Published on Feb 15, 2016
Process- and stage models outline certain steps which the company follows when expanding internationally. These models were primarily developed already in the 1970’s but have proven to be surprisingly resilient in spite of significant changes in the economic environment.
New theories fail to give comprehensive insight into the international expansion of modern firms.
This thesis describes a firm’s international expansion in the 21 st century, as well as determines the reason for the process- and stage models still receiving significant attention. According to new theories and our case study, Acne Jeans, the modern firm will internationalise early and fast. Hence, the process- and stage models fail to explain the short time it takes from a company’s founding to its internationalisation, as well as the speed at which the internationalisation takes place. Some of the steps are also out-dated. Yet, the models do prove to have some explanatory power.
International trade has been the subject of much attention and trade has been expanding fast over the last few decades. This has led to an increase in many forms of international business. International trade is believed, and has been proved, to bring with it great potential benefits for most parties involved, such as for the nation’s economy and for the firm itself. Consequently, public policy makers have shown significant interest in the international development of firms. And the managers of the individual firms have tended to focus on exporting and internationalisation, since international activities can provide a useful platform for the exploitation and exploration of competitive advantages.
The firm’s international expansion has been of great interest and it has also been the focus of much prior research. However, most models of this phenomenon were formulated several decades ago. The most prevailing ones are the process- and stage
models developed during the 1970’s. None of the more recently written theories capture the internationalisation process of a “modern” firm in an entirely satisfactory way. They are much more focussed on describing the evolvements in the international economic environment than outlining a description on how firms actually behave when going international. In fact, these papers neither provide comprehensive insight into the actual behaviour of the moden firm, nor do they give an explanation to the fact that the process- and stage models are still widely used
Purpose and General approach
Having studied the evolution in the global economic environment and the developments in theory we are curious to see how well the process- and stage models describe a firm’s internationalisation process today. The purpose of this thesis is to determine how a modern firm’s international expansion can be described in the 21st century as well as establishing the reason for why the process- and stage models are still widely used for describing firms’ internationalisation processes. The approach chosen for this thesis has been to start by determining the major changes in the economic environment. Through an extensive review of research we have formulated developments in the environment, both on the macro level and on the firm level. The review of changes in the economic environment is followed by a description of how economic theory has developed during the course of the last few decades.
Following this section, we establish how the develpments in the economic environment have given rise to a new type of multinational corporation. In the next section we look into the process- and stage models, which are the most prevailing models to date describing the firm’s international expansion. They were primarily developed and formulated during the late 1970’s. Two of the most well known models are Johanson & Vahlne’s Uppsala Model, formulated in 1977, and a stage model published by Lars Håkanson in 1979. These models are indeed still widely used. The Uppsala model is for example used by Andersen (1993), Coviello & McAuley (1999) and Andersson (2000). And Håkanson’s model is referenced in Bagchi-Sen (1995), Westhead et al. (2001) and Ettlinger (2003), among others
Author: Sebastian Hybbinette, Peder Stubert, Stockholm School of Economics ,Department of Economics