Dynamic capabilities and performance of emerging market international new ventures: Does international entrepreneurial culture matter?

Abstract

This article examines the phenomenon of dynamic capabilities in international new ventures (INVs) from emerging markets. While this research stream is gaining traction, the literature is fragmented as to how INVs from emerging markets develop dynamic capabilities to overcome resource constraints and legitimacy issues. The authors highlight the importance of a comprehensive international entrepreneurial culture (IEC) to better understand how these INVs develop dynamic capabilities and foster international performance. This study draws on organisational learning and the knowledge-based view (KBV) to examine the role of IEC in shaping dynamic capabilities and international performance under various levels of market turbulence. To conduct our analyses, this study uses a sample of INVs from India – a key emerging market. The results indicate that IEC shapes dynamic capabilities and both support superior international performance. The findings also confirm the utility of IEC towards dynamic capabilities and international performance when operating in turbulent markets.

Keywords

dynamic capabilities international entrepreneurial culture international new ventures knowledge-based view market turbulence organisational learning

Introduction

The World Bank reports that small- and medium-sized enterprises (SMEs) account for more than 50% of job creation and contribute between 35% and 50% of gross domestic product (GDP) in emerging markets (Alibhai et al., 2017). Moreover, SMEs have become pivotal international actors for emerging markets (Jormanainen and Koveshnikov, 2012) as indicated by the growth of international new ventures (INVs) from these regions (Kiss et al., 2012). INVs are new ventures that enter international markets early in their existence (Oviatt and McDougall, 2005). Despite the growing importance of emerging markets, much of the international entrepreneurship (IE) research has focused on INVs from developed markets (Felzensztein, 2016). As findings in developed markets may not be generalisable to the emerging market context (Rahman et al., 2017), this article contributes to the call for further research on INVs that originate in emerging markets (Cavusgil and Knight, 2015; Paul et al., 2017).

INVs face liabilities of newness and smallness which result in financial and human capital resource deficiencies (Djupdal and Westhead, 2015). INVs from emerging markets contend with additional obstacles related to underdeveloped or absent formal institutions, and unfavourable societal attitudes towards new business development (Mair et al., 2012). These institutional complexities contribute to their state of resource poverty. Such challenges are further heightened by the rise of an anti-globalisation sentiment, which threatens the liberalisation of markets that yielded fertile conditions for these new ventures to thrive in the last 30 years (Buckley and Hashai, 2020). The result is a global landscape characterised by uncertainty and volatility (Van Tulder et al., 2020). This is not a trivial issue as these INVs generally lack advanced capabilities in technology and marketing compared with their developed market counterparts. Such advanced capabilities are necessary to overcome constraints and environmental challenges in global markets. The question then relates to understanding the factors that drive the competitiveness of emerging market INVs (Liñán et al., 2019).

IE scholars brought forward dynamic capabilities to explain how INVs utilise organisational learning and knowledge to succeed in the absence of significant resource endowments (Knight and Cavusgil, 2004; Weerawardena et al., 2015). These capabilities reflect the internally developed processes, by which firms build, integrate and extend competences needed to identify and capitalise on opportunities (Helfat et al., 2007; Teece et al., 1997). Emerging market INVs develop dynamic capabilities to overcome constraints that would otherwise limit their internationalisation activities (Li and Liu, 2014). Considering the aggressive nature in which these new ventures pursue global markets, driven in part by limited domestic demand, the importance of dynamic capabilities is amplified. While much of the INV literature has empirically analysed specific dynamic capabilities such as marketing and new product development for instance, the overarching second-order dynamic capabilities such as sensing, seizing and reconfiguring that guide INV internationalisation have received less attention. Also, the impact of dynamic capabilities towards performance lacks empirical consensus (Pezeshkan et al., 2016). Despite the growing interest in this topic, we still lack an understanding of how emerging market INVs develop and deploy dynamic capabilities that drive international growth (Khan et al., 2020; Khan and Lew, 2018).

Capabilities are viewed as being embedded within the particular culture of an INV and provide competitive advantages to the extent that they result in core competencies (Knight and Kim, 2009). The IE literature suggests INVs embrace an international entrepreneurial culture (IEC) to overcome constraints and develop distinctive competitive advantages (Zahra et al., 2005). An IEC facilitates new ideas and creativity in seeking novel international opportunities (Dimitratos et al., 2012) and has come to describe firm-level entrepreneurship of INVs. Entrepreneurship in emerging market INVs differs from developed market INVs (Demirkan et al., 2019; Estrin et al., 2019) as they historically possess lower levels of economic development and supportive policies to foster SME development. Many new ventures in emerging markets are born out of necessity to resolve poverty and social issues; furthermore, access to government aid for global expansion is limited, and institutional deficiencies weaken capital markets (venture capital). Due to resource limitations, emerging market INVs find advanced managerial capabilities to be immensely expensive to access (Falahat et al., 2018). Such a setting is conducive to high-impact entrepreneurship, as uncertainty creates a need for INVs to leverage an IEC that fosters dynamic capabilities to enhance international performance. This is where emerging market INVs capitalise on IEC. While there is evidence that IEC distinguishes emerging market INV behaviour as compared with traditional SME exporters (Zhang et al., 2009), research examining this perspective is still in its infancy (Zhang et al., 2017). Therefore, further study of entrepreneurship within emerging market INVs is necessary for theory development (Paul and Rosado-Serrano, 2019).

Our guiding research question is how does IEC enable emerging market INVs to develop dynamic capabilities needed to succeed in international markets? Drawing on the knowledge-based view (KBV) and organisational learning perspectives, this article provides three contributions to the INV literature. First, we bring forward IEC as a foundational pattern of behaviours that enable INVs to do more with less. We explain how IEC creates dynamic capabilities of emerging market INVs. Second, empirical research on the performance outcomes of IEC is still embryonic. Therefore, we examine the linkage between IEC and performance of emerging market INVs; in addition, we analyse the performance outcomes of dynamic capabilities, which are the actionable skill sets that link IEC to performance. Third, there is a commonly accepted notion that dynamic capabilities are more relevant in turbulent markets. We explore the efficacy of IEC in shaping dynamic capabilities and international performance – under varying degrees of market turbulence. These analyses offer insights as to the appropriateness of IEC as a foundation for the dynamic capabilities and international success of emerging market INVs.

This article continues with a review of the background literature to support the hypotheses of our theoretical model. The empirical study is then divided in two parts: first, the measurement instruments are discussed; second, the results of the structural equation model (SEM) are analysed. A presentation of the results is followed by a discussion of theoretical and practical implications, as well as study limitations and future research opportunities.

Theoretical underpinnings and conceptual framework

Organisational learning, KBV and capabilities-based view are complementary as they outline how INVs leverage knowledge repositories to expand capability configurations (Jantunen et al., 2008; Kuivalainen et al., 2010). Scholars theorise that firms utilise knowledge to generate new combinations of processes and mindsets which yield distinctive capabilities (Grant, 1996; Kogut and Zander, 1992). Building dynamic capabilities that support new venture internationalisation involves learning and the application of knowledge to create distinctive skill sets (Luo, 2000). Moreover, the competitive advantages of these under-resourced new ventures are founded on such capability differentials. Accordingly, knowledge acquisition, transformation and exploitation are the processes at the core of INV capabilities (Prashantham and Young, 2011) and underlie IEC and dynamic capabilities.

While emerging market firms are viable competitors in international markets, they often suffer from technological disadvantages and lack financial and human capital resources (Cuervo-Cazurra et al., 2017). To overcome such obstacles, emerging market INVs require advanced managerial capabilities to combine and utilise knowledge in unconventional ways (Lu et al., 2010). Entrepreneurial managers utilise an array of knowledge (Mejri and Umemoto, 2010) to mould an IEC to overcome newness- and size-related constraints. For new ventures with limited resource endowments, IEC not only guides strategic outcomes but also enables them to thrive in unpredictable markets (Groysberg et al., 2018). Earlier analyses argued that IE behaviour reflected the propensity to be innovative, proactive and take risk across international markets – referred to as international entrepreneurial orientation (IEO) (McDougall and Oviatt, 2000). However, scholars contend there is a need for a comprehensive IEC to enhance our understanding of IE behaviour (Dimitratos and Jones, 2005). Additional behaviours beyond IEO should be included in firm-level IE behaviour (Jones and Coviello, 2005; Rauch et al., 2009), as IEO coalesces with international market orientation (IMO), international learning orientation (ILO), international motivation, international competitor network orientation and international non-competitor network orientation to shape an IEC (Dimitratos et al., 2012; Gabrielsson et al., 2014). See Table 1 for IEC dimensions and definitions.

Table 1.

International entrepreneurial culture (IEC), dynamic capabilities and dimensions.

Construct	Construct definition
IEC	Culture of an organisation that facilitates the entrepreneurial activities of the firm internationally (Zahra et al., 2005)
IEC dimensions
International entrepreneurial orientation	Propensity to engage in innovative, proactive and risk-taking behaviours to achieve strategic objectives in global markets (Wiklund and Shepherd, 2005)
International market orientation	Propensity to collect market information as to create superior value for international customers and monitor strategic moves of competitors (Knight and Kim, 2009)
International motivation	Propensity to initiate and stimulate aggressive behaviour towards international venturing (Dimitratos et al., 2012)
International learning orientation	Propensity to actively develop new knowledge in foreign markets (Sinkula et al., 1997)
International competitor network, international non-competitor network	The extent to which the firm accesses resources from its external environment through cooperative arrangements for its activities abroad (Gulati, 1998)
Construct	Construct definition
Dynamic capabilities	Reflect the strategic processes by which firms build, integrate and extend resources to capitalise on market opportunities (Teece et al., 1997)
Dynamic capabilities dimensions
Sensing	Search and exploration across technologies and markets such that it reflects the capacity to learn about customers, competitors and the broader market environment (Teece, 2012)
Seizing	Evaluation of existing and emerging capabilities, and possible investments in relevant designs and technologies that are most likely to achieve marketplace acceptance (Teece, 2012)
Reconfiguring	Extending, modifying and recombining capabilities in response to changes in the market and technologies (Teece, 2012)

Dynamic capabilities do not emerge but rather need to be cultivated; as this process of skill development is a managerial task, entrepreneurial management is a key antecedent of dynamic capabilities (Teece, 2012; Zahra et al., 2006). Gnizy et al. (2014) contend international SME culture encompasses IEO, IMO and ILO to shape dynamic capabilities; while this organisational culture is successful for INVs from developed markets, it lacks elements critical to emerging market INVs. An international orientation is a foundational mindset for INVs from emerging markets (Williams et al., 2020); to survive and grow despite limited domestic demand, these new ventures are often forced into global markets. Also, the literature demonstrates network learning to be at the core of capability development and international growth (Zhou et al., 2010).

In the emerging market INV context, Mudalige et al. (2019) highlight IEO and networking as key tenets of an international SME culture that fosters dynamic capabilities; missing from their conceptualisation are international orientation, IMO and ILO. An encompassing IEC comprises knowledge to develop international scope, devise innovative processes, calculate risk, develop market research and identify alliances – all of which contribute to capability development. This breadth of knowledge is important for new ventures that face resource scarcity, institutional barriers and legitimacy issues that would otherwise limit international market entry. IEC comprises a set of traits that support strategic activities associated with dynamism, namely, sensing opportunities, seizing resources and transforming the firm (Dimitratos et al., 2016; Gabrielsson et al., 2014). Accordingly, IEC more accurately explains how emerging market INVs foster an overarching set of advanced managerial capabilities that drive international growth.

Analyses of the dynamic capabilities of INVs largely focus on developed markets, for example, conceptual articles (Andersson and Evers, 2015; Zahra et al., 2006) and case-study work (Pehrsson et al., 2015; Weerawardena et al., 2019), but there are relatively few quantitative analyses (Weerawardena et al., 2015). This is partly because dynamic capabilities are best captured using longitudinal research designs that track their evolutionary nature, and cause and effect (Easterby-Smith et al., 2009; Schilke, 2014). In addition, empirical analyses are lacking in the emerging market context (Mudalige et al., 2019), partially due to the challenges in collecting reliable data from such markets (Prashantham and Birkinshaw, 2015; Varma and Budhwar, 2012). The particular challenges faced by INVs from emerging markets, coupled with the growing evidence on the importance of dynamic capabilities, warrant further examination. Dynamic capabilities reflect the capacity to sense and seize opportunities, and reconfigure resources and processes (Teece, 2007). Sensing involves search and exploration across markets such that it reflects the capacity to learn about customers, competitors and the broader market environment. Seizing involves the evaluation of existing and emerging resources and possible investments in designs and processes likely to achieve marketplace acceptance. Reconfiguring entails extending, modifying and recombining capabilities in response to changes in the marketplace (Teece, 2012).

Dynamic capabilities are organised in a hierarchy: second-order dynamic capabilities (sensing, seizing and reconfiguring) and specific first-order dynamic capabilities (marketing, new product development) (Ambrosini et al., 2009; Collis, 1994; Schilke, 2014), with the latter receiving a greater portion of the empirical analysis (Pezeshkan et al., 2016; Schilke et al., 2018). Second-order dynamic capabilities are considered ‘learning to learn’ capabilities that develop specific first-order dynamic capabilities, which in turn shape operational zero-order capabilities and firm performance (Collis, 1994; Schilke, 2014). Differences in hierarchy and specificity of dynamic capabilities are problematic in generalising empirical results; therefore, it is necessary to examine dynamic capabilities at various levels of analysis (Schilke et al., 2018). While the literature offers empirical evidence regarding the impact of IEC towards first-order dynamic capabilities in emerging market INVs (Buccieri et al., 2020; Gölgeci et al., 2019; Li and Liu, 2014), such analysis is limited regarding underlying second-order dynamic capabilities. This article focuses on second-order dynamic capabilities as an overarching mechanism that drives performance (Ambrosini et al., 2009; Schilke, 2014). Such analysis broadens our understanding of how emerging market INVs succeed in global markets.

INVs that originate in emerging markets contend with resource scarcity and legitimacy issues in global markets. These ventures have to undertake behaviours and processes to form sensing, seizing and reconfiguring activities. Appropriately, INVs that possess an IEC are well positioned as organisational learning routines are the mechanism underlying dynamic capabilities (Zollo and Winter, 2002); it is in this context that an IEC comprising various knowledge areas shapes the dynamic capabilities which guide INV internationalisation. Accordingly, this discussion highlights the importance of IEC towards the development of dynamic capabilities and achievement of performance objectives in international markets.

Hypotheses

Central to our conceptual framework (see Figure 1) is the role of IEC in shaping dynamic capabilities that are critical to the international success of emerging market INVs. In brief, we argue that IEC supports the development of dynamic capabilities, and each drive international performance. Our conceptual framework also highlights the importance of IEC towards dynamic capabilities and international performance in turbulent markets.

Figure 1.

Research framework.

IEC and dynamic capabilities

As dynamic capabilities reflect the activities of sensing and seizing opportunities, and transforming the firm, they represent an entrepreneurial facet of management (Al-Aali and Teece, 2014). The dynamic capabilities of emerging market INVs commence with an orientation towards international markets that actively supports the capacity to sense new product and market opportunities (Knight and Kim, 2009). Moreover, this global mindset allows INVs to exploit or seize culture-specific knowledge to shape resources and processes for new markets (Eriksson et al., 2014); such a proactive orientation towards international markets enables INVs to seize new opportunities and competences (Kiss et al., 2013). As to reconfiguring, an international orientation enables INVs to uncover knowledge assets used to recombine resources that meet changing customer expectations (Weerawardena et al., 2015). INVs with an international motivation will be open to learning and developing ideas from abroad that will shape their dynamic capabilities. In addition, IEO reflects emerging market INV’s proactive approach to sensing product- and market-related opportunities, as well as a risk-aptitude necessary to seize opportunities (Khan and Lew, 2018; Swoboda and Olejnik, 2016). These firms leverage an IEO to scan for new ideas to extend offerings and remain ahead of the competition (Eriksson et al., 2014). In addition to sensing and seizing opportunities, an IEO facilitates reconfiguring knowledge resources (Chirico and Nordqvist, 2010; Jantunen et al., 2005).

INVs utilise IMO to learn about prospective customer needs and gaps in competitor coverage to uncover product and market opportunities (Hernández-Linares et al., 2020). Li and Zhou (2010) further suggest IMO affects the ability of Chinese INVs to reconfigure assets to adapt to new markets. These firms combine and utilise knowledge of consumer needs and preferences and industry responses (or lack thereof) to shape their response in the form of process or business model transformation. As INVs create market knowledge, they develop sensing capabilities (Dong et al., 2016). The ability to commercialise knowledge enables INVs to seize opportunities and learn new processes to recombine resources (Easterby-Smith and Prieto, 2008). Hence, learning is a foundational micro-process of dynamic capabilities, as knowledge is the most critical resource for resource-constrained INVs to develop advanced management capabilities.

Networking provides experiential knowledge that would be difficult and costly for INVs to acquire via traditional market research approaches. Networking partners provide a key source of knowledge regarding latent market needs which supports sensing (Khan and Lew, 2018) and seizing capabilities (Mort and Weerawardena, 2006) of emerging market INVs. Furthermore, networking enables INVs to reconfigure resource combinations as partners identify lucrative opportunities to solve problems in global markets by applying modified variations of current offerings (Mudalige et al., 2019). Cooperative networks provide resource-constrained firms with opportunities to acquire, recombine and extend complementary resources and capabilities.

The preceding discussion explains how the micro-processes of an IEC shape dynamic capabilities. While managerial skills are the key agents of change, the building blocks of dynamic capabilities need to be embedded in organisational routines. INVs lean on an IEC to overcome a lack of resource endowments and legitimacy issues in sensing the next big opportunity and devising creative approaches to seize it. The elements of an IEC provide knowledge to understand opportunities (impact of new products and markets) and experiment with new skill sets. The result of an IEC is the know-how to calibrate opportunities, direct or redirect resources accordingly, and potentially, reshape organisational processes (Teece, 2012; Zahra et al., 2006). Appropriately, the complexity inherent with developing dynamic capabilities necessitates an IEC, which serves as a central repository to collect and utilise knowledge that forms key strategic behaviours:

Hypothesis 1. IEC has a positive impact on the dynamic capabilities of emerging market INVs

IEC and international performance

Emerging market INVs apply an international orientation to achieve a global reach that results in international success (Zhang et al., 2014); such firms utilise an international orientation to uncover and exploit opportunities that create competitive advantages in global markets. As many emerging markets provide limited domestic demand, a global mindset expands an INV’s opportunity horizon to new potential customers; in addition, IEO provides performance benefits for these firms (Messersmith and Wales, 2013). Emerging market INVs leverage IEO to aggressively experiment with approaches to create competitive advantages based on first-mover advantages (Falahat et al., 2018; Martin and Javalgi, 2016). These firms are innovative in that they do not allow their constraints to affect them, but rather continually look for ‘outside-the-box’ opportunities and solutions to drive international performance.

IMO supports international growth of INVs through a focus on customers and competitors (Armario et al., 2008). IMO provides significant value for emerging market INVs in institutionally distant markets, allowing these firms to learn and adjust strategies that align better with international market requirements (He et al., 2018). These firms need to learn about prospective customer needs, and competitor strategies within distant target markets. This is especially true for firms that enter markets where customer preferences are less understood. Similarly, organisational learning supports the international performance of emerging market INVs (Gerschewski et al., 2018). Entrepreneurial firms use experiential and informational sources of learning to explore and exploit opportunities for international growth (Voudouris et al., 2011); firms that emphasise learning processes generate knowledge in greater amounts that can be applied to address profitable opportunities in new international markets.

Networking is a critical element as it enhances the range of strategic options that INVs can pursue across global markets. Emerging market INVs leverage networking to fill resource voids needed for their internationalisation activities (Musteen et al., 2014). As these firms lack human capital, international networks provide a knowledge substitute. Foreignness, newness and smallness of INVs from emerging market are relatively unknown in global markets. Therefore, local partners help overcome legitimacy issues. In addition, INVs use collaborative arrangements with competitors to develop global brands and pool resources to fill large volume orders (Freeman et al., 2013). These strategic alliances enable firms with limited resource endowments to be globally competitive; thus, networking supports performance of emerging market INVs (Zhou et al., 2007).

Collectively, the elements of an IEC provide knowledge and learning that drive the international success of emerging market INVs. Firms that nurture an IEC are equipped with the strategic processes needed for international growth. While empirical studies are limited, IEC generally supports the performance of emerging market INVs (Baimai and Mukherji, 2015; Zhang et al., 2009, 2017). An IEC underlies the ability of these INVs to conduct learning essential to successfully identify and exploit international opportunities. While IEC is not a capability distinct to a firm function related to product and strategy implementation, its focus on knowledge creation enables INVs to uncover profitable opportunities; in effect, a strong IEC is the underlying structure that enables INVs to overcome resource constraints and shape their competitive advantages in global markets:

Hypothesis 2. IEC has a positive impact on the international performance of emerging market INVs

Dynamic capabilities and international performance

The literature provides support for the performance benefits of emerging market INV dynamic capabilities, so, for instance, there is evidence that sensing and transformation processes are key performance drivers of INVs from China (Jiao et al., 2013) and Sri Lanka (Mudalige et al., 2019). These INVs rely on environmental sensing and rapid adaptability to effectively respond to market needs, which translates into success, while Khan and Lew (2018) find that all three dimensions of dynamic capabilities facilitate the survival of Pakistani INVs. Organisational agility and adaptability enable these firms to overcome weak domestic institutional settings and a lack of financial capital to succeed against all odds. Also, Li and Liu (2014) find that dynamic capabilities result in competitive advantages for Chinese ventures.

Emerging market INVs apply exploration processes to sense for opportunities to attract international clientele (Park and Xiao, 2020); such firms actively search to acquire information and better understand the needs of global markets. In the absence of well-developed market research capabilities, emerging market firms rely on sensing to learn about targeted segments. This ensures proper alignment between product and service development and market needs, which ultimately enhances performance; in addition, these firms utilise exploitation activities to seize a range of capabilities needed to develop global offerings (Buccieri et al., 2020). As prospective customer preferences and needs evolve and vary from market to market, seizing the appropriate strategic skills and processes is critical to manage resource constraints. Decisive, yet accurate decision-making, increases the likelihood that these INVs will form the necessary capabilities. Finally, emerging market INVs leverage reconfiguring as part of their developmental activities to tailor offerings that meet the specific needs of international customers (Buccieri et al., 2020). These firms provide key anchor customers with initial versions of offerings and work with them to learn of necessary nuanced modifications to ensure market adoption. Therefore, the ability to redesign and modify resource combinations is crucial to the competitiveness of emerging market INVs.

In response to their resource voids and legitimacy issues, emerging market INVs develop signature processes and skills to facilitate international entry and achieve success. Through the successful implementation of dynamic capabilities, these firms are prepared to identify and shape profitable opportunities. The abilities to rapidly acquire, integrate and recombine knowledge in new ways position unknown INVs to develop offerings and business models that attract new customers across global markets. Accordingly, the ability to align product and market knowledge with new advanced managerial capabilities drives INV performance:

Hypothesis 3. Dynamic capabilities have a positive impact on the international performance of emerging market INVs

Role of market turbulence

The evolution of technology creates uncertainty within global markets; such turbulence refers to the rate and state of change related to customer preferences and needs (Jaworski and Kohli, 1993). Compared with larger firms, INVs are more vulnerable to these changes because of limited technological and marketing resources (Hilmersson, 2014); however, knowledge supports a capacity to foresee the potential impact of environmental turbulence and devise an appropriate strategic response (Teece, 2012). Therefore, dynamic capabilities are critical for new ventures to stay ahead of market trends; without such competences, INVs risk losing customers, which leads to unpredictable performance outcomes.

The goal of dynamic capabilities for internationalised firms is to provide evolutionary fitness in addressing unpredictable environments (Eisenhardt and Martin, 2000; Petricevic and Teece, 2019). Moreover, market dynamism plays a part in shaping dynamic capabilities of emerging market firms (Li and Liu, 2014). As entrepreneurship supports the ability to sense and seize opportunities in unpredictable markets (Huang et al., 2014), INVs utilise an IEC to create new knowledge that shapes dynamic capabilities, while an ‘entrepreneurial toolbox’ supports the international success of emerging market INVs operating under marketplace uncertainty (De Clercq and Zhou, 2014; Javalgi and Todd, 2011). To manoeuvre in turbulent markets, these firms utilise entrepreneurial processes to foster organisational learning, which in turn promotes performance (Zhou, 2007). These firms use entrepreneurship to assess new trends and match capability stocks to navigate dynamism so, in effect, use an IEC to convert unpredictability into opportunities for success.

The above discussion highlights the necessity for an IEC and dynamic capabilities to navigate markets fraught with uncertainty in terms of changing customer preferences. INVs that originate from emerging markets often contend with liabilities of foreignness related to country of origin effects (Gaur and Kumar, 2010). Country of origin effects exacerbate the dynamics of customer preferences for these firms, in that foreign customers are more apt to avoid an offering perceived as inferior. Furthermore, resource deficiencies contribute to this challenge as small firms lack the ability to invest capital to meet changing trends bringing about the need for IEC. Instead of following market trends, knowledge-driven INVs leverage entrepreneurial management to shape or lead market demand (Yang and Gabrielsson, 2017). Emerging market INVs create the market disruptions that create opportunities for customer-switching. Ultimately, IEC is a valuable dynamic capability for INVs to survive and take advantage of opportunities within turbulent markets.

Hypothesis 4a. Market turbulence positively moderates the relationship between IEC and dynamic capabilities of emerging market INVs.

Hypothesis 4b. Market turbulence positively moderates the relationship between IEC and international performance of emerging market INVs.

Research method

Sample

In conjunction with the growth of Indian hi-tech products and services, new ventures from India are internationalising early (Bello et al., 2016). The government recently created a burgeoning entrepreneurship ecosystem through various initiatives (Start-Up India, Stand-Up India) and the Ministry of Skill Development and Entrepreneurship (Shukla et al., 2019). To explore this phenomenon, we target data collection on INVs from high-technology industries (information technology software, information technology services, electronics, aerospace and aviation, and biotechnology and pharmaceuticals) originating in India. Conducting empirical research in emerging markets can be challenging as publicly available data are often limited or deficient (Prashantham and Birkinshaw, 2015; Varma and Budhwar, 2012). In response to distrust and unwillingness of managers to respond, we collaborated with a market research firm to administer surveys in India (Hoskisson et al., 2000; Zhang et al., 2017). We employed Qualtrics to collect responses from 286 high-tech Indian INVs via an online survey in 2017. This process involved developing the survey with quality checks and then outsourcing recruitment of respondents to Qualtrics as the firm maintains Internet panels. This convenience sample offers less representativeness than a random sample, which does have implications for external validity. However, the Qualtrics panels are considered the most representative commercial Internet panel option in India (Boas et al., 2018) and offer a promising avenue for business researchers to obtain participants (Holt and Loraas, 2019).

While the definition of INVs suggests these firms internationalise at inception, most target international markets within the first few years after founding. In this study, INVs are conceptualised as firms that have internationalised within five years of their foundation and 25% or more of total revenues coming from international markets. This operationalisation is supported by research on INVs from India (Buccieri, 2020; Kim et al., 2011). Firms with 10–50 employees are considered small, and firms in the range of 51–249 employees are medium. Micro firms, those with fewer than 10 employees, were omitted as many are characterised by part-time operations. This study uses the owner-entrepreneur, director, or manager of the firm as the key respondent. These individuals are responsible for the organisationally embedded IEC, managerial capabilities and performance in international markets. The survey is in English, as it is one of India’s official languages and the dominant language used by Indian businesses. Table 2 exhibits a breakdown of the final sample descriptive statistics.

Table 2.

Sample descriptives.

Firm size (number of employees)
10–50	76
51–250	210
	% firms		% firms
Position		Speed of internationalisation (years from startup)
Executive managers	51	>2	13
Owners	33	2–3	56
Senior-level directors	16	4–5	31
Type of industry		Scale of internationalisation (foreign sales/ total sales)
Information technology software	47	25–50	57
Information technology services	37	51–75	39
Aerospace and aviation	12	76–100	4
Biotechnology and aviation	4
Entry mode		Scope of internationalisation (number of markets)
Direct exporting	52	1–3	30
Used a sales agent	18	4–6	33
Used a distributor	17	7–9	35
Joint venture	8	10 +	2
Wholly owned subsidiary	4
Licensing	1

We compared early and late respondents (first 25% and last 25% to return the surveys, respectively) with estimate potential late-response bias. Results of a t-test to identify potential differences on key demographic variables (firm size, industry, year of establishment, and speed, scale and scope of internationalisation) reveal no significant differences (p > .05). Therefore, we conclude that late-response bias is likely not an issue (Armstrong and Overton, 1977). As a result of utilising key informant surveys to collect data, common method bias is a potential concern. However, due to the challenges in collecting data from firms located in emerging markets, the use of key informants is often the most practical method. We followed guidelines established to assess the degree of common method bias (Podsakoff and Organ, 1986). The item wordings were reviewed to ensure survey respondents had a clear understanding of the questions. To avoid socially desirable responses, we assured respondents of confidentiality and that there were no correct or incorrect responses. In addition, the items used in this study were spread out in the questionnaire to limit the likelihood of respondents rationalising their answers. Finally, we followed the marker variable approach to assess potential common method bias (Lindel and Whitney, 2001). The variable, entry mode, is theoretically unrelated to the main study constructs, and its average correlation with the main study variables was −0.06, ranging between −11.4 and 0.002. Therefore, we deem common method bias likely is not an issue.

Variables

All measures were adapted from established scales, using 7-point Likert-type scales. IEC is a second-order measure that reflects six interrelated international organisational culture dimensions. In this study, we adopt the 23-item scale developed by Dimitratos et al. (2012), ranging from (1) ‘strongly disagree’ to (7) ‘strongly agree’. Dynamic capabilities are modelled as a reflective second-order measure to capture the sensing, seizing and reconfiguring dimensions. We draw upon Wilden et al. (2013) to operationalise the dynamic capabilities scale items. This scale comprises 14 items, ranging from (1) ‘very rarely’ to (7) ‘very often’. We follow previous studies that adopt an international performance measure which captures financial and market performance of INVs (Cavusgil and Zou, 1994; Knight, 2001), ranging from (1) ‘much worse’ to (7) ‘much better’. We use a subjective measure of international performance as international business (IB) research indicates that primary data can be more reliable than secondary data, especially in emerging markets. Objective financial data are often difficult to obtain and may be difficult to compare across international contexts due to differing accounting standards (Hult et al., 2008). To capture market turbulence, we used items developed by Cadogan et al. (2009), ranging from (1) ‘strongly disagree’ to (7) ‘strongly agree’.

We also included four control variables in the structural model. First, industry has been found to predict firm performance due to the level of global competition within an industry (Zhou et al., 2012). Second, as firms operate in more markets, they accrue additional knowledge assets that contribute towards their international expansion (Zhou and Wu, 2014), so we used the number of international markets in which the INV operated or sold products to measure degree of internationalisation (Lu and Beamish, 2001). Third, we use years of international experience as a proxy for asset accumulation. International experience provides invaluable knowledge to resource-constrained SMEs from emerging markets, which support their performance objectives (Oura et al., 2016). Finally, the number of full-time employees captures firm size, which provides yet another indicator of asset accumulation that supports international performance. As larger firms have larger pools of resources to exploit and the possibility of achieving advantages of scale in international operations, firm size has been found to be positively related to international performance (Jantunen et al., 2008).

Statistical procedures and results

This study follows Zou and Cavusgil (2002) in assessing the fit of our second-order confirmatory factor analysis (CFA) measurement model. IEC and dynamic capabilities were modelled as second-order factors with market turbulence and international performance as first-order factors. First, we examined the model fit statistics. The results reveal a statistically significant chi-square (χ² = 1928.90; df = 979; p < 0.01). However, the chi-square statistic should not be used as the only measure of model fit (Bagozzi and Yi, 1988). Therefore, we examined other fit indices (standardised root mean square residual (SRMR) = 0.038, Tucker–Lewis fit index (TLI) = 0.91, comparative fit index (CFI) = 0.92, incremental fit index (IFI) = 0.92 and root mean square error of approximation (RMSEA) = 0.058), which suggest good model fit. Considering the relatively complex nature of the measurement model, which includes second-order factors, these fit indices suggest that the second-order CFA model fit the data satisfactorily (Bentler, 1995).

In addition, we conducted a CFA to compare the proposed four-factor model with an alternative 11-factor model (including all first-order dimensions). Model fit for the proposed five-factor model was superior to the 11-factor model (χ² = 2031.75; df = 1019; p < 0.01, SRMR = 0.040, TLI = 0.90, CFI = 0.91, IFI = 0.91 and RMSEA = 0.059). In addition, the value of another CFI, Akaike’s information criterion (AIC) (Boomsma, 2000; Hu and Bentler, 1999), was better (smaller) for the four-factor model (AIC = 2226.90) than for the 11-factor (AIC = 2249.75) model. These results indicate that our higher order four-factor model provided better fit to the data than its rival model.

Convergent validity of the measurement model was assessed through the examination of factor loadings, composite reliabilities and average variance extracted (AVE; see Table 3). Item loadings of their respective factors all exceed 0.77 with t-values exceeding 12.79 (Anderson and Gerbing, 1988). Composite reliabilities range from 0.88 to 0.98, which suggest satisfactory internal consistency (Bagozzi and Yi, 1988). AVE estimates range from 0.63 to 0.95, exceeding the recommended 0.50 threshold (Fornell and Larcker, 1981). The loadings of the first-order dimensions on IEC and dynamic capabilities are also positive and statistically significant. Item loadings exceed 0.73 (t-values exceeding 13.73), coupled with composite reliabilities greater than 0.82, and AVE estimates above 0.61 indicate an adequate level of construct validity. Next, we conducted Fornell and Larcker’s (1981) test of discriminant validity (see Table 4). This procedure involves assessing whether the AVE for every construct’s measure is larger than the squared phi correlation of that construct with all other constructs in the model. All AVE estimates compare favourably with the corresponding phi correlation. In summary, we conclude that all constructs in the measurement model possess convergent and discriminant validity and the second-order CFA model fits the data adequately.

Table 3.

Results of second-order CFA.

Factor and items					Standardised loadings	t-value
International entrepreneurial culture (second-order factor)
International entrepreneurial orientation (CR = 0.92, AVE = 0.61)
We favour high-risk projects (with chances of very high return)					0.77	15.51
We believe that owing to the nature of the environment in this foreign country it is best to achieve the firm’s objectives in its marketplace via bold and wide-ranging acts					0.84	14.17
Our firm typically initiates actions to which competitors then respond					0.78	14.63
Our firm is very often the first firm to introduce new products/services, administrative techniques and operating technologies					0.80	14.03
Our firm typically adopts a very competitive ‘beat-the-competitors’ posture					0.78	13.91
In the past five years, our firm has marketed very many new lines of products or services					0.77	13.07
In the past five years, changes in product or service lines have usually been quite dramatic					0.73	^a
International market orientation (CR = 0.89, AVE = 0.62)
We have many routine or regular measures of customer service					0.83	17.00
Our product or service development is heavily based on good market and customer information					0.83	14.43
We have a very good sense of how our customers value our products/services					0.74	17.70
Our firm always collects information on our customers through any					0.75	15.13
Our firm always collects information on our competitors through any means					0.77	^a
International motivation (CR = 0.82, AVE = 0.69)
In regard to the management philosophy for firm activities in foreign markets, developing an employee’s own ideas is not particularly encouraged					0.85	16.07
In regard to the management philosophy for firm activities in foreign markets, top management is ignorant and unreceptive towards ideas and suggestions of employees					0.82	^a
International learning orientation (CR = 0.84, AVE = 0.63)
We have many formal information links established between departments/functions					0.75	13.73
We have many formal/informal processes that provide direction on implementation of activities					0.80	14.40
We have many formal/informal processes that evaluate the effectiveness of its activities					0.83	^a
International competitor network orientation (CR = 0.88, AVE = 0.71)
Cooperates with competitors in joint manufacturing agreements					0.83	16.29
Cooperates/participates to a very large extent with competitors in joint research					0.83	17.17
Cooperates heavily with competitors in advertising and marketing					0.86	^a
International non-competitor network orientation (CR = 0.88, AVE = 0.70)
Cooperate with non-competitors in joint manufacturing agreements					0.84	17.02
Cooperates to a very large extent with non-competitors in joint research					0.84	17.07
Cooperates heavily with non-competitors in joint advertising and marketing					0.84	^a
Second-order international entrepreneurial culture scale (CR = 0.98, AVE = 0.86)
International entrepreneurial orientation					0.95	13.37
International market orientation					0.98	14.82
International motivation					0.92	14.26
International learning orientation					0.94	12.79
International competitor network orientation					0.88	13.34
International non-competitor network orientation					0.90	^a
Dynamic capabilities (second-order factor)
Sensing (CR = 0.90, AVE = 0.69)
People participate in professional association activities					0.86	18.01
Employees attend scientific or professional conferences					0.82	18.02
We connect with our active network of contacts with the scientific and research community					0.83	17.57
We use established processes to identify target segments, changing customer needs and customer innovation					0.81	^a
Seizing (CR = 0.88, AVE = 0.65)
We invest in finding solutions for our customers					0.82	16.52
We adapt the best practices in our sector					0.83	15.50
We respond to defects pointed out by employees					0.79	15.17
We change our practices when customer feedback gives us a reason to change					0.78	^a
Reconfiguring (CR = 0.93, AVE = 0.70)
Implementation of a new or substantially changed company strategy					0.83	16.45
Implementation of new kinds of management methods					0.80	17.42
New or substantially changed technological equipment, manufacturing or service delivery process					0.83	18.69
Substantial renewal of business processes					0.87	17.11
Initiation of new procedures or systems					0.82	17.97
New or substantially changed ways of achieving our targets and objectives					0.85	^a
Second-order dynamic capabilities scale (CR = 0.98, AVE = 0.95)
Sensing					0.99	16.96
Seizing					0.97	15.49
Reconfiguring					0.96	^a
International performance (CR = 0.91, AVE = 0.63)
Market share growth					0.84	15.13
Growth in sales revenue					0.81	14.56
Acquiring new customers					0.79	14.08
Profitability					0.79	13.96
Return on investment					0.78	13.78
Margins					0.77	^a
Market turbulence (CR = 0.88, AVE = 0.65)
Our product preferences of international customers change quite a bit over time					0.79	14.45
Our international customers tend to look for new products all the time					0.80	14.61
We are witnessing changes in the types of products/services demanded by our customers					0.84	15.40
New international customers tend to have product-related needs that are different from those of our existing customers					0.80	^a
Model fit	χ²(df)	1928.90 (979)	TLI	0.91	CFI	0.92
	SRMR	0.038	IFI	0.92	RMSEA	0.058

CR: composite reliability, AVE: average variance extracted; TLI: Tucker–Lewis fit index; CFI: comparative fit index; SRMR: standardised root mean square residual; IFI: incremental fit index; RMSEA: root mean square error of approximation.

Fixed to set the scales.

Table 4.

Validity and reliability table with correlations.

	Construct	CR	AVE	MSV	1	2	3	4
1	International performance	0.91	0.63	0.63	0.80
2	International entrepreneurial culture	0.97	0.86	0.70	0.79	0.93
3	Market turbulence	0.88	0.65	0.59	0.61	0.77	0.81
4	Dynamic capabilities	0.98	0.95	0.70	0.78	0.84	0.65	0.97

CR: composite reliability; AVE: average variance extracted; MSV: maximum shared variance.

Bold diagonal elements are the square root of AVE. The correlations are off-diagonal.

Structural model and results

We tested the structural model using covariance-based SEM, SPSS AMOS 25, as the research objective was theory testing and confirmation (Hair et al., 2011). To achieve a ratio of sample size to estimated parameter of greater than 5 to 1, which is necessary for reliable parameter estimates, a parsimonious structural model estimation procedure was utilised (Bentler, 1995). In this procedure, the indicators for each construct are averaged to form manifest composites. Thus, IEC and dynamic capabilities are regarded as first order with composites of their dimensions (Morgan et al., 2004). The fit indices for the structural model (χ² = 316.15, df = 139, p < 0.01; TLI = 0.94; IFI = 0.95; CFI = 0.94; RMSEA = 0.067) suggest good fit to the data (see Table 5). In addition, the structural model offers satisfactory explanatory power as the squared multiple correlations are 0.73 for dynamic capabilities and 0.68 for international performance.

Table 5.

Structural relationship and hypothesis testing.

Structural relationships	Path coefficients	t-value	p-value
Hypothesised relationships
H1: IEC → dynamic capabilities	0.85	17.13	<0.001
H2: IEC → international performance	0.43	4.51	<0.001
H3: Dynamic capabilities → international performance	0.43	4.60	<0.001
H4a: Moderation test-group split at the median level of market turbulence
Low-intensity group
IEC → dynamic capabilities	0.54	6.25	<0.001
High-intensity group
IEC → dynamic capabilities	0.94	10.57	<0.001
H4b: Moderation test-group split at the median level of market turbulence
Low-intensity group
IEC → international performance	−0.19	−0.53	0.593
High-intensity group
IEC → international performance	0.45	4.56	< 0.001
Control variables
Firm size → international performance	−0.03	0.50	0.496
Industry → international performance	−0.01	−0.19	0.848
Degree of internationalisation → international performance	0.00	0.09	0.928
International experience → international performance	0.01	0.89	0.893
Goodness-of-fit statistics

IEC: international entrepreneurial culture.

χ²(df) = 316.15 (139), p < 0.01, Tucker–Lewis fit index = 0.94, incremental fit index = 0.95, comparative fit index = 0.94, root mean square error of approximation = 0.067.

Hypothesis 1 predicts that IEC shapes dynamic capabilities. The coefficients are positive and significant (β = 0.85, p < 0.001), offering support for H1. In support of H2, the findings exhibit IEC is positively associated with international performance (β = 0.43, p < 0.001). Finally, the relationship between dynamic capabilities and international performance is positive and significant (β = 0.43, p < 0.001). Accordingly, H3 is supported. The results of our analysis reveal IEC drives dynamic capabilities, and both positively impact international performance of emerging market INVs. In addition, the four control variables are non-significant.

We conducted an additional analysis to assess the moderating effect of market turbulence. The sample was split into two groups, high and low, at the median level (Boehe and Jiménez, 2016). To test H4a, we re-estimated two structural models (Morgan et al., 2004). In the first model, we constrained the path between IEC and dynamic capabilities to be equal across the two groups, and in the second model we allowed the path coefficients to vary freely. A significant chi-square difference (Δχ² = 22.97, p < 0.001) reveals a better fit for the unconstrained model. Thus, the high and low groups in the IEC–dynamic capabilities relationship are different. The two-group moderator test of market turbulence is supported in both the high (β = 0.94, t-value = 10.57, p < 0.001) and low groups (β = 0.54, t-value = 6.25, p < 0.001). Thus, H4a is supported. Similarly, a significant chi-square difference (Δx² = 24.55, p < 0.001) indicates that the relationship between IEC and international performance is different in the high and low groups. In support of H4b, market turbulence is supported in the high group (β = 0.45, t-value = 4.56, p < 0.001), but not supported in the low group (β = –0.19, t-value = −0.53, p = 0.593). The results show moderation when market turbulence is high.

Discussion

Theoretical relevance

This research provides new knowledge as to how IEC, dynamic capabilities and international performance are interconnected in the context of INVs from emerging markets. In examining the interplay between IEC, dynamic capabilities, market turbulence and international performance, this article offers three contributions to the INV literature. First, our understanding as to how IEC shapes dynamic capabilities of emerging market INVs remains incomplete. There is some evidence as to the importance of IEC in guiding dynamic capabilities related to marketing, new product development and others (Buccieri et al., 2020; Gölgeci et al., 2019), but our evidence extends contemporary knowledge of dynamic capability development as we shift the focus to explore the effects of IEC towards second-order dynamic capabilities that inform INV performance. The data indicate IEC to be a key antecedent; this is consistent with the limited empirical evidence that illustrates the importance of entrepreneurship in shaping the sensing, seizing and reconfiguring capabilities of emerging market INVs (Mudalige et al., 2019). Moreover, this finding supports the broader conceptual work on the impact of learning-based behaviours (Eriksson, 2014) and entrepreneurship (Teece, 2012; Zahra et al., 2006) towards dynamic capabilities. As such, IEC supports ‘learning to learn’ second-order dynamic capabilities. This is relevant as reduced levels of economic development combined with voids in supportive SME development policies within emerging markets result in business ecosystems that lack advanced management capabilities. To overcome such voids, INVs leverage a culture steeped in organisational learning to develop knowledge of several key facets that gives rise to path-breaking capabilities to explore international opportunities, pursuing resources in external markets and creating processes to modify resources and capabilities that align with international market entry goals. In bringing forward IEC, this research extends our understanding on how INVs from emerging markets develop a key set of dynamic capabilities.

Second, the results find support for the impact of IEC towards international performance. While extant studies of emerging market INVs have analysed the performance benefits of micro-processes in isolation, namely, IEO and networking, this article follows an emergent theme in examining the performance consequences of IEC. IEC comprises embedded routines aimed at learning-of and how-to capitalise on international opportunities; such analysis illuminates how resource-constrained INVs visualise opportunities and challenges in the global landscape to find their niche. Our findings confirm the limited quantitative analyses that indicate IEC positively effects international performance (Baimai and Mukherji, 2015; Zhang et al., 2009, 2017). Our study extends knowledge of the IEC–performance relationship to INVs from India, a key emerging market in Central Asia; in fostering an expansive pursuit of new opportunities, IEC affords leeway for creativity, supports collaboration and promotes experimentation with new ideas. This provides new latitude ventures to make mistakes and pivot business models when previous assumptions are proven incorrect. Learning from miscalculations and successes is an invaluable experience that supports international expansion; by promoting an IEC, emerging market INVs utilise knowledge to chart the course and jumpstart their internationalisation.

The evidence from this study is consistent with the limited quantitative research that dynamic capabilities drive performance of emerging market INVs. Whereas much of the INV scholarship examines specific first-order dynamic capabilities, this article highlights the underlying second-order dynamic capabilities that guide the strategic directions of INVs. As noted, new ventures from emerging markets face institutional constraints alongside limited resource endowments and advanced capabilities; developing a sensing capability is paramount to learning about profitable opportunities across international markets. A seizing capability is key to understanding how to acquire the necessary resources from external markets; a reconfiguring capability enables INVs to gauge needed transformations to align the firm with international opportunities. Finally, this result contributes to the dynamic capabilities literature more broadly as the empirical findings on the performance outcomes to date have been mixed (Pezeshkan et al., 2016); we find support for the positive relationship between dynamic capabilities and performance. Developing dynamic capabilities enables INVs to survive and thrive in global markets.

Third, the data provide support for the utility of IEC in developing dynamic capabilities and supporting international performance – under varying levels of market turbulence. IEC provides knowledge to shape sensing, seizing and reconfiguring capabilities that guide international growth in unpredictable markets. This analysis provides further support for IEC as a core antecedent of the dynamic capabilities of emerging market INVs. While the impact of turbulence in the dynamic capabilities–performance relationship has been explored, we examine how turbulence affects the necessity of an entrepreneurial culture in forming dynamic capabilities, and also, INVs utilise IEC to project and shape future trends to uncover profitable opportunities that yield competitive advantages. These results support the narrative that INVs which confront unpredictable environments benefit from entrepreneurship (De Clercq and Zhou, 2014; González-Benito et al., 2014). Alert entrepreneurs and leaders can reshape organisational culture in response to opportunities and threats (Groysberg et al., 2018). Not only does IEC enable INVs to overcome resource constraints, but also equip these new ventures to better navigate and even lead unpredictable and volatile environments. Collectively, these results emphasise how IEC serves as the bedrock of dynamic capabilities and international performance of emerging market INVs.

Managerial relevance

This article also yields several implications for INV managers. First, IEC is a key determinant of INV international success; it enables INV managers to develop greater understanding of the broader firm and external business environment. They will gain a better sense of market trends, learn needed skills and utilise collaborations to better grapple with changing market dynamics. Entrepreneurial managers should develop behaviours embedded within the firm to act on early insights yet remain open to adjusting priorities according to new wisdom. Furthermore, these firms must be willing to change course to capitalise on presented opportunities and mitigate threats. A learning-based IEC enables INVs to be successful despite limited resources and technological capabilities that result from their newness and smallness (internal) or institutional environment (external).

Second, resource limitations impair INVs means to compete with established, larger firms for existing opportunities. INVs should understand that while they may not possess an abundance of financial resources and personnel, they develop higher order capability configurations to create new opportunities that facilitate internationalisation activities. As a result, sensing skills aid INVs in uncovering new opportunities for success, while seizing and reconfiguration skills facilitate their ability to acquire and modify resources needed capitalise on these opportunities. Dynamic capabilities look different for each firm; the manner in which INV managers conduct or utilise sensing, seizing and reconfiguring can take different shapes. The key for entrepreneurial managers is to develop a set of dynamic capabilities that align with their internationalisation goals.

In relating our results to INV managers, we aim to offer a more fine-grained understanding as to the individual elements associated with IEC and dynamic capabilities. While our sample size prevents a full-scale SEM analysis as to the relationships between the dimensions of our higher order constructs and international performance, we offer additional insights via post hoc analysis. We split our sample at the median level of international performance, into high- and low-performance groups, and examined the individual dimensions of IEC and dynamic capabilities (see Table 6).

Table 6.

Above- versus below-median performing INVs.

International entrepreneurial culture and dynamic capabilities dimensions	Above-median performer mean (SD)	Below-median performer mean (SD)	t-value (probability ⩽)
International entrepreneurial orientation	6.36 (0.67)	5.24 (1.07)	10.58 (0.01)
International market orientation	6.44 (0.62)	5.46 (0.97)	10.14 (0.01)
International learning orientation	6.46 (0.69)	5.49 (1.08)	9.00 (0.01)
International motivation	6.35 (0.72)	5.43 (1.11)	8.30 (0.01)
International competitor network orientation	6.30 (0.79)	5.18 (1.23)	9.17 (0.01)
International non-competitor network orientation	6.39 (0.82)	5.28 (1.14)	9.39 (0.01)
Sensing	6.28 (0.94)	5.07 (1.15)	9.62 (0.01)
Seizing	6.30 (0.90)	5.26 (1.10)	8.74 (0.01)
Reconfiguring	6.30 (0.89)	5.21 (0.99)	9.72 (0.01)

SD = standard deviation.

The results indicate that investments in all six dimensions of IEC lead to enhanced INV performance. International orientation to see new opportunities, entrepreneurship to drive venturing, learning to collect knowledge, gathering customer data to remain connected to the market and building social capital – all contribute towards superior international performance. Thus, this analysis offers further support for the usefulness of an IEC and suggests sensing, seizing and reconfiguring drive stronger performance results. The results of our analyses suggest that emerging market INVs should develop and implement strategic capabilities to uncover opportunities related to new market and product offering opportunities, grasp profitable product development and customer acquisition opportunities, and adapt and modify resource constellations in new ways to achieve performance objectives.

New ventures that experience limited domestic demand need strategic capabilities to identify market imperfections or gaps in coverage – be it product- or market-related. To translate these opportunities into profitable ventures, these firms require strategic processes to reach these underserved and/or underdeveloped segments and, most importantly, combine limited resources with assets accessed from external networks and shape them as to create new sources of competitive advantage. Without this collection of strategic capabilities, INVs are likely to struggle to develop the necessary advanced managerial capabilities. Thus, a combination of IEC and dynamic capabilities is critically important in the early growth of INVs.

Limitations and future research

In addition to the contributions, several limitations provide opportunities for further scholarly investigations. First, emerging economies provide a useful research context to test theoretical models; however, these markets are inherently dynamic. To gain a maximum understanding of these markets, it is necessary to consider their changes. Thus, our use of cross-sectional research design and self-reported survey data may limit the conclusions that can be drawn relative to other research designs and methods. A longitudinal study provides the opportunity to examine these firms over time. This will yield a clearer picture of the causal effects of IEC towards dynamic capabilities and international performance, and dynamic capabilities as a mediating force between IEC and international performance. In addition, the impact of market turbulence over time would be useful. Second, a sample of high-tech INVs from India was used for data collection. Use of a single market potentially limits to what extent the study findings are generalisable. It would be useful for future research to collect data from several regions or contexts to validate the present findings. Third, use of a convenience sample offers less representativeness than a random sample. This results in low external validity as the results potentially cannot speak for the entire population. Fourth, self-reported survey data from a single respondent create the potential for common method bias. While the common method bias analysis indicates this is most likely not problematic, eliciting responses from two key respondents within each firm would provide robustness of results. Fifth, while it is difficult to obtain publicly available secondary performance data for INVs in emerging markets, the use of a subjective measure is a potential study limitation as it raises the question of validity and bias related to subjectivity. It may be interesting to compare subjective and objective performance data. Sixth, data were collected by Qualtrics which raises questions of data quality. For proprietary reasons, the authors are not in direct contact with respondents. However, we are confident both the survey design and reputation of Qualtrics provide quality responses. Despite these shortcomings, this research confirms the role of IEC as an important aspect of INV dynamic capabilities.

While this is an initial attempt to examine the relationship between a complex IEC and dynamic capabilities of emerging market INVs, future research should examine some of these relationships at a more granular level. Examination of individual IEC dimensions and their interaction towards theoretically relevant dimensions of dynamic capabilities will provide a greater awareness as to the antecedents of each. While our study examines performance consequences of second-order dynamic capabilities, future research should empirically examine first-order dynamic capabilities as a pathway for success. An examination of how the overarching sensing, seizing and reconfiguring processes shape specific dynamic capabilities in the areas of marketing and new product development will broaden our understanding as to how emerging markets overcome resource and institutional constraints to succeed in global markets.

Conclusion

While scholars have begun to examine the significance of an IEC for emerging market INVs, our knowledge of how an IEC supports firm internationalisation is fragmented. These INVs lack not only the financial and human capital but also the advanced capabilities of their developed market counterparts. This article offers evidence that emerging market INVs draw upon the learning mechanisms of an IEC as the foundation of their dynamic capabilities. An IEC is necessary for these firms to thrive in unpredictable and volatile markets. Incorporating IEC into the KBV and organisational learning perspectives enables us to capture how INVs shape dynamic capabilities and experience subsequent international performance.

Footnotes

Funding

The author(s) received no financial support for the research, authorship and/or publication of this article.

ORCID iD

Dominic Buccieri

Author biographies

Dominic Buccieri is an Assistant Professor of International Business at Missouri Southern State University. His research interests include international business, entrepreneurship, and marketing strategy. In these areas, Dominic has published in journals such as International Business Review and International Journal of Services, Economics and Management. Prior to enter academia, he served as a Business Development Director of a small firm located in Cleveland, OH, U.S.A.

Raj G Javalgi is Dean of the Deville School of Business. His research interests are in the areas of strategy, international business, and entrepreneurship. In these areas, Raj has published extensively and some of his articles have received best paper awards. He has had broad experience working with international business professionals and has assisted SMEs in developing international marketing plans, export plans, country analyses, and in cultural issues of doing business in developed and emerging economies.

Vivien E Jancenelle is an Assistant Professor of Management at Texas A&M University - Central Texas. He earned his doctorate with a concentration in strategy from Cleveland State University in 2017. His research investigates the nature of the relationship between financial performance and managerial skills, firm resources, organizational capabilities, and strategic orientations. His research has been published in journals such as Long Range Planning, International Business Review, International Small Business Journal, and the Journal of Leadership and Organizational Studies, to name a few. His teaching interests include strategy, global business, and entrepreneurship.

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