How local culture influences product adoption

 How local culture influences product adoption

 Conceptual model

This study presents a conceptual model focusing on cultural factors that influence product adoption. The study focuses on firm adoption status as the only dependent variable. Adoption status is the observation on whether or not an organization has adopted or is likely to adopt a product. Exogenous variables in this case are macro-level, meso-level and micro-level factors influencing product adoption. Macro-level variables are national characteristics while micro- and meso-level variables are company and industry characteristics respectively (Baldwin & Scott, 2007, p. 78). In order to gain insight into the role of the above elements in influencing product adoption, this paper will present a case study involving European countries where cultural factors have varying influences on the adoption of enterprise resource planning (ERP) system in organizations.  Figure 1 describes the conceptual model for this study.

Figure 1: Model explaining product adoption status of firms

Macro Variables

One of the main models describing the influence of national culture on product adoption is Hofstede’s cultural framework (Yalcinkaya, 2008, p. 207). This framework describes four cultural factors influencing product adoption, namely, individualism index (IDV), uncertainty avoidance index (UAI), power distance index (PDI) and masculinity index (MAS). These factors were derived through a study conducted in large multinational companies in 72 countries in 1968 and 1972. In 2001, a fifth factor, long-term orientation (LTO), was added to this framework (Yalcinkaya, 2008, p. 207). As Hofstede (2001, p. 19) explains, these five dimensions can be used in providing an overall type of a nation’s cultural type. Table 1 provides a summary of the attitudes and value connotations associated with low and high scores on the five dimensions of culture.

Table 1. Organizational characteristics based on scores on the Hofstede (2001) Dimensions

According to Hofstede (2001, p. 20), power distance is the extent to which power is unequally distributed among individuals within institutions in a society. In societies where the degree of power distance is high, authority and status are quite important. Such societies are constrained by hierarchical characteristics such as use of formal rules and centralized decision making. Consequently, the level of innovation in such societies is low. Opinion leaders and high-status individuals in such societies tend to influence consumption decisions of the low-status individuals. Thus, adoption of new products in these cultures is slower than in low-power distance cultures.

Uncertainty avoidance, on the other hand, refers to the extent to which people within a society feel threatened by ambiguous situations and the extent to which they try to avoid these situations by use of rules and regulations (Gauvin & Sinha, 2010, p. 65). Societies that are high in uncertainty avoidance tend to avoid ambiguous situations and are less likely to take risks.  In the same vain, firms with high uncertainty avoidance index tend to constrain innovations by rules and have highly formalized management (Mohr, Sengupta & Slater, 2009, p. 236). Such organizations do not take unnecessary risks and only adopt products whose value has been proven in their market. On the other hand, societies that are low in uncertainty avoidance easily accept uncertainties. Thus, individuals in such societies are more willing to take risks and to accept new products.

According to Hofstede (200, p. 22), individualism is the extent to which a person exercises independence from groups or organizations in which he or she belongs to. In individualistic cultures, personal tasks accomplishments are given priority over group’s tasks and people are expected to show independence in thinking. On the other hand, some cultures emphasize interdependence, loyalty, identification with groups, solidarity and conflict avoidance. This is known as collectivism. In individualistic cultures, individual rights are paramount and people tend to form looser relationships compared to people living in collectivist cultures. This implies that the impact of word-of-mouth on adoption of new products in individualistic cultures is less than in collectivist cultures. As Hofstede (2001, p. 27) explains, communication and consultations lead to a delay in the adoption decision process, meaning that people and organizations in collectivist nations make take longer in making product adoption decision.

Masculinity index refers to the value that is attached to the traditionally male and female cultural values. According to Hofstede (2001, p. 28), masculine cultures embrace values such as self achievement, career advancement, ambition, competition and focus on performance. In these cultures, achievement is valued and thus, any products that lead to such achievements are highly valued. Thus, individuals in masculine cultures keep on looking for opportunities for high earnings and advancement. One way of achieving this is to be innovative and to adopt the latest products that are expected to bring success and higher status in the society. Thus, individuals and organizations in such societies are more likely to adopt new products. On the other hand, feminine societies are characterized by values such as social relationships, solidarity, equality, care, intuition and sympathy (Frambach & Schillewaert, 2002, p. 304). Recognition, advancement and higher status are less effective motivators in these cultures and thus, individuals and organizations adopt innovation at a slower rate than in masculine cultures.

Finally, long-term orientation index is the extent to which a society exhibits a future oriented perspective rather than a short-term perspective (Doole & Lowe, 2008, p. 91). In long-term oriented cultures, individuals show perseverance towards slow results and thrift, are doubtful to sudden changes and are cautious to novel ideas. These cultures are characterized by values such as adaptations of traditions to new circumstances, persistence and personal adaptability. On the other hand, short-term cultures focus on the past and the present. Individuals in short-term-oriented cultures value novelty and respect personal stability and tradition. This implies that individuals and organizations in short-term oriented cultures are expected to be more innovative that their counterparts in long-term oriented cultures. However, individuals and firms in long-term oriented cultures are more likely to adopt in-depth investments with long-term benefits compared to individuals and organizations in short-term oriented cultures (Yalcinkaya, 2008, p. 207). In general, these dimensions of to Hofstede are applicable in explaining cross-national consumer innovativeness, national innovativeness and business-to-business adoption.

Micro-level Variables

According Yaveroglu and Donthu (2008, p. 117), there are two micro-level variables affecting adoption status of new products by firms, namely, characteristics of the adopter and the adopter’s perception of the new product. The relevant adopter characteristics in this context are organizational structure, size and innovativeness. Organizational structure in this context may be defined as the level of integration among information systems and processes across various functions within a firm. This aspect is particularly relevant in this case since the main purpose of the ERP software is to integrate business information across various functional areas within a firm. As Yaveroglu and Donthu (2008, p. 117) explain, the size of a firm has also been found to influence adoption status. A firm’s innovativeness refers to the attitude of a firm towards the new product or the readiness of a firm to accept innovation or new ideas. IT-savvy organizations, for instance, are likely to invest in ERP software faster than organizations that are IT conservative.

Perceived innovation characteristics refer to the value that a firm will derive in investing or in adopting a new product or innovation. Onkvisit and Shaw (2008, p. 340) explain that organizations compare the current situation to the expected situation after implementation, before arriving at the final decision on whether or not to adopt a new product or innovation. They weigh the advantages of adopting the new product or innovation against costs before making the final decision. According to Onkvisit and Shaw (2008, p. 340), the relative benefits of a new product, as perceived by the members of an organization, are positively related to its rate of adoption. As well, the perceived level of compatibility of an innovation with current organizational procedures is highly influential to the decision on whether to adopt it or not. Onkvisit and Shaw (2008, p. 340) note that adopting ERP software may requires numerous changes in an organization’s work-related procedures and norms.

Meso-level Variables

There are two key meso-level factors that influence adoption status of a new product by a firm, namely, supply-side activities at industrial level and industry competitiveness. According to Robertson and Gatignon (1986, p. 47), supplier’s marketing activities influence the rate at which an innovation or a new product is accepted in the targeted market. The more a supplier is aggressive in marketing ERP software to firms, the more they are likely to adopt it. Secondly, the level of competition that thrives in an industry influences the rate of adoption of new products. Intense rivalry among firms within an industry increases the likelihood of product adoption. Severe competition prompts organizations to adopt new ideas fast so as to enjoy any benefits that may occur and if possible, achieve a competitive edge (Yalcinkaya, 2008, p. 204). As such, an organization is likely to adopt ERP system if it is thriving in an industry that is highly competitive.

Case Study

Waarts and Everdingen (2005, p. 601) conducted a survey on the cultural factors influencing adoption of innovation/new product in 2647 medium-sized companies from 10 European nations (Finland, Norway, Sweden, Denmark, Belgium, Netherlands, France, Italy Spain, and the United Kingdom). They selected these countries since they perceived them as having varying cultures and hence, they would give varying values on most of Hofstede dimensions. The study included six industries in each country, namely, electronics industry, process industry, discrete and automotive industry, project industry, wholesale industry and food and beverage industry. Data for the study used was collected using pre-structured questionnaire containing questions about intention or actual plans to adopt ERP and also questions related to meso- and micro-variables (Waarts and Everdingen, 2005, p. 608). The researchers developed the questionnaires in English and were subsequently translated by official translation agencies into local languages.  Data related to macro-economic variables (Hofstede dimensions on culture) was derived from secondary sources, mainly from local chambers of commerce databases. The researchers then developed various measures for the variables used in their research model, as provided in table 2. Adoption status was measured based on whether a firm had adopted ERP system by 1998 or whether plans were underway to adopt the system by 2000.

Table 2. Variables and measures used in the study

When conducting the survey, the researchers divided the sample into 60 segments with distinct characteristics. 45 observations were then taken from each segment. The researchers developed a professional call centre to perform actual sampling and conduct telephone interviews. The recipients targeted in this survey were IT and financial managers involved in making IT purchase decisions. Ta.............