The analysis of level of institutional support for international entrepreneurial expansion of small and medium-sized enterprises from developing countries

Abstract

The initiating and development of international entrepreneurial expansion of small and medium-sized enterprises (SMEs) from developing countries (DCs) is under the influence of numerous internal and external challenges and limitations. Unlike developed countries, the institutional context of DCs determines specific business conditions, so the relevant literature indicates the necessity of incorporating institutional theory in international entrepreneurship research. Compared to previous research in which the estimation of institutional environment was performed on the basis of one dimension, in this paper, a composite indicator of benefits of country institutional profile for entrepreneurship (CIPE), which is relevant for export SMEs, is used. The aim of the paper is to point out the importance and the necessity of measuring entrepreneurs’ perception on the characteristics of institutional environment of a small and open economy, encompassing its regulatory, normative and cognitive dimension. The subject of the research is the attitude of entrepreneurs/managers of export SMEs from Bosnia and Herzegovina (BIH) about the level of institutional support for their international expansion. The results of the research indicate that the CIPE scale has high reliability and validity. Based on the data collected from 81 export SMEs from BIH, it has been determined that the institutional environment in BIH does not provide significant support for international entrepreneurial activities. The normative dimension of institutional environment has been rated the most favorably, while the regulatory dimension is considered to be the greatest obstacle to international entrepreneurship development. The paper, both theoretically and empirically, presents the complexity of institutional profile of DCs, states the recommendations for overcoming institutional barriers, the areas of institutional framework where measures of government policy are necessary, as well as recommendations for future research.