Home and host country location advantages - Distance between home & host country

6 important questions on Home and host country location advantages - Distance between home & host country

What is meant by distance between home & host country?

When firms try to transfer, deploy and exploit abroad their home-grown FSAs or create new FSAs and engage inresource recombination, they fase additional barries and complexities not faced by local competitors in the host country due to:
  • Cultural distance
  • Administrative distance
  • Geographic distance
  • Economic distance

What is administrative distance?

Differences in political or administrative systems in different locations:
  • Absence of colonial ties
  • Absence of shared monetary or political asociation
  • Plotical hostility
  • Government policies

What is Geographic distance?

The difference in the physical location in the world (e.g. EU or Asia):
  • Physical remoteness
  • Lack of a common border
  • Lack fo sea or rivier access
  • Size of country
  • Weak transportation or communication links
  • Differences in climates
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What is economic distance?

The distance in economic well being of a country and the welfare:

  • Differences in consumer incomes
  • Differences incosts and quality of:
    • Natural resources
    • Financial resources
    • Human resources
    • Infrastructure
    • Intermediate inputs
    • Information or knowledge

What is the influence of distance on Non-LB FSAs?

Greater distance leads to weaker transferability and exploitation potential of NLB FSAs.

What is the influence of distance on LB FSAs?

Greater distance leads to higher investmens requirements in LB FSAs.

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