Social networks and speed of new venture internationalization during institutional transition: A conceptual model

This paper examines the role of social networks in the internationalization process of new ventures in the context of transition economies. We introduce a conceptual model in which the relationship between various dimensions of an entrepreneur’s network and new venture internationalization speed is contingent upon a country’s stage of institutional transition. We theorize that strong national ties and weak international ties, accessible through brokers, contribute to speedier new venture internationalization in contexts characterized by fundamental institutional upheaval. We also theorize that the value of various structural aspects of an entrepreneur’s network changes as transition progresses.     

Government Intervention,Perceived Benefit,and Bribery of Firms in Transitional China

This article examines whether (1) government intervention causes bribery (or corruption) as rent-seeking theory suggested; (2) a firm’s perceived benefit partially mediates the relationship between government intervention and its bribing behavior, as rational choice/behavior theory suggested; and (3) other firms’ bribing behavior moderates the relationship between government intervention and a firm’s perceived benefit. Our study shows that government intervention causes bribery/corruption indeed, but it exerts its effect on bribery/corruption through the firm’s perceived benefit. In other words, a firm’s perceived benefit fully mediates the relationship between government intervention and its bribing behavior. We also find that other firms’ bribery positively moderates the relationship between government intervention and a given firm’s bribery. This study partly proves that firms are rational actors. Potential benefit encourages them to practice bribery. Besides, this research also supports the rent-seeking view of bribery/corruption, which argues that government intervention is a source of bribery/corruption. However, we have also identified that only those government interventions that will create “rent” can cause bribery/corruption.     

Networks in Entrepreneurship: The Case of High-technology Firms

The value of networks as an integral part of the explanation of entrepreneurial success is widely acknowledged. However, the network perspective does not specify the role of networks in the emergence and early growth of a venture. We have distinguished three entrepreneurial processes in new venture development, i.e. discovery of opportunities, securing resources, and obtaining legitimacy, which are of importance for survival and performance. This paper examines how these processes are influenced by strong and/or weak ties and whether the degree of innovation (incremental versus radical) acts as a contingency factor in the way network ties support entrepreneurial processes. In this explorative study three cases on high technology firms in The Netherlands provide empirical material enabling us to develop a number of propositions on the network effect, in particular the mix of strong and weak ties, on the three entrepreneurial processes.     

Internationalization as an entrepreneurial process

When firms cross-borders it is, by definition, internationalization. We believe that often internationalization should be seen as either a by-product of a firm’s efforts to improve its position within its network or networks, or as the result of an entrepreneurial action. We consider three theoretical approaches as a starting point and breathe life into them with a rich case study. We suggest adjustments to Johanson and Vahlne’s business network internationalization process model, an update of the Uppsala internationalization process model, to emphasize the entrepreneurial aspects of the process.     

Compatibility Under Differentiated Duopoly with Network Externalities

This paper investigates a firm’s equilibrium behavior under product compatibility, product differentiation, and the network effect. We find that a firm with a higher degree of compatibility has a greater competitive disadvantage due to its higher spillover effect with other firms. A firm under Cournot competition can increase its demand and profit by decreasing consumers’ subjective belief about the degree of differentiation between products, when the firm’s product compatibility and/or relative production cost is sufficiently small. When the relative production cost satisfies certain conditions, the principle of maximum differentiation exists. However, the principle of minimum differentiation never exists. Furthermore, when firms can freely determine their own compatibility, each firm will choose the lowest degree of compatibility, in contrast to the social optimum in which both firms choose the highest degree of compatibility. A social dilemma occurs.     

Strategic Risk-Taking Propensity: The Role of Ethical Climate and Marketing Output Control

In the wake of the current financial crises triggered by risky mortgage-backed securities, the question of ethics and risk-taking is once again at the front and center for both practitioners and academics. Although risk-taking is considered an integral part of strategic decision-making, sometimes firms could be propelled to take risks driven by reasons other than calculated strategic choices. The authors argue that a firm’s risk-taking propensity is impacted by its ethical climate (egoistic or benevolent) and its emphasis on output control to manage its marketing function. The firm’s long-term orientation is argued to moderate the control–risk propensity relationship. The authors also extend research on risk and performance and argue that the association of risk-taking propensity and firm performance is contingent on the ownership (publicly traded versus privately held) structure of the firm. Based on survey data from a sample of manufacturing industries in the United States, the results show significant impact of ethical climate and marketing output control on a firm’s risk-taking propensity; also risk-taking propensity shows a stronger association with firm performance in privately held firms than in publicly traded firms.     

Innovating across boundaries: A portfolio perspective on innovation partnerships of multinational corporations

This paper examines how and under what conditions alliance portfolio diversity influences a firm's innovative performance, with special attention being given to potential performance differences between multinational corporations (MNCs) and domestic firms. Analyses of data from 1045 German firms, among which 598 MNCs, revealed an inverted U-shaped relationship between alliance portfolio diversity and MNCs’ innovative performance. Findings also indicate MNCs to be better positioned than their domestic counterparts with regards to translating alliance portfolio diversity into superior innovative performance. Importantly though, this only holds for MNCs equipped with strong internal R&D capabilities and, to some extent, high human capital.     

Export Barrier Perceptions in Tanzania: The Influence of Social Networks

In this article, the author empirically examines export barriers Tanzanian firms encounter in attempting to initiate and/or expand export activities and the strategies they use for overcoming these barriers. Based on a social network perspective, the research hypothesizes that firms exploiting diverse networks should normally encounter fewer export barriers. Using a survey dataset collected from 122 manufacturing firms, the findings support the notion that networking reduces export barriers. More specifically, exploiting a large number of strong ties relative to weak ties, and a large number of institutional ties relative to business ties, can substantially enhance firms’ capabilities of overcoming barriers to exporting. In light of these findings, implications for policy, research, and practices are discussed.     

A Multidimensional Approach to the Influence of Environmental Marketing and Orientation on the Firm’s Organizational Performance

Since it implies a reduction in the quality and the quantity of the natural resources, environmental degradation is a present day problem that requires immediate solutions. This situation is driving firms to undertake an environmental transformation process with the purpose of reducing the negative externalities that come from their economic activities. Within this context, environmental marketing is an emerging business philosophy by which organizations can address sustainability issues. Moreover, environmental marketing and orientation are seen as valuable strategies to improve a firm’s competitiveness. However, the literature that has analyzed the link between environmental strategies and firms’ results has been inconclusive and contradictory. In this study, we propose and test a model that analyses how the implementation of ecological issues within a firm’s marketing strategy and orientation influences organizational results. Data were obtained through a survey sent to Spanish manufacturing firms. The results show that environmental marketing positively affects firms’ operational and commercial performance and this improvement will influence their economic results. Moreover, environmental marketing is revealed as an excellent strategy to obtain competitive advantages in costs and in product differentiation. Thus, this study agrees with the researchers who affirm that environmental strategies positively affect firm’s competitiveness while reducing environmental impact.     

Testing Gibrat’s Law for Small, Young and Innovating Firms

This article analyses whether small, young, and innovating firms have experienced a greater employment growth than other Spanish firms over the period 1990–2000. The study draws upon a sample of 1272 manufacturing firms in which only 967 of the firms survived for the entire ten year period. The analyses test Gibrat’s law, both by least squares and by utilizing the procedure proposed by Heckman in which a probit survival equation is first estimated to correct for sample selection bias. Two estimators correcting for selection bias are utilized: one that incorporates the inverse Mill’s ratio and the other that employs maximum likelihood methods. All the results reject Gibrat’s law and support the proposition that small firms have grown larger. Additionally, the results show that old firms grow less than young ones, and innovating activity – both process and product – is a strong positive factor in the firm’s survival and its employment growth.     

Effects of extent and diversity of alliancing on innovation: the moderating role of firm newness

The purpose of this paper is to show the varying effects of alliance portfolio size and heterogeneity on innovation in biotechnology firms. Previous literature has indicated that the number and heterogeneity of partners in an alliance portfolio might have positive effects on innovativeness. Yet, engaging in multiple and heterogeneous collaborations also raises managerial costs and complexity levels disproportionally, potentially causing detrimental performance effects. Analysis of a unique panel dataset suggests that engaging in many alliances generally has a positive influence on a firm’s innovation output. Furthermore, maintaining diverse alliance portfolios and a high extent of alliancing jointly affects a firm’s innovation output ?negatively. By additionally showing that younger firms benefit disproportionally from both alliance portfolio diversity and size, this study provides a more nuanced view of alliancing effects.     

Alliance portfolios and shareholder value in post-IPO firms: The moderating roles of portfolio structure and firm-level uncertainty

Using longitudinal data for initial public offering (IPO) firms, we examine the role played by structural differences between different types of alliance portfolios in the relationship between IPO firm alliance portfolios and shareholder returns. We show that because of the different signals they send to the capital market, different types of alliance portfolios affect IPO firm performance differently. Namely, financial markets seem to reward firms whose alliance portfolio is diversified across different types of alliances (a portfolio high in functional diversity), but not those who align their alliance partners into multiple functional points in the value chain (a portfolio high in vertical scope). We also examine the signaling role of alliance portfolios under different IPO firm uncertainty conditions. We note that uncertainty about the IPO firm is not limited to pre-IPO quality uncertainty. Investors also face transition uncertainty, post-IPO uncertainty about the ability of the firm to adapt to the new managerial challenges it faces and succeed post-IPO. We find that these two types of uncertainties moderate alliance portfolio effects in different ways. The beneficial effects of alliance portfolios in mitigating liabilities of newness is of greater importance for firms associated with higher quality uncertainty and for those associated with lower transition uncertainty.     

Firm Networking and Bribery in China: Assessing Some Potential Negative Consequences of Firm Openness

Economic openness, both in terms of increased international trade exposure and enhanced inter-firm networking, has been a key element of China’s economic emergence since the implementation of market reforms and the “opening-up policy” over 30 years ago. Unfortunately, these changes have also coincided with the increased incidence of bribery and corruption. Both in general, and in the specific context of China, research on the relationship between a firm’s tendency toward openness and its propensity to engage in bribery is scarce. This study seeks to fill this gap based on empirical evidence provided by a large sample of Chinese firms. The findings of the study reveal that firms’ increased networking and openness tend to occur contemporaneously with greater bribery and corruption. We suggest that this may be due to the misuse of guanxi-based networks that coincide with the presence of firms’ open network strategies, heightened by the potential loss of resource and capability heterogeneity (and hence reduced competitive advantages) in the context of openness. We further find that firms paying bribes do so as an attempt to overcome unnecessary bureaucratic processes and ineffective institutional support that might tend to hinder their development.     

Social capital in relation to the foreign market entry and post-entry operations of family SMEs

Scholars in the discipline of international entrepreneurship have mainly studied rapidly internationalizing firms. However, the majority of entrepreneurial firms are family-owned businesses (85% of all firms in the EU and the USA). Research on family business has focused on the importance of bonding social capital whereas, despite its importance, bridging social capital has not so far attracted much attention. It has been argued that bridging social capital plays an important role in firms’ internationalization processes. The purpose of this article is to examine the role of bridging social capital in the initial entry and post-entry operations of eight family SMEs with regard to the French market. We found that in foreign market entry social capital generally had a serendipity role, based on weak and intermediary relationships. In the post-entry situation, the role of strong and formal ties emerged strongly, and social capital most commonly took on efficacy or liability roles. Thus, it seems that the social capital of family entrepreneurs is limited to their strong bonding social capital, and perhaps to their strong national social capital. However, when such firms start to internationalize, they have to find new networks to gain the bridging social capital that will enable foreign operations. It seems that having a limited number of international ties drives family SMEs to search for relevant contacts at international trade exhibitions and trade fairs.     

Upstream internationalization process: Roles of social capital in creating exploratory capability and market performance

This paper investigates to what extent resource governance of international ventures affects dynamic capability and market performance in the high-tech firms’ internationalization process. We examine the non-equity-based international network collaborations of high-tech firms as forms of strategic resource seeking within the internationalization process. Within the context of upstream technology collaborations by international software and hardware firms, this paper proposes and empirically examines the impact of resource governance mechanisms (i.e. trust-building and behavioral monitoring) on the exploratory capabilities of firms. The findings indicate that building trust in the internationalization process of network ventures contributes to the firm-level exploratory capabilities and, in turn, market performance. Furthermore, this paper tests the moderating effects of structural capital on the capability–performance relationship. The relationship is stronger when network relationships existed before the inception of the international technology alliance. We also find a negative moderating effect from the existence of an actual alliance and from network duration on the relationship between exploratory capability and market performance. To this end, the longevity of the alliance may not always be something firms should aim for. The paper highlights the criticality of relational and structural capital in the internationalization process and the importance of exploratory capability for creating radical innovation in high-tech industries.     

Social capital of entrepreneurs and small firm performance: A meta-analysis of contextual and methodological moderators

Despite a surge of studies examining the role of social capital in the entrepreneurial process, no quantitative assessments exist of the empirical evidence to date. To resolve seemingly conflicting results, we conducted a meta-analysis of the link between entrepreneurs' personal networks and small firm performance and identify new moderators affecting this relationship. Analyses of 61 independent samples indicated that the social capital–performance link was positive and significant (r_c = .211). Effect sizes of weak ties were smaller than those of structural holes, while network diversity had the largest positive effect on performance. Results also showed that the social capital–performance link depends on the age of small firms, the industry and institutional contexts in which they operate, and on the specific network or performance measures used. Based on these findings, we develop recommendations for future research on the contingent value of social capital for small firms.     

The Impact of Corporate Social Performance on a Firm’s Multinationality

Using panel data of 4,244 company years, we examine whether and how corporate social performance (CSP) affects a firm’s capacity to achieve profitable sales in foreign markets. Based on our extension of instrumental stakeholder theory into the international arena, we hypothesized a U-shaped relationship between CSP and multinationality. Results supported our contention that multinational enterprises (MNEs) need to be substantially committed to social performance objectives if they are to recoup the cost of their CSP investments, and improve their capacity to compete in foreign markets. MNEs engaged in intermediate levels of CSP achieve lower levels of multinationality than firms operating at either anchor of the social performance continuum. In addition, this study demonstrates that CSP moderates a well-established relationship in international business literature – the relationship between R&D investment and a firm’s multinationality. Implications for research and practice are discussed.     

Determinants of the Incidence and Scale of Seed Capital Investments by Venture Capital Firms

Employing both behavioral decision making and agency theories, our study seeks to identify those factors that influence a venture capital (VC) firm’s decision to undertake seed capital investments and, subsequently, the scale of such activity. Using data on the investments made by 2949 VC funds raised worldwide between 1962 and 2002, we find investor age, timing of investment, and fund location to be of importance. In addition, the size of the fund and the existing number of portfolio firms exert opposite influences on the level of seed capital activity of the VC firm. These results suggest that seed activity is a valuable source of market intelligence for leading VC firms seeking proactively to identify and invest in novel technologies.      

Connectivity and Performance of Science-based Firms

This paper addresses whether or not there is a relationship between a young science-based firm’s patterns of connections and the associated resource flows, and its performance. Hypotheses derived from the literature are tested in relation to three performance indicators: inventiveness, innovativeness and employment. Analyzing a set of firms in Sweden, Ohio and Massachusetts, working with biocompatible materials and related products, the results indicate that firm performance is significantly influenced by the firms’ pattern of connectivity. In particular, technology-related connections proved important, where a high diversity in types of sources for technological input, a large number of technological relations and a high amount of technology transfer from the parent organization were related to better performance for this specific group of firms.