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International Business Review 10 (2001) 25–49www.elsevier.com/locate/ibusrev

A holistic approach to internationalisation

Richard Fletcher*

School of Marketing, University of Technology, PO Box 123, Broadway, Sydney, NSW 2007, Australia

Received 7 January 1999; received in revised form 13 October 1999; accepted 26 June 2000

Abstract

Previous research into internationalisation has viewed it as being an export-led phenomenon.Although this is a phenomenon that extends to other activities such as licensing and manufac-ture overseas, it is usually considered from an ‘outward’ perspective. In this paper it is arguedthat internationalisation is no longer just an outward-driven activity and that firms also becomeinternationalised by undertaking import-led activities and activities in which ‘inward’ and ‘out-ward’ activities are ‘linked’, as happens with strategic alliances, cooperative manufactureand countertrade.

The paper demonstrates that a majority of firms engage in ‘inward’ and ‘linked’ internationalactivities as well as ‘outward’ activities. It also illustrates that the factors that predict outwardinternationalisation also predict ‘inward’ and, to a lesser extent, ‘linked’ internationalisation.The paper questions the traditional view that internationalisation should be progressive andincremental and explores the issue of de-internationalisation and its role in the long-term inter-nationalisation of the firm.

The implications of the above conceptual approach to internationalisation are discussedbriefly and illustrated in the case of government programs of export assistance, born globalfirms, firms operating on a global basis and firms undertaking international business in theelectronic environment. 2001 Elsevier Science Ltd. All rights reserved.

Keywords:Internationalisation; De-internationalisation; Export; Import; Strategic alliances andcountertrade

* Tel.: +61-2-95143537; fax:+61-2-95143535.E-mail address:[email protected] (R. Fletcher).

0969-5931/01/$ - see front matter 2001 Elsevier Science Ltd. All rights reserved.PII: S0969 -5931(00 )00039-1

26 R. Fletcher / International Business Review 10 (2001) 25–49

1. Introduction

Over the past thirty years, one of the most frequently researched topics in inter-national marketing has been that of internationalisation of the firm. For the mostpart, this research has been devoted to factors causing internationalisation or to theprocess by which firms become increasingly involved in international activities. Oneconclusion which emerges from this research is that internationalisation is a complexand multidimensional process (Barrett, 1986). There are many definitions of inter-nationalisation and more recent ones such as those of Welch and Luostarinen (1988),Rao and Naidu (1992), Easton and Li (1993) and Johanson and Vahlne (1993)describe internationalisation as a process by which firms increase their involvementin international business activities. There have been two streams of research intointernationalisation. The first research stream relates to factors causing internationa-lisation, and the second has focused on the process of firms’ internationalisation.

2. Factors causing internationalisation

Research in this area has been extensive and has been summarised by Cavusgiland Naor (1987), Aaby and Slater (1989) and Zhou and Stan (1998). These factorscan be categorised according to whether they are management characteristics, organ-isation characteristics, external impediments or external incentives to engage in busi-ness overseas.

Important management characteristics are demographic such as age (Pinney, 1970;Barrett, 1986) and education (Simpson & Kujawa, 1974; Fletcher, 1996); and thoseinvolving aspects of international exposure such as country of birth (Simmonds &Smith, 1968; Barrett, 1986, Da Rocha, Christensen & Da Cunha, 1990; Eriksson,Jahanson, Majkgard & Sharma, 1999), time spent living overseas (Langston & Teas,1976; Barrett, 1986; Fletcher, 1996), and frequency of business trips overseas(Simmonds & Smith, 1968; Barrett, 1986); those which reflect a knowledge of inter-national business such as familiarity with culture and international business practises(Shoham & Albaum, 1995; Fletcher, 1996) and international transactions experience(Fletcher, 1996). Other important characteristics include a structured approach tomanagement—such as planning orientation (Cavusgil, 1984; Diamantopoulos &Inglis, 1988) or having a strategic or proactive approach (Cavusgil & Godiwalla,1982; Dominguez & Sequeira, 1991).

The most important organisational characteristics are willingness to develop pro-ducts for overseas markets (Rosson & Ford, 1982; Bilkey, 1985; Chetty & Hamilton,1993), technological advantage (Chang & Grubb, 1992; Evangelista, 1994), willing-ness to fund international activities (McKinsey/AMC, 1993; Evangelista, 1994), sizeas measured by employment (Miesenbock, 1989; Akoorie & Enderwick, 1992;Chetty & Hamilton, 1993), willingness to research overseas markets (Cavusgil, 1984;Bello & Barksdale, 1986), having a focus on research and development (Chang &Grubb, 1992; McKinsey/AMC, 1993), and finally the nature of the product(Akoorie & Enderwick, 1992).

27R. Fletcher / International Business Review 10 (2001) 25–49

The most important external impediments are marketing activities by competitorsin overseas markets and perception of higher risk in overseas markets including lackof continuity in overseas orders, tariff and non-tariff barriers (Bilkey, 1978),exchange-rate movements (Bradley, 1981; Cavusgil, 1982), knowledge of the marketand how it operates (Reid, 1983; Johnston & Czinkota, 1985), issues related to agentsand control including attitudes of foreign governments (Bello & Williamson, 1985;Yaprak, 1985), cost issues, lack of export training and government assistance(Bilkey, 1985).

The most important external incentives are availability of export incentives fromgovernment (Kaynak & Kothari, 1984), overseas demand factors such as competi-tiveness (Reid, 1984) and inquiries via industry bodies or government representativesoverseas or information in publications. Others include fall in domestic demand orexcess capacity (Johnston & Czinkota, 1985; Sullivan & Bauerschmidt, 1987;Kumcu, Harcar & Kumcu, 1995; Ogunmokun & Ng, 1998), and reduction in costsof production (Reid, 1983; Axinn, 1988).

These studies of factors causing internationalisation categorise the degree of inter-nationalisation according to the nature of involvement in exporting (Bilkey & Tesar,1977), or progression from one stage of outward-driven international behaviour suchas exporting to another such as foreign direct investment (Johanson & Wiedersheim-Paul, 1975), or in terms of exporting as opposed to non-exporting (Barrett, 1986). Inall cases, the focus is on internationalisation as an outward-driven (exported) activity.

3. The process of firms’ internationalisation

This process includes the ‘stages’ approach which views internationalisation asinvolving changes in the firm as it increases its commitment to foreign markets.Firms start with the entry mode that requires the least commitment of resources andgradually increase their commitment of resources (Bilkey & Tesar, 1977; Cavusgil,1980; Reid, 1981). These studies tend to be cross-sectional in nature and do notaddress the dynamic nature of internationalisation.

The ‘learning’ approach, on the contrary, attempts to explain rather than describepatterns of internationalisation behaviour. With this approach, the process is treatedas an evolutionary, sequential build-up of foreign commitments over time due tointeraction between knowledge of foreign markets, on the one hand, and increasingcommitment of resources to their development, on the other (Johanson & Wiedersh-eim-Paul, 1975, Johanson & Vahlne, 1977, 1993; Luostarinen, 1978).

The ‘contingency’ approach, by contrast, is based on the premise that firms’ inter-national evolution is contingent upon a wide range of market-specific and firm-spe-cific characteristics. External situations or opportunities may cause firms to leapfrogstages or to enter markets that are psychically distant from the home country (Reid,1984; Turnbull, 1987; O’Farrell & Wood, 1994).

Finally, the ‘network’ approach attributes internationalisation to the developmentof networks of relationships over time as international buyers and sellers build upknowledge about each other. At a point in time, the firm has a position in an overseas


network that characterises its relations with other firms. The network approach con-centrates on the market and the relationship of the firm to that market as opposedto internal development of a firm’s knowledge and resources (Hakansson, 1982;Johanson & Mattsson, 1984, 1988; Easton, 1992). In addition, there has been someexamination of buyer–seller relationships based on the network approach as reflectedin the work of the Industrial Marketing and Purchasing (IMP) group (Leonidou &Kaleka, 1998).

There has been some challenging of the above approaches on the grounds thatthey do not reflect how firms actually behave, especially in hi-tech and service indus-tries (see Bell, 1995). Such challenge has not gone beyond questioning the relevanceof these approaches to outward forms of internationalisation. This raises the issueas to how relevant are the more traditional approaches to internationalisation of firmsin the new millennium.

There are two main reasons for the change in the environment for internationalbusiness. In the first place, national borders are becoming increasingly irrelevant.This is evidenced by the expansion of regional trade groupings, developments in theinternational trade environment such as the World Trade Order and the difficultiesfaced by governments in enforcing national sovereignty. This aspect is illustrated bythe rise in incidence of transfer pricing, promotion activity via the Internet and theexpanded focus of global policies towards issues such as the environment and humanrights. In the second place, strategic alliances are being formed by firms acrossnational boundaries. These are driven by the information revolution, rising fixedcosts, the need for increasing R&D expenditures, rapid dispersion of technology,shorter product life-cycles, converging consumer tastes, and increasing value placedon brand equity—all of which stimulate firms to enter into cooperative arrangementswith organisations in other countries.

These issues in turn are requiring firms to adopt a more dynamic as opposed toan incremental approach and switch between forms of international involvement aschanging market circumstances require. The opposite of stepwise progression andforward momentum is de-internationalisation. In international as in domestic mar-kets, firms often downsize, shed unprofitable operations and return to their core com-petencies and increase their outsourcing—all in the interests of enhancing their abilityto compete in the longer term. Niall Fitzgerald, the co-chairman of Unilever, arguesthat for the multinational, this process is

like having a nice garden which gets weeds. You have to clean it up so thelight and air get to the blooms which are likely to grow best (Wall Street Journal,3 September, 1996).

Although the above refers to voluntary de-internationalisation, it can also be involun-tary as when expropriation occurs in a foreign country. De-internationalisation cantake the form of reducing operations in a market, completely withdrawing from amarket or switching to modes of operation that entail a lesser commitment ofresources.


4. A holistic approach

In response to these developments in the international environment, more complexforms of international behaviour have evolved. These forms of behaviour have beeninfluenced by the increasing need to serve customers in the global environment, tobring products to market more quickly, to introduce products into several countriessimultaneously, to lower costs by firms in each country focusing on their core com-petencies and to reduce promotion costs by marketing globally under one brand.Underlying the above is a realisation by firms that in order to be internationallycompetitive, they also need to be internationally cooperative.

Whilst the early approaches to internationalisation such as the ‘stages’, ‘learning’and ‘contingency’ approaches were developed on the basis of empirical surveys ofpast export practices in the US and Europe in the 1970s and 1980s, the above changesin the international business environment mean that such approaches may no longerbe relevant. These changes in the environment call for a new approach that embracesa more holistic view of internationalisation. This new approach needs to recognisethe following factors.

O Firms can also become internationalised by inward-driven activities such asindirect importing, direct importing, becoming the licensee for a foreign firm,being the joint venture partner with an overseas firm in its domestic market, orby manufacturing overseas to supply the home market. It is only recently thatempirical research has been undertaken in this area and this has been from apurchasing rather than from an internationalisation perspective. As an example, inthe Australian context, James N. Kirby (Australia) now manufacture refrigerationcompressors in Thailand via a joint venture to supply the Australian market,whereas 15 years ago they exported compressors from Australia to Thailand.

O Outward internationalisation can lead to inward internationalisation and viceversa, as when the franchisee or licensee in one country becomes the franchisoror licensor in another. International franchising often spreads in this way, as forexample when the McDonald’s franchisee in Australia becomes the McDonald’sfranchisor in Papua New Guinea.

O Internationalisation often requires more complex forms of international behaviourin which there is a linking of both inward and outward international activities ashappens with strategic alliances,1 countertrade and cooperative manufacture. Anexample of this that receives frequent comment in the press is offset programs inthe aerospace and defence sectors. An example involving Australia was the sale ofsubmarines by Kokums of Sweden to the Royal Australian Navy—an arrangementinvolving components supply by Australian firms, technology transfer to Australiaand cooperative manufacturing activities in Australia.

1 Joint ventures are considered as strategic alliances in cases where the foreign investment involvesthe linking of inward and outward activities. Where this is not the case, joint ventures are regarded asan outward form of internationalisation.


O Internationalisation should be viewed as a global activity rather than as an activitywith respect to a firm’s involvement in a specific overseas country. This meansthat internationalisation should not only focus on expansion of internationalinvolvement in a particular country but also on contraction. This is because a firmmight involuntarily or deliberately reduce its involvement in one country so asto devote resources to more beneficial activities in other countries. This relatesto the concept of de-internationalisation as proposed by Welch and Benito (1996).

Several researchers in the area of internationalisation have written conceptual paperswhich point to a more holistic view which embraces inward and linked forms aswell as outward forms. However, these papers commented on the extent of theseadditional forms of internationalisation rather than on the motivations for inward andlinked internationalisation. For example, in Finland Luostarinen (1984) found thatof manufacturers engaged in outward activities, 79% were also involved in inwardactivities and 17% in linked activities. In a later study in Finland referred to byKorhonen, Luostarinen and Welch (1994), it was found that only 44% of small andmedium-sized firms began international operations from the outward side.

Fig. 1 is a conceptual framework of a holistic approach to internationalisation. Itshows that factors previously found to apply to outward-driven internationalisationalso impact on inward and linked forms of internationalisation. It also shows thatoutward forms can lead to inward forms and vice versa. In addition, it illustratesthat linked forms of internationalisation can be driven by outward forms (e.g, a desireto export) or by inward forms (i.e. a desire to tie up a long-term supply from overseasof a difficult-to-obtain product). Within each of the above forms as appropriate, vari-ous types of international activity are shown (e.g. exporting, licensing, productionoverseas, strategic alliances, etc.).

Fig. 1. A holistic approach to internationalisation.


The above discussion leads to three areas for research. The first relates to whetherfirms that engage in outward internationalisation also engage in other forms such asinward or linked internationalisation.

Proposition 1The international behaviour of firms indicates that a majority of firmsundertake different forms of internationalisation (i.e. outward, inward and linked)at the same time.

The second area for research relates to whether factors that predict outward inter-nationalisation also predict inward and linked internationalisation and as well asoverall internationalisation.

Proposition 2Those factors which predict internationalisation with an outward focusalso predict inward internationalisation, linked internationalisation and inter-nationalisation overall.

The third area for research relates to the extent to which factors predicting inter-nationalisation also apply when de-internationalisation takes place. As logic wouldindicate that the factors applying to internationalisation are unlikely to apply whenthe reverse occurs, the proposition is posed as follows:

Proposition 3The factors which predict internationalisation do not apply when de-internationalisation takes place.

5. Methodology

In order to test the above propositions, responses to questions in a broad-basedsurvey on internationalisation developed by Fletcher and Albaum were analysed. Theresponses to questions on management characteristics, firms’ characteristics, impedi-ments and incentives were analysed in terms of the form and nature of the inter-national involvement of respondents. In order to measure change over time, respon-dents were asked to indicate the form and nature of firms’ international involvementin both 1983 and 1993. It is acknowledged that asking respondents to recall thesituation both at the time of completing the survey and at an earlier time may resultin unwitting self-justification by exaggerating present performance compared to thepast. The alternative of comparing separate studies of the same broad group nineyears apart was considered. However, this was discarded because of the small num-ber of firms that responded to both surveys due to mergers, acquisitions and bank-ruptcies.2

2 The surveys were those undertaken by Barrett in 1983 and Fletcher in 1992 and reported in Barrett(1986) and Fletcher (1996) respectively. Both were of Australian manufacturing firms based on a Dunand Bradstreet listing. There were approximately 500 firms in each survey of which only 22 were commonto both surveys.


Originally developed in 1992, the questionnaire was revised following pilot testingin 1993 by mailing to 28 international business executives who had attended theWorld Countertrade Conference at Eindhoven in the Netherlands. In 1994, theupdated survey was mailed to the population of exporting firms in the state of NewSouth Wales listed in the Australian Directory of Exports. These were exporters ofAustralian goods and services. As there is no equivalent listing of importers and asdirectories of manufacturers exclude service providers, the Directory of Exports wasthe best available data base. The limitation of relying on a directory of exporters toprovide a sample of importers is acknowledged. However, given the thesis of thispaper that most firms engage in forms of international behaviour in addition toexporting and that a majority of exporting firms are likely to engage in inward orlinked international activities, the approach would appear to be reasonable. The ques-tionnaire was mailed to 2845 firms and, taking into account firms with wrongaddresses or those that had ceased operations, resulted in an effective list of 2637exporting firms. Completed questionnaires numbered 541 which is a response rateof 20.5%. Sixty-two per cent of respondents were small firms (1–49 employees),29% were medium-sized firms (50–499 employees) and 9% were large firms (500+employees). This response pattern corresponds with previous surveys of manufactur-ing firms in Australia (Barrett, 1986; Fletcher, 1996). Although the mailing was toa census of direct exporting firms, not all the firms that responded were undertakingdirect export at the time of the survey. All these firms, however, engaged in someform of international activity. Because of the preliminary nature of the study, testingfor non-response bias was not undertaken.

As the data were gathered 5 years ago, their continuing relevance was checkedby including questions relating to the findings in interviews conducted with 17 execu-tives and officials involved in international activities in Sydney in November–December, 1999. The questions related to forms of international activities under-taken, percentage of business accounted for by forms of international involvement,factors causing international involvement and whether de-internationalisation hadtaken place over the last decade. Responses were analysed using ‘Nu*dist’. Nothingwas revealed by this subsequent qualitative research that negated the findings.

In order to test the first proposition that a majority of firms undertake differentforms of internationalisation at the same time, percentages of respondents participat-ing in various forms of internationalisation were compared. This was to establishthe extent to which both exporting and non-exporting firms participated in otherforms of internationalisation.

In order to test the second proposition that the factors found to predict outwardinternationalisation also predict inward and linked internationalisation and inter-nationalisation overall, a measure of dependency on internationalisation was arrivedat. A firm was deemed to be dependent on internationalisation overall, or on a specificform of internationalisation, if the percentage of its international business activityaccounted for by internationalisation, or the form of internationalisation, was equalto or greater than 20%. Chi square was used to determine levels of significance.

In order to measure the third proposition—the factors that predict internationalis-ation do not apply when de-internationalisation occurs—respondents were split into


those that had increased their dependency on international activity, on the one hand,and those that had decreased their dependency on international activities, on theother, between 1983 and 1993. ANOVAs were calculated, grouping companies basedon management characteristics, firms’ characteristics, perceptions of impedimentsand perceptions of incentives. The resulting group means were used to determine ifthere was a difference in the overall level of international business activity over the10-year period.

6. Results

Table 1 shows the number and percentage of the 503 firms in the survey thatundertook a specific international business activity. First, all respondents were ana-lysed. They were analysed according to the form of international activity undertaken(outward, inward or linked) and within each form (e.g. indirect export, productionoverseas, licensing overseas). Second, firms that undertook direct export were ana-lysed according to the same criteria to see whether there was a difference betweenrespondents that did and respondents that did not engage in direct export. Whereas

Table 1Involvement in differing types and forms of international businessa

Activity All responses Direct exporters Sole involvement

N % N % N %

OutwardIndirect export 108 21.5 97 26.7 5 5.3Direct export 363 72.2 363 100.0 108 33.6Sales branch 113 22.5 101 27.8 4 6.3overseasProduction overseas 46 9.1 42 11.6 3 7.3Licensing overseas 68 13.4 64 17.6 1 2.6Total 698 667 121InwardIndirect import 73 4.5 68 18.7 – –Direct import 208 41.1 194 53.4 12 8.6Purchasing office 23 4.6 21 5.8 – –abroadLicensing in 48 9.5 44 12.1 1 3.8AustraliaTotal 352 327 13LinkedCountertrade 13 2.6 13 2.6 – –Strategic alliances 47 9.3 41 11.3 3 11.1Total 60 54 3

a Examples of types of international business involvement are indirect export, direct export, salesbranch overseas, production overseas, etc. Forms of international business involvement are ‘outward’,‘inward’, ‘linked’. Totals of percentages exceed 100% as firms engage in more than one type or form.


most respondents engaged in several forms of international activities, 27% (137) offirms engaged in one form of international activity only. These are shown accordingto the activity undertaken. This enables a comparison to be made between firmsundertaking individual international activities and firms undertaking multiple inter-national activities.

The 503 firms surveyed engaged in 1120 types of international business activity.Seventy-three per cent of firms undertook more that one type of international busi-ness activity. Anecdotal comment would suggest that those firms that engage in directexport are most likely to only undertake the single activity of direct export becauseit is an activity at an early stage of the internationalisation process. This was notthe case. The 363 firms that engaged in direct export undertook 1048 types of inter-national business activity (685 types of activity other than direct export). With directexporters, 28% had sales branches overseas, 19% also exported indirectly throughexport intermediaries, 18% licensed manufacture of their products in overseas coun-tries and 12% engaged in direct manufacture overseas. The responses of these firmsindicate that exporting is not a precondition for other forms of internationalisation.In fact, only 27% (137) of firms in the survey engaged in only one type of inter-national business. The figure ranged from a low of zero in the case of indirect import,purchasing office overseas and countertrade to 33.3% in the case of direct exporting.

Table 1 also reveals that respondents did not confine their international businessactivities to one form—be it outward, inward or linked. This can be inferred fromthe fact that of activity forms undertaken by respondents drawn from the AustralianDirectory of Exporters, although of 63% of activity types were outward driven, 32%were inward driven and 6% were linked. This is further supported by the analysis ofinternational business transaction types by direct exporters. The 363 direct exportersundertook a total of 327 inward and 54 linked types of international business trans-action. Furthermore, 53% undertook direct importing and over 14% engaged in someform of linked activity.

The above indicates that internationalisation is multifaceted, does not just relateto outward activities and supports the views of researchers in Finland mentionedearlier. Proposition 1 is therefore supported.

The second stage of analysis related to Proposition 2—whether factors that pre-dicted outward internationalisation also predicted inward and linked internationalis-ation as well as internationalisation overall. As mentioned, these factors were derivedfrom previous research on drivers of outward internationalisation. Questions relatingto these drivers were included in the survey instrument. The factors were groupedaccording to whether they were management characteristics, firms’ characteristics,incentives or impediments. Table 2 contains detail of which factors were significantpredictors of inward, linked and overall internationalisation and provides details ofthe Chi square figures and significance levels. All factors that according to the litera-ture predict outward internationalisation were found in this research to also predictoutward internationalisation with the exception of size as measured by employment.

As far as management characteristics are concerned, all those which predict out-ward internationalisation were found to predict internationalisation overall. With theexception of the factor ‘build up long-term relationships’, the same factors also pre-


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Dep

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χ2(s

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Hig

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(50–

499

empl

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79.2

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.0(0

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26.3

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(0.0

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gree

52.0

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43.0

31.6

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9362

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Impo

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62.0

42.5

(0.0

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65.4

37.9

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31.7

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68.3

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69.2

55.2

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(co

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do

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)


Tab

le2

(con

tinu

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Fac

tor

Out

war

dIn

war

dLi

nked

Tot

al

Dep

ende

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χ2(s

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gm

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ting

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50.9

63.4

5.71

54.3

63.5

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53.8

62.1

0.39

50.5

61.6

4.81

Uni

mpo

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t49

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45.7

36.5

(0.1

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56.5

66.7

3.86

48.9

69.5

9.56

68.0

62.1

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57.3

67.5

4.32

Uni

mpo

rtan

t43

.533

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.05)

51.1

30.5

(0.0

0)32

.037

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4154

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3153

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9456

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44.4

31.4

(0.0

1)45

.730

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46.2

24.1

(0.0

9)43

.531

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Lack

ofco

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lov

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ents

Impo

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t45

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2344

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4945

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68U

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54.2

39.9

(0.0

1)55

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56.0

27.6

(0.0

3)54

.141

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Con

trol

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nal

oper

atio

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port

ant

48.5

62.0

6.54

47.8

63.3

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53.8

79.3

4.04

50.0

62.3

5.91

Uni

mpo

rtan

t51

.538

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.01)

52.2

36.7

(0.0

2)46

.220

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ckof

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assi

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on

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Tab

le2

(con

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Fac

tor

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war

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χ2(s

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dicted inward internationalisation. Although only three management characteristicspredicted linked internationalisation (frequency of overseas trips, preparation of aninternational business plan and knowledge of foreign cultures), this may not meanthat the other management characteristics do not predict linked internationalisation.This is because the four other factors could not be tested due to the small numberof respondents.

With firms’ characteristics, those factors that predicted outward internationalis-ation also predicted inward internationalisation as well as internationalisation overall.Again, as with linked forms of internationalisation, there were a number of character-istics that could not be tested because of the small number of respondents engagingin strategic alliances or countertrade. However, two factors that predict outward,inward and overall internationalisation did not predict linked internationalisation—‘international business experience’ and ‘international market research’. On the otherhand, the only factor that was found not to be positively related to other forms ofinternationalisation or internationalisation overall—size (as measured by Australianemployment)—was found to be a predictor of linked internationalisation.

Concerning incentives to internationalise, both factors that predict outward inter-nationalisation also predicted overall internationalisation, although the second ofthese factors (increasing domestic competition) did not apply to either inward orlinked internationalisation.

Finally, regarding impediments to internationalisation, those that related to out-ward internationalisation also related to internationalisation overall and, with theexception of ‘strong marketing by overseas competitors’, to inward internationalis-ation. With linked forms of internationalisation, the four impediments that were sig-nificant drivers mostly related to information and control, although there were sevenfactors which were not significant. This provides a mixed picture as far as linkedinternationalisation is concerned. From the foregoing, it would seem that it will benecessary to undertake a study involving a larger number of respondents engagingin linked internationalisation, before any meaningful conclusions can be drawn asfar as factors underlying this form of internationalisation is concerned.

Overall, the results indicate that Proposition 2 is supported as far as inward inter-nationalisation and overall internationalisation are concerned.

The third proposition relates to whether the factors that predict internationalisationdo not apply when de-internationalisation takes place. This was measured by compar-ing the percentage of turnover due to international business in 1983 compared to1993 (i.e. dependency on international involvement). Where the percentage hadincreased, it was presumed internationalisation had taken place. Where the percent-age had decreased, it was assumed that de-internationalisation had taken place. Thefactors that applied to firms in this latter group were treated as having contributedto firms’ de-internationalisation (see Table 3).

This measure can only provide an indication as there is a bias in the sampletowards internationalisation as it was taken from a directory of current exporters. Inaddition, some of those whose internationalisation had decreased may have beenreluctant to respond to the survey as it was entitled ‘Internationalisation of Compa-


Table 3ANOVA results for factors which predict internationalisation and de-internationalisation

Factor Internationalisation De-internationalisation

% of Group meanF (sig.) % of Group meanF (sig.)respondents respondents

MANAGEMENT CHARACTERISTICSTrips overseasInfrequent (1–4 31.6 15.13 7.22 52.4 212.82 0.05year)Frequent (5+ year) 68.4 24.38 (0.01) 47.6 211.60 (0.83)Senior executivespends more than10% time on IBDisagree 14.9 11.31 3.86 25.0 215.57 0.84Ambivalent 4.9 24.00 (0.02) 10.7 23.33 (0.44)Agree 80.4 22.24 64.3 214.28InternationaltransactionsexperienceDisagree 16.6 8.49 11.36 17.9 217.40 0.546Ambivalent 14.9 14.54 (0.00) 14.3 27.25 (0.58)Agree 68.5 24.99 67.9 213.68Knowledge offoreign culturesDisagree 19.2 13.38 6.64 21.4 216.67 0.199Ambivalent 30.3 17.31 (0.00) 14.3 213.75 (0.82)Agree 50.4 25.6 764.3 212.28FIRM CHARACTERISTICSInternationalbusiness experienceLow (1–4 years) 19.6 16.17 5.195 – Unable to testMedium (5–9 26.8 28.05 (0.00) –years)High (10+ years) 53.6 18.69 100.0Number ofcountries involvedSmall (1–4) 27.5 15.00 4.065 25.0 222.00 1.758Medium (5–9) 34.1 20.44 (0.02) 35.7 210.40 (0.19)Large (10+) 38.4 25.28 39.3 210.73Developing newproducts foroverseasDisagree 8.9 17.62 0.981 21.4 211.00 2.277Ambivalent 6.0 20.43 (0.42) 10.7 233.33 (0.09)Agree 85.1 20.98 67.9 211.16Adequate funds forIB

(continued on next page)


Table 3 (continued)



Disagree 13.7 14.50 5.29 21.4 24.00 1.87Ambivalent 21.8 14.59 (0.01) 21.4 213.67 (0.18)Agree 64.5 24.17 57.1 216.88Adequate IBmarket researchDisagree 32.6 15.95 2.982 53.6 211.80 0.385Ambivalent 23.8 21.07 (0.05) 25.0 213.00 (0.68)Agree 43.8 23.99 21.4 218.00Growth in majoroverseas marketGrowing 56.5 23.13 3.08 61.5 215.19 1.28Static 37.8 17.93 (0.05) 15.4 22.50 (0.30)Declining 5.7 9.92 23.1 215.50INCENTIVESExclusiveproduction processImportant 49.5 21.95 0.89 45.8 29.36 2.92Unimportant 50.5 19.13 (0.35) 54.1 219.46 (0.10)Inquiries forindustryrepresentativesImportant 42.5 17.04 3.96 48.1 212.15 0.22Unimportant 57.5 23.02 (0.05) 51.9 214.86 (0.64)Industry tradeassociationsImportant 27.4 15.52 3.819 38.5 29.50 1.48Unimportant 72.6 21.86 (0.05) 61.5 216.69 (0.24)Fall in domesticdemandImportant 52.9 17.50 4.042 48.1 213.46 0.001Unimportant 47.1 23.23 (0.05) 51.9 213.64 (0.98)Increasing domesticcompetitionImportant 44.2 13.44 18.84 37.0 26.90 3.627Unimportant 55.8 25.53 (0.00) 63.0 217.47 (0.07)Domestic suppliersmore competitiveImportant 33.8 16.07 3.95 37.0 212.40 0.096Unimportant 66.2 22.10 (0.05) 63.0 214.24 (0.76)Technology ofsuppliers increasedImportant 24.9 15.87 2.77 34.6 213.00 0.07Unimportant 75.1 21.50 (0.10) 65.4 214.59 (0.80)Acquire overseasmarket knowledge

(continued on next page)


Table 3 (continued)



Important 69.7 21.18 0.69 66.7 210.22 3.03Unimportant 30.3 18.48 (0.40) 33.3 220.22 (0.09)Versatile productionImportant 68.2 21.16 0.45 57.7 29.53 3.43Unimportant 31.8 19.06 (0.50) 42.3 219.91 (0.08)IMPEDIMENTSStrong marketing by overseas competitorsImportant 53.1 17.10 6.998 63.0 212.88 0.169Unimportant 46.9 24.80 (0.01) 37.0 215.30 (0.68)Lack of continuity of overseas ordersImportant 59.9 18.47 3.20 78.6 213.32 0.006Unimportant 40.1 23.85 (0.08) 21.4 213.83 (0.94)Identifying overseas decision-makersImportant 61.0 19.79 0.69 64.3 28.17 8.70Unimportant 39.0 22.30 (0.41) 35.7 222.90 (0.01)Availability of working capitalImportant 61.4 22.96 3.34 53.6 215.60 1.03Unimportant 38.6 16.92 (0.01) 46.4 210.93 (0.41)Compete on price overseasImportant 62.1 18.29 4.17 71.4 213.15 0.51Unimportant 37.9 24.43 (0.00) 28.6 214.13 (0.73)Strong competition overseasImportant 77.0 18.79 4.15 75.0 214.62 0.57Unimportant 23.0 25.81 (0.04) 25.0 29.86 (0.46)Lack of exporttrainingImportant 36.6 17.20 2.896 37.0 218.10 1.43Unimportant 63.4 22.33 (0.09) 63.0 211.24 (0.24)Foreign government attitudesImportant 49.3 17.50 4.096 42.9 213.75 0.10Unimportant 50.7 23.39 (0.04) 57.1 213.19 (0.92)Typical help to overseas firmsImportant 49.1 17.10 5.23 42.3 29.00 2.45Unimportant 50.9 23.77 (0.02) 57.7 217.87 (0.13)Higher risk in overseas marketsImportant 53.3 17.18 5.89 35.7 214.50 0.08Unimportant 46.7 24.19 (0.02) 64.3 212.83 (0.78)

nies’. This may explain why only 28 cases of de-internationalisation were foundcompared to 209 cases of internationalisation.

Contrary to the suggestion of Welch and Benito (1996), none of the factors thatpredicted internationalisation operated in reverse in the case of de-internationalis-ation. Those factors which were found to be unique to increased internationalisationcentre around management characteristics such as commitment and experience of


employees with regard to involvement in international activities. Organisationalcharacteristics focus on a willingness to make adjustments to accommodate the needsof foreign markets and a willingness to commit adequate resources. The externalimpediments relate to overseas competition and difficulty in identifying decisionmakers overseas (both only significant at the 0.09 level). External incentives wererelated to both product advantages and to inquiries from and assistance by industrybodies. In general, these factors indicate that a proactive approach characterises firmswhich experienced an increase in internationalisation as measured by dependencyon international business for turnover.

By contrast, those factors unique to de-internationalisation did not include anymanagement characteristics and those relating to firms’ characteristics were confinedto developing new products for overseas markets. External impediments relate tolack of continuity in overseas orders and poor performance of overseas agents. Thesefactors point to a more reactive approach on the part of firms that have experiencedde-internationalisation rather than a conscious attempt to reduce immediate inter-national involvement in order to strengthen the firm’s future domestic or inter-national position.

Finally, there were a number of factors that related to international involvementin general but which did not differentiate between internationalisation and de-inter-nationalisation. These include the management characteristic of frequency of over-seas trips and the firms’ characteristics of degree to which decision making in thefirm was driven by foreign market considerations, length of firms’ involvement ininternational business, adequacy of international market research and extent ofgrowth in major overseas markets. The only external incentive in this category waswhether the firm’s R&D expenditure level was above the industry average (and henceinternational involvement was necessary in order to amortise it).

Of the 28 factors in Table 3, 17 only related to increases in internationalisation,six only related to increases in de-internationalisation and a further five related toboth internationalisation and de-internationalisation. Because of this, Proposition 3is supported.

7. Implications

The above research indicates that firms’ international decision-making is both mul-tidimensional and multifocal. It is multidimensional in that it is not only outwarddriven but can also be inward driven. Outward-driven activities can be influencedby inward-driven activities and vice versa. It is multifocal in that firms do not focuson one form of involvement overseas but tailor their form of involvement to boththe circumstances of the firm and the circumstances of the market.

The research indicates that the management and firm characteristics that previousresearch attributed to outward-driven internationalisation also applied to inward-driven internationalisation and internationalisation overall. This would suggest thatthe firm and management characteristics attributed previously to a tendency to engagein export and other outward forms of internationalisation in fact reflect a tendency


towards international involvement regardless of the form it takes. Similarly, theincentives and impediments attributed in previous research to outward-driven inter-nationalisation apply, for the most part, to inward-driven internationalisation andinternationalisation overall.

Finally, the research provided some evidence that the management characteristics,firms’ characteristics, impediments and incentives of firms that expanded their inter-national involvement did not apply in reverse to firms that decreased their inter-national involvement. To the extent that these variables differed between firms thatincreased as opposed to decreased their internationalisation, a preliminary conclusionwould be that the former were more proactive and the latter more reactive inapproach.

The above suggests that internationalisation should be viewed in a holistic wayrather than in terms of the form it takes. This is because it was found that with firmsengaged in export, their international involvement in a majority of cases was notconfined to export or even outward-driven activities. Rather it involved t a range ofinward and linked forms of international behaviour that interacted with each otherto influence the extent of the firm’s internationalisation.

A holistic approach to internationalisation is better able to mirror the more sophis-ticated forms of international involvement that characterise many firms’ internationalactivities at the threshold of the of the new millennium. There are an increasingnumber of firms that operate on a global basis. Driven by shorter product life-cyclesand increased costs of bringing new products to market, these firms, in their searchfor inputs to improve their global competitiveness, are likely to sell to and sourcefrom the same overseas firm or subsidiary. In so doing, they are endeavouring toserve the global market by maximising the capabilities and advantages that individualcountries have to offer. This may necessitate the formation of strategic alliances, theentering into cooperative manufacturing arrangements, acting as both licensee andlicensor, or operating as both franchisee and franchisor. In some cases, in order tosecure a competitive position in difficult markets, global firms may have to becomeactively involved in countertrade.

The holistic approach is also a more appropriate description for the involvementof small and medium-sized firms that are ‘born global’. These are firms that, fromthe outset, plan to market their products and services internationally. Within 2 yearsof establishment, these firms usually achieve 25% of turnover from overseas activi-ties. They do not follow a sequential process of internationalisation and often theirexpansion overseas reflects the nature of their operation in the domestic market (i.e.if their skill in the home market lies in franchising, this will be their mode of entryinto overseas markets).

The holistic approach is also more appropriate for both small and mediumexporters (SMEs) as well as transnational companies undertaking international busi-ness in the new electronic environment. In the world of electronic commerce, out-ward-driven internationalisation may well prove an inadequate explanation of inter-national behaviour in an environment characterised by interactivity, disintermediationand the replacement of marketplace by marketspace transactions. Whereas in themarketplace, internationalisation tends to be incremental, unidimensional and dis-


tinct, in marketspace, internationalisation tends to be rapid, multidimensional andindistinct (Zhao & Du, 2000).

Finally, from the perspective of government, the holistic approach to internationa-lisation has significant implications. This can be illustrated in the case of governmentassistance programs. Governments in many countries, via programs of export assist-ance (e.g. Export Now, Australia 1978) and export incentives (e.g. Australian ExportMarket Development Grants Scheme), endeavour to encourage firms to become moreinvolved in international activities. Government assistance measures in general havenot moved beyond outward forms and governments tend to only assist firms to sellto and manufacture in overseas markets with a view to supplying those and adjacentmarkets. In general, this approach lags behind the reality of international behaviourin that it does not recognise that inward-driven internationalisation today can leadto outward-driven internationalisation tomorrow and vice versa, and that internationalbusiness increasingly involves activities in which inward and outward forms arelinked. As far as government assistance is concerned, a majority of respondentsengaged in outward, inward and linked forms of internationalisation did not considerlack of assistance an important impediment to undertaking international business.This appears to indicate that assistance measures offered by the Australian govern-ment are not rated highly. It also raises the possibility that the assistance offeredmay be of the wrong kind—that assistance measures tailored to direct exporters areof little relevance to many exporting firms because most of them simultaneouslyengage in other forms of international activity.

8. Limitations and directions for future research

One of the limitations of this research is the source of the population used forthis study. In the absence of an up-to-date directory of Australian importers, a Direc-tory of Exporters was used. This can be supported on the basis of overseas researchthat most exporters also engage in inward and linked forms of internationalisation.Although this was borne out by the study, we do not know whether most importersalso engage in export and a further study using a list of current importers wouldassist in confirming this. If this proves impossible, the study could be replicated inanother country where up-to-date directories exist of both importers and exporters.The results of that study could then be compared with the present findings to seewhether they differ significantly.

The model in Fig. 1 shows that outward activities might lead to inward activitiesand/or linked activities and vice versa. This was not explored in the survey. Becauseof the complex nature of internationalisation, this aspect might be explored by selec-ted case studies of firms that engage in multiple forms of international activity. Inaddition, the number of firms undertaking linked international activities was too smallin most instances to determine which factors were significant drivers of linked inter-nationalisation. This suggests that a replication of the study on a larger basis mightbe undertaken, specific to firms undertaking linked international activities.

Another aspect is that the study was conducted from the perspective of firms


domiciled in New South Wales, irrespective of whether they were wholly or partlyforeign owned and/or subsidiaries of trans-national companies. An area that couldbe further explored is whether degree of foreign ownership impacts on firms domi-ciled in Australia adopting a holistic approach to internationalisation.

Finally, on the issue of de-internationalisation, the number of firms was too smallto reach other than indicative conclusions. A more comprehensive list of firms whichreduced their international involvement needs to be obtained and a specific surveyadministered inquiring as to the factors causing their de-internationalisation.

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Dr Richard Fletcher is a Senior Lecturer in charge of international marketing studies at the University ofTechnology, Sydney (UTS). He is also Director of Post-Graduate Programs in Marketing and Course Directorof the Master of Business (International Marketing) Degree. Prior to joining UTS in 1989, Dr Fletcher was aSenior Trade Commissioner for the Australian Government over a 25-year period and represented Australia’scommercial interests in New Delhi, Bombay, San Francisco, Jakarta, Teheran, Libya, Los Angeles and Bang-kok.

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