International expansion of transnational advertising agencies in China: An assessment of the stages theory approach

Abstract

This paper examines the expansion of multinational enterprises (MNEs) in a service industry to a country which is both developing and in transition—i.e. the advertising industry in China—to assess how useful the stages theory is in understanding internationalisation issues in today's globalised world. Three of our findings are consistent with the expectations and formal denouement of the stages approach: (a) the agencies increased their involvement in the China market over time; (b) the agencies went through organisational structure change through an incremental process; and (c) the internationalisation process was much faster for late entrants. On the other hand, some findings are not congruent with the theoretical explanations or logic of the theory. The main reason why agencies change their form of operations to a more involved mode, according to executives, was that their clients’ investment in China had increased. They argued that change in operational form is client-driven, rather than being driven by an increase in market knowledge. In sum, form must not be taken for the substance, although some aspects of the Uppsala model can explain the stages and changes of modality in MNE operations in China.