Impact of cultural positions on FDI’s entry mode

Abstract

Purpose – The purpose of this paper is to study the influence of cultural positions on the choice of entry mode in foreign direct investment (FDI) – joint ventures vs wholly owned subsidiaries. The paper focusses on the impact of cultural positions along four cultural dimensions, as well as on the interactions between these positions and FDI’s contextual variables (i.e. linguistic differences). Design/methodology/approach – A fuzzy set qualitative comparative analysis is performed on a data set of Spanish investments located in the European Union. Findings – Existence of interaction effects among cultural positions along different dimensions, as well as between cultural positions and FDI’s contextual variables. Research limitations/implications – Main limitations relate to the data set, as only FDIS carried out by big corporations and coming from a single country are considered. Practical implications – Managers making decisions on the choice of entry mode must take into account the position relative to each individual cultural dimension, as well as its interaction with other cultural dimensions and FDI’s contextual variables, rather than just considering cultural distances (CDs) between countries. Originality/value – First, focus on cultural positions (rather than CDs). It allows taking into account both the cultural characteristics of each party and their relative values along individual cultural dimensions. Second, development of a qualitative analysis that considers the contextual features of the investment.

Legal family, cultural dimensions, and FDI

“…This result lends support to the argument that highly individualistic countries are more willing to bear the risk of foreign investments, regardless of legal origin. Benefits increase the more different societies are in tackling specific problems, because differences in the individualism/collectivism dimension bring uniquely different problem and conflict-solving skills to the table (López-Duarte et al , 2015).…”

“…On the one hand, countries with high cultural distance (or dissimilar countries) are less likely to invest in each other (Beugelsdijk and Frijns, 2010; Grosse and Trevino, 1996). On the other hand, foreign investments in wholly owned subsidiaries are more likely to happen between countries with high cultural distance (López-Duarte et al , 2015).…”

Foreign direct investment patterns of global hotel chains

“…Several recent studies, although focusing on different target regions, have emphasized the importance of general business conditions for attracting foreign investment in the hotel industry (Barrowclough, 2007;Chen, Dimou, 2005;López-Duarte, Vidal-Suárez, González-Díaz, 2015;Salazar, 2005;Yang, Luo, Law, 2014).…”

Do Strategic Motives Affect Ownership Mode of Foreign Direct Investments (FDIs) in Emerging African Markets? Evidence from Ghana

“…According to Malhorta and Sivakumar (), cultural distance has curvilinear and interaction effects on the level of equity participation. Moreover, it has been established that there is the existence of interaction effects among cultural positions along different dimensions, as well as between cultural positions and FDI's contextual variables (López‐Duarte, Vidal‐Suárez, & González‐Díaz, ). A study by Wei, Xie, and Zhang () found a negative relationship between cultural distance and choice of WOS.…”