A Multilevel investigation into the effect of cultural distance on bilateral trade: The roles of product type and uncertainty avoidance

Abstract

AbstractPrevious research shows mixed findings about how cultural distance may affect bilateral trade. To reconcile the mixed findings, we examine how key moderators at both the country‐pair level (product type) and the country level (uncertainty avoidance) affect the magnitude of the effect of cultural distance on bilateral trade. Using trade data on electronic products from 90 nations during 2008–2 014, we show that cultural distance in general has a negative impact on bilateral trade. However, the effect is more pronounced when the trade is on experience (versus search) products, or if the importing country is low (versus high) in uncertainty avoidance. Apart from its moderating effect, experience (versus search) product also has a negative main effect on bilateral trade, but its impact is stronger for countries low (versus high) in uncertainty avoidance.