From internationalization to evolution: The Uppsala model at 40 years

As we know that the Uppsala model explains the internationalization process of firm. After
developing it several time, in this article, the authors anchor the model in process ontology
and apply it to multi-business enterprise (MBE) evolution. They show how the Uppsala
model could be enhanced to offer a dynamic, process-based explanation of MBE evolution,
resting on more realistic assumption than the eclectic paradigm.

The structure of the article is as follows. The authors begin by describing the process
ontology to which they subscribe, then briefly discuss the assumptions on which the model
rests, after which they present the augmented Uppsala model.

Process Ontology

The authors chose the process ontology because of the self-evident that managers act in a
flow of ongoing events and that continuous change characterizes any present situation.
Process Ontology implies open-endedness: it cannot be known what will come out of a
process. Such open-endedness is an important feature of the model.

They follow Nelson and Winter’s view of evolution as the “processes of long-term and
progressive change” with an emphasis on their cumulative nature. Besides, they also use the
concept of “history-dependence” that encompasses both the evolutionary nature of the
firm and its potential for revolution adaption to its changing environment.

An important aspect of their process view is thus the symbiosis between stability and
change.

Assumptions of the Uppsala Model

The Uppsala model is a micro-level tool of analysis that essentially provides a holistic
explanation of MBE evolution. It is important to make explicit the key underlying
assumptions on which the model rests. The authors include milli-micro level assumptions
without the individual in their process description.

First assumption: Heterogeneity and the Network View of the Business Context. This
assumption of heterogeneity is crucial and provides the basic explanation for the existence
of idiosyncratic relationships and networks. Not only goods and money are exchanged in
relationships, but knowledge is as well. Moreover, relevant network partners should be
considered to be co-evolving units in any specific research project. Processes in the Uppsala
model involve not only the local firm but also all the organizations in the network.

Second assumption: Risk, Uncertainty, and Partial Ignorance. These characteristics are all
associated with resources that are at stake when a decision is made.

The Uppsala Model

Although the model has been extended, the structure and general content of it remains the
same as the original developed in 1977. The purpose here is to build a general model of
MBE evolution, however, when applied to a particular research problem, two types of
variables must be considered: the state variables and various contextual aspects.

Change variables: The model suggests two starting points for change: intermittent decision
processes related to (not)committing resources, and continuous knowledge development
processes through learning, creating and trust-building. The two types of change processes
also affect each other indirectly.

Commitment Process: The dimensions of the commitment process include reconfiguring

and coordinating. These sub-processes, just like others, occur under conditions of risk,
uncertainty and partial ignorance. The outcome becomes a new input into commitment
processes to reconfigure resources and coordinate action.

Knowledge Development Process: The knowledge development process of learning,

creating, and trust-building, can also be either inter or intra-organizational. It also occurs in
all network units, internal and external. In discussing learning and creating, there are two
different, overlapping concepts: social construction and sense-making. There are also
several knowledge development sub-processes that occur in MBE internal and external
units. They operate quasi-independently of each other but unfold simultaneously, thereby
affecting the more formal commitment process in terms of reallocation of resources, and
triggering a changed, improved package of operational and dynamic capabilities. The
entrepreneurial knowledge development process includes three sub-processes,
relationship-building, flexibility in strategy implementation and adaptation to the
organization’s task environment.

State Variables: The model is differentiated between two groups of state variable: capability
variables and commitment/performance variables, both of which are the result of – and
affect – the change variables.

Operational Capabilities: Making use of operational capabilities amounts to exploiting extant

FSAs (firm-specific advantages). In most case, internationalization requires a dynamic
capability, but in firms with much experience from past internationalization, the
internationalization process, building upon proven managerial practices, can actually be an
operational capability in its own right.

Dynamic Capabilities: is an ability to integrate, build and reconfigure internal and external
competencies to address rapidly changing environments and can be seen as a pattern of
routines accumulated during the firm’s history. It cannot be bought but have to be built
internally. The dynamic capabilities are mostly consistent with the model.

Commitments/Performance: Commitments describes the distribution of resources over the

MNE’s functions, its product lines, the countries where it is active and the relationships in
which it has invested. In contrast, performance refers to what has been achieved already.