How cultural distance influences entry mode choice: The contingent role of host country's governance quality

Yi-Chieh Chang, Ming-Sung Kao*, Anthony Kuo, Chih-Fang Chiu

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

46 Scopus citations

Abstract

When entering a culturally distant host country, whether MNEs prefer JVs or WOSs has long been a paradox. The current study aims to explain the paradox by examining the effect of the host country's governance quality. This study hypothesizes that governance quality plays a contingent role. When MNEs enter a culturally distant country with poor governance quality, the risks of collaborating with local partners soar. MNEs thus prefer WOSs. However, if governance quality is satisfactory, the local partners' opportunistic behavior will be restricted, and MNEs thus prefer JVs. An analysis of 2451 entries by Taiwanese MNEs into 13 countries supports the hypotheses. (C) 2011 Elsevier Inc. All rights reserved.

Original languageEnglish
Pages (from-to)1160-1170
Number of pages11
JournalJournal of Business Research
Volume65
Issue number8
DOIs
StatePublished - Aug 2012

Keywords

  • Cultural distance
  • Governance quality
  • Entry mode
  • Joint venture
  • Wholly owned subsidiary
  • FOREIGN DIRECT-INVESTMENT
  • TRANSACTION COST INFLUENCES
  • EQUITY JOINT VENTURES
  • INSTITUTIONAL ENVIRONMENT
  • MULTINATIONAL-ENTERPRISE
  • OWNERSHIP
  • IMPACT
  • DETERMINANTS
  • PERSPECTIVE
  • PERFORMANCE

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