Reducing cultural uncertainty through experience gained in the domestic market

Abstract

This paper addresses one of the major debates in the international strategy literature: whether the transfer of experiential knowledge is bound within the cultural boundary of a firm's home country. We argue that some experienced firms can transfer experiential knowledge gained in their domestic market or foreign market to the focal host country in their initial investment. Drawing on the organizational learning literature, this study proposes the boundary conditions under which multinational corporations (MNCs) with experiential knowledge gained in their domestic markets through joint ventures with foreign partners benefit in their initial entry into the host country. The results provide support for the hypotheses, and according to the empirical analysis, MNCs’ cross-border joint-venture experience gained in the domestic market can facilitate their expansion into host countries culturally similar to foreign partners’ originating countries by reducing cultural uncertainty perceived in the focal host country with respect to doing business in general.