The importance of context in International Business

A critical analysis of the use of cultural distance in international business

Anne-Wil Harzing - Thu 24 Jan 2019 12:21 (updated Thu 2 Jun 2022 13:26)

In 2016 I published an article with with my long-term collaborator Markus Pudelko. The article is discussed in a separate blogpost Should we distance ourselves from the cultural distance concept? 

• Harzing, A.W.; Pudelko, M. (2016) Do we need to distance ourselves from the distance concept? Why home and host country context might matter more than (cultural) distance, Management International Review, 56(1): 1-34. Available online... - Publisher’s version (free access!) - ESI top 1% most Highly Cited Paper

When rereading the article's concluding section  - entitled "The Wider Implications of Our Study for International Business Research" - it struck me how well it stood on its own. Thanks to Middlesex University the article is available in Gold Open Access , so I can reproduce the text in full.

Longstanding pleas for context in IB

Although pleas for the relevance of context for International Business research are by no means new (see e.g., Schneider and Barsoux 2003; Redding 2005), most management scholars, even in International Business, have not taken context seriously or have only paid lip service to it. Management scholars, particularly those representing an economics-based strategy perspective, are frequently relying on existing theory and extant data sets that are often a-contextual. The only exception to this might be their reference to the concept of culture, which is usually, however, referred to in its static, reductionist and conveniently employable form of cultural dimensions and their country scores (Brannen and Doz 2010).

Consequently, we cannot agree more with scholars such as Shenkar (2004) and Tsui (2007) who emphasize the relevance of contextually ‘‘rich and thick’’ data. Contextual information is not only important to better understand a nation’s domestic companies or even an entire business system (or several, in a comparative analysis). It is also relevant for studying the exchanges taking place across different contexts, for example the home and host country contexts of MNCs. Hence, we see the major objects of analysis in International Business to be deeply embedded contextually, and it is only through studying and understanding the relevant contexts that we can advance our comprehension and interpretation of International Business phenomena.

Serious engagement with deep contextualization is also necessary in International Business research to pose new and relevant questions, apply existing theories to novel contexts, acknowledge the limitations of existing theories, and develop new and innovative theories that explain empirical phenomena. Ultimately, understanding contextual particularities is essential in order to understand universalities. It is through comparing contextual particularities across different locations that we can identify common phenomena, and separate them from idiosyncratic particularities or even singularities, which ultimately helps us to discover context-free regularities (see also Pudelko 2006).

Context vs. distance: profound differences in theoretical assumptions

Studying more path-dependent and embedded combinations and configurations of country-specific context instead of relying on distance-based generalizations also implies a profound difference in terms of underlying theoretical assumptions within International Business research. Whereas the distance concept perceives cultural and institutional distance more as liabilities or constraints, a focus on cultural and institutional contextual differences is open to regard these differences as opportunities or resources. Thus, concentrating on the ability of MNCs to increase competitiveness by combining the advantages of very different national contexts is an entirely different perspective (differences as opportunities) from keeping contextual distance low to reduce transaction costs (distance as liability). Understanding what opportunities and what liabilities are can only be achieved, however, by closely studying particular contextual differences at home and host country locations and not by establishing generic distance measures (Sorge 2005).

Furthermore, in order to gain the required understanding about deeply embedded context, interdisciplinary research, often called for, but rarely conducted in research practice, is an absolute necessity. Whereas psychology has reached a powerful influence in management, matching the weight traditionally accorded to economics, insights from other disciplines such as political science, law, sociology, anthropology and history should (again) be accorded more relevance, especially in International Business research. In addition, instead of relying so heavily on mainly ‘‘academic’’ concepts such as distance, scholars should (again) pay more attention to those concepts, phenomena, facts, and variables that do matter for acting managers. More specifically, most entry mode studies seem to ‘‘have succeeded in completely removing the manager(s) who make(s) the entry-mode decision from the equation ... [and as a consequence] no researcher ... ever seems to have bothered to ask managers whether CD was a factor that influenced their entry-mode decisions’’ (Harzing 2003, p. 103–104). We therefore suggest that scholars should (again) become better listeners, focusing on the actual and context-sensitive problems of practitioners, instead of relying overly on abstract and largely context-free conceptualizations.

We acknowledge that these recommendations can be seen as ‘‘uncomfortable’’ and ‘‘inconvenient’’ for International Business researchers. Collecting particularistic, multilevel, contextual data, with a focus on managers’ actual problems instead of scholars’ preconceived solutions, clearly is more cumbersome than the convenient application of generic distance measures. However, we would argue that, as cumbersome and muddy the pathways of collecting ‘‘rich and thick’’ contextual data might be in comparison to the convenient and neatly paved boulevards of simple distance measures, they can potentially lead to unearthing much deeper insights. In that sense, we urge International Business scholars to exchange their business shoes and high heels for rubber boots and return to the groundwork more commonly practised by prior generations of International Business scholars.

research focus cultural distance international business country-of-origin cross-cultural management

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