Culture and international trade: evidence from Canada

Abstract

PurposeThe purpose of this paper is to investigate the effects of culture on international trade.Design/methodology/approachA measure of the cultural distance is incorporated into the Gravity model to test the marginal effects of cultural variables on bilateral trade between Canada and 53 other countries. In addition to the cultural distance and economic factors, other control variables such as religion and language commonalities are included.FindingsAfter controlling for the size of GDP and linguistic commonality, the effects of culture on international trade are found to be insignificant. The empirical analysis shows that while the linguistic commonality has positive implications for international trade, the cultural distance and religion commonality do not seem important.Research limitations/implicationsWhat is true for the Canadian international trade may not be true for other countries, especially for developing nations. Moreover, this study is limited to the Schwartz's cultural dimensions.Practical implicationsManagers should not stay away from culturally dissimilar partners as long as trade is economically beneficial. Instead, they should pay attention to training bilingual agents and standardizing trade procedures in order to streamline the negative effects of linguistic dissimilarity.Originality/valueThis study refutes the generally accepted idea that culture is subversive to any cross‐border business activity.