Abstract
The conventional approach in international business research is to consider and/or compute country distance as independent of individual and firm actions. Borrowing from Teece et. al. (1994), we propose in this paper an alternative approach that relies on ‘survivor’ data culled from the very actions of these individuals and/or firms to compute ‘country relatedness’, the inverse of distance. We then focus on country relatedness for investment decisions, defined as the degree to which there are economies to joint operations and/or ownership in these countries by a multinational enterprise (MNE). To test the predictive validity of country relatedness for investment decisions, we hypothesize that MNEs characterized by high levels of international coherence, the degree to which they operate in related countries, will have a superior performance. Our empirical test starts by computing country relatedness for 24,000 country pairs, using investment data for the full sample of 20,000 public MNEs worldwide. We then...
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