Abstract
In this paper we examine how foreign actors capitalize on their ethnic identity to gain skills and capabilities that enable them to operate in a new and strange environment. We explore the mechanisms by which Bulgarian entrepreneurs in London use their ethnic identity to develop competitive advantage and business contacts. We find that the entrepreneurs studied gain access to a diaspora network, which enables them to develop essential business capabilities and integrate knowledge from both home and host country environments. The diaspora community possesses a collective asset (transactive memory) that allows its members to remove competition from the interfirm level to the network level (i.e., diaspora networks vs. networks of native businesspeople). Additionally, the cultural identity and networks to which community members have access provide bridging capabilities that allow diaspora businesspeople to make links to host country business partners and thus embed themselves in the host country environment. Thus, this paper adds to the growing body of work showing how foreignness can serve as an asset in addition to its better-known role as a liability.
Highlights
International business research shows that firms operating outside their home countries face additional costs of conducting business activities, commonly described as liabilities of foreignness (LOF)—costs that native actors do not usually incur (Hymer 1976; Zaheer 1995; Petersen and Pedersen 2002; Baik et al 2013)
We describe the entrepreneurs’ experiences in building their businesses in London, showing how the diaspora community facilitates this by helping the entrepreneurs recognize how valuable their specific knowledge about unique opportunities or resources in Bulgaria is to their customer, as well as to other members of the diaspora network
We have seen that diaspora networks provide transnational entrepreneurs with a unique organizational infrastructure that supports, and helps shape, the way they develop strategies for the management, combination and utilization of resources
Summary
International business research shows that firms operating outside their home countries face additional costs of conducting business activities (resulting, for example, from a lack of local institutional and business knowledge), commonly described as liabilities of foreignness (LOF)—costs that native actors do not usually incur (Hymer 1976; Zaheer 1995; Petersen and Pedersen 2002; Baik et al 2013). This study builds upon research showing that learning about the specificities of the market and the environment is crucial for starting companies, because this knowledge allows entrepreneurs to locate and exploit business opportunities, as well as to develop operational efficiency (Penrose 1959; Spender and Grant 1996; YliRenko et al 2001). Even though inter-organizational learning in a group setting has been viewed as essential for the successful operations of foreign companies, there is still a dearth of empirical qualitative studies scrutinizing the dynamics of learning in international business (Keupp and Gassmann 2009; Fletcher et al 2013) This gap is even deeper within the context of the assets of foreignness literature, which welcomes further insight on the dynamics of how firms operate within networks (Denk et al 2012). The final section contains a discussion of the findings and conclusions
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