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Cultural distance and entry modes: implications for global expansion strategy

Johanna Franziska Gollnhofer (Center for Customer Insight, University of St. Gallen, St. Gallen, Switzerland)
Ekaterina Turkina (Department of International Business, HEC Montreal, Montreal, Canada)

Cross Cultural Management: An International Journal

ISSN: 1352-7606

Article publication date: 2 February 2015

Abstract

Purpose

The purpose of this paper is to take a strategic perspective on how MNEs in the retail sector decide to enter a new market. Drawing on transaction cost theory, the contingency approach and resource-based theory, the implications of the interplay between global strategy, cultural distance and entry mode strategies are examined by means of an analysis of Carrefour’s global expansion.

Design/methodology/approach

To account for the shortcomings of prior research, a hypothesis in the relationship between entry modes and cultural distance is tested empirically using a sample of 44 foreign market entries by Carrefour over the 40 last years. The paper uses a quantitative approach, i.e., logistic regressions. To measure cultural distance, the authors rely on the GLOBE dimensions and the Kogut-Singh Index.

Findings

The findings suggest a positive relationship between a resource commitment, entry mode strategy and cultural distance for Carrefour. However, these findings are contrary to the mainstream argument that high cultural distance is related to entry strategies based on relatively low resource commitment. The authors explain these findings by integrating a cultural distance perspective with Carrefour’s overall global expansion strategy.

Research limitations/implications

Because of the chosen research approach, the research results may lack generalizability.

Practical implications

The paper provides insights into why prior research on cultural distance and entry modes has yielded mixed results. From a strategic viewpoint, the paper stresses the particularities of the retail sector and how retailers try to account for cultural distance in their entry mode decisions.

Originality/value

By focussing on a single company instead of a meta-analysis, the analysis demonstrates how the search for strategic consistency and the particularities of the retail sector reverse a well-investigated theoretical assumption. The main originality of the paper is that it shows the implications of the interplay between cultural distance and entry mode as being part of the retail firm’s overall global expansion strategy.

Keywords

Citation

Gollnhofer, J.F. and Turkina, E. (2015), "Cultural distance and entry modes: implications for global expansion strategy", Cross Cultural Management: An International Journal, Vol. 22 No. 1, pp. 21-41. https://doi.org/10.1108/CCM-07-2013-0114

Publisher

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Emerald Group Publishing Limited

Copyright © 2015, Emerald Group Publishing Limited