An Analysis of Cultural Impact on International Business.Pdf Essay

2738 Words Feb 21st, 2012 11 Pages
Journal of Management and Marketing Research

An analysis of cultural impact on international business performance via foreign market entry mode: case of South Korean MNCs
Cheong-A Lee Pusan National University Ho-Yeol Bang Pusan National University Jong Wook Ha Columbus State University Joo Young Lee The University of West Alabama Young Hee Yun Kim Tuskegee University ABSTRACT Research on the entry mode of multinational companies (MNCs) to a new market has been one of the major topics in the international business, and the cultural factor has been regarded as one of the major factors to explain the entry mode selection of MNCs. Based on the development on the cultural factors on entry mode, MNCs can enter a market with joint venture or
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Different cultures have different levels of trustworthiness, and cultural difference needs to be used to measure the different level of trustworthiness among different countries. One of the ways to measure cultural difference is four cultural dimensions by Hofstede (1980). Masculinity will negatively affect the joint venture projects, and individualism will make negative impacts on the voluntary joint management of a firm (Tiessen, 1997). Power distance can be used to measure the level of control of joint venture company, and uncertainty avoidance can promote more joint venture projects in foreign direct investment (Hofstede, 1980). Cultural difference of countries can be a factor to determine the type of wholly owned subsidiary investment. Larger difference in culture requires stronger controls of business, and firms will prefer wholly owned subsidiary as an entry mode to foreign markets. To fully own a foreign firm, a firm can establish a new business or acquire an existing firm in the target market. Morosini (1998) argues that the cultural difference will increase the benefit from acquiring an existing firm in a new market, since the MNE can learn the different norms and routines on the

An analysis of cultural, Page 2

Journal of Management and Marketing Research target country from the acquired subsidiary. Jemoson and Sitkin (1980) and Hofstede (1980) show the similar results. Meanwhile, Klein, Frazier and Roth (1990), and

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