Significance of distance in the internationalisation process of firms

Abstract

Purpose: The purpose of the article is to discuss the multidimensionality of the distance construct and to provide a critical overview of the existing research on distance and its significance for the internationalization process.

Methodology: The review of relevant literature, based on databases such as EBSCO, Elsevier, JSTOR and ProQuest, covered empirical papers (keyword: “distance” included in the title or abstract) investigating the relationship between the distance and key issues in the companies’ internationalization. The presentation of results was structured along five key dimensions of distance: geographic, economic, institutional, cultural and psychic. The first four dimensions are antecedents to psychic distance, which itself relates to the managerial perception of differences between the countries.

Findings: The development of new forms of transportation and communication technologies, together with the increasing economic integration, have made many authors and managers believe that distance is no longer relevant to the companies’ internationalization process. However, the empirical studies do not confirm this claim.

Research implications: The multidimensionality of distance and inconsistencies in the body of research concerning the cultural dimension of distance create new research challenges. The present article provides recommendations for the scholars interested in the role of distance in international business.

Originality: The article presents an extensive literature review, explicitly indicating the role of different dimensions of distance in key internationalization issues, i.e. motives, market selection, mode of entry, level of local responsiveness and global integration. It makes a clear distinction between psychic distance and country-level distance.