Dynamic Theories of Internationalisation

Internationalisation is not a static phenomenon but a dynamic process. Companies change their configuration over time, enter into new countries, and/or change their operation mode. While the theories above allow an analysis at any given point in time, they do not explicitly consider changes over time. Some International Management facilitates this, however, for example the older stages models more recent born global approaches.

Stages Models of Internationalisation

The stages models of internationalisation are rooted in the behavioural theory of the firm. These models, of which the internationalisation process model (IP model, also called “Uppsala model”) by Johanson/Vahlne (1977) is the best known, propose an association between the knowledge of the decision makers in the company and the level of resource commitment in a foreign market. The core assumption is that companies with low market knowledge about a specific foreign market prefer a low commitment in this market. Once in the market, the company accumulates experiential knowledge and this leads to the willingness to commit additional resources. In the so-called establishment chain, the model proposes that foreign operation modes in a specific foreign country are switched along a certain path:

■ no international activities

■ export activities via agents

■ export activities via the company's own sales subsidiaries

■ establishment of production subsidiaries in the foreign country.

In addition, the IP model suggests that companies often select foreign markets based on the psychic distance to that market and that internationalisation often occurs along a psychic distance chain, with psychologically close markets being entered before more distant countries.

In general, the common assumptions of all stages models are (Swoboda 2002, pp. 72-73):

■ Internationalisation is a slow and gradual process.

■ The process of internationalisation is not the result of long-term strategic planning, but of incremental decisions.

■ Internationalisation is an adaptive process, and with time, resource commitment in the foreign market and changes in the management of the foreign organisational unit will occur.

■ Internationalisation is a process occurring in stages, characterised by different rates of change and unsteady development.

■ During internationalisation, companies accumulate experiential knowledge which facilitates foreign activities and further internationalisation.

Overall, the stages models explain foreign operation modes mainly through the country-specific knowledge of a company that determines the perceived uncertainty and, thus, the willingness of the company to invest resources in that country.

While the stages models are highly plausible, criticism has emerged over the years. First, the models omit that management has a strategic choice and the operation mode decision is not only determined by a single influence factor. In particular, external influence factors (like host country conditions) are neglected. Second, the models over-simplify a complex process and certain operation modes – in particular cooperative modes – are not considered. Cooperation (and acquisitions) offers the possibility of gaining knowledge without the MNC having long-term experience of its own in the host country. Finally, MNCs often leap over certain stages in the establishment chain (leap frogging). Still, for many companies, the stages models of internationalisation offer a good general explanation of their observed behaviour.

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