Retos y desafíos de la educación indígena

According to Scott, institutions can be regarded as relatively stable entities which may be

"subject to change" by social actors. They consist of three main pillars − regulatory, normative, and cognitive-cultural − which are present at both micro and macro levels. Each of these pillars signify important aspects such as rules (regulatory), norms (normative) and beliefs (cognitive) which are usually disseminated though different types of "carriers" such as formal, relational, and symbolic systems (Scott, 2001: 48).

Furthermore, institutions can be classified as both formal and informal. At one extreme lie formal institutions, which articulate formal rules, constitutions, specific bylaws and contracts defining the terms and boundaries of a specific transaction or exchange between concerned parties (North, 1990; Scott, 1995; 2001). At the other end of the spectrum lie the informal institutions, which are bearers of "codes of conduct, norms of behaviour and conventions"

(North, 1990: 36). Informal institutions are often not as obvious and clear as in the case of formal institutions. They emerge as a consequence of the imperfect information that is diffused within society. This gives scope for individuals to interpret information based on their experience and in this way informal institutions tend to reflect the culture of the country in question (North, 1990). Moreover, informal institutions are represented by a set of

73 expectations and norms that govern business practices and codes of conduct within particular

"localised interpersonal relationships" or groups of actors (Scott, 1995; 2001:48).

Scott (1995; 2001) offers an encompassing analytical framework that covers both the formal and informal aspects of institutions. The formal/regulatory institutions which have to do with laws, regulations and sanctions are coercive mechanisms that encourage or discourage certain behaviours (Scott, 1995:2001; Busenitz, Gomez, and Spencer, 2000). By contrast, informal institutions are composed of values, norms, beliefs and symbols that define desirable or expected behaviours, shared and cultural supported beliefs, and the ways of doing things embedded in society, which are passed on from one generation to another (Boyd and Richerson, 1985; North, 1990; Scott, 2001).

Informal institutions in Scott’s (1995) terms encompass both cultural-cognitive and normative dimensions. He differentiates between culture and normative dimensions, and argues that culture involves the diffusion of knowledge sets, values and norms of behaviour from one generation to another through the process of copying and instructing (Boyd and Richerson, 1985; North, 1990). These shared understandings and norms are the framework through which individuals and organisations make rational decisions and choose a certain course of action. However, normative values and norms are more related to moral obligations that are deemed desirable or undesirable by a particular group of people such as a certain religious groups, members of a professional body. These normative institutions stipulate the appropriate course of action and whether this course of action is likely to be "certified or accredited" by the members of a social group (Scott, 2001:52).

74 Scholars from different disciplines have discussed the impact of institutions on the level of innovation within countries, on how international partnerships evolve, and on how entrepreneurial activities differ from one context to another (Kiss and Danis, 2008, Schumpeter, 1926). Within the international entrepreneurship literature, studies have focused on how social networks influences entrepreneurial initiative in countries like China which are characterised by a collectivist culture and low level of institutional development. According to Kiss and Danis (2008) there is still limited understanding about the impact of different national contexts on the internationalisation process of the firm and the extent to which firms rely on their social networks (Jones et al., 2011).

Institutions, social capital and the entrepreneurial behaviour of firms

Countries differ in their level of institutional development. This disparity has implications for the extent to which entrepreneurial behaviour is encouraged or restricted. In addition, it is well established within the network literature that relationships are context specific and that they are embedded within their local context or environment (Kiss and Danis, 2008; Dodd and Patra, 2002; Jones et al., 2011). This means that the country’s level of institutional development is likely to determine the extent to which entrepreneurs rely on social relationships to do business and whether local institutions (formal or informal) encourage or discourage entrepreneurial internationalisation activities. Table 2.6 provides an explanation on how the different levels of institutional development affects the SMEs internationalisation and networking behaviours.

75 Table 2.6 Relevance of institutional development for internationalisation and networking

Institutional Dimension

Definition Level of institutional development

High Low

Regulatory Refers to governmental policies and regulations that govern the cross border activities of firms (Busenitz et al., 2000). It also identifies other formal institutions that play a crucial role in offering support for firms such as equity markets and banks (Kiss and Danis, 2008; Busenitz et al., 2000).

Well established legal and monetary conditions demonstrated in effective law enforcement and efficient banking systems and efficient support provided through government supporting agencies to internationalising firms. Thus creating a favourable business environment (Bruton et al., 2005)

It is difficult for entrepreneurs to internationalise with unfavourable regulatory conditions, such as export restrictions and restrictions on finance.

Normative This sets the standards and values shared by members of a group or organization regarding the preferable way to do business (Scott 1995; 2001;

Kiss and Danis, 2008; Burton, Fried, and Manigart, 2005).

Moreover, it also involves the expectations and accreditation of informal professional groups such as members of the same industry.

In the context of entrepreneurship, normative institutions, such as export promotion agencies, potentially influence the importance that entrepreneurs place on internationalisation and view it as an integral aspect of their overall business (Kiss and Danis, 2008).

Internationalisation is stressed as a desirable behaviour and an important means of business development.

Internationalisation is less valued and there are limited normative values supporting

internationalisation.

Cognitive/

cultural

This identifies cultural values and norms that govern the way entrepreneurs generally do business (in terms of honesty, integrity and how to deal with foreigners). It also reflects the importance of relationships in society and more specifically as a means of doing business (Bruton et al., 2005; Kiss and Danis, 2008).

Relationships may be important. However,

international expansion and firms success is more the primary concern/ in other words, the entrepreneurs would not focus on creating strong relationships first with their business partners before they start talking about business. Hence the focus on weak ties is prevalent (Dodd and Patra, 2002; Dodd, Jack and Andersson, 2002).

Personal relationships are more important than doing business. Hence strong ties are crucial for doing business (Dodd and Patra, 2002; Dodd et al., 2002).

76 The lower the institutional level of development the more likely it is that firms will rely on strong personal ties to compensate for intuitional voids. Conversely, the higher the level of institutional development, the more they will rely on weak ties (Kiss and Danis, 2008; Dodd, Jack and Andersson, 2002; Dodd and Patra, 2002). However, this raises an important question: if this is the case during the formation stage or early establishment of the firm, will it apply to later stages?

The constraints that a country’s institutional framework imposes on individual or organisational actions are the sum of both formal and informal institutions. It is important to note that not only do institutions create opportunities and constraints that influence the entrepreneurial firms’ behaviour over time but also entrepreneurs (political or economic) influences and alters the institutional framework in a way that benefits them. This triggers institutional change that is incremental and stable in nature, whereby laws are revised and altered in a gradual manner. In some instances this process of change could be on a discontinuous (revolutionary) basis whereby, a dramatic change occurs to formal or informal institutions (North, 1990; Scott, 1995; 2001). The main focus of this study is on how the institutions facilitate or hinder entrepreneurial (internationalisation) activities and how entrepreneurs alter and influence the institutional framework in a way that creates value for them. Institutional change and paths through which it evolves is beyond the scope of the current study.

The present study focuses on two different national contexts which exhibit contrasting levels of institutional development, namely UK and Egypt. The above discussion suggests that the

77 level of institutional development will impact on SME internationalisation and networking behaviour. The following section briefly reviews the contextual differences between the two countries.