Culture based development: measuring an invisible resource using the PLS-PM method

Purpose – The purpose of this paper is to conduct an in-depth exploratory test of the innovative culture-based development (CBD) concept and to evaluate its potential for empirical research. Design/methodology/approach – The authors use the partial least squares path modelling (PLS-PM) method to look closely at the latently present factor culture and investigate its various possible relationships with the rest of the sub-components of socio-economic development. The authors estimate two alternative specifications of the CBD model, with regional data for Germany in 2006. Findings – The main finding is that according to the PLS-PM quality criteria, the CBD model is a suitable approach for measuring the cultural impact on regional level. The expected sign of the cultural effect suggested by the CBD concept is also confirmed by the results. Originality/value – The authors identify interesting potential bottlenecks in applying the CBD concept incorrectly and demonstrate the PLS-PM potential to control for them.