What explains the degree of internationalization of early-stage entrepreneurial firms? A multilevel study on the joint effects of entrepreneurial self-efficacy, opportunity-motivated entrepreneurship, and home-country institutions
Introduction
The internationalization of early-stage entrepreneurial firms has become a distinct sub-field at the intersection of international business (IB) and international entrepreneurship (IE) research over the past two decades (Oviatt & McDougall, 1994; Zander, McDougall-Covin, & Rose, 2015). However, the question of what drives the internationalization actions of such firms is still a current topic. Recent developments suggest that, to understand the phenomenon, scholars need to pay more attention to the interactions between micro- (i.e., individual) and macro-level (i.e., contextual) antecedents (Zahra & George, 2002; Zhang, Ma, Wang, Li, & Huo, 2016). Particularly, the interactions between the entrepreneurs’ characteristics and the institutional environment proposed by Shane (2003) and Frese (2009) has been highlighted as the key to a multilevel approach (Davidsson, 2015; De Clercq, Sapienza, Yavuz, & Zhou, 2012). However, notwithstanding the increasing awareness of the potential interactions between micro- and macro-level antecedents, determining the joint effects of cross-level factors on early-stage entrepreneurial firms’ internationalization remains challenging (Zahra, Korri, & Yu, 2005).
This paper tackles this challenge by investigating how the multiple interactions between the micro- and macro-level contexts shape the internationalization degree of early-stage entrepreneurial firms. Specifically, building on Shane (2003) individual–opportunity nexus model and Frese (2009) action theory of entrepreneurship, we develop a conceptual framework to examine whether and how entrepreneurial self-efficacy (ESE)—a key personality trait and psychological resource (Rauch, 2014; Shane, Locke, & Collins, 2003)—affects the internationalization degree of early-stage entrepreneurial firms as mediated by opportunity-motivated entrepreneurship. Further, our framework uses new institutional economics (NIE) to investigate how country-level formal institutions provide boundaries for the relationships between ESE, opportunity-motivated entrepreneurship, and internationalization degree of early-stage entrepreneurial firms.
As a micro-level antecedent, ESE has recently attracted significant attention and plays a particularly important role in entrepreneurship (Hannibal, Evers, & Servais, 2016; Schmutzler, Andonova, & Diaz-Serrano, 2019). Self-efficacy refers to the belief in one’s capability to motivate, exercise control over the events, and execute the behaviors necessary to produce specific, certain level performance (Bandura, 1997). In the context of entrepreneurship, self-efficacy refers to individual entrepreneurs’ beliefs in their capabilities to start and run new businesses (McGee, Peterson, Mueller, & Sequeira, 2009; Newman, Obschonka, Schwarz, Cohen, & Nielsen, 2019). While entrepreneurship research has extensively studied the impact of ESE on entrepreneurship (Fitzsimmons & Douglas, 2011), how the personality of individual entrepreneurs affects entrepreneurial firm internationalization has received much less attention in IB literature.
In parallel, entrepreneurship is being progressively understood as a motivational consequence (Frese & Gielnik, 2014; Shane & Venkataraman, 2000). As motivational factors have attracted increasing attention in entrepreneurship research (Carsrud & Brännback, 2011; Hessels, Van Gelderen, & Thurik, 2008; Hisrich, Langan-Fox, & Grant, 2007; Shane et al., 2003), the recent psychological approaches towards entrepreneurship (Frese & Gielnik, 2014) suggest motivational factors are the consequences of entrepreneurs’ personality or cognitive traits (e.g., self-efficacy) and important antecedents of entrepreneurial actions. Based on the premise that human action is the result of the integration between cognition and motivation (Locke, 2000), this psychological approach assumes individuals’ personality traits affect their actions indirectly by mobilizing their motivations (Shane et al., 2003). We thus propose that the theoretical development of entrepreneurial firms’ internationalization determinants requires the consideration of both the personality traits of entrepreneurs and what motivates them to make decisions. Specifically, as a first research objective, we examine whether and how ESE affects the internationalization degree of early-stage entrepreneurial firms by mobilizing opportunity-motivated entrepreneurship.
Entrepreneurship is not merely the outcome of human action, but external environmental factors also play a role in this context (Shane et al., 2003). In addition to micro-level antecedents, substantial empirical research, both on entrepreneurship and IB, suggests that the macro-level institutional environment can facilitate entrepreneurial behaviors (Boudreaux, Nikolaev, & Klein, 2019; Davidsson & Wiklund, 1997; Wu & Chen, 2014). The role of institutions in shaping firm internationalization behaviors is not new to the broad IB field. However, regarding entrepreneurial firms’ internationalization, with the exception of a few recent studies (e.g., Chen, Saarenketo, & Puumalainen, 2018), the focus has been on the impact of host-country institutions, thus neglecting the impact of home-country institutions. Moreover, in both entrepreneurship and IB literature, how entrepreneurs’ home-country institutions interact with their personality traits in influencing firm internationalization remains understudied. This is an important literature gap because IE is a multilevel phenomenon, in which country institutions play a critical role in regulating the extent to which entrepreneurs can exercise their knowledge on IB opportunities while exploiting personal capabilities and resources (McMullen & Shepherd, 2006). In the context of the internationalization of early-stage entrepreneurial firms, it is reasonable to expect home-country institutions to be more important to firm internationalization than host-country institutions, which will only become important as firms continue to grow internationally (Zhang et al., 2016). The second purpose of this study is thus examining how macro-level home-country institutions may facilitate or impede the relationships between ESE, opportunity-motivated entrepreneurship–, and entrepreneurial internationalization.
By addressing the above two objectives, we contribute to both IB and IE literature. We test our model and hypotheses using a multilevel design on a unique sample of early–stage entrepreneurship Monitor–Adult Population Survey (GEM–APS), International Monetary Fund (IMF), and World Economic Outlook Database.
Section snippets
Theoretical background
This section provides an overview of the current research on entrepreneurial firms’ internationalization and introduces the two recent theoretical developments in the entrepreneurship field as building blocks for our conceptual model.
Effect of ESE on entrepreneurial firms’ internationalization: the mediation mechanism of opportunity-motivated entrepreneurship
The entrepreneurial process, whether within or across national borders, occurs because people pursue opportunities (Shane et al., 2003). Drawing upon the individual–opportunity nexus model and the action theory of entrepreneurship, we develop a conceptual model that examines how the variations in entrepreneurs’ personality and motivational attributes affect the degree to which they will act on IB opportunities, manifested by the internationalization degree of newly created firms. There are many
Sample and design
To test the hypotheses, we used a multilevel design, in which individual entrepreneurs (level 1) were nested within countries (level 2). Individual-level data were collected from the 2014 GEM–APS, the latest publicly available GEM data. We collected national-level data from the 2014 GEM–NES and the World Economic Outlook Database. The GEM-APS survey was conducted using a geographically stratified sampling procedure. Respondents and households aged between 18 and 64 were identified for
Hypotheses testing
The means, standard deviations, and pairwise correlation coefficients for all studied variables are shown in Table 4. We then conducted a diagnostic test of multicollinearity by examining the variance inflation factors (VIFs) of all variables. All VIFs were below 5. Therefore, multicollinearity is not a concern (Pfarrer, Pollock, & Rindova, 2010).
Because the study design includes both individual-level responses and country-level measures, hierarchical modeling methods were used for analyzing
Findings
It has long been recognized that entrepreneurs’ engagement in IB opportunity discovery and exploitation is a joint result of individual and environmental factors (Shane & Venkataraman, 2000; Shane, 2003), as well as cross-level interactions between the two (Autio & Acs, 2010). However, scholars have only recently started to examine this research question using different construct/variable levels (see Table 1 for a review). Motivated by the dearth of multilevel studies, this paper aims to
Funding
This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors.
Declarations of interest
None.
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