Cultural Influences on Foreign Direct Investment

Authors

DOI:

https://doi.org/10.18568/internext.v14i2.458

Keywords:

Cultural influences, Foreign Direct Investment (FDI), National cultures, Cultural distance, Hofstede

Abstract

The current business competitive environment has influenced companies to cross national borders to explore foreign markets. The decision about in which country the company should invest isn’t easy. Many factors can influence this decision, and culture is one of factors that international business scholars have incorporated in their researches. This article deals with the influence of cultural distances on Foreign Direct Investment, specifically it aims to examine whether cultural values affects bilateral Foreign Direct Investment, that is, Foreign Direct Investment Stock. Data that include bilateral Multiple Regression Quadratic Assignment Procedure technique between 45 countries in 2007 were used, representing almost 95% of the Foreign Direct Investment Stock worldwide. The Multiple Regression Quadratic Assignment Procedure technique was used. It was found that the similarities in Power Distance between two countries positively affects the Foreign Direct Investment stock between them (it means that companies prefer countries similar from their home country) and the presence of high Uncertainty Avoidance in one or in both countries of a dyad negatively affects the Foreign Direct Investment stock between them (it means that companies avoid countries that are different from their home country). Contributions: (1) uses an innovative approach Multiple Regression Quadratic Assignment Procedure technique to analyze how individual cultural dimensions influence Foreign Direct Investment; (2) responds to the critique by Shenkar, by applying separate rather than aggregate cultural distance; (3) unveils how some cultural dimensions work in influencing FDI.

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Author Biographies

Marcelo Ribeiro Goraieb, Universidade Estadual de Maringá - UEM

Mestre em Administração pela Universidade Estadual de Maringá - UEM.  

Maurício Reinert do Nascimento, Universidade Estadual de Maringá - UEM

Doutor em Administração pela Fundação Getúlio Vargas- FGV, São Paulo, (Brasil). Pós-Doutorado em Sociologia Econômica pelo Max Planck Institute, Alemanha. Professor do Programa de Pós-Graduação em Administração na Universidade Estadual de Maringá - (PPA/UEM), Paraná. 

Fabiane Cortez Verdu, Universidade Estadual de Maringá - UEM

Doutora em Administração pela Universidade Federal do Paraná - UFPR, Paraná, (Brasil). Pós-Doutorado em Administração pela Universidade de Colônia, Alemanha. Professora do Programa de Pós-Graduação em Administração - (PPA/UEM), Paraná.

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Published

2019-03-29

How to Cite

Goraieb, M. R., Reinert do Nascimento, M., & Verdu, F. C. (2019). Cultural Influences on Foreign Direct Investment. Internext - International Business and Management Review, 14(2), 128–144. https://doi.org/10.18568/internext.v14i2.458