The locus of psychic distance

Abstract

Purpose This paper argues that longstanding inconsistencies in psychic distance research arise from a fundamental locus problem: the construct has drifted away from its original definition as barriers to information flow between the firm and the market. The purpose is to re-establish the correct locus of psychic distance and identify the multilevel antecedents that shape firm–market information flow. Design/methodology/approach The paper develops a conceptual analysis grounded in Johanson and Wiedersheim-Paul's (1975) definition. It synthesizes macro-, meso- and micro-level perspectives to build a multilevel framework that traces how country-level differences, firm-level characteristics and individual-level perceptions jointly influence firms' psychic distance. Findings The analysis shows that prior empirical inconsistencies stem from operationalizations that equate psychic distance with national cultural or institutional differences or with individual perceptions detached from firm–market interaction. Psychic distance emerges instead from the alignment or misalignment, between firm and market-specific information barriers. The framework clarifies that psychic distance is neither symmetrical nor stable, and that it varies across firms within the same country and across markets within the same host environment. Originality/value The paper introduces the notion of a locus problem and provides a clarified conceptual foundation for understanding psychic distance. By re-centering the construct on the firm–market relationship and specifying its multilevel antecedents, it offers a coherent explanation for mixed empirical results and a more precise basis for future operationalization and theory development.