Some Fundamental Issues in International Entrepreneurship

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: mcdougal@indiana.edu

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: BenOviatt@gsu.edu










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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