Cultural distance revisited: Towards a more rigorous conceptualization and measurement of cultural differences: : :2011150091.AbstractCultural distance is a widely used construct in international business, where it has been applied to foreign investment expansion, entry mode choice, and the performance of foreign invested affiliates, among others.Few constructs have gained broader acceptance in the international business literature than cultural distance (CD).To understand the appeal of the CD construct, it is useful to recall the nature of the phenomenon it is set to capture.2.CULTURAL DISTANCE IN THE FOREIGN INVESTMENT LITERATUREIn the FDI literature, CD has had three primary thrusts. (1) The first thrust has been to explain the foreign market investment location and especially the sequence of such investment by multinational enterprises (MNEs). (2) The second, to predict the choice of mode of entry into foreign markets. (3) A third application has been to account for the variable success, failure and performance of MNE affiliates in international markets. A brief review of each of those three thrusts follows3.HIDDEN ASSUMPTIONS IN THE CULTURAL DISTANCE CONSTRUCTThe hidden assumptions appear in two clusters, one emanating from the conceptual properties of the construct, the other from its methodological properties.(1) Conceptual Properties1) The illusion of symmetryDistance, by definition, is symmetric: The distance from point A to point B is identical to the distance from point B to point A.2) The illusion of stabilityMeasured at a single point in time, CD is implicitly assumed to be constant. Cultures change over time, however.3) The illusion of linearityThe higher the distance between cultures, the higher the likelihood that (a) investment will occur at a later stage in the investment sequence, (b) a less controlling entry mode will be chosen , and (c) the worse the performance of foreign affiliates will be.4) The illusion of causalityImplicit assumption in much of the literature is that CD has a causal effect on FDI pattern, sequence and performance.5) The illusion of discordanceThe implicit assumption that differences in cultures produce lack of fit and hence an obstacle to transaction is questionable.(2)Methodological Properties1) The assumption of corporate homogeneity2) The assumption of spatial homogeneity3) The assumption of equivalence4.INTEGRATION AND CONSTRUCT DEVELOPMENT The significant conceptual and methodological inadequacies relating to the CD construct carry important implications for theory and research.(1) Closing Cultural Distance(2) Globalization and convergence(3) Geographical proximity(4) Foreign experience(5) Acculturation(6) Cultural attractiveness(7) Staffing(8) Cultural Interaction as FrictionRecommendationsFirst, The use of the aggregate index must be theoretically justified and where appropriate, substituted by CD measures calculated separately for one or more of the five dimensions as necessitated by theoretical and domain considerations.Second, measures of general cultural similarity such as Ronen and Shenkars, which do not assume linearity, additivity and normal distribution should be used in conjunction with other measures.Third, national level data should be supplemented by cognitive CD measures.Fourth, control for closing distance mechanisms such as cultural attraction, acculturation and foreign experience, geographical distance, language, level of development, home market and company size which have already been found to correlate with CD or to mediate or moderate its impact on FDI.Fifth, consider CD not only as an independent variable predicting FDI governance, sequence and performance (or other variables as the case may be) but also as a dependent variable.Finally, consider cultural differences as having the potential for both synergy and disruption.