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The Most Dangerous Market May Be the One That Feels Familiar

Writer: Prof George Batsakis
Prof George Batsakis
5 days ago
5 min read

Imagine that your company is considering two foreign markets. One looks obviously different. Unfamiliar rules, different social norms, perhaps a political system you do not know well. The other feels reassuringly familiar. The business culture seems recognizable, consumers look understandable, and the regulatory context does not appear radically different to that of your home country.


Which one worries you more? Most people would probably say the first. Yet the second may contain a bigger danger. When something looks unfamiliar, we expect challenges and prepare for them. When it looks familiar, we are more likely to assume that we already understand it. We make versions of the same mistake when choosing a supplier, accepting a job, hiring someone, or investing in something that looks like what worked for us before. The problem is simple. We do not make decisions based on reality alone. We make them based on our perception of reality.


Why good decision-making is harder than it looks

Managers spend a considerable part of their professional lives making decisions. However, a major problem they encounter is the limited confidence in the quality of these decisions. A McKinsey Global Survey of more than 1,200 respondents found that 54% spent more than 30% of their working time making decisions, while 61% said most of that decision-making time was used ineffectively. Only 37% said their organizations made decisions that were both high-quality and fast (McKinsey & Company, 2019).


Managers spend a considerable part of their professional lives making decisions. However, a major problem they encounter is the limited confidence in the quality of these decisions. A McKinsey Global Survey of more than 1,200 respondents found that 54% spent more than 30% of their working time making decisions, while 61% said most of that decision-making time was used ineffectively. Only 37% said their organizations made decisions that were both high-quality and fast (McKinsey & Company, 2019).


Figure 1. Decision-making takes time - and much of it is not used well. Source: McKinsey Global Survey (2019), 1,259 respondents.
Figure 1. Decision-making takes time - and much of it is not used well. Source: McKinsey Global Survey (2019), 1,259 respondents.

The harder question is not simply whether managers have enough information, but how they interpret it. The same evidence can look reassuring to one person and threatening to another. Once an initial impression is formed, it can be surprisingly difficult to shake.


Distance is real, but so is how we interpret distance in our minds

Companies expanding abroad face differences between countries. Some are formal: laws, regulations, political systems, consumer protection, and rules governing ownership. Others are informal: social norms, values, attitudes and accepted ways of doing business. We, international business scholars, often describe these differences as institutional distance. But managers do not respond directly to that distance. They respond to what they believe the distance to be.


That distinction is at the heart of our recent study, published in Long Range Planning (Azar et al., 2026). Using an experiment with 208 managers who had international business experience, we presented participants with different foreign-market scenarios and compared the institutional differences built into those scenarios with how managers actually perceived them. Underestimating formal institutional differences made foreign markets appear more attractive, while overestimating formal and informal differences made them appear less attractive. Our findings basically show that:


Optimism can be costly, but so can excessive caution. Underestimating differences may lead managers to enter without preparing sufficiently for unfamiliar rules or ways of doing business. Overestimating them may cause firms to reject a viable opportunity because it appears more foreign or risky than it really is.


When exaggerating differences makes opportunities disappear

Our findings are especially clear when we look at overestimated formal differences. As Figure 2 shows, the more managers exaggerated differences in areas such as regulation, political structures, and economic institutions, the less attractive the foreign market became. The decline was much steeper among managers with a more intuiting cognitive style than among those with a stronger sensing orientation, which is more closely associated with concrete information and systematic assessment (Azar et al., 2026).


Figure 2. Overestimating formal institutional distance reduces perceived market attractiveness more sharply for managers with an intuiting orientation. Source: Azar et al. (2026), Figure 1; reproduced under CC BY 4.0.
Figure 2. Overestimating formal institutional distance reduces perceived market attractiveness more sharply for managers with an intuiting orientation. Source: Azar et al. (2026), Figure 1; reproduced under CC BY 4.0.

The implication is not that intuition is bad. Strategic decisions rarely arrive with complete information. The danger arises when intuition becomes confidence without further confirmation and calibration: “I know this market,” “these customers are basically like ours,” or, in the opposite direction, “that country is too different for us.”


Earlier experimental research in the Journal of International Business Studies reaches a related conclusion. Baack et al. (2015) showed that confirmation bias can shape managers' perceptions of psychic distance. What this study shows is that people tend to process information in ways that reinforce what they already believe about foreign environments. More information does not automatically correct a bad assumption if we selectively notice the information that agrees with us.


The solution: thinking style can amplify the mistake

A further finding from our study is that misperceptions do not affect everyone in the same way. Figure 3 illustrates this clearly. As managers increasingly overestimated informal differences - the less visible world of values, norms and social behaviour - market attractiveness fell sharply among managers with a more perceiving orientation. Among those with a more judging, structured decision style, the assessment remained comparatively stable (Azar et al., 2026).


The point is not that one personality type always makes better decisions. Our preferred way of processing uncertainty becomes part of the decision itself. Two competent people can examine the same market, candidate, investment, or strategic opportunity and genuinely “see” different things.

This is why a useful managerial capability is cognitive flexibility: noticing when evidence challenges a first interpretation.


A lesson beyond foreign markets

The same logic applies to everyday decisions. You may prefer a job or professional role because the organization feels similar to somewhere you previously succeeded. You may trust a supplier because the people communicate in a familiar way. You may dismiss a candidate because their background seems too different from your usual hires. Or you may reject a new technology because it feels too far from how your organization normally works.


In each case, perceived distance can quietly substitute for actual analysis.

A useful discipline is to treat familiarity - and unfamiliarity - as a hypothesis rather than a fact. Before an important decision, ask: What do I actually know? What am I assuming because this feels familiar or foreign? What evidence would prove my initial view wrong? And who understands this environment better than I do? These questions make the difference between observation and interpretation substantially important.


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