The impact of home-host cultural distance on foreign affiliate sales: The moderating role of cultural variation within host countries

Sjoerd Beugelsdijk*, Arjen Slangen, Robbert Maseland, Marjolijn Onrust

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

39 Citations (Scopus)

Abstract

Research on how multinational firms deal with home-host cultural differences argues that cultural differences are minimized and assumes that foreign cultures are homogenous. In this paper we relax the cultural homogeneity assumption. In the presence of cultural variation in host countries the minimization of cultural differences leads existing mean-based indices of cultural differences to overestimate the actual cultural differences these firms have to deal with. We test this argument in a 25-year panel analysis of total US multinationals' foreign sales in 54 host countries. At the sample average of cultural variation, the use of mean cultural difference indices yields a 74% overestimate of the actual cultural difference effect. This suggests that home-host cultural differences are a substantially smaller barrier to multinational sales than hitherto assumed. The assumption of cultural homogeneity leads to conclusions in which a too large role is attributed to cultural differences. (C) 2013 Elsevier Inc. All rights reserved.

Original languageEnglish
Pages (from-to)1638-1646
Number of pages9
JournalJournal of Business Research
Volume67
Issue number8
DOIs
Publication statusPublished - Aug-2014

Keywords

  • Cultural differences
  • Foreign affiliate sales
  • Cultural variation
  • Multinational firms
  • Segmentation
  • INTERNATIONAL MARKET-SEGMENTATION
  • DIRECT-INVESTMENT
  • MULTINATIONAL-ENTERPRISE
  • ETHNIC FRACTIONALIZATION
  • EMPIRICAL-ANALYSIS
  • NATIONAL CULTURE
  • ENTRY
  • VALUES
  • GLOBALIZATION
  • DETERMINANTS

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