The Effects of Cultural Distance and Institutions on Foreign Direct Investment Choices: A Research of Turkey & China

Abstract

Global changes in social, cultural and economic spheres and advances in technology and communication have made the world a global market where borders no longer exist. The importance of foreign investment has become undeniable with the emergence of the concept of foreign investment for developing economies. Due to its direct impact on the global market and its economy in transition, China is the focus of this research. The research aims to determine the interplay of variable factors influencing foreign direct investors and investment location choices with cultural distance and investment models, and to use the associated evaluation as a guide for investors. In this study, qualitative research methods are used to measure the impact of the variable factors that determine the hypotheses of the study on foreign direct investors and to evaluate the findings. In this study, designed with the technique of phenomenology, in-depth interview is used as the method of data collection and data analysis is done through descriptive analysis. All the research and interviews have revealed that FDI is very responsive to institutions and cultural distance. Moreover, agglomeration is the strongest determining factor for FDI in the Chinese market. The reason these factors encompass the sectoral aggregate are not the strongest factors is that agglomeration is the most important finding. This study is a useful guide for developed and developing countries as well as for the strategic plans of local and national institutions.