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JOURNAL ARTICLE
The Psychic Distance Paradox
Shawna O'Grady and Henry W. Lane
Journal of International Business Studies
Vol. 27, No. 2 (2nd Qtr., 1996), pp. 309-333
Published by: Palgrave Macmillan Journals
https://www.jstor.org/stable/155287
Page Count: 25
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.
Introduction
It has been argued in the international business literature that companies begin the internationalization process in countries that are psychically close before venturing to more distant countries [Johanson and Vahlne 1992]. If this description is accurate, then Canadian companies would be expected to begin in the United States which is not only the closest but also, in many ways, the most similar country to Canada. Indeed, evidence from the retail industry indicates that firms have followed this pattern.
The literature on the internationalization process describes the sequence of market entry that firms follow when internationalizing. This sequence reflects a gradual, learning through experience process. What is not explicit in the literature is why firms follow this pattern. Researchers have suggested that entering countries that are psychically close reduces the level of uncertainty firms face in the new market [Johanson and Vahlne 1992]; and that psychically close countries are easier for companies to learn about [Kogut and Singh 1988]. Such explanations seem logical and implicitly support the conclusion that beginning in psychically close countries should improve a company’s chances of success in these markets. Although the literature is not prescriptive, an unstated conclusion can be drawn from it linking sequence of entry to performance. There is an implicit assumption that psychically close countries are more similar, and that similarity is easier for firms to manage than dissimilarity, thereby making it more likely that they will succeed in similar markets.
Although sequence of entry is an important consideration, we believe that one limitation of this literature is that it does not address how the perceived psychic distance between countries affects the decisionmakers’ choice of entry or the organization’s ultimate performance in the new market. This research presents evidence demonstrating that starting the internationalization process by entering a country psychically close to home may result in poor performance and, possibly, failure. We refer to this as the psychic distance paradox. Instead of psychically close countries being easy to enter and to do business in, we argue that perceived similarity can cause decisionmakers to fail because they do not prepare for the differences. The failure lies in the managerial decision making aspect of the internationalization process, to which international business researchers have not paid enough attention [Johanson and Vahlne 1992]. In addition, even in psychically close countries such as Canada and the United States, there may be significant differences that can affect the ability of managers to conduct business. What appears on the surface to be psychically close may, in reality, be more distant than expected.
第二段说了个反例。说加拿大的很多公司向外国扩张的时候,扩张到美国的只有22%,很少。因为什么我忘了。。。 by funingfs 然后还举了例子:加拿大vs美国,说有三十几个加拿大公司发展到了美国,但其实只有几个公司真正在美国成功了。之后就开始分析原因为什么这种方法不好,因为各个国家的characteristics是用standard measures来衡量的,ignore了很多方面(有题),然而现实中公司在别的类似国家发展的时候会遇到更多两个国家不同的地方。
This research was exploratory in nature and focused on the performance of Canadian retail companies that entered the United States. With the American retail market worth more than $1.5 trillion, there is a very powerful incentive for Canadian retailers to understand how to compete in this market. Consistent with internationalization theory, domestically successful companies entered a country that is not only the closest physically, but probably the most similar country to Canada. However, of the thirty-two Canadian retail companies that entered the United States market, almost 80% failed and only seven (22%) were continuing to function successfully [Evans, Lane and O’Grady 1992]. The high failure rate suggests that there may be a paradox, or inherent contradiction, within internationalization theory and the psychic distance concept, and that executives cannot always rely upon measures of psychic distance when making their internationalization decisions.
The purpose of this paper is to use the experience of Canadian retailers entering the United States to analyze the psychic distance concept in greater detail and to suggest some possible qualifications that could improve its use in research and practice. First, a summary of the psychic distance concept is presented, as well as the evidence in the literature positioning Canada and the United States as being culturally close. Next, the results from both clinical and questionnaire data show areas in which cultural and business differences manifested themselves, as well as empirical evidence of these cultural differences. Then, the paradox inherent in the psychic distance concept is explored, which explains how the perception of a country as having a small psychic distance from one’s own can lead decisionmakers to a number of faulty assumptions, creating an inability to learn about that country. Some recommendations are provided to help companies learn in these situations. Finally, we explore the psychic distance concept in greater depth, and propose some qualifications to it. The results of this study suggest that the psychic distance concept is more complex than is generally recognized in the literature and should be explored more fully.
It is no surprise that Canada and the United States are so close to each other in both rankings given their proximity and apparent cultural similarities. From their review of eight comparative studies of attitudes and values conducted through the 1960s and 1970s, Ronen and Shenkar [1985] found that Canada and the United States were consistently in the same Anglo cluster. In addition, they were very close to each other in Hofstede's [1980] original research. It is reasonable to assume a substantial degree of cultural similarity between the two countries.
physical distance,有一个题目"the difficultpart of physical distance according to the standard distance"是什么, 我选的是有national 和regional对比的个选项,别的感觉都不靠谱。
还有一篇是讲那个perceived distance(好像)就是本来两个距离比较近文化背景相似的国家,一个国家的公司在另一个国家应该发展比较好,但用加拿大domestic firms在美国的发展距离返例,给了一个数据,然后说对加拿大公司管理层还是ceo进行采访调查,就说其实perceived distance due to regional(有这词,因为除了个题选了含regional的选项)factors要比用national perception算出来的perceived distance要大。
However, a limitation of the current indices used is that they measure cultural or psychic distance at a very high level of aggregation that may hide important variations. Measuring distance at the national level may overlook regional differences that exist within countries; cultural and structural differences that may exist by industry; and individual differences and experiences. For example, a firm that hires managers with significant experience in a target market that is distant from the culture of the firm's home country would have a much smaller psychic distance from that market than measurements at national levels of aggregation would indicate. One contribution of this research is that it investigates the concept of psychic distance at industry and firm level.
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