Mitigating Psychic Distance and Enhancing Internationalization of Fintech SMEs from Emerging Markets: The Role of Board of Directors

Prior research suggests that corporate boards and directors play important roles in firm strategy and performance. In this paper, we examine an important yet underexplored avenue and focus on their role in overcoming multilevel psychic distance (PD) faced by internationalizing small and medium-sized enterprises (SMEs) originating from an emerging market. Analyzing Indian Fintech SMEs, using multiple case studies, our findings reveal that boards contribute important network-level resources and knowledge about foreign markets, which in turn assists internationalizing SMEs in mitigating PD. We demonstrate that the human and social capital of boards’ play important, yet, distinctly different, roles in mitigating PD at pre- and postinternationalization phases. At the pre-internationalization phase directors’ prior international and industry experience, as well as board interlocks and prior connections, are most valuable, whereas, at the post-entry phase, transnational boards, and those with stronger trust-based personal relationships (i.e., greater depth of social capital (Haynes and Hillman, 2010), facilitate faster experiential learning. Taken together, our findings contribute novel insights into the mechanisms through which boards affect the outcomes of firms operating, and originating from, extreme institutional environments. We further draw implications for research and practice.