Small Business Entrepreneurship and the Internal Determinants of International Behaviour

1、8th global conference on business & economicsisbn : 978-0-9742114-5-9small 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 o

2、f economic sciences, university of udine, italy, +39 0432 249590abstractthe 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 u

3、nderstanding of the main characteristics of the global economy. although 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 stre

4、ssed the importance of human resources and entrepreneurial behaviour 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

5、study is to suggest a “holistic” model, in order to analyze the relations 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

6、 expansion and business strategy, explores the process of internationalization 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

7、 study stresses the central role played by individual expectations and 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. i

8、ntroductionexport marketing literature has distinguished the main determinants 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 det

9、erminants. the growing importance of these internal factors, to support 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 el

10、ements tightly linked to the international performance of the firms.although 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 stre

11、ssed the importance of human resources and entrepreneurial behaviour 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

12、study is to suggest a “holistic” model, in order to analyze the relations 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

13、 expansion and business strategy, explores the process of internationalization 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

14、 study stresses the central role played by individual expectations and 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

15、sample frame consisted of 150 smes from the italian region of friuli 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 respo

16、nse rate of about 10%.2. literature reviewthe analysis aimed at deepening 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

17、hand, protecting their businesses (skrt and antoncic, 2004). the literature 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 huma

18、n capital, mainly due to the owner, is the main source of competitive 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 dij

19、ken, 1998; reid, 1981; westhead, binks, ucbasaran, and wright, 2002). 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 l

20、ongfellow, 1994), responsibilities (dhanaraj and beamish, 2003) and international 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, 200

21、2; mcauley, 1999; moini, 1995; trevino and grosse, 2002) the influence 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 focuse

22、d on identifying the success factors of internationalization, it is therefore 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-cognit

23、ive aspects of management (dichtl, koglmayr and muller 1990; muller 1991).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 variable

24、s is a fundamental prerequisite in business studies, because the development 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

25、is therefore necessary to, on the one hand, select a suitable set of 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

26、universally shared conceptualization has not been developed (cavusgil 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 t

27、he theoretical framework presented, we have developed a multi-dimensional 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 subjecti

28、ve one, emphasizing the relevance of psycho-cognitive aspects. in accordance 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 th

29、e approach suggested by some authors (aabay and slater, 1989; bijmol 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 o

30、bjective entrepreneurial characteristics that have a direct and mediated 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

31、 various studies (katsikeas, deng and wortzel, 1997; wolff and pett, 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 emp

32、loyees) are positively related to international activity. this suggests 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

33、 supports the hypothesis that the international activity of smes is dominated 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 vari

34、ables and international performance since smes are not able to influence 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/technolog

35、y);objective entrepreneurial characteristics ogg (education, age, work experience, international experience);subjective entrepreneurial characteristics sog (proactivity, risk acceptance, tolerance for ambiguity, initiative, personal development, relationship with uncertainty);international activity

36、int (internationalization methods, expansion strategies, international 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

37、 modeling (sem) was used to test the relationships between observed and 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 purpo

38、se of the analysis, because the explanatory investigation requires an 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.

39、3. research methodologyfrom a panel of 1509 small and medium enterprises 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

40、. data were collected by submitting a questionnaire to firm owners in 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 entrepren

41、eurial characteristics (ogg), subjective entrepreneurial characteristics (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. measu

42、res and resultsthe estimated structural equation modeling (sem), analyzed 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 t

43、he model and observed data. the second step is based on a comparison 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

44、rejected. the analysis will then determine if the model is able to represent 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

45、goodness of fit index), by jreskog and srbom (1986).the goodness-of-fit 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

46、 are zero.the goodness-of-fit index adjusted for degrees of freedom, 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.

47、both of these measures should be between zero and one, although it is 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 i

48、s adequate.cn= (1-)/f-1 (3)where is the 1 - a percentile of the chi-square 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 b

49、onnet (1980), nnfi (non-normed fit index), by bollen (1988) and cfi (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

50、. nfi=1-f/fi (4)nnfi adjusts nfi for the dgrees of freedom.nnfi=(fi-f)/(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 g

51、ood fit.cfi=1-/i with =max(nf-d,0) and i=max(nfi-di, nf-d, 0) (6) and 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 expla

52、in.lisrel model consists of two parts: the structural model and the measurement 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 u

53、sed by lisrel are listed in table 3.the measurement model aims at explaining 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 a

54、ctivity of the firm (int), the performance of the firm on the international 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

55、 estimating causal relationships using a combination of statistical data 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 characte

56、ristics (sog) has been conceptualized as a second-order model, explained 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 activ

57、ity (int) has been conceptualized as a second-order model, explained 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. internationa

58、l performance (ip) has been conceptualized as a second-order model, explained 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, explai

59、ned by three observed variables. the fit statistics for the model are 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