The effects of cultural dimensions, government regulations and entrepreneurial orientation on firms' international performance : a study of SMEs in Malaysia

This research advances an integrative approach to examining the complex interplays between various internal and external determinants to the firm, in order to provide a fuller understanding of the international performance of firms. Specifically, this research aims to enrich our understanding of the role of entrepreneurial orientation (EO) in driving the international performance of small- and medium-sized enterprises (SMEs). For this purpose, the research integrates the resource-based view (RBV) with the institutional perspective to explicate the dynamic interactions among EO - a core firm-specific resource - and two institutional factors, i.e. cultural dimensions and government regulations in explaining the international performance of SMEs. The research conceptualises and examines four core sets of associations that relate to: i) EO and international performance of firms; ii) cultural dimensions and EO; iii) government regulations on the association between EO and international performance; and iv) government regulations on the association between cultural dimensions and EO. The study employed a quantitative research method and conducted a large-scale, self-administered questionnaire survey in Malaysia. The statistical analysis of data of 203 internationalised SMEs confirms the positive impact of EO on the firms’ international performance. Moreover, analyses provide evidence of the association of cultural dimensions of high individualism, high masculinity and low uncertainty avoidance with EO; and of the premise that government regulations positively moderate the individualism-EO and masculinity-EO relationships. The incorporation of the RBV and the institutional perspective offers a fuller explanation of the international performance of SMEs. Specifically, it advances understanding of the importance of EO - a critical resource for firms, whose manifestation and strength are influenced by institutional factors - in the internationalisation of firms. The research also contributes to the institutional perspective in two ways. First, the focus on the macro institutional factors based on a micro perspective reflected through the perception of the key decision-maker advances the understanding of the entrepreneurship phenomenon. It explains that how firms perceive and respond to the institutional context within which they are embedded will, in turn, prompt the responding entrepreneurial behaviours and subsequently affect international performance. Second, it explicates the interacting and reinforcing effect of cultural dimensions and government regulations, which are an informal and a formal component of institutions, on the genesis of EO. Significant practical implications are derived accordingly for business practitioners and policy makers to promote SMEs’ international business development and growth.