International hidden entrepreneurs: Concealed partnerships in new venture formation in an emerging markets context

Abstract

This study examines the emergence of international hidden entrepreneurs (IHEs) in the Kingdom of Saudi Arabia through an institutional theory lens. An international hidden entrepreneur arises when local regulations impose high costs on an international entrepreneur operating as the legal head of an enterprise, therefore giving rise to a concealed partnership with a local entrepreneur to serve as the official managing director. The IHEs in our study typically originate from emerging market nations. Drawing on qualitative data from 44 participants, we examine the complexities of (1) mechanisms of IHE practices, (2) catalysts to the rise of IHEs, and (3) ethical and economic impacts of the presence of IHEs and their implications for the local economy. We establish the existence of IHEs as a still underexplored phenomenon and the advantages and disadvantages of the system in consonance with the cognitive, regulative, and normative pillars of institutional theory. Our findings reveal that IHEs arise as a response to stringent regulatory barriers, socio-cultural norms, and cognitive skill gaps. This study contributes to institutional theory by demonstrating how these pillars intersect in the Saudi context, offering novel insights into informal entrepreneurship and its challenges to Saudi Vision 2030.