In a previous article, some statements were made about the nature of geopolitics and business geoeconomics.
Among other concepts, it was stated that business geopolitics should be concerned with explaining the relationship between the power of owners, managers, employees, suppliers, competitors and customers, i.e. internal and external politics, and individual and collective interests, in the light of their internal and external spaces, i.e. the land, floors, available resources or things that are part of the organization. And that the spatial context in which the company develops involves understanding the size, distribution, levels and vision of the spaces occupied or to be occupied by the various actors involved in its development.
It has also been asserted that business geoeconomics must explain the same relationships based on the political power that creates the conditions for the acquisition and distribution of organizational wealth and the possession of current or to be acquired business resources within the organizational space.
In addition, it was argued that both the internal and external space of companies go beyond the market, although it is very important, because there are resources, actors, processes and relationships that generate needs and interests that affect organizational development and the business on which companies are based.
In this paper, it will also be stated that corporate geopolitics and geoeconomics help to explain how the particular spatial conception that companies have and, above all, how owners and managers project it, define the reality of organizational action, entering into harmony or conflict with the perspectives of other actors. And this definition produces important consequences because a narrow spatial conception of a company will lead it to think and act, for example, in a limited environment and market (zonal, local, communal, neighborhood and even national) and a broadened vision will lead it to understand and work in the international, multinational or global market.
Therefore, it is necessary that all companies, without distinction, as well as their actors (owners, managers, employees, customers, suppliers), develop a spatial awareness and that their management decisions are accompanied by geopolitical analysis appropriate to the spaces where they work. In addition, each company should have its own geopolitical or geoeconomic analysis tools, to define the starting point and how to make its own geostrategic diagnosis, in order to define its geostrategic lines of action.
This call is especially addressed to small and medium-sized enterprises, to organizations anchored to local, neighborhood, regional or national markets and to the people who direct, guide, advise or manage them, because it depends on them whether their development has a wider or narrower field of action.
On the other hand, it will be said that companies that are working on internationalization processes understand this reality better than those that do not. In this case, it will be stated that corporate internationalization (IE) means a change of spatial conception, which entails important changes in the daily activities of their operations, since it implies thinking in scenarios that are not the site of their natural market.
Internationalization: a spatial conception towards an expanded space
It is no secret that micro, small and medium-sized enterprises, known as MSMEs, play a major role in the global economy, especially in generating employment, coverage and production of goods and services to meet the needs of the general population, but studies show that few of them think, study, work in or for international markets.
Other studies indicate that, in general, small entrepreneurs are interested in internationalization, but that they have not carried out processes associated with it. They also indicate that when they do, their priorities are only focused on foreign trade, i.e. on the purchase and sale of products, but that many do not think of them as being linked to geostrategic processes, which could lead to obtaining fresh resources, or to understanding other cultural, political or legal dynamics in broader markets, or to identifying the needs of other actors, or to resolving with their international presence the search for possible new partners, suppliers or competitors associated with those same spaces.
Thus, many investment options, sources of capital or strategic alliances, as well as issues not directly linked to their products, or about possible new friendly players, are ignored or left aside.
Well, these issues go hand in hand with their spatial conception and the meaning of expanded spaces.
The problem is that the changes and challenges in today’s business space, which go beyond markets, mean that the expanded conception of the world touches aspects as diverse as the 5th Industrial Revolution, electronic markets, innovation processes and massive technology, automation or digitalization of processes, personnel recruitment or product design, affecting the current productive and economic dynamics of all markets and companies, whether they are protected or not in their natural markets.
In this way, even without wanting or understanding it, companies are being affected on a daily basis, especially in their local or national markets, which forces them to think about new management actions and new spaces for action, as well as the permanent search for new markets. This is also the subject of business geopolitics and geoeconomics.
Definition and approaches to corporate internationalization (IE)
In practice, business internationalization (BI) is more than the expansion of business or transactions into foreign markets. Or it is even more than the set of activities that the company develops outside the markets that constitute its natural geographical environment.
It is also a process by which an organization develops capabilities to be able to market and/or produce its products in another country of the world, different from its country of origin, in order to expand its geographic impact. It is also a set of values, actions and behaviors associated with the international world, which go hand in hand with principles such as honesty, transparency and the ability to communicate within and with other companies.
And above all, it is a managerial decision that seeks, among other things, to satisfy the needs of external market audiences, but it does not stop there. New resources, other partners, better allies, other sources of raw materials or better technologies are part of this strategic action.
All this implies a spatial conception that goes beyond the natural markets of companies, which are almost always tied to national or local markets. And this same reality makes it necessary to develop new theoretical approaches to what is understood by business internationalization (BI) and how to do it, which is why, over the last fifty years, its conceptual development has been so important.
In this case, and taking as an example, approaches such as Trujillo’s, we find the following:
First, there were the economic perspectives, based on costs and economic advantages (Vernon, 1966; Hymer, 1976; Dunning, 1981).
Then, internationalization was conceived as a learning process based on the accumulation of knowledge and the increase of resources committed to foreign markets (Vahlne, 1977, 1990; Johanson and Wiedersheim-Paul, 1975; Lee and Brasch, 1978; Alonso and Donoso, 1998).
Later, Johanson and Vahlne (1977) defined it as a process in which companies gradually increase their international participation.
In 1988, Welch and Luostarinen (1988) defined it as a process that increases participation in international operations, but considering that both the internal and the external must be involved.
Johanson and Mattson (1988) pointed out that internationalization is the development of networks of commercial relations in other countries through extension, penetration and integration (Dawei, 2008). In the 1990’s, Covin and Slevin stated it as the company’s ability to innovate its products, the type of decisions made under high uncertainty, and organizational dynamism.
Around the same time, some argued that internationalization was more the product of a series of decisions. In this case, Beamish (1990) offered the following definition: “the process by which firms increase their awareness of the direct and indirect influences of international transactions on their future and establish and conduct transactions with other countries” (Beamish 1990, pp. 77-92; Coviello and Munro 1997).
In 1997, Madsen and Servais stated that the internationalization of companies is linked to people and their characteristics, so that the decision to enter international markets is linked to the previous experience, education and managerial style of the executives.
And with regard to the network perspective, new ideas were developed focusing on the internationalization process as a logical development of inter-organizational and social networks of companies (Johanson and Mattson, 1998; Weiman, 1989; Larson, 1992).
In 1994, Root and Rialp (1999) defined internationalization as the set of operations that facilitate the establishment of more or less stable links between the company and international markets, throughout a process of growing international involvement and projection.
And Villarreal (2005) defined the internationalization of the company as “a corporate strategy of recognition by international geographical diversification, through an evolutionary and dynamic long-term process that gradually affects the different activities of the value chain and the organizational structure of the company, with a growing commitment and involvement of its resources and capabilities with the international environment, and based on an increasing knowledge” (p.58). (Lambraño, 2017)
With another approach, the author of this writing, states that business internationalization (BI) has been joined with international business and there three currents of thought can be distinguished:
On the one hand, Daniels and Radebaugh (2000), who define international business as all business transactions – private and governmental – involving two or more countries. Private companies engage in such transactions for profit; governments may or may not pursue the same in their respective transactions.
There are also Arese and Tuller, who have said that international business is the transactions that take place abroad to satisfy the needs of individuals and organizations (Arese, 1999). Here internationalization is a way to develop such transactions.
On the other hand, another current of thought, represented by the famous Charles Hill (2001), affirms that an international business is any company that participates in international trade or investment. In this case, internationalization is associated with the organization acting in the international market.
And a third current, which integrates international business into a single unit, with internationalization. This is explained because in a more modern vision, internationalization goes beyond the company, since it involves society and people, and in the commercial encounter a set of cultural, political, social, individual, moral, communicative, legal, business and economic elements arise, as well as technical ones, which are intertwined at a given historical moment and in a given space. In this way, internationalization is understood as the fruit of multiple social, institutional and personal factors.
Another approach focuses on explaining it as linked to business capabilities and accelerators, or the experiences, strategies or managerial decisions that enable companies to operate outside their natural market. In this scenario, we find thinkers such as Hill and Jones (2011), Hills (2010) Canals (1994), Peng (2012), Jarillo and Martinez (1997) or institutional thinkers such as Upsala (1997) and also Murillo (2001), Guacaneme (2019) and Ronderos (2006).
Finally, for a group of doctoral students at the Universidad de Los Andes in Colombia, the common characteristic of these contributions is that the explanation of internationalization is fundamentally contextualized in the initial satisfaction of the needs of the local market and then exporting the surplus. And the understanding of the market and its needs, favoring the diversification of the product and the creation of clusters to maximize the advantages of the markets.
Thus, as can be seen, both in practice and in the current theory of internationalization, there is a set of issues, explicit or implicit, linked to the spatial conception developed by companies and their actors, which affect the decisions, actions, processes and productive, commercial and/or financial activities, which are developed outside the limited market where their legal, accounting, administrative and managerial bases are based.
As a consequence, the daily life of managers, executives, employees and customers is affected, by modifying the corporate culture, practices and beliefs and making major changes in the structure, functioning and management and operations systems.
The spatial conception of business internationalization
In conclusion, business internationalization (BI) implies a profound change in the spatial vision of the organization, its markets, its needs and its work possibilities and methodologies, among other issues, forcing it to think in new geostrategic terms.
Thus, the particular spatial conception that companies have, and especially the one projected by owners and managers, define the reality of organizational action, entering into harmony or conflict with the perspectives of other actors. And this definition produces important consequences because a narrow spatial conception of a company will lead it to think and act, for example, in a limited environment and market (zonal, local, communal, neighborhood and even national) and a broadened vision will lead it to understand and work in the international, multinational or global market.
It then becomes evident that internationalization entails reviewing the spatial conception and the action taken on the spaces occupied or to be occupied, which are essential to understand its development, and that spatial awareness and managerial decisions must be accompanied by broad geopolitical analyses, developed with their own tools to make their own geostrategic diagnosis and their geostrategic lines of action.
Finally, the people who direct, guide, advise or manage internationalization must assume it as a change of spatial mentality, since it depends on them whether the development has a wider or narrower field of action. In this case, business internationalization (BI) also means a change of spatial conception in all organizational actors, since it entails important changes in the daily activities of their operations.
Mauricio Diagama Durán – Business consultant and author of numerous writings on geopolitics, geoeconomics and international relations.