CULTURE AND GLOBALISATION

International Business Environment: Culture and Globalisation

Name
School

CULTURE AND GLOBALISATION

International Business Environment: Culture and Globalisation

Globalisation is generally understood as the process that refers to the growth of
integration and inter-dependencies between national markets and industries on a scale that is
worldwide. In simpler terms, this is a phenomenon that radically changed how the world is
connected. Businesses, interactions, and communications have become different from what they
were previously. For instance, a company can be headquartered in the United States but it can
also have some of its operations in India or China. The company is able to do this because
globalisation brought down traditional barriers to free trade. As such, the concept represents a
widely-accepted tool that can encourage the economic growth of a state.
However, the extent of globalisation varies across countries. The most common examples
of countries that greatly benefitted from globalization are China, India, and Brazil. This happens
because the countries are ready for the changes. They have the necessary infrastructure, the
workforce, and the policies that encourage direct foreign investment. On the other hand, some
countries appear to be less integrated and connected compared to what is commonly believed. As
a result of their non-readiness for globalisation, these countries do not benefit. Instead, they
experience negative effects due to this phenomenon.
Meanwhile, there are several factors that aid or boost the process of globalisation of
countries. Cross-national diversity is an element, which involves differences in language, culture
or religion. These elements can be a main hindrance that limits the integration process between
countries.
This paper shall proceed by discussing existing literature and theories that are relevant to
culture and globalisation, and how they affect each other. Then, it will compare and contrast how

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these theories are applicable to two related countries: Hong Kong and China. In particular, the
paper will show how globalisation has negatively Hong Kong while positively affecting China.
Culture and Globalisation
While globalisation is often paired with business outcomes, this is not the only area
affected by this process. Culture is one aspect that globalisation has reshaped. This happens
because globalisation allows countries and people opportunities to interact in unprecedented
ways. For instance, tourism in one particular place will bring people from various cultures. This
will allow for locals and tourists to interact and learn from each other. Without realising it, these
people could end up adapting to each others cultures. The same can happen to a company that
sets up an international operation where it would send expats to work in the offshore location.
The foreign workers will also deal with local workers such that they would eventually learn to
adapt to each other. Foreign workers too can end up adopting the mainstream culture or they
could also influence others around them. Aside from this, foreign workers while staying in
their own countries can interact with local workers through the Internet. This advancement in
technology is also one way that culture is affected and possibly reshaped by global factors.
Machida (2012) states that the impact of globalisation on culture is one of the most
controversial issues in modern society. He notes that scholars have debated on whether or not
globalisation has a tendency to destroy the diversity of local cultures, citing examples of the
strong influences of American and Western cultures to others in the world (Schiller, 1976). For
less influential cultures to feel threatened by the West especially the U.S. is valid. U.S.
companies are somewhat ubiquitous. With their presence is the ability to influence the
environment around them. This is even one reason why there are certain groups that recent the

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presence of Americans in their regions because they are afraid that traditional customs,
traditions, and beliefs will be irrevocably lost in the process. With globalisation making Western
presence in other nations more prevalent, the process of changing local cultures is underway.
This is inevitable no matter how some groups will try to prevent it. People adapt to the stimuli
around them and if they perceive another culture to be of great interest, then, they would likely
adopt some of the foreign cultures practices.
Meanwhile, globalisation does more than simply increase the availability of foreign-made
consumer products and disrupt traditional producers. It also increases international trade in
cultural products and services, such as movies, music, and publications. Cable television can
increase the local viewers knowledge of other cultures and if they like what they observe, the
tendency is for them to adapt. This can be observed in youths who are more easily influenced as
opposed to the older members of a community. The expansion of trade in cultural products is
increasing the exposure of all societies to foreign cultures, and the exposure to foreign cultural
goods frequently brings about changes in local cultures, values, and traditions.
Although there is no consensus on the consequences of globalisation on national cultures,
many people believe that a people's exposure to foreign culture can undermine their own cultural
identity (Globalization 101, 2015). This has been interpreted to mean that globalisation creates a
similar culture around the world, in a perspective coined by Holton (2000) as the
homogenization thesis in which globalisation leads to cultural convergence. He also presents
an alternative perspective called the polarization thesis, in which posits cultural wars between
Western globalisation and its opponents, as well as the hybridization or syncretism thesis, in

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which globalisation encourages a blending of the diverse set of cultural repertoires made
available through cross-border exchange.
There have been several studies on the impacts of globalisation, especially on culture. As
two separate concepts, globalisation and culture have different definitions. Although
globalisation can be described in many ways, there is no single definition of what it really is.
However, it can be understood as the expansion of the interconnection in all respects (Held,
2002). On the other hand, the notion of culture is also one of the most important concepts in
humanity and social sciences. Scholars have devoted a significant amount of attention to the
issue of culture, generating numerous studies on culture in different disciplines. Although it has
been defined in various ways, Machida (2012) defines culture as a pattern of transmitting norms,
behaviours, beliefs, and even symbols and practices so that a particular group can perpetuate
pervading understanding and attitudes concerning the environment, the group, and life as a
whole. In terms of globalisation, culture has been found to affect financing through at least three
channels: (1) that values that are predominant in a country depend on its culture; (2) culture
affects institutions; and (3) culture affects how resources are allocated in an economy (Stulz and
Williamson, 2003). In contemporary studies, globalisation has been deemed to drastically
transform the basic framework of cultural studies (Holton 2000). Although a large number of
studies have been conducted on the issue of globalisation and cultures, scholars have not agreed
on how globalisation transforms cultures around the world (Machida, 2012).
In relation to globalisation specifically, scholars have also done studies on the gravity
mode of international trade, which is a topic that is well established in the international business,
economics and finance literatures. This is relevant in globalisation because trade inevitably

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involves the interconnectedness among economies of different countries. In international

economics, it has become the dominant empirical model of trade flows, and in international
business, it has been applied to patterns of firm-level internationalization, foreign market entry,
international strategy, and the effects of culture on human resources, management and marketing
(Aggarwal, Kearney & Lucey, 2012).
Another important theory to point out is the Portfolio theory which predicts that
investors diversify across domestic and foreign markets to maximize portfolio efficiency.
International portfolio allocations by mutual funds are influenced by stock market development
and investor familiarity with various foreign markets as suggested by common language,
bilateral trade flows, and geographic proximity between investor and target countries. These
factors can be seen as a proxy for a behavioural bias toward familiar investments. Anderson,
Fedenia, Hirschey and Skiba (2011) point out that these factors can also be alternatively
considered as an ease of market access, a lack of information asymmetries among investors and
different foreign markets, as well as other kinds of market imperfections to which the managers
of the portfolio would respond to in the process of making decisions for asset allocation
(Anderson et al., 2011).
There are four dimensions that are assumed to reflect a societys culture: Power
distance refers to the extent to which people believe that power and status are distributed
unequally and the extent to which they accept an unequal distribution of power as the proper way
of organizing social systems; Masculinityfemininity refers to the extent to which a society
emphasizes traditional masculine values versus feminine values these masculine values include

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competitiveness, assertiveness, achievement and ambition, including the acquiring money and
other material possessions.
Feminine values include nurturing, offering help to others, and showing overall concern
and care for the quality of life; Individualismcollectivism reflects the degree to which a
society emphasizes the role of the individual as opposed to that of the group; and Uncertainty
avoidance refers to the extent to which people are uncomfortable with uncertain, unknown or
unstructured situations. Of the four dimensions, uncertainty avoidance and individualism in
particular have been related to economic phenomena (Beugelsdijk and Frijns, 2010). The firms
language, culture, and distance from the investor are three important familiarity attributes that
might explain an investors preference for certain firms. Grinblatt and Keloharju (2001) have
found that all three of these attributes contribute to investor preferences for certain stocks. It also
shows that the preferences tied to these attributes are inversely related to investor sophistication.
Discussion
According to Ghemawat and Altman (2013), the top ten ranks on the 2013 Depth Index
of Globalisation are as follows: Hong Kong first, followed by Singapore and Luxembourg
constituting the top three, and then Ireland, Belgium, Netherlands, Malta, Malaysia, Bahrain and
Estonia. Naturally, advanced economies with relatively small internal markets will have a larger
share of their trade, investment, communications, and even people, outside of their own borders.
These countries were presumed to have such. On the other hand, China did not fall into the top
ten but ranked 122nd out of 139 countries. The statistics in the report by Ghemawat and Altman
illustrate that China has a stronger outward compared to their inward depth in terms of
globalisation, despite their global impact being very large particularly in the field of trade.

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Despite their depth ranking, it serves as a useful point that even in China, the overwhelming
majority are still domestic, as it is similar to all other economies that are large. But this does not
mean that globalisation factors are not gradually changing these societies. The changes will not
be radical or sudden. Instead, they can manifest through time. For example, people can become
more materialistic and may start preferring Western-made products. Instead of valuing thrift and
simplicity, the local people can become more extravagant in their choices in proportion to the
rise in their incomes. This suggests that even in China were domestic companies still dominate
the economy, changes brought on by globalisation are still influencing culture.
Taking a transnational and historical approach, two major propositions were made in a
study by Lin (2002). First, the historical movement of people from the countryside in South
China to the metropolis of Hong Kong cannot be understood without reference to the distinct
sub-ethnic identity of the migrants in the nation. The great spatial mobility of the Hongkongers,
or, their refugee mentality as it is known, is closely related to their ethnolinguistic identity
which is based on the rural hinterland of the South China region.
Secondly, spatial restructuring in Hong Kong and the subsequent diasporic landscape
created have been inseparable from territorial organization on the Chinese mainland. Even after
the decade long process of globalisation and homogenization, the impact of the place of origin of
the Hongkongers on the settlement system they developed in Hong Kong has remained strong
and visible. Thus, urban-rural interaction across the Hong KongChina boundary, seemingly a
transnational and placeless phenomenon, has been deeply rooted in place-specific social
conditions. If the transnational movement of people between the countryside in South China and
the metropolis of Hong Kong is considered an important component of globalisation, then this

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study reinforces the importance of locality and contests the fashionable notion of globalisation as
a placeless phenomenon (Lin, 2002)
Hong Kong
While the effects of globalisation are fairly new to many Asian countries, this is not the
case in Hong Kong. The dual process of financial globalisation and economic restructuring
policies has sustained Hong Kongs continual growth of GDP at an average rate of 5.92 per cent
over the past two decades. Nevertheless, these developments have brought greater income
polarisation to Hong Kong, if not occupational polarisation. Meaning, becoming a financial
centre opened jobs related to this market. This means that individuals who are able to work in
companies in the financial industry earn a lot, making it possible for them to stay in comfortable
and even luxurious homes. Those who could not get well-paying jobs are relegated to the jobs
that do not pay a lot. As a result, these individuals would have to stay in places affordable to
them and these are often far the centre or cramped in terms of space.
By the mid- 1990s, the city saw continually rising unemployment and underemployment
rates. Increasing turbulence appeared with the drastic Asian financial crisis in 1997/ 1998, the
continued economic depression for 5 years afterwards and a substantial increase in households
with negative equities. For disadvantaged groups in Hong Kong, the Asian financial crisis broke
out in a context of deteriorating opportunities, an increasingly turbulent economy, overloaded
families and strictly limited social welfare support (Fung, 2014). The problem was, of course,
overcome in time. Hong Kong flourished again but the old polarisation problems continued.

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International competition drives research universities to find ways to anchor globalisation

for academic productivity and innovation through cross-border collaboration. This article
examines the case of pre- and post-colonial Hong Kong and how its universities transited from
undergraduate institutions to highly ranked research universities within 30 years. While this is
attributed to an enabling environment of institutional autonomy, open borders and cross-cultural
capacity, a case study of one research university points to the role played in all of Hong Kongs
universities by network agents, institutional arrangements, and brain circulation to recruit and
retain international scholars and scientists. While this has strengthened capacity, it cannot be
sustained without indigenous academic leadership to ensure that globalisation is anchored in
local culture. The article makes the case that the Hong Kong model already studied by research
universities on the Chinese mainland, is generalizable as a cosmopolitan model for developing
countries (Postiglione, 2013).
As a result of the spread of globalisation, new conflicts and tensions have emerged,
resulting in a surge of nationalism and fundamentalism, as discussed by the scholar Samuel
Huntington. In particular, in the face of globalisations impact upon the nation-state, nationalism
has been revived as a central form of political and cultural identity, which has resulted in diverse
national or local responses. One surprising feature of the global age is how robust local and
national cultures have proved to be. The tendency of globalisation to detraditionalize societies
does not necessarily mean that local cultures vanish, but rather that traditions are forced into the
open and challenged by a multiplicity of cultural forms (Ho and Law, 2009).
China

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While Hong Kong does not fare so well with globalisation, China its mother country
has greatly benefited from this phenomenon. Due to the occurrences of both liberalisation and
globalisation, the Gross Domestic Product (GDP) of China has been reported to grow by 9.8%
annually from the period of 1978 to 2012, and that its overall GDP volume has increased by 22.5
times (Xue, Luo and Li, 2014). The central plank of Chinas industrial policy has been the
attempt to transform its giant state-owned enterprises into globally competitive firms (Nolan,
2014). Since the 1990s, the problem of globalisation gradually became a focus of attention of
Chinese society. The Chinese government has a great respect for economic globalisation, but it is
against the global-scale unification of politics and economics. It approves establishment of
common world economy, but at the same time, sup- ports political multiplicity and cultural
diversity (Qinian, 2014). There is a close overall connection between globalisation and
innovation.
The high-income regions in China, often in the coastal area, have both high levels of
globalisation and innovation. For poorer regions, there is much less evidence that globalisation
of a region is associated with higher levels of innovation. More likely, poorer regions have
people who do not have the requisite skills, knowledge, or education to be able to compete in a
globalised employment market. Second, the panel analysis is able to focus on causal relation
within regions, so as to answer the question whether regions which open up to external
influences over time become more innovative (Zhang and Roelfsema, 2014). To some extent, the
"simplification" of culture can be regarded as a direct consequence of economic globalisation.
The Chinese cultural market, for example with regard to the publishing of books from the West

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including scholarship is facing challenges in the context of cultural and economic globalisation
(Wang and Ma, 2015).
Conclusion
This paper has discussed existing literature and theories that are relevant to culture and
globalisation, particularly how scholars have defined the two concepts. Globalisation and culture
are also interconnected with the field of economics and international trade, because of how
culture plays a big role when international investors make decisions, or how their culture
influences their preferences. It has also compared and contrasted between the situations of Hong
Kong from China, despite both countries having similar cultural ties. The former does not fare so
well in a globalised world as opposed to China that has greatly taken advantage of the fact that it
has the manpower and infrastructure to support global trade and to adapt to global demands.
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