The internationalisation process of the firm

Welch, Lawrence S., 1945- (1978). The internationalisation process of the firm PhD Thesis, School of Economics, The University of Queensland.

       
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Author Welch, Lawrence S., 1945-
Thesis Title The internationalisation process of the firm
School, Centre or Institute School of Economics
Institution The University of Queensland
Publication date 1978
Thesis type PhD Thesis
Supervisor Prof D. Lamberton
Total pages 325
Language eng
Subjects 14 Economics
150308 International Business
Formatted abstract This thesis examines the process of international expansion by the individual firm. An overall model of the internationalisation process is developed as a framework for explaining the firm's growth from its earliest international activities through to the point of the initial investment in foreign manufacturing facilities. The model is then applied to the various stages of the internationalisation process, reflecting the pattern of sequential development, by means of a series of connected sub-models. Various aspects of the models' operations are through an empirical study of a sample of Australian-owned manufacturing firms.

The overall model provides a conceptual framework which is suggestive of the type of influences operating to induce new international expansion. The model extends the behavioural analysis of the firm into an inter-disciplinary approach. This is evident in the introduction of learning and commitment as international growth forces. They result from past activities initiated by the firm but change its ability to undertake new activities. A basic contention of the model is that for any new expansion decision to be made, the relevant decision-maker must perceive the stimuli as being sufficiently strong to warrant action, provided the risk and uncertainty of so doing has been, or is capable of being, reduced to acceptable levels.

An important point demonstrated in the thesis is that the beginnings of the internationalisation process are established in the pre-export stage. The activities undertaken and experience generated during this stage explain why only some firms become exporters. The empirical evidence indicates that new exporters are more likely to come from those firms which have pursued an active interest in the possibility of exporting. Also, it has been argued that extra-regional expansion is one of the key background preparatory factors in a firm's early move into exporting. Within Australia, the evidence reveals that a firm is unlikely to begin exporting before selling interstate; while there is a marked difference between exporters and non-exporters with regard to the extent and speed of interstate expansion. Initially, the period after exporting is an experimental and tentative phase in the overall growth process. Limited background pre-export preparation and negative feedback are important contributing factors to a high failure rate during this period. Continued expansion of exporting activities depends on a combination of factors, although the type of feedback resulting from export operations and the ability to expand internal resources, given the demands of the domestic market, are particularly important.

Past experience and commitments can be said to prepare the firm for new steps in the internationalisation process such as foreign investment, and provide a clearer basis for the perception of market possibilities. Nevertheless, new commitments do not simply grow out of past developments. For example, the stimulus to foreign investment often arises from an external threat to an established market. Of course the meaning of the threat can only be understood within the context of past actions and their results. It is the past activities which make the foreign investment decision feasible. In this manner international expansion is throughout characterised by a process of incremental gradualism. A number of case studies of the initial foreign investment by Australian firms confirm this characteristic. This approach also means that each firm's behaviour cannot be deduced from a given set of environmental conditions. The individual firm's experience and the perceptions of its decision-maker are to some extent unique, so each new expansion decision can only be understood within this context.

The research suggests that, if a government is to expand exports from the manufacturing sector, the policies adopted will be most effective when designed to suit the special characteristics of each stage of the internationalisation process.

The internationalisation model demonstrates that international expansion decisions can be better understood as part of an overall growth process. It could, however, be developed further by continued research in such areas as the role of perceptual and personal factors in decision-making.
Keyword International business enterprises.

 
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