THE INTERNATIONALIZATION
PROCESS: IMPACT OE
COMPETITION AND
EXPERIENCE
Jan-Erik Vahlne
Kjell A. Nordstrom
The process, or evolution, through wbich multinational firms
have reached their present intematiotml position is often referred to
as the internationalization process of the firm." The most widely
accepted theory of this phenomenon explains this slow, and sequential pn)cess in terms of organizations' growth and leaming. It is every
now and then argued that this approach has lost some of its explanatory value. The purpose of this article is to discuss the validity of this
model against the backdrop of assumptions in two key dimensions,
namely, firms' exfjerience of intemational business and the industry's
degree of internationalization.
The process theory of internationalization (cf. Johanson and Vahlne,
1977) has become ihe dominant paradigm in this area of research
Jan-Erik Vahlne is Professor of Intemational Business and Director of
the Institute of Intemational Business at the Stockholm School of
Economics.
KjcU Nordstrom is Assistant Professor at the Stockholm School of
Economics.
ISSN.- 0885-3908. THE INTERNATIONAL TRADE JOURNAL. Volume VII. No- 5, Fail 1993
529
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THE INTERNATIONAL TRADE JOURNAL
{Bjorkman and Eklund, 1991).' The model explains the slow sequential process of a firm's internationalization as the outcome of a continuous process of learning and commitment of resources to international markets. The fact that internationalization processes have very
often heen characterized by initial entry into psychically close markets
has been confirmed by many studies. Also, commitments to individual
markets seem gradually to increase.^
Although most empirical studies seem to have validated the process theory of internationalization, some results also contradict the
generally accepted description of this process. Some reports indicate
an increased tendency on the part of firms to leap-fi-og low-commitment modes or to jump immediately to psychically distant markets.^
Consequently, it is now and then asserted that the theory should be
changed. Most suggestions imply that a number of explanatory variables such as, for example, industry, home, and host country characteristics as well as product characteristics, should be added.^
It is true that the inclusion of such variables will add to the
explanatory' value. At the same time, it will make the theory more
eclectic and by definition harder to falsity. As it should be possible to
falsify a theory, we think that variables such as those mentioned above
can be used to specify under what conditions or assumptions the
theory is valid. The efforts to improve on the theory can then concentrate on the core aspects, namely, the mechanism of the internationalization process.
Contrary' to Ihe "eclectic paradigm"—the most widely accepted framework in
direct investment theory—that sets out to explain "extent form and pattern of international production" (Dunning, 1988), the internationalization mcxlel aims at explaining
the process through which national firms have reached the state of being multinational.
It is explanations to patterns and modes in firms" establishment of foreign marketoHented operations—among them Uxral manufaeturing subsidiaries—that are in focus.
^For references, see Johanson and Vahlne (1990).
'See, for example, .Sullivan and Bauerschmidt (1990).
See. for example, Nord.strom (1991).
Vahlne and Nordstrom: The Internationalization Process...
53i
In this article, changes in the theory as such will not be suggested.
A set of assumptions and their impact on the mechanism will, however, be evaluated. The focus will be on two factors of the utmost
importance in the context of the internationalization process; experience and competition.
I. EXPERIENCE AND COMPETITION
Critics of the process theory rightly stress that experienced companies—those with experience at operating internationally—^seem to
take quicker and more radical action than de novo entrants in the
international arena (Hedlund and Kvemeland. 1985). It therefore seems
as if the theory is more vaUd in the early stages of the internationalization process of a company.
The early literature on internationalization did not mention competition (J()han.son and Wiedersheim-Paul. 1975). But the data collection guide for a study made in 1970 (Homell and Vahlne, 1972) did
include "competition." Our conclusion is thai an omission by the
researchers does not lie behind the lack of competition as an explanatory fector in the models. It is rather—in geographical terms—a
fragmented industry structure, i.e., nations constituting separate industries and markets with little or no relation to each other, that has
diverted interest away from competition. Most of the early Swedish
internationalizers probably experienced limited, if any, competition
from foreign firms. So the motive for their internationalization was not
to compete or strike back but just to grow. Moreover, in many cases
the product or process introduced could be perceived as new or
unique. As a result, the early entrants to foreign markets did not
foresee any competition or pay particular attention to this dimension.
However, the environment has changed considerably during the
last decades. Due to actions of international bodies (e.g., General
Agreement on Tarifls and Trade), government and businesses, industries have internationalized and become global. Fewer and fewer
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industries are, by the early 1990s, nationally structured (Porter, 1986).
It is reasonable to believe that these changes have affected the internationalization process.
A firm's increased experience of doing business abroad and its
internationalization are obviously closely linked to each other."^ Furthermore, only firms that are successiul in their internationalization
process will survive to benefit from the experience that they accumulated previously. Being successful implies that the firm grows by
following the advantage cycle (Sandc'n and Vahlne, 1976) and building
a stronger advantage package (lohanson and Vahine, 1990). In effect,
the firm is not only more experienced, but also accumulates larger
human, financial, and technological resources. The successful international firms usually accumulate advantages beyond those of gaining
experience at doing business abroad. These factors, together with
experience, jointly determine the pace and pattern of the internationalization process. In efifect, the experience of doing international
business is somewhat of a proxy for a set of advantages that are in
constant change. Although the following analysis will focus on the
experience component, we will not (and cannot) completely disregard
the infiuenee of other advantages.
Something of the same principle applies to the industry dimension. Industries become more internationalized, but concurrently there
are usually increased economies of scale, increased R & D intensity,
and changes in concentration ratios. Consequently, an industry's degree of internationalization is not independent of these other charac-
A link that makes sense, given the significant weight of the Icaming-by-doing
component in the proces.s of accumulating experience. Compared to other compiinents
in this process, as, for example, the use of knowledge markets (i.e., consultants) or the
hiring of personnel with previous experience from abroad, the experience gained
through actually running operations abroad is by far the single most important one
(Nordstrom, 1991).
Vablne and Nordstrom: The Internationalization Process...
533
teristics. In effect, the degree of internationalization will therefore also
serve as a proxy for those aspects. (Nordstrom, 1991).
II. SOME DEFINITIONS
The eoncept of the multinational corporation was created to
designate a firm doing business internationally. The most widely used
definitions are structural, often involving the number of countries in
which a company is undertaking a particular type of operation, e.g.,
manufacturing. The Harvard definition—manufacturing in at least six
countries outside the home country (Vemon, 1971)—is one example
of a structural definition. The U.N. definition—with similar but weaker
requirements—regards a transnational firm as a firm with manufacturing in at least one country outside the home country (United Nations,
1974).
There are, however, some subeategories of multinational corporations that are of relevance to us here. Porter (1984, 1986) and others
(e.g., Solvell, 1987, Bartlett and Ghoshal, 1989) see the distinguishing
characteristic of the global corporation as the international coordination of activities (given a certain structural configuration of these
international activities). In a multidomestic firm, foreign operations are
managed as a portfolio of independent activities. Few, if any, activities
are coordinated internationally. We argue, however, that the multidomestic type of firm, such as was characterized by Philips of Holland or
ICI of Great Britain a couple of decades ago, has more or less
disappeared from the arena. The somewhat small Swedish multinationals that we know of are regional rather than multidomestic.'' They
have been forced and/or found it advantageous to coordinate several
''Ilie ABB group often assert that they are "multidomestic" (cf. interview with the
CEO in Hatrard Business Retneu\ March-April 1991). However. ABB use the term
multidomestic" to underline the fact that the ABB group has a local profile in every
country. The group is still "global" in the sense that the core competences Prahalad and
Hamct, 1990) are coordinated worldwide.
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THE INTERNATIONAL TRADE JOURNAL
key activities and operations in the more important markets within the
region but have not yet entered overseas regions. We would therefore
argue that the degree of coordination (cf. Porter, 1986)—the second
dimension usually used for subdividing multinational corporations
(MNCs)—and the concept of a muitidomcstic firm is more of academic than practical value. In any event, the behavior of this category
would be similar to that of national companies. Hence, for our
purposes we end with only one discriminating dimension—geographic spread.
Like Omhac (1985), we also require a certain geographic spread of
the global firm's operations. He claims that presence in the U.S.,
European, and Japanese markets is essential for a company if it is to be
regarded as "global." We would, however, prefer to avoid spcciiying
certain markets or regions. But, on the other hand, we do not find it
satisfying to require manufacturing in a certain number of national
markets, as in the case of the structural definitions of a multinational
company. As we sec it, a threshold of at least 75% of the world market
in which the firm actively competes would, apart from coordinating
activities across national boundaries, be an appropriate cutoff."
Clearly, there are numerous companies that coordinate their key
activities but only compete regionally. This is, for example, the situation for many Swedish multinationals that (so far) in many cases
compete mainly in Europe. We will use the term "regional" for these
firms, wiiere a region is an area like Europe, North America, Latin
America, the Middle East, and so on. Finally, there are numerous
companies competing nationally, but that are in the initial stages of the
internationalization process. Obviously, there is little or no need for
international coordination in this stage. For this group of firms we use
the term "national."
It was shown in Hymer's (1976) seminal work that the phenomenon of the multinational corporation was closely related to
II is acknowledged that this definition is somewhat arbitrary.
Vahlne and Nordstrom: The Internationalization Process...
535
certain industry characteristics, particularly with barriers to entry. The
strong relatiotiship between industry structure and the firm's strategy
that was established in this work has subsequently been at the heart of
strategic thinking in the academic world.
There are certainly many different industry characteristics affecting the process of internationalization. They include economies of
scale, R & D intensity, product differentiation, governmental policies,
and transportation costs. For a thorough analysis, several of these
characteristics have to be taken into account both individually and
jointly, as their impact will vary. However, we will confine ourselves to
working on a one-dimensional scale, focusing on industries where the
underlying structural characteristics favor either national, regional, or
global competition.
In certain industries, such as, for example, building materials or
fish breeding, competition is mainly national. The limited amount of
transferable technology and a low value-weight relationship to a large
extent prevent international trade and competition at tbe present
time. Other industries, such as the home appliance industry, are still
characterized mainly by regional competition. Although the European
key actor Electrolux recently acquired the third largest U.S. white
goods manufacturer—White ConsoUdated—and the U.S. firm
Whirlpool has entered into an agreement with Philips of Holland, it is
still mainly in tbe area of niche products (like microwave ovens) tbat
global coordination and interregional rationalization has taken place
(Solvell, 1985, 1987). The automobile and aircraft industries are both
often cited as examples of global industries. It is not only possible but
also necessary to exploit global economies of scale in various activities
within these industries.
The firm and industry characteristics taken together provide us
with a 3 X 3 matrix—similar to the one discussed by Solvell
(1985)—witb various combinations of industry and firm characteristics.
Some of the combinations in Fig. I might seem unlikely at a first
glance. But we would argue tbat they do exist in reality. We might, for
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THE INTERNATIONAL TRADE JOURNAL
Figure I
Combining Firm and Industry Characteristics
Company
characierisiics
Global
3
6
9
Regional
2
5
8
National
1
4
7
National
Regional
Global
Industry
characieristics
example, have global industries with no full-fledged global firms (cells
7 and 8). The environment of a regionally {or. in the more extreme
case, nationally) struetured industry might change dramatically due to,
for example, technological development or changes in legislation. A
global strategy subsequently becomes viable. It will, however, take
some time, first, before any actor becomes aware of this opportunity,
and, second, before this actor is able to restructure his operations and
actually implement a global strategy. Furthermore, even more time
will pass before other actors follow. Most probably a set of actors will
stay regional (or even national) for a very long period of time even if
some avantgardistic players have moved toward becoming global.
Consequently, we could also expect to find firms pureuing global
strategy in nonglobal industrial structures (cells 3 and 6). There are
examples of this in both the furniture and fast food industries. These
are basically nationally structured industries, but certain actors like the
Swedish furniture retailer Ikca, and the U.S. fast food giants Kentucky
Fried Chicken and McDonalds, are nonetheless global actors pursuing
global strategies.
However, it should be underscored that the expectation would be
that global industries will in the long term be populated by mainly
global actors. Both structural inertia and limited experience at doing
Vahlne and Nordstrom: The Internationalization
Process...
537
business in culturally distant areas combine to prevent instantaneous
adaptation to a changing environment.
III. THE INTERNATIONALIZATION PROCESS UNDER
DIEFERENT HRM AND INDUSTRY CONDITIONS
The basic assumption made is that an expanding firm can choose
between two generic strategies: either to meet key competitors headon or to avoid these competitors by focusing on product and/or
geographical niches.
Now let us turn to the various combinations of firm and industry
characteristics in Fig. I with the numbers between brackets below
indicating the corresponding cell in the matrix. Starting out in the
lower left comer (cell l), the situation is a familiar one. It is in tact the
situation implicitly assumed in early studies of internationalization
(Johanson and Vahlne, 1990), a national firm in the early st^es of
internationalization. The internationalization is based on a set of
firm-specific advantages. As the firm has a competitive edge vis-a-vis
foreign firms that more than oflsets the disadvantage of doing business
in an environment new to the entrant. The most common first step is
that the firm enters what, in terms of psychic distance, could be
regarded as a neighboring market. Similarly, firms in these early stages
tend to rely on a local organization, such as an agent or distributor,
that is familiar with the local environment and with established relations to local buyers. At later stages, when the foreign firm has
acquired knowledge about the local market conditions and established
relations of their own with middlemen and/or end users, the agent is
most often replaced by a sales subsidiary. Downstream manufacturing
activities are usually added later. Markets that are in psychic terms
more distant are sequentially entered.
A regionally established company in an otherwise nationally structured industry (cell 2) must be somewhat of a strategic inventor. The
industry characteristics obviously make at least a regional spread
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THE INTERNATIONAL TRADE JOURNAL
profitable, but other companies have been late to follow. It is reasonable to assume that the firm in this case has strong firm-specific
advantages, which can be expected to be further strengthened by
regional coordination. Further internationalization by such a firm
implies entering another region, namely, tr>ing to get a foothold on
one of the national markets in another region. The internationalization
process in this case will, both in terms of choice of market and entry
mode, he very similar to the pattern discussed above. Although the
regional company has experience of doing intemational business, a
jump to another region still implies a large psychic distance to overcome. At least initially, the process could be expected to resemble
that of national companies going abroad. However, given the experience and resources of the regional company, the process could be
expected to be somewhat fester. More markets might be entered per
time unit, and perhaps certain stages in the establishment chain such
as, for example, the "local agent stage," are leap-fro^ed. The invader
might prefer to avoid the home markets of strong national competitors. If the internationalization process is concurrent with a general
concentration process within the industry, the pace of the process
might be further increased, since acquisitions might be preferred over
greenfield establishment.
Finally, there is the continuing internationalization process of the
global company (cell 3) in an otherwise nationally structured industry.
Such a firm could be expected to be in an extremely strong position
vis-a-vis its actual and potential competitors for obvious reasons. And
being global, it could be expected to have the experience to cope
with any culture or environment. It can use its strength "to shop
around," largely undisturbed by competition. It can enter whatever
markets it prefers in the order it prefers. The speed of the process wiU
probably be primarily limited by the supply of management. It is quite
possible that exports will be a sufficient means of market penetration.
However, if transportation costs prevent exports, the global company
might well establish a greenfield operation. It has either no or limited
Vahlne and Nordstrom: The Internationalization Process...
539
competition to fear, and it might pay dividends to take the time and
resources to build up a local organization that exactly corresponds to
the needs of the firm.
The internationalization of the Swedish furniture retailer Ikea is an
example of this (as well as an example of the case in cell 2 in its
earlier stages of internationalization). For quite some time, Ikea was
the only retailer of knock-down furniture relying on out-of-city locations and customer transportation and assembly of the furniture. The
unique design and distribution of Ikea combined with its very elaborate procurement and logistics concepts has enabled the company to
gain economies of scale to such an extent that it can pursue an
extreme low-cost strategy in the furniture industry. First in Sweden,
second in Scandinavia, and third in Europe and later the United States
and Asia, Ikea has, within what is by and large a natiotially structured
industry, picked one market after the other. Its further international
expansion is primarily limited by the amount of managers being
prepared for international assignments in Ikea s in-house development
program.
All three cases of nationally structured industries imply that the
company starting, or continuing, to internationalize is an aggressor,
relying on certain strong and unique advantages. Competitive aspects
do not strongly affect the internationalization process. Instead it can
be concluded that the process can be explained mainly by the firms'
access to the necessary resources: experience, relations, capital, and
management.
Now let us look at internationalization in regionally structured
industries. A good example of this time is the home appliance industry. Until 1991, in spite of a few cross-regional acquisitions by the
largest actors, competition can be regarded as mainly regional. The
global restructuring process and interregional trade of products and
components are still limited to certain minor segments of the industry.
Starting from the very bottom of the second column in the matrix
(Fig. 1), we first have the case of a national firm going international in
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THE INTERNATIONAL TRADE JOURNAL
regionally structured industry, thus entering another national market
in the same region (cell 4). The firm could in this case be expected to
internationalize from a niche position. It does not possess the strengths
to meet the established regional competitors head-on in their main
product segments, certainly not in their main markets. The invader
wi\l probably enter area or product segments of less interest to the
latter established actors, accumulate experience and resources, and
then follow the traditional sequential process described above for the
cell 1 case. High speed is neither possible, due to lack of experience,
nor necessary (given a non-head-on strategy). On the contrary, the
success of the entry depends to a lai^e extent on the fact that the
regional competitors do not find the entrants' moves threatening
enough to trigger countermoves. Consequently, the focal company
viill avoid head-on competition with regional actors for quite some
time.
An example of this expansion route could be found in the home
appliance industry of the 1960s and 1970s. The Swedish firm Electrolux in its early phases avoided the large German, French, and Italian
markets, namely, the home markets of the largest competitors. Electrolux initially focused its efforts on the Nordic countries and only
when it had grown strong enough did it enter the strongholds of its
competitors.
A regional company entering a new region (cell 5) is a situation
where the traditional model of firms' internationalization is valid
under certain conditions. If the intruding firm follows a very focused
strategy and is in command of limited resources relative to its key
competitors, it is probable that the entrance will be gradual. One—in
psychic terms—nearby market after the other will be entered, and
positions within the respective markets will be gradually deepened
over time. However, if the intruder goes for more of a head-on
strategy, this will also be reficcted in the internationalization process.
It could be expected that less of the gradual pattern proposed by the
traditional models could be discerned. Competitive considerations
probably play the most important role.
Vahlne and Nordstrom: The Internationalization Process...
541
An example of the former process is often found when a firm finds
it necessary' to go outside its own region to get hold of new technology. Theoretically, this could be done through acquiring a license, hut
for reasons successfully outlined by proponents of the internationalization theory of the multinational corporation (cf. Rugman, 1980), this is
often not a viable altemative. An acquisition of a firm with the
appropriate technology might be preferred. Electrolux did not have
the technology to produce microwave ovens. Some of its European
competitors had this knowledge, so Electrolux acquired the U.S. firm
Tappan. a large mantifacturer of gas stoves but also of microwave
ovens. Possibly Electrolux signaled that this was the main motive
behind the acquisition in order to avoid retaliation in the U.S. market
(cf. Solvell. 1987, pp. 176 and 199). These microwave ovens are now
imported to Europe from the United States by Electrolux.
Finally, we have the case of a global company entering a new
region in a worldwide regionally structured industry (cell 6). The
global actor in this case is powerful and experienced vis-a-vis its
competitors. The choice of market, form, and timing of the entrance
will mainly depend on what is optimal from a competitive and resource allocation point of view. If, for example, there are no impediments to imports into a foreign market, those might be served from
existing plants. Larger markets will probably be preferred to smaller
ones. If necessary, new facilities can be established. This can be done
by a greenfield investment, but the opportunity to acquire a suitable
national or regional competitor is obviously also an altemative. Hence,
the classical model of firms' internationalization has little or no explanatory value in cases like this.
Taken together, the iniemationalization process in regionally
structured industries (cells 4, 5, 6) tends to be affected by competitive
considerations. This is not the case in nationally structured industries
(cells 1, 2, 3). It is only in the cases of inexperienced national and
regional firms following a focus strategy that the traditional pattern
could be discerned in regionally structured industries.
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THE INTERNATIONAL TRADE JOURNAL
A national firm embarking on the road of intemationalization in a
global industry (cell 7) will most certainly rely on a focus or niche
strategy. Sheer survival of a nationally oriented firm in an otherwise
global industry, with powerful regional and global actors, requires a
well-defined focus strategy both in terms of products and/or geography. However, even with a well-defined overall strategy, it could be
expected that a national firm is weak vis-a-vis the established regional
or global actors within the industry'. Since head-on competition with
the established firms is out of the question, the national firm will
internationalize with a focus on national markets and/or market
segments of less importance to these firms. Given that the firm is able
to successfully define a somewhat protected niche, a rather traditional
internationalization process could be expected. We see Asianfirms,as,
for example, the Korean auto manufacturer Hyundai or the Japanese
auto manufacturer Suzuki, together with several small innovation-based
firms entering the international arena following this route (ef. Lindqvist,
1991).
However, certain diversions from the traditional pattem could be
expected in the "choice-of-markets'" dimension. The necessity to avoid
certain of the competitor's key markets will be reflected in this area.
The frequency and magnitude of these diversions will depend on the
extent to which the firm has chosen to go for a geographic focus.
A regional firm is in most cases not a negligible competitor even
to global firms, although the latter can be assumed to be more
powerful. Hence, a regional firm entering another region (cell 8),
perhaps thereby beginning its own globalization, would probably be
considered threatening. At least some of the competitors will react.
Consequently, countermoves of some kind should be expected. For
the regional actor there are basically two alternatives. Either it has the
strength to meet the established competitors head-on or it has not. In
the former case, it will enter an important market in the region,
quickly and forcefully. A major acquisition is a plausible altemative but
so too is a significant cooperative venture with an established com-
Vahlne and Nordstrom: The Internationalization Pn)cess...
543
petitor within the region. The Swedish pharmaceutical firm Astra's
entry into the U.S. market is a good illustration of this avenue.
Astra—mainly established in Europe-—entered the U.S. market forcefully at the end of the 1980s, head-on with the established competitors
through a significant cooperative venture with the world's largest
pharmaceutical firm, Merck. In effect, Astra thereby displayed few or
no traces of the traditional establishment pattern. In the latter case,
the regional firm will enter with a focus strategy product-wise, geographically, or both. With a geographic focus the traditional sequential
process is applicable to some extent, although the choice of market
will to a large degree be affected by competitive considerations.
However, a strong and well-defined product focus allows the intruder
to act without too many competitive considerations, something that
will also he reflected in the internationalization process.
The last case is the global firm in a global industry (cell 9),
entering yet another national market. It is in this case very difficult to
have any a priori opinions about the method of entry or the country
sequence. Any form is possible. It all depends on what is most suitable
from a competitive point of view—^at least if the market is an important one. However, it could be expected that the industry is somewhat
concentrated. Consequently, any move might initiate countermoves
(cf. Knickerbocker, 1973). Given the high risk of retaliation, acquisitions might be preferred when entering a new market. However,
imports or greenfield investment are almost equally viable alternatives.
The leading firm in the global hard rock drill industry—Atlas
Copco—has, for example, used a variety of entry modes over time.
Atlas Copco prefers in many cases to import due to diseconomies of
scale in establishing yet another plant within a particular region. On
the other hand, the global competitive game has in certain cases made
it necessary to acquire a smaller, national or regional player to prevent
another global actor from getting a foothold in a certain market (SOU,
1981, p. 33).
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THE INTERNATIONAL TRADE JOURNAL
However, certain phenomena observed in the change process of
global actors—or highly internationalized firms in global
industries—are difficult to explain within the frame of the traditional
models.
Some global actors have, for example, taken steps that at a first
glance might look like a "deintemationalization" in terms of the
traditional model. In certain mature global industries, actors—like
Atlas Copco in the global air compressor industry—close down some
foreign units and rely instead on local distributors or agents for
imports. Economies of scale and decreasing transport costs make a
concentration of manufacturing operations profitable. The global standardization of the products and the customers' knowledge about the
products have reached a stage where it makes sense to externalize
sales, service, and distribution. Scare managerial and other resources
could be better utilized somewhere else. The bargaining power the
global firm can exert over its local partners guarantees the necessary
control and infiuence. Hence, in terms of its share of the foreign
market, the firm is equally (or even more) internationalized than
before the change, although it has taken one or a few steps "back" in
terms of the stages in the traditional model.
The high frequency of cooperative ventures in global industries,
as, for example, the automobile industry (cf. Kogut and Rolander,
1984), are equally difficult to explain in terms of the traditional
models. More powerful explanations are to be found in the sharing of
huge fixed costs of various kinds or in ambitions to stabilize an
uncertain emironment (C-ontractor and Lorange, 1988). These explanations are strongly correlated with the phenomenon of global competition.
Taken together, it can be concluded that the experience-based
models of a firm's internationalization have some difficulty in explaining when, how, and where a firm takes a step toward internationalization under the conditions prevailing in cell 9. The experience-based
models simply tell us that almost any step is within reach for the
Vahlne and Nordstrom: The Internationalization Process...
545
highly internationalized, or global, firm. Knowledge about and experience form foreign operations is not a scarce resource within such a
firm. The choice of market, mode of entry, and timing of entrance will
be a function of what is optimal from a competitive and resource
allocation point of view.
IV. CONCLUSION
Although our final case in cell 9 is extreme, we would argue that
the experience based model's general ability to provide unambiguous
explanations to any pattern in the internationalization process decreases as the firm's experience of doing business abroad and the
industry's degree of internationalization increase. The more experienced the firm and the more internationally structured the competition, the more we have to turn to competitive considerations for
unambiguous explanations of where, when, and how new markets will
be entered. As indicated in Fig. II, the experience-based model's ability
to provide unambiguous explanations decreases continuously as we
move from the extreme case of cell 1 to the other extreme case of cell
9.
Figure II
The Experience-Based Model's Ability to Provide Unambiguous
Explanations to Patterns in the Internationalization Process
Under Various Industry and Firm Conditions (The Darker the
Color, the Stronger the Ability)
Global
Company
characierisiics
Regional
National
National
Regional
Industry
charactenstics
Global
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THE INTERNATIONAL TRADE JOURNAL
As it seems that current changes in technology are leading to the
creation of even lai^er scale economies and consequent globalization
of industries, it is tempting to believe that the importance of competitive aspects in explaining the internationalization process will increase.
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Ciermany." Research paper presented at the Annual Conference of
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