The emergence of a knowledge-based theory of internationalisation

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Volume 33, Issue 4

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The emergence of a knowledge-based theory of internationalisation

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Author(s): Lawrence S. Welch

Publication date (Print): 1 December 2015

Journal: Prometheus

Publisher: Pluto Journals

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Abstract

This paper charts the development of the knowledge-based theory of internationalisation, driven particularly by early research at the University of Uppsala, led by Sune Carlson. Information and knowledge, allied with an interest in the associated effect on risk and uncertainty, were components of a process perspective. Its essence was a focus on the restraining effects of a lack of knowledge as decision-makers contemplated international market entry or expansion requiring a commitment of resources in various forms, in different types of foreign operations (such as exporting, licensing and foreign direct investment). Lack of knowledge of a prospective foreign market (of its characteristics, culture, ways of doing business) was seen to create uncertainty so that firm decision-makers would be less prepared to commit resources. This situation was bound to change as a firm conducted operations in the foreign market and acquired experiential knowledge (learning by doing), which made the foreign market less of a mystery, in the process lowering uncertainty. As the learning process unfolded, and expanded opportunities were perceived, at some stage the firm might be prepared to undertake additional commitments to the foreign market. Empirical research at Uppsala, and in Finland, had shown a pattern of gradual expansion of foreign commitments by internationalising firms. In terms of theoretical development, a key step was relaxation of the assumption of perfect knowledge used in economics (not without critique), noted by Don Lamberton in 1974. Following the development of internationalisation theory in the 1970s, there was a range of extensions to the basic theory, such as the role of networks, the nature of inward–outward connections, and the need for knowledge to pass over language hurdles in the process of international transmission – within and outside the firm. In one sense, the internationalisation of companies was a perfect research site for an exploration of the role of information and knowledge in firm behaviour, given the additional exigencies of the diverse and demanding information environment that is the international arena.

Content

Author and article information

Contributors

Lawrence S. Welch

Journal

Journal ID (doi): 10.2307/j50022063

Journal ID (jcode): prometheus

Title: Prometheus

Publisher: Pluto Journals

ISSN: 0810-9028

ISSN: 1470-1030

Publication date (Print): 1 December 2015

Volume: 33

Issue: 4 ( doiID: 10.1080/prometheus.33.issue-4 )

Pages: 361-374

Affiliations

Melbourne Business School, University of Melbourne, Melbourne, Victoria, Australia

Article

Publisher ID: 08109028.2016.1207874

DOI: 10.1080/08109028.2016.1207874

SO-VID: c9e9c2b2-cda9-4ad6-8c73-b224bf9753b5

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All content is freely available without charge to users or their institutions. Users are allowed to read, download, copy, distribute, print, search, or link to the full texts of the articles in this journal without asking prior permission of the publisher or the author. Articles published in the journal are distributed under a http://creativecommons.org/licenses/by/4.0/.

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lang eng

ScienceOpen disciplines: Computer science,Arts,Social & Behavioral Sciences,Law,History,Economics

References

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Arrow, K. (1969) ‘Classificatory notes on the production and transmission of technological knowledge’, American Economic Review, 59, 2, pp.29–35.
Benito, G. and Welch, L. (1997) ‘De-internationalization’, Management International Review, 37, 2, pp.7–25.
Bonaccorsi, A. (1992) ‘On the relationship between firm size and export intensity’, Journal of International Business Studies, 23, 4, pp.605–35.
Burenstam-Linder, S. (1961) An Essay on Trade and Transformation, Almqvist and Wiksell, Stockholm.
Carlson, S. (1973) ‘Investment in knowledge and the cost of information’, Annales Academiae Regiae Scientarum Upsaliensis, pp.15–28.
Carlson, S. (1974) ‘International transmission of information and the business firm’, Annals of the American Academy of Political and Social Science, 412, 1, pp.55–63.
Carlson, S. (1975) How Foreign is Foreign Trade?: a Problem of International Business Research, Department of Business Studies, Uppsala University.
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Drummond, H. (1995) ‘De-escalation in decision-making: a case of a disastrous partnership’, Journal of Management Studies, 32, 2, pp.265–81.
Economist (2015) ‘On the road again’, Economist, 21 November, pp.62–4.
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Shackle, G. (1970) Expectation, Enterprise and Profit, Cambridge University Press, Cambridge.
Shackle, G. (1974) ‘Decision: the human predicament’, Annals of the American Academy of Political and Social Sciences, 412, 1, pp.1–10.
Simmonds, K. and Smith, H. (1968) ‘The first export order: a marketing innovation’, British Journal of Marketing, 2, pp.93–100.
Simpson, C. and Kujawa, D. (1974) ‘The export decision process: an empirical inquiry’, Journal of International Business Studies, 5, 1, pp.107–17.
Szulanski, G. (1996) ‘Exploring internal stickiness: impediments to the transfer of best practice within the firm’, Strategic Management Journal, 17 (special issue), pp.27–43.
Törnqvist, G. (1970) Contact Systems and Regional Development, B35, Lund Studies in Geography, Lund University.
Turnbull, P. (1979) ‘Roles of personal contacts in industrial export marketing’, Scandinavian Journal of Management, 16, 5, pp.325–37.
Welch, C. and Welch, L. (2009) ‘Re-internationalisation: exploration and conceptualisation’, International Business Review, 18, 6, pp.567–77.
Welch, D. and Welch, L. (2008) ‘The importance of language in international knowledge transfer’, Management International Review, 48, 3, pp.339–60.
Welch, D. and Welch, L. (2015) ‘Developing multilingual capacity: a challenge for the multinational enterprise’, Journal of Management, advance online publication. doi:10.1177/0149206315594846
Welch, D., Welch, L. and Marschan-Piekkari, R. (2001) ‘The persistent impact of language on global operations’, Prometheus, 19, 3, pp.193–209.
Welch, D., Welch, L., Wilkinson, I. and Young, L. (1996) ‘Network development in international project marketing and the development of external facilitation’, International Business Review, 5, 6, pp.579–602.
Welch, D., Welch, L. and Worm, V. (2007) ‘The international business traveller: a neglected but strategic human resource’, International Journal of Human Resource Management, 18, 2, pp.173–83.
Welch, L. (1978) The Internationalisation Process of the Firm, unpublished Ph.D. thesis, School of Economics, University of Queensland.
Welch, L. (1985) ‘The international marketing of technology: an interaction perspective’, International Marketing Review, 2, 1, pp.41–53.
Welch, L. and Luostarinen, R. (1993) ‘Inward–outward connections in internationalization’, Journal of International Marketing, 1, 1, pp.44–56.
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Wiedersheim-Paul, F., Olson, H. and Welch, L. (1978) ‘Pre-export activity: the first step in internationalization’, Journal of International Business Studies, 9, 1, pp.47–58.

Comments

Comment on this article

[1] Ambler, T. and Styles, C. (2000) ‘The future of relational research in international marketing: constructs and conduits’, International Marketing Review, 17, 6, pp.492–508.

[2] Arrow, K. (1962) ‘The economic implications of learning by doing’, Review of Economic Studies, 29, 3, pp.155–73.

[3] Arrow, K. (1969) ‘Classificatory notes on the production and transmission of technological knowledge’, American Economic Review, 59, 2, pp.29–35.

[4] Benito, G. and Welch, L. (1997) ‘De-internationalization’, Management International Review, 37, 2, pp.7–25.

[5] Bonaccorsi, A. (1992) ‘On the relationship between firm size and export intensity’, Journal of International Business Studies, 23, 4, pp.605–35.

[6] Burenstam-Linder, S. (1961) An Essay on Trade and Transformation, Almqvist and Wiksell, Stockholm.

[7] Carlson, S. (1973) ‘Investment in knowledge and the cost of information’, Annales Academiae Regiae Scientarum Upsaliensis, pp.15–28.

[8] Carlson, S. (1974) ‘International transmission of information and the business firm’, Annals of the American Academy of Political and Social Science, 412, 1, pp.55–63.

[9] Carlson, S. (1975) How Foreign is Foreign Trade?: a Problem of International Business Research, Department of Business Studies, Uppsala University.

[10] Cyert, R. and Hedrick, C. (1972) ‘Theory of the firm: past, present and future; an interpretation’, Journal of Economic Literature, 10, 2, pp.398–412.

[11] Cyert, R. and March, J. (1963) A Behavioral Theory of the Firm, Prentice Hall, Englewood Cliffs NJ.

[12] Drummond, H. (1995) ‘De-escalation in decision-making: a case of a disastrous partnership’, Journal of Management Studies, 32, 2, pp.265–81.

[13] Economist (2015) ‘On the road again’, Economist, 21 November, pp.62–4.

[14] Ford, D. (1980) ‘The development of buyer–seller relationships in industrial markets’, European Journal of Marketing, 14, 5/6, pp.339–54.

[15] Ford, D., Håkansson, H. and Johanson, J. (1986) ‘How do companies interact?‘, Industrial Marketing and Purchasing, 1, 1, pp.26–41.

[16] Håkansson, H., Johanson, J. and Wootz, B. (1976) ‘Influence tactics in buyer–seller processes’, Industrial Marketing Management, 4, 6, pp.319–22.

[17] Håkansson, H. and Wootz, B. (1975) ‘Supplier selection in an international environment – an experimental study’, Journal of Marketing Research, 12, 1, pp.10–6.

[18] Hayek, F. (1937) ‘Economics of knowledge’, Economica, 4, 13, pp.33–54.

[19] Johanson, J., Mattsson, L.-G., Sanden, P. and Vahlne, J.-E. (1976) “The role of knowledge in the internationalization of the firm' in Uppsala 500 Years, Acta Universitatis Upsaliensis, Uppsala, vol. 7, pp.27–45.

[20] Johanson, J. and Vahlne, J.-E. (1977) ‘The internationalization process of the firm – a model of knowledge development and increasing foreign market commitments’, Journal of International Business Studies, 8, 1, pp.23–32.

[21] Johanson, J. and Vahlne, J.-E. (2009) ‘The Uppsala internationalization process model revisited: from liability of foreignness to liability of outsidership’, Journal of International Business Studies, 40, 9, pp.1411–31.

[22] Johanson, J. and Wiedersheim-Paul, F. (1975) ‘The internationalization of the firm – four Swedish cases’, Journal of Management Studies, 12, 3, pp.305–22.

[23] Korhonen, H. (1999) Inward-Outward Internationalization of Small and Medium Enterprises, Helsinki School of Economics, Helsinki.

[24] Korhonen, H., Luostarinen, R. and Welch, L. (1996) ‘Internationalization of SMEs: inward–outward patterns and government policy’, Management International Review, 36, 4, pp.315–29.

[25] Lamberton, D. (ed.) (1971) Economics of Information and Knowledge, Penguin, Harmondsworth.

[26] Lamberton, D. (1974) ‘Preface (The Information Revolution)‘, Annals of the American Academy of Political and Social Sciences, 412, 1, p.ix.

[27] Lamberton, D. (ed.) (2002) The Economics of Language, Edward Elgar, Northampton MA.

[28] Liesch, P., Welch, L. and Buckley, P. (2011) ‘Risk and uncertainty in internationalisation and international entrepreneurship studies: review and conceptual development’, Management International Review, 51, 6, pp.851–73.

[29] Luostarinen, R. (1970) Foreign Operations of the Firm, Helsinki School of Economics, Helsinki.

[30] Luostarinen, R. (1979) Internationalization of the Firm, Academiae Oeconomicae Helsingiensis, Helsinki School of Economics, Helsinki.

[31] Mintzberg, H., Raisinghani, D. and Théoret, A. (1976) ‘The structure of “unstructured” decision processes’, Administrative Science Quarterly, 21, 2, pp.246–75.

[32] Nyström, H. (1974) ‘Uncertainty, information and organizational decision-making: a cognitive approach’, Swedish Journal of Economics, 76, 1, pp.131–39.

[33] Olson, H. and Wiedersheim-Paul, F. (1974) Export-Propensity of Non-Exporting Firms, Working Paper, Centre for International Business Studies, Uppsala.

[34] Penrose, E. (1959) The Theory of the Growth of the Firm, Basil Blackwell, Oxford.

[35] Piekkari, R., Welch, D. and Welch, L. (2014) Language in International Business: The Multilingual Reality of Global Business Expansion, Edward Elgar, Cheltenham.

[36] Piekkari, R., Welch, D., Welch, L., Peltonen, J.-P. and Vesa, T. (2013) ‘Translation behaviour: an exploratory study within a service multinational’, International Business Review, 22, 5, pp.771–83.

[37] Pred, A. (1974) ‘Industry, information and city systems interdependencies’ in Hamilton, F. (ed.) Spatial Perspectives on Industrial Organization and Decision-Making, John Wiley, London.

[38] Shackle, G. (1970) Expectation, Enterprise and Profit, Cambridge University Press, Cambridge.

[39] Shackle, G. (1974) ‘Decision: the human predicament’, Annals of the American Academy of Political and Social Sciences, 412, 1, pp.1–10.

[40] Simmonds, K. and Smith, H. (1968) ‘The first export order: a marketing innovation’, British Journal of Marketing, 2, pp.93–100.

[41] Simpson, C. and Kujawa, D. (1974) ‘The export decision process: an empirical inquiry’, Journal of International Business Studies, 5, 1, pp.107–17.

[42] Szulanski, G. (1996) ‘Exploring internal stickiness: impediments to the transfer of best practice within the firm’, Strategic Management Journal, 17 (special issue), pp.27–43.

[43] Törnqvist, G. (1970) Contact Systems and Regional Development, B35, Lund Studies in Geography, Lund University.

[44] Turnbull, P. (1979) ‘Roles of personal contacts in industrial export marketing’, Scandinavian Journal of Management, 16, 5, pp.325–37.

[45] Welch, C. and Welch, L. (2009) ‘Re-internationalisation: exploration and conceptualisation’, International Business Review, 18, 6, pp.567–77.

[46] Welch, D. and Welch, L. (2008) ‘The importance of language in international knowledge transfer’, Management International Review, 48, 3, pp.339–60.

[47] Welch, D. and Welch, L. (2015) ‘Developing multilingual capacity: a challenge for the multinational enterprise’, Journal of Management, advance online publication. doi:10.1177/0149206315594846

[48] Welch, D., Welch, L. and Marschan-Piekkari, R. (2001) ‘The persistent impact of language on global operations’, Prometheus, 19, 3, pp.193–209.

[49] Welch, D., Welch, L., Wilkinson, I. and Young, L. (1996) ‘Network development in international project marketing and the development of external facilitation’, International Business Review, 5, 6, pp.579–602.

[50] Welch, D., Welch, L. and Worm, V. (2007) ‘The international business traveller: a neglected but strategic human resource’, International Journal of Human Resource Management, 18, 2, pp.173–83.

[51] Welch, L. (1978) The Internationalisation Process of the Firm, unpublished Ph.D. thesis, School of Economics, University of Queensland.

[52] Welch, L. (1985) ‘The international marketing of technology: an interaction perspective’, International Marketing Review, 2, 1, pp.41–53.

[53] Welch, L. and Luostarinen, R. (1993) ‘Inward–outward connections in internationalization’, Journal of International Marketing, 1, 1, pp.44–56.

[54] Welch, L. and Wiedersheim-Paul, F. (1980a) ‘Initial exports – a marketing failure?‘, Journal of Management Studies, 17, 3, pp.333–44.

[55] Welch, L. and Wiedersheim-Paul, F. (1980b) ‘Domestic expansion – internationalization at home’, Essays in International Business, 2, pp.1–31.

[56] Wiedersheim-Paul, F., Olson, H. and Welch, L. (1978) ‘Pre-export activity: the first step in internationalization’, Journal of International Business Studies, 9, 1, pp.47–58.