Internationalization Theories PDF

**Internationalization models** **Answer the following question:** 1. What are the internationalization models mentioned in the extract of this article? Create their short summary. **Digitalization and Its Impact\ on the Internationalization Models of SMEs** **Aleksandra Gaweł, Katarzyna Mr...

**Internationalization models** **Answer the following question:** 1. What are the internationalization models mentioned in the extract of this article? Create their short summary. **Digitalization and Its Impact\ on the Internationalization Models of SMEs** **Aleksandra Gaweł, Katarzyna Mroczek-Dąbrowska, and Maciej Pietrzykowski** Internationalization means having some international involvement. Scholars distinguish between active internationalization, which means expanding the geographical range of the company, and passive internationalization, which refers to sourcing goods and services from abroad. The internationalization models discussed here concern the active approach, since such activities are said to boost growth, reduce unemployment, and enhance competitiveness. Internationalization is a phenomenon that accelerated in the 1920s (Ruzzier et al., 2006) and, due to globalization gained, strength and impact. Therefore, observing the business reality, scholars conceptualized the internationalization processes into models that were (and sometimes still are) specific to certain company groups. One of the models that played a key role in explaining the internationalization process is the so-called Uppsala model, otherwise known as the dynamic sequential model. This framework, conceptualized in the 1970s, explains the process of a firm's internationalization; namely, how organizations learn and how their learning path impacts companies' international expansion. The dynamic model claims companies undertake expansion in a stepwise and orderly manner. They increase their commitment in both markets and operations. Firms are expected to start their operations in close markets, i.e., markets close to the domestic one in terms of psychic distance. They are also said to start with modes that do not require much investment, which means they start with the non-equity modes and later turn to equity ones. In time, organizations would change by learning from their experience. They would also extend the scope of their operations, starting with sales and marketing, and later moving on to production, R&D, finance, and others. Incremental expansion also concerns the number and types of products and services offered in foreign markets, which increase over time. The sequential model assumes that in time, companies deepen their dependence on their business functions, like marketing, production, finance, personnel, and administration in international markets. Along with the new entries, they also deepen the degree of penetration in already acquired markets. The Uppsala model was criticized for its deterministic nature. Companies said to inter- nationalize in stages would have no real strategic choices (Chetty, 1999). Also, the appearance and spread of the so-called born-globals seems to prove that the model is losing its bearing on contemporary businesses. **Table 1** Determinants of internationalization process---cross-comparison of chosen models Obraz zawierający tekst, paragon, zrzut ekranu, Czcionka Opis wygenerowany automatycznie The business network internationalization process model was developed as an answer to the changes in business practices and theoretical advances which have occurred since 1977. Companies are embedded into a business network, and there- fore, market entry should not be considered as a decision of modes of entry, but instead as a position-building process in a foreign market network. Anything that happens does so in the context of a relationship. International expansion "is pursued within a network." Internal network relations are characterized by specific levels of knowledge, trust, and commitment, which vary between the network members, and therefore, they may differ in how they approach the internationalization process. The speed, intensity, and efficiency of the learning processes, knowledge creation, and trust building depend on the existing level of these factors, and especially on the extent to which the partners find given opportunities appealing. The business network ceases to see the firm as a production unit and starts perceiving it as an exchange unit. Therefore, for them, we no longer talk of the internationalization of a unit, but of the entire network. The network may also be driven to internationalization by environmental push factors, which aim to increase the competitiveness level of the entities involved (c.f. Kania, 2019). The resource-based view originates from strategic management, where a company seeks a source of competitive advantage in its competences and resources. Likewise, a company's ability to seek, seize, and attain position in international markets can also stem from the company's unique capabilities and resources (cf. Conner, 1991). The importance of intangible, knowledge-based resources is especially emphasized. In reference to SMEs, however, some scholars point to the fact that it lacks explanatory power. SMEs tend to be heterogenic, and identifying the resources critical for internationalization is difficult to achieve. As Table 1 indicates, the internationalization models draw on one another. The stage approach and resource-based approach both emphasize the importance of experience and knowledge in venturing abroad. It is also vital to stress the dependence between knowledge and resource commitment. The resources committed will translate into a greater degree of internationalization and complexity and that in return should result in accumulated knowledge on the internationalization process. Similarly, one can also indicate commonalities between the resource-based internationalization approach and the networking approach. Some claim that both perspectives evolve hand-in-hand (Ruzzier et al., 2006). Companies create their resource not only internally, but especially through network interactions. Therefore, the control over and interdependence of the resources crucial for internationalization can be network-based. To give a fuller perspective on the internationalization models of the SMEs, it is crucial to mention the international entrepreneur approach where the time of inter- nationalization is emphasized. Since entrepreneurship by nature is size-limited, internationalization is normally driven by the entrepreneur's abilities to innovate. In the internationalization process, what counts is not only the innovation's feasibility to be introduced; the key element is also the timing, which needs to be quick (c.f. McDougall & Oviatt, 2000). That links directly to the concept of born globals, companies which internationalize quickly after launching their market activities. Given the fact that the discussed models have been developed mostly based on MNEs, there is a lasting doubt as to their fitness for SMEs' internationalization path. The SMEs suffer from the "liability of smallness" (Aldrich & Auster, 1986), "liability of newness" (Freeman et al., 1983), "liability of foreignness" (Mezias, 2002; Zaheer, 1995), and "liability of outsidership" (Johanson & Vahlne, 2009), meaning that they have fewer resources, lower reputation reach, lower knowledge of international markets, and a lesser position in the international networks. This used to mean a greater shock when expanding abroad (Morais and Ferreira, 2020). Morais and Ferreira (2020) conducted a systematic literature review which indicates that SMEs---depending on the context---seem to follow different internationalization models. It is, however, impossible to pinpoint which of the perspectives---in case of SMEs---is superior in comparison to others. Therefore, scholars recognize the need to combine ideas stemming from different frameworks and not base their assumptions on one approach only (c.f. Vahlne & Ivarsson, 2014). It is also commonly acknowledged that although MNEs and SMEs differ structurally, they need to overcome similar internal and external barriers in the process of internationalization (García-Álvarez de Perea et al., 2019). They are also all prone to the pressure of globalization that makes the internationalization processes more alike. Some scholars claim that MNEs are no longer viewed as big global monoliths but rather as subunits of MNEs that follow their own internationalization paths and in this regard are similar to SMEs (Borghoff & Welge, 2001). Therefore, although the discussed models---and the stage model especially---are well-recognized approaches in discussing MNEs' expansion, they are equally suited for analyzing the SMEs internationalization processes. The Uppsala model is known for its general validity which makes it both its strength and weakness at the same time, but this unambiguously points to the fact that it can be applied to SMEs as well. The networking approach, on the other hand, is also applicable as the network is generally seen as a tool allowing the SMEs to combat size-related disadvantages when entering the foreign markets.