With respect to international business (IB) and international marketing research, the term ‘psychic distance was first coined in 1956 in a Review of Economics & Statistics (38-1) article by W. Beckerman. In his closing remarks on page 40, the author speculated on what might have been causing some of the unexplained variance in his analysis of intra-European trade:
“… a special problem is posed by the existence of “psychic” distance. It is probable that the manner in which the purchases of raw materials by a firm are distributed geographically will depend partly on the extent to which foreign sources have been personally contacted and cultivated. While the transport costs paid … by an Italian entrepreneur on a raw material supplied by Turkey may be no greater … than the same material supplied by Switzerland, he is more likely to have contacts with Swiss suppliers, since Switzerland will be “nearer”to him in a psychic evaluation (fewer language difficulties, and so on) …”
Subsequent to that initial coining of the term, the concept largely remained dormant until the mid-1970s when researchers at the University of Uppsala adopted the concept as a key factor underlying their internationalization process model (Johanson & Wiedersheim-Paul, JMS, 1975; Johanson, J., & Vahlne, J.-E., JIBS, 1977). As part of that work, they defined psychic distance as …
“factors preventing or disturbing the flows of information between firm and market. Examples of such factors are differences in language, culture, political systems, level of education, level of industrial development, etc.”
Johanson & Wiedersheim-Paul, JMS, 1975, p308
However, more recent commentators (e.g. Evans et al, JIBS, 2000; Sousa & Bradley, JIM, 2006) have credibly argued that it is more appropriate to concentrate on a manager’s perception of psychic distance, particularly since it is a manager’s perceptions which drives their choices and behaviours.
In an effort to reconcile these two views, I have adopted the terminology of ‘psychic distance stimuli‘ and ‘perceived psychic distance‘ (Dow & Karunaratna, JIBS, 2006), and argue that the former set of factors are major drivers of the later construct (Figure 1). Thus, I tend to refer to the constructs made available via this web-page as ‘psychic distance stimuli‘, rather than direct measures of ‘psychic distance‘.
Now on to the specific factors …
Linguistic Distance (i.e. differences in languages)
Religious Distance (i.e. differences in religions)
Differences in Industrial Development
Differences in Levels of Education
Differences in Political Systems
- Differences in Degree of Democracy
- Differences in Political Ideology
The following Excel file includes the indicators for all five dimensions across the bilateral pairs of 120 countries (i.e. 14,280 dyads) –
However, if you want more detail, please proceed to the pages for each specific dimension.
I should also clarify that one aspect of these scales that has caused some confusion.
- For the latter three dimensions mentioned above (i.e. industrial development, education, and political system distances), they are based on the absolute value of difference scores. As a result, the value of zero corresponds to ‘no difference’.
- However, the summary scores for linguistic distance and religious distance found here are derived from confirmatory factor analysis. As a result, they are z-scores with a mean of zero and a standard deviation of one. ‘No difference’ between countries on these scales is actually a negative number (-4.346 for linguistic distance and -1.551 for religious distance).
- This is particularly relevant if one is trying to collapse these dimensions into a single index – e.g. following the Kogut & Singh (JIBS, 1988) approach or Euclidean distance approach. The language and religion scales need to be adjusted so that ‘no difference’ equals zero and the remaining values are positive. Otherwise the step of squaring the values creates seriously flawed results. This can be done simply by adding a fix value to each scale (4.346 for linguistic distance and 1.551 for religious distance.
- Given that I have already done this calculation for my 2010 IBR paper with Sonia Ferencikova, I have attached an Excel file (below) that provides both the calculations and the final results for creating a summary psychic distance stimuli index using the Kogut & Singh (1988) approach.
JIBS – Journal of International Business Studies
JMS – Journal of Management Studies
JIM – Journal of International Marketing
IBR – International Business Review