How subsidiaries differ in IT-enabled supply chain integration: The role of multinational firms’ cultural and geographical distance

Abstract

Information technology (IT) coordination with supply chain (SC) partners improves customer and supplier integration. However, little research integrates multinational firms' cultural and geographical distance with subsidiaries' SC practice even as subsidiaries increasingly face problems engaging with their parent firms due to institutional pressures and poor SC integration. This study investigates the moderating roles of cultural and geographical distance between parent firms and subsidiaries on the relationship between subsidiaries' IT coordination with SC partners and customer and supplier integration. Three data sources were utilized to test the hypotheses. Survey data were collected from multinational firms in the retail industry across a variety of countries. Hofstede's national culture index was used to measure cultural distance, and Google Maps data were used to calculate geographical distance. We conducted structural equation modelling and hierarchical regression analysis to test the varying effects. The results indicate that when subsidiaries have higher cultural and geographical distance from their parent firms, the positive effects of IT coordination on customer and supplier integration of subsidiaries are weaker. Understanding the roles of cultural and geographical distance is important for both parent firms and subsidiaries to facilitate IT-enabled SC integration and to select the geographical locations of subsidiaries.