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International Marketing Review
The Mechanism of Internationalisation

Jan Johanson Jan-Erik Vahlne
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Jan Johanson Jan-Erik Vahlne, (1990),"The Mechanism of Internationalisation", International Marketing
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The Mechanism of Internationalisation
Internationalisation
Jan Johanson
University of Uppsala, and 11
Jan-Erik Vahlne
Stockholm School of Economics, Sweden
In the last decade, we have witnessed a growing amount of research about

the internationalisation of firms. Evidently, this expanding research reflects an
increasing internationalisation offirmsand industries. This internationalisation
process is manifested in a number of different ways. It can be seen in the

establishment of foreign subsidiaries, in international joint ventures, in licensing
agreements, in international advertising campaigns, in international trade,
exhibitions and a multitude of other events and actions.
Although the eclectic theory combining economic theories of monopolistic
competition, location and transaction costs has been the dominant line in this
research, a number of studies have been based on more behavioural approaches.
One such theoretical line has focused on the process of internationalisation of
thefirm(Johansonand Vahlne, 1977; Bilkey, 1978; Wiedersheim-Paul et al., 1978;
Cavusgil, 1980; Welch and Luostarinen, 1988). The following description and
discussion of the mechanism of the internationalisation process — one of the
most widely adopted concepts in thefield(Reid and Rosson, 1987) — is based
on Johanson and Vahlne's model. This line of research is later contrasted with
the eclectic theory, and ideas for further development of this theory are
proposed.
The Uppsala Internationalisation Model

In this model, the internationalisation of the firm, which has its theoretical base
in the behavioural theory of the firm (Cyert and March, 1963; Aharoni, 1966)
and Penrose's (1959) theory of the growth of the firm, is seen as a process
in which the enterprise gradually increases its international involvement. This
process evolves in an interplay between the development of knowledge about
foreign markets and operations on one hand and an increasing commitment
of resources to foreign markets on the other.
A distinction is made between state and change aspects of internationalisation.
The state aspects of internationalisation are market commitment and market
knowledge; the change aspects are current business activities and commitment
decisions. Market knowledge and market commitment are assumed to affect
decisions regarding commitment of resources to foreign markets and the way
current activities are performed. Market knowledge and market commitment
are, in turn, affected by current activities and commitment decisions (Figure
1). Thus, the process is seen as causal cycles.
International
Marketing
Review
7,4
12
Following Penrose (1959), two kinds of knowledge are distinguished: objective

knowledge which can be taught, and experiential knowledge which can only
be acquired through personal experience. A critical assumption is that market
knowledge, including perceptions of market opportunities and problems, is
acquired primarily through experience from current business activities in the
market. Experiential market knowledge generates business opportunities and
is consequently a driving force in the intemationalisation process. But experiential
knowledge is also assumed to be the primary way of reducing market uncertainty.
Thus, in a specific country, the firm can be expected to make stronger resource
commitments incrementally as it gains experience from current activities in
the market. This market experience is to a large extent country-specific, i.e.
it can be generalised to other country markets only with difficulty.
The model implies that additional market commitment will be made in small
steps with three exceptions. First, when firms have large resources the
consequences of commitments are small. Thus, big firms or firms with surplus
resources can be expected to make larger intemationalisation steps. Second,
when market conditions are stable and homogeneous, relevant market knowledge
can be gained in ways other than through experience. Third, when the firm
has considerable experience from markets with similar conditions it may be
possible to generalise this experience to the specific market.
A characteristic of the intemationalisation process model is that the firm is
viewed as a loosely coupled system in which different actors in the firm have
different interests and ideas concerning the development of the firm (Cyert
and March, 1963; Weick, 1969; Pfeffer, 1981). In particular those who are
engaged in a foreign market will see opportunities and problems in that market,
they will seek solutions to the problems in that market and they will promote
those solutions. Thus, the model expects that the intemationalisation process,
once it has started, will tend to proceed regardless of whether strategic decisions
in that direction are made or not.
The internationalisation process model can explain two patterns in the Internationalisation
internationalisation of the firm (Johanson and Wiedersheim-Paul, 1975). One
is that thefirm'sengagement in the specific country market develops according
to an establishment chain, i.e. at the start no regular export activities are
performed in the market, then export takes place via independent
representatives, later through a sales subsidiary, and eventually manufacturing
may follow. In terms of the process model, this sequence of stages indicates 13
an increasing commitment of resources to the market. It also indicates current
business activities which differ with regard to the market experience gained.
Thefirststage gives practically no market experience. The second stage sees
the firm as having an information channel to the market and receiving fairly
regular but superficial information about market conditions. The subsequent
business activities being performed in the market lead to more differentiated
and wide market experience, which even may include factor markets.
The second pattern explained is that firms enter new markets with
successively greater psychic distance. Psychic distance is defined in terms of
factors such as differences in language, culture, political systems, etc., which
disturb the flow of information between the firm and the market (Vahlne and
Wiedersheim-Paul, 1973). Thus firms start internationalisation by going to those
markets they can most easily understand. There they will see opportunities,
and there the perceived market uncertainty is low.
Observe, however, that these patterns are manifestations of the process in
the internationalisation of the firm. The process is a theoretical model based
on assumptions about the relations between the concepts of market
commitment, market knowledge, current business activities, and commitment
decisions. The patterns can be seen as operationalisations of the process model
with the stages and the psychic distance as possible indicators. Other indicators
may also be possible. Market commitments can be indicated by the size of the
investment in the market or the strength of the links with the foreign markets,
i.e. the degree of vertical integration. Other patterns may be derived as well,
such as regarding joint ventures or acquisitions versus greenfield investments.
The process model has grown out of empirical research, based on traditional
microeconomic and marketing theory, about Swedish firms competing
internationally (Carlson, 1966, 1975). It could be expected that the model's
validity is limited to countries like Sweden which are rather small and highly
industrialised. Later research from other countries has reported empirical
observations in support of or consistent with the model. Empirical research
by Wisconsin researchers about export behaviour provides a similar picture
(Bilkey, 1978; Bilkey and Tesar, 1977; Cavusgil, 1980,1984). Consistent results
have also been reported from extensive export research in Mannheim (Dichtl
et al., 1984). Davidson (1980,1983) and Denis and Depelteau (1985) have also
reported supporting results from empirical studies of market selections of US
firms going abroad. Similar results have also been obtained in studies of Hawaiian
export firms (Hook and Czinkota, 1988), Japanese firms' export strategies
Qohansson and Nonaka, 1983), Turkish exporters (Karafakioglu, 1986), and
Australian firms (Barrett, 1986). A study of US entry by acquisitions
International and joint ventures gives robust results supporting the model (Kogut and Singh,
Marketing 1986). Ford et al. (1987) report in a study of export development of firms from
Review less developed countries that export entries are first made in culturally close
7,4 countries and subsequently in the developed countries. In a study of US firms
exporting at industrial shows, Bello and Barksdale (1986) found strong support
for the model.
14 Overall, the model has gained strong support in studies of a wide spectrum
of countries and situations. The empirical research confirms that commitment
and experience are important factors explaining international business behaviour.
In particular, the model receives strong support regarding export behaviour,
and the relevance of cultural distance has also been confirmed.
Critical Views
Criticism of various kinds has also been put forward. One criticism is that the
model is too deterministic (Reid, 1983; Turnbull, 1987; Rosson, 1987). This
is primarily directed at what is sometimes called the "stages theory", which
is one of the manifestations of the internationalisation process. The argument
is that the firm has the option of making a strategic choice as to modes of entry
and expansion. Reid argues that such a choice is contingent on market conditions,
and a transaction cost approach is superior to the process model in explaining
diversity and variations in internationalisation behaviour. This view is supported
by Turnbull's (1987) studies of export organisation in some British industries.
This argument is quite plausible but should perhaps not be primarily an
argument against the process model — unless it is directed at the manifestations
of the model — but rather an argument for development and differentiation of
the model. This means that the critique should be directed at the very partial
nature of the model, which is the consequence of a very conscious effort by
the model builders to catch one single, and so far rather unnoticed, mechanism
with strong explanatory power regarding a wide spectrum of manifestations
of the internationalisation of the firm.
It has also been argued that the process model says something important
only about the early stages of internationalisation when lack of market knowledge
and market resources are still constraining factors (Forsgren, 1989a). When
the firm already has activities in several countries, these factors are no longer
a problem. In that situation, the firm can allocate resources to international
activities on the basis of the real market conditions rather than in response
to the unknown. This view is consistent with the fact that most of the empirical
support has come from studies of the early stages of internationalisation. This
critique concerns the range of validity of the model and should be shared with
the direct investment theory in which a basic assumption is the disadvantage
a foreign firm has compared with domestic firms.
In a study of Swedish firms in Japan, Hedlund and Kverneland (1985) found
evidence that the development patterns of thosefirmswere not in accordance
with those expected on the basis of the internationalisation process model.
The reason for this, they argued, is that there has been a general inter-
nationalisation of industries and markets so that the lack of market knowledge Internationalisation
is no longer a factor limiting the pace and patterns of internationalisation of
firms. Assuming that internationalisation is an irreversible process, their
conclusion is that the model of the firm internationalisation process will be
increasingly less valid in the future. Their reasoning seems, however, more
convincing than their interpretation of the data which are surprisingly consistent
with the process model. 15
Nordstrom (1990) argues that the world has become much more homogeneous
and that consequently psychic distance has decreased. He expects that recent
starters are willing and able to enter directly into large markets as some of
these are now as close to Sweden in a cultural sense as are the Scandinavian
countries. The explanatory value of psychic distance would in that case have
decreased. Nordström's preliminary results seem to confirm this argument.
Britain, Germany and the US have become as common a target for the very
first establishment of sales subsidiaries as the Scandinavian neighbours. Other

environmental changes such as improved information supply and more efficient
means of transmitting information, less fragmented markets (cf. Nordstrom
and Vahlne, 1985), increased emphasis on R&D, all have an impact on the
internationalisation process.
It has also been argued that the model does not take into account
interdependencies between different country markets (Johanson and Mattsson,
1986). This is both a conceptual and an explanatory problem. The conceptual
problem is that it seems reasonable to consider afirmmore internationalised
if it views and handles different country markets as interdependent than if it
views them as completely separate entities. The explanatory problem is that
interdependencies between markets can be expected to have a strong impact
on the internationalisation of the firm.
Studies have shown that the internationalisation process model is not valid
for service industries. A study of the internationalisation process of Swedish
banks suggests that their foreign establishments are not governed by cultural
distance (Engwall and Wallenstal, 1988). Nevertheless, like Tschoegl's (1982)
study of bank entry into Japan and California, this study showed that market
entry was made in small steps. On research about the internationalisation of
Swedish technical consultants — a typical service industry — it has been
demonstrated that the cumulative reinforcement of foreign commitments implied
by the process model is absent (Johanson and Sharma, 1987).
A process view of internationalisation differs radically from the internalisation
model both in its assumptions and its predictions. Forsgren (1989b) used the
two models to analyse how international expansion via foreign acquisitions or
greenfield investments is influenced by such factors as degree of international-
isation, diversification and R&D intensity. In an empirical analysis of the
acquisitions of Swedish multinationals, the process model was strongly
supported.
The Eclectic Paradigm

The internationalisation model explains and predicts the mode and pattern of the
International internationalisation process whereby nationalfirmsare transformed into being
Marketing multinational. It is of interest to relate this model to direct investment theory.
Review As we perceive "the eclectic paradigm" to be the most widely accepted
7,4 framework within this area of theoretical thought, we have chosen it as our
frame of reference.
The condensed version of the eclectic paradigm given below is based on
16 Dunning (1988). This paradigm sets out to explain the extent, form and pattern
of international production which relies on three distinct sets of advantages.
The first set is ownership-specific advantages. Dunning makes the distinction
between advantages stemming out of structural and transactional market
imperfections. The former relate to the company's possession of, for example,
superior technology or a characteristic such as multinationality. The transaction
type advantage implies that the multinational organisation, as compared with
the market mechanism, can enjoy lower transaction costs.
The second set of advantages, internalisation advantages, refer to the

multinational enterprise's (MNE's) ability to transfer ownership-specific
advantages across national borders within its own organisation rather than
exploiting the advantage by selling it. Again, imperfect markets explain why
the company, for example, prefers to exploit technology by using it as an input
in its own foreign manufacturing unit, rather than to sell the right to use that
technology to an indigenous firm in that same market.
The internalisation advantage should be distinguished from the transaction
advantage mentioned above. In Dunning's words (1988): "We believe it is not
only useful but logically correct to distinguish between the capability of MNEs
to internalise markets, and their willingness to do so. For while the latter
(internalisation advantages) may explain why hierarchies rather than external
markets are the vehicle by which transactional ownership advantages are
transferred across national boundaries, it is the former (ownership advantages)
which explains why these advantages are exploited by one group of MNEs rather
than another, or by MNEs rather than firms indigenous to the country of
production".
The third set of advantages are locational advantages, again of two types:
structural and transactional. The former relates, for example, to differences
in factor costs while the latter refers to "enhanced arbitrage and leverage
opportunities". "It is then the juxtaposition of the ownership-specific advantages
offirmscontemplating foreign production, or an increase in foreign production,
the propensity to internalise the cross-border markets for these, and the
attractions of a foreign location for production which is the gist of the eclectic
paradigm of international production" (Dunning, 1988).
The Eclectic Paradigm and the Internationalisation Model Contrasted

According to Dunning, the eclectic paradigm sets out to explain "the extent,
form and pattern of international production", while the internationalisation model
aims at explaining the pattern and mode of establishing marketing-oriented
operations (including manufacturing for the local market). "Pattern" implies
choice of location. The eclectic paradigm predicts that production will be
established where advantages can be enjoyed. The internationalisation model Internationalisation
predicts, taking only psychic distance into account, thatfirmswill start by invading
"neighbouring" (in the cultural sense) markets and later, as experience grows,
more distant markets will be entered. It is thereby assumed, of course, that
thefirmwould not enter markets where there is not some demand for its output.
Obviously, timing is also an important aspect of the pattern.
One might suspect, as is confirmed by empirical research, that the explanatory 17
value of the internationalisation model in this regard is high in the very early
stages of the internationalisation process, while the explanatory value of the
eclectic paradigm is high for "global" (in the sense of having experience from
many regions of the world) firms. The internationalisation model rests on
behavioural theories while the theoretical underpinnings of the eclectic paradigm
assume that the decision makers have access to perfect information. The former
assumption is obviously more true for inexperienced firms and the latter for
experienced. On this point the two frameworks are obviously inconsistent, but
it is interesting to note that when Dunning discusses to what extent the eclectic
paradigm allows forfirm-specificbehavioural differences, he asks for more
research on the attributes offirmswhich can have an impact on their response
to any particular configuration of the three types of advantages. We would argue
that the commitment and the amount and quality of experience gained, are
examples of such attributes.
A second explained variable in both frameworks is the mode or form, internal
or external to thefirm.Again, the eclectic paradigm predicts that the company
will optimise rationally, while the internationalisation model, placing uncertainty
avoidance in the centre, assumes that no optimisation will occur. Unless the
constraints in terms of lack of knowledge of the foreign market and lack of
established relationships to various parties, especially customers, on the foreign
market (which makes it possible to calculate costs andrisks)are included among
the explanatory firm characteristics, the eclectic paradigm cannot explain the
shifts in mode explained by the internationalisation model. In other words, an
experienced decision maker will perceive future transaction costs differently
than the inexperienced decision maker.
In terms of explanatory variables the difference is dramatic. The
internationalisation model in its original version explicitly used only one — the
firm's knowledge. Implicitly there was another — relationships to other bodies
on the foreign market. This is now made explicit in the present article. There
is no ambition to increase the number of explanatory variables, as our aim is
really to contribute to an understanding of the incremental nature of the
internationalisation process. The eclectic paradigm on the other hand has the
objective of giving a full-fledged explanation of the firm's foreign operations,
thereby relying on all relevant exploratory factors.
It is interesting to compare the underlying mechanism of the two frameworks.
According to Williamson (1981) transaction costs are affected by uncertainty,
bounded rationality and opportunism. When transaction costs reach a certain
size, it pays to internalise. Transaction costs are, for example, high for
technologically complex products. Consequently, the propensity to rely on
International own sales organisations rather than agents are higher infirmswith those kinds
Marketing of products (cf. Hörnell and Vahlne, 1973). But these typically also rely on outside
Review middlemen in the early stages of the internationalisation process for reasons
7,4 explained above. The company at this stage is neither able nor willing to
internalise the activities performed by the middleman. Once uncertainty falls
below a certain level, the ability to internalise is there but the willingness to
18 do it may not exist until something triggers the decision. Alternatively, when
uncertainty is eliminated extemalisation might be feasible. The main difference
between the two frameworks is that the internationalisation model recognises
that transaction costs change over time, while the eclectic paradigm assumes
the decision makers involved are rational and well-informed right from the start
of the internationalisation process.
The eclectic paradigm is basically static in nature, while the internationalisation
model is dynamic paying explicit consideration to changes in the explanatory
variables as the process proceeds. But, of course, the internationalisation model

is extremely partial, deliberately excluding many relevant explanatory factors.
Clearly, the two frameworks in their present shape are inconsistent as the basic
assumptions are so different.
Industrial Networks
Some of the deficiencies of the process model will be discussed by relating
the internationalisation process to the concept of industrial networks. Empirical
research has demonstrated thatfirmsin industrial markets establish, develop,
and maintain lasting business relationships with other business actors
(Hakansson, 1982; Turnbull and Valla, 1986; Hallén et al., 1987). This research
has shown that relationships develop through interaction in which the parties
build mutual trust and knowledge, and that interaction means strong commitment
to the relationships (Ford, 1979).
The relationships are connected by networks which develop as a consequence
of the interaction between firms. The specific firm is engaged in a network
of business relationships comprising a number of different firms — customers,
customers' customers, competitors, supplementary suppliers, suppliers,
distributors, agents and consultants as well as regulatory and other public
agencies. Similarly, industries can be regarded as networks of business
relationships comprising a number of different business actors. In any specific
country, different industrial networks can be distinguished. Such different
industrial networks may be more or less international to the extent that the
connections between networks in different countries are more or less extensive.
Evidently, business relationships and consequently industrial networks are
subtle phenomena, which cannot easily be observed by an outside observer,
i.e. a potential entrant. The actors are tied to each other through a number
of different bonds: technical, social, cognitive, administrative, legal, economic,
etc. The outsider can only achieve a very superficial comprehension of such
a complex and fluid network. The relationships and the networks can only be
understood through experience from interaction inside, and especially so if there
is a cultural distance between the actors. Thus, in relation to the inter-
nationalisation process model it can be assumed that market (i.e. network) Intemationalisation
knowledge is based on experience from current business activities, or current
business interaction.
The network view implies that all actors in a network are more or less active
and that the establishment of new relationships and the development of old,
is a result of interaction between active parties. To enter a network from outside
requires that other actors have to be motivated to engage in interaction, 19
something which is resource demanding, and which may require several firms
to make adaptations in their ways of performing business. Thus, foreign market,
or network, entry of the firm may very well be the result of interaction initiatives
taken by other firms which are insiders in the network in the specific country.
However, the chances of being the object of such initiatives are much greater
for an insider. An extension of the intemationalisation process model to take
into account the network aspect should consequently make the concepts
"commitment, knowledge, current activities and commitment decisions" as

multilateral rather than unilateral as in the original model. That is, the process
is also inter-organisational and not just intra-organisational (Figure 2).
This line of thinking is related to that of Porter (1980), who argues that "switching
costs" make it expensive for a customer to change supplier. The higher these
costs are, the more difficult it will be for a potential alternative supplier to
convince the buyer to change, and it will require some time.
The networks in a country may well extend far beyond country borders. It
can be assumed that there are differences between countries as to the
international extension of the networks in the country. Likewise it can be
assumed that there are differences between products regarding the inter-
nationalisation of the relevant networks. It can also be expected that the
international extension of these networks has strong implications for the
intemationalisation of the firm.
Thus, in relation to the intemationalisation of the firm the network view argues
that the internationalisingfirmis initially engaged in a network which is primarily
domestic. In terms of networks, intemationalisation means that the firm
International develops business relationships in networks in other countries (Johanson and
Marketing Mattsson, 1988). This can be achieved: (1) through the establishment of
Review relationships in country networks that are new to the firm, i.e. international
7,4 extension; (2) through the development of relationships in those networks, i.e.
penetration; and (3) through connecting networks in different countries, i.e.
international integration.
20 The relationships of a firm can be used as bridges to other networks. Consider
the firm which is engaged in international business relationships. These
relationships can help the firm in getting inside networks in foreign countries.
In some cases they can even force the firm to enter foreign networks (Johanson
and Sharma, 1987). This is the case when the customer demands that the
supplier follows him abroad if he wants to keep the business at home. Generally,
it can be assumed that direct or indirect bridges exist betweenfirmsand different
country networks. Such bridges can be important both in the initial steps abroad
and in the subsequent entry of new markets.

The character of the ties in a network is partly a matter of thefirmsinvolved.
This is primarily the case with technical, economic and legal ties. To an important
extent, however, the ties are formed between the persons engaged in the
business relationships. This is the case with social and cognitive ties. Industries
as well as countries may differ with regard to the relative importance of firm
and person relationships. But it can be expected that the personal influence
on relationships is strongest in the early establishment of relationships. This
conforms closely to thefindingthat cosmopolitans are often important in the
first steps abroad (Simmonds and Smith, 1968). Later in the process, routines
and systems will become more important.
Correspondingly, it can be expected that personal relationships and networks
are especially important in turbulent, high technology industries (Laage-Hellman,
1989). A study of the internationalisation process of small high-tech firms
indicates that some of these companies follow the traditional internationalisation
patterns, while others behave differently (Lindqvist, 1988). They go directly
to more distant markets and more rapidly set up their own subsidiaries. One
reason seems to be that the entrepreneurs behind those companies have
networks of colleagues dealing with the new technology. Internationalisation,
in these cases, is an exploitation of the advantage this network constitutes.
The Advantage Package and the Advantage Cycle

In a research project on Swedish multinationals, the concepts of the "advantage
package" and the "advantage cycle" were used (Sandén and Vahlne, 1976).
The advantage package is designed as the aggregated amount of strengths and
weaknesses of a company, evaluated in relation to a specific set of circumstances,
such as a particular environment, set of competitors and objectives. In principle,
all relevant attributes of the company should be taken into consideration. Certain
attributes, which in other situations might have constituted a strength, can be
regarded as a weakness. In this particular situation, the relative size of the
advantage package and the composition of the package will have an impact on
the characteristics of the internationalisation process.
The advantage cycle proposes that the size and composition of the package Internationalisation
changes over time. In these terms, the internationalisation model can be
described in the following way. A company, performing activities in a foreign
market, interacts not only with potential and actual customers but also
authorities, suppliers, etc. In this way, knowledge is accumulated and
relationships established, the company improves on certain attributes, and an
advantage is created. This is not free of cost. In principle it should be regarded 21
as an investment, but many companies do not, and the assets created cannot
be incorporated in the balance sheet. The cost for building the new advantage
is covered by exploiting the previous advantages whether access to technology
or something else. If the value of the previous advantage decreases because
of the exploitation, it is really an advantage cycle. If not, the package increases
in value but there is still a change in the composition of the package. The changed
composition of the package will have an impact on the continued development
of the company as new or different opportunities can be exploited. For example,

joint product development between supplier and customers might lead to the
creation of new technology that can be utilised by the supplier elsewhere. Also,
the location of the new advantage in terms of units within the multinational
organisation will change the power balance within the corporation. Those decision
makers controlling critical resources will have a say concerning, for example,
investment decisions (cf. Forsgren, 1989a).
An example of the advantage cycle is Sandvik's switch from being a
manufacturer of steel to products made of cemented carbide. Towards the end
of the last century, Sandvik was an unprofitable producer of steel. It managed
to acquire the right to use the newly invented Bessemer process, which was
superior to other available methods in terms of the quality of the output. Resting
on this advantage, Sandvik built a network of agents and established a strong
position with individual customers. The size of the original package did not permit
Sandvik to establish its own sales organisation directly — that is, to internalise
the sales operations. But as sales volume grew, experience was gained and
relationships established, and the size of the package permitted internalisation.
Later, methods superior to the Bessemer process were developed and Sandvik's
main advantage became its distribution network in foreign markets and
relationships established with customers. These, in spite of the technological
disadvantage, allowed Sandvik to sustain profitability. Parts of these resources
were used to develop cemented carbide technology, a new product range was
launched and again a new advantage was born. Utilising its network of subsidiaries
today, Sandvik supplies systems for performing cutting operations, incorporating
software adjusted to the needs of the individual customer. Successful distribution
of this type of system clearly benefits from lower transaction costs connected
with the internalisation of sales and service activities.
Seen in this way, the internationalisation process through the advantage cycle
is clearly linked to the network view on markets. As discussed earlier,
internationalisation is to a large extent a matter of establishing relationships
in foreign markets. We are admittedly biased in this respect as Swedish
companies went abroad almost exclusively for market reasons, in which case
International establishment of relationships may be more important than in other cases.
Marketing Application of the concepts of the advantage cycle and advantage package
Review are, however, not limited to this type of intemationalisation. As in the somewhat
7,4 simplistic case of Esselte, the Swedish office equipment supplier, the advantage
was possession of a large sum of cash, which was used to acquire a number
of companies abroad to create a whole new set of advantages.
22 Relaxing some of the "neoclassical" assumptions, thereby making room for
some of the most striking features of the area of international business and
using the concepts of the advantage package and advantage cycle, would go
a long way to "dynamise" the eclectic paradigm and make it useful to explain
states and changes in the early phases of the intemationalisation process also.
Conclusion
Although the intemationalisation process has captured the interest of many

researchers, there have been only a few attempts at developing the concept.
This is easily understandable as the basic ideas are drawn from several theoretical
traditions — economic theory, organisation theory and marketing theory —
and most researchers feel at home in only one. We think, however, that future
research about this process can be very fruitful. It can enrich our understanding
about how basic changes in the international business arena take place.
We suggest that researchers should investigate howfirmintemationalisation
processes are related to surrounding processes, i.e. market or network
intemationalisation, industry intemationalisation, technical development,
concentration as well as deconcentration processes. It is important to remember
that firm intemationalisation is embedded in an ever-changing world.
Another field of study worth attention concerns intemationalisation strategies.
Basically the process model is rather sceptical in regard to strategy.
Nevertheless, we think that intemationalisation processes are the result of a
mixture of strategic thinking, strategic action, emergent developments, chance
and necessity. We believe it is worthwhile to analyse the intemationalisation
of firms with an open mind with regard to these factors.
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The Mechanism of Internationalisation

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In the last decade, we have witnessed a growing amount of research about

process is manifested in a number of different ways. It can be seen in the

The Uppsala Internationalisation Model

Following Penrose (1959), two kinds of knowledge are distinguished: objective

first establishment of sales subsidiaries as the Scandinavian neighbours. Other

The Eclectic Paradigm

The second set of advantages, internalisation advantages, refer to the

The Eclectic Paradigm and the Internationalisation Model Contrasted

variables as the process proceeds. But, of course, the internationalisation model

"commitment, knowledge, current activities and commitment decisions" as

and in the subsequent entry of new markets.

The Advantage Package and the Advantage Cycle

of the company as new or different opportunities can be exploited. For example,

Although the intemationalisation process has captured the interest of many

Institute of International Business, Stockholm, forthcoming.

initial pace of internationalization. International Business Review 24, 102-114. [CrossRef]

Issues in Engineering Education and Practice 140, 04013002. [CrossRef]

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