The effect of the magnitude and direction of institutional distance on the choice of international entry modes

Virginia Hernández and María Jesús Nieto

Journal of World Business, 2015, vol. 50, issue 1, 122-132

Abstract: This paper analyzes the relation between institutional regulative distance and the choice of international entry mode. The study contributes to existing literature by considering the relative positions of the origin and destination countries on this relation, examining the possibility that institutional distance may exert an asymmetric effect. The results, using a database of European firms and multilevel analysis techniques, indicate that entry in countries with lower levels of regulatory development than that of the origin is related to modes that require a lower resource commitment. Conversely, entry in countries with higher levels of regulatory development is related to higher resource commitment modes. These findings suggest that the direction of institutional distance is important for the choice of international entry mode.

Keywords: Regulative distance; Direction of institutional distance; Foreign market entry; Institutional theory; Transaction cost economics; Multilevel analysis (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (55)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:worbus:v:50:y:2015:i:1:p:122-132

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DOI: 10.1016/j.jwb.2014.02.002

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