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The Effect of Cultural Distance on Entry Mode Choice: the Moderating Effect of Language Diversity

In: Business and Management

Submitted By RajaE1992
Words 2641
Pages 11
The effect of cultural distance on entry mode choice: the moderating effect of language diversity

Name: Rajae El Aiachi
Student number: 10202773
Teacher: Dr Johan Lindeque
MSc. In Business Administration – Theories of International Management
Date: 27-09-2015
Abstract (50 Words)
Previous studies have shown that the choice of entry mode depends on various types of aspects, containing also cultural distance between countries (Arora and
Fosfuri, 2000). However, there is not a lot of consensus among these articles. A few articles mentioned the effect of language distance on entry mode choice.
Keywords: Cultural distance, entry mode choice and language distance

1. Introduction
In this time of globalization a lot of companies are expanding their international business activities in overseas market. The ways in which firms are expanding their business in overseas market differ per enterprise and country. The hierarchical model of market entry modes by Pan and Tse (2000) shows that there are different choices of entry modes. Entry modes can be seen as equity-based versus non-equity based. Within equity-based modes, there is a division between equity joint ventures and wholly owned operations. Within nonequity based modes, there is a division between export and contractual agreements. Prior research demonstrated that the choice of entry modes rely upon different types of components. Especially, a lot of previous studies focused on the effect of cultural distance on entry mode choices. Most of the articles exposed that as cultural distance increases, firms are likely to choose non-equity modes over equity modes (Arora and Fosfuri, 2000).
There is no consensus among the articles about the relationship between cultural distance and entry mode choice. In addition to that, few articles pointed out the influence of language distance on entry mode...

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