Despite crises and uncertainty in international capital markets, foreign direct investment (FDI) by multinational enterprises (MNE) is booming. The buzzword is globalization. The business world is expected to be moving closer together through more or less recent developments in communication technologies and transportation facilities. The political ideal of democracy along with a liberalization of national economies seems to have finally gained the recognition it deserves as the system that in the end allows for the best utilization of wealth creating endowments. Besides differences in economic development, cultural differences remain as a single important means of distinguishing between people from several nations (Huntington 1996; Axford 1995). The critical issue is that this situation is being recognized and mankind restrains from emphasizing distinctions, and instead focuses on working out compatibility between cultures.
This paper is separated into three interactive parts. Part I deals with the theoretical background behind this study, and after these introductory notes, gives an overview of the theory of international production in order to show which factors influence MNEs and their activities. Part II of the paper is devoted to the interaction between the two cultures of Thailand as a host country and the USA as the investor's home country. First, both value systems and environmental factors are analyzed and compared. Then some findings from interviews with U.S.-American7 investors on cultural factors that influenced their location selection will be summarized in order to provide some anecdotal evidence on how trust was generated in their decision to invest in Thailand. In Part III, the findings from the two previous parts will be synthesized into the theory of international production. Based on the assumption developed in the preceding parts that location decisions are made in pursuit of a fit between the investor's and the host country's cultures, the findings on the influences of inter-cultural trust and leadership on transaction costs will be integrated into the respective components of the Eclectic Paradigm of International Production. Finally, the findings are summarized and some conclusions are drawn.
Inhaltsverzeichnis (Table of Contents)
- Part I: Introduction and Theoretical Background
- 1. Introduction
- 1.1 Introduction and Objective of the Paper
- 1.2 Outline
- 2. Theory of International Production
- 2.1 Definitions
- 2.1.1 Foreign Direct Investment
- 2.1.2 Multinational Enterprise
- 2.2 Theories of Multinational Enterprise Activity
- 2.3 International Location Decisions and Transaction Costs
- 2.4 The Eclectic Paradigm of International Production
- 3. Culture
- 3.1 Culture in Economic Theory
- 3.2 Cultural Environment of International Business
- 3.2.1 Religion
- 3.2.2 Language
- 3.3 Hofstede's Value System
- 3.3.1 Unequal Distribution of Power
- 3.3.2 Avoiding Uncertainty
- 3.3.3 The Individual and the Group
- 3.3.4 Male and Female Values
- 3.3.5 Confucian Dynamism: Time Orientation
- 3.4 Casson's Economics of Business Culture
- 3.4.1 Trust
- 3.4.2 Leadership
- 3.4.3 Implications for Multinational Enterprises
- 3.5 Environment, Values, and Trust
- 3.6 Shaping Inter-Cultural Trust
- 3.6.1 Contrasting Value Systems
- 3.6.2 Environmental Factors
- Part II: Observations in the Real World
- 4. USA meets Thailand - Issues in Building Trust
- 4.1 Similarities and Distinctions in the Value Systems
- 4.1.1 Individualism and Collectivism
- 4.1.2 Masculinity and Femininity
- 4.1.3 Uncertainty Avoidance
- 4.1.4 Power Distance
- 4.1.5 Long Term and Short Term Orientation
- 4.2 Similarities and Distinctions in the Environment
- 4.2.1 Protestantism and Theravada Buddhism
- 4.2.2 Language
- 5. Culture as Location Factor - Anecdotal Evidence
- 5.1 Research Procedure
- 5.2 Results
- 5.2.1 Initial Consideration
- 5.2.2 Comparing Locations
- 5.2.3 Doing Business in Thailand
- 5.2.4 Sexual Cultures - A Side Note on a Controversial Topic
- 5.3 Conclusions – In Pursuit of the Cultural Fit
- Part III: Synthesis
- 6. Discussion - Trust and Multinational Enterprise Location
- 6.1 Ownership Assets
- 6.2 Internalization Incentives
- 6.3 Location Advantages
- 7. Conclusion
- The role of culture in international business, particularly in the context of foreign direct investment.
- The significance of trust in building successful business relationships across cultural boundaries.
- An analysis of cultural differences between the United States and Thailand, highlighting potential challenges and opportunities in fostering inter-cultural trust.
- The impact of cultural factors on location decisions, exploring how these factors contribute to the success or failure of multinational enterprises.
- An examination of the eclectic paradigm of international production and its application in understanding the interplay of ownership assets, internalization incentives, and location advantages in multinational enterprise activity.
- Chapter 1 introduces the topic of cultural factors in multinational enterprise location, outlining the objective of the paper and its overall structure.
- Chapter 2 provides a theoretical framework for understanding international production and multinational enterprise activity. It examines definitions, theories, and the eclectic paradigm, which emphasizes the importance of ownership advantages, internalization incentives, and location advantages.
- Chapter 3 delves into the concept of culture, discussing its significance in economic theory and its role in shaping the international business environment. It examines the influence of religion, language, and Hofstede's value system, including dimensions like power distance, uncertainty avoidance, individualism, and long-term orientation.
- Chapter 4 analyzes the cultural differences between the United States and Thailand, comparing their value systems and environmental factors, with a focus on building trust across cultures.
- Chapter 5 presents anecdotal evidence on the role of culture as a location factor, exploring research procedures, results, and the significance of cultural fit in international business decisions.
- Chapter 6 discusses the relationship between trust and multinational enterprise location, examining the influence of ownership assets, internalization incentives, and location advantages.
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
The objective of this paper is to explore the influence of cultural factors on the location decisions of multinational enterprises. Focusing on the case of Foreign Direct Investment in Thailand, this research aims to understand how cultural differences impact the establishment and success of international business ventures. Key themes covered in the paper include:Zusammenfassung der Kapitel (Chapter Summaries)
Schlüsselwörter (Keywords)
This paper explores the impact of cultural factors on the location decisions of multinational enterprises. Key topics covered include foreign direct investment, Thailand, culture, trust, inter-cultural understanding, business relationships, ownership assets, internalization incentives, location advantages, and the eclectic paradigm.- Quote paper
- Klaus Schmidt (Author), 1998, Cultural Factors in Multinational Enterprise Location. The Case of Foreign Direct Investment in Thailand, Munich, GRIN Verlag, https://www.grin.com/document/185228