Literature Review Prompt

The Impact of Cultural Differences on Overseas Investment of Enterprises Li �1

Ziwei Li

NIck Kendle

Research Proposal

April 16, 2019

The Impact of Cultural Differences on Overseas Investment of Enterprises

When a multinational enterprise enters the international market by way of overseas

investment, how to choose the entry mode is an important issue in the internationalization

strategy of the multinational enterprise. The entry mode of overseas investment represents the

resource supply, control and technology transfer of parent enterprises of multinational enterprises

to overseas sub-enterprises, which will have a long-term and significant impact on the

performance of overseas operations of enterprises. However the entry mode of multinational

enterprises is determined by the core decision makers.

This paper focuses on the direct overseas investment of multinational enterprises, and

studies the influence of cultural gap on the core choicer of multinational enterprises. Through

reviewing the relevant literature, it is found that the influence factor of the cultural gap will affect

the information input and decision-making risk in enterprise decision-making, thus affecting the

decision-making results.

Clark and Pugh (2001) studied the impact of "psychological distance" on the overseas

business of enterprise decision-makers when making decisions, and found that the cultural gap is

an important factor. At the same time, the geographical distance and institutional distance

between the home country and the host country also play an important role in the development of

enterprise internationalization. Some scholars have studied the influence mechanism of cultural

The Impact of Cultural Differences on Overseas Investment of Enterprises Li �2

gap to some extent: Wang Weigong (2014) pointed out that although the international expansion

of enterprises has shortened the spatial distance between the mother company and the market of

the host country, there are still information barriers between the host country and the mother

country, which are caused by cultural and institutional factors. The greater the cultural gap, the

higher the cost of the decision maker's perception of the host country's market, and the greater

the environmental uncertainty and operational risk.(Johanson 1997)

In this study, the main theories involved were sorted out. Through the literature review,

the research ideas were gradually clarified and the research questions were finally answered.

The Impact of Cultural Differences on Overseas Investment of Enterprises Li �3

References

Clark T, Pugh D S. Foreign country priorities in the internationalization process: a measure and

an exploratory test on British firms. International Business Review, 2011, 10(3):285-303

Johanson J, Vahlne J E. The Internationalization Process of the Firm— A Model of Knowledge

Development and Increasing Foreign Market Commitments. Journal of International

Business Studies, 1977, 8(1):23-32

Wang Gongwei. Research on international diversification and innovation capability of mother

enterprises -- adjustment effect based on institutional distance. Scientific and

technological progress and countermeasures, 2014(19):75-80