Cultural Distance or Cultural Positions? Analysing the Effect of Culture on the HQ—Subsidiary Relationship

This paper adopts a relational view of cultural differences: that is, we are interested in how the cultural characteristics of the national environments of two organisational units, and the differences between them, affect the units’ relationship. In the international business literature, the conventional approach to studying cultural differences is to use the concept of cultural distance and its most popular measure, the Kogut and Singh (1988) index. Recently, this concept and its measure have faced serious criticism (Drogendijk & Slangen, 2006; Shenkar, 2001), so we need studies that help develop other, richer conceptualisations and metaphors of cultural differences (Drogendijk & Zander, 2010; Shenkar, Luo, & Yeheskel, 2008) and their role in relationships between organisations. The cultural distance concept has limitations when applied in the investigation of relational situations, because it does no justice to actual cultural characteristics, nor does it account satisfactorily for both sides of the relationship. For example, two pairs of cultures can be at the same cultural distance, yet at completely different ends of one or more cultural dimensions. Cultural distance, in other words, ignores the actual cultural characteristics or positions on cultural dimensions, though these likely affect the behaviour of people from different countries and the relationships between them.