International Studies of Management & Organization

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Nordic International Business Research

Ingmar Bjrkman & Mats Forsgren
To cite this article: Ingmar Bjrkman & Mats Forsgren (2000) Nordic International
Business Research, International Studies of Management & Organization, 30:1, 6-25, DOI:
10.1080/00208825.2000.11656780
To link to this article: http://dx.doi.org/10.1080/00208825.2000.11656780

Published online: 01 Feb 2016.

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In!. Studies 0/ Mgt. & Org.. vol. 30, no. 1, Spring 2000, pp. 6-25.
2000 M.E. Sharpe, Inc.
ISSN 0020-882512000 $9.50 + 0.00.

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INGMAR BJORKMAN AND MATS FORSGREN

Nordic International Business

Research
A Review of Its Development
ABSTRACT: This article identifies the specific characteristics a/Nordic international business research by analyzing how Nordic researchers over time have perceived and conceptualized their research object, "the international firm." Their
perceptions about essential/eatures a/the internationalfirm are arguably reflected
in their theoretical and empirical work on the internationalization o/the firm and
the management o/the internationaljirm.
By comparison with most regions in the world, the Nordic countries constitute a
homogenous area. Sweden, Finland, Denmark, and Norway are of about the same
size; their history is intertwined and their economies relatively similar. Because
their economies are open, Nordic firms depend extensively on countries outside
the region for business. The importance of international trade and foreign investment has induced many Nordic business scholars to focus on the internationalization of firms and industries, as well as the strategy and management of the
international firm. Given the relative similarity in industry characteristics and educational systems, and the close relationships between the business community and
universitieslbusiness schools that have facilitated access to data held by firms,
international business research in the Nordic countries shows some common features. There has also been extensive interaction among Nordic international business scholars. Thus, to a certain extent we can talk about Nordic research in
international business (IB).
This article describes and analyzes research in the IB field by Nordic scholars.
While several reviews of the development and state of the art of IB research have
Ingmar Bjorkman is a Professor at the Swedish School of Economics in Helsinki, Finland. Mats Forsgren is a Visiting Professor at the Institute of International Business.
Stockholm School of Economics.
6

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NORDIC INTERNATIONAL BUSINESS RESEARCH

been published (e.g., Melin, 1992; Hedlund, 1993), to the best of our knowledge no
such analysis has been made of Nordic IB research. International business research
refers here to theoretical or empirical studies aimed at analyzing behavior and management problems at the fIrm level (including groups of fIrms) rather than macro-related aspects such as international trade, which are usually covered by the subject of
international economics. We have also excluded work within the fIeld of international fInance as well as cross-national comparative research on domestic fIrms.
The article has three sections. The fIrst section deals with the perception of the
international fIrm among Nordic IB scholars and argues that IB research has been
dominated by a behavioral and interorganizational perspective. In the next section
models of internationalization are examined. We conclude that the implementation
of internationalization has been the focus ofNordic researchers' interest. The Uppsala
internationalization model has been an important component of this work, as has
network theory.
In the last section we discuss the Nordic researchers' work on problems related to
managing the international fIrm. Our main conclusion as a result of this discussion
concerns the minor role played by the environment-strategy-structure approach in
Nordic IB research. Instead, almost from the beginning, issues related to informal
organization, personal networks, shared norms, and the power structure became the
focus of Nordic scholars. The article ends with the statement that present Nordic
research on IB still benefIts from models and frameworks developed by Sune Carlson
and other Nordic scholars several decades ago.
Perceptions ofthe international firm
Sune Carlson, who in the mid-1960s established a group to conduct international
business research at Uppsala University in Sweden, said that international business is against human nature. His statement reflected the fact that fIrms that try to
export or to invest abroad always do so with an incomplete knowledge and a high
degree of uncertainty about foreign markets and possible alternatives. In Carlson's
view, doing business abroad was like taking cautious steps into unknown territory
rather than a consequence of rational choice based on economic analyses. Ever
since, Nordic scholars have tended to view the international fIrm as a learning
organization characterized by bounded rationality and limited knowledge.
This approach is based on two fundamental insights. First, the difference between conducting business in the home country and abroad can be analyzed largely
in terms of the level of knowledge within the fIrm itself. Second, and maybe more
important for research in the long run, the concept of the fIrm as used by Nordic
researchers has deviated more and more from the one commonly used in mainstream economics. From his empirical research Carlson (1951) concluded that managers' work was much more fragmentary and less rational than was usually assumed,
and that these conclusions were equally applicable to international business. This picture of the managerial behavior was later confIrmed by Mintzberg (1973) and Kurke

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8 BJORKMAN AND FORSGREN (FINLAND AND SWEDEN)

and Aldrich (1983), and it became the basis of the conviction that any theory of the
international finn had to use a concept of the finn different from the one nonnally
used in economic theory.
The development of such a theory among Nordic researchers was strongly influenced by the work of Penrose (1959) and Cyert and March (1963). Penrose offered
a theory of knowledge and change within organizations that could immediately be
applied to analyzing the prerequisites for international operations. In particular, her
discussion of knowledge within an organization had a profound influence on the
emerging assumption that knowledge offoreign business can be acquired only through
direct experience. Later, the behavioral theory of the finn fonnulated by Cyert and
March (1963) became influential. The seminal study ofAharoni (1966) persuasively
showed this theory's usefulness in the area of IB research, while the concepts of
bounded rationality, uncertainty avoidance, organizational learning, quasi-resolution of conflict, and sequential attention to goals inspired many Nordic researchers
in subsequent years. In fact, the building block of the behavioral theory of the finn
fit well with researchers' empirical observations of Nordic flnns.
The influence of Penrose and of Cyert and March largely explains why many
Nordic researchers have perceived the internationalization of a finn as an incremental process. Managers are risk avoiders rather than risk takers, and decisions
about foreign investments are primarily based on experiential, individual knowledge. This theoretical background still inspires Nordic researchers (e.g., Eriksson,
Johanson, Majkgard, and Shanna, 2000).
Loose coupling

The influence ofCyert and March (1963) extends beyond research on the internationalization process. Their discussion of conflict resolution and sequential attention to goals inspired other researchers (e.g., Weick, 1976; Pfeffer, 1981; Pfeffer
and Salancik, 1978) to apply a loose coupling image to the organization (Scott,
1981). These theorists proposed that one should view organizations not as unitary
hierarchies or as organic entities but as loosely linked coalitions of shifting interest groups. It is an open question why so many Nordic IB scholars, as compared
with U.S. or British researchers, were inspired by the loose-coupling image. A
partial answer may be that Nordic researchers have been more inclined to carry
out case studies and have ha~I r~latively easy access to data from different levels of
the finn. Thus, observations of different groups and interests have probably been
more frequent and less dependent on the top-management level and headquarters
perspective than in Anglo-American research. Possibly, the personal contacts and
the collaborative work of James March with Nordic scholars (e.g. Cohen, March,
and Olsen, 1972; March and Olsen, 1976) have also contributed to the diffusion of
his ideas within the Nordic community of management and organization scholars.
Finally, Nordic flnns may be more loosely coupled than international flnns from
other parts of the world.

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NORDIC INTERNATIONAL BUSINESS RESEARCH

In any case, the loose-coupling metaphor has inclined many Nordic scholars to
analyze the international ftnn as a heterogeneous unit. Different subsidiaries not
only control different sets of resources and play different corporate roles but also
represent different interests. Such concepts as heterarchy (Hedlund, 1986; Hedlund
and Rolander, 1990) and the political view of the international ftnn (Kallinikos,
1984; Larsson, 1985; Forsgren, 1989, 1990) have sometimes been used in conjunction with the concept ofloose coupling. Amain theme behind this research is that the
center-periphery metaphor, so extensively used by researchers within the IE fteld,
should be replaced by a multicenter perspective whereby different units, and not
only the parent company, play decisive roles in shaping the strategic behavior of the
whole group. The loose-coupling image still plays an important role among Nordic
researchers (e.g., Hedlund and Rolander, 1990; Marschan, 1996; Andersson and
Johanson, 1997; Forsgren, 1997).
To sum up, Nordic researchers have mostly used a behavioral rather than an
economic perspective in studying the international ftnn, which is viewed as an
organization characterized by bounded rationality, action-based learning processes,
and a dispersed and complex structure in terms of resources, competencies. and
influence.
The firm and the market

Another feature of Nordic research, especially in recent years, is the perception of

the relationship between the ftnn and the "market." First, there has been a tendency to analyze the environment of the international ftrm as a bundle of concrete
links with speciftc counterparts, whether these are called "strategic alliances"
(Lorange and Roos, 1992), "buyer-supplier collaborations" (Davis, 1997), or "business relationships" (Hallen, Johanson, and Seyed-Mohammed, 1991). This may
be a consequence of the dominance of industrial markets in some Nordic countries, where speciftc long-term links among ftrms, rather than links to more or less
anonymous end users, are the rule rather than the exception. The conviction that
the interplay between the market and the ftrm cannot be fully understood without
an analysis of such links has strengthened with time. In some Nordic research, the
market surrounding the international ftrm has become almost as speciftc and visible in the analysis as the ftrm's internal structure and links, giving the environment a "face." This view is ftnally winning acceptance among international scholars,
who used to study the international ftnn from an economic rather than from a
marketing or organizational perspective (e.g., Dunning, 1995).
Second, this Nordic feature also means that the border between the ftnn, as a
strategic and decision-making body, and the market is much less clear. This view of
the market, together with the loose-coupling image, signiftes not only that the ftnn's
relationships with the market are regarded as being less "market-like," but also that
internal relationships are somewhat more "market-like" than is usually assumed in
IB research. This may also explain why the transaction cost theory (Williamson,

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fO

BJORKMAN AND FORSGREN (FINLAND AND SWEDEN)

1975) has had comparatively little influence on Nordic researchers' choice of tools
for analyzing the international fIrm (but see Jansson, 1993; Haugland and Reve,
1994). The idea that internalization of the market produces a shift from no control to
full control of a transaction has been difficult to reconcile with these new concepts of
the market and the fInn. The interdependence and trust within interorganizational
relations can be used to exert considerable control by both parties over specifIc transactions, while the dispersed power structure within a fInn circumscribes management's
ability to exert full control over internal transactions.
The market concept applied in conjunction with loose coupling can give new
insights into the basic characteristics of international fIrms. Lately many scholars
have proposed that the main competitive advantage of the modem multinational
fIrm stems from its administration of a global network of units with different capabilities (Hedlund, 1986; Dunning 1988a; Bartlett and Ghoshal, 1989; Kogut and
Zander, 1993).
Explaining firm internationalization
Explaining why and in what forms (how) foreign direct investment (FDI) takes
place is probably the most popular topic in international business research (Inkpen
and Beamish, 1994). The vast majority of researchers attempt to explain FDI by
drawing on economic theories such as transaction-cost theory (Hennart, 1982),
internalization theory (Buckley, 1988), and the eclectic paradigm (Dunning, 1988a,
1988b). There are, of course, some notable exceptions (e.g., Larirno, 1993; Pedersen,
1994; Benito, 1995; Randoy, 1997), but using mainstream economic theory to
investigate why FDI occurs has been, comparatively speaking, quite rare among
Nordic scholars.
Some Nordic researchers have studied the process leading up to the fIrst export
order or FDI decision (Welch and Wiedersheim-Paul, 1980; Bjorkman, 1989; Larirno,
1995), and there has been work on fIrms' decisions to replace foreign intermediaries
(Petersen, Benito, and Pedersen, 2000). However, the main concern has been to
understand the forces underlying the internationalization process (that is, the increase in international business involvement over time) of the fIrm rather than the
reasons behind individual IE decisions. Nordic IE scholars are also probably best
known globally for their research on the internationalization of the fIrm (see Buckley
and Ghauri, 1993; Chandy and Williams, 1994).
As discussed above, the influence ofPemose, Cyert, and March, and others on
Nordic scholars has contributed to the research focus on the internationalization
process. Perceptions and conceptualizations of the fIrm are also reflected in the
methods used to study fInns' internationalization. Although some Nordic studies
have employed large samples, others have either supplemented this approach with
case studies (e.g., Nordstrom, 1991; Lindqvist, 1991) or even relied entirely on indepth longitudinal data (e.g., Johanson and Vah1ne, 1992; Zander and Zander,
1997).

NORDIC INTERNATIONAL BUSINESS RESEARCH

II

The Uppsala internationalization model

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The starting point for work on fInn internationalization was a collection of articles
published by researchers at the University of Uppsala (Carlson, 1975; Forsgren
and Johanson, 1975; Johanson and Wiedersheim-Paul, 1975; Johanson and Vahlne,
1977; Welch and Wiedersheim-Paul, 1980), which outlined what later became
known as the Uppsala internationalization model. In this model, the internationalization of a fInn is seen as a process in which the fInn gradually increases its
international involvement. According to one formulation of the model:
[The internationalization process] evolves in an interplay between the development of knowledge about foreign markets and operations on one hand and an
increasing commitment of resources to foreign markets on the other.... A critical assumption [of the model] is that the market knowledge, including perceptions of the market opportunities and problems, is acquired primarily through
experience from current business activities in the market. Experiential market
knowledge generates business opportunities and is consequently a driving force
in the internationalization process. (Johanson and Vahlne, 1990, pp. 11-12)
According to Johanson and Vahlne, incremental commitment manifests itself in
the sequence of modes of operation used by the fIrm and the sequence of foreign
markets entered by the f1llIl. Firms are expected to follow a sequence from low to
high commitment modes of operation and to enter new markets with successively
greater psychic distance. The psychic distance between the home country and the
focal market is defmed in terms of difference in language, culture, and political
systems between the two countries-that is, factors that disturb the flow of information between the f1llIl and the market (Wiedersheim-Paul, 1972). Luostarinen (1979)
later extended the use of the incremental model by analyzing the sequence of different kinds of products offered by internationalizing f1llIls, while Welch and Luostarinen
(1993) examined the effects of "inward" internationalization (e.g., imports) on the
process of "outward" internationalization.
Following the initial case studies of Swedish f1llIls conducted by researchers at
the University ofUppsala, considerable effort has been made to test the validity of
the model empirically, not least in the Nordic countries (for reviews of research
outside the Nordic countries, see Young et aI., 1989; Johanson and Vahlne, 1990).
The sequence of foreign markets entered has been studied in Sweden (Engwall
and WallenstAl, 1988; Nordstrom, 1991; Lindqvist, 1991; Shanna, 1983, 1991;
Johanson and Sharma, 1987), Norway (Benito and Gripsrud, 1992), Denmark
(Strandskov, 1995), and Finland (Luostarinen, 1979; Laage-Hellman, 1989); while
the sequence of market-entry modes has been analyzed by Swedish (e.g., Hedlund
and Kverneland, 1985; Agren, 1990), Danish (Petersen and Pedersen, 1997), Norwegian (Juul and Walters, 1987), and Finnish researchers (Luostarinen, 1979;
Bjorkman and Eklund, 1996).
Research has provided considerable, although not undisputed, empirical support for the Uppsala model. It has, for instance, been argued that the boundary

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12 BJORKMAN AND FORSGREN (FINLAND AND SWEDEN)

assumptions of the model are inadequately specified, and that the model is less
valid for very large multinational enterprises, firms with extensive international
experience, firms in high-technology sectors, service industries, and international
operations that are not motivated by market seeking. Much of the criticism, as
well as efforts at further developing the model, has come from Nordic scholars
(e.g., Hedlund and Kverneland, 1985; Welch and Luostarinen, 1988; Johanson
and VaWne, 1990; Andersen, 1993; Benito and Welch, 1994; Hadjikhani 1997;
Petersen and Pedersen, 1997).
There is, however, a more fundamental problem with the Uppsala model: its
emphasis on organizational learning as a basic driving force of a firm' s internationalization. It is not at all clear how experiential knowledge affects organizational
behavior. To have an impact, experience must be interpreted, but the relationship
between cause and effect is ambiguous and the difference between success and failure not always apparent. The interpretation of history is made by individuals and
groups with different goals and commitments, which leads to systematic biases in
interpretation. As a result, evaluations of outcomes are likely to be more mixed in
organizations than in individuals. For example, organization leaders are inclined to
attribute successes to their own actions and organizational failure to others or to
external forces, whereas opposition groups are likely to employ the opposite principle (Levitt and March, 1988). New leaders are often inclined to defme previous
outcomes more negatively than are the leaders who preceded them (Hedberg, 1981).
Furthermore, the lessons of history are likely to be lost through turnover of personne!. Therefore, the question of how experiential knowledge affects organizational
behavior is not only dependent on the possibility of relating effects to causes but also
contingent on who makes the interpretation. The role played by key individuals has
not yet received much attention in research on the internationalization process of the
finn (Andersson, 2000).
Although it has been claimed that the Uppsala model is based on a loose-coupling view of firms (Johanson and VaWne, 1990, p. 12), this is not fully reflected in
the mode!. An implicit assumption is that the interpretation of experiential knowledge and past outcomes is made by the leaders of the organization, and that the
leadership is stable over time. If these assumptions are questioned, the relationship
between organizational behavior and experiential knowledge is not as straightforward as the model predicts. This does not automatically invalidate the assumption of
incremental behavior (although to some extent it renders incrementalism vulnerable
to questioning), but it certainly produces a broader spectrum of internationalization
routes than the model predicts.

The network perspective and the internationalization process

Although the Uppsala model has occupied a central position in much of the work
on corporate internationalization, alternative or complementary models and frameworks have been offered. Nordic researchers have occupied a central role in the

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NORDIC INTERNATIONAL BUSINESS RESEARCH

13

development of the (industrial) network perspective (e.g., Hakansson and Snehota,

1995), which has also been used to analyze the internationalization of firms (e.g.,
Johanson and Mattsson, 1988; Johanson and Vahlne, 1990, 1992; Forsgren and Johanson, 1992). The network perspective draws our attention to the often longterm business relationships that exist between firms in industrial markets. Case
studies have shown how the development of a company's operations in foreign
markets has been influenced by the relationships gradually formed in that particular market (Johanson and Vahlne, 1992).
As Johanson and Mattsson (1988) argued, the internationalization of a finn means
that it develops business relationships in networks in other countries. This can be
achieved through: (1) the establishment of relationships in country networks that are
new to the firm, that is, through international extension; (2) the development of
relationships in those networks, that is, by penetration; and (3) connecting existing
networks in different countries. Existing relationships can be used as bridges to other
networks-for instance, when a customer invites or even demands that a supplier
follow the company abroad (Johanson and Sharma, 1987). Existing personal networks are also likely to facilitate the entrance into new foreign networks (Lindqvist,
1991).
The network perspective reveals the difficulties in formulating and implementing a strategy for foreign market entry. Instead of using conventional economic drivers to explain firm internationalization, the perspective attaches considerable
importance to the social and cognitive ties that are formed between actors engaged
in business relationships and emphasizes how ongoing interactions between actors,
rather than strategic decision making, shape the network structure (Johanson and
Vahlne, 1992). While the traditional foreign-market entry literature seeks to describe
how firms decide about markets, entry modes, and planning the entry (e.g., Root,
1982), network theory focuses on how existing actors influence the entry of new
firms into the foreign network (Axelsson and Johanson, 1992; Blankenburg Holm,
1995).
Theories of business networks improve our understanding of the internationalization process. While the Uppsala model focuses on the characteristics of the individual finn as the main driving force, network theory highlights the firm's business
context. Network theory emphasizes that business contexts to a large extent consist
of specific relationships with other actors, which further improves our understanding of the decisive factors behind internationalization as such. Earlier works usually
interpreted the degree of internationalization as the fInn's relative amount of resources located abroad. Network theory leads us to conclude that a fInn's degree of
internationalization also reflects the degree of internationalization of the business
network in which it is embedded. A finn can have most of its physical assets located
domestically but still be an important actor in an international network, and vice
versa.
Another important conclusion is that the resources on which internationalization
is based consist to a large extent of technological and other relationships with cus-

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14 BJORKMAN AND FORSGREN (FINLAND AND SWEDEN)

tomers, suppliers, and so on. In that sense, the definition of market knowledge used
in the Uppsala model is made much more specific and concrete in network theory. A
third conclusion is that internationalization is not only a question of moving production abroad but, perhaps more important, of exploiting potential relationships across
borders (Andersson and Johanson, 1997).
.
Although the contribution of the network theory to IB research among Nordic
scholars is promising, its strength as a tool for understanding internationalization is
limited and its predictions quite vague. This may be because researchers within that
tradition tend to include too many variables in their analyses. Business network
research often produces good descriptions of business reality but less satisfactory
models for predictions. Compared with the Uppsala model, network theory offers
less precise conclusions about the empirical manifestations of internationalization.
Internationalization is assumed to be dependent not only on the firm's own resources,
activities, and experience but also on other actors' resources, activities, and experience and on the actors' subjective interpretation of the relevant network. Consequently, the possibility of drawing conclusions about the pattern of
internationalization, in general or in individual cases, is limited. This reflects the fact
that network theory was developed to understand market behavior in general rather
than specific research questions-for instance, how flnns internationalize.
Others have argued that network analysis does not make theorizing about actors' behavior more difficult than theorizing about the behavior of oligopolists,
because "a network is simply a web of interdependent dyadic relationships" (Dunning, 1995, p. 473). However, if one acknowledges the fundamental idea of most
business network theories-that an analysis of a specific relationship cannot be
made independently of negatively or positively connected relationships (Cook and
Emerson, 1976}-this conclusion is misleading. Network theory tells us not only
that a finn's behavior is related to a more complicated web of relationships than is
postulated in oligopoly models, but also that a business relationship between two
firms includes more dimensions than is usually assumed in economic analysis.
This makes the theory more relevant but also more difficult to use for predictive
purposes.
Managing the international firm
Much of the early work on the management of international flnns by researchers
outside the Nordic countries dealt with the question of how such fInns should be
organized and was largely based on the environment-strategy-structure paradigm
(Fouraker and Stopford, 1968; Stopford and Wells, 1972; Franko, 1976; Egelhoff,
1988). Inspired by this line of research, Nordic scholars conducted similar studies.
It is interesting to note, though, that from the beginning Nordic researchers were
dissatisfied with the heavy emphasis on formal organization in this line of research (Egelhoff, 1999). For instance, the early studies by Gunnar Hedlund and
his collaborators on the management of international firms (Hedlund, 1980, 1981,

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NORDIC INTERNATIONAL BUSINESS RESEARCH

15

1984; Leksell, 1981; Hedlund and Arnan, 1984) moved the analysis beyond formal organizational structure and gave "organizational structure a limited, albeit
still interesting, role. Instead, normative control through shared norms and outlook, internal promotion and internal transfers were emphasized" (Hedlund, 1993,
p. 6). An often-cited paper by Edstrom and Galbraith (1977) elaborated how some
international fIrms used extensive personnel transfers to control their foreign units.
This special feature of Nordic research within this area reflects not only the fact
that formal organization is (or was) ofless importance in Nordic firms than in, for
instance, U.S. finns, but also that Nordic researchers had better access to data on
organizational processes within firms. On the whole, the environment-strategystructure paradigm as an explanation for structural change in international firms
has played a limited role in Nordic IB research. Instead, Nordic scholars have
offered explanations of structural change that are rooted in quite different perspectives and theories such as a result of mimetic behavior (Bjorkman, 1990, 1996) or
a reflection of change in the power structure (Forsgren, Holm, and Johanson, 1995).
Recent IB management research has been directed at capturing the complexity of
large global firms and focuses largely on the balance between global integration and
local responsiveness. Researchers within this tradition emphasize a much more dynamic and reciprocal fit between strategy and structure, including flexibility in modes
of administration, global integration by means of normative mechanisms, and different strategic roles for different subsidiaries (Doz and Prahalad, 1987; Bartlett and
Ghoshal, 1989; Bartlett, Doz, and Hedlund, 1990; Chakravarty and Doz, 1992).
Gunnar Hedlund was one of the leading scholars employing this perspective
(Hedlund, 1986; Hedlund and Rolander, 1990). In elaborating the concept of
"heterarchy," Hedlund proposed that to be globally efficient, each unit in a multinational firm must share information about the whole and have access to detailed information about other units' needs and resources. In a heterarchy, corporate culture
and personal networks are much more important devices for management control
than hierarchy and formal processes.
This research has contributed to a richer conceptualization of the complex international finn (Melin, 1992). However, its impact on research on the management of
the international firm among Nordic scholars is rather modest so far, even though
some scholars have used related approaches (e.g., Marschan, 1996; Marschan, Welch,
and Welch, 1996). There are probably several reasons for this, including the fact that
the models of the transnational or heterarchic firm are relatively new. Another reason may be that this school, implicitly or explicitly, assumes an extremely skillful
and powerful top management which can orchestrate the various lateral information
processes through networking, teamwork, task forces, and so on. It must also be able
to implant a common culture in order to break down barriers to cooperation across
borders and among organizational units. This is not an easy task, since Nordic researchers have demonstrated that intraorganizational differences based on national
culture have a considerable impact on the management of international firms (Salzer,
1994; Zander, 1997).

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16 BJORKMAN AND FORSGREN (FINLAND AND SWEDEN)

The role of headquarters reveals a contradiction over how the organization is

perceived. On one hand, the organization is regarded as informal and flexible; on the
other, the informality and flexibility are decided and designed by top management.
In this sense, the perspective is rather design-oriented. The view that headquarters
always have the ultimate capacity and power to design an organization has seldom
been a natural element in Nordic researchers' frame of reference, as noted above.
This fact, together with the perspective's normative bent and its preoccupation with
top management, also explains its relatively limited influence on Nordic IB research.
The difficulty of extending a ftrm's operations to markets outside its home base,
which occupied so much of Nordic researchers' attention twenty years ago, has gradually given way to an interest in the management of networks of subsidiaries. This is
in line with research that prefers to treat the international ftnn as an "interorganizational
network" (Ghoshal and Bartlett, 1990; Kogut, 1993; Forsgren and Johanson 1992).
Some Nordic researchers have emphasized normative control as headquarters' main
tool to integrate different units (Hedlund, 1986; Hedlund and Rolander, 1990). Other
scholars have stressed the difficulty of managing an international ftrm based on
conflicting interests that reflect differences in the business networks in which the
subsidiaries are embedded (Holm, Johanson, and Thilenius, 1995; Andersson and
Forsgren, 1995, 1996).
This interorganizational approach has increased interest in portraying the international firm as an entity that specializes in the creation and internal transfer of
knowledge. The international ftrm arguably does not emerge because of market failure in the buying and selling of knowledge but because of the corporation's efficiency as a vehicle for transferring knowledge across borders. Empirical research by
Udo Zander has shown that the less codiftable and more difficult the teaching of a
new technology, the more likely it is that the transfer of this technology will be to a
wholly owned subsidiary (Zander, 1991; Kogut and Zander, 1993). The question of
the extent to which knowledge can be transferred between different units with different capabilities becomes crucial when global efficiency, local responsiveness, and
corporate-wide learning and action are quintessential for the competitiveness of the
multinational ftrm (Bartlett and Ghoshal, 1989; Solvell and Bresman, 1995). However, behind these issues even more important questions seem to be waiting, such as:
What are the underlying factors behind the development of organizational capabilities in the different subsidiaries, and to what extent is it possible for headquarters to
influence these factors? For instance, there has been empirical work analyzing the
importance of the local context for knowledge creation and the development of internationally competitive firms (e.g., Solvell, Zander, and Porter, 1991, Forsgren,
Foss, and Pedersen, 1999). Other studies have been directed at the problem of transferring knowledge between subsidiaries in an international firm (Forsgren, 1997).
The analysis of the international ftrm as an entity for the creation and transfer of
knowledge is, of course, dependent on how firms and markets are conceptualized.
As noted above, the concepts of the firm and the market used by many Nordic researchers imply that specific exchange relationships within the firm as well as with

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NORDIC INTERNATIONAL BUSINESS RESEARCH 17

other organizations play an important role in the analysis. A crucial question here is
how the development of an international firm's core capabilities can be handled in
interorganizational collaboration. From the perspective of transaction-cost theory, a
collaboration with an external partner, when the finn's core competence is involved,
will pose problems because of opportunism, especially if the core competence is
based on tacit knowledge. Thus, one conclusion is that firms should avoid such
collaborations to minimize transaction costs. Lately, increasing attention has been
paid to the notion of fInns competing primarily on the basis of capabilities, rather
than low transaction costs, and to the corresponding notion of collaboration formation for the purpose of developing a finn's capabilities (Kogut, 1988; Hamel, 1991).
As pointed out by Madhok (1997), this line of argument is theoretically and
intellectually rooted in the behavioral and evolutionary theory of the firm. It should
therefore be oflittle surprise that there has been a tendency among Nordic researchers
to view a firm's collaboration with a foreign counterpart as an opportunity rather
than as a problem (e.g., Hakansson, 1987; Laage-Hellman, 1989; Lundgren,
1994).
Conclusions
We have identified and analyzed the specific characteristics of Nordic IE research
during the last two decades by: (1) focusing on how Nordic researchers have perceived and conceptualized the "international finn"; and (2) examining Nordic research on the firm's internationalization and management. Nordic scholars have,
generally speaking, perceived the international firm as an organization characterized by bounded rationality, experiential learning processes, and lack of a clear
hierarchy. This view of the finn appears to have been rather stable during the last
two decades. There has also been a tendency to stress the importance of concrete
links between the firm and specific counterparts in its environment and, conversely,
to view the relationships among units within the finn as somewhat more "marketlike" than is usually assumed in IE research.
The perceptions of the "international firm" held by Nordic scholars have arguably influenced the choice of research problems and methods and, therefore, the
results obtained (Sayer, 1992). Hence, Nordic research on the internationalization
process of the firm has stressed incremental elements of this process (Johanson and
Vahlne, 1977). Research on the management of the international finn has emphasized, among other things, knowledge creation and diffusion in international finns
as well as the problems involved in managing large international firms through formal control mechanisms (Hedlund, 1986; Zander and Kogut, 1993).
There have, of course, been some changes over time in Nordic IE research. Research on the internationalization of the firm has traditionally analyzed the sequence
of foreign markets entered by the finn and/or the operational modes used by finns in
foreign settings. There has been a gradual shift in interest from analyzing the internationalization process of the firm to an interest in the functioning of large interna-

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18 BJORKMAN AND FORSGREN (FINLAND AND SWEDEN)

tional fInns with extensive networks of geographically dispersed yet interdependent

subsidiaries. Increasing attention has also been devoted to the internationalization of
functions within international fInns. For instance, the internationalization of the R&D
function has been studied, particularly through analyses of Swedish companies
(Hakanson and Zander, 1988; Hakanson, 1990; Hakanson and Nobel, 1993; Zander,
1994). There has also been work on the management of international R&D projects
(Ridderstrale, 1996), the internationalization of headquarters organizations (Forsgren,
Holm, and Johanson, 1995), and fInns' interactions with political actors abroad
(Hadjikbani, 2000).
Already in the 1980s there was some research on the operations of international
fInns in Japan (Hedlund and Kverneland, 1985; Kverneland, 1988; Gripsrud, 1990)
and on the market entry and management of Swedish companies in the United
States (A.gren, 1990). Recently, there has been a spectacular growth in research on
"economies in transition," in which there is a signifIcant emphasis on analyzing
the impact of the context on a fInn's operations. Nordic scholars have investigated, among other things, the development of Finnish fIrms' operations in Russia
and the Baltic states (Salmi, 1995; Hirvensalo, 1996; Nieminen and Tomroos,
1997), the market entry by Swedish fInns into Eastern and Central Europe (Vahlne,
Nordstrom, and Torbacke, 1996), and Western companies' market entry and management of operations in China (Bjorkman, 1995, 1996; Bjorkman and Kock, 1995).
A general conclusion from several of these studies is that market entry and management of new units is often conducted in an incremental way characterized by
"learning by doing."
Although one can no longer say that it is against human nature to conduct business abroad, many of these studies clearly indicate that it is still a question of
taking cautious steps in an unknown terrain. Hence, Nordic IE research is still
influenced by a model of the international fInn developed by Sune Carlson several
decades ago, a model subsequently shaped by such Nordic IE scholars as Jan
Johanson, Jan-Erik Vahlne, and Gunnar Hedlund.
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