Psychic Distance in International Expansion

Paper Summary:

The paper identifies the relative importance of the various elements of psychic distance, at each of the stages of the process of cross-cultural business relationship development. The paper analyzes the various stages of business relationship development and discusses the different types and elements of psychic distance that must be taken into account. Finally, the paper provides an analysis and evaluation of the relative importance of each psychic distance element in formulating strategies for international expansion. The paper concludes that the concept of psychic distance can help companies identify opportunities for creating strategic alliances and relationships with foreign companies to their mutual benefit, while avoiding the pitfalls and hazards typically associated with such international expansion efforts.

Outline:
Introduction
Stages of Process of Business Relationship Development
Types and Elements of Psychic Distance
Analysis and Evaluation of Relative Importance of Each Element
Conclusion

From the Paper:

"The developmental phases that occur during expansion into foreign markets reported in many models of internationalization also suggest that companies perform best in foreign markets that are most similar to their domestic market (Johanson and Vahlne, 1977; Nordstrom and Vahlne, 1994). In this regard, Evans and Mavondo (2002) cite research by Nordstrom and Vahlne (1994) that determined the perceived negative relationship between psychic distance and organizational performance is attributed to the fact that psychically close countries are easier to learn about and understand. In spite of the widespread acknowledgement concerning a negative relationship between psychic distance and organizational performance, though, the existing body of knowledge remains nebulous in this regard (Evans and Mavondo, 2002)."

Sample of Sources Used:

• Anderson, J.C. and Weitz, B.A. 1989. Determinants of continuity in conventional industrialchannel dyads. Marketing Science 8(4): 310-323 in Conway and Swift at 1394.
• Beckerman, W. 1956. Distance and the Pattern of Intra-European Trade. Review of Economics and Statistics 28: 31-40 in Evans and Mavondo at 515.
• Black's law dictionary. (1990). St. Paul, MN: West Publishing Co.
• Blois, K.J. 1998. Don't all firms have relationships? Journal of Business & IndustrialMarketing 13(3): 256-270 in Conway and Swift at 1394.
• Conway, Tony and Jonathan S. Swift. 2000. International relationship marketing: The importance of psychic distance. European Journal of Marketing 11/12: 1391-1413.

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