Research summary: Prior research focused on cultural differences and their impact on foreign direct investment (FDI), neglecting other potentially relevant variables attesting to the cultural interaction between a multinational enterprise and its host environment. In this article, we draw on interpersonal attraction research to develop a positive approach to cross‐cultural interaction with the cultural attractiveness (CA) construct, whereby members of a focal culture view another culture as desirable. We create a CA measure and establish its predictive validity with country reputation data. Using FDI data for 41 nations from 1985 to 2012 and performance data for 8,519 cross‐border acquisitions (CBA) for 40 nations from 1990 to 2009, we find that CA is a predictor of FDI inflows and CBA outcomes, whose explanatory power is superior to cultural difference measures. Managerial summary: Practitioners have traditionally emphasized potential difficulties of cross‐cultural interaction when dealing with culturally distant countries. In contrast, our study addresses the positive aspects of cultural differences and suggests that a lot can be gained from dealing with attractive cultures, even when they are different. This insight can be helpful, for example, in contemplating/managing international M&As. Managers of acquiring/merging firms can use our approach to identify whether their employees find the partner's culture desirable, and if they do, proceed with the takeover and then adopt the partner's organizational routines during post‐merger integration. This approach can help avoid conflicts, improve performance of home country expatriates, and ultimately, create value for acquiring firms.
- cultural attractiveness
- foreign direct investment
- interpersonal attraction
- country reputation
- cross‐border acquisition performance