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

Author

Listed:
  • 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.

Suggested Citation

  • Alessandra Perri & Francesca Checchinato & Cinzia Colapinto, 2013. "The hidden costs of going global: insights from firms' entry into foreign markets," Working Papers 26, Venice School of Management - Department of Management, Università Ca' Foscari Venezia.
    • Handle: RePEc:vnm:wpdman:62
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    Cited by:

    1. Francesca Checchinato & Giulia Zanichelli, 2016. "An analysis of factors influencing the online presence in distant countries: the case of italian fashion brands in china," MERCATI & COMPETITIVIT?, FrancoAngeli Editore, vol. 2016(3), pages 45-67.

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    More about this item

    Keywords

    Hidden costs; estimation; internationalization; distance;
    All these keywords.

    JEL classification:

    • M16 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - International Business Administration

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