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Introduction
Psychic distance is one of the most commonly cited (Sivakumar and Nakata, 2001), yet vaguely measured, constructs within the realm of international business research. Within the last 5 years, 37 articles referring to psychic distance, or the closely associated concept cultural distance,1 were published in the Journal of International Business Studies alone. Among the 24 of those articles that employed an empirical measure of psychic or cultural distance, 17 relied on scales developed by Hofstede (1980), two employed dummy variables, and five employed self-reported estimates of psychic or cultural distance. As we shall argue in the next section, each of these approaches has methodological limitations. It is therefore not surprising that researchers over several decades (Vahlne and Wiedersheim-Paul, 1977; Stottinger and Schlegelmilch, 1998; Shenkar, 2001) have called for further work on the measurement of psychic distance.
This article attempts to improve on that situation by developing and testing a broad selection of indicators, such as differences in language, religion, and political systems, which we shall refer to as psychic distance stimuli . These macro-level factors form the context within which a manager's perceptions of psychic distance are formed, and thus are major influencers of international marketing decisions, such as market selection. Measures of these psychic distance stimuli are empirically validated using the trade flows among a sample of 38 countries.
A definition of psychic distance
The term 'psychic distance' was coined by Beckerman (1956) in the concluding paragraph to his empirical research on intra-European trade flows:
... a special problem is posed by the existence of 'psychic' distance. It is probable that the manner in which the purchases of raw materials by a firm are distributed geographically will depend partly on the extent to which foreign sources have been personally contacted and cultivated. While the transportation costs paid by an Italian entrepreneur on a raw material supplied by Turkey may be no greater than the same material supplied by Switzerland, he is more likely to have contacts with Swiss suppliers, since Switzerland will be 'nearer' to him in a psychic evaluation (fewer language difficulties, and so on), as well as in the economic sense that air travel will absorb less of his time.
Over the subsequent few decades, the psychic distance construct was...