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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.

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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  • López-Duarte, Cristina & Vidal-Suárez, Marta M., 2010. "External uncertainty and entry mode choice: Cultural distance, political risk and language diversity," International Business Review, Elsevier, vol. 19(6), pages 575-588, December.
    • Handle: RePEc:eee:iburev:v:19:y:2010:i:6:p:575-588
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    5. Golesorkhi, Sougand & Mersland, Roy & Piekkari, Rebecca & Pishchulov, Grigory & Randøy, Trond, 2019. "The effect of language use on the financial performance of microfinance banks: Evidence from cross-border activities in 74 countries," Journal of World Business, Elsevier, vol. 54(3), pages 213-229.
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    7. Yilanci, Veli & Kilci, Esra N., 2021. "The role of economic policy uncertainty and geopolitical risk in predicting prices of precious metals: Evidence from a time-varying bootstrap causality test," Resources Policy, Elsevier, vol. 72(C).
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    9. 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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    11. 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.

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