The effect of cultural distance on entry mode choice, international diversification, and MNE performance: a meta-analysis

Abstract

Although a growing literature indicates that cultural distance – that is, differences between national cultures – is an important determinant of organizational actions and performance, both empirical and theoretical concerns abound. In this study, the relationships of cultural distance with entry mode choice, international diversification, and MNE performance are examined by meta-analyzing data from 66 independent samples, with cumulative sample sizes ranging from 2,255 to 24,152. Regression results failed to provide statistical evidence of significant relationships between cultural distance and entry mode choice, international diversification, and MNE performance. The examination of moderator effects, however, yielded important results. We found a strong negative association between cultural distance and entry mode choice for US-based MNEs. The cultural distance–international diversification relationship was negative for high-technology industries, while it was positive for other industries. Cultural distance also had a strong positive effect on MNE performance for developed country investments. A similar, strong positive relationship was found between cultural distance and international diversification in studies with more recent samples. Results of this study indicate that substantial additional research is needed before the role of cultural distance is fully understood.