The antecedents of psychic distance

Abstract

This study investigates the antecedents of psychic distance. Building on original data in 25 of the world's largest economies, we investigate potential drivers of the perceived distance among a given pair of countries. Results confirm that psychic distance is indeed a multifaceted construct which is determined by cultural, geographic and economic factors. Furthermore, our results indicate that geographic distance accounts for the largest share of the explained variance, suggesting that future studies should attribute geographic distance a more prominent role when it comes to empirically investigating international business decisions for which psychic distance perceptions may be important. They also suggest that, used in isolation, cultural distanceas measured by the so called Kogut and Singh index -is a poor predictor of distance perceptions.

An overview of Hofstede-inspired country-level culture research in international business since 2006

“…Here we put this claim to test -do their recommendations indeed increase the rigor of country-based culture research? Specifically, we replicate a published study : Håkanson & Ambos' (2010) analysis of psychic distance. Psychic distance is referred to as factors preventing or disturbing the flow of information between potential and actual suppliers and customers (Johanson & Vahlne, 1977, p. 24), and is frequently used to explain expansion patterns of internationalizing firms.…”

“…Unlike cultural distance which is based on a comparison of 'objective' sets of values that people in different countries hold, psychic distance is in essence perceptual. Håkanson & Ambos (2010) empirically tested the relationship between cultural distance and psychic distance (average countrylevel perception of distance), while controlling for geographic and economic distance. They found that cultural distance is positively related to psychic distance, but the effect of cultural distance is relatively smaller than that of geographic distance.…”

“…We chose Håkanson & Ambos' (2010) paper because it fits the scope and focus of KLG's discussion -it tests the relation between cultural and psychic distance, which KLG suggest; it uses the Hofstede-based cultural distance index which is central to the country level discussion in KLG; it compares the cultural distance effect with other distance effects, thus explicitly addressing the effects size discussion; its uses a sample with multiple home and host countries, allowing us to explicitly address the distance versus profile question. Furthermore, all required data for the retest are publicly available.…”

Symmetric and asymmetric effects of proximities. The case of M&A deals in Italy

“…In a study on expatriates, Selmer et al (2007) concluded that German expatriates assigned to the US were better adjusted than US expatriates assigned to Germany. Håkanson and Ambos (2010) argued that managers from a country with a well-defined regulatory environment and transparent governance structures experience huge difficulties in countries with weak formal institutions. By contrast, managers from countries with weak institutional structures may not experience the same difficulties in countries with more developed and transparent institutions that are easier to understand.…”

“…By contrast, managers from countries with weak institutional structures may not experience the same difficulties in countries with more developed and transparent institutions that are easier to understand. Another example of asymmetry in the study by Håkanson and Ambos (2010) concerns the size of countries and their political and cultural influence. For instance, despite sharing the same language, Belgian newspapers and other media are more likely to report on developments in France than the other way around, which creates asymmetry in the perceived distance between the two countries.…”