Week 2 [Benito & Gripsrud, 1992]

Question 1

What can be said about ‘mainstream economic theory’ (of Hirsh, 1976)?
[Benito & Gripsrud, 1992]

Answer 1

It treats the individual investment decisions as [static] discrete phenomena.

• “inexperience is a cost”
• -> Lack of experience is generally treated a as a cost component in terms of cost of controlling foreign operations and to be included in the profit max function.

Question 2

What can be said about ‘internationalization process’ (of Johanson & Vahlne, 1977)?
[Benito & Gripsrud, 1992]

Answer 2

Expansion follows an expansion path, whereby companies move from close to more distant markets.

• The internationalization of a firm consists in a series of small steps, whereby firms gradually increase their international involvement
• Uppsala model, “learning by doing”

Question 3

What are the findings of the [Benito & Gripsrud, 1992] article (2)?
[Benito & Gripsrud, 1992]

Answer 3

1. No evidence that first FDI investments are made (culturally) closer to home country that later FDIs
2. No relation between average change in cultural distance and number of investments made-will not increase w/ number of FDIs
   - -> “Location choices are discrete rational choices, and NOT a cultural learning process” (…but sample etc. to challenge this statement…)

Question 4

How does the [Benito & Gripsrud, 1992] article measure cultural distance?
[Benito & Gripsrud, 1992]

Answer 4

Kogut-Singh index with the 4 Hofstede dimensions; UA, Ind, PD, Mas-Fem.

Question 5

What are four (4) important factors that can alleviate the impact of distance?
[Benito & Gripsrud, 1992]

Answer 5

1. Inter-country (inside bubble) distance is different from inter-firm (MNE) distance
2. Impact of distance will vary along different parts of the value chain
3. High distance may actually create new (MNE-wide) learning opportunities (-> go there to learn, ‘arbitrage’ of being inspired by habits, etc.)
4. No role for mediating impact of entry modes on reducing impact of distance

Question 6

What sample is used in the [Benito & Gripsrud, 1992] article?
[Benito & Gripsrud, 1992]

Answer 6

Only Norwegian manufacturing firms used (data from survey)