Difference Scores, Analysis Levels, and the (Mis)Interpretation of Cultural Distance

Abstract

Purpose – Cultural distance (CD) reflects differences in cultural values across countries. Many studies have used CD to explain strategies and outcomes in international business practices, although often with limited success. This chapter demonstrates previously unrecognized problems with the conceptualization, analysis, and interpretation of CD measures and suggests methods for improvements in CD research. Design/methodology/approach – Problems with traditional methods in CD research are demonstrated analytically and illustrated with correlation and regression analyses of secondary data. One analysis shows that individual cultural dimensions may provide alternative explanations for hypothesized effects of distance. Two other examples illustrate the incorrect conclusions that traditional analysis approaches may suggest. Findings – The difference scores that are implicit in measures of CD usually imply unrealistic constraints on relationships between variables. Analyzing CD at the level of organizations rather than countries exaggerates the available sample size and may result in inaccurate statistical tests. Research limitations/implications – The empirical examples illustrate problems with methodology for CD research. They are not proposed as substantive, generalizable tests of hypotheses. Originality/value of the chapter – This chapter provides original arguments to augment existing criticisms of CD research. It shows that findings from extant CD studies may not support the conclusions that have been reported in the literature. Future research should use methods that lead to correct interpretations of CD effects.