Theories of Internationalization Essay Example | Topics and Well Written Essays - 3000 words

Theories of Internationalization - Essay Example This paper takes a comprehensive look at three of these theories: The Uppsala Model, The Eclectic Theory of International Production and Michael Porter Diamond Model. The definitions, assumptions, strengths and weaknesses relating to the above mentioned theories are discussed in this paper. The Uppsala Model The Uppsala Model was developed by Johanson and Vahlne in 1977 from their studies which focused on manufacturing firms of Sweden (Buckley & Ghauri, 1998 p.63). The empirical observations from their studies made them formulate the Uppsala Model. This model is based on the behavioural theory which uses behavioural actions to explain the nature of firms. Internationalization has been described as a process of experiential learning and incremental commitments which leads to an evolutionary development in a foreign market. The model has focused more on acquisition of knowledge and learning. In this regard, the lack of knowledge is seen as a barrier to the development of foreign operat ions. Four core concepts can be extracted from the Uppsala Model. These are market knowledge, market commitment, current activities and commitment decisions (Buckley & Ghauri, 1998 p.66). ... Both kinds of knowledge are required for international initiatives. The objective or general knowledge is easily learnt through teaching and marketing researches while the experiential or market -specific knowledge is only learnt through personal experience and is not transferrable of separable from the source. The model places much emphasis on experiential knowledge because it generates business opportunities and lays the foundation upon which internationalization process takes place. Market commitment concept is built from two factors. They are the amount of resources and the degree of commitment. The amount of resources refers to the size or the scale of investment in terms of marketing, personnel, research and others. The degree of commitment varies depending on the level of integration between the resources and other parts of the firm. The degree is higher if the level of integration is higher. Current activities constitute the main source of experience for a firm. Experience is important because it generates opportunities that lead to market commitments. Other sources of experience would include hiring people with experience, getting advice from other firms and taking over other firms with experience. These options have their limitations. First, the experienced force to be hired may not be available and second, the firms to take over or get advice from may not also be available. The best available option of gaining experience is through current activities which is a slow process (Michael, 2011 p. 39). The current business activities have to be continuous over time in order to realize desired consequences. Therefore, if the lag between the current activities and desired