Internationalization Theory

Internationalization Theory explains how firms expand their activities across borders, gradually increasing their involvement in foreign markets. It suggests that companies prefer to grow internationally by leveraging internal resources and knowledge rather than relying solely on external partnerships or exporting. This process often starts with exporting, then moves toward establishing subsidiaries or direct operations as the firm gains experience and confidence. The theory emphasizes the importance of reducing transaction costs, safeguarding proprietary knowledge, and maintaining control, making international expansion a strategic, systematic process rather than impulsive or random.