Schumpeterian Growth Model And Convergence Theory Economics Essay

Schumpeterian Growth Model And Convergence Theory Economics Essay The Schumpeterian model, developed by Aghion and Howitt (1992) is an economic growth model that includes technological improvements, or innovation. This leads to the process of creative destruction where the advancement of new technologies renders the old obsolete. To give a theoretical example, colour mobile phones have replaced the old black and white ones in stores. Also the advancement of mobile phone technology could mean less need for wrist watches or cameras. This is based on the work pioneered by Joseph Schumpeter (1950) where innovators are the drivers of economic growth. He popularised the use of the term creative destruction or Schà ¶pferische Zerstà ¶rung. The efficiency frontier, used interchangeably with technological frontier, is based on growth with technological progress. It describes how technological implementation affects the growth rate of countries depending on their relative level of technological development. An industrialising country is far behind the frontier so has a large advantage by adopting the technologies of wealthier countries. As the economy moves closer to the frontier the effectiveness of this practise is abated. Hence policies that are effective in one economy could be detrimental in another depending on their level of industrialisation. This has implications on the theory on convergence. If a country is positively investing in RD they should be able to maintain economic growth. The way a country converges and if convergence is possible depends party on its comparative level of development and in part on its economic policies. Hence the Schumpeterian theory is that of club convergence. there are different lev els of convergences; a country moves towards the same frontier to that of his technological peers. This paper looks at the basic model of Schumpeterian growth and then applies it examine why growth rates differ across countries. The remainder of the paper is set out as follows: section 2 provides a brief literature review, section 3 presents the model. An application of the Schumpeterian model is looked at in section 4 where the effect of technological advancement is used to examine the technological frontier. Section 5 is an empirical testing of the model including the efficiency frontier is looked at in section 4. Section 6 looks at convergence due to technological advancement. and section 7 concludes and suggests areas for future research. Section 2: Literature review Majority of the work in this field has been undertaken by Aghion and Howitt. They developed the original model and have released a number of papers, together and corroborating with others, that expand the model. They have also done work on the technological frontier. Acemoglu has also published a prominent amount of literature in this field. Barro and Sala-i-Martin (2004) have provided a good algebraic model which is replicated in the next section. Jones (1995), Young (1998) and subsequently Dinopoulos and Thompson (1998) have developed neo-Schumpeterian models to remove scale affects. Empirical literature testing the accuracy of the model is rare, especially for countries outside the EU (excluding the USA). Most empirical literature discovered is testing other theories within the context of the Schumpeterian growth model. Zachariadis (2002) gives an overview of previous empirical literature and finds that most conform to the Schumpeterian model. He then does his own analysis and concurs that an increase in technological progress has a positively affects the growth rate of output. Teixeira and Vieira (2004) examine the relationship between productivity and human capital in Portugal. They find the pattern conforms to the Schumpeterian model of creative destruction. A problem with the literature is that they all use statistics on patent approval as a measure of technological development. The Schumpterian growth model is concerned with technological improvement in general, not just new innovations, so in this case imitation could also be included. The problem is that it is difficult to find data on imitation rates in an economy. Xu (2000) attempts to solve this problem by using data on the rate of technology transfers from US multinational enterprises to both developed and developing economies. Empirical literature also tends to focus on the USA, whom is at the forefront of the efficiency frontier. This could result in an underestimation on the effects of RD on growth because there is no effect from technological transfer at the head of the frontier. Once again Aghion and Howitt are prominent researchers in the field of Schumpeterian convergence. Howitt (2000) provided a framework which was later developed into a model (Howitt Mayer-Foulkes, 2004). Krugmans paper (1994) was seminal in literature on growth accounting, an early paper on Schumpeterian convergence. He argued the miraculous growth rates experience by the Soviet Union and in Asia were simply a product of large scale increases in input. There must be technological change for growth to be sustainable. Section 3: The model In the Schumpeterian growth paradigm, growth in driven by technological change. Here new technologies replace the old in a process described as creative destruction (Durlauf, 2010). In this model we assume new technologies are completely substitutable for the old ones. So as new technologies are invented they completely drives out the old technology from the marketplace. Innovation leads to a higher level of output being achieved for a given level of capital and labour than was previously possible which enables the economy to transcend the law of diminishing returns (Weil, 2005). Figure 1 in the appendix shows the law of diminishing returns where the purple line indicates the higher output possibility with technological improvement. The country acquires this new technology either through innovation or imitation. There are three players in the model: producers, innovators and consumers (Barro Sala-i-Martin, 2004). Innovators perform RD in order to develop new technologies. Those that are successful receive monopoly rents from the product due to patents. Note that the latest innovator has a efficiency advantage compared to the previous innovator but he has a disadvantage compared to the next. This is because the latest innovator is able to expand upon past knowledge in his creation of new technologies. This is shown in Figure 2. The successful innovator has the right to sell his idea to a final good producer, at this stage the profit stream to the previous innovator is terminated. The model makes several assumptions about the producers. There are a fixed amount Ñ products in the economy of varying quality. Each new producer is different from the old producer. So when innovations are made the old producer receives no more profit and the new producer takes over the market. Therefore the industry leader has the first mover advantage. The duration of dominance in the market is random (Barro Sala-i-Martin, 2004). The products are placed on a quality ladder, as shown in Figure 3. There are Ñ different goods of quality K. An improvement in a certain good corresponds with a movement up the ladder, an increase in K. Figure 4 shows the quality ladder for an individual product. Here we can see that duration between quality improvements and the size of quality improvements are both random. An incomplete, simplistic version of the growth model is as follows: in an economy with a fixed amount Ñ products, output is given by Yi = ALi1-ÃŽÂ ± .à ¢Ã‹â€ Ã¢â‚¬ËœNj=1 (qKjXij)ÃŽÂ ± where Yi is output in industry i, given A is the technology parameter, L is labour input and qKjXij is the quality, K, adjusted amount of the jth type of intermediate good X in industry i. If P is price, a firm maximises profit with Yi wLi à ¢Ã‹â€ Ã¢â‚¬ËœNj=1 Pjxij Demand for product X equals the marginal cost of production Xj = L. [AÃŽÂ ±qÃŽÂ ±Kj/Pj]1/(1-ÃŽÂ ±) The monopoly profit, à Ã¢â€š ¬Kj, for the innovator is the difference between the price of the product and marginal cost of production à Ã¢â€š ¬Kj =(Pj -1)Xj If Zj Kj is the flow of resources (as in figure 1) and à Ã¢â‚¬ ¢ is random then an innovator faces probability of success pKj = Zj Kj.à Ã¢â‚¬ ¢Kj and with ÃŽÂ ¶ as a parameter equal to the cost of doing research à Ã¢â‚¬ ¢ is equal to à Ã¢â‚¬ ¢kj = (1/ÃŽÂ ¶). q-(kj+1).ÃŽÂ ±/(1-ÃŽÂ ±) which is an endogenous variable (Barro Sala-i-Martin, 2004: 321-22). The consumers are interested in consuming the latest good. If ÃŽÂ ¸ is a constant representing the elasticity of marginal utility, in other words the willingness to substitute and (r à Ã‚ ) is a marker of growth over time then household consumption grows by ÄÅ  /C = (1/ÃŽÂ ¸).(r à Ã‚ ) The interest rate can be defined as a function of profit flow, ÃÅ'„à Ã¢â€š ¬, the cost of doing research, ÃŽÂ ¶, and the probability of success r =( ÃÅ'„à Ã¢â€š ¬/ÃŽÂ ¶) p So the amount of resources devoted to RD in sector j at k quality can be defined as Zkj = q(kj+1).ÃŽÂ ±/(1-ÃŽÂ ±).(ÃÅ'„à Ã¢â€š ¬ rÃŽÂ ¶) Hence aggregate RD spending is à ¢Ã‹â€ Ã¢â‚¬ËœNj=1 Zkj= qÃŽÂ ±/(1-ÃŽÂ ±)Q.(ÃÅ'„à Ã¢â€š ¬ rÃŽÂ ¶) Q is the aggregate level of quality improvements. The growth rate of Q is equal to ÃÅ'†¡Q/Q = ( ÃÅ'„à Ã¢â€š ¬/ÃŽÂ ¶ r).[qÃŽÂ ±/(1-ÃŽÂ ±) 1] If we algebraically substitute the above equation into the the consumption growth equation, allowing for r =( ÃÅ'„à Ã¢â€š ¬/ÃŽÂ ¶) p we get the growth rate ÃŽÂ ³ ÃŽÂ ³ = [qÃŽÂ ±/(1-ÃŽÂ ±) 1] . [( ÃÅ'„à Ã¢â€š ¬/ÃŽÂ ¶) à Ã‚ ] 1+ÃŽÂ ¸ . [qÃŽÂ ±/(1-ÃŽÂ ±) 1] We can see growth increases with economic profit flows, ÃÅ'„à Ã¢â€š ¬, and quality enhancements, q, but decreasing with the cost of research, ÃŽÂ ¶, and the utility parameters à Ã‚  and ÃŽÂ ¸ (Barro and Sala-i-Martin, 2004: 91, 327-31). The basic model has been expanded upon in recent literature. Aghion et al (2001) relaxes the assumption that the monopoly rent receiver will cease to innovate while he receives the rents. In this model there are two firms in an industry so the rent receiver must continue to innovate in order to keep up with the industry leader. This is important because leap frogging is not possible in this model and competition is important for growth. I was unable to find empirical testing of this framework but the assumptions made are more realistic to the real world. For example, when Nintendo invented the gameboy in the 1990s, they did not wait for the competitors to develop hand held gaming devices before they made improvements to the original gameboy. The paper also proposes that a small level of imitation is always good for growth because it encourages competition. Contrastingly, large levels of imitation is detrimental. This issue is explored further in the next section. Aghion et al. (2005) introduce credit constraints into there model. In reality poorer countries are restricted in how much they can imitate because they do not have enough money. Poorly functioning financial institutions or markets limit the flow of credit to potential entrepreneurs. Another line of research was pioneered by Jones (1995) we he brought into light the problems with assuming scale affects. Scale affects arise because the in the classic Schumpeterian model, Aghion and Howitt (1992) assume productivity will rise as the population increases but this has not been empirically supported (Durlauf, 2010). Aghion and Howitt (1998) acknowledged the correction to their model and have also incorporated growth effects into their new model. Dinopoulos and Thompson (1998) have also based work on Jones model by modifying the welfare effects. Section 4: Efficiency Frontier The Schumpeterian model describes growth due to technological progress. The productivity parameter is shown as a change in technology between two periods. If ÃŽÂ ¼n is the frequency innovations take place, ÃŽÂ ¼m the frequency of implementation and ÃŽÂ ³ is a multiple of the new technology we can write the productivity parameter as At+1 At = ÃŽÂ ¼n(ÃŽÂ ³-1)At + ÃŽÂ ¼m(At-At) and we can describe the growth rate,g, as the percentage change in productivity between the two periods (At+1 At)/At g = ÃŽÂ ¼n(ÃŽÂ ³-1) + ÃŽÂ ¼m(ÃŽÂ ±-1-1) where ÃŽÂ ±-1 = At/Äâ‚ ¬t (Durlauf 2010: 232). This leads us to the theory of the technological frontier. The country at the forefront of the frontier is the most technologically progressive economy, which has typically been the USA (Griffth et al. year). The distance of a country to the frontier impacts the effectiveness of adopting technologies and policies on growth. This is used to explain the experience of the slowdown of european growth after the 1970s. It cannot be explained by the Solow model as Europe had much higher levels of savings (Aghion Howitt 2006: 270). An alternative explanation is the lower frequency of technological implementation in Europe meant the continent could not keep up with the USA in terms of growth during the technological revolution during the 1980s. The technological frontier is captured algebraically by à £ = ÃŽÂ ¼m/(g + ÃŽÂ ¼m ÃŽÂ ¼n(ÃŽÂ ³-1)) which is the steady state value of at (Durlauf 2010: 233). Gerschenkrons theory of backwardness is incorporated into the model above. Gerschenkron (1962) proposed that relatively backwards economies could achieve high levels of growth by investing RD into imitating technologies of the advanced countries. Relating it to this model, economies far behind the frontier could move closer to à £ by enabling a large increase in ÃŽÂ ¼m because it is quicker to mimic technologies instead of inventing new ones. This result is true for OECD countries (Griffith et al 2000: 893) At the lower stage of development countries are advantaged by implementing anti-competitive policies that would encumber growth at later stages of development. For example, having many state owned enterprises means lower competition. This means an economy should not rely on investment based strategies for a prolonged period of time, at later stages of development they should start to encourage innovation instead. Investment based strategies are those that protect certain indus tries, foster strong relationships between firms and workers and between firms and banks, and encourage high levels of savings (Acemoglu et al 2006: 38-9). The German and Japanese economic model is an example of this. Although perhaps not the best example as both economies also place importance on innovation. Figure 6 shows the relationship between distance to the frontier and barriers to competition. This confirms that the closer a country is to the frontier, the more detrimental barriers to competition are to growth by the significant negative coefficient in all estimates for this relationship. The relationship between distance to the frontier and low barriers on growth is less negative and not significant (Acemoglu et al. 2006: 42-43). Most papers find tacit knowledge to be an important factor when adapting technologies. In this case location and close relationships with developed countries is important because the information can be easily passed on. An example was given in Grif fith et al (2004: 883) of when the British supplied the Americans with jet planes during the Second World War. The planes had to be redrawn to comply with American standards, a process which took ten months. Even once a country has sufficiently developed institutions or a high level of human capital it could still be at a disadvantage because it does not have the knowledge implicit in other regions. In the case of USA versus European economic growth, one aspect not covered by the model is that Europe is made up of many different countries with different attitudes. Hence fiscally responsible nations like Germany need to make up for large spending nations like Greece and Hungary. Countries like France and Sweden have highly developed social welfare systems, which impede growth, while the US welfare system is notoriously poor. On the other hand the social welfare systems can also play into the Schumpeterian model. For example, firm entry and exit rates are far lower in Europe, partly because Europeans tend to be more cautious in entrepreneurship and failure is not as heavily stigmatised in the US (Verheul et al 2002: 230). Firm turnover is part of creative destruction. Note that high entry and exit rates are only important at the head of the frontier. As described above, they should be low when a country is far behind the frontier, consistent with anti-competitive behaviour. The importance of technological progress for growth is seen in the examples of the Soviet Union in the 1950s and the East Asian miracle in the 1990s. These countries moved rapidly towards the frontier during their respective years of growth but it was unable to be sustained and they never reached the frontier. The high growth rates have been found to have resulted from large scale increases to input (Krugman, 1997) in other words from government investment and growing populations. The governments failed to successfully switch to innovation strategies and the growth rates faltered. A similar phenomenon appears to be unfolding at the moment in China. Once the population growth rate starts to decrease it remains to be seen whether they can continue to sustain their economic growth. An government then faces the problem of when to switch from policies promoting catch up growth to those enabling competition. Acemoglu et al. (2006: 64) has derived an algebraic model capturing the point where an economy should switch strategies The turning point is a function of ÃŽÂ ¼, innovation incentive, ÃŽÂ ´, anti-competition and à Ã¢â‚¬Å¾, the fraction of government subsidised investment. This equation also incorporates the spillovers, cost of the investment, the skills of the entrepreneur and the amount of high skilled agents in the economy. The full model is explained in Acemoglu et al (2006). If the economy were to transfer before the turning point was reached it would lose the advantage of backwardness and also may not have industries developed enough to compete globally. On the other hand if it remains in the investment stage for too long it may risk falling into the non convergence trap. Growth levels stagnate because total factor productivity is not increasing with the global standard. The problem with this model is that it is simplistic. There are many factors hard to capture in economic model. An example is poorly developed countries tend to have high levels of corruption. Powerful business leaders could influence the decision not to switch away from the investment strategy. In the case above with the Soviet Union there were political problems hindering growth when communism fell. Another problem is that the communist destroyed large amounts of resources with their inefficient techniques. Large amounts of land became in-arable due to pollution and untapped oil became inaccessible. Natural resources or geographic local could also affect growth. For example the EU has great benefits to member countries. There could be problems mobilising the population from rural to urban areas such as in Africa. Sociologist literature places emphasis in a national psyche that influences economic growth. This is common in entrepreneurial literature when examining regional motivatio nal difference but discredited somewhat in economic literature. The example previously used in this paper is that America is more entrepreneurial because of its emphasis on individualism and willing acceptance of change. This is a reason for their strong growth. The empirical testing of the above framework is looked at in the next section. Education is another important factor to consider in growth models. Does higher human capital result in economic growth. One might assume with a highly educated population there is greater likelihood of successful innovations. Yet as described in the above scale effects literature this is not automatically true. A country with a basic primary and secondary education may advance in the earlier stages of development but there are diminishing returns to scale as the country progresses towards the frontier. For countries near to the frontier a greater emphasis must be placed on tertiary education. Table 1 shows the educational attainments of 5 large OECD countries. USA and Japan both have relatively high levels and France has been quite low. Table 2 shows Japan and the US have had the highest levels of productivity growth over the period and the Netherlands was low. The amount of total patents shown in Table 3 shows a different ranking. The USA and Japan still at the top but Germany has also performed highly. France and Netherlands have granted a far lower amount of patents. These figures are too superficial to make any conclusions and further research should be done on this issue but it seems tertiary education is unrelated to patent number but could be one of many contributing factors towards productivity growth. It might be useful to look at increases in education rates and compare it to increases in patent rates to see if tertiary education has an affect on innovation when close to the frontier. Section 5: Empirical evidence There have been examples of data from various countries conforming to the Schumpeterian model of growth, as a closer fit than captured by the Solow model. Venturini (2010) have taken data from the US economy. He has expanded the model to include ÃŽÂ ´, the rate at which ideas become obsolete. He finds only a weak fit to the Schumpeterian model but acknowledges that this could be to do with a bias formed from the underlying assumptions of the framework. Teixeira and Vieira (2004) find the Schumpeterian model fits the case of regional Portuguese data. They estimated an econometric model of human capital, firm productivity and firm failure rates. The main finding is that regions with higher levels of income and human capital have higher failure rates on average, a process of creative destruction. Clydesdale (2007) finds the Chinese economic growth is hampered by not engaging a technological enhancement strategy. The Chinese economy is restricted by being overly ridgid and too special ised, making change difficult (Clydesdale, 2007: 71). Recent Chinese growth has been found to be resultant from a large scale increase in the quantity of inputs rather than from improvement in input quality. Historically this has not been a sustainable method of growth, for example the former USSR. Zachariadis (2010) used a neo-Schumpeterian model to estimate an RD steady state on the US manufacturing industry. He empirical evidence that scale effects do not exist in Schumpeterian growth (Figure 6). Between 1957 and 1989 levels of RD remained constant as did technological progress despite an obvious increase in population (Zachariadis, 2002: 569). The main finding in the paper is that RD has a strong positive affect on patent rates and is probably a cause of growth. Although most papers rely on data on patents to estimate technological progress, Xu (2000) measures technology spillovers from US multinational enterprises on 40 different countries. He finds that technology spillovers have a positive affect on productivity growth as long as they have met a certain level of human capital accumulation. This means countries that are relatively undeveloped like Brazil. These results are consistent with the findings of Aghion and Howitt (2006) above where developed countries have a greater emphasis on tertiary education and therefore a greater ability to innovate. Poorer countries need to reach a certain level of knowledge before they can successfully adapt technologies. As they move further towards the frontier the emphasis must shift to innovation in order to keep growing. Positive affects on productivity are still felt in the poorly developed economy but from other causes (Xu, 200: 479). Griffith et al (2000) made a study in OECD countries on the effe cts of RD imitation in catching up to the efficiency frontier. As with Zachariadis, Griffith et al. find an affect on patents from RD. They also find human capital affects innovation and imitation but international trade does not have a significant affect. Figure 7 was taken directly from their paper. TFPGAP is a measure of distance to the frontier and robust standard errors are in parentheses. Column 1 shows a positive, significant relationship of technology transfers on productivity growth, and in column 2 they introduce the effects of RD growth, also significant. In column 3 the level of RD and the relationship between RD is positive. The greater the distance to the frontier, the greater the chance of technology transfers to positively affect RD and growth but only at a ten per cent significance level. Aghion et al (2005) theoretically and empirically test the importance of financial development on convergence. This paper examines the role of financial development in supporting or hindering technological progress, the main force behind economic growth. Figure 8 shows average financial development and per capita GDP. There is a positive relationship between the two factors. There is no longer a positive affect of financial development on growth once a country reaches approximately a 39 per cent level of development, which is the level of Greece (Aghion et al 2005: 190) Section 6: Convergence Convergence is the concept that all countries will move towards the same economic growth rate. Convergence is theoretically possible because of the advantage of backwardness Gerschenkron (1962). Pritchett (1997) found that over the past 140 years that while the major economies moved towards convergence, there has been an overall divergence between the rich and the poor. This is the main idea driving the section on the efficiency frontier. First countries most mobilise resources, as seen with the large scale increases in inputs. They most also develop economic and financial institutions able to withstand and support prolonged growth. Technological progress is the last stage of convergence. This is the newer theory of club convergence (Howitt and Mayer-Foulkes, 2004). Based on Schumpeterian growth theory, countries move towards different steady states determined by their level of development. The richest countries benefit from technology transfers amongst each other but the poorer grou p must reach the appropriate level of human capital to be able to support advanced technology first. Global convergence begun in the later stages of the industrial revolution where European countries and the new world countries: USA, Canada, Australia and New Zealand began to move towards similar growth rates (Pritchett 1997). However the poorer countries were not able to match such progress. In fact the opposite happened; during the period 1870 to 1990 the ratio between rich and poor went from 8.7 to 45 times the GDP per capita (Krugman, 1997: 11). Howitt (2000) theorised that while countries are making positive investments in RD they should eventually converge to the long run growth path . This is because innovations in other countries can be easily adopted as long as the country has the appropriate underlying institutions (Howitt, 2000: 830). Hence we have club convergence as shown in Figure 9. Growth path A represents those countries investing in modern RD and at the forefront of the efficiency frontier. Line B are those countries in the catch-up stage who have not reach reached the innovation stage of development. This could be a representation of countries such as the BRIC nations (Brazil, Russia, India and China), or the eastern tigers of the 1990s. Countries that are growing rapidly but that must make a structural and political change before they are completely industrialised. Line C are those countries that started far behind the rest and are too poorly developed to start converging and, though they are growing, are classified third world countries. Countries that are not investing at all in RD would be a flat line along the x axis. This is probably only the experience of remote amazonian tribes and other communities removed from the modern world and so are not included in the model. Mayer-Foulkes (2000) proposes there are five clubs of convergence, experiencing divergence between groups. The richest group has the highest average steady state growth. Of the five groups, three describe different levels of development. In Mayer-Foulkes (2000) model development is defined by level of income, to represent propensity to innovate, and by average life expectancy, to show the level of human development. Groups 1, 3 and 5 represent high, medium and low levels of development, respectively. The other two groups, 2 and 4, are transiting to a higher level of development. Figure 10 shows the geographic locations were groups members are situated. This is mostly what is expected above except the BRIC nations are not in the one group. India for example is in group 4 (Mayer-Foulkes, 2002: 8). Interestingly Argentina Uruguay are in the highest group. and Latin America dominates the third group and the lowest group has only two non African members. Note that Eastern Europe has not b een included. Three groups have been recognised as existing outside the model: the ex-Soviet countries; other countries that were previously, or are currently socialist; and countries that are mainly oil-exporting. These groups experience a different growth pattern to the rest of the world and so are not converging to any of the steady states in other groups. In this model the economy produces a single good Zt with output dependent on the input of intermediate goods i at date t, denoted by x(i)t and à Ã¢â‚¬  , a parameter representing the non-technological aspects of total factor productivity Zt = à Ã¢â‚¬  L1-ÃŽÂ ± à ¢Ã‹â€ Ã‚ «o1 At(i)1-ÃŽÂ ±xt(i)ÃŽÂ ± di The probability that an entrepreneur innovates, ÃŽÂ ¼, is increasing with the skill level of entrepreneurs, St, the productivity of the innovation, ÃŽÂ », and the quantity of inputs, zt. ÃŽÂ · is the Cobb-Douglas exponent of skills in innovation and Äâ‚ ¬t+1 is the global frontier. Such that and the division by the global frontier represents the fact that as technologies become more advanced innovation becomes harder (Howitt Mayer-Foulkes, 2004:8,10). Note, this last assumption may not be realistic because inventions such as the steam train, electricity and computers have resulted in large increases in innovation. St = à Ã¢â‚¬ ºAt where à Ã¢â‚¬ º is the entrepreneurs level of education. It follows that the equilibrium rate of innovation is As at = At / Äâ‚ ¬t the local human capital level is compared to the global standard and the difficulty of coming from behind is captured in the equation. Greater values of At mean the country is at an advantage. Howitt and Mayer-Foulkes refer to this as the absorption affect (2004: 11) because the probability of innovation is proportional to the skill level. Diving the national factors by the world growth rate gt implies an increase in growth globally hinders the rate of innovation. These are important because it represents the countries ability to effectively incorporate new technologies into its own economy, thus the basis of the club convergence model. A low value of at implies a disadvantage of backwardness. Hence a countrys productivity can advance in to ways; independently or towards the global standard On average At+1 = ÃŽÂ ¼tÄâ‚ ¬t+1 + (1-ÃŽÂ ¼t)At dividing both sides by the world productivity in the next period yields In this case there is no absorption effect, so Gerschenkrons (1962) advantage of backwardness would apply (Howitt Mayer-Foulkes, 2004: 12). In the above section the USA was acknowledged as the efficiency frontier. The USA is still a country, therefore the productivity rate of the efficiency frontier can be written as ÃŽÂ ¼tUS = ÃŽÂ ¼US.atUS 1 + gt The growth of the USA would be the world growth rate. In this case gt = à Ã†â€™ÃƒÅ½Ã‚ ¼tUS where à Ã†â€™ is a spillover affect from similarly advanced countries, line A in Figure

Food and beverage sector in the consumption service

Food and beverage sector in the consumption service The service consists of four categories which are people processing (direct at a customer), possession processing (direct at customers physical possessions), mental stimulus processing (direct at peoples mind), and information processing (use technology direct at a customers assets). The people and possession processing are based on tangible service while the mental stimulus and information processing are based on intangible service. In this assignment we choose the food and beverage sector in the service consumption which is based on people processing service. This is a common sector on worldwide. It is the daily routine and needs for everyone. In this sector, different people have different tastes of food, so it will split into different food and beverage sector such as Western, Chinese, Japanese, Korean, Thai, and other foods form different countries. As a customer, we have three-stage model of service consumption in buying and using a service of our choice, which are pre-purchase stage, service encounter, and post-purchase stage. The Secret Sanctuary is the restaurant that we are chosen. It not just provided the food and beverage service, it also provide the accommodation service. Actually, it is called Secret Sanctuary Boutique Cottage Kuching and created by Cyril Lim. The Secret Sanctuary is a unique boutique cottage located inside Taman Stutong Indah at Jalan Setia Raja (JG blogs 2009). It is like Minangkabau or Padang style house and exotic garden. The Secret Sanctuary is a peaceful garden because it provides a great place for a quiet retreat to get away from the hectic busy city life (JG blogs 2009). This place is for customers to find inner peace, creativity, beauty, love and truth (Travel Borneo Blog 2010). The Secret Sanctuary classifies as a three star hotel, that provides room service, restaurant service, and facilities available service which is waterfall pool, Jacuzzi, stream room, fish spa, open air hot tub, garden shower, gym, Wi-Fi access, and BBQ. For the facilities available service, they jus t provide to those customer who wish to pay RM30 per person (RM15 per children) for the charged of use the facilities available (Cyril 2010). The Secret Sanctuary provides the restaurant service to the guests and also the outsider customers. The foods of its restaurant are based on western foods. THE THREE-STAGE MODEL OF SERVICE CONSUMPTION Pre-purchase stage The pre-purchase is first stage model of service consumption. Pre-purchase is defined as a series of information acquires according to consumer-specific decision making evaluation, which recognize salient information from different resources depending on situation (Hoffman, 1998). Pre-purchase can also being defined as customer decision on their initial decision making pertaining to their purchase of a product or service that being reflected by their underlying needs (Lovelock Wirtz 2004). At pre-purchase stage, we start to be aware of our needs and wants. Such awareness of our needs and wants enable further consideration into the decision making process in later stage, service encounter. It also enables a further implementation of information search and alternative evaluation in pre purchase stage. We awareness needs a restaurant for our friendship reunion and we wants provide the western food and beverage services. This tangible service is based on people processing that provide service directed at the customer. Under information search stage, it plays a relative important role in defining our needs and wants as discussed earlier. When we decide what to the service needed, we will seek for information prior our consumption. Such information search can either be active or passive, depending on the level of involvement and perceived risk associated to the search of information. Active and passive information search normally provided by family, friends, colleagues, advertisement, mass media or organization. For our information search, that is provided by our friends. In addition, information search can also come from both internal and external sources. For example of internal information search are personal preferences and self involvement. Oppositely, external information search such as internet, catalog, and advertisement. Such purchase of service is considered limited decision making mainly because consumers unlikely will purchase such service on the daily basis. This also define the level o f low involvement consumer have on purchasing such service. We information search also come from internet search and Privilege Book which can provide our restaurants information and the environment. Apart from information search and awareness of our needs in consumption service, at pre-purchase stage, we also do alternatives search. Such alternative search enables us to have more choices on our consumption. When we from information search, we have three alternative choices which are Tray Cafe, Secret Sanctuary, and Friends n Family. At this stage, we are concern on our choices between different service provided by both Secret Sanctuary and its competitors which are Tray Cafe and Friends n Family. We not only evaluate the service provided by Secret Sanctuary, but also similar service provided by other competing service providers. Tray Cafe is a memories restaurant that they provide a wall to let customers write down their comments and inside the restaurants memories. But the Tray Cafe does not have a seat to provide a group customers seat on together. However, the Friends n Family is an ordinary western food restaurant and they provide less choice of the food and beverage. As for Secret Sanctuary, it not just a restaurant, it also is a unique Boutique Cottage. The Secret Sanctuary has a graceful environment provide to customers. It can provide a seat like a peaceful garden for our friendship reunion. For our decision making, we are discussing on Facebook and compare the entire three restaurants. After discussion, we are decide to choose the Secret Sanctuary because its service and environment provide be close to our needs Service encounter After making a pre-purchase decision, we will consume a service encounter of the Secret Sanctuary. A service encounter is a period of time during the customer interacts directly with a service provider. Secret Sanctuary is providing us the tangible service (Lovelock Wirtz 2004). The service encounters as moment of truth which is metaphor by Richard Normann. The point of Normann is a service organizations life of the relationship that is at stake on building long-term relationships with their customers (Lovelock Wirtz 2004). The Secret Sanctuary is our decision for friendship reunion place. The Secret Sanctuary is our decision for friendship reunion place. We requests from them to provide the food and beverage service and the happy environment possess a peaceful sanctuary for away from the hectic busy city life and also providing a memorable reunion for us. Throughout service delivery between customers and organization that consists of different level of services which is high-contact services and low-contact services. Most of the restaurants are focuses on customers service rather than inanimate objects (Lovelock Wirtz 2004). But, Secret Sanctuary is focuses on customers service and also the exterior and interior of its building, equipment, physical facilities and furnishing. Secret Sanctuary not only a restaurant, it also is a boutique cottage. It provide a garden style home-stay, is a great place for us because we does not feel the hectic busy city life but a peaceful garden. It is providing high-contact service on their environment and the facilities to their customers. For their low-contact service as customers undertake the self-service on beverage and take order. To conceptualize the service factory as a system that integrated marketing, operations, and customers themselves. It is known as the servuction system which is combining the terms service and production. This conceptual framework to embrace three overlapping elements, there are service operations, service delivery and service marketing system (Lovelock Wirtz 2004). The service operations can be divided into those relating to the service provider and those relating to the tangible services such as equipment and physical facilities (Lovelock Wirtz 2004). The Secret Sanctuary is satisfied our requirement because it provides us a graceful and freedom environment (high-contact service). In Secret Sanctuary, we needs to go their bar counter and take an order by self (low-contact service). Service delivery is concerned with the process of delivery between the product service and customer (Lovelock Wirtz 2004). During the service delivery, the customer will start evaluating the quality of service they are receiving and deciding whether its services meet their expectation. The Secret Sanctuary is a restaurant to provide the western foods. For their restaurant services, they does no provide the service delivery on beverage which is undertake our self-service from their bar counter. But, they were providing the food delivery service on customer seat. In addition, they have prepare a book in the bar counter which is for customer to write down their feeling of the Secret Sanctuary and leave down the contact number, so they can inform them to come their event together. The service marketing system of Secret Sanctuary is a full-service of accommodation and restaurant. The Secret Sanctuary is providing the best facilities to attract customer such as waterfall pool, fish spa, BBQ, and Wi-Fi access. Additional service encounter, they are through their sites to introduce their services and also provide the map of their place. Post-purchase stage After service encounter, we then enter the post-purchase phase. During the post purchase stage, we will evaluate the service performance that we have received and compare it with our prior expectations (Lovelock Wirtz 2004). Post purchase produce satisfaction and loyalty, which are aim of most marketing strategies. The product is evaluated to dissatisfaction or satisfaction. If it is dissatisfaction, customer may produce complaints. The complaints must be handling properly to reserve dissatisfaction. If it is satisfaction, loyalty may perform and the customer is committed to the service. Comparison of the Secret Sanctuarys service performance with our received and prior expectations, it satisfied our prior expectations. Whatever it is expensive than Tray Cafe and Friends n Family, but it provide us the foods service with the best behavior of their employees, comfortable and graceful environment. Therefore, we are satisfaction its employees service behavior and the environment provided. Post purchase dissonance is a doubt or anxiety about the correctness of ones decision after a purchase has been made (Lovelock Wirtz 2004). Customers satisfaction is a purpose of the proximity between the customers expectations and the services perceived performance. If the performance is below the customers expectations, then the customer will be dissatisfied and will suffer the consequences resulting from the mismatch. Dissatisfied customers will reduce the cognitive dissonance and customer will exhibits risk-reducing behavior. Although the Secret Sanctuary satisfied our expectations, but if we were go frequently that prices provide is expensive for us. So, we will loyal in occasionally. Customers may attempt to modify the facts of the purchase scenario, mostly by reducing the proposed price paid for the goods when it meets dissatisfaction. Dissatisfaction is the feeling experienced by a customer whose expectations have not been met by a service. However, the purchase has resulted in complete dissatisfaction and goods returning are not probable, this strategy is to hide the good away in an attempt to forget about the purchase. On the other hand, word-of-mouth (WOM) plays an important role in the advertising. Word-of-mouth is used to reduce the cognitive dissonance following a major purchase decision. Nevertheless, word-of-mouth serves functions of ego defense otherwise as a means of enhancing the status of the information giver, as well as dissonance reduction. Purchase satisfaction is the ultimate goal of marketing. It results when perceptions of product performance match expectations that are at, or above, the minimum desired performance level (Lovelock Wirtz 2004). It happens when the purchase expectations are fulfilled; there is a tendency for customers to repurchase and loyalty to the services. Repeat purchase is a pattern of customer behavior that involves the purchase of the same product or services over time (Lovelock Wirtz 2004). However, consumers develop certain expectations about the ability of a product to fulfill instrumental and symbolic needs. If the services meet the needs, satisfaction is likely to result. In the other round, if the expectations are not meet, dissatisfaction is being experiences. In this case, we are satisfied about the services provided by Secret Sanctuary. Secret Sanctuary provided us the delicious food and a garden style home-stay for our reunion. In addition, it is a great place for a quiet retreat to get away from our hectic busy city life, so, it let us enjoyed and relax for our reunion on this place (Travel Borneo Blog 2010). The owner of Secret Sanctuary (Cyril Lim) ever said that, this little cottage is also for those who want to enjoy the sights and sounds of this hidden island paradise. This place will give an ambience of local culture as well as Zen living all under one roof (Travel Borneo Blog 2010). While in our future intention, we cannot go there frequently. Our reason is although the Secret Sanctuary provides us the satisfaction services but their price of food and beverage are expensive, so, we do not have ability to go there frequently. However, we will go there occasionally. CONCLUSION As a result of overall performance, we should through the three-stage model of service consumption before buying or using the service of our choice. When we decide our event, we start to be aware of our needs and wants. For we awareness our needs and wants, we enable a further implementation of information search and alternative evaluation in pre-purchase stage. After that, we enable consideration into decision making process in later stage, service encounter. During the service encounter, we will request service from our chosen supplier and service delivery. After service encounter, the customers then enter the post-purchase phase. At post-purchase stage, customers evaluate the service performance they have received and compare it with their prior expectations. Finally, the customers will make a future intentions whether they loyalty or disloyalty on their chosen supplier. As a conclusion of Secret Sanctuary, it is a unique boutique cottage for accommodation and restaurant business. It provides the service of our needs and wants. Secret Sanctuary let us to enjoy the sights and sounds of this hidden island paradise for our reunion (Travel Borneo Blog 2010). We are satisfaction about their delicious food (western food) and its building style. In future intention, we were going there occasionally because the price of food is expensive and we do not have ability to go frequently.

Internet & Society: Technologies and Politics of Control Essay

Internet & Society: Technologies and Politics of Control From the moment Internet file-sharing became a reality, exploding into millions of homes and dorms, something changed. Internet file sharing brought with it the opportunity to access for free what had previously cost money. Beyond that, file sharing created a social norm that music and digital media ought to be free. How did this happen? How did file sharers warp reality and forever create this notion that digital media, notably music doesn’t require the money it always had before? Through this paper, I will attempt to prove that the social norms of the Internet public were corrupted by code, by deceptive P2P programs that mask reality for the sake of prosperity. It is this warped social norm that plagues the future of digital media tomorrow. By examining the programs that have forced this revolution (Napster, LimeWire, KaZaA) much can be learned and understood about where and how society failed to recognize its Internet world is in fact an extension of the physical world, and the same rules of civility and morality ought to apply. It is my contention that the P2P networks created an atmosphere built around harmonious sharing—using the ideas of strength in numbers and anonymity to create richly stocked P2P networks. Finally, after careful analysis and discussion of the facts, I will offer suggestions on moving forward and hopefully solving the chaos and problems faced by the present system (or lack thereof). In â€Å"Code and other Laws of Cyberspace†, Lawrence Lessig outlines the four modalities of regulation—law, markets, norms, and architecture. Law has the ability to regulate behavior through penalty and markets create incentives for people to behave in particular... ...the Internet and online file sharing no longer be a chaotic jungle of copyright infringement, but an extension of community and relationships as we understand these terms in the offline world. Works Cited Goulder, Alvin. â€Å"The Norm of Reciprocity: A Preliminary Statement† American Sociological Review 1960. Levin, Daniel. â€Å"Building Social Norms on the Internet†. Yale Journal of Law & Technology. 2001-2002. Steiner, Peter. â€Å"On the Internet, Nobody Knows You’re a Dog†. The New Yorker 5 July 1993. Strahilevitz, Lior Jacob. â€Å"Charismatic Code, Social Norms, and the Emergence of Cooperation on the File-Swapping Networks†. John M. Olin Law & Economics Working Paper No. 165. The University of Chicago Law School. http://law.uchicago.edu/lawecon.index.html Takahashi, Nobuyuki. â€Å"The Emergence of Generalized Exchange† American Journal of Sociology 2000.

Death Essay -- Psychology, Anxiety

Death is an inescapable event in human life. Human beings, to a certain extent, are afraid of the unpredictable and inevitable death issues and deadly threats. Reason behind the anxiety is due to the difficulty to find a definitive answer of a question on life and death (Becker, 1973). We aware their ultimate fate of nonexistence and deaths often occurs uncontrollably. In order to explain the death anxiety, terror management theory (TMT) was developed to help to answer the human’s psychological reaction on the existential terror of mortality issue (Greenberg, Pyszczynski, & Solomon, 1986; Pyszczynski, Greenberg & Solomon, 1999). According to TMT, self-esteem is a defensive motivation in tackling the everyday life threats. It is a subjective concept that individual is being a valuable part in the world. Human animals obtain self-esteem mainly from their individual belief on cultural worldview – symbolic perception on the society shared by groups of people (Greenberg & Solomon, 1999). Individuals believed that their own set of cultural worldview is the only true value in the society. They feel that they are the valuable units engaging in the culture worldview and hence the perceptual construction maintains self-esteem of one self as well as providing defensive function to the death anxiety. Since self-esteem is derived from a strong perception on conceptual belief, it is able to serve as a psychological buffer that protects people against the awareness and negative feelings towards death (Greenberg, Pyszczynski, & Solomon, 1995). It is strong enough to shield people’s anxiety from death reminder s (i.e. mortality salience). When there is mortality salience, people enhance their self-esteem as a defensive reaction against the death... ...l to restore the emotion stability (Taubman et al., 2002). Secure attachment behaviour of relationship partners served as distress-regulation function to deal with anxieties encounter in the environment. It is asserted that the role of self-esteem in TMT and the role of secure attachment on proximity maintenance share the function of minimizing anxiety. The mechanism of distress regulation on securely attached behavior is able to generalize the fear of death (Mikulincer, Florian, & Tolmacz, 1990). Similar to the notion suggested by TMT, individuals required higher self-esteem to defend against death anxiety. Also, people with higher self-esteem elicit less death anxiety than the one with lower self-esteem since the positive self-evaluation provides an emotional buffer to minimize the anxiety. Secure attachment behaviour is also the buffer to negative emotions.

Negotiation and Culture: Case Study

Culture and Negotiations Why do Japanese negotiators behave in the manner they do? How does culture affect negotiating behavior and outcomes? MASTER THESIS Author’s name: Patrycja J. Krause Student’s number: 258891 Academic advisor: Soren O. Hilligsoe Faculty of English Aarhus School of Business May 2006 I would like to thank my Mom, Barbara, for her understanding, encouragement and eternal support, as well as my advisor, Soren O. Hilligsoe, for his academic help, advice and faith in me keeping my deadline! Patrycja J.Krause Aarhus, May 2006 In loving memory of my Dad, Wladyslaw, for showing me the world – this one is for you. 2 1. 2. 3. 4. 5. 5. 1 5. 2 5. 3 5. 4 5. 5 6. 7. 8. INTRODUCTION METHOD WHY JAPAN? DEFINITION OF CULTURE AND VALUES HOFSTEDE’S VALUE DIMENSIONS POWER DISTANCE UNCERTAINTY AVOIDANCE COLLECTIVISM VERSUS INDIVIDUALISM FEMININITY VERSUS MASCULINITY LONG-TERM VERSUS SHORT-TERM ORIENTATION CRITICAL PERSPECTIVES ON HOFSTEDE EDWARD HALL CULTU RAL DIMENSIONS 4 6 7 9 11 12 13 13 14 15 15 16 19 20 21 23 25 26 28 30 40 43 47 59 61 64 65 . 1 CONFUCIANISM 8. 2 IE 8. 3 THE WA-CONCEPT 8. 4 ISOLATION 8. 5 UNIQUENESS 8. 6 WESTERN INFLUENCE 9. 9. 1 10. 11. 12. 13. JAPANESE NEGOTIATOR THE NANIWABUSHI STRATEGY BRETT & USUNIER CASE STUDIES CONCLUSION SUMMARY REFERENCES APPENDIX 3 1. Introduction This paper wants to provide a culture-based explanation, examination and analysis as to why Japanese negotiators behave in the manner they do in negotiation, as well as how culture affects negotiations and their outcome.The paper is, due to the focus on cultural differences, solely dealing with international negotiations. This paper is focusing on the cultural aspect of the negotiation, which is only one piece of a larger puzzle, but it is a crucial and decisive piece. It is now widely accepted that culture indeed has an affect on negotiation and its outcome, which reflects a given culture and the underlying values and beliefs that are central and fundamental in a culture.The culture can be defined as being both behavior, a meaning system and a communication style, and there is a link between the dominant world view present in a given culture (Japan), and the negotiating style that appears to be characteristic of that culture. This paper is not to depict a stereotypical image of a Japanese negotiator, but merely to show that culture indeed does influence the behavior, negotiations and their outcome. It should also be kept in mind that (a) the negotiation is a universal process, and (b) there are a number of contextual factors that too have an impact on the cultures’ impact on the negotiation – e. . the nature of the other party (member of an in-group or an out-group), and the individual difference, although a member of a collectivistic culture tends to suppress his personality and individuality in order to maintain group harmony. This paper is to focus on a Japanese negotiator, who is dominated by his cultu ral values, and his interaction (in a negotiation) with a member of an out-group (foreigners and people that do not have a long term relationship with the Japanese negotiator), and a member of the in-group (fellow Japanese with established long-term relationships).Several studies and surveys (e. g. Brett and Usunier) have shown that culture does affect the negotiation process and the final agreement or outcome of the negotiations. Nevertheless, while there have been a number of studies that have explored the behavior of negotiators from different cultures, only very few have dealt with the underlying reasons – why people from a given culture behave the way they do.Additionally, most theorists and scholars have relied on the value dimensions index, depicting the differences between cultures, developed by Hofstede between 1968 and 1973. Hofstede’s research has undoubtedly helped people understand other cultures, but there is also a need to understand the underlying reaso ns why people from a given culture behave the way they do – the so-called mental frames that are shaping the behavior of Japanese negotiators. 4Otherwise, negotiators tend to create their own interpretation of the behavior of the other party, which without the necessarily cultural knowledge may lead to prejudices and ultimately lack of trust (Gudykunst & Kim, 2003: 125-160). For instance, trust in individualistic societies is based on the fact that a promise that will be implemented on a specific time or day, whereas trust in collectivistic societies is based on emotions and relationships as well as on sacrifice.The other party may thus think the Japanese negotiator do not want to reach an agreement within a week because they are difficult and want to sabotage the negotiation or untrustworthy, rather than the Japanese are relationship oriented rather than task oriented. They thus want to establish a relationship before they reach an agreement and need more time in order to re ach an agreement because it is based on group consensus. The paper starts by giving a definition and an analysis of culture and values in general in order to delimit and define the cultural framework that is the fundament of this paper.The culture and values of Japan are then to be described and discussed in order to show which cultural factors and dimensions in Japan determine and influence the Japanese negotiator, as well as serving as a an introductory guide to Japanese culture and society – hopefully, the guide will present both useful and interesting knowledge to all those interested in cross-cultural negotiations and intercultural communication. Two frameworks are presented and used in order to gain deeper behavior knowledge of culture: Hofstede’s Cultural Dimension and Hall’s Silent Language and Beyond Culture.Next, the paper discusses and analyzes Japanese negotiating styles and techniques 1 , and how they are influenced by the Japanese culture and cultu ral values. For this purpose, different aspects of verbal and non-verbal communication are to be discussed as well, and the paper is to analyze the meaning of these aspects in the context of negotiations. Finally, the paper is to take a look at two real life cases involving Japanese negotiators in order to illustrate behavior patterns and negotiation styles and techniques of Japanese negotiators.The author of this paper would argue that in an increasingly interdependent world, the ability to negotiate successfully is an important skill, and understanding the mindset and the behavior of the Japanese negotiator is essential and fundamental for successful negotiations. 1 Mainly focusing on the male negotiator, being the dominant player during negotiations in Japan. 5 Being aware of the reasons why the Japanese negotiator behaves and communicates they way he does, one may be less surprised or shocked by Japanese behavior, and may be better at focusing on, and handling, the negotiation i tself.Knowledge of culture and cultural values of the other party works as an uncertainty avoidance in negotiations, and helps building trust in stead of tarnishing it with prejudices, which ultimately leads to a dead lock or even break downs. 2. Method The research concerning this paper was mainly carried out in the form of a desktop study method – all the data were carefully collected mainly from secondary sources, such as, studies, surveys, as well as statistics and articles.The paper is culture-based, and the chosen data depict this approach – all the scholars referred quoted and referred to are specializing in culture, intercultural communication, as well negotiating. In order to give a general overview of the Japanese culture as well as to determine what type of values are predominant in Japan, the paper refers to and applies Hofstede’s five value dimensions index – masculinity/femininity, collectivism/individualism, uncertainty avoidance, long-term versus short-term orientation and power distance.Additionally, the paper is also to refer to Hall’s theory on the difference between high and low context and cultures, and the concept of Chronemics, in order to identify the Japanese culture and how these differences and concepts influence a negotiation. Also, several historical concepts (e. g. the ie-concept, geographical isolation, Western influence, etc. and Confucianism, which is one of the cultural dimensions that have influenced the Japanese worldview, are to be described and discussed in order to explain why the Japanese negotiator behaves in the manner he does, and how the historical events and Confucianism affect the culture and the behavior in Japan. Hofstede’s work has been criticized over the years for being incomplete, static and too narrow. The paper is thus to discuss the critical perspectives on Hofstede in order to show that the author has been aware of the possible disadvantages, when using Hofstedeâ €™s five value dimensions index. Additionally, Brett and Usunier are also discussed in the paper when dealing with the connection and interaction between culture and negotiation – how does culture affect negotiations. Both Brett and Usunier argue that in order to reach an agreement, the negotiators need to be aware of each other’s culture and cultural values, as well as understand the reasons for the way the other part behaves during negotiations. Finally, two real life case studies have been analyzed in order to depict the culture-based theory described and discussed in this paper.The reason for using case studies was to give a more holistic portrayal of a Japanese negotiator, while analyzing the contents by seeking patterns and themes in the data while referring them to the culture-based theory (e. g. culture and values and how they influence ones behavior and negotiating style) in this paper. Additionally, using case study is the best way to obtain data for anal ysis when one is not able to make actual field studies by observing Japanese negotiators in action. Both case studies depict the Japanese negotiators interacting and negotiating with members of an out-group, the Americans.This is due to the fact that the author of this paper would argue that when observing two different cultures one observes reactions that may not be present when both parties had the same cultural background, which would ultimately result in a smoother negotiation. Additionally, this paper deals with international negotiations and the importance of knowing and understanding the other party’s culture and cultural values. The case studies are thus used to highlight the focus of the paper – why Japanese negotiators behave in the manner they do in a negotiation, as well as how culture affects negotiations and their outcome. . Why Japan? The author of this paper has chosen to focus on Japan and the cultural values and behavior of a Japanese negotiator due t o the following factor: Japan’s consumer market. In order to know how attractive Japan is as a business associate, and thus how important it is to know the Japanese culture and negation behavior in order to win the market and succeed in the country, a brief description of the Japanese consumer market will now be given – its size, its consumers and its products.Japan is a closely populated and highly urbanized country with one of the most powerful economies in the world, currently amongst the top three economies in the world, although still rebounding from the collapse of the country’s economy back in 1991. 7 According to the Statistical Handbook of Japan, consumption expenditures increased by approximately 0. 5 percent in real terms due to such factors as the indication of an economic recovery and improvement in consumer sentiment (Statistical Handbook of Japan, 2005 2 : 158).Statistical Handbook of Japan states: As of May 2005, the excellent performance of the corporate sector is continuing, and overall business is recovering gradually. Recovery of employment is lagging slightly. However, the unemployment rate, which was 5. 4 percent in 2002, recovered to 4. 4 percent in May 2005. As seen in this state of affairs, there is some improvement, although harshness still remains. The growth of consumer spending, which slowed between the end of 2004 and early 2005, is showing signs of a resurgence (Statistical Handbook of Japan, 2005: 33 3 ).Due to its geographical nature, Japan cannot supply all its needs for raw material for energy and fuel, metal products, and foods from indigenous resources, and is thus dependent on overseas supplies. In 1996 Japan had an overall deficit in food of about 30 % – in 2003 it was approximately 40 %. According to Statistical Handbook of Japan, the present food self-sufficiency rate of Japan is the lowest among major industrialized countries, so Japan has thus become the world's largest food importing natio n (Statistical Handbook of Japan, 2005: 69 4 ).This makes Japan an attractive market with its 127 million consumers, where women are a majority and retired people outnumber the youngest age strata, and are thus the most significant consumer group (Reischauer, 1995: 25). Additionally, the Japanese are well educated and households have a fairly disposable income, in which the majority of it is spent on food. According to the 2004 Family Income and Expenditure Survey, monthly consumption expenditure averaged ? 304,203per household with two or more family members excluding single-member households (Statistical Handbook of Japan, 2005: 158 5 ). Appendix 1 – Household 3 Appendix 2 – Economy 4 Appendix 3 – Agriculture 5 Appendix 1 – Household 8 Japan is the world’s largest net importer of agriculture and food products (in 2003 alone, the country has imported over 60 % of its food supplies), amounting to US$ 40 to 50 billion annually. Thus, the Japanese fo od market is powerful but demanding (Agri-Food Country Profile: Japan, 2003: 1 6 ). Needless to say, it is a relatively difficult task to target a foreign, and rather remote, market as it may require extra resources and special cultural knowledge.Therefore, it is valuable to study the values and the culture of Japan before entering the country’s market in order to promote and sell a product. 4. Definition of Culture and Values This chapter is to describe and define culture and values in general in order to delimit and define the cultural framework that is the fundament of this paper. At first glace, the human race behaves more or less alike – we smile, laugh and cry. We talk, gesticulate, and perform actions. Nevertheless, our behavior is influenced by our cultures – through the norms and rules existing in our society.Our cultures also affect our communication through the individual characteristics we learn when we are socialized into our culture. In short, our culture provides us with a system of knowledge that generally allows us to know how to communicate with other members of our culture and how to interpret their behavior. Culture can thus be defined as an underlying framework that guides an individual’s perceptions of observed events and personal interaction, and thus directly influences what people will do and what they can do. In short, knowing and using culture and its many dimensions is a must know negotiating with foreigners.Culture includes all learned behavior and values that are transmitted through shared experience to an individual in a society. According to Sir Edward Taylor, a classic definition of culture is as follows: â€Å"Culture is that complex whole which includes knowledge, belief, art, morals, law, custom, and any other capabilities and habits acquired by (individuals as members) of society. † (Taylor, 1871: 1). Culture is thus everything that people have (objects), think (ideas, values, attitudes, b eliefs), and do (behavior) as members of a particular society.Culture is made up of material objects, ideas, values and attitudes, and behavior patterns (Gudykunst & Kim, 2003: 14-19, Yokochi & Hall, 2001: 193). 6 Appendix 4 9 Additionally, according to Hall, a culture must have the following three characteristics: 1. It is learned; people over time transmit the culture of their group from one generation to another 2. It is interrelated; one part of a particular culture is deeply interconnected with another part – e. g. religion with marriage, or education and work with social status 3.It is shared; the basic concepts of a particular culture are accepted by most members of the group. In other words, culture develops through recurrent social relationships that form a pattern that is eventually adapted by members of the entire group, and transmitted to new members through the process of learning and interacting with ones environment and other members of ones culture (Hall, 1977 : 16). The most fundamental aspect of our culture consists of values. Values are acquired in the family, during the first years of our lives, further developed and confirmed in school, and einforced in work organizations and in life within a national cultural environment. Values determine what we consider to be good and evil, beautiful and ugly, natural and unnatural, rational and irrational, normal and abnormal (Ghauri & Usunier, 2003: 97-100, 137-138). Values too are a major influence and determination factor when it comes to behavior and communication during a negotiation. Values are defined by the particular culture, hence the importance of understanding the value concept and culture when negotiating with foreigners. One of the early U. S. esearches of values, Milton Rokeach, defines a value 7 as: â€Å"An enduring belief that one mode of conduct or end-state of existence is preferable to an opposing mode of conduct or end-state of existence†. According to Rokeach values are thus both guiding principles in life, and preferences for one mode of behavior over another. Values are depicted in the general norms of a culture (what is right and wrong), and they are depicted in what we want and what we consider important for ourselves. Values are also among the very first things children learn – implicitly – by observing the community, kyodotai in Japanese (e. . parents and people around them). 7 An attitude, on the other hand, refers to an organization of several beliefs around a specific object or situation. 10 According to the American development psychologist, Daniel Yankelovich, most important traditional values will remain firm and constant over time, and are thus stable and enduring through generations (de Mooij, 2004: 22-26). It is thus essential to remember that the intercultural communication and negotiation are never far from cultural considerations (Roth, 1982: 6).This assumption was mistakenly conceived from the converging technol ogy and the spread of the English language that was taking place globally (de Mooij, 2004: 1-18). One has to remember though that globalization is not an entirely new phenomenon. In fact, some would argue that it even dates back at least to the Marco Polo’s voyages in the 1300s, and the fundamental values of the many different cultures have not changed significantly since then. People still live in the local. We define ourselves by our differences.It’s called identity – self, family and nation† (de Mooij, 2004: 16). Human behavior is learned and growing up in a culture, a person is taught values, perceptions, wants and how to behave from the family and other institutions (Lasserre & Schutte, 1995: 49-59). For instance, in today’s Japan, group harmony is still dominating the nation's behavior, seniority by age is still respected, and promotion in most public and private organizations is based on the length of service, which is usually connected to th e age of the individual.Reciprocity is emphasized in social relations in order to maintain a long-lasting relationship. Values and traditions do not easily change in a society. 5. Hofstede’s value dimensions This chapter is to describe and discuss the Dutch professor, Geert Hofstede’s, value dimension index, which is based on the first international survey taking place in IBM in more than 50 different countries from 1968 to 1973 (Hofstede, 2001: xv), mainly focusing on Japan in order to determine what type of culture is present in Japan.According to Hofstede, the way people perceive and interpret their world varies along five dimensions, and are as follows: power distance, uncertainty avoidance, collectivism/individualism, and masculinity/femininity. Finally, Hofstede added a fifth dimension called long-term orientation in life versus short-term orientation. Each of the countries in Hofstede’s study has been ranked according to their scores in each dimension. 11 According to Hofstede a dimension is: â€Å"†¦an aspect of a culture that can be measured relative to other cultures. Additionally, Hofstede defines culture as: â€Å"The collective programming of the mind that distinguishes the members of one group or category of people from another† (Hofstede, 2001: 9). 5. 1 Power distance Power distance refers to the inequality among people, which the population of a country considers acceptable. There is inequality in all societies, and thus there will always be some people who have more power than other. In some cultures power is concentrated among a few people at the top, who make all the decisions, whereas people at the other end simply carry out these decisions.Such cultures are associated with high power distance levels. In other cultures, on the other hand, power is widely spread and relations among people are more equal. These are low power distance cultures. (Hofstede, 1991: 23) According to Hofstede’s value dimensio ns Japan scores 55 points – placing it in the middle of the index (Hofstede, 1991: 26). In countries which have a high power distance employees dislike to disagree with their superiors. Superiors are seen as paternalistic, and subordinates expect to be told what to do.There is also a large emotional distance between subordinates and their superiors (Hofstede, 1991: 28). When it comes to family and school, parents will teach children to be obedient and the children will treat their parents with respect, just as students will treat their teachers with respect. In high power distance societies inequalities among people are in general expected and desired (Hofstede, 1991: 37). In Japan this inequality is especially expressed in the oya-ko concept (literally meaning parentchild), which originally refers to a leader or a work group and its members.As work and home began to separate during the beginning of modern period of Japan oya and ko began to have a strictly kinship meaning â €“ with no economic aspect – such as it had until the Tokugawa period where the ie (extended household) was more than just a family or a kinship unit – it was an economic organization in which each of its members (not always related to each other by blood or marriage) contributed towards it (Harumi, 1971: 38-39). 12 5. 2 Uncertainty avoidance Uncertainty avoidance describes the need or lack of need a society has towards written or unwritten rules and how it deals with structured or unstructured situations.At the organizational level, uncertainty avoidance is related to factors such as rituals, rules, and employment stability. People in less structured cultures face the future without experiencing unnecessarily stress. The uncertainty associated with future events does not result in risk avoidance behavior. On the other hand, in cultures where people experience stress in dealing with future events, high uncertainty avoidance cultures, various steps are taken to cope with the impact of uncertainty: e. g. long-time planning in order to minimize the anxiety associated with future events.Japan scores 92 points and is seen as a country with high uncertainty avoidance, where there are many regulations and a strong etiquette in order to avoid uncertainty (Hofstede, 1991: 113). 5. 3 Collectivism versus individualism According to several researchers within the field of culture, individualism versus collectivism is one of the basic pattern variants that determine human action. It is a pattern that is visible in every day life, as well as being present in the interaction between people. Individualism indicates the degree to which people of a particular culture learn to act as individuals rather than as members of a group.It is essential to remember that all people and cultures posses both individual and collective traits, but at the same time one of these traits is always more dominant or more visible than the other (Samovar & Porter, 2004: 59). A typica l collectivistic culture distinguishes between in-groups (relatives, clans, and organizations), and out-groups (the rest of ones network). Ones’ in-groups can be defined as ones’ extended family – like the one found in the Japanese society throughout the history; also known as ie.People from individualistic cultures are self-centered, and feel relatively little need for dependency on others. They seek the fulfillment of their own goals over the goals over the groups. Additionally, people from individualistic cultures are competitive, and show little loyalty to the organizations for which they work. 13 People from collectivistic cultures, on the other hand, have a group mentality (with e. g. joint decision making), where they suppress and subordinate their goals for the sake of the group. They are interdependent on each other and seek mutual accommodation in order to maintain group harmony.People in a collectivistic culture expect that their in-groups will take c are of them and in return they owe the in-groups a great deal of loyalty and submission (Samovar & Porter, 2004: 61). Children who grow up in collectivistic societies are expected to show lifelong loyalty to the group (Hofstede, 1991: 50-51). In short, individualism versus collectivism, deals with the degree to which one thinks in terms of I versus we – either ties between individuals are loose or people are part of cohesive ingroup throughout their lives (Samovar & Porter, 2004: 61).Contrary to the stereotype, Japan actually ranks in the middle of this dimension, with 46 points – but is still defined as being a collectivistic culture (Hofstede, 1991: 67). An interesting theory stated by Kumon Shumpei, a Japanese anthropologist, characterizes Japanese as contextualists rather than collectivists, as is the case in both Hofstede and Hall’s studies. A contextualist retains a personal identity, which the collectivist probably loses, but this personal identity is vir tually inseparable from the contextual identity.Thus, the individual changes, depending on the context he is in or the people he is with. One of the arguments Kumon makes to support the theory is that most Japanese belong to in-groups in order to reach a self-realization. But one could argue that even in these â€Å"self-realization in-groups† the members strive to maintain harmony and act for the benefit of the group, making them predominantly collectivistic (Hendry, 1998: 22-39). 5. 4 Femininity versus masculinity One of the main differentiations between masculine and feminine cultures is how gender roles are distributed in cultures.Thus masculine cultures create clearly distinct gender roles; men are supposed to be self-confident, tough and concerned with the material aspect of life, whereas women are expected to be modest, tender and dealing with the quality of life. Thus according to Hofstede Japan is a highly masculine culture (Gudykunst & Kim, 2003: 77), whereas in mas culine countries both people are taught to be ambitious and competitive. It should be mentioned though that females’ ambitions are sometimes directed towards the achievements of their brothers and later in life their husbands and sons.According to Hofstede’s index, Japan is one of the more masculine countries, scoring 95 – ranking as number one (Hofstede, 1991: 96). 14 5. 5 Long-term versus short-term orientation Michael Harris Bond originally found the fifth dimension in the answers of student samples from 23 countries in 1985 in Hong Kong, and later it was incorporated by Hofstede in his value dimensions index. The reason why this dimension was not found in the original IBM data was due to the fact that the IBM questionnaires were composed from the minds and values of Westerners – whereas the fifth dimension was composed from the minds and values of Easterners.The fifth dimension, nevertheless, is present across all 23 cultures taking part in the survey (Hofstede, 2001: 71-73). Long-term orientation, also known as Confucian Dynamism, is composed of the following values: being determinate or firm, prudent, arranging relationships by status as well valuing interpersonal relationships, as well as having a sense of shame, saving ones face, having a great deal of respect for tradition and reciprocation of greetings, favors and gifts.Japan ranks as number 4 on the Long-term Orientation Index Values, with 80 points (Hofstede, 2001: 351356). 6. Critical perspectives on Hofstede There has been a great deal of critique of Hofstede’s value dimensions when dealing with culture analyses, which this paper will shortly discuss – simply to show that the author of this paper is indeed aware of the advantages as well as disadvantages when using Hofstede’s value dimensions in order to analyze a specific culture.One of the most recent Danish critical analyses was performed by Susan Baca at the Aalborg University where it is being argued that Hofstede’s IBM-based rapport which is supposed to depict characteristic traits visible in cultures cannot be used simply due to the fact that IBMemployees from a specific culture cannot be representative for the culture in question as a whole (Baca, 1999: 11). One can argue that since Hofstede published his IBM-based rapport several other culture-analytics (e. . Triandis, Brislin and Bond) have made further analyses, which do not exactly contradict Hofstede’s value dimensions. These analyses both support Hofstede’s dimensions, as well as having reached the same conclusions. One can also add that since the amount of IBM-employees amounted to hundreds of thousands it is only logical to conclude that one did find enough traits, which can be viewed as characteristic for the cultures in question. 15Another aspect of Hofstede’s survey-based value dimensions, which is being criticized is the fact that his model is static, and can ultimately not be u sed because surely the cultures in question studied by Hofstede must have changed over the time since he performed the survey from 1968 to 1973. This is one of the reasons why the paper is looking at the cultural and historical influence on Japanese behavior over time – in order to see if Hofstede’s value dimensions are still valid in the Japanese culture that this paper is dealing with.Susan Baca is also criticizing Hofstede for actually separating a given culture into several, isolated dimensions, strongly supported by Turner and Trompenaars. For instance, Hofstede is depicting the American culture as highly individualistic, but does not describe the interaction people have with each other among the different in-groups – and if one can categorize this interaction as being highly individualistic as well or not (Baca, 1999: 15). To this, the author of this paper can only say, using Hofstede’s own words that this paper’s main task is to study cultur es, and not individuals. (Hofstede, 2001: 15).Additionally, in order to back up Hofstede’s theory, this paper is also to refer to Hall’s theory on Chronemics as well as a more general cultural analysis of the Japanese culture. 7. Edward Hall Another cultural framework used in this paper in order to gain deeper behavior knowledge of the Japanese culture, is Hall’s concept of Chronemics as well as his theory on low-context and high-context cultures. According to the American sociologist, Edward Hall, the world is divided into monochronic and polychronic culture, also known as the concept of Chronemics. It is a nonverbal behavior that speaks to how people use time to communicate.Lateness, for example, can communicate messages of power (waiting in the doctor's office), attraction (arriving early for the first date), or identity (being â€Å"fashionably late†). Chronemics, like all other nonverbal behavior is culturally based. Different cultures have different rules governing the use and meaning of time. Hall's distinction between monochronic and polychronic cultures highlight the different ends of the cultural spectrums of how culture's view time. A culture’s conception of time can thus be examined from Hall’s monochronic and polychronic classifications. 16Monochronic cultures see time as a measurable, quantifiable entity, which is linear. Thus, being punctual, scheduling, planning tasks to match time frames are valued behaviors. In the monochronic culture time becomes a concrete and segmented reality where only one thing can be done at a time without interruptions. Additionally, in negotiations, monochronic people’s main focus is on goals, tasks and results, rather than relationships. Polychronic cultures, on the other hand, tend to view time as nonlinear – almost as a general guideline, which has no substance or structure. There is thus a circular or cyclical quality to time.Punctuality and scheduling is do ne but rarely found in monochronic cultures. Additionally, people from polychronic cultures are able to do many things at one time, and do not mind interruptions. Because time is not linear or segmented, matching specific activities with specific time frames is not done. Times and activities are fluid. Finally, in negotiations, polychronic people’s main focus is on relationships and people. Japan belongs to the polychronic cultures. In a negotiation context, the Japanese want to get to know their business counterparts, and they feel that the best way to do so is by engaging in long conversations with them.This reflects the fact that the Japanese culture is long-term relationship oriented. Negotiators from polychronic cultures are thus relationship-focused. Monochronic and polychronic time orientations tend to produce two other significant cultural phenomena: the difference between high and low context cultures, which refers to the fact that when people communicate, they take for granted how much the listener knows about the subject under discussion. Negotiators from monochronic cultures are thus deal-focused. Although Edward T.Hall classified Japan as a polychronic culture, Gesteland argues that the Japanese business people expect strict punctuality in meetings and close adherence to schedule. Punctuality in Japan might be ruled by the high level of uncertainty avoidance and the maintenance of group harmony, which is essential for the Japanese culture. Hall also discusses and distinguishes between high-context and low-context cultures. He views meaning and context as being interconnected. The difference between high and low context cultures depends on how much meaning is found in the context versus in the code. 17One can think of â€Å"code† as the message, and of â€Å"context† as setting or circumstance, including the people, in which the message appeared. In low-context communication, the listener knows very little and must be informed about every detail. In high-context communication, on the other hand, the listener is already ‘contexted', and does not need to be given much background information. According to Hall, low-context cultures, such as the American culture, tend to place more meaning in the language code and very little meaning in the context. Communication tends thus to be specific, explicit, and analytical.In analyzing messages, low-context cultures tend to focus on â€Å"what was said† and give literal meaning to each word. Low-context cultures tend to use a direct verbal-expression style in which the situation context is not emphasized, important information is usually carried in explicit verbal messages, people tend to directly express their opinions and intend to persuade others to accept their viewpoints, and self-expression, verbal fluency, and eloquent speech are valued. In high-context cultures, on the other hand, such as the Japanese culture, meaning is embedded more in the conte xt rather than the code.In this case, â€Å"what was said† cannot be understood by the words alone – one has to look at who said it, when they said it, where they said it, how they said it, the circumstances in which they said it, and to whom they said it. Each variable will thus help define the meaning of â€Å"what was said. † Hall states: People raised in high-context systems expect more from others than do the participants in lowcontext systems. When talking about something that they have on their minds, a high-context individual will expect his interlocutor to know what's bothering him, so that he doesn't have to be specific.The result is that he will talk around and around the point, in effect putting all the pieces in place except the crucial one (Hall: 1977, p. 98). This is also the case with the behavior of a Japanese negotiator – he expects the other party to know exactly what he wants to obtain from the negotiation, and what type of a deal he i s looking for. 18 In short, the difference between high and low context cultures depends on how much meaning is found in the context versus in the code, or, in high-context exchanges, much of the â€Å"burden of meaning† appears to fall on the listener.In low context cultures, the burden appears to fall on the speaker to accurately and thoroughly convey the meaning in her spoken or written message. Conclusively, according to Hall, Japan and the Japanese negotiator belongs to the polychronic culture type. Thus, in a negotiation context, the Japanese want to get to know their business counterparts by engaging in long conversations with them. This again reflects the fact that the Japanese culture is long-term relationship oriented. Additionally, Japan is a high-context culture, where meaning is embedded more in the context rather than the code.Japanese negotiators expect thus more from the other party and when something is bothering them, they tend to express this indirectly (fo r instance by using silence) (Cohen, 1997: 159-160, Rowland, 1993: 68-69). Finally, although Edward T. Hall classified Japan as a polychronic culture, Gesteland argues that the Japanese business people expect strict punctuality in meetings and close adherence to schedule. Punctuality in Japan might be ruled by the high level of uncertainty avoidance and the maintenance of group harmony, which is essential for the Japanese culture (Hall, 1973, 1977, Gudykunst & Kim, 2003: 69, 179-180). 8.Cultural Dimensions This chapter is to discuss and analyze which values and cultural dimensions that are present and dominant in Japan in order to understand the behavior of a Japanese negotiator: Confucianism Ie The WA-concept Isolation – geographical & political Uniqueness Western influence 19 8. 1 Confucianism The cultural perspective has for some time provided the dominant paradigm in comparative studies management, organization and cross-cultural negotiations. Even before Hofstede’ s survey on cultural values, international studies of organization generally regarded culture as the key explanatory factor for cross-cultural differences.One of the most important influences on Japanese everyday life, culture and behavior was, and still is, Confucianism, which entered Japan via Korea in the 5th Century. Japanese culture and behavior reflect the values of collectivism and harmony, and are highly inspired and influenced by Confucianism. Confucius (Kongzi, 551-479 BC) writing around the time of Socrates but a while before Jesus Christ, based his ideas on absolute respect for tradition, on a strict hierarchy of primary relationships between family-members, and then again between the people and their rulers.His philosophy was intended to guide people’s everyday life, to regulate social behavior, and it established a mode of thought and habit that has persisted and that blended well with other belief systems that were and still are present in Japan, such as Buddhi sm and Shinto. The central concepts of the Confucian ethic were summarized in the Three Cardinal Relationships: ruler guides subject, father guides son, and husband guides wife), five constant virtues (benevolence, righteousness, propriety, wisdom, and fidelity, and the doctrine of the mean (harmony). In this teaching, emphasis is on the obligation of the inferior to the superior.The assumption is that society needs a hierarchical order in which every individual has his or her own place, and the peace and harmony prevail if everyone follows the proper manner of conduct. These concepts are the fundament of the Japanese society to this very day. Also, the Confucian teachings emphasized uprightness, righteousness, loyalty, sincerity, reciprocity, and benevolence as personal virtues. The principle of filial piety was especially useful during the Tokugawa period when family was the social and economic unity of society. Occupation and property belonged to the family.Continuation of the fa mily line was thus a primary concern because it was a necessity for keeping ones position and income. Individuals often sacrificed their happiness to ensure survival of the family. After Japan was centralized under the Meiji government in the 19th century, the concept of filial piety was expended to embrace the idea of loyalty to the emperor, who was regarded as the father of the nation. 20 The Confucian concepts of hierarchy in human society and respect for age were useful in the feudal society, also during the Tokugawa period, which was structured hierarchically.Its stability rested on individual’s dutiful fulfillment of obligations to their superiors and maintenance of proper conduct in daily life. The general rules of conduct were respect for seniors in social rank and age, and acknowledgement of the superiority of man over women. Additionally, Confucius laid down that Ren or benevolence was the supreme virtue the follower can attain. As a strictly natural and humanistic love, it was based upon spontaneous feelings cultivated through education. In order to attain Ren, you have to practice Li, which represents social norms.The latter can be interpreted as rituals, rites or proprieties and includes all moral codes and social institutions. As Li is a term for moral codes and social institutions, one could assume that the practice of Li is to enforce social conformity at the cost of the individual. However, an individual personality is not an entity cut off from the group. According to Confucius, in order to establish one self, one has to establish others. There is interdependence between the individual and the group that is essential in order to create harmony.The strong Japanese cultural preference for basing business transactions upon the quality of inter-personal relationships and for settling disputes through mediation rather than relying upon contracts and legal process can be seen to stem from this philosophy (McGreal: 1995). According to Confuci us, all societies deal with survival, production, distribution, and consumption – yet they all develop different systems in order to survive and obtain their ultimate goals and aims. Things have changed in the Japanese society when it comes to material and technological development.As far as human relations and communication with foreigners are concerned, things have not changed. One can say that Japan has modernized, but it has not westernized just yet (Kodansha, 1994: 202-218, McGreal, 1995: 5-7, Cohen, 1997: 159-160, Gudykunst & Kim, 2003: 80, 119, 217, Samovar & Porter, 2004: 213-217). 8. 2 Ie Japan is a Shinto, Confucianism and Zen Buddhism inspired culture, Confucianism being the fundament, where everything and everyone is connected and relies on each other in order to exist. 21The concept of ie, or extended household/kinship unit in traditional Japan, thus containing more than close family members all living under the same roof – and under the authority of one m ale, describes this way of thinking, or the Japanese values, the best. The main focus in ie is on in-group benefits, harmony and family – where interdependence and togetherness is essential (de Mooij, 2004: 100-1003, Harumi, 1971). Although the ie-concept does not formally exist in the original form 8 , as it did during the pre-modern or feudal Japan, one still finds it in the underlying values of the Japanese people.The ie-concept 9 became dominant and visible during the Edo or Tokugawa period (16001867), where a strict political regime was introduced by the Tokugawa family, who, besides retaining large estates, also took control of major cities, ports and mines in Japan. Under Tokugawa rule, Japan entered a period of national seclusion (sakoku), where the Japanese were forbidden to travel to or return from overseas or to trade abroad. Only the Dutch, Chinese and Koreans were allowed to remain and they were placed under strict supervision.Additionally, to ensure political se curity, the daimyo were required to make ceremonial visits to Edo every other year, and their wives and children were kept in permanent residence in Edo as virtual hostages of the government. The cost of this constant movement and the family ties in Edo made it difficult for the daimyo to remain anything but loyal. At the lower end of society, farmers were subject to a severe system of rules, which dictated their food, clothing and housing. Social mobility from one class to another was blocked – social standing was determined by birth.Additionally, women in the Japanese society were fully submitted men 10 . Women were submitted either their fathers, husbands or in the case of widows, their eldest son – with no legal rights. Ie means extended household – thus containing more than close family members all living under the same roof – and under the authority of one male. Ie was formally abolished in 1947 with the introduction of the New Constitution, which p rescribed a more â€Å"Democratic† family system based on equal rights of husbands and wives. Inspired by Confucianism. 10 This submission was further supported by the Civil Code of 1898, which placed women in the family under the authority of men. 8 22 The patriarchal family structure, ie, was officially abandoned in 1947, but one can still sense its presence, in a revised form, in today’s Japanese society – both in the corporal system where the chief executive is the male, who has been working for the company longest time, and in family life where women take care of children and men provide for the well-being of the amily. Nevertheless, the rigid emphasis of these times on submitting unquestionably to rules of obedience and loyalty has lasted to the present day. Today the ie-concept is still visible in that Japanese businessmen do not entertain their business associates at home. There is both a practical and a social reason for not doing so. First of all, the typical Japanese home is small and a larger group of people simply cannot fit in. Second,† Home† for the Japanese is very private.It is generally only open to relatives, long-time friends, children’s friends and their own family – the so-called in-group. Additionally, salary has for many years been linked to the age of employees until they entered their forties to fifties age – a male worker had thus a lifetime-employment guarantee until they reached their fifties. However, this system does not operate in small-business sector. The seniority system is one of the special characteristics of Japanese employment practices.Since the 1990s, however, there has been a substantial increase in the number of companies, who are reconsidering this type of employment system, and progress is being made in introducing a new compensation system based on employee’s performance rather than their age and the amount of time they have worked for the company in ques tion (Sugimoto, 1997: 80, Kodansha, 1994: 117-118, Hendry, 1998: 22-39). In short, ie puts an emphasis upon continuity, succession practices, and some of the socioreligious (e. . volunteer organizations such as environmental movement groups) functions that still occupy an important place in Japan today (Refsing, 1990, 11-25, Bando, 1980: 27-29, Hendry, 1998: 22-39, Harumi, 1971: 38-39, Sugimoto, 1997: 80, Kodansha, 1994: 117-118) 8. 3 The Wa-concept According to Wierzbicka, cultural values and behavior of a particular culture can be found in a core concept. For Japan this core concept is wa, which means harmony, unity or the desire to be one with those of your in-group.The wa-concept illustrates the concept, with several aspects (please see below), that although people have differences, it is the most convenient when people want the same thing at the deepest level. 23 This deep level of sharing underlies the desire for harmony at the interpersonal level, as well as a high level of c onsideration of others within ones group, and creates a unity among members of the in-group. In Japan, individuals are thus expected to act in ways that protect the unity or wa of the in-group (Wierzbicka, 1992).The several aspects, which the Wa-concept consists of, are described and discussed below: Enryo is an aspect that is encompassed in wa, illustrates the effort of avoiding explicit opinions, assessments, or other displays of personal feelings. It is thus a form of self-restraint that proscribes the brining of attention to oneself and ones personal desires in order to avoid having others think badly of one. Japan has been categorized as a high-context culture, and in a communicative context, the meaning is often implicit. The focus is thus on the listener and his or her ability to understand implicit messages.Sasshi refers thus to the ability to guess or intuit another person’s meaning without that person having to express it directly. Implicit communication is essentia l in a collective culture where maintaining harmony and avoiding conflicts is essential. Amae refers to a form of mutual dependency, or a relationship in which one person is in a protective stance toward another (Wierzbicka, 1992). The desire for amae motivates one to belong to a group and depend on another person. Amae emphasizes thus a protective relationship and a mutual dependency between the members of the in-group.Giri refers to a type of obligation felt toward others who have done something good for the person. According to Befu, it is a â€Å"moral imperative to perform ones duties toward members of ones group† (Befu, 1986: 162). It is also a long-term relationship and a sense that one will be forever in the other person’s debt. This sense of obligation is very typical in a culture that stresses the wa-concept as well as in collectivist cultures, where members of the in-group are closely tied to each other. Awase refers to the ability to always be able to adjus t to the situation or the circumstances.The self is thus constantly changing and moving with the situation, whereas the group is constant and needs to be maintained. Thus, maintaining wa equals being flexible in situations, and not on consistently following ones principles. 24 Kenson involves discounting ones abilities and to avoid standing out in order to maintain the status quo of a relationship. Kenson is sometimes manifested in a verbal apology, and it demonstrates a desire not to disturb the nature of the relationship, and a desire to maintain group harmony.For instance, a speaker may begin his or her speech by apologizing to the audience for his or her low status or insufficient knowledge on the topic – this depicts humility. Kata refers to the constant and familiar way something is done. In Japan, there is a kata or form for almost everything – from the way one plays ball to the way one performs a tea ceremony. The Japanese thus value form over function and proc ess over outcome – an important element to remember when involved in negotiations with the Japanese.This again refers to the uncertainty-avoidance that is present in the Japanese culture, which illustrates itself in the form of strict rules and regulation (Wierzbicka, 1992, Gudykunst & Kim, 2003: 5354). 8. 4 Isolation Another dimension characterizing Japan is the historical separateness of Japan from the rest of the world 11 , and the strong belief in the uniqueness of the Japanese culture and society. Its distance from the Asian continent and from the rest of the world had a crucial influence over the formation of the Japanese society and culture.The isolation began during the Tokugawa period when the Tokugawa government was trying to create relative peace and security. Instead, the government was facing stagnation, corruption and isolation. Famines and poverty among the peasants and samurai weakened the system even further. Additionally, foreign ships (from Russia, Britain and the USA) started to examine Japan’s isolation with increasing insistence, and Japan realized that their defenses were outdated and ineffective. In 1853, Commodore Matthew Perry of the US Navy arrived with his famous â€Å"black ships† to demand the opening of Japan to trade, followed y other countries. This resulted in a stream of antigovernment feeling among the Japanese due to the fact that it failed to defend Japan against foreigners and of neglecting the national reconstruction and modernization. 11 The first contact with the West occurred about 1542, when a Portuguese ship, blown off its course to China, landed in Japan. 25 After 200 years of total isolation from the outside world – due to the fear of Western and Christian invasion or superiority, Japan agreed to open the country to the outside world.Nevertheless, 200 years of isolation has resulted in a rather great amount of regulations, etc. (one may argue that this is a hidden form of protectionism) that are there in order to adopt an e. g. Western product to the needs and circumstances of the Japanese culture. This separateness, or isolation, has also caused the Japanese to be extremely aware of anything that comes from outside, and they thus strongly distinguish between foreign and native culture, as well as its products and innovations (Reischauer, 1995: 32, Kodansha, 1994: 32-37, 131-132, Wakaba, 1996: 4-12). 8. 5Uniqueness The Japanese people have long believed that they are the children or descendants of gods, living in a divinely land. In the 18th century, the scholar, Motoori Norinaga, was responsible for resurrecting ancient myths about Japan and the Japanese. Before Norinaga’s time, Japanese scholar viewed China and its civilization as the most important in the world. Norinaga attacked this view, claiming that Japan was superior to any other country in the world. According to him, Japan was the country where the Sun Goddess was born, making it the epicenter of all other nations.With the appearance from the early 19th century of Russian, British, and other foreign ships in the waters of Japan, there was an intense debate on how to react, since the country had had a policy of isolation from the rest of the world for two hundred years. The military government thus attempted to promote hate and fear of foreigners by law 12 . In 1825, Expulsion Edict was implemented, prohibiting all barbarians and Westerners from entering Japan. If a foreign ship was seen, it was fired upon and driven off. If foreigners went ashore, they were captured and their ship destroyed. 2 Antiforeign attitudes in Japan have generally been limited to the official level. 26 The belief in superiority and uniqueness of all things Japanese have weakened but not entirely disappeared in the present-day Japan. Although this extraordinarily chauvinistic mentality was temporarily restrained after the defeat in WWII, the post-war â€Å"economic miracle† has reawakened the feelings once again. Nevertheless, the rigid, exclusive world view that has been present in pre-1945 Japan, no longer dominates the country.Ultra-nationalism has been discredited – at least in mainstream social, political, and intellectual life. The ideology that has its place is a set of rules by which society generally has learned to operate efficiently. The set of rules are learned from parent, the authority figures, the educational system and the mass media, and contain among other things social solidarity, or collectivistic behavior and thinking, hierarchical social structure, or power distance, role playing, or tatemae, reciprocal obligations, or group harmony.Although this set of rules is far weaker than the pre-war ultra-nationalistic ideology, it is still more rigid and omnipotent than those of e. g. Western societies. In Japan, the rights of the group are thus prioritized over those of the individual, and there are rules for most activities, creating a dependency on others and on group, which again reinforces an ideal of rules, group harmony and collectivism. The Japanese ideal portrays men and women behaving modestly, speaking prudently, and avoiding offending others and maintaining in-group harmony. For them, the deal of individualism is un-noble, risky and illogical. The Japanese desire people to be polite, courteous and indirect with each other. The Japanese are only frank on rare occasions, striving to put the best face, as well as save face, on themselves and situations (Cohen, 1997:146147, 184-186, 224). To express what one really thinks or feels in Japan is regarded as uncultivated and vulgar. The Japanese do not see themselves in first place as individuals, but as group-oriented members. The social group gives them approval, identity and companionship, status, and meaning as such with their lives.All the group members are interdependent. Matsumoto used a food model in order to describe human relations in Japan, calling it natto (ferme nted soybeans). Fermented soybeans sit in sticky glue of starch, and it is impossible to extract one without pulling out the others – they are all connected by the same glue. According to Matsumoto, the beans represent the closeness and interdependence present in the Japanese culture (March, 1996: 15-34, Kodansha, 1994: 32-37, 131-132, Wakaba, 1996: 4-12). 27 8. 6 Western InfluenceThe Japanese culture has been greatly influenced by Western cultures throughout the years, such as the British, the Prussian (e. g. in 1889, Japan created Western-style constitution greatly influenced by Prussia), the Portuguese, and the American. The Western influence entered the shores of Japan through trade, Christianity (missionaries) and war (WWII and the American occupation), as well as through cultural and business exchanges (e. g. through travels and international business). During the mid-16th Century, the Europeans made their first appearance on the shores of Japan.The first Portuguese to be shipwrecked in 1543 found an appreciative Japanese reception for their skills in making firearms. The Jesuit missionary, Francis Xavier, arrived in 1549, and was followed by more missionaries who converted local lords to Christianity (several hundred thousand converts particularly in Nagasaki) – keen to profit from foreign trade and assistance with military supplies. Initially, the Japanese emperor saw the advantages of trading with Europeans and tolerated the arrival of Christianity as a counterbalance to Buddhism.However, this tolerance gradually turned into suspicion of a religion, which he saw as a threat to his rule. This suspicion resulted in rulings against Christianity and the crucifixion of 26 foreign priests and Japanese believers in 1597. The prohibition and the prosecution of Christianity continued under the Tokugawa government until it reached its peak in 1637 with the brutal suppression by the authorities of the Christianled Shimabara Rebellion. This put an e nd to the Christian Century although the religion continued to be practiced secretly until it was officially allowed at the end of the 19th Century.Additionally, in order to eliminate Christianity's presence in Japan, it was required for every family to register a Buddhist temple, becoming a familiar scene in every community. Because of this religious policy, all Japanese today are Buddhist by default. The Western influence continued during the Meiji period (1868-1912) when the Japanese economy underwent a crash course in westernization and industrialization. An influx of Western experts was encouraged and Japanese students were sent abroad to acquire expertise in modern technologies.During the Meiji period, the process of modernization and industrialization took place in Japan, inspired by Western philosophers. An almost obsessive admiration and adaptation of Western ideas and culture had taken place during this period. 28 By the 1890s, the Japanese government leaders were concerne d by the spread of liberal Western ideas and encouraged nationalism and traditional Japanese values. Japan was becoming more confident and an equal player to the Western powers, resulting in the abolition of foreign treaty rights and, in the years to come, in nationalism.This continued till Japan’s defeat in WWII, and the American occupation. The main aim of the occupation was to reform the Japanese government through demilitarization, the trial of war criminals and the removal of militarist and ultranationalists from the government. Additionally, a new constitution was introduced, which dismantled the political power of the emperor, forcing him to publicly reject any claim to divine origins. Once again, Japan was influenced, if not ruled, by Western powers. Finally, in the late 19th century, Western Europe became its model for modernization.