Psychic distance in exporter–importer relationships: A grounded theory approach

Psychic distance is one of the most widely used, researched, and contentious constructs in the fields of international business and marketing. It has been applied to a variety of issues, often leading to inconsistent and conflicting results. In response to this problem, this study critically focuses on the construct of perceptual psychic distance and identifies the weaknesses and inconsistencies across major existing empirical studies regarding the conceptualization, operationalization, and measurement of psychic distance. We employ a grounded theory-based qualitative empirical study with export managers in French manufacturing companies to fill in the gaps identified in this evaluation, leading to a revised definition of psychic distance in the context of exporting. We discuss the major results and the limitations of the study, propose avenues for further research, and outline managerial implications for managing psychic distance in the internationalization strategy.     

Entrepreneurship through a qualitative lens: Insights on the construction and/or discovery of entrepreneurial opportunity

This article applies inductive analytic techniques to identify and elaborate on two recurring themes that underpin the core puzzle of entrepreneurship research — where entrepreneurial opportunities come from. The first theme is the unique role of imprinting, or the profound influence of social and historical context in constraining the perceptual apparatus of entrepreneurs and delimiting the range of opportunities for innovation available to them. Second, our analysis offers insight into the counterbalancing role of reflexivity, operating at both individual and collective levels of analysis, in generating the ability of entrepreneurs to overcome the constraints of imprinting. These insights are based on a thematic review of the nine studies that comprise this special issue on qualitative research. The nine studies, individually and each in their own way, offer key insights into how we might better understand the emergence of entrepreneurial opportunity.     

Ethno-national ties and international business opportunity exploitation: The role of environmental factors

This paper examines the effect of ethnic populations on international opportunity exploitation at a societal, or national, level. Past research shows a relationship between ethnic ties and international opportunity at an individual level; however, little is known about the role of ethnic ties and international opportunity at a national level, which is called ‘ethno-national ties’ in this study. In order to acquire in-depth knowledge of this subject, we studied a population of Chinese who are living outside their home country and applied contingency theory principles to investigate environmental boundary conditions that affect this population. Data collected from Chinese exporters indicate an overall positive effect of ethno-national ties on international opportunity exploitation—an effect that is influenced by three moderating variables: technological turbulence, psychic distance, and export barriers. Technological turbulence and export barriers weaken the effect of ethno-national ties on international opportunity exploitation while psychic distance enhances the effect.     

Applying Psychic Distance to Services Internationalization: A Case Study of Thai Caregivers and Japanese Elderly

This study applied psychic distance concept to the internationalization of healthcare service. The findings found that the psychic distances perceived by Japanese elderly and Thai caregivers toward their counterparts were asymmetric and varied across dimensions. Moreover, the respondents’ experience with a country affected their psychic distance toward that country. These findings extend the theoretical lens by clarifying the key characteristics of psychic distance, especially in international service, that psychic distance from service providers’ and recipients’ perspectives affect service expectation and performance. It also suggests practitioners to arrange working environments and training program to satisfy service providers and recipients.     

Firm Resources and Corporate Venturing Investment

Corporate venturing (CV) in which established firms invest in new entrepreneurial businesses involves identifying opportunities and creating new combinations of resources to seize opportunities. Moving beyond literature that has focused predominantly on the consequences of CV, we adopt a resource‐based view to examine how knowledge‐based and organizational‐slack resources relate to the level of firm CV. The implications of the findings for future research are discussed. Copyright © 2011 ASAC. Published by John Wiley & Sons, Ltd.     

Multilevel psychic distance and its impact on SME internationalization

We expand the conceptualization of psychic distance and use a multilevel framework by studying it as a founder’s psychic distance in the pre-entry phase of entering a specific foreign market, and the SMEs (firm) psychic distance in the post-entry phase of entering that specific foreign market. Based on qualitative research involving six SMEs’ with 18 internationalization events, we found that psychic distance at country and business levels causes difficulties for SMEs in the post-entry phase because of their lack of knowledge. Bridge-makers possessing knowledge about target markets help SMEs to overcome psychic distance challenges. Trust in the relationship with the bridge-maker is an important ingredient to gain knowledge that alleviates the SMEs’ psychic distance challenges. Finally, we go beyond country-business levels of psychic distance by showing that psychic distance also matters at bridge-maker level. This relates to their lack of knowledge about the target market and SMEs’ routines.     

Assessing credit quality from the equity market: can a structural approach forecast credit ratings?

We investigate the empirical performance of default probability prediction based on Merton's (1974) structural credit risk model. More specifically, we study if distance‐to‐default is a sufficient statistic for the equity market information concerning the credit quality of the debt‐issuing firm. We show that a simple reduced form model outperforms the Merton (1974) model for both in‐sample fitting and out‐of‐sample predictability for credit ratings, and that both can be greatly improved by including the firm's equity value as an additional variable. Moreover, the empirical performance of this hybrid model is very similar to that of the simple reduced form model. As a result, we conclude that distant‐to‐default alone does not adequately capture the firm's credit quality information from the equity market. Copyright © 2007 ASAC. Published by John Wiley & Sons, Ltd.     

Socio-cognitive traits and entrepreneurship: The moderating role of economic institutions

We examine how country-level institutional context moderates the relationship between three socio-cognitive traits—entrepreneurial self-efficacy, alertness to new business opportunities, and fear of failure—and opportunity entrepreneurship. To do this, we blend social cognitive theory (SCT) with institutional theory to develop a multi-level model of entrepreneurial entry. We merge data from the Global Entrepreneurship Monitor (GEM) surveys and the Economic Freedom of the World (EFW) index for 45 countries from 2002 to 2012. Our results, which are based on a multi-level fixed-effects model, suggest that entrepreneurs' self-efficacy and alertness to new opportunities promote opportunity entrepreneurship while fear of failure discourages it. However, the strength of these relationships depends on the institutional context, with entrepreneurial self-efficacy and alertness substantially more likely to lead to new opportunity-driven ventures in countries with higher levels of economic freedom. These results provide suggestive evidence that economic freedom not only channels individual effort to productive entrepreneurial activities, but also affects the extent to which individuals' socio-cognitive resources are likely to mobilized and lead to high-growth entrepreneurship.     

Geographic Distance as a Moderator of Curvilinear Relationship Between Cultural Distance and Shared Ownership

This study tests geographic distance as a moderator of the curvilinear relationship between cultural distance and a firm's preference for shared ownership entry mode. The sample consisted of US foreign direct investments in 60 countries spread over 18 years. Results showed that an inverted U‐shaped relationship between cultural distance and preference for shared ownership is stronger for firms separated by high geographic distance. While full equity ownership is most likely when both cultural and geographic distances are either low or high, shared ownership is most likely when the cultural distance is high (low) but the geographic distance is low (high). Copyright © 2012 ASAC. Published by John Wiley & Sons, Ltd.     

Understanding the formation of psychic distance perceptions: Are country-level or individual-level factors more important?

This study investigates individual managers’ formation of psychic distance perceptions to foreign countries. Adopting a social psychological perspective, we propose that three social-cognitive mechanisms—social comparison, mere exposure, and social learning—help explain why and how country- and individual-level characteristics affect the formation of these perceptions. Based on an international survey of 1591 managers located in 25 countries undertaken between 2003 and 2008, we find that country-specific international experience, formal education, and the use of common language reduce psychic distance perceptions. Surprisingly, and in contrast to conventional wisdom, managers’ international experience and overall work experience do not seem to affect their distance perceptions. Moreover, individual-level antecedents seem to have limited explanatory power relative to country-level factors as predictors of overall psychic distance perceptions, which lends support to the widely-employed practice of operationalizing psychic distances through country-level indicators. In addition to these empirical findings, the study provides a theoretical social psychological framework useful for understanding how psychic distance perceptions are formed.     

A case study on the internationalization process of a ‘born-global’ fashion retailer

This case study on Zara elucidates the expansion strategies used by both born-global and gradual global fast-fashion retailers based on theories of internationalization. Aspects related to knowledge sharing, resource-based theory, and psychic distance are overlaid with Zara's internationalization strategies to advance understanding of the role fashion plays in dynamic internationalization. Zara employs a high-risk, high-reward model of internationalization to defend its unique merchandise and retail position by remaining completely vertical. Zara's born-global expansion strategy engendered a psychic distance paradox in that it was very successful in distant markets early on. It is proposed that fashion retailers may take note of Zara's success through the proposed ‘dynamic strategic planning process’ for expansion in international markets. Researchers can test the proposed framework empirically to investigate the theoretical constructs for both gradual- and born-global firms.     

Identifying the preferable bancassurance alliance structure from the bank's executive management perspective: analytic network process application

This paper identifies the preferable bancassurance alliance structure from the bank's executive management perspective in the Taiwan area. In combination with the relevant literature and interviews with experts, this study adopts the modified Delphi method and the analytic network process (ANP) to construct an evaluation method and to determine ANP effectiveness. The results indicate that executives of banks and insurance companies most prefer financial holding companies. In this study, we apply ANP to construct an evaluation method and introduce four criteria and ten subcriteria for evaluating six alternative bancassurance alliance models. This paper supports ANP as an effective decision making tool. Copyright © 2010 ASAC. Published by John Wiley & Sons, Ltd.     

It’s personal: The emotional dimension of psychic distance perception in intercultural knowledge transfer

Psychic distance (PD) is a perceived obstacle to information flows in knowledge transfer between individuals in different national markets. However, the impact of individuals’ subjective perceptions of macro-level distance factors disrupting these flows has been undertheorized. Prior research has conceptualized PD as a geospatial concept – symmetric, continuous and stable over time. Using appraisal theory and a qualitative study of a Chinese multinational, we analyse individual-level psychic distance stimuli. We examine how perceived psychic distance is impacted in the appraisal of personal concerns, triggering salient emotions in the process of individual’s cross-border interactions. Our key contribution is to trace and explain how individual-level psychic distance is created in intercultural knowledge transfer. We theorize that it is created by a psychological mechanism involving emotionally charged processes of individuals coping with concerns arising from emotional encounter. We find that conventional macro-level psychic distance is moderated by the emotions of individuals.     

Unpacking the uncertainty construct: Implications for entrepreneurial action

Uncertainty is central to entrepreneurship; however robust and generalizable findings that explain the conditions in which uncertainty may impede [or promote] entrepreneurial action remain elusive. We operationalize uncertainty as a multi-dimensional construct composed of state, effect, and response types of uncertainty (Milliken, 1987) to investigate the relationship between uncertainty and entrepreneurial action. We decompose more than 2800 exploitation decision policies nested within a sample of new product decision-makers working in entrepreneurial software firms. We focus on the primary decision-maker's willingness to exploit a given opportunity in the face of varying combinations and manifestations of uncertainty and find that the type of uncertainty experienced influences the willingness to engage in entrepreneurial action differently. Further, we find that differences in how each type of uncertainty is manifested in the environment, the scale of exploitation (i.e. large vs. small), and the entrepreneur's expertise serve to moderate the relationship between uncertainty and action in counter-intuitive ways. We discuss the implications for both theory and practice.     

The inception of internationalization of small and medium enterprises: The role of activeness and networks

This study analyzes how exporters begin their internationalization leveraging information collected through interviews with 109 Chinese textile manufacturers. It examines whether firms that found their first international clients through a “proactive” search are likely to export faster, more intensively, and to a larger number of markets. The findings illustrate that the proactiveness of the search for the first client in a foreign market is an important predictor of the intensity and geographic scope of the firm's internationalization path but not of its speed. They support the view of internationalization as an actively pursued entrepreneurial process, which may also be affected by serendipitous events. This study provides new evidence on the first international business discovery of Chinese exporters, contributing to the literature on international entrepreneurship, international new ventures and the network approach to internationalization.     

The Effect of Threat of Job Loss on Entrepreneurial Intentions and Gestation Actions

The purpose of this study is to examine the effect of impending layoff on employees’ entrepreneurial intention and gestation actions in Kenya. Results from a sample of 394 employees drawn from three Kenyan firms facing possibility of retrenchment show that an impending layoff adversely affected individual’s entrepreneurial intention both directly and indirectly, with the indirect negative effect being mediated by entrepreneurial self‐efficacy and gestation actions. The results highlight the importance of cultivating employees’ positive perceptions about themselves and helping them view the layoff exercise as an opportunity to turn a new page.     

What does diversity management mean for the gender equality project in the United Kingdom? Views and experiences of organizational “actors”

There has been a shift at the organizational level away from a traditional “equal opportunity” paradigm underpinned by notions of social justice, with a specific focus on tackling gender inequalities towards a business‐led “diversity management” paradigm, with a focus on the individual and their contribution to the organization. We argue that diversity management as a concept and model has the potential to undermine the gender equality project, but drawing on a UK‐based study we conclude that whether or not it presently does so in practice is less clear. Nevertheless, our study, presenting views and experiences of multiple organizational actors, demonstrates the seductiveness of the diversity discourse, which could herald danger for the future direction and substance of the gender equality project. Copyright © 2010 ASAC. Published by John Wiley & Sons, Ltd.     

The Psychological Basis of Opportunity Identification: Entrepreneurial Alertness

Opportunity identification represents a unique entrepreneurial behavior yet its processes and dynamics remain mysterious. Entrepreneurial alertness, a distinctive set of perceptual and information-processing skills, has been advanced as the cognitive engine driving the opportunity identification process. To date, empirical support has been equivocal; however, these early studies suffer from fundamental mistakes in theory and method. These mistakes are examined and addressed. A research agenda for the systematic and conceptually sound study of entrepreneurial alertness and opportunity identification is outlined.     

Towards a schematic theory of entrepreneurial alertness

This article is an investigation into Kirzner's concept of entrepreneurial alertness — its mechanism and its antecedents. By drawing from decision theory and schema theory, a model is developed to show how changes in the environment are mediated by entrepreneurial alertness and brought to the situated attention of entrepreneurs for evaluation. Entrepreneurial alertness is seen to be the application of unique schemata that allow the entrepreneur to impute meaning to environmental change that would not be imputed by other managers. It is argued that the alertness that allows entrepreneurs to see opportunity where others do not arises from differences in schematic richness, schematic association, and schematic priming. These three antecedents may therefore form a basis on which enhanced entrepreneurial alertness can be developed.