SpringerLink
Log in

An assessment of alternative empirical measures of cultural distance: Evidence from the Republic of Korea

  • Published:
Asia Pacific Journal of Management Aims and scope Submit manuscript

Abstract

This study assesses the relative merits of alternative cultural frameworks as the basis to construct indices of cultural distance using the one introduced by Kogut and Singh (1988). We assess not only Hofstede (1980, 1991) but also the more recent Schwartz (1994, 2003) and GLOBE (2004) frameworks. Using primary data collected through a questionnaire survey of 228 foreign manufacturing firms in the Republic of Korea, we find consistently across the three different frameworks that cultural distance has a positive association with full ownership. These results support not only the robustness of Kogut and Singh’s method to construct an index of cultural distance but also the consistency of the alternative indices of cultural distance used to explain ownership mode decisions by MNEs.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Subscribe and save

Springer+ Basic
EUR 32.99 /Month
  • Get 10 units per month
  • Download Article/Chapter or Ebook
  • 1 Unit = 1 Article or 1 Chapter
  • Cancel anytime
Subscribe now

Buy Now

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Aczel, A. D. 1996. Complete business statistics. Chicago: Irwin.

    Google Scholar 

  • Agarwal, S. 1994. Socio-cultural distance and the choice of joint ventures: A contingency perspective. Journal of International Marketing, 2(2): 63–80.

    Google Scholar 

  • Ahn, I. 2005. The impact of national culture on the planning and purchase–consumption behaviour of international leisure travellers. Doctoral dissertation, The University of New South Wales, Sydney.

  • Anand, J. & Delios, A. 1997. Location specificity and the transferability of downstream assets to foreign subsidiaries. Journal of International Business Studies, 28(3): 579–603.

    Article  Google Scholar 

  • Arora, A. & Fosfuri, A. 2000. Wholly owned subsidiary versus technology licensing in the worldwide chemical industry. Journal of International Business Studies, 31(4): 555–572.

    Article  Google Scholar 

  • Barkema, H. G. & Vermeulen, F. 1997. What differences in the cultural backgrounds of partners are detrimental for international joint ventures? Journal of International Business Studies, 8(4): 845–864.

    Article  Google Scholar 

  • Barkema, H. G. & Vermeulen, F. 1998. International expansion through start-up or acquisition: A learning perspective. The Academy of Management Journal, 41(1): 7–26.

    Article  Google Scholar 

  • Bell, J. 1996. Joint or single venturing? An eclectic approach to foreign entry mode choice. Dissertation, Tilburg University, The Netherlands.

  • Brouthers, K. D. 2002. Institutional, cultural and transaction cost influences on entry mode choice and performance. Journal of International Business Studies, 33(2): 203–221.

    Article  Google Scholar 

  • Brouthers, K. D. & Brouthers, L. E. 2000. Acquisitions or greenfield start-up? Institutional, cultural and transaction cost influences. Strategic Management Journal, 21: 89–97.

    Article  Google Scholar 

  • Brouthers, K. D. & Brouthers, L. E. 2001. Explaining the national cultural distance paradox. Journal of International Business Studies, 32(1): 177–189.

    Article  Google Scholar 

  • Chang, S. & Rosenzweig, P. M. 2001. The choice of entry mode in sequential foreign direct investment. Strategic Management Journal, 22: 747–776.

    Article  Google Scholar 

  • Chen, H. & Hu, M. Y. 2002. An analysis of determinants of entry mode and its impact on performance. International Business Review, 11: 193–210.

    Article  Google Scholar 

  • Chinese Culture Connection (CCC). 1987. Chinese values and the search for culture-free dimensions of culture. Journal of Cross-Cultural Psychology, 18(2): 143–164.

    Article  Google Scholar 

  • Cho, K. R. & Padmanabhan, P. 1995. Acquisition versus new venture: The choice of foreign establishment mode by Japanese firms. Journal of International Management, 1(3): 255–286.

    Google Scholar 

  • Cho, K. R. & Padmanabhan, P. 2005. Revisiting the role of cultural distance in MNC’s foreign ownership mode choice: The moderating effect of experience attributes. International Business Review, 14: 307–324.

    Article  Google Scholar 

  • Chow, C. W., Kato, Y., & Shields, M. D. 1994. National culture and the preference for management controls: An exploratory study of the firm-labour market interface. Accounting, Organisations and Society, 19(4/5): 381–400.

    Article  Google Scholar 

  • Contractor, F. J. & Kundu, S. K. 1998. Model choice in a world of alliances: Analysing organisational forms in the international hotel sector. Journal of International Business Studies, 29(2): 325–358.

    Article  Google Scholar 

  • Delios, A. & Henisz, W. J. 2000. “Japanese firms” investment strategies in emerging economies. Academy of Management Journal, 43(3): 305–323.

    Article  Google Scholar 

  • Earley, P. C. 2006. Leading cultural research in the future: A matter of paradigms and taste. Journal of International Business Studies, 37(6): 922–931.

    Article  Google Scholar 

  • Erramilli, M. K. 1991. The experience factor in foreign market entry behaviour of service firms. Journal of International Business Studies, 22(3): 479–501.

    Article  Google Scholar 

  • Erramilli, M. K. 1996. Nationality and subsidiary ownership patterns in multinational corporations. Journal of International Business Studies, 27(2): 225–248.

    Article  Google Scholar 

  • Erramilli, M. K., Agarwal, S., & Kim, S. 1997. Are firm-specific advantages location specific too? Journal of International Business Studies, 28(4): 735–757.

    Article  Google Scholar 

  • Erramilli, M. K. & Rao, C. P. 1993. “Service firms” international entry-mode choice: A modified transaction-cost analysis approach. Journal of Marketing, 57: 19–38.

    Article  Google Scholar 

  • Gupta, V., Hanges, P. J., & Dorfman, P. 2002. Cultural clusters: methodology and findings. Journal of World Business, 37: 11–15.

    Article  Google Scholar 

  • Hair Jr., J. F., Anderson, R. E., Tatham, R. L., & Black, W. C. 1998. Multivariate data analysis. Upper Saddle River, NJ: Prentice-Hall.

    Google Scholar 

  • Harzing, A. W. K. 2002. Acquisitions versus greenfield investments: International strategy and management of entry modes. Strategic Management Journal, 23(3): 211–227.

    Article  Google Scholar 

  • Harzing, A. W. K. 2003. The role of culture in entry mode studies: From negligence to myopia? Advances in International Management, 15: 75–127.

    Article  Google Scholar 

  • Harzing, A. W. K. & Noorderhaven, N. 2006. Geographical distance and the role and management of subsidiaries: The case of subsidiaries down-under. Asia Pacific Journal of Management, 23: 167–185.

    Article  Google Scholar 

  • Hennart, J.-F. 1988. The transaction cost theory of joint ventures. Strategic Management Journal, 9(4): 361–374.

    Article  Google Scholar 

  • Hennart, J. F. & Larimo, J. 1998. The impact of culture on the strategy of multinational enterprise: Does national origin affect ownership decisions. Journal of International Business Studies, 29(3): 515–538.

    Article  Google Scholar 

  • Hofstede, G. 1980. Culture’s consequences: International differences in work-related values. London: Sage Publications.

    Google Scholar 

  • Hofstede, G. 1991. Cultures and organisations: Software of the mind. London: McGraw-Hill International.

    Google Scholar 

  • Hofstede, G. 2001. Culture’s consequences: Comparing values, behaviours, institutions and organisations across nations. Thousand Oaks, CA: Sage Publications.

    Google Scholar 

  • Hofstede, G. 2006. What did GLOBE really measure? Researchers’ minds versus respondents’ minds. Journal of International Business Studies, 37: 882–896.

    Article  Google Scholar 

  • Hofstede, G. 2007. Asian management in the 21st century. Asia Pacific Journal of Management, 24 (in press).

  • Hofstede, G., Neuijen, B., Ohayv, D. D., & Sanders, G. 1990. Measuring organisational cultures: A quantitative study across twenty cases. Administrative Science Quarterly, 35: 286–316.

    Article  Google Scholar 

  • House, R. J., Hanges, P. J., Javidan, M., Dorfman, P. W., & Gupta, V. (Eds.). 2004. Culture, leadership, and organisations: The GLOBE study of 62 societies. Thousand Oaks, CA: Sage Publications.

    Google Scholar 

  • Javidan, M., House, R. J., Dorfman, P. W., Hanges, P. J., & de Luque, M. S. 2006. Conceptualising and measuring cultures and their consequences. Journal of International Business Studies, 37(6): 897–914.

    Article  Google Scholar 

  • KISC (Korea Investment Service Centre). 2003. Introduction to the foreign direct investment system in Korea. Seoul: KISC (Korea Investment Service Centre).

    Google Scholar 

  • Kluckhohn, F. R. & Strodtbeck, F. L. 1961. Variations in value orientations. Wesport, CN: Greenwood Press.

    Google Scholar 

  • Kogut, B. & Singh, H. 1988. The effect of national culture on the choice of entry mode. Journal of International Business Studies, 19: 411–432.

    Article  Google Scholar 

  • Laurent, A. 1986. The cross-cultural puzzle of international human resource management. Human Resource Management, 25(1): 91–102.

    Article  Google Scholar 

  • Luo, Y. 2001. Determinants of entry in an emerging economy: A multilevel approach. Journal of Management Studies, 38(3): 443–472.

    Article  Google Scholar 

  • MacSweeney, B. 2002. Hofstede’s model of national cultural differences and their consequences: A triumph of faith; a failure of analysis. Human Relations, 55(1): 89–118.

    Article  Google Scholar 

  • Mezias, S. J., Chen, Y-R., Murphy, P., Biaggio, A., Chuawanlee, W., Hui, H., Okumura, T., & Starr, S. 2002. National cultural distance as liability of foreignness: The issue of level of analysis. Journal of International Management, 8: 407–421.

    Article  Google Scholar 

  • Meyer, K.E. 2001. Institutions, transaction costs, and entry mode choice in Eastern Europe. Journal of International Business Studies, 32(2): 357–367.

    Article  Google Scholar 

  • MOCIE. 2002. Directory of foreign investment companies 2002. Seoul: MOCIE (in Korean).

    Google Scholar 

  • Newman, K. L. & Nollen, S. D. 1996. Culture and congruence: The fit between management practices and national culture. Journal of International Business Studies, 27(4): 753–779.

    Article  Google Scholar 

  • Padmanabhan, P. & Cho, K. R. 1996. Ownership strategy for a foreign affiliate: An empirical investigation of Japanese firms. Management International Review, 36(1): 45–65.

    Google Scholar 

  • Padmanabhan, P. & Cho, K. R. 1999. Decision-specific experience in foreign ownership and establishment strategies: Evidence from Japanese firms. Journal of International Business Studies, 30(1): 25–44.

    Article  Google Scholar 

  • Pak, Y. S. & Park, Y. R. 2004. Global ownership strategy of Japanese multinational enterprises: A test of internalisation theory. Management International Review, 44(1): 3–21.

    Google Scholar 

  • Pan, Y. 1996. Influences on foreign equity ownership level in joint ventures in China. Journal of International Business Studies, 27(1): 1–26.

    Article  Google Scholar 

  • Pangarkar, N. & Klein, S. 2001. The impact of alliance purpose and partner similarity on alliance governance. British Journal of Management, 12: 341–353.

    Article  Google Scholar 

  • Pothukuchi, V., Damanpour, F., Choi, J., Chen, C. C., & Park, S. H. 2002. National and organisational culture differences and international joint venture performance. Journal of International Business Studies, 33(2): 243–265.

    Article  Google Scholar 

  • Rajan, K. S. & Pangarkar, N. 2000. Mode of entry choice: An empirical study of Singaporean multinationals. Asia Pacific Journal of Management, 17: 49–66.

    Article  Google Scholar 

  • Read, R. 1993. Politics and policies of national economic growth. Unpublished doctoral dissertation, Stanford University.

  • Rho, K. 2002. A study on labour-management relations of automotive components subsidiaries of foreign MNEs in Korea: 1997–2000. Unpublished masters dissertation, Korean Catholic University, Seoul (in Korean).

  • Rosenzweig, P.M. & Nohria, N. 1994. Influences on human resource management practices in multinational corporations. Journal of International Business Studies, 25(2): 229–251.

    Article  Google Scholar 

  • Schwartz, S. H. 1994. Beyond individualism–collectivism: New cultural dimensions of values. In Kim, E., Triandis, H. C., Kagitcibasi, C., Choi, S-C., & Yoon, G. (Eds.), Individualism and collectivism: Theory, method and applications, 85–119. Newbury Park, CA: Sage.

    Google Scholar 

  • Schwartz, S. H. 2003. Map** and interpreting cultural differences around the world. In Vinken, H., Soeters, J., & Ester, P. (Eds.), Comparing cultures, dimensions of culture in a comparative perspective. Leiden, the Netherlands: Brill.

    Google Scholar 

  • Shane, S. A. 1992. The effect of cultural differences in perceptions of transaction costs on national differences in the preference for licensing. Management International Review, 32(4): 295–311.

    Google Scholar 

  • Shane, S. A. 1994. The effect of national culture on the choice between licensing and direct foreign investment. Strategic Management Journal, 15: 627–642.

    Article  Google Scholar 

  • Shenkar, O. 2001. Cultural distance revisited: Towards a more rigorous conceptualisation and measurement of cultural differences. Journal of International Business Studies, 32(3): 519–533.

    Article  Google Scholar 

  • Sivakumar, K. & Nakata, C. 2001. The stampede toward Hofstede’s framework: Avoiding the sample design pit in cross-cultural research. Journal of International Business Studies, 32(3): 555–574.

    Article  Google Scholar 

  • Smith, P. B. 2004. Nations, cultures, and individuals: New perspectives and old dilemmas. Journal of Cross-Cultural Psychology, 35(6): 6–11.

    Article  Google Scholar 

  • Smith, P. B. 2006. When elephants fight, the grass gets trampled: The GLOBE and Hofstede projects. Journal of International Business Studies, 37: 915–921.

    Article  Google Scholar 

  • Sondergaard, M. 1994. Research note: Hofstede’s consequences: A study of reviews, citations, and replications. Organisation Studies, 15(3): 447–456.

    Article  Google Scholar 

  • Steenkamp, J-B. E. 2001. The role of national culture in international marketing research. International Marketing Review, 18(1): 30–44.

    Article  Google Scholar 

  • Tihanyi, L., Griffith, D. A., & Russell, C. J. 2005. The effect of cultural distance on entry mode choice, international diversification, and MNE performance: A meta-analysis. Journal of International Business Studies, 36: 270–283.

    Article  Google Scholar 

  • Xu, D. & Shenkar, O. 2002. Institutional distance and the multinational enterprise. Academy of Management Review, 27(4): 608–618.

    Article  Google Scholar 

  • Zhao, H., Luo, Y., & Suh, T. 2004. Transaction cost determinants and ownership-based entry mode choice: A meta-analytical review. Journal of International Business Studies, 35(6): 524–544.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. School of Organisation and Management, The University of New South Wales, Sydney, 2052, Australia

    Youngok Kim

  2. Faculty of Economics and Business, Discipline of International Business, The University of Sydney, Darlington, 2006, Australia

    Sidney J. Gray

Authors
  1. Youngok Kim
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Sidney J. Gray
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Youngok Kim.

Additional information

We would like to thank the two anonymous referees and the senior editor, Klaus Meyer, for their invaluable and extensive comments on earlier drafts of this paper.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Kim, Y., Gray, S.J. An assessment of alternative empirical measures of cultural distance: Evidence from the Republic of Korea. Asia Pac J Manag 26, 55–74 (2009). https://doi.org/10.1007/s10490-007-9061-4

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10490-007-9061-4

Keywords

Search

Navigation