The role of pre- and post-entry psychic distance perceptions for FDI - The case of Chinese FDI to Germany

The concept of psychic distance (PD) is recently re-introduced to International Business research to identify determinants, motives and location choices of foreign direct investments (FDI) from emerging market multinationals. In the context of Chinese green tech OFDI to Germany, we investigates if managers perceive differences, if they think that these perceived differences impact their international business activities between these two countries, and if manager’s perceptions change over time, namely between the pre-market entry and the post-entry operation. We use a multiple-case study research design with a sample of six Chinese companies which entered Germany through FDI. We found that managers perceive PD between home and host country and received insights on its impact on their businesses. Managers’ perceptions of differences along the dimensions are on average higher than their perceptions of the impact on business. PD perceptions can vary over time, i.e. from the pre- and the post-market entry. Experienced managers (study, work, investment abroad) perceive lower differences than the inexperienced ones and perceive a higher PD impact on their business.