Venturing to Distant Markets-Polish Firms in Latin America

The objective of this paper is to shed light on the understudied phenomenon of expansion of Polish firms to distant markets. Authors ask the following questions: (1) What is the current state of internationalisation of Polish firms in Latin America, in both quantitative (i.e. value of exports and FDI) and qualitative terms (i.e. characteristics of key exporters and investors); (2) What are the main distance-related barriers to internationalisation of Polish firms in Latin America. In order to describe the scale, scope and characteristics of Polish exports and investments in Latin America, authors analyse publicly available information, macro-level data and micro-level data, collected from the press and financial statements of Polish firms present in Latin America, combined with the information received from the Trade and Investment Promotion Sections of the Polish Embassies. In order to assess the distance between Poland and Latin America, thus indicating the major barriers to internationalisation of Polish firms in this region, the psychic distance measures elaborated by Hakanson and Ambos and the CAGE framework offered by Ghemawat are employed. This paper contributes to the discussion on whether the ‘go global’ strategy is viable for Polish firms and whether it should be supported by the State.


Introduction
Polish firms typically start their internationalisation process, and continue their expansion, in the markets proximate to Poland1.As a result, the geographical structure of Polish trade and foreign direct investment (FDI) is not diversified.In 2015, 89% of Polish exports went to Europe and Central Asia, with top ten trading partners (i.e.Germany, Czech Republic, UK, France, Italy, Netherlands, Russian Federation, Sweden, Spain and Hungary) accounting for 66% of Polish exports2.Europe accounted for 88% of Polish outward FDI stock in 2015.The main recipients of Polish outward FDI in 2015 were Cyprus, Luxembourg, Czech Republic, Netherlands and Switzerland, although, except for Czech Republic, these investments typically were not productionor sales-oriented.In terms of the number of investment projects (both greenfield and M&A), the most popular destinations of Polish ventures abroad are Germany, Lithuania, Czech Republic and UK3.In 2014, 61.4% of foreign subsidiaries of Polish firms were located in the European Union (EU)4.
Thus, Polish firms follow the path of 'regional multinationals'5, and very rarely reach out to global (i.e.outside the EU) markets.This strategy is in line with both the Uppsala model of internationalisation (at the early stage of internationalisation firms limit their international presence to psychically-close markets)6, as well as the studies on performance outcomes of 'regional' versus 'global' MNCs.The latter stream of research indicates that home region-focused expansion yields faster growth that geographically dispersed expansion path7.The international behaviour of Polish firms is also consistent with the International Business (IB) literaturę, indicating the crucial role of distance in shaping the firms' internationalisation strategy8.
Most of the IB studies conducted in Poland focus on 'typical' patterns of internationalisation and investigate firms operating in regional markets9.Recently, there have been numerous calls to diversify the structure of Polish exports and FDI, increasing the presence of Polish firms in the global (as opposed to purely regional) markets10.These calls have been supported by a number of initiatives sponsored by the Polish government.In 2012, the Polish Ministry of Economy initiated two programmes aimed at increasing the global presence of Polish firms: Go China and Go Africa11.One of the key goals of the Polish government for 2016 involved further diversification of export, measured by the increase in the share of export to distant markets (i.e.outside the EU) in the total Polish export12.Mexico has been chosen as one of the five key markets where the Polish government will conduct an intensive promotion of Polish industries13.Another initiative aimed at increasing the presence of Polish firms in distant markets, is the governmental Programme of Financial Support for Exporters14.This programme, realised through the state development bank BGK, involves support for Polish firms on high-risk markets, based on an assumption of risk-sharing between the company expanding abroad and BGK.
The calls for Polish firms 'going global' have not been followed by academic research, focusing on the opportunities and barriers to internationalisation in regard to distant markets.This paper aims at addressing this research gap, by focusing on the activities of Polish firms in one of the 'distant' regions, that is Latin America.
Despite its economic potential15, and ethnic Polish minorities active in this region16, the presence of Polish firms in Latin America is very limited.In 2015 the region accounted for only 0,86% of Polish export and 0,87% of Polish outward FDI stock17.
In this paper the following questions are being asked: (1) What is the current state of internationalisation of Polish firms in Latin America, in both quantitative (i.e.value of exports and FDI) and qualitative terms (i.e.characteristics of key exporters and investors)?; (2) What are the main distance-related barriers to internationalisation18 of Polish firms in Latin America?Our contribution to the IB literature is twofold.First, on a theoretical level, we shed light on the understudied phenomenon of the expansion of Polish firms to very distant markets, providing a better understanding of the role of distance in the internationalisation process.Second, on a practical level, we contribute to the discussion on whether the 'go global' strategy is viable for Polish firms and whether it should be supported by the public policy measures.The article is structured as follows.First, the literature review is presented and theoretical foundations for the study are provided.Next, the research methods are being discussed.Then, the reader is being acquainted with the results of the conducted analyses.The theoretical and practical implications of the findings and the limitations of the study are also being discussed.18 IB literature indicates a n u m b er o f barriers to internationalization, typically differentiating between internal (i.e.firm-specific, related to the company's strategy and resources) and external (i.e.environmental-specific, related to the conditions in the target m arket and the hom e country context),

Role o f Distance in th e Internationalisation Process
Theories of foreign trade and International Business are based on the assumption that the location of home and host markets, and the resulting distance between them, play a fundamental role in shaping the internationalisation process and its outcomes.The macro-level gravity models of trade, posit that the geographic distance between two countries is a key determinant of the value of trade between these countries19.The micro-level IB theories assume that the liability of foreignness, resulting from operating in the unfamiliar market, is the key barrier to firm's internationalisation20.They also point to the fact that there are many sources of 'liability of foreignness' , other than purely geographic distance, such as differences in language, education, business practices, level of economic development21, national culture 22, institutional and political environment23, etc.Thus, the concept of distance is multidimensional and may not be reduced to geographical distance only.
A multidimensional framework of distance has been offered by Ghemawat24.His model is called CAGE, which is an acronym for: cultural, administrative, geographic, economic dimension of distance.Cultural distance refers to differences in language, religion and norms and values25.Extant research reveals that cultural distance increases the pressure on local responsiveness (as opposed to global integration)26, thus motivating firms to adapt their marketing mix27.Findings relating to the role of cultural distance in other internationalisation choices (e.g. market selection, mode of entry) and their outcomes, have been inconclusive.For example, Edwards and Buckley28 revealed that cultural proximity was the main attractor for Australian firms entering UK, whereas Robertson and Wood29 found cultural distance to be the least important determinant of location choice.In a similar vein, there are studies revealing that high cultural distance increased the likelihood of choosing full-control modes of entry, that is wholly owned subsidiaries30, increased the likelihood of choosing joint ventures31 or did not affect the choice of entry mode32.Studies on the performance outcomes of internationalisation to culturally distant countries, again, yielded mixed results33.
Inconsistencies in findings relating to the role of cultural distance in internation alisation have been explained by difficulties in measuring national culture, and consequently, cultural distance.In IB literature, cultural distance is typically measured with the Kogut and Singh's34 index, based on dimensions offered by Hofstede35.Originally, the Hofstede framework, developed based on IBM database, covering 64 countries and created in 1967-1973, included four dimensions: power distance, uncertainty avoidance, individualism (vs.collectivism) and masculinity (vs.feminity).Recently, the Hofstede framework has been severely criticised both by psychologists36 and IB scholars37, and there have been calls to use more modern approaches to measure culture, one of them being the GLOBE project38.
Administrative distance encompasses differences in administrative systems (resulting, for example, from the lack of colonial ties), currency, participation in international organisations and agreements (e.g.free market agreements).It is also determined by the level of political proximity and increases if the countries are politically hostile 39.Administrative distance is strictly related to institutional distance40, and both terms are often used interchangeably41.The concept of institutional distance, grounded in institutional theory, relates to the differences in regulative, normative and cognitive institutions42 or, in other words, formal and informal institutions43.In IB research, institutional distance is typically measured with the use of Worldwide Governance Indicators, encompassing six dimensions: voice and accountability, political stability and absence of violence, government effectiveness, regulatory quality, rule of law, control of corruption44.Existing research reveals that administrative distance plays a crucial, yet often underestimated, role in export strategy.Frankel and Rose45 indicate that, while common frontier (corresponding to 'geographic distance') and common language (corresponding to 'cultural distance') increase the trade between two countries by 80% and 200% respectively, administrative factors such as common currency and former colonial ties increase the volume of trade by 340% and 900% respectively.Administrative distance is also important to FDI.Firms entering markets with high institutional distance prefer joint ventures over full control entry modes and are less likely to pursue the strategy of global integration46 (as opposed to local responsiveness).Institutional distance is particularly relevant to developed market firms entering emerging markets, characterised by 'institutional voids '47.Geographic dimension of the CAGE model corresponds to the geographic dis tance concept included in the gravity models of foreign trade.It is typically measured as a distance between the capitals of two countries48.However, Ghemawat49 points to the fact that this dimension encompasses also differences in time zones, climate and diseases, as well as the lack of common border.Extant research reveals that, despite the fact that transportation and communication costs decrease, geographic distance still plays an important role in firms' internationalisation strategy.Hummels50 found that 25% of world trade is conducted between countries sharing a border, and 50% -between countries located at a distance of less than 3000 kilometres.While geographic distance constitutes an important barrier to export, its impact upon FDI is less clear.On the one hand, FDI in distant countries may serve as an alternative to export, limiting the transportation costs.On the other hand, geographic distance increases the costs of conducting business abroad (e.g.monitoring costs), thus decreasing the volume of FDI51.Boeh and Beamish52 revealed that the choice of target market and entry mode is determined not by distance measured in kilometres, but rather by travel time.Moreover, they proved that long travel time between headquarters and subsidiary motivates companies to pursue joint ventures, in order to limit the monitoring costs.
Economic distance relates to the differences in the level of economic development, reflected in the costs of factors of production (especially labour) and the availability of technology53.The concept of economic distance, though implicitly included in technological theories of foreign trade, such as the Vernon's54 model, has rarely been explicitly used in IB studies55.In one of the few studies applying this concept, Makino et al.56 revealed that companies investing in countries with lower level of economic development exploit their existing resources (e.g.knowledge) and seek access to natural resources, while companies entering more developed markets explore new resources (e.g.seek new technologies).In a follow-up study building upon the findings of Makino et al.57, Tsang and Yip58 investigated the impact of eco nomic distance upon FDI performance.They revealed that high economic distance contributes to better performance, since it allows one to achieve benefits resulting from exploitation (in less developed countries) or exploration (in more developed countries) of resources.
The CAGE framework describes the objective' differences between two countries, measurable based on macro-level data.However, it has been argued that decisions in the internationalisation process are driven by the 'psychic distance' , that is differ ences between two countries, subjectively perceived by decision-makers59.'Objective' differences, encapsulated by the CAGE framework play a role of 'psychic distance stimuli'60, that is, they strongly influence the 'subjectively' perceived distance.Psy chic distance has been defined as 'distance between the home market and a foreign market, resulting from the perception of both cultural and business differences'61.Thus, psychic distance is multidimensional, and encompasses differences in culture, political systems, economic development62, religion, language63, etc.Moreover, it does not refer to objective' differences between the countries, but rather to the perception of these differences by decision-makers (i.e.managers and entrepreneurs).A large body of research on the antecedents and consequences of psychic distance, recently reviewed by Ciszewska-Mlinaric and Trąpczyński64, indicates that psychic distance influences market selection, modes of entry, sequence and speed of internationalisation, international strategy (e.g. the level of market adaptation) and performance outcomes of internationalisation.
Venezuela65.In order to describe the scale, scope and characteristics of Polish exports and investments in Latin America, data from various sources is combined.First, macro-level statistics on trade and investment available from the General Statistics Office and the National Bank of Poland are used.Second, detailed information on the activities of Polish firms in Brazil and Argentina, provided to the author by the Trade and Investment Promotion Sections of the Polish Embassies in respective countries is used.Third, this information is compiled with data obtained through desk research, based on the review of Polish and foreign press and companies' websites and financial statements.
In order to assess the distance between Poland and Latin America, thus indicating the major barriers to internationalisation of Polish firms in this region, we employ the psychic distance measures elaborated by Hakanson and Ambos66 and a framework offered by Ghemawat67.In order to assess the cultural dimension of distance, the measures by Hofstede68 and GLOBE69 are used, and differences in language and religion are discussed, as well as the role of Polish diaspora in Latin America.In order to assess the administrative dimension of distance, the Worldwide Governance Indicators70 are used.A brief overview of institutional relationships between Poland and Latin America (e.g. economic diplomacy) is also presented.The geographic dimension of distance using the number of kilometres and travel time is assessed.In order to assess the economic distance, the GDP per capita and the GINI Index are used.Due to unavailability of data, in some cases the number of used Latin American countries in the research is being limited (e.g.Hofstedes scores are available only for 13 Latin American countries).
Two largest Polish trade partners in Latin America are Brazil and Mexico.In 2015, Polish export to Brazil amounted to 397.6 million USD (25% decrease in comparison to 2014)71 and included mostly fertilisers, rubber, telecommunications equipment and parts and accessories of the motor vehicles72.The decrease in Polish-Brazilian trade was due to economic crisis in Brazil, combined with high duties and complicated import procedures in this country.Polish export to Mexico amounted to 653.6 million USD and included mostly telecommunications equipment, parts and accessories of the motor vehicles, parts of furniture, razors, video games consoles, trucks, small aircraft, pharmaceuticals73.Polish export to Panama included mostly machinery and transport equipment and chemicals74.Except for Brazil, Mexico and Panama, the annual volume of Polish export to Latin American countries does not exceed 100 million USD per country.One of the destination with high potential for future development of Polish export is Chile, where an increased activity of Polish cosmetic industry is observed75.Most of the Polish export to Latin America is conducted by Polish subsidiaries of multinational corporations.For example, within 25 largest exporters to Brazil there are only 6 independent Polish companies: Medcom, Azoty, ND Service, ADOB, Selena and Synthos (Table 2).The remaining part of the largest exporters to Brazil are the Polish subsidiaries of multinational corporations, typically headquartered in Western Europe or US.Polish FDI in Latin America is very low, both in terms of value (see Table 1) and the number of foreign ventures.In 2014, there were 29 subsidiaries of Polish firms in South America76.Polish FDI in Latin America focuses on Chile, Brazil, Mexico and Panamas offshore banking sector.However, Polish FDI in Chile is nearly exclusively attributable to one project: KGHM's investment in Sierra Gorda mine in 2012.Before this transaction, Polish stock of FDI in Chile did not exceed 5 million USD.In terms of the frequency of the investment projects, the most common destination of Polish FDI has been Brazil.Major foreign direct investments of Polish firms in Latin America are presented in Table 3.
Investment projects in Latin America have been conducted by mature firms, most of them well-established in the domestic market and in markets proximate to Poland.Moreover, some of them, before investing in Latin America, already had a significant export experience in this market (e.g.Synthos), and FDI experience in more proximate markets (e.g.Lug Group, Selena).Thus, it may be concluded, that key Polish investors in Latin America followed the Uppsala model of international-isation77: they gradually increased the distance and commitment to foreign markets and FDI in Latin America constituted a mature stage in their internationalisation lifecycles.However, even for large, experienced Polish firms, FDIs in Latin America are difficult, as evidenced by some failed (e.g.Ciech, City Interactive, FM Group, Nowy Styl, Synthos) or challenging (e.g.KGHM) projects.

Cultural distance
Latin America is often depicted as a homogeneous region78, with a common cul-ture79.A number of studies grouping national cultures based on values and attitudes have found that Latin American countries form a common cluster80.A detailed anal- ysis of cultural dimensions by Hofstede81 (see Figure 1) and GLOBE82 (see Figure 2) reveals, however, im portant heterogeneities between Latin American countries.Moreover, it enables to detect similarities and differences between Poland and Latin American countries.Power distance is defined as 'the extent to which the less powerful members of institutions and organisations within a country expect and accept that power is distributed unequally'83.Poland and most of the Latin American countries (with the exception of Costa Rica and Argentina) score relatively high in this dimension.They are, therefore, hierarchical societies, where subordinates expect to be told what to do and an ideal boss is a 'benevolent autocrat'.Moreover, Latin American leadership is based on paternalism, i.e. 'making decisions for employees in a parental way that engenders care and loyalty, as well as protecting working relationships'84.Paternalism has its roots in the 'hacienda' system, where the owner (patrón) 'lorded over the employees and their families'85.Hierarchism related to high power distance is reflected in honorific expressions, used extensively in Polish ('Panie Dyrektorze' , 'Panie Magistrze (...)' , Spanish (Senor Director) and Portuguese ('O Senhor Doutor').Individualism (vs.Collectivism) addresses 'the degree of interdependence a society maintains among its members'86 and has to do with whether members of a society define themselves in terms of 'I' or 'We'.Latin American countries score rather low on this dimension, thus being collective societies, which manifests itself in long-term commitments to the group members (e.g.families, extended families, neighbourhoods) and loyalty towards a group over-riding other societal rules.Poland, in turn, is an individualistic society, and its members exhibit a preference towards loosely-knit social structure.
Uncertainty avoidance reflects the level of anxiety caused by a fact that the future is unknown, that is the extent to which members of a culture feel threatened by ambiguous, unknown situations87.Poland and the Latin American countries score high on this dimension, which indicates that these countries may share an 'emotional need for rules' (even if these rules are not respected) and intolerance of unorthodox beliefs and ideas.Uncertainty avoidance, in the Hofstedes interpretation, is grounded in historical experience of non-democratic regimes, protecting ideological purity (as opposed to democracy and pluralism).
Masculinity (vs.feminity) reflects the extent to which the society is driven by 'competition, achievement and success, with success being defined by the winner / best in field'88.Poland and some of the Latin American (i.e.Venezuela, Mexico, Ecuador, Colombia) countries score high on this dimension, thus being masculine societies where emphasis is put on competition and performance, while managers are expected to be decisive and assertive.However, Latin America is a very heterogeneous region, with some countries scoring exceptionally low on masculinity.The most 'feminine' country in Latin America (and in the world) is Costa Rica.This is reflected by a general fear of personal criticism as well as high acceptance of women in business.'Feminine' values (i.e.caring for the quality of life and the well-being of others) are also evidenced by the fact that Costa Rica wants to become the first carbon neutral country in the world.
The GLOBE Project constitutes an alternative to Hofstedes framework and describes national cultures on 9 dimensions89.The 1st triad (performance orientation, future orientation and uncertainty avoidance) is presented in Figure 2. GLOBE indicates that Poland and Latin American countries rank low on performance orientation.Therefore, these societies do not encourage innovation, excellence and high standards90.Moreover, Poland and Latin American countries score very low on future orientation.The perception of time in Latin America is polichronic (as opposed to monochronic), i.e. numerous duties are dealt with simultaneously (not in a linear order), with many duties left aside, to be dealt with in the future (the concept of mańana).Related to future orientation is another dimension, i.e. uncertainty avoidance, on which Poland and Latin American countries score very low.Thus, these societies are characterised by disorder and lack of respect to rules and regulations91.The 2nd triad of GLOBE dimensions (power distance, in-group collectivism, institutional collectivism) is presented in Figure 3.The results for power distance are consistent with Hofstede's work and indicate that Poland and Latin American countries score relatively high on this dimension, with Poland scoring higher than Bolivia, Costa Rica and Mexico, and lower than the remaining Latin American countries under study.Moreover, Poland and Latin American countries score high on in-group collectivism, which indicates that members of these societies demonstrate pride, loyalty and cohesiveness in their families.Conversely, Poland and Latin American countries score medium-low on institutional collectivism, therefore, they do not value collective actions on a public level.

91
According to Hofstede, 'uncertainty avoidance' for Poland and Latin America is exceptionally high, while according to GLOBE, it is exceptionally low.This inconsistence is due to fact that the definition and operationalisation of this dim ension in the GLOBE Project is different than in Hofstedes work and moreover, the analysed dim ension o f GLOBE focuses on the aspect of cultural 'practices' (as opposed to cultural 'values'), see: P. Boski, op.cit.

2
The 3 rd triad of GLOBE dimensions is presented in Figure 4. Poland scores higher than all the Latin American countries under study on gender egalitarianism, defined as 'the degree to which a collective minimises gender inequality'92.In terms of assertiveness, defined as 'the degree to which individuals are assertive, confrontational, and aggressive in their relationships with others'93, Poland and Latin American 92 Ibidem, p. 30.93 Ibidem, p. 30.countries rank medium to high, with Poland scoring lower than El Salvador, Brazil, Venezuela, Argentina and Colombia, and higher than Bolivia, Costa Rica, Ecuador and Guatemala.Poland scores lower than the Latin American countries (with the exception of El Salvador) on humane orientation, defined as 'the degree to which an organisation or society encourages and rewards individuals for being fair, altruistic, friendly, generous, caring, and kind to others'94.
Apart from Hofstede and GLOBE cultural dimensions, cultural distance includes also language, religion and the effects of diaspora95.In all Latin American countries (excluding Brazil and Haiti), Spanish is the official language.In Brazil, it is Portuguese, while in Haiti it is French.The sole official language in Poland is Polish.The linguistic distance between Poland and Latin America can be bridged by the fact that Spanish is a popular language learned by non-native speakers, also in Poland.The number of people learning Spanish in Poland is estimated at 390 thousand96.The number of students learning Spanish at the level of primary and secondary school amounts to 72 thousands97.Conversely, a factor that may contribute to an increased linguistic distance between Poland and Latin America is the fact that the command of English is rather poor in some Latin American countries.In terms of adult English proficiency, measured with the EF English Proficiency Index98, Poland scores very high (9th position out of 70 countries), while the ranking positions of Latin American countries included in the study are as follows: Argentina -15, Dominican Republic -24, Peru -35, Chile -36, Ecuador -38, Mexico -40, Brazil -40, Costa Rica -43, Uruguay -44, Guatemala -46, Panama -48, Colombia -57, Venezuela -59, El Salvador -61.
Poland and Latin American countries share a common religion.In all Latin American countries Roman Catholicism, introduced by the Spanish and the Portuguese during the colonial era, remains the dominant faith.Latin America accounts for 40% of the World's total Catholic population, with Brazil being the largest Catholic population of any country (150 million Catholics)99.Another factor that is believed to contribute to the reduction of cultural distance between Poland and Latin America is the Polish diaspora100.Two major destinations of Polish migration in Latin America are Argentina and Brazil.According to the UN Global Migrant Origin Database101, covering national censuses and taking into account the country of birth, of in 2001, in Argentina there were 14 150 Polish immigrants, the majority of which were over 65 years old.In 2010, the number of Polish immigrants to Brazil amounted to 3 483.Again, the majority of Polish immigrants were above 65 years old.In other Latin American countries the population of Polish immigrants is much smaller (see Table 4).The 'Polonia' organisations assess the size of Polish diaspora in Latin America, including the descendants of Polish immigrants, as much higher (e.g. 10 000 in Mexico, 10 000 in Uruguay, 10 000 in Paraguay, 3000 in Venezuela, 3000 in Colombia, 5000 in Peru, 200 000-450 000 in Argentina and 80 000-3 000 000 in Brazil)102.
Taking into account the shrinking of the population of Polish-born immigrants in Argentina and Brazil and the small Polish migrant stock in other Latin American countries, it may be concluded that the impact of Polish diaspora upon the cultural distance between Poland and Latin America is rather limited.

Administrative distance
In order to assess the administrative distance between Poland and Latin American countries, authors first review the Worldwide Governance Indicators (WGI)103 for these countries.Figure 5 presents first two indicators: voice & accountability, which captures the 'perceptions of the extent to which countrys citizens are able to participate in selecting their government, as well as freedom of expression, freedom of association, and free media' and political stability and absence of violence/terrorism, referring to the 'perceptions of the likelihood that the government will be destabilized or overthrown by unconstitutional or violent means, including politically motivated violence and terrorism'104.In terms of voice & accountability, Poland scores a little lower than Costa Rica and Uruguay, and higher than the remaining Latin American countries.In terms of political stability, Poland is outperformed only by Uruguay.policies' , and regulatory quality, capturing 'perceptions of the ability of the government to formulate and implement sound policies and regulations that permit and promote private sector development'105.In both this dimensions Poland scores higher than Latin American countries (with the exception of Chile).Figure 7 presents last two governance indicators: rule of law, capturing 'the extent to which agents have confidence in and abide by the rules of society, and in particular the quality of contract enforcement, property rights, the police, and the courts, as well as the likelihood of crime and violence' and control of corruption, referring to the 'perceptions of the extent to which public power is exercised for private gain, including both petty and grand forms of corruption, as well as 'capture' of the state by elites and private interests'106.In terms of the rule of law, Poland is outperformed only by Chile.On 'control of corruption' Poland scores higher than most of the Latin American countries, with the exception of Chile, Uruguay and Costa Rica.

l.lll n ii B i l i n i i m i i n i i i i i i i i i i i i i
The above analysis reveals that Latin America is extremely heterogeneous in terms of governance quality.On most dimensions, Chile, Costa Rica and Uruguay achieve the level comparable to Poland or higher, while other countries score considerably 105 Ibidem.106 Ibidem.lower.In this sense, the administrative distance between Poland and, for example, Chile is much lower than between Chile and Venezuela, Cuba or Haiti.Poland maintains diplomatic relations with all Latin American countries, with eight embassies (i.e.Argentina, Brazil, Chile, Colombia, Cuba, Mexico, Peru, Venezuela) and one Consulate General in Curitiba (Brazil).However, the intensity of country-level dialog between Poland and Latin America is very low, as the region occupies a rather marginal place in the Polish foreign policy107.The accession of Poland to the EU contributed to lowering the barriers to entry to some Latin Amer ican countries, with which the EU has trade agreements (Mexico -since 2000, Chile -since 2003, Colombia and Peru -since 2013)108.

Geographic distance
Geographic distance between Poland and Latin America is significant, with flight distance and travel time between Warsaw and respective capitals ranging from 8 474 kilometres, i.e. 10 hours 29 minutes (for Dominican Republic) to 12 982 kilometres, i.e. 15 hours 51 minutes (for Chile) (see Table 5).In terms of availability of transportation, there are no direct flights from Poland to Latin American countries.by the Polish managers.This asymmetry may be explained by the 'mere exposure effect'113, as Polish managers are typically much more exposed to the Western European countries (e.g. through import of products, including cultural goods, as well as incoming FDI) than the Western European managers to Poland.The perceived distance from Poland to Argentina, Brazil and Mexico is at a very similar, high level (with only four destinations -China, India, Japan and Korea scoring higher).Moreover, the asymmetries in country pairs (Poland-Argentina, Poland-Brazil, Poland-Mexico) are lower than for Western European economies, with distance from Poland to Mexico slightly higher than vice versa and distance from Poland to Argentina and from Poland to Brazil slightly lower than vice versa.This asymmetry may be explained by the effect of emigration114.Polish diaspora present in Argentina and Brazil may contribute to lowering the psychic distance from Poland to these countries, though this effect is rather limited, as the scores of psychic distance are high.

Conclusion
The objective of this paper was to evaluate the current state of the internationalisation of Polish firms in Latin America and to indicate the main distant-related barriers to internationalisation of Polish firms in Latin America.
It is concluded that the activity of Polish firms in Latin America is very limited.Both Polish exports and FDI are focused on the EU markets.Latin America is one of the least represented regions in the structure of Polish trade and foreign investment.Most of the largest exporters to Latin America are Polish subsidiaries of multinational corporations headquartered in Western Europe or US.Thus, the Polish trade with Latin America is, to a large extent, attributable to the activity of multinational corporations, which have located parts of their value chains in Poland.
Polish firms are very reluctant to enter Latin American markets through FDI.Those who did invest in Latin America are typically large, mature and geographically diversified.Even for these firms, however, FDIs in Latin America are challenging and often fail.
The limited activity of Polish firms in Latin America may be explained by the early stage of internationalisation of Polish economy.Before 1989, Polish firms were nearly non-existent in foreign markets.After 1989, the Polish economy has opened to the world, which resulted in a dramatic increase of export, import and inward FDI.However, outward FDI started only very recently and its value has been very modest, with Poland being still at the second stage of the Investment Development Path115.At the micro-level, the limited presence of Polish firms in Latin America may be explained by the fact that most of them are at an early stage of internationalisation lifecycle and they have not developed enough resources or experience to successfully venture to distant markets.
The Uppsala model of internationalisation predicts that firms start internation alisation in proximate markets and gradually enter more 'psychically' distant coun-tries116.Polish managers assess the distance between Poland and Latin American countries as very high117.This is due to a number of 'psychic distance stimuli' , such as geographic distance, as well as cultural, institutional and economic differences.Our analysis, based on the CAGE framework, reveals a number of differences between Poland and Latin America, on all these dimensions.Moreover, the findings indicate that Latin America is not a homogeneous region and both the market attractiveness and the distance from Poland differ across the countries.
The conducted study has two major limitations.First, given the early stage of research on internationalisation of Polish companies in regard to distant markets, as well as the novelty of the phenomenon itself, the study is exploratory in nature.Therefore, instead of formulating and testing research hypotheses, the reader is offered with a description of the activities of Polish firms in Latin America and distance-related barriers to internationalisation in connection to this region are being reviewed.Second, the obtained findings are based on secondary data.Thus, authors argue that future research into the phenomenon of internationalisation in reference to distant countries is needed.More specifically, future studies might use qualitative research techniques, that would enable to understand how different dimensions of distance affect the internationalisation choices and their outcomes.Moreover, it would be useful to shed more light on the mechanisms that contribute to bridging the distance (e.g. the significance of Polish diaspora in Latin America, the role of institutional support for internationalisation in regard to distant markets).Finally, quantitative studies are needed to draw conclusive findings on the firm-specific attributes through which companies overcome distant-related barriers to interna tionalisation.The measurement of distance in quantitative studies may be based on aggregate indices of psychic distance stimuli or the subjective measures of distance perceived by the decision-makers.
The practical implications of the performed work are as follows.It is concluded that the calls for Polish firms 'going global' (instead of 'going regional') should be treated with caution.Although some managers (and policymakers) '(...) seem to share unquestioned assumptions about the need to go global'118, extant research indicates the performance-related advantages of region-focused expansion over distant markets internationalisation119. Taking into consideration the early stage of internationalisation of Polish economy, the limited international experience of Polish firms and a high psychic distance resulting from geographic, cultural, administrative and economic differences between Poland and Latin America, it is argued that the majority of Polish firms are unprepared to successfully venture to these markets.

Figure 6
Figure6presents another two indicators: government effectiveness, capturing 'perceptions of the quality of public services, the quality of the civil service and the degree of its independence from political pressures, the quality of policy formulation and implementation, and the credibility of the government's commitment to such

Figure 6 .
Figure 6.WGI -government effectiveness and regulatory quality ■ government effectiveness ■ regulatory guality study based on World Bank.See World Bank, W o r ld w id e G o v e r n a n c e In d ic a to r s, op.cit.

Figure 7
Figure 7. WGI -government effectiveness and regulatory quality

Figure 9 .
Figure 9. Psychic distance to and from Poland ■ Distance to Poland ■ Distance from Poland 15 K. Brudzińska, B. Znojek, Poland and Brazil: Narrowing the Distance, ExploringMutual Potential, Policy Paper no. 46, Polish Institute of International Affairs, Warsaw 2012; P. Pazaran, Mexico y Polonia, socios estrategicos, "Fortuna", 18.12.2012;B. Znojek, EmergingLatin America: A Case for Increasing Polands Interest in the Region, PISM Strategic File no. 25, Polish Institute of International Affairs, Warsaw 2012; K. Brudzińska, M. Rostowska, Latin America and the Caribbean Countries and Central-Eastern Europe -Potential for Economic Cooperation: Polish Case Study, EU-LAC Foundation, Polish Institute of Inter national Affairs, Warsaw 2014.16 M.Gorynia et al., Fostering Competitiveness of Polish Firms: Some Musings on Economic Policy and Spacial Expansion, in: International Management Development Research Yearbook, eds.E. Kaynak, T. Harcar, IMDA, Pennsylvania 2005; K. Brudzińska, Visao Geral das Relaęoes Polonia-Brasil, "A Uniao

Table 1 . Polish exports and FDI to Latin America (in thousand USD)
Source: own study based on World Bank and National Bank of Poland.See World Bank, W o r ld In te g r a te d T ra d e S o lu tio n , op.cit.and National Bank of Poland, P o lsk ie in w e sty c je b e zp o ś re d n ie z a g r a n ic ą , http://www.nbp.pl/home.aspx?f=/publikacje/pib/pib.html (28.10.2016).

Table 2 . Largest Polish exporters to Brazil Autorobot-Strefa (turnkey car body assembly lines) A joint-venture company, created as a resuft of cooperation of Polish, Italian and Brazilian partners Faurecia-Automotive Polska (automotive parts) Polish subsidiary of a French group Flextronics International Poland (Flex) (electronics manufacturing services) Polish subsidiary of an American group headquartered in Singapore FLSMIDTH MAAG Gear (gear units) Polish subsidiary of a Swiss group HTL-Strefa (medical devices) Polish-born company, currently owned by a Swedish private equity fund EQT Klingspor (abrasive technology supplier) Polish subsidiary of a German group Medcom (traction converters) Polish firm Michelin Polska (tires) Polish subsidiary of a French group Nidec Motors & Actuators Poland (motors, actuators) Polish subsidiary of a German group Arcelormittal Poland (steel) Polish subsidiary of an international group of Indian origin, headquartered in Luxembourg Arjohuntleigh Polska (healthcare products) Polish subsidiary of a Swedish group Durr Poland (production, process and measuring technology) Polish subsidiary of a German group GE Power Controls (electrical components) Polish subsidiary of an American group GlaxoSmithKline (pharmaceuticals) Polish subsidiary of a British group Grupa Azoty S.A. (nitrogenous fertilisers) Polish firm Hamilton Sundstrand Poland (aircraft engines) Polish subsidiary of an American group Adama Polska (crop protection products) Polish subsidiary of an Israeli group ND Service (power hydraulics, electrical systems) Polish firm Nexteer Automotive Poland (steering and driveline systems) Polish subsidiary of an American group PCC Rokita (chemical facilities) Polish subsidiary of a German group Philips Lighting (lighting solutions) Polish subsidiary of a Dutch group
Source: own study based on data provided by the Trade and Investment Promotion Section of the Polish Embassy in Brazil.