An Empirical Research On The Influence Of Institutional Distance To The Entry Mode Choices

When multinational enterprises enter the market of the host country, firstly, it faces the institutional environments of the host country, which quite different from institutional environments of their own country. The difference of institutional environments leads to the multinational enterprises facing the entry barriers of outsiders, and it is hard for the multinational enterprises to get legality of the market of the host country. In order to solve this problem, multinational enterprises can choose a suitable entry strategy to avoid the liability of foreignness. Thus, how to choose a suitable entry strategy has become an important problem for the internationalized process of multinational enterprises.Basing on view of the institutional distances, this study focuses on investigating the influences of institutional distance to the entry mode choices. Firstly, by reviewing the institutional distances, legitimacy theory and entry modes theories of transnational strategy, this study analyses the inadequacies of the influences of institutional distance to the entry mode choices and raises the research questions. Secondly, on the basis of existing studies, this study proposes the hypotheses and builds a theoretical model of the contact between institutional distances and entry mode choices, then measures the variables. Again, this study collects the data of 87 Chinese multinational enterprises that distribute in 26 countries, on the basis of the institutional distances being divided into regulative distance, normative distance and cognitive distance, using the Binomial Logistic regression analysis method to examine the influence of regulative distance, normative distance and cognitive distance on the choice of acquisition and greenfield. Finally, according to the empirical results, this study gives the conclusions, and puts forward corresponding countermeasures from the institutional distances and investment motives for multinationals entry mode.The research results show that for greenfield, the bigger the normative distance and cognitive distance are, the bigger the tendency to choose acquisition for Chinese multinational enterprises. The regulative distance is not significant. The market-seeking motive has negative effect on the influence of cognitive distance on the entry mode choices. However, the resources or strategic assets-seeking motive have positive effect on the influence of regulative and normative distance on the entry mode choices.