Culture and Cost Stickiness: A Cross-country Study

Abstract

In this study, we examine the effect of national culture on managerial decision-making through the lens of cost stickiness. Recent studies document that managerial discretion in adjusting resources leads to costs that are “sticky” in that costs respond less to decreases in activity than to increases in activity. We analyze how different dimensions of societal culture explain cross-country variation in cost stickiness. Using a sample of firms from 39 countries, we find that cost stickiness is less pronounced in countries with higher uncertainty avoidance, masculinity, and long-term orientation. Our findings support the proposition that culture affects resource management decisions made by managers and, in doing so, our study makes a significant contribution in understanding differences in sticky cost behavior observed across countries.