Abstract
Cultural distance is one of the most widely used distance construct in international business. However, its application as having linear and homogenous impact on organizational actions and performance has long been questioned. In this paper, we attempt to redress this weakness by proposing the moderating effects of firm-level capabilities and industry context, on the impact of cultural differences on firm-level outcomes. Drawing on the organizational learning theory with cultural friction perspective, we propose that the ‘cultural experience reserve’ of a focal firm is a potential firm-specific capability, mitigating the negative impact of cultural differences on cross-border deal abandonment. Second, we propose that the firm’s industry context impacts the uncertainties associated with cultural differences. We believe our testable proposition advance the role of contextual factors in studying the impact of cultural difference.
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