Chief executive officers' dispositional optimism, host country's rule of law, and foreign market equity mode choice of Ghanaian small and medium‐sized enterprises

• DOI: http://doi.org/10.1002/tie.22109
• Date: 01 January 2021
• Author: Robert A. Opoku,Rifaqat Hussain,Samuel Adomako,Kwabena Frimpong,Riaz A. Mohammed
• Published date: 01 January 2021

RESEARCH ARTICLE

Chief executive officers' dispositional optimism, host country's

rule of law, and foreign market equity mode choice of

Ghanaian small and medium-sized enterprises

Samuel Adomako

1

| Kwabena Frimpong

2

| Riaz A. Mohammed

3

|

Robert A. Opoku

4

| Rifaqat Hussain

3

1

School of Management, University of

Bradford, Bradford, UK

2

Department of Management and Marketing,

King Fahd University of Petroleum and

Minerals, Dhahran, Saudi Arabia

3

Entrepreneurship Institute, King Fahd

University of Petroleum and Minerals,

Dhahran, Saudi Arabia

4

Donald Business School, Red Deer College,

Red Deer, Alberta, Canada

Correspondence

Samuel Adomako, School of Management,

University of Bradford, Bradford, UK.

Email: s.adomako@bradford.ac.uk

Abstract

Despite a growing interest in the influence of managerial characteristics on firms'

strategic decision-making process, scholarly knowledge is limited with regard to how

and when psychological attributes of executives affect firms' foreign entry mode

decision. Building on behavioral decision-making theory, we address this gap by

investigating the effect of chief executive officers' (CEOs') optimism on firms' foreign

market equity mode choice. In addition, we examine the moderating influence of the

host country's rule of law on this relationship. Using primary data from 227 small and

medium-sized enterprises (SMEs) in Ghana, we found that increases in the levels of

CEOs' optimism are related to the increases in preference for equity entry mode. This

relationship is amplified when CEOs perceive the host country to have stronger rule

of law. The findings have theoretical, managerial, and policy implications for SMEs'

foreign market entry mode strategy.

KEYWORDS

CEOs, dispositional optimism, foreign market entry mode choice, Ghana, rule of law

1|INTRODUCTION

The broad strands of the internationalization literature agree that

firms' choice of methods for foreign market entry depends mostly on

macrovariables such as the risks associated with host countries, but

also personal factors relating to chief executive officers' (CEOs') per-

sonality characteristics (Adomako, Opoku, & Frimpong, 2017; Lai,

Lin, & Chen, 2017; Oesterle, Elosge, & Elosge, 2016). However,

despite a growing interest in the influence of managerial characteris-

tics on firms' strategic decision-making process, scholarly knowledge

is limited with regard to how and when psychological attributes of

executives significantly affect firms' foreign entry mode decision.

Consequently, a number of scholars have called for more research

efforts to be dedicated to understanding the ways in which relevant

personal characteristics of CEOs impact their firms' internationaliza-

tion behavior (Barkema & Shvyrkov, 2007; Laufs, Bembom, &

Schwens, 2016). This is an important research agenda since the inter-

nationalization of small and medium-sized enterprises (SMEs) is partic-

ularly dependent on CEOs (Francioni, Musso, & Cioppi, 2015;

Reuber & Fischer, 1997). For example, the upper echelons theory

(Hambrick, 2007; Hambrick & Mason, 1984) suggests that a firm's

strategic decision mostly depends on top management's personality

characteristics. Instructively, personality characteristics, such as the

cognitive and psychological orientations of top management, have

been noted to have very crucial influence on a firm's internationaliza-

tion decision-making process (Francioni et al., 2015; Hsu, Chen, &

Cheng, 2013; Nielsen & Nielsen, 2011). This viewpoint seems logical

because foreign marketing operations involve considerable risks, com-

plexities, and uncertainties, which invariably require CEOs who are

highly optimistic and possess high tolerance for risk (Amankwah-

Amoah, 2014; Amankwah-Amoah, 2016; Liesch, Welch, & Buckley,

2011). Similarly, behavioral decision theorists also argue that

DOI: 10.1002/tie.22109

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