It was found that insidership in networks developed prior to entering new markets, “even before the foundation of the firm, is instrumental to the internationalisation process” (Coviello, 2006). The research studied Swedish firms, finding that they tend to develop their international operations in small gradual steps (Johanson and Vahlne, 1977:24). Stud. Three major approaches explaining the behaviors of SME’s internationalization are proposed in the literature: the stage approach, the network approach and the international entrepreneurship approach. This is not an example of the work produced by our Essay Writing Service. LITERATURE REVIEW This section firstly reviews the extant literature on experiential knowledge and internationalisation in relation to the degree of internationalisation of the firm and its network. Andersen, O. Rather, the network involvement will be beneficial in reducing the psychic distance by establishing relationships which would make it easier to have access to agents or to set up subsidiaries. Previous research on internationalization has applied the business network approach to a large extent; also, studies on internationalizing digital platform firms discuss how these companies establish their user network. The integration of the models would also eliminate some issues related to over-embeddedness as firms will be less vulnerable to network pressure as they are still following the process. It is apparent that both approaches have limitations and so are not sufficient on their own. According to the network approach (Johanson and Mattson 1988) internationalization is seen as a process in which relationships are continuously established, developed, maintained and dissolved with the aim of achieving the objectives of the company. Finally, section eight summarizes the different theories put forward through-out the paper and concludes with a proposal for a new theory incorporating Nation- The theory of the growth of the firm. Dissertation in Management of Innovation and Business Development, 15 ECTS. (2008). The Uppsala model fails to explain the beginning of the internationalisation process (Andersen, 1993) nor does it consider the decision makers’ perceptions and roles, which makes it appear deterministic (Andersson, 2000). Entry in a psychically distant market: European Management Journal. 0000000760 00000 n You can view samples of our professional work here. I assumed it would take a practical approach in explaining what enterprise involves. In contrast, with the network approach resource commitment is only required after relevant network relationships are established and information is accessible to make decisions. However, the market selection was not based on psychic distance, but rather as a result of the relationships the firms had in networks (Coviello and Munro, 1997). Reference this. It also provides a better explanation for the internationalisation of SME’s which rely on networks for the supply of international experiential knowledge and is influenced by manager’s personalities which facilitate the international relationships and (Barbosa et al, 2005). Free resources to assist you with your university studies! Do you have a 2:1 degree or higher? Section seven addresses the internationalization of SMEs following two main strands: the Uppsala model and the network approach, which are concentrated on SMEs. The internationalization process of enterprises has been a subject for theoretical and empirical research for more than twenty years. Consequently, this implies that the Uppsala model exaggerates the gradual nature of the learning process. A larger psychic distance would make it more difficult to build new relationships due to the liability of foreignness (Johanson and Valhne, 2009). The Internationalization Process of the Firm—A Model of Knowledge Development and Increasing Foreign Market Commitments. [online] McDougall and Oviatt (1994) introduced the concept of International internationalization models divided it into stages and network theories (behavior theories) and those coming from economic concepts (Saarenketo et al, 2004). I was also glad of the opportunity to critically analyse and challenge a published academic piece of work. Oxford: Basil Blackwell. Experiential knowledge gained from personal experience cannot be taught or transferred, as opposed to objective knowledge which is transferable (Penrose, 1966:53). 0000044110 00000 n VAT Registration No: 842417633. The theoretic approach of the internationalization process Over the last three decades, researchers have presented various descriptions and analyses of the firms’ internationalization as a result of their interest on how the company enters a foreign market. However, researchers have also found that more general internationalisation knowledge is equally important (Johanson and Vahlne, 2009). a) “A basic assumption in the Network Approach to internationalization is that the individual firm is dependent on resources owned or controlled by the actors.” You are a Consultant tasked by Management of Ghacem Ghana Ltd. producers of cement to assess companies it can build partnerships with in the Uganda market to enable them make strategic decisions. International Business Review. Through network internationalization, a company can gain access to other firms’ experiential knowledge without necessarily going through the same experiences. I was able to gain a basic and clear understanding of the concepts being taught during lectures and then further understanding during seminars where we broke down the seemingly complex theoretical approaches by discussing research and examples related to the topics. 0000044032 00000 n Our academic experts are ready and waiting to assist with any writing project you may have. The reality of the course was different. Adaptations of Eriksson et al.’s three knowledge constructs [J. Int. It has also been suggested that certain types of non-experiential learning can also be effective, such as imitation of firms with high legitimacy (DiMaggio and Powell, 1983) and the acquisition of other firms (Forsgren, 2002). From simple essay plans, through to full dissertations, you can guarantee we have a service perfectly matched to your needs. (2006) The network dynamics of international new ventures. Design/methodology/approach. 0000002778 00000 n 0000003267 00000 n x^����$�ݚ�{��K�Nn�K��[8qoV��#9�����v{�V�� >�@(!�������uQS�T_K���7~u��6. It was refreshing to express my own opinions and views. Economic Action and Social Structure: The Problem of Embeddedness. Cyert, R. D., & March, J. G. 1963. The model was designed to be dynamic and emphasises the need for experiential knowledge about foreign markets and their operations (Johanson and Vahlne, 1977:23). Accor- The experience has taught me to view academic writing differently by recognising that they can be challenged in the face of evidence from practical study and changing contexts. A behavioral theory of the firm. Research has found that psychic distance influences internationalisation as the performance of firms in international markets are affected by the level of similarity (Evans et al, 2000). The Uppsala model stresses the importance of experiential learning to gather market-specific knowledge (Johanson and Vahlne, 1977). Additionally, it has been found that firms can learn through focused research when faced with a problem or opportunity (Huber,1991). Johanson et al (1988) propose that internationalisation can be achieved either by international extension, penetration or integration. Findings. I had yet to come across entrepreneurship as an academic field of study, having always seen enterprise as a practical venture. Etemad, H. (2013) Internationalization theories and international growth of smaller firms from emerging markets. H��U�r�6}�W�#0a�H�~�l˩�D�Xh;�LX��Y�d����7����Hm�Ri�����,x��5(���RBWu�G[� An overview of the network approach to internationalization While the traditional internationalization literature largely concentrates on the processes of deciding and planning to enter a market and on entry modes, the network approach stresses the actual process of market entry and becoming a player in the network (Salmi 2000). 76 0 obj << /Linearized 1 /O 78 /H [ 760 435 ] /L 177754 /E 72586 /N 20 /T 176116 >> endobj xref 76 16 0000000016 00000 n A study of technical consultants also shows that because the sale and the production of services cannot be kept separate, and it is easier for these firms to establish a subsidiary abroad, they do not follow the establishment chain (Sharma and Johanson, 1987). This implies a structure of interdependency which requires coordination of operations and management of ties. This shows that though relationships are important to these firms when entering markets, the actual decision to do so is strategic. Furthermore, as a result of globalisation, markets have become more homogenous, making it easier to set up businesses abroad (Petersen et al, 2003), hence the establishment chain is obsolete in many instances like in relation to born-global companies. This shows that the establishment chain has limited applicability to service industries. It has also been found that firms prefer to enter markets where English is spoken, to reduce language barriers (Ojala, 2009), which supports the relevance of psychic distance. With advances in ICT and the accessibility of the internet, objective and tacit knowledge can be codified meaning information about different markets can easily be obtained resulting in the acceleration of the internationalisation process (Petersen et al, 2003). Firstly, much of the research on internationalisation is done on specific markets and industries, and as such it may be inaccurate to extrapolate the findings to other types of businesses or markets. It also argues that there is no one ‘correct’ approach to internationalisation. In: Pla Barber and, Majkgård, A. and Sharma, D.D (1998) “Client-following and market-seeking strategies in the internationalization if service firms” Journal of Business-to-Business Marketing 4, 3, 1-41. Journal of International Business Studies, 24(2), pp.209-231. Definition of Network Approach: According to this approach, internationalization of the firm can be achieved through creating relationships in foreign country networks that are new to it ; the development of relationships and increasing resource commitments in those networks in which the company already has a position (penetration) or connecting the existing networks in different countries. The two models also share the underlying notions of resource heterogeneity and the relationship between knowledge and commitment (Johanson and Kao, 2010). Discusses four theories of internationalisation: the Uppsala model of internationalisation; the eclectic paradigm and transaction cost analysis; the interactive network approach of the International Marketing and Purchasing Group; and what may be termed the business strategy approach. New York: Croom Helm] to test the association between experiential knowledge, firm degree of internationalisation and market degree of internationalisation. NETWORK APPROACH OF INTERNATIONALIZATION The network approach stresses on becoming a player in the network through the actual process of market entry, in contrast to the conventional internationalization approach such as Uppsalat hat stresses on planning and deciding about how to enter to international markets (Salmi, 2000). 0000003228 00000 n Johanson, J., & Vahlne, J.-E. 2003. Business relationship learning and commitment in the internationalization process. The Uppsala Model is a process model that originated from studies on internationalisation by researchers at the University of Uppsala, based on empirical studies. *You can also browse our support articles here >,,,,, The network approach to internationalization is therefore relevant in situations in which more complex issues related to international extension and integration of activities are important. Theories of the multinational firm: A multidimensional creature in the global economy. This study has employed a case-based approach to explore the relevance of relational factors in explaining the internationalization of six software B2B SMEs from Syria. My previously superficial views have been substantiated by academic material. A study found that software firms’ network relationships first give them access to psychically similar countries and then in time these relationships give access to countries with higher psychic distance (Coviello and Munro, 1997) which is in line with the psychic distance argument in the Uppsala model. (1993). The network approach in contrast stipulates that it is unnecessary to consider the beginning but rather think of how firms strengthen their network positions (Johanson and Vahlne, 2009). The Network Approaches. International Studies American Journal of Sociology, 91(3), pp.481-510. London: Croom Helm. 0000001174 00000 n The Role of Networks on the Internationalisation Process of Small and Medium-sized Companies: propositions for theory development. 2. This means that I had no pre-existing views of entrepreneurship or the perspectives we have studied. An enterprise learns about the capabilities, needs and strategies of its partner, as well as about business conditions and the networks. The focus is not simply on the extension of current markets, but also on issues related to building or changing positions in networks which reflect the future positioning goals of the firms involved. According to the network approach, the internationalisation process is determined by the establishment of formal and informal relationships with network participants in foreign markets and maintaining and developing these relationships in order to gain access to external resources (Johanson and Mattson, 1988). Stremţan, F., Mihalache, S. and Pioraş, V. (2009). The first relates to the development of strategic networks and is initiated by the cluster coordinator activity, and the second is the network connections of an operational nature between cluster members and their stakeholders. Several approaches have been put forward to understand the process however, this essay will focus on the staged Uppsala model and the network approaches to internationalisation. Moreover, the global business environment is constantly changing, and this affects the perceived psychic distance and the separation of markets. All work is written to order. A review of the literature on the internationalisation process shows that many view the network approaches and Uppsala stage model as alternatives to the other, however they need not be mutually exclusive. In N. Hood, & J.-E. Vahlne (Eds. [online] Available at: Evans, J., Treadgold, A. and Mavondo, F. (2000) “Psychic distance and the performance of international retailers – A suggested theoretical framework”, International Marketing Review, 17(4/5) pp.373-391, Available from: Forsgren, M. (2008). Bus. To illustrate this, consider the business network model proposed by the originators of the Uppsala model (Johanson and Vahlne, 2009) which integrates the two models. Andersson, S. (2011). Available from: Uzzi, B. I have since gained a better understanding. I have an array of week days ["Monday","Tuesday"..etc] and i need to translate each day to another language. The Uppsala model’s sequential one-way approach and establishment chain have also been described as outdated. It was particularly interesting to analyse current business situations such as the demise of the high-street based companies such as Debenhams whose profitability has been significantly affected by its structure. It has been found that internationalisation knowledge is positively correlated to variations in the experiences a firm has in different markets (Barkema and Vermeulen, 1998). Journal of International Entrepreneurship, 1(1): 83–101. Annales Universitatis Apulensis Series Oeconomica, [online] 11(2), pp.1025- 1033. The instance of this dependency is the Uppsala model and the network approach. Study for free with our range of university lectures! 0000069758 00000 n Final seminar date: 28st of May 2013 Author: Janina Sundermeier 881219 – T123 Supervisor: Svante Andersson Examiner: Joakim Tell . Firms, particularly in high-technology sectors, internationalise because the target customers for the niche products they offer are in other markets. However, the network approach fails to explain how networks are created and to consider the network structures in the countries being entered (Johanson and Vahlne, 2009). In your view what would you … (2009). In addition, the effects of psychic distance are not insurmountable. Some economists have asked whether it might be effective for a nation to shelter infant industries until they had grown to a sufficient size large enough to compete internationally. ‘Insiders’ are firms that are well established in relevant networks and therefore privy to network’s knowledge and resources. 0000003006 00000 n There is an establishment chain which begins with the ad hoc export of products, then progresses to selling through an agent, establishing sales subsidiaries and finally a production subsidiary. Huber, G. P. (1991), ‘Organizational Learning. One difference between the two processes is their approaches to gathering the information required. Journal of, Johanson, J. and Vahlne, J. Acknowledgement This thesis is the last part of … The data sources consist of semi-structured interviews, observations at three major events and secondary data sourced from industry reports and materials that are available online. In an increasingly global market, the study of internationalisation is paramount in understanding how firms expand beyond local markets. Finnish firms were able to overcome psychic distance in Japan by hiring local employees and managers (Ojala, 2008). Petersen, B., Pedersen, T. and Sharma, D. (2003) The role of knowledge in firms’ internationalisation process: wherefrom and whereto? Social structure and competition in interfirm networks: The paradox of embeddedness. The cluster structure makes the network approach to internationalization process of clus-ter have a dual character. However, evidently network relationships will continue to be influential in achieving internationalisation as businesses operate within multilateral networks. 303–321). Company Registration No: 4964706. The network approach in contrast, stipulates that relationships in the relevant networks guarantees access and facilitates the transfer of knowledge (Majkgård and Sharma, 1998). Hence it seems the knowledge factor the models are based on have diminished in their effect on the internationalisation process (Petersen et al, 2003). In contrast, the network approach can explain the internationalisation process of different companies based on the degree of company internationalisation and market internationalisation making it more widely applicable to firms in different conditions (Johanson & Mattson 1988). This implies a structure of interdependency which requires … It was found that software firms begin to internationalise their operations early on in leading markets and the majority did not follow the entry route suggested by the Uppsala model, with many starting with direct entry modes (Ojala, 2008). This knowledge is integral to the process as it informs decisions on market commitment and the activities which flow from these, with further resource commitment and decisions being influenced by information acquired from current activities and a firm’s subsequent involvement.