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Beyond Cultural Distance: Developing a Richer Measure of Psychic Distance for Emerging Markets
This study heeds the call for an aggregated distance measure by developing an updated measure of psychic distance that acknowledges the intricacies of institutional, cultural and economic differences based on complex historical entanglements. The study’s central argument is that the current psychic distance measures do not fully acknowledge the importance of countries’ histories as these may create ties that shorten previously hypothesized large(r) distance measures. Using South Africa as the base country, we develop an aggregated measure of psychic distance with 20 underlying indicators, including both cultural and institutional distance. Although the relationship between the constructs is kept linear and additive, the magnitudes of the indicators are dynamic and result in a panel of psychic distance measures.