In his latest research, Tales Andreassi, Professor and Vice-Dean of FGV-EAESP, Brazil, examines the catalytic role corporate entrepreneurship plays in reinforcing multinationals’ international performance.
By CoBS Editor Nicolas Desarnauts. Related research: ‘Corporate Entrepreneurship and International Performance: A Cross-Country Study’ by Marianne Hoeltgebaum, Tales Andreassi, Mohamed Amal, Svante Andersson, Marleen Hensbergen
Even for experienced multinationals, establishing an operation in a new foreign country is a risky endeavour. However, internationalisation—if done right—also presents numerous opportunities. In a recent study, Professor Tales Andreassi of the Fundação Getúlio Vargas (FGV) examines the link between corporate entrepreneurship in multinational companies and their international performance. His analysis of two high-tech companies operating subsidiaries in Brazil reveals the dimensions of corporate entrepreneurship most beneficial to international performance—producing valuable and practical insights for companies operating abroad.
Growth beyond borders
Multinational companies, the “apex predators of the global economy” as The Economist calls them, have proliferated in recent decades. In the early 1990s, foreign direct investment skyrocketed as companies began establishing operations around the globe. Today, these multinationals’ share of global profits stands at about 30%. Beyond the sale of products in a foreign market, internationalisation—as Prof. Andreassi defines it—involves “the commitment of resources and risk-taking in a different country”. This process presents numerous opportunities for companies. Firstly, the establishment of operations abroad empowers local managers to strongly influence companies’ strategies. This is supported by studies highlighting the importance of top management in international business. What’s more, research shows that internationalisation is also positively associated with increased innovation. Indeed, better access to effective R&D and distribution channels in addition to exposure to diverse experiences enriches employees’ sources of knowledge. This stimulates innovation which companies may have otherwise missed if it were not for the cross-border cooperation and collaboration internationalisation fosters. Nevertheless, risks must not be ignored. In countries with weak institutions and high uncertainty, various obstacles may arise. However, particularly under these circumstances, Prof. Andreassi argues multinationals’ international performance can be reinforced through entrepreneurial activities.
While commonly associated with Silicon Valley startups, entrepreneurial activities can also thrive within large corporations. The term “corporate entrepreneurship” refers to this general concept. In the case of multinationals, Prof. Andreassi distinguishes between two main aspects of corporate entrepreneurship which support international performance. The first relates to the behavioural features of entrepreneurial activities. Levels of proactiveness, innovative behaviour, and self-renewal exhibited by companies are important dimensions of this “entrepreneurial behaviour”. These are key factors that will support the successful internationalisation of companies and their strategies when they enter new foreign markets. However, companies must also possess and develop a results-based entrepreneurial perspective. This second aspect of corporate entrepreneurship focuses on companies’ ability to transform their assets into specific market outcomes. Levels of risk-taking, competitive aggressiveness, and new ventures are examples of important dimensions of “entrepreneurial results”. These “results” dimensions, on the other hand, will help convert entrepreneurial behaviour into powerful assets to compete in foreign markets and generate high performance. According to Prof. Andreassi, together, these two aspects of corporate entrepreneurship “stimulate the identification and pursuit of lucrative opportunities while also providing a foundation for the creation of superior competitive positions”.
Tales of corporate entrepreneurship
Undoubtedly then, corporate entrepreneurship is a real driver of international performance. However, in order to identify which dimensions of corporate entrepreneurship are most beneficial to international performance, Prof. Andreassi studied the case of two European multinationals operating in Brazil. The two companies were selected because they both “operate in high-tech industries and engage in continuous involvement in foreign markets” and presented “strong evidence of corporate entrepreneurship”. While they are headquartered in different countries, both companies have operations in Brazil—enabling Prof. Andreassi to include contextual factors in his analysis.
Through his analysis, Prof. Andreassi first confirmed that many dimensions of corporate entrepreneurship were directly related and enhanced each other. A company’s “competitive aggressiveness” and level of “product/service innovation” were found to have direct effects on the “proactiveness and self-renewal” dimensions of corporate entrepreneurship as well as “risk-taking”. Furthermore, the analysis showed that companies with more “new business ventures” also exhibited higher levels of “innovative behaviours”. As for the dimensions of corporate entrepreneurship most beneficial to international performance, Prof. Andreassi’s study concluded that “proactiveness, innovative behaviour, and self-renewal” all had “direct associations with [multinationals’] international performance” but that “proactiveness [had] the clearest positive connection”. In addition, the study found that context exerts a significant influence on corporate entrepreneurship. Indeed, Prof. Andreassi states: “in countries with some institutional uncertainties and high market imperfections, proactiveness and aggressive market approaches will significantly shape the performance of the firm and its commitment to the host market”. This implies that context can shape to a large extent the entrepreneurial behaviour of companies.
In pursuit of international performance
Prof. Andreassi’s findings provide valuable and practical insights for the management of multinational companies. First, it is important to recognize that the performance of companies’ subsidiaries abroad is strongly dependent on some dimensions of corporate entrepreneurship. Notably, proactiveness, innovative behaviour, self-renewal and innovativeness of the company. This implies that companies operating abroad in different institutional environments must consider and seek to foster mainly “entrepreneurial behaviour” dimensions which are more closely related to individual employees’ behaviours. Moreover, Prof. Andreassi’s findings also suggest that promoting proactiveness in subsidiaries operating in developing countries, in particular, is crucial to grow, improve, and sustain companies’ international performance.
- View Prof. and Vice-Dean Tales Andreassi’s academic profile
- Link up with Prof. Andreassi via LinkedIn
- Discover the learning experience at FGV-EAESP, Brazil
- View other feature articles from Prof. Tales Andreassi.
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