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MULTINATIONAL ENTERPRISES WITHIN CULTURAL SPACE AND PLACE: INTEGRATING CULTURAL DISTANCE AND CULTURAL TIGHTNESS-LOOSENESS
MULTINATIONAL ENTERPRISES WITHIN CULTURAL SPACE AND PLACE: INTEGRATING CULTURAL DISTANCE AND CULTURAL TIGHTNESS-LOOSENESS
Duck-jung ShinPrior research into the effects of cultural differences between MNE home and host countries on expatriate staffing decisions in foreign subsidiaries has produced a large number of conflicting findings. We address some of these conflicting findings and aim to advance theory in two ways. First, we draw on transaction cost economics to explain why and how the effects of cultural distance on the proportion of expatriate parent-country nationals form a curvilinear instead of a linear relationship, as commonly proposed. Second, we integrate the values-based cultural distance concept with the norms-based tightness–looseness concept. This allows us to simultaneously account for cultural differences between countries and location-bound normative cultural effects within countries, which cannot be overcome solely through expatriate learning and adaptation. Using a large global dataset of Japanese MNEs, we find support for a convex relationship between cultural distance and the proportion of expatriate parent-country nationals. We also find a moderating (steepening) effect of tightness– looseness on this relationship. The results reconcile some of the tensions between the subjectivists' values-based approach, which positions culture in the shared cognitions realm, and the structuralists' approach, which places culture in a normative situational environment.
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Cultural Distance and Firm Internationalization: A Meta-Analytical Review and Theoretical ImplicationsThis 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 ...
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2004 •
Abstract The concept of 'distance'has been of pivotal interest to international business scholars aiming to explain variations in international business strategies and operations across foreign countries. The further a certain host country is away from the origins of a multinational enterprise (MNE), the more it has to manage cultural, regulatory and cognitive differences, and to develop appropriate entry strategies, organizational forms, and internal procedures to accommodate these differences.
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