Thinking Inside the Box: Psychological Theories, Constructs and Methodological Approaches to Explain Psychic Distance. Systematic Literature Review and Future Research Recommendations

Psychic distance is one of the most fundamental concepts in International Business literature. Due to its relevance to the field, research on psychic distance is increasing and at the same time the field is becoming more dispersed. While the centrality of psychic distance is widely accepted amongst International Business scholars, there are some debates around the construct’s validity, its measurement and level of analysis. To assess these debates and provide some transparency of the field, I conduct a systematic overview of 78 peer-reviewed articles that focus on psychic distance. Building on the identified research gaps, I contribute to the debate around the construct’s measurement by analyzing the fit between theory and measurement in the empirical articles in the set. Additionally, I draw from the review to give recommendations for future research. More specifically, I argue how including theories around decision-making under uncertainty and cognitive biases, as well as experimental research approaches in the research agenda could significantly change our understanding of the construct and subsequent decisions. I thus make a case for the use of psychological theories, constructs and methodological approaches to explain psychic distance.