Abstract
Major studies on FDI looks at location, technology, policy, availability of natural resources, skilled labor, state support, climate, political and economic advantages for investment decisions. There are few studies that look at cultural factors affecting FDI decisions in service. This paper provides qualitative analysis of the impact of national culture on the flow of foreign direct investment in the service sector within the context of Germany. In particular, the paper discusses the cultural logic of German foreign direct investment in the service sector. It argues that inward FDI in the service sector was actually substantially more affected by cultural distance compared to outward FDI. The study finds that it is important to distinguish between inward and outward FDI to assess the cultural logic of German FDI in the service sector.
Highlights
One of the most critical and challenging key decisions commonly discussed in the field of international business is the location decision of Foreign Direct Investment (FDI) since its failure causes impactful consequences, financially as well as for the brand image (Galan et al 2007; Johnson et al 2006)
8 Conclusion Since the big difference in FDI between services and manufacturing cannot be explained by FDI policies alone, as for example Germany is very open and seldom discriminates between sectors, market forces such as the OLI advantages as well as competitive advantages and FDI policies of the host countries in the case of outward FDI are more appropriate for assessing the wide difference between those two sectors
When comparing those two flows of investment, German inward and outward FDI, it becomes clear that ownership, location and internalization advantages are different in importance depending on the sector as well as the flow of investment
Summary
One of the most critical and challenging key decisions commonly discussed in the field of international business is the location decision of Foreign Direct Investment (FDI) since its failure causes impactful consequences, financially as well as for the brand image (Galan et al 2007; Johnson et al 2006). 5 Outward vs inward German foreign direct investment In general, it can be said that culture and economies worldwide become more receptive to FDI.
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