Inward-Outward Internationalization Patterns in Two Brazilian Industries

Transcription

1 Inward-Outward Internationalization Patterns in Two Brazilian Industries Autoria: Angela Maria Cavalcanti da Rocha, Maria Domenica Serpa Blundi, Vanessa Tavares de Jesus Dias ABSTRACT This study investigated outward and inward internationalization patterns in two Brazilian industries: paper and pulp and footwear. Both industries have been traditionally involved with international operations for many decades. Data was collected by a mail survey. A total of 45 firms from the footwear industry and 40 from the paper and pulp industry returned the questionnaire. Chi-square tests were used to test the research hypotheses. Some results contradicted the empirical findings reported in the literature; contrary to expected, smaller firms did not show more often combinations of inward and outward activities than larger firms. However, the industry to which a firm belongs seems to influence to a large extent the different combinations of inward-outward activities used by firms in the industry. Further research seems to be necessary to better understand inward-outward connections in the internationalization process of the firm. INTRODUCTION This study looked at outward and inward internationalization activities of Brazilian firms in two industries: paper and pulp and footwear. Brazil is an interesting locus of research on the internationalization of the firm because of a number of unique factors. First, Brazilian firms were late in internationalizing, despite the fact that Brazilian economy ranks number eleven in the world in terms of GDP. The reasons for such late entry in the international arena have been discussed in many studies and range from geographical (the country s location in South America) to economic (economic policies that did not stimulate exports or FDI), entrepreneurial (lack of managers willingness to accept risk), psychic (large perceived psychic distance to foreign countries), and cultural (the nature of family businesses and the perception of cultural distance), besides the traditional explanation of the attractiveness of a large domestic market. Second, Brazil has been one of the countries least open to foreign trade in the last decades, due to the adoption of import substitution policies. These policies aimed initially at protecting the infant industry and permit rapid industrialization, but with the debt crisis of the 80s import substitution became a necessity to achieve trade balance. In fact, protectionism was only reduced in the late 80s and beginning of the 90s when trade tariffs were substantially lowered and non tariff barriers were in large extent eliminated, permitting the entry of foreign products in the Brazilian market. One interesting measure of the impact of the opening of Brazilian markets to foreign products is the extent by which Brazilian companies used foreign inputs in their production processes. Oliveira Júnior (2000) estimated that the average percentage of imports of intermediary products for Brazil in 1995 was 5.3%, compared to 8.2% for the U.S., 20.2% for Canada and 21.6% for England. This coefficient was 5.0% for the paper and pulp industry; and 5.3% for the footwear industry in the year There is no data available for more recent years, but it 1

2 can be estimated that these coefficients increased until the end of 1998 due to the overvalued Brazilian currency. In January 1999, a 50% devaluation of the local currency probably forced many Brazilian firms to substitute some of their imported raw materials, parts or components for local products in order to remain competitive. These two factors late internationalization and decadeslong severe restrictions to imports suggest limited international activities by a large number of firms until the end of the 80s, and a substantial increase during the 90s. In fact, Brazilian trade (exports plus imports) doubled from 1990 to 2000, from $ 56 billion to 111 billion. This implies that a large number of firms have initiated or substantially increased export and import activities during the last decade, permitting to analyze both inward and outward internationalization processes. LITERATURE REVIEW Internationalization Theory and Stages Theory of Internationalization One of the most dominant theoretical models in the study of a firm s internationalization process is the one proposed by Nordic scholars often referred to as the Uppsala internationalization theory. Based on early studies in the 70s by several Nordic researchers, which saw the international firm as a learning organization, characterized by limited knowledge of international markets and bounded rationality (Bjorkman and Forsgren, 2000), Johanson and Vahlne (1977) proposed a model which described such process as a sequential set of stages of internationalization, with increased commitment to international operations. Firms increase their commitment to international operations as they acquire experiential knowledge in foreign markets by conducting business activities. Knowledge is acquired through experience; it is seen as a driving force in the internationalization process (Bjorkman and Forsgren, 2000). Firms typically start their operations in a psychically close market; as experience is acquired, psychic distance to foreign markets is reduced, and the firm expands its international activities to more distant markets. Psychic distance between the home and the host country was originally defined as the sum of factors preventing the flow of information from and to the market (Johanson and Vahlne, 1977, p.24), and more recently as mapping relations between cultural proximity and foreignness of international markets (Stöttinger and Schlegelmilch, 2000, p.169). Johanson and Wiederscheim-Paul (1975) proposed the existence of four stages in the internationalization process of the firm: no regular export activities; export via independent representatives; sales subsidiary; production/manufacturing abroad. The authors believed that such stages were different with regard to the degree of involvement of the firm in the market (p. 306). The idea of an evolutionary approach to the internationalization process of the firm was supported by other authors. Pavord and Bogart (1975), Bilkey and Tesar (1977), Reid (1981), Czinkota and Johnston (1981) and Czinkota (1985) proposed a series of stages based on the degree of the firm s involvement with exporting. Their stage models do not contemplate international involvement beyond exporting. Cavusgil (1980, 1982, 1984) advanced four stages of international involvement, the last one including other international activities besides exporting. 2

3 Empirical research produced mixed results. Welch and Luostarinen (1988) claimed that research in several countries showed a reasonable degree of consistency, at least up to the mid-70s, that the pattern of internationalization for most firms has been marked by a sequential, stepwise process of development (p.48). Juul and Waters (1987) confirmed that the internationalization pattern of Norwegian firms entering the U.K. followed the sequential model of internationalization and Rao and Naidu (1992) found significant differences among Wisconsin firms in different stages of the internationalization process. Yet Jarillo and Martínez (1991) argued that although this approach might have worked in the 70s, it did not describe the strategic behavior of Spanish firms in the 80s in their international development. It was also found that the stages model was rather the exception than the rule in explaining the international behavior of U.K. firms entering the EC (Millington and Bayliss, 1990); and that it did not adequately explain the international development of software firms (Bell, 1995). The theory has received a number of criticisms. One criticism was directed towards a perceived deterministic nature of the theory (Melin, 1992; Andersen, 1993). Reid (1983) indicated that there was no rationale to justify why companies should go through a systematic set of stages in their internationalization. Such approach, he claimed, was highly speculative. Strandskov (1993, p.210) argued that the belief in the existence of universal regularities implies a deterministic description of firm evolution over time. Another criticism referred to the static nature of the model (Leonidou and Katsikeas, 1996). More recently, some researchers have advanced that the born-global phenomenon, which describes firms that are internationalized from their inception, challenges traditional internationalization theories (Oviatt and McDougall, 1994; Knight and Cavusgil, 1995; Madsen and Servais, 1996). Research findings on the psychic distance construct also produced contradictory results. A study by Conway and Swift (2000) found that the higher the levels of psychic distance, more time and effort were required to establish long lasting business relationships. The psychic distance construct was challenged by certain studies. O Grady and Lane s (1996) study, for example, challenged the assumption that companies would perform better when entering psychically closer markets; they would rather more often fail because they tend to underestimate subtle but relevant differences. Stöttinger and Schlegelmilch (1998, 2000) challenged the relevance of the psychic distance construct to explain the international behavior of firms, arguing that the construct had very little explanatory power. However, Evans et al (2000) claimed that psychic distance is still very relevant but its relationship with performance is not yet known. In general, most researchers agree (see, for example, Millington and Bayliss, 1990; Morgan and Katsikeas, 1997; Bjorkman and Forsgren, 2000) including Johanson and Vahlne (1990) that the Uppsala internationalization theory describes more adequately smaller firms and early stages of internationalization. As firms become multinationals, other theoretical frameworks may be more adequate to describe their choice of markets and entry modes, their level of commitment to foreign operations and the importance of internationalization in their strategic choices. Yet, the Uppsala internationalization model resists empirical tests when the object of the study is small and recently internationalized companies. In the specific case of Brazil, there are research evidences that the model adequately explains the relevance of the sequential model in the internationalization process of Brazilian firms (e.g. Leite, Figueiredo and Da Rocha, 1988; Barretto and Da Rocha, 2001). 3

4 Inward-Outward Connections in the Internationalization Process Welch and Luostarinen (1988) proposed a broader view of internationalization involving both the inward and outward international activities of a firm. Internationalization was thus defined as the process of increasing involvement in international operations (p.35). This definition encompasses the two sides of internationalization, inward internationalization being seen as a mirror image of the outward process (Welch and Luostarinen, 1993, p.44). Connections between inward and outward internationalization processes can be direct or indirect (Welch and Luostarinen, 1993). Direct relationships occur, for example, in the case of countertrade. Indirect relationships can result from experiential knowledge in international markets. For example, the learning process involved in importing technology could later be useful in licensing a foreign company with the firm s own technology; or importing activities could lead to foreign orders. The connection between the two sides of internationalization might not be obvious since inward and outward activities could occur at different times. It is proposed in the literature that inward activities should contribute to outward involvement especially in the early stages of internationalization (Welch and Luostarinen, 1993) and in smaller firms (Kohonen, Luostarinen and Welch, 1996). The connection between inward and outward internationalization in smaller firms would happen more probably than in larger firms because in the first the same manager is usually responsible for both activities thus permitting the cross-learning process to occur. Indirect evidence of the interconnection between inward and outward internationalization was provided by a study of Finnish small and medium-sized exporters of manufactured products (Korhonen, Luostarinen and Welch, 1996). In this study, it was found that 54% of all exporting firms started their international activities with inward operations. The work of Young, Huang and McDermott (1996) provided additional evidence of the link between inward and outward patterns in the internationalization of Chinese state-owned firms. In the cases studied, however, outward movements preceded inward activities, because of specific environmental constraints. Research in the United Kingdom (Crick and Jones, 2000), Finland (Björkman and Kock, 1997), and Brazil (Barretto and Da Rocha, 2001) also supplied anecdotal evidence of the linkages between inward and outward activities. Examining ten Brazilian firms with foreign operations, Barretto and Da Rocha verified that although a direct connection between inward and outward internationalization could only be established in one case, in most of the other cases these two sides of internationalization seemed inextricably linked... (2001, p.104). The relationship between inward-outward internationalization patterns and psychic distance was also of interest to some researchers. It was reported in a study conducted in Australia (Fletcher and Bohn, 1998) that psychic distance would have a different impact on the firm s internationalization process depending on whether it was outward (indirect export, direct export, sales branch overseas, license overseas, production overseas), inward (indirect import, direct import, purchasing office overseas and license in Australia for overseas firms), or linked (countertrade and strategic alliances). The relationship between psychic distance and internationalization was least for inward activities, followed by outward activities and linked activities, in this order. The study by Jones (1999) provided interesting insights on the relationship between inward 4

5 and outward patterns of internationalization of small high-technology firms in the United Kingdom. Jones found that although import activities usually appeared in the beginning of the internationalization process, its impact on further international involvement was not clear; there was also a number of firms that started with exporting and later developed import activities. Also, other outward or inward activities associated to production or R&D did occur in the beginning of firms internationalization processes, but they tended to be accompanied by international trade activities. Younger small-sized high-technology firms tended however to show more complex inward/outward links. In general, the number of studies on inward-outward connections in internationalization has been rather small, especially when considering the growing body of research on the internationalization of the firm. One obvious reason for this limitation is the difficulty involved in establishing causality, because of the unusual and indirect links between these two activities. METHODOLOGY Data Collection Data used in this study were collected in the year 2000 as part of a larger research project funded by the Brazilian government. Because data collection had other purposes, this study suffered the typical limitations derived from the use of secondary data. The two industry lists used in the study included companies that were involved with international activities and those that were not. Original data were collected by means of a questionnaire sent by mail to top managers of companies belonging to the footwear and the paper and pulp industry. These two industries were chosen because of their export orientation. A list of 351 footwear manufacturers was obtained from ACI-NH, the Association of Footwear Manufacturers of the State of Rio Grande do Sul, where the largest regional cluster of footwear production in Brazil is established. Companies with less than 20 employees were eliminated from the list as well as companies that had suspended their activities recently. Initial telephone contact was made with each company in order to verify names and addresses. Questionnaires were then sent to 192 companies. A letter was sent after three weeks as a reminder. A total of 45 companies answered the questionnaire, representing a response rate of 23%. Similarly, a list of 195 producers of paper and pulp was obtained from Bracelpa - the Brazilian Association of Pulp and Paper Producers and questionnaires were sent by mail to all these companies, following the same procedure. A total of 40 usable questionnaires returned, representing a response rate of 21%. No significant differences were found between the responses of the first and the last questionnaires returned. Measures Outward-Inward Internationalization. The following variables were used to measure outward and inward international activities: outward internationalization intensity; export intensity; FDI intensity; licensing intensity; import intensity; joint-venture intensity; technology transfer intensity; inward and outward internationalization stages and inward-outward combinations. Two of these measures were excluded from the subsequent analysis: licensing intensity and 5

6 FDI intensity. No companies were found in the two industries studied that licensed technology to foreign countries and only two firms had made foreign direct investment. Stages in the Internationalization Process. Two measures were used: one for outward internationalization stages and another for inward internationalization stages. To measure outward internationalization stages, companies were classified in four groups, according to the highest level of outward activities performed: (1) no outward activities; (2) indirect exporting; (3) direct exporting; and (4) ownership of foreign subsidiaries. This classification is similar to the one adopted by Fletcher and Bohn (1998), with the exception of stage 3 ownership of foreign subsidiaries which included both the use of sales offices abroad and production facilities abroad (stages 3 and 4, respectively, in Fletcher and Bohn s taxonomy). This was done because the original file from which the data was drawn did not separate the two situations. Finally, as mentioned earlier, no companies were found that were involved in licensing their technology to foreign companies, thus reducing the number of stages to four. A similar measure was developed for inward internationalization stages; companies were classified in five groups, according to the highest level of inward activities performed: (1) no inward activities; (2) indirect importing; (3) direct importing; (4) acquisition of foreign technology; (5) joint-ventures in Brazil with foreign companies. Again, although similar to the operational measures used by Fletcher and Bohn (1998), stages 3 and 4 were different in this study. In Fletcher and Bohn s taxonomy, stage 3 was characterized by the operation of a purchasing office abroad, and stage 4 by the concession of licenses in Australia for overseas firms. In the present study we considered stage 3 as the acquisition of foreign technology and stage 4 as the establishment of joint-ventures in Brazil with foreign companies. The rationale for these changes is three-fold. First, this study was limited to the use of data collected with other purposes, which did not include the use of purchasing offices outside the country. Second, since no cases of licensing foreign companies appeared in this study, the use of Fletcher and Bohn s stage 4 of inward internationalization (license in Australia for overseas firms) would not be feasible. Third, the acquisition of foreign technology usually is an important step in the inward internationalization of firms of developing countries. As showed by Barretto and Da Rocha (2001), the acquisition of foreign technology is commonly found among Brazilian companies with subsidiaries abroad. This activity showed looser or tighter connections with outward internationalization. Finally, the change in order, with the acquisition of technology (licensee) preceding joint-ventures in Brazil was based on the judgement of the authors and supported by two international business professors that have been involved in researching international activities of Brazilian firms. They both agreed that, at least in the Brazilian case, the acquisition of technology by firms was a much less demanding international activity than the establishment of a joint-venture in the country with foreign firms. Thus the changes introduced in the last two stages compared to Fletcher and Bohn s (1998) proposed taxonomy seemed more adequate to the Brazilian reality, and, for that matter, to the reality of other developing countries. Inward-Outward Combinations. Using the two variables defined before, outward and inward internationalization, a new variable was created, depending on whether: (1) the firm did not have ant inward or outward activities; (2) the firm had only inward activities; (3) it had only outward activities, or (4) it had both inward and outward activities. Firm Size. Size was measured by total company sales in dollars. Five companies in the sample refused to give this information. For the test of hypothesis, this variable was divided 6

7 in two groups: less than US$ 5,000,000 and more than US$ 5,000,000. This value was adopted to differentiate smaller from larger firms. Data Analysis The first step in data analysis consisted of computing descriptive statistics. The second step was the test of hypotheses using chi-square tests. A significance level of 0.05 was adopted in order to reject the null hypothesis. RESULTS AND DISCUSSION Descriptive statistics for selected variables are presented in Tables 2 and 3. Firms belonging to the paper and pulp industry were, in the average, substantially larger than those belonging to the footwear industry (average company net sales was $ 64,998,000 in the paper and pulp industry, compared to only $9,655,000 in the footwear industry). In general, the footwear industry showed higher outward and inward internationalization intensity, with an average of 26.3% of outward internationalization intensity and export intensity and 4.6% of import intensity, compared with only 9.8% of inward internationalization intensity in the paper and pulp industry, 9.6% of export intensity and 2.9% of import intensity. The slight difference between export intensity and outward internationalization intensity in the paper and pulp industry is due to two companies that established subsidiaries abroad. The paper and pulp industry scored slightly better in joint-venture intensity (2.0%) than the footwear industry (1.6%) and both had the same percentage of acquisition of foreign technology on total company sales, with an average of 0.2% for both industries. The stages patterns in outward internationalization were also substantially different in the two industries examined, although the overall means were the same for both industries (1.3). Only 17.8% of footwear manufacturers had no outward activities, compared to 40% of their counterparts in the paper and pulp industry. Few companies in the paper and pulp industry used indirect exporting (2.5%) with almost all exporters going directly to their customers (52.5% of all firms). Footwear manufacturers, on the other side, tended to use agents and representatives to export their products (35.6%), but also a substantial number used direct methods to export (46.7%). Only two paper and pulp producers and no footwear manufacturers appeared in stage 3 (ownership of foreign subsidiaries). As to inward internationalization stages, the situation was inverse. Firms in the paper and pulp industry tended to be consistently more involved with inward activities than the footwear manufacturers. More than double the percentage of firms in the footwear industry, compared to the paper and pulp industry, had no inward activities (37.8% compared to 15%). Also in contrast with outward activities, there were less footwear manufacturers involved only with indirect importing (15.6%) compared to paper and pulp producers (30.0%). As to stage 2 (direct importing), however, firms in the footwear industry exceeded those in the paper and pulp industry (20.0% and 17.5% respectively). In stage 3 (acquisition of foreign technology), there was a larger percentage of firms from the paper and pulp industry (32.5%) than from footwear (24.4%). Finally, 5% of the paper and pulp producers had joint-ventures in Brazil 7

8 with foreign companies (stage 4) compared to 2.2% among footwear manufacturers. The connection between inward and outward internationalization is shown in Table 3. Only 9% of the footwear manufacturers and 15% of the firms in the paper and pulp industry had neither inward nor outward international activities. The largest frequency is of companies that had both inward and outward activities (53.3% of footwear firms and 60% of paper and pulp producers). A correlation analysis was performed in order to investigate the association between different measures of inward and outward internationalization (Tables 4, 5 and 6). Outward and inward internationalization show a significant but moderate association, with a higher coefficient for the paper and pulp industry, compared to the footwear industry. However, outward internationalization shows low correlation coefficients with two measures of inward internationalization, the percentage of imports of raw material to total production costs and the percentage of imports of equipment and machinery on total imports, and it does not show significant associations with the percentage of expenses with the acquisition of foreign technology and the percentage of sales by joint-ventures with foreign companies in Brazil on total company sales. The correlation between inward internationalization and the percentage of exports on total sales was also moderate, positive and significant. Test of Hypotheses Hypothesis 1: The choice of inward-outward combinations is industry-specific. This hypothesis was tested using crosstabs and chi-square statistics. Two variables were used: industry type (paper and pulp industry and footwear) and inward-outward international activities combinations. The results permitted to reject the null hypothesis, with a chi-square of , 3 degrees of freedom and a probability of of erroneous rejection of the null hypothesis. We can therefore imply that inward-outward combinations seem to be industryspecific. Inward-outward combinations Industry Paper and Pulp Footwear Total 0 - no inward or outward activities 6 (15.0%) 4 ( 8.9%) 10 (11.8%) 1 - only inward activities 10 (25.0%) 4 ( 8.9%) 14 (16.5%) 2 - only outward activities 0 ( 0.0%) 12 (26.7%) 12 (14.1%) 3 - inward and outward activities 24 (60.0%) 25 (52.9%) 49 (57.6%) Although both industries have been traditionally internationally oriented for many decades, it is clear that the patterns of inward-outward internationalization differ substantially from one sector to another. The paper and pulp sector shows a remarkable absence of companies that are only involved in exporting, and a much higher percentage of only inward activities, compared to the footwear sector. Also, the paper and pulp industry has more companies that are not engaged in exporting. Hypothesis 2: Smaller firms show more often a combination of both inward and outward 8

9 international activities. This hypothesis was also tested using crosstabs and the chi-square test. Two variables were used: company size (measured by total sales) and inward-outward international activities combinations. The results showed a chi-square of , 6 degrees of freedom and p < Yet the direction of the relationship is contrary to what was hypothesized in the literature. Smaller firms do not appear to be more involved with both inward and outward activities than larger firms. Quite the contrary, smaller firms are more involved with only inward activities or only outward activities than larger firms. Inward-outward combinations Company size (sales in US$ thousands) 5,000 (n=33) 5,000 (n=47) Total (n=80) 0 - no inward or outward activities 6 (18,2%) 3 ( 6,4%) 9 (11,3%) 1 - only inward activities 8 (24,2%) 5 (10,6%) 13 (16,3%) 2 - only outward activities 10 (30,3%) 1 ( 2,1%) 11 (13,8%) 3 - inward and outward activities 9 (27,3%) 38 (80,9%) 47 (58,8%) CONCLUSIONS This research explored the relationship between different inward and outward activities in the internationalization process of the firm. The study was limited by the fact that its data was drawn from an existing datafile associated to another research project. Yet the results obtained do seem to offer a contribution to the understanding of inward-outward internationalization patterns, opening opportunities for future research. Results point to substantial differences in inward-outward internationalization patterns depending on the industry to which the firm belongs. It is possible that these patterns are in fact industry -specific. For example, the local availability of raw materials in one industry, compared to another, should influence the amount of imports of raw materials by each industry. Also, when an industry has attained a higher degree of technological development, or when it is based on a traditional technology already known, it might not show a high level of technology transfer intensity, compared to another industry. These observations suggest that the understanding of internationalization patterns may require more cross-industry studies. A second relevant aspect of our research results relates to the impact of size on inwardoutward combinations. This study did find a relationship between these two variables, but the direction of the relationship was opposite to the one previously hypothesized. In-depth studies may be useful to improve our understanding of the issue. REFERENCES Andersen, O., On the Internationalization Process of Firms: a Critical Analysis, Journal of International Business Studies, 24, 2, 1993, pp

10 Barretto, A./Da Rocha, A., Patterns of Internationalization of Brazilian Firms and the Decision to Establish Subsidiaries Abroad, in Axinn, C./Matthyssens, P. (volume editors), Reassessing the Internationalization of the Firm, Advances in International Marketing, 11, 2001, pp Bell, J., The Internationalization of Small Computer Software Firms: a Further Challenge to Stage Theories, European Journal of Marketing, 29, 8, 1995, pp Bilkey, W.J./Tesar, G., The Export-Behavior of Smaller-sized Wisconsin Manufacturing Firms, Journal of International Business Studies, 8, 1, 1977, pp Björkman, I/Forsgren, M., Nordic International Business Research, International Studies of Management & Organization, 30, 1, 2000, pp Björkman, I./Kock, S., Inward International Activities in Service Firms - Illustrated by Three Cases from the Tourism Industry, International Journal of Service Industry Management, 8, 5, 1997, pp Cavusgil, S.T., On the Internationalization Process of Firms, European Research, 8, 6, 1980, pp Cavusgil, S.T., Some Observations on the Relevance of Critical Variables for Internationalization Stages, in Czinkota, M.R./Tesar, G. (eds.), Export Management: An International Context, New York, Praeger, 1982, pp Cavusgil, S.T., Organizational Characteristics Associated with Export Activity, Journal of Management Studies, 21, 1, 1984, pp Crick, D./Jones, M., Small High-technology Firms and International High-technology Markets. Journal of International Marketing, 8, 2, 2000, pp Czinkota, M.R., Export Development Strategies, New York, Praeger, Czinkota, M.R./Johnston, W.J., Segmenting U.S. Firms for Export Development, Journal of Business Research, 9, 1981, pp Evans, J./Treadgold, A./Mavondo, F., Explaining Export Development Through Psychic Distance, International Marketing Review, 17, 2, 2000, pp Fletcher, R./ Bohn, J., The Impact of Psychic Distance on the Internationalisation of the Australian Firm, Journal of Global Marketing, 12, 2, 1998, pp Hallén, L./Wiederscheim-Paul, F., Psychic distance and buyer-seller interaction, Buckley, P./Ghauri, P., The Internationalization of the Firm: A Reader, London, Academic Press, 1993, pp Jarillo, J.C./Martínez, J.I., The International Expansion of Spanish Firms: Towards an Integrative Framework for International Strategy, in Mattson, L.G./Stymme, B. (eds.), 10

11 Corporate and Industry Strategies for Europe, New York, Elsevier Science Publishers, Johanson, J./Wiederscheim-Paul, F., The Internationalization of the Firm - Four Swedish Cases, Journal of Management Studies, October 1975, pp Johanson, J. /Vahlne, J.E., The Internationalization Process of the Firm - a Model of Knowledge Development and Increasing Foreign Market Commitments, Journal of International Business Studies, 8, 1, 1977, p Jones, M., The Internationalization of Small High-technology Firms, Journal of International Marketing, 7, 4, 199, pp Juul, M./Walters, P.G., The Internationalization of Norwegian Firms - A Study of the UK Experience, Management International Review, 27, 1, 1987, pp Knight, G.A./Cavusgil, S.T., The Born Global Firm: A Challenge to Traditional Internationalization Theory, Proceedings of the Third Symposium of the Consortium for International Marketing Research. Odense, Denmark, Odense University, Korhonen, H./Luostarinen, R./Welch, L., Internationalization of SMEs: Inward-outward Patterns and Government Policy, Management International Review, 36, 4, 1996, pp Leonidou, L.C./Katsikeas, C.S. The Export Development Process: An Integrative Review of Empirical Models. Journal of International Business Studies, 27, 3, 1996, pp Madsen, T.K./ Servais, P., The Internationalization of Born Globals An Evolutionary Process?, Proceedings of the Fourth Symposium of the Consortium for International Marketing Research, San Diego, California, CIMaR, Melin, L., Internationalization as a Strategy Process, Strategic Management Journal, 13, 1992, pp Millington, A.I./Bayliss, B.T., The Process of Internationalization: UK Companies in the EC, Management International Review, 30, 2, 1990, pp Morgan, R.E./Katsikeas, C.S., Theories of International Trade, Foreign Direct Investment and Firm Internationalization: a Critique, Management Decision, 35, 1, 1997, pp O Grady, S./Lane, H.W., The Psychic Distance Paradox, Journal of International Business Studies, 27, 2, 1996, p Oliveira Júnior, M. A Liberalização Comercial Brasileira e os Coeficientes de Importação /95, Texto para Discussão n o 703, Rio de Janeiro, Instituto de Pesquisa Econômica Aplicada, Febr Oviatt, B.M./McDougall, P.P., Toward a Theory of International New Ventures, Journal of International Business Studies, First Quarter 1994, pp Pavord, W.C./Bogard, R., The Dynamics of the Decision to Export, Akron Business and Economic Review, 6, 1975, pp

12 Rao, T.R./Naidu, G.M. Are the Stages of Internationalization Empirically Supportable? Journal of Global Marketing, 6, 1/2, 1992, pp Reid, S., The Decision-maker and Export Entry and Expansion, Journal of International Business Studies, Fall 1981, pp Reid, S., Market Expansion and Firm Internationalization, Proceedings of the 9th Annual Conference of the European International Business Association. Oslo, Norway, Stöttinger, B./Schlegelmilch, B.B., Psychic Distance: a Concept Past its Due Date?, International Marketing Review, 17, 2, 2000, p Stöttinger, B./Schelegelmilch, B.B. Explaining Export Development Through Psychic Distance: Enlightening or Elusive?, International Marketing Review, 15, 5, 1998, pp Strandskov, J., Towards a New Approach for Studying the Internationalization Process of Firms, in Buckley, P./Ghauri, P., The Internationalization of the Firm: A Reader, London, Academic Press, 1993, pp Sullivan, D./Bauerschmidt, A., Incremental Internationalization: A Test of Johanson s and Vahlne s Thesis, Management International Review, 30, 1, 1990, pp Welch, L./Luostarinen, R., Internationalization: Evolution of a Concept, Journal of General Management, 14, 2, 1988, pp Welch, L./Luostarinen, R., Inward-Outward Connections in Internationalization, Journal of International Marketing, 1, 1, 1993, pp Young, S./Huang, C.H./ McDermott, M., Internationalization and Competitive Catch-up Processes: Case Study Evidence on Chinese Multinational Enterprises, Management International Review, 6, 4, 1996, pp

13 Table 1 Operational Measures for Outward-Inward Internationalization Variables outward internationalization intensity export intensity licensing intensity* FDI intensity** outward internationalization stage import1 intensity import2 intensity technology transfer intensity joint-ventures intensity inward internationalization stage inward-outward combinations firm size Operational Measures % of company sales coming from three forms of outward internationalization: exporting, licensing*, and international sales by foreign subsidiaries % of company sales coming from exporting % of company sales coming from licensing foreign companies % of company sales coming from international sales by foreign subsidiaries Companies were classified in five groups, according to the highest level of outward activities performed: 0 = no outward activities 1 = indirect exporting 2 = direct exporting 3 = licensing 4 = ownership of foreign subsidiaries % of imports of raw materials, parts, and components on total production costs % of imports of equipment and machinery on total imports of equipment and machinery % of expenses with the acquisition of foreign technology on total company sales % of sales by joint-ventures in Brazil with foreign companies on total company sales Companies were classified in five groups, according to the highest level of inward activities performed: 0 = no inward activities 1 = indirect importing 2 = direct importing 3 = acquisition of foreign technology 4 = joint-ventures in Brazil with foreign companies 0 = no inward or outward activities 1 = only inward activities 2 = only outward activities 3 = both inward and outward activities total company sales in dollars smaller = US$ 5,000,000 larger = > US$ 5,000,00 13

14 Variables Table 2 Mean Values of Selected Variables Footwear Industry (n=45) Paper and Pulp Industry (n=40) Total Outward Internationalization outward internationalization intensity export intensity outward internationalization stages 26.3% 26.3% % 9.6% % 18.5% 1.3 Inward Internationalization import intensity technology acquisition intensity joint-ventures intensity inward internationalization stages 4.6% 0.2% 1.6% % 0.2% 2.0% % 0.2% 1.7% 1.6 Firm Size sales in US$ ,655 64,998 35,698 Table 3 Frequencies of Selected Variables Variables Footwear Industry Paper and Pulp Industry Total Outward Internationalization Stages stage 1 - no outward activities stage 2 - indirect exporting stage 3 - direct exporting stage 4 - licensing stage 5 - ownership of foreign subsidiaries 17.8% 35.6% 46.7% 0.0% 0.0% 40.0% 2.5% 52.5% 0.0% 5.0% 28.2% 20.0% 49.4% 0.0% 2.4% Inward Internationalization Stages stage 1 - no inward activities stage 2 - indirect importing stage 3 - direct importing stage 4 - acquisition of foreign technology stage 5 - joint-ventures in Brazil with foreign companies 37.8% 15.6% 20.0% 24.4% 2.2% 15.0% 30.0% 17.5% 32.5% 5.0% 27.1% 22.4% 18.8% 28.2% 3.5% Inward-Outward Combinations no inward, no outward activities only outward or only inward activities both inward and outward activities 8.9% 37.8% 53.3% 15.0% 25.0% 60.0% 11.8% 31.8% 56.5% 14

15 Table 4 Correlations between Inward and Outward Stages of Internationalization Variables Footwear Paper and Pulp Total Stage of Outward Internationalization with Stage of Inward Internationalization (0.017) (0.000) (0.000) Table 5 Correlations between Level of Outward Internationalization and Inward Variables Inward Internationalization Variables Level of Outward Internationalization Footwear Paper and Pulp Total % of imports of raw materials. parts. and components on total production costs (0.036) (0.006) (0.003) % of imports of equipment and machinery on total imports of equipment and machinery (0.031) (0.014) (0.001) % of expenses with the acquisition of foreign technology on total company sales (0.230) (0.312) (0.465) % of sales by joint-ventures in Brazil with foreign companies on total company sales (0.174) (0.186) (0.098) Table 6 Correlations between Level of Inward Internationalization and one Outward Variable Outward Internationalization Variable Degree of Inward Internationalization Footwear % of company sales coming from exports (0.004) Paper and Pulp (0.001) Total (0.002) 15