The double-edged sword of cultural distance in international alliances

Purpose While previous studies have primarily assumed dysfunctional effects of cultural distance in joint ventures and M&A, this paper elucidates from a positive organizational scholarship perspective how perceived cultural distance can advance firms’ new product development within non-equity alliances. The purpose of this paper is to explain how perceived cultural distance stimulates task discourse that supports alliance partners’ employees in recognizing and applying culture-related differences as complementary problem-solving potentials. Due to a lower integration level in non-equity alliances compared to joint ventures or M&A, this paper assumes that the positive effects outweigh the negative effects of cultural distance. Design/methodology/approach This study applies structural equation modeling to test the hypothesized effects on a sample of 246 international alliances in the manufacturing industry. Findings The analysis mainly supports the hypothesized model and unravels how positive effects can emerge from perceived cultural distance. Practical implications The findings provide managerial implications. Alliance managers should note that cultural distance can have positive and negative effects, and thus it is not a barrier per se in alliances. Firms can benefit from cultural distance if they are able to leverage culture-specific complementarities through task discourse among partners in alliances. Originality/value The manuscript uses a unique data set of 246 international alliances from the global manufacturing industry. The manuscript has not been published elsewhere.