Psychic Distance, Its Impact and Coping Modes Interpretations of Sme Decision Makers

Zusammenfassung

---

This paper adopts an interpretative focus in addressing SME decision makers' perceptions of psychic distance. It draws on empirical evidence from British SMEs exporting to Brazil. The study also addresses the hitherto neglected question of how SMEs cope with the difficulties of engaging in international business with psychically distant countries. It discusses the implications of its cognitive approach and findings for further research and conceptual development. Results indicate the relevance of a broad-based multi-dimensional interpretation of psychic distance. Distance dimensions also have a differential impact on doing business with Brazil, although a strong socio-institutional cluster appears. Further exploration of the understandings that SME decision-makers have of psychic distance-related impacts and the possibilities of coping with these, illustrate how they attempt to bridge psychic distance features or adopt avoidance measures.

Siehe den Gesamtinhalt dieses Dokumentes

Auszug

---

Psychic Distance, Its Impact and Coping Modes Interpretations of Sme Decision Makers

Introduction

Studies in psychology demonstrate that human beings tend to avoid unfamiliar situations compared with familiar ones (e.g., Powell/Ansic 1997). In the theory of international trade and investment, the idea of 'psychic distance' implicitly captures this insight by suggesting that the perceived differences between the characteristics of a firm's domestic environment and those of a foreign country generate uncertainties among business decision-makers which may discourage the firm's international diversification into that country.

Despite the inherent reasonableness of this proposition, psychic distance is a concept with a long and patchy history, and it has been written off more than once (e.g., Stöttinger/Schlegelmilch 1998). Its study has suffered from various handicaps, one of them being the limited attention that has been given to the 'psychic' side of the concept. Previous studies on psychic distance have focused on differences between countries and have mainly relied on questionnaire survey data (e.g., Klein/Roth 1990), 'expert' respondents (e.g., Dow 2000) or national indicators (e.g., Dow/Karunaratna 2006), while failing to examine the cognition of relevant decision makers in any depth (Stöttinger/Schlegelmilch 2000). The neglect of the cognitive dimension is a significant omission, given that perceptions and understandings of decision-makers represent the core feature of the psychic distance concept (Evans/Treadgold/Mavondo 2000). Furthermore, it is specific individual decision-makers whose perceptions and skills in overcoming psychic distance are consequential for the international expansion of a firm. Therefore, there is a case for studying the role of psychic distance in greater depth within the reasoning of executives who have decided to diversify internationally.

This paper reports a study of how executives in British small and medium-sized enterprises [SMEs] with a business interest in Brazil perceived aspects of distance between the two countries and the ways in which psychic distance impacted on their business with Brazil. Its primary aim is not to develop or validate a new psychic distance construct but, rather, to allow respondents to unpack the concept and to articulate the relevance of its constituent dimensions. The findings indicate how psychic distance can be interpreted in more differentiated and subtle ways than has generally been recognized. A further contribution lies in the demonstration that some dimensions of psychic distance have greater impact on the conduct of international business than do others. Thirdly, the study shows that, although they have limited resources, even small firms may be able to cope with the barriers posed by psychic distance through conscious managerial action.

The following section briefly reviews the history of the psychic distance concept, arguing that its relevance has been masked by questionable methodological and theor...

Siehe den Gesamtinhalt dieses Dokumentes

---