The Influence of Cultural Distance when Choosing a Suitable Foreign Direct Investment for the Internationalization Process of Companies. A theoretcal overview<br>http://dx.doi.org/10.5585/riae.v10i1.1712

The present study is theoretical analysis on the influence that cultural distance (CD) may possess on the process of internationalization of companies, and country cost representing this variable; comparing the arguments of the transaction cost theory and the organizational capability theory, with the purpose of determining which form of foreign direct investment (FDI) is most appropriate when companies are directed to culturally distant countries. Two types of FDI strategies are discussed in this study: a WOS (Wholly Owned Subsidiary), for companies wishing to expand their business into culturally distant countries, but with a lower risk; and an IJV (International Joint Venture), for companies wishing to expand their business into culturally distant countries, but with a higher risk to the company. This study describes two opposing positions attempting to converge when a moderator variable is included: country risk. Thus, we shall look to build a thorough model of analysis, where the earlier theories are complemented to explain the entrepreneurial performance following various scenarios, in which the involved variables are, concurrently, the cultural distance and country risk.

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Revisit the CD Paradox in Entry Model Choice: Toward the Perspective of Strategic Fit

American Journal of Management ◽

10.33423/ajm.v18i3.77 ◽

2018 ◽

Vol 18 (3) ◽

pp. 86-103

Keyword(s):

Joint Venture ◽

Cultural Distance ◽

Model Choice ◽

Outward Fdi ◽

Strategic Fit ◽

Market Expansion ◽

Technological Competence ◽

Entry Model ◽

Wholly Owned Subsidiary ◽

Strategic Motives

The effect of cultural distance (CD) on the entry mode choice (EMC) has been intensively studied but the empirical results are mixed. This study adopts the strategic fit perspective to examine how firms’ strategic motives and technological ownerships may influence the EMC in face of different cultural distances. Analyzing Taiwanese outward FDI cases from 2004 to 2007, this study found that firms entering the culture-distant countries would choose the wholly-owned subsidiary (WOS) mode when emphasizing more about the protection of technological competence than market expansion, or else would choose the joint-venture (JV) mode when the market expansion is prioritized.

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Foreign direct investment and country risk: Further empirical evidence

Global Economic Review ◽

10.1080/12265089908449766 ◽

1999 ◽

Vol 28 (3) ◽

pp. 49-59 ◽

Cited By ~ 11

Author(s):

Harri Ramcharran

Keyword(s):

Foreign Direct Investment ◽

Empirical Evidence ◽

Direct Investment ◽

Country Risk

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Influence of Cultural Distance on Chinese Outward Foreign Direct Investment

Emerging Economies and Firms in the Global Crisis ◽

10.1057/9781137277473_7 ◽

2013 ◽

pp. 154-178

Author(s):

Rian Drogendijk ◽

Katarina Blomkvist

Keyword(s):

Foreign Direct Investment ◽

Direct Investment ◽

Cultural Distance ◽

Outward Foreign Direct Investment

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The Role of Cultural Distance Across Quantiles of International Joint Venture Longevity

Journal of International Marketing ◽

10.1177/1069031x19874040 ◽

2019 ◽

Vol 27 (4) ◽

pp. 3-21 ◽

Cited By ~ 1

Author(s):

Annette P. Tower ◽

Kelly Hewett ◽

Anton P. Fenik

Keyword(s):

Cultural Differences ◽

Joint Venture ◽

Cultural Distance ◽

Methodological Approach ◽

International Marketing ◽

Cultural Dimensions ◽

International Joint Venture ◽

International Joint ◽

The Impact

Rapid global economic development and liberalization have increased the motivation and opportunities for firms to enter into international joint venture (IJV) agreements. Numerous studies in the international marketing literature have examined the impact of international partners’ cultural differences on IJV longevity; however, results are inconclusive, potentially due to limitations in the methods used. While this study examines the varied impact of cultural differences on IJV longevity based on the IJV’s age, it uses quantile regression, enabling the detection of varying effects’ strengths across the dependent variable’s entire distribution. The results demonstrate variations in the role of cultural differences across individual cultural dimensions as well as variations in the patterns of association between cultural differences and IJV longevity dependent on the IJV’s age. Implications for theory and the practice of international marketing are offered as well as potential applications of this study’s methodological approach.

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Regime Type and Foreign Direct Investment: A Transaction Cost Economics Approach to the Debate

Oxford Research Encyclopedia of Politics ◽

10.1093/acrefore/9780190228637.013.578 ◽

2017 ◽

Author(s):

Austin P. Johnson ◽

Quan Li

Keyword(s):

Foreign Direct Investment ◽

Multinational Corporations ◽

Direct Investment ◽

Multinational Firms ◽

Joint Venture ◽

Transaction Cost Economics ◽

International Political Economy ◽

Regime Type ◽

Ownership Type ◽

Multiple Dimensions

A debate exists in international political economy on the relationship between regime type and foreign direct investment (FDI). The central point of contention focuses on whether multinational firms generally prefer to pursue business ventures in more democratic or autocratic countries. A considerable amount of theory has been developed on this topic; however, the arguments in previous studies lack consistency, and researchers have produced mixed empirical findings. A fundamental weakness in this literature is that while FDI has largely been treated conceptually as a homogeneous aggregate, in reality, it features divergent characteristics on multiple dimensions. Three possible dimensions that FDI can be decomposed on are: greenfield vs. brownfield, ownership type (wholly owned vs. joint venture), and horizontal vs. vertical. The most relevant dimensions to the problem at hand are: greenfield vs. brownfield, and horizontal vs. vertical. Five propositions, based on the notion of asset specificity, other investment attributes, and host nation domestic factors, are derived to predict how regime type might affect four types of FDI: vertical-greenfield; vertical-brownfield; horizontal-greenfield; and horizontal-brownfield. Depending on the type of FDI, multinational corporations may have no regime preference, an autocratic preference, or a democratic preference. This research contributes to empirical international relations theory by providing a useful example on how to resolve a scholarly debate, theoretically, and by laying out testable propositions for future empirical research.

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