Entry in a Psychically Distant Market: Finnish Small and Medium-sized Software Firms in Japan

Abstract

This paper investigates the market entry and entry mode choice of eight small and medium-sized Finnish software firms in the Japanese market. The findings in this study reveal that, despite of the psychic distance between Finland and Japan, most of the firms entered Japan at a very early stage of their internationalization process by using direct entry modes. This was mainly due to the market size, sophisticated industry structure, and requirements for intensive cooperation with the customers during the sales process. The firms were able to overcome psychic distance by hiring local employees and western managers who already had working experience in the Japanese market. This finding indicates that psychic distance is based on a manager’s personal experiences and feelings about how distant a country is rather than on cultural differences between the countries.