The roles of the entrepreneur and of organization management essay


We investigate the roles of the entrepreneur and of organizational learning processes in the internationalization of small and medium size enterprises (SMEs) in Italy’s mature industrial system. We identify two paths to international performance: the first is direct from the traits of the entrepreneur to international performance, while the second is a mediated path which links several differentiated learning capabilities with innovation to influence international performance. The relative importance of these paths is not influenced by the age and size of these firms, indicating that our model could be generalizable to the universe of Italian international SMEs. The importance of learning from different sources and the importance of various sources of knowledge for innovation are confirmed. Nonetheless, innovation is mainly influenced by external learning, conceptualized by network and market focused learning, while internally focused learning is not directly related to innovation in our sample. Key words: international performance, organizational learning, innovation, entrepreneur’s traits


The vision and international orientation of the entrepreneur in small and medium size enterprises (SMEs) has attracted attention in both the international business and international entrepreneurship literatures as partial explanations of their firms’ entry into international markets. However, our understanding of how the entrepreneur’s vision is enacted within the firm to influence international outcomes is not well developed. The context within which these processes are enacted has focused on start-ups that internationalize early (Burpitt & Rondinelli, 1998; Knight & Cavusgil, 2004), while in other contexts these processes might differ. It has been argued that early internationalizing firms distinguish themselves by having leaders with a strong international orientation from inception (Rennie, 1993; Oviatt & McDougall, 1994; Knight & Cavusgil, 1996; McKinsey & Co. & AMC, 1993) which enables them to identify and exploit international market opportunities rapidly (Knight, 2001). Early internationalizing firms, while interesting and important, represent a minority of firms that internationalize. A cadre of established firms that remain small over many years but which are led by persons with an entrepreneurial orientation and subsequently internationalize has escaped empirical scruitiny. How entrepreneurs equipped with an international orientation enact processes within their firms for internationalization activities is not as well understood as is the association of traits of the entrepreneur with internationalization. It is acknowledged that the resources paucity of these firms (eg Rothwell 1983, 1984, 1988; Buckley, 1989), their liability of foreignness (eg Lu & Beamish, 2001; Zaheer, 1995; Hymer, 1960) and their liability of newness (eg Amason, Shrader & Thompson, 2006; Hay et al. 1993; Singh, Tucker & House, 1986; Stinchcombe, 1965) mitigate against internationalization. On the other hand, it has been shown that other resources embodied in the entrepreneur can help in overcoming these constraints. For example, entrepreneurs with prior experience of international business venturing motivate internationalization as a growth strategy, and bring the capabilities required to effect this strategy. Nonetheless, the processes through which the entrepreneur performs their role in these firms is not well-understood. Addressing this shortcoming, this paper examines the role of the entrepreneur in the internationalization of established small and medium firms (Zahra & Garvis, 2000; Zahra & George, 2002; Davidsson, 1991; 1989). Our research context is established Italian small and medium industrial firms that remain entrepreneurial by retaining a tight family control even after many years of focused growth. While it is expected that the entrepreneurs, through their vision and international orientation, will have a direct influence on the international performance of the firm, it is also expected that there are other indirect effects through which the entrepreneur will be influential in guiding their firms. In particular, it might be possible to circumscribe a set of capabilities that the entrepreneur brings to the firm and configures into a process that can support the internationalization strategy of the firm. To what extent these processes, which are likely to be learning processes, occur and how the ensuing capabilities from this learning are configured in mature SMEs that internationalize remains under-explained. This is particularly pertinent for Italian firms as there is evidence that the Italian industrial landscape is characterized by relatively small, but nonetheless mature firms with centralized governance and decision making vested in the ” entrepreneur”. Consequently, our research question is: Within the internationalized firm in a mature industrial system, how do entrepreneurs directly and indirectly through organizational learning processes interrelate to determine international performance? In SMEs, entrepreneurs not only play an important role both at the firm’s foundation and during its early years, but also after the firm becomes well-established (Lloyd-Reason & Mughan, 2002; Zucchella et al., 2007; Mort &Weerawardena, 2006). The firm continues to carry the footprint of its founders long after it is established (Beckman & Burton, 2008; Kenney & von Burg, 1999). Decisions taken by the founders set up path dependencies that affect not only corporate performance but also the culture, innovation and growth strategies of the organization (Schein, 1995) and its day-to-day operational processes. Beyond entrepreneurs, the sustainability and development of a firm rests on organizational learning mechanisms (Anderson & Skinner, 1999; Ruigrok &Wagner, 2003) which support the formation of capabilities at the organizational level (Teece et al., 1997). Moreover, the capacity to integrate different sources of knowledge through learning leads the firm to reconfigure its resource sets and capabilities to meet environmental contingencies and to generate and capitalize on opportunities (Grant, 1996; Sirmon, Hitt & Ireland, 2007). The renewed knowledge base and the ensuing dynamic capabilities can generate innovation which is often the hallmark of these firms and can be a major source of international performance (Teece, 1986; Basile, 2001; Knight & Cavusgil, 2004; Golokov & Valentini, 2011)). In addressing our research question, we conceptualize and assess (1) a direct path from the traits of the entrepreneur to international performance, and (2) an indirect path mediated by three typologies of organizational learning and innovation. We approach the differing origins and means of learning by integrating them on the basis of their prevailing focus (Weerawardena et al., 2007), internally-focused, market-focused and network-focused learning and we model interaction effects. We contribute to a better understanding of the possible trade-off between ‘ entrepreneurs’ firms’ vis-à-vis ‘ entrepreneurial firms’, an issue which is at the heart of the debate about the future growth of mature industrial systems such as that in Italy. By bridging two research streams, namely, international entrepreneurship and organizational learning theory, the study provides a novel explanation of the extent of this learning, and how these learning processes occur in the configuration of capabilities in mature SMEs that internationalize. Next, in this paper, the development of hypotheses is followed by empirical analysis on a sample of 253 Italian SMEs. Specifically, we use structural equation modeling to examine the interplay of the entrepreneur’s traits and the various organizational learning processes that we conjecture to be influential on innovation and subsequently that influence performance. Discussion and implications follow the presentation of results, with conclusions terminating the paper.


In highly competitive and rapidly changing global markets, the growth of firms rests increasingly on their capacity to adapt to, and to anticipate, environmental change. To address these challenges, internationally-active firms are advantaged if they conceive of their international expansion as a process driven by innovation, which in turn rests on the attitude and capacity of the organization to continually learn. SMEs are challenged by their resource constraints and they rely on multiple sources of learning in order to augment their knowledge base to achieve faster and more effective international growth. We conceptualize two learning processes at the foundation of SME internationalization and which remain with the firm as it grows; an entrepreneurial path determined by the traits of the entrepreneurs who drive it, and an organizational path at the company level. This construction accounts for the SME context, where strategic decision making is often centralized in a single individual or in a few individuals (Westerberg et al., 1997), and the fact that the internationalization process can only be understood when considering the decision makers’ abilities to identify and create opportunities and to respond to threats. In general, at an enterprise level, the firm’s knowledge base can be generated through two different processes: through transfer of knowledge between the founders and members of the top management team, and through experience accumulated within the organization itself as it does business. The first process does not require the organization to have any history. While communication between the founders of a firm takes places even before the new firm is formed, the second process needs the firm to exercise decisions and actions, and to experience results to create its unique, path-dependent trajectory over time (Eriksson et al., 2000). The two processes have important connections: the founders leave their footprint in the organizational learning and they influence trajectories of development over time (Beckman & Burton, 2008; Kenney & von Burg, 1999). In that SMEs are usually characterized by a lack of formal planning and processes, and that they additionally operate in uncertain environments (Pelham, 2000), an organization-wide channeling of learning activities into market focused, internally focused and network focused learning, which are interactive, can provide the firm with viable routines and heuristics for decisions and operational activities. This interactive learning system seems especially important in phases of rapid growth and internationalization. Our research model is framed within the resource-based view which helps to explain how knowledge and capabilities are developed and leveraged within the firm (Penrose, 1959; Wernerfelt, 1984). Although SMEs tend to lack financial and human resources, they can leverage a set of intangible resources that can be dedicated to achieving international performance. Following Johanson and Vahlne (1977) and Grant (1996), and more recent evidence (Peng, 2001; Barney et al., 2001), we contend that knowledge is a key strategic resource, and the firm’s capability to integrate and exploit international knowledge can lead to successful internationalization. We consider learning from multiple sources to be an antecedent to innovation, and it is the capacity to implement innovations that determines whether the firm’s market-focused, internally-focused and network-focused learning will lead to international performance. Therefore, in our conceptualization, innovation is the intervening mechanism by which firms leverage knowledge and learning and adapt to their environments as they engage internationally. This is consistent with the interpretation of learning which requires that it appears in new behaviors (Argyris & Schön, 1978; Fiol & Lyles, 1985), and which Sinkula (1994) describes as an ongoing accumulation of knowledge that spurs innovation, the consequence of the firm’s learning. Knowledge plays a critical role in both the stages-based internationalization process models and the international (entrepreneurship) new venture approaches, but it does so in significantly different ways. The stages models emphasize the necessity of building organizational experiential knowledge in international markets after entry (Johanson & Vahlne, 1977), whereas the international entrepreneurship perspective focuses on individual experiential knowledge and/or vision prior to internationalization (Oviatt & McDougall, 1994) to argue that ventures do not need organizational experience, routines or capabilities to enter their first foreign market early. We identify a research opportunity that consists in understanding how the two levels of learning, entrepreneurial and organizational, affect the international performance of a firm, irrespective of whether the approach taken is stages- or INV-based. Moreover, to date, our understanding of how these two levels of learning interplay is rudimentary, as it is for the issue of how the three organizationally-oriented learning processes (i. e., internally-focused, market-focused and network-focused) interact to produce an outcome, viz. innovation, which is directed at international expansion.


Entrepreneur’s traits and international performance

The entrepreneur’s pivotal role in venture development at an international scale has been extensively explored in the international entrepreneurship literature (e. g., Dimitratos & Jones, 2005; Nummela et al., 2004; Zahra & George, 2002); export performance research has also dealt extensively with this topic (e. g., Aaby & Slater, 1989). Early research focused on firms’ so-called ” international orientation” (Dichtl et al., 1990). More recently, research has targeted growth orientation through which international activities are approached (Nummela, Puumalainen & Saarenketo, 2005; Chetty & Campbell-Hunt, 2004). Export performance and international entrepreneurship research suggests that the founders or decision-makers of actively internationalizing firms possess a distinctive proactive orientation that enables them to identify windows of opportunity on a global scale (Knight & Cavusgil, 1996). A proactive attitude toward internationalization is reflected in growth-seeking behavior (Covin et al., 2006) leading to earlier internationalization (Autio et al., 2000), higher levels of foreign sales, and an increased commitment to foreign markets (Shrader et al., 2000). Accordingly, another characterizing feature of these proactively internationalizing firms is their risk-accommodating behaviors facing prospects of failure (Liesch, Welch & Buckley, 2011). The positive relationship between this entrepreneurial posture and international performance (De Clerq et al., 2005; Jantunen et al., 2008) is evident in both young/new firms (Knight, 2000) and mature firms (Dimitratos et al., 2004; Gabrielsson et al., 2008). The traits of managers and founders in these firms include further variables, such as their international education and business experience abroad. Entrepreneurs with prior international experience import embryonic routines for entering and serving foreign markets (Sapienza et al., 2006) and so provide an understanding of foreign markets and international business. Thus, prior exposure to international markets decreases ‘ costs of experimentation’, decreases the time taken to enact internationalization plans and can reduce the number of opportunities lost or missed (Sapienza et al., 2006). Accordingly, international experience reduces the uncertainty of operating abroad and increases the likelihood of entering additional countries; it also leads to more extensive internationalization activities (Bloodgood et al., 1996; Reuber & Fischer, 1997; Oviatt & McDougall, 2005). Many thus-oriented entrepreneurs decide to enter foreign markets as a response to environmental challenges and opportunities. As such, internationalization is an entrepreneurial act and an expression of innovation (Schumpeter, 1934; Ibeh & Young, 2001). On these premises we hypothesize for SMEs a direct link between the traits of the entrepreneur and international performance. These aspects of the entrepreneurial team directly affect international performance, bypassing organizational learning processes and targeting at internationalization as expression of innovation per se. This leads us to formulate Hypothesis 1. H1: International performance is directly and positively influenced by the traits of the entrepreneur. In addition, we conjecture that these characteristics of the firm’s management also become embedded within the organization through a complementary path and so influence international development indirectly via intermediate variables. We now turn to this mediated path, which incorporates a learning view and accommodates the observation that organizational learning requires time to materialize and that routines need to be established.

The entrepreneur’s traits and organizational learning

We argued above that international business activity is necessarily set in the context of the individuals who make decisions related to organizational development. This is particularly important in small firms, where the entrepreneur and/or a few individuals are usually dominant. The dominance of the entrepreneur is also strongly linked to their learning objectives and the processes through which knowledge acquisition occurs. In our context, though, it is not only existing knowledge that has to be considered, but also the learning orientation of entrepreneurs – an orientation that plays a pivotal role in the internationalization pattern (Baum et al., 2011) – along with the process whereby new knowledge is assimilated into the organization’s knowledge base (Autio et al., 2000). Seen from the entrepreneurial learning framework (Matsuno et al., 2002), entrepreneurial posture (defined as the combination of proactive, innovative and risk-accommodating behaviors) increases the firm’s information-scanning activities. At the same time, said posture promotes the creation of new knowledge and responsiveness to changes in the external environment. In addition, Zhou (2007) observes (i) that an entrepreneurial posture stimulates the quest for anticipatory knowledge about foreign markets that could present opportunities, and (ii) that individuals behaving entrepreneurially encourage an organization-wide proactivity in knowledge acquisition. The innovative component of entrepreneurial posture pushes individuals to develop search- and analysis-processes, which in turn enable them to redesign and innovate business practice on the basis of differing market needs. Thus, the dimensions of a firm’s entrepreneurial posture collectively facilitate the firm’s willingness and ability to engage in market learning activities. Similarly, De Clerq et al. (2012) observe the convergence of proactive search and high learning orientation in entrepreneurial firms. In general, Wang (2008), Ruokonen and Saarenketo (2009) and Rhee et al. (2010), inter alia, find that learning is a pre-requisite for an entrepreneurial orientation to produce corporate benefit. This finding might be indicative of a targeted search by these firms and their quest to learn from different and diverse sources. Entrepreneurship theory argues that knowledge re-combination can open up hitherto unknown opportunities, given that knowledge is dispersed (Hayek, 1945). Different individuals know different things: knowledge resides both within the firm and outside its boundaries, and knowledge intersections are multitudinous. We therefore conceptualize three different learning capabilities and their inter-linkages to comprise organizational learning that is consistent with Weerawardena et al. (2006, 2007). We posit that international SMEs will engage in wide-ranging exploration, and thus learn from multiple sources, in order to identify and create opportunities, under the guidance of the entrepreneur’s vision. Formally, we hypothesize: H2 a, b, c: The traits of the entrepreneur positively influence a) an internally-focused learning capability, b) a market-focused learning capability, and c) a network-focused learning capability.

How do forms of learning interplay?

According to Weerawardena et al. (2006, 2007) and Lu et al. (2010), firms that possess a certain ‘ assortment’ of knowledge may be able to undertake production with greater economic efficiency and/or to satisfy customer needs better than other firms do (Peteraf, 1993). Learning from multiple sources is a capability that impacts significantly on firms’ strategic international decisions, such as market selection and entry mode choice; such learning also influences the firm’s decisions as to how product portfolio and product/service development meet customer needs in foreign markets. Knight and Cavusgil (2004) note that existing knowledge has to be constantly renewed, especially in constantly changing international environments. Managerial ties are an important means by which firms can overcome their lack of resources in acquiring the information needed to leverage international activities and to identify international opportunities (McDougall et al., 1994; Chetty & Campbell-Hunt, 2004; Sullivan Mort & Weerawardena, 2006; Coviello, 2006; Ojala, 2008; Prashantham & Dhanaraj, 2010). Firms can acquire access to knowledge bases created by partners and thus compensate for their lack of experiential knowledge (Saarenketo et al., 2004). Networks offer entrepreneurs known sources for new and timely information (Borgatti & Cross, 2003; Luo, 2003) which most probably is product – or firm-specific. On the proposed basis that new knowledge is easier to use when it approximates to existing knowledge, firms enjoy a better and more timely understanding about operations and the tasks and activities required by customers and suppliers to provide better products or services to customers (McAuley, 1993; Lu et al., 2010). In addition, cooperation may also result in closer interactions between managers, which in turn enables them to learn methods, approaches and practices in the collection and analysis of information about product attributes, customer needs and competitive conditions (Zettinig & Benson-Rea, 2008; Borgatti & Cross, 2003; McAuley, 1993). Nonetheless, Haahti et al. (2005) suggest that network learning is not directly related to export performance, but rather that SMEs reap the benefits of cooperation through knowledge intensity and that network learning therefore interacts with other forms of learning. Networks contribute to firm performance by helping to identify new market opportunities and by adding to market knowledge (Chetty & Blankenburg-Holm, 2000; Coviello & Munro, 1995; Forsgren, 2002), while customer linkages have been found to enhance technological learning and R&D activities (Yli-Renko et al., 2002; Presutti et al., 2007; Knight & Cavusgil, 2004). We posit that network learning is instrumental in improving the knowledge base of the firm. H3a, b: Network learning positively influences a) an internally- focused learning capability, and b) a market- focused learning capability. With this hypothesis we posit that network learning is specifically related to the differing objectives of any given firm. Since we do not account for the type of network learning, we coordinate knowledge transfer in accordance with the different areas of competence within the firm, and build a mechanism of assessment and evaluation. Consequently, acquired knowledge is linked to internally- focused learning when technological learning is the primary objective, whereas non-technological learning is related to market-focused learning. The underlying idea is that new knowledge needs to be exposed to a variety of other significant sources of knowledge to be assessed and assimilated for purposeful application. In addition, the breadth of profitable knowledge and ideas might benefit from an enlarged array of sources such as more customers, more suppliers, more institutions and the internal knowledge base, for example (Zahra et al., 1999; Holm et al., 1996). Operating uni-directionally, this knowledge transfer channels and coordinates knowledge combinations. It also indicates the crucial role of market intelligence for all types of generated knowledge. On these grounds, we introduce a validation and integration mechanism of internally-focused learning, mainly through R&D, and posit that: H4: Internally-focused learning positively influences a market- focused learning capability. We then incorporate the dependency effects between the three different learning capabilities and innovation, because learning can be interpreted by, and assimilated from, different persons and organizations and thus enable effective compilation and application. Furthermore, knowledge processed and produced by one part of the organization creates a stream of related information and knowledge, which then triggers changes in the organization’s wider knowledge systems (Nonaka, 1994).

Learning capabilities and innovation

Sustained performance in internationalized small firms depends on alignment between the knowledge acquired and the dynamics of local market conditions (Knight & Cavusgil, 2004), but knowledge and learning per se are not sufficient. Even more important is the firm’s ability to use its new knowledge base, an ability that arises from the combination and adjustment of prior and newly acquired knowledge through concrete actions (Cohen & Levinthal, 1990; Zahra & George, 2002). We accordingly argue that a model that conceptualizes learning capabilities and processes of learning in internationalization should focus on innovation, broadly defined as the primary mechanism for responding to market needs. As such, the firm does not only to react to possible market changes, but it also is able to anticipate or provoke such changes. Network learning and innovation The economics of the networks approach to internationalization (Hakansson, 1987, 1990) establishes a relationship between learning, innovation and networks based on actors, activities and resources. According to Lundvall (1988) ‘ learning by interacting’ is a fundamental pattern through which new knowledge creation and innovation takes place. It is widely acknowledged that innovation processes are above all the result of inter-firm collaborations (Breschi et al., 2003) that derive from important environmental changes, such as increased R&D costs, technological convergence, increased global competition and rapid technological change. Innovation theories consider networking as the main locus of learning and new knowledge creation (Freeman, 1991; Pennings & Harianto, 1992) and one of the determinants of a firm’s competitive advantage. A network simultaneously gathers different knowledge bases: the diversity of each firm’s knowledge base fosters learning processes and the creation of new knowledge. Powell, Koput and Smith-Doerr (1996) suggest that when knowledge bases are complex and dispersed, inter-firm cooperation is crucial as innovation takes place in networks of partnerships rather than in individual firms. Market-focused learning and innovation Market information generally fosters improvement and change. As mentioned earlier, foreign market knowledge is a necessary condition for international expansion in both the traditional and the international new venture approaches to internationalization. Accordingly, market-focused learning promotes the acquisition and analysis of information about customers, competitors and environmental forces needed to create and deliver superior value (Weerawardena et al., 2007). Market learning leads to the recognition of customer needs well ahead of competition. Wiklund and Shepard (2003) note that being aware of customer problems may present market opportunities, make evaluation of scientific and technological change easier, and reveal that innovation frequently resides in costumers themselves. Understanding and meeting customer expectations lead in turn to the development of new products and services, and new processes (Verhees & Meulenberg, 2004; Hurley & Hult, 1998; Gatignon & Xuereb, 1997; Slater & Narver, 1995, Han et al., 1998). Commenting on small entrepreneurial firms, Tolstoy (2009) indicates that customer-orientation spurs knowledge-creating processes as expressed in new product development and the creation of new routines. Prashantham and Dhanarai (2010) observe that firms identify trends through relations with foreign customers and develop new technological skills to widen their technological portfolio. Internally- focused learning and innovation In addition to external sources of knowledge acquisition, we assign importance to internally-focused learning in the organizational learning process. Internally-focused learning relies on a firm’s capacity to develop knowledge through internal sources and the extent to which it disseminates, unlearns and uses this knowledge for organizational change (Weerawardena et al., 2006). It is operationalized alongside experiential learning through trial and error (Huber, 1991), and is inclusive of both technological and non-technological learning. In-house R& D activity is an example of this important form of knowledge acquisition (Macpherson, 1992), which in turn is seen as essential for effective innovation (Kim et al., 1993; Autio et al., 2000). Small firms that internationalize early are often from the high-tech sectors, with their competitive advantage based on an innovative product or technology. Frequently, they show a strong inward orientation (Roberts, 1991) which is consistent with an internally focused learning capability. Athanassiou and Nigh (2000), inter alia, argue that tacit knowledge is difficult to transfer and therefore difficult to access from external sources, and has to be developed internally. In summary, the above argument leads us to suppose that learning from multiple sources leads to the identification and the creation of more opportunities and to the exploitation of these latter through more diversified types of innovation. Hence, we hypothesize: H5a, b, c: a) Internally- focused learning, b) market- focused learning, and c) network learning are positively related to innovation.

Innovation and international performance

Schumpeter’s (1934) new combinations re-framed innovation as something that can be exercised in many forms, such as the implementation of new managerial practices, the modification of existing product attributes to meet changes in customer demand, the exploration of new markets with novel or upgraded products, or the transformation of production with new processes. Most of the empirical studies on the relationship between innovation and performance confirm that this relation is positive (Bierly & Chakrabarti, 1996; Brown & Eisenhardt, 1995; Damanpour, 1991; Damanpour et al., 1989; Weerawardena et al., 2006). Intangible resources and capabilities are more likely to produce sustainable competitive advantage as they are knowledge-based resources that embody complexity and causal ambiguities that are difficult for rivals to imitate (Collis & Montgomery, 1995). Of the intangibles, technological resources and innovation have been instrumental in explaining SMEs internationalization (Schoonhoven et al., 1990), and innovation has been identified as an important source of competitive advantage in firms’ attempts to gain access to and to succeed in international markets (Dhanaraj & Beamish, 2003; Lopez-Rodriguez & Garcia-Rodriguez, 2005; Westhead, et al., 2001). Hence, our final hypothesis is: H6: Innovation positively influences international performance. Figure 1 presents the hypothesized pathways. Insert Figure 1 about here


Data collection

The data collection began with an English version of the questionnaire translated into Italian and back-translated. This questionnaire was based on the framework reported in Weerawardena et al. (2007) in which a capability-based argument and model was reported for explaining SME internationalization. Executives and academics screened and edited the items of the questionnaire in a pre-test. The study is cross-sectional and draws on a representative sample of Italian manufacturing SMEs as surveyed through the self-administered questionnaire. Having limited the sample to firms of less than 250 employees and a target population of international (exporting) firms, we drew a random sample (n = 1500) from the official database of the Italian Chambers of Commerce. The resulting companies were contacted by phone and asked if they wished to participate in the study. An email with the cover letter and a link to the electronic version of the questionnaire was then sent to those firms that had agreed to be part of the study. We drew on a final sample of 253 usable questionnaires from the 274 returned. The response rate of around 18 % is acceptable and comparable to other studies in the field (Harzing, 2000, Hagen et al. 2012). The SMEs in our sample were on average 38 years old, employed an average 46 people and had an average annual turnover of 2. 3 Million Euro. The sample is representative of the overall Italian industrial scenario and gathers data from all the so-called ” Made in Italy” sectors (machinery, textiles, food and furniture)


Construct measurement is built on six scales derived and adapted from prior literature in the international business, entrepreneurship and innovation fields (see Appendix for details). The construct, entrepreneur’s traits (12 items), was adapted from Knight and Kim (2009). The three learning scales, market-focused learning (12 items), internally-focused learning (12 items), and network- focused learning (12 items) followed Weerawardena et al. (2006, 2007). Respondents scored the items for entrepreneur’s traits on a 5-point Likert scale, anchored by the endpoints ” strongly agree” to ” strongly disagree”. Consistently with earlier studies in the field (Weerawardena, 2003; Damanpour et al., 1989), innovation was operationalized along three dimensions to account for a broad definition of the capacity to innovate. Respondents assessed ” any new idea that their firm had adopted that resulted in a value addition to the firm” on two bases: extent (anchored by ” few” to ” many”) and degree of innovation (anchored by ” incremental” to ” radical”). The outcome construct, international performance, was based on a composite of precocity, intensity and scope, which can be considered the most representative variables of a firm’s international commitment (Dess et al., 2003), and other subjective measures regarding perception and satisfaction as compared to expectations regarding international activities. The scale was adapted from Pla-Barber and Escriba-Esteve (2006) and Knight and Cavusgil (2004), and the relative construct comprised 11 items. Subjective measures are used in SME settings because they account for the heterogeneity of these firms and their industries. They also eliminate potential differences in accounting rules or when confidentiality would have induced respondents to mask or not disclose financial or economic data. There is strong evidence for the general reliability of subjective, self-reported performance data (Dess & Robinson, 1984; Venkatraman & Ramanuajam, 1986, 1987).

Model fitting

Structural equation modeling was performed by the two-step strategy suggested by McDonald (1999) and McDonald and Ho (2002). First, Confirmatory Factor Analysis (CFA) on the polychoric correlation matrix of the ordinal (Likert types) items, using connected unidimensional cogeneric measurement models, was tested for the 6 constructs (latent variables) of the questionnaire. Second, a Path Analysis (PA) on the resulting covariance (correlation) matrix of the latent variable was fitted. Indices of unidimensionality (AVE= average of items variance extracted by construct: Fornell & Larcker, 1981), reliability (omega = ratio of variance of the construct scores to the scale scores: McDonald, 1999), and construct validity (rho = correlation of scale scores with construct scores: McDonald, 1999) were computed to validate the latent variables. As the data were collected from self-reports, the potential for the occurrence of common method variance (Chang et al., 2010) was tested including an additional latent variable loading on all the items, and partialling out this general methods factor (Podsakoff et al., 2003). The hypothesized model fitted by PA was tested by SEM indices: the Goodness of Fit Index (GFI, a measure based on the proportion of total variance of the observed correlation matrix that is ” explained” by the fitted model); the Root-Mean-Square Error of Approximation (RMSEA, a measure based on the difference between the fitted model and a hypothetical ” true” model), and the Standardized Root-Mean-square Residual (SRMR, a measure based on the differences between observed and model values of the correlation matrix). GFI > 0. 90, RMSEA <0. 06 or SRMR <0. 09 were retained for adequate approximation fitting of the model to the data. For each response latent variable, we considered the percent of variance explained by the predictor latent variables (R2 = 1 – residual variance / total variance), and we decomposed the total effect (TE) of each predictor on the response variables in a pure direct effect (DE) plus an indirect effect (IE) via intermediate variables. The structural equations parameters (regression coefficients, residual variances and covariances) were computed by maximum likelihood estimates (MLE). The P-values of the estimates were evaluated by z-tests. P values <0. 05 in two-sided tests were considered statistically significant. To rule out the possibility of spurious results, we also considered a number of objective covariates. Specifically: firm size (number of employees) and firm age are commonly used controls in international business literature; in the present study, they were hypothesized to have an effect on both the explanatory entrepreneur’s vision variable and the outcome variable, international performance, and were added in the PA equations. SEM was performed on R 2. 15. 0 using lavaan package (R Development Core Team, 2012).


Table 1 shows the CFA output for the constructed latent variables underlying the items of the questionnaire, after deletion of items with factor loading (item-factor correlation) < 0. 4 and common method factor according to Podsakoff et al. (2003). All CFA indices of unidimensionality (AVE > 0. 2), reliability (omega > 0. 7) and general construct validity (corr > 0. 8) were adequate, and the item-factor correlations (r > 0. 5) proved high-quality specific construct validity for each indicator of the latent variables. Accordingly, hypotheses H1-H6 were tested fitting the path analysis model on the covariance (correlation) matrix of the latent variables partialling out the common method factor of Table 2. Insert Tables 1-2 about hereParameter estimates (standardized coefficients,  and residual variance, 1-R2) and the corresponding path diagram of PA output are reported in Table3 and depicted in Figure 2. The direct link between the entrepreneur’s traits and international performance, under hypothesis H1, is significant with the expected sign (= 0. 50). As hypothesized in H2 a, b, c, the entrepreneur’s traits construct positively influences learning capabilities, i. e. internally-focused learning (= 0. 34 ), network- focused learning (= 0. 29 ) and market- focused learning (= 0. 35 ). Further, the hypothesized interactions between learning capability under H3 a, b and H4 are strongly supported: network- focused learning reinforces the other two learning constructs (= 0. 49 for internally- focused learning, and = 0. 23 for market- focused learning), and internally- focused increases market- focused learning (= 0. 37 ). The relationship between intermediate capabilities and innovation under H5 a, b, c are partially supported: network-focused learning (= 0. 25) and market-focused learning (= 0. 34) influence innovation positively, whereas internally-focused learning (= 0. 11, p= 0. 13 NS) has no impact on the secondary outcome. Finally, innovation (secondary outcome) strongly augments the international performance (primary outcome), as hypothesized in H6 (= 0, 30). Insert Table 3 and Figure 2 about hereThe goodness-of-fit statistics (2 (df)= 9. 341 (4), P= 0. 053; GFI= 0. 991, RMSEA= 0. 073 and SRMR= 0. 029) provide evidence of an adequate fit. The model explains 46. 6% of the variance in the outcome construct (international performance) and 36. 2% (innovation), 58. 5% (market focused learning), 45. 4% (internally focused learning) and 8. 5% (network learning) of the endogenous intermediate variables. The total effect (TE= 0. 58, p <0. 001)) of the exogenous traits on the outcome international performance was decomposed into a pure direct effect (DE= 0. 50, p <0. 001, 86%) and an indirect effect (IE= 0. 08, p <0. 001, 14%) via intermediate variables.[1]It has to be noted that adjusting for size and age does not change the importance of the direct path (0, 49) and that the decomposition in indirect and direct effects of the path is similar to our model 0 (DE= 0, 49, p <0, 001, 86 %; IE= 0, 08, p <0, 001, 14%) To sum up, on the basis of the individual parameter estimates, the following study hypotheses were supported. H1: Entrepreneur’s traits → international performanceSupportedH2 a, b, c: Entrepreneur’s traits → internally- focused learning, market- focused learning, network- focused learningSupportedH3 a, b: Network- focused learning → internally- focused learning, market- focused learningSupportedH4: Internally-focused learning → market-focused learningSupportedH5 a, b, c: Internally-focused learning, market-focused learning, network-focused learning → innovationPartially supportedH6: Innovation → international performanceSupported


We set out to address the research question: Within the internationalized firm in a mature industrial system, how do entrepreneurs directly and indirectly through organizational learning processes interrelate to determine international performance? Our empirical analysis confirms two paths that influence international performance in the sample of Italian SMEs that we surveyed: a path directly traced by the traits of the entrepreneur, and a mediated path through which this construct, the traits of the entrepreneur, influences a suite of organizational processes that are instrumental in effecting organizational innovation, which in turn influences performance. The first (and by far the stronger relationship in our sample) is the direct path between the entrepreneur and international performance, as measured by a subjective scale of a set of parameters (growth, size, market share and precocity). The entrepreneur antecedent variable reflects both the vision of, and orientation towards, international market opportunities. These factors significantly and strongly increase the firm’s international performance, and thus confirm the findings of previous studies (Zucchella et al., 2007; Hagen et al., 2012). This direct link between the traits of the entrepreneur and international performance may be specific to smaller firms, in which entrepreneurs play a dominant or even exclusive role in the firm’s management. It may also characterize firms at an early stage of development, when organizational learning processes are in their infancy and organizational processes are generally not yet fully operational. In this stage, the entrepreneurial team is responsible for innovation and conveys the mindsets, ambitions and activities involved with innovation, which is expressed by the value proposition developed by the founders and by the act of foreign market entry, as Schumpeter (1934) foretold. In order to account for these facts, we added two controls, age and size, to our analysis. The introduction of these two variables does not alter the importance of our conceptualized path which indicates that the model holds across young and mature, smaller and larger SMEs. Importantly, our sample is representative of the mature industrial system that characterizes Italy, with an average age of our sample firms of almost 40 years. Similarly characteristic of the Italian system is the persistence of firms that remain small to medium sized over time. Typically, rather than dimensional growth, Italian firms target control over their small (global) market niches, and prefer to maintain family control over decision-making (Onida, 2004). The dominant role of the entrepreneur, and the consequently excessive cephalization of the organization (Caruana et al., 1998), might accordingly be identified as an obstacle to organizational learning (and growth). This is a widely debated issue in the context of Italian SMEs, which traditionally function as an ‘ extended artifact’ of the entrepreneur, and subordinate growth targets to a reluctance to delegate power and/or share governance, especially to non-family members of staff (Bianco & Casavola, 1999). This ‘ entrepreneur-driven’ growth path is a consistent characteristic of Italian SMEs, wherein strategic decision-making and day-to-day operations management are strictly orchestrated by the entrepreneurs. The entrepreneur drives the firm’s internationalization and international expansion (Compagno, 2011; Nanut & Tracogna, 2011) throughout their lifetime, regardless of their age. This finding confirms extant research in the field of international entrepreneurship (Knight, 2000; Dimitratos et al., 2004; Gabrielsson et al., 2008) but contrasts with Italian evidence to the effect that young and mature firms differ in this regard. A prior study on internationally-oriented SMEs in Italy revealed that there are significant differences between young and mature firms: the former internationalize earlier, may adopt forms of governance that differ from those of the family firm and actively seek collaboration with other organizations, and tend to enhance organizational learning from their inception as a means to higher growth (Zanni & Zucchella, 2009). However, these ‘ new’ Italian SMEs represent a small portion of the overall population in question: high centralization and entrepreneur-driven management structure and ethos continue to dominate. The second path affecting the firm’s international performance is the more intricate organizational learning-mediated path. Although it is appreciable, the explained variance in performance from this second path is much lower than it is from the first. As such, the effect on international performance of the antecedent entrepreneur’s traits is shared between a direct effect and a mediated effect through learning which influences innovation in the firm with a consequent effect on international performance. Our study confirms that the three differently focused forms of learning (internally-, market- and network- focused) affect international performance via innovation and we confirm the hypothesized interaction effect between the learning capabilities. Consistent with Nonaka (1994), who posited that knowledge processed and produced by one part of the organization creates a stream of related information and knowledge, we find significant interaction effects across the hypothesized genres of learning. Network-focused learning emerges as the conduit for the other forms of learning conjectured in this study. Firms need to internalize information and knowledge accessed via networks in order to make it effective – it needs be put to a purposive use (Liesch & Knight, 1999; Knight & Liesch, 2002). Of the three forms of learning we here identify, market-focused learning seems to play a major role. The path that we identify as passing from the antecedent entrepreneur’s traits through the mediation of organizational learning processes, and notably through market-focused learning, suggests a model of market-customer orientation in our sample. Innovation in our sample occurs through collaborative projects, customer adaptation, understanding and market sensing, but it is not a direct consequence of internally-focused learning. This is consistent with the extant literature, which views inward- oriented firms as being less innovative (Zhang et al., 2006; Salavou et al., 2004). Further explanation might be found in the fact that small and medium sized mature Italian firms tend to be active in traditional industries. In this sector, external learning from partners and from markets prevails over formal innovation processes via internal knowledge development and R&D. Innovation occurs mostly through market sensing and in response to customer needs, and thus follow the von Hippel model (1976). In general, our analysis supports the importance to the firm’s innovation activities of learning from and combining different sources of knowledge (Nonaka, 1994). It should be noted, however, that innovation is mainly influenced by external learning, which is conceptualized by network- and market- focused learning, while internally-focused learning is not directly related to innovation in our sample of firms. Innovation represents one of the main avenues to the building of firm-specific advantages, and is supported by dynamic capabilities which are grounded in learning from different sources, a finding consistent with other studies that have revealed a relationship between innovation and international performance in Italian SMEs (Nassimbeni, 2001; D’Angelo, 2010; Giovannetti et al., 2009). Our findings provide novel results which inform the debate on Italian SMEs and their reluctance, despite their internationalization, to expand beyond the dominant influence of their founding entrepreneurs. We offer a contribution to the international entrepreneurship literature on the drivers of corporate performance and on the ambiguous role of the entrepreneur(s) who constitute a major factor in a firm’s establishment and international growth and, simultaneously, can be a hindrance to that expansion, especially in certain specific contexts. The frequently cited anecdotal evidence on the causes and effects of entrepreneurs’ control over Italian SME growth is now supported by a model which measures two different paths and which verifies that international performance is mostly and directly determined by the traits of the entrepreneur. The role of the entrepreneur as a driver of organizational learning is confirmed, but this path is not as important in explaining the international performance of our sample of firms, although both paths jointly account for this performance. Italian firms seem to conform as ” entrepreneurs’ firms” rather than as ” entrepreneurial firms”. Their growth opportunities are limited primarily by the entrepreneurs themselves, who fail both to exploit the potential embedded in organizational learning within these firms, and to define how this learning can create innovation for improved international performance. In the second, mediated path, the most significant source of learning is the market-focused learning, with internally- and network-focused learning being of lesser importance. These learning orientations offer potential through harnessing, reconfiguring and orienting the different sources of knowledge available towards internationalization performance. Our findings suggest interesting avenues for future research. For example, an international comparison would help to understand these processes in other industrial systems. In addition, comparison of early internationalizing firms with traditional internationalizers might reveal different and alternative internationalization process behaviors. This could in turn facilitate our understanding of how (if at all) alterations in the learning paths influence international performance differentially over time, regardless of whether the process initiated early and proceeded rapidly, or progressed incrementally.


We investigate the role of the entrepreneur in the international performance of Italian SMEs. Specifically, we identify two path trajectories that enact the entrepreneur’s direct and indirect (mediated) influence on the international performance of the firm. The indirect influence is enacted through the entrepreneur’s effect on their firm’s organizational learning processes, which in turn influence international performance through the intervening influence of innovation in the firm. The contribution of this paper is twofold. We develop and empirically test a model that explains international performance in mature SMEs along both a direct path and a learning path, both of which jointly determine performance. More precisely, in identifying the co-existence of two paths, the entrepreneur-driven path and the organizational learning-driven path, we establish a bridge between the international entrepreneurship and organizational learning literatures. To the best of our knowledge, no extant studies expose this conjecture and empirically test the existence of the two paths and their effects on international performance. We also suggest that country-specific, institutional frameworks might influence the prevalence of one of the two paths over the other, and thus explain some of the characteristics of the industrial structure of a mature economic system.


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