MNE home country cultural norms and conflict strategy fit in transnational business contract disputes

The increasing frequency and complexity of transnational business relationships has been commensurate with an increase in contractual disputes. In such situations, home country cultural norms will often influence how MNEs resolve contractual disputes in foreign markets. This begs the question: does fit between an MNE's choice of conflict strategy and its home country cultural norms affect monetary payouts (costs) in transnational business contract disputes? We apply organizational imprinting theory and the fit paradigm to a model employing data from U.S. court cases involving 316 MNEs from 47 countries. We find that choosing a conflict strategy that fits home country cultural norms will result in higher monetary payouts for MNEs. Additionally, cultural distance, but not legal distance, enhances the positive relationship between MNE conflict strategy fit and monetary payouts. Implications and future research directions are discussed.

► We model the cultural determinants of MNE monetary payouts in transnational business contract disputes. ► Study draws from organizational imprinting theory and the fit paradigm. ► We employ data from U.S. court cases involving 316 MNEs from 48 countries. ► Results show that choosing a conflict strategy that fits home country national culture results in higher monetary payouts. ► Cultural distance was found to moderate the relationship between MNE conflict strategy fit and monetary payouts.