Chapter 1: Expanding to Institutionally Different Countries: Reasons, Firm International Experience, and Entry Mode Choice

Thanks in large part to the liberalization and development of emerging markets—such as Brazil, Russia, India and China—firms are expanding in these markets at a rapid pace. In fact, recent data on foreign direct investment (FDI) suggests that for the first time ever, emerging markets are likely to attract more FDI inflows than developed countries (Kekic, 2009). Moreover, even though global FDI flows decreased by 17% in 2008, FDI flows to emerging markets increased by 10% during the same year. Further, it is likely that the majority of growth in the future will come from developing country markets. Many of these countries however, are markedly different from the Triad countries (i.e., United States, Europe, and Japan), both in terms of formal institutional structure and their cultural values (House, Hanges, Javidan, Dorfman, & Gupta, 2004; Kaufmann, Kraay, & Mastruzzi, 2003).