Structural Model of Institutional Environment Influence on International Entrepreneurship in Emerging Economies

There is general consensus in the field of international business research that the institutional environment provides an influence on the establishment of a firm’s operations across borders. For smaller firms, the role of the institutional environment becomes even bigger than for large multinational enterprises, as they lack bargaining power and typically have to play according to the existing rules of the game (Fujita, 1995; Coviello and McAuley, 1999; Knight, 2000; Hollenstein, 2005). In emerging economies, where the continuously changing legal framework neither provides significant support nor necessarily reduces the ambiguity of the external environment for small businesses, the role of informal societal institutions, such as personal networks and family ties, becomes greater than the role of formal ones (see e.g. Puffer and McCarthy, 2011; Shirokova and McDougall-Covin, 2012). A weak institutional environment potentially drives international entrepreneurship (IE) in emerging economies, as innovative small businesses start looking for opportunities abroad in order to avoid domestic institutional pressures (Boisot and Meyer, 2008; Rui and Yip, 2008). However, due to the high heterogeneity of the operational, institutional and market environments in emerging economies, our knowledge of the relationship between institutional factors and entrepreneurial motives of SMEs in international markets remains limited (He, 2012; Kiss et al., 2012; Smallbone and Welter, 2012).