Policy Drivers Of International Entrepreneurship In Europe


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Policy Drivers Of International Entrepreneurship In Europe

  1. 1. ‘ Policy Drivers of International Entrepreneurship in Europe ’ Vanessa Ratten UniSA 16 March 2006
  2. 2. Background to Research <ul><li>Collaboration with I. Welpe (Ludwig-Maximilians University, Germany), M. Han (Ryerson University, Canada) and L. Dana (University of Canterbury, New Zealand) </li></ul><ul><li>Ratten, V., I. Welpe and M. Han, (2005) Track Chairs for Entrepreneurship and International Business track at the European Academy of Management </li></ul><ul><li>Han, M., V. Ratten and I. Welpe (2005) Workshop Coordinators ‘Developing Strategic Entrepreneurship in Small Business’, The United States Association for Small Business and Entrepreneurship (USASBE) 50th World Conference of the International Council for Small Business (ICSB) </li></ul><ul><li>Welpe, I., M. Han, V. Ratten, S. Zahra, L. Dana, and D. Grichnik, (2005) ‘International Entrepreneurship: Developing the Field of Entrepreneurship and International Business’, Caucus, Academy of Management </li></ul><ul><li>Ratten, V., Welpe, I. and M. Han (2006) Guest Editors of a Special Issue on International Entrepreneurship in Europe , International Journal of Small Business and Entrepreneurship </li></ul><ul><li>Dana, L., M. Han, V. Ratten and I. Welpe (Editors) (2006) A Theory of Internationalisation for European Entrepreneurship , Edward Elgar </li></ul>
  3. 3. Outline of Seminar <ul><li>Literature on International Entrepreneurship </li></ul><ul><li>International Entrepreneurship in Europe </li></ul><ul><li>European Policy Perspectives </li></ul><ul><li>Implications </li></ul><ul><li>Future Research </li></ul>
  4. 4. International Entrepreneurship <ul><li>Useful for multi-level unit of analysis </li></ul><ul><ul><li>Individuals in the firm </li></ul></ul><ul><ul><li>Organisations </li></ul></ul><ul><ul><li>Collaborative relationships </li></ul></ul><ul><li>Definition “a combination of innovative, proactive and risk seeking behavior that crosses national borders and is intended to create value in organisations” (McDougall and Oviatt, 2000:903) </li></ul><ul><li>Definition revised to focus on opportunity recognition : “the discovery, enactment, evaluation, and exploitation of opportunities- across national borders-to create future goods and services” ( McDougall and Oviatt, 2003:7) </li></ul>
  5. 5. International Entrepreneurship <ul><li>This research seeks to address the gap in the existing literature </li></ul><ul><ul><li>On comparative research on international entrepreneurship (Coviello and Jones, 1994) </li></ul></ul><ul><ul><li>Need for more holistic theoretical perspectives to explain international entrepreneurship (eg Dana, Etemad and Wright, 1999; McDougall, Shane and Oviatt, 2003) </li></ul></ul><ul><li>Government is an important driver of international entrepreneurship (Dimitratos and Jones, 2005) </li></ul><ul><li>A contribution to international entrepreneurship is to examine “the role of national and international institutional environments in the entrepreneurial decision making process” (Zahra, Korri and Yu, 2005 :137) </li></ul>
  6. 6. Internationalisation Theories <ul><li>Classic economic view of internationalisation </li></ul><ul><ul><li>Based on theory of competitive advantage </li></ul></ul><ul><li>Incremental process </li></ul><ul><ul><li>Eg Uppsala Model (Johanson and Wiedersheim-Paul, 1975) </li></ul></ul><ul><ul><li>Stages model of internationalisation (eg Johanson and Vahlne, 1977; Buckley and Tesar, 1977; Newbould, Buckley and Thurwell, 1978; Cavusgil, 1980, 1984; Bartlett and Ghoshal, 1989) </li></ul></ul>
  7. 7. Stages Model Criticism <ul><ul><li>Assumes time taken as firm gains experience, accumulate resources, develop managerial capabilities required for international operations </li></ul></ul><ul><ul><ul><li>Hence small firms internationalise gradually in a controlled fashion </li></ul></ul></ul><ul><ul><li>Globalisation of markets (Levitt, 1983) </li></ul></ul><ul><ul><li>Competition (Ohmae, 1989, 1990) </li></ul></ul><ul><ul><li>Serendipitous encounters (Crick and Spence, 2005) </li></ul></ul><ul><ul><li>Circumstances forcing small firms to deviate from stage model </li></ul></ul><ul><ul><ul><ul><ul><li>Eg economies of scale, high start up costs, small domestic markets, short product life cycle </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>(see international new venture/born global research eg Oviatt and McDougall, 1999; Knight and Cavusgil, 1996) </li></ul></ul></ul></ul></ul>
  8. 8. Motives for Internationalisation <ul><li>Europe </li></ul><ul><ul><li>Internationalisation seldom seen as a competitive necessity </li></ul></ul><ul><ul><li>Only expansionist option </li></ul></ul><ul><li>Traditional internationalisation theories focused mainly on large multinational corporations (Dana, Etemad and Wright, 1999a, 1999b) </li></ul><ul><li>Until recently </li></ul><ul><ul><li>Firms who wished to avoid risks and uncertainties could refrain from expanding internationally </li></ul></ul><ul><li>Liberalisation of trade protection </li></ul><ul><ul><li>Small businesses now compete with international competitors </li></ul></ul><ul><li>Success of entrepreneurs </li></ul><ul><ul><li>Is their ability to become competitive across Europe </li></ul></ul>
  9. 9. Internationalisation Theory and Entrepreneurial Behaviour <ul><li>Current business environment </li></ul><ul><ul><li>Time strategic weapon (Stalk and Hout, 1990) </li></ul></ul><ul><li>Entrepreneurial behaviour does not always follow stages approach </li></ul><ul><ul><li>Eg small, high tech firms rarely follow stage approach (Coviello and Martin, 1999) </li></ul></ul><ul><ul><li>Cross border activity of small firms is often importing rather than exporting (Jones, 1999) </li></ul></ul>
  10. 10. Europe and SMEs <ul><li>International transactions were until recently the realm of big companies </li></ul><ul><ul><li>Smaller businesses remaining local or regional </li></ul></ul><ul><li>Europe now is removing barriers to internationalisation </li></ul><ul><ul><li>Driven by expansionist policies of EU </li></ul></ul><ul><li>Definition of SMEs is less than 250 employees (European Commission) </li></ul>
  11. 11. Definition of SME- European Context More than 50 million More than 250 Large 10-50 million 50-250 Medium 2-10 million 10-50 Small 0-2 million 0-9 Micro Turnover (€/Year) Number of Employees Size of Enterprise
  12. 12. Europe and SMEs <ul><li>European Charter for Small Enterprises 2000 </li></ul><ul><ul><li>Emphasises importance of SMEs </li></ul></ul><ul><li>EU- more than 99% of businesses are SMEs </li></ul><ul><ul><li>2/3 total private employment (European Commission, 2004) </li></ul></ul><ul><ul><li>37% of SMEs in EU engaged in internationalisation </li></ul></ul><ul><ul><li>92% of all European enterprises have less than 10 employees (micro enterprises) </li></ul></ul>
  13. 13. Europe and SMEs <ul><li>SMEs hold a stable position in the economy (European Commission, 2003) </li></ul><ul><li>International entrepreneurship is helpful to understand how small business harnesses their entrepreneurial capabilities to internationalise </li></ul><ul><li>Europe characterised by 2 trends </li></ul><ul><ul><li>Reduced importance of nation state as an influence of international business </li></ul></ul><ul><ul><li>Decreased importance of the firm itself as principal unit of doing business ( Dana, Bajramovic and Wright, 2005 ) </li></ul></ul>
  14. 14. Europe Transforming Competitive Environment <ul><ul><li>Past- SMEs could stay domestic </li></ul></ul><ul><ul><li>Now- SMEs must achieve world-class efficiencies in order to survive, whether or not they compete globally </li></ul></ul><ul><ul><ul><li>No longer can afford to achieve internationalisation sequentially </li></ul></ul></ul><ul><ul><ul><li>SMEs expand by linking operations into value chain of large operations </li></ul></ul></ul>
  15. 15. Research on Entrepreneurship: Europe’s Position <ul><li>Source: adapted from Fayolle, Kyro and Ulijn (2005) </li></ul>North America and Europe with a global view USA, but with European and global flavour USA Western Europe Geographical/ Cultural Dominance Europe as an equal partner with expanding partners in different geographical areas The re-emergence of a European view The impact of Europe declines Entrepreneurship was born in Europe Europe's Position 21 st Century 1970 Onwards 19 th -1970 Industrialisation 18 th -20 th Centuries: Toward Industrialisation Time Scale
  16. 16. This Research <ul><li>Propose that international entrepreneurship is different in Europe </li></ul><ul><ul><li>Diverse </li></ul></ul><ul><ul><li>Different institutional factors </li></ul></ul><ul><ul><li>Market dynamism </li></ul></ul><ul><li>Countries in Europe have different </li></ul><ul><ul><li>Size (population and land mass) </li></ul></ul><ul><ul><li>Political structure (democratic, transition) </li></ul></ul><ul><ul><li>Culture (religion, work practices) </li></ul></ul>
  17. 17. Policy <ul><li>European Commission ‘Green Paper for Entrepreneurship’ </li></ul><ul><ul><li>The importance of increasing competitiveness for firms in the EU (European Commission, 2004) </li></ul></ul><ul><ul><li>Recent enlargement of EU has meant that European SMEs now compete more on a level playing field and are required to become competitive </li></ul></ul>
  18. 18. Government Influence Encouraging SME Internationalisation <ul><li>Scotland </li></ul><ul><ul><li>‘ Smart, Successful Scotland’ </li></ul></ul><ul><li>Spain </li></ul><ul><ul><li>Program Pipe (Plan Iniciacion Promocion Exterior) </li></ul></ul><ul><li>Finland </li></ul><ul><ul><li>Entrepreneurship policy programme by the government 2003- increase support for SMEs </li></ul></ul>
  19. 19. Government Influence Encouraging SME Internationalisation: New EU Members <ul><li>Slovakia </li></ul><ul><ul><li>National Agency for the Development of SMEs </li></ul></ul><ul><li>Hungary </li></ul><ul><ul><li>Legislative developments </li></ul></ul><ul><ul><ul><li>Act on SMEs (Act XCV of 1999 on Small and Medium Sized Enterprises and the Promotion of their Development) </li></ul></ul></ul><ul><li>Latvia </li></ul><ul><ul><li>Government funding is needed for SMEs as the existing EU structural funds are insufficient </li></ul></ul><ul><ul><li>2004- basic guidelines of the SME development policy </li></ul></ul><ul><ul><ul><li>Programme of Small and Medium Sized Enterprises of Latvia </li></ul></ul></ul>
  20. 20. Government Influence Encouraging SME Internationalisation: Institutions <ul><li>Bulgaria </li></ul><ul><ul><li>Institutions (government and private) can encourage SME internationalisation activity (Todorov and Kolarov, 2006) </li></ul></ul><ul><li>Monaco </li></ul><ul><ul><li>Prince Rainier ‘The Building Prince’ (Spence, 2006) </li></ul></ul><ul><ul><li>Government utilised tax incentives and programmes that encourage high value added SMEs to share risks (Spence, 2006) </li></ul></ul>
  21. 21. Government Influence Encouraging SME Internationalisation <ul><li>Lithuania </li></ul><ul><ul><li>Remnants soviet system (Brige, 2006) </li></ul></ul><ul><li>Ukraine </li></ul><ul><ul><li>1991 Ukrainian State Committee for (Creation of) Small Enterprises and Entrepreneurship </li></ul></ul><ul><ul><li>SMEs driving force of Orange Revolution (Goldmann et al, 2006) </li></ul></ul>
  22. 22. Government Influence Encouraging SME Internationalisation: Knowledge Intensive Industries <ul><li>Sweden </li></ul><ul><ul><ul><li>Highest number of biotech firms per capita in the world- necessitates international outlook (Loftgren et al, 2006) </li></ul></ul></ul><ul><li>Estonia </li></ul><ul><ul><li>More SME internationalisation activity in information technology and biotechnology sector (Elenurm, 2006) </li></ul></ul>
  23. 23. Education <ul><li>Some research: Negative relationship with international entrepreneurship </li></ul><ul><ul><li>Malta </li></ul></ul><ul><ul><ul><li>Entrepreneurship negatively associated with higher education qualifications ( Baldacchino , 2006) </li></ul></ul></ul><ul><li>Most research supports: Positive relationship with international entrepreneurship </li></ul><ul><ul><li>Belarus </li></ul></ul><ul><ul><ul><li>Previous studies report 80% of interviewed business owners had higher education qualifications (Smallbone et al, 1999; Welter et al, 2006) </li></ul></ul></ul><ul><ul><li>Lithuania </li></ul></ul><ul><ul><ul><li>Higher education level of entrepreneurs is 86% (Mockatis, 2006) </li></ul></ul></ul><ul><ul><li>Spain </li></ul></ul><ul><ul><ul><li>Important policy initiative is to increase the level of education in entrepreneurs </li></ul></ul></ul><ul><ul><ul><li>As level of education was found to be a distinguishable characteristic between exporters and non-exporters (Cruz et al, 2006) </li></ul></ul></ul><ul><li>Role of English as international business language </li></ul><ul><ul><li>Scandinavia </li></ul></ul><ul><ul><li>Latvia </li></ul></ul><ul><ul><ul><li>Language English (Brige, 2006) </li></ul></ul></ul>
  24. 24. Implications <ul><ul><li>Some SMEs indirectly involved in international activities </li></ul></ul><ul><ul><ul><li>Eg alliances </li></ul></ul></ul><ul><ul><li>Value chain </li></ul></ul><ul><ul><ul><li>SMEs in Europe increasingly cannot be classified as being from one country as various countries involved in their business </li></ul></ul></ul><ul><ul><li>Underestimation of SME internationalisation activity </li></ul></ul><ul><ul><ul><li>Ukraine- in transition economies sometimes small entrepreneurs are reluctant to report exporting activities because of corruption and dangers from criminal networks (Goldmann et al, 2006) </li></ul></ul></ul>
  25. 25. Implications <ul><li>Internationalisation as a learning process (Yip, Biscarri and Monti, 2000) </li></ul><ul><ul><li>Learning influenced through experiential knowledge (Eriksson et al, 1997) </li></ul></ul><ul><ul><ul><li>Eg Market, institutional and international knowledge </li></ul></ul></ul><ul><li>SMEs need to focus on building networks (Elenurm, 2004) and invest in learning about foreign markets (Zahra et al, 2001) </li></ul>
  26. 26. Future Research <ul><li>Role of social capital and human capital of an entrepreneur needs to be examined in more detail in relation to a SMEs internationalisation success </li></ul><ul><li>How recent 10 new EU members have affected internationalisation activities of SMEs </li></ul><ul><li>How international entrepreneurship fostered in transition economies such as Hungary and Belarus </li></ul>
  27. 27. <ul><li>Thank you! </li></ul>