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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.

Suggested Citation

  • 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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    References listed on IDEAS

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    Cited by:

    1. Antoaneta Daneshka, 2016. "Culture and International Business," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 1, pages 88-111.
    2. 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, pages 440-454.
    3. Klitmøller, Anders & Lauring, Jakob, 2016. "When distance is good: A construal level perspective on perceptions of inclusive international language use," International Business Review, Elsevier, pages 276-285.
    4. Choi, Jeongho & Yeniyurt, Sengun, 2015. "Contingency distance factors and international research and development (R&D), marketing, and manufacturing alliance formations," International Business Review, Elsevier, pages 1061-1071.
    5. 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, pages 27-39.
    6. 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, pages 342-356.
    7. Lauring, Jakob & Selmer, Jan, 2012. "International language management and diversity climate in multicultural organizations," International Business Review, Elsevier, pages 156-166.

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