Psychic distance and performance of MNCs during marketing crises

When multinational corporations face foreign marketing crises, the psychic distance between the home and host country represents a distinct challenge. This paper examines the curvilinear relationship between psychic distance and firm performance during marketing crises, and the moderating role of marketing capabilities. We test our hypotheses using an event study on a panel dataset of 217 firms based in 19 countries facing crises in 41 host countries. The results show that (1) marketing crises are most harmful when the host country is either very close or far away and (2) firms can mitigate this effect with marketing capabilities.