Cognitive distance and obstacles to subsidiary business success-the experience of Chinese companies in Germany

authored by

Yuefang Si, Ingo Liefner

Abstract

The success of foreign direct investment (FDI) from developing countries to developed countries is critically dependent on managing the differences in the knowledge bodies of the regions and players involved. The theories that at least partly explain successful FDI of this kind use the terms cognitive distance and embeddedness. Most of the empirical research takes the perspective of regions and has addressed the problem of becoming embedded in the host regions. This paper takes the firm perspective and examines cognitive distance regarding not only the host region, but also the knowledge of the firms involved. It uses qualitative information from an extensive study of Chinese affiliates in Germany. In contrast to many other studies, this paper shows that a fast and successful process of becoming embedded in the host region can hamper the subsidiary's success, as it may cause conflict with the parent firm.

External Organisation(s)

East China Normal University
Justus Liebig University Giessen

Type

Article

Journal

Tijdschrift Voor Economische en Sociale Geografie

Volume

105

Pages

285-300

No. of pages

16

ISSN

0040-747X

Publication date

06.06.2014

Publication status

Published

Peer reviewed

Yes

ASJC Scopus subject areas

Geography, Planning and Development, Economics and Econometrics

Sustainable Development Goals

SDG 10 - Reduced Inequalities

Electronic version(s)

https://doi.org/10.1111/tesg.12064 (Access: Closed)