Open AccessThe Influence of Cultural Distance when Choosing a Suitable Foreign Direct Investment for the Internationalization Process of Companies. A theoretcal overview<br>http://dx.doi.org/10.5585/riae.v10i1.1712
Author(s) -
Ivani Ferreira
Publication year - 2011
Publication title -
revista ibero-americana de estratégia
Language(s) - English
Resource type - Journals
ISSN - 2176-0756
DOI - 10.5585/ijsm.v10i1.1712
Subject(s) - moderation , foreign direct investment , internationalization , transaction cost , process (computing) , business , international business , variable (mathematics) , investment (military) , industrial organization , accounting , marketing , economics , international trade , management , political science , finance , law , computer science , macroeconomics , mathematical analysis , machine learning , politics , mathematics , operating system
The present study is theoretical analysis on the influence that cultural distance (CD) may possess on the process of internationalization of companies, and country cost representing this variable; comparing the arguments of the transaction cost theory and the organizational capability theory, with the purpose of determining which form of foreign direct investment (FDI) is most appropriate when companies are directed to culturally distant countries. Two types of FDI strategies are discussed in this study: a WOS (Wholly Owned Subsidiary), for companies wishing to expand their business into culturally distant countries, but with a lower risk; and an IJV (International Joint Venture), for companies wishing to expand their business into culturally distant countries, but with a higher risk to the company. This study describes two opposing positions attempting to converge when a moderator variable is included: country risk. Thus, we shall look to build a thorough model of analysis, where the earlier theories are complemented to explain the entrepreneurial performance following various scenarios, in which the involved variables are, concurrently, the cultural distance and country risk.