Title: The effect of institutional distance on international market selection: comparing export to foreign direct investment

Authors: Desislava Budeva; Gladys Torres-Baumgarten

Addresses: Anisfield School of Business, Ramapo College of New Jersey, 505 Ramapo Valley Rd., Mahwah, NJ 07430, USA ' Anisfield School of Business, Ramapo College of New Jersey, 505 Ramapo Valley Rd., Mahwah, NJ 07430, USA

Abstract: The goal of the current paper is to investigate the effect of institutional distance on market expansion. We specifically focus on two dependent variables, export and foreign direct investments (FDIs) from the USA. The research uses a cross-sectional time-series analysis to test the influence of institutional factors on exports and FDI. Dimensions of the institutional environment have an effect on export and FDI activity between two countries. The regulative, normative, and cultural dimensions of the institutional environment vary in importance across the two modes of entry. Of the three, culture turns out to be the most significant. Our framework allows companies to classify markets with regards to these macro variables and then investigate international expansion opportunities.

Keywords: exports; foreign direct investment; FDI; institutional theory; market selection.

DOI: 10.1504/IJEXPORTM.2021.115288

International Journal of Export Marketing, 2021 Vol.4 No.2, pp.127 - 149

Received: 20 Dec 2020
Accepted: 03 Feb 2021
Published online: 26 May 2021 *

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