Cultural differences and clichés always make a good debate and a recent article in the Journal of Business Logistics caught my interest the other day. It's about Germans and Americans and their different attitudes towards business relationships and how loyalty is formed in 3PL outsourcing. Having grown up in Germany myself, although no longer living there, and having spent some years in the US, albeit not in business, I was immediately drawn to it and was quite surprised, because I never thought that business relationships the US and Germany would be that different from each other.
Essentially, so the authors, in the US, loyalty is based on commitment; in Germany it is based on trust.
Although the authors base their model on as many as 795 logistics outsourcing relationships in the the US and Germany, which suffices as far as statistical validity goes, they also caution that the results should by no means be generalized or accepted as facts about cultural traits and how business operates in these two countries. Nonetheless, the article does paint an interesting picture of how business relationships are formed in the US versus in Germany, and which elements that foster loyalty and which elements that don’t. Well, I must say that life (and business life) is probably much more complicated than 795 cases can illustrate or establish. Life is life.
The background for the article is something as mundane as third-party logistics outsourcing, or 3PL, and while a large part of the article is spent discussing statistical linkages results and hypotheses, another large part is spent on citing known works on cultural traits and presumed differences, which in the end turn out to be very much true. So there is a difference after all?
Citing several renown academic works and studies of national and cultural differences in their literature review, the authors explore and highlight some of the presumed and empirically tested differences:
Germany displays significantly higher uncertainty avoidance than the United States. Uncertainty avoidance captures the extent to which a culture socializes its members into accepting ambiguous situations and tolerating uncertainty. While individuals from the United States are viewed to be relatively fearless of change and unknown risks, to embrace innovations, and exhibit an open attitude, Germans generally are considered to be uncomfortable with unfamiliar behavior, resistant to change, desiring of loyalty and stable business relationships, open to information sharing, consensus seeking, and avoidant of conflict. Also, an important aspect in Germany is that personal bonding has a greater importance as a basis for enduring business relationships.
The United States exhibits higher individualistic traits than Germany. Hence, managers in the United States have a greater tendency toward opportunity taking-behavior, perceive business relationships as less personal, and subscribe to an active self-concept. Germans, on the other hand, tend to seek consensus, avoid change, establish rules to maintain a desired state, and ascribe more importance to personal bonds and to preferential treatment of in-group members, whom they trust and are loyal to.
Germany and the United States exhibit different time fixations. Germans are more fixated to the future, generally ‘‘not preoccupied with immediate results’’, and prefer planning for the long term. Americans, on the contrary, are more fixated to the present and demand immediate results. Consequently, Americans tend to favor the realization of immediate economic benefits, while Germans rather prefer arrangements that promise rewards in the long term.
Germans tend to be more territorial than Americans and extend a feeling of territoriality ‘‘to all possessions’’, which has the following implications on business relationships: Germans value frankness, honesty, and directness; and relationships in Germany may go a lot deeper than in the United States. While on one hand, it is a lot more tedious to form a relationship with Germans than it is with Americans, on the other hand, according to establish cultural theory, relationships in the United States are also more endangered, as ‘‘the American’s first loyalty is still to self, family, and the career, not the company. […] Being pragmatic, they do business where they ‘get the best deal’, which usually means the best price’’.
The United States displays higher individualism than Germany, suggesting that interpersonal relationships are more meaningful to Germans, who also value personal loyalty more highly. In addition, group decision making and consensus are nurtured in Germany. Also, as a culture with more diffuse cultural traits than the United States, personal factors are more important to business relationships in Germany than in the United States, where business conduct is significantly more results oriented. Germans are much less self-determined than Americans, which may make it easier and more important for them to maintain relationships. While both countries accord social status mainly on the grounds of achievement, ascription is still a factor in Germany and, consequently, managers there have to be less focused on short-term and visible results and performance.
Germans demonstrate greater focus on egalitarianism (individuals are seen as moral equals who share basic interests) and intellectual autonomy (individual pursuit of ideas and rights). In contrast, Americans are closer aligned with hierarchy (individuals socialized to comply with their roles) and mastery (individuals seek change to advance personal or group interests).
Americans have a stronger task orientation, while Germans are more employee oriented. Americans and Germans also have different future orientation values. Americans are defined by their flexible and adaptive organizations engaged in long-term planning and investments as compared to Germans. Institutional collectivism and in-group collectivism both assess the extent to which a society prefers affiliations and loyalty toward collectives. Germans demonstrate higher levels of institutional collectivism values as compared to Americans. However, American practices along this dimension are seen as higher. Thus, while Germans desire more collective distribution of resources and action, it is the Americans who demonstrate higher levels in practice. In addition, Americans also exhibit higher levels of in-group collectivism, which is the degree to which individuals express pride, loyalty, and cohesiveness in their organizations. Americans tend to have higher levels of humane orientation practices, which translates into encouragement and reward for individuals being fair, altruistic, friendly, generous, caring, and kind to others. Finally, while Americans’ uncertainty avoidance values are higher than Germany, in practice Germans seek out certainty at higher levels.
In summary, then, the authors conclude that in contrast to US Americans, Germans ...
- extend trust more readily, especially to in-group members
- are more accepting of information sharing
- dread change and innovation
- adhere to rules and regulations more strictly
- place higher emphasis on stable relationships
- are more loyal toward relationships, especially with in-group members
- seek consensus and try to avoid conflict
- require personal bonding for maintaining long-term business relationships
- place lower emphasis on immediate economic benefits
- are rather long-term oriented
Sort of semi-German in my heart and soul, after living there for 15 years, and having spent a number of years in the US, I would agree to some of the points above, but certainly not all.
Loyalty, so the authors, shows itself in the form of retention and referrals, or in other words: continuing purchases and recommendations to others.
Leading up to loyalty are commitment and trust, and while both both commitment and trust have direct links to retention and referrals, trust also plays a role in forming commitment, in Germany more than in the US, and the results from the authors' 795 surveys show a very diverging formation of loyalty in the US versus Germany:
Commitment assumes a key role in the United States. While trust has no significant direct effect on retention and referrals, commitment has a strong direct effect on both dimensions of loyalty. In Germany, the effect of commitment on loyalty is substantial, yet significantly weaker than in the United States, while trust in Germany has a strong and significant direct effect on both loyalty dimensions. Interestingly,
Germans seem to focus more on frictionless long-term relationships fostered by trust, because business relationships in Germany often are accompanied by personal relationships and mutual admittance of relationship partners to the respective in-groups. Americans, on the other hand, are comparatively impersonal in the business world and rather calculative. Therefore, trust as an expression of the quality of the interpersonal relationship between buyer and seller is usually able to stimulate loyalty in Germany, while it has no direct effect in the United States. Here, instead, trust has to create commitment before it fosters loyalty behavior.
So now you know what the differences are. Having said that, would you agree?
Wallenburg, C., Cahill, D., Michael Knemeyer, A., & Goldsby, T. (2011). Commitment and Trust as Drivers of Loyalty in Logistics Outsourcing Relationships: Cultural Differences Between the United States and Germany. Journal of Business Logistics, 32 (1), 83-98
You can read my own review of the article in my post on Committed Americans and Trusting Germans on my own blog.