The antecedent of psychic distance: Are political factors matter?

Psychic distance stimuli including linguistic, cultural, economic, and political factors can prevent the flow of information between foreign markets and firms. Thus, it can adversely affect the interpretation of information, quality of judgment, and decision-making. Previous studies show that country-level factors are among the key determinants of psychic distance; whereas individual characteristics of managers such as work experience, education, language proficiency can strengthen or weaken the psychic distance perception but have less influence in predicting psychic distance. Among country-level factors, political factors are more volatile and contingent on political leaders, country elections, and regional conflicts. Political factors, however, remain underdeveloped in the literature of psychic distance and are partially conceptualized as static or unchanging in regulatory differences between countries in the institutional distance theory, or framing as administrative differences in the Ghemawat's CAGE framework. This study contributes to this literature gap in understanding the stimuli of political factors on psychic distance. I propose using firm surveys in technology industry in the top ten largest economies by GDP 2022 to examine two political factors: the differences in the political systems and country governance quality between home and host markets. These differences affect the firm’s capability to collect and process information as well as predict changes in the host country’s political environment. I expect that political factors positively correlate with psychic distance perception. The research’s findings contributes to understand political stimuli in psychic distance perception. In particular, how individual stimuli such as political experience, and networks between business and politicians may reduce psychic distance caused by cross-country political differences.