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An institutional approach to cross-national distance

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Abstract

Cross-national distance is a key concept in the field of management. Previous research has conceptualized and measured cross-national differences mostly in terms of dyadic cultural distance, and has used the Euclidean approach to measuring it. In contrast, our goal is to disaggregate the construct of distance by proposing a set of multidimensional measures, including economic, financial, political, administrative, cultural, demographic, knowledge, and global connectedness as well as geographic distance. We ground our analysis and choice of empirical dimensions on institutional theories of national business, governance, and innovation systems. In order to overcome the methodological limitations of the Euclidean approach, we calculate dyadic distances using the Mahalanobis method, which is scale-invariant and takes into consideration the variance–covariance matrix. We empirically analyze four different foreign expansion choices of US companies to illustrate the importance of disaggregating the distance construct and the usefulness of our distance calculations, which we make freely available to managers and scholars.

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Notes

  1. See Appendix 1 at http://lauder.wharton.upenn.edu/ciber/faculty_research.asp for more information about the specific questions from the WVSs that we used.

  2. Because the great circle distance is already a dyadic distance, we do not convert it into Mahalanobis distance (see below).

  3. See Appendix 2 at http://lauder.wharton.upenn.edu/ciber/faculty_research.asp for more information about calculating Euclidean and Mahalanobis distances.

  4. In Table 7 we show the results when comparing models that incorporate Hofstede as the main distance variable vs models that include our cross-national measures of distance. In results not reported below we also compared models that incorporated Hofstede's cultural variable in place of our WVS cultural distance variable, and consistently got improved model fit and higher R-squared values when incorporating our additional dimensions of cross-national distance in the models. Our comparison of “nested models” below therefore compares a model having a limited conception of distance (using Hofstede's measure) with a model that incorporates our expanded notion of cross-national distance.

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Acknowledgements

We gratefully acknowledge funding from the Penn Lauder Center for International Business Education and Research (CIBER).

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Accepted by Sea-Jin Chang, Area Editor, 10 March 2010. This paper has been with the authors for three revisions.

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Berry, H., Guillén, M. & Zhou, N. An institutional approach to cross-national distance. J Int Bus Stud 41, 1460–1480 (2010). https://doi.org/10.1057/jibs.2010.28

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