Abstract
This paper outlines a view of cultural issues, connecting it to the risk literature. Culture, as a risk-driver of the firm, has not previously been fully explored. International business scholars tend to ignore either the external or the internal aspects of a firm's cultural environment, emphasizing only one side: either cultural diversity issues within the organization or host country cultural challenges. Using strategic management, this paper suggests that cultural risk should consider both out there according to product-market-positioning concepts and in here with the resource-based view of the firm to capture the essence of the firm's cultural dynamics. This paper proposes a theoretical framework to assess cultural risks under an enterprise-wide risk management (ERM) process to better manage such risks. The suggested framework can serve as a tool to benefit researchers as well as practitioners.
Highlights
In recent years, public concern about the risks faced by many firms has increased (Andersen and Schroder, 2010 [2])
Some other constructs of culture may exist. While this perspective provides a richer description of cultural dynamics and offers insight not captured by the positivist approach to culture, it needs further development, notably to address its measurement issues
To be effective, a cultural risk management strategy should be developed in view of the firm’s overall strategic planning to capture the firm’s both internal and external cultural dynamics
Summary
Public concern about the risks faced by many firms has increased (Andersen and Schroder, 2010 [2]). Cultural distance (Kogut and Singh, 1988 [64]), which has been considered to be a key indicator of firm foreignness (Barkema, Bell, and Pennings, 1996 [8]; Child and Markoczy, 1993 [20]; Gomez-Mejia and Palich, 1997 [40]), had a reverse effect in Disney’s cases of internationalization, where there was a greater cultural distance between the United States and Japan than between the United States and France This paradox suggests that even though we know a lot about foreignness, there is still something that we are missing.
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