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This paper challenges the conventional wisdom that team members' objective distance (e.g., measured in miles) translates directly and fully into subjective distance (i.e., a team's perception of distance between its members). We have build on social information processing theory and argue that team members' reactions to workplace stimuli such as dasiadispersionpsila are more influenced by their perceptions of these stimuli than merely by their physical properties. Using responses from 678 team leaders and team members pertaining to 161 new product development projects in the software industry, our results show that the subjective perception of distance is affected rather by team members' national diversity than their physical distance. In alignment with this theory's presumptions, we find that team members' perceptions of distance do not primarily stem from the extent of their objective distance. Instead, subjective distance emanates from a more complex and socially based construction of reality which we find to be significantly affected by team members' national heterogeneity. In further support of social information processing theory, our analyses reveal that subjective distance as a psychological state is more predictive of social and task-related team processes than spatio-temporal distance or any form of configurational distance.