Globalization of the world market brings new possibilities as well as enormous hurdles for both established and young businesses. With the emergence of international entrepreneurship, entrepreneurs are concentrating on specific issues that they face operating in complex environments affected by diverse national cultures and institutional influences (Johanson & Vahlne, 2009). New global entrepreneurs depend on global networks for resources, distribution, and designs for growth. International entrepreneurs realize that success in a new marketplace requires agility, ingenuity, and certainty with a global viewpoint to acquire sustainability. Thus, global thinking is beneficial since foreign business clients can choose ideas, products, and services from many countries and cultures. However, entering into a foreign environment and culture can also become an obstacle psychologically in and of itself for the individual international entrepreneur (Mitchell et al., 2002). This paper will examine two areas that focus on the importance of cultural understanding in international entrepreneurship. The first will comprise of how entrepreneurs who expand into international markets must know how to think globally in order to design and adopt strategies for different nations as a business ventures into an uncertain market. The second part will explore how psychological adaptation of the individual entering a foreign culture is interconnected with the international entrepreneur.
Entrepreneurs can expand their business by participating in the global market; as every year thousands of small business enterprises are actively engaged in the international field. International entrepreneurship studies have started to focus on specific topics that confront entrepreneurs as they expand their new ventures (Zahra, Korri, & Yu, 2005). The definition of ‘international entrepreneurship’ in this paper will focus on the process of creatively discovering and exploiting opportunities that lie outside of a firm’s domestic markets in the pursuit of competitive advantage (Zahra & George, 2002); across national borders, to create future goods and services (Oviatt & McDougall, 2005). This meaning incorporates the process aspect of international entrepreneurship, which focuses on a central issue of why some individuals exploit international opportunities while others equally well placed do not act on them (Zahra, Korri, & Yu, 2005). Globalization is a process fuelled by increasing cross border flows of goods, services, money, people, information, and culture (Held et al., 1999, p. 16). However, the use of this term will refer to Guillén’s (2001) definition of globalization as a process leading to greater interdependence and mutual awareness among participants in general. Guillén (2001) combines the understanding of globalization as the intensification of consciousness of the world as a whole, and as the ‘diffusion of practices, values and technology that have an influence on people’s lives worldwide’ (Guillén, 2001).
Noticing opportunities is normally more difficult in international settings, and the level of uncertainty that the potential entrepreneur must undergo will also be greater. Entrepreneurs able to function successfully in international settings may be both more skilled at noticing opportunities and have a greater capacity to endure the uncertainty associated with international entrepreneurship (Lu & Beaamish, 2001). Noticing opportunities is normally more difficult in international settings, and the level of uncertainty that the potential entrepreneur must endure will also be greater (Coviello, 2006).
Oviatt and McDougall (2005) emphasized that international entrepreneurs display the intention to compete in multiple locales at the inception of the firm to exploit existing international opportunities and would have the intention to do so when they started their firms (McNaughton, 2003). Starting a firm is a difficult process under the best of circumstances. International business scholars have traditionally argued that internationalization is difficult because firms had to overcome a liability of foreignness, although Johanson and Vahlne (2009) have recently acknowledge that being part of an effective network and prior knowledge can greatly accelerate the international entrepreneurship process. This liability of foreignness was based on the fact that firms and entrepreneurs lacked knowledge about doing business in other countries, which meant they had to endure the costs of learning and the discomfort of uncertainty (Lu & Beaamish 2001). However, by positioning themselves in relevant networks, or because of their past experience, many entrepreneurs have high levels of operational knowledge about foreign markets. In this manner, the traditional approaches for dealing with the liability of foreignness of either imitating local firms or by transferring unique organizational or managerial competences to their foreign unit (Sapienza et al., 2006) have been supplemented with a knowledge component, which is more related to uncertainty. There has been an acknowledgement that firms could begin to internationalize sooner and Sapienza et al. (2006, p. 915) suggest that “the earlier a firm internationalizes, the more deeply imprinted its dynamic capability for exploiting opportunities in foreign markets will be.” Others have pointed out the benefits of internationalizing earlier, or at least exporting at an earlier stage (Kundu & Katz 2003). This may be because although there is a cost to learning, early entrants begin this process sooner (Autio, Sapienza, & Almeida, 2000) and at least some suggest they should do this before they actually start the firm (Coviello, 2006).
An entrepreneur who would like to take advantage of international markets may have to study a foreign language, may have lived abroad and may be face with culture shock. Entrepreneurs must realize their company’s competitive advantage such as: technology, price, financial superiority, or marketing, product innovation, an efficient distribution network or possession of exclusive information about the foreign market (Sapienza et al., 2006). Declining market conditions at home may cause entrepreneurs to seek foreign markets to help their business. Successful global entrepreneurs should have the following characteristics: a global vision, international management experience, innovative marketing or technology processes, a strong international business network, and effective organizational coordination worldwide (Lee, Peng, & Barney, 2007).
When global opportunities occur, entrepreneurs are likely more open-minded about internationalizing. The advantage of international trade is that a company’s market is expanded much and growth prospects are greatly raised. Other advantages include minimizing seasonal slumps, reducing idle capacity, getting knowledgeable about products not sold in target markets, technology used in other countries, and learning about other cultures (Johnson, Lenartowicz, & Apud, 2006). Before going to a foreign market, it is essential to study the unique culture of the potential consumers. Concepts of how the product is used, psychographics, demographics, and political norms as well as legal normally differ from an entrepreneurs’ home country (Miller & Parkhe, 2002). De Tienne & Chandler (2004) suggest that entrepreneurs must consider five factors relative to the country and cultures that the business venture will inhabit. First, they must study foreign government regulations: patent, import regulations, trademark laws, and copyright that affect their products. Second, they must know political climate: relationship between business and government or public attitudes and political events in a given country affect foreign business transactions. Third, they must consider infrastructure: packaging, distribution system, and shipping of their export product. Fourth, they must research distribution channels: accepted trade both retail and wholesale, service charges and normal commissions, distribution agreements and laws pertain to agency. And fifth, they must study competition: number of competitors in target nations and their market share, as well as their price, place, product and promotion. Additionally, they must find market size: of their product stability, size, country by country, and know what nations are markets expanding, opening, maturing, or declining (De Tienne & Chandler, 2004). Eventually, entrepreneurs must understand culture of their products. Small businesses can study international cultures by business travel, participating in training programs, reading the current literature, and undertaking formal educational programs. Small business, who wants to sell product on a worldwide basis must realize different standardization in each country. In some cases, goods must be adapted for different local markets if it is to be accepted and consumer goods always require much more adaptation (Johanson & Vahlne, 2009).
One issue related to international opportunity is why individuals in home countries are not the ones that take action on these opportunities, which would seem logical, as they are better positioned to notice. This question is especially important because research indicates that local firms usually have higher levels of performance than do foreign firms (Miller & Parkhe, 2002). While the matter of liability of foreignness is present in some cases, this relates to firms competing in the same industry. Thus, when locals begin to imitate the foreign firm, they may in fact end up with higher levels of performance, because of factors such as lower lawsuit awards (Mezias, 2002). However, national average levels of entrepreneurship to uncertainty, opportunity, and cognition uncertainty avoidance are not identical across countries (Hofstede, 2001). This suggests that although it is possible that both a local and foreigner notice a specific opportunity at the same time, the local may not act for both the fear of failure and stigma attached to that failure in certain cultures (Lee, Peng, & Barney, 2007). Thus, the potential entrepreneur must also be willing to endure the uncertainty associated with acting on these opportunities.
To gain insight into effective professional task performance across cultures, an understanding of effective communication and psychological adaptation has to be complemented by an exploration of the effect of culture on task process. Over the last few years studies on cross cultural competencies in different professional fields have started to emerge.
Examining the relationship between national culture and entrepreneurship is an important emerging subject matter in international entrepreneurship (Hayton, George, & Zahra, 2002). The sociological viewpoint on entrepreneurship proposes that entrepreneurs are intertwined in a social framework and their cognitive process and behaviours are shaped by the interactions between the environment and entrepreneur (Zahr, Korri, & Yu, 2005). There is also evidence of the impact of national cultural values on the characteristics and behaviour of individual entrepreneurs (Mitchell et al., 2002). Mitchell et al. (2002) confirmed that entrepreneurs share a set of cultural values, regardless of their national origin or cultural background. However, it appears that whilst some core values are shared across different countries and cultures, some of the behaviours of individual entrepreneurs reflect the value system of their respected national culture.
With regards to adaptation in international entrepreneurship, entering into a foreign environment is not a transition for the business venture alone. The actors, international entrepreneurs, involved are also plunging into same the foreign environment (Hofstede, 2001). Entering a new culture means commencing to share a pattern of thinking, feeling, reacting, and problem-solving (Saee, 1999). Cross-cultural psychology argues that unfamiliar cultural territory negatively affects an individual’s affective, both the sense making and cognitive mechanisms, and undermines the appropriateness and effectiveness of their behavioural responses (Maznevski & Lane, 2004). This happens when individuals are unable to accurately perceive and interpret the alien cultural environment, nor explain or predict the behaviour of people with different cultural backgrounds (Maznevski & Lane, 2004). Evidence suggests that exposure to a foreign cultural environment can cause ‘culture shock’, a psychological condition which adversely affects psychological and affective states (Johnson et al., 2006). Saee (1999) contends that opportunity identification competencies developed in an entrepreneur’s home cultural environment may not be sufficient to perceive a high level of entrepreneurial self-efficacy about performing the task of identifying opportunities across borders and cultures.
Cross-cultural studies have explored the challenges that a foreign cultural environment poses to human behaviour, cognition, and professional performance. Human behaviour is considered the coping mechanism that individuals consequently develop. Some researchers suggest that building this coping mechanism, in individuals, amounts to developing a global mindset or cultural intelligence (Maznevski & Lane, 2004; Early & Mosakowski, 2004). According to Maznevski and Lane (2004, p. 172), a global mindset is ‘the ability to develop and interpret criteria for personal and business performance that are independent from the assumptions of a single country, culture, or context’; then to adequately implement those in different countries, cultures, and contexts. Cultural intelligence is seen as the ability to interpret the foreigner’s behaviour the way the foreigner’s countryman would (Earley & Mosakowsi, 2004). Cross-cultural competence is defined as the appropriateness and effectiveness of one’s behaviour in a foreign cultural environment (Mitchell et al., 2000). Psychological adaptation is considered the centre point of personal traits and attributes that help generate internal responses in an unfamiliar environment by managing stress (Saee, 1999). Successful adaptation to a host cultural environment requires the abilities to be mindful, to tolerate ambiguity, and the ability to explain and make accurate predictions of strangers’ behaviour (Saee, 1999). This also includes the levels of anxiety and uncertainty that affect the intercultural encounter (Saee, 1999).
International entrepreneurs actually face greater uncertainty than is generally common in more established businesses, which benefit from learning and experience, because international entrepreneurship is about the implementation of a new innovative business. There is an uncertainty to entrepreneurship and the role it plays in initiating the process. Mitchell et al., (2000) observes that entrepreneurial action is a result of overcoming and paralysis that is caused by the uncertainty that precedes the entrepreneurial act. Guillén (2001) adds that the key concept that entrepreneurs create new combinations, which become the innovations that are the engine of economic growth. The entrepreneur is likely to see the opportunity as relatively certain. This is important with regards to international entrepreneurship in that exploiting an international opportunity requires more than dealing with operational certainty; there is also a high level of cultural uncertainty that the entrepreneur has to endure to ensure the new venture’s prosperity. The volume of research on international entrepreneurship supports the notion that a period of domestic development is no longer necessary for many firms and that international entrepreneurship is possible at the time the firm is established or shortly thereafter. However, consideration must be taken with respect to the foreign culture a venture will go into and the psychological affects upon the entrepreneurs joining in the venture.
Effective operation in the globalised economy requires that entrepreneurs develop new skills and competencies. Some of these skills and competences are needed to deal with national and regional cultural differences that are becoming intense with the continuance of globalisation (De Tienne & Chandler, 2004). (Authors) believe that current and future international entrepreneurs need to develop cross-cultural competence to successfully identify business opportunities.