XXI. MEZINÁRODNÍ KOLOKVIUM O REGIONÁLNÍCH VĚDÁCH. SBORNÍK
PŘÍSPĚVKŮ.
21ST
INTERNATIONAL COLLOQUIUM ON REGIONAL SCIENCES.
CONFERENCE PROCEEDINGS.
Place: Kurdějov (Czech Republic)
June 13-15, 2018
Publisher: Masarykova univerzita, Brno
Edited by:
Viktorie KLÍMOVÁ
Vladimír ŽÍTEK
(Masarykova univerzita / Masaryk University, Czech Republic)
Vzor citace / Citation example:
AUTOR, A. Název článku. In Klímová, V., Žítek, V. (eds.) XXI. mezinárodní kolokvium
o regionálních vědách. Sborník příspěvků. Brno: Masarykova univerzita, 2018. s. 1–5.
ISBN 978-80-210-8969-3.
AUTHOR, A. Title of paper. In Klímová, V., Žítek, V. (eds.) 21st
International Colloquium
on Regional Sciences. Conference Proceedings. Brno: Masarykova univerzita, 2018. pp. 1–
5. ISBN 978-80-210-8969-3.
Publikace neprošla jazykovou úpravou. / Publication is not a subject of language check.
Za správnost obsahu a originalitu výzkumu zodpovídají autoři. / Authors are fully responsible for the
content and originality of the articles.
© 2018 Masarykova univerzita
ISBN 978-80-210-8969-3
ISBN 978-80-210-8970-9 (online : pdf)
Sborník příspěvků XXI. mezinárodní kolokvium o regionálních vědách Kurdějov 13.–15. 6. 2018
340
DOI: 10.5817/CZ.MUNI.P210-8970-2018-44
CULTURAL DISTANCE IN THE CONTEXT OF EUROPEAN
REGIONAL ECONOMIC INTEGRATION
Kulturní vzdálenost v kontextu evropské regionální ekonomické integrace
RENATA ČUHLOVÁ
Katedra marketingu a obchodu
Ekonomická fakulta
Technická univerzita v Liberci
Department of Marketing and Business
Faculty of Economics
Technical University of Liberec
 Studentská 2, 416 17 Liberec, Czech Republic
E-mail: renata.cuhlova@tul.cz
Annotation
Regional integration is the process of overcoming barriers and creating a common market for goods, services,
capital and people within the geographically close countries. The aim of this paper is to investigate the calculation
of cultural distance and its modification into measurement applicable in regional economic integration context.
The formula of calculating the cultural distance of each country in regional economic integration is derived from
the computations developed by Kogut and Singh. Hofstede’s framework of six cultural dimensions for countries
that belong to the selected European regional economic integration blocks is applied to get the national cultural
distances and the average cultural distance of the regional blocks. The findings offer the comparison within the
analysed member states and stimulate the discussion over the cultural dissimilarities of neighbouring countries
and the diversity on the common market.
Key words
cultural distance, Hofstede, regional economic integration
Anotace
Regionální integrace je procesem překonávíní bariér a zároveň vytvoření společného trhu pro zboží, služby,
kapitál a osoby v rámci geograficky blízkých zemí. Příspěvek se zabývá výpočtem kulturní vzdálenosti a jeho
modifikací použitelné k výpočtu kulturní vzdálenosti v kontextu regionálních ekonomických integračních
uspořádání. Vzorec k výpočtu kulturních vzdáleností zemí v rámci integračních uskupení je odvozen od kalkulace
provedené dvojicí Kogut a Singh. Hofstedeho rámec šesti kulturních dimenzí je použit pro země, které jsou členy
zvolených Evropských regionálních ekonomických integračních uskupení, k získání kulturní distance dané země a
průměrných hodnot v rámci regionálního uskupení. Závěry nabízí komparaci analyzovaných členských států a
podněcují diskuzi ohledně kulturních disparit sousedních států a diverzity na společném trhu.
Klíčová slova
kulturní vzdálenost, Hofstede, regionální ekonomická integrace
JEL classification: J11, Z13
1. Introduction
The economic integration is a phenomenon realized in both continental and intercontinental economic blocks with
the aim to increase productivity and stimulates trade between the member states. Important to note that the
economic integration exists in different stages. As a term of regional economic integration we understand
agreements among neighbouring countries in a geographic region. This integration eases or completely removes
barriers to free flow of goods, services, capital and people as factors of production and it enables businesses to
find the most suitable locations at the same time (Hill, 2014). Not only geographical proximity is required for
effective economic integration, but also similarities in terms of culture, history and ideology; competitive or
complementary economic linkages, and preferably a common language among member states (Čuhlová, 2017,
Rauch, 2001). Countries around the world have been forming certain regional economic integration arrangements
often without deep considering real impacts on citizens and sustainability of businesses.
Sborník příspěvků XXI. mezinárodní kolokvium o regionálních vědách Kurdějov 13.–15. 6. 2018
341
Moreover, the regional economic integration brings freedom for workforce to work anywhere within the region.
This closely relates to the dynamic trend of migration that is increasing in the last decades and is becoming the
natural part of nowadays life style (Rauch, 2001). Naturally, labour market changes into diverse environment. The
workforce differs in terms of culture, gender, ethnicity, race and other characteristics. As any firm conducting
business in Europe must possess a thorough understanding of local economic integration affecting its
organizational strategy, human resource management has to come out with suitable strategies to effectively
manage the multinational teams and diverse workforce and their specifics (Dartey-Baah, 2013).
Diversity brings potential source of synergy as well as of the disruptiveness. Main cause is made by cultural
background of the employees that might colligate in their interactions. Human resource management nowadays
incorporates diversity and intercultural management as part of the practices (Dartey-Baah, 2013, Shenkar, 2012).
The influence of culture on the overall performance increases together with increasing level of regional economic
integration.
As Colakoglu and Caligiuri (2008) point out, although there are measures for national cultural distance that enable
multinational firms to know the cultural distance between host and home country of the headquarter and subsidiary
for example, there is still a problem of full understanding a region in terms of its cultural differences.
2. Metodology and data
The research question we ask is how to measure cultural distances in the context of regional economic integration
since different approach for the calculation is needed.
In this paper, cultural distance is measured for following regional economic integration blocks: European Union
(EU) consisting of current number of member states and Visegrad group. For further illustrations and
understanding, cultural distance for founder members of European Union is to be analyzed as well. Since all the
EU founder member states and member states of Visegrad group are still members of current EU14
, the cultural
distance is calculated for totally 28 countries; however in various grouping.
To calculate the cultural distances of the countries in selected regional economic integration blocks, we rely on
the cultural framework developed by Hofstede (Hofstede and Hofstede, 2001) that currently consists of six cultural
dimensions. Dataset for each country contains a score on following national cultural dimensions: power distance,
individualism vs. collectivism, masculinity vs. femininity, uncertainty avoidance, long vs. short term orientation
(complemented the model in 2001) and indulgence vs. restraint (complemented the model in 2010). All Hofstede´s
cultural dimensions are briefly discussed below.
Power distance stands for the inequality among members of society and the power distribution. In countries with
low power distance, there is less hierarchical order, members are considered as equal and relations are more
democratic. Dimension of individualism versus collectivism reflects whether people feel to be part of any group,
try to achieve personal or group goals and define themselves more as “I” or “we”. The masculinity vs. femininity
preference is extend of importance on masculine values such as individual achievement, assertiveness,
materialism, strength and encouragement of competitive environment. Contrary, feminine-oriented societies
prefer cooperation, relationship building, modesty and preference is given on quality of life and the environment.
Next, uncertainty avoidance is the degree to which society feels uncomfortable with uncertainty, ambiguity and
as well as in unstructured situations. Moreover, it measures the degree of relying on rules and plans (Hofstede and
Hofstede, 2001, Hofstede et al, 2010).
Long term versus short term normative orientation generally distinguishes between the East and West. Short termoriented
society is characterized by personal steadiness, protecting and keeping own “face” and reciprocation of
favours. On the other side, long term-oriented culture encourages thrift. The latest dimension of indulgence stands
for relatively free gratification of human drives of enjoying life, leisure time and gives importance to freedom.
Restrained cultures are contrary more regulated by strict social norms (Hofstede et al, 2010).
Values of cultural dimensions for all countries of selected economic integration blocks are presented in table 1.
They are a base for the computations of cultural distances. As it has been already said, all selected countries are
current EU member states. Different framing in the table then shows the integration blocks within – firstly the
founder EU member states and secondly the Visegrad group member states.
14 The United Kingdom remains a full member of the EU till March 2019 (Europa.eu, 2018).
Sborník příspěvků XXI. mezinárodní kolokvium o regionálních vědách Kurdějov 13.–15. 6. 2018
342
Tab. 1: Scores of cultural dimensions of analysed countries
PDI – Power Distance Index, INV – Individualism, MAS – Masculinity, UAI – Uncertainty Avoidance Index, LTO – Long Term
Orientation, IND – Indulgence
*Complete data for Cyprus are not available
Source: Hofstede (2015)
As Shenker (2012) points out, differences among cultural dimensions rise a question whether they are equally
decisive for measuring overall cultural distance. Kogut and Singh's (1988) formula for national cultural distance
is a composite index making an assumption of dimensional equivalence since the aim of the paper is to provide
general idea about cultural distances in the regional integration context. It has been used in numerous studies to
find out the suitability of one country in doing business in other country (Morosini, et al, 1998) and it stays the
most popular cultural distance calculation.
The formula 1 is calculated as an arithmetic average of the variance-corrected squared distances in single
dimensions and it is formed as follows (Kogut and Singh, 1988):
= ∑ ( − ) / / (1)
where CDjk is the cultural distance between the jth and kth country, Iij and Iik are indicators of the ith cultural
dimension for the jth and kth country, Vi stands for the variance of the ith cultural dimension, n is the number of
cultural dimensions. In Kogut-Singh study from 1988, n stands for four original Hofstede's cultural dimensions.
This formula compares two countries at a time however it is not completely suitable to visualize the compatibility
of a regional economic integration in terms of cultural differences.
In this paper, the measure of cultural distance of regional integration is derived in the formula 2:
= ∑ ( − ) / / (2)
where CDj is the cultural distance between country j and the average of the score of the dimension, Iij is the country
j´s score on the ith cultural dimension, IiAj is the average score of the countries on this dimension, Vi is the variance
of the score of the dimension and n again stands for the number of cultural dimensions. Consequently, the cultural
distance of regional economic integration is shown in formula 3:
Country PDI INV MAS UAI LTO IND
Belgium 65 75 54 94 82 57
France 68 71 43 86 63 48
Germany 35 67 66 65 83 40
Italy 50 76 70 75 61 30
Luxembourg 40 60 50 70 64 56
Netherlands 38 80 14 53 67 68
Bulgaria 65 75 54 94 82 57
Denmark 18 74 16 23 35 70
Estonia 40 60 30 60 82 16
Finland 33 63 26 59 38 57
Croatia 73 33 40 80 58 33
Ireland 28 70 68 35 24 65
Cyprus 70*
Lithuania 42 60 19 65 82 16
Latvia 44 70 9 63 69 13
Malta 56 59 47 96 47 66
Portugal 63 27 31 104 28 33
Austria 11 55 79 70 60 63
Romania 90 30 42 90 52 20
Greece 60 35 57 12 45 50
Slovenia 71 27 31 104 28 33
UK 35 89 66 35 51 69
Spain 57 51 42 86 48 44
Sweden 31 71 5 29 53 78
Czech Republic 57 58 57 74 70 29
Hungary 46 80 88 82 58 31
Poland 68 60 64 93 38 29
Slovakia 104 52 110 51 77 28
Sborník příspěvků XXI. mezinárodní kolokvium o regionálních vědách Kurdějov 13.–15. 6. 2018
343
= ∑ / (3)
where CDr is the cultural distance of the regional economic integration and n is the number of countries in the
regional economic integration.
3. Findings
The visualization of the cultural distance of countries in regional economic integration can be used as an instant
tool of information to multinational enterprises and human resource management which countries in the regional
economic integration might be more compatible in terms of culture and which not.
Table 2 displays the calculated values of cultural distances for the regional integration blocks – the average values,
standard deviation and variance within the integration. As can be seen, both standard deviation and variance values
are significantly higher in the case of Visegrad group.
Tab. 2: Calculated values of cultural distance in selected regional economic integration blocks
Economic
integration
EU-6 EU-28 Visegrad group
Av Sd Var Av Sd Var Av Sd Var
CD 0.83 0.36 0.13 0.75 0.46 0.21 1.19 1.31 1.72
Source: own calculation
Figure 1 illustrates cultural distance of EU founder member states (Belgium, France, Germany, Italy, Luxembourg
and Netherlands) thus the situation of European integration beginning in 1958. As the figure clearly shows,
Netherlands is the odd out. The main reason is due to its feminine-oriented society compared to more masculine
cultures of other countries from this group. Similar values of other dimensions enables more smooth mobility of
people within the region as well as their integration.
Fig. 1: Cultural distance of EU founder member states
Source: own proceeding based on the Hofstede´s data (2015)
How the cultural distance within the European Union integration has changed from the beginning of its formation
till nowadays can be seen on figure 2. The figure illustrates the values for current 28 member states. Please note
that the value for Cyprus is displayed as average due to missing date on all cultural dimensions.
Slovakia and Denmark have notably higher cultural distances from the average within the group of member states.
Contrary, the lowest values can be found in Luxembroung, Spain, Czech Republic and France. Not surprisingly,
increasing number of member states in the integration means larger variance but due to the number of sample the
difference is not significant.
0
0,5
1
1,5
2
Belgium France Germany Italy Luxembourg Netherlands
CD Value Average
Sborník příspěvků XXI. mezinárodní kolokvium o regionálních vědách Kurdějov 13.–15. 6. 2018
344
Fig. 2: Cultural distance of 28 EU member states
Source: own proceeding based on the Hofstede´s data (2015)
The importance of the sample itself in terms of its cultural dimensions´ values exhibits the following figure. Figure
3 displays the cultural distance of Visegrad group member states, the integration in the Central Europe, namely
Czech Republic, Slovakia, Hungary and Poland.
Fig. 3: Cultural distance of Visegrad group member states
Source: own proceeding based on the Hofstede´s data (2015)
The largest variance was found in the dimension of Power Distance index where Slovakia even outstands the scale
of 100. Even in the dimension of Masculinity, the Slovakia´s score is an extreme outlier. Slovakia and the Czech
Republic shared a common history in the last century as Czechoslovakia however the Czech Republic’s
Masculinity and Power Distance scores were reported as much more moderate than in case of Slovakia. Although
such a difference is provoking the discussions over its validity, true is that after the countries´ separation in 1993
a process of divergence in some highly visible areas, such as federal institutions, political discourse, television
programs or for example news reporting was triggered (Bašňáková et al, 2016).
Conclusion
Distance between countries is not only the geographical and therefore the regional economic integration should
not happen regardless other local factors. It certainly covers the cultural knowledge that has become an important
part of business, foreign investment activities, diversity on labour market and its understanding. This
interconnectivity of regions that occurs nowadays is also done by the effect of political decisions to integrate on a
regional level.
The aim of the paper was to find out the measurement of cultural distance applicable for regional economic
integration blocks. Methodology is based on dataset of national cultural dimensions developed by Hofstede and
secondly, on a formula derived from Kogut and Singh. Both chosen approches have been proved by many studies
and belong to the most widely used. The derived formula for cultural distance of regional economic integration
was applied on three European regional economic integration blocks and displayed the differences. The
0
0,5
1
1,5
2
2,5
3
Belgium
Bulgaria
CzechRepublic
Denmark
Estonia
Finland
France
Croatia
Ireland
Italy
Cyprus*
Lithunia
Latvia
Luxembourg
Hungary
Malta
Germany
Netherlands
Poland
Portugal
Austria
Romania
Greece
Slovakia
Slovenia
UK
Spain
Sweden
CD Value Average
0,00
0,50
1,00
1,50
Czech Republic Slovakia Hungary Poland
CD Value Average
Sborník příspěvků XXI. mezinárodní kolokvium o regionálních vědách Kurdějov 13.–15. 6. 2018
345
information is applicable for human resource management and business management strategies when trying to
make the best of the regional economic integration settlement.
The markets of the integrated blocks create a diverse meeting place of people with different cultural background
and values. Even when the member states shared certain historical development, as the findings of this paper
proved, the differences exist there. In this matter a following remark is made. Extreme values of Slovakia´s cultural
dimensions – especially compared to its neighbouring Czech republic – deserve more attention and analysis.
However it was not the aim of this contribution and further research of the disparities is highly recommended.
Literature
[1] BAŠŇÁKOVÁ, J., BREZINA, I., MASARYK, R., (2016). Dimensions of culture: The case of Slovakia as
an outlier in Hofstede´s research. Československá psychologie, vol. LX, no. 1, pp. 13-25. ISSN 0009-062X.
COLAKOGLU, S., CALIGIURI, P., (2008). Cultural distance, expatriate staffing and subsidiary
performance: The case of US subsidiaries of multinational corporations. The International Journal
of Human Resource Management, vol. 19, no. 2, pp. 223–239. DOI: 10.1080/09585190701799804.
[2] ČUHLOVÁ, R., (2017). Motivational Factors of Czech Corporate Expatriates to an International Assignment.
Ad Alta: Journal of Interdisciplinary Research, vol. 1, no. 7, pp. 23-25. ISSN 1804-7890.
[3] DARTEY-BAAH, K., (2013). The culture approach to the management of the international human resource:
An analysis of Hosstede's cultural dimensions. International Journal of Business Administration, vol. 4, no.
2.
[4] EUROPA.EU., (2018) United Kingdom. [online]. [cit. 15-03-2018]. Available from:
https://europa.eu/european-union/about-eu/countries/member-countries/unitedkingdom_en
[5] HILL, C. W. L., (2014). International Business: Competing in the global marketplace. Berkshire: McGrawHill
Education. ISBN 978-0078112775.
[6] HOFSTEDE, G. H., (2015). Dimension Data Matrix. [online]. [cit. 10-03-2018]. Available from:
http://www.geerthofstede.nl/dimension-data-matrix.
[7] HOFSTEDE, G. H., HOFSTEDE, G., (2001). Culture's consequences: Comparing values, behaviors,
institutions and organizations across nations. University of Michigan: Sage. ISBN 0803973233.
[8] HOFSTEDE, G. H., HOFSTEDE G. J., MINKOV, M., (2010). Cultures and Organizations: Software of the
Mind. Revised and expanded 3rd ed., McGraw-Hill Education. ISBN-10: 007166418.
[9] KOGUT, B., SINGH, H., (1988). The effect of national culture on the choice of entry mode. Journal of
international business studies, vol. 19, no. 3, pp. 411-432.
[10]MOROSINI, P., SHANE, S., SINGH, H., (1998). National Cultural Distance and Cross-Border Acquisition
Performance Journal of International Business Studies, vol. 29, no. 1, pp. 137-158.
[11]RAUCH, J. E., (2001). Business and social networks in international trade. Journal of economic literature,
vol. 39, no. 4, pp. 1177-1203. ISSN 00220515.
[12]SHENKAR, O., (2012) Cultural Distance Revisited: Towards a More Rigorous Conceptualization and
Measurement of Cultural Differences. Journal of International Business Studies, vol. 43, no. 1, pp. 1-11.
Available at: http://www.jstor.org/stable/41408885.
The paper was processed under the SGS grant Internationalization of regional business environment.