Looking at an organization as an open system, one can easily see some of the reasons why a firm might decide to go international by investing in the stock of a company in another country, by buying up that company, or even by building a brand new company from scratch (the so-called Greenfield approach).
The international market is part of a domestic company's external business environment. Although there are mutual effects, the company does not have as much control over the external environment as it would like to have. A company may decide to invest in another company's assets merely to learn more about this environment—knowledge is the best surrogate for control. Or a company may invest in another company's assets because it desires to influence the other company's managerial decisions. Through investment a company can eliminate the risk of being deprived of the opportunity to secure needed material (inputs), secure access to new technology (processes), and secure access to the market (outputs). Of course, the degree of control assumed by the investing company increases along with the investment commitment. Sole, or 100%, ownership is the type of direct foreign investment preferred by most U.S. companies. IBM, one of the world's most successful and best-managed companies, is notorious for its refusal to engage in anything but wholly owned ventures.
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