Paradoxes of psychic distance and market entry by software INVs

Abstract

Purpose

This paper aims to examine the role of psychic distance during the process of international market entry by software international new ventures (INVs) from small, open economies. Specifically, we investigate how home market and global industry contexts influence market-entry strategies, and how psychic distance influences initial then subsequent market-entry choice decisions.

Design/methodology/approach

Using Atlas.ti7 software, this paper adopts a qualitative, multi-case analysis of ten software INVs based in New Zealand. Thematic coding of interview and secondary data revealed three core processes: pre-entry considerations, market selection criteria and post-entry evaluation, across the stages of initial and subsequent market entry.

Findings

In the context of the global software industry, the key driver of proactive market entry by INVs from small, open economies is market size rather than psychic distance. During the process of market expansion, firms encounter the psychic distance paradox (PDP). A second paradox arises when, despite experiential learning, managerial perceptions of psychic distance increase, making entry into more distant markets less, rather than more, likely and reactive, rather than proactive.

Originality/value

This paper addresses contextual differences in software versus more traditional sectors, and the influence of psychic distance on market entry rather than outcomes. Specifically, extending our understanding of the PDP, we find perceptual psychic and cultural distance ignored as criteria for initial market-entry decisions, and initial positive attitudes toward risk-taking become less apparent during subsequent entries.

Citation

Sinha, P., Wang, M.(A)., Scott-Kennel, J. and Gibb, J. (2015), "Paradoxes of psychic distance and market entry by software INVs", European Business Review, Vol. 27 No. 1, pp. 34-59. https://doi.org/10.1108/EBR-12-2013-0144