Keywords
outward foreign direct investment, cultural distance, overseas subsidiary, performance, entry mode
Abstract
Prior theoretical analysis together with empirical evidence points to conflicting results regarding the role of cultural distance on overseas subsidiary performance.Drawing on resource-based theory,in this paper we focus on two routes (resource transfer and resource acquisition)to develop a theoretical framework for explaining how cultural distance impact overseas subsidiary performance.Our empirical test,based on a sample of 1 678 overseas subsidiary performance observations of Chinese listed companies from 2011 to 2017,underscores that cultural distance is negatively associated with overseas subsidiary performance.With the increase of cultural distance,the overseas subsidiary performance is worse.Moreover,our findings indicate that the relationship between cultural distance and overseas subsidiary performance is moderated by entry mode,as opposed to wholly owned investment,the negative effect of cultural distance on subsidiary performance will be weaker when subsidiary is established in the form of joint venture.This study has important enlightenment on managers dealing with cultural distance as well as improving quality and benefit in OFDI.
DOI
10.16315/j.stm.2020.06.003
Recommended Citation
WANG, Pan-pan and ZHANG, Hai-bo
(2020)
"How cultural distance affects overseas subsidiary performance,"
Journal of Science and Technology Management: Vol. 22:
Iss.
6, Article 3.
DOI: 10.16315/j.stm.2020.06.003
Available at:
https://jstm.researchcommons.org/journal/vol22/iss6/3
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
