Examining the Impact of Internationalization on Competitive Dynamics

Abstract

This paper examines the impact of the internationalization process on the competitive dynamics of an industry in an international context. The examination was carried out using two complementary approaches: first, by constructing a Dunning–Porter diamond framework, which is an extension of Porter's diamond framework, and embedding a causal modelling approach in it; second, by using the multi-market contact approach and evolving a deeper understanding of the impact of internationalization on competitive dynamics. One conclusion of this paper is that a firm's cost structure and the quality of skills (resources) possessed are important factors of market defence in an internationalization process driven by cost advantage factors. Another important conclusion is that a firm's cost structure and skills base have a joint influence on the impact of internationalization on incumbents and their subsequent competitive behaviour, especially in larger market segments. This paper combines internationalization and multi-market contact-based approaches towards an understanding of competitive dynamics. This is an initial attempt towards developing an internationalization framework, which may help clarify the complexity and uncertainty involved in operating in international markets.