Paul A. Brewer
Executive Summary
The concept of psychic distance has long been used to help understand the internationalization process of the firm. In particular, it has been used in research to determine the most likely direction of a firm’s foreign sales, at least in the first years of its international activity. The definition of psychic distance is widely agreed on, but the operationalization or measurement of the concept has been the subject of much debate. In this article, Brewer identifies a flaw in the most common manner of measuring psychic distance and works to improve the basis on which psychic distance research work is conducted.
Psychic distance has been defined as encompassing the impediments to information flows between a country market and a firm. Psychic distance is usually assessed in modern research according to either the actual or the perceived differences between the home country and the foreign market in terms of culture, legal systems, language, and other business-related factors. Although these factors may well affect information flows between the country and the firm, so may many other factors, and Brewer claims that there is no real basis on which these measures should be taken to represent adequately all the impediments to information flows.
To measure psychic distance more completely in the terms of its originally defined meaning, Brewer conducts a search of relevant literature and proposes 15 central determinants of the ease or difficulty of information flows between countries. He demonstrates ways that these elements can be measured and uses them in the construction of a formative index, which measures the psychic distance between any pair of countries.
Finally, Brewer uses the proposed index to calculate the psychic distance between Australia and 25 other countries. He then compares the results of this analysis with Australian exporters’ actual choices of markets. Brewer shows that the index accurately predicts the international market selection of Australian exporters as a group, and this provides further evidence of the real effect of the psychic distance concept. Managers can be more confident that the internationalization process is subject to the impact of the psychic distance phenomenon.
Biography
Paul Brewer is a lecturer at the University of Queensland Business School. He has worked in government trade policy development and export consulting, including as an Australian Trade Commissioner. He received his PhD and MBA from the University of Queensland and his BEc from the Australian National University. His area of expertise is in international business management and international economic analysis. In addition to Journal of International Marketing, he has published in International Business Review and Australian Journal of Management.
Journal of International Marketing, Vol. 15, No. 1, March 2007
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