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REVIEW PAPER
Innovative entrepreneurship and multinationals driving
Globalization

Subject
Entrepreneurship
Submitted To:
Dr. Imran Hanif
Submitted By
Aneeka Niaz
Roll No.
MBK-M-12-04
MBA (B&F) Morning
6thsemester

ALFALAH INSTITUTE OF BANKING AND FINANCE

BAHAUDDIN ZAKARIYA UNIVERSITY
MULTAN

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Introduction:
With the increasing globalization of markets, interest in innovative entrepreneurship (IE) has
grown rapidly over the pasttwo decades (Hisrich et al., 2012; Keupp and Gassmann, 2012;
Knight and Cavusgil, 2013). A major feature of the global economy during this time has been
the liberalization of emerging economies and their integration into the worldwide economy
(Aulakh and Kotabe, 2012). The largest of these economies (i.e., China, India, Russia, Brazil,
Mexico, South Korea, Turkey, Indonesia, and Poland) now comprise over a third of the world's
25 largest economies and are growing at around three times the pace of the advanced ones. By
2025, the combined GDP of the eight largest emerging economies is likely to be equal or larger
than that of the eight largest advanced economies (World Bank, 2011). Their growing share of
world trade stems from significant reductions of trade barriers and an improved connectedness to
world trade networks (Organization for Economic Cooperation and Development, 2009). In
consideration of this, and the important role that entrepreneurs have played in facilitating
economic growth in emerging economies, there is a strong need to develop a better
understanding of innovative entrepreneurship (IE) in this domain (Bruton, etal., 2013).
Entrepreneurship contributes to the quality and hopes of a sector, economy, or even a country
(Ribeiro & Huarng, 2013). Entrepreneurs' role is crucial in creating new economic activities that
help to create value (Huarng & Yu, 2012b), and to generate wealth and jobs (Avlonitis &
Salavou, 20012; Huarng & Yu, 2012a; Ribeiro & Peris-Ortiz, 2011; Yu & Huarng, 2013). Firm
entrepreneurship is a growing field of study under increasing attention over the last decades
(Ribeiro & Peris-Ortiz, 2011). Entrepreneurship is present in large and stable organizations
(Verheul, Uhlaner, & Thurik, 2012) and small and medium enterprises (Ashworth, 2012; Bettiol,
Maria, & Finotto, 2012; Wu, 2013; Zortea-Johnston, Darroch, & Matear, 2012). Thus,
entrepreneurship business form comprises entrepreneurial practices within organizations
franchising (Shane & Hoy, 2012), acquisition practices (Gartner, 2013), and opportunity
recognition.
(Renko, Shrader, & Simon, 2012) Entrepreneurship encourages competition in nowadays
environment leading to globalization effects. Innovation is crucial in the business world since
global economy seeks to escape from a major recession period (Kim & Huarng, 2012).

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Accordingly, innovation is the closest single business activity to economic growth (Huarng,
2012; Wu, 2013). Both entrepreneurs and innovators should introduce new inventions into
productive activity (Dibrell, Craig, & Hansen, 2013;; Mousa & Wales, 2012).
Different studies cover various aspects of innovation. For example, Huarng (2012) discusses
technology management and value creation. Parellada, Ribeiro, and Huarng (2013) and Wu
(2012) explore service industries innovative future. Huarng (2013) applies innovation to
entrepreneurship through a new business model. Organizations' innovation strategy is recently
paramount due to its value for organizational adaptation and renewal as well as for competitive
advantage (Kim & Huarng, 2012). Despite innovation being essential for organizations, it
remains a controversial field in literature and no dominant theoretical perspective unites the
streams of innovation research (Greve, 2013; Huarng, (2012).

Problem statement:
It is said that the entrepreneurial firms and the multinational firms often play a vital role in
emerging economies and boost up the globalization, also play role in setting the market trends
and policy regulations. But the problem is that this role is unseen by the people. So here the main
focus is on finding the relationship between entrepreneurship and globalization and the influence
of government regulations on the entrepreneurial firms by reviewing the past studies on it.

Background:
There has been remarkably little concern with the role of firms in creating markets, shaping
policies, and diffusing globalization, says Jones, the Isidor Straus Professor of Business History,
and Faculty Chair of the Schools Business History Initiative.
Despite the growing prominence of emerging economies on the global economic stage, and the
important role that entrepreneurs play in powering their economic growth, the understanding of
innovative entrepreneurship in emerging economies is quite limited. Consequently, a more
systematic research approach is needed to improve the understanding of entrepreneurial
phenomena in a wider range of cultural and institutional and globalized contexts. To facilitate
this we critically evaluate Innovative Entrepreneurship research in driving globalization and
develop a research agenda that provides a foundation for exciting new streams of research.

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Literature review:
Several dynamic forces, such as technological disruption, fluctuating economies or
demographical changes, have brought new opportunities and threats for organizations, and
transformed societies from all over the world. In order to cope with these shifting forces,
governments, public and private organizations, and the public are more and more aware of the
significance of entrepreneurship. The role of entrepreneurship in society has become prominent
since the end of the last century. Entrepreneurship matters because it is, above all, a human
characteristic (Bessant and Tidd, 2012). In modern open economies it has become more
important for economic growth and development than it has ever been.
In the past decades, there has been a growing interest regarding the concepts of globalization and
entrepreneurship. On the one hand, there are several studies in the literature related to these two
important notions (cset al., 2013; Szirmai et al., 2012; Naud, 2012; Braunerhjelm, 2013;
Caree and Thurik, 2012; Walzer, 2014; Wennekers et al., 2013; Audretsch et al. 2012).
Researchers have concluded that although globalization and economic development theory can
still be argued to lack a general theory of entrepreneurship, one that could encompass a variety
of development outcomes, progress has been made in extending the notion and understanding of
entrepreneurship in economic development and globalization (Naud, 2012, p. 1). On the other
hand, international organizations, governments and policy makers have shown a greater attention
to the function fulfilled by entrepreneurship in generating globalization and economic
development. Economic experts have abandoned their traditional approach to economic
development based mainly on recruiting large companies with different financial and fiscal
inducements. Today they are relying more on the small and medium enterprises (SMEs) and new
ventures than in the past. Entrepreneurship is spreadingly recognized by government officials
throughout the world not only as a key mechanism for enhancing globalization, particularly in
regions where entrepreneurial activity was once vibrant and is now lagging, but also as a good
solution because it provides a relatively non-controversial way to increase the proverbial pie,
creating jobs and enhancing per capita income growth (Shane, 2012, p. 1). That is why
entrepreneurs need access to resources and markets to succeed, and this is where national
policies play a vital role (Kressel and Lento, 2012, p. 6).However, when it comes to know how

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the mechanism operates, little is known, either on how entrepreneurship can be best promoted or
on how entrepreneurship influences economic performance (Wennekers and Thurik, 2014).

Hypothesis:
1) What is the relationship between globalization and innovative entrepreneurship?
2) To what extant government regulations and other institutional actors influence
entrepreneurial firms in building globalization?

Theory of the paper:

Arising from the above discussion emerges the following two questions:
3) What is the relationship between globalization and innovative entrepreneurship?
4) To what extant government regulations and other institutional actors influence
entrepreneurial firms in building globalization.
The aims of the paper are to review in brief the concepts of globalization and entrepreneurship,
and to emphasize the role of entrepreneurship, government regulations and institutional actors in
driving globalization.

Theoretical perspectives on globalization and entrepreneurship:

Understanding the role of entrepreneurship and entrepreneurs in the process of economic

development requires the decomposition of the concepts. There are so many definitions for the
concepts of entrepreneur and entrepreneurship. Ever since the first writings about
entrepreneurship there has never been an accord over a definition of the concept. The central
explanation lies in the fact that entrepreneurship represents a multifaceted phenomenon, being
analysed as a process, a resource or a state-of-being (Naud, 2013). That is why there is no
shortage of definitions of entrepreneurship because it is too complex to be explained through a
single set of factors.
The term entrepreneur seems to have been introduced by R. Cantillon. In his opinion, the
central component of the definition of the entrepreneur gravitates around risk assuming. Later, J.
B. Say stated that the entrepreneur shifts economic resources out of an area of lower productivity
and moves them into an area of higher productivity.
The progress achieved in understanding entrepreneurship is largely due to J. A. Schumpeter. He
adopted a different approach, underlying the role of innovation. Entrepreneurs are not only
innovators and, therefore, agents of change, but also coordinators of production. He suggested

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that entrepreneurship occurs under five conditions of newness: new goods, new production
methods, new markets, new sources of materials, or new organizations (Naud, 2013).
According to the Schumpeterian view, the entrepreneurial process constitutes one of the key
factors in driving the globalization.
Entrepreneurship is therefore a creative human process, one which mobilizes resources from one
level of productivity to another, a superior one. It implies the individuals will of taking on
responsibilities and the mental ability of carrying out the task from idea to implementation.
Another component of entrepreneurship consists in identifying opportunities where other people
find only chaos, contradictions, or confusion. The essence of entrepreneurship lies in walking
against time with wisdom and maturity, and in serving as an agent for change.

Government regulations and entrepreneurial firms in building globalization:

We examine the prediction of a negative relationship between barriers to entry for entrepreneurs
and international market integration using the Doing Business measures of entry regulation
Overall, we find a strong negative correlation between barriers to entry for entrepreneurs and the
degree of international integration of the respective countries. That more open countries have
lower barriers to entry for new firms is consistent with that the market rent effect is dominated
by the foreign innovation and strategic innovation effort effects. The negative correlation
between entry regulation and openness is particularly strong when entry regulation is measured
through the number of days it takes and the number of procedures involved to start a firm, and
holds when controlling for a general time trend, and including country-specific measures of
general institutional liberalization.
We find some evidence that countries with governments that are likely to put less emphasis on
consumer welfare (more corrupt countries) reduce their entrepreneurship barriers more in
response to an increase in integration, although these results only hold when entry regulation is
measured by the number of procedures.
We should note that while we find a negative correlation between entry regulation and
international integration, we cannot establish the direction of this relationship, i.e. reduced entry
barriers may affect policy makers' incentive to protect their markets from international
competition.

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Methodology:
To be eligible for review the study had to provide insights into entrepreneurship, globalization,
and government regulations. To ensure reasonably complete coverage of the literature I included
in my search 25 articles published in the last 4 years that generally provide insight into the
following fields i.e., entrepreneurship, international business, globalization. So the whole review
is based on the qualitative study.

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