Beyond cultural distance Switching to a friction lens in the study of cultural differences

Beyond cultural distance: Switching to a friction lens in the study of cultural differences Authors: Oded Shenkar Source: Journal of International Business Studies, Vol.. RETROSPECTIVE B

Beyond cultural distance: Switching to a friction lens in the study of cultural differences Author(s): Oded Shenkar

Source: Journal of International Business Studies, Vol 43, No 1 (January 2012), pp 12-17 Published by: Palgrave Macmillan Journals

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RETROSPECTIVE

Beyond cultural distance: Switching to a

friction lens in the study of cultural differences

Oded Shenkar

Fisher College of Business, The Ohio State

University, Ohio, Columbus, USA

Correspondence:

О Shenkar, 730A Fisher Hall, Fisher College

of Business, 2100 Neil Avenue, Columbus,

OH 43210, USA.

Tel: +1 614 292 0083;

Fax: + 1 614 292 7062

Received: 30 June 201 1

Revised: 18 August 201 1

Accepted: 30 August 201 1

Abstract

My 2001 article provided a critical review of one of the most popular constructs

in international business, and in the management and business literature as

a whole, namely cultural distance It listed various illusions, implicit yet

unsubstantiated and refutable assumptions that underpinned a construct set to capture the essence of cultural differences The paper questioned the validity of

the measure; the resultant findings obtained in such international business applications as foreign direct investment patterns, sequence, entry mode, and

performance; and, ultimately, the wisdom of continuing the use of the measure

and its underlying construct In this retrospective, I review subsequent work that tested some of the original observations, the impact the article has had,

and, in particular, how we can redirect research away from the static cultural

distance paradigm toward the dynamic interaction of the actual entities that

come into contact in international business.

journal of International Business Studies (201 2) 43, 1 2- 1 7 doi: 1 0 1 057/j¡bs.20 1 1 42 Keywords: cultural distance; cultural dimensions; cultural friction

BACKGROUND

The idea for the original paper (Shenkar, 2001) developed over

a long period of time It involved research and review of the

literature in international business and in related areas, and a number of "critical incidents" that were as much the result of trial

and error as they were of systematic investigation Taken together, these diverse processes produced an increasing sense of unease over

how the scholarly community, myself included, has measured

cultural differences and, in particular, how we have used the

cultural distance index to study the impact of those differences on

major international business phenomena I have gradually come to realize that what we have been doing was not only superficial, lacking in substance and rigor, but was perhaps invalid or, at the very least, seriously flawed This was not an easy conclusion to

reach After all, in over a decade since its introduction, the cultural

distance measure developed by Kogut and Singh (1988) has become

the field's standard-bearer, supplanting virtually all other modes of

gauging cultural variations, including the prior concept of psychic

distance.

It is difficult for me to recall when exactly I first came to identify

the deficiencies of the cultural distance measure I can vividly remember, however, an instance roughly two decades ago when,

in one of my co-authored studies (Shenkar & Zeira, 1992), initial

13

analysis showed that cultural distance had no

discernible impact on role ambiguity, one of the

key dependent variables in our study When this

finding was challenged by post-study interviews,

we became suspicious, and after some brainstorming

came to identify the aggregation of cultural

sions as the culprit Indeed, a reanalysis showed

that differences on all four of Hofstede's (1980)

constituent dimensions, when included separately in

the regression, came out as significant, although

with different signs, cancelling out their impact in

the aggregate measure This not only questioned the

rigor of the aggregation, but has also raised another

issue, namely that not all cultural differences were

disruptive and dysfunctional, and that - contrary to

the assumption embedded in the cultural distance

concept - some could be, in fact, complementary

and conducive to performance

As more and more challenges to the cultural

distance index emerged, I began to suspect the

measure and, in time, the very concept of distance,

as a valid representation of cultural differences, and

as a predictor of impact on business phenomena

Inconsistent empirical findings in the application

of the construct in a variety of settings should have

alerted me and others even earlier to the problem,

but did not Why? There are a number of reasons

One is that there were other plausible explanations

for the inconsistent findings, ranging from

ences in sampling and research designs to

tical deficiencies A second explanation for failing

to detect the faults of the measure at an earlier stage

was more worrisome, namely the temptation to

use a simple formula to gauge variations in the

complex, intangible phenomenon called "culture."

This temptation was simply too big to pass up,

especially as it yielded a single quantitative measure

that could be incorporated in a regression equation

together with supposedly hard data variables, such

as R&D intensity, producing what seemed to be

seamless research Equally worrisome was a third

explanation, that the more it had been used, the

more legitimacy was conferred upon the measure,

so that subsequent authors justified its utilization

by referring to prior usage This pointed to a

fundamental failure in the knowledge-building

process that was bigger than any one measure,

and constituted one motivation behind the 2001

paper.

Although my primary motivation was to enhance

the rigor and depth of business research involving

culture, I was also seeking to draw attention to

other major concerns, among them what I saw as

an erosion of the interdisciplinary platform that is

supposed to be a stalwart of international business research, and which underpins its strengths Being "interdisciplinary" has become a popular mantra

in business schools, joining "globalization" and "relevance" as catchy terms that are fashionably promoted while rarely practiced beyond the

ficial International business has a vital role in

exercising interdisciplinary research, but at present

the field has not lived up to its full potential as

a hub and model for such research Unlike

disciplinary research, which connotes borrowing from many disciplinary areas, interdisciplinary

research requires the intersection and

zation of disciplines with the aim of extracting

theoretical and methodological insights and gies Interdisciplinary research implies borrowing that is not cursory or haphazard, leveraging rather than merely acknowledging the diversity within

each area, and is aimed at the eventual creation of

a feedback loop from the borrower back to the

originator This necessitates much more than the mechanistic import of disciplinary content plified by the cultural distance construct, which,

as I have tried to illustrate, can do more harm

than good

AFTERMATH

Although the 2001 paper was extensively cited, its impact varied widely, not always producing

the outcomes I had hoped for I did not expect an immediate impact, but was disappointed, especially

as other work published around the same time corroborated some of the points made in the

article, for example, the distinct influence of the individual dimensions of culture (e.g., Pothukuchi, Damanpour, Choi, Chen, & Park, 2002) or the role of non-cultural mediators (e.g., Brouthers &

Brouthers, 2001) At the same time, several authors appear to have taken the criticism to heart, as in the

case of adopting cognitive measures of cultural

differences (Chen, Kirkman, Kim, Farh, & Tangirala, 2010) Still, these efforts fell short of my hopes for

redirecting research in the field Worse, in quite a

few instances, authors referenced the article to

acknowledge that dealing with cultural differences was challenging, promptly proceeding to use the same measure I had argued against There were

other, more determined voices, however For

ple, Kirkman, Lowe and Gibson (2006: 303) have

lent empirical support to several of the illusions listed in the 2001 article, and came up with a strongly worded take-away, recommending that

Journal of International Business Studies

researchers "avoid further use of the overall cultural

distance index."

In the meantime, efforts were under way to

convince scholars of the merits of the original

recommendations Two subsequent studies tested

the first illusion identified in the 2001 paper, namely

that of asymmetry The illusion was that the term

"distance" connoted, by definition, symmetry - that

is, that the distance from A to В was identical to the

distance from В to A; yet there was no empirical

evidence or logical or theoretical justification to

support an assumption of symmetry There was

indirect evidence to the contrary, but not in the

form of direct testing, so this was attempted in a

study on expatriate adjustment led by my colleagues

(Selmer, Chiù, & Shenkar, 2007) We confirmed

asymmetry for German expatriates assigned to the

US compared with US expatriates assigned to

Germany: controlling for length of assignment,

German expatriates were better adjusted,

culturally and psychologically, than the US

ates We await further studies that will test expatriate

asymmetry for other national pairs, and which will

expand the scope of research into other facets of

selection, training, and performance

In another firm-level study (Lee, Shenkar, & Li,

2008), we were able to confirm asymmetry by

simultaneously studying the inward and outward

international partnering preferences of South

ean firms We found that while cultural differences

did not significantly impact on the control

ences of the Korean firms, the relationship was

moderated by the direction of investment This

study was also aimed at highlighting another

problem associated with the application of the

cultural distance measure, that of confounding

firm and environment In other words, scholars

often looked at the investment entity and the

investment environment as if they were equivalent,

in effect measuring distance between "apples" and

"oranges." They did not consider, for example, that

a Korean firm bringing a foreign partner to work

within Korea faced a different cultural challenge

than that faced by counterparts partnering with

foreign firms on foreign turf The same confusion of

levels of analysis can be found in other cultural

distance applications, attesting to the danger of

veering away from actual transacting entities

Finally, in another international human resource

(IHR) article (Brock, Shenkar, Shoham, & Siskocick,

2008), we have gone beyond asymmetry,

ing that only certain cultural dimensions were

impactful when it came to expatriate assignment,

which challenges the equivalence/aggregation assumption, as well as the autopilot focus on

distance as opposed to nominal readings In that

paper, we found that MNEs hailing from high

power distance/assertiveness cultures exercised tight control over subsidiaries in the form of expatriate assignment, regardless of whether the host country was high or low on those dimensions, showing that "distance" failed to capture the impact Those findings served as a reminder that home-country culture was an important nant of strategic and IHR decisions, an assumption once taken for granted in the literature, but one that seems to have been all but forgotten Indeed, another broader concern revealed by the 2001

article was that the field has failed to build on

prior work, which became even more apparent in a subsequent review, which concluded that earlier research in the "psychic distance" tradition was in some ways (e.g., the consideration of non-cultural variables) richer and more rigorous than the latter

stream of "cultural distance" research (Shenkar, Luo, & Yeheskel, 2008)

Finally, it was probably naive of me to expect an even deeper soul-search to result from my article,

one that would touch on fundamental issues relating

to the conceptualization and measurement of

ture, such as the ability to capture the phenomenon

through a set of discrete dimensions (Bond et al., 2004; Gelfand, Erez, & Aycan, 2006; Usunier, 1998), the complexity of dealing with multiple levels of

analysis (e.g., Klein, Dansereau, & Hall, 1994), or the appropriateness of using questionnaires as a singular

data collection device (Smith, Peterson, & Thomas, 2008) This brings me back to the meaning, and

value, of interdisciplinary research, and the risk of generic imports If we do not learn the language of

another discipline, not only will we not be able to eventually export knowledge to that discipline, but

will also fail in a more fundamental sense by

importing an ill-adapted good International

ness scholars are more aware than any of the

consequences of failing to adapt a product to a local

environment, and we should not treat knowledge inputs differently.

THE WAY FORWARD When I searched for yet more explanations as to

why cultural distance retained its position as a

popular concept despite increasingly glaring comings, I came to the conclusion that at least

part of the problem was the use of "distance" as the base metaphor for capturing the essence of cultural

Journal of International Business Studies

15

differences, and their impact on international

business phenomena This became the basis for a

paper (Shenkar et al., 2008) that constituted a

phorical analysis of the construct In that paper, we

argued that the appeal of cultural distance was at least partially rooted in the characteristics of the geographic "background metaphor," which

noted a rational, objective and quantifiable gauge, and which avoided dealing with the "messier," but crucial aspects of meeting and interaction

quently, we suggested doing away with the distance

metaphor in favor of another metaphor, that of

friction We noted that the friction metaphor provided a superior representation of what was

arguably the heart of the matter in international business, namely the interaction between viable

entities We also discussed a number of

sions flowing from this switching of metaphors, for

instance that entry mode, traditionally the

dent variable in international business research, be

also considered an independent variable, as ent entry modes generated variable levels of

friction Much remains to be done, however, if we

are to achieve this shifting of metaphors from

"distance" to "friction."

One of the remaining challenges remains the

measurement of friction, a necessary step if we are

to achieve an eventual switching of measures as

well as of metaphors A study published by Orr and

Scott (2008) showed how friction may actually

occur Although their focus was more on

tional distance than on cultural distance, the

paper's zeroing-in on the actual interaction

between specific actors rather than dwelling on

their degree of separation is equally valid on the

cultural front Using 23 global projects, the authors

illustrated the process by which entities meet and

go through phases of ignorance, sense-making, and

response While falling short of providing direct

quantitative measurement of friction, the paper

showed the complexity of outcome associated with

direct interaction of actual actors, and managed to

capture tangible instances of friction, "critical

incidents" that provided a visible substitute for

the current sterile views encapsulated in the

concept and measure of "distance."

Another paper dealing with friction (Luo &

Shenkar, 2011) seeks inspiration in the disciplines

originally associated with the concept, namely

physics and mechanical engineering The

edge base in those disciplines is used to develop

"laws of friction," as well as to remind readers

that, in and of itself, friction is a neutral term

entailing a positive as well as a negative potential:

too much friction will generate heat and resistance,

but too little friction will bring about adverse

consequences, for example, slippage, as is the case

of a tire interfacing with the road The paper also introduces "drag parameters," to include, in tion to entry mode, workflow interdependence, the breadth of local stakeholders, the speed and

stage of international expansion, and the depth

of localization Also discussed are "lubricants,"

namely elements with the potential to reduce

friction at the point of contact (e.g., cultural

sensitivity training) A friction formula is provided,

although empirical work is yet to be conducted

FINAL THOUGHTS Looking at recent developments in international

business, a switch to a friction lens seems more

necessary than ever As the actors in the foreign

investment arena are transformed, the need to

specify and ground them, and to capture the resultant interaction, becomes paramount Take, for example, the sovereign wealth funds, which

have been rapidly gaining in volume and clout,

but which have the potential to generate a very

different reaction in a host country than an investment by a business firm, especially one

lacking a strong national identity Holding other variables (e.g., a friendly vs a hostile takeover) constant, the cultural interaction generated in the

case of the former will be much more intense than

in the latter case Or think of the likely wave of Chinese foreign investment in the US against the background of increasingly tense relations between the two countries, at least one of which sees the culture of the other as a material threat Only a perspective that embeds actual actors within their respective systems, as well as within their bilateral

and contextual relationship, political as well as

cultural (Shenkar & Arikan, 2009), is likely to capture the essence of the transaction; in contrast,

clinging to a "distance" view will not only provide a

limited tunnel vision but may well produce wrong

readings as far as the nature, scale and scope of

impact are concerned

It will be a mistake to focus only on conceptual

and methodological flaws of cultural distance,

important as they are, or even on the vital work

that remains to be done in developing and

measuring cultural friction, without reassessing the very role of culture in our theoretical works The next front must also evolve around a

theory development effort To start with, we should

journal of International Business Studies

attend to something that has been taken for granted

for too long, namely the tenuous connection

between the construct of culture and the theoretical

frameworks into which it has been deposited all too

often in an implicit, haphazard and questionable

fashion, and whose latent assumptions are as

matic as those underlying the cultural distance

construct Take, for instance, transaction cost

nomics, which has become the most popular

tical platform from which to study market entry

mode Williamson's theory does not include culture

as a theoretical construct, and in its various

tions culture has been conceived, when spelled out at

all, by and large as a proxy for uncertainty Although

seldom if ever questioned, this is a very problematic

assumption: there are numerous forms of uncertainty

that have nothing to do with culture and cultural

differences, and culture can be, at times, a harbinger

of stability As noted in the 2001 paper, the problem

can be easily illustrated in the case of entry mode

Gatignon and Anderson (1988; see also Anderson &

Gatignon, 1986) acknowledge that transaction cost

theory can accommodate contrasting predictions:

under high cultural distance, a firm may choose

low control to compensate for its lack of local

knowledge, relying on a local partner; or it may opt

for tight control to reduce dependence upon agents

whose actions are poorly understood These

dictory predictions may represent a fundamental flaw

in the transaction cost argument, but they may be

the result of how cultural differences are positioned

within the theoretical framework.

Similar questions regarding the theoretical role

of culture may be raised regarding agency theory,

where an intriguing question is whether and how

cultural interaction alters the nature of the

principal-agent relationship; regarding resource

dependence, where culture may be viewed to

potentially cement a relationship as a substitute

for actual dependence, or, in the presence of

certain moderators, such as historical interaction

(Park & Ungson, 1997), strain or sever it; or

regarding institutional theory, where culture is

surprisingly missing except in limited discussion

of the "normative pillar" of institutions The same

is true for indigenous international business

theories For instance, the Uppsala lization model incorporated psychic distance as

a key construct (Johanson & Vahlne, 1977), and

later Oohanson & Vahlne, 2009) it was positioned

as a root of uncertainty, raising similar questions

to those pertinent in the transaction cost

tion Similarly, Dunning (2009) called for the

injection of context into his eclectic theory, and

cast culture in the potential role of triggering

country-specific and firm-specific advantages, but

we have yet to specify how this would happen

within a multinational enterprise, or under what

conditions advantages might be eroded rather

than leveraged as an outcome

The main point here is that until and unless

culture is appropriately incorporated into the

theoretical landscape, rather than reduced to tionable and frankly indefensible proxies, while efforts directed at increasing research rigor will have limited value To get there, we will also need to revisit broader, fundamental assumptions,

such as whether the narrow economic view of

institutions is the right prism for international business research (a resounding "no" in my humble opinion), and whether it should be substituted or

supplemented by the more comprehensive view available from sociology and other areas (e.g., political science) that have all but disappeared

from the theoretical radar screen of business

scholarship Then again, only a truly ary approach, one that seeks to learn from and work with other areas of study rather than naively import

out-of-context inputs, will set us on the way of achieving the theory development we covet This

same approach can also turn us into knowledge

exporters; after all, many of the problems endemic

to the cultural distance construct similarly afflict such concepts as institutional distance, industry

distance, technological distance, and tional distance, which are widely used in the

organizational literature Let international business lead the way

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ABOUT THE AUTHOR

Oded Shenkar, Ford Motor Company Chair in Global Business Management and Professor of

Management and Human Resources at the Fisher

College of Business, The Ohio State University,

where he heads the international business area, and

is also a member of the Centers for Chinese Studies and for Near East Studies.

Accepted by John Cantwell, Editor-in-Chief, 30 August 2011 This paper has been with the author for one revision.

Journal of International Business Studies