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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.

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.

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.

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.

The aim of this study is to explore how springboard subsidiaries affect the psychic distance between the headquarters (HQ) of multinational companies (MNCs) and a distant target region. The study applies a single case study methodology to analyse a springboard subsidiary located in Spain that helps its German HQ to pursue opportunities in a psychically distant Latin American region. The findings suggest that springboard subsidiaries help MNCs to reduce the perceived psychic distance between their HQ and a target region due to (1) their intermediate psychic proximity in both directions (i.e. to the HQ and the target region) and (2) their location outside the target region, which makes them somewhat ‘impartial’ and not involved in intra-regional conflicts; the study also shows that the sum of psychic distance stimuli between HQ’s home country –springboard subsidiary’s country and springboard subsidiary’s – Latin American countries is actually smaller than the direct psychic distance between HQ’s home country and Latin American countries. No previous studies have explored the effect of springboard subsidiaries on psychic distance.

In spite of technological advances and the removal or reduction of tariffs and other barriers to trade, international buyer–supplier relationships often struggle. In this conceptual chapter, we examine how purchase intentions are influenced by the effects of the psychic distance between the countries where the buyer and the supplier reside. We look into the causal mechanism through which the psychic distance between the buyer and the supplier influences the extent to which the two will enter a business relationship. Two causal pathways are proposed, a more emotional pathway, through organizational identification, as predicted by the psychological distance theory, and a more rational pathway, through trust and expected relationship quality, as predicted by internationalization theory.

To analyze the internationalization pattern of newly established firms in view of Johanson and Vahlne’s (1977, 2009) contributions.

We analyze all 2,390 Norwegian new ventures established in 2003 that export in the period 2003–2011.

We find three different groups of exporters in this cohort: the True Born Globals that start exporting the same year as they are established, and that export further away and to more countries than the other groups. We surmise that these firms fit the revised version of the Uppsala school of internationalization (Johanson & Vahlne, 2009) and are less hindered by “liability of outsidership.” The second group, Born Regionals, export already the second year after foundation, but to countries closer to Norway but to more than one country. Late-comers – starting three years after foundation or later – follow a more traditional path to international markets more in accordance with the original contribution by Johanson and Vahlne (1977).

Our analyses are based on secondary data provided by Statistics Norway. Whereas this gives us data on the total population, we lack information on more specific factors that may explain this pattern more precisely.

This is to our knowledge the first contribution that tests elements of the Uppsala school (pace of international expansion and psychic distance) in a country’s total population of newly founded firms.

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.

In this chapter we test a conceptual model to shed light on the psychic distance (PD) hazards in cross-border acquisitions’ (CBAs’) performance. Only a few studies have sought to examine the impact of national-level dimensions on CBAs’ performance, such as cultural distance or PD, with non-conclusive and contradictory results. Event study methodology is used to scrutinize the impact of the five key dimensions of psychic distance stimuli (PDS) on the stock market performance of the US acquirer firms and 26 countries involved in the CBA. Our results support that PD, as a whole, has a negative impact on CBAs’ performance although only in the short term there is a statistically significant negative impact, whereas in the long term no effect is statistically significant. Analyzing the different dimensions of PDS, only differences in language, education, and political systems are significant. This chapter is the first to empirically examine the PD hazards on CBAs by breaking down the PDS and test the effect of each dimension on CBAs´ performance. The findings of this study may be useful for managers of firms that wish to undertake CBAs as it denotes important dimensions which hinder post-deal performance.

Prior research has tended to view cross-country distance as an obstacle. Yet, differences across countries are a key reason for firms to internationalize. To address this discrepancy, this paper puts forward a unifying framework which (1) synthesizes and delineates the different types of cross-country distance, (2) provides a logic for analyzing cross-level influences of distance on internationalization decisions, and (3) highlights the opportunities brought about by distance. The paper argues that firms are more likely to be able to realize these opportunities when they have internationally experienced managers and diverse, well-functioning top management teams at the helm. The paper also highlights the complex influences of distance, calling for the use of cognitive and behavioral research methodologies to further our understanding of the role of distance in internationalization. An illustrative example of Vodafone Group PLC is included.

Purpose – Cultural distance (CD) reflects differences in cultural values across countries. Many studies have used CD to explain strategies and outcomes in international business practices, although often with limited success. This chapter demonstrates previously unrecognized problems with the conceptualization, analysis, and interpretation of CD measures and suggests methods for improvements in CD research.

Design/methodology/approach – Problems with traditional methods in CD research are demonstrated analytically and illustrated with correlation and regression analyses of secondary data. One analysis shows that individual cultural dimensions may provide alternative explanations for hypothesized effects of distance. Two other examples illustrate the incorrect conclusions that traditional analysis approaches may suggest.

Findings – The difference scores that are implicit in measures of CD usually imply unrealistic constraints on relationships between variables. Analyzing CD at the level of organizations rather than countries exaggerates the available sample size and may result in inaccurate statistical tests.

Research limitations/implications – The empirical examples illustrate problems with methodology for CD research. They are not proposed as substantive, generalizable tests of hypotheses.

Originality/value of the chapter – This chapter provides original arguments to augment existing criticisms of CD research. It shows that findings from extant CD studies may not support the conclusions that have been reported in the literature. Future research should use methods that lead to correct interpretations of CD effects.

Three types of industrial buyer-seller relational process models are available: joining theory, stage theory, and state theory. However, historically, these models have developed based on the knowledge and cultural context of the Western world. Several researchers note that national culture may have an impact on international industrial buyer-seller relationships. Including culture in the models is highly important, especially as the business environment is increasingly more global and different countries have different business cultures. The goal of this paper is to define the most suitable industrial buyer-seller relational process models for describing relationships in various contexts. The paper includes a through literature review and a single case study in order to reach this objective. A new state theory model evolved during the research. It consists of two beginning states: searching and starting; four purely middles states: constant/static, decline, growth, and troubled; and a purely end state: termination. The state of dormant/inert is both a middle state and an end state, that is, when the relational actors are not in contact does not mean that the relationship has ended, but instead, for example, new legislation may have been implemented, which requires the actors to evaluate their relationship and its future. A relationship goes through the two beginning states in the order mentioned above, but after that, any state may occur.