Abstract
Is the internationalization theory, which has been employed to explain the international expansion patterns of Western firms, equally good for Asian MNCs? Employing South Korean foreign direct investment data from 1973 through 1990, the paper tests two central tenets of the internationalization theory. Results show that physical distance plays a critical role in market selection during the early waves of investment, but economic factors become more important in subsequent waves of investment. Furthermore, the use of majority ownership modes increases over time, but firms appear to ‘leapfrog’ when the market potential is good. The paper concludes that the internalization theory could be very useful even in an Asian context, particularly when employed in conjunction with strategic and economic models.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
REFERENCES
Aharoni, Y. 1966. The Foreign Investment Decision Process. Boston: Harvard Business School.
Anderson, O. 1993. On the internationalization process of firms: A critical analysis. Journal of International Business Studies, 24(2): 209–211.
Anderson, E. and Gatignon, H. 1986. Modes of entry: A transaction cost analysis and propositions. Journal of International Business Studies, 17(Fall): l-26.
Benito, G.R.G. and Gripsrud, G. 1992. Expansion of foreign direct investments: Discreterational location choices or a cultural learning process? Journal of International Business Studies, 23(3): 461–476.
Bilkey, W. 1978. An attempted integration of the literature on the export behavior of thefirms. Journal of International Business Studies, 16(2): 33–46
Bilkey, W. and Tesar, G. 1977. The export behavior of smaller-sized Wisconsin firms. Journal of Internationul Business Studies, 8(First Quarter): 93–98.
Calof, J. and Beamish, P. 1994. Adapting to foreign markets: Explaining internationalization. International Business Review, 4(2).
Cavusgil, T.S. 1980. On the internationalization process of firms. European Research,273–281.
Cavusgil, T.S. and Nevin, J. 1984. A conceptualization of the initial involvement ininternational marketing. In C.W. Lamb and P.M. Dunne (eds) Theoretical Developments in Marketing, pp. 68–71. Chicago: American Marketing Association.
Contractor, F.J. 1990. Ownership patterns of U.S. joint ventures abroad and the liberalization of foreign government regulations in the 1980s: Evidence from the Benchmark Survey. Journal of International Business Studies, 13(1): 80–97.
Erramilli, K.M. 1991. The experience factor in foreign market entry behavior or service firms. Journal of International Business Studies, 22(Third Quarter): 479–501.
Erramilli, K.M. and Rao, C.P. 1993. Service firms' international entry mode choice: A modified transaction-cost analysis approach. Journal of Marketing, 57(July): 19–38.
Gatignon, H. and Anderson, E. 1988. The multinational corporation's degree of control over foreign subsidiaries: An empirical test of a transaction cost explanation. Journal of LUZU Economics, and Organization, Fall: 305–336.
Gripsrud, G. 1990. The determinants of exports, decisions and attitudes to a distant market: Norwegian fishery exports to Japan. Journal of International Business Studies 21(3): 469–486.
Hofstede, G. 1980. Culture's Consequences: lnternational Differences in Work Related Values. Beverly Hills: Sage Publications.
Johanson, J. and Wiedershiem-Paul, E 1975. The internationalization of the firm-Four Swedish cases. Journal of Management Studies, 12(3): 305–322.
Johanson, J. and Vahlne, J.-E. 1990. The mechanism of internationalization. International Marketing Review, 7(d): 11–24
Johanson, J. and Vahlne, J.-E. 1977. The internationalization Process of the firm-A model of knowledge development and increasing foreign market commitment. Journal of International Business Studies, 8(Spring/Summer): 23–32.
Kogut, B. and Singh, H. 1988. The effect of national culture on the choice of entry mode.Journal of International Business Studies, 19(3): 411–412.
Lall, S. 1981. The New Multinational: The Spread of Third World Enterprises. New York, John Wiley and Sons.
Lecraw, D.J. 1981. Internationalization of firms from LDCs: Evidence from the ASEAN region. Multinationals from Developing Countries. In K. Kumar and M.G. McLeod (eds) pp. 37–51. Lexington, Mass.: D.C. Heath, Lexington Books.
Lecraw, D.J. 1993. Outward direct investment by Indonesian firms: Motivation and effects Journal of Internationa Business Studies, 24(Third Quarter): 589–600.
Luostainen, R. 1980. Internationalization as a strategy process. Strategic Management Journal, 13(Winter): 99-l 18.
Melin, L. 1992. Internationalization as a strategy process. Strategic Management Journal,13(Winter): 99–118.
Millington, A.I. and Bayliss, B.T. 1990. The process of internationalization: U.K. companies in the EC. Management International Review, 30(2): 151–161.
Ortiz-Buonafina, M. 1991. Export marketing activities in the internationalization stages of the export firm. Akron Business & Eonomic Review, 22( 1): 45–55.
Reid, S. 1981. The decision-maker and export entry and expansion. Journal of International Business Studies, 12(Fall): 101–112.
Sharma, D. and Johanson, J. 1987. Technical consultancy in internationalization, International Marketing Review, Winter: 20–29.
Vernon, R. 1969. Sovereignty at Bay. New York: Basic Books.
Weinstein, A. 1977. Foreign investments by service firms: The case of multinational advertising agencies. Journal of International Business Studies, 17(Spring/Summer): 83–91.
Wells, Jr., L.T. 1983. Third World Multinationah: The Rix of Foreign Investment from Developing Countries. Cambridge, MA: The MIT Press.
World Tables 1993. The World Bank. U.S.: The John Hopkins University Press.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Erramilli, M.K., Srivastava, R. & Kim, SS. Internationalization Theory and Korean Multinationals. Asia Pacific Journal of Management 16, 29–45 (1999). https://doi.org/10.1023/A:1015406118378
Issue Date:
DOI: https://doi.org/10.1023/A:1015406118378