Uppsala Internationalization Model (Johanson & Vahlne, 1977)

Uppsala Internationalization Model (Johanson & Vahlne, 1977)

Overview

The Uppsala Model explains internationalization as a gradual, path-dependent process driven by experiential learning. Firms enter foreign markets incrementally, starting with psychically close countries (similar language, culture, institutions) and progressing through an establishment chain: no regular export, export via agent, sales subsidiary, production subsidiary. Each stage builds market knowledge that enables the next commitment.

When to Use

Trigger conditions:

• User is planning a staged international expansion strategy
• User asks which foreign markets to enter first and in what order
• User needs to evaluate the pace and sequence of internationalization
• User mentions "psychic distance", "gradual internationalization", "Uppsala", or "establishment chain"

When NOT to use:

• For firms that internationalize rapidly from inception -> use grad-born-global
• For FDI mode selection (OLI-based) -> use grad-oli
• For national competitive advantage assessment -> use grad-diamond

Assumptions

IRON LAW: Internationalization Is Path-Dependent

Firms enter PSYCHICALLY CLOSE markets first — those with similar
language, culture, political systems, and business practices.
Each market entry builds experiential knowledge that reduces the
perceived risk of entering the NEXT, more distant market.

Skipping stages (e.g., jumping from no exports to production
subsidiary in a distant market) violates the model and dramatically
increases failure risk — UNLESS the firm has compensating mechanisms
(acquisitions, network relationships, prior international experience).

• Market knowledge is primarily experiential, not codifiable
• Uncertainty reduction comes from operating in the market, not from research alone
• Commitment decisions are incremental and tied to accumulated knowledge
• The model applies best to manufacturing SMEs with limited international experience