The Interplay of Formal Institutional and Cultural Distances and the Financial Performance of Foreign Subsidiaries in Latin America

We investigate how formal institutional distance (FID) moderates the cultural (CD) and financial performance relationships of foreign subsidiaries firms. Following recent research, we estimate asymmetric effects CD by considering its size direction towards host countries on opposite poles each dimension’s scale. propose that a limited understanding institutions in country, as measured magnitude FID, can positively moderate CD–performance relationship. This is mainly because subsidiary firms may be more reliant their capacity to navigate less (and implicit) aspects country’s environment, such ability cope with CD. use data from Orbis database, which includes 22 developed developing home over 1400 operating 10 Latin America’s largest economies (host countries) 2012 2015 (a period 3 years). Findings confirm CD; however, our findings reveal FID directed are developed, significant performance. These contribute knowledge informal distances interact showing greater countries, pronounced