paper

literature review on analysis of external environment

Analyzing external environmental, strategic alliance, and strategic alliance of Kingdom of Saudi Arabia firms – an empirical research

Arab Gulf Journal of Scientific Research

ISSN : 1985-9899

Article publication date: 13 September 2022

Issue publication date: 17 November 2022

This study investigates the effect of strategic internal critical factors on strategic alliance performance in an emerging market, the Kingdom of Saudi Arabia.

Design/methodology/approach

Multivariate statistical analysis technique Partial Least Square-Squared Equation Model is used for data analysis considering a survey of 260 alliance managers.

Environmental complexity moderates the relationship between strategic internal critical factors and strategic performance. A significant positive effect of strategic internal critical factors on corporation strategic performance was found. It suggests that environment and strategic alliance enable alliance managers and decision-makers to translate alliance strategies and improve the overall organization’s performance outcome, productivity, efficiency, availability of a product and profitability.

Practical implications

The findings disseminate beneficial implications for alliance managers regarding how they can best use their capability to maximize alliance performance. Realizing the antecedents of strategic alliance performance allows a manager to be sensitive about the influent factors and try to improve the alliance performance.

Originality/value

This paper shows how to create associations between interfirm coordination as a framework of new ventures for implementing radical technological change, firm performance in the post-innovation period, industry and firm innovative output.

  • Business environment
  • Emerging markets
  • Strategic alliance
  • Transaction cost theory

Abdalkrim, G. and Guizani, M. (2022), "Analyzing external environmental, strategic alliance, and strategic alliance of Kingdom of Saudi Arabia firms – an empirical research", Arab Gulf Journal of Scientific Research , Vol. 40 No. 4, pp. 347-363. https://doi.org/10.1108/AGJSR-07-2022-0115

Emerald Publishing Limited

Copyright © 2022, Gafar Abdalkrim and Moncef Guizani

Published in Arab Gulf Journal of Scientific Research . Published by Emerald Publishing Limited. This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode

1. Introduction

Alliances are important for firms as they assist them in complying with sustainable market demands ( Huda et al. , 2019 ). Often, a strategic alliance is referred to as effective cooperation between two or more firms that engage in strategic production and operations to enhance their performance, productivity and profitability ( Aldakhil & Nataraja, 2014 ). Strategic alliances are a new practice that helps stimulate business development ( Albers, Schweiger, & Gibb, 2013 ). Given the changing and rapidly growing markets, organizational networks, global competition, and expensive and complex technologies, the strategic value of the alliances is evident ( Tjemkes, Vos, & Burgers, 2017 ). Strategic alliances are an important strategic alternative and an essential weapon in firms’ arsenals for improving their strategic position. In recent times, building alliance portfolios has effectively achieved competitive advantages for the involved parties. Recently, it has drawn increased interest from business and finance practitioners, as well as from academicians.

Strategic alliances and business networks, and strategies are the mechanisms that drive a firm to success by enhancing its learning, efficiency of production, development of market focus, transfer of skills, and technology. The emergence of new global competition encourages firms to form alliances to share and exchange resources, join forces and complement the weakness of insufficient infrastructural facilities and financial resources ( Muturi, Ho, Douglas, Muange, & Maru, 2015 ). Thus, creating a successful strategic alliance for attaining firms’ goals is critical for advancing the overall performance of the firms.

Strategic alliances are a way to manage complex and unstable environments, which serves as a major ongoing interest in the strategic and organizational management field. Despite the growing interest, only a few studies have explored the impact of the environment on strategic alliances ( Aldakhil & Nataraja, 2014 ). Primarily, the focus has been on the internal factors of strategic alliances and less on external factors, such as the environment. The environment has an important influence on firms that cannot be denied ( Chen, Tang, Jin, Li, & Paillé, 2015 ). Therefore, this study bridges this gap and builds a better and advanced understanding of how external factors of strategic alliance affect strategic alliance performance.

The primary proximity dimensions are geographical, organizational and technological distance/relatedness between partners ( Ardito, Messeni Petruzzelli, Pascucci, & Peruffo, 2019 ). The proximity between companies minimizes uncertainty and improves cooperation, allowing for interactive learning and the generation of new knowledge. Whereas closeness may result in unwanted information spillovers or a lack of flexibility and openness to distant knowledge sources, both stifle innovation ( Capaldo & Petruzzelli, 2014 ). Hohberger (2014) showed that patents filed by local R&D collaborations tend to be cited earlier and Capaldo and Messeni Petruzzelli (2014) highlighted that the lower the geographical distance between the partners. Therefore, the greater the overall spillovers related to the innovations developed, both confirm the positive effect of geographical proximity between partnering organizations on the innovation process ( Messeni Petruzzelli & Murgia, 2020 ).

The competition is very intense in an environment where organizations are in rapid change and complex at the same time. The essential source for enterprises to identify the possible opportunities and risks is information in such an environment dominated by uncertainties ( Zhu & Yu, 2018 ). Businesses are needed to implement changes and upgrade information to sustain their competitive force in a rapidly changing world. Information is an emerging resource for organizations and individuals for creating adaptation, problem-solving, core competencies and learning new business forms ( O'Dwyer & Gilmore, 2018 ). Firms should examine the external environment efficiently in terms of customers’ changing needs and preferences and should modify to the market conditions. In this regard, strategic management can be considered as offering appropriate tools to ensure the adaptation of firms to the external environment ( Zhao, Dong, & Xi, 2019 ).

Identifying the level to which firms must be prepared for changing effects and stresses that come from external forces is essential. The development of adequate strategies is based on the changes to the external environment and to accomplish lasting success in firms ( Drewniak & Karaszewski, 2019 ). On the contrary, firms need to examine the existing status in the marketplace before developing a strategy. A fundamental function was considered by managers in the process of adaptation to the external environment. In particular, the organization’s relations with the external environment should be directed by managers and an apparent relation of organization among stakeholders of the external environment should be retained ( Jianyu, Baizhou, Xi, Guangdong, & Tienan, 2018 ). Such a close interaction will encourage managers to capitalize on opportunities and avoid risks in the external environment. Therefore, enterprise management needs to understand the attributes and variety of the external environment ( Liu & Hsiao, 2019 ).

The increased efforts of system integration may significantly impact the nature of currently established external partnerships and interdepartmental contacts. The external environment should also influence how much performance systems integrators may extract over time ( Geleilate, Parente, & Talay, 2021 ). The expenses associated with managing complex product systems may grow in more dynamic and competitive situations due to technological advancements and the obsolescence of other strategic resources like production and R&D operations.

The main purpose of this study is to examine whether environmental complexity plays a full or partial role as a moderator between strategic alliance and alliance performance within the context of manufacture. This research contributes to the knowledge of strategic alliance and the external environment in a manufacturing context by extending the external environment to the domain of strategic alliance and strategic alliance performance outcomes. Strategic alliance performance enables alliance managers and decision-makers to translate alliance strategies into performance outcomes, yielding superior performance and offering competitive advantages. This study also contributes to alliance-based knowledge management research by exploring the moderating impact of environmental complexity on the relation between strategic alliance and strategic alliance performance. The moderating effect of environmental complexity on this relation is inconsistent in literature, particularly for an emerging economy, as previously developed economies have been focused on ( Jiang, Yang, Pei, & Wang, 2016 ). Primarily, there is relatively less knowledge about Gulf Cooperation Council (GCC) countries, specifically Saudi Arabia, the leading country in the region. Furthermore, GCC and Saudi enterprises have faced internal and external challenges recently. On the other hand, they need to consider transformation or technical improvement for enhancing competitiveness, cooperation or integration through strategic alliances.

This paper assesses the theory, concepts and practices associated with the goals, measured outcomes and effective strategies or practices of all three strands of literature. The approach of this paper is to assess the relationship between all three elements that have yet to be empirically reviewed in the context of Saudi Arabia. Secondly, this study evaluates the points of similarity and determines what is different between the three strands of literature. This approach assists in developing theories of context that might effectively inform differences, dissimilarities or phenomena from one to the other where applicable. Thirdly, the contribution of this paper is aimed to establish insights and empirical relationships for providing viewpoints into how external and internal environments may be enhanced through strategic alliances with local communities for updating and satiating an increasing societal hunger for a more collective instance of management in Saudi Arabia.

2. Theoretical framework

2.1 resource-based view theory.

From the viewpoint of resource-based view theory, dispersion of resources across firms is the fundamental reason for the existence of strategic alliances, where resources are explained as managerial, financial, technological and other appropriate resources. Business elements can merge their resources with competitors or depend on internal resources to enhance their performance and develop their competitiveness ( Das & Teng, 2000 ). Developing strategic alliances is one of the core ways to join resources. In this regard, participation is an approach to gain access to significant resources of other business elements for maximizing returns on resources of an individual in a strategic alliance. According to Lado, Boyd and Hanlon (1997) , profitability is increased through alliances with competitors via mutual effects of resource sharing and learning.

Producing positive interaction impacts relies on several elements under the common aspect of resource complementarity. It links to a combination of resources to maximize performance ( Eisenhardt & Schoonhoven, 1996 ). Therefore, generating a strategic alliance offers business components access to resources that cannot be achieved otherwise. Such resources can opt for various forms, including access to distribution channels, financial and technical resources, market position, and knowledge about the market ( Whipple & Frankel, 2000 ). The accomplishment of synergy effects is determined by partner characteristics concerning profitability and resource complementarity. According to Luo et al. (2007) , a strategic alliance might have a negative impact on profitability if the motivation for linking is the acquisition of resources that particularly allow independent market entry. In addition, the risk of opportunistic behavior can avoid a comprehensive linkage of resources and deteriorate the profitability of each alliance partner. Lastly, a strategic alliance’s effect on its partners’ performance relies on the firm’s absorption competence. The competence for identifying commercialization, the potential for their application and external resources demonstrate the intensity and direction of the impact of the strategic alliance on performance.

2.2 Transaction cost theory

Transaction cost theory refers to the question of economic organization by emphasizing the transaction as the unit of investigation. When a good or service is transmitted, a transaction occurs across a technologically separable interface ( North, 1990 ). According to the theory, specific forms of economic organization will result from the efforts to reduce transaction costs and links to these forms of economic organization as governance structures. The core of the theory refers that the market governs those transactions that are classified by a low level of transaction-particular investments ( Ghoshal & Moran, 1996 ). On the contrary, the hierarchy ranges from low to high. Some alliance forms can be observed to reduce the high transaction costs that influence three types of international transactions: the purchase of marketing services, the sale of intermediate services and the purchase of adversely protected technology ( Yasuda, 2005 ).

3. Literature review

This section provides a foundation for discussing strategic alliance internal factors, environment and alliance performance outcomes through a review of relevant literature.

3.1 Strategic alliances

Strategic alliances are defined as collaborative arrangements between organizations that build value by creating competitive advantages and synergies provided by sharing resources, capabilities, skills, knowledge and risks ( Shakeri & Radfar, 2017 ). According to O'Dwyer and Gilmore (2018) , this is a collaborative arrangement between two or more organizations who share mutual input to identify better competitive performance by sharing resources while maintaining their own corporate identities. However, the question arises as to why firms want to engage in strategic alliances even with their direct competitors. Many scholars have provided several reasons for forming the alliance from a strategic perspective ( O'Dwyer and Gilmore, 2018; Shakeri & Radfar, 2017 ).

3.2 Alliance formation motives

Strategic alliances and their motives are explored from three theoretical perspectives: transaction cost theory, strategic behavior theory and organizational learning theory. Transaction cost theory analyzes strategic alliance as an efficient settlement for the hazards of economic transactions ( Henten & Windekilde, 2016 ). The strategic alliance is placed in the context of competitive rivalry and collusive agreements by a strategic behavior motivation approach to enhance market power. While strategic organizational learning approach views the strategic alliance as a medium through which organizational knowledge is exchanged and imitated.

The relationship between strategic motives of alliance formation and strategic alliance performance is likely to be positive.

3.3 Interfirm diversity

Strategic alliances are a variegated phenomenon, and their internal differences are important in theory-building efforts ( López-Duarte, González-Loureiro, Vidal-Suárez, & González-Díaz, 2016 ). From the transaction cost perspective, interfirm diversity can lead to the opportunistic behavior of their partners thus negatively affecting alliance performance. While organizational learning theory suggests that similarities between partners may affect alliance performance because they facilitate the appropriate and articulated knowledge ( Usman, Ahmad, & Burgoyne, 2019 ). The interactions between partnering firms in strategic alliances bring together people with diverse behavior and beliefs. Thus, interfirm diversity may have an important influence on the interaction process.

Maintaining an alliance culture is challenging because it combines and harmonizes two different organizational cultures. Various studies found that organizational cultures enable organizations to achieve their goals ( Chatman, Caldwell, O'Reilly, & Doerr, 2014 ). In addition, these studies show how organizational culture significantly influences the types of behaviors known in alliances. For example, organizational culture commitment, collaboration, relational skills and leadership are critical for collaborative interactions. Furthermore, scholars have found that organizational culture significantly impacts practice, conflict management and innovation ( Shanker, Bhanugopan, Van der Heijden, & Farrell, 2017 ).

The relationship between interfirm diversity and strategic alliance performance is likely to be positive.

3.4 Alliance process climate

Previous researches on strategic alliances have concentrated primarily on corporations’ motivations for entering strategic alliances. These focused on studying partner characteristic variables and their vital role in alliance success while deserted the more dynamic aspects of the alliance development process. Social exchange theory places the interactions between people and organizations at the core of relationships. Like any other relationship, communication is important for an alliance to succeed ( Niesten & Jolink, 2015 ). It allows information exchange among members of the firms within strategic alliances ( Mohr & Spekman, 1994 ). Sambasivan, Siew-Phaik, Mohamed, and Leong (2011) acknowledged that improved communication between the partners induces trust and commitment (in a positive way) and declines the possibility of emerging distrust for their partners (in a negative way).

The relationship between strategic alliance process climate and strategic alliance performance is likely to be positive.

3.5 Environment

The degree of environmental complexity positively moderates the relationship between strategic motives of alliance formation and strategic alliance performance.

The relationship between alliance interfirm diversity and strategic alliance performance is strengthened for organizations with the degree of environmental complexity.

Environmental complexity positively moderates the relationship between alliance process climate and strategic alliance performance.

3.6 Research model

A conceptual model was developed to investigate the relationship between strategic alliance and alliance performance ( Figure 1 ). A multidimensional approach captures the essence of the environment’s effect on the relationship between strategic alliance and alliance performance. Therefore, one dimension is embraced in the environmental factor, including complexity. Based on the intensive literature review for the internal alliance factor (independent variables), three significant variables are included, i.e. strategic motives, alliance forms and alliance process climate. The dependent variable is the strategic alliance performance. The model indicates that strategic alliance factors directly affect organizations’ alliance performance. Also, it suggests that the environment plays a moderating role between these determinants and alliance performance.

4. Material and methods

The sample consists of alliance managers and alliance executives representing different business firms in Kingdom of Saudi Arabia (KSA) in the context of manufacturing companies listed in the GCC stock exchange that engaged in strategic alliances. The rationale for recruiting managers is that they are responsible for overseeing and coordinating their corporations’ strategic alliance and performance. The study is based on KSA as it has fertile soil for the alliance. Most firms use an intrinsic scarcity of knowledge and technologies; therefore, they must work harder to explore opportunities from the broad external environment and obtain complementary knowledge through such strategies as strategic alliances. The inclusion criteria of the study required participants to currently manage an ongoing alliance for an average period of two years.

4.2 Data collection procedure

Following Sudman and Blair (1999) , the data collection procedure comprised a series of activities consisting of multiple phone calls, faxes and e-mails over a month. After multiple contact attempts via e-mail to solicit their cooperation, 387 respondents were reached and judged qualified. The participants were informed that all their responses were confidential. After completing the study, they promised to be provided with a summary report to motivate the informants to participate and give true and reliable information. Of these, 260 (67%) agreed to participate, while 37 declined (14%). The survey was first prepared in English, then questionnaire items previously used in antecedent international empirical studies were translated into Arabic, reviewed by three Arabic-speaking professionals, and then translated back to English to ensure conceptual equivalence. The surveys were delivered to the 387 committed participants; however, only 260 returned questionnaires were received. Out of 260, 37 questionnaires were excluded due to missing data on measures essential for testing the research hypotheses. The useable response rate is approximately 58% and was included in the subsequent analysis.

4.3 Survey instrument development

Following recent research practices, a model based on measurement instruments for all variables used in the survey was developed per previous extensive literature reviews. Furthermore, interviews with three experts in the field were conducted to assess if the measurement scales were representative of each construct in the survey. Three academic experts also scrutinized the proposed conceptual model to refine the questionnaire and gain insights concerning how to conduct the survey. Based on the feedback, some scale items were excluded, while others were rephrased. Two pilot tests were conducted to check the reliability of the measurement items. The pilot study did not show any concern with the questionnaire’s length, item ambiguity or clarity of instructions. Various statistical approaches were conducted to assess whether the measurement scales represented each construct. Also, for better results, the revised questionnaire was pretested by sending it to ten eligible informants, from which six completed questionnaires were received. These results were also excluded from the main study.

4.4 Measures

The full version of the scale consists of four variables, i.e. strategic alliance internal factors, strategic alliance performance, external environment indicator and the control variables. These variables were operationalized using their dimensions (multi-item measures), as Bagozzi, Yi, and Phillips (1991) suggested. These items were based on a five-point Likert scale (ranging from 1 strongly disagree to 5 strongly agree). Strategic alliance internal factors (independent variable) were based on prior literature. Three strategic alliances and internal factors dimensions were identified and used, i.e. the strategic motive of alliance formation (4 items), interfirm diversity (3 items) and alliance process climate (3 items).

4.4.1 Environment (moderating variables)

Environmental dimensions were used to measure the effects of the environment on the relationship between strategic alliances and strategic alliance performance. The environmental dimension identified and used in this research is complexity. Complexity was assessed using a total of three items. The specific items were based on the studies of Sambasivan, Siew-Phaik, Mohamed and Leong (2013) . Environment dimensions on a five-point scale (high to low level) were measured, where high scores represent a high level of complexity.

4.4.2 Strategic alliance performance (dependent variable)

The area that has increasingly received more attention from researchers in strategic alliance concerns measuring alliance performance ( Sambasivan et al. , 2011 ). Prior research shows significant differences in the operationalization of strategic alliance performance. No consensus on this concept’s appropriate definition and measures has yet emerged. The measures of alliance performance in earlier studies could be summarized into two main categories: objective measures and subjective measures. Therefore, in this research, alliance performance was approached from subjective measures using goal achievement and satisfaction re-evaluation. The informants were asked to indicate the goals and objectives achieved over the past year, including six items.

4.4.3 Control variable

In common with previous recent reviews, it is found that control issues have received constant attention from the earliest literature up till now. The study included two control variables: firm size and duration, to account for additional determinants of performance in the alliance. Firm size was measured by the logarithm of the focal firm’s total number of employees, while alliance duration reflects the number of years firms had used strategic alliances. This criterion is adopted from different studies ( Luo, Rindfleisch, and Tse, 2007; Fink & Harms, 2012 ).

4.5 Data analysis

The collected data were analyzed statistically using the multivariate statistical analysis technique Partial Least Square-Squared Equation Model (PLS-SEM). PLS-SEM is a variance-based soft modeling technique, and its advantage is that it allows flexibility in multivariate normality assumptions, the ability to analyze complex models with smaller samples, use both reflective and formative constructs, can be used as a predictive tool for theory building and the ability to examine the chain of effects ( Nair, Demirbag, Mellahi, & Pillai, 2018 ). It is commonly used in data analysis to estimate complicated connections between constructs in various topics, such as management information systems and business research ( Ahammad, Tarba, Frynas, & Scola, 2017 ). Furthermore, PLS-SEM allows for investigating indirect and total effects, allowing for the simultaneous assessment of correlations between multi-item constructs and the reduction of overall model error ( Astrachan, Patel, & Wanzenried, 2014 ).

5. Results and discussion

5.1 measure reliability.

The reliability test was estimated following the instructions suggested by Anderson and Gerbing (1988) . Initially, a series of exploratory factor analyses was performed. Results demonstrated that factor solutions were consistent with theoretical expectations. Cronbach’s α coefficient scores were used to test the main study constructs for inter-item constancy reliability. The values of Cronbach’s α coefficient of latent variables and observed variables all exceed 0.80, and that of some constructs even exceed 0.87. Furthermore, the composite reliability (CR) test and average variance extracted (AVE) were checked for each construct, equal to or above 0.50 and 0.6, respectively. Thus, the measurements were found sufficiently reliable. Alpha scores, AVEs and CR are reported in Table 1 . An overall five-factor confirmatory measurement model was estimated, such as each measurement item was linked to its corresponding construct, and the covariance among the constructs was freely estimated. The results of confirmatory factor analysis indicated that the measurement model fitted the data reasonably well ( χ 2 /df = 2.36, CFI = 0.96, NNFI = 0.95, SRMR = 0.049, RMSEA = 0.078).

5.2 Common method bias

Numerous scholars ( Kang, Hur, & Kim, 2014; Kock, 2015 ) have corresponded that common method variance is a potentially serious threat to bias in behavioral research, especially with single-informative surveys. Thus, it was sought to reduce common method bias (CMB) through procedures integrating controls using procedural and statistical remedies as Podsakoff, MacKenzie, and Podsakoff (2012) recommended. Therefore, procedural remedies were introduced by assuring the informant’s anonymity, reverse coding some items and avoiding double-barreled, complex and abstract questions. Nevertheless, the correlation-based marker variable technique was used to detect the presence of CMB. Specifically, a marker variable (i.e. job experience) was used. Since it is theoretically unrelated to all dependent variables, CMB was detected by observing the correlation value(s) between the marker variable and the theoretically unrelated variable(s) in the mode. This correlation was used to calculate a CMB-corrected matrix consistent with Malhotra, Kim and Patil (2006) . The statistical procedures proved that CMB did not seriously threaten the study results.

5.3 Hypothesis testing

With H1 , a positive relationship between strategic motives of alliance formation and strategic alliance performance was considered. The results support H1 ( b  = 0.21, t  = 2.83, p  < 0.01). This implies that enough motives are the first and very important determinants of the success of strategic alliances. Firms with huge incentives would overcome difficulties that happened during the cooperation period.

The result also shows that H2 and H3 were both confirmed in the analysis as the study deals with a positive relationship between interfirm diversity ( b  = 0.22, t  = 2.68, p  < 0.01), alliance process climate ( b  = 0.20, t  = 2.98, p  < 0.01) and strategic alliance performance.

With H4 , the degree of environmental complexity positively moderates the relationship between strategic motives of alliance formation and strategic alliance performance. The results provide support for H4 ( b  = 0.13, t  = 2.10, p  < 0.01).

Similarly, in H5 , the degree of environmental complexity positively moderates the relationship between strategic interfirm diversity and strategic alliance performance. The results support H5 ( b  = 0.18, t  = 2.66, p  < 0.01). These findings support the arguments that viewed the environment as a contingency variable with moderating effects between the predictor and dependent variables.

However, with H6 , the results did not provide support for this relationship; instead, it was revealed that the process degree of environmental complexity is negatively moderate linked between alliance process climate and strategic alliance performance ( b  = −0.02, t  = −0.32, p  < 0.01). None of the two control variables included in the model has significant links to performance.

6. Conclusions and implications

The central idea for this research was to examine the effect of strategic alliance critical internal factors on strategic alliance performance outcomes and investigate the moderating effect of environmental complexity on the relationship between strategic alliance critical internal factors and strategic alliance performance outcomes. The study tested six hypotheses employing a structural equation. The model found relatively strong empirical support for the factors and relationships affecting strategic alliance performance in the GCC manufacturing sector. Overall, the analysis supported the hypotheses proposed in the study, except for the hypothesis that environmental complexity positively moderates the relationship between alliance process climate and strategic alliance performance.

6.1 Theoretical contributions

The concept of strategic alliance and alliance performance outcome has been popular in literature ( Li, Jiang, Pei, & Jiang, 2017 ). This study made several theoretical contributions to the existing literature on strategic alliance. In this study, these relationships were identified in-depth to fill the deficiency in the literature.

The conceptual model also provided a better understanding of the factors that affected the performance of strategic alliances in the KSA manufacturing context. The findings support other empirical studies on the strategic alliance field. The presented model not only presents suggestions tested to increase knowledge regarding the influence of relating factors on strategic alliance but also highlights how the constructs often researched empirically are separately integrated into the theoretical rationales’ researchers posit with the variation in theoretical foundations in the literature. Specifically, this study clarified the relationship between strategic alliance and strategic alliance performance outcomes and highlighted the important role of environmental complexity in this relationship.

Strategic alliances might be demonstrated in a framework where access to the assets must be on a continuous but mutual basis regardless of destroying economic rents. Other forms might be explained on a spot basis undertaking input/output aspect. The maintenance of a broad area of coordination and cooperation is mutually associated with the prospect of the identification of significant economic rents throughout an alliance. On the contrary, international strategic alliances may also comprise explicit strategies for different national markets, which include the destruction of competition between the firms in particular markets, partially or completely. Therefore, these cooperation agreements should be considered economically or restrict competition between firms formerly working in a domestic regulated environment. A possibility cannot be ruled out that the alliance might be attempting to reduce the competence in a predefined market and artificially prevent the technological development level. On the contrary, this needs a specific investigation of the actual and future market structure, scope of current agreements, and real and potential competitors in different markets. Strategic alliances can minimize the transaction cost while conserving economic rents under specific conditions.

6.2 Managerial implications

Strategic alliances are a significant component of firms’ critical strategies used by the business manager to achieve competitive advantages ( Siew-Phaik, Downe, & Sambasivan, 2013 ). In this research, the findings disseminate beneficial implications for alliance managers regarding how they can best use their capability to maximize alliance performance. Realizing the antecedents of strategic alliance performance allows a manager to be sensitive about the influent factors and try to improve the alliance performance. It implies allowing a manager to be proactive about dealing with conflict and misunderstandings that indeed emerge during an alliance. As alliances are effective learning platforms, the lesson for alliance managers is obvious: they need to work actively at choosing fit (complement and compatible) partners, developing the routines and mechanisms to facilitate the articulation, codification, sharing and internalization of alliance know-how between alliance partners, extend firm’s alliance capabilities and developing trustworthiness among firm’s partner through increasing the number of prior experiences with specific or general partnering that lead to reducing the likelihood of opportunistic behavior among the alliance partners.

The contribution of this paper depends on order to create associations between interfirm coordination as a framework of new ventures for implementing radical technological change, firm performance in the post-innovation period, industry and firm innovative output. The findings have supported the idea of incumbent survival via complementary assets and the significance of distinguishing between market and technological-related abilities when implementing new technology. Viewpoints into the importance of interfirm coordination for research are offered based on extensive empirical analyses of Saudi firms. Developing interfirm collaborative relations is essential as commercial firms become more autonomous from academic research.

Saudi firms specialize in specific research areas compared to universities and research institutes. Therefore, specialization for Saudi firms for entering into alliances with other firms to achieve access to complementary technological awareness throughout the industry. Similarly, specialization encourages Saudi firms to access technological, market, manufacturing and financial resources. This is also the cause for Saudi firms to enter alliances with firms compared to generating their operations.

6.3 Study limitations and direction for future research

The study suggests exploring other control variables that affect strategic alliance and alliance performance. Secondly, this study has made a conscious attempt to investigate the effect of the strategic alliance on strategic alliance performance, as well as examine the interaction effect of the environment on this relation in the KSA manufacturing context. It would be worthwhile to explore the more systematic impact of these relations in the service context; therefore, future research on manufacturing versus service industry comparison would be an interesting study and may result in some interesting findings. Third, KSA represents a unique economy heavily influenced by complicated culture. This raises the question of whether relationships between the internal alliance factors of this research and strategic alliance performance outcome would predict the same effects in a more open economy with a tradition of meritocracy (e.g. USA, UK). Therefore, it is hoped that this research will fuel more significant interest in forming a strategic alliance in a different culture. Finally, in common with most alliance studies, the main research variables were measured by relying on survey data, which carries the potential for self-serving bias. Future research could use longitudinal data to validate the results further. Thus, the study encourages future empirical research to facilitate greater managerial understanding, particularly the moderating effect of the environment, which would be a fruitful extension of this work.

Research model

Structural model result

Reliability and validity test of strategic alliance (SA), environment (ENV) and alliance performance (AP) constructs

ConstructsSub-constructNo. of itemsCronbach’s Composite reliability (CR)Average variance extracted (AVE)
Strategic alliance (SA)Strategic motive of alliance formation (SMAF)40.8340.910.54
Interfirm diversity (ID)30.8420.800.58
Alliance process climate (APC)30.8330.790.65
Environment (ENV)Complexity30.8010.950.51
Alliance performance (AP)Goal achievement (GA)30.8780.810.52
Satisfaction from re-evaluation (SFRV)30.8210.930.58

Means, standard deviation and correlations between variables

VariablesMeanSD123456789
1. Goal achievement4.221.811
2. Satisfaction from re-evaluation4.241.520.68 1
3. Motive of alliance formation4.091.930.62 0.55 1
4. Interfirm diversity4.000.880.46 0.64 0.54 1
5. Alliance process climate4.071.260.54 0.22 0.72 0.87 1
6. Job experience (MARKET)4.581.750.04 0.12 0.10 0.09 0.05 1
7. Complexity3.691.660.600.37 0.39 0.42 0.47 0.43 0.62
8. Firm size4.181.02−0.050.060.03−0.020.060.040.011
9. Duration3.993.50−0.010.050.03−0.01−0.04−0.03−0.070.011
*significant at 1%, **significant at 5%

Factors and itemsParameter estimate -value
SMAF 10.8915.58
SMAF 20.8013.44
SMAF 30.6410.15
SMAF40.7112.82
ID10.9215.77
ID20.9916.07
ID30.9915.89
APC10.6410.02
APC20.8013.42
APC30.8915.54
ENV10.7614.57
ENV20.9114.60
ENV30.9617.52
SAP10.9316.30
SAP20.9015.64
SAP30.9015.96
SAP40.9417.48
SAP50.8814.01
SAP60.8916.32

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  • DOI: 10.5281/ZENODO.4058794
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PESTEL Analysis of External Environment as a Success Factor of Startup Business

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External and Internal Analysis of the Environment

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literature review on analysis of external environment

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The environmental analysis is a precondition for the formulation of an effective strategy that can generate a competitive advantage. Its purpose is to identify strategic forces that may determine the present and future success of a company. In this chapter we present the basic concepts and tools for the study of the firm’s external and internal environment, with particular regard to the macro-economic environmental factors, the industry’s competitive forces and the firm’s internal strategic resources, capabilities and competencies.

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Gandellini, G., Pezzi, A., Venanzi, D. (2012). External and Internal Analysis of the Environment. In: Strategy for Action – I. SpringerBriefs in Business. Springer, Milano. https://doi.org/10.1007/978-88-470-2487-8_2

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></center></p><p>Exploring The Relationship Between Organizations Internal and External Environments: A Conceptual Study</p><ul><li>Newton Annobil Atuahene</li><li>Comfort Asadina</li><li>Rita Acquah</li><li>Peter Agyekum Boateng</li><li>Aug 29, 2023</li></ul><p> Newton Annobil Atuahene, Comfort Asadina, Rita Acquah, Peter Agyekum Boateng</p><p>Valley View University, School of Graduate Studies, P. O. Box AF595, Adenta, Ghana</p><p>DOI: https://doi.org/10.51244/IJRSI.2023.10801</p><p>Received: 10 July 2023; Accepted: 26 July 2023; Published: 29 August 2023</p><p>This article presents a comprehensive exploration of the relationship between an organization’s internal and external environments through a conceptual study. The purpose of this study is to gain a deeper understanding of how these environments interact and influence the performance of the organization. The methodology used in this study is a literature review, where existing research is analyzed to identify any gaps in knowledge that need to be explored further. The findings of this study emphasize the importance of aligning the internal and external environments of an organization. This alignment is crucial for the success of the organization, as it ensures that both environments are working together harmoniously. The study also highlights the various factors that shape the relationship between these environments. These factors include the organization’s strategy, culture, leadership, and its ability to adapt to changes in the external environment. The implications of this study are significant. It suggests that organizations need to be aware of the interplay between the internal and external environments and effectively manage it to achieve success. By understanding these dynamics, organizations can make better decisions and adjustments to adapt to the ever-changing business landscape.</p><h2>INTRODUCTION</h2><p>Exploring and comprehending the relationship between an organization’s internal and external environments is crucial for effective management and decision-making. Despite acknowledging the significance of this relationship, there is still a need for a comprehensive understanding of how these environments interact and influence each other. In today’s ever-changing business landscape, organizations are faced with the challenge of operating within complex and dynamic contexts that consist of both internal and external factors (Oliveira, 2022). The internal environment reflects the internal factors and conditions within an organization, including its structure, culture, resources, and capabilities. On the other hand, the external environment comprises the external factors and forces that influence an organization’s operations and strategies, encompassing economic, technological, political, and social aspects (Johnson, 2021). Understanding the relationship between an organization’s internal and external environments plays a critical role in effective management and decision-making processes (Stewart, 2022). The internal environment forms the foundation for an organization’s operations, while the external environment presents opportunities and challenges that organizations need to navigate (Robbins, 2020). Consequently, it is of utmost importance to thoroughly explore and comprehend the intricate dynamics and interplay between these two environments in order to attain organizational success (Barney & Hesterly, 2019).</p><p>Despite recognizing the significance of the internal-external relationship, there remains a need for a comprehensive understanding of how these environments interact and influence each other (Hitt, Keats, & DeMarie, 2021). Previous research has provided valuable insights into specific aspects of the internal and external environments independently; however, a comprehensive view of their relationship is still lacking (Mosey et al., 2021). The research problem lies within the knowledge gap regarding the intricacies and interdependencies between an organization’s internal and external environments. To bridge this gap, it is necessary to thoroughly explore the factors that shape this relationship and their implications for organizational performance (Boxall & Purcell, 2021).</p><p>The objective of this literature review is to delve into the relationship between an organization’s internal and external environments, aiming to provide a holistic understanding of their interdependencies (Grant, 2022). By synthesizing existing research, this study intends to identify the key factors that influence this relationship and their implications for organizational performance (Barney, 2019). The ultimate goal is to develop a conceptual framework that enhances our understanding of how organizations can effectively manage the intricate dynamics of their internal-external relationship (Eisenhardt & Martin, 2019).</p><p>This study carries significant implications for both theory and practice. The findings will add to the existing body of knowledge by providing a comprehensive overview of the relationship between an organization’s internal and external environments (Barney, 2019). This understanding will aid scholars in developing new theoretical frameworks and models that capture the complex interactions of these environments (Eisenhardt, 2020). From a practical perspective, the insights gained from this study will guide managers and decision-makers in developing strategies to align their internal and external environments (Kapoor, 2021). This alignment is critical for improving organizational performance and ensuring long-term sustainability (Wernerfelt, 2019).</p><p>The scope of this literature review primarily focuses on exploring the relationship between an organization’s internal and external environments. The analysis will encompass various aspects of the internal environment, such as organizational structure, culture, resources, and capabilities, and examine their interactions with the external environment (Barney, 2021). It is crucial to acknowledge that the internal and external environments are multifaceted and broad, making it impossible to comprehensively cover every aspect within the scope of this review (Dyer, 2020). Additionally, this study has some limitations, including the reliance on existing literature, which may have inherent biases and limitations, as well as the absence of primary data (Grant, 2022).</p><h2>LITERATURE REVIEW</h2><p>Internal environment: an overview</p><p>The internal environment of an organization refers to the internal factors and conditions that shape its operations and decision-making processes (Oliveira, 2022). It encompasses various components, including organizational structure, culture, resources, and capabilities. Organizational structure defines the formal relationships and hierarchical arrangement within the organization (Dyer, 2021). On the other hand, organizational culture encompasses shared values, beliefs, and norms that guide behavior (Barney & Hesterly, 2021). Resources, such as financial, human, and physical assets, as well as capabilities, such as knowledge and skills, play a significant role in influencing the internal environment (Grant, 2022; Dyer, 2020).</p><p>Several key factors have been identified that influence the internal environment of an organization (Mosey et al., 2021). These factors include leadership style and behavior, employee attitudes and motivation, communication channels, and the organizational climate (Hitt, Keats, & DeMarie, 2020; Stewart, 2022). Effective leadership plays a vital role in shaping the internal environment by setting the tone, fostering collaboration, and promoting a positive work culture (Grant, 2022; Stewart, 2022). Employee attitudes and motivation impact the internal environment by influencing engagement, productivity, and job satisfaction (Robbins, 2021). Effective communication channels facilitate information flow, decision-making, and coordination within the organization (Boxall & Purcell, 2022). The organizational climate, including factors like teamwork, empowerment, and recognition, also contributes to the internal environment (Barney & Hesterly, 2022).</p><p>Theoretical perspectives: internal environment</p><p>The internal environment has been studied from various theoretical perspectives. One prominent perspective is the resource-based view (RBV), which emphasizes the role of resources and capabilities in providing a competitive advantage to organizations (Mosey et al., 2021). The RBV suggests that unique and valuable resources, such as intellectual property, brand reputation, and a skilled workforce, can lead to sustained competitive advantage (Hitt, Ireland, & Hoskisson, 2020). Another theoretical perspective is the organizational culture approach, which highlights the influence of shared values, norms, and beliefs on the behavior and performance of individuals within an organization (Eisenhardt & Martin, 2021). The contingency theory suggests that the effectiveness of the internal environment depends on its alignment with external factors and conditions (Kapoor, 2020). This perspective emphasizes the need for organizations to adapt and adjust their internal environment in response to changes in the external environment (Wade, 2021; Kapoor, 2021).</p><p>External environment: an overview</p><p>The external environment of an organization encompasses the external factors and forces that impact its operations and strategies (Johnson, 2021). It includes the economic, technological, political, social, and ecological aspects of the organization’s external context (Oliveira, 2022). Economic factors, such as market conditions, economic stability, and consumer behavior, shape the economic dimension of the external environment (Robbins, 2020). Technological factors encompass advancements in technology, digital transformation, and innovation, which influence organizations’ technological capabilities (Barney & Hesterly, 2019). Political factors refer to government policies, regulations, and political stability, which can create opportunities or constraints for organizations (Stewart, 2022). Social factors include societal norms, cultural values, and demographic trends, which shape customer preferences and behaviors (Grant, 2022). Lastly, ecological factors consider environmental sustainability, climate change, and natural resource availability, which impact organizations’ operations and strategies (Dyer, 2020).</p><p>The external environment is influenced by several major elements (Mosey et al., 2021). These elements include industry competition, market trends, customer preferences, technological disruptions, political and legal changes, and socio-cultural shifts. Industry competition determines the intensity and dynamics of competitive forces that organizations must navigate (Hitt, Keats, & DeMarie, 2021). Market trends, such as changing consumer preferences, emerging markets, and globalization, shape the external environment by creating opportunities and threats for organizations (Boxall & Purcell, 2021). Technological disruptions, such as the rise of artificial intelligence, automation, and digital platforms, have a profound impact on industries and organizations (Barney, 2021). Political and legal changes, such as new regulations, trade policies, and government interventions, can significantly influence the external environment by shaping the business landscape and altering industry dynamics (Eisenhardt & Martin, 2019). Socio-cultural shifts, such as changing demographics, social values, and lifestyle trends, also shape the external environment and impact organizations’ strategies and consumer preferences (Wernerfelt, 2019).</p><p>Theoretical Perspectives: external environment</p><p>The external environment has been examined through various theoretical perspectives (Eisenhardt, 2020). One widely used theoretical framework is the PESTEL framework, which categorizes external factors into political, economic, social, technological, environmental, and legal dimensions (Barney & Hesterly, 2020). This framework provides a structured approach to analyze and understand the external environment. The industry life cycle model is another theoretical perspective that focuses on the evolution of industries over time (Kapoor, 2021). This model highlights the impact of technological advancements, market growth, and industry maturity on organizations within the industry. The institutional theory emphasizes the influence of societal norms, regulations, and cultural expectations on organizations’ external environment (Barney, 2020). It highlights how institutions shape the external environment and organizational behavior.</p><p>Relationship between the environments</p><p>The relationship between an organization’s internal and external environments is characterized by intricate interactions. Changes in the external environment influence the organization’s internal operations and strategies, while the internal environment, in turn, can impact the external perceptions and market outcomes. Understanding these interactions is crucial for organizations to effectively manage their operations, adapt to external changes, and achieve sustainable success. By aligning their internal and external environments, organizations can capitalize on opportunities, mitigate risks, and build a competitive advantage.</p><p>The relationship between an organization’s internal and external environments is characterized by intricate interactions (Stewart, 2022). The internal environment serves as the foundation for an organization’s operations and decision-making, while the external environment presents opportunities and challenges that organizations need to navigate (Johnson, 2021). Research suggests that these environments are interdependent, meaning changes in one environment can influence the other (Barney & Hesterly, 2022). For instance, a shift in consumer preferences in the external environment may require an organization to adapt its internal processes to meet new demands (Grant, 2022). Similarly, changes in the internal environment, such as a new leadership style or organizational structure, can impact how the organization responds to external market conditions (Mosey et al., 2021). Understanding the relationship between these environments is crucial for organizations to effectively manage their operations and strategies (Hitt, Keats, & DeMarie, 2020).</p><p>External versus Internal environments</p><p>The external environment exerts significant influence on an organization’s internal dynamics (Oliveira, 2022). Environmental factors, such as changes in technology, economic conditions, and regulatory policies, can create both opportunities and threats for organizations (Robbins, 2020). For instance, advancements in technology may require organizations to update their internal capabilities and processes to remain competitive (Eisenhardt & Martin, 2019). Economic downturns may necessitate cost-cutting measures and restructuring within the organization (Boxall & Purcell, 2022). External factors can also affect employee morale and motivation, as uncertainties in the external environment can lead to job insecurity and stress (Barney, 2021). Therefore, understanding the external environment is essential for organizations to proactively adapt their internal strategies and operations (Dyer, 2020). By monitoring and responding to external changes, organizations can anticipate and capitalize on emerging opportunities while mitigating potential risks (Wernerfelt, 2019).</p><p>Internal Environment versus External Environment</p><p>While the external environment plays a crucial role in shaping an organization’s internal operations, the internal environment can also influence the external environment (Hitt, Ireland, & Hoskisson, 2021). Organizational actions and decisions can impact the perception of the organization by external stakeholders, including customers, investors, and regulatory bodies (Kapoor, 2021). For example, a company’s commitment to sustainability and social responsibility can positively influence its brand image and reputation in the external market (Barney, 2020). Additionally, an organization with a strong internal culture of innovation and creativity is more likely to introduce disruptive products or services that can shape the broader industry landscape (Eisenhardt, 2020). Thus, the internal environment can act as a source of competitive advantage and differentiation in the external market (Wade, 2021). By fostering a positive internal environment, organizations can enhance their capabilities and resources, ultimately influencing their external positioning and performance (Grant, 2022).</p><p>Factors influencing internal and external environments</p><p>Organizational culture, strategic management approaches, and resource dependency theory play an important function in influencing and coordinating an organization’s internal and external environment. Organizational culture plays a critical role in shaping the relationship between an organization’s internal and external environments (Stewart, 2022). A strong and adaptive organizational culture enables employees to embrace change and respond effectively to external challenges (Hitt, Keats, & DeMarie, 2021). Organizations with a culture that values innovation, agility, and continuous learning are better equipped to adapt to changes in the external environment (Barney & Hesterly, 2022). Conversely, organizations with a rigid or resistant culture may struggle to embrace external changes, leading to potential inefficiencies and missed opportunities (Oliveira, 2022). Therefore, fostering a culture that promotes openness, flexibility, and responsiveness is essential for aligning the internal and external environments (Mosey et al., 2021).</p><p>Strategic management approaches provide frameworks and tools for aligning an organization’s internal capabilities with external demands (Robbins, 2020). Strategic planning is a key approach that involves the systematic analysis of the external environment, setting strategic goals, and formulating action plans to achieve those goals (Grant, 2022). Additionally, competitive positioning helps organizations identify their unique value proposition in the market and align their internal resources and capabilities accordingly (Eisenhardt & Martin, 2021). Strategic management also involves continuous monitoring of the external environment to identify emerging opportunities and threats, which can inform adjustments to internal strategies and operations (Boxall & Purcell, 2022). By adopting strategic management approaches, organizations can effectively align their internal and external environments to adapt and thrive in a dynamic and competitive business landscape.</p><p>Resource Dependence Theory (RDT) highlights the interdependence between organizations and their external environment (Dyer, 2020). According to RDT, organizations rely on external resources and must manage their dependencies to ensure continued access to those resources (Barney, 2021). This theory suggests that organizations should strategically build relationships with external stakeholders, such as suppliers, customers, and regulatory authorities, to secure essential resources (Hitt, Ireland, & Hoskisson, 2021). Managing external dependencies effectively can enhance an organization’s internal capabilities and provide a competitive advantage (Eisenhardt, 2020). Therefore, understanding and leveraging resource dependencies is crucial for aligning the internal and external environments and ensuring organizational success in resource-scarce environments (Wade, 2021).</p><p>Conceptual Model</p><p>The conceptual model provides a visual representation of the complex, mutually influential relationship between an organization’s internal and external environments, allowing for a better understanding of how these environments interact and shape organizational outcomes. At the center of the model is the organization itself, represented by a central circle which encapsulates the internal environment, represented in the model by elements such as organizational culture, structure, processes, and resources. These internal factors directly impact the organization’s operations, decision-making processes, and overall performance. Surrounding the central circle representing the organization’s internal environment are several external environment elements depicted as external circles. Elements such as industry trends, market conditions, competition, technological advancements, socio-political factors, and regulatory frameworks represent the internal environment in the model. Each external circle represents a specific aspect of the external environment that can exert influence on the organization.</p><p><center><img style=

Fig. 1 Conceptual model depicting the environments of an organization

The arrows connecting the internal and external circles illustrate the reciprocal relationship between the two environments. They depict the bidirectional flow of influence and interaction. Changes, opportunities, or challenges in the external environment can impact the organization’s internal environment, prompting adaptation, innovation, and strategic decision-making. Likewise, the organization’s internal environment can shape its responses and strategies to navigate and succeed in the external environment. The model reflects the dynamic and ongoing nature of the relationship between an organization’s internal and external environments. It emphasizes the need for organizations to continuously monitor and assess both environments, and to align their internal processes, structures, and resources with the demands and opportunities presented by the external environment.

Implications on Organizational Performance

The relationship between an organization’s internal and external environments has significant implications for organizational performance. By recognizing the importance of the internal-external relationship and effectively managing it, organizations can achieve sustainable success and thrive in today’s complex and competitive business environment. Environmental scanning, the process of monitoring and analyzing the external environment, significantly impacts an organization’s decision-making processes (Stewart, 2022). By gathering information about market trends, customer preferences, technological advancements, and regulatory changes, organizations can make informed decisions and develop strategies that align with the external environment (Johnson, 2021). Research indicates that effective environmental scanning improves decision quality, reduces uncertainty, and enhances organizational performance (Barney & Hesterly, 2022). Organizations that proactively scan the external environment are better positioned to identify opportunities, anticipate threats, and adapt their internal processes accordingly (Mosey et al., 2021). This ability to scan and react to the external environment positively impacts decision-making and ultimately contributes to organizational success.

The relationship between an organization’s internal and external environments is vital for its ability to adapt and survive in dynamic and turbulent environments (Oliveira, 2022). Organizations that can effectively align their internal capabilities with changing external conditions are more likely to thrive (Hitt, Keats, & DeMarie, 2020). Studies have shown that organizations with flexible structures, adaptive cultures, and strong change management processes are better equipped to respond to external disruptions and seize new opportunities (Robbins, 2020). The ability to adapt to the external environment is closely linked to organizational performance, as it enables organizations to maintain competitiveness, sustain growth, and achieve long-term survival (Grant, 2022). In an ever-changing business landscape, organizations that can successfully navigate the dynamic external environment through internal adaptation are more likely to flourish and outlast their competitors.

The internal-external relationship directly impacts an organization’s competitive advantage and overall performance (Eisenhardt & Martin, 2019). By aligning internal resources, capabilities, and strategies with the external environment, organizations can differentiate themselves from competitors and achieve superior performance (Barney, 2021). Research has shown that organizations that effectively leverage their internal strengths to capitalize on external opportunities gain a competitive edge (Dyer, 2020). This alignment can manifest in various ways, such as product innovation, operational efficiency, customer satisfaction, and market share (Boxall & Purcell, 2022). Achieving and sustaining a competitive advantage is a key driver of organizational performance and long-term success (Wade, 2021). By understanding the complex interplay between their internal and external environments, organizations can position themselves strategically to gain a competitive advantage, leading to improved performance outcomes.

Gaps in the literature

While substantial research has been conducted on the internal and external environments of organizations, certain areas within the internal-external relationship remain underexplored (Stewart, 2022). For instance, limited research exists on the specific mechanisms and processes through which the internal environment influences the external environment and vice versa (Hitt, Keats, & DeMarie, 2021). Further investigation is needed to understand the dynamics and interactions between these two environments in greater detail (Oliveira, 2022). Additionally, more empirical studies are needed to explore the outcomes of effective alignment between the internal and external environments on organizational performance (Hitt, Ireland, & Hoskisson, 2020). Expanding research in these areas would enhance the comprehension of the complex relationship between the internal and external environments.

The existing literature on the internal-external relationship also contains contradictory findings and unresolved debates (Barney & Hesterly, 2022). Some studies suggest that a strong internal environment can buffer the effects of the external environment, while others argue that external factors have a dominant influence (Robbins, 2020). These inconsistencies highlight the need for further research to clarify and reconcile these divergent perspectives (Eisenhardt & Martin, 2019). Additionally, debates persist regarding the specific strategies and approaches that organizations should employ to effectively align the internal and external environments (Boxall & Purcell, 2022). Addressing these debates would contribute to a more comprehensive understanding of the internal-external relationship and guide organizations in developing effective alignment strategies.

As the business landscape continues to evolve, new trends and challenges are emerging that warrant further investigation (Grant, 2022). For example, the rise of digital transformation, globalization, and sustainability concerns presents new dynamics in the internal-external relationship (Mosey et al., 2021). Future research should explore how organizations can effectively navigate these trends and leverage them to enhance performance (Eisenhardt, 2020). Additionally, the increasing interconnectedness and interdependence among organizations in global markets call for research on the collaborative aspects of the internal-external relationship, such as strategic partnerships and supply chain management (Barney, 2021). Investigating these emerging trends and directions would contribute to a more up-to-date and comprehensive understanding of the relationship between the internal and external environments.

METHODOLOGY

A literature review was chosen as the appropriate methodology due to its ability to comprehensively examine and analyze existing research, theories, and concepts on the topic. The process of selecting relevant literature involved conducting a comprehensive search in academic databases, using appropriate keywords, and limiting the search to peer-reviewed scholarly sources. Data collection and analysis involved the identification and retrieval of scholarly articles and books related to the topic. The evaluation and synthesis of the literature involved critically analyzing the retrieved sources to identify key themes, concepts, and theories. Themes and sub-themes were then developed based on the analysis and synthesis.

The quality assessment of the literature included criteria for assessing the credibility and relevance of sources, such as the author’s credentials, the reputation of the journal or publisher, and the rigor of the research methods employed. Inclusion and exclusion criteria were also established to maintain focus and relevance in the literature review. Data synthesis and presentation involved organizing and categorizing the findings based on the identified themes and sub-themes. The methodology allowed for a comprehensive literature review that synthesized existing knowledge, identified gaps in the literature, and established a conceptual framework for further study on the relationship between an organization’s internal and external environments. The study successfully addressed the research objectives and provided valuable insights into the topic.

FINDINGS AND DISCUSSION

Key Findings

The literature analysis has provided significant findings. The internal environment consists of factors inherent to the organization, such as culture, structure, resources, and processes, which directly influence its operations. On the other hand, the external environment encompasses elements beyond the organization’s control, including the industry, market conditions, competitors, and regulatory factors. The literature review demonstrates the interconnection and mutual influence between the internal and external environments. External forces play a vital role in shaping the internal environment, impacting an organization’s operations and decision-making processes. For instance, market demands and industry trends significantly influence internal operations. Conversely, the internal environment can also impact the external environment through organizational strategies, capabilities, and responses to external changes.

Additionally, various theoretical perspectives have been highlighted in the literature, offering unique frameworks to understand the dynamics and interactions between the internal and external environments. Contingency theory examines how organizations align their internal structures with external demands. The resource-based view emphasizes the strategic importance of internal resources and capabilities. Institutional theory explores how organizations conform to external norms and expectations, while stakeholder theory emphasizes the influence of various stakeholders on the internal and external environment. These findings from the literature establish that the relationship between an organization’s internal and external environments is dynamic, complex, and mutually influential. Understanding this relationship is crucial for organizations striving to adapt, innovate, and succeed in a constantly evolving business landscape.

Discussion and analysis

The relationship between an organization’s internal and external environments, as highlighted in previous research, is a dynamic and reciprocal one. Recent sources further support these findings and shed light on the significance of this relationship. The internal environment, which includes organizational culture, structure, and resources, greatly influences an organization’s perception and response to changes in the external environment. Recent studies have shown that organizations with a strong internal culture that fosters innovation, adaptability, and customer focus are more likely to effectively respond to external changes. For example, a study by Gómez et al. (2019) found that organizations with a culture of adaptability are better prepared to cope with changes in the external environment. Conversely, the external environment shapes the internal environment through market pressures, customer demands, and regulatory requirements. For instance, a study by Lengnick-Hall, Beck, and Lengnick-Hall (2019) emphasizes that changes in customer preferences, such as the increasing demand for sustainable products, can prompt organizations to adapt their internal processes and capabilities to meet these new demands.

The impact of the external environment on the internal environment is significant, as changes in technological advancements or shifts in customer preferences require organizational adaptations. Recent research highlights the importance of actively monitoring and scanning the external environment to identify emerging trends, challenges, and opportunities. A study by Furrer, Thomas, and Goussevskaia (2018) emphasizes the need for organizations to adopt a proactive approach to external environment scanning to effectively respond to changes. Organizations with strong internal capabilities, such as innovation, operational efficiency, and customer-centricity, can influence market dynamics and shape industry practices. Recent studies provide evidence of how organizations can shape their external environment through strategic decisions and the cultivation of competitive advantages. For example, a study by Osiyevskyy and Dewald (2015) found that organizations with strong internal innovation capabilities influence their industry’s technological trajectory.

Organizational culture, as confirmed by recent sources, plays a crucial role in aligning the internal and external environments. A culture that promotes innovation, adaptability, and customer focus enables organizations to effectively respond to changes in the external environment. A study by Serrat (2017) underscores the importance of creating an organizational culture that encourages learning, collaboration, and risk-taking to thrive in dynamic environments. Effective strategic management approaches are essential for achieving alignment between the internal and external environments. Recent research emphasizes the need for organizations to develop strategies that capitalize on external opportunities and mitigate potential threats. This involves strategic planning, resource allocation, and continuous monitoring of the external environment. A study by Harrison, Han, and Bienstock (2019) highlights the role of strategic flexibility, which enables organizations to adapt their strategies in response to changes in the external environment.

According to resource dependence theory, organizations are influenced by their external environment due to their dependence on key resources. Recent studies have confirmed that managing resource dependencies, such as supplier relationships, customer partnerships, and regulatory compliance, is critical for maintaining stability, competitiveness, and performance. A study by Gaimon and Kay (2020) emphasizes the need for organizations to manage supplier relationships effectively to reduce dependence on specific suppliers and mitigate risks associated with external changes.

Implications for performance

Based on the evaluation of the available literature, there are several implications for organizational performance to be considered. Primarily, effective environmental scanning and decision-making processes are crucial. When organizations engage in such scanning practices, they develop a deeper understanding of the external environment, which in turn enables them to make more informed decisions. By actively monitoring market trends, competitors, and customer preferences, organizations can anticipate potential changes and align their internal processes accordingly. This proactive approach is not only beneficial in reducing uncertainty but also supports strategic decision-making, ultimately enhancing organizational performance.

Another important implication is the significance of organizational adaptation and survival. The relationship between the internal and external environments plays a vital role in determining the success and sustainability of an organization. Organizations that effectively align their internal processes, structures, and resources with the demands of the external environment are more likely to thrive in dynamic and competitive settings. On the other hand, failure to adapt to changes occurring in the external environment can lead to organizational decline and diminished performance. Therefore, it is crucial for organizations to recognize the importance of adapting to external changes to maintain their competitiveness and ensure long-term survival.

Furthermore, a strong alignment between the internal and external environments can result in competitive advantage. By effectively utilizing their internal capabilities, organizations can differentiate themselves from their competitors. This can be achieved by effectively meeting customer needs and seizing market opportunities. Ultimately, this alignment enables organizations to gain a competitive edge and potentially achieve superior performance within their respective industries.

Concluding, this conceptual study has provided valuable insights into the correlation between an organization’s internal and external environments. The literature review has contributed to a clearer understanding of the definitions and components of both the internal and external environments, as well as the influential factors and theoretical perspectives that shape them. The study has emphasized the interactive nature of these environments and their reciprocal impact on one another. Additionally, the research has identified several factors that influence the internal-external relationship, including organizational culture, strategic management approaches, and resource dependence theory. Notably, the study has uncovered the implications of this relationship on organizational performance, such as the impact of environmental scanning on decision-making, the significance of organizational adaptation for survival, and the achievement of competitive advantage. However, there are still gaps in the existing literature that indicate the need for further investigation.

Contribution to the Existing Knowledge  

The study adds to the existing knowledge by offering comprehensive understanding of the relatioinship between an organization’s internal and external environments. The literature review uncovers valuable theoretical perspectives like contingency theory, resource-based view, institutional theory, and stakeholder theory, which provide insights into this relationship. The study highlights the dynamic interactions that transpire between the internal and external environments.

Direction for future research

The findings and identified gaps suggest several recommendations for future research. Empirical studies employing quantitative or qualitative methods can offer solid evidence and deeper insights into the internal-external relationship. Cross-cultural studies can reveal the influence of cultural factors on organizational responses to external changes. Investigating the impact of digital transformation, artificial intelligence, and automation can provide valuable insights for organizations in the digital age.

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A Systems View Across Time and Space

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The effect of external factors on industry performance: the case of Lalibela City micro and small enterprises, Ethiopia

  • Abriham Ebabu Engidaw   ORCID: orcid.org/0000-0002-5081-5668 1  

Journal of Innovation and Entrepreneurship volume  10 , Article number:  10 ( 2021 ) Cite this article

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The purpose of this study was to examine the effect of external factors on industry performance: in micro and small-scale enterprises. To achieve its objectives, the study employed a descriptive and explanatory research design and used quantitative research approach. The target population of the study was 395 MSEs owners working in manufacturing, trade, and service sectors. It used stratified and simple random sampling techniques and the required data have been collected from a sample size of 199 MSEs through standardized 5-point Likert-scale questionnaire. The study used both primary and secondary sources of data. For data analysis purpose, it employed descriptive and inferential statistical data analysis methods like correlation and multiple linear regression analysis. The finding of the study discovered the agreement of respondents to the positively significant relationship between external factors and industry performance in the study area. Specifically, marketing factors, financial factors, infrastructure, work premises factors, trade fair factors, and political-legal factors all have a positive effect on enterprises’ performance in the study area. In addition, the study result shows that financial factors, marketing factors, infrastructure, work premises factors, and trade fair factors have a positive significant effect on industry performance but political-legal factors do not significantly affect the dependent variable industry performance. From the predicting variables, infrastructure has more effect on industry performance than the rest of variables in the study area. The study recommends that the government/micro and small enterprises development offices should maintain different supportive trainings, decrease infrastructural problems, facilitate credit services, and create attractive environment to entice or create productive MSEs. In addition, the MSEs owners should design adoptive plans and programs with the external as well as internal environment to increase their performance.

Introduction

The contribution of micro and small enterprises has been recognized over the world which is one of the mechanisms and strategies to reduce poverty, and intergenerational wealth creation transfer is a focus on the development of MSEs, which generate income and employment opportunities (Belete, 2015 ). Micro and small enterprises generally account for bulk of the total enterprise population, irrespective of the level of economic and social development of a country. In many countries of the world, particularly those in Africa and Asia, the micro-enterprise sector constitutes the majority of the working population. Micro and small enterprises play various roles in economic development of a nation that include building up local production structure, creating employment opportunity, and achieving a fair distribution of national resource, income, knowledge, and power, and help to promote rural industrialization and promote export market specifically (Mulugeta, 2008 ).

In Ethiopia, micro and small enterprises play fundamental position for socio monetary development and serve as engines for employment opportunity and methods of improving wealth creation with the aid of supporting the monetary boom Government of Federal Democratic Republic of Ethiopia (GFDRE, 2011 ) noted in Lencho ( 2019 ). However, there are significant doubts about the high quality of administration in this region with policy-makers suggesting that there are particular weaknesses in innovation, lack of monetary access, lack of adequate market, entrepreneurial failure, lack of practical information, and human aid management. As a result, many corporations do no longer attain their full practicable and fail to grow in Ethiopia.

Performance is the act of performing or of doing something successfully; the use of knowledge as unique from in basic terms possessing it. Business organizations should measure their overall performance with the use of set of financial and non-financial symptoms which provide statistics on degree of accomplishing their objective and result. Organizational overall performance entails the use of sources wisely to keep away from wastage Global Entrepreneurship Monitor (GEM, 2004 ). Kamunge, Njeru, and Tirimba ( 2014 ) used special performance warning signs like extend in sales, enterprise growth, client retention, and rise in stock, waste reduction, and value discount in their study of elements affecting the performance of micro and small enterprise, whereas Mashimba and Kühl ( 2014 ) examined enterprise performance in phrases of business enterprise income and employer capital investment in machinery as measure of performance. Additionally, Abera ( 2012 ) used profitability as a measure of performance in his evaluation of factors affecting the performance of micro and small companies. Based on the assessment of related literature, the performance of MSEs can be measured in terms of financial and non-financial symptoms, that is, increasing profit, growing sales/product or services, and capital development for this study. Abdissa and Fitwi’s ( 2016 ) study has investigated the factors that affect the performance of SMEs in Bench Maji, Sheka, and Kefa zone unique to the manufacturing, trade, and service provider sector. And it revealed that the significant effect of political, legal, social, working premises, technology, infrastructure, marketing, finance, management, and entrepreneurial competencies on the overall performance of MSEs. Hence, the main reason to conduct this study is to analyze the effect of external factors on industry performance in micro and small enterprises in the study area.

Statement of the problem

To obtain its objective of transition to industry, Ethiopia has prolonged a number of commercial enterprise guide approach or coverage to decorate business overall performance and to create conductive commercial enterprise surroundings for MSE growth and development. This coverage aid consists of access to markets, getting the right of entry to finance, getting entry to industrial extension, and getting admission to education and technological support. One of the major challenges that confronted the increase and development of MSEs in Ethiopia is getting the right of entry to enough and sustainable market (EDRI, 2014 ).

According to Namusonge ( 2010 ), the principal factors that affect the overall performance of micro and small firms and continuously altering the business environment are; market access infrastructure, material supply, education, and technical assistance service and also the study conducted by Abera ( 2012 ), elicited eight principal challenges which appear to have an effect on the overall performance of MSEs in sub-cities which include inadequate finance, lack of working premises, marketing problems, insufficient infrastructures, terrible administration practices, and technological, entrepreneurial, and politico-legal issues along with bureaucratic bottlenecks system. The discovery indicated external factors and internal factors affect the overall performance of the micro and small enterprises (MSEs) positively.

The study of Kebede and Simesh ( 2015 ) examined an effect of internal and external business environmental factors on the performance MSEs in East Gojjam Zone, Ethiopia. The research finding shows that infrastructure and monetary environment, technological environment, and factors related with entrepreneurial commitment have a clear significant relationship with performances of MSEs. Mainly, researchers found that infrastructure and finance had positive impacts on the overall performance of MSEs, while the rest has negative roles.

Akinruwa, Awolusi, and Ibojo’s ( 2013 ) study found that political-legal factor has no significant effect on industry performance on his study of Nigeria’s’ SMEs. Similarly, the study of Mezgebe ( 2012 ) showed that politico-legal factor did not significantly affect business performance of MSEs in Addis Ababa city. Fetene ( 2017 ) finding shows that the monetary elements have been the most influencing predictor variable for SMEs’ overall performance followed through infrastructure and politico-legal factors. Working premises were at the fourth role in phrases of its electricity in influencing commercial enterprise overall performance followed through administration and advertising and marketing factor. This study focuses on six external factors or dimension which affects industry performance that is marketing factors, infrastructure factors, financial factors, working premises, trade fair, and political-legal factors which are potential or crucial for micro and small enterprises in the study area.

As mentioned by different authors and researchers, MSEs are the backbones of the country economy especially in developing countries. But in our country Ethiopia, even the government have given high attention to MSEs and try to increase their performance by giving some supports, they are not effective as expected because of different internal and external factors. From external factors, the major problems are lack of credit access, unfavorable infrastructure, insufficient work premise, marketing factors, trade fair factors, and political-legal factors. Although a number of researches are still being finished on factors affecting the performance of micro and small enterprises, they are no longer as fantastic as expected and the problem continues, because there is a trouble in understanding and inspecting the inside and contextual elements that affect the performance of micro and small enterprises. Moreover, preceding studies that had performed so far have the center of attention in developed countries and urban areas on overall performance of micro and small enterprises, whereas restricted research are conducted in rural place and most studies ignored vast variables such as trade fair and marketing. Based on the above studies’ findings, there is inconsistency in results, and as per the researchers’ knowledge, there are few researches conducted relating to this topic in the country specially in the study area; because of the above problems stated, the researcher would like to fill this gap in this study to check out the external factors that have an effect on the overall performance of micro and small enterprises especially working in manufacturing, service, urban agriculture, and trade sectors. Based on the above research problems, the researcher developed the following research questions:

What is the effect of financial factors on industry performance in the study area?

How marketing factors affect industry performance in the study area?

What is the effect of infrastructural factors on industry performance in the study area?

What is the effect of work premise factors on industry performance in the study area?

How political-legal factors affect industry performance in the study area?

What is the effect of trade fair factors on industry performance in the study area?

Objectives of the study

General objective.

The general objective of the study was to examine the effect of external factors on industry performance in the study area.

Specific objectives

To analyze the effect of financial factors on industry performance in the study area?

To examine how marketing factors affect industry performance in the study area?

To measure the effect of infrastructural factors on industry performance in the study area?

To evaluate the effect of work premise factors on industry performance in the study area?

To examine how political-legal factors affect industry performance in the study area?

To investigate the effect of trade fair factors on industry performance in the study area?

Literature review

External factors and their influence on the performance of mses.

There are a number of financial challenges that face small enterprises. They encompass the high fee of credit, excessive bank prices, and fees. Lack of access to credit/finance is almost universally indicated as a key problem for MSEs. Credit constraints function in variety of methods in Ethiopia where undeveloped capital accumulation and saving (Nabintu, N. Factors affecting the performance of small and micro enterprises, Unpublished). According to Akinruwa et al. ( 2013 ), finance and performance in MSEs are significantly related with 0.000 at 5% significant level. This emphasizes that finance has a significant effect on the business overall performance. Most MSEs failed in most developing international locations because of their incapability to gain get admission to credit score facilities.

On the other hand, meagerness of the physical infrastructure is a precept cause of low ranges of funding and unsatisfactory overall performance of micro and small enterprises (Kebede & Simesh, 2015 ). World Bank group enterprise survey (WBG, 2011 ) has identified poor infrastructure as a necessary issue that constrains commercial enterprise overall performance in Ethiopia. The infrastructure problem comprises of bad nation of roads, inaccessibility to land, workspace, electrical energy, and utility. Lack of allocation of suitable land to MSEs in most city and rural areas is a fundamental obstacle to growth and development in the industry.

Factors such as legal and bureaucratic restrictions, unfavorable tax system, complicated rules and regulations political stability, strategic development objectives, the government accomplished institutional promoting and regulatory policy, the government’s aid and the business of an institution’s regulating legislation, and other political-legal environment will influence industry performance directly or indirectly (Davidsson, 1989 ).

Abera’s ( 2012 ) study revealed that marketing factor is consisted of seven items. From these factors, inadequacy of market, difficulty in searching new market, lack of demand forecasting, lack of market information, and absence of relationship with an organization/association that conduct marketing research are critical factors that affect the performance of MSEs engaged in all sectors. In contrast, UNDP ( 2004 ), cited in Mengstie ( 2016 ), presented market access as a seven-element factor comprising market research, market information, trade fairs, product exhibitions, advertising, packaging, marketing trips and meetings, and subcontracting and outsourcing. Federal Public Procurement Administration Agency has set a rule that enforces public institutions to source positive component of their annual procurement from MSEs. That is, MSEs are given precedence in authorities’ procurement.

The other crucial factor for MSEs’ growth is working space. In response, although the government has massively built working spaces for MSEs in major cities and towns, working space remains a critical challenge. Amwele ( 2013 ) entitled empirical investigation into the elements affecting the overall performance of SMEs in the retail quarter in Windhoek, Namibia, revealing that rent or lease a place for their commercial enterprise in Windhoek has prevented their performance. He discovered that it was once pricey to hire a working vicinity for business use in their present-day locations; therefore, most MSEs are unable to grow financially as the massive element of the income goes in the rental expenses. Access to land for business use in Windhoek used to be one additionally that hinders business performance.

The trade fair factor including trade show, trade exhibition, or expo is an exhibition organized so that companies in a specific industry can showcase and demonstrate their latest products and services, meet with industry partners and customers, study activities of rivals, and examine recent market trends and opportunities. In contrast to consumer fairs, only some trade fairs are open to the public, while others can only be attended by company representatives (members of the trade, e.g. professionals) and members of the press; therefore, trade shows are classified as either “public” or “trade only”. There are presently many trade shows held every year, and several online directories have been established to help organizers, attendees, and marketers identify appropriate events (Morgan, 2014 ).

Overall performance is the act of performing or of doing something successfully; the use of knowledge as unique from in basic terms possessing it. However, performance seems to be conceptualized, operationalized, and measured in one-of-a-kind ways as a result making cross-comparison difficult. Business organizations should measure its overall performance with the use of set of financial and non-financial symptoms which provide statistics on degree of accomplishing their objective and result. Organizational overall performance entails the use of sources wisely to keep away from wastage. Given through the interaction between groups and environment, it follows that overall performance relates to how an employer reacts and is aware of the effect on positive surroundings change Global Entrepreneurship Monitor (GEM, 2004 ). Kamunge et al. ( 2014 ) used special performance warning signs like extend in sales, enterprise expansion, client retention, and increase in stock, waste reduction, and value discount in their study of elements affecting the performance of micro and small enterprise, while Mashimba and Kühl ( 2014 ) analyzed enterprise performance in phrases of business enterprise income and employer capital investment in machinery as a measure of performance. Moreover, Abera ( 2012 ) used profitability as a measure of performance in his evaluation of factors affecting the performance of micro and small companies in Arada and Lideta sub-cities of Addis Ababa. Based on assessment of related literature, performance of MSEs can be measured in terms of financial and non-financial symptoms, that is, increasing profit, growing sales/product or services, and capital developing for this study.

Empirical reviews

Vast number of studies performed on the overall performance of MSEs with a number of factors that determine enterprise surroundings of micro and small enterprises. Therefore, some of empirical research mentioned comply with:

Abdissa and Fitwi’s ( 2016 ) study recognized that the exterior and internal factors affected overall performance of MSEs and their existence could improve the everyday operation of micro and small firms’ performance. The study indicates variables such as political, legal, financial, marketing, working premises, infrastructural, probability seeking, persistence, commitment to the work, demand for affectivity and quality, goal setting, hazard taking, data seeking, and self-confidence are positively affecting the performance of MSEs (profit) in the study area. Similarly, for capital, variables such as political, legal, financial, marketing, working premises, technological, probability seeking, persistence, commitment to the work, demand for effectivity and quality, risk taking, statistics seeking, and self-confidence positively affected the overall performance of MSEs (capital) and significantly affect the performance of MSEs. In addition, for range of employees, variables such as political, financial, marketing, working premises, chance seeking, persistence, commitment to the work, demand for efficiency and quality, data seeking, and intention setting have positive impact on the performance of MSEs and substantially have an effect on overall performance of MSEs in phrases of quantity of employees. Hence improving these variables increases the overall performance of MSEs (profit, capital, and variety of employees).

Kebede and Simesh’s ( 2015 ) studied the influence of internal and external enterprise environmental elements on the overall performance MSEs in East Gojam Zone, Ethiopia. Results from the study exhibit that infrastructure and monetary environment, technological surroundings, and factors associated with entrepreneurial commitment have a clear substantial relationship with performances of MSEs. Furthermore, based on the signal of the slope coefficients researchers located that infrastructure and finance had wonderful impacts on the overall performance of MSEs, while the rest has poor roles.

According to Fetene’s ( 2017 ) study, results have shown that the eight hypothesized factors financial, management, marketing, entrepreneurial, technology, politico-legal, infrastructural, and working premises factors have been discovered substantially affecting the business performance of SMEs working in the study area and it was found that the monetary elements have been the most influencing predictor variable for SMEs’ overall performance followed through infrastructure and politico-legal factors. Working premises were at the fourth role in phrases of its electricity in influencing commercial enterprise overall performance followed through administration and advertising and marketing factor.

Abera ( 2012 ) finds out the eight most important challenges which appear to affect overall performance of MSEs which include inadequate finance, lack of working premises, advertising and marketing problems, inadequate infrastructures, negative management practices, and technological, entrepreneurial, and politico-legal problems which include bureaucratic bottlenecks system. The findings similarly point out that there exists linear and superb massive ranging from tremendous to strong relationship which was located between independent variables and dependent variable

Conceptual framework

According to (Nabintu N. Factors affecting the performance of small and micro enterprises, Unpublished), conceptual framework is a diagrammatic presentation of the relationship between dependent and independent variables (Fig. 1 ). In this study, the dependent variable is performance of SMEs while independent variables are financial factors, marketing factors, infrastructure factors, legal factors, and trade fair factors.

figure 1

Conceptual framework. Source: adopt from Admasu ( 2012 )

The current study

The study aimed at analyzing the effect of external factors on industry performance in the study area. Based on the overall findings of the study, the general conclusions and recommendations are drawn. Thus, the study has six major hypotheses:

Hypothesis A1 : Financial factor has a significant effect on industry performance in the study area.

Hypothesis A1 : Marketing factor has a significant effect on industry performance.

Hypothesis A1 : Infrastructural factors have a significant effect on industry performance.

Hypothesis A1 : Work premise factors have a significant effect on industry performance in the study area.

Hypothesis A1 : Political-legal factors have a significant effect on industry performance in the case area.

Hypothesis A1 : Trade fair factors have a significant effect on industry performance in the case area.

Methodology

Methodologically, the study followed quantitative research approach and it used explanatory study type with cross-sectional survey design. To explain position of variables studied and effect of one variable to another variable, it is advisable to use this design. For the purpose of this study, both the primary and secondary sources data are utilized to achieve the objective of the study. Primary data was collected directly from the owners of the MSEs with standardized close-ended questionnaires used to collect data necessary to meet the objectives of the study. And also, secondary data was collected through the various sources like previously published materials as a literature review especially research papers, organization’s reports, and Internet websites. The target population were considered as all MSEs’ owners working in manufacturing, service, and trade industries in the study area. The total population of the study was 395 MSEs. Based on Taro Yamane ( 1967 ), sample size determination formula ( n = N/ (1+ Ne ^2)), the researcher got a grand total sample size of 199, at 95 % confidence level and 0.05 precision levels. The researcher applied stratified and simple random sampling techniques to collect the data. And also the collected data was analyzed through correlation and multiple linear regression analysis.

Measures of variables (external factors and industry performance)

The independent variables were measured using the total of 29-item questions including five political-legal factors, five work premise factors, five infrastructure factors, five marketing factors, five financial factors, and four trade fair factors. And also the dependent variable industry performance was measured using 5-item questions. Both the dependent and independent variables were measured with 5-point Likert scale response range (from 5 (strongly agree) to 1 (strongly disagree)). The variables used to measure the items on the instrument had been ordinal scale (strongly agree, to strongly disagree) because the nature of this study is quantitative.

Scale reliability

When we see the reliability, it was statistically tested by using the most commonly used statistics Cronbach’s alpha coefficient and all seven scales had a high level of reliability: financial factor (alpha = .832), marketing factor (alpha = .824), infrastructural factors (alpha = .781), work premise factors (alpha = .696), political-legal factors (alpha = .729), trade fair factors (alpha = .626), and performance (alpha = .706).

Descriptive analysis

In this study, descriptive analysis was used to observe the level of agreement to the find out about variables; mean and standard deviation were used to measure the responses dispersion degree from arithmetic mean. Therefore, the end result of this study was analyzed using this standard to decide the relative importance for interpretation whether it fails in 1–1.80 very low, 1.80–2.60 low, 2.60–3.40 medium, 3.40–4.20 high, and 4.20–5.00 very high.

Table 1 result indicates that the descriptive statistics result of marketing factor, financial factors, infrastructure factors, work premises factors, trade fair factors, and performance measurement factors has grand mean of 2.7296, 2.7402, 2.8111, 2.9266, 2.6417, and 2.8854 at a standard deviation of .78101, .85185, .77699, .73226, .61338, and .73645 respectively. This clearly shows that the majority of the respondent response level of agreement falls into medium range. But political-legal factors mean value was 2.2050 with standard deviation of .48635. This indicates that the majority of the respondent level of agreement is closer to low range. Furthermore, the standard deviation result indicates the extent to which the respondents’ opinions about the statements on external factors and performance varied.

Correlational analyses

For the purpose of this study, the researcher used Pearson product moment correlation analysis to find out the relationship of independent variables (marketing factor, financial factors, infrastructure factors, work premises factors, political factors, and trade fair factors) with the dependent variable industry performance. According to Cohen ( 1992 ), an interpretation of the range of the coefficient of correlation has been described into the following: − 0.3 to + 0.3 weak; − 0.5 to − 0.3 or 0.3 to 0.5 moderate; − 0.5 to − 0.9 or 0.5 to 0.9 strong; and − 0.9 to − 1 or 0.9 to 1 very strong.

Based on Table 2 Pearson product moment correlation analysis result, there was a strong positively significant relationship between the dependent variables marketing factor, financial factors, infrastructure factors, and work premises factors with the dependent variable industry performance at correlation coefficient of 0.720, 0.539, 70.731, and 0.673 respectively. And also there was a weak positively significant relationship between independent variables (political factors and trade fair factors) with industry performance at correlation coefficient of 0.187 and 0.221 respectively. Generally, the study finds out there is existence of a positively significant relationship between overall external factors and industry performance at significance level of r < 0.01 in the case area.

The study result showed that there is not a problem of multicollinearity, normality, and linearity in the study variables.

Regression analysis

Multiple regression analysis result portrays that R square is .674 and adjusted R square is .664 (Table 3 ). This implied that 67.4% variation in industry performance is explained by external factor in the study area. In addition, the significance value of F statistics indicates a value .000 and it was less than p < 0.05, so that it means the model was significant enough.

Based on Table 4 result, infrastructural factor was the most contributing factor for the dependent variable industry performance in the study area. Since the beta value is 0.319 with significance level 0.000 and marketing factor’s beta value is B = 0.296 at sig. 0.000, this implies that that marketing factor has a positive significant effect on industry performance and the second most contributing factor for the dependent variable. In addition, independent variables financial factors, work premise factors, and trade fair factors have a positive significant effect on industry performance at beta value of 0.124, 0.199, and 0.123 at sig. level of 0.014, 0.001, and 0.004 respectively. As a result, the regression coefficient clarifies the average amount of change in industry performance was affected by a unit of change in external factors by the stated beta value. Contrarily, political-legal factor has no significant effect on industry performance at sig. 0.996 (Table 5 ).

Discussions

The mean score of independent variables showed that most employees’ feeling result was approaching to moderately agreed on measures of marketing factor, financial factors, infrastructure factors, work premises factors, trade fair factors, and performance measurement factors. However, political-legal factors mean value indicates that the majority of the respondents’ level of agreement is closer to low range. The correlation result indicated that all the external factors have a significantly positive relationship with industry performance. Based on the study result, 67.4% of variation in industry performance is explained by industry performance in MSEs and the other 22.6% is explained by other factors not included in this study. And also, the model was significant at p = 000. The effect analysis result showed that independent variables marketing factor, financial factors, infrastructure factors, work premises factors, and trade fair factors have a positive significant effect on the dependent variable industry performance at beta value of 0.124, 0.199, and 0.123 at sig. level of 0.014, 0.001, and 0.004 respectively. But political factors have no significant effect on industry performance in study area MSEs at sig. 0.996. In conclusion, the regression coefficient elucidates that the average amount of change in industry performance was affected by a unit of change in external factors by the stated beta value.

Finally, this study objective is meted up well by originated findings as previously supposed.

Recommendations

The empirical result confirmed that there is a significant relationship with eternal variables and industry performance in the study area and also infrastructural factor and marketing factors are the key contributors to MSEs’ performance. Accordingly, the government should seek a great attention and solve these infrastructural and marketing problems to increase the performance of MSEs as well as to support the country’s economy as expected. Because creating a favorable marketing/work environment and sufficient infrastructure will motivate MSEs and increase their effectiveness in their business activity.

In the study area there is a big gap of source of finance and getting loan from different financial institutions is low with higher interest rate, Consequently, the study recommends that micro and small enterprises development office is better to collaborate/integrated with credit and saving associations to give admission to affordable and principal source of finance for MSEs to reduce their requirement producers and increase their performance; then, they will play their role in poverty reduction in the country. In addition, the owners/managers of MSEs might also develop adequate and appropriate marketing strategy and participate in different trade fair activities/programs to display their products/services to meet industry buddies and loyal customers.

Generally, the study recommends that the government/ micro and small enterprises development offices should maintain different supportive business trainings, decrease infrastructural problems, facilitate credit services, and create attractive marketing environment to entice or create productive MSEs. In addition, the MSEs’ owners should design adoptive business plans and programs with the external as well as internal environment to increase their performance.

Conclusions

In the present paper, the researcher attempts to evaluate the effect of external factors on industry performance in the study area MSEs. In the study, various parameters are used to evaluate the performance of MSEs and external factors. The study has six independent variables and one dependent variable. To achieve the research objectives, the statistical relationship of each independent variable with the dependent variable was well examined and presented in the study in line with the study questions. After evaluating all the parameters exclusively, the researcher found that all the independent variables excluding political-legal factors have a significant effect on industry performance in the study area and infrastructural factor was the most contributing factor for performance. Hence, in the end, we can conclude that the external factor has a significant effect on industry performance.

Suggestion for future study

The researcher conducted more of quantitative study; deep qualitative study could also be done to validate the results of this study. From the findings of the study, it is concluded that the model which was included in external factors explained only 67.4% of the variance of industry performance and the rest 22.6% may be due to the other variables which were not included in this study and left for further study.

Availability of data and materials

All the metadata used under the research process is available on hand: for instance, look for the spss data output here.

Abbreviations

Entrepreneurial Attitude Orientation

Entrepreneurial culture

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Ebabu Engidaw, A. The effect of external factors on industry performance: the case of Lalibela City micro and small enterprises, Ethiopia. J Innov Entrep 10 , 10 (2021). https://doi.org/10.1186/s13731-021-00147-7

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  • Marketing factors
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literature review on analysis of external environment

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A Review of 50-Years of International Literature on the External Environment of Building Practice-Based Research Networks (PBRNs)

Anna dania, mph, phd candidate; zsolt nagykaldi, phd; ari haaranen, phd; jean w.m. muris, md, phd; philip h. evans, frcgp, mphil; pekka mäntyselkä, md, phd; chris van weel, md, phd.

Corresponding Author:    Anna Dania, MPH, PhD Candidate; Department of Family Medicine / General Practice - CAPHRI Institute - Maastricht University. Contact Email:  [email protected] Section:   Original Research Published Version:  www.jabfm.org/content/35/4/762

PURPOSE: This paper is the second part of a novel scoping review of the international literature that presents those key elements that underpin the foundational activities of Practice-Based Research Networks (PBRNs). In this paper, we examine the external environment and the intersection between the internal and external environment domains.

METHODS: We searched electronic databases, including MEDLINE (PubMed), OVID, CINAHL (EBSCOhost), Scopus, and SAGE for publications in English between 1/1/1965 and 9/15/2021. We also searched reference lists of selected publications, grey literature and other online sources. Inductive thematic analysis was applied to construct the main themes, sub-themes, and key elements from a scoping review covering up to 10 years of reported experiences of each of the 98 PBRNs that met the inclusion criteria.

RESULTS: In this study we present two main themes: “Stakeholders at the Intersection Between the Internal and External Environment” and the “External Environment”. The first is linked to the sub-themes “Patient and Community Stakeholders” and “Other Healthcare Stakeholders” and 11 key elements. The second relates to the sub-themes “National Health System”, “Institutional/Governmental Support, National/State Policy and Regulatory Environment” “Professional Organizations”, “Leveraging Previous Research and PBRN Experience and Interacting with Other Networks” and “Health Information Technology (HIT) and HIT Vendors” and 21 the key elements.

CONCLUSIONS: Despite variations in geography, time and healthcare context, PBRNs shared many similar developmental experiences over the past five decades. Their external environment contributed significantly to their developmental trajectories during the first ten years of their operation.

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In March 2020, Wendy Williams published the Windrush Lessons Learned Review. Commissioned on 2 May 2018 by the former Home Secretary, the review examined “the key legislative, policy and operational decisions that led to members of the Windrush generation becoming entangled in measures designed for illegal immigrants” and aimed to “identify the key lessons for the Home Office going forward” (Williams, 2020).

The review resulted in 30 recommendations which were accepted by the Home Secretary in June 2020. Following this, in September 2020, the Home Office published its Comprehensive Improvement Plan setting out how the recommendations would be taken forward (Home Office, 2020a).

Recommendation 7

Recommendation 7 of the Windrush Lessons Learned Review stated, “The Home Secretary should commission officials to undertake a full review and evaluation of the hostile/compliant environment policy and measures – individually and cumulatively. This should include assessing whether they are effective and proportionate in meeting their stated aim, given the risks inherent in the policy set out in this report, and its impact on British citizens and migrants with status, with reference to equality law and particularly the public sector equality duty. This review must be carried out scrupulously, designed in partnership with external experts and published in a timely way” (Williams, 2020).

The compliant environment is a series of administrative and legislative measures that aim to deter immigration offending. The compliant environment aims to: discourage those who may be thinking of coming to the UK unlawfully from doing so; secure compliance and support the enforcement of UK immigration laws; protect taxpayers’ money; and protect vulnerable migrants from the risk of exploitation by unscrupulous employers and landlords (Home Office, 2020a).

As set out in the Comprehensive Improvement Plan, there are 6 strands which make up the compliant environment:

Work – Employers should make sure prospective employees have the right to work in the UK. An individual will not be able to work if they do not have permission to live in the UK and to work here.

Private Rental Sector – Landlords should make sure prospective tenants have the right to rent a property in England. If an individual does not have permission to live in the UK, they will not be able to rent a privately owned property.

Public Funds – An individual must have permission to live in the UK and to access public funds to claim most benefits, like Universal Credit or Child Benefit. If the permission to stay ends, payments for existing benefit claim(s) will also be stopped. If someone has paid National Insurance contributions, they may still be able to claim contributory benefits.

Health – An individual may be asked to pay for some types of healthcare if they are not lawfully living in the UK on a properly settled basis. Whether someone pays may differ depending on location in the UK, but treatment considered to be immediately necessary or urgent will always be provided, even if someone has not paid in advance – they will be asked for payment afterwards. If someone does not pay for the cost of treatment, future applications for permission to enter or stay in the UK may be refused.

Banking – An individual must have permission to live in the UK to hold a current account. If they do not, they will not be able to open a current account. If someone stays in the UK without permission and already have an account, it will be closed.

Driving – An individual must have permission to live in the UK to hold a UK driving licence. Someone’s application will be rejected if they do not have permission. If someone stays in the UK without permission and already has a licence, it will be revoked.

Various governments have put in place the legislation underpinning the 6 measures, as shown in List 1.

The purpose of Recommendation 7 is for the Home Office to examine the impact of these measures both individually and cumulatively.

List 1: Timeline of policies to restrict access to work, benefits and services in the UK

1982: First NHS treatment charges for overseas visitors and irregular migrants.

1996: First controls restricting asylum seekers’ access to benefits introduced in the Immigration and Asylum Act 1996 come into force. First controls of migrants’ access to social housing assistance introduced in the Housing Act 1996 come into force.

2000: Comprehensive controls on temporary and irregular migrants’ access to state benefits introduced in the Immigration and Asylum Act 1999 come into force.

2003: Controls on irregular migrants’, European Economic Area ( EEA ) migrants’ and asylum seekers’ access to local authority social care introduced in the Nationality, Immigration and Asylum Act 2002 come into force.

2007: The Security Industry Authority introduces immigration status checks on all non- EEA nationals applying for a security licence.

2008: New legislation introduced in the Immigration, Asylum and Nationality Act 2006 comes into force. This means that the offence of employing an illegal worker is replaced by a new system of civil penalties, with prosecution for knowingly employing illegal workers, alongside a renewed campaign encouraging employers to conduct right to work checks.

2014: Introduction of Immigration Act 2014. This introduces Right to Rent checks; measures to prevent those with irregular status from opening bank accounts and powers to revoke driving licences. It also increases employer fines for illegal working.

2016: Introduction of Immigration Act 2016. This introduces new sanctions in relation to illegal working and strengthens legislation around preventing irregular migrants from accessing housing, driving licences and bank accounts.

Changes in response to the Windrush Review

In response to the Windrush scandal, the Home Office has made several policy and operational changes to prevent a similar scandal happening again. These include improving decision-making processes, introducing new safeguards in the data-sharing process, and improving guidance for employers and landlords undertaking right to work and rent checks.

This is part of the ongoing commitment to review the measures of the compliant environment individually and collectively. The changes have come into force gradually since 2018.

Reading this report

Evaluating the compliant environment is complex. A critical part of designing a full review of the compliant environment is to fully scope the remit of the evaluation through assessing the existing evidence base and identifying gaps. This report is part of the work to do that.

The report comprises 2 parts:

Part 1 is a rapid evidence assessment ( REA ) (HM Treasury, 2020) of existing academic and grey literature [footnote 1] on the compliant environment, exploring key themes and gaps coming out of the assessment.

Part 2 looks at how a few European countries manage access to public services, and how these compare to the UK compliant environment. This review aims to explore what lessons we can draw from other countries and how best to use international studies in evaluating the compliant environment.

Together, these 2 parts present initial steps in understanding the evidence base on compliant environment measures and their effectiveness.

This initial work also highlights key research gaps and intends to help form the basis for an evaluation strategy that can assess the effectiveness and proportionality of the compliant environment. This evaluation strategy will need to address a range of different measures, data sources and research questions. Future reports will set out our proposed approach in more detail and the learning from this initial research will inform the design of further evaluation.

Note that this report focuses on external literature and does not cover any Home Office publications or reports that are based on Home Office data such as the Independent Chief Inspector of Borders and Immigration ( ICIBI ) or National Audit Office ( NAO ) reports. Including reports in this review does not mean that the Home Office considers the findings correct or robust.

Part 1: Literature synthesis

An REA methodology was used to review and synthesise evidence on the compliant environment and the measures within it. This approach provides a structured method for literature searches and quality assessment of the evidence. While not as exhaustive as a systematic review, it is quicker to conduct, and a widely used technique in government evaluation, included in the HM Treasury Magenta Book – evaluation guidance in government (HM Treasury, 2020). The REA was used to gain an overview of the volume of publications in the area and the quality of evidence, which helped choose which information to review in more detail. The scope of the review comprised:

Time period: Policies to ensure only those with rights to access work, benefits and services do so have been in place for decades and have been amended and developed by successive governments. However, in line with the approach adopted in the Windrush Lessons Learned Review, this review has focused on literature published between July 2014 and the end of 2020, when we completed the work [footnote 2] .

Literature included: We used academic and grey literature in this review to draw on the widest evidence base possible.

Searches: We used search terms based on the 6 measures, the compliant environment; and the hostile environment (see Appendix A for details).

Once we identified relevant literature, we screened it against the following criteria:

  • specificity to the UK (for example, drawing on UK experience and policy)
  • relevance to the policies comprising the compliant environment and their impact
  • use of primary or secondary research, whether original studies conducted by the authors or reviews of existing evidence (but not opinion or argumentation pieces), with a focus on independent analysis
  • methodology – robustness of approach and available methodological details

Using the criteria set out above (namely, specificity to the UK, relevance, use of original research and methodology), we assessed 125 studies and included findings from 29 papers in the literature synthesis, references for which are included in Appendix B .

Undertaking research with irregular migrants

We used a content analysis to extract key themes from the available evidence and identify gaps in relation to the effectiveness, proportionality, and impact of the compliant environment, and its 6 strands.

Several studies involve research with irregular migrants directly. Undertaking research with irregular migrants can be challenging due to the sensitivities of the topic area and the difficulties of identifying the size and composition of the irregular migrant population [footnote 3] , which would help provide for a larger or more representative sample. This causes difficulties with evaluating policies that aim to reduce irregular migration as it is challenging to assess their true impact. As a result of the challenges of irregular migration research, many of the studies included have engaged small samples of irregular migrants with a variety of non-probability [footnote 4] sampling methods used. These studies, while not statistically representative and therefore not generalisable to all irregular migrants, provide valuable insights into the lived experiences of those irregular migrants who are included, and those in the operational environment who are involved in implementing the measures, such as landlords and employers.

This review has not been stringent on the degree of methodological rigour required from research to include in this assessment, recognising the challenges involved in researching this topic area. Therefore, we have included some studies with relatively little information on methodology and/or sampling strategies where we believe they add additional insight.

Key findings

This section presents key findings both in assessing the impact of the compliant environment as a whole and by individual measure.

The compliant environment

Most of the studies found covered the compliant environment as a whole rather than individual measures, albeit from different perspectives. Authors differ somewhat in defining the compliant environment, which may not necessarily align with the Home Office definition used in the introduction to this report.

In terms of the literature reviewed, a summary of key themes from the analysis is presented below.

Complexity of immigration law

Multiple studies note the complexity of the measures and the challenges around co-ordination and communication between the Home Office and different stakeholders involved in enforcing compliant environment policies. Stakeholders involved include other government departments, landlords and banks (Karamanidou, 2019). An increase in legislation volume also reflects the complexity; Aliverti (2016) notes a drastic increase in actions being deemed immigration offences since 2009.

Studies also refer to difficulties faced in interpreting and carrying out the policies in practice by those with legal obligations to carry out checks (Leahy et al., 2020). They point out that complexities can lead to those tasked with enforcing the policies, such as landlords and employers, to act erroneously and refuse opportunities to those with legal rights, for example refusing European Union ( EU ) nationals’ jobs or not accepting their documentation, such as ID cards, as valid [footnote 5] (Yuval-Davis et al., 2018).

Attitudinal and behavioural changes among those enforcing the compliant environment

Several studies argued that the complexity of compliant environment measures led those enforcing policies to adopt cautious strategies relating to anyone without a British passport. For example, some studies suggested that people with the right to live in the UK who did not have a British passport were discriminated against in Right to Rent checks (Mykkanen et al., 2017). The Home Office has commissioned additional research looking into this issue within Right to Rent in more detail, which found no evidence of systematic unlawful discrimination as a result of the scheme.

Some studies explored how employers deliberately take advantage of migrants’ irregular status to exploit them by using excessively long hours, low pay, poor work conditions and coercion strategies to control workers (Bloch et al., 2015).

Overall, the research highlights how the compliant environment has had different effects on a range of different actors – from those enforcing the measures, to those who have been personally affected.

The studies suggest that the compliant environment has affected the behaviours of different groups. However, it is much less clear, drawing on the existing evidence base, the extent to which the compliant environment has had its intended effects of deterring irregular migration or leading those with no recourse to regularising their status to leave the UK.

Routes into the compliant environment

Several studies identified that the compliant environment is complex, owing to the multiple different routes that lead migrants to be affected by the different measures. This includes not only those arriving without permission or documentation but also people who entered legally and have since seen their legal rights expire. One study (Düvell et al., 2018) identified 3 broad types of irregular migrants based on their motivations: those arriving in the UK intending to be non-compliant with immigration law, to better their personal situation; those who originally visited the UK to travel, visit family or study before experiencing life events which made them decide to overstay; and those who became irregular unintentionally, for example, by being misled by others, such as employers, who had originally suggested their situation would be regularised. Other reasons to stay among these groups could include a changing political situation in their country of origin or personal reasons (for example, starting a relationship).

Other studies examined this issue from the perspective of specific groups, for example, those who entered the UK as children and unknowingly ended up with an irregular status (Bawdon, 2014) and those who entered the UK knowing that they were irregular migrants (Bloch et al., 2015).

The compliant environment effect on migrant behaviour

Several studies highlighted how concerns regarding enforcement activities can drive migrant behaviour, such as fear of sanctions or inspections. (Düvell et al., 2018; Bloch et al., 2015). Migrants adopt strategies to avoid detection while within the UK, such as working in sectors where they think inspections are less likely (such as construction rather than catering); changing jobs frequently; or working outside big cities where they assume there are fewer inspections due to a perceived lower number of migrants living in these areas.

However, while studies outlined clear impacts of the compliant environment on migrants’ everyday lives in the UK, they noted that these did not lead to irregular migrants leaving the UK or deter immigration offending. Instead, irregular migrants have remained in the UK and adapted their behaviours to try to avoid detection (Bloch et al., 2015). Studies noted that this can have a direct impact on service use, for example, deterring someone from accessing health care when they need it (Nellums et al., 2018). This impact on service use is driven by perceptions of immigration enforcement, whether accurate or not.

Multiple studies also noted that these changes in behaviour resulting from compliant environment measures indirectly led to displacements of costs elsewhere within service provision. For example, in accessing healthcare, fear of being charged led to overreliance on A&E services, which are free to all, unlike secondary healthcare (Poduval et al., 2015).

Individual measures

In terms of individual measures, this review identified studies covering the areas of right to rent, access to public funds, right to work and access to healthcare. This review did not identify any reports looking at driving or access to financial services in detail within the search inclusion criteria.

Overall, the number of studies focusing specifically on individual compliant environment measures was relatively limited indicating that there are still important gaps in the understanding of the measures’ impacts.

The Right to Rent Scheme

Under this measure, private landlords and letting agencies in England must not let a property to someone without lawful immigration status. They are advised to carry out a Right to Rent check on all prospective tenants before a tenancy commences to ensure they have lawful immigration status in the UK. They should then carry out follow-up Right to Rent checks if the individual’s permission to be in the UK is time limited. There are penalties for non-compliance, including financial penalties or a custodial sentence in the most extreme cases.

Studies in this area have often attempted to use surveys as a way of achieving consistent and robust data on their perceptions around this measure. For example, the former Ministry of Housing, Communities and Local Government ( MHCLG : now Department for Levelling Up, Housing and Communities) runs a regular survey with English private landlords and letting agents ( MHCLG , 2019). The survey briefly explored the knowledge and uptake of Right to Rent checks with letting agents and landlords, with by larger landlords being most likely to be aware and undertake checks [footnote 6] . The study also found that landlords and letting agents were less willing than agents to rent to certain groups, in particular those on housing benefits (with 52% of landlords and 37% of letting agents reporting unwillingness to let to this group) but also, to a lesser degree, those with non-British passports (with 25% of landlords and 10% of letting agents). However, the reasons for the disinclination to let to those with non-British passports were not explored in detail.

Another study (Mykkanen & Simcock, 2018) explored this policy in more detail via a survey with landlords, finding that fear of prosecutions had led landlords to become more reluctant to rent to anyone without a British passport.

Whether the Right to Rent policy encouraged discrimination was identified in multiple studies (Grant et al., 2017; Mykkanen & Simcock, 2018), which reported evidence of landlords preferring to rent to those with British passports, affecting not just irregular migrants but also those with lawful status in the UK. The Home Office’s publication on the Right to Rent Scheme specially focuses on whether discrimination is a key factor in landlords and letting agents’ decisions, finding it is not.

Several studies (Crawford et al., 2017) argued that many landlords did not fully understand their Right to Rent Scheme obligations, and that Home Office guidance was unclear. For example, the studies found evidence of landlords’ unwillingness to rent to EU or EEA nationals, highlighting general misunderstanding of the Right to Rent policy among this group. Evidence from one study found that landlords were more reluctant to engage with prospective tenants who were not British or did not have a British passport than those who did [footnote 7] . Based on this study’s findings, Britons without a passport were more likely to face rejection; however, Black, Asian and Minority Ethnic ( BAME ) Britons without a passport would also potentially be more likely to receive a negative response to a tenancy application than a White British citizen without a passport (Patel & Peel, 2017).

Access to public funds

Access to benefits will depend on the immigration status of a migrant. There are some benefits that are available to all (for example, contributory or statutory benefits), but other benefits (such as child benefit, income support or housing benefit) are restricted by immigration status and having recourse to public funds.

Migrants with indefinite leave to remain can access benefits, but temporary immigration status generally comes with a No Recourse to Public Funds ( NRPF ) condition, meaning the applicant accepts that, as part of the conditions of entering the UK, they cannot access benefits as it is expected that they can support themselves. Irregular migrants also cannot access public funds.

Where a migrant’s legal status has lapsed, the Home Office shares data with the Department of Work and Pensions ( DWP ) or HM Revenue and Customs ( HMRC ) to help prevent those who are not entitled to benefits from accessing them.

The limited research identified on access to benefits has tended to concentrate on the operation of the NRPF condition. The small number of studies in this area focus on the experiences of those with no recourse to state benefits who need assistance, and therefore rely on other sources of support. A study noted that NRPF could often disproportionately affect families with children (Jolly, 2018). Another study explored children and young adults’ experience of NRPF , and the negative impacts brought on by limited access to services such as public housing or benefits (Dickson, 2019).

Another questioned the effectiveness of NRPF as, while it may halt some migrants from accessing public funds, the researchers asserted that in practice it simply displaces costs by leaving local authorities to provide support instead, often leaving those in need without an adequate standard of living (Jolly, 2019).

Further studies pointed to the complexity of the legislation, lack of guidance and varying level of subsistence rates among local authorities. This led to variation between different local authorities’ levels of support to those with no access to public funds (Jolly, 2019). Another study noted that local authority support was not sufficiently advertised to families with NRPF (Dickson et al., 2020).

One study investigating the experience of a few families with NRPF highlighted a lack of awareness of the potential impact NRPF may have on those accepting this condition as part of the visa application process (Odumade & Graham, 2019).

Studies in this area did not cover the experience of benefits being withdrawn due to no longer being eligible to live and work in the UK.

The Right to Work Scheme

Employers conduct checks on prospective employees to ensure they have the correct status for the employment in question. Failure to conduct the correct checks can lead to civil penalties, or prosecution in the most serious cases.

The Home Office also exchanges data with other departments, including HMRC . These data-sharing arrangements alert employers to employees who may not have a regular immigration status, or those that have regular status that is due to expire, so that the employer can take appropriate action (such as, nudge letters). The department also conducts enforcement operations against employers suspected of employing irregular migrants.

There were relatively few studies in this area, although some included information directly from migrants, outlining their experience of Home Office inspections and strategies for living with the threat of detection (moving often and avoiding sectors with frequent inspections). They also touched on potential abuse by employers exploiting their irregular status. (Bloch et al., 2015). Findings were mixed in terms of how irregular status affected migrants’ ability to find work. Some felt it reduced their employment choices, while others felt it was relatively easy to find a job as an irregular migrant.

Other studies focused on employers’ perspectives (Yuval-Davis et al., 2018), arguing that it could be difficult for employers to assess someone’s right to work, leading to potential negative outcomes for those without a British passport. One study (Bloch & McKay, 2015) noted the complexity around recruitment practices and employer preferences, drawing on interviews with employers who tended to recruit others from the same ethnic community. Low cost was not necessarily the key driver for employing irregular migrants; instead, a complex range of motivations which included social obligations, cultural preferences and availability of workers were considered alongside economic considerations. The study also noted a clear awareness among employers of the risks relating to employing irregular migrants, and implications of any fines on their business. However, awareness of risks did not necessarily act as a deterrent, as the other previously mentioned motivations also affected an employer’s decision (Bloch & McKay, 2015).

To assess impacts, one study suggests that the barriers to legal work can lead migrants into vulnerable employment situations similar to enforced labour, arguing that the compliant environment measures are in tension with the Modern Slavery Act (Hodkinson et al., 2020).

The studies related to right to work focus on employer checks and Home Office inspections and do not cover other Home Office activities in this area, such as letters to employers encouraging them to check the immigration status of their employees.

Access to healthcare

The NHS is a residency-based healthcare system and so only people who are ‘ordinarily resident’ in the UK, or otherwise exempt from charges under the NHS (Charges to Overseas Visitors) Regulations (the Charging Regulations), are eligible for free care. Being ordinarily resident broadly means living in the UK on a lawful and properly settled basis for the time being, with individuals subject to immigration control also requiring ‘indefinite leave to remain’ in the UK.

Primary care and accident and emergency services [footnote 8] are free for all in the UK. Primary care is defined as the first point of contact to the healthcare system and includes all general practice services and community pharmaceutical, dental, and optometric services ( NHS England, n.d.). The remainder of healthcare is defined as secondary care.

All temporary migrants coming to the UK for longer than 6 months pay the Immigration Health Surcharge [footnote 9] at the point of visa application as a one-off payment (HM Government, n.d.a), even if they have private healthcare insurance ( NHS England, 2021). This allows them to access NHS services without further charge [footnote 10] . The charge does not apply for those seeking to come to the UK for up to 6 months or for those applying to stay in the UK indefinitely (HM Government, 2020). Since 2015, people who are not ordinarily resident in England and have not paid the Immigration Health Surcharge (irregular migrants, expatriates or visitors) have been charged 150% of any secondary healthcare treatment costs they incur, subject to certain exemptions, although note that healthcare charging regulations vary in the devolved administrations. Clinicians will always provide care that is immediately necessary or considered urgent [footnote 11] without delay regardless of the patient’s ability to pay. However, the treatment is not provided for free; if not yet recovered, the NHS will pursue charges after providing the treatment. Non-urgent treatment needs to be paid for upfront and should only be carried out after payment has been received.

As part of the compliant environment, debts are reported to the Home Office when they are for more than £500 and have been outstanding for more than 2 months with no repayment plan. Since 2011, people with outstanding NHS debts and no repayment plan can be refused new grants of leave to enter or remain in the UK. However, this is not a mandatory ground for refusal.

Studies of this measure focused on actual and perceived barriers to healthcare for various migrant groups, particularly asylum seekers. Several of the studies referenced the policy to charge failed asylum applicants for healthcare.

A selection of studies focused on access to healthcare by exploring the impacts of NHS charging regulations using interviews with undocumented migrants and stakeholders in the healthcare sector. Experts, including government officials, healthcare providers and charity workers, expressed concerns that charging regulations could severely affect access to healthcare and that migrants already faced barriers in culture, language, and GP registration (Britz & McKee, 2015).

Another study specifically explored the impact of a data-sharing agreement between the Home Office and the NHS . The agreement, in place from January 2017 to November 2018, allowed the Home Office to request personal demographic information from NHS Digital about irregular migrants who were previously known to the Home Office but had lost contact with the immigration system. Medical professionals participating in the research argued that awareness of this data-sharing agreement could lead to behavioural changes such as avoiding seeking healthcare in a timely manner or giving false contact information to avoid detection. Some medical professionals felt that the data-sharing agreement contradicted the ethical principles of confidentiality and consent. The study suggested that the lack of awareness of the agreement among many migrant patients could also be problematic (Papageorgiou et al., 2020).

At a community level, risks of migrants facing barriers to accessing healthcare also had negative implications for public health; for example, in one study, healthcare staff spoke about the possibility of infectious diseases spreading further if primary care became chargeable in the future. Barriers to healthcare access and lack of understanding of eligibility also led to increased use of other parts of the NHS instead, such as accident and emergency services (Poduval et al., 2015).

Interviews with asylum seekers (Kang et al., 2019) further highlighted barriers to access, such as awareness of services, language and affordability. Some of the asylum seekers interviewed also reported a feeling of being treated differently due to their immigration status or foreign background by staff at GP surgeries. Another study also highlighted fear and misconceptions around how data were shared between the NHS and the Home Office, and how this, coupled with unpaid healthcare bills, would discourage those interviewed from seeking hospital care (Nellums et al., 2018).

Evidence gaps

This literature synthesis has highlighted some important research across many of the policy areas that make up the compliant environment. However, it has also highlighted some important gaps in terms of topics to be explored as well as the existing extent of research in specific compliant environment policy areas.

This section outlines some areas that may warrant further exploration and which the wider compliant environment evaluation should consider.

Unintended consequences

Several studies explored for this review have touched on the complexity of implementing the compliant environment policies, and the way this could potentially lead to inconsistencies in enforcement and consequently to negative unintended consequences. For example, whether the risk aversion of those enforcing the policies, such as employers and landlords, could potentially lead to discrimination has been assessed. This is a particular concern raised in studies related to the Right to Rent Scheme (Patel & Peel, 2017), (Mykkanen & Simcock, 2018) but was also alluded to in some studies relating to right to work (Yuval-Davis et al., 2018),

Only a few studies from this time period specifically explored the impact of the compliant environment on those who are British citizens or have lawful status. Note that the time period reviewed here partially predates the Windrush scandal.

Some studies alluded to the possibility that those without a British passport or not perceived to be British may face discrimination. For example, some of the studies of right to rent indicated that landlords preferred being presented with a British passport as an ID document when conducting checks (Grant & Peel, 2015; Mykkanen & Simcock, 2018).

How the compliant environment is driving behaviour

Research reviewed has tended to focus on the experience of migrants living with reactive controls, rather than any deterrent effect of the measures.

Some qualitative evidence from migrants and employers has suggested that the policies do not serve as a deterrent from breaking immigration law for migrants already in the country (Düvell et al., 2018; Schweitzer, 2017).

Further research is needed to understand the role government policies play in decision making and in driving behaviour around immigration. This is the case for irregular migrants and those who employ or rent to them.

The number of studies on individual policy measures varies considerably, with no studies found that assess the impact of driving and banking measures. However, even in the areas that are relatively well covered, many studies raise important points, but are relatively small in scale. The studies also tend to focus on parts of the measures, such as inspections or rules around access, rather than any one measure as a whole. There is scope to carry out more research across all measures to assess their impacts in a more consistent manner. However, it is worth noting the difficulties in carrying out large-scale research with irregular migrants, which would present a challenge for any future study.

The cumulative effect of the compliant environment

Most studies centre on specific themes related to the compliant environment, and although some attempt to summarise the wider implications of the policy (Schweitzer, 2020), the compliant environment’s cumulative effect is not covered extensively. There is therefore scope to explore this area in more detail.

Part 2: Understanding practices in other countries

Part 1 focused on the UK and on the external evidence available related to the compliant environment. This section looks at how the evaluation of Recommendation 7 can best draw on evidence from other countries.

Reviewing practices in other countries can be complex and resource intensive, particularly since the compliant environment comprises several different policy areas underpinned by different types of regulations which are usually not applied in the same way in different countries. Language can also be a barrier to accessing the most up to date and relevant information.

To better understand how the compliant environment review can draw on international examples going forward, this report explores the measures in place in France, Germany and Spain that govern access to healthcare, work and the private rental sector. We chose these 3 measures because they are vital services and how access is managed will be relevant to all irregular migrant groups.

The report explores access to measures in France, Germany and Spain, as these countries have relatively comparable welfare structures. The UK was a member of the EU until recently, and hence all compared countries have been underpinned by similar legislation, although the implementation and operation of systems might be different.

These countries are relatively similar to the UK in terms of total population and are also 3 of the 4 EU countries with the highest number of found irregular migrants [footnote 12] This combination of similar sized countries and high rates of irregular migration suggested that the initial review should focus on these particular countries.

The intention of this review is to look at 4 countries’ rules around access to health, work and housing in general, as well as regulation related to irregular migration. Where possible, the review attempts to assess whether the UK’s compliant environment measures are also in place in some way in France, Germany and Spain. This review does not aim to reflect all policies dealing with irregular migration in these countries.

This review has used information from a range of publicly available sources, mainly in English. This includes grey literature [footnote 13] , such as information from the European Commission and official government websites of the countries reviewed. We accessed the information using online searches and by liaising with analysts from the European Commission’s European Migration Network (European Commission, n.d.a) to confirm our understanding of these other systems and gain their insights in this area where possible.

The review focuses on the national legislation in each country. In some cases, EU law will underpin some rules, such as ID card design or the illegal immigration penalties for employers Directive (EUR-Lex, 2016), but reviewing EU legislation in detail is outside of the scope of this review. It should also be noted that the UK, while a member of the EU , did not have to opt into legislation related to Justice and Home Affairs including the Directive on illegal working.

Note that with freedom of movement in the EU , all EU nationals are treated the same and have similar rights and obligations. In terms of rights for nationals outside the EU /EAA/Switzerland, the term ‘third-country national’ is used.

Note: This review took place in 2020, which was prior to the end of the transitional period for the UK’s departure from the EU and new UK Immigration policies being introduced.

Overall legislation

All the countries reviewed have complex systems of laws regulating migration. To some extent, each country’s history of migration will also have affected legislation over time.

The 1971 Immigration Act is the foundation of the UK’s immigration system and sets out the key principles for managing immigration to and in the UK (Immigration Act 1971). Subsequent legislation, as well as sanctions and restrictions, have been applied in UK policy over several years. The 2014 and 2016 Immigration Acts built on previous legislation and developed these much further, for example, introducing specific obligations on other agencies outside the Home Office to carry out checks on someone’s immigration status and increasing penalties for employers using illegal workers. (See List 1 at the start of this report for a timeline of key developments in immigration law.)

Most matters regarding the management of migration are documented in the Code of entry and stay of foreigners and right of asylum (Code de l’entrée et du séjour des étrangers et du droit d’asile ( CESEDA ) initially passed in 2004. This covers the management of those seeking asylum and those in the country illegally, as well as legally residing foreign nationals. There have been several amendments and additions to this law over the years. The most recent modification of the Code occurred in 2021.

Illegal entry and residence are managed by Section 95 of the Residence Act. The Act came into force in 2005, with amendments to the Act taking effect in 2008 as amended and promulgated in the 1 March 2020 version (Bundesministerium der Justiz & Bundesamt für Justiz/Federal Ministry of Justice & Federal Office of Justice ( BMJ & BFJ ), n.d). The Act requires all people living in Germany to have the relevant residence permit. This control is in place to support German residency law, which aims to manage migration in a way that supports Germany’s labour market and community integration aims. Those found to be living in the country in breach of the Act are required to leave and can be deported (Bundesministerium des Innern und für Heimat/Federal Ministry of the Interior and Homeland ( BMI ), 2021a).

The Residency Act is comprehensive and includes rules for migrants accessing work and education, as well as penalties for companies employing people illegally.

The main law which regulates the immigration of non- EU citizens in Spain is the Immigration Act 2009 (Baltic Legal, 2019). In addition to standard work, student and residency visas, residency can also be granted if someone makes a significant financial investment in Spain, based on Law 14/2013 on support for entrepreneurs and their internationalization. Standard visas are valid for one year, after which they need to be renewed every 2 years, whereas investment visas are valid for 2 years, after which they need to be renewed every 3 years.

Proving status

In terms of proving rights, the documentation required varies depending on the country’s approach to identity management, the person’s legal status and the time spent in the country. All countries, except the UK, issue national identity cards to their residents that are used to prove identity and to access some services.

In France, identity documents are compulsory, as well as visa or residence permits for third-country nationals to prove their right to legal entry and residency. Non- EU nationals staying for longer than 3 months are required to hold some form of residency card (depending on their grounds for staying in France) which specifies the timescales of residency allowed (Service-Public, 2020). This means residence permits show someone’s residency rights and can be used to access some services such as healthcare or social/family benefits.

In Germany, ID cards are mandatory for all those lawfully present, including for third-country nationals since 2011, when electronic residence permits were introduced, replacing permit stickers in passports and other residence permits ( BMI , 2021b).

In Spain, national identity cards are compulsory for all residents. Third-country nationals with permission to reside in Spain for more than 6 months must apply for a Tarjeta de Identidad de Extranjero/Foreigner’s Identity Card ( TIE ). This is an ID card which proves that they hold lawful status in Spain (Ministerio del Interior/Ministry of the Interior, 2013a).

The UK also issues Biometric Residence Permits and Cards ( BRP/Cs ) but only for third-country nationals granted permission to stay in the UK for longer than 6 months, for example, foreign students or those with work visas. The UK Government is in the process of replacing physical BRP/Cs by introducing digital status for migrants residing in the UK lawfully. Some immigration routes, like the EU Settlement Scheme, have already moved to this new approach.

Therefore, in the countries considered in this review compared to the UK, ID cards showing someone’s residency rights can be used to access services. As most residents have an identity document, including both foreigners and resident nationals, ID checks are commonplace, hence becoming embedded in wider processes for managing access to services, work and the private rental sector.

The following sections present further detail on healthcare, work and rent.

All countries included in this review require a person to have residency status before they can access non-emergency healthcare. All emergency healthcare is free but what constitutes an emergency can vary. Germany and France require all residents to hold health insurance, while in Spain and the UK contributions are made via wider social security/national insurance systems. Spain broadly offers irregular migrants the same healthcare options as those legally in the country. Germany also offers free services beyond emergency care, but social welfare officers handling the subsequent claims must report anyone not legally in the country to immigration authorities. In the UK, emergency healthcare and primary healthcare is free.

Primary care services, which include general practice services, community pharmaceutical, dental and optometric services, are free for all in the UK regardless of immigration status ( NHS England, n.d.). This also applies to accident and emergency care, and testing and treatment for certain infectious diseases, including coronavirus (COVID-19). The remainder of healthcare treatment, known as secondary care, is free only if someone is ordinarily resident [footnote 14] , covered by a reciprocal healthcare agreement between the UK and their country or has paid the Immigration Health Surcharge [footnote 15] (HM Government, n.d.a). In England, those who are not entitled to free secondary care are charged 150% of the treatment cost: in the other devolved administrations they are charged 100%.

The first step to accessing non-emergency care in the UK is to register with a GP , although this does not mean that all healthcare will be free.

A person may be required to show a Biometric Residence Permit or digital evidence of their immigration status, as well as other documentation or evidence. This is to determine whether they are entitled to free secondary healthcare, for example, they:

  • are ordinarily resident in the UK
  • have paid the Immigration Health Surcharge

Some checks are completed by data sharing between government departments.

Those not entitled to free secondary care, including irregular migrants, will need to pay for treatment upfront unless deemed urgent by the healthcare practitioner [footnote 16] or immediately necessary, in which case they can pay afterwards. Debts of £500 or more that have been outstanding for 2 months with no repayment plan are reported to the Home Office, meaning that debtors can be refused new grants of leave to enter or remain in the UK. However, this is not a mandatory ground for refusal.

The state guarantees and underwrites access to healthcare, and residents are generally required to make mandatory contributions towards their health insurance. There is also an option to complement this insurance to gain additional coverage (Vie Publique, 2021). Since 2016 there has been a simplified system, Protection Universelle Maladie/universal health protection ( PUMa ), whereby a person who is going to be residing legally in France for longer than 90 days can access healthcare (Ameli, 2021). Those employed are required to register for social security (Welcome to France, 2021a) and obtain private or public health insurance. This health insurance usually covers 70% of the cost of receiving treatment (depending on the type of treatment). In some cases, employers will be responsible for providing health insurance. Further support can be provided if people are below certain income thresholds. Proof of legal residency is required to register for PUMa .

Irregular migrants who have resided in France for at least 3 months and are under a specific financial threshold [footnote 17] can access free primary and secondary healthcare via L’aide médicale de l’État/state medical assistance ( AME [footnote 18] ). They must apply to get access and renew this annually (Service-Public, 2022).

As with France, health insurance in Germany is compulsory. There are 3 different types of health insurance available: public, private and expat. All German residents can access public insurance, which is funded by statutory contributions, and then choose to take out private insurance to top up or replace the public insurance. Registering for social security is mandatory before registering for insurance. Health cards are electronic and contain health insurance information, which is scanned when visiting medical services. Asylum seekers can access healthcare without being registered for social security, either via medical treatment vouchers or e-cards (Bundesministerium für Gesundheit/Federal Ministry of Health ( BMG ), 2016).

Healthcare insurance is a pre-requisite of the visa application as anyone applying for a visa must demonstrate self-sufficiency, which includes being able to pay for healthcare. The insurer issues health insurance cards, which need to be shown to access healthcare.

Irregular migrants in Germany have access to free emergency and maternity care. Hospitals can apply for reimbursement from the Social Welfare Office when treating irregular migrants in an emergency, without disclosing their information. However, free access to any care that is not deemed an emergency does need to be approved by a Welfare Office, which is not a confidential process (Platform for International Cooperation on Undocumented Migrants ( PICUM ), 2016).

Spain has a universal healthcare system. Those insured under the national social security system and their family members are entitled to free healthcare. The national social security system insures those in work, pensioners and those who are receiving unemployment benefits or allowances, so long as they are legally residing in Spain. Third-country nationals residing legally in Spain must first show that they have not been provided healthcare by other means, including via their country of origin (European Commission, n.d.b).

Emergency care is available to all regardless of residency. In 2018 Spain expanded irregular migrants’ rights in terms of healthcare (Boletín Oficial del Estado/Official State Gazette ( BOE ), 2018). However, for care to be free of charge certain conditions have to be met. To register someone must provide ID, demonstrate that they are registered with the local authorities, and provide a certificate stating that they have no access to healthcare via their country of origin or elsewhere.

Access to private rental market

The focus of the private rental market in the 4 countries is on whether the prospective tenant can afford the rent. In all 4, proof of identity is explicitly mentioned as necessary when someone enters into a rental agreement, but the UK is the only country where landlords are legally obliged to check whether someone has the right to live in the UK, with failure to do so incurring fines [footnote 19] .

Sections 20 to 37 of the Immigration Act 2014 limit access to the private rental property sector in England to those with the lawful right to be in the UK (Home Office, 2022a). The Right to Rent Scheme requires landlords to obtain evidence of a person’s right to live in the country before signing a contract (Home Office, 2016).

Under the legislation, landlords found to have let to someone without the right to rent and to have not conducted checks as per government guidance can be sanctioned with a civil penalty of up to £3,000 per disqualified person, or a prison sentence in severe cases.

In terms of checks, acceptable evidence includes passports and residence permits. In cases where the individual may not have the right documentation to hand, landlords can also use a service offered by the Home Office to check their status (Home Office, n.d.).

To access the private rental sector in France, individuals must provide proof of identity and proof of income/status (Légifrance, 2015). This can include ID cards, any passport or residency cards. There are limits on the amount of information that landlords can ask for (Service-Public, n.d.). Facilitating the stay of irregular migrants is punishable, which could extend to landlords; however, there are no explicit obligations for landlords, estate agents or others to ask for evidence of residency rights.

While private sector landlords and agents will require ID, such as a passport or residence visa, as part of the application, there are no required checks on immigration status. A prospective tenant is expected to provide ID and a General Credit Protection Agency record (Schutzgemeinschaft für allgemeine Kreditsicherung/ Schufa record) if they are already residing in Germany. Anyone staying in Germany for more than 3 months should register their German address with the local authorities, a process which requires certification of residence from the landlord or main tenant ( BMJ & BFJ , n.d.b). In Germany, facilitating the stay of irregular migrants for profit is punishable which could apply to landlords ( FRA , 2014).

Landlords wishing to let their properties (short and long term) need to comply with the 2019 National Rental Law ( BOE , 1994). Different types of tenancy agreements exist in Spain covering both short- and long-term rentals. However, a prospective tenant will always need to demonstrate they can afford the rent and provide proof of identity which can be a passport from another country. Facilitating the stay of irregular migrants is punishable and this could include landlords, however the landlord or letting agent is not obliged to check whether the prospective tenant is in the country legally ( FRA , 2014).

Right to work

All 4 countries have clear rules for taking on workers outside of the EU . Generally, being sponsored by an employer will be a pre-requisite to entry, with visas being available for different amounts of time and often in certain sectors (for example, agriculture) or based on skills (for example, IT workers). In some cases, citizens from specific countries can have different conditions to entry.

In terms of irregular migrants, all countries carry out intelligence-led inspections conducted by various agencies such as the police, tax authorities and immigration agencies.

All 4 countries issue fines to illegal migrants, although penalties vary by country. The treatment of employers found to be employing illegal workers is harsher across all countries compared with fines and custodial sentences in the most aggravating cases.

To come to work in the UK, a specific visa that allows working is required, although some other visa types do allow the holder to do limited paid work, such as family and student visas. There are a variety of long- and short-term visas which are often aimed at specific professions (HM Government, n.d.b).

Employers are legally responsible for checking a person’s right to work, with digital checking tools available. This applies to all over 16-year-olds taking up work in the UK. Failure to check someone’s right to work in the UK can lead to penalties for the employer.

Being found to employ someone without the requisite permission to work can lead to a civil penalty of up to £20,000 per worker or a prosecution which may result in a fine or custodial sentence in serious criminal cases [footnote 20] . The liability within the legislation sits with the employer, although it is also a criminal offence to work illegally.

The Home Office undertakes proactive checks, including inspections, to ensure employers comply with the legislation. Intelligence-led inspections are carried out regularly and led by the Home Office enforcement teams across the UK. In 2019, the Home Office carried out 5,613 inspections (Home Office, 2020b), though the UK does not have targets in terms of the number of inspections it aims to perform (European Commission, 2021).

Outside of Freedom of Movement for EEA citizens, France also offers a series of short- and long-term visas to those coming to work. Work authorisation is always required if the job is for longer than 90 days (France-Visas, 2017), though it is also needed for shorter jobs in many sectors (Welcome to France, 2021b).

Multi-agency teams (for example, police, gendarmerie, labour inspection and border control authorities) conduct inspections related to illegal workers in the sectors deemed most high risk (Organisation for Economic Co-operation and Development ( OECD ), 2018). There are targets, with 1,286 inspections carried out in 2019 representing 0.1% of employers in all sectors inspected (European Commission, 2021).

There are penalties for the illegal worker ranging from fines of up to €45,000 to prison sentences of up to 3 years. The worker also risks being banned from France for 5 years. Employers can normally be fined between €15,000 and €75,000, going up to €100,000 in some cases, depending on the legal status of the business. They can also face repatriation costs and imprisonment of up to 5 to 10 years, and be banned from public contracts and doing business for 5 years (ibid). See the European Commission’s 2021 Communication on the implementation of the Sanctions Directive for additional details on criminal penalties depending on employer actions (ibid).

Anyone who finds employment in Germany can apply for a work permit, however, requirements will differ depending on nationality, as some nationalities can apply in-country (for example, USA, Australia and Japan) while others need to apply at a German embassy (German Federal Government), n.d. [footnote 21] ). Like other countries, Germany offers a mix of short- and longer-term visas.

Activities are undertaken to target all forms of undeclared work and illegal employment. Inspections are driven by risk-based criteria and multiple agencies are involved (for example, tax authorities, the police and immigration authorities). There are minimum targets set for employee and employer inspections ( OECD , 2018). In 2019, over 98,000 inspections of employers were carried out, corresponding to 6% of all employers in the sectors inspected (European Commission, 2021).

Someone found to be working illegally can face a fine of up to €5,000, have their residence permit revoked and also face a prison sentence. Employers can be fined up to €500,000 and face a prison sentence of one to 3 years, increasing to 5 years if they have been involved in abuse or human trafficking ( OECD , 2018).

Like other countries, a non- EEA national generally needs an offer of employment to work in Spain. Third-country nationals in Spain require a specific type of visa to work. There are various types of visas depending on employment status, profession and duration of employment. In most of those circumstances, visas will only be issued after the employer has provided evidence of the vacancy or contract (SpainVisa, 2022).

Multi-agency teams (Ministry of Labour and Social Security, police and Ministry of Interior) conduct inspections to detect illegal working. Inspections are driven by data analysis and past experiences ( OECD , 2018). Each region in Spain has a different target; in 2019, there were 15,706 inspections in total, representing 1.7% of employers in the sectors inspected (ibid).

Employees with no right to work can be fined. The lowest fines are for those with residency rights but no right to work (up to €500), while irregular migrants can be fined up to €10,000 and, in some cases, expelled from Spain (Ministerio del Interior/Ministry of the Interior, 2013b).

Employers, on the other hand, can face fines of €10,001 to 100,000 per irregular worker, and a custodial sentence between 3 to 18 months, rising in aggravated circumstances (high number of workers or abuse) to up to 6 years’ imprisonment. They also risk the closure of their facilities ( OECD , 2018).

Informing the evaluation of the compliant environment

This review found that the measures making up the compliant environment have attracted a variable number of research studies. This means that the number of topics explored within these areas vary, and so does the robustness of the coverage. Some areas, such as the Right to Rent Scheme, have seen a relatively large amount of quantitative and qualitative assessment, while other areas, such as benefits and work, have mainly been explored qualitatively. Driving and banking have not been the standalone focus of any research reviewed.

This review has also highlighted important evidence gaps, which may warrant further exploration. These include any unintended consequences and deterrent effects, as well as the cumulative effects of the compliant environment.

Future research should aim to build on the findings summarised in this literature synthesis. It should also seek to establish a much wider evidence base on the effectiveness and proportionality of the compliant environment itself.

The review of other countries has shown that, although broad principles around access to services can be similar across the 3 countries compared to the UK, the tools used in implementing the measures vary. This means that the value in comparing other countries’ approaches across all areas might be somewhat limited.

While access to services can be similar, France, Germany and Spain use ID cards for all their residents, which are often used or required as proof of ID and/or residence to access a range of services. As ID cards are widely used when in contact with authorities, in practice, automatic checks take place in those countries.

The review found that right to work was the measure with the most international similarities so could therefore warrant further exploration around the practicalities of implementing inspections and penalties for illegal working, for example. Further academic studies assessing the impacts of the measure across the 3 countries compared could be reviewed especially concerning deterrence.

Though access to healthcare, work and rent is based on residency rights, the checks in place, and the responsibility of third parties to check immigration status, appear to vary quite significantly between the UK and the other countries (although reporting obligations exist to some extent in Germany). The literature synthesis also highlighted potential implications related to third-party enforcement, in the areas of right to rent and right to work.

This review has found that, rather than looking at the full set of regulations in a country, it might be more beneficial to look at specific obligations that are in place in the UK and elsewhere, such as third-party checks, and to explore in more detail the implementation of these obligations and any external research concerning them.

These findings will inform future planning in terms of areas to focus on in more detail when assessing the effectiveness and proportionality of the compliant environment.

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Appendix A: Search terms

The terms “compliant environment” uk and “hostile environment” uk were combined with “no recourse to public funds”, benefits, banking, NRPF , “Right to Rent”, “driving licence”, “right to work”, “healthcare access” and NHS + health. Searches of the terms “Right to Rent”, “undocumented migrants” work uk, “undocumented migrants” “access to health services”, “no recourse to public funds” impact, “hostile environment policy” effect, “hostile environment” impact, “immigration sanctions” and “irregular immigration status” were also conducted. Google and Google Scholar were used for these searches.

Appendix B: References for the literature synthesis

Aliverti, A. (2016) Immigration offences: Trends in legislation and criminal and civil enforcement. Migration Observatory.

Bawdon, F. (2014) Chasing Status: If not British, then what am I? Legal Action Group.

Bloch, A. and McKay, S. (2015) ‘Employment, social networks and undocumented migrants: The employer perspective’. Sociology, vol. 49(1), pp. 38-55.

Bloch, A., Kumarappan, L. and Mckay, S. (2015) ‘Employer sanctions: The impact of workplace raids and fines on undocumented migrants and ethnic enclave employers’. Critical Social Policy, vol. 35(1), pp. 132-151.

Britz, J.B. and McKee, M. (2015) ‘Charging migrants for health care could compromise public health and increase costs for the NHS ’. Journal of Public Health, vol. 2, pp. 384-390.

Crawford, J., McKee, K. and Leahy, S. (2020) ‘More than a Hostile Environment: Exploring the Impact of the Right to Rent part of the Immigration Act 2016’. Sociological Research Online, vol. 25(2), pp. 236-253.

Dickson, E., Jolly, A., Morgan, B., Qureshi, F., Sojka, B. and Stamp, D. (2020) Local Authority Responses to People with NRPF During the Pandemic. Research Report. Institute for Community Research and Development ( ICRD ): University of Wolverhampton.

Dickson, E. (2019) Not Seen, Not Heard: Children’s experiences of the hostile environment. London: Project 17.

Düvell, F., Cherti, M. and Lapshyna, I. (2018) Does immigration enforcement matter? Irregular migration and control policies in the UK. Oxford: Centre on Migration, Policy and Society.

Grant, S. and Peel, C. (2015) ‘No Passport Equals No Home’: An Independent Evaluation of the ‘Right to Rent’ Scheme. Joint Council for the Welfare of Immigrants.

Hodkinson, S., Lewis, H., Waite, L. and Dwyer, P. (2020) Fighting or fuelling forced labour? The Modern Slavery Act 2015, irregular migrants and the vulnerabilising role of the UK’s hostile environment. Critical Social Policy.

Jolly, A. (2018) ‘No recourse to social work? Statutory neglect, social exclusion and undocumented migrant families in the UK’. Social Inclusion, vol. 6(3), pp. 190-200.

Jolly, A. (2019) ‘From the Windrush Generation to the ‘Air Jamaica generation’: local authority support for families with no recourse to public funds’, Social Policy Review 31: Analysis and Debate in Social Policy, p. 129.

Kang, C., Tomkow, L. and Farrington, R. (2019) ‘Access to primary health care for asylum seekers and refugees: a qualitative study of service user experiences in the UK’. British Journal of General Practice, vol. 69(685), pp. E537-E545.

Karamanidou, L. (2019) Border Management and Migration Controls – UK Report. RESPOND.

Leahy, S., McKee, K. and Crawford, J. (2018) ‘Generating confusion, concern, and precarity through the Right to Rent scheme in Scotland’. Antipode, vol. 50(3), pp. 604-620.

MHCLG (2019) English Private Landlord Survey 2018. Ministry of Housing, Communities and Local Government.

Mykkanen, N. and Simcock, T. (2018) Right to Rent and the Impact on the Private Rented Sector. Residential Landlords Association.

Nellums, L.B., Rustage, K., Hargreaves, S., Friedland, J.S., Miller, A., Hiam, L. and Le Deaut, D. (2018) The lived experiences of access to healthcare for people seeking and refused asylum, Equality and Human Rights Commission Research report 122.

Odumade, V. and Graham, P.L. (2019) ‘Everyday experiences of migrant families with No Recourse to Public Funds’. The British Psychological Society North East Branch Bulletin, Autumn 2019 issue (10), pp. 31-42.

Oliver, C. (2020) ‘Irrational rationalities and governmentality‐effected neglect in immigration practice: Legal migrants’ entitlements to services and benefits in the United Kingdom’. The British Journal of Sociology, vol. 71(1), pp. 96-11.

Papageorgiou, V., Wharton-Smith, A., Campos-Matos, I. and Ward, H. (2020) ‘Patient data-sharing for immigration enforcement: a qualitative study of healthcare providers in England’. British Medical Journal Open, vol. 10(2), e033202.

Patel, C. and Peel, C. (2017) Passport Please: The impact of the Right to Rent checks on migrants and ethnic minorities in England. Joint Council for the Welfare of Immigrants.

Poduval, S., Howard, N., Jones, L., Murwill, P., McKee, M. and Legido-Quigley, H. (2015) ‘Experiences among undocumented migrants accessing primary care in the United Kingdom: a qualitative study’. International journal of health services, vol. 45(2), pp. 320-333.

Schweitzer, R. (2017) ‘Integration against the state: Irregular migrants’ agency between deportation and regularisation in the United Kingdom’. Politics, vol. 37(3), pp. 317-331.

Schweitzer, R. (2020) ‘How inclusive institutions enforce exclusive immigration rules: Mainstream public service provision and the implementation of a hostile environment for irregular migrants living in Britain’. Politics of (dis) integration, pp. 121-140. Springer, Cham.

Skehan, A., Sandhu, B., Payne, L. and Wake Smith, E. (2017) Precarious Citizenship: Unseen, Settled and Alone – The Legal Needs of ‘Undocumented’ Children and Young People in the England and Wales. London: Migrant and Refugee Children’s Legal Unit ( MiCLU ).

Yuval-Davis, N., Wemyss, G. and Cassidy, K. (2018) ‘Everyday bordering, belonging and the reorientation of British immigration legislation’. Sociology, vol. 52(2), pp. 228-244.

We’re always looking to improve the accessibility of our documents. If you find any problems or have any feedback relating to accessibility, please email us at [email protected] .

A term to describe a range of evidence and literature not published in a commercial publication, for example, reports by charities or government.  ↩

Note that while we have included published evidence for this specific time period, the synthesis does include some research where fieldwork took place prior to 2014.  ↩

See Walsh & Sumption (2020) for a discussion of recent external studies on the size of the irregular migrant population.  ↩

Individuals are selected based on subjective non-random criteria which means that not everyone in a population has the same chance of being included.  ↩

Note that this refers to before the UK’s exit from the EU .  ↩

Proportion of those who had carried out right to rent checks: 87% of agents; 77% of landlords with 5 or more properties; 65% of landlords with 2 to 4 properties and 53% of landlords with one property.  ↩

A total of 316 survey responses were received from landlords and agents. The mystery shopping included 7 fictional personal profiles sent to a total of 750 online adverts.  ↩

As well as some specific other treatments.  ↩

With the exception of those with a Health and Care Worker visa.  ↩

Though there are some exceptions, including assisted conception services.  ↩

Urgent treatment is defined as treatment that cannot wait until someone returns home – for irregular migrants this timeframe is decided on a case-by-case basis but is often 6 months.  ↩

In 2019, 70% of all those found to be irregularly present in the EU were based in Germany, Greece, France and Spain ( Eurostat, 2020 ).  ↩

A term to describe a range of evidence and literature not published in commercial publication, for example, reports by charities or government.  ↩

A person is ordinarily resident if they are living in the UK: 1) lawfully, 2) voluntarily, 3) for settled purposes as part of the regular order of their life for the time being, whatever the duration. People subject to immigration control must have indefinite leave to remain to be classified as ordinarily resident.  ↩

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The Impact of External Influences and Personal Values on Career Decisions

1. introduction.

In the career decision-making literature, the factors that influence the career decisions of students can be divided into two types: external influences and personal value types. External influences refer to the influence of a party present outside the individual or the environmental structure on a decision made by students. These could be inherent in the external environmental structure in which students live and from which students obtain their beliefs and socializations, or they could be economic conditions students currently face. On the other hand, personal value types refer to the student's frame of reference, or decision-making model that is value-based, which students would use to make career decisions based on their values related to work and education. External influences and personal value types, according to Schein, result in individual career behavior. Schein's model of career behavior is a behavioral theory on how individuals confront career tasks: lifecycle career issues that individuals confront in school and subsequently when they seek work, explore work, gain work and deal with progress in work and transcript and trek, i.e., the sequence of roles that provide a stage for either the evolution or the progression of one’s career. Schein proposes that career decision making is dependent on an interaction between individual characteristics and Weberian class (the individual's relationship with their economic system) and community social structure. Individuals or families endowed with resources, including economic resources or other resources in society, such as human and social capitals, would have completed more levels of education and be in occupations of higher economic prestige and security. Additionally, the employment environment and work tasks for successful transition to adult economic roles would be more challenging and existential priority for the economically less advantaged.

1.1. Background and Significance of the Study

The challenge for the individual career decision-maker is to find a way of taking these external influences into consideration in promoting a satisfactory balance between the many potentially relevant personal values and motives. To the extent that the individual believes such a balance to be politically legitimate, he may experience some measure of career decision control, and his general interactions with the working system are likely to be facilitated. Such control is important, of course, for satisfaction, creativity, and performance in individual jobs, and is thus appropriate for a process as obviously linked to the psychological and social functioning of the individual as is involved in career decision-making. To the extent that the individual conscientiously gives expression to his conflicting personal values, he may experience some measure of career decision alignment, and his potential for stress and dissatisfaction may be diminished. However, the success with which either element, control or alignment, may be achieved probably depends on the individual's ability to perceive, value, and deal with the external influences. The more systematic and selective he can be in using external influences to shed light on the dimensions of job options that he values, and in keeping them from unduly compromising the options that are particularly important to him, the better his chances of making an effective career decision. In professional education faced with preparing individuals for important, complex, and avowedly long-term participation in career decision-making, attention to such a sophisticated, instrumental approach seems warranted.

2. Theoretical Framework

Purposeful science addresses the impact of personal values on career choices by combining affective as well as cognitive structure to depict the vocational counsel that people exercise. developed a model which combined cognitive values and motivational patterns to explain the integration of work into life as a whole. first illustrates the two-level content model of value structure which he developed and which is prerequisite to his theoretical construction. The second part of the paper shows how these cognitive patterns are linked to the basic motivational patterns of people. The third point highlights the relevance of social context. According to Büchel, the process of making sense of the vocational world is initiated by the interaction of individual level values and the multi-dimensional complexity of the vocational environment. The outcome of the interaction is the self-assignation of work and work content in terms of ability by means of a co-ordinating device, which Büchel calls vocational construct, which enables the agent to engage more or less successfully in productive activity (i.e. improve the adaptation of environment/agent patterns).

2.1. Definition of External Influences and Personal Values

Let it be noted from the onset that CECs are assumed to be embedded in and influenced by the general economic and societal context; as such, external influences play a major role in molding and shaping the educational and professional choices of individuals. The phrase "external influences" typically refers to the full range of forces shaping and directing career choices. The potential influences are numerous, ranging from the immediate and temporal - such as parents' expectations - to the more distal and societal - the macro-economic structure and professional opportunity patterns. Values are sets of guiding beliefs that shape and direct human activities, binding people in commonly held customs and institutions that have disparate effects on people's lives; as such, personal values play a significant role in career choice decisions. In this paper, we use a definition of career decision making similar to that adopted by Feldman and Bolino (1996:1344): "the purely economic side of career decision making – that is, decisions about occupational choice, advancement, and effort level" (emphasis in original). In other words, people's interests and/or involvement in J. Caren Pee's (1991:6) "domain of work" are assumed to be shaped and influenced by an organizationally based world view, defined by her as "sets of beliefs and biases about what is valued in the work environment". As such, they assume that aside from the purely economic components of the decision, organizational climates influence decisions about occupational choice.

3. Literature Review

In choosing a profession and life career, an individual is influenced by a vast number of factors. Parents exert the strongest overall influence, while the reward potential of a profession appears to be the most important type of personal value related to a business career. While women are influenced by the environmental requirements and job opportunities, men tend to be influenced by social standards, social status, job opportunities, social influence, and role demands. In the sociological literature, at least three separate research traditions have focused on the social forces that shape individuals' career choices. A tradition, unique to the career literature, emphasizes the effects of individuals' personal characteristics on career choices. Hathaway et al. maintain that social influence worksheets provide useful information to social scientists, particularly where specific career issues are under consideration. Associated with this perspective is a substantial literature identifying individual differences that shape career choices. Such research tends to underscore the importance of family background, race, gender, and other personal characteristics in predicting career paths. The focus of these studies is on how these impact individual career decisions and patterns.

3.1. Key Theories and Concepts

The base point from which all earlier career theories depart is quite straightforward: that to understand one’s career choices and aspirations, one must look to the outside influences at stages of development. These external influences, which have been analyzed and classified in numerous different ways, are often seen as serving to direct the individual either toward (society, other people...) or away from (contrary values, beliefs, etc.) a particular career, occupation, or job. In addition to considering the place of these external influences in the making and molding of individuals’ career choices and aspirations, we also examine their interrelationship within the total process of career planning and decision. Since the model suggests that in the long run, external influences are likely to hold sway in determining the occupation and role that an individual actually undertakes within society, we also refer to the possible process of de- and/or re-socialization in which individuals appear to engage at different stages of their life. A second theme to emerge from the literature on career choice (both from those advocating different career theories and also from distinguished career researchers) is the matter of personal values. These appear to have a pivotal role. It is personal preference, or individual ends, that ultimately drive and direct any individual choice or activity. Without such preference, one has no sound basis on which to make any choice at all. Regulations, other people’s values, and others' needs are often set up against those of the individual. They perhaps this inclination comes from what some may consider a neglect of these could normally be considered the more fundamental, structural considerations that were thought to underpin decision, particularly those in the area of occupation choice. Again, a part of the answer may be that in recent years, there has been a move away from the more formal models, both to a broader field of economics and indeed to other social science disciplines.

4. Methodology

In order to investigate the influence of external pressures and internal values on career decision-making, an exploratory study was carried out. The method used was a questionnaire design, combined with semi-structured interviews. The initial questionnaire was developed on the basis of the literature review and has been pilot tested in a previous phase of the research project. The information received from the pilot testing was analyzed and the questionnaire revised. This final version was then completed by 135 undergraduate students at a university in the United Kingdom. After the first phase of analysis of the questionnaire data, 25 of the respondents were selected at random to take part in a semi-structured interview. The interviews were tape-recorded and transcribed and analyzed in conjunction with the questionnaire data. The main research question was: What personal values and external influences affect students' career decisions, and how is this abstract preference reflected in decisions to take a job related to the chosen field of study, job location, and type of organization? The questionnaire included the following sections: - Sociodemographic information (gender, age, country of origin, paternal level of education, current level of education, and course of study). - Competence questionnaire. - Value proposition, which required ranking various attributes of a job in descending order of importance. - Subissue questionnaire to establish whether subissues affected job decisions. - Nine external influences on career decision-making were included. The items on the questionnaire are shown in the Appendix and were measured on a 5-point Likert scale.

4.1. Research Design and Data Collection

The data for this research were collected during the Erasmus Course "Global Business and Career Development Practicum" held in Shanghai, China. The course is designed for IBA students in the second year of their studies. As part of this course, students have to do a three-week internship in order to gain international business exposure. For these internships, primarily Chinese companies were targeted. Prior to the course, students are offered career development training and are supported in their career development process and job search strategies, using career counseling theories and techniques. The training aims at developing more self-understanding, awareness of global markets, and values needed to connect with and succeed in global business practice. Apart from taking part in this internship, students are required to work on their personal career development process, more specifically reflect on their personal values, their function in organizations, and the connection to more international job opportunities. Students have to actively engage in professional development in order to take responsibility for their own career decisions and actions. The career development part of the course includes various exercises and assignments during the three-week internship: students interview Chinese employees about their attitudes, career paths, company loyalty, leadership styles, and accepted business ethics at the company. Also, students are to do assignments aimed at comprehending job requirements, expected relations in the industry, and an overview of salary structure. Finally, their career development process is concluded with students delivering a report on their main findings and participating in a final seminar of the practicum. This seminar is essential in order to generate more in-depth understanding and insight.

5. Findings and Analysis

In the previous section, evidence of the relationships between some external phenomena and career barometer choices was provided. At the same time, we noted the influence of certain personal characteristics upon job preferences. In this section, returning to the individual, the external influences for which relationships have been found will be reviewed in order to synthesize a more integrated understanding of factors affecting the sample. Firstly, we will discuss the constellation and direct nature of relationships between career decisions and value domain scores. The findings in this paper indicate that the association between empathy and service could be of particular relevance to the recruitment and retention plans of the financial services industry, as the organizations that comprise it have been associated with high power maps of value for self and money. In addition, by application of the concept that corporate culture acts in a heuristic role in the determination of acceptability relationships for particular organizations, it is clearly important for service-oriented companies to be selective in their recruitment. Follow-up research to this study supports this view. To employees of financial services firms, the person/job match with a company high in empathy would be important, particularly if the previous decisions were found in more respondents besides the sector-specific sample to be linked with socio-geodemographic and work-life value concerns.

5.1. Comparison of External Influences and Personal Values

The section began by discussing the constraints affecting career planning in organizations. In our system, we place these constraints, which lie at two different levels, in a wider context, showing the influence of management and personalistic values. This enabled us both to set external influences against an individual's interests and personal values and to consider cultural and individual differences. In the previous section, we drew attention to the extent of management influences that limit an individual's career planning options. Some of these can be resisted or worked around, but others are dependent on the policies of higher management and the internal organization of a particular company. Many corporations have well-defined career ladders and standard policies for assessing their employees' career prospects. However, malcontents may drop off the ladders, and others are simply not suited to climb them because they are not good soldiers. To them, no opportunities at all are made available.

6. Discussion and Implications

The dynamic model of the impact of societal influences and personal values described in this chapter demonstrated the complexity of career decisions made by university graduates at the time of graduation. This model applied to over half of the graduates in the study who were willing to venture short-term work in Eastern Europe and/or countries of the Confederation of Independent States. The balance of the graduates who were reluctant to leave New Zealand at graduation were noted to be equally confused about their career choices. The majority of these students were female, entered the university straight from secondary school, were well-adjusted students holding external views of the world of work, and had failed to engage in self-development activities during their undergraduate studies. Not only has the range and breadth of sources of societal influences and personal values been demonstrated to be more complex, but this chapter also identified that these sources of influence can be either distal and/or act to be unrelated or reinforcing. In comparing the career decision-making process of undergraduates in New Zealand to that of those studying leadership programs in the USA, the study found that at the time of graduation, large numbers of university students were confused about their career choices. The graduates of the study were characterized for being externally directed, unsure of their career direction, self-deceptive about their choice, and resisting doing the sort of work they see others like themselves engaging in. These findings are comparable with those of the USA study. The study also found no support for the self-planning model of career development for graduates choosing to leave New Zealand within fifteen months of graduation and little support for any of the five vocational theory models save one: Holland and his hexagon.

6.1. Practical Applications and Recommendations

The following recommendations for individuals, educators, employers, and policymakers follow from the findings of the research. For individuals, the consideration of strong personal values when making career decisions implies a need to address these directly. The values an individual holds are reflected in perceived behavioral control, intention, and decision-making stages of the applicant-organizational attraction and other career-making processes. If objectives are consistent with an individual’s values, then subsequent actions are more likely to be successful. Individuals might also be advised to identify the degree to which their decisions may be influenced by outside sources and question the objectivity and fairness of these influences. Or, when contemplating competing career choices, the potential payoff to the individual, if the most valued career choice is taken over another, should be weighed. Individuals may also give priority to the direct and indirect impact on their values of six specific issues that surfaced as having implications for career decisions. These issues are work-life balance, corporate social responsibility, trust and ethical conduct in the employment process and between managers and employees, diversity, the job and industry stigma, and understanding of individual values and concerns by human resources managers. A greater understanding of these six topics emphasizes the need for really good career advice and counseling from careers advisers and especially for those interacting with students. It also opens up opportunities for non-career educators to address values primarily in areas of the curriculum that endorse the consideration of individual values in how they are discussed. These may include high-level values like sustainability and diversity and issues like appropriate employment practice that are part of discussions about other topics. Besides careers educators, other teachers have an impact on career preferences and thus how values are likely to be considered. The possible influential role of teachers implies a tactical approach for business school faculty members. If the findings are indicative of the perceived impact of career development and business studies training on individuals' values throughout life, it suggests that business courses, in addition to developing technical skills and application, also inculcate social, environmental, and ethical standards. Furthermore, integrating work-life balance with other aspects of a performance managing course aligns a collection of distinctive business competencies. Understanding and challenging or reinforcing the message received by students are also necessary for those involved in recruitment messaging since their intention is to attract the best candidates through corporate image. Teaching and administrative staff within professional recognition bodies are also charged with checking the ethical and professional standards in the business world. For employers, the practical consequence of enhancing the employment decision-making process would imply a greater understanding of the most frequently cited values and that work would involve respectfully addressing general factors cited during the face-to-face stages of the employment process. Implementation happens in pre-, during, and post-event communications, before and after the recruitment process, beyond the labor supply and before or at the decision-making stage. Consciously managing and nurturing the role responsibilities and opportunities that exist in corporate life is part of managing the employment lifecycle more sensitively. It also means acquiring data on organizational values and calculating the output performance that is affected by being seen as the employer of choice. Thus, commercially-owned intellectual property is improved by relating business reputation to the processes relied on for assurance; by developing a context that encourages professional behavior; by creating socially, ethically, and environmentally sustainable business models; by increasing flexibility and reducing inequality; and by supporting the nurturing of healthy and balanced working lives.

7. Conclusion

Understanding and being able to predict what type of career choice a person will make is important for those individuals in organizations who help them to make those choices. It is also important on a national level for the development of the workforce and economy. For future studies within this area, the following conclusions can be drawn from the present study. Broad teaching and educational programs in secondary schools have a major influence on a student's career choice. More information is available about the career choice predictors of those who will either not complete a four-year degree or go on to a community college, technical school, or to work. The academic environment of the school where the student is doing the present study affects career choices. Students motivated by values and beliefs expressed a higher percentage of business careers, as did students from the public school sector. In addition, these students may have higher career-seeking self-efficacy, and their vocational attitudes may be influenced by parental role models. As companies find that the lack of personnel does not allow for their expansion, increasing numbers of corporate downsizings and retirements occur, one prediction to the scarcity of English-speaking university graduates will be made. These shortages may also lead to graduates being placed in a job that they are overqualified for and less satisfied with their careers. There may also be labor shortages in certain fields, thereby costing the economy in actual wages and lost production. This economic situation and the war for talent predicted by economists can be addressed in some part by educational institutions that assist in developing career decision-making skills that match one's education with the correct career. The employment outlook for high school graduates should give economic reasons for planning for the future. Prompting through education about how to do this will give potential recruits indicators about their future working environment without being concerned about who at the company is producing these guides. As it is acknowledged that there is a potential for occupational stereotypes and prejudice to interfere with students' career decision-making, a study of the level and intensity of these career choice villains should first be conducted. A second part would be to ascertain the impact that these negative career influences have upon vocational decisions. The traditionalists, humanitarians, and enterprisers will continue to affect the future of their careers as well as shaping the workforce needed for business organizations. The difficult task will be to identify these vocational personas through career education and develop their unique potential by adapting instructional tools to each of these persona types.

7.1. Summary of Key Findings

Given the dramatic changes in the work environment, individuals' professional careers are now more affected by various external influences than ever before. These influences generally result from individuals' interaction with the world around them and can be classified based on time dimension as past, present, and future influences/pull factors. What is also important is that currently, in the modern work environment, people do not only find themselves constantly influenced by the world around them but are also frequently expected to meet certain expectations. These expectations result from other people's interference and may take the form of students making unreasonable – and definitely incorrect – career decisions, not attempting to do their share of work, avoiding doing some work that should be done, failing to apply for graduate programs, deviating from the expected performance in their courses, attempting to use one's connections, and not making some arguments at the job. Personal values play a great role in this whole process as they are a reflection of the unique inner world of people, affecting their behavior and guiding their decision making in all walks of life. And personal values are both stable and individual-based perceptional data acquired as a result of a self-improving and integrative lifetime process. In other words, as each person goes through the process of acquiring perceptional data, they both reconfirm and refashion their changing personal values. Consequently, the salient importance of this research is that it examines imprints of both external influences and personal values on business students' career plans. More precisely, one aim is to understand how business students navigated external influences while deciding on a career and which career choices seemed to resonate with their personal values, with a particular emphasis on gender differences.

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Review of smart-home security using the internet of things, 1. introduction.

  • User awareness level: Users are always considered one of the weak links on the cyber risk chain, and usually, home users are not aware of the cyber threats related to smart-home devices, or may not know how to properly secure them. This can lead to weak passwords, false configurations, failure to update software, and other security vulnerabilities.
  • Complexity: Smart homes can be complex systems with many devices, sensors, and services. This complexity can make it difficult to manage security and identify vulnerabilities.
  • Interoperability and Heterogeneity: Smart-home devices are often developed by different manufacturers and use different communication protocols, which makes it difficult to ensure that they can all work together securely.
  • Remote access: Smart-home devices often allow for remote access via Internet connection, which increases the risk of unauthorized access by attackers. This is especially concerning as many users may not secure their remote access properly.
  • Limited resources: Smart-home devices often operate with limited resources, such as low power consumption, limited memory, and processing power. This makes it challenging to implement strong security protocols.
  • Lack of regulation: There are currently no standardized security regulations for smart-home devices, which means that security measures can vary widely between different devices and manufacturers.

2. Related Works

3. smart-home ecosystem, 3.1. iot in smart homes, 3.2. infotainment devices, 3.3. physical home security and monitoring, 3.4. ambient living devices, 3.5. other aspects and actuators, 4. analysis and discussions of the iot setting, 4.1. architectural structure of iot ecosystems.

  • International Organization for Standardization (ISO) and International Electrotechnical Commission (IEC): The ISO and IEC have developed several standards related to IoT, including ISO/IEC 30141 [ 93 ] which provides guidelines for the architecture and interoperability of IoT systems. While the ISO/IEC standards may not explicitly define the layers of an IoT architecture, they offer principles and recommendations for designing scalable and interoperable IoT solutions.
  • Institute of Electrical and Electronics Engineers (IEEE): The IEEE has published numerous standards and guidelines for IoT, including IEEE P2413 [ 94 ] which defines an architectural framework for IoT. While IEEE P2413 does not prescribe specific layers, it outlines key architectural concepts and considerations for IoT systems.
  • Industrial Internet Consortium (IIC): The IIC has developed the Industrial Internet Reference Architecture (IIRA) [ 95 ], which provides a comprehensive framework for designing industrial IoT solutions. While focused on industrial applications, the IIRA can be adapted for other IoT use-cases and includes concepts related to layered architectures.
  • Open Connectivity Foundation (OCF): The OCF has developed standards for interoperability and connectivity in IoT devices and ecosystems [ 96 ]. While the OCF standards primarily focus on interoperability protocols, they also address architectural principles that may align with layered approaches.
  • National Institute of Standards and Technology (NIST): The NIST has published several documents related to IoT security and architecture, including the NIST Cybersecurity Framework [ 97 ] and NIST Special Publication 800-183 [ 98 ], which provide guidance on IoT device cybersecurity. While not explicitly defining layers, these documents offer principles and recommendations for designing secure IoT architectures.
  • Application: smart environment, smart home, smart city;
  • Perception: movement sensors, smoke sensors, pressure sensors;
  • Network: nodes, servers, topologies;
  • Physical: smart phones, smart appliances, power supplies.

4.2. Threats Faced by a Smart Home and Related Countermeasures

4.2.1. application layer analysis, 4.2.2. perception layer analysis, 4.2.3. network layer analysis, 4.2.4. physical layer analysis, 4.2.5. summary of threats and countermeasures, 5. best-practices guide for a secure smart home.

  • Identify Needs: Determine what you want your smart-home devices to accomplish. This could range from enhancing security to improve energy-efficiency or simply adding convenience to your daily routines.
  • Select Compatible Devices: Choose devices that are compatible with each other and can be easily integrated into a single ecosystem. Look for devices that support common standards or platforms (e.g., Apple HomeKit, Google Home, Amazon Alexa).
  • Update/Upgrade Regularly: Set a process to automatically or periodically seek for and install updates/upgrades. Both for firmware and application software.
  • Disposal Policy: Set safe disposal strategies for all equipment, including secure deletion/destruction of data and even physical destruction of digital components and memories/storage.
  • Device’s Security Controls: Set all potential defenses that are provided by the main manufacturer (e.g., pins, extra security code, networking safeguards, etc.).
  • Minimize Exposure: Restrict connectivity to the least open/public LANs and networks that are necessary. Minimize the exposure of the system.
  • Set User Privileges: Restrict the number of authorized users to the minimum required. For each user, restrict access rights to the least privileges required.
  • Security Software: Set anti-virus, anti-malware, host-firewall, and host-IDS where applicable.
  • Delete Unnecessary Elements: Remove services, applications, or other elements that are insecure or not in use by the current system (e.g., Telnet).
  • Avoid Outdated Equipment: Do not use outdated devices that are not supported by the vendor anymore.
  • Configure Before Deployment: Before incorporating a new device to your system, verify that it is updated/upgraded, and all security and configurations are properly set.
  • Use Only Secure Versions: Install the latest secure and stable versions.
  • Set And Update Before Use: Upon installation, proceed immediately with the proper updates/upgrades, configurations, and settings of security/privacy.
  • Automate Updates: Set automated or periodic updates/upgrades.
  • Strong Authentication: Use strong passwords, as well as multi-factor authentication, wherever possible.
  • Application-Level Protections: Enable application-level firewalls, IDS, extra pins, or other defenses, wherever possible.
  • Restrict Access: Restrict access rights/permissions and connectivity to the minimum required.
  • Restrict Users: If applicable, restrict the number of users to the minimum required.
  • Especially for the technicians/engineers, always check the validity of the elements that are about to be installed (e.g., check the digital certification of the website, as well as the digest of the downloaded software).
  • For elements of unknown or less popular vendors, also check for recommendations from other users in related forums.
  • Do not install less trusted applications/software in the core of the system, especially if you have not tested them in a less critical part of your setting.
  • Monitor Operation: Where applicable, install security software for monitoring of the runtime environment and alerting.
  • Set Build-In Security and Privacy Controls: Check the offered options and set the privacy policies to the minimum required.
  • Secure Deletion: Apply secure removal strategies, logging out from all accounts and applications, revoking all acquired accesses/permissions, and securely erasing all permanent and temporary data.
  • Respond to Incidents: Set a response strategy, including details of whom you have to call and your first actions in case you notice something strange. For example, if you start receiving unknown notifications of purchase attempts in your mobile banking, you block your cards immediately and call your bank’s 24/7 security service.
  • Recover from Incidents: Set a recovery strategy in case something happens.
  • Security Configuration: Set the highest possible protections and set as a high priority the protection of the equipment that facilitates networking, especially for the devices that have direct access/exposure to Internet, and especially the main router.
  • Security Primitives: Activate or set additional firewalls and IDS/IPS. Use the most restrict policies possible.
  • Usage Zones: Create different LANs and virtual LANs (VLANs) for different usage zones of the smart home.
  • Remote Access: Consider setting an in-house virtual private network (VPN) for accessing the smart home remotely (e.g., the surveillance system).
  • Least Privileges: Restrict the privileges of services that are exposed to the Internet.
  • Network Monitoring: Install monitoring systems and periodically audit the activity of your system.
  • Decrease Attack Surface: Disable insecure communication protocols and services (e.g., http), as well as elements that are not currently in use.
  • Regular Updates: Similar with the devices, do not use outdated equipment.
  • Strong Passwords: Use strong, unique passwords for your Wi-Fi network and each of your smart-home devices.
  • Network Segmentation: Consider creating a separate Wi-Fi network for your smart devices to isolate them from the network you use for personal computing, reducing the risk of cross-device hacking.
  • Regular Updates: Keep your router’s firmware and your smart devices’ software up to date to protect against known vulnerabilities.
  • Follow Installation Guides: Carefully read and follow the installation instructions provided with your devices. This may include downloading an application, connecting to Wi-Fi, or performing initial setup steps.
  • Optimal Placement: Place devices in locations where they can function effectively (e.g., smart cameras with a clear field of view, smart thermostats away from direct sunlight).
  • Choose a Central Control System: Select a central hub or application that can control all your devices. This unifies control and makes managing your devices more convenient.
  • Customize Settings: Adjust settings for each device according to your preferences. This may involve setting schedules, creating automation rules, or defining scenes.
  • Test Operations: After setting up, test your devices individually and the system as a whole to ensure they work as expected.
  • Troubleshoot Issues: If a device is not working correctly, consult the troubleshooting section of the device manual or contact customer support.
  • User Training: Educate all household members on how to use the smart devices, emphasizing the importance of security practices, like not sharing passwords.
  • Manage Your Passwords and Accounts: Consider utilizing password/account managers.
  • Backup Your Data: Set a backup strategy.
  • Regular Reviews: Regularly review your smart-home setup to ensure it continues to meet your needs. Adjust settings, add new devices, or remove unnecessary ones as needed.

6. Directions for Future Research

  • Enhanced Biometric Security: Developing more sophisticated biometric authentication methods that leverage the unique capabilities of smart-home devices.
  • Context-Aware Security Protocols: Creating security protocols that adapt to the user’s context and environment within the smart home.
  • Decentralized Security Mechanisms: Exploring blockchain and other decentralized technologies for managing identity verification and ensuring data integrity.
  • Privacy-Enhancing Techniques: Developing methods for protecting personal data captured by smart-home devices, using advanced anonymization techniques and local data processing.
  • Secure Multi-User Interactions: Enhancing security for environments where multiple users interact with the same devices, like smart TV or AR/VR equipment.
  • Robust Malware Detection: Implementing sophisticated systems for detecting malware in IoT devices, including smart locks and cameras.
  • Physical and Network Security Integration: Investigating ways to integrate physical security measures with network security protocols across smart-home devices.
  • Energy-Efficient Security Protocols: Creating security solutions that minimize energy consumption, particularly for devices like smart locks and smart plugs.
  • Secure Device Management and Disposal: Ensuring secure lifecycle management of smart-home devices, from installation to disposal, to prevent data leaks.
  • International Security Standards for IoT: Developing and promoting the adoption of global security standards for IoT devices to ensure consistent security practices.
  • Anomaly Detection Using AI: Leveraging AI to detect and respond to unusual behavior or threats in smart-home environments.
  • IoT Device Interoperability and Security: Ensuring that all interconnected smart-home devices adhere to strict security protocols to prevent vulnerabilities.
  • Ethical Design and User Consent: Examining ethical issues in smart-home technology deployment, especially regarding surveillance and data-collection practices.
  • Forensic Capabilities for IoT Security: Developing forensic tools and techniques for investigating and mitigating security incidents in smart homes.
  • Consumer Awareness and Education: Enhancing user understanding of the potential risks and security practices associated with smart-home technologies.
  • Regulatory Compliance and Privacy Laws: Addressing compliance with existing and emerging privacy laws and regulations that affect smart-home technologies.
  • Advanced Encryption Methods: Researching more robust encryption techniques to secure data transmission between smart-home devices and external networks.
  • Hybrid Energy-Efficient Privacy Preserving Schemes: Developing privacy-preserving protocols that balance energy efficiency with effective privacy protection, especially in communication-heavy IoT environments, like smart homes.

7. Conclusions

Author contributions, data availability statement, acknowledgments, conflicts of interest.

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Click here to enlarge figure

LayerThreatsCountermeasures
ApplicationSocial-engineering and phishingThreat modeling [ ], ML detection [ , ], user training, and raising awareness [ , ]
Installation of malicious software and applicationsCode and application analysis [ , , ]
Attacks on access controlMulti-factor authentication [ ], privacy preserving authentication [ ]
Rootkit attacksRootkit detection with TEE [ ]
Failure to install security patches and updatesUser education [ ]
PerceptionEavesdropping and sniffing attacksOperate within private networks and transmission of fake packets protocol [ ]
Side-channel attacksEncrypted communication [ ]
Noise in dataAI and neural network anomaly detection [ ]
Booting attacksSecure booting with encryption and authentication [ ]
NetworkDoSWARDOG device notification and mitigation mechanism [ ]
Man-in-the-middleMulti-factor authentication of device and server [ ]
Unauthorized accessAttribute-based access control with HABACα [ ]
Routing and forwarding attacksTrust-based computing with SCOTRES [ ]
Traffic analysisIDS/IPS [ ]
PhysicalLoss of power and environmental threatsN/A
CloningQuantum key distribution [ ]
JammingML with SVM classifiers [ ], trust-based authentication with TRAS [ ]
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Vardakis, G.; Hatzivasilis, G.; Koutsaki, E.; Papadakis, N. Review of Smart-Home Security Using the Internet of Things. Electronics 2024 , 13 , 3343. https://doi.org/10.3390/electronics13163343

Vardakis G, Hatzivasilis G, Koutsaki E, Papadakis N. Review of Smart-Home Security Using the Internet of Things. Electronics . 2024; 13(16):3343. https://doi.org/10.3390/electronics13163343

Vardakis, George, George Hatzivasilis, Eleftheria Koutsaki, and Nikos Papadakis. 2024. "Review of Smart-Home Security Using the Internet of Things" Electronics 13, no. 16: 3343. https://doi.org/10.3390/electronics13163343

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