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An improvement to Kogut and Singh measure of cultural distance considering the relationship among different dimensions of culture

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  • Kandogan, Yener
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    Abstract

    National cultural distance construct has wide-spread use in the international business literature, with many applications. Despite its limitations as summarized by Shenkar (2001), the method in Kogut and Singh (1988) is commonly adopted by researchers to measure cultural distance. This article demonstrates that this method is a special case of the distance measure in Mahalanobis (1936) under the assumption of zero covariances between different dimensions of culture. Further, it demonstrates that this assumption is not valid for several cultural dimensions of countries measured by Hofstede (1980), and suggests a simple modification to the method that corrects for this invalid assumption, and hence produces more accurate measures of cultural distance. The article concludes with a comparison of cultural distances as measured by the original and the modified version of the method.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0275531911000560
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    Bibliographic Info

    Article provided by Elsevier in its journal Research in International Business and Finance.

    Volume (Year): 26 (2012)
    Issue (Month): 2 ()
    Pages: 196-203

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    Handle: RePEc:eee:riibaf:v:26:y:2012:i:2:p:196-203

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    Web page: http://www.elsevier.com/locate/ribaf

    Related research

    Keywords: Cross-cultural research/measurement issues; Internationalization theories and foreign market entry; Cultural distance;

    References

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    1. Solomon Tadesse & Chuck Kwok, 2005. "National Culture and Financial Systems," William Davidson Institute Working Papers Series wp884, William Davidson Institute at the University of Michigan.
    2. Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert W. Vishny, 1996. "Law and Finance," NBER Working Papers 5661, National Bureau of Economic Research, Inc.
    3. Robert M. Bushman & Joseph D. Piotroski & Abbie J. Smith, 2004. "What Determines Corporate Transparency?," Journal of Accounting Research, Wiley Blackwell, vol. 42(2), pages 207-252, 05.
    4. W Chan Kim & Peter Hwang, 1992. "Global Strategy and Multinationals' Entry Mode Choice," Journal of International Business Studies, Palgrave Macmillan, vol. 23(1), pages 29-53, March.
    5. Andy C W Chui & Alison E Lloyd & Chuck C Y Kwok, 2002. "The Determination of Capital Structure: Is National Culture a Missing Piece to the Puzzle?," Journal of International Business Studies, Palgrave Macmillan, vol. 33(1), pages 99-127, March.
    6. Rosalie L Tung & Alain Verbeke, 2010. "Beyond Hofstede and GLOBE: Improving the quality of cross-cultural research," Journal of International Business Studies, Palgrave Macmillan, vol. 41(8), pages 1259-1274, October.
    7. Oded Shenkar, 2001. "Cultural Distance Revisited: Towards a More Rigorous Conceptualization and Measurement of Cultural Differences," Journal of International Business Studies, Palgrave Macmillan, vol. 32(3), pages 519-535, September.
    8. William H Davidson, 1980. "The Location of Foreign Direct Investment Activity: Country Characteristics and Experience Effects," Journal of International Business Studies, Palgrave Macmillan, vol. 11(2), pages 9-22, June.
    9. Stephen B Salter & Frederick Niswander, 1995. "Cultural Influence on the Development of Accounting Systems Internationally: A Test of Gray's [1988] Theory," Journal of International Business Studies, Palgrave Macmillan, vol. 26(2), pages 379-397, June.
    10. John H Dunning, 1988. "The Eclectic Paradigm of International Production: A Restatement and Some Possible Extensions," Journal of International Business Studies, Palgrave Macmillan, vol. 19(1), pages 1-31, March.
    11. Luis R G�mez-Mejia & Leslie E Palich, 1997. "Cultural Diversity and the Performance of Multinational Firms," Journal of International Business Studies, Palgrave Macmillan, vol. 28(2), pages 309-335, June.
    12. Aggarwal, Raj & Kearney, Colm & Lucey, Brian, 2012. "Gravity and culture in foreign portfolio investment," Journal of Banking & Finance, Elsevier, vol. 36(2), pages 525-538.
    13. Bruce Kogut & Harbir Singh, 1988. "The Effect of National Culture on the Choice of Entry Mode," Journal of International Business Studies, Palgrave Macmillan, vol. 19(3), pages 411-432, September.
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    Cited by:
    1. Beracha, Eli & Fedenia, Mark & Skiba, Hilla, 2014. "Culture's impact on institutional investors' trading frequency," International Review of Financial Analysis, Elsevier, vol. 31(C), pages 34-47.
    2. Fedenia, Mark & Shafer, Sherrill & Skiba, Hilla, 2013. "Information immobility, industry concentration, and institutional investors’ performance," Journal of Banking & Finance, Elsevier, vol. 37(6), pages 2140-2159.

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