How cultural distance affects the formation of international strategic alliance – an explanation of the transaction costs theory
Nankai Business Review International
ISSN: 2040-8749
Article publication date: 4 August 2021
Issue publication date: 6 May 2022
Abstract
Purpose
Based on the transaction cost theory, this paper aims to investigate the impact of cultural distance on international strategic alliance formation and its underlying mechanisms.
Design/methodology/approach
This paper uses the investment of foreign firms in the Chinese Venture Capital market as an empirical background, Obtaining VC data from Zero2IPO Private Equity, CVsource Investment Database (2001–2015). This paper chooses the Logit regression method, according to Lind’s three-step method to test the inverted U-shaped relationship.
Findings
The empirical analysis of foreign venture capital firms invested in China revealed that there is an inverted U-shaped relationship between cultural distance and the possibility of international strategic alliances. This relationship is the result of two opposing mechanisms, which are the need and the feasibility of international strategic alliances. In addition, this study further examined the moderating effects of social embeddedness and social reputation, revealing the boundary effects on the complex relationship between cultural distance and possible international strategic alliance formation.
Originality/value
This study focuses on cultural difference, which is a key factor leading to a firm’s transaction costs. Based on the transaction cost theory, this paper investigates the impact of cultural distance on international strategic alliance formation and its underlying mechanisms.
Keywords
Acknowledgements
Supported by the National Natural Science Foundation of China (grant number 71532011).
Supported by Modern Enterprise Management Research Center of Changsha University of Science and Technology (grant number 20qgyb03).
Citation
Xiong, M.N., Wang, T. and Zhao, P. (2022), "How cultural distance affects the formation of international strategic alliance – an explanation of the transaction costs theory", Nankai Business Review International, Vol. 13 No. 2, pp. 173-200. https://doi.org/10.1108/NBRI-04-2021-0026
Publisher
:Emerald Publishing Limited
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