The effect of management's perception of psychic distance on organizational performance in a foreign market
Independent thesis Advanced level (degree of Master (One Year)), 10 credits / 15 HE creditsStudent thesis
Globalization and global markets are dominating in the today’s business arena. Companies are more often than not required to internationalize and operate in global markets instead of just competing within national borders. Due to the high level of globalization, psychic distance between nations and countries is argued to have decreased significantly. However, underlying national and business culture differences still very much exist and companies must be aware of and take the differences into account in their international operations. For decades cross-cultural science has been guided by Hofstede’s cultural dimensions model and it is widely used to research and describe national cultures and differences between different cultures.
Psychic distance concept is one of the most applied constructs of multinational enterprises’ internationalization and it has deservedly attracted a lot of attention within the literature and research of international business. Psychic distance is recurrently utilized when presenting and evaluating differences between a company’s home and foreign market. The general underlying notion of psychic distance is that companies operating in psychically close countries will succeed in their international operations. However, there is an increasing amount of research and literature providing contradictory evidence, referred to as psychic distance paradox. According to the concept of psychic distance paradox, perceived similarities within countries may result in cultural overconfidence and inadequate preparation prior entering psychically close markets resulting in poor organizational performance.
The aim of the dissertation is to contribute in the research of the psychic distance concept regarding the existence of the psychic distance paradox and how it appears in the international business. The main focus is on management’s perceptions of psychic distance and how they affect a company’s organizational performance in psychically close foreign market. From the research conducted it can be concluded that the management’s perceptions of psychic distance can essentially affect the company’s organizational performance in a foreign market. In case the management’s perceptions of psychic distance are not in accordance with reality and the differences are overlooked, the company can face difficulties and poor organizational performance even in a psychically close market. The findings of the research provide additional proof to the existence of the psychic distance paradox concept.
Place, publisher, year, edition, pages
2012. , 49 p.
Psychic Distance, Psychic Distance Paradox, Hofstede's Cultural Dimensions
Economics and Business
IdentifiersURN: urn:nbn:se:hh:diva-17851OAI: oai:DiVA.org:hh-17851DiVA: diva2:531062
Subject / course
UppsokSocial and Behavioural Science, Law