The logic behind foreign market selection: Objective distance dimensions vs. strategic objectives and psychic distance

Abstract

The aim of this paper is to highlight the importance of the firm's strategic objectives regarding the choice of countries for foreign expansion, complementing the existing literature on the internationalisation process. Through a multiple case study methodology, we conduct a comparative analysis of three Brazilian ventures that have internationalised in Italy, and three Italian firms that have internationalised in Brazil, seeking to investigate the firms' decisions on the selection of foreign markets. We consider jointly the objective aspects of distance, the overall perceptions of the decision-makers in relation to the differences between the domestic and (potential) host countries, and the firm's strategic objectives. This research contributes to International Business studies by revealing the role of firm-specific strategic objectives as determinants of foreign market selection, in addition to, or even on top of, the dimensions of objective distance and psychic distance.Paper type -Research paper.

Exploring key logistics characteristics supporting embeddedness in retailers’ geographical expansion

“…Another contextual factor that may hinder generalisation and comparison to other existing research is the fact that existing research is mainly based on larger western European or US TNCs expanding into China or other Asian markets. In contrast, the case companies to this study have relatively short economic, geographic, institutional, cultural as well as psychic distances (Magnani, Zucchella, and Floriani 2018) between their home market and their new ones. As noted by Lowe and Wrigley (2010), western retailers entering another western mature economy are less researched.…”

“…They have all expanded into regions with short economic, geographic, institutional, cultural as well as psychic distances (Magnani, Zucchella, and Floriani 2018) to the domestic market (i.e. Sweden).…”

“…Although these studies provide important insights into retail logistics operations they are limited to the local development in the new region, neglecting the overall logistics operations of the company. They are also concerned with expansions characterised by high economic, geographic, institutional, cultural as well as psychic distances (Magnani, Zucchella, and Floriani 2018), often with focus on food retailers. In contrast, non-food retailers' expansions into more similar markets are less researched (Lowe and Wrigley 2010).…”

The Paths of Internationalization of Chinese Innovative Firms

“…In this study, the psychic distance is defined as the distance between the home country and the host country which is a factor preventing or disturbing the flow of information between enterprises and markets. We use the absolute differences regarding the level of industrialization, education, language, religion and political systems [101,129]. In addition, we introduce the dummy variables institutional proximity, language proximity, nature proximity, geographic proximity, economic proximity [97,98].…”

Factors that influence the choice of a destination country for Brazilian foreign direct investment

“…Nevertheless, the consideration of psychic and cultural distancing as determining factors in the destination of investments does not seem to find practical support (Harzing, 2003;Shenkar, 2001;Tihanyi, Griffith, & Marcello Marchiano, Fernando Antonio Ribeiro Serra, Jose Antonio de Sousa Neto e Henrique Cordeiro Martins Russell, 2005). The consideration is that the level of analysis should be that of the company and not be carried out with aggregate data, as a myriad of diverse cultures, values, and business objectives (Magnani, Zucchella, & Floriani, 2018) are found when one considers macroeconomic data (Ellis, 2008;Evans & Mavondo, 2002;Sousa & Bradley, 2006). …”