Adapting to Foreign Markets: Explaining Internationalization
by Jonathan L. Calof and Paul W. Beamisht
Earlier research explains that internationalization could be thought of at an evolutionary
process. However, this article addresses the issue of exploring the patterns of
internationalization. The definition of “internationalization”, of which this article is based on,
is: the process of adapting operations (strategy, resources, structure, organization, etc) to an
international environment. The element of internationalization, which is in focus of this article,
is mode.
Explaining the patterns of internationalization
The result of the article show that a majority of all mode changes involved movement to a
foreign-direct-investment-mode and in terms of internationalization path the predominant
pattern was from export towards an approach with sales subsidiary.
13% of the change (from export) was towards wholly owned production subsidiary and also
towards joint venture. As other factors was mentioned less than 10% of the cases these are
mentioned as less significant.
Understanding the mode change itself
Categories of underlying reason behind the mode change: Attitude-, internal environment-,
external environment- or performance based stimuli. Although it was found that all of the four
stimuli have major contribution to mode change, one stimuli by itself was rarely sufficient for
a firm to change their mode. On average three stimuli was associated with each mode
change. Following are the most predominant factors within each group of stimuli presented:
Internal environment based stimuli had the largest contribution and where evident in 66% of
the cases – a change in the strategy accounted for the greatest mode change within this
category with 40%, a change in the firm’s resources was the second most frequent answer.
For external environment based stimuli (evident in 57%) the predominant factor was
acquisition opportunity.
With performance based stimuli (evident in 50%) the factors most prominent where: continual
good performance and continual poor performance – which made them realize that it was
time to go make a, for them, logical mode change.
Attitude-based stimuli - accounted for 36% of all mode changes. Most frequent cited factor
for this category was associated with the stages of school of internationalization. Typical
answers include: “Over time we became comfortable with the markets’ potential and
operating within the market and felt that a change in mode was now appropriate.”
Explaining the step to a new mode
Reasons behind a move to a mode was wide-ranged. However, pattern with attitude was
identified.
Discussion – The emergent international adapting model
A significant percent of mode changes arose from change in attitudes – the dominant
explanatory of mode choice. The article finds that a mode change appears to be determined
by a interplay of the variables presented in the figure below.
The model aims to strengthen our understanding of the overall phenomenon of
internationalization.
Conclusion of the article
The reasons behind a mode change are varied and complex but can be traced to stimuli.
The ensuing of the internationalization pattern (de-investment, one-step and multistep
investment) depends on the nature of the stimuli, attitudes, and other mediating variables
associated with internal- and external environment.
Primarily appear the attitudes to be the major determinant to the internationalization path.
As the attitude influence the perception of people (i.e: risk assessment) it is imperative that
these are appropriate for international success. This is similar to how the corporate/business
strategy must be appropriate.