68 EFFECTIVENESS OF GOVERNMENT EXPORT ASSISTANCE FOR U.S. SMALLER-SIZED MANUFACTURERS: SOME FURTHER EVIDENCE

Gerald Albaum* Graduate School of Management, University of Oregon, U.S.A.

Introduction and Methodology Current statistics indicate a considerable untapped potential in overseas markets, particularly for the smaller U.S. companies. The role of federal and individual state governments - in spite of current contrary evidence - is potentially particularly relevant and this paper therefore reviews the level of awareness and usage of government assistance amongst a sample - from Oregon, Washington and Idaho - of smaller manufacturers. The sample of 129 respondents (86 existing exporters and 43 non exporters), all with under 500 employees, was supported by a small number of contracts at federal and state government level.

Results and Discussions Almost 80% of exporters began exporting as a result of company sales effort or an unsolicited enquiry/order. Only 1 respondent started with a federal government generated lead, whilst none came from state governments.

Major problems encountered overseas included documentation, lack of customer leads, foreign competition, locating distributors and markets and financing sales. Surprisingly, lack of government assistance was very infrequently raised which may indicate a low awareness level of governmental services or that little is to be gained by working with governments.

The non exporters were neutral about assistance offered because little government activity had been directed towards them and they were unfamiliar with the existing availability and usage of government programmes.

Conclusions Contrary to governmental views, their programmes are generally unfavourably viewed and there is therefore a need to reappraise the effectiveness of export assistance programmes as well as the methods used to generate user awareness amongst businesses.

Accepting the small sample base, there is evidence of a lack of understanding between government and small business as to the role and value of existing export assistance programmes. Future programmes should consider the real needs of the small exporter and acknowledge their different stages of development, varying periods of overseas involvement and levels of export expertise.

Introduction Less than 10 percent of gross national prod­uct in the United States is spent each year for exports and imports. In addition, it has been estimated that as few as 30,000 U. S. com­panies do any type of exporting and that there are about 20,000 additional companies

that could sell successfully in foreign markets [14]. It seems, therefore, that there is a great potential for business firms to tap overseas markets. This is particularly true for small

The author acknowledges the assistance provided him by the RGK Foundation in Austin, Texas, where he was RGK Scholar during the time this paper was written.

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business. The evidence seems to be quite clear that current export activity is directly related to size of firm.1 Since such a large proportion of the larger firms already export, it can be argued that the potential for "new" firms to begin exporting is greatest for smaller companies.

Previous research has provided many reasons why business firms, particularly smaller-sized companies, have not been more heavily engaged in exporting than they have [1]. In addition to the general and historical feeling of lack of concern and interest on the part of American business, specific difficul­ties encountered include: (1) determining for­eign opportunities, (2) obtaining adequate representation in foreign markets, (3) obtain­ing funds necessary to get started in export­ing, and (4) understanding foreign business practices [2]. In another study, the following market problems faced by small exporters were uncovered; high cost of transport and distribution, high tariffs and restrictions, in­sufficient marketing information, and diffi­culty in export mechanics [8]. Finally, it has been reported recently that a number of man­agement and firm characteristics account for a large amount of the variation in the export marketing behavior of companies [4].

So-called external change agents can play a key role in the export performance of a firm. One major external change agent is gov­ernment. Assistance is available through the various export promotion (i. e., assistance) programs of the federal government (Depart­ment of Commerce, Small Business Admin­istration, etc.) and individual state governments. Although the services pro­vided by most government agencies are avail­able to all companies regardless of size, it is small business that is most likely to need the types of assistance that are available, particu­larly when first starting exporting. There is evidence, however, that smaller companies

are less likely to be aware of the availability of such assistance and less inclined to view it as being important than are larger firms [9, 13, 14]. It has been suggested that firms find a high absolute level of export sales a pre­requisite before using specific export incen­tives [12].

The purpose of this paper is to report on a study which examined primarily the level of awareness, extent of usage, and percep­tions of value of government export assist­ance activities directed to smaller manufacturers. Other recent studies have addressed various aspects of this issue [3, 5, 6, 9, 10, 11, 13, 14].2 One conclusion reached by, or which can be inferred from, most of the recent research is that government ser­vices are not widely known or used, and among firms using such services in the past, satisfaction has not been very great.

Methodology As a preliminary phase of the study, semi-structured depth inteviews were conducted with representatives of the U. S. Department of Commerce, U. S. Small Business Admin­istration, and State Government for the states of Oregon, Washington, and Idaho. A total of nine such interviews were made. While this is a rather small sample, it was adequate for its intended purpose. As an aspect of ex­ploratory inquiry, these interviews were de­signed to provide relevant information for developing the measurement instrument to be used in the study.

Data were collected using mail survey tech­niques. Questionnaires were sent to two sep­arate equal-sized samples of business firms in the states of Oregon, Washington, and Idaho: (1) exporters, and (2) non-exporters. Although the primary focus of the study was to be on exporters' experiences, etc. with government assistance programs, it was felt that relevant information bearing on the ef-

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fectiveness of government could be obtained from firms that were not exporters. One of the major purposes of government assistance programs is to provide assistance, through personal contacts and other outreach meth­ods, to firms not presently exporting but who might be interested in exploring and ulti­mately pursuing export markets. Conse­quently, non-exporters provide a perspective about government programs not available from exporters. Those companies already en­gaged in exporting included both manufac­turers and non-manufacturers whereas only manufacturers were included in the non-ex­porter sample. An original sample of 642 companies was selected randomly from the most recent international trade and manufac­turing directories for the three states. The sample included only companies reported in the sample frames as having less than 500 employees. The questionnaire used was de­signed to provide the following types of in­formation: (1) characteristics of the firm; (2) characteristics of existing international activi­ties; (3) perceived problems and obstacles affecting actual and potential international operations; and (4) familiarity, usage, and perceptions of usefulness of selected organi­zations offering assistance.

Usable responses were received from 190 companies, representing an overall response rate of 31 percent of those actually receiving the questionnaire. The response rates varied among the three states, ranging from about 27 percent for Idaho to 39 percent for Oregon. Although there were some differences be­tween responding companies from each state, for most of the variables such differ­ences were minor and not statistically sig­nificant. Therefore, the findings are presented for the three states combined. In order that the exporter and non-exporter samples be comparable, only those respon­dents indicating that their primary business

activity was manfacturing were used for analysis. This reduced the number of usable responses to 129 companies. Of these, 86 companies operated some type of export activity while 43 companies did no exporting at all. On the basis of number of employees, the responding manufacturers tended to be relatively small as about 75 percent of the exporters and 90 percent of the non-exporters had less than 100 employees.

Data were collected on selected character­istics of those companies that engage in some type of export activity (Table 1). More than one-half of the respondent exporters had been exporting for no more than 10 years at the time of data collection. For the most part

Table 1 Percent Distribution of Selected Characteristics of

Manufacturer Respondents that Export

Characteristic Percent of Respondents* NUMBER OF YEARS EXPORTING:

Less than 6 6-10 11-15 16-20 More than 20

FREQUENCY OF EXPORT: Rarely Seldom Now and then Pretty often Most of the time

EXPORT VALUE DURING PAST YEAR: $50,000 or less $50,000-$100,000 $100,001-$500,000 $500,001-$1,000,000 $1,000,001-$5,000,000 More than $5 million

PERCENT OF SALES FROM EXPORT: Less than 10% 10-25% 26-50% More than 50%

(N=85) 27.1 25.9 14.1 11.8 21.2

(N=86) 10.5 8.1

36.0 12.8 32.6

(N=66) 39.4 15.2 10.6 7.6

16.7 10.6

(N=75) 62.7 17.3 13.3 6.6

*For each characteristic, the total may not add exactly to 100% because of rounding.

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respondent firms exported quite regularly. Less than 19 percent of these companies re­ported that they rarely or seldom exported while almost 33 percent indicated that they exported most of the time. Although more than one-half of all respondents did some exporting and did so fairly frequently, most companies were relatively small exporters. Slightly more than 50 percent of the exporters who provided sales data reported having ex­port sales of $100,000 or less. In contrast, about 27 percent of such companies reported export sales of at least $1 million. In addition, more than 60 percent of responding exporters indicated that exports account for less than 10% of their total annual sales, but only about 7 percent of exporters reported that exports accounted for more than 50% of annual sales.

Results And Discussion Respondent exporting manufacturers were asked to provide some data about their ex­port operations. Regarding the aggressive­ness with which companies seek export business, 41 percent of responding exporters reported that they actively sought out cus­tomers, 54 percent reacted only to unsolicited orders and inquiries, and 5 percent did both. To an extent this finding is supported by re­

spondent reports pertaining to the manner in which they first started exporting. Almost 80 percent of respondents began exporting as a result of company sales effort or an unsoli­cited inquiry or order (see Table 2). It is in­teresting to note that only one respondent started with a lead provided by a federal govern­ment agency, while not one respondent reported starting with a lead provided by state government.

Data were collected pertaining to those fac­tors which respondents perceived to be prob­lems or obstacles affecting the smooth operation of their company's export pro­grams. These results are reported in Table 3. Most frequently mentioned as problems were: documentation requirements, lack of customer leads, competing with foreign sup­pliers, locating overseas distributors, locating foreign markets, and financing sales. These findings are consistent with those reported in other studies. It is surprising, and perhaps even significant, to note that lack of assist­ance from government agencies was viewed as a problem by only a very few respondents. To test whether a unique subgroup of re­sponding exporters viewed lack of assistance as an obstacle, responses were cross-tabu­lated with exporting characteristics. For each of the government agencies, there was no

Table 2 Method by Which Respondents Started to Export

Method

Unsolicited inquiry or order from a foreign buyer Company's own export sales efforts Lead provided by State Government agency Lead provided by Federal Government agency Lead provided by a non-government organization Unsolicited inquiry or order from an export management

company or other domestic-based trader or agent General export promotion event or campaign Other

Number of Exporter

Respondents 39 23 0 1 1

5 2 7

78

Percent Distribution

50.0 29.5 0.0 1.3 1.3

6.4 2.5 9.0

100.0%

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significant relationship (chi-square test) be­tween response to the obstacle question and number of years exporting, aggressiveness of company efforts, frequency of export, export value, and percent of sales from export. On an absolute basis and in general terms, there is no lack of available assistance, although companies in different stages of export de­velopment have different needs. In addition, it has been suggested that government export assistance programs are selectively biased in their application [12] and that there is a lack of programs designed especially to meet the needs of smaller firms [15]. Consequently, lack of assistance not being viewed as a prob­lem many reflect either or both of the follow­ing situations: (1) a low level of awareness and use of government services, and (2) re­spondents do not feel there is much to be gained by working with government and, thus, lack of assistance is not viewed as an obstacle. These explanations are consistent with available data from other studies as well as other findings that emerged from this study.

Respondent companies not presently en­gaged in export activities were asked to in­

dicate the extent of their agreement or disagreement with a set of statements per­taining to specific factors that might affect export operations. Although not asked to do so, some exporter respondents also provided judgments. A five-category scale was used, and scored, as follows: strongly (1), agree (2), neither agree nor disagree (3), disagree (4), and strongly disagree (5). The results for the statements pertaining to government assist­ance are shown in Table 4. Since there were no significant differences between exporter and non-exporter respondents, responses from these two groups were combined.3 Re­spondents tended to feel that the U.S. De­partment of Commerce and the Small Business Administration did not try to inter­est their companies in exporting, and there were neutral feelings about assistance offered by state government.

All respondents were asked to indicate the extent to which they were familiar with and had used export programs of federal and state government agencies. Also, each re­spondent was to rate the usefulness to his or her company of each program. These find­ings are reported in Table 5. The program

Table 3 Respondent Perceptions of Problems or Obstacles Faced in Conducting Export Operations

Type of Problem

Lack of assistance from the U.S. Small Business Administration Financing export sales Export controls Locating overseas distributors Not knowing export procedures Lack of assistance from my state government Competing with foreign suppliers Documentation requirements Competing with other domestic companies Lack of assistance from the U.S. Department of Commerce Locating foreign markets Lack of customer leads Other

Number of Exporter

Respondents 3

19 8

22 17 4

23 25 10 3

22 24 26

Percentage of Respondents

(N=86) 3.5

22.1 9.3

25.6 19.8 4.7

26.7 29.1 11.6 3.5

25.6 27.9 30.2

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most widely known, used, and perceived to have the most usefulness was that of the U. S. Department of Commerce. Second on all dimensions was state government. On an absolute basis, however, except for the De­partment of Commerce, familiarity with and usage of government programs was quite low. Moreover, respondent perceptions of the value to them of all programs tended to

be "not useful." The extreme case is that of the program of the SBA. One possible ex­planation of the "poor showing" of the SBA is that at the time of data collection their formal export program was relatively new, as compared to the other programs.

Conclusions The results of this survey of manufacturers

Table 4 Agreement with Statements About Government Assistance

Statement My state government does not offer any assistance to companies wanting to export.

The U.S. Department of Commerce has tried to interest my company in exporting.

The U.S. Small Business Administration has tried to interest my company in exporting.

Mean Valuea

2.91 (45)

3.52 (48)

3.68 (47)

K-S Pb

.82

.87

1.00

aThe lower the value the more there is agreement with the statement. Numbers in parentheses are number of respondents who responded to the statement. bLevel of significance of difference between exporter and non-exporter respondents (Kolmogorov-Smirnov two-sample test.) This test is sensitive to any kind of difference in the distributions from which the two samples were drawn.

Table 5 Respondent Experiences and Perceived Value of Government Programs

Program Export programs of the

U.S. Department of Commerce

Export programs of my state government

Export programs of the U.S. Small Business Administration

Export credit programs of the Export-Import Bank

Percent of All Respondents Familiar (N=129)

38.0

18.6

13.9

13.2

Percent of Exporter Respondents Using (N=86)

22.1

7.0

2.3

1.2

Usefulness Mean Valuesa

(all respondents)

2.26

1.97

1.21

1.58

K-S p

.01

.22

1.0

.94 aScores are from 1 to 5, with 1 being "not at all useful" and 5 being "very useful." The number of respondents ranged from 22 to 49. Differences between exporters and non-exporters were significant only for Department of Commerce. In this case, exporters indicated higher ratings, although still tending to be "not useful."

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have distinct implications for policy, at both the state and federal levels in the United States and perhaps elsewhere. The explora­tory personal interviews with government officials responsible for international pro­grams, which can be regarded as suggestive only for this study, indicated that such pro­grams were being received favorably by busi­ness firms. The results of this survey did not support this, and, in fact seem to indicate that the opposite situation exists. This would suggest that government agencies should examine the need to re-evaluate their export assistance programs as well as the methods used to creat program awareness among business firms.

The limited geographic coverage of the sample raises questions about representative­ness. The content of assistance programs definitely varies among the states having such a program and the services offered by federal government agencies, and the man­ner in which they are implemented, probably also varies widely among the district offices. Therefore, the specific findings from this study cannot be extended without further re­search beyond the states covered. However, the situation in the three Northwest states can be viewed as a "red flag" that should be heeded - CAUTION, THINGS MAY NOT BE AS THEY APPEAR. The implication of this is that government should audit continually its programs to ensure that they are truly achieving objectives set for them. Programs that are not used are not perceived to have much usefulness by those for whom they are intended really have little value to anyone.

It might be concluded, therefore, that there is a lack of clear understanding between gov­ernment and small business as to the nature and value of existing programs. Since gov­ernment programs supposedly often are de­veloped on the basis of perceived need, the results of this study might suggest that future

services be developed with input from busi­ness firms. A risk with following this ap­proach is that what exporters and potential exporters request may differ from what they actually need. For example, in a recent study it was found that there was a great discrep­ancy between what exporters believed would help sales (from the viewpoint of the importer) and what these same exporters requested for assistance from the U. S. De­partment of Commerce [6]. Consequently, government should consider also foreign cus­tomer desires when designing programs of assistance to be offered to exporters. Such an approach would put a needed burden on the exporter to take an active interest in market­ing its product(s) abroad rather than merely "putting it on a boat" and forgetting it.

Any government export assistance pro­gram should recognize that not all companies are at the same stage of export development. Therefore, ideally there is need for a set of programs, each one targeted to firms at dif­ferent stages of export development [2].

1 One notable exception is reported in [10]. This study used sales volume as the measure of size and com­pared small firms (less than $5 million annual sales) with medium firms (annual sales in the range of $-50 million.) It was concluded that, overall, small and me­dium sized firms are quite similar in their export behavior.

2 A related study is reported in [7]. In this study, 370 exporter firms provided information pertaining to their perceptions of the U. S. regulatory environment. At­titudes toward the impact on export activities of 32 federal government regulations, laws, programs, agen­cies, and foreign market barriers were measured.

3 On the surface, the reliabilities of the estimated means may be suspect because of this procedure. However, it was felt that the amount of error introduced was minimal since the p values are extremely large and the Kolmogorov-Smirnov test is sensitive to any kind of difference in the sample distributions.

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10. Johnston, W. J. and M. R. Czinkota, "Size of Firm as a Determinant of Exporting Attitudes and Activ­ities," College of Administrative Science, The Ohio State University, working paper 80-37, 1980.

11. Rabino, S., "An Examinination of Barriers to Ex­porting Encountered by Small Manufacturing Com­panies, paper presented at the annual meetings of the Academy of International Business, 1979.

12. Reid, S., "Export Research in a Crisis," paper pre­sented at the Second International Symposium on Exporting, Rio de Janeiro, 1982.

13. Ryans, J. D., Jr. and C. C. Ryans, "Northwest Ohio 'International Firms' Evaluation of Select Foreign Marketing Information Sources," Akron Business and Economics Review, Winter 1980, pp. 19-22.

14. U. S. Department of Commerce, A Survey of Busi­ness Needs in Export Marketing - Federal and Non-Federal Sources of Assistance, Washington, D. C: Industry and Trade Administration, U. S. De­partment of Commerce, 1978.

15. Yanzito, R. A. and S. T. Cavusgil, "Alternative Ap­proaches to Stimulating Small Firms in Export Mar­keting," Tradelook, September/October 1980, pp. 4-9.

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