Should we distance ourselves from the cultural distance concept?

After discussing my first-ever academic article in my first research focus blog, I would now like to present my most recent publication, coincidentally also falling in the "why on earth did everyone just accept this uncritically?" category. As a former research assistant of Geert Hofstede, I have long been concerned about the way in which his work on cultural dimensions has been used in an increasingly mechanistic way. In 1988 Kogut & Singh’s published an article in JIBS that quantified cultural distance with a simple formula based on Hofstede’s original dimensions. Since then its popularity as an explanatory variable for just about any international business phenomenon seems to be unassailable.

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Critique of the use of culture in entry mode studies

In the early 2000s, I reviewed the literature in entry mode studies and published what I thought was a fairly scathing critique of the way cultural distance had been incorporated in this field. This was part of the article’s conclusion.

Researchers in the area of entry mode choice seem to have borrowed from cross-cultural management what was convenient – an index-score of cultural distance to be used in conjunction with other secondary data in large-scale regression models – but have conveniently ignored other developments in the field that take a far more sophisticated view of the impact of culture on management.

[…] In their eagerness to include cultural distance in their analyses, researchers in this field seem to have blinded themselves for other, more important, country related influences on entry mode choice and have settled for a very narrow view of culture. […] Over thirty years ago Ajiferuke & Boddewyn (1970) already warned us not to limit ourselves to the cultural explanations in the area of comparative management. We argue that this warning is equally valid for international business and management.

Sample design flaws lead to problems in attributing causality

A key conclusion in this paper was that inadequate sample selection lead to problems in attributing causality. Especially in studies where only one home or host country was included - i.e. the vast majority of studies in this field - it was impossible to separate host or home country effects from cultural distance effects.

As we have seen in our review of studies in the field, home- and host-country characteristics would seem at least equally plausible explanations for differences in entry-mode choice as CD in many studies.

The disturbing impact of home- and host-country differences as discussed above is often aggravated by the fact that many studies in this field are characterized by serious sample imbalances, in which a limited number of countries make up half to three-quarters of the sample. In this way, any home/host-country idiosyncrasies will have a huge impact on the results.

Like my earlier critical work on the myth of high expatriate failure rates, I naively thought this critique might change the way IB academics used the cultural distance concept. Of course I was wrong! Whereas in the early 2000s there were only about 150 citations to Kogut & Singh’s work, its popularity continued to increase. In fact, half of the article’s current - more than 1,500 - Web of Science citations occurred since 2010.

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Trying again with a dual approach

So nearly fifteen years later I tried again, this time with my long-term collaborator Markus Pudelko. In a paper presented at the 2014 AIB meeting, we updated the detailed review of previous studies in Harzing (2003) from 30 to over 90 publications. We concluded – as before – that in each and every study home or host country context constituted at least an equally likely explanation for the entry mode choice in question as cultural distance. This conclusion was made easier by the fact that, even in the updated review, most studies still included only one home or host country.

  • Harzing, A.W.; Pudelko (2014) Why the importance of the (cultural) distance concept in International Business is not justified: A literature analysis, paper presented at the 2014 annual meeting of the Academy of International Business, June 24-June 26, Vancouver, Canada. Available online...

This time though, we also included an empirical investigation in over 800 subsidiaries of MNCs, covering nine host and fifteen home countries across the world. In a paper presented at the 2014 AoM meeting, we showed that the explanatory power of distance was highly limited once home and host country context were accounted for. Any significant effects of cultural distance on entry mode choice are likely to have been caused by inadequate sampling.

  • Harzing, A.W.; Pudelko (2014) Why home and host country context matters more than (cultural) distance: An empirical study, paper presented at the 71st Academy of Management annual meeting, August 1-5, in Philadelphia, Pennsylvania, USA. Available online...

Deep contextualization rather than distance measures

We thus contend that entry mode studies in particular, and International Business research in general, would do well to reconsider its fascination with distance measures, and instead, focus first and foremost on differences in home and host country context. We also argue that serious engagement with deep contextualization is necessary in International Business research to pose new and relevant questions and develop new and innovative theories that explain empirical phenomena.

We acknowledge that these recommendations can be seen as “uncomfortable” and “inconvenient” for International Business researchers. However, we would argue that, as cumbersome and muddy the pathways of collecting “rich and thick” contextual data might be, in comparison to the convenient and neatly paved boulevards of simple distance measures, they can potentially lead to unearthing much deeper insights. In that sense, we urge International Business scholars to exchange their business shoes and high heels for sturdy boots and return to the groundwork more commonly practised by prior generations of International Business scholars.

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Want to read the published paper?

The literature review and empirical study, presented at the two 2014 conferences, were published as one - admittedly fairly long - paper in Management International Review.

  • Harzing, A.W.; Pudelko, M. (2016) Do we need to distance ourselves from the distance concept? Why home and host country context might matter more than (cultural) distance, Management International Review, 56(1): 1-34. Available online... - Publisher’s version (free access!)

Thanks to Middlesex University, this article is available in Gold Open Access, so it can be freely downloaded and shared by everyone.

Drop me a line

Free pre-publication versions of these papers are hyperlinked. If you’d like to have an official reprint for these papers, just drop me an email.

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