Public and Corporate Governance and Young Global Entrepreneurial Firms

Abstract

Abstract Manuscript Type Conceptual Research Question/Issue New ventures are internationalizing their operations from inception. This creates opportunities for growth and profitability. However, early internationalization creates serious challenges for effective governance. This article focuses on two key layers of governance (public and corporate) and how they interact to influence global entrepreneurial young firms, especially those “born globals” that enter foreign markets from inception (e.g., internet companies) or soon after their establishment, also known as early internationalizers. Though established companies also create new businesses dedicated to international business, they differ in fundamental ways from their younger counterparts that venture into international markets. Therefore, in this article, we focus on those global entrepreneurial young companies. We propose that the interaction of public and corporate governance systems has important implications for global entrepreneurial young firms' strategic choices as they seek to position themselves in their markets. Ideally, public and corporate governance systems combine to ensure the viability, survival and success of these firms. Research Findings/Insights Born global and early internationalizing new ventures encounter distinct problems centered on free riding and management of intellectual property. Public governance establishes the essential framework that can guide the resolution of these issues. Corporate governance systems interact with public governance to harmonize the interests of different claimants, especially in disputes that arise across national borders. Corporate governance systems not only ensure effective monitoring of owner‐managers but define what they do and how to do it in a highly globalized environment. Theoretical/Academic Implications The article shows how public and corporate governance systems interact over time, determining the fate of global new ventures. It also articulates how these systems define and protect intellectual property rights. The discussion highlights the role of governance in a global marketplace where intangibles define success and failure, pointing out the efficacy of traditional agency theory while underscoring the need for revising its boundaries. Future theorizing should consider diversity of managerial motives, and these motives are influenced by national institutions. As a result, we should not start with the assumption that the interests of firms and owners are perfectly aligned. Practitioner/Policy Implications There is a need to understand the dynamic interplay between public and corporate governance systems, placing a greater focus on value creation across international borders. This interplay defines what managers (owner‐managers) do and how they lead their ventures in a global environment, one that is characterized by political and institutional uncertainties. The discussion makes clear that national institutions shape the definition and performance of managerial decisions and roles.

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