This study of 122 executives in Canadian small businesses examined the extent to which managerial cultural intelligence was a contributing factor to the organizational effectiveness of small businesses. We found that the cultural intelligence of small business managers engaged in international business was higher than that of small business managers in domestic-only firms. After controlling for firm entrepreneurial orientation, we found that managerial cultural intelligence was positively related to corporate reputation and employee commitment, but not to the financial performance of small businesses. Further, these relationships were similar for small businesses that conducted international business and those that were domestic-only. For internationalized small businesses, managerial cultural intelligence was not influenced by the international scope of business activities. One implication is that cultural intelligence is a managerial competency that is not restricted to international business contexts. Directions for future research on cultural intelligence are identified.
Key words: small business, cultural intelligence, entrepreneurial orientation
Managerial cultural intelligence and small business in Canada
The increasing internationalization of small business is a phenomenon that has received interest from scholars and practitioners alike (Knight/Kim 2009; Leonidou et al. 2007). Entry of small businesses into international trade has been facilitated by advances in communication technologies and transportation as well as the lowering of international trade barriers (e.g., Rialp et al. 2005). Even so, the international presence and performance of small and medium-sized enterprises (SMEs) has been proportionately lower than that of large enterprises (Leonidou et al. 2007; Orser et al. 2008; Rialp et al. 2005) in most industrialized countries including Canada (Industry Canada 2007; OECD 2009; Statistics Canada 2008).
Hie small business and entrepreneurship literature has identified a number of barriers to the internationalization of small business. Compared to large organizations, SMEs have greater resource constraints to conduct business outside of domestic markets (Etemad 2004; Knight/Kim 2009; Leonidou 2004; Westhead et al. 2001). In respect to tangible resources, SMEs have relatively less access to financial capital, market information, and international customer contacts (Leonidou 2004; Hitt et al. 1996). SME success in foreign markets is also largely dependent on the intangible internal competencies and capabilities needed to conduct business internationally (e.g., Knight/Kim 2009; Hitt et al. 1996). Consistent with upper echelons theory (Hambrick/Mason 1984) that proposes that top executives have significant direct influence on organizational strategies and functioning, previous research has identified that the strategic orientation and human capital attributes (personal characteristics, knowledge, and skills) of small business owners and executives are important determinants of small business internationalization (e.g., Leonidou 2004; Miesenböck 1988; Westhead et al. 2001; Wiklund et al. 2009).
In respect to strategic orientation, small businesses with more growth-oriented managers are more likely to make strategic decisions to enter and expand internationally (e.g., Knight/Kim 2009; Wiklund et al. 2009). Similarly, the entrepreneurial orientation of small businesses' top management is predictive of a firm's propensity to internationalize as well as the number of countries exporting to or operating in (De Clercq et al. 2005; Ripollés-Meliá et al. 2007). In respect to human capital resources, internationalized SMEs are more likely to have top managers with previous international experience (personal, educational, and work-related), and foreign language proficiency (e.g., Etemad 2004; Fernandez-Ortiz/Lombardo 2009; Leonidou et al. 2007; Orser et al. 2008). Further, managerial international experience and knowledge have been found to be positively related to the financial performance of SMEs in foreign markets (Etemad 2004; Fernandez-Ortiz/Lombardo 2009; Knight/Kim 2009; Rialp et al. …