The IE research that applies neo-institutional theory in the studies of emerging economies is an even more narrowed down and contextualized research niche.
Following the Jones et al. (2011) classification, the research area could also be divided into the three following streams: (1) entrepreneurial internationalization, (2) comparative studies on entrepreneurship, and (3) comparative entrepreneurial internationalization. In order to describe the state-of-the-art of the NIT research in IEEE, a literature review of the key studies was conducted (Table 5).
In order to identify the core studies applying institutional theory in international entrepreneurship research in emerging economies, a search in two major databases, Web of Science and EBSCO, was conducted using search terms such as “international entrepreneurship”, “internationalization”, “entrepreneurial growth”, “institution*”,
“emerging market*”, and “SME”. A total number of 23 relevant studies was identified after several rounds of searches. Four more studies were added to the list by the author, due to the high relevance and importance of these publications (Estrin et al. 2013, Gupta et al. 2012 a, b; Eunni and Manolova 2012), although they were not identified by the search engines.
Through conducting this review, it became clear that the outlined research field at the intersection between institutional theory, international new ventures theory, and entrepreneurship is currently at an early stage of development. This was visible through the high number of conceptual studies that have not yet been empirically tested, neither qualitatively nor quantitatively (i.e. Li 2013; Webb et al. 2010; Kiss and Danis 2010;
Kshetri 2009; Roxas et al. 2008).
The existing studies were conducted at different levels of analysis, that is at individual level (Riddle et al. 2010), at firm level (Liu et al. 2011), at country level (Kshetri and
Dholakia 2011; Tonoyan et al. 2010), and as multi-level analysis (Estrin et al. 2013).
Some of the reviewed studies addressed institutional influences only as background explanatory constructs (Liu et al. 2011). In the context of emerging economies, a stage of institutional transition seems to provide an important effect on internationalization-based growth (Li 2013; Kiss and Danis 2010).
Research method composition in the conducted studies remained quite limited.
Qualitative research is predominantly based on the case studies (Riddle et al. 2010), while quantitative research utilizes first-generation statistical methods, such as factor analysis and regressions (Demirbas et al. 2010). Only one study applies covariance-based structural equation modeling (Liu et al. 2011), however, institutional theory is applied in this study only as a background explanatory tool.
The reviewed studies present a variety of research topics, although several focal themes of discussion were identified. First, the effect of the stage of institutional transition on firm internationalization was discussed (Li 2013; Danis et al. 2010; Kiss and Danis 2010). The internationalizing firms launching their foreign operations from the economies in the later stages of institutional transition seemed to be less dependent on the national network ties (Kiss and Danis 2010) and managerial network intensity (Danis et al. 2010). Firms in the economies in the later stages of transition seemed to rely more on competence-based than on the price/volume-based or network-based internationalization strategies (Li 2013). Shared institutional practices shaped managerial practices in the same way, regardless of the stage of institutional transition (Danis and Shipilov 2012).
Second, network-level variables were found to mediate the effect of institutional discontinuances on the entrepreneurial growth process (Webb et al. 2010). Strong national ties and weak international ties, accessible through brokers, contribute to faster new venture internationalization in early phases of institutional transition (Kiss and Danis 2010). Social networks mediated some, but not all, institutional discontinuances (Estrin et al. 2013).
Third, the influence of the strategic orientations on internationalization strategy in emerging economies was discussed. In emerging economies with a highly unpredictable institutional environment, entrepreneurial orientation directly supported internationalization, while market orientation had an inversed U-shape relationship with internationalization (Liu et al. 2011). Both formal and informal institutions influenced a firm’s strategic posture, which is tightly related to the firm’s entrepreneurial orientation (Roxas et al. 2008).
Fourth, higher institutional uncertainty was found to lead to the choice of joint venture entry mode over wholly owned subsidiary (Demirbag et al. 2010). The reduction of institutional-related risk was also possible through affiliation with national business groups and foreign partnerships (Gaur et al. 2013).
38
Fifth, international comparisons of conductivity of the institutional environment for entrepreneurship were provided (Eunni and Manolova 2012; Gupta et al. 2012 a, b;
Manolova et al. 2008). No significant difference was found in the perception of the favorability of the regulatory environment among BRIC countries, while the perception of normative and cognitive environments varied significantly (Eunni and Manolova 2012). The normative dimension in Brazil, India, and China was found to be more favorable than in Russia (Eunni and Manolova 2012). The results prove sufficient invariance of the “country institutional profile for entrepreneurship” (CIPE) construct (Gupta et al. 2012 a, b; Manolova et al. 2008).
Sixth, comparative studies were presented by the macroeconomic research, analyzing the impact of the institutional environment on internationalization across emerging economies (Hermelo and Vassolo 2010; De Clercq et al. 2010; Hitt et al. 2004). Finally, three critical review studies discussing the impact of institutions on IEEE were identified (Jormanainen and Koveshnikov 2012; Kiss et al. 2012; Drori et al. 2009).
Table 5. Core studies applying Institutional Theory in International Entrepreneurship research in emerging economies Author (s)Journal, year Aims TheoriesMethod, sampleVariables Results Type A: Entrepreneurial Internationalization Li, J. Journalof International Entrepreneurship, 2013
Toexamine the influenceof institutional transitions andmarket opportunities in emergingeconomies onthe internationalizationof entrepreneurial firms Institutional theory (institutional transition),INV theory, Conceptual paperStages of institutionaltransition, strategicchoices for internationalization of SMEs from emerging economies
Duringthe beginningstag transition, the network- and per relationship-basedstrategies dominant; during the earlier stag price/volume-basedstrategies common; duringthe later stag competence-basedstrategies applied. Gaur et al.Journalof World Business, 2013Toexplorewhat factors enable emergingeconomy firms tomake a strategicshift from export to FDI
RBV, Institutional theoryQuantitative – exponentialmodeling; 28,563firm-year observations from India (1989–2005) Institutionalresources (business groupaffiliation, foreign participation, service sector); Firm resources (Export intensity, exportexperience, technology, marketing), Shift from Export to FDI
The firms thatcanuse institutionaladvantages are likely to shift from export to FD firms thatare affiliatedw business group, have more firm group-levelinternationalexper have moretechnological marketingresources, andoper service industries are morelik shift from export to FDI. Liu et al.Journalof World Business, 2011Toexamine how, in emergingmarkets, ownershipstructure affects EOandMO strategicorientations, andhoweffective theseorientations are infacilitating internationalization
Internationalizatio ntheory, agency theory, theoryof corporate governance, Institutional theory Quantitative – structural equationmodeling, 607 firms from 8regions of China Ownershipconcentration, CEO ownership, Entrepreneurial orientation, Marketorientation, Internationalization
Ownershipconcentrationcause the institutional conditions lead choice of different st orientations.EOdirectlysu internationalization. MOhas inversedU-shape relationship internationalization. Riddle et al.Journalof International Management, 2010
Toexamine how business incubators contributetothe economic development of emergingeconomies bybridgingthe institutionaldivides thattransnational diasporaentrepreneurs Institutional theory (institutional change), Diaspora entrepreneurship, Business incubators Qualitative – case study of an IntEnt incubator in Netherlands thatserves exclusively transnational diaspora entrepreneurs
Institutionalvoids, Incubator services, Desired outcomes Incubator services mediate the of the institutional voids related labor markets,educationalsy risk-capitalproviders,informat analyzers andadvisors,cap enhancers, and transaction facil This mediatedeffectleads formation of new ventures, crea jobs, increaseinFDI,andp spillover effects.
40 face when establishing their international ventures Webb et al.Entrepreneurship Theoryand Practice, 2010 Toexamine how partnerships with NGOs canoffset the negative effects on MNCs inthe caseof pyramid markets Entrepreneurship, network, and institutional theories Conceptualpaperbased onthe secondarycase- study examples
Entrepreneurialalertness, Opportunityrecognition, Opportunity exploitation, Growth; Inter-Institutionaldistance, Formalinstitutionalvoids,Intra- Institutional distance; Knowledge depth, Social embeddedness, and Network breadth of NGO partner
Institutional-level variables affect the entrepreneurialprocess atdifferent stages. Inter-institutionaldistance affects the linkage between entrepreneurialalertness and opportunityrecognition. Formal institutional voids prevent opportunity exploitation. Intra-institutional distanceaffects growth. Network (proto-institutional) levelvariables mediate the effect. Danis et al.Journalof International Business Studies, 2010
Toexamine howthe competitive strategies of SMEsevolve duringinstitutional transitions,andwhat kindof effectit provides onfirm growth Institutional transition, SME internationalizatio n, Network theory, Strategic management and market-based strategies Quantitative – t-tests, regression; 135 SMEs in 1993, and 200 SMEs in 2001 from Hungary Managerial networkingintensity, Market-basedstrategies, Firm growth, Firm type,Nof employees, N of organizations the manager worked for, Firm age
The importanceof managerial networking intensity (i.e., developing andmaintainingrelationships that maybe usedfor business purposes) declines markedly over time, whereas the importanceof market-based strategies increases.Managerial networkintensityis strongly associatedwithSME growthinthe earlystages of transition. Market- basedstrategies are not associated with growth. Changes in strategy are driven by social norms that legitimize the firm’s behavior and by knowledge acquisition and learning. Kiss, A.N. and Danis, W.M. Journalof International Entrepreneurship, 2010
To examine the role of social networks in the internationalization process of new ventures intransition economies Network theory of internationalizatio n, institutional theory Conceptual paperNationalandinternational networks of anentrepreneur, Brokers, Structural embeddedness inthe networks, Stage of institutionaltransition, Internationalization speed
Strongnationaltiesandweak internationalties, accessiblethrough brokers, contributetofasternew ventureinternationalizationinthe early phase of institutional transition. However, inthe later stages, a low number of strong national ties and a high number of weak international ties is positivelyassociatedwith internationalization. Demirbag et al.Management International Review, 2010
To examine the effect of the institutional factors onthe choice of anentrymode decisionof the FDI theories, Institutional theory, Entry mode theory Quantitative – factor analysis, logistic regressions; 104 Turkish MNCs operatingin Central Asian Republics Factors of political risk(ethical uncertainties andarbitrariness, attitude towards FDI,riskof interventions,political-economic factors, international relations of Higherethical-societaluncertainty leads tothe choice of joint venture entrymode overwhollyowned subsidiary. There is a strong correlation between the perceived risk
emergingeconomies’ MNCs investing in the emerging economies (Azerbaijan, Kazakhstan, Turkmenistan, Uzbekistan, and Kyrgyzstan) the host, lawandorder);Bribe payerindex, Natural resource intensityof the targetindustry, entrymode,entryroute, foreign parent size
of interventionandthe joint v entry mode. Only limited supp the Uppsalainternational model is found. Rui,H.and Yip, G.S. Journalof World Business, 2008Toexamine the strategicintentions in foreignacquisitions made byemerging market firms.
Strategicintent perspective (SIP), RBV, Internationalizatio ntheories of MNCs,Corporate entrepreneurship and M&A Qualitative – in-depth studyof three Chinese firms (Lenovo, Nanjing Automobile and Huawei Technology) Internal conditions push for SIP, Externalpullfor SIP, Strategic goals of the Chineseforeign acquisitions,External environment,institutional constraints and incentives
Chinese firms strategically use c borderacquisitions toachieve such as acquiring strategic capab tooffset their comp disadvantages andutilizing unique ownershipadvantages, making use of institutional ince andminimizinginstitu constraints Estrin, S., Korosteleva, J. and Mickiewicz, T.
Journalof Business Venturing, 2013 Toexplain entrepreneurial growth aspirations across individuals and institutionalcontexts inemerging economies Entrepreneurial growth, Institutional theory Quantitative – multilevel modeling; GEM surveys, 42countries (both developedand emerging) Constraints onexecutives, TPR, Corruption, Government size, GDP per capita PPP, GDP growth rate, age,sex, current employment,education, owner- manager, Business angle in last 3 years, Knows other entrepreneurs, Entrepreneur’s employment growth aspirations Entrepreneurship benefits from (IPR) andsmall government, constrainedbycorruption. networks mediatesomebut n institutional discontinuances. Type B: International Comparisons of Entrepreneurship Eunni and ManolovaJournalof Enterprising Culture, 2012
How conducive is the institutional environment for entrepreneurship in the BRIC countries?
Institutional theory(country institutional profilefor entrepreneurship) Quantitative –490 business students from BRIC Regulatory, Normative, Cognitive pillars of institutional environment for entrepreneurship
No significant difference was fo the perceptionof the favorabil the regulatory environment, wh perception of normative and cog environments varied significantl normative dimensioninB, I, was found to be more favorable in R. Danis and ShipilovThunderbird International Business Review, 2012
Whatare the critical knowledge types for SME success? How do SMEs acquire these types of knowledge? What factors influence the success of knowledge acquisition? How does the levelof institutional development affect the Institutional theory (institutional transition), Knowledge management (knowledge acquisition) Qualitative – multiple case-study; 12SMEs from Hungaryand Ukraine Importanceof knowledge for success, Difficultyof knowledge acquisition, Effective methods of knowledge acquisition
Sharedinstitutionalpractices managerial practices in the same evenatdifferent stages in institutionaltransition. Man knowledge was perceived as th difficult to acquire in compariso marketingandtechno knowledge.Bothmanageria marketingknowledge were fou be criticalfor the success company, although the priority to these sets of knowledge may
42 importance of different types of knowledge?basedonthe firm’sstage of development. Gupta et al.International Entrepreneurship andManagement Journal, 2012a
1.Is the CIP (or CIPE) constructcross- countryinvariant in REME countries? 2.Consideringthe major differences in their institutional structures and traditions, which of the REME countries are morefavorableto entrepreneurshipand onwhatinstitutional facets?
Institutional theory(country institutional profilefor entrepreneurship) Quantitative –CFA SEM; REME countries (Brazil-183, China-170, India-232, South Korea- 224),a total of 809 responses from university-levelbusiness students Regulatory, Normative, Cognitive pillars of institutional environment for entrepreneurship
1.The results prove sufficient invarianceof the CIPE construct across the REME countries. 2.The overall institutionalprofile scores are significantlydifferent amongthe REMEs.China is ranked mostfavorablefor entrepreneurship, followed by India, South Korea, and Brazil. Gupta et al.Journalof Developmental Entrepreneurship, 2012b
1.Isthe CIPE instrument validfor developmental states? 2.Giventhe differences between SouthKorea andthe UAE,whichof these twocountries is more conducive to entrepreneurshipand why?
Institutional theory(country institutional profilefor entrepreneurship) Quantitative –CFA SEM; University business students from SouthKorea (200) and the UnitedArab Emirates (152) Regulatory, Normative, Cognitive pillars of institutional environment for entrepreneurship
1.The CIPE instrument is validfor developmental states. (However, the measures of the institutionalprofiles operated differentlyfor eachsample. After CFA, the Korean sample has a better fit than the UAE sample.) 2.The CIPE means were significantly smaller inSouthKorea thaninthe UAE. Kshetriand DholakiaJournalof International Entrepreneurship, 2011
Toinvestigate the differences between regulative institutions affecting entrepreneurshipin China and India.
Institutional theory(regulatory pillar) Quantitative – t-tests; WorldBusiness Environment Survey data for China and India Regulatory, participatory, and supportive roles of the government
Chinesefirmsperceivedtheir court systemmorefavorablycomparedto Indianfirms. China outperformed India in terms of bureaucratic support for entrepreneurshipatthe local/regionallevel. The shift in businesses’ perception of the relation between government, bureaucracy and private firms in the 3-year period was higher in India than in China. Tonoyan et al.Entrepreneurship Theoryand Practice, 2010
Whatare the determinants of corruption in transition economies of the post- Soviet Union, Central- EasternEurope,and Westernindustrialized Institutionaland network theoriesQuantitative – multilevel modeling; 20countries basedonthe data from The WorldBusiness Environment Survey Corruption, Financial institutions, Legalinstitutions,Timefor red tape, Legal alternatives to bribes, Competitor’s unfair play, shadow economy, investments from familyandfriends, trusttoward public officers,firm size, firm Low efficiency of financial and legal institutions andthe lackof their enforcement increase the likelihood of engagement incorruption. When illegal business activities are widespread, their legitimacy increases. Existenceof closedsocial
states?industry, firm ownership, GDP per capita, duration of democracynetworks withfamily, friend nationalbureaucrats breeds g for corruption. KshetriJournalof International Entrepreneurship, 2009 Toexamine various forms of entrepreneurshipin post-socialist(PS) economies Institutional theory, Entrepreneurship in PS economies ConceptualRegulatory, Normative, Cognitive environment,Government legitimacy
Astrongregulatoryenviro encourages entrepreneurship economies. Normative andcog institutions in PS economies ar supportive of entrepreneurship t developedmarketeconomies, institutional inertia. Roxas et al.Singapore Management Review, 2008
Whatis the relationshipbetween formalandinformal institutions and strategic choices of the micro- and SME firms inemerging economies?
Institutional theory, Strategic perspective of the growth of the firm
Conceptual paperFormalinstitutions (ruleof law, IPR, government policies, regulatoryquality, government assistance),Informalinstitutions (performanceorientation, future orientation, assertiveness, collectivism, powerdistance, humane orientation, uncertainty avoidance), Strategic posture Both formal and informal instit influence a firm’s strategic post a firm that is tightly related to fir Manolova et al.Entrepreneurship Theory& Practice, 2008
1.Isthe CIPE instrument validfor emerging economies? 2.Giventhe different institutionaltraditions and heritage, which of the economies under analysis is more favorableor unfavorablefor entrepreneurshipand for what reasons?
Institutional theory(country institutional profilefor entrepreneurship) Quantitative –CFA SEM; EasternEurope (Bulgaria-136, Hungary- 64, Latvia-54), total 303 responses frombusiness students Regulatory, Normative, Cognitive pillars of institutional environment for entrepreneurship
1.CIPE is validfor em economies in Eastern Europe. 2.The institutionaldifference mostlyinthe individualinstitu dimensions,althoughthe o scores maybe similar.All profiles seemedtobe rela unfavorable for entrepreneurship Type C: Comparative Entrepreneurial Internationalization Beyerand FeningInternational Journalof Business and SocialScience, 2012
What is the impact of formalinstitutions in developedand emergingeconomies on the globalstrategyof firms?
Institutional theory(formal institutions), Internationalizatio ntheories of a firm ConceptualBusiness regulation, Trade barriers, Propertyrights, Global strategyfor developedvs. emerging economies
Emergingeconomies have friendlyregulation, high barriers, and a lack of property r Due tothe differences betwee institutionalenvironments developedandemergingecon the twogroups of countries re different entry strategies. Hilmersson and JanssonJournalof International Marketing, 2012
Whatis the uncertainty-reducing effectof experiential knowledge inmarkets Internationalizatio nprocess theory, Institutional theory Quantitative - SEM; 203 SMEs from Sweden enteringnewEU- memberstates, Russia Internationalizationknowledge, Societalknowledge,Business networkknowledge,Perceived uncertainty Nosupportwas foundfo hypothesis thatexper knowledge reduces uncertainty i marketentryprocess. S
44 withdifferent institutional distances from a firm'shome base?
and China knowledge reduces uncertaintywhen enteringless institutionallydistant markets.Internationalexperiential knowledge of high specificity reduces uncertainty. De Clercqet al. International Business Review, 2010
Whatis the effectof associationalactivity onthe levelof new business activityin EE?
Socialnetwork andinstitutional theories Quantitative - Logit; GEM, WorldValue Survey Associationalactivity, New business activity, Regulatory, normative, and cognitive burdens
Associationalactivityandnew business activityare positively related. The relationshipis stronger for higherregulatoryandnormative burdens and lower cognitive burdens. Thus, social ties and institutions seem to have a substitutive effect. Networks couldbe instrumental inthe environments characterizedbyweak institutions. Hermeloand VassoloStrategic Management Journal, 2010
Toexplorewhether andwhycompetitive advantages are becomingless sustainablein emerging economies?
Institutional theory, Competitive advantage theory of international trade Quantitative – regression analysis;Economatica database, sevenLatin Americancountries, 13 144observations, 21 industries ExitSEP, Period, Institutional development, Multicountry, MNC subsidiary, Log assets, Liabilities, Bank debt, GDP growth
Superior economic performanceis possible. The hazardratefor exiting the superior economicperformance has increasedovertime. The development of the institutional context accelerates the rate of exiting the superior economic performance. Domestic firms find it more difficult toremaininthe superior economic performancethansubsidiaries of foreign MNCs. Hitt et al.Organization Science, 2004Howdoes the institutional environment affect strategicalliance partner selection?
Institutional theory, strategic alliances, transition economies Quantitative – HLM analysis; 63 Chinese and 58 Russian firms 14partner-firm characteristics, Industry, Size,Alliance experience, Attractiveness of a firm as analliancepartner, Probabilityof recommendingan alliance with a firm
China’sinstitutionalenvironment is morestableandsupportive,andit helps firms to take a longer-term view of alliance partner selection, focusing moreonthe potential partner’s intangibleassets alongwith technologicalandmanagerial capabilities.InRussia, where the institutionalenvironment ismore uncertain, firmsfocus onshort-term partnerselection, whichprovides access tofinancialcapitaland complementarycapabilities soas to enhance the firms’ ability to utilize the domestic turbulent environment.
2.4
Multi-theoretical framework for country-level analysis of the institutional environment for international entrepreneurship Although institutional perspective is viewed as particularly relevant for addressing the phenomenon of SMEs’ entrepreneurial internationalization (Baumol et al. 2009) in emerging economies, the single application of neo-institutional theory to the analysis of business strategies in emerging economies will not incorporate a comprehensive theoretical perspective for research. A multi-faceted theoretical view on strategy development and performance should thus, in some way, account for the firm-specific resources (Barney 1991), dynamic capabilities (Teece et al. 1997), and industry-based competition (Porter 1980).SMEs in emerging economies may perceive a lack of resources and specific knowledge required for exploiting the opportunities provided by the foreign markets (Verkhovskaia and Dorokhina, GEM Russia 2011). Industry-based factors, such as low intensity of competitive rivalry in the domestic market and big domestic market size, tend to discourage local SMEs from internationalization (Verkhovskaia and Dorokhina, GEM Russia 2010); however, a potential increase in competition is assumed to push the firms to venture abroad (Zahra and George 2002). Other environmental factors, such as institutional factors, may provide both constraining (Li 2013; Kiss and Danis 2010) and supporting (He 2012) effects for SMEs to internationalize. Together, the resource-based, industry-resource-based, and institution-based views constitute a so-called “strategy tripod” (Peng et al. 2009) for a firm’s entrepreneurial internationalization.
In this doctoral dissertation, entrepreneurial internationalization is defined as exploitation of the opportunities to create future goods and services across national borders, which corresponds to a final stage of the international entrepreneurship process definition by Oviatt and McDougall (2005). Entrepreneurial internationalization can occur in both early and later stages of a firm’s life-cycle and does not necessarily follow the earlier defined stage models of internationalization (Schulz, Borghoff, and Kraus 2009), thus making it important to include both start-ups and older growth firms in the conducted research, and to investigate the whole spectrum of potential foreign market operations of the SMEs.
Hence, in order to address this multitude of theoretical perspectives in entrepreneurial internationalization and capture the research subject in the most comprehensive way, a multi-theoretical framework for analyzing the country-level institutional environment for international entrepreneurship was developed, as presented in Figure 1.
46 Regulatory environment Normative environment Cognitive environment Cultural envitonment Conductive environment
Institution-based view Organ
izational factors
Intensity of competition Market sizeIndustry-based view Dynamic capabilities (Innovation capability)
Resource-based/ Knowledge-based view
Size, age, locationFirm variables
Envir onme ntal factors
International Entrepreneurship Entrepreneurial Intention
Opportunity Search and Discovery Opportunity Exploitation
Entrepreneurial process Growth Maturity Exit
Internationalization proclivity
Opportunity Evaluation International performance
Start-up
Firm lifecycle stages
Beh avioral perspect ive
of en trepre neurship
Neo-Institutional theory Cultural dimention theory Theory of conductiveness
Strategic views of firm internationalization
Fig. 1 Theoretical framework of the study