Abstract
This chapter analyzes the internationalization strategy of a Portuguese knowledge-based service firm. It is based on a case study and the main objective is to discuss what internationalization theory best explains the company's internationalization strategy. The literature reviews the main internationalization patterns—Uppsala model, born globals, born again globals, and born regionals—so that a comparison of the main characteristics of each theory is discussed and analyzed. At the end of the chapter, a table summarizes the main characteristics of the internationalization process of each model presented. The case study is based on the analysis of both primary data from the firm and data obtained from an interview obtained with the CEO.
TopIntroduction
Internationalization is of key importance for small and medium-sized firms (SMEs) to grow, as domestic markets are sometimes very restricted. Internationalization helps SMEs to exploit their competitive advantages abroad (Ribau, Moreira, & Raposo, 2017; Stanisauskaite & Kock, 2016). Internationalization is normally known as the process of increasing involvement in international activities and is related to how companies explore international markets (Ribau et al., 2015; 2018a; 2018b).
Although internationalization has been traditionally considered an incremental process in which companies gradually increase their involvement in overseas markets through a series of evolutionary stages (Bell, McNaughton, & Young, 2001; Ribau et al., 2015), several companies follow different international paths as a consequence not only of their capabilities, but also as a result of their active behavior (Pinto, Ribeiro, & Moreira, 2018; Moreira, Alves, Martins, Pereira, & Conceição, 2018; Ribau et al., 2017; 2018a).
Although the Uppsala model—which advocates an evolutionary, sequential and linearly growing international involvement (Ribau et al., 2015)—and the network-based view of the firm—based on relations among market players (Hakansson & Snehota, 2006)—have been extensively used to explain how some firms internationalize, there have been new models—known as born global and born again global in which firms internationalize rapidly or suddenly, based on entrepreneurial behaviors empowered by powerful, open-minded entrepreneurs/managers (Bell, McNaughton, & Young, 2001; McDougall & Oviatt, 2000)—that explain internationalization from a different perspective.
In the last decades, major changes have led to a global socio-economic climate. Globalization, emergence of new markets, advances in technology and a constant need for novelty are examples of those changes (Engelman, Zen, & Fracasso, 2015). Thus, and related to this paradigm, governments have acknowledged the inherent benefits of increasing exports, in order to improve the balance of payments, among other indicators and indexes (Bayfield, Dana, & Stewart, 2009).
Nowadays, in an increasingly global world economies are constantly growing. Several countries recognize the importance of the internationalization process, as this allows increased productivity and economic growth (Marin, 1992; Bayfield, Dana, & Stewart, 2009), as well as reduced costs and the exploitation of economies of scale (Jornal de Negócios, 2019).
Based on a case study analyzing a Portuguese knowledge-intensive firm—known as EPSILON for confidentiality reasons—that seeks to internationalize its activities, the objective of this chapter is to examine the internationalization process from a historical perspective and to debate the intricacies of the main internationalization theories: the Uppsala perspective; the born global; born-regional; and born again global theories. The aim is to confront these four theories in order to address the firm’s particularities within them.
Despite the criticism associated with case studies, fundamentally due to the impossibility of generalizing the results obtained, such studies undeniably contribute to the acquisition and construction of knowledge (Mariotto, Zanni, & Moraes, 2014). Therefore, this case study aims to explore, understand and analyze the strategic formulation combined with the internationalization process, framing the perspective and processes conducted by EPSILON.
The case study shows how EPSILON addresses new market entry opportunities abroad, based on the firm’s strategy to deploy their new services in international markets, which is a very significant advance for this company. Accordingly, the aim of this chapter is to examine EPSILON from a business historical perspective and the internationalization process. In order to achieve that goal, several theories about internationalization are presented and discussed throughout this chapter.
The chapter is structured in five main sections. After the introduction, the second section addresses the importance of internationalization. To do so, a literature review addresses four internationalization theories: the Uppsala model, born globals, born regionals and born again globals. The third section presents the methodology implemented. The case study is presented in the fourth section, with section five containing the results. Finally, the discussion and conclusions are presented in sections six and seven.
Key Terms in this Chapter
Internationalization: Normally associated with a strategy formed by firms that decide to operate in foreign markets. It involves the implementation of goods and services that can be easily adapted and adopted in different countries. It could involve business to consumer as well as business to business activities. It may involve cross -border transactions of goods, services or resources between two or more firms or organizations belonging to two different countries, as well as foreign direct investment.
Globalization: A worldwide movement toward economic, financial, trade and communication integration. It is usually envisaged as a lack of trade barriers between nations, these being removed through free trade agreements throughout the world and between nation-states. It implies the opening up of local and nationalistic perspectives to a broader outlook of an interconnected and interdependent world with free transfer of capital, goods and services across national frontiers, in which investment opportunities soar.
Internationalization Process: This emphasizes a company’s trajectory in its transition from a national market to a particular foreign market. It normally involves several entry modes (exports, FDI, franchising, etc.) that exert a critical influence on the subsequent trajectory, as well as on the cost related to the internationalization process. The two most important theories explaining the internationalization process are the Uppsala model and the network-based approach.
Uppsala Model: One of the most discussed dynamic theories in the Nordic School and International Business Studies. It explains the process of companies’ internationalization, how organizations learn and the impact of learning on their international expansion. This theory defends that companies’ internationalization process is carried out in stages, from non-regular exports to establishing companies abroad.
Case Study: A qualitative methodology, normally used in social sciences, that seeks to interpret a reality through a particular perspective. It is normally used to answer questions like “how” and “why.” It is commonly used to address constructivist research processes.
Born Again Globals: Characterized as being focused on the domestic market and suddenly being able to change their strategic focus radically in order to increase their sales volumes in international markets.
Born Global: A type of company that, from its inception, seeks to derive a competitive advantage to compete in many countries. It normally pursues a vision of becoming global and globalizes rapidly without any preceding long-term domestic or internationalization period or experience. Usually born globals are small, technology-oriented companies that operate in several international markets.