Why are Chines Companies attracted by the Showroom Concept? - Culture´s Impact on Choice of Entry Mode

Abstract: As the world is becoming increasingly interconnected, companies from all over the world begin to internationalize their operations. Many researchers suggest that the world is becoming more homogenous. Consequently, one would think that companies’ internationalization processes would be similar to each other. However, there are some evident differences between the internationalization patterns of different countries. Recently, there has been a huge surge of Chinese foreign investments and operations. This has led to a rather new phenomenon, which has spread to many Western nations. Thousands of Chinese companies simultaneously enter new markets, enabled by so-called ‘showrooms’. Despite minimal previous international experience, Chinese companies engage in relatively high-commitment entry modes from the start. No equivalent patterns or entry modes exist in Western countries. Therefore, the question emerges; is the variance of entry mode choices and internationalization processes culturally dependent? However, existing literature about the impact of culture on choice of entry mode is scarce. Furthermore, none of the previous research has dealt with the use of the showroom, or any other export entry mode. As a result, we decided it was necessary to explore the subject further. In our research, we identified a new variable, which has never before been used to explain the cultural impact of entry mode choice. This variable was then tested by distributing a questionnaire via e-mail to the target group - Chinese companies using showrooms as their international expansion strategy. More specifically, we concentrated on those who operate showrooms in the United Arab Emirates. Moreover, our identified variable was recognised and supported by the participants of our sample.