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Revisiting the psychic distance paradox: international retailing in China in the long run (1840-2005

Andrew Godley () and Haiming Hang ()
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Andrew Godley: School of Management, University of Reading
Haiming Hang: School of Management, University of Reading

No em-dp2008-66, Economics Discussion Papers from Department of Economics, University of Reading

Abstract: This paper uses original research on the roles played by two sets of foreign entrants into Chinese retailing since the 1850s - the overseas Chinese entrants and western entrants - to explore the psychic distance paradox over the long run. It explains how the advantages of psychic closeness in Chinese retailing have always been important in reducing entry barriers, but that the increasing costs of technology have increased the significance of firm proprietary strengths in some formats, notably supermarkets, so reducing the relative importance of psychic closeness. The paper therefore illustrates how taking the long-term perspective enables more sophisticated conclusions to emerge. A cross sectional analysis of one sector - Chinese supermarkets - would confirm the psychic distance paradox; overseas Chinese have been unable to translate psychic closeness into superior performance. By contrast their historic performance in department stores and more recently in fashion chains has been superior to the format leaders. This long term perspective therefore suggests that the understanding of the psychic distance paradox needs to be moderated by additional conceptualisation.

Keywords: Psychic Distance; China; International Retailing; Internationalisation Process (search for similar items in EconPapers)
Pages: 47 pages
Date: 2008-11-18
New Economics Papers: this item is included in nep-cna and nep-his
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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