Cultural Distance and Entry Mode Choice: Evidence from the North-Adriatic Area (original) (raw)
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Foreign Market Entry Strategies in the North-Adriatic Area
International Journal of Information Systems and Social Change, ISSN: 1941-868X, EISSN: 1941-8698, 2013
The consolidation of economic and political relations in the North-Adriatic area and their formalization encouraged by the new institutional structures of Euro-regions are phenomena of central relevance to the actual European economic environment. These conditions have a significant influence on the strategic choices of local firms. In spite of the geographical proximity between Italy, Austria, Slovenia, and Croatia, cultural differences still act as important determinants in leading foreign investment strategies. The current study aims at analyzing the role played by cultural distance between the examined countries in affecting entry mode strategies followed by companies of the Italian region of Friuli-Venezia Giulia. In particular, the analysis suggests that a larger cultural distance, together with specific market characteristics, may force companies to choose entry forms with a lower degree of control, while specific firm characteristics may have an opposite impact on the internationalization strategies.
Cultural Influences on Entry Mode Choice in International Business: An Assessment and Review
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The aim of this paper is to provide a reflection on how academic production in International business has approached culture and its influences on entry mode choice. This paper provides: a theoretical basis for systematically interrelating the literature into four propositions: propositions about both horizontal and vertical joint ventures and different levels of profitability in an industry; the relationship between perceived cultural distance for joint venture or wholly owned subsidiaries, and finally, the role of trust and inward FDI and uncertainty avoidance. The cultural factors and investments risks and cultural factors and trust relationships on entry mode choice literature are reviewed in the context of such propositions, and it is possible to identify, depending on the level of cultural distance, that it certainly affects the relationship between countries in the process of deciding for an entry mode. The level of trust plays an important role when the MNE is looking for local partners, aiming to cease any possibility of investment risks.
Journal of International Business Studies
"Although a growing literature indicates that cultural distance – that is, differences between national cultures – is an important determinant of organizational actions and performance, both empirical and theoretical concerns abound. In this study, the relationships of cultural distance with entry mode choice, international diversification, and MNE performance are examined by meta-analyzing data from 66 independent samples, with cumulative sample sizes ranging from 2,255 to 24,152. Regression results failed to provide statistical evidence of significant relationships between cultural distance and entry mode choice, international diversification, and MNE performance. The examination of moderator effects, however, yielded important results. We found a strong negative association between cultural distance and entry mode choice for US-based MNEs. The cultural distance–international diversification relationship was negative for high-technology industries, while it was positive for other industries. Cultural distance also had a strong positive effect on MNE performance for developed country investments. A similar, strong positive relationship was found between cultural distance and international diversification in studies with more recent samples. Results of this study indicate that substantial additional research is needed before the role of cultural distance is fully understood."
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Using a resource-based view model, this paper examines the main factors influencing small and medium-sized enterprise (SME) international entry mode selection. In addition, a possible relationship between firms belonging to industrial districts and the entry mode choice has been verified. Data for the analysis of this study were collected interviewing 221 owners/managers of SMEs in Italy. Results showed that entry mode decisions are mainly influenced by firm specific factors. Furthermore, the study does not support the hypothesis of a connection between the firm’s belonging to an industrial district and firms’ behavior in entry mode selection. This study has made it possible to detect by a resource-based perspective the main factors influencing the choice of entry modes.
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Recent studies have shown that culture has an effect on the choice of foreign investment venture structure. Cultural distance has been identi ed as a primary determinant in the selection of shared control over wholly foreign owned investment. The data from these studies indicate, however, that individual cultural characteristics of investor countries may be more important than the difference in culture. In this study, a sample of Singaporean building and construction rms is utilized to explore whether joint venture (JV) formations correspond more to the uncertainty avoidance dimension of the investor's culture than to cultural distance. The results show that an investor's cultural aversion to risk may be more in uential in explaining the propensity for rms from certain countries to engage in JVs, rather than other cultural factors.
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