The role of human capital in the foreign market performance of US SMEs: does owner ethnicity matter?

DOIhttps://doi.org/10.1108/JIC-09-2020-0312
Pages24-42
Published date29 April 2021
Date29 April 2021
AuthorLorenzo Ardito,Viviana D'Angelo,Antonio Messeni Petruzzelli,Enzo Peruffo
The role of human capital in the
foreign market performance
of US SMEs: does owner
ethnicity matter?
Lorenzo Ardito
Polytechnic University of Bari, Bari, Italy
Viviana DAngelo
Luiss Business School, Luiss University, Rome, Italy
Antonio Messeni Petruzzelli
Polytechnic University of Bari, Bari, Italy, and
Enzo Peruffo
Luiss Business School, Luiss University, Rome, Italy
Abstract
Purpose This paper adopts an intellectual capital perspective to investigate the role of owners who are
ethnic minorities in the foreign market expansion performance of SMEs,and in particular considers the human
capital dimension of intellectual capital.
Design/methodology/approach Based on the empirical investigation of a sample of 10,326 small- and
medium-sized US high-tech manufacturing enterprises, the authorsresults reveal a positive relationship
between the number of foreign markets where these SMEs operate and their financial performance, and that
this effect is reinforced by the presence of ethnic minority owners, as ethnic minorities constitute a valuable
source of intellectual capital which bring value to firms.
Findings The authorsfindings reveal the importance of intellectual capital in an SMEs leadership position,
specifically in terms of having individuals from normally disadvantaged groups as owners. In this sense,
policymakers are crucial in supporting the inclusion of ethnic minorities in SME ownership, through
advantageous treatment in firms, for example.
Practical implications The study presents practical implications for managers seeking foreign market
expansion. In addition, when defining ownership structure (e.g., in the start-up phase), the role of human
capital, in the form of ethnic minorities, should not be neglected, especially if an SME intends to operate or is
already operating in different national contexts.
Originality/value The authorsresults provide important insights into the positive effect of human capital
on SME foreign market performance. The idea of a moderating role played by owners from ethnic minorities
suggested here contributes to the literature on human capital and is one of the first attempts to consider this
moderating factor in this relationship, especially in the SME context.
Keywords Small- and medium-sized enterprises (SMEs), Human capital, Foreign market expansion,
Ethnic minorities
Paper type Research paper
JIC
22,7
24
© Lorenzo Ardito, Viviana DAngelo, Antonio Messeni Petruzzelli and Enzo Peruffo. Published by
Emerald Publishing Limited. This article is published under the Creative Commons Attribution (CC BY
4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for
both commercial and non-commercial purposes), subject to full attribution to the original publication
and authors. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/
legalcode
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1469-1930.htm
Received 25 September 2020
Revised 20 December 2020
18 February 2021
Accepted 23 March 2021
Journal of Intellectual Capital
Vol. 22 No. 7, 2021
pp. 24-42
Emerald Publishing Limited
1469-1930
DOI 10.1108/JIC-09-2020-0312
1. Introduction
Within a fast-changing globalized economy, intellectual capital (IC), defined as the knowledge
set firms utilize to create value and competitive advantage (Nahapiet and Ghoshal, 1998), is a
fundamental driver for the internationalization of firms (Edvinsson, 2000;Nerdrum and
Erikson, 2001). Intellectual capital is a complex construct which synthetizes and embodies all
the different dimensions of human knowledge (Allameh, 2018), i.e. not only skills, capabilities
and personal traits (human capital), but also the knowledge embedded within interactions
among individuals (social capital) and the more institutionalizedand codified knowledge
stored within data sets, patents, manuals, structures, systems and processes (organizational
capital). These three sub-constructs (human capital, social capital and organizational capital)
constitute the three pillars of intellectual capital (Nerdrum and Erikson, 2001) and enable us to
understand the importance of individuals within organizations more deeply, especially how
firms perform and create competitive advantage. Since these dimensions contribute to a
firms performance not only as singular entities but also through their interaction and
combination, they create a unique and therefore difficult-to-imitate pool of knowledge and
intangible resources (Subramaniam and Youndt, 2005).
Within this framework, the dimension of human capital, defined in terms of the firms
management and/or ownerseducation, skills, capabilities and characteristics, constitutes
one of the driving forces in a firms international activities (Kianto et al., 2014;Onkelinx et al.,
2016). In fact, human capital bolsters international commitment and shapes an organizations
values and orientation, as well as deploying the essential resources to pursue
internationalization efforts (Javalgi and Todd, 2011).
The importance of human capital is further intensified in small- and medium-sized
enterprises (SMEs), where the ownerscommitment has a stronger influence on foreign
market expansion performance than in larger enterprises (Javalgi and Todd, 2011;Onkelinx
et al., 2016). This effect is due to the flat structure of SMEs and their non-bureaucratic, free-
floatingmanagement style (Yew Wong and Aspinwall, 2004;Wee and Chua, 2013), where
control tends to be based on the personal supervision of owners and where formal policies
tend to be absent (Durst and Wilhelm, 2012), thus making SMEs more sensitiveto the
ownersmanagerial attitude. Hence, human capital plays a crucial role in the foreign market
expansion of SMEs because operating in foreign markets may be challenging due to issues
related to cultural diversity, geographical distance, different consumer needs and national
regulations, and limited resources available (Gassmann and Keupp, 2007). Human capital
may promote SME foreign market expansion because it can smooth out cultural diversity,
geographical distance, and different consumer needs and national regulations
(Pangarkar, 2008).
With this in mind, individual with foreign origins in leading positions are believed to
provide a particularly strong contribution in terms of new knowledge and different mental
models and problem-solving approaches that make the presence of a firm in foreign markets
more effective (Giudice and Maggioni, 2014;Cook and Glass, 2015;Liu and Almor, 2016;Usai
et al., 2018). Thus, given that SMEs may also lack the financial and human resources that
could help them face complex, international economic environments, having foreign owners
could modify the relationship between the presence of SMEs in foreign markets and their
financial performance (Mcadam and Reid, 2001;Scuotto et al., 2017). In line with this
reasoning, ethnic minority ownership, defined as the presence of individuals from an ethnic
minority group in the ownership structure, enriches the human capital of SMEs and may be a
specific source of competitiveness or hindrance (Li, 2010;Del Giudice, 2012). Broadly
speaking, ethnic minority groups are those that, because of physical or cultural
characteristics related to their foreign origins, are singled out from the broader ethnic
majority in the society in which they live, and that still possess fundamental cultural values
and a strong sense of belonging to a certain ethnic group and feel identified by it
Role of human
capital
25

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