Small Business Entrepreneurship and the Internal Determinants of International Behaviour

1、small business entrepreneurship and the internal determinants of international behaviourmichela c. mason, department of biology and agro-industrial economics, university of udine, italy, +39 0432 558325rubens pauluzzo, department of economic sciences, university of udine, italy, +39 0432 249590abstr

2、actthe role of italian small and medium enterprises (smes) in the international economic environment has attracted many scholars for its peculiarities. in particular, their development and longevity paths are critical to a better understanding of the main characteristics of the global economy. altho

3、ugh they manage many of the same issues of other companies, they must also face specific problems, mainly related to their status and to the entrepreneurial behaviour of the firm owners.nevertheless, few empirical studies have stressed the importance of human resources and entrepreneurial behaviour

4、for the performance and growth of italian smes, especially in the international environment, where keen competition and difficulties of reaching the necessary resources are often insuperable barriers for smes.the main goal of this study is to suggest a “holistic” model, in order to analyze the relat

5、ions between the internal determinants of the internationalization process of smes, by integrating the individual-level with the firm-level features. the analysis, based on the theories of individual cognitive aspect, international expansion and business strategy, explores the process of internation

6、alization of smes from a cognitive perspective. therefore, the study aims to provide a better understanding of the deepest reasons that lead entrepreneurs towards distinctive paths of international development. finally, the present study stresses the central role played by individual expectations an

7、d risk perception in understanding the international expansion strategies of smes. in particular, it considers some significant relationships between international processes, human capital and the role played by the firm owner.1. introductionexport marketing literature has distinguished the main det

8、erminants of firm export behaviour in two categories: internal and external determinants. macroeconomic literature has widely considered the external determinants, whereas management scholars have mainly focused on the internal determinants. the growing importance of these internal factors, to suppo

9、rt the international development of smes, offers interesting research ideas. the organizational structure, together with management characteristics, entrepreneurial behaviour and human capital represent some of the most relevant elements tightly linked to the international performance of the firms.a

10、lthough smes manage many of the same issues as other companies, they must also face specific problems, mainly related to their status and to the entrepreneurial behaviour of firm owners.nevertheless, few empirical studies have stressed the importance of human resources and entrepreneurial behaviour

11、for the performance and growth of italian smes, especially in the international environment, where keen competition and difficulties of reaching the necessary resources are often insuperable barriers for smes.the main goal of this study is to suggest a “holistic” model, in order to analyze the relat

12、ions between the internal determinants of the internationalization process of smes, by integrating the individual-level with the firm-level features. the analysis, based on the theories of individual cognitive aspect, international expansion and business strategy, explores the process of internation

13、alization of smes from a cognitive perspective. therefore, the study aims to provide a better understanding of the deepest reasons that lead entrepreneurs towards distinctive paths of international development. finally, the present study stresses the central role played by individual expectations an

14、d risk perception in understanding the international expansion strategies of smes. in particular, it considers some significant relationships between international processes, human capital and the role played by the firm owner.our sample frame consisted of 150 smes from the italian region of friuli

15、venezia giulia, with particular regard to the provinces of udine and pordenone, associated with the family business centers of the most significant sectors. the surveys were submitted to a panel of 1509 firms, with an overall response rate of about 10%.2. literature reviewthe analysis aimed at deepe

16、ning what are the main factors of international success for smes. in fact, the openness towards foreign markets is a strategic choice for smes, aimed at, on the one hand, supporting fundamental development paths, and, on the other hand, protecting their businesses (skrt and antoncic, 2004). the lite

17、rature offers a vast and composite theoretical framework, in which the various approaches agree in suggesting the central role and influence played by the family ownership in this process. in particular, at the smes level, the human capital, mainly due to the owner, is the main source of competitive

18、 advantage. in these companies, in fact, the owner does not only invest in the firm activity, but also acts as the main, though not exclusive, decision maker and business manager (glancey, 1998; miesenbock, 1988; prince and van dijken, 1998; reid, 1981; westhead, binks, ucbasaran, and wright, 2002).

19、 several contributions on this matter highlight different aspects of the entrepreneurial role, such as the strategy followed (baird, lyles, and orris, 1994; tyebjee, 1994), managers attitudes (bijmolt and zwart, 1994; ogbuehi and longfellow, 1994), responsibilities (dhanaraj and beamish, 2003) and i

20、nternational experiences (qian, 2002; reuber and fischer,1997) as well as other elements of human capital (andersson, 2000; bilkey and tesar, 1977; cavusgil, 1993; herrmann and datta, 2002; manolova, brush, edelman, and greene, 2002; mcauley, 1999; moini, 1995; trevino and grosse, 2002) the influenc

21、e of managerial characteristics on the internationalization process has been analyzed by leonidou and katsikeas, (1996); leonidou, katsikeas and percy, (1998) and manolova , edelman and greene, (2002).considering the studies focused on identifying the success factors of internationalization, it is t

22、herefore possible to detect an evolutionary path characterized by the gradual transition from tangible determinants (foreign markets, export incentives) to more intangibles dimensions, such as demographic features and psycho-cognitive aspects of management (dichtl, koglmayr and muller 1990; muller 1

23、991).in order to better understand the main reasons for success in the international markets, it is necessary to develop a model able to consider several variables explaining the complexity of the phenomenon. the number of variables is a fundamental prerequisite in business studies, because the deve

24、lopment of these organizations is influenced by various factors which constantly interact with each other and with the external environment (macharzina and engelhard, 1991).in order to analyze the international performance of smes is therefore necessary to, on the one hand, select a suitable set of

25、variables and, on the other hand, to apply a specific statistical method. several studies suggested different methods to identify the dependent variable (international performance) because, since its introduction (tookey, 1964), a universally shared conceptualization has not been developed (cavusgil

26、 e zou 1994; shoham, 1998). as a result, we would like to suggest a frame of reference of the most important studies focused on the determinants of export success. some of these analysis are presented in table 1.with reference to the theoretical framework presented, we have developed a multi-dimensi

27、onal model able to integrate two levels of analysis: the firm level and the individual characteristics level. in particular, the analysis has distinguished between the “observable” or objective management dimension and the subjective one, emphasizing the relevance of psycho-cognitive aspects. in acc

28、ordance with the upper echelon theory (hambrick and mason, 1994), the study has therefore accepted the assumption that the individual characteristics affect business attitudes, strategic choices and business performance.revising the approach suggested by some authors (aabay and slater, 1989; bijmol

29、and zwart, 1994; holzmller and stottinger 1996, 2001), the model identifies several explanatory variables, emphasizing the importance of subjective entrepreneurial characteristics, international activity, firm characteristics and objective entrepreneurial characteristics that have a direct and media

30、ted effect on international performance. the study also deepens an issue only marginally considered by the literature: the bond between firm characteristics and international activity.in particular, with reference to the results of various studies (katsikeas, deng and wortzel, 1997; wolff and pett,

31、2000 the authors confirm the hypothesis that there is a direct link between the number of employees and the international activity of the firm.), the analysis has accepted the assumption that smaller dimensions (small number of employees) are positively related to international activity. this sugges

32、ts that smes do not follow competitive paths based on their dimensions, as larger companies usually do, but, in order to find the needed resources at lower costs, they show an interesting orientation to international activity. this supports the hypothesis that the international activity of smes is d

33、ominated by a resource seeking orientation, influenced by the comparative advantages that can be reached in terms of factor costs and especially of labour costs.the model analyses the relationships between the following set of variables and international performance since smes are not able to influe

34、nce significantly the external environment, due to their small dimension (bijmolt e zwart, 1994), we have excluded the environment dimension from the analysis.:firm characteristics (company size, age, degree of innovation/technology);objective entrepreneurial characteristics ogg (education, age, wor

35、k experience, international experience);subjective entrepreneurial characteristics sog (proactivity, risk acceptance, tolerance for ambiguity, initiative, personal development, relationship with uncertainty);international activity int (internationalization methods, expansion strategies, internationa

36、l planning, internationalization motivations, resource seeking orientation, foreign procurement).international performance ip (export sales/total turnover, international market share) see also sousa c.m.p., 2004.structural equation modeling (sem) was used to test the relationships between observed a

37、nd latent variables. in particular, the analysis focused on a latent structure model with explicit causal relations, developed with lisrel 8.51 (jreskog and srbom, 2001, corbetta, 2002).lisrel is particularly suitable for the purpose of the analysis, because the explanatory investigation requires an

38、 identification of those variables that can be considered as “cause” and those variables that can be considered as “effect”. the model identified with the relevant determinants of international performance is presented in figure 1.3. research methodologyfrom a panel of 1509 small and medium enterpri

39、ses from the italian region of friuli venezia giulia (853 from the province of udine and 656 from the province of pordenone), 150 smes, associated with the family business centers of the most significant sectors, have been surveyed. data were collected by submitting a questionnaire to firm owners in

40、 the period january-december 2007.the empirical analysis is based on multivariate statistics. factor analysis with varimax rotation has been performed to identify the five dimensions: firm characteristics (imp), objective entrepreneurial characteristics (ogg), subjective entrepreneurial characterist

41、ics (sog), international activity (int) and international performance of the firm (ip). the reliability of each factor has been tested with cronbachs coefficient. table 2 shows the results of factor and reliability analysis4. measures and resultsthe estimated structural equation modeling (sem), anal

42、yzed with lisrel 8.51, follows a logic based on two steps. the first one is related to the process for estimating parameters, which takes place through an interactive procedure aimed at minimizing the gap between data produced by the model and observed data. the second step is based on a comparison

43、of the theoretical model with the data observed. if the gap between the matrix of the observed covariance and the expected matrix, generated by the program, is higher than the gap attributable to the stochastic error, the model is rejected. the analysis will then determine if the model is able to re

44、present the examined phenomenon, through four different kinds of fir indices.these indices are represented by the test, the overall model fit indices overall model fit indices include gfi (goodness of fit index) and agfi (adjusted goodness of fit index), by jreskog and srbom (1986).the goodness-of-f

45、it index (gfi) is defined as:gfi=1-ti/max (ti) (1)the numerator in (1) is the minimum of the fit function after the model has been fitted; the denominator is the fit function before any model has been fitted, or when all parameters are zero.the goodness-of-fit index adjusted for degrees of freedom,

46、or the adjusted gfi, agfi, is defined as:agfi=1-(k/df)(1-gfi) (2)where df is the degrees of freedom of the model. this corresponds to using mean squares instead of total sums of squares in the numerator and denominator of 1 - gfi. both of these measures should be between zero and one, although it is

47、 theoretically possible for them to become negative. this should not happen, of course, since it means that the model fits worse than no model at all.we should also consider cn index (critical n). it underlines if the sample size is adequate.cn= (1-)/f-1 (3)where is the 1 - a percentile of the chi-s

48、quare distribution. this is the sample size that would make the obtained chi-square just significant at the significance level a., the incremental fit indices incremental fit indices include nfi (normed fit index), by bentler and bonnet (1980), nnfi (non-normed fit index), by bollen (1988) and cfi (

49、comparative fit index). nfi compares the improvement in the minimum discrepancy for the specified (default) model to the discrepancy for the independence model. a value of the nfi below 0.90 indicates that the model can be improved. nfi=1-f/fi (4)nnfi adjusts nfi for the dgrees of freedom.nnfi=(fi-f

50、)/(fi-1) with f=nf/df and fi=nfi/dfi (5)nnfi close to 1 indicates a good fit. cfi compares the existing model fit with a null model which assumes the latent variables in the model are uncorrelated. cfi close to 1 indicates a very good fit.cfi=1-/i with =max(nf-d,0) and i=max(nfi-di, nf-d, 0) (6) and

51、 the residuals indices residuals indices include rmr index (root mean square residual) and rmsea index (root mean square error of approximation). residuals are the part of observed data that the estimated model is not able to explain.lisrel model consists of two parts: the structural model and the m

52、easurement model. the structural model submits all the causal relations between endogenous and exogenous latent variables. the measurement model analyzes the links between latent and observed variables. the abbreviations commonly used by lisrel are listed in table 3.the measurement model aims at exp

53、laining if the observed variables can effectively measure the latent variables. with reference to our study, the measurement model analyzes the bonds between the subjective entrepreneurial characteristics (sog), the international activity of the firm (int), the performance of the firm on the interna

54、tional markets (ip), the objective entrepreneurial characteristics (ogg), the firm characteristics (imp) and their observed variables.as we stated above, structural equation modeling (sem) is a statistical technique for testing and estimating causal relationships using a combination of statistical d

55、ata and qualitative causal assumptions. in order to provide the fullest evidence of measurement efficacy, before testing the complete model, it should be useful to test also each latent variable. subjective entrepreneurial characteristics (sog) has been conceptualized as a second-order model, explai

56、ned by six observed variables. the fit statistics for the model are rmsea = 0, 90% confidence interval for rmsea (0; 0.0062), nfi = 0.96, nnfi = 1, gfi = 0.99, agfi = 0.97, confirming a very good model-data fit. international activity (int) has been conceptualized as a second-order model, explained

57、by six observed variables. the fit statistics for the model are rmsea = 0.046, 90% confidence interval for rmsea (0.02; 0.0097), nfi = 0.77, nnfi = 0.74, gfi = 0.94, agfi = 0.87, confirming a reasonable model-data fit. international performance (ip) has been conceptualized as a second-order model, e

58、xplained by two observed variables. the fit statistics for the model has not been calculated by lisrel due to the small number of observed variables.firm characteristics (imp) has been conceptualized as a second-order model, explained by three observed variables. the fit statistics for the model are

59、 rmsea = 0.058, 90% confidence interval for rmsea (0; 0.25), nfi = 0.88, nnfi = 0.86, gfi = 0.99, agfi = 0.96, confirming a good model-data fit. objective entrepreneurial characteristics (ogg) has been conceptualized as a second-order model, explained by four observed variables. the fit statistics for the model are rmsea = 0.017