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Influence Of National Culture On Fdi

2529 words - 10 pages

Influence of national culture on FDIAbstractThis research seeks to empirically test the influence of the uncertainty avoidance Hofstede's dimension and trust on the choice of the flow of foreign direct investment (FDI). The results obtained suggest that the flow of FDI is better in countries with lower levels of uncertainty avoidance and high levels of trust, as suggested in the hypotheses. A third hypothesis proposes that the relationship between trust and FDI could become impaired when uncertainty avoidance increases. The outcomes aim to show how the important role of culture can significantly influence the choice of entry into a new country.Table of contents1. Introduction 42. Literature Review 53. Research Design & Methodology 64. Data analysis & expected results 75. Timetable 76. Limitations 77. References 81. IntroductionIn our globalized world managing business operations across cross-country boundaries has become one of the largest challenges for international business. Since the world becomes more and more interconnected companies seek to maximize their competitiveness by locating facilities in multiple locations around the world. Faced with increased international competition, Foreign Direct Investment (FDI) has grown significantly as a major criterion for entering a new gainful market in the global economic landscape. This remarkable growth of FDI around the world makes it an important component of the overall company's strategy. When a company moves to a foreign market, it must consider many different choices regarding the location of the FDI. One of the main problems a firm has to face with, are the cultural differences and characteristics in the respective country. Therefore, sensitivity to cross-national differences has become an important determinant for success in today´s international business arena.WFF is facing these mentioned challenges above. In order to stay competitive the firm should contemplate Foreign Direct Investment in another lucrative country. Since the company is already operating in four West-European countries the question raises if WFF should enter again a European country or preferably one of the fast growing economies. The wrong choice could reduce opportunities and increase the risks for high financial losses. The business representatives of WFF should be aware of the fact if and how foreign firms may be attracted by certain national cultural characteristics. Therefore the main research question the paper tries to answer is: How does national culture influence the decision of entering into a new country? In order to find out which country would be the better choice to exploit new market opportunities as well as what is the possible risk involved, two sub-research questions can be stated: First, which factors do most strongly affect the choice to enter into a new country? Second, what is the most efficient way to reduce risk in order to achieve a successful FDI? To extent these main statements,...

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