Department of Management, Universita Ca' Foscari Venezia.
Abstract
Recent literature on strategic decision-making highlights the role of hidden costs, i.e.
costs that firms are not able to predict ex-ante (Larsen et al., 2012). This paper analyses the
hidden costs of going global, i.e. unanticipated costs that emerge in the implementation of
market entry strategies. Foreign market entry requires firms to assess the potential
attractiveness of different locations, select an appropriate entry mode, and organize their
international value chain. When taking such decisions, firms can make evaluation mistakes.
We propose that cultural distance is one factor that generates “blind spots” in a firm’s
strategic analysis, thus affecting its ability to evaluate the actual challenges of entering
foreign markets. Firms can offset distance-driven hidden costs by building international
experience and relational capability
