National cultural differences and foreign direct investment in emergent countries

Abstract

The aim of this study is to examine the effects of cultural differences on foreign direct investment performance in a rent-based economy. Regression analysis was used to test the hypotheses in a sample of 121 firms. The findings show that cultural distance, in general, did not have an effect on international foreign direct investment performance, but the hypothesis relating individualism scores of cultures from where foreign investment belongs and the performance of foreign affiliates is verified. The moral engagement of local employees appeared to have a catalytic effect. In contrast, uncertainty avoidance does not have any significant impact on the performance of affiliates. We also find that the performance of a foreign affiliate increases when they invest in the industry in which the host country has a comparative advantage.