At the empirical level, Kogut and Singh (1988) measured cultural distance using what is now commonly referred to as 'national cultural distance' or 'the Kogut and Singh index'--a scale based on Hofstede's (1980) four dimensions of national culture.
Boyacigiller 1990; Shenkar 2001; Harzing 2003; Dow and Karunaratna 2006; Brewer 2007) have criticised the heavy reliance on the Kogut and Singh index, and have argued that a much broader conceptualisation of distance is required in international business research.
Dow and Karunaratna (2006) found that six of their psychic distance stimuli variables were highly significant predictors of trade flows; while the Kogut and Singh index was not a significant predictor.
While one of the contributions of this paper is to include a more comprehensive set of distance scales, the Kogut and Singh index may still represent an important component of psychic distance; and thus, it is critical that we include it in our models.
The addition of the Kogut and Singh index (Hof) in Model 2 is a statistically significant improvement ([DELTA]Chi Sq = 28.7, [DELTA]df = 1, p < 0.001), and the results continue to support Hypotheses 1 and 2; though with smaller effect sizes.
Model 3 confirms that these additional distance variables collectively provide a statistically significant improvement over the baseline model ([DELTA]Chi Sq=78.8, [DELTA]df=3, p<0.001), and Model 4 confirms that this holds true even when the impact of the Kogut and Singh index (Hof) is already taken into account (Model 2 versus Model 4: [DELTA]Chi Sq=52.5, [DELTA]df=3, p<0.001).
Comparing Model 3 to Model 4 also demonstrates that once the broader range of distance variables are included in a model, adding the Kogut and Singh index does not increase the predictive ability of the model ([DELTA]Chi Sq=2.4, [DELTA]df= 1, p > 0.05).
A second contribution of this paper is more methodological in nature, demonstrating that the current practice of using the Kogut and Singh index as the sole measure of distance between countries dramatically understates the importance of the distance construct in establishment mode choice.