A Note on Psychological Distance and Export Market Selection

The concept of psychological distance, or psychic distance, was first proposed by Beckerman (1956) and later popularized by Johanson and Vahlne (1977) . However, efforts to test the impact of psychological distance on export market selection have been sporadic and flawed. The author calibrates a single-item indicator of psychological distance using an independent panel of experts. The predictive ability of the resulting instrument is then tested on the order in which Australian exporters select their first five foreign markets. The author then compares this instrument with three other scales that are commonly employed as indicators of psychological distance. Scales based on Sethi's (1971) and Hofstede's (1980) work prove to be inferior predictors of early market selection. Geographic distance is found to be a significant predictor, but its effect is largely independent of psychological distance. The author also explores the dynamic nature of psychological distance. The impact of psychological distance on market selection appears to decrease substantially after the first market entry decision but remains a significant predictor.