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The Psychic Distance Postulate Revised: From Market Selection to Speed of Market Penetration

  • Pia Arenius

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    In this paper we revise the psychic distance postulate of the Uppsala Model (Johanson and Vahlne, 1977, 1990) by injecting more recent findings (i.e., distinguishing between selection of foreign markets and time needed to achieve sufficient penetration in foreign markets and the role of social capital). The model we propose posits that a higher psychic distance decreases the speed of market penetration. On distant markets, internationalizing technology-based ventures need more time to establish a position in the foreign network and to obtaining positive cash flow. Our model presents social capital as a mean to overcome the psychic distance and to increase the speed of market penetration. We build our model on four case studies on technology-based new ventures internationalizing at very early ages. Copyright Springer Science + Business Media, Inc. 2005

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    File URL: http://hdl.handle.net/10.1007/s10843-005-4203-6
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    Article provided by Springer in its journal Journal of International Entrepreneurship.

    Volume (Year): 3 (2005)
    Issue (Month): 2 (June)
    Pages: 115-131

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    Handle: RePEc:kap:jinten:v:3:y:2005:i:2:p:115-131
    Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=112039

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    1. Gary A Knight & S Tamer Cavusgil, 2004. "Innovation, organizational capabilities, and the born-global firm," Journal of International Business Studies, Palgrave Macmillan, vol. 35(4), pages 334-334, July.
    2. Otto Andersen, 1993. "On the Internationalization Process of Firms: A Critical Analysis," Journal of International Business Studies, Palgrave Macmillan, vol. 24(2), pages 209-231, June.
    3. Gary A Knight & S Tamar Cavusgil, 2004. "Innovation, organizational capabilities, and the born-global firm," Journal of International Business Studies, Palgrave Macmillan, vol. 35(2), pages 124-141, March.
    4. Phillips McDougall, Patricia & Shane, Scott & Oviatt, Benjamin M., 1994. "Explaining the formation of international new ventures: The limits of theories from international business research," Journal of Business Venturing, Elsevier, vol. 9(6), pages 469-487, November.
    5. Czinkota, Michael R. & Ursic, Michael, 1991. "Classification of exporting firms according to sales and growth into a share matrix," Journal of Business Research, Elsevier, vol. 22(3), pages 243-253, May.
    6. Jones, Marian V., 2001. "First steps in internationalisation: Concepts and evidence from a sample of small high-technology firms," Journal of International Management, Elsevier, vol. 7(3), pages 191-210.
    7. Chetty, Sylvie & Blankenburg Holm, Desiree, 2000. "Internationalisation of small to medium-sized manufacturing firms: a network approach," International Business Review, Elsevier, vol. 9(1), pages 77-93, February.
    8. Shawna O'Grady & Henry W Lane, 1996. "The Psychic Distance Paradox," Journal of International Business Studies, Palgrave Macmillan, vol. 27(2), pages 309-333, June.
    9. Scott Shane & Daniel Cable, 2002. "Network Ties, Reputation, and the Financing of New Ventures," Management Science, INFORMS, vol. 48(3), pages 364-381, March.
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