IDEAS home Printed from https://ideas.repec.org/a/eee/iburev/v27y2018i1p1-20.html
   My bibliography  Save this article

The logic behind foreign market selection: Objective distance dimensions vs. strategic objectives and psychic distance

Author

Listed:
  • Magnani, Giovanna
  • Zucchella, Antonella
  • Floriani, Dinorá Eliete

Abstract

The aim of this paper is to highlight the importance of the firm’s strategic objectives regarding the choice of countries for foreign expansion, complementing the existing literature on the internationalisation process. Through a multiple case study methodology, we conduct a comparative analysis of three Brazilian ventures that have internationalised in Italy, and three Italian firms that have internationalised in Brazil, seeking to investigate the firms’ decisions on the selection of foreign markets. We consider jointly the objective aspects of distance, the overall perceptions of the decision-makers in relation to the differences between the domestic and (potential) host countries, and the firm’s strategic objectives. This research contributes to International Business studies by revealing the role of firm-specific strategic objectives as determinants of foreign market selection, in addition to, or even on top of, the dimensions of objective distance and psychic distance.

Suggested Citation

  • Magnani, Giovanna & Zucchella, Antonella & Floriani, Dinorá Eliete, 2018. "The logic behind foreign market selection: Objective distance dimensions vs. strategic objectives and psychic distance," International Business Review, Elsevier, vol. 27(1), pages 1-20.
    • Handle: RePEc:eee:iburev:v:27:y:2018:i:1:p:1-20
    DOI: 10.1016/j.ibusrev.2017.10.009
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0969593117300045
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ibusrev.2017.10.009?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Rosalie L Tung & Alain Verbeke, 2010. "Beyond Hofstede and GLOBE: Improving the quality of cross-cultural research," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 41(8), pages 1259-1274, October.
    2. Srilata Zaheer & Margaret Spring Schomaker & Lilach Nachum, 2012. "Distance without direction: Restoring credibility to a much-loved construct," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 43(1), pages 18-27, January.
    3. Edwards, Ronald W. & Buckley, Peter J., 1998. "Choice of location and mode: the case of Australian investors in the UK," International Business Review, Elsevier, vol. 7(5), pages 503-520, October.
    4. Arjen H L Slangen & Sjoerd Beugelsdijk, 2010. "The impact of institutional hazards on foreign multinational activity: A contingency perspective," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 41(6), pages 980-995, August.
    5. Verwaal, Ernst & Donkers, Bas, 2003. "Customs-Related Transaction Costs, Firm Size and International Trade Intensity," Small Business Economics, Springer, vol. 21(3), pages 257-271, November.
    6. Elizabeth Garnsey & Erik Stam & Paul Heffernan, 2006. "New Firm Growth: Exploring Processes and Paths," Industry and Innovation, Taylor & Francis Journals, vol. 13(1), pages 1-20.
    7. Alexander Schmitt & Johannes Van Biesebroeck, 2013. "Proximity strategies in outsourcing relations: The role of geographical, cultural and relational proximity in the European automotive industry," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 44(5), pages 475-503, June.
    8. Cuervo-Cazurra, Alvaro, 2008. "The multinationalization of developing country MNEs: The case of multilatinas," Journal of International Management, Elsevier, vol. 14(2), pages 138-154, June.
    9. Oded Shenkar, 2001. "Cultural Distance Revisited: Towards a More Rigorous Conceptualization and Measurement of Cultural Differences," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 32(3), pages 519-535, September.
    10. Jan Johanson & Jan-Erik Vahlne, 2009. "The Uppsala internationalization process model revisited: From liability of foreignness to liability of outsidership," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 40(9), pages 1411-1431, December.
    11. Chao, Mike Chen-Ho & Kumar, Vikas, 2010. "The impact of institutional distance on the international diversity-performance relationship," Journal of World Business, Elsevier, vol. 45(1), pages 93-103, January.
    12. Nebus, James & Chai, Kah Hin, 2014. "Putting the “psychic” Back in Psychic Distance: Awareness, Perceptions, and Understanding as Dimensions of Psychic Distance," Journal of International Management, Elsevier, vol. 20(1), pages 8-24.
    13. Yildiz, H. Emre, 2014. "Not All Differences Are the Same: Dual Roles of Status and Cultural Distance in Sociocultural Integration in Cross-border M&As," Journal of International Management, Elsevier, vol. 20(1), pages 25-37.
    14. Kaufmann, Daniel & Kraay, Aart & Mastruzzi, Massimo, 2007. "Governance Matters VI: Aggregate and Individual Governance Indicators, 1996-2006," Policy Research Working Paper Series 4280, The World Bank.
    15. Pierre-Philippe Combes & Miren Lafourcade, 2005. "Transport costs: measures, determinants, and regional policy implications for France," Journal of Economic Geography, Oxford University Press, vol. 5(3), pages 319-349, June.
    16. Clark, Ximena & Dollar, David & Micco, Alejandro, 2004. "Port efficiency, maritime transport costs, and bilateral trade," Journal of Development Economics, Elsevier, vol. 75(2), pages 417-450, December.
    17. John H Dunning, 1998. "Location and the Multinational Enterprise: A Neglected Factor?," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 29(1), pages 45-66, March.
    18. Chandler, Gaylen N. & Hanks, Steven H., 1994. "Market attractiveness, resource-based capabilities, venture strategies, and venture performance," Journal of Business Venturing, Elsevier, vol. 9(4), pages 331-349, July.
    19. Ambos, Björn & Håkanson, Lars, 2014. "The Concept of Distance in International Management Research," Journal of International Management, Elsevier, vol. 20(1), pages 1-7.
    20. Pushyarag N. Puthusserry & John Child & Suzana B. Rodrigues, 2014. "Psychic Distance, its Business Impact and Modes of Coping: A Study of British and Indian Partner SMEs," Management International Review, Springer, vol. 54(1), pages 1-29, February.
    21. Antonella Zucchella & Per Servais, 2012. "The internationalisation process of small- and medium-sized firms and the liability of complexity," International Journal of Entrepreneurship and Small Business, Inderscience Enterprises Ltd, vol. 15(2), pages 191-212.
    22. Yamin, Mohammad & Sinkovics, Rudolf R., 2006. "Online internationalisation, psychic distance reduction and the virtuality trap," International Business Review, Elsevier, vol. 15(4), pages 339-360, August.
    23. Knight, Gary A. & Liesch, Peter W., 2016. "Internationalization: From incremental to born global," Journal of World Business, Elsevier, vol. 51(1), pages 93-102.
    24. Douglas Dow & Amal Karunaratna, 2006. "Developing a multidimensional instrument to measure psychic distance stimuli," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 37(5), pages 578-602, September.
    25. World Bank, 2015. "World Development Indicators 2015," World Bank Publications - Books, The World Bank Group, number 21634.
    26. Robertson, Kim R. & Wood, Van R., 2001. "The relative importance of types of information in the foreign market selection process," International Business Review, Elsevier, vol. 10(3), pages 363-379, June.
    27. Jan Johanson & Jan-Erik Vahlne, 1977. "The Internationalization Process of the Firm—A Model of Knowledge Development and Increasing Foreign Market Commitments," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 8(1), pages 23-32, March.
    28. Anthony Goerzen & Christian Geisler Asmussen & Bo Bernhard Nielsen, 2013. "Global cities and multinational enterprise location strategy," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 44(5), pages 427-450, June.
    29. David M Brock & Oded Shenkar & Amir Shoham & Ilene C Siscovick, 2008. "National culture and expatriate deployment," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 39(8), pages 1293-1309, December.
    30. World Bank, 2016. "World Development Indicators 2016," World Bank Publications - Books, The World Bank Group, number 23969.
    31. Jody Evans & Felix T Mavondo, 2002. "Psychic Distance and Organizational Performance: An Empirical Examination of International Retailing Operations," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 33(3), pages 515-532, September.
    32. Hutzschenreuter, Thomas & Kleindienst, Ingo & Lange, Sandra, 2014. "Added Psychic Distance Stimuli and MNE Performance," Journal of International Management, Elsevier, vol. 20(1), pages 38-54.
    33. Drogendijk, Rian & Martín Martín, Oscar, 2015. "Relevant dimensions and contextual weights of distance in international business decisions: Evidence from Spanish and Chinese outward FDI," International Business Review, Elsevier, vol. 24(1), pages 133-147.
    34. Heather Berry & Mauro F Guillén & Nan Zhou, 2010. "An institutional approach to cross-national distance," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 41(9), pages 1460-1480, December.
    35. Bruce Kogut & Harbir Singh, 1988. "The Effect of National Culture on the Choice of Entry Mode," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 19(3), pages 411-432, September.
    36. Ojala, Arto, 2015. "Geographic, cultural, and psychic distance to foreign markets in the context of small and new ventures," International Business Review, Elsevier, vol. 24(5), pages 825-835.
    37. Oded Shenkar, 2012. "Beyond cultural distance: Switching to a friction lens in the study of cultural differences," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 43(1), pages 12-17, January.
    38. Paul D Ellis, 2008. "Does psychic distance moderate the market size–entry sequence relationship?," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 39(3), pages 351-369, April.
    39. Andersson, Svante, 2004. "Internationalization in different industrial contexts," Journal of Business Venturing, Elsevier, vol. 19(6), pages 851-875, November.
    40. Sjoerd Beugelsdijk & Ram Mudambi, 2013. "MNEs as border-crossing multi-location enterprises: The role of discontinuities in geographic space," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 44(5), pages 413-426, June.
    41. Pamela J. Hinds & Diane E. Bailey, 2003. "Out of Sight, Out of Sync: Understanding Conflict in Distributed Teams," Organization Science, INFORMS, vol. 14(6), pages 615-632, December.
    42. Håkanson, Lars & Ambos, Björn, 2010. "The antecedents of psychic distance," Journal of International Management, Elsevier, vol. 16(3), pages 195-210, September.
    43. Robert Grosse & Len J Trevino, 1996. "Foreign Direct Investment in the United States: An Analysis by Country of Origin," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 27(1), pages 139-155, March.
    44. Robert A Burgelman, 2011. "Bridging history and reductionism: A key role for longitudinal qualitative research," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 42(5), pages 591-601, June.
    45. Jeffrey Frankel & Andrew Rose, 2002. "An Estimate of the Effect of Common Currencies on Trade and Income," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(2), pages 437-466.
    46. Bradley L Kirkman & Kevin B Lowe & Cristina B Gibson, 2006. "A quarter century of Culture's Consequences: a review of empirical research incorporating Hofstede's cultural values framework," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 37(3), pages 285-320, May.
    47. Robert M Grant, 1987. "Multinationality and Performance among British Manufacturing Companies," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 18(3), pages 79-89, September.
    48. Ellis, Paul D., 2007. "Paths to foreign markets: Does distance to market affect firm internationalisation?," International Business Review, Elsevier, vol. 16(5), pages 573-593, October.
    49. Burgelman, Robert A., 2011. "Bridging History and Reductionism: A Key Role for Longitudinal Qualitative Research," Research Papers 2045r, Stanford University, Graduate School of Business.
    50. Klaus E. Meyer & Saul Estrin & Sumon Kumar Bhaumik & Mike W. Peng, 2009. "Institutions, resources, and entry strategies in emerging economies," Strategic Management Journal, Wiley Blackwell, vol. 30(1), pages 61-80, January.
    51. Geert Hofstede, 1983. "The Cultural Relativity of Organizational Practices and Theories," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 14(2), pages 75-89, June.
    52. Coviello, Nicole & Munro, Hugh, 1997. "Network relationships and the internationalisation process of small software firms," International Business Review, Elsevier, vol. 6(4), pages 361-386, August.
    53. Nicole E Coviello, 2006. "The network dynamics of international new ventures," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 37(5), pages 713-731, September.
    54. Joanna Tochman Campbell & Lorraine Eden & Stewart R Miller, 2012. "Multinationals and corporate social responsibility in host countries: Does distance matter?," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 43(1), pages 84-106, January.
    55. J Stewart Black & Mark Mendenhall, 1991. "The U-Curve Adjustment Hypothesis Revisited: A Review and Theoretical Framework," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 22(2), pages 225-247, June.
    56. John Child & Suzana B. Rodrigues & J. George Frynas, 2009. "Psychic Distance, its Impact and Coping Modes," Management International Review, Springer, vol. 49(2), pages 199-224, April.
    57. Keith D Brouthers & Lance Eliot Brouthers, 2001. "Explaining the National Cultural Distance Paradox," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 32(1), pages 177-189, March.
    58. Anthony Ferner & Phil Almond & Trevor Colling, 2005. "Institutional theory and the cross-national transfer of employment policy: the case of ‘workforce diversity’ in US multinationals," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 36(3), pages 304-321, May.
    59. Leamer, Edward E, 1974. "The Commodity Composition of International Trade in Manufactures: An Empirical Analysis," Oxford Economic Papers, Oxford University Press, vol. 26(3), pages 350-374, November.
    60. Morosini, Piero & Singh, Harbir, 1994. "Post-cross-border acquisitions: Implementing 'national culture-compatible' strategies to improve performance," European Management Journal, Elsevier, vol. 12(4), pages 390-400, December.
    61. Benjamin M Oviatt & Patricia Phillips McDougall, 1994. "Toward a Theory of International New ventures," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 25(1), pages 45-64, March.
    62. Harry G Barkema & Rian Drogendijk, 2007. "Internationalising in small, incremental or larger steps?," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 38(7), pages 1132-1148, December.
    63. Dubois, Anna & Gadde, Lars-Erik, 2002. "Systematic combining: an abductive approach to case research," Journal of Business Research, Elsevier, vol. 55(7), pages 553-560, July.
    64. Håkanson, Lars & Ambos, Björn & Schuster, Anja & Leicht-Deobald, Ulrich, 2016. "The psychology of psychic distance: Antecedents of asymmetric perceptions," Journal of World Business, Elsevier, vol. 51(2), pages 308-318.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Giovanna Magnani & Antonella Zucchella & Dinorà Eliete Floriani, 2015. "Relativity and asymmetry in distance. The role of strategic distance in the internationalization decisions of Brazilian and Italian firms," DEM Working Papers Series 111, University of Pavia, Department of Economics and Management.
    2. García-Muiña, Fernando E. & Romero-Martínez, Ana M. & Kabbara, Diala, 2020. "Does religion influence location choice in the hotel industry?," International Business Review, Elsevier, vol. 29(2).
    3. Håkanson, Lars & Ambos, Björn & Schuster, Anja & Leicht-Deobald, Ulrich, 2016. "The psychology of psychic distance: Antecedents of asymmetric perceptions," Journal of World Business, Elsevier, vol. 51(2), pages 308-318.
    4. Sjoerd Beugelsdijk & Björn Ambos & Phillip C Nell, 2018. "Conceptualizing and measuring distance in international business research: Recurring questions and best practice guidelines," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 49(9), pages 1113-1137, December.
    5. Ojala, Arto, 2015. "Geographic, cultural, and psychic distance to foreign markets in the context of small and new ventures," International Business Review, Elsevier, vol. 24(5), pages 825-835.
    6. Weber, Clarissa E. & Chahabadi, Dominik & Maurer, Indre, 2020. "Antecedents and performance effect of managerial misperception of institutional differences," Journal of World Business, Elsevier, vol. 55(1).
    7. de Jong, Gjalt & van Dut, Vo & Jindra, Björn & Marek, Philipp, 2015. "Does country context distance determine subsidiary decision-making autonomy? Theory and evidence from European transition economies," International Business Review, Elsevier, vol. 24(5), pages 874-889.
    8. Goudarz Azar & Rian Drogendijk, 2019. "Ex-post Performance Implications of Divergence of Managers’ Perceptions of ‘Distance’ From ‘Reality’ in International Business," Management International Review, Springer, vol. 59(1), pages 67-92, February.
    9. Conti, Claudio Ramos & Parente, Ronaldo & de Vasconcelos, Flávio C., 2016. "When distance does not matter: Implications for Latin American multinationals," Journal of Business Research, Elsevier, vol. 69(6), pages 1980-1992.
    10. Srivastava, Saurabh & Singh, Shiwangi & Dhir, Sanjay, 2020. "Culture and International business research: A review and research agenda," International Business Review, Elsevier, vol. 29(4).
    11. Ana M. Romero-Martínez & Fernando E. García-Muiña & Agnieszka Chidlow & Jorma Larimo, 2019. "Formal and Informal Institutional Differences Between Home and Host Country and Location Choice: Evidence from the Spanish Hotel Industry," Management International Review, Springer, vol. 59(1), pages 41-65, February.
    12. Drogendijk, Rian & Martín Martín, Oscar, 2015. "Relevant dimensions and contextual weights of distance in international business decisions: Evidence from Spanish and Chinese outward FDI," International Business Review, Elsevier, vol. 24(1), pages 133-147.
    13. Nebus, James & Celo, Sokol, 2020. "Cognitive biases in the perceptions of country distance," Journal of International Management, Elsevier, vol. 26(3).
    14. Hutzschenreuter, Thomas & Kleindienst, Ingo & Lange, Sandra, 2014. "Added Psychic Distance Stimuli and MNE Performance," Journal of International Management, Elsevier, vol. 20(1), pages 38-54.
    15. Popli, Manish & Akbar, Mohammad & Kumar, Vikas & Gaur, Ajai, 2016. "Reconceptualizing cultural distance: The role of cultural experience reserve in cross-border acquisitions," Journal of World Business, Elsevier, vol. 51(3), pages 404-412.
    16. Moalla, Emna & Mayrhofer, Ulrike, 2020. "How does distance affect market entry mode choice? Evidence from French companies," European Management Journal, Elsevier, vol. 38(1), pages 135-145.
    17. Hernández, Virginia & Nieto, María Jesús, 2015. "The effect of the magnitude and direction of institutional distance on the choice of international entry modes," Journal of World Business, Elsevier, vol. 50(1), pages 122-132.
    18. Yeganeh, Hamid, 2014. "A Weighted, Mahalanobian, and Asymmetrical Approach to Calculating National Cultural Distance," Journal of International Management, Elsevier, vol. 20(4), pages 436-463.
    19. H Emre Yildiz & Carl F Fey, 2016. "Are the extent and effect of psychic distance perceptions symmetrical in cross-border M&As? Evidence from a two-country study," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 47(7), pages 830-857, September.
    20. Pushyarag N. Puthusserry & John Child & Suzana B. Rodrigues, 2014. "Psychic Distance, its Business Impact and Modes of Coping: A Study of British and Indian Partner SMEs," Management International Review, Springer, vol. 54(1), pages 1-29, February.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:iburev:v:27:y:2018:i:1:p:1-20. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/133/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.