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International EconomicIntegration and Business Cultures: Comparative Historical Perspectives

DennisM.P. McCarthy• Iowa State University

"Economicintegration" and "businessculture," two conceptsthat are also processes,have great importance in today'sinternational business arena. Contem- poraryfinancial literature contains many separate references to eachand sometimes, thoughnot asoften as one would wish, features discussions of theirconnections. Many people understandablyinvoke the notionsof economicintegration and businessculture as convenientshorthand, without analyzing these terms with the comprehensivenessthey deserve. Economicintegration and businessculture are alsosignificant historical phenomenaboth in themselvesand as subjectsof scholarlyresearch. But just as thesenotions have becomeuseful if superficialabbreviations in discussionsof today's globalbusiness news, so alsohave theybecome too compressedas they have beenprojected back into the past.Analysts take whatthey think economic integrationand business culture mean in thepresent and read these unspecified def- initionsinto past situations. Thus, the shorthand of thepresent becomes the shackles of the past. And it is the future that is the greatestloser, becauseall evidence suggeststhat economic integration and business culture, as interrelated processes, will becomeeven more important in the twenty-firstcentury. It is imperativethat businesshistorians develop the comprehensivedefinitions and refined methods for studyingthese concepts that their historical and contemporary richness deserves.

Definitions and Methods: Economic Integration

This task does not necessitate creatio ex nihilo. Elements of definitions and componentsof possiblemethods already exist. Consider definitions first. Economic integrationcan have two mainthrusts: removing barriers to businessand economic activity;and involving participants in aneconomic grouping in progressivelycloser relationships.It is an umbrellaterm for differentkinds of groupingspursuing different kinds of integrationwith different strategies.Economic integration requires•e_c•onomic"unification" and, while related, the two are distinct processes. Unificationmeans gluing or stitchingthings together; the partsof the unified productkeep their previousidentities but theyare nowjoined togetherin some manner.Integration builds on unificationbut it is somethingmore. An analogy residesin thedifference between a mosaicand a tapestry.A mosaicunifies pieces; a tapestryinterweaves threads. Mosaic is to unificationas tapestry is to integration.

•I wishto thankMary Yeager and Diana Davids Olien for their constructive remarks. BUSINESS AND ECONOMIC HISTORY, Volumetwenty-five, no. 1, Fall 1996. Copyright¸1996 by the BusinessHistory Conference. ISSN 0849-6825.

72 EconomicIntegration and Business Cultures / 73

Today manyassociate international economic integration with a menuof optionsfor linkingnation-states. Indeed, the accelerating pace of suchactivities has elevatedan importanttrend into a crucialphenomenon. The metamorphosisof the EuropeanCommunity (EC) intothe European Union (EU) in late1994, the creation of theNorth American Free Trade Area (NAFTA) on 1 January1994, the projected evolutionof the Asia-PacificEconomic Cooperation Forum (APEC) into a free- tradearea in the nextcentury, the emergenceof mercosuras a SouthAmerican customsunion of Argentina,Brazil, Paraguay, and Uruguay, all theseexamples and moreconstitute an irrefutable global itinerary for anyonedoubting the significance of this force.The kindsof economicgroupings now dominating the international landscapeare the free-trade area (FTA), customsunion (CU), andcommon market (CM). Membersof anFTA striveto reducebarriers to tradeamong themselves. A CU is anFTA plusa commonexternal tariff wall. A CM, themost integrated of the three,is a CU withinternal mobility of laborand capital and an evolving set of laws for theentire grouping. But internationaleconomic integration includes more than thosethree -stategroupings. "International" does mean cross-border in the senseof politicalboundaries, but private agents and agencies als 9 crossthose borders. And their cross-borderactivities that exemplifyeconomic integration are legitimate subjectsas well. Hereeconomic integration may involve the activities of onecross- borderbusiness or variousrelations evolving between or amongcross-border businesses.In the first casethe businessmay, for instance,initiate or accelerate diversificationby nationalityof itsmanagement teams. The heightened national mix canrepresent integration with a significanteconomic dimension, as a management team may embodymore typesof specializedknowledge of local market and communicationpatterns. As far asinter-business integration is concerned,there is anarray of options. Theseare mergers,acquisitions, takeovers, joint ventures,and strategic alliances. Whenthese are cross-border, they are asmuch a pan of theprocess of international economicintegration as free-tradeareas, customs unions, and common markets. And one shouldnot forgetthe othercreations of businesseswhich constitute an historicalrecord that goes back centuries. These feature merchant empires, leagues, associations,syndicates, and consortia.

Definitions and Methods: Business Culture

Our call for a morecomprehensive definition of internationaleconomic integrationis matchedby a pleafor morethorough attention to businessculture. In thisendeavor business historians should consider how anthropologycan assist an explorationand delineationof businessculture. There is a literatureconcerning relationsbetween and business,but to the bestof my knowledge nothingwritten specifically on how businesshistorians can useanthropology to studybusiness cultures [16, 18]. Justas economic theory is necessaryfor business historiansto understandeconomic integration, so also should anthropology be pre- requisitein ourprobing business cultures. And anthropologyshould be appreciated not asa one-methoddiscipline but asa setof researchchoices. Business culture "embodies the character or ethos of the business as reflectedin theways its personnel think and act" [11, p. 4]. But whatapproaches can be usedto understandproperly "the waysits personnelthink and act," the interactionbetween those ways and the businessitself, and how this process DennisM.P. McCarthy/ 74 producesthe ethos that distinguishes a particular culture? "The ways its personnel think and act" involve,first of all, how peopleperceive what they are doing. Understandingtheir perceptions, or moreprecisely their "cognitions," is centralto penetratingthe cultureof theirbusiness. How doesan outsidergrasp those cognitions? Anthropology offers different approachesto answeringthat question. In an "ethnographic"search the categories of the investigatorremain controlling; information discovered is framed and analyzedthrough them. In an "ethnoscientific"project the researcher tries to reveal the cognitionsof the researchedin their own terms.While an ethnoscientific investigatorcan neverempty his or her mindcompletely, the goal is to present evidencefrom localor indigenousviewpoints, not in termsimposed from outside. Ethnoscienceis a typeof cognitiveanthropology; it stresses the necessityof understandinglocal languages and communicating with the researched in theirown words.This dialogue helps an ethnoscientific investigator construct a community's "indigenousknowledge" in variousareas. The name ethnosciencecan be misleading.It is ,not ethnoscience,that is ethnocentric.Ethnography imposes a researcher'sown mental categorieson the subjectsof his or her investigation.Evidence is thusinterpreted throughthe lenses of theresearcher, not the researched. This is the quintessenceof .Ethnoscience, as it delineatesindigenous knowledge, presents evidenceprimarily through the lensesof thosewho contribute information. Some mightcharacterize indigenous knowledge itself as ethnocentric, but thisis a super- ficialuse of theterm ethnocentrism. Indigenous knowledge is the livingrepository of a community'sexperience and cannot in itselfbe ethnocentric.Individual mem- bersof a community,however, can use that knowledge in ethnocentricways. As in otherdisciplines, choice of methodis controversial[10]. This scholar respectsthe research corpus of ethnography,but strongly believes that ethnoscience offersa betterchance of gettingto knowhow others really think and so appeals to the deepestscholarly longings of most historiansto know the "insidestory." ElsewhereI analyzerelations between ethnoscience and economichistory and explainthe technical aspects of ethnosciencein moredetail. There I alsoargue that historianscan adopt the spirit if notthe technical letter of ethnoscienceasthey study peoplewhom they may not be ableto questionin person[10]. And if scholarscan interview live witnesses,so much the better. How can ethnosciencehelp in studyingbusiness cultures both pastand present?Space limitations prevent my furnishinga detailedanswer here to this inquiry.But for now the centralthrust of ethnoscienceserves as a startingpoint. Recallthat ethnoscience seeks to revealindigenous knowledge, which is composed of local cognitions,as these have been collectedby researchersworking in indigenouslanguages. In ,for instance,scholars pursue indigenous knowledgeon a varietyof medicaltopics, including local remedies. Those studying businesscultures can take the core notionsof indigenousknowledge, local cog- nitions,and local languages, relate them to theproblems involved in uncoveringand analyzingbusiness cultures, and endeavor to fashionmethodological analogues. Indigenouslanguage offers fertile ground for suchanalogues. Since the study of businessculture involves an organizationthat is frequentlya bureaucracy,the notionof "administrative"or "bureaucratic"language offers one path to follow in a questto understanda particularbusiness culture. Bureaucratic language can evolveand, in anyevent, usage is notstatic. So one crucial task for appreciatingany businessculture is to studythe historyof its bureaucraticlanguage. EconomicIntegration and Business Cultures / 75

The"language key" becomes especially intriguing when business culture is studiedin relationto internationaleconomic integration. In a cross-bordergrouping of nation-statesthere are many business cultures in thesame organization: those of the memberstates and businesses within the grouping,and possibly those of any centralorganization set up to runthe grouping. The presence of manyindigenous languagesspoken by internationalpersonnel and many bureaucratic languages used by constituentpolities and local businesses makes for a mostintricate tableau indeed.A cross-borderinternational business may itself exhibit more than one bus- inessculture and a singlebureaucratic language. A businessthat decentralizes more power to its subsidiariesor establishesdifferent headquarters for its product divisionsis encouragingthe growth of multipleand possibly conflicting business culturesand bureaucratic languages within the same organization. Justas some have used ethnography in organizations [ 16], so we recommend an approachinformed by bothethnoscience and history in researchingbusiness cultures.An "ethnoscientifichistory" would consider business cultures developing on suchlevels as that of the individual business,the nation-state,and an economic groupingas a whole.It would,ideally, interview members of eachculture in their ownlanguages, a technique both ethnoscience and history share. But if thiswere not possible,it couldstill employ the wider evidential base associated with historyand examinewritten documents of variouskinds. Research inspired by ethnosciencebut combinedwith history's traditional catholicity of evidence,which includes material producedboth by andabout witnesses, can deepen our understanding of business cultures.Indeed, our panoramaof internationaleconomic integration, which includesboth governmentand privategroupings, has been guided all alongby consideringexamples of economicintegration from the viewpointsof those involvedin a particulargrouping. In otherwords, respect for indigenousknowledge will yielda diverseappreciation for thevaried historical examples of international economicintegration.

ResearchAgenda: Outline

Relationsbetween international economic integration and business culture go backmillennia and should be studiedin numeroushistorical venues. A research agendadoes not lack typesof internationaleconomic integration to study.These rangefrom the differentof empires(colonial, merchant, religious, and criminal), throughleagues, cartels, syndicates, and consortia, into the integrating cross-border activities of multinationals, and include free trade areas, customs unions, and common markets. Nor is a researchagenda wanting in attributesthat have been applied to businesscultures. A few exampleswill sufficefor now.Many havebeen character- izedas "bureaucratic" [2, p. 267], an overworkedterm, some as "nonbureaucratic" [14, p. 5], a mysticalconcept, and a few even as "cowboy"[7, p. All, which containsso many stereotypesthat before it satiricallyimplodes, it shouldbe replacedwith "creativelyautonomous" or "harmfullyself-centered," depending on one's viewpoint. These terms can, nonetheless,serve as questions.For "bureaucratic":what is the type and degreeof bureaucratizationinvolved? For "nonbureaucratic":how can administration, without which at leastin minimalways therecan be no groupor organization,be somanaged that it eitherdoes not become bureaucratic,or if it doesis still experiencedas "nonbureaucratic?"For "cowboy" or "cowgirl":to whatdoes this term apply? To localmanagerial autonomy that has DennisM.P. McCarthy/ 76 become,in theeyes of centralmanagers, excessive? Or just to a styleof business that staid operatorsdislike? This term really pivotson personalcognitions of appropriatebehavior.

Colonial Empires

Some historicalexamples seem to offer richer possibilitiesfor the approachessketched in the sectionson definitionsand methods. Colonial empires featurebusiness cultures in greatand sometimes fatal conflict. The imperialpower hasits own businessculture; so do the expatriatebusinesses operating within a particularcolony. The localcolonial bureaucracy, a creation of theimperial power, candevelop sufficient local autonomy to nurturethe emergence of its ownbusiness culture, which may differ in key respectsfrom that of its imperialcreator. Indigenousbusinesses, governments, and even somelocal societiescan havetheir own businesscultures. As the leitmotif of colonialismis control that often harms, indigenousbusiness cultures must either cooperate or be trampled.So the historical recordfeatures numerous examples of localbusiness cultures wrecked or merged in someway with expatriate agencies. And if anempire is pursuingits ownversion of economicintegration in itscolonies, which many though not all did,the conflicts will be greatlyinfluenced by thekind of economicintegration imposed. Classicillustrations of thesethemes resonate in theAfrican colonial empires of GreatBritain and France, especially during the height of formaladministrative colonialismfrom the 1880sinto the 1960s.Each country sought a differentkind of economicintegration for its empire;the Frenchversion was more centralized administrativelyand culturally than that of theBritish. To oversimplify,the French soughta standardizationof both form and content in theirapproaches to indigenous cultures.French culture would not only packagebut also penetrateindigenous cultures.The Britishdid seekin theirapproaches to localsocieties to standardize themall withincommon bureaucratic categories and forms but, by sharpcontrast, did notconsciously seek to infuseor suffuseBritish culture into local cultures. To compareand contrast the fates of indigenousAfrican business cultures under British andFrench colonial rule is a compellingsubject that is mentionedhere to illustrate thecreative possibilities in myapproach, because history and anthropology together arereally needed to analyzethese cultural clashes. Fuller treatment of theseissues awaitsanother venue, just as doesconsideration of anothermajor topic that historicallyinterweaves international economic integration and business cultures overmany international boundaries: the Hanseatic League, a powerfulforce in the internationalcommerce of late medievalEurope.

The Hanseatic League

This cross-bordergrouping consisted of numeroushansas, which were companiesor guildsof merchants.These were situated in strategictowns from southernEngland through northwestern and into northeasternEurope, reaching Poland,the Baltic states,and Russia.Many of the townsin the HanseaticLeague wereGerman, but it wouldbe a mistaketo call it a Germanorganization. While the notionof businessculture on the level of the Europeannation-state was then nascent,business cultures flourished on the levelof thecity andcity-state and in suchmerchant associations as the hansas.The developmentof town and hansa cultureswas interwoven throughout the Hanseatic League's history, which spanned EconomicIntegration and Business Cultures / 77 the thirteen, fourteenth,and fifteen centuries[15]. The result is yet another complicatedtableau of numerouslocal business cultures in contactwith one another and a majorquestion which I seekevidence to answer:was there a distinctive businessculture for theentire Hanseatic League? This association was not a confederation in an institutional sense. It was an allianceof localcompanies and guilds that sought certain common objectives: to reducebarriers to tradeamong themselves by suchtechniques as standardizing the formsof transactions;but a secondgoal was to protectcommercial privileges which its variousmember groups had achieved. So it exhibitedelements of a common marketcreated by privateagents: internal barrier reduction; external protection againstoutsiders; promoting factor mobility of capitaland merchant labor; and a partialstandardization of commerciallaw. It did have a governingbody, the assemblyof townrepresentatives called the "Hansetage." This group reportedly met irregularlyand meetings were not well attended.It hadno court of lastresort. It had no secretariator sustainingcentral bureaucracy to serveas the matrixof an over- archingbusiness culture, although Ltibeck seemed to functionas a headquarters city. But businessculture does not require "western-style" bureaucracy to emerge. Thereare "non-Western"types of "bureaucracy"which do not involvecodified tablesof organization,rules and regulations, paperwork, buildings, or headquarters operatingcontinuously in fixed locations. Bureaucracy can in factdevelop around extensivekinship structures, as the experiencesof someAfrican societies have shown[6]. The networkof hansasis analogousto extensivekinship structures. To the extentthat all hansasshared those objectives of barrierreduction, protection, andstandardization, they promoted the emergence of a commonbusiness culture. Common values cohered their activities and became, in effect, a commercial language,which functioned as a substitutefor the administrativelanguage that a bureaucratizedheadquarters would surely have pushed. Colonialempires and the Hanseatic League are mentioned here to suggest thefresh reinterpretations of long-standing topics that our approach might generate. Not sovenerable but in factextraordinarily contemporary are the two subjectsthat focusthe rest of thispaper: the "multiculturalmultinational" Asea Brown Boveri (ABB) andthe European Union (EU).

"Multicultural Multinationals": Asea Brown Boveri

It isde rigueurtoday to mentionABB in anydiscussion of thecontemporary multinationalcorporation in relationto organization,management, and culture. In 1988Percy Barnevik, its current leader, combined ASEA, the Swedish engineering grouphe ranfrom 1980,and Brown Boveri, a Swisscompetitor [4]. ABB hasbeen calleda "modelmultinational" [13] partlybecause its structures,personnel, and proceduresreflect the cultural diversity that contemporary organization requires in the globalbusiness arena. Diversity is one of the great PC buzz words of the 1990s and often enshroudedin suchjargon as the "culturalintegration function" [8, pp. 35-62]. It is thussusceptible to ridiculeon severalfronts. But it is an essentialconcept for today'scross-border businesses. The realchallenges lie in customizingthe concept for a particularorganization and then controlling its implementationto ensurethat an excessof diversitydoes not weakenthe organization.To knowledgeable observersBarnevik has apparently embodied cultural diversity in ABB in waysthat DennisM.P. McCarthy/ 78 havestrengthened the multinational. ABB is "a companywith a smallcore and only a thin layer of managersto supervisea myriadof subsidiariesand profit centers." It does contain 1,300 separatecompanies divided into 5,000 profit centers. Headquartersin Zurichis comparatively"small" with a staffof about171 people. And managerialranks are streamlined;there are about 500 so-calledglobal managers[4]. ButBarnevik has linked economy in staffingwith both cultural diversity and integration.Headquarters staff come from aboutnineteen different countries; there is a "co-ordinatingexecutive committee," with membersfrom eightcountries, that bestridesABB; and those"global managers"seem to functionas international circuitriders or mobilesupervisors. Barnevik supposedly selects those managers withspecial attention to their"cultural sensitivity" and "their spouses' willingness to move."(It wouldbe interestingto knowwhat questions Barnevik asks to discover a candidate'scultural sensitivity.) The co-ordinatingexecutive committee and the cadre of global managersfulfill that "culturalintegration function" mentioned above:as agenciesthat combinecultural diversity and makethe businesswork. Barnevikhas madeEnglish ABB's official language;this can promotecultural integration,but only one third of hisemployees speak it astheir first language. Most intriguingnot only with respectto culturalintegration but alsoin connectionwith thenotion of bureaucraticlanguage introduced earlier is Barnevik'sbooklet on the company'saims and values. He reportedly"forces" all employeesto readthis work; howhe doesthis is not indicated[4]. This book,which is apparentlyinaccessible to mostoutsiders, should be an outstandingprimary source for revealingwhat aims and valuesBarnevik believes can coherean organizationwith a non-traditional structure.It shouldalso contain some of thebuilding blocks of ABB's bureaucratic language.

The European Union

If ABB is the "multiculturalmultinational" model to studyfor the twenty- firstcentury, the EU is thepremier contemporary model of a commonmarket born in thetwentieth century to examinefor relationsbetween economic integration and businesscultures. This organization as a commonmarket is a work in progress;the EU still hasan enormousamount of workto do in evolvingcommunity laws and in integratingits capitalmarkets, for instance.The wholequestion of Economicand MonetaryUnion (EMU), withits centerpiece a single currency, is in travail[5]. And membersdebate whether and if so at what pace the Union shouldwelcome new members;there remainsconsiderable tension between the "marketdeepeners," thosewho preferto developthe EU with its presentfifteen members, and the "marketwideners," those who favor a prudentexpansion of the membership. Whateverits future,it offersmany fascinating examples of theinterplay between economicintegration and business culture. Let usbegin at thetop. The EuropeanCommission (EC) andits attendantbureaucracies attempt to run the EU from their headquartersin Brussels,Belgium. The EC itself now featuresheightened cultural conflict, with the recentadditions of representatives fromAustria, Finland, and Sweden. The departmentsof theEC work with different issues,such as agriculture, science, fisheries, energy, and transport. And each, partly basedon its mission,has its ownculture [17, pp.133-34].Since we regardthe EC andits departments as both bureaucracies and businesses, their culturesare surely relevantto thetopic of businessculture. Examine the culture of theEC itself,which EconomicIntegration and Business Cultures / 79 one observer described in the London-based Financial Times as "closed," "male- dominated,"and "spendthrift" [1]. The newEU membersare apparentlypushing for moreattention to opengovernment, women's equality, free trade,and sound financialmanagement. And on someissues newer and older members have formed informal alliances.The Swedes,Finns, Danes, Dutch, and to someextent the British are"pressing for moretransparency and openness in EU decision-making."But this approachconflicts with the behind-the-scenes"intricate deal-making favoured by oldermembers of theEU club suchas the Belgiansor the French"[1 ]. An episodethat spotlightscultural conflict in the contextof bureaucratic languageoccurred at the Cannessummit of the EU in June, 1995. The Swedesand the Danes reportedlysought numerous amendments to the final communiqut, known as "the conclusions"in Brusselsjargon. They thoughtthey had secured referencesto the connectionbetween the environmentand employmentand told theirdomestic audiences of theirsuccess. But thefinal communiqu6 "mysteriously" omittedseveral of theirpoints. The missingitems do appearin theprocbs verbal, the minutesof the summit,which do not commandthe sameattention or analysis asfinal communiquts.One seniordiplomat, commenting on thestyles of the newer members,is quotedas saying"they have yet to graspthe importanceof law, precedent,and the institutional framework" [ 1]. Culturalconflicts are clearly rooted in differentcognitions of the law, precedent,and institutional framework. National and companybusiness cultures within the EU have received considerableanalysis. Attention has focused on suchtopics as distinctive national managementstyles [3, 9, 12] and different nationalapproaches to economic integration.I can onlyhint hereat the richnessof thismaterial and only in con- nectionwith nationalmanagement styles. One fascinating study probes the attitudes of nationalmanagers towards foreign partnersin prospectivemergers and acquisitionsas well asthe compatibility of managerialstyles. This research is based on completedquestionnaires by managersrepresenting seventeen and goesbeyond the EU to includethe United States and Japan. The resultsdisplay the mostand least preferred partner or acquirerand the rationale for the selection. Formost preferred partner or acquirerthe British and Americans prefer each another.British managers cite the "positiveattitude" of U.S. managers;the latter describethe British approachas "professional."The Frenchprefer themselves because"you know whereyou stand."So do the Germans,who note "market access."The Swedesmost prefer Americans for their"professional approach"; the Danes,the British for their"positive attitude." As to leastpreferred merger partner or acquirer, the British and the Americanscite the Japanesebecause of "incompatiblelanguage." The Frenchand the Germans also designate the Japanese onthe grounds of "incompatibleunderstanding." The Dutch rank lowest the Spanish becauseof "incompatibleunderstanding." Both the Swedishand the Danesleast preferthe Italians. The formersay "you never know where you stand"; the latter cite "incompatiblelanguage" [2, p. 267]. Thisstudy does not probe what such phrases as "you never know where you stand,""positive attitude," and "professional approach" mean from the viewpoints of thoselisting them as rationales.The researchersdo comeclosest to an ethno- scientificapproach when they discusswhy the Japaneseregard mergers and acquisitionsas "a potentially'dishonourable' activity and a strategyof lastresort." The Japaneseword for acquisitionis 'notori,'they note, which also means hijacking [2, p. 269]. It would be helpfulto studythose key phrasescited abovein the DennisM.P. McCarthy/ 80 languagesof the respondentsto see whetherany other words with multiple meaningsmight exist and further explain managerial preferences and dislikes.

Conclusions

More light can be cast on the historicalrelations between economic integrationand business culture by approachingthese topics with a frameworkthat continuesto rely on economictheory but now explicitly incorporates anthropology. The kind of anthropologywith the greatestexplanatory power is ethnoscience,a typeof cognitiveanthropology. A research agenda listed the great range of possible subjectsthat a new approachmight consider. The authorselected four thatlend themselveswith •pecial promiseto this fresh frameworkand the author's knowledge:colonial empires with emphasison Anglo-Frenchcomparisons and contrasts,the HanseaticLeague, the "multiculturalmultinational" par excellence AseaBrown Boveri, and the European Union. The firsttwo topicswere sketched to suggestpossibilities; the last two were partlydeveloped to demonstratethe determinationof thisframework to revealthe "inside story," based on an exposition of thecognitions expressed in theindigenous languages of thosestudied.

References

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