Improving on the Kogut and Singh metric of psychic distance
Stephan Gerschewski · Multinational Business Review · 2013
Abstract Purpose – The purpose of this study is to examine the applicability of the Kogut and Singh (1988) index to the psychic distance scales of Dow and Karunaratna (2006). This is in response to recent scholarly articles that have used the Kogut and Singh (1988) index in combination with the scales of Dow and Karunaratna (2006) in order to calculate composite psychic distance scores. Design/methodology/approach – We review the literature on the measurement of psychic distance, in particular with regard to the empirical usage of the scales of Dow and Karunaratna (2006). In addition, we develop a new approach to calculate aggregate psychic distance scores. Findings – Our findings indicate that the Kogut and Singh (1988) index is not appropriate to use in combination with the psychic distance scales of Dow and Karunaratna (2006). We propose an alternative methodology for calculating aggregate psychic distance scores which involves standardizing the raw scores of the psychic distance dimensions of Dow and Karunaratna (2006) and establishing summated scales. Originality/value – The study contributes to the literature by proposing an alternative methodology for the psychic distance scales of Dow and Karunaratna (2006) rather than the Kogut and Singh (1988) index. In light of the prominence of these two influential and widely-cited articles, our commentary challenges the notion of calculating psychic distance.