Cultural logic of German foreign direct investment (FDI) in service sector

Abstract

One of the most critical and challenging key decisions commonly discussed in the field of international business is the location decision of Foreign Direct Investment (FDI) since its failure causes impactful consequences, financially as well as for the brand image (Galan et al. 2007; Johnson et al. 2006). For this reason, knowledge about why one country invests in another and what influences it is vital for governments and multinational enterprise (MNE) managers alike in order to ensure effective policy-making and to assess potential costs and benefits for firms (Aguiar et al. 2006). Currently, there is a controversial discussion about the decisive factors and polices that influence FDI in the global economy which is also due to the plethora of research about the determinants of FDI which does not find consensus (Du et al. 2012; Mellahi and Guermat 2001; Zait et al. 2014). Consequently, it is impossible to assess all possible determinants of FDI, and hence this dissertation will look at German FDI abroad and how location choices for this type of investment are influenced by cultural differences between home and host country. There are many forms of distance; i.e., geographical, political or economic, however, as Gomez-Mejia and Palich (1997) pointed out, cultural differences are an inevitable challenge for an internationally expanding firm and crucial to consider. Despite its alleged importance, the plethora of research to determine the reason for FDI abroad all too

Climate risk, climate risk distance and foreign direct investment

“…More generally, Li et al (2021) suggest that cultural differences have a negative impact on the possibility and scale of Chinese FDI flowing into a host country. Nayak and Scheib (2020) discuss the relationship between cultural distance and FDI in Germany’s service industry. In addition, some scholars have proposed that, compared to a single factor, institutional distance can more accurately explain the differences between national environments (Xu and Shenkar, 2002; Phillips et al , 2009).…”