Multimarket Contact and Firm Performance: The Moderating Effect of Confucian Culture

Multimarket Contact and Firm Performance: The Moderating Effect of Confucian Culture This paper examines the effect of Confucian cultural value on the relationship between multimarket contact and two dimensions of firm performance, i.e., firms’ innovation and profitability. It is hypothesized that firms with a high level of multimarket contact are more likely to show mutual forbearance towards their competitors, which in turn influences their innovative behavior and financial performance. Taking into account the possible moderating effects of Confucian cultural value, we also hypothesize that the effect of multimarket contact is more pronounced among firms from the Confucian culture. In other words, it is argued that firms from the Confucian culture are more likely to innovate and obtain better financial performance. Empirical tests were conducted after the hypotheses, and the findings support the arguments on multimarket contacts and mutual forbearance hypotheses. Through facilitating tacit collusion, multimarket contact does seem to help create superior economic performance. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Frontiers of Business Research in China Brill

Multimarket Contact and Firm Performance: The Moderating Effect of Confucian Culture

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Publisher
Brill
Copyright
Copyright 2011 by Koninklijke Brill NV, Leiden, The Netherlands
ISSN
1673-7326
eISSN
1673-7431
DOI
10.1007/s11782-011-0120-9
Publisher site
See Article on Publisher Site

Abstract

This paper examines the effect of Confucian cultural value on the relationship between multimarket contact and two dimensions of firm performance, i.e., firms’ innovation and profitability. It is hypothesized that firms with a high level of multimarket contact are more likely to show mutual forbearance towards their competitors, which in turn influences their innovative behavior and financial performance. Taking into account the possible moderating effects of Confucian cultural value, we also hypothesize that the effect of multimarket contact is more pronounced among firms from the Confucian culture. In other words, it is argued that firms from the Confucian culture are more likely to innovate and obtain better financial performance. Empirical tests were conducted after the hypotheses, and the findings support the arguments on multimarket contacts and mutual forbearance hypotheses. Through facilitating tacit collusion, multimarket contact does seem to help create superior economic performance.

Journal

Frontiers of Business Research in ChinaBrill

Published: Jan 1, 2011

Keywords: multimarket contact; mutual forbearance; Confucian culture

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