China-USA Business Review (ISSN 1537-1514) Vol.15, No.3, 2016

China-USA

Business Review

Volume 15, Number 3, March 2016 (Serial Number 153)

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China-USA Business Review

Volume 15, Number 3, March 2016 (Serial Number 153)

Contents

Economics

The Impact of Differences in Political and Economic Systems on the Internationalization

of Companies―Results of Qualitative Research 105

Aleksandra Olejnik-Nizielska

The Role of Knowledge Processing Management in SME Development and Economic Growth 130

Kambiz Talebi, Mahla Zare Mehrjerdi, Seyed Mohammad Reza Akbari

Management

Individual Attitudes Toward Migrants: A Cross-Country Comparison 137

Yu Jin Woo

Neutral Spaces: The Close Relationship Between Professional and Educational Spaces 148

Roberta Barban Franceschi, Adolfo Jordán, Lucinda Morrissey, María Jesús Triviño

China-USA Business Review, March 2016, Vol. 15, No. 3, 105-129 doi: 10.17265/1537-1514/2016.03.001

The Impact of Differences in Political and Economic

Systems on the Internationalization of Companies―

Results of Qualitative Research

Aleksandra Olejnik-Nizielska

University of Economics Katowice, Katowice, Poland

This paper provides insights and evidence related to the role of two of the psychic distance factors (differences in

political and economic systems) in the process of Polish companies’ internationalization. Psychic distance is a

concept widely used in international business and international marketing literature to assess differences in culture,

economic, and political systems as well as differences in mentality and geographic distance. The objective of the

paper was to identify the impact of political and economic differences on main decisions of Polish managers

connected with internationalization and engagement in international business activity. The direct research allowed

answering two research questions: What are the perceptions of managers about Psychic Distance and its stimuli

(differences, differences in economic and political systems) between Poland and markets of foreign expansion of

Polish companies? What is the impact of psychic distance stimuli differences in economic and political systems on

the process of Polish companies internationalization? The paper is based on the critical literature overview and on

the field research conducted on the sample of 13 Polish companies with the technique of in depth interview. The

depth interviews were conducted with export and marketing managers and directors of Polish companies. In the

first theoretical part of the article, different approaches to conceptualization, operationalization, and measurement

of psychic distance were compared. The critical literature overview led to the conclusion that there is a need for

researchers to rethink the conceptualization, operationalization, and measurement of the phenomenon and factors of

psychic distance. It is assumed that psychic distance should be considered at the individual level, the factors having

impact on managerial perceptions of differences among countries depend on the environmental factors, companies

characteristics, and managers’ features. There is applied a methodology stating that psychic distance (and its stimuli)

should not be measured only with the use of objective constructs and statistical data, but with the use of subjective

data, such as the responses of decision makers. The results of depth interviews contain the essence of understanding

in qualitative research, essentially, meaning knowledge based on experience, the confrontation of theoretical

constructs with an empirical “world” and creation of the preliminary theory by the identification of constructs,

when a priori assumption does not exist. The second empirical part of the article presents field research results on

the importance of differences in political and economic systems in the process of companies internationalization.

Empirical research reveals that differences in political and economic systems constitute important factor having

Aleksandra Olejnik-Nizielska, Ph.D., associate professor, International Management Department, University of Economics

Katowice, Katowice, Poland. Correspondence concerning this article should be addressed to Aleksandra Olejnik-Nizielska, International Management

Department, University of Economics Katowice, Bogucicka str. 14, 40-226 Katowice, Poland.

DAVID PUBLISHING

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RESULTS OF QUALITATIVE RESEARCH

106

impact on companies’ internationalization. They have the most significant impact on the number of countries

subject to a company’s foreign expansion, the choice of directions for a company’s foreign expansion and the value

of capital engagement on foreign markets. Such differences are also a crucial factor in making decisions on the

withdrawal of business operations from international markets.

Keywords: psychic distance, political factors, economic factors, companies’ internationalization, triangulation of

methods, qualitative methods

Introduction

The process of globalization and economic integration favors the internationalization of companies. One

phenomenon which has an impact on internationalization is psychic distance, a concept which is broadly

discussed in the literature. Research has been conducted on the importance of this factor in the decision-making

process relating to companies’ export activities, the choice of forms and strategies of companies’ foreign

expansion, and decisions on the standardization and adaptation of marketing strategy implemented by

companies operating on international markets.

The importance of different psychic distance stimuli (differences in culture, differences in political and

economic systems, and differences in mentality and geographic distance) in the internationalization process of

Polish companies is the subject of both qualitative and quantitative research conducted by the author. However,

only the impact of differences in political and economic systems will be presented in the current article. For the

purposes of the article and whole research project, economic differences were operationalized as follows:

including the level of economic development—measured by GDP per capita, the level of infrastructure

development, situation in the labour market in the region. In turn, political differences were operationalized as:

the role of the government in the country, the level of democracy, and political stability.

Political and economic factors are treated here as the psychic distance stimuli (Dow & Karunaratna, 2006).

The first theoretical part of the article consists of a comparison of differences in the conceptualization,

operationalization, and measurement of psychic and cultural distance. The second empirical part of the article

presents qualitative research results relating to managerial perceptions of the impact of political and economic

factors on Polish companies’ activity on international markets.

The conducted research enabled the author to answer the following research questions: What are the

perceptions of managers about the differences in economic and political systems among Poland and the foreign

expansion markets of Polish companies? What is the impact of differences in political and economic systems

on the process of Polish companies internationalization (the directions and forms of internationalization, the

pace and amount of countries subject to foreign expansion of Polish companies, and the value of sales and

foreign capital engagement of Polish companies abroad)? What is the impact of differences in economic and

political systems on managers’ decisions connected with engagement on international markets (initiating

business with foreign partners, leading business on international markets, and withdrawing business from

international markets)?

To obtain the comprehensive results, joining the qualitative and quantitative methods is necessary.

Theoretical Foundations

Researchers and scholars have strived to comprehend and evaluate the nature of psychic distance and its


107

impact on the process of internationalization of companies. During the past six decades, this has been cited as

an important predictor variable for: the decision to export (Holzmutter & Kasper, 1991); market selection

decisions (Dow, 2001); entry mode choices (K. D. Brouthers & L. E. Brouthers, 2001; Tihanyi, Griffith, &

Russel, 2005); the degree of adaptation in foreign markets (Sousa & Bradley, 2005; Sousa & Lages, 2011; Dow,

2001); international performance (Evans & Mavondo, 2002; Evans, Mavondo, & Bridson, 2008); and a variety

of other international phenomena (Nordmann & Tolstoy, 2014). There is evidence of measuring the effects of

the interaction among cultural distance, perceived psychic distance, and psychic distance stimuli on the process

of internationalization. A large sector of the International Business (IB) field, along with other fields (such as

international marketing and international management), has dedicated themselves to research on the role of the

aforementioned constructs in the internationalization process critically reviewed by Harzing (2004), Dow and

Karunaratna (2009).

Due to the volume of the article, a limited number of remarks on the conceptualization and

operationalization of the psychic distance construct will be presented herein.

The concept of psychic distance was originally introduced by Beckerman (1956) in 1956, as an

afterthought to a study on the impact of relative economic distance on trade patterns. Psychic distance was

introduced as a subjective influence moderating the role of objective economic distance (Beckerman, 1956). At

the beginning, however, no extensive research was conducted in order to analyze the impact of psychic distance

on the choice of foreign markets. Subsequently, in the 1970s, this concept was further developed by Johanson

and Vahlne (1977), the authors of the sequential model, as mentioned above. These economists from Uppsala

University define psychic distance as a set of factors preventing or disturbing the flow of information between

the firm and the market (Johanson & Vahlne, 1977; Johanson & Wiedersheim-Paul, 1975). These difficulties

may be directly related to communication with existing and potential customers. It has been stated that the

internationalization process (as well as other international business transactions) is not only determined by

objective economic realities, but also influenced by the availability of information and by the decision-maker’s

cognitive capabilities (Hakanson & Ambos, 2010).

When describing the insights into the reasons for various degrees of businesses’ market entry into,

references are often made to managers’ “psychic distance” to operating abroad (Albaum, Strandskov, & Duerr,

2002). This reflects the managers’ subjective impressions and emotions towards a foreign country and also has

an ultimate impact on whether a company opens up and decides to commence operations abroad or chooses to

limit its market connections (Albaum et al., 2002). Cultural distance, in turn, is defined as the differences

between the culture of one’s own country and the culture of a target country (e.g., an export destination). In this

approach, the term of psychic distance refers to the perception, e.g., of customers’ needs and expectations in a

foreign country (Sousa & Bradley, 2006; Sousa & Bradley, 2008). The distance is culturally-determined but

subjective. Cultural distance has a more objective character―it acknowledges the existing cultural differences

(Ibid.). Dow and Karunaratna (2006) and Dow and Larimo (2009) have distinguished the term “perceived psychic

distance” from the psychic distance stimuli. The former referred to the managers’ perception of factors

(measured by psychic distance stimuli) which distort the flow of information between different markets.

Although culture is considered to be one of the factors of psychic distance stimuli (Dow & Larimo, 2009), this

is usually operationalized in simple form by the values of Kogut and Singh (1988), and Avloniti and Filippaios

(2014).


108

Special consideration is given in this article to the differences in political and economic system among

nominated countries (Dow & Karunaratna, 2006). Commentators ranging from Carlson (1974) to Child, Hong,

and Wong (2003), such differences as a potential psychic stimulus, but few researchers (Goerzen & Beamish,

2003) have employed it in their empirical research. Differences in political systems can potentially impact

managers on two levels. First of all, industries must necessarily involve a substantial amount of

business-to-government and government-to-business communication. Differences in political systems will tend

to increase the costs of uncertainty of such communications. Governments also play a key role in policing

various business-to-business and business-to-consumer interactions, such as the enforcement of contracts and

the monitoring of anti-competitive behavior. As a result, differences in political systems increase the risk that

foreign firms might misjudge how a government is likely to reach in specific situations, and how other firms

are likely to react in the light of any potential government intervention. Both of these phenomena have the

potential to increase the costs and risks of doing business in a foreign country, thus influencing market selection

decisions (Dow & Karunaratna, 2006).

Attempts to operationalize psychic distance and empirically test its relevance remain relatively limited,

although generally speaking, they are on the increase (Ghemawat, 2001; Brewer, 2007; Prime, Obadia, & Vida,

2009). This applies to both the number of empirical studies on psychic distance and to the sophistication of the

measurement instruments which have been developed (Shoham & Albaum, 1995; Sousa & Bradley, 2008;

Sousa & Lages, 2011).

In this article, special consideration is given to measuring the differences in political and economic

systems. There are different examples of research on the impact of political (institutional) factor of international

business activity of companies (Jonsson & Lindbergh, 2010). Dow and Karunaratna (2006) proposed the

following measurement scale of differences in political systems (differences in degree of democracy or political

freedom) among countries, as represented by four variables. The first, variable is Henisz’s (2000) polcon scale

of comparison, which measures the degree of political constraint within a country. The second, measure of

“democracy” and “autocracy” is the polity IV instrument (Gleditsch, 2003). The two final “democracy”

variables come from Freedom House (2000). The selected indicators represent differences in “political rights”

and “civil liberties” across nations. The second political dimension, which is less commonly measured, also

exists. The right-centre-left scales of Beck, Clarke, Groff, Keefer, and Walsh (2001) measure “the policy

preferences or ideological leanings of the decision-makers in each country”. The mean difference of scores

among countries is calculated based on the ideological leanings of the chief executive party (e.g., president) and

the largest political party within the government.

There are different approaches to the measurement of differences in economic systems among countries.

Vahlne and Wiedershein-Paul (1973) measured the differences in industrial development with the use of such

indicators like: GDP per capita, consumption of energy and steel, a number of phones per 1,000 inhabitants as

the indicators. Kobrin (1976) employed a broader range of 10 items including the percentage of employment in

agriculture, consumption patterns (e.g., phones, radio, and newspapers), the degree of urbanization, and the

GDP per capita. Dow and Karunaratna (2006) proposed the following measures: the difference in GDP per

capita, the differences in consumption of energy, the vehicle ownership, the percentage of employment in

agriculture, the percentage of GDP from manufacturing, the difference in degree of urbanization, and the

differences in the development of the communication infrastructure (newspapers, radios, telephones, and TV

sets per 1,000 population).


109

According to the author of the article, none of the aforementioned classifications of psychic distance

stimuli is sufficiently comprehensive, which has led to the preparation of the author’s own system of

classification. For the purpose of this study, the following classification of psychic distance stimuli is

presented: cultural differences (including differences in values and norms, differences in languages, and

differences in religion), economic differences (including the level of economic development―measured by

GDP per capita, and the level of infrastructure development, situation in the labour market in the region),

political differences (including the role of the government in the country, the level of democracy, and political

stability), the differences in mentality (different way of thinking of managers, the managers’ attitude to the

reality, and the rules, with which the entity is heading during processing information from the

market/environment), and geographic distance (distance in kilometres, transportation costs, and differences in

time zones).

A number of authors have conceptualized and operationalized psychic distance in a variety of ways.

Current methods of measuring the psychic distance phenomenon are not without their critics. A major

issue is that measurement development procedures do not take into account the perceptual nature of the

phenomenon. Psychic distance is conceived as a perceptual and subjective phenomenon, but is typically

operationalized as an objective, collective construct―an inconsistency that has been perpetuated over time

(Hakanson & Ambos, 2010). Perception is interpretative and highly subjective in terms of the individual’s

personal experiences and cultural value systems (Swift, 1999). As a consequence, the development of a

measure of perceptual psychic distance should involve decision makers from the very beginning. If respondents

are given a list of factors generated from the literature and asked to evaluate their degree of psychic distance

stimuli, the subjective aspects of such perceived psychic distance are limited to the researchers’ a priori

conceptualization of psychic distance. Acknowledging the subjectivity of psychic distance stimuli perception is

of crucial importance as decision makers themselves are confronted with the potential problems which result

from psychic distance, and therefore should be able to identify the issue as the origin of such problems (Prime

et al., 2009).

According to the author’s view, qualitative methods could be appropriate when investing on the role of

psychic distance in companies’ internationalization. The examples of qualitative research on the perceived

psychic distance are presented in the following articles: Child, Rodrigues, and Frynas (2009) and Prime et al.

(2009).

Research Methodology

As previously mentioned, the research conducted by the author focused on the investigation of the impact

of overall psychic distance and psychic distance factors, in the process of Polish companies’ entry into

international markets. To this end, a hypothesis was established that the psychic distance between Poland and the

foreign markets onto which Polish companies are expanding is an important determinant of managerial decisions

concerning internationalization. In order to fulfill the aforementioned research objectives, it was deemed

necessary to combine various research methods (the so-called triangulation of methods), therefore the following

research methods and techniques should be used: a critical review of literature on the subject; desk research;

field research in the form of qualitative research carried out using in-depth interviews (on a sample of 13

companies); and quantitative research with the use of face-to-face interviews (on a sample of 200 companies).

Special consideration should be taken into building instruments for field research.


110

The article presents only the results of qualitative research on the impact of one of the psychic distance

stimuli―differences in political systems―on the process of Polish companies’ internationalization.

Sampling

Qualitative research in the form of depth interviews was undertaken in the period between July 2013 and

April 2014. This research was undertaken within the territory of Poland; the research objects were Polish

companies undergoing the process of internationalization; and the research subjects were managers’

perceptions of the psychic distance between Poland and the foreign expansion markets of Polish companies.

Purposive sampling was selected for the research. The rules of sampling were chosen in accordance with

methodology proposed by Miles and Huberman (2000), and research was conducted on a sample of 13

companies.

The sample was consisting of Polish companies. The list of companies, as the subjects of the research, was

created on the basis of the general knowledge of the researcher and the following lists and rankings of Polish

exporters: the rankings of the Ministry of Economy; “Sława Polski”, “Orzeł Eksportu”, and “Dobra firma”; the

“Lista 500” Polityki ranking of the most significant Polish companies; the list by “Stowarzyszenie Eksporterów

Polskich”, and the “Liderzy Eksportu” ranking of Polish companies.

The criteria for choosing the cases were as follows: origin of capital (100% Polish capital); experienced in

activity on foreign markets (more than five years); value of sales on foreign markets during the last two years

(more than 10.00% of total sales); and the geographic spread of foreign sales (companies should operate in more

than 10 foreign markets). The criteria of 100% Polish capital ensured that the national culture of the companies as

subjects of the research was Polish (thus facilitating a contrast between Poland and foreign countries). In the

author’s opinion, the interviewees should ideally have experience in activity on international markets in order to

formulate opinions on different psychic distance stimuli. This was measured by the time of activity abroad, the

share of foreign sales in total sales, and the geographic spread of foreign activity.

On the basis of telephone contact, those responsible for managing export functions in the company were

chosen, omitted and direct relations were subsequently established. Interviews were conducted directly during

visits to export companies. Additionally, some telephone interviews were also included. The maneuverability of

research was 30.00%. Cases were developed based on interview data combined with information freely

available on company websites.

Characteristics of the Companies

The majority of the companies were large (69.23%) and medium-sized (30.76%) companies, representing

the mining industry (companies B and C); the chemical industry (companies F and J); the cosmetics industry

(companies E and I); the food industry (company D); the pharmaceutical industry (company L); the ICT

industry (company M); the vehicle industry (company G); the furniture industry (company A); the automation

industry (company H); and the aluminum profiles industry (company K). The majority of the respondents were

export directors and export managers (46.15% of the respondents); sales and marketing directors (23.07% of

the respondents); international markets and regional directors (15.38% of the respondents); marketing and

communication managers (7.69% of the respondents), and assistants to export directors (7.69% of the

respondents). The companies are experienced in activity on international markets. The main features of the

companies under research are presented in Table 1.

Tab

le 1

Cha

ract

eris

tics o

f Pol

ish

Com

pani

es

Com

pany

sym

bol

A

B

C

D

E

Yea

r of

est

abli

shm

ent

1973

19

22

1951

19

92

1989

Indu

stry

fu

rnit

ure

min

ing

min

ing

FM

CG

co

smet

ics

Key

cha

nges

in s

truc

ture

19

73―

esta

blis

hmen

t by

a pr

ivat

e en

trep

rene

ur (

fam

ily

owne

d co

mpa

ny)

1922―

esta

blis

hmen

t of

the

priv

ate

com

pany

19

51―

tran

sfor

mat

ion

the

com

pany

into

the

stat

e tr

easu

ry c

ompa

ny

2002―

purc

hasi

ng w

ith

the

stat

us o

f ba

nkru

ptcy

by

a pr

ivat

e in

vest

or

1951―

esta

blis

hmen

t of

the

stat

e ow

ned

com

pany

19

93―

tran

sfor

mat

ion

from

a

stat

e-ru

n co

mpa

ny in

to a

st

ate

trea

sury

com

pany

.

1992―

esta

blis

hmen

t by

a pr

ivat

e en

trep

rene

ur (

fam

ily

owne

d co

mpa

ny)

1989―

esta

blis

hmen

t by

a pr

ivat

e en

trep

rene

ur (

fam

ily

owne

d co

mpa

ny)

Tot

al s

ales

20

05

2010

20

12

2013

126,

927,

964

116,

775,

038

140,

423,

837

124,

233,

022

240,

000,

000

664,

000,

000

1,20

0,00

0,00

0

4,78

0,05

9.3

2,94

7,75

8.6

3,47

2,67

2.3

166,

000,

000

476,

300,

000

460,

000,

000

ni

For

eign

sal

es

2005

20

10

2012

20

13

33,1

11,0

00

16,0

16,0

00

19,0

95,0

00

14,9

73,5

05

60,0

00,0

00

95,0

00,0

00

260,

000,

000

4,65

9,65

5.2

2,72

1,28

5.3

2,72

8,09

5.5

12,2

31,0

00

19,9

76,0

00

ni

Star

ting

yea

r of

for

eign

sa

les

2001

20

05

1951

20

04

2000

Fir

st f

orei

gn e

xpan

sion

m

arke

t C

zech

Rep

ublic

, Rus

sia,

U

krai

ne, G

reat

Bri

tain

R

ussi

a G

erm

any,

Rus

sia

Ger

man

y L

ithu

ania

Mar

ket e

xpan

sion

(ye

ars)

13

63

10

14

Fir

st f

orei

gn s

ubsi

diar

y –

A

ustr

ia

– –

For

eign

man

ufac

turi

ng u

nits

–

Rus

sia,

Ukr

aine

, K

azak

hsta

n –

– –

Exi

t fro

m f

orei

gn m

arke

ts

– 20

07―

Iran

–

– –

Tab

le 1

con

tinu

ed

Com

pany

sym

bol

F G

H

I

J

Yea

r of

est

abli

shm

ent

1945

19

96

1953

19

93

1992

Indu

stry

ch

emis

try

auto

mob

ile

auto

mat

ion

cosm

etic

s ch

emis

try

Key

cha

nges

in s

truc

ture

1945―

form

ed a

s go

vern

men

t-ow

ned

corp

orat

ion,

19

95―

tran

sfor

mat

ion

into

th

e fo

rm o

f a

lim

ited

li

abil

ity

com

pany

1996―

esta

blis

hmen

t by

a pr

ivat

e en

trep

rene

ur (

fam

ily

owne

d co

mpa

ny)

1953―

esta

blis

hmen

t by

the

priv

ate

entr

epre

neur

1993―

esta

blis

hmen

t by

a pr

ivat

e en

trep

rene

ur

(fam

ily

owne

d co

mpa

ny)

1992―

esta

blis

hmen

t of

two

part

ners

hips

Fir

st f

orei

gn e

xpan

sion

m

arke

t C

zech

Rep

ublic

C

zech

Rep

ublic

F

ranc

e U

krai

ne

Ger

man

y

Tot

al s

ales

20

05

2010

20

12/2

013

2,20

0,00

0,00

0 4,

000,

000,

000

3,50

0,00

0,00

0

659,

000,

000

1,29

8,00

0,00

0 1,

301,

000,

000

1,50

2,00

0,00

0

19,4

00,0

00

17,9

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00

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322,

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767,

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ting

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eign

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1945

20

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ket e

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69

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14

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st f

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ubsi

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zech

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, 194

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zech

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, 199

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oman

ia 2

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ania

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man

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urke

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t fro

m f

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gn m

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Tab

le 1

con

tinu

ed

Com

pany

sym

bol

K

L

M

Yea

r of

est

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shm

ent

1953

19

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1991

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stry

al

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um p

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les

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cal

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tran

sfor

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the

form

of

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mit

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abil

ity

com

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19

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com

pany

est

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196,

000,

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510,

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000

151,

586,

000

378,

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000

406,

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000

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000

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00,0

00

200,

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000

263,

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es

2005

20

10

2012

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13

43,0

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00

64,0

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00

117,

000,

000

26,9

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00

255,

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000,

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f fo

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krai

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krai

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The

Net

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ands

200

1,

Mex

ico

2009


114

Managers’ opinions of the importance of differences in political systems in the process of

internationalization of companies. The respondent representing company A noted the differences in political

systems between Poland and the foreign expansion markets on which Polish companies are active. Such

differences are related to democratic systems, the role of government in the country, political stability, and the

quality of legal institutions. The most significant political differences are in Belarus and the Ukraine, likely

resulting from the lack of democracy and political stability. Differences in political systems affect decisions on

the choice of foreign expansion markets and the choice of the form which internationalization they will take.

Because of the higher political risk in Belarus, Ukraine, and Russia, company A is reluctant to choose the most

advanced form of internationalization. Political risk also reduces the number of foreign expansion markets, as

the company fears entering foreign markets with an unstable political situation, of which one such example

would be Belarus. According to the manager of company A, it would be necessary to introduce a democratic

system in this country in order to make it viable to conduct business there. Belarus, however, continues to be

perceived as under the control of an authoritarian regime.

Differences in political systems constitute a barrier to internationalization for the manager representing

company B, who took into consideration social security in this country. For example, the unstable political

circumstances in Egypt brought about his company’s withdrawal from that market. This manager took into

consideration the role of the democratic system within a country. According to him, “the more democracy in

the country, the bigger the competition”. Political conditions make it difficult to conduct business in Ukraine,

where his company is unable to implement a clear business policy. The obligations placed upon entrepreneurs

are ignored; there are no clear tax regulations, and corruption is rampant. This state of affairs causes uncertainty

as to the feasibility of conducting business in that country and also the potential return on invested capital; thus,

it is deemed too risky to apply more advanced forms of internationalization, which demand capital engagement

in these countries.

The manager representing company C also noticed the clear differences in political systems. He admitted

that political differences are not as important in countries belonging to the EU, because of the unified

policy within this organization. Differences in political systems are taken into consideration by managers

entering foreign countries not part of the European Union. A fine example is Egypt, where corruption,

autocracy, and restrictions on the labor market may all be encountered. For him, the factors complicating

cooperation with foreign partners are the lack of political stability on the foreign market and the quality of legal

institutions.

The respondent representing company D also perceives the differences in political systems between

countries―according to him, such differences can be easy to overcome. He made mention of tariff barriers,

limiting the massive demand for business activity abroad. This manager has a negative opinion of the

attractiveness of the Ukrainian market, believing that “the rules of law” should be implemented in that country

and should be applicable to everybody. To improve investment conditions in this country, the interests of both

employees and employers should be taken into consideration. Nowadays, industries originally developed by

oligarchs are undergoing continued development, among them the energy, banking, and media sectors. Also

viewed as important is the presence of a local partner with decent connections to the government, which

constitutes the most important bridging factor reducing the perceived uncertainty of venturing into a new

foreign market. As such, the process of identifying suitable partners, as well as establishing and managing

relationships with them, is vital to the business’ continued overseas expansion.


115

The manager representing company E is of a similar opinion, as to him there is no point in choosing more

advanced forms of internationalization (such as direct investment) on markets such as Ukraine and Belarus.

This state of affairs is brought about by the unstable economic and political circumstances in these countries, as

well as the prevalence of corruption. The respondent also made mention of the unstable legal system in these

countries. Political conditions are important in post-communist countries such as China and Vietnam. The

typical profile of a manager in these nations runs similar to that of a representative of the “powers that be”. For

the manager representing company E, formal barriers to export activity can significantly impede activity on

international markets.

According to the manager representing company F, differences in political systems―and subsequently the

regulatory environment―have a noticeable effect on decisions regarding internationalization. As an example,

in the so-called “oligarchy” of Ukraine, the market is perceived as dangerous, as “the rules of the jungle” are

the main regulations in force. Furthermore, in Belarus, local businessmen can have trouble gaining access to the

single European currency. Under the circumstances, trade can even resemble a bartering process. Such

countries are characterized by a lack of political stability.

The manager representing company G perceived the impact of differences in political systems on

decisions concerning internationalization. The German government strongly encourages the internationalization

of domestic companies; to this end, there is an active lobbying policy, especially in the case of vehicles using

alternative sources of energy. The level of market impenetrability is also a factor in the implementation of

internationalization policies. Many decisions connected with the aforementioned industry are discussed at the

government, self-government, and union levels, as in the United Arab Emirates.

According to the manager representing company H, differences in political systems exist, and political

factors cause restrictions in trade. Protectionist policies can create limits on international trade, tax barriers,

dumping, and export subsidies. There are no clear rules for conducting business in Eastern countries. In order to

decrease competition, the inflow of goods from abroad is reduced. An alternative example is China, where a

pro-export policy can be observed. Due to government’s subsidies, there is massive price competition on this

market.

The manager of company I stated that his company undertakes activity on each international market

without regard for political systems. However, political instability has an effect on quality and risk inherent in

activity on international markets. As an example, the company has a highly competent partner on the

Belarusian market, but the political and economic system in that country limits business opportunities. The

devaluation of currency also brought about limitations on the value of sales―in fact, clients experienced falls

in sales revenue of up to 30%. The most basic risk of their activity on international markets is the failure of

foreign partners to settle outstanding debt.

For the manager representing company J, the most important factor hindering international trade changes

to the regulatory environment, about which foreign partners are often not informed. The next problem is the

highly individualized decisions made by officers (clerks), which are not based on legal regulations. As an

example he cited Russia, where the authoritarian system is prevalent and decisions are generally made on an

individual basis. Political stability and the associated sense of day-to-day security are the only guarantees when

conducting business within a country. The autocratic system guarantees a company’s operations on the foreign

market. Low levels of democracy bring about corruption. Ukraine is perceived as a “fickle market”, where

nobody can predict events. Such circumstances have a direct impact on decisions on investment in that country.


116

According to the manager representing company K, political systems could cause uncertainty on foreign

markets. Various institutions encourage business activity on international markets, in forms such as export

subsidies. This manager finds it difficult to co-operate with Ukrainian managers, who differ from Poles in terms

of mentality. Standards of both responsibility and ethics are lower. The respondent described Russian and

Ukrainian managers as “people who need quarantine for a period of 20 years”. In his estimation, Poland has

taken enormous strides in recent years. Polish managers tend to adhere to international standards and establish

long-lasting business relationships.

Political stimuli are also considered important in making decisions on internationalization by the manager

representing company L. Such circumstances can apply when the market is regulated by the government. The

political system may also influence the decisions of the courts concerning litigation. Another political factor is

corruption, which is considered important on each level of business. In numerous business situations,

managerial decisions are dependent on the decisions of clerks. According to the manager of company L, the

rules of business are followed in each country in which his company operates.

The respondent from company M also noted the differences in political systems between Poland and the

foreign expansion markets of the company he represents. He outlined the clear delineation between the

so-called “Eastern” and “Western” parts of the world, noting the role of the government in business activity,

which can hinder operations. Political differences do not have an effect on his company’s activity on the

German, Scandinavian, and American markets. According to the respondent, the most definitive elimination of

differences in political systems was brought about by Poland’s accession to the European Union. The quality of

legal institutions, or lack thereof, is another important political factor, as this manager observed in Mexico

which he labeled a “Latin mess”. As a further contrast, the level of public safety in the Ukraine cannot be

assured. The company decided to expand into the Russian market due to the interationalization of business.

There is a perceived lack of business stability on Eastern markets such as Belarus and Ukraine.

Managers’ opinions of the importance of differences in economic systems in the process of

internationalization of companies. The respondent of company A stated that there are not many differences in

economic systems between Poland and Central European countries (Czech Republic, Hungary). More

significant differences are observed between Poland and more developed European countries, such as France

and Germany, or Japan and the United States. The most significant differences are connected with the level of

economic development, unemployment rate, inflation rate, and the wealth of the society. According to the

manager of company A, differences in economic systems have huge impact on decisions connected with

internationalization and they are still being treated as a barrier of internationalization. The fact that Poland is

less developed than other European countries has impact on the country of origin of Polish products. Polish

products are still being perceived as being of less quality and it is difficult to position them as luxury products

in the most developed countries. The company A does not want to enter less developed foreign markets. The

reason of it is the anxiety of the terms of payments by the business partners. The other economic criteria taking

into consideration by the company A is the prosperity of the society. The company A did not enter the Slovak

market (despite the geographic distance is close), because Slovak society is not perceived as rich. The company

is focused on the regions inhabited by the well educated and rich social class, which ensures demand for the

company’s products. The differences in economic systems do not have impact on the choice of the

internationalization form of company A, but in future the company plans the choice of more advanced form of

internationalization in countries, where economic situation is stable, infrastructure is better developed, and the


117

public safety is higher. The differences in economic systems have impact on the initiating relations with foreign

partners. According to the manager of the company A, it is easier to establish relations with partners coming

from countries of the same level of economic development.

The respondent representing company B also saw the differences in economic systems between Poland

and foreign expansion markets of company he manages. For him the most important are tariff barriers, patents

and intellectual property law, norms, and standards obligatory in each country (it results from the specific

features of products offered by the company). The respondent of company B took into consideration the life

cycle of the products on international markets. Polish products, which are not being sold in Poland find demand

on international markets. The results of protectionist policy used by different countries are the embargo on

companies’ products, the difficulties in financial transfers (the example was the blockade the SWIFT

transactions in Iran). Because of the fact that the clients of the company are public enterprises, the impact on

transaction of the company has also fiscal deficit. In countries such as Romania, there is a huge impact on

inflation on the regulation of the country on the activity of coal mines. It also has impact on financing the

investments in these companies. The company B’s representative mentioned about the importance of stability

of financial institutions for establishing economic transactions. Because of the huge values of transactions, it is

important to use different financial instruments, such as: bank guarantees, letter of credit, and leasing. It is

important to verify the financial situation of the host country and of the company―the party of the transaction.

The respondent representing company B gave the example of Africa. He noticed that the banking system in

Africa is less developed than in Poland. The transaction was not performed there, because it was not possible to

find proper bank. Another issue is difficult situation in the competitive market, which is the result of

subsidizing export. It is connected with the products coming from China. For the respondent representing

company B, what important is also situation on the labor market. The unfovarable is the fact that there is a

cheap labor force in Chinese market. It means that it will be difficult to substitute labour force with the

machines.

The differences in economic systems are also important for the respondent representing company C. He

took into consideration the situation in the industry, which he represents (energy). According to him,

globalization caused that differences in economic systems do not have impact on decisions connected with

internationalization. His clients are huge transnational corporations, he makes B2B transactions, and the

products of the company come to individual clients. Because of the fact of the huge values of transactions when

he decides to enter foreign markets, he just took into consideration the financial situation of the expansion

country and the company―business partner. The manager of company C took into consideration the way of

protection of business transaction. As its foreign expansion field, he chooses less rich countries, under the

condition that the company has good reputation and good financial situation. Nowadays, the company

concentrates mainly on European countries, which are for the respondents the most “natural markets”, and the

clients are the most reliable.

Also the manager representing company D saw the necessity of taking into consideration differences in

economic systems between countries. The importance for him is the wealth of the clients in the host country.

The same as the respondent representing company A, he gave the example of Slovakia. This is the requirements

of low prices, to be competitive in the foreign markets. Because of the delays of payments, it is difficult to

cooperate with the Greek managers. The manager representing company D does not see the tariff barriers.

Because of the fact that the company is realizing its transaction only on the EU markets, there are the same


118

regulations connected with international trade. The respondent representing company D noticed that because of

the much diversified assortment of products, the company is adjusting its products to consumer’s preferences

on each international market. The company is adjusting to local markets each marketing mix instruments. For

the manager representing company D, what very important is the development of economic, social, and

transportation infrastructure on its foreign expansion markets.

The same differences in economic systems are noticed by the manager representing company E. For him,

what the most important are factors making difficulties in payments. It is e.g., the accession to the foreign

currencies. The example is Belarus, where the partner could not make the bank transfer because the financial

situation in the country is not stable, which makes changes in exchange rates. The difficulties in business

activity are tax barriers and the lack of possibility of verification of business partners. The next issues are

differences in income levels between Poland and foreign expansion markets of Polish companies.

In case of differences in economic systems, the manager of company F showed tax barriers connected with

trade from beyond EU countries and restriction connected with the lack of competition. The respondent gave

the example of China, from which country the company had to withdraw itself, because the antidumping tariffs

were imposed. In contacts with Eastern countries, so-called registration of product is important. It causes the

increasing of costs of launching the products on the market.

For the respondent representing company G, what important is the tender procedure in different countries.

According to this, what important is preparing to foreign contacts. The respondent took into consideration the

fact that the offer is being driven to countries, which prognosticate well, there are different ways of reaching

clients in these countries. The next issues are subsidies. There is a question, who will be promoted: the country

or the company from the country, for example, in France, what advantaged are French products. They have

superiority in the access to the market. Preparing the order, the contractor reserves the components be produced

in France. They have the primary access to the market. The next issue is financing the public transport or the

exchange of transport means (for example, it was necessary to withdraw the diesel vehicles from some markets

because of the environment protection). The companies chose alternative sources of propulsion. According to

the respondent representing company G, the differences in economic systems have impact on decisions

connected with internationalization.

For the manager representing company H, the important economic factor having impact on decisions

connected with internationalization are securities of payment. The clients from developing countries are

characterized with the aversion to risk. What important for them are instruments like: bill of sale, letter of credit,

and prepayment. what important is also logistic, calculating the offer, and the development of business. There is

no place for cooperation with country institutions. The managers of the company try to verify business partners

to trust them. Taking decisions about expansion on the foreign market the manager makes two-way evaluation:

the country―its stability and the partner―his experience, history, and references.

The manager representing company I was asked to identify the differences in economic systems. The

clearest procedures of conducting business are in the European Union market. The respondent noticed the

necessity of products registration, who should take the time of 1.5 year. It is connected with Arab countries. On

the contrary, in North Korea there is a necessity of preparing very detailed documentation describing products.

There is also embargo in Iran. In Algeria, the transaction was possible with the use of letter of credit. Tariffs

and taxes increase the prices of products in countries like Russia and Brazil. The respondent gave the example

of Brazil as strong and dynamically developing market. The purchasing potential of its inhabitants is huge. This


119

country is very closed and hermetic to foreign countries. The monuments prefer national products, 96% of

cosmetic market are Brazilian products.

The respondent representing company J showed the differences in economic systems between Poland and

foreign expansion markets of Polish companies. The manager noticed the different structure of distribution in

Poland and in the Kazakhstan. Poland is characterized by small distances among cities, but in Kazakhstan the

distances are significant. It is the challenge for the logistic department. The respondent noticed the differences

among foreign markets, in which the company operates. Ukraine is a very corrupted market, it is unpredictable.

The barrier is a bit procedure in this country. Kazakhstan is a very dynamic market, it develops very quickly.

Local entrepreneurship and local production are developing here. The respondent of company J took into

consideration tariff barriers in export to Russia, Belarus, and Kazakhstan. These barriers cause the increase of

prices of products being sold on these markets. The trade is being impeded by the lack of unified rules of

documentation. The next criterion of conducting business in foreign countries is social and transportation

infrastructure. The quality of life increases in these countries. Kazakhstan is a leader in Central Asia and the

intermediary in trade with China. The dynamic development of country makes the good conditions for

investment. According to the respondent of the company J, differences in economic systems have impact on

decision connected with internationalization. The manger of company J does not invest in Western European

countries; the international activity of this company is focused on Russia, Kazakhstan, and Romania.

According to the manager representing company K, there is a significant economic distance among Poland,

Switzerland, and Germany. The differences in economic systems have impact on decisions connected with

internationalization. For him it is better to contact with partners from developed countries, representing so

called “Old Europe”. The more favorable conditions of conducting business are in countries like Bulgaria,

Romania, and Hungary. These countries are being perceived by manager representing company L as less

developed than Poland. Both infrastructure and economic position of these countries are worse than in case of

Poland. There are also not good conditions for investment. According to the manager of company L, the

economic situation of the country has impact on business behavior of managers. The stable situation in foreign

country encourages managers to enter into special foreign markets. What also very important is the analysis of

economic environment of a country. The respondent mentioned about the differences in economic systems. One

of the spheres is financial flows and making transactions in different currencies. According to the respondent,

“the less currency in a country, the better to make business there”. The region, where the unhampered activity

is inhibited is the East of Europe. The biggest differences are connected with Belarus (where is the lack of

private companies) and Ukraine (where the structure of the industry is different, the authority is oligarchic and

where is corruption).

Economic environment is also important by making decisions by the manager representing company L.

During transactions with local partners, what important are exchange rates and the engagement in business

activity by local partners. Their image and financial position could be lower. What also important is the market

position the company would like to achieve. The reason of withdrawal from local market could be the local

partners’ behavior and the lack of support on foreign markets.

The manager representing company M stated that more favorable conditions of conducting business are in

EURO zone. Important factors taken into consideration by businessmen while making decisions about entering

foreign markets are banking system and the possibility of giving crediting clients. While engaging in

international activity by foreign direct investment, what important is also situation on the labor market and


120

possessing staff for working in international companies of the company. According to the manager of company

M, the differences in economic systems have impact on decisions connected with activity on international

markets. They caused the withdrawal from Mexican market. Also the expansion on Burma market was difficult.

It is caused by the law level of scholarship there. The level of knowledge and competencies of engineers

implementing IT systems is low there. The special education programs were created for them (Table 2).

Managers’ opinions of the significance of differences in economic and political systems in the

process of internationalization of companies. The managers were also asked to evaluate, on a scale of 1 to 5,

the significance (1 being the least important and 5 the most important) of the differences in political and

economic systems in the process of internationalization and on the engagement into international markets. In

order to identify the impact of the level of internationalization on the perceptions of managers of the role of

political differences in the internationalization process, the samples were divided into four subsamples: I, II, III,

and IV (Table 3).

Subsample I consists of less internationalized companies (in terms of value of foreign sales) and is

comprised of companies A, B, D, E, I, and K. The value of foreign sales in these companies is up to 25.00% of

total sales.

Subsample II consists of highly internationalized companies (in terms of value of foreign sales) and is

comprised of companies C, F, G, H, J, L, and M. The value of foreign sales of these companies exceeds 25.00%

of total sales.

Subsample III consists of less internationalized companies (in terms of the number of continents on which

the company operates). Companies operating on up to three continents were assigned to this subsample, namely,

companies D, E, F, G, H, and K.

Subsample IV consists of highly internationalized companies (in terms of the number of continents on

which the company operates). Companies operating on more than three continents were assigned to this

subsample, namely, companies A, B, C, I, J, L, and M.

The differences in political systems have the most significant impact on the number of countries subject to

the foreign expansion of a company (the average of respondents’ answers is 3.85). They may also affect the

choice of directions for the companies’ foreign expansion and the value of capital engagement on foreign

markets (the average of respondents’ answers is 3.77).

Managerial perception of the impact of the differences in political systems on the decisions relating to

internationalization differs depending on the level of their company’s internationalization.

Managers of companies in which the value of foreign sales does not exceed 25.00% of the total value of

sales perceive the impact of differences in political systems to be more significant than that of managers of

companies in which the value of foreign sales is above this 25.00% threshold. The former group perceives the

most significant impact of differences in political systems to be manifested on the value of exports (the average

of respondents’ answers is 4.67), the choice of directions for the company’s foreign expansion, and the number

of countries subject to the foreign expansion of the company (the average of respondents’ answers is 4.50).

Companies in which the value of foreign sales exceeds 25.00% of total sales perceive that differences in

political systems have the most significant impact on the choice of a company’s market entry strategy (the

average of respondents’ answers is 3.86).

Tab

le 2

Man

ager

s’ O

pini

ons o

f the

Impo

rtan

ce o

f Diff

eren

ces i

n Po

litic

al S

yste

ms i

n th

e Pr

oces

s of I

nter

natio

naliz

atio

n of

Com

pani

es

Com

pany

D

iffe

renc

es in

pol

itic

al s

yste

ms

Dif

fere

nces

in e

cono

mic

sys

tem

s

A

de

moc

rati

c sy

stem

in th

e co

untr

y,

th

e ro

le o

f th

e go

vern

men

t in

the

coun

try,

poli

tical

sta

bilit

y,

th

e qu

ality

of

lega

l ins

titu

tion

s

th

e le

vel o

f ec

onom

ic d

evel

opm

ent,

un

empl

oym

ent r

ate,

infl

atio

n ra

te,

th

e w

ealt

h of

the

soci

ety,

punc

tual

pay

men

ts o

f pa

rtne

rs,

pe

rcep

tion

of

Pol

ish

prod

ucts

,

trea

ted

as a

bar

rier

of

inte

rnat

iona

lizat

ion

B

th

e le

vel o

f sa

fety

in th

e so

ciet

y,

th

e de

moc

rati

c sy

stem

in th

e co

untr

y

ta

x ba

rrie

rs,

pa

tent

s,

in

tell

ectu

al p

rope

rty

law

,

norm

s an

d st

anda

rds

obli

gato

ry a

nd d

iffe

rent

cou

ntri

es,

pr

oduc

t lif

e cy

cle

on in

tern

atio

nal m

arke

ts,

st

abil

ity o

f fi

nanc

ial i

nstit

utio

ns,

si

tuat

ion

on th

e la

bour

mar

ket,

fi

scal

def

icit,

fina

ncia

l ins

trum

ents

: ban

k gu

aran

tees

, let

ter

of c

redi

t, an

d le

asin

g,

th

e le

vel o

f de

velo

pmen

t of

bank

ing

syst

ems,

the

cost

s of

labo

ur f

orce

C

co

rrup

tion

, bur

eauc

racy

th

e im

pact

of

glob

aliz

atio

n on

red

ucin

g ec

onom

ic d

iffe

renc

es b

etw

een

coun

trie

s,

fina

ncia

l sit

uati

on o

f th

e co

untr

y,

fi

nanc

ial s

itua

tion

of

busi

ness

par

tner

s,

th

e w

ay o

f pr

otec

tion

of

busi

ness

tran

sact

ion

D

ta

x re

gula

tion

s,

st

abil

ity o

f le

gal i

nsti

tuti

ons,

adhe

renc

e to

reg

ulat

ions

th

e le

vel o

f cl

ient

s’ w

ealt

h in

the

host

cou

ntry

,

the

pref

eren

ces

of c

lien

ts in

the

host

cou

ntry

,

adju

stin

g to

loca

l mar

kets

mar

ketin

g m

ix in

stru

men

ts,

th

e le

vel o

f de

velo

pmen

t of

econ

omic

, soc

ial,

and

tran

spor

tati

on in

fras

truc

ture

E

la

ck o

f st

abili

ty w

ithi

n th

e le

gal s

yste

m (

Ukr

aine

, Bel

arus

),

co

rrup

tion

,

poli

tical

con

diti

ons

in p

ost-

com

mun

ist c

ount

ries

: Chi

na, V

ietn

am,

fo

rmal

bar

rier

s

th

e fa

ctor

s m

akin

g th

e pa

ymen

ts d

iffi

cult

,

acce

ssio

n to

for

eign

cur

renc

ies,

diff

eren

ces

in i

ncom

e le

vels

bet

wee

n Po

land

and

for

eign

exp

ansi

on m

arke

ts o

f P

olis

h co

mpa

nies

F

diff

eren

ces

in le

gal s

yste

ms

in d

iffe

rent

cou

ntri

es,

ol

igar

chic

al p

olic

y on

the

Ukr

aini

an m

arke

t,

lack

of

regu

lati

on a

nd p

oliti

cal s

tabi

lity

in U

krai

ne

ta

x ba

rrie

rs w

ith

trad

e w

ith

coun

trie

s be

yond

EU

cou

ntri

es,

re

stri

ctio

ns c

onne

cted

wit

h th

e la

ck c

ompe

titio

n,

re

gist

rati

on o

f pr

oduc

ts,

an

tidu

mpi

ng ta

riff

s

G

th

e su

ppor

t of

the

Ger

man

gov

ernm

ent

for

the

inte

rnat

iona

liza

tion

pr

oces

s,

lo

bbyi

ng p

olic

y of

the

Ger

man

gov

ernm

ent,

th

e le

vel o

f m

arke

t im

pene

trab

ility

te

nder

pro

cedu

re,

su

bsid

ies,

the

prom

otio

n of

cou

ntri

es a

nd o

f th

e co

mpa

nies

,

fina

ncin

g of

pub

lic

tran

spor

t,

deva

luat

ion

of c

urre

ncy

Tab

le 2

con

tinu

ed

Com

pany

D

iffe

renc

es in

pol

itic

al s

yste

ms

Dif

fere

nces

in e

cono

mic

sys

tem

s

H

re

stri

ctio

ns in

trad

e du

e to

pol

itica

l fac

tors

,

prot

ecti

onis

t pol

icy:

lim

its,

tax

barr

iers

, dum

ping

and

exp

ort s

ubsi

dies

se

curi

ties

of

paym

ent (

bill

of s

ale,

lette

r of

cre

dit,

prep

aym

ent)

,

tend

ency

to r

isk,

logi

stic

pro

cedu

re,

th

e pr

oces

s of

ver

ifyi

ng b

usin

ess

part

ners

fro

m th

e ot

her

coun

trie

s (t

he s

tabi

lity

of

the

coun

try

and

the

expe

rien

ce o

f pa

rtne

r)

I

th

e im

pact

of

poli

tical

fac

tors

on

the

qual

ity a

nd r

isk

of a

ctiv

ity o

n in

tern

atio

nal m

arke

ts,

th

e li

mit

atio

n of

bus

ines

s ac

tivity

on

the

Bel

arus

ian

mar

ket

(b

ecau

se o

f la

ck o

f st

abili

ty o

f po

litic

al s

yste

ms)

,

the

deva

luat

ion

of lo

cal c

urre

ncy

th

e ne

cess

ity

of p

rodu

cts

regi

stra

tion

,

deta

iled

doc

umen

tati

on d

escr

ibin

g pr

oduc

ts,

th

e le

vel o

f th

e de

velo

pmen

t of

the

mar

ket,

th

e pu

rcha

sing

pot

enti

al o

f th

e in

habi

tant

s of

the

coun

try,

the

leve

l of

clos

enes

s of

the

mar

ket,

th

e im

pact

of

fina

ncia

l ins

trum

ents

like

: em

barg

o, ta

rrif

s, a

nd ta

xes,

Bra

sil a

s a

clos

ed a

nd h

erm

etic

cou

ntry

,

lack

of

paym

ent f

rom

loca

l par

tner

s

J

la

ck o

f st

abili

ty o

f le

gal s

yste

ms,

indi

vidu

al d

ecis

ions

of

cler

ks n

ot b

ased

on

lega

l reg

ulat

ions

,

the

auth

orit

aria

n sy

stem

of

man

agem

ent (

Rus

sia)

,

the

leve

l of

dem

ocra

cy,

co

rrup

tion

,

Ukr

aine

per

ceiv

ed a

s a

fick

le m

arke

t

th

e di

ffer

ent

stru

ctur

e of

dis

trib

utio

n in

dif

fere

nt c

ount

ries

(e.

g. t

he d

ista

nces

be

twee

n th

e ci

ties

in o

ne c

ount

ry)

ta

riff

bar

rier

s to

exp

ort t

o R

ussi

a, B

elar

us a

nd K

azak

hsta

n,

th

e le

vel d

evel

opm

ent o

f a

coun

try,

corr

upti

on in

cou

ntri

es li

ke U

krai

ne,

so

cial

tran

spor

tati

on in

fras

truc

ture

,

qual

ity

of li

fe

K

in

stit

utio

ns e

ncou

ragi

ng b

usin

ess

acti

vity

on

inte

rnat

iona

l mar

kets

the

size

of

econ

omic

dis

tanc

e be

twee

n P

olan

d an

d W

este

rn a

nd E

aste

rn c

ount

ries

,

cond

itio

ns f

or in

vest

men

t

L

th

e im

pact

of

lega

l sys

tem

s on

cou

rts,

corr

upti

on im

port

ant o

n ea

ch le

vel o

f bu

sine

ss,

th

e ru

les

of l

aw i

mpo

rtan

t in

eac

h co

untr

y in

whi

ch t

he c

ompa

ny

oper

ates

an

alys

is o

f ec

onom

ic e

nvir

onm

ent o

f th

e co

mpa

ny,

th

e di

ffer

ence

s in

eco

nom

ic s

yste

ms,

cond

itio

ns o

f in

vest

men

t in

Eas

tern

and

Wes

tern

cou

ntri

es,

th

e cu

rren

cy r

ate

in a

cou

ntry

M

de

line

atio

n be

twee

n E

ast a

nd W

est,

th

e ro

le o

f th

e go

vern

men

t in

busi

ness

act

ivity

,

no i

mpa

ct o

f po

litic

al d

iffe

renc

es o

n co

mpa

ny’s

act

iviti

es o

n th

e G

erm

an,

Sc

andi

navi

an a

nd A

mer

ican

mar

ket,

th

e qu

ality

of

lega

l ins

titu

tion

s,

la

ck o

f as

sura

nce

of p

ubli

c sa

fety

in c

ount

ries

like

Ukr

aine

,

lack

of

poli

tical

sta

bilit

y in

Ukr

aine

and

Bel

arus

th

e di

ffer

ence

s in

con

duct

ing

busi

ness

in E

U a

nd c

ount

ries

out

side

EU

,

situ

atio

n on

the

labo

r m

arke

t,

the

leve

l of

know

ledg

e an

d co

mpe

tenc

ies

of I

T e

ngin

eers

and

spe

cial

ists

Sou

rce:

ow

n el

abor

atio

n.


123

Table 3 The Significance of Differences in Political Systems in the Process of Companies’ Internationalization (the Average of Respondents Answers)

Specification Differences in political systems Differences in economic systems

Total sample

I II III IV Total sample

I II III IV

The choice of directions of foreign expansion of the company

3.77 4.50 3.14 3.83 3.71 3.77 4.50 3.14 3.86 3.71

The choice of market entry strategy of a company

3.66 3.33 3.86 3.50 3.71 3.62 3.33 3.86 3.50 3.71

The amount of countries subject to foreign expansion of the company

3.85 4.50 3.29 3.67 4.00 3.69 4.67 2.86 3.67 3.71

The pace of internationalization of the company

3.08 4.17 2.14 2.83 3.29 3.38 4.17 2.71 3.33 3.43

The value of sales of the company on the foreign markets

3.54 4.67 2.57 3.50 3.57 3.77 4.67 3.00 3.50 4.00

The value of capital engagement on the foreign markets

3.77 4.33 3.29 3.33 4.14 4.08 4.33 3.86 3.67 4.43

The perception of the impact of differences in political systems also depends on the amount of continents

in which the company operates. Managers of companies operating in three or fewer continents perceive that

differences in political systems have the most significant impact on the directions of foreign expansion (the

average of respondents’ answers is 3.83). Managers of companies operating in more than three continents

perceive that differences in political systems have the most significant impact on the value of capital

engagement on the foreign markets (the average of respondents’ answers is 4.14), as well as on the number of

countries subject to the foreign expansion of a company (the average of respondents’ answers is 4.00).

According to the managers, the differences in economic systems have the most significant impact on the

value of capital engagement abroad (the average of respondents answers is 4.08), the value of sales of the

company on the foreign markets and the choice of directions of foreign expansion of the company (the average

of respondents answers is 3.77), the amount of countries subject to foreign expansion (the average of

respondents answers is 3.69), the choice of market entry strategy (the average of respondents answers is 3.62),

and the pace of internationalization of the company (the average of respondents answers is 3.38).

Managers’ perceptions of the impact of differences in economic systems on the process of companies

internationalization depend on the value of export of these companies and on the number of continents the

company operates.

Managers of companies in which the value of foreign sales does not exceed 25.00% of the total value of

sales perceive the impact of differences in economic systems to be more significant than that of managers of

companies in which the value of foreign sales is above this 25.00% threshold. The former group perceives the

most significant impact of differences in economic systems on the value of sales on international markets and

on the amount of countries subject to foreign expansion (the average of respondents answers is 4.67), on the

choice of directions of foreign expansion of the company (the average of respondents answers is 4.50), and on

the value of capital engagement abroad (the average of respondents answers is 4.33).

The perception of the impact of differences in economic systems also depends on the amount of continents

in which the company operates. Managers of companies operating in three or fewer continents perceive that


124

differences in economic systems have the most significant impact on the choice of market entry strategy (the

average of respondents’ answers is 3.83), and the amount of countries subject to foreign expansion and the

value of capital engagement abroad (the average of respondents’ answers is 3.67). The managers operating in

more than three continents perceive the most significant impact of differences in economic systems on the

value of capital engagement abroad (the average of respondents answers is 4.43), the value of foreign sales of

the company (the average of respondents answers is 4.00), the choice of directions of foreign expansion of the

company, and the choice of market entry strategy and the amount of countries subject to foreign expansion (the

average of respondents answers is 3.71) (Table 3).

The managers perceived the differences in political systems to have the most significant impact on the

withdrawal of business activity from a certain market (the average of respondents’ answers is 4.54), such

impact was perceived by all managers, without regard to the level of companies internationalization. However,

the most significant impact of political differences is perceived by managers of less internationalized

companies in terms of the value of export (the average of respondents answers is 4.83) and by managers of

highly internationalized companies in terms of number of the continents the company operates (the average of

respondents answers is 4.57).

The respondents declared that the differences in economic systems have the most significant impact on

the withdrawal of business activity from a certain market (the average of respondents answers is 4.38) and

initiating business activity with a foreign partner (the average of respondents answers is 3.31). The

differences in economic systems are less important factors in performing business activity from international

markets (the average of respondents answers is 2.31). The level of companies engagement abroad does not

have impact on managerial perceptions of the importance of differences in economic systems on decision

connected with internationalization. No matter what is the level of companies engagement abroad (measured

by the value of foreign sales and the amount of continents the company operates), differences in economic

systems have the most significant impact on withdrawal of a business activity from international market

(Table 4).

Table 4 The Significance of Differences in Political Systems in International Business Activity (the Average of Respondents’ Answers)

Specification Differences in political systems Differences in economic systems

Total sample

I II III IV Total sample

I II III IV

Initiating business activity with foreign partner

3.08 3.33 2.86 3.17 3.00 3.31 3.50 3.67 3.17 3.43

Performing business activity with foreign partner

1.92 1.83 1.92 1.83 2.00 2.31 2.50 2.50 1.67 2.86

Withdrawal of a business activity from a certain market

4.54 4.83 4.29 4.50 4.57 4.38 4.67 4.83 4.33 4.43

Conclusions

The literature overview indicates that there are different approaches to defining and measurement of

psychic distance and there is a need for researchers to rethink the conceptualization, operationalization, and

measurement of this phenomenon. It is assumed that psychic distance should be considered at the individual


125

level, the factors having impact on managerial perceptions of differences among countries depend on the

environmental factors, companies characteristics, and managers’ features.

The main advantage of the article is the presentation of a new approach to measuring psychic distance and

especially one of its factors (political and economic factors). The aim of the applied methodology is the

confrontation of theoretical constructs with an empirical “world” and creation of the preliminary theory by the

identification of constructs, when a priori assumption does not exist. The chosen methodology allowed the

measurement of the subjective opinions of managers regarding the importance of differences in political and

economic systems―in practice, between Poland and the foreign expansion markets in which Polish companies

operate.

Psychic distance was not measured with the use of objective constructs and statistical data, but with the

use of subjective data, such as the responses of decision makers in the form of managers of Polish companies.

The main source of information in the research was the answers of the respondents received while conducting

depth interviews. They were discussing their perceptions of the differences in economic systems in

international engagement of Polish companies.

The results of depth interviews contain the essence of understanding in qualitative research, essentially

meaning knowledge based on experience, which in turn is related to the majority of questions asked by the

interviewer. The interviewees’ responses were treated as a mixture of opinions, feelings (emotions),

descriptions, and interpretations. As the researcher was not able to accompany the respondents in the field and

thus observe their activity first-hand, it was necessary to obtain knowledge of the features of this activity

ex-post. To make the data collection process more objective, the researcher used the techniques of replication

(conducting research on a sample of 13 companies) and triangulation of methods. Thus, the decision to

continue the research with the use of quantitative methods was made.

Psychic distance needs to be viewed in terms of its changing context. The results indicate that political and

economic differences are still relevant in the decision-making process as it relates to internationalization and

the international activity of companies. These factors are taken into consideration in the decision-making

process as they relate to developing business activity abroad, however they are not treated as a barrier to

internationalization. Managers agreed that they are able to overcome such barriers to undertake business

activity in cooperation with foreign partners.

The most significant political factors which have an effect on internationalization are as follows: the

existence of a democratic system; the varying role played by government in different countries; lack of political

stability; corruption; stability of legal institutions; differences between legal systems in different countries; the

level of adherence to regulations; the government policy promoting foreign operations of companies;

restrictions of foreign trade; protectionist policy; and the impact of policy on the decisions of courts of law.

The managers were also asked to evaluate the significance of the differences in political systems between

Poland and the foreign expansion markets in Polish companies operating in different decisions concerning

internationalization. Differences in political systems have the most significant impact on the number of

countries into which a company expands, the choice of directions for a company’s foreign expansion, and the

value of capital engagement in foreign markets. Managers also evaluated the significance of differences in

political systems in different aspects of international business activity. Without regard to the level of

internationalization of companies, all managers stated that differences in political systems have the most

significant impact on the withdrawal of Polish companies from certain markets.


126

According to the managers, differences in economic systems also have significant impact on decisions

connected with internationalization.

The differences perceived by managers are the following: the level of economic development of a country

and business partner; foreign trade policy of the home and host country; fiscal policy of a home and host

country; situation on the labour market; the level of development of the banking system accessing to financing

instruments enabling international transactions; the consumer preferences in the host country; the level of

development of economic, social, and transportation infrastructure; tax barriers; conditions of investment in

Eastern and Western countries; the currency rate; tender procedure; tendency to risk of business partners; the

purchasing potential and quality of life of business partners; and the country belonging to EU.

Respondents stated that the differences in economic systems have the most significant impact on the value

of capital engagement abroad, the value of sales of the company on the foreign markets, and the choice of

directions of foreign expansion of the company. Managers’ perceptions of the impact of differences in

economic systems in the process of companies internationalization depend on the value of export of these

companies and on the number of continents the company operates.

It can be generalized that the managers of less internationalized companies (taking into consideration the

value of export) perceive more significant impact of the psychic distance on companies internationalization.

Different situation can be observed in case of highly internationalized companies, taking into consideration the

number of continents the company operates. Managers of these companies perceive more significant impact on

decisions connected with internationalization.

No matter what is the level of companies engagement abroad (measured by the value of foreign sales and

the amount of continents the company operates), differences in economic systems have the most significant

impact on withdrawal of a business activity from international market.

The first, exploratory stage of research enabled to formulate conclusions on the base of the unhampered

managers’ responses. The herded material allowed identifying the examples of differences in economic and

political systems perceived as psychic distance stimuli. Conducted depth interviews allowed also identifying

the manager’s perceptions about the significance of economic and political factors in decisions about the

engagement in international markets.

Research was conducted on a sample of Polish large- and medium-sized companies, who utilize export

activity as the main means of internationalization. Such companies have considerable experience operating on

foreign markets and in investing their capital abroad. The level of internationalization of these companies could

be measured by the share of total sales accounted for by foreign trade, and by the number of foreign

manufacturing units. The results of research not described in this article show that other psychic distance

stimuli (differences in culture, differences in economic systems, as well as differences in mentality and

geographic distance) also affect the internationalization process of Polish companies.

Large and more internationalized companies seem to be more aware of the importance of political factors,

as they are internationalizing their activity by foreign investment (which is connected with higher level of risk).

Limitations and Future Research

As with any study, the results would be interpreted in light of some limitations. The study was conducted

within the context of one country, which may limit the generalizability of the results to some degree. Therefore,

additional research should aim to test the framework in other countries as well.


127

First, the results obtained did not allow identifying the impact of the level of internationalization of the

company on the perceptions of managers about the significance on economic stimuli in market entry decisions.

There are no explicit (univocal) results stating that the company’s engagement abroad influences the

perceptions of psychic distance (and economic factors). This disposed the author to conducting quantitative

research on the bigger sample―200 companies. It will enable to generalize the results on the whole population.

Second, the use of managers responsible for foreign operations introduces a potential limitation in that it is

possible that these managers do not constitute samples representative either of other managers or of the general

population. In this study, the respondents were more likely to be more experienced in operating on foreign

markets and aware of the conditions prevalent on the international environment.

In future, further research of a quantitative nature is needed, which will enable testing of the hypothesis

and projection of the results onto the entire population. In general, further research in this field should provide a

more comprehensive picture of the importance of psychic distance stimuli and allow for a preciser evaluation of

its relationship with internationalization. Such quantitative research is in fact planned and will be conducted by

means of face-to-face interviews. The main objective of this quantitative research will be the identification of

the importance of cultural and systemic (economic and political) differences, as well as differences in mentality

and geographic distance between Poland and the foreign markets into which Polish companies expand.

Respondents will be asked to indicate, according to the Likert scale, the extent to which the host country of

their business operations differs from their home country.

Managerial Implications

The research results show in which ways managerial perceptions of foreign countries (among other factors)

systematically influence decisions’ relating to companies’ international activities. The perceptions of political

and economic differences among or between countries may influence the attractiveness of foreign markets as

perceived by managers. The research results may also be applied to a country’s economic policy, with the aim

of increasing the level of internationalization of companies. Such policy is focused on facilitating access for

entrepreneurs to complex, high-quality information necessary for the planning, organization, and fulfillment of

the requirements of exporting and foreign direct investment. Managers will therefore be supported by

knowledge of and competencies in best-practice activity on international markets as well as the most successful

strategies which may be realistically implemented on these international markets. They will also obtain

information on the current state of business activity in different countries and on other continents.

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The Role of Knowledge Processing Management in SME

Development and Economic Growth

Kambiz Talebi

University of Tehran, Tehran, Iran

Mahla Zare Mehrjerdi

Drexel University, Philadelphia, USA

Seyed Mohammad Reza Akbari

Islamic Azad University, Marvdasht, Iran

Small and medium enterprises (SMEs) contribute to economic development by virtue of their employers’ numbers

and increasing share in Gross National Product (GNP). SMEs strengthen the resilience of the countries to face a

competitive and challenging global environment. A large body of investigations has been done on the

identification of factors which facilitate the creation or development of SMEs. One of the most important factors

which affect the creation and development of SMEs is individuals’ information processing. In this study, by using a

theoretical model, authors tried to determine the role of knowledge processing in recognizing those opportunities

which lead to SME creation and development. Based on Olson’s theory (1985), authors considered two moods for

cognitions styles which affect knowledge processing in entrepreneurs and lead to SME creation: intuition versus

analysis and the result of factor analysis showed that opportunities are both born and created but not by accident,

authors found those entrepreneurs who develop and create SMEs have special characteristics in recognizing and

processing the information. They can process the business related information much faster than typical people. This

ability allows them to turn their knowledge into a large endowment of assets which form a new SME or extend an

existing one.

Keywords: economic growth, knowledge process, SME

Knowledge Processing in SME Management SME development is the process of recognizing profitable opportunities and founding an organization to

exploit them. Information resources are scare. Due to the asymmetry of information, individuals with higher

alertness can grasp information and exploit it faster than others. Hence, one of the most important factors which

contribute to SME development through opportunity recognition is the information processing style of an

entrepreneur (Julien & Vaghely, 2002). During last three decades, scholars showed that knowledge processing

style is mainly affected by the individual’s cognitive styles. While an individual has an intention to create a

Kambeiz Talebi, associate professor, entrepreneurship, University of Tehran, Tehran, Iran. Mahla Zare Mehrjerdi, graduate economics student, Drexel University, Philadelphia, USA. Seyed Mohammad Reza Akbari, young researcher and elite club, Marvdasht Branch, Islamic Azad University, Marvdasht, Iran. Correspondence concerning this article should be addressed to Mahla Zare Mehrjerdi, Gerri C. LeBow Hall 1001, Economics

Department, Drexel University, Philadelphia, Pennsylvania, USA.

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venture, the cognitive styles may nurture some self-cognitions. Thus, this may lead to preventing or

encouraging a person to follow his/her intention (Timmons & Spinelli, 2004).

Inspite of enhance literature body on knowledge processing and SMEs, we know very little about the ways

in which cognitive styles develop or inhibit the SME development through different information processing.

Hence, the main objective of this study is to clarify the relation between SME development and knowledge

processing style by considering the mediator role of different cognitive styles.

This study contributes to the SME development literature body in two main ways:

(1) First of all, this paper presents some theoretical facts for various kinds of knowledge and information

processing methods and determines its relation with different cognitive style.

(2) Second, the paper tries to prove the exact amount of the effects of independent variables (information

processing styles) on SME development.

Theory and Hypothesis In order to build the paper’s hypothesis, the authors refer to Gartner’s (1985) conceptual framework on

SME development.

Gartner’s Conceptual Framework of New Venture Creation Gartner (1985), in his well-known article, drew a question on SME development which is what are the

main differences of each entrepreneur’s venture with the others. He then stressed that for answering this

question, one should integrate the constituents variables of various ventures.

He believed the creation of an entrepreneurial venture is a multidimensional phenomenon, entrepreneurs,

and their SMEs, their activities and responses and the environment which they have to operate are, at the same

time, complicated and unique. Thus, NVC (new venture creation) highly depends on the components of the

comprehensive model which he defined as below (Figure 1):

Accordingly, the assumptions can be made as the following:

H1: Information processing effects business developing via cognitive scripts;

H2: Information processing increases the probability of business opportunity recognition.

Various Kinds of Knowledge From Hayek’s View Hayek (1937) determined two main kinds of knowledge:

(1) The main body of knowledge which is scientific and sustainable and can be used through each field by

those fields’ experts;

(2) Diffused information about determined time and places which are important for individuals only because

it helps them to judge about different situations.

The second type of knowledge is the key for economic development in societies (Hayek, 1937).

Information Processing and SME’s Development Through Entrepreneurial Opportunity Recognition How individuals’ information processing can help them to identify entrepreneurial opportunities and

venture creation is the question which this study tries to answer in this section. Information processing is the

dynamic combination of heuristics and algorithmic information.

Entrepreneur as an information processor, uses both of information type for business’s opportunity

identification. Recent studies introduced individual’s information processing as the most important ingredient

in NVC (Vaghely & Julien, 2010).


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Figure 1. The variables of conceptual framework for venture creation (Gartner, 1985).

Research Design Research Framework

On the basis of Gartner’s model, this study will establish the theoretical framework by the logical

deduction and group discussions as shown in Figure 2. The study’s hypothesis has been shown in a theoretical

INDIVIDUAL(S) Cognitive, demographic, and sociological factors: locus of control, risk taking propensity,

job satisfaction, previouswork experience, entrepreneurial parents age, and education

ENVIRONMENT Venture capital availability Presence of experienced entrepreneurs technically Skilled labor force accessibility of suppliers Accessibility of customers or new markets Governmental influences Proximity of universities Availability of land or facilities Accessibility of transportation Attitude of the area population Availability of supporting services Living conditions High occupational and industrial differentiation High percentages of recent immigrants in the populationLarge industrial base Larger size urban areas Availability of financial resources Barriers to entry Rivalry among existing competitors Pressure from substitute products Bargaining power of buyers

Bargaining power of suppliers

ORGANIZATION Overall cost leadership Differentiation Focus The new product or service Parallel competition Franchise entry Geographical transfer Supply shortage Tapping unutilized resources Customer contract Becoming a second source Joint ventures Licensing Market relinquishment Sell off of division Favored purchasing by government

Governmental rule changes

PROCESS The entrepreneur locates a business opportunity The entrepreneur accumulates resources The entrepreneur markets products and services The entrepreneur produces the product The entrepreneur builds an organization The entrepreneur responds to government and society


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process as below. Based on the paper’s research design, individuals try to process explicit and tacit knowledge

through their cognitive scripts. The way they process their information will then lead to whether start an

establishment by recognizing business opportunities or not.

Figure 2. Structural path diagram of theory and hypothesis.

Definition and Measurement of Variables To insure the validity and reliability of the questionnaire, this research consulted the mature scales in

foreign references in the process of operational definition and measurement of the variables.

The preliminary questionnaire was examined carefully and critically by the specialists of the field, and

revisions are made according to the feedbacks. The questionnaire adopts 10-point Likert scales (1 = extremely

bad, 10 = very good).

Research Method Research Subject

The study assumes that information processing styles affect SME development activities through

individual’s cognitive scripts. For estimating this assumption, authors used multidimensional regression model.

Key variables in knowledge processing. (1) Intuition. Psychologist of cognitive school defines intuition

as the immediate knowing of something without the conscious use of reasoning. Knowing is different from

reasoning. The former is having a range of information while the latter is thinking logically and analytically.

Intuition is something that usually occurs when an individual is confronted with new situation

(Csikszentmihàlyi & Sawyer, 1995); (2) Knowledge. This term can be defined as a combination of information,

experience, context, interpretation, and reflection. Knowledge is rich information, action-oriented and leads to

sensemaking and interpretation (Davenport, Delong, & Beers, 1998). Schemata and information processing. While information turning into embedded, organized, and

interconnected knowledge structure, it leads to greater impact. However, individuals do not actively process all

the information they confront, rather, they usually prefer to depend on a set of personal schemata to understand

how to behave. That is why they can react to the different business situation with relatively little active

information reasoning. Thus, it can help them to immediately do decision-making about business creation

activities, considering the information they receive (Kiesler & Sproull, 1982). Cognitive scripts are defined as schematic knowledge structures in individual’s mind, which determine

one’s self-diagnosis appropriate behavior in a specific situation (Gioia & Poole, 1984). Information processing

models are part of such abstract structures. The function of cognitive scripts is to simplify information process,

but of course, individual’s biases interfere with this process which affects judgment and decisions. The

Cognitive scripts Information processing SME’s development (activities)


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interference of biases through cognitive scripts can be both supportive or disincentive for business creation

activities (Gioia & Manz, 1985).

The following questionnaire was designed according to the above-mentioned factors:

(A) cognitive scripts:

(1) To what extent do you use algorithmic process (or use of formula) for decision making?

(2) To what extent do you use archives information for business activities?

(3) How much do you let your employee use their self-experiences of make decision in their own way?

(4) How much do you use of trial and error method for business activities decisions?

(5) What do you think of the effects of employees’ behavior on your business activities?

(B) SME’s development:

(1) Did the number of new customers grow your business within last three mounts?

(2) Did the unit of products sales grow for your business within last three mounts?

(3) Did the total sales of all product’s categories increase within last three mounts?

These questions were designed into structured questionnaires and were filled by the 25

techno-entrepreneurs in a random sample.

Regression Analysis To be confident about using regression analysis, the Durbin-Watson test was estimated. The result for this

test is 0.68 which is reliable. Authors used enter method for regression analysis. The adjusted R square is 0.825

which is very significant and indicates that 82% of the variability in the dependent variable is explained by the

regression.

In coefficients table, all the constant and coefficients are significant. Beta coefficients for all independents

variables (use of an algorithmic process, use of archived information, use of employees’ experiences in their

own way, use of trial and error method, and the benefit of a distinct employee) are 0.162, 0.195, 0.645, 0.236,

and 0.449. The regression equation for all dependent and independent variables is as follow:

(Y = -4.82 + 0.86x1 + 2.03x2 + 0.43x3 + 0.85x4 + 1.06x5) (1)

Friedman Test Friedman’s test is used to rank the independent variables. The rank of the variables with this test is as

follow (Table 1):

Table 1

Friedman’s Estimation Results

Variables Mean Rank

Use of the algorithmic process 3.96 5

Use of archived information 3.22 4

Use of employees` experiences in their own way 1.24 2

Use of trial and error method 1.1 1

The benefit of the distinct employee 2.4 3

Source: authors.

It means that the significance of these variables on dependent one is as shown above. Figure 3 shows the

software results for Friedman’s test. Thus, the ultimate model of the study will be as follow:


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Figure 3. The ultimate model of the study. Source: authors.

Conclusion and Discussion This study tried to identify the critical role of cognitive scripts in information processing and its effects on

business developing activities, especially opportunity identification. Authors discussed that there is a little

amount of knowledge about the role of individual as an information processor. Individuals grasp knowledge

from environment and process it to identify a profitable business opportunity. Thus, it is obvious if there is

noinformation processing, there will no any opportunity too. However, this process is not as simple as it looks.

Scholars believe individuals’ biases affect their knowledge processing through their cognitive scripts. This is

the key functionality which has been discussed less than other topics.

In order to estimate the effect of information processing on business developing via cognitive scripts,

authors designed a conceptual framework (Figure 2) and introduced some variables regarding literature. As

regression analysis shown, because of the high amount for β coefficient in three heuristic variables (use of

employees’ experiences in their own way, use of trial and error method, and the benefit of distinct employee), it

can be concluded that entrepreneurs in the paper’s sample benefit from heuristic information processing in their

business development activities. Meanwhile, this result will prove the positive relation between dependent and

independent variables in the study’s assumption. Although this study tried to shed a light on the subject of

Cognitive scripts

Use of the algorithmic process

Use of archived information

Use of employees’ experiences in their own way

Use of trial and error method

The benefit of the distinct employee

Information processing SME’s development (activities)

Β = 0.162

Β = 0.195

Β = 0.645

Β = 0.236

Β = 0.449


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cognitive scripts and its role in information processing and business development, there is still much more

which should be studied in future researches.

References Csikszentmihàlyi, M., & Sawyer, K. (1995). Creative insight: The social dimension of a solitary moment. In R. J. Sternberg and J.

E. Davidson (Eds.), The nature of insight (pp. 329-363). Cambridge Mass: MIT Press. Davenport, T. H., Delong, D. W., & Beers, M. C. (1998). Successful knowledge management projects. Sloan Management Review,

39(2), 43-57. Gartner, W. B. (1985). A conceptual framework for describing the phenomenon of new venture creation. Academy of

Management Review, 10(4), 696-706. Gioia, D. A., & Manz, C. C. (1985). Linking cognition and behavior: A script processing interpretation of vicarious learning.

Academy of Management Review, 10(3), 527-539. Gioia, D. A., & Poole, P. P. (1984). Scripts in organizational behavior. Academy of Management Review, 9(4), 449-459. Hayek, F. (1937). Economics and knowledge. Economica, 4, 33-54. Julien, P. A., & Vaghely, I. (2002). From weak signals to strategy formation: A third piece of the puzzle. Frontiers of

Entrepreneurship Research 2002. Kiesler, S., & Sproull, L. (1982). Managerial response to changing environments: Perspectives on problem sensing from social

cognition. Administrative Science Quarterly, 27, 548-570. Timmons, J. A., & Spinelli, S. (2004). New venture creation. Boston: McGraw-Hill/Irwin. Vaghely, I. P., & Julien, P. A. (2010). Are opportunities recognized or constructed?: An information perspective on

entrepreneurial opportunity identification. Journal of Business Venturing, 25(1), 73-86.


Individual Attitudes Toward Migrants: A

Cross-Country Comparison

Yu Jin Woo

University of Virginia, Charlottesville VA, United States

One of the most widely examined topics within recent migration study has been the root cause to anti-migration

sentiment. This paper tackles this puzzle by connecting public attitude to citizenship law. Based on a dichotomous

classification of the citizenship law into jus soli (by birthplace) and jus sanguinis (by blood), it argues that

citizenship law has a fundamental effect in shaping people’s perception toward migrants. Extending Allport’s (1954)

contact hypothesis, this research poses two specific hypotheses. First, natives in jus soli principle reveal more

favorable attitudes toward migrants. Second, natives in jus soli countries tend to become more threatened by a new

inflow of migrants while those in jus sanguinis countries will be hostile against overall stock of migrants. Statistical

analyses, using Eurobarometer (2011), strongly support the first claim while results on the second hypothesis are

mixed. This paper concludes with potential ways to more accurately test the second contention.

Keywords: anti-migration sentiment, citizenship law, contact hypothesis, democratic destination countries, inflow

versus stock, survey data

Introduction

This paper attempts to answer a puzzle: why do consolidated democracies reveal different levels of

anti-migration sentiment? Understanding underlying factors that formulate people’s perception toward migrants

is particularly an important task in democracies, because politicians are constrained by the general public due to

its institutional setting. In answering this inquiry, scholars, especially in the field of sociology and psychology,

have paid a great attention on the effect of citizenship law (principle by birthplace or blood) since the 1980s

due to a growing number of migrants (Brubaker, 1992). Particularly, contact hypothesis has been frequently

applied in analyzing public view toward migrants (Benhabib, 2002; Brubaker, 1992; Crepaz, 2008). Extending

this logic, this paper poses two hypotheses. First, natives in jus soli law (citizenship by birthplace) reveal more

favorable attitude toward migrants compared to those in jus sanguinis rule (citizenship by blood). Second,

natives in jus soli rule feel threatened by a new inflow of migrants while those in jus sanguinis rule are hostile

against overall stock of migrants. The ordered logit regressions with country fixed effects, using Eurobarometer

(2011) dataset, are applied. This research contributes to migration study in two important ways. First, not many

scholars in international political economy have attempted to connect citizenship law with public perception

toward migrants. Instead, they have mainly approached public perception from economic standpoint, such as a

threat for income level or fiscal burden. By shedding light on non-materialistic concerns arising from the

Yu Jin Woo, Ph.D. candidate, Department of Politics, University of Virginia, Charlottesville VA, United States. Correspondence concerning this article should be addressed to Yu Jin Woo, 1540 Jefferson Park Avenue, Charlottesville VA

22904, United States.

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citizenship law, this research aims to open a new avenue in studying migrant issues in political science. Second,

sociological and psychological researches have focused on this relationship based on micro-level, but not

macro-level. By focusing on aggregate effect of citizenship law, this paper further analyzes in what direction

citizenship law would formulate people’s threat perception toward a particular type of migrants.

Literature Review

In analyzing a cause to anti-migration sentiment, scholars in international political economy have mainly

approached this question from economic perspective (resource threat argument), focusing on individual level

factors. Specifically, they claim that natives’ anti-migrant sentiment is due to materialistic economic concerns,

such as a fear on labor market competition (Dancygier, 2010; Kessler, 2001; Malhotra, Margalit, & Mo, 2013;

Mayda, 2006; Scheve & Slaughter, 2001) or fiscal burden on public services or welfare state (Cornelius &

Rosenblum, 2005; Facchini & Mayda, 2009; Hanson, 2005; Hanson, Scheve, & Slaughter, 2007; Hero & Preuhs,

2007; Mayda, 2008; O’Rourke & Sinnott, 2006). They suggest that these economic concerns are correlated to

negative attitude against migrants. Meanwhile, few others approach this issue based on identity or cultural

threat arguments, referring to cultural, ethnic and linguistic differences as the most significant reason to negative

sentiment against migrants, stating that material self-interest does not affect people’s views on major policy

issues (Zimmerman, Bauer, & Lofstrom, 2000; Brader, Valentino, & Suhay, 2008; Burns & Gimpel, 2000;

Chandler & Tsai, 2001; Citron, Green, Muste, & Wong, 1997; Davidov, Meuleman, Billiet, & Schmidt, 2008).

Although individual economic concerns are vital in formulating natives’ attitude toward migrants;

however, this line of explanation is unsatisfactory in explaining why consolidated democratic destination

countries, which tend to hold similar levels of national economic achievement and inequality level, reveal

varying degrees of anti-migrant sentiment across these countries. Moreover, identity or cultural threat

arguments also shed light on significant factors deducing public tolerance toward migrants. Yet, it seems

necessary to discover a root cause to why or how natives view migrants differently based on their identity or

cultural dimensions. In order to further advance this non-materialistic approach, this paper highlights a

citizenship law as a fundamental cause in formulating differing levels of anti-migration sentiment by extending

a logic of contact hypothesis. The next section defines this hypothesis along with its application to the

relationship between citizenship law and natives’ attitude toward migrants.

Theory: Contact Hypothesis and Citizenship Law

Allport (1954) claimed that intergroup contact will lead to a favorable attitude toward initial out-group

members due to decreasing prejudice and increasing familiarity. While numerous researches theoretically and

empirically support this claim (Escandell & Ceobanu, 2009; Fine, 1979; Herek & Capitanio, 1996; Hewstone &

Greenland, 2000; Luksyte & Avery, 2010; Paluck & Green, 2009; Voci & Hewstone, 2003), one should not

mistakenly understand this hypothesis as a straightforward mechanism where a simple contact would generate a

positive intergroup relationship. In other words, this hypothesis requires varying aspects necessary in realizing

positive contacts. Particularly, when proposing this hypothesis, Allport (1954) has suggested four optimal

conditions for this effect to be realized: 1) equal status between the groups in the situation; 2) acquisition of

common goals; 3) intergroup cooperation; and 4) institutional support where the contact is legitimized. In

regards to these conditions, Pettigrew and Tropp’s (2006) meta-analysis confirms that contact situations that

meet Allport’s conditions result in greater prejudice reduction than those situations that do not. Meanwhile,


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Pettigrew (2008) also claimed that these conditions should be seen as facilitating rather than essential since

positive (though diminished) contact effects exist even when these conditions are not met.

If Pettigrew and Tropp’s (2006) findings are followed, it seems that a positive contact would be realized

even without satisfying Allport’s criteria. Yet, these conditions become particularly essential when this contact

hypothesis is applied to migrant issues in relationship with citizenship law, because migrants, who have gained

host country’s nationality, generate another typology of migrant group.

Specifically, the four criteria bring about a valuable insight in conceptualizing a role of citizenship law. A

common practice of granting citizenship to foreign nationals, who most of times reveal some vital difference

from natives, takes a form of either naturalization (jus domicilis) or automatic citizenship at birth (jus soli).

Either way, if a migrant obtains a nationality of a destination country, he/she would earn the equal status to that

of natives, approved by legal domestic institution, and hence, satisfying the first and fourth conditions suggested

by Allport (1954). This would naturally let the two groups believe in the homogenous national custom or rule

of law. Also, this increases a chance of natives being exposed to situations where they have to communicate

and cooperate with these settled initial foreign nationals. This indicates that there would be a higher probability

for realizing common goals along with engaging in cooperation, fulfilling the second and third conditions. In

sum, whether natives have a higher chance to acknowledge a possibility that migrants can gain the same status

as theirs becomes the central aspect in determining how they perceive these foreign aliens. This recognition

provides natives a new way of categorizing migrant groups: ones with equal status and others without it.

If a traditional way to classify citizenship law into a dichotomous distinction is followed, democratic

destination countries can be divided into jus soli (law of birthplace) and jus sanguinis (law of blood) rules. On

the one hand, if a child is born under migrant parents, he/she will automatically obtain nationality of the host

country even without the parents being the nationals, if the host country’s citizenship law is based on jus soli

principle. On the other hand, if the host country’s nationality law is based on jus sanguinis principle, he/she

will not be able to acquire the country’s nationality, because he/she is not connected to the country by ancestry.

In this case, naturalization (jus domicilis) becomes the only option to become host country’s citizen. Naturally,

countries with jus soli principle tend to be more inclusive by providing a wider avenue for citizenry while ones

with jus sanguinis rule tend to be more ethno-cultural and restrictive (Vink & Bauböck, 2013). When

application of this dichotomous classification of citizenship law is taken into account, the first hypothesis

emerges; natives in jus soli countries pose a more favorable attitude toward migrants (Hypothesis 1).

Under jus soli principle, natives have a higher chance to have contacts with initial migrants, who now

possess the equal nationality as the natives. This would not only induce a familiarity toward ethnically or

linguistically different others, but also let them realize that migrants can actually realize the equal status.

Because jus soli principal gives migrants a broader avenue to fulfill Allport’s four conditions, a more positive

contact would be likely. Under jus sanguinis rule, on the contrary, natives may have a chance to encounter

migrants and engage in iterating contacts with them. This may generate familiarity and positive feelings toward

them. However, because there are simply two few migrants, who now hold host country’s nationality, it would

be rarer for natives to realize a meaningful contact with them. To put it in another way, migrants in jus

sanguinis rule would have a harder time to satisfy Allport’s critical conditions, and more importantly, potential

trust and respect that natives may have toward migrants due to repetitive contacts would not be as high as what

would have been achieved in jus soli rule.

Of course, the first hypothesis stated above does not guarantee that natives in jus soli rule would hold


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favorable attitude toward migrants all the time. When there is a domestic turmoil, for instance a

macroeconomic downturn, this may surely stimulate people’s threat perception toward migrants under both

citizenship laws. Still, the intensity of this hostility against migrants would be stronger in jus sanguinis

countries. What needs to be more studied instead is toward what kind of migrants natives would feel threatened

by when they face uneasy domestic conditions. Here, it posits that toward which dimension of “migrants”

natives feel afraid of is based on their categorization of migrants. Therefore, the second hypothesis yields;

natives under jus soli rule would be more fearful of new inflows of migrants while those under jus sanguinis

rule would be antagonistic against overall stock of migrants (Hypothesis 2).

From a standpoint of natives under jus soli principle, permanent migrants, who already reside in the host

country, would be already incorporated as in-group members. Thus, they would feel fearful of newly incoming

migrants, instead of towards migrants, who already reside and work in their territory. On the contrary, natives

in the latter principle are not used to include foreigners into their in-group members and thus, they are in an

easier position to blame on this out-group as a cause to individual misfortunes. Thus, instead of distinguishing

migrants into categories, their sense of threat would be more likely to gear toward overall migrants in general.

Data, Measurement, and Model Specification

To assess the two hypotheses on public attitude toward migrants, this research relies on survey data

(Eurobarometer 76.4), which was conducted in December 2011. There are two questionnaires that specifically

ask in regards to immigrants;

(qb9_1) Immigration enriches (country’s) economy and culture

1 Totally agree

2 Tend to agree

3 Tend to disagree

4 Totally disagree

(qb9_2) Legal immigrants should have the same rights as (country’s) citizens

1 Totally agree

2 Tend to agree

3 Tend to disagree

4 Totally disagree

The first question asks respondents’ opinion on whether immigrants actually contribute any positive aspect

to the destination country, either in economically or culturally (overall image on immigrants). The second

question is on immigrant rights (degree of integration). Thus, these two variables are chosen as two dependent

variables for this statistical analysis.

There are three main independent variables. For the first independent variable, updated version of a dataset

by Fitzgerald, Leblang, and Teet (2014) is used to identify citizenship law of each country (Citizenship). This is

a binary variable that marks whether a country adopts jus soli or jus sanguinis principle. Table 1 classifies how

countries in Eurobarometer can be distinguished into the two citizenship laws. Moreover, two other indepdent

variables capture Inflow and Stock of migrants across countries in the year of 2011. The data are taken from the

United Nations (United Nations Population Division, Trends in Total Migrant Stock: 2012 Revision, 2012) and

OECD (2016) datasets. Further variables along with specific details are shown in Table 2. Measures selected

for the rest of independent and control variables are directly taken from Eurobarometer dataset.


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Table 1

Countries by Their Citizenship Law Jus soli rule Jus sanguinis rule

Germany, France, Ireland, UK Austria, Belgium, Czech Republic, Denmark, Estonia, Spain, Finland, Greece, Hungary, Italy, Luxembourg, Netherlands, Poland, Portugal, Sweden, Slovakia

Table 2

Summary of Variables Variables Description on questionnaires and coding

Dependent variables

Attitude (qb9_1) Immigration enriches (country’s) economy and culture: Totally agree (1) Tend to agree (2) Tend to disagree (3) Totally disagree (4)

(qb9_2) Legal immigrants should have the same rights as (country’s) citizens: Totally agree (1) Tend to agree (2) Tend to disagree (3) Totally disagree (4)

Independent variables

Citizenship Citizenship regime (Binary): 1 if jus soli, and 0 if jus sanguinis

Stock Increased rate of immigrant stock from 2005 to 2010 (%)

Inflow Increased rate of inflow of immigrants from 2005 to 2010 (%)

Control variables

Income (d60) During the last 12 months, would you say you had difficulties to pay your bills at the end of the month? Most of the time (1) From time to time (2) Almost never/Never (3)

Education (d8r2: Recoded) How old were you when you stopped full-time education? No formal education (1) Up to 15 (2) 16~19 (3) above 20 (4)

Nationalism (qa1_1) You are happy living in [country]: Totally agree (1) Tend to agree (2) Tend to disagree (3) Totally disagree (4)

View on EU (qa1_2) You are happy living in the EU: Totally agree (1) Tend to agree (2) Tend to disagree (3) Totally disagree (4)

Unemployed (d15a_r1: Recoded): 1 if unemployed, 0 otherwise

Married (d7: Recoded) Binary: 1 if married, 0 if not

Gender (d10) Binary: 1 if male, 0 if female

Age (d11r2) 15-24 (1) 25-39 (2) 40-54 (3) 55-64 (4) 65-74 (5) 75+ (6)

Rural (d25) Would you say you live in a: Rural area or village (1) Small or middle sized town (2) Large town (3) Don’t know (4)

Notes. Original variables in parentheses. Responses, “refused,” “don’t know,” or “not applicable,” are deleted.

The values of dependent variables are ordered categorical. Thus, ordered logit regression model with

country-fixed effects is applied. What also needs to be taken into account is that independent

variables―citizenship law, migrant inflow, and migrant stock―only vary across countries while a unit of

analysis of this survey dataset is an individual respondent. Thus, if these variables are directly implemented into

the model, these effects will be washed away due to the country-fixed effect. Thus, the ideal solution is to

include these variables as interaction terms with other control variable, which varies across observations. For

the sake of convenience, a control variable on Income is selected as an interacting variable.

Results and Interpretations

Table 3 reports results for the effect of citizenship law. When the model includes both an independent

variable and its interaction term with citizenship law, a coefficient for the independent variable shows its effect

when citizenship law is 0 (jus sanguinis). Meanwhile, a summation of coefficients of the independent variable

and interaction term represents the independent variable’s effect when citizenship law is 1 (jus soli). While

these coefficients provide insightful observations, they tend to be less reliable to deduce a firm conclusion.


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Table 3

Ordered Logit Regressions With Country-Fixed Effects on Citizenship Law

Overall images on immigrants Views on immigrant rights

(1) (2) (1) (2)

Citizenship x income -0.154** (0.051)

-0.099# (0.051)

Education -0.284*** (0.021)

-0.285*** (0.021)

-0.187*** (0.021)

-0.188*** (0.021)

Income -0.020 (0.023)

0.020 (0.027)

-0.054* (0.023)

-0.029 (0.027)

Nationalism -0.103*** (0.023)

-0.103*** (0.023)

-0.019 (0.023)

-0.019 (0.023)

View on EU 0.474*** (0.020)

0.475*** (0.020)

0.323*** (0.020)

0.323*** (0.020)

Unemployed 0.045 (0.030)

0.044 (0.030)

-0.011 (0.030)

-0.012 (0.030)

Married -0.065* (0.029)

-0.064* (0.029)

-0.062* (0.029)

-0.061* (0.029)

Gender 0.035 (0.028)

0.036 (0.028)

0.005 (0.028)

0.005 (0.028)

Age 0.034*** (0.009)

0.035*** (0.009)

0.058*** (0.009)

0.059*** (0.009)

Rural -0.070*** (0.018)

-0.071*** (0.018)

-0.085*** (0.018)

-0.086*** (0.018)

Observation 18,304 18,304 18,483 18,483

Log likelihood -22,630.5 -22,626.0 -22,229.9 -22,228.1

Notes. ***p < 0.001, **p < 0.001, *p < 0.05, #p < 0.01; standard errors in parentheses.

Figure 1. Marginal effects by citizenship law.

In order to more accurately examine the effects of citizenship law on public attitude, marginal effects, shown

in Figure 1, demand more attention. The citizenship law for both dependent variables turns out to be significant.

For either dependent variable, moreover, jus soli principle yields a higher probability for respondents to become

pro-immigrants for both overall immigrant image and integration. These outcomes demonstrate that citizenship

law carries out a significant and noticeable effect in formulating people’s perception toward immigrants.


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Next, Table 4 reports effects of migrant inflow and stock in each citizenship law. Again, variables on

inflow and stock are included in the model as interaction terms with income level, which varies across cases. In

order to present in a concise way, marginal effects demand more attention (Figure 2 and Figure 3). The results

seem quite contradictory from the second hypothesis. It appears that an increase of overall immigrant stock

negatively impacts natives’ attitude toward migrants (on both general image and integration) in jus soli

countries while it positively affects natives’ pro-immigrant sentiment in jus sanguinis countries. In regards to

immigrant inflow, it appears that an increase of inflow induces positive immigrant-sentiment in both citizenship

regimes and for both dependent variables. These results are different from expected outcomes, because it seems

that both enlarged inflow and stock are positively associated with jus sanguinis law.

Table 4 Ordered Logit Regressions With Country-Fixed Effects on Immigrant Inflow and Stock

Overall images on immigrants Views on immigrant rights

Jus soli Jus sanguinis Jus soli Jus sanguinis

(1) (2) (3) (4) (1) (2) (3) (4)

Income x stock 0.001# (0.001)

-0.006*** (0.000)

-0.002** (0.000)

0.001 (0.002)

Income x inflow -0.001 (0.001)

-0.003*** (0.000)

-0.001*** (0.000)

0.001*** (0.000)

Education -0.440*** (0.044)

-0.461*** (0.044)

-0.244*** (0.023)

-0.178*** (0.023)

-0.314*** (0.044)

-0.316*** (0.043)

-0.133*** (0.025)

-0.125*** (0.023)

Income -0.142** (0.060)

-0.105* (0.047)

0.028 (0.026)

0.005 (0.026)

-0.165*** (0.044)

-.135** (0.045)

-0.061# (0.037)

-.017 (0.026)

Nationalism 0.025 (0.048)

0.025 (0.048)

-0.137*** (0.027)

-0.138*** (0.027)

0.047 (0.048)

0.047 (0.048)

-0.036 (0.027)

-0.036 (0.027)

View on EU 0.509*** (0.038)

0.510*** (0.038)

0.457*** (0.023)

0.458*** (0.023)

0.365*** (0.038)

0.364*** (0.038)

0.302*** (0.023)

0.302*** (0.023)

Unemployed -0.004 (0.062)

-0.005 (0.062)

0.057# (0.034)

0.057# (0.034)

-0.070 (0.061)

-0.069 (0.061)

0.008 (0.035)

0.008 (0.035)

Married 0.005 (0.059)

0.005 (0.059)

-0.081* (0.034)

-0.079* (0.034)

-0.065 (0.059)

-0.064 (0.059)

-0.053 (0.034)

-0.054 (0.034)

Gender 0.200*** (0.056)

0.200*** (0.056)

-0.018 (0.032)

-0.017 (0.032)

0.071 (0.056)

0.071 (0.056)

-0.015 (0.032)

-0.016 (0.032)

Age 0.017 (0.020)

0.017 (0.020)

0.040*** (0.011)

0.040*** (0.011)

0.039* (0.020)

0.039* (0.020)

0.064*** (0.011)

0.064*** (0.011)

Rural -0.199*** (0.038)

-0.200*** (0.038)

-0.032 (0.021)

-0.032 (0.021)

-0.162*** (0.037)

-0.161*** (0.037)

-0.063** (0.021)

-0.063** (0.021)

Observation 4,345 4,345 13,959 13,959 4,380 4,380 14,103 14,103

Log likelihood -5,428.9 -5,418.9 -17,159.0 -17,158.4 -5,557.8 -5,557.9 -16,614.0 -16,614.0

Notes. ***p < 0.001, **p < 0.001, *p < 0.05, #p < 0.01; standard errors in parentheses.

There are potential explanations, first, variables on inflow and stock capture an increased rate (percentage)

from the values in 2005 to those in 2010. This is because of data limitation as well as a subsequent attempt to

avoid losing too many valuable observations. This still may have biased some trends. Moreover, the rate of

increase, in fact, does not capture the original amount of stock of inflow. Indeed, there is a possibility that some

countries already had a large size of immigrant inflow or stock, and thus, their values did not quite fluctuate

between 2005 and 2010. Meanwhile, some other countries may have had a small size of inflow and stock in

2005, and thus, their overall sizes in 2010 are still much smaller compared to the former example, even if the


144

data mark a rapid increase. These plausible scenarios suggest that exploring an accurate measure for inflow and

stock would be helpful while filling out missing data.

Second, while this paper aims to study public attitude toward overall “migrants,” Eurobarometer questions

on “immigrants.” Thus, this may carry out different connotation to each respondent. Some may refer to

permanent migrants while the others may interpret the terminology as migrants in general or foreigners, who

reside in the country regardless of their visa types. Although this poses a serious threat to construct validity;

however, most of surveys cross-nationally conducted in regards to migrants use the word, “immigrants,”

instead of “migrants”. Thus, these questions are the closest ones that allow researchers to study public attitude

on migrants at this point. Still, this may be particularly problematic for testing the second hypothesis, because it

fails to capture a complex interrelationship among temporary migrants, permanent immigrants and those, who

have already obtained host country’s nationality. Perhaps, natives do not view migrants, who have naturalized,

as “migrants” or “foreign nationals,” because they are already citizens of the same country. In this sense, an

attempt to measure effects of immigrant inflow and stock is a crude method.

Figure 2. Marginal effects of stock.


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Figure 3. Marginal effects of inflow.

Conclusion

This paper has investigated why natives in democratic destination countries reveal different levels of

anti-migration sentiment. Based on contact hypothesis, it argues that citizenship law has a fundamental effect in

formulating public perception toward migrants. Based on a dichotomous distinction of citizenship law into jus

soli and jus sanguinis rules, two specific hypotheses have been contested. First, natives in jus soli principle

hold a more favorable attitude toward migrants, because migrants have a wider avenue to become host

country’s citizens under this rule. This leads natives to re-categorize initial out-group migrants, and thus, this

process decreases prejudice against migrants. Second, natives in jus soli principle tend to feel threatened by

new inflow of migrants while those in jus sanguinis rule would be more fearful of overall stock of migrants.

Statistical evidence, using Eurobarometer (2011), strongly supports the first hypothesis. However, the results

for the second hypothesis are mixed and controversial. The examinations on marginal effects for the second

hypothesis lead to future suggestions. The most imminent task for migration study is to generate survey data

that classify respondents’ view toward migrants and immigrants. Moreover, scrutinizing whether natives view

migrants, who have obtained host country’s nationality, as the same citizens or still as migrants, and whether

citizenship law has any effect on this classification would be ideal in accurately tackling this hypothesis.


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Neutral Spaces: The Close Relationship Between Professional

and Educational Spaces

Roberta Barban Franceschi, Adolfo Jordán Ramos, Lucinda Morrissey, María Jesús Triviño

Universidad Europea de Madrid, Madrid, Spain

This article reflects on new educational spaces, which are similar to the work areas of a creative company, spaces

that simultaneously stimulate students, professors, visitors, etc. There are flexible spaces that respond to the

different needs of all these kinds of users. These spaces are referred to as “neutral spaces” in this article. In

European education, the Bologna Plan’s implementation has brought the academic context much closer to the

professional. This change has required the actors involved to develop skills and competencies that stimulate

collaborative working, connectivity, creativity, and an entrepreneurial outlook. Without doubt, it has also brought

people closer to the needs of innovative companies and progressively to the need for educational spaces, which are

more akin to workspaces. The main focus is placed on the analysis of new educational spaces in universities and the

collaboration between university and business, both are principal aspects in the investigation of the Steelcase Chair

of Educational Spaces and Facilities. To link design activities within the European University of Madrid BA

Design Degree with the company Steelcase, to study the issue of neutral spaces with the intention of providing

teaching, that is intended to be closer to the professional environment. The purpose of this research is to verify the

spatial needs of the university and compare them to professional spaces. For this a data collection process was

created in which company and university spatial circumstances are studied to determine equivalences. From these

findings a collaboration between the university and company was developed, involving students and developing a

dynamic collaborative work model for all involved.

Keywords: neutral spaces, educational spaces, university, creative companies, collaboration between university and

companies, learning process

Introduction

This article makes explicit the ever closer relationship between of the company and university contexts,

which is reflected in the spatial architecture. It covers an evolution of the social contexts and their translation to

the field of spatial design with a review of the theorists who have studied the subject. The neutral (informal)

Roberta Barban Franceschi, architect, Department of Architectural Design, Graphic Expression, History, Art and Design,

Architecture, Engineering and Design School, Universidad Europea de Madrid, Madrid, Spain. Adolfo Jordán Ramos, architect, Department of Architectural Design, Graphic Expression, History, Art and Design,

Architecture, Engineering and Design School, Universidad Europea de Madrid, Madrid, Spain. Lucinda Morrissey, graphic designer, Department of Architectural Design, Graphic Expression, History, Art and Design,

Architecture, Engineering and Design School, Universidad Europea de Madrid, Madrid, Spain. María Jesús Triviño, architect, Department of Architectural Design, Graphic Expression, History, Art and Design, Architecture,

Engineering and Design School, Universidad Europea de Madrid, Madrid, Spain. Correspondence concerning this article should be addressed to Roberta Barban Franceschi, UEM Urb. El Bosque, Calle Tajo,

s/n, 28670 Villaviciosa de Odón, Madrid, Spain.

DAVID PUBLISHING

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CLOSE RELATIONSHIP BETWEEN PROFESSIONAL AND EDUCATIONAL SPACES

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business spaces are identified; it without much meaning before, but now gaining in importance and content.

University spaces are then revised, where an attempt to recreate the same type of space is identified and

reviewed. Finally, the authors reach conclusion with the experience in Universidad Europea.

Universities have been physical institutions ever since they were first created. The first university was

founded around the 13th century as space inherited from monastic cloisters, where the Absolute Truth was

taught. Much later, due to the increase in student’s numbers, their architectural typology evolved in the 1960s

into large complexes situated in the suburbs―segregated from cities.

Today the university as a “City of Knowledge” is no longer strictly a physical space due to the advances in

technology. A non-physical information-based site was created to take its place, namely, the virtual campus.

Doubts exist with regards to this digital concept, since it rivals the university’s traditional mission of educating

students through direct contact and physical presence.

Technology has allowed today’s society to no longer be subject to either space or time. In principle, it has

freed us of many obligations, but at the same time, it has also invaded people’s lives and its presence occupies

much time. Leading to a new development of social structures that could be called “informationalism” (Castells,

1996), where the concept of Temporary and Physical Space fades, only the Ontological Space remains,

especially with the new online possibilities as noted by Augé (2005).

The world is becoming increasingly intellectual. Cerebral and virtual activities prevail over manual

activities, not only during periods of work but also during leisure time. Among intellectual activities,

creativity is the most highly valued and has become an essential value for today’s society. The stimulus

provided by creativity is vital for human beings. De Masi (2000) explained the way in which creative groups

have exerted an influence on all areas of human knowledge from the industrial revolution to the present day.

Today the work spaces of innovative companies are designed by, and for, creative people, a large number

of whom belong to the Generation Y (Matute, 2007). People who have grown up surrounded by technology

take decisions in real time and demand immediate responses and results.

The extraordinary volatility and flexibility of information are ways of thinking and living, which mean that

there is a permanent transformation in today’s society; a liquid society that is always in a state of flux. The

most illustrative example of this idea would be the fashion industry with its continuously changing trends,

reflecting a volatile and fluid collective (Bauman, 2007).

In the early 20th century, the “Taylorist” work character prevailed. The first office copied the structure

seen in factories, repeating the dynamics of the production line (Myerson, Bichard, & Erlich, 2010). This model

was then reflected in the areas of education, with the arrangement of tables in rows with the teacher being the

center of attention with a panoptic view of the complete classroom.

In addition, Florida (2010), an expert in demographic and urban trends, economic competitiveness, and

technological innovation, complemented Bauman’s theory of “liquid society” (Bauman, 2007) with what he

called a “creative society” and their working relationships, understanding human creativity as the driving force

of change is the key factor to economic prosperity for society (Florida, 2010).

These spaces apply a design philosophy that constitutes a radical break with the Fordist styles of work,

which viewed workers as passive, linear, and isolated from others; they are similar to the notion of a production

chain, where socializing did not take place. In the model now in use by these innovative companies, workers

are seen as fluid, mobile, and connected assets. They are physically integrated into society through spaces,

which stimulate collaboration, debate, and dialogue, as well as through virtual spaces like Dropbox, Google


150

Drive, or Facebook, among others. One can already see examples of some universities adopting these concepts

for their communal areas.

De Masi (2000) explained the fact that creative people need emotion, fantasy, and illusion, he justifies that

emotion is an essential ingredient for creation. From his viewpoint, a creative person should be a hybrid of reason

and emotion. Rationality was a characteristic developed in an industrial society, which allowed people to

materialize ideas and put them into practice. Emotion is the new characteristic that should be encouraged today.

In the socio-cultural consequences of informational development, psychology and sociology have

analyzed thoroughly the behavior of the main current generation in both the academic and professional circles

during this period of informational development, establishing a classification of three generations divided by

birth, who cohabit but have very different profiles. The Generation X, those born in the 60s and 70s, is made up

of individuals who are very skeptical in politics (as a result of repression and experienced frustration with the

previous generation), and go against the values characterized by their parents, offering a radically different

social model, according to a report by the Spanish business school Escuela de Negocios Instituto de Empresa

and Adecco (Gil & Morales, 2009). They appreciate flexibility at work, and feel less material attachment than

previous generations seeking employment stability, who remained 20 or 30 years in the same company, as

explained by Filho (2010).

The Generation Y is made up of younger professionals currently in a constant pursuit of creativity and

flexibility. They have qualified training, but refuse to live for work and demand from employers for better

working hours, salary, and a professional career. They hate endless workdays because they want to control their

time and not miss out on other activities that interest them, they reject jobs requiring high sacrifice or excessive

commitment and enjoy change. In Matute’s (2007) article on the Generation Y, she identified some important

features: “Generation Y perform better in a creative environment where independent thinking is valued”,

adding “they want committed and fair leaders and tend to question the status quo. It is important always to tell

them the truth. In order to enlist their support, one should explain each decision and remind them of the benefits”

(Matute, 2007). Within the context of current students, the Generation Z, born with all the information

technologies at their disposal: mobile phone, internet, game consoles, and MP3, is the generation of social

networks and they are connected every minute of the day. They represent a group with knowledge of advanced

digital technology and socialize within the special dynamics of social networks. They are individuals of their

times, they manage information well, they are immersed in all kinds of events and virtual relationships and

attend university equipped with all kinds of accessories that link them to the cyberspace, but often this huge

amount available media makes them inactive and impatient with a configured link with the immediate context.

They are students, who sometimes are unable to proceed in a reflexive manner required for quality personal

construction and are unlikely to be receptive, patient, or constant.

In European education, the Bologna Plan’s implementation has brought the academic context much closer

to the professional. This change has required the actors involved to develop skills and competencies that

stimulate collaborative working, connectivity, creativity, and an entrepreneurial outlook. Without doubt, it has

also brought people closer to the needs of innovative companies and progressively to the need for educational

spaces, which are more akin to workspaces.

Universities will have to place the limelight on spaces that encourage coexistence, meetings, and

collaboration, where the dynamics and the way of working are no longer the same as in traditional classrooms,

with continuous learning dynamics within and beyond the classroom.


151

This article reflects on new educational spaces, which are similar to the work areas of a creative company,

spaces that simultaneously stimulate students, professors, visitors, etc. There are flexible spaces that respond to

the different needs of all these kinds of users. These spaces are referred to as “neutral spaces” in this article.

Neutral Spaces

The design of technology company offices or co-working spaces has to be configured today in a way that

encourages open and closed spaces, concentrated work rooms or working in teams, along with informal

communication or rest areas. Exchange networks allow the creativity to flow and socialize with others to arise,

with which the user feels free and at ease. Emotion is thus linked to the most human experience of space and

design. A space focused on the individual is created, a more human space that fosters wellbeing. A connected

network in which the user, at all times, chooses the kind of space that best fits with their needs.

Informationalism, according to Castells (1996), is a technological paradigm. It concerns technology, not

social organization or institutions. Informationalism provides the basis for a certain type of social structure that

Castells (1996) called the “network society”. Without informationalism, the network society could not exist,

but this new social structure is not a product of informationalism, it is a broader pattern of social evolution.

The difference between professional spaces and educational spaces has been diminishing over the years.

Today, there are without doubt some very strong links between both kinds of environment and it is becoming

increasingly difficult to set the limits which separate them. The evolution of society and the new requirements

in these areas have gradually led to an increasing similarity. Today, learning and putting this into practice is a

continuous process that is also reflected in the spatial design. In general terms, the greatest innovations arisen in

business environments give that companies are opting for less conventional solutions that favour productivity,

in addition to energy and cost savings.

Projects like office designs for Pixar (Emeryville, California, USA), Facebook (Palo Alto, California,

USA), and Google (Zurich, Switzerland) apply these concepts. In these spaces, one can see that emotional and

rational components intermingle, so workers may make use of the spaces depending on their current needs:

spaces for teamwork, individual work, or leisure. Diversity in space typologies is encouraged in these new

offices, thereby boosting collaboration and flexibility.

In the university, spaces that fulfil this function are called neutral spaces. Based on the document (Braidy,

2013) entitled “Guía de criterios de diseño para los espacios administrativos de la UNED” (Design Criteria

Guidelines for UNED Administrative Spaces), this research Chair proposes four concepts to be used in the

so-called “neutral spaces” of the university:

(1) Closed collaboration spaces for small meetings or activities like workshops or small lectures;

(2) Open collaboration spaces for informal meetings, concentrated work, teamwork, etc.;

(3) Emotional creative spaces, rest areas, informal meeting, and communication areas with low tables and

armchairs;

(4) Concentration spaces, a silent ambiance free from distractions that allows one to work occasionally in

a closed room for individual concentrated work.

Universities

The main focus is placed on university campuses. Today, such an environment needs a variety of different

spaces and an ideal scenario to replicate the atmospheres which characterize the professional world. The goals


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sought are those which configure universities as a space for research, collaboration, and innovation, in addition

to improving the quality of the university system. The new demands placed by the European Higher Education

Area (EHEA) require the modernization of European universities.

As opposed to traditional work and study spaces, where each space is destined to a specific purpose, the

new spaces are flexible and adaptable and offer a wide variety of activities. There is no delimited individual

space for each student or worker. Rather, collaboration is sought among people in communal areas equipped

with the necessary tools for cognitive interchange.

A variety of factors have contributed to this transformation, such as the sustainability, cost savings,

demographics, globalization, technology, and changes in society.

The need for a physical communal space is something that is also deemed essential by Alexandra den

Heijer, an architect and professor at the Delft University of Technology in the Netherlands. The notion of a

campus within the city is present in the refurbishment of BK City, the university’s School of Architecture.

University spaces are integrated into those of the city, so that students and residents alike can make use of the

services and amenities at any time. Meeting areas like cafeterias or libraries, activities, lectures, etc. foster this

interchange. The city provides services to the university, as does the university to the city. Consequently, the

learning environment becomes the third teacher.

Another significant university-driven initiative is that of the University of Brighton in the United Kingdom.

It explores the creative possibilities of spaces that can be adapted to any activity or educational need. The

Creativity Centre is comprised of two halls (Leonardo and Galileo), which are equipped with basic furniture,

walls, mobile separators, temperature and lighting controls, olfactory control system, audio visual equipment

(projectors, cameras, etc.), and games like Lego or Connect Four. The halls are fully adaptable to the kinds of

activities carried out there, ranging from training sessions or courses to dance classes or theatre. This represents

a new typology of flexible space.

The hub is located within Coventry University. It is a space for students in their free time between classes,

which was created to cater for student’s needs of comfort in an informal learning space that stimulates

collaboration. It can hold up to 1,000 students at one time. These workspaces are being implemented at

universities to meet student’s needs, their proximity to the professional world and layout of a working

environment is clear, and there is an ever increasing number in European universities.

University and Company Cooperation

These types of research chairs encourage entrepreneurship among academics by developing lines of

investigation that are related (Larrauri & Clemente, 2000) and also to companies if they share this interest in

knowledge development, and use of new teaching methodologies and space requirements.

The collaboration activity between university and business was made possible by the fourth year of the BA

Interior Design Degree students in the subject “Surveys and budgets. Direction and production. Standards”

during the 2014/2015 academic year, taught by the professors Adolfo Jordán and María Jesús Triviño.

The proposal to design a neutral space was incorporated to the subject as a project intended to apply the

theoretical knowledge acquired in their studies, in addition to the recent realities identified during the

investigation. Thus prepare students for an immersion in working life and enhance the development of

interdisciplinary skills such as time management, communication, responsibility, self-confidence, and other

specific skills related to the profession.


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The problem presented to the students proposed an interior design project within the Universidad Europea

Madrid (UEM) Campus―in Villaviciosa de Odón―specifically in the B Building’s neutral spaces; identified

as the first, the second and the third floor are hall lobbies and cafeteria. In these renovated spaces, the users

would be able to perform various activities, such as collaborative meetings, tutorials, both individual and team

study, as well as rest and eat. The students were required to incorporate to their project the Steelcase furniture

designed for such spaces.

Six projects were developed and three were selected to be presented to Steelcase (Figures 1, 2, and 3).

The dynamics of the experience (among professionals, professors from various areas, and students)

reflects the previously mentioned concepts, in the field of design, of “interdisciplinary” and

“multidisciplinary”―in the field of design, not a mere proclamation but a reality. The interdisciplinary project

undertaken faithfully reflects the daily reality of the profession. Interdisciplinary design is a fact: the distance

between creativity and applied design to a market product is shrinking. All members of the team (students,

professors, and collaborators) became the professionals in this exercise, leaving behind the established roles of

training and teaching, organizational hierarchies, and privileged positions. Continued collaboration and a

common goal in a flexible and tolerant manner ensured true teamwork, a more professional and less academic

part emerged, relegating teaching procedures to professional judgment.

Figure 1. Abla Loudghiri. Neutral spaces project in B Building of the UEM.

Figure 2. Raquel Díaz. Neutral spaces project in B Building of the UEM.


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Figure 3. Miriam Múñiz. Neutral spaces project in B Building of the UEM.

Conclusions

The constant changes undergone by society lead one to propose simple and diverse spaces (flexible and

customizable) that can be adapted to each person’s needs. In conceptual terms, tablets are a good example of a

device that adapts to the needs of a changing society. The experience of uniting university and business has led

to an evident break with the traditional classroom space as the absolute protagonist of learning and requires

expansion into other areas, transforming the new environments into living mutable elements, where exchanges

and contributions of the diverse actors involved are constant.

There are therefore enough indications to firmly believe that business and educational spaces have a

common future geared to flexibility. Professional environments require collaboration among employees and the

introduction of more efficient, creative, and environmentally responsible work models. Spaces therefore have to

be in keeping with these demands. For their part, educational spaces are becoming increasingly like

professional models. They must therefore also adapt to their environment. Today’s students have changed.

They work and study at the same time, or stop working to go back to university. They are more mature and

demand professional spaces in the university. This evolution is aimed at increasing the productivity of

companies to better prepare students when joining the labour market.

When seeking a learning space that satisfies the needs of contemporary society, it is therefore necessary to

attain a new balance, understood as harmony between opposing ideas: technological and analogue, complex

and simple, global and local, static and dynamic, physical and virtual, etc. Balance has been a transversal value

throughout history. Present times―in the very midst of a digital and social revolution―requires more balance

than ever.

Unfortunately, one has as yet to see in the university campus spaces that respond to the needs of students

who will be the professionals of the future, there exist few examples of projects and spaces in an academic

environment of interest, much more needs to be done in order to turn this context into a reality.

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Documents

China-USA Business Review (ISSN 1537-1514) Vol.15, No.3, 2016