The Sequence of Operational Modes Used by Finnish Investors in Germany

Abstract

During the last two decades, foreign market entry has received extensive attention among international business scholars. Central among recent attempts to explain the sequence of operational modes used by foreign investors is the (Uppsala) internationalization model ( Johanson and Vahlne 1977 ). The aim of the present study is to address the question of why some companies follow while others deviate from the ‘traditional’ establishment chain proposed in the Uppsala model. In an explanatory analysis on the sequence of operational modes used by a number of Finnish companies with sales or manufacturing subsidiaries in Germany, hypotheses based on the Uppsala internationalization model, industrial economics, and internalization theory received limited support. A separate analysis focusing on only manufacturing subsidiaries indicated that other factors, such as existing market network relationships, top management changes, and product characteristics, all have an important influence on the choice of local manufacturing as some firms’ first operational mode abroad. Implications of these results for future theory building are discussed.