The purpose of this paper is to investigate whether and to what extent psychic distance (PD) is considered by scholars as specific determinant of inbound and outbound foreign direct investments (FDI) in China. The finding of this study, which is a systematic literature review show that PD as a variable of FDI determinants seems to be under-investigated. The difficulty in quantifying the variable in international business might be one of the reasons. Nevertheless, the literature does raise awareness on distance issues and its multi-dimensions since it first appeared. Besides, the most applicable indexes elaborated by international business scholars are based on Hofstede's work, whose results are used both in psychology and management studies, pinpointing its interdisciplinary nature. This paper aims to systematize the limited and fragmented literature about non-tangible perceptions of distance between home and host economies this paper contributes in raising awareness . However, as part of a wider European Union project the ultimate results of the paper have not been leaked yet. This study provides useful insights and practical implications for international scholars regarding a more comprehensive review of PD, for managers in terms of raising awareness on PD and of the foreign environment (opportunities and difficulties which they are experiencing in the market context) as well as setting up and strengthening long-term cooperation between Europe and China and finally, policy makers on the issue of trade and investment flows between Europe and China, key barriers which affect companies and which require action at political and institutional level in order to ensure that opportunities are fully exploited
Purpose
The purpose of this paper is twofold. First, to analyze the impact of Chinese managers’ psychic distance (PD) with Germany on their businesses; and second, to investigate whether managers’ previous experiences affect their PD.
Design/methodology/approach
A multiple case study research design is adopted. It is based on six Chinese companies that have recently entered Germany through FDI.
Findings
PD influences the decision making of Chinese FDI to Germany, it has an impact on Chinese businesses in Germany on 4 out of 12 dimensions, namely, legal, political, cultural aspects as well as language. Managers with no international experience (study, work, foreign investment practice) perceive a higher impact of PD dimensions on business with the host country, whereas the opposite is true for experienced ones.
Originality/value
While extensive research has been conducted on the PD construct under the point of view of the differences between the home and host country’s characteristics, this paper sheds lights on the impact of pre- and post- periods of investment, as well as over international experiences of managers investing abroad. It examines the environmental industry for Chinese FDI to Germany.
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