Risk Averse Trade Cultures

Uncertainty Avoidance Countries Value Strict Rules to Reduce Risk

© Daniel Workman

Jan 25, 2008

Different cultures have distinct risk attitudes, (14543)

Guatemala, Greece, Portugal, Uruguay & Japan rank as the highest uncertainty avoidance nations while Singapore, Jamaica, Denmark & Sweden tolerate new ideas more easily.

Based on detailed analyses of international employee values that IBM collected from 1967 to 1973 and subsequent validation studies, Professor Geert Hofstede® has engineered a model with five dimensions that differentiate cultural values and behaviors.

These cultural dimensions are key to understanding how to more effectively negotiate international trade deals with people in other countries. Even large multinationals like Starbucks and Wal-Mart make billion dollar trade bloopers when they assume that people in foreign lands will share the same cultural negotiating and decision-making behaviors as in their home country America.

Uncertainty Avoidance Defined

One of Hofstede’s cultural dimensions is called uncertainty avoidance. This dimension measures the extent to which a society feels uncomfortable with the ambiguity that typically arise from the unknown or surprises.

Cultures with high uncertainty avoidance try to minimize uncertainty through strict laws and rules as well as safety and security measures. People in these societies tend to be more emotional, and are motivated by inner nervous energy.

In general, societies with lower uncertainty avoidance are more tolerant of new and different opinions. The cultures prefer as few rules as possible. Typically, people in these cultures don’t easily express their emotions.

Based on Hofstede’s statistics, the world average uncertainty avoidance score is 64 points per country.

High Uncertainty Avoidance Countries

Countries with high uncertainty avoidance scores typically have managers who take less risks, have more written rules and experience lower labour turnover. Below is a list of countries with the highest uncertainty avoidance scores.

Low Uncertainty Avoidance Countries

Cultures with low uncertainty avoidance scores favour managers who take more risks, have fewer written rules, offer less-structured activities and experience higher labour turnover. The following shows the countries with the lowest uncertainty avoidance scores from Hofstede’s study.

*Ethiopia, Kenya, Tanzania, Zambia

Other Country Uncertainty Avoidance Scores

Shown below are the uncertainty avoidance scores for other countries in Professor Hofstede’s study.

*Egypt, Iraq, Kuwait, Lebanon, Libya, Saudi Arabia, United Arab Emirates

**Ghana, Nigeria, Sierra Leone

References

This article presents independent calculations and insights based on geert-hofstede.com and research from International Management, Culture, Strategy and Behavior (6th edition, Hodgetts-Luthans-DOH).


The copyright of the article Risk Averse Trade Cultures in International Trade is owned by Daniel Workman. Permission to republish Risk Averse Trade Cultures must be granted by the author in writing.


Different cultures have distinct risk attitudes, (14543)
        


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