The distinctiveness effect: How cross-country dissimilarities influence governance decisions

Publication Type

Journal Article

Version

acceptedVersion

Publication Date

2-2026

Abstract

Transaction cost theory is one of the most commonly used theories to explain how firms govern their economic activities. In the context of cross-border collaborations, transaction cost theory proposes that dissimilarities between the partners’ home countries, which constitute a key source of behavioral uncertainty, affect how collaborations are governed (i.e. whether firms opt for equity joint ventures or non-equity alliances). Although many firms are likely to face more than one dimension of dissimilarity—for example, in terms language and religion, as well as culture—studies in transaction cost theory typically focus on how each source of dissimilarity impacts governance choices independently, in isolation. We integrate insights from research on decision-making and social psychology into the logic of transaction cost theory to theorize about how multiple dimensions of dissimilarity interactively impact governance choices in collaborative agreements, such that the influence of a given level of dissimilarity is not independent of the level of dissimilarity in other dimensions. Specifically, we propose that the impact of dissimilarity on a given dimension on these governance choices will be lower, that is, negatively moderated, when dissimilarities on other dimensions are higher. For example, a given level of cultural distance will have a greater impact on governance choice when linguistic distance is low (because cultural distance becomes more distinctive) as compared to a case when linguistic distance is not low. Our analysis of 21,951 cross-border non-equity alliances and equity joint ventures yields support for our predictions.

Keywords

alliances; inter-organizational relations; international management; multinational firms; topics and perspectives; transaction cost economics

Discipline

Strategic Management Policy

Research Areas

Strategy and Organisation

Areas of Excellence

Sustainability

Publication

Strategic Organization

Volume

24

Issue

1

First Page

170

Last Page

205

ISSN

1476-1270

Identifier

10.1177/14761270241254756

Publisher

SAGE Publications

External URL

https://api.elsevier.com/content/abstract/scopus_id/85199618355

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