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How German, Japanese, and U.S. Executives View Markets and Planning as Alternative Coordinating Mechanisms

Author

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  • William G. Egelhoff

    (Fordham University)

  • Erich Frese

    (University of Cologne)

Abstract

Markets and central planning are alternative mechanisms for coordinating economic activity within economies and firms. A multi-level economics literature describes and contrasts the coordinating characteristics of markets and planning. While it assumes these characteristics reflect the perceptions and decisions of economic actors, this behavioural assumption has not been tested. Based on the literature, the study develops hypotheses specifying how executives will perceive the coordinating characteristics of markets and planning. Using existing theory about individualism-collectivism, the study further hypotheses how the perceptions are likely to vary between individualistic and collectivistic cultures. When tested with a sample of top German, Japanese, and U.S. executives, the results, with two exceptions, support the hypotheses. Going beyond the hypotheses, the study explores the preferences and underlying logic of executives across nationalities. German and U.S. executives share a similar cognitive structure. Japanese executives exhibit a different cognitive structure which reflects a more collectivistic culture. The study emphasizes the importance of testing the basic behavioural assumptions of economics and the need to consider culture a potential moderator of such assumptions.

Suggested Citation

  • William G. Egelhoff & Erich Frese, 2011. "How German, Japanese, and U.S. Executives View Markets and Planning as Alternative Coordinating Mechanisms," Management International Review, Springer, vol. 51(4), pages 511-532, August.
    • Handle: RePEc:spr:manint:v:51:y:2011:i:4:d:10.1007_s11575-011-0084-1
    DOI: 10.1007/s11575-011-0084-1
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    References listed on IDEAS

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