Research On The Influence Of Cultural Distance On The Choice Of Chinese Enterprises’ Methods Of Entering The "Belt And Road" Market

With the "Belt and Road" initiative was proposed and promoted,more and more Chinese companies continued to carry out international operations in the “Belt and Road” countries.Many Chinese companies have achieved gratifying results in the process of "going global",but at the same time,many companies encounter a succession of failures.More and more surveys show that one of the important reasons for the failure of international operations is the cultural differences between countries.How to avoid risks caused by cultural differences and effectively use host country resources is a major issue for Chinese companies in the process of better implementation of internationalization strategies.The choice of overseas market entry methods is one of the important strategic decisions in the process of internationalization of Chinese companies.The scientific choice of overseas market entry methods directly affects the success of corporate transnational operations.At present,related research mainly focuses on influencing factors such as enterprise-specific assets,geographical factors,political environmental factors,institutional factors,and host country infrastructure construction.While few studies have influenced the choice of Chinese companies’ overseas market entry methods from the perspective of national cultural differences.Moreover,most of the related researches in the past have focused on developed countries such as European countries and the United States,and lack related research on developing countries.This paper introduces the concept of "cultural distance" to measure the degree of cultural differences between different countries,uses the Hofstede’s cultural dimension theory to measure cultural distance,and uses transaction cost theory as a theoretical support to analyze the influence path of cultural distance on enterprises’ choice of overseas market entry,and based on panel data of trade and investment in 68 “Belt and Road” countries from 2005 to 2017,construct a panel regression econometric model to conduct an empirical study of cultural distance and Chinese companies’ entry into the “Belt and Road” country market.The empirical analysis in this paper is divided into two parts.First,the two overseas market entry methods of export and foreign direct investment are discussed,and the impact of cultural distance on the two is analyzed.Then,we will further examine the greenfield investment and cross-border mergers and acquisitions in the mode of entry of foreign direct investment,and analyze how cultural distance will affect both the cross-border mergers and acquisitions and greenfield investments.The empirical results show that cultural distance has a strong negative correlation with both exports and foreign direct investment,which means that cultural distance will greatly inhibit Chinese enterprises’ export or direct investment in the “Belt and Road” countries.In addition,between export and foreign direct investment entry methods,the cultural distance has a more significant inhibitory effect on foreign direct investment,indicating that without considering other factors,the greater the cultural distance between China and the host country,the more inclined Chinese companies are to enter the host country market by way of trade export.In addition,cultural distance also shows a restraining effect on greenfield investment and cross-border mergers and acquisitions.It can be seen that no matter whether greenfield investment or cross-border mergers and acquisitions are adopted,there are certain difficulties in the management and operation of Chinese companies after they invest in " Belt and Road" countries,indicating that Chinese enterprises are exporting capital to the “Belt and Road” countries during the process of international operation.The export of culture is also very important.Although cultural distance has a negative correlation with greenfield investment and cross-border mergers and acquisitions,there is a difference in the inhibitory effect of cultural distance on the two.In most previous research literature on greenfield investment and cross-border mergers and acquisitions,the research results generally agree that,without considering other factors,the greater the cultural distance is,the more the company is willing to choose the overseas market entry method of cross-border mergers and acquisitions.However,this paper draws different conclusions.Without considering other factors,the larger the cultural distance is,the enterprises may be more inclined to choose the overseas market entry method of greenfield investments because of the complexity of cultural integration and management in the later stages of the merger.Finally,combined with the conclusions of the thesis,this paper proposes countermeasures from the government and enterprise levels to provide valuable reference for Chinese companies to choose more appropriate market entry methods when conducting trade and investment activities in the “Belt and Road” countries.