Entrepreneurial leadership, capital structure and capabilities development of the firm: The case of the Haier Group

Abstract

This paper integrates the concept of entrepreneurial leadership and capabilities theories with Austrian economics to explain the growth of the firm in emerging economies. It argues that entrepreneurial leadership provides a vision to the development of a new product or an organisation. The entrepreneurial leader organises and coordinates production activities under uncertainty. In doing so, the entrepreneur becomes a systematic capital structure builder. In the production process, capital resources are combined according to entrepreneur's plans and judgment. As the market indicates that there is a need for the firm to expand, the entrepreneur will combine more capital resources with the capabilities to yield larger profit to the growing firm. Our Austrian theories can interpret the expansion strategies of the firm through imitation, joint ventures and mergers and acquisitions. The growth of the Haier Group, one of the largest and most successful household appliances firms in mainland China, will be used to illustrate our arguments.