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Dow and Larimo use a sample of 1502 outward foreign direct investments by Nordic firms between 1993 and 1999 to examine how changes to the conceptualization and measurement of the distance and experience constructs may improve their ability to explain entry mode choice. Using the scales measuring national-level differences in language, religion, industrial development, education, and political systems, the authors demonstrate that this broader conceptualization of the underlying factors driving the distance construct substantially increases the ability to predict entry mode. The explained variance attributable to these distance factors is four times greater than the variance explained by the classic distance scale, Kogut and Singh’s national cultural distance. The weak and equivocal empirical results regarding the relationship between entry mode choice and distance that have been reported in several recently published meta-analyses may be simply the result of defining the distance construct too narrowly.

Dow and Larimo also use a refined interpretation of international experience, separately measuring prior international experience in countries that are culturally similar to the target market and those that are culturally dissimilar to the target market. This enables them to discriminate between culture-specific experience (e.g., learning the specific languages, customs, and culture of a foreign market) and experience in general internationalization processes (e.g., learning how to effectively monitor and control an agent’s activities in a foreign market). The empirical results show that only experience in similar countries has a statistically significant impact on entry mode selection. Experience in dissimilar countries seems to have no predictive power. Again, the weak and equivocal results regarding the relationship between international experience and entry mode choice may be simply the result of how the construct has been defined and measured. These results indicate a need for a radical change in how distance and experience should be operationalized in further entry mode research.

Biography
Douglas Dow is Associate Professor in Business Strategy in the Melbourne Business School, University of Melbourne, and is affiliated with the school’s Centre for the Practice of International Trade. He received a BSc in Mechanical Engineering from Queen’s University, Kingston, Ontario; an MBA from the University of Western Ontario; and a PhD from the University of Melbourne. His current areas of interest include psychic distance, the internationalization process, market selection, entry mode choice, and the performance of firms in international markets. He has previously published in Journal of International Marketing, Journal of International Business Studies, and Journal of Management, among others.

Jorma Larimo is Professor of International Marketing at the University of Vaasa, Finland. He is also the Director of the Finish Graduate School of International Business. He has received all his degrees from the University of Vaasa. His current areas of interest include psychic and cultural distance, export marketing strategies, entry mode and form of investment choice, international joint venture strategies, and performance in exports and foreign investments. He has previously published in Journal of International Business Studies, Journal of Business Research, Journal of World Business, and Management International Review, among others.

J International Marketing, Volume 17, Number 2, June 2009
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