Abstract
Strategic alliance research has shown that national cultural similarity between partner firms can reduce transaction costs and positively influence cross-border alliance formation and performance. Yet, social identity research in psychology suggests that cultural similarity can give rise to in-group favoritism, which can lead partner firms sharing similar cultural backgrounds to cooperate with each other to defend their shared identity instead of pursuing economic efficiencies associated with cultural similarity. To investigate in-group favoritism associated with cultural similarity, we examine the influence of cross-regional religious similarity and ethnic similarity in the U.S. on domestic strategic alliance formation and alliance announcement returns. We find that cross-regional religious similarity and ethnic similarity in the U.S. positively affect the volume of interstate alliance activities, but are negatively associated with combined alliance announcement returns of partner firms. These findings suggest that cross-regional religious similarity and ethnic similarity facilitate interstate alliance activities between U.S. states, but investors seem to negatively interpret alliance decisions that can be potentially driven by in-group favoritism.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 32-46 |
| Number of pages | 15 |
| Journal | Journal of Corporate Finance |
| Volume | 34 |
| DOIs | |
| State | Published - Oct 1 2015 |
| Externally published | Yes |
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Keywords
- Culture
- Ethnicity
- Religion
- Strategic alliance
ASJC Scopus subject areas
- Business and International Management
- Finance
- Economics and Econometrics
- Strategy and Management
Cite this
Cultural similarity as in-group favoritism : The impact of religious and ethnic similarities on alliance formation and announcement returns. / Shi, Wei; Tang, Yinuo.
In: Journal of Corporate Finance, Vol. 34, 01.10.2015, p. 32-46.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - Cultural similarity as in-group favoritism
T2 - The impact of religious and ethnic similarities on alliance formation and announcement returns
AU - Shi, Wei
AU - Tang, Yinuo
PY - 2015/10/1
Y1 - 2015/10/1
N2 - Strategic alliance research has shown that national cultural similarity between partner firms can reduce transaction costs and positively influence cross-border alliance formation and performance. Yet, social identity research in psychology suggests that cultural similarity can give rise to in-group favoritism, which can lead partner firms sharing similar cultural backgrounds to cooperate with each other to defend their shared identity instead of pursuing economic efficiencies associated with cultural similarity. To investigate in-group favoritism associated with cultural similarity, we examine the influence of cross-regional religious similarity and ethnic similarity in the U.S. on domestic strategic alliance formation and alliance announcement returns. We find that cross-regional religious similarity and ethnic similarity in the U.S. positively affect the volume of interstate alliance activities, but are negatively associated with combined alliance announcement returns of partner firms. These findings suggest that cross-regional religious similarity and ethnic similarity facilitate interstate alliance activities between U.S. states, but investors seem to negatively interpret alliance decisions that can be potentially driven by in-group favoritism.
AB - Strategic alliance research has shown that national cultural similarity between partner firms can reduce transaction costs and positively influence cross-border alliance formation and performance. Yet, social identity research in psychology suggests that cultural similarity can give rise to in-group favoritism, which can lead partner firms sharing similar cultural backgrounds to cooperate with each other to defend their shared identity instead of pursuing economic efficiencies associated with cultural similarity. To investigate in-group favoritism associated with cultural similarity, we examine the influence of cross-regional religious similarity and ethnic similarity in the U.S. on domestic strategic alliance formation and alliance announcement returns. We find that cross-regional religious similarity and ethnic similarity in the U.S. positively affect the volume of interstate alliance activities, but are negatively associated with combined alliance announcement returns of partner firms. These findings suggest that cross-regional religious similarity and ethnic similarity facilitate interstate alliance activities between U.S. states, but investors seem to negatively interpret alliance decisions that can be potentially driven by in-group favoritism.
KW - Culture
KW - Ethnicity
KW - Religion
KW - Strategic alliance
UR - http://www.scopus.com/inward/record.url?scp=84938233692&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84938233692&partnerID=8YFLogxK
U2 - 10.1016/j.jcorpfin.2015.07.003
DO - 10.1016/j.jcorpfin.2015.07.003
M3 - Article
AN - SCOPUS:84938233692
VL - 34
SP - 32
EP - 46
JO - Journal of Corporate Finance
JF - Journal of Corporate Finance
SN - 0929-1199
ER -