Academic journal article American Journal of Entrepreneurship

The Foreign Entrepreneur: An Exploratory Study of How Assets and Liabilities of Foreignness Affect the Foreign Entrepreneurial Venture

Academic journal article American Journal of Entrepreneurship

The Foreign Entrepreneur: An Exploratory Study of How Assets and Liabilities of Foreignness Affect the Foreign Entrepreneurial Venture

Article excerpt


Preceding the emergence of International Business as an academic field, the study of multinational enterprises (MNEs) and the internationalization process of multinationals have attracted great attention. Alongside with theories and research on motivation, advantages, and means of internationalization, a significant amount of research has been conducted in regards to the challenges the MNEs face when expanding operations to new overseas markets. Hymer (1960) initially introduced the concept "costs of doing business aboard" (CDBA). Following, various articles have been released on the topic, which grew into the term "Liability of Foreignness" introduced by Zaheer (1995).

Subsequent to Zaheer's (1995) article, st udies have come to encompass not only the LOF in relation to MNEs, but new important actors in the global economy: small to medium sized enterprises (SMEs) and MNEs from emerging markets. In the domain of entrepreneurship however, the creation of ventures in a foreign country and which strategic actions the foreign entrepreneur has to implement in order to overcome different challenges arising from the LOF, have not received much attention. The foreign entrepreneur (FE) has been defined as an individual, who launches a venture in a new "host" country, to which the foreign entrepreneur has migrated.

While some sources of the LOF to a large extent only affect multinationals, other drivers of the LOF also encompass challenges that FEs encounter during the start-up of a venture in a foreign host country. Despite various research on the individual characteristics of the entrepreneur (such as human capital, age and gender) (Bates, 1990; Boden & Nucci, 2000; Taylor, 1999), nationality, ethnic enclaves and related implications concerning strategies (Bates, 1997; Kalnins & Chung, 2014; Saxenian, 2001), and survival of FEs visà-vis locals (Mata & Alves, 2013), no study has been carried out explicitly on how entrepreneurs, with limited resources, overcome the LOF when founding an endeavor overseas.

Given the limited attention this topic has received from scholars of international business, research within the field of LOF, studies in the domain of entrepreneurship, it seems highly relevant to investigate this matter through an exploratory study.

The aim of this paper is to carry out an in-depth qualitative study focusing on the relationship existing between foreign entrepreneurial starts-ups and implications by being a FE. In doing so, the object is, first, understand how the background of the FE affects the foreign entrepreneur and his/her venture and/or operation in relation to the LOF, second, to recognize which challenges and associated risks the FE can overcome and how.

Hence, this research is conducted in the overlapping area between the research domains of international business, LOF and entrepreneurship. In relation, Nachum (2010) suggested further research concerning to which extent firms strategically could influence the costs and advantages that they experience in foreign countries. Studies conducted on immigrant entrepreneurs demonstrate the importance of these actors. Immigrant entrepreneurs can be a vital source in revitalizing a country's economy and contribute to renewal (Echikson, 2000). There are no logical reasons for why this notion should not apply to the FE as well.

Literature Review

The Foreign Entrepreneur

The main actor and focus of this paper is the foreign entrepreneur. Currently, no specific or coherent definition of this actor exists. Although the FE shares similar characteristics and is closely related with the immigrant entrepreneur, I argue that it is different. The most feasible way to define the FE is to outline the distinctive features of immigrant entrepreneur, and subsequently explain how the FE differs. The purpose for this literature exercise is to clarify and to obtain validity for my argument for introducing a new terminology: the foreign entrepreneur. …

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