The Role of Culture in Foreign Direct Investment and Trade: Expectations from the GLOBE Dimensions of Culture

Abstract

This paper offers qualitative analysis of the impact of culture on international business. In particular, we discuss the potential impact of each of the nine cultural dimensions that were established by the Global Leadership and Organizational Behavior Effectiveness Research Program, which is led by Robert J. House, on the decision to trade with or invest in another country. The analysis finds characterizations of source- and destination-country are important for each dimension when deciding between trade and FDI. Given the potentially conflicting recommendations, the dimensions are placed in a hierarchy to distinguish those most in need of consideration from those of secondary import.