#3 Internationalization Process Model

Question 1

Explain the Internationalization Process Model

Answer 1

It aims at answering two questions: 1) Do firms follow any pattern of entry into foreign markets? 2) Does the degree of involvement in foreign markets change over time?
The model’s predictions: 1) Entry into increasingly dissimilar countries. 2) Gradual increase in involvement in the host country

Question 2

What are the stages of a company’s commitment to a country?

Answer 2

Sales via agent
Sales subsidiary
Production facility

Question 3

What is psychic distance?

Answer 3

“Factors preventing the flow of information from and to the market”. Cross-country differences in:

• Language
• Education
• Business Practices
• Culture
• Industrial / economic development

Question 4

Institutional distance

Answer 4

Difference found in instittutional dimensions:

• Regulative
• Normative
• Cognitive-cultural

Question 5

Describe state and change aspects of the Uppsala model:

Answer 5

In the words of the 2009 paper, the Uppsala model has two sets of variables: state variables, change variables.

Current knowledge and relationships (state aspects) affect future decisions and actions (change aspects) - These decisions in turn affect future relationships [loop back to state]

Question 6

What is the “psychic distance paradox”?

Answer 6

Firms enter “psycically close” countries, but may overestimate the “closeness”. I.e. Do not adjust as much as needed. Even close countries, i.e. US and Canda can be different, and expansion from one to the other may bring difficulties.

Caused by overestimating similarity. Since a business model worked in one country, it must work in another as well.

Familiarity leads to carelessness.
“learning begins with the ability to see differences”

Question 7

What are some solutions to the “psychic distance paradox”?

Answer 7

• Treat foreign markets as foreign
• Check assumptions and preconceptions before entry
• Interpret data about the market correctly
• Increase knowledge and understanding of other countries

Question 8

What are the different internationalization costs?

Answer 8

Learning and accumulation of internationalization experience
International coordination of cross border activities
Engagement with external actors
Local adaption of product or business model
Legitimacy acquisition

Question 9

What are the state aspects of the Uppsala model?

Answer 9

Knowledge
Opportunities
Network position

Question 10

What are the change aspects of the Uppsala model?

Answer 10

• Learning, creation of knowledge, trust Building

- Relationship commitment decisions (augment existing or develop new relationships)