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Performance effects of “added cultural distance” in the path of international expansion: the case of German multinational enterprises

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  • Thomas Hutzschenreuter

    (WHU Otto Beisheim School of Management, Vallendar, Germany)

  • Johannes C Voll

    (WHU Otto Beisheim School of Management, Vallendar, Germany)

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    Abstract

    This paper contributes to the debate on the performance impact of “added cultural distance” in the multinational enterprise's (MNE's) expansion path. Our research focuses on the ability of MNEs to handle complexity associated with added cultural distance in international expansion, and on the effect this may have on profitability. We hypothesise that firms that make expansion moves involving a high level of added cultural distance per unit of time, and those that expand in culturally distant countries in an irregular fashion, that is, with a higher variability, will be less profitable. We test these hypothesised relationships using detailed data on 2404 expansion moves undertaken by our panel of 91 German MNEs, whose expansion paths we tracked during periods ranging between 5 and 20 years. Journal of International Business Studies (2008) 39, 53–70. doi:10.1057/palgrave.jibs.8400312

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    Bibliographic Info

    Article provided by Palgrave Macmillan in its journal Journal of International Business Studies.

    Volume (Year): 39 (2008)
    Issue (Month): 1 (January)
    Pages: 53-70

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    Handle: RePEc:pal:jintbs:v:39:y:2008:i:1:p:53-70

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    Web page: http://www.palgrave-journals.com/

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    Postal: Palgrave Macmillan Journals, Subscription Department, Houndmills, Basingstoke, Hampshire RG21 6XS, UK
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    Cited by:
    1. Chen, Chiung-Jung & Yu, Chwo-Ming Joseph, 2012. "Managerial ownership, diversification, and firm performance: Evidence from an emerging market," International Business Review, Elsevier, vol. 21(3), pages 518-534.
    2. Hutzschenreuter, Thomas & Kleindienst, Ingo & Lange, Sandra, 2014. "Added Psychic Distance Stimuli and MNE Performance," Journal of International Management, Elsevier, vol. 20(1), pages 38-54.
    3. Malhotra, Shavin & Sivakumar, K. & Zhu, PengCheng, 2011. "Curvilinear relationship between cultural distance and equity participation: An empirical analysis of cross-border acquisitions," Journal of International Management, Elsevier, vol. 17(4), pages 316-332.
    4. Aggarwal, Raj & Goodell, John W., 2013. "Political-economy of pension plans: Impact of institutions, gender, and culture," Journal of Banking & Finance, Elsevier, vol. 37(6), pages 1860-1879.
    5. Li, Ji & Chu, Chris W.L. & Wang, Xinran & Zhu, Hong & Tang, Guiyao & Chen, Yuanyi, 2012. "Symbiotic ownership, cultural alignment, and firm performance: A test among international strategic alliances," International Business Review, Elsevier, vol. 21(6), pages 987-997.
    6. Casillas, José C. & Moreno, Ana M. & Acedo, Francisco J., 2012. "Path dependence view of export behaviour: A relationship between static patterns and dynamic configurations," International Business Review, Elsevier, vol. 21(3), pages 465-479.

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