Cultural Distance and Firm Internationalization: A Meta-Analytical Review and Theoretical Implications

This paper presents the most comprehensive review and meta-analysis of the literature on cultural distance and firm internationalization to date. We analyze the effects of cultural distance on key strategic decisions throughout the entire process of internationalization. For the preinvestment stage, we examine the decisions on where to invest (location choice), how much to invest (degree of ownership), and how to organize the foreign expansion (entry and establishment mode). For the postinvestment stage, we examine the decisions of how to integrate the foreign subsidiary into the organization (transfer of practices) as well as the performance effects of cultural distance at both the subsidiary and the firm level. We find that firms are less likely to expand to culturally distant locations but if they do, they prefer greenfield investments and integrate subsidiaries more through transfer of management practices. Cultural distance does not seem to affect how much capital firms invest and whether they enter through a joint venture or full ownership. Interestingly, cultural distance has a strong negative effect on subsidiary performance but no effect on the performance of the whole multinational company. In addition, we find that the effects of cultural distance are not sensitive to time, but they are sensitive to the cultural framework used (e.g., Hofstede vs. Global Leadership and Organizational Behavior Effectiveness) and the home country of the company (developed vs. emerging market). Based on our study, we feel confident to offer some theoretical insights, recommendations for improving the validity and reliability of cultural-distance research, and ideas for future research.

Reference:

Sjoerd Beugelsdijk, Tatiana Kostova, Vincent E. Kunst, Ettore Spadafora, Marc van Essen. 2017. Cultural Distance and Firm Internationalization: A Meta-Analytical Review and Theoretical Implications, Journal of Management, 44(1): 89-130: http://journals.sagepub.com/doi/abs/10.1177/0149206317729027

2018-03-06T13:36:35+00:00 By |

About the Author:

Marc van Essen
Marc van Essen (PhD Erasmus University) is an Associate Professor of International Business at the Moore School of Business, University of South Carolina and permanent visiting professor at emlyon business school, France. His research interests include comparative corporate governance, international business, family business, and meta-analytic research methods. His works applying meta-analysis have been published or are forthcoming in the following journals: Academy of Management Journal, Journal of Banking and Finance, Journal of International Business Studies, Journal of Management, Journal of Management Studies, and Organization Science, and other outlets.

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