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Revisiting the psychic distance paradox: international retailing in China in the long run (1840-2005

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  • Andrew Godley

    (School of Management, University of Reading)

  • Haiming Hang

    (School of Management, University of Reading)

Abstract

This paper uses original research on the roles played by two sets of foreign entrants into Chinese retailing since the 1850s - the overseas Chinese entrants and western entrants - to explore the psychic distance paradox over the long run. It explains how the advantages of psychic closeness in Chinese retailing have always been important in reducing entry barriers, but that the increasing costs of technology have increased the significance of firm proprietary strengths in some formats, notably supermarkets, so reducing the relative importance of psychic closeness. The paper therefore illustrates how taking the long-term perspective enables more sophisticated conclusions to emerge. A cross sectional analysis of one sector - Chinese supermarkets - would confirm the psychic distance paradox; overseas Chinese have been unable to translate psychic closeness into superior performance. By contrast their historic performance in department stores and more recently in fashion chains has been superior to the format leaders. This long term perspective therefore suggests that the understanding of the psychic distance paradox needs to be moderated by additional conceptualisation.

Suggested Citation

  • Andrew Godley & Haiming Hang, 2008. "Revisiting the psychic distance paradox: international retailing in China in the long run (1840-2005," Economics Discussion Papers em-dp2008-66, Department of Economics, University of Reading.
    • Handle: RePEc:rdg:emxxdp:em-dp2008-66
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    References listed on IDEAS

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    Cited by:

    1. Peter Magnusson & Anja Schuster & Vas Taras, 2014. "A Process-Based Explanation of the Psychic Distance Paradox: Evidence from Global Virtual Teams," Management International Review, Springer, vol. 54(3), pages 283-306, June.
    2. Goudarz Azar & Rian Drogendijk, 2014. "Psychic Distance, Innovation, and Firm Performance," Management International Review, Springer, vol. 54(5), pages 581-613, October.
    3. Ciszewska-Mlinarič Mariola & Trąpczyński Piotr, 2016. "The Psychic Distance Concept: A Review of 25 Years of Research (1990–2015)," Journal of Management and Business Administration. Central Europe, Sciendo, vol. 24(2), pages 2-31, June.
    4. Thierry Theurillat & Pierre-Yves Donzé, 2015. "Retail Networks and Real Estate: the case of Swiss luxury watches in China and Southeast," Discussion Papers in Economics and Business 15-28, Osaka University, Graduate School of Economics.

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    Keywords

    Psychic Distance; China; International Retailing; Internationalisation Process;
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