First Steps Abroad
Name two key factors that influence psychic distance between countries.
Cultural differences, language differences, institutional distance, business norms, and education levels
Which entry mode provides low risk, low commitment, and is typically used by SMEs entering a foreign market for the first time?
Indirect exporting
What is a first-mover advantage? Give one example.
A benefit of entering early, such as preempting key partners, building brand loyalty, or securing scarce resources.
What does the Uppsala model say about how firms typically begin internationalization?
They start with low-commitment modes in physically close markets and gradually increase commitment as they gain experiential knowledge.
Name one non-equity and one equity entry mode.
Non-equity: exporting, licensing, franchising, subcontracting.
Equity: joint venture, acquisition, greenfield wholly-owned subsidiary.
Name one market-seeking motive for Foreign Direct Investments.
To access new customers, enter growing markets, or increase global market share.
What is a “born global” firm, and how does it differ from the stages model?
A born global seeks significant international engagement from the beginning, skipping gradual stages; it expands rapidly instead of step-by-step, like in Uppsala.
Why might a firm choose a joint venture (JV) instead of a wholly-owned subsidiary?
To gain local knowledge, share costs/risks, navigate institutional constraints, or because local regulations require a local partner.
Give two location-specific advantages that might motivate a firm to enter a foreign country.
Market size, skilled labor, low production costs, natural resources, strong infrastructure, and global city ecosystems
According to the network internationalization model, what is the main driver of international expansion?
The firm’s relationships and network ties — internationalization occurs as the networks expand, giving access to partners, knowledge, and foreign opportunities.
Which entry mode offers maximum control but also maximum risk and cost, and why might a firm still choose it?
A greenfield wholly-owned subsidiary
chosen for full control, long-term presence, quality consistency, or to access strategic assets.
Name one first-mover disadvantage and one late-mover advantage.
First-mover disadvantage: high uncertainty, regulatory risk, and costly market education.
Late-mover advantage: free-riding on pioneers’ learning, lower uncertainty, ability to imitate/improve.