Abstract
Extant studies have not highlighted how country of origin (COO) and country of residence (COR) in institutionally distant context shape diasporans’ behaviour, rationales, and capabilities, leading to the growth and success of entrepreneurial ventures in the COR; our paper contributes to this gap.
Investigating seven cases (micro, small, and medium enterprises) of Bangladeshi diasporans’ in Denmark, our study presents an in-depth understanding of the impact of dual institutional characteristics, whereby the relatively higher importance of COR institutional features shape diaspora entrepreneurial motivation and management. Motivation and management styles vary due to the length of a diaspora’s stay in the COR, their educational background, relevant previous experience, and degree of social integration in the COR. Some important personality traits, which are shaped by dual institutional features, determine the degree to which diaspora can develop cultural intelligence and social capital in the COR context. This helps the diaspora develop suitable entrepreneurial capabilities to grow the venture, while the personality traits and social capital derive from the diasporans’ educational background and involvement in sports and social activities in the Danish context. This study postulates four broad categories of motivational factors, namely (a) income security and financial success, (b) social recognition and status, (c) work achievement, and (d) independence and autonomy of work, which manifest different types of entrepreneurship depending on the diaspora’s personal background and the nature of the Danish (COR) institutional features. We find a mixed influence of COO and COR institutions on various features of management. Finally, we develop an analytical model, called the ‘House Model’, to explain diasporas’ venture creation and venture management processes in an institutionally distant context and argue that researchers should take into account both the COO’s and COR’s institutional features when examining the growth and survival of diaspora entrepreneurship. Our study contributes to the understanding and practice of transnational diaspora entrepreneurship and management as well as policy formulation by institutional actors.
1 Introduction
Economically developed countries have witnessed a great influx of immigrants over the last few decades due to war, relaxed immigration policies, globalization, and liberal labour markets. Despite debates on immigrants and diasporans, particularly in Europe, as to how and whether they are integrated and can contribute, they become an integral part of the society and economy. Though several studies conducted across different disciplines have considered political, sociological, and business perspectives, researchers have not paid due attention to diaspora entrepreneurship and management in a country of residence (COR) that has an institutional context that is distant from that of the country of origin (COO). Therefore, we ask the question of how diasporans create and manage ventures in institutionally distant contexts (COR) in which state role/support, socio-cultural conditions, language, and cognitive mind-sets are quite different and distant from those of diasporans’ COO.
This is an interesting topic of study at this time, because the majority of diaspora live, work, and conduct entrepreneurial activities in institutional contexts that are relatively distant from those of their COO. Thus, in this study we aim to understand the motivations and mechanisms for creating and managing ventures in a COR, knowing how institutional features of both the COR and COO shape the orientations and capabilities that lead to the creation, management, and, above all, growth of the ventures.
Extant research provides a great deal of information on new venture creation (Oviatt and McDougall 1994), international joint-venture creation (Rana and Elo 2016, 2017), transnational diaspora entrepreneurship (Kruja 2014; Nkongolo-Bakenda and Chrysostome 2013), and diaspora investment in COO (Riddle and Brinkerhoff 2011). Our point of departure, in contrast, is to explain venture creation and management dynamics in COR from dual institutional perspectives, thus illustrating how diaspora entrepreneurs navigate and grow in institutionally distant contexts.
Based on seven case studies of small and micro enterprises run by Bangladeshi diaspora entrepreneurs in Denmark we develop a framework, which we call the ‘House Model’, and seek to understand the venture creation process, entrepreneurial orientation, and management, as well as the influence of institutional conditions on entrepreneurial behaviour.
The reasons we have decided to investigate Bangladeshi diaspora ventures in Denmark are, firstly, the Danish institutional condition, particularly its regulative, normative, and cultural cognitive features, which are relatively distant from those of the Bangladeshi institutional context. Secondly, the number of Bangladeshi diaspora entrepreneurs in Denmark is relatively small, so it is easy to investigate them in depth. Thirdly, Bangladeshi entrepreneurs have both types of educational backgrounds, i.e. from Denmark and Bangladesh; thus, we were able to examine the influence of education and personal background from both the COR and COO on entrepreneurial motivation, capability, and management.
This study contributes to policy development and diaspora entrepreneurship management, and serves as a seminal work on diaspora entrepreneurship and management in an institutionally distant context, while also presenting a discussion of how institutional features shape the conditions by which diaspora entrepreneurial motivation, management, and above all capability are in turn shaped.
2 Institutional Condition and Distance
2.1 Institutions
Institutional theory, tracing back at least to the neo-institutional theory of Max Weber, has been put through an evolutionary process by several scholars from sociology, economics, organizations, and psychology. However, new-institutionalism does not represent a sharp break with the neo-institutional framework, but rather conceptualizes the definition of institution differently.
The school of economics that employs the notion of institution, commonly known as new-institutional economics, was primarily driven by the pioneering concept of transaction cost by Coase (1937) and later Williamson (1975). The concept derives logic that is in line with the notion of institutionalism. They argued that the costs of negotiation and information collection are conditioned by the nature of the institutional context and human ability. Transaction cost increases as a function of two paired conditions. Firstly, the fact that when an individual behaves rationally, the behaviour is ‘bounded’, meaning there is a cognitively limited ability to process information, and this rational behaviour is confronted by heightened complexity and uncertainty due to the cognitive limitation of accessing all the information needed to analyse the risks of the transaction. Secondly, when opportunism, i.e. the propensity of some actors to lie and cheat, is coupled with an absence of alternative exchange partners, the transaction is stuck in that condition, and the one is likely to be cheated because of cognitive limitation to find an alternative exchange partner. For example, collecting information on property transactions or investment in Bangladesh is relatively difficult and often leads to confusing and unreliable data; in Denmark, on the other hand, the government has developed an open and reliable digital system to check real estate data and historical information. One can easily find the necessary information regarding current and previous real estate transactions free of charge on one website. This provides the opportunity to assess risks in transactions by accessing recorded historical information; furthermore, one cannot hide information in a transaction, and this reduces the bounded rationality for the buyer and opportunism for the seller.
Economic historian North (1990) moves one step ahead in defining institution, encompassing three crucial phenomena of institutions to develop a framework, namely cultural, political, and legal conditions. Dividing them into two types, formal and informal institutions, he describes institutions as the societal ‘rules of the game’ and views organizations as players who are attempting to devise strategies to win the game. Thus, he views the institution as a constraining factor when conducting business in a particular context. His assumption is in line with the notion of transaction cost theory, which assumes that firms tend to incur costs due to the institutional conditions in which they operate.
The political science stream includes both formal structures and informal rules and procedures that govern or shape behaviour (Thelen and Steinmo 1992). This stream focuses on the state, examining the ways in which these structures shape the characters and outcomes of conflicts according to how they distribute power among actors, develop policies that allow distribution of resources, and shape actors’ conceptions of their interests; these factors ultimately lead to equilibrium within a society.
However, the sociological stream, together with psychology, stresses ‘cognitive evolution’ of the institution, connecting it with individual intelligence, i.e. the ability to perceive, interpret, make sense of, and respond to external stimuli. Humans, on the one hand, have limitations in judging and assessing both risks and opportunities because they have limitations in developing intelligence and limited ability to access information (Tversky and Kahneman 1974). This condition might be typical for a diaspora/multinational enterprises (MNE) in a distant institutional context, at least at the initial stage in a foreign context, due to a lack of contextual intelligence and embeddedness (originating from ethnicity, education, language, social networks, sense of local culture, etc.). Institutional condition, on the other hand, influences human minds and provides limitations or advantages for the ability to perceive, interpret, and make sense of external stimuli, leading to a construction of common meaning and rationale in a given context (Berger and Luckmann 1966; DiMaggio and Powell 1983).
Organizational sociologist Richard Scott (2008), however, summarizes all these views in new-institutionalism and presents a theoretical framework in which institutions comprise regulative, normative, and cultural-cognitive elements that, together with associated activities and resources, provide stability and meaning in social life. This means that institutions guide behaviour by defining what is appropriate or expected in various social and commercial situations, and thus firms or entrepreneurs can develop capabilities in order to respond to such social/commercial situations (Rana and Sørensen 2014).
In a similar vein, comparative institutionalism and business systems scholars consider culture and history to form a background institution that affects proximate (i.e. formal) institutions, such as the role of the state, regulation and policies, education and labour institutions, and financial institutions (Whitley 2010; Redding 2005). However, they presume that dominant features of the culture and values of the background institution shape the nature of authority, hierarchy, trust, reciprocity, social capital, identity, and the logics of managing and organizing economic activities in a society. While these features of the background institution underpin the proximate institutions, over time the nature of proximate institutions also affects the background cultural institutions. This means that comparative institutionalism sees an institution as a dynamic and interactive process that includes the dominant forms of background and proximate institutions together with the firms; thus, their interactions give rise to a particular set of systematic logics of doing business in a society, which they call business systems (Rana 2015). This helps explain how firms organize and manage activities in different societies and how and why diverse institutional conditions shape them to be different in different societies (Whitley 1992; Rana 2015; Rana and Morgan 2015).
Comparative institutionalism further analyses why firms/entrepreneurs in certain societies develop certain types of capabilities while others cannot, or why and how entrepreneurs create ventures and manage them in a certain way in one context while they do so differently in another context. Thus, comparative institutionalism (Morgan et al. 2010) presents an analytical framework to explain venture creation, organization, and management between two or more countries in a logical way based on the concept of institutionalism. This is the view we primarily use in this study, together with the organizational sociology perspective of new-institutionalism, in order to explain why Bangladeshi diaspora entrepreneurs create ventures and how they manage them in Denmark.
2.2 Institutional Distance
The institutional distance metaphor originates from the concept of the liability of foreignness and psychic distance. The institutional distance concept helps measure the difference of various institutional features between two or more countries, for example, political risks, regulative differences, norms affecting authority and trust, executive rationales and mind-sets for decision making, etc. Grounded on the notions of new-institutionalism and new-institutional economics, it has become a popular construct in international business studies, where the unit of analysis is embedded in two or more institutional contexts (Xu and Shenkar 2002; Phillips et al. 2009; Bae and Salomon 2010). The comparative institutionalism literature helps researchers explain how institutional diversities can shape human and firm capabilities to create and innovate in certain societies compared to other societies (Jackson and Deeg 2008; Whitley 2007). As our study focuses on Bangladeshi diaspora entrepreneurship, in which entrepreneurs create and operate ventures in Denmark while they hold embeddedness with Bangladesh, comparative institutionalism and the institutional distance concept are relevant and useful in order to explain what, why, and how diaspora entrepreneurs do things in a particular way in Denmark and how institutional features from both contexts shape their behaviour and capabilities.
3 Diaspora Entrepreneurship, Orientation, and Motivation
3.1 Diaspora Entrepreneurship
‘Diaspora entrepreneurship’ differs from ‘entrepreneurship’ because of diasporans’ background (i.e. the degree to which they are oriented towards the COO or COR). This difference is manifested in levels of social capital, education, entrepreneurial motivation, and previous experience, as well as the ability to adapt to and navigate in a new context, i.e. the COR, as compared to native entrepreneurs.
Entrepreneurial motivation of the diaspora is subject to personal and family needs and affordances in a foreign context. This means that whether and how a diaspora can afford to conduct entrepreneurial activities in the COR, given their personal conditions and institutional opportunities and constraints (i.e. in terms of financial resources, policy support, ability to access necessary information, etc.), depends on their cognitive ability to respond to external conditions. Thus, the diaspora’s motivation is a dynamic construct (i.e. one that is subject to change), and is shaped by the institutional conditions with which the diaspora’s cognitive intelligence is strongly aligned, i.e. the COR or COO. In fact, motivation allows the diaspora to change in a way that enables them to develop the required capability to navigate challenges arising from institutional distance, which strengthens the personal resource bundle required for entrepreneurship suited to the context, thus helping to legitimize the venture and its operation there (Decker 2015).
Diaspora entrepreneurs tend to possess three types of capital—human, social, and financial—which are shaped partly by contextual intelligences drawn from both contexts, and partly by the institutional features of the COR, as this is the context in which the transnational diaspora attempts to develop a venture. These capitals eventually affect their entrepreneurial capability in the COR.
Instead of diaspora entrepreneurship in the country of origin (COO), as diasporans often temporarily or permanently return to COO as entrepreneurs, (see Riddle and Brinkerhoff 2011), in this study we take the perspective of diaspora entrepreneurship in the COR (see Elo 2016).
Elo (2013) presents nine types of diaspora entrepreneurship (see Table 1) corresponding to different country contexts: developing, emerging, and developed countries. The underlying assumption of her categorization is that the institutional contexts in which diasporans live shape their entrepreneurial types. The assumption, which is in line with the argument of comparative institutionalism, indicates that institutional contexts shape entrepreneurs’ capabilities. Different contexts present different opportunities and weaknesses, and thus they give rise to different types of entrepreneurs. According to Elo (2013), the developed country context has three types of entrepreneurship: colonial-style, pioneer-style, and elite entrepreneurship. Of these types, the ‘pioneer style’ may fit the Bangladeshi diaspora (from an emerging market) in Denmark (a developed country). Yet this typology has not been well explored regarding what antecedents motivated these diasporans to become entrepreneurs or how they manage ventures in the COR.
Transnational diasporas who maintain dual embeddedness (i.e. maintain links with and frequently visit the COO) possess sentiments towards their homeland (Rana and Elo 2016); this is often a motivation, together with economic gain, for entrepreneurship in the COO. In addition, they hold social capital and contextual intelligence in the COO due to their family network, living conditions, education, and work, which they can often exploit. Moreover, they tend to have rare resources and distinctive knowledge due to living, studying, and working in the COR (typically a developed country context); thus, they can take the opportunity of institutional arbitrage. However, this is a COO perspective, which we do not focus on here; instead, we would like to uncover the motivations of transnational diaspora entrepreneurs in the COR.
As Drori et al. (2009) argue, transnational entrepreneurship builds on entrepreneurship literature and migration studies and considers various perspectives that are useful for analysing diasporans vis-à-vis diasporic transnational entrepreneurial activities; such perspectives are agency, institutional and cultural factors, power relations, social capital, and networks.
3.2 Entrepreneurship and Orientation
The entrepreneurship literature presents a thick description of entrepreneurship categories, motivations, and orientations through which we can develop an understanding of diaspora entrepreneurship.
Building on theories of learning and innovation (i.e. creativity and innovative thinking), Gartner et al. (1989) describe eight categories of entrepreneurs. The first is escaping to something new; second, putting the deal together; third, roll-over skills/contacts; fourth, purchasing a firm; fifth, leveraging expertise; sixth, aggressive service; seventh, pursuing a unique idea; and the final category is methodically organizing.
These categories represent an understanding of how an entrepreneur’s ability allows them to develop and grow a business. This is a resource-based view but a generic condition for being an entrepreneur, but it is also a partial view because it isolates entrepreneurial capability from its context and background; this perspective considers the action and human capability of an entrepreneur only at a certain point in time and space. This does not fit with the understanding of transnational diaspora entrepreneurship because a transnational diaspora’s condition and situation are embedded in more than one context, making transnational diaspora entrepreneurship more complex and context dependent.
In a similar vein, Kuada (2015) describes four types of entrepreneurs building mainly on two factors: imitation orientation and innovation orientation. These typologies are survivalists, opportunists, orphans, and eye-catchers (see Table 2). Kuada (2015), drawing on contextual and entrepreneurial characteristics in Africa, suggests that economic conditions and the entrepreneurial focus (i.e. either imitation or innovation) determine whether necessity or opportunity entrepreneurs are most prevalent in any given country. Growth-oriented entrepreneurs create many job opportunities and are involved in social welfare activities in high-income countries, while necessity entrepreneurs are more common in low-income countries where they need to start a business to survive. He further added that survival-oriented business owners tend to unwittingly adopt coping strategies that keep them in the grip of growth inhibitors (Kuada 2015). Kuada’s (2015) propositions, however, may not apply to diaspora/immigrant entrepreneurs living in a developed country such as Denmark. This is because such developed and supportive institutional conditions present several opportunities for diaspora entrepreneurs, depending on how well diasporas are integrated and embedded in COR society (i.e. in terms of social capital, education, language skills, etc.). However, one could argue that despite living in a developed country context, diasporans may behave like necessity-driven entrepreneurs because of their low or non-existent integration into the social system. Thus, they may find that the institutional conditions are foreign to them due to their inability to access sufficient information, social capital, and financial capital, while also lacking contextual intelligence. Therefore, they cannot exploit the full potential of the institutional system, ultimately opting for self-created necessity-oriented ventures.
As far as the entrepreneurial orientation (EO) literature is concerned (Covin et al. 2006), EO refers to the strategy-making processes that an entrepreneur goes through when creating and managing a venture; this includes entrepreneurial decisions, actions, and visions (see Lumpkin and Dess 1996; Wiklund and Shepherd 2003; Rauch et al. 2009). The notion of EO, therefore, can also help to understand entrepreneurs’ motivations.
According to Miller (1983) and Lumpkin and Dess (1996), there are five dimensions of EO, namely innovativeness (doing something innovative in terms of product, process, or management), risk-taking (ability to take risk), pro-activeness (a forward-looking perspective), autonomy (ability to work independently, make decisions, and take actions), and competitive aggressiveness (intensity of the effort to perform better than its rivals). The innovativeness, proactiveness, and competitive aggressiveness orientations depend on the entrepreneur’s high-level skills, education, social capital, and contextual intelligence. The risk-taking and autonomy orientations commonly appear in immigrant entrepreneurs when they do not have high-level skills, education, or strong embeddedness in the COR.
Studies find that contextual intelligence and strong embeddedness of highly skilled diasporas can lead to innovative venture creation in the COR (as seen in the Bangladeshi, Indian, and Pakistani diaspora in the US and UK) and internationalization of MNEs in the COO (see Riddle and Brinkerhoff 2011; Rana and Elo 2016, 2017). These two types of entrepreneurship can be termed ‘eye-catcher’ and ‘innovative’ in the COR; they show that the entrepreneur’s deep embeddedness and education in the COR have provided them with a high level of social capital and contextual intelligence to succeed in entrepreneurship in the COR.
3.3 Entrepreneurial Motivation
Many studies have tried to identify both the traits and motives of entrepreneurs and the demographic characteristics that may predispose individuals toward entrepreneurial careers and management (e.g. Collins et al. 2004; Hansemark 2000, 2003; Lachman 1980; McClelland 1965; Meyer et al. 1961).
We discussed above the motives of entrepreneurs based on the ‘necessity’ and ‘opportunity’ dimensions, which are conditioned by intra-personal need and external context (i.e. the fit between internal requirements and capabilities and the external situation). Some other common dimensions of entrepreneurial motivation are illustrated here:
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Achievement, challenge, and learning: This explains the desire for personal development through entrepreneurship. It includes aspects such as having meaningful work and responsibility and learning through the challenge of creating or running a business, i.e. self-realization, including fulfilling one’s personal vision (Jayawarna et al. 2011; Edelman et al. 2010; Giacomin et al. 2011; Gorgievski et al. 2011; Benzing et al. 2009).
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Independence and autonomy: This highlights the entrepreneurial motivation of having control over one’s work and life. This includes having control over one’s own time and work, making independent decisions, and having the flexibility to combine work with one’s personal life (Jayawarna et al. 2011; Giacomin et al. 2011; Edelman et al. 2010; Benzing et al. 2009; Akehurst et al. 2012; Aziz et al. 2013).
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Income security and financial success: This dimension captures the importance of financial returns from entrepreneurial ventures (Edelman et al. 2010; Giacomin et al. 2011; Jayawarna et al. 2011; Aziz et al. 2013). Notably, there is no significant distinction between the motive related to income security and financial success and the necessity-driven motivation, which we have explained.
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Recognition and status: This dimension represents aspects related to social status such as the desire to receive recognition and respect from friends, family, and the wider community for one’s work as an entrepreneur (Edelman et al. 2010; Giacomin et al. 2011; Jayawarna et al. 2011; Aziz et al. 2013).
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Family and roles: This illustrates the desire to continue a family tradition and/or follow the example of other role models. This dimension, however, also emphasizes creating a family legacy (Edelman et al. 2010; Jayawarna et al. 2011; Dej et al. 2012; Aziz et al. 2013).
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Dissatisfaction: This dimension represents entrepreneurial motivation due to dissatisfaction with prior work arrangements (Akehurst et al. 2012; Giacomin et al. 2011). Therefore, it bears some similarity to necessity motivation, which is rarely explicitly included in this type of motivational research (Fernández-Serrano and Romero 2012). However, it may not be entirely the same as necessity motivation because dissatisfaction may arise due to a lack of innovation, creativity, personal enjoyment, or even social prestige arising from the earlier work or business.
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Community and social motivations: This dimension includes the desire to contribute to the community in which the entrepreneur lives, either through philanthropy or through the business itself (i.e. social entrepreneurship) (Estrin et al. 2013). However, in a broader sense it may include aspects such as looking after one’s employees and being an environmentally friendly company (Jayawarna et al. 2011).
4 Management Styles in Entrepreneurial Ventures
There is a significant amount of literature on management styles, i.e. the way a manager organizes and manages firm activities. However, our focus is on the diaspora management style, and there have been few studies related to this phenomenon.
One perspective on management style would be to understand the rationale that shapes the way managers organize and manage business operations, which is rooted in institutionalism. This rationale is shaped by the socio-cultural norms and values and management education that a manager experiences. For example, this rationale influences whether a manager would favour kinship, friends, and social relations when recruiting employees, and whether a manager would volunteer some social services, as expected by society (not as corporate social responsibility as such, but rather as a sporadic social service as requested or desired by the social context or actors).
The other perspective would be to understand the management style as how a manager performs different managerial tasks within the organization, for example, how a manager makes decisions, to what extent they delegate authority to subordinates, the level of authority distance between manager and subordinates, the level of employer-employee commitment, and so forth. Although it is true that institutional conditions affect both these perspectives, the latter has been is most prevalent in the comparative management/business systems literature (Whitley 2010; Rana 2015).
Brinkerhoff (2016) presents a thick description of how diasporas manage their entrepreneurial ventures in Egypt, Ethiopia, and Chad, in which diasporas’ education from the COR and the cultural influence of the COO shape their management styles. In other words, she describes how diaspora entrepreneurship and management are influenced by dual institutional settings while diasporans act as change agents in the institutional conditions of the COO.
Since the objective of this paper is to understand the entrepreneurial motivation and management style in diasporas’ micro-small-medium ventures in a COR, i.e. Denmark, we need an operational framework to understand and document this phenomenon. Thus, we use a framework presented by Rana (2014) (see Table 3), building on comparative institutionalism and business systems theory (see Whitley 1992; Redding 2005). This operational framework for the internal dynamics of management has previously been empirically tested on firms in the Bangladeshi context, and is thus relevant to this study. We do not necessarily use the entire framework; rather, we focus on the dynamics of management that are important for micro-small-medium enterprises.
Business systems theory primarily concentrates on how firms are shaped by national-level institutions, as it is at this level that institutions tend to be strongest; however, in the case of diaspora, national contexts become dual or even plural. Thus, the framework will help us determine how dual institutional contexts affect management behaviour and logics in diaspora ventures. Although Rana (2014) developed this framework based on the practices of large and medium-sized local companies in Bangladesh, the findings from Rana (2014) can be used to gain insight for our study.
There are six factors within management style that can be examined. We discuss these from the perspectives of both contextual settings, i.e. Bangladesh and Denmark. However, the findings presented below relating to Bangladeshi and Danish firms’ practices will provide us with an understanding of the overall management styles of firms in these two countries.
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Nature of control and decision-making: Under this category, we illustrate how and to what extent decision-making and control are decentralized. In the case of Bangladesh (in a form of owner-centred management in an entrepreneurial venture), decision-making and control are highly centralized processes (Rana 2014). In Denmark, the business environment is informal and hierarchy is not of great importance in the decision-making process (Josafath 2014). Here, decisions are made in a decentralized process where the gap between managers and subordinates is reduced to allow free communication with each other (Lewis 2006). Bangladeshi companies tend to follow the top-down management style. Top management employees maintain relatively high levels of autonomy, while mid-level and front-level management do the routine jobs and are expected to carry out directions (Rana 2014).
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Impersonality of authority and subordination relations: The major questions commonly asked in this category are: (a) To what extent do managerial hierarchies coordinate and control economic activities through impersonal/formal procedures? (b) To what extent is the coordination and control system based on personal/informal shared values, commitment, and relational mechanisms? (c) To what extent are long-term employment practices used? In Bangladesh, managerial hierarchies coordinate and control the economic activities of the organization through formal procedures, the organization itself is centrally directed and the strategic decisions are made by entrepreneurs. As there is a low/medium level of trust and a high authority distance in formal relationships, an informal relationship within the formal authority relationship is important (Rana 2014). The biggest difference between administrative and entrepreneurial managers is their behaviour in different situations. In contrast, the Danish culture is a classic example of a low power distance society—managers show concern for employees’ well-being and interact directly with them (Josafath 2014). According to Rana (2014), both long- and short-term employment are evident in Bangladeshi organizations. In most cases, promotion and incentive packages are not well documented or relationally applicable. In contrast, short-term employment is commonly practiced in Danish firms, while the determination of promotion and incentive packages is standardized up to a certain level, although individual incentives are negotiated at the personal level. Short-term job-orientation in Denmark is stimulated due the institutional support given during the unemployment period (the ‘flexicurity’ model commonly practiced in the Scandinavian context).
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Delegation of tasks, skill and role specialization, and individualization: The major question we ask here is to what extent individual task allocation based on skill is preferred, as opposed to teamwork. There is a clear contrast between Danish and Bangladeshi firms in terms of task allocation, due to institutional differences. Danish firms prefer team-based work, and thus task allocation is primarily based on team competency and relevance, while Bangladeshi firms tend to allocate tasks based on individual competency and trustworthiness (Rana 2014). Though entrepreneurial managers have a strong action orientation, they also need to be differentiated in terms of innovators (who are very creative but typically low in action orientation) and executors (who are typically not creative, but very active) (Hortoványi 2012). Danes are problem-solving oriented and want the best solution for themselves and their business partners. They will always try to achieve a win-win situation (Josafath 2014).
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Decentralization of operational control and level of work group autonomy: The major question to be examined here is to what extent directly controlled supervision is preferred, as opposed to responsible autonomy. In Bangladesh, decentralization of operational control over the work in large firms can be characterized by a combination of ‘direct owner control’ and ‘managerial control’. Since large firms are family owned, it is common for owners to have direct control over their operation, but the extent of control or centralization by owners varies from firm to firm. However, small firms in Bangladesh have a common practice of direct owner control and less autonomy for employees (Rana 2014). Danish business structures tend to be decentralized, with executives fulfilling the role of team leaders, encouraging employees to take on active roles (Josafath 2014). Managers usually ask their team members for their opinions and feelings when making decisions, and when a decision is made it can be difficult to change (Josafath 2014).
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Distance and superiority of managers: The extent of the power distance in the hierarchical structure is the main question here. The distance between the supervisor and subordinate in the workplace of a Bangladeshi company is high. The manager is expected to give directions to the subordinates. A little consultation is allowed, but it is generally believed that subordinates should not argue with the decisions/directions of the manager (Rana 2014). This is due to the high power distance and hierarchical nature of the society. Usually, subordinates are afraid of the boss, so they follow directions in order to be perceived as loyal and obedient. Managers are never involved in the tasks that subordinates carry out, not even if problems arise. Managers prefer to keep their distance from the subordinates. They usually do not admit to any limitations that they may have (Rana 2014). In contrast, in the Danish context, the distance between the supervisor and subordinate in the workplace is low (Josafath 2014). The Scandinavian management style includes the idea that feelings should not influence decision-making, but at the same time values respect for others’ feelings and conflict avoidance (Clausen 2006).
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Extent of employer-employee commitment and organization-based employment system: In Bangladesh, employees are recruited through a formal recruitment procedure, particularly for mid- and front-level management, although social networks and family relations also affect the recruitment process (Rana 2014). Importance is also placed on social networks and personal connections for the recruiting process. Firing employees is not well received in society and affects the reputation of the firm. However, commitment between employees and owners is not very high due to poor management and the high level of authority hierarchy within management. Danish firms, in comparison, maintain a higher level of commitment towards their employees due to legal obligations and strong employee unions. Firms tend to prioritize social relationships and networks in appointing people, especially in small firms, which is similar to Bangladesh.
5 Methodology
We employ the multiple case study method and the in-depth interview technique to collect data from Bangladeshi diaspora-led micro-small-medium enterprises in Denmark. This technique is suitable to capture the reality of dual and cross-institutional settings (Ghauri and Firth 2009). Given the research aim, i.e. understanding how institutional conditions shape motivational factors and management styles of Bangladeshi diaspora-led medium-small-micro enterprises in Denmark, we focus on exploring logical relationships among multiple phenomena and factors stemming from institutional conditions, particularly the distant institutional context, entrepreneurial behaviour, and management styles. In particular, we investigate the relatively complex relationship between institutional factors and entrepreneur behaviour and decision-making in the COR context. This is a seminal work as no similar study in the past has covered such depth and breadth of understanding of the relationship between entrepreneurship and institutionalism, particularly institutional distance. We consider it an exploratory study that will lay the foundation for future studies on transnational diaspora entrepreneurship, management, and institutionalism.
5.1 Selection of Cases and Data Collection
In total seven cases were selected (see Table 3) based on three predefined characteristics: firstly, the ventures should be established and managed by Bangladeshi diasporans in Denmark; secondly, the ventures should have existed for varying lengths of time; and thirdly, the entrepreneurs should have different lengths of stay in the COR, with different educational backgrounds. The goal was to achieve diversity in entrepreneurial phenomena, management styles, and institutional characteristics in order to find a logical relationship between transnational diaspora entrepreneurship and entrepreneurial success. In Denmark, Bangladeshi diaspora entrepreneurship possesses dual characteristics in terms of when they came and why they came; one group of diaspora came to Denmark in the early 1980s for settlement/works, while the other group of entrepreneurs came after 1990s for education and afterwards decided to settle. Their numbers are not very large, and thus are manageable from a research perspective. Due to sharing similar ethnic backgrounds with the researchers, this group of diaspora entrepreneurs provides an ethnic network for data collection and trust building, providing rich data for an in-depth study. The major growth businesses of Bangladeshi diaspora entrepreneurs in Denmark are restaurants, multi-store shops, and cleaning companies. We have covered these three types of businesses in selecting cases so that we can access rich data on these different types for theorization. We have concealed the names of these companies in order to ensure confidentiality (see Table 3).
The venture names were collected from the diaspora network and social networks in Denmark, as there are no official data on diaspora entrepreneurship in terms of ethnic background. Eight interviews were conducted with diaspora entrepreneurs during the period of April–May 2016, totalling ten hours. In the case of C5 there were two interviews, as this was an entrepreneurial couple.
A detailed questionnaire template was developed based on different factors of motivation, management style, and institutional conditions; however, the interviews themselves were open-ended and semi-structured. We asked ‘what’, ‘to what extent’, ‘how’, and ‘why’ questions based on the questions listened in the template. Very often, we asked supplementary questions for clarification; we wanted interviewees to give elaborate answers with examples. Often we discussed the positive and negative aspects of the entrepreneurial processes of the Bangladeshi and Danish styles and later asked for the judgments of the interviewees. All interviews were either recorded or annotated in notebooks and were conducted in the native Bengali language. This indicates the degree to which connections to the COO still persist.
5.2 Level of Analysis
Following the qualitative data analysis technique, as suggested by Miles and Huberman (1994), we employed three stages of analysis for the empirical data, namely data reduction (i.e. data organizing and coding), data displays (i.e. structuring, clustering, presenting), and conclusion drawing/verification (i.e. understanding the meaning and underlying principles, and developing patterns, explanations, and relationships).
We used two levels of analysis. First, we focused on understanding motivational factors and types of management styles in entrepreneurial ventures. Second, after categorizing these in terms of different typologies of motivation and management, we linked them with institutional characteristics of both the COO and COR to explain why something happened as they happened. At this level of analysis, we combined both micro- and macro-level analyses. This allows us to demonstrate a logical relationship among entrepreneurship, management, and institutional conditions.
6 Analysis and Discussion
Our analysis and discussion is presented in two sections: first, ‘diaspora entrepreneurs’ motivation’, and second, ‘diaspora management’. A logical explanation of the institutional conditions of the COO and COR with regard to diaspora entrepreneurs’ motivation and management is presented throughout the analysis and the discussion.
6.1 Diaspora Entrepreneurs’ Motivation
Bangladeshi diaspora started coming to Denmark after the liberation war of Bangladesh in 1971, particularly during the early 1980s. The major motivational factors for Bangladeshi diaspora entrepreneurs are personal, social, and self-employment with financial security (see Table 4). Financial security is the most dominant motivation; however, other important factors have been found, such as business achievement, independence, and intrinsic and job security factors. The reason financial factors dominate is that Bangladeshi diaspora came to Denmark with educational backgrounds from the COO that were not well received in the Danish labour market. These backgrounds were mostly non-technical; thus, their education did not fit with the skills, cultural intelligence, and aptitudes required for the job market. It is also true that they did not have adequate language skills and social networks at the initial stage, at least during the first 3–4 years, which put them in a disadvantageous position for finding a good job in Denmark.
In recent times, even though some diaspora have come under the Green Card scheme, legal requirements do not allow them to become involved in entrepreneurship, despite adequate skills, talents, and motivation. This legal barrier often motivates immigrant diaspora to aim for low value added work in order to survive, and afterwards, when they are allowed to do so (that is, after becoming a permanent resident or Danish citizen), they tend to set up ventures in similar or different areas but with different levels of value addition. Such conditions motivate them to try entrepreneurship, mainly for financial security and self-employment. However, this is not the only condition; we present the entire scenario below (see Table 5).
Our in-depth interviews reveal 13 important factors of motivation for Bangladeshi diaspora entrepreneurs. These are: (1) income security and financial success, (2) opportunity for high income and achievement from one’s own work, (3) encountering new challenges and thereby learning something new, (4) having complete independence and autonomy in work, (5) opportunity for social recognition and status, (6) lack of job opportunity in Denmark, (7) opportunity for social work by providing new job opportunities to both locals and fellow country-people, (8) enjoying more leisure/free time, (9) opportunity for building local networks, (10) Denmark’s business-friendly regulations, (11) ‘opportunity for doing something that diasporas like most, thus removing dissatisfaction’ from previous job, (12) can achieve a better life style, and (13) a ‘new market opportunity—because Danes cannot do something that diaspora can offer’ (e.g. Bangladeshi food).
Instead of discussing all 13 factors of motivation, we have grouped them into four broad categories: financial motives, social motives, business motives, and self-actualization motives (see Fig. 1). The next analysis links the discussion of these four motivational categories with entrepreneurial types. The figure illustrates the importance of various motivational factors under each category based on the interviews.
6.1.1 Factors of Motivation and Entrepreneurial Typology
In general, the modal factors of motivation under the four categories are income security and financial success (see the size of the bubbles in Fig. 1), social recognition and status, work achievement, and independence and autonomy of work (see Fig. 1).
Our case studies reveal four main factors that drive necessity entrepreneurs: income security and financial success, high income in business, removing dissatisfaction, and lack of other job opportunities. Most of the diasporans’ coming from distant cultures and institutions tend to face similar conditions in Denmark; thus, they become necessity entrepreneurs. However, over the course of time, many necessity entrepreneurs become opportunity-driven or eye-catcher entrepreneurs due to the changing conditions of their internal capabilities, financial status, and life style, which eventually alter their motivations.
Our study includes only two opportunity-driven entrepreneurs (C-2 and C-5), who said they became entrepreneurs because of (1) business-friendly rules and regulations and (2) market opportunity. However, the underlying fact is that both entrepreneurs were working in similar types of business ventures (the food business) when they came to Denmark, and, over time they became financially strong while at the same time fostering the dream of creating their own ventures. Thus, when C-2 suddenly had the opportunity to buy a pizza restaurant, as his friend was selling it off, he jumped at the chance to start his own venture. C-5 had had previous experience in the restaurant business from his family background in Bangladesh. In Denmark, he worked in an Italian restaurant chain for 2 years before he became an entrepreneur. He saw rising opportunity for restaurants in Denmark and dreamt of establishing one focused on Indian food. As he was still an employee at the Italian chain, he asked his wife to take the driver’s seat at the new restaurant, keeping himself in disguise while still providing all the necessary practical support to establish the restaurant. The new restaurant was registered under his wife’s name, and she manages the entire operation. She is a graduate in marketing from a Danish university; thus, it was rather easy and thrilling for her to use all the marketing and management knowledge she had learned at the university in the new venture. This was the beginning of their entrepreneurship.
In a true sense, both of these entrepreneurs (C-2 and C-5) managed to grab emergent opportunities because they had a dream to create own ventures, previous experience and knowledge, and the financial solvency to create new ventures.
However, for C-5 it was the beginning of their (the husband and wife team who run the venture) entrepreneurial journey. Later on, C-5 managed to convince his Italian employer to create a new restaurant under the umbrella of the Italian food chain, because the Indian food window at the Italian restaurant chain had experienced a rise in the number of customers. However, by this time, his Italian employer could see that his (C-5) wife’s restaurant had become a competitor to their Indian-food window; thus, C-5 made a deal with his employer to create a new restaurant on a partnership basis and was willing to merge his wife’s restaurant with the Italian food chain. His creative strategy brought a rapid increase in growth for their start-up Indian restaurant. This positioned C5 as both an opportunity-driven and eye-catcher type of entrepreneur, at least within the context of the Bangladeshi diaspora community in Denmark.
Venture Age and Motivation
Venture age does not correspond to the time-length of diaspora residence in Denmark. Therefore, we look at diaspora residence in Denmark because this allows diasporans to develop contextual intelligence over time, and helps us to understand the overview of a venture’s growth and the reasons behind it. We found three types of venture in terms of age. C-5 and C-6 fall into the first category—new ventures that are less than 2 years old; however, C-5 managed to have the highest growth. In the second category, growing ventures, are three firms: C-1, C-2, and C-3, which are between 3 and 6 years of age. The third category is that of established ventures; these are C-4 and C-7, which are more than 15 years old. In-depth interviews reveal that entrepreneurs with young ventures (0–3 years old) tend to be motivated by a lack of job opportunities, income security, market opportunity, and independence of work (see Fig. 3). This is typical because these entrepreneurs are relatively new to entrepreneurship in Denmark and they have had a hard time finding a good job with financial security. Although C-6 had lived in Denmark for a relatively long time, he was never happy with the job he was doing, because his academic background and aspirations did not match the nature of his job nor the financial return. His inability to find a job better suited to his interests was partly due to the language barrier and differing cultural intelligence, which put C-6 in a disadvantageous position for finding a good job in the Danish labour market.
Entrepreneurs with 3- to 6-year-old ventures have been living in Denmark for a relatively long time and thus have different motivations, such as being involved in social work, having a higher degree of networking scope, and social recognition and status, although financial security and success remain important. At this point, diaspora entrepreneurs’ cognition possesses dual aspirations for, firstly, social status/identity in their own Bangladeshi community as well as the mainstream Danish community, and secondly, building a social network with an aim to grow the venture or do something great in the future for purposes of self-realization.
Entrepreneurs with established ventures of more than 15 years tend to have a unique motivation, removing dissatisfaction. This means they do business to please their minds, making them free from the anxiety of searching for jobs, creating new start-ups, and losing in life. Thus, they are no longer necessity driven; rather, they want work that they enjoy and that gives the freedom to maintain a healthy work-life balance. To our understanding, this sort of motivation stems from Danish social/institutional logics and the condition of social security in which diaspora have lived for a long time (Fig. 2).
Diaspora Background and Motivation
As self-motivation is highly influenced by individuals’ backgrounds and personal psyches, we depict a short overview of the diaspora entrepreneurs’ backgrounds, linking them with the motivation factors. Our case studies find an interesting relationship among venture growth and education, family background, and sports involvement.
Firstly, our data reveal that entrepreneur’s educational background has a direct relationship with venture creation and growth in the Danish context. Six out of the eight diaspora entrepreneurs have a master’s level education from Bangladesh, but the most interesting point is that four diaspora entrepreneurs (C-5, C-6, C-7) have further education from Danish or European universities; this provided them with the personal confidence, cultural intelligence, and relatively higher embeddedness for entrepreneurial success in Denmark.
Secondly, family background with a similar business provided the competitive advantage to learn quickly; thus, venture creation and growth were relatively faster than for other entrepreneurs. For example, C-5 has a family background in the food business in Bangladesh, while he was educated in Ireland and his wife was educated in Denmark. They learned the tricks of this business very quickly due to their previous experience with their family and their work in the Italian food chain for about a year. Their education from Denmark and Europe helped them to integrate that knowledge with the Danish context very quickly.
Thirdly, involvement with social activities and sports provided an opportunity for diasporans to develop social capital, including social networks and cultural intelligence in the Danish context. Later, this cultural intelligence acted as an internal resource for creating and growing the venture. Two high-performing ventures, C-1 and C-5, have strong involvement with sports in Denmark; C-1 is passionate about social activities and various sports, such as football, cricket, and hockey. He has been a sponsor and player of a cricket club in Copenhagen since his arrival in Denmark. C-5 is a pool champion and became involved in a pool club in Aalborg soon after he arrived in Denmark, and he regularly attends various pool tournaments. These entrepreneurs’ social and sports associations played a vital role in helping them develop local networks in Denmark.
Based on in-depth interviews with these two high-performing entrepreneurs, we postulate that personality determines the passion for sports, social work, meeting people, and making friends that provides an opportunity for diasporans to develop social capital and cultural intelligence in the COR. In addition, higher education and language skills in the COR supplement entrepreneurial capabilities to create and grow ventures in the COR context. These two characteristics thus help reduce the institutional distance in diaspora entrepreneurship in the COR, particularly in Denmark.
6.2 Management of Entrepreneurial Ventures
By nature, the seven entrepreneurial ventures investigated are labour intensive, meaning that direct labour input and employee management are critical success factors for the ventures. However, they are also low value added and require strong customer relationship management. Thus, management factors are important and of interest for this type of entrepreneurship. The common understanding from this study is that diaspora entrepreneurs have mixed types of management in Denmark, combining both Danish and Bangladeshi styles; however, we do not necessarily generalize our findings, but rather illustrate them as an insight for future study. A detailed accounting of management factors is presented below (see Table 6), followed by a discussion.
Our study finds that most entrepreneurs use a form of owner-centred management in their ventures. The owner is the driver who sits at the wheel, making decisions and controlling everything in a centralized manner. Danes follow a decentralized process when making decisions that is generally the opposite of the Bangladeshi style. Only C-7 follows the decentralized decision-making process and relies on subordinates to decide on the spot. This entrepreneur took his MSc education in business management from the University of Southern Denmark, which helped him shape the management style for his venture, remaining close to the Danish way of giving his subordinates more autonomy to make decisions.
In the case of individual task allocation or team-based work, all the entrepreneurs follow individual task allocation methods in their ventures, which is a typical characteristic in Bangladeshi firms (see Rana 2014), as opposed to teamwork, which is common in Danish organizations.
Regarding maintaining relationships with employees, Bangladeshi diaspora entrepreneurs tend to maintain very friendly and personal social relations with them, treating them as family members. This clearly indicates a pattern from the collective society, a paternalistic role that is common in Bangladesh, unlike in Danish organizations. However, simultaneously, diaspora entrepreneurs tend to expect a hierarchical distance from subordinates during work. To give a clarifying example: one of the entrepreneurs developed personal social relationships with all of the employees of his venture, both European and Bangladeshi. In Bangladesh, social relations of this sort with the owner motivate employees, particularly in SMEs, and thus help to maintain trustworthy relations and a high commitment between employer and employees. Despite personal social relations, employees in Bangladeshi firms tend to maintain an authority distance due to normative pressure in the context, which has a high authority hierarchy. This did not happen in the venture in the Danish context; rather, the owner failed to maintain manager-subordinate relations with the Bangladeshi employees in his venture, which eventually culminated in misunderstandings and conflicts of emotion.
As far as employer-employee commitment is concerned, all the entrepreneurs maintain a strong commitment to their employees, which is common in Bangladesh. Moreover, all the entrepreneurs recruit employees through social networks, which is very common in both Denmark and Bangladesh. However, it is also true that these types of small and micro ventures do not use formal recruitment processes. High commitment leads Bangladeshi diaspora entrepreneurial firms to follow long-term employment practices, as is common in Bangladesh, but rare in Danish organizations. Finally, it is evident that the COO and COR institutional characteristics shape the way Bangladeshi diaspora entrepreneurs manage their ventures.
7 Conclusion
This study uncovers characteristics from dual institutional contexts that influence diaspora entrepreneurial motivation and management. Our findings stress that COR institutional conditions and personal background (e.g. education from both host and home country, previous relevant experience, access to social networks) have a relatively high influence on diaspora entrepreneurs’ motivation and their ability to create and grow ventures. This study reports several important motivational factors; we group these into four broad categories: financial motives, social motives, business motives, and self-actualization motives. At the initial stage of living in Denmark, Bangladeshi diasporans tend to appear to be necessity entrepreneurs in terms of their motivations; however, over time they tend to turn into opportunity entrepreneurs and seek opportunities to be eye-catcher entrepreneurs. In the latter stage, they are motivated by new opportunities, social motivation, and self-actualization motives.
In addition to the entrepreneur’s previous experience and relevant educational background from the COR, we identify another interesting factor that affects entrepreneurial growth. This study finds that entrepreneurs’ passion for and involvement with sports provides them with strong social capital and cultural intelligence, which eventually affect entrepreneurial growth. It is true that this characteristic stems from the Danish institutional environment, where involvement with sports activities and a passion for sports are integral parts of the social discourse and daily routines. Thus, it is easy to make friends and develop networks by being involved in sports activities. Whilst anish society is relatively closed to foreigners/strangers, diaspora entrepreneurs can develop social capital by being involved in sports activities, but this is only possible when the diaspora’s background fits with the social discourse (for example, passion for sports) or a diaspora possesses the dynamic capability to change themselves in a way that fits with the COR’s institutional context.
This study also finds different dynamics in diasporans’ venture management, which exhibits a mixed style combining Bangladeshi and Danish patterns of management; however, this depends on the type of venture and the diaspora entrepreneur’s background. We develop a model based on these findings called the ‘House Model’ (see Fig. 3), which encompasses institutional duality to show how and why diaspora entrepreneurs create and manage ventures, and which factors from the COO and COR affect the success and growth of the venture. COO institutions, particularly cognition and cultural intelligence, act as a foundation for diaspora entrepreneurs’ behaviour in the COR. While this foundation may not be explicit, it can affect the motivation and rationales for diaspora entrepreneurs’ strategies. However, the influence of COR institutions is explicitly manifested in entrepreneurial motivation and behaviour, because it is in this context that entrepreneurial actions take place; thus, diasporas’ behaviour needs to fit this context. We therefore use the metaphor of a house to build an analytical framework through which we can depict diaspora entrepreneurs’ behaviour and the institutional phenomena that affect such behaviour. The house metaphor clearly expresses the connotations of our model: the foundation of a house is not seen from outside, though it is the stone on which the visible portion of the house stands.
We acknowledge that our idiosyncratic approach to the institutional distance metaphor/parameter may not be enough to comprehend the complexity of the dual institutional contexts that influence diaspora entrepreneurial motivation and management in the COR. Our study therefore proposes a more complex, multiple-context consideration perspective that includes multiple dynamics of institutions, institutional duality, institutional discrimination, and institutional distance. These factors are inevitable in understanding diaspora entrepreneurship and venture management in a COR context, together with diasporas’ individual characteristics. It is true that diaspora entrepreneurs’ personal capabilities have a significant influence on the growth of a diaspora venture, but the extent to which these capabilities can impact growth depends on how COR institutions impose constraints and offer opportunities for flourishing diaspora entrepreneurships in a certain context.
Since this was an inductive study of diaspora-driven micro-small-medium enterprises, our aim was to illustrate the exploratory findings on how motivational factors and management styles are shaped by institutional conditions; our study can be a cornerstone for future studies. Policymakers can use the findings of this study in formulating national/regional policies on how to support diaspora entrepreneurship more effectively, which would not only boost entrepreneurial activities but also affect the sustainable growth of diaspora entrepreneurial ventures in various countries that host many refugees and ethnic diaspora communities.
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Rana, M.B., Nipa, F.S. (2019). Entrepreneurship in an Institutionally Distant Context: Bangladeshi Diaspora Entrepreneurs in Denmark. In: Elo, M., Minto-Coy, I. (eds) Diaspora Networks in International Business. Contributions to Management Science. Springer, Cham. https://doi.org/10.1007/978-3-319-91095-6_27
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