Embracing the foreign: Cultural attractiveness and international strategy

• Published date: 01 April 2017
• Date: 01 April 2017
• Author: Oded Shenkar,Felix C. Brodbeck,Jan Hendrik Fisch,Chengguang Li,Leonard J. Ponzi
• DOI: http://doi.org/10.1002/smj.2528

Strategic Management Journal

Strat. Mgmt. J.,38: 950–971 (2017)

Published online EarlyView 23 June 2016 in WileyOnline Library (wileyonlinelibrary.com) DOI: 10.1002/smj.2528

Received 21 June 2015;Final revisionreceived 9 April 2016

EMBRACING THE FOREIGN: CULTURAL

ATTRACTIVENESS AND INTERNATIONAL STRATEGY

CHENGGUANG LI,1*FELIX C. BRODBECK,2ODED SHENKAR,3

LEONARD J. PONZI,4and JAN HENDRIK FISCH5,6

1Department of Management, Paderborn University, Paderborn, Germany

2Department Psychology, Ludwig-Maximilians-Universität (LMU) Munich, Munich,

Germany

3Fisher College of Business, The Ohio State University, Columbus, Ohio, U.S.A.

4Reputation Inc., London, U.K.

5Department of Global Business and Trade, Vienna University of Economics and

Business, Vienna, Austria

6Newcastle Business School, University of Newcastle, Callaghan, Australia

Research summary: Prior research focused on cultural differences and their impact on foreign

direct investment (FDI), neglecting other potentially relevant variables attesting to the cultural

interaction between a multinational enterprise and its host environment. In this article, we draw

on interpersonal attraction research to develop a positive approach to cross-cultural interaction

with the cultural attractiveness (CA) construct, whereby members of a focal cultureview another

culture as desirable. We create a CA measure and establish its predictive validity with country

reputation data. Using FDI data for 41 nations from1985 to 2012 and performance data for 8,519

cross-border acquisitions (CBA) for 40 nations from 1990 to 2009, we nd that CA is a predictor

of FDI inows and CBA outcomes, whose explanatory power is superior to cultural difference

measures.

Managerial summary: Practitioners have traditionally emphasized potential difculties of

cross-cultural interaction when dealing with culturally distant countries. In contrast, our study

addresses the positive aspects of cultural differences and suggests that a lot can be gained from

dealing with attractive cultures, even when they are different. This insight can be helpful, for

example, in contemplating/managing international M&As. Managers of acquiring/merging rms

can use our approach to identify whether their employees nd the partner’sculture desirable, and

if they do, proceed with the takeover and then adopt the partner’s organizational routines during

post-merger integration. This approach can help avoid conicts, improve performance of home

country expatriates, and ultimately, create value for acquiring rms. Copyright © 2016 John

Wiley & Sons, Ltd.

INTRODUCTION

National culture has been extensively studied in

international strategy, and its impact on managerial

and economic outcomes has been shown to be

Keywords: cultural attractiveness; foreign direct invest-

ment; interpersonal attraction; country reputation; cross-

border acquisition performance

*Correspondence to: Chengguang Li, Paderborn University,

Warburger Straße 100, 33098 Paderborn, Germany. E-mail:

chengguang.li@upb.de

Copyright © 2016 John Wiley & Sons, Ltd.

profound (Franke, Hofstede, and Bond, 1991;

Kirkman, Lowe, and Gibson, 2006). Of particular

interest have been situations in which different

cultures come into contact with each other. While a

few studies show a positive impact generated from

the meeting of national cultures (e.g., Morosini,

Shane, and Singh, 1998; Shenkar and Zeira, 1992;

Vaaraet al., 2014), the vast majority of the literature

has focused on the challenges, negativities, and

difculties that originate from such encounters

(Shenkar, 2001; Tung and Verbeke, 2010).

Cultural Attractiveness 951

The most widely used construct implemented to

examine the differences between national cultures

is that of cultural distance (CD) (Kogut and Singh,

1988), which measures how far apart two cultures

are on an aggregate of Hofstede’s (1980) original

four cultural dimensions. The main premise behind

this construct is that differences in cultures con-

stitute hurdles that hamper rms’ ow of infor-

mation, knowledge, and competencies, increasing

uncertainty and augmenting the cost of doing busi-

ness abroad (Barkema, Bell, and Pennings, 1996;

Nachum, 2003). The CD formula has been applied

to numerous international business phenomena,

including foreign direct investment (FDI) (Shenkar

and Zeira, 1992), entry mode (Chang and Rosen-

zweig, 2001), knowledge acquisition (Li, Poppo,

and Zhou, 2010), multinational enterprise (MNE),

subsidiary, and cross-border acquisition (CBA)per-

formance (Barkema et al., 1997; Stahl and Voigt,

2008), among others. Consistent with the hurdle

logic are familiarity theory (e.g., Miller and Parkhe,

2002), transaction cost economics (TCE) (Hennart,

1982), and the Uppsala Stage model (Johanson and

Vahlne,1977). All three theoretical lenses view cul-

tural differences as obstacles to the initiation, oper-

ation, and success/survival of FDI.

While CD helped generate valuable ndings, its

key properties and resulting deciencies have been

criticized on both conceptual and empirical grounds

(Lee, Shenkar, and Li, 2008; Tung and Verbeke,

2010), leading some to endorse a rejection of the

construct and its underlying metaphor altogether

(Shenkar, 2001; Shenkar,Luo, and Yeheskel, 2008).

Subsequent empirical research conrmed that many

of the assumptions behind CD were erroneous,

including, for instance, symmetry (Lee et al., 2008).

One illusion that has been criticized is the assump-

tion of discordance (Tung and Verbeke, 2010),

namely, the belief that CD invariably generates neg-

ative outcomes, neglectingevidence that differences

can also be a source of benets and synergies (e.g.,

Morosini et al., 1998; Vaara etal., 2014). The con-

cept of cultural attractiveness (CA) is introduced

with the latter line of reasoning in mind and is

consistent with calls for introducing novel cultural

constructs and challenges to a simplistic distance

metaphor (Lee et al., 2008; Leung et al., 2005).

Drawing on interpersonal attraction research, we

dene “CA” as the desirability of a culture for mem-

bers of another. To examine the predictive valid-

ity of the construct, we explore its relation with a

country’sreputation. We further examine its relation

with country-pair FDI inows for 41 nations dur-

ing the 1985– 2012 time period and CBA perfor-

mance for 40 nations between 1990 and 2009. We

seek to contribute to a growing thrust question-

ing the usage of CD and their FDI negativity pre-

sumption, while building on the cultural friction

lens (Shenkar et al., 2008). Specically, we seek to

establish cultural attraction as a key force bring-

ing cultures together, as opposed to keeping them

apart, in the process impacting FDI. In so doing, we

reassess assumptions embedded in extant theories

ranging from cultural familiarity (Yoshino, 1976)

to the Uppsala model (Johanson and Vahlne, 1977)

and TCE (Chang and Rosenzweig, 2001), using a

behavioral, interpersonal lens to augment under-

standing of the complex relationship between cul-

ture, foreignness, and FDI.

LITERATURE AND THEORY

In interpersonal attraction research, rooted in social

psychology and sociology (Byrne and Griftt,

1973; Klohnen and Luo, 2003), “attractiveness”

refers to the possession of desirable qualities

by an individual that evoke positive affective

evaluations in others (Blau, 1960; Lott and Lott,

1965). Individuals who display specic traits,

characteristics, or behaviors deemed desirable and

valuable by an observer evoke positive perceptions

in the observer, and thus, becomes attractive in

the observer’s eyes (Berscheid and Walster, 1969).

Interpersonal attraction also occurs when the shared

behaviors and actions of a collective are valued

by an observer or an observing group (Lott and

Lott, 1965). Interpersonal attraction impacts the

cognitive schemas and behaviors of individuals and

groups, and has been shown to stimulate approach,

conformity, and performance (Byrne and Griftt,

1973; Lott and Lott, 1965) on a wide range of

issues, comprising job interviews and evaluation

(Ellis et al., 2002), social integration (Simsek et al.,

2005), and interpersonal relationships (Fitness,

Fletcher, and Overall, 2007), among others.

We build on the interpersonal attraction frame-

work to develop the novel concept of CA.1Cultures

comprise the “values, beliefs, norms, and behav-

ioral patterns of a national group” (Leung et al.,

1While a few studies mention CA (e.g., Shenkar, 2001; Shenkar

et al., 2008; Veryet al., 1997), to our knowledge, the concept has

not been hitherto developed and measured systematically.

Copyright © 2016 John Wiley & Sons, Ltd. Strat. Mgmt. J.,38: 950–971 (2017)

DOI: 10.1002/smj