Psychic distance and the internationalization process of large Turkish corporations

Abstract

In line with the Uppsala Model, internationalization process is a consequence of an incremental decision and learning process in which firms initially enter psychically close foreign markets with low control/commitment modes. They gradually enter psychically distant countries with increased control/commitment involvements as they gain experience. Psychic distance is defined as differences relating to the foreign market characteristics that prevent the flow of information between suppliers and customers and lead to the perception of foreignness and uncertainty. Extant literature identifies market, firm and manager characteristics as the three groups of variables affecting the perception of psychic distance. The impact of psychic distance on foreign country market and entry mode selection decisions, marketing strategy pursued, and the performance of the operations in the host countries is widely studied, however contradictory findings are observed. The current study explores the relationships between psychic distance and market, firm, manager characteristics. entry mode and marketing strategy decisions for and the performance of operations in the most important foreign market, as well as the impact of psychic distance on the internationalization process of 104 large firms within the context of an emerging economy, Turkey. The results reveal that the most important foreign country market –Germany is perceived to be psychically distant and that the perception of psychic distance vaguely affects the foreign market selection decisions of Turkish managers. Firm and manager characteristics such as the firm’s age and size, the degree of international experience, foreign market diversification, the frequency of overseas travels by managers and the marketing strategy pursued in the most important foreign market are significantly related to the level of psychic distance perceived. Additionally, marketing strategy pursued and the performance of operations in the most important foreign market are found to be significantly related.