Google Answers Logo
View Question
Q: Psychic distance and Psychic distance paradox ( Answered,   0 Comments )
Subject: Psychic distance and Psychic distance paradox
Category: Business and Money > Advertising and Marketing
Asked by: doreen-ga
List Price: $5.00
Posted: 29 Oct 2002 05:32 PST
Expires: 28 Nov 2002 05:32 PST
Question ID: 91925
I want to know something about "Psychic distance" and "Psychic
Distance Paradox" and what are the academic research findings about
Subject: Re: Psychic distance and Psychic distance paradox
Answered By: tehuti-ga on 29 Oct 2002 06:54 PST
Hello doreen-ga,

Here are some references to academic works about the concept of
psychic distance and the resulting paradox. Please ask for
clarification if you do not think this answer meets your requirements.

1.  Psychic distance is defined as “the distance between the home
market and a foreign market resulting from the perception and
understanding of cultural and business differences”  Definition given
in Evans, Jody, Treadgold, Alan and Mavondo, Felix (2000) “Psychic
distance and the performance
of international retailers: A suggested theoretical framework”.
International Marketing Review,
17(4/5): 373-391. 

2.  A discussion of the theoretical basis of the concept of psychic
distance, and a critique of the measures used can be found in the
following article, which suggests a new measure, as well as providing
a bibliography of previous work on the subject (available in full text
anzmac/AUTHORS/pdfs/Evans3.pdf )

of the Manchester Metropolitan University Business School and Felix
Mavondo of Monash University

Abstract: We develop a measure of cultural distance on the basis of
Hofstede’s dimensions of national
culture with appropriate modifications in wording to reflect the
organisational study settings. The
method of calculating cultural distance suggested by Kogut and Singh
(1988) results in an index
relative to the USA. We believe that most respondents do not benchmark
cultural distance on the
USA but on their specific countries. Moreover, the Kogut and Singh
(1988) index results in an
objective measure of cultural distance, which is based on work-related
values. The index is not
intuitively meaningful and rather difficult to interpret. To overcome
these limitations, we develop
a measure that is based on subjective perceptions of differences in
general national cultural values
between foreign countries and a respondent’s home country. This
measure is easy to interpret and
compute. We test it against the Kogut and Singh (1988) measure and
find the correlation to be
.957. It is concluded that this measure is reliable, robust and has
acceptable psychometric

3.  A further paper by Evans is available in full text
ORGANISATIONAL PERFORMANCE by Jody Evans of the Manchester
Metropolitan University Business School

This study contributes to the psychic distance debate by empirically
examining the relationship
between psychic distance and organisational performance in an
international retailing context.
The results of the study suggest that psychic distance has a positive
effect on both financial
performance and strategic effectiveness. Other strategic,
organisational and management
characteristics were also investigated. It was found that psychic
distance has a positive influence
on research and planning and adaptation of the retail offer, but a
negative effect on entry strategy.
Moreover, entry strategy has a negative effect on financial
performance and a positive effect on
strategic effectiveness, while retail offer adaptation adversely
effects financial performance.

Both these papers (refs. 2 and 3) are from the proceedings of the
Australian and New Zealand Marketing
Academy Conference  held 1st - 5th December 2001 at Massey University,
published under the title Bridging Marketing Theory and Practice
(ISBN: 0-473-08206-3).  The conference web site is at:

4.  The psychic distance paradox arises from the fact that operating
in a psychically close country does not necessarily lead to superior
performance, as was elaborated by:

 O'Grady, Shawna and Lane, Henry (1996) 
“The psychic distance paradox”. Journal of International Business
Studies, 27(2), 309-333.

Abstract: Companies tend to begin their internationalization process
in countries that are psychically close. Researchers describe the
sequence of entry that firms follow and the mode of entry they choose.
It is suggested that psychically close countries are more easily
understood than distant ones, and offer more familiar operating
environments. An unstated conclusion can be drawn linking sequence of
entry to performance. Evidence from 32 Canadian retail companies shows
that only 7 (22%) were functioning successfully in the US. The psychic
distance paradox is that operations in psychically close countries are
not necessarily easy to manage, because assumptions of similarity can
prevent executives from learning about critical differences. Moreover,
empirical evidence from 271 CEOs confirms greater cultural differences
between Canada and the US than assumed previously. Modifications are
suggested to improve the psychic distance concept.
(Available in Google’s cache:

Other relevant articles:

5.  Psychic Distance and Internationalization: A Critical Examination
by John Child (Birmingham Business School, University of Birmingham,
Birmingham B15 2TT,  UK and Sek Hong Ng and
Christine Wong (both from School of Business, The University of Hong
Presented at: the 2000 Annual Meeting of the Academy of International
Business, Session 3.3.2, Tapatio Cliffs Pointe Hilton Resort, Phoenix,
Arizona, November 17-20, 2000.

This paper re-examines the concept of psychic distance and its
theoretical roots, with reference to case studies of
internationalizing Hong Kong firms. The rapid economic development of
Hong Kong and the fast changing business orientation of Hong Kong
firms in recent decades provides a fruitful opportunity to study the
concept in a new setting.  The theory of psychic distance developed by
Scandinavian researchers in the 1970s has demonstrated considerable
explanatory value for the sequence of internationalization of Swedish
firms. These firms usually expanded their overseas
business by successive stages to markets that were characterized by
greater psychic distance. The international expansion of Hong Kong
firms also lends the concept some empirical support. However, evidence
from the case studies indicates the need for a reformulation of the
concept and an extension of the original theory to include an
investigation of perceptions of distance at the strategic level, and
mechanisms for managing it at the operational level.

Available in full text at:

From this paper: “Although the term ‘psychic distance’ was used in
some prior studies (Beckermann
1956; Linnemann, 1966), empirical studies of Nordic multinationals
have been widely accepted as the starting point for research on this
concept (Johanson and Wiedersheim-Paul, 1975; Johanson and Vahlne,
1977).”   “Johanson and Wiedersheim-Paul (1975) defined psychic
distance in relation to a set of factors preventing or disturbing the
information flows between firms and foreign markets. These
information flows, whether actual or potential, may include elements
like information on needs in the foreign market flowing to the firm,
and information on the product flowing from the firm to the market.
Examples of factors affecting psychic distance include differences in
languages, culture, political system, level of education, and level of
industrial development.”

“Moreover, O’Grady and Lane (1996) found that many Canadian retail
companies did not function successfully in the culturally close
environment of the USA. They concluded that there is a ‘psychic
distance paradox’ because assumptions of cultural similarity can
prevent managers from learning about critical differences.”

The respective references are (apart from the O’Grady reference, which
is already cited above):
Beckermann, W. (1956). Distance and the pattern of intra-European
trade, Review of
Economics and Statistics, Vol.28, pp.31-40.

Linnemann, H. (1966). An Econometric Study of International Trade
Amsterdam: North-Holland.

Johanson, J. & Wiedersheim-Paul, F. (1975) The internationalization of
the firm –
Four Swedish cases, Journal of Management Studies, Vol.12, pp.305-322.

Johanson, J. & Vahlne, J.E. (1977). The internationalization process
of the firm – A
model of knowledge development and increasing foreign market
Journal of International Business Studies, Vol.8, No.1, pp.22-32.
5.  A “working paper” that looks at psychic distance with respect to
ecotourism is available at (please not
that the formatting is not very good on this web page!)

Culture Influences on Ecotourism Participation by  Paul Herbig (1997)
“Marketing Guru and International Consultant” of
San Antonio Texas

“Abstract: A distinct correlation between high individualism and small
power distance to high ecotourism use exists.  The concept of high and
low-context cultures is also used as a predictor in tendencies of
members of a given culture to participate in ecotourism.   Themes from
Hofsted's Culture's Consequences are offered as a theoretical
framework to add coherence to the cross-cultural study of ecotourism
participation.   The psychic distance paradox has been found to have a
negative impact on ecotourism participation.  The travel motivations
of ecotourists is discussed and recommendations provided.”

I hope that these references will give you a start.  A search on
Google on the phrase “psychic distance paradox” brings up many more
resources that explore the concept from different angles.  You can see
the search results at this URL:

Request for Answer Clarification by doreen-ga on 29 Oct 2002 09:49 PST
Can you please provide more academic papers that supports both psychic
distance and psychic distance paradox? Thank you.

Clarification of Answer by tehuti-ga on 29 Oct 2002 12:37 PST
Hello doreen-ga,

Here are some other references to your topics. 

1. Monash University: Research Publications Working Paper Series -
Jody Evans and Alan Treadgold "The relationship between psychic
distance and organisational performance: an analysis of international
retail operations"
 A key proposition in the internationalisation literature is that
businesses enter countries that are psychically close and
progressively expand into more psychically distant countries. There is
an implicit assumption that this process will lead to superior
organisational performance. However, the negative relationship between
psychic distance and organisational performance has not been
empirically supported. This paper develops a conceptual model
depicting the relationship between psychic distance and organisational
performance in an international retailing context. It is proposed that
the intervening influence of the strategic decision-making process and
retailing strategy result in a psychic distance paradox, where psychic
distance is positively related to organisational performance. (Only
the abstract is available:

2. The Relationship between Psychic Distance, Adaptation of the Retail
Offer and Organisational Performance
Jody Evans, Manchester Metropolitan University and Felix Mavondo,
Monash University
Presented at ANZMAC 2000 Visionary Marketing for the 21st Century:
Facing the Challenge
The present study contributes to the standardisation-adaptation debate
by empirically examining the
relationship between psychic distance, adaptation and organisational
performance in an international retailing context. Existing research
in this area has concentrated on the marketing strategies of export
firms and has reported conflicting results. The results of this study
demonstrate that retailers operating in both close and distant markets
are more likely to adapt their retail offer where they perceive
substantial cultural and business differences between the home and
foreign market. Such adaptation, however, does not necessarily enhance
organisational performance. While adaptation of store atmosphere,
merchandise range, merchandise quality and pricing strategy were found
to adversely effect organisational performance in close markets,
adaptation of display quality, customer service and overall image had
a positive influence. In contrast, adaptation of merchandise range,
pricing strategy, customer service and store atmosphere were found to
have a positive influence on organisational performance in distant
markets. Adaptation of customer facilities and store layout,
however, were found to negatively effect organisational performance in
distant markets.
Full text:

Hassel, L. Henriksgatan 7, FIN-20500 TURKU, Finland
In order to capture differences between countries and cultures in a
multinational corporation this paper uses the concept of psychic
distance. A generally held view is that the longer the psychic
distance between the HQ and the subsidiaries, the higher the
probability that there will be misunderstandings and communication
problems in MNCs. At the same time it has been argued that
organizations tend to use more impersonal controls, e.g. budgets, when
the distance is greater.
Based on a survey in an European MNC, this paper demonstrates by using
a contingency model that psychic distance will dilute the
effectiveness of budget control. Budget control is more effective
towards Scandinavian subsidiaries of the Finnish parent than towards
foreign subsidiaries that are more distant from the parent.
Presented at the 20th Annual Conference of the European Accounting
(abstract only: )

4. Artistic Detachment in Japan and the West: Psychic Distance in
Comparative Aesthetics
by Steve Odin Artistic Detachment in Japan and the West takes up the
notion of artistic detachment, or psychic distance, as an
intercultural motif for East-West comparative aesthetics. The work
begins with an overview of aesthetic theory in the West from the
eighteenth century empiricists to contemporary aesthetics and
concludes with a survey of various critiques of psychic distance.
Throughout the author takes a highly innovative approach by
juxtaposing Western aesthetic theory against Eastern (primarily
Japanese) aesthetic theory.   Steve Odin is professor of philosophy at
the University of Hawaii
Available on Amazon at $29.95 new, and from $5.95 used

5. An Attempt to Conceptualize Psychic Distance on Market and Channel
Selection in the Case of Zimbabwe's Manufacturing Exporters
Zororo Muranda, Department of Business Studies, University of
Zimbabwe, Harare, Zimbabwe
This article reports results of a study on influence and role of
psychic distance in market and channel selection by Zimbabwe's
manufacturing exporters. The objective of this study is to investigate
the relevance and applicability of psychic distance model in
explaining Zimbabwe's manufacturing exporters' market and channel
choices. The analysis in the study is qualitative. Results show a
strong preference for exporting to other developing markets and the
target are principally neighboring markets. Exporters do not only feel
physically but also physically closer to clients in developing markets
than they are to developed market clients. Channel choice shows use of
sales offices in neighbouring markets but preferring agents and
distributors in other markets especially the developed. New exporters
tend to prefer markets where domestic rivals are already doing well.
Psychic distance factor decreases in both market and channel where
export relations involve neighbouring markets or markets of same
development status.

Review of Human Factor Studies, Vol. 6, No. 1, June 2000
(abstract only: 

Bent PetersenR, Torben Pedersen
Department of International Economics and Management, Copenhagen
Business School

Much has been written about how international firms create and sustain
firm-specific advantages that offset their liability of foreignness.
Less attention has been devoted the question of how international
firms can reduce their liability of foreignness. Looking for different
paths of learning our study explores the dynamics of firms’ liability
of foreignness. A sample of 494 international firms from Sweden,
Denmark and New Zealand is clustered along three structural dimensions
of liability of foreignness: (1) perceived lack of knowledge about the
foreign market, (2) the longevity of operations in the foreign market,
and (3) international experience of the entrant firm. The four
clusters that precipitate represent different learning path positions.
One group of firms can be identified as pre-entry learners, another
group as post-entry learners. A minor group of firms is characterized
by perceiving a persistent lack of knowledge about the foreign market
they are operating in. One might speculate if these firms engage in
any learning about the foreign business environment. Furthermore, the
data suggest that firms with extensive international experience are
more capable in familiarizing with the foreign business environment
than are firms with little international experience.
From Working Papers 2002, of the Copenhagen Business School  (full
text: )

7. Speaking in Tongues? The Influence of Language and Networks
on Internationalisation 
R Marschan-Piekkari, D Welch, L Welch
School of Management, Department of Marketing, University of Bath, UK

In the new millenium, the Internet and e-commerce are expected by many
to change the way in
which international business is conducted and the possibilities for
firms to internationalise.
This expectation raises questions regarding the process of
internationalisation, a subject of
considerable research over the last three decades. Much of this
research has shown the pattern
of internationalisation to be one of incrementalism as a response to a
variety of factors,
including network development and psychic distance. The paper examines
the issue of the
impact of language on networks and the process of
internationalisation. A central argument is
that, despite the volume of research, the nature of psychic distance
and its impact on
internationalisation has remained relatively underdeveloped as an
explanatory factor. We
therefore attempt to unravel the psychic distance package with a focus
on language. The paper
also addresses the relationship between language and firms'
internationalisation path, including
the difference in approach of firms from English-speaking and
non-English-speaking countries.
While the use of the Internet may facilitate many aspects of
international communication and
commerce, we argue that different languages and different levels of
language competence may
well distort these effects. Consequently, it will be difficult to
anticipate exactly how
internationalisation is likely to evolve in the new e-world.
(full text:

Torben Pedersen and J. Myles Shaver, Copenhagen Business School, March

We refine the prominent theory of the process by which firms expand
internationally -
internationalization theory. By augmenting the behavioral theory of
the firm (which is the basis
of internationalization theory) with theories of foreign direct
investment, we argue that
international expansion is not a gradual incremental process as argued
by internationalization
theory. Rather, we hypothesize that international expansion is a
discontinuous process
characterized by an initial “big step.” We expect that the differences
of operating in one’s home
country versus abroad are the major difficulties faced by foreign
firms, and subsequently the
differences between foreign countries are only marginal. As a result,
we hypothesize that the
internationalization process will be characterized by the following
observations: (a) firms take a
long period of time to make their first international investment; (b)
firms take shorter but
constant periods of time for subsequent investments; and (c) no
relationship between time to
expansion and the cultural distance of the target country will exist.
We examine the international
expansion activities of 176 Danish firms over 150 years and find
support for these arguments.

(The authors use the concepts of psychic distance and psychic distance
paradox in their arguments in the main part of the paper. Available in
full text:

A couple to get a local library to obtain for you:

Stöttinger, Barbara, Schlegelmilch, B.B., 2000: Psychic Distance - A
Concept Past its Due Date?. International Marketing Review, 17, 2,

 A Conway and J S Swift.  International Relationship Marketing: The
Importance of Psychic Distance' European Journal of Marketing, 2000,
Vol 34.
There are no comments at this time.

Important Disclaimer: Answers and comments provided on Google Answers are general information, and are not intended to substitute for informed professional medical, psychiatric, psychological, tax, legal, investment, accounting, or other professional advice. Google does not endorse, and expressly disclaims liability for any product, manufacturer, distributor, service or service provider mentioned or any opinion expressed in answers or comments. Please read carefully the Google Answers Terms of Service.

If you feel that you have found inappropriate content, please let us know by emailing us at with the question ID listed above. Thank you.
Search Google Answers for
Google Answers  

Google Home - Answers FAQ - Terms of Service - Privacy Policy