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“I declare that, except where explicit reference is made to the contribution of others, that this dissertation is the result of my own work and has not been submitted for any other degree at the University of Glasgow or any other institution.”

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Chapter 1: Introduction

1.1 Research Background

Following the rising numbers of SMEs across the globe due to increasing ownership reforms and privatization, their importance has been highly acknowledged around the world due to unique roles they play in the economy of many different countries. Many scholars have recognized and demonstrated the crucial role, played by SMEs, as a driving engine of economic growth, job creation, competitiveness, and general health and welfare of economies, both nationally and internationally. SMEs have been identified as the best job creators in the current world. For example, around 85% of new jobs in the United States are created by small business (Lappalainen and Niskanen, 2009). In the current modernization and globalization, many small and medium-sized enterprises (SMEs) choose to extend their scope geographically to foreign markets from the domestic ones as part of their growth strategies. The impact of globalization has been evidenced not only in the social sphere but also in the entrepreneurial platform. Unlike in the past where only the large multinational companies have been associated with global business operations, small and medium enterprises have increasingly been participating in international business activities over last few years (Kauppinen and Juho, 2012).

Several reasons have been put forward with respect to the ongoing internationalisation of SMEs. Today, SMEs just like many other businesses have been forced to consider moving into the larger market to ensure they remain competitive even with the change realized with each new day. Many firms consider expanding their geographical scope from the domestic to foreign market as part of their growth strategy. This is ideally good for small and medium-sized enterprises, which have a limited geographical coverage, limited financial base, and domestic focus. Many previous studies have identified that an internationalisation process is always accompanied by multiple goals and motivations (Lu and Beamish, 2002; Laghzaoui, 2011; European Commission, 2007). According to Ruzzier et al. (2006), the two common goals attributed to the internationalisation of SMEs is the achievement of the firm’s growth and improvement of its profitability.

However, many SMEs do not appear to be maximizing their potential growth from internationalisation as they face many challenges and constraints, which affect their success in the international market. Capital limitations and stiff competition from large multinationals have ever remained to be key drawbacks facing the internationalisation of SMEs (Ruzzier et al., 2006). Worse still, SMEs from the less developed and developing regions, where technology, skilled managers, and capital are key limitations have been finding it quite challenging to compete with their counterparts from the developed world (Dwomoh, 2011).

Previous studies have suggested that coping with such harsh conditions of the international market might require firms to demonstrate special capabilities, internal resources, or behaviours such as innovativeness, flexibility, or adaptability. In that sense, the strategic management and entrepreneurship literature may offer useful concepts to utilize when looking for possible remedies or enhancements for firm’s success in the foreign market. Hakala (2013) pointed out that several distinct strategic orientations of businesses, such as market, customer, learning, technology, and entrepreneurial orientations (EO) have gained considerable attention from both managers and management scholars. Several studies have provided evidence that one of these orientations alone (Calantone et al., 2002; Wiklund and Shepherd, 2005) and the interaction between the orientations (Huang and Wang, 2011) or different combinations of the orientations (Amin, 2015; Knight, 2001) may provide a source of high performance or competitive advantage for firms (Hult et al., 2004). As these strategic orientations are significant drivers of a firm’s performance, the study focuses here on one of them, more specifically on entrepreneurial orientation.

The international business researchers have widely acknowledged the role of entrepreneurial orientation in the firms’ success and survival in the international market, especially for SMEs (Thanos et al., 2016; White and Vila, 2017; Brouthers et al., 2014; Knight, 2001). EO aids SMEs to discover and exploit emerging opportunities in the international market ahead of competitors (Brouthers et al., 2014). For example, innovative behaviour enables SMEs to introduce creative and novel ideas, strategies, and technologies to meet foreign market customers’ needs (Boso, 2010). Proactive behaviour gives SMEs the ability to create first-mover advantage ahead of competitors by anticipating the changes in the foreign market and the needs and demands of the customers and acting to exploit these opportunities by launching a new product or service (Zahra and Covin, 1995). Third, risk-taking behaviour enables SMEs to take bold steps and initiatives to capture opportunities that are emerging in the market. Firms that are risk-takers are willing to break away from conventional business and expand into new markets (Sundqvist et al., 2012).

According to the resource-based view (RBV), EO is considered as valuable and imperfectly imitable resources that can help SMEs to compete successfully and gain a sustainable competitive advantage over their competitors in the international market (Boso, 2010; Engelen et al., 2016). Although EO can help SMEs develop an advantage as they expand abroad, foreign expansion requires the commitment of the ﬁrm’s resources (financial, technical, and managerial) that SMEs may lack, particularly those firms in developing countries like Oman, which hinders their ability to maximize the potential benefit from EO to improve firm’s performance (Parida et al., 2010).

The social capital theory suggests that the different networking ties of small firms with various partners can help them overcome effectively SMEs resource constraints (Coviello and Munro, 1997; Tang, 2006; Zhang et al., 2012). Kusumawardhani et al. (2009) stated that networking is considered as an essential tool to firm’s success in both local and foreign markets, especially under the influence of globalization with its associated challenges and opportunities. Further, they argue that networking, which is effectively launching and managing, is assumed as a source of competitive advantage and, in turn, will result in the superior firm performance. These advantages from social relationships can, in turn, enable SMEs to be more innovative, proactive, and risk-taking, and thus portray their entrepreneurial orientation (Zhang et al., 2012; Wimba et al., 2015).

Prior research has accordingly shown that social capital, which is embedded in firm’s networks, can positively affect firm’s entrepreneurial orientation behaviour and enhance its performance in the international market. However, despite the fact that extensive scholarly attention is given to entrepreneurial orientation and social capital, they are mostly approached in isolation as the majority of previous studies have addressed them separately as antecedents of SMEs internationalisation (Wimba et al., 2015). In addition, social capital is considered as multidimensional concept, which consists of three dimensions: structural social capital which concerns the properties of the social system and the network of relations as a whole; relational social capital which concerns the quality of personal relationships people have developed with each other through a history of interactions; and cognitive social capital which refers to the resources providing shared representations, interpretations, and systems of meaning among parties (Nahapiet and Ghoshal, 1998). Previous studies have not yet examined how each dimension of social capital affects entrepreneurial orientation (Zhang et al., 2012; Stam and Elfring, 2008). Thus, this study advances its investigation by examining the effect of each dimension of social capital (structural, relational, and cognitive) on entrepreneurial orientation to gain a broad understanding of the relationship between these concepts and SMEs internationalisation.

1.2 Research Questions

This study aims to address the role of entrepreneurial orientation in the international performance of Omani SMEs and the moderating role of social capital to provide comprehensive understanding of the relationship between EO and international performance of SMEs. To achieve this aim, the following research questions are developed:

· What is the relationship between EO and international performance of SMEs?

· What is the potential moderating role of structural social capital in the relationship between EO and international performance of SMEs?

· What is the potential moderating role of relational social capital in the relationship between EO and international performance of SMEs?

· What is the potential moderating role of cognitive social capital in the relationship between EO and international performance of SMEs?

1.3 Importance of the Study

In addressing these research questions, the present study contributes to the literature entrepreneurship, international business, and social capital in several ways. First, this study examines the association between EO and SMEs international performance. In this respect, the study argues that EO may lead to improvement in international performance. The study draws on the resource-based view of a firm to argue that firm’s EO is an organisational resource that enables firms to identify and exploit overseas market opportunities to generate superior performance (McDougall and Oviatt, 2000). Second, it addresses Miller’s (2011) call to connect the EO construct to the theory by embedding firm’s social capital into the EO-performance relationship. The third contribution from this research is the emphasis that is put on identifying moderators of the link between EO and firm performance. By exploring moderators of these relationships, this study explicates the organisational variables that may alter the strength and direction of the linkages between EO and firm performance. This is important because research shows that EO, sometimes but not always, contributes to improved business performance (Hughes and Morgan, 2007).

Whereas much work has been focused on the moderating role of environmental and organizational factors; surprisingly, few studies have examined how different dimensions of firm’s social capital influence the relationship between EO and performance (Stam and Elfring, 2008). The limited empirical evidence suggests that although networks may facilitate the performance of entrepreneurial firms, not all kinds of networks do so equally (Peng and Luo, 2000). Thus, identifying conditions under which particular relationships enhance or constrain entrepreneurial behaviour and performance represents an important research agenda (Lee et al., 2001). This study aims to extend this line of work by examining how firm’s social capital influences the relationship between the firm’s entrepreneurial orientation and its performance. Thus, in studying the moderating roles of each dimension of social capital in shaping the influence of EO on international performance, this study adds to previous studies arguing that a firm’s social capital may help improve the benefits that firms derive from their adoption of entrepreneurial activities in international operations. Concisely, examination of the moderators of EO and firm performance relationship helps enrich knowledge of the international performance outcomes.

Finally, the study has focused on the developing countries context (Oman), where further research is required on the grounds of the previous ones (Mu and Benedetto, 2011; Aminu and Shariff, 2015). More specifically, the study focuses on international SMEs, which are characterised by resource constraints compared to large firms and face many challenges and obstacles when they operate internationally due to their small size and lack of experience and knowledge (Dimitratos et al., 2010). However, such firms contribute substantially to the gross domestic product (GDP) and the export activities of developed and developing economies across the globe (Charoensukmongkol, 2016). Thus, it is essential to identify the antecedents and contingences of their performance.

Managerially, this study offers a new insight for owners/managers of international SMEs to identify the role of EO in firm’s performance and helps them reinforce entrepreneurial spirit and develop entrepreneurial behaviour when formulating their firm’s strategy to achieve a sustainable competitive advantage in the international market. Also, the investigation of the moderators helps offer SMEs’ owners and managers a clear recommendation regarding situations when the adoption of EO positively (or negatively) drives the international success. In addition, this study provides an effective foundation for Omani policymakers to develop strategies to support entrepreneurial activities in Omani SMEs for the purpose of enhancing their performance in international markets. Effective adoption and implementation of EO would require creating entrepreneurial culture among SMEs. As such, there is a need to involve educational institutions (colleges and universities) and other supporting organisations to provide entrepreneurial education and training for SMEs.

1.4 Research Context

1.4.1 Overview of Omani economy

Oman is an Arab oil country situated on the eastern side of the Middle East. It shares borders with Yemen, Saudi Arabia, and the United Arab Emirates (UAE). With a population of 4 million, Oman is spread over 309,500 square kilometres. Historically, fisheries and agriculture formed the backbone of Oman’s economy. The discovery of oil in the 1960s created a strategic shift, and the economy got transformed as an oil income-based economy. The oil discovery boosted the development of the strong economy of Oman. The revenues from the oil export constitute around 80% of the entire government earnings. The oil revenue has helped Oman build its world-class infrastructure and facilities.

The government is pursuing a strategy of diversification to broaden the economy. It is currently focusing on developing natural gas resources, tourism and real estate sectors, manufacturing and service sectors, and privatisation of the utilities and telecommunication sectors. Oman has been recording real economic growth at an average rate of 6% over the past few years. Non-oil exports exceeded OMR 1 billion (£1.93 billion) in 2008, growing by 59%, having been spurred by the growth in manufacturing and service sectors (Ministry of Commerce and Industry, 2014).

Since 1976, Oman’s economic policy has been determined in regards to the 5-year planning cycles in the short term and 25-year cycles in the long term. Initially, the long-term economic policy was determined by the First Long-Term Development Strategy (1970-1995). The economic development depended on four pillars – oil resources, high levels of government expenditure, investment, and employment of a large number of expatriates to provide a sufficient skill base. However, the high dependence on depleting oil resources reduced the viability of this strategy. Accordingly, the government decided to pursue a strategy of diversification (Vision 2020) to reduce the reliance on oil resources for achieving economic development in the Second Long-Term Development Strategy (1996-2020).

The significant lesson learned by Omani policymakers as well as those in many oil-producing countries over the last decades is the need to closely forecast oil prices, especially in Oman, to reduce the level of oil dependence. This is especially so for the simple reason that oil is a non-renewable resource and its supply will be exhausted sometime in the future. This underscores the need to diversify the source of national revenues (Al-Siyabi, 2005). The policy of diversification of national income outside of the petroleum sector via public investment in income-generating projects has been the primordial economic development goal of Oman since the inception of planning (Miller, 1991). The government aims to invest oil and gas returns to achieve sustainable economic diversification of the production base, and improve infrastructure, health, and education sectors. Increased employment of Omanis in the workforce and more active participation of the private sector in economic development are now gaining more importance in the government’s future planning. The focus of development has now shifted to new levels and patterns such as:

• Upgrading skills of local manpower and developing local human resources to reduce the over-dependence on expatriate manpower;

• More active involvement of the private sector in economic activity;

• Optimum exploitation of natural resources and the country’s strategic location as a maritime hub;

• Economic diversification by increasing non-oil activities such as natural gas-based industries, non-oil exports, and tourism;

• Developing information technology, research, and development covering sectors of the national economy.

1.4.2 Private sector and the role of small and medium-sized enterprises

In recent years, SMEs have gained importance in many Gulf Cooperation Council (GCC) countries as a result of both economic and social issues facing these economies like diversification and privatization of businesses, unemployment, and domination of expatriates in most small business activities. As mentioned before, the long-term objectives of economic development in Oman are to diversify the production base, and secondly, to create and develop a viable private sector capable of sustaining and increasing economic growth and take over the present leading role of the government in the development process.

To achieve these goals, the government has taken responsibility for establishing the basic infrastructure essential for the development of the targeted sectors and the setup of the basic industries to exploit the crude oil and natural gas in which Oman has comparative cost advantages. The private sector was given the opportunity to participate in the development of the rest of the sectors including manufacturing, agriculture, trade, and service. The decline in government spending due to a sharp reduction in its oil revenues necessitated for more private sector involvement in economic development and less dependence upon public sector activity, and in this respect, small businesses can play a significant role. The contribution of the private sector (within which small businesses exist) to the development of the national economy has improved throughout the time. This is confirmed by the increasing number of small businesses in Oman and their contribution, amongst other things, to employment and the gross national product.

According to the Public Authority of SMEs in Oman, there are around 121,000 SMEs in Oman (Al Barwani et al., 2014). The latest statistics indicate that 40% of the labour is linked to small and medium enterprises and their contribution ranges between 15 and 20% of the overall GDP of the country. The key point to note is that in developed countries, SME workforce ranges between 50-60% and on an average GDP contribution from this segment is 50-55%. Hence, it is important to expedite the growth of the SME sector in Oman considering the limited employment opportunities for citizens in the government sector and also to scale down the country’s reliance on hydrocarbon sector.

The SME sector in Oman is currently at its introductory or infancy stage. The government in Oman, along with the private sector, has taken several steps for the initiation, development, support and encouragement of the SME sector in the country. These steps include tying up soft loans and extending financial guarantees through the Oman Development Bank (ODB), allocating a share of public tenders and sourcing a share of procurement by large contractors of government projects to SMEs, providing mentorship and assistance to entrepreneurs, setting up a development fund to target colleges and universities students entering the job market, and creating the Public Authority for SMEs in 2013. In addition to the government’s initiatives, the private sector also takes some steps to promote the SME sector. For example, Zubair Small Enterprises Centre (Zubair SEC), Bank Muscat, National Bank of Oman (NBO), Intilaaqah Oman among others, have set up funding and advisory initiatives to support the SMEs.

1.4.3 Challenges of SMEs sector in Oman

As described in the OECD policy brief, some challenges faced by SMEs in any country include low growth and productivity, additional rules and regulations, limited financing, inadequate capabilities for exploiting technology and inhibited managerial skills (OECD Observer, 2000). Beside these generic challenges and barriers, there may exist some other challenges for SMEs that can be particular to few economies. These challenges include increasing rivalry among firms, problems in recruitment, creating and keeping capable workforce, restricted admittance to business prospects such as new markets and consumers (Abraham, 2007).

The challenges that the Omani SME sector is facing may be categorized as infrastructural, institutional, and financial ones (Al Barwani et al., 2014). Because of these challenges, both the supply and demand side of the SMEs’ industry gets affected. Some of the institutional challenges faced by the SME sector in Oman involve poor business abilities and know-how of potential entrepreneurs, additional paperwork in getting licenses, labour policies in recruiting emigrant employees, and incentive gaps for young Omani citizens to do the job outside big private firms or the public sector (Al-Shanfri et al., 2013; Christina et al., 2014).

Financing is a key challenge for SMEs worldwide. Access to liquidity for working capital or other purposes is considered as a big problem facing SMEs in Oman. The banking system is generally unsupportive and unresponsive to these enterprises’ needs leading to a funding gap. This is due to the lack of accounting discipline of SMEs, which in turn, subjects them to further bias with respect to funding. Entrepreneurship supporting funding organizations have tried to fill this gap; however, their funds remain limited, insufficient and access to them is subject to difficult regulations and rules. The funding gap is further widened by severe shortage seed capital in Oman. SMEs are also challenged by severe collateral requirements that prohibit business start-ups or expansion (Al Shanfari, 2012).

Moreover, one prominent challenge to the SMEs’ financing in Oman is conditional lending which demands the loan recipients to purchase certain thing/equipment from a specified representative or purchase needed materials from exclusive firms. It may guarantee trustworthiness or security standards; however, the entrepreneurs or SMEs owners are forced to buy goods or materials from certain suppliers and vendors. This is a serious challenge for the SME sector in Oman as the SMEs owners or entrepreneurs who get a loan from banks may find it difficult to do business in a flexible and profitable way because of these obligations. To promote the entrepreneurial activities in Oman and develop the SMEs sector of the country, the owners of SMEs in Oman should be allowed to select vendors and suppliers who are residing in Oman or abroad (Al Barwani et al., 2014).

In addition, another financial challenge that SMEs in Oman are facing is their cash flow management and the capability of paying their loans to banks. This challenge emerges due to late payments from government agencies or bigger companies to which they offer services contractual agreements (Al Barwani et al., 2014).

Another major challenge faced by SMEs in Oman is institutional environment. The entrepreneurial and SMEs environment is governed by the policies, legislations, and regulations surrounding it. These act as empowering or debilitating factors in the development of the entrepreneurial environment. Key challenges faced by SMEs point to vague nature of the laws with specific weakness in investor protection and competition emphasis. Moreover, enforcement mechanisms of the judicial system are slow and inefficient. At the individual level, the laws penalize entrepreneurs’ failures heavily, thus reinforcing disincentives (Al Shanfari, 2012).

From the regulation perspective, the issue of the lack of synergies and coherence of a national policy of entrepreneurship and SMEs is a gaping hole. The overlap of government agencies and their regulatory jurisdiction place severe stresses on SMEs, especially at the start-up stage. Government red tape and complexity of regulations and procedures is a key challenge. Labour regulations have been found restrictive and problematic, especially in SMEs. Omanisation policy with its good intentions is distorting the labour market. Finally, corruption is a problem that many business in general and SMEs in particular have to contend with (Al Shanfari, 2012)

Additionally, in the case of Oman and many other countries, another major challenge for SMEs is the market power of bigger companies, which are responsible for restricting the growth of SMEs. For preventing this phenomenon by the large companies, rules and regulations have been designed for stopping exclusive agreements, price fixing, predatory behaviour, and other types of barriers.

For tackling the challenges of SMEs in Oman, the government of Oman may adopt the successful strategies and steps taken by other countries. For example, the Small Business Act (SBA) in Europe provides guidelines, support to SMEs, and helps them in tackling the challenges in their internationalisation. This Act also aims to enhance the entrepreneurial activities by incorporating the “Think Small First” approach to the overall policy for SMEs. Oman can enhance the entrepreneurial activities in the country by adopting this strategy for SMEs.

1.5 Research Overview

1.5.1 Definitions of research

1.5.1.1 International entrepreneurship (IE)

Since McDougall’s (1989) seminal work of international entrepreneurship, its definition has developed over time, and scholars have tried to incorporate the international business, entrepreneurship, and even strategic management perspectives into their definitions of international entrepreneurship (Fletcher and Loane, 2011). This study adopts the most recently refined version by Oviatt and McDougall (2005, p.540) the “discovery, enactment, evaluation, and exploitation of opportunities across national borders to create future goods and services”.

1.5.1.2 Internationalisation

The term ‘internationalisation’ is being used extensively by researchers and scholars, who have defined it from various angles. The word is not restricted to export or import of a particular good; instead, cross-the-border networking, collaboration, joint venture, alliances, franchises, and a host of other aspects are also available for internationalisation, where the scope of the business goes beyond the home country and environment (Chetty, 1999; Tang, 2011). The definition of this term usually varies in the context within which it is used. Chetty and Campbell (2003, p.798) concluded that this term “... is ambiguous and the definitions vary”. For example, Welch and Luostarinen (1988, p.36) considered internationalisation as “a process in which the firm gradually increases international involvement”. This definition implies that internationalisation is a sequential linear process of increasing involvement. Calof and Beamish’s (1995, p.116) define the internationalisation as “the process of adapting the firms’ operations (strategy, structure, resources, etc.) to the international environment”. This study agrees with Calof and Beamish’s (1995) definition as it reflects the idea that internationalisation is a dynamic and adjustable process.

1.5.1.3 SMEs

Definitions of SMEs vary from country to country, and with regard to different criteria include the number of employees, market size, turnover, market position, profits, total capital and so forth which each country considers for an enterprise to be either perceived as micro-enterprise, small, or medium (Zavatta, 2008). Each country defines SMEs based on its economic characteristics and development in order to design programs to support these firms. For example, the US Small Business Administration (SBA) defined SMEs as the firms with fewer than 500 employees (United States International Trade Commission, 2012). In Oman, the Ministry of Commerce and Industry (MoCI) revised the definition of small and medium enterprises (SMEs) in the sultanate in an effort to improve the flow of credit and provide more efficient training and guidance to SMEs. According to the new definition, small enterprises are establishments with five to nine workers and annual sales of OMR25,000 to OMR250,000 (£48,250 to £482,500), while medium-sized entities are companies employing between 10-99 workers and with annual sales of OMR250,000 to OMR1.5 m (£482,500 to £2.9 m). Because this study is limited to Omani SMEs only, the official definition of MoCI is adopted.

1.5.1.4 Resource based view

1.5.1.5 Entrepreneurial orientation

Entrepreneurial orientation is defined as the practices, methods, and decision-making styles that entrepreneurs use to act entrepreneurially. The key dimensions that characterise EO include a propensity to act autonomously, a willingness to innovate and take risks, and a tendency to be proactive relative to marketplace opportunities.

1.5.1.6 Social capital

Many scholars and theorists have attempted to provide the definition and a conceptual meaning to social capital. The concept, however, remains broad in the sense that its applicability could vary depending on social context and discipline as the term gains more relevance and progressive applicability in multiple fields today. The current study adopts Nahapiet and Ghoshal’s (1998, p. 243) definition of social capital, who defined it as “the sum of the actual and potential resources embedded within, available through, and derived from the network of relationships possessed by an individual or social unit”.

1.5.2 Research approach

In order to address the research topics, a quantitative approach was applied for this study. The main objective of the study is to test the hypothetical effects of entrepreneurial orientation on international performance of SMEs and to examine the moderating role of social capital. In addition, to a certain extent, generalise the findings. A survey design involving the collection of many cases should be appropriate for detecting patterns of association and for arriving at generalisable findings (Scandura and Williams, 2000; Bryman, 2004).

A large-scale survey of 1,425 privately owned manufacturing SMEs in Oman was conducted by face-to-face and email questionnaire, using two rounds. These generated 317 replies, giving a response rate of 22%. After completion of construct validation, a hierarchal multiple regression was conducted for testing the hypotheses. Moreover, in order to further interpret the phenomenon of interest, 13 supplementary semi-structured interviews were employed as the purpose of the qualitative approach is to provide a deeper understanding of the moderating role of social capital in the relationship between EO and international performance of SMEs with more focus on the negative moderating role of structural social capital. Four criteria were applied to identify appropriate firms for the interview: (a) they should be among the sample firms in the survey; (b) they should vary in terms of their local and international experience, (c) they should represent different manufacturing sectors; (d) they should represent different size (small and medium).

1.6 Thesis Structure

The thesis consists of six chapters, which are structured as follows:

Chapter 1: Introduction, the current chapter, indicated the background of the research that has identified the main theoretical and contextual gaps for this study. Moreover, research objectives and methods were illustrated. Then, it outlined a brief description of the definitions to be used. Finally, following the presentation of main theoretical and practical contributions, this chapter illustrated the structure of the thesis.

Chapter 2: Literature review. This chapter will build the theoretical foundation for the study by reviewing the existing literature about internationalisation theories, entrepreneurial orientation, and social capital to provide a fundamental background. The first section of the chapter will present several internationalisation theories including traditional theories (economic approaches and behaviour approaches) and modern theories such as RBV and IE, which are considered more pertinent to small firms than traditional theories. Then, it will review the literature of entrepreneurial orientation, its three dimensions, its importance to firms and the general economy. In addition, it will discuss the empirical link between EO and firm performance. Finally, it will discuss the social capital construct and its dimensions (structural, relational, and cognitive), the role of social capital in international entrepreneurship, and will highlight some drawbacks of social capital.

Chapter 3: Conceptual framework and hypotheses. This chapter will develop the study’s conceptual framework and discuss its hypotheses. First, it will present the conceptual framework. Then, it will discuss the hypotheses pertaining to the direct connection between EO and international SMEs performance and the moderating effect of each dimension of social capital (structural, relational, and cognitive) on the association between EO and international performance of SMEs.

Chapter 4: Research methodology. The chapter will describe the research methodology used in the study. First, it will introduce the research design and its operationalisation. Specifically, the quantitative data collection method will cover four aspects: (1) research population and sample selection ; (2) data collection technique; (3) research instrument; and (4) survey administration. The qualitative data collection method will include 13 semi-structured interviews.

Chapter 5: Research findings. This chapter will outline the major findings from the study and explain the results in relation to the research hypotheses. It will starts by presenting the descriptive statistics of the respondents and their firms. This is important because it will help develop a fundamental understanding of the subjects that are studied. Then, it will present the results of normality, linearity, constant variance, and multicollinearity of the research data. Finally, it will report the results of research hypotheses and multiple regression analysis, which will be used to understand the effect of entrepreneurial orientation on international performance of SMEs and to examine the moderating role of social capital dimensions (structural, relational, and cognitive).

Chapter 6: Discussion and conclusion. This chapter will focus on the discussion of and conclusions drawn from the study results. Specifically, summaries of key findings relating to the study’s objectives will be provided. Moreover, the chapter will present the theoretical, managerial, and policy implications of the study results. The chapter will conclude with a discussion of the limitations of the study and highlight several useful areas for future research.

1.7 Summary

This chapter has introduced the foundation for the thesis. It provided a brief background of the study, which was followed by the identification of the research problem, as well as the objectives of the study, and the questions, which the study intends to answer. Then, brief descriptions of the research definitions were introduced. This was followed by the brief discussion of the intended contributions of the study and a description of the research context. Finally, the structure of the study was presented.

Chapter 2: Literature Review

2.1 Introduction

The objective of this chapter is to critically review the existing literature on internationalisation theories, entrepreneurial orientation construct, and social capital construct. The first section of the chapter presents some internationalisation theories including traditional theories (economic approaches and behaviour approaches), and modern theories such as RBV and IE, which are considered more pertinent to small firms than traditional theories.

Entrepreneurial orientation is, thus, among the key areas in entrepreneurship research, where there is a consistent development of a body of knowledge, that is cumulative in nature (Lim and Envick, 2013). This chapter discusses entrepreneurial orientation and how it influences the performance of organisations. The second section of the chapter discusses the definition of entrepreneurial orientation and its importance to the firms and the general economy. The next section of the chapter majors in the three dimensions of entrepreneurial orientation. Then, the chapter discusses the empirical link between EO and firm performance. The last section of the chapter discusses the social capital construct and its dimensions (structural, relational, and cognitive), the role of social capital in international entrepreneurship and highlights some drawbacks of social capital.

2.2 Internalisation Theories

Various theories and approaches have been established by different scholars and researchers on how internationalisation of firms takes place. Though traditional internationalisation theories such as behaviour approaches (stag models) and economics approaches (eclectic paradigm) less pertain to SMEs, modern approaches and perspectives such as the international entrepreneurship perspective and born-global perspective have been developed to explain how SMEs venture into international markets. Before embarking on discussion of the resource-based view and social capital theories, as this thesis is aimed at contributing to the International Baccalaureate (IB) literature, key internationalisation theories are explained in this section. Although traditional internationalisation theories have received considerable criticisms as they were all developed around large multinational businesses, they help explain entrepreneurial firms motives for internationalisation irrespective of their ethnic origin, and they have played an important role in the attempt to explain the method in which global expansion occurs (Fletcher, 2004). In addition, they provide different models and frameworks to describe the processes necessary for firms to survive in international markets.

2.2.1 Economic approach of internationalisation

The economic approach has its base in mainstream economics and focuses on the firm and its environment (Andersson, 2000). The approach focuses on two fundamental aspects of international production: the ownership of assets employed in production activities in different countries and the location pattern of such activities (Benito and Gripsrud, 1992). Several economic theories have been proposed to explain the choice of foreign entry modes by firms. Among these are the Dunning’s eclectic theory, the international product life cycle model, and the transaction cost approach.

2.2.1.1 International product life cycle (IPLC) approach

International product life cycle theory is an economic theory that was developed by Vernon in 1966. The theory claims that many products go through a trade cycle, during which the United States is initially an exporter, then loses its export markets and may finally become an importer of the product (Wells, 1968). Therefore, it suggests that the internationalisation process should be a systematic, incremental, and predictable sequence (Ayal, 1981), where the form of entry into foreign markets depends on the life stage of the traded products (Wells, 1968), passing through the phase of introduction, growth, and maturity (Almor et al., 2006). The introduction stage is domestic, and innovators locate production activities at home, where the product was developed (Melin, 1992; Almor et al., 2006). The company is primarily engaged in exporting and that will continue until the company has obtained enough knowledge about the foreign market to shift production abroad (Kwon and Hu, 1995; Melin, 1992; Sikorsky and Menkhoff, 2000). Through the growth phase, export activities increase, and the demand for products expands into additional markets. Over time, the innovators locate production activities in proximity to consumers in these countries (Almor et al., 2006; Galan and Benito, 2001; Luo et al., 2005; Melin, 1992). At the maturity stage, major markets are saturated, and a certain degree of standardization of the product has usually taken place (Melin, 1992). Concerns about production costs begins to take the place in regards to the product characteristics. At this stage, there is likely to happen a considerable shift in the location of production facilities to the degree that the production will be located in less developed countries where costs are lower (Krishnamurthy et al., 2004; Almor et al., 2006). At the end, the firm will export its product from the less developed countries back to the original innovating country (Sikorsky and Menkhoff, 2000).

2.2.1.2 Transaction cost approach (TCA)

The roots of the transaction cost approach go back to Ronald Coase (1937) who argued that there are conditions under which it is more efficient for a firm to create an internal market rather than enter foreign ones. Such conditions are the transaction costs of foreign activities. This approach assumes that a MNE has developed a firm-specific advantage in its home market, usually in the form of internally developed intangible assets, primarily some form of know-how. The market for know-how, however, under the assumption of economic approach, is characterized by imperfections which can create complications in its pricing and transfer and consequently increase the associated costs of transacting with a partner. A high level of transaction cost results in a preference for internalizing the transaction (Johanson and Mattsson, 1987; Madhok, 1997). Firms therefore decide to produce abroad if they perceive that the reduction in transaction costs resulting from the replacement of the external imperfect markets will be greater than the cost of organizing such activities internally. Otherwise, foreign markets will be supplied by exports, licensed sales, or some other form of international activity (Anastassopoulos and Traill, 1998). Internalisation does have associated administrative and risk-taking costs. These costs will be lower the less different the foreign market is from the home market. Thus, this approach predicts that international expansion will start in nearby markets (Johanson and Mattsson, 1987).

2.2.1.3 Eclectic theory/OLI paradigm

The eclectic theory was introduced by Dunning in 1976 to investigate the decisions made by firms prior to investing in foreign markets. The model has been widely used to explain the growth of multinational enterprises during the past twenty years (Cantwell and Rajneesh, 2003).

According to eclectic theory, initiation of foreign production will depend upon the resource implications and attractions of the firm’s home country compared to locating production in another country. Dunning’s eclectic theory framework proposes that the firm’s decision to enter a foreign market and the choice of entry form relay on a combination of three advantages that are necessary conditions for entry into foreign markets. These advantages are; ownership-specific advantages (O-advantage), location-specific advantages (L-advantage) and internalization-specific advantages (I-advantage).

In other words, the eclectic paradigm suggests that three conditions should be satisfied in order for effective FDI to occur. Firstly, an MNE should possess ownership specific advantages, which help the MNE to overcome the liability of foreignness. Ownership specific advantage takes the form of the possession of tangible and intangible assets for a significant period of time. It tends to be more beneficial for firms if they use this ownership specific advantage, rather than selling it to foreign investors. It is therefore important to extend their operations outside their home market at some stage. This is what is known as internalization advantage (Dunning, 1988).

Secondly, the MNE in question should combine ownership specific advantages with location specific advantages. Location advantages are very important when a firm wants to internalise operations between nations, because different locations have different characteristics based on their local demands and business contexts (Tomassen and Benito, 2003).

The O and L factors have different characteristics. Ownership specific advantage is restricted to one firm, and can transfer normally across borders. Location advantages, on the other hand, are public to any investor, but possess no global mobility (Ozawa and Castello, 2003).

Thirdly, there are internalization advantages, which refer to the benefits of retaining assets and skills within the firm. I-advantages accrue to firm from the internal use of its O-advantages rather than renting them out to external parties in the form of licensing agreements or franchising (Mtigwe, 2006). According to the theory, internalization is an alternative organizational strategy in order to reduce transaction costs, given the imperfections of markets and transportations costs (Glückler, 2006). Because of this, firms have to assess whether the O-advantage can best be realized through internalization (I-advantage), or through external cooperative or market transaction (Glückler, 2006).

Dunning’s Eclectic Theory puts its emphasis on the issues of the fit between the firm and the market and the extent to which a MNE is best suited to own and operate in a specific market against both local and other foreign competition.

2.2.2 Behavioural approaches of internationalisation

The behaviour approaches of internalization focuses on the process of internalization as sequential and linear processes that comprise distinctive stages in series. This approach focuses on the impact of international experience on the pace and direction of firm internationalisation. The fundamental assumption of the behaviour approach is the role of organizational knowledge in the internationalisation process (De Clercq et al., 2005). The internationalisation is viewed as a sequence of steps by which companies acquire experience and knowledge about external markets through the gradual commitment of resources and learning by doing (Seifert and Machado-da-Silva, 2007).

The major schools that support behaviour approach are the (U-model) Uppsala model, and the Innovation model (I-model). These two approaches conceptualize the process of internalization as a sequential and gradual stages of export development that are based on the incremental decisions of commitment that are dependent on expectations, experiences, managerial capabilities, perceptions and so forth.

2.2.2.1 U-model (Uppsala model)

The Uppsala model was first posited three decades ago as a result of the gap that had emerged between theoretical explanations of firm internationalisation, and the actual behaviour of companies (Vahlne et al., 2011). This model seeks to explain the internationalisation process of the typical global firm. It is suggested that firms should carefully select the type of entry mode used to break into a new market by determining the risks which a firm may encounter, as well as the costs of operating in a new market, and their own existing resources (Johanson and Vahlne, 2009).

This model describes the internalization as the process where there is a gradual learning gained through experiences from markets of foreign origin. The psychic distance and the learning process are the major fundamental aspects that contribute to the U-model. The model takes organizational and managerial experiences to be the major elements of internalization and incorporates the learning theory. The internalization process involves the integration, utilization and acquisition of international markets information and continuous participation. Therefore, SMEs can make their decision-making process easier through integration of international experiences knowledge. Thus, the process of internalization in this case involves a series of decisions that are incremental in nature (Laghzaoui, 2011).

In this model, the process of internalization involves integrating the cycles and changes of various events in one mechanism. The two elements that are crucial in this model are the level of resources that are committed, and the commitment degree (Johanson and Vahlne, 1990). Thus, the U-model describes the internalization process as the level of interactions between the knowledge of foreign markets in a successive manner and the commitment of resources to international markets in a gradual mode (Johanson and Vahlne, 1990). The U-model also identifies two important aspects of internalization that must interact for the process to be successful in SME’s. To start with is the static aspect, which involves the commitment of resources to targeted markets and the related knowledge. The dynamic aspect involves the decision-making process and activities in real time in regards to distribution of resources in international markets (Khayat, 2004).By incorporating the two aspects, the SME’s increase their international markets commitment by integrating more complicated strategies using experiences, and knowledge generated from international performance.

According to Lumpkin and Lichtenstein (2005), the Uppsala model of firms’ internationalisation is based on four steps which include non-regular export activities, export through independent representatives, establishment of sales subsidiary and production in the overseas markets. At step one, firms are not much active in international activities, and hence they have limited or no resources for enabling their overseas business in the foreign markets. At stage two, firms establish strategic networks with independent representatives who help them to understand the dynamics of the overseas market environment (Sommer, 2010; Senik et al., 2011). During this step, firms learn the best marketing approach into the overseas market through the representatives.

After the firms gain enough knowledge and understanding of the foreign market, they establish a sales subsidiary under the mother brand as a market tester. Through the sales subsidiary, firms tend to develop better and deeper understanding of the market dynamics in the new foreign markets through direct interaction with customers (Bell et al., 2003; Chetty and Campbell-Hunt, 2003; Ojala, 2009). At this point, the new subsidiary only acts as a sales outlet, after which a production unit is established in the overseas market to help in cutting costs associated with exports and transportation. During the stage of establishing production units in the overseas markets, the firms will have already understood and gained sufficient understanding of the new market

The U-model also introduces psychic distance concept, which is simply the summations of linguistic, cultural and political differences, which influence circulation of information (Laghzaoui, 2011). According to the U-model, decreasing the psychic distance makes the SME’s get close to the foreign markets and, therefore, increase the uptake of international knowledge and experiences.

2.2.2.2 Innovation model

The I-model relates internationalisation process to the adoption of a new product (Roger, 1962). It considers internationalisation as an enterprise innovation (Reid, 1981). The subsequent steps for internationalisation are innovations for the SME’s in this case. Different opinions on the I-model describe it as being affected by a pull and push force. The push is the change happening externally, and which prompts the decision to export, while the pull mechanism is the change that occurs internally, and that leads from one-step to another. The different processes for internationalisation are in three stages that include:

a) Pre-export stage - The SME is only interested in the domestic market.

b) Export trail stage - The SME exports irregularly at a time when has the ability to extend its operations to international markets.

c) Advanced export stage - In this case, the SME starts exporting regularly and has extended experiences and commitments to international markets.

In the I-model, decision-makers together with the conditions that influence decisions start internationalisation process (Collinson and Houlden, 2005). According to Reid (1981), the experiences, motivation, expectations and attitudes of decision-makers have a major impact on the process of internationalisation. Fisher (1997) argued that using the I-model, the SMEs could evade the first two steps to internationalisation if the entrepreneur had correct international knowledge and experience.

To conclude, two main approaches on the internationalisation theories process were introduced, the economic approach and the behavioural approach. These two approaches observe the internationalisation process of firms from considerably different angels. While the economic approach is mainly focusing on the company and its environment, the central point of the behavioural approach is the role of organizational knowledge in the internationalisation process. Even though these theories provided the base that most research today is built on, there are some criticisms that arise from the traditional theories due to their generality nature. It appears that most of traditional internationalisation theories focus on explaining the internationalising behaviour of large firms from developed countries that expand internationally on a gradual basis from psychologically close to psychologically more distant countries and their applicability to smaller firms has been questioned (Alon, 2004; Collinson and Houlden, 2005; Coviello and Martin, 1999; Glückler, 2006; Hall and Jones, 1999; Mort and Weerawardena, 2006; Mtigwe, 2006; Zhao et al., 2008). (Axinn and Matthyssens, 2002). According to Shuman and Seeger, (1986,p.8): “Smaller businesses are not smaller versions of big business’’. Smaller firms, due to their limitations in size and resources, and inadequate management behave differently in their business environment, and these limitations constitute significant barriers for SMEs that want to invest in foreign markets (Zhao et al., 2008). Therefore, SMEs that intend to undertake FDI must explore and rely on unique or nontraditional resources that differ from those that large MNEs use, to overcome their size-related disadvantages (Mort and Weerawardena, 2006; Zhao et al., 2008). Reid (1981) pointed out the need to make a distinction between the foreign entry expansion process in small and large firms. Alternative frameworks and approaches have developed within the small and medium sized enterprises’ (SMEs) sector suggest that internationalisation of smaller firms is more innovative and entrepreneurial and is strongly influenced by managerial variables (Reid, 1981).

2.2.3. International entrepreneurship perspective

International entrepreneurship is considered a new field positioned at the intersection of international business and entrepreneurship (Allen, 2016). IE is distinguished through elements of behavioural traits that drive entrepreneurial actions across-borders. Research in this new field has gained increased attention over the last two decades.

Although there is no a generally accepted definition for IE, the current literature provides well-founded descriptions that offered valuable insight on the key areas of focus. McDougall’s (1989) seminal work was the first empirical study indicates to the term of “international entrepreneurship” as they differ between the international new ventures and the domestic new ventures in terms of their strategy and industry structure. McDougall (1989, p.388) defined international entrepreneurship for the first time as “the development of international new ventures or start-ups that, from inception, engage in international business, thus viewing their operating domain as international from the initial stages of firm’s operation”. The definition of international entrepreneurship has developed over the time and scholars have tried to incorporate international business, entrepreneurship, and even strategic management perspectives into their definitions of international entrepreneurship. For example, Zahra (1993) introduced another definition of international entrepreneurship: “The study of the nature and consequences of a firm’s risk-taking behaviour as it ventures into international market”. Zahra (1993) argued that the study of international entrepreneurship should involve both new ventures and established firms as entrepreneurial activities are considered as a continual process exposes over the time. Another definition of international entrepreneurship is presented by McDougal and Oviatt, (2000, p.903) as “a combination of innovative, proactive and risk-seeking behaviour that crosses national borders as is intended to create value in organizations”. In this definition, they focused on entrepreneurial activities which include innovative, risk taking and proactive across the borders and are not limited to new ventures it also includes established and large firms (Jones and Coviello, 2005).

Moreover, some scholars defined IE from opportunities based approach. For example, Oviatt and McDougall (2005), in their latest refinement of IE definition, related it to the pursuit of international opportunities. They defined it as “the discovery, enactment, evaluation, and exploitation of opportunities across national borders to create future goods and services” (Oviatt and McDougall, 2005, p.540). In addition, Styles and Seymour (2006, p.134) added the notion of exchange and defined it from the marketing perspective as “the behavioural processes associated with the creation and exchange of value through the identiﬁcation and exploitation of opportunities that cross national borders.

Jones et al. (2011) reviewed 323 IE research between 1989 and 2009 and provided a well-founded categorisation of IE by mapping out three major types of research, namely: (i) entrepreneurial internationalisation, (ii) international comparisons of entrepreneurship, and (iii) comparative internationalisation. These streams represent the central elements from which exploratory research has been conducted to investigate various thematic areas of international entrepreneurship.

The concept of entrepreneurship in IE literature is usually represented by the construct of international entrepreneurial orientation (IEO) as some scholars argued that IEO as an immanent element of international entrepreneurship theory (Wach, 2015) and international entrepreneurial culture (IEC) (Dimitratos et al., 2012; Dimitratos and Plakoyiannaki, 2003). Dimitratos and Plakoyiannaki (2003) developed a comprehensive framework to examine IE by investigating overall organization culture in which it embedded. They argued that IE could apply to any firm’s age and size. Dimitratos and Plakoyiannaki (2003, p.189) defined IE as “an organization-wide process which is embedded in the organizational culture of the ﬁrm and which seeks through the exploitation of opportunities in the international marketplace to generate value”. According to Dimitratos and Plakoyiannaki (2003), five key concepts are associated with their definition; IE is a firm wide phenomenon, IE is a process, IE is embedded in organization culture of the firm, it associated with discovery and exploitation of international opportunities, and it aims to create value for the firm. Dimitratos et al. (2012) proposed six dimensions of IEC (international market orientation, international learning orientation, international innovation propensity, international risk attitude, international network orientation, and international motivation). According to Zahra (2005), entrepreneurial culture facilitates the entrepreneurial activities of international firms.

IE theory is usually differentiated from stag theory in that; where prior experience in local markets is not a factor to consider while establishing the firms in the international markets (Knight and Cavusgil, 1996; Verbeke et al., 2014). Recent technological advancements have enabled SMEs to have access to foreign markets through the easy and cheap access to vital information and improved modes of communications. Therefore, SMEs have experienced internalization more rapidly using technological advancements.

2.2.4 Resource based view theory (RBV)

The resource-based view (RBV) theory has become an important perspective within the literature of international business (Peng, 2001), and one of the most used theoretical frameworks in the field of strategic management (Wernerfelt, 1995; Lieberman and Montgomery, 1998; Powell, 2001; Priem and Butler, 2001). It has been developed by many researchers, starting from the work of Penrose in 1951, who is considered to be one of the most influential researchers in this area (Wernerfelt, 1984; Mahoney and Pandian, 1992; Peteraf, 1993; Kor and Mahoney, 2000), as well as the intellectual founder of RBV (Rugman and Verbeke, 2002). Contributions by researchers such as Teece (1982), Wernerfelt (1984), Barney (1986), and others have been built on this initial work.

RBV has been used in order to examine the firm’s resources and ability to gain a high return on its investment through a sustainable competitive advantage (Oliver, 1997). RBV is considered to be one of the leading theories relating to business success (Teece et al., 1997; Dunning and Lundan, 2008). It is also often used as a model to explain how firms compete uniquely within strategic management (Peteraf, 1993), and it is also a useful tool with which to analyse the viability of bankrupt firms (Cook et al., 2011).

Wernerfelt (1984) was the first researcher to use RBV within the field of management. He attempted to develop the theory by examining how the existing resources of the firm could be used to achieve a competitive advantage over its competitors (Barney and Clark, 2007). According to Wernerfelt (1984), RBV sets resources at the heart of performance and competitive advantage (Combs and Ketchen, 1999). He found that the competition between firms, based on their resources, can play an important role in their ability to gain advantages for their market strategy (Barney and Clark, 2007). In fact, environmental competencies in RBV can be improved when the firm has the ability to develop its resources (Joppesen and Hansen, 2004; Esteve-Perez and Manez, 2008).

In 1986, Barney published an article, which suggested developing a theory of superior firm performance based on the power of resources and firm controls. Barney extended his use of RBV theory over and above Wernerfelt’s, by arguing that RBV can be used to examine a firm more comprehensively, and that it is not just a theory of competitive advantage (Barney and Clark, 2007). Barney is acknowledged as the first academic to formalize RBV literature into a framework (Newbert, 2008).

Firm resources are defined as “all assets, capabilities, organizational processes, firm attributes, information, knowledge, etc., controlled by a firm that enable to conceive of and implement strategies that improve its efficiency and effectiveness” (Barney, 1991, p.101).

Companies can develop their market performance if they exploit market opportunities whilst minimizing the threats in these markets (Barney and Clark, 2007). This can be done by using a firm’s resources effectively. In fact, an examination of the differences in resources between firms is one of the cornerstones of the RBV approach (Peteraf, 1993; Priem and Butler, 2001; Helfat and Peteraf, 2003). RBV predicts that a firm’s resources should create a competitive advantage against its market competitors (Amit and Schoemaker, 1993).

Therefore, resources should be evaluated when examining a company, in order to help distinguish the success factors for each type of business (Collis and Montgomery, 2005).

According to Barney and Hesterly (2010), resources can be classified as tangible and intangible assets attached to a company. Tangible assets take the form of assets such as real estate, raw materials and production facilities. They are easy to value. Intangible assets include assets such as reputation, culture, brand names, know- how, experience, patents (Collis and Montgomery, 2005). They can also include company knowledge, management abilities, and organisational capabilities (Aharoni, 2000). All of these assets play crucial role in generating competitive advantage (Collis and Montgomery, 2005).

Barney (1991) argued that firm’s resources must be heterogeneous across firms and imperfectly mobile to able a firm to generate a sustainable competitive advantage. To achieve this, the resources and capabilities must hold four characteristics. These referred to VRIN, standing for valuable, rare, inimitable, and non-substitutable (Barney and Hesterly, 2006). Valuable resources, which enable the firm to implement strategies that exploit environmental opportunities or mitigate environment threats (Li, 2011). Rarity of resources is when the firm has absolutely unique resources over its competitors. A firm’s resources and capabilities must be short in supply and persist over time to be source of sustainable competitive advantage (Barney and Hesterly, 2006). However, if the resource is valuable but not rarely, the firm excepted to generate a competitive parity. In other words, when the resource distributed homogenously among competitors in the same industry, it is difficult for one firm to obtain long term superior advantage (Kirzner, 1973; Porter, 1980).

Moreover, resources may valuable and rare but not enable company to generate a sustainable competitive advantage, because it easily to duplicate by rival firms. Li (2011) argued that inimitability of resource consider as vital tool to achieve a sustainable competitive advantage.

Finally, resource and capability must be non- substitutability (Barney and Hesterly, 2006). Thus, if equivalent resource of valuable, rare, and inimitable resource exits and this equivalent resource is less costly to imitate, so it is possible for rival firms to relay on it to generate a sustainable competitive advantage and in turn a valuable, rarely, and inimitable resource will lost its position in the market (Barney and Hesterly, 2006).

According to Acedo et al. (2006), internationalisation of SMEs is inspired by the need to mobilize, accumulate and develop resource stocks for international activities. The key tenet of this theory is that, the resources of the firm must be valuable, rare and difficult to imitate in order to facilitate sustainable competitive advantage (Kauppinen and Juho, 2012). According to this theory, firms tend to venture into international markets to utilize their key resources which cannot be adequately exploited in the local markets. Basically, the heterogeneity of the firm’s resources where other firms find it difficult to compete directly provides a basis for successful ventures into the international markets. For example, a firm which has outstanding brand name which is highly reputable for high quality products can decide to venture into the international markets through its unique and reputable brand. For example, Starbucks Company has been able to expand to all over Europe and Asian countries due to its outstanding and reputable brand for quality coffee.

With regard to Dhanaraj and Beamish (2003), firm’s operation in international markets, using the resource-based view is done through combining resources in the best way to create sustainable competitive advantage. This is done through evaluation of the firm’s internal capabilities and the resources available in the foreign environment in order to optimize the opportunities for the organization to successfully establish its ventures into the new foreign markets (Korsakiene and Tvaronaviciene, 2012). The fundamental assumption of this theory is that, strategic combination and allocation of the firm’s key resources in an inimitable manner facilitates successful establishment of its new operations in the foreign markets. The RBV theory is considered by Peng (2001) as being closely linked to the innovation-related ever higher-order capabilities.

Internationalisation model where firms with unique resources which enable them to innovate and create new products can be motivated to venture into overseas market to capitalize on larger market base. As a result, firms usually tend to consider internationalisation as an innovative idea which provides them with new perspectives to show-case their innovative capabilities in the global platform.

The RBV theory has been widely criticized from different scholars (Priem and Butler, 2001; Foss and Knudsen, 2003; Spender, 2006). Foss and Knudsen (2003) grouped these critiques in eight categories: 1) The RBV lacks substantial operational validity, 2) limited applicability of RBV, 3) the RBV implies a endless search for ever higher -order- capabilities, 4) sustainable competitive advantage (SCA) is not easy obtained, 5) The RBV is striving to be a theory of the firm, 6) VRINO (valuable, rare, inimitability, and non- substitutable, organization of resources) framework is neither necessary nor sufficient for SCA, and 8) the definition of resource is unworkable. Despite these criticisms, pervious researchers agreed the RBV is an important tool to explain firm’s performance (Ainuddin, 2000; Morgan et al., 2003; Dhanaraj and Beamish, 2003; Roxas and Chadee, 2011).

As depicted by Lumpkin and Dess (1996), the EO acts as a process where the practices and the activities involved in decision-making lead to a new entry. The new entry by SME’s implies the application of a new product or service to the existing or new market. According to Covin and Slevin (1991), the EO is a developed factor of entrepreneurship perfectly defined in organizational levels rather than in individual levels. In this regard, the resource-based view argues that EO is a necessary organizational resource that leads to the success of any firm. It also suggests that the EO is not tradable in the market place like other goods since it is perfectly hidden in the routines of the organization (Lee et al., 2001). Because that EO are the function of managerial heurists and experience that usually linked together into a complex set of routine, it is difficult to imitate or transfer to other settings (Busenitz and Barney, 1997). Other researchers such as Lumpkin and Dess (1996), Miller (1983), Covin and Slevin (1998) and Walter et al. (2006) suggested that the EO plays a significant role especially in SMEs if they are to achieve a cutting edge or competitive advantage in international markets.

The resource-based view associates the entrepreneurial orientation with a firm’s capabilities in such a way that they possess a positive correlation. Therefore, according to the RBV theory, the EO is the point of departure that is responsible for bringing competitive advantage to the SME’s in international markets. The EO thus contains strategic reflection and orientation in the form of three characteristics, which include proactiveness, risk taking, and innovativeness. According to the RBV theory, the combination of existing resources and the distinctive EO leads to exploitation of international opportunities in global markets (Knight and Cavusgil, 2004). In the same manner, those SME’s with a higher level of entrepreneurial orientation are able to exploit the international opportunities more proactively and thus likely to have a superior performance in internal market (Ruokonen and Saarenketo, 2009).

2.3 Entrepreneurial Orientation

2.3.1 Overview

Prior scholars are utilizing various typologies and terminologies to describe firm- level entrepreneurship, for example; corporate entrepreneurship (Zahra and Covin, 1995; Zahra et al., 1999; Kuratko, 2007), strategic posture and strategic orientation (Covin and Slevin, 1991; Morgan and Strong, 2003) and entrepreneurial orientation (Lumpkin and Dess, 1996, Parida et al., 2010, Covin and Lumpkin, 2011; Wincent et al., 2014). Entrepreneurial orientation (EO) has been prominently employed in the academic literature. Thus, this study adopts the term of entrepreneurial orientation (EO) to be consistent with this growing trend.

Entrepreneurial orientation appears to be a significant concept in the entrepreneurship literature, strategic management, and international entrepreneurship over the last three decades since the seminal works of Mintzberg (1973), Khandwalla (1976/77), and Miller (1983). It has received a considerable academic and theoretical attention, prompting a recent meta-analysis by Rauch et al. (2009), literature review (Wales et al., 2011), and an entrepreneurship theory and practice issue (Covin and Lumpkin, 2011) on the topic.

Entrepreneurial organisations, which possess a high level of EO, are able to understand market changes and respond in time to ensure they do not run out of business. It also has the ability to identify new opportunities that they can pursue to ensure growth (Cruz and Nordqvist, 2012). Previous research has shown that there are many differences between entrepreneurial firms and less- entrepreneurial firms or conservative firm’s (Miller and Friesen, 1983; Karagozoglu and Brown, 1988; Covin and Slevin, 1991; Zahra and Covin, 1995). Non-entrepreneurial firms or conservative firms tend to be less- innovative, risk averse, and not proactive in exploring market opportunities. Due to their traits, conservative firms tend to succeed more in the stable and predictable environment (Covin, 1991). On the other hand, entrepreneurial organizations are investing more in innovation especially in product, service, and technology to meet their customers’ demands. They also engage in risky activities, and they are proactive and aggressively compete to explore and pursue opportunities in the marketplace. Researchers argue that all firms in a continuum from highly conservative to highly entrepreneurial and the firm’s position in this continuum reflects its EO level (Miller and Friesen, 1983; Covin, 1991; Kaiser et al., 2008).

Previous studies demonstrate that EO is a critical component for organisational profitability and success. Taylor (2013) argued that for new entrants to perform well in a market, they must have a strong EO. Wang (2008) reported that entrepreneurial orientation (EO) is considered as a key feature towards a firm achieving success and meeting its goals. Lumpkin and Dess (1996) and Wiklund and Shepherd (2005) argued that EO is an essential tool for firms to achieve sustained competitive advantage.

Two perspectives of measuring EO have emerged in the literature: uni-dimensional perspective and multi-dimensional perspective. Particularly, some scholars have argued that the entrepreneurial orientation construct is a one-dimensional concept and consequently, the different dimensions of EO should relate to the organizational outcomes in similar ways (Miller, 1983; Covin and Slevin, 1989; Zahra and Covin, 1995). Uni-dimensions of entrepreneurial orientation perspective are thus the original dimensions that were identified by Miller (1983). The three dimensions: proactiveness, risk taking, and innovativeness are believed to be necessary for the success of any entrepreneurial firm in the market. An important advantage for this perspective is that researchers can determine how EO in totality affects firm performance.

In contrast, studies suggest that the dimensions of EO may occur in different combinations, and each of them represents the different and independent aspect of the multi-dimensional concept of the EO (Lumpkin and Dess, 1996; Hughes and Morgan, 2007). Lumpkin and Dess (1996) posited that innovativeness, risk taking, proactiveness, competitive aggressiveness, and autonomy represent five dimensions that independently and collectively define the domain of EO. The dimension that is implemented by an enterprise depends on the factors that influence its operation in the environment (Hughes and Morgan, 2007). This is because there are different types of entrepreneurship that may use different dimensions to achieve success. The advantage of this perspective is it presents the unique effect of each dimensions of EO in firm’s performance.

This issue has become an important source of debate in this study field. Covin et al. (2006, p.80) stated that “intellectual advancements pertaining to EO will likely occur as a function of how clearly and completely scholars can delineate the pros and cons of alternative conceptualizations of the EO construct and the conditions under which the alternative conceptualizations may be appropriate”. Consequently, EO may appear in different combinations (George, 2011).

Currently, scholars applied entrepreneurial orientation construct in international business research. In this context, the scholars establish international entrepreneurship as emerging field lies at the intersection of entrepreneurship and international business disciplines (McDougall and Oviatt, 2000; Jones and Coviello, 2005).

International business scholars have changed their focused from large businesses to smaller firms in international market. With the globalisation of markets, low trade barriers, deregulations, and advances in communication technologies, transportations, and information, more SMEs are becoming active in international market than before (Sundqvist et al., 2012). Previous researchers argue that internationalisation process of SMEs is entrepreneurial in nature as it involves risky activities (Javalgi and Todd, 2011; Styles and Seymour, 2006). As a result, researchers have examined the effect of entrepreneurial orientation (EO) or international entrepreneurial orientation (IEO) (Covin and Miller, 2014) on international performance of SMEs (Knight, 2001; De Clercq et al., 2005; Jantunen et al., 2005; Brouthers et al., 2014; Bianchi and Mathews, 2016). Brouthers et al. (2014) argued that SMEs with high level of EO will perform better in the international markets because EO enables SMEs to develop innovative strategies to meet customers’ needs in foreign markets, to take bold to lunch risky ventures, and to capture opportunities that emerge in foreign markets, this in turn, will lead to enhance international performance of SMEs.

The rest of this chapter will discuss the definitions of EO and the three original dimensions of EO (M/CandS scale) as adopted for this study, and review the literature on the relationship between EO and firm performance.

2.3.2 Definition of entrepreneurial orientation

EO construct had its root in Mintzberg (1973), who proposed an entrepreneurial mode, strategy-making as managerial disposition characterized by active searching for new opportunities in uncertain environments in which high growth might be achieved. Miller (1983, p.770) defined the entrepreneurial firm as one that “engages in product market innovation, undertakes somewhat risky ventures and is first to come up with ‘proactive’ innovations, beating competitors to the punch”. He characterized entrepreneurship through the use of dimensions like risk taking, proactiveness, and innovativeness. Miller (1983) was the first who moved his focus from individual analysis of entrepreneurship to firm- level entrepreneurship.

Covin and Slevin (1991, p.10) defined EO as “top management risk taking with regard to investment decisions and strategic actions in the face of uncertainty; the extensiveness and frequency of product innovation and the related tendency toward technological leadership; and the pioneering nature of the firm as evident in the firm’s propensity to aggressively and proactively compete with industry rivals”. According to Lumpkin and Dess (1996), entrepreneurial orientation refers to the practices, processes, and activities of decision-making that result in the new entry. Covin and Wales (2012) summarized the definitions of EO from the literature that illustrate the development of EO construct (see Table 2-1).

Table 2-1: EO List of Definitions (Source: Covin and Wales, 2012)

Author	Definition of EO
Mintzberg (1973)	“In the entrepreneurial mode, strategy-making is dominated by the active search for new opportunities” as well as “dramatic leaps forward in the face of uncertainty” (p.45).
Khandwalla (1976/77)	“The entrepreneurial [management] style is characterized by bold, risky, aggressive decision-making” (p.25).
Miller and Friesen (1982)	“The entrepreneurial model applies to firms that innovate boldly and regularly while taking considerable risks in their product-market strategies” (p.5).
Miller (1983)	“An entrepreneurial firm is one that engages in product-market innovation, undertakes somewhat risky ventures, and is first to come up with ‘proactive’ innovations, beating competitors to the punch” (p.771).
Covin and Slevin (1998)	“Entrepreneurial firms are those in which the top managers have entrepreneurial management styles, as evidenced by the firms’ strategic decisions and operating management philosophies” (p.218).
Merz and Sauber (1995)	“Entrepreneurial orientation is defined as the firm’s degree of proactiveness (aggressiveness) in its chosen product-market unit (PMU) and its willingness to innovate and create new offerings” (p.554).
Lumpkin and Dess (1996)	EO refers to the “processes, practices, and decision-making activities that lead to new entry” (p.136).
Zahra and Neubaum (1998)	EO is “the sum total of a firm’s radical innovation, proactive strategic action, and risk taking activities that are manifested in support of projects with uncertain outcomes” (p.124).
Pearce et al. (2010)	“EO is conceptualized as a set of distinct but related behaviours that have the qualities of innovativeness, proactiveness, competitive aggressiveness, risk taking, and autonomy” (p.219).

2.3.3 Dimensions of entrepreneurial orientation

Miller (1983) came up with a core starting point when he stated that for a firm to be considered entrepreneurial, it has to engage in innovation of product and market, undertake ventures that are risky, have the desire to beat its competitors, and be the proactive in pursuing market opportunities. He characterized entrepreneurship through the use of dimensions like risk taking, proactiveness, and innovativeness. Later, Covin and Slevin (1989, 1991) conceptually and empirically grounded this construct as primary characteristics of firm-level behaviour. Various researchers employed the scale of Covin and Slevin (1989) in explaining the dimensions of entrepreneurial orientation for its highly validity and reliability (Ginsberg, 1985; Morris and Paul, 1987; Schafer, 1990; Naman and Slevin, 1993, Dimitratos et al., 2004; Rajshekhar et al., 2011; Mahmood and Hanafi, 2013).

Lumpkin and Dess (1996) added two additional dimensions to Miller’s (1983) three construct – autonomy and competitive aggressiveness, and they argued that they are also significant dimensions of EO. Consequently, Lumpkin and Dess (1996) proposed five dimensions to measure EO firm – level: risk taking, proactiveness, innovativeness, autonomy, and competitive aggressiveness. See Table 2-2 demonstrating the development of EO construct in the literature.

Table 2-2: The Development of EO Scale in the Literature (Source: the author)

Author(s)	Contribution
Khandwalla (1977)	In his study, “Some top management styles, their context and performance”, the author distinguished between entrepreneurial firm and non-entrepreneurial firm based on their top management styles according to five dimensions: risk taking, flexibility, participation, coercion, and optimisation.
Miller and Friesen (1982)	In their article “Innovation in conservative and entrepreneurial firms: two models of strategic momentum”, Miller and Friesen made a distinction between two types of strategic behaviour: some firms are seen as entrepreneurial while other are seen as conservative.
Miller (1983)	In his study “Correlates of entrepreneurship in three types of firm”, Miller defined the entrepreneurial firm as one that “engages in product market innovation, undertakes somewhat risky ventures and is first to come up with ‘proactive’ innovations, beating competitors to the punch”. He characterised entrepreneurship through the use of dimensions like risk taking, proactiveness, and innovativeness. Later, this definition has become the foundation of EO construct and was adopted by Covin and Slevin (1989).
Covin and Slevin (1989)	In their seminal article “Strategic management of small businesses”, the authors developed the first widely accepted operationalisation of EO based on Miller’s (1983) study. This nine-item measurement, labelled as “strategic posture” and consists of three dimensions; innovativeness, proactiveness, and risk taking.
Lumpkin and Dess (1996)	In their study “Clarifying the entrepreneurial orientation construct and linking it to performance”, the authors suggested an alternative model to measure EO. They added two additional dimensions: autonomy and competitive aggressiveness, and they argued that these dimensions are varying in their relationship to firm performance. In addition, they differentiated between entrepreneurship and entrepreneurial orientation based on the distinction that was established in strategic management literature between content and process.

In their meta-analysis, Rauch et al. (2009) found that the majority of EO research employed Covin and Slevin’s (1989) scale for its high reliability and validity, and only few studies adopted Lumpkin and Dess’s (1996) measurement.

Moreover, several research adopted Lumpkin and Dess’s (1996) model of EO and addressed only some dimensions of the construct. For example, Sriprasert (2013) examined four dimensions of EO: autonomy, innovativeness, risk taking, and proactiveness when he investigated the effect of EO in the success of community enterprise in Thailand. Wang (2008) also used four dimensions: competitive aggressiveness, innovativeness, risk taking, and proactiveness to investigate the relationship between EO and a firm performance. Lumpkin and Dess (2001) examined two of the five dimensions: competitive aggressiveness and proactiveness, and Covin and Covin (1990) examined only competitive aggressiveness.

Despite the acknowledgment of the role of autonomy and competitive aggressiveness in firm performance, several scholars were unable to find a positive effect of these two dimensions in firm performance, especially in SMEs (Milovanovic and Wittine, 2014; Kusumawardhani et al., 2009; Boso, 2010; Hughes and Morgan, 2007). Critics hold that autonomy may be more related to individual characteristics and difficult to apply and maintain at firm- level. In addition, some researchers claimed that competitive aggressiveness is not applicable in all cultural contexts (Landstrom and Lohrke, 2010), and some of them argued that this dimension is a part of proactiveness and does not represent a separate dimension (Vij and Bedi, 2012; Radulovich, 2008). Thus, current study focuses on three dimensions of EO that are most commonly used: innovativeness, proactiveness, and risk taking.

2.3.3.1 Innovativeness

Schumpeter (1942) was among the initial researchers to discuss the significance and meaning of innovativeness in entrepreneurship. He explained that it is through creative destruction that wealth is created by the emergence of new structures in the market that bring new services and goods, disrupting the activities of the structures that already exist in the market. He thus emphasized that innovativeness is a significant part of entrepreneurship process.

Innovativeness, when defined with reference to a firm’s strategy, means the ability of an enterprise to participate in as well as support novelty, original ideas, process, and investigation that may result in the production of new items, emergence of new technological processes, or creation of new services (Lumpkin and Dess, 1996). Baker and Sinkula (2009) also state that innovativeness reveals a basic determination to quit from existing technologies or practices and venture beyond the current state of the skill.

The context of innovativeness can vary within firms but is important in ensuring that a firm takes the advantage of new creations of services, products, or technological advancements in capturing the market and competing favourably for the desired share of the market (Kreiser et al., 2013). The kind of innovation that is significant for any firm is the technological innovation and the product-market innovation (Davis, 2007). Firms need to be ready to create advancements in technology and apply them to the creation and delivery of goods and services. They also need to improve their goods and services through creativity and offer them to customers in a manner that is more appealing and likely to attract a large number of buyers and users. Innovation in firms is highly ensured through the creation of research and development departments that promote the activity (Todd, 2008).

Survival and growth of firms is highly influenced by their innovative ability to create and improve their offerings to the market (Rosenbusch et al., 2011). This is because factors like advancements in technology, competition in the market, and scarcity of resources are constraints to the progress of firms (Damanpour and Wischnevsky, 2006). Facing shortening life cycles of business models makes innovativeness a necessity for sustainability of SMEs (Perez-Luno et al., 2007).

Landstrom (2005) insisted that there is a relationship between innovativeness and creativity. Creativity refers to the implementation of the curiosity and mental ability of a person in the discovery of something that never existed (Morris et al., 2008). It is through creativity that a person or a firm can be described as innovative (Ireland et al., 2003). Since creativity is the origin of the imaginations and ideas that lead to the formation of new services, products, technology, markets, or processes (Landstrom, 2005), one can deduce that innovativeness originates from the creativity of individuals (Ireland et al., 2003).

Innovation and innovativeness have been used interchangeably over and over because of the inconsistency in the literature that defines the major difference between the terms (Garcia and Calantone, 2002). Innovation leads to better performance and growth of enterprises (Aloulou and Fayolle, 2005), as it ensures that a firm competes favourably in the market (Damanpour and Wischnevsky, 2006), helps in the formulation and definition of the strategy of a firm (Covin and Miles, 1999), and ensures firms register superior performance in the market (Otero-Neira, Lindman, and Fernandez, 2009).

There are three major types of innovation namely: process innovation, product innovation, and market innovation (Johne and Davies, 2000). Product innovation is the use of creativity to improve on existing products or create new ones, process innovation refers to the advancement of the capacities, operations as well as internal capabilities possessed by an enterprise, and market innovation relates to the act of coming up with new segments of the market that highly consume the products and services of the firm (Johne and Davies, 2000).

A firm that undertakes innovation can engage in any of the three types as they are independent of one another. The traits of a firm as well as its levels of performance determine its level of innovations (Johne and Davies, 2000). Firms chose the type of innovation that can ensure they grow in the market, become more competitive, and attain sustainability.

Innovativeness is considered as one of EO dimensions that meet the greatest degree of consensus regarding its positive effect on firm performance in both SMEs and large firms (Rauch et al., 2009; Silva et al., 2012). Innovativeness helps the firms to realize first-mover advantages and exploit emerging opportunities in the markets. Moreover, innovativeness enables the firms to develop their market niche and differentiate themselves than their market rivals. An innovative strategic posture is thought to be linked to performance because it increases the chances that a firm will realize first-mover advantages and capitalize on emerging market opportunities (Covin and Slevin, 1991). Rosenbusch et al. (2011) argued that innovation is an opportunity for SMEs to gain rents through the temporary establishments of monopoly and the introduction of innovative products, service, process, or business models designed to attractive niches is an additional opportunity for SMEs to successfully compete with larger counterparts.

In addition, innovativeness has found to positively associated with firm international performance (Knight and Cavusgil, 2004; Zhang et al., 2009). For example, Zhang et al. (2009) based on 155 Chinese manufacturing ﬁrms found that international innovativeess is positively affected subjective ﬁnancial performance and strategic indicators of global performance for both traditional exporting ﬁrms and born-global INVs. Zahra and George (2002) argued firms that internationalize their operations in innovative and creative ways able to obtain significant gains that lead to superior financial performance. In addition, a strong emphasis on product innovativeness provides a firm with the opportunity to generate early market share, cash flows, external visibility and legitimacy, and an increased likelihood of survival in overseas markets (Samiee et al., 1993; Schoonhoven et al., 1999).

2.3.3.2 Proactiveness

Having a mission that is clearly determined is significant in entrepreneurship (Valliere and Peterson, 2009). An entrepreneur should always know the reason for starting a new venture and the factors that should be achieved by the venture (Valliere and Peterson, 2009). After the identification of a new venture and carrying out various analyses, firms should actively take the initiative of a new entry. This is described by the issue of first-mover advantage that enables firms to benefit from new ventures before competitors flock the market (Covin and Wales, 2012).

Proactiveness means taking a swift action aimed at countering expected changes and problems in the future and achieving set goals (Kreiser et al., 2013). Lumpkin and Dess (1996, p.146) defined proactiveness as “taking initiative by anticipating and pursuing new opportunities and by participating in emerging markets”. According to Rauch et al. (2009, p.763) proactiveness is “opportunities-seeking, forward-looking perspective characterized by the introduction of new product and service and acting in anticipation of new future demand”. Miller (1983) described an entrepreneurial firm as one that is first to develop proactive innovations. Eckhardt and Shane (2003) indicated that proactiveness includes exploration, evaluation of new opportunities and expectation of market demands. By engaging in these activities, entrepreneurial firms will be able to introduce new product/service or technology a head of competitors (Boso, 2010). A proactive firm is more considered as a leader than a follower in the market as it has the ability and foresight to exploit new opportunities (Lumpkin and Dess, 1996). Stevenson and Jarillo (1990) considered this pursuit of emerging business opportunities to be the fundamental backbone of entrepreneurship.

Firms should always have the ability to detect any environmental changes and respond using the right actions or internal changes. When problems are identified, the firms should implement the right solutions before the impacts are felt (Hughes and Morgan, 2007). This is the same to the situation when a new venture is identified. The firms should be among the first to exploit the ventures before the competitors flock the market (Hughes and Morgan, 2007).

Proactiveness improves the performance of enterprises, and its impact varies with the level of development of an organization. It is believed that the firms that are at the embryonic stage exhibit growth through proactiveness more than the firms that are already developed (Coulthard, 2007). The emerging and young firms have the ability to secure a good segment of the market and ensure prosperity through the implementation of proactiveness (Hughes and Morgan, 2007).

Firms that possess proactive characteristics compete in an aggressive manner by launching bold and risky strategies, practically in the face of uncertainty (Todd, 2008). Proactive firms are characterised by continues the search for new opportunities with various reactions to the change in the surrounding environment resulting in the introduction of new product/service or technology a head of market rivals (Wiklund and Shepherd, 2005; De Clercq et al., 2005). In addition, proactive firms are those that visualise market opportunities by taking the lead to introduce new products, technologies, and procedures to the market ahead of the competitors (Eckhardt and Shane, 2003).

Several scholars have reported a positive relationship between proactiveness and firm international performance. For example, based on 117 Chinese SMEs, Zhang et al. (2012) examined the relationships between the individual EO dimensions of innovativeness, proactiveness, and risk taking and two dimensions of degree of internationalisation: multinationality (international sales as a percentage of total sales) and country scope (number of foreign countries in which the SME has operations and the cultural diversity of the SMEs overseas markets). Results indicated that of the three EO dimensions, proactiveness is most consistently and positively associated with the internationalisation performance criteria. Zahra and Garvis (2000) argued that first-movers survived longer in their foreign markets than late entrants.

2.3.3.3 Risk taking

Several research on entrepreneurship explain individual entrepreneurs as risk takers (Unger et al., 2011). The uncertainty and risk of self-employment have highly been used to describe the difference that exists between an entrepreneur and non-entrepreneur (Valliere and Peterson, 2009).

The definition of risk is dependent on how the word is used. When referring to strategy, there are three major traits of strategic risks: pursuing ventures that have some form of uncertainty; borrowing a lot of resources; and spending a lot of an enterprise’s resource to pursue a new venture (Baird and Thomas, 1985). Risk, therefore, means uncertainty of the results of a venture that includes the possibility of incurring financial losses. Miller and Friesen (1978, p.923) defined risk-taking as “the degree to which managers are willing to make large and risky resource commitments, i.e., those that have a reasonable chance of costly failure”. Similarity, Lumpkin and Dess (1996) defined risk taking at firm level as firm’s willingness to make large resource commitment even when the outcome is uncertain. This means that a firm would be able to invest resources in projects even if there were a high potential for failure.

Organizations that are undertaking technological changes coupled with the renovation of services and products are believed to be taking some form of risk. There is also risk in venturing into new markets. Entrepreneurial organizations are characterized with risk taking that is aimed at enhancing growth and sustainability (Unger et al., 2011). The firms, however, undertake various analyses to ensure that the potential risks are identified, analysed, and proper decisions made. This ensures that the possible returns of taking risks are identified and the right decision made as to whether the risk is worth taking (Unger et al., 2011).

Organizations may be faced with three main forms of risks including financial risks, business risks, and personal risks (Dess and Lumpkin, 2005). Enterprises that take risks are those that take part in a venture without having the knowledge of the outcomes (Heba, 2013). Business risks are related to lack of knowledge of the success of a business venture as a result of untested market or use of technology that is not yet approved (Covin and Wales, 2012). Financial risks are incurred when a firm borrows a lot of money or uses a lot of its resources in the pursuit of the growth (Dess and Lumpkin, 2005). Personal risks are those that the executives take in the implementation of strategies that may ensure the growth of a firm (Dess and Lumpkin, 2005).

Firms that have a behaviour indicating strong entrepreneurial activities are believed to be engaging in higher risk levels with the aim of receiving higher return levels while firms that are risk averse highly avoid engaging in activities that have uncertain yields (Avlonitis and Salavou, 2007). Risk averse firms are less responsive to environmental changes and perform weakly as they are less willing to capture new opportunities in the market (Hughes and Morgan, 2007).

Risk taking does not, however, contribute to the higher performance of firms like other dimensions of entrepreneurial orientation (Rauch et al., 2009). For a firm to undertake a new venture or implement innovativeness, it has to take some risks. Though greater risks come with higher returns, firms are not guaranteed of growth through taking such risks (Dess and Lumpkin, 2005). Risk taking should be accompanied with analysis that helps the firms know the diversity that they face and their potential of success when they take given risks (Covin and Wales, 2012). Knight (2000), notes that SMEs with strong entrepreneurship orientation are often characterised by high risk taking behaviour, such as incurring heavy debt or making large resource commitments with the aim of obtaining high returns by grasping opportunities in the marketplace. He points out that all business endeavours involve some degree of risk that must be taken for the potential opportunities to be exploited.

Internationalisation itself is considered as a risky business activity as it can result in significant losses, but it can also bring considerable positive returns (Samiee et al., 1993). Because of this, international firms are encouraged to assume high risks in foreign markets if they are to be more successful (Samiee et al., 1993). High international risk-taking (developing novel product innovations; venturing into far distance geographical regions; competing in markets with completely different national cultures) is expected to generate greater export sales returns than safety seeking (competing in regional markets; operating in neighbouring countries, and undertaking line or brand extensions). This is notwithstanding the fact that reckless risk-taking can be counterproductive (Lumpkin and Dess, 1996; Brouthers et al., 1996). Although some researchers have argued that tried and true international strategies may have significant positive effect on the performance of international ventures, however, it can also be argued that taking risks to create new products or services, or new processes may be more profitable in the long-run. This is because, while some may fail, some may succeed and the successful ones can bring greater dividends (McDermott and O’Connor, 2002).

2.3.4. Relationship between entrepreneurial orientation and firm performance

The relationship between entrepreneurial orientation and firm’s performance has gained increased attention among EO scholars (Wiklund and Shepherd, 2005; Covin et al., 2006; Gil, 2013). There is a general agreement among EO researchers that EO positively influence firm performance. Rauch et al (2009) argued that firms with high level of EO perform better than those firms with a more conservative approach, since entrepreneur firms are able to capture high- quality opportunities in the marketplace, able to counter dynamism in the environment, and to control uncertainty in the market and life cycle of their products (Kraus et al., 2012).

While EO literature theorized the positive relationship between EO and firm performance, empirical studies have revealed mixed results both in the domestic and in the international context.

For example, in examining EO in the domestic context, many studies (Naman and Slevin, 1993; Zahra and Covin, 1995; Wiklund, 1999; Wiklund and Shepherd, 2005; Wang and Yen, 2012; Gupta and Batra, 2016; Shirokova et al., 2016; Fadda and Sorensen, 2017) found support for a positive relationship between EO and the firm performance. However, some studies have concluded that there is no important relationship between performance and entrepreneurial orientation (Covin et al., 1994; Slater and Narver, 2000). Furthermore, Lee et al. (2001) made a discovery that entrepreneurial orientation does not necessarily result in the rise of firm performance. Renko et al. (2009) found a negative relationship between EO and firm performance. See Table 2-3 for more examples.

Table 2-3: Empirical Relationship between EO and Firm Performance (Source: the author)

Findings	Method	Uni/Multi dimensions	Author/Year
EO is positively related to overall firm performance.	Quantitative	Uni-dimensional Risk taking Product innovation	Miller and Friesen (1982)
EO is positively related to overall firm performance.	Quantitative	Uni-dimensional Risk taking Innovativeness	Miller and Friesen (1983)
Entrepreneurial strategic posture positively affects firm performance in hostile environment.	Quantitative	Uni-dimensional Innovativeness Proactiveness Risk taking	Covin and Slevin (1989)
Corporate entrepreneurship has a significant influence on financial performance and this influence is increasing over time.	Mixed methods	Uni-dimensional Innovativeness Proactiveness Risk taking	Zahra and Covin (1995)
Innovativeness is negatively related to firm profitability.	Quantitative	Innovativeness	Hundler et al. (1996)
EO positively affects firm profits, revenues, growth, employee satisfaction, the size of customer base.	Quantitative	Uni-dimensional Proactiveness Risk taking Innovativeness	Morris and Sexton (1996)
There is no significant relationship between EO and firm performance	Quantitative	Uni-dimensional Innovativeness Proactiveness Risk taking	Sapienza and Grimm (1997)
EO is an important drive of sale growth	Quantitative	Uni-dimensional Innovativeness Proactiveness Risk taking	Covin et al. (2006)
EO is positively influenced firm performance	Quantitative	Uni-dimensional Innovativeness Proactiveness Risk taking	Wiklund and Shepherd (2005)
There is no direct relationship between EO and spin off performance, this relationship moderated by network capability.	Quantitative	Uni-dimensional Proactiveness Risk taking Innovativeness Autonomy Assertiveness	Walter et al. (2006)
EO indirectly influences firm performance through knowledge creation process.	Quantitative	Uni dimensional Innovativeness Proactiveness Risk taking Autonomy Competitive aggressiveness	Li et al. (2008)
EO indirectly influences firm performance (the relationship mediating by learning orientation).	Quantitative	Uni dimensional Innovativeness Proactiveness Risk taking Competitive aggressiveness	Wang (2008)
EO is negatively related with capital investment. There is no relationship between EO and product innovation success.	Quantitative	Uni dimensional Innovativeness Proactiveness Risk taking	Renko et al. (2009)
EO significantly and positively related to firm performance	Quantitative	Uni dimensional Innovativeness Proactiveness Risk taking	Idar and Mahmood (2011)
EO is positively and significantly related to firm performance.	Quantitative	Uni-dimensional Innovativeness Proactiveness Risk taking Competitive aggressiveness	Lee and Chu (2013)
EO moderately influences firm performance in turbulent market.	Quantitative	Uni-dimensional Innovativeness Proactiveness Risk taking	Engelen et al. (2014)
Entrepreneurial orientation has a significantly positive effect on financial and non-financial business performance. Innovativeness and proactiveness have significantly positive effect on non-financial performance; while there have not been found any significantly positive influence on the financial and overall business performance. There is no significant relationship between risk taking, autonomy, and competitive aggressiveness and firm financial and non financial performance.	Quantitative	Uni and Multi-dimensional Innovativeness Proactiveness Risk taking Autonomy Competitive aggressiveness	Milovanovic and Wittine (2014)
EO is positively influenced by firm performance	Quantitative	Uni-dimensional Innovativeness Proactiveness Risk taking	Wijesekara et al. (2014)
EO is positively influenced firm performance	Quantitative	Uni-dimensional Innovativeness Proactiveness Risk taking	Shirokova et al. (2016)
There is a strong positive linkage between EO and firm performance	Quantitative	Uni-dimensional Innovativeness Proactiveness Risk taking	Gupta and Batra (2016)
EO is positively influenced firm performance	Quantitative	Uni dimensional Innovativeness Proactiveness Risk taking Autonomy Competitive aggressiveness	Fadda and Sorensen (2017)

The international business literature also reflects mixed results about the influence of EO/ construct in firm international performance. While studies such as Knight (2000), Balabanis and Katsikea (2003), Todd (2008), Weerawardena et al. (2007), Boso (2010), Brouthers et al. (2014), Thanos et al. (2016), and White and Vila (2017) reported a positive association between EO and firm performance, research such as Robertson and Chetty (2000) found only a weak relationship, and other research such as Kaya and Agca (2009), Jantunen et al. (2005), Bianchi and Mathews (2016) found there is no significant relationship between EO and firm performance. See Table 2-4 for more details.

Table 2-4: Empirical Relationship between EO/IEO and International Performance of the Firm (Source: the author)

Findings	Method	Uni/Multi dimensions	Author /Year
International corporate entrepreneurship (ICE) was positively associated with a firm’s overall profitability and growth as well as its foreign profitability and growth.	Quantitative	Uni-dimensional Innovativeness Venturing Proactiveness	Zahra and Garvis (2000)
International Entrepreneurial Orientation (IEO) is important driver to international performance through different parameters such as international preparation, strategic competence, and technology acquisition firm.	Mixed Method	Uni-dimensional Innovativeness Proactiveness Risk taking	Knight (2001)
There is a positive relationship between Overall EO and firm performance. Innovativeness and proactiveness are positively affect firm performance There is no significant relationship between risk taking and firm performance	Quantitative	Uni and Multi dimensions Innovativeness Proactiveness Risk taking	Kaya and Agca (2009)
Entrepreneurship positively influences perceived satisfaction with performance in the foreign country.	Quantitative	Uni-dimensional Innovativeness Proactiveness Risk taking	Dimitratos et al. (2004)
EO was not significantly correlated with an objective measure of degree of internationalisation (percentage of international sales). EO is positively related to the subjective measurements of international performance.	Quantitative	Uni-dimensional Innovativeness Proactiveness Risk taking	Jantunen et al. (2005)
While proactiveness has no effect, risk taking has negative effect, and competitive aggressiveness has positive effect on the performance of true global firms.	Quantitative	Multi dimensional Proactiveness Risk taking Competitive aggressiveness	Kuivalainen et al. (2007)
EO is significantly higher among firms that internationalized than among their non-internationalized counterparts, EO is positively related to international scope and international sales percentage.	Quantitative	Uni dimensional Innovativeness Proactiveness Risk taking	Ripolles-Melia et al. (2007)
International innovativeness is positively related to international business performance.	Quantitative	International innovativeness	Knight and Kim (2009)
Global SMEs are distinguish by a stronger entrepreneurial orientation than international SMEs in terms of proactive, risk taking, innovativeness	Qualitative	Multi dimensions Innovativeness Proactiveness Risk taking Competitive aggressiveness	Dimitratos et al. (2010)
EO is a precursor of both product development and market-related exploitative and explorative capabilities	Qualitative	Uni dimensional Innovativeness Proactiveness Risk taking	Lisboa and Skarmeas (2010)
Overall EO has a positive relationship with the degree of internationalisation Proactiveness and risk taking have a positive effect on the degree of internationalisation There is no significant relationship between innovativeness and the degree of internationalisation.	Mixed Method	Uni and Multi dimensions Innovativeness Proactiveness Risk taking	Zhang et al. (2012)
Innovativeness and proactiveness affect export performance positively and significantly. Risk taking not has a significant effect on export performance.	Quantitative	Multi -dimensional Innovativeness Proactiveness Risk taking	Ismail et al. (2013)
EO positively influence export performance.	Quantitative	Uni-dimensional Proactiveness Risk taking Innovativeness	Monteiro et al. (2013)
EO enhances organization learning capability and innovation performance, which in turn enhance export intensity.	Quantitative	Uni-dimensional Proactiveness Risk taking Innovativeness	Mesa and Vidal (2013)
EO is positively and significantly related to international performance.	Quantitative	Uni-dimensional Innovativeness Proactiveness Risk taking	Brouthers et al. (2014)
IEO is not significantly related to SMEs international performance.	Quantitative	Uni-dimensional Innovativeness Proactiveness Risk taking	Bianchi and Mathews (2016)
IEO is positively related to international performance	Quantitative	Uni-dimensional Innovativeness Proactiveness Risk taking	Thanos et al. (2016)
Firms with high EO levels obtain better financial results in newly liberalized markets. Firms with high EO levels report higher scores of service quality, a better competitive profile, and more investment in RandD Firms with high EO levels favour new product/service development more than firms with low EO levels.	Quantitative	Uni-dimensional Innovativeness Proactiveness Risk taking	White and Vila (2017)

The mixture in findings of the various researches regarding the relationship between performance of the firms and entrepreneurial orientation is explained by the fact that the researchers used designs of research, methodologies, and samples that were basically different (Rauch et al, 2009). The fact that the firms studied existed in different stages may also explain the mixture in the findings (Hughes and Morgan, 2007). National culture may also be a reason for the difference in the findings as firms in different nations operate under different culture conditions (Thomas and Mueller, 2000; Saeed, Yousafzai, Engelen, 2014). This actually prompted Lumpkin and Dess (2005) to recommend for further research regarding the role of culture in the relationship between performance of SMEs and dimensions of entrepreneurial orientation.

Moreover, previous scholars argue that inconsistent of empirical findings about the relationship between EO and firm performance is evidence that this relationship is moderated and mediated by many external and internal variables. The presence of several internal as well as external factors determines the impact that entrepreneurial orientation has on performance (Covin and Wales, 2012). This was explained by other researchers like Wang (2008), who noted that when this kind of a correlational investigation is carried out, the results do not provide a clear description to the relationship as many internal and external factors could impact performance and decisions made in an enterprise. The nature factors determine the extent to which entrepreneurial orientation affects the performance of an organization with regard to market share, sales growth, overall performance, profitability, and stakeholder satisfaction (Kuivalainen et al., 2004; Jantunen et al., 2005; Soininen et al., 2012; Bianchi and Mathews, 2016). These mixed results call for further examination of the relationship between EO and firm performance.

2.4 Social Capital

2.4.1 Overview

In the last decade, social capital has become a critical concept in various disciplines in the field of social sciences (Bourdieau, 1983; Coleman, 1990). An increasing number of different researchers, such as for instance economists and sociologists, have used this concept to answer a wide range of questions related to their own specific fields of research, in accordance with the idea that social phenomena can influence economic activities (Burt, 1992; Moran and Ghoshal, 1996).

The central proposition of social capital theory is that certain relationships provide an important and valuable resource (Nahapiet and Ghoshal, 1998). It has been studied on different levels including the individual (Burt, 1997), organizational (Nahapiiet and Ghoshal, 1998), and social levels (Putnam, 2000; Dakhli and De Clecq, 2004).

Because it is dynamic, contextual, multi faceted perspective (), it has labelled differently in the literature, including for example relational capital (Rialp et al., 2005), relational assets (Madhok and Tallman, 1998), social resources (Florin et al., 2003), network resources ( Gulati,1999), and social networking (Westhead et al., 2001).This variations in labelling social capital reflects the fact that it is context in natural.

This thesis focuses on the moderating role of social capital in the relationship between entrepreneurial orientation and international performance of SMEs. The rest of this section presents the definitions of social capital, dimensions of social capital, strengths and drawbacks of social capital, and the relationship between social capital and international entrepreneurship.

2.4.2 Definition of social capital

Social capital is primarily defined as resources that exist in social relations among individuals, networks, and communities (Burt, 1997; Coleman, 1990; Nahapiet and Ghoshal, 1998; Putnam, 2000(. Bourdieu (1985), Coleman (1988), and Putnam (1993) have significantly contributed to the conceptualization of social capital.

Many scholars and theorists have attempted to provide the definition and a conceptual meaning to social capital. The concept, however, remains broad in the sense that its applicability could vary depending on social context and discipline as the term gains more relevance and progressive applicability in multiple fields today. For this reason, there has not been a specific definition or clear meaning attached to social capital. Among the most common definitions and conceptualizations of social capital are listed in the table below, adapted from (Adler and Kwon, 2002). They vary depending on whether their focus is primarily on (1) the relations an actor maintains with other actors, (2) the structure of relations among actors within a collectively, or (3) both types of linkages (Adler and Kwon, 2002).

Table 2-5: Definitions of Social Capital (Source: Adler and Kwon, 2002)

Authors	Definition of Social Capital	External Versus Internal
Bourdieu (1986)	“The aggregate of the actual or potential resources which are linked to possession of a durable network of more or less institutionalized relationships of mutual acquaintance or recognition” (p.248).	External (Bridging view)
Baker (1990)	“Sees social capital as the totality of resources that members of a society acquire from certain social structures” (p.619)	External
Burt (1997)	‘‘Friends, colleagues, and more general contacts through whom you receive opportunities to use your financial and human capital” (p.9).	External
Portes (1998)	‘‘The ability of members of a society to secure resources or benefits simply because they are members of certain social networks or structure’’ (p.6)	External
Knoke (1999)	‘‘The process by which social actors create and mobilize their network connections within and between organizations to gain access to other social actors’ resources” (p.18)	External
Portes (1998)	Sees social capital as the ability of members of a society to secure resources or benefits simply because they are members of certain social networks or structure.	External
Coleman (1990)	‘‘Social capital is defined by its function. It is not a single entity, but a variety of different entities having two characteristics in common: They all consist of some aspect of social structure, and they facilitate certain actions of individuals who are within the structure” (pp.302-303).	Internal (Bonding view)
Portes Sensenbrenner (1993)	“Sees social capital as the various expectations that exists among members in the collective society and that affects their economic goals and dispositions” (p.1323).	Internal
Putnam (1995)	Described social capital as “features of social organization such as networks, norms, and social trust that facilitate coordination and cooperation for mutual benefit” (p. 67).	Internal
Thomas (1996)	‘‘Those voluntary means and processes developed within civil society which promote development for the collective whole” (p.11).	Internal
Brehm Rahn (1997)	‘‘The relationships among members of a society that are characterized by cooperation and collective resolution of social problems’’ (p.999).	Internal
Loury (1992)	“Natural relationships that exist in a society and that facilitate the acquisition of skills that are in demand in the market” (p. 100).	Both (external and internal)
Schiff (1992)	‘‘The set of elements of the social structure that affects relations among people and are inputs or arguments of the production and/or utility function” (p.160)	Both
Pennar (1995)	‘‘The web or network of social relationships that affects economic growth and the way individuals behave’’ (p.154).	Both
Nahapiet and Ghoshal (1998)	“The sum of the actual and potential resources embedded within, available through and derived from the network of relationships possessed by individual or social units” (p.243).	Both
Woolcock (1998)	‘‘The information, trust, and norms of reciprocity inhering in one’s social networks” (p.153).	Both

Conceptualization of social capital from the different perspectives presented by the authors shows a strong relationship with social progression as one of the primary benefits that individuals or groups enjoy from social capital (Grootaert et al. 2002). This implies that social capital results from the interactions that occur among members of a society or group and as such depends on the nature of such relationships. Adler and Kwon (2002) analyzing the different definitions and conceptualizations of social capital and categorized them into three groups. The first group is bridging views, focuses primarily on social capital as a resource that is embedded in the social network, tying a focal actor to other actors and located in the external linkages of a focal actor. For example, Bourdieu (1985) described social capital as the collective resources that emanate from potential and actual relationships that could or could not be institutionalized and that are durable and mutually recognized. Bourdieu’s work had been presented in French and at a time when little relevance could be attached to the term in its self. Bourdieu’s ideology and meaning attached to the term is however important to contemporary scholars and academic research since it provides one of the earliest formal conceptualizations of social capital. In addition, Baker (1990) defined social capital as a resource that actors derive from specific social structures and then use to pursue their interests; it is created by changes in the relationships among actors.

The second group, regarded social capital as bonding views, focuses on the internal characteristics of the partners, especially those characteristics that give the collectivity cohesiveness and thereby facilitate the pursuit of collective goals. As a key examples of this group, are Coleman (1990) and Putnam (1995). Coleman (1990) define social capital by its function. He states it is not a single entity, but a variety of different entities having two characteristics in common: they all consist of some aspect of social structure, and they facilitate certain actions of individuals who are within the structure (p.302). Putnam (1995) described social capital as “features of social organization such as networks, norms, and social trust that facilitate coordination and cooperation for mutual benefit” (p.67).

The third group including external and internal perspectives of social capital. A key representative of this group are Nahapiet and Ghoshal (1998, p.243) who defined social capital as “the sum of the actual and potential resources embedded within, available through, and derived from the network of relationships possessed by an individual or social unit”. They view social capital as one of the key organizational capabilities and assets which can be of much help organizations in knowledge creation and sharing, and in giving them a sustainable organizational advantage relative to other organizations. The application of social capital theory in organizational settings was initially proposed by Nahapiet and Ghoshal (1998), who conceptualized social capital into three dimensions: structural, relational, and cognitive.

Nahapiet and Ghoshal’s (1998) conceptualization of social capital has been widely applied by scholars who address the social capital in the firm-level in both entrepreneurship field (Paul et al., 2009; De Clercq et al., 2010; Fornoni and Vila, 2012; Liu and Lee, 2015) and international entrepreneurship (Yli-Renko et al., 2002; Zhou et al., 2007; Harris and Wheeler, 2012; Semrau et al., 2015; Dimitratos et al., 2016). Thus, this study applied Nahapiet and Ghoshal’s (1998) definition of social capital.

2.4.3 Dimensions of social capital

Nahapiet and Ghoshal (1998) categorized social capital into three interrelated dimensions: structural (network ties, network configuration, and appropriate organization), relational (trust, norms, obligations, and identification) and cognitive (shared codes and language and shared narratives. Each dimension of social capital serves as a separate construct and, while the characteristics used to describe the three dimensions of social capital are highly inter-related, each has a set of unique qualities. Some scholars treat these dimensions of internal social capital independently (Nahapiet and Ghoshal, 1998; Wu, 2008; Villena et al., 2011; Mani and Lakhal, 2015) while others state that they are interrelated (Long, 2011; Pearson et al., 2008; Liao and Welsch, 2005). In this section, the three dimensions are presented.

2.4.3.1 Structural dimension

The structural dimension concerns the properties of the social system and the network of relations as a whole (Nahapiet and Ghoshal, 1998, p.244). This dimension has been explored in depth and strongly influenced by the work of Burt (1992) and deals with who you reach and how you reach them. The structural dimension encompasses some characteristics such as network ties which deal with specific ways that partners are connected to each other, network configurations which determine the patterns of linkages among the members of network such as the presence or absence of ties between parties, the hierarchy, the density and connectivity of a network, and network stability which is defined in terms of membership change in a network (Nahapiet and Ghoshal, 1998).

According to Burt (1992), actors on opposite sides of structural holes operate in different information circles, and thus, there is value in spanning these separate information circles. Combining information from these separate, non-redundant information flows, then, offers the potential for innovation and the generation of new intellectual capital. The argument of the social capital’s structural dimension is that quantity and diversity of the relationships are key features in facilitating the access to more resources, which, in turn, can be used to achieve better performances (Nahapiet and Ghoshal, 1998; Inkpen and Tsang, 2005).

2.4.3.2 Relational dimension

The relational dimension concerns the kind of personal relationships people have developed with each other through a history of interactions (Nahapiet and Ghoshal, 1998, p.244). This dimension encompasses the characteristics and qualities of the relationships. Therefore, issues such as trust, respect, and friendship are important. The relational dimension is associated with the qualities the connection between actors. This is often characterized by trust and cooperation and the identification that a particular individual has within a network of relationships. An example of how the relational dimension may come into play can be seen when comparing the interactions between two actors that may have the same positions in a network of relationships. Depending on the history of bonds and trustworthiness between the two actors, the action and dynamics of the interactions will be very different than between the same two actors without the relational ties. The interaction between the individual actors is highly influenced by the relationship and history of exchanges between the particular individuals. Nahapiet and Ghoshal (1998) asserted that individuals who have social relationships high in trust are more likely to exhibit cooperative behavior and engage in social exchange. Trust, the first element of this dimension, keeps the communication and interaction channels open and “indicates greater openness to the potential for value creation through exchange and combination” (p. 255).

2.4.3.3 Cognitive dimension

The cognitive dimension refers to those resources providing shared representations, interpretations, and systems of meaning among parties‖ (Nahapiet and Ghoshal 1998 p. 244). This dimension, the least studied of the three (Nahapiet 2008, Krause et al. 2007), encompasses the shared meanings and shared interpretations between parties in a relationship. The cognitive dimension captures the concepts of shared norms, systems of meanings and values, and, as such, we can expect the cognitive dimension to directly impact the development of social capital and the development of relationships.

Tsai and Ghoshal (1998) suggest that cognitive capital is embodied in the shared visions and collective goals of organizational partners and is encapsulated by shared perceptions, expectations and interpretations. Relationships developed with shared norms and values can be expected to be stronger (Moran 2005, Burt 1992). Weick et al. (1995) assert that when there is congruence on goals and values and when interpretations are shared by and across organizational partners this cognitive capital becomes on-going, cumulatively supportive, and self-reinforcing. The cognitive dimension reflects the concept that separate networks or communities develop unique terms, acronyms, interpretations of numbers and concepts. The cognitive dimension captures the essence of the importance of truly sharing rich information with shared meanings across network actors and not just passing along data or bandying about fancy terms. Cabrera-Suárez et al. (2011) argued that the cognitive dimension enhances shared communication and integration of ideas. Furthermore, a common language encourages interactions and information exchange among actors (Nahapiet and Ghoshal, 1998). Maurer et al. (2011) argue that frequent interactions play a significant role in creating rich communication channels and common understanding. Partners can avoid possible misunderstandings in their communications and exchange ideas and resources when they have the same perceptions about how to interact with each other (Tsai and Ghoshal, 1998).

2.4.4 Social capital and international entrepreneurship

Previous studies of entrepreneurship and international business have emphasised the importance of social capital as a powerful resource for improving firm performance and outcomes (Stam et al., 2014).On the entrepreneurship filed, several studies show the positive effects of social capital from the very beginning of an entrepreneurial project and also throughout the life of the start-up. Social capital is especially essential for the firm creation and economic outcomes (Aldrich et al., 2003; Cope et al.,2007) since it helps entrepreneurs to recognize opportunities, mobilize resources, and build legitimacy for their firms. Social networks allow the flow of valuable information or knowledge into the firm, enhance its strategic assets and facilitate processes that enable a firm to behave proactively and innovatively (Luo, 2003; Walter et al., 2006). This knowledge that flows into the firm may take the form of information and know-how (Kogut and Zander, 1992), business opportunities (Walter et al., 2006), skills or management capabilities (Kale., 2000). Wu (2008) study of 108 Hong Kong based Chinese family firms indicates that three dimensions of social capital positively affect firm competitiveness improvement through information sharing. In addition, Fornoni and Vila (2012) found that dimensions of social capital (structure, relational, and cognitive) able the entrepreneurs in Argentina to access to different resource such as finance, information, and markets which in turn, promote their entrepreneurial project success.

In addition, international business scholars have widely acknowledged the role of social capital in international firm success, particularly for small firms. Harris and Wheeler (2012) stated that the relationships that comprise the social capital of firms have increasingly been recognized to be a crucial factor that influences the internationalisation of smaller firms. Johanson and Vahlne (1990) describe internationalisation as a process of developing business relationships through expansion, penetration, and integration. Firm’s social capital can help reduce internationalisation barriers by offering more international opportunities and promoting learning (Johanson and Vahlne, 2009).Therefore, networks facilitate internationalisation speed and outcomes, determine market entry strategies (Coviello, 2006), and influence international entrepreneurial activities (Mark and Della, 2007). According to Zhou et al. (2007) social capital can help international entrepreneurs firms to identify opportunities, establish credibility and legitimacy in the foreign market. Yli-Renko et al. (2002) in their longitudinal study found that internal and external social capital of technology-based new firms influences the acquisition and creation of knowledge, and that knowledge is an essential resource driving the international growth. Thus, the current study applied social capital theory to explore the moderating role of social capital represented in three dimensions ( structural, relational, and cognitive) as conceptualized by Nahapiet and Ghoshal (1998) in the relationship between entrepreneurial orientation and international performance of SMEs.

2.4.5 Drawbacks of social capital

The majority of social capital studies have focused only on the positive outcomes of social capital in the literature. Some authors argued that social capital can also have some negative consequences for both individuals and organizations (Adler and Kwon, 2002; King, 2004; Agluezui and Filieri, 2010), however, only few scholars have highlighted the drawbacks of social capital (Willem and Scarbrough, 2006). The negative consequences of social capital are resulted primarily from group solidarity in the network ties. When a group possessing a strong solidarity becomes dominant within a social structure, it may exclude other members to maintain its privileged status (Portes, 1998). The dominant group uses its monopoly power to prevent other actors or groups from accessing and utilizing available resources, such as information and opportunities (Adler and Kwon, 2002). Second, overly strong group solidarity may lead to diminished personal freedom and high loyalty or conformity, which may reduce incentives for innovative activities and creative thinking (King, 2004; Leana and Van Buren, 1999). Strong solidarity may also prevent new ideas from flowing into the network (Adler and Kwon, 2002) .Powell and Smith-Doerr (1994,p.393) states that “ the ties that bind may also turn into ties that blind”. Likewise, Nahapiet and Ghoshal (1998) insist that excessive group loyalty may inhabit the transfer of new information, which creates collective blindness in the social structure. In addition to these possible negative sides, social capital may be risky: Building social capital is costly, since maintaining relationships is an important requirement in building social capital, and this maintenance requires an investment of time and effort. In addition, actors may over invest in specific relationships transforming theses assets to liabilities (Adler and Kwon, 2002). Having stated the possible negative outcomes of social capital, however, previous empirical studies support the argument that social capital’s positive outcomes outweigh its downsides.

2.5 Conclusion

This chapter has presented theoretical underpinnings of internationalisation theories , and the entrepreneurial orientation construct (EO) and social capital concept.

a. The chapter highlighted some internationalisation theories such as traditional theories (behavioural approaches and economic approaches) which are view internationalisation process as a systematic process. Other theories and perspectives such as RBV and IE have explored internationalisation process as it applies to the SMEs and thus providing a divergent perspective from that of the traditional theories.

The chapter discussed one of the critical concepts within strategic management and entrepreneurship literature, entrepreneurial orientation. It presented the development of EO construct since it was introduced for the first time by Miller (1983). The original three dimensions of EO; innovativeness, proactiveness, and risk taking are presented and explained.

The relationship between EO and firm performance is one of the most important issues that draw the attention of the scholars. Entrepreneurial orientation is very significant for ensuring growth and sustainability of firms. This chapter highlighted the effect of EO in firm performance.

Previous scholars argued that the relationship between EO and firm performance is very complex and there are many external and internal factors could affect this relationship (Covin and Slevin 199; Lumpkin and Dess, 1996). For example, social capital enables firms to form partnerships that are significant in the acquisition of resources, relevant technology, as well as information regarding markets, products, processes, services, and customer behaviour. These enable firms to come up with the right dimensions that enable them to acquire more resources and compete favourably for market share. The chapter discussed the concept of social capital its definitions, dimensions, its relationship with international entrepreneurship, and its drawbacks.

Chapter 3: Research Hypotheses and Framework

3.1 Introduction

This chapter focuses on the development of the research conceptual model and hypotheses to describe the central role of EO in driving SMEs international success and to discuss the potential moderating role of social capital. To achieve this objective, the chapter is organised into four sections. The first part presents the conceptual framework of the study. Secondly, the hypotheses pertaining to the direct connection between EO and international SMEs performance and the moderating effect of each dimension of social capital in the association of EO with international SMEs performance are discussed. Finally, the summary of the chapter is presented.

3.2 Conceptual Framework and Hypotheses Development

This section describes the development of the conceptual model that links EO to the international performance of SMEs under moderating role of dimensions of social capital (structural, relational, and cognitive). There has been growing interest in the internationalisation of small and medium- sized enterprises (SMEs), however, the present literature has two limitations. First, traditional theories such as stages theory (Johanson and Vahlne, 1977) and Dunning’s eclectic theory (Dunning, 1979) are applied to examine the antecedents to the internationalisation of SMEs, which are more applicable to large multinational enterprises (MNEs) than small firms which usually lack resources and capabilities that large multinational enterprises (MNEs) possess and are hard pressed to reach beyond their own boundaries to discover and control such key resources (Dyer and Singh, 1998). Second, the majority of current research have focused on SMEs based in developed countries, and neglect SMEs in emerging markets such as Oman (Mathews and Zander, 2007). It remains unclear whether the findings based on the experience of SMEs from advanced economies can be used to explain the internationalisation of SMEs in developing countries (Gassmann and Keupp, 2007; Luo and Tung, 2007). For addressing these theoretical and empirical gaps, this study integrates the entrepreneurship literature and social capital theory to examine the factors that contribute to the internationalisation of Omani SMEs. Recently, the entrepreneurship literature (Covin and Slevin, 1998; Lumpkin and Dess, 1996) and social capital theory (Nahapiet and Ghoshal, 1998) have offered insights into SME internationalisation behaviour. As entrepreneurship research emphasizes the unique ability of small firm entrepreneurs to discover and exploit international market opportunities as the key to understanding SME internationalisation, the social capital theory argues that SMEs can obtain required resources from their external social network relationships, which can effectively attenuate the risks of overseas operations and, hence, promote their success abroad.

Despite the importance of entrepreneurial orientation and social capital in understanding SMEs internationalisation, they widely used in isolation, as the majority of previous studies examine them as antecedences of SMEs internationalisation (Zhang et al., 2012). Recently, many scholars have acknowledged the role of networking in promoting entrepreneurial activities (Tuan, 2017; De Clercq et al., 2010; Cope et al., 2007; Casson and Giusta, 2007). According to McDougall and Oviatt (2005, p.544) “networks help entrepreneurs identify international opportunities, establish credibility, and often lead to strategic alliances and other cooperative strategies”. Andersson and Wictor (2005) argued that networks contribute to the success of entrepreneurs firms by helping them to identify and exploit new market opportunities.

Moreover, some scholars are considered social capital as a multidimensional concept consists of three dimensions; structural, relational, and cognitive (Andrews, 2010; Wu, 2008; Alarcon et al., 2017), yet previous studies have not examined how each dimension of social capital affect SMEs entrepreneurial orientation behaviour and hence, affect their international performance. In addition, the majority of previous studies that addressed the moderating role of social capital in the relationship between EO and firm performance, they examined it as uni-dimensional or focused more on structural and relational dimensions and neglected cognitive dimension (Turner,2011). Harris and Wheeler (2012) argue that network research in international entrepreneurship is becoming more sophisticated and that we should abandon the notion of just ‘strong’ or ‘weak’ ties that has characterised social capital research. Consequently, this study adds further development in EO literature by integrating both perspectives. As such, the framework focuses on examining the relationship between EO and firm international performance, in addition to the moderating role of social capital (structural, relational, cognitive) in this relationship.

Model 2: Multidimensional Effect Model

3.3 Hypotheses

3.3.1 Entrepreneurial orientation – international performance of SMEs relationship

This section describes the relationship between entrepreneurial orientation and international performance of SMEs. EO initially developed by Covin and Slevin (1989) as construct consists of a combination of three dimensions; innovativeness, proactiveness, and risk taking. All these might exhibit when SMEs engage in new international opportunity exploration and exploitation and they may in combination affect SMEs outcomes in the international market.

The relationship between EO and firm performance has been gained considerable attention in entrepreneurship literature over last three decades. This attention result from the perception that organizations which possess a high level of innovative, proactive, and risky behaviors can successfully develop organizational competitiveness and thereby enhance their performance (Chadwick et al., 2014).

Although, there are some studies unable to find a positive relationship between EO and firm performance (Chadwick et al., 2014) and others found a weak association between EO and firm performance (Kropp et al., 2008), the majority of EO scholars have theorized and established a positive association between EO and firm performance in both; domestic context (Covin and Slevin, 1989; Zahra and Covin, 1995; Wiklund, 1999; Slevin and Green, 2006;) and international context (Zahra and Garvis, 2000; Knight, 2001; McDougall et al., 2003; Brouthers et al., 2014).

In the domestic context, many studies found that EO is an essential tool for firm success. For example, in the foundational piece, Miller (1983) examined the correlates between firm entrepreneurial behaviours and environmental hostility. Using data from a sample of 52 large diverse Canadian firms, the author theorized and found evidence suggesting that firms competing in more hostile environments (those with intense competition and harsh business climates) must engage in more entrepreneurial behaviours because only through such efforts would a firm be able to cope with the challenges posed by that environment. Similarly, in the other foundational piece, Covin and Slevin (1989) utilized data from 161 small manufacturing firms and found that small firms operating in hostile environments performed better with higher levels of EO. In addition, Zahra and Covin (1995) and Wiklund (1999) applied longitudinal approach by examining EO over many years, and they confirmed a positive relationship between EO and firm performance and the strength of this relationship tends to be increasing over time.

The results of the international business studies also consonant with results of the domestic studies, EO has been found to positively drive internationalisation process of the firms. For example, Knight (2001) found that EO is an essential driver of different parameters such as technology acquisition, strategic competence, and internationalisation preparation which in turn resulted in enhancing organization international performance. The role of EO in firm’s success and survive in international market has been widely acknowledged in the entrepreneurship literature especially for SMEs (Thanos et al., (2016); Brouthers et al., (2014); Saeedi et al, (2013); Tylor, (2013); Basile, 2012). Brouthers et al (2014) argued that SMEs with a high level of EO will perform better in the foreign markets than SMEs that possess a lower level of EO because EO aids SMEs to discover and exploit emerging opportunities in the international markets ahead of competitors. Innovative behaviour enables SMEs to introduce creative and novel ideas, strategies, and technologies to meet foreign market customers needs (Boso, 2010). Proactive behaviour gives SMEs the ability to create first -mover advantage ahead of competitors by anticipating the changes in the foreign market and the needs and demands of the customers and acting to exploit these opportunities by launching new product or service (Zahra and Covin 1995). International firms are risk- taking firms as internationalisation involves some risky activities such as entering unknown markets and committing intensive resources with uncertain outcomes. According to Brouthers et al. (2014) risk taking behaviour in foreign market more link to innovative and proactive behaviours, SMEs need to overcome legitimacy - based liabilities of foreignness to be successful in the international market by developing innovative ideas and strategies, launching new products or services to meet customers’ needs, or identifying and entering new markets, all these activities require a commitment of resources and time. Silva et al. (2012) addressed the role of EO in 121 Spanish exporter manufacturing SMEs found that EO is one of the most critical factors for the international success of SMEs, especially those operating in an uncertain environment where few opportunities and intensive competition. In a longitudinal single case study of pharmaceutical ingredient B2B SME in Iran, Saeedi et al (2013) found that high degree of EO in the various level of the firm has had a significant effect on the internationalisation process of the company. In addition, Javalgi and Todd (2010) examined the role of EO behaviour in 150 international Indian SMEs; their results reveal that EO positively influences the success of Indian SMEs in the international market. Thus, the following hypothesis is suggested

H1- EO is positively related to International Performance of SMEs.

3.3.2 Moderators of entrepreneurial orientation behaviour – international performance of SMEs relationship

In addition to attempts to examine the direct effect of EO on firm performance, many researchers have also investigated whether these direct associations are applicable under different organisational and environmental conditions. As a result, in the entrepreneurship literature a number of moderator variables have been modelled on the link between EO and firm performance in both domestic-focused (Zahra and Covin, 1995; Wiklund and Shepherd, 2005) and international- focused EO studies (Boso, 2010; Brouthers et al., 2014; Thanos et al., 2016). Accordingly, it is suggested that contextual factors can strengthen or weaken the relationship between EO and firm performance. As a result, many entrepreneurship scholars have emphasized the importance of continuing exploring the contingencies factors (internal and external) of the relationship between EO and firm performance (Covin and Slevin, 1991; Lumpkin and Dess, 1996; Rauch et al., 2009). Thus, this study addresses the moderating role of social capital (structural, relational, and cognitive) in the relationship between EO and international performance of SMEs.

3.3.2.1 Moderating role of structural social capital between entrepreneurial orientation behaviour and international performance of SMEs relationship

The structural dimension encompasses the properties of the network including personal linkages and the overall pattern of connections. This aspect of social capital has been described as “who you reach and how you reach them” (Nahapiet and Ghoshal 1998). The structure of social capital is operationalized as network ties describe the extent to which actors are related. Ties are a fundamental aspect of social capital because network ties create opportunities for social capital transactions (Adler and Kwon, 2002). A social network ties are comprised of some relevant units of one’s social landscape from an ego-centred perspective. Thus, firm’s social network can include customers, suppliers, university and research institute, government, financial institution and other service organization (Stam et al., 2014). It has been widely acknowledged by researchers that this type of social capital would encourage cooperative behaviour, thereby facilitating the development of new forms of association and innovativeness.

Network ties are considered as an essential tool that enables firms to acquire and share knowledge about market, increase organizational learning, combine resources, coordinate with their partners and promote internal communication (Tajvidi and Karmi, 2014). Networking is associated with sharing of resources among partners, access to market and new technologies that firms cannot be able to access in isolation. By building good relationships with different partners, firms can obtain potential information about untapped opportunities, which make firm more alter and responsive to emerging opportunities. Thus, a firm with a high level of social interactions able to actively pursue new opportunities through knowledge and information available provided by its partners (Saeedi et al., 2013). In addition, to exploit these opportunities, firms need to a commitment of large resources, network ties can help firms to acquire required resources, particularly SMEs which characteristics by resource constraints (Su et al., 2015).

Innovative behaviour is argued to be more effective when organizations cooperating with each other, sharing information, stimulating new idea and combining resource. The multiple and heterogeneity of actors help the firms to acquire heterogeneity and specialized knowledge. Firms can apply this knowledge to improve and develop existing product/services or introduce new product or service (Wu et al., 2008; Cao et al., 2012). Because innovation is a process of combining assets (Nahapiet and Ghoshal, 1998), network relationships may facilitate the ﬁrm’s ability to obtain appropriate resources for combination and thus innovate (Wu et al., 2008). A study of a large multinational electronics company found that the structural dimension of social capital improved inter-unit resource exchange, which in turn improved product innovation (Tsai and Ghoshal 1998).

Stam and Elfring (2008) assert that ventures with divers ties are more able to access to high quality and novel information that facilities facilitate a firm’s responsiveness to innovative and high risk opportunities. Furthermore, Kreiser (2011) argued that possessing a multiple network ties can help entrepreneurial firms to access to new information and to determine environmental changes rapidly. The ability of a firm to acquire knowledge about existing market opportunities will help the entrepreneurial firms to recognize and exploit those existing opportunities before their rivals. So, accessing to various networks provide the firms with information about when they should proactively pursue a particular market opportunity. This also helps to diminish the chance of failure associated with risk-taking behaviors by reducing the chance of taking too long or being too quick to take a particular strategic initiative. In other words, entrepreneurs with a high level of network connections are likely to be able to identify and capture the knowledge and resources they require in an efficient and effective way to develop their entrepreneurial behavior and thereby, enhance their firm performance. Based on 248 SMEs from Germany, Austria, and Switzerland, they examined the moderating effect of social capital dimensions (networks, trust, and solidarity) in the relationship between EO and firm performance. Their results revealed that network ties positively moderate the relationship between EO and firm performance as different network ties (with customers, suppliers, buyers, etc.) help entrepreneurially oriented firms to deﬁne the most suitable strategy by which to navigate the current market conditions. For example, using the additional insights that managers obtain from their network ties, such as those with customers, improves the quality of strategic decisions (by ﬁnding the right moment to be proactive in the marketplace) and thereby increases their ﬁrm performance. This, therefore, leads to the hypothesis that:

H2 -The relationship between entrepreneurial orientation (EO) and international performance of SMEs is moderated by structural social capital (network ties); In particular, entrepreneurial orientation will be more strongly affects international performance of SMEs in firms with high level of structural social capital.

3.3.2.2 The moderating role of relational social capital between entrepreneurial orientation behaviour and international performance of SMEs relationship

The relational dimension of social capital is associated with the qualities of relationships among actors. It is often characterized through trust, norms, obligations, expectations, and identification that a particular actor has within a network of relationships, which are mainly derived from a long history of connections (Granovetter, 1992; Tsai and Ghoshal, 1998). This suggests that social actors may have similar connections within their networks, but the quality of their relationships and emotional attachments may differ leading to different benefits and outcomes for each. As such relational social capital refers to assets that are created and used through relationships based on behaviours rather than on structures (Clercq et al., 2010). The present study focuses on the trust aspect of relational social capital as one of the important characteristics of networks.

Trust is a necessary element in developing relationships and is considered as an essential facet in the relational dimension of social capital (Tsai and Ghoshal, 1998). It is the expectations and beliefs of the actor about others’ good intentions, reliability and predictability and positive motives in situations including risk and vulnerability (Boon and Holmes, 1991). High levels of trust between organizations allow the transfer of sensitive information that is unavailable to those beyond the boundaries of trust and fosters collaborative action among exchange partners (Coleman, 1990). Accordingly, various scholars (Tsai and Ghoshal, 1998; Koka and Prescott, 2002; Liu and Lee, 2015) consider that trust is the critical tool to the creation and transference of knowledge and other resources. This is because it decreases the likelihood of opportunistic relationships and allows for greater fluidity in the sharing and combination of resources (De Clercq et al., 2013; Moran, 2005).

Entrepreneurship and international Entrepreneurship scholars have widely acknowledged the role of trust in promoting entrepreneurial activities. For example, De Carolis and Saparito (2005) and Clercq et al (2010) argued that trust is vital to acquire the more tacit and sensitive knowledge and competencies that positively influence a firm’s ability to identify and exploit entrepreneurial opportunities. There is a general agreement that a high level of social capital built on a good reputation, solid experience, and direct personal contacts often assists entrepreneurs in gaining access to confidential recourses necessary for the successful exploitation of entrepreneurial opportunities (Alarcon et al.,2014; Floyd and Lane, 2000; Harris and Wheeler, 2012). For example, Kreiser (2011) argued that firms within closed networks will be willing to share tacit information with their partners than other firms. Strong relationships tend to facilitate the development of group norms and shared expectations among members of the network, which facilitates the transfer of more complex knowledge among members (Coleman, 1988; Uzzi, 1997). Members of a closed network are also willing to expend the larger amounts of time and energy necessary to transfer complex information. The transfer of this high-quality of information makes it more likely for the recipients’ firms to develop new firm-specific combinations of knowledge (Simsek et al., 2003). Reciprocity and trust tend to develop within a closed network, which increases the motivation of the members to share tacit knowledge with one another (Clercq et al (2010). Trust encourages organizations to share high quality of information and more sensitive tacit information with one another (Tsai and Ghoshal, 1998; Moran, 2005). These arguments provide useful insight into the relationship between relational social capital and firms entrepreneurial orientation behavior. For example, organizations can promote their innovativeness behavior by combining high quality information and tacit knowledge regarding customer preferences and technological opportunities (Kreiser, 2011). Finally, firms are able to utilize complex information regarding the potential costs and profits associated with risk-taking strategies to internalize new knowledge related to market opportunities (McEvily and Chakravarthy,2002). Firms with closed networks are also able to learn from one another by integrating information regarding the successes and failures associated with particular risk-taking strategies (De Clercq and Sapienza, 2006).

Moreover, Moran (2005) stated that entrepreneurs in social networks with a high level of trust among members can to reduce entrepreneurial risks, specifically in those environments with high level of uncertainty such as international environment, as those confidential recourses enhances the willingness of entrepreneurs to implement risky actions and increases the scope of ideas about how to convert entrepreneurial opportunities into action. According to Carey et al. (2011) tacit and organization specific knowledge shared through trusted relationships can improve the aspect of innovation performance such as product and process design, and manufacturing flexibility. Examining a sample of 232 Canadian- based firms representing a broad range of industries, Clercq et al., (2009), found that the overall positive relationship between EO and performance becomes nuanced once the account for social exchange processes. In particular, the relationship is positive only at high levels of procedural justice, trust, and organizational commitment. Hence, the following hypothesis is proposed:

H3 -The relationship between entrepreneurial orientation (EO) and international performance of SMEs is moderated by relational social capital(trust); In particular, entrepreneurial orientation will be more strongly affects international performance of SMEs in firms with high level of relational (trust) social capital.

3.3.2.3 Moderating role of cognitive social capital between entrepreneurial orientation behaviour and international performance of SMEs relationship

Nahapiet and Ghoshal (1998) defined cognitive social capital as the bundle of resources providing shared representations, interpretations, and systems of meaning among parties. Moreover, it comprises the group’s shared vision and purpose, as well as its unique language, and deeply embedded narratives and culture (Pearson, Carr, and Shaw, 2008), which enables them to make sense of information and classify it into perceptual categories. Cognitive capital facilitates the development of common understandings and collective ideologies, outlining appropriate ways for partners to coordinate their exchange and share each other’s thinking processes (De Carolis and Saparito, 2006). In effective networks, actors have a shared vision about what the members should accomplish, what is valued or of interest, and what is required or expected from membership (Wollebaek and Selle, 2002).

A shared vision is viewed as individuals having similar values and expectations of behavior (Thorelli,1986). Performance outcomes generated through a shared vision across the members of the network include integrated strategies, more synchronized activities and more timely and meaningful dissemination of knowledge across network partners (Kandemir et al., 2006). Leana and Pil (2006) stated that as long as organizations interact as members of a group, they can form better sets of shared goals. Shared views and goals created values that facilitate the development of integrity and shared responsibility among actors. Further, social norms create openness, cooperation, and willingness to engage in information exchange between actors (Moran, 2005).

Shared language and codes that are the basis of efficient verbal exchanges and communicative linkages help actors exchange ideas, understand each other better, and more effectively share views and expectations (Turner, 2011). Narrative, organizational stories, and myths can also help the exchange of information by providing informality to interaction (Baron and Markman, 2000). Meaningful contexts of communication amongst actors coordinates motivation, enhances trust and develops cooperation in accordance with individual interpretive understanding (Nofsinger, 1991).

According to Lee and Jones (2006), communicative language not only transmit information it also influences the perception of meaning and reality in the relationships. Without a shared understanding, information exchange is costly and inefficient (Huang and Wang, 2013). Furthermore, good communication can reduce conflicts and enhance joint problem- solving. Mutual adjustment is possible if parties have the same understanding of their final goals and the procedures that are necessary to achieve the goal (Hsu and Hung, 2013). Tsai and Ghoshal (1998) asserted that individuals developing similar or shared languages, values, and practices might create opportunities to effectively communicate and exchange information by reducing misunderstanding and providing effective communication.

According to Cohen and Prusak (2001), the cognitive dimension plays an important role in enhancing knowledge transfer, promoting organizational learning, and developing norms and values. Shine (2010) asserted that the cognitive dimension captures the essence of the importance of truly sharing rich information with shared meanings across network actor.

Previous studies have widely acknowledged the role of cognitive social capital in fostering firm’s entrepreneurial activities. Krause et al. (2007) argued that cognitive relationships that characteristic with shared norms and goals give freedom to openly discuss the ideas, secure flow of high quality of information, provide solidarity in coping with the future, and create bold behaviour in trying a more innovative idea.

According to Dakhli and De Clercq (2004), a higher level of shared values and common culture is associated with higher levels of innovativeness. Firstly, specific aspects such as a shared vision can be regarded as a mechanism favouring knowledge integration between parties in a network, thus becoming a critical element in the innovation process. Secondly, the existence of common norms between firms facilitates ideas exchange between parties, Finally, when entrepreneurs share their creative ideas with their emotionally supportive relationships, it gives them a social comfort, thereby enabling them to accept open criticisms and true feedback, leading to an improvement of innovation performance. Thus, the higher the norms, goals, and a common culture, the higher will be the propensity of actors to interpret useful information and knowledge and therefore to innovate (Alarcon et al., 2017).

Moreover, shared understanding provide entrepreneurs firms with opportunities to access, learn and understand complex knowledge such as tacit knowledge which is learned through experience (Rosenberg, 1982). Frequent interactions help partners to develop heuristics that facilitate mutual understandings of complex problems and consequently ease the transfer of complex information. Thus, fully understanding the complex knowledge obtained from other partners particularly in terms of how others’ knowledge bases, in combination with their own, contribute to the development of innovative ideas, risky projects, or proactive entry into new markets (De Clercq et al., 2013; Tuan, 2017).

In addition, Engelen et al. (2016) stated that shared goals and visions among entrepreneurial firms ensure that such a firm’s network actors do not behave opportunistically, such as by using the firm’s innovative ideas to gain first-mover advantage. Thus, solidarity with network members allows small entrepreneurially oriented companies to discuss and enhance their innovative ideas with network members without worrying that the insights the network partner gains during the discussions will be misused.

De Clerq et al. (2013) explore how social capital can lead to an entrepreneurial orientation (EO) in a ﬁrm. Speciﬁcally, they examine how organizational social capital promotes internal knowledge sharing and a subsequent EO. They ﬁnd that higher levels of internal knowledge sharing relate to stronger EO and results from higher levels of trust and goal congruence. Alarcon et al (2017) examined how the three dimensions of social capital (structural, relational, and cognitive) affect entrepreneurial orientation through dynamic capabilities in 292 in Spanish agri-food industry, and the results indicated that cognitive social capital positively affects entrepreneurial orientation and in turn enhance firm’s performance. As shared norms, goals, culture among actors allow firm to access to valuable information and resources, and this improve firm’s EO behaviour by promoting practices that are focusing on creativity, tendency to be ahead of competitors by introducing novel ideas or products and favouring a greater risk taking projects. According to Harris and Wheeler (2012) relationships assured by common understanding, shared information, or shared values, enables small international enterprises to acquire critical knowledge about foreign market trends, competition and the new technological development, which in turn, enable them to recognize and exploit emerging opportunities ahead of their rivals. From these arguments, the following hypothesis is proposed:

H4 -The relationship between entrepreneurial orientation (EO) and international performance of SMEs is moderated by cognitive social capital; In particular, entrepreneurial orientation will be more strongly affects international performance of SMEs in firms with high level of cognitive social capital

3.4 Conclusion

This chapter presents a discussion of the study’s conceptual model and hypotheses development. Accordingly, a framework relating to the relationship between entrepreneurial orientation and international performance of SMEs and moderators of the EO – international performance relationship has been introduced. In drawing on the RBV, the model argues that EO is an intangible internal organizational resource that SMEs use to generate a superior competitive advantage in their international markets, and ultimately EO is argued to be a major determinant of international performance of SMEs. Fundamentally, EO might be predicted international performance positively, however, SMEs might be unable to maximize the benefit from EO due to their resources constraints. From the social capital theory, small firms can use their network relationships to acquire required resources to promote their entrepreneurial orientation, and in turn, enhance their performance in foreign markets. Drawing on the social capital theory, social capital is modeled as a key contingency that might moderate the relationship.

Chapter 4: Research Methodology

4.1 Introduction

In this chapter, research design is described which works for the collection of the data for the study. According to Janesick (2014), research design is very essential because it considers the evidence which is collected for testing the theory. It is essential to develop the research plan for achieving the objectives of the research and the testing the hypothesis. Accordingly, this chapter is divided into eight sections for addressing the issues of research design. The first section describes the philosophy of the research. The second section describes the research strategy and the research design for conducting the study. The research population and the selection of the sample are explained in the third section. In section four, the questionnaire design procedures are presented. The way of distributing the questionnaire is explained in section five. Section six presents the method of assessing response bias. The way of checking internal consistency (Cronbach alpha) of the scale is presented in section seven. In the eight section, the way of analyzing quantitative data is presented. The qualitative approach is presented in section nine. Section ten describes the sample techniques of the qualitative approach. Then, the data collection by interview is presented in section eleven. In the last section, the ethical consideration of the research is presented.

4.2 Research Philosophy

Research is guided by an underlying research philosophy. Understanding this research philosophy is important because it determines the perspective that the researcher adopts towards the nature of reality, the role of knowledge, the way that knowledge can be gathered through the research process, the manner in which such knowledge can be analysed, and how the value of such knowledge is assessed (Thietart, 2001). Hirschman (2016) stated that a philosophy is a part of belief and it guides the scientist in a particular direction which influences that what is to be studied, how to do the research and how the results of the research are to be interpreted. Broadly, there are two main research philosophies have used widely in social science research; Positivism and Interpretivism (Galliers, 1991).

The first research philosophy is positivist philosophy. Crossan (2013)describes that the aim of positivist philosophy is to discover the laws of universe which can be utilized for predicting the activities of human. It focuses on discovering observable and measurable facts and regularities, and only phenomena that you can be observed and measured would lead to the production of credible and meaningful data (Crotty 1998).

With the science view, this philosophy is focused on the value free objective; it is linked frequently with the quantitative methods that trust the ability of the researcher for gathering the numerical evidence for the procedure under investigation and for analyzing the research question answer. In positivist approach, deductive method is most commonly used. Deductive reasoning starts with the underlying theory with the hypothesis of the research and also utilizes the empirical evidence for testing the hypothesis (Saunders,2009).

The second philosophy is interpretivism. Webb (2009) examines that this philosophy states that behavior of humans cannot be studied in a similar way as the phenomena of non-human and concentrates on the view that the world is constructed in a social and subjective manner. This philosophy is normally related with qualitative methods, such as observations and interviews- for exploring the phenomena in social terms, for example, attitude of respondents, experiences and behaviours. However, the consequences of this method are dependent on the skills of the researcher and deep knowledge for acquisition and the procedure of non-quantitative information. This philosophy is emphasized on the inductive reasoning method which uses the measures in subjective form for developing the hypothesis. This approach is concentrated on the actual meaning and not the occurrence of the phenomena in social terms.

The present study is focused on the positivism philosophy. As the study focus on quantitative methods with statistical techniques of data analysis, with the aim of supporting or not supporting a number of research hypotheses that are set.

4.3 Research Strategy and Design

Research design can be described as the framework for collecting the data and analysing it for answering the research questions. The nature of research questions is very important for the selection of the appropriate method for conducting the study. Basically, there are two types of research strategies- quantitative and qualitative- that is directed towards the accurate methods of research or the tools that are used for gathering and analysing the data. The main research strategy for current study is the quantitative approach. In addition, it applied a qualitative approach to explain in depth the results of the quantitative findings. In this section, the research design of this study and its underlying rationales are described and justified.

4.3.1 Quantitative approach

In order to address the research questions, a quantitative approach was adopted as the main design for this study. The choice of the design reflects the study interests and objectives pursued. More specifically, the main objective of this study is to test the hypothetical effects of entrepreneurial orientation on international performance of SMEs in Oman, and the moderating role of social capital. Understanding the correlations between these variables will assist the researcher in determining the degree of the relationship between them. Therefore, the main purpose of the study is to detect patterns of association and magnitude of effects (Bryman, 2004) between explained and explanatory variables. A survey design collecting many more than one case should be most appropriate to examine hypothetical relations. Quantitative research is widely relied upon within international business research and strategic management literature (Cuervo-Cazurra and Genc, 2008), and is often used to describe and identify the relationships between variables. Quantitative research is suitable when the researcher needs to answer factual questions such as ‘what?’ (Kolb, 2008). Moreover, this study attempts to measure the studied phenomenon and its potentially explanatory variables, and to some extent, to generalise the findings (Aken, 2005). A quantitative approach based on statistical theory is more suitable to achieve the objective of the study because it has the ability to give objective and valid information in statistical terms on the basis of quantified measures. In addition, due to the limited time and budget, this study would not intend to address the phenomenon over time, rather than collect data at a specific point of time. A survey design can satisfy this rationale of the study. A major criticism of the survey design is the lack of contextual and historical information on the phenomenon of interest. A supplemental qualitative approach in this study may remedy this potential limitation by providing richer information and better explanations (Yin, 2003).

4.3.1.1 Research population and sample selection of quantitative approach

Before determining the research sample for the quantitative section, it is important briefly to outline the study population, from which the researcher has chosen the sample. According to Cooper and Schindler (2011, p.167), a population is defined simply as “the total collection of elements about which we wish to make some inferences”.

Whilst it is impossible to obtain a sample that reflects the population entirely accurately, a good sample is able to represent the characteristics of the real population (Cooper and Schindler, 2011). There are many factors, which go into choosing an accurate research sample (Cooper and Schindler, 2011, p.168), which include cost issues, greater accuracy of results, greater speed of data collection, and availability of population elements.

According to Cooper and Schindler (2011), there are two types of sampling methods. The first is probability sampling, which uses a random selection of the research sample. Each participant therefore has the same chance of participating in the research. The second is non-probability sampling, which uses non-random selection methods.

The existing literature on the sample design process spells out the core steps which should be taken when addressing sampling issues. In deciding the population and sampling for this study, these guidelines (shown in Figure 1 below) were followed. The population for this study includes all international SMEs listed in The Public Authority of SMEs in Oman and operate in manufacturing sector.

After defining the target population, the researcher determined the sample frame (Cooper and Schindler, 2011). In this study, probability sampling is used because it is scientific in nature and gives more accurate data as every unit has equal chance of selection. In addition, it is sufficient to meet the research objectives outlined in the previous chapters.

Different perspectives are emerging to determine the correct sample size for a quantitative survey design. Scholars can use a variety of techniques and guidelines when applying regression and factor analysis. For example, Bartlett et al (2011) recommended that for applying multiple regression and factor analysis the ration of observations to independent variables should not be less than five. Coakes et al (2010) also stated that a minimum sample of five cases for each variable is required. As the sample size influence the quality and accuracy and generalisability of results, they recommended that sample size should not be less than 100 to represent the population (Bartlett et al., 2011 and Hair et al., 2010).

Considering above guidelines and based on the probability sampling technique, questionnaire has been distributed randomly to 1,425 international SMEs, which are registered in the Public Authority of SMEs and the Ministry of Commerce and Industry in Oman by face to face and by email. Three hundred and seventeen usable questionnaires out of 1,425 have been returned and answered. This represents approximately 22% of the total population.

4.3.1.1.1 Choice of international SMEs

This study used the firm as unit of analysis, as entrepreneurial orientation behaviour and its dimensions operate at firm level. Covin and Slevin, (1991) posited that EO is considered as a behavioural phenomenon at firm –level. As this research aims to examine the effect of entrepreneurial orientation in the international performance of Omani SMEs, firms were selected for the study should meet specific criteria. Firstly, since Omani companies are subject of this study, all enterprises should have possessed by Omani people. For that reason, seven cases which owned by foreigners were excluded from the study. Secondly, they should be independent enterprises, so they should not be subsidiaries of other firms. Thirdly, all organizations including in the current research should operate in the manufacturing sector. Hence, 11 cases were ruled out as they operate in service sector. Fourthly, they should meet the definition of SMEs in Oman. Definition of SMEs is varying from one country to another with regard to different criteria include number of employees, market size, turnover, market position, profits, total capital and so forth which each country considers for an enterprise to be either perceived as micro-enterprise, small or medium (Zavatta 2008). Each country define SMEs based on its economic characteristics and development in order to design programs to support these firms. For example, The American Small Business Administration defined SMEs as the firms with fewer than 500 employees (U.S. International Trade Commsion, 2010). In construct, the Europe Union defines SMEs as the enterprises with 250 employees or less (OECD, 2005).

In Oman, the Ministry of Commerce and Industry (MoCI) and the Central Bank have revised the definition of small and medium enterprises (SMEs) in an effort to improve the flow of credit and provide more efficient training and guidance to SMEs. The new definition, which is based on the number of employees and the annual sales turnover of businesses, also includes a category for micro-sized enterprises. According to the circular, micro-enterprises are establishments with less than five workers and annual sales of less than RO25,000, small-enterprises are establishments with five to nine workers and annual sales of RO25,000 to RO250,000, while medium-sized entities are companies employing between 10-99 workers and with annual sales of RO250,000 to RO1.5mn.(see table 1). Under the previous definition, the number of employees was the only criteria used to define a company as a small or medium enterprise. (Ministry of Commerce and Industry 2012).

Table 4-1: Definition of SMEs in Oman

The type of enterprise	No. of employees	Annual turnover
Micro enterprise	<5	<25,000 OMR*
Small enterprise	5-9	25,000-250,000 OMR
Medium enterprise	10-99	More than 250,000-1.5mn OMR

*1 OMR = £1.93

The number of employees is the most acceptable criteria to define SMEs by many researchers and policy makers, as it is objective and easier to obtain than financial measurements, especially in developing countries where there is no update on financial data about SMEs. Similarly, this study define SMEs based on the number of full time employees and because this study is limited to Omani SMEs only, the official definition of The Ministry of Commerce and Industry (2012) in Oman is adopted. Micro business that employee less than 5 employees and large firms with more than 100 persons were excluded from the study as both their strategic behaviour in foreign markets are differ than SMEs. Based on that, eight cases are excluded (two micro enterprises and six large firms). Finally, the firms included in this study should have a significant international operation in that they should have a minimum of three years’ sale activities overseas.

To conclude, the respondents of the current study were made up of Omani small and medium enterprises; employ between 10 and 100 employees; are located in Muscat; are independent firms; they have significant international activities abroad; and operate in manufacturing sector.

4.3.1.1.2 Choice of respondents: owners/managers of SMEs

The owners and managers have been chosen to be the respondents of the current study because they are most likely to be knowledgeable about the firm international activities and therefore should be able to provide accurate information on the key constructs of interest to the current study. This consent with previous entrepreneurship and international business studies which have used different respondents including owners, Chief Executive Officers (henceforth CEOs), managing directors, sale managers, and marketing mangers (Zahra and Covin, 1995; Covin et al., 2006; Wang, 2008; Zahra and Garvis, 2000; Knight and Kim, 2009). They argued that because the key managers are more involved in their organizations and are able to provide accurate and reliable information about their firms’ activities and performance.

4.3.1.2 Data collection by questionnaire

The questionnaire is one of the most widely used data collection techniques within the survey strategy. It provides an efficient way of collecting responses from a large sample on the same issue (Jankowicz, 2000).

The reason for choosing questionnaire for conducting this research is because it is one of the popular means of collecting data. In addition, it is the best method to know people’s opinions and their attitudes towards specific phenomenon. Moreover, questionnaire can be posted, emailed, faxed or distributed by hand. Also, it can cover a large number of people or organizations. It is very cheap compare to other methods such as, the observation. It can avoid the embarrassment on the part of the respondent and respondent can consider responses (Iftikhar, 2007).However, many authors such as Bell, (2005) and Saunders et al, (2003) argue that it is not easy to produce a good questionnaire. The researcher needs to ensure that it will collect the precise data that is require to answer the research questions and objectives.

Questionnaire designed based on a review of previous literature and included simple questions to help respondents to understand the meaning of the questions (McDaniel and Gates, 1999). The figure below presents the specific procedures for questionnaire design which are followed for designing the questionnaire in the present study. The questionnaire development and the kind of information required in the questionnaire have the reflection of the conceptualizations and hypothesis of the study

For developing the questionnaire for the present study, the existing literature was reviewed to locate suitable scales to measure the key constructs of interest. In addition, nine face-to-face interviews were conducted with some academic experts, managers of SMEs, and some responsible people of SMEs in some government organizations in Oman to check what is suitable for Oman context and culture.

4.3.1.3 Variables

The dependent, independent, control variables for this study are fully explained within the following subsections. All variables measurements were developed from the extent literature and all items were measured on a 5 Likert scale ranging from 1 ‘‘ strongly disagree’’ to 5 ‘‘strongly agree’’. All items can be found in Appendix A.

4.3.1.3.1 Dependent variable (International performance)

In order meaningfully to discuss the dependent variables in the present study, it is first important to understand how businesses measure their organizational performance, and what the views of various academics have been when examining the different tools available for this purpose. Bourne et al. (2003, p.4) define a business performance measurement system as “the use of a multi-dimensional set of performance measures for the planning and management of business”. In traditional research, which is based largely around Western company’s performance has been classified by Ali (2011) and Ferreira and Otley (2009) into two types. These are economic performance measures (otherwise known as financial measures) and non-economic performance measures (otherwise known as non-financial measures). Economic performance measures include aspects such as return on investment (ROI), profit, market share, sales volume, revenues, and overall financial position. They tend to involve the use of objective and specific data, in order to measure organizational performance. In contrast, non- economic measures may include issues such as customer satisfaction and customer loyalty. Ali (2011) argues that there are many types of measures which can be used to determine organizational performance, and that no particular measure can describe all characteristics of firm’s performance as the concept of firm’s performance itself is a complex construct, and the literature offers no solid consensus on the appropriate measures (Wiklund,1999). For this reason, prior scholars use a variety of different indicators to analyse organizational performance.

The literature suggests that objective or subjective measures could be used to assess international performance of small firms. According to Richard et al. (2009), both approaches have some advantages and disadvantages. Rauch et al. (2009) noted that performance is regularly measured in one or a combination of the following means: perceived financial, perceived non-financial and archival financial. Several studies in entrepreneurship field (Lumpkin and Dess, 2001; Wiklund and Shepherd, 2003; Kraus et al., 2012; Messersmith and Wales, 2013) and in international business field (Morgan et al., 2004; Boso, 2010; Thanos et al., 2016; Charoensukmongkol, 2016) have used perceived performance indicators to assess firm performance. The items that were used to measure the performance indicator typically based on manager’s subjective views about firm’s profitability, growth, market share, in relative to its most important competitors. There are many reasons for the use of perceived performance measures. Firstly, the lack of publicly available archival performance data on SMEs and the problem of objective sources containing data that are not updated especially in developing countries (Kraus et al., 2012). Secondly, although objective measures can be reliable indicators of performance, their operationalization can have some problems such as the difficulty to distinguish between domestic and international business outcomes in reported data since few firms are publicly report their international performance separately from overall performance, and concerns about comparability of financial data (differences in internal accounting practices) (Katsikeas et al., 2000). Thirdly, the fear of losing respondents if such accurate performance figures are requested in questionnaires as privately owned firms are often reluctant to disclose such financial information (Messersmith and Wales, 2013). Moreover, previous studies have reported a high correlation between subjective and objective measures. For example, Morgan et al. (2004) examined antecedents of export ventures performance in 278 export companies, the results revealed a high correlation between objective and subjective measure. These results are confirmed by the meta-analysisof Rauch et al. (2009), where no difference in the EO-performance relationship with perceived financial performance, perceived non-financial performance or archival financial performance was found.

Therefore, the subjective measures of financial performance is used in this study asked owners or key mangers to assess the performance of their firm relative to their firm’s principal competitor over the past three years on the following financial performance measures: return on investment, return on assets, profitability, market share, sale growth, and general performance. This practice follows previous studies that reported adequate reliability estimates for very similar scales of performance (Charoensukmongkol, 2016; Morgan, et al., Moen et al., 2008; Nummela et al., 2004; and Jantunen et al., 2005).

In addition, this study used the percentage of annual sale generated from international activities to measure international performance. The firms were asked to indicate the percentage of annual sales that was accounted for by international sales (Knight 2001). This measure, therefore, helped to establish whether international operation was a major aspect of the firm’s business activity. The significant correlation between the subjective measure and it was 0.48, attested to the close association between subjective performance measures and the percentage of annual sales generated from international activities.

Moreover, Katsikeas et al. (2000) argued that subjective primary performance measures are often subject to method bias and this bias can be removed by; (a) determining background differences between responding and non- responding firms using published data (geographic location, industry group, and company size); (b) contrasting assessments by different managers in the same organization; and (c) comparing firm executives performance evaluations to those of industry experts and whenever possible to direct competitors in export markets. Thus, this study drew on previous studies (Luo et al., 2007; Boso, 2010) and distributed the questionnaire to a sub- sample of 127 (other respondents from the same firms that involved in the sample). The additional performance data was subsequently compared with those provided by the managers in the main study survey and no substantial differences were found between the two sources of performance data.

4.3.1.3.2 Independent variables

4.3.1.3.2.1 Entrepreneurial orientation

The entrepreneurial orientation scale operationalised in this study is based upon the work of Covin and Slevin (1989). The scale has been empirically tested in numerous studies throughout literature (refer to the chapter two of literature review) and has more recently been used by many scholars in entrepreneurship and international business studies. The scale includes the three dimensions of EO discussed before: innovativeness, risk-taking and proactiveness, and consists of nine items measuring research and development (RandD) leadership, new product lines, product change, competitive actions, new techniques, competitive posture, risk-taking proclivity, environmental boldness, and decision-making styles related to international markets. The response format requires that the respondent select a response among a Likert scale ranging from 1 to 5, where 1 indicates that the respondent strongly disagrees with the anchored statement, and a 5indicates that the respondent strongly agrees with the anchored statement.

Many scholars have tested the applicability of the entrepreneurial orientation scale of Covin and Slevin (1989) to measure the level of entrepreneurship in firms abroad (Knight, 1997; Kemelgor, 2002; Kreiser et al., 2002; Tang et al., 2009; Engelen et al., 2015; Semrau , Ambos, and Krous, 2016). For example, Knight (1997) tested the measurement properties of the scale using samples of English and French speaking managers in 258 Canadian SMEs. The results revealed that the scale performs well in terms of both reliability and validity and possesses a unique factor structure, this implies that the scale is suitable for measuring the entrepreneurship construct abroad. In addition Semrau , Ambos, and Krous, (2016) applied Covin and Slevin (1989) scale and examined the effect of EO in 1248 SMEs from seven national contexts, the results indicated that EO positively affect firms performance in all countries, and based on this result, they argued that EO concept is universally applicable and can apply in different national context. Accordingly, several scholars have applied the scale when conducted research in international business field (Jantunen et al., 2005; Freeman and Cavusgil, 2007; Knight, 2011; Brouthers et al., 2014; Thanos et al., 2016).

4.3.1.3.2.2 Social capital

Social capital was measured using survey items based on Nahapiet and Ghoshal(1998) three dimensions (structural- relational - cognitive). The scale has widely applied in entrepreneurship and international business research (Wu, 2008; Vila, 2012; Zhou et al., 2007; Harris and Wheeler, 2012).

The structural dimension encompasses the properties of the network including personal linkages and the overall pattern of connections. This aspect of social capital has been described as “who you reach and how you reach them” (Nahapiet and Ghoshal, 1998). The structure of social capital is operationalized as network ties describe the pattern of the relationships between the focal firm and its key stakeholders. It was measured using 6 items developed from the literature and are very much in line with the measures used in Park and Luo (2001) and Wu (2008).

The relational dimension of social capital is associated with the qualities of relationships among actors which are mainly derived from a long history of connections (Nahapiet and Ghoshal,1998). According to De Clercq et al. (2010) , trust pertain to functional managers’ beliefs and expectations about others’ good intentions, reliability and predictability, and positive motives in situations entailing risk and vulnerability. In this study, interpersonal trust between SMEs mangers and their partners was conceptualized as an indicator of the construct of the relational social capital. It was measured by five items adopted from Yli-Penko et al (2001), and Wu, (2008), and De Clercq et al. (2010) and assessed some aspects of trust among managers and their partners such as promises, honest, truthful, and opportunistically behaviour.

The cognitive dimension of social capital refers to resources within the network that are influenced by shared values, mission, culture, interpretations, and systems of meaning between social actors that are developed over time (Nahapiet and Ghoshal, 1998; Tsai and Ghoshal, 1998). The cognitive dimension, an essential component of social capital, provides effective communication between individuals and facilitates information sharing (Bolino, Turnley, and Bloodgood, 2000; Tsai and Ghoshal, 1998). The cognitive dimension is operationalized using five measured the perception of cognitive social capital by assessing the extent to which SMEs managers and owners shared the same visions, missions, ambitions, easily communicate with each other, and have the same understanding of organizational goal. All items were adopted from Carr et al. (2011) and Krause et al. (2007) and measured using a 5-point Likert-type scale ranging from 1 = strongly disagree to 5 = strongly agree.

4.3.1.3.3 Control variables

Consent with previous studies of entrepreneurship (Zahra and Garvis 2000; Lumpkin and Dess, 2001;Wiklund and Shepherd, 2005; Stam and Elfring, 2008)and international business (Zahra,2003; Kreise et al., 2013; Dimitratos et al., 2004; Thanos et al., 2016) and to account for alternative explanations for variations in the firm’s international performance, this study control firm size, firm age, international experience, industry type, and environment dynamism, as they can affect the resource base of the firm and firm behaviour (Kraus et al 2012).

4.3.1.3.3.1 Firm size

Size of the firm can influence its international growth and performance (Dimitratos et al., 2004) as size can be considered as proxy for a firm’s specific resources (Audia and Greve, 2006; Wu, 2008). The larger firms might possess the resources needed to intensively internationalize their operations and enter multiple countries and had higher income from international activities (Zahra,2003).The natural log of full-time employees served as the measure of firm size, following previous studies (Clercq et al 2013; Wales et al., 2015).

4.3.1.3.3.2 Firm age

Established firms may possess greater resource and experience essential for international success compared with news firms (De Clercq et al, 2010). In addition, according to Zahra (2003), older companies are more likely to obtain information about foreignmarkets and build the infrastructure needed for internationalisation. Therefore, firm age was included as a control variable. Firm’s age is captured by the (logarithm) of the number ofyears in operation ((Zahra,2003; Thanos et al, 2016).

4.3.1.3.3.3 International experience

International experience measured through the (logarithm) of the number of years that the firm has been active internationally, since this could affect firm internationalisation outcomes (Deligianni et al, 2016; Thanos et al., 2016).

4.3.1.3.3.4 Industry

The study also controlled for the firm’s industry type. The companies in the sample operated under eleven industries according to classification of The Public Authority of SMEs and The Ministry of industry. Six dummy variables were created for the eleven different industries. Each industry dummy variable was given a value of 1 if the ﬁrm was operating in that industry and a value of zero (0) if the ﬁrm was in another industry.

4.3.1.3.3.5 Environment dynamism

Environmental dynamism was included as a control variable since dynamic environments can stimuli EO behaviour and, in turn, affect the firm performance (Miles et al., 2000). It was measured using a five-items, measuring the rate of product obsolescence, the predictability of competitor’s actions, the predictability of demand and consumer needs, and the rate of technological change within the industry, as well as the change in marketing practices (Khandwalla, 1977; Miller and Friesen, 1982).

4.3.1.4 Design of the questionnaire

The physical characteristics of the questionnaire are significant for the effect of the respondents. The respondents should be willing to participate in the study and they should be cooperative. A bad questionnaire can result the respondents for assuming that the research is not important and may lead to low responses. Therefore, it is essential for ensuring that the questionnaire is presentable in physical form and should be delivered in a professional manner (Salant and Dillman, 1994).

In addition, a short questionnaire may be suitable for high response rate rather long questionnaire which may be a burden for the respondents. Long questionnaire may consume more time of respondents and they may not be interested to fill such a long questionnaire. Moreover, the researchers must have a length of the questionnaire which has the capacity of demonstrating the acceptable reliability. The reliability of the questionnaire may be reduced if it is shorter in length but can have more response rate (DeVellis, 2003).

Furthermore, for undertaking the statistical analysis in advanced form the researchers require that most of their questionnaires are returned in complete form. Consequently, it is recommended that researchers must optimize the questionnaire length with the help of making a trade-off with the high reliability and low rate of response (DeVellis, 2003; Foddy,1994).

In the present study, for determining the format of the questionnaire in physical form, the paper used was of good quality and was printed clearly. Further, a covering letter was accompanied with the questionnaire explained the aim and the importance of the research. It also illustrated that the respondents’ firms have randomly chosen and their participation in the project is completely voluntary and their replies would remain anonymous. It also emphasis the importance of their participation for the completion of the research. The benefit of including the covering letter in the questionnaire was that to increase the reliability of the study and gave a professional look to the questionnaire.

Furthermore, the length of the questionnaire was considered, the cost of data collection and the comprehensiveness of the required information were considered. On this note, initially, a questionnaire of 7 pages was formed as it ensures the collected information was comprehensive. Additionally, to these precautionary measures, the questions were properly numbered and spaced consistently. With this, the clarity of the questionnaire was increased and also credibility of study for the participants and these in turn will increased the response rate.

4.3.1.5 Experts’ judgment on the questionnaire

Face validity is considered an essential research assessment activity (Hair et al., 2006).Assessment of face validity is crucial when the questionnaire items are taken from the literature. Moreover, it is essential if there is a development of the new measure and the measures that are existing are adapted for the new contexts. Kothari (2014) says that whenever the face validity is established, the scale contents should be important and they should be presentable for the theoretical construction. Thus, face validity means the degree of the scale’s items presents a sample in a proper manner of the content domain in theoretical form of the construct (Nunnally and Bernstein 1994). That is, face validity is the reflection of to what extent the scale reflects what it is intended to measure.

Since there is no formal tactical test for face validity, it can be acquired by the judgment of the experts on the items of the scale. The face validity was addressed in the current study as all the measurements of the constructs are derived from relevant literature. All items of the constructs were reviewed by (4) academic experts in the international business and entrepreneurship, and (1) expert in questionnaire design. The experts suggested for amending the item in EO section, which measured proactiveness as the phrase of “competitive aggressiveness” is not suitable for Oman context and culture. They also suggested for deleting some items under the dimension of relational social capital as some of them measure the same things. In addition, the two principal research advisors (supervisors) in this study continuously commented on the scale items until an agreement was reached on their face validity.

4.3.1.6 Translation of the questionnaire

Because the respondents of the study have different languages, the questionnaire has translated from their original English version to Arabic using the forward and backward translation approach suggested by Brislin (1980) in order, to enable comparison between the two versions. This will help others to check or verify the research instrument, and to ascertain if there were any differences in the meaning among the two versions (Su and Parham, 2002; Gibson, et al., 2003; Manee and Dixon, 2004). In addition, the Arabic version reviewed by two experts; one expert whose native language is Arabic and a professional translator for reviewing the translations, and another academic expert in international business to check the meaning.

4.3.1.7 Pre testing

A pre-test was conducted before the main questionnaire was conducted, in order to ensure the clarity of the questions, and to minimize any potential cultural biases (Su and Parham, 2002).A pre-testing step was very useful for the researcher, because it enabled him to find out if there were any unclear questions or instructions, to proofread the questions, and to measure the time required to complete the questionnaire.

In this study, the researcher pre-tested the questionnaire with 15 international SMEs. This pilot research was conducted in the same manner, so that the final questionnaire would be taken shapely. It had been found that some respondents keep asking about some academic constructs used in the questionnaire such as entrepreneurial orientation, social capital and its dimensions, and environment dynamism. In addition, some questions in the social capital section and entrepreneurial orientation were not answered by tow respondents. The researcher contacted them by telephone to ask if they intentionally didn’t answer them or they didn’t understand them. They replied that intentionally didn’t answered them. Consequently, the researcher deleted all the academic terms from the questionnaire to ensure that every thing clear and to avoid the misunderstanding for the questions.

4.3.1.8 Distribution of the questionnaire

After reviewed and pre- tested the questionnaires, it is distributed to 1,425 international SMEs listed in the Public Authority of SMEs and the Ministry of Commerce and Trade in Oman through face to face interview and through email. After, obtaining the list of international SMEs, all companies have visited and called to invite to participate in the study and to make sure that all firms meet research sample criteria.

The researcher distributed the questionnaire by email for the companies that have update email address and contact details and regularly access their email. Otherwise, the questionnaire has distributed face to face to the majority of companies. The researcher hired two other researchers to get help in distributing and collecting the questionnaire. After two weeks of distributing the questionnaire (first wave), 362 questionnaires have been received; only 168 of them are usable. After, two weeks a reminder has sent to the other companies (second wave) and 207 questionnaires have received; only 149 of them are usable. Accordingly, the total number of usable questionnaire have received were 317. Some questionnaires were unusable because they didn’t meet sample criteria as mentioned earlier, some of them contained missing values, and other returned empty.

4.3.1.9 Response bias assessment

In academic research, generalisability is the main concern, and similarly, there are huge concerns for the extension of which the data, which is used in the research project, reflects a broad population and includes the possibility for non-response bias. Non-response bias comes when the responses are failed (or observed) is not proportionate across the groups (Paulhus, 2011).

To ensure that the sample of responses obtained was representative of the population, non-response bias was examined through a comparison of early and late waves of returned surveys (Armstrong and Overton, 1977). The late respondents can be described as the respondents who filled the questionnaire after reminding them after fifteen days after distributed the questionnaire. Early respondents were considered those who responded within fifteen days of the study. Responses between early and late respondents were compared using two tailed t-statistics across all the variables included in the survey (p<.10). No statistically significant differences among the variables were identified, suggesting that non-response may not be a concern in this study.

In addition, the researcher has conducted t-test to compared between the responses of the questionnaires have distributed by face to face and the responses of the questionnaires have distributed by email across all the variables, the result was (p<.10) indicted also that there is no statistically significant differences.

In addition, to reduce individual bias, the questionnaire has distributed to a sub- sample of 127 firms (approximately 40 %) followed the procedures of Elbanna and Child (2007). Testing the level of agreement between respondents within the same organization helps to verify the validity of the data and minimizes concerns related to common method bias (Grimmer et al., 2013). Subsequent tests showed no statistically significant differences. These results indicate that the responses are not influenced by the views of the managers and owners participating in the study. The respondents also motivated to provide accurate responses by reassuring them that their responses would be strictly confidential and offering them a summary of the main results of the study. It was made explicit that no firm would be named in any publications that would follow from the analysis of the collected data.

4.3.1.10 Check internal consistency (Cronbach alpha)

Cronbach alpha is the indicators’ inter-correlation, which gives the estimation of the reliability of the indicators, which are used. It is used to know the reliability of the data. It should be more than 0.7 for the reliability and hence, the data is assumed to be reliable. In the present study, Cronbach alpha is used for all the items- entrepreneurial orientation, social capital (relational, structural and cognitive social capital), environment dynamism and international performance as presented in below table.

Table 4-2: Internal Consistency of Reliabilities

	The Variable	The Number of items	Cronbach alpha
1.	Entrepreneurial orientation	9 items	.874
2.	Structural Social Capital	6	.914
3.	Relational Social Capital	5	.808
4.	Cognitive Social Capital	5	.943
5.	Environment Dynamism	5	.768
6.	International Performance	5	.799

As can be seen from the table, all values of Cronbach’s alpha were found to be higher than 0.7, which reflects a good degree of internal consistency. The value of ‘entrepreneurial orientation’ was 0.874; the value of ‘structural social capital’ was 0.914; the value of ‘relational social capital was 0.808; the value of cognitive social capital was 0.943; the value of ‘environment dynamism’ was 0.768; and the value of ‘ international performance ‘ was 0.799.

4.3.1.11. Data analysis of quantitative method

For analyzing the data, hierarchical moderated regression analysis was used to test the following hypotheses as the same procedures as in Stam and Elfring (2008) and Wiklund and Shepherd (2005). Instep 1,the control variables were entered so as to partial out their effects from the hypothesized relationships of the study. In step 2, the main effects of entrepreneurial orientation, and social capital are entered. In step 3, the two-way interactions (contingency tests) between entrepreneurial orientation and structural social capital was entered. In step 4, the two-way interactions (contingency tests) between entrepreneurial orientation and relational social capital was entered. Finally, in step5, the two-way interactions (contingency tests) between entrepreneurial orientation and cognitive social capital was entered.

4.3.2 Qualitative approach

Qualitative research is a strategy, which usually emphasizes words rather than quantification within the collection and analysis of data (Eisenhardt, 1989). Qualitative data are useful for understanding the rationale or theory which underlies the relationships revealed in quantitative data. It may also directly suggest a theory which can then be strengthened by quantitative support (Jick, 1979, cited in Creswell and Plano-Clark, 2007). Hesses-Biber and Leavy (2004) note that qualitative research can provide scholars with a broad range of choices. Such a method allows a researcher to ask many questions, obtain detailed answers, and develop relevant theories. Cavana et al. (2001) state that qualitative research is recommended where the researcher is seeking to understand a complex social phenomenon (see also Seaman, 1999; Ghaouri, 2004; McGaughey, 2004; Tihanyi et al., 2005). As noted by many researchers, qualitative methods are suitable for exploratory research (Jarratt, 1996; Darlington and Scott 2002; Yin, 2003), and also for research which seeks to answer ‘how’ and ‘why’ questions (Ghauri, 2004).

Qualitative research places a significant emphasis on the capture of in-depth understandings of interactive processes (Wainwright, 1997; Cooper and Schindler, 2011). This type of research can also improve the efficiency of quantitative research (McDaniel and Gates, 1998). However, the qualitative research has some criticisms. Firstly, being the main instrument for collection of the data, as a researcher, the research findings may be considered as subjective. Secondly, the selection of the sample is not taken with the help of any statistical technique. In other terms, it can be said that the sample do not takes into account the representativeness of the population. As a result, it is very tough for claiming that there is generalization of the findings (Hair et al. , 2006).

There are several strategies for qualitative data collection within the social sciences. Four of the main classifications are observation, audio-visual materials, the use of documents, and interviews (Creswell, 2009). Interviews are, without doubt, the most used qualitative method in social science (Hollway and Jefferson, 2000).

In the current study, when initial data analysis of the survey was completed, in order to further interpret the phenomenon of interest, a supplementary semi- structured interview was employed. As the purpose of the qualitative approach is to provide a deeper understanding of the moderating role of social capital in the relationship between EO and international performance of SMEs, with more focus on the negative moderating role of structural social capital.

4.3.2.1 Sample selection for the qualitative section

When making a decision about a research sample, a researcher must first know the answer to three main questions (Daymon and Holloway, 2010). Firstly, a decision must be made as to where to sample, which refers to the macro-level of the study. Secondly, a decision must be made about what to sample, including time, events, issues and so on. Thirdly, a decision must be made about whom to sample, which refers to the micro-level of the study.

As has been mentioned in a previous section, any sample is selected on a probability basis (probability sampling or non-probability sampling). In probability sampling, each member of the sample has the same chance to be chosen for the research sample. In essence, this method is based on random selection. In contrast, non-probability sampling is non-random. Each member of the population does not have the same chance to participate in the research sample.

This study will use a non-probability sampling technique (Cooper and Schindler, 2011) , more specifically it employed a convenience sampling, which is often considered to be the easiest variant to conduct, and tends to incur less cost (Bryman and Bell, 2007; Ellison et al., 2009; Anderson et al., 2009). Using this method, the researcher is free to choose anybody for his sample (Cooper and Schindler, 2006). In other words, the researcher simply uses those participants who are easy to reach (Gravetter and Forzano, 2012). Because the interview has conducted by the telephone, the researcher chose the managers who personally know them, to reach them easily and quickly to make sure that they will respond on time.

The qualitative method sample in the present study included interviews with thirteen managers and owners of SMEs (see table 3). The researcher followed pre-determined criteria when SMEs were selected for participation in a semi-structured interview. These were:

A) The companies should be among the sample firms in the survey/

(B) The companies should represent different size (small and medium).

(D) The companies should represent different manufacturing sectors.

Table 4-3: Interview Participants

Participants	Occupation	Sectors	Size	International Experience
1	Owner	Textiles and Garments	Small	Over 5 years
2	Sales Managers	Food and Beverages	Small	7 years
3	Owner	Perfumes	Small	9 years
4	Owner	Jewelleries	Small	Over 10 years
5	Marketing Manager	Agriculture and fisheries	Small	11 years
6	Export Manager	Papers and Plastics	Medium	4 years
7	CEO	Food and Beverages	Medium	15 year
8	Marketing Manager	Perfumes	Medium	8 years
9	Export Manager	Wood (Furniture)	Medium	13 years
10	Financial Manager	Agriculture and Fisheries	Medium	Over 15 years
11	Sales Managers	Jewelleries	Medium	Over 10 years
12	CEO	Food and beverages	Medium	21 years
13	Owners	Marble and Grants	Medium	12 years

4.3.2.2 Data collection by interview

Robson (2002) states that the interview is considered as an important tool to collect data. It includes the researcher ask questions and receive the answers from the interviewee. The use of interviews can help the research to gather valid and reliable data that are relevant to the research questions and objectives (Saunders et al., 2003).

Robson (2002) and Saunders et al. (2003) classify interview into three types: structured interviews, it is known as an interviewer- administered questionnaires, semi-structured and in-depth (unstructured) interviews is non-standardised. A structured interview is often referred to as quantitative data, and semi-structured and unstructured interviews are known as qualitative data.

In this research, the scholar conducted a semi-structured interview with international SMEs owners and managers in Oman to understand the moderating role of social capital on the relationship between EO and firm performance. This type of interviews provides the research with the opportunities to probe answers where want the interviewees to explain or build on their response (Saunders et al. 2003).

The firms were contacted and consented to participate in the study. The anonymity of their organisation and any personal identity was promised. Thirteen semi-structured interviews were conducted between July and October, 2017. The duration of these interviews varied from 40 minutes to 60 minutes, and all the interviews were conducted by the telephone. Most interviewees were owners or CEOs. Before beginning the interview formally, the purpose of the interview and the purpose of the study were explained. Then, the interviews started by asking introductory questions about the company, its internationalisation, and the role of its social capital in promoting its entrepreneurial activities. Responding to replies about their social capital and entrepreneurial activities, were further probed. Then questions about the role of each dimension of social capital were asked, and further exploration of the negative moderating role of structural social capital was conducted. During the interviews, any issues worthy of being followed up was carried out. The whole interview process was flexible but ensured coverage of interesting points related to the study questions. Most of the interviews are audio-recorded, and notes were taken for some interviewees who didn’t agree to the conversations to being audio-recorded.

4.4 Ethical Considerations

Research ethics are vital when seeking to conduct a study in a morally appropriate way. A researcher must always seek to protect the participants’ rights (Cooper and Schindler, 2011). This is an issue, which emerges whenever access to organizations and individuals is sought in order to collect research data (Saunders et al., 2007).

There are several ethical issues which a researcher involved in such work must consider. These include the privacy of participants, their right to withdraw at any time, the maintenance of data confidentiality, and the need to avoid harm, pain, and embarrassment to the research participants (Saunders et al., 2007).

In this study, all of these issues were addressed clearly. Firstly, the author applied for ethical approval from the research ethics committee at the University of Glasgow. Secondly, the author informed all of the interviewees about the purpose of the study and how the resulting data would be collected, analysed, and kept secure. Thirdly, the researcher ensured confidentiality, privacy, and anonymity for all of the participants. These points were explicitly addressed in the cover letter of the interview questionnaire, and again at the beginning of each interview. Finally, the researcher informed all participants about their free choice to withdraw from the study at any time.

4.5 Conclusion

This chapter mainly presented the research design, research method, and response results of this study. More specifically, due to the nature and interest of this study, a survey design was made to achieve the study objectives. The mail questionnaire was adopted as data collection method to realise the design due to its relatively low cost, geographical flexibility, time efficiency, and being free from interviewer effects (Kanuk and Berenson, 1975).

The questionnaire was distributed via face to face and by e-mail for capturing a large number of responses. 1,425 questionnaires were distributed, and After two rounds, 317 usable questionnaires were received. Respondents were mainly the managers or the owners of the SMEs who have full knowledge of their SME. After that, the reliability and validity of the data were conducted, and the results were more than 0.7 in all the cases. So, it was considered that the data is reliable and valid. In addition, several methods were employed to detect potential non-response bias, and no significant differences were revealed between respondents and non-respondents on a variety of indicators.

In addition to the questionnaire, 13 semi-structured interviews have used to provide a comprehensive understanding of moderating role of social capital in the relationship between EO and international performance of SMEs and especially to deeply explain the negative moderating role of structural social capital.

Chapter 5: Findings

5.1 Introduction

The chapter presents the detailed statistical results of the primary data collected through questionnaire from 317 Omani managers of international SMEs through mail and face-to-face interviews. In addition, it illustrates the results of semi- structured interviews. The result will assist in understanding the role of entrepreneurial orientation on the international performance of SMEs and the moderating role of social capital. To achieve the aim of the study, different statistical measurements are conducted including the descriptive statistics of characteristics of the sample, correlation and descriptive analysis of dependent, independent, and control variables, multicollinearity issues for the variables, Normality distribution for the variables and outliers of the variables. Then multiple hierarchal regression model is developed for testing research hypotheses to assess the relationship among the dependent variable, independent variable and control variables.

5.2 Characteristics of Managers/Owners and Firms

In this section of the results, characteristics of the firms and the managers are presented. Descriptive statistics such as frequency and percentages analysis was calculated. Earlier scholars have extended their investigation process in line with the sample characteristics because there are many factors, which can distinguish the responses of participants in the sample group measuring similar aims and seeking out answers to identify research questions.

5.2.1 Characteristics of Managers/Owners

The profile of the respondents is looked upon in terms of gender, educational attainment, years of experience in the sector, and years of experience in the international market.

5.2.1.1 Gender

Table 5-1: Gender


		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Male	277	87.4	87.4	87.4
	Female	40	12.6	12.6	100.0
	Total	317	100.0	100.0

Table 5-1 describes the gender distribution of the respondents. From the results, it is clear that 277 or 87.4 % of the respondents are male while 40 or 12.6 % of them are female. The results indicated that majority of the subjects are male that indicates their view pertaining to the role of entrepreneurial orientation in the international performance of Omani SMEs and moderating role of social capital and. The male respondents outnumbered the female respondents by approximately 74.8%; this data provides a glimpse of the aggregate size of men in the workforce particularly of business environment.

5.2.1.2 Education degree

Table 5-2: Education Degree


		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Secondary school	25	7.9	7.9	7.9
	Diploma	38	12.0	12.0	19.9
	Bachelor	186	58.7	58.7	78.5
	Master	53	16.7	16.7	95.3
	Doctoral	7	2.2	2.2	97.5
	Other	8	2.5	2.5	100.0
	Total	317	100.0	100.0

Table 5-2 reports the education degree of the respondents. The results informed that the majority of Omani managers possess bachelor as their higher education degree 58.7%, and 16.7% have master’s degree. While very few managers have diploma 12%, secondary school 7.9% and doctoral degrees 2.2%. This data illustrates that most of the respondents are graduates.

5.2.1.3 Experience in the industry

Table 5-3: Experience in Current Industry


		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	6-9 years	1	.3	.3	.3
	10-13 years	8	2.5	2.5	2.8
	14-17 years	33	10.4	10.4	13.2
	18-21 years	65	20.5	20.5	33.8
	22- 25 years	93	29.3	29.3	63.1
	Over 25 years	117	36.9	36.9	100.0
	Total	317	100.0	100.0

Table 5-3 presents the number of years of the respondents in their current industry. Based on the collated data, 36.9% of the total respondents have over 25 years of job experience, while 29.3% have 22-25 years’ experience. This means that the most of the respondents have a long experience in their industry. The figure also illustrates that the 20.5% of the total respondents who are serving the industry for 18-21 years. Actually, there are also some small percentages of respondents who are servicing their industry for 10 years and less.

5.2.1.4 International experience

Table 5-4: Experience in International Market


		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	2-5 years	5	1.6	1.6	1.6
	6-9 years	14	4.4	4.4	6.0
	10-13 years	55	17.4	17.4	23.3
	14-17 years	101	31.9	31.9	55.2
	18-21 years	68	21.5	21.5	76.7
	22- 25 years	54	17.0	17.0	93.7
	Over 25 years	20	6.3	6.3	100.0
	Total	317	100.0	100.0

Table 5-4, likewise, presents the years of experience in the international market. The results indicated that 31.9% of subjects have 14-17 years of experience in the foreign market. Followed by 21.5% have 18-21 years. The figure also illustrated that 17.4% and 17% of the total respondents are in the range of 10-13 and 22-25 respectively. Moreover, the data shows that there is a small percentage of respondents have international experience over 25 years and 5 years and less.

5.3 Characteristics of the Firms

Previous literature has argued for the importance of the firms’ characteristics such as, business size, business experience, as the critical environmental factors, which reflect the entrepreneurial orientation of a business. Therefore, this section presents the profile of firms that participated in the survey. This include firm age, firm size, firm industry, firm international experience, regional markets, international strategy, and percentage of the annual sale is generated from the international activities.

5.3.1 Firm age

Table 5-5: Firm’s Number of Years in Business


		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	6-9 years	11	3.5	3.5	3.5
	10-13 years	30	9.5	9.5	12.9
	14-17 years	60	18.9	18.9	31.9
	18-21 years	88	27.8	27.8	59.6
	22- 25 years	68	21.5	21.5	81.1
	Over 25 years	60	18.9	18.9	100.0
	Total	317	100.0	100.0

From Table 5-5, it is clear that 27.8% of the small and medium companies in the manufacturing sector have been operating in Omani market for about 18-21 years, while 21.5% of the firms are operating for 22-25 years. Moreover, 18.9% of the firms had been running business between 14-17 years and over 20 years. A significant minority of the companies in the manufacturing sector, therefore, are young (operating for 6-9 years). This implies that most of the responding firms are mature companies, which have accumulated a substantial amount of experience in manufacturing their products.

5.3.2 Firm international experience

Table 5-6: Your Company Experience in International Markets
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	2-5 years	53	16.7	16.7	16.7
	6-9 years	112	35.3	35.3	52.1
	10-13 years	88	27.8	27.8	79.8
	14-17 years	39	12.3	12.3	92.1
	18-21 years	17	5.4	5.4	97.5
	22- 25 years	5	1.6	1.6	99.1
	Over 25 years	3	.9	.9	100.0
	Total	317	100.0	100.0

It can be seen from Table 5-6 that the majority of the companies in the manufacturing sector 35.3% have international experience of 6-9 years. Followed by 27.8% of the firms have 10-13 years. The figure also indicates that few companies have 25 years and over experience in the foreign market. It clearly appears from the data that small and medium enterprises in Oman have a short experience in the international market.

5.3.3 Firm size

Table 5-7: Firm Size


	Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Small	21	6.6	5.7	5.7
	Medium	296	93.4	94.3	100.0
	Total	317	100.0	100.0

One of the most important characteristics of a firm’s performance is size. Previous studies have used the number of full-time employees for measuring the firm size (Sapouna et al., 2016; Wales et al., 2015). This research also measured firm size by the number of full-time employees. According to the Omani Central Bank, companies that employed between (5-9) employees are considered small enterprises and companies that employed (10-99) employees are considered medium enterprises. It is clear from Table 5-7 that 296 (93.4%) of the respondents are medium firms and only 21 (6.6%) are small firms. The results illustrate that the majority of the international SMEs in Oman are medium firms.

5.3.4 Firm industry

Table 5-8: In Which Industry Does Your Company Operate?


		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Food and Beverages	75	23.7	23.7	23.7
	Papers and Plastics	51	16.1	16.1	39.7
	Textiles and Garments	24	7.6	7.6	47.3
	Minerals and Metals	33	10.4	10.4	57.7
	Marble and Granite	21	6.6	6.6	64.4
	Petrochemicals and Woods	41	12.9	12.9	77.3
	Agriculture and Fisheries	42	13.2	13.2	90.5
	Jewellery and perfumes	30	9.5	9.5	100.0
	Total	317	100.0	100.0

Table 5-8 illustrated the categories of industry in the manufacturing sector, the results indicate that the majority of SMEs 23.7% are from food and beverages industry, followed by 16.1% of the firms are from papers and plastics industry. Moreover, 13.2% of SMEs are operating in the agriculture and fisheries industry, and 12.9% are operating in petrochemicals and woods. The data also indicates that there is a minority of percentage of the firms are from some sectors such as, jewellery and perfumes (9.5%), textiles and garments (7.6%) and marble and granite (6.6%).

5.3.5 Regional markets

Table 5-9: In Which Regional Markets Does Your Company Sell Its Product?


Regional Market			Frequency	Percent	Valid Percent	Cumulative Percent
USA	Valid	No	290	91.5	91.5	91.5
		Yes	27	8.5	8.5	100.0
		Total	317	100.0	100.0
Europe	Valid	No	268	84.5	84.5	84.5
		Yes	49	15.5	15.5	100.0
		Total	317	100.0	100.0
Asia	Valid No Yes Total	157	49.5	49.5	49.5
		160	50.5	50.5	100.0
		317	100.0	100.0
The Middle East	Valid No Yes Total	3	.9	.9	.9
		314	99.1	99.1	100.0
		317	100.0	100.0
Africa	Valid No Yes Total	176	55.5	55.5	55.5
		141	44.5	44.5	100.0
		317	100.0	100.0

Regional development constitutes as the vital part of the internationalisation process. Table 5-9 presents the regional markets where SMEs sell their products. The results reveal that 99.1% of the international SMEs are selling their products in the Middle East, 50.5% are selling in Asia, 44.5% are selling in Africa, 15.5% of the firms are selling in Europe, and 8.5% are selling in America. From above data, it appears that international Omani SMEs mostly prefer Middle Eastern regions while minimal focus has been placed in the western regions.

5.3.6 Number of Countries

Table 5-10: Approximately, to How Many Countries Does Your Company Sell Its Product?


		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	1-4	124	39.1	39.1	39.1
	5-8	135	43.3	43.3	82.4
	9-12	53	16.7	16.7	98.1
	over 12	5	1.6	1.6	99.7
	Total	317	100.0	100.0

The results of table 5-10 report the number of countries where the international Omani SMEs sell their products. Out of 317 SMEs, 42.3% are confirmed their selling in 5-8 countries, 39.1% of the firms are selling their products in 1-4 countries, 16.7 % of the firms are selling their products in 9-12, and very few companies (1.6%) are selling in more than 12 countries.

5.3.7 International strategy

Table 5-11: In Which Regional Markets Does Your Company Sell Its Product?


International entry strategy			Frequency	Percent	Valid Percent	Cumulative Percent
Exporting	Valid	No	4	1.3	1.3	1.3
		Yes	313	98.7	98.7	100.0
		Total	317	100.0	100.0
Joint Venture	Valid	No	288	90.1	90.1	90.1
		Yes	29	9.1	9.1	100.0
		Total	317	100.0	100.0
Licensing	Valid No Yes Total	309	97.5	97.5	97.5
		8	2.5	2.5	100.0
		317	100.0	100.0
Franchising	Valid No Yes Total	311	98.1	98.1	98.1
		6	1.9	1.9	100.0
		317	100.0	100.0
Wholly Owned Subsidiary	Valid No Yes Total	312	98.4	55.5	55.5
		5	1.6	44.5	100.0
		317	100.0	100.0

Table 5-11 illustrates the entry strategies that international Omani SMEs are fallow to enter the foreign market. Our sample of the current research has recognized that out of 317 SMEs, 98.7% are using exporting as their international market entry strategy, 9.1% are using a joint venture strategy, 2.5% are using licensing strategy, 1.9% of the firms are using franchising strategy, and 1.6% are using wholly owned subsidiary. From the data, it clear that the most of the Omani SMEs in the manufacturing sector are using export as strategy to enter the international market.

5.3.8 Firm annual sale turnover

Table 5-12: Total Sales of the Organisation


	Frequency	Percent	Valid Percent	Cumulative Percent
Valid
	OMR 25,000-OMR 320,000	4	1.2	1.2	1.3
	OMR 321,000-OMR 616.000	17	5.4	5.4	6.6
	OMR 617,000-OMR 911,000	50	15.8	15.8	22.4
	OMR 912,000-OMR 1.206,000	114	36.0	36.0	58.4
	Over OMR 1.207.000	132	41.6	41.6	100.0
	Total	317	100.0	100.0

Sales turnover is one variable used to measure an organization’s size. To explore the financial performance of SMEs in the sample, respondents were asked to indicate that their company’s annual sales turnover. To identify sales turnover in Omani rials, five categories were established according to the definition of SMEs in Oman. Table 5-12 presents the participating firms based on their annual sales turnover. It can be seen from the table that the majority of companies in the manufacturing sector (41.6%) had a sale turnover over 1.207,000 Omani rials, 36.0 % had a sale turnover between 912,000 to 1.206,000 Omani rials, 15.8% had a sale turnover between 617,000-911,000 Omani rials, and few companies 5.4% and 1.2% had a sale turnover between 321,000-616,000 and 25,000-320,000 Omani rial respectively.

5.3.9 Percentage of revenue generating from international activities

Table 5-13: International Sale Percentage


	Frequency	Percent	Valid Percent	Cumulative Percent
Valid	1-10	1	.3	.3	.3
	11-20	19	6.0	6.0	6.3
	21-30	48	15.1	15.1	21.5
	31-40	43	13.6	13.6	35.0
	41-50	77	24.3	24.3	59.3
	more than 50	129	40.7	40.7	100.0
	Total	317	100.0	100.0

Table 5-13 clearly indicates that the most of the international SMEs in the manufacturing sector (40.7% of the firms) indicated that more than 50% of their revenue is generated from the international activities, 24.3% of the firms are generated between 41- 50%, 15.1% of the companies are generated between 21-30%, 13.6% of the firms are generated between 21-30%, 6.0% of the companies are generated between 11-20%, and the minority of the firms (0.3%) indicted that between 1-10% of their revenue come from international operations. Therefore, from the results, it can be seen that the international SMEs in the manufacturing sector in Oman generated high percentage of their revenue from their international operations.

5.4 Correlation and Descriptive Analysis of Dependent, Independent, and Control Variables

Based on the results from the statistical analysis conducted for this study, the forthcoming section presents the data relating to the proposed research hypotheses. However, before conducting multiple regressions so as to test the study’s hypotheses in more details, it is useful to examine the correlations amongst the study’s variables. This enables the researcher to understand the strength of the relationships between the study’s variables. The Table below shows the results of Pearson correlation between the control, dependent and independent variables.

Table 5-14: Pearson Correlation Results of the Control, Dependent, and Independent Variables

The Variable

Mean

International performance

19.35

2.011

Entrepreneurial orientation

35.04

3.922

0.510**

Structural social capital

32.01

2.330

0.300**

0.489**

Relational social capital

32.01

2.993

0.147**

0356**

0.674**

Cognitive social capital

20.90

1.897

0.114*

0.092

0.206**

0.357**

Early enter international market

2.483

1.129

-0.029

0.011

0.160**

0.072

0.046

Environment dynamism

31.62

1.865

0.358**

0.402**

0.303**

0.204**

0.135

-0.062

Firm Size

52.75

24.801

0.304**

0.423**

0.272**

0.112*

0.005

0.012

0.168**

Firm age (log)

0.774

0.106

0.157**

0.274**

0.212**

0.018

-0.017

0.540**

-0.010

0.447**

10.

Firm industry

3.99

2.482

0.019

0.052

0.031

-0.084

-0.063

-0.036

-0.013

-0.170**

-0.071

11.

Firm international experience

0.535

0.145

0.299**

0.318**

0.089

-0.050

-0.063

-0.287**

0.064

0.501**

0.632**

-0.015

N=317, SD= Standard Deviations.

*p < 0.05; **p < 0.01; ***p < 0.001

Table 5-14 reports the means, standard deviations, and correlations for the independent, dependent, and control variables assessed in this study. Correlations Matrix has used to check multicollinearity, which refers to high correlations between independent variables (Field,2009). According to Pallant (2013), a correlation of less than 10 is a good value which presents no cause for concern. As can be seen from the results shown above the correlations among the variables didn’t reveal any multicollinearity concern. The largest value was (0.674) between relational social capital and structural social capital the next correlation to watch was between International experience and firm age log (0. 632) and all of them still less than 10. Multicollinearity also checked in more details in the section of assumptions of multiple hierarchical regression.

The results of Pearson Correlation Coefficient in above table showed that there was a negative relationship between dependent variable (international performance) and early enter international market (moderating variable). The results were r = (-0.096) and P = (0.244). The negative relationship means when there was an increase in one variable, the other decreased.

Moreover, the results indicated that there were positive and significant relationship between some independent and control variables and the dependent variable (international performance). First, the independent variable (entrepreneurial orientation) positively and significantly associated with the dependent variable, specifically the results were r = (0.510) and P = (0.000).

Secondly, the dimensions of social capital (structural, relational, and cognitive) were positively and significantly correlated with dependent variable. The results were r = (0.300) and P = (0.000) for structural social capital, r = (0.1470) and P = (0.009) for relational social capital, and r = (0.114) and P = (0.043) for cognitive social capital.

Finally, the results also revealed that there were positive and significant relationships between environment dynamism, firm size, firm age log, firm international experience log (all of them control variables) and the dependent variable. The results were r = (0.358) and P = (0.000) for environment dynamism, r = (0.304) and P = (0.000) for firm size, r = (0.157) and P = (0.005) for firm age, and r = (0.229) and P = (0.000) for firm international experience log. In simple terms, the positive relationships reflect the fact that when there was an increase in one variable, the other also increased

In addition, there was a weak and not significant relationship between firm industry (control variable) and the dependent variable. The results were r = (0.019) and P = (0.738). Appendix 3 presents a further summary of these statistics.

5.5 Assumptions of Hierarchical Multiple Regression Analysis

This study used the multiple hierarchical regression analysis to discover the effect of entrepreneurial orientation in the international performance of SMEs, and to examine the moderating role of social capital (structural, relational, and cognitive) and early enter the international market. Multiple regression analysis is based upon certain assumptions (Field, 2009), which are important for any researcher to understand and take account of. These are the normality of residuals, homoscedasticity of residuals, linearity, independence of residuals, and multicollinearity.

Firstly, in order to test the normality of the present data, two graphical methods were used to assess the fourth models. These were a normal probability plot of the data and a histogram (Field, 2009). See Figures 4.1 to 4.4 as example (refer to appendix 2 to see the results of other models). All models showed roughly normal distribution and, based on this test; it is reasonable to assume the normality of the data within the four models.

Figure 5-1: Histogram for Model 1

Figure 5-2: Normal Probability Plot of Data for Model 1

Figure 5-3: Histogram for Model 2

Figure 5-4: Normal Probability Plot of Data for Model 2

Secondly, the assumptions relating to both homoscedasticity of residuals and linearity were tested by checking the plot of standardized residuals against standardized predicted values. The scatterplot of Y against X was also investigated. An investigation of scatterplots between the dependent variable and all of the independent variables for all models assured the researcher that the assumption of linear relationships between Y and each of the X variables was valid (see Figures 5-5 and 5-6 as example and refer to Appendix 2 for more results).

Figure 5-5: Plot of Standardized Residuals against Predicted Values for Model 1

Figure 5-6: Plot of Standardized Residuals against Predicted Values for Model 2

Fourthly, multicollinearity, which refers to the relationships among the independent variables and it exists when the independent variables are highly correlated. In addition to using a correlation matrix to check multicollinearity problem, it can be also investigated by checking VIF and tolerance values for all independent variable. VIF refers to variance inflation and Tolerance is an indicator of how much of the variability of the particular independent variable is not explained by other independent variables in the model (Pallant (2013). According to Pallant (2013), a variance inflation factor (VIF) of less than 10 is a good value which presents no cause for concern. However, if the values of tolerance are below 0.1, this indicates a serious problem. The results of the multicollinearity checking process are presented in the below table.

Table 5-15: Collinearity Statistics

Variables	Collinearity Statistics
	Tolerance	VIF
1. Firm Size	0.680	1.470
2. Firm Age (log)	0.555	1.802
3. firm international experience (log)	0.535	1.870
4. Firm industry	0.964	1.037
5. Environment dynamism	0.959	1.047
6.Entrepreneurial Orientation	0.566	1.767
7.Structural Social Capital	0.432	2.313
8. Relational Social Capital	0.474	2.110
9. Cognitive Social Capital	0.869	1.150
10. Early Enter International Market	0.156	6.420

As can be seen from the results shown above, the variable early enter international market had the highest VIF. This VIF was (6.420), following by the VIF relating to structural social capital, it was (2.313) and the VIF relating to relational social capital, it was (2.110), while the VIF relating to cognitive social capital was (1.150). The VIF relating to entrepreneurial orientation was (1.767). Regarding to the control variables, The VIF relating to firm size was (1.745), the VIF relating to Log firm age was (1.853), the VIF relating to Log international experience was (1.366), the VIF relating to firm industry was (1.109), the VIF relating to environment dynamism was (3.394). Of the tenth outlined variables in the above table, early enter international market had the lowest tolerance, at (0.156), the tolerance for structural social capital was (0.432), the value of tolerance for relational social capital was (0.474), the value of tolerance for cognitive social capital was (0.540), the value of tolerance for entrepreneurial orientation was (0.566). While the value of tolerance for firm size was (0.680), the value of tolerance for Log firm age was (0.555), the value of tolerance for Log firm international experience was (0.535), the value of tolerance for firm industry was (0.964), and the value of tolerance for environment dynamism was (0.959). In summary, all VIF values for the current models were well below a value of (10). Moreover, tolerance values were significantly higher than (0.2). Given the VIF and tolerance levels found in the analysis, multicollinearity does not appear to be a problem between the variables in either of the study models.

Finally, outliers, which means cases with values above or below the majority of other cases. Multiple regression very sensitive to outliers so is best checking for extreme scores for both dependent variable and independent variables before conducting the regression analysis. Outliers can either be deleted from the data set or, alternatively, given a score for that variable that is high but not too different from other clusters of scores (Pallant, 2013). In order to check the outliers’ problem of the dependent and independent variables, boxplot was used. Outliers appear as little circles with the ID number of the cases. SPSS determines cases as outliers if they extend more than 1.5 box-lengths from the end of the box. While extreme outliers appear with an asterisk*, and those that extend more than three box-lengths from the end of the box (Filled, 2009; Pallant, 2013). The results of outlier checking process are indicated there are some outliers cases in some variables such as international performance, entrepreneurial orientation, and cognitive social capital (see figures (4.13-4.19). Also, there are seven extreme outliers in cognitive social capital variable. The researcher has decided to keep those outliers as there were no big differences between them and other remaining cases in the same variables and delete the seven extreme outliers of cognitive social capital from the data set to avoid outliers’ problem that affect the result of hierarchical regression. In conclusion, the models that were used in the study appear to be statistically accurate, and generalisable to the research sample.

Figure 5-7: Boxplot for International Performance

Figure 5-8: Boxplot for Entrepreneurial Orientation

Figure 5-9: Boxplot for Cognitive Social Capital

5.6 Hierarchical Multiple Regression Analysis Results

This study used the multiple hierarchical regression analysis to test the hypotheses following the same procedures as in Covin et al. (1997) and Dimitratos et al. (2004). In step1, the five control variables (firm age log, firm size, firm international experience log, firm industry, environment dynamism, and early enter international market) were entered so as to partial out their effects from the hypothesized relationships of the study. In step 2, the main effects of EO, dimensions of social capital (structural, relational, and cognitive), were entered. In step 3, the two-way interactions (contingency tests) between structural social capital and entrepreneurial orientation were added. In step 4, the two-way interaction of relational social capital and entrepreneurial orientation were entered. Finally, in step 5 the two-way interaction of cognitive social capital and entrepreneurial orientation were added. To reduce numerical instability for estimation associated with multicollinearity, the independent variables were mean-centred before calculating interactions (Aiken and West, 1991; Afshartous and Preston, 2011). The following table presents the results of the hierarchical regression analysis of subjective international performance scale.

Table 5-16: Multiple Hierarchical Regression Analysis Result of International Performance Subjective Measurement

Model5	Model4	Model3	Model2	Model1	The variable
9.773 (2.420)***	9.234 (2.425)***	9.770 (2.225)**	5.416 (2.228) **	7.675 (2.086) ***	Constant
0.008 (0.005)	0.009 (0.005)*	0.009 (0.005)*	0.008 (0.005)*	0.018 (0.005) ***	Firm size
-5.089 (2.533) **	-5.357(2.548) **	-5.198(2.590) **	-5.390(2.600) **	-4.251 (2.755)	Firm age (log)
3.298 (1.505)*	3.363 (1.515)**	3.497 (1.540)**	3.675(1.926)*	3.754 (1.636) **	Firm international experience(log)
-0.002(0.040)	0.008(0.040)	0.008(0.040)	0.011(0.041)	0.057(0.043)	Firm industry
0.101(0.060) *	0.104(0.060) *	0.171(0.058) **	0.171(0.058) **	0.338(0.056) ***	Environment Dynamism
0.361(0.215) *	0.402(0.216)*	0.358(0.220)*	0.406 (0.220)*	0.418(0.236) *	Early enter international market
0.025(0.069)-	0.010 (0.069)-	0.192(0.032)**	0.195 (0.033) ***		Entrepreneurial Orientation
0.116 (0.062) *	.113 (0.062) *	0.104(0.063)**	0.114 (0.063) *		Structural social capital
-0.070(0.047)	-0.087(0.046)*	-0.089(0.047)*	- 0.094 (0.047)**		Relational social capital
0.025(0.056)	0.062(0.054)	0.081(0.054)	0.087 (0.055)		Cognitive social capital
0.034(0.011)**-	0.025(0.010)-	- 0.020 (0.010)**			*Entrepreneurial Orientation Structural social capital**
0.010 (0.003)***	0.010 (0.003)***				*Entrepreneurial Orientation Relational social capital**
0.029(0.013)**					*Entrepreneurial Orientation Cognitive social capital**
0.608	0.599	0.579	0.571	0.462	R
0.370	0.359	0.335	0.326	0.213	R2
0.342	0. 0.333	0.310	0.304	0.197	Adjusted R2
0.011	0.024	0.009	0.113	0.213	R2
13.344***	13.846***	13.644***	14.483***	13.674***	F
5.051**	11.023***	3.866**	12.565***	13.674***	F
307	307	307	307	307	N

- Unstandardized beta coefficients are reported with standard errors shown in parentheses.

***p < 0.01, **p < 0.05, *p < 0.10.

As it can be seen from the above table, model one presents the results of the effect of the control variables (firm size, firm age, firm international experience, firm industry, environment dynamism, and early enter international market) in the dependent variable (international performance). In general, the value of the multiple correlation coefficient (R) between the control variables and the dependent variable was 0.454 for Model one and the value of R square was 0.206. R square is a measure of how much of the variation in the dependent variable is accounted by the independent variable (Field, 2009). In this case, the control variables accounted for approximately 21% of the variation in the international performance. The results also indicate that there is a significant positive relationship between firm’s size, firm’s international experience, environment dynamism, early enter international market and international performance (p < 0.10). The beta value here was 0.018, standard errors = 0.005, P = 0.000 for firm size, the beta value = 3.754, standard errors = 1.636, P =0.022 for firm’s international experience, the beta value = 0.346, standard errors = 0.057, P =0.000 for environment dynamism, and the beta value = 0.418, standard errors = 0.236, P =0.077 for early enter international market.

Model 2 presents the direct effect of the independent variable (entrepreneurial orientation). The value of the multiple correlation coefficients (R) between the independent variables and the dependent variable was 0.570 and the value of R square was 0.325, this implies that the model 2 accounts for an approximately 33% of the variation in the international performance of SMEs. The results of model 2 reviles that there is a positive and significant relationship between entrepreneurial orientation and international performance (p < 0.01), the beta value = 0.195, standard errors = 0.033, and P = 0.000. Therefore, the results of the model two offer support for the hypothesis 1 (Entrepreneurial orientation is positively related to international performance).

Model 3 presents the result of moderating effects of structural social capital on the relationship between entrepreneurial orientation and international performance. Hypothesis 2 predicted a positive moderating effect of structural social capital on the relationship between entrepreneurial orientation and performance in the foreign marketplace. The results indicate that this two-way interaction is significant (p < 0.05) but on the opposite direction of the hypothesis, the results were beta value = - 0.020, standard errors = 0.010, and p= 0.050. The data therefore does not offer support to hypothesis 2 (Structural social capital is positively moderate the relationship between entrepreneurial orientation and international performance).

Model 4 illustrates the result of moderating effects of relational social capital on the relationship between entrepreneurial orientation and international performance. Hypothesis 3 predicted a positive moderating effect of relational social capital on the relationship between entrepreneurial orientation and the international performance of SMEs. The results indicate that this two-way interaction significant (p <0.01). The beta value was 0.010, standard errors = 0.003, and p= 0.001. Thus, the hypothesis 3 (Relational social capital is positively moderate the relationship between entrepreneurial orientation and international performance) has received an empirical support.

Finally, Model 5 presents the result of moderating effects of cognitive social capital on the relationship between entrepreneurial orientation and international performance Hypothesis 4 predicted a positive moderating effect of cognitive social capital on the relationship between entrepreneurial orientation and the international performance of SMEs. The results indicate that this two-way interaction is significant (p < 0.05). The results were, the beta value = 0.029, standard errors = 0.013, and p = 0.025, This suggests that hypothesis 4 (Cognitive social capital is positively moderate the relationship between entrepreneurial orientation and international performance) is confirmed.

In addition, the study has conducted a multiple hierarchical regression analysis using objective performance measurement (percentage of annual international sale), the results almost the same as with subjective measure (see the below table).

Table 5-17: Multiple Hierarchical Regression Analysis Result of International Performance Objective Measurement

Model5	Model4	Model3	Model2	Model1	The variable
-34.776 (15.145) **	-37.520 (15.130) **	-54.455 (13.741) ***	-55.335 (13.787) **	-39.260 (12.354) **	Constant
0.326 (0.030) ***	0.328 (0.030) ***	0.327 (0.031) ***	0.327 (0.031) ***	0.368 (0.030) ***	Firm size
16.235(15.852)	14.873(15.897)	15.645(16.044)	15.038(16.033)	22.674 (16.315)	Firm age (log)
14.631(9.417)	14.960(9.453)	15.614(9.539)	15.275(9.533)	13.403 (9.687)	Firm international experience(log)
0.315(0.249)	0.369(0.248)	0.364(0.250)	0.375(0.041)	0.532(0.253) **	Firm industry
0.322(0.374)	0.335(0.375)	0.658(0.357) *	0.658(0.357) *	1.338(0.334) ***	Environment Dynamism
-1.555(1.348)	-1.349 (1.348)	-1.428 (1.361)	-1.362 (1.359)*	-1.504(1.396)	Early enter international market
-0.523 (0.429)	-0.452 (0.429)	0.531(0.201) ***	0.542 (0.201) ***		Entrepreneurial Orientation
0.780(0.386) **	0.762(0.387) **	0.721 (0.390) *	0.753 (0.389) **		Structural social capital
0.169(0.292)	0.084(0.289)	0.074 (0.292)	0.058 (0.292)		Relational social capital
-0.315 (0.350)	-0.126 (0.336)	-0.034 (0.337)	-0.018 (0.337)		Cognitive social capital
- 0.130(0.011)**	- 0.086 (0.064)	- 0.065 (0.065)			*Entrepreneurial Orientation Structural social capital**
0.050 (0.019)***	0.049 (0.019)**				*Entrepreneurial Orientation Relational social capital**
0.147(0.080)*					*Entrepreneurial Orientation Cognitive social capital**
0.780	0.777	0.772	0.771	0.750	R
0.609	0.604	0.595	0.594	0.563	R2
0.592	0.588	0.580	0.580	0.554	Adjusted R2
0.004	0.009	0.001`	0.032	0. 563	R2
35.421***	37.796***	39.867***	43.753***	64.939***	F
3.339*	6.671**	1.005	5.801***	64.939***	F
307	307	307	307	307	N

- Unstandardized beta coefficients are reported with standard errors shown in parentheses.

***p < 0.01, **p < 0.05, *p < 0.10.

As it appears from Model 1, the control variables accounted for approximately 21 % of the variation in the international performance. The result of this model slightly difference than model 1 in subjective measure as they indicate that there is only a significant positive relationship between firm size, firm industry, environment dynamism, and international performance (p < 0.10). The beta value here was 0.368, standard errors = 0.030, P = 0.000 for firm size, the beta value = 0.532, standard errors = 0.253, P =0.037 for firm industry, and the beta value = 1.338, standard errors = 0.334, P =0.000 for environment dynamism. In this model, the control variables accounted for approximately 56% of the variation in the international performance compared to 21 % with subjective measure.

Model 2 presents the direct effect of the independent variable (entrepreneurial orientation). The value of the multiple correlation coefficients (R) between the independent variables and the dependent variable was 0.771 and the value of R square was 0.594, this implies that the model 2 accounts for an approximately 59% of the variation in the international performance of SMEs compared to 33% with subjective measure. The results of Model 2 also offer support to the hypothesis one as with subjective measure. The results show that there is a positive and significant relationship between entrepreneurial orientation and international performance (p < 0.01), the beta value = 0.542, standard errors = 0.201, and P = 0.007.

Model 3 presents the result of moderating effects of structural social capital on the relationship between entrepreneurial orientation and international performance. Also the results indicate that this two-way interaction is negative and not significant as with subjective measure (p > 0.10), the results were beta value = - 0.065, standard errors = 0. 0.065, and p= 0.317. The data therefore also does not offer support to hypothesis 2 (Structural social capital is positively moderate the relationship between entrepreneurial orientation and international performance).

Model 4 illustrates the result of moderating effects of relational social capital on the relationship between entrepreneurial orientation and international performance. The results same as the results of subjective measure, they indicate that this two-way interaction is significant (p < 0.05). The results were, the beta value = 0.049, standard errors = 0.019, and p = 0.010, This suggests that hypothesis 3 (Relational social capital is positively moderate the relationship between entrepreneurial orientation and international performance) is confirmed.

The results of Model 5 also offer support to hypothesis 4 as the results of subjective measure, however, they offer support at 10 level while with subjective measure at 5 level. The results were, the beta value = 0.147, standard errors = 0.080, and p = 0.069, so hypothesis 4 (Cognitive social capital is positively moderate the relationship between entrepreneurial orientation and international performance) is confirmed.

5.7 Summary of Hypotheses Test

	The Hypothesis	Supported/Not supported
H1	Entrepreneurial orientation (EO) is positively correlated with the international performance of SMEs.	Supported
H2	Structural social capital is positively moderate the relationship between EO and the international performance of SMEs.	Not supported
H3	Relational social capital is positively moderate the relationship between EO and the international performance of SMEs.	Supported
H4	Cognitive social capital is positively moderate the relationship between EO and the international performance of SMEs.	Supported

5.8 Qualitative Findings

5.8.1 Introduction

The objective of this section is to present the qualitative results of the semi-structured interviews that were conducted. The qualitative results are expected to provide a richer explanation of the moderating role of the dimensions of social capital (structural, relational, and cognitive) in the relationship between entrepreneurial orientation and international performance, especially the negative moderating role of structural social capital. As discussed in chapter 3, the researcher conducted interviews with managers and owners of thirteen SMEs in Oman.

The interviews were recorded using a digital audio device or through written notes. The interviews were analysed using ‘content analysis’ as the participants’ responses were classified according to major headings and themes, which were already contained within the interview schedule. The respondents’ answers were then placed under each main question, so as to help the researcher to compare and contrast their answers. This enabled him to establish the differences and the similarities between those answers. In the next step of the procedure, these answers were divided into main themes and attributed to many different codes. Finally, an example of each code was taken from the collected data.

The sub-sections which follow will examine the perceptions of interviewees of the moderating role of the dimensions of social capital (structural, relational, and cognitive) in the relationship between entrepreneurial orientation and international performance, especially the negative moderating role of structural social capital.

5.8.2. Social capital dimensions and entrepreneurial activities of international SMEs

5.8.2.1 Structural social capital

Research participants were asked about their perceptions about the role of structural social capital dimension represented by ‘network ties’ in promoting entrepreneurial activities in international market. The majority of the participants confirmed that their different relationships with different partners such as customers, suppliers, distributors, and competitors providing them with timely information, knowledge, technology, and tangible resources that firms cannot be able to access in isolation and that they necessary to develop their entrepreneurial behaviour in international market.

Table 5-18: Example of Qualitative Data Analysis of Structural Social Capital

Main themes of Structural social capital (network ties)	Sub- themes Structural social capital (network ties)	Example of Quotes
Relationship with business partners (customers, distributors, suppliers, etc.)	Knowledge and information. Tangible resources. Training, technology, and skills.	“Our company depends more on our partners in foreign countries such as our distributors and customers to obtain information and knowledge about the market and customers’ needs and preferences, and this makes us more alter and responsive to any emerging opportunity”. ‘‘Our partners in UAE help us more to obtain required resources to expand our business in Abu Dabi and Dubai, they provide us with land to establish our factory in Dubai”. “There is no doubt that our partners help us more and they are considered as part of our success in foreign markets, we are export to nine countries in the Middle East, Asia, and Africa, our suppliers, distributors, and other organizations always provide us with many resources. For example, our partners in India very cooperative with us they provide us with different resources such as technology, knowledge, labour, and sometimes offer training and courses for our employees {....} all these make us innovative and able to face any risk in international market”.
Relationship with government organizations.	Information and knowledge. -Not effective because of: - bureaucracy - corruption, - nepotism	“Yes, they did [help], like The Public Authority of Investment Promotion and Export Development and The Ministry of Commerce and Industry that they help SMEs and provide them with a lot of information about international market.’’ “Their bureaucratic processes affect our business operations.” ‘‘ I have applied for land to establish my factor 5 years ago until now I don’t have any reply from the government about that while I know others applied after me and they get a land. In Oman, if one of your relatives or friends in decision makers position you will be lucky as all your business procedures will complete very quickly.’’
-Relationships with financial institutions.	- Complicated regulations	‘‘ I applied for a loan from the bank to expand our business, the bank asked for complicated financial guarantees, and the procedures take very long time, and in the end, the bank refused to give the company the loan.’’

One owner mentioned:

‘‘Our partners in UAE help us more to obtain required resources to expand our business in Abu Dabi and Dubai, they provide us with land to establish our factory in Dubai’’ (Owner code: OTGM).

Another manager stated that:

‘‘ Our company depends more on our partners in foreign countries such as our distributors and customers to obtain information and knowledge about the market and customers’ needs and preferences, and this makes us more alter and responsive to any emerging opportunity” (Manager code: EMWFM).

One manager illustrated:

“Definitely, without our partners, we can’t survive in international market, we are a perfume company, and there is an intense competition in this sector, to succeed you need to be always innovative and active, and this requires a commitment of substantial resources’’ (Manager code: MMPM).

One CEO explained further:

“There is no doubt that our partners help us more and they are considered as part of our success in foreign markets, we are export to nine countries in the Middle East, Asia, and Africa, our suppliers, distributors, and other organizations always provide us with many resources. For example, our partners in India very cooperative with us they provide us with different resources such as technology, knowledge, labour, and sometimes offer training and courses for our employees {....} all these make us innovative and able to face any risk in international market” (CEO code: CFBM).

Some new small firms indicated that they still search for appropriate partners in international market and some of them mentioned that they lack the resources required to lunch and develop relationships with foreign partners. One owner stated:

‘‘We are currently entering international market, so still, we don’t have constant network ties, we still search for appropriate partners” (Owner code: OPS).

Another manager pointed out:

‘‘We do not have many foreign relationships because manage foreign relationships required larger investments of time and resources and need engage in greater participation especially with those partners geographically far away’’ (Manager code: MMAFS).

An additional question was asked for participants regarding their relationships with government organizations and financial institutions in Oman because the majority of them have mentioned only to their relationships with their business partners such as supplier, distributors, customers, and other organizations. Some differences were found between the interview responses with regard to this issue. On the one hand, a group of the participants agreed that government organizations in Oman are helpful. They saw them as ready to offer whatever resources they have available. One manager stated:

“Yes, they did [help], like The Public Authority of Investment Promotion and Export Development and The Ministry of Commerce and Industry that they help SMEs and provide them with a lot of information about international market’’ (Manager Code: FMAFM).

This viewpoint was confirmed by an owner of small jeweller’s firm who stated:

“We attended many exhibitions in different countries such as UAE, Egypt, and South Africa that organized by The Public Authority of Investment Promotion and Export Development ‘Ithraa’ which help us to introduce our products for customers and help us to get a lot of information about market and customers’ needs and preferences in these countries’’ (OJS).

Another point was highlighted by other managers as follows:

‘‘Yes we have good relationships with different government organizations in Oman such as The Chambers of Commerce, The Export Credit Guarantee Agency, and The Ministry of Industry and Commerce. For example, The Export Credit Guarantee Agency protects us in international markets and help SMEs to face uncertainty and risks associated with foreign markets such as when buyers refused to pay, foreign exchange delay, war, civil disorder, and natural disasters’’ (Manager code: MMFBS).

On the other hand, another group of participants were not satisfied with their relationships with some government organizations and their services. They asserted that these organizations provide little assistance, and often use very bureaucratic methods. One owner made this comment:

“Their bureaucratic processes affect our business operations” (Owner code: OTGS).

Another point was highlighted by one manager as follows:

“If you want to expand your business and enter a new market, for example, you will need to wait a long time to finish all the unnecessary processes, which could be done within few weeks” (Manager code: SMJM).

CEO interviewee stated:

‘‘Although currently there are many organizations in Oman offer different services for international SMEs, their work still shaped by bureaucracy, corruption, nepotism or wasta, and complicated regulations’’ (CEO code: CPPM).

One manager illustrated this point:

‘‘I have applied for land to establish my factor 5 years ago until now I don’t have any reply from the government about that while I know others applied after me and they get a land. In Oman, if one of your relatives or friends in decision makers position you will be lucky as all your business procedures will complete very quickly’’ (Manager code: MMPM).

Another owner had this to say:

‘‘I applied for a loan from the bank to expand our business, the bank asked for complicated financial guarantees, and the procedures take very long time, and in the end, the bank refused to give the company the loan’’ (Owner code: OPS).

To conclude, the majority of interviewees have confirmed that they establishing good relationships with their partners in foreign markets such as the customers, buyers, suppliers and other organizations, and these relationships provide them with different resources such as information, knowledge, technology, experiences, ideas, and financial resources which are considered essential to promote their entrepreneurial activities in international markets and to their success (Lindstrand, a Mele’n, and Nordman, 2007; Fornoni and Vila, 2015).

Moreover, the interview indicates that some SMEs currently enter international market and they still struggle with their networks as they still search for appropriate partners. In addition, some new small firms indicate that they lack the resources required for the development of international relationships especially in the absence of government support.

In addition, the interview indicated that there is a difference in participants’ opinion regarding their relationship with government organizations and financial institutions in Oman. While some of them have confirmed that they have good relationships with different government organizations responsible about SMEs in Oman and they get the help and resources required to their success in international markets. Another group of participants stated that they don’t get adequate support from government agencies in Oman due to many constraining institutional factors such as bureaucracy, corruption, nepotism, and complicated regulations.

5.8.2.2 Relational social capital

It was evident when analyzing the interviews that relational social capital which describe the quality of relationships among partners (Nahapiet and Ghoshal, 1998) and represented by trust in this study play an essential role in promoting SMEs entrepreneurial activities in foreign markets. The vast majority of respondents insisted on the importance of their trusted relationships with their partners to obtain sensitive and complex resources that are unavailable to those beyond the boundaries of trust. In addition, they indicated that mutual trust could be a powerful source of communication and cooperation, especially under the conditions of high uncertainty in the international business environment. The majority of them also indicate that with their trusted partners they feel free to discuss any ideas and issues related to their business without any fears from criticism and that enhance their willingness to adopt risky actions.

Table 5-19: Example of Qualitative Data Analysis of Relational Social Capital

Main themes of Relational social capital (trust)	Sub- themes Main themes of Relational social capital (trust)	Example of Quotes
Trusted relationships with different business partners	Exchange sensitive and complex resources (tacit knowledge)	‘‘To be a successful entrepreneur in the international market, you need a commitment of large resources. Usually, we obtain these resources from our trusted partners especially tacit knowledge and sensitive information about the market and competitor’’. ‘‘Our trusted relationships with loyal customers in different foreign markets enable us to identify their demands and needs as closely as possible, and this helps us to develop our products and keep us ahead of our rivals”.
	Prevent opportunism behaviour	“Of course, we trusted our partners because we deal with them for a long time. Currently, we do not need a formal contract because we sure that they never behave opportunistically when any advantage arises”.
	Exchange ideas freely.	‘‘ .... Our relationships with our partners in India very old since we started our international business in 1980s, indeed we trusted them, they become part of our business we sharing everything and discuss any new idea about our business freely with them”.

One CEO indicted that:

‘‘Our relationships with our partners in India very old since we started our international business in 1980s, indeed we trusted them, they become part of our business we sharing everything and discuss any new idea about our business freely with them’’ (CEO code: CPPM).

Another owner mentioned:

‘‘To be a successful entrepreneur in the international market, you need a commitment of large resources. Usually, we obtain these resources from our trusted partners especially tacit knowledge and sensitive information about the market and competitor’’ (Owner code: OMGM).

Another manager explained further:

‘‘As you know we are small perfume company and the competition in this sector very intensive locally and internationally, we rely only on the trusted suppliers to provide us with the original materials such as the ‘oud, Ambre, and musk which are considered as main ingredients in all our perfumes’’ (Manager code: MMPM).

One manager of furniture firm stated that:

‘‘Our trusted relationships with loyal customers in different foreign markets enable us to identify their demands and needs as closely as possible, and this helps us to develop our products and keep us ahead of our rivals’’ (Manager code: EMWFM).

In addition, some interviewees also have mentioned that they rely on trusted relationships because of it confident especially in international markets where the distance far away and it diminishes the perceived risk of opportunism behaviour, and thus they do not need to spend their time and resources to monitor these relationships.

One manager explained this:

‘‘We export to more than 11 countries where they are far away from us and culturally different. So we have to rely on trusted partners only as its difficult to monitor all our business relationships in these countries’’ (Manager code: SMFBM).

The following statements support this view:

“Of course, we trusted our partners because we deal with them for a long time. Currently, we do not need a formal contract because we sure that they never behave opportunistically when any advantage arises’’ (Manager code: SMJM).

It is clear that the majority of respondents insist on the importance of trust in facilitating access to valuable and sensitive resources such as tacit knowledge (Lindstrand, Melen, and Nordman, 2011) which is considered essential for products development. In addition, trust facilitates the exchange of confidential information among partners because it diminishes the perceived risk of opportunism and thus the need to hide sensitive information (Inkpen and Tsang, 2005; Presutti, Boari, and Fratocchi, 2016). Finally, trust reduces fears of criticism and that increase the willingness of managers and founders to implement risky actions and increases the scope of ideas about how to convert entrepreneurial opportunities into action (Gima and Murray, 2007).

5.8.2.3 Cognitive social capital

Cognitive elements of social capital refer to the resources facilitating shared representations, interpretations, and systems of meaning among partners (Nahapiet and Ghoshal, 1998). The most important aspects of cognitive social capital include: shared goals, values, vision, and systems of meanings. Participants were also asked to give their perspectives on the role of cognitive social capital in their entrepreneurial activities in foreign market. The majority confirmed that shared goals, values, culture, and language are considered as important aspects of cognitive social capital creating general understanding among partners and facilitating resources acquisition and exchange. They insisted that relationships characteristic with shared norms, goals, and language reduce misunderstanding and secure flow of high quality of information.

Table 5-20: Example of Qualitative Data Analysis of Cognitive Social Capital

Main themes of Cognitive social capital	Sub- themes of Cognitive social capital	Example of Quotes
-Shared goals	- Ideas exchange -Accept criticism	‘‘ When there is a mutual understanding between our partners and us, we can discuss everything freely with them. We consulate with them about any idea related to our business.’’
-Shared language	-Ease the communication and arise the understanding	‘‘ Our company now export only to the Middle East countries because doing business in these countries very easy for us as we share the same language, culture, customs, and traditions. This makes us understand the market and customers’ needs and preferences.’’ ‘‘ When we enter Iranian market, in the beginning, we struggle with the language, and we found difficult to negotiate with them as they do not speak Arabic or English. Then we hired someone speaks Persian and Arabic.”
-Shared culture	- Reduce conflict and misunderstanding	‘‘ Of occurs it’s important to understand the culture and language of your partners it will ease the communication and reduce the conflict {....}. For example, because I lived in Zanzibar for around 15 years before I come to Oman. I established my first factor there because I speak the Swahili language, I understood the culture there, and I have many business partners.” ‘‘ I can’t cope with business culture in Egypt. It’s actually something difficult. If you want to get some business done, you need to pay a bribe. It is a waste of money as you need to pay for everything there if you want your business to accomplish.

One owner stated:

‘‘When we enter Iranian market, in the beginning, we struggle with the language, and we found difficult to negotiate with them as they do not speak Arabic or English. Then we hired someone speaks Persian and Arabic” (Owner code: OMGM).

Another manager mentioned:

‘‘Our company now export only to the Middle East countries because doing business in these countries very easy for us as we share the same language, culture, customs, and traditions. This makes us understand the market and customers’ needs and preferences’’ (Manager code: FMAFM).

One owner also explained:

‘‘If occurs it’s important to understand the culture and language of your partners it will ease the communication and reduce the conflict {....}. For example, because I lived in Zanzibar for around 15 years before I come to Oman. I established my first factor there because I speak the Swahili language, I understood the culture there, and I have many business partners” (Owner code: OPS).

One CEO pointed out:

‘‘I can’t cope with business culture in Egypt. It’s actually something difficult. If you want to get some business done, you need to pay a bribe. It is a waste of money as you need to pay for everything there if you want your business to accomplish” (CEO code: CPPM).

The existence of common norms, and goals among partners promote ideas exchange, and when entrepreneurs share their creative ideas with their emotionally supportive relationships, it gives them a social comfort, thereby enabling them to accept open criticisms and true feedback. One owner explained this as follow:

‘‘When there is a mutual understanding between our partners and us, we can discuss everything freely with them. We consulate with them about any idea related to our business’’ (Owner code: OTGS).

On the other hand, some participants have mentioned that shared goals and visions with their business partners not necessary if both parties committed to the agreement.

One manager mentioned:

“Not necessary that our partners to have shared vision with us. As they {the partners} committed to the agreement between there will be a mutual understanding, and there will be no conflict’’ (Manager code: EMWFM).

To sum up, cognitive social capital that characteristic by shared goals, culture, and language is considered crucial for Omani SMEs to foster their entrepreneurial behaviour and their success in foreign market. Shared goals and culture among network ties facilitating cooperative behaviour, reduce conflict and misunderstanding (Tuan, 2017), promoting sharing sensitive information and complex knowledge (De Clercq et al., 2013; Harris and Wheeler, 2012).

5.8.2.4 Summary

The results of interviews confirmed the importance of the three dimensions of social capital (structural, relational, and cognitive) in accessing resources such as financial, information, knowledge, and technology that necessary to promote and develop entrepreneurial activities of SMEs in international market. The vast majority of participant confirmed that through the trusted relationships they could access to sensitive information and complex knowledge necessary for their products development. In addition, shared goals, norms and culture with their partners are considered important aspects to develop a mutual understanding, reduce conflict, and ease the communication among partners which in intern, enhance the access and integrate of knowledge. This explains that why the majority of SMEs in Oman are operated in Middle East, Asia, and Africa as these regions are considered geographically close to Oman, and the majority of them share the same language and culture. Moreover, the interviewees showed a difference in their responses regarding structural social capital. While, some of them confirmed that they have good relationships with different partners locally and internationally such as government organizations in Oman, financial institutions, customers, suppliers, and distributors and these network ties help them to access to different resources required to develop their entrepreneurial behaviour, other participants especially new small firms indicated that they still search for appropriate partners, and some of them struggled to lunch and develop good relationships with foreign partners as they lack the resources required to manage these relationships. In addition, some participants indicated that they do not have good relationships with government agencies and financial institutions in Oman due to many constraining institutional factors that shape the work of these organizations such as bureaucracy, nepotism, complicated regulations, and the absence of coordination among them. Thus, this difference in the perspectives of interviewees regarding the role of structural social capital explained its negative moderating in the relationship between EO and international performance.

5.9 Conclusion

The aim of this chapter was to report the results of the quantitative and qualitative data. The statistical methods package known as SPSS was used, and four hypotheses were tested using multiple hierarchical regression analysis.

As part of this analysis, the study has examined the normality, linearity, constant variance and multicollinearity of the research data. None of these criteria posed an issue for the study. The variables within the four models appear to be accurate and can be generalised to the research sample.

The results of the multiple regression analysis do offer support for some research hypotheses. The results supported hypothesis one which is suggested that there is a positive relationship between entrepreneurial orientation and international performance of SMEs. Moreover, the results confirmed hypothesis three which is predicted a positive moderating effect of relation social capital on the relationship between entrepreneurial orientation and international performance of SMEs. In addition, hypothesis four which is stated that cognitive social capital positively moderates the relationship between entrepreneurial orientation and international performance of SMEs has supported by results.

However, the results didn’t offer support to the hypothesis two which is predicated a positive moderating effect of structural social capital on the relationship between entrepreneurial orientation and international performance of SMEs.

In addition, the study has conducted semi-structured interviews with 14 owner and managers of international SMEs to offer a deep understanding of the moderating role of the dimensions of social capital (structural, relational, and cognitive) in the relationship between entrepreneurial orientation and international performance, especially the negative moderating role of structural social capital. Generally, the results of interviews confirmed the importance of the three dimensions of social capital (structural, relational, and cognitive) in accessing resources such as financial, information, knowledge, and technology that necessary to promote and develop entrepreneurial activities of SMEs in international market. The vast majority of participant confirmed that relational and cognitive social capital facilitating access to valuable resources such as sensitive information and complex knowledge, which are considered crucial to developing entrepreneurial behaviour in foreign market. However, the interview analysis has illustrated there is differences in respondents’ opinions regarding structural social capital.

Chapter 6: Discussion, Conclusion, Implications, and Limitations

6.1 Introduction

This chapter focuses on the discussion of the findings and conclusion drawn from the study. Specifically, it summarises the findings of the study based on the objectives. Then, the discussion of the findings is presented and structured according to the research hypotheses. The chapter also presents the theoretical and managerial implications. The chapter then concludes by highlighting the study limitations and several useful areas relevant for future research.

6.2. Overview of the Main Findings

The study aimed at understanding the relationship between EO and international performance of SMEs in Oman as well as the moderating effect of the social capital dimensions (structural, relational, and cognitive) on this relationship. From the findings, it was first established that there is a positive and significant relationship between EO and international performance of SMEs in Oman. This was derived from the regression analysis results which showed that the significant value to be less than 0.01, thus, supporting the first hypothesis of the study. By measuring the level of the moderating influence of the dimensions of social capital, it was established that out of the three social capital dimensions, two have moderating impact on the EO - international performance relationship. The results showed that structural social capital had a negative significant value on the relationship between entrepreneurial orientation and international performance. Having a negative beta value of - 0.020, it was implied that structural social capital negatively moderates the relationship between EO and international performance. Thus, it failed to support the second hypothesis. In the case of the relational social capital, it was determined that the variable had a positive moderating effect with a significant value of less than 0.01. This result, therefore, supported the third hypothesis of the study. The final result revealed from the study is the positive moderating effect of cognitive social capital on the relationship between entrepreneurial orientation and international performance. This finding supports the fourth hypothesis.

6.3 Discussion of the Hypotheses in Relation to the Study’s Findings

This section discusses the results of the study in regards to the hypotheses.

6.3.1 Entrepreneurial orientation is positively correlated with the international performance of SMEs

Owing to the role of EO in promoting firm performance, there are various theoretical frameworks as well as empirical studies conducted in the past to investigate the relationship (Brouthers et al., 2014). In the study, the influence of EO on the international performance of SMEs in Omani was investigated using a quantitative approach.

The study showed that there is a positive and significant relationship between entrepreneurial orientation and international performance (β = .195, p < 0.01 and CR = 0.325). This is supported by the literature with many studies revealing that EO positively drives internationalisation process and success of the firms (Knight, 2001; De Clercq et al., 2005; Zhang et al., 2012; Brouthers et al., 2014; Bianchi and Mathews, 2016). This is associated with the fact that firms that possess a high degree of EO come up with innovative ideas frequently, take risks initiatives and act proactively towards emerge opportunities in the global markets (MartinandJavalgi,2016). Innovative strategies and considerations of new ideas can help SMEs remain relevant in the international market (Brouthers et al., 2014) as these can help SMEs to meet different demands and preferences of overseas customers (Zhang, et al., 2012). Basile (2012) had also argued that with the implementation of EO dimensions such as risk-taking, SMEs are able to traverse regional and international markets without the fear of unknown economic climate. In addition, proactive SMEs are more likely to gain insight into international market opportunities and to alter to the changes in the global business environment which offers first-mover advantages ahead of the competitors through the anticipation of the needs and demands of the customers, thus, promoting international performance (Martin and Javalgi, 2016; Zhang et al., 2012).

In conclusion, as reflected in various empirical studies of EO carried out across various contexts including industries, regional targets, cultures, and firm sizes, the Oman SMEs sample was found by the study to demonstrate that EO has a great impact on the international performance of firms. The positive relationship is associated with the fact that SMEs are more often exposed to “harsh” economic climate; by implementing EO, they are able to overcome the entrepreneurial challenges. The finding also supports the arguments of entrepreneurship scholars that EO is currently applied in both western and non-western countries.

6.3.2 Structural social capital positively moderates the relationship between EO and the international performance of SMEs

The study used model 2 to assess whether structural social capital moderates the relationship between EO and international performance. The findings revealed that there is a significant but negatively moderates effect on the relationship between the two variables (β = -.020, p < 0.05 and CR = 0.050). This inference contradicts literature which supports the hypothesis.

Interestingly, this result is not in support of the literature as many entrepreneurship scholars posit that structural social capital promotes entrepreneurial activities which are linked to the overall performance (Stam and Elfring 2008: Boso, Story, and Cadogan, 2013: Engelen, Kaulfersch, and Schmidt, 2016). Through structural social capital, firms are able to integrate and share information that can aid in particular risk-taking strategies. Tajvidi and Karmi (2014) considered network ties (structural social capital) to be essential in acquiring and sharing knowledge in regards to the market trends, resource acquisition and accessibility, stakeholders collaboration, and the trending communication system. The authors added that this form of social capital is associated with sharing of resources among partners, access to new markets, and obtaining technologies that cannot be accessed in isolation. Saeedi et al. (2013) had also argued that having a good relationship among business partners can help in accessing and sharing of information regarding existing opportunities and help access to advice, resources, and problem- solving skills enable entrepreneurial-oriented activities to be implemented more quickly with less time and other resources.

An interpretation of this finding is that seems some social capital dimensions matter for entrepreneur firms more than others. Thus, that seems that seems SMEs in Oman rely more on the quality of social capital more than the number of ties that they established with different partners. This also confirmed by interview results which revealed that owners and managers of SMEs in Oman worked mainly with relational social capital, people they know well and trusted.

The results of semi- structured interviews with managers and owners of SMEs in Oman which conducted to deeply explain the negative moderating role of structured social capital in the relationship between EO and international performance of SMEs indicated that SMEs in Oman rely more on their relationships with different partners in foreign markets such as customers, suppliers, distributors, and other organizations to obtain required resources to develop their entrepreneurial behaviour in international market than on their relationships with government organizations and bank institutions in Oman as there are some institutional factors affect these relationships such as bureaucracy, corruption, nepotism, and complicated regulations. In addition, the results of interview indicated also that some new small firms still struggle with their networks as they still search for appropriate partners because they lack the resources required for the development of international relationships especially in the absence of government support.

In conclusion, the Oman SMEs may be willing to integrate structural social capital into their entrepreneurial ventures, but there are factors that may hinder this. Scarcity of resources may hinder establishing and management network ties. In addition to this, some institutional factors related to Oman context would affect the benefits gained from network ties especially those with government organizations.

6.3.3 Relational social capital positively moderates the relationship between EO and the international performance of SMEs

The study also utilized model 3 to investigate whether relational social capital moderates the relationship between EO and international performance. It was found that there is a positive and significant moderation effect of the variable on the relationship between EO and international performance (β = .010, p < 0.01 and CR = 0.001).

This result is in line with the empirical findings from the previous studies (Moran, 2005; De Clercq et al., 2010; De Clercq et al., 2013; Engelen et al., 2016; Luu and Tuan, 2017) which found that relational social capital represented by trust promote entrepreneurial activities and thereby foster firm performance. High levels of trust allow sharing and transfer of important information and foster collaborative action among exchange partners (Coleman, 1990). In addition, trusted relationships encourages organizations to share high quality and sensitive information with each other and prevent the likelihood of opportunistic behaviour among actors (De Clercq et al., 2013). Moran (2005) stated that entrepreneurs in social networks with a high level of trust among members can reduce entrepreneurial risks, specifically in those environments with high level of uncertainty such as international environment, as those confidential recourses enhances the willingness of entrepreneurs to implement risky actions and increases the scope of ideas about how to convert entrepreneurial opportunities into action. Moreover, a high level of social capital built on a good reputation and solid experience often assists entrepreneurs in gaining access to confidential recourses necessary for the successful of exploitation of entrepreneurial opportunities (Luu and Tuan,2017).

The result also confirmed by interview as the majority of respondents have insisted on the importance of trusted relationships to their entrepreneurial activities in international market. As through their trusted relationships with different partners they able to access to sensitive information about foreign markets and access to confidential resources that help them to explore and exploit emerge opportunities before their competitors. In addition, they indicated that mutual trust could be a powerful source of communication and cooperation, especially under the conditions of high uncertainty in the international business environment.

To conclude, relational social capital associated with the qualities of relationships among actors and characterized through trust has found to positively moderate the relationship between entrepreneurial orientation and international performance and this results confirmed also by interview results as trust is considered as critical tool to access to complex and sensitive resources necessary to promote entrepreneurial behaviour especially among SMEs which characterized by limited resources.

6.3.4 Cognitive social capital positively moderates the relationship between EO and the international performance of SMEs

In the result section, model 4 represents the result of the moderating effect of cognitive social capital on the association between entrepreneurial orientation and international performance of SMEs. It was found that there is a positive and significant moderation effect of the variable on the association between EO and international performance (β = .029, p < 0.05 and CR = 0.013). It may be concluded that cognitive social capital is an important attribute to the entrepreneurial orientation behaviour of SMEs in Oman.

The result is supported by empirical findings showed by previous studies highlighted in the literature (De Clerq et al., 2013; Engelen et al., 2016; Alarcon et al., 2017). This result can be interpreted in terms of the value of shared goals, culture, and visions among the entrepreneurial stakeholders. Usually, shared norms and goals, which are key elements of cognitive social capital, give freedom of sharing ideas, secure information flow, and create bold behaviour in embracing innovative ideas (Krause et al., 2007). Similarly, Dakhli and De Clercq (2004) argued that a common culture accompanied with shared values associated with increased innovativeness among SMEs. Firstly, aspects like shared vision are mechanism favouring integration of knowledge between parties, thus, considered a critical element in the process of innovation (Alarcon et al., 2017). Thus, the higher the norms, goals, and a common culture, the higher will be the propensity of entrepreneurs to interpret useful information and knowledge and therefore to innovate.

Moreover, shared understanding enable entrepreneurs’ firms to access, learn, and understand complex knowledge such as tacit knowledge, which is learned through experience. As the entrepreneurs interact, they help each other develop heuristics that facilitate mutual understandings of complex problems and consequently ease the transfer of complex information (De Clercq et al., 2013). Furthermore, shared goals and visions among entrepreneurial firms ensure that actors do not become opportunistic by using the shared ideas to benefit themselves (Engelen et al., 2016).

In the case of SMEs in Oman, it is evident that the business owners like to associate and do business with those whom they share similar visions, perceptions, and expectation in the business arena. This explains why more than 99% of the international businesses are based in Middle East; Oman and other countries within the Middle East share various cultural norms including social, economic, and political expectations. They are also affected by similar challenges especially in the aspect of technology development.

Moreover, these results were also supported by interviews as the vast majority of the respondents have confirmed that shared goals and culture among network ties facilitates cooperative behaviour, reduces conflict and misunderstanding, and promotes sharing sensitive information and complex knowledge.

In conclusion, the cognitive social capital is a moderating factor influencing the relationship between EO and international performance. The SMEs sample agreed to the fact that having shared vision and goals can foster their entrepreneurial activities and in turn, enhance their international success. As relationships characteristic by shared goals and culture ease communication, creating common understanding among the entrepreneurs regarding how to interact with each other, facilitating exchange of sensitive resources such as tacit knowledge and integration of ideas. This has resulted in fostering entrepreneurial behaviour and thereby increased international performance of the SMEs.

6.4 Conclusion

The aim of the study was to investigate the effect of EO in the international performance of SMEs in Oman and examine the moderate role of the dimensions of social capital (structural, relational, and cognitive) in the relationship between EO and international performance. To achieve this aim, the study mainly employed a quantitative approach and further conducted semi- structured interview to deeply explain the moderating role of social capital especially the negative moderating role of structural social capital.

Firstly, the findings revealed that EO is positively influence the international performance of SMEs. The positive impacts of EO on firm performance have been acknowledged in the entrepreneurial literature which has led to the abundant understanding of the relationship between the two constructs. Many of the reviewed scholars argued that firms who implement EO perform better than their counterparts that are using more conservative approaches. This has been associated with the fact that EO enables exploration of high-quality opportunities in the marketplace and aids in the control of uncertainty in the market and product life-cycle. Also, EO provides businesses with innovative ideas which they proactively implement to remain relevant in the competitive business world.

Secondly, the findings indicated that structural social capital as represented by network ties in this study is negatively moderate the relationship between EO and international performance of SMEs. This finding contradicts the literature which shown that structural social capital is an essential tool for promoting entrepreneurial activities. One of the factors that have been suggested to influence this observation is resource constraint which hinders SMEs to establish and manage relationships especially with those partners in foreign market. It also emerged that the sample characteristics and measures have used may have affected the results. In addition, the interview results have showed that there are some institutional factors hinder the relationships between SMEs and government organizations in Oman.

Thirdly, the study confirmed that relational social capital positively moderates the relationship between entrepreneurial orientation and international performance. The finding supported arguments of scholars who suggest that entrepreneurs having high level of trust with their partners can reduce entrepreneurial risks. This fact applies majorly to the SMEs operating in environments that have high uncertainty levels such as international market. Confidence among entrepreneurs can enhance their willingness to consider risky actions convert entrepreneurial opportunities into successful ventures. SMEs that are able to create a trusting environment with their networks can easily obtain sensitive information which may be important for innovation (Boon and Holmes, 1991). Trust reduces the likelihood of opportunistic relationships, thus, promotes the sharing and combination of resources that are necessary for exploiting entrepreneurial opportunities (De Clercq et al., 2013).

Finally, the study found that there is a positive and significant moderating effect of the cognitive social capital on the relationship between EO and international performance. This result is associated with the fact that entrepreneurs who share goals and visions with their partners are able to work harmoniously towards achieving international performance. Relationships characterized by shared goals and culture ease communication, creating common understanding among the partners regarding how to interact with each other, and facilitating exchange of sensitive resources such as tacit knowledge (Krause et al.,2007; De Clerq et al., 2013).

6.5 Theoretical and Managerial Implications

A key theoretical implication of the findings is the new way of thinking entrepreneurship as a result of the integration of two separate subjects – entrepreneurial orientation and social capital. This idea implies that there is a need to adopt a broader perspective instead of what researchers have applied so far (Kollmannand, 2014). For instance, literature addressing EO and social capital dimensions are vast but have ignored the wealth creation opportunity that can emerge when entrepreneurs link the two strategies within the firm. As such, the study’s integration of the two concepts suggests a new approach to entrepreneurship, which indicates the interest of academics in explaining the existing relationship between social capital and EO.

In regards to international entrepreneurship field, the findings address the gap in the international entrepreneur studies (Styles and Seymour, 2006). In particular, the study provides an empirical evidence of the impact of EO on firm international performance, which further enhances academic understanding through the convergence of two separate and distinct streams of internationalisation research. The study has integrated international business and entrepreneurship by providing evidence of the relationship existing between the two constructs. It contributes to the field of international entrepreneurship by confirming that EO is the key contributor of international performance.

Additionally, the study advances the EO research streams by applying social capital theory to address the moderating role of different dimensions of social capital (structural, relational and cognitive) as suggested by previous studies (Covin and Miller, 2014) to explore the role of these three dimensions in explaining the relationship between EO and firm performance. Although prior research has shown that networking in general can be beneficial for EO (Kaulfersch and Engelen, 2012; Stam and Elfring, 2008), the present study takes a comprehensive view of social capital, examining each of its three dimensions and finding that only two, relational and cognitive, enhance the influence of EO on performance, whereas the third dimension, structural, does not affect. These findings add to the literature of social capital and EO by clarifying the functions of social capital and showing that an aggregated approach to social capital may not be beneficial.

The growth of Omani SMEs as being key contributor to international business is evidence of new factors that influence the global financial and internationalisation success. The success of the SMEs in the study validates that even smaller firms are able to internationalize. Research has just recently begun to assess the capabilities and resources, which can facilitate internationalisation, as well as to overcome limitations such as resource constraints (Etemad, 2015; Jin et al., 2017). The acceleration of internationalisation among the SMEs is still not fully understood not the national effects and cultural implications been adequately investigated. These findings validate the role of EO and social capital for international performance of SMEs in the context of Oman.

Overall, the study provides empirical support for an integrated multidisciplinary framework, which contributes to entrepreneurship, strategy, international business, and management literatures. It confirms the significance of EO and social capital in understanding of SMEs performance in international market.

The study has also proven to have managerial significance. The results proved that a focus on EO is a significant factor in the success of SME internationalisation. Thus, it is important that SMEs keep abreast with the new competitive strategies through a continuous research and development as well as generation of innovative ideas. So, it is important that SMEs’ owners and managers get informed on how to implement EO in order to position themselves in the competitive and volatile market (Rodrigo-Alarcón, García-Villaverde, Ruiz-Ortega, and Parra-Requena, 2017). EO is important in the business where there is high instability and turbulent markets such as international markets, thus, can help SMEs to compete effectively.

Furthermore, this study provides an effective foundation for Omani policy makers to develop strategies and programmes to support entrepreneurial activities and promot enterpreneurial spirit in Omani SMEs to enhance their performance in international markets. Effective adoption of and implementation of EO would require create entrepreneurial culture among SMEs. As such, there is need to involve the educational institutions (colleges and universities) and other supporting organizations are needed to provide entrepreneurial education and training for SMEs. This is suggested by Gray (2006) who argued that effective firm management is associated with the relevance and level of formal training. It is, therefore, important that universities and professional bodies provide educational framework for more innovative ideas among the SME managers and owners.

In addition, the findings of the study are highligting the important role of dimensions of social capital in facilitating the EO–performance relationship. In being entrepreneurial and trying to anticipate the future needs of the market, top management should cultivate social capital with different partners external to their firms. Personally reaching out to their contacts and staying in touch is critical to making clear that they are interested in maintaining these relationships to the benefit of both sides. In particular, a large number of network ties can help prevent the bad decisions that can lead an entrepreneurially oriented firm down the wrong strategic path. Although networking requires investment of time and resources, the benefits outweigh the costs for entrepreneurially oriented firms because having a large number of network ties (for example with external customers, suppliers, and government officials) and establishing trust and shared goals and culture with these contacts helps an organization navigate the market environment and obtain critical resources necessary to promote their entrepreneurial activities. The findings also show that one dimension of social capital, structural, does not enhance the effect of EO, suggesting that, if top managers devote substantial time and resource with different partners in foreign market. In addition, government and private orgnazations in Oman have improved institional environment by reducing bureaucracy, corruption, and inefficiencies that may hinder their relationships with SMEs. Moreover, there is need to engage the SMEs in the government-funded programs including export fairs, tradeshows, export management training, financial management, and service quality improvement to spur networking among the entrepreneurs.

6.6 Research Limitations and Future Research

6.6.1 Limitations of study

Although the research increases the knowledge base of the relationship between EO and international performance of SMEs in Oman, it is still faced with various limitations:

Limitations of the study sample. The sample of the study had been restricted to a country (Oman) and to the context of SMEs only. This means that there could be possible variations in the results in case samples were considered from different countries and big multinational companies. Most of the participants were based in the manufacturing industry; this means that other industries such as service is not represented yet it might be having different experiences with EO approach. Furthermore, the respondents were all indigenous people from the country with similar background. The researcher also considered a survey method that involved “drop and collect” approach in a specific area of Oman and in specific time. Thus, the sample may not accurately represent the whole Oman population.

Limitations in the survey instrument. Although the study considered the use of questionnaires adapted from past research and translated to the Oman case, some of the questions that address EO and social capital dimensions as well as international performance were not related to the respondents’ activities. This could have created ambiguity in the answers of the respondents, thus, affecting validity and accuracy of the information. Similarly, using perceptual instead of objective data for the SMEs’ firm-performance variable could have not promoted the actual depiction of the current state of the respondents.

Limitations of the time frame. During the collection of data, a cross-sectional design was adopted in which information from the participants was adopted at a particular point in time. Due to this short timeframe, it was not possible to capture the actual social capital dimensions, the EO adoption processes, and particularly the effect on international performance in Oman over time. Thus, strong conclusion regarding the true adoption and effect of EO as well as the dynamic effects of social capital could not be drawn in a manner as if the study was conducted through a longitudinal design.

6.6.2 Recommendations for future research

The findings of the study suggest the key ways through which future research can address the relationship between EO and firm performance.

There is a need to use a larger sample in both interviews and survey, taken across different industries, SMEs and big enterprises that cover Omani and other countries in the Middle East. This could be beneficial since the process will provide more information regarding the phenomena studied and also help identify whether specific EO dimensions influence international performance. A larger sample that involves different populations is more representative and, thus, can be more accurate. The study should also investigate whether the varying firm characteristics (size, firm age, industry, international strategy, and consumer target) influence adoption of EO by the entrepreneurs.

There was an inconsistent finding for the moderating effect of structural social capital on the relationship between EO and international performance using SMEs sample in Oman. Since this was contradicting to the literature presented, it might be possible that the nature of the sample and measures affected the results. For example, international performance measurement the researcher used may not represent the perception of SME managers or owners on international performance. Also, structural social capital might be measured in different way. Utilizing different measures for international performance such as objective and non-financial measures and for structural social capital such as (network configuration and network centrality could reveal best results.

Empirical research shows that there is a contingent, rather than direct, relationship between entrepreneurial behaviour as dictated by EO and performance of a firm. This assertion is supported by the results of the study which shows that social capital seems to be the moderator in the EO-firm performance relationship. This means that key variables including external and internal environments within which a firm operates should be put into consideration during the investigation of the correlation between EO and firm performance in order to obtain a wider context of the entrepreneurial processes. While external environment includes the cultural values and industry environment, the internal environments include characteristics of the firm such as size, type of industry, age of the firm, internationalisation process, etc.

Future research may also consider the use of longitudinal design to explain further the results. This design method enables the researcher to examine the persistence and existence of the relationship between the variables investigated over a period of time. In particular, using longitudinal method for EO research enables the researcher to investigate if the relationship between EO and international performance changes over time due to variations in development stages. This has been suggested by Saeedi et al. (2013) who used longitudinal design to assess the effect of EO on internationalisation process among the Iran B2B SMEs. Similar design is also advocated by Javalgi and Todd (2010) who also examined the role of EO on SME behaviour in India.

6.7 Summary

Chapter six has discussed the findings of this study. It concluded that there is positive relationship between EO and international performance and this relationship moderating by relational and cognitive social capital.

This study has contributed to the existing entrepreneurship literature by filling the gap with regards to the role of different dimensions of social capital in the relationship between EO and firm performance (Engelen et al., 2016). Moreover, this study has used a quantitative method design as main approach and conducted semi-structured interview for a more comprehensive understanding about moderating role of dimensions of social capital.

The current research findings have practical managerial implications for SMEs, and the conclusions of this research are expected to be beneficial for policy makers in Oman. However, this chapter has also highlighted the limitations of this research, and the further studies which are needed. It has indicated that there are some limitations, which can be resolved by conducting further research.

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Figure � SEQ Figure \* ARABIC �3-1�: Research Framework

Social Capital

relational

structure

cognitive

Entrepreneurial Orientation

International performance of SMEs

The direct effect

The moderating effect

Determine the sampling frame

Select sampling technique(s)

Determine the sample size

Figure � SEQ Figure \* ARABIC �4-1�: Sample Design Process

Execute the sampling process

Figure � SEQ Figure \* ARABIC �4-2�: Questionnaire Design Process (Source: Malhotra and Briks, 2003)

Purpose of Assignment

The purpose of this assignment is for students to learn how to make managerial decisions using a case study on Normal Distribution. This case uses concepts from Weeks 1 and 2. It provides students an opportunity to perform sensitivity analysis and make a decision while providing their own rationale. This assignment also shows students that statistics is rarely used by itself. It shows tight integration of statistics with product management.

Assignment Steps

Resources: Microsoft Excel®, SuperFun Toys Case Study, SuperFun Toys Case Study Data Set

Review the SuperFun Toys Case Study and Data Set.

Develop a 1,050-word case study analysis including the following:

· Use the sales forecaster's prediction to describe a normal probability distribution that can be used to approximate the demand distribution.

· Sketch the distribution and show its mean and standard deviation. Hint: To find the standard deviation, think Empirical Rule covered in Week 1.

· Compute the probability of a stock-out for the order quantities suggested by members of the management team (i.e. 15,000; 18,000; 24,000; 28,000).

^^My portion is the highlighted bullet 3 above ^^

· Compute the projected profit for the order quantities suggested by the management team under three scenarios: pessimistic in which sales are 10,000 units, most likely case in which sales are 20,000 units, and optimistic in which sales are 30,000 units.

· One of SuperFun's managers felt the profit potential was so great the order quantity should have a 70% chance of meeting demand and only a 30% chance of any stock- outs. What quantity would be ordered under this policy, and what is the projected profit under the three sales scenarios?

Format your assignment consistent with APA format.

Title

ABC/123 Version X

Case Study – SuperFun Toys

QNT/561 Version 9

Case Study – SuperFun Toys

SuperFun Toys, Inc., sells a variety of new and innovative children’s toys. Management learned the pre-holiday season is the best time to introduce a new toy because many families use this time to look for new ideas for December holiday gifts. When SuperFun discovers a new toy with good market potential, it chooses an October market entry date. To get toys in its stores by October, SuperFun places one-time orders with its manufacturers in June or July of each year.

Demand for children’s toys can be highly volatile. If a new toy catches on, a sense of shortage in the marketplace often increases the demand to high levels and large profits can be realized. However, new toys can also flop, leaving SuperFun stuck with high levels of inventory that must be sold at reduced prices. The most important question the company faces is deciding how many units of a new toy should be purchased to meet anticipated sales demand. If too few are purchased, sales will be lost; if too many are purchased, profits will be reduced because of low prices realized in clearance sales.

This is where SuperFun feels that you, as an MBA student, can bring value.

For the coming season, SuperFun plans to introduce a new product called Weather Teddy. This variation of a talking teddy bear is made by a company in Taiwan. When a child presses Teddy’s hand, the bear begins to talk. A built-in barometer selects one of five responses predicting the weather conditions. The responses range from “It looks to be a very nice day! Have fun” to “I think it may rain today. Don’t forget your umbrella.” Tests with the product show even though it is not a perfect weather predictor, its predictions are surprisingly good. Several of SuperFun’s managers claimed Teddy gave predictions of the weather that were as good as many local television weather forecasters.

As with other products, SuperFun faces the decision of how many Weather Teddy units to order for the coming holiday season. Members of the management team suggested order quantities of 15,000, 18,000, 24,000, or 28,000 units. The wide range of order quantities suggested indicates considerable disagreement concerning the market potential.

Having a sound background in statistics and business, you are required to perform statistical analysis and the profit projections which is typically done by the product management group. You want to provide management with an analysis of the stock-out probabilities for various order quantities, an estimate of the profit potential, and to help make an order quantity recommendation.

SuperFun expects to sell Weather Teddy for $24 based on a cost of $16 per unit. If inventory remains after the holiday season, SuperFun will sell all surplus inventories for $5 per unit. After reviewing the sales history of similar products, SuperFun’s senior sales forecaster predicted an expected demand of 20,000 units with a 95% probability that demand would be between 10,000 units and 30,000 units.

SuperFun Toys Case Study Grading Guide

QNT/561 Version 9

SuperFun Toys Case Study Grading Guide

QNT/561 Version 9

Applied Business Research and Statistics

Copyright

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Microsoft®, Windows®, and Windows NT® are registered trademarks of Microsoft Corporation in the United States and/or other countries. All other company and product names are trademarks or registered trademarks of their respective companies. Use of these marks is not intended to imply endorsement, sponsorship, or affiliation.

Edited in accordance with University of Phoenix® editorial standards and practices.

Learning Team Assignment: SuperFun Toys Case Study

Purpose of Assignment

The purpose of this assignment is for students to learn how to make managerial decision using a case study on Normal Distribution. This case uses concepts from Weeks 1 and 2. It provides students an opportunity to perform sensitivity analysis and make a decision while providing their own rationale. This assignment also shows students that statistics is rarely used by itself. It shows tight integration of statistics with product

Resources Required

· Microsoft Excel®

· SuperFun Toys Case Study

· SuperFun Toys Case Study data set

Grading Guide

*Content*	Met	Partially Met	Not Met	Comments:
Review the SuperFun Toys Case Study and Data Set.
Develop a 1,050-word case study analysis including the following: · Use the sales forecaster’s prediction to describe a normal probability distribution that can be used to approximate the demand distribution. · Sketch the distribution and show its mean and standard deviation. Hint : To find the standard deviation, think Empirical Rule covered in Week 1. · Compute the probability of a stock-out for the order quantities suggested by members of the management team (i.e. 15,000; 18,000; 24,000; 28,000). · Compute the projected profit for the order quantities suggested by the management team under three scenarios: pessimistic in which sales are 10,000 units, most likely case in which sales are 20,000 units, and optimistic in which sales are 30,000 units. · One of SuperFun’s managers felt the profit potential was so great the order quantity should have a 70% chance of meeting demand and only a 30% chance of any stock- outs. What quantity would be ordered under this policy, and what is the projected profit under the three sales scenarios?
		*Total Available*	*Total Earned*
		7	#/7

*Writing Guidelines*	Met	Partially Met	Not Met	Comments:
The paper—including tables and graphs, headings, title page, and reference page—is consistent with APA formatting guidelines and meets course-level requirements.
Intellectual property is recognized with in-text citations and a reference page.
Paragraph and sentence transitions are present, logical, and maintain the flow throughout the paper.
Sentences are complete, clear, and concise.
Rules of grammar and usage are followed including spelling and punctuation.
		*Total Available*	*Total Earned*
		3	#/3

Assignment Total

#/10

Additional comments:

Profit Projections

Order Quantity	15,000
Purchase Cost per unit	$ 16.00
	Sales		Order Quantity	Total Cost	Total Revenue		Profit
					@ $24.00	@ $5.00
	Pessimistic	10,000	15,000
	Likely	20,000	15,000
	Optimistic	30,000	15,000
Order Quantity	18,000
Purchase Cost per unit	$ 16.00
	Sales		Order Quantity	Total Cost	Total Revenue		Profit
					@ $24.00	@ $5.00
	Pessimistic	10,000	18,000
	Likely	20,000	18,000
	Optimistic	30,000	18,000
Order Quantity	20,000
Purchase Cost per unit	$ 16.00
	Sales		Order Quantity	Total Cost	Total Revenue		Profit
					@ $24.00	@ $5.00
	Pessimistic	10,000	20,000
	Likely	20,000	20,000
	Optimistic	30,000	20,000
Order Quantity	24,000
Purchase Cost per unit	$ 16.00
	Sales		Order Quantity	Total Cost	Total Revenue		Profit
					@ $24.00	@ $5.00
	Pessimistic	10,000	24,000
	Likely	20,000	24,000
	Optimistic	30,000	24,000
Order Quantity	28,000
Purchase Cost per unit	$ 16.00
	Sales		Order Quantity	Total Cost	Total Revenue		Profit
					@ $24.00	@ $5.00
	Pessimistic	10,000	28,000
	Likely	20,000	28,000
	Optimistic	30,000	28,000

Question 4

Order Quantity
Purchase Cost per unit	$ 16.00
	Sales		Order Quantity	Total Cost	Total Revenue		Profit
					@ $24.00	@ $5.00
	Pessimistic	10,000
	Likely	20,000
	Optimistic	30,000

blog1

Case Study – SuperFun Toys

Learning Team Assignment: SuperFun Toys Case Study

Purpose of Assignment

Resources Required

Grading Guide

Profit Projections

Question 4

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