A Psychological Perspective on the Role of Culture in Sino-European FDI Contexts - Managers’ Perception of Cultural Difference and its Impact on International Business

This paper aims at conducting an explorative study to investigate three research questions: 1) whether culture in cross-cultural business context still matters, 2) why it matters, and 3) how we can deal with cultural differences. Drawing upon theories of international business, social/cultural psychology and the contributions of positive psychology, this study in the context of Sino-European FDI provides a more integrative and constructive view of culture (cultural differences) as an evergreen phenomenon in international business. Extant literature contains numerous studies about culture, mostly from the perspective of countries and organizations. We fill the void in our study by focusing on the individual level and explore the perceptions of culture of European managers investing in China. Our sample consists of managers representing their European companies investing in China. Managers’ perceptions were inquired along 12 dimensions within the psychic distance model, elaborated and operationalized by international business scholars. Managers agreed on replying to a series of questions under the form of an interview, including Likert scale questions, reflecting their perceptions along each psychic distance dimension, including culture. Main findings show that culture is perceived as the most relevant dimension in Sino-European contexts. This paper contributes to the literature on cultural impact in international business settings by focusing on the individual’s subjective perceptions. This study highlights how intergroup relations between European and Chinese managers coming from different cultural background are challenging, while the diversity and perceived differences also provide opportunities.