American[i] and Western European entrepreneurs and their firms were capable of seizing the opportunities to build international businesses across national borders because they were able to combine three factors: institutional support, appropriate national cultural values and multinationals leverage. These factors were key for entrepreneurs and firm not only in the first global economy but also both during the era of deglobalization after 1914 and during the second global economy after 1979.
The beginning of global entrepreneurs and their firms started with the building of well-thought institutions in their nations. There are two important characteristics for a national institution to be successful: (a) fairness and consistency, and (b) promote creation and accumulation of wealth.
Institutions that promote fairness and consistency across its constituents are able to create trust. By creating trust, the nation is able to leverage each citizen to form a larger support system. If the national institution wants to promote the creation and accumulation of wealth, then trust is its key component. To be able to promote the creation and accumulation of wealth, an institution needs to promote people and capital mobility. Trust is the factor that allows for people and capital to move around the country.
On one hand, trust-worthy institutions allow people to leverage each other to create larger support system. One example of this case is banks. Banks are able to operate because the citizens believe on the system would protect their investments. By trusting the institution, citizens are allowing to leverage each other to create more wealth. Banks are able to fuel the economy by investing on entrepreneurial ideas. Entrepreneurs are able to finance their ideas due to the existence of these support systems (i.e. banks, angel investors, venture capitalists, etc.)
On the other hand, trust also allows increasing people and capital mobility. When people know that there is consistent treatment and fair processes in their national institutions, they are more willing to move across the nation. When a nation has this environment, people would travel across the nation to find better opportunities with good chances of finding it. It is a matter not only of thinking that there are better opportunities out there but actually of finding those opportunities. When the national sentiment is full of trust, people can take the decision of looking for new opportunities across the country. Having consistent and fair institutions allows those people to find the opportunities. Success in this case is a combination of willingness to move and finding the opportunity.
On the other hand, in developing nations, there are several examples that prove what happen in the absence of good institutions. The case Multinational Corporations in
In addition to the fairness of the institutions in the country, the national cultural values play a key role in developing and promoting entrepreneurship. The difference between local and global entrepreneurship is a matter of the right institutions combined with some key cultural values.
Local entrepreneurship is just a matter of culture and individual’s characteristics. When individuals lived in a culture where creation of wealth is the ultimate goal, entrepreneurship spirit increases. All the nations in the world posses this drive, and that’s why all nations have local entrepreneurs (95% of the businesses in the world are family businesses). Nevertheless, having global entrepreneurs requires more than just a drive for wealth. As mentioned in Professor Geoffrey Jones’ course (Entrepreneurship and Global Capitalism at the
Before this century,
Additionally, people from
Lastly, Western Europe but specially
Trust on Management Practices --> Knowledge Accumulation --> Transfer of Knowledge --> Excellent results on average --> Trust on Management Practices
Even though there are some counter examples for such virtuous circle (Toyoda Automatic Looms and Toyota Automobiles), it is clear that the initial advantage was for Western Europe and
Multinationals play a key role on global entrepreneurship. Multinational are able to maintain the trend previously mentioned (institution + culture à global entrepreneurship). There are two ways in which Multinationals try to maintain the beneficial trend for
Multinationals have not only maintained the trend in favor of
Additionally, by creating wealth for
Other countries have been trying to participate in this virtuous cycle of creating multinationals that can promote knowledge and wealth that would help create more multinationals (i.e.
[i] Referring to people from
[ii] Referring to people from
[iii] Referring to people from
[iv] Referring to people from
[v] Entrepreneurship and Global Capitalism Course by Geoffrey Jones