The Impact of Cultural Distance on MNEs’ Performance: Focusing on “China-Specific” Capabilities of TMT

Extant studies have proposed that cultural distance is closely related with performance of multi- national enterprises (MNEs). Based on the literature, this research explores the research questions when and how MNEs’ liability of foreignness caused by cultural distance can be mitigated with locally capable top management team (TMT). In particular, the paper proposes three China-specific interactions, 1) returnee manager , 2) educational background , and 3) political connections of top management team. With data on 102 foreign-invested enterprises in China, this research finds positive moderating roles of TMT which possesses China-specific local capabilities. The implication of the study is that cultural diversity between two different country contexts is an important obstacle for the performance of MNEs and those with oversea-experienced, highly-educated, and politically- connected TMT managers can relieve this disadvantage. Our studies may contribute to the management studies by providing practical tools to avoid liability of foreignness in emerging market.