Description
In such a detailed information regarding some fundamental issues in international entrepreneurship.
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Some Fundamental Issues in International Entrepreneurship
PATRICIA P. MCDOUGALL
Kelley School of Business
Indiana University
1309 E. Tenth Street
Bloomington, IN 47405-1701
Phone: (812) 855-7873
E-mail: [email protected]
BENJAMIN M. OVIATT
Department of Management
P.O. Box 4014
College of Business Administration
Georgia State University
Atlanta, GA 30302-4014
Phone: (404) 651-3021
Fax: (404) 651-2804
E-mail: [email protected]
Submitted to:
Entrepreneurship Theory & Practice
July 2003
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Some Fundamental Issues in International Entrepreneurship
Abstract
This paper explores four fundamental issues that deserve additional attention from scholars
interested in international entrepreneurship. First, a reformulated definition of international
entrepreneurship is presented that is consistent with the recent definition of entrepreneurship
proposed by Shane and Venkataraman (2000). Second, several theoretical models and
frameworks useful to the further development of international entrepreneurship are explored.
Third, the important role of network theory is highlighted. Fourth, learning theory and
knowledge management are shown to be core issues for international entrepreneurship scholars.
The paper concludes with a call for international business and entrepreneurship scholars to
produce more joint research.
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Some Fundamental Issues in International Entrepreneurship
According to Zahra and George (2002) the term “international entrepreneurship” first
appeared in a short article by Morrow (1988). It highlighted recent technological advances and
cultural awareness that appeared to open previously untapped foreign markets to new ventures.
Soon after that McDougall’s (1989) empirical study comparing domestic and international new
ventures paved the way for academic study in international entrepreneurship. Building on
popular business press interest in rapid internationalization (e.g., Brokaw, 1990; The Economist,
1992, 1993; Gupta, 1989, Mamis, 1989), Oviatt and McDougall (1994) provided a theoretical
base for the study of international new ventures, which they defined as business organizations
“that, from inception, [seek] to derive significant competitive advantage from the use of
resources and the sale of outputs in multiple countries” (p. 49). Thus, international
entrepreneurship began with an interest in new ventures.
As additional studies were conducted and articles published, interest in the arena
increased, and the field of international entrepreneurship broadened from its early studies of new
venture internationalization theory. For example, insightful studies on national culture (McGrath
& MacMillan 1992; Thomas & Mueller, 2000), alliances and cooperative strategies (Steensma,
Marino, Weaver, & Dickson, 2000; Li and Atuahene-Gima, 2001), small and medium sized
company internationalization (Lu & Beamish, 2001), top management teams (Reuber & Fischer,
1997), entry modes (Zacharakis, 1997), cognition (Mitchell, Smith, Seawright & Morse, 2000),
country profiles (Busenitz, Gomez, & Spencer, 2000), corporate entrepreneurship (Birkinshaw,
1997), exporting (Bilkey & Tesar, 1977), knowledge management (Kuemmerle, 2002), venture
financing (Roure, Keeley & Keller, 1992), and technological learning (Zahra, Ireland & Hitt,
2000) have all helped move the field forward. Reflective of the multi-disciplinary nature of both
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entrepreneurship and international business, researchers have drawn upon theories and
frameworks from international business, entrepreneurship, anthropology, economics,
psychology, finance, marketing, and sociology. It is clear that the domain of international
entrepreneurship is rich in opportunity. Because the field is broad, there are many interesting
research questions to be explored, and many existing theories may be beneficially employed.
Opportunities for both multidisciplinary and multi-country collaboration are clear.
The importance of the field also has been signaled by the appearance of special issues
and forums on international entrepreneurship in various journals, such as Entrepreneurship
Theory & Practice in 1996 and Academy of Management Journal in 2000. Journal of Business
Venturing regularly publishes articles in the area. Journal of International Business Studies has
established an editorial area for international entrepreneurship, and the Journal of International
Entrepreneurship was recently launched. Both the Kauffman Foundation and the Strategic
Management Society have sponsored edited volumes that included reviews of international
entrepreneurship literature and research issues (McDougall & Oviatt, 1997; Zahra & George,
2002). Academic meetings focused on international entrepreneurship are held on multiple
continents, and doctoral student consortia on the topic have emerged. In summary, academic
interest in international entrepreneurship is strong.
We wish to highlight here four broad issues that we believe are fundamental to the study
of international entrepreneurship. How these issues are resolved affects the research that most
every scholar of international entrepreneurship conducts. The first of these fundamentals is the
definition of international entrepreneurship. The definition is jointly influenced by the two
distinct traditions from which the arena of inquiry emerges—entrepreneurship and international
business—and both continue to evolve. Second, theoretical frameworks and models that guide
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international entrepreneurship research are considered, and refinements are suggested. Third, for
international entrepreneurs, networks and cooperation are believed by some scholars to be
essential to successful new venture operations. Applications of network theory in international
entrepreneurship are reviewed. Finally, organizational learning and knowledge management are
fundamental to successful entrepreneurship in an international environment. What we currently
know about these issues is discussed and some ideas for further development are highlighted.
Definitions of International Entrepreneurship
International business scholars Wright and Ricks (1994) highlighted international
entrepreneurship as a newly emerging research direction, and it became clear the arena included
(1) comparisons of entrepreneurial behavior in multiple countries and cultures as well as (2)
organization behavior that extends across national borders and is entrepreneurial. While these
foci have remained over time, the definition of “international entrepreneurship” has moved from
a very broad one, which avoided prematurely proscribing important nascent interests
(Giamartino, McDougall, & Bird, 1993), to excluding nonprofit and government organizations to
be consistent with the commonly accepted definition of “international business” (McDougall &
Oviatt, 1997). However, to be consistent with the interests of entrepreneurship scholars in such
issues as social entrepreneurship, that exclusion was eliminated:
International entrepreneurship is a combination of innovative, proactive,
and risk-seeking behavior that crosses national borders and is intended to create
value in organizations. (McDougall & Oviatt, 2000).
Individual, group, and organizational levels of behavior and academic study are included. Thus,
international entrepreneurship has evolved from a focus on new ventures to include corporate
entrepreneurship (Birkenshaw, 1997; Zahra, Ireland, and Hitt, 2000; Zahra & George, 2002).
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The definition of entrepreneurship, however, is a matter of continued debate. As a result,
the meaning of entrepreneurship continues to evolve. The idea that entrepreneurship is a
combination of innovative, proactive, and risk-seeking behavior finds its origins in strategic
management literature (e.g., Covin & Slevin, 1989; Miller, 1983), but those are not the only
entrepreneurial dimensions that scholars have identified. Lumpkin and Dess (1996) highlighted
a variety of “entrepreneurial orientation” dimensions and distinguished them from the definition
of entrepreneurship itself, which they equated with new entry, or the act of launching a new
venture.
Venkataraman (1997) and Shane and Venkataraman (2000) maintain, however, that the
creation of new organizations, while possible, is not a defining condition (cf., Gartner, 1988).
Opportunities may be sold to others, for example. Thus, they define the study of
entrepreneurship as the,
“examination of how, by whom, and with what effects opportunities to create
future goods and services are discovered, evaluated, and exploited” (Shane &
Venkataraman, 2000, p. 218).
The authors emphasize that entrepreneurship has two parts, (1) opportunities, and (2) individuals
who strive to take advantage of them. We agree with these observations, but Shane and
Venkataraman’s (2000) definition has been criticized for depicting opportunities as being
“objective phenomena” that go beyond subjective recognition by people influenced by their
social milieu (Baker, Gedajlovic, & Lubatkin, 2003). We believe the issue is resolved by noting
that opportunities may be enacted (Weick, 1995) as well as discovered. That is, people act and
then interpret what their actions have created, and sometimes those creations are economic
opportunities. Shane (2000), for example, described how eight new venture opportunities were
created from different applications of a single technology. The patented technology, called
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three-dimensional printing, deposited multiple layers of material in a complex manner to produce
a component. The proposed applications varied from creating architectural models to
manufacturing pharmaceuticals; four entrepreneurial efforts had failed by the time the article was
written, and four companies survived. The inventors of the technology did not discover any of
the eight applications, and while the entrepreneurs may have discovered the technology, it was
their idiosyncratic interpretations of its capabilities that appeared to create the opportunity.
While Shane (2000) terms it a process of discovery, it seems very much like what Weick (1995)
describes as enactment. Thus, we adopt the following definition:
International entrepreneurship is the discovery, enactment, evaluation, and
exploitation of opportunities—across national borders--to create future goods and
services.
It follows, therefore, that the scholarly field of international entrepreneurship examines
and compares--across national borders--how, by whom, and with what effects those
opportunities are acted upon.
As we noted, the international entrepreneurship arena includes both the study of
entrepreneurial activities that cross national borders and the comparison of domestic
entrepreneurial activities in multiple countries. However, the remainder of the current paper
focuses exclusively on the former due to the authors’ interests and knowledge and an effort to
confine this work to a journal-length paper.
Theoretical Models and Frameworks
The sine qua non of an established academic area of interest is a fully delineated theory
on which it is based, through which outcomes may be explained, and by which propositions and
empirical research are motivated. At this time, no complete and well supported theory of cross-
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border entrepreneurial behavior exists, but important steps toward delineating a complete theory
have been published.
Business enterprises evolved from mid-nineteenth-century independent units of
production and units of distribution into large, integrated, and diversified, multinational
corporations in the early twentieth century (Chandler, 1986). While new technologies such as
railroads, steamships, and the telegraph were essential to that evolution, the entrepreneurial
ingredient was the unprecedented appearance of salaried managers who could form and run large
administrative hierarchies that for the first time in history combined production with distribution
and marketing activities on a large scale. By the mid twentieth century such institutions were
well established. Thus, some past cross-border entrepreneurial behavior and outcomes can be
explained, but more recent issues, such as accelerated internationalization, require alternative
theoretical approaches.
The process of firm internationalization following World War II was described by
Vernon (1966) as the product cycle. The concept explained a then frequently observed pattern of
domestic product development, followed by exporting, and then by foreign production. Firm
behavior in the early stages of the product cycle was entrepreneurial in its discovery and
international exploitation of novel goods. However, Vernon (1979) later noted that international
development eventually made the product cycle less and less relevant. Therefore, explanations
for twenty-first century international entrepreneurship remain elusive.
Stopford and Wells’ (1972) research on the organizational structures and processes of
large multinational corporations described an evolution in organizational forms. To the degree
that managers initiated and continue to initiate new forms for managing transnational commerce
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(Ghoshal & Bartlett, 1997), international entrepreneurship continues. However, the work of
these scholars is not so much a theory as a rich and valuable description of their observations.
Perhaps the model of firm internationalization most familiar to entrepreneurship scholars
is the Uppsala model. Based on their studies of Swedish manufacturing firms, Johanson and
Vahlne’s (1977) showed initial internationalization activities were targeted to psychically close
markets and used the less committed modes of entry, such as exporting. Johanson and Vahlne
(1977) explained that the firm learned and increased its foreign market knowledge over time
primarily through experience, and only then did it increase its foreign market commitments and
later expand to more psychically distant markets. Despite weaknesses (Andersen 1993), the
Uppsala model has provided an attractive explanation for the traditional incremental
internationalization of firms over time (Johanson & Vahlne, 1990; OECD, 1997).
Not all firm internationalization is of the traditional incremental type, however. In the
current environment there exists much regional and global integration of trade and production
(UNCTAD, 2001), and accelerating technological changes both enable and facilitate more rapid
internationalization among firms. In particular, researchers have carefully detailed cases of new
venture firms that have skipped incremental stages and/or have been international virtually from
inception (McDougall, Shane, & Oviatt, 1994). The ventures engaged in early
internationalization have been referred to as international new ventures (McDougall et al., 1994);
born globals (Knight & Cavusgil, 1996; Madsen & Servais, 1997), infant multinationals
(Lindqvist, 1991), instant internationals (Preece, Miles, & Baetz, 1999), and global start-ups
(Oviatt & McDougall, 1994), with no clear definitional differences between the choice of terms.
These ventures are defined as,
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“a business organization that, from inception, seeks to derive significant
competitive advantage from the use of resources and the sale of outputs in
multiple countries” (Oviatt & McDougall, 1994, p. 49).
Born globals and international new ventures are the terms most frequently used in the academic
literature. The driving forces and facilitating factors that produced the accelerated
internationalization of new ventures, as well as small and medium size entrepreneurial firms, are
discussed by Knight and Cavusgil (1996), Madsen and Servais (1997) and Oviatt and McDougall
(1999). Research studies have included ventures from all regions of the world, and while the
samples have been dominated by technology-based ventures, there are examples from other
industries as well. A recent literature review of research on such firms is presented by Rialp-
Criado, Rialp-Criado, and Knight (2003).
Oviatt and McDougall (1994) established the elements of a theory of international new
ventures. Such firms are said to own certain valuable assets, to use alliances and network
structures to control a relatively large percentage of vital assets, and to have a unique resource
that provides a sustainable advantage and is transferable to a foreign location. However, those
static elements contained no description of the dynamic process by which international new
ventures formed. Oviatt and McDougall (1999) identified some important parts of such a
process theory. The foundation was rapidly changing computer, communication, and
transportation technology, and the primary building blocks were the political economy, industry
conditions, firm effects, and the management team. These ideas, however, need further
development. For example, no attempt has been made that we know about to combine the static
and dynamic concepts. Moreover, none of these ideas has been subjected to rigorous empirical
tests. The importance of conducting such tests is highlighted by the fact that some research has
shown alliances may not be employed by international new ventures as often as predicted by the
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static elements believed to explain the existence of international new ventures (Shrader, 2001;
Shrader, Oviatt, & McDougall, 2000).
Recently, Zahra and George (2002) highlighted the cross-border entrepreneurial activity
of established corporations, and proposed a model of forces that influence the degree, speed, and
geographic scope of corporate international entrepreneurship. They hypothesized that the
political and economic environment and an organization’s strategy moderate the effect of
organizational factors, such as the management team and firm resources, on international
entrepreneurial behavior and competitive advantage. Their model, however, represents one of a
variety of possible moderating, mediating, and interacting models using the variables they
introduce (Lumpkin & Dess, 1996), and it does not provide an exhaustive list of possible
important forces at work. Thus, much empirical work is needed to test Zahra and George’s
(2002) ideas.
In summary, while traditional incremental firm internationalization is still often observed,
both international business and entrepreneurship scholars have successfully challenged the
assumption that it is universal and established that an important group of firms enjoy quite
accelerated internationalization (e.g., Turnbull, 1987; Hedlund & Kverneland, 1985; Brush,
1992; Jolly, Alahunta, and Jeannet, 1992; Andersen, 1993; Rennie, 1993; Oviatt & McDougall,
1994; McDougall, et al., 1994; Bell, 1995; Coviello and Munro, 1995, 1997; Roberts & Senturia,
1996; Knight & Cavusgil, 1996; Bloodgood, Sapienza, & Almeida, 1996; Madsen & Servais,
1997; Petersen and Pedersen, 1997; Burgel & Murray, 2000; McAuley, 1999; Autio, Sapienza,
& Almeida, 2000; Autio & Sapienza, 2000; Madsen, Rasmussen & Servais, 2000; Shrader et al.,
2000; Zahra, Ireland & Hitt, 2000; Bell and McNaughton, 2000; Crick & Jones, 2000;
Aspelund & Moen, 2001; Larimo, 2001; Moen, 2002; Moen and Servais, 2002). We cite this
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incomplete list of 29 publications for the purpose of encouraging the academic community to
build on and extend this work and to not continue simply challenging the Uppsala model. Even
scholars who originated the Uppsala model have accepted the challenge. In a recent article,
Johanson & Vahlne conclude that,
we have a situation where old models of internationalization processes are still
applied quite fruitfully at the same time as a number of studies have suggested
that there is a need for new and network-based models of internationalization. We
think it might be worthwhile to reconcile and even integrate the two approaches”
(2003: 84).
Johanson and Vahlne (2003) provide the bare outline of a proposed integration that uses
the interplay of experiential learning and resource commitment in organizations as its driving
mechanism. These are, of course, concepts from the traditional Uppsala model, but they
combine them with a new focus on network relationships involving customers and suppliers.
They hypothesize that firms learn and benefit from such relationships and, therefore, make
increasing commitments to them. Those relationships, in turn, sometimes lead them to enter
foreign markets, at times incrementally and at times quite rapidly. However, Johanson and
Vahlne (2003) draw the unexpected conclusion that with a network-based model foreign entry
and expansion are no longer the most interesting scholarly issues. Rather, how customer and
supplier relationships are established and developed are the key research questions. Such a
conclusion about the power of networks from these scholars strongly indicates a need for further
development of the model and empirical testing.
Network Theory
Networking is a powerful tool for the entrepreneur (Dubini & Aldrich, 1991), and
network analysis has been a powerful framework for international entrepreneurship researchers.
Firms use their networks to gain access to resources, to improve their strategic positions, to
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control transaction costs, to learn new skills, to gain legitimacy, and to cope positively with rapid
technological changes (Alvarez & Barney, 2001; Bonaccorsi, 1992; Hitt & Ireland, 2000; Das &
Teng, 1998; Gulati, 1995).
Networks emphasize reciprocity norms, personal relationships, reputation, and trust
(Larson, 1992). The entrepreneur’s network represents social capital that is intangible and
idiosyncratic, and it appreciates through repeated interactions that help build trust (Coleman,
1990). Trust is the basic element that determines the solidity of the network link (Dubini &
Aldrich, 1991). When an entrepreneur draws upon a network contact in an exchange, thereby
making use of his/her social capital, a debt is incurred for which there is expected reciprocity.
As noted previously, Johanson and Vahlne’s (2003) network model calls specifically
upon international entrepreneurship researchers to integrate network theory into existing theories
of firm internationalization. Earlier calls to draw upon network theory in international
entrepreneurship were made by several researchers (Oviatt & McDougall, 1994; Bell, 1995,
Coviello & Munro, 1995, 1997). Separate from the study of international entrepreneurship,
scholars in both international business (e.g., Johanson and Mattsson, 1988; Ghoshal & Bartlett,
1991; Axelsson & Easton, 1992; Forsgren, 1989) and entrepreneurship (e.g., Aldrich & Zimmer,
1986; Larson & Starr, 1993) previously recognized the importance of network research to their
fields of study.
One of the four elements of Oviatt and McDougall’s (1994) new venture
internationalization theory is “alternative governance structures.” They posit that because
international new ventures lack sufficient resources to control many assets through ownership,
they must rely on alternative means of control. They point to the network structure as one of the
new ventures’ most powerful resource-conserving alternatives to internalization. The network
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exchange structure offers the typically financially constrained entrepreneurial firm a critical
leveraging opportunity whereby resources can be gained without incurring the capital
investments of vertical integration. The entrepreneurial firm is, thereby, provided a way to
maximize its adaptability to its environment (Larson, 1992).
Focusing primarily on the personal and extended networks of the entrepreneur and
his/her management team, several studies challenging traditional models of internationalization
have drawn upon network theory. For example, the findings of Bell’s (1995) comparative study
of export behavior among entrepreneurial software firms in Finland, Ireland, and Norway led
Bell to the conclusion that the network approach was a better explanation of the
internationalization process of these firms. McDougall et al., (1994) explained that networks
helped founders of international new ventures, or born-globals, to identify international business
opportunities, and those networks appeared to have more influence on the founders’ country
choices than did their psychic distance. Oviatt and McDougall (1995) identified strong
international business networks as one of the seven most important characteristics of successful
global start-ups. Servias and Rasmussen (2000) found that networks were important to the
majority of the Danish firms in their study, although Rasmussen, Madsen & Evangelista’s
(2001) case studies of five Danish and Australia born-globals did not find support for the
importance of the founder’s network. Finally, much of Coviello and Munro’s international
entrepreneurship research has used network theory to examine international market development
and marketing-related activities within international markets. Based on the findings of their study
of the internationalization processes of New Zealand software firms, Coviello and Munro (1995)
noted:
Our understanding of the internationalization processes of entrepreneurial
firms is enriched when we expand the analysis beyond the individual firm’s
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actions and address the impact of a firms’ role and position within a network of
relationships. From this perspective, foreign market selection and entry initiatives
emanate from opportunities created through network contacts, rather than solely
from the strategic decisions of managers in the firm. …it is not surprising that the
observed patterns of international market growth for entrepreneurial high-
technology firms differ from the processes of the larger manufacturing firms
outlined in the literature. Their relatively rapid and dispersed involvement in
foreign markets creates the impression of being random and somewhat irrational,
when in fact the span of activities can be linked to opportunities emerging from a
network of relationships. (p. 58)
While much of the international entrepreneurship research using network theory has
focused on the personal and extended networks of the entrepreneur/entrepreneurial team, there is
also an important body of work that focuses on organizational networks. Viewing the
multinational corporation as an interorganizational network, Birkinshaw’s (1997) corporate
entrepreneurship study builds a conceptual framework for examining the initiatives of the
subsidiaries of multinational corporations. Hara and Kanai’s (1994) study of strategic alliances
between a Japanese company and three Silicon Valley companies proposes the “network of
networks mode” in which a key company or person has the role of creating a global network of
local networks.
The role of governments in fostering networks has been examined by several researchers.
As discussed by McNaughton and Bell (1999), several countries have made government funding
available for relationship brokers to encourage networks that promote growth and
internationalization. Cooke and Morgan, (1993, 1994) highlight the role of government agencies
and business associations in promoting networks in their studies of successful regional
economies.
In summary, network analysis represents a powerful framework for the international
entrepreneurship researcher. Networks help entrepreneurs identify international opportunities,
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establish credibility, provide access to critical resources including knowledge, and often lead to
strategic alliances and other cooperative strategies.
Learning Theory and Knowledge Management
The need to acquire local market knowledge is a key tenet of internationalization. Thus,
scholars have recognized the importance of organizational learning for entering or expanding in
the international marketplace (e.g., Andersen, 1993; Barkema & Vermeulen, 1998; Erramilli,
1991; Inkpen & Beamish, 1997; Luo, 1997; Lord & Ranft, 2000; Zahra, Ireland, & Hitt, 2000).
Learning was a primary element of Johanson and Vahlne’s (1977) original internationalization
model and is likewise a primary element of their recently presented business network model of
internationalization (Johanson & Vahlne, 2003).
Organizational learning is defined by Autio et al. as “the process of assimilating new
knowledge into the organization’s knowledge base” (2000: 911), and Huber notes that “an
organization learns if any of its units acquires knowledge that it recognizes as potentially useful
to the organization” (1991: 271). Thus, much of the growing body of research on knowledge
management is closely related to learning theory. The management of knowledge is particularly
challenging in cross-national settings where different cultures, corporate governance systems,
time zones, and languages are involved (Kummerle, 2002).
For entrepreneurial firms competing in international markets, the learning process is
critical in helping firms overcome their liabilities of foreignness (Hymer, 1976; Inkpen &
Beamish, 1997; Zaheer, 1995), as much of this liability relates to the foreign firm’s lack of local
market knowledge (Lord and Ranft, 2000). In addition, learning is critical to the entrepreneurial
firm competing internationally because knowledge is often the most critical asset of the firm and
is its primary basis of achieving competitive advantage. The importance of learning theory, and
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the related study of knowledge management, is well illustrated in the case studies of international
new ventures (Kuemmerle, 2002; McDougall et al., 1994; Simões & Dominguinhos, 2001). To
compete successfully in the international arena, these ventures must effectively manage the
learning process so as to build knowledge stocks and create new knowledge.
One of the most compelling international entrepreneurship studies using learning theory
is that of Autio et al. (2000) in which they introduce the concept of “learning advantages of
newness.” Using panel data from the Finnish electronics industry, they concluded,
“as firms get older, they develop learning impediments that hamper their
ability to successfully grow in new environments and that the relative flexibility
of newer firms allows them to rapidly learn the competencies necessary to pursue
continued growth in foreign markets” (2000: 919).
As the field of international entrepreneurship positions itself as a distinctive field of study, the
“learning advantages of newness” represents a distinct concept that is core to the area. It
represents a counterpoint to the widely accepted concept that there is a “liability of newness” for
young organizations (Stinchcombe, 1965). Thus, the learning advantages of newness deserve
additional empirical testing and conceptual development so that both the advantages and
liabilities of young firm age can be understood and compared.
Another noteworthy study is Zahra et al. (2000). Using mail survey data from 321 new
ventures, Zahra et al. (2000) examined how these ventures used the technological learning
gained through internationalization. Specifically, the study examined the effects of international
expansion on a firm’s technological learning. International expansion was measured by
international diversity and mode of market entry. The study also examined the effects of this
learning on the firm’s financial performance. The results showed a strong positive relationship
between international diversity and the breadth, depth, and speed of a new venture’s
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technological learning. The mode of international entry also was related to technological
learning, and learning, in turn, had a positive performance impact.
In conclusion, there is rich opportunity for the use of learning theory in studies
concerning knowledge management, international diversification, international expansion,
alliances, and networks (Barkema &Vermeulen, 1998; Khanna, Gulati, & Nohria, 1998; Zahra et
al., 2000; Bresman, Birkinshaw, & Nobel, 1999). Each of these areas of study is important to the
advancement of knowledge within international entrepreneurship.
Conclusion
The field of international entrepreneurship is rich with possibility and opportunity, and
the full extent of its scope is undefined (Acs, Dana, & Jones, 2003). As the field moves from
infancy to what appears will be a high level of growth, there are interesting research questions
that will surely be asked and investigated. We believe the preceding exploration of four
fundamental issues highlights some especially fruitful areas for scholarly research.
As we reviewed articles for this paper, it was noteworthy to us that the authors of the
majority of the multi-authored articles were either exclusively international business scholars or
entrepreneurship scholars. Articles that have authors from both disciplines are unusual.
International entrepreneurship researchers have embraced the notion of multi-country research
teams and excellent examples of scholarly work have resulted; we believe disciplinary diversity
would be just as beneficial. As the role of the entrepreneur is increasingly being explored in
international business journals and the internationalization of the entrepreneurial firm appears in
traditional entrepreneurship journals, we encourage the formation of research teams composed of
entrepreneurship and international business scholars. Too often, international entrepreneurship
articles appearing in entrepreneurship journals demonstrate a lack of knowledge of international
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business theories and research. Likewise, international entrepreneurship articles appearing in
international business journals demonstrate a need for greater understanding of the scholarly
work in entrepreneurship. Although both entrepreneurship and international business are multi-
disciplinary, there appears to have been limited research collaboration between entrepreneurship
and international business scholars. The increased comingling of entrepreneurship and
international business scholars that is evident at research conferences is encouraging. As
entrepreneurship scholars extend their networks to include international business scholars, and
vice versa, we hope that collaborative research projects will be launched that consider the
fundamental issues highlighted in this paper.
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doc_931261677.pdf
In such a detailed information regarding some fundamental issues in international entrepreneurship.
1
Some Fundamental Issues in International Entrepreneurship
PATRICIA P. MCDOUGALL
Kelley School of Business
Indiana University
1309 E. Tenth Street
Bloomington, IN 47405-1701
Phone: (812) 855-7873
E-mail: [email protected]
BENJAMIN M. OVIATT
Department of Management
P.O. Box 4014
College of Business Administration
Georgia State University
Atlanta, GA 30302-4014
Phone: (404) 651-3021
Fax: (404) 651-2804
E-mail: [email protected]
Submitted to:
Entrepreneurship Theory & Practice
July 2003
2
Some Fundamental Issues in International Entrepreneurship
Abstract
This paper explores four fundamental issues that deserve additional attention from scholars
interested in international entrepreneurship. First, a reformulated definition of international
entrepreneurship is presented that is consistent with the recent definition of entrepreneurship
proposed by Shane and Venkataraman (2000). Second, several theoretical models and
frameworks useful to the further development of international entrepreneurship are explored.
Third, the important role of network theory is highlighted. Fourth, learning theory and
knowledge management are shown to be core issues for international entrepreneurship scholars.
The paper concludes with a call for international business and entrepreneurship scholars to
produce more joint research.
3
Some Fundamental Issues in International Entrepreneurship
According to Zahra and George (2002) the term “international entrepreneurship” first
appeared in a short article by Morrow (1988). It highlighted recent technological advances and
cultural awareness that appeared to open previously untapped foreign markets to new ventures.
Soon after that McDougall’s (1989) empirical study comparing domestic and international new
ventures paved the way for academic study in international entrepreneurship. Building on
popular business press interest in rapid internationalization (e.g., Brokaw, 1990; The Economist,
1992, 1993; Gupta, 1989, Mamis, 1989), Oviatt and McDougall (1994) provided a theoretical
base for the study of international new ventures, which they defined as business organizations
“that, from inception, [seek] to derive significant competitive advantage from the use of
resources and the sale of outputs in multiple countries” (p. 49). Thus, international
entrepreneurship began with an interest in new ventures.
As additional studies were conducted and articles published, interest in the arena
increased, and the field of international entrepreneurship broadened from its early studies of new
venture internationalization theory. For example, insightful studies on national culture (McGrath
& MacMillan 1992; Thomas & Mueller, 2000), alliances and cooperative strategies (Steensma,
Marino, Weaver, & Dickson, 2000; Li and Atuahene-Gima, 2001), small and medium sized
company internationalization (Lu & Beamish, 2001), top management teams (Reuber & Fischer,
1997), entry modes (Zacharakis, 1997), cognition (Mitchell, Smith, Seawright & Morse, 2000),
country profiles (Busenitz, Gomez, & Spencer, 2000), corporate entrepreneurship (Birkinshaw,
1997), exporting (Bilkey & Tesar, 1977), knowledge management (Kuemmerle, 2002), venture
financing (Roure, Keeley & Keller, 1992), and technological learning (Zahra, Ireland & Hitt,
2000) have all helped move the field forward. Reflective of the multi-disciplinary nature of both
4
entrepreneurship and international business, researchers have drawn upon theories and
frameworks from international business, entrepreneurship, anthropology, economics,
psychology, finance, marketing, and sociology. It is clear that the domain of international
entrepreneurship is rich in opportunity. Because the field is broad, there are many interesting
research questions to be explored, and many existing theories may be beneficially employed.
Opportunities for both multidisciplinary and multi-country collaboration are clear.
The importance of the field also has been signaled by the appearance of special issues
and forums on international entrepreneurship in various journals, such as Entrepreneurship
Theory & Practice in 1996 and Academy of Management Journal in 2000. Journal of Business
Venturing regularly publishes articles in the area. Journal of International Business Studies has
established an editorial area for international entrepreneurship, and the Journal of International
Entrepreneurship was recently launched. Both the Kauffman Foundation and the Strategic
Management Society have sponsored edited volumes that included reviews of international
entrepreneurship literature and research issues (McDougall & Oviatt, 1997; Zahra & George,
2002). Academic meetings focused on international entrepreneurship are held on multiple
continents, and doctoral student consortia on the topic have emerged. In summary, academic
interest in international entrepreneurship is strong.
We wish to highlight here four broad issues that we believe are fundamental to the study
of international entrepreneurship. How these issues are resolved affects the research that most
every scholar of international entrepreneurship conducts. The first of these fundamentals is the
definition of international entrepreneurship. The definition is jointly influenced by the two
distinct traditions from which the arena of inquiry emerges—entrepreneurship and international
business—and both continue to evolve. Second, theoretical frameworks and models that guide
5
international entrepreneurship research are considered, and refinements are suggested. Third, for
international entrepreneurs, networks and cooperation are believed by some scholars to be
essential to successful new venture operations. Applications of network theory in international
entrepreneurship are reviewed. Finally, organizational learning and knowledge management are
fundamental to successful entrepreneurship in an international environment. What we currently
know about these issues is discussed and some ideas for further development are highlighted.
Definitions of International Entrepreneurship
International business scholars Wright and Ricks (1994) highlighted international
entrepreneurship as a newly emerging research direction, and it became clear the arena included
(1) comparisons of entrepreneurial behavior in multiple countries and cultures as well as (2)
organization behavior that extends across national borders and is entrepreneurial. While these
foci have remained over time, the definition of “international entrepreneurship” has moved from
a very broad one, which avoided prematurely proscribing important nascent interests
(Giamartino, McDougall, & Bird, 1993), to excluding nonprofit and government organizations to
be consistent with the commonly accepted definition of “international business” (McDougall &
Oviatt, 1997). However, to be consistent with the interests of entrepreneurship scholars in such
issues as social entrepreneurship, that exclusion was eliminated:
International entrepreneurship is a combination of innovative, proactive,
and risk-seeking behavior that crosses national borders and is intended to create
value in organizations. (McDougall & Oviatt, 2000).
Individual, group, and organizational levels of behavior and academic study are included. Thus,
international entrepreneurship has evolved from a focus on new ventures to include corporate
entrepreneurship (Birkenshaw, 1997; Zahra, Ireland, and Hitt, 2000; Zahra & George, 2002).
6
The definition of entrepreneurship, however, is a matter of continued debate. As a result,
the meaning of entrepreneurship continues to evolve. The idea that entrepreneurship is a
combination of innovative, proactive, and risk-seeking behavior finds its origins in strategic
management literature (e.g., Covin & Slevin, 1989; Miller, 1983), but those are not the only
entrepreneurial dimensions that scholars have identified. Lumpkin and Dess (1996) highlighted
a variety of “entrepreneurial orientation” dimensions and distinguished them from the definition
of entrepreneurship itself, which they equated with new entry, or the act of launching a new
venture.
Venkataraman (1997) and Shane and Venkataraman (2000) maintain, however, that the
creation of new organizations, while possible, is not a defining condition (cf., Gartner, 1988).
Opportunities may be sold to others, for example. Thus, they define the study of
entrepreneurship as the,
“examination of how, by whom, and with what effects opportunities to create
future goods and services are discovered, evaluated, and exploited” (Shane &
Venkataraman, 2000, p. 218).
The authors emphasize that entrepreneurship has two parts, (1) opportunities, and (2) individuals
who strive to take advantage of them. We agree with these observations, but Shane and
Venkataraman’s (2000) definition has been criticized for depicting opportunities as being
“objective phenomena” that go beyond subjective recognition by people influenced by their
social milieu (Baker, Gedajlovic, & Lubatkin, 2003). We believe the issue is resolved by noting
that opportunities may be enacted (Weick, 1995) as well as discovered. That is, people act and
then interpret what their actions have created, and sometimes those creations are economic
opportunities. Shane (2000), for example, described how eight new venture opportunities were
created from different applications of a single technology. The patented technology, called
7
three-dimensional printing, deposited multiple layers of material in a complex manner to produce
a component. The proposed applications varied from creating architectural models to
manufacturing pharmaceuticals; four entrepreneurial efforts had failed by the time the article was
written, and four companies survived. The inventors of the technology did not discover any of
the eight applications, and while the entrepreneurs may have discovered the technology, it was
their idiosyncratic interpretations of its capabilities that appeared to create the opportunity.
While Shane (2000) terms it a process of discovery, it seems very much like what Weick (1995)
describes as enactment. Thus, we adopt the following definition:
International entrepreneurship is the discovery, enactment, evaluation, and
exploitation of opportunities—across national borders--to create future goods and
services.
It follows, therefore, that the scholarly field of international entrepreneurship examines
and compares--across national borders--how, by whom, and with what effects those
opportunities are acted upon.
As we noted, the international entrepreneurship arena includes both the study of
entrepreneurial activities that cross national borders and the comparison of domestic
entrepreneurial activities in multiple countries. However, the remainder of the current paper
focuses exclusively on the former due to the authors’ interests and knowledge and an effort to
confine this work to a journal-length paper.
Theoretical Models and Frameworks
The sine qua non of an established academic area of interest is a fully delineated theory
on which it is based, through which outcomes may be explained, and by which propositions and
empirical research are motivated. At this time, no complete and well supported theory of cross-
8
border entrepreneurial behavior exists, but important steps toward delineating a complete theory
have been published.
Business enterprises evolved from mid-nineteenth-century independent units of
production and units of distribution into large, integrated, and diversified, multinational
corporations in the early twentieth century (Chandler, 1986). While new technologies such as
railroads, steamships, and the telegraph were essential to that evolution, the entrepreneurial
ingredient was the unprecedented appearance of salaried managers who could form and run large
administrative hierarchies that for the first time in history combined production with distribution
and marketing activities on a large scale. By the mid twentieth century such institutions were
well established. Thus, some past cross-border entrepreneurial behavior and outcomes can be
explained, but more recent issues, such as accelerated internationalization, require alternative
theoretical approaches.
The process of firm internationalization following World War II was described by
Vernon (1966) as the product cycle. The concept explained a then frequently observed pattern of
domestic product development, followed by exporting, and then by foreign production. Firm
behavior in the early stages of the product cycle was entrepreneurial in its discovery and
international exploitation of novel goods. However, Vernon (1979) later noted that international
development eventually made the product cycle less and less relevant. Therefore, explanations
for twenty-first century international entrepreneurship remain elusive.
Stopford and Wells’ (1972) research on the organizational structures and processes of
large multinational corporations described an evolution in organizational forms. To the degree
that managers initiated and continue to initiate new forms for managing transnational commerce
9
(Ghoshal & Bartlett, 1997), international entrepreneurship continues. However, the work of
these scholars is not so much a theory as a rich and valuable description of their observations.
Perhaps the model of firm internationalization most familiar to entrepreneurship scholars
is the Uppsala model. Based on their studies of Swedish manufacturing firms, Johanson and
Vahlne’s (1977) showed initial internationalization activities were targeted to psychically close
markets and used the less committed modes of entry, such as exporting. Johanson and Vahlne
(1977) explained that the firm learned and increased its foreign market knowledge over time
primarily through experience, and only then did it increase its foreign market commitments and
later expand to more psychically distant markets. Despite weaknesses (Andersen 1993), the
Uppsala model has provided an attractive explanation for the traditional incremental
internationalization of firms over time (Johanson & Vahlne, 1990; OECD, 1997).
Not all firm internationalization is of the traditional incremental type, however. In the
current environment there exists much regional and global integration of trade and production
(UNCTAD, 2001), and accelerating technological changes both enable and facilitate more rapid
internationalization among firms. In particular, researchers have carefully detailed cases of new
venture firms that have skipped incremental stages and/or have been international virtually from
inception (McDougall, Shane, & Oviatt, 1994). The ventures engaged in early
internationalization have been referred to as international new ventures (McDougall et al., 1994);
born globals (Knight & Cavusgil, 1996; Madsen & Servais, 1997), infant multinationals
(Lindqvist, 1991), instant internationals (Preece, Miles, & Baetz, 1999), and global start-ups
(Oviatt & McDougall, 1994), with no clear definitional differences between the choice of terms.
These ventures are defined as,
10
“a business organization that, from inception, seeks to derive significant
competitive advantage from the use of resources and the sale of outputs in
multiple countries” (Oviatt & McDougall, 1994, p. 49).
Born globals and international new ventures are the terms most frequently used in the academic
literature. The driving forces and facilitating factors that produced the accelerated
internationalization of new ventures, as well as small and medium size entrepreneurial firms, are
discussed by Knight and Cavusgil (1996), Madsen and Servais (1997) and Oviatt and McDougall
(1999). Research studies have included ventures from all regions of the world, and while the
samples have been dominated by technology-based ventures, there are examples from other
industries as well. A recent literature review of research on such firms is presented by Rialp-
Criado, Rialp-Criado, and Knight (2003).
Oviatt and McDougall (1994) established the elements of a theory of international new
ventures. Such firms are said to own certain valuable assets, to use alliances and network
structures to control a relatively large percentage of vital assets, and to have a unique resource
that provides a sustainable advantage and is transferable to a foreign location. However, those
static elements contained no description of the dynamic process by which international new
ventures formed. Oviatt and McDougall (1999) identified some important parts of such a
process theory. The foundation was rapidly changing computer, communication, and
transportation technology, and the primary building blocks were the political economy, industry
conditions, firm effects, and the management team. These ideas, however, need further
development. For example, no attempt has been made that we know about to combine the static
and dynamic concepts. Moreover, none of these ideas has been subjected to rigorous empirical
tests. The importance of conducting such tests is highlighted by the fact that some research has
shown alliances may not be employed by international new ventures as often as predicted by the
11
static elements believed to explain the existence of international new ventures (Shrader, 2001;
Shrader, Oviatt, & McDougall, 2000).
Recently, Zahra and George (2002) highlighted the cross-border entrepreneurial activity
of established corporations, and proposed a model of forces that influence the degree, speed, and
geographic scope of corporate international entrepreneurship. They hypothesized that the
political and economic environment and an organization’s strategy moderate the effect of
organizational factors, such as the management team and firm resources, on international
entrepreneurial behavior and competitive advantage. Their model, however, represents one of a
variety of possible moderating, mediating, and interacting models using the variables they
introduce (Lumpkin & Dess, 1996), and it does not provide an exhaustive list of possible
important forces at work. Thus, much empirical work is needed to test Zahra and George’s
(2002) ideas.
In summary, while traditional incremental firm internationalization is still often observed,
both international business and entrepreneurship scholars have successfully challenged the
assumption that it is universal and established that an important group of firms enjoy quite
accelerated internationalization (e.g., Turnbull, 1987; Hedlund & Kverneland, 1985; Brush,
1992; Jolly, Alahunta, and Jeannet, 1992; Andersen, 1993; Rennie, 1993; Oviatt & McDougall,
1994; McDougall, et al., 1994; Bell, 1995; Coviello and Munro, 1995, 1997; Roberts & Senturia,
1996; Knight & Cavusgil, 1996; Bloodgood, Sapienza, & Almeida, 1996; Madsen & Servais,
1997; Petersen and Pedersen, 1997; Burgel & Murray, 2000; McAuley, 1999; Autio, Sapienza,
& Almeida, 2000; Autio & Sapienza, 2000; Madsen, Rasmussen & Servais, 2000; Shrader et al.,
2000; Zahra, Ireland & Hitt, 2000; Bell and McNaughton, 2000; Crick & Jones, 2000;
Aspelund & Moen, 2001; Larimo, 2001; Moen, 2002; Moen and Servais, 2002). We cite this
12
incomplete list of 29 publications for the purpose of encouraging the academic community to
build on and extend this work and to not continue simply challenging the Uppsala model. Even
scholars who originated the Uppsala model have accepted the challenge. In a recent article,
Johanson & Vahlne conclude that,
we have a situation where old models of internationalization processes are still
applied quite fruitfully at the same time as a number of studies have suggested
that there is a need for new and network-based models of internationalization. We
think it might be worthwhile to reconcile and even integrate the two approaches”
(2003: 84).
Johanson and Vahlne (2003) provide the bare outline of a proposed integration that uses
the interplay of experiential learning and resource commitment in organizations as its driving
mechanism. These are, of course, concepts from the traditional Uppsala model, but they
combine them with a new focus on network relationships involving customers and suppliers.
They hypothesize that firms learn and benefit from such relationships and, therefore, make
increasing commitments to them. Those relationships, in turn, sometimes lead them to enter
foreign markets, at times incrementally and at times quite rapidly. However, Johanson and
Vahlne (2003) draw the unexpected conclusion that with a network-based model foreign entry
and expansion are no longer the most interesting scholarly issues. Rather, how customer and
supplier relationships are established and developed are the key research questions. Such a
conclusion about the power of networks from these scholars strongly indicates a need for further
development of the model and empirical testing.
Network Theory
Networking is a powerful tool for the entrepreneur (Dubini & Aldrich, 1991), and
network analysis has been a powerful framework for international entrepreneurship researchers.
Firms use their networks to gain access to resources, to improve their strategic positions, to
13
control transaction costs, to learn new skills, to gain legitimacy, and to cope positively with rapid
technological changes (Alvarez & Barney, 2001; Bonaccorsi, 1992; Hitt & Ireland, 2000; Das &
Teng, 1998; Gulati, 1995).
Networks emphasize reciprocity norms, personal relationships, reputation, and trust
(Larson, 1992). The entrepreneur’s network represents social capital that is intangible and
idiosyncratic, and it appreciates through repeated interactions that help build trust (Coleman,
1990). Trust is the basic element that determines the solidity of the network link (Dubini &
Aldrich, 1991). When an entrepreneur draws upon a network contact in an exchange, thereby
making use of his/her social capital, a debt is incurred for which there is expected reciprocity.
As noted previously, Johanson and Vahlne’s (2003) network model calls specifically
upon international entrepreneurship researchers to integrate network theory into existing theories
of firm internationalization. Earlier calls to draw upon network theory in international
entrepreneurship were made by several researchers (Oviatt & McDougall, 1994; Bell, 1995,
Coviello & Munro, 1995, 1997). Separate from the study of international entrepreneurship,
scholars in both international business (e.g., Johanson and Mattsson, 1988; Ghoshal & Bartlett,
1991; Axelsson & Easton, 1992; Forsgren, 1989) and entrepreneurship (e.g., Aldrich & Zimmer,
1986; Larson & Starr, 1993) previously recognized the importance of network research to their
fields of study.
One of the four elements of Oviatt and McDougall’s (1994) new venture
internationalization theory is “alternative governance structures.” They posit that because
international new ventures lack sufficient resources to control many assets through ownership,
they must rely on alternative means of control. They point to the network structure as one of the
new ventures’ most powerful resource-conserving alternatives to internalization. The network
14
exchange structure offers the typically financially constrained entrepreneurial firm a critical
leveraging opportunity whereby resources can be gained without incurring the capital
investments of vertical integration. The entrepreneurial firm is, thereby, provided a way to
maximize its adaptability to its environment (Larson, 1992).
Focusing primarily on the personal and extended networks of the entrepreneur and
his/her management team, several studies challenging traditional models of internationalization
have drawn upon network theory. For example, the findings of Bell’s (1995) comparative study
of export behavior among entrepreneurial software firms in Finland, Ireland, and Norway led
Bell to the conclusion that the network approach was a better explanation of the
internationalization process of these firms. McDougall et al., (1994) explained that networks
helped founders of international new ventures, or born-globals, to identify international business
opportunities, and those networks appeared to have more influence on the founders’ country
choices than did their psychic distance. Oviatt and McDougall (1995) identified strong
international business networks as one of the seven most important characteristics of successful
global start-ups. Servias and Rasmussen (2000) found that networks were important to the
majority of the Danish firms in their study, although Rasmussen, Madsen & Evangelista’s
(2001) case studies of five Danish and Australia born-globals did not find support for the
importance of the founder’s network. Finally, much of Coviello and Munro’s international
entrepreneurship research has used network theory to examine international market development
and marketing-related activities within international markets. Based on the findings of their study
of the internationalization processes of New Zealand software firms, Coviello and Munro (1995)
noted:
Our understanding of the internationalization processes of entrepreneurial
firms is enriched when we expand the analysis beyond the individual firm’s
15
actions and address the impact of a firms’ role and position within a network of
relationships. From this perspective, foreign market selection and entry initiatives
emanate from opportunities created through network contacts, rather than solely
from the strategic decisions of managers in the firm. …it is not surprising that the
observed patterns of international market growth for entrepreneurial high-
technology firms differ from the processes of the larger manufacturing firms
outlined in the literature. Their relatively rapid and dispersed involvement in
foreign markets creates the impression of being random and somewhat irrational,
when in fact the span of activities can be linked to opportunities emerging from a
network of relationships. (p. 58)
While much of the international entrepreneurship research using network theory has
focused on the personal and extended networks of the entrepreneur/entrepreneurial team, there is
also an important body of work that focuses on organizational networks. Viewing the
multinational corporation as an interorganizational network, Birkinshaw’s (1997) corporate
entrepreneurship study builds a conceptual framework for examining the initiatives of the
subsidiaries of multinational corporations. Hara and Kanai’s (1994) study of strategic alliances
between a Japanese company and three Silicon Valley companies proposes the “network of
networks mode” in which a key company or person has the role of creating a global network of
local networks.
The role of governments in fostering networks has been examined by several researchers.
As discussed by McNaughton and Bell (1999), several countries have made government funding
available for relationship brokers to encourage networks that promote growth and
internationalization. Cooke and Morgan, (1993, 1994) highlight the role of government agencies
and business associations in promoting networks in their studies of successful regional
economies.
In summary, network analysis represents a powerful framework for the international
entrepreneurship researcher. Networks help entrepreneurs identify international opportunities,
16
establish credibility, provide access to critical resources including knowledge, and often lead to
strategic alliances and other cooperative strategies.
Learning Theory and Knowledge Management
The need to acquire local market knowledge is a key tenet of internationalization. Thus,
scholars have recognized the importance of organizational learning for entering or expanding in
the international marketplace (e.g., Andersen, 1993; Barkema & Vermeulen, 1998; Erramilli,
1991; Inkpen & Beamish, 1997; Luo, 1997; Lord & Ranft, 2000; Zahra, Ireland, & Hitt, 2000).
Learning was a primary element of Johanson and Vahlne’s (1977) original internationalization
model and is likewise a primary element of their recently presented business network model of
internationalization (Johanson & Vahlne, 2003).
Organizational learning is defined by Autio et al. as “the process of assimilating new
knowledge into the organization’s knowledge base” (2000: 911), and Huber notes that “an
organization learns if any of its units acquires knowledge that it recognizes as potentially useful
to the organization” (1991: 271). Thus, much of the growing body of research on knowledge
management is closely related to learning theory. The management of knowledge is particularly
challenging in cross-national settings where different cultures, corporate governance systems,
time zones, and languages are involved (Kummerle, 2002).
For entrepreneurial firms competing in international markets, the learning process is
critical in helping firms overcome their liabilities of foreignness (Hymer, 1976; Inkpen &
Beamish, 1997; Zaheer, 1995), as much of this liability relates to the foreign firm’s lack of local
market knowledge (Lord and Ranft, 2000). In addition, learning is critical to the entrepreneurial
firm competing internationally because knowledge is often the most critical asset of the firm and
is its primary basis of achieving competitive advantage. The importance of learning theory, and
17
the related study of knowledge management, is well illustrated in the case studies of international
new ventures (Kuemmerle, 2002; McDougall et al., 1994; Simões & Dominguinhos, 2001). To
compete successfully in the international arena, these ventures must effectively manage the
learning process so as to build knowledge stocks and create new knowledge.
One of the most compelling international entrepreneurship studies using learning theory
is that of Autio et al. (2000) in which they introduce the concept of “learning advantages of
newness.” Using panel data from the Finnish electronics industry, they concluded,
“as firms get older, they develop learning impediments that hamper their
ability to successfully grow in new environments and that the relative flexibility
of newer firms allows them to rapidly learn the competencies necessary to pursue
continued growth in foreign markets” (2000: 919).
As the field of international entrepreneurship positions itself as a distinctive field of study, the
“learning advantages of newness” represents a distinct concept that is core to the area. It
represents a counterpoint to the widely accepted concept that there is a “liability of newness” for
young organizations (Stinchcombe, 1965). Thus, the learning advantages of newness deserve
additional empirical testing and conceptual development so that both the advantages and
liabilities of young firm age can be understood and compared.
Another noteworthy study is Zahra et al. (2000). Using mail survey data from 321 new
ventures, Zahra et al. (2000) examined how these ventures used the technological learning
gained through internationalization. Specifically, the study examined the effects of international
expansion on a firm’s technological learning. International expansion was measured by
international diversity and mode of market entry. The study also examined the effects of this
learning on the firm’s financial performance. The results showed a strong positive relationship
between international diversity and the breadth, depth, and speed of a new venture’s
18
technological learning. The mode of international entry also was related to technological
learning, and learning, in turn, had a positive performance impact.
In conclusion, there is rich opportunity for the use of learning theory in studies
concerning knowledge management, international diversification, international expansion,
alliances, and networks (Barkema &Vermeulen, 1998; Khanna, Gulati, & Nohria, 1998; Zahra et
al., 2000; Bresman, Birkinshaw, & Nobel, 1999). Each of these areas of study is important to the
advancement of knowledge within international entrepreneurship.
Conclusion
The field of international entrepreneurship is rich with possibility and opportunity, and
the full extent of its scope is undefined (Acs, Dana, & Jones, 2003). As the field moves from
infancy to what appears will be a high level of growth, there are interesting research questions
that will surely be asked and investigated. We believe the preceding exploration of four
fundamental issues highlights some especially fruitful areas for scholarly research.
As we reviewed articles for this paper, it was noteworthy to us that the authors of the
majority of the multi-authored articles were either exclusively international business scholars or
entrepreneurship scholars. Articles that have authors from both disciplines are unusual.
International entrepreneurship researchers have embraced the notion of multi-country research
teams and excellent examples of scholarly work have resulted; we believe disciplinary diversity
would be just as beneficial. As the role of the entrepreneur is increasingly being explored in
international business journals and the internationalization of the entrepreneurial firm appears in
traditional entrepreneurship journals, we encourage the formation of research teams composed of
entrepreneurship and international business scholars. Too often, international entrepreneurship
articles appearing in entrepreneurship journals demonstrate a lack of knowledge of international
19
business theories and research. Likewise, international entrepreneurship articles appearing in
international business journals demonstrate a need for greater understanding of the scholarly
work in entrepreneurship. Although both entrepreneurship and international business are multi-
disciplinary, there appears to have been limited research collaboration between entrepreneurship
and international business scholars. The increased comingling of entrepreneurship and
international business scholars that is evident at research conferences is encouraging. As
entrepreneurship scholars extend their networks to include international business scholars, and
vice versa, we hope that collaborative research projects will be launched that consider the
fundamental issues highlighted in this paper.
20
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