Interactive impact of ethnic distance and cultural familiarity on the perceived effects of free trade agreements

Russel Kingshott,Peter Hosie,Piyush Sharma,Nebojsa Davcik

doi:10.1007/s10490-018-9581-0

Abstract

Past research on free trade agreements (FTAs) mostly uses an economic perspective to assess their impact on the level of trade and investments between nations. As a result, there is a distinct paucity of research on the perceptions of employees and managers in organizations affected by FTAs, towards the likely outcomes of those FTAs. We address this gap by using the context of recently signed China-Australia free trade agreement (ChAFTA) to develop a multidimensional scale for the perceived advantages and disadvantages of FTAs. Drawing on social identity theory and the similarly-attraction paradigm we also show direct and interactive effects of perceived ethnic distance (between home and partner country) and cultural familiarity (with the FTA partner country) on these perceived outcomes of FTAs. Our findings highlight the need to look beyond the economic perspective and consider a much broader range of perceived outcomes of FTAs.

Highlights

In recent decades, free trade agreements (FTAs) have proliferated at an unprecedented rate, as reflected in the world trade organization’s (WTO) estimate of around 600 FTAs during 2014 (Hayakawa, 2015)
There is a distinct paucity of research on the perceptions of employees and managers in organizations affected by FTAs, towards the likely outcomes of those FTAs
We address this gap by using the context of recently signed China Australia free trade agreement (ChAFTA) to develop a multidimensional scale for the perceived advantages and disadvantages of FTAs

Summary

Introduction

Free trade agreements (FTAs) have proliferated at an unprecedented rate, as reflected in the world trade organization’s (WTO) estimate of around 600 FTAs during 2014 (Hayakawa, 2015). Such individual beliefs are important to understand because while FTAs provide an overarching framework at the macro-level the decision to (and how to) engage in cross-nation trade is largely a function of those individuals responsible for developing organization business strategies and translating them into meaningful actions (Gaur, Kumar, & Singh, 2014; Singh & Gaur, 2013) This means that any intrinsic beliefs held by decision makers that help to shape thinking and behavior with respect to others have the potential to enhance or undermine any perceived benefits derivable from FTAs. prior research in other disciplines indicates that individuals often view the world through an “ethnocentric lens” (Dutton, Madison, & Lynn, 2016; Sharma, Tam, & Kim, 2009; Shimp & Sharma, 1987; Villarreal, 2014) and this shapes their attitudes, perceptions, preferences and behaviors towards people and objects from other cultures and countries. We describe our overall methodological approach in this study, followed by data analysis and discussion of our findings and research implications

Methodology

Procedure

Findings

Limitations and Future