FOREIGN ENTRY, CULTURAL BARRIERS, AND LEARNING

FOREIGN ENTRY, CULTURAL BARRIERS, AND LEARNING

Feb 1996 | HARRY G BARKEMA and JOHN H. J. BELL; JOHANNES M PENNING
This paper examines the longevity of foreign entries and explores how cultural distance affects the mode (start-ups vs. acquisitions) and ownership structure (wholly owned vs. joint ventures) of foreign ventures. Using data on 225 foreign entries by 13 Dutch firms from 1966 onwards, the study tests hypotheses on the relationship between cultural distance and the persistence of foreign ventures. The findings show that cultural barriers significantly impact an organization's learning process, with cultural distance being a key factor in foreign entry, especially when involving other firms. The study also identifies locational 'paths of learning,' where firms gain relevant knowledge through prior experiences in similar countries or cultural blocks. The paper highlights that the longevity of acquisitions is positively influenced by prior entries in the same country, and the longevity of foreign entries with a majority stake improves when the firm has prior experience in the same country or in other countries within the same cultural block. The study also finds that firms learn from previous foreign entries, reducing cultural barriers over time and becoming more effective in foreign markets. Learning is particularly important for ventures requiring 'double layered acculturation,' such as joint ventures and acquisitions, where firms must adapt to both national and corporate cultures. The study uses a Weibull regression model to analyze the hazard of ventures, finding that cultural distance negatively affects the longevity of foreign ventures, especially in cases of double layered acculturation. The results support the Scandinavian process model, which emphasizes the importance of learning and gradual expansion into cultural space. The study also finds that firms benefit more from previous experience in the same country than from other countries in the same cultural block or more proximate blocks. The findings suggest that learning from previous foreign entries is crucial for the success of later ventures, particularly in cases where firms must adapt to foreign organizational cultures. The study concludes that cultural distance significantly affects the longevity of foreign ventures, and that learning from previous experiences is essential for firms to overcome cultural barriers and succeed in international markets. The results support the Scandinavian process model, which emphasizes the importance of learning and gradual expansion into cultural space. The study also highlights the importance of locational learning and the role of prior experiences in the same country or cultural block in enhancing the success of later ventures. The findings suggest that firms should focus on learning from previous foreign entries to improve their chances of success in international markets.This paper examines the longevity of foreign entries and explores how cultural distance affects the mode (start-ups vs. acquisitions) and ownership structure (wholly owned vs. joint ventures) of foreign ventures. Using data on 225 foreign entries by 13 Dutch firms from 1966 onwards, the study tests hypotheses on the relationship between cultural distance and the persistence of foreign ventures. The findings show that cultural barriers significantly impact an organization's learning process, with cultural distance being a key factor in foreign entry, especially when involving other firms. The study also identifies locational 'paths of learning,' where firms gain relevant knowledge through prior experiences in similar countries or cultural blocks. The paper highlights that the longevity of acquisitions is positively influenced by prior entries in the same country, and the longevity of foreign entries with a majority stake improves when the firm has prior experience in the same country or in other countries within the same cultural block. The study also finds that firms learn from previous foreign entries, reducing cultural barriers over time and becoming more effective in foreign markets. Learning is particularly important for ventures requiring 'double layered acculturation,' such as joint ventures and acquisitions, where firms must adapt to both national and corporate cultures. The study uses a Weibull regression model to analyze the hazard of ventures, finding that cultural distance negatively affects the longevity of foreign ventures, especially in cases of double layered acculturation. The results support the Scandinavian process model, which emphasizes the importance of learning and gradual expansion into cultural space. The study also finds that firms benefit more from previous experience in the same country than from other countries in the same cultural block or more proximate blocks. The findings suggest that learning from previous foreign entries is crucial for the success of later ventures, particularly in cases where firms must adapt to foreign organizational cultures. The study concludes that cultural distance significantly affects the longevity of foreign ventures, and that learning from previous experiences is essential for firms to overcome cultural barriers and succeed in international markets. The results support the Scandinavian process model, which emphasizes the importance of learning and gradual expansion into cultural space. The study also highlights the importance of locational learning and the role of prior experiences in the same country or cultural block in enhancing the success of later ventures. The findings suggest that firms should focus on learning from previous foreign entries to improve their chances of success in international markets.
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