Why hasn't Yelp pushed internationalization more aggressively?

3 Selected process approaches of internationalization

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1 3 Selected process approaches in internationalization This chapter is devoted to the essential approaches in internationalization process research. Those concepts were included in the selection that explicitly address the temporal aspect and thus deal with the course of the internationalization process and are trend-setting in this research area. There is also a large number of papers that deal extensively with theoretical approaches to the internationalization process. 327 This reduces the selection to the following concepts of internationalization process research, which are critically appraised in the context of this work: Vernon's product life cycle model (1972), Aharoni’s behaviorist theory of direct investments (1966), including the Uppsala model around Johanson and Vahlne the essential further developments, the Helsinki model according to Luostarinen (1988), the GAINS approach by Macharzina and Engelhard and finally the 3-E model by Kutschker and Bäurle. Figure 17 shows the structure of the chapter. 3.1 Neglecting dynamic aspects Selected process approaches of internationalization 3.2 Product life cycle model by Vernon 3.3 Behavioral theory of direct investments by Aharoni 3.4 Uppsala model including significant further developments 3.5 Helsinki model according to Luostarinen 3.6 GAINS approach by Macharzina / Engelhard 3.7 The 3 E model by Kutschker / Bäurle Figure 17: Chapter structure 3 Selected process approaches in internationalization 327 Cf. Braun (1988), Jahrreiß (1984), Macharzina (1982), Pausenberger (1982), Dülfer (1982), Perlitz (2004), S, Swoboda (2002), Kutscker / Schmid ( 2006), Forsgren (2008), Holtbrügge / Welge (2010), S, etc. 79

2 3.1 Neglecting dynamic aspects Research into changes in companies or individual sub-areas in the course of internationalization is still in its infancy, as opposed to dealing with content-related issues relating to internationalization. 328 In numerous studies and papers, the choice of a suitable form of internationalization, the coordination of the parent-subsidiary relationship, risk management and individual functional areas of international management (e.g. R&D, production, personnel management and finance) are dealt with. 329 By focusing on the strategy content, both procedural and temporal aspects are neglected. 330 The contributions also do not do justice to the demand for an integrated, procedural approach. 331 The time factor is only explicitly discussed in a few studies, for example in Bäurle (1996) and Kutschker / Schmid (2006). In the literature, static approaches 332 (vs. dynamic 333) dominate and in empirical studies cross-sectional instead of longitudinal analyzes. 334 This is shown by an evaluation by Li / Cavusgil (1995) between 1982 and 1990, where of 757 articles on international marketing or management, less than 5% took a dynamic perspective. 335 Melin (1992) also identifies only a few empirical long-term studies or studies with dynamic aspects in a categorization of articles in the Journal of International Business Studies between 1989 and 1991. Cf. Braun (1988), p. 165, Melin (1992), p. 100, Miller (1981), p. 7, Bäurle (1996), p. 39f., Macharzina / Engelhard (1991), p. 24, Swoboda (2002), p. 33f. etc. 329 Cf. for example Perlitz (2004), Schmidl (1997), Pausenberger (1994), Söllner (2008), Macharzina / Wolf (2005). 330 See criticism by Swoboda (2002), p. 34, which refers to the work of e.g. Segler (1986), Cichon (1988) and cites exemplary exceptions in Barnett / Burgelman (1996) and Al-Laham (1997). 331 Macharzina / Wolf (2005) attribute this lack of integration to a largely isolated analysis of forms of internationalization and processes with regard to the study levels as well as the set study goals and selected methods (cf. Macharzina / Wolf (2005), p. 930). 332 for example Dunning's eclectic theory (cf. Dunning (1979, 1980 and 1988). For an overview of internationalization theories, see Cantwell (2000), Navaretti / Venables (2004) and Stein (1994), pp. 49ff. 333 Perich speaks For example, there is a clear deficit in dynamic theory formation in business administration (cf. Perich (1993), p. 3). 334 Cf. Kutschker et al. (1997), S Cf. Li / Cavusgil (1995), pp. 255 and 261f 336 See Melin (1992), p

3 The internationalization of companies has been the subject of much discussion in science for more than 50 years. An abundance of model approaches was designed, which began with the employment of exports as the main form of internationalization as well as economic explanatory approaches. It is only since the 1960s that procedural approaches have found their way into the theory of internationalization. 337 process approaches that address the factor of time can be found in the theory of direct investment. The main ones to be mentioned here are the product life cycle model by Vernon (1966) and the behaviorist theory of direct investments by Aharoni (1966). Process elements in the internationalization of individual industries are also addressed by Knickerbocker (1973), Graham (1974) and Flowers (1976) within the framework of the theory of oligopolistic parallel behavior 338. On the other hand, authors have been working on behavioral studies since the 1970s, building on Aharoni s (1966) dynamic elements in the research area of ​​international management by making statements about the object, forces and course of the internationalization of companies. They differ from previous theories in that the temporal dynamic sequence is less in the foreground but more business concepts with a focus on the design of (sales) markets. Questions of management and integration are considered subordinate and the topic of optimal international allocation or the coordination of value creation functions are partially excluded. 339 The scientific discussion in the research area of ​​international management has primarily shaped the knowledge of the behavioristic work of the Scandinavian school. Pointing the way in this context are on the one hand the work of the so-called Uppsala School of the Swedish researchers around Johanson and Vahlne and on the other hand the Finnish-Australian research team Luostarinen and Welch. The two groups both worked on the basis of the findings of the other, but also carried on research into the internationalization process independently of one another. 340 These approaches aim to explain rather than describe patterns of internationalization. They understand the internationalization process as an evolutionary and step-by-step structure of foreign activities 337 For an overview of the development of internationalization theories see e.g. Macharzina / Wolf (2005), pp. 929ff., Holtbrügge / Welge (2010), p, etc. 338 Due to the Focus on a specific industry, these contributions will not be discussed in more detail. 339 See Swoboda (2002), p. 72f. 340 See Johanson / Vahlne (1977) and (1990), Johanson / Mattsson (1986), Luostarinen (1989) and Nordström (1991). 81

4 over a period of time. Internationalization develops from an interplay of knowledge about foreign markets and increasing international commitment and investment of resources. These approaches are therefore also referred to as learning approaches. Both currents are presented below, including the essential further developments of the original approaches. 341 The German research team Macharzina and Engelhard, with their gestalt approach of international business strategies (GAINS) 343 based on the punctuated equilibrium theories 342, introduced a completely new perspective compared to the behavioral studies. In this approach, the management and its active control of the internationalization process, which the authors see as being dependent on a wide range of market and company-specific factors, are of great importance. 344 In response to changes in the corporate environment, internationalization changes the shape of the entire company and includes both evolutionary and revolutionary developments. The GAINS approach is not only formative for the German-speaking area, but also provides interesting insights for the topic at hand through the representation of a multidimensional and development-oriented concept. It is explained in detail in Chapter 3.6 and critically assessed. The authors Kutschker, Bäurle and Schmid developed the so-called 3-E model (development, evolution, epoch) of internationalization from the criticism of the partial analytical consideration and the insufficient mapping of the dynamic reality of the internationalization process 345 in the process theories of internationalization. They focus the consideration on the dynamic processes and the design elements of management in the internationalization process, which are unaffected in the other work. 341 See Chapter 3.4 Uppsala Model, Chapter The Further Developments of the Uppsala Model and Chapter 3.5 The Helsinki Model according to Luostarinen. 342 See Miller / Friesen (1982), Gersick (1991). 343 Cf. Macharzina / Engelhard (1991) and more precisely in the section Cf. Turnbull (1987), Macharzina / Engelhard (1991). 345 See Kutschker (1993, 1994, 1995 and 1996), Kutschker / Bäurle (1997), Kutschker et al. (1997), Bäurle (1996) and, in summary, Kutschker / Schmid (2006). For the development of the 3-E model and the criticism of the internationalization approaches mentioned by Bäurle, see Bäurle (1996) and Chapter 3.7. The concept itself, but not the form of the internationalization process over time, was empirically investigated by Bäurle (1996) and Eckert / Mayrhofer (2005). 82

5 must be taken into account. The focus is also on the theoretical discussion of different courses of the internationalization process with the concept of evolutionary, episodic and epochal internationalization. 347 In the more recent literature there are also approaches that illuminate a co-evolutionary perspective of internationalization. Pajunen / Maunula (2008), for example, view the internationalization path as a joint development of internationalization activities, organizational resources and influences from the industry. 348 Simon (2007), for example, developed a resource-oriented 349 theoretical framework for the analysis of internationalization processes as an alternative to the strongly behavioral-oriented approaches. Resource-oriented research in the context of internationalization is a very young approach, as Simon (2007) was only able to identify 37 studies that dealt conceptually or empirically with this topic. 350 From a resource-theoretical point of view, the question of why a company is internationalizing has to be answered either with a focus on the sales market or the procurement market, which results in different decision-making scenarios for internationalization depending on the attractiveness of the market and the available resource base. 351 However, Simon (2007) leaves out the production side of the company. Under the basic assumption that at all points in time of the internationalization process there is a specific resource. 346 See also Borghoff (2005), p. 329ff., Who developed an evolutionary theory of the globalization of companies. 347 For more information on the 3-E model and the terminology, see the section cf. Pajunen / Maunula (2008), Madhok / Liu (2006). 349 Resources are understood to be input goods that are available to the company for internal and external provision of services and to which the company has all property rights (cf. Freiling (2001), p. 20). Simon (2007) delimits the resources on the basis of the criteria of reproductive possibility and person-relatedness (cf. Simon (2007), p. 143ff.), Works out their value, lack of marketability and non-limitation as constituent properties (cf. Simon (2007), P. 152f.) And confirms their dynamic character (cf. Simon (2007), p. 163ff.). 350 For an overview of the contributions see Simon (2007), p. 173ff. 351 Cf. Simon (2007), p. 216ff. For example, a highly attractive market and a high resource base represent the case of exploitation, while a very attractive market shows a resource gap when there is no resource base. Conversely, the case of a low market attractiveness with a non-existent resource base is irrelevant to the decision or existing resources lead to resource degeneration. 83

6 cen equipment is required, a resource requirement profile can be created 352 as well as a time sequence of internationalization steps (internationalization pattern) 353 depending on the time requirement and the speed of resource development or the use of existing resources. 354 On the one hand, this approach opens up a completely new perspective, since internationalization is of a voluntaristic nature with an open end result 355 and, on the other hand, it is particularly able to explain the real phenomena of Immediate Internationalization 356 and Born Globals from a resource-theoretical point of view 357 Entrepreneurship research found its way into the discussion on dynamic internationalization processes. This includes, on the one hand, dealing with the phenomenon of so-called Born Globals 358. On the other hand, new views on the behavior of companies in the initial phases of internationalization have led to revealing insights in internationalization research and in particular the time-strategic aspects. 359 [] we propose that all firms engaging in their early stages of internationalization are, in a sense, like these new species of internationalizing entities, in that they display in their early stages the entrepreneurial features of internationalization rather 352 Cf. Simon (2007) , P. 236f. 353 Cf. Simon (2007), S Cf. Simon (2007), pp. 251f. 355 Cf. Simon (2007), pp. 266f. 356 Immediate or instant internationalization is understood as the empirically seldom observed case that services developed or produced in Germany are first marketed on foreign markets (cf. case presentation of the internationalization of Daimler von Oesterle (1997), p. 134ff). 357 Cf. Simon (2007), S Born Globals are companies that have been operating in global markets from day one and thus skip the entire internationalization process. They are also referred to as global start-ups or international new ventures. See Rennie (1993), Oviatt / McDougall (1994, 1995, 1997, 2005), Bloodgood et al. (1996), Kohn (1997), Madsen / Servais (1997), Knight / Cavusgil (2004). See also Rialp et al. (2005), who provide a literature review of 38 studies in the period from, and Zahara (2005). 359 Cf. Sharma / Blomsterno (2003) or Mathews / Zander (2007), who present an international entrepreneurial dynamics framework as a supplement to the analysis of internationalization processes. 84

7 than the traditional activities and advantages associated with the mature and well-established MNE. 360 These approaches are still in their infancy and offer plenty of scope for further scientific research in this area. In the following, the essential approaches of dynamic internationalization process research are presented and critically assessed, which consider the internationalization process of large companies. 361 This includes the product life cycle model by Vernon (1966) 362, the behaviorist theory of direct investment by Aharoni (1966) 363, the work of the Uppsala 364 and Helsinki School 365, the GAINS approach by Macharzina and Engelhard 366 as well as the 3- E-model by Kutschker and Bäurle 367. The work from entrepreneurship research around the phenomenon of born globals is not examined in more detail, as this type of company is not the subject of this work. The findings of the resource-based research flow into the chapter in which the connection between the internationalization process and financial strategic aspects is discussed. 3.2 Product life cycle model by Vernon Vernon (1966) developed the international product life cycle model as an explanatory approach for the emergence of exports as well as for the investment behavior of companies. This depends on where the company is on the product life cycle curve. 368 In his search for more meaningful models, Vernon overcomes 360 Mathews / Zander (2007), S For a detailed critical appraisal of central approaches in internationalization process research, for example, Swoboda's habilitation thesis (2002). 362 See Section 3.2 Vernon Product Lifecycle Model. 363 See Section 3.3 Behaviorist Theory of Direct Investment by Aharoni. 364 See section 3.4 Uppsala model. 365 See section 3.5 The Helsinki model according to Luostarinen. 366 See section 3.6 GAINS approach by Macharzina / Engelhard. 367 See Section 3.7 The 3-E model by Kutschker / Bäurle 368 See Vernon (1966) and (1971). The concept of the product life cycle was not invented by Vernon, but has existed in previous approaches to international trade. However, he is considered to be the founder of a complete theory. (See Wells (1974), p. 5) 85

8 of the product life cycle model expressed his dissatisfaction with the prevailing theory of comparative cost advantages at the time by defining the focus on the chronological sequence of innovations, the influence of economies of scale and uncertainty as central building blocks.369 The product life cycle model has found a high level of acceptance in business practice, but, as Wells (1974) points out, was not very elegant compared to traditional foreign trade theory. 370 The first version was written against the background of US direct investment activities in Europe, and as the appearance of multinational corporations as well as international economic conditions changed over time, Vernon formulated a new version as early as 1974. 371 In the original version, the internationalization process is characterized by three phases, which Vernon names as (1) the phase of the new product, (2) the phase of the maturing product and (3) the phase of the standardized product. 372 The names of the individual phases have been partially changed and expanded in the literature, for example Pausenberger (1982) speaks of the innovation, growth and maturity phase 373 and Braun (1988) of the introductory, maturation and stagnation phase 374 during Wells (1974 ) even identified five phases 375. Due to the scope of Vernon's original approach, the basic assumptions and explanations should be briefly presented. Cf. Vernon (1966), S Cf. Wells (1972/74), S See Vernon (1974), p. 108ff. This approach combines elements of industrial organization and location theory and makes no explicit reference to the product life cycle model. Other authors such as Buckley / Casson (1976) and Jahrreiß (1984) nevertheless see this as a modification of the basic model (cf. Buckley / Casson (1976), p. 77f., Jahrreiß (1984), p. 77f). Since this approach basically has only minimal similarities with the product life cycle model and only provides an indirect explanation for the emergence of multinational companies and the internationalization process due to the lack of dynamic character, it will not be discussed in more detail here. For a critical appraisal of the new version see e.g. Stein (1994), S cf. Vernon (1966), pp. 191ff. 373 See Pausenberger (1982), pp. 334f. 374 See Braun (1988), S See Wells (1974), p. 13ff. 376 In the following see Vernon (1966), pp. 191ff. and the sources mentioned. 86

9 The product life cycle model is based on the following basic assumptions: 377 products change over time in a predictable manner with regard to production processes and sales conditions. Over time, this opens up the possibility of achieving economies of scale. There are differences in taste depending on the income level between different countries. The simplistic assumption of perfect information is discarded and limited information is introduced as an independent variable in the decision to export or direct investment. Communication, especially over long geographical distances, is therefore associated with costs. There is good reason to believe, however, that the entrepreneur's consciousness of and responsiveness to opportunity are a function of ease of communication; and further, that ease of communication is a function of geographical proximity. 378 The starting point for the argumentation of the product life cycle is a product that is new in terms of input factors, the production process or the equipment at home and abroad Phases of the product life cycle model The three phases of the product life cycle are presented in this section. 379 Phase 1: New product In the first phase, the new product is developed, produced and introduced in the home market and foreign customers are satisfied through exports, which can be continued until imitators enter the market. In the introductory phase, both the product and the production process are still largely unstandardized and not fully developed. The first consequence of this is that there is a certain flexibility of the input factors 377 See also the summary by Stein (1994), S Vernon (1966), S Cf. in the following Vernon (1966), pp. 191ff, p. 196ff. and p. 202ff. 87

10 must be done until the final product shape has been found. Secondly, this requires very well-trained workers, who are not only required for further development and improvements to the product, but also to the manufacturing process. Ultimately, no economies of scale can be generated at this point in time, which is reflected in a higher price for the new product due to the resulting cost structures. However, due to the low price elasticity of the demand for innovative, qualitative products, pricing is of less relevance. In addition, cost aspects play a negligible role in the initial phase due to the monopoly profits achieved from innovative product differentiation. The key to the success of the new product is more the communication options between producers and consumers in order to reduce the market risks associated with innovations and to be able to react quickly and flexibly to changes in demand. 380 Phase 2: Maturing product Both the product and the production process achieve a certain degree of standardization over time, which on the one hand reduces the need for intensive communication with the market and the need for flexible production. At the same time, economies of scale are achieved through the high output volumes and product cost considerations are increasingly coming to the fore. Since the standardization of the product increases the price elasticity of demand and competitors are pushing into the market, sales prices have to be lowered in order to remain competitive. Abroad, especially as Vernon writes, in the European industrialized countries the demand for the product is increasing and considerations are being made about the choice of the optimal production location. Production is relocated abroad precisely when the marginal costs of production plus the transport costs for export are higher than the average costs of foreign production. Countries with a similar demand structure as the domestic market come into question for direct investment. 381 Vernon cites economies of scale and wage costs as the main cost differences between competing production sites. 382 Vernon emphasizes, however, that not only cost considerations are decisive, but also international 380 cf. Vernon (1966), S, Braun (1988), S, Stein (1994), p. 71, Swoboda (2002), S cf. Vernon (1966), S, Stein (1994), p. 71f., Braun (1988), S, Wells (1974), p. 11ff., Swoboda (2002), p. 43, Bäurle (1996), S cf. Vernon (1966), pp

11 ization can also be the result of strategic constraints such as exports may be endangered by local foreign competitors or by impending trade barriers. 383 In addition, based on Aharoni's behaviorist theory, he emphasizes the complexity or irrationality of the decision-making process on direct investments, since any hypotheses based on the assumption that the United States entrepreneur will react rationally when offered the possibility of a lower-cost location abroad is , of course, somewhat suspect. 384 The threat to the status quo from competitors plays a particularly important role. If I interpret the empirical work correctly, a threat in general is a more reliable stimulus to action than opportunity is likely to be. 385 In this phase the monopoly profits decrease, there are first losses and producers from developing countries use their cost advantages to finally even compete on the domestic market of the innovator by means of re-imports. 386 Phase 3: Standardized product In the third phase, the product and production process are standardized in such a way that mass production takes place. Communication with the market and flexible manufacturing processes have become unimportant. Due to the increased price war, the manufacturer is forced to make further cost savings and is no longer competitive on the domestic market. This is followed by complete export substitution by imports and the relocation of production to low-wage countries is increasing sharply. The markets of the industrialized countries are supplied from these foreign production sites. 383 Cf. Vernon (1966), p. 198, Vernon (1966), S Aharoni's theory is discussed in detail in Section 3.2. 385 Vernon (1966), S. Cf. Swoboda (2002), p

12 det a low-wage trade instead of a technological gap trade and the former exporting countries thus become net importers Critical appraisal of the product life cycle model Vernon's product life cycle model has already been criticized and appreciated many times in the literature. Criticism points include that internationalization does not take place in the sequence postulated by Vernon starting with exports and only subsequent direct investments, but that the deterministic pattern 388 of the product life cycle should be seen more as a strategic business concept that tends to anticipate, but also by strategists is reversed. 389 Predictions about the specific course are only possible in exceptional cases. 390 and Buckley (1981) criticize the fact that three interdependent decisions are separated, namely firstly on investment in product development, secondly on the form of foreign market cultivation and thirdly on the desired market position compared to foreign competitors . 391 Perlitz (2004) states that the corporate strategy must be determined in advance in order to define the variables that are dependent on the (ideal-typical) course of the internationalization curve in the life cycle model. However, it was precisely the development of company policy based on the life cycle curve that was the intention of this concept. 392 Although statements are made about the geographical distribution of activities, two important aspects of the internationalization process are left out. On the one hand, the length of the individual phases is not discussed 393 and, on the other hand, the broad spectrum of foreign marketing forms such as licensing, cooperation, joint ventures or franchising is hidden 394. However, the greatest limitation of the model is the focus on US companies and 387 Cf. Vernon (1966), S, Pausenberger (1982), p. 335, Braun (1988), p. 142f, Swoboda (2002), p. 43, Stein (1994), S cf. . Also criticism by Bäurle (1996), p. 47, Giddy (1978), Buckley (1981), p. 76. Stein (1994) and Pausenberger (1982) speak of a mechanistic process (cf. Stein (1994), p . 74, Pausenberger (1982), p. 336). 389 See Giddy (1978), S See Perlitz (2004), S See Buckley (1981), S See Perlitz (2004), S See Kappich (1989), S See Bäurle (1996), p. 47, Stein (1994), pp

13 people with high incomes. 395 Vernon himself sees that the validity of the model due to rapidly changing framework conditions (e.g. the USA could not maintain its special economic position after the Second World War, multinational companies set up international networks of subsidiaries and sell products at the same time global level is restricted to). 396 Despite all the criticism, the life cycle model impresses with its simplicity and directness. 397 Pausenberger (1982) emphasizes that Vernon describes the process of massive internationalization of American companies after the Second World War with a very clear and didactically fruitful approach 398. Against the background of the process of internationalization, it should be noted that the Vernon life cycle model is a dynamic model and explicitly includes time as an additional dimension in the considerations. 399 Buckley / Casson (1976) criticize the programmatic character of the model, since the sequences of the internationalization steps are discussed, but not the speed of the sequences or the time intervals between the phases. 400 Swoboda (2002) refers to the main suitability of the approach for ex-post analyzes, which implies for companies from high-wage countries that they have to constantly introduce new products and thus start new international product life cycles in order to ensure their long-term competitiveness. 401 Vernon, thirteen years after developing the basic model, has specified the following possible applications against the background of changed framework conditions in foreign trade: 402 Internationalization activities by smaller, innovative companies with a not yet very advanced degree of internationalization can be explained because these companies are leaving due to more intensive communication Jahrreiß (1984), S cf. Vernon (1979), S cf. Buckley (1981), S Pausenberger (1982), S cf. Bäurle (1996), p. 48, Swoboda (2002), p. 44. See also reference from Jahrreiß (1984), S and Kappich (1989), S cf. Buckley / Casson (1976), S cf. Swoboda (2002), S cf. Vernon (1979), p. 265ff, Stein (1994), 74, Braun (1988), 145, Bäurle (1996), 49f., Swoboda (2002), 45f. 91

14 cation possibilities, the higher flexibility and also the increased risk their initial production initially in the home country. The innovation activity of companies that were interested in products that conserve capital and materials, e.g. Japanese and Europeans can be explained. Due to the significant economic differences, the model is relevant for export and investment flows between industrialized and developing countries. The approach provides explanatory contributions for direct investment within the group of developing countries. 3.3 Behavioral theory of direct investments by Aharoni The behavioristic theory of direct investments by Aharoni (1966) explains the internationalization process of companies with an approach 403 unusual for the time, namely the subjective decision-making behavior of managers. 404 With the emphasis on behavioral science elements as the central explanatory variable in the internationalization process, Aharoni turns his back on the perfect world of classical economics. The focus is on the decision-maker as a behavioral man who has only limited information and whose information processing and problem-solving capacity is limited. In contrast to the classical, rationally acting economic man 405, the behavioral man himself has to strive for suitable alternatives, agree on countless goals and set them up in the organization, which can be learned in the behavioral theory 403 Cf. Bäurle (1996), S The behavioral basis for this was made by Simon (1961) and Cyert / March (1963). 405 In the literature, the Latin term homo oeconomicus is used and it is understood to mean a person who behaves according to the economic principle. This means that someone achieves the best possible result or a certain result with the least possible use of resources with given resources. For more details on the decision-making behavior of the homo oeconomicus, see Bamberger et al. (1993), pp. 68ff. 92

15 is, defend. 406 While in the classic view the decision-making process is seen as the final product of a logical process, at the end of which doubts end and action begins 407, Aharoni states that in a business context, decisions are made as a result of many small actions, interactions or conversations and the decision-making process can have gaps and jumps in the sequence. 408 The behavioral science context provides clues for an explanation of investment decisions that appear irrational at first glance. Behavior that had seemed baffling and irrational began to make sense when the decision process as a whole, taking part within an organization and a cultural system, which was considered. Once my preconceived notions about how organizations should behave were erased, an orderly system of behavior began to be apparent. 409 Aharoni dealt with the apparently irrational phenomenon that companies have decided against foreign direct investments despite the high possible profit opportunities abroad, which would also compensate for the associated higher risk. Obviously, decision-makers were ignorant of the exact situation abroad and thus uncertainty about the level of risks involved in investing abroad, so that, despite knowledge of foreign interest or tax advantages, profitable domestic investments were preferred. As a rule, high profit expectations are therefore not sufficient to stimulate the internationalization process, as decision-makers tend to underestimate disadvantages and advantages. 410 Aharoni therefore asked himself why direct investments can occur despite this basic attitude and analyzed around 100 investment decisions by US companies with regard to their decision-making processes for foreign direct investments (primarily in less developed countries) Cf. Aharoni (1966), p. 30. For the basics of behavioral science, see Braun (1988), p. 82ff. 407 Aharoni (1966), S cf. Aharoni (1966), S Aharoni (1966), p. X. 410 cf. Aharoni (1966), p. 50f. See also Perlitz (2004) and Swoboda (2002), pp. 66f. 411 The sample consisted of 38 companies with a focus on direct investments in Israel including the questioning of external experts such as government officials or business consultants. For the procedure, see Aharoni (1966), p. 3ff. 93

16 Aharoni's behavioristic model is used in the literature as a basic model of the decision-theoretical consideration of the internationalization of companies and is to be presented in the following overview Shown abroad. This process comprises four successive phases 413: The decision to look abroad The investigation process The decision to invest Reviews and negotiations.These phases are particularly typical for initial investments abroad and thus for internationally inexperienced companies. 414 The first foreign investment decision is to a large extent a trip to the unknown. It is an innovation and development of a new dimension, and a major breakthrough in the normal course of events. For the following brief description, see the phases in Aharoni (1966), pp. 40ff. 413 Building on Aharoni's characterization, Pausenberger et al. (1980) five phases of the decision-making process for foreign investments: (1) problem with the definition of the goal and content of the internationalization strategies, (2) information acquisition, (3) generation of alternatives, (4) evaluation of alternatives and (5) decision including a cross-border enforcement instruction (cf. Pausenberger et al. (1980), pp. 1023ff.). 414 Cf. Stein (1994), p. However, the decision-making process itself typically occurs in situations of uncertainty (cf. Aharoni (1966), p. 3). 415 Aharoni (1966), p

17 Each phase is briefly explained below. 416 Phase 1: The decision to look abroad The foreign investment must first be perceived as a profitable opportunity by the decision-makers in the company 417 and thus a stimulus (initiating force) is required that sets the decision-making process for internationalization in motion. On the one hand, the impetus lies within the company, e.g. in the special interest of top management in a particular foreign market or come from external factors such as suggestions from customers, sales intermediaries or foreign governments. But also the fear of losing sales potential, strong foreign competition on the home market or the so-called band wagon effect, which describes successful internationalization activities of a direct competitor as a driving force, trigger decision-making processes for foreign engagements. In any specific case it is generally very difficult, if not impossible, to pin down one reason for a decision to look abroad, or to find out precisely who was the initiator of a project. 418 Phase 2: The investigation process Once the fundamental decision for a foreign investment has been made, the investment alternatives are evaluated in the second phase. The project evaluation is strongly influenced by which driving force initiated the direct investment decision. 419 In practice it is not possible to consider all conceivable parameters when choosing the best alternative, as the information processing capacity of the decision-makers is limited. Obtaining additional information is usually associated with considerable search costs and managers therefore make their decision on the basis of 416 See the description of the phases in Aharoni (1966), p. 40ff. 417 Aharoni describes the explicit perception of foreign investment opportunities as a decision to look abroad and particularly emphasizes the significance of the decision when making initial investments abroad, since the company has no empirical values ​​and neither processes nor structures exist for working on the foreign market (see Aharoni (1966), pp. 53f.). 418 Aharoni (1966), S Cf. Aharoni (1966), p

18 of some prioritized factors. 420 Second, the sequence of the individual investigation steps, which are chosen in the context of the successive decision-making process, plays a decisive role, since the complexity of the decision problem increases over time. 421 Aharoni argues that due to the high information costs [] some variables are fixed in advance and a certain value, based on previous experience in another environment, is assigned to them. 422 Finally, a large amount of easily and quickly available information favors the investment decision, while a lack of flexibility, a tight regulatory framework or smaller markets have a negative impact on project evaluation. 423 According to Aharoni, three other factors must be taken into account, which are not directly associated with costs in the decision-making process, but have an impact on the go-no-go decision and the choice of the investment project. 424 First, the employees preparing the foreign investment decision in the company build on in-house methods and principles in order to avoid potential tensions with management from the outset. This includes both a ready-made exclusion process with regard to the possible alternatives and the assumption of certain constant variables. Secondly, the people who carry out the analyzes are rarely also the decision-makers and therefore aspects of group dynamics should also be analyzed over time and taken into account accordingly. Thirdly, not only does the structure and content of the document (often specified by the company) that is presented for decision-making, but also the employee's ability to successfully sell the proposal to management influence the final decision. Phase 3: The decision to invest and Phase 4: Reviews and negotiations Finally, in the third phase of the process, the decision is made or sufficient data is available to implement the alternative favored at the beginning. The final decision to invest emerges at some point of time as the cumulative result of small acts performed by different people [emphasis 420 cf. Aharoni (1966), p. 78f. For example, not all investment opportunities around the world can be explored. 421 Cf. Aharoni (1966), S Aharoni (1966), pp. 79f. 423 Cf. Aharoni (1966), S Cf. in the following Aharoni (1966), pp. 80ff. 96

19 i. Orig.] 425 This decision must be enforced in the organization. If, however, resistance arises, certain aspects may have to be renegotiated or even new investigations carried out. Aharoni describes this phase as Reviews and negotiations Phases of the long-term internationalization process Aharoni (1966) deals with the long-term internationalization of companies in addition to the individual phases of the decision-making process for direct investments. 427 In the course of the long-term internationalization process, Aharoni classifies investments into two different, albeit interrelated, categories, namely, on the one hand, a step-by-step, gradual evolution and, on the other hand, groundbreaking, innovative decisions. While he sees the evolutionary internationalization in a classic understanding as a slow progression of the market cultivation forms starting with exports up to direct investments, which is mainly due to an adjustment to external environmental factors, revolutionary internationalization steps are driven by the innovative decision-maker in the Schumpeterian understanding. 428 In both variants, the ability of the organization to learn plays a major role, as does the experience that the respective decision-makers gain with the internationalization of the company.Critical appreciation of the behaviorist theory Aharoni s explanatory approach to internationalization is found to be original, especially through the inclusion of irrational behavior of the decision-makers in the internationalization process 429, refreshing 430 or completely new 431 and thus recognized as innovative for its time. The image of the behavioral man, who acts with limited information and limited information processing and problem-solving capacity, the emphasis on the attitude of the top- 425 Aharoni (1966), S cf. Aharoni (1966), S cf. on the following remarks Aharoni (1966) , P. 175ff. 428 See Aharoni (1966), S See Braun (1988), S See Stein (1994), S See Stein (1994), p

20 Management in decision-making processes and also striving to meet a certain level of demand 432 instead of optimal decisions still shape the discussion today. 433 Aharoni deserves great credit for the fact that he presented a process declaration of internationalization early on with his approach and, in the context of this declaration, pointed out a supposedly simple but paradoxical situation in the internationalization process, namely the fact that some companies, despite excellent profit prospects, encourage foreign investment among other things due to their indolence do not or only belatedly. 434 The literature criticizes the partial analytical nature of the approach, which only makes it meaningful in combination with other theories. 435 Aharoni himself admits this. Jahrreiß (1984) criticizes the fact that Aharoni s approach concentrates on explaining insufficiencies in the internationalization process, i.e. differences from the optimal behavior from the classical theoretical point of view. 436 In addition, the strength of the influencing variables mentioned remains open compared to the systematic behavior, which is rational in the classical understanding. 437 For Kutschker / Schmid (2006), however, this criticism does not seem appropriate, since the task of science is also to enable a better understanding of reality by describing behavior that can actually be found and to pave the way for potential changes. 438 Aharoni's approach is often referred to as descriptive, since Aharoni does not derive any empirically testable hypotheses. 439 In contrast, Braun (1988) remarks that Aharoni s model is in fact not an explicit theory of direct investment, but that his observations generalize 432 Kutschker / Schmid (2006) speak of a satisfying endeavor in this context (Kutschker / Schmid (2006), p. 423). 433 Cf. Swoboda (2002), pp. 69f. 434 See Kutschker / Schmid (2006), p. 424f. 435 Cf. for example Bäurle (1996), p. 57, Swoboda (2002), p. 70, Stein (1994), p. 116, Kutschker / Schmid (2006), p. 424, etc. 436 Cf. Jahrreiß ( 1984), S cf. also about Stein (1994), p. 116 and Swoboda (2002), S cf. Swoboda (2002), S cf. Kutschker / Schmid (2006), S cf. Swoboda (2002), p

21 have a commoner character. 440 Aharoni himself relativizes the scope of the behaviorist approach, however, by stating that, with the increasing degree of internationalization, direct investments are no longer random but targeted and carried out. 441 Thus, for Jahrreiß (1984), a higher explanatory value of Aharoni s approach lies with smaller, less experienced companies. 442 Against this statement, Kutschker / Schmid (2006) counter that, despite a certain justification of this criticism, decision-makers in companies that are already more internationalized also show the behaviors described by Aharoni, such as a lack of planning, ex-post justification of investment favorites, etc. 443 Swoboda (2002) also emphasizes the problem of the focus of organizational learning as a motor for internationalization. He emphasizes that the reduction of decision-making to organizational learning, even under the assumption of identical starting situations with regard to the level of knowledge of two companies, makes it difficult to compare the success of the companies. With increasing internationalization, for example, market research, competitive advantages or planning in general gain in importance, so that the level of knowledge and learning are neutralized. 444 Overall, it can be said that Aharoni’s behaviorist approach did little to develop the theory of direct investment 445, but it did lay the foundation for many dynamic approaches to internationalization. Aharoni s work paved the way for further studies of the firm s internationalization process. Although Aharoni focused very much on decision-making rather than internationalization, his findings served as a source of inspiration for future research. 446 Against the background of the present topic, three aspects are of interest. First, the dynamics that Aharoni considers on two levels, 440 Cf. Braun (1988), S Aharoni himself states that the decision-making process for internationalization that he has described can function as a basic framework for every entrepreneurial decision under uncertainty (see Aharoni (1966), p. 3 and 13). 441 For more details, see Aharoni s chapter on organizational evolution (cf.Aharoni (1966), S cf. Jahrreiß (1984), S cf. Kutschker / Schmid (2006), S cf. Swoboda (2002), S cf. Braun (1988) ), S Nordström (1991), p

22 namely at the individual or group level and in the context of the long-term internationalization process and, secondly, the abandonment of the strict framework of classical investment theory in favor of realistic, behavioristic assumptions. 447 In addition, Aharoni s approach includes elements of the holistic view of the internationalization process, which addresses the classic sub-areas of sales but also the internationalization at the overall company level through the discussion of corporate financing for foreign engagements. 448 Trying to describe a decision process is like cutting a stream of events at two quite arbitrary points in a multidimensional space. Some observers will choose to look at a decision process from the moment of definition of a problem until a final commitment is made. Others will prefer two other points. 449 Aharoni addresses on the one hand the arbitrariness that lies in the choice of the start and end point of consideration of the decision-making process and on the other hand the question from which point of view the decision, which cannot be completely abstracted from preceding events or influences from other areas, is hit. 3.4 Uppsala model Coming from the research field of international management, a research group in the Scandinavian region dealt with dynamic issues relating to the internationalization of companies, which continues to shape the discussion in internationalization process research to this day. The focus is on considering internationalization as an incremental process, which builds cumulatively on historical experience and is referred to as path-dependent, as each internationalization step increases the company's knowledge base. Specifically, we believe that internationalization is the product of a series of incremental decisions. 450 Essentially, the work is based on the theory of direct investment by Aharoni (1966), the basic behavioral ideas of Cyert / March (1963) and Simon (1961) as well as the theory of the growth of the 447 Cf. also Bäurle (1996), S see more detailed section Aharoni (1966), S Johanson / Vahlne (1977), p

23 firm by Penrose (1966) and are classified as neo-behaviorist 451. Although the literature mostly speaks of the Uppsala model with reference to an article by Johanson and Vahlne from 1977, the model is based on a number of earlier work by other Swedish researchers. In addition, it has undergone a large number of extensions, for example by Kjell A. Nordström, which means that much more complex and varied facts can be mapped than in the much criticized original model. Due to its importance for the internationalization process theory, the original model is presented and also some essential further developments are briefly presented. The original Uppsala model In the original Uppsala model according to Johanson / Vahlne (1977) the internationalization process is precisely not the result of an optimization of the allocation of resources between different Corporate strategy applied to countries, as part of which alternative forms of market cultivation are compared and evaluated. Internationalization is viewed more as a consequence of an incremental or evolutionary adjustment process to changing company-specific factors as well as external framework conditions. 452 The focus is on the development of the individual company and, in particular, the step-by-step acquisition, integration and use of knowledge about foreign markets and business processes, which results in a gradual increase in foreign involvement. The company is faced with new challenges and problems due to a lack of knowledge of foreign markets and uncertainties. Internationalization therefore emerges step-by-step from an interplay between the development of knowledge about foreign markets and increasing foreign involvement. 453 The assumption of a gradual development of internationalization is based, besides other studies, in particular on the findings of a long-term study of the internationalization of four Swedish companies by Johanson / Wiedersheim-Paul (1975), which distinguishes between two patterns of internationalization: cf. (2002), S cf. Johanson / Vahlne (1977), p. 26. In this aspect, the authors refer to the findings of Aharoni (1966). 453 Cf. Johanson / Vahlne (1990), S Cf. in the following Johanson / Wiedersheim-Paul (1975), p. 307ff. 101

24 The first pattern describes the internationalization of companies within a certain target market, which takes place along the so-called establishment chain. This comprises four phases in which the companies gradually overcome the obstacles posed by a lack of information and resources and expand their foreign involvement with increasing international experience. Internationalization can accordingly be broken down into a four-stage process 455: Figure 18: Establishment Chain 456 The second pattern of internationalization describes the sequence in which foreign engagements are expanded into several target markets. It is assumed that internationalization first takes place in countries with a short psychological distance and expands incrementally in the form of concentric circles to countries with greater distance. Psychological distance is defined as the factors preventing or disturbing the flows of information between firms and market 457 and includes, for example, linguistic and cultural differences, different political systems, different levels of education, the level of industry development, etc.458 Since the backlog of knowledge decreases with increasing international experience and the differences to the foreign market are also felt less strongly, 455 Buckley (1982) divides the export activities that are at the beginning of the internationalization process into seven phases, which have their roots in the previous one Have development of the company. He cites the learning and feedback process, external change agents and the orientation of management as critical influencing factors on this development, all three of which are related to the flow of information (or the development of knowledge) (cf. Buckley (1982), p . 176f.). See also Bilkey / Tesar (1977), S cf. Johanson / Wiedersheim-Paul (1975), S The authors mention the simplistic nature of the approach and the difficulty of assigning other forms of market development such as joint ventures to the individual phases. In addition, the four phases are not to be interpreted as necessarily consecutive, so that skipping individual phases was integrated into the model (cf. Johanson / Wiedersheim-Paul (1975), p. 307). 457 Johanson / Wiedersheim-Paul (1975), S Cf. Johanson / Wiedersheim-Paul (1975), p

25 psychological distance and the companies are also expanding into more distant areas (see Figure 19). Home market Country A / Region A with less psychological distance Country B / Region B with greater psychological distance Global expansion into countries / regions with the greatest psychological distance Figure 19: Internationalization pattern in concentric circles In the cases examined by Johanson / Wiedersheim-Paul, psychological Distance, which could only partially be confirmed in these case studies, in particular the market size plays a decisive role as an explanatory factor for the choice of the foreign market. 459 A study by Barkema et al. (1996) shows that the influence of cultural differences in the type of foreign market development (e.g. company formation abroad or acquisition) and also in the ownership structures (100% subsidiary or joint venture) vary greatly. The authors also found that the cultural barriers are even greater in the case of so-called double layered acculturation, i.e. when extremely different foreign companies and national cultures collide at the same time. 460 Figure 20 illustrates the internationalization process in the Uppsala model, which is a sequence of causal cycles 461 ie the result of one event represents the input for the next in the context of a dynamic 459 Cf. Johanson / Wiedersheim-Paul (1975), S Mit the refinement of the concept of psychological distance was subsequently dealt with by Nordström (1991) and Vahlne / Nordström (1992). 460 See Barkema et al. (1996), S For information on cyclical processes, see the section on time. 103

26 mix interplay of static and dynamic factors unfolds. The dynamic in this approach arises from the mutual influence of state and development variables, which drive internationalization forward in incremental steps. State Aspects Market Knowledge Market Commitment Internationalization Process Change Aspects Commitment Decisions Current Activities Figure 20: The Uppsala model of internationalization (based on: Johanson / Vahlne (1977), p. 26). State variables in the model are market commitment and market knowledge, development variables are current business activities and decisions about further internationalization steps (commitment decisions). These are shown below: 463 State Aspects Market Commitment consists of two parts, firstly the amount of resources committed, which, in a broad conceptual context, encompasses the size of the investment in the market, including investments in the areas of marketing, sales, 464 personnel, etc. and secondly, the degree of commitment, which indicates the depth of the integration and the flexibility of the dissolution of the ties. 465 These terms are used by the authors 462 Cf. Johanson / Vahlne (1977), p. 26ff. and ibid. (1990), pp. 11f. 463 See Johanson / Vahlne (1977), p. 26ff. 464 Johanson / Vahlne do not specify the term resource in more detail and fail to define their understanding of the term. 465 See Johanson / Vahlne (1977), p. 27. The degree of commitment comes very close to the concept of sunk costs (see Andersen (1993), p. 212). 104

27 however not sufficiently explained or operationalized. 466 It is assumed that a company ties up resources in foreign markets and enters into obligations in foreign markets. At the same time, it is becoming more difficult to look for alternative resources and to transfer the existing ones to them. Thus, with increasing internationalization, the tying up of resources in foreign markets and thus the market commitment increase, especially in the case of vertical integration. 467 Market Knowledge is also understood very broadly and is divided into objective (teachable) and experiential (experienced) knowledge and further consequence into general (e.g. marketing methods, common characteristics of customer types) and market-specific knowledge (e.g. business climate, cultural aspects, market structures in the country, customer-specific factors ) classified. 468 In the internationalization process, experiential knowledge and, accordingly, market-specific knowledge are of great importance, as experience must first be gained in the course of international expansion and this then sets the framework for further internationalization steps. Market knowledge is directly related to market commitment if knowledge building is viewed as a resource and ties to foreign markets become stronger with increasing knowledge. 469 Development Variables Change Aspects Current Activities represent the main source for the development of empirical knowledge, which is, however, subject to a certain time lag. The desired effects, such as greater market knowledge, are only achieved when certain activities become more or less routine. Finally, 470 Commitment Decisions represent the decision to use any kind of resources 471 for activities abroad. Decisions 466 Cf. Simon (2007), S Cf. Johanson / Vahlne (1977), S Cf. Johanson / Vahlne (1977), pp. 28f. In describing these types of knowledge, the authors refer to the findings of Penrose (1966) (cf. Penrose (1966), p. 53). 469 See Johanson / Vahlne (1977), S See Johanson / Vahlne (1977), p. 28f. 471 As in the section on market commitments, the authors do not go into detail on the term resource. 105

28 are taken as part of a learning process either as a response to perceived problems or opportunities based on the current business activity and always include the weighing of the associated risk with the expected economic effects. 472 The internationalization spiral develops its own dynamic upward in an interplay of building up of knowledge, increasing market loyalty and mutually dependent decisions. A prerequisite and at the same time a limiting assumption is the view of the company as a loosely coupled system with individually acting actors. It is also assumed that the internationalization process, once it has been initiated, will continue to develop mechanistically regardless of strategic decisions. 473 The authors themselves mention three exceptions to this model: 474 First, larger companies are less aware of the individual commitments, which means that they can take larger steps towards internationalization. Second, under stable and homogeneous market conditions, relevant market knowledge can also be generated in other ways than through experience 475 and thirdly, companies with sufficient international experience can generalize their knowledge of a market and transfer it to similar market conditions The further developments of the Uppsala model The original Uppsala model was not only tested in numerous empirical studies, but also developed further by the research group itself. In connection with Nordström, Vahlne endeavored to consider competition as an important influencing factor and to refine the concept of psychological distance, while Johanson, in collaboration with Mattsson, brings the network idea into the discussion of internationalization processes and the distinction between different internationalization situations. In this consideration only the two 472 cf. Johanson / Vahlne (1977), p. 29f. Managers of smaller companies in particular can go through a longer learning and motivational process before opportunities in foreign markets can become an integral part of corporate activity (cf. Cavusgil (1982), p. 277). 473 cf. Johanson / Vahlne (1977), p. 11ff., Johanson / Vahlne (1990), p. 11f., Bäurle (1996), p. 70 and Swoboda (2002), S cf. Johanson / Vahlne (1990) , S Knowledge can be bought in externally from consulting firms, for example. 106

The introduction of the network concept The network concept was introduced into the Uppsala model by Johanson and Mattsson in two essays at the end of the 1980s. The core element is the conception of the internationalization process as a build-up and reduction of international network positions, which arise when companies in industrial markets do business with other actors, e.g. Enter, develop and maintain suppliers, customers, governments, etc. 477 The mutual building of trust and the gathering of knowledge and experience play an important role in this. 478 The authors differentiate between three possible thrusts: 479 Extension: the company opens up new networks to which access was previously closed, e.g. new country markets penetration: existing positions in foreign networks are expanded, e.g. Acquisition of new suppliers or customers. Integration: existing positions in various national networks are coordinated more closely. In 1990 Johanson and Vahlne finally integrated the network idea into their basic model and thus expanded it to a multilateral approach by adding the knowledge and commitment that existed between companies to the concepts of market knowledge and market engagement of the individual company (see Figure 21). For a comprehensive discussion of four extended models see Bäurle (1996), 74ff. 477 See Johanson / Mattsson (1986, 1988). The authors draw on groundwork from other Swedish researchers. See Johanson / Mattsson (1985) and an overview e.g. Ford (1990). 478 cf. Johanson / Vahlne (1990), S cf. Johanson / Mattsson (1986), p. 249ff., Johanson / Mattsson (1988), S cf. Johanson / Vahlne (1990), p

30 Swoboda (2002) states that the three options for internationalization listed above (extension, penetration and integration) include considerations of evolutionary theory. 481 Figure 21: The Uppsala model by Johanson / Vahlne (1990) expanded to include network ideas (based on: Johanson / Vahlne (1990), p. 19) Johanson / Mattsson determine the degree of internationalization of a company via the extent of the positions achieved in different positions national networks and how important and integrated these positions are. 482 The basic model of the Uppsala School is therefore being fundamentally expanded, particularly through the introduction of the integration dimension. 483 The network concept includes the company's environment, which, although not explicitly mentioned by the authors, contains possible drivers of the internationalization process. For example, supporting a customer in their foreign target market as a result of the network structure is cited by Johanson / Vahlne (1990) 484. An em- 481 Cf. Swoboda (2002), S Cf. Johanson / Mattsson (1988), S Bäurle (1996 ) sees the three dimensions presented by Johanson / Mattsson (1986) directly comparable to the core elements of the internationalization range conceived by Kutschker (1994) to determine the internationality of companies (see Bäurle (1996), p. 75). For the internationalization mountains according to Kutschker, see Kutschker (1994) or section The international fingerprint. 484 See Johanson / Vahlne (1990), p

However, a pirical review of this extended model has not yet materialized. Differentiation according to different internationalization situations The second major extension of the Uppsala model that is considered here is the differentiation of different internationalization situations in which companies can find themselves. Johanson and Mattsson present these in the form of a four-field matrix, which result from the combination of a high or low degree of internationalization of the company on the one hand and the market or industry on the other. This gives rise to four variants, which they call early starters, late starters, lonely international and international among others. The authors describe these as follows: 486 The early starter companies are characterized by a low degree of internationalization and also operate in a market environment that is only slightly internationalized. Little experience and little knowledge of foreign markets as well as scarce resources for obtaining information result in a gradual internationalization process in markets with little psychological distance. 487 Companies are often triggered indirectly via their network to expand into foreign markets, or if they are small, they mainly use sales agents to minimize risk. As a result, 488 early starters are moving towards the second internationalization situation, lonely international. In contrast to the industry in which they operate, Lonely Internationals play a pioneering role in international networks. They already have a large repertoire of options for adapting their resources and therefore only a few difficulties arise for them, even in good 485 Cf. Swoboda (2002), S Cf. Johanson / Mattsson (1990), p. 476ff, Johanson / Mattsson ( 1986), p. 251ff., Johanson / Mattsson (1988), p. 298ff. as well as the following remarks. 487 This internationalization situation is most compatible with the assumptions of the Uppsala basic model (cf. Johanson / Mattsson (1988), p. 309). 488 See Johanson / Mattsson (1988), p. 298ff., Johanson / Mattsson (1986), p. 251ff. The authors only name acquisitions as a form of internationalization for early starters for companies that have already achieved a correspondingly large market position in their home market. 109

32 networked markets. You also use this for quick internationalization steps, such as company takeovers. 489 The late starter companies are internationalizing due to a competitive disadvantage (pull-out effect), as the environment is already strongly international. This is usually done in larger jumps through an acquisition, but depends on the available options (availability of acquisition objects). The larger the company, the more difficult it is to enter the right niche in the foreign market. 490 After all, the international among others are companies that are themselves strongly international and also operate in a strongly internationalized environment. Further internationalization steps mean only marginal changes in extension and penetration, but the international integration of the company can lead to radical changes in internationalization. The internationalization process is characterized by a strategic use of the networks and, due to strong market concentrations, involves joint ventures, mergers and acquisitions. The mainspring of the internationalization process is the ability to change the geographical redistribution of business activities. 491 Each of these four types is linked to a different embodiment of the internationalization process, which is summarized in Figure 22. 489 See Johanson / Mattsson (1986), p. 254ff., Johanson / Mattsson (1988), p. 300ff. 490 See Johanson / Mattsson (1986), p. 256ff., Johanson / Mattsson (1988), p. 302ff. 491 See Johanson / Mattsson (1986), pp. 258ff., Johanson / Mattsson (1988), pp. 304ff. In the case of international among others, the Uppsala model loses its relevance in the broadest sense because specific differences between markets in a global context provide little explanatory value (cf. Johanson / Mattsson (1988), p. 310). 110

33 Degree of Internationalization of the Market (the Production Net) Low High Degree of Internationalization of the Firm Low High early starter: internationalization process s progresses gradually via neighboring countries Sales agents lonely international: first mover advantage drives internationalization process Company takeovers late starter: internationalization process s driven by indirect foreign relations sales representatives international among others: strategic use of interdependencies of international networks joint ventures, acquisitions and mergers Figure 22: internationalization situations according to Johanson / Mattsson (based on: Johanson / Mattsson (1986), p. 252 and Johanson / Mattsson ( 1993), p. 298). The idea of ​​combining company and industry-specific factors was refined a few years later by Vahlne and Nordström into a nine-field matrix (see Figure 23). While the dimensions remain the same, this differentiates between national, regional and global characteristics, but comes to the same result as the first matrix, namely that the meaningfulness of the Uppsala model decreases as the company becomes more international.492 Industry characteristics Company characteristics National Regional Global Global Regional National Figure 23: Patterns of internationalization processes according to Vahlne / Nordström (based on: Vahlne / Nordström (1993), p. 545). The nine different internationalization combinations contain gradations beginning with the extreme position of a national company. 492 Cf. Vahlne / Nordström (1993), p

34 men in a purely national industry (field number 1), which essentially represents the initial situation of a company described in the Uppsala basic model, up to the position of the global company in a global industry (field number 9). In each of these positions, the company has the choice between two basic strategies, namely either to lead a head-to-head race with the main competitors or to avoid the competition by focusing on product or regional niches. 493 In their matrix, the authors come to some conclusions regarding the internationalization process: 494 For example, companies in national industries (fields 1 to 3) internationalize as aggressors and rely on certain strong and unique advantages. Competitive aspects play a subordinate role. The internationalization process is rather characterized by the availability of the necessary resources: experience, relationships, capital and management. In contrast, the internationalization process of companies in regional industries (fields 4 to 6) is characterized by competitive considerations, which in turn determine the speed and forms of market entry depending on experience and resources. In global industries, competition between the industries dominates and, apart from a national company, which can gradually penetrate the market with a niche strategy in line with the model, the Uppsala model does not provide any explanations for these positions (fields 8 and 9). The distinction between different internationalization situations brings, in addition to the consideration of different forms of market entry, such as joint ventures, acquisitions and mergers, a direct link between corporate and environmental reality in the discussion. The competitive aspect is also included in the consideration. 495 This results in a more differentiated analysis perspective than in the original model of the Uppsala School. The nine patterns described by Vahlne / Nordström (1993) are in comparison to the four positions in Johanson / Mattsson (1986, 1988) on the one hand 493 Cf. Vahlne / Nordström (1993), S Cf. Vahlne / Nordström (1993), p. 537ff. 495 Nordström deals extensively in his dissertation with the introduction of competition into the Uppsala model. For more details, see Nordström (1991) and for the discussion Bäurle (1996). 112

35 more detailed, but on the other hand more general in the description of the respective internationalization strategy. Vahlne / Nordström (1993) practically does not use the network concept at all and the process character of this approach is difficult to identify. The timing of internationalization steps is discussed 496, but it is not clear from the explanations whether the authors aim to describe the situation in their nine-field matrix or what role the dynamics play within the industry characteristics. 497 Since both extensions defend the basic assumptions of the Uppsala model, 498 the fundamental, step-by-step process of internationalization is not rejected either. Instead, depending on the company's resources and environmental influences (for example, if a national company internationalises into a regional or global market), sudden expansion steps are integrated into the consideration of the internationalization process. However, there is no consistent theoretical revision. Furthermore, there is still an operationalization of the degree of internationalization of companies and industries. Swoboda (2002), for example, questions whether the internationalization of the industry is the only environment variable sufficient to explain internationalization processes Critical appreciation of the Uppsala model and its further developments The incremental internationalization process of the Uppsala model has been confirmed in numerous studies and according to the assessment of the respective authors, their empirical results are consistent with the basic assumptions of the model. 500 However, there are also very mixed results, which 496 Cf. Swoboda (2002), S The discussion of the internationalization strategies of the companies is carried out on the basis of a fixed branch situation (on the basis of the columns in the matrix). There is no dynamic along the changes in the industries towards globalization (line consideration). 498 Cf. for example the opening statement by Vahlne / Nordström (1993), p. 529 and Johanson / Mattsson (1988), S Cf. Swoboda (2002), S See e.g. Bilkey / Tesar (1977), Bilkey (1978), Cavusgil ( 1984), Engwall / Wallenstal (1988), Eriksson et al. (2000), Mitra / Golder (2002), etc. Bäurle (1996) conducts a broad spectrum of country-specific studies that confirm the Uppsala model, including 113

36