Internationalisation and entrepreneurial orientation of multi-national organisations in emerging markets

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Author: Prof. B Urban (Ph.D)
Year: 2013
Paper Type: Award winning paper
Conference Track: Best Research and Knowledge Exchange Paper

Internationalisation and entrepreneurial orientation of multi-national organisations in emerging markets

INTRODUCTION Internationalisation and globalisation has allowed for increased multinational enterprise (MNE) participation in emerging markets primarily through the worldwide integration of financial systems, lower barriers to entry, deregulation and trade liberalisation, and the emergence of a global cultural and economic homogeneity (Chang 2012). The past decade has witnessed a rapid growth of internationalisation in firms from emerging markets (Liu, Li & Xue, 2011). Research recognises that emerging markets are a moderately new facet of the global investment landscape (Goldstein, 2007), where the internationalisation of MNEs is viewed as a process of increasing involvement in international operations, and where factors such as the institutional environment and investments are important for international strategy (Ge & Deng, 2011). Several topics have been considered in the literature on the internationalisation process (Buckley & Casson, 2009; Oviatt & McDougall, 2005), where earlier research noted that as industry internationalisation increases, the pressure on all firms in the industry to internationalise increases too, which, in turn directly relates to firms venturing to ultimately become MNEs. This venturing is most notable in emerging markets where there is less market saturation and more room for MNE growth through expansion, especially export market orientated growth (Miocevic & Crnjak-Karanovic, 2012). The notion of expansion directly relates to MNE evolution in the form of corporate venturing, accessing additional market capacity and seeking out new opportunities (Ge & Deng, 2011; Wiklund & Shepherd, 2003). Recognising the importance of new opportunities to MNEs in emerging markets, this study aims to add empirically grounded theoretical insights to the discourse on internationalisation and venturing. Song, Wang and Parry (2010) consider entrepreneurship as a key driver of economic development, where a firm’s entrepreneurial orientation (EO) plays an important role. EO has positive performance implications for firms and may assist firms in seeking out new opportunities, and is therefore critical for MNEs in emerging markets that are looking to expand operations (Wiklund & Shepherd, 2003). International entrepreneurship (IE) has been defined as the ‘discovery, enactment, evaluation, and exploitation of opportunities—across national borders—to create future goods and services’ (Oviatt & McDougal, 2005, p. 539). A firm’s EO denotes the entrepreneurial process in a firm, where entrepreneurship is undertaken and relates to the methods, practices, and decision-making styles used to act entrepreneurially. Lee and Peterson (2000) note that firms exhibiting EO act independently (autonomy), encourage experimentation (innovativeness), take risks, take initiative (proactiveness), and aggressively compete within their markets. The business environment in emerging economies, such as in China has become more conducive to entrepreneurial activity where many new firms are innately entrepreneurial (Peng, 2003). Liu, Li and Xue (2011) suggest that a firm EO provides a foundation on which an MNE can build its interactions with dynamic foreign markets. This article responds to direct calls for further research, which recommends that firms integrate entrepreneurship in their internationalisation process (Shaw & Darroch, 2004). The research problem emerges from past research which finds, when reviewing the geographic spread of MNE operations, that MNEs from developing countries have, on average, affiliates in six countries, mostly in their own region (Goldstein, 2007). By way of contrast, on average, the largest MNEs have affiliates in 40 foreign countries, spread across a number of regions. This suggests that emerging market MNEs need to internationalise to create competitive advantages, and to differentiate themselves by adopting an entrepreneurial orientation. The research problem is furthermore motivated by considering that even though emerging economies provide a unique, quasiexperimental setting for testing existing theories, too often these emerging economies are treated as a set uniform bloc. Although emerging economies may share many similarities, they also have distinctive characteristics. Clearly, there is a need to develop an understanding of these differences and their impacts (Bruton, Ahlstrom & Obloj, 2008). The research problem stems from the fact that emerging markets in general, but specifically the countries selected for this study have received very little attention in academic research (Parnell et al., 2011). Although there has been academic research on the internationalisation of MNEs, the vast majority of studies tend to review MNEs from BRIC related countries, with very little on African emerging countries such as South Africa. Understanding of emerging markets is rather fragmented with existing entrepreneurship research focusing almost exclusively on North American and European contexts. In fact, a systematic review of seven top international entrepreneurship journals reveals that less than half of 1% of the articles from 1990 to 2006 addressed entrepreneurship in emerging markets (Bruton et al., 2008). 3 This article fills this gap by investigating levels of firm EO, EO enablers and their role in the internationalisation of MNEs in the three emerging markets of China, Malaysia and South Africa. Three specific regions incorporating the Far East, Asia Pacific and Africa, were selected so as to specifically identify MNEs from formally peripheral areas such as East Asia, Asia Pacific and Africa. The innovative features that these MNEs share, such as their accelerated internationalization, strategic innovation and organizational innovation, fit particularly well with the characteristics of the emergent global economy as one of complex inter-firm linkages (Mathews, 2006). This study builds on existing entrepreneurial aspects of EO and EO antecedents and enablers, such as: firm culture (Lee & Peterson, 2000; Thomas & Mueller, 2000), entry modes (Oviatt & McDougall, 2005), corporate entrepreneurship (Oviatt & McDougall, 2005; Zahra, Ireland & Hitt, 2000), exporting (Oviatt & McDougall, 2005), knowledge management (Kuemmerle, 2002), strategic and organisational innovation (Mathews, 2006), and networking (Oviatt & McDougall, 2005). Additionally, the study investigates modes of internationalisation, which may be associated with MNE internationalisation success. The study contributes to the discourse on internationalisation in two ways: First, it applies the theoretical lens of internationalisation to the empirical setting of the corporate entrepreneurship context. Second, it formally tests hypotheses that link EO to MNE success. This article starts by the reviewing the constructs under study and their potential links to MNE internationalisation and success. This is followed by formulating hypotheses in terms of the overall research question: “Is there a positive relationship between higher levels of EO in MNEs and higher levels of internationalisation success, for three emerging economies over the 2005 to 2010 trading period?”

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