Cultural Distance and its Effect on Cross-Border Entry Mode: Latin American Evidence

15 Pages Posted: 17 Sep 2011

See all articles by Eduardo Pablo

Eduardo Pablo

Minnesota State University Moorhead

Date Written: September 16, 2011

Abstract

This paper studies if 'cultural distance' between two firms determines the entry mode of a foreign organization. We study two different modes of entering a market: cooperative agreements and acquisitions. We analyze a database that gathers 1,292 cooperative ventures and acquisitions in ten Latin American countries from 1998 to 2004. Evidence is consistent with firms selecting cooperative agreements over acquisitions the larger the cultural distance, particularly when we proxy cultural distance in two dimensions: individualism-collectivism and masculinity-femininity. Results hold when we run a logistic regression controlling for other variables among them, the Heritage Foundation Indexes, and a same-language dummy.

Keywords: cultural distance, entry-mode, institutional environment

JEL Classification: G34, G38, G39

Suggested Citation

Pablo, Eduardo, Cultural Distance and its Effect on Cross-Border Entry Mode: Latin American Evidence (September 16, 2011). Available at SSRN: https://ssrn.com/abstract=1928915 or http://dx.doi.org/10.2139/ssrn.1928915

Eduardo Pablo (Contact Author)

Minnesota State University Moorhead ( email )

Moorhead, MN 56563
United States
218-4774655 (Phone)

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