Influence of national culture on FDI

Essay by guiabertUniversity, Master's April 2013

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Influence of national culture on FDI


This research seeks to empirically test the influence of the uncertainty avoidance Hofstede's dimension and trust on the choice of the flow of foreign direct investment (FDI). The results obtained suggest that the flow of FDI is better in countries with lower levels of uncertainty avoidance and high levels of trust, as suggested in the hypotheses. A third hypothesis proposes that the relationship between trust and FDI could become impaired when uncertainty avoidance increases. The outcomes aim to show how the important role of culture can significantly influence the choice of entry into a new country.

Table of contents

1. Introduction 4

2. Literature Review 5

3. Research Design & Methodology 6

4. Data analysis & expected results 7

5. Timetable 7

6. Limitations 7

7. References 8


1. Introduction

In our globalized world managing business operations across cross-country boundaries has become one of the largest challenges for international business.

Since the world becomes more and more interconnected companies seek to maximize their competitiveness by locating facilities in multiple locations around the world. Faced with increased international competition, Foreign Direct Investment (FDI) has grown significantly as a major criterion for entering a new gainful market in the global economic landscape. This remarkable growth of FDI around the world makes it an important component of the overall company's strategy. When a company moves to a foreign market, it must consider many different choices regarding the location of the FDI. One of the main problems a firm has to face with, are the cultural differences and characteristics in the respective country. Therefore, sensitivity to cross-national differences has become an important determinant for success in today´s international business arena.

WFF is facing these mentioned challenges above. In order to stay competitive the firm should contemplate...