Globalization and Ethics - China

Globalization and Ethics - China
Samantha Hall
International Business - IMS 3310
S. Carraher
April 30, 2015
Globalization and Ethics-A glance at the past, present, and future-Unites States of America
and China-how cultural differences impact business ethics between these countries.
Abstract
Purpose In order for companies to succeed and dominate in todays world, global
expansion is crucial. Some challenges companies may face when expanding globally is aligning
their company values and mission within the cultural values and ethics of the countries they are
seeking to expand to. It is important to have a grasp on these differences in order for the
company and its employees to be successful. With globalization on the rise and the need for
businesses to maximize cost savings, this is a trend that is not slowing down any time soon. The
purpose of this paper is to examine past, present and future attitudes regarding business ethics in
the United States and China and how cultural differences between these two countries may
influence ethical decisions within the present and future. These differences and similarities may
include government, money, language, meal times, and even day to day activities. This paper
also assesses how individuals live within both of these countries throughout their lives while
realizing how ethics and values impact their daily decisions and ultimately impact the overall
success of their own lives.
Design/methodology/approach The data obtained for this research paper was found by
researches within the Hofstede model, questionnaires, The European Journal of International
Management, and publications posted on Emerald Insight discussing the differences between
China and the United States.
Findings The major differences between culture, ethics and values between China and
the United States can significantly impact and highly influence how a company perceives and
commits to its ethical practice. From the study, we saw that undergraduate and graduate US and
Chinese students did not perceive the fundamentals of the importance of business ethics that
differently. In fact it seems that on most topics the gap is shortening.
Originality/value As each country is extremely unique in their own way, there are
many different findings between the two countries which show that individualism and ethics are
very unique as well.
Keywords Cross-cultural differences, Hofsteade, Business ethics, Forsythe Ethics
Questionnaire, Managers, China, United States of America, Culture, Ethics, Values, Project
GLOBE Model, Guanxi
Paper type Research paper
Introduction
More and more United States (USA) based companies are realizing the cost savings of
outsourcing to foreign countries and with outsourcing to other countries comes with a number of
risks. As a manager working for a multi-national company, it is important to understand
differences and similarities between cultures and how to adapt. Culture plays a huge impact on
the ethical standards of countries and how businesses view their code of ethics. Ethical standards,
reputation and corporate social responsibility recognition within the business community is
becoming more and more prevalent and required for a business to be successful these days. It is
also, however; equally important to maximize profits and efficiencies. In the last couple of
decades outsourcing to China has become more and more common. With a yearly economic
growth rate of ten-plus per cent over the past three years (World Economic and Financial
Surveys, 2007), outsourcing to China does not seem to be slowing down anytime soon. Both the
USA and China have historys and reputations of bribery, conspiracy and other clandestine
activities. The embedded cultural differences between the East and the West are vast. In this
paper, we will take a look at, past, present and future and how differences among these two
cultures influence the ethical actions of businesses in these countries and the ethical attitudes of
future business leaders.
Cross-cultural differences
Every country has a very unique and precise way of living and doing just about everything
through their culture. Although there is not just one way to define culture, culture has been
defined several different ways by several different authors, such as (Ying Fan, 2000)
all the historically created design for living, explicit and implicit, rational, irrational,
and non-rational, which exist at any given time as potential guides for the behavior of
men (Kluckhohn and Kelly, 1945)

the man made part of the environment (Herskovits, 1955)
the integrated sum total of learned behavioral traits that are shared by members of
society (Hoebel, 1960)
a mental map which guides us in our relations to our surroundings and to other people
(Down, 1971)
The most current and latest definition of culture was made by the Social Psychologist,
Geert Hofstede in 1980. Hofstedes definition reads, the interactive aggregate of common
characteristics that influence a groups response to its environment which was then later
redefined by Hofstede as, the collective programming of the mind which distinguish one group of
people from another. The word culture was derived from the Latins which is closely related to
the word cultus and also referred to as cult or worship. Cults around the world are very well
known in doing things their own certain ways and worshipping their own specific people, which
results in having their own special beliefs and culture is summed up in just about the same way.
With all the above definitions, culture is collectively behaviors, beliefs, customizations, attitudes,
and values based on a society originated by people who believe in all these different ideas and
beliefs as a whole (Ying Fan, 2000). Cultures between the United States and China differ in an
extreme amount of ways. With the help of the nine dimensions according to the GLOBE model
and the five dimensions according to the Hofstede model, both of these models provide
explanations and a better understanding of cross-cultural differences between these two countries
(Garcia, Mendez, Ellis, Gautney, 2014). The nine dimensional culture studies based on the
GLOBE model is below in Table 1.
Table 1: Nine dimensional measurement of culture based on GLOBE Model

Power distance
Degree to which a cultures people are (should be) separated by power,
In-group collectivism
authority and prestige

Degree to which a cultures people (should) take pride in and (should) feel
Institutional
loyalty toward their families, organizations and employers

Degree to which individuals are (should be) encouraged by institutions to
collectivism
be integrated into broader entities with harmony and cooperation as
Uncertainty
paramount principles at the expense of autonomy and individual freedom

Degree to which a cultures people (should) seek orderliness, consistency
avoidance
Future orientation
and structure
Degree to which a cultures people are (should be) willing to defer
Gender
immediate gratification for future benefits

Degree to which a cultures people are (should) support gender equality
egalitarianism
Assertiveness
Degree to which a cultures people are (should be) assertive,
Humane orientation
confrontational and aggressive

Degree to which a cultures people are (should be) fair, altruistic, generous,
Performance
caring and kind toward others

Degree to which a cultures people (should) encourage and reward people
orientation
for performance
Source: Shi and Wang (2011)

Table 2: Cultural dimensions between China and USA using GLOBE Model
AO
CHINA
USA
P
3.77
4.50
IC
V
5.52
4.36
P
4.67
4.21
IGC
V
4.52
4.20
P
5.86
4.22
FO
V
5.12
5.79
P
3.68
4.13
GE
V
4.7
5.34
P
3.03
3.36
V
3.73
5.03

HO
5
PO
PD
UA
P
V
P
V
P
V
P
V
CHINA 4.29
5.34
4.37
5.72
5.02
3.01
4.81
5.34
USA
4.18
5.51
4.45
6.14
4.92
2.88
4.15
3.99
Notes: AO = assertiveness orientation; IC = institutional collectivism; IGC = in-group
collectivism; FO = future orientation; GE = gender egalitarianism; HO = humane orientation; PO
= performance orientation; PD = power distance; UA = uncertainty avoidance; P = practice; V =
value; M = mean
Source: Shi and Wang (2011)
Based on the data provided above on Table 2, China differs significantly between practice
and value showing that China practices a low level of assertiveness (AO) but values a much
higher level whereas, the United States (USA) practices and values are about average levels of
AO. Based on the information in table 2, it is determined that cultures within the USA have high
levels of aggressiveness, confrontation, and assertiveness whereas China shows a much lower
level within their cultures.
Based on the data provided above in Table 2, China practices a higher level of
institutional collectivism (IC) than the USA. Based on the definition of IC in Table 1, those
cultures that have a higher level of IC are shown to be more interdependent within their
organization, decisions are based on groups, and rewards are mainly driven by groups and
equality rather than individual success and freedom. Therefore, the table displays a lower level of
IC within the USA which results in less group activities and success and more individuality and
personal success. The Chinese culture practices group success and equality rather than individual
success and is willing to give up their own personal success in order to have success for the
group.
Based on the data provided above in Table 2, China practices on a significantly higher
level of in-group collectivism (IGC) over their lower level of IGC values. The USA practice
levels of IGC are extremely lower compared to the culture values and based on the definition of
IGC in Table 1; the USA displays a low level of pride and loyalty toward their families and
organizations and is more individualistic in many ways. China has significantly high levels of
pride and loyalty to their families and employers.
Based on the data provided above in Table 2, the Chinese culture displays very low levels
of future orientation (FO) in both practice and value. Having low levels of FO displays that
China is not willing to defer immediate gratification for future benefits whereas, the USA scored
a little higher for both practice and value. Every culture emphasizes on a different level with
accordance to the past, present, and future and by having higher levels with FO, the USA is
willing to look towards the future.
Based on information in Table 2, both Chinese and the USA cultures practice on average
about the same level of gender egalitarianism (GE), meaning both countries have about the same
level of gender equality with USA being a little higher than China. Although USA values GE on
a much higher level, their practice levels are still much higher than China which result in much
more equality throughout their culture.
Based on Table 2, although China and USA value about the same levels of humane
orientation (HO), both countries practice at a significantly lower level with USA being lower
than China. According to the HO definition in Table 1, USA is less fair, generous, caring,
altruistic and kind towards others within their society and culture.
Based on the information provided in Table 2, USA has a higher level of performance
orientation (PO) over China, which means the USA encourages and provides rewards for
individuals with high performance levels. Although, the USA values a significantly higher level
of PO, they are still showing encouragement at a higher level than China.
Based on Table 2, both countries value an extremely low level of power distance (PD),
meaning these cultures are separated by power, authority and prestige. China is scored at a higher
level over USA showing that they display a higher level of PD. PD is defined as the difference
between the extent to which supervisors can determine the behavior of subordinates and the
extent to which subordinates can determine the behavior of supervisors (Chang, 2011).
Based on the data provided in Table 2, the Chinese scored much higher within practice
and value category of uncertainty avoidance (UA) whereas, USA scored at a significantly low
degree of value and much higher in practice. This information shows that the Chinese culture
seek orderliness, consistency and structure.
While comparing the differences and similarities of culture between China and the USA
while utilizing both the GLOBE and Hofstede model, there are a few consistencies as well as
inconsistencies between the two countries as noted above. Culture is believed to shape beliefs,
values and behaviors of individuals and their future (Ying Fan, 2000). Culture is highly
influenced which can define ones behavior and attitude towards their own personal day to day
lives. Based on analyses between China and the USA, it is quite obvious that each country has a
significant culture difference between each category provided. It is quite obvious that both
Chinese and American cultures are very rich, dynamic and unique and both cultures are
continuously changing every single day.
Ethics
Companies need a code of ethics to thrive as a business. As J. Singh et al. (2005) have
confirmed, two important and interrelated issues in businesses are globalization and ethics.
Reports have shown there is a strong correlation between having a strong code of ethical
standards and the success of a business. More and more US based companies are realizing the
cost savings of outsourcing to foreign countries, and with outsourcing to other countries comes
with a number of risks. As a manager working for a multi-national company, it is important to
understand differences and similarities between cultures and how to adapt. A successful company
typically has a high reputation of integrity and loyal customer base. In the US especially, a legal
system is in place to protect businesses and consumers. Beyond borders, however, the integrity
of a company becomes more and more risky because of the lack of consistency with laws and
consequences. Studies on international co-operative relationships, such as reported in Zakhem
(2008), Yen and Barnes (2011), Berger and Herstein (2012), have shown that the uncertainty of
whether the other party will fulfill obligations, commitments and expectations is a major issue in
countries where the legal infrastructure is weak and unpredictable, as is the case in China (Ron,
2014). With more and more US companies infiltrating China, this is something they should be
aware of and take action on.
The history and perceptions of business ethics in both countries have had a shaky past
and continues to be under constant scrutiny. A National spotlight on the ethical practices of
American businesses began with the Watergate scandal in the 1970s. After that debacle,
businesses and their practices were being closely watched more closely by the American people.
Not to say that the exposure of Watergate resolved all issues of unethical behavior by American
companies. In 2002, the Enron scandal proved that US companies were still capable of
clandestine activities in the quest of the almighty dollar. Scandals such as these and others,
however; paved the way for several laws such as The Foreign Protection Act and the SarbanesOxley Act overall strengthening the US law system and the consequences of mal actions by US
companies. China does not have an advanced legal system like the US does and that can put US
companies at risk of potential malpractices when partnering with China. In recent years, 2005,
the National Corporate Responsibility Index ranked China 66 out of 80 countries in terms of
corruption, environmental management, and corporate governance and in 2006, Transparency
International ranked China second worst in terms of engaging in bribery in developing nations
(The Economist Intelligence Unit, 2006). That statistic is alarming. US Companies, in their
worldwide operations, are forbidden to engage in activities that are illegal in the US (Dennis,
1999). Bribery to obtain business, particularly, is strictly forbidden for a US company no matter
where it takes place (Dennis, 1999). But, in some countries, bribery is a part of life and business
cannot be transacted without it (Dennis, 1999).
We can assume that the cultural differences between these two countries attribute to how
companies in those countries view ethics within the business. Highlighting differences between
the USA and China, Leung (2004) suggested that trust, equity, responsibility and commitment
are the basis of ethical judgment in the USA. On the other hand, in China, ethics values and
decisions are based on the relational constructs of jen (moral excellence), guanxi (networks
of informal relationships and exchanges of favors that dominate business activity), xinong
(personal trust) and face (Spero, 2009). The same goals essentially just interpreted in different
contexts. The Chinese, for example, do not interpret bribery in the same context as in the US. It
is these differences that can make it challenging doing business beyond borders. The question
remains to be unseen of where the future of business ethics between US and China is headed.
How has time and revelations about business practices over the years impacted the next
generation of future business leaders.
We will look at a survey which was conducted and given to traditional and nontraditional business students enrolled in graduate and undergraduate programs in a private
university in the Southeastern USA and in two public universities in eastern China (Spero, 2009).
The survey consisted of a paragraph and seven statements. They asked the students to pretend an
Ethical Practices code had been implemented where they work and they were asked what the
code would accomplishment if consequences for not following the code would be implemented.
The students were asked to rate the following statements below on a scale of 1 to 5, with
1=disagree and 5=agree.
. The code would raise the ethical level of business in this industry.
. The code would be easy to enforce.
. In situations of severe competition, the code would reduce the use of unethical practices.
. Individuals working in this industry would welcome the code when looking for a way to
diplomatically refuse an unethical request.
. The code would protect inefficient firms and retard the growth of businesses in this industry.
. The code would help business people by clearly defining the limits of acceptable conduct.
. People would violate the code whenever they thought they could avoid detection.
According to the statistical results, both the Chinese and USA groups believed that an
ethical practices code would raise ethical levels and that individuals would welcome a code when
looking for a way to diplomatically refuse an unethical request (Spero, 2009). Both groups were
in agreement that a code would help by clearly defining the limits of acceptable conduct, would
not protect inefficient firms, and would not retard the growth of businesses in the industry
(Spero, 2009). The groups tended toward the middle of the scale with regard to whether, in
situations of severe competition, the code would reduce the use of unethical practices (Spero,
2009). Interestingly, both groups believed that the code would not be easy to enforce and that
people would violate the code if they thought they could avoid detection. Table I (below)
presents the results in more detail (Spero, 2009).
Survey Responses (%)

Ethical Practices
Nationalit
Mean
t-
Significanc
1=Disagre
5=Agree
code statement
1. The code
y
Chinese
3.48
value
0.377
e
0.706
e
3
10
36
36
15
would raise the
US
3.43
10
31
37
15
10
ethical level of
business in this
industry.
2. The code
Chinese
2.67
would be easy to
US
2.62
enforce.
3. In situations
Chinese
3.15
of severe
US
2.96
practices.
4. Individuals
Chinese
3.91
working in this
US
4.01
0.873
request.
5. The code
Chinese
2.89
4.550
would protect
US
2.31
this industry. *
6. The code
Chinese
3.59
would help
US
3.77
1.693
0.435
1.493
0.664
0.137
10
37
31
20
12
37
34
12
20
32
28
12
13
21
31
27
27
42
22
15
44
34
13
26
25
30
26
34
25
13
36
41
15
19
50
20
competition, the
code would
reduce the use of
unethical
0.384
industry would
welcome the
code when
looking for a
way to
diplomatically
refuse an
unethical
0.000
inefficient firms
and retard the
growth of
businesses in
0.091
11
business people
by clearly
defining the
limits of
acceptable
conduct.
7. People would
Chinese
3.25
violate the code
US
3.16
0.674
0.501
17
34
26
16
21
34
27
12
whenever they
thought they
could avoid
detection.
Note: *Significant at the 0.05 level of significance.
We can conclude from this survey that both, US and Chinese future business leaders can
agree on the fact that a code of ethics, if not in the right hands can impact the financial success of
a business. I think it is safe to assume that these codes of ethics are headed in the right direction.
Undoing centuries of outlooks and opinions when it comes to business dealings are hard to undo.
But with time, I feel the language of business, which is becoming more and more universal, will
prevail from centuries of old outlooks and traditions. Because business is just that, business!
nothing personal. How can we maximize profits and minimize costs? Those are truly the brass
tacks subjects that should drive a company. It is a strategic game, an analytical game. Hopefully
one day a universal code of business will exist; an equal playing field for all companies to use
strategy to get ahead in the business world instead of bribery and corruption.
Suggestions for future research
Research will always be a never ending task between all sorts of information throughout
the world. With two of the largest countries continuously growing not only in size but in number
of people as well, these countries will continue to rapidly change including their nations
cultures, ethics and values. Future research needs to focus on evolution of these specific cultures
12
and values and what makes these countries so vastly different. Although culture is only one
factor in explaining the differences between these two countries, culture is one of the most highly
significant reasons as to why they are so different.
Within the next 50 years there will be a whole new generation in charge of the market
economy. It would be interesting to analyze the mindsets of well-known corporations Chief
Executive Officers that are engaged in international business with China from those mindsets of
their elders. Focusing specifically on technological advances over the last half century and how
that has influenced cultures during that time and whether that has an impact on current trends in
business ethics. The study would need to be conducted every decade to have a good sense on the
different ethical outlooks 50 years down the road.
Gender equality has been and continues to be a hot button issue. Should males and
females be treated equally in the business sense? Are they both equally capable of producing the
same output if given the same task? Further research of gender equality in China and the US and
how gender impacts business ethics and the ethical decisions of large corporations in each
country ultimately impact the success of a business in both a qualitative and quantitative sense.
Do business ethics have a strong correlation between the financial successes of a business? This
study would need to monitor the deployment and implementation of a specific universal
developed code of ethics within two large corporations within the US and China. Financial
records of each company would need to be analyzed over the course of a decade to determine if a
universally implementation of a code of ethics has an impact on financially successful a
company can be.
Education is said to be vital to the success of a person, mentally, emotionally and
financially. A study on how education impacts business ethics within the US and China could
draw a further conclusion on why business ethics vary between these two countries. An
interesting variable to analyze would be the relationships between a traditional US student
attending business school in the US, US Student attending business school in China, Chinese
student attending business school in the US and Chinese student attending business school in
China. Taking a look at these four variables may also identify education gaps between different
countries and how that may impact future ethical decisions in multinational companies.
13
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Shi, X. and Wang, J., (2011), Cultural distance between China and US across GLOBE Model
and Hofstede Model, International Business and Management, Vol. 2 No. 1, pp. 11 17

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