Between Neighbours’ Heat and Colonial Ties’ Comfort: Does Distance Really Matter?

This paper examines the role of firm capabilities, psychic distance and choice of country risk variables in the entry mode decision between developed and emerging countries. The conceptual model extends previous studies built on gravity models by considering the potential effect of colonial ties on the entry mode. The empirical test applies an ordered logit model on a survey sample of 462 Portuguese firms. A subsample of 143 firms with internationalisation in the former Portuguese colonies was rerun to be compared with the total sample results. The findings suggest that firm capabilities maintain their importance in the presence of colonial ties, whereas psychic distance and perceived risk seem to be distorted or absent from the decision process of the market entry.