The Relative Effects of Client-Following and Market-Seeking Strategies in the Internationalisation Process of Financial-Service Companies: A Comparison of Spanish and Finnish Entities

We do not know, as yet, whether or not the internationalisation patterns followed by manufacturing firms can be applied without further revisions to the service companies, as a whole, and to the financial service industries. This article examines the internationalisation patterns followed by Finnish and Spanish financial-services companies, to find out whether they are more influenced by "customer following" or "market seeking" approaches. It can be acceptable that larger Finnish firms which have been leaders in internationalisation are market seekers, while the smallest ones are following the market leaders or their industrial customers. When Spanish firms are considered, no conclusive evidence is found. It seems that they are following both, their customers and their leaders, as well as opening new markets. 1. Introduction In spite of the increasing importance of the financial service-sector, the theoretical literature that revises the internationalisation process of the firm, has mostly focused mainly on the manufacturing sector. The general theory on the internationalisation of the firm in research on the manufacturing firm has been applied to explain the recent phenomenon of the internationalisation of service firms. One of the dominant features in the internationalisation of service companies is what might be called the "customer following". A particular case can also be considered, wherein the domestic market is organised as an oligopoly: the internationalisation process might be a reaction to the strategy followed by the main local competitor. This phenomenon is known as the "follow the leader" approach. Secondly, it has been observed that certain service companies behave as "market seekers". The article analyses if there are differences between the approaches following by the Spanish and Finnish firms, what is interesting to compare because: i) the countries have undergone a similar kind of deregulation process of capital markets during the period studied; ii) both countries have become members of the European Union (EU); and iii) Finland and Spain are culturally very distant. Our article follows the outlines of previous papers by Engwall and Wallenstal (1988); Hellman (1996); Majkgard and Sharma (1998); Sharma and Johanson (1987), who studied the internationalisation of Nordic financial-service companies all over the world, as well as the work by Alvarez, Cardone, Lado and Samartin (1999), who studied the evolution of Spanish financial-service companies in Latin America (LA). After this introduction, section 2 presents the theoretical framework, as well as the hypotheses to be contrasted. The data and methodology used in the analysis are shown in section 3. The empirical study is presented in section 4. Finally, section 5 presents the main conclusions of our research. 2. Theoretical background and hypotheses The internationalisation of the firm research area is divided into two main research streams: i) research tradition deals with Foreign Direct Investment (FDI) decisions as the result of a rational plan decided; and ii) research stream views the FDI as an incremental process (Scandinavian "Nordic School"). Nordic School researchers argue that exporting begins with countries close in terms of "psychic distance"(1) and extends incrementally to "psychic distant" ones as the firms gain experience. However, Johanson and Wiedersheim-Paul (1975) did not fully find support for this notion. Luostarinen (1979) on the other hand found that, firms enter into markets in a sequential order, i.e., first into countries with a short "business distance"(2) and later into countries with larger "business distance". Previous studies have identified two large groups of conditions which determinant the entry forms and the gold country of the service-sector firms in their internationalisation process: i)Market seeking: A service firm enters foreign markets primarily to access new markets and opportunities. …