Internationalisation: Motives and Consequences
Abstract
In recent decades, the global business environment has been growing dramatically. We are living in a more-than-ever- interdependent world. Many firms involve in the process of internationalisation, engaging their operations outside the boundary of their home country. The level of involvement of firms in international process can be specified by different types of foreign market entry modes ranging from import/export, contractual and investment entry modes. Import and export entry modes are the traditional form of international activities of firms. International licensing and franchising are the example of contractual entry modes. Firms can undergo international operations by investment entry modes. These entail joint ventures, consisting of contractual operations, equity joint-venture and strategic alliance, and sole ventures or the establishment of a wholly owned subsidiary.
The advanced technological change, trade liberalisation and intensified international competition are the factors that facilitate and drive such process of economic activities. Yet, it is not sufficient to explain the reason why firms decide to operate their activities abroad. As the business environment has increased in uncertainty and complexity, firms must immediately recognise the critical changes and respond to them rapidly to survive in the industry. It is generally accepted that the first and the most important motive of the businesses in the capitalism economy is the profit maximisation by either increasing the revenue or decreasing the cost of production. In the face of an globally increasing competition, firms not only compete with the rivals in home countries but also the international competitors. Therefore, the pursuit of global profit becomes the key motive of the enterprises (Dicken; 1992). Every activity of the firms, including the expansion of their activities across border, is aimed at increasing or protecting the profits. The sheer variety of competing explanations derived from different theories and motivations have been advanced to explain the internationalisation of businesses.
The transition of social relation also emerges along the processes of internationalisation of business. In an era of globalisation, it is possible to say that the process of internationalisation of the commerce and industry has an implication for political power of nation state. Clearly, historical evidences suggest that it substantially affects the world political landscape. Particularly, the proliferation of the worldwide-basis operation of MNCs in the past two decades requires us to rethink the traditional thought of the relationship between the governments of the nation states and the firms.
The purpose of this paper is to investigate some explanatory frameworks and motivations to explain the process of internationalisation of the firms. The second part of the paper is devoted to the examination of the consequence of such development of the political power of the nation states.
