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The effect of institutional distance on international market selection: comparing export to foreign direct investment

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  • Desislava Budeva
  • Gladys Torres-Baumgarten

Abstract

The goal of the current paper is to investigate the effect of institutional distance on market expansion. We specifically focus on two dependent variables, export and foreign direct investments (FDIs) from the USA. The research uses a cross-sectional time-series analysis to test the influence of institutional factors on exports and FDI. Dimensions of the institutional environment have an effect on export and FDI activity between two countries. The regulative, normative, and cultural dimensions of the institutional environment vary in importance across the two modes of entry. Of the three, culture turns out to be the most significant. Our framework allows companies to classify markets with regards to these macro variables and then investigate international expansion opportunities.

Suggested Citation

  • Desislava Budeva & Gladys Torres-Baumgarten, 2021. "The effect of institutional distance on international market selection: comparing export to foreign direct investment," International Journal of Export Marketing, Inderscience Enterprises Ltd, vol. 4(2), pages 127-149.
    • Handle: RePEc:ids:ijexpo:v:4:y:2021:i:2:p:127-149
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