This study examines the role of cultural distance in the duration of an international alliance in a high technology sector. The general view is that cultural distance between international partners can hamper the duration of the alliance. We propose the alternative argument that cultural distance can be a source of the alliance duration. We use cultural distance based on widely perceived five cultural dimensions (Hofstede et al., 2010). Overall, the result supports the proposition. The distance based on masculinity, uncertainty avoidance and long-term orientation tends to increase the duration of the alliance. The distance based on power distance and individualism tends to decrease the duration of the alliance. Nevertheless, the composite measure based on all five dimensions also shows a positive effect on the duration of the alliance. The study concludes that learning alliances prefer diversity of knowledge sources. Knowledge transfer is a context dependent phenomenon. The diversity of the context delays knowledge transfer. Therefore, learning alliances tend to be longer when there is a cultural distance between international partners. The article notes some implications and limitations for the future research.
Most of the literature on international business alliance suggests that the duration of the technology alliance is shorter than its maturity. A majority of inter-firm alliance meets untimely mortality (Das and Teng, 2000, Dyer et al., 2001 and Park and Ungson, 1997). About 90% international alliances terminate before their maturity (Makino, Chan, Isobe, & Beamish, 2007). The short lifespan makes the alliance an interesting field of research and understanding. It is interesting for research because the alliance is a complex phenomenon, and its explanation dependents are multiple perspectives (Parkhe, 1993a). It is important for research because an unintended termination incurs high cost, increases uncertainty for the success of its objectives and decreases opportunities for its partners (Inkpen and Beamish, 1997 and Madhok and Tallman, 1998). Hence, a shorter duration of the alliance is undesirable in business. Researchers face a common question, why international alliances are short-lived.
National cultural distance appears to be a common explanatory factor in the extant research. Several empirical studies have extensively used cultural distance as the main explanatory variable. For instance, some studies use national culture to explain the formation of the alliance (Mayroffer, 2004, Steensma et al., 2000a and Steensma et al., 2000b). Other studies examine the link between cultural diversity and evolution of the alliance (Hennart and Zeng, 2002 and Kumar and Nti, 2004). Some link cultural distance to foreign entry modes (Indora & Richards, 2007). Yet other studies find adverse effects of national culture on the performance of the alliance (Barkema et al., 1996, Beamish and Kachra, 2004, Kim and Park, 2002 and Sirmon and Lane, 2004). Likewise, some others suggest that cultural diversity is responsible for the termination of the alliance (Folta & Ferrier, 2000a). Accordingly, cultural distance is the main impeding variable for the success of the alliance (Lenartowicz and Roth, 2004 and Westwood and Posner, 1997) and its stability (Meschi & Riccio, 2008).
However, cultural distance also has potential as an enabling factor in the duration of a learning alliance. A learning alliance seeks knowledge exchange and technology transfer. A short duration of the alliance limits its learning potential. Therefore, the question should whether and how cultural diversity influences the duration of the alliance. Since international alliances terminate 90% of the time before their maturity (Makino et al., 2007), it becomes relevant to understand the duration of the alliance. The currents study is an attempt in this direction. It examines whether and how cultural diversity influences the duration of the learning alliance in a high technology setting. The purpose of this article is to extend prior literature in some minute ways.
Prior research suggests that cultural distance negatively influences the duration of the international alliance. This study proposes the opposite—cultural distance can positively influence the duration of the alliance. Prior studies focus on the financial and subjective performance of the alliance. This study focuses on the duration of the learning alliance in response to context-dependent knowledge transfer. Assuming that knowledge is context dependent, cultural distance between exchange partners can delay knowledge transfer. Therefore, the alliance intended for knowledge transfer (learning) is likely to have a relatively longer duration. Prior empirical literature uses binary status of the alliance—terminated vs. not terminated. This study uses a gradation in the duration of the alliance (Contractor and Lorange, 2004, Gulati, 1998, Hennart et al., 1998 and Parkhe, 1991). Prior studies use governance mode as the outcome. This study uses governance mode as an alternative explanation (control variable) in the duration of the alliance. Cultural distance is the context-dependent phenomenon that influences the duration of an international alliance (Contractor, 2007, Mintzberg, 1985 and Ring and Van de Ven, 2000). Thus, this empirical study aims to make some incremental contribution to the knowledge on the duration of the alliance by providing empirical evidence.
The empirical analysis seeks support for this proposition. The evidence can reveal some insights for the future research and practice as to why alliances may last longer when cultural diversity is greater. The next section develops the framework and testable propositions. Section 3 discusses research method. Section 4 presents results. Section 5 provides discussion with some implications and limitation of the study.
