How a Firm's Domestic Footprint and Domestic Environmental Uncertainties Jointly Shape Added Cultural Distances: The Roles of Resource Dependence and Headquarters Attention

Even though many firms conduct most of their business domestically, international management research has remained remarkably silent on the role of a firm's domestic footprint in its internationalization strategy. We shed light on that role by exploring how the size of a firm's domestic footprint influences the cultural distance that the firm adds to its country portfolio when expanding internationally. Integrating resource dependence theory and the attention‐based view, we hypothesize that a firm's domestic footprint has a negative relationship with added cultural distance (ACD), and that domestic policy uncertainty strengthens this relationship whereas domestic demand uncertainty weakens it. We find robust support for our hypotheses in a sample of the world's largest retailers covering the period 2000–07, indicating that a firm's domestic footprint and domestic environmental uncertainties jointly shape cross‐cultural expansion strategies. Our findings suggest that ACDs reflect headquarters executives' desire to avoid ineffective foreign expansions, hinting at possible biases in studies of the performance effects of distance.