Proceedings of 4th European Business Research Conference
9 - 10 April 2015, Imperial College, London, UK, ISBN: 978-1-922069-72-6
The Second Degree of the Psychic Distance Phenomenon:
The Internationalization Process of Lithuanian
Manufacturing Firms
Modestas Gelbuda, Ruta Kazlauskaite1, Tadas Sarapovas and Sarunas
Abramavicius
Dominant theories of internationalization have been developed based on Western
conceptual tradition and empirical evidence pertaining to the behaviour of North American
and European firms. This in turn has led to a number of influential calls for research in
more diverse settings and a broad agreement that firms from emerging countries operate
in different kind of environments, and thus may not follow the internationalization patterns
and logics prescribed by “Western theories”.
Our paper aims to map out the pattern of the internationalization process of de novo
manufacturing firms from emerging post-socialist European economies in terms of foreign
market selection, entry mode choice, mechanism of internationalization and under-lying
cognitive logics. A de novo manufacturing firm is a firm which has been established by a
founder or a team of founders and was not acquired a result of the privatization process,
which was instituted across Central and Eastern Europe after the collapse of the Soviet
Union and planned economy.
Our study employs a multi-case study research strategy. A purposeful sampling was used
to identify 4 companies in two major industries in Lithuania: construction and textiles. The
data was collected in 2014-2015 through a series of interviews with key decision makers,
media reports and internal documents.
This research has produced several interesting findings. Most notably, our study revealed
that Lithuanian firms did not follow the pattern of one particular established theory. To
reflect the unique pattern of internationalization of our case companies, especially, the
market selection side of it, we coined it as the “second degree of psychic distance”
phenomenon. It means that the studied firms “jumped over” the psychologically closest
foreign markets and started their activities in developed EU economies. Once they
established a foothold, they continued to enter other markets close to the first foreign
market in line with the prediction of the psychic distance logic.
Track: Management (International Business)
JEL Codes: F20, F23 & M13
1
Assoc. Prof. Modestas Gelbuda, Corresponding author, Prof. Ruta Kazlauskaite , ISM University of
Management and Economics, Arkliu Street 18, Vilnius 01305, Lithuania, Tel. +370 620 87543, Fax
+370 5 212 3961, ruta.kazlauskaite@ism.lt, Assoc. Prof. Tadas Sarapovas,
and Assoc. Prof. Sarunas Abramavicius,