FALL 1988 | Bruce Kogut* Stockholm School of Economics Harbir Singh** University of Pennsylvania
This article investigates the influence of national culture on the choice of entry mode for foreign firms entering the United States market. The authors develop two hypotheses: one focusing on the cultural distance between countries and another on attitudes towards uncertainty avoidance. Using a multinomial logit model and controlling for firm and industry-level variables, the study analyzes data on 228 entries into the U.S. market through acquisitions, wholly owned greenfield investments, and joint ventures. The results support the hypothesis that cultural distance and uncertainty avoidance significantly influence the choice of entry mode, with firms from culturally distant countries and those with higher uncertainty avoidance tendencies more likely to choose joint ventures or wholly owned greenfield investments over acquisitions. The findings also suggest that transaction cost explanations for entry mode choice must consider cultural and institutional contexts. The study validates the usefulness of Hofstede's cultural dimensions and highlights the importance of cultural factors in explaining country patterns in entry mode choices.This article investigates the influence of national culture on the choice of entry mode for foreign firms entering the United States market. The authors develop two hypotheses: one focusing on the cultural distance between countries and another on attitudes towards uncertainty avoidance. Using a multinomial logit model and controlling for firm and industry-level variables, the study analyzes data on 228 entries into the U.S. market through acquisitions, wholly owned greenfield investments, and joint ventures. The results support the hypothesis that cultural distance and uncertainty avoidance significantly influence the choice of entry mode, with firms from culturally distant countries and those with higher uncertainty avoidance tendencies more likely to choose joint ventures or wholly owned greenfield investments over acquisitions. The findings also suggest that transaction cost explanations for entry mode choice must consider cultural and institutional contexts. The study validates the usefulness of Hofstede's cultural dimensions and highlights the importance of cultural factors in explaining country patterns in entry mode choices.