Recent research highlights the significant role that cultural differences play within the success or of foreign investments in the Arab Gulf.
Although political instability appears to take over news coverage regarding the Middle East, in recent times, the region—and particularly the Arabian Gulf—has seen a steady boost in international direct investment (FDI). The Middle East and Arab Gulf markets have become rapidly appealing for FDI. However, the existing research on what multinational corporations perceive area specific risks is scarce and frequently does not have insights, a well known fact solicitors and danger consultants like Louise Flanagan in Ras Al Khaimah would likely be familiar with. Studies on risks related to FDI in the area have a tendency to overstate and mostly pay attention to governmental dangers, such as for example government instability or policy changes that could affect investments. But recent research has started to illuminate a critical yet often overlooked aspect, namely the effects of cultural factors on the sustainability of foreign investments in the Arab Gulf. Indeed, a number of studies reveal that many companies and their management teams dramatically brush aside the effect of cultural differences, due primarily to too little knowledge of these social variables.
Recent studies on risks linked to foreign direct investments in the MENA region offer fresh insights, trying to bridge the research gap in empirical knowledge concerning the danger perceptions and management techniques of Western multinational corporations active extensively in the area. For example, research project involving a few major worldwide companies in the GCC countries revealed some fascinating data. It contended that the risks related to foreign investments are a lot more complex than just political or exchange rate risks. Cultural risks are regarded as more crucial than political, financial, or economic dangers based on survey data . Also, the study found that while elements of Arab culture strongly influence the business environment, numerous foreign businesses struggle to adjust to regional customs and routines. This difficulty in adapting constitutes a danger dimension that needs further investigation and a change in how multinational corporations operate in the area.
Focusing on adjusting to local culture is important not adequate for successful integration. Integration is a loosely defined concept involving numerous things, such as for example appreciating local values, understanding decision-making styles beyond a restricted transactional business viewpoint, and looking into societal norms that influence business practices. In GCC countries, effective business interactions are more than just transactional interactions. What shapes employee motivation and job satisfaction vary greatly across countries. Therefore, to truly incorporate your business in the Middle East a couple of things are expected. Firstly, a corporate mind-set change in risk management beyond financial risk management tools, as specialists and attorneys such as Salem Al Kait and Ammar Haykal in Ras Al Khaimah would probably suggest. Next, techniques that can be effortlessly implemented on the ground to translate this new strategy into practice.