The evolving role of Psychic Distance in the discovery and search for international opportunities over time

Abstract

This research sees internationalisation as an evolutionary entrepreneurial process in which firms identify and exploit international opportunities over time. Opportunities, their type, sequence, intensity and execution, define the internationalisation trajectory of a firm in a process characterised by time and entrepreneurial behaviour (Jones & Coviello, 2005). Such an evolutionary process involves the dynamics of opportunity identification and resource deployment for opportunity exploitation (Mathews & Zander,2007). It is a process in which the outcomes of one opportunity become the antecedents of a subsequent one (Jones & Coviello,2005), using networks and feedback from actual project execution (Chandra, Styles, & Wilkinson, 2012). Two basic assumptions guide the study. First, that a focus on opportunity identification and exploitation is important to explain entrepreneurial internationalisation, especially of Small and Medium Sized Enterprises (SMEs). Second, that opportunity development is a process which evolves over time and is shaped temporally. Firmly grounded in these premises and based on a longitudinal study of knowledge-intensive firms, we re-examine two central assumptions of International Process Theory (IPT) and International New Ventures (INV). These are the concept of Psychic Distance (PD), and the debate on whether an entrepreneurial opportunity is discovered or searched. Based on case study data collected over a two-year period, we find that while Psychic Distance is not a central consideration in the development of the earlier international opportunities, it becomes an important consideration as the firm gains more control over the internationalisation process and as it adopts more pro-active search for new and additional opportunities. These findings tie the concept of PD, and the dichotomy between the discovery and search of international opportunities to the control which a firm develops only eventually in its trajectory of international growth. This can only be explained when internationalisation is seen as a series of events that unfold over time.