Psychic distance encompasses the factors determining the flow of information between organization and market (Johanson & Wiedersheim-Paul, 1975). This exchange of information might be influenced by home and foreign culture or language (Evans, Treadgold & Mavondo, 2000). Sousa and Lages (2011) define psychic distance as “the individual’s perceived differences between the home and the foreign country” (p. 203). Used equivalently to cultural distance, psychic distance is measured according to Hofstede’s (2001) cultural dimensions in a research instrument developed by Kogut and Singh (1988). Sousa and Lages (2011) however, differentiate between distance referring to country and people characteristics in the Psychic Distance Scale. Country characteristics refer to differences such as infrastructure, development and competitiveness, whereas people characteristics categorize income, lifestyle, purchasing power, and language, among others.
Perceived proximity is “a dyadic and asymmetric construct which defines one person’s perception of how close or how far another person is” (Wilson et al., 2008, p. 981). Perceived proximity differs from objective proximity since perceived proximity is only apparent to the individuals involved. It consists of a cognitive and an affective element. Whereas the cognitive component is assessed in terms of the rational state of the focal person, the affective component takes emotional elements into account.
Wilson and colleagues (2008) claim that working at a high level of distance does not necessarily lead teams to a sensation of perceived distance by any of the involved individuals. The researchers suggest physical proximity and perceived proximity at best to be mediated, with communication and identification having even bigger effects on perceived proximity. Communication as well as identification is expected to lower the perceived distance between leaders and subordinates. The more detail in which one is able to imagine the other, the less distant they perceive themselves from their counterpart, due to a declining feeling of uncertainty. Common identities (Wilson et al., 2008, p. 986) can be established through creating a common ground of understanding and stimulating a positive image of one another. Social proximity may result in robust norms and intensified learning. Communication may thus reduce perceived distance and, conversely, amplify perceived proximity. Gibson et al. (2009) investigate a similar construct which they refer to as leader-follower perceptual distance. The authors define distance as “the degree to which there are significant variations in perceptions of the same social stimulus" (Gibson et al., 2009, p. 63). Perceived proximity and perceived distance both focus on the individual’s mental state. Earlier work by Murphy and Ensher (1999) found that followers with a high degree of self-efficacy were better liked and perceived as more similar by supervisors. Those subordinates also received higher performance ratings. Leaders also liked subordinates better, the more extensive job experience they had.