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Psychic distance effects for Russian market: Estonian and western experience

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Abstract:

Purpose ‐ This paper is aimed at providing the theoretical basis and some empirical implications concerning the effect of the psychological (or "psychic") distance on the enterprise internationalisation process. The main goal is to examine distance components and their dynamics with the focus on the Russian Federation market. Design/methodology/approach ‐ The qualitative analysis is based on the range of theoretical and empirical studies focused on expanding of Estonian and foreign enterprises to the Russian Federation market as well as Russian market attractiveness and risk assessment. Findings ‐ According to the analysis conducted in the study, the slightly diminishing psychic distance effect between Baltic states and the Russian Federation, as well as the gateway effect could be identified. Uncertainty and discrepancies with the western business techniques are found to be the factors of significant influence. Research limitations/implications ‐ Further research of the subject can be dedicated to the distance components estimation through factor or component analysis on the base of macroeconomic data and the data obtained from the questionnaires of selected enterprises. Practical implications ‐ Research of the current topic can provide a solid basis for the management strategies interpretation and development in the context of the vulnerability of the Russian Federation market with the goal of establishing effective business operations. Originality/value ‐ This paper provides a basis for future research and emphasizes the role of the given phenomenon in strategic management.

Keywords: Estonia; Globalization; Russia

Document Type: Research Article

DOI: http://dx.doi.org/10.1108/17465260610663908

Publication date: May 1, 2006

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