The idea of studying entrepreneurship at established companies was first presented in Peterson and Berger’s (
1971) study of the music industry. They described entrepreneurship as a specific type of strategy, which helps companies to cope with turbulent markets. However, until Covin and Slevin’s (
1989) seminal paper on entrepreneurial posture, the field did not receive much attention. Covin and Slevin (
1989) reinvestigated and empirically validated Miller’s (
1983) concept of entrepreneurial posture, and paved the way for subsequent studies by introducing a reliable conceptualization and operationalization of the phenomenon. Another stream of the research that fundamentally influenced the field was Burgelman’s (
1983) study of corporate venturing and Pinchot’s (
1985) work on intrapreneurship. While Covin and Slevin had mainly focused on entrepreneurial orientation, these researchers took a different perspective and brought the actual entrepreneurial activities into consideration. The lack of consensus on what entrepreneurship means and how it should be measured was evident from the outset; different studies proposed diverse explanations of entrepreneurship and the way it could be measured. Generally, three separate views have been developed around the topic: first, entrepreneurship as specific characteristics of a group of people or organizations (characteristic view); second, entrepreneurship as desired outcomes for companies or national economies (outcome view); and third, entrepreneurship as the process of doing things in given industrial or organizational contexts (process view). Following this classification, Covin and Slevin’s study of entrepreneurial posture can be seen as the product of the characteristic and process view, while Burgelman’s corporate venturing has been evolved from the outcome perspective of entrepreneurship.
The first definition of international entrepreneurship had explicitly relied on FLE as an essential part of the field (See McDougall and Oviatt
2000, p. 903). This definition was later altered to better emphasize opportunity exploration and exploitation; still, understanding how international entrepreneurs grasp opportunities to create new ventures and perform entrepreneurial activities across borders is a major topic in international entrepreneurship. In response to this gap and to compensate for the lack of entrepreneurship research in developing countries, this study attempts to explain the effect of FLE on the international performance of Iranian food and beverage SMEs. Thus far, the majority of FLE studies have been performed in the USA and other developed countries, and little understanding of the phenomenon exists in developing areas such as the Middle East, Latin America, Sub-Saharan Africa, Eastern Europe, and South Asia (Wales et al.
2011). The Iranian food and beverage industry provides a unique context for such research. In Iran, around 99.8% of all registered businesses are SMEs which in turn are responsible for 54.6% of the total employment in the country (UNIDO
2003). The second most productive industry is food and beverage with around 7370 active companies, of which 94% are SMEs that need immediate attention (Hosseininia and Ramezani
2016), specifically with regard to their internationalization (Hosseini
2016).
Firm-level entrepreneurship: Clarifying the concept
A principal challenge that emerged from the very beginning is the lack of agreement on defining and measuring the FLE construct. This confusion led researchers to apply different labels to name and define the concept such as entrepreneurship (Miller
1983), entrepreneurial posture (Covin and Slevin
1991), entrepreneurial orientation (Lumpkin and Dess
1996; Stambaugh et al.
2017), corporate entrepreneurship (Burgelman
1983; Zahra
1991), and intrapreneurship (Antoncic
2007; Menzel et al.
2007; Pinchot
1985). Employing different labels and conceptualizations, which actually indicate different concepts or the different dimensions of the same concept, results in persistent confusion and leads to contradictory findings among empirical studies. In the absence of an all-inclusive conceptualization, researchers are advised to rely on a consecutive approach in which the literature is reviewed to identify, separate, and categorize the dimensions, and their individual and collective outcomes are then studied to make inferences about the higher-order construct of FLE.
Among all the concepts in the FLE studies, entrepreneurial orientation (EO), corporate entrepreneurship (CE), intrapreneurship, and entrepreneurial management (EM) have drawn the most attention. Covin and Miles (
1999) categorized these constructs into three different groups: (1) employees as entrepreneurs (e.g. intrapreneurship), (2) entrepreneurship as an entire philosophy or orientation (e.g. EO and EM), and (3) entrepreneurship as new entries (e.g. CE). This classification provides a proper footing to separate various dimensions or recognize different types of FLE. Intrapreneurship deals with the personal characteristics of intrapreneurs (Antoncic et al.
2004), employees who present and implement innovative ideas in their organizations. It limits the focus to entrepreneurial employees and admits an individual level of analysis. FLE, in essence, is an entire organizational philosophy or an overall strategy that is not limited to a group of select people. It originates from all sections, flows through the whole system, and grows in a harmonic coordination of organizational functions. Therefore, intrapreneurship that is regarded as a concept helping researchers to understand entrepreneurial employees has been excluded from our research model, in which FLE is considered as a whole-firm phenomenon admitting a firm level of analysis.
The second theme extends the entrepreneurial activities to the whole organization and defines FLE as an orientation or a type of management. Defining FLE as an orientation or posture proved immensely popular in the literature. EO has become the most approved measurement of FLE in that a number of meta-analyses have been done to summarize the collective results of the related studies (e.g. Rauch et al.
2009; Saeed et al.
2014). In contrast, entrepreneurship as a style of management has not attracted much attention (Gartner and Baker
2010). The original study by Stevenson and Jarillo (
1990), who conceptualized entrepreneurial management, has been mainly cited for its opportunity-based definition of entrepreneurship rather than its proposed measurement of FLE (Kuhn et al.
2010). To be in line with the current literature and to avoid the complexity of analysis, this paper relies on EO to capture the tendency of a company toward entrepreneurship.
Although EO is a well-known and a widely-approved construct, conceptualizing a broad phenomenon such as FLE based on orientation alone does not draw a holistic picture because it only covers the attitudinal aspect, while “entrepreneurship has attitudinal and behavioral components” (Morris
1998, p. 17). In addition, entrepreneurship is usually defined as the process of exploration and exploitation (Shane and Venkataraman
2000). This means entrepreneurship happens only when an entrepreneurial opportunity is discovered, and a unique package of resources is brought together to exploit that. Discovering an opportunity without realizing it or exploiting an existing opportunity could not be seen as true entrepreneurship. EO has mainly focused on the exploration, values, and organizational tendency to search and screen business opportunities, and does not count the realized opportunities. In other words, showing a high level of EO does not guarantee entrepreneurial success because the shortage of resources in an organization may lower the probability of actual entrepreneurial outputs.
The last theme is entrepreneurship as new entries. This theme of entrepreneurship accepts an output-based view and focuses on the behavioural component of FLE. CE is a popular construct of this category. It relies on entrepreneurial actions and enumerates the number of new ventures, innovations, and the level of self-renewal as the indications of entrepreneurial success (Simsek et al.
2007; Zahra
1991). As it is obvious, this construct also counts on one dimension of entrepreneurship: the behavioural component. Unlike EO, which primarily focuses on opportunity exploration, CE captures opportunity exploitation by taking the entrepreneurial outputs into consideration. It values the visible outputs of entrepreneurship such as new products or services, new ventures, and self-renewal, and nearly ignores the orientation.
Some researchers add to the confusion by using EO, CE, and even intrapreneurship interchangeably (Antoncic
2007; Menzel et al.
2007). To explicate the concept and elucidate the current jargon of the field, this study separates FLE, intrapreneurship, EO, and CE as distinctive constructs. EO and CE are respectively defined as an entrepreneurial tendency and entrepreneurial actions of companies which jointly display the degree of FLE. Furthermore, intrapreneurship differs from other constructs in terms of the level of analysis. While EO and CE measure entrepreneurship at the firm level, intrapreneurship adopts an individual level of analysis dealing with individual intrapreneurs in a typical organization.
As discussed earlier, EO shows a strategic orientation (Covin and Slevin
1989), a tendency to act innovatively and proactively, and to take calculated risks when facing entrepreneurial opportunities (Miller
1983). Researchers have used different sets of dimensions to measure this notion of entrepreneurship. The original conceptualization proposed by Miller (
1983) and Covin and Slevin (
1989) listed the three dimensions of innovativeness, proactiveness, and risk-taking. Later, Lumpkin and Dess (
1996) criticized this conceptualization and added two extra dimensions: aggressiveness and autonomy. There are many researchers who employed different versions of EO, including more or fewer than three dimensions. A meta-analysis study performed by Rauch et al. (
2009) confirmed that applying a slightly modified version with more or fewer than three dimensions does not affect the overall validity of the construct. Thereby, this paper adheres to the three-dimensional construct of EO because it is widely accepted (Rauch et al.
2009; Wales et al.
2011) and supported by a large body of research.
Innovativeness refers to the tendency to support creativity and experimentation that could be put into operation in different areas of business (Knight
2000; Rauch et al.
2009). Proactiveness shows an organizational posture which is characterized by opportunity-seeking, a forward-looking perspective that acts upon forthcoming needs and wants (Rauch et al.
2009; Wiklund and Shepherd
2005). Finally, risk-taking reflects the tendency of a company to allocate resources to projects in which the probability of return and failure is high (Knight
2000). To sum up, all the dimensions of innovativeness, proactiveness, and risk-taking denote a type of tendency or orientation which plainly diverges from actual entrepreneurial behaviour or outcomes. This issue is clearly highlighted in Hansen et al. (
2011) explanation of EO dimensions, which says: “Innovative behaviors are borne from a tendency to enter into experimentation, support new ideas, and depart from established practices; proactive behaviors reflect a propensity to act aggressively towards rival firms in the pursuit of favorable business opportunities; and risk-taking behaviors result from a willingness to make investments in projects that have uncertain outcomes or unusually high profits and losses.” (p. 62).
CE measures the actual engagement of a firm in entrepreneurship activities, reflects the entrepreneurial behaviour, and thus differs from EO, which depicts an orientation or tendency (Simsek et al.
2007). CE captures both formal and informal entrepreneurial activities (Zahra
1996) and is frequently defined by the three dimensions of innovation, venturing, and strategic renewal
1 (Antoncic and Hisrich
2004). Innovation departs from innovativeness, a dimension of EO that reflects the capacity or tendency of an organization toward innovation (Garcia and Calantone
2002). Innovation is considered to be the real combination of resources (Nahapiet and Ghoshal
1998), discoveries which result in actual production and boost the economic value of a firm (Garcia and Calantone
2002), or a continued commitment to introduce new products, services, and technologies (Zahra
1996). Corporate venturing, a kind of action that may occur throughout a company (Zahra
1993), encompasses all the activities of creating new risky businesses within or by an established company. Strategic renewal involves redefining a firm’s relationships with markets and competitors, transforming the fundamental values that direct the strategic moves (Antoncic
2007), and absorbing new knowledge that modifies core competencies and changes the strategic position (Memili et al.
2011). It includes all activities causing significant changes in the business model, corporate strategies, and organizational structures.
According to the above discussion, EO and CE are two distinct measurements of FLE, which may have different performance consequences, especially for SMEs, which do not have access to the necessary resources for converting their orientation into action. A quick review of the literature demonstrates that the majority of the empirical research has applied only one construct (EO or CE), and a few studies focused on studying both constructs simultaneously. In reference to Knight (
1997), who stated that EO is more suitable for determining the orientation while CE aims at measuring the entrepreneurial activities, and Lumpkin and Dess (
1996), who distinguish between EO as the processes, practices, and decision-making indicating the tendency of managers to act entrepreneurially and CE as new entries which explain what entrepreneurship really consists of, focusing on EO or CE alone could be misleading. It may result in a one-dimensional explanation that only covers one aspect of entrepreneurship. This challenge is even worse in the international entrepreneurship literature, where almost all studies only investigate the effect of EO or CE on international performance, and their simultaneous effects are extensively disregarded. Therefore, this research is intended to answer these questions: What are the effects of EO and CE on the international performance of SMEs? Do they produce the same international performance consequences in different environmental situations?
Theoretical framework and hypotheses development
In a systematic review of the resource-based view (RBV) in international studies, Peng (
2001) came to the conclusion that SMEs are not able to compete with large multinational companies in terms of tangible resources; instead, they should rely on “intangible resourcefulness, that is, the ability of doing more with less” (p. 818). From the RBV perspective, FLE can be considered to be a major intangible resource of SMEs, which is rare, valuable, inimitable, and non-substitutable, and thus can help them to achieve a competitive advantage in international markets. A company which possesses a higher level of FLE can discover international opportunities faster and realize them in a more optimized way than others. Defining FLE as a rare, valuable, inimitable, and non-substitutable resource that assists companies to compete in international markets successfully (Zahra and George
2002) and helps them to create value in early internationalization by increasing their competitive advantage (Zahra
2005) is a well-known application of the RBV in international entrepreneurship studies. Until now, the empirical (e.g. Covin and Slevin
1989; Lumpkin and Dess
2001; Wiklund and Shepherd
2005) and conceptual (e.g. Covin and Slevin
1991; Lumpkin and Dess
1996; Zahra
2005) studies of international entrepreneurship corroborate well with this theoretical framework.
However, there are a few studies that found only a partial (e.g. Dimitratos et al.
2004; Jin et al.
2017; Zhang et al.
2012; Zhou et al.
2009) or no significant connection (e.g. Jantunen et al.
2005) between EO and international performance; the majority of EO empirical studies (e.g. Glavas et al.
2017; Knight
2000; Knight and Cavusgil
2004; Liu et al.
2011; Thanos et al.
2017) confirm a positive relationship. For instance, in their study of international success, Contractor and Kundu (
2004) found an entrepreneurial orientation with a peculiar emphasis on glocalization (simultaneous handling of both local and international market demands) as a way to attain international success. The current literature underpins the RBV explanation of FLE as a featured resource that could help companies to achieve superior international performance.
Unfortunately, the number of empirical studies on CE and international performance is not adequate to infer a collective conclusion. The few current empirical studies on the whole construct (e.g. Yiu et al.
2007) or venturing as a recognized dimension of CE (e.g. Zahra et al.
1997) indicate a significant positive connection. In accordance with these few studies, the RBV explanation of CE as a rare, valuable, inimitable, and non-substitutable resource that supports companies to achieve superior performance, and empirical studies of corporate performance which confirm a positive effect of corporate entrepreneurship, make it plausible to conclude the next hypothesis.
Hypothesis 2:SMEs’ corporate entrepreneurship positively influences their subsequent international performance.
Although EO and CE are discussed as two dimensions of the same construct, this does not mean that they should be discussed at the same level. In fact, EO could be viewed as an orientation or tendency which may lead to successful CE activities (Lumpkin and Dess
1996). The amount of owned or controllable resources is a necessary medium in translating EO into superior performance (Lyon et al.
2000). A recent empirical study performed by Stambaugh et al. (
2017) supported a type of EO-CE connection among a sample of 156 community banks headquartered in the Southwestern United States. Using banks’ risk-weighted asset ratio, which captures the actual risk-taking behaviour of the banks, Stambaugh et al. (
2017) confirmed a significant positive relationship between an orientation to take risks and the level of actual risk-taking. In another study performed in Austria, Switzerland, and Germany, Klammer et al. (
2016) demonstrated EO as an antecedent of strategic renewal. These recent studies are in line with others, which highly recommend entrepreneurial orientation as a posture that determines entrepreneurial activities (Rauch et al.
2009; Wiklund and Shepherd
2003).
As discussed before, a disagreement exists in the current empirical research on the relationship between EO and international performance. Implementing different types of indicators to measure performance (Hughes and Morgan
2007) or the contingency nature of the EO-performance connection (Lumpkin and Dess
1996; Rauch et al.
2009) are considered the potential causes of this inconsistency. Several studies have been performed to determine if employing different measurements of performance might result in different conclusions in the business (e.g. Dess and Robinson
1984; Wall et al.
2004) or entrepreneurship research (Rauch et al.
2009). All the studies revealed a significant correlation between perceptual and archival measures of performance and did not find a considerable deviation in their links with other organizational variables. Rauch et al. (
2009) in particular found no difference between EO studies which used perceptual financial, perceptual non-financial, and archival measures of performance. Consequently, measuring performance using different types of indicators could not be regarded as enough of a serious challenge to cause the existing disagreement.
In their conceptual model, Lumpkin and Dess (
1996) discussed environmental factors and organizational characteristics as intermediate factors that may modify the intensity or direction of the EO-performance connection. Environmental factors are increasingly considered to be moderating variables that could influence the way EO is configured to result in superior performance (Wiklund and Shepherd
2005). EO studies place their attention on the outcome rather than the process; therefore, the context could play an essential role (Dess et al.
2011). Recognizing the importance of environmental factors in the EO-performance connection recalls the contingency analysis of organizational functions. Companies need to fit their strategies with the environment if they want to act successfully (Venkatraman and Prescott
1990). From this perspective, the fit is considered to be a way that strategy and environment pair together to improve performance. Contingency analysis is frequently employed in empirical research on EO (Rauch et al.
2009; Wales et al.
2011), and is in line with the contingency approach of internationalization developed by Cavusgil and Zou (
1994) and Yeoh and Jeong (
1995). This approach supposes FLE as a way to enhance international performance when the environment is aligned with entrepreneurial strategies. Supporting this perspective, there are a number of studies which confirmed that the extent to which FLE relates to international performance is dependent on the presence of other factors such as cultural intelligence (Şahin and Gürbüz
2017), absorption capacity (Hernandez-Perlines
2018), stronger channel management capability (Boso et al.
2017), international networking, and opportunity recognition (Bianchi et al.
2017).
Although the environment could be conceptualized and measured using different indicators, environmental hostility (EH) and environmental dynamism (ED) received more attention in the FLE literature (Rauch et al.
2009). ED refers to a favourable environment in which business opportunities are continuously created, and companies are encouraged to be at the edge of technological change (Zahra
1993). EH, in contrast, shows an unfavourable environment in which companies’ missions are threatened, and their survival is in danger (Zahra
1991,
1993). When a business environment becomes hostile or dynamic, companies can change the market where they compete or change their strategy of competition (Zahra et al.
1997). Leaving the current market for a new one (new entry) or choosing a proactive strategy to compete in a hostile or dynamic environment could both be seen as different forms of entrepreneurship (Lumpkin and Dess
1996,
2001). As a result, FLE including EO and CE helps companies to manage and compete in hostile or dynamic environments successfully. This inference is supported by the current empirical research (Rauch et al.
2009) and is in consonance with Yeoh and Jeong’s (
1995) model of contingency analysis. Yeoh and Jeong’s model of contingency analysis describes entrepreneurial and conservative firms as unique organizations with specific characteristics, each of which works better under proper environmental conditions. When the business environment is benign and stable, conservative companies outreach entrepreneurial firms, but entrepreneurial firms perform better in dynamic and hostile environments.
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Hypothesis 4:
ED moderates the relationship between EO and international performance in a way that the effect of EO on international performance will be stronger when the level of ED is high.
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Hypothesis 5:
ED moderates the relationship between CE and international performance in a way that the effect of CE on international performance will be stronger when the level of ED is high.
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Hypothesis 6:
EH moderates the relationship between EO and international performance in a way that the effect of EO on international performance will be stronger when the level of EH is high.
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Hypothesis 7:
EH moderates the relationship between CE and international performance in a way that the effect of CE on international performance will be stronger when the level of EH is high.