Open Conference Systems, 16th SGBED & XII ESPM International Conference in Management

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ARE WE TALKING ABOUT COUNTRY PROFILE OR DISTANCE?
Henrique Correa da Cunha, Svante Andersson, Mohamed Amal, Dinorá E Floriani, Giancarlo Gomes

Last modified: 2019-03-27

Abstract


Since its introduction in International Business research, Distance has been an important topic but recently there is an ever growing concern related to the country profile and distance conflation. Studies investigating the implications of distances should include a sufficiently diversified sample. In order to provide adequate assessments for the implications of country profiles and distances, it is essential to consider that firms may be affected in different ways depending on the direction of the distances. We argue that the asymmetric effects of distances might result not only from the ability of foreign subsidiary firms adapting to the host country’ conditions, but also on the characteristics of the host country environment that may be more or less receptive to foreign firms’ operations. We test these assumptions in Latin America due to its diversity in terms of cultural and formal institutional conditions and also because it includes a great number of emerging market and developed country foreign subsidiaries. Data comes from Orbis database, totaling 1466 subsidiary firms being 1216 from developed countries and 250 from emerging markets operating in 10 host countries in Latin America and a combination of 168 different home and host countries over a period of 3 consecutive years ranging from 2013 to 2015. By measuring distances in opposite directions independently we are able to verify the asymmetric effects of both Cultural and Formal Institutional Distances. Additionally, results show that the expertise in dealing with formal institutional conditions at the home country can be converted more easily into firm specific advantages in foreign host countries whereas cultural distances seem to affect firms in similar ways, depending more on the cultural characteristics at the host country than by the distances between home and the host countries.

Keywords


Institutional distance; Cultural Distance; Country Profile; subsidiary; performance; Latin America

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