Distance in the eye of the beholder: an exploration of the nomological network of psychic distance

Psychic distance is understood as perceived differences held towards a host location and/or the perceived difficulties of doing business there. This concept has four distinct characteristics: it is perceptual (i.e. it refers to what is perceived, not to what is), individual-level (i.e. it is formed in the cognition of individuals), dynamic (i.e. it can change over time), and asymmetrical (i.e. respondents from the home country do not perceive the host country in the same way as the respondents from the host country perceive the home country).
The goal of this thesis is to explore the nomological network of psychic distance. First, I assess its evolution through roughly the last 50 years of academic research. Second, I calculate dyadic aggregated scores of psychic distance based on the individual perceptions of thousands respondents from different home countries. Third, I investigate the micro-level and macro-level antecedents of these psychic distance scores. Finally, I show that psychic distance has a significant impact on foreign direct investment (FDI): while perceived differences deter FDI, perceived difficulties seem to encourage it.