Internationalization of the forest industry: A corporate-level analysis

With far-reaching impacts of economic globalization, the internationalization process of the forest industry has been accelerated. Particularly since the 1990s, internationalization has progressed intensively through industry consolidation and production relocation. Within the wood and wood products sector, for example, world inward foreign direct investment (FDI) stocks increased from 20 billion US dollars in 1990 to more than 120 billion US dollars in 2011. Forest industry firms have geographically shifted their operations from traditional production bases in developed countries to emerging Asian and Latin American countries. The share of FDI flows into developing and transition economies has grown from 18.8% in 1990–1992 to 73% in 2009–2011. The internationalization process of the forest industry has induced multifaceted concerns from economic, strategic, and environmental perspectives at both country and corporate level. However, the actual consequences of such expansion are still largely unknown. It is therefore important to study the current status of the forest industry’s internationalization process and to explore drivers and goals of this process. The theoretical background of this thesis is mainly based on the internationalization and FDI theories portrayed in international business literature. A systematic literature review, a qualitative case study and cross-sectional regression analysis have been applied methodologically. China is used as an example in two of the empirical studies, as it is the most attractive FDI destination in the global forest sector. This thesis conceptually depicts a framework of the systematic internationalization process of the forest industry. Empirically, three themes are identified as focal topics; namely corporate financial performance, corporate sustainability, and corporate entry mode choice. Managerial implications derived from this thesis indicate that (1) firms could aim for either internationalized or domesticoriented operational strategies to pursue higher financial performance; (2) firms should implement social and environmental assessment to maintain sustainable overseas operations; and (3) firms ought to accumulate operational experience and familiarity with local culture before investing in a wholly owned subsidiary. In general, this thesis concludes that internationalization is a dynamic process of pursuing sustainable development to tackle physical forest resource constraints, socio-economic challenges, and corporate operational risks at the global operations scale. Topics related to the analysis of new innovative products, collaboration with supporting industries, and the consideration of sustainability as corporate core competitive advantages are worthy of future research aiming to analyze the further internationalization process of the forest industry.