Reassesing the Internationalization of the Firm: Volume 11

This paper analyzes theory development over the last fifty years. It identifies strands of research, the origins of theories and the ways in which theories complement and conflict with each other. Using the framework of Larry Laudan's model of scientific method, it questions to what extent this theory development process is rational and has led to scientific progress. It concludes that, since the research tradition has enabled scientists to find solutions to problems, there has indeed been progress. Thus, according to Laudan's criteria, this construction of a foundation of solved problems is a rational process.

This study attempts to facilitate the future development of a more general theory relative to the nature of small business internationalization and provides a step toward a more holistic understanding of this process. More concretely, its general goal is to draw attention to this potential: the possibility of better examining this process - and developing a more accurate explanation of it - by encouraging future writers to consider the consolidated contributions of four major streams of research in the international business literature: FDI theories, the stage models, entry-mode research and the network approach. Some relevant conclusions and implications are derived from this holistic approach.

The internationalization process of Brazilian firms was examined using the case study method of research, in order to determine whether existing theories could explain the Brazilian experience. Ten in-depth case studies were conducted. All companies studied were involved in foreign direct investment (FDI) at the time of data collection, and, with the exception of one, had started their internationalization by exporting. Motives to internationalize and to establish subsidiaries abroad were investigated. Typical patterns of motives to invest abroad and common sequences of entry modes were identified. The choice of foreign markets for FDI seemed to be associated with perceived psychic distance as postulated in the literature. The ownership structure, however, did not seem to follow the patterns identified in other studies. The study confirmed the proposition that inspired leaders play a major role in the initial steps of the internationalization process. Following network theory, personal and professional networks were determined to be of paramount importance in this process. Concluding, a framework is proposed for the study of the FDI decision of firms from emerging countries.

This research analyzes two issues: (1) MNCs' foreign entry process, and (2) the relationship between foreign entry strategy and international technology transfer. The study is based on a comparative case analysis of ten U.S. high-tech manufacturers operating in the Asian Pacific Rim.We analyzed firms' foreign entry processes and compared them with the predictions of internationalization theory. We also studied the causal relationship between a firm's international technology transfer policy and its foreign entry strategy.We found support for companies' incremental Asian commitment in terms of operating mode; however, their reasons were different from those professed in internationalization theory. We also found that foreign entry process varies with the purpose and nature of foreign business activities. The stage theory is less applicable to firms that follow customers into foreign markets, firms whose foreign expansion is to improve customer service, and firms that must produce abroad to sell abroad. Finally, host government policies also tend to limit the applicability of the stage process model.In addition, we found that companies' desire to sell abroad was the overriding consideration to enter foreign markets. As such, they accepted operating modes to maximize their sales, even at the risk that collaborative partners could more easily appropriate the technologies they transferred. However, the danger of technology loss was mitigated by a belief that their core competency was the ability to develop ever-newer technologies rather than the product and process technologies they transferred.

Internationalization has usually been depicted as an incremental process of limited commitment in the face of high uncertainty. Yet in recent years, a number of major changes — ranging from industry deregulation to newly opened markets to the revolution in information technology — have transformed the context for international growth. The result is two-fold: on one hand, firms face lower barriers to international growth, meaning that more firms, smaller in size and fewer in resources, can expand internationally; yet precisely because of the resulting surge in international growth, firms face a need to internationalize more rapidly than before. The result is a new set of imperatives for successful internationalization, stressing entry mode versatility and the simultaneous use of resources.

Firm internationalization or the degree of internationalization (DOI) has both been viewed as a critical dimension of company strategy and linked with enhanced firm performance. This research reports a theoretical postulation based on a conceptual synthesis and an empirical assessment, of this relationship among Chinese firms. Based on the economies of scale, market seeking, risk reduction and experiential learning benefits and possible threshold effects due to learning and accumulation, it is hypothesized that there is a curvilinear relationship between DOI and firm performance and furthermore firms in open or more marketized regions of China will benefit more from their internationalization efforts because of the supportive institutional environment. Multiple regression models employing a large data set of Chinese firms provided supportive empirical evidence. Theoretical and practical implications and research directions are considered.

This paper deals with the effects of firm age on export behavior and performance for small exporters. Using market and technology trends from the last decades, we have classified three generations of small exporters: the traditional, the flexible specialists, and the Born Globals. Building upon a sample of Norwegian exporters these three generations of exporting firms are compared using competitive advantage, manager orientation, export motives, and export strategy. The results revealed several significant distinguishing features between the generations. Important differences were the strong technological competitiveness, niche focus and widespread use of advanced communication technology in the two groups of recently established exporters compared to the older, traditional exporters. The study also showed that the various generations of firms had different export performance antecedents. Key factors for the Born Globals were found to be technological advantage and niche focus combined with strong customer orientation. Among both the other groups — traditional exporters and flexible specialists — marketing advantage, product quality, and various manager orientation factors were important performance determinants. It seems that firm behavior and performance are partly contingent upon the environmental context in existence during the firm's year of establishment, which results in systematic differences between the generations of exporting firms. As the firm's year of establishment has often been a neglected variable in international marketing research, these results suggest we should pay more attention to firm age in future studies, as both export behavior and performance determinants vary between different generations of exporting firms. This study further concludes that we can now distinguish a new generation of exporters; the Born Global firms. One of the most important characteristics of these firms is their speed of internationalization; just a few years after establishment the Born Global firms achieve considerable sales in a number of export markets.

Throughout the last decades a growing concern for international marketing has been reflected in the leading journals. The preponderance of the articles has, however, been oriented towards firms' sales and export (outward) activities. Since the late 1980s a growing concern for manufacturing firms' international sourcing (inward) activities has arisen, stressing the importance of this phenomenon on firms' success. However, research in firms' internationalization of purchasing activities is still limited. This article focuses upon international purchasing. Through a literature review of mainly U.S. empirical surveys, research topics requiring further exploration are identified. Hence this article addresses four major issues, using results from a large Danish survey: (1) To what extent are Danish firms involved in international purchasing? (2) What are the reasons for choosing or not choosing a foreign supplier? (3) What is the decision process regarding the choice of supplier?, and (4) What problems are experienced in the relationship? Results from firms with foreign suppliers and firms with domestic suppliers are compared. It is revealed that international purchasing is not confined to large firms, but also small manufacturing firms are very much involved in this internationalization of their sourcing activities. It is also stressed that the main reasons for choosing a foreign supplier, apart from availability, was to obtain products of a better quality at a lower price. The firms also find international purchasing important to their competitiveness. However, in order to better understand international purchasing as an internationalization process further research is needed, especially cross-national studies clarify the process.

Although built to explain an inherently dynamic process, current theories of internationalization are criticized for having limited dynamic qualities. To come to this conclusion, we adopt international market withdrawal as an empirical extreme. We expect dynamic theories of internationalization to be able to accommodate and explain international market withdrawal within the scope of the internationalization process of the firm. An integrated global strategy framework is presented as a promising point of departure toward this aim. To assess this framework's dynamic qualities, we compare it with the ‘stages’ models of internationalization and the transaction-cost based international business theory. Although this integrated global strategy framework — and especially the resource-based part of it — seems to outperform these two established theories, the framework is not capable of fully explaining the dynamics in the internationalization process of the firm. Moreover, the integrated global strategy framework struggles with the paradigmatic incompatibilities among its fundamental explananda. Adopting the resource-based perspective as a pivotal point, we propose an (emergent) resource-based evolutionary theory of the firm as a dynamic framework that is capable of explaining international market withdrawal and the internationalization process of the firm.