An incentive-based model of international entrepreneurship in emerging and transition economies

The importance of firms from emerging and transition economies (ETES) is rising in the global economy. But what factors drive firms from ETES to internationalize? Prior frameworks do not allow us to fully answer this question. In this paper, we present a model that conceptually links the institutional environment, the firm’s resource investment, and internationalization. We argue that the domestic institutional attributes (i.e., the degree of specificity, stability, predictability, and enforceability) of property rights and contracting institutions drive the firm’s perceived risk and uncertainty, and therefore its resource investment and ability in pursuing international strategic behaviors. Focusing on private firms in ETES whose property rights and contracting institutions are still lacking, we name our model an incentive-based model of international entrepreneurship from emerging and transition economies (IEEE).