Intercultural differences between Indonesia

and the Netherlands on CSR perspectives Hofstede’s dimensions and a changing context

Bachelor’s thesis

BSc. Future Planet Studies – major Business Studies

Supervisor Nesrien Abu Ghazaleh

Student Abe Hendriks

Student number 10416587

Word count 9.311

Date 28-06-2016

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Verklaring eigen werk

Hierbij verklaar ik, Abe Hendriks, dat ik deze scriptie zelf geschreven heb en dat ik de

volledige verantwoordelijkheid op me neem voor de inhoud ervan.

Ik bevestig dat de tekst en het werk dat in deze scriptie gepresenteerd wordt origineel is en

dat ik geen gebruik heb gemaakt van andere bronnen dan die welke in de tekst en in de

referenties worden genoemd.

De Faculteit Economie en Bedrijfskunde is alleen verantwoordelijk voor de begeleiding tot

het inleveren van de scriptie, niet voor de inhoud.

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Abstract

This aim of this research is to clarify the implications of intercultural differences between the

Netherlands and Indonesia on their Corporate Social Responsibility (CSR) perspectives. The

relationship between the values of Hofstede’s dimensional framework of national cultures

and CSR has been suggested in literature between different countries and regions (Chapple &

Moon, 2005; Maignan & Ralston, 2002; Mathis, 2004; Welford, 2005; Welford & Frost,

2006). In this research the focus is on the three dimensions in which the Netherlands and

Indonesia clearly differ: power distance (PDI), masculinity (MAS) and individualism (IDV).

There are multiple concrete differences and examples in this research to clarify the cultural

expressions in relation to CSR. The different dimensions are built on indicators, wherefore

the meaning of the value can be explained by interpretations of examples. The findings of this

research suggest that the perspective on CSR in Indonesia and the Netherlands is related to

the content of the values of the three mentioned dimensions.

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Table of content

Abstract 3

1. Introduction 5

2. Background 7

a. Introduction 7

b. Definition of CSR 7

c. Levels of CSR 9

d. Cultural drivers 11

e. Hofstede’s dimensional framework of national cultures 13

3. Literature analysis 16

a. Power distance 16

b. Individualism 19

c. Masculinity 22

4. Conclusion 25

5. Discussion 26

a. Limitations 26

b. Further research 26

6. References 28

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1. Introduction

There is a growing interest amongst companies in operating in an ethically responsible way.

Many different kinds of stakeholders are involved in developing corporate social

responsibility (CSR). While CSR has been of interest in Western society for quite some time

(Maignan & Ralston, 2002), many recent studies have illustrated that the interest in the

concept of CSR is growing rapidly in other parts of the world as well, like Asia (Chapple &

Moon, 2005). Although CSR is gain popularity worldwide, there are still differences between

cultures. Different researchers have conducted studies in different countries and regions on

the influence of culture on CSR (Chapple & Moon, 2005; Maignan & Ralston, 2002; Mathis,

2004; Welford, 2005; Welford & Frost, 2006). At the same time, firms are increasingly

globalizing along with the spread of CSR practices. It is necessary to understand the

implications of CSR practices because the number of international activities of multinational

enterprises (MNEs) is rapidly increasing (Crane & Matten, 2004).

In September 2012, the influential Indonesian diplomat Retno Marsudi (current

minister of foreign affairs and former Indonesian ambassador to the Netherlands) gave a

speech at the Indonesian embassy in The Hague during the kick-off event for the Indonesian-

Netherlands Society about the ‘special relationship’ between the Netherlands and Indonesia.

The speech was about the improvement of the bilateral relationship between the Netherlands

and Indonesia. These countries have a shared history as a result of the Dutch colonisation of

Indonesia. Since decolonisation and globalization, both countries have established themselves

as trade countries (Marsudi, 2012). There is still a link between the countries, according to

Marsudi (2012), demonstrated by the fact that Dutch companies and the Dutch government

are the fourth largest investors in the Indonesian economy and the largest investors relative to

GDP (Badan Koordinasi Penanaman Modal [BKPM], 2014).

As Indonesia was part of the Kingdom of the Netherlands for almost 150 years, the

two countries share an interesting history, beginning with the United East Indian Company

(VOC) and developing over the last 60 years despite the colonial connection having ended.

In this period of decolonisation and adaptation, both governments have developed their own

views on managing their countries, including the legal system, social and traditional media,

and national culture (Colombijn, 2013).

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Countries differ in their perspectives on CSR. The Indonesian government instituted

mandatory legal requirements for CSR in 2007 (Rosser & Edwin, 2010; Waagstein, 2010). In

other countries, like the Netherlands, there are different laws related to the common

interpretation of CSR.

The aim of this paper is to determine whether different cultural characteristics

influence national perspectives on CSR by comparing the Indonesian and Dutch perspectives.

Concrete differences between these two countries are expected to be found. Thus, the

research question for this thesis is as follows: What are the implications of the intercultural

differences between the Netherlands and Indonesia for the countries’ perspectives on CSR?

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2. Background

Introduction

This chapter provides theoretical background on the topic to help in the formulation of an

answer to the research question. In the first section, the concept of CSR is explained and

narrowed because, as Campbell (2007) states, “CSR may mean different things in different

places to different people at different times”. Through specifying the concept of CSR that is

relevant to this thesis, a framework is created for comparing other concepts, like culture. As

is the case with CSR, there are also different definitions of culture. In this thesis, the different

definitions of culture are related to Hofstede’s dimensional framework (Hofstede, 1983).

Hofstede’s framework is used to link CSR and culture in order to determine the implications

of culture on CSR perspectives. In the first section, the concept of CSR is defined.

Definition of CSR

In 1916, J.M. Clark claimed that “if men are responsible for the known results of their

actions, business responsibilities must include the known results of their business dealings,

whether they have recognized the law or not” (Katsoulakos et al., 2004). Clark was not aware

of how this concept would evolve after 1916. From 1916 to today there has been a lot written

about the definition of what we now call (especially since the 1960s) corporate social

responsibility (Carrol, 1991).

Crane and Matten (2004) state that corporate responsibility is different from the

individual responsibilities of the members of the organisation; therefore, Clark’s definition is

too simplified. In contrast, Friedman (1998) claims that corporations are not persons and

cannot be held responsible for actions; therefore, the individuals in the organisation are

responsible for their actions. Friedman (1998) continues that if corporations were considered

individuals with responsibilities, then actual people, especially executive management, would

be free of all personal responsibility for their actions. Therefore, it is currently widely

accepted that organisations have responsibilities beyond their economic responsibility

towards their shareholders, but these responsibilities differ from individual responsibilities.

Corporations have four different kinds of responsibilities, which can be organised into

a pyramid structure (Carrol, 1991/2004). The first layer of the pyramid (Figure 1) is

economic responsibility. Corporations must be profitable and their economic performance is

important in a system of global capitalism. The second layer is legal responsibility. Both

companies and individuals are expected to obey the law. Since society determines the law,

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legal responsibility is required by society. The third layer is ethical responsibility. According

to Carroll (1991/2004), this responsibility is not required by global stakeholders, unlike legal

and economic responsibility. Rather, it is an expectation held by global stakeholders. Carroll

(2004) defines ethical responsibility as “doing what is right, just, and fair to avoid or

minimize harm to stakeholders (employees, consumers, the environment, and others)”. The

fourth layer is philanthropic responsibility, which is desired by global stakeholders and

entails that corporations should contribute to the community, either through time or money.

Carroll believes that ‘total corporate social responsibility’ is about meeting these

requirements, expectations, and desires completely. Carroll’s definition is not the only

definition of CSR. Another widely used definition of CSR is that of McWilliams and Siegel

(2001).

Figure 1: Carroll, A. B. (2004). Managing ethically with global stakeholders: A present and

future challenge. The Academy of Management Executive, 18(2), 114-120.

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McWilliams and Siegel’s (2001, in Beers, 2013) definition of CSR is currently one of the

most used and comprehensive definitions. They define CSR as “situations where the firm

goes beyond compliance and engages in actions that appear to further some social good,

beyond the interest of the firm and that which is required by law”. The use of the term social

good is vague. Combining McWilliams and Siegel’s (2001) definition with that of Carrol

(2004), in this paper ‘social good’ will be interpret as the definition of Carrol’s ‘global

stakeholders’ (1994) because, according to Carrol (2004), doing social good is about meeting

the requirements, expectations, and desires of global stakeholders.

Levels of CSR

As mentioned above, there are many different definitions and interpretations of CSR.

Dahlsrud (2008, in Beers (2013)) compares 37 different definitions, concluding that

definitions of CSR are socially constructed in particular contexts. Even the above definition

could be interpreted differently depending on the context of the specific culture. Singhapakdi,

Vitell, and Leelakulthanit (1994) claim that culture is one of the most important factors in

business ethical decision-making. Gjølberg (2009) has studied the influence of legal

regulations and the ability to enter global markets on the CSR performance of companies.

The author states that CSR must be understood within a framework of contextual factors, like

institutional and historical factors. The understanding of the different levels of CSR is used

here to clarify the influence of culture on CSR. In the following sections, the individual,

organisational, and cultural levels of CSR are reviewed.

Individual level

As mentioned above, there has been some discussion about the discrepancy between

individual versus corporate responsibility which is a result of theoretical differences

regarding the perception of CSR.

Wood (1991) argues that the idea of organisational responsibility is irrelevant to CSR

because businesses are composed of individual actors, like managers. Therefore, managers’

personal characteristics are likely to influence the CSR perspective of an organisation

(Maignan & Ralston, 2002; Chapple & Moon, 2005). Maignan (2001) conducted a study that

compares French, German, and U.S. consumers’ perspectives on legal and ethical issues

regarding CSR and has found that French and German respondents consider legal and ethical

issues much more relevant than do participants from the U.S. Therefore, there is room for

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individual judgement in defining CSR and managers’ understandings of it are likely to differ.

Managers steer corporations and make decisions. Crane and Matten (2004) have concluded

that the interpretation of ethical acts and issues depends on the specific moral principles of

the specific person and take into consideration that people do not always react the same way

in different situations. Therefore, cultural habits and beliefs likely influence individual

perspectives on CSR. The interpretation of ethical acts could lead to a different interpretation

of CSR in different cultures.

Finally, corporations are more than just the sum of the individuals that work in them.

CSR is related to decision-making on the ethical and philanthropic levels and although

individual factors do have an influence, some individual factors are likely influenced by

situational factors like national or organisational culture. Thus, the organisational level is also

important to take into account.

Organisational level

Organisations and corporations also influence CSR. As mentioned above, organisations can

influence individual actions because of situational context and individuals can also influence

organisational culture. The values of the organisation, especially those of upper management,

influence the strategic choices of the firm and therefore CSR policies (Hambrick & Mason,

1984). Organisational culture is created through socialisation, which leads to a dominant

belief within the firm, even while individuals have different perspectives on (social) issues.

Organisational culture functions to help individuals gain know-how within the organisation to

deal with customs and habits in the organisation (Crane & Matten, 2004). According to Bae,

Chen and Lawler (1998), organisations do not only interact with individuals, but also interact

with their host and home countries. The home country influences the organisational

perspective in the growth period of an organisation. After this period, upper management

changes in host country and home country influence the organisational perspective on CSR.

These changes in the upper management can be the replacement of managers or the change of

strategy. These changes do not influence the perspectives differently when the organisation

replaces the managers and changes the strategy at the same time.

Other characteristics related to the organisation, like firm size, may affect the

perception of CSR. On the one hand, large firms are less agile and therefore must use their

resources to make strategic choices according to public pressure and legal regulations

(Buehler & Shetty, 1976). On the other hand, large firms have bureaucracy, which could also

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affect ethical decision-making (Crane & Matten, 2004); for example, there could be a gap

between the actions of upper management and the outcome perceived by global stakeholders.

Hemingway and Maclagan (2004, in Beers (2013)) suggest that the intrinsic values of

executives influence strategic choices and thereby indirectly affect CSR initiatives. Certain

rules and procedures allow these managers to formally speak for the corporation and to

exercise their own judgment in making decisions linked to CSR.

Country level

Visser (2008) has found that developing countries and developed countries differ in their

perceptions of CSR. National pressures can drive companies to act in specific ways, whether

ethically or unethically. Such drivers can be at the country level and include the socio-

economic environment, the current dominant ideology, or cultural traditions, like colonialism.

According to Visser (2008), there is a difference between weak governments and strong

governments. This difference includes differences in the position and power of corporations

in relation to the government. For example, in China, government pressure on the economy is

much more apparent than in Europe. In countries with democratic systems, the public is able

to put pressure on businesses more than in authoritarian systems (Gnyawali, 1996). Also, in

countries with either a weak or strong government, CSR may be a governmental priority

because of the failures of voluntary approaches. Institutions usually evolve as the level of

economic development increases. Business’ perception of CSR might vary according to this

level. McAdams and Nadler (2005) argue that laws influence social expectations of CSR, and

social expectations function as a focal point for the strategic choices and behaviour of

corporations. In addition, consumers are more likely to know about the activities and actions

of corporations in more developed countries because of media. Therefore, higher levels of

economic development could be linked with the higher levels of pressure on businesses to

participate in CSR and could engender a broader perspective on corporate activities

(Campbell, 2007, in Beers, 2013).

Cultural drivers

All of these different levels and perspectives on CSR mutually influence each other, and

culture is thought to influence perspectives on ethics and CSR. Different authors, like

Hofstede (1983, in Hofstede, 2010) and Trompenaars and Hampden-Turner (1997), have

concluded that standardisation of management across the world is impossible because of the

differences between cultures. People in different cultures hold different views on what is

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wrong versus what is right, and the question of ethical responsibility is difficult to answer.

Interestingly, Katz, Swanson, and Nelson (2001) posit that expectations of CSR are shaped

by culture. This means that the ethical and philanthropic responsibilities mentioned above are

dependent on the cultural context. But what does culture mean and what is included in the

concept of culture?

To ensure a consistent definition of ‘culture’, different definitions must be reviewed. In this

article, the definitions of Hall (1977), Hofstede (1980/1994), and Plog and Bates (1990, in

Hofstede, 1994) are reviewed and compared to each other. Over the last several decades,

there have been several different dominant frameworks for understanding cultural

differences. Investigating the differences between Dutch and Indonesian perspectives on CSR

has revealed that national culture is the most relevant type of culture.

According to Hall (1977), culture can be compared with an iceberg, where there are some

visible parts, like arts, language, and customs, and also some hidden parts, like values,

beliefs, and historical roots. Hall’s metaphor has had a huge impact in academic and

professional spheres and is still widely used. The visible parts of culture can be considered as

the external side of the culture, while the invisible parts can be considered as the internal side

of the culture. In the metaphor, Hall (1977), suggests that the understanding of a culture

depends on understanding mutual sides.

Hofstede (1994) argues that culture is related to the individual mental process; therefore,

cultural meaning is shaped by individuals and their interpretations. Hofstede (1980) defines

culture as “the collective programming of the mind that distinguishes one group of people

from another"’. This definition implies that people become mentally programmed by

experiences in specific situations. Plog and Bates (1990, in Hofstede, 1994) state that culture

is “the system of shared beliefs, values, customs, behaviours, and artefacts that the members

of society use to cope with their world and with one another, and that are transmitted from

generation to generation through learning”.

Everyone is part of different groups and each group has different layers and systems

that influence mental programming. The different layers are characterised, for example, by

the ethnic, regional, and national levels. In this thesis, the focus is on the layer of national

culture. Hofstede (1994) argues that national culture could be a limitation because the

concept of culture applies more to communities than to nations. However, different cross-

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cultural studies have been conducted with respect to national culture because this

measurement enables study in a common political environment (Christie, Kwon, Stoebler &

Baumhart, 2003).

There are different ways to conceptualise national culture for the purposes of research.

Hofstede’s dimensional framework of national culture is used most in scholars because of the

large amount of data available and the transparent way of conducting research that it affords.

Hofstede’s dimensional framework of national cultures

The cultural practices of people are readily apparent, but the cultural meaning of practices

depends on the type of group (Hofstede, 1983, in Hofstede, 2010). This implies that it is

possible to identify a group by looking at commodities that influence their interaction with

the environment.

Over the past thirty years, Hofstede has researched different national cultures and created a

framework to make culture measurable. In his first book, he identifies four main dimensions

according to which cultures can be ordered (Hofstede, 1980). These four dimensions are: 1)

power distance (PDI), 2) uncertainty avoidance (UAI), 3) individualism (IDV) and 4)

masculinity (MAS). In 1991, Hofstede added a fifth dimension: 5) long-term orientation

(LTO).

These five dimensions are used by many researchers to characterise national societies.

This framework may be used as a base for formulating hypotheses and is commonly used in

various CSR studies (Ho, Wang & Vitell, 2012; Kim & Kim, 2009; Ringov & Zollo, 2007;

Ioannou & Serafeim, 2012). There has been a lot of criticism of the framework (Javidan et

al., 2006; McSweeney, 2002), but it also has a great deal of support due to its clarity and the

degree to which it can be applied. It makes it relatively easy to understand how cultures

differ. In 2011, Hofstede added a sixth dimension, indulgence, but there has not been much

research conducted that takes the sixth dimension into consideration; therefore, this

dimension is not used in this research, as this research is based on a literature review. In this

thesis, Hofstede’s dimensional framework of national cultures is used specifically to compare

the cultural dimensions of Indonesia and the Netherlands.

Hofstede (2010) claims that there is a difference between desirable and desired. He considers

desirable to mean what people ideally think the world should be like, desired to mean what

people want and need for themselves. Philanthropic responsibility, as defined by Carroll

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(2004), is about the desire of global stakeholders; therefore philanthropic responsibility

should be interpret as what people consider as desirable.

Figure 2: Indonesia vs. the Netherlands (Hofstede, Hofstede & Minkov, 2010)

Power distance

This value reflects the degree of centralisation of power and to what degree leaders must be

obeyed. If the value for power distance is low, people accept the power distribution within

the country and view everyone as equal. If the power distance value is high, dialogue

between management and employees is lacking, and therefore consumer pressure on CSR is

low. Ho, Wang, and Vitell (2012) claim that there are more environmental regulations and

strict enforcement in countries with a high power distance score. The power distance value of

Indonesia (78) is higher than that of the Netherlands (38), which leads to the following

hypothesis.

H1: Power distance has more of a negative influence on CSR in Indonesia than in the

Netherlands.

Individualism

This value reflects the extent to which people attach importance to personal self-interest and

how closely people live together. In a highly individualistic culture, individuals stress

primary responsibility for their own actions. In collectivist cultures (low individualistic),

people are more engaged with the interest of the group. Interestingly, Matten and Moon

(2008) claim that individualistic workers will choose to fight for an ethical organisation, but

mainly on the grounds of being internal stakeholders and not for the ultimate greater good of

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society. The individualism value of Indonesia (14) is much lower than the value of the

Netherlands (80), which leads to the following hypothesis.

H2: Individualism has more of positive influence on CSR in Indonesia than in the

Netherlands.

Masculinity

This value reflects the preference for assertiveness and achievement. If there is a high value

for masculinity, there is an acceptance of assertiveness and drive for achievement. As stated

by Ringov and Zollo (2007), companies in countries with a low value of masculinity focus

more on social and environmental performance. The masculinity value of Indonesia (46) is

higher than the value of the Netherlands (14), which leads to the following hypothesis.

H3: Masculinity has more of a negative influence on CSR in Indonesia than in the

Netherlands.

Uncertainty avoidance and long-term orientation

The value of uncertainty avoidance refers to how society deals with unknown situations and

the degree to which they feel threatened by such situations. Hofstede has developed three

indicators: 1) rule orientation, 2) employment stability, and 3) stress. A high value of

uncertainty avoidance means that employees have a strong emotional need for rules

(Hofstede, 1980). Openness to initiatives and willingness to take risks are indicators of a

lower value of uncertainty avoidance.

The value of long-term orientation was added to Hofstede’s first model (1980) after

Bond et al. (2004) published their paper. This dimension adds a future-oriented degree based

on values like thrift and persistence.

As the Dutch and Indonesian values of uncertainty avoidance and long-term orientation are

so similar, there is no hypothesis related to these two dimensions.

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3. Literature analysis

In this section, the values of Indonesia and the Netherlands of the different dimensions of

Hofstede’s framework will be analysed. This analysis will be done in order to accept or reject

the hypotheses. This chapter will be used to answer the research question. In the following

section, the dimension power distance will be analysed.

Power distance

As mentioned above, the power distance value of Indonesia (78) is higher than that of the

Netherlands (38); therefore hypothesis 1 reads:

Power distance has more of a negative influence on CSR in Indonesia than in the

Netherlands.

Hofstede (2010) has found that:

- The more north a country is situated, the lower its PDI

- The smaller the country is, the lower its PDI

- The more wealthy the country is, the lower its PDI

These three statements explain why the PDI of the Netherlands is lower than the PDI of

Indonesia. Especially the first two are irrefutable: The Netherlands is situated more north and

is smaller than Indonesia.

Waldman et al. (2006) argue that corporate managers in societies with high power

distance values are not likely to take CSR into consideration when making decisions. These

managers are less concerned with the company’s needs than with their own needs. If the

power distance values are lower, Waldman et al. (2006) expect that institutional pressure

guides managers to act for the good of the company. Although Waldman et al. (2006) focus

only on the managerial aspect of the firm, it seems to be likely that in this specific case, the

country will be a reflection of the upper management. Thus, if the power distance value is

higher, it will influence the CSR perspective more. The high power distance value of

Indonesia is analysed first.

Power distance in Indonesia

Although no studies have been conducted on how power distance in Indonesia relates to the

country’s level of CSR, Hoshiko (2015) has conducted a comparable study on the efficacy of

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CSR programs in Hainan, China. The power distance value of China (80) is very close that of

Indonesia (78). Hofstede (2007) has found significant similarities between Indonesian and

Chinese power distance; therefore, a comparison between China and Indonesia is possible.

Hoshiko (2015) has found that, in China, there is acceptance that powerful, wealthy people,

including the government, influence the people’s daily lives and the CSR programs that are

offered. Hoshiko (2015) conducted five case studies that measure the influence of power

distance on CSR programs. In these cases, employees of different MNEs (European,

American, Japanese, and Chinese) were interviewed and asked for their perspectives.

Hoshiko (2015) concludes that the efficacy of the CSR programs was influenced by the

power distance and the perspectives of the participants were influenced by the powerful,

wealthy people, including government.

Indonesia has a large bureaucratic system, where subordinates always follow their

superiors. One common problem in Indonesia is that many employees prefer to wait for their

bosses’ orders rather than making their own decisions. This phenomenon consolidates the

power of the superiors, which implies that decisions related to CSR are not made by

individuals, which slows down the process of CSR. There is an interesting difference

between Indonesia and the Netherlands in this respect.

Regulations

In 2007, the Indonesian government adopted Law no. 40 and Law no. 25, which have made

CSR mandatory. At that point, Indonesia became the first country in the world with a

mandatory agreement on CSR. As stated in the Law (no. 25):

“Every corporation is obliged to implement corporate social and environmental

responsibility, defined as [a] responsibility mounted in every investment company to keep

creating relationship which is in harmony, in balance, and suitable to the local community’s

neighbourhood, values, norms, and culture” (Waagstein, 2011).

On the one hand, the adoption of this law represents the acceptance of CSR by the

government. Further, the government implies that the implementation of CSR is a

government responsibility. However, Waagstein (2011) claims that there are some problems

in the functionality of the law because of the Indonesian government’s definition of CSR and

the lack of implementation mechanisms.

The creation of this law is a clear signal of the power distance in Indonesia. As

mentioned above, Waldman et al. (2006) claims that managers of corporations in societies

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with high power distance values are not likely to value CSR in their decision-making, which

is why governments must intervene in the processes of the corporations.

In the Netherlands, there is a great deal of discussion about environmental/CSR regulations,

implying the stronger connection with the European Union. There is no CSR law, like in

Indonesia, but there are environmental laws, which could be connected to the common

definition of CSR that differs from the definition of CSR in this research. Two types of CSR

laws are laws that prohibit certain investments and sustainability laws (CO2-emissions,

discharging wastewater, etc.).

When a CSR law is brought into the regulation system, it becomes the legal

responsibility of the firm to meet the demands. This is in contradiction to the definition of

CSR that entails that a company should meet its economic and legal responsibilities as well

as its ethical and philanthropic responsibilities. Waagstein (2010) claims that this type of law

is too difficult to supervise because of the vague definition of CSR.

Power distance in the Netherlands

Since the value of power distance for the Netherlands relatively low, it would seem to follow

that there are indicators for this lower value of power distance in the Netherlands. As

mentioned by Hofstede (2010), power is much more decentralised in the Netherlands than in

Indonesia, which indicates a lower power distance. In the Netherlands, employees expect to

be consulted by their supervisors and treated equally. Speaking freely and express opinions

without permission is even expected by their supervisors (Hofstede, Hofstede & Minkov,

2010).

While there are underlying reasons for the values of power distance, there are also more

apparent and practical expressions of these power distance scores and their implications on

CSR perspectives.

Inequality

As mentioned above, the degree of inequality is part of the value of power distance,

especially inequalities related to opportunity, the labour market, and wealth. The World Bank

(2015) has concluded that these three types of inequality are still present in Indonesia. The

fate of poor children is often determined at birth and an unfair start can lead to fewer

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opportunities. At least one third of inequality is due to factors outside of the individual’s

control (Vogel, 2006).

This inequality is inherently in contradiction with the abovementioned definition of

CSR that claims that it should be the ethical/philanthropic responsibility of the corporation to

fight against inequality.

Individualism

Earlier research by Hofstede and Hofstede (2007) indicated that it is commonly thought that

Western societies are more individualistic, as indicated by the score of 80 for the

Netherlands, and Eastern societies are more collectivistic, as indicated by the score of 14 for

Indonesia.

As the individualism value of Indonesia (14) is lower than that of the Netherlands (80), the

following hypothesis emerges.

H2: Individualism has more of positive influence on CSR in Indonesia than in the

Netherlands.

In 1997, Hampden-Turner and Trompenaars researched the concept of ‘individualism-

collectivism’ and came up with similar findings as Hofstede. As stated by Williams and

Zinkin (2008), this dimension may help to explain CSR based on the integration of social

demands within the culture. Williams and Zinkin (2008) offer some criticism of Hofstede’s

suggestion that countries with low scores for individualism are more likely to be vulnerable

to group pressure than others. They argue that there are different countries with high scores

for individualism, but still the presence of examples where people handled out of group

pressure. This brings some complexity to the discussion individuality within the framework.

Therefore, Hampden-Turner and Trompenaars (1997, in Williams & Zinkin [2008])

support the idea that “in individualistic cultures, people are inner-directed, believing in self-

reliance and seeking to satisfy self-interest, whereas in communitarian cultures, people are

outer-directed and so more concerned with what society or their in-group has to say about

their actions.”

It is important to understand what kind of underlying assumptions this brings to the

perspectives on CSR. For example, the United States has developed many codes of ethics, but

they have not been introduced into the corporate culture due to the interest of the stakeholders

(Williams & Zinkin, 2008).

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Waldman et al. (2006) state that high institutional collectivism may positively influence the

priority of CSR within an organisation. This could be the result of the desire of the employees

in the organisation. Ho, Wang & Vitell (2012) have found a supporting positive relation

between institutional collectivism and CSR and define institutional collectivism (House,

Javidan & Dorfman, 2001, in Ho, Wang & Vitell, 2012) as ‘the degree to which

organisational and societal institutional practices encourage and reward collective distribution

of resources and collective action’.

Individualism in Indonesia

Although Indonesia’s score is very low, there is a serious problem with corruption in

Indonesia (Olken, 2005). Olken (2005) states that there is a contradiction between the

corruption and the perceived high level of internal cohesion of social groups in the country.

According to the idea of Hampden-Turner and Trompenaars (1997, in Williams in Zinkin

(2008)) mentioned above, these two components express the opposite. As Olken (2005)

claims, a distinction must be made between different kinds of corruption. As Indonesians live

in smaller social groups and are very collectivistic, they are not against foreigners,

government, and corporations. This implies that the there is a low level of institutional

collectivism, but a high level of collectivism, according to the definition of Hofstede (2010).

According to Supartono (2011), Indonesian society has created ideals over thousands

of years of collectivistic thinking. These values are intrinsic to the different societies and still

very apparent in the habits, values, and beliefs of Indonesians. The collectivistic culture in

Indonesia is clearly visible within family relationships. An example of the collectivistic ideal

can be found in the relation between children and their parents. Parents and children are

committed throughout life. First, the parents try to make their children’s lives as easy as

possible. This relation later reverses and the children eventually try make their parents’ lives

easier in old age (Hofstede, Hofstede & Minkov, 2010).

One example for the collectivistic culture in Indonesia is the principle of ‘Bhineka

Tunggal Ika’. This may be considered a contradiction in terms because the meaning of this

principle is unity in diversity (van Bruinissen, 2007). This principle considers: “the beliefs in

God, tolerance, humanity, democracy, and social justice” in the “Pancasila”. The Pancasila is

a written statement, wherein the fundamentals of the Indonesian society are captured. It

reflects the country’s belief in collectivism. The Pancasila is a slogan for the Indonesian

society, whereby everyone knows the statement and the underlying meaning (Morfit, 1981).

21

For example, in business, subordinates speak courteously to their supervisors, even when

arguing in discussion, without harming or offending people. This example of discussion is

also used above in the section on Dutch power distance (Supatono, 2011). It is mentioned

above that Dutch subordinates speak more freely than Indonesian subordinates. Therefore, an

indicator to the degree of individualism can be linked to the degree of power distance.

Different views on situations link characteristics to different dimensions, in this example the

Indonesian subordinate (individualism) versus the Dutch subordinate (power distance).

Individualism in the Netherlands

The Netherlands is an individualistic society (it has a high score of 80). The social framework

is not as tight as in Indonesia. Individuals are expected to take care of themselves and of their

immediate families, but this relation is not as tight as in Indonesian culture. One important

aspect of the individualistic culture in the Netherlands is the formal relationships. A

professional relationship is always an agreement based on mutual advantage, while in more

collectivistic cultures, such agreements are for the ‘greater good’ (Hofstede, Hofstede &

Minkov, 2010).

Self-interest

Christie, Kwon, Stoeberl, and Baumhart (2003) argue that injury to the environment has been

found to be more negatively perceived in collectivistic cultures. Based on the comparison

between the Netherlands and Indonesia, there is a slight discrepancy in this statement. Taking

the earlier mentioned claims into consideration, injury to the environment would, in the end,

harm the future of the children of the current generation. This is much more of a concern for

Indonesians than for the Dutch. This could be the main reason that collectivistic countries

have more environmental policies and regulations than individualistic countries (Katz,

Swanson & Nelson, 2001).

22

Masculinity

A high score for masculinity means that a society is characterised by a drive for competition,

success, and achievement, while a low score indicates that caring for others is more important

and that success is signified by quality of life and not especially by material wealth. The

Indonesian (46) and the Dutch (14) both have a low score for masculinity, but the value is

higher for Indonesia (46) than for the Netherlands (14):

H3: Masculinity has more of a negative influence on CSR in Indonesia than in the

Netherlands.

The degree of masculinity reflects the role that gender plays in society. In cultures with a

lower value of masculinity, people are more modest, tender, and concerned with quality of

life (Kim & Kim, 2010). Feminine societies tend to reward people based on equality, while

masculine societies tend to reward people based more on perceived merit. The focus on

material wealth and competitiveness as measures of success is therefore greater in masculine

societies (Williams & Zinkin, 2010). It is more likely for societies with a higher value of

masculinity to be active in unethical business practices. (Vitell et al., 1993 in Williams &

Zinkin, 2010). In masculine cultures, ‘high pressure selling’ may be seen as a good business

practice, while feminine may perceive ‘high pressure selling’ as unethical. Vitell et al. (1993)

illustrate that there is a difference between business practitioners in countries with a high

value for masculinity and those with a low value for masculinity. Masculine societies tend to

perceive fewer ethical problems and the business practitioners in them are less likely to be

influenced by codes of ethics.

According to Carroll’s pyramid (2004), different situations can be placed into

different ‘categories’ in the Netherlands and Indonesia. Ringov and Zollo (2007) have found

that companies based in masculine societies exhibit lower levels of social and environmental

performance. Ho et al. (2012) have found partial support for Ringov and Zollo’s (2007)

implication that masculinity has a negative influence on CSR.

Masculinity in Indonesia

Indonesia has a slightly low score for masculinity (46), although its score is higher than the

Dutch score (14). Compared to the scores of other Asian countries like Japan, India, and

China, Indonesia’s score can be considered low. Indonesia is close to the midline of 50,

meaning that in Indonesia, visible symbols of success are still important, but not always the

motivation. The concept of ‘gengsi’ implies the importance of social position in Indonesia.

23

‘Gengsi’ has to do with how one appears to others. An aura of status can be created and

people may be intimidated by it (Hofstede, Hofstede & Minkov, 2010).

Ford, Lyons, and Wilson (2012) describe an interesting phenomenon in the big cities

of Java, Indonesia (Jakarta, Yogyakarta, Surabaya, and Bandung) known as the ‘jago’. The

jago is a local strongman who controls part of the city with social constructions and violence.

The authors focussed on specific areas, like local markets, transport hubs, and docks, and saw

that a jago was controlling these marginal economic areas through the threat of physical

violence.

The authors claim that violence is the currency in the areas where the jagos are the

boss and even the government, NGOs, and corporations must obey their rules and

restrictions. These men use territory as a resource and reputation is their basis for honour. An

interesting point of view is that locals and followers often believe that the jago has magic

powers with which he can create conflicts between everyone else, but never be harmed

himself. It must be noted that jagos only have power in marginal areas and attempt to create

order in the expanding middle class enclaves in Indonesia (Ford, Lyons, & Wilson, 2012).

The influence of the jago can influence the power of government, NGO, and corporations,

wherefore the outcome of the strategic choices of these organisations will be reduced,

including possible CSR programmes.

In other articles (e.g. Silberschmidt, 2004), different authors make the connection

between violence, low socio-economic status, and violence in relation to expressions of

masculinity. As mentioned by Hofstede (2010), the value of masculinity in Indonesia is not

particularly high, as the Indonesian people believe that the appearance of success is more

important than material indications of success.

Masculinity in the Netherlands

With a score of 14, the Netherlands is one of the most feminine cultures in the world. It is

important for the Dutch to maintain a balance between work and life. Managers are expected

to be supportive of their people and involvement of employees is the key to how they make

decisions.

Graafland and Eijffinger (2004) relate the number of female top-level managers in the

Netherlands in the service industry to the industry’s relatively high involvement in CSR

practices. Hofstede (1980) states that one of the differences between feminine and masculine

cultures is that in feminine cultures, differences between the sexes do not factor into the

power structure. This idea is supported by the number of women in the Dutch labour market.

24

Begal and Mills (2012) conclude that there is a high level of participation amongst women in

the labour market in the Netherlands and that women are giving birth later in their lives. Most

women are spending a (relatively) long time in the labour market before giving birth to their

first child. Begal and Mills (2012) examine this point to refer to another characterisation of

Hofstede’s definition of masculinity/femininity—occupational segregation by gender. There

is relatively less occupational segregation according to gender in the Netherlands (Begal &

Mills, 2012), which supports the claims of Hofstede (2010). The authors posit that one of the

main drivers of these phenomena is the accessibility of education.

The Netherlands and Indonesia both have relatively low values for masculinity, but there are

socio-economic differences between the countries. The socio-economic differences and

differences in indicators seem to be linked to the differences in power distance.

The abovementioned examples of masculinity/femininity in the Netherlands and

Indonesia are completely different, which can be explained by the extreme situation of one of

the indicators for each country.

25

4. Conclusion

In the previous chapters, there have been several examples of the differences of the

implications of CSR in the Netherlands and Indonesia. As mentioned in the theoretical

chapter, the ethical and philanthropic responsibilities are considered as the main part of CSR.

The Indonesian government moved some ethical or philanthropic responsibilities to the legal

level of responsibility, wherefore the government takes the responsibility for the (corporate)

citizen. According to the levels of power distance, it seems to be a logical step for the

Indonesian, while this kind of response will not be likely in the Netherlands.

Furthermore, the interaction between subordinates and their supervisors in Indonesia

and the Netherlands seem to differ so much, that these two countries are even hard to

compare in this context. Both cultures have their background, wherefore they developed over

couple of decades their own values and norms and therefore have their own perspectives on

‘doing the right thing’. If something is accepted as right in the Netherlands, it does not have

to be right in Indonesia. When a subordinate in the Netherlands does not bring up all

arguments in a discussion, it will probably not be appreciated, while this may be the

interpretation of doing the right thing in Indonesia. Therefore, it might be harder for the

Indonesian to discover society’s view of the ethical and philanthropic responsibility. This

seems to have an interaction with the governmental actions related to CSR.

The amounts of power distance, individualism and masculinity in Indonesia and the

Netherlands seems to have influence on the perspective on CSR. The Dutch and Indonesian

perspectives on CSR are completely different. While the Dutch individualistic and feminine

culture seems to interpret CSR as a responsibility of society. In this perspective the logical

response from the society is to not harm others, expressed by the feminine value. On the other

hand, the Indonesian collectivistic and masculine culture seems to interpret CSR as a

responsibility of society and government. The government has to do as much as they can to

help society and let their children raise up in a better world. Therefore, the conclusion of

Ringov and Zollo (2007) in this case is similar to this conclusion. Ringov and Zollo (2007)

claim that power distance and masculinity are found to have a negative effect on CSR,

whereas the differences according to individualism does not have a significant effect. In this

thesis: there are examples found of the differences between the two countries and therefore

explaining their influence on CSR.

26

5. Discussion

Limitations

The focus in this thesis is on the specific single dimensions. The relevant values of the

Hofstede dimensional framework are explained by different practical examples. The scores of

the Netherlands and Indonesia have been evaluated by the measure of a literature analysis.

The main limitations of this thesis are influenced by the limited amount of time and the lack

of literature in the specific areas.

As mentioned earlier, the indicators are influenced by factors, like religion, socio-

economic status and historical situations. Thereby is a comparison between cultures and their

CSR perspectives inherent part of a broader view than only business. In the concept of

national culture, measured by the Hofstede dimensions, there are so many scientific

disciplines involved in creating the right context. Thereby this thesis is not inclusive for a

total view of the both countries and their CSR perspectives. An interesting research could

include the influence of religions (Islam in Indonesia) on CSR. The Islamic influence on CSR

and the culture in Indonesia has not been specifically measured in this thesis, but is reflected

in the dimensions of Hofstede. Several authors have focussed on the relationship between

CSR and religion (Brammer, Williams & Zinkin, 2007; Dusuki, 2008; Ramasamy, Yeung &

Au, 2010; Williams & Zinkin, 2010).

Further research

Comparing two countries on their CSR perspectives could create a useful view for

corporations, governments and NGO’s in behaving right in the right context. There are some

recommendations for future research.

First, in further research, quantitative research could test validity of the theories. In

this research, literature for the different dimensions and practices has been demonstrated,

wherefore Ringov and Zollo (2007) claim that there is need for more in-depth analysis. This

in-depth analysis should exclude the biases in current research, like (ironically) cultural

biases.

Secondly, Hampden-Turner and Trompenaars (1997) have some founded criticism on

the dimensional framework of Hofstede. While this framework is one of the most used

frameworks according to research on culture, the model suggests some interpretational bias.

Using national cultures is hard when investigating a diversified cultural landscape as

Indonesia. As mentioned above, within the limitations of this research, this was considered

27

the best option to use, because of the clear statements and support of the model. There has

also been criticism on the use of national cultures related to the concept of CSR, whereby

other authors argue that not the national culture, but only the organizational culture of a firm

will influence the perspectives of CSR.

Thirdly, comparing two countries might be too broad. In these countries there are

different cultures as well. In 2009, Mangundjaya conducted research whereby the author

specified the different regions in Indonesia and measured the dimensions of Hofstede within

the country of Indonesia. Thereby, the comparison is harder to make between countries and

therefore less useful for MNE’s and NGO’s if they are focussing on the country. On the other

hand could this research of Mangundjaya (2009) be useful for MNE’s, NGO’s and

international associations if they focus on a particular part of the country.

28

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