Application of human resource management's universal model: An examination of people versus institutions as barriers of internationalization for SMEs in a small developing country

• Author: John Mendy,Mahfuzur Rahman
• Date: 01 March 2019
• DOI: http://doi.org/10.1002/tie.21985
• Published date: 01 March 2019

INTERNATIONAL BUSINESS THEORY AND APPLICATION

Application of human resource management’s universal model:

An examination of people versus institutions as barriers of

internationalization for SMEs in a small developing country

John Mendy | Mahfuzur Rahman

Lincoln International Business School,

University of Lincoln, Lincoln, UK

Correspondence

Dr John Mendy, Senior Lecturer/Programme

Leader, Lincoln International Business School,

University of Lincoln, London LN6 7TS, UK.

Email: jmendy@lincoln.ac.uk

Although the importance of people and institutions has been highlighted in multinational enter-

prise studies, theassociation between people, institutions, and the internationalizationof small to

medium-sizedenterprise (SMEs) is an underexplored issuefrom the context of a small developing

country. We examinetheories subsumed under the Universal Modelof human resource manage-

ment (HRM) onto SMEs to study the hypothesized people and institutionally orientated barriers

posed to SMEs’internationalization. Using quantitative analysis, the impacts of the barriers on

internationalization are highlighted with particularattention to employer attractiveness. Following

extant literature review, this study has used primary data collected through questionnaires from

212 Bangladeshi SMEs. We developed and validated the partial least square-based structural

equation model (PLS-SEM) to assess the impacts and successfully framed people versus institu-

tional barriers as a second-order hierarchical reflective model, which has not been done previ-

ously. Given their marginal significance over institutions, people-oriented cultural barriers should

be included asan extension of the Universal Modelto study SME internationalization.

KEYWORDS

barriers, emerging economies, internationalization, people, SME, Universal Model

1|INTRODUCTION

For decades, researchers have witnessed significant developments in

the fields of international business, human resource management

(HRM)/organizational behavior (OB), and small business. The impor-

tant contribution of SMEs toward the economies of emerging coun-

tries has been categorized as twofold; first, there is a growing number

of SMEs. and second, they have registered positively significant

effects “on developing national economies”(Steinerowska-Streb &

Steiner, 2014, p. 375). Despite their important contributions to small

developing countries, such as Bangladesh's garment industry's heavy

reliance on the international market, these economies are underrepre-

sented in the international literature (N. L. Williams, Ridgman, Shi, &

Ferdinand, 2014). This calls for further developments, which have

partly triggered the growing attention on the entrepreneurship activi-

ties of SMEs from an emerging country perspective. However, this

needs further development and investigation (Adomako, Danso,

Uddin, & Ofori-Damoah, 2016; Alon & Rottig, 2013).

Despite the three scientific disciplines' individual contributions to

society and organizations, the combined aspects of people, institu-

tions/institutionalism, and internationalization have long been over-

looked. Institutional differences between countries are similarly

important as these increase uncertainty and complexity in the today's

highly competitive international business environment (Liu & Vrontis,

2017, p. 255). Despite their constraints and significance, it is claimed

the location provides firms with exploitation opportunities (Zoogah &

Mburu, 2015). Recent developments in institutional theory have

attempted to include linkages between HRM practices and perfor-

mance with a degree of legitimacy (Gruman & Saks, 2011; Saridakis,

Yanqing, & Cooper, 2017). Other studies highlighted the influence of

technological advancements on the future of HRM and on people's

behavior at work although some challenges are still posed by techno-

logical change (Stone, Deadrick, Kimberly, & Lukaszewski, 2015),

employee engagement and entrepreneurial commitment, and perfor-

mance (Von Bonsdorff, Janhonen, Zhou, & Vanhalad, 2015). Some

scholars have examined the role of transformational leadership and

DOI: 10.1002/tie.21985

Thunderbird Int. Bus. Rev. 2019;61:363–374. wileyonlinelibrary.com/journal/tie © 2018 Wiley Periodicals, Inc. 363