In spite of a progressing globalization, characterized by improvements in communication technologies, the world faces four billion people who live in poverty, mostly due to underemployment. By building up business activities in these markets, especially multinational corporations, are not only able to supply the local consumers with goods, but also create income potentials, while, at the same time, doing good in an economic sense. But these markets are often coined with problems, like a lack of basic infrastruc-ture, which makes entering these markets a long lasting, expensive and risky process for firms.
Goal of this paper is to illustrate the stages model of internationalization according to Johanson and Vahlne in detail and evaluate its validation limits, 30 years after its first release, by summing up contemporary and recent reviews.
After a short introduction, the basic principles will be identified, before pointing out the two fundamental parts of the stages model. While pointing out these parts, each section of it will be explained. Following the theoretical background, the limitations of the stages model, according to critics, will be presented. To conclude this work, an approach to evaluate the today´s relevance of the model and an overall conclusion will follow.
Table of Contents
1 Introduction
1.1 Problem
1.2 Goal
1.3 Structure
2 Stages Model of internationalization according to Johanson and Vahlne
2.1 Introduction
2.2 Basic principles
2.3 Patterns of internationalization
2.3.1 Establishement chain
2.3.2 Psychic distance chain
2.4 Model of internationalization
2.4.1 Market commitment
2.4.2 Market knowledge
2.4.3 Current activities
2.4.4 Commitment decisions
3 Limitations of the stages model
3.1 The determinism of the stages model
3.2 The psychic distance aspect
3.3 Today´s relevance
4 Conclusion
Research Objectives and Themes
The primary objective of this study is to provide a detailed analysis of the Johanson and Vahlne stages model of internationalization and to critically evaluate its contemporary relevance and limitations three decades after its initial publication.
- The incremental and gradual nature of firm internationalization.
- The role of establishment chains and psychic distance in market entry strategies.
- The interdependent relationship between market knowledge, commitment, and activities.
- Critical perspectives on the determinism of the stages model.
- The emergence of "born global" firms and the shifting significance of psychic distance.
Excerpt from the Book
2.3.2 Psychic distance chain
Furthermore, Johanson and Vahlne name another variable. The so called Psychic Distance Chain “is defined as the sum of factors preventing the flow of information from and to the market. Examples are differences in language, education, business practices, culture and industrial development.” Hence, it defines the order in which companies extend their business activities into foreign markets, because the bigger the psychic distance between the domestic market and the foreign market, the bigger the effort has to be to collect information about it and interpret it correctly. Johanson and Vahlne figured out, that “the operations of the firm are extended first to those markets that best fit the cognitive and resource character of the company, and ultimately those of the poorest fit” So the decision of a firm, whether to enter a market or not strongly depends on the places of location and the intensity of former commitments to foreign markets. These findings can be illustrated in a figure again, see figure 2.
Summary of Chapters
1 Introduction: This chapter outlines the problem of market entry in the context of global poverty and defines the paper's goal of evaluating the historical and contemporary validity of the Johanson and Vahlne model.
2 Stages Model of internationalization according to Johanson and Vahlne: This section details the fundamental principles of the Uppsala model, including the establishment chain and the cyclical relationship between state and change aspects.
3 Limitations of the stages model: The chapter explores academic criticisms of the model, specifically focusing on its deterministic nature, the flaws in the psychic distance concept, and the challenges posed by modern "born global" firms.
4 Conclusion: The final section summarizes that while the model retains historical importance, modern technological and economic conditions necessitate a re-evaluation and the inclusion of new external factors.
Keywords
Internationalization, Johanson and Vahlne, Uppsala Model, Psychic Distance, Establishment Chain, Market Commitment, Market Knowledge, Global Expansion, Firm Behavior, Market Entry, Born Global, Strategic Decisions, Business Activities, Incremental Process, Globalization.
Frequently Asked Questions
What is the core focus of this publication?
The publication provides a critical evaluation of the Johanson and Vahlne stages model of internationalization, examining its core components and its validity in the 21st century.
What are the primary thematic areas covered?
The study covers the establishment chain, the psychic distance between markets, the role of market knowledge, and the impact of commitment decisions on international expansion.
What is the main objective of this study?
The main objective is to illustrate the stages model in detail and evaluate its limitations 30 years after its first release by synthesizing contemporary reviews.
Which scientific methodology is employed?
The work utilizes a literature-based theoretical analysis, drawing on empirical studies and previous academic reviews to test the validity of the model's assumptions.
What topics are discussed in the main body?
The main body examines the establishment chain, the psychic distance chain, the four elements of the internationalization model, and critical arguments regarding its determinism and modern relevance.
Which keywords best characterize this work?
Key terms include Internationalization, Uppsala Model, Psychic Distance, Market Commitment, Market Knowledge, and the Establishment Chain.
How does the "psychic distance paradox" impact a firm?
The paradox suggests that a perceived small psychic distance can lead to false confidence and inaccurate estimations of market entry risks, potentially harming the firm.
Why are "born global" firms a challenge to the Johanson and Vahlne model?
These firms operate internationally from their inception, which contradicts the model's assumption of a gradual, incremental process of internationalization.
- Arbeit zitieren
- Marvin Brucker (Autor:in), 2014, A Critical Evaluation of the Stages Model of Internationalization according to Johanson and Vahlne, München, GRIN Verlag, https://www.hausarbeiten.de/document/295092
