Integrating Diversity into Distance Research for Added Rigor, Parsimony, and Relevance

The management of cross-national differences is of central concern in international business (IB) and international management (IM). Thus, it is not surprising that the concept of distance which captures such differences has received much attention in this field. Lumineau, Hanisch, and Wurtz, in their Point article, seek to strengthen distance research by challenging one of its key assumptions - country level homogeneity - and advancing an alternative view of country differences based on the notion of diversity. We concur with their critique of the homogeneity assumption and with the general idea of bringing in the concept of diversity. However, our approach to this goal is substantially different. Instead of replacing distance with a diversity-based conceptualization, as they seem to propose, our emphasis is on integrating diversity into current distance research. Moving beyond critique and high-level conceptualizing, we provide a usable roadmap for incorporating diversity into distance research both theoretically and empirically. Specifically, we introduce a new construct of intra-country diversity that captures the condition of within-country differences, and then, explain how it can be used to enrich distance models, illustrating our approach with several key IB/IM topics. Empirically, we use available cross-cultural data to illustrate how to account for different degrees and patterns of intra-country diversity in distance research. Overall, our approach aims at building on, not negating, existing distance research, increasing its rigor and relevance through the concept of diversity, and helping scholars incorporate diversity into their work by providing concrete guidelines and examples

Understanding Agency Problems in Headquarters-Subsidiary Relationships in Multinational Corporations: A contextualized Model.

This paper proposes an agency model for headquarters subsidiary relationships in multinational organizations with headquarters as the principal and the subsidiary as the agent. As a departure from classical agency theory, our model is developed for the unit level of analysis and considers two root causes of the agency problem - self-interest and bounded rationality. We argue that in the organizational setting, one cannot assume absolute self-interest and perfect rationality of agents (subsidiaries) but should allow them to vary. We explain subsidiary level variation through a set of internal organizational and external social conditions in which the headquarters-subsidiary agency dyad is embedded. We then discuss several agency scenarios reflecting various levels of selfinterest and rationality that lead to different manifestations of the agency problem. The proposed framework can inform more relevant applications of the agency perspective in organizational studies and motivate future research

The construct of institutional distance through the lens of different institutional perspectives:Review, analysis, and recommendations

This paper presents a review and critique of the 20-year-old literature on institutional distance, which has greatly proliferated. We start with a discussion of the three institutional perspectives that have served as a theoretical foundation for this construct: organizational institutionalism, institutional economics, and comparative institutionalism. We use this as an organizing framework to describe the different ways in which institutional distance has been conceptualized and measured, and to analyze the most common organizational outcomes that have been linked to institutional distance, as well as the proposed explanatory mechanisms of those effects. We substantiate our qualitative review with a meta-analysis, which synthesizes the main findings in this area of research. Building on our review and previous critical work, we note key ambiguities in the institutional distance literature related to underlying theoretical perspectives and associated mechanisms, distance versus profile effects, and measurement. We conclude with actionable recommendations for improving institutional distance research

Cultural Distance and Firm Internationalization:A Meta-Analytical Review and Theoretical Implications

This paper presents the most comprehensive review and meta-analysis of the literature on cultural distance and firm internationalization to date. We analyze the effects of cultural distance on key strategic decisions throughout the entire process of internationalization. For the preinvestment stage, we examine the decisions on where to invest (location choice), how much to invest (degree of ownership), and how to organize the foreign expansion (entry and establishment mode). For the postinvestment stage, we examine the decisions of how to integrate the foreign subsidiary into the organization (transfer of practices) as well as the performance effects of cultural distance at both the subsidiary and the firm level. We find that firms are less likely to expand to culturally distant locations but if they do, they prefer greenfield investments and integrate subsidiaries more through transfer of management practices. Cultural distance does not seem to affect how much capital firms invest and whether they enter through a joint venture or full ownership. Interestingly, cultural distance has a strong negative effect on subsidiary performance but no effect on the performance of the whole multinational company. In addition, we find that the effects of cultural distance are not sensitive to time, but they are sensitive to the cultural framework used (e.g., Hofstede vs. Global Leadership and Organizational Behavior Effectiveness) and the home country of the company (developed vs. emerging market). Based on our study, we feel confident to offer some theoretical insights, recommendations for improving the validity and reliability of cultural-distance research, and ideas for future research

Escaping the Iron Cage: Liabilities of Origin and CSR Reporting of Emerging Market Multinational Enterprises

This article examines the link between the condition of institutional voids in emerging markets and the use of the practice of corporate social responsibility (CSR) reporting by emerging market multinational enterprises (EM-MNEs). Based on neo-institutional theory and in light of the specificity of emerging markets, we propose a positive relationship between institutional voids and CSR reporting. Home-country institutional voids push companies to internationalize as a way to escape the institutional constraints and inefficiencies in their own markets, but at the same time create legitimacy challenges for these companies abroad. In particular, EM-MNEs from less institutionally developed countries are likely to face liabilities of origin – negative perceptions in host countries about these firms’ willingness and ability to conduct legitimate business. CSR reporting is an effective strategy to overcome such liabilities and barriers to legitimation as it conveys to host countries and global stakeholders alignment with global meta-norms and expectations. Internationalization, listing on developed country stock exchanges, and time, further magnify EM-MNEs’ legitimacy challenges and thus the use of CSR reporting to mitigate them. Our hypotheses are supported in a longitudinal study of 157 of the largest EM-MNEs ranked by the United Nations Conference on Trade and Development (UNCTAD) between 2004 and 2011

An overview of Hofstede-inspired country-level culture research in international business since 2006

Kirkman, Lowe, & Gibson's (2006) JIBS article summarized and critiqued international business research inspired by the most cited book in the field Hofstede's 1980 Culture's Consequences: International differences in work-related values (Hofstede [1980]2001). They identified a number of issues in this research and offered several recommendations for improving it in the future, thus laying a strong foundation for Hofstede-related work since 2006. In this commentary, we assess Kirkman et al.'s (2006) impact on the field. Our review shows that their ideas have informed and inspired their own and other scholars' work and have led to significant progress in the way in which Hofstede's framework has been used in international business in the last decade. Here, we specifically focus on the country-level culture studies and assess how research has implemented Kirkman et al.'s three main recommendations - to explore cultural dimensions beyond those introduced by Hofstede, to distinguish between country effects and cultural effects, and to show not only if culture matters but also how much it matters. In addition to the overview, we provide a comprehensive test of these recommendations showing how they can be put into research practice underscoring the theoretical and empirical relevance of the original 2006 article. Our commentary concludes with additional ideas on further strengthening Hofstede-inspired research at the country level of analysis

An experimental study of the acceptance of a foreign newcomer into a workgroup

We examine the acceptance of a foreign newcomer into a local workgroup. Using Social Identity and Acculturation theories, we try to identify factors that help a foreign newcomer gain acceptance of a host group. We test the model using a group-level policy-capturing technique. Our results indicated that a workgroup's attitude towards a foreign newcomer was influenced by socially attractive behaviors of the newcomer, the apparent sincerity of such behaviors, the group's culture on the individualism dimension, cultural similarity between the newcomer and the group, and cultural intelligence of the newcomer as reflected in the individual's reputation of establishing a relationship with his/her host culture.Group acceptance, Newcomer, Social identity theory, Acculturation