Do you perceive any constraints on the use of different forms of compensation, such as bonuses or incentive compensation schemes? What would these constraints be and why? As multinational firms open more and more operations in more and more countries, they must make basic decisions about what structure they want for their compensation system in each country. Trying to use a centralized system everywhere can cause prob¬ lems in countries that may utilize different compensation systems. And, yet, trying to localize the compensation system may also run up against cultural assumptions about what might or might not work, as the following example shows.

At the end of 1995, Canon ranked forty-third in market value on the Tokyo stock exchange. By the end of 2001 it had shot up to eighth. Canon's performance is driven by a competitive company culture that sets it apart in Japan. Canon has long based compensation on performance instead of seniority, creating significant wage differen¬ tials, greater than at other Japanese companies. For example, in March 2002, 21 of its best assembly workers were each awarded a bonus and the title "Meister." This clearly goes against the traditional Japanese culture of group performance and recog¬ nition and seniority-based pay.

Canon's R&D also runs on competitive principles. Cash-flow management reduces development time and cost. Unprofitable products are cut mercilessly. Patents protect newly developed technology. Researchers can receive unlimited rewards for big patents, and such incentives have spurred epoch-making products like the laser beam printer and bubble jet printer.