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International relationship The importance

of psychic
marketing distance

The importance of psychic distance

Tony Conway 1391
Graduate School of Management, University of Salford, UK, and Received October 1998
Jonathan S. Swift Revised March
Revised September
1999
1999
Staffordshire University Business School, Stoke-on-Trent, UK Revised December 1999
Keywords Relationship marketing, International marketing, Marketing strategy,
International business
Abstract This conceptual paper outlines why, when working in the international as opposed to
the domestic environment, the success of a relationship marketing strategy is heavily dependent
on levels of psychic distance. The higher the level of psychic distance, the greater the time and
effort required to develop successful business relationships. At the different stages of relationship
development, different variables of psychic distance assume relatively greater levels of importance
which are likely to have implications for the implementation of a relationship marketing strategy.

Introduction
This paper examines the factors which are involved in the implementation of a
relationship marketing (RM) strategy in international markets. By transferring
RM theory from a domestic to an international context, various factors emerge
which can impede the development (or establishment) of cross-cultural
business relationships. These factors are largely a consequence of different
cultural value systems and can be synthesised in the concept of distance to
one's market most particularly in the concept of psychic distance, defined by
Hallen and Wiedersheim-Paul as the: ``. . .difference in perceptions between
buyer and seller . . .'' (1984, p. 17).
The paper suggests that a positive relationship exists between the level of
psychic distance between the parties concerned, and the financial and
psychological investment that is generally required to develop a successful RM
strategy: the higher the level of psychic distance, the greater the ``effort''
required. If such a relationship were proven empirically, then it would suggest
that the constituent variables of psychic distance should be important factors
in influencing the development of international RM strategies.

Relationship marketing
Introduction
RM involves organisations gathering information about their customers and
then deciding with whom they can develop a dialogue; it allows buyers and
sellers to work together in joint problem solving, easing the pressures on the European Journal of Marketing,
buyer. Rather than employing market share as a measure of marketing success, Vol. 34 No. 11/12, 2000,
pp. 1391-1413. # MCB University
this approach uses customer retention (Gronroos, 1996; Gummesson, 1994). Press, 0309-0566
European Morgan and Hunt (1994, p. 22) produce the following definition:
Journal of Relationship marketing refers to all marketing activities directed toward establishing,
Marketing developing and maintaining successful relational exchanges.
34,11/12 Duck (1991) considers the idea that relationships provide mutual support,
identifying the key point as ``reciprocity'', with the nature of the exchange or
1392 support helping to define the degree and type of relationship. McCall (1970)
distinguishes between the ``role relationship'' where interaction is dictated by
the actors' roles (a formal relationship) and acquaintanceship (a personal
relationship). In reality, most social relationships are a blend of the two. McCall
(1970) sees a continuum ranging from the more formal interactions which are
unlikely to be characterised by much feeling or emotion to the much more
personal relationships which resemble what psychologists refer to as close
relationships. Similarly, Clark and Mills (1979) use the term ``communal
relationships'' to denote those relationships which have benefits to both parties
where each is concerned with the welfare of the other. Such relationships are
likely to be of a long term nature.
Levitt (1983) and Dwyer et al. (1987) see five stages in the development of a
relationship:
(1) awareness;
(2) exploration;
(3) expansion;
(4) commitment; and
(5) dissolution.
Scanzoni (1979) sees three stages of involvement:
(1) exploration;
(2) expansion; and
(3) commitment.
Once exploration has taken place, the degree of interdependence is increased
during the expansion stage; the commitment stage is where individualist
concerns merge with collective interest.

Components of a successful relationship

A good deal has been written on the components of successful relationships
(Gupta, 1983; Juttner and Wehrli, 1994; Dion et al., 1995; Dawar et al., 1996;
Holm et al., 1996; Conway, 1996; Selnes, 1998; Ali and Birley, 1998; Lin and
Germain, 1998). Wilson, for example, lists 13 relationship variables `` . . .that
have both theoretical and empirical support'' (1995, p. 337); he also notes that:
Given situational factors, one might add or delete from the list to capture the relationship
situation (Wilson, 1995, p. 337).
In view of the number of potential variables in any relationship, it was decided The importance
to concentrate on those variables which, according to the literature, are deemed of psychic
relatively more important in most relationships, especially in an international distance
context. These variables or factors are:
. commitment;
. trust; 1393
. customer orientation/empathy;
. experience/satisfaction; and
. communication.
It is, therefore, proposed to examine each of these in greater detail:
Commitment. Of central importance in developing relationships is the level
of commitment a partner feels towards that relationship. Indeed, Wilson
identifies commitment as ``. . .the most common dependent variable used in
buyer-seller relationship studies'' (1995, p. 337). Morgan and Hunt (1994) see
relationship commitment as a key characteristic associated with a successful
marketing relationship, as do Berry and Parasuraman (1991). Commitment
level has been found to be the strongest predictor of voluntary decisions to
remain in a relationship (Rusbult, 1983).
Commitment can be viewed as an intention to continue a course of action or
activity (Hocutt, 1998) or the desire to maintain a relationship: this is often
indicated by an ongoing ``investment'' into activities which are expected to
maintain the relationship (Blois, 1998). Rusbult (1983) believes that
commitment is stronger when levels of satisfaction are high (Gladstein, 1984;
Kelley and Davis, 1994), when the quality of alternatives is perceived to be
poor, and when investment size is large.
Commitment is also likely to be influenced by social bonding (``. . .the degree
of mutual personal friendships and liking shared by the buyer and seller''
(Wilson, 1995, p. 339)). Buyers and sellers who have a strong personal
relationship are more committed to maintaining the relationship than less
socially bonded partners (Wilson and Mummalaneni, 1986).
Social bonding would seem to be closely connected to the concept of
``closeness''. A relationship is ``close'' when it is characterised by high
interdependence over a period of time. Closeness influences the size of the
investment in the relationship which in turn influences commitment (Hocutt,
1998). The development and maintenance of a relationship requires the
investment of time, energy, emotion and money. Anderson and Weitz (1989)
found evidence to suggest that the greater the level of investment made by a
manufacturer in a relationship, the greater the increase in that manufacturer's
commitment to its relationship with its distributor.
Trust. Ford (1984) sees this as an important consideration as:
. . . many aspects of relations between customers and suppliers cannot be formalised or based
on legal criteria. Instead relationships have to be based on mutual trust (Ford, 1984, p. 18).
European Trust is the precondition for increased commitment (Mietilla and Moller, 1990)
Journal of and is, according to Wilson, ``. . . a fundamental relationship model building
Marketing block, and as such is included in most relationship models'' (1995, p. 337).
Rotter (1967) sees trust as a generalised expectancy held by an individual
34,11/12 that the word of another can be relied upon. In economic exchanges, there is the
expectation that parties will make a good faith effort to behave in accordance
1394 with any commitments, be honest in negotiations and not take advantage of the
other even when the opportunity is available (Hosmer, 1995). Rusbult and
Buunk (1993) and Ganesan (1994) see satisfaction and experience as
antecedents of trust.
Trust is often stated as a vital factor in successful relationships. Morgan and
Hunt, for example, argue that trust along with commitment are ``key'' elements
in a relationship as they encourage marketers to work at preserving
relationship investments, by co-operating with exchange partners. They also
aid in resisting attractive short-term alternatives, in favour of the expected
long-term benefits of staying with existing partners (Morgan and Hunt, 1994,
pp. 22-3).
Ali and Birley (1998) identify two types of trust:
(1) Characteristic based trust (``because of who they are''): this ``. . . pertains
only to individuals . . .'' and is dependent on criteria such as ``. . .social
similarity. . .'' between individuals. Of specific interest to the present
paper, they suggest that:
. . .an exchange partner may consider the ethnic background of their suppliers/
customers to be an important factor in exchange since common social and cultural
norms may make a satisfactory exchange easier to achieve (Ali and Birley, 1998,
p. 751).
(2) Process-based trust (``because of how they behave''): this refers to the
association between ``. . .trust and long-term relationships.'' This is a
more rational form of trust and is based on existing performance and
relationships.
Trust established through interaction is combined with other external factors,
such as word of mouth opinions and media reports about the seller to form an
overall perception of trust in the seller.
The influence of trust on the development of relationships is considerable,
especially at the later stages of relationship development. Furthermore, trust
has the potential to influence the development of two other major variables:
customer orientation/empathy and experience/satisfaction. A high level of trust
is likely to engender a more positive attitude, which in turn is likely to increase
the level of customer orientation/empathy. Conversely, low trust can have the
opposite effect: how can you begin to empathise (identify) with someone you do
not trust? Similarly, trust can be related to experience. In their model of
``trusting behaviour'', Mitchell et al. (1998) see experience as an important
variable as it plays a role in trust by making it possible to compare the realities
of the firm with preconceived expectations. Ganesan (1994) goes further, and
views experience as an antecedent of trust. It is difficult to build trust where The importance
none (or very little) exists, despite subsequent positive experiences. A negative of psychic
experience, however, can be used to justify or confirm the low level of trust that distance
one person has in another. Thus, low trust levels can effectively be reinforced
by a negative experience a downward cycle.
Customer orientation/empathy. This is considered to be a key factor by
Palmer and Bejou (1994, p. 500), and has links with the concept of social 1395
bonding. The word ``empathy'' really refers to an understanding, or the ability
to see a situation from someone else's point of view, although many use the
term synonymously with affinity and liking. For the purpose of this paper, the
wider interpretation is the one which is used.
In the initial stages of relationship development, the onus is more likely to be
on the seller to empathise with the buyer. However, as the relationship develops
further, mutual empathy becomes increasingly more important.
Studies have shown how ``liking'' by one party of the other is important in
the development of close interpersonal and business relationships (Friedman et
al., 1988; Moorman et al., 1992). The greater the degree of empathy or ``liking''
between the parties concerned, the fewer the barriers to relationship
development. ``Liking'' a particular individual (or group of people) gives a more
positive outlook towards that person; Aronson (1969, p. 144) mentions ``. . .
interpersonal attraction. . .'', a theme that is also addressed by Adler and
Graham (1989), who suggest that:
In addition to the bargaining strategy itself, interpersonal attraction (e.g. like/dislike, friendly/
unfriendly feelings) can strongly influence current negotiation outcomes and the success of
future transactions (Adler and Graham, 1989, p. 523).

This supports previous claims of a link between social bonding and closeness,
and the balance of evidence would, therefore, appear to underline the
importance of empathy or liking as a major influence in establishing
relationships.
Experience/satisfaction. Experience is another factor in successful
relationships. The decision to continue in a relationship can be seen as
dependent on the level of congruity between relationship expectations and
performance so far (Levitt, 1981; Jackson, 1985). Negative experience may, of
course, hinder the relationship, or even lead to customer defection.
Furthermore, we tend to remember best the last experience (the ``recency
effect''): thus one positive experience may be sufficient to alter perceptions of
more than one preceding negative experience, and vice versa. This suggests the
important influence experience can have on customer satisfaction and, the more
satisfied the customer, the more durable the relationship (Buchanan and Gillies,
1990). Storbacka et al. (1995) believe that customer satisfaction can be
experienced at both an episodic and at a more general relationship level.
Although the literature emphasises the link between customer experience
and satisfaction, it is likely that this would also be the case for other parties in
the relationship both parties must have positive experiences in order to reach
European the required overall level of satisfaction over a period of time and develop the
Journal of relationship further.
Marketing Although the confirmation/disconfirmation approach to analysing
satisfaction has been criticised (LaTour and Peat, 1979; Clemons and
34,11/12 Woodruffe, 1992), such dissent, in the opinion of the present authors, does not
detract from the importance of experience as a variable in influencing
1396 satisfaction. Indeed, Rust and Zahorik (1993) believe that customer satisfaction
has no direct impact on new entrants as potential customers at this point have
no experience with the competitors. Additionally, Rosen and Surprenant (1998)
provide evidence that what had been satisfiers/dissatisfiers during earlier
stages of the relationship appear to be only sources of dissatisfaction as they
become minimum requirements for partners.
Hocutt (1998) links satisfaction with commitment and trust. Although she
proposes that trust directly influences commitment, she also sees the
relationship between trust and commitment as being mediated by both
satisfaction with the service provider and relative dependence. Satisfaction,
then, is an important component of relationships, both in its own right and in
the way it can influence other components.
While there is indeed a great degree of interaction between the variables, it
has been suggested that individually they are relatively more or less important
at different stages of relationship development. This is implied by Czepiel
(1990), for example, who sees long-term relationships as being developed
through the accumulation of satisfactory encounters (``experience''); active
participation based on mutual disclosure and trust (``trust''); creation of a double
bond (personal and economic) and psychological loyalty to the partner
(``commitment'').
Communication. According to Schramm, communication is
. . .the process of establishing a commonness or oneness of thought between a sender and a
receiver (Schramm, 1954, p. 3).

Thus communication is a vital component in the establishment of business

relationships, yet it is a variable that is often assumed or taken for granted and
consequently overlooked as a component of relationship development. This is
unfortunate, as all other components are experienced through the medium of
communication.
In the business sense, communication is as much concerned with receiving
as it is with giving: (Cherry, 1952, p. 640; Osgood and Sebeok, 1965, pp. 1-7; de
Lozier, 1976, pp. 2-6; and Crystal, 1978, pp. 14-18). Within the field of business
communications, the communicator (or sender of the message), still needs to
know the effect his/her message has had on the target audience; ``feedback'' is
essential, and this is only possible if information flows two ways.
The extent to which communication is important can perhaps best be
calculated by considering the many target audiences with whom a business
must communicate in order to survive. Rowe (1978, pp. 3-4) suggests two main
categories of communication for each organisation internal and external, and
it is the area of external communications that is of greatest relevance to this The importance
study, as dealing with foreign customers or suppliers is an area in which of psychic
problems are likely to be most pronounced adding to what Hakansson et al. distance
describe as ``. . . transaction uncertainty. . .'' (1976, p. 319).
Effective collaboration and co-ordination depend on effective communication,
and communication becomes even more important when one is trying to
establish business relationships. The importance of communication as an 1397
element of RM is commented on by Anderson and Weitz (1989), Frazier and
Rody (1991), and Metcalfe et al. (1992). Selnes (1998, p. 310) agrees, hypothesising
that communication is not only an important element in its own right, but also
has the propensity to influence levels of trust between buyer and seller.

Relationship marketing for all?

Recent research suggests that certain variables may make a relationship
marketing strategy less attractive (Sharland, 1997). For instance, the costs
incurred in the development and implementation of a relationship marketing
strategy (Nevin, 1995), the extent to which the relationship enhances
competitive advantage (Day, 1995) and the influence of alternative sources of
supply; when alternatives are not available, buyers feel more positive about the
relationship in terms of value and expected length (Sharland, 1997).
Blois (1998) claims that it is important to note that costs are incurred when
building and maintaining relationships, as do Johanson and Mattsson (1985).
Relationships are a ``market investment'' or an asset; they have positive and
negative aspects, their value being determined by the relative importance of each
and from the point of view of a specific customer, the balance between the positive
and the negative may vary between suppliers for a whole variety of reasons.
Blois (1996) suggests that the customer's view of the desirability of entering
into a relationship will be affected by perceptions of the likely size of the
transaction costs involved. Similarly, Hakansson and Snehota (1995) note five
negative factors or disadvantages which result from being in a relationship:
(1) loss of control;
(2) indeterminedness (i.e. difficult to predict);
(3) resource demanding;
(4) preclusion from other opportunities; and
(5) unexpected demands.
The degree to which each is a disadvantage will vary with each relationship.
To summarise thus far, there would appear to be four major components:
(1) commitment;
(2) trust;
(3) customer orientation/empathy; and
(4) experience/satisfaction.
European All four being influenced by the level and type of communication that exist
Journal of between the relevant parties. As relationships go through stages of
Marketing development, these components are likely to be of relatively different levels of
importance at different stages of the relationship development. Finally, the
34,11/12 development of relationships may not be appropriate in all situations.
If RM is placed in an international context, this presents additional
1398 complications. Now, instead of developing relationships within the same
cultural context, these relationships are developed within a cross-cultural
context. The extent to which interaction and relationship development can take
place is generally determined by the degree of difference (or ``distance'')
between the parties concerned. The greater the degree of distance, the harder to
achieve and more resource intensive will be the process of relationship
development, as Lin and Germain (1998) point out, with reference to cross-
cultural joint ventures:
When . . . partners view one another as culturally dissimilar, the feeling of a lack of common
ground may result in a higher degree of perceived behavioral uncertainty. As a consequence,
the parties may be more likely to place their trust in legal and written documents. . . (Lin and
Germain, 1998, p. 182).

To enable relations to develop successfully, it is necessary to understand the

values, expectations and motivations of all executives involved. Thus,
successful inter-cultural business relationships are heavily dependent on
understanding cultural backgrounds (Morosini et al., 1998, p. 140).

The cultural environment and international relationship marketing

Tornroos (1989, p. 754) suggests that culture gives a sense of belonging,
forming a reference towards life; Hofstede (1984) equates culture with value
systems and views values as the ``. . . building blocks of culture''. Other writers
(Mayo and Hadaway, 1994; Kanter and Corn, 1994; Swierczek and Hirsch, 1994)
emphasise the relative importance of culture in enhancing or impeding the
establishment of business relationships between executives from different
backgrounds.
Culture affects people and the way they live their lives; in many respects it
dictates how they live their lives, and it influences many day-to-day decisions
that people make. However, the different components (or elements) of culture
have varying degrees of importance for both individuals and societies, and this
variation could be expressed in terms of ``immediacy'' or ``closeness'' to the
individual in society.
Those elements which have the greatest impact are those that are
encountered on a daily basis. For example, language is probably the most
``immediate'' or ``closest'' element of culture; we use language (or are subjected to
other people's use of language) each day and, furthermore, language is the
means by which we access elements of culture, communicating with other
members of our sociocultural grouping.
Successful communication is dependent on an exchange of mutually-
recognised symbols and values; this is why problems relating to values or
understanding emerge when communication takes place between individuals The importance
from different cultural backgrounds, each of which may have its own value of psychic
system (Kale, 1991, p. 19). distance
Cross-cultural interaction
The importance of business relationships led the IMP (International Marketing
and Purchasing) group to their ``interaction approach'' model, which focuses on 1399
supplier-customer interactions (Ford, 1980, 1984, 1989; Turnbull and
Cunningham, 1981; Hakansson, 1982; Ford et al., 1986; Cunningham and
Homse, 1986; Turnbull, 1986, 1987). Hakansson (1982, p. 15) gives three sets of
variables to be taken into consideration when assessing the importance and
influence of interaction: the environment in which interaction takes place, the
``atmosphere'' surrounding the interaction, and the elements and process of the
interaction itself.
The manipulation and control of these variables is of particular importance
in the context of cross-cultural business and is a resource-intensive and time-
consuming process. The interaction approach places the emphasis on processes
and relationships; buyers and sellers are seen as active participants in long-
term relationships which involve complex patterns of interaction. Marketers
and purchasers are more involved in supporting and maintaining relationships
than merely buying and selling. The links between the two parties can
eventually become institutionalised.

Psychic distance and closeness

Psychic distance as an aspect of cross-cultural relationships was studied in the
1970s by authors such as Johanson and Wiedersheim-Paul (1975), Johanson and
Vahlne (1977) and Wiedersheim-Paul et al. (1978). Since the 1970s, it has
received greater attention (Hallen and Wiedersheim-Paul, 1984; Kogut and
Singh, 1988; Gripsrud, 1990; Klein and Roth, 1990; Holden and Burgess, 1994;
Swift, 1999). This has been very largely due to the importance of psychic
distance in relationship building, and the work of the IMP group referred to
previously. Hallen and Wiedersheim-Paul (1984) see psychic distance as a
consequence of both cultural and social distance. Cultural distance is:
. . .the extent to which the norms and values of the two companies differ because of their
separate national characteristics (Ford, 1984, p. 102).

It is an outcome of the differing cultural backgrounds of individuals involved in

the process of interaction; the more ``different'' the other person's culture seems,
the greater the degree of cultural distance. Cultural distance is a potentially
powerful determinant of the way relationships can develop (Tse et al., 1988;
Feldman and Thompson, 1993; Meschi and Roger, 1994). Indeed, there may be
the possibility that universal prescriptions for relationship marketing may fail
in a firm's foreign markets, where a buyer-seller relationship means something
quite different from its meaning in the same firm's domestic markets. For
example, the overall approach to relational exchange is the ``win-win'' situation,
European but in cultures where there is the presumption that there is only one winner, i.e.
Journal of the seller, this may be inappropriate (Palmer, 1997).
Marketing Social distance refers to the gap or distance between two social groups, and
34,11/12 is largely a product of cultural distance (Furnham and Bochner, 1982). Meschi
and Roger (1994) refer to ``social effectiveness'', which in the context of the
present study can be regarded as a consequence of reduced social distance.
1400 Hallen and Wiedersheim-Paul suggest three component elements of psychic
distance:
(1) The degree of cultural affinity (generally most apparent at the national
level of relationships).
(2) The level of mutual trust engendered (this is generally an ``organisation-
level'' consideration).
(3) The level of experience of the individuals concerned (this is generally an
``individual level'' consideration).
The relationship is illustrated in Figure 1.
If there is a low level of cultural affinity, a low level of trust and little
mutual experience, then the resulting level of psychic distance between the
individuals or organisations concerned will be very high. A high level of
psychic distance can jeopardise the establishment and/or development of
business relationships. If, however, the converse is true (a high level of
cultural affinity, high levels of trust and experience), there is likely to be a
high degree of psychic closeness, which is beneficial to the establishment of
good business relationships.
Comparing the elements of psychic distance with those of RM suggests a
high degree of similarity (see Table I).
As suggested previously, the components of a successful business
relationship are relatively more or less important depending on the stage at
which one examines the relationship; the same can be said of psychic distance,

Figure 1.
Determinants of psychic
distance between firms
in which, according to Hallen and Wiedersheim-Paul, some determinants may The importance
be relatively more important than others: of psychic
Depending on the stage of evolution of a relationship, these determinants are assumed to distance
influence the psychic distance with various strength (Hallen and Wiedesheim-Paul, 1984,
p. 18).

To illustrate the point, they suggest four stages in the development of a 1401
relationship:
(1) pre-contact;
(2) initial interaction;
(3) development;
(4) mature relationship.
(Whilst relationships can break down at any point after initial interaction, this
paper is concerned with the factors which lead to successful relationship
development.)
At each stage they identify which of the three determinants of psychic
distance has the greatest influence. Table II is an adapted version of their
model, which brings together phases of relationship development and psychic
distance implications.
In the pre-contact stage, psychic distance is considered to be at a medium
level as there is no personal experience of the other party. The term ``medium''
is used here to describe a level of psychic distance that occupies the mid-point
on the continuum between low and high, and is not indicative of a neutral
position. While participants have no personal experience on which to base a

Relationship marketing components Psychic distance components

Table I.
Commitment and trust Trust Components of
Seller's customer orientation/empathy Cultural affinity/liking relationship marketing
Experience/satisfaction Experience and psychic distance

Stage/phase of relationship Principal determinant(s) of

development Level of psychic distance psychic distance

1. Pre-contact Medium Cultural affinity

2. Initial interaction High Cultural affinity and
experience
3. Development Medium Experience and trust Table II.
4. Mature relationship Low Experience and trust Psychic distance and
relationship
Source: Based on Hallen and Wiedersheim-Paul (1984, p. 25) development
European judgement, their attitudes may have been influenced to a certain extent through
Journal of indirect exposure, i.e. word of mouth, written reports etc., or as Hallen and
Marketing Wiedersheim-Paul explain:
34,11/12 . . . the organisation perception intervals will probably be very much affected by national
image (1984, p. 22).

1402 In the initial stage of interaction, the differences between the two parties are at
their most apparent and therefore psychic distance is likely to be high.
If the relationship develops further, it is likely that psychic distance will be
reduced as time goes on (the ``development'' and ``maturity'' stages).
Hallen and Wiedersheim-Paul (1984, p. 24) hypothesise that, initially,
cultural affinity is a major determinant of psychic distance, but if the
relationship develops then it is trust and experience that assume relatively
greater importance.
It should, therefore, be possible to assess the ease of adopting an RM based
strategy, by reference to the stage of relationship development and the three
key variables.

Cultural affinity
The whole basis of inter-cultural business relationships is heavily dependent
on understanding cultural backgrounds as a major factor to ensure success.
Holden and Burgess (1994), for example, cite cultural affinity as a key element
of psychic distance:
High cultural affinity is a major factor reducing psychic distance between two parties . . .
(Holden and Burgess, 1994, p. 33).

Hallen and Wiedersheim-Paul define cultural affinity as operating at the

national level, and feel that it broadly equates to cultural distance. They view it
as:
. . . a concept intended to express the perceived impact of cultural similarity in different
dimensions such as language, business habits, cultural environment, legal environment etc.
(Hallen and Wiedersheim-Paul, 1984, p. 18).

The IMP study, refers to ``liking'' as a major factor in business relationships

(Turnbull and Cunningham, 1981, p. 47). Francis (1991) not only highlights the
importance of interpersonal attraction, but also suggests that cultural
adaptation (to a greater or lesser degree) may be one way of achieving such
rapport. In a similar vein, Ganesan (1994) believes that marketing managers
must understand the concept of time orientation; insufficient understanding of
this can lead to problems in the international context, where high and low
context cultures may have different perspectives of time.
It can be seen, therefore, that, the greater the cultural difference between the
two parties, the greater the cultural distance or the lower the level of affinity/
empathy.
Experience The importance
Experience is influential at the individual level and can be a powerful of psychic
determinant of psychic distance as it influences attitude formation: distance
Individual experience can result in preconceptions regarding suppliers and customers . . .
These prejudices will affect attitudes and behaviour towards those suppliers and buyers
(Ford, 1984, p. 18).

Working abroad is considered important by Turnbull and Welham (1985); they

1403
studied 407 executives from companies located in five European countries, and
conclude that:
. . . the experiences of different cultures and business practices should give improved
customer orientation and reduce psychic distance (Turnbull and Welham, 1985, p. 34).

In an extensive study on ``international orientation'', Dichtl et al. (1990)

constructed a profile of those executives that were not foreign market oriented.
Such people, they claimed,
. . . experience a greater-than-average psychic distance to foreign markets or countries; are
older, have a more limited education level, are less proficient in modern languages, and travel
less to foreign countries than their colleagues; are risk averse, rigid and unwilling to change,
and expect lengthy job-related stays abroad to have a negative effect on their careers and
families . . . (Dichtl et al., 1990, p. 27).

Trust
Obviously, it is far easier to trust someone if one can relate to them; thus trust,
while being a determinant of psychic closeness (or distance), is also a
consequence.
Aulakh et al. (1996) identify the antecedents of trust in cross-border
marketing partnerships and examine the relationship between trust and
performance. They see trust as involving expectations about future behaviour
which is guided by past behaviour of exchange partners. Such expectations can
enhance partnership marketing performance.
Furthermore, trust may vary not only from individual to individual, but
from nationality to nationality, as the criteria by which it is measured may vary
considerably, depending on cultural values and attitudes. For example,
Barsoux (1994) observes that:
. . . in Germany, trust is heavily biased towards a person's dependability. Delivery on
promise, honesty and punctuality all increase trust . . . In other cultures, where time is more
elastic, and words and statements taken less literally, not meeting a deadline is not critical
and will not necessarily lead to a loss of trust.

Inglehart (1991) views the concept of trust at the national level, suggesting that
trust is also determined by cultural closeness or affinity. He found that most
people, perhaps understandably, ``. . . express considerably more trust in their
own nationality than in any other'' (1991, p. 161). In plotting perceptual maps
(``psychogeographical'' representations of how much one nationality trusts
another), some differences are considerable and are linked with elements of
cultural closeness. For instance, UK respondents indicated that the US were
European trusted most, followed by the Dutch and the Danes. Least trusted were the
Journal of Russians, Chinese and French, and Inglehart suggests that cultural
Marketing considerations may well be the reason for these different perspectives. One
might conclude, therefore, that there could be some psychological distance to
34,11/12 trusting these nationalities even before initial contact had been made.
Although the constructs used within the psychic distance literature and
1404 those used within the RM literature are not identical, there would seem to be a
high degree of similarity and/or linkage.
For example, Hallen and Wiedersheim-Paul see cultural affinity as operating
at the national level, whereas the RM literature uses the terms cultural
empathy/customer orientation to emphasise the individual or organisation.
There is, however, a common feature: ``liking'' or positive outlook. This can be
towards a person or organisation (in the RM context) or to a nationality (in the
psychic distance context). Social bonding or closeness is relevant here for both
areas of analysis. The greater the degree of cultural similarity, the greater the
degree of closeness and understanding; this in turn increases the ability to
understand customer wants and needs (customer orientation). It can be seen,
therefore, that the greater the cultural similarity between the two parties, the
lower the cultural distance or the higher the level of affinity/empathy.
Hallen and Wiedersheim-Paul see trust as predominantly operating at the
organisational level. However, organisations are made up of individuals and
are not independent entities. As previously noted, one of Ali and Birley's types
of trust is based on who they are and, in an international context, this can
depend on social similarity. Therefore, trust may vary, not only from individual
to individual or organisation to organisation, but also from nationality to
nationality, as the criteria by which it is measured may vary considerably
depending on cultural values and attitudes (Barsoux, 1994) and on cultural
affinity itself (Inglehart, 1991).
Hallen and Wiedersheim-Paul see experience as predominantly operating at
an individual level, which can influence attitude formation and thus
preconceptions of both buyers and suppliers. Such experience could be of a
particular transaction which would be closely linked to perception of
satisfaction or otherwise, but could be at a more general level in terms of
experience of working abroad, experience of a partner organisation or
experience of a culture itself. In the RM literature, as has been noted, experience
can be an influence on perceived service quality, although this can also come
from knowledge via word of mouth from others' experiences.
Although the Hallen and Wiedersheim-Paul model does not formally include
some RM variables previously considered, such as ``commitment'' and
``satisfaction'', our analysis suggests a number of strong linkages.
For example, as already noted, a number of authors link commitment and
trust very closely (Rotter, 1967; Morgan and Hunt, 1994; Wilson, 1995; Hocutt,
1998).
The variable ``experience'', as used in the RM literature, pertains to
experience of specific commercial relationships, and many see the role of
satisfaction being important (Buchanan and Gillies, 1990; Storbacka et al., 1995; The importance
Rosen and Surprenant, 1998). However, ``experience'', as a component of of psychic
psychic distance, also relates to the experience of a particular culture. Some distance
have indeed linked all or most of the above variables (Gladstein, 1984; Rusbult
and Buunk, 1993; Ganesan, 1994; Kelley and Davis, 1994; and Hocutt, 1998).
In addition, reference was made to the importance of communication,
especially in terms of inculcating trust in a relationship. How much more 1405
difficult, therefore, when the parties trying to establish the relationship cannot
communicate directly with each other?
The development of relationships is as dependent on informal interaction as
it is on interaction in the more formal, workplace environment. Foreign visitors
may be entertained socially at weekends and evenings, giving plenty of
opportunities for establishing rapport. However, this is also culturally
determined; in Southern European markets, for example, it is very rare to invite
business associates to one's house, and most entertaining is done in cafes and
restaurants.
As social interaction is important for many business relationships, the issue
becomes one of relationship building. Foreign language competence becomes
crucial in ``smoothing'' negotiations and social contacts by helping executives to
understand the cultural differences between their background and that of their
overseas colleagues (Swift, 1997); it will also enable them to develop a degree of
trust (Gill and Butler, 1996, p. 81). As Inglehart found in his study, from the UK
point of view:
. . . the Americans, rather than the Swiss, are the nearest and most trusted nationality. While
the Germans share a common language with (most of) the Swiss, the British share one with
(most of) the Americans. A common language and long-standing alliance seems more
important than geographical proximity . . . (Inglehart, 1991, p. 163).

Using an interpreter or translator would tend to introduce a degree of distance

between the two parties and prevent the establishment of close relationships.

Conclusions
It has already been indicated that an RM-based strategy may not be the most
appropriate under all circumstances. The objective of this paper, however, is to
analyse those circumstances under which it is to be employed.
The basic premiss is that, when working in an international context, the
success (or otherwise) of an RM-based strategy is dependent both on the stage
of relationship development and on the degree of psychic distance that exists.
For each stage, the importance of each RM variable differs, which has
implications for the role of communications.
A conceptual model which illustrates the above is offered which utilises
Hallen and Wiedersheim-Paul's original model (see Figure 2). The model deals
with pre-contact, initial interaction, development and maturation stages of
relationships. The ``break-off'' stage has been omitted as being symptomatic of
a failed relationship this being beyond the scope of the present study.
European
Journal of
Marketing
34,11/12

1406

Figure 2.
Psychic distance and
implications for
international RM
development

Pre-contact stage
At this stage, as contact has not been established, there is no relationship. In
terms of market development, this is likely to correspond to the ``market
scanning'' stage of internationalisation, during which potential markets are
identified through secondary and then primary research.
No relationship means that there is nothing with which to make
comparisons. Consequently psychic distance is likely to be at the ``medium''
level indicating that, whilst a certain degree of uncertainty (and perhaps
trepidation) is likely to be present, the lack of contact prevents executives from
either reducing or increasing this level of uncertainty.
As contact has yet to be made, commitment/trust, experience and
satisfaction are not relevant, although under certain circumstances national
stereotypes may be influential in making executives more or less pre-disposed
to trusting prospective buyers or suppliers.
The key criterion at this stage is empathy, or more specifically cultural
empathy. The importance of cultural empathy/liking has already been referred
to, particularly in the way it can influence relationship development from the
outset. It is, therefore, important to use this pre-contact period to develop a The importance
positive attitude towards the culture of potential business partners. A of psychic
communication strategy for developing cultural awareness and empathy distance
(affinity) is therefore likely to be relevant here.

Initial interaction
Contact has been made and the relationship is beginning to develop. It is at this 1407
stage that ``us and them'' comparisons are likely to be made, as those
differences that do exist become apparent for the first time. This means that the
level of psychic distance is likely to increase.
The role of communication remains focused on the development of cultural
empathy and liking, as a precursor to relationship development. However,
some staff are now likely to have had some experience of cross-cultural
interaction. Whilst the criterion ``experience'' and particularly initial customer
satisfaction now become important, commitment and trust are only in their
infancy.
These initial stages of relationship development are the most risk laden and,
if relationships do fail, it is most likely to be at this point.

Development
If the relationship has not broken down, it is safe to assume that the level of
psychic distance has now decreased: in other words, the parties concerned have
become psychologically ``closer'' to each other, sharing a greater level of mutual
understanding and empathy.
The role of communication now consists of reinforcing those positive
experiences accrued thus far, in addition to using this information to develop
commitment and trust between both parties.

Mature relationships
Mutual familiarity and understanding should, by this stage, have contributed
to a significant reduction in psychic distance. Communications will now be
needed to maintain existing levels of trust and commitment and to continue to
reinforce positive experiences and enhance satisfaction. The key elements are
now trust/commitment and, to a lesser extent, experience/satisfaction.
Commitment and trust are, at this level, the most important criteria of
relationship development and, whatever other strategies are identified, the
maintenance and development of trust should take priority.

Future research implications

This paper suggests that, as relationships develop on a continuum from the
pre-contact to mature stage, the relative importance of the variables that
influence both psychic distance and relationship marketing change. This being
the case, there would seem to be an opportunity for further research to test the
validity of the proposed model and, as a result, propose RM strategies for
different stages of international relationship development.
European Relationships can be examined within various contexts, such as business to
Journal of business and consumer markets and whether services and/or products are
Marketing involved. Taking these sectors separately, it should be possible to develop a
means of assessing levels of psychic distance and correlating these with levels
34,11/12 of empathy, experience, satisfaction and commitment/trust for each level of
relationship development.
1408 Issues to be addressed would include:
(1) A measurement of psychic distance through analysis of:
. the perceived level of cultural closeness with the overseas partner;
. positive and negative experiences of working with overseas business
partners;
. the interpretation of the term ``business trust'' and examples of high
and low levels of trust.
(2) An identification of the stages of relationship development through a
consideration of:
. the duration of an existing relationship;
. the extent to which companies assess business partner satisfaction
with a specific relationship;
. the reasons given for successful relationship commitment and
development.
(3) The extent to which foreign language competence is seen as
instrumental in relationship development.
If the model is valid, there should be a positive correlation between RM success
and decreased levels of psychic distance. As a result, specific communication
strategies can be devised.
Such empirical testing is currently being undertaken in the travel and
tourism sector. Jenkins (1991, p. 274) has suggested that, within the tourism
sector, the key role in relationship development is that of the tour operator; it
was, therefore, felt that this group should be the focus of the exploratory
research. Research into the role of RM in services has produced the recurring
themes of customer satisfaction, mutual trust and commitment (Voss and Voss,
1997), all of which are key elements within our model and by its very nature the
tourism sector is highly globalised and is characterised by a high level of
interdependence between sectors: e.g. tour operators, travel agents, airlines and
hotels.
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