Abstract
It is recognized in the literature that experience may affect the cost and the uncertainty of operating in foreign markets, and experience and market knowledge may therefore influence the location decisions of FDIs. Economic theory does not, however, predict a general expansion pattern of FDIs across industries. On the other hand, the theory associated with the “internationalization process” approach highlights the importance of cultural distance, and predicts a movement from “close” to more “distant” markets as more experience is acquired by the firm. The internationalization process approach is rooted in a behavioral theory of the firm.
In this article two hypotheses are developed from the internationalization process approach regarding the locations of FDIs. The database used for testing the hypotheses includes in principle all FDIs undertaken by Norwegian manufacturing companies up to the midyear 1982. Cultural distance is measured by an index developed by Kogut and Singh [1988]. No support is found for the notion that the first FDI in general takes place in culturally closer countries than later FDIs. Furthermore, for given companies, an expansion into more distant countries is not found as the number of investments increases.
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*Gabriel R.G. Benito is Assistant Professor of Business Administration at Østfold College, Halden (Norway). The article was written while he was a Research Fellow at the Norwegian Institute for Research in Marketing. His main research interests are in foreign market entry behavior and MNE theory.
**Geir Gripsrud is Professor of Marketing at the Norwegian School of Management. His research interests are in international marketing, entry strategies and distribution channels. His previous work has appeared in a number of journals, including the Journal of International Business Studies, Journal of Industrial Economics and International Journal of Research in Marketing.
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Benito, G., Gripsrud, G. The Expansion of Foreign Direct Investments: Discrete Rational Location Choices or a Cultural Learning Process?. J Int Bus Stud 23, 461–476 (1992). https://doi.org/10.1057/palgrave.jibs.8490275
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DOI: https://doi.org/10.1057/palgrave.jibs.8490275