International Business
The Effect of National Culture on the Choice of Entry Mode
Foreign direct investment has increased dramatically over the last couple of decades and this trend has been studied. However, it is argued that the entry model form many of these investments has not been studied with the same rigor. It is commonly thought the composition of national cultures on Hofstede's scale and the distance between the two cultures influences the model of entry that is chosen. The study proposes that the cultural distance between two cultures as well as the uncertainty avoidance principles will guide the selection and compares data on 228 entries into the U.S. market through acquisition, wholly owned greenfield, and joint venture. The study finds several correlations in the data and concludes that the entry mode is influenced by cultural factors.
Position of the Author
The position of the author is that there is a gap in the literature that examines the influence that culture can have on direct foreign investment with the entry model as the vehicle for this relationship. The multiple regression tests that were run on the cultural variables showed significant correlations. The author believed that this was an indirect method for validating the usefulness of Hofstede's cultural factors and their scales. The author also seemed surprised at the strength of the relationships...
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