Cultural distance or cultural positions? Analysing the effect of culture on the HQ–subsidiary relationship

We develop a model of cultural positions in relationships that should be considered in addition to the more conventional cultural distance. We empirically analyse relationships between headquarters and foreign subsidiaries in multinational corporations and how high or low acceptance of power differences at both sides of the relationship is associated with headquarters influence on subsidiary competence development. ANCOVA analyses of 1529 subsidiaries in six European countries, headquartered in 28 countries, provide new insights. We find that relationships with low cultural distance, differ significantly in terms of headquarters influence depending on whether headquarters and subsidiaries agree on accepting or rejecting power differences. Similarly, relationships with high cultural distance differ depending on whether it is headquarters or the subsidiary that is from a high-power-distance culture: we find that headquarters influence is particularly dependent on great acceptance of power differences by the subsidiary.

► A model of cultural positions in HQ–subsidiary relations.
► Based on power distance of HQ and subsidiary.
► ANCOVA analyses of 1529 subsidiaries.
► General support for cultural positions in relationships.
► Subsidiary position particularly important in empirical context.