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As multinational companies enter different countries, the extent of cultural unfamiliarity they face depends on their most recent entry. We examine this pattern of added cultural distance between a newly entered target country and the closest previous one and its effect on ownership decisions in each cross-border acquisition (CBA). We also examine the combined effect of added cultural distance and time between successive acquisitions on such decisions.

The sample came from the Thomson Financial Securities Data Corporation (SDC) Platinum database, which spans different source and target countries for a 25-year period (1980–2014). We collected firm- (acquirer and target), industry-, country-, and transaction-level variables from SDC. After merging information from the different sources, the final sample comprised 10,423 CBA observations from 138 target countries.

Our findings reveal that the ownership share decision is affected negatively by added cultural distance but positively by the time between two successive acquisitions. In addition, prior ownership and geographic distance moderate the relationship between added cultural distance and ownership in CBAs.

Our findings suggest that MNCs' managers who consider CBAs need to carefully examine closest previous target information and CBA experience, rather than focusing on direct cultural distance between the focal firm and target firm. Additionally, they should also consider the relevance of key contingency factors.

We disentangle the effects of added cultural distance on CBA ownership decisions and explore the boundary conditions of this relationship.

This paper aims to propose an integrated framework combining the cost-reduction rationale and the institution-leveraging rationale to explain how institutional distance, both formal and informal, influences emerging multinational enterprises (EMNEs)’ foreign direct investment (FDI) location choice. This paper also explores the moderating role of EMNEs’ FDI experience and strategic intent on value chain positioning as a reflection of firm heterogeneities, on the link between institutional distance and location choice.

This paper tests the hypotheses based on a firm-level longitudinal data set of FDI by Chinese EMNEs. The unique data are manually collected from Chinese companies listed on Shenzhen and Shanghai Stock Exchanges, composed of 250 FDI entries of 122 manufacturing firms from 2006 to 2010. The conditional logit model is used to estimate the proposed main effect and moderating effect.

Cultural distance does not deter Chinese EMNEs’ entrance in general, but firms investing in low value-added manufacturing subsidiaries are more likely to choose culturally similar countries than those investing in high value-added subsidiaries such as in upstream R&D and downstream marketing. Formal institutional distance with positive direction promotes Chinese EMNEs’ entrance, and this effect is enhanced when firms have less FDI experience and have the strategic intent to invest in high value-added subsidiaries.

This paper contributes to the current literature by identifying a holistic view of the institutional influences on FDI location choice of EMNEs and revealing how firm-level heterogeneities, particularly FDI experience and strategic intent of subsidiary value chain positioning, shape the boundary conditions of the institutional effects in different ways.

The globalization of knowledge has driven an increased emphasis on cross-border, high-technology acquisitions where a target firm in a technology industry is acquired by a firm in another nation. However, learning depends on similarity of knowledge, and we find that needed similarity can be provided by either technology or culture. As a result, firms can learn from acquiring targets at increasing cultural distance or at increasing technological distance, but not both. We find an interaction where acquisitions made at longer cultural distances and less technological distance, and acquisitions at shorter cultural distances and greater technological distance improve financial performance. This means technological distance and cultural distance are substitutes or represent a trade-off where improved acquisition performance depends on having commonality (low distance) for one of the variables.

Institutions and culture as well as their distance between home and host countries matter for international business activities. Yet, the exact nature of this influence is still not fully understood. In this chapter, we develop the concept of institutional and cultural compatibility and propose empirical measures of both to contribute to our understanding in this regard. We argue that the institutional and cultural profiles of home and host countries can create synergies that facilitate bilateral foreign direct investment (FDI) flows (that is being compatible) even if they are characterized by high distances. We apply our measures of compatibility to a sample of bilateral FDI flows between 127 host and 122 home countries over 12 years.

Prior research has tended to view cross-country distance as an obstacle. Yet, differences across countries are a key reason for firms to internationalize. To address this discrepancy, this paper puts forward a unifying framework which (1) synthesizes and delineates the different types of cross-country distance, (2) provides a logic for analyzing cross-level influences of distance on internationalization decisions, and (3) highlights the opportunities brought about by distance. The paper argues that firms are more likely to be able to realize these opportunities when they have internationally experienced managers and diverse, well-functioning top management teams at the helm. The paper also highlights the complex influences of distance, calling for the use of cognitive and behavioral research methodologies to further our understanding of the role of distance in internationalization. An illustrative example of Vodafone Group PLC is included.

This study combines institutional and organizational learning perspectives to investigate the impact of institutional distance and institution-specific cross-border acquisition experience in emerging markets on cross-border acquisition performance.

The sample consists of 874 transactions involving targets across 37 emerging markets by 484 different acquirers from 45 developed and emerging markets. The authors decompose institutional distance and acquisition experience along their cultural, administrative, geographic and economic dimensions.

The authors find that cultural, administrative and geographic distance have a negative impact on acquisition performance. In contrast, economic distance does not appear detrimental to acquisition performance across markets. The study provides evidence that a company may apply learnings from previous transactions in similar cultural and economic emerging market environments to elevate the likelihood of a successful acquisition.

This study offers a more fine-grained perspective of the distance concept by decomposing the concepts of institutional distance and acquisition experience along different institutional dimensions. The research across 37 emerging markets sheds light on which of the similarities and differences between these markets are relevant concerning acquisition experience and performance.

This paper aims to examine whether the cultural distance between an international audit firm and target audit clients in emerging countries is associated with auditor choice decisions.

Based on a sample of 104,699 firm-year observations from 20 countries over 2009–2020, logit regression analysis is used to investigate the research questions.

The authors find strong evidence that cultural distance affects the auditor selection decision. The results suggest Big N auditors are more likely to be chosen by target audit clients in emerging countries with less cultural distance. In other words, target audit clients in emerging countries prefer to choose international audit firms whose cultural characteristics are similar. Moreover, results from two-stage least squares regression further suggest that the observed effect of cultural distance on auditor choice is unlikely to be driven by potential endogeneity.

The auditor choice is limited to companies hiring Big N auditors; the authors exclude any switches to non-Big N auditors or switches between Big N auditors. The study also suffers from the concerns about methodological and conceptual criticism that most studies about national culture have to deal with. Finally, through this paper, the authors carry out the auditor selection process from the target audit clients’ side; the authors do not discuss the supply side of the process.

The authors contribute to the audit choice literature by providing evidence that the cultural distance between the countries of audit firms and target audit clients plays a role in the auditor choice decision. The study complements the prior auditor choice literature, focusing primarily on Western economies, by structuring the sample scope to emerging market economies.

Purpose – This chapter analyzes the relation between normative and cultural-cognitive institutional distance and the international entry forms of SMEs. We also examine the interaction effect of each of these distances and the regulatory development of the destination on entry mode choice.

Methodology/approach – This chapter deals with a multilevel analysis of a database of European SMEs containing information on different locations and three entry forms: exports; collaborative modes and direct investment.

Findings – The results indicate that greater levels of normative distance increase the likelihood of using collaborative forms in SMEs. Similarly, the findings also show that the preference for collaborative forms grows as the cultural-cognitive distance increases. In both cases, the study finds a positive moderating effect of regulative institutions on these relations.

Originality/value of chapter – The chapter contributes to the literature by separately considering informal institutional dimensions such as normative and cultural-cognitive distances, as well as examining how the regulatory development of the destination may moderate these relations. Additionally, the study sheds light in the development of the literature on SMEs, both by using the institutional theory to explain the internationalization of these firms and providing a more complete picture of their entry modes.

The purpose of this paper is to investigate how the relative institutional distance of the subsidiary from the multinational enterprise (MNE) headquarters influences job satisfaction in the subsidiary. The authors argue that job satisfaction in the MNE subsidiary will be influenced by the institutional distance between the firm’s home (headquarter) and host (subsidiary) countries, such that the greater the institutional distance, the less satisfied the subsidiary employees. The authors also argue that the degree of function interdependence (global vs local roles) will moderate this relationship, such that high interdependence will result in lower job satisfaction as distance increases.

Using data from a global high-tech Canadian MNE, consisting of over 15,000 employees located in 19 subsidiaries, the research undertakes an empirical investigation that identifies if and how job satisfaction varies between countries and tests the influence of subsidiary-level institutional distance from the headquarters on subsidiary-level job satisfaction, using a multilevel model.

The results demonstrate that subsidiary distance from the headquarters has a complex effect on subsidiary-level job satisfaction; in some distances, no effect is found, while in others, either some or all job satisfaction facets are affected (depending on the distance and facet) in both positive and negative ways. Unlike much of the past research on distance, which has treated distance as a barrier to be overcome or reduce (Stahl et al., 2016), the paper’s finding demonstrate that “negative” distance operates independently (and at varying strengths and significance) than “positive” distance, due to underlying mechanisms.

There is a real opportunity to push ahead on linking international business strategy research with organizational theory and organizational behavior research. To do so, it requires not only a positive organizational scholarship approach (Stahl et al., 2016) but also methods that will allow researchers to study the influence of distance on mechanisms and processes, as opposed to stand-alone variables. The authors therefore suggest that future work in this area pursue qualitative methods as called for by Chapman et al. (2008).

Findings are surprising, in that results vary across job facets and distances. Practitioners need to therefore focus on the mechanisms that influence job satisfaction, not just differences and their potential negative impact.

The firm-level study provides a rich perspective on the complex way in which country-level differences influence subsidiary-level job satisfaction.