The internationalization process model revisited: an agenda for future research.

VerfasserWelch, Catherine

1 Introduction

Our interest in this editorial is internationalization processes. We see it as axiomatic that time is elemental to process. Hence, we labelled our Focused Issue ABOUT TIME: PUTTING PROCESS BACK INTO FIRM INTERNATIONALIZATION RESEARCH. At the outset, process research is about events and incidents and their sequencing. It asks questions about who did what, where they did it and how, and why they did do the things they did. This is not to say that the events and incidents will have happened in a neat, discrete and non-overlapping order at specific points in time where each event begins and ends within an orderly temporal sequencing. It is also not to say that the events and incidents will have been orchestrated by just one person who can be explicit as to why they did what they did, and how they did it. How and why things happen is messy but this does not mean explanation is not possible. In this issue, we will take up the challenge of theorizing about these complex processes.

As the field of international business (IB) has a dominant model of the internationalization process, we decided that this model should be our focus. The Uppsala internationalization process model remains much cited--and much critiqued. It has also been revised by its original authors, remaining current with these revisions. Its importance to the IB field cannot be understated. It has incited extended debate in our field, a debate which most recently has spawned the research stream of international entrepreneurship (IE). Our arguments in this paper are a contrast to the received view about the model's shortcomings, and provide an alternative interpretation. From a process perspective, it is not the original model nor its more recent formulations that are problematic. Rather, open to critique is the reception the model has received.

The Uppsala model is an explanation not of internationalization but of internationalization process. Yet rarely have those who have written about it paused to consider the implications of this differentiation. This is our objective in this paper. We provide a reading of the model that teases out its process elements and their origins, arguing that such a reading opens up new questions and new approaches for future inquiry. Our position is that our field is yet to fully understand and explore the potential of the model. Hence, we do not agree with those who seem to assume that the model has been superseded because it can no longer explain internationalization processes in today's fast-paced, interconnected world in which time has been compressed and information is only a keystroke away. It also means we disagree with those who dismiss the model as 'superannuated', to quote the opinion of a journal editor communicated to us recently. Rather, the model--as a process theory--represents a challenge to current assumptions and research practices in our field. Our field is not well-practiced at challenging prevailing assumptions, nor is it practiced at making assumptions explicit. Yet challenging assumptions makes a theoretical contribution interesting (Alvesson and Sandberg 2011). Our aim with this paper is to encourage readers to query their current assumptions about the internationalization process model, allowing a new generation of research to revitalize inquiry into internationalizing firms.

2 Introducing the Model

Researchers interested in the internationalization process of a firm typically regard the seminal work as being the model which Jan Johanson and Jan-Erik Vahlne, who had both completed their research training at Uppsala University, published in the Journal of International Business Studies (JIBS) in 1977. Johanson and Vahlne have also written a number of articles in which they extend the discussion on the key elements and mechanisms of the model (Johanson and Vahlne 1990, 2003a, b, 2006) and an article with a revised version of the model (Johanson and Vahlne 2009). However, given that the dynamic nature of the model has remained unchanged, the original model is our focus in this section.

The 1977 model is grounded in the broader research program on international business, led by Professor Sune Carlson, which was launched following the establishment of the Institute of Business Studies at the University of Uppsala in the late 1950s. The 1977 publication was the culmination of a decade of intensive research, the impressive scope of which is not appreciated today (for a summary, see Carlson 1966, 1975). The establishment chain and the role of psychic distance were identified from a database of more than 2000 subsidiaries that the group assembled through comprehensive questionnaires of the population of Swedish multinationals in 1964 and 1969-1970 (Homell and Vahlne 1972; Homed et al. 1972; Vahlne and Wiedersheim-Paul 1973). The model was also informed by Jan Johanson's 1966 licentiate thesis of the special steel industry and his study, co-authored with Wiedersheim-Paul (Johanson and Wiedersheim-Paul 1975, p. 305), of the subsidiaries of four Swedish multinationals that at the time were 'often used as examples and patterns in discussions of international operations'.

As we will discuss in more detail below, the model is commonly interpreted as postulating an incremental internationalization pattern, based on two dimensions: (1) a progressive establishment chain of operation modes, and (2) market selection based on the psychic distance from the home market. Johanson and Vahlne themselves (1990) consider the internationalization pattern as one operationalization of the process postulated in their 1977 theoretical model, and also point out that alternative patterns and operationalizations may exist. In fact, in the 1977 article, Johanson and Vahlne (1977, p. 26) pose another, much more interesting question: 'If internationalization indeed follows the pattern described above, how can we explain it?'.

All theories make assumptions, and in their 1977 paper Johanson and Vahlne are careful to specify many of their assumptions. The most important of these (in our view) is that lack of knowledge about foreign markets and foreign operations 'is an important obstacle to the development of international operations and that the necessary knowledge can be acquired mainly through operations abroad' (1977, p. 23). The uncertainty represented by decision-makers' lack of knowledge was a theme that had already been highlighted by Sune Carlson (1974, p. 56), who explained why it was such an impediment to international business: 'The world is large and complex, and it is only partially known to the decision maker. His horizon is limited--often very limited, indeed. The world is also changing. Old knowledge may rapidly become obsolete; it must be supplemented by new knowledge.' The importance of experiential knowledge--of 'learning by doing'--was identified as the critical source of knowledge in various studies by Carlson's research group (Carlson 1975; Olson 1975), as well as by Johanson and Vahlne's own empirical research. Nonetheless, and interestingly, the 1977 model does not explicitly take into account the negative impacts of experiential knowledge; how it may also increase the decision-maker's lateral rigidity (cf., Luostarinen 1979).

The second fundamental assumption relates to the objective of the firm, namely that it 'strives to increase its long-term profit, which is assumed to be equivalent to growth' (Johanson and Vahlne 1977, p. 27). This is very much in line with the thoughts of Edith Penrose (1959), who also equates growth to increase in profits. The influence of Penrose also can be seen in the way in which Johanson and Vahlne consider firm growth to be a joint result of internal and external conditions: internal conditions determine what firms 'see out there' and how they respond to the opportunities recognized.

The third assumption is that the firm 'is also striving to keep risk-taking at a low level', although risk is considered to be relative so what is considered low may vary depending on the decision-maker and the context, which means that higher risks may be acceptable in some circumstances (Johanson and Vahlne 1977). In fact, their thinking on risk is, to use more current terminology, a balancing act between expected rewards and affordable loss; that is, the decision-maker's subjective perception of what he or she estimates can be put at risk and potentially lost as an outcome (Dew et al. 2009). Not surprisingly, in a later paper with Figueira-de-Lemos, Johanson and Vahlne themselves acknowledge the connection between their understanding of risk and affordable loss (Figueira-de-Lemos et al. 2011). Throughout the evolution of the internationalization process model, internationalization is considered to be a continuous process of risk management through a series of decisions (Johanson and Vahlne 1977).

Following these assumptions, the core argument is developed that 'the state of internationalization affects perceived opportunities and risks which in turn influence commitment decisions and current activities' (Johanson and Vahlne 1977, p. 27). This is, as they say, a 'dynamic model' (Johanson and Vahlne 1977, p. 26), in that the present state of internationalization--knowledge of opportunities and challenges in foreign markets (market knowledge) and the amount and transferability of resources committed to a particular market (market commitment)--is considered to have an impact on subsequent decisions. Moreover, the present state is a product of the firm's past activities in foreign markets and its prior decisions to commit resources to foreign operations. The model posits a self-reinforcing cycle that connects past, present and future. Accordingly, internationalization is not an isolated resource allocation problem, but rather a series of interconnected 'decision situations' representing continual 'adjustments to changing conditions of the firm and its environment' (Johanson...

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