PSYCHIC DISTANCE, ITS BUSINESS IMPACT AND MODES OF COPING: A STUDY OF INTERNATIONALIZING BRITISH AND INDIAN PARTNER SMES

Informações

Código: ESO1425
Divisão: ESO - Estratégia em Organizações
Tema de Interesse: Tema 08 - Negócios Internacionais

Autores

Pushyarag Nellikka Puthusserry, Suzana Braga Rodrigues, John Child

Resumo

This paper examines the perceptions of psychic distance held by the decision makers of internationalizing British and Indian SMEs, and their views on its business impact and methods of coping with it. It reports one of the first studies to examine whether psychic distance is reciprocated between transacting partners in different countries. This paper contributes to knowledge on psychic distance in three main ways: (1) It analyzes psychic distance from the point of view of the both business partners; (2) it investigates two neglected aspects: the impact of psychic distance on doing business in a foreign country, and ways of coping with any difficulties that arise because of that impact and (3) it demonstrates the role of social capital as a way of coping with perceived differences between countries. The methodology employed combines a qualitative approach and quantitative measurement. The sample comprised the leading managers of 30 British SMEs and their partners in India, giving a total sample of 60 companies. The findings reveal contrasting patterns of response as between Indian and British SME decision makers. The multidimensionality of psychic distance is confirmed. The results question the linking of psychic distance with cultural distance and its measurement through national-level indicators. They confirm that the level of psychic distance does not necessarily predict its level of business impact. The results reveal that understanding and learning about a foreign market is one of the key techniques to enter and survive in that market. The first coping strategy, the absorption coping mode, is identified based on the way firms learn about a foreign market. The second mode, the contingent mode, considers inter-partner dependence. The third coping mode is the pragmatic one consisting of ad hoc adjustments. This study also highlights the role of social capital in helping to cope with the impact of psychic distance where it occurs. The findings also indicate that psychic-distance dimensions are socially or institutionally embedded. They reveal that the socially embedded psychic distance dimensions have less impact and are easier to cope than the institutionally embedded dimensions. Dimensions such as logistics, regulations, and political systems are institutionally embedded, and in some cases the decision makers were unable to cope with them. By contrast, socially rooted dimensions, such as culture, language, business practice, and ethics are more easily manageable through the SMEs’ social capital. We conclude that psychic distance remains a valid and valuable concept in international business theory. This paper begins with a review of the psychic distance concept, its impact, and coping modes that have been addressed by studies published in the fields of international business and international marketing. It then describes the scope and method of the research. Its findings are then presented, followed by a discussion of their implications. A conclusion summarizes the contributions of the research as well as directions for future research.

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