Culture's Consequences in International Trade

The purpose of this research is to close the knowledge gap between social studies and economics; to contribute to theory development in areas of international trade and cross-cultural management; and to predict cultural effects in international trade through comprehensive modeling of trade flows with empirically-generated cross-cultural data. The key research question is how and to what extent do cultural differences between countries influence bilateral trade flows. The author analyzes links between economic and organizational behavior theories that contribute to the advancement of a multi-disciplinary research of international trade. The cultural data collection is linked to the 62-societies’ Global Leadership and Organizational Behavior Effectiveness (GLOBE) research in which the author served as Country Co-Investigator. Application of the augmented gravity model reveals positive effects of cultural distance in international trade flows. These results support arguments about the role of specialization and preference for trade over FDI in higher cultural friction country combinations. They also argue against simplified negative interpretation of the role of cultural distance in bilateral trade flows. Among other valuable results of the dissertation are: (1) the creation of a cultural distance map for 57 countries representing all major parts of the world; (2) proof of consistency of the augmented gravity model with previous researches; (3) generation of the original “culture-trade” index for different countries that help to better understand complex cultural effects in trade.