Formation of cross-border corporate strategic alliances: The roles of trust and cultural, institutional, and geographical distances

Abstract

We investigate the effects of four macro variables (trust and cultural, institutional, and geographical distances) on the propensity to form a strategic alliance. From a set of 26 countries, we construct 315 country pairs over the period from 1996 to 2004. We collect our data from the SDC platinum database that identifies how many cross-border strategic alliances occurred between the firms in the country pairs in each year. For each country pair we construct measurements for the macro variables. Then in a multivariate framework, we examine their effects on the number of cross-border alliances. We find that the cross-border alliances are more likely to occur between firms from countries that have higher trust and shorter cultural and geographical distances—the institutional distance does not have an effect. Additional tests show that greater trust lessens the adverse effect of geographical distance, but a shorter cultural distance does not.