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 (i.e. differences in degree of democracy)
Note: I had previously included a measure of ‘Differences in Political Ideology’, but unlike the other dimensions, it rarely proved to be a statistically significant predictor of International Business outcomes. Thus, I have dropped it from the more recent upgrade of the scales.
And lastly, one can combine these five dimensions into a formative index of Psychic Distance Stimuli.
For more details on each dimension and the overall formative index, please refer to the specific pages for each. They can be accessed via the relevant hyper links, or via the horizontal menu.
The following Excel file includes the indicators for all of the five main dimensions, plus the overall formative index, across bilateral pairs of 150 countries (i.e. 22,350 dyads) –
Please note that on 15 May 2021, I made two minor corrections to the linguistic distance scales. The first correction was to adjust for how the use of Standard German is coded in Austria. This only affected L2 for the distance between Austria and other countries that have more than 1% of their population who speak German; and L3 for the distance between Austria – Germany and Austria – Luxembourg. This correction applies for 1995, 2005 and 2015. The second correction was to fix a coding error for the use of Russian in Belarus in 2005. This only affected L2 for Belarus to any country that has more than 1% of their population who speak Russian.
JIBS – Journal of International Business Studies
JMS – Journal of Management Studies
JIM – Journal of International Marketing
IBR – International Business Review