Culture and international trade: evidence from Canada Hamid Yeganeh College of Business, Winona State University, Winona, Minnesota, USA Abstract Purpose – The purpose of this paper is to investigate the effects of culture on international trade. Design/methodology/approach – A measure of the cultural distance is incorporated into the Gravity model to test the marginal effects of cultural variables on bilateral trade between Canada and 53 other countries. In addition to the cultural distance and economic factors, other control variables such as religion and language commonalities are included. Findings – After controlling for the size of GDP and linguistic commonality, the effects of culture on international trade are found to be insignificant. The empirical analysis shows that while the linguistic commonality has positive implications for international trade, the cultural distance and religion commonality do not seem important. Research limitations/implications – What is true for the Canadian international trade may not be true for other countries, especially for developing nations. Moreover, this study is limited to the Schwartz’s cultural dimensions. Practical implications – Managers should not stay away from culturally dissimilar partners as long as trade is economically beneficial. Instead, they should pay attention to training bilingual agents and standardizing trade procedures in order to streamline the negative effects of linguistic dissimilarity. Originality/value – This study refutes the generally accepted idea that culture is subversive to any cross-border business activity. Keywords Canada, Language, National cultures, International trade Paper type Research paper Introduction The impact of culture on international business is one of the most debated issues in the literature. Rushton (1989) posits that we are attracted to people whom we perceive similar, and we keep distance from those whom we perceive dissimilar. Cultural differences may make it difficult to understand, anticipate, and predict the behavior of others (Elsass and Veiga, 1994). Therefore, people from different cultures who work together face increased levels of misunderstanding and ensuing problems that may lead to lower levels of mutual trust (Boyacigillar, 1990). Based on the transaction cost economics (TCE) theory, many researchers argue that difficulties, costs, conflicts, frictions, communication problems, and risks increase when two culturally different partners come into contact (Hofstede, 2001; Kogut and Singh, 1988; Gomez-Mejia and Palich, 1997). Consequently, it is plausible to expect a direct and negative relationship between cultural distance and trade flows. In addition, we may assume that cultural similarity between two partners is very likely to promote the level of bilateral trade. Despite the heated debate in the literature, the complex nature of culture and its measurement difficulty has been deterring empirical research (Shenkar, 2001). To overcome the operational complexity, Kogut and Singh (1988) relied on Hofstede’s framework to build a composite index. Over the course of the past 20 years, the Kogut-Singh’s Index has received remarkable acceptance from such different disciplines The current issue and full text archive of this journal is available at www.emeraldinsight.com/1056-9219.htm Culture and international trade 381 International Journal of Commerce and Management Vol. 21 No. 4, 2011 pp. 381-393 q Emerald Group Publishing Limited 1056-9219 DOI 10.1108/10569211111189374