A generic conceptualization of the cultural distance index

Abstract

Purpose This article aims at offering and validating a theory‐driven conceptualization of the cultural distance index. Design/methodology/approach First, the cultural distance index is conceptualized, its conceptual properties are discussed, and a generic formula is proposed. Subsequently, the generic formula is applied to Schwartz's and Hofstede's frameworks. Finally, using the new formula the cultural distance is calculated, its robustness is examined, and its advantages over the Kogut and Singh's measure are inspected. Findings Through this paper it is found that by considering issues such as cultural dimensions' alignment and their relative weight, it is possible to build a more accurate index of cultural distance. Moreover, based on the generic formula it is understood that collectivism/individualism and power distance in Hofstede's framework and conservatism, egalitarianism in Schwartz's model are important cultural dimensions and account for a considerable weight in the cultural distance index. Research limitations/implications The index is based on cultural dimensions and naturally it carries all shortcomings attributed to dimensionalization such as symmetry, linearity, stability and causality. In addition, it can be recognized that while alignment is a legitimate method, it should be interpreted cautiously because cultural dimensions are essentially nebulous concepts. Practical implications Researchers may use the proposed index to test the implications of cultural differences for a wide range of cross‐national issues such as joint ventures, entry mode choices, mergers, negotiations, organizational behavior, and technology transfer. Originality/value This article offers a novel and theory‐driven approach to building the cultural distance index. Considering the popularity of the Kogut and Singh's index in international business, the paper is of major significance.

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