The establishment mode choice (M&A, merger and acquisitions, vs. greenfield investment) has always been one of the most prominent topics in the field of international research and practice. In the research on the antecedents of the decision-making of establishment mode, cultural distance has triggered much debate. The main theoretical frameworks used to explain the influence of cultural distance on the establishment mode choice like the transaction cost theory (TCE), the resource-based view (RBV), the institutional theory, the eclectic theory of international production (OLI paradigm), and the organizational learning theory have drawn conflicting conclusions on this issue. This phenomenon is called a “Cultural Distance Paradox”.In order to explain the inconclusive findings in previous studies, this article decomposes the influence of cultural distance on the choice between greenfield investments and M&A into a dual mechanism of internal and external risks, i.e.the upsurge in the cultural distance between the host country and the home country of a multinational company (MNC) will result in sharp increases of the risks of both external adaptation and internal integration faced by the MNC. Cross-border M&A’s are in the position to alleviate external risks because they help MNCs to acquire local knowledge and legitimacy in host countries. However, cross-cultural human resource management resulted from the diverse cultural backgrounds of the staff will make the integration of subsidiaries more difficult. On the contrary, MNCs which choose to make greenfield investments can easily replicate the organizational processes and management styles from a subsidiary to another, thus being able to manage subsidiaries in a more standardized manner and minimize the internal integration risks. However, they must put in more efforts to deal with the uncertainties outside the organization. Based on the above discussion, this paper proposes that from the perspective of attention the distribution of multinational companies’ attention to internal and external risks will determine their preference for greenfield investments and M&A’s when minimizing the overall uncertainties of cross-cultural investments.The attention-based view points out three principles of the distribution of executors’ attention.It affirms that the attention of an enterprise is determined by the internal and external environment of the organization, while how the firm interprets these contextual situations depends on its structural characteristics. Based on this framework, this paper establishes a corresponding theoretical model which proposesthat the distribution of the attention of the company’s decision-makers between internal and external risks depends on the internationalization strategy adopted by the company (the organization’s internal environment) and the dynamism of the host country (the organization’s external environment), which is further moderated by the type of organization (prospector or defender).Using the outward foreign direct investment (OFDI) data of Chinese MNCs in 2010-2012，we empirically verified the three-way interaction model and reached the following conclusions: (1) When the MNC implements a globalization strategy, the higher the cultural distance is, the more likely it will adopt the greenfield investment. (2) When the market environment in the host country is highly dynamic, the higher the cultural distance is, the more likely the MNC will adopt M&A. (3) When the MNC is a prospector, the moderation effect of internationalization strategy will diminish, (4)but the moderation effect of market dynamism in the host country will be enhanced.This study introduces the attention-based view to explain the mechanism of how cultural distance influences establishment mode choice, cracking the “cultural distance paradox” by deconstructing the decision-making process on a micro level. It shows that the influence of cultural distance on overseas investment establishment mode is moderated by the internal and external context of the firm. There also exists a moderated moderation of organization type on the relationship between cultural distance and the choice between greenfield investments vs. M&A. This study provides some implications for Chinese firms whichlack international experiences on how to make establishment mode choice when entering a culturally distant country.