Around the world, governments have taken steps to stimulate entrepreneurship (OECD, 2003), with Asia noted for its strong potential (Economist, 2006), but disappointing progress (Carney & Gedajlovic, 2000). Extant new venture internationalization research focuses on firm and founder-level explanations, mostly overlooking the role of institutions (Yeung, 2002; Zahra, 2005).

Given the lack of theory-based institutions research (Baker, Gedajlovic & Lubatkin, 2005), the present study fills an important gap by developing and testing political economy’s Varieties of Capitalism (VOC) theory to investigate the relationship between national-level institutions and export-oriented entrepreneurial activity. VOC describes how nation-states shape critical institutions and national-level institutional differences affect firm behavior. Institutions enable information exchange, monitor/sanction non-cooperative behavior, set norms/attitudes and provide actors with otherwise unobtainable strategic capacities (Hall & Soskice, 2001; North, 1990), including the ability to internationalize (Whitley, 1999).

Institutions enable varying degrees of capital accumulation which promote investment/growth, including entrepreneurship. To export, new ventures must produce goods/services which are valued by foreign customers and depend on efficient internal organizations and coordinated external relationships. New firms are particularly susceptible to institutional environments (Carney & Gedajlovic, 2003) and face higher transaction costs abroad than at home (Zacharakis, 1997). We focus on five institutions: Industrial Relations, Vocational Training/Education (shapes work attitudes), Corporate Governance (access to patient capital for innovative, international activities; returns; governance), Inter-firm Relations (LaPorta etal, 1998) and Employee Relations (incentives, returns, hierarchies).