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The Psychic Distance Paradox

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Author Info

  • Shawna O'Grady

    (Queen' University)

  • Henry W Lane

    (The University of Western Ontario)

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    Abstract

    Companies tend to begin their internationalization process in countries that are ‘psychically’ close. Researchers describe the sequence of entry that firms follow and the mode of entry they choose. They suggest that psychically close countries are more easily understood than distant ones; and offer more familiar operating environments. Although not prescriptive, an unstated conclusion can be drawn linking sequence of entry to performance. Evidence from thirty-two Canadian retail companies shows that only seven (22%) were functioning successfully in the United States. The psychic distance paradox is that operations in psychically close countries are not necessarily easy to manage, because assumptions of similarity can prevent executives from learning about critical differences. Moreover, empirical evidence from 271 CEOs confirms greater cultural differences between Canada and the U.S. than assumed previously. Modifications are suggested to improve the psychic distance concept.© 1996 JIBS. Journal of International Business Studies (1996) 27, 309–333

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    Bibliographic Info

    Article provided by Palgrave Macmillan in its journal Journal of International Business Studies.

    Volume (Year): 27 (1996)
    Issue (Month): 2 (June)
    Pages: 309-333

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    Handle: RePEc:pal:jintbs:v:27:y:1996:i:2:p:309-333

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    Postal: Palgrave Macmillan Journals, Subscription Department, Houndmills, Basingstoke, Hampshire RG21 6XS, UK
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