This study tests and finds that U.S. subjects, who are higher in individualism than Taiwanese subjects, initially prefer to award relatively less merit than the Taiwanese to poor
7Davison and Sharma (1990) and Dalal (2001) caution against interpreting main effects or lower level interactions when a higher one exists. The only significant main effect without a significant higher level interaction is the gender variable which indicates that across all samples and conditions women are less generous in their merit awards.
performers. The communitarian Taiwanese prefer to ‘spread the wealth around’in the interest of harmony. What is interesting is that unlike previous studies which have been based on preference surveys or secondary data, this study places the Taiwanese subjects in a situation where they have the opportunity to award merit to individuals and they in fact use it as an opportunity to spread reward across all groups of performers. This is concomitant with a very powerful collectivist ethos in play. It also raises questions for Anglo companies in Taiwan as to whether their agency based reward systems will be effective and what other agency based control systems will fail.
Outside these initial parameters, U.S. subjects trying to avoid the appearance of failure are significantly more likely than Taiwanese to escalate their commitment to failing subjects that they have personally selected. They do this by awarding more and larger merit awards. This result parallels existing self-justification explanations for escalation, particularly Harrison et al.
(1999), which finds individualistic cultures are more prone to reacting to their own perceived failure by escalating. This does not mean the U.S. subjects are alone as Taiwanese do escalate their commitment somewhat, possibly driven by face effects, but the escalation is at a
significantly lower rate than U.S. subjects.
In considering these results, however, some limitations should be noted. First, this study uses a pencil and paper instrument administered in a classroom environment. To the extent that this atmosphere is artificial it may affect results. Second, the cases were comprised of relatively brief scenarios and did not contain all of the information that might normally be available.
However, the information provided was realistic, consistent with prior research, based on actual scenarios and was deemed by industry professionals to be sufficient for our intended purpose.
Finally, participating students were not randomly selected but instead were attending accounting
classes at their respective universities. Thus, generalizations should be made cautiously. While the results of this study may not generalize to other students or to the professionals it should be noted that due to the nature of the task (which is not complex), student subjects are expected to be adequate surrogates. As noted by Walters-York and Curatola (1996, 124), "Examination of past research results and existing theoretical arguments on the subject does not allow us to unequivocally conclude that the use of students as surrogate subjectsisnecessarily invalid.” Given the significant experience of the students in our experiment, we believe this group can be more appropriately described as managers in a student environment. In addition, Walters-York and Curatola (1996, 125) state: "If conclusions about the effects of treatments are the same for student and non-student groups, the experimenter may then tentatively conclude that the student subjects were reasonable surrogates within the particulars of the experimental setting." The instrument in this study was used previously with accounting professionals (Brody et. al 2001) with similar results to our student subjects.
These results have consequences for U.S. firms investing in Taiwan or other parts of Greater China such as the PRC. The unwillingness of our Taiwanese subjects to award large differentials in merit pay removes one of the key motivation tools used in the U.S. control arsenal. This may well require a rethinking of incentives, possibly reorienting the control system to focus on group rewards or to make awardable items outside of the traditional pay structure such as non-monetary prizes (e.g. travel, appliances, and club memberships). It perhaps behooves researchers to examine the type of items that are valued and model a reward mechanism that has a stronger mapping of cultural norms to the control system.
On the other hand, U.S. firms with employees in Greater China may wish to alter their control system to one that requires less control for perceptual bias than might be the case in the
U.S. This might well offer a chance to build longer term and more open relationships between a firm and its Taiwanese employees or possibly allow managers in these subsidiaries to focus on issues other than the annual reward cycle. Finally, it also shows that U.S. managers are a source of strategic weakness in that they have greater risk of perceptual failure than managers from other cultures. This may require training and other mediating activity.
Table I
Standardized Culture Scores of Countries Discussed in this study
Country Individualism Uncertainty Avoidance
Power
Distance Masculinity Confucianism/LTO
USA 1.92 -0.86 -0.83 1.28 -0.77
Australia 1.88 -0.64 -1.00 1.22 -0.69
Finland 0.80 -0.27 -1.13 -0.72 N/A
Japan 0.12 1.23 -0.25 3.11 1.30
Hong Kong -0.72 -1.64 0.33 1.00 1.95
Singapore -0.92 -2.59 0.58 0.50 0.00
Korea -1.00 0.91 0.00 0.00 1.10
Taiwan -1.04 0.18 -0.13 0.56 1.59
Hofstede (2000) Mean 43 65 60 39 48
Hofstede (2000) Standard Deviation
25 22 24 18 25
Note:
1. Standardized scores for Individualism, Uncertainty Avoidance, Power Distance and Masculinity are computed by subtracting the mean for 53 countries provided in Hofstede (2000) and dividing by the 53 country standard deviation for the same sample.
2. Standardized scores for Confucianism/LTO are computed by subtracting the mean for 23 countries provided in Hofstede (2000) and dividing by the 23 country standard deviation for the same sample.
Table II
EXPREIENCE TAIWAN 214 4.05 7.656 .523
2.752 383 3.642 .000
1. Realism: 1=not very realistic, 4=somewhat realistic, 7=very realistic 2. Difficulty: 1=not very difficult, 4=somewhat difficult, 7=very difficult 3. Gender: =1 if female, =0 if male
4. Graduate: =1 if graduate, =0 if undergraduate
Table III
Number and Proportion of Subjects Receiving Merit by Group
Panel A: Poor Performers
Total 80 98 107 107 392
Percentage of Individuals
No Merit 78.75% 40.82% 36.45% 21.50% 42.09%
Merit 21.25% 59.18% 63.55% 78.50% 57.91%
Chi-Square Test: Poor Performers
Merit 80 98 107 106 391
Total 80 98 107 107 392
Percentage of Individuals
No Merit 0.00% 0.00% 0.00% 0.93% 0.26%
Merit 100.00% 100.00% 100.00% 99.07% 99.74%
Chi-Square Test: Good Performers Value df
Asymp. Sig.
(2-sided)
Pearson Chi-Square 2.670 3 0.445
Table IV
Descriptive Statistics of Dollar Merit Awards by Sub Groups
Mean Min Max Std. Deviation
Group U.S. Taiwan U.S. Taiwan U.S. Taiwan U.S. Taiwan
Poor performer/
control group
140.00 563.35 0 0 1500 2167 332.68 606.04
Poor performer/
Treatment
428.06 705.56 0 0 2000 2667 522.19 638.14
Good performer/
control group
2862.5 2419.38 1000 333 3000 3000 346.55 626.73
Good performer/
Treatment
2593.37 2464.81 800 0 3000 3000 518.05 733.84
Table V
Mean Range of Awards by Country -- Good Minus Bad Performers:
A Test of Hypothesis 2 for the Control Group with No Prior Commitment Variable: Difference in Merit Pay—Good minus Bad Performers (Same Evaluator)
Country N Mean Std.
Deviation
Std.
Error
Mean
Difference df t Sig.
2-tailed TAIWAN 107 1855.45 840.93 81.30
USA 80 2722.50 440.65 49.27
-867.05 168 -9.121 .000
Table VI
Mean Range Of Awards by Country -- Good Minus Bad Performers:
A Test of Hypothesis 2 for the Treatment Group with Prior Commitment Variable: Difference in Merit Pay—Good minus Bad Performers (Same Evaluator)
Country N Mean Std.
Deviation
Std.
Error
Mean
Difference df t Sig.
2-tailed TAIWAN 107 1750.78 894.58 86.48
USA 98 2165.31 782.49 79.04
-414.5 203 -3.517 .001
Table VII Logistic Regression
Coefficient Std.
Error
Wald
Statistic df Sig.
Constant .556 .201 7.660 1 .006
TREAT .739 .309 5.711 1 .017
USA -1.866 .339 30.262 1 .000
USA*TREAT .942 .461 4.173 1 .041
Definitions:
Dependent Variable: POORMAN=1 if $ Merit given to a poor performer is greater than 0, else=0 Independent Variables:
TREAT 0=Control Group, 1=Treatment Group USA 1=U.S., 0=Taiwan
Table VIII
1 0.879 0.773 0.770 577.848 2.114
Dependent Variable: MERIT
ANOVA Table
Sum of Squares df Mean Square F Sig.
Regression 882,408,004 11 80,218,909 240.24 0.000
Residual 258,445,175 774 333,908
Total 1,140,853,179 785
Coefficients Dependent Variable: MERIT=the amount of merit dollars
Unstandardized Coefficients
TREAT 46.041 79.632 0.019 0.578 0.563 3.723
PERFORM -1,855.452 79.002 -0.770 -23.486 0.000 3.673
USA 421.479 86.902 0.174 4.850 0.000 4.405
GENDER -107.920 42.183 -0.045 -2.558 0.011 1.045
WORKEXP 1.525 2.824 0.010 0.540 0.589 1.094
REALISM -0.509 15.814 -0.001 -0.032 0.974 1.106
DIFFICUL -21.569 14.221 -0.028 -1.517 0.130 1.168
TREATPFM 96.192 111.466 0.035 0.863 0.388 5.656
USAPFM -867.048 120.785 -0.301 -7.178 0.000 6.016
USATREAT -297.058 117.671 -0.107 -2.524 0.012 6.101
USATRTPFM 461.001 166.093 0.126 2.776 0.006 7.087
Notes:
1. TREAT =1 if high responsibility, =0 if from control group 2. PERFORM =1 if the accountant is a poor performer, =0 otherwise 3. USA =1 if from U.S., =0 if Taiwan
4. GENDER =1 if female, =0 if male
5. WORKEXP = number of years of work experience
6. Realism measures the degree to which subjects regarded instrument and task as realistic on a 7 point scale with 7 being the most realistic.
7. Difficulty measures the degree to which subjects regarded instrument and task as difficult on a 7 point scale with 7 being the most difficult.
Interactions:
8. TRTPFM = Treat*Perform; 1if the evaluator a poor performer they hired (treatment group), else 0.
9. USAPFM = USA*Perform; 1if both a U.S evaluator is rating a poor performer, else 0.
10. USATRT = USA*Treat; 1 if a U.S. evaluator is rating a person they hired (treatment group), else 0.
11. USTRTPFM = U.S.*Treat*Perform; 1 if a U.S. evaluator is rating a person they hired (treatment group) who is a poor performer, else 0.
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