cultural distance Peter B. Smith Cultural distance is a concept first formulated by Kogut and Singh (1988) as a tool for predicting the difficulties and opportunities that would be encountered by companies engaging in foreign direct investment (see FOREIGN DIRECT INVESTMENT). These authors constructed an index of the cultural distance of two nations from one another by summing the difference between scores on each of four dimensions of national culture that had been identified by Hofstede (1980) (see HOFSTEDE’S CULTURAL DIMENSIONS). Numerous studies have been reported that use this index, but early findings were inconclusive with some studies showing beneficial effects of greater cultural distance and others favoring lesser cultural distance, or showing no effect at all. Shenkar (2001) identified several reasons why this index could yield unreliable results. In particular, he urged the use of separate distance scores for each cultural dimension, as the effects of cultural distance on different dimensions may cancel one another out. Furthermore, some dimensions may be more important than others in particular circumstances. The majority of researchers continue to use scores derived from Hofstede’s project, but scores based on more recent cultural data are now preferable (Drogendijk and Slangen, 2006). Stahl and Voigt (2008) proposed that the conflicting results could best be understood by distinguishing differing types of mergers and acquisitions (M&As) (see MERGERS AND ACQUISITIONS). Where M&As envisage low integration of the two organizations, cultural distance is predicted to generate beneficial synergy, whereas for M&As that envisage high integration, cultural distance is predicted to be problematic. Stahl and Voigt conducted a meta-analysis including 46 studies of over 10 000 M&As, and their predictions were supported. The effects found were stronger for measures of organizational cultural distance than for measures of national cultural distance. Measures of cultural distance provide a static index of the potential problems and opportunities that organizations involved in M&As may face, but they do not address the degree to which differential use of managerial expertise may contribute to the outcomes that are achieved. Bibliography Drogendijk, R. and Slangen, A. (2006) Hofstede, Schwartz or managerial perceptions? The effects of different cultural distance measures on establishment mode choices by multinational enterprises. International Business Review, 15, 361–380. Hofstede, G. (1980) Culture’s Consequences: International Differences in Work-related Values, Sage, Beverly Hills, CA. Kogut, B. and Singh, H. (1988) The effect of national culture on the choice of entry mode. Journal of International Business Studies, 19, 411–432. Shenkar, O. (2001) Cultural distance revisited: towards a more rigorous conceptualization and measurement of cultural differences. Journal of International Business Studies, 32, 519–536. Stahl, G.K. and Voigt, A. (2008) Do cultural differences matter in mergers and acquisitions? A tentative model and examination. Organization Science, 19, 160–176. Wiley Encyclopedia of Management, edited by Professor Sir Cary L Cooper. Copyright © 2014 John Wiley & Sons, Ltd.