A Framework for Strategic Decison-making and Performance Among Chinese Managers

8/6/2019 A Framework for Strategic Decison-making and Performance Among Chinese Managers

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I T L S

WORKING PAPER

ITLS-WP-09-17

A framework for strategic

decision-making and

performance among Chinese

managers

By

Peter Lok, Jo Rhodes1

and Vincent

Cheng2

1Macquarie Graduate School of Management

Macquarie University2

International Graduate School of Business

University of South Australia

July 2009

ISSN 1832-570X

INSTITUTE of TRANSPORT andLOGISTICS STUDIES

The Australian Key Centre in

Transport and Logistics Management

The University of SydneyEstablished under the Australian Research Councils Key Centre Program.


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NUMBER: Working Paper ITLS-WP-09-17

TITLE: A framework for strategic decision making andperformance among Chinese Managers

ABSTRACT: This study develops an integrative model that explains therelationship between Chinese culture, managers strategic

decision making (SDM) processes, and organizational

performance. 1200 participants were randomly selected

from a business clubs company register, resulting in 204

valid respondents. The results highlighted two significant

SDM paths used by managers: (1) The cognitive-speed

path, which suggested that Overseas Chinese managers (the

Chinese who live outside of Mainland China ) focus on the

big picture, draw analogies from past experiences, and use

extensive networks to reduce the duration of the decision

process. (2)The social-political path which shows that

Overseas Chinese managers focus on collective interests,

strive to maintain harmony, and to save face whilst using a

collaborative style to handle conflict; this approach reduces

dysfunctional political behavior, while reinforcing the

decision teams focus on common goals. From these results

we concluded that a speedier decision making process

(based on intuition, experience and networks)accompanied

by the appropriate use of political behavior (that created

harmony, through a hierarchical structure, during conflict

management) in the Overseas Chinese managers strategicdecision making process could positively influence

organizational performance.

KEY WORDS: Chinese culture, cognitive-speed path, organizational performance, social-political path, strategic decision

making processes (SDM)

AUTHORS: Peter Lok, Jo Rhodes and Vincent Cheng

CONTACT:Institute of Transport and Logistics Studies (C37)

The Australian Key Centre in Transport ManagementThe University of Sydney NSW 2006 Australia

Telephone: +61 9351 0071

Facsimile: +61 9351 0088

E-mail: [email protected]

Internet: http://www.itls.usyd.edu.au

DATE: July 2009
http://www.itls.usyd.edu.au/http://www.itls.usyd.edu.au/http://www.itls.usyd.edu.au/


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A framework for strategic decision making and performance among Chinese managersLok, Rhodes & Cheng

1

1. Introduction

The rapid expansion of Chinese firms, from the Peoples Republic of China (PRC), onto the global

stage has been propelled by the business investment boom in mainland China. Whilst there are

numerous factors influencing investment decisions in the PRC, such as the expectation of higher

shareholders returns, market expansion, production efficiency, and strategic positioning and alliances,the impact of one significant factor, national culture or values, on investment decisions lacks empirical

research to explain its impact on organizational performance.

Different national cultures exhibit different approaches to decision making (Hofstede, 1994, 2001,

Child 1981). Carr and Harris (2004), when comparing the strategic investment decision style of

companies from Germany, Britain, Japan, and the US, in the automotive component business,

concluded that divergence in national values had a significant impact on investment decision style. For

example: the German emphasis on a small top professional team; the extensiveness of consultation

practices in Japan; the surprisingly systematic approach in the US; and the pragmatic, shallower

approach of the British. In addition, differences in regional decision making styles may be important;

Nakamura (1994) posits that Chinese strategic management is similar to the Japanese, whilst others

argue to the contrary (Fukada 1983, Martinsons et al., 2007).

Whilst the link between cultural diversity, cognitive diversity, and strategic decision quality outcomes

has been demonstrated (Olson et al., 2007), there is limited evidence regarding the impact of cultural

values, and cognitive diversity, on the Chinese SDM process for investment decisions. Haley et al.,

(2004) highlighted certain Chinese decision making characteristics (such as own experience and

network support) and notes that in addition, PRC managers incorporate the central and provincial

governments goals and desires into their planning. However, Hayleys findings are insufficient for

determining the effect of cultural factors on the Chinese strategic decision making process. This gap is

significant because of the growing volume of investment decisions made by Chinese and other non-

Chinese managers in the growing PRC economy. Since there is a significant difference in thinking,

strategy, and experience between Overseas Chinese managers (e.g. those from Taiwan, Hong Kong,

Singapore, Malaysia, Indonesia, US and Europe), and Mainland Chinese managers (Haley et al.,

2004, East Asia Analytical Unit 1995, Warner, 2002); and that the Overseas Chinese have substantialinvestment in the PRC; it is the intention of this empirical study to focus on Overseas Chinese

managers experience in order to establish an integrative framework that explains the impact of key

Chinese cultural factors on the SDM process and the impact on these factors on organizational

performance.

Although it can be argued that global convergence of managerial best practices could, in the future,

render the Mainland Chinese investment decision making process as similar to that of the Overseas

Chinese (Von Glinow et al 2005, Hofstede 2001, McGaughery et al., 1999) future studies could

compare the SDM process between Overseas and Mainland Chinese and Western and Chinese

investors. The understanding of the similarities and differences between Chinese and Western SDM

models can improve business transaction activities, and performance through providing management

(both East and West) with enhanced insights into the Chinese SDM process.

2. Literature review

As most cross-cultural studies on strategic management pursue comparisons between the United

States, Japan and European countries, the need for further exploration of the influence of cultural

values on strategic decision processes with Chinese managers is well established (Papadakis and

Barwise, 1998; Brouthers et al., 2000; Said, 2006). In the last two decades around 20 studies have

included the topic of Chinese SDM. However, the literature provides sparse evidence, nor a

comprehensive theory to explain the critical cultural factors involved, nor an explanation as to how

they function in the SDM process (Peng et al., 2000; Quer et al., 2007). Early studies focused on the

influence of the political and economic environment on the process (Child and Lu, 1990; Easterby-

Smith and Gao, 1996). In recent years research studies addressed the influence of cognitive diversity,


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and decision style, on the decision process of Overseas Chinese (Martinsons and Davison, 2007; Olson

et al. 2007).

Most studies on the Overseas Chinese examine their entrepreneurial spirit, and their networks with

trusted family and friends (Redding, 1980) with a strong focus on the effect of cultural factors on the

SDM process (Haley, 1997; Haley and Haley, 2006). While acknowledging that Overseas Chinese

managers are influenced by Western management practices, it is known that cultural change requires arelatively long time (Carr and Harris, 2004). Though these societal and psychological changes may

precipitate modernization, Chinese values still display significant similarities that can be traced back

to their common root (Leong et al., 2006). Consequently the influence of Chinese culture on Overseas

Chinese investment decision making is a significant area for further exploration.

3. Chinese cultural factors

Whilst cultural values are incorporated into the many different models of cultural diversity not all have

an equal impact on, and importance to the study of the SDM process. Studies such as Martinson and

Davison (2007), Jaw et al., 2007, Yan and Sorenson 2004, Olson et al., (2007), Haley and Haley

(2006), Chen and Li (2005), Tsang (2004), Hofstede (2001), House et al., (1999), and Lu (1998)

discuss critical Chinese cultural factors such as collectivism, long term orientation, and conflictavoidance styles that could influence managers decision making process. The majority of these

cultural factors can be grouped under four categories: the locus of control, decision style and mode,

group orientation, and hierarchy. The first two correspond with the decision makers personal

cognitive elements, while the latter two relate to the vertical and horizontal social relationships of the

decision maker within the decision team. Table 1 provides the link between these cultural factors and

their possible influence on the SDM process.

3.1 Locus of controlThe locus of control impacts on organizational decision making (Boone et al., 1996). Research on the

locus of control generally classifies people as either internal or external types. The internal type tends

to view rewards as dependent on individual behavior. In contrast, the external type tends to viewrewards as resulting from external factors such as luck or fate. Recent research (Aube et al. 2007)

indicates that the locus of control can also be classified as primary control, and secondary control.

Asians might rely more on socio-instrumental control that is also a form of primary control, ignored in

Western measures. Socio-instrumental control is the active attempt to influence the environment

through social means (Spector et al. 2002; Spector et al., 2004).


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Table 1: Link between cultural factors and possible influence on SDM process.

3.2 Decision style and modeDecision style and mode, which is a preferred way of making decisions, is directly related to the SDM

process; the Chinese have specific characteristics in this area (Yates and Lee, 1996) which explain the

adoptability of and perceived risk in making strategic decisions (Nutt, 1986). Chinese managers

exhibit patience in making decisions, lack a sense of urgency, and can be informal and insensitive to

time in the decision process (Wengrowski, 2004).

Decision mode refers to the decision making mechanism. Some researchers suggest that the Chinese

place more emphasis on rules, roles and case-based decisions. Consequently their behaviour could be

categorized as uncertain avoidance (Hofstede 2001, Haley, Haley and Tan 2004); they would bemore likely to use rules that originated from folk history because the Chinese are accustomed to

Cultural Factors Impact on SDM process

Locus of control Low control to environment lead to longer planning

horizon (+) but passive and less innovative (-)

Low control to environment leads to risk averse (-)Rely on Socio-instrumental control lead to longer

decision process (-)

The uncertainty avoidance leads to longer decision

time (-) and less rational approach (-)

Decision style and mode Chinese prefer to use rule-based folk precedent

matching mode to speed up decision process (+)

Less preference on analytic mode may lead to use

of wrong precedent (-)

Processing information with a holistic view enable

the big picture to be seen (+)

Acceptance of multiple truths widens strategic

options (+)

Chinese reliance on qualitative and personal sourcedata in uncertain situations (+).

Non-analytic approach causes problematic

decisions in certain situations (-)

Patience in making decisions (+) but insensitivity to

time frame (-)

Group orientation Putting groups interest before self interest helps

focus on common goal. (+)

Focus on collective interest leads to high

commitment to decision (+)To achieve group consensus would length the

decision process (-)

Maintaining guanxi leads to avoidance style

conflict resolution. (-)Rational thinking may give way to maintaining

guanxi. (-)

Guanxi enables decision makers to save time in

getting information (+)

Hierarchy Hierarchy moderate conflict in the SDM process

(+)Low transparency of decision making process (-)

The respect of hierarchy leads to centrally

monitored decision making that is slow due to

provisional review with supervisors. (-)

Decision could be very fast if it get top

administrations attention (+)


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tradition and antiquity. If no match can be found in the recognition mode, then the analytic mode

will be used (Weber et al., 1998). The folk-precedent matching decision style can be considered as a

variant of category-based or case-based decision making whereby decision making is based on

qualitative and personal data.

3.3 Group orientationThe Chinese, throughout their long history, have had a collectivist culture that is characterized by

participation in intensive social interaction, which affords little privacy (Tang and Ward, 2003). In a

collective society (group orientation) the interests of the collective are more important than those of

individuals. Individual effort and achievements are expected to contribute to the collective good

(Laaksonen, 1988). An important part of the Chinese collectivist culture is guanxi (a form of social

networking and relationship building) which plays a major role in doing business (Chow and Ng,

2004). Understanding face is another important aspect in the management of guanxi; although face is

a universal phenomenon, it is particularly salient in Chinese culture (Redding and Ng, 1982).

3.4 HierarchyHierarchy is identified as one of the important variables in the analysis of SDM processes thatinfluence the politicality of the process (Hickson et al., 1986). Scholars note that a major feature of

Chinese culture is respect for age and hierarchy (Lockett, 1988); consequently the Chinese prefer clear

distinctions between managers and subordinates. Chinese decisions are made, or at least monitored,

centrally. That is, the person with the highest status makes the decision, or, if the superiors wishes are

clear, subordinates decide in accordance with those wishes, essentially as the superiors agent (Xu and

Wang, 1991).

4. SDM process characteristics

Rajagopalan et al., (1993) in examining past SDM studies noted four key characteristics in the SDM

process: speed of decision making; degree of rationality; political behavior; and participation and

involvement. In recent years, studies by Martinson and Davison (2007), Olson et al., (2007), Haleyand Haley (2006), Chen and Li (2005), Haley et al., (2004), Tsang (2004), Jehn and Weigelt (2001),

Haley, Tan and Haley (1998), and Lu (1998) included other factors (such as ritual, trust, harmony)

that influence the strategic decision making process among Chinese managers. However, Rajagopalan

et al.,s (1993) four key SDM characteristics capture the meaning of the other factors. In this study

these 4 SDM process factors have been adopted to measure the linkage between SDM and

performance.

4.1 SpeedThe effect of the speed of the SDM process on organizational performance has received more attention

in recent research because the business environment is more dynamic and the rate of change faster.

The strategy process variables such as the ability to consider alternatives simultaneously, the size ofthe organization, and the industry context are important in determining the speed of the SDM process

(Judge and Miller, 1991). Furthermore, a sporadic SDM process has a longer process time when

compared with a fluid process (Hickson et al., 1986).

4.2 Degree of rationalityComprehensiveness and extensiveness are used by most researchers as the indicators of rationality

(Rajagopalan et al., 1993). Comprehensiveness is defined as the extent to which organizations

attempt to be exhaustive or inclusive in making and integrating strategic decisions (Fredrickson and

Mitchell, 1984). Extensiveness is defined as the extent to which an upper-echelon executive group

utilizes a substantial planning process to formulate long term goals and strategies for the firm (Miller

et al., 1998). Use of intuition is also included as a measure of rationality as it is recently receivingmore attention in the study of the SDM process (Miller and Ireland, 2005).


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4.3 Political behaviourPolitical behavior is defined as behavior by individuals, or, in collective terms, by sub-units within an

organization, that make a claim against the resource-sharing system of the organization (Pettigrew,

1973). Political behavior has a negative effect on organizational performance because it is inefficient,

unpleasant and causes disruption in information flow (Mintzberg et al., 1976; Gandz and Murray,

1980). However political behavior may be necessary in some situations to drive and implementstrategic changes (Mintzberg, 1990). Whether political behavior is beneficial or harmful to

organizations depends on the way it is used.

4.4 Participation/InvolvementParticipation refers to the involvement of middle managers in the SDM process which can achieve

higher strategic consensus to then improve the implementation of the strategic decision choices.

However, the main contribution of participation to the SDM process is to improve the quality of the

decision rather than facilitating implementation (Wooldridge and Floyd, 1990). At a lower level,

middle managers that are closer to day-to-day business operations, and are better informed about the

market conditions, are in a better position to generate and assess the alternatives, with directions from

top management (Andersen, 2004).

5. Organizational performance

Although the measurement of organizational performance traditionally uses financial metrics,

businesses have recognized that a dynamic business environment requires the use a broader set of

measures (Eccles, 1991). Improvements in areas such as quality, customer and employee satisfaction,

and innovation are not fully captured using financial measures. As non financial measures, that include

intangible assets, supplement financial measures (Ittner and Larcker, 1998), the balanced scorecard

framework is used in this study to capture the effectiveness of both financial and non-financial

measures of organizational performance (Kaplan and Norton, 1992).

5.1 Research questionsThis research addresses the area of the effect of Chinese cultural factors on the SDM process from a

holistic view using an integrative framework. The study concentrates on Chinese cultural factors that

have a critical effect on the SDM process resulting in the following research questions:

1) What cultural factors are critical to the SDM process of Overseas Chinese?

2) How do these cultural factors affect Overseas Chinese managers in making strategic

decisions?

3) How do these cultural factors affect organizational performance through the SDM

process?

4) What are the limitations of these cultural factors? What are the managerialimplications for both Western and Chinese companies?

To avoid ambiguity in this study, the Chinese who live outside of Mainland China are identified as

Overseas Chinese (e.g. Hong Kong, Singapore and Taiwan). The Chinese living in China (PRC) are

identified as Mainland Chinese. Collectively, the Overseas and Mainland Chinese form the Chinese

people. The generic term Chinese is used when the discussion refers to common issues that address

both groups of Chinese people. Since the 1997 return of Hong Kong to Mainland China, the term

Hong Kong Chinese as Overseas Chinese may not be considered politically correct. However, for the

purpose of this study, the Hong Kong Chinese are included in the Overseas Chinese definition.


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6. Hypotheses

6.1 The relationships between cultural factors and the SDM processThere are four groups of hypotheses that demonstrate the relationships between the four cultural

factors and the SDM process. Locus of control influences both the speed and degree of rationality of

the SDM process. Chinese managers are typically classified as external types, relying on secondary

control, characterized as less willing to take risks, and tending towards uncertainty avoidance (Lau

and Woodman, 1995). Uncertainty avoidance is usually dealt with by gathering more

information which then lengthens the SDM process (Schneider, 1989). Chinese managers alsorely on socio-instrumental control to change the environment (Spector et al., 2004). This type of

control requires more time to achieve objectives. To alleviate the anxiety of making important

decisions, and to psychologically reduce the feeling of uncertainty, Chinese managers rely on social

norms or rituals like Fung Shui (Tsang, 2004; Leung, 1996). These superstitious actions reduce the

rationality of decision making and may cause problematic consequences such as distracting the

managers from the normal SDM process (Tsang, 2004). This leads to the following hypotheses:

Hypothesis 1a: The uncertainty avoidance and use of socio-instrumental control will

increase (+) the duration and reduce the speed of strategic decision making among

Overseas Chinese.

Hypothesis 1b: Relying upon social norms and rituals to avoid uncertainty will negatively

(-) associate with degree of rationality in strategic decision making among Overseas

Chinese.

The decision style and mode of Chinese managers will influence both decision speed and degree of

rationality. Chinese managers placing emphasis on recognition-based decision making, or intuition,

may improve the speed and effectiveness of the decision-making (Weber et al., 2004). Dane and Pratt(2007) further suggested that intuition can facilitate fast and accurate decisions in organizations.

Research shows that the Chinese consider problem situations holistically (Yates and Lee, 1996). By

looking at the big picture, bits and pieces of qualitative and personal information can be combined to

solve the business puzzle. When insufficient hard data is available, the Chinese information processing

style focuses on using qualitative and personal data, which fits this type of information gathering.

Decisions are made intuitively by managers with extensive experience and knowledge of the subject

matter (Haley and Haley, 2006). This reduces the degree of rationality of the analysis. Chinese

decision makers also make use of guanxi to acquire first hand information regarding government

regulations, and their competitors moves, where there are no clear and transparent channels to acquire

data for formal analysis (Haley and Haley, 1998; Haley et al. 2004). Therefore, the following

hypotheses are expected.

Hypothesis 2a: The use of the recognition-based decision mode and the use of qualitative

and personal data will decrease (-) with the speed of the SDM process.

Hypothesis 2b: The use of the recognition-based decision mode and the use of qualitative

and personal data will negatively (-) associate with the degree of rationality.

Group orientation affects speed, the degree of rationality, and political behavior. The collectivist

nature of Chinese culture leads to longer process duration as time is spent on reaching a group

consensus. The Chinese consider Guanxi important for conducting business (Xin and Pearce, 1996;Park and Luo, 2001); building and maintaining guanxi can be a high priority in making managerial


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decisions. In making decisions, rational analysis may give way to maintaining guanxi with business

partners and/or among the decision making team members. Managers must pay attention to saving and

giving face to team members, which could then lead to a reduction in comprehensiveness by avoiding

challenges or questioning of the options put forward by different team members (the problem of

groupthink); extensive effort may be spent in avoiding conflict.

Chinese managers have a higher level of commitment to teamwork (Chen et al., 2000). The singlebelief underlying Chinese group orientation is that the future of the individuals from the same group

are inter-related; and that each persons well-being depends upon the results of the collective effort

(Leung, 1996; Chen and Chen, 2004). It is important to maintain harmony, and avoid conflict,

because these are viewed as a threat to the collective interest. This leads to the following hypothesis:

Hypothesis 3a: Group orientation that requires more effort and time to achieve consensus

in decision making will increase (+) duration (or decrease speed).

Hypothesis 3b: The concern of face and guanxi will negatively (-) associate with degree of

rationality.

Hypothesis 3c: The restraint of self-interest for the greater interest of the group in

maintaining harmony, and avoiding conflict will negatively (-) associate with political

behavior.

Hierarchy has a relationship with all the SDM process characteristics. Big decisions are made or at

least monitored, as well as influenced, by the preference of the top management team. However, if

these decisions get the attention of the person with the highest authority, they can be decided quickly

(Yates and Lee, 1996). This is a reflection of being less dependent on formal procedures (Wang et al.,

2005). Since strategic decisions are important decisions, they should attract the attention of the top

management team.

Hypothesis 4a: The speed of the SDM process will positively (+) associate with top level

hierarchy (i.e. the time for strategic decision making is quicker when top level hierarchy is

involved rather then filtering up the chain of command).

The intervention of the chief executive distracts managers from the normal rational process. Because

of hierarchy, managers will not question the chief executives rationale for the decision, and will

accept and execute the chief executives choice. Even if the chief executive does not intervene or make

the decision himself, if his preference is known the management team may conform to the chief

executives choice; this reduces the degree of rationality. Hierarchy also means that strategy decisions

are mostly limited to those at the top. Unless the top management team explicitly makes it clear thatsomeone from below is allowed to take part in the process, middle managers will not publicly express

their opinion, or voluntarily give input to the SDM process. On the other hand, the chief executive

may more easily be able to resolve conflict and re-establish harmony using superior position, which

may be more effective in rectifying derailed situations. Hence, rationality in decision making is

irrelevant because the final decision is made by the top hierarchy. This leads to the following

hypotheses:

Hypothesis 4b: Top hierarchy decision making will negatively (-) associate with the

degree of rationality.

Hypothesis 4c: Top hierarchy decision making will positively (+) associate with political

behavior.


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Hypothesis 4d: Top hierarchy decision making will negatively (-) associate with

participation.

6.2 The relationship between the SDM process and organizational performanceSpeed, shown to have an impact on organizational performance, is moderated by the businessenvironment. In a turbulent environment, Chinese cultural factors will mostly lead to faster decision

speed because of the decision style, and the attention received by the boss or the chief executive.

Although locus of control and group orientation will lengthen the process duration, the recognition-

based/intuition decision mode may take precedence in the SDM process over the analytic mode.

Furthermore, if the chief executive intervenes, steps in, or his/her intention is made known in the SDM

process, it will significantly reduce the time required to reach consensus. Therefore, the following

hypothesis is expected:

Hypothesis 5: The speed of the SDM process will associate positively (+) with higher

organizational performance in a turbulent business environment.

Comprehensiveness will have a different impact on organizational performance, depending on the

external business environment, as well as on the organizational information environment (Goll and

Rasheed, 1997; Atuahene-Gima and Li, 2004; Hough and White, 2003). A longer planning period

corresponding to the extensiveness of the SDM process (hypothesis 2b) improves firm performance in

turbulent business environments. Additionally the use of intuition has a positive effect on

organizational performance in turbulent business environments (Sadler-Smith and Shefy, 2004; Klein,

2004). Therefore, when moderated by the business environment, the reduction in the degree of

rationality should lead to improved organizational performance in a turbulent business environment;

this is a characteristic of emerging markets.

Hypothesis 6: The degree of rationality of the SDM process will associate negatively (-)with organizational performance in a turbulent business environment.

Political behavior is influenced by group orientation and hierarchy; both have a negative impact on the

degree of political behavior and conflict. Most of the literature points out that political activity is

harmful to organizational performance (Eisenhardt and Bourgeois III, 1988). Although it has been

suggested that some level of politics is necessary in certain activities, it needs to be managed carefully.

Chinese cultural factors while decreasing political behavior and conflict also attends to the latter case

by focusing on maintaining harmony within a group, and establishing stability through a hierarchical

structure. Taking these into account, the following hypothesis is expected:

Hypothesis 7: The political behavior of the SDM process will associate positively (+)with organizational performance.

Hierarchy limits the participation of middle and lower level managers thereby reducing the effect of

upward influence where these managers may attempt to progress options that may favor themselves

(Schilit and Paint, 1987). Since participation/involvement is found to have a positive relationship with

organizational performance, it is expected that:

Hypothesis 8: The participation/involvement of the SDM process will associate

negatively (-) with organizational performance.

Figure 1 summarizes the hypotheses within the conceptual framework of this study. A (+) sign

indicates a positive influence and a (-) sign indicates a negative relationship between the two variables.


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The business environment has a moderating effect on the speed of decision making and the degree of

rationality affecting organizational performance.

7. Research design

7.1 Sampling and data collectionCross-cultural management research on the value similarities and differences of various Chinese

societies such as China, Hong Kong, Taiwan, and Singapore provide evidence that economic

development leads to a convergence of value orientation among these societies (Inglehart and Baker,

2001; Ralston et al., 2006). Although only Hong Kong Chinese managers are sampled in this study,

they are considered as representative of the Overseas Chinese in strategic decision making behaviour.

Hong Kong has a resistance to questionnaire surveys, and is known to have a low survey response rate

(Harzing, 2000). It is not uncommon to have a response rate of less than 10%, thus invalidatingmeaningful analysis (Westwood and Lok, 2003). To address this problem, this study followed

previous established studies based on convenience sampling method (Siu, Lu, and Cooper 1999) and

selected the Lions club to represent the Chinese businesses in the city. The Lions Club company

register has a well balanced representation from various industries with different sizes ranging from

small family owned, SMEs to MNCs. Also, the club encouraged members participation in this study.

In total, 1200 participants (firms) were randomly selected from the Clubs total 2401 firms.

A structured questionnaire was mailed with a self-addressed return envelope, and a covering letter

stating the purpose; confidentiality was ensured via the anonymously returned questionnaire. A second

round of the survey was sent out again to the total sample four weeks after the initial one as a reminder

to the non-returns. 204 valid questionnaires were returned (i.e. 17% response rate) for this study.


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7.2 Instrument designA five point Likert scale ranging from strongly agree (5) to strongly disagree (1) was used in all

questions. The questionnaire was administrated in Chinese since it was the native language of

Overseas Chinese managers. Items were translated into Chinese using the standard backward

approach. All items in this questionnaire were reviewed by 8 owners/managers to establish clarity with

the questions. No modification was required after their feedback.

The scales used to measure the four Chinese cultural factors of SDM were obtained from previous

cultural surveys. Items for locus of control were derived from Lau and Woodman (1995); for

primary control Spector et al., (2004), and Tsang (2004) for secondary control. Items for decision

style were obtained from Schneider (1989) and Nisbett et al., (2001). Items for decision mode were

obtained from(Yates and Lee (1996), Klein (1999), Chen and Chen (2004). Items for hierarchy

behavior were obtained from Xu and Wang (1991), Hofstede ( 2001) and Wang et al., (2005).

In the SDM process, items for speed were obtained from Miller et al., (1998) and Frishammer

(2003). Items for rationality were obtained from Eisenhardt and Zbaracki, (1992) and Said, (2006).

Items for political behavior were derived from Eisenhardt and Bourgeois III, (1988) and Amason,

(1998). Items for participation were obtained from Pettigrew, (1973), and Eisenhardt and Bourgeois

III, (1988).

Since most participants were associated with privately owned SMEs, extracting exact financial figures

such as, sales growth, profit figures, and return on investment that are commonly used and available in

measuring the organizational performance of listed public companies is problematic. In this case

organizational performance data has previously been measured using perceptual scales, proposed by

scholars, and used in various studies when objective data are not available in research (Dess, 1987;

Powell, 1992; Delaney and Huselid, 1996; Goll and Rasheed, 1997; Papadakis, 1998). In this study,

organizational performance was assessed based on the balanced scorecard principle (Kaplan and

Norton 2008). Items were derived from Marr and Schiuma, (2003) and Kaplan and Norton (2008) and

data obtained were perceptual responses from all four factors (financial, customers, processes and

learning/innovation) of the balanced scorecard. A final aggregated index was used as the

outcome/dependent variable for organizational performance.

7.3 Data analysisThis study focuses on the establishment of an Overseas Chinese SDM process model derived through

testing of the causal relationships hypothesized in the research framework (Figure 1) of multiple

independent and intervening variables. To achieve this, a structural equation modeling (SEM)

technique was used to analyze the data collected from the survey. The data analysis was conducted

using SPSS 15 and AMOS (Analysis of Moment Structure) 7.0 software package. A recommended

two step model-building approach was adopted (Anderson and Gerbing, 1988). The SEM model was

separated into a measurement model, and a structural model. The measurement model consisted of

relationships between the latent variables and their indicators, while the structural model showed the

causal relationships among the latent variables (Williams et al., 2003).

8. Results

8.1 Descriptive statisticsA total of 204 valid returned questionnaires were used. This was equal to a response rate of 17%,

based on a total of 1200 questionnaires. The response rate was better than the average of around 12%

of surveys in Hong Kong, as reported by various researchers (Harzing, 1997; Entrekin and Pearson,

1999; Isobe et al. 2000). This rate was comparable to other similar survey studies on Chinese subjects

using structural equation modeling as the analysis tool. Consequently the survey response in this study

should be seen as acceptable.

The results of the study provided empirical support to some of the Chinese SDM characteristicsproposed in the literature. First, nearly 20% of the strategic decision processes were completed within


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20 days and another 28% completed within 30 days. 80% of the SDM processes were completed

within 120 days; this is significantly shorter than the mean duration of 12.4 months in Hicksons study

(Hickson et al., 1986). This finding supports the description in the literature relating to quick, action

driven decision making as a characteristic of the SDM process in Chinese businesses (Redding, 1990;

Haley and Tan 1996, Haley and Haley 2004). Second, the returned data showed that 41% (n=82) of

the returned survey were small family owned businesses; with the owner as the chief executive officer.

22% (n=45) were controlled by a professional CEO (with a small management team owner presence

is not known). 37% (n = 77) of the remaining returns were from medium to large enterprises with a

larger top management team. As a whole, over 60% of the decisions were made with a team size of

three or fewer people. This finding supports other Chinese SDM characteristics, namely that the

owner, or a few trusted top managements or advisors, are involved in making strategic decisions

(Haley and Tan 1996, Haley and Haley 2004).

The combination of this empirical evidence provides an elucidate description that small Chinese

companies can make quick decisions with a small decision making team or just by the owner. The

content of the SDM process largely involved considerations of new product and services, and new

plant and process re-engineering (about 70%). This confirmed that most Chinese companies were

engaged in niche markets. This position enabled the decision makers to accumulate the rich domain

knowledge that supported their decision characteristics.

8.2 Analysis of measurement modelThis part of the analysis examines the uni-dimensionality and reliability of the measurement scales.

Principal factor analysis was applied to establish the right construct that could reflect the true meaning

of the variables used in the study. Items with low loading were discarded. After satisfying the

prerequisite of uni-dimensionality, these selected indicators were then subjected to reliability analysis.

The Cronbachs Alpha values for different constructs are shown in Table 2.

Table 2. Composite reliability analysis using Cornbachs Alpha

Latent variable Cornbachs Alpha Discarded

Business environment 0.522 *

Organizational performance 0.909

Speed 0.713

Degree of rationality 0.653

Political behavior 0.774

Participation/Involvement 0.762

Locus of control 0.671

Decision style and mode 0.628

Group orientation 0.717

Hierarchy 0.616 *

A popular rule of thumb is that 0.70 is an acceptable threshold for composite reliability (Fornell and

Larcker, 1981). Therefore, the indicators for the business environment were considered not reliable

and were discarded in subsequent analysis. Because of this, the structural analysis could not be used to

test the moderating effect of the business environment.

Confirmatory factor analysis was used to determine a plausible representation of the causal structure

of the variables. The hypothesized model was first tested with goodness of fit statistics. If the model

was a poor fit, the analysis then proceeded in an exploratory fashion to determine which parameters in

the model were mis-specified. The results of this analysis supported the discarding of the locus of

control and hierarchy variables; this resulted in a model with Chi-square = 198.27, p = 0.055. The


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goodness of fit measures (RMSEA = 0.042, CFI = 0.958, TLI = 0.705 and CMIN/DF = 1.180)

suggested that it could be considered as a good fit model.

8.3 Analysis of structural modelThe resulting measurement model was then used to construct the structural model tested using

maximum likelihood estimation and Bayesian analysis. The testing of the structural model employed amodel development methodology that combined the confirmatory and exploratory approach.

The initial model has Chi-Square = 189.928, degree of freedom = 158 and p = 0.064. The goodness of

fit measures (RMSEA = 0.041, CFI = 0.958, TLI = 0.945 and CMIN/DF = 1.177) suggest that the

model is a good fit. However, the results reveal only three significant relations among the seven

constructs. Since the analysis purpose is to arrive at a model of specified relationships, eliminating

insignificant relationships is carried out to improve the model (Bollen, 1989; Ulf et al. 2002).

Following this approach, five hypotheses were found to be significant in the final good fit structural

model (RMSEA = 0.036, CFI = 0.977, TLI = 0.969 and CMIN/DF = 1.130) consisting of: decision

style and mode to duration/speed (Beta = 0.49); group orientation to political behavior (Beta = 0.26);

speed to organizational performance (Beta = 0.22); political behavior to organizational performance

(Beta = 0.20) and political behavior to degree of rationality (Beta = -0.25). However, the degree ofrationality had no significant influence on organizational performance; the political behavior to degree

of rationality path was not included in the final structural model that is shown in Figure 2.

*the term duration and speed is interchangeable in Fig.2

The research framework has a total of 8 hypotheses representing the causal relationships among the 4

independent variables, the intervening variable, and the 4 dependent variables. Since data for the

business environment construct were not used in the subsequent structural analysis stage for reliability

reasons, the moderating effect of the business environment could not be included. Hypothesis 4 (a to

d) that links hierarchy to the process characteristics cannot be tested because indicators of

hierarchy were rejected due to low reliability. For the remaining hypotheses, five were supported

with statistical significance based on the structural equation modeling analysis results. A summary of

the result of testing of hypotheses is shown in Table 3.


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Table 3 Summary of paths and hypotheses in the analysis

Path Hypothesis Result

Locus of control Speed 1a Not supported

Decision style/modespeed 2a Supported

Group orientation speed 3aNot supported

Hierarchy speed 4a Not tested

Locus of control Degree of rationality 1bNot supported

Decision style/mode Degree of rationality 2b Supported

Group orientation Degree of rationality 3bNot supported

Hierarchy Degree of rationality 4b Not tested

Locus of control Political behavior * Not tested

Decision style/mode

Political behavior * Not tested

Group orientation Political behavior 3c Supported

Hierarchy Political behavior 4c Not tested

Locus of control Participation/involvement * Not tested

Decision style/mode Participation/involvement *Not tested

Group orientation Participation/involvement 3d Not supported

Hierarchy Participation/involvement 4d Not tested

Speed OP 5 Supported

Degree of rationality OP 6 Not supported

Political behavior OP 7 Supported

Participation/involvement OP 8 Not supported

indicate that these paths are not included in the hypotheses

9. Discussion

9.1 The Chinese SDM process modelThe development of an integrative Chinese SDM process model incorporates the results of the surveydata and reveals several important findings. First, uncertainty avoidance and the use of social-

instrumental control had a weak link with reducing the speed of strategic decision making, with a

regression weight of 0.45. Hence, Hypothesis 1a was rejected. With hypothesis 1b, relying upon

social norms to avoid uncertainty did not show significant impact on the degree of rationality in

strategic decision making, with a regression weight of 0.39. Hence, hypothesis 1b was rejected. Thus,

the result from this study showed that locus of control did not have any significant influence on

strategic decision making.

Second, the decision style and mode has a strong positive influence on speed with a regression

weight of 0.49 that corresponds to the hypothesis 2a. The hypothesis that speed had a positive

relationship to organizational performance was also supported. When these two findings are

combined, it suggests that the Chinese style and mode of decision making will shorten the duration ofthe process, resulting in improved organizational performance. This finding is compatible with Weber

et als. (2004) proposition that recognition-based decision making, or intuition, may improve the speed


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and effectiveness of decision making. This is the first path identified in the structural model described

as decision style and mode -> speed -> organizational performance link and is labeled as the

cognitive-speed path.

Third, group orientation has a positive influence on political behavior with a regression weight of

0.26 that corresponds to hypothesis 3c. Political behavior has a positive influence on organization

performance and supports hypothesis 7. The group orientation will lead to better organizationalperformance through the mediation of political behavior. The latter finding seems to be contradictory

to the view that political behavior will lead to deteriorating performance; however, a careful

examination of the respondents answers reveals that group orientation can contribute to the

improvement of the management of politics in the political model, even if the number of managers

forming a coalition or lobbying during the process increases. This finding is supported by the notion of

guanxi, that is, a business network, the trusted group circle and partner relationships (Park and Luo,

2001, Haley and Haley, 2006), and harmony and respect of face (Chen and Chen, 2004) are some of

the forms of political behavior that exert a positive effect on organizational performance.

Therefore, the positive relationship between group orientation and political behavior does not focus

on more politicizing but on the effort to reduce the dysfunctional effects through the focus on common

goals and the presence of a fair process. Combining these two support hypothesis leads to anotherpath: Group orientation -> political behavior -> organizational performance link and is labeled as

the social-political path.

Organizational performance, speed, and political behavior are shown to be affected by many other

external factors in the study of SDM (Rajagopalan et al., 1993). An examination of the structural

equation model shows that the cultural factors explain 22% of the variance of speed and 13% of the

variance of political behavior. The combination of the two paths explains more than 9% of the

variance of organizational performance. Comparing this with other similar studies on strategy process

and organizational performance (Priem et al. 1995), the effect of cultural factors is considered to be

significant in studying the SDM process. A summary of the different paths in the Chinese SDM

process model is provided in Figure 3.

9.1.1 The cognitive-speed pathThis research provides some evidence that in the SDM process, the Overseas Chinese manager tends

to focus on the big picture and adopt a holistic view using previous experience in drawing analogies to

make decisions. This finding is compatible with Yates and Lees (1996) proposition that the Chinese

tend to consider problem situations holistically. By looking at the big picture, bits and pieces of

qualitative and personal information can be combined to solve the business puzzle. The structural

equation model appears to substantiate that this Chinese decision style and mode will shorten the

duration of the SDM process and consequently lead to improved organizational performance. To focus


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on the big picture can be described as an approach to examine issues in an integrative way instead of

studying factors in a discrete, independent fashion which ignores the interactions of the factors.

Scholars have emphasized the importance of this approach in order to derive comprehensive models

for business strategy for performance (Stimpert and Duhaime, 1997), or in studying multidimensional

constructs (White, 2002).

While focusing on the big picture, holistic style may have an advantage in assessing complicatedsituations that reduce problems, such as sub-optimization, for local solutions; a potential tradeoff

might be the overlooking of details which could be important to the making of effective decisions

(Haley et al., 2004). Experience can be considered as a type of information to address this deficiency.

The tacit knowledge, and rules synthesized from experience, might be utilized to fill the voids in this

process. The recognizing of non obvious patterns might reduce the danger of overlooking some trivial

but important hints or traits that are difficult to spot even with sophisticated analysis tools.

These two features lead to fast decision making that allows Chinese managers to seize opportunities as

they arise. Most of the literature in SDM contended that speed of decision making leads to higher

organizational performance in turbulent business environments. The common explanation for this is

that as business environments or dynamics change rapidly, companies need to change at a faster speed

to match with the environment to maintain their competitive advantage. However, there is little in-depth investigation as to why speed can improve business performance.

9.1.2 The social-political pathWhile research has shown that political behavior is influenced by decision specific and

organizational characteristics (Papadakis et al., 1998), most studies in politics or political behavior are

essentially based on a Western perspective of the notion of power, hierarchy, and group dynamics.

This empirical research has provided support for the notion that the Chinese tend to put the interest of

the organization (collective interest) in front of self-interest in the decision process. They also

emphasize good relationships by maintaining harmony, face, and avoiding conflict during the process.

The focus on the collective effort and the organizations interest in a Chinese company tends to align

decision team members towards a common goal that reduces dysfunctional political behavior. Grouporientation is underpinned by values such as putting the groups interest before individuals and

maintaining good guanxi among members. This is different from the Western value system (such as

the United States) that focuses on individualism where the relationship between employers and

employees is mostly contractual (Hofstede, 1994). The results from this empirical study confirmed

that collective behavior, the inner social network, and this network of relationships are significant

social political forces among Chinese managers seeking higher organizational performance.

To foster a working environment that focuses on maintaining harmony, care must be taken to maintain

and protect face; the handling of conflict in a collaborating style is necessary to achieve an effective

decision process. These two measures will reduce dysfunctional politicizing activities while

reinforcing good practice in the management of politics. These two approaches of adopting Chinese

culture to improve the constructive management of political behavior are the major contributions toorganizational performance from the social-political path.

Therefore, the issues that make politics dysfunctional may be different and some of the Western

shortcomings may rarely occur under the Chinese SDM context. For example, in a Chinese company,

concern for a relationship or guanxi, interpersonal norms and collective interests will influence the

handling of conflict using an avoidance and collaboration style (Yan and Sorenson, 2004). In Chinese

companies, these may not be viewed as shortcomings that cause ineffectiveness to the SDM process;

instead, they are viewed as necessary behaviors of the members of the SDM team to make the process

work effectively. The cognitive speed path and the social-political path may seem nonconventional to

Western practices. However, a recent study (McKenzie, J. et al. 2009) have shown that

nonconventional thinking capabilities may be adopted by strategic decision makers in conditions of

uncertainty, ambiguity and contradiction.


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In summary, there are two significant and related contributions from this empirical study: that for

Chinese managers, improvements in the speed of strategic decision making, combined with a guanxi

network has a positive relationship with organizational performance.

9.1.3 Management implicationsThe Overseas Chinese SDM process model leads to the generation of several important implicationsfor practitioners in strategic management. These consist of quick decision making by the owner or

leader of the firm; positive political behavior, such as maintaining harmony and collaboration; this

could result in higher organizational performance. While Western companies may find it difficult to

directly replicate or adopt all elements of the model (Elbanna and Child 2007), they are likely to

benefit from understanding the Overseas Chinese SDM process model.

The strength of the Chinese SDM process comes from invisible root- Chinese values. First, the

cognitive-speed path provides support for the focus on the big picture, and the use of experience can

speed up decision making. These two are important characteristics of Chinese decision makers. This

decision style and mode works well in certain situations such as: where little data is available; there is

no time to collect data; the decision involves poorly structured problems; the top of the hierarchy (e.g.

the owner) makes the decisions; and the decision context is complicated (Sterman, 2000). It is mostsuitable for managing uncertainty and complexity. Second, the group orientation aspect lets the

decision focus on collective interests and concern for the relationships of group members. This is

supported by Martinsons and Davidson (2007). This effectively minimizes the conflicts between group

members and focuses on a common goal. However, the limitation of this resides in the strength of the

model. First, relying on experience and intuitive styles requires time to accumulate and synthesis, and

this is likely to be environmentally bounded. It works effectively only if it is in a fast changing

environment. Secondly, group consensus may restrict the emergence of new ideas or alternatives that

might be better than the one favored or put forward by the top decision makers.

9.1.4 Limitation of the study and future researchThe contributions and implications of this study are subject to several limitations. The sample size

makes it impractical to carry out further inter group analysis and model building using the same

technique among different respondent categories, for example, age, education level or industry type.

Bigger sample sizes in future studies could make it possible to perform the above analysis.

This research uses cross sectional data; future studies could use a longitudinal design to study the

dynamics of Chinese SDM as it unfold over time (Van de Ven, 1992; Said, 2006). This could also

produce a better understanding of the detailed interaction of the high performance factors identified in

the research. For example, to what extent do team members put an organizations interest in front of

their own interest when conflict arises?

This study did not analyze the strategic decision making process from the various groups perspective

(i.e. owner, small top management team, large management team) to determine how top hierarchy

decisions could have influenced the firms performance. A comparative study could be included infuture studies.

This research focuses on Overseas Chinese managers strategic decision styles. Due to the

convergence of managerial and best practices globally, and the traditional value system among

Chinese, there could be strong links between Mainland Chinese and Overseas Chinese in their

strategic decision making style. However, this association needs empirical testing to conclude its

relationships. Furthermore, differences between Westerns and Chinese in strategic making styles could

be investigated. Finally, the link between Overseas Chinese strategic decision making style and

investment decisions in China could be further investigated.


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Conclusions

A key contribution of this study has been to show the relative influence of Chinese cultural factors,

and strategic decision making characteristics, which are the two basic variables that influence SDM

process, and the outcomes of the SDM model. The findings from this study showed that cultural

factors, such as decision style and mode, of Chinese managers (mainly due to intuition, experience,

guanxi) could significantly affect the processes of strategic decision making. That is, a shorter

duration in strategic decision making and the association with hierarchy authority and control.

Finally, the analysis of the findings also suggested that the cognitive-speed and social -

political paths in strategic making among Overseas Chinese could have a significant impact

on higher organizational performance. However, the results are specifically related to

Overseas Chinese managers and further comparative studies are necessary to examine the

relationships between Overseas Chinese, Mainland Chinese and Westerners.

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A Framework for Strategic Decison-making and Performance Among Chinese Managers

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