Psychic Distance versus Market Size in International Business: Study of Brazilian Exporters

International Business (IB) theories encompass economic approaches, where firms use objective criteria to select foreign markets, and behavioral approaches, where firms use psychic distance. This study proposes new objective criteria to measure psychic distance and adopts multiple linear regressions with a foreign-trade econometric model adapted to address psychic distance and market size and their relationships with Brazilian exports over 10 years. Psychic distance showed a close relationship to exports from smaller firms, while the market size of the destination country was always significant. This brought original empirical evidence to the validity of IB theories as well as to the exports behavior of firms from emerging economies.