Impact of Culture on Incentive Systems : Findings from Swedish Organizations Operating in Japan and Korea

Abstract: Many organizations use global incentive systems without recognizing the suitability to foreign subsidiaries' local cultures. Applying incentives to employees in foreign subsidiaries without considering culture's impact on incentive system effectiveness may dilute the incentives' effectiveness. The majority of the incentive system literature is based on Anglo-Saxon notions of incentive system effectiveness and employee motivation. And assuming that culture impacts incentive system effectiveness, the Anglo-Saxon notions may be inapplicable in a non-Anglo-Saxon context. This study uses a sequential exploratory mixed method to explore culture's impact on incentive systems, and to analyze the applicability of Anglo-Saxon incentive system literature to non-Anglo-Saxon cultures. The study develops a five-dimensional incentive system framework that, together with a literature review of Swedish, Japanese, and South Korean culture, interprets empirical findings. Empirical findings from Swedish organizations operating in Japan and South Korea are used to form hypotheses and a basis for qualitative interviews with representatives from the Japanese and South Korean subsidiaries. Sweden, Japan, and South Korea are strongly represented on the global market with multinational organizations covering a wide range of industries. Together they constitute a large portion of global business, and are good representatives for business in Europe and Asia. The study's results establish that culture should be considered an important determinant of incentive system effectiveness, and that the Anglo-Saxon literature may be too insular to be applied outside Anglo-Saxon countries.