A Contingency Perspective on Psychic Distance in International Channel Relationships

Abstract

Internationalization theory states that firms, which attempt to forge exchange relationships with foreign counterparts, will be most successful with those who appear to be similar to their own culture and business practices. Other research has pointed toward a psychic distance paradox, whereby successful trading relationships thrive when the parties are “far apart” along these lines (i.e., great psychic distance). These inconsistent findings suggest a contingency approach may better determine when differences between international channel partners are a hindrance to success and when they are an asset. A conceptual model is proposed as to how psychic distance affects an international channel relationship at different stages of its development. In general, it is felt that significant psychic distance will be detrimental to the relationship in its early stages, where it may serve as an asset in later stages of the relationship.