Adapting to foreign markets: Explaining internationalization

Abstract

While much is known about the factors associated with the choice of an individual mode of distribution (e.g. export, sales branch, wholly owned production), we know little about why firms change modes and what explains the pattern of mode change. After interviewing 76 executives from 38 firms regarding 139 mode changes, that which best explained mode change was a modified stages model. Mode change tended to arise following changes in (A) constraints (resources or regulation) or (B) perceptions of market and mode costs and benefits. The ensuing pattern of internalization — whether de-investment, single step stages type investment or multi step incremental investment — depended on the nature of the stimuli, the firm's level of resources, experience and international skills, and the extent to which attitudes changed.