Abstract
Psychic distance (PD) has been a popular topic in internationalisation research; however, it has not been studied in an importing context. This research sought to answer these questions: Does PD affect import buyers’ selection of new suppliers, and why (or why not)? What are the components of import buyers’ PD? What is the importance of types of PD components relative to each other? What is the importance of PD relative to other country factors? The study relied on the Uppsala Internationalisation Process Model (Johanson & Wiedersheim-Paul, 1975; Johanson & Vahlne, 1977) and its underlying Behavioural Theory of the Firm (Cyert & March, 1963). Semi-structured interviews were conducted face to face with 49 buyers who are in charge of importing food and non-food consumer goods for retail and non-retail firms in the United States, Australia and New Zealand. Data was analysed thematically on NVivo, using mainly template analysis but also degrees-of-freedom analysis. Findings indicate that: (1) buyers’ selection of foreign country is determined first and foremost by economic factors (price, quality, quantity, etc); (2) PD has a negative moderating effect on buyers’ consideration of a country; (3) the impact of PD and even economic factors is sometimes not very strong because buyers face a very limited number of available, suitable and willing supplier countries that they know, which can be reduced to even a single country for some products; (4) buyers’ PD is composed of cultural, language, administrative, geographic and economic (CLAGE) distance factors, with cultural distance as the most important component, followed by geographic, language, administrative distance and economic distance in that order; and (5) when buyers are not familiar with a country, they have no or little perception of how psychically distant that country is from their home base; this lack of PD magnitude perception seriously impedes their consideration of suppliers from such a country. The research contributes to the Uppsala model and the behavioural theory of the firm by its findings that: (1) PD has negative impact on many import buyers’ supplier selection because in addition to causing perceived difficulty in understanding foreign suppliers, PD sometimes consists of cultural differences that buyers do not tolerate, or PD makes buyers concerned that foreign suppliers may not understand them and their home market very well; (2) buyers are strongly deterred from selecting a supplier country when they are not aware of how psychically distant or proximate that country is from their home country; and (3) buyers’ previous international sourcing experience does not reduce the negative effect of large or unknown PD magnitude on their supplier country selection.