Performance of foreign subsidiaries: Does psychic distance matter?

Desislava Dikova

International Business Review, 2009, vol. 18, issue 1, 38-49

Abstract: Psychic distance paradox emerged from studies that found a positive effect of psychic distance on subsidiary performance. Recently, it was argued that international experience influences the relationship between psychic distance and performance. We propose that the effect of market-specific knowledge, rather than general international experience, should be examined because it negates the effect of psychic distance. We study 208 foreign direct investments made by west-European MNEs in the CEE (Central and Eastern European) region between 1996 and 2002 and find that positive relationship between psychic distance and subsidiary performance is observed only in the absence of market-specific knowledge. Psychic distance has no effect on subsidiary performance when the MNEs have CEE investment experience or have established the subsidiary with a local partner.

Keywords: Market-specific; experience; Psychic; distance; paradox; Subsidiary; performance; Transition; economies (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (56)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0969593108001340
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:iburev:v:18:y:2009:i:1:p:38-49

Ordering information: This journal article can be ordered from
http://www.elsevier.com/wps/find/journaldescription.cws_home/133/bibliographic
http://www.elsevier. ... me/133/bibliographic

Access Statistics for this article

International Business Review is currently edited by P. Ghauri

More articles in International Business Review from Elsevier
Bibliographic data for series maintained by Catherine Liu ().