Supplier-customer cultural similarity and supplier performance

Using a corporate culture measure based on the textual analysis of the Q&A &A section of earnings conference calls, we document robust evidence that similar corporate cultural values between supply chain partners improve the financial performance of suppliers. Consistent with the view that supplier-customer cultural similarity facilitates communication, promotes altruistic attitudes, and builds trust between trading partners, we find that culturally similar suppliers experience higher cost efficiency, fewer problems with underinvestment, and better innovation performance. Our results also indicate that cultural similarity benefits customers, although to a lesser extent. Overall, our study sheds new light on how inter-firm cultural similarity influences firm performance along the supply chain.