Home Country Institutions and International Entrepreneurship: A Multi-Level Framework – Institutions and International Entrepreneurship

Home Country Institutions and International Entrepreneurship: A Multi-Level Framework – Institutions and International Entrepreneurship

Etayankara Muralidharan (MacEwan University, Canada) and Saurav Pathak (Kansas State University, USA)
DOI: 10.4018/978-1-7998-1981-3.ch014

Abstract

The extent of internationalization by early-stage entrepreneurial firms may depend upon home country institutional conditions. Using insights from institutional theory, this chapter suggests that national-level institutional conditions facilitate or constrain the efforts made by early-stage entrepreneurs to internationalize. Given the strong linkages between entrepreneurs and the enterprises they drive, the multi-level framework proposed in this study suggests that a strong national system of innovation and better regulatory quality, which supports early internationalization by new entrepreneurial firms. Smaller domestic markets induce such firms to explore overseas markets for their products. The framework also suggests that a strong regulatory environment positively moderates the effects of national innovation systems and domestic market size on the extent of early internationalization. While implications for the internationalization process are discussed, specific reference to the importance of policy to support internationalization by early entrepreneurial firms is made.
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Background

Entrepreneurial firms may be compelled to internationalize early in their life cycle in order to recover the high costs they incur in the development of new products (Preece, Miles, & Baetz, 1999). The international perspective adopted by entrepreneurial firms is facilitated by improved communication and low-cost transportation combined with greater liberalization of global markets (Ohmae, 1990). These conditions have led to the emergence of new international enterprises, a new class of firms that crossed international borders early in their life cycle (Fan & Phan, 2007; Oviatt & McDougall, 1994). Early internationalization may be motivated by the desire to leverage managerial and commercial experience in more places (Ganotakis & Love, 2012), spurred by an influx of cash and liquidity after an initial public offering (Filatotchev & Piesse, 2009), or encouraged by threats that force them away from home markets (Autio, Sapienza, & Almedia, 2000).

Key Terms in this Chapter

Internationalization: Process of marketing, manufacturing, or innovating outside the firm’s home country.

Market Size: Demand for goods and services in an economy.

Institutions: Regulations, norms, and values of society that guide behavior.

Regulatory: Guiding behavior through formal rules.

Entrepreneurship: Process of discovery, evaluation, and exploitation of opportunities to produce and market goods and services.

Innovation: Changing, improving, or developing new products and processes.

Born-Global: An entity that internationalizes right from its inception.

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