Cultural Distances and Its Association to Time Spent on Conflicts

Internationalization and cross-border business activities shape the world’s economy. Disruptions of international trade, such as the ones caused by the Covid- 19 crisis, demonstrate the great extent to which businesses and countries rely on global interactions. In line with the trend of globalization and also driven by the endeavor for competitiveness and success that cannot be reached by focusing on economic indicators only (Canen and Canen, 2008), the necessity arises to better understand cross-cultural differences (Chen, et al., 2003; Friedman, et al., 2006; Doucet, et al., 2009) regarding social parameters, such as employee requirements (Ascalon, et al., 2008) or conflict management (Friedman, et al., 2006; Chen, et al., 2003; Doucet, et al., 2009). Conflict is defined as “perceived incompatibilities or discrepant views among the parties involved” (Jehn and Bendersky, 2003). Research studies present convincing findings on the consequences of conflict, reaching from positive performance outcomes (Jehn and Bendersky, 2003; Pelled, et al., 1999b) to negative effects on advice seeking, trust, group performance, well-being, or satisfaction (Jehn and Bendersky, 2003; De Dreu and Weingart, 2003; Wit, et al., 2012; Kuriakose, et al., 2019; Marineau, et al., 2018). To determine the financial effects of conflict, the concept of conflict costs was introduced (Buss, 2011; Freres, 2013; Dirrler and Podruzsik, 2022) and is now used to measure conflict consequences more quantitively (Dirrler and Podruzsik, 2022). Prior studies presented that companies spend €251 for a conflict of up to 1 month and €911 for conflicts of 6–12 months for each person involved. These figures do not include all possible conflict costs but only represent the financial burden caused by lost time on some internal indirect conflict costs. This can, for example, be people thinking about a conflict or resolving it, instead of carrying out their actual work. Potentially, additional costs would need to be added for a holistic overview that can be, for example, in more severe cases legal or turnover costs (Dirrler and Podruzsik, 2022). Researchers suggest turnover costs to reach 25–240% of annual salary costs (Conbere, 2000; Kreisman, 2002) and legal costs £750 (CIPD, 2011). Considering cultural diversity as an additional variable in the research of conflict costs, there are several limitations. First, cultural diversity is often considered as one variable; however, this is often too short-sighted, as it is difficult to express or measure cultural differences using one universal parameter. Inter alia, this can be traced back to the differences between the nationalities, as a group of Indians, Russians, Egyptians, and Chinese people differs to a group of Japanese, Chinese, American, and French members (Ayub and Jehn, 2014). To overcome this problem by addressing the divergent differences, the model of social distances was introduced (Ayub and Jehn, 2014; Hutzschenreuter and Voll, 2008). Second, there is no study yet investigating the relation or effect between diversity and conflict costs. So far there are only studies indicating the correlation between cultural diversity and conflicts (Vodosek, 2005, 2007; Ayub and Jehn, 2014). The focus lies on general conflict outcomes, instead of conflict costs. The overall research objective is to evaluate the effects of cultural distance on lost time due to internal indirect conflict costs. We test whether there is an association between the amount of lost time due to a conflict and the extent of a cultural distance. Our research addresses a current research gap and presents new findings on the link between diversity and conflict. Going beyond the scientific contribution, our study provides important insights for companies on how to ideally staff teams and manage intercultural workforces.

Power distance refers to inequality within a society and how people expect or accept it. Inequality can have many facets reaching from physical or mental features, to social status, prestige, wealth, power, and even up to laws, rights, or rules (Hofstede, 2001). Some people can benefit from several characteristics, such as wealth, power, and prestige, at the same time, whereas others such as athletes might only possess more beneficial physical characteristics. In each society, there are people supporting inequality, whereas others try to avoid or abolish it. Due to hierarchies in organizations, inequality is inevitable, leading to an unequally distributed power across the different levels (Hofstede, 2001). Power means that someone can potentially decide or even direct the behavior of someone else, whereas the other person does not have the same potential. Power distance is understood as inequality of power between someone more and someone less powerful, who are part of one social system, with loose or tight ties. In high power distance countries, people are more likely to accept and expect inequality in their daily lives and organizations, compared to low power distance countries, where inequality is less tolerated. Translating these differences into organizational rules, in high power distance countries, subordinates expect to be told what to do, demand close supervision and an authoritative leadership style, as well as tall organizational pyramids. Decisions are made centrally, and managers abusing their power are not confronted. They are expected to have significantly higher salaries, privileges, and status symbols. In low power distance countries, hierarchies are flat, the relationships between subordinates and managers are more pragmatic, and information is more openly shared. Subordinates more openly express their anger or opinions, for example, in case of power abuses. The leadership style is more consultative, and authority is widely distributed, whereas the salary range between top management and workers is less severe (Hofstede, 2001). There have been studies that investigated the effects of inequality on civil conflicts or war and found that inequality increases the likelihood of conflict (Bartusevicius, 2014) and that economic inequality is important to explain these civil conflicts (Cramer, 2003). More workplace-related findings indicate that the way people feel about and deal with a conflict will differ significantly in cultural diverse groups (Vander Pal and Ko, 2014). Velten and Lashley (2018) state that “very different” cultures and great dissimilarities cause conflict (Martin, 2014). An example provided by their study points out the directness of Germans or Europeans in general, compared to Asians (Velten and Lashley, 2018). Summarizing the results, we expect that power distance can be compared to inequality (Bartusevicius, 2014; Cramer, 2003) also encouraging workplace conflict. We also estimate conflict resolution to be more difficult in case of “very different” (Velten and Lashley, 2014) cultures as the embedded values and expectations on how to deal with a conflict are likely to be dispersed. In total, that would lead to more time spent on a conflict.

H1: The higher the power distance inequality between people of different nationalities, the more time is spent on internal indirect conflict costs.

The dimension of uncertainty avoidance is summarized by Hofstede (2001) as to what extent people of a society are afraid of uncertain or new situations. Every person is faced with uncertainty about the future and needs to deal with it, which also applies to organizations or societies. The stronger the need to avoid uncertainty, the more a society depends on rules. This does not mean that risks need to be kept as low as possible, as uncertainty does not refer to risk avoidance, but to ambiguity avoidance. In high uncertainty avoidance cultures, people are more likely to take known risks, whereas individuals of low uncertainty avoidance societies are willing to take additional unknown risks. High uncertainty countries overall rely on law and order and a need for clarity and structure, whereby rules should not be broken. People feel more comfortable working for larger organizations, to stay with an employer and to be more change resistant. Unknown and different people, things, or situations are regarded as more frightening, which fosters suspicion. Job seniority is of immense importance, as well as higher respect for older people. In low uncertainty countries, individuals are more flexible in changing their employer and the ambition for personal development higher. The openness toward change, foreign or different people, and diversity is larger, with people not having any problems to break rules if necessary. The job seniority is lower, younger people are highly respected, and people feel more comfortable in chaotic or ambiguous situations (Hofstede, 2001). Fundamental needs may differ completely depending on the magnitude of uncertainty avoidance. This is the need for chaos versus structure, change versus stability, or diversity versus homogeneity. As a result, we expect conflict costs to increase in case of a larger uncertainty avoidance distance. The first argument rests on basic diversity theories, which emphasize a preference for in-group members (Tajfel and Turner, 1986; Byrne, 1971; Williams and O’Reilly, III, 1998). Especially in case of high uncertainty countries, we assume a stronger in-group focus. Our second assumption for more lost time is based on more difficult conflict management. Depending on the level of uncertainty, avoidance conflict management styles vary. High uncertainty avoiding cultures are claimed to be more passive (Mangundjaya, 2018) or avoidant, but also to have a more problem-solving-based approach (Caputo, et al., 2018).

H2: The higher the uncertainty avoidance inequality between people of different nationalities, the more time is spent on internal indirect conflict costs.

The category of individualism and collectivism refers to the relationship between individuals and the collective. In countries of high individualism, relationships between people are loose and individuals look after themselves and possibly after their closest family members. These people have been raised I-conscious and make individual decisions. Collectivism presents stronger ties, whereas people are born into groups to which they demonstrate complete loyalty and the group in return proves a life-long integration and protection. People are we-conscious and try to make group decisions. The requirements and expectations toward an employer are diverse. Collectivist societies expect the company to be responsible for themselves and demand order, security, and expertise. Individualists feel themselves responsible and ask for autonomy, pleasure, and individual financial security. Collectivism cultures try to avoid open confrontations or losing one’s face, whereas high individualism tolerates or even encourages open confrontation, as the truth should be told. At work, individualism demands the management of individuals, with both managers and employees having a preference to work independently. Groups need to be formed by considering individual criteria and in-groups are rather undesirable. Collectivism believes that in-groups foster performance and should be kept together. Teamwork is seen as essential for success, and employees are managed in groups instead of as individuals. Looking at the different views on teamwork and in-groups, the fundamental diversity theories come into play again. It is expected that in-groups will be forced especially by collectively shaped countries and that this can hinder an effective cooperation. Collectivism cultures stronger emphasize compromise and integration when managing a conflict, compared to individualists (Cai and Fink, 2002). In case of larger cultural differences, we assume that this can either lead to collectivists accepting undesired outcomes, but being personally affected by the conflict longer, as for example by thinking about it. Another scenario can be that a consensus is hard to be reached, as individualists pursue stronger persistence.

H3: The larger the gap between people of different nationalities in regard to their individualism and collectivism index, the more time is spent on internal indirect conflict costs.

Based on the two sexes, masculinity describes a society with clearly defined gender roles. Men are focused on material success, ego goals, money, and careers and demonstrate tough and assertive characters. Women care about the quality of life and relationships and behave modestly and tenderly. Often masculine societies represent more traditional families, in which fathers make many decisions and deal with facts, compared to women handling feelings. Contrarily femininity represents societies with gender overlaps, where men and women share responsibilities to ensure a certain quality of life and both sexes demonstrate tender and modest behaviors. Values of men and women do not differ significantly, leading to flexible gender concepts and a general sympathy for weaker ones. These cultural differences can also be translated to the workplace, where less women take over professional or management jobs, often due to less equal opportunities in masculine cultures. The payment gap between genders is large, and the management styles are more aggressive and competitive. In case of conflicts, masculine countries tend to deny conflicts or fight them, to the point where the best wins. Compared to feminism, where people try to solve conflicts via compromise, negotiations, and problem solving, and management demonstrates higher intentions for consensus. Salary gaps based on gender are small in feminist societies, and women have higher chances for management and professional jobs, as the opportunities are generally more equal (Hofstede, 2001). Due to the opposed conflict behaviors mentioned above, as well as the finding that masculine cultures tend to have a more forceful conflict management style (Caputo, et al., 2018), we expect conflicts to last longer and that people are more affected on a personal level, which is reflected in time lost on a conflict.

H4: The larger the gap between people of different nationalities in regard to their masculinity and femininity index, the more time is spent on internal indirect conflict costs.

The teachings of Confucius are the base for the dimension of long-term orientation, which stands for future orientation, perseverance, and thrift. This is in contrast to short-term orientation with a stronger focus on the past and present, mainly in terms of traditions, social obligations, and the protection of face. In these societies, results are expected quickly and the best things are assumed to happen in the past or present, which encourages a higher immediate spending in society and organizations. When doing business in long-term-oriented societies, the focus lies on building up relationships and a market position over time. Investments and savings are done in businesses and private lives (Hofstede, 2001). Based on former research studies (Martin, 2014; Velten and Lashley, 2018), we consider fundamental values to differ in the case of opposing standpoints in the dimension, thereby intensifying conflicts. In addition, we assume verbal and non-verbal communication to differ, which can result in miscommunication (Velten and Lashley, 2018), followed by conflicts and more difficult conflict resolution. Overall, we hypothesize significant differences in this dimension to cause longer conflicts, resulting in a more lost time.

H5: The larger the gap between people of different nationalities in regard to their long-term versus shortterm orientation, the more time is spent on internal indirect conflict costs.

The nationalities of the conflict parties were diverse with 75 different nationalities in total. Turkey was most often stated with 47 counts. Ten conflict party individuals were from Austria and Great Britain, followed by 11 from Romania, 14 from Italy, 17 from Russia, and 23 from Poland. However, no nationality was represented too often, so that the risk of a result falsification can be negated. All continents were represented, except of Australia and Antarctica. There were people from Africa, such as Ghana or Egypt, and Asia, such as Thailand or China. Conflict parties were American and Canadian, as well as Mexican and Columbian, covering both North and South. European countries were stated frequently.

None of the hypotheses proved to be significant. Power distance did not significantly predict internal indirect conflict costs (H1) in any step. When testing for power distance only, the model was insignificant (p = 0.2147) with a very low explanatory power (R² = 0.009547). There was also no significant effect on internal indirect conflict costs (B = 0.0524, p = 0.14847). When including the control variables, power distance still did not influence the dependent variable (B = 0.0585, p = 0.1446). None of the control variables had an effect on internal indirect conflict costs either (Table 1), except of the age group between 50 and 59 years. We could also not detect any effect of uncertainty avoidance on internal indirect conflict costs (R² = 0.01328, p = 0.143), tested in Hypothesis 2 (B = 0.1971, p = 0.1527). Again, the control variables did not influence the model, nor did the uncertainty avoidance category in the second model; the only exceptions were people between 50 and 59 years (Table 1). We could not prove that individualism predicts internal indirect conflict costs, as stated in Hypothesis 3. The first linear regression model (R² = 0.0001135, p = 0.8926) with individualism as the only independent variable, no significance was found (B = -00067, p = 0.9079). Table 1 presents the linear regression results for Model 2, including all control variables in addition to individualism, whereas the results were very similar to Hofstede’s previous models of cultural dimensions. Continuing with Hypothesis 4, results are in line with the already presented results. There is no prediction power of masculinity (R² = 0.008434, p = 0.2437) on internal indirect conflict costs (B = 0.0886, p = 0.2566), irrespective of including control variables (Table 1). Lastly, the long-term orientation dimension was tested. The linear regression model for long-term orientation and its influence on internal indirect conflict costs could not be proven (B = 0.0318, p = 0.5209) (H5), and the overall model was insignificant (R² = 0.002581 and p = 0.5195). Neither the control variables nor the cultural dimension did show any significance, when applying linear regression testing including control variables (Table 3).

In addition to the individual hypothesis testing and linear regression models, we also conducted a multiple regression analysis with 5000 bootstrap samples, including Hofstede’s cultural dimensions, assessing their predictive power on internal indirect conflict costs. In line with our prior analysis, we did not find any explanatory power of the variables on conflict costs, as none of the variables proofed to be significant. Power distance and individualism had the lowest but still insignificant p-values (B = 0.0754, p = 0.1884) for power distance and (B = -0.1359, p = 0.1391) for individualism, followed by long-term orientation (B = 0.0569, p = 0.2948). Masculinity (B = 0.0531, p = 0.5123) and uncertainty avoidance (B = 0.1167, p = 0.4479) had the highest p-values.

We hypothesized that greater cultural distance results in more time spent on conflicts. Our assumptions were based on former research studies that diversity itself and key differing values can trigger conflict. We expected more lost time due to longer lasting conflicts (Dirrler and Podruzsik, 2022), caused by more difficult conflict resolution. Our statistical analysis and hypothesis testing were, however, only conducted for the element of lost time. None of Hofstede’s cultural clusters and its corresponding cultural distance indicated any significant correlation. Therefore, none of our hypotheses could be proven, meaning that we cannot demonstrate a link between cultural diversity and internal indirect conflict costs, nor that cultural distance explains the depend variable costs. It is either possible that there is no association between the variables or that other factors have influenced our results, such as group proportions (Kanter, 1977; Jehn, et al., 2008) or national variety (Ayub and Jehn, 2014).

By using the standardized squared mean values of each cultural dimension, we did not consider the group dynamics of each individual conflict situation. There are different theories dealing with the topic of group proportions (Jehn, et al., 2008). Minority theory refers to the proportion of minorities within a diverse group (Choi and Levine, 2004; De Dreu, et al., 1999; Moscovici, 1976), whereas Kanter (1977) introduced four group types, referring to uniform groups that have the identical external status, skewed groups with 1–15% of minority members, titled groups with 15–35% of minorities, and balanced groups, where the minority accounts for approximately half of the group members. Findings suggest that the group setups influence group outcomes and that skewed groups are most difficult for minority members to interact as stereotyping and marginalization takes place (Kanter, 1977). Competition theory states that balanced groups are difficult, as the minority members can be considered as a threat (Blalock, 1967). Ayub and Jehn (2014) investigated national variety, referring to the numerical count of nationalities. They found that high variety was associated with higher performance outcomes and less relationship conflict. These theories partially do not refer to national diversity but can still be considered as potential factors that influenced our results and should be included in future studies.

Even though our findings do not indicate any association between the cultural distance and conflict costs, measured in terms of lost time, we do not want to exclude any general associations between the variables. Our study was based on self-reports about one specific conflict and the amount of time people spend on individual cost variables. It is still possible that the total amount of conflicts per year varies depending on the cultural distance. That would potentially also influence the overall conflict costs (Dirrler and Podruzsik, 2022).