Theoretical perspective on the internationalization of the firm

Question 1

Describe the Uppsala internationalization model.

Answer 1

Uppsala model suggest that additional market commitments are made in small incremental steps: choosing geographic markets with small psychic distances, combined with choosing entry modes with few additional risks.
- There are four different stages of entering an international market (establishment chain):
o Stage 1: no regular export activities (sporadic export).
o Stage 2: export via independent representatives (export modes).
o Stage 3: establishment of a foreign sales subsidiary.
o Stage 4: foreign production/manufacturing units.

Question 2

What are the underlying assumptions of the Uppsala model?

Answer 2

Uncertainty (risk averse) and bounded rationality

Question 3

Describe the network model

Answer 3

The network model suggests that the relationships of a firm in a domestic network can be used as bridges to other networks in other countries.

Question 4

describe the dimensions of the four theoretical perspectives of the internationalization of the firm

Answer 4

Two dimensions: drivers and the nature of the decision.
o The term drivers refer to attention-evoking factors. Drivers are either internal or external and describe whether the form and direction of internationalization is explained primarily by factors within the company itself (strengths and weaknesses), or factors within the company’s environment and its interaction with these factors.
o The nature of the decision indicates whether the internationalization is a result of planned actions or of a gradually emerging process
 Planned action: carefully considered plan based on a thorough analysis of all relevant decision alternatives and choices.
 emerging process: there is a gradual increase with regards to the consciousness of the decisions and the actions, which are implemented—and the consequences of this is an increase of learning and experience within the company.

Question 5

How is the four theoretical perspectives of the internationalization of the firm divided according to the drivers and the nature of the decision?

Answer 5

institutional economic perspective: internal/planned
strategic competition perspective: external/planned
learning perspective: internal/emerging
inter-org. perspective: external/emerging