Causes of De-Internationalization: Evidence of Six Cases

Causes of De-Internationalization: Evidence of Six Cases

Raquel Meneses (University of Porto, Portugal) and Helder Pinho (University of Porto, Portugal)
Copyright: © 2019 |Pages: 23
DOI: 10.4018/978-1-5225-8906-8.ch008

Abstract

Until a few years ago, internationalization was seen as a self-feeding process, resulting from decisions based on accumulated knowledge. De-internationalization is not an option. However, the reality shows us that enterprises have done international divestment. To this date, the research on de-internationalization remains somehow scarce and needs additional research. The authors want to understand the causes of de-internationalization. They use the grounded theory methodology, studying six Portuguese cases that already have a process of de-internationalization. Five firms cooperate with, presenting six cases. The authors distinguish causes that occur before/after the internationalization process begin and causes related to firm or external to firm. One of the main causes of de-internationalization is the incorrect internationalization process. The Misfit Micro-Location (the wrong choice of place inside a determined country) is a very important cause, which means that, after choosing the country, it is necessary to choose the best place to be located.
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Literature Review

Research on the internationalisation of companies intensified with the rapid growth of international trade and foreign direct investment in the 1960s. Since this time, a large number of researchers have analysed factors which have had an impact on the internationalisation process, the influence of internationalisation on the company and the home economy, threats and opportunities of internationalisation, and several other problems related to the international activities of the company. Until a few years ago, all approaches viewed internationalisation as a self-feeding process. The Stage Model was the dominating approach towards explaining internationalisation. This model is based on organising learning processes (Johanson & Vahlne, 1977). Firms tend to begin international investment in countries with a short psychic distance to the home country. This similarity with the home country reduces the risk of the internationalisation process, because the company has experience of operating in a similar reality. With the accumulation of experience in these markets, firms tend to invest in the farthest countries, making small steps for a safe internationalisation process.

The evolution of international trade brings with it other theories such as the Network Approach, the International Entrepreneurship Perspective and the Born Global Firms. The Network Approach supports the principle that business networks play a fundamental role in the internationalisation process. Business networks are defined as an interconnected set of trade relationships with other actors in business, suppliers and customers, affecting new internationalisation processes (Johanson & Mattson, 1988; Johanson & Vahlne, 2003). These business networks influence how initial market entry is selected, its mode and any development on an international level.

Firms are not faceless, and it is important to emphasise the role of the entrepreneur, since opportunities are recognised as a result of entrepreneurial alertness and ability to adapt to surprises. The International Entrepreneurship Approach places more importance on the role of entrepreneurs than on other variables such as the firm’s size and age. Additionally, Schweizer, Vahlne and Johanson (2010) reinforce the role of entrepreneurs adding a more holistic view to Johanson and Vahlne’s model (2009), the studies on entrepreneurship and opportunity identification and development (Ardichvili, Cardozo, & Soray, 2003), studies on effectuation by Sarasvathy (2001) and the literature on dynamic capabilities (Sapienza, Autio, George, & Zahra, 2006).

Key Terms in this Chapter

Recession in Situ: Decrease of the size of a company’s structure, by reducing the number of employees and decreasing productive activity.

International Market Selection: Process of choosing the right market for a company to internationalize.

Technological Downgrading: The decision from a company of producing low-end products that are not intensive in skilled labor or technology.

Unfair Competition: Situation in what local companies have privileged conditions comparing to international companies, considering both legal or less legal ways in that market.

Inter-Subsidiary Competition: Competition among multiple subsidiaries of the same mother-company regarding strategic options, investment choices for example.

De-Internationalization: Total or partial, voluntary or involuntary exit of a company from an extern/foreign market.

Misfit of Micro-Location: Wrong choice of determining a place to be located after choosing a country, due to the fact that it is not only necessary to choose the best country but also the best place inside it.

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