Content area
Full Text
Introduction
The increasingly competitive environment of today's business world has compelled a large number of firms to target international markets ([74] Wood and Robertson, 2000). Removal of trade barriers and increasing globalization has further accelerated the number of firms entering new markets/countries. More and more managers today are faced with the decision of which foreign markets to target. This decision is one of the most critical decisions for firms in their internationalization process ([59] Sakarya et al. , 2007; [72] Whitelock and Jobber, 2004), as it represents the first step in their objective to go international. Thus, an error in selecting the right target country can have long-term consequences on the firms' future success. As a case in point, the Enron Development Corporation, a US-based power company, entered India in 1992 to build a $2.8 billion power plant in Maharashtra. Since its inception in 1992, the power plant (which was to become the largest power plant in India) was mired in controversies due to protectionist policies of the then government in the state of Maharashtra ([80] Johansson, 1997), and finally, after investing huge amounts of money and resources, Enron decided to sell its operations in India in 2001 ([77] Davis, 2001). There are several such examples that illustrate the dynamics of foreign market entry behavior.
Researchers in international marketing have long examined the impact of distance factors such as cultural and geographic on firms' selection of target markets. A review of empirical studies in this domain shows inconsistent results ([12] Davidson, 1980; [18], [19] Dunning, 1973, 1992; [16] Dow, 2000; [30] Green and Allaway, 1985; [38] Johanson and Vahlne, 1977; [39] Johanson et al. , 1975; [46] Mitra and Golder, 2002; [50] Ojala and Tyrvainen, 2007; [53] Pothukuchi et al. , 2002; [59] Sakarya et al. , 2007; [69] Weitzel and Berns, 2006). For example, [21] Edwards and Buckley (1998), [6] Buckley et al. (2007), [10] Clark and Pugh (2001), and [16] Dow (2000) find that cultural and geographic distances have a significant impact on firms' decisions to select international markets. By contrast, [57] Robertson and Wood (2001), [46] Mitra and Golder (2002), and [64] Terpstra and Yu (1988) find no impact of cultural and geographic distance on firms' selection of international markets.
This divergence...