Investigating entrepreneurial intensity and capability among South African exporting firms

Sefalafala, Mpho Raymond
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Given the increasing interest in international entrepreneurship and an increasing reliance of emerging economies on exporting to reach global markets, an investigation into internationalising firms in emerging economies is vital. Not only do these firms face pressures arising from the liability of smallness, foreignness, and resource limitations, but they also need compensating advantages in order to viably compete on the international stage. This study contributes to the international entrepreneurship literature by analysing the relationship between entrepreneurial intensity and capability, taken as independent variables, and their effect on international performance, taken as a multi-item dependent variable. The study uses a sample of 117 South African exporting firms of any size, industry, and/or age. Furthermore foreign environmental conditions within which these firms operate are measured in terms of their impact/moderation on the relationship between the independent variables and international performance. The study examines entrepreneurial intensity, which is a measure of the level of entrepreneurship in a firm that looks at both the degree and frequency of events with respect to innovativeness, proactiveness and risk-taking. The study also examines three entrepreneurial capabilities – namely social capital, human capital, and technology - that can enhance a firm’s international performance. Performance consists of two dimensions – namely economic performance and export intensity. Export intensity is a proxy of international intensity, measured as a ratio of foreign sales as a percentage of total sales. In this study, the dimensions of social capital that are measured are social interaction, relationship quality and network ties. Social capital is analysed in relationships among firms and their foreign actors/contacts. Social capital is also analysed as a multidimensional asset inside the business relationships comprising of both strong and weak ties, and implemented by the firms with their international partners or contacts. Social interaction and relationship quality corresponds to inter-organisational strong ties whereas network ties correspond to weak ties. iii Human capital consists of three dimensions – namely foreign institutional knowledge, foreign business knowledge, and internationalisation knowledge – based on the conception of foreign market knowledge. The two aspects of technology that are measured are technology distinctiveness and technology acquisition. The study also offers insights into key firm-level factors that influence international performance under foreign environmental conditions characterised by hostility and dynamism. Hypotheses were put forward to be tested in order to facilitate the study. To test the hypothesised bivariate relationship between entrepreneurial intensity and performance, correlation analysis was performed to examine the relationship between the predictors and the performance variables. Similarly, the tests were performed to examine the hypothesised bivariate relationship between entrepreneurial capabilities and performance variables. To test the impact of the environmental moderators on the efficacy of entrepreneurial intensity (EI) and entrepreneurial capability (EC), multiple regression analysis was performed. Overall the results show that EI and EC had a significant effect on both performance measures, with EC predicting stronger than EI. The results showed that different aspects of EI were associated with performance depending on the performance outcomes desired. Frequency of entrepreneurship was related to economic performance whereas entrepreneurial orientation (EO) was related to export intensity. Furthermore EI had a weakening impact under moderating conditions of increasing hostility on both performance measures. Dynamism did not moderate the relationship between EI and performance. EC had a positive impact under all moderating conditions on both performance measures. Social capital played an important role in hostile foreign environments whereas human capital was more important in dynamic foreign environments. In hostile foreign iv business environments, strongly embedded relationships did not provide benefits for advancing business whereas weak ties did. In dynamic foreign environments, internationalisation knowledge (prior internationalisation experience) was associated with both performance variables whereas foreign institutional knowledge (FIK) and foreign business knowledge (FBK) were not found to be important. The overall comparison revealed that in the foreign market environment, entrepreneurial capabilities were more important predictors of performance than entrepreneurial intensity. This suggests that entrepreneurial firms must possess compensating advantages in order to compete viably in unfamiliar markets abroad if they are not strong on innovation, proactiveness, and taking risks. Knowledge-based factors encourage initiative and flexibility among managers to gain influence over vital resources. However the challenge remains for the firms in emerging economies to adopt technology and act entrepreneurially. The results suggest that exporting firms in emerging market countries should pursue an entrepreneurial posture in order to achieve higher export intensity and engage in frequent product, process, and service enhancement activities if the objective is to achieve economic performance. Furthermore, the study found that entrepreneurial capability among South African exporting firms is positively related to performance. The study found that in order to improve their export intensity, human capital and social capital are among the most essential capabilities for organisational perfomance, whereas technology was not. The purpose of this research was to perform an empirical investigation on three main constructs - namely: entrepreneurial intensity, entrepreneurial capabilities, and the environmental dimensions - among South African exporting firms and the relationship of these factors with international performance. This study integrates the role of entrepreneurial intensity and capability in international entrepreneurship and their effects on performance of exporting firms within an emerging market context. v In line with theoretical studies in international entrepreneurship, this study reinforces the strategic role of entrepreneurial capabilities such as social capital and human capital in enhancing international performance. The role of EO and technology acquisition is also acknowledged.
Entrepreneurship, Internationalisation, Exporting firms, South Africa