-

c PROCESS
LElF MELIN
Strategic Management Journal, Vol. 13, 99-1 18 (1992)

INTERNATIONALIZATION AS A STRATEGY

Department of Management and Economics, Link6ping University, Linkoping,

Sweden

This paper critically reviews the field of international business research. The field is
characterized by considerable intellectual diverse, where theoretical focus is blurred by the
multidisciplinary nature of the field. The review focuses on three themes that help shed
light on internationalization as a strategy process; stage models of internationalization,
studies of the link between strategy and s m t u r e in MNCS, and studies of administrative
processes in MNCs and recent organizational models for MNCs. Sequential stages models
are too deterministic and stress only early stages of internationalization. Conceptual
contributionsfrom research on structures following strategies have a very static character.
Research on management processes in MNCs have a questionable empirical base and
normative bent. Three key themes for future research on internationalization as a process
are suggested. These themes, dealing with major omirsions and weaknesses identified in the
review, are: the study of acquisition processes and internationalization,the study of dynamic
processes in MNCs, and the study of internationalization processes in their outer contexts.

INTRODUCTION international business will help to clarify the

choice of subfields and themes in this review.
The corpus of international business research As Toyne (1989) stated, there seems to be a
produced over the last three decades reveals a lack of consensus about the conceptual domain
field characterized by considerable intellectual of international business. Theoretical focus is
diversity drawing on a wide span of disciplines. blurred by the multidisciplinary nature of the
The purpose of the paper is to review that corpus field. Compare, for instance the content of
and explore the meaning of internationalization articles published in a single volume of the
as a process. Key themes for future research on Journal of International Business Studies (JIBS,
internationalization as a strategy process are 1991): analysis of information content in multi-
suggested. Our review is based on an extensive national advertisements; theories underlying
reading of works categorized as international Japanese lifetime employment; measurement of
business research. The review task includes performance in international joint ventures;
an ambition to discover and analyze certain nontariff barriers for foreign investments; and
underlying assumptions concerning theoretical factors related to expatriate and spouse repatri-
and methodological issues. ation adjustment. This not only demonstrates
A brief characterization of the broad field of diversity but indicates a natural lack of a common
theoretical base. To more systematically illustrate
the broad scope of research on international
Key words: Internationalization, strategy process,
multinational corporation, stage models, global inte- business, we have categorized all articles pub-
gration, local responsiveness, acquisition, differen- lished in the last three full volumes of JIBS
tiation, longitudinal approach (1989-91). Here are the seven mosr frequent

0143-2O95/92/120$15 .OO
@ 1992 by John Wiley & Sons, Ltd.
100 L. Melzn

areas of international business published in the international business research are cataloged
three volumes of JIBS (with a total of 76 articles): (exceptions include the international finance and
banking theme). These key themes are structured
-Finance and banking, (9 articles)
along two lines: the type of activity in focus and
-Cross-cultural aspects, (8 articles)
whether the activities are intraorganizational or
-International joint ventures, (7 articles)
interorganizational. Figure 1 illustrates that the
-Human resources (including expatriates), (6
research on international business deals with
articles)
organizational activities across borders. A large
-Foreign direct investments (5 articles)
proportion of the work focuses on the intraorgan-
-Coordination and control in MNCs (5 articles)
izational activities of large firms, with the obvious
-Host government relationships (3 articles)
intent to explain and characterize the structural
These seven areas represent alternative theor- form of the typical multinational corporation
etical frameworks of international business (MNC). In fact, research on strategy, structure
research, each with fundamental differences. In and administrative processes in MNCs forms
addition, few empirical studies reported in these the basis for a named subfield, international
volumes were founded on longitudinal studies management (IM) .
and/or dynamic theory, i.e., the process dimen- Since a brief paper cannot fairly review
sion of internationalization was weakly rep- the whole field of international business and
resented. Most articles were based on cross- management, we will limit our discussion to
sectional methods and static models. International three themes (boxes A, B and E in Figure 1)
business research as a whole does not have the that help shed light on internationalization as a
preponderance of U.S. researchers found in strategy process:
many other subfields of management research.
-stage models of internationalization
This may help to explain the greater methodolog-
-studies of the link between strategy and
ical diversity to be found in the field of
structure in MNCs
international business.
-studies of administrative processes in MNCs
The field of international business has its roots
and recent organizational models for MNCs.
in international economics, including a number
of theories on international trade, such as the We restrict ourselves to research themes that
comparative advantage of nations. However, either address the process dimension of the
from the 1960s onward we find other research international enterprise’s formation and continu-
themes. In Figure 1, most major key themes in ance (Toyne, 1989) or are kindred to this

TRUlSXtiions

Figure 1. The field of international business-activities across borders

 Internationalization as a Strategy Process 101

dimension. Consequently, themes rooted in eco- more, the strategic management field is still
nomics (such as the eclectic theory with the dominated by cross-sectional research that ‘pro-
internalization theory, Dunning, 1981; Buckley, ceeds from a distance, with a remote researcher
1988) are excluded because of their static view gathering data from organizations he knows
of the multinational enterprise. Content-oriented almost nothing about’ (Miller and Friesen, 1982:
research on international strategy is ruled out 1014). At the same time, there seems to be
for the same reason. Our focus on the firm increasing consensus among researchers that
level automatically excludes such themes as the longitudinal research would enable a better
competitiveness of nations (Porter, 1990). understanding of organizations. According to
The paper has five sections. In the first section Huff and Reger (1987: 227) ... there is danger
the significanceand certain methodological conse- in believing that statistically rigorous, narrowly
quences of internationalization as a strategy focused studies are superior to the rich, compli-
process is discussed. The three following sections cated understanding that results from careful
contain a review of major contributions and the understanding of a few organizations.
underlying assumptions and weaknesses of the In sum, there remains a considerable need for
three selected themes of internationalization: research that is responsive to the longitudinal
stage models, strategy-structure relationships, character of internationalizationas a development
and management processes in MNCs. The con- process through time (Welch and Luostarinen,
cluding section suggests three key themes and 1988). However, different meanings of develop-
questions for future research. ment processes can be identified, depending on
the methodological approach used to reveal
the process. In fact, the longitudinal approach
INTERNATIONALIZATION AS A incorporates at least four different approaches
STRATEGY PROCESS (graphically illustrated in Figure 2):
-In type A, process is a time-series of detached
Strategy making is about changing perspectives critical events, or states, e.g., structural or
and/or positions (Mintzberg, 1987). economic. Most management studies that include
Internationalization-the process of increasing the time dimension in their explanatory models
involvement in international operations across seem to use this approach, analyzing situations
borders (Welch and Luostarinen, 1988-m- disjointed in time. Typical are the large number of
prise both changed perspectives and changed studies of the correspondence between strategy,
positions. Thus internationalization is a major structure, and performance. Recent illustrations
dimension of the ongoing strategy process of include a study by Gomez-Mejia (1992) who
most business firms. The strategy process deter- related corporate performance during a 5-year
mines the ongoing development and change in period to changed strategies, and a study by
the international firm in terms of scope, business Habib and Victor (1991) where the fit between
idea, action orientation, organizing principles, strategy and structure in MNCs was related to
nature of managerial work, dominating values performance of the two following years. We see
and converging norms. The internationalization that the process dimension is weakly developed
dimension is related to all these aspects of the in this type of longitudinal approach.
strategy process. As is shown in this paper, -In type B, process is relatively short episodes.
structural theory on MNCs has advanced much The approach here may be to study a single
further than dynamic theory on internationali- episode such as an acquisition from the preacqui-
zation as a strategy process. In a survey of sition phase to the postacquisition phase
academic researchers in strategic management, (Haspeslagh and Jemison, 1991), or to study
Lyles (1990) argued that the internationalization several episodes in sequence or in parallel. The
theme regarding global competition was viewed time period for an episode may vary from a few
as the coming decade’s most important area of weeks to a few years.
strategic management research (see also Bettis, -In type C, process is lengthy epochs. An epoch
1991). This notwithstanding, the research in may be the strategic development of a company
strategic management currently pays little atten- under an in&lential CEO. A series of epochs may
tion, says Lyles, to internationalization. Further- be long periods of evolutionary change disrupted
102 L. Melin

Qp~Im(prspocbr

TypeD=otP@kW *
I

1970

1930
-- I
1990

I,
1990

Figure 2. Four types of process captured by different longitudinal approaches

by shorter episodes of revolutionary change. An stood within a process context. Change concerns
epoch may be from 2 to 20 years. Illustrative the dynamics in development over time
examples of epoch-oriented studies are found in (Pettigrew, 1985b). Change is implicitly related
Pettigrew (1985a) and Pettigrew and Whipp (1991). to content, in other words, some particular thing
-In type D, process is seen as biographic history. becomes different. When we study longitudinal
Here the biography of a firm captures the whole processes such as the internationalization process
development from the time of its founding to of a firm, we must also focus on content. The
the present time, (see for example the classic dichotomy of process vs. content in strategy
case studies of Chandler, 1962). The time period research has been misleading and should be
may vary considerably but for large MNCs it avoided in international management research.
will extend over several decades.
We use this process typology to characterize
the process studies covered by our review and INTERNATIONALIZATION AS A
to determine the types of process studies that SEQUENCE OF STAGES
might be desirable in future research on inter-
nationalization. A broad reading of empirical Significant models in the field of international
studies in the field indicates that longitudinal business describe the internationalization process
studies of internationalization processes rep- as a gradual development taking place in distinct
resenting types C and D are very infrequent. stages and over a relatively long period of time.
Models and methods in the IM field are overly Two often cited models will be discussed here,
static. This is a weakness since the IM field, like the product (life) cycle model (Vernon 1966) and
the (overlapping) field of strategic-management the (Uppsala) internationalizationprocess model
focuses ‘on managerial problems, for which (Johanson and Vahlne, 1977). Both models still
timing, sequence and change are key elements’ exert considerable influence on the field and the
(Hambrick, 1990: 244). internationalization process model in particular
Descriptions of internationalization processes, attracts many followers. Their longitudinal
as of other strategy processes, include information character satisfies one criterion of internationaliz-
about change. The degree of change may differ ation as a process. Their shortcomings include
from a state of more or less status quo to radical certain problems inherent to stage models labelled
transformation. Between these extremes, we find by Stubbart (1992) as the ‘deceptive allure of
three kinds of change: expanded reproduction, developmental models’.
incremental change and evolutionary transition The product cycle model developed by Vernon
(Wilson, 1992). Change must always be under- (1966) is an attempt to bridge a country-based
 Internationalization as a Strategy Process 103

perspective of international trade theory with an The second stage model of importance is the
individual firm’s perspective of international intemtionalizatbn process model (Johanson and
investment theory. Vernon wished to remedy Vahlne, 1977). This process, whereby a firm
a lack of realism found in the dominating gradually increases its international involvement,
comparative-costs-advantagetheory by emphasiz- is described as being sequential from the initial
ing the role of product innovation, the effects of export activities to the setting up of foreign
scale economies and the role of uncertainty in production units (Johanson and Wiedersheim-
influencing trade patterns across national borders Paul, 1975). Each firm goes through a number
(Vernon 1%: 190). He identified several stages of logical steps of international behavior, based
in the life cycle of a product, each of which has on ‘its gradual acquisition, integration and use of
different implications for the internationalization knowledge about foreign markets and operations,
of the innovative company and the product itself. and on its successively increasing commitment to
The introduction stage is domestic, having its foreign markets’ (Johanson and Vahlne, 1977).
orientation in the country where the product was The focus is on market knowledge and market
developed. Export to other industrial countries commitment (through engaged resources). The
may support the emerging goal of achieving learning through development of experiential
economies of scale in production. In the growth knowledge about foreign markets is necessary in
stage, export activities increase and foreign direct order to overcome the ‘psychic distance’ to these
investments in manufacturing plants are made in markets, i.e., differences between any two
countries with an expanding demand for the countries in terms of language, culture, education
product. In the maturity stage, when major level, business practice and legislation. According
markets are saturated and the product stand- to Johanson and Vahlne (1990), the firm enters
ardized, the manufacture is relocated to countries new markets with successively greater psychic
with low labor costs. Finally, in the stage of distance. This perceived distance is expected to
decline, manufacture, and in some cases also the disturb the flow of information between the firm
demand, definitely leaves the industrial country and the foreign market. Therefore firms start
which was home to the original innovation their internationalization on markets with the
(Vernon, 1966; McKiernan, 1992). lowest perceived market uncertainty, in other
Although the product cycle model takes the words, markets that they can rather easily
company level into account, it has its main focus understand, often in neighboring countries.
on the country level. Its main contribution is Similar models which build on the behavioral
the developmental view on relocalization of theory of the firm (Cyert and March, 1%3, later
production activities; such change is related to applied to international investments by Aharoni,
various national characteristics such as technologi- 1966) have been introduced by Bilkey (1978)
cal know-how, demand and labor costs. A general and Cavusgil (191)o). The internationalization
conclusion is that increasing product maturity process model contributes an alternative and
makes it less critical to have a short distance significant view on internationalization as com-
between the production facilities and the corpor- pared to the dominating theory on foreign
ate centers for decision-making and product investments, the ‘edectic paradigm’ (Dunning,
development. However, the descriptive value of 1980, 1988). The eclectic paradigm argues that
this stage model is weak for products with short three distinct sets of advantages explain the
life cycles, a circumstance which applies to more involvement of firms in foreign production; these
and more products (McKiernan, 1992). The are ownershipspecific advantages, internalization
applicability of this model is also limited if new advantages (further emphasized by Buckley, 1988
products are developed in companies that already and Rugman, 1980), and localization advantages.
have considerable operations in foreign countries The eclectic paradigm is based on economic
(see Vernon, 1979). Furthermore, as we will see theory and has transaction costs and factor costs
below, new localization patterns emerge in MNCs as its main explanatory variables together with
as new organizational forms are introduced, the assumption of rational decision-making in
implying a new way of thinking about where international firms which make foreign direct
to establish product development centers and investments. However it explains the existence
manufacturing units. of the multinational enterprise rather than the
104 L. Melin
process of internationalization even if the more the internationalization process model does
ambition is to make the internalization theory not pay enough attention to the acquisition choice
more dynamic and more behavioral in its as a route to internationalization, a shortcoming
orientation (Buckley, 1990; 1991). The inter- shared with the mainstream of foreign direct
nationalization process model on the other investment theory (Forsgren, 1990).
hand explains internationalization as one distinct In more general terms, both stage models
pattern of growth. It is based on behavioral discussed in this section suffer from distinct
theories, with assumptions about lack of infor- limitations. The focus of stage models is on the
mation and the importance of perceived risk and nature, sequence and order of activities (Van de
uncertainty (Cavusgil, 1980). Within this view, Ven, 1992). According to Van de Ven (p. 172)
the internationalization process is not seen as a these stage models represent a unitary pro-
sequence of deliberately planned steps founded gression, which means a sequence of the form
on rational analysis. Instead the incremental U V + W where U, V and W represent
nature of successive learning through stages of qualitatively different stages that must occur in
increasing commitment to foreign markets is the an ordered progression. Each stage of develop-
main characteristic of the internationalization ment is seen as ‘a necessary precursor of
process, which according to Johanson and Vahlne succeeding stages’ (Van de Ven, 1992: 177).
(1990) will proceed along the presented stages The implication is that stage models describe
regardless of whether strategic decisions in this developmental history as the result of predeter-
direction are made or not. This process model mined factors and preprogrammed forces. But
matches two of the four types of processes in the consequences of unforeseen environmental
Figure 2, the episodical and the epochal, since interactions are hardly predetermined (Stubbart,
the internationalization stage can be seen as a 1992). Furthermore, stage models downplay the
sequential chain of episodes or epochs. possibility for managers to make voluntary
The internationalization process model has a strategic choices. According to Stubbart (1992),
number of shortcomings which have been another problem related to stage models is their
accepted by Johanson and Vahlne (1990: it is disregard of individual differences. Variations
too deterministic; its significance is limited to and differences are not made a part of the
the early stages of internationalization; and as pattern of sequential stages.
the world becomes more homogeneous, the
explanatory value of psychic distance tends to
decrease. The deterministic, sequential nature of STRATEGY, STRUCTURE AND
this process model excludes other options of CONTROL IN THE MULTINATIONAL
strategic choices, e.g., to initiate local production CORPORATION
in a foreign country without having gone through
the steps of exporting or having local sales During the last two decades a large share of the
subsidiaries. Leapfrogging of intermediate stages research in the field of international management
is in fact quite common (Hedlund and Kverne- has been devoted to structural aspects of h4NCs.
land, 1984; Bjorkman, 1989; McKiernan, 1992). During the 1970s, interest mainly focused on
The internationalization model is based on structural forms and formal control mechanisms,
empirical research about Swedish firms, but has but during the 1980s emphasis shifted toward
gained strong support in several other studies less formal ways of coordinating the MNCs. In
(Bilkey, 1978, Cavusgil, 1980; Denis and Depel- an exhaustive literature survey, Martinez and
teau, 1985;Johanson and Nonaka, 1983), showing Jarillo (1989) identify 82 empirical studies pub-
that this model’s validity is not limited to small lished between 1964 and 1988 on coordination
countries which are highly dependent on export. mechanisms in MNCs. A notable share of these-
However, most empirical support comes from about 25 percent-have their roots in two
studies on the early stages of internationalization business schools, the Harvard Business School
represented by the model. The model tells us little and the Stockholm School of Economics. Earlier
about the internationalization process taking place contributions from two distinguished Harvard
in experienced companies which have learned scholars, Alfred Chandler and Joe Bower, have
through decades of international activities. Further- been especially influential in this part of the IM
 Internationalization as a Strategy Process 105

field. In fact, the influence of these two scholars Aman, forthcoming). The international division
has generated two rather distinct schools of grew and as the ratio of foreign sales to
thought. The text below is organized in line with total sales continued to increase, top managers
this evolution. The first part deals with studies recognized that the enterprise needed a global
following Chandler’s (1%2) work on strategy perspective. The presence of an autonomous
and structure, and the second part reviews international division actually served to constrain
the so-called process school of international the integration process since only the general
management, based on Bower’s (1970) work on manager of the international division had
strategy process. responsibility that transcended national bound-
aries. The predominant international division was
superseded by two new types of global structures:
The structure of MNCs follows strategy
worldwide product division and geographic area
(research following Chandler) division for all products. Worldwide product
The origin of this stream of research is made clear division was the choice of firms with high product
in the first paragraph of an Administdve Science diversity, in which each domestic product division
Quarterly article by Fouraker and Stopford: was assigned responsibility for the worldwide
activities of its particular line of products. Area
One of the landmark studies in the field of divisions emerged in firms with greater geographic
business administration is Strategy and Structure diversity. Each such area division was made
by A.D. Chandler, Jr. A central proposition responsible for one geographic region of the
in Chandler’s book is that the strategy of
diversification led to organizational problems world market. in some cases a combination of
and eventually to the emergence of a new these two types of global structures was found,
corporate structure... International business where some product lines were managed on a
activity is a form of diversification. ... In some worldwide basis and others through area divisions
sense, this development may be considered a (Stopford and Wells, 1972: 26-53). However, in
replication against which Chandler’s thesis may
be tested.. .. the new diversification should lead the beginning of the 198Os, the international
to new problems of organization and, finally, to division structure still seemed to be the most
different structuralaccommodations(1968: 4748). frequent in MNCs based in the United States
(Daniels, Pitts and Tretter, 1985).
The early research on internationalization strat- In a parallel study, Franko (1976) compared
egy and organizational structure starts with the the 85 largest industrial firms of the western part
assumption that structure follows strategy. Not of continental Europe, focusing on (in his
surprisingly, this assumption is given strong terminology) their international networks. The
support in the first major study, where Stopford organizational structure of 70 of these firms was
and Wells found that managers in multinational analyzed in greater detail. A biographic approach
enterprises ‘following similar strategies in quite was used to identify epochs of dominating
different industries have developed similar organ- structural forms (see Figure 2). In contrast to
izational structures (1972: 5 ) . Stopford and Wells multinational enterprises based in the United
studied epochs of internationalization (i.e., pro- States, 26 of the European MNCs retained the
cess type B in Figure 2) in order to identify the parent-subsidiary form, with direct ties between
structural state of 187 large U.S.manufacturing the corporate head office and each autonomous
firms, all internationally dispersed and each subsidiary. The route to global structure differed
having manufacturing facilities in at least six from that found in the U.S. firms studied by
foreign countries. An initial phase of international Stopford and Wells. Most European multination-
structure with relatively autonomous subsidiaries als did not choose the international division as
was followed by a second phase in which an intermediate form, but went directly from
the MNCs organized an international business the parent-subsidiary structure to a worldwide
division intended to increase control and coordi- product structure (24 enterprises did so). As 84
nation of the expanding international activities. percent of the European enterprises in Franko’s
This division covered all foreign activities of the study were diversified outside the home country,
firm and became its locus of international one would expect that an even greater number
expertise (Stopford and Wells, 1972: 21 and of product division structures would have been
106 L. Melin
introduced. Franko’s conclusion is that ‘in conti- increasingly blurred in a global grid structure.
nental Europe, structure did not follow strategy Emphasis shifts from hierarchical to contractual
until there was a (new) change in the competitive management. Grid structures can function as
environment’ (Franko, 1976: 204). Scandinavian systems of creative conjZicts. In a grid structure,
MNCs show a similar pattern to the European ‘the creation among the managers of a sense of
firms studied by Franco. The Scandinavian firms cooperation and shared values is one way of
retained the parent-subsidiary structure until the combating the control problem’ (op. cit., p. 173).
1970s at which time most big firms went directly Unfortunately, these significant and quite novel
to the global product division structure without observations did not stake a direction to sub-
ever having introduced the international division sequent research in international management
(Hedlund, 1984; Hedlund and b a n , 1984; during the 1970s. Another important discussion
b a n , forthcoming). often ignored by (U.S.) researchers in both
Also Stopford and Wells (1972) softened their strategic management and international manage-
conclusion on the strategy-structure fit despite ment is the skepticism expressed by Stopford
their empirical evidence. They emphasized that and Wells about the possibility of drawing
the relationship between strategy and organi- linear conclusions on the relationship between
zation ‘is clearly not the simple one in which strategy-structure and performance. These
strategy is determined first and then a structure authors conclude that it is very difficult to make
established to implement it’ (p. 6). However, for any satisfactory analysis that relates structure to
Stopford and Wells, strategy + structure was performance. The reason given is that ‘perform-
still the natural sequence, a statement later ance is an amalgam of many factors..., even if
questioned by several authors (e.g., Hall and one could decide how best to measure perform-
Mas, 1980; Peters, 1984; and Melin, 1989). ance, one could never be sure that the results
The studies of Stopford and Wells (1972) and were influenced by the choice of structure’
Franko ( W 6 ) represent a landmark in international (Stopford and Wells, 1972: 79). From their
management research. These studies give a valuable noteworthy findings that some multinational
understanding of the historic development of enterprises with mismatched strategies and struc-
international strategies and structures for multin- tures grew faster and showed a greater foreign
ational enterprises. However, their major findings profit than others with matched strategies and
have to do with which strategies and structures structures, Stopford and Wells allege that the
actually emerged. Their contribution is far more success of an enterprise relies more on managerial
modest when they attempt to deal with why skills and abilities than on the structural form
strategies and structures are changed. The process within which these managers work.
dimensionof how they changedis almost completely Several IM researchers later studied the strat-
absent. Although these studies take a longitudinal egy and structure relationship in MNCs, among
approach, they can hardly claim to capture the others Davidson and Haspeslagh (1982) and
essence of internationalizationas a process. Rather Egelhoff (1988). Furthermore, Bjorkman (1990)
they present steady states of structural forms and put forth an alternative explanation for changed
fail to describe the processes of formation and structures in MNCs. He regards the changed
implementation related to these structures. In structure as being the result of mimetic behavior
addition, they emphasize mainly formal aspects of rather than of the influence exerted by a
structure. company’s individual strategy. A new structural
Notably, both studies contain early obser- form becomes the fashion, or norm, and is
vations about a new structural form for the imitated by several followers (DiMaggio and
MNC, the global matrix. Stopford and Wells Powell, 1983).
(1972) called this the ‘grid structure’ which
apparently opened their eyes for a necessary
Research on informal coordination mechanisms
shift from the formal view on structure to a
in MNCs
stronger emphasis on informal and fluid aspects
of structure. They made several significant In addition to the focus on structure of the
observations about the grid structure: Boundaries MNC, there are two other coordination dimen-
between divisions and departments become sions which received attention from several IM
 internationalization as a Strategy Process 107
researchers (Martinez and Jarillo, 1989). One THE ‘PROCESS SCHOOL’ OF MNCs
dimension concerns the degree of centralization
of decision-making and bureaucratic control The emergence of a process perspective in policy
mechanisms (e.g., Brooke and Remmers, 1970 research (Bower, 1970) has resulted in a large
and Schollhammer, 1971). The other dimension body of empirical research dealing with mana-
is the less formal and more elusive mechanisms gerial issues of MNCs.The doctoral dissertations
of control and coordination. Wiechmann (1974) of Prahalad, Doz and Bartlett (all at Harvard
found, that formal and informal integrative Business School between 1975 and 1979) seem
devices were closely interrelated in multinational to have laid the foundation for a visible stream
enterprises. Notably, one of the devices was of research in international management.
corporate acculturation. This relates to findings Researchers in this stream are referred to as
regarding the Japanese type of MNC (‘type Z) ‘belongingto the process school’ of the diversified
that maintained control through a process of multinational corporation (DMNC), (Bartlett and
acculturation and socialization of employees Ghoshal, 1991; Doz and Prahalad, 1991). Today
(Ouchi and Johnson, 1978). In subsequent this school holds paradigmatic qualities, according
studies, the cultural control mechanisms were to Doz and Prahalad (1991: 145): ‘The develop-
given extended meaning by Jaeger and Baliga ment of a “process school” of research on the
(1985). In the same vein, Edstriim and Galbraith DMNC over the past 15 years has led to the
(1977) presented arguments for transfer of emergence of a new paradigm.’
managers in multinational organizations as a This new so-called paradigm represents knowl-
deliberate means to develop control through a edge on DMNC management, which emphasizes
socializing process and the creation of a verbal the global mtegration/local responsiveness frame-
information network. The objective seemed to work. The basic unit of analysis is considered to
be to create a somewhat uniform corporate be the individual manager. Most scholars within
culture that transcended national boundaries this paradigm, it is claimed, have ‘put managerial
(see also Jaeger, 1983), today a questionable relevance before theoretical elegance,’ ‘have
proposition. That notwithstanding, Edstriim and underexploited the theories available to them’
Galbraith (1977: 248) wanted their article to be and ‘often been engrossed in the complexity of
understood as a call for further research. what they studied, and failed to develop, or
However, the internationalization theme on borrow, a sufficiently powerful conceptual frame-
which they focused (as did Ouchi and others) has work’ (op. cit., p. 161). According to Doz and
not yet become a major stream in international Prahalad, the result has been a missing link
management research, even if the ‘process between the DMNC phenomenon and available
school’ (see below) shows interest in informal organization theory. However, this is not
management systems. Martinez and Jarillo regarded as being a problem since the emerging
(1989) suggest that the informal and social paradigm constitutes a theory on its own:
mode of control has emerged in MNCs as a
necessary result of the increased integration Taken together the work of Prahalad, Doz,
and dispersion of these firms’ operations to Bartlett, Ghoshal, Hedlund, Hamel, and others
several units in many countries. However, a following the same research approach provides
us with a rich organization theory of the DMNC
recent study of Swedish MNCs (Rolander, and with detailed understanding of managerial
Zander, and Hedlund, 1989) draws a different tasks of DMNCs (Dozand Prahalad, 1991: 158).
picture. This study claims that these firms
instead introduce more formal mechanisms of
control. One explanation of this divergency According to Doz and Prahalad, this organi-
may be that Swedish MNCs made early use of zation theory contains mid-range constructs and
social control mechanisms and only recently provides a set of such integrative constructs for
have adjusted to the combined mode of formal observation, analysis and understanding, as well
and informal control. If so, these different as for normative assessment of DMNC managers.
pictures instead illustrate a converging move- The main conceptual contributions from this new
ment regarding control mechanisms throughout paradigm, are briefly presented below, but it
the entire MNC population. must first be emphasized that it is quite unusual
108 L. Melin
for a rather small group of researchers to appoint weighted one against the other separately for
themselves as constituting a new paradigm. Does each decision, with no a priori assumption of
not a new paradigm emerge in a rather less dominance of one over the other’ (1986: 214).
deliberate way, as a result of an institutionali- The multifocal MNC will trade-off the costs and
zation process drawing on ideas and debates benefits regarding national responsiveness and
from several related fields? multinational integration in a flexible manner.
Doz and Prahalad (1984) want to supplement The key organizational capability of the multifocal
the multinational management literature, which strategy firm is the capability to ‘shift the locus
in their opinion is too ‘architectural’ in its search and logic of decision from a national concern to
for the right structure. Their own contribution a global view, and vice versa, from decision to
builds on the identification of the constant decision’ (1986: 214). Doz believes that a matrix
balancing of MNC managers between (a) the structure that assigns equal power to executives
economic imperative, i.e., the impact of global with differing responsibilities would lead to
competition that pressures the MNC to transcend corporate paralysis. Instead, conflicting views
the boundaries of national markets, develop a should be confronted, which leaves the relative
global strategy and rationalize global operations power of various executives unspecified. The
through central control and coordination and (b) ideal situation for Doz is constant tension
the political imperative, i.e., the adjustments between defenders of national responsiveness
made necessary by host government demands, and managers supporting multinational inte-
which work to give greater autonomy to the gration, and this is something quite apart from
local subsidiary, and through diversity among balance and power symmetry.
national markets, regarding customer needs, Bartlett and Ghoshal (1987, 1989) focus their
distribution channels etc., that call for increased interest on how large crossborder enterprises
local responsiveness (Doz, 1980; DOZ, Bartlett, organize their activities. The studies of these
and Prahalad, 1981; Prahalad and DOZ, 1981a; authors emphasize the functioning and capabilities
Doz and Prahalad, 1984). No specific structure of the MNC, not its structural form. Important
provides the solution to this dilemma. Direct elements are informal mechanisms of coordi-
substantive control is not possible. The alternative nation, including normative values, and modes
for top management is to create an organizational and patterns of internal communication. Bartlett
context as a more subtle strategic control mechan- and Ghoshal’s work represents a surprisingly
ism. The design of this organizational context strong belief in the environment-strategy-struc-
has been in focus in most of the work presented ture paradigm which they claim ‘provides a
jointly by Doz and Prahalad (1981, 1984, 1987 powerful way to understand differences in corpor-
and Prahalad and Doz 1981a, 1981b and 1987). ate performance’ (1987: 53). They mean, how-
Their framework for strategic control in multi- ever, that as the global industrial world becomes
national companies can be depicted as a matrix more complex, the unidimensional concepts of
of (a) subprocesses of change and (b) a collection strategic fit should be replaced by a more dynamic
of management tools. To be more precise, the view. The main driving forces for changes in
subprocesses of change has three dimensions: MNCs, according to Bartlett and Ghoshal, are
cognitive perspective, strategic priorities and environmental. But Bartlett (1986) also calls
power allocation. The management tools are of attention to the administrative heritage, i.e., the
three kinds. Data management tools provide history and background of the firm. The basic
data for critical decisions. Managers’ management assumption in the research of Bartlett and Ghoshal
tools express the rules of the game that shape concerning large MNCs is that environmental
executive perception and expectations. Conflict forces shape the strategic profile of a business,
resolution tools are used to create decision while a company’s administrative heritage molds
structures for careful trade-off between priorities its organizational form and capabilities.
of global integration and national responsiveness. In an empirical project, Bartlett and Ghoshal
Alongside this framework, Doz argues that found three clearly distinguishable organizational
the diversified multinational company should models among nine multinational companies
strive for multifocal strategies. This means that (three each from Japan, Europe and the U.S.).
‘responsiveness and integration needs are Each model is ‘characterized by distinct structural
 Internationalization as a Strategy Process 109

configurations, administrative processes and man- ation of tomorrow’s competitive MNC-is a more
agement mentalities’ (1989: 49). The importance speculative suggestion impelled by the studies of
of a company’s administrative history is evident these two scholars. They found that several of the
in these organization models, as each of them is nine MNCs in their study increasingly converged
related to specific dependence on their respective to the structural form of a differentiated network
European, Japanese or U.S. cultural background. (Ghoshal and Bartlett, 1990). In the transnational
The multinational organization model fits the company, efficiency is a means to achieve global
management norms of many European companies competitiveness, while local responsiveness is a
that grew internationally during the prewar means to achieve increased flexibility, and com-
period. Bartlett and Ghoshal label this model ‘a pany-wide organizational learning is a means to
decentralizedfederation of assets and responsibili- develop innovations vital to corporate survival.
ties’ (1989: 49) which allow foreign units to The transnational firm should function as an
respond to local differences. The international integrated network. The subsidiaries should have
organization model-which suited the manage- differentiated and specialized roles and they should
ment norms of many U.S. firms, especially during participate in a worldwide sharing and development
the 1950s and l-is a coordinated federation, of knowledge. This type of organization is not easy
where the parent company transfers knowledge to manage. The threat of internalfragmentation and
and expertise to foreign markets which lay dissipation is obvious, because of the strong degree
open to exploitation. The subsidiaries are more of dispersion. Furthermore, the interdependence
dependent on the parent company, compared with may counteract the need for flexibility, since the
the multinational model, while the international complexity can obstruct the necessary learning
model requires more formal systems for control capability. However, according to Bartlett and
of subsidiaries. The global organization model Ghoshal, these problems can be resolved by top
fits the managerial norms of many Japanese management if they succeed in legitimizing diverse
firms, which reached global competitive positions perspectives, developing multiple coordination and
during the 1970s and early 1980s. It is charac- innovation processes, and building shared vision
terized as a centralized hub, where most assets and individual commitment.
and decisions are centralized. Foreign operations Hedlund (1986) has developed a similar,
are used as delivery pipelines to what is regarded speculative model for the modem multinational
as a unified global market. The subsidiaries are company, the heterarchy. He sees the unidimen-
highly dependent on the parent company and sionality within the traditional structure-follows-
are tightly controlled. This empirically founded strategy view as being too narrow and believes
typology gives an important understanding of three that multinationals must transform their hier-
distinct forms of MNCs and supplements the old, archial form to something more flexible if they
but still valid, conceptions of the global enterprise are to survive (Hedlund and Rolander, 1990).
presented by Perlmutter (1W) ;ethnocentric,
the Some of the main characteristics of the heterarch-
the polycentric, and the geocentrictypes.However, ial MNC are: many centers, in which traditional
the framework by Bartlett and Ghoshal lacks headquarter functions are dispersed; strategic
process dimensions, such as the dynamic transition roles for foreign subsidiaries; flexibility in govern-
from one form to another, and characteristics of ance modes; global integration by normative
the strategy process within each model. mechanisms, such as shared culture and ethics;
According to Bartlett and Ghoshal alI three a holographic organization, where each part of
MNC models have problems in today’s complex the company shares information about the whole
global environments, because they cannot meet and has access to detailed information; strategic
the demand to simultaneously achieve national action, based on heuristic search orientation and
responsiveness, global efficient integration, and exploitation of current potential (Hedlund and
an ability to develop and transfer knowledge Rolander, 1990: 25-27).
worldwide. Bartlett and Ghoshal have constructed To complete the picture of the ‘process school’
a solution to this demand, the tranmational in international management, the new concepts
organization model, which is not derived from for understanding strategic capabilities of MNCs
empirical evidence as are the other three models. (introduced by Hamel and Prahalad) should also
Instead the transnational solution-the configur- be presented. These concepts emphasize the
110 L. Melin
role of strategic intent in strategic development to be understood as a more progressive device
processes (Hamel and Prahalad, 1989); the than differentiation. There is an apparent risk
that this tendency will lead to a neglect of the
importance of developing core competencies in limitations and costs of integration. Second,
diversified MNCs in order to reach global even though several authors maintain that the
competitiveness (Prahalad and Hamel, 1990); global firm is moving away from a hierarchy
and the role of resource leverage and the towards a multi-center structure, there seems to
importance of aspirations outstripping resources be little doubt about the headquarter’s possibility
to design the structure and systems in such a
for proactive strategy making (Hamel and Pra- way that a beneficial integration is created ...
halad, 1992). The concepts introduced by Hamel The problem is primarily presented as analytical
and Prahalad are intuitively quite reasonable, and a question of design, rather than a political
but when considered more carefully, they are problem (Forsgren, 1992: 479480).
vague and lack descriptive precision.
The configurations suggested by the ‘process
school’ are complex and require an extremely The power dimension is of utmost importance
skillful and powerful top management team that in theory-building about multinational enter-
can orchestrate all internal forces in a large prises, as shown by Larsson (1985) in his political
worldwide corporation. The attitudes of the analysis of foreign acquisitions made by several
members of the ‘process school’ range from Swedish multinational firms. A valid description
critique of the possibility to find the right concerning the dynamics of MNCs must contain
structural form, to the suggesting of ways to find more of the power struggle of individuals
the right balance and compromises between all and groups on different levels that actually
interests and units and thus simultaneously characterizes these large organizations. We need
achieve global efficiency, local responsiveness, to better understand how and why MNCs are
flexibility and learning. The ambition to capture able to perform comparatively well despite
the complexity in large, global business firms is the counteractive forces and inertia that are
desirable (see Melin, 1987 and 1989). However, embedded in the culture of these mature organiza-
the strong belief-xpressed by Bartlett and tions.
Ghoshal, 1989, and by Doz and Prahalad, 1984- The ‘process school’ has further weaknesses.
in a new type of fit, much more dynamic The researchers found within this school have
than the old structure-follows-strategy-follows- mainly used a clinical (or phenomenological)
environment is based on an extended use of research method which, however, is seldom
cultural control. A rather monolithic culture explained in detail. The reader does not get
seems to be necessary to unite the dispersed much help when the bridge between empirical
MNCs. This implies a view on culture as a work and conceptual development is described
variable that can be controlled from the top of as ‘intensive research suggests’ or ‘detailed
the organization and based on an underlying analysis was performed’ (Doz and Prahalad,
assumption that manipulation of cultural dimen- 1984: 59-60). There are exceptions, of course,
sions will lead to intended changes in the mind like the methodology appendix in Bartlett and
sets of organization members. These assumptions Ghoshal(l989). The conceptual language emanat-
are questioned by many students of organizational ing from this school is built up from empirical
culture (e.g., Smircich, 1983; Alvesson and Berg, research, and with the expressed ambition of
1992). putting managerial relevance before theoretical
In a critical review of ‘Managing the Global elegance. Organization and strategic management
Firm’ (with Barlett, Doz and Hedlund, as editors, theory have been avoided (with a few exceptions)
1990), Forsgren (1992) identifies two main in the interpretation and concept generating
problems in the models of transnational, heter- phases of research. The developed framework
archic and multifocal firms: on managing MNCs has seldom been related to
prevailing concepts describing similar phenomena
in other contexts than that of the international
First, the need and possibilities of integration is
strongly overemphasized compared to differen- firm. The striving for managerial relevance has
tiation. There is a tendencv for integration also led to a normative bias. The normative bent
(especiallyin combination withthe word ‘gobal’) seems to be increasing with an increased degree
 Internationalization as a Strategy Process 111

of speculation in conceptual frameworks without of internationalization of the 1980s and 19%,

empirical support. This is the case with the covering also the process whereby internationally
models for the emerging new MNC:the multifocal mature firms further increase their degree of
strategy, the heterarchy, and the transnational internationalization. The second theme, research
solution (Hagstrom, 1991). on structures following strategies in MNCs,
The ‘process school’ emphasizes the dynamic describes the historical development of structural
dimension of strategy and structure. But, apart forms of MNCs such as the parent-subsidiary
from the change process study (by Doz and structure, the international division and the
Prahalad, 1987) of the transition in sixteen MNCs worldwide product division. Major weaknesses
from local to cross-national orientation, the within this theme are its attachment to the
process orientation is in fact rather restricted. linear thinking evident in strategy-structure-fit
Doz and Prahalad developed in their study a four- arguments, and the static character of their
stage process model of strategic redirection- conceptual contributions, in spite of the apparent
incubation, variety generation, power shift, and longitudinal nature of their research approach.
refocusing (Doz and Prahalad, 1987:69-74). The The role of learning and political processes in
empirical focus in the ‘process school’ is on the internationalizationof the firm is not accounted
global MNCs, but their conceptual contributions for at all. The third theme focuses on the
are expressed in rather general terms, and should management of DMNCs and constitutes the so-
be seen as belonging to the fields of organization called pracess school in international management.
theory and strategic management rather than This school of thought contributes a rich set of
constituting an isolated IM theory. new and thought-provoking concepts which both
This notwithstanding, the research group rep- describe and prescribe management processes in
resenting the ‘process school’ of international MNCs. Major weaknesses of this school are its
management has increased the knowledge in this questionable empirical base, and weak relationship
field in several aspects. The researchers have with existing management theory and its overpres-
identified new organizational patterns of MNCs. criptive nature. Furthermore, despite the label of
They have contributed a richer conceptual charac- the school, the process orientation in the theoretical
terization of the global multinational firm with body of the school is undeveloped.
its coordination mechanisms and strategic logic This concluding section suggests three key
in use in complex MNCs. They have articulated themes €or future research: the study of acqui-
the strong need for more multidimensional sition processes and internationalization, the
approaches in (international) management study of dynamic processes in MNCs, and the
research. Furthermore, the empirical research is study of internationalization processes in their
based on access to several top managers in global outer contexts. Each theme will be oper-
MNCs, a fresh contrast to much of the US.- ationalized through a number of questions perti-
based strategy research with its very weak nent to research. These themes deal with major
empirical connection to strategists in action. omissions and weaknesses identified in the review
of the field. Research on these themes should
produce additive knowledge on internationali-
KEY THEMES FOR FUTURE zation as a strategy process. This knowledge
RESEARCH ON should be of a descriptive nature, based on
INTERNATIONALIZATION PROCESSES the belief that the purpose of (international)
management research is to develop new models
Three major themes in the field of international and frameworks that will help us understand how
management have been reviewed. The first organizationswork rather than how organizations
theme, regarding stage models of internationali- should work (see Daft and Buenger, 1990).
zation, reflects the conventional mode of inter-
nationalization that goes frm export activities
The aeqoisltlon theme: Research on the
to foreign direct investment. The sequential stage
dominant mode of internationalization
model is too deterministic and stresses only early
stages of internationalization. This model should Acquisitions have been a predominant feature
be supplemented with research on new patterns of internationalization during the last decade
112 L. Melin

according to recent empirical evidences and Melin, 1991). Another strategic choice is
(McKiernan, 1992). Between 1983 and 1988, between foreign acquisitions and organic growth
acquisitions worldwide rose by more than 20 through foreign greenfield investments (Hennart
percent annually. This implies a far-reaching and Park, 1992). An acquisition does not increase
concentration process with a remarkable increase the overall manufacturing capacity and is there-
in foreign ownership on many markets. In this fore a suitable action in a mature and declining
situation, research in international business is industry. In such industries, crossborder acqui-
really lagging behind. Conventional theories sitions as a means of global restructuring will
on internationalization, including foreign direct increase the degree of internationalization and
investment theory have paid little attention to at the same time reduce the population of firms.
acquisition as a major route to internationali- In which phases of a firm’s internationalization
zation (Forsgren, 1989; 1990). The significant are acquisitions to be found? Regarding new-
role of acquisitions as a major mode of comers on international markets, recent studies
internationalization demands comprehensive show that these home-country-based firms may
research efforts. In general, process theory on go international directly through acquisition of a
acquisitions is still weakly developed (Trautwein, foreign competitor (Sharma, 1991; Luostarinen,
1990). We need descriptions and conceptualiza- 1991), contrary to the prediction of the sequential
tions on crossborder acquisitions in order to stage model. Forsgren claims that ‘the less
develop our understanding of the processes and internationalized the firm, the higher its acqui-
mechanisms of internationalization. Some key sition propensity’ (1990: 262). These new obser-
research questions on international acquisition vations should be followed by more empirical
processes are suggested below: studies in order to develop descriptive models of
What are the typical patterns shown by internationalization phases, where the acquisition
crossborder acquisition processes, in terms of mode is included and where the order of phases
their different strategic and organizational charac- is not sequentially predetermined.
teristics? What driving forces impel these acqui- In conclusion, an empirical focus on acquisition
sition processes? What strategic logic is embraced processes creates good opportunities to better
in crossborder acquisitions? The strategic logic understand acculturation processes as one
may express not only rational formulas, but even important dimension of internationalization.
institutionalized myths and subjective rationales. Acculturation is an ongoing process in all
An illustration is the announcement of the late international firms with crossborder operations.
eighties about E.C.-92 which led non-E.C. But the acculturation process should be more
companies to escalate acquisitions in the Common evident and visible when two different cultures
Market. Research about these acquisition pro- meet in the integration process that follows every
cesses might reveal not only cases of purposeful crossborder acquisition.
strategic intent to use acquisition as a means of
securing a competitive European position, but
The process theme: A process perspective on
even cases which were a sudden reaction to
the then-prevalent E.C. hysteria and which
MNCs
illuminates mimetic or legitimating strategic The IM field has been dominated by studies on
behavior (see Hellgren and Melin, 1991). Such structure, control and coordination of MNCs.
reactive ways of acting show that managers The research is characterized by cross-sectional
may be more concerned with jumping on the approaches, or at least findings expressed in
acquisition bandwagon than with corporate profit terms of structural constructs. The process
(see Daft and Buenger, 1990). perspective is (with few exceptions) absent in
What characterizes the strategic choices in analyses and theory generation. Knowledge about
international acquisition processes? One such structural forms of international business is
strategic choice concerns the selection of a foreign unusually well-developed, while the knowledge
market to be entered by taking over some other about the transition of these structures is certainly
firm which may be a rational choice of a specific insufficient. Five clusters of research questions
country or a more inherent consequence of a covering different aspects of a process perspective
company being available for acquisition (Lindell on MNCs are suggested:
 Internationalization as a Strategy Process 113

A common assumption in the IM field is MNCs? Which differentiation mechanisms are

that structures change as a result of strategic found in political and cultural processes in
adaptation to a changing environment. As dis- MNCs? Research on differentiation processes
cussed earlier, this linear view should be ques- should pay attention to political and cultural
tioned: What internal forces impel change in forces that do not originate from the MNC
MNCs, regarding strategies, organizational forms headquarters. These forces may have their origins
and coordination mechanisms? How do internal not only inside various units of the dispersed
and external forces interplay in the strategic MNC but also outside, in the local environments
processes of MNCs? How and why do control of these units.
and coordination mechanisms change over time The focus on heterogeneity and diversity raises
and how do these changes interplay with strategic further questions on power processes and fluid
actions? These questions imply a need for boundaries of MNCs: Will MNCs remain hier-
research on strategic and structural change in archial or will they grow into a multicenter form,
MNCs based on a more reciprocal, dynamic and in other words, have several power centers
complex view than the model of (characterized by Forsgren, 1992 as inter-
environment-strategy-structure fit (Pettigrew, nationalization of the second degree; see also
1987; Melin, 1985; 1989; Hedlund and Rolander, Hedlund, 1986)? This multicenter model is based
1990). on the observation that different units of the
Several researchers in the IM field, from MNC are integrated in different local business
Stopford and Wells and onward, have identified networks (Forsgren, 1990; Forsgren and Johan-
distinct structural forms of MNCs. In accordance son, 1992). How does the power distribution in
with Child (1972), in his early critique of the these networks influence the strategic freedom
contingency school, we argue that research on of action for the MNC headquarters? How do
MNCs should be more concerned with processes units in the internal network of the MNC become
over time and should regard structures as rather integrated in these external business networks
temporary manifestationsof such processes. What (see Ghoshal and Bartlett, 1990; Kogut, 1989)?
characterizes the continuous change of these What characterizes the interplay regarding
temporary MNC structures? If more stable exchange processes and political processes
structures are to be revealed, what determines between these two types of networks?
the steady state of each form and the transform- The need for more research on long-term
ation from one identified form to the following? internationalization processes of MNCs should
According to Aman (forthcoming), who has also be noticed. Prevailing knowledge on inter-
studied the transition from a traditional parent- nationalization as a process focuses on firms in
subsidiary structure to an across-the-border type the early phases of internationalization. But most
of MNC, this transition is a long-term evolution- MNCs are internationallyvery experienced: What
ary process with several ‘in between’ phases. characterizes ongoing globalizing processes of
The research on coordinating mechanisms mature MNCs? What new patterns of phases
in MNCs describes the development in these and modes of internationalization can be found
organizations towards global integration, even if in these processes (see Bouchikhi and Kimberly,
local responsiveness is part of the game (see 1992)? A research effort taking this perspective
Ghoshal and Nohria, 1989). This research is a comparative project of internationalization
describes a rather homogeneous and well-united patterns and organizational capabilities in British
international organization. However, a dispersed and Swedish firms (see Macdonald et al., 1991,
organization such as the MNC is a plurality of and Gustavsson et al., 1992). To allow the
systems, where intended actions of powerful illumination of the full internationalization pro-
members as well as unintended consequences of cess of a firm and to uncover developmental
the social action structure play important roles trajectories of this process, we need comprehen-
(Brown, 1992). Besides coordination, another sive studies that capture long epochs and even
inherent but less controllable mechanism continu- biographic histories (see Figure 2) of the whole
ously affects the function of the MNC: the development of the firm. Such an approach should
differentiation mechanism. How do differen- increase our understanding of internationalization
tiation processes influence the management of as a ‘fundamental engine of organizational
114 L. Melin
development’ (Kimberly and Bouchikhi, 1991: nationalization process of MNCs, or rather of
25). strategic business units within MNCs must be
understood in a dynamic and global sector
perspective, where collaborative forces with
The context theme: Understanding the
‘win-win’ relationships and competitive forces of
embeddedness of internationalization in outer
zero-sum character act simultaneously across
contexts
borders (Hellgren and Melin, 1991).
This third theme stresses the importance of In addition to the three suggested research
relating the internationalization process of the themes, future research on international manage-
firm to its surrounding context, which the ment should also take into consideration that
reviewed research fails to do. Two suggested all organizational processes are engrained by
subthemes focus on internationalization embed- subjective sensemaking (Gioia and Chittipeddi,
ded in two outer contexts; the institutional and 1991). As the MNC acts in the perhaps most
social context and the sectoral context. complex and turbulent of all environments,
The first subtheme concerns the embeddedness the management process through creation and
of internationalization processes in its social transfer of meaning should here be especially
and political outer context. Internationalization critical (cp Salzer, 1992). In order to capture the
inherently means that the international firm acts essence of symbolic interaction and sensemaking
in a number of different social and cultural processes we need radically different research
contexts, often country-based. Hofstede (1983, methodologies that have been used in the field
1991) has shown the diversity in cross-cultural of internationalization, such as an ethnographic
patterns. Whitley (1992) have shown the diversity and interpretive field work approach (cp Botti,
in the institutionalized structure of business 1992).
systems in different countries. What characterizes I will end with some final concluding points.
the link between the internationalization process The research themes suggested above illustrate
of an individual firm and this institutional, social the need for a better connection between
and cultural diversity? How does the MNC that international management and theoretically more
pursues a rather uniform and integrated global mature subdisciplines of management. This call
strategy maneuver such diverse institutional for a closer theoretical relationship with organi-
environments?Mutabazi (1992) argues, for exam- zation and (strategic) management theory raises
ple, that all attempts to reach cultural uniformity a question not only about the boundaries but also
in MNCs are doomed to failure. According to about the autonomy of the field of international
Jones (1991: 13), mainstream theories of the management. The boundaries between organi-
MNC are unable to access the institutional and zation theory, strategic management and inter-
social environment ‘due to their undersocialized national management are fluid and blurred. This
construction,’ which underlines the need for new review points toward a conclusion that the
research efforts on this subtheme. internationalization dimension should be
When studying internationalization within a regarded as an empirical focus and not form the
strategy process framework, it is crucial to focus basis for a theoretical field of management on
on ‘organizations in their sectors’ (Child, 1988). its own. The general issues of business strategy,
The second subtheme, contrasting the first, organizational structures, and coordination mech-
emphasizes the embeddedness of internationali- anisms that have been the core of international
zation processes in the context of industrial management should hardly be divided into one
sectors crossing borders. Most industrial sectors subtheory for international firms and another for
of today are international and characterized by noninternational firms. But this is what IM
global competition where rivals within one sector researchers have tended to do, often not relating
compete against one another on a worldwide basis their results and conceptual models to existing
(Porter, 1986). Furthermore, most international theories. On the other hand, the multinational
sectors are interlaced through widespread collab- enterprise represents one category of organiza-
orative arrangements between competitors in tions to which scholars of organization theory
different overlapping constellations. The global should devote more interest and research efforts.
auto industry is a good illustration. The inter- Students of organizations are served an important
 Internationalization as a Strategy Process 115

challenge by this type of large and dispersed Bettis, R. (1991). ‘Strategic management and the
organization, with an inherent mosaic of cultures, straightjacket: An editorial essay’, Organization
Science, 2(3), pp. 315-319.
unclear and ambiguous boundaries (within the Bikey, W.J.(1978). ‘An attempted integration of the
intraorganizational network and also in relation literature on the export behavior of firms’, Journal
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and multiple organizational identities. Bjorkman, I. (1989). ‘Foreign direct investments. An
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Finnish firms’. Doctoral dissertation, No 42, The
as a strategy process must capture the develop- Swedish School of Economics and Business Admin-
ment and dynamics over time, the driving forces istration, Helsinki.
of the process, and the content of the process. Bjorkman, I. (1990). ‘Foreign direct investments:
Internationalization processes are characterized An organizational learning perspective’. Working
by a high degree of complexity, variability and paper, The Swedish School of Economics and
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Bouchikhi, H. and J. Kimberly (1992). ‘Large French
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ACKNOWLEDGEMENTS figurations’. In Proceedings from the first Inter-
national Federation of Scholarly Associations of
Thanks are due to Andrew Pettigrew for numer- Management Conference, Tokyo, pp. 448-451.
ous suggestions and to my colleagues in the Bower, J. L. (1970). Managing the Resource Allocation
Strategic Change Research Group at Linkoping Process: A Study of Corporate Planning and
Investment. Harvard University Press, Boston, MA.
University for all their support. In addition I Brooke, M.S. and H.L. Remmers (1970).The Strategy
would like to thank the Axel and Margaret of Multinational Enterprise. American Elsevier,
&:son Johnson Foundation for funding the New York.
research on which this article is based. Brown, R. (1992). Understanding Industrial Organiza-
tiom: Theoretical Perspectives in Industrial Soci-
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Buckley, P. J. (1988). ‘The limits of explanation;
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