de Jong, G. and van Houten, J. (2014). The impact of MNE cultural diversity on the internationalization-performance relationship. International Business Review, 23(1), pp.313–326. doi:https://doi.org/10.1016/j.ibusrev.2013.05.005.

What is the central argument of de Jong and van Houten (2014)?

The impact of internationalisation on MNE performance is contingent on MNE cultural diversity.

What is the difference between 'degree of internationalisation' and 'MNE cultural diversity'?

Degree of internationalisation refers to how widely spread an MNE is, while MNE cultural diversity refers to how culturally different those countries are.

Why has the internationalisation-performance (I-P) relationship produced mixed results in prior research?

Most studies treated internationalisation as the only variable, ignoring cultural diversity as a moderating factor.

What are the benefits of internationalisation according to the paper?

Economies of scale and scope, access to lower-cost factor markets, ability to shift sales to higher-margin markets, portfolio risk diversification, and exploiting firm-specific competitive advantages.

What are the costs of internationalisation according to the paper?

Coordination costs, governance and transaction costs, liabilities of foreignness, and potential for costs to outweigh benefits at high degrees of internationalisation.

What is the 'liability of foreignness' (LOF) and how does cultural diversity amplify it?

LOF is the extra cost a foreign firm incurs, amplified by cultural diversity due to greater cultural gaps.

What is the positive view of cultural diversity on MNE performance?

Cultural diversity exposes firms to different routines and practices, enabling learning and creativity benefits.

What is the negative view of cultural diversity on MNE performance?

Cultural diversity increases coordination, agency, and transaction costs.

What shape does the relationship between cultural diversity and MNE performance take?

An inverted U-shape, where initial diversity can be beneficial but excessive diversity leads to performance decline.

What are the four cells of the de Jong and van Houten contingency framework?

Cell I: high internationalisation, low cultural diversity → high performance; Cell II: high internationalisation, high cultural diversity → intermediate performance; Cell III: low internationalisation, low cultural diversity → intermediate performance; Cell IV: low internationalisation, high cultural diversity → low performance.

What does the interaction effect finding mean in plain terms?

The negative effect of internationalisation on performance increases with cultural diversity.

How did de Jong and van Houten improve on Gomez-Mejia and Palich's (1997) earlier study?

They introduced non-linear relationships and used cultural diversity as a contingency moderator.

What is the weighted cultural diversity (WCD) measure and why is it an improvement?

WCD weights cultural distance by the proportion of subsidiaries, accounting for international experience.

What are the practical implications for managers from this paper?

Managers should consider cultural distance in internationalisation decisions and control costs at moderate levels.

Why do many large MNEs remain regionally oriented?

Expanding beyond culturally similar regions increases cultural diversity costs, diminishing performance gains.

What are the key limitations of de Jong and van Houten (2014)?

The cultural diversity measure cannot account for subsidiary size or type, and findings may not generalise to SMEs or non-European firms.

How does this paper connect to the argument that diversity must be managed?

It shows that cultural diversity has an inverted U-shape effect, requiring active management to avoid overwhelming costs.