Does distance matter for internationally-oriented small firms?Jürgen Kai-Uwe Brocka, Jeffrey E. Johnsonb,?, Josephine Yu ZhoucaUniversity of Strathclyde, United KingdombSt. Mary's University, USAcInternational University of Applied Science, Germanya b s t r a c ta r t i c l ei n f oArticle history:Received 18 June 2009Received in revised form 27 February 2010Accepted 15 March 2010Available online 9 September 2010Keywords:DistanceCultural distancePsychic distanceForeign market selectionSmall firm internationalizationThis paper assesses the contemporary relevance of distance and its key components in international businessfor young, internationally-oriented small firms. In doing so, it reconceptualizes the distance concept andinvestigates its relevance in American, British, and German firms' early foreign market selection. Economic,geographic, and cultural distance (based on Hofstede's and Schwartz's frameworks) for the three countries,along with psychic distance for the German firms, are considered. The results show that some components ofdistance still matter for internationally-oriented small firms and that cultural distance is sample source andconcept sensitive. In addition, psychic distance acts as a mediator construct to the more objective, externaldistance measures of economic, geographic, and cultural distance, confirming the proposed distanceframework.© 2010 Elsevier Inc. All rights reserved.1. IntroductionDistance and its intrinsic notion of a location-sensitivity inbusiness transactions is one of the key theoretical underpinnings ofthe international business literature. Explicitly introduced byBeckermann (1956), further conceptualized by Linder (1961), andthen popularized by the psychic distance concept (Hallén &Wiedersheim-Paul, 1979; Johanson & Vahlne, 1977; Vahlne &Wiedersheim-Paul, 1973), distance in international businessremains an integral part of empirical studies and theoreticaldiscussions (e.g., Dow & Karunaratna, 2006; Evans, Treadgold, &Mavondo, 2000; Fletcher & Bohn, 1998; Johanson & Vahlne, 2003;Ojala & Tyrväinen, 2007; Shenkar, 2001; Sousa & Bradley, 2006;Stöttinger & Schlegelmilch, 2000).However, developments in transportation technology and infor-mation and communication technology, as well as various political,economic and social factors, have led to an increasingly integrated,less distant world. This ongoing process, often referred to asglobalization, has facilitated the emergence of small internationalentrepreneurial firms and has led some authors to question therelevance of the distance concept in international business. Hamill(1997) argued, for example, that due to the emergence of thelocation-insensitive Internet the traditional distance sensitive inter-nationalization process no longer makes sense. Cairncross (1997)went even further than that and simply proclaimed the overall deathof distance. In addition, as reported below, empirical findingsregarding the importance of distance and its various elements aremixed.This increasing gap between the theoretical importance attributedto the distance concept on the one hand and decreasing importance ofdistance in a globalizing world on the other hand gives rise to aninteresting research question: Does distance still matter for interna-tionally-oriented small firms in today's globalized world? And if so,which components of distance matter and which do not?This paper addresses these research questions by assessing the roleof distance in the contemporary internationalization dynamics of firms'early foreign market selection. The paper begins with a review anddiscussion of relevant international entrepreneurship and distanceliterature including empirical evidence, leading to a proposed frame-workofthe distanceconcept. Next, a description of thestudy's researchmethods are provided, subsequently leading to the delineation anddiscussion of its empirical results. This is followed by an articulation ofthestudy'skey findings along with a discussion of their implicationsfortheory and practice, as well as the recognition of important researchlimitations that should be taken into consideration.2. Synthesis of the literatureThe concept of distance in international business and its im-portance in the internationalization process of firms has beenresearched and debated for many years. Beckermann (1956) wasone of the first to explicitly relate this intrinsic notion of location-sensitivity in international business transactions through assessing itsrole empirically. Ever since, various aspects of distance – usuallyIndustrial Marketing Management 40 (2011) 384–394? Corresponding author. Bill Greehey School of Business, St. Mary's University, OneCamino Santa Maria, San Antonio, Texas 78228-8607, USA. Tel.: +1 210 431 2024;fax: +1 210 431 2115.E-mail address: jjohnson6@stmarytx.edu (J.E. Johnson).0019-8501/$ – see front matter © 2010 Elsevier Inc. All rights reserved.doi:10.1016/j.indmarman.2010.08.007Contents lists available at ScienceDirectIndustrial Marketing Management
