Are the extent and effect of psychic distance perceptions symmetrical in cross-border M&As? Evidence from a two-country study

H. Emre Yildiz*, Carl F. Fey

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

25 Citations (Scopus)

Abstract

The concept of psychic distance has several entrenched assumptions that have not been put to sufficient systematic scrutiny. We address this gap by investigating the assumptions of symmetry (i.e., whether psychic distance from Country A to Country B is the same as that from Country B to Country A) and discordance (i.e., whether differences in psychic distance between two countries always lead to lack of fit) of psychic distance in cross-border mergers and acquisitions. We propose a new framework, which differentiates between the extent (i.e., the degree to which two countries are perceived to be similar/different) and effects (i.e., the degree to which distance perceptions create favorable or unfavorable attitudes and responses) of psychic distance perceptions. We argue that relative status positions affect extent and effects of psychic distance. To test our predictions, we collected data through policy-capturing studies in Sweden and China. Our findings reveal that both the extent and the effects of psychic distance perceptions are asymmetric. We also found that psychic distance perceptions create unfavorable (favorable) attitudes among Swedish (Chinese) respondents toward Chinese (Swedish) acquirers. Our follow-up examination confirms that relative status positions are a key driver of these results.

Original languageEnglish
Pages (from-to)830-857
Number of pages28
JournalJournal of International Business Studies
Volume47
Issue number7
DOIs
Publication statusPublished - Sep 2016
MoE publication typeA1 Journal article-refereed

Keywords

  • psychic distance
  • symmetry
  • cross-border mergers and acquisitions (M &
  • status
  • social comparison
  • experimental designs
  • NATIONAL CULTURAL DISTANCE
  • DECISION-MAKING
  • INTERNATIONAL ACQUISITIONS
  • SOCIAL IDENTITY
  • ORGANIZATIONAL COMMITMENT
  • KNOWLEDGE TRANSFER
  • INTEGRATION
  • PERFORMANCE
  • SELF
  • MERGERS

Cite this