Growing and Internationalizing in Entrepreneurial Firm

Chapter 9 - Growing and
Internationalizing the
Entrepreneurial Firm
9
Growing &
Internationalizing
the
Entrepreneurial
Firm
Copyright ©2016 Cengage Learning. All Rights Reserved. May not be

scanned, copied or duplicated, or posted to a publicly accessible
website, in whole or in part.
LEARNING
LEARNING OBJECTIVES
OUTCOMES
1 Define entrepreneurship, entrepreneurs, and

entrepreneurial firms
2 Identify the institutions and resources that affect
entrepreneurship
3 Identify three characteristics of a growing
entrepreneurial firm
4 Describe how international strategies for entering
foreign markets are different from those for staying in
domestic markets
5 Articulate what you should do to strengthen your
entrepreneurial ability on an international level
Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. GLOBAL3 | CH9 2
Entrepreneurship
• Identification and exploitation of previously

unexplored opportunities
• Entrepreneurs: Founders and owners of
new businesses or managers of existing
firms
• International entrepreneurship
• Innovative, proactive, and risk-seeking behavior
that crosses national borders
- Intended to create wealth in organizations
Exhibit 9.1 Institutions, Resources, and
Entrepreneurship
Institutions and Entrepreneurship
• Development of entrepreneurship within a

country is based on its entrepreneur-
friendly institutional framework
• Informal institutions
• Individualistic and low uncertainty-avoidance
societies encourage entrepreneurship
Exhibit 9.2 Average Ranking on the Ease of Doing
Business
Resources and Entrepreneurship
Value (V) Rarity (R)
Organizational
Imitability (I)
(O)
Characteristics of a Growing Entrepreneurial
Firm
Growth
• Attempt to fully utilize a firm’s potential resources and
capabilities
Innovation
• Basis of entrepreneurship that gives a competitive edge
Financing
• Start ups require capital
Internationalization
• Globalization of entrepreneurial firms
Exhibit 9.3 Venture Capital Investment as a
Percentage of GDP
Exhibit 9.4 Informal Investment as a Percentage of
GDP
Internationalizing the Entrepreneurial Firm
• Many SMEs are now going international

• Born global firm: Start-up company that
attempts to do business abroad from
inception
• International transaction costs are high
International Strategies for Entering Foreign
Markets
• Direct exports: Entrepreneurs sell products

made in their home country to customers in
other countries
• SMEs may not have enough resources to make
profits
• Many SMEs reach foreign customers through
sporadic exporting
- Sporadic (or passive) exporting: Sale of
products is prompted by unsolicited enquiries
from abroad
Exhibit 9.6 An Export/Import Transaction
Markets (continued 1)
• Licensing/franchising
• Allows foreign expansion without risking capital
• Licensors and franchisors may lose control over
the usage of their technology and brand names
• Foreign direct investment (FDI)
• Involves:
- Strategic alliances with foreign partners
- Foreign acquisitions
- Greenfield wholly owned subsidiaries
Markets (continued 2)
• Firms are psychologically and physically closer to

foreign customers
- Have better control over the usage of their
technology and brand names
• Expensive and complex
Stage Model
• Slow step-by-step process a firm goes

through to internationalize its business
• International experience of entrepreneurs
helps rapid internationalization
International Strategies for Staying in
Domestic Markets
• Indirect exports
• Supply to foreign firms
• Become licensees or franchisees of foreign
brands
• Become an alliance partner of a foreign
direct investor
• Harvest and exit through sell-offs
Strengthening Entrepreneurship
Institution-based view
• Institutional frameworks explain the differences in

economic and entrepreneurial development in the
world
Resource-based view
• Intangible resources like vision, drive, and willingness

to take risks fuel entrepreneurship around the globe
Implications for Actions
• Promote formal and informal institutions

that help entrepreneurial development
• Engage in careful internationalizing
• Entrepreneurs should take risks without being
reckless
Debate - Boom in Busts: Good or Bad?
Good Bad
• Allows for • Harsh bankruptcy

experimentation laws and
• Helps societies entrepreneur
develop policies
• Increases experience • Numerous risks and
uncertainties
KeyKEY
Terms
TERMS
• Small and medium- • Sporadic (or passive)

sized enterprise (SME) exporting
• Entrepreneurship • Letter of credit (L/C)
• Entrepreneurs • Licensing
• International • Franchising
entrepreneurship • Stage model
• Microfinance • Indirect export
• Born global firms • Export intermediary
• Direct export
Summary
SUMMARY
• Entrepreneurship is the identification and

exploration of potential opportunities
• Entrepreneurs start and own new businesses or
manage existing firms and make use of
opportunities
• International entrepreneurship is a combination
of innovative, proactive, and risk-seeking
behavior that crosses national borders
• Formal and informal institutions affect
entrepreneurship
Summary
SUMMARY(continued 1)
• Characteristics of a growing entrepreneurial

firm are growth, innovation, and financing
• Strategies to enter foreign markets
• Direct exports, licensing/franchising, and FDI
• International strategies to staying in
domestic markets
• Indirect exports
• Become suppliers for foreign firms
• Become licensees or franchisees of foreign
brands
Summary
SUMMARY(continued 2)
• Become alliance partners of foreign direct

investors
• Harvest and exit through sell-offs
• Entrepreneurs should have vested interest
in formal and informal institutions in
various countries

Growing and Internationalizing in Entrepreneurial Firm

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Chapter 9 - Growing and

Copyright ©2016 Cengage Learning. All Rights Reserved. May not be

1 Define entrepreneurship, entrepreneurs, and

• Identification and exploitation of previously

• Development of entrepreneurship within a

Value (V) Rarity (R)

• Many SMEs are now going international

• Direct exports: Entrepreneurs sell products

• Firms are psychologically and physically closer to

• Slow step-by-step process a firm goes

• Institutional frameworks explain the differences in

• Intangible resources like vision, drive, and willingness

• Promote formal and informal institutions

• Allows for • Harsh bankruptcy

• Small and medium- • Sporadic (or passive)

• Entrepreneurship is the identification and

• Characteristics of a growing entrepreneurial

• Become alliance partners of foreign direct

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