Cross-national distance and insidership within networks: Japanese MNCs’ ownership strategies in their overseas subsidiaries

The equity ownership strategy is critical for MNCs as it affects both the foreign affiliate’s

likelihood of success and its probability of survival (Dhanaraj and Beamish 2004; Li 1995;

Stopford andWells 1972). Meanwhile, the field of international business (IB) has paid much

attention to the impact of cross-national distance on the various strategies ofMNCs’ operating

in foreign countries (Werner 2002), including equity ownership. For decades of research, the

mostwidely used approach to cross-national distance is based onHofstede’s fourmeasures of

culture, originally made available in his 1980 book Culture’s Consequences: International

Differences in Work Related Values. IB scholars find his approach appealing for two reasons.

First, Hofstede (1980) proposes power distance, uncertainty avoidance, individualism and

masculinity as the key distinguishing aspects of national culture, and compares these factors

using a large sample of countries. Second, the emphasis on flows of information between the

home and host countries lends itself to a conceptualization based on cultural and psychic

differences, which increases the uncertainty, risk and, hence, the costs of entering foreign

countries (Hennart and Larimo 1998).