The internationalization process

Published on April 2, 2014 Updated on April 6, 2014   50 min

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Welcome to this lecture on the internationalization process. My name is Timothy Devinney, a professor of International Business and the University Leadership Chair in International Business at Leeds University Business School. Prior to this, I held a number of positions across the globe, including at the Australian Graduate School of Management, UCLA, the University Chicago, and Vanderbilt University. Fellow of the Academy of international business, as well as having been the Head of the International Management Division of the Academy of Management. I'm currently an editor, one of the Academy of Management Journals plus a number of other journals.
What we're going to do today is talk through the internationalization process. The logic of the internationalization process sort of came into being in the 1970s. Prior to this, many theories of globalization were driven by economic models of comparative advantage, along with different models which would relate that comparative advantage to specific locational types of advantages. In the 1970s, more of a process logic started to come into our thinking. The question which was really arising was related to the fact that if you looked at different firms at different points in time from different countries, they didn't all follow the same underlying model in terms of the way in which they internationalized. This was contrary to many of the logic that had been in vogue up until that point in time. One of the questions was, well, why might this arise? This is where two scholars, Johanson and Vahlne, started to discuss what was going on in the internationalization process. This is a fascinating topic in the sense that what it does is it gets us to concentrate not on kind of the rational logic of why firms do what it is they do, particularly with respect to internationalization. But also the question of why they do things differently and what might drive that. Johanson and Vahlne focused on a couple of issues. The first one is that internationalization is a risky process and managers are risk-averse and therefore, they'll make different decisions early in the internationalization process, then they will once they have more experience. This has been related to the second issue they bring up, which is the issue of learning. That is that no firm, no manager, gets a degree and immediately becomes a multinational. Therefore, they have to learn how to internationalize. This is a bit of "learning-by-doing" logic in the sense that you can't read a book and just learn how to internationalize. You need to have much more in the sense that what you need to do is focus on how I learn or my company learns about these specific circumstances which are related to the underlying unique advantages that my firm might have. Therefore, the process can be very different, even for the same firms in different industries or different firms in the same industry. As we go through this, you'll see a lot of the issues which will arise will be related to these issues of learning and evolution and how it is that the firms which apparently are facing similar circumstances might make very different choices.