Les 5: Behavioral/ dynamic approaches on
internationalization
Dynamic look at the process
Uppsala: people get stuck in history, but the process model about increasing the production
process
It is outdated, but still in d textbooks
Internationalization process perspective
Context: early studies 1960’s
Mature multinational companies
Very large MNEs
Large domestic market
Early interest on FDI: from US to Europe where they challenged the EU companies
No generally accepted theory of internationalization of firms
(One could argue, still so today)
!!! All the studies were based on the US: the businesses are big and active on the biggest markets
The model still remains very important to explain what firms do
Two similar but different schools:
Two Scandinavian studies in 1970s
o Researchers based at HSE, Finland and around (Luostarinen et al., 1979)
• HSE= Helsinki school of economis
o Researchers based at Uppsala university, Sweden (Johanson & Vahlne, 1977).
Very different methodological choices:
o The Uppsala model based on a case study of four companies
o Luostarinen’s study based on a questionnaire with >1000 company respondents
2 studies at the same time in scandinavian because it was the most advanced economy at that time
J& V: import names in internationalisation
Context: European company studies in 1970s:
Very small: Finland, but international because it was a small and open market
Small production units due to small markets
Small and open economies
o Small ecnomie forces companies to internationalilze. They went to other
Scandinavian countries
o Some firms were starting to internationalize, some were in more advanced stages
they could compare those who are just getting started to those who had already
been in the first stages
Different international business methods, mainly export operations
Companies at different stages of internationalization (extent of internationalization)
o Firms are observed at different stages of internationalization
o How much internationalised with = forgein sales/total sales
Research objectives: What, when, how, why and where
To construct a model of internationalization to explain the nature and dynamics of the
internationalization behavior of firms.
Les 5 25/10/2022 Pagina 1 van 15
, Luostarinen’s
Premises:
14933 industrial companies in 1976; 5596 >5 employees + not owned by foreigners
Internationalization stages (Luostarinen 1979):
o Domestic (4300 companies)
o Starting stage = other than subsidiary operations abroad (1084 companies)
You are international, but you don’t have subsidiary operations
o Development stage = other than manufacturing abroad (150 companies)
If you have subsidiary operations than you are in this stage
o Growth stage = manufacturing units in less than 6 countries (65)
o Mature stage = manufacturing units in more than 6 countries (1)
Started to make a list of companies no computers or databases: all had to be done manually
Most did not internationalize (= were domestic)
He observed the different stages in line with life cycle ideas of Vernon
Other than subsidiary operations: licensing, export… JUST NO SUBSIDIARY OPERATIONS!!
If you have subsidiary: development! Just not manufacturing!
Distinction between growth and mature! There was 1 that had more than 6 countries very
big company
Research questions:
Why do companies start internationalizing their activities
o i.e. what are the major reasons for the transfer from the purely domestic company
stage to the internationally operating company stage?
Why do companies in small and open domestic markets become involved in international
business?
How have companies internationalized, i.e. what are the major strategies followed in the
internationalization process?
How do companies with small and open domestic markets internationalize their
operations?
Research objectives:
To explain the importance and role of the small size and openness of domestic markets for
the internationalization of companies
To explain the importance and role of internationalization within growth strategies in firms
with small and open domestic markets
To explain the internationalization path and three components of internationalization
strategy: product, operation and market strategy (POM).
To construct a tentative model based on internationalization strategy to explain the nature
and dynamics of the internationalization behavior of these firms
Les 5 25/10/2022 Pagina 2 van 15
internationalization
Dynamic look at the process
Uppsala: people get stuck in history, but the process model about increasing the production
process
It is outdated, but still in d textbooks
Internationalization process perspective
Context: early studies 1960’s
Mature multinational companies
Very large MNEs
Large domestic market
Early interest on FDI: from US to Europe where they challenged the EU companies
No generally accepted theory of internationalization of firms
(One could argue, still so today)
!!! All the studies were based on the US: the businesses are big and active on the biggest markets
The model still remains very important to explain what firms do
Two similar but different schools:
Two Scandinavian studies in 1970s
o Researchers based at HSE, Finland and around (Luostarinen et al., 1979)
• HSE= Helsinki school of economis
o Researchers based at Uppsala university, Sweden (Johanson & Vahlne, 1977).
Very different methodological choices:
o The Uppsala model based on a case study of four companies
o Luostarinen’s study based on a questionnaire with >1000 company respondents
2 studies at the same time in scandinavian because it was the most advanced economy at that time
J& V: import names in internationalisation
Context: European company studies in 1970s:
Very small: Finland, but international because it was a small and open market
Small production units due to small markets
Small and open economies
o Small ecnomie forces companies to internationalilze. They went to other
Scandinavian countries
o Some firms were starting to internationalize, some were in more advanced stages
they could compare those who are just getting started to those who had already
been in the first stages
Different international business methods, mainly export operations
Companies at different stages of internationalization (extent of internationalization)
o Firms are observed at different stages of internationalization
o How much internationalised with = forgein sales/total sales
Research objectives: What, when, how, why and where
To construct a model of internationalization to explain the nature and dynamics of the
internationalization behavior of firms.
Les 5 25/10/2022 Pagina 1 van 15
, Luostarinen’s
Premises:
14933 industrial companies in 1976; 5596 >5 employees + not owned by foreigners
Internationalization stages (Luostarinen 1979):
o Domestic (4300 companies)
o Starting stage = other than subsidiary operations abroad (1084 companies)
You are international, but you don’t have subsidiary operations
o Development stage = other than manufacturing abroad (150 companies)
If you have subsidiary operations than you are in this stage
o Growth stage = manufacturing units in less than 6 countries (65)
o Mature stage = manufacturing units in more than 6 countries (1)
Started to make a list of companies no computers or databases: all had to be done manually
Most did not internationalize (= were domestic)
He observed the different stages in line with life cycle ideas of Vernon
Other than subsidiary operations: licensing, export… JUST NO SUBSIDIARY OPERATIONS!!
If you have subsidiary: development! Just not manufacturing!
Distinction between growth and mature! There was 1 that had more than 6 countries very
big company
Research questions:
Why do companies start internationalizing their activities
o i.e. what are the major reasons for the transfer from the purely domestic company
stage to the internationally operating company stage?
Why do companies in small and open domestic markets become involved in international
business?
How have companies internationalized, i.e. what are the major strategies followed in the
internationalization process?
How do companies with small and open domestic markets internationalize their
operations?
Research objectives:
To explain the importance and role of the small size and openness of domestic markets for
the internationalization of companies
To explain the importance and role of internationalization within growth strategies in firms
with small and open domestic markets
To explain the internationalization path and three components of internationalization
strategy: product, operation and market strategy (POM).
To construct a tentative model based on internationalization strategy to explain the nature
and dynamics of the internationalization behavior of these firms
Les 5 25/10/2022 Pagina 2 van 15
