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Internalization is the process of businesses entering international markets. It is a crucial strategy for companies that strive to increase their influence and revenue globally. Different companies consider various internalization models to reach the highest degree of sustainability in different cultures and industries. Several internationalization theories explain the process, but the most popular models are Uppsala, springboard, born global, and a resource-based view. Uppsala model has certain advantages and disadvantages with its steady development compared to the springboard theory, but resource-based and born global models prove to be the most successful internalization processes.
Uppsala Model
The Uppsala model is one of the most popular models of internalization for firms. The model states that the company first chooses to enter nearby areas with lower commitment (Oliveira et al., 2018, p. 35). Then, it gradually expands into moving broader and goes international (Coviello et al., 2017, p. 1152). It embodies a sequential approach by internalizing incrementally (Forsgren et al., 2016, p. 1140).
Uppsala model assumes the lack of knowledge of the foreign markets and suggests establishing the firm in the domestic market first, then increasing the target countries commitment. This process consists of 4 steps: stage 1 is when there is no export; stage 2 is when the export to the target country begins through independent representatives; stage 3 is when the sales subsidiaries are established; stage 4 is when the production in the target country begins (Vahlne and Johanson, 2017, p. 1101). For example, Samsung Electronics Corp. followed this strategy by internationalizing sequentially and having a high market commitment (Maksimov and Luo, 2020, p. 162).
However, the Uppsala model suggests following the same steps for entering every new country, not considering the varying degree of difficulty for a specific country or market. It also assumes the same amount of knowledge for every market (Pull and Richard, 2019, p. 18). The model lacks consideration of such variables as the specific market environment, industry characteristics, government regulations, and research intensity, which may either hinder or benefit the internationalization process (Wu and Vahlne, 2020, p. 16). The specific aspects, such as the firms size, the product, and competitive advantage, are also not considered in the model (Ramon-Jeronimo et al., 2019, p. 3241). Thus, the Uppsala models inflexibility often disregards the businesss specifics and makes it unprofitable to follow for certain companies.
Springboard theory
On the other hand, the springboard theory elucidates the unique processes and behaviors of international expansion. It is named after the consideration that the international expansion of the company resembles a springboard that helps to acquire critical resources to compete with the rival companies and strengthen the domestic position (Kumar et al., 2020, p. 181). The following model possesses unique development motives, leaping strategic behaviors, and internal and external facilitating forces (Luo and Tung, 2018, p. 133). Such examples are Chinas Lenovo and ZTE which reorganized their home supplies to meet increased global sales and rebranded the product after using foreign technology (Wu and Vahlne, 2020, p. 15). However, such a theory also faces more risks and challenges than a cautious Uppsala model.
Resource-Based View and Born Global Model
The best alternatives for the Uppsala model would be a resource-based view or a born global firm. A research-based view allows the firm to explore the resources to build and control internalization for sustainable competitive advantage (Dang et al., 2019, p. 53). It overcomes the step-by-step process in the Uppsala model by having a comparative analysis that gives the flexibility of decision (Panda and Reddy, 2016).
Otherwise, a radical change from the Uppsala model would be a born global model primarily focused on its international expansion (Yamin and Kurt, 2018). Instead of following incremental steps as in the Uppsala model, born global firms such as Netflix, Amazon, and Spotify seek to gain a competitive advantage through resources and sales in multiple countries from the start (Taylor and Jack, 2016). Such a focus on rapid expansion gives the company a more significant advantage than a slowly developing Uppsala one.
Based on critical evidence, the Uppsala model proves to be more generic and lacks decisiveness. It is rather simplistic since it focuses mainly on smaller firms without considering many market and business variables. The other internalization models, such as resource-based and born global models, are more descriptive and include more variables and environmental factors that allow the firms to increase their international presence rapidly.
Reference List
Coviello, N., Kano, L. and Liesch, P.W. (2017) Adapting the Uppsala model to a modern world: macro-context and microfoundations, Journal of International Business Studies, 48(9), pp.1151-1164.
Dang, D., Vartiainen, T. and Pekkola, S. (2019) patterns of enterprise architecture adoption in the public sector: a resource-based perspective. Proceedings of the 27th European Conference on Information Systems (ECIS), Stockholm & Uppsala, Sweden, 2019., 53.
Forsgren, M. (2016). A note on the revisited Uppsala internationalization process modelthe implications of business networks and entrepreneurship, Journal of International Business Studies, 47(9), pp.1135-1144.
Kumar, V., Singh, D., Purkayastha, A., Popli, M. and Gaur, A. (2020) Springboard internationalization by emerging market firms: speed of first cross-border acquisition, Journal of International Business Studies, 51(2), pp.172-193.
Luo, Y. and Tung, R.L. (2018) A general theory of springboard MNEs, Journal of International Business Studies, 49(2), pp.129-152.
Maksimov, V. and Luo, Y. (2020) International springboard as an entrepreneurial act, Journal of World Business, 56(3), p.101-176.
Oliveira, R. H., Figueira, A. R. and Pinhanez, M. (2018) Uppsala model: a contingent theory to explain the rise of EMNEs, Revista Eletrônica de Negócios Internacionais (Internext), 13(2), 30-42. Web.
Panda, D. and Reddy, S. (2016) Resource-based view of internationalization: evidence from Indian commercial banks, Journal of Asia Business Studies.
Pull, E. and Richard, Å. (2019) Domicide: displacement and dispossessions in Uppsala, Sweden, Social & Cultural Geography, pp.1-20.
Ramon-Jeronimo, J.M., Florez-Lopez, R. and Araujo-Pinzon, P. (2019) Resource-based view and smes performance exporting through foreign intermediaries: the mediating effect of management controls, sustainability, 11(12), p.3241.
Taylor, M. and Jack, R. (2016) Born global firm internationalisation: the influence of industry factors, Contemporary Management Research, 12(3).
Vahlne, J.E. and Johanson, J. (2017) From internationalization to evolution: the Uppsala model at 40 years, Journal of International Business Studies, 48(9), pp.1087-1102.
Wu, J. and Vahlne, J.E. (2020) Dynamic capabilities of emerging market multinational enterprises and the Uppsala model, Asian Business & Management, pp.1-25.
Yamin, M. and Kurt, Y. (2018) Revisiting the Uppsala internationalization model, International Marketing Review.
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