Internationalization is important for small- and medium-sized enterprises (SMEs) since it is a way to survive and to grow. Emerging markets have enormous latent possibilities for SMEs but behind the possibilities there are potential risks linked to political and institutional factors, uncertain economic and market conditions, and unknown business environments. National culture is one of the factors that create distance between home and host countries. In this paper, the author intends to examine the importance of cultural distance in the internationalization process and the relationship between the international experiences and cultural distance. The author focuses on the internationalization process of Swedish SMEs in Russia. Since culture is a complex phenomenon, the author scrutinizes the nature of cultural distance by employing a qualitative method by in-depth interviewing of managers from two Swedish SMEs. The theoretical framework is important for the analysis and consists of the Uppsala internationalization model and Hofstede’s cultural dimensions. Through the analysis of empirical data and previous research, the author finds that there are significant cultural differences between Russia and Sweden but the role of cultural distance in the internationalization process of the Swedish firms in Russia should not be exaggerated. The author’s conclusions are that cultural distance as a part of psychic distance has influence on the choice of entry mode though its impact is implicit and comes along with other factors. Another finding is that the international experiences of the firms have a great influence on the internationalization process - in the way that cultural distance becomes less important.

Previous studies often associated a specific type of ownership mode with the extent of control a parent firm may have over (strategic) decision-making in a foreign subsidiary, suggesting that parent firms should have higher control over wholly-owned subsidiaries (WoS) than international joint ventures (IJVs). Building on principal agent theory, we argue that in the Chinese context higher ownership levels do not necessarily have a positive effect on the extent of control over the foreign subsidiary. We further argue that cultural distance between the parent firm and the subsidiary moderates this relationship. We test our hypotheses using data from a sample of 156 foreign subsidiaries in the People's Republic of China (PRC) and find strong support for our arguments. Our findings show that in WoS parent firms reduce their extent of control, while in IJVs parent firms increase their extent of control. Moreover, we find that extent of control over WoS (IJVs) declines (increases) when cultural distance increases. Our results have significant theoretical implications for international business (IB) research as they challenge existing views with regard to the relationship between ownership mode and control as well as the moderating effect of cultural distance.

The Kogut and Singh (1988) index is the most widely used construct to measure cultural distance in international business and management research. We show that this index is incorrectly specified and captures the squared cultural distance. This inaccuracy is problematic because it means that the empirical findings on the effects of cultural distance presented in different strands of international business research are likely to be misleading. We specify the correct form of the distance measure based on the Euclidean distance formula and demonstrate the implications of using the incorrectly specified Kogut and Singh (1988) index.

Since China entered WTO, the multinational corporations (MNC) increased the foreign direct investment (FDI) in Chinese market because China is famous for its huge market volume and low labor cost. However, the knowledge of Chinese market is still limited. This paper analyses the determinants of automotive MNC's FDI choice made in Chinese market based on the study of Chinese FDI environment and the investment behavior of Swedish firms. The determinants are tested through three variables: industry development, cultural distance and the government policy. In this thesis, data related to FDI in automotive industry is collected mainly from 13 provinces or municipalities. The results show that: (1) The regions with larger market size will attract more FDI; (2) The larger cultural distance will create more obstacles when MNCs invest, thus has the negative impacts on FDI choices; (3) MNCs will give priority to those areas with lower tax burden. Besides, this thesis also describes the detailed cultural distance at firm level between China and Sweden based on the interview with a Swedish firm. The results suggest Swedish firms need to focus more on the partner selection and management adaption when investing in Chinese market.

Purpose The purpose of this study is to investigate the influence of cultural distance in cross-cultural adjustment of inpatriates. Furthermore, it investigates the role  of organizational and social support in cross-cultural adjustment. Method In order to achieve the purpose of this study a qualitative method of data gathering was chosen. A case study was conducted in Sandvik Sweden in Gävle, and personal interviews were done with the Indian inpatriates and other representatives involved in international assignment. Findings The cultural distance between Sweden and Indian  directly affect the concept of teamwork in Sandvik-Sweden and Sanvik-India. To understand the cultural background and  motive of  inpatriates is important  in designing organizational support that facilitates anticipatory and in-country adjustment processes. The existence of a recognized socializing way at headquarter eases to interact and develop interpersonal relationship, which facilitate the adjustment process of inpatriates through  referral made from known sources. Implication and suggestion for the future This study can assist multinational companies that are interested in the Cross- cultural adjustment process of inpatriates. We suggest for additional investigations in different organizational setup about the same subject matter to compare new results with the current findings. Future researchers can also investigate the impact of repatriation of inpatriates’ in cross- cultural adjustment. / Masters Thesis

Cultural differences between countries are widely acknowledged, and these differences manifest in HQ-subsidiary relations of MNCs. Central to the strategies that MNCs implement outside their home countries is the understanding of the dynamic nature of culture. While studies exist on the HQ-subsidiary relations these studies fall short in understanding the impact on individuals employed by MNCs. Thus, understanding if common differences between MNCs from different countries exist and how these manifest at the individual level may provide valuable insight into the nature of culture. 404 responses from 12 MNCs representing 5 countries was collected and analysed. Analysis included principle component analysis, ANOVA, correlation co-efficients and the cultural distance index. Results indicate that individual and organisational cultures are weakly correlated to home and host country national cultures; and individual culture is correlated to organisational culture. Common differences exist between MNCs with HQ in different countries. MNCs from South Korea are the most accommodating to the subsidiary organisational culture, while the Netherlands the least accommodating. Unintentionally results indicated that the perception of cultural distance is different to what is predicted. Culture is elastic and evidence exists for individuals holding an in-culture and out-culture. MNCs should understand the impact of culture at the individual level rather than only at the national level. / Dissertation (MBA)--University of Pretoria, 2012. / Gordon Institute of Business Science (GIBS) / unrestricted

In response to a call for more advanced and more inclusive models for measuring difficulty of international expansion, the resistance index (RI) was created and is advanced in this paper. The RI includes several factors that contribute (detract) to the success (failure) of firms regarding cross border expansion. The RI features variables that represent country specific advantages (CSA), firm specific advantages (FSA), and government specific advantages (GSA). These three areas are represented by a diverse set of data obtained from such widely recognized agencies as the World Bank and Thomson Reuters. Taking data from different sources, may render better predictability for firms than using the popular cultural distance index. Therefore, it is proposed that the RI may be a more relevant tool for firms to use when they are considering international expansion into a particular country, or for researchers to employ in undertaking success or failure in international expansion.

<p>Based on Hofstede's findings, this study breaks down Kogut and Singh's index of cultural distance, examining implications for acquisition performance of each individual dimension. Hypotheses are formulated, and based on deal data covering 488 acquisitions with American companies as acquirers, tested through linear regression. We find support for a positive relationship between cultural distance of power distance and performance, and an inverse relationship between cultural distance of masculinity and performance. Significant results are not obtained for the remaining dimensions.</p>

Distance is a central concept in international business research, yet there is debate about the construct as well as its operationalization. In this editorial, we address three of the most important recurring questions posed by authors, editors, and reviewers by examining the theory, methods, and data of distance research. We discuss (1) how to theorize on distance, and (2) what method and (3) what data to use when constructing a distance index. We develop practical recommendations grounded in theory, illustrating and supporting them by calculating cross-country distance indices for all available country pairs and two of the most used distance indices: cultural and institutional distance. We show that whereas a specific method to calculate distance may matter to some extent, the choice for a specific cultural or institutional framework to measure cultural or institutional distance has a major impact on country pair distances. Overall, this editorial highlights the importance of matching data and method to the theoretical argument.

Based on Hofstede's findings, this study breaks down Kogut and Singh's index of cultural distance, examining implications for acquisition performance of each individual dimension. Hypotheses are formulated, and based on deal data covering 488 acquisitions with American companies as acquirers, tested through linear regression. We find support for a positive relationship between cultural distance of power distance and performance, and an inverse relationship between cultural distance of masculinity and performance. Significant results are not obtained for the remaining dimensions.