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Cognitive Distance and Obstacles to Subsidiary Business Success‐The Experience of C hinese Companies in G ermany
Author(s) -
Si Yuefang,
Liefner Ingo
Publication year - 2014
Publication title -
tijdschrift voor economische en sociale geografie
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.766
H-Index - 55
eISSN - 1467-9663
pISSN - 0040-747X
DOI - 10.1111/tesg.12064
Subject(s) - embeddedness , foreign direct investment , perspective (graphical) , business , cognition , host (biology) , empirical research , industrial organization , economic geography , marketing , economics , psychology , sociology , computer science , ecology , artificial intelligence , neuroscience , biology , anthropology , macroeconomics , philosophy , epistemology
The success of foreign direct investment ( FDI ) from developing countries to developed countries is critically dependent on managing the differences in the knowledge bodies of the regions and players involved. The theories that at least partly explain successful FDI of this kind use the terms cognitive distance and embeddedness. Most of the empirical research takes the perspective of regions and has addressed the problem of becoming embedded in the host regions. This paper takes the firm perspective and examines cognitive distance regarding not only the host region, but also the knowledge of the firms involved. It uses qualitative information from an extensive study of C hinese affiliates in G ermany. In contrast to many other studies, this paper shows that a fast and successful process of becoming embedded in the host region can hamper the subsidiary's success, as it may cause conflict with the parent firm.