Headquarters Resource Allocation in the Multilayered Cultural Context

Although the importance of cross-country culture has been widely acknowledged in international business (IB) literature, we have limited understanding about how culture distance at different levels influences multinational corporations' (MNCs') management of subsidiaries. This paper contributes to culture related research by stressing cultural differences at the sub-national level and examining how cultural distances at both within-country and cross-country levels simultaneously influence MNCs' resource allocation for innovation transfer projects between subsidiaries. Based on 1,439 dyadic innovation transfer projects between Korean MNC subsidiaries in China, we find that the within-country cultural distance between subsidiaries is positively related to headquarters resource allocation for innovation transfer projects, and this relationship is strengthened when the cross-country cultural distance between headquarters and the sending subsidiary increases.