Cross Cultural Conflict and Its Impact on the Economy

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Globalisation and rapid development of economies has resulted into more multinational corporations worldwide which in turn developed more demand for managers who are skilled in working with employees from countries other than their own and who are familiar with global management. It’s often observed that in firms cross-cultural communication is a positive experience. Despite that, existence of multicultural people belonging to a different race and of different colour often leads to discomfort, irritation and confusion (Arai, et al, 2001:445). This may lead to cultural conflicts. “Conflict may be viewed as a feeling, a disagreement, a real or perceived incompatibility of interests, inconsistent worldviews, or a set of behaviours” (Mayer, 2000:3). Conflict has been a part of all human societies and thus been a vital aspect of all social, cultural and professional interactions. Values and identity issues are often associated with conflict (Cartwright and Cooper, 2000; Mayer, 2010).This is because conflict often begins when an individual or group perceives differences about interests, beliefs, needs and values as well as opposition between the self and others (De Dreu et al.,1999). Due to internationalisation amongst various organizations, there has been an increase in cross-cultural, intercultural and transcultural conflict related research (Mayer, 2008). Accordingly, the influence of culture in conflicts and thereof on management are increasingly gaining attention in, cross-cultural management (Gerhard, 2008), and conflict management research (Kazan, 1993). While some researchers like William Zartman(1993) argue that culture has very limited effect on conflict and mediation outcomes and prefers to focus on issues such as power, resources, allies and other “realist considerations”, others like Raymond Cohen(1996) stresses upon the fact that cross-cultural differences are vital issues affecting conflicts.

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Literature Review

Cross-cultural conflict

Going by definition, “cross-culture conflict” may be considered as conflict between individuals or social groups separated by cultural boundaries. However, individuals are part of many different groups even in the same society, for example through geographical region in political interest groups, and through education, occupation or institutional membership in professions, industries, organizations etc. Each of these groups is a potential “container” for culture, and therefore any complex society is likely to be made up of different “subcultures”, i.e individuals who themselves are multicultural by virtue of overlapping and multiple group membership. This implies that conflict across cultural boundaries can occur at many different levels and not just at the higher levels of social groupings. For example, those separating “Japanese” from “American” cultures. Therefore, it can be said that conflict exist in all cultures even in the same society as it is inherent in social life.

Sources of conflict

As stated by Mayer, 2000:16 “Culture affects conflict because it is embedded in individuals’ communication styles, history, way of dealing with emotions, values, and structures.” According to Mayer (2000:9), there are six crucial sources of conflict: methods of communication, emotions, history, values, structures, and needs (refer. Appendix-Figure 1). (Mayer, 2000:9). The Communication process becomes more strenuous when the source and the participant emanate from various cultures. The difficulty level is due to difference between two original cultures (Myers, et al, 2001:98). The greater the differences between cultural backgrounds, the greater the obstacles to communication. Emotions are another one of sources of conflicts. As the emotional level among the social actors increases, communication difficulties also increase. Process of rational thinking are also at a minimum.

Another dimension in conflict cycle is History. Some countries have a long history of conflicts amongst their own kinsfolk, with disastrous consequences for the people. Families have retained severe conflicts over generations in other cases. Conflict must be views in its historical context in all these cases. The fourth source of conflict is the Value System which originates within everyone’s own culture. The value system plays a pivotal role in a society; however, it is also a potential source of conflict. Robbins (2001:388) proposed in one of his study that value systems are one of the most overlooked variables in conflict study. This is especially correct from cross cultural context as the value system is embedded in a culture. Structure is another source of conflict in the wheel of conflict. Mayer (2000:12) has defined structure as “the external framework of a conflict”. Structural issues include job related items such as organisational structure, resource availability and the actual interactions. Structural issues are one of the issues that are unlikely to change. The last source of conflict that Mayer described in his wheel of conflict is Needs which is placed at the hub of the conflict wheel. Needs like physiological needs, security and safety needs, belongingness and love needs, needs for esteem or recognition and needs for self-actualization (Steyn, 1996:6 cited Maslow, 1954) are the basic human needs that may affect the areas of emotions, history, values and structure. Conflict arises when one or more needs are not met. Mayer (2000:8) suggests that a conflict cannot be resolved until the needs of the individuals are not known.

Another major source of conflict as suggested by Geert Hofstede could be national culture. Hofstede has recognized four different dimensions that cause cultural difference or the factors that affect an organization’s national cultural differences. In general, Hofstede (1993 ) classifies these dimensions as Individualism/collectivism, power-distance, uncertainty avoidance and Masculinity / femininity. Individualism / collectivism is the degree to which individuals value their self-determination as opposed to their behaviour, determined by the organization’s collective will. The next dimension power distance also has an enormous influence on the cross-cultural environment.For example, employees are more involved in the low power distance culture and have a participatory management style. Masculinity /Femininity is one of the most difficult dimensions. In an organization, there is always a strong conflict between highly masculine cultural values and highly feminine cultural values. Uncertainty avoidance dimension represents the employee’s endurance of workplace uncertainty. A research on Japanese organizations on Japanese organizations operating in United Kingdom by Higgs & Phelps (1990) also proves the practical evidences of these dimensions.

Cross-cultural Management (Conflict Resolution)

Effective Cross-cultural management would help the multinational firms to resolve cross cultural conflicts more efficiently. Cross-cultural management includes solutions like – Knowledge Transfer and Dissemination, Effective management of human resources, Bicultural skills etc. Transfer and dissemination of knowledge helps allure new skills and knowledge from both a professional and cultural point of view. “Knowledge culture of organization is essential and must ensure that values are widely and extremely spread amongst the individuals “(Greb, 2010). Effective human resource management also avoids cross -cultural problems. Employees with excellent skills may be better able to adapt to the situation, especially as issues in multicultural environments are on a rise. Bicultural skills are obtained in bicultural families and are used as an advantage in multicultural environment in multicultural corporations. Research shows that bicultural people not only seem to adapt their behaviour but are also able to hold on to different conceptions of themselves as being simultaneously independent of others and independent with others.

Also, with the growth of economies and markets, it’s becoming highly important for managers to develop basic understanding of intercultural negotiation and cross-cultural communication. Due to increasing number of multinational corporations and rapid globalisation, Intercultural Communication poses a greater challenge for managers of these MNC’s. It is becoming highly imperative for the expatriate managers to understand the communication process to express themselves efficiently. Communication skills help people to come forward with ideas, settle conflicts and mentor others (Bergeron, 2000:38). Communication and negotiation as pointed by Harris and Kumra (2000:604) is one of the important soft skills in the portfolio of international managers. Some of the general solutions that the multinational firms can adopt to resolve cross culture conflicts are as follows – Firms can help global managers manage conflicts arising out of cross-cultural differences. As part of the firm’s selection process, firms should adopt emotional intelligence assessment and they should improve their training methods in order to prepare individuals to interact with the culturally diverse team.

Cross cultural conflicts in International Business and its Implications on Management

In this era of rapid globalisation and economic development, more firms are internationalizing and extending their businesses abroad. Although this brings an opportunity for the firms however it also presents a challenge in terms of the managerial implications of cross-cultural conflicts. Many issues arise in these firms mainly due to different personnel management system, different organizational system and different supervisory system. Majority of the cross-cultural conflicts that arises in a multinational corporation are verbal language, beliefs, values, non-verbal languages and social system. “Culture and cultural differences play an important role in international companies, the work of multicultural teams, and at international meetings”. Culture also plays a pivotal role in shaping up the managerial work thus impacting managerial roles in multinational corporations.

Nowadays Global expatriate managers face more challenges in terms of a more dynamic, uncertain, competitive and a more difficult environment to sustain than ever before. Also, the challenges posed by economic, legal and political factors of the multinational firm’s environment are complex. According to a research, there are 3 challenges that a multicultural team in a multinational firm faces due to the cultural diversity – the existence of language barrier, issue of trust and competition. Lack of trust amongst the multicultural teams leads to interpersonal conflicts. According to Silberzahn & Chen (2012), lack of trust in a multicultural team lead to less interpersonal communication, increased stereotypes, diminished loyalty, and increased the likelihood of interpersonal conflict. Another researcher (Agrawal, 2012) concluded in his research that lack of cooperation, distrust, and unwillingness to work in a diverse team could influence performance of the team and hence the firm. Employees need to overcome distrust in order to get maximum benefits out of the multicultural teams. Many studies have also claimed language barriers as source of cultural-conflict in a diverse group of people. According to a research done by Mesly, Lévy-Mangin, Bourgault, & Nabelsi (2013) language difficulties including fluency and accents created interactional obstacles that led to disastrous outcome within a team. The researchers concluded that the use of different languages and national cultures created barrier to communication that obstructed the sharing of vital information amongst the multicultural teams. The mere existence of competition in a multicultural team is another source of conflict. Cultural diversity in a multicultural team may lead to interpersonal rivalry and conflicts that hinders the performance of the team (Desivilya & Raz, 2015). Multinational corporations should pay special attention to cross-cultural conflicts and should resort to various techniques to resolve the conflicts by the cross-cultural barriers.


After a thorough research on cross cultural conflicts, it’s sources and implications on international business, it can be summarized that conflict is an inherent frequent part of life. Mayer (2000:92-93) states that “The most serious conflicts in our world, with the gravest consequences, involve cross-cultural issue…Resolution must involve a new approach to interaction, in which the diversity of people becomes a source of strength and not a cause of tragedy.” In view of this, multinational corporations should build an effective system to encourage healthy development, such as language training, establishment of enterprise culture and foreign knowledge acquisition. The management of multinational corporations plays a pivotal role in the process of promoting the development of developing nations economy. Cross-cultural communication in the multinational corporations should therefore be given more attention. So, it can be concluded that occurrence of cultural conflict in a multicultural firm containing diverse people is quite natural, however an effective and efficient management system by these multinational firms could lead to better productivity and new innovations in a global market.

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