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1、DISSERTATIONES RERUM OECONOMICARUMUNIVERSITATIS TARTUENSIS8THE INTERNATIONALIZATION OF FOREIGN-OWNED ENTERPRISES IN ESTONIA: A NETWORK PERSPECTIVETIIA VISSAKTARTU 2003Table of contentsINTRODUCTION41. THE THEORETICAL CONTEXT OF THE INTERNATIONALIZATON OF FOREIGN-OWNED FIRMS111.1.The Uppsala, innovati
2、on-related and the target country internationalization process models111.1.1. The Uppsala model111.1.2. Innovation-related internationalization models141.1.3. The target country internationalization process model181.1.4. The importance and limitations of the Uppsala, innovation-related and the targe
3、t country internationalization process models221.2. Studies in FDI and their impact on foreign-owned companies internationalization251.2.1. Studies in foreign direct investments251.2.2. Studies in the impact of FDI on foreign-owned companies internationalization301.2.3.The importance and limitations
4、 of studies in FDI and theirimpact on foreign-owned companies internationalization351.3. The network approach (to internationalization)401.3.1. The network approach401.3.2. The network approach to internationalization461.3.3. The importance and limitations of the network approach (to internationaliz
5、ation)511.4. Studies in multinational corporations, networks, entrepreneurship and internationalization531.4.1. Studies in multinational corporations as inter-organizational networks531.4.2. Studies in entrepreneurship and internationalization571.4.3. The importance and limitations of studies in mul
6、tinational corporations, networks, entrepreneurship and internationalization622. THE IMPACT OF NETWORKS ON THE INTERNATIONALIZATION OF SEVEN FOREIGN-OWNED COMPANIES IN ESTONIA642.1. The research outline for exploring the impact of networks on the internationalization of foreign-owned firms in Estoni
7、a642.1.1. The background of Estonian companies internationalization642.1.2. Three propositions for empirical analysis672.1.3. Case study methodology722.2. The internationalization of seven foreign-owned enterprises in Estonia: a case study752.2.1. The case firms internationalization process752.2.2.
8、The impact of (foreign parent companies) networks on the internationalization of the selected firms862.2.3. The impact of the other factors on the case firms internationalization962.3. Discussion of the studies in the role of foreign ownership in host country firms internationalization in the contex
9、t of seven Estonian cases1052.3.1. Theoretical implications of the studies in internationalization1052.3.2. Theoretical implications of the studies in FDI and their impact on foreign-owned companies internationalization1112.3.3 Theoretical implications of the studies in networks, MNCs, entrepreneurs
10、hip and internationalization121CONCLUSIONS AND RECOMMENDATIONS FOR FUTURE RESEARCH129REFERENCES141APPENDICES188Appendix 1. An overview of relevant theories/models/approaches188Appendix 2. Innovation-related internationalization models195Appendix 3. The importance and limitations of the research them
11、es discussed in the subchapter 1.1200Appendix 4. The OLI paradigm post 2000204Appendix 5. The needs and bargaining power of multinationals and host countries207Appendix 6. The product (life-) cycle and the “flying-geese” models208Appendix 7. The importance and limitations of the research themes disc
12、ussed in the subchapter 1.2209Appendix 8. The classification of organization forms219Appendix 9. Reasons for participating in and avoiding networks and strategic partnerships220Appendix 10. The importance and limitations of the research themes discussed in the subchapter 1.3222Appendix 11. The class
13、ification of subsidiary roles226Appendix 12. The importance and limitations of the research themes discussed in the subchapter 1.4233Appendix 13. The global environment in the end of the 20th and beginning of the 21st century236Appendix 14. An overview of the economic situation in CEE in the beginni
14、ng of 1990s238Appendix 15. The investment climate indicators in 2002 in the Baltic Sea region239Appendix 16. Changes in the Estonian investment climate since the initial investment, perceived by foreign-owned exporters240Appendix 17. Estonias direct investment stock by countries and fields of activi
15、ty by the end of the 3rd quarter 2002241Appendix 18. Balance of payments of Estonia 242Appendix 19. Estonian foreign trade by groups of goods 243Appendix 20. Estonian foreign trade by main trade partners244Appendix 21. Estonian exports* by type of ownership in selected industries245Appendix 22. Prob
16、lems hindering Estonian local exporters and foreign-owned exporters*246Appendix 23. Basic conclusions for making Proposition 1247Appendix 24. Basic conclusions for making Proposition 2248Appendix 25. Basic conclusions for making Proposition 3250Appendix 26. The purposes and types of theory-building
17、activities252Appendix 27. The case study method: importance and limitations253Appendix 28. The (mail) survey method: importance and limitations256Appendix 29. The seven case firms: short description257Appendix 30. The case firms internationalization: additional evidence263Appendix 31. Some examples
18、of previous case studies on firms internationalization, networks and/or entrepreneurship265Appendix 32. Questionnaire used for interviews (pre-prepared questions)266KOKKUVTE267INTRODUCTIONThe motivation of the researchThe internationalization Internationalization is the process of increasing involve
19、ment in international operations (Welch and Luostarinen 1988). process of the firm has been widely researched for over the last four decades. During the period, many different views about the companies increasing foreign involvement have emerged. Some of them have described internationalization as a
20、 sequential process, while the others have stressed the importance of network A business network is a set of connected relationships between actors controlling business activities (Forsgren and Johanson 1992). relationships, foreign direct investments Foreign direct investments (FDI) reflect the obj
21、ective of obtaining a lasting interest by a resident entity in one economy in an entity resident in another economy. The lasting interest implies the existence of a long-term relationship between the direct investor and the enterprise and a significant degree of influence on the management of the en
22、terprise. The numerical guideline of ownership of 10 per cent of ordinary shares or voting stock determines the existence of a direct investment relationship (OECD 1999). The management dimension distinguishes foreign direct investments from portfolio investments in stocks, bonds and other financial
23、 instruments (WTO 1997)., managers entrepreneurial behavior Entrepreneurial behavior is a combination of innovativeness, proactivity, risk- seeking, autonomy and competitive aggressiveness (Lumpkin and Dess 1996). and so on. Despite the variety of concepts, there is no common theory concerning the i
24、nteraction between trade, FDI and international production networks (Ernst and Guerreri 1998). There is also still much to be learned from examining the network approach in the context of an entrepreneurial firm (Coviello and Munro 1995). The foreign direct investment theory, the internationalizatio
25、n models or the network perspective, when examined independently, cannot fully describe the (foreign-owned) firms complex internationalization process. Consequently, future research should attempt to develop an all-inclusive perspective (Coviello and McAuley 1999). By viewing internationalization as
26、 a holistic process, we are more likely to develop theory with predictive ability, rather than fragmented explanations of specific components of internationalization (Jones and Coviello 2002).The need to understand the factors affecting the firms internationalization process is especially important
27、in case of transition economies. In Estonia, foreign trade deficit is relatively high. In 2001, it was 13.8 billion EEK In June 1992, the Estonian currency, Kroon (EEK) was pegged to the German Mark at the rate 1DM= 8EEK. Since January 1999, it has been pegged to the Euro at the rate 1EUR=15,65EEK,
28、an equivalent to the former exchange rate. (Bank 2002a). The size of the country (a population of less than 1.4 million) can mean that even very young companies have to internationalize quickly. This is not easy especially for recently established smaller local enterprises due to a lack of resources
29、, capabilities and contacts. For older and/or larger companies, internationalization has also been relatively difficult: after the dissolution of the Soviet Union, many trading arrangements broke down and most of these firms were forced to find new foreign buyers and suppliers. Consequently, in Esto
30、nia, both older and newer enterprises may often require external assistance to internationalize. As one way to improve the Estonias foreign trade deficit, the government has tried to attract as much foreign direct investment inflows as possible. By the end of September 30th 2002, Estonia had receive
31、d 61.9 billion EEK of FDI inflows (Bank 2002c). It has been demonstrated in earlier studies that in Estonia, foreign-owned firms export more than local enterprises. Unfortunately, the mechanism of the impact of FDI on the internationalization of foreign-owned firms in Estonia has still received rela
32、tively little attention. It has yet to be shown, whether and how the internationalization of foreign-owned companies differs, how participating in the foreign owners networks influence the firms internationalization and how foreign-owned firms managers can impact the companies internationalization p
33、rocess. This thesis will be based on seven case studies and nine research themes within the framework of internationalization models, foreign direct investment studies, the network approach, and entrepreneurship literature In this thesis, the terms model, theory, approach, paradigm and so on are use
34、d about each research stream on the basis of what is mostly used in the literature or by the authors belonging to the stream. (see Appendix 1). It will seek to provide an understanding of foreign-owned Estonian firms internationalization from the network perspective. We will also analyze the impact
35、of subsidiary and, to a smaller extent, parent company characteristics, home, host country and global environment factors on these companies internationalization (see Figure 1). In addition, the thesis will demonstrate how different streams of internationalization research can contribute to the over
36、all understanding of the internationalization process of foreign-owned firms and what are their limitations. This should improve the comprehension of the internationalization of foreign-owned firms not only in Estonia, but also in other countries. In addition, the results of this thesis could be use
37、d for analyzing or making changes in the Estonian economic policy or drawing managerial implications. Figure 1. The main framework of the thesisThe aim and research tasksThe aim of this thesis is to prove that the impact of foreign investors networks on the outward internationalization of foreign-ow
38、ned companies in Estonia depends on the foreign-owned firms characteristics, their managers behavior and other factors. To achieve the aim, the following five research tasks have been set. To analyze the conclusions, importance and limitations of internationalization models, foreign direct investmen
39、t studies, the network approach and entrepreneurship literature. To highlight the general trends in the world economic environment and analyze the general characteristics of Estonia from the aspect of foreign-owned companies outward internationalization. Based on the theoretical studies and the conc
40、lusions about the Estonian and global economic environment, to draw research propositions about the foreign-owned companies outward internationalization and the impact of network membership and their characteristics on it. To test the propositions by using case study analysis about seven foreign-own
41、ed companies in Estonia. Based on the results, to analyze the importance and limitations of different theoretical concepts in the context of the outward internationalization of foreign-owned companies in Estonia. Research methodologyIn Estonia, mostly surveys have been used to study firms internatio
42、nalization. Unfortunately, due to a limited space, mainly closed-ended questions For example, a closed-ended question is “Does your firm export to Finland?” An open-ended question is “Why did the company start exporting to Finland?” have been asked, which has limited the comprehension of this proces
43、s. In the other countries, case studies have been widely used for analyzing different aspects of firms internationalization. In Estonia, some later studies have also applied this method (for example, see Reiljan 2002 and Roolaht 2002). This empirical part of this thesis will be primarily based on ca
44、se studies as this method allows to get a deeper understanding of the impact of FDI on the foreign-owned firms internationalization, it is generally accepted as a tool for generating new theory or criticizing and specifying already researched topics and allows the researcher to study a topic as a dy
45、namic process. Using this method, theoretical reading and empirical research can be done at the same time. New theories can be added during the study. This type of research can also provide richly detailed information from a variety of sources, both qualitative and quantitative. In addition, it allo
46、ws the researcher to better understand the causality between elements and enables to study a firm from multiple perspectives rather than the influence of a single variable.In the thesis, seven foreign-owned firms in Estonia from different industries, having different foreign owners and levels of int
47、ernationalization will be examined. This should ensure theoretical replication Theoretical replication means producing contrasting results but for predictable reasons (Yin 1994). The case study data are verified by survey data and several other sources of information: newspapers, the companies homep
48、ages, annual reports and so on. This allows triangulation Triangulation is the approach of using different data-collection methods. When the results converge (agree), it can be concluded that we are getting a true understanding of the reality (Gillham 2001). and secures construct validity Construct validity means that selected measures are suitable to study the specific concepts (Yin 1994). This thesis builds theory according to the
