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INTERNATIONALIZATION THEORIES - Coggle Diagram
INTERNATIONALIZATION THEORIES
The Uppsala internationalization model
The stage model:
Stage 2: Export via independent representatives (export modes).
Stage 1: No regular export activities (sporadic export)
Stage 4: Foreign production/manufacturing units.
Stage 3: Establishment of a foreign sales subsidiary.
The original stage model has been extended by Welch and Loustarinen (1988), who
operate with six dimensions of internationalization:
3 markets (where?): political/cultural/psychic/physical distance differences between
markets
4 organizational structure: export department, international division
2 operations methods (how?): agents, subsidiaries, licensing, franchising management
contracts
5 finance: availability of international finance sources to support the international
activities
1.sales objects (what?): goods, services, know-how and systems
6 personnel: international skills, experience and training
The transaction cost analysis model
The foundation for this model was made by Coase (1937). He argued that ‘a firm will tend to expand until the cost of organizing an extra transaction within the firm will become equal to the cost of carrying out the same transaction by means of an exchange on the open market.
Transaction costs: The ‘friction’ between buyer and seller, which is explained by opportunistic behaviour
Ex ante costs
Search costs
Contracting costs
Ex post costs
Monitoring costs
Enforcement costs
Opportunistic behaviour: Self-interest with guile misleading, distortio, disguise and confusion.
Transaction cost analysis: Concludes that if the friction between buyer and seller is higher than through an internal hierarchical system then the firm should internalize.
Internalize: Integrate an external partner into one's own organization.
Limitations of the TCA frameworks
Excluding ‘internal’ transaction costs
Relevance of ‘intermediate’ forms for SMEs
Narrow assumptions of human nature
Importance of ‘production cost’ is understated
Born Globals
In recent years research has identified an increasing number of firms that certainly do not follow the traditional stages pattern in their internationalization process. In contrast, they aim at international markets or maybe even the global market right from their birth
A ‘born global’ can be defined as: ‘a firm that from its inception pursue a vision of becoming global and globalize rapidly without any preceding long term domestic or internationalization period’.
Born globals are challenging traditional theories
The network model
Basic concept
Business networks: Actors are autonomus and linked to each other through relationships, which are flexible and may alter accordingly to rapid changes in the environment. The glue that keeps the relationships together are based on technical, economic, legal and especially personal ties.
Network model: The relationships of a firm in a domestic network can be used as bridges to other networks in other countries.
It can be concluded that business networks will emerge in fields where coordination
between specific actors can give strong gains and where conditions are changing rapidly