Conceptualizing and Operationalizing the Reverse Internationalization Phenomena of Firms

Abstract

Internationalization is a two way street and firms can move through its processes forward and backward. Reverse internationalization (RI) is a common but crucial phenomenon for firms that operate in a world of heightened globalization. However, while research on internationalization is voluminous, the exploration of RI remains limited. In light of the 2008–2009 economical global crises, many international firms worldwide have experienced RI episodes. Given that scholars and practitioners have been sending warning signals about a potential global crisis on the horizon, and given that RI must be considered as a serious strategy, revisiting the RI domain, its patterns and drivers, is a topical and important research area. Notably, the literature has not converged on its definition and drivers and a clearer and richer view of RI is needed to facilitate its conceptualization. Many previous studies were restricted in the range of RI forms included and analyzed RI using mainly one dimension.

Grounded in data emerged from field in-depth interviews of executives from 20 internationalizing firms, this study employs a qualitative approach. The primary objective is exploratory work and theory development. The study illuminates the RI phenomenon further, proposes a broader conceptualization and operationalization of RI, and develops propositions. The exploratory nature is limited to an in-firm analysis of RI patterns and antecedents situated within an internal (e.g., reduced knowledge of the firm) and external (e.g., foreign market dynamics) factors context. The basic unit of analysis is the reduction in firms’ cross border activities. Content story approach was used as main analytic tool. The study built on the stage-based internationalization models and on the resource-based-view theory.

Findings show that RI emerges as a multifaceted formative construct reflecting a reduction in firms’ activities on one or more of four dimensions. These include the (i) number of active foreign markets, (ii) width/length of product lines, (iii) stage of internationalization, and (iv) pace of internationalization. Additionally, various internal and external factors (i.e., international knowledge/experience, planning/strategy/formalization of the internationalization process, intensity/complexity of international services, and various characteristics of the international environment such as turbulence, competition, and customers’ demand and preferences for services) foster RI. Since firms apply sophisticated forms of international exposure, RI domain should address its wide-ranging forms with a clearer and richer view that facilitates RI’s conceptualization.

The study concludes with a model of RI patterns and drivers that aims at directing future research. Managers learn to pay attention to likely episodes in internationalization that may arise and lead to RI and of ways to approach them.