The influence of the cultural differences on the internationalization process of firms

The increased competition, saturated home markets or market expansion has highly motivated
firms to internationalize. Regardless of the nature of the expansion all firms are affected by
the cultural differences. The main outcome of this thesis is that the internationalization
process of firms tends to start in countries that are culturally similar and follow a sequence of
entries. Naturally when companies take the decision to internationalize their activities one of
the first challenges faced is which offshore market to enter. Since this kind of decision is of
major importance, scholars state that it is necessary to enlarge the literature about
international business in order to gain knowledge on this matter. Firms tent to perform better
in foreign markets that are similar to the home one because it is easier to understand and adapt
to markets that are culturally close. The previous research conducted indicates that the most
cultural differences between the home and a foreign country are important. Bigger the
difference between the markets, harder it will be to gather information, understand and gain
knowledge about the foreign market concerned. According to the research findings a gradual
internationalization with initial market entry in culturally similar market can be a successful
strategy to deal with cultural differences and pursuing internationalization will allow firms to
limit the risk involve in this process. Hence this thesis finding is linked to the following
research question, consisting of concepts of culture and the internationalization process:
“How do cultural differences influence a firm’s process of internationalization?”
The main purpose of this thesis is to provide a deeper understanding and improve knowledge
about cultural differences and the way they impact the internationalization process of a firm.
This is done by investigating the firms’ selection of foreign markets in the order of entry, as
well as identifying and analyzing the effects of the cultural differences that firms experienced
as a consequence of their internationalization strategy.