Political Hazards, Experience and Sequential Entry Strategies: The International Expansion of Japanese Firms, 1980-1998

Abstract

We extend the stages model of internationalization to incorporate a sophisticated consideration of temporal and cross-national variation in the credibility of the policy environment. Using a sample of 6,570 international expansions of 665 Japanese manufacturing firms, we build on the concepts of uncertainty and experiential learning, to show that firms that had gathered relevant types of international experience were less sensitive to uncertain policy environments. We further highlight an important change in within-country expansion in which firms move to a manufacturing to distribution sequence in countries characterized by uncertain policy environments.

Keywords: FDI, Political risk, Japan, International