Risk management in the internationalization process of the firm: A note on the Uppsala model

Abstract

This paper analytically and graphically examines the Uppsala model’s risk formula (Johanson & Vahlne, 1977) in its two variables: commitment and uncertainty. The graphical treatment of the variables demonstrates the internationalization mechanism’s consistency with the risk formula. In particular, commitment manipulation develops a risk management perspective to the model, wherein contingent uncertainty is a central concept. Themain contribution consists in the composition of a set of hypotheses on the effects of risk contingencies on a firm’s commitment behavior in different internationalization phases. A pertinent remark that emerges from this analytical exercise is the Uppsala model’s contingent nature, which explains the differences in the pattern and pace of the internationalization process, as well as potential leapfrogging and market-exit moves.