Organizational Culture and Commitment

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1 Organizational Culture and Commitment

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3 Organizational Culture and Commitment Transmission in Multinationals Victoria W. Miroshnik Palgrave macmillan

4 Victoria W. Miroshnik 2013 Softcover reprint of the hardcover 1st edition All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No portion of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, Saffron House, 6 10 Kirby Street, London EC1N 8TS. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The author has asserted her right to be identified as the author of this work in accordance with the Copyright, Designs and Patents Act First published 2013 by PALGRAVE MACMILLAN Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited, registered in England, company number , of Houndmills, Basingstoke, Hampshire RG21 6XS. Palgrave Macmillan in the US is a division of St Martin s Press LLC, 175 Fifth Avenue, New York, NY Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world. Palgrave and Macmillan are registered trademarks in the United States, the United Kingdom, Europe and other countries ISBN ISBN (ebook) DOI / This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. Logging, pulping and manufacturing processes are expected to conform to the environmental regulations of the country of origin. A catalogue record for this book is available from the British Library. A catalog record for this book is available from the Library of Congress.

5 To my Angel and my Angelique

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7 Contents List of Tables List of Figures Acknowledgments Glossary of Abbreviations and Terminology xii xviii xix xx 1 Introduction 1 Importance of this research 1 Global culture 3 Global citizenship 3 National citizenship versus company citizenship 5 Company citizenship 5 Company citizenship as a competitive advantage 6 Key gaps in the related literature 7 Objectives of this research 8 Conclusion 9 2 Organizational Culture and Commitment 10 Organizational culture 10 Theoretical models of organizational culture 11 Values as core components of culture 16 Organizational culture as resource under the RBV theory 20 What is a resource under the RBV theory? 24 Organizational culture as a resource under the RBV theory 25 Organizational culture and corporate performance 26 Organizational commitment as the index of corporate performance 28 Organizational commitment 29 Relationship between culture and commitment 33 Conclusion 36 3 Relationship between the Headquarters and Subsidiaries in Multinational Companies 37 Types of multinational companies 40 Strategy structure literature 42 HQ subsidiary-relationship literature 43 vii

8 viii Contents Globalization/localization issues 46 Role of subsidiaries 46 Centralization versus autonomy issues 47 Alternative models of HQ subsidiary relationship 48 Hierarchical versus heterarchical approaches 48 Role of culture 50 Characteristics of the management system of Japanese multinational companies 54 HQ subsidiary management in Japanese multinational companies 55 Keiretsu and its impact on Japanese multinational companies 57 Organizational culture and its impact on commitment 58 Characteristics of the organizational culture of Japanese multinational companies 60 Characteristics of the organizational commitment of Japanese multinational companies 61 Thailand: general characteristics of organizational culture 62 India: general characteristics of organizational culture 63 Impacts of culture on commitment in Indian and Thai organizations 65 Transmission of culture from the HQ to the subsidiaries in multinational companies 65 Conclusion 69 4 Methodology 70 Design of data collection and survey 70 Brief characteristic of Shogun, the selected Japanese multinational company 72 5 Model and Measurement Instrument 76 Models of organizational culture 76 Models of organizational commitment 80 Models on the relationship between organizational culture and organizational commitment 83 Measurement of organizational culture 84 Measurement of organizational commitment 87 Research model 93 Measurement instrument 94 Characteristics of the sample scale 94 Measurement instrument: Organizational Culture Assessment Scale (OCAS) 95

9 Contents ix Measurement instrument: Organizational Commitment Scale (OCOMAS) 99 6 Organizational Culture and Organizational Commitment in the Parent Unit in Japan 104 Analysis of the factors comprising organizational culture and organizational commitment 105 Characteristics of the sample of the parent unit, Japan 105 Descriptive statistics: organizational culture 106 Reliability analysis: OC in HQ, Japan 108 Composition of the OC as unobserved variable 109 Covariance and correlation analyzes: OC in HQ, Japan 110 Analysis of variance: OC in HQ, Japan 111 Factor analysis: OC in HQ, Japan 112 Entrepreneurship and supportiveness: important characteristics of organizational culture in Japan 114 Statistical analysis of organizational commitment (OCOM) in HQ, Japan 118 Descriptive statistics: OCOM in HQ, Japan 119 Composition of the OCOM as unobserved variable 121 Covariance and correlation analyzes: OCOM in HQ, Japan 122 Analysis of variance: OCOM in HQ, Japan 123 Factor analysis: OCOM in HQ, Japan 124 Interrelationship between organizational culture and organizational commitment in Japan 129 Results of multiple regression analysis: HQ, Japan 129 Results of Structural Equation Modeling (SEM): Japan 134 Results of testing model for convergent and divergent validity in HQ, Japan 138 Conclusion Study B: Analysis of the Organizational Culture and Organizational Commitment in the Thai Subsidiary 140 Factors comprising the organizational culture of the Thai subsidiary of the Japanese MNC 141 Reliability analysis: OCOM in Thai subsidiary 151 Analysis of variance 154 Interrelationship between organizational culture and organizational commitment in Thai subsidiary 158 Structural equation modeling (SEM): Thai subsidiary 164 Conclusion 167

10 x Contents 8 Study C: Organizational Culture and Organizational Commitment in the Indian Subsidiary 169 Organizational culture of the Indian subsidiary 171 Analysis of variance: OCOM in the Indian subsidiary 184 Interrelationship between organizational culture and organizational commitment 189 Results of Structural Equation Modeling (SEM): Indian subsidiary 193 Conclusion Transmission of Culture-commitment from HQs to Subsidiaries: A Multilevel Model 199 Purpose of multilevel modeling 199 Structural equation modeling: organizational culture in HQ, Japan, and Thai subsidiary 203 Organizational culture: comparison between HQ, Japan, and Indian subsidiary 206 Organizational commitment (OCOM): comparison between HQ, Japan, and Thai subsidiary 210 Organizational commitment (OCOM): Comparison between HQ, Japan, and Indian subsidiary 213 Test of Equality of covariance matrices: OCOM: HQ, Japan, and Indian subsidiary 214 Comparison of organizational culture: Thai and Indian subsidiaries 216 Article I. Test of equality of covariance matrices for six value components of organizational commitment: Thai and Indian subsidiaries 218 Conclusion Discussion 222 Philosophical position of the research: positivism 223 Organizational culture in the parent unit in Japan 226 Transmission of culture-commitment from HQ to subsidiary operations 237 Comparison of organizational cultures: parent unit in Japan versus Indian subsidiary 239 Organizational commitment: comparison between HQ in Japan and the Indian subsidiary 245 Culture commitment relationship in the Thai subsidiary 248 Conclusion 254

11 Contents xi 11 Conclusion 255 Research achievements 255 Contributions of this research 256 Empirical contributions of the research 260 Contributions to practice 260 Appendices 267 References 296 Index 329

12 List of Tables 1.1 Key gaps in the related literature Research questions Theoretical models of organizational culture Conceptual studies on organizational commitment Conceptual studies on relationship between culture and commitment Multinational literature in chronological pattern Conceptual studies on transmission of organizational culture and commitment in HQ subsidiary relationship literature Advantages and disadvantages of stratified random sampling Empirical studies with value-components of culture of OCP Empirical studies with value-components of commitment of OCQ Study A: set of hypotheses examined Characteristics of the sample of the parent unit, Japan Descriptive statistics: OC, Japan Composition of organizational culture, structural regression: HQ, Japan Covariance matrix: OC in HQ, Japan Correlation matrix: OC in HQ, Japan Analysis of variance: OC in HQ, Japan Communalities matrix: OC in HQ, Japan Total variance explained: OC in HQ, Japan Component matrix: OC in HQ, Japan Rotated component matrix: OC in HQ, Japan Factor analysis: OC in HQ, Japan Essentials of factor analysis: OC in HQ, Japan KMO and Bartlett s test: OC in HQ, Japan Descriptive Statistics: OCOM in HQ, Japan Composition of organizational commitment: structural regression, SEM: HQ, Japan Covariance matrix: OCOM in HQ, Japan Correlation matrix: OCOM in HQ, Japan Analysis of variance: OCOM in HQ, Japan Communalities: OCOM in HQ, Japan 124 xii

13 List of Tables xiii 6.21 Total variance explained: OCOM in HQ, Japan Factor analysis: OCOM in HQ, Japan Essentials of factor analysis: OCOM in HQ, Japan Component matrix: OCOM, Japan Rotated component matrix: OCOM, Japan KMO and Bartlett s test: OCOM in HQ, Japan Model summary, regression: OCOMJV2 in HQ, Japan ANOVA, regression: OCOMJV2 in HQ, Japan Coefficients, regression: OCOMJV2 in HQ, Japan Model summary, regression: OCOMJV3 in HQ, Japan ANOVA, regression: OCOMJV3 in HQ, Japan Coefficients, regression: OCOMJV3 in HQ, Japan Model summary, regression: OCOMJV4 in HQ, Japan ANOVA, regression: OCOMJV4 in HQ, Japan Coefficients, regression: OCOMJV4 in HQ, Japan Model summary, regression: OCONJV5 in HQ, Japan ANOVA, regression: OCOMJV5 in HQ, Japan Coefficients, regression: OCOMJV5 in HQ, Japan Results of multiple regression analysis: OCOM in HQ, Japan Factor scores regressions: standardized solution of SEM: OC and OCOM in HQ, Japan Correlation matrix of SEM: OC and OCOM in HQ, Japan Study B: set of hypotheses examined Characteristics of the sample of the Thai subsidiary Descriptive statistics: OC, Thai subsidiary Covariance matrix: OC, Thai subsidiary Correlation matrix: OC, Thai subsidiary Analysis of variance: OC, Thai subsidiary Communalities: OC, Thai subsidiary Total variance explained: OC, Thai subsidiary Component matrix: OC, Thai subsidiary Rotated component matrix: OC, Thai subsidiary Factor analysis: OC, Thai subsidiary Essentials of factor analysis: OC, Thai subsidiary KMO and Bartlett s test: OC, Thai subsidiary Descriptive statistics: OCOM, Thai subsidiary Covariance matrix: OCOM, Thai subsidiary Correlation matrix: OCOM, Thai subsidiary Analysis of variance Communalities: OCOM, Thai subsidiary Total variance explained: OCOM, Thai subsidiary 155

14 xiv List of Tables 7.20 Component matrix: OCOM, Thai subsidiary Rotated component matrix: OCOM, Thai subsidiary KMO and Bartlett s Test: OCOM, Thai subsidiary Factor analysis: OCOM, Thai subsidiary Essentials of factor analysis: OCOM, Thai subsidiary Model summary, regression: OCOMTHV1, Thai subsidiary ANOVA, regression: OCOMTHV1, Thai subsidiary Coefficients, regression: OCOMTHV1, Thai subsidiary Model summary, regression: OCOMTHV2, Thai subsidiary ANOVA, regression: OCOMTHV2, Thai subsidiary Coefficient, regression: OCOMTHV2, Thai subsidiary Model summary, regression: OCOMTHV4, Thai subsidiary ANOVA, regression: OCOMTHV4, Thai subsidiary Coefficients, regression: OCOMTHV4, Thai subsidiary Multiple regression analysis: Thai subsidiary Factor scores regressions: standardized solution of SEM: OC and OCOM, Thai subsidiary Correlation matrix of SEM: OC and OCOM, Thai subsidiary Study C: set of hypotheses examined Characteristics of the sample of the Indian subsidiary Descriptive statistics: OC, Indian subsidiary Covariance matrix: OC, Indian subsidiary Correlation matrix: OC, Indian subsidiary Analysis of variance: OC, Indian subsidiary Relative importance of factors: OC, Indian subsidiary Eigen values and total variance: OC, Indian subsidiary Component matrix: OC, Indian subsidiary Rotated component matrix: OC, Indian subsidiary KMO and Bartlett s test: OC, Indian subsidiary Factor analysis: OC, Indian subsidiary Essentials of factor analysis: OC, Indian subsidiary Descriptive statistics: OCOM, Indian subsidiary Covariance matrix: OCOM, Indian subsidiary Correlation matrix: OCOM, Indian subsidiary Analysis of variance: OCOM, Indian subsidiary Relative Importance of factors: OCOM, Indian subsidiary Eigen values and total variance: OCOM, Indian subsidiary Component matrix: OCOM, Indian subsidiary Rotated component matrix: OCOM, Indian subsidiary Factor analysis: OCOM, Indian subsidiary KMO and Bartlett s test: OCOM, Indian subsidiary 188

15 List of Tables xv 8.24 Essentials of factor analysis: OCOM, Indian subsidiary Model summary, regression: OCOMINV1, Indian subsidiary ANOVA, regression: OCOMINV1, Indian subsidiary Coefficients, regression: OCOMINV1, Indian subsidiary Model summary, regression: OCOMINV4, Indian subsidiary ANOVA, regression: OCOMINV4, Indian subsidiary Coefficients, regression: OCOMINV4, Indian subsidiary Multiple regression analysis: successful results, Indian subsidiary Factor scores regressions: standardized solution of SEM: OC and OCOM, Indian subsidiary Correlation matrix of SEM: OC and OCOM, Indian subsidiary Tests of equality of group means: OC in HQ, Japan and Thai subsidiary Log determinants: OC in HQ, Japan and Thai subsidiary Test results: OC in HQ, Japan and Thai subsidiary Eigen values: OC in HQ, Japan and Thai subsidiary Wilk s Lambda: OC in HQ, Japan and Thai subsidiary Factor scores regression, SEM: OC in HQ, Japan and Thai subsidiary Tests of equality of group means: OC in HQ, Japan and Indian subsidiary Log determinants: OC in HQ, Japan and Indian subsidiary Box s M-test results: OC in HQ, Japan and Indian subsidiary Summary of canonical discriminant functions: OC in HQ, Japan and Indian subsidiary Wilks Lambda: OC in HQ, Japan and Indian subsidiary Factor scores regression, SEM: OC in HQ, Japan and Indian subsidiary Tests of equality of group means: OCOM in HQ, Japan and Thai subsidiary Log determinants: OCOM in HQ, Japan and Thai subsidiary Test results: OCOM in HQ, Japan and Thai subsidiary Eigen values: OCOM in HQ, Japan and Thai subsidiary Wilk s Lambda: OCOM in HQ, Japan and Thai subsidiary Tests of equality of group means: OCOM in HQ, Japan and Thai subsidiary Log determinants: OCOM in HQ, Japan and Thai Subsidiary Box s M-test results: OCOM in HQ, Japan and Thai subsidiary 215

16 xvi List of Tables 9.21 Eigen values: OCOM in HQ, Japan and Thai subsidiary Wilk s Lambda: OCOM in HQ, Japan and Thai subsidiary Tests of equality of group means: OC in Indian subsidary and Thai subsidiary Log Determinants: OC in Indian subsidiary and Thai subsidiary Box s M-test results: OC in Indian subsidiary and Thai subsidiary Eigen values: OC in Indian subsidiary and Thai subsidiary Wilk s Lambda: OC in Indian subsidiary and Thai subsidiary Tests of equality of group means: OCOM in Indian subsidiary and Thai subsidiary Log determinants: OCOM in Indian subsidiary and Thai subsidiary Box s M-test results: OCOM in Indian subsidiary and Thai subsidiary Eigen values: OCOM in Indian subsidiary and Thai subsidiary Wilk s Lambda: OCOM in Indian subsidiary and Thai subsidiary Theoretical contributions of research Methodological contributions of research Empirical contributions of research 261 List of Tables in Appendices 4A.1 Features of qualitative and quantitative research methods 267 4A.2 Characteristics of the basic research techniques used in quantitative studies 268 4A.3 Characteristics of different types of surveys 269 5A.1 Organizational culture, some major measurement instruments reported in literature 270 Questionnaire in English language 272 Questionnaire in Japanese language 275 Questionnaire in Thai language 278 6A.1 Details of reliability tests using Cronbach Alpha: HQ, Japan 281 6A.2 Analysis of variance (organizational culture): HQ, Japan 281 6A.3 Analysis of variance (organizational commitment): HQ, Japan 282 6A.4 Goodness of fit statistics for structural equation modeling: HQ, Japan 282

17 List of Tables xvii 6A.5 Means and standard deviations: each factor comprising organizational culture in HQ, Japan 283 6A.6 Means and standard deviations: each factor comprising organizational commitment (OCOM) in HQ, Japan 285 7A.1 Details of reliability tests using Cronbach Alpha 287 7A.2 Analysis of variance (organizational culture) 288 7A.3 Analysis of variance (organizational commitment) 288 7A.4 Goodness of fit statistics for structural equation model 289 8A.1 Details of reliability tests using Cronbach Alpha 289 8A.2 Analysis of variance (organizational culture) 290 8A.3 Analysis of variance (organizational commitment) 290 8A.4 Goodness of fit statistics for structural equation model 291 9A.1 Goodness of fit statistics: structural equation model Japan Thailand: organizational culture 292 9A.2 Goodness of fit statistics: structural equation model Japan India: organizational culture 293 9A.3 Goodness of fit statistics: structural equation model Japan Thailand: organizational commitment 294 9A.4 Goodness of fit statistics: structural equation model Japan India: organizational commitment 295

18 List of Figures 2.1 Factors comprising performance Research design Conceptual research model Multilevel research model Mean responses on eight factors comprising OC in HQ, Japan Mean responses on six factors comprising OCOM in HQ, Japan Relationship between OC and OCOM in HQ, Japan Mean responses on eight factors comprising OC in the Thai subsidiary Mean responses on six factors comprising OCOM in the Thai subsidiary Relationship between OC and OCOM in the Thai subsidiary Mean responses on eight factors comprising OC in the Indian subsidiary Mean responses on six factors comprising OCOM in the Indian subsidiary Relationship between OC and OCOM in the Indian subsidiary Relationship between OC in HQ, Japan and OC in the Thai subsidiary Relationship between OC in HQ, Japan and OC in the Indian subsidiary OC in all three locations: HQ, Japan, Thai subsidiary and Indian subsidiary Organizational commitment as index of performance in all three locations: HQ, Japan, Thai subsidiary and Indian subsidiary 240 xviii

19 Acknowledgments The idea of this book took shape while I was researching multinational companies as a part of my MBA study. As my background is in psychology, I felt a lot of things might be missing if I restricted myself to the economic and operations research aspects of the management systems. The human factor is the most essential part of management. This is particularly true of Japanese companies, which place emphasis on employee satisfaction and participate in rituals to bridge the gap between management and ordinary employees a policy that may not exist in Western multinationals. I suspect that most experts still do not appreciate the Japanese system of management and its distinct human relationship system. The purpose of this book is to inform the readers of the core of that system. I was supported in this research by a large number of senior executives, presidents and vice-presidents, board members, plant managers, general managers, and finance managers from Mitsubishi, Toyota, Nissan, Suzuki, and Honda in Japan, Thailand, India, Australia, and Britain. I was supported in this research by Nagasaki University, particularly Professor Dipak Basu. It would have been impossible to design the research or gather the data without this assistance. I was pleasantly surprised by their openness to discuss every issue in detail. My family members, Walter Bjichkian, Tanya Miroshnik, and little Anghelika have provided every incentive for my research for this book. xix

20 Glossary of Abbreviations and Terminology CP Corporate Performance HQ Headquarters JIT Just in Time MNC Multinational Company MRA Multiple Regression Analysis OC Organizational Culture OCAI Organizational Culture Assessment Instrument, the research measurement instrument to assess organizational culture that proposed by O Reilly et al. (1991) OCAS Organizational Culture Assessment Scale, the research measurement instrument proposed by the author OCB Organizational Citizenship Behavior OCOM Organizational Commitment OCOMAS Organizational Commitment Assessment Scale of the research measurement instrument proposed by the author OCP Organizational Culture Profile, the research measurement instrument to assess organizational culture proposed by O Reilly et al. (1991) OCQ Organizational Commitment Questionnaire, the research measurement instrument to assess organizational culture proposed by Mowday et al. (1979, 1982) ODQ Organizational Description Questionnaire, the research measurement instrument to assess culture proposed by Bass and Avolio (1990, 1997) RBV Resource-Based View, the theory proposed by Barney (1991, 2001, 2005) RVS Rockeach Value Survey, the research measurement instrument to assess culture proposed by Rockeach. (1973) SEM Structural Equation Modeling SS Sample Scale of the research measurement instrument proposed by the author xx

21 Glossary xxi SVS Schwartz Value Survey, the research measurement instrument to assess culture proposed by Schwartz (1994, 1996) TQM Total Quality Management OCINVi = OCInvi for all i = 1, 8 OCINVi Organizational Culture India Value (i = 1, 8) OCJPVi Organizational Culture Japan Value (i = 1, 8) OCJVi = OCJVi for i = 1, 8 OCOMJVi = OComJVi for i = 1, 8 OCOMINVi Organizational Commitment India Value (i = 1, 6) OCOMINVi = OComInvi for all i = 1, 8 OCOMJPVi Organizational Commitment Japan Value (i = 1, 6) OCOMTHVi Organizational Commitment Thailand Value (i = 1, 6) OCOMTHVi = OComThvi for all i = 1, 8 OCTHVi Organizational Culture Thailand Value (i = 1, 8) OCTHVi = OCThvi for all i = 1, 8 Definitions of Values as Factors composing the variable Organizational Culture : OCJV1 = Innovation; OCJV2 = Entrepreneurship; OCJV3 = Decisiveness; OCJV4 = Stability & Security; OCJV5 = Supportiveness; OCJV6 = Emphasis on Performance; OCJV7 = Team Spirit; OCJV8 = Preciseness Definition of values as factors composing the variable Organizational Commitment : OCOMJV1 = Emotional Attachment; OCOMJ2 = Value Attachment; OCOMJV3 = Environment Attachment; OCOMJ4 = Sense of Sacrifice; OCOMJV5 = Rational Attachment; OCOMJV6 = Ego Orientations