AbstractsEconomics

Internationalization of firms has been an on-going process for many years, however, over the recent years, there has been radical changes in the business world, which has created a more competitive business environment for firms. This change in the business environment has not been an easy process nor is it anticipated to get any easier. International firms entering new markets are faced with different challenges, which could be embedded in the behaviour specific to the people living in these countries. Cultural distance is defined as complex and intangible and measured only at a single point in time. Cultural distance easy creates an “illusion” of symmetry where measures at the time of market entry might have changed by the time the performance is measured. Measuring only the cultural distance is not enough to fully understand the international behaviour and how business practices have adapted to the foreign market, to do so one need to understand the institutional distance in order to understand the behavioural patterns existing within the foreign market and adapt its business practices accordingly. There is no support for the perception of cultural and institutional distance between two institutional contexts to be symmetric; it is an illusion of symmetry. Therefore the purpose of this study is to describe and analyze how asymmetry in firms’ perception on cultural and institutional distance affect the extent of firms’ adaptation. This is by increase understanding on how firms from different institutional contexts perceive the distance between them and to what extent they adapt their business practices to the foreign market. In order to answer this purpose a qualitative research has been conducted where managers in three firms from Sweden and three firms from China has been interviewed on their perception of distance on the opposite market. The theoretical framework has included a presentation of the cultural distance, the institutional distance and adaptation of business practices.  This has been followed by a theoretical synthesis, which has been conducted based on the theoretical concepts. Furthermore, the empirical chapter presents the findings of each case company. In the analysis chapter, the theoretical framework has been analyzed together with the empirical data. Based on the analysis the authors have been able to conclude that asymmetry in firms’ perception on distance affects the extent of firm’s adaptation of business practices to the institutional context. It can be concluded that Swedish firms adapt business practices to less extent than Chinese firms and the reason behind it is the asymmetry in firms’ perception of distance. Swedish firms investing in the Chinese market is not faced with the same distance as a Chinese firm investing in the Swedish market, and thus they do not adapt to the same degree.