Public and Corporate Governance and Young Global Entrepreneurial Firms

• Published date: 01 March 2014
• DOI: http://doi.org/10.1111/corg.12059
• Author: Shaker A. Zahra
• Date: 01 March 2014

Public and Corporate Governance and Young

Global Entrepreneurial Firms

Shaker A. Zahra*

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 entrepre-

neurial 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 internationalmarkets. 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 entrepre-

neurial 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 managementof intellectual property.Public governance establishes the essential framework thatcan 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.

Keywords: Corporate Governance, Public Governance, International Entrepreneurship, Born Global, National

Institutions

INTRODUCTION

Governance research has, for the most part, focused on

established companies, probably because of their vast

market powers and their capacity to inf‌luence the dynamics

of competition in their industries. While this focus is under-

standable, it has led researchers to overlookyoung entrepre-

neurial f‌irms that are the backboneof today’s global economy

(Zahra & Filatotchev, 2004; Zahra, Filatotchev, & Wright,

2009). Whether established in emerging or advanced econo-

mies, these f‌irms are active on a global scale, exploiting

opportunities for technological development, job creation,as

well as wealth-creating and -capturing activities,using inno-

vative business models in pursuit of these opportunities,

*Address for correspondence: Shaker A. Zahra, Departmentof Strategic Management

and Entrepreneurship & Gary S. Holmes Center for Entrepreneurship,Carlson School

of Management, University of Minnesota, 321 19thAvenue South, Minneapolis, MN

55455, USA. Tel: 612 626 6623; Fax:612 626 1316; E-mail: zahra004@umn.edu

77

Corporate Governance: An International Review, 2014, 22(2): 77–83

© 2014 John Wiley & Sons Ltd

doi:10.1111/corg.12059