Cultural Distance and Firm Internationalization

Sjoerd Beugelsdijk (), Tatiana Kostova, Vincent E. Kunst, Ettore Spadafora and Marc van Essen
Additional contact information
Tatiana Kostova: University of South Carolina [Columbia]
Vincent E. Kunst: University of Groningen [Groningen]
Ettore Spadafora: RIT - Rochester Institute of Technology
Marc van Essen: University of South Carolina [Columbia], EM - EMLyon Business School

Post-Print from HAL

Abstract: 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.

Keywords: cultural distance; multinational companies; firm internationalization; meta-analysis; location choice; FDI; entry mode; establishment mode; transfer of practices; firm performance; subsidiary performance (search for similar items in EconPapers)
Date: 2018-01-01
Note: View the original document on HAL open archive server: https://hal.science/hal-02312065
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (73)

Published in Journal of Management, 2018, 44 (1), 89-130 p. ⟨10.1177/0149206317729027⟩

Downloads: (external link)
https://hal.science/hal-02312065/document (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02312065

DOI: 10.1177/0149206317729027

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().