Douglas Dow

A Note on Psychological Distance and Export Market Selection

The concept of psychological distance, or psychic distance, was first proposed by Beckerman (1956) and later popularized by Johanson and Vahlne (1977). However, efforts to test the impact of psychological distance on export market selection have been sporadic and flawed. The author calibrates a single-item indicator of psychological distance using an independent panel of experts. The predictive ability of the resulting instrument is then tested on the order in which Australian exporters select their first five foreign markets. The author then compares this instrument with three other scales that are commonly employed as indicators of psychological distance. Scales based on Sethis (1971) and Hofstedes (1980) work prove to be inferior predictors of early market selection. Geographic distance is found to be a significant predictor, but its effect is largely independent of psychological distance. The author also explores the dynamic nature of psychological distance. The impact of psychological distance on market selection appears to decrease substantially after the first market entry decision but remains a significant predictor.

Challenging the Conceptualization and Measurement of Distance and International Experience in Entry Mode Choice Research

Although international entry mode choice has been extensively studied, the empirical results regarding two key antecedents—various forms of distance and international experience—have been equivocal. The authors argue that the conceptualization and measurement of these variables may be contributing to the ambiguous results. They demonstrate that a broader conceptualization of the underlying factors driving the distance construct substantially increases the ability to predict entry mode. Furthermore, when a refined interpretation of international experience is employed, only experience in similar countries affects entry mode selection. Experience in dissimilar countries seems to have no predictive power. These results call for a radical change in how these two key constructs should be operationalized in further entry mode research.

A Field Experiment on the Effects of Benchmarking and Goal Setting on Company Sales Performance

The effectiveness of internal benchmarking and goal-setting is examined in a field experiment carried out in an electrical products distribution company. The experiment involves a pre-post experimental design in which 138 branches of the company are assigned randomly to one of four conditions: (a) benchmarking; (b) “small-wins” goal-setting; (c) “big-bang” goal-setting; and (d) control group. The dependent variable is percentage increase in sales performance over a four month period. The findings point to the effectiveness of benchmarking for achieving improved performance and suggest that comparison against partners and knowledge about “best practice” contributes, together with goal-setting and goal-evaluation, to the efficacy of benchmarking.

The Adaptation of Host Market Positioning Strategies: Empirical Evidence on Australian Exporters

The author explores how and why the content of an exporters host market positioning strategy differs from the content of its home market strategy. The research is significant for two reasons: (1) It uses a more comprehensive and rigorous definition and measurement of firm strategy than previous adaptation research, and (2) it systematically measures the magnitude and direction of the adaptation. Previous research has concentrated only on the need to adapt. This approach opens up an entirely new debate about what patterns of adaptation should be expected. The author uses a large-scale survey of Australian exporters to test the emerging hypotheses, which are strongly supported. Domestically based Australian exporters tend to have a narrower focus and rely more heavily on operations-based differentiation in foreign markets.

Born global firms and accidental internationalists: Has Hennart (2014) opened a can of worms?

Purpose The purpose of this paper is to respond to Hennart’s (2014) challenge to the existing born global literature. In his challenge, Hennart proposes a simpler explanation of why some firms internationalize earlier and more aggressively than others. However, such a parsimonious model of born global firms raises the awkward question of whether born global firms are indeed any different from firms that internationalize more gradually. Design/methodology/approach Using two extensive surveys of Australian exporters, this paper first explores the degree to which a set of six “facilitating factors” that Hennart puts forward are different across born global and non-born global firms. Next, it tests the second aspect of the debate highlighted above – i.e. whether born global firms behave differently from non-born global firms. This is done by testing for differences in the patterns of early market selection for born global and non-born global firms. Findings Support is found for both the role of facilitating factors and for the view that born global firms behave differently from non-born global firms. As a result, it is proposed that the Hennart and the RBV-oriented explanations of born global firms need to be viewed as complementary, rather than competing. Each may represent a necessary but not sufficient condition with respect to born global firms. Originality/value A systematic testing for differences in facilitating factors and market selection patterns across born global and non-born global firms are both issues that have major implications for the born global literature, and yet have been left largely unexplored to date.

Perceptions Versus National-Level Differences: A Mediating Model of Psychic Distance

Abstract Purpose This chapter bridges the gap between two distinct approaches to the concept of psychic distance – measuring it in terms of people’s perceptions of distance or in terms of exogenous national-level differences. The two approaches are reconciled in a “refined and integrative” definition of the concept, which is tested empirically using a mediating model. Methodology Structural equation modeling is used on a bilateral sample of 25 countries to test whether perceptions of psychic distance mediate the relationships between national-level differences and bilateral trade and investment. Findings By testing for alternative direct paths, the chapter confirms that for the main forms of national-level differences, culture, socioeconomic development, language, and religion, psychic distance fully mediates their relationships with both trade flows and investment patterns. However, for geographic distance, while the relationship is fully mediated for investment, it is only partially mediated for exports. Two asymmetric “distance-bridging” factors are also found to be significant antecedents of psychic distance. Originality and implications This chapter is the first to empirically demonstrate the mediating relationship between exogenous national-level differences and perceptions of psychic distance, and thus, provides new insights into the debate over which measurement approach is more appropriate. Perceptions of psychic distance, even if measured by expert panels rather than the actual decision-makers, fully capture the impact of national-level differences on trade and FDI flows; however, if such measures of perceptions are not available, a simple selection of four national-level differences will still capture 80% of the same effect.

Are We at a Turning Point for Distance Research in International Business Studies

Abstract In this chapter I argue that the distance research in international business studies is at a turning point, not in terms of its popularity, nor the quantity of articles published, but rather, in terms of the types of issues that are explored. Past distance research has largely been conducted at the level of the firm and/or the market – that is, linking national-level measures of distance with specific firm behaviors and outcomes. However, the seminal paper by Shenkar (2001) represents a shift in focus that is only just beginning to gain traction. This shift involves stepping back and beginning to unpack the black box we call ‘distance’ by exploring the micro-level mechanisms involved. In essence, it is about digging deeper in multiple aspects, to understand when, why and how distance matters in the international business (IB) context. These are issues that until now have typically been neglected. A metaphor borrowed from the social psychology literature, known as Coleman’s Boat, is used as a vehicle to explain the key issues involved in this shift and the opportunities for future research.

Biases in Charitable Giving to International Humanitarian Aid: The Role of Psychic Distance

At a time when government support for international humanitarian aid is decreasing, organizations devoted to helping in times of disaster are looking ever more to the individual donor for financial contributions. In this paper, we explore the relationship between the donor and the distant other by introducing the concepts of psychic distance and psychic distance stimuli to the macromarketing literature and exploring the role of psychic distance in fundraising for international humanitarian aid. It is our contention that by better understanding the biases that psychic distance introduce into the system, an improved flow of donations for the betterment of the distant needy and a more effective marketing system can be achieved. We offer four propositions for future testing and exploration.