchical relationships: The individual stands in
different relationships with different people. The five relationships in Confucianism
are ruler/ruled, father/son, elder brother/younger brother, husband/wife, and older
friend /younger friend. All stress respect for seniority and mutual obligations. The
junior owns a senior respect and obedience; the senior owns the junior consideration
and protection (Hofstede, 1988). Confucius believed that virtue is achieved by
observing and learning from senior role models (Tweed, & Lehman, 2002).
2.
Collectivism is the basis for all social organisations: A person is not primarily an
individual, but a member of a family. Children need to learn to overcome their
individuality in order to maintain the family's harmony. Harmony is created by
maintaining "face", meaning each individual's dignity. Social relations are to conduct
in a way that face is saved. Paying respect to someone is referred to as "giving face"
(Hofstede, 1988, p. 8). The principle of collectivism is also found in Confucian
approaches to learning and knowledge creation. Truth is not found in the self, but
along with good character traits learned from the collective (Tweed, & Lehman, 2002)
3.
Treat others as one would like to be treated oneself: Confucius argued that
behavioural reform is the primary goal of education because virtuous behaviour
ensures individual success and social harmony (Tweed, & Lehman, 2002)
4.
Success with regard to ones tasks in life requires effortful and pragmatic acquisition of
skills and knowledge, thrift, patience and preservation: For Confucius, learning was
closely related to hard work. Effort is more important than ability. He emphasised the
importance of making an extended effort to achieve sustainable transformation and
improvement as opposed to pursuing quick results. He also urged his students to
continuously acquire knowledge rather than to focus on generating ideas. Innovation is
welcomed, but the tendency to criticise present realities without extensive underlying
knowledge was seen as a fault (Tweed, & Lehman, 2002; Hofstede, & Bond, 1988).
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2.1.2
Confucian Dynamism dimension of culture
In international business (IB) research, a cultural dimension which partly represents
Confucian philosophy was empirically established for 23 countries in a combined effort by the
Chinese Culture Connection (1987) and Hofstede and Bond (1988). In contrast to Hofstede's
(1980) initial four dimensions, the CD-dimension has yet received little attention from IB-
scholars (Fang, 2003; Kirkman, et al., 2006). Nonetheless, the dimension is appealing and
unique in that it indicates a culture's attitude towards time through two sets of Confucian
values. It is based on survey instruments developed by Chinese researchers. Most previous
cultural value studies were based on survey instruments designed by Western researchers
(Robertson, & Hoffman, 2000). Hence, previous measures of culture focused on finding
values that were inherent in Western cultures (Hofstede, 1994). CD, on the other hand,
provides an Eastern perspective on cultural values. The dimension can be understood as
indicative measure for "the acceptance of legitimacy of hierarchy and the social valuing of
perseverance and thrift, all without undue emphasis on traditions and social obligations" in a
society (Franke, Hostede, & Bond, 1991, p. 167). Exhibit 1 presents the values associated with
the dimension (adapted from Hofstede, & Bond, 1988, p. 16)
Exhibit 1: Confucian Dynamism values
-
Personal steadiness and stability
- Persistence (perseverance)
-
Protecting and giving face
- Acceptance of hierarchical
- Emphasis of traditions
relationships with mutual obligations
- Reciprocation of greetings,
- Thrift
favours, and gifts
- Having a sense of shame
Source: Hofstede & Bond (1988, p.16)
static, tradition-orientated
dynamic, future-orientated
7
Referring to the negative pole of the dimension, personal steadiness and stability means
prudence and trusting the well-known and accepted when making decisions. People with
strong need for personal steadiness and stability tend to lack entrepreneurial spirit and
dynamics. Protecting and giving face in response to criticism and questioning from others is a
social concept to preserve the own and other's dignity and social status. Even though present
in all cultures (Gudykunst, Stella, & Chua, 1988), face-consciousness is particularly strong in
more static, tradition-orientated cultures (Hofstede, 1991). The concept of face not only
applies to private concerns, but also to interactions in communities and organisations
(Schuette & Ciarlante, 1998). Emphasis of traditions means a tendency to preserve past
realities, structures and relationship. Lastly, the meaning of reciprocation of greetings, favours
and gifts is well captured by a metaphor in Fang (2003, p. 358):"If you honour me a foot, I
will honour you ten feet in return".
Referring to the positive pole of the dimension, persistence means that virtue is the
outcome of effort. This value has also connotations to patience and tolerance of others (Fang,
2003). Accepting relationships with mutual obligations implies ordering of relationships by
status with emphasis on each person's task in the hierarchy. This contributes to social stability
and harmony. Thrift refers to the Confucian value of not spending more than necessary.
Extensive consumption is taboo. Moderation is enjoyed in all aspects of life. Having a sense
of shame in refers to a person's moral, integrity and courage.
The values underlying the CD-dimension can be confusing, particularly to western minds.
Redpath and Nielsen (1997, p. 337) state: "the dimension was most difficult to apply, because
distinctions between the two ends of the spectrum are unclear and often seem contradictory".
Such confusion demonstrates just how powerful the impact of culture is. Culture does not only
shape our values, attitudes and behaviours, but also determines which theories we are able to
create and comprehend (Hofstede, 1994).
Hofstede and Bond (1988, p. 17) state: "If this dimension (Confucian Dynamism) is
somewhat puzzling to the Western readers, they should not be surprised. The
dimension is composed precisely of those elements that our Western instruments had
not registered".
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2.1.3
Confucian Dynamism and innovation
High CD cultures can be characterised by future-orientated values with emphasis on
proactiveness, strong work-ethics and thrift. In contrast, low CD cultures maintain a more
static mentality with tendency to preserve past and present realities (Hofstede & Bond, 1988).
Innovation requires investing in activities with uncertain payoffs and uncertain time frames
(Steensma, Marino, Weaver, & Dickson, 2000). Such investments are risky and can often only
be justified with anticipation of long-term payoffs. Long-term oriented cultures are arguably
more likely to recognise the long-term benefits of innovative activities. More short-term
orientated cultures would rather invest in activities that maximise short-term gains.
There is a small body of literature that relates cultural long-term orientation to innovation-
related topics. Herbig and Miller (1992) propose long-term orientated traits support a society's
ability to source and adopt innovations. In another study, Nakata and Sivakumar (1996)
propose that long-term orientation, by emphasis on action and future possibilities, promotes
the development of new products. Short-term orientation works against new product
development, because the underlying values encourage staying within accepted and well-
known boundaries. In an empirical study, Lin (2009) investigates the impact of national
culture on the innovation activities of major automakers in 14 countries. The results confirm a
significant and positive impact of cultural long-term orientation on innovation performance.
They argue that the Confucian trait most relevant to innovation is perseverance. This cultural
value provides an inherent source of strong work ethic and motivation to complete projects
successfully. A Japanese top executive of Honda has pointed out that perseverance can be a
national competitive advantage:" We are very different from the rest of the world. Our only
natural resource is the hard work of our people" (Peters & Waterman, 1982, p. 39).
Hence, there seems to be a link between long-term orientation and innovativeness of a
culture. Since only a few studies are concerned with this link, it is useful to consider further
consequences of cultural long-term orientation. In order to gain a better understanding of how
this dimension could influence national innovativeness, I also review the literature on cultural
long-term orientation in relation to economic development and R&D.
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2.1.4
Confucian Dynamism and economic development
One stream of research seems to be increasingly interested in economic outcomes of
culture. Various studies have acknowledged a relationship between national culture and
economic development (Guiso, Sapienza, & Zingales, 2003, 2006; Johnson & Lenartowicz,
1998). Franke, Hofstede, and Bond (1991) found that long-term orientated cultures have
higher economic growth rates than short-term orientated cultures. Using a sample of 20
countries, Hofstede's (1980, 1988) cultural dimensions explained more than 50 percent of
cross-country differences in economic growth rates during the periods 1965-1980 and 1980-
1987. The cultural dimension with the most explanatory power was CD. Considering the
values underlying the dimension, some explanations can be made. Acceptance of hierarchy
and mutual obligations in relationships is a shared value in long-term orientated cultures.
Such a sense of hierarchy and complementarity of relations arguably favours
entrepreneurship. A sense of shame enables sensitivity and concern for social contacts. Strong
social networks are beneficial for individuals' economic success (Hofstede & Bond, 1988).
High CD drives individuals to pursue their goals with strong perseverance and discipline. This
includes personal economic goals as well as career and work-related goals. Empirical studies
confirm the impact of cultural values on work values (Jaw, et al., 2007).
Low presence of long-term orientated cultural values also seems to aid economic growth.
Too much concern for the own and others' reputation might distract from the actions
necessary to get the business done. For example, face-concerned managers are more prone to
hold onto business projects suggested by them, even after viability arise. The reciprocation of
greetings, favours and gifts as a social manner is related to the concept of face. Such gestures
are social norm in short-term orientated cultures, however, they have no effect on economic
performance (Hofstede & Bond, 1988). Furthermore, too much emphasis on traditions and
past structures impedes economic development. China's rapid economic growth throughout
the past decades is at least partly related to the ease it has accepted and adopted Western
technology. Lastly, personal steadiness and stability discourages adaptations to changes in
dynamic environments. Such static mindsets lead to rigid business models and missed
opportunities. (Hofstede & Bond, 1988).
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