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INTRODUCTION
Business organizations may expand from their home countries to foreign countries by setting up replicas (of parts of) their value chains in those foreign countries. Well-known examples of such organizations are those that expand internationally by replicating a format aimed mainly at distribution, such as McDonald's (Watson, 1997), The Body Shop (Quinn, 1998), Starbucks (Schultz & Yang, 1999), Hennes & Mauritz (Bengtsson, 2008), and IKEA. The replication of a fixed format is associated with benefits, such as economies of scale and brand recognition (Winter & Szulanski, 2001). However, the international business literature, and notably the integration-responsiveness framework (Bartlett & Ghoshal, 1989; Devinney, Midgley, & Venaik, 2000; Prahalad & Doz, 1987), has long recognized that such benefits often need to be traded off against the benefits of local adaptation. This raises the issues of how and to what extent international replicators combine replication and adaptation, and what explains these choices. Unfortunately, there is a dearth of research literature in international management that explicitly addresses international replicators in terms of how they build a format for replication, adapt it to local circumstances, transfer new learning from such adaptation, and otherwise manage the process of expanding by means of replication (although descriptive work exists on international franchise chains; Quinn, 1998; Schultz & Yang, 1999; Watson, 1997). The research literature in strategic management that deals explicitly with replication, namely the replication-as-strategy literature (e.g., Winter & Szulanski, 2001), concentrates mainly on national firms (but see, e.g., Szulanski & Jensen, 2006, 2008). Our knowledge about these issues is therefore rather scant, warranting a small-N research design (Piekkari, Welch, & Paavilainen, 2009).
Specifically, we undertake a detailed study of the internationalization process and practices of the retailing part of the value chain of Swedish home furnishing giant IKEA. Based on this study, we show that most of IKEA's international expansion over almost five decades has, following a period of initial exploration, proceeded in terms of replicating a format. However, this is not the exact replication of a fixed format as recommended by the replication-as-strategy literature (e.g., Winter & Szulanski, 2001). Rather, IKEA seeks to combine the advantages of format standardization with local adaptation. Local adaptation, for example, by country-specific IKEA service offices, results in explorative learning. The acquisition and internal...