The Effect of Regulative and Normative Distances On Mne Ownership and Expatriate Strategies1

Zusammenfassung

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Researchers have used cultural distance to explain strategic and operational control mechanisms of the multinational enterprise, yet the construct has failed to yield consistent results. This study proposed two new measures of country differences, regulative and normative distances, from an institutional perspective, and examined their effect on MNE ownership and expatriate strategies. The results of this study show that larger regulative and normative distances were associated with a lower level of equity ownership and smaller presence of expatriates for over 2000 Japanese overseas sub-units. It is argued that strategic choices are made in such a way that the MNE can maintain an optimal level of strategic and operational control over its foreign subsidiaries, and also maximize the benefits provided by local partners and personnel in terms of institutional transition and local legitimacy.

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Auszug

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The Effect of Regulative and Normative Distances On Mne Ownership and Expatriate Strategies1

Introduction

The degree of control over the foreign subsidiary is an important subject in multinational enterprise (MNE) research. Two kinds of control have been discussed extensively in the literature: strategic control commonly associated with equity ownership (Gatignon/Anderson 1988, Hennart 1988, Pan 1996), and operational control through the use of expatriates from the home country (Beamish/Inkpen 1998, Boyacigiller 1990). Among the many factors that may have an impact on these two control mechanisms, researchers have paid particular attention to the effect of cultural differences between countries. Early works in this stream (e.g., Davidson 1980) were based on general impressions about national cultures. Beginning with Hofstede (1980), however, the concept of culture became empirically derived, better defined, and commonly accepted (Hofstede 1983).

Building on Hofstede's four cultural dimensions - individualism/collectivism, power distance, uncertainty avoidance, and masculinity/femininity - Kogut/ Singh (1988) compiled a composite index for cultural distance between two countries. The construct has been widely applied in various studies on the multinational enterprise and cross-cultural management (e.g. Barkema/Bell/Pennings 1996, Brouthers/Brouthers 2000, 2001, Hennart/Larimo 1998, Li/Lam/Qian 2001, Manev/Stevenson 2001). It can be readily incorporated by the main theoretical perspectives on foreign direct investment, such as the internationalization school (Johanson/Vahlne 1977, 1990), the transaction cost - internalization theory (Beamish/Banks 1987, Gatignon/Anderson 1988), and the learning perspective (Barkema/Bell/Pennings 1996, Barkema/Vermeulen 1998).

In a recent review, however, Shenkar (20...

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