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Distances between contexts that a multinational enterprise (MNE) is familiar with and those that it is not familiar with do not hinder the MNE from becoming global. In this sense, distance serves as a barrier between an MNE’s global intentions and its regional realizations. (Multi)regional strategies are a possible expression of an MNE’s inability to approach distances. Considering the managerially relevant distances is essential to analyze the internationalization and the resulting (multi)regional strategies. A deeper understanding of how distance works requires linking distance to micro-foundations. Besides bounded rationality, bounded reliability opens the conceptual pathway toward a deeper understanding of internationalization and (multi)regional strategies.

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.

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.

This chapter investigates the theoretical support for the distance metaphor that is widely used to capture the effects of institutional diversity in international business (IB) and management studies. It argues that neither new institutional economics (NIE) nor in neo-institutional sociology (NIS) offers support for a focus on the degree of dissimilarity. Rather, both literatures emphasize dis-commonality as a problem for cooperation. In the NIE argument, common enforcement mechanisms are needed to reduce transaction costs. In the NIS argument, effective communication and cooperation is limited to meaning-giving structures common to all parties. In neither perspective, the degree of difference in structures that are not common is relevant. We propose an alternative metaphor, institutional overlap, to capture the effects of institutional diversity on IB transactions. We argue that such a concept differs from institutional distance in being agency-centered, sensitive to intra-country variation, non-additive, and driving the thickness rather than the costs of transactions.

In this chapter I argue that the distance research in international business studies is at a turning point, not in terms of its popularity, nor the quantity of articles published, but rather, in terms of the types of issues that are explored. Past distance research has largely been conducted at the level of the firm and/or the market – that is, linking national-level measures of distance with specific firm behaviors and outcomes. However, the seminal paper by Shenkar (2001) represents a shift in focus that is only just beginning to gain traction. This shift involves stepping back and beginning to unpack the black box we call ‘distance’ by exploring the micro-level mechanisms involved. In essence, it is about digging deeper in multiple aspects, to understand when, why and how distance matters in the international business (IB) context. These are issues that until now have typically been neglected. A metaphor borrowed from the social psychology literature, known as Coleman’s Boat, is used as a vehicle to explain the key issues involved in this shift and the opportunities for future research.

Cultural and geographical distances create friction in multinational enterprises (MNEs), friction that indigenous firms do not experience in the same manner. This friction or liabilities of distance is conceptualized as governance costs in this chapter. Unfortunately, governance costs seem to be a rather equivocal concept, although it is one of the building blocks of internalization theory, and the raison d’être of the idea that certain kind of transactions have to be internalized to overcome the most prohibitive consequences of business activities across cultural and geographical distances. By going back to an award-winning paper, published in IBR in 2009, we put forward some nuances and reflections upon theory and findings presented in that paper, as well as upon implications and behavior of governance costs. The reason for this endeavor is grounded in the idea that theories must be challenged, empirical finding, just as well. Building upon survey data from 159 Norwegian MNEs, we explore and test six hypotheses by structural equation modeling (SEM). The results indicate that information fallacies seem to be the main driver of monitoring – and bargaining costs in the relationship between MNE HQs and their foreign subsidiaries, and thereby also the indirect driver of the observed negative effects of monitoring and bargaining on subsidiary performance. On the other hand, trust shaped by bonding activities seems to be an important factor in reducing bargaining costs and improving subsidiary performance.