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External uncertainty and entry mode choice: Cultural distance, political risk and language diversity

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  • López-Duarte, Cristina
  • Vidal-Suárez, Marta M.
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    Abstract

    This paper aims at analyzing the effect of external uncertainty on the entry mode choice when investing abroad. We consider the effect of uncertainty coming from the formal host country's environment (political risk) and from the informal one (cultural distance). The potential existence of an interaction effect between both of them is also analyzed. In particular, we analyze how language diversity between the home and host countries may condition the influence of this interaction effect on the entry mode choice. In order to empirically test our predictions, a database of foreign direct investments made by Spanish firms is used.

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    Bibliographic Info

    Article provided by Elsevier in its journal International Business Review.

    Volume (Year): 19 (2010)
    Issue (Month): 6 (December)
    Pages: 575-588

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    Handle: RePEc:eee:iburev:v:19:y:2010:i:6:p:575-588

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    Related research

    Keywords: Cultural distance Entry mode Foreign direct investment Joint venture Language Language barriers Language diversity Political risk Wholly owned subsidiary;

    References

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    Cited by:
    1. Verdu, Antonio J. & Gómez-Gras, José María & Martínez-Mateo, Jesús, 2012. "Value creation through production offshore–inshore strategies in a footwear industry cluster: A coevolutionary perspective," International Business Review, Elsevier, vol. 21(3), pages 342-356.
    2. Lauring, Jakob & Selmer, Jan, 2012. "International language management and diversity climate in multicultural organizations," International Business Review, Elsevier, vol. 21(2), pages 156-166.
    3. Lee, Joong-Woo & Abosag, Ibrahim & Kwak, Jooyoung, 2012. "The role of networking and commitment in foreign market entry process: Multinational corporations in the Chinese automobile industry," International Business Review, Elsevier, vol. 21(1), pages 27-39.
    4. Sachdev, Harash J. & Bello, Daniel C., 2014. "The effect of transaction cost antecedents on control mechanisms: Exporters’ psychic distance and economic knowledge as moderators," International Business Review, Elsevier, vol. 23(2), pages 440-454.

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