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The hidden costs of going global: insights from firms' entry into foreign markets

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  • Alessandra Perri

    ()
    (Dept. of Management, Università Ca' Foscari Venice)

  • Francesca Checchinato

    ()
    (Dept. of Management, Università Ca' Foscari Venice)

  • Cinzia Colapinto

    ()
    (Dept. of Management, Università Ca' Foscari Venice)

Abstract

Recent literature on strategic decision-making highlights the role of hidden costs, i.e. costs that firms are not able to predict ex-ante (Larsen et al., 2012). This paper analyses the hidden costs of going global, i.e. unanticipated costs that emerge in the implementation of market entry strategies. Foreign market entry requires firms to assess the potential attractiveness of different locations, select an appropriate entry mode, and organize their international value chain. When taking such decisions, firms can make evaluation mistakes. We propose that cultural distance is one factor that generates Òblind spotsÓ in a firmÕs strategic analysis, thus affecting its ability to evaluate the actual challenges of entering foreign markets. Firms can offset distance-driven hidden costs by building international experience and relational capability.

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File URL: http://virgo.unive.it/wpideas/storage/2013wp26.pdf
File Function: First version, 2013
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Bibliographic Info

Paper provided by Department of Management, Università Ca' Foscari Venezia in its series Working Papers with number 26.

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Length: 11 pages
Date of creation: Nov 2013
Date of revision:
Handle: RePEc:vnm:wpdman:62

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Web page: http://www.unive.it/dip.management
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Related research

Keywords: Hidden costs; estimation; internationalization; distance;

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References

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  1. Jan Johanson & Jan-Erik Vahlne, 2009. "The Uppsala internationalization process model revisited: From liability of foreignness to liability of outsidership," Journal of International Business Studies, Palgrave Macmillan, vol. 40(9), pages 1411-1431, December.
  2. Luis R G�mez-Mejia & Leslie E Palich, 1997. "Cultural Diversity and the Performance of Multinational Firms," Journal of International Business Studies, Palgrave Macmillan, vol. 28(2), pages 309-335, June.
  3. Bruce Kogut & Harbir Singh, 1988. "The Effect of National Culture on the Choice of Entry Mode," Journal of International Business Studies, Palgrave Macmillan, vol. 19(3), pages 411-432, September.
  4. T.K. Das, 1999. "Cognitive Biases and Strategic Decision Processes: An Integrative Perspective," Journal of Management Studies, Wiley Blackwell, vol. 36(6), pages 757-778, November.
  5. Jean-Fran�ois Hennart & Jorma Larimo, 1998. "The Impact of Culture on the Strategy of Multinational Enterprises: Does National Origin Affect Ownership Decisions?," Journal of International Business Studies, Palgrave Macmillan, vol. 29(3), pages 515-538, September.
  6. M Krishna Erramilli, 1991. "The Experience Factor in Foreign Market Entry Behavior of Service Firms," Journal of International Business Studies, Palgrave Macmillan, vol. 22(3), pages 479-501, September.
  7. Robert Grosse & Len J Trevino, 1996. "Foreign Direct Investment in the United States: An Analysis by Country of Origin," Journal of International Business Studies, Palgrave Macmillan, vol. 27(1), pages 139-155, March.
  8. Jaideep Anand & Andrew Delios, 1997. "Location Specificity and the Transferability of Downstream Assets to Foreign Subsidiaries," Journal of International Business Studies, Palgrave Macmillan, vol. 28(3), pages 579-603, September.
  9. Keith D Brouthers, 2002. "Institutional, Cultural and Transaction Cost Influences on Entry Mode Choice and Performance," Journal of International Business Studies, Palgrave Macmillan, vol. 33(2), pages 203-221, June.
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