Gichuki, Samwel Mwangi (2015) Influence of Host Country’s National Culture on the Choice of Foreign Entry Mode by Automotive Firms in Kenya. Masters thesis, University of Nairobi.
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Abstract
Firms interested in servicing foreign markets face a difficult decision with regards to the choice of an entry mode. Studies have linked foreign market entry modes to a firm’s future performance. Literature on cultural distance (differences between national cultures) and foreign entry modes conveys contradictory results. Gatignon and Anderson (1988) argue that, under conditions of high cultural distance, MNEs may require greater flexibility, resulting in preferences for modes of entry with lower control, such as licensing or a joint venture. On the other hand, Hennart and Reddy (1997) indicated that large differences in cultures prompt MNEs to exert greater control in their entry in order to minimize transaction costs). This study was based on MNEs in the Kenyan automotive sector. It sought to establish whether national cultural differences between Kenya and the firm’s country of origin influence entry mode choices. The study was underpinned by two theories; factor proportions theory and comparative advantage of nations theory. A total of 24 firms were targeted as per KMI list of registered MNEs in the motor vehicle sector. Out of the 24 firms, only 15 provided information representing a response rate of 62.5%. The study used a cross-sectional survey research design and set out to conduct a census but faced a challenge from lack of cooperation from some firms. Data was collected through semi-structured questionnaires that were self-administered to the respective firms. The study findings indicated that majority of the firms originated from Japan and China and most of them entered the Kenyan market through exporting and franchising which are associated with low risk and less resource commitment. Majority of the firms studied have been in operation in Kenya for over 5 years represented by 53.3% of the firms. Study findings indicated that cultural differences affect foreign market entry decisions to a great extent, 13.3% and to a small extent 66.7%. The decision on which country to enter is also influenced by culture as indicated by 33.3%, somewhat, and 40%, to a little extent. The most considered dimension in cultural differences was collectivism (group achievement) with a mean of 1.93 and a standard deviation of .884 reflecting national cultures from where majority of the firms originated from. Culture was also linked to performance with business negotiations emerging as the most influenced (mean of 3.93 and standard deviation of .704). In addition to national culture other factors were notably considered important namely economic factors, legal political factors, and geographical distance with means of 1.53, 1.73, and 2.33 respectively. The study findings indicate that prior visits to a firm before entry would alleviate the conflicts arising from national cultural differences with a mean score of 1.80 and standard deviation of 0.775. This study concludes that host country’s national culture influences the choice of foreign market entry mode by multinational firms in the automotive industry in Kenya. The study recommends that MNEs in Kenya should invest in R&D initiatives where host national culture should be given a priority research consideration. The implications of this study are that mechanisms should be put into place to entrench key national culture aspects into existing policies. Practitioners in the motor industry and other sectors should undertake cross-cultural training initiatives to have a deeper understanding of the diversities and identify the associated opportunities. Finally this study adds to the existing literature and will act as a basis for future studies on national culture and international business transactions
| Item Type: | Thesis (Masters) |
|---|---|
| Subjects: | S Agriculture > S Agriculture (General) S Agriculture > SB Plant culture |
| Divisions: | Africana |
| Depositing User: | Mr Nahum Osman |
| Date Deposited: | 23 Sep 2016 06:49 |
| Last Modified: | 23 Sep 2016 06:51 |
| URI: | http://thesisbank.jhia.ac.ke/id/eprint/977 |
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