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The International Dimension of Entrepreneurial Decision-Making Cultures, Contexts, and Behaviours (Andrea Caputo, Massimiliano M. Pellegrini Etc.)
The International Dimension of Entrepreneurial Decision-Making Cultures, Contexts, and Behaviours (Andrea Caputo, Massimiliano M. Pellegrini Etc.)
Andrea Caputo
Massimiliano M. Pellegrini
Marina Dabić
Léo-Paul Dana Editors
The International
Dimension
of Entrepreneurial
Decision-Making
Cultures, Contexts, and Behaviours
Contributions to Management Science
The series Contributions to Management Science contains research publications in
all fields of business and management science. These publications are primarily
monographs and multiple author works containing new research results, and also
feature selected conference-based publications are also considered. The focus of the
series lies in presenting the development of latest theoretical and empirical research
across different viewpoints.
This book series is indexed in Scopus.
This Springer imprint is published by the registered company Springer Nature Switzerland AG.
The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland
To my family, who always supported my
“international dimension.”
Andrea Caputo
To my life partner, who always withstood my
“international dimension.”
Massimiliano Matteo Pellegrini
To my family, who always accepted my
“international dimension.”
Marina Dabic
To Michelle, with thanks for having
encouraged my “international dimension.”
Léo-Paul Dana
Foreword
It is a privilege for me to welcome you to the new book The International Dimension
of Entrepreneurial Decision-Making: Cultures, Contexts, and Behaviours, edited by
Dr Andrea Caputo, Dr Massimiliano M. Pellegrini, Prof Marina Dabić, and Prof
Léo-Paul Dana. Each of the chapters provides a valuable contribution to developing
the field of international entrepreneurship.
During the past 30 years, increasingly more attention has been paid to interna-
tionalization of small business and international entrepreneurship. Policy makers
have been observing on the economic growth potential (job creation, etc.), while
researchers have been grappling with analyzing the convoluted border crossing
phenomena. Indeed, international entrepreneurship and internationalization of
SMEs can take on many forms and develop in a diverse context but common to
these activities is that they involve human decision-making, cross-cultural contexts,
and risk as well as opportunities.
Research has shown the importance of SMEs and international entrepreneurship
in relation to acting on emerging opportunities and developing innovative products
and services. Accordingly, a major part of the SME and IE research literature draws
the attention to the innovativeness of technology-based firms. However, recently and
following global trends, we have seen an increased research attention toward the
“innovativeness” in a broader sense. Hence, there has been a rise in literature on the
interplay between the potential impact of SME and IE activities on broad-based
global issues such as sustainability, social equality, migration, and emerging econ-
omies. This research indicates that SME and IE might be a key ingredient in solving
these vital issues that we are confronted with.
vii
viii Foreword
We would like to deeply thank all the friends and colleagues who were involved in
the production of this edited book. In particular, special thanks go to all the
contributing authors for being interested in participating in this ambitious project
and for delivering such high-quality manuscripts in a timely fashion and despite the
challenges the COVID-19 pandemic brought to all of us. We would also like to
explicitly thank all the reviewers who assisted us and took part in reviewing the
manuscripts published in this book. Moreover, we would like to express our
gratitude to the European Academy of Management community and the SIG of
Entrepreneurship’s scholars, who supported this project during its development.
ix
Contents
xi
xii Contents
xiii
xiv Editors and Contributors
Contributors
Abstract This chapter introduces the content of the book, presenting the key
insights from the contributed chapters. The book comprises 11 diverse and insightful
contributions from nine different countries.
A. Caputo (*)
University of Trento, Trento, Italy
University of Lincoln, Lincoln, UK
e-mail: [email protected]
M. M. Pellegrini
University of Rome “Tor Vergata”, Roma, Italy
e-mail: [email protected]
M. Dabić
Faculty of Economics and Business, University of Zagreb, Zagreb, Croatia
Nottingham Trent University, Nottingham, UK
e-mail: [email protected]
L.-P. Dana
Dalhousie University, Halifax, NS, Canada
e-mail: [email protected]
Colombia, Finland, Italy, Perù, South Africa, Spain, the United Kingdom and the
United States.
In the call for chapters of this edited book, we called for scholars to submit
empirical, theoretical, and review chapters, which try to bridge the literature on
entrepreneurship, entrepreneurial, and innovative behaviours with decision-making
and negotiation. To the best of our knowledge, this edited book is among the first to
combine those streams of research thereby offering a new and insightful addition to
the entrepreneurship field.
Every chapter that the reader will read in this book has undergone a thorough
double-blind peer-review process. It started with authors submitting a chapter
proposal in October 2020, which was reviewed and then authors were invited to
submit a full chapter by February 2021. Chapters were then reviewed and finalised
during 2021. Offering the reader with contemporary and high-quality research
investigating the international dimension of entrepreneurial decision-making in
terms of cultures, contexts and behaviours.
Following this introduction, the book starts with Chap. 2, titled Revitalizing the
‘International’ In International Entrepreneurship: The Promise of Culture and
Cognition, where Robert J. Pidduck, Daniel Clark, and Lowell Busenitz discuss
the fusion of international business and entrepreneurship research to form the field of
IE, and how this has provided substantial added value for one half of its coparent
disciplines, international business. IE helped extend the traditional phenomenolog-
ical focus beyond large corporations to include new ventures. The value-add for IE’s
other coparent discipline, entrepreneurship, though, remains unclear. In this chapter,
we build the case that this may be partly due to an unnecessarily restrictive
interpretation of what ‘international’ can represent to be framed as an IE study and
to usefully build on and integrate related works in adjacent fields. Our analyses
reveal that the ‘international’ elements in most IE studies are chiefly interpreted to
mean geographic contexts for firm outcomes. While useful to an extent, this niche
has and continues to limit us from drawing on international dynamics to meaning-
fully probe the many foundational questions in entrepreneurship; that IE has still left
mostly untouched. We argue that a shift in the directional focus of IE is required: to
include intercultural dynamics as antecedents to entrepreneurial action, both inter-
national and domestic. We discuss how adopting a broader international lens, used
through the social sciences, can foster valuable insights from domains such as cross-
cultural psychology and international organisational behaviour. Finally, we lay out a
research agenda for investigating how intercultural constructs underpinning cross-
border dynamics influence the discovery, enactment, evaluation and exploitation of
opportunities in general.
In Chap. 3, Mauri Laukkanen and Francisco Liñán present their work titled
Uncovering Entrepreneurial Belief Systems through cognitive causal mapping.
4 A. Caputo et al.
The chapter illuminates the basic issues of human cognition and the preconditions of
disclosing and studying entrepreneurial actors’ subjective knowledge or beliefs (aka
cognitive maps, mental models, schemas), which underlie their reasoning, inten-
tions, and decision-making. To demonstrate such research in practice, the chapter
presents in some detail an established, yet accessible cognitive method, comparative
causal mapping (CCM) using the freely downloadable CMAP3 software, for reveal-
ing and analysing the belief systems of micro-entrepreneurs and small business
advisors. Particularly useful in international studies, this methodology supports
research that uses raw data in different languages but a standard language like
English for coding the data and reporting the findings. Thus, the CCM-CMAP3
approach can facilitate, for instance, studies that compare cross-cultural or cross-
national belief systems or those of specific entrepreneur categories, or which track
the cognitive evolution of entrepreneurs or key stakeholders during
internationalisation.
Chapter 4 follows and is titled International Entrepreneurial Ecosystem, Knowl-
edge Exploitation and Innovation: Case of International Biotech Pharmaceutical
SME, authored by Naima Cherchem and Christian Keen. The chapter investigates
how innovation and internationalisation are key elements of knowledge-intensive
industries such as the biotech pharmaceutical sector. Small- and medium-sized
enterprises in this highly competitive and global sector are under significant pressure
to innovate and commercialise their product in a short period of time. Given the lack
of resources when compared to the big pharmaceutical firms, these SMEs tend to be
part of several international entrepreneurial ecosystems. As members of these
ecosystems, the biotechnological SMEs collaborate with other members in almost
all the different phases of product development. From the first step of working
together to develop a new molecule, to form an alliance with a foreign firm to
enter a new market. The biotechnological sector has the distinctiveness that technical
expertise and reputation are the most important resources. Internationalisation, either
to develop or to commercialise a product, is not an option but a day-to-day
occurrence.
Bob Bastian and Antonella Zucchella follow with Chap. 5, titled Ignorance and
international entrepreneurship. Two sides of a blade in the decision to enter a
foreign market. This chapter takes an unusual perspective on International Entre-
preneurship, namely, how entrepreneurs, when deciding to enter a foreign market,
‘don’t know’. While a lot has been said about knowledge, scholars rather avoid the
other side of the coin: ignorance. Throughout the chapter, we discuss the influence of
ignorance on entrepreneurship cognition, when it may be beneficial, and when
instead it is detrimental. Practical tools to recognise and unmake ignorance are
provided.
In Chap. 6, Risk or opportunity? Exploring the relationship between entrepre-
neurial decision and the use of equity crowdfunding campaigns in less- and well-
developed regions in Italy, Simona Leonelli, Filippo Marchesani, and Francesca
Masciarelli investigate decisions around crowdfunding in Italy. The democratising
role of crowdfunding has had a substantial impact on SMEs development and
opportunities. Crowdfunding enables entrepreneurs to fund their firms by drawing
Introduction to The International Dimension of Entrepreneurial. . . 5
on small contributions from many individuals without the help of financial interme-
diaries. Crowdfunding impacts firms’ strategic and financial development and entre-
preneurs’ decision-making processes because of geographical contexts not offering
the same economic and financial opportunities. Mainly, in Italy, characterised by
heterogeneity in the regional economic development, crowdfunding may allow
entrepreneurs to break out of the traditional linkage between the SME and urban
area. The chapter analyses how the entrepreneurial decision-making process differs
across Italian regions considering entrepreneurial choices about using equity
crowdfunding campaigns and shows that the gap between less- and well-developed
regions is reduced thanks to crowdfunding itself.
With Chap. 7, The Internationalization of Family SMEs: A Literature Review and
Research Agenda, Franco Ernesto Rubino, Claudio Multari, and Giuseppe Valenza
discuss the internationalisation process of family Small and Medium Enterprises
(SMEs). Although several studies have dealt with overseas expansion strategies, it
seems that only a few of them have focused on family SMEs. By a Systematic
Literature Review (SLR), based on a sample of 29 articles, the research work intends
to investigate the ways that family SMEs undertake to internationalise their busi-
nesses. The originality of the study concerns the lack of an SLR about the
internationalisation process of family SMEs. The findings highlight that there are
some theories supported by most of the academics, while others revealed conflicted
opinions. Moreover, there are interesting theories that should be better investigated
by future research. Furthermore, it was found out that business literature interest for
the topic has been grown in the last two decades. The chapter aims to stimulate the
debate about family SMEs’ internationalisation strategies.
The following chapter, Chap. 8, is titled Internationalising HRM Framework for
SMEs: Transcending High Performance Organisation Theory’s Economic Utilitar-
ianism towards Humanism by John Mendy. The work rests on the premise that
people and economic barriers constitute fundamental challenges to SMEs’ perfor-
mance internationally. SMEs’ internationalisation studies have relied on an eco-
nomic utilitarian approach to resolve this conundrum with limited success. This
chapter examines and critiques High-Performance Organisation Theory’s five char-
acteristics and highlights both a theory and practice gap in SMEs’
internationalisation and how staff’s performance is managed humanely. By using
a conceptual abstraction methodology based on over eighty referred articles from the
Web of Science, this chapter develops an ‘Internationalising HRM Framework’.
There are four characteristics and principles centring on competency, R & TD, social
and resilience capacity. This chapter contributes not only to filling the dual theory-
practice gap in SMEs’ internationalisation research but also helps in addressing the
problem of how managers, entrepreneurs and HRM professionals can manage
people humanely way whilst addressing the performativity lag when SMEs operate
internationally.
Chapter 9 is authored by Paul AguIgwe and is titled Cross-cultural tribes,
Community and Indigenous entrepreneurship. This chapter review important con-
cepts of indigenous entrepreneurship including clan entrepreneurship, kindred
6 A. Caputo et al.
Simultaneously with publishing this book, we combine ideas about the next book
since the shared ideas tend to contribute to the synergy that results in this book.
Therefore, I send a heartfelt welcome to the network and invite your feedback and
opinions. This publication effort would not have been possible without the people
participating directly or indirectly in the compilation of this book (authors,
reviewers, Springer as publisher, academic, business owners and managers). They
all have contributed and collaborated solidly by providing the examples, the realities
that help the future growth of the firms and help to prepare entrepreneurs, managers
and our students for the realities they will face: challenges and opportunities,
confidence and compassion, awareness strength and courage, failures through crises
and success stories and most skills, experience, knowledge, wisdom and motivations
that will help them to prove the most critical real-life concepts in the business world.
References
Caputo, A., & Pellegrini, M. M. (2019). The anatomy of entrepreneurial decisions: Past, present
and future research directions. Springer.
Caputo, A., & Pellegrini, M. M. (2020). The entrepreneurial behaviour: Unveiling the cognitive
and emotional aspect of entrepreneurship. Emerald.
Caputo, A., Pellegrini, M. M., Dabic, M., & Dana, L.-P. (2016). Internationalisation of firms from
Central and Eastern Europe. European Business Review, 28(6), 630–651. https://doi.org/10.
1108/EBR-01-2016-0004
Crick, J. M., & Crick, D. (2018). Angel investors’ predictive and control funding criteria: The
importance of evolving business models. Journal of Research in Marketing and Entrepreneur-
ship, 20(1), 34–56. https://doi.org/10.1108/JRME-11-2016-0043
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SME internationalization: A bibliometric and systematic review. Small Business Economics, 55
(3), 705–725. https://doi.org/10.1007/s11187-019-00181-6
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8 A. Caputo et al.
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entrepreneurial intentions? Theory and debate. International Business Review, 25(6),
1197–1210.
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Dr. Andrea Caputo is Associate Professor in Management at the University of Trento (Italy) and
at the University of Lincoln (UK). He received his PhD in Management from the University of
Rome “Tor Vergata” in 2013. Previously, he was Assistant Professor at Princess Sumaya Univer-
sity. He has also held visiting positions at several universities, like University of Queensland,
George Washington University, University of Seville, Alicante, Pisa, Macerata and Naples
Parthenope. His main research expertise is related to entrepreneurship, strategic management,
innovation, negotiation, and decision-making. He has authored more than 60 international publi-
cations, including Journal of Business Research, International Journal of Entrepreneurial Behav-
iours & Research, International Journal of Entrepreneurship & Small Business, and Business
Process Management Journal. He is Associate Editor of the Journal of Management & Organiza-
tion and editor of the book series “Entrepreneurial Behaviour” for Emerald, and co-chair of the
track Entrepreneurial Behaviour and Decision-Making at EURAM.
Prof. Marina Dabić is Full Professor of Entrepreneurship and International Business at Univer-
sity of Zagreb, Faculty of Economics and Business, Croatia, and Nottingham Business School,
NTU, U.K. She received her Ph.D. degree in Economics, focus on transfer technology in interna-
tional business from the University of Zagreb, Faculty of Economics and Business, Zagreb, Croatia
in 2000. Her research appears in a wide variety of international journals, including the Journal of
International Business Studies, Journal of World Business, Journal of Business Research, Techno-
logical Forecasting and Social Change, Small Business Economics, Organizational Dynamics,
International Journal of Human Resource Management, IEEE- Transactions on Engineering
Management, Journal of Small Business Management, Technovation, Organizational Dynamics,
among many others. Prof. Dabić is an Associate Editor of the Technological Forecasting and Social
Change listed as CABS 3*, Technology in Society and Department editor of IEEE- Transactions on
Engineering Management, listed as CABS 3*. Professor Dabic was grantholder if EC project and
she is reviewer and partner for Horizon 2020 projects. Prof Dabic received the “Highly Commended
Introduction to The International Dimension of Entrepreneurial. . . 9
Award” at the Emerald Literati Network Awards for Excellence in 2017 and 2018 and TOP HOT
25 in the Journal of World Business for period 2000–2007 and WAIB best paper award at
AIB 2021.
Prof. Léo-Paul Dana is Professor at Dalhousie University and holds titles of Professor at
Montpellier Business School and Visiting Professor at Kingston University. He is associated with
the Chaire ETI at Sorbonne Business School. A graduate of McGill University and HEC-Montreal,
he has served as Marie Curie Fellow at Princeton University and Visiting Professor at INSEAD. He
has published extensively in a variety of journals including: Entrepreneurship: Theory & Practice,
International Business Review, International Small Business Journal, Journal of Business
Research, Journal of Small Business Management, Journal of World Business, Small Business
Economics, and Technological Forecasting & Social Change.
Revitalizing the ‘International’
in International Entrepreneurship: The
Promise of Culture and Cognition
R. J. Pidduck (*)
Old Dominion University, Norfolk, VA, USA
e-mail: [email protected]
D. R. Clark
Ivey Business School - Western University, London, ON, Canada
e-mail: [email protected]
L. W. Busenitz
University of Oklahoma, Norman, OK, USA
e-mail: [email protected]
1 Introduction
1
Although we acknowledge and appreciate that there is fierce debate over how various journal
quality ranking systems align (e.g., Australian Business School Deans List, The Rotterdam List,
JCR-based lists etc.), 3 in CABS generally align with outlets considered to be from a “B” to a “A-
A*” in many North American Business Schools, and thus ‘count’ in tenure decisions as ‘influential’
or ‘quality’ outlets.
2
To capture influential articles that can also garner substantial citations yet lie outside of journals
(e.g., Venkataraman, 1997)—we also supplemented this with research from within leading
research-based book series.
Revitalizing the ‘International’ in International Entrepreneurship: The. . . 15
In addition, when comparing IE articles that focus on the individual level or the
firm level, we see that both types of articles have continued to increase. In the earlier
years of our review time frame, firm-level articles formed the majority of IE articles
published, yet individual-level analyses have increased significantly in recent years,
highlighting their growing importance for the field. Further, when comparing the
incidence of IE articles focusing on cultural aspects of IE, as opposed to geographic
aspects, we see initially that the majority of published articles focus on geographic
aspects of IE. In recent years, however, there has been an increase in the number of
articles focusing on cultural aspects of IE, also suggesting a growing influence in the
field.
To summarize, IE articles continue to be published in rising numbers, albeit in
non-premier entrepreneurship journals, as publishing in premier journals has
decreased. Further, key emerging trends are a growing emphasis on the antecedent
(over outcome), cultural (over geographic), and individual-level/cognitive (over
firm-level) aspects under the IE thematic umbrella. We turn to addressing the
implications of these findings next.
16
Fig. 1 (a–c) Focus of IE Publications: Antecedent vs. Outcome, Individual vs. Firm, Cultural vs. Geographic
R. J. Pidduck et al.
Revitalizing the ‘International’ in International Entrepreneurship: The. . . 17
Strategy
IE (to date)
International Business
Entrepreneurship
Cross-Cultural
Psychology /
International
Organizational
Behavior
Strategy
IE
International Business (post-pivot)
Entrepreneurship
Cross-Cultural
Psychology /
International
Organizational
Behavior
Fig. 2 (a) Pivoting the Scope of the International in IE Research. (b) Pivoting the Scope of the
International in IE Research
20 R. J. Pidduck et al.
Considering this pivot, we propose building on the emerging trends identified in our
review by further integrating (now directly relevant) insights from intercultural
research in fields such as cross-cultural psychology and international organizational
behaviour. Whether the IE studies in our review implicitly or explicitly acknowledge
or ground their culture-based variables in these fields, our goal in the following
section is to first highlight how the existing intercultural constructs are specifically
helpful to each of the four pillars of entrepreneurial opportunities. We select three
areas: cultural intelligence, multicultural experience, and global entrepreneurial
orientation. Then, we provide some selected examples from recent studies in these
adjacent fields (i.e., outside IE, IB, and Entrepreneurship) that illustrate the value to
future IE studies in building on these currently overlooked streams of research and
their rich history of conceptual and theoretical development on cross-border phe-
nomena. We also demonstrate that while such research may initially appear to be out
of IE’s remit due to a saturated focus on firm internationalization; in light of our
proposed definitional pivot, we can now advance understanding on how, why, and
when cultural boundaries and dynamics influence discovering, enacting, evaluating,
and exploiting opportunities.
research on the role of entrepreneur spouses (e.g., Brüderl & Preisendörfer, 1998;
Kirkwood, 2009); could multicultural ‘swipes’ from popular dating apps be a novel
source of data to predict forms of entrepreneurial activity in a given metropolitan
area? In sum, there are numerous potential contributions for advancing understand-
ing on how multicultural experience informs entrepreneurial decision-making per se.
development and how resources are exploited or deployed (Busenitz & Lichtenstein,
2019). Such faith or religion-based issues bring to light several important questions
for IE and the exploitation of entrepreneurial opportunities. For example, how do
adopting faith-based perspectives impact the entrepreneurs’ consideration of a
regional market place or the nature of the internationalization process? Relatedly,
how does an entrepreneur or host-market’s faith impact the product and services
offered? For example, can we realistically assume-away factors surrounding entre-
preneurs from Islamic countries and their consideration of sourcing or selling to
markets that are politically hostile to elements of the Islamic faith or ethnic minority
enclaves? Faith certainly plays a role in this entrepreneurial opportunity process.
While work and organizational efforts are often conceptualized in a separate silo
from entrepreneurs’ faith-related thinking, the reality is that for most people they are
inseparable. Rather than a control variable used in a similar vein to demographic
variables, explicit consideration of entrepreneurs’ personal faith conviction and the
degree of importance they place on it in their lives is likely to illuminate new insights
into various interesting aspects of IE, especially cognitive processes in opportunity
development and exploitation.
5 Conclusion
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3
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explains why incessant research focus on niches are problematic for knowledge creation of much
richer, broader fields of study: https://journals.aom.org/doi/abs/10.5465/amp.2017.0123
4
To put this in perspective, less than 1% of the 30 million registered firms in the USA even export
(Trade.Gov). Yet, it is probable that the vast majority of firms and the entrepreneurs that found them
are directly influenced by cross-border and cross-cultural phenomena despite their venture out-
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within major metropolitan areas, and digital communication interactions with suppliers overseas.
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Abstract This chapter discusses the grounds and methods of studying the knowl-
edge structures (aka belief systems, cognitive maps, mental models) that underlie
and guide entrepreneurs’ and entrepreneurial actors’ perceptions, intentions,
decision-making and performance. Current entrepreneurial cognition research
(ECR), largely emulating cognitive psychology, tends to emphasise individual
cognitive processes, studying how entrepreneurs in general think and solve prob-
lems. This is important but underemphasises the also essential questions of what
specific entrepreneurs know and think (or ignore); the contents, formation, relevance
and consequences of their knowledge and beliefs. This chapter discusses some basic
issues of cognition and the conditions of empirically studying knowledge or beliefs.
It also presents an accessible and established method, cognitive comparative causal
mapping (CCM), for revealing and analysing entrepreneurs’ and entrepreneurial
actors’ belief systems, demonstrating it in the case of nascent micro entrepreneurs
and small business advisors. In international entrepreneurship research, this
approach facilitates, e.g., tracking the evolution of entrepreneurs’ thinking during
internationalisation or comparing their belief systems in different cross-cultural or
cross-national contexts. Such research is supported by CMAP3, a CCM specific
software, by enabling studies where the data, such as interviews, use different
languages, the coding and reporting a standard language like English.
M. Laukkanen (*)
University of Eastern Finland, Business School, Kuopio Campus, Finland
e-mail: mauri.laukkanen@uef.fi
F. Liñán
Universidad de Sevilla, Facultad de CC, Económicas y Empresariales, Seville, Spain
1 Introduction
section draws some methodological and research lessons for content-oriented ECR
considering especially cross-cultural and cross-national contexts.
1
The terms knowledge and belief are used now interchangeably to refer to social actors’ subjective
knowledge, in practice propositions they hold and consider plausible enough to express as their
views (Good & McDowell, 2015; cf. however, e.g., Churchland & Churchland, 2013).
Uncovering Entrepreneurial Belief Systems Through Cognitive Causal Mapping 41
The notion of mental models/belief systems implies that their key elements are
causal beliefs/propositions that certain phenomena or states of affairs (A, B, C,
etc.) exist and have some influence (or temporal) relationships (that A influences B,
C follows B, etc.) (Sloman & Lagnado, 2015). Cause maps (see below) consist of
nodes and arrows that correspond to the entities and relationships someone per-
ceives in a domain. This makes causal mapping a highly useful formality for
representing actors’ phenomenological and causal beliefs and their systems, includ-
ing conceived event sequences (scripts) (Ifenthaler et al., 2011; Jones et al., 2011).
Using causal maps underlies some constraints. First, as noted, knowledge/beliefs
and their systems must be externalised in natural language or graphically before they
can be analysed and interpreted (Evans, 1998; Ifenthaler et al., 2011; Rouse &
Morris, 1986). Second, people have no single universal belief system/mental
model, but several variously coherent and developed conceptualisations about
specific issues or domains. This implies a researcher decision about which issues
are relevant and focusing data elicitation accordingly. Third, belief systems cannot
be expressed nor elicited as whole gestalts. When probed, people can express beliefs
only as successive binary propositions (a ! b, c ! d, etc.), which correspond to
what they recall and/or infer based on the recalled knowledge.
The construction of cause maps depends on the data. In archival CCM studies the
data, causal propositions, are distilled from texts usually from among much irrele-
vant material (Axelrod, 1976). In the present case the original propositions had to be
elicited by semi-structured interviewing (SSI) (Laukkanen & Wang, 2015). This has
the additional benefit of acquiring mainly causal proposition and little redundant
data. In cognitive terms, SSI probing activates the declarative LTM which contains
retained facts and general notions like concepts, principles, ideas and theories
(Baddeley, 2010; Chi & Ohlsson, 2005). Probing usually also triggers WM recon-
struction using mental simulation, imagination and logical reasoning (Johnson-
Laird, 2010, 2013). It follows that respondents may occasionally utter also things
which do not exist in their LTM and might not occur to them when probed again.
This must be observed in the study’s instructions, uniform elicitation times and data
interpretation.
Uncovering Entrepreneurial Belief Systems Through Cognitive Causal Mapping 43
Assessing the CCM approach involves a practical and a plausibility issue. The
former varies by each researcher and study case. The latter means that the method
and the findings make sense and conform to basic theory-based expectations.
Perhaps the first expectation is that both respondent groups do have more or less
shared belief systems. This follows of belief systems’ key role and formation logic as
discussed above. A test of this expectation is whether plausible, coherent ACMs can
be generated. That is not possible if the belief systems are so divergent that the
elicited ICMs have only few shared notions and causal relationships.
Further expectations concern the respondents’ belief systems’ complexity and
within-group congruence, manifested in a higher or smaller number of cause map
nodes and causal relationships and more or less complex ACMs. In this respect, it
can be assumed that the SBAs’ belief systems and thus ACM will be more uniform
and complex than those of the NMEs. This follows of the SBAs’ business education,
counselling experience and characteristics as a community of practice.
The NMEs’ belief systems and ACM are more difficult to predict. Their educa-
tional and work-life backgrounds, personal situations and objectives vary. In gen-
eral, it can be assumed that, as lay persons, their shared knowledge/beliefs will
reflect, in addition to the above discussed cultural tendencies, also socially shared,
common-sense ideas about entrepreneurship. On theoretical grounds (cognitive
dissonance), their ideas about entrepreneurship should be sanguine, emphasising
entrepreneurship’s positive outcomes and feasibility. Otherwise, they would hardly
be seeking counselling. A further factor is that the NMEs have no entrepreneurial
experience, yet are seriously considering an entrepreneurial career. Thus, their belief
systems about micro firms are less sophisticated and more divergent, suggesting
simple ACMs. It is also likely that they have thought about entrepreneurship and
sought related information. This suggests rudimentary but still diverse ideas about
entrepreneurship and managing a business, also implying less uniform and simpler
belief systems and thus a relatively simple ACM.
44 M. Laukkanen and F. Liñán
We present the CCM methodology using two recent study cases. In both, the context
is Finnish Entrepreneurship Agency (FEA), the country’s only nationwide provider
of micro entrepreneur advisory services. Currently, there are 29 local agencies which
employ some 90 SBAs, supported by voluntary local experts. In a typical year, FEA
has around 15,000 clients and helps found 8000 firms, which corresponds to one half
of Finland’s early-stage entrepreneurs and one third of new firms. SBAs evaluate
prospective entrepreneurs’ business ideas and qualifications, offering no-cost advice
whether and how to realise the project. They also provide contacts and endorsements
about start-up allowances or loans. Currently only the start-up phase is covered.
The SBA sample (N ¼ 15) was constructed by randomly selecting local FEA
units and then inviting the manager SBA and one further SBA (if available) to
participate. The sample includes 6 females and 9 males and was built stage-wise,
observing active concepts’ saturation (see below). The SBAs’ mean age was
45.3 years (SD 8.76). They have worked long as SBAs (7.9 years SD 6.24). Most
have an MSc and also several years’ experience as owner-managers or in family
business.
The NMEs are clients of two FEA agencies. As FEA cannot disclose client
information, the participation had to be voluntary. The criterion was that they had
not yet started the actual counselling so that the interviews would reflect their
pre-founding beliefs. The NME sample too was based on tracking the saturation of
their active concepts. The final sample (N ¼ 13) included 8 female and 5 male
participants. Their mean age was 44.1 years (SD 10.24) with a range of 27–57 years.
Six NMEs have a university, five a polytechnic and two a trade school degree, a
somewhat higher level compared with GEM studies’ NMEs (Suomalainen et al.,
2016).
The CCM method is discussed in Laukkanen (2018) and in detail in Laukkanen and
Wang (2015). The main stages (Fig. 1) can be summarised as follows. The data,
original causal propositions, were acquired using semi-structured interviewing (SSI)
around two anchor topics: (1) Why does (or does not) someone become an entre-
preneur and what follows? and (2) What are the causes and consequences of a micro
firm’s emergence and success or failure? As noted, a focusing of respondents’
thinking and responses is necessary to elicit beliefs about the relevant domain, in
this case, individual entrepreneurship and small firms’ performance.
Uncovering Entrepreneurial Belief Systems Through Cognitive Causal Mapping 45
Fig. 1 Main stages of the CCM-SSI research process (For the abbreviations, please see the text)
Before starting, the SSI process was explained. It was emphasised that the
respondents’ own ideas, not “book wisdom”, are sought and that no sensitive issues
will be addressed. SSI started by asking first about the causes of the first anchor topic
and then about its consequences. This produces a first layer of original notions and
causal propositions, more familiar and easily recalled as the topic’s proximate causes
and effects. Then the same format was repeated using the elicited original concepts
as new anchors. This generates a much larger secondary layer of concepts, causally
more distant but still representing the respondents’ retained beliefs and causal
inferences. Because of the limited access time and the need to cover both domains
consistently, the present SSI probed only about the antecedents of the primary causes
and the consequents of the primary effects. When the first topic was covered and the
respondent had not anything to add, the second anchor topic was addressed
46 M. Laukkanen and F. Liñán
similarly. The allotted response times were kept uniform. The SBA interviews took a
good hour (M ¼ 80.0 min, SD ¼ 16.9), the NMEs’ duration was M ¼ 66.77 min
(SD ¼ 13.99). The interviewer kept hand-written notes (see Laukkanen & Wang,
2015), backed by voice-activated recording (with permission).
As noted earlier, CCM-SSI data consist of causal propositions, i.e., concept pairs
(a ! b, b ! c, etc.), where a notion, or rather its referent phenomenon, is stated to
influence another notion or to be caused by it. The SBA data contained 1153 original
concepts (M ¼ 76.87, SD ¼ 19.14 per respondent), called natural language units
(NLU) and 1539 causal relationships, called, respectively, natural causal units
(NCU) (M ¼ 102.60, SD ¼ 28.10 per respondent). NME data contained
923 NLUs (M ¼ 71.00, SD ¼ 16.49 per respondent) and 1312 NCUs
(M ¼ 100.92, SD ¼ 21.69 per respondent).
The studies utilised a CCM specific application, CMAP3.2 Natural language data,
typical of SSI-CCM studies, makes this obligatory (cf. Haak et al., 2013). In practice,
original data are keyboard entered into CMAP3, coded/standardised and processed
to create the base for graphic cause maps and the numerical data which represent the
respondents’ belief systems and enable their visual and numerical analysis. The
technical processes are explained in Laukkanen and Wang (2015) and in CMAP3
support documentation (Footnote 2).
A key step in CCM is standardising (coding) (Laukkanen & Wang, 2015). It
converts the respondents’ uttered concepts (now in Finnish) into standard terms
(in English) which represent the underlying core meanings and referents. Usually,
standard terms are developed iteratively by grouping and inferring of the original
concepts and entered into a CMAP3 data table called standard term vocabulary
(STV). In practice, standardising interprets the original concepts’ meanings and
defines them as same-denoting with an appropriate standard term. This also com-
pacts data by identifying synonyms and homonyms and removing (presently)
redundant details like polar states or attributes. Most importantly, standardising
facilitates converting the NLUs into the STV’s standard language and enables thus
comparing the respondents’ beliefs and defining their similarity or difference.
The present coding was at low level, where the standard terms are close to the
original concepts. This simplifies coding and makes it more reliable compared with
studies using higher-level standard terms. Because standardising influences the
results of CCM, it must be done carefully ensuring its validity, e.g., by using external
reviewers (see below).
A key feature of CMAP3 is that the NLUs and the STV reside in separate data
tables and that the STV allows two parallel languages. This means that the original
data and the STV can (but must not) be in different languages. This is important in
cross-national studies (see Footnote 2) and generally in studies where the raw data
2
CMAP3 installation file, the CCM/CMAP3 User Guide and support documents can be
downloaded without cost at the University of Eastern Finland website: https://www3.uef.fi/fi/
web/cmap. Setting up CMAP3 installs automatically two testable learning projects, the default
project representing a fictional cross-national CCM study.
Uncovering Entrepreneurial Belief Systems Through Cognitive Causal Mapping 47
like interview responses and the reporting must use different languages. The tech-
nique facilitates also validating the individual standardising decisions using respon-
dent feedback (Laukkanen & Wang, 2015).
After coding, the original data were processed by CMAP3 into data tables, one
containing active standard concepts (SNT, standard node terms), the other
standardised cause-effect links or pairs, called standard causal units (SCU). The
process also determines which respondents own a given SNT and SCU; that is, had
expressed the corresponding original concepts and causal propositions. The inci-
dence information also enables distilling a respondent’s or a group’s active standard
causal links, which can be then converted into pictorial ICMs or ACMs by exporting
the SCU sets to a graphic application like IHMC CmapTools3 or MSPowerPoint
(Laukkanen & Wang, 2015). CMAP3 also calculates numerical indicators like
densities and mutual distances of the ICMs. These as the above data tables can be
exported to MS Excel for further analysis and printing.
3.3 Validity
3
IHMC CmapTools can be freely downloaded at: https://cmap.ihmc.us/cmaptools/cmaptools-
download/
48 M. Laukkanen and F. Liñán
100,0%
90,0%
80,0%
70,0%
60,0%
50,0%
10,0%
0,0%
S01 S02 S03 S04 S05 S06 S07 S08 S09 S10 S11 S12 S13 S14 S15
Fig. 2 Saturation of the SBAs’ (N ¼ 15) and the NMEs’ (N ¼ 13) active standard concepts
This led to some corrections, yet yielded a high inter-rater reliability (IRR) measured
as average percent agreement (NME IRR ¼ 99.42%, SBA IRR ¼ 98.51%). This
indicates essentially correct coding and high semantic validity.
Lastly, the credibility of causal maps (and mapping) implies reasonable
behavioural congruence of the respondents’ expressed beliefs and what they do
(Axelrod, 1976). If so, cause maps correspond to and make understandable what the
studied actors did or enable predicting their corresponding behaviours. When
assessing this, the spheres (speech, overt action) must be comparable, i.e., at the
same level of specificity and reasonably proximate in time. In this case, the broad
congruence was tested by comparing the elicited core beliefs with what happens in
NME/SBA counselling. The results are discussed below.
4 Findings
4.1 Examining Belief Systems’ Sharedness
As noted, the first expectation concerned the studied groups’ beliefs’ homogeneity,
indicated by the saturation of the respondents’ concepts (Nelson et al., 2000). As
shown in Fig. 2, the majority of their active concepts emerge already by the 7th
respondent in both groups. After this, each additional participant contributes only
1 or 2 new concepts. As causal links follow the concepts, this indicates that the
SBAs’ and NMEs’ belief systems concerning the inquired issues are relatively
uniform.
Uncovering Entrepreneurial Belief Systems Through Cognitive Causal Mapping 49
The observed saturation serves also constructing the ACMs which represent the
respondents’ typical or core thought patterns. Technically, ACMs are intersections
of ICMs and contain the standard nodes and causal relationships which a specific
number of the group’s members share. Causal mapping literature suggests a criterion
of around 50% (Carley, 1997). In general, the threshold depends on how uniformly
the groups think about the focal issue (Guest et al., 2006). In this case, the observed
saturation pattern and the 50% rule both suggest cut-off points of N 6 or N 7.
However, the ACMs must also present the participants’ core thinking in a practical
and comprehensible form. Using CMAP3, this could be tested by generating ACMs
using different thresholds. This showed for both groups that N ¼ >6 produces too
dense, poorly readable ACMs, a high threshold (N ¼ >8), respectively, simple
ACMs, which risk excluding probably shared notions. N 7 appeared a good
compromise. This is also indicated by the high sharedness of ACMs’ nodes (mea-
sured by their total frequency, TF, the number of respondents owning a standard
concept). The SBA ACM’s (Fig. 3) median TF ¼ 8.0; the NME ACM (Fig. 4)
median TF ¼ 9.0.
The first ACM (Fig. 3) represents the SBAs’ core belief systems about the causes and
consequences of nascent micro firms’ (NMF) emergence and success and failure. It
contains 58 nodes and 114 causal links, some reciprocal. The nodes in bold are
shared by nearly all SBAs.
This ACM is relatively complex, indicating sophisticated typical thinking. The
left side displays the main factors of NMF success or failure as perceived by the
SBAs. There are two primary mechanisms. One concerns the NMEs’ business,
manifested first in a business idea (BI) or a business plan (BP). The SBAs emphasise
demand, “paying customers”, the proposed business’s competitiveness v. local
competition, and the NMEs’ resources’ adequacy and their BPs’ quality. In general,
the factors SBAs observe are symmetrical and continuous, different states having a
positive or negative impact on the outcome.
The second subsystem concerns NMEs’ characteristics. The SBAs discern sev-
eral background factors shown in the ACM. A specific one explaining especially
failure is the standard notion NMEs’ negative attitudes/traits. It summarises charac-
teristics which the SBAs have encountered and consider problematic such as strong
introversion, laziness, unconscientiousness and alcohol or moral problems.
Two further observations are noteworthy. First, the ACM indicates that the SBA
emphasises the negative consequences of an entrepreneurial failure, suggesting an
inherent tendency to avert risks as far as possible. Second, the SBAs emphasise the
positive societal consequences of NMFs (and thus of midwifing them) but seem
50
unaware of their potential and common negative impacts like causing local firm and
job churning (Bennett, 2014).
The ACM’s upper part displays the NMEs’ ideas about entrepreneurship. They
explain it first by personal goals such as ensuring livelihood, independence and
better life quality. Successful entrepreneurship realises those, which is why they
appear as drivers and outcomes. The NMEs also believe that there are specific traits
and motives that differentiate entrepreneurs from “normal” persons. Second, NMEs’
have several beliefs concerning entrepreneurship’s business aspects. They note that a
Business Idea (BI), an accessible product or service or a detected need can trigger
entrepreneurship, and that entrepreneurship requires certain competences about
which their ideas, however, are hazier. Notably, to most NMEs the reason preventing
entrepreneurship is fears of the consequences of a failure and of the uncertainty of
being able to launch and run an NMF. Interestingly, this aspect did not come up in
any SBA interview. Therefore, it is missing in the SBAs’ ACM.
The ACM’s middle part displays NMEs’ core beliefs about NMF success. They
explain it by an active, competent entrepreneur and a product/service which corre-
sponds to customer needs, attracts customers and has partner network support. To
influence customers, NMEs emphasise marketing, personal selling and reputation.
As outcomes, ensuring livelihood and better life quality are mentioned again. More
distant results include firm growth, hiring personnel and ability to provide jobs and
support public welfare. Notably, stereotypic motives like wealth or social status do
not appear in the ACM, only two NMEs noting them. Perhaps such things are
perceived more hypothetical at this early stage.
The NME ACM’s dense subsystem about NMF failure suggests that too they
consider this a serious issue. They perceive several failure causes. Interestingly,
nearly all NMEs believe that failure always means bankruptcy, leading to major
losses and serious personal and family problems. The normal unforced termination
seems unknown. However, the NMEs are remarkably euphoric: Failure can happen
but not to one, but should it happen, one can return to a wage-earning job or restart
having learned much. This may indicate the common avoidance of cognitive disso-
nance, here between intentions and perceived risks. At this stage, it is perhaps natural
to diminish the dissonance by mentally minimising the latter.
Uncovering Entrepreneurial Belief Systems Through Cognitive Causal Mapping 53
To assess the congruence of the two groups’ belief systems and respective behav-
iours, a brief SBA survey4 (N ¼ 15) was conducted to illuminate the foci and
conduct of typical FEA counselling sessions. As evidence, this is asymmetric but
unavoidable. The SBAs have counselling experience, the NMEs none. It seems,
however, reasonable to assume that the NMEs’ main concerns will be manifested in
the SBAs’ responses.
The ACM simply two, possibly three foci in typical counselling. The first
concerns the NME’s proposed business and personal goals. These are essential but
largely neutral issues. For the NMEs, they mean entrepreneurship’s preconditions;
for the SBAs things they meet daily and which they are, by definition, prepared to
handle. The other is NMEs’ qualifications. Whilst the NMEs understand qualifica-
tions’ significance, they can seldom assess their own capabilities relative to their
projects. As for the SBAs, although they emphasise NME competence and charac-
teristics, assessing them is difficult. The SBA belief system reflects this: the ACM
contains things for which information is easily available and/or which concern
observable characteristics like extraversion or consciousness, inferable (not neces-
sarily accurately) from the NMEs’ behaviours. The third but problematic issue is
NMEs’ fears, salient in the NME ACM but missing in the SBA ACM. The
asymmetry suggests that NMEs’ qualms are probably seldom actively tackled.
The survey broadly supports the above predictions. The SBAs emphasise the
realism of proposed business, seeking evidence of a plausible business and revenue
logic. They also examine NMEs’ resources. As to NME capabilities, the SBAs
emphasise personality, “a good E-type” with overt signs of motivation and drive,
knowledge of the business and customers and appropriate skills. The NMEs’
business plans are key tools of the SBAs. They facilitate concrete, numerical
assessment and indicate the NMEs’ communication, conscientiousness and mental
capabilities.
The SBAs were specifically asked about NMEs’ fears. The responses indicate that
these issues come up rarely. The majority think that eventual qualms vanish auto-
matically when the NMEs grasp their projects’ practical realisability. Another
approach, more typical of female SBAs, provides sympathetic listening, advice
and encouragement. Two SBAs denied the existence of fears as “unentrepreneurial”.
Overall, it can be assumed that most SBAs would not refuse discussing a client’s
fears if the client wishes that and specifically expresses them. That, however, seems
unusual in the present context. Why this is so and which counselling strategies make
sense are interesting questions for further research.
4
This SBA sample was randomly selected and invited to respond to an emailed open questionnaire.
The sample followed a saturation logic, approaching new respondents till no essentially new
notions emerged. This point was reached by N ¼ 15. The SBAs’ mean age was 54.50 (SD 7.82),
average SBA-experience 17.08 years (SD 9.12) and business experience 20.69 years (SD 12.22).
10 had an MSc, 4 a Polytechnic (BBA) degree, 1 undefined.
54 M. Laukkanen and F. Liñán
5 Discussion
This section examines first the belief systems considering the theory-based expec-
tations. It then discusses the CCM methodology and its variants and use in cross-
cultural and cross-national studies. We conclude by some lessons of the study cases
and suggest some directions for further CCM studies.
A first conclusion is that both respondent groups have shared beliefs systems as
expected. This is indicated by the congruence of both groups’ active concept bases
and by the emergence of coherent ACMs when intersecting the respondents’ ICMs.
Second, the belief systems’ overall complexity is also as predicted, the SBA ACM
indicating clearly more sophisticated thinking about the probed issues compared
with the NMEs. Such observations may seem now self-evident, but this is hindsight.
At the outset they could be only surmised.
Second, the two groups’ belief systems’ contents provide persuasive evidence of
the basic formation logic of practical knowledge. To behave intelligently, social
actors must internalise and gradually develop their understanding of their external
situations’ structures and causal mechanisms. Thus, the SBA ACM indicates a rather
detailed cognitive grip of things which are normally germane when counselling
NMEs and assessing their projects, largely corresponding to established wisdom
about small business and entrepreneurship. On the other hand, the SBAs seem to
emphasise things of which information is readily available such as the NMEs’
business plans. They may also overstress stereotypic ideas about the role of entre-
preneurial personality and overt characteristics like extraversion or consciousness,
found to predict entrepreneurial performance only moderately (Zhao et al., 2010).
Furthermore, the SBA ACM indicates considerable risk aversion and also unaware-
ness (or routine bypassing) of new micro firms’ occasional negative consequences
(Bennett, 2014). Such tendencies cannot but influence their inferences and recom-
mendations. However, it should also be noted that the SBAs must prioritise the
NMEs’, not public, interests and that they have only few hours per client and must
use mainly information the NMEs provide.
The NMEACM indicates surprisingly uniform and rather complex shared belief
systems. This is unexpected considering that the respondents are lay persons with
diverse and “non-entrepreneurial” backgrounds. The system of core beliefs can be
assumed to reflect the cognitive impact of the similarities of their objectives and
personal situations. It also probable that there has been some self-education using
similar, readily available printed and digital materials, which reproduce received
wisdom about small business and entrepreneurship. Thus, it is not surprising that the
two groups’ belief systems indeed partly overlap, which should facilitate
Uncovering Entrepreneurial Belief Systems Through Cognitive Causal Mapping 55
According to Carley and Palmquist (1992: 605), “Cognitive mapping is perhaps the
most useful means of exploring the nature of shared knowledge in social groups”.
The above studies demonstrate that CCM-SSI facilitates accessing, describing and
analysing the typical belief systems of entrepreneurial actors like the SBAs and
NMEs. The methodology is also applicable in different contexts, including settings
involving different languages.
In practical terms, the cases show that CCM-SSI is similar to typical qualitative
methods. It uses on-site acquisition of natural language data which require subjective
interpretation and thus independent verification in some form. On the other hand, the
method is not overly demanding in terms of technical know-how, resources and
logistics. Importantly, the time per respondent required for data elicitation,
processing and analysis is reasonable. For instance, the NME interviews took
typically a good hour yet elicited rather detailed ICMs about two key domains.
The downside is that systematic and transparent data processing is more or less
requires using software like CMAP3. However, this also generates numerical data
for “counting the countable”, important in qualitative studies (Cassell & Symon,
1994; Maxwell, 2010). In addition, the data tables can be exported to Excel for
advanced quantitative analysis and further, e.g., to SPSS for cluster analysis
(Laukkanen & Wang, 2015).
What alternatives to present approach are there for comparative studies of belief
systems? This depends on the question. The above studies’ question is essentially:
What are group A’s, B’s, etc., beliefs about X? This necessitates uniform acquisition
of original causal propositions about the focal topics. That effectively eliminates
using less controllable off-site elicitation and also structured approaches like the
concept-pool method (Laukkanen & Wang, 2015; Markóczy, 2000), where the
elicited concepts are researcher-defined. Conceivable on-site options for eliciting
rich original data include text-writing tasks (Nadkarni & Narayanan, 2005) and
low-structured interviewing (Nicolini, 1999). Their problem is that they require
56 M. Laukkanen and F. Liñán
time or can tap only a restricted set of beliefs. Further issues can be ensuring
uniformity and eliciting much redundant material in addition to relevant data.
The CCM approach can be modified. One way is to elicit uniform original data by
video-conferencing, increasingly common because of the Covid-19 pandemic. Fur-
thermore, the study can focus on exploring specific beliefs, e.g., the reasoning behind
NMEs’ fears or the role of social relationships. In this case, the probing would go
deeper behind the antecedents of the causes, accessed in the above cases.
A very different possibility is to examine not belief systems’ contents as here, but
their characteristics such as differences of goal setting or simply relative complex-
ity. That would allow using structured approaches like the above concept-pool
method, permitting also larger samples and nomothetic studies. However, such
studies should ensure that the pool instrument does represent the participants’ natural
thinking. CMAP3 supports also the concept-pool method.
Culture has been defined as the set of values, beliefs and behavioural expectations or
“. . . the collective programming of the mind that distinguishes the members of one
group or category of people from others” (Hofstede, 2011: 3). This makes culture
essentially a cognitive phenomenon, expressed and mediated through people’s
beliefs and causal reasoning (Bender et al., 2017; Oyserman & Lee, 2008), providing
therefore an intuitive framework for explaining social behaviour. This also explains
culture perspective’s popularity in entrepreneurship studies (Engelen et al., 2009;
Valliere, 2017) concerned, e.g., with national cultures’ links with new firm emer-
gence (Thurik & Dejardin, 2012) or with entrepreneurs’ self-efficacy and fear of
failure (Wennberg et al., 2013). Entrepreneurship studies commonly describe
national cultures in terms of Hofstede’s seminal dimensions power distance,
individualism-collectivism, masculinity-femininity and uncertainty avoidance, later
augmented with long-term-short term orientation and indulgence-restraint
(Hofstede, 2001, 2011).
In the present context, cultures, especially national cultures, can be considered in
two respects. First, they, rather their impacts, can be research targets. In this case the
presently relevant issue is CCM’s ability to detect valid manifestations of cultures
and cultural dimensions. Although the above studies were not specifically “cultural”,
the findings enable roughly assessing CCM by examining the above ACMs’ (Figs. 3
and 4) congruence with the Finnish culture in terms of Hofstede’s dimensions.
Thereby, particularly relevant observations of the ACMs concern the salience of
individual, not societal benefits as entrepreneurship’s goals, the prominence of
NMEs’ personal fears, and, in the SBAs’ case, their shunning of failure and
emphasis of formal plans. These aspects can be interpreted to indicate individualism
and uncertainty avoidance, perhaps also short-term normative orientation and
Uncovering Entrepreneurial Belief Systems Through Cognitive Causal Mapping 57
5
https://www.hofstede-insights.com/country-comparison/. See also Lindell and Sigfrids (2008).
58 M. Laukkanen and F. Liñán
6 Conclusion
This chapter has discussed the CCM method applied to aspiring entrepreneurs and
small business advisors. The findings show that the respondents’ knowledge and
understanding about starting and performance of new ventures differ markedly but
logically. In research terms, this provides a new and deeper perspective to under-
standing entrepreneurial decision-making, in this case also counselling processes.
Methodologically, the chapter shows that CCM, especially when computerised,
facilitates an accessible and versatile approach to revealing and analysing entrepre-
neurial actors’ subjective knowledge in different research contexts.
As for future CCM studies, one direction is to explore different entrepreneur
types’ belief patterns, e.g., solo v. team, first-time v. serial entrepreneurs, nascent
entrepreneurs v. lay persons, educated vs. uneducated, nationals vs. immigrants, etc.
Such studies are especially interesting in cross-cultural and/or cross-national set-
tings. A second important application of CCM is to track belief systems’ evolution
resulting from interventions like counselling, critical events such as starting a firm,
or when assessing the effectiveness of entrepreneurship education by examining the
participants’ mindsets’ development (Nabi et al., 2017; Solesvik et al., 2013). Third,
CCM can test or complement well-established theories. For instance, the widely
used theory of planned behaviour (TPB) (Ajzen, 1991; Liñán & Fayolle, 2015)
establishes how motivational antecedents determine individuals’ entrepreneurial
intentions. This, however, tells little (if anything) about the specific knowledge
structures that drive persons to express favourable or unfavourable attitudes towards
entrepreneurship, why they expect support from their reference people should they
start up or what is the mental basis of their perceived control over the start-up
process. Here, CCM can provide an essential complementing role. Lastly,
representing an entirely different approach, CCM methods can help explore, using
SSI data collected from persons who know a specific domain well, the structure and
causal mechanisms of social or socio-technical systems for developing intervention
methods or new theory (cf. Montibeller et al., 2008; Pyrko & Dörfler, 2018; Russell,
1999). We hope entrepreneurship researchers find this chapter interesting and
inspiring to explore some of these avenues for future research.
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Uncovering Entrepreneurial Belief Systems Through Cognitive Causal Mapping 63
Abstract Although the literature has generally well defined the actors and their
roles within international entrepreneurial ecosystems, more insight is needed on how
SMEs fit into these networks and use them to broaden their knowledge exploitation
frontiers and leverage their international innovation. This study draws upon
knowledge-based theory and an international perspective on entrepreneurship and
entrepreneurial ecosystems to examine how collaboration between actors within an
international entrepreneurial ecosystem (IEE) stimulates knowledge exploitation
and, consequently, the success of international SME innovation and commerciali-
zation. To this end, we examined an international pharma-biotech SME and col-
lected primary data from in-depth interviews with its top management team and
triangulated the interview data with secondary data. The study was initiated before
the onset of the COVID-19 pandemic and continued 11 months after. Our research
findings contribute to the theory that the diversity of an IEE’s actors and the intensity
of collaboration between them are fundamental to the dynamics of scientific, tech-
nological, market, and institutional knowledge exploitation and to international
innovation success. Further, the dynamics of this knowledge exploitation can sup-
port the development of business agility, that is, adapting quickly and efficiently—
and even gaining an advantage in pursuing new opportunities—in turbulent context
such as the COVID-19 pandemic.
N. Cherchem (*)
Entrepreneurship & Strategy Department, Ted Rogers School of Management, Ryerson
University, Toronto, ON, Canada
e-mail: [email protected]
C. Keen
Entrepreneurship and International Business, Faculty of Business Administration, Laval
University, Québec, QC, Canada
e-mail: [email protected]
1 Introduction
This exploration aims to contribute to the field by: (1) answering the call made by
Dabić et al. (2019) to expand our understanding of the role of SME knowledge
exploitation in an industry characterized by fast-paced innovation, international
reach, complexity of knowledge and operations, and interactions between multiple
actors; (2) being one of the first to analyse the relationship between knowledge
exploitation and the internationalization of innovation through IEEs in the context of
the biotechnology industry; (3) showing that the diversity of IEE actors and the
intensity of collaboration between them play an important role in knowledge exploi-
tation efficiency and thus in the success of the development and commercialization
of drugs in international markets; and (4) shed light on the exploitation dynamics and
their role in developing business agility to overcome market turbulence and uncer-
tainty such as caused by the COVID-19 pandemic, or other types of dynamic and
turbulent international business environments (Caputo & Pellegrini, 2019).
This chapter is organized into four sections. The first discusses the importance of
knowledge exploitation and IEEs in developing international innovation. The second
outlines the empirical study description and research method. The third presents and
discusses the empirical findings. Lastly, we conclude by outlining the research
contributions and presenting them alongside the limitations and perspectives for
future research.
et al. (2020) argued that knowledge access strategies have shifted from organiza-
tional knowledge creation to an inter-organizational network dynamic where sharing
expertise and resources offers actors a competitive advantage, especially in high-
pressure contexts. However, whereas the literature has generally well defined the
actors and their roles within IEEs, more insight is needed on how SMEs fit into these
networks and use them to broaden their knowledge frontiers and leverage their
international innovation.
4 Methodology
Gassmann and Keupp (2007) highlight the interests of studying the biotechnology
sector because it is populated by many SMEs whose degree of internationalization
differs considerably. This sector is also heavily regulated by authorities and govern-
ments controlling drug development and product safety to approve final products.
Moreover, exports in this sector are restricted by different national and institutional
standards and approval protocols. The work of pharmaceutical and biotechnology
firms is based in intensive scientific, technological, commercial, and regulatory
knowledge exploitation, which drive the success of their R&D activities and the
development and commercialization of new drugs (e.g. Gassmann & Keupp, 2007;
Gurău & Dana, 2020).
4.2 Method
5 Discussion
Our findings show that exploitation of external knowledge from different IEE
partners speeds up the development of a new drug and speeds up its commerciali-
zation in international markets. In Alpha’s case, external sources of knowledge
include market sources, private R&D organizations, institutional sources, govern-
ment, public research organizations, chambers of commerce, trade fairs, exhibitions
and conferences, scientific journals, and trade/technical publications.
More specifically, Alpha exploits specialized types of knowledge:
• Technological and scientific knowledge (i.e. molecules, patents, academic publi-
cations, technological models for clinical tests);
• Market knowledge (i.e. customers, distributors, competitors);
• Institutional knowledge (regulatory standards and business laws).
We will now discuss the dynamics of knowledge exploitation as they pertain to
Alpha and then conclude with how these dynamics allow Alpha to be performant and
to develop the necessary business agility to overcome the challenges posed by the
COVID-19 pandemic.
Scientific and technological knowledge exploitation typically takes place during the
pre-clinical phase of new drug development. Alpha acquires the rights to exploit a
specific intellectual property from another partner (e.g. patent, technological model,
protocol, or scientific paper) to access some complementary technological and
scientific knowledge and conduct R&D activities in-house. This exploitation also
includes the validation of a new drug in specific markets since some countries, such
as Japan, require drug companies to run part of their clinical trials with their
population because of the pharmaceutically relevant biological differences between
Caucasian and Asian populations (e.g. absorption capacity for a given molecule,
metabolism, and molecule elimination capacity).
Because we are focusing on chronic diseases, we need to intensively exploit unique
knowledge to create highly competitive drugs. [. . .] Our new drug for narcolepsy, a chronic
sleep disorder, has a competitive advantage over other products that are made of stimulants.
Our drug has no stimulants. For restless leg syndrome, we have three other molecules in
clinical trials that were developed internally through collaborations with an American
university research center and other universities in the UK, Spain, and Italy.
Our results confirm Gurau et al.’s (2010) study that posited that the organizational
structure of R&D in many biotech-pharmaceutical SMEs is similar in some respects
to the ones found in university research teams focused on special areas of research.
International Entrepreneurial Ecosystem, Knowledge Exploitation and. . . 73
We have established scientific collaborations with both American and European partners at
the early levels of our drug development process. The primary objective is to have access to
scientific expertise and technological models that we do not have internally, such as the
absorption mechanisms of molecules. We also leverage scientific collaborations during the
development phase with contract research organizations which help us finalize clinical trials
and synthesize the chemical molecules needed to support the pharmaceutical development of
the drugs.
74 N. Cherchem and C. Keen
These scientific collaborations with scholars from universities in the USA, the
UK, France, Spain, and Italy are in keeping with the company’s values and its
founders, that is, well rooted in academic research. Alpha’s cofounder is 85 years old
and still active in research with almost 800 published academic papers. His knowl-
edge and expertise can initiate and facilitate contacts with international research
centres. However, beyond this asset, what makes collaboration attractive is the
nature of the project, the quality, and the importance of the developed molecule.
The international diversity of Alpha’s knowledge exploitation process has
strengthened its uniqueness in developing drugs that treat chronic diseases.
Collaboration with business partners at Alpha involves in the commercialization
and marketing of its drugs. Their business partners (e.g. marketing, sales, and
distribution partners and professional advisors) also help initiate negotiations with
authorities towards acquiring product validation, such as from the United States
Food and Drug Administration (a federal agency of the US Department of Health
and Human Services) and the Ministry of Health in Japan.
We don’t have resources and staff in every country. [. . .] We have teams in our European
subsidiaries that work with sales forces in the US, Japan, and China where we don’t have
sales forces but have business partners. We look for complementarity on a commercial level.
As such, partners allow us to access resources and skills needed for our product’s commer-
cial and regulatory development.
Our new narcolepsy drug is in the compliance phase with Health Canada for its commer-
cialization thanks to a Canadian partner to whom we granted a license for the product [. . .]
making it available for sale within a few months instead of years. The same product is now
commercialized in the US and has a very important place in the market thanks to a business
partner who worked with the FDA for its registration and commercialization.
occurs over a shorter time thanks to it having developed diverse collaborations with
IEE partners to help successfully manage their innovation projects.
Risk is a characteristic of the pharmaceutical industry [. . .] For decades, it was possible to
commercialize products that were not innovative. Today only very innovative products can
be successfully commercialized and our business adopts this approach. We work on
products involving very risky innovation, important medical needs, and complicated indi-
cations, which are each important facet of the pharmaceutical industry.
Finally, as our key findings demonstrate the various dynamics through which Alpha
exploits knowledge to develop new drugs and commercialize them in international
markets, they also demonstrate how these dynamics contribute to the development of
business agility that allows it to overcome the uncertainties of COVID-19 pandemic.
The competitive environment of the biopharmaceutical sector is in and of itself
highly dynamic and unpredictable, especially for SMEs (Gurău et al., 2010). The
context of COVID-19 crisis makes the overall business environment ever more
uncertain. Our findings show how the diversity of IEE partners and the intensity of
their shared knowledge exploitation appear to foster Alpha’s business agility to
efficiently adapt to this uncertainty.
We closed our labs for 2 months during the first lockdown period, with some researchers
continuing to work remotely while others were technically unemployed and compensated
[. . .]. Then we opened up, and we went through a second lockdown period. However, this
time we were well prepared to rapidly adapt our organization to continue working in an
efficient way by switching to virtual networking, such as attending virtual conferences,
effecting virtual collaborations and experimentation with different international partners,
and undertaking virtual knowledge co-creation. Now we are pursuing new and very prom-
ising projects while saving on travel costs and time. We are adapting resources, processes,
and technologies to meet the needs of the changing environment caused by this pandemic
[. . .] thanks to the information and communication technologies platforms we have mobi-
lized during this uncertain context.
This finding points to Alpha’s significant agility capacity to quickly embrace the
virtual working infrastructure and identify new ways of collaborating and operating
with established partners. This organizational restructuring was quickly mobilized
using an important set of IT capabilities that allowed them to respond to unexpected
operating and management constraints, thus enabling continuous collaborative inno-
vation and organizational learning with IEE partners despite the uncertainties. This
agility enabled the firm to explore novel opportunities to work and operate in the
volatile and uncertain context of the COVID-19 crisis. Our findings show that the
76 N. Cherchem and C. Keen
7 Conclusion
Resource limitations prompt SMEs to seek out resources available in their networks
and efficiently exploit them with a certain degree of complementarity to create
distinctive innovations. Our study supports very recent research that argues that
the close interaction between ecosystem members based abroad serves as sources of
information, sources of opportunity, and sources of expertise. What is more, these
interactions bring valuable international knowledge to regional ecosystems
(Theodoraki & Catanzaro, 2021).
Our research offers an in-depth analysis of knowledge complementarity to
explain the dynamics of knowledge-based collaboration and the interconnectedness
of an IEE’s actors. The case aptly shows the challenges and opportunities faced by
most SMEs in global knowledge-intensive industries and how nurturing the R&D
activities of international science-based ventures is driven by their need for contin-
uous knowledge exploitation.
Collaborating with large firms, research centres, universities, and public institu-
tions is key in fostering this SME’s R&D capabilities and its access to patents and
new technologies. It is also key in reducing risk in commercializing its products in
international markets. Our research shows the importance of being part of an
international entrepreneurial ecosystem that offers its SME members an opportunity
to access, co-create, assimilate, transform, and deploy innovative knowledge in their
development and commercialization of new products or services. Our exploration
found that being part of an IEE was crucial at every stage of the value chain for this
firm, from accessing new technologies, patents, and skills, which led to more R&D,
to opening new international markets for their products. Different actors of interna-
tional ecosystems play different roles depending on the SME’s objective, the stage of
its products, and its knowledge about the markets.
By approaching this topic in the context of the COVID-19 pandemic, we were
also able to find that the development of knowledge exploitation combined with IT
capabilities allows a business to develop a level of business agility that helps them
adapt quickly and efficiently and even take advantage of new opportunities such
International Entrepreneurial Ecosystem, Knowledge Exploitation and. . . 77
turbulent contexts can offer. This business agility can provide managers with
valuable insights into how best to manage the pressures of a crisis.
Alongside its original findings, our study’s limitations nevertheless provide an
impetus for further research. This study began before the onset of the pandemic and
continued 11 months into it. As such, the research model of this study should be
retested in further research, targeting larger samples from different sectors, business
sizes, and countries in order to confirm our findings. It would also be interesting for
future research to explore what types of resources can be leveraged from an IEE to
increase the entrepreneurial productivity of each stage of an innovative SME’s life
cycle.
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Dr. Naïma Cherchem is an assistant professor in the Entrepreneurship and Strategy Department
at Ted Rogers School of Management, Ryerson University. She is also an associate researcher at the
Strategy and Society—Chair of Management at HEC Montréal. Her current research interests focus
on strategic entrepreneurship, institutional entrepreneurship, cognition, entrepreneurial ecosystem,
and internationalization.
Abstract The aim of this chapter is to further explore and understand the role of a
topic seldom discussed so far in the decision to enter a foreign market for entrepre-
neurs, namely ignorance. Rather than providing an extensive literature review of the
topic, we will explore why entrepreneurship scholars so far neglected the topic of
how entrepreneurs, and their firms, “don’t know.” Specifically, this chapter will be
focused on the entrepreneur as an individual when making the decision to enter a
foreign market. Throughout this chapter, we shall analyze ignorance from different
perspectives when foreign entry decisions on an individual level have to be made.
We will discuss that widespread international knowledge may not naturally advance
International Entrepreneurship opportunities, point out the idea that individual
decisions are cognitively influenced by ignorance, and point to the relevance of
knowing what you do not know in IE. Finally, the chapter calls for an integration of
ignorance within the decision-making framework in IE.
1 Introduction
Perhaps all this talk about knowledge is a way of creating an appealing image of an economy
going places in order to avoid discussing the darker prospects that haunt de-industrializing
countries around the world. (Alvesson & Spicer, 2016, p. 30)
B. Bastian (*)
University of Bergamo, Bergamo, Italy
e-mail: [email protected]
A. Zucchella
University of Pavia, Pavia, Italy
e-mail: [email protected]
Alvesson and Spicer (2012, p. 2) call for a more nuanced significance of knowl-
edge because “researchers take it for granted that the foundation of industrial
economies has shifted from natural resources to intellectual assets”. Thus, firms
that internationalize without relying on these sources of knowledge remain scarcely
investigated.
Internationalization studies have confirmed that the cognitive perspective remains
scarcely investigated (Aharoni et al., 2011; Maitland & Sammartino, 2015). This is a
problematic issue since firms are recognized to follow heterogeneous paths, which
can arguably be best understood by considering an individual’s cognition as an
antecedent of the decisions of the firm (Zahoor et al., 2020). The increased interest in
understanding the role of the individual actor and her1 cognitive strategy has—as
mentioned above—lately been acknowledged to contribute to current
microfoundations research gaps in IB and entrepreneurship (Buckley & Casson,
2020; Foss & Pedersen, 2019; Niittymies & Pajunen, 2019).
In this chapter, we provide arguments to answer these gaps and calls for studies,
by pushing the field towards a better understanding of how cognitive aspects
influence entrepreneurs in international settings (Dana, 2017). More specifically,
we highlight the role of ignorance, which we define as an inevitable widespread
phenomenon that concerns a lack of information, knowledge, or awareness (Roberts
& Armitage, 2008; Shepherd et al., 2007). Ignorance as a topic is, despite its
relevance, usually considered to be perpendicular to knowledge. While knowledge
construction and knowledge formation processes are inevitably interwoven with
entrepreneurship theories (e.g. entrepreneurs use knowledge structures when making
judgements and decisions; internationalizing ventures aim at leveraging on their
knowledge or their partners’ knowledge), ignorance as a topic remains to be largely
ignored (Ungar, 2008).
We argue that firms often find themselves with a lack of knowledge and infor-
mation when facing internationalization decisions. These forms of ignorance impact
the role of the bounded rational individual in her perception of the environment, and
in her cognitive available tools to arrive at satisficing decisions (March & Simon,
1958). This chapter takes an unconventional perspective on entrepreneurship,
namely, the existence of ignorance as a generic phenomenon. We elucidate this
viewpoint by integrating the recently increased interest in understanding entrepre-
neurship cognition with internationalization studies. In doing so, shall we analyze
the individual role in internationalization choices (Dabić et al., 2020) and discuss
ignorance, heuristics and cognitive biases as affecting foreign market entry.
1
Note that we use female pronouns when referring to the individual entrepreneur for readability
reasons. Our theory is gender neutral.
84 B. Bastian and A. Zucchella
global case, illustrates the idea that acquiring knowledge from existing sources does
not guarantee success (Mudambi, 2005; Taylor, 1993).
The example shows that there may be highly successful international entrepre-
neurs that make decisions based on what is, till then, unknown to thrive. Investors,
customers, and suppliers might even be completely ignored for the better good. The
case of Swatch elegantly illustrates that when individuals solely rely on existing
knowledge, they may ignore contradictions, fail to reflect, overlook opportunities or
pursue opportunities that many others are pursuing. In fact, “a fetishistic interest in
knowledge and intelligence can in some cases drive ignorance and poor judgment”
(Alvesson & Spicer, 2016, p. 40).
4 Degrees of Ignorance
As we know, there are known knowns; there are things we know we know. We also know
there are known unknowns; that is to say we know there are some things we do not know.
But there are also unknown unknowns—the ones we don’t know we don’t know. (Donald
Rumsfeld, former US Secretary of Defense)
Rumsfeld (2011), not notably well-known for his epistemological interests, once
underscored a fundamental issue in the fields of entrepreneurship (Foss & Klein,
2012). Namely, the differences in decision-making between known and unknown
issues, and the essential importance to consciously acknowledge and know the
differences. Entrepreneurs act on a daily basis within such a complex international
environment while relying on incomplete, non-objectively optimal decision-making
processes under uncertain circumstances (e.g. Caputo & Pellegrini, 2019; Forbes,
2005; Packard et al., 2017; Townsend et al., 2018).
The awareness of these limitations in order to enter a foreign market is essential in
identifying firstly the “known knowns”—information that entrepreneurs have and
know that they have—and secondly the “known unknowns”—information that
entrepreneurs do not have and know that they lack (Gross, 2007; Proctor &
Schiebinger, 2008). There are also some elements that imply ignorance that is rather
invisible to people. Those we call ‘unknown unknowns’—information that is rele-
vant to decisions but that entrepreneurs do now know they lack (Dunning, 2011).
This is information that is not questioned because it lies outside a decision-maker’s
scope. Founders for instance may be unaware of data because they lack the skills to
make sense to them, or because they are not brought to their attention (Hayward
et al., 2006). “Unknown unknowns” may frequently refer to essential information
such as potential problems, risks, actions, strategies, and lead to fatalities. Often,
entrepreneurs and their firms do not know what to do with scenarios that represent
unknown outcomes with the presence of forms of ignorance such as misinformation,
complexity, volatility, uncertainty and ambiguity (Suarez & Montes, 2020). The
Boeing 787 production issues (resulting in $10 billion additional costs) and the
Fukushima crisis in Japan (forcing 100,000 to evacuate and $38 billion compensa-
tion costs) were novel, unknown, and thus unanticipated events that had massive
consequences for the international economic environment (Kaplan et al., 2020). We
follow Faulkner et al. (2017) in their distinctions that something “known” implies
knowledge and “unknown” lack of knowledge, and that “known unknowns” suggest
awareness while “unknown unknowns” suggest an absence of awareness. Unknown
unknowns may go unrecognized until people got informed. Fischhoff et al. (1977)
argued for example that people cannot critically evaluate and distinguish inferred
knowledge when they are unaware of the nature of their perception.
This implies that a lack of awareness may need an external reference point to
serve individuals becoming aware of their limitations. As a result, it is essential for
entrepreneurs to reduce fatal “unknown unknowns” towards “known unknowns”
and eventually “known knowns”, by consciously searching and considering what
might not be known yet. Ignorance is both socially constructed and socially
Ignorance and International Entrepreneurship. Two Sides of a Blade in the. . . 87
When firms are involved with internationalization decisions, such as foreign market
entry, they balance on a daily basis between their known, unknown, and unknowable
knowledge (Chow & Sarin, 2002). That is because, taking any point in time, there
are always some known matters and some unknown matters, to any individual
(Faulkner et al., 2017). In economic theories, ignorance can represent a necessary
part of the market process since it is described to be responsible for the creation of
profitable opportunities (Kirzner, 1979). This disequilibrium is a consequence of
market ignorance. “Thus, an understanding of ignorance, or limitation of knowledge,
is crucial in Austrian thought” (Elias et al., 2020, p. 323).
In international business theories, internationalization is usually described as a
process developed from knowledge and through which knowledge is further grad-
ually acquired. However, this assumption overlooks alternative internationalization
processes that rely on anything but knowledge. When international firms are in the
process of discovering new markets, entrepreneurs often do not know what it is that
they do not know. In some cases, they might not even deliberately be scanning or
consciously searching (Mcmullen & Shepherd, 2006). The previous example of
Swatch demonstrated that it is the process of discovering the unknown for entrepre-
neurs that often leads to success. It is not the awareness of what people know, but
what people do not know, that leads to new insights and discoveries.
Additionally, internationalization studies have recently shown that foreign coun-
try entries do not necessarily elaborate on a slow and progressive process of
acquiring knowledge, while more traditional entry forms like the Joint Venture
point to the complementary role of knowledge (Buckley & Casson, 2009; Hennart,
1982; Hymer, 1960; Rugman & Verbeke, 2003). Instead, some firms that decided to
enter a foreign market have been using an opposite approach. For instance, success-
ful foreign entry strategies have been explained with the so-called in and out
decisions, in which firms do not seem to build on knowledge (e.g. Melén &
Nordman, 2009; Nummela et al., 2020). Galkina and Chetty (2015) and Nummela
et al. (2020) illustrated this by documenting a serendipitous process in which the
sequence of foreign country entries is basically random because it is the result of
unsolicited orders and fortuitous contacts. These findings appear to confirm that it is
the process of discovering the unknown for entrepreneurs that often leads to success.
After all, if the knowledge behind the decision was known to someone else, it
would have been done before (Taleb, 2007). New knowledge however always leads
to new perspectives of what is unknown. Entrepreneurs and their firms thus may
88 B. Bastian and A. Zucchella
ways (Dunning, 2011). We argue that, as one’s environment becomes more complex
and complicated, combined with an incomplete and uninformed mind due to novel,
unknown circumstances, one’s strategy to recognize ignorance becomes an essential
part of a major decision such as entering a foreign market.
Decision-making is the “entire process of choosing a course of action” (Hastie,
2001, p. 657), usually preceded by an identification process which we know as
judgement. Decisions such as foreign market entry rely on a dual-process mecha-
nism when processing information. System 1 is known as the fast system of thought
that works automatically. System 2 on the other hand involves effortful, slow,
rational processing of information. Most of what individuals think and do happens
in System 1. System 2 comes usually into play when System 1 runs into difficulty
(Kahneman, 2011; Stanovich & West, 2000). Given the complexity and uncertainty
of the entrepreneurial environment coupled with non-optimal information
processing of the human mind, heuristics and biases may occasionally come into
play (Caputo & Pellegrini, 2019; Grégoire et al., 2011; Packard et al., 2017). In fact,
ignorance is believed to influence cognitive biases and heuristics in significant ways
(Roy & Zeckhauser, 2015).
Heuristics come into play when rather quick judgemental shortcuts must be made by
entrepreneurs. They refer to simplifying fast and frugal mental shortcuts or princi-
ples that entrepreneurs use for information processing and problem-solving (Baron,
2007; Kahneman & Tversky, 1982). Heuristics additionally enable entrepreneurs to
make sense of uncertain and complex situations more quickly (Mitchell et al., 2007).
They represent “actionable simple rules that synthesize the entrepreneur’s subjective
knowledge, expectations, and vision, and for which optimal outcomes cannot be
determined by mathematical methods” (Gilbert-Saad et al., 2018, p. 76). An example
is Sarasvathy’s research (2008) on effectuation that has been shown to support
entrepreneurs in international settings and implies the existence of heuristics
(Sarasvathy et al., 2014).
The field of IE has demonstrated that entrepreneurs are affected by these cogni-
tive shortcuts in their decisions to enter a foreign market (Petersen et al., 2008). For
example, Zahra et al. (2005) showed that entrepreneurs’ cognition as a result may
lead to more risky foreign activities, since it may lead to inaccurate opportunity
evaluation. That is because System 1 thinking leads individuals to arrive at the first
plausible-appearing explanations. Some scholars have suggested that heuristics
interact in considerable means with ignorance because it “adds a dimension of the
unknown beyond uncertainty. Thus, decision makers confronting it also suffer more
from biases and heuristics than when faced merely with uncertainty” (Roy &
Zeckhauser, 2017, p. 235). That is because some of the cognitive tools that often
work out well tend to lean strongly towards what is known from previous experi-
ences, or prior knowledge, when predicting the future, such as the availability
90 B. Bastian and A. Zucchella
heuristic (Tversky & Kahneman, 1973). For example, research has shown that
availability leads economic forecasters to ignore crucial known information by
solely judging a moment, and as a result overlooking well-known practices
(Alvesson & Spicer, 2016; Lee et al., 2008).
The future, however, is mostly unknown. The cognitive ease that individuals
apply to rely on their known past has little to say about judging a future world that is
unpredictable and uncertain. A similar case occurs with the recognition heuristic.
When individuals are presented two equal alternatives but only one of them is
mentally recognized, it will automatically be valued higher. That is because people
have a preference to bet on known probabilities (Ellsberg, 1961). Once individuals
are confronted with an unknown situation, they tend to follow familiar clues and
ignore unfamiliar contextual information. These heuristics imply that people
overestimate what they know, and do little effort to find out what they might still
be ignorant about. When decisions such as entering a foreign market are made,
“crucial information is ignored, and the wrong lessons are drawn from experience”,
because people are not consciously aware of these heuristics (Alvesson & Spicer,
2016, p. 61).
Because heuristics simplify or ignore part of the information processing, they are
associated with cognitive biases, systematic deviation from rationality or norms in
judgement and decision-making (Gilovich et al., 2002; Kahneman & Tversky,
1982). Research on cognitive bias—systematic errors in decision-making (Kahne-
man, 2011)—has become an important area of study because it provides practical
and empirical perspectives in entrepreneurial decision-making (e.g. Krueger, 2003;
Zacharakis & Shepherd, 2001; Zahra et al., 2005). Most cognitive biases are
undergone unconsciously, at least a priori.
Cognitive biases are known to make IE activities risky (Zahra et al., 2005), and
ignorance plays a fundamental role. Some examples are overestimation, which leads
entrepreneurs overvaluing previous market knowledge while ignoring novel infor-
mation (Zahra et al., 2005), illusion of control, in which individuals overestimate
their ability to control events while ignoring the base-rates, fundamental attribution
error, where individuals tend to ignore contextual factors when entering a foreign
market, halo effect, that may lead entrepreneurs to have a falsely positive image of a
particular market without any previous experience, and confirmation bias, that
inclines people to ignore solutions, such as leaving an unprofitable market, that
contradict their primary judgement and as a result demonstrate cognitive dissonance.
Similarly, when foreign entry decisions are made within a team of co-founders, the
group think bias may cause entrepreneurs to “go with the crowd” and thus ignore
arguments, contradictions, critique, doubts, and the consequences that follow from
the decisions made.
While the above examples illustrate the unconscious character of biases with
ignorance, that is not always the case. Some other biases may be perceived and
operated consciously because a decision-maker believes the outcome will be
favourable. For example, in the case of overconfidence (Busenitz, 1999;
Gudmundsson & Lechner, 2013), entrepreneurs may be aware of the risks of
entering unfamiliar foreign markets but simultaneously believe that they can beat
Ignorance and International Entrepreneurship. Two Sides of a Blade in the. . . 91
the odds of breakdown, therefore ignoring the information and ‘taking the risk for
granted’ (Hayward et al., 2006). Another example may be the sunk cost fallacy,
where firms persist to invest in entering foreign markets that are clearly
underperforming, hoping for a positive change and ignoring the less costly decision
to abandon (Holland & Shepherd, 2013).
During the process of entering a market, additional cognitive biases may evolve,
even when they are recognized. The status quo bias is one’s tendency to hold on to
pre-existing choices and is often triggered by loss aversion. That is because decision-
makers are more affected by losses than by benefits. Research has demonstrated that
firms keep investing in decisions that have been shown to not work, in order to win
back their losses (Staw, 1981). Additionally, even when firms recognize their
ignorance, they may fall prey to status quo bias because their awareness has not
yet been overcome. For example, potential self-blame may affect decision-makers in
“doing nothing or maintaining one’s current or previous decision” (Samuelson &
Zeckhauser, 1988, p. 7). This additionally shows the complex direction of cognitive
biases, since, like with ignorance, one may lead to another. Ignorance may cause the
emergence of biases, and these biases may additionally lead to new ignorance. A
similar example is the indecision bias, which refers to inaction because of one’s
tendency to delay or play the game safe as a result of acknowledged ignorance,
resulting decision-makers being paralyzed (e.g. Goldman, 1986; Mcmullen & Shep-
herd, 2006). Roy and Zeckhauser (2017, p. 237) note that indecisions facilitate
individuals to “fail to recognize that choosing the unknown probability often offers
valuable learning opportunities, opportunities that would otherwise be missed”.
Thus, cognitive biases that go well with ignorance do not only differ in degree of
consciousness but may additionally emerge when acknowledged but not yet
conquered.
So how do we move from here? Ignorance is a cognitive condition that affects all of
us. That is not necessarily bad, as long as its presence is acknowledged. Rather than
neutralizing ignorance, we propose that ignorance should be embraced by increasing
one’s awareness. In doing so, we see two directions to cope with ignorance.
Firstly, when analyzing the interaction of ignorance with heuristics and cognitive
biases, entrepreneurs should tailor their decision-making processes through their
dual-process theory (Kahneman, 2011; Stanovich & West, 2000). The type of
ignorance that interacts with these processes is, as we have shown, often not
beneficial for entrepreneurs when entering a foreign market. Thus, ignorance
needs a neutralizing approach. Behavioural decision theorists have shown that
situations where actors use counterfactual thinking (Baron, 2000) and search for
feedback (Fischhoff, 1982) limit the functioning of cognitive biases, while Alvesson
and Spicer (2012) pointed out that an inability or unwillingness to mobilize one’s
cognitive capacities is caused by a lack of critical thinking and reflexivity. The above
92 B. Bastian and A. Zucchella
2
We would like to acknowledge the role of the anonymous reviewer in our submission process, who
generously provided us this table in order to better understand ways to unmake ignorance.
Ignorance and International Entrepreneurship. Two Sides of a Blade in the. . . 93
Fig. 1 The Ignorance Scale (Source: Adapted version from North & Kares, 2005)
9 Conclusion
The aim of this chapter was to demonstrate the role of ignorance in International
Entrepreneurship. We debated that scholars might have overemphasized the role of
knowledge, while ignorance has been ignored. We have argued that firms who
internationalize do not exclusively follow pre-defined knowledge strategies in
order to find their most suitable foreign market. We have also demonstrated that
following knowledge patterns, even if they exist, may not give satisfying results to
firms, since it may result in overlooking opportunities and ignoring new important
information.
Ignorance also plays an important role in entrepreneurial cognition and may
cause, or be caused by, serious cognitive errors. The field of entrepreneurship,
94 B. Bastian and A. Zucchella
Appendix
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Bob Bastian is a PhD candidate at the universities of Bergamo and Pavia. He is also a teaching
assistant in International Business, and Entrepreneurship, at the University of Pavia and at LUISS in
Rome. Previously, Mr. Bastian was a visiting research fellow at the RUG in Groningen. He is also
co-proponent for the EURAM entrepreneurship standing track “Entrepreneurial Decision Making
and Behaviour”. This year, he has been awarded the Manera research grant. His main research
interests are focused on entrepreneurial cognition, emotions, and decision-making.
S. Leonelli (*)
Department of Economics and Management, University of Padova, Padua, Italy
e-mail: [email protected]
F. Marchesani · F. Masciarelli
Department of Business Administration, University of “G. d’Annunzio” Chieti, Pescara, Italy
e-mail: fi[email protected]; [email protected]
1 Introduction
2 Theoretical Background
different scenarios and various conditions that enable the entrepreneur to choose the
most impactful factors for the strategies and development of the firm (Vaillant &
Lafuente, 2007). For example, there are many studies examining the weight that
differences between countries and geographical areas have in the entrepreneur’s
decision-making process (García-Cabrera et al., 2016; Shepherd et al., 2015). How-
ever, only a few studies show the impact of location in explaining entrepreneurial
decision-making, for example in fundraising and business strategies, especially in
the context of regional disparities.
Economic disparities between regions have been studied in different research fields
such as employment (Filippetti et al., 2019), productivity (Castelnovo et al., 2020),
human capital (Fonseca, 2017), and have grown significantly in the explanation and
promotion of entrepreneurship (Muñoz & Kimmitt, 2019). Regional disparities also
exist in well-developed countries and show differences in innovation and economic
development at the regional level (Fratesi & Percoco, 2014). For example, in
examining the Italian case, many differences have emerged in recent decades, related
to innovation (Min et al., 2020), economic development (Gagliardi & Percoco,
2011) and employment (Ciriaci & Muscio, 2014).
Regional differences persist in a variety of contexts and are gaining importance
for academic research and policymakers (Castelnovo et al., 2020; Filippetti et al.,
2019; Fonseca, 2017). Regional disparities impact the region’s own economy and
local strategic enterprise development (Stuetzer et al., 2014). However, this differ-
ence is decreasing as a result of globalization and the world market. Recent studies
have shown that SMEs’ internationalization and digitalization can reduce regional
disparities (Caputo et al., 2016). SMEs’ digitalization and entrepreneurs’ use of
digital platforms can strongly impact firms’ opportunity to operate in international
markets (Neubert, 2018), expand the market (Gaur & Kumar, 2010) and find
alternative financial sources (Smolarski & Kut, 2011). Therefore, entrepreneurs
operating in a limited geographical context in terms of economic development,
due to difficulties in raising capital may search for alternative online sources of
financing such as crowdfunding (Belleflamme et al., 2014; Mollick, 2014).
Crowdfunding is “an online open call for financial resources either in the form of
donation or in exchange for some form of reward and/or voting rights in order to
support initiatives for specific purposes” (Schwienbacher & Larralde, 2010, p. 7).
The increasing development of crowdfunding is mainly related to the globaliza-
tion process and to the need for start-ups and SMEs to get new credit and other
Risk or Opportunity? Exploring the Relationship Between Entrepreneurial. . . 103
funding sources (Langley & Leyshon, 2017). The main factor in the growth of
crowdfunding is represented by the technological innovation of Web 2.0, which has
allowed internet users to generate online content and share it with other users,
making crowdfunding effectively viable (Kirby & Worner, 2014). In practice,
crowdfunding can take different forms such as donation-based crowdfunding,
rewards-based crowdfunding, debt-based crowdfunding and equity-based
crowdfunding (Belleflamme et al., 2014). We focus on equity-based crowdfunding
that represents the main form of a crowdfunding campaign in terms of capital and
financing. As defined by Ahlers et al. (2015, p. 955): “Equity crowdfunding (ECF) is
a form of financing in which entrepreneurs make an open call to sell a specified
amount of equity or bond-like shares in a company on the Internet, hoping to attract a
large group of investors”. The open call and investments take place on an online
platform (such as Mamacrowd, CrowdfundMe) that connects investors and entre-
preneurs worldwide.
Over the years, crowdfunding has grown considerably due to its ability to bridge
the gap between entrepreneurs and crowds and to democratize access to capital
(Cumming et al., 2019; Troise & Tani, 2020). This has resulted in a viable option for
entrepreneurs who face challenges in accessing traditional financing channels (Kim
& Hann, 2013).
Over time, rapid technological development has reduced boundaries and dis-
tances and investors are now allocating far more risk financing via online equity
crowdfunding platforms (Brown et al., 2020). Simultaneously, entrepreneurs have
started to strategically approach ECF not only to raise funds but also as a marketing
approach to engage the crowd by generating visibility, contract and feedback
(Di Pietro et al., 2018).
We assume that crowdfunding allows us to move from the local context to the
global marketplace. However, interesting relationships exist between territory and
crowdfunding; a large stream of literature examines the impact of geographic
position on campaign success, recognizing the importance of localization (Giudici
et al., 2018; Josefy et al., 2017).
Previous studies suggest that although crowdfunding reduces the distance
between local and global contexts (Ahlers et al., 2015), the geographical location
also influences crowdfunding outcomes. The impact of the geographical proximity
of crowdfunding campaigns to banks lies almost entirely in projects that are less
attractive to the local population, whereas online projects are virtually immune to the
competition between online crowdfunding and offline banks (Kim & Hann, 2013).
Localization effects also have an impact on successful campaigns due to local
altruism or the promotion of projects sharing values with local communities (Josefy
et al., 2017). For example, Giudici et al. (2018) show that the characteristics of the
geographical area where entrepreneurs reside affect the success of the crowdfunding
projects they propose. By analyzing reward-based entrepreneurial projects, they also
note that the existence of social relationships between people residing in a specific
geographical area increases the likelihood of success of the campaigns themselves.
Research on the relationship between crowdfunding and geographical area
mainly focuses on investor decisions and campaign success factors (Ahlers et al.,
104 S. Leonelli et al.
2015; Block et al., 2018; Lukkarinen et al., 2016; Nix-Stevenson, 2013; Vismara,
2018), while little is known about the reason why entrepreneurs decide to use
alternative financial sources such as ECF campaigns in the context of regional
disparities.
Most of the studies on crowdfunding have been developed in advanced econo-
mies that are relatively homogenous from an institutional, regulatory and cultural
perspective (Bapna, 2019; Fornes & Cardoza, 2019; Giudici et al., 2013). However,
even in the context of well-developed countries, there are internal disparities that can
influence several aspects such as SMEs’ strategies (Giudici & Rossi-Lamastra, 2018)
and financial assets (Mollick, 2014).
Specifically, regional differences in market and economic structure can influence
investments and crowdsourcing, which may either reinforce or offset the effects of
geographical agglomeration (Filippetti et al., 2019). Firms are expected to operate
more in the crowdfunding market when local markets are less responsive, which
would generally be the case in economically less developed regions. At the same
time, more economically and technologically developed regions are also more
responsive to the use of financial and strategic instruments detached from traditional
ones (Di Pietro & Butticè, 2020; Vassallo, 2016).
Therefore, we expect that the adoption of a tool such as crowdfunding in less
developed regions to be less affected by regional disparities as a consequence of the
‘democratizing’ role that crowdfunding plays on the financial market (Kim & Hann,
2013). Aiming to evaluate the role of regional disparities in the entrepreneurial
decision-making process in raising capitals, we posit:
Hypothesis: Less developed regions are more likely to adopt alternative financing
sources such as crowdfunding.
3 Methodology
investment and the database of the Italian Chambers of Commerce to gain informa-
tion about firm registration in each region over the years.
To distinguish between less developed and well-developed Italian regions, we
considered the recent Italian Government and European Union ranking of regional
development between 2014 and 2020. The European Union has used this division to
allocate structural and investment funds and resources for economic, social, techno-
logical and territorial development. In the breakdown, less-developed regions
are those with GDP per capita below 75% of the EU average, regions in transition
are those with GDP per capita between 75% and 90%, and well-developed regions
are those whose GDP per capita exceeds 90% of the EU average.
According to this ranking, the least developed regions are Basilicata, Calabria,
Campania, Apulia and Sicily. The “transition” regions between less developed and
well-developed ones are Abruzzo, Molise and Sardinia, while the others (i.e. Emilia-
Romagna, Friuli-Venezia Giulia, Lazio, Liguria, Lombardy, Marche, Piemonte,
Sardinia, Sicily, Tuscany, Trentino-South Tyrol, Umbria, Valle d’Aosta and
Veneto), located mainly in central and northern Italy, are considered developed.
We merged less developed and transition regions in our sample to oppose them to
the developed ones and to highlight the different economic development between
them, and we called the two sides less developed and well-developed regions.
The dependent variable is called CF_Campaign and represents the total number of
crowdfunding campaigns per Italian region. It is a continuous variable measured by
the logarithm of the ratio of crowdfunding campaigns in each region to the total
number of firms in the respective region. This variable is usually used to assess the
adoption of crowdfunding campaigns and allows us to understand the adoption of
these alternative financial tools in the local context (Lukkarinen et al., 2016; Piva &
Rossi-Lamastra, 2018).
The independent variable in our model is called Total_Firms. Total_Firms is a
continuous variable indicating the total number of companies listed in the Chamber
of Commerce register. In the context of crowd-sourcing and regional development,
the total number of firms operating in each region helps us to understand the current
usage of crowdfunding campaigns based on possible users such as entrepreneurs and
firms operating in each region. Total firms in the region as well as GDP per capita
represent an economic indicator of each Italian region and a measure of the market
value of regional economic development (Sternberg & Arndt, 2001; Yang et al.,
2011).
In the regression model, we controlled for several factors at both the regional and
crowdfunding level that can predict regional development. All variables are contin-
uous variables, and the model specification includes the following indicator as a
control variable. In Public R&D, we looked at each region’s R&D expenditures
relative to the population of the region itself. This variable is used to estimate the
106 S. Leonelli et al.
4 Results
The study was conducted using the ordinary least-squares method (OLS) and
inferential t-test statistics to analyze the entrepreneurial decision-making process in
the context of regional disparities.
We have a panel dataset consisting of 621 crowdfunding campaigns, including
47 campaigns from 2016, 109 campaigns from 2017, 124 campaigns from 2018,
155 campaigns from 2019 and 186 campaigns from 2020. Table 1 reports the
descriptive statistics and inferential statistics of the t-test that were used to analyze
the difference between less- and well-developed regions in our sample.
As we can see from Table 1, the difference between these two groups also
emerges from a paired t-test. The results reveal significant differences between
less- and well-developed Italian regions with respect to the use of crowdfunding
campaigns ( p ¼ 0.003), the total number of firms in those areas ( p ¼ 0.044), the
number of new firms’ creation ( p ¼ 0.034), and the amount of R&D expenditure
( p ¼ 0.036). The values of these variables are slightly higher in well-developed
regions than in less developed ones, although we had more observations in the well-
developed sample.
Table 2 reports the correlation matrix of our model. We checked for possible
multicollinearity issues. As we can see from Table 2, the variables public R&D
display a correlation coefficient higher than 0.7, namely 0.788 and 0.867. We also
ran the regressions excluding public R&D and all results were confirmed.
To assess potential multicollinearity, we computed the variance inflation factor
(VIFs). For each model in Table 3, the mean and maximum VIF are well below the
threshold of 3.2. We, therefore, concluded that multicollinearity is not a threat to the
validity of our results.
Table 3 reports the empirical results of our model. In detail, column (1) reports
our results for the total sample, while columns (2) and (3) are related to under- and
Risk or Opportunity? Exploring the Relationship Between Entrepreneurial. . . 107
well-developed regions, respectively. Models I, III, and V only include the control
variables, while Models II, IV, and VI add the independent variable.
Model II shows a positive and significant relationship between the total number
of companies and the use of crowdfunding campaigns (β ¼ 2.863, p < 0.05). This
relationship is also significant in Model IV and Model VI. In detail, Model IV
illustrates the positive and significant relationship between the total number of
companies and the use of crowdfunding campaigns in less developed regions
(β ¼ 6.034, p < 0.001). Model VI shows the same relationship in well-developed
regions (β ¼ 5.861, p < 0.05). However, the relationship between the total number
of companies and the use of crowdfunding campaigns is stronger in less developed
regions than in well-developed ones, allowing us to accept Hypothesis 1, suggesting
that firms located in less developed regions are more likely to adopt alternative
financing sources such as crowdfunding.
Risk or Opportunity? Exploring the Relationship Between Entrepreneurial. . . 109
evaluating the measures and regional policies to support innovation and internation-
alization process in regions.
We conclude by pointing out the limits of the research. In terms of data, we could
only refer to a 9-year period. To obtain more precise data, future research might
extend the time frame over the years considered by also evaluating the influence of
COVID-19. As regards our sample, we based our study on Italian regions. Future
research might replicate this study in other countries, even those that are less
economically developed than Italy, to provide a more comprehensive overview of
the use of this tool in contexts of economic and social disparity.
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Simona Leonelli is Research Fellow at the University of Padova (Italy). Previously, she was
Postdoctoral Research Fellow at the University G. d’Annunzio Chieti-Pescara (Italy) where she
received her Ph.D. in Accounting, Management, and Finance in 2017. She was visiting researcher at
Skema Business School (Nice—France). Her main research interest lies in the area of Entrepre-
neurship (i.e. personality traits, individual resilience, start-ups’ innovation, entrepreneurial orienta-
tion), and Business Organization (i.e. organizational resilience and ambidexterity). She published in
numerous journals including: Journal of Small Business and Entrepreneurship and Journal of
Entrepreneurship and Small Business. She is the author of two books: “Entrepreneurial Personality
and Small Business Management” (Edward Elgard Publishing), and “Sustainable entrepreneurship:
How entrepreneurs create value from sustainable opportunities” (Emerald Publishing). She is an
adjunct professor of Business Organization, Behavior in Organization, and Organization Design
and Governance of Human Capital at the University of Padova.
Francesca Masciarelli is Associate Professor at the University G. d’Annunzio. She received her
Ph.D. from the University of Trento. She was visiting researcher at the Copenhagen Business
School (DK) and at the University of Sussex (UK). Her research interests include social capital,
management of innovation, and entrepreneurship. She has published on these issues on Organiza-
tion Science, Journal of International Business Studies, Journal of Business Ethics, Regional
Studies, Industry and Innovation, International Marketing Review, and Journal of Small Business
and Entrepreneurship. She has also published two books with the Edward Elgard Publishing: “The
strategic value of social capital: how firms capitalize on social assets” and “Entrepreneurial
personality and small business management” a book with Emerald Publishing, “Sustainable
entrepreneurship: How entrepreneurs create value from sustainable opportunities” and a book
with Routledge, “Cultural Proximity and Organization: Managing Diversity and Innovation”. She
is a senior lecturer of Management and Entrepreneurship at the University G.d’Annunzio and
LUISS University. She teaches Innovation in Corporate and University Master courses.
The Internationalization of Family SMEs:
A Literature Review and Research Agenda
F. E. Rubino
University of Calabria, Rende, Italy
e-mail: [email protected]
C. Multari
University ‘Mediterranea’ of Reggio Calabria, Reggio Calabria, Italy
e-mail: [email protected]
G. Valenza (*)
University of Palermo, Palermo, Italy
e-mail: [email protected]
1 Introduction
2 Methodology
authors. The main goal of the panel discussion among the authors was to consider
only those articles strictly connected to the research field of internationalization.
First, we identified those articles that specifically focused on the topic of interna-
tionalization. Then, we excluded the documents less relevant to the research ques-
tion. For example, papers on performance, succession, or organizational culture,
were excluded when not strictly related to internationalization. We also excluded
those articles which could not be considered research works (e.g. historical articles,
educational case studies and industry reports).
The selection approach was therefore qualitative, critical and systematic. We
could have put the keyword ‘internationalization’ in the string, but we wanted to
adopt a qualitative approach to make sure not to miss relevant articles on interna-
tionalization, which is the core of this study.
Through these inclusive and exclusive criteria, we obtained a set of articles
representing the state of the art of the research on the internationalization of family
Small and Medium-sized family businesses, where the first bibliographic reference is
dated 2002 (i.e. Poutziouris et al., 2002). No documents before 2002 matched the
search criteria. In particular, the result was a final sample of 29 articles, published
from 2002 to 2020, which formed the basis for the systematic literature review.
In this section, we analyze the main theories used in the literature to study the
internationalization processes of family SMEs. The section is divided into subsec-
tions, each of which focuses on a specific stream of research.
The review of the papers provided us information about the trend of scholars’
interest in the family SMEs’ internationalization process, which seems to be aver-
agely increased in the last two decades, as evidenced by Graph 1.
This leads us to consider the internationalization process of the family SMEs as
an emerging field in the business literature. It is possible to observe an increasing
number of published articles, especially during the last year considered (2020).
The Internationalization of Family SMEs: A Literature Review and Research. . . 119
4
3
2
1
0
-12000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
Years
To solve the discussed issues, SMEs may decide to introduce non-family mem-
bers in the TMT. External managers can apport ‘extremely beneficial results’ toward
an internationalization strategy: they can apport (international) experience, capabil-
ities, different visions, new ideas and their pre-existent social networks (Cruz &
Nordqvist, 2011; Liang et al., 2013; Vandekerkhof et al., 2014). Furthermore,
non-family managers can ‘increase rationality and objectivity in the decision-making
process, promoting change and innovation’ (Alayo et al., 2019; Cruz & Nordqvist,
2011).
Another obstacle to the internationalization process can be represented by the
presence of older generations, generally constituted by the founder generation, who
seem to be more reluctant to change, less inclined to risk, and may present insuffi-
cient capabilities, knowledge and social networks to extend the business abroad
(Basly, 2007; Fernández & Nieto, 2005; Shi et al., 2018; Yang et al., 2020). As
argued by Basly (2007), conservatism can be discussed by three aspects: gover-
nance: the high-dependence of the firm to the owner-manager (Jenster & Malone,
1991); strategic: rigid devotion to a strategy (Gudmundson et al., 1999); cultural:
independence from the environment and external culture (Donckels & Fröhlich,
1991).
The stagnation, as hypothesized by Alayo et al. (2019), can be overcome by the
involvement of subsequent generations, which are generally better prepared, have
upper-level education, and may have external experiences (Arzubiaga et al., 2019).
Although they may lack specific firm experience like previous generations, the best
way is represented by generational involvement in TMT, where the founder
(or older) generation can provide firm and market experience and later generation
can introduce creativity, innovation, diversity in TMT’s capabilities and skills
(Chirico et al., 2011; Sciascia et al., 2013).
Furthermore, family businesses are characterized by ‘patient capital’ (Sirmon &
Hitt, 2003), which implies a long-term perspective that may enhance the adoption of
choice of internationalization (Simon, 1996).
underline the existence of three main aspects of internal social capital related to the
internationalization process: FCC (family commitment culture), SEW (socio-
emotional wealth) perspective and stewardship orientation.
FCC is a distinguishing characteristic of FBs (Astrachan et al., 2002; Zahra et al.,
2008) and can be defined as a ‘consistent behaviour’ (Becker, 1960), in which family
and organizational values of a FB are fused in the culture of commitment (Segaro
et al., 2014). For instance, FCC can be shaped by the employees’ desire, need, and/or
obligation to hold membership in the firm (Meyer & Allen, 1991; Riketta, 2002).
SEW perspective can be defined as ‘the stock of affect-related value that a family
derives from its controlling position in a particular firm’ (Berrone et al., 2012). In
general, the most relevant aspect of SEW is the importance of non-economic goals
that family members seek in the business (Berrone et al., 2012).
As argued by some authors (Del Bosco & Bettinelli, 2020), SEW can be shaped
in the following dimensions: family control and influence; family member’s identi-
fication with the firm; binding social ties; emotional attachment; renewal of family
bonds to the firm through dynastic succession (Berrone et al., 2012).
Scholes et al. (2016) discuss the positive and negative effects of SEW. On the one
hand, SEW apports a longer-term view and this can conduct investments in terms of
developing human resources, capabilities, network ties and financial reserve (patient
capital). On the other hand, SEW may lead to the self-behaviour of family members,
who can recruit incompetent employers or managers (based on family ties or
personal friendly relationships), or inappropriately use the firm’s resources.
The agency-based theory represents one of the main discussed paradigms in
corporate governance literature (Eisenhardt, 1989). One of the focal points of the
agency perspective deals with two problems caused by the divorce of ownership and
control in a firm: moral hazard and adverse selection (Jensen & Meckling, 1976).
Nevertheless, as argued by D’Angelo et al. (2016), in FBs, the relevant family
influence often leads to a system where ownership and control are run
(or influenced) by the same people. Hence, it is more appropriate to discuss stew-
ardship orientation (Miller et al., 2007). This approach could be defined as an
extension of SEW perspective, from family members to the whole firm. Indeed, in
stewardship orientation, the executives (stewards) are motivated to act in the inter-
ests of principals (owners) (Davis et al., 1997; Donaldson & Davis, 1991). Stewards’
behaviour is pro-organizational and collectivistic, and the most important qualities of
a steward are trust, involvement, collectivism, commitment and long-term orienta-
tion (Davis et al., 1997). As proposed by Segaro et al. (2014), stewardship orienta-
tion may influence the level of internationalization of a FB in three ways: the unusual
devotion to the continuity of the business, the emphasis placed on nurturing of
employees and the seeking out of closer connections with customers.
External social capital improves the firm social network, which contributes to the
firm’s foreign expansion (Majocchi & Strange, 2012). As hypothesized by Basly
(2007), social networking is important at least on two levels of internationalization
activities: as a trigger of international expansion and, subsequently, for the decision
about penetration and entry modes. Distributors, suppliers, customers, competitors,
The Internationalization of Family SMEs: A Literature Review and Research. . . 123
The term ‘pathways’ refers to the different strategies that a firm can adopt in the
internationalization process (Dabic et al., 2020; Kuivalainen & Saarenketo, 2012;
Mathews & Zander, 2007). The entry choice in the international market influences
multiple aspects, such as firms’ revenue performances (Fernández Olmos et al.,
2015). Based on the model proposed by Bell et al. (2003), there are three main
internationalization pathways of SMEs: incremental way, born global firms and
born-again global.
One of the most cited theories in literature on international business is the
incremental model proposed by Johanson and Vahlne (1977). The Uppsala model
describes internationalization as an incremental process in which firms expand their
business abroad from closer countries to more distant countries. The paradigm
consists of three stages: exportation, the involvement of agents and the founding
of a foreign sales subsidiary. The building of an own production facility may follow
the three stages.
The original Uppsala model highlights the relevance of distance and country
specificity while his revision (Johanson & Vahlne, 2009) emphasizes the important
role of networks and opportunity recognition in the internationalization process.
Born global represents the second pathway. These firms, less influenced by
geographical distance, internationalize to several countries simultaneously and rap-
idly (Kontinen & Ojala, 2012b). As argued by Kuivalainen and Saarenketo (2012),
born global firms commonly achieve foreign sales from two to five years from their
founding, operate at least in five foreign countries, and have a minimum of 25% of
their income from overseas sales. Born global firms usually develop products for the
international market rather than for domestic market demand (Bell et al., 2004).
The third pathway is constituted by born-again global. Born-again global firms
have previously focused on the domestic market but, after a critical event such as a
The Internationalization of Family SMEs: A Literature Review and Research. . . 125
4 Discussion
Most of the findings of the examined research papers seem to confirm the
pre-existent literature theories but, in some cases, we found out discordance between
the dominant theory assumptions and the outcomes of research works.
In general, family firms are less inclined to internationalize their business, if
compared to non-family ventures, as confirmed by several research works
(Davidkov & Yordanova, 2016; Fernández & Nieto, 2005). Moreover, the presence
of external shareholders (Segaro, 2012) or foreign owners (Davidkov & Yordanova,
2016) significantly increases the chances to internationalize. Other studies found out
no significant relationship between family control (Basly & Saunier, 2020) or the
presence of a founder CEO (Yang et al., 2020) and DOI. Conversely, recent
literature has examined the family features which can impact positively on interna-
tionalization, such as family commitment (if combined with strategic flexibility
and/or stewardship orientation), patient capital and informal governance system
(Calabrò & Mussolino, 2011; Segaro, 2012). Furthermore, Kontinen and Ojala
(2010) found out that family SMEs’ members, when entering foreign markets, are
more motivated than non-FB to learn the culture and language of the target country
to fill the lack of financial resources and managers and employers with international
experience.
Regarding the composition of TMT in family SMEs, several empirical studies
(Bika & Kalantaridis, 2017; Calabrò & Mussolino, 2011; Compagno et al., 2005;
D’Angelo et al., 2016; Fernández & Nieto, 2005; Kontinen & Ojala, 2010; Segaro
et al., 2014) have unanimously confirmed the positive relationship between the
presence of non-family managers and the degree of internationalization. As
suggested by Alayo et al. (2019), the presence of experienced external managers
provides foreign market knowledge, experience, social networks transferred from
past experiences and can help the SME’s governance to solve conflicts in a more
rational way. Moreover, Segaro (2012) found out that the presence of familial TMT
is negatively related to internationalization, whilst parental TMT, if combined with
stewardship orientation and behavioural integration, increases the DOI. Further-
more, D’Angelo et al. (2016) argue that external managers can exert their full
potential if family control over the firm is less than 50% of shares. This is due to
the conservatism and risk-aversion typically of family control. Bika and Kalantaridis
(2017) concluded that non-family managers, in addition to network ties, provide
organizational-social capital (managerial resources, learning processes, behavioural
norms), which positively impacts the DOI. The presence of non-family members in
126 F. E. Rubino et al.
TMT, as found out by Compagno et al. (2005), seems to be more relevant in dynamic
sectors than in stable sectors.
Recent FB literature has detected various factors that foster a firm’s internation-
alization process. Among attitudes, it is opportune to cite international knowledge
(generally provided by external managers) (Basly, 2007); international opportunity
recognition, which is favoured by governance flexibility (Kontinen & Ojala, 2011b)
and the presence of TMT members from different areas (Segaro et al., 2014);
collectivistic culture (Zaefarian et al., 2020); TMT managerial capabilities and
experience (Segaro, 2012); organizational social capital (Bika & Kalantaridis,
2017); and pro-active, risk-seeking and innovative entrepreneurial orientation
(Davidkov & Yordanova, 2016). As displayed by Zaefarian et al. (2020), the
presence of valuable, rare, imperfectly imitable, non-substitutability (VRIN)
resources (Barney, 1991) is positively associated with internationalization.
The connection between generational succession and internationalization repre-
sents another common ground for family SMEs’ studies. Indeed, some authors
(Anand, 2013; Basly & Saunier, 2020; Fernández & Nieto, 2005; Segaro et al.,
2014) found a positive relationship between the involvement of second and subse-
quent generations in TMT and firms’ internationalization. Furthermore, concerning
Japanese firms, Anand (2013) suggested the involvement of subsequent generations
in the decision-making process to develop international strategies. Nevertheless,
based on the research work by Yang et al. (2020) involving Chinese enterprises,
generational succession provides significant results on export propensity, but mar-
ginal findings on export intensity.
Scholars have been paid great emphasis to the stewardship orientation, which
seems to be more adequate than the agency theory to explain family SMEs’
dynamics (Kontinen & Ojala, 2012a; Segaro, 2012; Segaro et al., 2014). For
instance, Segaro (2012) suggested that the presence of stewardship, if combined
with other factors (TMT managerial capabilities and experience, TMT behavioural
integration) leads to a higher DOI. Moreover, stewardship orientation can mitigate
the effects of family characters identified by dominant theory as a threat to interna-
tionalization, such as family ownership, family commitment, parental TMT and
governance with particularism and personalism (Segaro, 2012).
Up-to-date literature seems to be increasingly concerned to SEW, which is
considered one of the main characteristics of family control over the firm, thus its
connection with international strategies could not be ignored by the scholars.
Nevertheless, the results seem to be contrasting and it is not still clear how SEW
perspective impacts on FBs’ internationalization. Research studies (Lahiri et al.,
2020; Scholes et al., 2016) found out equivocal the impact of socio-emotional goals
on the DOI: on one side, current SEW can inhibit risk-seeking and the hiring of
external employees, managers or shareholders to preserve total familiar control
(Basly & Saunier, 2020; Yang et al., 2020); nonetheless, the pursuit of future
SEW may generate patient capital to provide a more solid firm structure to future
generations (Segaro, 2012).
Alayo et al. (2019) argued that the succession process can be complex for family
firms. The model proposed by Shi et al. (2018) may mitigate the risks associated with
The Internationalization of Family SMEs: A Literature Review and Research. . . 127
Through a systematic literature review, our study aimed to discuss the state of art
inherent family SMEs internationalization processes and to propose future research
directions.
First of all, although the family SMEs’ internationalization process seems to be a
growing field in the business literature, we noticed that the most relevant journals
specialized in the family business have mostly ignored the abovementioned subject.
As discussed in the previous sections, in family business literature there are
features that positively (or negatively) impact SMEs’ DOI. Some of these are
accepted by most scholars, such as the presence of external managers with interna-
tional capabilities and experience in TMT, the introduction of subsequential gener-
ations in the decision-making process, the presence of international opportunity
recognition by the board and TMT members, governance dynamics shaped by
stewardship orientation, social networking with foreign firms (which is lead, as
argued above, firstly by the participation to international trade forums).
Instead, other findings seem to be controversial, for instance, the role of SEW in
the internationalization process, which can be a threat because it may conduct to risk-
avoiding by family members, but on the other hand, it generates patient social capital
and the willingness to pass on future generation a more solid firm. For future studies,
it would be interesting to better investigate the negative, but especially the positive
role of SEW on international strategies.
Another controversial field is represented by family SMEs’ external social cap-
ital, constituted by the ties that a firm bridges with third parties. As mentioned, social
networking represents a driver to internationalize firms’ business, but literature is not
unanimously concordant about the types of ties that better impact internationaliza-
tion (e.g. weak or strong, formal or informal). Future research works may better
examine which forms of ties have a stronger influence on overseas expansion
procedures.
Distance, when a FB decide to engage the international strategy, is still a
determinant factor, particularly concerning the subsidiary ownership choice. Never-
theless, globalization and technological progress are transforming the concept of
distance, year by year. In this regard, internationalization research cannot ignore
these phenomena, so we suggest, for future studies, to research how progress impact
the perceive of distance by the firms, and how they react to these persistent changes.
The ways throughout family SMEs undertake internationalization is one of the
most discussed issues in internationalization FB literature. In this context, the more
accepted theory is the incremental model (Uppsala). Despite most SMEs follow this
way, phenomena such as born-global and born-again global firms are growing.
Future research agenda may investigate these models to understand if they only
constitute exceptions to the incremental model or are destined to deepen through the
years.
Finally, based on the model proposed by Lahiri et al. (2020), we found interesting
the tripartite division of features impacting firms’ international strategy
The Internationalization of Family SMEs: A Literature Review and Research. . . 129
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Claudio Multari is a Ph.D. student in Law and Economics at the University “Mediterranea” of
Reggio Calabria (Italy). His research is focused on business strategies, family business, and
financial report analysis.
John Mendy
J. Mendy (*)
University of Lincoln, Lincoln International Business School, Lincoln, UK
e-mail: [email protected]
1 Introduction
HPO Theory is a concept that has been adopted by organisations in the hope that it
will bring about a sustainable and improved performance that can deal with the
firms’ economic challenges. This section examines some of the core HPO charac-
teristics such as planning, teamwork, commitment, productivity and collaboration to
see the extent to which its theory helps SMEs to resolve the performance-related
challenges they face in internationalisation.
Attempts to define HPO Theory are polarised. Despite the definitional differ-
ences, there are a variety of terms/concepts used ranging from High-Performance
Work Organisation, High-Performance Work Systems, Flexible, Agile, Resilient to
Sustainable Organisation. These concepts seek to highlight the way a firm’s struc-
tures, its procedures, processes, leadership and management capacity create an
innovative and inclusive environment, which organisations such as SMEs can use
to develop high levels of financial performance, productivity and engaged stake-
holders (e.g., staff, management, community, clients). To ascertain the extent to
which the HPO literature’s key aspects help SMEs to address their performance-
related challenges in a highly competitive international environment, it is necessary
to further sub-categorise performance under financial and non-financial. The finan-
cial category highlights the importance for SMEs to have a return on investment or
ROI. This involves the triple bottom line of socio-economic and environmental
performance, higher outputs/productivity, growth and expansion. On the other
hand, the non-financial category focuses on the extent to which customers, staff
and other stakeholders are engaged with and committed to the organisation’s vision,
mission, objectives and values. Although the second category appears to have no
financial linkages when compared to the first, its examination in this section’s
sub-sections shows the continuous emphasis of a financial aspect that dampens the
people-related elements that it is supposed to emphasise. For the purpose of this
chapter and on the basis of the available literature, HPO Theory is defined here as an
organisation that achieves, maintains and sustains competitive advantage over its
rivals by facilitating a financial and non-financial results’ oriented set of activities,
policies, procedures and processes towards that goal. This study focuses on SMEs as
organisations that have not been examined using HPO Theory.
By attempting to draw from different theoretical and thematic insights on HPO
Theory that highlight the key financial and non-financial aspects, which are expected
to make SMEs internationally competitive (i.e., performing), the author critiques
their underlying assumptions. This approach helps to highlight how each of the HPO
categories/themes individually and collectively fosters a predominantly economic
utilitarian perspective for SMEs whilst, at the same time, shows what has been
lacking in HPO Theory. An alternative, more humanistic perspective referred to as
‘Internationalising HRM’, which highlights principal principles of Humanism serves
as this chapter’s contribution to HPO theorisation and the internationalisation
of SMEs.
142 J. Mendy
HPO Theory advocates that management planning can help SMEs become more
financially viable (Sardi et al., 2020). However, the theory also assumes that this
planning process can only be successful when undertaken in the longer term as this
helps in creating additional (financial) value creation for SMEs’ stakeholders,
including staff, customers and the community (i.e., the extended team) that compa-
nies do business with (Katzenbach & Smith, 2015). Additionally, management is
trained to help create reward systems that would keep staff satisfied such that
financial viability and sustainability becomes achievable (Brown et al., 2010).
However, this belief has prompted critique that it overlooks a much wider and
more crucial staff development and knowledge management issue (Albassami
et al., 2019; Cerchione et al., 2016) especially for SMEs that are resource constrained
(Mendy & Rahman, 2019). HPO Theory also advocates value creation through the
identification and facilitation of an on-going customer-organisational relational
improvement. The theory also highlights that staff need to learn what customers
want, understand their values and develop a more longer-term relational experience
with customers. The theory goes further to highlight the need to develop networks
and partnerships that span an SME’s shareholders, client and general stakeholder
networks in as doing so will improve an organisation’s profitability and reputation
within the wider society. HPO Theory also fosters management promotion and
training from within and encourages every staff member to balance their individual
short-term interests with those that can help sustain their organisations in the more
strategic future. These aspects highlight how HPO Theory seeks to create a sense of
job and psychological security whilst, at the same time, underscoring the need for
strategic financial viability. However, such emphases fail to fully address the core
human resource issues related to what staff regard as valuable, meaningful and
sustainable in the longer term (Ali et al., 2020). There is also a lack of consensus
in the literature on which specific HPO planning characteristic SMEs’ management
should specifically be focused on and adequately trained if overall financial and
organisational performance is to be ensured in the longer-term (Higgs & Dulewicz,
2014). Therefore, the question remains whether such disagreement and lack of
clarity in HPO Theory do not jeopardise the very SME viability the concept was
designed to promote (Ali et al., 2020; Ogunyomi & Bruning, 2016). When
Lampadarios et al. (2017) reviewed and synthesised empirical data from a range of
SME successes from the 1990s to their study’s publication, they sought to address
this issue by highlighting the knowledge needed by both management and staff so as
to facilitate SMEs’ performance. The development of a conceptual framework of the
necessary HPO characteristics, similar to the one provided by Bagorogoza and de
Waal (2010) recognises the importance that knowledge creation, its sharing and
utilisation may add to SMEs’ members’ value creation processes. However, it does
not resolve the fragmentation of the knowledge that members may develop from the
variety of partnerships and networks that SMEs engage with over time or even what
counts as valuable knowledge to facilitate a much strategic higher performance for
Internationalising HRM Framework for SMEs: Transcending High-Performance. . . 143
smaller firms. Similarly, Sidik (2012) had earlier identified barriers to SMEs’
performance but whilst having produced a framework that expounds on and helps
to resolve the apparent fragmentation of the linkages between the constituent
entrepreneur’s planning qualities and an SME’s performance, fails to underscore
how team working can help facilitate SMEs’ performance capability through more
innovative, market orientated and overall capacity development.
2.2 Teamwork
SMEs also face the additional challenge of a wider staff commitment to performance
(Asamany & Shaorong, 2018). Whilst HPO Theory seeks to resolve this by advo-
cating combined management-staff development, it also highlights a deeper, more
fundamental overall employment relations challenge in a wider internationalisation
context. HPO Theory advocates that management should provide the working
environment where values such as respect, commitment and engagement are
supported/promoted. HPO Theory further highlights the need for all staff to work
with management towards the achievement of their SMEs performance objectives,
mission and goals. This can be done through the identification of appropriate
measurement criteria. The latter are communicated to staff through an identified
set of actions, activities, performances and rewards. Whilst employees are permitted
to take risks and see mistakes as an opportunity to enhance their learning and
improvement, HPO Theory does not specify how SMEs’ management’s values of
independence, entrepreneurial leadership and drive can be balanced against the need
to foster management-staff dialogue and the sharing of both financial and
non-financial performance in the decision-making process. Whilst HPO Theory
also allows experiments and mistakes, the constant pressure faced by SMEs and
their management to stimulate change by continuously striving for renewal, the need
to develop dynamic managerial capabilities and facilitate employees’ flexibility do
not indicate which staff and management competencies should be treated as core and
which ones ought to be relegated to the skills’ development scrapheap. HPO Theory
has also not resolved the social aspects relating to which type of language can be
jointly agreed upon between SMEs’ management and staff as they seek to reinvent
their commitment to value creation potential within an internationalisation con-
text. Sardi et al. (2020) thought that a performance measurement system would
help resolve this issue for four Europe-based SMEs. Whilst they showed the
relevance of HRM in supporting, measuring and improving organisational per-
formance, their conceptual frame did not specify how SMEs’ performance
measurement could enhance the quality of the performance outcomes interna-
tionally (Sousa & Aspinwall, 2010) and what HRM could contribute. Therefore,
the identification of measurement tools and models do not necessarily guarantee
strategic and higher performance standards for SMEs competing internationally
(Simpson et al., 2012).
HPO Theory advocates for flexibility and diversity and proposes the recruitment and
selection of creative, innovative and problem-solving staff and management to help
SMEs overcome their performance constraints. It is believed that this strategy
enhances task-orientation among staff, which leads to workplace productivity and
Internationalising HRM Framework for SMEs: Transcending High-Performance. . . 145
2.5 Collaboration
To address the issue of what else might be needed to resolve SMEs’ performance
difficulty internationally, HPO Theory has turned to research and development and
information dissemination as a platform that could facilitate collaboration between
organisations and respective stakeholders. This is believed to enhance the longer-
term sustainability of SMEs’ performance. Through this, companies can develop
their national and international networks of partnerships and alliances (Lepak &
146 J. Mendy
Snell, 1999). Through such a resolution proposition, it has also been envisaged via
HPO Theory that mergers and acquisitions could be enhanced internationally
through the adoption of appropriate R&D practices. These resolution mechanisms
will, in turn, help SMEs to overcome collaboration challenges through compliance,
competition and productivity. Most companies have used ICT in trying to achieve
such a performance boost (Kim-Soon et al., 2017). However, Soto-Acosta et al.
(2016) have analysed how the fundamental use of technologies to facilitate financial
performance sustainability has impacted adversely on Spain’s manufacturing SMEs’
ability to innovate and perform in the longer term. The ability of SMEs to combine
knowledge dissemination and the appropriate utilisation of technology has shown
how internet businesses’ ability to perform could be largely affected by their
effective usage of internal, technological capability. Such capability has been
noted to be largely dependent on SMEs’ international performance and their ability
to collaborate with external partners and networks (Donbesuur et al., 2020; Mendy
2019). The level and scale of such collaboration is mainly dependent on a much-
neglected aspect of HPO Theory, which is the extent to which the human aspects of
performance can complement the traditional and predominant profit /economic-
centric perspective of such theorisation.
3 Methodology
This chapter’s methodology has been conducted based on and inspired by concep-
tual studies that have adopted a similar approach (Dabić et al., 2019; Ruzzier et al.,
2006). A search of the literature included key search words such as High Performing
Organisation, SMEs, internationalisation challenges and Human Resource Manage-
ment, similar to the conceptual work by Liñán et al. (2019). These keywords led to
the identification of critical literature on High-Performance Organisation and the
extent to which they impacted on SMEs’ ability to address performance-related
challenges of internationalisation (Ruzzier et al., 2006). Secondly, the author also
examined past conceptual studies from the Web of Science (WoS) database given its
comprehensiveness and the interdisciplinarity of the performance-related issues that
SMEs have been highlighted to address (Dar & Mishra, 2019). Thirdly, the author
used an inclusion and exclusion criteria to determine which papers fitted the search
criteria and, therefore, should be included in the theoretical review on HPO and
which ones did not and were therefore omitted. Book reviews, conference pro-
ceedings and editorials were excluded as these did not serve the current chapter’s
purpose. Out of an initial total of over a hundred papers from the earlier search, these
were compressed to just over seventy to form part of the theoretical review from a
range of major journals on internationalisation, SMEs and High-Performance
Organisation.
One of the foremost theory-based/bibliometric studies within recent
internationalisation is Dabić et al. (2019). Having highlighted a variety of areas
within SMEs’ internationalisation, ranging from internationalisation strategies to the
Internationalising HRM Framework for SMEs: Transcending High-Performance. . . 147
4 Results
sense that there is a more focused attention here on what may have given rise to the
SMEs’ internationalisation performance-related challenge and how HPO Theory,
which has been predominantly used to address such types of challenges, has been
insufficient in doing so. The findings/results are conducted through thematic pre-
sentation and analysis of each theme derived from the theoretical content. This is
done to ascertain not only the chapter’s contribution but also what is needed for a
shift from the economic utilitarianism to people-centric management used in HPO
Theory to address the SME challenges to a much longer term need to highlight what
the nature of the challenges are and how a different alternative to the economic-
centric approach/perspective of HPO Theory could actually enhance smaller busi-
nesses’ survivability in internationalisation.
The concept of ‘Internationalising HRM’ for SMEs was built from the shortcomings
of earlier propositions in relation to how efficient and effective HPO Theory’s
aspects are in addressing the performance challenges faced by SMEs when they
internationalise their business (Krishnan & Scullion, 2017). Despite Dar and Mishra
(2019), Booltink and Saka-Helmhout and Mamoghli et al. (2018) pointing out the
contributions of people practices in facilitating organisations’ economic benefits we
do not know how the people management practices highlighted in HPO Theory can
be effectively used in combatting not only economic challenges as suggested by
Ruzzier, Caputo et al. (2016) and Ardito et al. (2018) but also the overlooked socio-
cultural aspects (Oseghale et al., 2019) which could potentially lead to the develop-
ment of longer term individual and collective resilience for SMEs. Figure 1 below
identifies the types of challenges that the development of an internationalising HRM
perspective are intended to address when SMEs are confronted with similar issues
highlighted in the introduction and the literature review sections as well as the
missing aspects, following the tradition of Dabić et al. (2019) and Liñán et al.
(2019). Additionally, this chapter highlights the underpinning principles of each of
the aspects and how both serve as contributions to HPO Theory and the fields of
Internationalisation and HRM. The implications for HRM and Internationalisation
theory and practice are presented and discussed in the next sections.
The first principle entails developing the requisite skill for competency capacity
within an ‘Internationalising HRM’ framework. This involves the need for HRM
150 J. Mendy
SMEs’
Competency capacity
SMEs’
SMEs’
Social Capacity
• Develop staff's and managers' cultural capacity to enhance their social capacity to facilitate
their international network capability
• Facilitate staff's and management's understanding of cultural nuances of doing business
internationally
• Train staff and management to develop entrepreneurial networks sharing cultural capital
between themselves
• Enhance communication strategies between various networks internally and externally
SMEs’
Resilience Capacity
The second principle centres on developing research and training and development
capacity within an ‘Internationalising HRM’ framework. It highlights the impor-
tance of HRM specialists to facilitate the development of staff’s capability to not
only acquire information about ‘best practices’ but also to share both tacit and
explicit knowledge of how such practices are implemented pragmatically. This
fills the HPO aspect regarding overlooked knowledge management (Lampadarios
152 J. Mendy
The third principle focuses on developing both staff’s and managers’ cultural
competence capacity within an ‘Internationalising HRM’ framework. This involves
HRM helping all SME members to identify the informal taken-for-granted cultural
Internationalising HRM Framework for SMEs: Transcending High-Performance. . . 153
values around network creation, collegiality, ‘can-do’ spirit and ‘being there’ for one
another as a set of valuable competences that could be used in a foreign/host country.
The literature acknowledges that one of the fundamental resource constraints faced
by SMEs’ ability to internationalise their business into other markets has partly been
caused by a cultural deficit (Dabić et al., 2019) as both staff and managers may not be
aware of the institutional, regulatory and socio-cultural combinations that provide
the cultural fabric within internationalisation contexts, the deeper understanding and
navigation of which are crucial for international business success. However, apart
from an identification of the potential benefits that the development of SMEs’
capacities could have in enhancing a culture of innovation to ease some of the
financial viability concerns (Sardi et al., 2020) of small firms (Gonzalez-Loureiro
et al., 2017) understanding the cultural nuances and complexities of international
collaboration networks is a missing, yet important human aspect in fostering firms’
economic value. Evidently, there is a need to not only use cultural expertise to
maintain external, economic business partnerships, but to also encourage members
to adopt and integrate with foreign languages and customs. Therefore, an interna-
tional HRM perspective should focus on facilitating HRM’s capacity to develop
such cultural know-how in SMEs’ members to facilitate the social cohesiveness of
entrepreneurial networks. This can additionally be done by developing more effec-
tive communication processes.
The fourth principle centres on developing SMEs’ members’ capacity not only to
bounce back from the adversarial challenges but also to develop the wherewithal to
sustain such a capability. This is a fundamental principle within an
‘Internationalising HRM’ framework as it helps SMEs, their owners and staff not
only to recognise challenges as part of what they have to deal with in new geographic
dispensations but also to nurture and learn key characteristics such as commitment,
continuous engagement, the preparedness to challenge sub-standard performance, to
learn from it and to bounce back when challenged. Resilience capacity consists of an
organisation and individuals’ recognition of social and cultural aspects that both
parties need if they are to successfully deal with their commitment, productivity,
compliance and collaboration problems internationally and what is needed to
operationalise it. This aspect of internationalising HRM highlights aspects other
than the economic utilitarianism of HPO Theory through the encouragement for
SMEs to competently develop procedures enhancing skills development, flexible
working, information sharing and value enhancing partnerships that have formed the
crux of HPO Theory over the decades. Given the literature’s recognition of the
precarity of SMEs’ sustainability as a result of their economic-resource dependency,
the resilience capacity development combines both the material with the
154 J. Mendy
non-material resources that SMEs may have (e.g., social, cultural, aspirational and
attitudinal) in an inextricably interdependent relationship so as to facilitate SMEs
sustainability when they are challenged to operate internationally. This was absent in
previous studies on how SMEs deal with their economic as well as people-related
performance challenges. Resilience capacity now becomes a development issue for
SME internationally within the new ‘Internationalising HRM’ framework as
depicted below (Table 2).
Table 2 Comparative analysis between HPO Theory’s economic centrism and Internationalising
HRM Framework’s humanism
Internationalising HRM Contributions of framework to
HPO Theory’s economic- Framework’s human-centric SMEs & Internationalisation
centric aspects principles & aspects literature
• Management planning for • HRM to develop members’ • New framework addresses
financial viability entrepreneurial skills to ease SMEs’ practical skills,
• Reward staff for organisa- SMEs’ resource constraints resource and social integration
tion’s sustainability • HRM to develop staff’s constraints
• Train staff to sustain orga- geography-specific skills to • New framework recognises
nisation’s profitability enhance their social integration competency development not
• Improve customer relations only as an economic but also a
for profit social priority
• Develop networks to boost
profits
• value creation for
stakeholders
• Team working to enhance • Develop SMEs’ members’ • Team working has been
organisation’s competitivity awareness of international cul- broadened to include a deeper
• Monitor respective teams to tural nuances understanding of the cultural
ensure firm profitability • HRM to develop members’ capital of international partners
• Update team-members’ ability to use cultural practices • ‘Socio-cultural competence’
skills in line with product from different regions that is added to team working and
development work overall organisational compet-
• Foster a climate of ‘socio- itive capability
cultural know-how’
• Promote values of respect, • HRM to develop a culture of • Values of respect, engage-
engagement and commitment resilience ment and commitment are now
to enhance organisation’s • HRM to develop procedures fostered as part of a resilience-
goals towards a culture of resilience building culture for SMEs’
• Measure management’s and building survival
staff’s commitment • HRM to facilitate a more
• Identify actions and com- sustainable staff as well as
municate measurement management commitment,
criteria engagement, productivity and
flexible working as integral
aspects of resilience
development
• Promote flexible working to
boost productivity
• Lean production is
enhanced through perfor-
mance monitoring
• Direct skills’ development
interventions dampen staff
creativity
• Facilitate an organisation’s
capability through staff’s
skills’ restructuring
• Develop international net- • HRM to develop research, • HRM now uses ‘best prac-
works through R & D training and development tices’ as an overall
(continued)
156 J. Mendy
Table 2 (continued)
Internationalising HRM Contributions of framework to
HPO Theory’s economic- Framework’s human-centric SMEs & Internationalisation
centric aspects principles & aspects literature
• Overcome legal and pro- using ‘best practices’ international R & TD package
ductivity problems through • HRM to help develop requi- to create human capital
partnership building site knowledge acquisition and through knowledge acquisi-
• Use technology to build utilisation for SMEs tion, transfer and utilisation
collaborations • Use relationship building and
knowledge transfer to boost
SMEs’ human capital
• Use research and talent
development to facilitate
SMEs’ members’ behavioural
change
the development of the requisite skilled expertise which had adversely impacted on
HPO Theory’s crucial aspects such as teamwork, commitment, task productivity and
collaboration. Additionally, this new framework shows SMEs’ managers, decision
and policy makers what additional aspects need to be included in HPO Theory’s
management planning.
The second implication is related to research. Using HRM practices as a tool to
train and develop staff as highly resilient performers highlights not only ‘what’ (i.e.,
the activities and actions required when doing business internationally) but also
‘how’ (i.e., ways of adapting to the myriad of personal, socio-cultural, emotional,
performativity and economic challenges) to survive and be strategically sustainable.
This study’s results have exposed the fact that inasmuch as procedures are needed to
implement HRM in diverse international SME environments HPO Theory and
research should also consider ‘how’ to investigate and mitigate against other
nuanced challenges of internationalisation beyond the economic-centric paradigm.
By understanding the multi-facetted nature of the problem of performance-related
challenges faced by SMEs and by appreciating the dual theory-practice gap that
Business and Management scholarship has to deal with in SMEs’
internationalisation, the implication is that current and potentially future studies
could appreciate what types of new research are required to deal with this important
set of issues. What this study has done is new in the sense that it successfully
analysed HPO Theory, identified how an emphasis on the economic-centric para-
digm had robbed prospective Business and Management research from focusing on
the people/human-centric areas where improvements are actually needed to resolve
SMEs’ internationalisation. How to do so in research is suggested via an HRM
pathway.
Internationalising HRM Framework for SMEs: Transcending High-Performance. . . 157
5 Conclusion
signposted the need for additional investigative theoretical studies on SMEs and
internationalisation challenges. This chapter addresses the way the challenges can be
addressed via a development of an ‘Internationalising HRM Framework’, which fills
earlier scholarship’s research deficit. Previous studies stopped short of fulfilling this
practice gap.
Future studies ought to build on the applicability of each of the ‘Internationalising
HRM’ framework’s aspects in a range of developing and developed economies’
contexts with the view to comparing areas of convergence, divergence and comple-
mentarity/cross pollination of the HRM and business practices. Future theoretical
developments on HPO Theory can also investigate and analyse a range of additional
challenges and resolution mechanisms other than the social, competency, research
and talent and resilience capacity development aspects propositioned in this chapter.
By doing so it is anticipated that alternative research questions, methodologies and
conceptual developments could be generated and used to address key emerging SME
internationalisation challenges. It would also be interesting to see the extent to which
the HRM discipline emerges as a more formidable systemic business partner espe-
cially in the context of SME. The work continues . . .
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Dr. John Mendy is Senior Lecturer and Programme Lead for MSc HRM based at the University
of Lincoln, UK. He is interested in resilience research, the intersection between International HRM
and International Business, Organisational Studies, Strategy, employment relationships, autism and
employment/HRM policies and practices with specific foci on SMEs and MNEs in developed and
emerging economies. John is a Senior Fellow of the Higher Education Academy (SFHEA, UK) and
a Chartered Member of the CIPD (MCIPD, UK). John is the Chair of the Organisational Transfor-
mation, Change and Development Track at the British Academy of Management and has authored
several peer-reviewed articles in respected journals. John has also won several awards, the most
recent of which is the Best 2020 Special Issue on ‘The Impact of Resilience in Developing
Individual and Organizational Capacity to ‘Bounce Back’ from Challenges’ in Advances in
Developing Human Resources Journal. He also currently serves on the Editorial Boards of a
number of journals, the exam boards of a couple of Higher Education institutions both in the UK
and abroad and a Visiting Scholar.
Cross-cultural Tribes, Community
and Indigenous Entrepreneurship
1 Introduction
This chapter evaluates the cultural and niche social elements of indigenous entre-
preneurial behaviours. It examines “clan entrepreneurship”, “kindred entrepreneur-
ship”, “tribal entrepreneurship”, “community entrepreneurship” and nomadic
entrepreneurship” within the broader theory of Indigenous entrepreneurship. Indig-
enous entrepreneurship is an emerging context in the field of management research.
Hence, new studies focus on entrepreneurial identities, entrepreneurial attitudes and
entrepreneurial behaviours which are influenced by Indigenous cultures (Bruton
et al., 2018; Dana, 2015; Edwards, 2017; Greidanus & Sharpe, 2017). It has been
stated that indigenous tribes are a minority—and a special type of minority (Dana,
2015). In the field of entrepreneurship, indigenous entrepreneurship is the “creation,
management and development of new ventures by indigenous people for the benefit
P. A. Igwe (*)
Lincoln International Business School, University of Lincoln, Lincoln, UK
e-mail: [email protected]
There are several definitions of indigenous (see, e.g., Peredo et al., 2004). The
General Council of the International Labour Organisation (1991) convention pro-
vides a definition which states inter alia:
People in independent countries who are regarded as indigenous on account of their descent
from the populations which inhabited the country, or a geographical region to which the
country belongs, at the time of conquest or colonisation or the establishment of present State
boundaries and who, irrespective of their legal status, retain some or all of their own social,
economic, cultural and political institutions. (cited in Peredo et al., 2004, p. 4)
In many regions, indigenous people share unique religious values, cultural and have
a high entrepreneurial passion (Hubner et al., 2019). Also, Peredo et al. (2004)
defined indigenous people as:
• Descent from populations inhabiting a region before later inhabitants
• Geographical, political, and/or economic domination by later inhabitants or
immigrants
• Maintenance of some distinctive social-cultural norms and institutions
Although indigenous people are known for their entrepreneurial exploits in many
regions by creating, managing and developing new ventures, they face several
challenges. Several African and Asian indigenous tribes lack access to entrepreneur-
ial resources, gender discrimination and misrepresentation in the national gover-
nance and economic system (see, for example, Igbo Indigenous people) (Igwe et al.,
2018, 2020). Also, many indigenous populations are minority communities and
disadvantaged groups (Hindle & Moroz, 2010) or discriminated (Marlow &
McAdam, 2012). Turning problems into opportunities, there is a rise in entrepre-
neurship among indigenous such as the Aboriginals (Canada), Igbos, Yoruba,
Hausa, Fulani (Nigeria), and Chagga, Kalenjin, Maasai (East Africa), Zulu, Xhosa,
Ndebele, Venda, Khoisan (South Africa) Gonds, Bhils, Santhal, Andamanese,
Khasi, Garo, Angami, Munda, Marwari (Indian), indigenous peoples of Maori
(New Zealand) and indigenous people of Chinese.
Culture represents the totality of a society’s distinctive ideas, beliefs, values, and
knowledge (Serrat, 2017), behaviours and artefacts that can be learned and trans-
mitted between individuals (Creanza et al., 2017). Cultural studies on diverse
societies often concentrate on how a particular phenomenon relates to matters of
ideology, nationality, ethnicity, social class, and gender (Serrat, 2017). Schwartz
(2006) presents seven cultural dimensions—Harmony (unity with nature & world at
166 P. A. Igwe
peace); Embeddedness (social order, obedience and respect for tradition); Hierarchy
(authority & humble); Mastery (ambition & daring); Affective Autonomy (pleasure);
Intellectual Autonomy (Broadmindedness & curiosity); and Egalitarianism (social
justice & equality). Culture shapes entrepreneurial behaviours that are often exam-
ined against institutional practices and pedagogies. Schwartz (2006) goes on to link
cultural theory to the three problems that confront all societies including
embeddedness versus autonomy; hierarchy versus egalitarianism; and mastery ver-
sus harmony. In many indigenous communities, culture can be either a barrier to
entrepreneurship or an entrepreneurial motivator.
The UNDP (2004) report states that:
proponents of cultural determinism often label large parts of the world as simply “African”
or “Islamic”. But culture is not a homogeneous attribute. There are huge variations in
language, religion, literature, art and living styles within the same cultural “group”.
(UNDP, 2004, cited in Telleria, 2015, p. 258)
Schwartz (2006) provides examples of the cultural value orientations where egali-
tarianism and intellectual autonomy share the assumption that people can and should
take individual responsibility for their actions and make decisions based on their
understanding of situations. According to Schwartz (2006), embedded cultures
emphasize maintaining the status quo and restraining actions that might disrupt
in-group solidarity or the traditional order. He gives examples of the important
values in such cultures as social order, respect for tradition, security, obedience,
and wisdom. And high egalitarianism and intellectual autonomy usually appear
together, as in Western Europe, while embeddedness and hierarchy are both high
in the Southeast Asian cultures.
Within indigenous entrepreneurship literature, elements such as tribal life, ethnic
identity, tribal attitudes, ethnic behaviours have been used to measure and evaluate
the contributions of indigenous people to the field of entrepreneurship. Towards
these notions, cultural theory defines traditional and modernistic practices in differ-
ent regions (Light & Dana, 2013), the role and values of families and communities
(Van Gils et al., 2014). Indigenous behaviours are influenced by culture, social
norms and the rules which govern the conduct of economic activity and social
interactions (Scott, 2008). Bonding is integral in the context of community entre-
preneurship (Tubadji et al., 2014). Studies of entrepreneurial motivation tend to
emphasize the role of internal factors like self-regulatory or affective constructs, for
Cross-cultural Tribes, Community and Indigenous Entrepreneurship 167
In the indigenous setting, extended family members form clan and kindred. Oxford
dictionary definition of a clan is “a close-knit group of interrelated families”. In the
context of entrepreneurship, “clan entrepreneurship” could be defined as the creation
of business activities or extraction of value through a close-knit group of interrelated
and extended families who share similar entrepreneurial orientation, intentions, and
practices. Given the relatively recent turn to acknowledge the importance and roles
of families and communities in entrepreneurship development clan entrepreneurship
provide a platform for the future development of the field of indigenous management
practices. Kindred in the indigenous setting defines a group of people connected or
related through kinfolk, kin, tribe, or clan by birth, descent and sometimes by
168 P. A. Igwe
marriage. Kindred explores the dynamics and dilemmas of indigenous people from
the sensibility and legacy of cultural orientations in contemporary society.
Also, kindreds within indigenous communities often have similar religious
beliefs, norms, and values system that influence their entrepreneurial behaviour.
Some scholars examined kindred issues like elemental, apocalyptic and archetypal
about the events in the narrative (Crossley, 2004) and individualism-collectivism
cultural dimensions (Gorodnichenko & Roland, 2011). African indigenous cultures
highlight elements of communalism and collectivism where strong and able mem-
bers of society are required to help the less able members to develop economic,
social and entrepreneurship responsibility. In indigenous settings, families become a
critical factor in the development of entrepreneurship and management orientation.
For example, among the indigenous Igbos (Nigeria), the family is the most important
element in their entrepreneurial drive, risk-taking and motivation (see, e.g., Igwe
et al., 2018). Among Indian indigenous communities, “a closely-knit family rela-
tionship” provides greater labour resources and skills required for family enterprises
(Dutta, 1997). Also, family identity and relationships reinforced trust that is required
for business transactions (Dyer, 2012).
Fig. 1 Determinants of
indigenous
entrepreneurship. Source:
Author’s framework
170 P. A. Igwe
3 Methodology
The case study approach is the preferred method to enable the presentation and
analysis of different indigenous tribal groups. This is method is best suited to
generate an in-depth, multi-faceted understanding of a complex issue in its real-
life context (Crowe et al., 2011). This approach enabled the analysis of four
Indigenous tribes in Nigeria. Also, it enabled the analysis of the sub-set of Indige-
nous entrepreneurship including “clan entrepreneurship”, “kindred entrepreneur-
ship”, “tribal entrepreneurship”, “community entrepreneurship” and nomadic
entrepreneurship”. The objective is to provide foundational research from in-depth
multiple case studies of Indigenous tribes. This article uses reports of past studies to
explore and understand the similarities, differences, and commonalities between the
cases. Although case studies enable an investigation of cases thoroughly and deeply,
scholars can form a bias. Also, another weakness is the lack of primary data and
validation.
4 Case Studies
customs, and lifestyles. Igbo societies are patriarchal and the males dominate
authority, leadership, and political structures. Also, the family and extended family
system is the most important element of Igbo societies and economic activities are
usually based on family values, family capital or family participation. The Igbos
have been described as suffering an institutional disadvantage compared to other
Nigerian tribes (Igwe et al., 2018).
Igbo’s motive or drive for entrepreneurship, risk-taking, wealth-seeking and
learning process have indigenous and modern entrepreneurship elements. Igbos
have been described as “naturally enterprising and ingenious” and can be found
throughout Nigeria and West Africa” (Igwe et al., 2018, p. 34). For many decades,
Igbos in the South-eastern region of Nigeria has practised Indigenous entrepreneur-
ship system regarded as “stakeholder capitalism—a construct that businesses must
elevate the interests of communities, workers, consumers, and the environment
alongside those of shareholders” (Ekekwe, 2021, p. 1). Igbos practice individual
and communal entrepreneurship. They are individualist when opportunity-seeking,
profit-seeking and wealth-seeking. However, they are communal when building
financial capital, social capital, human capital, and community development (Igwe
et al., 2018, 2020). Also, family, kindred and clan are the important factors in Igbo
entrepreneurship.
To overcome the disadvantage, Igbos take to business as a means of survival and
wealth creation. An extended family system and an informal apprenticeship system
(Nwa-boyi system) often regarded as the “Igbo Business School” system provide a
safe environment for learning the business, starting the business, marketing, risk-
taking, creativity and innovation (Igwe et al., 2020). Igbos have historically been
migratory in habit trading outside their home regions and settling major cities in
Nigeria, West African countries and the diaspora (Madichie et al., 2008). They
dominate the private sector in West Africa, specializing in a wide range of businesses
including exports and imports, trading, transportation, automotive spare parts, the
movie industry (Nollywood), pharmaceuticals, hospitality, etc. (Igwe et al., 2018).
Like the Igbos, the Fulani tribe are migratory entrepreneurs. However, Fulani
migration is regarded as nomadic. The Fulani are the largest nomadic group in the
world and descend from both North Africa and sub-Saharan Africa (World Atlas,
2017). They were the first tribe in West Africa to convert to Islam and establish
themselves not only as a religious group but also as a political and economic force in
the West African region. The Fulani have therefore settled in the large plain areas of
Nigeria, Senegal, Mauritania, Mali, Upper Volta, Niger, Guinea, Burkina Faso, and
Chad and many other countries in Africa (Aderanti, 1998). The vast Fulani com-
munities in the Western and Northern African countries are mostly very poor
nomads, semi-nomads, and sedentary farmers (Marnham, 1979). The social system
172 P. A. Igwe
of Fulani culture is regulated by norms and value systems and males are heads of
households (Usman, 2010).
Also, unlike the Igbos and Yoruba, Fulani entrepreneurship focus on livestock
and trading. Fulani men and women are primarily nomadic herders and traders.
Through their pastoralists and nomadic lifestyle, they established numerous trade
routes in West Africa. They trade mainly in local markets and cattle is the most
important livelihood asset. The Fulani are less entrepreneurial wealth-seeking and
risk-taking compared with other Nigerian tribes. They hold to a strict caste system
that includes mobility, merchants, crafts, blacksmiths, and descendants of slaves of
wealthy Fulani. They produce and market locally handcrafted goods across North
and West Africa. The social organization of nomadic Fulbe is based on patrilineal
descent with gender stratification as the base of all social systems (Usman, 2010).
Nomadic Fulbe girls engage in street hawking and other informal economic activ-
ities (Usman, 2010). These attributes make the Fulani an interesting group to study.
4.3 Hausa
Hausa Indigenous people in the northern part of Nigeria are predominantly Muslims,
while a few are Christians. Hausa ethnic group is one of the largest and most popular
ethnic groups in West Africa (Nigeria, Niger, Chad, Ghana, Cameroon, Benin and
Mali). This ethnic group has about 24 million people in Nigeria and its traditions and
culture are homogenized and people share similar beliefs and customs (Tersoo,
2018). Their main religion is Islam. Hausas were listed as one of the global
middleman minority ethnic groups alongside such ethnic groups as the Jews of
Europe, the Parsees of India and the Chinese of East Asia (Dandago, 2015). Hausa
culture is replete with proverbs that negate the very essence of hardworking coupled
with the influence of religion (Islam)which the people misinterpret as encouraging
belief in destiny (Halliru, 2017). Since a majority of Hausas are Muslims, they do
nothing that the Holy Quran forbids such as eating pork and alcohol consumption.
The entrepreneurial culture of the Hausa people is fascinating. Hausa Indigenous
entrepreneurship involves production and labour activities relevant to their location
and natural resources. The main sector the Hausa indigenous entrepreneurs dominate
is agriculture and trade (Tersoo, 2018). Hausa people grow corn, millet, yams,
different vegetables, cotton and peanuts, and breed horses, goats, and cattle (Tersoo,
2018). The Men hunt and go fish, while women are mostly involved in pottery,
baskets, mats, knitting, among others (Tersoo, 2018). Also, Hausa entrepreneurs are
famous for their cloth weaving and dyeing, cotton goods, leather sandals, metal
locks, horse equipment and leather.
Leadership in the early Hausa states was based on ancestry and those who could
trace their relations back to Bayajidda were considered royal. Hausa traditional
marriage is mostly based on Islamic, and not expensive like the Igbo and Yoruba
traditional marriage ceremonies. Hausas like the Fulani are regarded to have less
entrepreneurial wealth-seeking and risk-taking ambition. Impliedly, entrepreneurs
Cross-cultural Tribes, Community and Indigenous Entrepreneurship 173
need not struggle nor worry about the competition from those who have developed
superior strategies to guarantee success (Halliru, 2017). Women's economic devel-
opment of the Hausa populace has remained at its lowest ebb, especially the Muslim
group (Sabiu, 2018). The society, norms, beliefs, traditions of the society are
believed to be significant in retarding the development and entrepreneurship pro-
gress of the Hausa people (Halliru, 2017). The underdevelopment has seriously
affected the progress and advancement of Hausa society and the whole of Nigeria
(Sabiu, 2018).
4.4 Yoruba
Yoruba group inhabits South-western Nigeria and other Africa countries of Benin,
Ghana and Togo. Yoruba are Christians or Muslims (Hunwick, 1992). Yoruba were
among the first ethnic groups in Africa to come into contact and trade with
Europeans (Dandago, 2015). Ibadan and Lagos are the two major Yoruba cities
and the largest city in the whole of Sub-Saharan Africa. Music and dance have
always been an important part of their culture and Yoruba celebrate major events
with colourful festivals such as Ayeye and the Eyo Olokun festival, celebrated by the
people of Lagos (Lawal et al., 2009). The social, political, and economic civilization
of the Yoruba nation started with the Oduduwa dynasty at Ile-Ife around 850 AD
(Fadamiro & Adedeji, 2016). Evidence points to a powerful Yoruba kingdom in the
eighth century in Ile-Ife (Ighobor, 2019). With the onset of the Atlantic slave trade,
Yoruba people from Nigeria and Benin were forcibly transported to America as
slaves.
Yoruba culture expanded across many borders to Trinidad, Cuba, Saint Lucia,
Benin, Togo, Brazil, Guyana, Haiti, Jamaica, to name a few (Ighobor, 2019). “By
being the last wave of mostly homogenous groupings of slaves to arrive in Salvador,
they would leave one of the most visible and lasting cultural imprints on the growing
Afro-Bahian community of Salvador, resulting in what Miguel Calmon called, “the
brutal metamorphosis of Mangolas (Bantus) into Nagôs (Yoruba)” (Alonso, 2014,
p. 33). The culture of a people has both geography and history as spatial and
temporal entities, respectively, and the domains of space and time are essential to
understanding the civilization of any group of people (Fadamiro & Adedeji, 2016).
Yoruba entrepreneurs are merchants, industrialists, traders or craftsmen
(Britannica, 2014). Cultural landscapes are the material evidence of the interaction
of the people with the environment, the repository of nature (Fadamiro & Adedeji,
2016). Yoruba traditional culture enables them to develop skills of craftsmen,
blacksmithing, weaving, leatherworking, glassmaking, and ivory and wood carving,
etc. Nowadays, many Yoruba entrepreneurs are popular in the banking sector,
media, aviation, manufacturing, medicine and technology. Like the Igbos, the
motive or drive for entrepreneurship, risk-taking, wealth-seeking and learning pro-
cess was similar to indigenous and modern entrepreneurship (Ayinde, 2015).
174 P. A. Igwe
5 Discussion
6 Conclusion
Indigenous people have motives or drives for entrepreneurship that develop through
indigenous cultures. Indigenous entrepreneurship is widely considered to be the
most critical factor in the economic growth and innovations among cultural societies,
minority groups and migrant groups. Igbos, Fulani, Hausa and Yoruba (four major
Nigerian ethnic groups) have been analyzed to develop further understanding of the
concept of indigenous entrepreneurship practices. This chapter makes several con-
tributions. First, it contributes to research on new concepts in indigenous entrepre-
neurship such as clan, kindred and nomadic entrepreneurship. Second, this article
supports the notion that indigenous entrepreneurship could be in response to disad-
vantage, towards overcoming institutional barriers or inherently family and commu-
nity entrepreneurial orientations. Third, the neglect of indigenous management and
business practices in the mainstream literature calls for more studies that integrate
indigenous perspectives to the knowledge of broader entrepreneurship.
Understanding the inherently entrepreneurial and the historic economic activity
of indigenous people could lead to the promotion of equality especially among
minority groups, poverty reduction and economic growth. Discriminations and
exclusions are high in many regions where indigenous people inhabit. They are
excluded from education, public services, political representations, and decision-
making authorities. Against the background of neglect or exclusion, indigenous
people take into entrepreneurship to develop economic power, social and commu-
nity development. These attributes make indigenous people located in many regions
unique. The case study approach provides detailed (rich qualitative) information
(McLeod, 2019). Although the case study lacks scientific rigour, this approach
provided an opportunity for examining tribal groups and cultures which are under-
reported in the entrepreneurship literature. As a result, there is a lack of a coherent
conceptual and analytical framework (Lam et al., 2019). Therefore, more studies are
needed to explore indigenous entrepreneurial behaviours and indigenous business
management practices.
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Dr. Paul Agu Igwe is a Senior Lecturer and Programme Coordinator for BA Business &
Enterprise Development at the Lincoln International Business School (LIBS), University of Lin-
coln, UK. He received his MSc and PhD in Business with Management from the University of
Plymouth. Dr. Igwe is a member of the UNESCO Project on Sustainable Foresight. He is a fellow of
the Chartered Institute of Management and Higher Education Academy. His research interest and
expertise include Entrepreneurship, Small Businesses development, Business Strategy & Interna-
tionalization, Organizational analysis and educational issues. Dr. Igwe has published in many
top-ranked ABS journals such as International Journal of Entrepreneurship & Innovation, Interna-
tional Journal of Entrepreneurial Behaviour Research, Studies in Higher Education, Politics &
Policy, Innovations in Education and Teaching International, etc. He is a member of the editorial
board of the International Journal of Public Sociology and Sociotherapy.
Sustainable Initiatives in International
Markets
Abstract This chapter makes a novel contribution analyzing the necessary actions
in education to generate professionals who can propose, implement and manage
sustainability initiatives in companies for global markets. Likewise, various exam-
ples of industries that have been implementing initiatives that contribute to sustain-
able development are presented; thus, the actions that are being developed in the
hospitality industry are presented, mentioning the research results and the examples
of the most important hotels in the world regarding their sustainability reports. The
initiatives in the supply chain management with a sustainable approach are also
presented, mentioning its link with industry 4.0. Likewise, the components of
sustainable transport were detailed, emphasizing sustainable ports and the use of
electricity-based transport as an energy source. Finally, the sustainable plastic
management strategies by some companies are mentioned.
1 Introduction
A. Alvarez-Risco (*)
Universidad de Lima, Lima, Peru
e-mail: [email protected]
S. Del-Aguila-Arcentales
Escuela Nacional de Marina Mercante “Almirante Miguel Grau”, Callao, Peru
specify how education should be in universities to forge professionals who are ‘born
sustainable’. In other words, have a sustainable approach from day one as
professionals.
The arrival of COVID-19 has increased the speed at which social changes are
occurring. Thus, it has been possible to show that cities are urged to improve their
living standards through the increasing use of technologies and digital resources,
with the specific objective of having sustainable growth (Palumbo et al., 2021). Even
though the interest of the rulers and even a certain group of citizens is to transition
towards sustainable business models, this great step requires prior conditions, both in
terms of infrastructure and the market. Likewise, there is a need for governance
focused on technology and that the citizen, on the ecological side, be the centre of
management activities. Measuring sustainability requires considering several factors
that are influencing government, consumers, businesses and society at large (Pizzi
et al., 2020). Thus, it will be possible to have a real approximation of the advance
that can be had in an integral way. Students in universities should be trained with this
multi-stakeholder vision and at the same time with an inclusive spirit.
2 Methodology
3 Results
companies can achieve important benefits and can contribute to a given social
environment.
It is from this training based on sustainability that sustainable global managers
can be achieved. On what should train in universities be based in order to have
professionals with a sustainable approach? Education for Sustainability aims to build
awareness and knowledge of sustainability issues but also to develop students and
universities that are able to think disruptive, innovate and provide solutions towards
more sustainable patterns of living around the world.
Education for global sustainability, one that can be applied to international markets,
initially requires equipping the actors of the university education system (students,
professors, university managers) with competencies, capacities and motivation to
generate educational development plans based on the global demands of the market,
considering the local reality and projecting it towards the world. This profound
change needs to rethink what is being needed in companies at a global level and
redesign the programs in their theoretical and practical components so that graduates
can fit in the business needs of companies. This redesign must be carried out
constantly due to the increasingly accelerated changes taking place in international
markets.
The current crisis has forced the markets to see great changes in a short time and that
companies have had to modify their operations to be able to satisfy a new market in
extreme conditions. This flexibility of constant learning and in a short time is an
element that should be part of undergraduate and graduate university training, which
not only provides content but also models professionals so that they know that more
than ever they must continue learning because changes will be every more drastic
and in a short time.
Learning must be planned to bring together diverse business content for global
business. Thus, health, economics, accounting, big data, finance, agriculture,
among others, should be developed. The exchange with other professors and uni-
versities will contribute to the international component in the training; it should be
noted that virtual exchanges have also started.
184 A. Alvarez-Risco and S. Del-Aguila-Arcentales
The sustainability approach starts from professional training in universities (Hay &
Eagle, 2020), in many cases placing greater attention on global business strategies to
generate business and contribute to tackling climate change simultaneously (Shields,
2019). Likewise, these efforts must be developed by companies, motivating pro-
cesses based on sustainability (Lorincová et al., 2019). Various efforts have been
reported from the hospitality sector as was reported by Filimonau and De Coteau
(2019) who reviewed the challenges in the classification, quantification and charac-
terization of food waste in the hospitality industry, analyzed the opportunities and
obstacles for its mitigation and based on examples of good commercial practices.
These sustainability initiatives were also reported by Wu et al. (2021) from
32 businesses located in Wales, UK. On the other hand, Filimonau et al. (2020b)
evidenced the good practices in food management in UK and Netherlands restau-
rants and although it is true that it is not yet massively implemented, it is a great
opportunity for companies to contribute with sustainable initiatives in global
markets.
These sustainable initiatives have also been reported by Sakshi et al. (2020) who
show the impact of environmental policy and training aspects in the hotels’ sustain-
ability practices, as well as the impact of these practices on their environmental and
financial performance. After the survey of 312 managers, it was found that the
hotels’ environmental policy and training aspects have a positive statistical influence
on sustainability practices. This data shows that more and more hotels are
implementing sustainability initiatives in their business models and strategies.
Another initiative that is growing is the hotel’s offer of small rooms that allow
optimizing waste management, making space more efficient and making a concrete
contribution to Sustainable Development Goals (SDGs). Thus, you can see the
report of Agyeiwaah (2020) that presents the results of small accommodation for
the sustainable management of waste and that at the same time can reduce accom-
modation costs and at the same time generate a reduction in maintenance costs for
the company.
Various hotels in the world are already using messages aimed at their consumers
to ensure that they make a complete consumption of the food that is served daily
since it is known that there are many foods that are prepared but not consumed. As
reported by Kallbekken and Sælen (2013), a sign can be placed on the tables of the
buffet breakfast at the hotel that allows guests to be warmly welcomed to serve more
portions so that they can contribute to serving more portions and thereby reduce they
heap up food. These same initiatives have been reported by Okumus et al. (2020).
This global proposal for the management of food waste in the hospitality industry is
also related to an increase in customer loyalty, as reported previously (Filimonau
et al., 2020a; Kim & Hall, 2020).
Sustainable Initiatives in International Markets 185
There are many dogmas in the hotel industry. These dogmas do not allow the
optimization of processes and should be eliminated soon in companies: ‘the buffet is
offered in hotels because there is no problem in food surcharges because that cost is
already included in the customer’s bill’. The implementation of this measure may
seem easy but international markets are becoming more demanding and these
sustainable initiatives need to be perfected to achieve the objective of waste man-
agement and at the same time ensure that consumers are able to be attracted and
increase their intention to pay for the proposal of sustainable hospitality (Yetkin
Özbük & Coşkun, 2020). The perspective of these sustainable initiatives for waste
management will be increasingly demanded globally after the COVID-19 crisis
(Filimonau, 2020).
Alvarez-Risco et al. (2020a) evaluated the most important hotel chains in the
world about the offer in relation to sustainability on the same website. Preferred
Hotels and Resorts, Hyatt Hotels and Hilton. However, there are other reports that
may also be interesting to review, such as the one developed by Marriot (2020)
which details the efforts to reduce carbon emissions by 30%, 50% food waste,
achieve 30% renewable electricity, 250 adaptive reuse projects, among others.
When the need to implement and develop sustainable initiatives arises, in the case of
supply chain management it has been possible to identify some possible mechanisms
(Cloutier et al., 2020):
a. Relationship management.
Mechanism: Networking and training.
Impact in sustainability: Voluntary projects and motivation.
b. Joint practices.
Mechanism: Synchronizing activities and joint delivery scheduling.
Impact in sustainability: Development of collaborative execution to reach
the goal.
c. Digital activities, generation and exchange of information.
Mechanism: Exchange of knowledge and information developed.
Impact in sustainability: Enabling communication and collaboration.
When talking about related processes, Industry 4.0 has to be considered, which
allows enhancing the industrial capability through digitally controlled manufactur-
ing and thus contributes to sustainability which shows that there is a strong link
between Industry 4.0 (Müller et al., 2018).
Successful supply chain experiences consider the coordination between the
government, private investment focused on sustainability and the preferences of
the companies that pay for the services (Zhang & Yousaf, 2020). A concrete
example is the ports of Amsterdam (2021), Italy and Croatia through of SUSPORT
programme (Italy-Croacia, 2021) and Antwerp (UN, 2021). These ports are essential
because they generate a global commercial influence so that the international market
186 A. Alvarez-Risco and S. Del-Aguila-Arcentales
moves towards sustainability since it is the only way in which products could pass
through these ports. It is important to note that tools and technologies are required, as
indicated Bjerkan and Seter (2019) to become a port in a sustainable: Management of
environment and energy, concession agreements focus on sustainability, modal split,
wind energy, solar energy, geothermal energy, electrification, biofuels, technologi-
cal shift: trucks and drayage and others who can be established between big
companies and the ports.
There are more sustainable initiatives that are shown in the international market such
as those that are framed in the control of plastic (Alvarez-Risco et al., 2020c).
In relation to companies, some efforts can be described as Unilever (2021),
Henkel (2021), Danone (2021), and Basf (2021). More and more industries are
incorporating initiatives focused on sustainability so that they can offer international
markets a product or service that allows them to be more efficient, generating less
pollution, positive social impact and higher profits. However, in order to evaluate
that companies can really implement plastic management, it is important to evaluate
what aspects are favouring and slowing down the change in purchasing, manufactur-
ing, distribution, storage and other processes.
In that sense, Dijkstra et al. (2020) described in a systematic review the main
facilitators for the development of competitive advantage. Another aspect that could
also be recognized as a facilitator was the differentiation of products and services
that provide strength for companies in order to achieve the implementation of plastic
handling. Consumers also play a major role in demanding the company to offer a
sustainable image based on its ecological management. It has also been possible to
identify that the reduction in costs that is produced by the use of waste from
production processes is a facilitator together with the alliance that companies can
establish with institutions focused on research that allow the generation of technol-
ogies that help sustainability. The barriers to the implementation of plastic manage-
ment are those that are linked to the high investment costs to acquire the necessary
technologies as well as the training that must be carried out for sophisticated
equipment, also taking into account the maintenance costs of said equipment;
Likewise, it is possible that the consumer does not take this management of plastic
as important or that these adjustments are not to the liking of consumers, with the
probability of certain bottlenecks due to the limited inputs and that finally the market
does not reward the investment of the company in this sustainable management.
One way in which barriers can be overcome is to gradually incorporate informa-
tion on sustainability into the products and services that the company offers and
evaluate the importance that customers give to such information so that some
approximation can be obtained about the return on investment Alvarez-Risco and
Del-Aguila-Arcentales (2021). What will be done; It should be noted that not all
consumers will be impacted by this sustainable offer, but in those who do, it is
necessary to know what additional aspect they would like to feel from the company’s
offer. Is it enough to say that they have environmental care policies? Will not it be
very abstract? Is it better to say that we are saving 20% of the water consumption in
the new containers or that we are collaborating with the planting of 1000 trees in a
community?
The value that customers in international markets place on sustainability is
evolving more and more and an example of this is what has been seen with the
arrival of COVID-19. This pandemic has had negative impacts on health workers
(Chen et al., 2020; Yañez et al., 2020; Zhang et al., 2020, 2021), people (Alvarez-
Risco et al., 2020d, 2020e, 2021a, 2021b, 2021c, 2021d, 2021e; Quispe-Cañari
et al., 2021) and companies (Apcho-Ccencho et al., 2021; Leiva-Martinez et al.,
2021; Yan et al., 2021).
In this scenario, the question arises: What do customers value most in times of
pandemic? What is the value that clients expect from multinationals?
In this sense, Bartolacci et al. (2020) have found that innovation and entrepre-
neurship, together with corporate social responsibility and green management, is an
expected management to achieve that more SMEs are obtained with a sustainable
business model. Sustainability will have a place in international markets to the extent
that it can capture the sensitivity of customers in new, increasingly changing
scenarios.
188 A. Alvarez-Risco and S. Del-Aguila-Arcentales
4 Conclusions
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Prof. Shyla Del-Aguila-Arcentales is a researcher in the Sustainability area. She is a candidate for
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Marcos and Pharmacist at Universidad Nacional de la Amazonia Peruana. She has experience in
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uses, and it is a solid academic networker.
Social Capital and the Morphogenesis
of Actors: Lessons from International Social
Entrepreneurs
E. Costales (*)
School of Business and Management, Royal Holloway University of London, Egham, UK
e-mail: [email protected]
A. Zeyen
School of Business and Management, Royal Holloway University of London, Egham, UK
Department of Psychology, Faculty of Humanities, University of Johannesburg, Johannesburg,
South Africa
e-mail: [email protected]
1 Introduction
1
https://www.ashoka.org/en-gb/ashoka-fellows
Social Capital and the Morphogenesis of Actors: Lessons from International. . . 195
In his seminal work, Gregory Dees (1998) identified the pursuit of social betterment
over profit as a distinguishing characteristic of the then nascent research field of
social entrepreneurship. While scholars still disagree about the finer elements of its
definition (Dacin et al., 2011; Short et al., 2009; Zeyen & Beckmann, 2019), they
agree on a core social mission and inherent hybridity as fundamental core features of
social entrepreneurship (Ebrahim et al., 2014).
The core social mission relates to the raison d’être of the entrepreneurial activity.
Social entrepreneurs wish to create positive social change (Dacin et al., 2010).
Therefore, social change is the objective of the endeavour rather than the means
(Zeyen et al., 2014). This is what distinguishes social entrepreneurship from com-
mercial entrepreneurship or corporate social responsibility (CSR). While both com-
mercial entrepreneurship and CSR can create social value for society, it is not the
reason for the organisation’s existence. If we take, for example, Jeff Bezoz and
196 E. Costales and A. Zeyen
In order to move beyond social value and affect social change, current research
postulates that social innovation is crucial as it introduces new players by creating
novel agential constellations. Social innovation’s fundamental principles involve:
(i) addressing needs neglected by the market or state, (ii) creating new institutional
relations and (iii) empowering people to transform existing structures (Moulaert
et al., 2013). The combination of these three principles enables the system-level
change necessary to sustainably fulfil the intentions of the social entrepreneur.
Enhancing understanding, cooperation and agential capacities are therefore key to
meeting these principles (Moulaert & MacCallum, 2019).
Within the social entrepreneurship field, Nicholls’ (2010) conceptualisation of the
social innovation model of social entrepreneurship integrates the social innovation
view firmly into the social entrepreneurship debate by contextualising the process of
social entrepreneurship in a three-tiered framework with social change as the
objective and social value creation as a necessary condition of this process. The
creation of an enterprise and its longevity is of lesser concern against the backdrop of
the social change objective. This model promotes the rationale that market failures
are best addressed through systems reconfigurations (e.g., Mulgan, 2012; Nicholls,
2010).
For the purpose of this book chapter, we understand social entrepreneurship as
conceptualised in the social innovation model of social entrepreneurship. Social
entrepreneurship understood as such allows for the emergence of social innovation
Social Capital and the Morphogenesis of Actors: Lessons from International. . . 197
Fig. 1 Overview of the Social Innovation model, the strata under inspection and the strata of
origination of social impacts
as both means and objective of social change. Indeed, social innovation as means
appears by promoting mutual understanding of actors and coalescing towards
mutually beneficial objectives (Moulaert & MacCallum, 2019). Yet, cooperation
per se is not a sufficient condition for creating social change. While it can spur
people into action and promote social value, social change requires institutional
change (Hietschold et al., 2019) and behavioural change of other (corporate) actors
(Schaltegger et al., 2016). Social innovation as objective emerges as a hybrid of
existing elements crossing sectoral boundaries, institutional (re)creation and novel
social relations between previously disparate and marginalised groups, which
empowers people to transform existing structures and sets the stage for further
innovation (Mulgan, 2007; Moulaert et al., 2013). Importantly, social entrepreneur-
ship requires agency at all three societal levels—individual (micro), enterprise
(meso) and societal (macro)—in order to create its objective of positive social
change. Figure 1 illustrates this interplay.
If we go back to the example of Muhammad Yunus and the Grameen Bank, we
can illustrate the potency of this way of understanding social entrepreneurship and
the underlying social entrepreneurial process. Yunus recognised that those who
could not afford collateral were disenfranchised by the traditional banking system
(Yunus et al., 2010). The underlying formal and informal rules of the banking system
inhibited what was considered high risk lending. Often the only option for the poor
in the Global South would be to lend from the so-called loan sharks at interest rates
that would often trap the individual in a vicious cycle of debt accumulation. Initially,
Yunus used his own money to micro-lend to a small number of individuals. This
experience combined with his expertise as an economics professor led to his
realisation that entrepreneurial behaviour was not a rare quality (see Yunus et al.,
198 E. Costales and A. Zeyen
This subchapter will introduce Morphogenesis and social capital as our two main
lenses for gaining insights into how international social entrepreneurs deal with their
lack of local embeddedness. In a first step, we will introduce morphogenesis and will
then turn our attention to social capital.
2
Grameen Bank’s March 2021 monthly report (issued April 06, 2021) reveals 93% of cumulative
lifetime dispersals have been repaid: https://grameenbank.org/data-and-report/monthly-report-
2021-03-issue-495-in-usd/
Social Capital and the Morphogenesis of Actors: Lessons from International. . . 199
3
In addition to agents, actors are introduced as (i) individual persons filling their given roles and
(ii) persons with both a personal and social self.
200 E. Costales and A. Zeyen
At any given point in time, a primary agent in one domain can be a corporate
agent in another domain. For example, ‘the poor’ represents a collectivity structured
by the capitalist system. However, within this collectivity sits multiple collectivities
(e.g., unemployed, underpaid, disabled) which are each confronted with some form
of barriers (such as racism, ageism, sexism) that leads them to be more concerned
with their differences than their similarities. As a consequence, ‘the poor’ engage in
decision-making processes to pursue their desires through special interest groups
that address single issues rather than systematic and pluralistic vested interests of
‘the poor’ as a whole. In these instances, multiple corporate agents emerge in
particular domains (e.g., trade union movement), while ‘the poor’ remain as primary
agent. For the social entrepreneur, social innovation as objective cannot be obtained
as a primary agent. Indeed, it requires them to move beyond inhabiting a context to
shaping the context for all actors.
The dynamic nature of complex systems allows for the acquisition of new vested
interests in accordance with novel social situations actors may occupy, as a conse-
quence of role elaboration. Social entrepreneurs endeavour to articulate deficiencies
in extant solutions in the social dimension and articulate the extent to which
cooperation can ameliorate these deficiencies and move towards corporate agent
status.
For the purpose of this chapter, a morphogenetic perspective on social entrepre-
neurship allows us to better understand the role of inter-person and intra- and inter-
collectivity relationships and their crucial role in setting the context for the move
from primary to corporate agent. Going back to our definition of international social
entrepreneurs: morphogenesis helps facilitate a better understanding of how and why
actors develop vested interest in new contexts and engage in changing the rules of
the game.
Social capital is paradoxical in that it does not belong to a single individual, yet it
is individuals who leverage and benefit from social capital (e.g., Waldstrøm &
Svendsen, 2008). Differentiating between cognitive, relational and structural social
capital enables us to examine why the outcomes of social capital accumulation are
seldom unitary. Cognitive social capital refers to perceptual tools and communica-
tive actions (e.g., Lee, 2009). It illustrates an individual’s adoption of shared
narratives and systems of codification. Relational social capital represents trust,
reciprocity and expectations (Zheng, 2010), while structural social capital refers to
personal or impersonal network ties (Nahapiet & Ghoshal, 1998). The beneficial
outcomes associated with these dimensions are determined by the extent to which
they ameliorate inefficiencies and access to resources (Coleman, 1988; Lee et al.,
2019). As such, the dimensions of social capital need to be examined in their
interdependency with one another, and the relationship between social and addi-
tional forms of capital (for overview see Table 1).
Fundamental to understanding the role of capital in all of its forms is their
characteristic of mutual metamorphosis. That is, varying forms of capital metamor-
phose into one another (see Putnam et al., 2004). As a fuel of agency, the metamor-
phic process of capital is critical to conceptualising its role in the emergence of
agency. For example, person A wants good x and metamorphoses their human
capital into financial capital through their labour and purchases x. As a consequence
of the metamorphic process, social and cultural capital represent the building blocks
upon which agency is realised and informs the ways in which further capital is
accumulated. Notwithstanding their intangibility, social and cultural capital have
substantial implications for how resources are allocated and why decisions are made.
In fact, the metamorphic process requires an initial stock of capital with which to
initiate the process (Light, 2004).
202 E. Costales and A. Zeyen
Cultural capital (in our use) refers to the socioeconomic and cultural identities one
is a part of. Individuals are born into both but can only ‘easily’ change one:
socioeconomic identity (cf. Lin, 1999). Cultural capital draws from a unique inter-
generational archive that is itself the result of past structure–agency interactions,
which influences agency (cf. Wekker, 2016) and shapes the mental models and
bounded reality within which decisions are made (Light & Dana, 2013). For
example, as it pertains to the cultural identity, we might expect those individuals
whose culture promotes a certain type of economic activity to undertake those
activities (see Light & Dana, 2013). In regard to the socio-economic status, Putnam
et al. (2004) note that an individual’s cultural capital often reflects the affluence one
is born into. For example, they use the concept of knowing how to dress for success
and the sartorial knowledge associated with it to a higher socio-economic status.
In sum, both morphogenesis and social capital theory highlight the importance of
social embeddedness and understanding the institutional setting for successfully
identifying and implementing a viable and effective solution to a societal challenge.
4
Please note that these case studies are only supposed to be illustrative of our conceptual argument.
It is not our intention to use them for purposes of induction or abduction. To protect the identity and
to keep confidentiality, we anonymised our case studies.
Social Capital and the Morphogenesis of Actors: Lessons from International. . . 203
other hand—and as we understand it for the purpose of this book chapter—it refers
to immigrants conducting social entrepreneurship in a country that is not their
country of origin. To be clear, this does not refer to social entrepreneurs who
might have started their venture in their home country and are now expanding to
another country, but to individuals who moved to a new country of residence and
then decide to start a social venture in that country. Our two theoretical lenses allow
us to carve out the challenges that these international social entrepreneurs face.
The initial endowment of cultural capital can be a reflection of the collectivities
one is a part of. For example, we might expect an individual from an Eastern culture
to have a stronger stock of social capital than one from a Western culture as a
consequence of the relatedness within Eastern culture (Snitker, 2010). Similarly, we
might expect the ‘quality’ of social capital to be higher for those born into a higher
socio-economic status as they are likely more connected to other individuals with
influence or decision-making power. While this cultural capital endowment might
increase over time for international social entrepreneurs, we conjecture that it is
nonetheless low.
The social embeddedness of social entrepreneurs requires that they leverage the
transmutative properties of different forms of capital in innovative ways. Often,
entrepreneurial behaviour begins in areas where social entrepreneurs have knowl-
edge of the existing institutional framework, a higher stock of social capital or lower
uncertainty in regard to resource acquisition (e.g., Dahl & Sorenson, 2012). For
international social entrepreneurs, we would expect an absence of this knowledge
and greater uncertainty. The relational and cognitive dimensions of social capital
enable social entrepreneurs to penetrate the institutional framework of a new setting
by familiarising themselves with the collectivities they aim to engage with, and the
deficiencies facing these collectivities. For example, investing in relational and
cognitive social capital may reveal that individuals with autism spectrum disorder
(ASD) are uniquely competent at processing numbers, yet the current system does
not actively promote employment of individuals with ASD. A social entrepreneur
may then provide an opportunity for employing people with autism for work heavily
reliant on number processing.5
If we combine the insights from both Morphogenesis and social capital, we can
see that social entrepreneurship is an innovative translation of the ideational over-
sights which lead to marginalised collectivities, by making issues palatable within
existing structures. As a consequence of the translation process, social entrepreneurs
invest in local knowledge which affects their ability to enhance the capacity of the
collectivities they are involved with (cf. North, 1993; Archer, 1995). Social
innovation enables social entrepreneurs to overcome the counter intuitiveness of
positive-sum potential within social interactions (Beschorner & Kolmar, 2016) by
accumulating and operationalising social capital. Indeed, social capital is a vital
resource that facilitates access to additional material and non-material resources by
affecting actors’ perceived quality of life and ability to act (Coleman, 1988). The
5
See the case of Spcialisterne for more information.
204 E. Costales and A. Zeyen
* Deficiency
Perception
Social
Entrepreneur Relational Social
Immune Capital
Deviant Behaviour Accumulation
Response
Structural Social
Navigating Existing
Capital
Institutions
Accumulation
Social entrepreneurs act in response to a perceived deficiency in the system and thus
deficiency perception sits at the top of the cycle. Following morphogenetic theory,
we assume that at that point it might not yet be feasible to fully articulate this
deficiency. Thus, the social entrepreneur may (unknowingly) adhere to the rules that
give rise to the deficiency in question. We call this the rule-following behaviour
stage (see Fig. 2 for visualisation). For example, a social entrepreneur who wishes to
address problems caused by inequalities will, for the time being, adhere to the rules
that caused it in the first place. In following these rules, relational social capital
(sc) begins to build. That is, obligation and expectations are formed.
As relational sc develops, questioning and navigating the existing institutions
begins. Coleman (1988) notes that social capital is significant in an individual’s
Social Capital and the Morphogenesis of Actors: Lessons from International. . . 205
6
Immune responses occur at all levels and at various stages of the social entrepreneurial process.
206 E. Costales and A. Zeyen
and an enterprise begins trading. The tangibility of this leveraging can be seen in the
development of business acumen (e.g., adoption of business language).
If we now consider a social entrepreneur who was not born in the country they
start their venture in, we can see how their process could be impacted at this stage.
Internationals will enter the social entrepreneurial process with a far lower level of
social capital than their local counterparts. While we assume a general low level of
social capital for international social entrepreneurs at the start of their journey,
differentiating between the three types of social capital is crucial as they impact
the social entrepreneurial process in different ways. Structural sc—i.e., personal and
impersonal networks—is lower due to lack of opportunity to build up these networks
during school, university, vocational training and family and friend interactions. Not
having the access to the same networks as locals will likely increase time and energy
spent by the individual social entrepreneur and will make it harder to navigate
existing institutions. Low levels of cognitive sc will impede their ability to engage
in certain types of deviant behaviour. Constructive deviance often necessitates a
grasp of existing narratives in order to circumvent or reshape them. Therefore, low
levels of cognitive social capital can lead to ineffective deviant behaviour. It could
also lead to a misinterpretation of immune responses as certain narrative models are
not understood. While negative feedback loops as argued above would usually lead
to changes in approaches, we argue that this feedback loop mechanism is somewhat
distorted for international social entrepreneurs. Low relational sc is likely to increase
time and energy spent on building trust and to decode expectations.
To illustrate, we use the example of Anna, a Dutch-American social entrepreneur
operating in Amsterdam, who talks about her lack of social capital and the struggles
she faces
I’ve been trying to get to know the impact community here, because what I found is I was
really starting from scratch and in [my hometown in the USA], having graduated from [the
local university], I already had a pretty thick network within [my home town in the USA]
with start-ups, and it was pretty easy to find work and jobs. Because once you’re in a startup
hub, for example, people get to know you and then your resume gets sent out and that’s sort
of it [. . .] I got involved with the impact hub hoping to get to know about more resources.
The frustration that Anna describes reflects her struggle with comparing a situa-
tion in which she had a good level of endowment of social capital and the situation
she faced in Amsterdam as someone who had just moved there from the USA. When
Anna initially arrived in the Netherlands, she spent a year “getting used to the
Netherlands”. She realised that she would not be able to just start a social venture
but had to learn how the business system in the Netherlands worked. This clearly
highlights how Anna tried to build up cognitive social capital. She started working in
cafes and other places to further develop her understanding of the Netherlands and to
start building relational social capital. Anna’s example shows how much time it took
her to accumulate a base—albeit still lower—level of social capital before she could
progress further in her social entrepreneurial process. These activities needed to take
place prior to the ideation stage.
Anna’s case also highlights the granularity of cognitive social capital and the
consequent (in)ability to engage effectively with feedback loops. Anna is Dutch by
Social Capital and the Morphogenesis of Actors: Lessons from International. . . 207
* Cognitive
Social Capital
Leveraging
Relational Social
Institutional
Capital
Change
accumulation
Structural Social
Permeable
Capital
Closure
Accumulation
Social
Enterprise
Rule-setting Deviating Rule- Immune
behavior (initial following
buy in behaviour Response
Immune Response
citizenship but was raised outside the Netherlands. As a consequence, while she
speaks Dutch, she is not familiar with certain more colloquial expressions which
sometimes lead to misunderstandings. Similarly, she is unfamiliar with certain
nuances in day-to-day interactions. These seemingly little things will restrict her
ability to leverage cognitive social capital as certain feedback loop nudges would not
be recognised or be misinterpreted by her.
At the enterprise level, shown in Fig. 3, the first point of operationalisation builds off
of the leveraging of cognitive sc. The business acumen developed encourages further
development of relational sc as it increases trusts by others and allows the social
entrepreneur to better understand obligations and expectations.
When the enterprise’s values are identified, the social entrepreneur accumulates
further structural sc as their values resonate with others (Nahapiet & Ghoshal, 1998).
208 E. Costales and A. Zeyen
Interestingly, Laura herself puts down her challenges to not speaking Dutch.
While we concede that this is in fact a problem, we would suggest that it merely
exacerbates the underlying challenge. We would argue that even if Laura were to
speak Dutch or had more board members that are Dutch speaking, she would still
face similar challenges. As Anna’s case highlighted merely speaking the language is
not sufficient. So rather than having more Dutch-speaking individuals within the
enterprise, Laura would probably be better advised in having more people born and
raised in the Netherlands on her board that could help the organisation navigate
given structures and mental models.
Laura’s social enterprise openly engages in political discussions that address the
root of the social enterprise’s social mission. Due to this political nature, it is
important for the organisation to permeably close. They intend to do so by engaging
people from various backgrounds to acquire relevant expertise. However, for her
social enterprise this is proving challenging as she herself reflects that many mem-
bers are from a privileged background. We conjecture that diversifying her organi-
sation will be made even more difficult due to her status as an international social
entrepreneur. She is surrounded by other foreigners and therefore less likely to have
access to people with other socioeconomic backgrounds. Moreover, her approach to
ensure permeable closure is based on her grasp of cognitive social capital, which in
turn is based more strongly on a German than a Dutch context.
As actors’ roles begin to elaborate and deficiencies of the status quo and potential
remedies are increasingly articulated, we would expect to see an initial buy-in to the
rule-setting behaviour of the social enterprise. In Laura’s case, if methodical self-
reflection and deconstruction of one’s own position in society is repeatedly under-
taken, it can be expected that such behaviour would be adopted in facets of actors’
lives that extend beyond the boundaries of the enterprise. The increased adoption of
the win-win articulation and innovative deviance enables the solidification of per-
meable closure. Indeed, closure is necessary to monitor and guide behaviour and
facilitate external articulation that extends the enterprise’s reach and influence and
promoting institutional change.
210 E. Costales and A. Zeyen
* Diffusion of
Institutional
Change
Social
Innovation
Higher stock of
Immune Human Capital Mitigated Immune
Response within a Response
collectivity
Adoption of Rule
Immune Response
point adoption of rule begins. The features of system change necessitate a shift in the
perception of those who act upon these perceptions. Thus, adoption of a new rule
begins small and slow and is a consequence of the new rule’s interaction with the
existing institutional frame that comprises an individual’s context (cf. North, 1993).
This process will arguably be more challenging for international social entrepre-
neurs. They might find it more difficult to initiate rule changes that fit within the local
context and would therefore enable others to start following it. Here, arguments are
similar to those already expressed at the individual and organisational level and are
linked to all three types of social capital.
At the same time, being situated more on the outside of a given system might
enable an international social entrepreneur to better recognise voids in the institu-
tional framework that can be exploited to create social change. Thus, the lack of local
social capital can be advantageous under certain conditions. To illustrate, we use the
example of Walter, an Irish social entrepreneur operating in Amsterdam.
Walter experiences significant challenges in creating change at the system level
due to his lack of social embeddedness:
It’s very hard for us to survive here. There’s actually not a culture here for buying food
ingredients and cooking it, and that was something I never thought about before. I never
prepared for. And so it’s actually quite difficult to convince people here as to why we’re
doing what we’re doing.
Walter expresses his frustration about the challenges in creating “mental shifts” as
his organisation’s approach requires completely different behaviours by customers
to what they are used to. As such, Walter and his social enterprise need to translate
their mission and its relevance to the system (that is the Netherlands) in a way that is
easily understood in given narratives. However, as a foreigner himself, this is less
feasible due to a lack of relevant cognitive social capital.
Walter responded to this negative feedback loop by moving to accumulate
relational and structural social capital concurrently, by collaborating with local
artisanal producers that share his values. In doing so, he builds his network while
also building the trust of that network. By working with local Dutch partners, Walter
aims to overcome his low endowment of social capital by tapping into the social
capital of others. While it might be harder for him to build up relational social capital
and in particular trust, he can use the relational social capital that local producers and
partners already possess. Analogously, by combing forces with locals who share his
vision, he can acquire cognitive social capital for himself while at the same time
utilising that of others.
Relational sc accumulation emerges, not just for Walter and his business, but also
for the wider community.
A lot of customers started to feel very sorry for us. They’d be looking at me and they’d be
saying, ‘this guy works really hard and he’s doing something that we all believe in.’ So I
would be providing kind of service to these people to help them change their lives. And so
they very much appreciate what we’re doing. And over the course of the last six months,
we’ve had an army of volunteers coming in and say to us, how can we help you guys? What
can we do? They see that we’re actually serving the community and doing something that
satisfies a need in them.
212 E. Costales and A. Zeyen
In Walter’s case, as adoption of the new rule gains traction, human capital
accumulates in previously uninvolved collectivities as more members of the com-
munity engage. Indeed, human capital is created by the changes within actors that
increase their ability to act in new ways (Coleman, 1988). As the stock of human
capital increases, so do the roles actors take on and their ability to mobilise additional
actors within their collectivity. A feedback loop emerges at this juncture from an
immune response arising in the way human capital is synthesised and promulgated.
Taking Walter’s case as example, in the instance that the win-win environment
potential of his venture idea is not accurately distilled among a new collectivity, it
may serve to alienate the collectivity in question. In such an instance, the resultant
feedback loop allows the enterprise and its actors to reimagine and articulate their
message more accessibly.
At such a time that the social enterprise’s remit becomes accessible (i.e., Walter’s
vision and rule-setting are disseminated), we can expect incremental progressive
system change to result from an increased shift in mental models and the beginning
of a new cycle, leading to further diffusion of system change. This system-level
diffusion and adoption is what makes the social enterprise (and by extension the
social entrepreneur) a corporate agent. A social enterprise remains in the primary
agent category if their remit and message is not adequately diffused through and
adopted by the system. Morphogenesis holds that primary or corporate agent status
is perpetually fluctuating as a consequence of the dynamic nature of complex
systems. Figure 5 illustrates the interactions between the social entrepreneur, enter-
prise and innovation cycles.
5 Discussion
Social
Entrepreneur
Immune Relational Social
Deviant Behaviour Capital Accumulation
Response
Encourage
Immune Expansion of Immune
Permeable
Social Capital and the Morphogenesis of Actors: Lessons from International. . .
Immune
Response
Immune Response
Anna, Laura and Walter demonstrate decisions to accumulate social capital for
ameliorating this othering.
In contrast to effectual logics, causal logics adopt a point of departure whereby one
views a predictable and subsequently controllable future (Sarasvathy, 2001). That is,
a causal process involves operating with a desired effect and choosing means to
achieve it. Going back to our cooking example, causation is picking a certain dish to
cook and then going to the shops to get ingredients. Additionally, causation involves
developing new means to meet these selected ends. Traditional economic theories
suggest that decisions involve a given goal, knowability of the results of a decision,
and knowability of means emerging from the results of previous decisions. The
extreme uncertainty of engaging in international social entrepreneurship presents a
significant barrier to the causal process. Similarly, while international social entre-
preneurs would be able to identify an end they wish to achieve, they might struggle
to identify the most effective means due to the challenges linked to low social capital
endowment as outlined in our Social-Capital-Morphogenic model of social
entrepreneurship.
Despite the perception of a wider deficiency, we see that the contextual conditions
of the new institutional framework within which our international social entrepre-
neurs find themselves requires a re-examination of the deficiency in question.
Indeed, knowledge of the environment is antecedent to predictability. The mission
of the international social entrepreneur necessitates a holistic understanding of the
system and thus understanding may become an objective. Cognitive social capital
allows for this holistic understanding by elucidating the meanings of language in a
given context—it highlights how the social entrepreneur can articulate the deficien-
cies they perceive in relation to the insufficiency of the current solutions. Relational
social capital promotes this understanding by creating a conduit of legitimacy
between the social entrepreneur and their stakeholders. That is, there is cohesion
between the social entrepreneur’s rhetoric and action. Structural social capital
represents the extent to which the social innovation diffuses through the system.
That is, structural social capital enables predictability through widespread involve-
ment and subsequent understanding of the behaviour in the new environment.
Feedback loops emerge at multiple stages within the social entrepreneurial process
in response to the behaviour of the social entrepreneur and the enterprise. Each cycle
is initiated through an effectual process. That is, entrepreneurs make decisions based
on available means with an eye towards acceptable risk rather than know ability of
216 E. Costales and A. Zeyen
the future. Central to the effectual logics is the emphasis on achieving the goal rather
than avoiding failure.
The initial othering of international social entrepreneurs leads them to engage in
the accumulation of different types of social capital, particularly relational and
cognitive social capital. Investment in social capital sits well within the threshold
of risk acceptability as a consequence of social capital’s accessibility relative to the
learning potential of deep agential interaction. That is, the time investment in
interaction is worth the mapping of the institutional environment that these interac-
tions provide. As a consequence of these interactions, the means and tools of the
international social entrepreneur expand.
The implications for deviance and rule-setting behaviour are that the feedback
loop cycle introduces a portfolio of disconnection between the social entrepreneur
and the system that the international social entrepreneur is able to learn from. This
portfolio enables relative predictability because it encompasses lived experiences
and accumulated knowledge which a (partial) causation process is adept at leverag-
ing. That is, as the international social entrepreneur continues this stumble-and-learn
cycle, we would expect a level of pattern recognition which serves to better exploit
contingencies as they arise. This is not to be confused with predicting; however, it
enables the international social entrepreneur to distinguish between natural phenom-
ena and human agential phenomena.
The distinction between what is made by nature and what is human-made within a
system is critical to invoke system change. In order for international social entre-
preneurs to fulfil their overarching aim of social change, they need to first be able to
articulate and organise towards deficiencies within the dominant structure. If this is
achieved, international social entrepreneurship can then represent an effective trans-
lation of deficiencies into narratives around which organisation is possible. In order
to engage in rule-setting behaviour, the international social entrepreneur needs to
engender an environment of trust in their actions and reciprocity amongst the
communities they endeavour to create. For the international social entrepreneur,
social capital provides the resources to do this.
6 Concluding Remarks
We set out to introduce a framework for examining the social entrepreneurial process
of social entrepreneurs and apply it to individuals who were not born in the country
they start their ventures in. We find that the initial paucity of social capital has
significant implications for how international social entrepreneurship is undertaken.
By infusing social capital and morphogenetic theories with the social innovation
model of social entrepreneurship, our framework highlights how the social entre-
preneurial process is affected as each type of social capital is accumulated. In a new
environment, the given means of international social entrepreneurs to pursue their
general vision are ideas and articulation. The accessibility of social capital comple-
ments these means and is crucial to their social entrepreneurial mission.
Social Capital and the Morphogenesis of Actors: Lessons from International. . . 217
Our model (Fig. 5) suggests that the role of social capital in the international
process is ordered between the three dimensions. That is, the relational and cognitive
social capital seem to be primary in that they present a conduit of access for mapping
the new environment, which enables the social entrepreneur to engage in quality
bridge building. Structural social capital emerges in two ways: (i) surface structural
social capital, which refers to the introductory stage (this can occur by simply joining
a meet-up group and involves ‘knowing’ who is in the network) and can precede
relational and cognitive social capital, (ii) deep structural social capital, which refers
to the diffusion throughout a network as a direct consequence of the quality of
interaction (this requires trust and similar ideational resources and leads to knowl-
edge about the system) and cannot precede the relational and cognitive dimensions.
Insofar as international social entrepreneurs adopt a patchwork quilt approach,
effectual logics push international social entrepreneurs towards accumulating rela-
tional and cognitive social capital to create opportunity for social change. Relational
and cognitive social capital enables ideational navigation of the international social
entrepreneur’s new landscape, while structural social capital enables a physical
navigation of the new landscape. That is, relational and cognitive social capital
offer endogenous resources for the international social entrepreneur, while structural
social capital is an exogenous resource—both of which are necessary for rule-setting
behaviour and altering the system.
As a consequence, our model has implications for teaching, policy-making and
future research. It calls for greater emphasis on complexity and the systems level in
social entrepreneurship education. Particularly, we suggest an emphasis on teaching
an ambivalence perspective of social entrepreneurship (see Zeyen & Beckmann,
2018) to equip students with the necessary knowledge and skills to recognise the
contextual complexities of social change. The ambivalence view on social entrepre-
neurship postulates that most means used and ends addressed in the social entrepre-
neurial process are ambivalent, i.e., can be both ‘good’ and ‘bad’. In the context of
international social entrepreneurship, this view can help students understand the
ambivalent nature of social capital endowment (or lack thereof) as well as lead to
fruitful discussions about the potency (or lack thereof) of international social entre-
preneurship in comparison with domestic social entrepreneurship. Our model further
allows students to analyse in more depth the activities of social entrepreneurs within
a given system and to thus evaluate their ability to create system change.
From a policy-making perspective, our framework suggests that interventions
should focus on agent-based models (See Paarlberg & Bielefeld, 2009) and enhance
communication between social entrepreneurs and their stakeholders.7 Such inter-
ventions could manifest through liminal municipal partnerships with a social ven-
ture. For example, offering short-term use of public spaces for an empowerment
7
We refer here to a Luhmann theory of communication which sees communication as the interpre-
tation of and distinction between information and the method by which the information is conveyed,
whereby meaning of the communication is determined by the receiver (see Leyesdorff 1996 for a
brief overview of Luhmann’s theory of communication).
218 E. Costales and A. Zeyen
workshop or social venture expo may serve to kick-start the process of social capital
accumulation and familiarisation with the environment. Existing literature (e.g.,
Pellegrini et al., 2019) demonstrates the value of multiple interactions for dissemi-
nating and recombining knowledge. Indeed, there are significant second order
impacts of knowledge sharing when networks are expansive, which encourages a
morphogenetic elaboration of knowledge within and between actors. As we have
shown, this could be particularly beneficial for international social entrepreneurs.
Further, interventions which bring local and international change makers together
hold the potential of developing endogenous and exogenous resources for the actors
involved.
Our Social-Capital-Morphogenetic model centres around the synthesis of mor-
phogenetic theory, social capital theory and a social innovation model
conceptualisation of social entrepreneurship. Throughout our conceptualisation,
we used illustrative cases that are based on somewhat homogeneous cases of
international social entrepreneurs in the Netherlands. Future research should empir-
ically validate the relations within our model. Particularly, further research would
benefit from building on our conceptualisation to incorporate how domestic social
entrepreneurs accumulate social capital to provide a within data comparison. Such
comparison may serve to further highlight the impact of each dimension of social
capital in the social entrepreneurial process. Moreover, future research could gener-
ate further insights into the relationship between different types of social capital
(endowment) within both domestic and international social entrepreneurship. Sim-
ilarly, quantitative analysis could be introduced which endeavours to better under-
stand and potentially quantify what we have called ‘immune response’ as a function
of a place’s propensity of (social) entrepreneurship (see the Global Entrepreneurship
Index8).
In conclusion, our model provides insights on the (international) social entrepre-
neurial process in at least three ways: firstly, our model serves to introduce social
innovation as both a means and objective within a multi-tiered process. In so doing,
we delineate the morphogenetic implications of social entrepreneurial behaviour.
Indeed, by incorporating morphogenetic theory we illustrate how social entrepre-
neurship develops and is developed by interactions between and among various
actors. Secondly, our framework demonstrates the role of feedback loops and their
relation with causal and effectual logics. Thirdly, we draw attention to the role of
endogenous (e.g., initial stock of social capital) and exogenous (e.g., accumulated
portfolio of local knowledge) contextual factors on the social entrepreneurial
process.
8
https://thegedi.org/global-entrepreneurship-and-development-index/
Social Capital and the Morphogenesis of Actors: Lessons from International. . . 219
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222 E. Costales and A. Zeyen
Emilio Costales is a PhD researcher at the School of Business and Management at Royal
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advocate.
Determinants of the Internationalisation
Process of Colombian Firms
1 Introduction
V. Pertuz
Universidad Nacional Abierta y a Distancia, Escuela de Ciencias Básicas, Tecnología e
Ingeniería, Grupo de Investigación Gestindustriales EOCA, Atlántico, Colombia
e-mail: [email protected]
L. F. Miranda (*)
Innovscience Research Group—IVS, Santa Marta, Colombia
e-mail: [email protected]
A. Charris-Fontanilla · J. V. Escobar
Instituto Nacional de Formación Técnica Profesional Humberto Velásquez García, Ciénaga,
Colombia
set up as a business growth strategy (Ciravegna et al., 2018; Denicolai et al., 2021;
Pinho et al., 2018; Rahman et al., 2020) and an indispensable condition for business
survival (Olmos, 2011). Indeed, many countries promote business
internationalisation processes of the firms (Pinho et al., 2018).
Internalisation is conceived as a gradual process that generates dynamics of
change into the organisations (Pawęta & Zbierowski, 2015). This process also
involves a number of difficulties (Li, 2019), complex interactions (Ciravegna
et al., 2018), uncertainty, and risks associated with validating a value proposition
in international markets (Orero-Blat et al., 2020) characterised by a high heteroge-
neity and complexity (Hilmersson & Johanson, 2020).
Academic interest in the internationalisation process of firms began in the late
1960s (Brandão et al., 2019; Pawęta & Zbierowski, 2015). As a result of the global
financial crisis of 2008 and 2009, researchers are interested in analysing
internationalisation processes in emerging economies (Chen et al., 2016). However,
empirical evidence of internationalisation processes in Latin America is scarce
(Chen et al., 2016), despite the fact that firms in Latin American countries began
to internationalise as of the 1970s (Chen et al., 2016).
Each firm’s internationalisation decision is driven by an underlying reason,
dependent on the company’s context (Ahsan et al., 2020). Furthermore, the interna-
tional expansion of a firm is affected by the internationalisation strategies of other
companies in the same sector (Song & Lee, 2020). Indeed, the degree, diversification
and speed of internationalisation stem from motivations from the organisation’s
environment (Song & Lee, 2020). Thus, companies increase the speed of
internationalisation if they perceive competitors to speed up the process (Song &
Lee, 2020). Additionally, foreign competition has a positive effect on the rate of
internationalisation of companies (Chen et al., 2020).
In this sense, increasing competition and the lack of opportunities in national
markets make companies identify market opportunities abroad (Pinho et al., 2018).
Similarly, severe competition, market saturation and market regulations drive com-
panies to look for opportunities to internationalise (Song & Lee, 2020). In addition,
internationalisation is conceived as a strategy to differentiate itself from competitors
(Hsieh et al., 2019) or to prevent competitors from gaining a dominant position in the
market (Ciravegna et al., 2018).
Literature also recognises innovation as an element generating competitive
advantages (Arredondo Trapero et al., 2016; Kato-Vidal, 2019; Pamplona &
Penha, 2019; Pino Soto, 2018; Pulgarin-Molina et al., 2017). Innovation, understood
as a process involving a broad set of factors with complex interrelationships
(Speldekamp et al., 2020), has become a need for organisations to react to changes
in the current globalised environment (Lii & Kuo, 2016).
One of the most addressed topics in the field of international business is, for
instance, the globalisation of innovation activities by companies (Perri & Andersson,
2014). This globalisation has taken place thanks to the increasing
internationalisation of R&D by large corporations, causing subsidiaries to start
playing a leading role in the development of these activities (De Beule & Van
Beveren, 2019). The literature on foreign R&D investment has noted that companies
Determinants of the Internationalisation Process of Colombian Firms 225
internationalise R&D activities to improve the way existing assets are used and the
way they become competitive in the external market. But they also do so to create
completely new technology assets through foreign-based R&D (Narula & Zanfei,
2009).
For example, while innovation activities would be expected to take place mainly
in the country of origin, the globalisation of innovation has enabled subsidiaries to
develop R&D activities themselves (De Beule & Van Beveren, 2019), because
sources of competitive advantage do not reside in a single country but in many
countries, suggesting that new ideas or products may arise in different countries and
then be exploited on a global scale (Narula & Zanfei, 2009). On this way, sub-
sidiaries can facilitate local adaptation of the multinational’s products or services and
acquire global technology for the rest of the corporation (De Beule & Van Beveren,
2019).
At the same time, the internalisation decision stimulates innovation and the
development of new skills in the organisation (Lam-González et al., 2019;
Rodriguez-Giron & Vanneste, 2018). Innovation is recognised as a significant
predictor of companies’ intention to internationalise (Pinho et al., 2018). In this
sense, internationalisation allows companies to increase their capacity for innova-
tion, through the learning acquired (Javadian & Richards, 2020).
Technological capabilities also create competitive advantages for companies,
which favour their internalisation processes (Amorós et al., 2016). In this sense,
innovative technology increases the company’s likelihood of international expan-
sion (Amorós et al., 2016). Thus, technology has a significant relationship with the
international entrepreneurial spirit (Amorós et al., 2016), considering that increasing
the level of use of information technologies improves the company’s
internationalisation capacity (Lecerf & Omrani, 2020). In this respect, the literature
highlights the impact of digital technologies on the success of the
internationalisation process, specifically in the context of small and medium-sized
enterprises (Hervé et al., 2020). This impact is maximised when technologies are
integrated into organisational processes and supported by organisational innovation
processes (Cassetta et al., 2020).
The literature validates the link between the availability of financial resources and
the internationalisation of companies (Rahman et al., 2020). Specifically, effective
financial management includes aspects associated with planning actions according to
objectives, carrying out the budget based on planning, controlling actions, and
evaluating the success of the plan’s execution (Villegas, 2015). In addition, clarity
in the organisational structure (Villegas, 2015) and the orientation of the system
towards the strategic objectives of the company (Savina & Kuzmina-Merlino, 2015)
significantly influence the planning and effectiveness of financial management.
From this perspective, financial management is aimed at guaranteeing the
resources required to achieve organisational objectives in highly changing environ-
ments (Kuzmina-Merlino & Savina, 2015). On the other hand, the financial risk
management policy constitutes a central axis of the current commercial strategy,
because exchange rate risk has been identified as a threat to international financial
management and the creation of value of companies (Vivel-Búa & Lado-Sestayo,
226 V. Pertuz et al.
2018). In sum, there is a positive relationship between financial resources and the
realisation of international expansion processes (Li, 2019).
The successful search for international activities generates significant benefits for
the company, associated with improving profitability and competitiveness (Pinho
et al., 2018). Similarly, external knowledge is recognised as an important mechanism
for promoting internationalisation (Wu & Liu, 2018). In this sense, organisational
ambidexterity is positively associated with internationalisation (Lee et al., 2020; Wu
& Liu, 2018) and improves the overall performance of firms (Lee et al., 2020). From
this perspective, the orientation towards the recognition of business opportunities is
a significant predictor of the internationalisation of firms (Hsieh et al., 2019; Pinho
et al., 2018). The identification of opportunities impacts the internationalisation
process of firms (Pinho et al., 2018).
Internationalisation processes require also a variety of organisational capabilities
(Uner et al., 2020) since company-specific factors such as executive demographic
characteristics and knowledge resources affect the decision to internationalise (Song
& Lee, 2020). In this regard, the literature of international business also highlights
that the acquisition of knowledge accelerates the development of the capacities of
firms to internationalise (Hilmersson & Johanson, 2020) and affects the propensity
to internationalise (Feng et al., 2020). Thus, the internationalisation process requires
developing routines involving various sources of knowledge (Hilmersson &
Johanson, 2020). In addition, dynamic capabilities have a direct effect on the export
performance of companies (Saputra et al., 2020), self-efficacy, as a trait of an
entrepreneurial personality, has a positive impact on the degree of
internationalisation (Yang et al., 2020).
Also, despite the growing number of research on the subject, there is little
emphasis on literature on the determinants of internationalisation in companies
(Li, 2019), and little consensus on the impact of the explanatory variables on the
export behaviour of companies (Olmos, 2011). Additionally, a gap is identified in
the literature associated with the classification of the different reasons for
internationalisation and the business characteristics that make up these reasons
(Ahsan et al., 2020).
Although many studies take a macro perspective to analyse the likelihood of
internationalisation, we adopt, following previous studies such as Li (2019), a micro
perspective since individuals’ resources are fundamental factors in explaining inter-
national entrepreneurship. In this sense, this study is mainly oriented from the
theoretical perspective of resources and capacities, an approach that suggests that
there is a positive relationship between the resources of entrepreneurs and their
international business activities (Li, 2019).
These resources can be human capital, social capital and cognitive factors.
According to previous studies, entrepreneurs’ resources increase their ability to
recognise and capture business opportunities and increase their intention to explore
international markets (Li, 2019). In words of Evald et al. (2011), the human capital
of the owner or founder of a company is essential to decide whether or not his/her
company should open up to international markets. At the same time, they argue that
an optimistic perception of the business environment makes the internationalisation
Determinants of the Internationalisation Process of Colombian Firms 227
2 Methodology
This is a study that adopts a cross-sectional design, since it analyses data from
variables collected over a determined-do time period over a predefined sample
population or subset (Saunders & Lewis, 2012). This cross-sectional study is
based on a publicly available dataset in which data is collected employing a survey
strategy.
The information that will be analysed in this study is secondary, since it uses data
systematically collected by the Global Entrepreneurship Monitor—GEM, in its
Adult Population Survey (APS). The GEM is the most prestigious and extensive
study on the state of entrepreneurship worldwide, and its main objective is to
measure the level of entrepreneurship in countries and analyse their relationship
with local economic development (Acheampong & Tweneboah-Koduah, 2018;
Pinho & Thompson, 2017; Simmons et al., 2014).
The APS explores the role of the individual in the life cycle of the business
process. The focus is not only on the characteristics of the company, but also on the
motivation of people to start a company, the actions taken to start and manage a
company, as well as the attitudes related to the spirit business. The APS is admin-
istered to a minimum of 2000 adults in each economy, ensuring that it is nationally
representative (GEM Colombia, 2019).
For the purposes of this study, the sample is made up of Colombians who
responded to the 2015 GEM Adult Population Survey (APS), that is, 3.686
individuals.
(
1 with probability p
y¼
0 with probability 1 p
In our case, the explanatory variable adopts 1 when in a business the proportion of
clients who live outside the country is equal to or greater than 25% (GEM Colombia,
2019), and 0 otherwise. The explanatory variables are also dichotomic in nature
(Table 1).
processes or their relationship with other actors has a fundamental role, considering
that innovation requires new behaviours and interactions with stakeholders
(Neutzling et al., 2018).
Additionally, the competition of the firm influences the decision of the companies
to internationalise. Indeed, companies in economies in transition are more vulnerable
than those in fully developed countries in internationalisation processes, and face
greater risks of competition (Caputo et al., 2016). Also, emerging market
internationalising firms increase their entrepreneurial orientation through
internationalisation (Purkayastha et al., 2021). In this sense, the performance of
organisations is determined by their resources and capabilities to use the accumu-
lated knowledge (Andreeva & Kianto, 2012). Knowledge currently corresponds to a
strategic resource for business decision-making, through the implementation of
technological surveillance and competitive intelligence processes (Pinto & Malcón,
2018). From this perspective, knowledge management aims to identify and leverage
the knowledge available in the organisation to achieve the improvement of processes
(Andreeva & Kianto, 2012) and the acquisition of a strategic advantage (Talamante-
Lugo et al., 2019).
Knowledge also facilitates innovation, improves process quality and promotes a
culture based on learning, to maintain high-level human talent (Andreeva & Kianto,
2012). In this sense, knowledge management corresponds to one of the main
strategies to innovate and consolidate a sustainable competitive advantage in com-
panies (Alzubi, 2018; Andreeva & Kianto, 2012; Pino Soto, 2018; Sanchez-
Gutierrez et al., 2016; Talamante-Lugo et al., 2019).
Finally, access to banks or other financial institutions is a significant variable in
the decision of internationalisation of firms. In this way, the availability of resources
runs to a fundamental element to obtain and maximise business competitiveness (Lii
& Kuo, 2016). In this regard, literature considers different approaches. The first
Determinants of the Internationalisation Process of Colombian Firms 231
highlights that companies with strong internal resources achieve better performance
in their environment (McCan & Folta, 2011). The second approach highlights the
importance of acquiring external resources required for the development of the
organisation, through exchange related to other companies (Lii & Kuo, 2016) or
through clusters (Speldekamp et al., 2020). A third approach, it conceives organi-
sations as open systems, with structures that involve the relationship with their
environment (Aldana-Bernal & Bernal-Torres, 2018).
4 Conclusions
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Vanessa Pertuz PhD in Management. Master in Research and Development Project Management.
Professor at Universidad Nacional Abierta y a Distancia-UNAD, Colombia. She is an Associate
Researcher recognised by the Ministry of Science, Technology and Innovation of Colombia
(MINCIENCIAS).
Luis Francisco Miranda Ph.D. student in Business at the Universitat de Barcelona. Master in
Business Research. His research is focused on open and collaborative innovation, environmental
management, sustainability-oriented innovation, and entrepreneurship.
236 V. Pertuz et al.
Javier Viloria Escobar PhD candidate in Educational Sciences of Universidad del Magdalena,
Colombia. Business Administrator. Professor of Instituto Nacional de Formación Técnica
Profesional Humberto Velásquez García, Ciénaga, Colombia. Active member of the Research
Group on Management of Organisations-GIGO.