There is an abundance of models and theories which describe and explain internationalization, foreign entry modes and the foreign operations of firms (Elo, 2005). These models can be divided into two different perspectives: behavioural and economic (Elo, 2005, p.65). It is also suggested that the literature based on economic theory, which focuses on new market opportunities, internationalization, vertical integration and corporate growth, has been dominating. Whereas, behavioural related theories refer to a firm’s social and organisational side.
The business environment has changed considerably in terms of technology such as the internet, business practices, theoretical advances and the reduction of trade barriers due to globalisation, which have all provided new methods of working.
But what is internationalization? Internationalization in economics is viewed as a process of increasing involvement of firms in international markets (Susman, 2007). Whereas globalisation refers to the increase in global relations of people, cultures and economic activity, it is this increase in relations that facilitates a firm’s internationalization process.
As already stated there are many theories which try to explain the internationalization of firms. This essay evaluates the Uppsala model as an explanation for internationalization, and contrasts the model with the literature on ‘born global’ firms and the network model, which are behavioural theories.
2. The Uppsala Model
The Uppsala Model is a ‘stages’ theory developed by (Johanson & Vahlne, 1977) the framework explains how firms proceed towards internationalization. Their research was a longitudinal case study involving four Swedish firms who were already established aboard.
The 1977 model suggests that firms tend to internationalize in logical steps first to countries that are psychically close, this does not necessary mean close in nautical miles but close in psychic distance. The firms then... [continues]
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