In choosing which countries to invest in, companies sometimes choose psychic proximity to their own country. Psychic proximity can best be defined as
A) countries that "mimic" the host country in terms of language and culture.
B) countries that the host country's management team have visited.
C) countries close to the "host" country in which the company feels that they can infiltrate quickly and profitable.
D) countries close to the "host" country in which the company feels comfortable with the language, laws, and culture.
E) countries close to the "host" country in which the company can easily transport their products.

Question

Quizplus · Accepted Answer

Psychic proximity refers to the perceived cultural, linguistic, and institutional similarity between the home country and the target country. Companies are more likely to invest in countries that share similar language, laws, and culture to their own, as it facilitates communication, reduces uncertainty, and enhances the adaptability of the company to the new environment. Therefore, option D is the best answer.

In Choosing Which Countries to Invest In, Companies Sometimes Choose