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Entry Mode Choice of Chinese Enterprises: The Impacts of Country Risk, Cultural Distance and Their Interactions |
Yuehua Xu1(), Songhua Hu2(), Xu’ang Fan3() |
1. Department of Management, Faculty of Business Administration, The Chinese University of Hong Kong, Hong Kong, China Lingnan College, Sun Yat-sen University, Guangzhou 510275, China; 2. Lingnan College, Sun Yat-sen University, Guangzhou 510275, China; 3. Lingnan College, Sun Yat-sen University, Guangzhou 510275, China |
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Abstract Recent years have witnessed a phenomenal growth in the number of Chinese enterprises “going global.” Drawing on three leading theoretical perspectives including the transaction cost theory, organizational capability theory and eclectic theory, this paper develops hypotheses to test how country risk and cultural distance are associated with entry mode choices of enterprises from China. Based on a sample of 167 Chinese companies, an empirical investigation has been conducted employing logistic regression and hierarchical regression analyses. Our results show that country risk and cultural distance have significant impact on entry mode choice. With the increase of country risk or cultural distance, businesses prefer non-ownership-based entry modes such as trade and licensing. However, entry mode choice is also noticeably influenced by the interaction between country risk and cultural distance, which is a new finding of international entry mode research. Furthermore, private enterprises are more likely to adopt high-involvement entry mode than the state-owned enterprises, and service enterprises are less likely to use high-involvement entry mode, which suggests that different approaches are used to deal with country risk and cultural distance by various types of enterprises.
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Keywords
country risk
cultural distance
entry mode choice
international business
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Corresponding Author(s):
Yuehua Xu,Email:yuehua@baf.msmail.cuhk.edu.hk; Songhua Hu,Email:lnshsh@mail.sysu.edu.cn; Xu’ang Fan,Email:fanxuang@gmail.com
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Issue Date: 05 March 2011
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