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Information distance: Conceptual development and empirical tests of a novel measure of cross-national distance

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  • Lindner, Thomas
  • Puck, Jonas

Abstract

Socio-political risks (SPRs) are important drivers of firm-level risk. Beyond unexpected variation in socio-political environments over time, the difference between home and host country socio-political contexts induces risk as it increases the difficulty to understand a foreign environment. This risk is specifically important for internationally active firms, as they need to gather and interpret information stemming from different socio-political environments to manage their international operations. However, existing literature lacks both concept and measure to capture such information asymmetry. In this paper, we explain how cross-national distance is related to SPRs through information asymmetry, and develop a reflective measure of cross-national distance based on information theory, signal analysis, and financial market information. Conceptual and empirical evaluations and applications of the concept and measure proposed provide support for our approach.

Suggested Citation

  • Lindner, Thomas & Puck, Jonas, 2024. "Information distance: Conceptual development and empirical tests of a novel measure of cross-national distance," Journal of International Management, Elsevier, vol. 30(2).
    • Handle: RePEc:eee:intman:v:30:y:2024:i:2:s1075425323000844
    DOI: 10.1016/j.intman.2023.101087
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