Uppsala Intl Process Model

The Uppsala internationalization process model revisited: From liability of Foreignness to
Liability of Outsidership
Author(s): Jan Johanson and Jan-Erik Vahlne
Source: Journal of International Business Studies, Vol. 40, No. 9 (Dec., 2009), pp. 1411-1431
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-1431
Journalof International Business Studies (2009) 40, 1411
? 2009 Academyof International
Business All rightsreserved0047-2506
www.jibs.net
The
internationalization
model
process
Uppsala
From liability of foreignness
revisited:
to liability
of outsidership
JanJohanson1and
Jan-ErikVahlne2
Uppsala
University, Uppsala,
Sweden;
University, Gothenburg,
2Gothenburg
Sweden
Correspondence:
J Johanson, Uppsala
PO Box 513, SE-751
University,
20, Uppsala,
Sweden.
Tel: + 46 859255215;
E-mail:
jan.johanson@fek.uu.se
Abstract
The Uppsala internationalization process model is revisited in the light of
changes in business practices and theoretical advances that have been made
since 1977. Now the business environment isviewed as a web of relationships,
a network, rather than as a neoclassical market with many independent
suppliers and customers. Outsidership, in relation to the relevant network,
more than psychic distance, isthe rootof uncertainty.The change mechanisms
in the revisedmodel are essentially the same as those in the original version,
although we add trust-buildingand knowledge creation, the latterto recognize
the fact that new knowledge isdeveloped in relationships.
journal of InternationalBusiness Studies (2009), 40, 141 I-1431.
doi:IO.I057/jibs.2009.24
Keywords:
theory; experiential
knowledge;
theories
and
commitment;
foreign market entry;

trust; opportunity
network
relations
INTRODUCTION
has changed
since our model
of the internationalization
was
of
the
firm
in
the Journal of International
process
published
Business Studies (JIBS) (Johanson
& Vahlne,
In fact, the
1977).
economic
and regulatory environments
have
dramati
changed
Much
is also different in some respects.

behavior
cally. Company
research frontier has moved
too. There are some concepts
not
that
did
exist when our model was published.
insights
Received: 10 July2007
Revised:
15 October
Accepted:
4 November
The
and
The Uppsala
model
of the inter
the characteristics
explains
nationalization
we constructed
the
process of the firm. When
model
there was only a rudimentary
of market
understanding
that might
difficulties,
complexities
explain
but subsequent
research on international marketing
and purchasing
in business markets provides us with a business network view of the
environment
faced by an internationalizing
firm.We further develop
this view and explore its implications
for the internationalization
of the firm. Our core argument
on business
is based
process
network
first is that markets
research, and has two sides. The
are networks of relationships
in which
firms are linked to each
other in various, complex
and, to a considerable
extent, invisible
2008
2008
Online publication date: 21 May 2009
insider ship in relevant network(s)

is necessary
patterns. Hence
for successful internationalization,
and so by the same token there
is a liability of outsidership. Second,
offer potential
relationships

_The Uppsala
1412
model
revisited
for learning and for building trust and commitment,

for internationaliza
both of which are preconditions
tion. Before we look at this business network view in
depth, we summarize our original model.
THE 1977 MODEL

in the Department
of Business
in
the
mid-1970s
University
Researchers
at Uppsala
Studies
made
the estab
that contradicted
empirical observations
and normative,
international
lished economics
to that
business
literature of the time. According
or should
the
choose,
literature, firms choose,
for entering a market by analyzing
optimal mode
their costs and risks based on market characteristics
and taking into consideration
their own resources
our empirical
Hood
&
However,
1979).
Young,
(e.g.
from a database
of Swedish-owned
of
subsidiaries
and also from a number
abroad,
in
interna
of
Swedish
studies
companies
industry
tional markets,
indicated
that Swedish companies
with ad hoc
internationalizing
frequently began
observations
exporting
H?rnell,
(Carlson,
Vahlne,
1975; Forsgren & Kinch,

& Wiedersheim-Paul,
Johanson, 1966; Nellbeck,
1970;
1973;
1967). They would
formalize their entries through deals

subsequently
often agents who represented
with intermediaries,
in the foreign market. Usually,
the focal companies
as sales grew, they replaced their agents with their
own sales organization,
and as growth continued
in the foreign market to

they began manufacturing
overcome
the trade barriers that were still in place
in the post World War
II era. We
this
labeled
pattern the
feature of the pattern
establishment chain. Another
was that internationalization
frequently started in
that were close to the domestic
foreign markets
as
in terms of psychic distance, defined
market
it difficult to understand
factors that make
foreign
The companies
then gradu
would
environments.
that were
further away
ally enter other markets
dimension
Vahlne
JanJohansonand Jan-Erik
(1966), Cyert and March
original
model
based
on
the work
of
Penrose
of our
1977
rationality. It
First, firms
from
their
change by learning
experience of opera
current
in
tions,
activities,
foreign markets. Second,
commitment
the
decisions
they change
through
that they make
to strengthen
in
their position
as
the foreign market. We define commitment
the
times its
of the size of the investment
product
a large investment
in
degree of inflexibility. While
indicate a
does not necessarily
saleable equipment
to
dedication
unwavering
strong commitment,
the needs of customers
does. Experience
meeting
of a market,
and that
builds a firm's knowledge
influences
decisions
about
knowledge
and
the activities
of commitment
that subsequently
grow out of them: this leads to
the next level of commitment,
which
engenders
more
still
Hence
is
the model
learning
(Figure 1).
body
the
of
level
dynamic.
The model
does not specify the form that increased

commitment might take. Indeed, commitment may
and prospects
decline, or even cease, if performance
are not sufficiently promising. Contrary to the views
is by no means
expressed by some, the process
deterministic. We
that the
assumed
nonetheless
as long
of
continue
will
process
internationalizing
as the performance and prospects are favorable.
We
also
that learning and commitment

assumed
time.
This explains why moves
into
take
building
more
but
and
risky,
potentially
rewarding, modes
moves
into markets
that are more distant in terms
of psychic distance are made
incrementally.
We
considered
largely because
we
to be
the model
it on Cyert
based
State
in psychic distance terms (Johanson & Wiedersheim

Paul, 1975; Vahlne & Wiedersheim-Paul,
1973). This
process had its origin in the liability of foreignness, a
that originally
why a foreign
explained
concept
to
investor needed to have a firm-specific advantage
more than offset this liability (Hymer, 1976; Zaheer,
1995). The larger the psychic distance the larger is the
liability of foreignness.
We
searched primarily in the theory of the firm
between what
for the deviations
for explanations
and the Swedish
theories prescribed
the extant
our
and developed
pattern of internationalization,
(1963), and Aharoni
(1966). The underlying

assumptions
are uncertainty
model
and bounded
two change mechanisms.
also has
descriptive,
and March
Change
Market
Commitment
knowledge
decisions
Market
Current activities
commitment
Figure
The
basic
mechanism
of
internationalization:
and change aspects (Johanson& Vahlne, 1977: 26).
journal of International Business Studies

state
_The Uppsala
model
revisited
in the
generally been characterized
as
literature
behavioral,
compared with
subsequent
are
seen
as
such as
that
other theories
economic,
&
internalization
Casson,
1976),
theory (Buckley
transaction
cost theory (Hennart,
1982), and the
recent
eclectic paradigm
1980). More
(Dunning,
It has
(1963).
that the interna

studies have indicated
empirical
as explained
tionalization
process
by our model
has a positive
(Barkema,
impact on performance
1996; Delios & Beamish, 2001; Li,
Bell, & Pennings,
can therefore
1995; Luo & Peng, 1999). Our model
a model
of rational internationaliza
be considered
tion, and can be used for prescriptive purposes.
THE FIRM INTHE MARKET ENVIRONMENT:

A BUSINESS NETWORK VIEW
networks
of studies have demonstrated

in the internationalization
Coviello
and
A number
Munro
studies of
the role of
of
firms.
conducted
1997)
(1995,
of
the internationalization
empirical
found that network
small software firms. They
an impact on foreign market
have
relationships
selection as well as on the mode
of entry in the
of ongoing network processes. Their find

to develop a model
that combines the
them
led
ings
In a
the
network
and
model
process
approach.
of
the
international
of
expansion
Japanese
study
context
of
automotive
Martin,
components,
(1998) found that the
of
inter-organizational
suppliers,
relationships
those with buyers, affected their pattern
especially
of
international
Other
researchers
expansion.
have looked at networks in studies of internationa
suppliers
Swaminathan,
and Mitchell
lization strategy (Welch & Welch,

location
of
foreign
direct
investment
1996), the
(Chen
&
Chen, 1998), the first step abroad (Ellis, 2000),
(Chetty & Blankenburg

of firms from
2000),
&
Pattnaik,
2007), and
emerging markets
(Elango
&
Bell,
2006), to
(Loane
rapid
name but a few.
SME
Holm,
to
conclude
that our original model
We
needs
be developed
further in light of such clear evidence
in the interna
of the importance
of networks
of firms. The research that has been
tionalization
to date generally has studied the ways
in
done
influence
internationalization,
how
those
networks have been
discussing
the network
and without
created,
considering
structure in the country or countries firms entered.
Based on case analyses, Coviello
(2006) developed
a model
new venture]
of "how
[international
which
without
networks
networks
evolve"
during
the early phase
of interna
jan johanson and Jan-Erik

Vahlne_
1413
Our aim differs from that of Coviello

tionalization.
in that we focus on business networks as a market
structure in which
the internationalizing
firm is
the corresponding
embedded
and on
business
our
network structure of the foreign market. While
goal is to develop a more general business network

Coviello's
model of firm internationalization,
(2006)
of great interest, as she shows
work is nevertheless
in networks,
that "insidership"
before
developed
even before the founda
entry into a new market,
to the specific
firm, is instrumental
process at hand.
the 1977 model was based
The studies on which
tion of the
that the received

were not useful
theories of markets and

in trying to understand
of individual
firms. An inter
indicated
marketing
the market
situation
national
business-to-business
started
research
marketing
in
in Uppsala
in the mid-1970s
a better understanding
of business
program
order to develop
markets
and marketing.
that
Early observations
with
firms develop
lasting relationships
important
customers were an important input into this research
1966).
program (Forsgren & Kinch, 1970; Johanson,
on
An
the
interaction
that focused
approach
and exchange
between
was used as a theoretical
of business
relationships
adaptation
customers
studies
?stberg, 1975).
A
large-scale
and
marketing
empirical
purchasing
suppliers and
framework for
&
(H?kansson
study of international
of industrial products
(the IMP project) thatwas carried out in the late
1970s and early 1980s by researchers from Sweden

and four other European
countries was based on the
interaction
1997;
(Ford,
H?kansson,
approach
1982; Turnbull & Valla, 1986). Work done during
the project demonstrated

that close and lasting
business
between
relationships
suppliers and cus
a
tomers are indeed
important, be they within
(Hallen, 1986).
given country or between countries
A number
shown the
of studies since then have
of
in
the
internationaliza
importance
relationships
tion process - client-following
strategies for example
(Bonaccorsi, 1992; Erramilli& Rao, 1990;Majkg?rd
&
Sharma,
IMP project
Sharma
&
1998;
Johanson,
1987).
studies also showed that such relation
involve a number of managers
who
ships usually
the activities
of the different firms,
coordinate
and who
create
routines
interrelated
together
&
these
Homse,
Moreover,
1986).
(Cunningham
seem
to
social
relationships
through
develop
in which
the firms involved
processes
exchange
enact the relationship
and sequen
interactively
tially (Kelley & Thibaut, 1978). The result is the
Journalof International Business Studies

The Uppsala
1414
accumulation
of knowledge
and
model
and building
commitment,
and relationship
greater
eventually
in channel
demonstrated
&
(Anderson
ing studies
revisited
of trust,
as
also
market
1992; Dwyer,
Weitz,
& Hunt,
In
1987; Morgan
Schurr, & Oh,
1994).
ties and unilateral
the process, weak
dependence
can be
into
transformed
strong
relationships
and
and
bilateral
interdependence,
ultimately
increased
(Hallen, Johanson, &
joint productivity
1991; Zajac & Olsen,
1993). As
Seyed-Mohamed,
with
the
process model,
in the IMP project
shows
research
done
that
through a process of experi
relationships
develop
ential
firms learn about
the
learning whereby
resources
and capabilities
of their counterparts,
increase their commitments
and gradually
(H?gg
& Johanson,
1982). There is one important differ
our model
and
the findings of
between
is a
IMP project:
development
relationship
two
bilateral
who
that
involves
process
parties
commitment
learn interactively and make a mutual
to the relationship
& Weitz,
1992;
(Anderson
ence
the
Holm,
Eriksson, & Johanson,
1999).
Blankenburg
we constructed
our original model we were
When
of mutual
not aware of the importance
commit
ment
that
for internationalization.
Now
successful
reciprocal
commitment
our
view
between
requires
the firm and
& Vahlne,
1990; Vahlne
is
a
its
&
(Johanson
counterparts
Johanson, 2002).
It takes time - some data indicate as long as 5
- and
effort to create working
years
managerial
and many
attempts fail (Hohenthal,
relationships,
is the result
Thus a working
2001).
relationship
and is an important
of considerable
investment,
firm resource
be some
there
(Dyer & Singh, 1998). While
relation
formal aspects, developing
an informal process
(Powell,
ships is essentially
and
Intentions,
1990).
expectations,
interpreta
are basically
tions are important.
Relationships
subtle
The
informal
and
constructed.
socially
may
of relationships makes
it almost impossible
involved to judge
for anyone who is not personally
into
that has gone
the scope of the investment
or
the
The
its
value.
it,
larger
psychic
building
the more
other
distance,
things being
equal,
This is
difficult it is to build new relationships.
the effect of the liability of foreignness. Two firms
are tied to each
that are parties to a relationship
other to some extent: they share in their mutual
some
exercise
and may
future development,
nature
degree
1985).
of power over one

in practice,
Thus,
another
they
(Granovetter,
are not
fully
Vahlne
level
they are linked by a non-trivial
control.
has now
also
shown
that firms are
a
set
in
of
involved
different, close and
frequently
with
lasting
important
relationships
suppliers
and customers
1988; H?kansson,
1989).
(Cowley,
As those firms presumably
in turn are engaged
in a
autonomous:
of mutual
Research
of additional
business
firms
relationships,
in
networks
of
connected business relation
operate
& Johanson,
1994;
ships (Anderson, H?kansson,
Cook & Emerson,
1978; H?gg & Johanson,
1982).
The term connected means
in one
that exchange
number
is linked to exchange
in another. These
relationship
are
webs of connected
labeled business
relationships
networks.
firm may
create new knowledge
through
its
in
network
of interconnected
rela
exchanges
an
is
outcome
creation
of
the
tionships. Knowledge
The
between
confrontation
and
producer
knowledge
user knowledge.
The process of creating knowledge
is not separate from the other activities in business
in them.
rather it is embedded
relationships;
accrue
not
does
the
firm's
from
Knowledge
only
own activities, but also from the activities of its
beyond
and
since
those partners also have other

their activities
partners with whom
relationship
are coordinated,
the focal firm is indirectly engaged
in a knowledge
creation process
that extends
far
partners,
its own horizon.
Thus a network of business

a firm with
an extended
relationships
provides
base
knowledge
(H?gg &
2000).
Johanson,
1982;
Kogut,
Penrose (1966) and the resource-based

view (RBV)
that resources are hetero
(Barney, 1986) assume
resource
and
that these
geneous,
idiosyncratic
lead to value
of
bundles
creation,
irrespective
market
conditions.
The business
network
view
starts with these same assumptions,
and adds that
a
a
to acquire
within
firm
network
allows
exchange
about its relationship partners, including
knowledge
their resources, needs, capabilities,
strategies, and
other relationships.
partners are there
Relationship
infor
fore indirectly a source of relevant business
mation
about their own partners and more distant
actors
in the network.
Thus
the firm commands
its
about
business network.
privileged knowledge
on the above, we view
the firm as a
Based
in exchange
business
entity engaged
primarily
rather than
activities
(Snehota,
1990)
exchange,
of the
feature
distinctive
the
being
production,
firm (cf. Alchian & Allen, 1964). Indeed, the value
is derived
from exchange. While
of production
traditional economic
theory defines a firmwithout

_The Uppsala
model
revisited
reference to other firms, we define a firm on the

of its exchange
with
specific other actors
&
Johanson, 2005).
(Forsgren, Holm,
a
and Mattsson
Johanson
(1988)
developed
on
network model
of internationalization
based
business
network
research.
discussed
the
They
of firms in the context of both
the firm's own business network and the relevant
basis
In contrast to
network structure in foreign markets.
many other network studies, their model highlights
the importance of the network structure outside the
firm's own business network. It stresses the impor
in a firm's
tance of specific business
relationships
ele
though it lacks dynamic
ments. That model
conceptual
provided
input for
our work
on
the mechanism
of internationa
as
lization, in which we view internationalization
a multilateral
network
process
development
(Johanson & Vahlne,
1990).
A firm's success requires that it be well established
in one or more networks. Anything
that happens,
a
the
context
of
within
relationship, and a
happens
in a relevant network
firm that is well established
or networks
it is
is an "insider." As shown above,
to a large extent via relationships
that firms learn,
- the essential
trust and commitment
and build
elements
process. We
a
but
insufficient
that
is
necessary
argue
insidership
for successful business development.
condition
in a relevant
A firm that does not have a position
network is an "outsider." If a firm attempts to enter

a foreign market where
it has no relevant network
from
it
will
the liability of outsider
suffer
position,
and
and
foreignness,
foreignness presumably
ship
an insider.
of becoming
the process
complicates
a
to
makes
it impossible
develop
Outsidership
and yet somehow
It might happen
that a potential
begins.
requests a service
partner inside the target market
from the focal firm, thus creating an initial insider
The learning process, and trust- and
opportunity.
business,
process
It could
then begin.
may
commitment-building,
that another firm in the focal firm's
also happen
to have
need
home
products
country would
to its own customer's new facility in a
delivered
foreign market, and so might ask the focal firm to

do that. In that case the focal firm's existing
insidership in a relevant network may help it enter
start
a foreign market.
Evidently, the process may
through efforts by the focal firm.

is made up of
In our view a firm's environment
for the ways
and this has implications
networks,
we
think
about
in which
building
learning,
Janjohanson and Jan-Erik

Vahlne_
</Tk
1415
as well as about
trust, and developing
commitment,
and
Such
identifying
exploiting
opportunities.
activities must be understood
within
the context
of business networks where the liability of outsider
In the following
three
ship is an impediment.
sections
we
discuss
these activities, which

in
in business
development
result
simultaneity may
and internationalization.
KNOWLEDGE AND LEARNING

is based on the assumption
that
is fundamental
to a firm's
developing
knowledge
and in particular
that knowl
that grows out of experience
in current
edge
to
activities
is
crucial
the
(operations)
learning
Our original model
also
assumed
that
learning
by
a
in
results
differen
experience
gradually more
tiated view of foreign markets,
and of the firm's
own capabilities.
It is such learning that makes
process.
We
In recent
foreign operations
developing
possible.
there has been a growing
in interest in
decades
organizational
learning in general, as well as in the
context
of internationalization.
In this section
we examine
some implications
of the research that
grown out of this interest for the business
network view of the internationalization
process.
Two
reviews of our original model
have been
written that discuss its concepts of knowledge
and
has
&
Petersen,
Pedersen,
(Forsgren, 2002;
learning
some
et
Petersen
of
the
discuss
al.
Sharma, 2003).
one of which
critical assumptions
of our model,
is
that market-specific
is the critical kind
knowledge
of knowledge.
A number of studies have supported
this conclusion
et al., 1996; Erramilli,
(Barkema
1991; Luo & Peng, 1999).
In a study based on the network view, Axelsson

and Johanson
how
three firms
(1992) examined
entered foreign markets. They showed that foreign
market
entry should not be studied as a decision
about modes of entry, but should instead be studied

as a position-building
in a foreign market
process
cases
network.
Their
revealed
the complexities
a firm enters a
with
associated
learning when
firms
market
For
network.
example,
foreign
have to identify the relevant market actors in order
in often
to determine
how
they are connected
invisible complex
patterns. These patterns can be
identified only by the actions of the entering firm,

which causes other market actors to reveal their ties
must
to each other. The liability of outsidership
and Johanson
The Axelsson
be overcome.
study
learning process that
highlights the market-specific
our 1977 model,
and
we assumed
in developing
???

_The Uppsala
1416
model
revisited
some
network
input into the business
of
internationalization.
analysis
in the
In their study of experiential
learning
Eriksson,
Johanson,
process,
provides
Majkg?rd, and Sharma (1997) found that lack

market
lack of
of institutional
and
knowledge
business
amounts
different
require
knowledge
of time to overcome,
and have dissimilar
effects
on the perceived cost of internationalization.
A lack
of institutional market knowledge
that is, lack of
and
rules - has
about
laws,
knowledge
language,
to do with factors related to psychic distance, and
to the liability of foreignness.
Lack of business
a firm's business
market
is
to
related
knowledge
environment
to the business net

that, according
it is
view, consists of the firms with which
or trying to do business,
and the
doing business,
between
firms in this environment.
relationships
The lack of such market-specific
business knowledge
work
constitutes
the liability of outsidership.
our original model we stressed that
In developing
is general market
there
that may
knowledge
be transferred between
units.
More
organizational
recent
research
has
shown
that more
general
- that
is, knowledge
knowledge
that reflects a firm's resources and its capabilities
for
- is also
in
international
business
engaging
impor
tant (Eriksson et al., 1997; Welch
& Luostarinen,
several studies have
shown
1988).
Furthermore,
that a number
of different aspects
of general
knowledge may be important
as well. We believe
now
that the general
inter
nationalization
that encompasses
several
knowledge
kinds of experience,
market
including foreign
entry
Autio, George, & Zahra, 2006), mode
(Sapienza,
& Cho, 1999), core business
specific (Padmanabhan
alliance
& Rothaermel,
1995),
(Chang,
(Hoang
and
&
2005),
(Nadolska
Barkema,
acquisition
and
other
kinds
of
internationaliza
2007),
specific
tion experience,
is probably more
important than
we had assumed back in 1977. It is worth noting
that knowledge
about internationalization
does not
result
the
from
of
identified
only
types
learning
above.
For instance,
it has been
shown
that
is
knowledge
positively related
to variations
a firm has
in the experiences
in
different markets
(Barkema & Vermeulen,
1998).
Given
the business network view, we add to our
model
the concept of relationship-specific knowledge,
is developed
which
interaction between
through
the two partners,
and that includes
knowledge
about
each
capabilities.
other's
heterogeneous
we expect
Moreover,
resources
that
and
interaction
Vahlne
|an Johansonand jan-Erik
to more
about
general knowledge
and
to
international
also
relationship development,
in
the
learn
about
which
ways
partners
help
they
can develop different and transferable relationships
in alternative
situations
(cf. Hoang & Rothaermel,
in the character
of
variations
Indeed,
2005).
a
on
have
the
relationships may
positive
impact
to contribute
of general
knowledge.
relationship
the importance
of business network
as we wrote in the section about the
coordination,
business
network
that
view,
suggests
learning
how to coordinate
sets of relationships
is impor
development
Furthermore,
tant. Such
in relationships
learning may develop
between
that are located
in different
partners
countries - for instance, suppliers in some countries
and customers in others (Johanson & Vahlne, 2003).
in business
Moreover,
knowledge
development
is different from the kind of knowledge
networks
we assumed
in our original model.
In
development
business networks knowledge
is not
development
a
matter
of
extant
from
only
learning
knowledge
other actors. The interaction between a buyer's user
and a seller's producer knowledge may
knowledge
also result in new knowledge.
Prior experience
with management
teams may
have a strong effect on internationalization,
at least
in new and small companies
&
(Reuber
Fischer,
1997). This is particularly
interesting, as the 1977
model
about
the beginnings
says nothing
From
(Andersen,
1993).
business network point of view it is important
emphasize
that
the management
of
a
to
team's
prior
relationships
probably
provide
impor
extremely
tant knowledge. We return to this issue later.
Petersen et al. (2003) discuss our original model

under the headings From simplicity to complexity and
From determinism tomanagerial discretion. Under the
first heading
the simple view of

compare
our
in
knowledge
presented
early model with later
research in knowledge
and organizational
learning.
We agree that research on organizational
learning
has demonstrated
more
is much
that learning
we
than
had assumed 30 years ago. When
complex
- and
we
our model
we
constructed
believed
a
to believe
in
continue
parsimonious
approach
to theory development.
The aim of theory building
is not to replicate a complex
reality; it is to explain
its central elements. The conclusion
of subsequent
research has been
that experiential
is
learning
indeed a central factor in a firm's internationaliza
tion. In his critical review of the Uppsala
and the
innovation models
(Bilkey & Tesar, 1977; Cavusgil,
1980) of the internationalization
process, Andersen
they

_The Uppsala
model
revisited
(1993) noted that the Uppsala model does not
specific situations, phases, firms, or foreign

is general.
In Andersen's
view, the model
a
model
that
has
general applicability
Obviously
and
cannot also consider all the kinds of knowledge
consider
markets.
be relevant. It is
learning that might occasionally
likely that ways of learning other than experiential
learning may be important for studies of specific
In his
episodes and situations.
critical
review of our original model,
Forsgren
(2002) argues that three types of non-experiential
- the
of other firms, imitation,
acquisition
learning
and search
may also speed up the internationa
means
that our
lization process. He consequently
model
exaggerates
the
gradual
nature
of
the
process.
Under the heading From determinism tomanagerial

discretion, Petersen et al. (2003) write that the model
we developed
is deterministic,
in 1977
though
the existence
of sub
research has demonstrated
Vahlne_
Given all the points made above, we conclude

that
there is good reason to retain experiential
learning
as a basic mechanism
in the business network view
Of
course,
process.
can
be
with
experiential
learning
complemented
of knowledge
other ways
TRUST AND COMMITMENT BUILDING

does not explicitly include any
original model
in relationships,
dimensions
affective or emotional
it can be argued that they are implicitly
though
present in the concept of knowledge. We now think
that
those
much
has
dimensions
the other,
variables. We
does
relation
causal
not mean
that
that one influences
the other; only

in combination
usually
with
other
do
discretion
agree that managerial
is important, although we think that path depen
to make
search
tend
dence
and problemistic
to
certain
alternatives
managers
prefer
specific
can easily
other ones. We also think that the model
and
discretion
strategic
incorporate
managerial
intentions.
In spite of the critical views
raised above, we
think that empirical studies of the internationaliza
be
on
from empirical
that affective
observation
are indeed important for understanding
of
the relationships
that are a critical component
our model.
an
trust
Third,
plays
important part
realize
process model
on the work
variables
been
dimensions
two
between
one determines
deterministic.
should
written
First,
explicit.
social capital,
trust, and similar concepts, which of course include
both affective and cognitive elements.
Second, we
since
(Morgan
0ohanson
as
development.
Our
discretion
in the internationa
stantial managerial
with
of
firms. We
their
lization
disagree
We do not see a causal
relation
characterization.
between
learning and resource com
experiential
mitment
1417
in recent
research
on
relationship
development
and business
networks
1994)
& Mattsson,
We
the
1987).
recognized
our
of
in
these
model
aspects
including
possibility
in a later note on the Uppsala
&
Hunt,
& Vahlne, 2006).

0ohanson
of Nahapiet
and Ghoshal
Building
(1998),
(1995) and others,
Granovetter
(1985,1992), Madhok
we conclude
that trust is an important ingredient
for successful
of
learning and the development
new
can
also
substitute
for
Trust
knowledge.
a firm lacks the
for instance when
knowledge,
so lets a trusted
and
market
necessary
knowledge
run
its foreign business

(cf. Arenius,
also introduce in this section a definition
of commitment
without
the tautological
relation
to Andersen
that, according
ship to knowledge
middleman
2005). We
the central
role of
demonstrate
In addition,
learning in the process.
experiential
streams have
stressed
research
other
important
that are consistent with our
learning mechanisms
research on learning curves
model.
For example,
(1993), is a problem in the original model (cf.

Hadjikhani, 1997).
Morgan and Hunt (1994) provide definitions of
Winter's
(1982)
evolutionary
theory emphasizes
that
routines
experience
through
developed
and limited path
result in behavioral
continuity
of absorptive
The concept
capacity
dependence.
acterized
tion
process
on experience,
and is
learning based
highlights
one of the fundamental
the field
sub-areas within
and
studies
of learning
(Argote, 1999). Nelson
developed by Cohen and Levinthal (1990) is a third

Like experiential
learning,
absorptive
means
tends
that
development
knowledge
capacity
to be a cumulative
process.
example.
trust. Trust keywords and phrases

include "integ
... of another
rity/' "reliability," and that "the word
can be relied upon."
In short, a sense of trust
an
to
another's
behavior.
implies
ability
predict
is char
Trust also assumes
that human
behavior
ethical
standards.
Trust may
by high
into
if
is
commitment
there
develop
willingness
intentions. Thus trust is a prerequisite
and positive
- a conclusion
that is consistent
for commitment
If
and Hunt.
with the results obtained
by Morgan
it implies
trust does
that
lead to commitment,
a
the relationship,
there is a desire to continue
willingness
to invest
in it, even
recognition
of the

The Uppsala
1418
model
revisited
of making
sacrifices
that
short-term
necessity
for reasons of long-term interest
benefit another
for oneself.
on his 1995 article on interna
In a comment
discusses
(2006)
joint ventures, Madhok
sense to assume either trust or
it makes
His conclusion
opportunism.
implies that there are
reasons for firms to rely on the trustworthiness of
tional
whether
their business
agree,
partners. We
though we
to assume
that it is unrealistic
that trust
believe
or that commitment
or extreme
is permanent,
are either. It is realistic, though, to
opportunism
assume that an extant degree of commitment will
increase when
persist and
a relationship
continuing
interest. While
opportunities
that
partners believe
is in their long-term
are the key factor in
the other side of the coin is

commitments,
not necessarily
One
may
partner
dependency.
one does,
the
and
other
appreciate
everything
some
actions
will
tolerated
the
of
be
for
sake
yet
making
long-term interests (Thorelli, 1986).

to share information,
Trust persuades
people
of
the
(Madhok,
promotes
joint expectations
building
1995), and is especially
important in situations of
uncertainty. Trust is crucial in the early phases of a
and its importance may be permanent

relationship,
efforts to
if the relationship
requires continued
create and exploit opportunities.
Madhok's
(1995)
is that trust "induces
reciprocity and
and
supports Morgan
a
that
"trust
is
Hunt's
conclusions
(1994)
major
of commitment"
determinant
(see also Gounaris,
2005). They go on to say that they see "relationship
as an exchange partner believing
commitment
that
contention
coordinates
action."
This
an ongoing
relationship with another is so impor
as
to
tant
warrant maximum
efforts at maintaining
it." (1994: 23) We agreewith this definition,with
do not believe anything is ever

Commitment
is rather a question
of
maximized.
or less intensive
more
efforts. We
do, however,
the caveat
that we
that "when both

and Hunt
agree with Morgan
and trust - not just one or the other commitment
are present, they produce
outcomes
that promote
and
effectiveness."
(1994: 22)
efficiency, productivity
Mathieu and Zajac (1990) distinguish between
Calculative
calculative
and affective commitment.
commitment
is built on cognitive
assumptions.
include
available
joint opportunities.
Examples
is based on "a generalized
Affective commitment
sense of positive
to the
regard for and attachment
other party" (Gounaris,

ment may
then replace
of knowledge,
absence
commit
In the
cognitive
analysis.
in
if the stakes are high
2005).
Affective
Vahlne
jan Johansonand Jan-Erik
or of switching costs, itmay

terms of opportunities
be rational to act on partially subjective opinions.
the decision
Therefore, given the circumstances,
makers in our model are rational. Clearly, knowledge
In fact, in some situations knowl
is never complete.
edge does not exist until the parties have developed

Gounaris
it together. Nonetheless,
(2005) finds in his
that
calculative
commitment
has
empirical analysis
a negative
on
to
intentions
the
impact
parties'
their
and
and so
preserve
strengthen
relationship,
suggests that firms may want to avoid dependence

and lock-in situations. However,
is an
dependency
a
unavoidable
by-product of beneficial relationship.
We
agree with Madhok

(2006:
7) that "trust
is a costly and time-consuming
process."
(2003) picture the
Buckley, and Ghauri
process as a sequence of phases inwhich the output
of one phase
constitutes
the input of the next.
As the output from each phase consists of either an
increased or a decreased
level of trust, the process is
building
Boersma,
not deterministic.
Commitment
is developed
late
in the process
Boersma
et
al.'s
this
(in
analysis,
occurs after joint venture negotiations).
We believe
that this view applies

to relationships
in general,
as long as firms signal
with or without negotiations,
their intent to commit.
OPPORTUNITY DEVELOPMENT
In our
we assumed
that market
original model
commitment and market knowledge affect "perceived
in turn influence
and risks which
opportunities
commitment
decisions
and
current
activities."
we assumed
"that the com
(1977: 27) Moreover,
to a market
mitment
affects the firm's perceived
and
risk."
(1977: 27) We also stated,
opportunities
or problems
of
is
"knowledge
opportunities
to initiate decisions."
(1977: 27) Despite
our model
has generally been
these assumptions,
reduction
(or
regarded as a risk (or uncertainty)
model.
We
is unavoid
that
risk
think
avoidance)
on a journey
able when
into the
embarking
so
and
stated
that
the
firm's
unknown,
approach
to risk is complicated
and variable. This assertion,
does not imply risk avoidance,
however,
only a
on business
need for risk management.
Research
assumed
consider
networks and entrepreneurship
has made
of our original
able progress since the publication
did
that we probably
model. We
recognize now
dimension
of
the
opportunity
experiential
neglect
learning. Still, we did write:
An
important
the
provides
of experiential
is that it
aspect
knowledge
and
framework
for perceiving
formulating

The Uppsala
model
revisited
the basis
it is
On
of objective
knowledge
opportunities.
to formulate only theoretical
possible
opportunities,
experi
to perceive
it possible
ential knowledge
makes
"concrete"
- to have a
"feeling" about how they fit into
opportunities
present
and
future activities.
(1977:
28)
of opportunity
research has grown
We
believe
find
that
by combining
significantly.
with
the
business
net
from
that
research
ings
on
in
markets
described
the
work
perspective
can
a
we
in
take
forward
section,
step
previous
in
the
discussing opportunities
The
field
process.
Kirzner (1973) offers a starting point. Entrepre

neurial discovery
of opportunities
plays a central
role in his theory of the market process. He argues
exist in the market
because
that opportunities
are
never
in equilibrium.
markets
Opportunity
involves
the hitherto
discovering
recognition
it is a result of entrepreneurs
unknown;
being
for surprises. This view implies
alert and prepared
is associated
with
that opportunity
recognition
ongoing business activities rather than with specific
activities. He also sees entre
opportunity-seeking
of serendipity
preneurial
discovery as an outcome
(Kirzner, 1997).
Following Kirzner, Shane (2000) studied the role
of prior knowledge and showed that it seems to have
a stronger impact on discovery
than the personal
do. Prior knowledge

of individuals
characteristics
some oppor
makes
individuals better at discovering
means
that opportunity-seekers
tunities, which
on what
concentrate
rather
should
they know,
than on what
resource-based
others
view,
on the
say. Similarly, building

Denrell,
Fang, and Winter
(2003) conclude, as Barney (1986) argued, that the
firm does not have any privileged knowledge

about
an
resources
for
external
required
identifying
as
Shane
Therefore,
(2000)
suggests,
opportunity.
the firm should focus its opportunity analysis on its
own
it presumably
has
resources, where
Kirzner
Like
Denrell
(1997),
privileged knowledge.
is
et al. conclude
that identifying opportunities
a
to
be
the
result
of
strategy
serendipitous
likely
internal
characterized
alertness and
by
effort and
luck, combined
with
flexibility.
to the network
view
of
However,
according
access
to
infor
firms
do
have
markets,
privileged
about their relationship partners and their
mation
business network. Moreover,
recogni
opportunity
tion is likely to be an outcome
of ongoing business
to the existing stock
activities that add experience
of knowledge. An important part of that experience
is knowledge
of one's own firm and its resources,
Vahlne
)an Johansonand Jan-Erik
1419
the external resources that are partially

including
available
through network relationships.
and Ray (2003) see opportu
Ardichvili, Cardozo,
as
central element
in their
the
nity development
of
identifica
theory
entrepreneurial
opportunity
tion and development,
and as such it should be its
primary focus: "The need or resource
'recognized'
or 'perceived'
a viable
cannot
business
become
this 'development'"
without
(2003: 106). According
to the network perspective on markets, opportunity
on
is based
interaction
between
development
come
and
partners who build knowledge
together
to trust each other as they commit

themselves
further to the relationship.
that there is
Provided
some basic entrepreneurial
alertness, opportunities
as a consequence
are likely to emerge
of the
two
the
that
partners develop
privileged knowledge
their interaction.
This
may
during
knowledge
allow them to recognize opportunities
that others
do not (Agndal & Chetty, 2007). Furthermore, they
in which
their
may
ways
identify and understand
resources
match
those
their
of
partner
idiosyncratic
(von Hippel,
1988). The opportunity
development
to the internationalization
is
similar
process
pro
cess, and to the relationship
process
development
& Johanson,
It is a
(Ghauri, Hadjikhani,
2005).
matter
of interrelated
of
processes
knowledge
and commitment
to an opportunity.
development
one
be unilateral,
with
firm
process may
about
another
firm's
needs,
learning
capabilities,
an
and network,
markets,
thereby
identifying
The
itmay be bilateral when

opportunity. Alternatively,
two firms in interaction identify an opportunity.
It
even
be
with several firms inter
multilateral,
may
to an idea
acting and increasing their commitment
or opportunity.
In this type of multilateral
oppor
firms that are connected

to
tunity development,
are
the two focal firms
likely to be involved in the
process, a process that may be facilitated by trust.
One
would
network
and
expect
configuration
to influence the type of
relational
embeddedness
or Schumpeterian,
that is
opportunity, Kirznerian
(Andersson, Holm, & Johanson,
2005).
developed
on the network
An important
based
conclusion
et al.
view is that both Kirzner (1997) and Denrell
the role of serendipity.
(2003) exaggerate
Consistent with the view that opportunity
iden
tification is a side-effect of an ongoing
business
we
and
believe
that exploitation
relationship,
because
1991)
(March,
overlap.
Partly
exploration
and partly because of the unavail
of heterogeneity,
be
research may
ability of information, market
unable
to identify many
?????
of the opportunities
that

The Uppsala
1420
model
revisited
can.
As a result, exploitation
breeds
at
for
the
of
least
type
opportunities
exploration,
that are induced by the market. While
exploitation
in
is risky, that risk can be reduced by progressing
insiders
successive commitments.
steps and building
that since opportunity
Shane
concluded
(2000)
with
it is
is
associated
recognition
prior knowledge,
difficult to centralize
the search for opportunities.
small
This
is consistent with Bjerre and Sharma's finding

in
of the knowledge
"that a major
portion
in
firms is indeed
international
local, deposited
our
which
local subsidiaries,"
(2003: 138)
supports
view
will
be
that market-derived
opportunities
of the
discovered
and/or created at the boundary
the necessary
firms where
experience
relationship
the view that subsidiary
exists. It also supports
initiatives are likely to be impor
entrepreneurial
tant for the multinational
(Birkinshaw,
enterprise
1997).
The
see as
two positions,
which we
following
a
are
at
two
of
ends
spectrum,
frequently
being
in opportunity
research: opportunity
mentioned
assumes
that there are opportu
discovery, which
to be recognized
the market
waiting
and
creation, which
(Kirzner, 1973);
opportunity
assumes
is created
that the opportunity
and
realized by one of the firms (Gelbuda,
Starkus,
2003; Schumpeter,
1934;
Zidonis, & Tamasevicius,
is that the process of
Weick,
1995). Our position
nities
in
elements
of
development
opportunity
both discovery and creation (Ardichvili et al., 2003).
to say that either
that it is meaningless
We mean
one is more
important. Furthermore, opportunity
includes
two stages:
our
again
research
between
usually distinguishes
and
Once
recognition
exploitation.
is an
is that opportunity
position
development
interactive process characterized
by gradually and
sequentially
exploitation
trust being
increasing recognition
(learning) and
of an opportunity, with
(commitment)
an important lubricant. It follows then
identification
and
that the process of opportunity
is
in
the
network
very
exploitation
perspective
similar to the internationalization
process and to
the relationship
development
process.
THE DECLINING VALIDITY OF THE

ESTABLISHMENT CHAIN
of the criticism of the internationalization
on the observation
is based
that
process model
we
our
since
built
has
behavior
company
changed
some
are
that
of
this
model.
companies
Examples
times leapfrog over stages in the establishment
Most
Vahlne
chain (Hedlund & Kverneland, 1985); that they

soon
internationalize
after their birth
&
that
the internationa
(Oviatt
1994);
McDougall,
lization process proceeds more rapidly now (Oviatt
start
to
& McDougall,
1994; Zahra, Ireland,& Hitt, 2000);
in which
enter
that the order
companies
no
markets
with
correlates
foreign
longer
psychic
distance
&
Servais,
Also,
(Madsen
1997).
joint
are modes
ventures and strategic alliances
that are
much more commonly used today than previously.
and
Internationalization
has also
through acquisitions
in terms of value
(UN World
grown enormously
Investment Report, 2000).
We do not dispute that these observations
appear
to be inconsistent with the establishment
chain we
The establishment
chain
that
implied
proposed.
start to internationalize
in neighboring
companies
move
markets
and subsequently
further away in
terms of psychic distance,
and also that in each
market companies
begin by using low-commitment
such as a middleman,
and subsequently
modes,
switch to modes
that suggest a stronger commit
such as wholly
Some
owned
subsidiaries.
ment,
researchers who have observed
behavior
company
that deviates
from the establishment
of
chain
used
pattern have occasionally
to criticize our internationaliza
their observations
tion process model.
We
review some of those
in the following paragraphs. We respond

in pointing
out that the establish
first, though,
ment
chain
is not part of the model,
but rather
a summary of the empirical observations
on which
comments
we based
our
theoretical arguments. We
in
for
most
the
argue
part changes
more
to
have
do
with
company behavior
changes
in the international environment
than with changes
in internationalization
mechanisms.
The network
also
inductive
that
view, presented
above, also helps to explain devia
tions from the establishment
chain.
to a review of articles
that were
According
published during the first4 years of this decade in
nine
&
academic
(Andall
important
journals
issues in
Fischer, 2005), one of the most debated
research is whether
the phe
nomena
new ventures
of international
(Oviatt &
McDougall,
1994, 2005) and born globals (Knight
& Cavusgil,
1996) are consistent with our model.
We
think they are, to the extent that most born
are really "born regionals," with
interna
globals
tional activities that do not really span the globe
&
in any significant
fashion
(see also Rugman
the
In fact, many of the companies
Verbeke, 2007).
studied
pattern of which we

model
_The Uppsala
revisited
Johanson & Wiedersheim-Paul,

(see, for example,
or
should
be
born
considered
1975)
regionals
international new ventures.
a well-known
use Sandvik,
multinational
We
as
an
In
1862
steel
company,
production
example.
was
started
in Sandvik
to exploit
the Bessemer
process:
had brought
the
founder of Sandvik, G.R G?ransson,
contacts
to Sweden
from the UK through
he had
process
of a Swedish
he was a general manager
made when
trading
contacts.
The
first
extensive
firm that had
international
The
firm soon went

known
but
bankrupt,
as Sandvik was
formed.
in 1868
now
the company
year, relation
In the same
in Denmark,
and the UK
Norway
ships with representatives
were established,
In 1870 a
and, one year later, in Germany.
in France was
linked to Sandvik. A represen
representative
was taken over at the start. (Vahlne &
tative in Switzerland
Johanson,
2002:
218)
relied on external
resources, not only for

and
marketing
selling abroad, but also for technol
While
Sandvik's
internationaliza
ogy.
subsequent
tion process was
its
fit the
history does
rapid,
Sandvik
establishment
and correlates with what
chain,
we would
in
expect
regard to psychic distance. We
can agree with Oviatt
and McDougall
(1994) on
one point:
new ventures
international
and born
are
As
old
such
firms are
regionals
phenomena.
frequently founded by individuals with previous
international
and have
established
experience
with
foreign companies,
they do not
relationships
create a problem
for our model
2006;
(Coviello,
Reuber & Fischer, 1997). True, the knowledge

and
the relationships might
indeed be in place prior to
the formal founding of the focal firm, but that is a
It is true too
formality of no major
significance.
in place may
those factors already
that having
If a firm starts from scratch
accelerate
the process.
as we
the processes
of
above,
though,
argued
commitment will take time.
learning and building
A wealth
of research,
and
including
Nahapiet
Ghoshal
(1998), Granovetter
(1985), and Ring and
van de Ven
is
(1992),
supports this point. There
in our model
that indicates that interna
nothing
cannot be done quickly. In fact it
tional expansion
can, as long as there is sufficient time for learning
and
(Vahlne & Johanson,

relationship
building
contextual
many
Although
aspects have
our observations,
since we made
almost
changed
50 years ago, the ways
in which
human
beings
not drastically
learn and make
decisions
have
since. Moreover,
changed
experiential
learning
2002).
and
building
prerequisites
trust and commitment,

for developing
business,
the basic
hence
and

Vahlne_
1421
for internationalization,
certainly have not chan
to
Partners
have
still
get involved in some sort
ged.
of exchange
that will create experience,
and while
these exchanges might be performed more quickly
today, it still takes time, and firms still have to face
the risk of failure.
We do believe
the
that the correlation between
a company
enters foreign markets
order in which
and psychic distance has weakened.

Some companies
and individuals have acquired more general knowl
this
and perhaps
edge of foreign environments,
in their ability
instils in them greater confidence
to cope with psychic distance. This does not mean
is unimportant.
that psychic
distance
However,
the relationship
and
between market
order
entry
at
distance
the
of
the
decision
level
psychic
applies
maker
& Vahlne, 2003; Sousa & Bradley,

0ohanson
at
not
that
of the firm. Johanson and Vahlne
2006),
some
offer
The chairman
of a
(2003)
examples.
was
a
an
Swedish
at
company
visiting professor
American
company
presence
for several years before that

university
a
its first attempt at establishing
made
abroad by entering into a joint venture
with the university (2003: 87). The president of the

same
knew someone
from Poland who
company
worked
with
other Swedish
for
companies
to
he
recruited
him
and
years (2003: 88),
many
establish
the firm's next subsidiary
in Poland.
In
had
both
instances
short psychic distance helped

the
and
recognize
parties
implement
opportunities.
The impact of psychic distance on internationaliza
tion may well be indirect, but this does not mean

that it has no effect on relationship building or on
the processes
of learning, trust building,
and so
on that occur in relationships.
The
domestic
relevant
unit
not be the most

market may
in terms of psychic
distance.
The
is more
distance
cultural blocs
to, and between,
cases
in many
relevant
(Barkema & Drogendijk,
There may
be
cultural
2007;
Shenkar,
2001).
a country that make
it logical
differences within
parts of the country as entirely different

with different psychic distances.
Indeed,
the concept of the liability of outsidership
does not
necessarily refer to countries. It is a firm-level concept
thatmay relate to a network within a country, or to a
to view
markets
wider
We
region (cf. Rugman Sc Verbeke, 2007).

an inter
think that Autio
(2005: 12) makes
he argues
that our original
esting point when
constraints
to internationaliza
model
emphasizes
tion whereas
Oviatt
and McDougall's
model
we
factors.
While
make
the
emphasizes
enabling
our
barriers
to internationalization
in
explicit

The Uppsala
1422
model
revisited
especially psychic distance, our most basic

"enabler," that is, the company and its firm-specific
is implicit. Oviatt
and McDougall
advantages,
we
on the factors
more
than
do
place
emphasis
model,
that make
do
possible. We
in our model
the presence of one or more
is typical of explanations
of
entrepreneurs, which
new ventures
and born
international
regionals,
include
and exploit opportu

may
identify, develop,
so
are
and
Our
nities,
obviously
indispensable.
article
assumed
original
corporate entrepreneurship
(Johanson & Vahlne,
1977), which we explicitly
who
in a
explored
Vahlne,
1993).
authors
Some
subsequent
article
(Johanson
&
the role played

emphasize
by
- for exam
"enablers" in rapid internationalization
(Moen & Servais,
ple, "boldness in decision-making"
the surface, our decision-makers,
who
2002). On
business,
perhaps want to expand their company's
in our 1977
do not appear to be risk takers. However,
article, we state "it is assumed that the firm strives to
its long-term
to growth
equivalent
to keep risk-taking at
we do not view our
increase
nationalization
model
is assumed to be
profit, which
... The firm is,
though, striving
a low level." (1977: 27) Thus
model
and
as essentially
the
rapid inter
different on this
or at least suc
point. Furthermore, entrepreneurs,

cessful ones, supposedly calculate risks carefully and
risks. Perhaps the
try to avoid taking unnecessary
firms
to
take
of
bigger risks is higher
propensity
some
cases
in
& Johanson, 2002:
Vahlne
(cf.
today
in the case
221,
itwould
However,
and the
of venture
capitalists
of IT-consultant
companies).
appear that neither we nor other
about the propensity

researchers really know much
for taking risks either in the past or now. Clearly,
at
those
which
like
Sandvik,
entrepreneurs
were
we
risks
mentioned
taking
previously,
when
they
acted
on
opportunities
in
foreign
markets.
model
does specifically
Oviatt and McDougall's
to the choice of
it comes
differ from ours when
modes. We have observed that companies
gradually
enter into what could be seen as more
risky, but
and controllable,
also potentially more beneficial
and
of operation.
Increased
modes
knowledge
and
commitment
make
such risk taking desirable
behind
the
On
other
hand,
entrepreneurs
possible.
are expected
new ventures
to opti
international
on
on constraints
mize mode
choice depending
resources
We
believe
and outside
opportunities.
do use
that this may be true. Today's
companies
we
see
not
a wider
do
of
modes,
range
although
Vahlne
more
often
"optimization"
going on
said that environmental
in a real sense.
such
It is
as
changes,
and
rapid
technological
change,
to
force
into
enter
alli
deregulation,
companies
ances and joint ventures, because
no single com
owns
resources
to exploit
all
the
pany
required
and
markets
larger
continuously
changing
If
&
that
is
the
case,
(Contractor
Lorange, 2002).
not use
if their
those modes
may
companies
globalization,
resources are sufficiently large to allow them to

In fact, companies
activities.
rely on internalized
have frequently switched from relying on an agent
resources - to an
that is, relying on external
internal operational mode when

their performance
that possible
for
and there are prospects
and better efficiency. We
do not view
growth
or choice
of modes
such as joint
leapfrogging
our establishment
chain did not
ventures, which
makes
as when we
for our model,
predict, as problematic
built it neither was common
the
Swedish
among
we
were
no
at
which
We
companies
looking.
a
mode
the
indicator
consider
reliable
of
longer
the level of commitment.

Contextual
aspects often
a
more
role.
For
important
play
example, Hedlund
and Kverneland
studied
Swedish
(1985)
companies
in Japan that had
to forgo the wholly
owned
mode
because
the
structure
the
of
subsidiary
in
which
made
it
Japanese
industry,
they were,
a
was
to
have
who
local
necessary
partner,
already
in local networks.
well established
As we have noted, acquisitions
have now become
the primary mode of entry in terms of value. This is
a way, of course, for a resource-rich
to
company
a
a
a
in
in
network
quickly buy itself
position
as
to
incre
foreign market,
opposed
proceeding
in smaller
mentally
era of globalization
in the
less risky steps. However,
other motives may play a role.
The focal company may want to gain access to an
or some other
of technology
interesting piece
resource, or itmay want to reduce the number of
competitors. We have argued that, in accordance
our model,
an acquisition
more
with
is much
if it is preceded
likely to be successful
by some
kind of exchange
between
the acquirer
and the
In
firms
have
such
acquiree.
exchanges
already
a body of knowledge
about each other,
acquired
some level of com
and have perhaps
established
mitment
1997).
(Andersson, Johanson, & Vahlne,
the
Without
such a previous
parties
relationship
to learn about
will have
each other after the
for post-acquisition
integration to pro
acquisition
ceed. This process may include some conflicts, and
an
will take time (Ivarsson & Vahlne, 2002). Hence

_The Uppsala
model
revisited
a way
of rapidly
is not necessary
a
a
on
market.
foreign
building
position
It is clear that one reason for the empirically
is that the business
driven criticism of our model
from
is different today
how itwas when we
world
acquisition
Events
observed
patterns of internationalization.
move more quickly and assume somewhat different
one constant
in coping with
forms. Nonetheless,
uncertainty
create or
exploit
remains:
strengthen
firms need
to learn, and
in order
relationships
to
to
opportunities.
A BUSINESS NETWORK MODEL OF THE

INTERNATIONALIZATION PROCESS
our revised
In light of all of this, we have developed
in the following way. The firm is embedded
model
in an enabling, and at the same time constraining,
in a
business network that includes actors engaged
Inter
wide variety of interdependent
relationships.
of firm
nationalization
is seen as the outcome
actions to strengthen network positions by what is
referred to as improving or protecting
traditionally
are
in the market.
their position
As networks
the
distinction
and
between
borderless,
entry
in the foreign market
is less relevant,
expansion
given the network context of the revised model.
The traditional view of entry - that is, overcoming
various barriers - is becoming
less important than
a
to strengthen
undertaken
internationalizing
firm's position
in the network (Johanson & Vahlne,
2003). As a result, we claim that existing business
it possible
to
because
they make
relationships,
a
and
have
consider
identify
exploit opportunities,
able impact on the particular geographical
market
a firm will decide
to enter, and on which mode
to use. This
is also consistent
claim
with
the
is contingent
business network view, where much
on existing relationships
& Snehota,
(H?kansson
and commitment
take
1995).
Learning
building
our 2003 article
in relationships.
place
Although
did not highlight
that particular point, this way
of thinking about internationalization
the
places
at the forefront.
identification
of opportunities
we mention
in our
While
1977
article
that
may lead to the identifica
this aspect has largely been
it has been
assumed
that
neglected.
Primarily,
reducing uncertainty has to do with the differences
between
the culture and institutions of the home
and those of the foreign country. We
country
now have
reason
to believe
that learning
and
are strongly related to identifying
commitment
experiential
knowledge
tion of opportunities,
and
exploiting
opportunities
(Johanson
& Vahlne,

Vahlne__^_
1423
some
are not
As
2006).
types of knowledge
to everyone,
accessible
and are instead confined
to network
to
insiders, a strong commitment
on
to
allows
firms
build
their
partners
respective
it possible
for
of knowledge,
making
to
We
them
discover and/or create opportunities.
that
is contingent
believe
on developing
more
than on over
opportunities
bodies
uncertainties,
coming
institutional
conditions
(Eriksson et al., 1997).
for example
concerning
in the foreign market
A reviewer of this paper has made us aware of the

constructed
that was
by
process"
to
describe
the
(2001)
process
entrepre
Sarasvathy
neurs
a new
to launch
follow as they prepare
"effectuation
to her, the effectuation pro

company. According
cess is "useful in understanding
and dealing with
action.
true
of
human
This
is especially
spheres
when
with
the
uncertainties
of
future
dealing
and problems
of existence."
(2001:
phenomena
we
As
have
250)
argued,
resembles entrepreneurship
and may be described
as corporate entrepreneurship.
too is characterized
by high degrees of uncertainty.
The effectuation
has much
in common
process
our
with
model,
process
a
similar environmental
characteristics,
including
of available
limited number
incremental
options,
on cooperative
and an emphasis
development,
strategies (2001: 251). However, while

Sarasvathy
views the actors and their characteristics
as impor
our
not
model
does
include this point at all.
tant,
We do argue, however, that the actors are implicitly
to the extent that they are the
present in our model
carriers of (tacit) knowledge,

trust, commitment,
and network
relations. We
therefore consider
the
effectuation process as developed
to
by Sarasvathy
be fully consistent with our model.
In addition, our
model
underlines
the fact that internationalization
in common with entrepreneurship.
has much
As in the 1977 version model,
the 2009 business
network model
consists of two sets of variables:
as the left-hand
state variables
side of
(shown
as the
variables
(shown
change
or
side
of
stock
and
2),
flow,
right-hand
Figure
are relevant to both sides in a relationship.
which
The variables
affect each other, the current state
an
impact on change, and vice versa. The
having
model
thus depicts dynamic, cumulative
processes
as well
as trust and commitment
of learning,
An increased
level of knowledge
may
building.
a positive
or a negative
thus have
impact on
Figure
building
2)
and
trust and
commitment.
In an
extreme

The Uppsala
1424
model
revisited
Vahlne
As
State
Relationship
commitment
Knowledge
Opportunities
decisions
activities
Trust-building
Figure 2 The business network internationalizationprocess

model (the 2009 version).
- which
may actually not be so rare

the firm and/or the firm on the opposite
side of the
or
in
the
fact
reduce
commitment
relationship may
even terminate
the relationship.
These processes
can occur on both sides of a mutual
relationship
case
scenario
and at all points

firm is a member.
in the network
in which
the focal
the basic structure of the model

is the
Although
same as the one we built in 1977, we have made
some slight changes. We have added "recognition
to the "knowledge"
as
of opportunities"
concept,
seen in the upper left-hand box of the model
(see
a subset of
constitute
Figure 2). Opportunities
this variable, we intend to

knowledge.
By adding
indicate that we consider opportunities
to be the
most
important element of the body of knowledge
that drives the process. Other
important compo
nents
of knowledge
include needs,
capabilities,
of directly or indirectly
strategies, and networks
contexts. The
firms in their institutional
state variable
is labeled "network position."
This variable was
identified in the original model
as "market commitment."
now assume
We
that
related
second
process is pursued within a
are characterized
network. Relationships
by specific
levels of knowledge,
that
trust, and commitment
be
distributed
the
may
among
parties
unevenly
involved, and hence
they may differ in how they
Nonethe
successful internationalization.
promote
as
seen
is
if
the
less,
process
potentially
rewarding,
a desirable outcome
of learning, trust and commit
ment
building will be that the focal firm enjoys

and a network position.
partnership
play
experiential
learning, although we still regard that
to be the most
important kind of learning.
The
and
of the
speed,
intensity,
efficiency
of learning,
and
processes
creating
knowledge,
Creating
position
an
lead to
role, and
important
increased knowledge,
Our
trust, and commitment.
use of the term "learning"
is at a higher level of
abstraction:
that is, we think of it as more
than
Learning
Network
to
we
the change
the
variables,
changed
label
of
"current
to
activities"
original
"learning,
to make
the outcome
creating, and trust-building"
of current activities more
explicit. The concept of
current activities,
or operations,
in the original
model was intended to indicate that regular daily
Change
building trust depend on the existing body of

and particu
trust, and commitment,
knowledge,
on
extent
to
the
which
the
larly
partners find given
We
have
made
the affec
opportunities
appealing.
tive dimension
of trust-building more explicit than
as we believe
in our earlier model,
a
it deserves
similar to
we
In addition,
which
creation,
sion, because we
status
that of the cognitive dimension.

want
to highlight
opportunity
is a knowledge-producing
dimen
believe
that developing
opportu
of any
part
relationship.
Furthermore, high levels of knowledge,
trust, and
in a relationship
a more
commitment
in
result
efficient creative process. The interplay between the
of learning, creating opportunities,
and
processes
trust
is described well by Nahapiet
and
building
nities
is
critical
Ghoshal (1998), although theyuse the concepts of

capital and social capital.
Finally, the other change variable,
"relationship
commitment
decisions," has been adapted from the
intellectual
to clarify
original model. We added "relationship"
or to networks
that commitment
is to relationships
of relationships. This variable
implies that the focal
firm decides either to increase or decrease
the level
of commitment
to one or several relationships
in its
In an extreme case scenario, this decision

itself only on a psychological
manifest
level.
may
the
decision
will
be
visible
however,
Usually,
in entry modes,
the size of
through
changes
network.
investments, organizational
changes, and definitely
in the level of dependence.
A change
in commit
ment will either strengthen or weaken
the relation
ship. From a network point of view, there are two
to the
kinds of decision
regarding the commitment
to
be
develop
relationship.
They may primarily
new
cases businesses,
in most
in
relationships,
others they may be about building bridges to new
networks
1992).
and
filling
Alternatively,
structural
they may

holes
(cf. Burt,
to protect or
be
_The Uppsala
model
revisited
of strategic
firm's existing network
a
For
few
years ago, Volvo
example,
relationships.
that some of its important
Swedish
demanded
car
with
German
suppliers develop
relationships
support
the
in order to demonstrate
that Volvo's
same
desirable qualities and skills
suppliers had the
as those of its German
competitors.
of the revised model
There are some implications
manufacturers
for the internationalization

tionalization
depends on
network. We thus expect
based on its relationships
are committed
to
who
process. First, interna

a firm's relationships
and
the focal firm to go abroad
with
important partners
the business
developing
These
partners may
through
be at home or abroad. The focal firm is also likely
if that partner
to follow a partner abroad
firm
in one or more
position
are
reasons
two
possible
foreign
is the likelihood
One
for such foreign expansion.
As
of finding interesting business
opportunities.
are
we have
of
bases
said, partner
knowledge
has
a valuable
network
countries.
There
are therefore
also
and
interrelated,
indirectly
of the network. Relying
related to other members
on a related knowledge
base, the focal firm may
itmay be able
thus enter networks abroad, where
to identify and exploit opportunities. We reiterate:
are based not on
trust and commitment
mutual
formal agreements but on a common history of at

least minimally
satisfactory, if not successful, joint
business experiences. A second reason to go abroad
a relationship
occurs when
is going
partner who
or
firm to
is
wants
the
focal
abroad,
abroad,
already
the firm
follow. By following the partner abroad,
to
the
its commitment
demonstrates
relationship.
will an internationalizing
Where
company
go?
The general answer is: where the focal firm and its
in
see opportunities.
A foreign market
partners
is another
the partner has a strong position
possibility. This is not only a matter of the first step
same process may
from
continue
The
abroad.
on
of
the
actions
to market,
market
depending
the focal firm's partners. If the firm has no valuable
itmay go where itmight be easy
partners, however,
to connect with a new firm that already has a

Vahlne_
How might the process start? Given the business

network model's
process view, any determination
of a starting point will be arbitrary (cf. Coviello,
2006; Reuber & Fischer, 1997; Wiedersheim-Paul,
of whether we
Olson, & Welch,
1978). Regardless
consider
the starting point to be the founding of
the company,
the first international market entry,
or the establishment
our
of a specific relationship,
model
look for
should
implies that we
in the state variables,
such as knowl
explanations
to the firm's specific
edge, trust, or commitment
For example,
the focal firm may
relationships.
some
of
its
connections
existing
exploit
by using
process
the trust that a partner has established with another

party or parties (Larson, 1992). Increased knowledge
may cause either the focal firm or its partner to
become
dissatisfied with
the relationship.
Either
its commitment
firm may then decide to decrease
or even end the relationship.
to
in an earlier paper
We
that access
argued
to large compa
is of more
relevance
information
is therefore more
nies, and that the Uppsala model
to
smaller
firms
(Johanson & Vahlne,
applicable
now
are
We
certain
less
about this observa
1990).
is highly context specific. The

tion, as knowledge
to large and
model
should be equally
applicable
small firms (Barkema et al., 1996; Steen & Liesch,
be better
firms may,
however,
2007).
Large
a
a
in
in
firm
market
informed when
they acquire
they are already active. In such acquisitions,
a matter
are not unusual,
it is more
of
size.
also
than
of
Such
experience
experience may
explain why international new ventures may grow
which
which
very rapidly: The founding

entrepreneur
and relationships
has access to knowledge
the internationalization.
for identification
and exploitation
of opportunities.
already
prior to
SUGGESTED RESEARCH AGENDA
which
it
For example,
in the foreign market.
position
such as an agent or a
may link itself to a middleman
the focal firm has
distributor.
Eventually, when
it may
with
established
customers,
relationships
own
its
establish
and
middleman
the
bypass
will
facilitate
distance
Short
psychic
subsidiary.
of relation
and development
the establishment
a
condition
insufficient
but
is
which
necessary
ships,
1425
identify here but a few of the exciting research

issues that follow from our revised internationaliza
tion process model
and are well worth exploring.
unified
As a step towards formulating a more
We
of the emergence and growth of multi

explanation
national
enterprise, it could prove both interesting
the
and important to look for similarities between
internalization
1976;
theory (Buckley & Casson,
and the eclectic
1982; Rugman,
Hennart,
1981)
1980) on one hand, and the
(Dunning,
paradigm
network model
process on the other. The process of changing modes
of operation is also frequently a matter of internaliza
tion or externalization. The version we propose now
firm
that an internationalizing
implicitly assumes
business

_The Uppsala
1426
has
model
revisited
The
to one or more
specific advantages.
focused explicitly on
of our model
foruncertainty
specificity as an explanation
access
original
location
version
2004:
location
Verbeke,
12). While
more
we
now
attention
does
matter,
pay
specificity
and com
to relational
knowledge,
shortcomings,
as reasons for uncertainty
mitment
and, indirectly,
for location specificity. This implies that established
offer a firm-specific advantage worthy
relationships
&
(Rugman
of attention. We observe that Dunning's

(1997) OLI
to
include strategic
paradigm has also been revised
alliances
and, more
recently, even broad network
(Dunning & Lundan, 2008). We have

relationships
& Vahlne,
elsewhere
1990) that
Qohanson
argued
to be addressed
two large issues need
when
the
and
to
eclectic
the
merge
paradigm
attempting
of
the
eclectic
version
The
model.
original
Uppsala
was
rested on the
rather static, and
paradigm
assumption of strong rationality, whereas

is dynamic and assumes bounded
the Uppsala model
a
that has now, fortunately,
difference
rationality,
with
the latest extension of the
largely disappeared
behavioral
OLI paradigm (Dunning & Lundan, 2008). To the
are based on
firm-specific advantages
distance
and RBV thinking, the conceptual
between the OLI paradigm and our business network
is still further reduced.
model of internationalization
seems to lie primarily in
At this point the problem
extent
that
Penrose
to the market
that
environment
a major
and
about
issue,
which RBV thinking says little. This is the core issue
in our original model,
and it is even more important
in our new model, which we see as an extension of
the "unknowable market" of Penrose and the RBV
the relationship
Penrose did not
consider
is
The remaining conceptual
problem
perspective.
to the internalization model. While
related more
firm boundaries,
focuses on explaining
that model
our model
focuses on the processes driving contin
and
uous
of those boundaries.
Buckley
change
the
Casson
address
issue,
(1998)
evolving boundary
from their discussion whether
though it is unclear
theory or
they see it as falling within internalization
separate
is now
from it. In any case, organizational

both
lines of
within
discussed
learning
research
(Benito& Tomassen, 2003; Kay, 2005; Pitelis,2007).
the
two studies
that combine
highlight
inter
with
the
of
concept
firm-specific advantages
nationalization
(1976)
process. Sanden and Vahlne
of an advantage
the
concept
cycle to
developed
some
how
describe
advantages
firm-specific
increase over time while others decrease. The cycle
is initiated by an internal firm-specific advantage
in
to develop
that allows the MNE
strong positions
We
Vahlne
Janjohanson and jan-Erik
constitute
foreign markets. These will subsequently
In a
main
the MNE's
firm-specific advantages.
recent
of
empirical
study
a model
in which
Hsu and Pereira (2008) develop
a
has
direct
impact on
firm-specific advantage
and an indirect
impact on
In
addition,
learning
organizational
performance.
on
the effect of internationalization
moderates
Both of these studies offer opportu

performance.
the two
nities for fruitful research that combines
them.
without
really integrating
approaches
Second, as we have argued, business relationships
a
firm with
an
extended
and
unique
it only partially
controls.
the potential
of such an
Furthermore,
exploiting
extended resource base requires that the firm's own
resources be coordinated
with
those of one or
provide
resource
base
that
several of its partners. The goal of business network

of a set of rela
is joint productivity
is
to implement
which
difficult
tionship partners,
coordination
as it involves
the partners' activities

coordinating
in diff
When
2006).
(Hohenthal,
partners operate
network
erent countries,
business
cross-country
coordination
is also needed,
and is more difficult
still. How hard this will be to achieve may vary
the actors. This
with the psychic distance between
interesting sub-issues, includ
brings to mind many
means
and the possible
of
the
coordination
ing
between
allocation
of coordination
responsibilities
units
1973;
(Galbraith,
organizational
designated
1979). We expect that these units will

Mintzberg,
in
the strategic partners' home countries.
be located
are
business net
that international
We
convinced
an
will become
coordination
work
increasingly
with
strong implications
important phenomenon
as well as for interna
for firm-specific advantage
tionalization.
Third, the subtitle of this paper, From liability of
foreignness to liability ofoutsidership, refers to the fact
in inter
and opportunities
that a firm's problems
are becoming
of
less a matter
national
business
one of relationship
and more
country-specificity
For example,
and
network-specificity.
specificity
the problems
associated with foreign market entry
are largely the same as those associated with entry
into any other market. The firm does not know who
actors are, or how they are related to
the business
it already enjoys relationships

each other, unless
with one or several actors in that market. There is a
the
that may
for research
need
explain when
in
main
is
the
of
problem
foreignness
liability
of
and
when
the
market
liability
entry
foreign
into
is the primary difficulty. Research
outsidership

The Uppsala
model
revisited
Vahlne
1427
in which
the two approaches
be
ways
might
also be interesting. For example,
combined would
we suggest that studies of the impact of psychic
on
the formation
distance
and deepening
of
relationships,
as vehicles
as of the role of relationships

about
and
institutional
learning
as well
in
cultural
conditions, would both be worthwhile.

of internationaliza
The business network model
to study both resource-seeking
tion can be used
and market-seeking
Pyndt and
Pedersen
(2006) found that at the resource-seeking
of learning
to
lead
building
in
context
the
of
exploration
exploitation
As our business
activities.
upstream
expanding
is symmetrical in terms of suppliers
network model
it can be used to analyze
interna
and customers,
end of the value
and
trust
and
and
chain
the dynamics
commitment
and supply
sourcing
there is considerable
tional
While
chain
chain
development.
research on global
in
little of it appears
development,
supply
business
international
journals compared with the
internationa
number of studies on market-seeking
two articles
In recent years, however,
lization.
on international
in
have
been
published
sourcing
JIBS (Griffith& Myers, 2005; Murray, Kotabe, &
articles the authors study the

and
of
global
supply relationships
performance
The
the
inter
of
alliance-based
sourcing.
dynamics
is an increas
nationalization
of supply networks
in
international
business
ingly important problem
can address.
that our model
network view of the firm as an
Our business
Zhou,
2005).
In both
unit rather than a production

unit, in
exchange
contrast to received microeconomic
theory, offers
new opportunities
to analyze the internationaliza
as
that operate
tion of companies
fundamentally
networks. A rapidly growing
firms are built around a brand,
number
a design,
of modern
or patented
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ABOUT THE AUTHORS

is Professor
Jan Johanson
(FX., Uppsala University)
Emeritus at Uppsala University, Sweden. His research
Accepted
by Alain
Verbeke, Area Editor, 4 November
2008.
interests include internationalization

processes and
business networks. He is a native of Sweden and can
be reached at jan.johans?n@fek.uu.se.
is
Jan-Erik Vahlne
(Ph.D., Uppsala
University)
a Professor
at Gothenburg
Sweden.
University,
His research interests include internationalization
and globalization
He
is a native
of
processes.
Sweden
and can be reached
at jan-erik.vahlne?
handels.gu.se.
This paper has been with the authors for four revisions.


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The Uppsala internationalization process model revisited: From liability of Foreignness to

This content downloaded from 31.221.97.98 on Tue, 4 Mar 2014 15:02:02 PM

foreign market entry;

is also different in some respects.

Online publication date: 21 May 2009

insider ship in relevant network(s)

This content downloaded from 31.221.97.98 on Tue, 4 Mar 2014 15:02:02 PM

for learning and for building trust and commitment,

THE 1977 MODEL

1975; Forsgren & Kinch,

Johanson, 1966; Nellbeck,

1967). They would

formalize their entries through deals

in the foreign market to

(1966), Cyert and March

does not specify the form that increased

that learning and commitment

in psychic distance terms (Johanson & Wiedersheim

(1963), and Aharoni

(1966). The underlying

and change aspects (Johanson& Vahlne, 1977: 26).

journal of International Business Studies

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that the interna

THE FIRM INTHE MARKET ENVIRONMENT:

of studies have demonstrated

of ongoing network processes. Their find

lization strategy (Welch & Welch,

Chen, 1998), the first step abroad (Ellis, 2000),

(Chetty & Blankenburg

the early phase

jan johanson and Jan-Erik

Our aim differs from that of Coviello

goal is to develop a more general business network

that the received

theories of markets and

(the IMP project) thatwas carried out in the late

1970s and early 1980s by researchers from Sweden

1982; Turnbull & Valla, 1986). Work done during

the project demonstrated

(Bonaccorsi, 1992; Erramilli& Rao, 1990;Majkg?rd

tially (Kelley & Thibaut, 1978). The result is the

Journalof International Business Studies

This content downloaded from 31.221.97.98 on Tue, 4 Mar 2014 15:02:02 PM

of power over one

those partners also have other

its own horizon.

Thus a network of business

Penrose (1966) and the resource-based

Journalof International Business Studies

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reference to other firms, we define a firm on the

network is an "outsider." If a firm attempts to enter

foreign market, and so might ask the focal firm to

through efforts by the focal firm.

Janjohanson and Jan-Erik

these activities, which

KNOWLEDGE AND LEARNING

Our original model

1991; Luo & Peng, 1999).

In a study based on the network view, Axelsson

about modes of entry, but should instead be studied

identified only by the actions of the entering firm,

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