The term Psychic Distance is a composite of the Greek word ‘Psychikos’ referring to an individual’s mind and soul (Simpson & Weiner 1989) and ‘Distance’ which is based on perceived cultural differences between a ‘home’ country and a ‘foreign’ country not withstanding physical time and space factors which differs across diverse cultures (Usinier & Lee 2005). The concept exists, therefore, in the minds eye of the individual and it is their own perception that uniquely determines ‘Psychic Distance’ (Sousa & Bradley 2005). By its very nature ‘Psychic Distance’ is a humanistic reflection of individual acuity and not a collective, organisational or societal perspective.
The ‘psychic distance’ construct has been used as an intercultural theme by the arts in the study of creative detachment between East and West (Odin 2001). Despite such cameo appearances in other fields, the concept has been essentially ‘operationalised’ by business with the marketing function acting as the chief curator. The fact that no specific definition of ‘psychic distance’ exists in any discipline or field makes any study of the subject challenging.
Despite the concept’s fairly widespread use in international and cultural marketing journals and text books, no authoritative definition exists in either the Oxford or Cambridge English Dictionary. The only authoritative attempt to define the phrase can be found in Dictionary.com which states that the concept is “the degree of emotional detachment maintained toward a person, a group of people or an event”. In a business context, this definition is expanded further where the degree of uncertainty felt by the individual determines the level of attractiveness or detachment to a particular country.
The business origins of the ‘psychic distance’ idiom can be traced back to research conducted by Beckerman (1956) and Linnemann (1966). As a fully formed concept Vahlne & Wiedersheim-Paul (1973) as cited by Nordstrom & Vahle (1992) described ‘psychic distance’ as “factors preventing or disturbing the flow of information between potential or actual suppliers and customers”. These factors are associated with country based diversities and dissimilarities and can be grouped into four clear areas: -
1.Linguistic differences and translation difficulty. 2.Cultural Factors – societal norms, level of individualism or collectivism, values and customs. 3.Economic Situation – existing trading links, infrastructure, local conditions, competition and investor confidence. 4.Political & Legal System – government stability and risk of instability, import tariffs, legal protection and taxation levels.
Although the concept was fully formed by the early Seventies, it was the study of Nordic multi-nationals by Johanson & Vahlne (1977) - which followed on from two earlier studies in 1975 and 1976 – that is generally accepted as the concept’s real genesis (Sousa & Bradley 2005b). The studies concluded that a firm’s international activities relate directly to ‘psychic distance’ and that further international expansion progresses into markets with successively greater ‘psychic distance’.
In summary, companies export only to countries that they understand then build on their acquired experience to explore opportunities further afield. In other words, firms enter new markets where they are able to identify opportunities with low market uncertainty then enter markets at successively greater ‘psychic distance’ (Johanson & Vahle 1990). As a consequence, contemporary literature on the internationalisation process cites ‘psychic distance’ as a key variable and determinant for expansion into foreign markets.