The Effect of cultural distance on the internationalization process of FinTech companies

Abstract

During recent decades, digital services have markedly influenced people's lives as well as the world economy. Although financial services were the slowest industry in terms of digitalization, nevertheless, the emergence of fintech firms led to the rising of severe challenges to traditional banking and financial services. This study aims to investigate the internationalization of fintech companies and the effect of the cultural differences on the location choice process. to do so, this study was based on a multiple-case analysis and samples selected from CFTE’s top unicorn fintech firms. The author proved that fintech firms, in contrast to other digital companies, tend to internationalize following the Uppsala school of thought model, which means that they begin their internationalization process within culturally closer countries. Furthermore, it was proved that fintech firms follow an incremental cultural distance sequence in their internationalization plan. In addition, this study focused more on the development level of home base countries. It investigated whether or not the development level of home countries has a relationship with the location choice based on cultural distance. Despite previous literature claiming that firms from developing countries tend to expand internationally from more culturally distant and developed countries, this study proved that fintech firms from developing countries are the exception to this claim.