Born Global or Grown Global: The Role of Legal Literacy

Abstract

Objectives: This work-in-progress research paper aims to empirically examine the moderating impact of the CEO's level of (international) legal literacy and sensitivity on the relationship between firm age and internationalization. Prior Work: The traditional stage model theory of internationalization considers the internationalization process of a firm as a series of events that take place over time. According to this theory, the firm's international development is thus a slow and gradual process, meaning that as a firm gets older and more experienced, it will internationalize more. However, such a "stage" model is challenged by the existence of the so-called "Born-Globals", which go international from day one, thus defying the traditional stage models of internationalization. The Resource Based View tries to explain born-global internationalization, by stressing that foreign market knowledge is a key factor to understand and explain the rapid internationalization of the firms. However, to date, international business (IB) research has placed most of its attention on the total knowledge present in the firm. But form small firms, and given the upper echelons theory, the relevant knowledge often lies with only one person, namely the CEO of the small firm. More specifically, in our opinion, the internationalization research field is missing the importance of the CEO's legal knowledge or legal literacy. In previous literature, researchers theorise that a lack of legal literacy could complicate the process and thus the pace of the implementation of strategic business decisions (like the internationalization of a firm), as it may cause stress and anxiety when making decisions. However, these studies never empirically examine the potential moderating impact of the CEO's level of legal literacy. Therefore, in this study we would like to fill this gap by empirically examining the moderating impact of the CEO's level of (international) legal literacy and sensitivity on the relationship between firm age and internationalization. Approach: Data-collection will be conducted via a quantitative survey that will be sent out to the respondents via email. The target sample will consist of the CEOs of Belgian private SMEs that are willing to internationalize or are already internationally active. We focus on the CEO's of SMEs since we know from the upper echelons theory that organizations (and especially small firms) are a reflection of their leaders, their CEO. Results: This is a work-in-progress paper, which is currently in a data-gathering phase. Results therefore cannot be provided at this point in time. Implications and value: The present paper makes a fundamental contribution to both the entrepreneurship and internationalization literature and to practice. First, it contributes to the theory of SMEs internationalization by evaluating the role of the CEO's knowledge on the internationalization process. Traditionally, however, one looks at the impact of the total knowledge present in the firm. But for small firms, and given the upper echelons theory, the relevant knowledge often lies with only one person, namely the CEO of the small firm (Hambrick & Mason, 1984). Next, the few studies on the importance of legal literacy are purely theoretical and thus have never examined a possible empirical impact of legal literacy. This study makes a fundamental contribution to these studies by empirically examining the impact of the CEO's (international) legal literacy and sensitivity on the relationship between firm age and internationalization. Further, using the RBV, we attempt to merge two internationalization theories: namely, the stage model theory of internationalization and the theory of born-global internationalization. Lastly, this study also provides practical implications. More specifically, our results will