INTERNAL AND EXTERNAL
ENVIRONMENTAL INFLUENCES OF
SUSTAINABLE INTERNATIONAL NEW
VENTURE INTERNATIONALIZATION
Master Thesis
MSc. Business Administration – International Management Supervisor: Dr. Johan Lindeque
Second reader: Dr. Markus Paukku
Student: Cathelijn Lotte Raaijmakers Student ID: 11197056
Abstract
International Business (IB) research recognizes the opportunities that lie in examining sustainability, yet approaches it “often in a generic way, without direct relevance for IB” (Kolk, 2016, p. 32; Kourula, Pisani, & Kolk, 2017). With sustainability being central to establishing a future in which the economic, environmental and social needs of the society can be met, sustainable entrepreneurs readily tackle these opportunities (Cohen & Winn, 2007; Dean & McMullen, 2007). Their initiatives have shaped the development of Sustainable International New Ventures (SINVs), a unique subset of International New Ventures (INVs). Therefore, to understand the development of SINVs the influence of the internal and external environment on their internationalization is examined. By breaking down the framework of Oviatt and McDougall (1994) the internal environment is characterized by resources, routines and alternative governance structures, and the external by foreign location advantages. Specifically, SINVs are analyzed from a subnational level of analysis allowing the in-depth analysis of environmental factors. Through a multiple case study research design 8 SINVs are interviewed and documentary data is collected for analysis. The main findings partially indicating that SINVs face additional constraints when internationalizing, due to the difficulties associated with obtaining sustainable resources and establishing sustainable routines. Full support is found concerning SINVs’ sustainable entrepreneurial leadership enabling internationalization. Further, research partially indicates that global sustainability is discontinuous, yet this is not due to others focus on profit-maximization. No support is found concerning the influence of global cities, consequently, the external environment of SINVs requires greater in-depth analysis.
Keywords: Sustainable International New Ventures, sustainability, entrepreneurship,
Statement of Originality
This document is written by student Cathelijn Lotte Raaijmakers who declares to take full responsibility for the contents of this document.
I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.
The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.
Acknowledgements
Hereby, I want to sincerely thank my supervisor Dr. Johan Lindeque for his time, energy and support. His expertise and guidance are what helped me develop this thesis, and his enthusiasm triggered its continuous improvement. Additionally, I would like to thank the SINVs for their time and input, without their cooperation I would not have been able to produce this final work product.
Table of Contents
1. Introduction ... 8
2. Literature Review ... 13
2.1. International entrepreneurship ... 13
2.2 International new ventures ... 14
2.2.1 International new venture internationalization ... 15
2.3. Sustainable international new ventures ... 17
2.4. Internal environment ... 19
2.4.1. Internalization of resources ... 19
2.4.2. Alternative governance structures ... 21
2.5. External environment ... 23
2.5.1. Foreign location advantages ... 24
2.5.2 Global cities ... 25
2.6. Conclusion ... 29
3. Methodology ... 30
3.1. Ontological and epistemological foundations of research ... 30
3.2. Qualitative multiple case study research design ... 30
3.3. Case selection ... 32
3.4. Data collection ... 34
3.5. Quality criteria ... 37
3.6. Data analysis method ... 38
4. Results ... 40
4.1 Within-case analysis ... 40
4.1.1. Case 1: Closing the Loop ... 40
4.1.2. Case 2: TreeWifi ... 42
4.1.3. Case 3: The CO2 Advisors ... 45
4.1.4. Case 4: CocoPallet ... 47
4.1.5. Case 5: Monsak ... 49
4.1.6. Case 6: Mud Jeans ... 51
4.1.7. Case 7: Firm A ... 54
4.1.8. Case 8: BBROOD ... 57
4.2.1. Internal environment ... 59
4.2.2. External environment ... 65
4.2.3. Working proposition results ... 68
6. Conclusion ... 70
6.1. Managerial implications ... 72
6.2. Limitations ... 72
7. References ... 73
Index of Tables and Figures
Tables
Table 1: Case Overview ... 33
Table 2: Matrix Interview Questions ... 35
Table 3: Data Collection Overview ... 36
Table 4: Coding Scheme ... 39
Table 5: Results Case 1, Closing the Loop ... 41
Table 6: Results Case 2, TreeWifi ... 43
Table 7: Results Case 3, The CO2 Advisors ... 46
Table 8: Results Case 4, CocoPallet ... 48
Table 9: Results Case 5, Monsak ... 50
Table 10: Results Case 6, Mud Jeans ... 53
Table 11: Results Case 7, Firm A ... 55
Table 12: Results Case 8, BBROOD ... 58
Table 13: Results Cross-Case Analysis, Sustainable Resources and Routines ... 60
Table 14: Results Cross-Case Analysis, Governance ... 63
Table 15: Results Cross-Case Analysis, Location ... 66
Table 16: Overview of Working Proposition Results ... 69
Table 17: Interview Questions in English and Dutch ... 85
Figures Figure 1: Necessary Elements for Sustainable International New Ventures ... 16
Figure 2: Conceptual Model, the Influences of Sustainable International New Ventures’ Unique Internal and External Environment on SINV Internationalization ... 18
1. Introduction
Sustainable development is one of the most prominent contemporary topics, as the exponential growth of business has become an increasing risk for humanity, and does not create the possibility of a sustainable future (Bocken, Short, Rana, & Evans, 2014; Evangelista, 2005; Kolk, 2016; Kourula et al., 2017; Shepherd & Patzelt, 2011; World Wildlife Fund [WWF], 2016). Scholars claim sustainable entrepreneurial action can counter the negative externalities of current business, as great opportunities lie within these market failures (Cohen & Winn, 2007; Dean & McMullen, 2007). Overlapping with the concepts of environmental and social entrepreneurship, sustainable entrepreneurship encompasses social and environmental goals, as sustainable development considers both needs (World Commission on Environment and Development [WCED], 1986). Consequently, central to sustainable entrepreneurship is the
“preservation of nature, life support, and community in the pursuit of perceived opportunities to bring into existence future products, processes, and services for gain, where gain is broadly construed to include economic and non-economic gains to individuals, the economy, and society”
Shepherd & Patzel (2011, p. 142).
Sustainable entrepreneurship has become innovation’s new frontier and transformed the competitive landscape of business, contributing to the development of Sustainable International New Ventures (SINVs) (Nidumolu, Prahalad, & Rangaswami, 2015). SINVs are a unique subset of International New Ventures (INVs), changing business as it is known today with proactive international sustainability driven strategies. Led by sustainable entrepreneurs, SINVs aim to lead a path of sustainable development “that meets the needs of the present without compromising the ability of future generations to meet their own needs” (WCED, 1986). Thus, there is a new need to understand this visionary strategy of sustainability that “focuses on sustainability issues within all business activities” (Baumgartner, 2009, p. 104), as International Business (IB) research on sustainability remains “generic and introductory in nature” (Kolk, 2016, p. 27).
The pressure from the rising global population, increased resources usage and the resulting negative externalities, have called for this “new breed of entrepreneurial firm, one that is driven to contribute to a society which is sustainable, not just from an economic perspective,
but from an environmental and social perspective as well” (Cohen & Winn, 2007, p. 30). Yet, a new found understanding of how SINVs’ entrepreneurs successfully exploit opportunities is required (Bocken et al., 2014). A SINV originates from the notion of an INV, defined as a “business organization that, from inception, seeks to derive significant competitive advantage from the use of resources and the sale of outputs in multiple countries” (Oviatt & McDougall, 1994, p. 49). This resemblance of SINVs and INVs in terms of internationalization patterns, small size and limited resources has resulted in a lack of research on SINVs (Sleuwaegen & Onkelinx, 2014). Uncertainties remain in understanding the challenges of internationalization faced by sustainable entrepreneurs (Cohen & Winn, 2007; Evangelista, 2005; Hall, Daneke, & Lenox, 2010, p. 439; Schaltegger, Lüdeke-Freund, & Hansen, 2016). Further, the fragmentation of this research area is visible in the inadequate understanding of the minimal presence of SINVs, as they are often characterized as niche market players with significantly lower market shares (Schaltegger et al., 2016).
Moreover, research remains fragmented as it has only recently begun “to build evidence that entrepreneurial activities are not evenly distributed across space and between places (Bosma & Sternberg, 2014, p. 1019). Indicating that scholars within IB literature have insufficiently covered SINVs, their internationalization, as well as the importance of their location choice. Specifically, location choice remains neglected even though it strongly influences the resource base of SINVs and their internationalization patterns. Therefore, this research argues that the standard national level of analysis provides inadequate in depth analysis on location choices (Beugelsdijk & Mudambi, 2013). The constant usage of countries as the location unit of analysis appears to have significantly limited IB research (Beugelsdijk & Mudambi, 2013). Even though there is a “growing body of international entrepreneurship literature, the evolutionary patterns of international new ventures... are not well understood” (Sleuwaegen & Onkelinx, 2014, p. 106). Therefore, the following three research gaps are addressed in this study.
Firstly, the gap regarding the necessary advancement of research on SINVs is considered. Even though the literature on INVs has pronounced theoretical importance, little thought has been given to the influence of sustainable entrepreneurship on the internal development of entities such as INVs (Shepherd & Patzelt, 2011; Sleuwaegen & Onkelinx, 2014). Research indicates that INVs do not reflect the traditional characteristics of Multinational Enterprises
(MNEs) (Oviatt & McDougall, 1994) and that “only few studies address how the innovation process [of sustainability] takes place within new organizations” (Keskin, Diehl, & Molenaar, 2013, p. 58), such as SINVs. Large MNEs that have been central to IB have become the basis of analyses and multiple theories. Yet due to this focus gaps remain in literature, insufficiently recognizing the internal environmental dimension of the sustainability of INVs (Hall et al., 2010). Even though “innovators and entrepreneurs will view sustainable development as one of the biggest business opportunities in the history of commerce” (Hart & Milstein, 1999), literature does not expand on the details of establishing sustainable initiatives. Consequently, the concept and development of SINVs requires greater attention, as gaps remain on what internal environmental factors influence SINVs and distinguish them from other rapidly internationalizing firms.
Secondly, there appears to be insufficient research on the internationalization process of SINVs, specifically the environmental factors influencing expansion. Akin to INVs, SINVs are assumed to internationalize rapidly and early in their life cycle, yet few look further into this further than as part of the definition. Theory on internationalization evolved largely in the 1970s and 1980s, focusing on the internationalization of large MNEs (Rialp, Rialp, & Knight, 2005). Therefore, lacking theory development on other types of entities has caused rapidly internationalizing entities to challenge the traditional internationalization view (Rialp et al., 2005). The primary frameworks are mainly focused on the drivers of internationalization, as well as the characteristic rapid internationalization rate (Oviatt & McDougall, 1994; Prashantham & Young, 2009; Zucchella, Palamara & Denicolai, 2007). Yet identification of the influence of distinct internal strategies or external environmental factors such as location shaping the organization, and in turn influencing expansion remain vague. Even though sustainable initiatives are often integrated into the workings of INVs, there appears to be no “comprehensive view of how firms should approach embedding sustainability” (Bocken et al., 2014, p. 43). When operating as a sustainable entity there is the need to “fundamentally rethink their prevailing views about strategy, technology, and markets” (Hart & Milstein, 1999, p. 32). Subsequently, research into the internationalization of SINVs is imperative.
Lastly, there is limited research at the subnational level of analysis. IB has often been approached from a national level of analysis examining topics on a country-by-country basis, as IB “continues to suffer from methodological nationalism” (Buckley, 2016, p. 78). Nevertheless, the expansion of SINVs may be better understood through the detailed
consideration of environmental influences, thus analyzing internationalization from a subnational level, bringing a new perspective to IB literature. By taking on the often-overlooked subnational level of analysis, location theory is challenged and the relevance of cities as subnational location is accentuated (Buckley, 2016; Goerzen, Asmussen, & Nielsen, 2013). The subnational level of analysis focusing on cities may even capture the international development of SINVs allowing the city elements that influence SINVs’ development to be analyzed in greater detail. Further, it may capture how unique Firm Specific Advantages (FSAs) interact with the context in which SINVs are present, contributing to the early and rapid internationalization of SINVs across cities.
Accordingly, these three gaps form the basis of new research opportunities. By bringing together the notion of a SINV and its internationalization process from a subnational level of analysis, environmental factors influencing this concept can be better understood. Opportunities lie within understanding the influence of environmental factors on the development of sustainable entrepreneurship in SINVs. Thus, the following research question is established:
RQ: How do the unique internal and external environments of sustainable international new ventures influence their internationalization?
In order to analyze the influence of the unique internal and external environment on SINV internationalization, the thesis is structured as follows. Firstly, the literature review section introduces the theoretical background relevant to this study. Then Oviatt and McDougall’s (1994) framework on the necessary conditions of INV establishment is broken down to analyze SINVs in-depth, distinguishing the internal environment in terms of sustainable resources and routines and governance structures, and external environment in terms of location advantages influencing SINV internationalization. Secondly, the methodology section presents the study’s qualitative multiple case study research design, defines the sample of 8 SINVs and the data analysis strategy. The study purposely selects 8 SINVs allowing data to be collected through semi-structured interviews and it to be supported with documentary data. Following the interviews are analyzed and thematically coded through NVivo, allowing within and cross-case analysis.
Thirdly, the results section presents the analysis of the influence of the internal and external environment on SINV internationalization. These results indicate that SINVs’ internationalization is partially obstructed due to the difficulties associated with obtaining sustainable resources and establishing sustainable routines, yet central to overcoming such difficulties is experience. Further, crucial to SINV internationalization is the presence of sustainable entrepreneurial leadership, detected in all SINVs acting as sustainable frontrunners. Nevertheless, acting as frontrunners is not enough to prompt the external environment, as the notion of global sustainability remains discontinuous and hinders SINV internationalization, yet this is not due to the profit-maximization attitude of individuals. Finally, stimulated stakeholders and the advanced technology of global cities do not enable SINV internationalization. The home institution stimulates certain SINVs, yet obstructs others, thus these contradictory results do not lend support to the stimulation of the cosmopolitan environment. Moreover, advanced technology does not play a role as the SINVs appear to be exceedingly focused on establishing sustainable supply chains. Accordingly, these results are discussed in-depth and lead to the final concluding section of this study.
2. Literature Review
To understand the origin of SINVs the literature review firstly introduces the international entrepreneurial field of study. From this notion, the absence of literature on the unique conditions of SINVs is highlighted. Subsequently, to understand the concept from which SINVs arise, INVs, their internationalization process and the complexities of INV internationalization are examined. This is followed by clarifying the unique nature of SINVs, illustrating their distinction. Following, the next sections categorize the three necessary conditions for a SINV to be established into the internal and external environment. This allows the influences within these environments to be examined and allows the effect of the internal and external environment of SINVs internationalization to be researched.
2.1. International entrepreneurship
The “resurgence of entrepreneurial spirit” (Zwilling, 2013) has led to an increase in the different types of INVs being established, such as SINVs, and created new areas of investigation within IB literature. The increasing focus on INVs originates from the international entrepreneurial field of study (Karra, Phillips, & Tracey, 2008; Jones & Coviello, 2005; Oviatt & McDougall, 1994). This field of study is based on understanding the international configuration of resources, and thus the “discovery, enactment, evaluation, and exploitation of opportunities – across national borders” (Oviatt & McDougall, 2005, p. 538). This field has focused on various areas of INV development by examining those “who discover, evaluate, and exploit [opportunities]” (Shane & Venkataraman, 2000, p. 218). Nevertheless, entrepreneurial research halts at the establishment of a general understanding towards INVs, as entrepreneurs are recognized to contribute to innovation yet scholars have failed to identify how entrepreneurship actually unfolds (Hall et al., 2010). Hence, insufficient attention is devoted to the influences of the internal and external environment on these configurations. Even though the importance of this field originates from the so far achieved theoretical understanding of entrepreneurial behavior, to sustain its relevance new areas must be investigated (Zetting & Benson-Rea, 2008). The identification of key entrepreneurial capabilities, “international opportunity identification, [and] institutional bridging” (Karra et al., 2008, p. 450), must be further understood to contribute to theory development in the entrepreneurial field of study.
Thus, as this field develops greater areas of ambiguity are revealed. Areas concerning the understanding of contextual variables influencing entrepreneurship, the role of geography and history, as well as motivation and mental models of entrepreneurs remain indistinct (Zahra, Korri, & Yu, 2005; Zetting & Benson-Rea, 2008). Specifically, the unique constituents of SINVs, and the influence of SINVs internal and external environment on internationalization remain unexplored. Entrepreneurs are known to exploit opportunities associated with environmental and societal objectives, yet major gaps in knowledge remain, as there is “little understanding of how entrepreneurs will discover and develop those opportunities” (Hall et al., 2010, p. 439). Therefore, by thoroughly integrating the international entrepreneurship within IB research and broadening its boundaries an enhanced analytical approach towards SINVs can be taken, as “entrepreneurship [is] a panacea for transitioning towards a more sustainable society” (Hall et al., 2010, p. 439). The international entrepreneurial field of study is widely recognized “as a significant conduit for bringing about a transformation to sustainable products and processes” (Hall et al., 2010, p. 439). Thus, it is fundamental to consider the entrepreneurial core of SINVs, as entrepreneurial judgment is central to the recombination capabilities that shape unique resources, and thus SINVs internationalization (Verbeke, 2009).
2.2 International new ventures
To understand the distinctive conditions faced by SINVs the concept of INVs from which SINVs originate must be addressed. INVs are defined as “independently operated and marketed corporate entities that have no prior corporate history in the industry, and hence no prior market presence” (Fan & Phan, 2007, p. 1114). INVs and the related born global concept are intermittently treated as two different business types of early internationalizing entrepreneurial ventures. Nevertheless, consistent with the term usage of other scholars (Knight, Maden, & Servais, 2004; Oviatt & McDougall, 1994; Rialp, Rialp, Urbano, & Vaillant, 2005; Sleuwaegen & Onkelinx, 2014; Zahra, 2005), this study uses the concept of born global and INV as one, since “arguably these terms have become somewhat interchangeable” (Crick, 2009, p. 453). INVs are characterized by their young age, proactive international strategies, and limited resources, in turn causing INVs to be considered as small and medium enterprises (SMEs) (Knight et al., 2004). INVs prove that large size is not a requirement for internationalization, and that large size may merely be a form of competitive advantage or effect of internationalization (Oviatt & McDougall, 1994). Further, INVs are
defined as international from the point of inception, however it is generally agreed that INVs internationalize within 6 to 10 years of inception dependent upon the industry in which they are present (Bantel, 1998; McDougall, Shane, & Oviatt, 1994; Zahra, Ireland, & Hitt, 2000).
2.2.1 International new venture internationalization
Having outlined the state of INVs, allows the consideration of their internationalization process. Contrary to large MNEs, INVs origins are argued to be international from inception onwards due to their proactive international strategy and distinctive organization, in turn making the application of stage theories of internationalization inappropriate (Oviatt & McDougall, 1994). INVs do not follow known stage theories such as the Uppsala model, in which internationalization starts close to home in terms of psychic distance, followed by a gradual expansion abroad through learning and experience (Vahlne & Johanson, 2013). Madsen and Servais (1997) and Taylor and Jack (2013) suggest that the fundamental reasoning behind the models is valid, yet such models fail to explain the internationalization of INVs. It is the dramatic changes in technology improving communication and transportation “along with homogenization of markets in many countries ... [that] simplify and shorten the process of firm internationalization” (Oviatt & McDougall, 1994, p. 52). Consequently, allowing INVs to skip the stages of international expansion (Oviatt & McDougall, 1994).
The resulting task of building INVs becomes an increasingly complex one, as throughout internationalization constraints of liability of newness (LON) and foreignness (LOF) are faced (Mudambi & Zahra, 2007; Zaheer, 1995; Zetting & Benson-Rea, 2008). These constraints are reflected in the increased costs encountered as newcomer and the resulting competitive disadvantages, as well as the challenge of finding the balance between knowledge exploration and exploitation (Lu & Beamish, 2004; Sleuwaegen & Onkelinx, 2014; Zaheer, 1995; Zetting & Benson-Rea, 2008). Consequently, there is a need to change systems, processes, structures, as well as mental maps accordingly when abroad (Bartlett & Ghoshal, 1989; Stopford & Wells, 1973). These complexities of internationalization further constrain INVs internationalization and must be overcome through the development of FSAs or through learning by mimicking local competitors (Zaheer, 1995).
FSAs being central to internationalization arise from the unique resources and capabilities of the firm that make the firm more efficient and superior compared to its competitors (Khalid &
Larimo, 2012). FSAs are shaped by the four conditions underlying the establishment of INVs. The four necessary conditions for INVs to be established according to Oviatt and McDougall (1994) are: (1) the internalization of resources central to survival, (2) alternative ways to access resources, (3) foreign location advantages, and (4) possessing unique resources. This framework by Oviatt and McDougall (1994, p. 52) was created to “lead to both theoretical development and empirical investigation toward greater understanding of international new ventures”. Consequently, as the unique resources can be interpreted as an outcome of the first three conditions, and as it refers to the combination of the INV’s resources resulting in its sustainable competitive advantage, the research focuses on the first three conditions (Oviatt & McDougall, 1994). The first three conditions reflect the internal and external environment of INVs, thus these are used as a foundational basis in this study, allowing the examination of elements within these necessary conditions. Therefore, by analyzing the influences of internal and external environment on SINV internationalization the focus resides on resources and routines, governance granting access to these, and location influencing internationalization. After the nature of SINVs has been clarified in the following section, this framework is used to understand the influences of the internal and external environment on SINV internationalization. As depicted in Figure 1, the necessary elements for a SINV to be established are categorized into the internal and external environment of the SINV.
Figure 1: Necessary Elements for Sustainable International New Ventures
2.3. Sustainable international new ventures
Having outlined the standard conditions of INVs and to move towards understanding the influence of the internal and external environment, the unique conditions of SINVs must be addressed. What mainly distinguishes SINVs are their unique proactive strategies addressing the increasing risks of the exponential growth of business, how continuing with the current state of business is not a possibility for a sustainable future (Bocken et al., 2014; WWF, 2016). To effectively tackle the current challenges a holistic approach is required to make business sustainable, sustainability being defined as a “normatively defined state of the world that is to be achieved via a sustainable development of the natural environment, society, and economy” (Bocken et al., 2014; Schaltegger et al., 2016, p. 265). According to the WCED the definition of sustainable development encompasses both environmental and social goals, as it considers the needs of “the world’s poor, to which overriding priority should be given; and the idea of limitations imposed by the state of technology and social organization on the environment’s ability to meet present and future needs” (WCED, 1986). Consequently, SINVs are driven by the innovative capabilities of sustainable entrepreneurs attempting to establish a business while focusing on society or the environment. This mission driven process at the heart of SINVs, is further supported by the fact that sustainability driven innovation may become the new driver of competitive advantage (Nidumolu et al., 2015).
Therefore, SINVs similarly to INVs are characterized by their small size, permitting the minimal internalization of resources and thus cause the reliance on networks and partners (Dean & McMullen, 2007). In turn, a great disadvantage of small size and young age becomes the difficulty in obtaining financial capital, as there is often no existing stream of revenue (Bohnsack, Pinkse, & Kolk, 2014; Sosna, Trevinyo-Rodríguez, & Velamuri, 2010). Nevertheless, SINVs unique conditions shift certain disadvantages of small size into advantages, as their smaller size allows an easier implementation of sustainability due to the small firms’ flexibility and lessened “pressure from external stakeholders [compared to] large corporations” (Bianchi & Noci, 1998, p. 272). Consequently, sustainable business can be a profitable business, as socially and environmentally oriented goals may improve pricing power, increase value chain efficiency, create goodwill, addresses new potentially profitable markets, or enhance revenues and lower costs (Epstein & Buhovac, 2014; Nidumolu, et al., 2015; Prahalad, 2004; Santos, Pache, & Birkholz, 2015).
Figure 2: Conceptual Model, the Influences of Sustainable International New Ventures’ Unique Internal and External Environment on SINV Internationalization
Nevertheless, even though the investigated costs and complexities of internationalization are generally faced by all businesses, SINVs appear to face more specific constraints as markets continue to be characterized by the presence of few SINVs (Schaltegger et al., 2016; Zaheer, 1995). Even though entrepreneurs develop unique capabilities that are difficult to imitate, boundaries when internationalizing are faced as internationalization involves “high levels of uncertainty” (Karra et al., 2008, p. 440; Mudambi & Zahra, 2007). Thus, the current gaps in literature require further investigation on SINVs internal and external environmental conditions.
Therefore, to guide the upcoming review, the conceptual model depictured in Figure 2 provides an overview of the elements examined. This model contributes to understanding how the research question is answered separating the influences of the internal and external environment, and what factors positively and negatively influence SINV internationalization, in turn guiding the research in the following sections.
2.4. Internal environment
As highlighted in the section above SINVs are subject to unique conditions, thus by examining their internal environment SINV internationalization can be understood. By categorizing and breaking down the framework of Oviatt and McDougall (1994), seen in Figure 2, the influences of the internal environment, the internalization of resources and presence of alternative governance structures, are recognized.
2.4.1. Internalization of resources
According to Oviatt and McDougall (1994) the internalization of resources is the first of the four necessary conditions for INVs to be established. The early and rapid internationalization of INVs originates from the internalization of resources essential to survival, and the presence of unique resources permitting “organizations with more constrained resources, such as new ventures, to enter the international arena” (Oviatt & McDougall, 1994, p. 52). Unique resources create a sustainable advantage that is transferable to new foreign locations, and is referred to as a FSA (Oviatt & McDougall, 2005, 1994; Verbeke, 2009). FSAs include “both proprietary know-how (unique assets) and transactional advantages” (Rugman & Verbeke, 1992, p. 762) and are critical to succeeding abroad. Resources in the forms of physical, financial, human, and reputational resources, as well as upstream, downstream, and
administrative knowledge shape the unique conditions of the INV (Verbeke, 2009). In turn, routines “reflect the distinct ability to combine further the above resources, in unique ways” (Verbeke, 2009, p. 6), shaping the developmental path of the INV. Further, it is the transferable, and thus non-location bound (NLB) FSA that allows capabilities to be exploited across borders, leading “to benefits of scale, scope or exploitation of national difference” (Rugman & Verbeke, 1992, p. 763). Location bound (LB) FSAs solely benefit the INV in specific locations and enhance local responsiveness (Rugman & Verbeke, 1992).
Thus, SINVs are unique subsets of INVs working towards social or environmental goals and proactively organizing strategy around sustainability. This is reflected in the resources and routines of SINVs, and thus the internal environment of the firm, shaping the unique nature and internationalization of SINVs. SINVs internal environmental conditions are reflected in the sustainable resources used such as the human capital of sustainable entrepreneurship, physical commodities such as recycled and upcycled materials, and reputational resources of for instance B Corporation certifications. Even though certain SINVs aim to do more with fewer resources to achieve resource efficiency, increase material productivity, or reduce waste, others require more complex resources (Bocken et al., 2014). The complexity of such resources is reflected in the struggle of obtaining sustainable materials, the fluctuating supply of resources, technologies lacking economic viability, up to the inadequate availability of education on sustainability (Bianchi & Noci, 1998; Bocken et al., 2014; Dixon & Clifford, 2007). Further, obtaining financial capital proves to be burdensome, as sustainable oriented businesses are new and without precedent (Dixon & Clifford, 2007).
Moreover, the routines of SINVs are reflected in the internal environmental conditions of SINVs and further shape the nature of the firm. Routines are focused on for instance value creation from waste, and substituting processes with renewables and natural procedures or establishing circular resource management (Bocken et al., 2014). Nevertheless, these routines rely on available technology, knowledge and the skilled input of labor, and these “still face difficulties in penetrating mainstream markets” (Bohnsack et al., 2014, p. 284). Challenges lie in the current “strong focus on the technical aspects and business opportunities of product concepts … but very little consideration of the sustainability implications” (Hallstedt, Thompson, & Lindahl, 2013, p. 282). Additionally, common knowledge on sustainable processes remains limited due to missing standard sustainability assessments (Hallstedt et al., 2013). These promising resources and routines leading to unique recombination capabilities
are difficult to obtain and achieve, and thus further hinder SINV development (Bianchi & Noci, 1998). The “artful orchestration of resources, especially knowledge bundles, as a response to differences between national and foreign environments, and to satisfy new stakeholder demands in these foreign environments” (Verbeke, 2009, p. 8) appears to be more difficult for SINVs as their sustainability dimension lacks significant recognition (Hart & Milstein, 1999). This prompts the development of first working proposition (WP):
WP1: SINVs are likely to face additional constraints when internationalizing, due to the difficulties of obtaining sustainable resources or establishing sustainable routines.
2.4.2. Alternative governance structures
The second necessary condition for INVs to be established is an alternative way to access resources (Oviatt & McDougall, 1994). Due to INVs small size and resulting deficient resources and power, alternative governance structures must be established (Oviatt & McDougall, 1994). Organizational governance refers to how the “flows of information, resources and goods are controlled by the relevant parties, the legal form of organization, and the incentives to the participants” (Casadesus-Masanell & Ricart, 2010, p. 197). Consequently, INVs often develop hybrid structures, sharing complementary assets with one another, or INVs develop network structures, in which they cooperate with multiple partners (Oviatt & McDougall, 1994). Such structures often indicate a greater flexibility of the organization and flat organizational structures, due to the small nature of INVs (Doherty, Haugh, & Lyon, 2014).
Thus, the influence of the internal environment on SINVs is further visible through the alternative governance structures of SINVs. These governance structures aid in accessing assets, as seen in INVs (Oviatt & McDougall, 1994). Accordingly, SINVs’ focus on sustainability influence the governance of SINVs, as governance can be defined by the presence of common interests of sustainable entrepreneurs (Daneke, 2001). This interest is needed “either within the set of appropriators or in the surrounding governance structures” (Daneke, 2001, p. 523), to obtain sustainable assets and successfully manage the firm. As the most effective way to undertake action towards this common interest is through a top-down approach, alternative governance structures are needed in which “top management is clearly committed to strategy” (Epstein & Buhovac, 2014, p. 34). Therefore, sustainable leadership is imperative, as “strategy and leadership are minimum enablers to successful sustainability
implementation” (Epstein & Buhovac, 2014, p. 7). Further, SINVs must be “sure that the values (practices) and behaviors on the cultural side are aligned to achieve desired business results” (Tosti, 2007, p. 25). Through ensuring strategy and cultural alignment sustainable strategies can be successfully executed (Tosti, 2007), as reflected in INV literature “different INVs are apt to develop specific and unique cultural norms that guide the deployment of their resources” (Zahra S. , 2005, p. 26). Consequently, sustainable entrepreneurs drive this alignment, as they “attempt to combine the environmental, economic and social components of sustainability in a holistic manner and are said to have a different organising logic to more conventional entrepreneurs” (Gibbs, 2006, p. 64). Thus, for SINVs to further develop sustainable entrepreneurial leadership must be present, promoting sustainability from within (Avery & Bergsteiner, 2011).
Therefore, sustainable entrepreneurial leadership is needed to “lead a cultural transformation” (Epstein & Buhovac, 2014, p. 37), which creates an organizational culture that builds on sustainability, as reflected in INV literature “it is reasonable to assume that these INVs benefit from different cultural variables in stimulating and exploiting entrepreneurial activities in international markets” (Zahra S. , 2005, p. 26). This type of leadership is fundamental to the creation and survival of SINVs as it reflects their mission to sustain nature, resources, and communities (Tideman et al., 2013; Shepherd & Patzelt, 2011). Tideman et al. (2013) classify the six key elements of sustainable leadership to be the following: recognizing context, being conscious of one’s actions, connecting to serve all stakeholder needs, creating value through creativity, and embedding sustainability collectively in business (Tideman et al., 2013). These elements being key to the mission of SINVs indicate the internal need for sustainable entrepreneurial leadership “as the driver and necessary condition for sustainable transformation and development” (Tideman et al., 2013, p. 49). Sustainable entrepreneurial leadership can assist the development of a sustainable culture, and SINV internationalization, as it successfully promotes the mission of the firm and allows more than just economic benefits to be developed through aiding access to sustainable assets (Baumgartner, 2009; Shepherd & Patzelt, 2011).
WP2a: The presence of sustainable entrepreneurial leadership within SINVs is likely to enable SINV internationalization.
Even though there are strong factors within the governance of SINVs enabling their sustainable expansion, barriers remain, specifically those created by the discontinuity of the concept of global sustainability (Hart & Milstein, 1999). SINVs are highly dependent on their environment, as “the more a company is able to involve its business partners in the development of co-operative environmental plans, the more it is able to achieve the expected results and improve its performance” (Testa & Iraldo, 2010, p. 961). Sustainable governance and dedication is required internally and in the SINVs network to access sustainable assets. Yet the view of sustainable stewardship is not shared as “many managers resist or discount sustainable development as business driver” (Hart & Milstein, 1999). SINVs reliance on others, due to their lacking resources and power, proves to be challenging, as cooperation with others may cause internal tension and mission drift due to the difficulties of pursuing multiple goals (Keskin et al., 2013; Santos et al., 2015). Unlike INVs, SINVs seek to align profit and impact when aiming to financially sustain their mission. As the financial survival of SINVs remains challenging like-minded partners are needed, supporting the goal of profit and sustainable mission alignment (Santos et al., 2015). Consequently, profit-oriented partners may hinder sustainable development due to the perceived uncertain viability of sustainable initiatives, difficulties and potential expenses in changing processes, or if they continue to consider profit as the only true source of value (Keskin et al., 2013). As Alexander (2007) notes the functioning of the market and business results in “managers making decisions that favor practices to insure profit-maximization at the expense of more morally preferable alternatives”. When actions conflict with that of profit-maximization, entities are less likely to pursue sustainable initiatives (Alexander, 2007; McWilliams & Siegel, 2001).
WP2b: The discontinuity of the concept of global sustainability and thus focus of others on profit-maximization is likely to hinder SINV internationalization.
2.5. External environment
Having analyzed the influences of the internal environment, the external environmental factors of foreign location advantages can be considered. The external environment is analyzed from a subnational level, purposely focusing on the analysis of global cities, as SINVs appear to be more likely to expand to these interconnected, cultured environments offering advanced producer services (Goerzen et al., 2013). Consequently, the conceptual model depicted in Figure 2 is used to further analyze the external environment of SINVs.
2.5.1. Foreign location advantages
The third necessary condition and element for the existence of INVs and thus SINVs are foreign location advantages of the external environment (Oviatt & McDougall, 1994). Location advantages are the “entire set of strength[s] characterizing a specific location, and useable by firms operating in that location” (Verbeke, 2009, p. 27) and often known as Country Specific Advantages (CSAs). According to Oviatt and McDougall (1994) it is through private and transferable knowledge that INVs can recombine their knowledge with immobile resources abroad, creating location advantages. The external environment contributes to the INV’s unique resource base, as the INVs sustainable competitive advantage is supported and complemented by location advantages (Zahra S. , 2005). Foreign locations “develop and leverage critical resources” (Sleuwaegen & Onkelinx, 2014, p. 108) and contribute to the resource base of the firm as INVs seek to derive competitive advantage through their unique recombination capabilities (McDougall et al., 1994).
Therefore, this necessary condition sheds light on the importance of SINV dependence on the external environment, as location contributes to the resource base of the firm, intimately relating location advantages and unique resources (Verbeke, 2009). According to Dunning (1998) and Verbeke (2009) location has been a neglected factor and must be carefully reconsidered, as the development of international entities does not occur in spatially homogenous environments. Location needs to be given more attention, as well as, how, where, and why firms are located in particular areas (Cantwell, 2009; Dunning, 1998; Goerzen et al., 2013). Location and its advantages are “instrumental to the type of FSAs that can be developed by locally operating firms” (Verbeke, 2009, p. 27). Yet the analysis of location and the “treatment of location and geography remain[s] very partial and fragmented” (Beugelsdijk, McCann, & Mudambi, 2010, p. 486).
The fragmentation of location research originates from the fact that the “term ‘IB’ invokes the nation-state as the unit of analysis” (Beugelsdijk & Mudambi, 2013, p. 413-414). The influence of the external environment, increasingly conceptualized from the national level of analysis views spatial variation in terms of distance between cultures, institutions, economic development, and resource bases, thus IB has been persistently focused on examining on country-by-country basis (Beugelsdijk & Mudambi, 2013). IB literature has long taken countries as unit of analysis due to the history of countries, importance of national governance and national institutions (Beugelsdijk & Mudambi, 2013). Nevertheless, IB literature “has
serious weaknesses, stemming from its traditional assumption of the country as the location unit of analysis” (Beugelsdijk & Mudambi, 2013, p. 413). The national level of analysis is too coarse to provide accurate insight; thus, the subnational level of analysis is necessary to add critical information to understanding location decisions (Beugelsdijk & Mudambi, 2013; Goerzen et al., 2013).
Further, the subnational level of analysis allows a finer analysis of SINVs and their tendency to locate in global cities. As Goerzen et al. (2013, p. 428) state, firms chose a specific location within a country causing analysis at the country or even regional level to obscure the understanding of sub-locational decisions. Thus, the subnational level of analysis in this case “allows a more fine-grained analysis of location” (Beugelsdijk & Mudambi, 2013, p. 413). By breaking down the national level of analysis greater insight is provided into spatial heterogeneity, driving location strategy (Beugelsdijk & Mudambi, 2013). The way in which SINVs chose their location due to their dependence on the external environment requires a more “nuanced examination of specific location strategy” (Goerzen et al. 2013, p. 428). Thus, as SINVs are highly dependent on their external environment, the linkages between the external environment of global cities and SINVs internationalization are further examined in the following section.
2.5.2 Global cities
The shift to a subnational level of analysis to examine cities acting as favored location for economic development has long been pressing (Goerzen et al., 2013). Global cities have arisen out of the structural transformations of globalization, growth of business capabilities, and consecutive increasing business networks (Goerzen et al., 2013; Sassen, 2005 & 2009). Cities such as Amsterdam, Berlin, and Paris have been identified as global cities (A.T. Kearney, 2016; Sassen, 2009). Yet this research has mainly touched upon demographic data, focusing on the implications of large populations in so-called megacities (Gilbert, 1996; Goerzen et al., 2013). Another approach of scholars (Goerzen et al., 2013; Sassen, 2005, 2009) has been that of a functional tradition, highlighting the influence of global city characteristics and interconnections. Consequently, when examining the external environment this study takes on a functional approach as research recognizes the interconnected nature of global cities and focuses on the effects of the external cosmopolitan environment and the availability of its advanced producer services on SINV internationalization. By analyzing the elements of the external environment this study
examines the influence of global cities’ unique talent bridging the interests of diverging individuals, helping overcome the excess costs of doing business abroad (Goerzen et al., 2013; Sassen, 2009).
Accordingly, when analyzing global cities’ activities, it appears that SINVs are more likely to locate in these “privileged site[s] for economic development” (Goerzen et al., 2013, p. 428-429). Characterized by “global interconnectedness, cosmopolitanism, and the abundance of advanced producer services” (Goerzen et al., 2013, p. 427), global cities create an attractive globalized environment for SINVs. Global interconnectedness being defined by connections expanding beyond national boundaries, create “extensive interconnectedness to global networks of transportation and communication” (Goerzen et al., 2013, p. 435). Additionally, cosmopolitanism is shaped by global “characteristics that emerge from politics, communications, education, culture, and other social factors” (Goerzen et al., 2013, p. 430). This environment is “closely interlinked to the pooling of specialized managerial capabilities” (Goerzen et al., 2013, p. 430; Dunning & Norman, 1983). These capabilities being defined as advanced producer services with high knowledge content addressing the needs of firms and thus including “banking, insurance and real estate… legal services, technical services, business and management consulting as well as marketing and advertising” (Tödtling & Traxler, 1995, p. 185). Therefore, a truly global city defined by “its ability to attract and retain global capital, people, and ideas, as well as sustain that performance in the long term” (A.T. Kearney, 2016, p. 1). With global cities being the “motors of ideological change” (Warf, 2015, p. 930), SINVs have the potential to succeed in this environment.
The tendency of SINVs to locate in global cities is reflected in the cosmopolitanism’s, “cross-national mindset and core values that might speak for a heightened environmental concern and positive disposition toward sustainable behavior” (Grinstein & Riefler, 2015, p. 697; Goerzen et al., 2013). This heightened apprehension possibly favors the development and acceptance of sustainable initiatives, as global cities’ populations are depicted as “a set of loyalties to humanity as a whole” (Nussbaum, 1994, p. 1). This international environment is often characterized by stakeholders with an open mindset as they are “adaptive [and] free thinking” (Goerzen et al., 2013; Knight Frank, 2017, p. 8). These characteristics can potentially influence SINV expansion, as the cosmopolitan environment produces globally oriented stakeholders such as institutions and independent organizations that are open to more international stimuli and have developed world perspectives (Fan & Phan, 2007; Goerzen et
al., 2013; Warf, 2015). The cognitive capacity of such environments increase stakeholder incentive, “mak[ing] people reconsider their own opinions, to understand the perspective of others, to look past initial dislikes, to accept dissenting ideas, to see more than one side of an issue, and to reduce the drive to force one’s own views on others” (Warf, 2015, p. 934).
Consequently, for sustainable initiatives to succeed support is required “by the wider technological system of which they are part, but also by the institutional framework of social rules and conventions” (Beddoea, et al., 2009; Foxon, 2007, p. 140). Thus, institutions both formal and informal become central to creating new tools to increase the importance of this dialogue and support the establishment of sustainable initiatives within cities, as without institutional support this cannot be achieved (Robinson, 2004). Institutions such as the government of the Netherlands already support such measures by “boost[ing] the startup ecosystem through a growing number of initiatives and policies, including favorable tax code and the introduction of the startup visa” (Startup Genome, 2017, p. 76). Further, institutions such as that of Germany support the development of its cities, into a hub for international founders and talent visible in for instance the so far reaped “rewards of Berlin’s healthy, if not deep, entrepreneurial roots” (Startup Genome, 2017, p. 52). As a “wider community of caring” (Warf, 2015, p. 927) is established individuals act more humane and thus sustainably oriented. This mindful community is further reflected in the presence of independent organizations such as Startup Accelerators. Startup Accelerators act as incubators for growth, guiding new initiatives and bringing them in contact with stakeholders willing to invest. This environment thus increases the likelihood that stakeholders push for the support of SINV establishment, communication of sustainability challenges, education increasing awareness, and establishment of sustainable culture (Grinstein & Riefler, 2015; Warf, 2015). Thus, it is the diversity of culture and open mindedness of global cities that stimulate stakeholders to support sustainable initiatives (Goerzen et al., 2013; Grinstein & Riefler, 2015; Warf, 2015).
WP3a: Increased stakeholder stimulation towards sustainability within the cosmopolitan environment of global cities is likely to enable SINV expansion.
Moreover, clustering in specific geographic locations has led to the advanced development of certain environments and, thus their ability “to handle the more complex needs of firms and exchanges operating across national borders” (Sassen, 2009, p. 4). The presence of advanced business capabilities and skilled labor in terms of consultancy and technical services, reduce
the need to import services from home (Goerzen et al., 2013; Knight Frank, 2017). Advanced producer services increase the ease of doing business, flow of information, and knowledge creation as these services’ advanced capabilities allow business to be bridged to new locations (Sassen, 2009). Global cities’ markets are stimulated by the presence of these specialized services and investment, thus increase the command functions of such cities aiding in controlling business (Sassen, 2005). In turn, the strategic roles of global cities ease the complex management of activities and allow firms to retain control over their dispersed activities (Sassen, 2009).
Thus, global cities being the “production and innovations centers of advanced producer services” (Taylor, 2011), have led to the advanced development of technology. The presence of advanced technology is indicated by the availability of advanced technical services and consultancy agencies offering business support functions that present “alternative[s] to knowledge transfer” (Attewell, 1992, p. 8) and offer services such as “cloud computing, big data and business analytics” (Shao & Lin, 2016). Advanced technology is central to developing the SINVs technological knowledge, this knowledge being central to success as it “is important to firms in achieving innovation and competitive advantage” (Prashantham & Young, 2009, p. 282). Instead of letting technology become a barrier to development the provision of these services allows SINVs to easily and quickly adopt new measures aiding internationalization (Attewell, 1992; Shao & Lin, 2016). Technology as service further lowers the costs and barriers to adopting the newest technology (Attewell, 1992). Thus, allowing global cities to act true to their characterization, as the “command and control points in the organization of the world economy” (Goerzen et al., 2013, p. 430; Sassen, 2009). As the complexity of introducing sustainable initiatives requires great coordination and “its accumulation is challenging and can be time-consuming” (Prashantham & Young, 2009, p. 284), these advanced capabilities may alleviate the complexity of tasks at hand (Goerzen et al., 2013; Martinez & Jarillo, 1989; Sassen, 2009). Services such as knowledge management have been noted to play “important roles in innovations and in the use as well as the creation and diffusion of new technologies” (Guerrieri & Meliciani, 2005, p. 490-491), thus potentially influence the location choice of sustainable innovation. These services and the resulting technology are “generating wealth and innovation at an exponential pace”, as “only a handful of places in the world are capturing most of that value creation” (Startup Genome, 2017, p. 9). Consequently, due to SINVs dependence on strong environments the “concentration of startups and their value” (Startup Genome, 2017, p. 10) becomes visible.
Further, as sustainable initiatives continue to battle against lock-in mechanisms, as sustainable innovations “are difficult to achieve because the prevailing system may act as a barrier” (Carrillo-Hermosilla, del Rio, & Könnölä, 2010, p. 1078). Consequently, SINVs require the technological knowledge and the advanced expertise of global cities to enable the establishment of their sustainable initiatives.
WP3b: Advanced technology resulting from the presence of advanced producer services within global cities is likely to enable SINV expansion.
2.6. Conclusion
Having outlined the notion of SINVs and broken down their internal and external environment allows the analysis of the influence of these environments on SINV internationalization. Therefore, the research is operationalized by analyzing SINVs based on the dimensions of the working propositions previously discussed. Having argued that SINV internationalization is influenced by internal environmental factors, such as the accessibility of resources and routines, presence of sustainable entrepreneurial leadership, and discontinuity of sustainability, these factors are separately addressed within and across each case. Further, the external environment is examined by analyzing the stance of stakeholders within the cosmopolitan environment and the availability of advanced technology. Therefore, in the following section these influences are understood by conducting interviews and collecting documentary data.
3. Methodology
The research is based on a multiple case study research design grounded on the principles of Eisenhardt (1989) and Yin (2003). Therefore, the following section introduces the ontological and epistemological foundations of the research. This section then clarifies the choice of this study’s qualitative multiple case study approach, the case sampling and data collection method, as well as the associated quality criteria. Subsequently, the data analysis method is presented.
3.1. Ontological and epistemological foundations of research
The ontological and epistemological foundations of research are key to consider when establishing the research design, as these determine what is considered as a “valid, legitimate contribution to theory” (Brannick & Coghlan, 2007, p. 62). The ontology, referring to “the way we think the world is” (Fleetwood, 2005, p. 197), of the study is objectivist. By perceiving reality concretely, it is assumed that the outcome of this research cannot be influenced by the researcher (Brannick & Coghlan, 2007; Morgan & Smircich, 1980). An objectivist approach, also known as a positivist ontology is appropriate as it focuses the research on accurately observing and measuring phenomena, and as it is the more “dominant approach or paradigm in management and organizational studies” (Brannick & Coghlan, 2007, p. 62; Morgan & Smircich, 1980). This ontological foundation of research further influences the epistemology adopted, “what we think can be known about [the world]” (Fleetwood, 2005, p. 197). It is argued that full objectivity remains an ideal and that measurements continue to be subject to inaccuracies (Trochim, 2006). Thus, a post-positivist epistemological stance is taken, as it is accepted that reality can only ever be known partially as all measurement is imperfect (Harrison, Birks, Franklin, & Mills, 2017; Yin, 2014). Thus, this research seeks to be as objective as possible to minimalize the researchers influence on the outcome, hence a structured and controlled approach is adhered to as expanded on below.
3.2. Qualitative multiple case study research design
The ontological and epistemological foundations of research reflecting Eisenhardt’s (1989) and Yin’s (2003) research approaches construct the ground for this study’s qualitative research. Qualitative research is established, as it can be a “central contribution to theory building in management” (Doz, 2011, p. 583; Eisenhardt, 1989; Yin, 1981). Contrary to quantitative analysis it allows an in-depth investigation of the context of SINVs, as it
“investigates a contemporary phenomenon within its real-life context” (Yin, 2003, p. 13). This theoretical lens allows constant comparisons to be drawn between entities, in turn enabling progressive theory building on SINVs (Doz, 2011). Thus, as reflected in the post-positivist epistemological approach deductive logic shapes the research (Shepherd & Sutcliffe, 2011; Yin, 2003). Deductive reasoning is portrayed throughout the study through the formulation of working propositions that progress to the data collection and analysis. Such deductive reasoning is the “most prominent approach for theorizing on organizations” (Shepherd & Sutcliffe, 2011, p. 361). This approach being central to developing understanding towards the contextual dimensions of IB is key to examine SINVs internal and external environments (Cheng, 2007; Doz, 2011). Thus, due to the importance of the contextual dimension in this research, a case study research design is preferred (Yin, 2009).
A case study as research method highlights the focus on decisions, “why they were taken, how they were implemented, and with what result” (Schramm, 1971, p. 6; Yin 2003). This strategy is reflected in the study’s research question, as it deals “with operational links needing to be traced over time, rather than mere frequencies or incidence” (Yin, 2009, p. 9). Specifically, a multiple case study research design with embedded units of analysis is used to investigate the research question, as this provides a more in-depth and focused analysis, robust outcome, and allows generalization to the theory (Piekkari, Welch, & Paavilainen, 2009; Yin 2003). The case study consists of multiple embedded cases due to the analysis of the phenomena faced in the internal and external environments of the SINVs (Yin, 2003). Therefore, through literal replication logic, expanded on in the case selection, 8 cases are selected making the research akin to that of multiple experiments, producing similar results (Yin, 2003). Thus, aiming to encompass analytical generalization, reflected in the principles of Eisenhardt (1989) and Yin (2003), this study builds theory from 8 SINV cases and can be categorized as an explanatory case study. This nature is reflected in research’s distinct focus on explaining the influence of SINVs’ internal and external environments on internationalization. Explanatory case studies look for support behind the occurrence of events and relationships, and thus the factors driving and inhibiting the internationalization of SINVs (Saunder & Lewis, 2012). As previously mentioned, context being key to the study supports the choice of a case study approach, as “there will always be too many ‘variables’ for the number of observations to be made, thus making standard experimental and survey design irrelevant” (Yin, 1981, p. 59). Consequently, a case study design is highly relevant when attempting to grasp the complexity of SINV internationalization.
3.3. Case selection
The sample consists of 8 SINVs that are purposely selected. This purposive sampling technique is often referred to as nonprobability sampling, and is focused on achieving representativeness and comparability (Teddlie & Yu, 2007). Due to the research’s specific focus it only “makes sense to choose cases such as extreme situations and polar types in which the process of interest is ‘transparently observable’” (Pettigrew, 1988 cited in Huber & van de Ven, 1995, p. 537).
Therefore, 8 cases are selected based on following criteria: (1) Representative SINV, (2) sustainable mission, (3) global city presence, and (4) international activity, meaning activity or presence in more than one country. The firm is characterized as a SINV if the firm is led by a sustainable entrepreneur aiming to fulfill a sustainable mission through a proactive international sustainability driven strategy (Baumgartner, 2009; Nidumolu et al., 2015). SINVs internationalize early, derive competitive advantage from their creative solutions and use of resources from their network across multiple countries (Nidumolu et al., 2015; Oviatt & McDougall, 1994). The firm’s mission is characterized as sustainable if social or environmental goals are central to the firm’s functioning (Cohen & Winn, 2007; WCED, 1986). Further, SINVs of Dutch origin and with presence in Amsterdam are selected to improve the comparability of the sample and gain insight into global city presence. SINVs must be under the age of 10 years in order to capture the activity of the firm before it reaches a mature stage (Bantel, 1998; Zahra et al., 2000).
Thus, vivid in Table 1 is the literal replication logic with which the 8 cases have been selected. The SINVs are selected based on the established criteria so that the influence of the internal and external environment of these SINVs can be compared. Examining similar cases allows the embedded units of analysis within the internal and external environment to be examined. These embedded units of analysis being; the accessibility of sustainable resources and sustainable routines, the presence of sustainable entrepreneurial leadership, the discontinuity of global sustainability, the support of stakeholders in the cosmopolitan environment, and the presence of advanced technology in global cities. These elements are specifically examined, as they provide detailed insight into the environment of each case and thus allow an explanation to be established specifically focused on the cases’ internal and external environments (Yin, 2003).
