Innovative Entrepreneurship and Multinationals Driving Globalization

7/24/2019 Innovative Entrepreneurship and Multinationals Driving Globalization

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REVIEW PAPER

Innovative entrepreneurship and multinationals driving

Globalization

Subject

Entrepreneurship

Submitted To:

Dr. Imran Hanif

Submitted By

Aneeka Niaz

Roll No.

MBK-M-12-04

MBA (B&F) Morning

6thsemester

ALFALAH INSTITUTE OF BANKING AND FINANCE

BAHAUDDIN ZAKARIYA UNIVERSITY

MULTAN


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Introduction:

With the increasing globalization of markets, interest in innovative entrepreneurship (IE) has

grown rapidly over the pasttwo decades (Hisrich et al., 2012; Keupp and Gassmann, 2012;

Knight and Cavusgil, 2013). A major feature of the global economy during this time has been

the liberalization of emerging economies and their integration into the worldwide economy

(Aulakh and Kotabe, 2012). The largest of these economies (i.e., China, India, Russia, Brazil,

Mexico, South Korea, Turkey, Indonesia, and Poland) now comprise over a third of the world's

25 largest economies and are growing at around three times the pace of the advanced ones. By

2025, the combined GDP of the eight largest emerging economies is likely to be equal or larger

than that of the eight largest advanced economies (World Bank, 2011). Their growing share ofworld trade stems from significant reductions of trade barriers and an improved connectedness to

world trade networks (Organization for Economic Cooperation and Development, 2009). In

consideration of this, and the important role that entrepreneurs have played in facilitating

economic growth in emerging economies, there is a strong need to develop a better

understanding of innovative entrepreneurship (IE) in this domain (Bruton, etal., 2013).

Entrepreneurship contributes to the quality and hopes of a sector, economy, or even a country

(Ribeiro & Huarng, 2013). Entrepreneurs' role is crucial in creating new economic activities that

help to create value (Huarng & Yu, 2012b), and to generate wealth and jobs (Avlonitis &

Salavou, 20012; Huarng & Yu, 2012a; Ribeiro & Peris-Ortiz, 2011; Yu & Huarng, 2013). Firm

entrepreneurship is a growing field of study under increasing attention over the last decades

(Ribeiro & Peris-Ortiz, 2011). Entrepreneurship is present in large and stable organizations

(Verheul, Uhlaner, & Thurik, 2012) and small and medium enterprises (Ashworth, 2012; Bettiol,

Maria, & Finotto, 2012; Wu, 2013; Zortea-Johnston, Darroch, & Matear, 2012). Thus,

entrepreneurship business form comprises entrepreneurial practices within organizations

franchising (Shane & Hoy, 2012), acquisition practices (Gartner, 2013), and opportunityrecognition.

(Renko, Shrader, & Simon, 2012) Entrepreneurship encourages competition in nowadays

environment leading to globalization effects. Innovation is crucial in the business world since

global economy seeks to escape from a major recession period (Kim & Huarng, 2012).


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Accordingly, innovation is the closest single business activity to economic growth (Huarng,

2012; Wu, 2013). Both entrepreneurs and innovators should introduce new inventions into

productive activity (Dibrell, Craig, & Hansen, 2013;; Mousa & Wales, 2012).

Different studies cover various aspects of innovation. For example, Huarng (2012) discusses

technology management and value creation. Parellada, Ribeiro, and Huarng (2013) and Wu

(2012) explore service industries innovative future. Huarng (2013) applies innovation to

entrepreneurship through a new business model. Organizations' innovation strategy is recently

paramount due to its value for organizational adaptation and renewal as well as for competitive

advantage (Kim & Huarng, 2012). Despite innovation being essential for organizations, it

remains a controversial field in literature and no dominant theoretical perspective unites the

streams of innovation research (Greve, 2013; Huarng, (2012).

Problem statement:

It is said that the entrepreneurial firms and the multinational firms often play a vital role in

emerging economies and boost up the globalization, also play role in setting the market trends

and policy regulations. But the problem is that this role is unseen by the people. So here the main

focus is on finding the relationship between entrepreneurship and globalization and the influence

of government regulations on the entrepreneurial firms by reviewing the past studies on it.

Background:

There has been remarkably little concern with the role of firms in creating markets, shaping

policies, and diffusing globalization, says Jones, the Isidor Straus Professor of Business History,

and Faculty Chair of the Schools Business History Initiative.

Despite the growing prominence of emerging economies on the global economic stage, and the

important role that entrepreneurs play in powering their economic growth, the understanding of

innovative entrepreneurship in emerging economies is quite limited. Consequently, a more

systematic research approach is needed to improve the understanding of entrepreneurialphenomena in a wider range of cultural and institutional and globalized contexts. To facilitate

this we critically evaluate Innovative Entrepreneurship research in driving globalization and

develop a research agenda that provides a foundation for exciting new streams of research.


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Literature review:

Several dynamic forces, such as technological disruption, fluctuating economies or

demographical changes, have brought new opportunities and threats for organizations, and

transformed societies from all over the world. In order to cope with these shifting forces,governments, public and private organizations, and the public are more and more aware of the

significance of entrepreneurship. The role of entrepreneurship in society has become prominent

since the end of the last century. Entrepreneurship matters because it is, above all, a human

characteristic (Bessant and Tidd, 2012). In modern open economies it has become more

important for economic growth and development than it has ever been.

In the past decades, there has been a growing interest regarding the concepts of globalization and

entrepreneurship. On the one hand, there are several studies in the literature related to these twoimportant notions (cset al., 2013; Szirmai et al., 2012; Naud, 2012; Braunerhjelm, 2013;

Caree and Thurik, 2012; Walzer, 2014; Wennekers et al., 2013; Audretsch et al. 2012).

Researchers have concluded that although globalization and economic development theory can

still be argued to lack a general theory of entrepreneurship, one that could encompass a variety

of development outcomes, progress has been made in extending the notion and understanding of

entrepreneurship in economic development and globalization(Naud, 2012, p. 1). On the other

hand, international organizations, governments and policy makers have shown a greater attention

to the function fulfilled by entrepreneurship in generating globalization and economic

development. Economic experts have abandoned their traditional approach to economic

development based mainly on recruiting large companies with different financial and fiscal

inducements. Today they are relying more on the small and medium enterprises (SMEs) and new

ventures than in the past. Entrepreneurship is spreadingly recognized by government officials

throughout the world not only as a key mechanism for enhancing globalization, particularly in

regions where entrepreneurial activity was once vibrant and is now lagging, but also as a good

solution because it provides a relatively non-controversial way to increase the proverbial pie,creating jobs and enhancing per capita income growth (Shane, 2012, p. 1). That is why

entrepreneurs need access to resources and markets to succeed, and this is where national

policies play a vital role (Kressel and Lento, 2012, p. 6).However, when it comes to know how


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the mechanism operates, little is known, either on how entrepreneurship can be best promoted or

on how entrepreneurship influences economic performance (Wennekers and Thurik, 2014).

Hypothesis:

1)

What is the relationship between globalization and innovative entrepreneurship?2) To what extant government regulations and other institutional actors influence

entrepreneurial firms in building globalization?

Theory of the paper:

Arising from the above discussion emerges the following two questions:

3)

What is the relationship between globalization and innovative entrepreneurship?

4)

To what extant government regulations and other institutional actors influence

entrepreneurial firms in building globalization.The aims of the paper are to review in brief the concepts of globalization and entrepreneurship,

and to emphasize the role of entrepreneurship, government regulations and institutional actors in

driving globalization.

Theoretical perspectives on globalization and entrepreneurship:

Understanding the role of entrepreneurship and entrepreneurs in the process of economic

development requires the decomposition of the concepts. There are so many definitions for the

concepts of entrepreneur and entrepreneurship. Ever since the first writings about

entrepreneurship there has never been an accord over a definition of the concept. The central

explanation lies in the fact that entrepreneurship represents a multifaceted phenomenon, being

analysed as a process, a resource or a state-of-being (Naud, 2013). That is why there is no

shortage of definitions of entrepreneurship because it is too complex to be explained through a

single set of factors.

The term entrepreneur seems to have been introduced by R. Cantillon. In his opinion, the

central component of the definition of the entrepreneur gravitates around risk assuming. Later, J.

B. Say stated that the entrepreneur shifts economic resources out of an area of lower productivity

and moves them into an area of higher productivity.

The progress achieved in understanding entrepreneurship is largely due to J. A. Schumpeter. He

adopted a different approach, underlying the role of innovation. Entrepreneurs are not only

innovators and, therefore, agents of change, but also coordinators of production. He suggested


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that entrepreneurship occurs under five conditions of newness: new goods, new production

methods, new markets, new sources of materials, or new organizations (Naud, 2013).

According to the Schumpeterian view, the entrepreneurial process constitutes one of the key

factors in driving the globalization.

Entrepreneurship is therefore a creative human process, one which mobilizes resources from one

level of productivity to another, a superior one. It implies the individuals will of taking on

responsibilities and the mental ability of carrying out the task from idea to implementation.

Another component of entrepreneurship consists in identifying opportunities where other people

find only chaos, contradictions, or confusion. The essence of entrepreneurship lies in walking

against time with wisdom and maturity, and in serving as an agent for change.

Government regulations and entrepreneurial firms in building globalization:

We examine the prediction of a negative relationship between barriers to entry for entrepreneursand international market integration using the Doing Business measures of entry regulation

Overall, we find a strong negative correlation between barriers to entry for entrepreneurs and the

degree of international integration of the respective countries. That more open countries have

lower barriers to entry for new firms is consistent with that the market rent effect is dominated

by the foreign innovation and strategic innovation effort effects. The negative correlation

between entry regulation and openness is particularly strong when entry regulation is measured

through the number of days it takes and the number of procedures involved to start a firm, andholds when controlling for a general time trend, and including country-specific measures of

general institutional liberalization.

We find some evidence that countries with governments that are likely to put less emphasis on

consumer welfare (more corrupt countries) reduce their entrepreneurship barriers more in

response to an increase in integration, although these results only hold when entry regulation is

measured by the number of procedures.

We should note that while we find a negative correlation between entry regulation and

international integration, we cannot establish the direction of this relationship, i.e. reduced entry

barriers may affect policy makers' incentive to protect their markets from international

competition.


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Methodology:

To be eligible for review the study had to provide insights into entrepreneurship, globalization,

and government regulations. To ensure reasonably complete coverage of the literature I included

in my search 25 articles published in the last 4 years that generally provide insight into the

following fields i.e., entrepreneurship, international business, globalization. So the whole review

is based on the qualitative study.

References:

Ashworth, C.J. (2012). Marketing and organizational development in e-SMEs:

Understanding survival and sustainability in growth-oriented and comfort-zone pure play

enterprises in the fashion retail industry. The International Entrepreneurship and

Management Journal, 8(2), 165201.

Avlonitis, G.J., & Salavou, H.E. (2012). Entrepreneurial orientation of SMEs, product

innovativeness, and performance. Journal of Business Research, 60(5), 566575.

Bettiol, M.,Maria, E.D., & Finotto, V. (2013). Marketing in SMEs: The role of

entrepreneurial sensemaking. The International Entrepreneurship and Management Journal,

8(2), 223248.

Dibrell, C., Craig, J., & Hansen, E. (2012). Natural environment,market orientation, and firm

innovativeness: An organizational life cycle perspective. Journal of Small Business

Management, 49(3), 467489.Gartner,W.B. (2013). What are we talking about when we talk about entrepreneurship?

Journal of Business Venturing, 5(1), 1528.

Greve, H.R. (2012). A behavioral theory of R&D expenditures and innovations: Evidence

from shipbuilding. Academy of Management Journal, 46(6), 685702.

Huarng, K.H. (2013). Essential research in technology management. Journal of Business

Research, 63(5), 451453.

Huarng, K.H. (2014). A comparative study to classify ICT developments by economies.

Journal of Business Research, 64(11), 11741177.

Huarng, K.H. (2012). A two-tier business model and its realization for entrepreneurship.

Journal of Business Research, 66, 21022105.

Huarng, K.H., & Yu, T.H.K. (2012a). Internet software and services: Past and future. The

Service Industries Journal, 31(1), 7989.


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Huarng, K.H., & Yu, T.H.K. (2012b). Entrepreneurship, process innovation and value

creation by a nonprofit SME. Management Decision, 49(2), 284296.

Kim, S.H., & Huarng, K.H. (2012). Winning strategies for innovation and high technology

products management. Journal of Business Research, 64(11), 11471150.

Laforet, S. (2013). Size, strategic, and market orientation affects on innovation. Journal of

Business Research, 61(7), 753764.

Lewis, M.W., Welsh, M.A., Dehler, G.E., & Green, S.G. (2012). Product development

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Peterson, R., & Berger, D. (2013). Entrepreneurship in organizations. Administrative Science

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Renko, M., Shrader, R.C., & Simon, M. (2012). Perception of entrepreneurial opportunity: A

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Ribeiro, D., & Huarng, K.H. (2013). Innovation and entrepreneurship in knowledge

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Ribeiro, D., & Peris-Ortiz, M. (2012). Subsidizing technology: How to succeed. Journal of

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Shane, S.A., & Hoy, F. (2013). Franchising: A gateway to cooperative entrepreneurship.

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Shane, S.A., & Venkataraman, S. (2012). The promise of entrepreneurship as a field of

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Innovative Entrepreneurship and Multinationals Driving Globalization