The Science of International Expansion: What Research Says

The hardest part of selling abroad is rarely the product. It is not knowing anyone in the new market. International business research has been reaching that conclusion for roughly 50 years. Below we summarise some of the most cited studies and what they mean for B2B and software companies entering new markets.

1. The Uppsala model: firms internationalise step by step

In 1977, Swedish researchers Jan Johanson and Jan-Erik Vahlne proposed a model of how firms expand abroad. Firms commit more resources to a foreign market as they gain experiential knowledge about it, and they tend to enter markets with a shorter “psychic distance” first.

Psychic distance is the sum of factors that hinder the flow of information to and from a market: differences in language, education, business practices, culture and industrial development.

In practice: When choosing a first market, weigh how easily you can understand its buyers, not just its size. Missing market knowledge is the most expensive line in any expansion budget.

2. Liability of foreignness: a cost local rivals do not carry

In 1995, Srilata Zaheer showed that foreign firms face costs that local firms do not, and called this the liability of foreignness. The study compared foreign exchange trading rooms of Western and Japanese banks in New York and Tokyo. Its question was whether foreign firms overcome the liability by importing capabilities from home or by copying successful local firms.

In practice: As a foreign supplier, you start with more question marks in the buyer’s mind. Local references, fast replies in the buyer’s time zone and communication that fits local business norms are the most concrete ways to close that gap.

3. The real problem is being outside the network

In 2009, Johanson and Vahlne revised their model. Business markets, they argued, are webs of relationships rather than markets of independent buyers and sellers. Being an outsider to the relevant network, more than psychic distance, is the root of uncertainty. They called this the liability of outsidership and added trust-building to the model.

In practice: Winning your first customer abroad means building your first relationships with the right people. That is exactly what outbound does: it identifies decision makers in the target market one by one, starts conversations and opens a door into the network.

4. Born-global firms: being small is not a barrier

In 2004, Gary Knight and S. Tamer Cavusgil studied young firms that succeed internationally from or near their founding. Despite scarce resources, these firms used an innovative culture, knowledge and capabilities to succeed in diverse markets.

Nicole Coviello (2015) later argued that some of these findings need reinterpretation and that the “born global” label is not always appropriate. The takeaway is not that every young firm can go global overnight.

In practice: For software companies in particular, scale is not a precondition for expansion. What matters is the capability to understand a target market and reach it with the right message.

5. Trust works differently across borders

Srilata and Akbar Zaheer (2006) stressed that countries differ not only in levels of trust, but also in the nature of trust and the institutions that support it. Partners from two countries can bring different expectations of trust to the same deal.

In practice: Detailed, consistent information may build trust in Germany, while personal relationships may matter more in the Gulf. Adapt your outreach messages and follow-up rhythm to each market.

Summary: four lessons from the research

Research finding	What it means for a B2B company going abroad
Knowledge grows with experience (1977)	Start small, learn fast, then scale commitment
Foreignness carries a cost (1995)	Close the trust gap with local proof, speed and language fit
The real barrier is outsidership (2009)	Your first job is building relationships with decision makers
Trust differs by country (2006)	Adapt messaging and follow-up to each market

ArgonOut Global’s Launch Sprint is built on this logic: in four weeks we test a market, learn from it and build the first relationships. Book a strategy call to decide where to start.

FAQ

What is the Uppsala model?

A model of internationalisation stating that firms gradually increase their commitment to foreign markets as they accumulate experiential knowledge about them (Johanson & Vahlne, 1977).

What is the liability of foreignness?

The additional costs a foreign firm faces in a market that local firms do not incur (Zaheer, 1995).

What is a born-global firm?

A young firm that operates and succeeds in international markets from or near its founding (Knight & Cavusgil, 2004).

References

Johanson, J., & Vahlne, J.-E. (1977). The internationalization process of the firm: A model of knowledge development and increasing foreign market commitments. Journal of International Business Studies, 8(1), 23–32. https://doi.org/10.1057/palgrave.jibs.8490676
Zaheer, S. (1995). Overcoming the liability of foreignness. Academy of Management Journal, 38(2), 341–363. https://doi.org/10.5465/256683
Knight, G. A., & Cavusgil, S. T. (2004). Innovation, organizational capabilities, and the born-global firm. Journal of International Business Studies, 35(2), 124–141. https://doi.org/10.1057/palgrave.jibs.8400071
Zaheer, S., & Zaheer, A. (2006). Trust across borders. Journal of International Business Studies, 37(1), 21–29. https://doi.org/10.1057/palgrave.jibs.8400180
Johanson, J., & Vahlne, J.-E. (2009). The Uppsala internationalization process model revisited: From liability of foreignness to liability of outsidership. Journal of International Business Studies, 40(9), 1411–1431. https://doi.org/10.1057/jibs.2009.24
Coviello, N. (2015). Re-thinking research on born globals. Journal of International Business Studies, 46(1), 17–26. https://doi.org/10.1057/jibs.2014.59

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The science of international expansion: what 50 years of research says