The role of Perceived Psychic Distance and Culture-Specific International Experience on the choice between Greenfield Investment and Acquisition in China: The Case of Ferrero Company

The aim of this thesis is to analyse the concept and role of two factors, namely Perceived Psychic Distance and Culture-Specific International Experience in order to understand how these variables have affected Italian managers’ decisions between the choice of a greenfield investment or an acquisition in China. A greenfield investment is basically the establishment of a subsidiary from scratch, while an acquisition is the decision to acquire an existing local company. Perceived psychic distance refers to the sum of stimuli, which prevent the flow of information within the market. The researcher has focused his analysis on three of them, namely differences in culture, language and religion; this in order to study to what extent the managerial perception of these stimuli has affected the choice of Italian managers in establishing a manufacturing plant in China through greenfield venture. Culture-Specific International Experience is the amount of experience developed by the company in countries similar to China, therefore it is a construct composed by the general experience developed in establishing and leading business activities and the knowledge of the host country. The researcher has quantified the amount of experience in similar countries developed by the company under study and has analysed its role toward the choice of the greenfield venture. The researcher has reviewed both concepts according to previous literature on the topic and has collected empirical evidence basing his research on a single case study strategy, namely that of a famous Italian Multinational Corporation operating in the food industry. The method chosen for the data collection have been semi-structured interviews with the head managers of Ferrero China, the subsidiary of the company under investigation. Findings have shown that some cultural habits and the linguistic barrier have hugely affected the distance perceived by Italian managers toward Chinese people, but this perceived distance was not really determinant toward the choice of the greenfield venture. Moreover, culture-specific international experience has been crucial in alleviating some of the cultural differences perceived by Italian managers and the know-how developed by Ferrero has affected the form of investment selected in China.fi=Opinnäytetyö kokotekstinä PDF-muodossa.|en=Thesis fulltext in PDF format.|sv=Lärdomsprov tillgängligt som fulltext i PDF-format