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As demonstrated above, network closure with its low monitoring costs can serve as a facilitator for social exchange. Depending on the institutional environment compliance enforced through peer-pressure mechanisms can be a matter of survival for the group. The reliance on networks as institutions for social coordination requires clear definition of network boundaries and a group identity that clearly distinguishes in-group and out-group members. The stronger the necessity to form a group and to rely on in-group cooperation, the

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stronger the commitment towards the group and the subordination of individual preferences (Yamagishi, 2008).

These characteristics of in-group commitment and compliance are expressed by the cultural dimension of collectivism and vary vastly across cultures. The dimension of collectivism and individualism provides insight into culture specific self-identity and the relation of self versus group. In individualist societies the self is defined as autonomous and independent, having an identity irrespective of group membership. Collectivist societies in contrast, define the individual as interconnected and interdependent with other members of the in-group.

Individualist and collectivist societies differ according to their prioritisation of individual and collective needs. When both types of needs are in conflict individual needs have a higher priority in individualist societies whereas collective needs have the primacy in collectivist structures (Chen, 2000).

Hofstede (2001), whose model for the operationalisation of culture is the backbone of most studies dealing with intercultural issues, has developed the following definition for this cultural dimension:

Individualism describes societies, in which relations between individuals are loose and each individual is expected to care for itself. Its counterpart, collectivism, describes societies in which humans are, from birth on, integrated in strong and closed groups, which provide lifelong protection in exchange for unconditional loyalty. (Hofstede, 2001: 209)

Approaching this distinction from Granovetter's embeddedness theory, collectivism describes the degree to which an individual from a certain culture is embedded in the structures of

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certain collectives. In relation to individualists, collectivists in general show stronger group identification, are more embedded in groups and show a stronger compliance towards the group's norms.

A more differentiated perspective on the cultural dimension of collectivism treats it as a two- dimensional construct instead of a one-dimensional one, depending on the level of analysis. Although the one-dimensional view makes sense if the comparison of entire societies or countries is the focus of analysis, empirical research has shown that individuals can score high in both individualism and collectivism. Therefore, the data of models which quantify constructs like a national culture should be interpreted cautiously. Nevertheless, in this research the premise is accepted that in societies, in which collectivist values are predominant, individualistic values are less prevalent.

As briefly mentioned above, group compliance is stronger the more closed collectives are, since the loss of social status might result in the loss of cooperation partners which can pose a vital threat to potential defectors. The environment of sometimes even unconditional trust among group members within the collective is the correlate of distrust to outsiders. If cooperation is dominated by coordination mechanisms of networks, engaging in transactions with anonymous strangers is considered as too risky and therefore becomes unlikely (Cook et al., 2005).

The relatively strong moral obligation that collectivists feel towards their group limits the probability of opportunism within the group whereas the lack of embeddedness outside the group results in the absence of such a moral obligation and defection becomes an option. Empirical research has shown that individualistic societies have developed more universal norms to treat individuals, with low emphasis on group identity whereas different standards

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are applied for the treatment of insiders and outsiders. This double standard leads to a “greater zone of moral indifference to out-group members.” (Chen, 2002: 571).

Immoral behaviour against an out-group member is unlikely to be punished by the in-group; if that action benefits the collective; it might even be rewarded by the group. The interconnectedness with other group members perceived by collectivists leads to loyalty to the in-group in a conflict of interests between the in-group and out-group. In the event of a conflict of interests between the self and the in-group, individuals with an individualistic background are expected to show a higher degree of opportunism than a collectivist. Research on the perceived trust towards out-group members in collectivist societies showed negative expectations of cooperation partners who were not in-group members. The lack of embeddedness not only leads to higher opportunism of collectivists, it also leads to collectivists expecting opportunistic behaviour from outsiders. Although this argument contains a degree of tautology, since the environmental hostility is one factor leading to the creation of or reliance on groups and networks, it demonstrates the different approach towards the selection of cooperation-partners in individualistic and collectivistic societies (Chan and Cheng, 2002). This different perception of the trustworthiness of outsiders and different evaluation of risk of cooperation with outsiders, results in a preference of collectivists to deal with in-group members.

Referring again to the embeddedness concept, it can be summarised that behaviour of a collectivist within a group deviates more strongly from behaviour outside a group than is the case for an individualist. So embeddedness as a regulating factor has a more powerful impact on a collectivist, than on an individualist.

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This is consistent with findings from experiments, in which participants from collectivist societies showed different degrees of conformity depending on the mechanisms of group monitoring (Yamagishi, 2008). One of the premises for the success of group pressure as a monitoring instrument is, as briefly mentioned above, apart from closure, density and the lack of viable exit strategies, that for participants to whom the loss of face in the group is a severe punishment that, apart from material losses, is a sanction that matters. Sanctioning by groups is basically inefficient in an environment in which actors feel immune to the loss of reputation within the collective. A cultural milieu in which individuals care about the conceptions others hold about themselves is favourable for the enforcement of norms and informal institutions. The concept and fear of losing face within the group in many East-Asian cultures, particularly in Japan, Korea, and Chinese societies is a strong, culture-specific regulating force in social action (Chan and Cheng, 2002).

Looking at collectivist societies and normative pressure, again we see a strong in-group/out- group distinction in the preoccupation about the loss of social status. Since the in-group is the preferred sphere of social interaction for a collectivistic conditioned person due to the demonstrated mechanisms, the out-group and the perceived trustworthiness in the out-group matter relatively less than for an individualist. In a collectivist society, normative institutions through mechanisms of social pressure work more strongly within the group than outside. In what Yamagishi calls the “institutional view of culture” he distinguishes an intrinsic culturally determined behaviour from “culture-specific behaviour as strategies adapted to a set of collectively created social incentives.” (Yamagishi, 2008: 580). Analysing the behaviour of participants of collectivist and individualist societies, in this case Japan and the United States, in terms of conformity by an experiment, Yamagishi claims that conformity is not a general cultural trait of collectivists but rather a strategy of collectivists in a collectivist environment

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(Yamagishi, 2008). Given the choice to act according to perceived expectations of peers, collectivists showed conformity only in the scenario of group monitoring. In all other scenarios in which monitoring mechanisms were not in operation, no significant difference between the behaviour of collectivists and individualists could be observed.

Collectivism as a cultural dimension is not about general conformity and compliance, it is about the strength of group boundaries and the responsiveness of individuals towards social pressure from the in-group. Referring again to the embeddedness approach of Granovetter (1973), the distinction between behaviour in an embedded structure corresponding to the concept of “oversocialisation” and a situation of low embeddedness as “undersocialised”, seems to be greater in a collectivist environment. Embeddedness has a greater impact on the actions of collectivists than on individualists’ actions (Yamagishi, 2008).

Figure 3.5: Collectivist Cooperation Depending on Monitoring

Collectivists – no personal monitoring available:

• No in-group bias

• Low levels of cooperation

Collectivists – personal monitoring available:

• In-group bias

• High levels of cooperation

Individualists:

• Cooperation level does not vary depending on personal monitoring

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