Uppsala Internationalization Process Model Research Articles

A note on the revisited Uppsala internationalization process model – the implications of business networks and entrepreneurship

In their article from 2009, Johanson and Vahlne suggest a reformulation of the Uppsala internationalization process model by incorporating business network theory and entrepreneurship theory into the model. The present paper makes a critical examination of this reformulation. The overall conclusion is that several issues have to be addressed regarding the relationship between business networks and firms’ internationalization, the meaning of entrepreneurship as well as the possibility to combine business network theory and entrepreneurship theory in the Uppsala model before the full potential of such an incorporation can be realized.

Internationalisation of Central and Eastern European small firms

Purpose– The purpose of this paper is to investigate the internationalisation of small firms from a Central and Eastern Europe (CEE) country with an emerging market economy, while accounting for the constantly changing institutional framework as well as resource (un)availability which may influence their involvement in foreign market operations. In doing so, it supports the applicability of the revised Uppsala internationalisation process model (2009), which highlights the key role of networks for international activity.Design/methodology/approach– This study is based on a qualitative approach leading to multiple case studies. The main source of data is semi-structured, in-depth interviews conducted within six small firms.Findings– The revisited Uppsala model proves to be generally valid for the small firms analysed in this study. Networks play a crucial role for knowledge creation and exchange, and frequently represent the most reliable resource at firms’ disposal. Trust is an indispensable ingredient that shapes network relationships. Institutional changes acted as push factors for small firms’ internationalisation.Research limitations/implications– Policy-makers and entrepreneurs should direct their efforts at encouraging international network building and the formation of partnerships. Specific policy-driven actions should facilitate the connection between (international) entrepreneurs and potential foreign business partners.Originality/value– This study brings insights to the revised Uppsala model, particularly considering the continuous and relatively rapid changes within the institutional environment that interact with the experiential learning curve and resource accumulation and subsequent commitment to foreign markets. Furthermore, it is one of the few studies that address the internationalisation of small firms from a CEE economy.

Balancing exploitation and exploration in FDI location choices

In this paper, I examine the location trajectory of foreign direct investments by emerging economy firms. I consider entries into countries with low cultural distance as exploitation, and entries into countries with high cultural distance as exploration in the internationalization process. Building on the organizational learning literature, I argue that the internationalization process is composed of a series of alternating exploitative and exploratory activities for a firm over time. Empirically, I propose to measure this process by the magnitude of the divergence in added cultural distance (i.e. the cultural distance that each new entry incurs relative to prior entries). In support of my argument, I find that the divergence in added cultural distance over time is far greater than what is predicted by the Uppsala internationalization process model and the springboard perspective. Moreover, I find that several firm- specific attributes can explain a sizable portion of the volatility of the internationalization process. Specifically, firm size, firm age, firm performance and organizational slack are significant antecedents of the fluctuations in the internationalization process.

How and why born global firms differ in their speed of internationalisation - a multiple case study approach

This article analyses the research problem of how and why born global firms (BGF) differ in their speed of internationalisation. It is based on the conceptual framework of the BGF theory and the Uppsala internationalisation process model. The research questions will be answered using a multiple case study research design with qualitative, in-depth, face-to-face, semi structured interviews of twenty subject matter experts (SME). The research results show that factors like the skills of the entrepreneur and the management team, their business networks, the business model of the BGF, the market entry mode, the successful implementation of a structured market development process, the uniqueness of the technology and the product portfolio, the availability of market opportunities, and the size of their home market influence the speed of internationalisation.

How European Tier-one automotive suppliers evaluate and select efficient market entry modes to India

This article analyses the research problem of how European Tier-one automotive suppliers (ETOAS) evaluate and select efficient market entry modes (MEMs) to develop emerging growth markets using the country market India as an example. It is based on the conceptual framework of the Uppsala internationalisation process model (UIPM) and the notion that international market development is an integrated part of strategic management to facilitate sustainable and profitable growth. The research questions will be answered using a multiple case study (MCS) research structure with qualitative, in-depth, face-to-face, semi-structured interviews of 18 subject matter experts (SME) and additional sources of evidence. The research results show that European suppliers of the automotive industry, which use a structured market entry process (MEP), will enter the Indian market faster, with less risk, and more profitability. This proposed market entry process consists of four steps and seven different integration levels.

Significance of the speed of internationalisation for born global firms - a multiple case study approach

This article analyses the significance of the speed of internationalisation for born global firms (BGFs). In this multiple case study, BGFs are defined as high-tech start-up firms (HSFs) from a small and open economy (SMOPEC) like Switzerland. The theoretical framework consists of the Uppsala internationalisation process model and BGF theory. A sample of 20 subject matter experts (SME) is interviewed. The results of this study show that the significance of the speed of internationalisation of HSFs is considered essential for the survival of HSFs from SMOPECs. Consequently, all SMEs included early and fast internationalisation in their business plans and built their business models accordingly.

Effectuation and Networking of Internationalizing SMEs

This paper explores previously discarded phenomena in the internationalization process literature, namely the non-predictive logic of foreign market entry, and employs effectuation theory to examine how small and medium-sized enterprises (SMEs) network during internationalization. It integrates effectuation theory with the revisited Uppsala internationalization process model to understand the unintentional aspect of networking by internationalizing SMEs. The research design is a multiple-case study approach. The findings show how entrepreneurs network with interested partners, instead of carefully selecting international partners according to predefined network goals. Entrepreneurs who network effectually enter markets wherever an opportunity emerges, and commit to network relations that increase their means. Network relations become an integrating point for effectuation theory from entrepreneurship research and the revised Uppsala model from international business. This bridge between the two areas suggests some implications for network research in International Entrepreneurship.

Emerging market entry and institutional change – three Swedish manufacturing firms in China between 1980 and 2010

Firms enter emerging markets to capture untapped opportunity and pursue high growth potential. Yet emerging markets are also characterized by unstable institutions that may affect firms' market entry behavior. Although most existing studies have taken a rather short-term and static perspective to addressing foreign market entry, we specifically draw on the Uppsala internationalization process model and use a long-term approach to examine the China market entry of three Swedish firms in terms of their market knowledge and market commitment. We argue that the relation between institutional change in the host market and the market entry behavior of a particular firm evolves over time. The findings also show that the type of institutional change, as well as the accumulated market knowledge and commitments firms have made, can influence the relation between them.

Early internationalisation of high-tech firms: past accomplishments and future directions

This article provides an evaluative overview of international management literature, in which the current research accomplishments of early and fast internationalisation of high-tech start-up firms from small and open economies using the example of Switzerland are analysed. The author puts a special emphasis on how born-global firms from small and open economies might use traditional internationalisation theories like the Uppsala internationalisation process model to acquire new clients in new foreign markets early and fast after their incorporation. The article discusses convergent and divergent findings in terms of conceptual and empirical issues and set forth areas for future qualitative and quantitative research.

Retailers׳ expansion mode choice in foreign markets: Antecedents for expansion mode choice in the light of internationalization theories

Whenever a retail company expands its store network in a foreign market, decisions have to be made about how this can be achieved. Existing studies of retail internationalization have usually analyzed the “entry mode” choice as an end in itself, and not as the start of a firm׳s international development. In addition, there is much debate in the academic literature about the antecedents for retail foreign operation mode choice and the relevance of generic internationalization theories to international retailing. Therefore, the objectives of this research are (1) to investigate the paths of entry and subsequent expansion modes pursued by retailers in international markets and (2) to develop and test a model of expansion mode antecedents in the light of generic business internationalization theories. This is achieved on the basis of data collected from 43 French fashion retailers and a PLS-SEM approach. Results show that (1) retailers clearly differentiate between entry and expansion modes; (2) the international marketing plan, the perceived attractiveness of the foreign market, and strategic and ownership conditions are the key antecedents for the choice of an expansion mode. After comparing the results with the explanations proposed by the generic internationalization theories, a multi-theoretical framework is proposed which draws from the Uppsala internationalization process model, network theory and the born-global theory. The findings provide a wealth of information for retailers׳ use in choosing appropriate foreign operation modes.

“Courting the multinational”: Subnational institutional capacity and foreign market insidership

Significant contemporary challenges face an internationalizing firm, including the non-ergodic nature of investment, and the liability of outsidership. Recent revisions to the Uppsala internationalization process model reflect these challenges, whereby “insidership” is represented as realized, successful foreign market entry. Drawing upon socio-spatial concepts from international business and economic geography, this paper demonstrates the endogeneity of subnational institutions in shaping foreign market insidership within an advanced economy. Employing a multi-method research design with almost 60 subnational actors, the role and interaction of subnational institutions within the internationalization process are explored. Our findings illustrate how customized coalitions of subnational institutions effectively initiate, negotiate and accelerate insidership of inward investment within the foreign market both prior to and during formal entry. Key aspects of this dynamic include communicating tangible and intangible locational resources, initiating functional and relevant business relationships, and facilitating access to codified and tacit knowledge. This paper embellishes the Uppsala internationalization process model by demonstrating the capacity of subnational institutions to participate actively with foreign market insidership, and in so doing advances understanding of how the risk and uncertainty associated with foreign market entry are currently navigated.

Italian banks and business services as knowledge pipelines for SMEs: Examples from Central and Eastern Europe

There are few analyses available of the role played by finance and business consultancies in post-socialist economic geographies and even fewer on the internationalization of small and medium-sized enterprises (SMEs). Both issues are addressed in this paper with a focus on Italian banks and business services as well as their relationship to SME outsourcing in Central and Eastern Europe. The basic premise of this paper is that a relationship exists between the internationalization of banks, services, and SMEs when analyzed within the framework of the Uppsala Internationalization Process Model. Specifically, banks and services allow the mobilization of resources forming knowledge pipelines between Italian firms and Central and Eastern European regional economies.

Psychic distance and environment: impact on increased resource commitment

PurposeThe purpose of this study is to provide a theoretical driven model, explaining the interaction between psychic distance and environment on increased (subsequent) resource commitment decisions made by firms in their internationalization process. Increasingly, contrary to the Uppsala internationalization process (IP) model, firms are engaging in direct investment, rather than exporting as an initial step into overseas markets. Yet, it remains unclear how psychic distance affects firms engaged in increased resource commitment, especially in the initial phase of their international expansion when uncertainty is higher.Design/methodology/approachBuilding theory by integrating two key theories of internationalisation (IP model and eclectic paradigm), the paper explains increased resource commitment. Comparing firm types, the study also fills the research gap of recognising multinational enterprises (MNEs) as heterogeneous in their internationalization experience. Psychic distance and environment are analysed across three groups of firms (born‐global, recent and older entrants) to observe the moderating effects of firm experience and related uncertainty. A model and propositions of the relationships between psychic distance and environment, providing an increased commitment perspective, are presented.FindingsThere are mixed responses to the three groups of firms for psychic distance factors (political, geographic, social, information and commercial and economic development); and environmental factors (near‐market effects and sunk costs). Surprisingly born‐global and recent entrants are less affected by psychic distance, and more influenced by external factors, but for different reasons, in making early increased resource commitment decisions in the host market, than are older entrants.Practical implicationsFirms need to consider the strategic objectives of the parent company, psychic distance, local environment and international experience when engaging in increase resource commitment in host economies.Originality/valueThe paper provides theoretical insights and practical implications for those involved in international business and marketing.

Markets as networks: implications for strategy-making

Based on empirical studies of firm exchange activities in business markets, this paper outlines a business network view of the firm-market relationship, which differs fundamentally from the view assumed by neo-classical economic theory. We define business networks as sets of connected business relationships. Thus business relationships and connections between relationships are the critical elements in the business network view. It is assumed, as suggested by the Uppsala internationalization process model, that an interplay between knowledge and commitment development is the mechanism that drives the relationship and network development process. Against this background the paper discusses how strategic change is analyzed in literature on alliances and networks. In conclusion the paper presents a set of propositions about strategy-making in business network settings.

The tortuous road to globalization for Volvo's heavy truck business: Extending the scope of the Uppsala model

The globalization of a firm is a time-consuming and incremental process similar in nature to the internationalization process. We adapt the Uppsala Internationalization Process Model ( Johanson & Vahlne, 1977, 2009) to explain the globalization process. We define globalization as an effort to optimize a business in terms of its configuration and coordination systems. Hence the globalization process is about making changes in these two aspects of firms. Globalization, like the internationalization process, is characterized by the management of complexities and uncertainties and that requires learning and commitment building. We “test” a globalization process variant of the Uppsala model on the globalization of Volvo's heavy truck business. We find support for our model, and find that the globalization process is indeed tortuous, and certainly not as easily managed as sometimes suggested by economists and management gurus.

Internationalization as an entrepreneurial process

When firms cross-borders it is, by definition, internationalization. We believe that often internationalization should be seen as either a by-product of a firm’s efforts to improve its position within its network or networks, or as the result of an entrepreneurial action. We consider three theoretical approaches as a starting point and breathe life into them with a rich case study. We suggest adjustments to Johanson and Vahlne’s business network internationalization process model, an update of the Uppsala internationalization process model, to emphasize the entrepreneurial aspects of the process.

The Uppsala internationalization process model revisited: From liability of foreignness to liability of outsidership

The Uppsala internationalization process model is revisited in the light of changes in business practices and theoretical advances that have been made since 1977. Now the business environment is viewed as a web of relationships, a network, rather than as a neoclassical market with many independent suppliers and customers. Outsidership, in relation to the relevant network, more than psychic distance, is the root of uncertainty. The change mechanisms in the revised model are essentially the same as those in the original version, although we add trust-building and knowledge creation, the latter to recognize the fact that new knowledge is developed in relationships.

International sourcing effectiveness in the fashion industry: the experience of Italian industrial districts

This paper investigates the impact of supply chain governance mechanisms on international sourcing effectiveness, with specific reference to Italian fashion districts. The internationalisation of the supply chain is challenging the traditional governance approach of district firms – mainly based on informal mechanisms – and seems to stimulate the adoption of innovative supply chain management practices. Our goal is to investigate – by using a Delphi method – how SMEs in Italian fashion districts are developing a mix of informal-formal governance approach in order to manage the higher complexity of an international supply chain. To pursue this research objective we use a conceptual framework developed from Uppsala's internationalisation process model. Considering the above, the article focuses on two key areas of international supply chain management: interorganisational knowledge-sharing and risk management. Thus, it summarises the learning process fashion SMEs are experiencing in managing their international supply chains.

Commitment and opportunity development in the internationalization process: A note on the Uppsala internationalization process model

Abstract * This paper starts from the observation that the internationalisation process (IP) model frequently is interpreted as a model of risk reduction in the internationalization of the firm. The dominating view of the model seems to be that commitment is the dependent variable and experience is the independent variable. A basic assumption of the original model, however, is that opportunity development is an important outcome of commitment. The purpose of this note is to articulate this relation, which is not stressed enough in earlier writings. Key Results * A causal chain from relationship commitment over relationship knowledge development and network knowledge development to opportunity development is specified. Two propositions are formulated regarding the effects of mutual relationship commitment and of network embeddedness in a country market on opportunity development in the market. Introduction 25 years afterwards, we are surprised. Firstly, we never expected this longevity of the model. Secondly, we are surprised, because after some thinking we have arrived at the conclusion, that we would not have built the model differently today, but with somewhat different underpinning. In a way we were lucky in using concepts such as "knowledge" and "commitment", which later came to be widely used in research on the theory of the firm but also in some functional disciplines. We were left with our inductively produced understanding of these concepts. We are grateful to the organizers of the conference and editors of this issue of MIR for focusing on the IP model and giving us this opportunity to elaborate on it. But, we must point out that the model is not "the establishment chain", going from ad hoc exports to the establishment of manufacturing subsidiaries. This was the empirical phenomenon we observed, giving the impetus to construct the model. The model is on learning and commitment building or, more precisely, on the interplay between knowledge development and increasing foreign market commitments. While the effect of knowledge development on foreign market commitment has been recognized and studied by many researchers the effect of commitment on knowledge development has been less noticed. The purpose of this note is to elaborate on this latter effect. In particular, we are here interested in the effect on opportunity development. Admittedly, this note is written in a way that it presupposes the reader is familiar with the original version of the internationalization model published in 1977 (Johanson/Vahlne 1977). In that article we tried to explain the gradual internationalization process observed by relying on two interdependent sub-processes--experiential learning and commitment building. We related those processes to the focal company only, later realizing that indeed these processes occur as interplay between at least two (potential) partners (Johanson and Vahlne 1990). In Johanson/Vahlne (2003), we tied the mechanisms of our original model closer to the network view of industrial markets by focusing on the critical role of building and changing relationships. One implication is that the concept of a "country market" is no longer seen as a valid unit of analysis. In this note, we focus on network or partner commitment and its role not only for uncertainty reduction, but on a sub-set of issues, notably--opportunity development. We believe we have under-estimated this aspect and the purpose of this note is to make up for that. The paper is structured as follows. After a short introductory review of important applications of the IP model in international business research, we discuss the change from market commitment to relationship commitment. In a following section, we discuss the relations between relationship commitment and knowledge development. Next, we widen the discussion to include network relationships, social capital and knowledge development. …

The concept of learning in the Uppsala internationalization process model: a critical review

In behavioral models dealing with the internationalization process, such as the Uppsala Internationalization Process Model, knowledge and learning have a profound impact on how the firm is seen to approach foreign markets. In the light of recent work on learning in organizations, this paper addresses some issues related to how the process of learning is conceptualized in the Uppsala Model. It is argued that the model builders apply a more narrow interpretation of learning than that allowed by the literature, which limits the ability of the model to explain certain forms of internationalization behavior. It is also claimed that perceiving a firm to be a loosely coupled organization causes some problems in relation to the model’s possibility to predict the internationalization behavior. The consequences of the strong emphasis on individuals as the holders of market-specific knowledge are also discussed. The paper concludes with some remarks on the emergence of interesting research issues about the internationalization behavior if a broader concept of organizational learning is applied.