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The Antecedents of Psychic Distance

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This study investigates the antecedents of psychic distance. Building on original data in 25 of the world’s largest economies, we investigate potential drivers of the perceived distance among a given pair of countries. Results confirm that psychic distance is indeed a multifaceted construct which is determined by cultural, geographic and economic factors. Furthermore, our results indicate that geographic distance accounts for the largest share of the explained variance, suggesting that future studies should attribute geographic distance a more prominent role when it comes to empirically investigating international business decisions for which psychic distance perceptions may be important. They also suggest that, used in isolation, cultural distance – as measured by the so called Kogut and Singh index – is a poor predictor of distance perceptions.

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Lars Håkanson, Björn Ambos

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