Psychic distance and online internationalisation - learning about distant customers

Yamin, M. and Sinkovics, R. R. (2004) Psychic distance and online internationalisation - learning about distant customers. Proceedings of the 4th Customer Research Academy (CRA) Workshop, Manchester, England ISBN 1861151241

Abstract

This paper seeks to investigate how cross-border commerce via online media is affected the incidence of psychic distance. The term psychic distance is normally understood as the degree to which a firm is uncertain about the environment in a foreign market. This uncertainty is important because it is a major cause of marketing blunders, even by firms that are generally recognised as possessing market prowess and the skills to analyse and understand customer behaviour. The literature on traditional patterns of internationalisation implicitly links the concept of psychic to the notion of organisational learning, whereby predominantly tacit knowledge relating to locally embedded customer behaviour patterns is the key impediment to a full understanding of market conditions. This literature thus strongly suggests that formal knowledge acquisition, e.g. through market research prior to entry is not likely to dilute psychic distance in a significant way. The key to reducing psychic distance is experiential and operational experience, gained cumulatively through the process of local market interactions. It is apparent that a process of pure online internationalisation reduces opportunities for experiential learning and to that extent undermines the process of organisational learning, focussed on market and consumer environments. On the other hand, a key feature of online commerce is that it potentially provides for closer customer intimacy and information exchange. This may have the affect of reducing psychic distance as the online dialogue with consumers may prod the marketer to a better realisation of some cultural and local determinants of customer demand. However, this cannot necessarily be regarded as a reliable basis for learning about particular foreign markets. At best therefore online customer activism is only an imperfect substitute for experiential learning from physical operations on specific markets. There is therefore uncertainty as to whether online cross-border commerce may be subject to high or low degrees of psychic distance. Furthermore there is a total absence of empirical work focussing on psychic distance in the context of online commerce and customer interaction. This paper seeks to remedy this gap and provide exploratory insights into the phenomenon of psychic distance and online internationalisation. The focus is on the development of propositions for how psychic distance plays out in the context of online commerce. The propositions will need to reflect the diversity of online commerce, for example it might be expected that online commerce of digital products may be subject to much lower degrees of psychic distance, whereas online commerce of atom-based products may be subject to higher psychic distance levels.

• Item Type: Conference or Workshop Item
• Keywords: psychic distance, online internationalization, internet, ICT
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: Sinkovics, Professor Rudolf
• Authors: Yamin, M., and Sinkovics, R. R.
• College/School: College of Social Sciences > Adam Smith Business School > Management
• ISBN: 1861151241