Faculty of Business Queensland University of Technology · Chapter 1 Introduction 1 - 8 1.1 The research focus ... Figure 2.10 The Gencturk and Kotabe Model

Antecedents of Firm Export Performance: The Role of Export Promotion Programs

Submitted by

A. K. Shamsuddoha B.Com. (Honours), M.Com. (Rajshahi), M.Com. (La Trobe)

A thesis submitted in fulfillment of the requirements for the degree of

Doctor of Philosophy

School of Advertising, Marketing and Public Relations Faculty of Business

Queensland University of Technology Brisbane, Queensland 4000

Australia

2004

Key Words

Antecedents of export performance,

Impact of Export promotion programs,

Export Assistance Programs,

Developing country,

Bangladesh.

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Abstract

This study empirically investigates the direct and indirect effects of export promotion programs (EPPs) on firm export performance. Government export promotion programs normally define the premise for successful exporting activities of the corporate sector and play a key role in stimulating international business activities of firms (Cavusgil and Michael, 1990; Marandu, 1995; Seringhaus and Rosson, 1990). While the extant literature on export performance mostly neglected EPPs as an antecedent of export performance, the literature on export promotion fails to relate it to export performance. A very few researchers in this area have focused on a direct relationship between EPPs and firm export performance, however, no study has investigated the effect of EPPs on other determinants of export performance toward establishing any indirect relation between EPPs and export performance. This study attempts to develop and test a comprehensive model of firm export performance that investigates how EPPs directly and indirectly influence firm export performance. Theoretical foundations are drawn from internationalization process and resource-based theories as frameworks for the analysis of the study. The model integrates the use of EPPs, management perception of export market environment, export knowledge, export commitment, and export strategy that influence firm export performance and develops a number of hypotheses. Export promotion programs are classified into two categories according to their similarity of purpose- “market development”, and “finance and guarantee” related programs. All other variables in the model are latent and are measured by a set of observed items. The model is tested on primary data obtained from a sample survey of exporting firms drawn from three major export oriented industries in Bangladesh. Structural Equation Modeling (SEM) techniques (in AMOS 5) are used to test the validity of the overall model and the relationship between variables hypothesized in the model. A two stage process is employed whereby the construct measurements are first evaluated, followed by an evaluation of the structural relationships. Analysis of the structural relationships supports most of the hypothesized relationships. The dimensions of export promotion programs are found to positively impact overall export performance. The research findings demonstrate that the use of market development-related export promotion programs influence firm export performance directly as well as indirectly through management perception of the export market environment, export knowledge and commitment. However, finance and guarantee-related export promotion programs indirectly influence export performance through export commitment. The study provides a guideline for managers of firms suggesting how they can benefit from EPPs in improving their positive attitude towards the export market environment, building their knowledge and enhancing commitment to exporting for better success in their international operations. This study provides guidelines to policymakers in designing and targeting export promotion programs effectively. The study also contributes to the literature by examining the indirect impact of EPPs on firm export performance. Finally, the limitations of the study are considered and possible directions for further research outlined.

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Table of Contents Key Words ……………………………………………………………………... ii Abstract ………………………………………………………………………… iii List of Tables…………………………………………………………………… vii List of Figures………………………………………………………………….. viii List of Abbreviations…………………………………………………………… ix Statement of Original Authorship………………………………………………. x Acknowledgements……………………………………………………………... xi Publications and Conferences Chapter 1 Introduction 1 - 8

1.1 The research focus ..………………………………………………….1 1.2 The research problem, the question and the objective .………….…...2

1.2.1 The research problem…………………………..………….… 2 1.2.2 Research question and objective of the study…..…………….5

1.3 The research significance……………….………………..…………...5 1.4 The research methodology……….………………………..………….7 1.5 Organization of the thesis………………………………….………....7

Chapter 2 Literature Review 9 - 61

2.1 Introduction…………………………………………………..……….9 2.2 Theoretical foundations of firm export performance…………..……. 9

2.2.1 International trade theory………………………………..…..10 2.2.2 Internationalization process/stage theory………………..…..13 2.2.3 Competitive strategy theory………………………………....15

2.3 Definitions, determinants and measures of export performance…....18

2.3.1 Conceptual definitions of firm export performance….……. 18 2.3.2 Determinants of export performance………………….…… 19 2.3.3 Models of export performance………………………….….. 29 2.3.4 Measures of export performance………………………...... 38

2.4 Export promotion related literature……………………………..….. 42

2.4.1 Studies on how to develop export promotion programs….…45 2.4.2 Studies on the impact of export promotion programs on firm

export performance……………………………………….…53

2.5 Conclusion..………………………………………………………... 59 Chapter 3 The Research Model and Hypotheses 63 - 81

3.1 Introduction……………………………………………………….…63 3.2 The research model and hypotheses ………………………………..63 3.3 Conclusion ……………………………………………………….....80

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Chapter 4 Research Methodology 83 - 118

4.1 Introduction…………………………………….……………………83 4.2 Operationalization of variables………………….…………………..83 4.3 Research methods……………………………….…………………..91

4.3.1 Nature of research ……………………….………………….91 4.3.2 Questionnaire – the research instrument….…………………92 4.3.3 Translation of research instrument ……….………………....93 4.3.4 Pre-test of research instrument…………….………………...95 4.3.5 Final questionnaire ………………….…….………….……...95 4.3.6 Key informant……………………………….……….………96 4.3.7 Population and sample……………………….……….……...97 4.3.8 Sample size…………………………………….…….……....98 4.3.9 Data collection, data editing and entry………….……….…100 4.3.10 Non-response bias………………………………...………..102 4.3.11 Check for outliers………………………………..……….. .103 4.3.12 Basic descriptive statistics of the sample………..……….. .104 4.3.13 Validity and reliability of research instrument….……….. .107

4.4 Data analysis procedures ……………………………….………… 108

4.4.1 Factor and reliability analysis……………………………...109 4.4.2 Structural equation modeling (SEM)……………………....110

4.4.2.1 Advantages of structural equation modelling…….. 112 4.4.2.2 Characteristics of structural equation modeling

application………………………………………… 113 4.4.2.3 Identification……………………………………… 113 4.4.2.4 Estimation……………………………………….. ..114 4.4.2.5 Assessment of overall model fit……………….…...115

4.5 Conclusion…………………………………………………….….. 118

Chapter 5 Analysis and Results 119 - 162

5.1 Introduction…………………………………………………….…. 119 5.2 Results of exploratory factor analysis ………………………….….119

5.2.1 Export commitment………………………………………..121 5.2.2 Export knowledge………………………………………….123 5.2.3 Export strategy……………………………………………..124 5.2.4 Management perception of export market environment…. .125 5.2.5 Export performance……………………………………… .128 5.2.6 Summary of the exploratory factor analysis results……….128

5.3 The structural equation model…………………………………… .129

5.3.1 Measurement models…………………………………….. .130 5.3.1.1 Export commitment……………………………… .132 5.3.1.2 Export knowledge……………………………….…134 5.3.1.3 Export strategy………………………………….… 135 5.3.1.4 Management perception of export market

Environment .………………………………………137 5.3.1.5 Export performance……………………………..…138 5.3.1.6 Summary of the measurement models………….….139

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5.4 Results of structural equation model……………………….....…...141 5.5 Discussion of the results……………………………………....…...147 5.6 Conclusion…………………………………………………....……158

Chapter 6 Summary, Conclusions and Implications 163 - 179

6.1 Introduction…………………………………………….....………. 163 6.2 Overview of Research…………………………………….....……. 163

6.2.1 Previous research………………………………....…....…. 164 6.2.2 Proposed model…………………………………….........….67 6.2.3 Questionnaire development and administration……….......167 6.2.4 Model testing and research findings………………....…… 168

6.3 Contributions of the study………………………....….……………170

6.3.1 Theoretical perspective…………………….....……………170 6.3.2 Managerial perspective……………………….....…………173 6.3.3 Public policy maker perspective………………….....……..174

6.4 Strengths and limitations of the study……………………….....…. 176 6.5 Future research direction……………………………………….......177 6.6 Conclusion………………………………………………....……... 179

Appendix A: Letter from Supervisor and Head of School……………………..181 Appendix B: Survey Instrument (English version)………………………182 - 193 Appendix C: Survey Instrument (Bangla version)……………………….194 - 207 Bibliography …………………………………………………………… 209 - 229

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List of Tables Table 2.1 Determinants of Export Performance……………………………. 21 Table 2.2 Past Empirical Studies on Export Promotion Programs…………. 44 Table 3.1 Summary of Hypothesized Relationships……………………….. 81 Table 4.1 Concept, Conceptual and Operational Definition, and

Measurement of Variables………………………………………. 85

Table 4.2 Total Population, Sample Drawn and Response Rate…………… 102 Table 4.3 Distribution of Respondents by Industry Type………………….. 104 Table 4.4 Distribution of Respondent Firms by the Number of Employees.. 105 Table 4.5 Distribution of Respondent Firms by Length of International

Experience……………………………………………………….. 106

Table 4.6 Summary of Respondents’ Personal Characteristics…………….. 107 Table 4.7 Reliability of the Purified Scales………………………………… 108 Table 4.8 Goodness of Fit Criteria and Acceptable Fit Interpretation…….. 117 Table 5.1 Extracted Factors and Factors Loadings Related to Export

Commitment …………………………………………………….. 122

Table 5.1a Extracted Factor and Factors Loadings Related to Export Commitment ……………………………………………………..

122

Table 5.2 Extracted Factor and Factor Loadings Related to Export Knowledge………………………………………………………..

123

Table 5.3 Extracted Factor and Factor Loadings Related to Export Strategy 124 Table 5.4 Extracted Factors and Factor Loadings Related to Management

Perception of Export Market Environment……………………… 126

Table 5.4a Extracted Factors and Factor Loadings Related to Management Perception of Export Market Environment …………………….

127

Table 5.5 Extracted Factor and Factor Loadings Related to Export Performance………………………………………………………

128

Table 5.6 Model Fit Statistics……………………………………………… 133 Table 5.7 Export Commitment – Factor Loadings, Critical Ratios and P-

Values……………………………………………………………. 134

Table 5.8 Export Knowledge – Factor Loadings, Critical Ratios and P-Values…………………………………………………………….

135

Table 5.9 Export Strategy – Factor Loadings, Critical Ratios and P-Values 136 Table 5.10 Export Process – Factor Loadings, Critical Ratios and P-Values 138 Table 5.11 Export Performance – Factor Loadings, Critical Ratios and P-

Values……………………………………………………………. 139

Table 5.12 Correlation Matrix between the Constructs, Means and Standard Deviation………………………………………………………….

140

Table 5.13 Results of the Analysis of the Structural Equation Model………. 143 Table 5.14 Standardized Direct, Indirect, and Total Effects Among the

Constructs………………………………………………………… 144

Table 5.15 Standardized Solutions for the Structural Equation Model of Export Performance………………………………………………

146

Table 5.16 Hierarchical Regression Models…………………………………. 158 Table 5.17 Summary of Research Hypotheses and esults………………161 - 162

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List of Figures Figure 2.1 The Aaby and Slater Model (1989)……………………………… 30 Figure 2.2 The Cavusgil and Zou Model (1994)……………………………. 31 Figure 2.3 The Katsikeas, Piercy, and Ioannidis Model (1996)…………….. 33 Figure 2.4 The Lages Model (2000)………………………………………… 34 Figure 2.5 The Katsikeas, Leonidou, and Morgan Model (2000)………… 36 Figure 2.6 The Leonidou, Katsikeas, and Samiee Model (2002) 37 Figure 2.7 The Bruning Model (1995)……………………………………… 46 Figure 2.8 The Singer and Czinkota Model (1994)………………………… 55 Figure 2.9 The Marandu Model (1995)…………………………………….. 56 Figure 2.10 The Gencturk and Kotabe Model (2001)……………………….. 58 Figure 3.1 A Conceptual Model of Firm Export Performance…………….. 66 Figure 4.1 The Direct and Indirect Effects………………………………….. 111 Figure 5.1 A Testable Model……………………………………………….. 141 Figure 5.2 The Empirically Tested Structural Model of Firm Export

Performance……………………………………………………… 145

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List of Abbreviations ADF = Asymptotically Distribution free AGFI = Adjusted Goodness-of-Fit Index AIC = Akaike Information Criterion AMOS = Analysis of Moment Structures ANOVA = Analysis of Variance BFLLFEA = Bangladesh Finished Leather, Leather goods and Footwear Exporters Association BG = Born Global BGMEA = Bangladesh Garment Manufacturers and Exporters Association BTTLMEA = Bangladesh Terry Towel and Linen Manufacturers and Exporters Association CFA = Confirmatory Factor Analysis CFI = Comparative Fit Index CMIN/DF = Chi-square/ Degree of freedom CR = Critical Ratios EFA = Exploratory Factor Analysis EPB = Export Promotion Bureau EPPs = Export Promotion Programs FDI = Foreign direct Investment FEP = Firm Export Performance GFI = Goodness-of-Fit Index H-O-S = Heckscher-Ohlin-Samuelson IE = Initial Estimates KMO = Kaiser-Meyer-Olkin LDCs = Less Developed Countries ML = Maximum Likelihood NFI = Normed Fit Index PLC = Product Life Cycle RMSEA = Root Mean Square Error of Approximation SEM = Structural Equation Modelling SPSS = Statistical Package for Social Science TLI = Tucker-Lewis Index ULS = Unweighted Least Squares Estimates US = United States USA = United States of America

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Statement of original authorship “The work contained in this thesis has not been previously submitted for a degree or diploma at any other higher education institution. To the best of my knowledge and belief, the thesis contains no material previously published or written by another person except where due reference is made.” Signed: __________________________ Date: __________________________

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Acknowledgements A dissertation is a mosaic of contributions from several people; without their co-operation and unhesitating assistance the task would be impossible. First, I gratefully acknowledge the privilege of having received an International Post Graduate Research Scholarship (IPRS). Additional funding received from the School of Advertising, Marketing and Public Relations (AMPR) and the Faculty of Business, QUT, made this study possible. These sources of funding were greatly appreciated. I am also grateful to the University of Rajshahi for providing me study leave during this study. I would like to express my deepest gratitude to my supervisor, Senior Lecturer Dr. Yunus Ali for his invaluable advice, guidance, encouragement, patience and time devoted throughout his supervision of this thesis. Without his patient criticism and generous willingness to spend his valuable time with me discussing many issues, I may never have reached the dissertation stage at all. I am also sincerely grateful to my Associate Supervisor, Professor William Renforth for his constructive suggestions, guidance, time, encouragement and support up to data analysis stage of this thesis. A special thank must also go to Dr. Stephen Cox for his support in data analysis and valuable advice on statistical issues. I would further like to thank Dr. Mohammad Alauddin, Dr. A. B. M. Rabiul Alam Beg and Dr. M. Jahangir Ali for their insight and helpful suggestions on different parts of this thesis. I am also grateful to company executives who provided me valuable information in this study. My special appreciation goes to Mr. Hafizur Rahman, Joint secretary, BGMEA, Md. Fazle Hossain, Assistant secretary, BGMEA, Mr. Omar Farouq, Deputy Director, EPB, and Mr. Rabi-Ul Hasan for their support and assistance during the field studies in Bangladesh. I would also like to thank Professor Charles Patti, the Head of School of AMPR, QUT, and his administrative staff for their support by way of providing excellent facilities and equipment to make it possible to complete this thesis. This dissertation marks the culmination of many years of support and encouragement on the part of my parents, brother, and sisters. My parents provided me with a love of learning, the desire to achieve, and the determination and perseverance to succeed. Without the support and encouragement of my family, this dissertation could never have been completed. I am especially indebted to my wife, Soji, for her patience and devotion. In fact, I would “share” my degree with her. Without her love, trust, encouragement and countless hours of work, my doctoral studies would never have been completed. Throughout, my children, Puspo and Porag have been an important source of inspiration. Many friends assisted me in a variety of ways during my graduate studies. To all of them, thank you. Finally I wish to dedicate this thesis to the memory of my late father, late sister and late grandmother. My only regret is that they were not with me to its completion.

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Publications and Conferences Shamsuddoha, A. K., and M. Y. Ali, (2005), Causal Effects of Export Promotion Programs on Internal Determinants of Firm Export Performance: Empirical Evidence from a Developing Country, in the Proceeding of the 34th European Marketing Academy Conference (Full paper on CD, ISBN ), Bocconi University, Milan, Italy, 23 – 27 May, 2005. Shamsuddoha, A. K., and M. Y. Ali, (2005), Causal Effects of Export Promotion Programs on Internal Determinants of Firm Export Performance: Empirical Evidence from a Developing Country, in the Proceeding of the 34th European Marketing Academy Conference (Abstract), Bocconi University, Milan, Italy, 23 – 27 May, 2005, p. 170. Shamsuddoha, A. K., and M. Y. Ali, (2004), Direct and Indirect Impact of Export Promotion Programs on Export Performance. Abstract in Marketing Accountabilities and Responsibilities, Book of Abstracts and Program ANZMAC 2004, Victoria University of Wellington, New Zealand, pp. 182. Shamsuddoha, A. K., and M. Y. Ali, (2004), Direct and Indirect Impact of Export Promotion Programs on Export Performance. Full paper in Australia New Zealand Marketing Academy Conference Proceedings (On CD, ISBN CD 0-475-22215-1), Victoria University of Wellington, New Zealand. Shamsuddoha, A. K., and M. Y. Ali, (2002), The Role of Export Promotion Programs in Economic Development of Bangladesh. Paper presented at the conference Bangladesh in the New Millennium: Unveiling Development Challenges and Visions, and abstract published in the Conference Proceedings, School of Economics, University of Queensland, Australia, pp. 53.

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Chapter 1

Introduction

1.1The Research Focus

Export can play a very important role in contributing to a nation’s economic

prosperity. Increased exports can result directly or indirectly in an increase of

domestic production, economic growth, a decrease in the unemployment rate, and the

generation of foreign currencies to meet import costs. A country’s ability to compete

successfully in world markets, maintain a favorable balance of trade and control its

external payments situation reflect its economic strength and marginal competence

over other nations. The government of a country is to some extent responsible for the

general economic health of a nation. It can directly and indirectly influence firms’

business objectives. Given the role exports play in constituting the wealth of a nation,

export development is certainly an aspect of economic development to which

responsible governments must pay attention. The government should intervene in

foreign trade, not aim to raise barriers to imports but to promote a nation’s exports. In

almost every developing country, government policy makers view exports as a top

priority in their national planning policies. This awareness of the importance of

exports also exists in most highly advanced countries as well.

Favorable macro environmental factors are thought to be preconditions for exporting

but whether a firm actually exports or not depends on the micro level firm factors

where the firm’s decisions affecting export success or failure are made. These micro

level factors include strategies to be used, organizational structures created to

formulate and carry out new strategies, and the caliber of management needed to

make decisions. Given the same combination of strategy, structure, and management

factors, a favorable macro environment raises overall export performance, while an

unfavorable environment lowers overall export performance (Marandu 1995). Some

external environmental factors, such as national export promotion measures, or the

competitive position of the firm’s product in foreign markets, usually define the

Chapter 1. Introduction 1

parameter for successful exporting activities. Governments can play a key role in

stimulating the international business activity of domestic firms through export

promotion programs (Cavusgil and Michael, 1990). From a government’s point of

view, offering export support programs is intended to improve the international

competitiveness of domestic firms. From a firm’s perspective, export promotion

measures attempt to reinforce the motivations of a firm to export. These motives

include exploitation of technological advantage, the ability to offer unique products,

the maximization of comparative marketing advantages, and the need for market

diversification (Seringhaus and Rosson, 1990). The use of export promotion

programs (EPPs) provides better pay off in terms of a firm’s competitive position

(overall strength of the firm) and efficiency (profitability) and is reflected in the

export performance of existing exporters and encouraging more firms to export

(Gencturk and Kotabe, 2001). Therefore, an assessment of the effectiveness of export

promotion programs is an important step toward achieving sustainable economic

development of a country. Despite increasing scholarly attention over how to improve

the efficiency of assistance programs (Kotabe and Czinkota, 1992; Moini, 1998;

Seringhaus and Botschen, 1991), the effectiveness of export promotion programs on

firm export performance (FEP) has not been examined conclusively. This study will

make a significant contribution to our understanding of the impact of export

promotion programs on firm export performance.

1.2 The Research Problem, the Question and the Objective

1.2.1 The Research Problem

The complexity of international business and the lack of know-how can place a firm

at a competitive disadvantage (Rabino, 1980; Ramaswami and Yang, 1989;

Seringhaus, 1986). It has become increasingly apparent that knowledge and expertise

are the critical factors in competing in foreign markets. In addition, several barriers to

exporting exist that can impede firms in seeking or expanding export sales.

Information, knowledge, experience, and resources are needed to overcome export

barriers and export promotion programs have emerged to provide information,

knowledge, experience and resources to firms. Export promotion, while only one


element in the export development process, potentially contributes in a critically

important area, namely in motivating the business community and helping in the

learning process so vital in the global competitive environment. Although the

importance of export promotion programs is well recognized in the literature and

accorded appropriate priority (Seringhaus and Rosson, 1990), however, the empirical

support to the influence of such programs on firm export performance is limited. The

issue can be examined to what extent export promotion programs influence firm

export capabilities and export strategies and ultimately export performance.

Several studies have examined firm related determinants (such as firm characteristics

and competencies, managerial characteristics, management support, and export

marketing strategy) and external determinants (industry characteristics, foreign

market characteristics and domestic market characteristics) of firm export

performance in the mainstream of the export performance literature. However, a

limited number of studies (Donthu and Kim, 1993; Katsikeas, Piercy and Ioannidis,

1996) have examined the impact of export promotion programs on a firm’s export

performance. As an example, Donthu and Kim (1993) suggested that those who used

more outside export assistance from federal, local and private agencies had higher

export growth. Katsikeas, Piercy and Ioannidis (1996) did not include export

promotion programs as an independent variable in their model as such, but they found

national export promotion policies serve as an export stimulus that positively

influences export performance (goal achievement). These studies that somehow

examined the effect of EPPs on firm export performance are not rigorous enough. As

such, the extant literature on export performance has mostly overlooked export

promotion programs as an antecedent of performance.

On the other hand, a number of studies have concentrated on export promotion

programs and these studies suggest how such programs can be more effective. Some

studies (Gencturk and Kotabe, 2001; Marandu, 1995; Singer and Czinkota, 1994; and

Wilkinson and Brouthers, 2000) examined the direct relationship between export

promotion programs and export performance. Wilkinson and Brouthers (2000)

examined the effectiveness of four government export promotion programs (trade

shows, trade mission, foreign offices, and objective market information programs) in

attracting FDI and export of high-tech product and found only trade shows were


positively associated with the volume of high-tech exports (dependent variables).

Singer and Czinkota (1994) revealed a significant positive relationship between the

numbers of export assistance services used (management commitment/persistence in

their model) and the number of export outcomes achieved. That study suggested that

those who committed to use a greater number of export assistance services, tended to

perform more pre-export activities (making a decision to export, export planning,

making overseas market contacts and establishing export channels) and have greater

export performance (beginning to export, increasing exports of current products in

current markets, exporting new products and exporting to new countries). Their

analysis, however, was limited to examining a bivariate relationship between export

outcome type and type of service used.

Marandu (1995) suggests on the basis of an empirical study on Tanzania that the level

of usage of, and satisfaction with, export promotion services does have a positive

impact on export performance i.e., export intensity. However, Marandu’s (1995)

study fails to clearly conceptualize the relational path between export promotion

programs and export performance. Gencturk and Kotabe (2001) integrated export

marketing involvement and the use of state export promotion assistance programs as

critical variables affecting export performance. Their study is more comprehensive

than prior studies in this literature stream which incorporated managerial and

organizational characteristics variables in the research model and adopted more

rigorous statistical techniques to examine the impact of export promotion programs

on export performance in terms of efficiency, effectiveness and competitive position.

The Gencturk and Kotabe (2001) results suggested that the usage of export promotion

programs had a positive impact on a firm’s efficiency and competitive position but no

effect on its effectiveness. Though, this study incorporated managerial and

organizational characteristics variables in the model it did not examine how export

promotion programs influence them in the export performance model.

In conclusion, few studies have explored the empirical link between export promotion

programs and other determinants of performance toward establishing any indirect

relation between export promotion programs and export performance. However, the

internationalization process theory indicates how gradual knowledge acquisition leads

to greater commitment to exporting and international operations (Johanson and


Vahlne, 1977). The resource-based theory of the firm proposes that human

competencies in the form of knowledge and expertise are critical to superior

organizational performance (Barney, 1991; Coff, 1997). While these competencies

are internal and are acquired by firms, export promotion programs help firms to

obtain the information, knowledge, experience, and resources they need to develop an

export strategy and achieve better performance (Singer and Czinkota, 1994). This

suggests that there is a link between export promotion programs and other

determinants of export performance. Therefore, export promotion programs may also

influence firm export performance indirectly through other determinants of export

performance.

1.2.2 Research Question and Objective of the Study

For each research problem a research question is necessary to provide a platform for

developing a theoretical framework, data collection and analysis of the study. An

appropriate research question encapsulating this research problem is: how do export

promotion programs directly and indirectly effect firm export performance? This is

the central question which will be pursued through the thesis.

To seek an answer to this research question, the main objective of this study is to

develop and test a comprehensive model to examine the direct and indirect effects of

export promotion programs on firm export performance. Drawing on the literature a

conceptual research model was developed and empirically tested with primary data

collected for the study.

1.3 The Research Significance

The study has significance in broadening research and empirical knowledge about the

impact of export promotion programs on firm export performance. The contribution

falls into three categories: theoretical advancement of existing export performance

literature, advances in public policy issues relating to export promotion and practical

assistance to exporting firms.


First, from a theoretical perspective, our knowledge on the impact of export

promotion programs on the export performance of a firm is very limited. While the

extant literature on export performance mostly neglects export promotion programs as

an antecedent of export performance, the literature on export promotion fails to relate

it to export performance. This study contributes to the literature as to how export

promotion programs directly and indirectly influence firm export performance by the

inclusion of export promotion programs as an independent determinant in the export

performance model and empirically tests a number of hypotheses linking export

promotion programs with other determinants of export performance. Moreover, most

studies in the literature used the direct impact of global measures (all export

promotion programs are measured collectively) of export promotion programs on

firm export performance but failed to identify the impact of different categories of

programs (designed for different purposes). This study contributes to the literature by

examining the direct and indirect impact of two main categories of export promotion

programs (foreign market development-related programs; and finance and guarantee-

related programs) on firm export performance.

Second, most of the theoretical development and empirical testing of theories in this

field has been conducted in developed country contexts. This study fills a much-

needed gap in the literature with empirical findings concerning export behavior of

developing country firms thereby increasing the generalizability of the findings.

Third, this study contributes to the extension of the Uppsala model of

internationalization. The Uppsala model places an emphasis on experiential

knowledge toward developing commitment to export. However, the model does not

explain why or how the export process starts and the sequence of conditions are not

discussed. This study suggests export promotion programs, as sources of educational

knowledge (such as, trade show, trade mission, and training), that facilitates firm

entry into the initial export stage to gain experiential knowledge. This is a significant

contribution to the literature. Similarly, this study also contributes to extend the

resource-based theory by adding export promotion programs as sources of resources

in terms of experience, knowledge, information and physical support-related services

to fill the gap of internal resources of a firm toward achieving export goals.


Fourth, the study provides a guideline for managers of exporting firms as to how they

can benefit from export promotion programs in improving their positive attitude

towards the export market environment, building their knowledge and enhancing

commitment to exporting for better success in their international operations.

Finally, this study also provides some guidelines to policy makers in designing and

targeting export promotion programs effectively.

1.4 The Research Methodology

The purpose of this study is to test a theoretical model to answer the narrowly defined

research question. The model is probed for its validity and statistical significances of

the variables in the model. Therefore, structural equation modeling techniques are

applied to test the validity of the overall model and to test the relationship between

variables hypothesized in the model. A single country, Bangladesh, has been selected

as the context of this research to control heterogeneity of export promotion programs

across countries. Firms in three industries: apparel, leather & leather products, and

specialized textiles, formed the population for the study. A cross-sectional single

source design is used where the unit of analysis is an organization. A mail survey

with telephone follow up was used to collect the data.

1.5 Organization of the Thesis

This thesis is developed through six chapters providing details of the theoretical

background of the research, research variables and their measurement methods, data

source, analysis and interpretation of the findings, conclusion and recommendations

of the research. Following this introduction, Chapter 2 reviews the literature related to

the topic with a specific focus on the major concepts that impact this research. The

literature is classified into three streams (theoretical background, empirical studies

conducted on firm export performance as well as export promotion programs), which

provide the theoretical framework within which this study fits and the platform on

which the research question is developed. A research model, conceptual definitions of

the variables and detailed hypotheses of the study are presented in Chapter 3.

Operational definitions and measurements of the variables, the survey procedures and


methods used to collect the data, an overview of the sample characteristics and the

statistical techniques for data analysis in this study are discussed in Chapter 4.

Findings of statistical analyses are reported and interpretations of the results are

discussed in Chapter 5. Finally, Chapter 6 concludes the work with an overview and

implications for management. The strengths and limitations of the study are also

discussed and recommendations for further research are presented in this chapter.


Chapter 2 Literature Review

2.1 Introduction With the growing internationalization of the world economy, there has been

increasing concern regarding export performance (Donthu and Kim, 1993). Superior

export performance is of vital interest to three major groups: public policy makers,

business managers involved in export and marketing researchers. First, public policy

makers view exporting as a way to accumulate foreign exchange reserves, increase

employment levels, improve productivity, and enhance state prosperity (Czinkota,

1994). Second, business managers see exporting as a tool to boost corporate growth,

increase capacity utilization, improve financial performance, strengthen competitive

edge, and ensure company survival in a highly globalized marketplace (Kumcu,

Harcar and Kumcu, 1995; Samiee and Walters, 1990). Third, marketing researchers

consider exporting a challenging, but promising area, for theory building in

international marketing (Zou and Stan, 1998). The focus of this review is to draw and

consolidate knowledge from related literature to synthesize a model which examines

the extent to which export promotion programs influence the export performance of

firms. The following literature review serves a number of purposes. The theoretical

foundations describing the export performance of a firm are discussed in Section 2.2.

Section 2.3 reviews the determinants of export performance at the firm level,

including definition and measurement issues. The emphasis in this section will also be

on the theoretical framework used in those studies. Section 2.4 of the chapter reviews

in detail the export promotion program-related literature to understand its position in

the study of export performance. Finally, the literature synthesis is simplified and a

testable research model derived.

2.2 Theoretical Foundations of Firm Export PerformanceTheory is a very useful tool for developing research ideas and then tying those ideas

to existing knowledge. Theories use a few principles to explain and summarize a

large number of facets, and they are a source of hypotheses that stimulate new

discoveries (Mitchell and Jolly, 1996). Three broad theories of international

Chapter 2. Literature Review 9

marketing/trade that provide the underpinnings to developing firm export

performance are critically reviewed below in brief.

2.2.1 International Trade TheoryA platform of scholarly contributions has been constructed to better understand the

phenomenon of export trade. Pioneers in this field were economists, who proposed

several theories on the engagement of nations in foreign trade. The most notable trade

theories are: absolute advantage (Smith, 1776), comparative advantage (Ricardo,

1817), factor endowment (Heckscher, 1919; Ohlin, 1933; Samuelson, 1948), and

product life cycle (Vernon, 1966; Wells, 1968). The basic idea of these theories is

that trade brings gains in national income through specialization and productive

efficiency.

Adam Smith wrote in “The Wealth of Nations” (1776) that nations should export

goods that are produced cheaply and import goods that are produced dearly, which is

known as the theory of absolute advantage. In addition, he also referred to trade as an

exchange of surplus commodities above their domestic demand. However, Smith saw

no possibility of trading between two countries when one was able to produce every

commodity at an absolutely lower real cost than the other.

David Ricardo (1817) later advanced Adam Smith’s theory of absolute advantage

with the concept of relative cost advantage. Ricardo contends that countries tend to

specialize in production and export those commodities for which they have a relative

cost advantage, and import commodities for which they have a relative cost

disadvantage.

These classical theories of trade were based on a number of important assumptions.

First, it assumed that transportation costs were zero and factors of production were

mobile domestically, but immobile internationally. Second, the law of comparative

advantage was based on a two-country model. Third, the amount and efficiency of

labour input was assumed to be the sole determinant of the cost of production. These

assumptions proved too simple for the real world. In recent years, countries have

traded in both commodities and factors of production. The neoclassical model of


trade developed by Heckscher (1919), Ohlin (1933), and Samuelson (1948) addressed

some of the shortcomings of Smith and Ricardo’s classical theories.

The Heckscher-Ohlin-Samuelson (H-O-S) theory maintains that a nation’s

comparative advantage is determined by the relative abundance of its factors of

production, such as capital and labor. Export facilitates intensive use of the country’s

relatively abundant factors and import conserves the use of a country’s relatively

scarce factors. The H-O-S theory is based on a number of simplified assumptions.

First, the model consists of only two countries, two factors of production in fixed

amounts, and two goods. Second, each country possesses identical preferences

(demand patterns) and technology. Third, factors are fully mobile within countries,

but immobile between countries. Fourth, perfect competition in all markets and zero

transportation costs are assumed.

Leontief (1953) was the first economist to test the H-O-S model empirically. He used

United States data for the year 1947, expecting to find that the United States exported

capital-intensive goods and imported labor-intensive goods, since it was the most

capital- abundant nation in the world. However, the result was contrary to his

predictions. It showed that United States’ imports (calculated from import

substitution goods) were more capital-intensive than its exports (the Leontief

Paradox). Some explanations of the Leontief Paradox are: a) factor intensity reversal:

the capital- labor ratio of producing a particular good may vary according to wage-

rental ratios (Minhas, 1962); b) natural resources: when natural resources become

scarce and natural resources and capital are complimentary, those goods whose

production require large quantities of natural resources will also require large

quantities of capital (Vanek, 1959); c) skills and human capital: labor is not

homogenous and the export sector could use higher skills compared to the import

competing sector (Kravis, 1956; Keesing, 1966); and d) tariffs and other protection

measures imposed in foreign trade distort the pattern of trade (Travis, 1964).

In the 1960s researchers at the Harvard Business School (Vernon, 1966; Wells, 1968)

provided a new explanation of international trade and investment patterns in the

Product Life Cycle (PLC) theory. In the model, Vernon (1966), and Wells (1968),

identified four stages in the life cycle of a product: introduction stage, growth stage,


maturity stage, and decline stage. The life cycle theory of world trade holds that

advanced countries like the US play the innovative role in product development.

These countries are producers and net exporters of the new product at the first stage.

Later on, other relatively less advanced countries take over the market position held

by the innovative country (Darlin, 1988). The second stage countries would go

through the same cycle as did the innovative country and, in turn, would lose their

markets to the next group of countries, such as third world countries as the

technology matures further and becomes more labor intensive compared to other new

generation products. Thus, a product initially produced in advanced countries would

eventually be produced only in less-developed countries (LDCs), with the result that

the innovating countries would meet their needs for that product through imports

from LDCs. Vernon (1966) and Wells (1968) suggest that market size and level of

economic development are important in explaining trade and investment patterns in

the early and middle stages of the product life cycle, while costs of the factors of

production are significant in explaining the role of developing countries in later

stages.

The theory suggests that a product is initially produced and consumed in an advanced

country and gradually its production shifted to relatively less advanced countries as

the product reaches its relative mature stages. Finally, the product is produced in less-

developed countries and exported to advanced countries at the maturity stage of its

PLC because LDCs are better endowed for its production than the advanced

countries. The PLC theory is effectively a theory explaining shifts in the production

of a commodity across countries and the consequent direction of trade in terms of

endowments of skills and technology.

In summary, although these international trade theories are useful for the analysis of

broad issues pertaining to international trade, their value is limited insofar as they can

only partially explain the export behavior of an individual firm (Wells, 1968; Bilkey,

1978; Cannon, 1980). In reality, international trade is far more complex than the

limiting assumptions upon which the theories of international trade are based. Despite

these limitations, however, the theory of comparative advantage does demonstrate

that trade between countries can lead to increases in world output and can be mutually

beneficial to all nations. Moreover, international trade theories, which explain why


nations trade with each other, are related concepts to international marketing. These

theories are aimed at understanding product flows between countries, either in the

form of exports or imports. In this situation, international marketing and international

trade are concerned with the same phenomenon (Krugman and Obstfild, 1991;

Rivera-Batiz and Rivera-Batiz, 1994; Sachs and Larrain, 1993; Yarbough and

Yarbough, 1994).

2.2.2 Internationalization Process/Stages TheoryBecause of the limited scope of economic theories, many researchers adopt a more

microscopic approach. Their studies produced a number of models that

conceptualized the process by which individual firms initiated, developed and

sustained their involvement in exporting (Haar and Ortiz-Buonafina, 1995). These

models focused not only on the economic rationale of the export development

process, as do international trade theories, but also concentrated on firm specific

aspects of behavior related to trade (Albaum, Strandskov, and Duerr, 1998). There are

two popular general models explaining the internationalization process: the Uppsala

international process model (Johanson and Wiedersheim-Paul, 1975; Johanson and

Vahlne, 1977), and the innovation related internationalization models (Bilkey and

Tesar, 1977; Cavusgil, 1980; Reid, 1981; Czinkota, 1982; Naidu and Rao, 1993).

The Uppsala internationalization model (Johanson and Wiedersheim-Paul, 1975;

Johanson and Vahlne, 1977, 1990) has received considerable attention over the last

two decades as an explanation of firm export behaviour. The model implies four

distinctive stages of gradually increasing foreign involvement which firms follow on

their way to becoming fully internationalized: 1) no regular export activities; 2)

export via independent representatives; 3) establishment of an overseas sales

subsidiary; and finally, 4) foreign processing and production. This process model

emphasizes the incremental path of internationalization through the gradual

acquisition, integration, and use of experiential knowledge about markets located

abroad. Internationalization hinges on two aspects: knowledge processed by the firm

about specific foreign markets and commitment of firm resources to those markets.

The model assumes that management will not commit higher levels of resources to a

market until it has acquired increasing levels of experiential knowledge through lower

level commitment such as unsolicited exporting. Because such learning is time-


consuming, internationalization is said to occur slowly (Anderson 1993; Johanson

and Vahlne, 1977, 1990). As Anderson (1993) contends, the model does not explain

why or how the process starts, and the sequence of states or conditions are not

discussed. The external environmental factors such as the domestic market condition,

the industry environment, and government policy of promoting internationalization of

the country’s business firms may have a profound effect on firms’ strategic decision

to (1) enter the first stage of internationalization, and (2) gain further knowledge

toward increasing commitment. Since government export promotion programs are

designed to encourage firms’ international endeavors (Czinkota and Ricks, 1981),

such a government policy is instrumental to conceive a firm’s internationalization

process.

Similar to the Uppsala model, the Innovation model (Bilkey and Tesar, 1977;

Cavusgil, 1980; Crick, 1995; Naidu and Rao, 1993; Reid, 1981) suggests

internationalization as an incremental sequence of market-targeting innovations

within the firm, evolving slowly as the firm gradually acquires relevant knowledge

and experience. Cavusgil’s (1980) review suggested that companies tend to

internationalize without much rational analysis or deliberate planning, that

internationalization is a gradual process advancing in incremental stages over a

relatively long period of time, and that each stage entails increasing commitments of

resources and managerial talent. The slowness of the process may be a reflection of

management’s aversion to risk-taking and its inability to rapidly acquire relevant

knowledge and market information (Cavusgil, 1980). The numbers of stages

identified differ, depending on the level of aggregation employed. Different

researchers identified from four to six stages (Cavusgil, 1980; Rao, 1990; Lim,

Sharkey and Kim, 1991; Crick, 1995). Although many versions of the stages of

internationalization have been suggested, all use the concept of innovation adoption

process as the basic understanding of the internationalization process. They all

portray one common view that the decision of a firm to go international is a gradual

process, which can be subdivided. The theory helps to explain export performance at

the different stages of the firm’s internationalization process.

Both Uppsala and Innovation models are based on the traditional views that

emphasize deterministic processes (e.g., the “establishment chain”) in which


internationalization proceeds almost ceaselessly, seemingly without much deliberate

planning. However, foreign expansion tends to be, in reality, a major undertaking,

fraught with contingencies and risk. To confront these challenges, many firms rely on

careful strategic planning which accounts for a potentially wide array of product-

market conditions and strategic options (Root, 1994). For example, a “born global”

(BG) firm is defined as a firm which from or near its founding, seeks to derive a

substantial proportion of its revenue from the sale of its products in international

markets. The key distinguishing feature of the BG is that its origins and fundamental

orientation are strongly international. Management at these firms demonstrates early

commitment of financial, human, and other resources to generating foreign sales.

Therefore, the phenomenon of the BG firm presents a substantial new challenge to

conventional thinking and affords an opportunity to extend and enrich numerous

theoretical perspectives.

2.2.3 Competitive Strategy TheoryMany scholars (Christensen et al., 1982; Andrews, 1987; Chandler, 1962; Mintzberg,

1987, 1988) have contributed to the concept of “strategy,” but “competitive strategy”

is a concept that is perhaps most closely associated with Porter (1980). Porter

suggests competitive strategy means developing a broad formula for how a business

is going to compete, what its goal should be, and what policies will be needed to

carry out those goals. The goal of competitive strategy is the attainment of superior,

sustainable organizational performance (Hofer and Schendel, 1978). Two most

widely accepted frameworks describe how firms can develop a competitive

advantage: a) resource-based theory of firm strategy, as originally proposed by

Penrose (1959) and expounded by Wernerfelt (1984) and Kay (1993); and b)

industrial organization theory (Aldrich, 1979; Hofer, 1975; Porter, 1980;

Venkatraman and Prescott, 1990).

The resource-based theory sees a firm as a unique bundle of tangible and intangible

“resources” (assets, capabilities, processes, managerial attributes, information, and

knowledge) that enable the firm to conceive and implement strategies aimed at

improving its efficiency and effectiveness (Barney, 1991; Wernerfelt, 1984). The

theory contends that the principal determinants of a firm’s export performance are its

internal organizational resources (Barney, 1991; Collis, 1991) that are superior in use


and hard to imitate or supplant (Porter, 1991; Prahalad and Hamel, 1990). While this

theory explains how a firm utilizes its superior tangible and intangible resources to

formulate and implement strategies for superior organisational performance

(including its export and international operations), it fails to recognize that such

resources could also be acquired and enriched by some firms through collaborative

arrangements with other firms (Harrigan 1987; 1988; Perlmutter and Heenan, 1986)

and corporate-government partnership (Czinkota, 1992). Managers with a favourable

attitude toward exporting and the export environment tend to find such an

arrangement that can fill their firms’ resources gap through strategic alliances with

other domestic or foreign firms, and/or outsource some of those resources from

private (e.g., research organisations for export market-related information) and public

organizations (e.g., government assistance on export market information, foreign

trade mission, trade show and sales lead). This suggests that a manager not only

utilizes his/her firm’s internal resources for better performance, he/she also finds

opportunities to acquire and enrich through collaborative arrangements (including the

use of appropriate government assistance) to exploit the international market

opportunities for above average performance.

Industrial organization theory examines the “fit” between strategy and the external

environment of the firm (Aldrich, 1979; Hofer, 1975; Porter 1980; Venkatraman and

Prescott, 1990). In the external context about theories of business strategy the primary

consideration is the firm’s environment and the key to success is to adapt to that

environment (Ellis and Williams, 1995). Superior performance hinges on the ability

of management to align the strategy variables within its control with those

environmental factors outside its control (Galbraith, Craig and Schendel, 1983).

Industrial organization theory rests on two premises: 1) organizations are dependent

on their environments for resources (Pfeffer and Salancik, 1978), and 2) organizations

can manage this dependency by developing and maintaining strategies (Hofer and

Schendel, 1978). Accordingly, firms manage their relationship with the environment

by developing and activating strategies such as marketing (Bourgeois, 1980; Hofer

and Schendel, 1978; Scherer and Ross, 1990). It is expected that some will modify

their strategies to profit from potential cross-border opportunities or to safeguard

competitiveness by expanding their activities abroad (Cavusgil, Zou and Naidu,

1993). Thus, shifts in the external environment of business (such as new global


market opportunities or government support services to export) may be instrumental

in enhancing the export performance of firms.

SummaryThis section describes the three broad types of theories i.e., international trade theory,

internationalization process/stages theory, and competitive strategy theory, that

directly or indirectly relate to firm export performance. International trade theories

explain why nations trade with each other and are related concepts to international

marketing. In this situation, international marketing and international trade is

concerned with the same phenomenon. The internationalization process/stages

theories show that the export activities of a firm developed through a gradual process

– experience and confidence in one stage help a firm move to the next stage,

eventually reaching the final stage of global operations. Switching from one stage to

the other is certainly a deliberate strategy of the firm based on its organizational and

managerial capabilities. Therefore, the process theory cannot be understood clearly

without understanding the impact of strategy and structure on the internationalization

process. The goal of competitive strategy theory is the attainment of superior,

sustainable organizational performance. Both internal and external determinants of

export performance can be interpreted by competitive strategy theory. Specifically,

internal determinants are justified by the resource-based theory, while external

determinants are supported by the industrial organization theory.

Most of these theories, especially the internationalization model, and resource-based

theory, have a direct bearing on this study in designing the theoretical framework. A

basic assumption of the Uppsala model is that lack of knowledge about foreign

markets is a major obstacle to international operations, and such knowledge can be

acquired through learning (Johanson and Vahlne, 1977, p. 23). The theory also

suggests that firms’ gradual knowledge acquisition leads to higher commitment to

export and international operations. This proposed research has been designed

(among other objectives) to examine the impact of a firm’s knowledge on its

commitment to export that eventually influence export performance. Therefore, the

framework of this study is partly built on the internationalization model. As discussed

earlier, the resource-based theory proposes that human competencies in the form of

knowledge and expertise are critical to superior organizational performance


(including its international operations). This study has been developed using this

theory as its conceptual source to examine the impact of a firm’s internal

organizational resources (particularly its knowledge and expertise) on export

performance. In doing so, this study also explores how government export promotion

programs contribute to a firm’s resource-base and its international marketing

operations. The basic objective of export promotion programs is to act as an external

resource for firms to gain knowledge and experience that is vital for successful

foreign market involvement (Gencturk and Kotabe, 2001).

2.3 Definitions, Determinants and Measures of Export PerformanceExport performance is the dependent variable in this research. This section discusses

different definitions, operational measures and determinants of export performance.

Performance is an indispensable guide for any firm analyzing its level of success,

both in the domestic and international arenas. Assessing export performance is a

complex task, its usefulness depending on the credibility of the measures (i.e.,

financial and non-financial) and on the ways in which one measures performance

(i.e., objective and subjective terms). Indeed, dealing with this variable may become

very complicated because export performance can be conceptualized and

operationalized in many ways (Das, 1994; Diamantopoulos and Schlegelmilch,

1994). This section is divided into three parts. The first part describes conceptual

definitions of the export performance of a firm. The possible determinants of firm

export performance are discussed in part two. Some export performance models are

reviewed in this part to identify the determinants that influence firm export

performance. Part three describes the different measures of export performance used

by previous researchers.

2.3.1 Conceptual Definitions of Firm Export PerformanceExport performance is defined as the extent to which a firm’s objectives (both

economic and strategic) for exporting a product into a foreign market are achieved

through the planning and execution of export marketing strategy (Cavusgil and Zou,

1994). One area of agreement in the management literature is that organizational

performance is multidimensional, with no single criterion being adequate (Lewin and

Minton, 1986; Nicholson and Brenner, 1994; Gencturk and Kotabe, 2001). Walker


and Ruekert (1987) suggest that the relevance and importance of performance

dimensions vary across stakeholder groups (investors, employees, customers) and

depend on whether the focus is on the short term or long term. Researchers highlight

three performance dimensions considered to be of most interest to corporate and

business unit managers. The first is effectiveness, in terms of a business’s product and

programs relative to competitors. Indicators such as sales growth can measure

effectiveness. The second is efficiency, which is concerned with the outcome of

business programs relative to the inputs employed to implement them. Profitability is

the key measure of this dimension. The third dimension is adaptability, in terms of

how the business responds to changing conditions and opportunities in the

environment (Walker and Ruekert, 1987). Indicators of adaptability are likely to be

more strategic in nature, such as responses to competitors of the degree to which the

firm has capitalized on new product/market opportunities. This is consistent with the

notion of environment/firm co-alignment, or fit, from strategic management

(Venkatraman and Prescott, 1990).

2.3.2 Determinants of Export PerformanceThe focus of this part of the review is to identify how many studies have included

export promotion programs as an independent variable in export performance models.

A summary of several predictors or determinants and their relationship with export

performance is reported in Table 2.1. The review covered the period from 1980 to

2004. Identification of eligible studies is based on a systematic bibliographic search,

using both manual and computerized methods. Though the list is not a comprehensive

one, it does include some of the most influential articles published in this area over

the past two decades as reviewed in three important studies (Aaby and Slater, 1989;

Chetty and Hamilton, 1993; Zou and Stan, 1998) as well as identified in a computer

(ABI/INFO) search for this study. Through this review, 59 export performance

studies are identified and collected.

Aaby and Slater (1989), in their review article have classified variables as firm

characteristics, firm competencies, and marketing strategies. Each one of these groups

is further operationalized by several underlying constructs. Koh (1991) has provided a

similar classification based on the structure-strategy-performance paradigm. In

another study (Schlegelmilch, 1986), 194 independent variables are identified and


grouped into factual variables (organizational characteristics, management/training,

performance/control, research and development, and marketing) and attitude

variables. Therefore, the large number and fragmented nature of independent

variables included in export performance studies may be interpreted as a lack of

coherence and consensus among researchers on the parameters of an export

performance model (Bodur, 1994). In this connection, Table 2.1 illustrates the

number of variables and how they influence export performance.

The determinants of export performance are classified into two main groups, namely,

determinants internal to the firm and determinants that are external (Reid, 1981). The

internal determinants conceivably are subject to management’s discrete decision-

making power that can be classified into four general categories: firm characteristics

and competencies (firm size, firm age, firm technology, and firm international

competence), managerial characteristics (skills of top management, training of

managers, export experience), management support (export commitment,

management’s attitude and perceptions, proactive export motivation), and export

marketing strategy (general export strategy, product quality, product line, product

adaptation, price adaptation, dealer support and promotion adaptation).

The external determinants are derived from external environmental factors. These are

factors that the firm usually tends to consider “given” and they shape the context in

which the firm has to operate. Hence, the firm does not directly control the

environmental context. The external environment generally affects organizations by

making resources available or by withholding them. The extant literature identified

three types of external determinants of export performance: industry characteristics

(industry’s technological intensity, industry’s level of instability), foreign market

characteristics (export market attractiveness, export market competitiveness, export

market barriers), and domestic market characteristics (domestic market

attractiveness). In Table 2.1, out of total 59 studies, 57 studies have included internal

determinants, however only 21 studies have included external determinants in their

studies.


Table 2.1

Determinants of Export Performance

InternalDeterminants(57 out of total 59 studies)

Relationshipfound

Studies that examined the variables

Firm characteristics and competencies

Firm size +

–

Ali, 2004; Cavusgil & Naor, 1987; Christensen, daRocha and Gertner, 1987; Kaynak & Kuan, 1993; Louter, Ouwerkerk and Bakker, 1991;Cavusgil & Kirpalani, 1993; Cooper &Kleinschmidt, 1985; Das, 1994; Evangelista, 1994

Firm age +–

Seifert & Ford, 1989Kaynak & Kuan, 1993; Louter, Ouwerkerk andBakker, 1991

FirmTechnology

+

_

Aaby & Slater, 1989; Chetty & Hamilton, 1993; Diamantopoulos and Schlegelmilch, 1994; ItoPucik, 1993; Moini, 1995Kaynak & Kuan, 1993; De Luz, 1993

Firminternationalcompetence

+ Aaby and Slater, 1989; Anderson, 1993; Barney,1991; Coff, 1997; Johanson and Vahlne, 1977, 1990; Madsen, 1987; Samiee and Walters, 1999; Wang and Olsen, 2002; Atuahene-Gima, 1995; Cavusgil & Zou, 1994; Katsikeas, Piercy &Ioannidis, 1996; Moini, 1995; Naidu and Prasad, 1994; O’Cass & Julian, 2003; Seifert & Ford,1989

Managerial Characteristics

Skills of top management

+ Kaynak and Kuan, 1993; Koh, 1991

Training ofmanagers

+ De Luz, 1993

Exportexperience/education/foreignlanguage

+ Das, 1994; De Luz, 1993; Czinkota and Ursic, 1991; Evangelista, 1994; Gomez-Mejia, 1988; Holzmuller and Kasper, 1991; Holzmuller and Stottinger, 1996; Madsen, 1989; Moini, 1995; Reid, 1981; Bilkey & Tesar, 1977


Managementsupport

Relationshipfound


Exportcommitment

+ Ali, 2004; Aaby and Slater, 1989; Cavusgil and Nevin, 1981; Cavusgil and Naor, 1987; Cavusgiland Zou, 1994; Donthu and Kim, 1993; Evangelista, 1994; Gomez Mejia, 1988; Gronhaug and Lorenzen, 1982; Julian, 2003; Katsikeas, Piercy and Ioannidis, 1996; Koh, 1991; Madsen, 1994; O’Cass & Julian, 2003; Wiederscheim,Olson and Welch, 1978

Management’sattitude andperceptions

+

_

Aaby and Slater, 1989; Chetty and Hamilton,1993; Donthu and Kim, 1993; Eshgi, 1992; Schlegelmilch, 1986; White, Griffith and Ryans,1998Axinn, Noordewier and Sinkula, 1996

Proactiveexportmotivation

+ Bodur, 1994; De Luz, 1993; Katsikeas, Piercy andIoannidis, 1996; Koh, 1991

Export marketing strategy

General exportstrategy

+ Aaby and Slater, 1989; Bodur, 1994; Chetty and Hamilton, 1993; Cooper and Kleinschmidt, 1985; Cavusgil and Zou, 1994; Donthu and Kim, 1993; Evangelista, 1994,1996; Moen, 2000

Exportmarketing mixstrategy

+

_

Axin, Noordewier & Sinkula, 1996; Cavusgil &Zou, 1994; Cooper & Kleinschmidt, 1985; Koh, 1991; Madsen, 1989; Namiki, 1994; Zou, Andrus & Norvel, 1997 Julian, 2003; O’Cass & Julian, 2003

Product quality/uniqueness

+ Beamish, Craig and McLellan, 1993; Dominguezand Sequeira, 1993; Louter, Ouwerkerk and Bakker, 1991

Diversifiedproduct line

+–

Christensen, da Rocha and Gertner, 1987 Kirpalani and Macintosh, 1980

Productadaptation

+ Cooper and Kleinschmidt, 1985; Cavusgil andZou, 1994; Koh, 1991

Price adaptation + Axinn, Noordewier & Sinkula, 1996; Christensen, da Rocha and Gertner, 1987; Kirpalani and Macintosh, 1980; Koh, 1991; Louter, Ouwerkerkand Bakker, 1991; Zou, Andrus & Norvell, 1997

Distributionchanneladaptation/dealer support

+ Beamish, Craig and McLellan, 1993; Bilkey,1982; Cavusgil & Zou, 1994; Madsen, 1989; Rosson & Ford, 1982; Zou, Andrus and Norvell,1997

Promotionadaptation

+ Namiki, 1994; Seifert and Ford, 1989; Zou,Andrus and Norvell, 1997


ExternalDeterminants(21 out of total 59 studies)

Relationshipfound


Industry characteristics

Industry’sinstability

+ Das, 1994; Lim, Sharkey and Kim, 1996

Industry’stechnologicalintensity

+ Cavusgil & Zou, 1994; Holzmuller & Kasper, 1991; Holzmuller and Stottinger, 1996; Ito &Pucik, 1993

Foreign market characteristics

Export marketattractiveness

+–

De Luz, 1993Kaynak & Kuan, 1993

Export marketbarriers

_ Diamantopoulos and Schlegelmilch, 1994; Donthu and Kim, 1993; Kaynak and Kuan, 1993; Khan, 1978; Madsen, 1994; Moini, 1995; Raven, McCullogh and Tansuhaj, 1994

Export marketcompetitiveness

+–

Cavusgil and Zou, 1994 Bilkey, 1982; Jung, 1984

Domestic market characteristics

Domesticmarketattractiveness

+

–

Atuahene-Gima, 1995; Katsikeas, Piercy and Ioannidis, 1996; Ito Pucik, 1993 Madsen, 1989


Internal Determinants of Firm’s Export Performance

The internal determinants can be classified into four groups which are discussed in

below.

Firm Characteristics and Competencies

Export researchers regard firm size as a critical variable in explaining export behavior

and success (Cavusgil and Naor, 1987; Kaynak and Kuan, 1993). Some researchers

have used the number of employees as a measure of size (Evangelista, 1994), while

other researchers have used sales volume (Kaynak and Kuan, 1993). For all the

attention firm size has received, there is little agreement regarding the impact that

organizational size has on export success. According to Kaynak and Kuan (1993), as

size and export volume increase, there is a sequential and gradual change in terms of

export marketing attitudes, and therefore, a strong impact by firm size on export sales.

Nevertheless, when looking at the percentage of total profit from exporting (an export

performance indicator), the same study reveals that successful exporters are

characterized by smaller corporate size (e.g., annual sales, number of employees) but

employing more people in export operating units. This implies that even though firms

of larger size excel in earning a lion’s share of the export market, they may not be

dealing with the lucrative niches given the larger share. As long as there are enough

people directly involved in exporting, the other structural adjustments would not

further improve export performance. Ali (2004) also found mixed relationship

between firm size and export performance. He measured firm size by total sales and

the number of employees and export performance by export volume, export intensity,

and export growth of a firm. He found a relationship only between firm size (measure

by total sales) and export performance (measured by export volume).

On the other hand, a negative relationship between firm size and export performance

has been found in other studies (Cavusgil and Kirpalani, 1993; Cooper and

Kleinschmidt, 1985; Das, 1994; Evangelista, 1994). In light of the conflicting

evidence, it seems no definitive conclusions can be drawn from past research on the

relationship between export success and the size of the firm.


Firm’s age (number of years in exporting) is also an important factor in export

performance (Seifert and Ford, 1989). However, Kaynak and Kuan (1993) and

Louter, Ouwerkerk, and Bakker (1991) reported a negative impact of the firm’s

number of years in exporting on export profitability and sales.

Technological strength is another critical variable in successful exporting. Aaby and

Slater (1989) assert that most empirical studies establish a positive relationship

between technological strength and the propensity to export. Moreover, Chetty and

Hamilton (1993) found a positive effect of firm technology on export performance.

However, Kaynak and Kuan (1993) reported export sales were negatively related to

Taiwanese export product technology intensity. They find that export sales

performance of Taiwanese firms can be improved by marketing mostly low-

technology products. This could possibly be due to the perceived image of Taiwanese

products by the international market, and the fact that people still tend to question the

quality of technologically advanced products made in Taiwan. Therefore, it appears

that more attention should be given to the context in which the technology level is

studied.

Firm competencies, in terms of both international competence and overall business

competencies (strong market position, strong human resources, strong functional

capabilities, and export market knowledge) appear to be important determinants of

export performance (Atuahene-Gima, 1995; Cavusgil and Zou, 1994; Katsikeas,

Piercy and Ioannidis, 1996; Moini, 1995; O’Cass and Julian, 2003; Seifert and Ford,

1989). This finding is consistent with those of previous reviews (Aaby and Slater,

1989; Madsen, 1987). For example, Cavusgil and Zou’s (1994) investigation of

American exporters found that a firm’s international competence influences its export

performance.

Managerial Characteristics

Research has consistently pointed to management as the principal force behind the

initiation, development, sustenance, and success of a firm’s export effort, because of

direct responsibility for and involvement in export decisions (Miesenbock, 1988).

Earlier studies dealing with success factors in exporting have examined the extent to

which characteristics of managers (skills of top management, age, education, export


experience and knowledge of foreign languages) have been linked to export success

(Das, 1994; De Luz, 1993; Koh, 1991; Reid, 1981). Koh’s (1991) study of American

exporters and Kaynak and Kuan’s (1993) investigation of Taiwanese exporters assert

that the skills of top managers are a key factor in terms of export performance. Other

studies also suggest that export performance is influenced by the training of managers

in international business (De Luz, 1993) and their knowledge of foreign languages

(Bilkey and Tesar, 1977). Reid (1981) argued that variables like educational

background and foreign language skills were antecedents of attitudes toward export

marketing. Exporting experience (operationalized as the number of years engaged in

exporting activities) is another firm characteristic facilitating export performance or

success (Madsen, 1989; Das, 1994). Management’s international experience seems to

have a positive effect on export sales, export profits, export growth, and a composite

measure of export performance. This is perhaps because managers’ international

experience helps to identify and leverage international opportunities while avoiding

international threats. Overall, it can be concluded that export performance benefits

from having educated and internationally experienced managers.

Management Support

Management support is mainly indicated by the export commitment of top

management (Ali, 2004; Cavusgil and Zou, 1994; Donthu & Kim, 1993; Evangelista,

1994). However, management attitude (Eshgi, 1992; White, Griffith and Ryans,

1998) and proactive export motivation (Bodur, 1994; De Luz, 1993) are also used as

indicators of management support. According to Aaby and Slater (1989) and Chetty

and Hamilton (1993), factors related to management’s attitudes and perceptions seem

to be potent determinants of the financial measures of export performance such as

export sales, profit, and growth. In addition, export commitment also influences non-

financial measures of export performance, including perceived export success,

satisfaction and goal achievement. Ali (2004) suggests that behavioural commitment

toward exporting has a significant positive impact on export performance (measured

by export volume and export intensity). Koh (1991) proposed that a firm’s

management will modify its internationalization strategy if a high level of

commitment to exporting exists within the firm. This finding is consistent with all

previous studies (Aaby and Slater, 1989). Cavusgil and Zou (1994) reinforced the

conclusion that high management commitment allows a firm to aggressively go after


the export market opportunities and pursue effective export marketing strategies that

improve export performance. However, Axinn, Noordewier and Sinkula’s (1996)

investigation found a negative relationship between managerial attitudes and export

performance. On the whole, the studies provided evidence that management support

of export activities is (often strongly) associated with export performance.

Export Marketing Strategy

Export marketing strategies have been other important predictors of export

performance. All export marketing strategy-related studies have a positive

relationship with export success, whereas only three studies had a negative

relationship with export success (Table 2.1). However, the combined tendency in the

reviewed studies seems strong enough to conclude that the effect of export marketing

strategy on performance is positive.

External Determinants of Firm’s Export Performance

The internal factors can be classified into three groups, which are discussed below.

Industry Characteristics

Das (1994) and Lim, Sharkey, and Kim (1996) found that industry instability

(operationalized as rate of change in technology, predictability, riskiness) positively

influences export sales. Four studies that addressed industry technological intensity

also reported a positive influence on export performance (Cavusgil and Zou, 1994;

Holzmuller and Kasper, 1991; Holzmuller and Stottinger, 1996; Ito and Pucik, 1993).

Foreign Market Characteristics

While some studies found that export market attractiveness has a positive effect on

export performance (De Luz, 1993); others reported a negative effect (Kaynak and

Kuan, 1993). Trade barriers have a negative impact both on export profitability and

on export sales (Khan, 1978). Therefore, it appears that selecting markets with low

trade barriers is a good idea. Bilkey (1982) and Jung (1984) find low levels of

competition are associated with high export performance. So, avoiding highly

competitive markets and identifying growing markets seems to be piece of good

advice.


Domestic Market Characteristics

Katsikeas, Piercy and Ioannidis (1996) found a positive effect on export performance

for the national export policy, but a non-significant effect for domestic market

pressure and domestic currency devaluation. Madsen (1989) reported a negative

influence of domestic market attractiveness on export sales. It seems that the

relationship between domestic market conditions and export performance needs to be

further researched.

After reviewing 59 studies, it is concluded that only two studies (Donthu and Kim,

1993; Katsikeas, Piercy and Ioannidis, 1996) have included export promotion

programs in their studies and examined its impact on export performance. Donthu and

Kim (1993) investigated the relationships between the firm controllable independent

variables such as a firm’s management characteristic factors (commitment to

exporting and attitude toward exporting) and export marketing policy factors

(international market expansion strategy, use of export assistance, and product policy)

and export growth, the dependent variable. This study found that the extent of use of

outside export assistance from federal, local and private agencies has an impact on

export growth. This suggests that those who used more of these agencies for export

assistance had higher export growth. Though the Donthu and Kim (1993) study

developed a comprehensive model including managerial characteristics and export

marketing policy, it did not explore the indirect effect of export assistance programs

on any of these variables. In terms of measurement, they used assistance providing

agencies (federal, state, local and private) as a proxy for export assistance usage

rather than using export assistance programs as an operational measure.

Katsikeas, Piercy and Ioannidis (1996) developed and empirically tested a model of

export performance focusing on exporters from a small EU country, Greece. These

authors included firm characteristics, export commitment and export related

perception variables (such as, export stimuli, exporting problems, and competitive

advantages) as independent variables in their model. However, the study did not

include export promotion programs as an independent variable in their model as such,

but they found national export promotion policy as an export stimulus, which

positively influenced export performance. The study measured export performance in

terms of goal achievement over the last three years in relation to export sales, market


share and profitability. Despite their significant findings of the impact of export promotion

programs as an export stimulus, they did not measure export promotion programs as a

variable. Rather, they used only two items (“national export promotion policies” and

“attractive export incentives”) to measure the variable “National Export Policy” (Katsikeas,

Piercy and Ioannidis, 1996:18-19). Moreover, their study failed to indicate the impact of

certain managerial factors (knowledge, commitment, and perception) included in their model.

2.3.3 Models of Export PerformanceResearch on firms’ export performance dates back to the early 1960s with the

pioneering work of Tookey (1964), who first attempted to identify the factors

associated with success in exporting. Since then, numerous empirical studies have

examined the interrelationships among export performance determinants and their

outcomes, indicative of an ever-increasing interest in export operations worldwide.

The various determinants discussed in the earlier section are considered for firm

export performance. Further some export performance models are also reviewed

below to identify relevant determinants of firm export performance and for better

understanding that the use of export promotion programs may also be a determinant

of export performance.

The Aaby and Slater ModelAaby and Slater (1989) reviewed the empirical studies of management influences on

export performance. They proposed a general model for assessing export performance

in which they distinguished an export performance factor, three internal factors, and

one external/environmental factor (Figure 2.1). The environmental level includes

macro-economic, social, physical, cultural, and political aspects, which influence

export management, behavior and performance. The environmental factors have been

left out in the more detailed explanation of their models as managers of SMEs have

only a minor influence on this aspect. Thus, Aaby and Slater (1989) considered the

external factors a constraint and focused on the managerial factors. The three internal

export-influencing factors they considered were: firm competence, firm

characteristics, and export strategy. They further classified, among others, the

following variables to firm competency: technology, market knowledge, planning,

export policy, management control, and communication. Firm characteristics were


further divided into firm size, management commitment, and management attitudes to

export-related dimensions. Strategy is made up of the following variables: market

selection, product and product line, pricing, promotion and distribution. Although this

model considered the external factors as a constraint these factors have an effect on

firm export performance.

Figure 2.1

The Aaby and Slater Model (1989)

The Cavusgil and Zou Model


Cavusgil and Zou (1994) suggested firms could achieve better performance in

international markets through deliberate marketing strategy implementation. They

also showed that various internal (firm characteristics and product characteristics)

Figure 2.2:The Cavusgil and Zou Model (1994)


and external factors (industry characteristics and export market characteristics) exert

indirect influences on export performance through export marketing strategy (Figure

2.2). Finally they found marketing strategy, firms’ international competence, and

managerial commitment, have emerged as the key success factors in export

marketing. So, the study has substantiated the empirical link between marketing

strategy and performance in the context of export market ventures.

The Katsikeas, Piercy and Ioannidis ModelKatsikeas, Piercy and Ioannidis (1996), developed and evaluated a model of export

performance using a sample of regular exporters from a small European Union

country, Greece, in their trading activities with overseas distributors. A

comprehensive model of export performance was developed based on internal and

external factors as determinants of export behavior. The model integrates key firm

characteristics, export commitment and export-related perception variables (Figure

2.3). They further classified the key variables, e.g. firm characteristics into size and

export experience; and export commitment into separate export department, foreign

market entry and customer selection criteria, regular export market visits, and export

planning and control. Export-related perception variables were divided into three

variables: export stimuli, exporting problems and competitive advantages. They

divided export stimuli into six fundamental dimensions including domestic market

pressures, fortuitous conditions leading to export involvement, international

managerial outlook, national export policy, export product-market match, and

exogenous market conditions. The results suggest that there is no influence of firm

size and export experience on firm export performance. Among six export stimuli

dimensions, only national export policy is positively related to export performance.

The study revealed a strong positive relationship of export marketing research with

export performance but a negative relationship of export planning and control with

export performance.


Figure 2.3

The Katsikeas, Piercy and Ioannidis Model (1996)

The Lages Model

Lages (2000) examined existing knowledge in export marketing, dealing in particular

with the relationship between internal and external factors, marketing strategy, and

export performance. Lages developed a conceptual framework whereby the preceding

year’s export performance, internal factors and external factors were shown as

influencing the current year’s export performance through the degree of marketing

program adaptation (Figure 2.4). He suggested that the application of this conceptual

framework might assist managers to improve their marketing strategy and enhance

international competitiveness, and consequently, improve their firm’s export

performance.


Figure 2.4

The Lages Model (2000)

Katsikeas, Leonidou and Morgan Model

Katsikeas, Leonidou, and Morgan, (2000), reviewed and evaluated more than 100

articles of pertinent empirical studies to assess and critique export performance

measurements. In a section of this article, Katsikeas, Leonidou and Morgan,

suggested a simple model of export performance, consisting of three groups of

variables (Figure 2.5): 1) background, that is, managerial, organizational and

environmental forces that indirectly affect export performance through intervening

variables; 2) intervening, that is, variables that directly affect export performance,

comprising mainly targeting and marketing strategy elements; and 3) outcome, that is,

the firm’s export performance.


Environmental factors are forces shaping both the domestic and overseas task

environment and macro environment within which exporters operate, and are

essentially external factors beyond the control of the exporting organization (Aaby

and Slater, 1989). Although the potential role of these factors in influencing export

performance has been repeatedly stressed in the export marketing literature, little

empirical research has been undertaken to confirm this, probably due to the

complexity of the international business environment (Rao, 1990; Rao and Naidu,

1992; Reid, 1987). Instead, these factors have been examined mainly within the

context of stimuli and/or barriers to exporting, and several factors (e.g., economic

conditions, trade barriers, and competitive pressure) were revealed as influential

(Leonidou, 1995).

Organizational factors comprise demographic aspects, operating elements, resource

characteristics and goals and objectives of the exporting firm (Leonidou, 1998).

Managerial factors are all those demographic, experiential, attitudinal, behavioral,

and other characteristics of the decision maker within the firm who is potentially, or

actually involved in the export marketing process (Leonidou et al., 1998).

Targeting factors relate to the critical processes of identifying, selecting, and

segmenting international markets (Kotabe and Helsen, 1998). Although these factors

received scant empirical attention and were confined to only two major issues- export

expansion strategy and foreign market segmentation- increasingly, significant

relationships between targeting variables and export performance were often reported

(Amine and Cavusgil, 1986; Donthu and Kim, 1993; Evangelista, 1994; Lee and

Yang, 1990). Marketing strategy factors refer essentially to the company’s export

product, pricing, distribution and promotion strategy (Albaum, Strandskov and Duerr,

1998) and are the key to superior export performance.


Figure 2.5

The Katsikeas, Leonidou and Morgan Model (2000)

The Leonidou, Katsikeas and Samiee Model

Leonidou, Katsikeas and Samiee (2002), synthesized extant knowledge on the subject

based on a meta-analysis of empirical studies on the export marketing strategy –

performance relationship (Figure 2.6). This simplified export performance model is

based on three distinct sets of variables which is similar to those in the model

developed by Katsikeas, Leonidou and Morgan (2000). The first group includes

variables relating to managerial, organizational, and environmental factors. These

factors directly affect the second group which includes export targeting and export

marketing strategy factors. The second group of factors are linked directly to export

performance. The firms’ export performance consists of economic and non-economic

measures. The basic operating mechanism of the model implies a unidirectional

causal relationship: managerial, organizational, and environmental factors influence

the firm’s export targeting and marketing mix that in turn affect export performance.


Figure 2.6

The Leonidou, Katsikeas and Samiee Model (2002)

(A Synthesis of Export Performance Models)

Summary

After reviewing the determinants of export performance in different studies and

conceptual writings, it can be argued that there is no clear-cut formula for developing

successful export performance. Although export performance is widely researched,

the knowledge of the determinants of it is still characterized by a fragmented

collection of confusing findings (Aaby and Slater, 1989; Cavusgil and Zou, 1994). A

major reason for the lack of clear conclusions regarding the determinants of export

performance is the lack of a synthesis and assimilation of the fragmented knowledge

(Leonidou and Katsikeas, 1996). To some extent this problem can be ascribed to the

difficulties in conceptualizing, operationalizing, and measuring the export

performance construct, and its antecedents (Katsikeas, Leonidou and Morgan, 2000).

As discussed so far, there are inconsistencies in terms of the effect of several

determinants on export performance (lack of generalizability) and use of large

numbers of determinants (lack of parsimony) which are the present state of research


in this field. Moreover, only two out of 59 studies which are discussed in Section

2.3.2 have explored the impact of export promotion programs on firm export

performance. These two studies that somehow addressed export promotion programs

when examining firm export performance are not rigorous enough. However, all the

models discussed in Section 2.3.3 suggest that environmental/external factors have an

effect on firm export performance but minimal empirical research has been

undertaken in a developing country context to confirm this. These

environmental/external factors have been examined mainly within the context of

stimuli or barriers to exporting. Katsikeas, Piercy and Ioannidis (1996) empirically

suggest that among other export stimuli dimensions, only national export policy is

positively related to export performance. Therefore, their study demonstrates that

export promotion programs can be an independent determinant in a comprehensive

export performance model though the extant literature on export performance mostly

neglects export promotion programs as an independent variable impacting export

performance. Moreover, not many studies have linked export promotion programs

with any internal determinants of firm export performance.

2.3.4 Measures of Export PerformanceThe purpose of this review is to analyze the different measures of export performance

used in previous studies together with their merits and demerits. There is no uniform

measure of export performance in the literature (Cavusgil and Zou, 1994). The

performance measurement problem is not unique to international business; it has been

researched and debated for many years in the general management and strategy

literature (Venkatraman and Ramanujam, 1986). However, it is also important to

recognise that an organization’s performance is situation-specific, and export

performance, therefore, must be considered in the context of the objectives of the firm

(Shoham, 1991) and the external environment (Aaby and Slater, 1989).

A review of the export marketing literature showed that studies on export

performance can be categorized into two major groups: exporters and non-exporters

(Cavusgil and Nevin, 1981; Keng and Jiun, 1989). One group involves the study of

the behavior of exporters and non-exporters. Generally, the aim of these studies is to

determine the variables that induce or stimulate exporting activities. The commonly

used measures of performance in these studies are: a categorization of exporters and


non-exporters according to firms’ propensity to export, export involvement or export

intensity. The second group consists of studies focusing on exporters’ achievement of

financial and strategic objectives. The popular financial measures of performance

include: level of export sales, export intensity, export growth, and export profitability

(Katsikeas, Leonidou and Morgan, 2000). These measures are operationalized in

either objective or subjective terms and the common aim is to identify variables that

explain the variations in the performance of those already engaged in exporting.

Researchers, in recent years, have also emphasized on achieving strategic objectives

such as market share, competitive position etc (Cavusgil and Kirpalani, 1993;

Cavusgil and Zou, 1994). The advantages and disadvantages of these export

performance measures are discussed below.

Export sales and export intensity - Export sales means the size of export earnings in

dollar value for a company (Madsen, 1989). Export intensity is the ratio of a firm’s

export sales to total sales, and is perhaps the most widely used measure of export

performance, either as a sole indicator or in combination with other measurements

(Axinn and Thach, 1990; Bodur, 1994; Axinn, Noordewier and Sinkula, 1996; Lim,

Sharkey and Kim, 1996; Gray, 1997; Namiki, 1994; Zou, Andrus and Norvell, 1997).

However, the use of this measure, especially when used alone, has been increasingly

criticised (Cooper and Kleinschmidt, 1985) for a number of reasons. Export intensity

and export sales are heavily influenced by firm demographic characteristics. For

example, a large firm may be expected to have more export sales (or volume) than a

smaller firm (Donthu and Kim, 1993). In addition, export intensity can be affected by

changes in the denominator (that is, sales) as well as in the numerator (export).

Cunningham and Spigel (1971) pointed out that a depressed home market would lead

to an improved ratio of export sales to total sales. Moreover, Cooper and

Kleinschmidt (1985) suggested that export intensity cannot be used as a measure for

individual export ventures, as it represents the performance of the entire export

business.

Export growth - Export growth means the increase of exports over a certain time

period (Aaby and Slater, 1989). Export growth measurement is similar to that of sales

growth, which reflects how well an organization relates to its environment (Hofer and

Schendel, 1978, p.4). The concept is commonly operationalized as growth in exports,


export intensity, or profit (De Luz, 1993; Donthu and Kim, 1993). Export growth, as

recommended by Cooper and Kleinschmidt (1985), is a dynamic measure and better

reflects the export performance of a firm. Moreover, export growth is not expected to

be a function of firm demographics. Both small and large firms may have increasing,

or decreasing, export growth.

Export profitability - This measure consists of the percentage of a firm’s total

profits attributed to export activities, that is, profitability as a percent of sales of

exporting that product relative to selling those same products in the home country.

The concept is operationalized as absolute profit (Khan, 1978), percent gross margin

(Airaksinen, 1982), ratio of operating profits to sales (Jung, 1984), and managers

perceived export profitability relative to domestic profitability (Bilkey, 1982, 1985,

1987; Koh, 1991).

The limitation of the financial measures is that there is no standard for judging

whether the measured performance is good or bad, or high or low. The implicit

assumption underlying such measures as export sales or export as a percentage of

total sales is that the higher these figures are, the more successful the company is in

its export venture. This interpretation suffers from a number of limitations. First, it

does not give any indication as to whether a firm has adequately responded to all the

profitable export opportunities open to it (Cavusgil, 1984). Second, it overlooks the

fact that it is the firm’s overall and not just export performance that matters. This

view is strongly supported by Axinn, Sinkula and Thach, (1994), while Dalli (1994)

provides empirical evidence that export performance is not necessarily related to

overall performance.

Non-Financial Measures

As there are some limitations involved in the sole use of financial variables as a

measure of export performance (Evangelista, 1994; Katsikeas, Piercy, and Ionnidis,

1996), the use of non-financial measures has increased in recent years. Non-financial

measures are commonly based on the systematic assessment by managers of such

items as: goal achievement (Cavusgil and Zou, 1994; Katsikeas, Piercy, and Ionnidis,

1996), satisfaction (Evangelista, 1994), and perceived success (Cavusgil and Zou,

1994; Louter, Ouwerkerk and Bakker, 1991).


Subjective and Objective Terms

Both financial and non-financial measures can be operationalised in both objective

(based mainly on records relating to absolute figures of firm’s profitability, sales level

and such like) and subjective (managers’ perceptions) terms (Evangelista, 1994). In

most studies financial measures (sales, profit, growth) have been associated with

objective terms (normally in absolute terms such as percentage), and non-financial

measures (goal achievement, success and importance) have been associated with

subjective terms (e.g., managers’ perception) (Katsikeas, Piercy, and Ionnidis, 1996).

There are some problems with the use of objective measures in assessing export

performance. Firms typically do not report the financial details of their exporting

activities; it is difficult to access readily available and valid archival data. In addition,

financial figures are subject to national and local accounting standards, as well as to

managerial perceptions/satisfaction with a given level of performance, which may or

may not converge in a multiple industry or cross-national setting (Leonidou,

Katsikeas, and Samiee, 2002). Moreover, formal financial statements and reports

often make no clear distinction between domestic and export business operations, due

in part to the fact that many firms view exporting as an extension of their domestic

activities (Yang, Leone and Alden, 1992). Finally, objective measures of performance

are difficult to obtain due to the reluctance of private firms to disclose figures, which

are deemed confidential (Appiah-Adu, 1999). The question, which may then be

raised, is whether accurate objective indicators of export performance can always be

obtained.

In relation to these issues several empirical studies support the reliability and validity

of the use of non-financial and subjective terms to assess export performance (Dess

and Robinson, 1984). Further, the method of subjective performance assessment, with

an anchor relative to expectations, allows better comparability across different

industrial sectors and situations, with varying standards of acceptable performance

(Pelham and Wilson, 1996).

Composite Measures

Export success is not an objective term, because people may perceive things

differently. What one export manager considers being an excellent success, another


may condemn as rather poor. Export results are evaluated against historical results,

expectations and objectives. Use of single performance measures as sole indicators of

export performance has been substantially criticised (Cooper and Kleinschmidt, 1985;

Fenwick and Amine, 1979; Reid, 1981; Rosson and Ford, 1982), as it is argued that

the complexity of export success justifies the use of a set of variables (Bijimolt and

Zwart, 1994; Madsen, 1989). Nevertheless, Aaby and Slater (1989) suggested that the

use of single variable measures is an improvement over the use of the categorical

approach, which simply separates firms into exporters and non-exporters. However,

multi-indicator measures tend to be more reliable and have less measurement error

than single indicator measures (Churchill, 1979). So, multiple measures are seeing

increased use (Bijimolt and Zwart, 1994; Cavusgil and Zou, 1994; Raymond, Kim

and Shao, 2001; Wang and Olsen, 2002). Multiple measures are preferable because

they offer a more complete picture of performance. Since different aspects of

performance may be affected by different types of firm characteristics, a multiple-

measure approach offers better guidance to decision- makers. Therefore, this study

uses multiple measures of export performance in subjective terms to assess managers’

perceived level of achievement of exporting goals.

2.4 Export Promotion Related LiteratureThe major empirical studies of government export promotion programs available in

the literature are reviewed in this section. This review is needed to establish that the

conceptual model (Chapter 3) and operationalisation of measures of export promotion

programs (Chapter 4) developed for the study are supported by prior research. The

literature review in this section focuses on understanding the relationship between the

export promotion programs and firm export performance. The empirical evaluations

of export promotion programs in developed and developing countries are scarce, but

they have slowly unfolded in the literature (Crick, 1995).

A summary of export promotion related literatures that are most relevant to this study

are reported in Table 2.2. These studies have been identified based on a systematic

bibliographic search using both manual and computerized methods. Through this

review, 20 export promotion program-related studies are identified and collected.

There are two macro level studies that examined the impact of export promotion

programs on nation/states’ export performance. Brezzo and Perkal (1983) examine


the effect of export promotion programs for four industries in Uruguay. They attribute

the rapid expansion of exports in the fisheries, handicrafts, car components and

footwear industries to government export support. However, the evidence they

provide is descriptive and does not demonstrate causality between public policy and

increased exports. Coughlin and Cartwright (1981) examined the relationship

between US state government expenditures on export promotion (as a proxy for the

amount of assistance provide to firms) and total state exports for all fifty States. State

export promotion expenditures were found to be a significant determinant of state

exports. The authors urged caution in interpreting their findings, however, due to

unexamined lags between expenditures and exports and because of uncontrolled rival

explanations of state export differentials. Secondary aggregate economic data and the

approach taken by the authors are not considered appropriate for this study. Such data

are available only for the general program-related outcome of increased exports (for

all exporters, not just for program clients), but are not available for the more detailed

measures of pre-export activity and export performance of interest here. Aggregate

secondary data thus precludes a detailed examination of the linkages between specific

export promotion services and several important outcomes.

Since this study is concerned with micro (firm) level performance, therefore, these

micro level studies in Table 2.2 have been classified into two major groups. The first

group of studies suggests how export promotion programs can be developed. The

impact of export promotion programs on firm export performance are examined by

the second group of studies. Table 2.2 shows that 14 empirical studies have explored

how to develop export promotion programs and implicitly offered guidance to export

assistance providers regarding the allocation of their resources and the content of their

programs. However, only four studies have evaluated the impact of export promotion

programs on firm export performance.


Table 2.2

Past Empirical Studies on Export Promotion Programs

Main Focusof the Study

Study Country Study TypeandSampleSize

Analysis

Impact of EPPson nations’exportperformance(2 out of total 20studies)

Brezzo and Perkal (1983)

Coughline and Cartwright(1987)

Uruguay

U.S.A

FourindustriesAnnualsurvey, 1981

Descriptive

GeneralizedLeast Squares

How to developthe exportpromotionprograms (EPPs)

(14 out of total 20 studies)

Bruning (1995)

Czinkota and Ricks (1981)

Gray (1997)

Henry (1996)

Howard and Herremans(1988)

Ifju and Bush (1994)

Kedia and Chhokar (1986)

Kotabe and Czinkota (1992)

Moini (1998)

Naidu and Rao (1993)

Naidu, et. al., (1997)

Seringhaus and Botschen(1991)

Silverman, Castaldi andSengupta (2002)

Weaver, Berkowitz andDavies (1998)

Canada

USA

New Zealand

USA

USA

USA

USA

USA

USA

USA

India

Canada andAustria

USA

Norwegian

Mail survey240Mail survey168Mail survey300Mail survey55Mail survey101

Mail survey354Interview96Mail survey162Mail survey111Mail survey777Not applicable

Mail survey583

Mail survey115

Mail survey697

Discriminate

Descriptive

Cluster

Descriptive

Descriptive

Chi-square

Descriptive

ANOVA

MANOVA

Chi-square

Not applicable

t-test

ANOVA

Regression

Impact of EPPson firm exportperformance

(4 out of total 20studies)

Gencturk and Kotabe (2001)

Marandu (1995)

Singer and Czinkota (1994)

Wilkinson and Brouthers(2000)

USA

Tanzania

USA

USA

Mail survey162Interview51Mail survey89

Secondarydata

ANOVA

Chi-square

Correlation &LogisticalregressionCorrelation


2.4.1 Studies on how to develop export promotion programs The following studies found what exporters need and how export promotion

programs could be designed as per their need.

Bruning (1995) examined a set of factors related to managerial attitudes, firm

characteristics, perceived barriers and export development support programs in

determining export readiness and performance. A conceptual model is developed

linking these four major factors to export status (Figure 2.7). Export status, composed

of three classes: non-exporters, minor exporters and major exporters, is the criterion

variable in the discriminant model used in this analysis.

Two government support variables are used in the analysis to assist in discriminating

between firms on the basis of export status, i.e., program awareness and programs in

importance using 11 programs. Programs awareness is calculated as the count of the

number of programs recognized by the respondent. The importance of each of the

export development programs is calculated as the mean value of the respondent’s

assessment of the perceived usefulness of each of the 11 programs measured on a

seven-point scale (7, very useful and 1, not very useful). The results indicate that

programs awareness is very significant in distinguishing between non-exporters,

minor and major exporters. Non – and minor exporters recognize between five and

six export development programs while major exporters recognize between three and

four. This indicates that as firms increase exporting activities, however, awareness of

governmental export programs declines. On the other hand, mean values for the

programs importance variable do not vary significantly across levels of export status.

So, importance is rated the same across the three export status levels. The results

indicate that different programs are important at different levels of export status.

Market development, direct financial support and research assistance programs are

preferred by firms at all export status levels. Trade seminars, market planning and

statistical support services, however are among the least-valued programs by all

levels. There are several noticeable differences among export status levels.

Counseling is more important to non-exporters while trade missions are very

important to minor and major exporters. Therefore, the finding suggests that while

awareness is inversely related to export status, programs importance is not.


Figure 2.7

The Bruning Model (1995)

Czinkota and Ricks (1981) examined the “perceived” needs and interests of

importers of US goods and compared these with the assistance requests of exporting

firms. To become successful, exporting firms must pay attention to what is deemed to

be of importance to the importing firms. Ideally, it is in these areas of importance that

they should be seeking government assistance and it is in these areas that the

government should be granting assistance. The researchers found large discrepancies

between what exporters want from the government and the factors which make US

exports most valuable to the foreign customer. This finding indicates that if the

government is going to provide assistance, it should not necessarily orient all of its

efforts in export promotion to simply fulfilling the wishes expressed by US firms.

Gray (1997) surveyed the most senior marketing decision makers in a broad, multi-

industry sample of New Zealand exporting firms in profiling managers to improve


export promotion program targeting and effectiveness. He found that there are

reasonably homogenous segments of senior decision makers who populate

international businesses. This sort of information is vital if international business

educators and export promotion organizations are to effectively target their services

to groups of managers who share similar needs. The results of the cluster analysis

suggests it is possible to devise a valid typology of senior international marketing

managers, based on shared attitudes and common levels of objective management

knowledge and skills. Such a typology could be useful for improving the targeting of

export promotion assistance and international business education programs. That is,

this appears to be a useful method for segmenting international marketing managers

to determine what sort of educational and export assistance particular groups may

require.

Henry (1996) investigates new exporter awareness and use of various US

government export assistance services and publications. He surveyed 55 new-to-

export firms in Indiana. The findings suggest that US government sponsored export

promotion services and publications are frequently unknown, and when known, are

generally underutilized or not useful. The Henry (1996) study suggests that since

most new exporting forms seek simple, uncomplicated, free or minimal-cost

assistance and become easily discouraged when export start-up problems occur, it’s

critical that these suggested improvements be seriously considered by the government

in order to make it easier for firms to begin exporting.

Howard and Herremans (1988) investigated two questions: (a) what successful

small business exporters perceive to be the most important tasks in initiating or

expanding an exporting program, and (b) what agencies they feel are most helpful in

accomplishing those tasks. This study identified successful exporters using a list of all

“E Award” winners from 1961 to 1985. Each of the executives was asked to evaluate

23 different activities in terms of overall importance to exporting operations. Each

was asked to indicate how important the activity was on a three-point scale. The study

found that information on where the markets are located and how to go about getting

the product to those markets are the most important activities involved in successful

exporting. Foreign distributors and trade shows were the most helpful sources of

assistance cited by the businesses surveyed in this study.


Ifju and Bush (1994) examined awareness, use, potential use, and the perceived

benefit of export program services among small hardwood lumber producers in the

eastern United States. They classified 21 services into five general groups: importer

information, promotion, physical exporting, financial and legal, and marketing

information. This study found that companies were least aware about the financial

and legal services and the perceived benefit was particularly high for services that

guarantee payment by foreign buyers, transfer funds from foreign buyers, and credit

information on foreign buyers. Low use of financial and legal services is most likely

the result of low awareness and promotional or informational campaigns may be

required to increase their use. So, the results help to identify possible reasons for

firms failing to use certain services and are useful in targeting services and programs

to the specific needs of the industry.

Kedia and Chhokar (1986) evaluated seventeen export promotion programs with

respect to their familiarity, use and benefits on the part of both exporters and non-

exporters in Louisiana. The results indicate that export promotion programs have not

been very effective due to lack of familiarity on the part of existing or potential

exporters of the existence or the availability of these programs. Most firms were not

aware of the existence of current programs. Among the small minority of firms who

were aware, the participation rate in the programs was rather high. The study

identified five programs: (1) a banking service which guarantees payment by

qualified customers, (2) a banking service which handles all financial aspects of the

sale, (3) an export service which buys the products and resells overseas, (4) general

commercial information on foreign firms, and (5) general export counseling, which

were most beneficial by non-exporters. However, the results indicate a vast majority

of firms both exporters and non-exporters, are not aware that these five programs are

already in existence. Further results indicate that most firms would have used these

programs if they have known of their availability. So, it is clear that a fairly large

number of small and medium-sized firms expect considerable benefits from some of

the existing programs and are also willing to use them. However, these companies are

not even aware that the programs do exist. Therefore, the findings suggest that

increasing the exposure to and awareness of existing programs needs to be a high

priority of export promotion efforts in encouraging non-exporting firms to export and

in assisting exporting firms to increase their export potential.


Kotabe and Czinkota (1992) found a gap between exporters’ priority assistance

requirements of firms and the level of government assistance allocated to improve the

effectiveness of a mid-western state export promotion in the US. They described

export promotion activities into two major groups: a) export service programs

(seminars for potential exporters, export counseling, how-to-export handbooks and

export financing); b) market development programs (dissemination of sales leads to

local firms, participation in foreign trade shows, and preparation of market analysis

and export news letters). They classified export involvement into five categories:

partial interest in exporting, exploring exports, experimental exporters, experienced

exporters with limited scope, and experienced exporters. They identified in their

empirical study that problems faced by exporters and types of desired assistance

varied by stage of export development. They summarized five areas of export-related

problems: a) logistics (i.e., arranging transportation, transport rate determination,

handling of documentation, obtaining financial information, distribution coordination,

packaging, and obtaining insurance; b) legal procedure (i.e., government red tape,

product liability, export licensing, and customs duty; c) servicing exports (i.e.,

providing parts, repair service, technical advice, and providing warehousing; d) sales

promotion (i.e., advertising, sales effort, and marketing information; e) foreign

market intelligence (i.e., locating markets, trade restrictions, and competition

overseas). The results suggest that logistic-related problems are the most pressing

area of assistance desired by firms across all stages of export involvement, followed

closely by legal procedure and foreign market intelligence. Servicing of export is not

strongly considered to be in the realm of state export assistance across all export

stages. Finally, they advise that the identification of expertise, problems, and

government assistance needs by the export stage can help government agencies

develop a systematic approach to export promotion.

Moini (1998) evaluated the impact of government assistance programs on the firm’s

export activity in the US state of Wisconsin. In Moini’s (1998) internationalization

process model, firms are divided into four categories: “non-exporters”, “partially

interested exporters”, “growing exporters”, and “regular exporters”. Moini (1998)

found that managers’ awareness of assistance programs varied by the degree of

internationalization of firms – the lack of awareness was more acute among “non-

exporters” and “partially interested exporters” than “regular exporters”. The non-


exporters’ lack of awareness about available export programs increased their

uncertainty about the potential benefits of these programs. It appears that many of

these programs fail to reach their targeted firms. Thus it is obvious that promoting

awareness of these programs is essential to the success of the programs in increasing

these firms’ export involvement.

Moini (1998) also argued a positive association between managers’ awareness and

use of the programs. In other words, he found that “regular exporters” used export

assistance programs more often than did “partially interested exporters” in his sample.

The results suggest that the degree of effectiveness ratio (a percentage of actual users

divided by the number of those who are aware of the programs) also varied with the

degree of firm export involvement. The programs had a higher effectiveness ratio

with regular exporters, while a low effectiveness ratio is associated with non-

exporters. Therefore, if the objective is to increase the effective use of the export

stimulation programs, the ratio of “users’ to “awareness”, is a good measure of the

impact of the program (Naidu and Rao, 1993). Finally, the results suggest that export

encouragement strategies should be designed and carried out with clear target

audiences in mind, and the targeted firms should be informed about how export

operations can contribute to their profits and growth.

Naidu and Rao (1993) identified the differences in needs for assistance by firms in

different stages of the internationalization process and proposed strategies to

overcome some of the deficiencies. The Naidu and Rao (1993) study proposed

strategies based on the needs of the firms targeted for assistance to formulate more

suitable export assistance programs. A survey of firms was conducted in an industrial

Midwestern state from a variety of manufacturing businesses in different size

categories. Responding firms were classified into four distinct groups (non-exporter,

export intenders, sporadic and regular exporters) based on their level of export

activity. The analysis lends support to the contention that the perceived “needs” in

export market development, and the hierarchy of these needs, differ by the degree of

internationalization of the firm. The study findings suggest that export assistance

programs should be designed and implemented with clear target audiences in mind.

Further, procedures should be developed to monitor the performance of various

export assistance programs in relation to their predetermined objectives. These


objectives may be aimed at creating impacts at the macro or micro level. At the micro

level, one may assess the impacts on awareness and utilization of programs by

individual firms, participation in export-related activities, and the progress of firms in

the internationalization process.

Naidu, et. al. (1997) outlined several processes and procedures for a comprehensive

public sector initiative to stimulate export activity. Naidu, et. al. (1997) highlighted

that developing a stock of competencies and resources were the key to export success.

Public institutions can play a major role in enhancing these competencies through a

proactive export assistance and promotion policy. However, to develop effective

export assistance programs, it is vital that firms are targeted by segments and

programs tailored to meet specific needs that arise in specific stages of

internationalization. While initially a firm may be uninterested in foreign markets,

awareness of export assistance may interest the firm to explore opportunities and start

sporadic exporting. With experience and learning, the firm develops competencies to

become a committed and regular exporter. Broadly, they classified export promotion

programs into four categories: export information and advice, marketing support,

finance and guarantees, and education and training. Naidu and his colleagues also

developed a conceptual framework for export development strategy and performance

but did not examine it empirically.

Seringhaus and Botschen (1991) examined the export promotion systems of Canada

and Austria. The Canadian system is government-based, while the Austrian one

operates in the private sector. The study findings indicated that Austrian exporters

used more of the export promotion programs than their Canadian counterparts and

managers perceived Austrian programs as more useful than Canadian programs.

While Seringhaus and Botschen (1991) contributed to a cross-national comparison of

the use and usefulness of the export promotion programs, their study fell short of

examining their impact on export performance at the firm level. Moreover, their study

only examined the use and usefulness of the programs to exporting firms in general

without investigating any variation by users’ stage in the internationalization process.

Silverman, Castaldi and Sengupta (2002) investigated the export assistance needs

of small and medium-sized firms in the Californian environmental technology


(EnviroTech) industry. They classified firms into two groups (exporter and non-

exporter) and identified their export assistance needs. Furthermore exporters were

classified into three stages: marginal, moderate and heavy. They found that the export

assistance needs of firms varied across stages. Moreover, firms without export

experience have a wide range of information needs in order to overcome external

barriers. Non-exporting firms want information about selling in foreign markets and

they are unsure as to where to find the best export market opportunities. The

Silverman et al (2002) study suggests that export assistance programs should be

tailored to the stage of export development (Moini, 1998) and they further suggest

that export assistance programs may have to be tailored to the specific needs and key

success factors in particular industries.

Weaver, Berkowitz and Davies (1998) developed a statistically-based weighted

checklist for assessing the likely effects of exporting on the firm’s profitability. The

purpose of the checklist was to screen candidates for governmental assistance,

identify candidates where support would be useful, and consequently more effectively

allocate limited public funds. The findings suggest that government assistance should

be directed to those firms who are more committed to export.

An overview of these studies’ findings suggests that government can promote the

export operations of firms through the creation of export assistance programs.

Typically, they help by providing information, sales leads, tax incentives, insurance,

and financing programs. It has been generally upheld that one of the prominent

aspects of the literature has dealt with the barriers or problems perceived by firms at

various stages of export activity. Export marketing researchers generally agree that

understanding the nature of exporting problems provides corporate and public policy

makers with key strategic guidelines and evaluative insights for the design and

implementation of effective export marketing plans and national export promotion

programs respectively. The next area of the literature to be reviewed is the impact of

export promotion programs on nations’ and firms’ export performance.

2.4.2 Studies on the Impact of Export Promotion Programs on FirmsExport Performance


The only four studies that found a direct relationship between export promotion

programs and export performance are reviewed below.

Wilkinson and Brouthers (2000) examined the impact of four government export

promotion programs (trade shows, trade missions, foreign offices, and objective

market information programs) in attracting foreign direct investment (FDI) and the

export of high tech products. The results indicate that states with comparatively more

FDI have greater success in their use of trade missions for the purpose of inward FDI

attraction and in their use of trade shows to promote high-tech exports.

Singer and Czinkota (1994) examined factors associated with effective use of export

assistance. They examined the relative importance of four key factors: the type of

services used, firm export stage, firm size, and management commitment and

persistence for service effectiveness among firms using the services of an agency of

the US state government. First they developed a general model of the role of export

promotion as helping management to overcome export barriers. The use of

government export assistance is expected to give managers more information,

experience, and resources to help them overcome export barriers and increase their

level of pre-export activity. By increasing, accelerating, or even substituting for

management export knowledge and experience, export assistance is thought to

stimulate positive perceptions of, and attitudes toward, exporting. This conceptual

linkage has logical strength however the Singer and Czinkota (1994) model was not

tested empirically.

Secondly, Singer and Czinkota (1994) developed another model of the role of service

type and firm export stage in the linkage between service use and export outcomes

(Figure 2.8). Pre-export activities and export performance were the dependent

variables and service type, export stage, firm size, and management

commitment/persistence were the independent variables in the model. ‘Service type’

was operationalized into two types – informational services and mixed services (both

informational and experiential). Export stage was measured in two dimensions –

exports as a percentage of sales, and a self-reported description of export activity.

Self-reported descriptions included: we didn’t export and weren’t interested; we only

exported in response to unsolicited orders; we were preparing to export; we had no


more than five export transactions per year; and we had six or more export

transactions per year. Firms were then assigned to one of five categories based on

these two dimensions: uninterested, unsolicited, exploring, experienced, and

unknown. Due to the small sample size, these were further collapsed into two

categories – less experienced exporters and more experienced exporters. The numbers

of services used were counted to measure the variable ‘management

commitment/persistence’. Firm size relative to its competitors was developed as a

measure of firm size. The Singer and Czinkota (1994) model reflected that the use of

export assistance depends upon both the type of assistance and the export stage of the

firm. The use of services providing objective knowledge (informational services)

increased the pre-export activity (deciding to export, planning, making contacts,

selecting channels) of the less export experienced firm, although firms with more

export experience were expected to be less likely to use such services. For firms with

less export experience, the use of services providing experiential knowledge (mixed

services) required in an increase in pre-export activities, while the use of such

services by more experienced firms was expected to result in increased export sales.

In the other words, the less experienced exporting firms tended to use both services

(informational and mixed) primarily to enhance their pre-export activities. On the

other hand, the more experienced exporting firms tended to use mixed services

primarily to increase exporting activities. Their analysis was however, limited to a

bivariate relationship between export outcome type and type of services used.


Figure 2.8

The Singer and Czinkota Model (1994)

(The Effect of Service Type and Firm Export Stage on Export Outcome)

Marandu (1995) developed a model where the export performance that a firm

attained was conceptualized as a joint function of both macro and micro level factors

(Figure 2.9). Macro factors exert a general influence and thus constitute the

environment of a firm. From the point of view of a public policy-maker, macro

factors are considered to be of two types: 1) those controllable at the level of a nation

(for example, taxation, general infrastructure, and institutional infrastructure, such as

export promotion services including domestic capital markets); and 2) those over

which a country has no control (for example, international economic conditions,

international capital markets and trade barriers). However, from the point of view of

an individual firm, all macro factors are considered to be mainly uncontrollable. On

the other hand, micro factors consist of characteristics of the firm itself, that is, its

‘strategy’, ‘structure’, and those of its ‘management’ team (caliber of management).

Micro factors are, on the whole, considered controllable at the level of the individual

firm.


Though Marandu (1995) described all possible factors that influence the export

performance of a firm in his model, his empirical examination was limited to the

bivariate relationships between managers’ extent of awareness, usage of, and

satisfaction with thirteen export promotion services and the export performance of

firms in Tanzania. Marandu (1995) analyzed the relationship between individual

export promotion programs and a firm’s export performance. The results suggest that

the level of usage of export promotion services does have a positive impact on export

performance i.e., export intensity is influenced positively by the extent of satisfaction

with export promotional services. This may indicate that the more satisfied the

managers with a program, the more it will contribute to export intensity. Despite this

interesting finding, the study fails to clearly conceptualize the relational path between

export promotion programs and export performance. Furthermore, statistical rigor

was a limitation of the Marandu (1995) study where measures of association were

primarily used and the hypothesized relationships were tested utilizing the Chi-square

test.

Figure 2.9

The Marandu Model (1995)


Gencturk and Kotabe (2001) integrated export marketing involvement and the use

of state export promotion assistance programs as critical variables affecting export

performance (Figure 2.10). The focal explanatory variable in the Gencturk and

Kotabe (2001) model was the use of state export promotion assistance programs,

which influence export performance (export efficiency, export effectiveness, and

competitive position) directly but were moderated by the firms’ level of export

involvement. The Gencturk and Kotabe (2001) model proposed that the usage of

export promotion programs could influence export performance directly as well as

indirectly through firms’ export involvement which moderates the impact of the

usage of export promotion programs on a firm’s export performance. Their empirical

findings revealed that the usage of export promotion programs only influence two

measures of performance - efficiency and competitive position.

While the Gencturk and Kotabe (2001) study is more comprehensive than previous

studies incorporating export promotion in the framework, it ignored other external

and export strategy factors that have been found to be critical to a firm’s export

performance (Bodur, 1994; Cavusgil and Zou, 1994; Madsen, 1987; Moini, 1995;

Moen, 2000). Moreover, Gencturk and Kotabe (2001) incorporated managerial and

organizational characteristic variables in the model but did not relate how export

promotion programs influence these in the export performance model. Furthermore,

the model outline suggested that the use of export promotion programs is an

important determinant of firms’ export performance not only directly but also through

its interaction with the firms’ export involvement behavior. The direct effect

explicitly models the premise that export promotion programs are an important

resource for building the knowledge and experience necessary for successful foreign

market involvement. However, this normative logic has not been subjected to a

rigorous empirical test. The Gencturk and Kotabe (2001) study developed four

categorical measures of export assistance users: non-user, low user (used 1 to 5

programs), medium user (6-9), and heavy user (10 or above). The model remains a

useful addition to the literature because it incorporates these two explanatory

variables (managerial characteristics and organizational characteristics). In the

Gencturk and Kotabe (2001) model, organizational and managerial differences among

firms involved in export marketing are investigated to ascertain the robustness of and

replicate the observed differences in firms’ export marketing involvement behavior.


The Gencturk and Kotabe (2001) study provides better insight into the extent to

which firms use export promotion programs and what impact, if any, that usage has

on the performance of exporting firms. Moreover, it adopted more rigorous statistical

techniques to examine the impact of export promotion programs on export

performance.

Figure 2.10

The Gencturk and Kotabe Model (2001)


2.5 ConclusionThe literature reviewed in this section leads to some major conclusions regarding the

relationship between export promotion programs and export performance. First, from

a theoretical perspective, our knowledge on the impact of export promotion programs

on the export performance of a firm is very limited. While the extant literature on

export performance mostly neglected export promotion programs as an antecedent of

export performance, the literature on export promotion fails to relate it to export

performance. Most studies (Table 2.2) on export promotion programs suggest how

export promotion programs can be more effective. Only a few studies that integrated

export promotion programs with firms export performance focused on a direct link

between the usages of export promotion programs and export performance. No study

has explored any link between export promotion programs and other determinants of

exports toward establishing any indirect relational link between export promotion

programs and export performance. However, the internationalization process theory

indicates how gradual knowledge acquisition leads to greater commitment to

exporting and international operations (Johanson and Vahlne, 1977). The resource-

based theory of the firm proposes that human competencies in the form of knowledge

and expertise are critical to superior organizational performance (Barney, 1991; Coff,

1997). While these competencies are internal and are acquired by firms, export

promotion programs help firms to obtain the information, knowledge, experience, and

resources they need to develop an export strategy that leads to better performance

(Singer and Czinkota, 1994). Gencturk and Kotabe (2001, p.58) also argue that export

promotion programs represent readily available external sources of information and

experiential knowledge at a nominal cost. Therefore, researchers have recognized that

export promotion programs are an important source for building the knowledge and

experience necessary for successful foreign market development but fail to test this

normative logic empirically. This suggests that export promotion assistance

stimulates export knowledge in a way that increases export market commitment and

export performance. It is also argued that export assistance stimulates positive

perceptions and attitudes toward exporting by increasing, accelerating, or by even

substituting for managers’ export knowledge and experience (Singer and Czinkota,

1994). These conclusions clearly indicate that there is a link between export

promotion programs and other determinants (such as, management perception and

attitude towards exporting, export knowledge and commitment which eventually


influences strategy and performance) of export performance. So, further research is

needed to examine the indirect effect of export promotion programs on firm export

performance.

Second, some research design limitations have been found in previous studies. The

research design issues in previous studies can be summarized as follows:

(1) Lack of consensus with regard to how export performance should be measured

(Aaby and Slater 1989; Cavusgil and Zou 1994). The different measurement schemes

e.g. export intensity, export growth, competitive position, perceived success etc for

export performance make it difficult to compare the findings of different studies. As

mentioned earlier, none of these studies used the same measure of export

performance, which limits the generalization of findings of these studies.

(2) Lack of consensus with regard to the measurement of export promotion programs.

While two studies (Marandu, 1995; Wilkinson and Brouthers, 2000) examined the

relationship between individual export promotion programs and firm export

performance, the other study (Gencturk and Kotabe, 2001) used a “global” construct

measure (all export promotion programs were measured collectively) to examine the

effect of the use of export assistance programs on export performance. Though the

“global” measure can simplify the examination of the impact of the use of export

promotion programs in general, some insight into the impact of some specific

programs may be lost. The literature suggests that export promotion programs are

designed not only for increasing knowledge, but for other purposes as well. For

example, some programs are designed to encourage managers to develop foreign

market for their products and some are designed to provide financial support to make

export competitive (such as subsidy and import duty draw-back on imported materials

and components for export products) and credit guarantees to facilitate export

financing (Kotabe and Czinkota, 1992; Kotabe, 1993). Singer and Czinkota (1994)

recognized this problem and used a “narrow global” measure to classify similar-

purpose programs into groups of export promotion programs – programs designed to

provide (1) objective knowledge and (2) experiential knowledge.


(3) Lack of appropriate analytical methods used to examine the relationships between

export performance and related factors. While regression is the most popular

analytical approach adopted by researchers, a diverse set of approaches are also used

such as the t-test and chi-square test, ANOVA and discriminant analysis (Table 2.2).

The popularity of the regression approach could be both the cause and the result of

researchers’ assumption that all potential factors influence export performance in the

same way. There is very little distinction between direct effects and indirect effects.

A review of the empirical work under the aegis of export marketing reveals a number

of major streams of research that have contributed to the establishment and

development of export theory relating to export promotion programs (Bruning, 1995;

Gencturk and Kotabe, 2001; Singer and Czinkota, 1994). These studies suggest that

government export promotion programs in general and their performance

implications in particular, represent an important topic necessitating further theory

development and empirical research. So, based on both the contributions and

limitations of the studies reviewed, further study is needed to explore the direct and

indirect effects of export promotion on firm export performance. The present study

addresses the above-mentioned gaps in the literature and further develops our

understanding of the role of export promotion programs on firm export performance

using a sophisticated structural equation modeling (SEM) technique. In the next

chapter, a comprehensive model is developed to assess the direct and indirect effect

of different categories (similar purpose programs) of export promotion programs on

firms’ export performance.


Chapter 3

The Research Model and Hypotheses

3.1 Introduction

The primary purpose of the study is to investigate the direct and indirect impact of the

use of export promotion programs (EPPs) on firm export performance. Export

promotion programs are essentially designed to serve different target firms and to

achieve specific objectives. As reviewed in the previous chapter, a number of prior

studies have examined the impact of the use of export promotion programs (either

individually or collectively) on firm export performance. This implies that the impact

of a category of programs (designed to achieve broad objectives) can not be

identified. For example, programs such as export workshops and seminars, trade

missions, marketing assistance for exporting new products, overseas promotion of the

firms’ products, assistance in establishing contact with foreign buyers, establishing

sales and display centers abroad and providing market information are usually

designed for initial exporters to develop foreign markets. Whereas income tax rebate,

credit guarantee insurance facilities and duty drawback programs are designed for

more advanced level exporters. Little known research has explored any link between

export promotion programs and other determinants of export performance toward

establishing any indirect relation between export promotion programs and export

performance. A model of export performance integrating firm and management

related factors is developed for this study to examine the direct and indirect

relationships between export promotion programs and export performance.

3.2 The Research Model and Hypotheses

Drawing on the literature reviewed in the earlier chapter, a diagram of the proposed

conceptual model for this study is shown in Figure 3.1. The diagram provides a

rationale for the results expected to flow from the use of market development-related,

and finance and guarantee-related, export promotion services. A review of the

Chapter 3. The Research Model and Hypotheses 63

internationalization, export behavior and performance literature suggests that firm

export performance is likely to be highly correlated with key decision makers’

international business attitudes, commitment, knowledge and skills (Aaby and Slater,

1989; Cavusgil and Zou, 1994; Donthu and Kim, 1993; Evangelista, 1994, 1996;

Johanson and Vahlne, 1977; Katsikeas, Piercy and Ioannidis, 1996; Moen, 2000;

Wang and Olsen, 2002). Drawing on the extant literature on export performance and

export promotion, the conceptual model developed for this study integrates export

strategy, management perception of the export market environment, export

knowledge, export commitment, and use of export promotion programs that influence

the export performance of a firm. The relational connections of these variables with

export performance are examined collectively and simultaneously, rather than on a

bivariate basis.

Broadly, Export Promotion Programs (EPPs) refer to all public measures designed to

assist firms’ exporting activity, ranging from counseling, tax incentives, and export

financing to trade shows and sales leads (Genturk and Kotabe, 2001). Most EPPs are

basically designed to provide the corporate sector with primary export knowledge

(propagating the benefits of exporting, export market information through trade

missions, trade fairs, sales leads etc), and experiential knowledge and physical

facilities to existing and potential exporters (Seringhaus and Rosson, 1990). Naidu, et

al. (1997) classified EPPs into four categories: (1) export information and advice,

providing export information and advisory services to intended/inexperienced

exporters; (2) marketing support, providing market information, finding

customers/agents/distributors, displaying products (trade fairs, exhibitions); (3)

finance and guarantees, providing export credit guarantees against

political/commercial risk, tax incentives, insurance, direct and indirect subsidies; and

(4) education and training, training managers and employees in export related rules,

procedures and processing paper-work. Kotabe and Czinkota (1992) and Kotabe

(1993), on the other hand, suggested two types of promotional activities: export

service programs (e.g., seminars for potential exporters, export counseling, how-to-

export handbooks, and export financing), and market development activities (e.g.,

dissemination of sales leads to local firms, sponsorship of foreign trade shows,

preparation of market analysis, and export newsletters). On the basis of these studies,

for the purpose of this study, EPPs are classified into two major categories in terms of


the broader purposes of use: namely market development-related EPPs, and finance

and guarantee-related EPPs.

The conceptual definitions of these variables and the research hypotheses developed

in the firm export performance model are presented in Figure 3.1. The first part of

this chapter conceptualizes the relationships between the use of market development,

and finance and guarantee related EPPs and different firms and management related

antecedents of firm export performance. The relationships between the widely used

firm and management related variables and firm export performance are hypothesized

at the end of the chapter to capture the direct and indirect impact of EPPs on firm

export performance in the comprehensive model.

3.2.1 Use of EPPs and Management Perception of Export Market Environment

The management perception of the overall market environment of a foreign country is

an important factor for an exporting firm to continue export or to expand export

activities. Favorable attitudes about a foreign market environment will induce the

existing exporting firm to consider exporting as an attractive step contributing to the

growth of the firm. Perceptions normally relate to managers’ levels of awareness of,

and concerns about, external environmental influences, particularly international

market opportunities and threats. This includes attractiveness of export, goals,

readiness to change, planning, obstacles, competitive advantage, profits, risks, costs,

and control (Schlegelmilch, 1986a). Eshghi (1992) argued that exporters’ assessment

of exporting risk and return is much more positive than non-exporters. Any firm

planning to internationalize should adequately understand the foreign market

environment. However, because of the complexity of the international business

environment and the comparative scarcity of resources, small- and medium-sized

firms are at a disadvantage if they decide to compete internationally (Ramaswami and

Yang, 1989; Seringhaus and Botschen, 1991; Seringhaus, 1986, 1987). The

uncertainties of exporting, ignorance about foreign markets, and the daunting


Figu

re3.

1: A

Con

cept

ualM

odel

of F

irm E

xpor

t Per

form

ance

Use

of M

arke

tD

evel

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ent-

Rel

ated

Expo

rtPr

omot

ion

Prog

ram

sEx

port

Kno

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rtSt

rate

gy

Expo

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tsa

les

Exp

ort

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itE

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les

grow

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Man

agem

ent P

erce

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Ex

port

Mar

ket

Envi

ronm

ent

Expo

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itmen

t

Use

of

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nce

and

Gua

rant

ee-

Rel

ated

Expo

rtPr

omot

ion

Prog

ram

s

H1a

(+)

H10

(+)

H3a

(+)

H6

(+)

H11

(+)

H4b

(+)

H13

H8

(+)

H4a

(+)

H9

(+)

H5

(+)

H2

(+)

H1b

(+)

H7

(+)

H12

(+)

H13

(+)

H3b

(+)

Cha

pter

3. T

he R

esea

rch

Mod

el a

nd H

ypot

hese

s66

Chapter 3. The Rese

natur

arch Model and Hypotheses 67

e of exporting processes all mitigate against such firms becoming committe

exporters (Bilkey and Tesar, 1977; Czinkota and Johnston, 1983; Goodnow and

Hansz, 1972; Kaynak and Ko , 1984; Rabino, 1980; Reid, 1984; Seringhaus and

Rosson, 1990; Weinrauch and Rao, 1974).

Silverman, Castaldi and Sengu ou that f s without export experience

have a wide range of information needs in order to overcome external but

many of the irms may not realize the services of public-sector orga tions to

satisfy their information ne s. A jor tus r export de nt and success

is the need to develop th pabi required to nage expor g problems (Yang,

Leone and Alden, 1992). Wiedersheim- Paul and his colleagues (1978) proposed that

pre-export activities, particularly the level m’s a y in information search,

are a major in tor determining the likelihood a firm to export. As a result, firms

must increase r ability to gather informa that they can react appropriately to

environmental chan

Government EPPs include riety of initiatives to deal with di nt export

barriers. Some init s (such as ising and loca mina highlight

the benefits of port involvement, thus providing a motivational boo reluctant

managers (Serin haus and Rosson, 1990). Othe grams (such as market reviews

and overseas visits) help companies to assemble timely and inexpensive foreign

market in ation, and so deal with the informational barriers. The third

operational/resource ed barrier is also dealt ways (such as bid

preparation and trade fair participation), easing the burden facing m y new or

expanding exporters. Therefore, EPPs are not only designed to prov gn

market information and financial support, they also encourage firms to export by

propagating the benefits of ex and tivating them to e e for n markets.

This helps overcome mental ba a positive nagers

toward exporting operation.

Lack of available resources within a firm to devote to export market development,

especially in small businesses, constitutes an important psychological barrier to

exporting (Koh, 1991). Barriers to establishing buyer credit worthiness, receiving

payment, and handling foreign exchange uncertainty create the risks of greater bad

d

thari

pta (2002) f nd irm

barriers

nizase f

ed

e ca

ma

lity

impe fo

ma

velopme

tin

of a fir

of

tion so

ctivit

dica

thei

ges.

of these

ex

g

a va

iative

ffere

rs)

st to

advert

r pro

l se

form

-bas with in various

an

ide forei

porting mo

rriers and develop

xplor eig

perception in ma

debt, longer payment period, and losses due to currency fluctuations and restrictions.

EPPs that are designed to provide the actual provision of export finance, insurance,

and credit guarantees tend to overcome these risks, and help generate positive

management perceptions of and attitude towards exporting. The empirical finding in

is area is lacking but the above normative logic can be used in support of the

tively related to management's perception of the

favorability of the export market environment.

th

theoretical framework developed in this study to guide the research. Therefore, it is

proposed that:

Hypothesis 1a:

The use of market development-related export promotion programs is

significantly positively related to management's perception of the

favorability of the export market environment.

Hypothesis 1b:

The use of finance and guarantee-related export promotion programs is

significantly posi

3.2.2 Use of EPPs and Export Knowledge

Export knowledge is the knowledge possessed by the exporter about how to market

the firm’s products and services abroad (Seringhaus, 1993). Wang and Olsen (2002)

identified two types of export knowledge as having critical bearings on the firm’s

exporting success: knowledge of exporting procedures and knowledge of the foreign

market. Knowledge of exporting procedures enables the firm to deal effectively and

efficiently with exporting procedures such as financing, shipping and forwarding,

processing paperwork, and receiving payment. Knowledge of the foreign market

includes understanding of the macro- and microenvironment, infrastructure, buyer

behavior of the foreign market, and the knowledge of how to effectively deal with

ese market factors. Export knowledge in this context relates to both knowledge of th

exporting procedures and knowledge of the foreign market.

Johanson and Vahlne (1977) suggest two types of knowledge that is needed for

overseas expansion: objective and experiential knowledge. Objective market


knowledge “can be taught” (Johanson and Vahlne, 1977, p.28) or can be “obtained

from secondary or primary sources” (Seringhaus, 1986, p. 27). Experiential market

knowledge, on the other hand, “can only be learned through personal experience”,

(Johanson and Vahlne, 1977, p. 28) or “must be personally acquired through direct

market or customer contact” (Seringhaus, 1986, p. 27). Johanson and Vahlne (1977)

argue that experiential knowledge is the critical kind of knowledge, because it

provides the framework for perceiving and formulating opportunities. Experiential

owledge enables managers to recognize export opportunities, to evaluate them, to

riate export behavior, and to achieve their export objectives. With

experie

regular

the firm ise positively affect export

, it has become increasingly apparent that the critical factor in

compet

Howev oreign markets, awareness

rough export promotion programs (advertising, export workshops and local

eminars) may create interest in the firm to explore opportunities and start sporadic

rt information related publications, a list

f agents and distributors in foreign markets, training, seminars and workshop

at information to collect

d how to use it, to a greater extent than their less knowledgeable counterparts

kn

adopt the approp

nce and learning, the firm develops competencies to become a committed and

exporter (Johanson, et. al., 1976). Wang and Olsen (2002) also suggest that

’s export-related knowledge and marketing expert

performance. So

ing in foreign markets is knowledge and expertise.

er, while initially a firm may be disinterested in f

th

s

exporting. Some programs (providing expo

o

programs for the exporter, sales leads etc) are designed to provide objective

knowledge to explore exporting. Other programs (such as trade fairs, trade missions)

enable managers to gain the experiential knowledge. Most of the EPPs are designed

to improve management quality and enhance its knowledge and expertise in

developing export markets. Singer and Czinkota (1994) argue that government export

promotion programs help to accelerate and expand management acquisition of

objective and experiential knowledge and develop their competitive competence.

Gencturk and Kotabe (2001) also argue that EPPs are an important resource for

building the knowledge and experience necessary for successful foreign market

involvement though this normative logic has not been tested. The firm that is

knowledgeable about exporting will be able to determine wh

an

(Seringhaus and Rosson, 1990). It is then predicted that:


Hypothesis 2:

The use of market development related export promotion programs is

significantly positively related to a firm’s export knowledge.

3.2.3 Use of EPPs and Export Commitment

The organizational commitment to exporting is defined as a general willingness by

management to devote adequate financial, managerial and human resources to export

related activities (Aaby and Slater, 1989). Commitment is made up of two

components, namely, attitudinal and behavioral (Axinn and Athaide, 1991). The

attitudinal component is analogous to the cognitive and affective elements of attitude

and has been referred to in other studies under such labels as favorability of

management’s expectations, perceived attractiveness, or management’s perception, of

e benefits and risks associated with exporting (Cavusgil and Nevin, 1981; Aaby and

a significant deterrent to

xport marketing.

th

Slater, 1989). The behavioral component refers to the expenditure of considerable

effort and resources associated with export related activities (Axinn and Athaide,

1991) which some studies seem to have referred to as the extent of resource allocation

or resource commitment (Cavusgil, 1984).

A large export development budget and a specialized export management staff have

been seen as critical to successful business performance in foreign markets (Cavusgil

and Zou, 1994; Evangelista, 1994). These studies suggest that management should

increase its commitment to exporting by investing greater resources in export

management and enhancing the firm’s competence to increase their export sale.

Because many tasks associated with export marketing are new to the firms,

involvement in export marketing requires additional financial and human resources.

These tasks include gathering foreign market information, hiring and training new

staff, learning about export tasks such as documentation and export financing, and

formulating basic planning toward export marketing. The “management element” is

crucial in carrying out these tasks (Cavusgil and Naor, 1987). Therefore, top

management’s reluctance to allocate sufficient resources for exporting, especially

those related to building the exporting infrastructure, is

e


Public institutions in the form of EPPs do play a major role in creating management

commi

worksh s providing a

otivational boost to reluctant managers. Other programs (such as overseas visits and

xport market information) help firms to assemble timely and inexpensive foreign

al barrier. The operational and resource-

ased barrier is also dealt with in various ways (trade fair participation, subsidies on

exporting through acquiring knowledge,

ey commit more resources to exporting. However, there is no empirical finding to

tment to exporting. Some of these programs (advertising, local seminars,

ops, training) highlight the benefits of export involvement, thu

m

e

market data, and so deal with the information

b

product/productivity development or market development activities, income tax

rebate, rebate on insurance premium, and duty drawback schemes), easing the burden

facing many new or expanding exporters. An export credit guarantee scheme (pre and

post-shipment credit guarantees and export payment risk guarantees) reduces risk on

export credit at probable commercial and political risks occurring abroad and

encourages managers to commit more investment and other resources toward

exporting. So, government EPPs make an important indirect contribution to create a

pro-exporting attitude and to assist in making exporting a positive experience for the

firm. This, in turn, fosters a high level of export commitment. Cavusgil and Nevin

(1981) argued that managers who have committed themselves to exporting and

actually engage in it invariably take a more positive view on foreign operations.

When managers become more competent in

th

support any direction of the relationship. On the basis of logical argument about the

relationship it is predicted that:

Hypothesis 3a:


significantly positively related to firms’ export commitment.

Hypothesis 3b:


significantly positively related to firms’ export commitment.


3.2.4 Use of EPPs and Export Performance

Export performance is defined as the extent to which a firm’s objectives (both

economic and strategic) for exporting a product into a foreign market are achieved

through the planning and execution of export strategy (Cavusgil and Zou, 1994).

EPPs represent a readily available external source of information and experiential

knowledge and provide the firm with an external capacity to cope with the

complexities of exporting (Gencturk and Kotabe, 2001). The literature indicates

government programs are important in developing awareness of opportunities,

planning and organizational capabilities, and can provide cost sharing opportunities

(Seringhaus and Botschen, 1991). More specifically, assistance is needed by firms

with logistics-related problems, legal procedures, and in developing foreign market

intelligence (Kotabe and Czinkota, 1992). Various types of export development and

promotion programs have been designed to meet these needs and are available

through public organizations to the business community (Seringhaus and Rosson,

1990).

Furthermore, export assistance is generally provided free or at a nominal charge,

offering a cost-efficient means of gaining knowledge and experience. Such assistance

also provides a central inventory for market information and sales leads, which

enables the firm to save time and money. Therefore, the use of export promotion

rograms can result in a considerable reduction in the investment necessary to

ntain in-house export expertise (Genturk and Kotabe, 2001). Another

well-kn

assistan ms such as

subsidies and credits (where allowed), below-market rate loans, and reduced bulk

paces at trade shows and travel fares (Crick and Czinkota, 1995;

Gronha

enables and therefore

ore efficient in its export activities. Moreover, the use of government export

ssistance can contribute to a successful export development strategy (Bilkey 1978;

ilkey and Tesar, 1977; Cavusgil, 1983; Denis and Depelteau, 1985).

iamantopolous and Inglis (1988) measured the usage of outside export assistance as

p

generate and mai

own and empirically supported financial benefit of export promotion

ce is the direct cost savings enjoyed by users through progra

rates on rental s

ug and Lorentzen, 1983). As such, usage of export promotion programs

a firm to reduce operating costs and become more profitable

m

a

B

D


the number of different agencies used by each firm and found a strong positive

lationship between the levels of use of export assistance and export success.

d

at:

port Knowledge and Management Perception of Export Market Environment

re

Moreover, export promotion-related studies also found a positive relationship

between use of export promotion programs and export performance (Gencturk and

Kotabe, 2001; Marandu, 1995; Singer and Czinkota, 1994). Therefore, it is predicte

th

Hypothesis 4a:


significantly positively related to firms’ export performance.

Hypothesis 4b:



3.2.5 Ex

The theoretical explanation for the relationship between ongoing export stimuli and

the level of export development rests with the issue of uncertainty and the way in

which firms cope with it (Erramilli, 1991). Exporting knowledge and information

gaps in many firms contemplating export market entry creates a barrier (Reid, 1984a)

and subsequently discourages many firms from pursuing exporting as an ongoing

activity. Therefore, it has been suggested that acquisition of knowledge through

experience from business operations in a specific overseas market is the primary

means of reducing foreign market uncertainty and consequently becomes a driving

force in the internationalization of the firm (Davidson, 1982; Johanson and Vahlne,

1977, 1990). Those firms with a high degree of international exposure are generally

more able to manage and overcome potential barriers in export markets. As a firm

gains more market experience and knowledge, they gradually gain positive

perceptions of the export market environment. The resource-based theory also

proposes that objective and experiential knowledge/skills are intangible firm

resources that create sustainable competitive advantages for the firm and help

performance better than competitors. As such, it is predicted:


Hypothesis 5:

Firms’ export knowledge is significantly positively related to

management's perception of a favorable export market environment.

3.2.6 Export Knowledge and Export Commitment

Internationalization process theory (Johanson and Vahlne, 1977, 1990) focused on

firms’

and op arkets. The

eory indicates that the lack of knowledge and resources are most important

nationalization and these obstacles are reduced through incremental

decisio

Vahlne wledge and

ommitment. Knowledge can be considered a resource (or preferably a dimension of

uman resources) and consequently the better the knowledge about a market, the

ohanson et al. (1976, p. 37) also argued that the experiential information “enables us

gradual acquisition, integration and use of knowledge about foreign markets

eration, and on it successively increasing commitment to foreign m

th

obstacles to inter

n making and learning about foreign markets and operation (Johanson and

, 1977, 1990). This indicates a direct relationship between kno

c

h

more valuable are the resources and the stronger is the commitment to markets.

J

to perceive opportunities for new or enlarged business activities …. [and] serves as an

input in the decision process that will eventually lead to commitment decisions.” As

such, it is predicted that:

Hypothesis 6:

Firm’s export knowledge is significantly positively related to export

commitment.

3.2.7 Export Knowledge and Export Strategy

Traditionally, export marketing strategy has been defined in terms of market selection

(i.e., degree of worldwide orientation and market segmentation) and product strategy

(Ames, 1968; Cooper and Kleinschmidt, 1985; Corey, 1962; Luck and Prell, 1968).

Contemporary marketing focuses not only on product strategy but also on integrated

marketing activities, i.e., product, price, promotion and distribution (Cavusgil and


Zou, 1994; Namiki, 1994; Zou, Andrus and Norvel, 1997). However, export strategy

in this

strategi for

mpeting in export markets, establishing distinct goals and objectives for export

peration, developing capabilities to collect necessary information, providing

entifying export countries to enter.

Firms’ export knowledge is significantly positively related to firms’

trategy.

.2.8 Export Knowledge and Export Performance

context (discussed in the operationalization section of Chapter 4) relates to the

es covering the identification of export customers, developing strategies

co

o

sufficient budget to exploit overseas markets and id

A firm’s physical resources and its capabilities (i.e., the mental models of its

managers) interact to a create competitive advantage (Mahoney, 1995). McKee and

Varadarajan (1995) argued that competitive advantage is the cornerstone of strategy,

and enacted knowledge is the essence of competitive advantage. Lack of this

knowledge makes exporting more risky and exotic (Sullivan and Bauerschmdt, 1989).

On the other hand, improved export knowledge will significantly reduce the

perceived barrier and complexity of exporting and help to implement proactive export

marketing strategies. Singer and Czinkota (1994) found that export knowledge

increases pre-export activities such as decision, planning, contacts and channels.

Therefore, knowledge may help a firm select its export markets and formulate and

implement its proactive marketing strategies more effectively (Cavusgil and Zou,

1994; Douglas and Craig, 1989; Terpstra, 1987). As such, it is predicted that:

Hypothesis 7:

export s

3

early indicates how firms’ gradual

nowledge acquisition leads to higher commitment to export and international

The internationalization process model cl

k

operations (Anderson, 1993; Johanson and Vahlne, 1977, 1990). The resource-based

theory proposes that while both tangible and intangible resources could be sources of

organizational competitive advantage, human competencies in the form of knowledge

and expertise are critical to superior organizational performance (Barney, 1991; Coff,

1997). With increasing export knowledge, firms are likely to perceive less uncertainty


in their exporting activities; have a better understanding of foreign market

mechanisms; develop a network of personal contacts and customer relationships

abroad; and, consequently, design and implement effective export marketing

programs (Madsen, 1989); and thus achieve better export performance levels in

comparison to others (Aaby and Slater, 1989). As such, it is predicted that:

Hypothesis 8:

Firms’ export knowledge is significantly positively related to export

performance.

3.2.9 Management Perception of Export Market Environment and Export Strategy

Effective exporting requires development of comprehensive export strategies that

take into consideration differences in the international environment (Jain, 1989).

Environmental influences significantly affect decision making of some managers who

perceive the environment unfavourably (Axinn, 1988), which seriously affects their

involvement in exporting and in developing proactive export strategies. Managers

who perceive the export environment favourably tend to search for and organize the

cquisition of environmental information to develop proactive export strategies and

arket entry decisions (Sood and Adams, 1984). Moreover, Axinn

(1988)

comple re important for export strategy making. Other studies also

vealed that decision makers who have positive perceptions of the foreign market

nvironment (cost, profit, risk etc.) invariably take a more positive view on foreign

planning (Johanson and Nonaka,

983; Simpson and Kujawa, 1974). As such, it is predicted that:

a

make rational m

posited that managers’ positive perceptions of the relative advantages and

xity of exporting a

re

e

operations and adhere to more export marketing

1

Hypothesis 9:

Management's perception of a favorable of export market environment is

significantly positively related to a firm's export strategy.


3.2.10 Management Perception of Export Market Environment and Export

Performance

While there is a consensus on the impact of domestic market conditions on the export

behavior, it is also suggested that foreign market conditions be examined to

nderstand the initial decision to export. When the factors in the foreign markets are

stacles, exporting does not take place (Khan, 1978). On the other

hand, t

way to nerally, intense competition in foreign markets from

reign firms or local firms is a major deterrent to an individual firm’s export

itiation. In contrast, foreign markets with little competition and high growth offer

ort

erformance (Madsen, 1989). Therefore, management perceptions of exporting

ypothesis 10:

ment's perception of a favorable export market environment is

u

perceived as ob

hey may provide opportunities, and consequently exporting is regarded as a

obtaining profits. Ge

fo

in

more favorable market conditions and thus contribute to successful exp

p

activities consistently appear to have a major role in defining export performance

(Aaby and Slater, 1989; Zou and Stan, 1998). Managements’ attitude and perceptions

towards exporting, export markets and domestic markets determine firms’ export

decisions. Schlegelmilch (1986a) examined the impact of managerial perceptions

towards export and several export-related issues on export performance.

Management’s positive perception and attitude toward export marketing,

competitiveness of company offerings in international markets, and confidence about

company’s capabilities encourage managers to search for more information to reduce

uncertainties and remove mental barriers to exporting, and consequently contribute to

proactive export strategies for successful exporting (Cavusgil and Zou, 1994; Donthu

and Kim, 1993; Koh, 1991). Conversely, managers’ negative perceptions toward

exporting lead them to avoid export as a risky business. On the basis of logical

argument it is predicted:

H

Manage



3.2.11 Export Commitment and Export Strategy

Many researchers assert that interest and commitment among top management levels

nt and Export Performance

is a critical determinant in carrying out export marketing functions (Benito and

Welch, 1997; Cunningham and Spigel, 1971; Hunt, Froggatt and Hovel, 1967). A

favorable orientation, deliberate interest, and a willingness to devote adequate

resources to export-related activities have been emphasized. So, the willingness of top

management to commit resources to the formulation and implementation of export

marketing strategies is the important ingredient needed to produce an aggressive

international marketer (Lim, Sharkey and Kim, 1993). Limited resources such as

specialized managerial resources will likely result in significantly less formal market

research and planning activity in smaller exporting firms. It is found that the level of

management commitment to exporting in small exporting firms is lower than that in

large firms (Cavusgil, 1982). When managers are committed to export, they carefully

plan the entry and allocate sufficient managerial and financial resources to export.

With formal planning and resource commitment, uncertainty is reduced and

marketing strategies can be implemented effectively (Aaby and Slater, 1989;

Cavusgil and Zou, 1994; Christensen, da Rocha and Gertner, 1987). It is then

predicted that:

Hypothesis 11:

Firms’ export commitment is significantly positively related to export

strategy.

3.2.12 Export Commitme

time and other resources which management expends on export

defines

allows and pursue

fective export strategies that improve export performance (Koh, 1991). Empirical

tudies suggest that there is a positive relationship between the commitment to export

nd export performance (Ali, 2004; Gomez-Mejia, 1988; Julian, 2003; Seifert and

ord, 1989; Wiederscheim-Paul, Olson and Welch, 1978). Cavusgil and Nevin (1981)

The amount of

the organizational commitment to export. High management commitment

a firm to aggressively go after export market opportunities

ef

s

a

F


in particular reported that commitment to export is causally related to export

erformance, which was further confirmed by Gronhaug and Lorenzen (1982). Top p

management commitment has also been seen as critical to successful business

performance in foreign markets, particularly during the early stages of

internationalization (Madsen, 1994; Cavusgil and Zou, 1994; Julian, 2003; O' Cass

and Julian, 2003). This leads to the following hypothesis to be tested:

Hypothesis 12:

Firms’ export commitment is significantly positively related to export

performance.

3.2.13 Export Strategy and Export Performance

Export strategy is the means by which a firm responds to market forces to meet its

objectives. The export literature increasingly reflects the importance of strategy on

export success (Kleinschmidt and Cooper, 1984; Julian, 2003; Moller, 1984; O’Cass

and Julian, 2003; Piercy, 1982; Turnbull and Valla, 1986; Yaprak, Sorek and

Parameswaran, 1984). Empirical studies unequivocally suggest that export

performance is determined by export marketing strategies and managements’

apability to implement the strategies as a whole (Aaby and Slater, 1989; Chetty and

Cooper and Kleinschmidt, 1985; Cavusgil and Zou, 1994) as well as

the com

Teegen, 2000) pricing and promotion strategy (Kirpalani and Macintosh, 1980),

oduct adaptation (Cooper and Kleinschmidt, 1985; Cavusgil and Zou, 1994; Koh,

991), promotion adaptation (Namiki, 1994; Seifert and Ford, 1989; Zou, Andrus and

, da Rocha and Gertner, 1987;

irpalani and Macintosh, 1980). However, the literature also provides contrary

c

Hamilton, 1993;

ponents of strategies such as export diversification (Aulakh, Kotabe and

pr

1

Norvell, 1997), and competitive pricing (Christensen

K

findings, where no significant relationship between export marketing strategy and

export performance was also reported (Julian, 2003; O’Cass and Julian, 2003). Such

findings were explained by the researchers that some firms in the same industry

adapting to the market whilst others opted for a standardized strategy. On the whole,

most studies provided evidence that export marketing strategy is significantly

associated with export performance. As such, it is predicted that:


Hypothesis 13:

A Firm’s export strategy is significantly positively related to export

performance.

3.3 Conclusion

This chapter has attempted to put forward various hypotheses to be investigated in the

urrent study. All the research hypotheses are summarised in Table 3.1. The key

ir development are: (a) to attempt to seek empirical testing of the

structu

signific managerial and/ or public policy implications. The next

hapter provides details of the operational definitions and measurements of the

s used to collect the data, and the

tatistical techniques used to analyze the primary data that was collected. This is then

c

objectives in the

ral relationships, and (b) to examine those predictions that may have

ant theoretical,

c

variables, the survey procedures and method

s

followed by the data analysis and a summary of the study's findings.


arch

Mod

el a

nd H

ypot

hese

s81

Tab

le 3

.1

Sum

mar

y of

Hyp

othe

size

d R

ela

Hyp

othe

ses N

o.

Hyp

othe

sized

Rel

atio

nsh

E

tions

hips

ipxp

ecte

dSi

gn

H1a

The

use

of m

arke

t dev

elop

men

t-rel

ated

EPP

s M

anag

emen

t's p

erce

ptio

n of

the

expo

rtm

arke

t env

ironm

ent

+

H1b

The

use

of fi

nanc

e an

d gu

aran

tee-

rela

ted

EPPs

Man

agem

ent's

perc

eptio

n of

exp

ort m

arke

t env

ironm

ent

+

H2

The

use

of m

arke

t dev

elop

men

t-rel

ated

EPP

s fi

rms’

exp

ort k

now

ledg

e+

H3a

The

use

of m

arke

t dev

elop

men

t-rel

ated

EPP

s F

irms’

exp

ort c

omm

itmen

t+

H3b

The

use

of fi

nanc

e an

d gu

aran

tee-

rela

ted

EPPs

Firm

s’ e

xpor

t com

mitm

ent

+

H4a

The

use

of m

arke

t dev

elop

men

t-rel

ated

EPP

s F

irms’

exp

ort p

erfo

rman

ce+

H4b

The

use

of fi

nanc

e an

d gu

aran

tee-

rela

ted

EPPs

Firm

s’ e

xpor

t per

form

ance

+

H5

Firm

s’ e

xpor

t kno

wle

dge

Man

agem

ent's

per

cept

ion

of e

xpor

t mar

ket e

nviro

nmen

t+

H6

Firm

s’ e

xpor

t kno

wle

dge

Firm

s’ e

xpor

t com

mitm

ent

+

H7

Firm

s’ e

xpor

t kno

wle

dge

Firm

s’ e

xpor

t stra

tegy

+

H8

Firm

s’ e

xpor

t kno

wle

dge

Firm

s’ e

xpor

t per

form

ance

+

H9

Man

agem

ent's

per

cept

ion

of th

e fa

vora

bilit

y of

the

expo

rt m

arke

t env

ironm

ent

firm

s’ex

port

stra

tegy

+

H10

Man

agem

ent's

per

cept

ion

of th

e fa

vora

bilit

y of

the

expo

rt m

arke

t env

ironm

ent

Firm

s’ex

port

perf

orm

ance

+

H11

Fi

rms’

expo

rtco

mm

itmen

t fi

rms’

exp

orts

trate

gy+

H12

Fi

rms’

expo

rtco

mm

itmen

t F

irms’

exp

ort p

erfo

rman

ce+

H13

Fi

rms’

expo

rtst

rate

gy F

irms’

exp

ortp

erfo

rman

ce+

Cha

pter

3. T

he R

ese

Chapter 4. Research Methodology 83

Chapter 4 Research Methodology

4.1 Introduction

As discussed in the evious chapter, the objective of this study is examine the

direct and indirect ef Ps on firm export performance throu of

hypotheses linking port promotion programs with other dete of export

performance. Acc , quantitative research techniques w nsidered in

examining the theo loped in the conceptual model. This c esents the

plan of execution of t udy. The variables included in the concept model are

first defined in oper terms and the measu onsider

described in Section 4.2. The resea me y in Section 4.3 describes the

resea ch desi n, whi

covered in s sect e nat of t study, res nstrument,

inally, the discussions of the

ented in Sect

4.2 Operat izat o

The firm export perfo

va les appearing a

The issue that needs to b

variables except “use

variables, which ca

of operationalization is to g ne te

measuring these var

previous work conducte used in this

research area and have e i n r, a

number of items have been modified for this study and some items were generated

based on variable definitions. The operational definitions and measurements are

summarize s g

from the lite e were operationalized.

pr

fect

ex

ordin

ries

h

ational

ch

ion

an

i

rmance

in th

nnot be measured dir

iab

to

gh a number

nts

co

ter pr

ual

ch i

.4.

se va

l a

m

re d

y

es.

s of EP

gly

deve

e st

was used to ac

are t

d data co

n of

e mode

e discussed here

of ex

les in qua

d b

been t

rmina

ere

hap

ations involved are

ctives. The issues

ear

ion 4

previo

the

mode

yed in the process

ale ite

we

udi

rement c

olog

esearch

ds. F

res

en defined in the

o ope

rogr

e approa

Most of

alid

rch

ure

anal

es

ve

sca

tive

ear

r scal

thod

he r

expected theor

dy be

n p

y. Th

m or

ms.

rs. These items are widel

e v

r

riab

g

thi

ional

complish the above obje

ysis are p

the

lrea

is how t

ectl

le ite

ter

che

h

Variabl

model and

port promotio

e

y other res

population, sampling

statistical methods used for the data

llection metho

l ha

ra

ntita

sted fo

etical

tiona

in the

ch emplo

ite

those st

relations

lize

sc

ms

hips

us chapter.

riab

re

s aime

erive

Howeve

among

les. All

late

d a

d fr

nt

t

om

ra

ams”

multiple

the

ty i

d in Table

ratur

4.1. Thi section describes how the constructs that emer ed

Export Promotion Programs

Seringhaus (1986a) in a re d that most of the studies

easure the attitude or perception of managers toward government programs. Nearly

y with a firm’s degree of knowledge, usage or perceived benefits

f such export assistance. The measures used in these studies usually consist of

to capture

e impact of export assistance thus resulting in an over-simplified assessment of

struct. The use of multiple measures would

xport activity. Global measures may exclude

view of 21 empirical studies foun

m

all dealt in some wa

o

quantitative responses, producing ordinal or nominal scale values rather than

subjective responses (Seringhaus, 1986a, p. 59). The author concluded that, based on

previous studies, it was not possible to determine whether or not promotional

programs actually have any impact on exporting firms. On the other hand, only a few

studies measured the benefit of government programs in quantitative responses

(Gencturk and Kotabe, 2001; Ifju and Bush, 1994; Marandu, 1995). Marandu (1995)

measured satisfaction of 13 export promotion programs on a 5- point scale ranging

from ‘very dissatisfied’ (1) to ‘very satisfied’ (5). However, his analysis involved

only comparing the export performance of those who were to some degree satisfied

against those who were to some degree dissatisfied. Neutral responses were deleted

from the analysis. Marandu (1995) analyzed individual export promotion programs

rather than developing a global measure. Single-item measures were used

th

what is essentially a multidimensional con

enable researchers to capture both “objective” (e.g. increase in export sales, order

receipts, etc) and “subjective” (e.g. managerial evaluations) outcomes of the effect of

export assistance use.

Gencturk and Kotabe (2001), on the other hand, developed a 14 item measure

consisting of export promotion programs. For each of these 14 programs, the

executives were asked to indicate whether they were aware of the program and, if so,

whether they have used that particular program. They calculated a usage index for

each firm by summing up the responses across all 14 state export promotion programs

and developed four categorical measures – non users, low users (used 1 to 5

programs), medium users (6 to 9 programs), and heavy users (10 or above). This is

clearly indicating a global measure (i.e., all export promotion programs/services are

measured collectively), which cannot capture the relative impact of some very

relevant programs on different stages of e


Table 4.1

Concept, Conceptual and Operational Definition and Measurement of theVariables

Concept ConceptualDefinition

Operational Definition andQ. No. in the Questionnaire

(Appendix A)

Measurement

Exportpromotionprograms

Government policiesdesigned to assistfirms’ export activity

An index of the usage of EPPs andtheir perceived benefits measured on7-point scale

Q. No. 11

The services usedwere weighted by thelevel of benefitperceived, and thesum of weightedusage of EPPs wasused as an index foranalysis.

Managementperception ofexport marketenvironment

Managers’ levels ofawareness of, andconcerns aboutexternalenvironmentalinfluences,particularlyinternational marketopportunities andthreats

A construct measure with 17 scaleitems (measured on a 7-point scale)

Q. No. 8

Exportknowledge

The knowledge ofexport markets andexport procedures

A construct measure of exportknowledge with eight itemstatements (measured on a 7-pointscale) covering market related knowledge and export proceduresQ. No. 7

Exportcommitment

A general willingnessby management todevote adequatefinancial/managerialand human resourcesto export

A construct measure of eight itemstatements (measured on a 7-pointscale) covering different resourcecommitment

relatedactivities

Q. No. 6

xport The presence of any A construct measure of eight scaleEstrategy formal export

strategies in the firmitems (on a 7-point scale) coveringidentification of export customers,developing strategies for competingin export markets, establishingdistinct goals and objectives for export operation, developingcapabilities to collect necessaryinformation, providing sufficientbudget to exploit overseas marketsand identifying export countries toenter

Q. No. 9Exportperformance

The extent to which a firm’s objectives withrespect to exportingare achieved

A construct measure of four scaleitems (measured on a 7-point scale)covering export sales, sales growth,profitability and new market entryQ. No. 13

relationshipscontained in thehypothesized model.

Measurement scalewas developedfollowing the procesrecommended byChurchill (1979).First stage, employedExploratory FactorAnalysis andCronbach’s alpha fopreliminaryassessment ofreliability andvalidity of theprimary constructmeasurements. Thesecond stageemployed StructuralEquation Modeling(SEM) forConfirmatory FactorAnalysis of the

s

r

constructmeasurements andfor assessing thehypothesized


the identification of the impact of a ca rograms (designed to achieve similar

pur nd

trade missions are designed for marke ent, whereas duty drawback, income

, an rograms

Combining the gle index plified manner

o lose o low

narro t m p

sub-sets rather than all in one set) of export promotion programs we

this study to examine their direct and i port pe

is th

xport oriented growth stra has been adopted since

where EPPs ar an important vehicle for economic devel

export. The m ese programs is to increase the willingnes

firms to expor r pre-export activities, and to impro

ce. E -2002 ( until t

nnou try PPsto inc rs’

profit as well as to make Banglades e intern

Export Promotion Bureau (EPB) as spon

m m tiv rdin

development e levels g of

performance a ra on of markets abroad and the of

participation in ade and t fairs abroad. Ready-ma

ing exp lad her igh

value added re ha sect n

these sectors enjoy some special E th

conducted with the Bangladesh EPB arget industry sectors

to identify widely use EPPs. This p 19 programs

were offered by the government to hese represent the

core set of available government rt support to the business community in

Bangladesh and are classified into egories according to their similarity of

The reted as market

development-re and ow.

tegory of p

pose) offered by an export promotion body. For example, export seminars a

t dev lopme

tax rebate d similar p

m into a sin

are designed for more advanced exporters.

or categorizing users in any sim

tends t

(1986a) “

explanatory power

w global” construc

f the variable. Therefore, fol

easures (combining similar-pur

ing Seringhaus

ose programs in

re developed in

rformance.ndirect impact on firm ex

Bangladesh

deficit. An e

one of the Less De

e designed as

ission of th

t, to increase thei

xport

veloped Countries (LDCs) wi a chronic trade

the mid 1970s

opment through

s and ability of

ve their export

he next Export

rease exporte

ational market.

sible for policy

ation of export

national export

organization

de garments are

goods and h

ors and firms i

is research was

tegy

performan

Policy is a

Policy, 1997

nced) of the coun

which is still valid

provides a number of E

h exports competitive in th

rnment agency is rea gove

and progra easures for the ac

fforts at various

nd progress, explo

international tr

e promotion of exports, coo

, co-ordination and monitorin

ti

expor

the lead ort sector in Bang

adymade garments

esh. However, leather and leat

ve been identified as ‘thrust’

PPs. The pilot study phase of

and trade bodies in three t

rocess revealed that the following

exporters in these industries. T

expo

two cat

purposes. se two categories

lated and finance

of programs can be interp

guarantee-related as listed bel


Market development (“market”):

1. Marketing assistance for exporting new products (1)

2. Technical assistance for developing new products (2)

3. Assistance in obtaining foreign technology for product development (3)

4. Technical and practical training programs for the development of skilled

manpower in the export sector (4)

5. Assistance for establishing sales and display centres abroad (5)

6. Participation in international trade fairs and specialized export fairs (6)

7. Inclusion in trade missions (7)

8. Export workshops and seminars (8)

9. Overseas promotion of the firm’s products (9)

10. Assistance in establishing contacts with foreign buyers (10)

11. Assistance in the settlement of trade disputes with foreign buyers (13)

12. Assistance for participation in overseas training programs on product

development and marketing (16)

13. Providing services in respect of market information, contact with buyers and

other support services by the Bangladesh missions abroad (18)

14. Matching grant facilities (19)

Finance and Guarantees (finance):

1. Pre-shipment, post-shipment and comprehensive guarantee insurance facilitiesthrough an export credit guarantee scheme (11)

2. Duty drawback scheme (12)

3. Rebate on insurance premiums of fire, marine and shipment of goods (14)

4. Bonded warehouse facilities for imported raw materials (15)

5. Income tax rebate on export earnings (17)

Respondents were asked to indicate their usage of each program in the past three

years (Genturk and Czinkota, 2001) and the level of benefit the services provided to

their exporting activities (Ifju and Bush, 1994). A seven-point scale was used to rate

the level of benefit of the services (1 = ‘not at all beneficial’; 7 = ‘extremely

beneficial’). The programs considered in this study were shown in question no.11 of

the questionnaire in Appendix A. The services used were weighted by the level of


benefit perceived, and th promotion programs in

eac y, the construct “market”

me t-related programs and

the and

gua

The les, therefore,

con ti-item

scal nsidered superior to single item scales as it

increas ent error (Churchill, 1979). These sets of

item the same theoretical construct.

The recommended by

Chu rement

dev iterature

and som the research context on the basis of expert

adv e

reliabil ruct. Third,

exp o identify structure and dimensionality of the

measures and to assess the validity of th easurement scales. The final step was

supplemented with conf ability of factor items

to e

develop tent variables.

Ma

Ma nds to measure

ma rket environment including

ompetition in the export market, government regulations, export profitability,

omplexity of export procedure, competitiveness of the firm’s products in foreign

e sum of weighted usage of export

h construct was used as an index for analysis. Accordingl

asured the sum of weighted usage of market developmen

construct “finance” measured the sum of weighted usage of finance

rantee-related programs by responding firms.

following five variables in the conceptual model were latent variab

struct measures were developed with multi observed items. The use of mul

es to measure a construct was co

es reliability and decreases measurem

s were generally reflective in that they all measure

widely used process for developing measurement scales

rchill (1979) was followed in this research. A three step process of measu

elopment was followed. First, measurement items were drawn from the l

e of them were modified to suit

ice and on the field test. Second, Cronbach’s alpha was used to measure th

ity of the scale to determine how well these items explain the const

loratory factor analysis was used t

e m

irmatory factor analysis to find out the

stimate constructs for structural equation modeling. This process was followed to

measurement scales for each of the following la

nagement Perception of the Export Market Environment

nagement perception of the export market environment te

nagers’ general attitude toward the export ma

c

c

markets, and consumer tastes and preferences. While many managers perceive these

very favorably, some managers may have negative perceptions. Seventeen scale items

were used to operationalize this variable. Most of these scale items were drawn from

past studies (Axinn, 1985; Eshghi, 1992; Robertson and Wood, 2001), and some of

the items were developed by the researcher with the help of other academics to

measure managers’ perception and attitude toward the export market environment


prevailing in Bangladesh. With the intension of understanding managers’ perception

about the global business environment, two items (globalization has created

opportunities for exports, and the firm is experiencing difficulty adjusting to the

globalized environment) were included in the questionnaire. Respondents rated their

perception on a seven-point rating scales ranging from: (1) ‘strongly disagree’ to (7)

trongly agree’.

aor, 1987;

vangelista, 1994; Katsikeas, Piercy and Ioannidis, 1996) export commitment was

itment in terms of

‘s

Export Knowledge

Exporters’ knowledge on overseas shipping and transportation arrangement; how to

structure transactions to ensure payment from abroad; regulations and paperwork for

foreign marketing; identification of foreign demand for products; foreign government

regulations that affect their product markets; economic situations in export markets;

international marketing services available from public and private sources; and

foreign buyers’ attitudes toward company products were widely used items in the

literature (Kaynak and Kuan, 1993; Kotabe and Czinkota, 1992; Wang and Olsen,

2002). A construct measure of export knowledge was developed with eight scale

items (see question no. 7 of the questionnaire in Appendix A). Respondents were

asked to indicate the level of the firm’s knowledge on each statement using a seven-

point rating scale where (1) is ‘strongly disagree’ and (7) is ‘strongly agree’.

Export Commitment

Drawing on past studies (Cavusgil and Nevin, 1981; Cavusgil and N

E

measured on the basis of firms’ behavioural and attitudinal comm

priority to exporting activity in the firm, funds to develop overseas markets, regularity

of export market visits; the firm’s response pattern to export opportunities; learning

about exporting procedures and documentation; gathering foreign market

information; the use of export marketing research; and the existence of a separate

export department. Respondents were asked to indicate the level of the firm’s

commitment on each of these statements on a seven-point rating scale where (1) is

‘strongly disagree’ and (7) is ‘strongly agree’ (see in Appendix A).


Export Strategy

The export marketing strategies of firms in most export-oriented industries in

developing countries like Bangladesh do not fit into the general trend of gradual

extension of domestic marketing to foreign markets. Rather, many of the firms are

‘born-global’ which cater to foreign market opportunities for labor-intensive products

where they have a locational advantage of cheap and abundant domestic labor. The

ales opportunity may actually be initiated by the importer, not by the exporter

l, 1981). Gradually some of them gain knowledge of foreign

growth, and new

arket entry formed the construct of export performance. Respondents were asked to

te the firm’s performance in achieving each of these four performance indicators

dicating whether results were below or above expectations on a seven-point rating

s

(Wortzel and Wortze

market demand, customer taste and acquire the knowledge and skills in

manufacturing and marketing their own branded products for diversified regional and

global markets. Therefore, the presence of such strategies covering the identification

of export customers, developing strategies for competing in export markets,

establishing distinct goals and objectives for export operation, developing capabilities

to collect the necessary information, providing sufficient budgets to exploit overseas

markets and identifying export countries to enter are important for those firms. A

construct measure of export strategy was developed with these eight scale items. This

measure has been used to capture the extent of existence rather than the presence or

absence of each element in the firm. All of these items were generated based on the

definition of the variable as applied in Bangladesh (see Appendix A).

Export Performance

As discussed earlier subjective measures of export performance were adopted for this

study based on the contribution from Katsikeas, Piercy and Ioannidis’s (1996)

measurement schema. However, ‘market share’ is not an appropriate item in the

country context of this study where target firms were too small to export a significant

volume of products in their target markets for any noticeable market share. Instead,

many of these exporting firms were increasing their export sales to existing markets

as well as expanding their exports in other markets. Therefore, export sales growth

and new market entry were important items to measure the export performance of

these target firms. Therefore, export sales, export profit, export sales

m

ra

in


scale (1 being ‘much below expectations’ and 7 being ‘much above expectations’)

1. Exploratory: Research is designed to allow an investigator to observe some

phenomenon. The researcher should endeavor to develop suggestive ideas,

h should be as flexible as possible. If possible, the research

over the past three years (see Appendix A).

4.3 Research Methods

A detailed description of the research methods follows, addressing the nature of the

study, development of the research instrument, sampling and data collection

procedures, and the data entry and coding techniques used. The descriptive statistics

relevant to describing the characteristics of the firms in the sample are presented. This

is followed by a profile of the persons responding to the questionnaires. Finally,

analyses undertaken to assess potential non-response bias, a check for outliers and to

determine the reliability and validity of the research instrument are also presented.

4.3.1 Nature of Research

According to Reynolds (1971), in building scientific knowledge a three step process

is necessary for an accurate representation of the area to be studied. This approach

consists of the following stages:

and the researc

should be conducted in such a way as to provide guidance for the procedures

to be employed in research activity during stage two.

2. Descriptive: The goal at this stage is to develop careful descriptions of

patterns that were suspected in the exploratory research. The purpose may be

seen as one of developing inter-subjective descriptions, i.e., empirical

generalizations. Once an empirical generalization is developed, it is then

considered worth explaining, i.e., the development of a theory.

3. Explanatory: The goal at this stage is to develop an explicit theory that can be

used to explain the empirical generalizations that evolved from the second

stage (Reynolds, 1971, pp. 154-155).


The research design used in this study encompassed the third of these stages. The

development of the research design and the process of analysis in any research study

hould be dependent on the nature and the objective of the research itself. The

st a theoretical model to assess the determinants of firm

xport performance and explore the role that the use of export promotion programs

;

ikmund, 2003) are considered more appropriate than a qualitative approach. A

ross-sectional single source design is used in this study and since this study

ance of firms, with respect to the impact of export

rom across the export oriented manufacturing

dustries in Bangladesh to compare and contrast results where possible. Cross-

sect

2004).

4.3.2 Q

s

purpose of this study is to te

e

plays in this process. The model will be probed for its validity and statistical

significances of the variables in the model. Accordingly, the study will test theories

developed in the conceptual model in Chapter 3 but it will be explanatory in nature

rather than predicting outcomes. In other words, it is designed to test the explanatory

power of the variables in the model toward understanding their effect on export

performance. Therefore, in examining the theoretical model, quantitative research

techniques (Aaker, Kumar and Day, 2004; Burns and Bush, 2000; Malhotra, 2004

Z

c

investigates the export perform

promotion programs, the individual firm is selected as the unit of analysis. The

reasoning for the selection of this cross-sectional method is because it involved a

sample of manufacturing firms f

in

ional data enables researchers to have more representative sampling (Malhotra,

uestionnaire – The Research Instrument

A q

instrum

respond

design

question nd minimizes

resp

The que nformation on managers’ perceptions

f the export market environment, export knowledge, export commitment, firms’

export strategy, and usage of government export promotion programs. As discussed

uestionnaire, whether it is called a schedule, interview form or measurement

ent, is a formalized set of questions for obtaining information from

ents (Malhotra, 2004). To collect quantitative primary data, a researcher must

a questionnaire that translates the information needed into a set of specific

s, motivates respondents to complete the questionnaire a

onse error.

stionnaire has been designed to collect i

o


later in this section, the construct item measures used in this study are subjective

rather than objective and are adopted from past studies. Although responses to such

measures are likely to be influenced by selection bias, there is evidence supporting

the general reliability of self-reported and subjective measures (Dess and Robinson,

1984). Nevertheless, care has been taken to select measurement items that previous

research has shown to be valid and reliable.

As a general rule, using the scaling technique that will yield the highest level of

information feasible in a given situation will permit the use of a great variety of

statistical analyses. The widely used Likert rating scale has been used for this study.

A Likert scale requires a respondent to indicate a degree of agreement or

disagreement with a variety of statements related to the phenomenon (Aaker and Day,

1990). The Likert scale has several advantages. It is easy to construct and administer.

Respondents readily understand how to use the scale, making it suitable for mail,

telephone, or personal interviews. The main disadvantage of the Likert scale is that it

takes longer to complete than other itemized rating scales, because respondents have

to read each statement. The rating scale could vary between two to any higher

numbers, but most researchers prefer between five and nine rating scales (Cox, 1980;

Reynolds and Neter, 1982). In this research a seven-point scale has been used to

capture respondents’ assessment on a longer range for sophisticated statistical

technique (seven and more categories provide rich data) and increases the variability

n the data. The correlation coefficient decreases with a reduction in the number of

n the correlation coefficient

ivon and Shapira, 1984).

alternative procedures for translation of an instrument: a) one-way

anslation (direct translation); b) back-translation (double translation); c) translation

i

scale categories, affecting all statistical analyses based o

(G

4.3.3 Translation of Research Instrument

The structured questionnaire was first developed in English and then translated into

Bengali for better understanding by the Bangladeshi exporters. McGorry (2000)

identified four

tr

by committee; d) decentering. Direct translation is frequently used, in which a

bilingual translator translates the questionnaire directly from a base language to the

respondent’s language. This procedure may be less expensive and less time-


consuming than other methods. However, if the translator is not fluent in both

languages and familiar with both cultures, direct translation of certain words and

phrases may be erroneous. Procedures like back-translation (double translation) can

avoid these errors.

In back-translation a researcher prepares material in one language and asks a bilingual

translate into another (target) language. A second bilingual independently

he first to account for limitations of the target language.

lthough the instrument may be more accurate culturally and linguistically, this may

s, and the length of the instrument

ay be increased.

to

translates the material back into the original language. The researcher then has two

original language forms to examine and, even if he/she does not know the target

language, can make a sound judgment about the quality of the translation. However,

several repeat translations and back-translations may be necessary to develop

equivalent questionnaires, and this process can be expensive and time-consuming. In

the committee approach a group of bilinguals translates from the base to the target

language. The mistakes of one member can be caught by others on the committee.

The weakness of the method is that committee members may not criticize one another

and may even unify against the researcher. Werner and Campbell (1970) proposed

decentering as a way to develop instruments that would be culturally appropriate

when cross-cultural research is conducted. In the decentering process, the original

language instrument is not considered final until the entire translation process is

completed. Therefore, if a translator believes that a grammatical structure or word or

tense must be changed to appropriately fit the cultural group under study, the original

instrument should also be changed to reflect these linguistic and cultural

characteristics. There is a constant comparison of the two instruments, and

modifications are made to t

A

also be more costly in terms of time and resource

m

Back-translation (double translation) has been described as one of the most adequate

translation processes (Marin and Marin, 1991). In this research back-translation

method was used for translating the questionnaire. First the original English

questionnaire was translated into Bangla by the researcher which was checked by

three bilingual academics in Australian universities who also taught at universities in

Bangladesh. Then the Bangla questionnaire was back-translated into English by a


Bangladesh government approved translator. The back-translated version was

compared with the original version to check the equivalence of the meaning of the

items before and after the translations. Except for some minor differences in wording,

no major change in meaning of the items was found. Thus, the two versions of the

uestionnaires were considered equivalent.

tial respondents. Only minor adjustments were made to improve

everal questions in need of clarification. So, all necessary revision was made in the

q

4.3.4 Pre-Test of Research Instrument

Preparation of the research instrument has been guided by the relevant literature and

expert opinion in the field of research. The questionnaires were pre-tested to

determine the willingness and ability of respondents to complete them and to uncover

any flaws in their design or in specific questions. The questionnaire developed for this

study was conducted at two stages. First, the preliminary questionnaire was reviewed

by three academics who are familiar with the export promotion programs and export

performance literature to assess the questionnaire items for content and face validity

of the constructs. After this reviewing process, the comments and suggestions were

incorporated in a revised questionnaire.

The next stage was to trial the questionnaire in the field to examine whether the

revised questionnaire is easily understood and whether it is possible to get

cooperation from the potential respondents when the questionnaires were finally

mailed. To achieve these objectives, a small sample of ten exporting firms in

Bangladesh were selected for personal interview. All aspects of the questionnaire

were tested, including inclusion or exclusion of any items, question content, wording,

sequence, form, layout, question difficulty and instructions. They were also asked to

provide additional comments on the questionnaire and the cover letter to be used in

contacting the poten

s

questionnaire before mail out.

4.3.5 Final Questionnaire

Following the alterations noted in the preceding section, the final questionnaires (both

English and Bengali version) were produced in the form shown in Appendices A and


B respectively. The survey instrument was organized in three parts. Part I (questions

1 to 5) related to the general information such as name of exporting products, name of

exporting countries, number of employees, length of business experience and export

experience of the firms. Part II (questions 6 to 11) related to the opinions regarding

different aspects of export trade. Key areas covered included usage of export

anagement perception of the export market environment,

port marketing strategy and export

erformance. Part III (questions 14 to 17) represented a profile of the persons

e approach sought to obtain an objective

ccount of an observed organizational event or phenomena. This was achieved by

mant must occupy a position that makes him or her

nowledgeable regarding the foreign trade involvement as it relates to the firm’s

ast research in exporting strategy supported this by

laiming the senior executive to be the key informant in this type of study (Gencturk

promotion programs, m

export knowledge, export commitment, ex

p

responding to the questionnaires.

4.3.6 Key Informant

The major sources of data were the company executives to whom the questionnaires

were initially mailed. However, the selection of the appropriate respondent to be

contacted within the firm is a very important issue. The appropriate respondent must

be the key informant in the context of the study. In collecting data for this study, the

key informant approach was used. Th

a

directing questions and soliciting responses from the “key person” within the

organization. In identifying the key informant, Campbell (1955) suggested that the

key informant would not be chosen for statistical representativeness, instead, he or

she would be chosen because they possess special qualities. The key informant should

occupy a role that makes him or her knowledgeable regarding the issues under the

study. Although there is still some controversy regarding the particular reliability of

the key informant, it is essential for this study that the target respondent be the senior

executive of the firm. The reason is that the type of information sought makes it

mandatory that the respondent not only be in a position integral to the firm’s policy

making and whose decision will have a strong influence on the direction the firm will

pursue, but also the key infor

k

overall business operations. P

c

and Kotabe, 2001; Silverman, Castaldi and Sengupta, 2002).


However, while the use of multi-informants may be ideal, it is not always possible

and sometimes not even necessary. As noted by Pennings (1979), it is

methodologically sound to use a single key informant when most of the informants

occupy senior executives or ownership positions within the focal organizations. In

maintaining this position, Pennings argued that top managers, senior executives, and

owner managers were the central boundary spanners in dealing with the external

environment and suitably qualified to speak for the organization. The multiple

informant approach is time-consuming and very expensive. Thus, taking the time and

financial resource constraints into consideration, the single informant approach was

sed as it is methodologically sound when care is exercised in the selection of the key

country context for this

u

informants.

As a consequence, an effort was made to access the person at the highest level of

management of the individual firm. In line with the research objectives of this study,

the managers/executives responsible for export decision-making were expected to be

knowledgeable about the strategy, structure and export related facilities of the firm as

well as any government support services available in this area and availed by the

firm. This ensures the reliability of collected information, as respondents respond to

questions within the domain of their responsibility (Kotabe and Czinkota, 1992).

Moreover, the guidelines provided by Huber and Power (1985) for using a single, key

informant has been followed, in order to keep the potential for systematic and random

sources of errors as low as possible. Accordingly, a personalized letter giving

background information on the research, along with a copy of the questionnaire and

self-addressed prepaid return envelope, was sent to the Chief Executive Officer of

each selected firm. The recipient was instructed to pass it on to the individual in the

firm who was responsible for making international marketing decisions if he or she

was uncomfortable in completing the questionnaire.

4.3.7 Population and Sampling Several factors were brought into consideration in determining the population for this

research.

1. The population was limited to only firms engaged in manufacturing products in

Bangladesh. A single country, Bangladesh was selected as the


research for several reasons: a) to control for heterogeneity of export promotion

programs across countries; b) Bangladesh is one of the least developed countries with

a high gap between import and export, and its government has explicit policies and

programs to promote export including extensive export promotion schemes for

potential and existing exporters; and c) being a native of Bangladesh the researcher

was familiar with the country context which assisted in collecting valuable

information for the study.

2. In order to ensure that the industries dealt with have export potential, only the

industries that possessed high export potential and contained a large number of

exporting firms were included in the population. Garments, leather products, and

pecialized textile industries had a great importance in the economy in terms of

these three industries formed the

opulation of this study.

itions were taken into account in identifying the sample size. First, the

s

export earning and employment (Government of Bangladesh, 2000). Garments

contributed 76%, leather products contributed 4.25%, and specialized textiles

contributed 1% to total export earnings. Moreover, the leather products and garments

sectors had been declared as thrust sectors in Bangladesh's Export Policy 1997-2002

(Government of Bangladesh, 1998), which is still valid until the next Export Policy is

announced. Bangladesh produces best quality hides and skins. There is tremendous

export potential for the development of leather products. It can contribute

significantly to the economy of Bangladesh in terms of employment, income

generation and export earnings. However, the sector has not been able, to date, to

achieve the desired results. On the other hand, the readymade garments sector is

expected to stage a breakthrough in the export of high-priced, high value added

garments of newer categories after having successfully survived the initial phase of

exporting low-end garments. Considering all such factors, these sectors have been

declared as thrust sectors and several facilities are being offered to the existing

industries in this export policy. Therefore, firms in

p

4.3.8 Sample Size

Two cond

limitation of time and financial resources made the inclusion of all elements in the

population impossible. Second, the sample size had to be large enough to provide


powerful statistical testing on the theoretically hypothesized relationships. The

sample size plays an important role in the estimation and interpretation of structural

equation modeling (SEM) results. Sample size, as in any other statistical method,

provides a basis for estimation of sampling error. Results derived within larger

samples have less sampling error and are more likely to be statistically significant

than within smaller samples. The next logical question is: how large a sample is

required in path analysis in order for the results to be reasonably stable?

ear Exporters Association (BFLLFEA), and Bangladesh

erry Towel and Linen Manufacturers’ and Exporters’ Association (BTTLMEA)

, 75 and 45 business organizations in these three chosen sectors

espectively. These lists were used as a sampling frame to draw a sample using the

The statistical method employed in this research was maximum likelihood (ML)

estimation as contained in the AMOS computer software. Review of the literature

indicated that there are no generally accepted criteria for determining a specific

sample size using maximum likelihood estimation or similar structural modeling

techniques (Hair et al., 1998; Hayduk, 1996). Although a specific sample size formula

is lacking, general guidelines have been advocated and followed in the majority of

studies examined. In terms of an absolute minimum, valid results have been obtained

with a sample as small as 50. It is generally regarded, however, that 100 is the

practical minimum for ensuring the appropriateness of maximum likelihood

estimation (Hair et al., 1998) but Boomsma (1983) suggested that, as a general rule

across a number of model types, samples of 200 were required to give parameter

estimates with any degree of confidence.

Bearing a low response rate (Ray, 1988) in mind, 37.15% of the total population or

approximately 1200 exporting firms were selected as the preliminary sample for mail

out. Based on this number, a stratified sampling method was used by stratifying the

total population into three industries i.e., garments, leather products, and specialized

textile (terry towel). Bangladesh Garment Manufacturers and Exporters Association

(BGMEA) Members’ Directory 2002-2003, Bangladesh Finished Leather,

Leathergoods and Footw

T

provided lists of 3110

r

stratified sampling method. However, there was a large discrepancy among these

three groups (approximately only 2% and 1% of total population were leather and

leather goods exporters and terry towel exporters respectively). As suggested by


Blalock (1960), the disproportionate stratified random sampling method is better than

the proportionate stratified method in the study where the differences in numbers

among groups are large. If the proportionate stratified method had been used, the

proportion among the three industries, the sample size would be estimated 1155 : 27 :

16. This would have given us too few exporting firms from those two smaller

industries in the sample. Therefore, 1080 firms (34.8% of total firms) in the garment

industry and all firms in the two other industries were included in the sample. A

ystematic sampling (every third number in the list) method was used to obtain the

retability. This all contributes to greater

liability of the overall results (Malhotra, 2004). The self-administration aspect of

s

target number of samples in the garment industry.

4.3.9 Data Collection, Data Editing and Entry

A mail survey with telephone follow up was used to gather the data. The research

setting entails a sample of export-oriented manufacturing firms in three selected

industries in Bangladesh. The self-administered mail survey approach was deemed

appropriate for this research for administrative and temporal reasons, given the nature

of the study, and the number and spread of respondents throughout the country. A

standardized questionnaire, with appropriately worded questions, is easy to

administer in the data collection stage and subsequently allows for efficient coding

and analysis, and will enhance interp

re

the survey has the advantage of being low cost, encouraging respondents to provide

more sensitive information because of the anonymity of the process and eliminating

potential interviewer bias (Hair, Bush and Ortinau, 2000; Malhotra, 2004). However,

mail surveys have been criticized because of low response rates and the implied

potential of non-response bias (Churchill, 1999). Further, considering the relative low

response rate through mail survey in developing countries (Ray, 1988), two-wave

mailing with telephone follow-up was selected as the most adequate technique to

achieve greater response rate.

A total of 1200 questionnaires (Bangla version), with a cover letter from the

researcher’s supervisor and Head of School (that explained the nature of the project

and request for cooperation), and a self-addressed, postage paid envelope, were send

to the senior executives. The names and addresses of the senior executives were


obtained from the directory and associations’ lists. One week after the mail out,

telephone contacts were made with the firms reminding them to reply. Out of the total

questionnaires that were mailed out, only 47 were returned (40 garments, 4 leather

and leather goods, and 3 terry towel) by the third week of August. A second wave of

mailings was carried out in late August 2003 along with immediate telephone follow

up soliciting participation in the survey. A total of 223 completed questionnaires were

received by the end of September 2003, resulting in a response rate of 18.5%.

All responses were checked and edited thoroughly for completeness. Fifteen returned

uestionnaires were found incomplete with so much missing data. The use of

set to be analyzed is free from

issing values (Anderson and Gerbing, 1982). Therefore, cases with missing data

q

covariance structure analysis requires that the data

m

were discarded, which yielded a total of 208 cases (179 garments, 17 leather and

leather goods, and 12 terry towel) that contained no missing data among the measures

of interest. The complete responses, therefore, were 208 questionnaires, generating a

net response rate of 17.33%, which is close to the standard and expectations for SEM

analysis (Boomsma, 1983; Hair et al, 1998). Table 4.2 depicts the total population,

sample drawn and response rate in each industry sub-set. Initially all data collected

were coded and entered into SPSS for WINDOWS release 11.5 spread sheet which

was previously constructed and tested. Strict controls were enforced to ensure the

integrity of the data. Measures taken included the examination of the value of each

data cell independently by two persons who proof read the original data against a

computer printout (Tabachnick and Fidell, 2001). Moreover, the data set was

screened through examination of basic descriptive statistics (means, standard

deviations, ranges) and frequency distributions, because, values that are out of range

or improperly coded can often be detected with such simple checks (Kline, 1998).


Table 4.2

Total Population, Sample Drawn and Response Rate

Sample Drawn Total Response ReceivedName ofIndustry

TotalPopulation

No. % of Total Population

No. Response Rate

Garments 3110 1080 34.8% 179 16.57%

Leather &LeatherGoods

75 75 100% 17 22.66%

TerryTowels

45 45 100% 12 26.66%

Total 3230 1200 37.15% 208 17.33%

4.3.10 Non-response Bias

Mail surveys have been criticized for possible non-response bias. A major concern in

survey research is the degree to which the validity of results may be compromised

due to non-response by the subjects. Non-response occurs when the information is not

obtained from some elements of the population that were selected for inclusion in the

sample (Churchill, 1999). In the present study non-response was defined as failure to

return a usable questionnaire.

If it is anticipated that the responses obtained from the sample may differ from the

kely responses of non-respondents, then the results should not be generalized to the

population (Armstrong and Overton, 1977). This bias will be more apparent in a

situation with low response rates and thus large numbers of non-respondents. The

most commonly recommended protection against non-response bias has been the

reduction of the number of non-respondents (Armstrong and Overton, 1977). Every

effort was made to minimize the number f non-responses which included a cover

letter, postage paid return envelope, phone follow-up. In addition,

questionnaires were carefully designed, with an easy to understand format and

li

o

and tele


language, and were able to be comple 30 minutes (Aaker, Kumar and Day,

2004). The ov nnaires were

returned by the cutoff date. This represented a response rate of 17.33 percent and

compared favorab rates gen d (Ch

p su asser hat with espon ld

be encountered in this study.

Researchers have proposed several methods to overcome this non-response bias

( nd O n, 1977). One meth ssess no sponse ail

s s to test for significant differences between early and late responses

(Armstrong and O on, 1977; rt an ington, 1 ). Past has

indicated that late respondents can be used as substitutes for non-respondents (Miller

and Smith, 1983; Newman, 1962). Therefor an diff e betwe rly

and the late respondents’ responses to the questionnaire was used to find any tential

on-response bias. For this purpose responses of the 40 early respondents from the

arment industry who responded to the first mail out were compared with those of the

ward the end of September. Ten survey items were

andomly selected and t-tests were performed. The overall pattern of responses

ften the sample data may be unduly influenced by one or more extreme

ted within

erall response rate was acceptable as 208 usable questio

ly with

pport for the

erally experience urchill, 1999). This provides

reliminary tion t few problems non-r se bias shou

Armstrong a

urveys i

verto od to a n-re bias in m

vert Lambe d Harr 990 research

e, the me erenc en the ea

po

n

g

last 40 respondents received to

r

between the two groups was quite similar with no statistically significant differences

among the 10 survey items noted. The results support the contention that the sample

is representative of the population under consideration.

4.3.11 Check for Outliers

O

observations that are quite different from the rest of the data. These extreme values,

known as outliers, often alter the covariance matrix and can seriously impact the

results in structural equation modeling (Ullman, 1996). For example, the parameter

estimates and associated standard errors, as well as fit indices, may be biased in the

presence of outliers. Therefore, the univariate and multivariate outliers have been

detected through different statistical techniques such as frequencies (Hair, et al,.

1998) so as to reduce their influence on the results of structural equation modeling.

Scatter plots using SPSS identified five cases (all from the garments industry) as

Univariate outliers with standardized scores in excess of 3.00 (Tabachnick and


Fidell, 2001). These five outlying observations were, therefore, removed from the

original data set (N = 208). Mahalanobis distance with a p < .001 criterion has also

been used to detect multivariate outliers among the cases and no further outlying

cases were observed. Therefore, the remaining 203 cases were used for final analyses

of this research.

4.3.12 Basic Descriptive Statistics of the Sample

Characteristics of the firms and the personal characteristics of the respondents in the

sample are shown in Tables 4.3 through 4.6. There was a mix of different industries

among the respondent firms, with the majority falling within the garments industry.

The distribution of the responding firms by industry is presented in Table 4.3.

Table 4.3 Distribution of Respondents by Industry Type

Industry Type Number of Respondents Percentage

Garments

Leather and leather goods

Terry Towel

174

17

12

85.71 %

8.38 %

5.91 %

Total 203 100%

The distribution of the responding firms by the number of employees is presented in

Table 4.4. The employee number of the majority firms (53.20 %) was up to 500.


Cha

pter

4. R

esea

rch

Met

hodo

logy

10

5

Tab

le 4

.4

ion

of R

he N

umbe

r

Ter

ry T

oL

eath

er a

nd L

eath

er

Goo

Gar

Tot

al

Dis

trib

ut

wel

espo

nden

t F

ds

irm

s by

t o

f Em

ploy

ees

men

t

Num

ber

of

Em

ploy

ees

Num

ber

Pe

Num

ber

Pen

tage

be

r r

Perc

ent

rcen

tage

erc

Num

Perc

enta

ge

Num

beag

e

1 –

200

3 %

10

58

.82

%

8

15.2

725

110

.34

%

31 %

201

– 50

0 4

6

35.2

9 %

37

.93

33.3

3 %

6738

.50

%

77 %

501

– 10

00

10

0 %

25

.12

8.33

%

5028

.73

%

51%

1001

– A

bove

4

31

5.88

%

9 21

.67

3.33

%

322

.41

%

44%

Tota

l 12

17

100

%

74

203

100

100

%

110

0 %

%


An overwhelming half of the respondent firms (50.74%) had international business

experience of more than 10 years with none below 3 years. Table 4.5 shows the

distribution of respondent firms by the length of their international business

experience.

Table 4.5

Distribution espo nt Firms by Length of International Experience

Length of International Business Experience

N ber espo nts Percentage

of R nde

um of R nde

3 – 6 Years

7 – 10 Years

More than 10 Ye s

35 17.24 %

32.02 %

50.74 % ar

65

103

Tota 203 100% l

The r also ssified in terms of their personal characteristics. Table

4.6 summarizes respondents’ personal acte ge o ajority of

respondents (54.20% years with another one third aged

above 40 years. Seventy-eight percent of respondents had international business

experience of more than ars with none below 3 years. Fifty- rcent of the

respondents wer g or commercial officers in charge of export operation

while 41% of the respondents were holding more senior position such as Managing

Director (26.6%), Chief (8%), r a eneral Manager

(6.4%).

espondents are

) w

e mana

cla

as between 30

char

-to 40

ristics. The a f the m

6 ye

ers

seven pe

Executive Officer and Directo nd G

Table 4.6 Summary of Respondents’ Personal Characteristics

Characteristics Number of PercentageRespondents

Age Group of the Respondents

Less than 30 Years30 to 40 Years M

xperienc

ore than 40 Years

International Business E e

Less than 3 Years

ation

3 to 4 Years 5 to 6 Years More than 6 Years

Design

Managing DirectorChief Executive OfficerGeneral Manager

24

69

11.8 %

34.0 % 110 54.2 %

DirectorManagerCommercial OfficerOthers

203 100%

0.0 %10.35 %11.82 % 77.83 %

02124

158203 100%

541667

24924

203

26.6 % 7.9 % 3.0 % 3.4 %

11.8 % 45.3 % 2.0 % 100%

4.3.13 Validity and Reliability of Research Instrument

fied scale was evaluated for reliability and validity. A measure of

un on the final data. The theoretically developed purified

es for each variable in this study approached the minimum standards suggested

y Nunnally (1978) for satisfactory reliability estimates. Therefore, the internal

onsistency of the items for each variable in the research instrument was considered

y. Table 4.7 describes the reliability of the items for each variable.

nt validity is an evaluation of the extent to which the measurement scale

captures the theoretical basis of the construct (Churchill, 1979; Malhotra, 2004).

The puri

Cronbach’s alpha was r

scal

b

c

to be satisfactor

Conte


Churchill (1979) stated that measu have content validity if the scale

evelopment p nerating a

s rom this domain, and purifyin throug

c ave been drawn ture and have been

purified using pre-test responses from academics and sample respondents, content

v ed. However, measuring content y is a sub test

a asure of the validity of the scale. ore formal e of

t as tested by exa the constr ity

in Chapter 5.

Table 4.7

Reliability of the Purified Sca

f Items y

res would

d rocess included specifying the domain of the construct, ge

ample of items f g the scales

from t e litera

h initial data

ollection. As the existing scales h h

alidity can be assum validit jective

nd not a sufficient me A m valuation

he validity of each of the measures w mining uct valid

les

Variables No. o Reliabilit

Use of export promotion programs .AN N.A

Export commitment 8 9.7

Export knowledge 8 .87

Management perception of export market 17 .66 environmentExport marketing strategy 8 .89

Export performance 4 .84

N.A = Not Applicable

4 Data Analysis Procedures

ta obtained from the

ompleted questionnaires. Since most variables in the conceptual model are latent

4.

A two-stage process was employed for the analysis of the da

c

variables, the first stage employed exploratory factor analysis (EFA) and Cronbach’s

alpha for preliminary assessment of reliability and validity of the primary construct

measurements. The second stage employed structural equation modeling as

contained in the AMOS 5 program (Byrne, 2001). SEM was used for confirmatory

factor analysis of the construct measurements and for assessing the hypothesized

relationships contained in the hypothesized model.


4.4.1 Factor and Reliability Analysis

Although the procedures employed in AMOS (version 5) assessed the validity and

reliability of the measures used, a preliminary screening was undertaken in order to

reduce the measures before incorporating them into a structural equation model.

This screening was based on exploratory factor analysis and the computation of

Cronbach’s alpha. This factor analytic approach is considered to be exploratory in

the sense that the researcher has no prior knowledge that the items do indeed

measure the intended constructs. EFA is designed for the situation where links

etween the observed and latent variables are unknown or uncertain. The analysis

proceeds in an exploratory mode to d w the observed variables are linked

to their underlying facto to identify the minimal

number of factors that underlie (i.e., account for cova v

o most of the variable cially ma

p arket environment, export knowledge, export commitment,

ex port performance were latent variab and were measured

with othe rom the literatur develope the

r y. This analysis was used to identify the number of factors

t riables and to conduct a test of t l f the

c

xploratory factor analysis was also used to assess the convergent and discriminant

s (Churchill, 1979). Convergent validity was

ndertaken to examine the extent to which the item correlated positively with other

f estimating reliability, measures

e degree of covariation which exists among the scale items. Cronbach’s alpha was

b

etermine ho

rs. Typically, the researcher wishes

riation among ariables) the

bserved variables. In this research s espe nagement

erception of export m

port strategy and ex les

r observed items either generated f

esearcher for this stud

e or d by

hat underlie the observed va he dimensiona ity o

onstructs.

E

validity of the construct measure

u

measures of the same construct. In this study, convergent validity was indicated by

high loadings on the construct to which the variable belonged. Discriminant validity

examined the extent to which a measure did not correlate with other constructs from

which it was suppose to differ. In this study, discriminant validity was indicated by

low loadings on constructs to which a variable did not belong. A test of internal

consistency was applied in this study for assessing the reliability of the scale

(Malhotra, 2004). Internal consistency was computed for each scale by calculating

Cronbach’s alpha. This, the most popular means o

th


used as an indicator of construct reliability with a desired minimum of .70

Nunnally, 1978).

ibes the measurement properties (reliabilities and validities) of the

observed variables.

independent variables and the dependent variable. Presented in standardized form, as

(

4.4.2 Structural Equation Modeling (SEM)

The fundamental objective of structural equation modeling is to map and test

hypothetically postulated causal relationships among variables (Homburg, 1991). In

contrast to conventional procedures, structural equation modeling allows testing of

an entire model simultaneously instead of testing each hypothesis step by step

(Schumacker and Lomax, 1996). Regardless of whether the variables of concern are

observable (manifest) or unobservable (latent), their assumed relations are set forth

in structural linear equations (Fornell, Lorange and Roos, 1990). The structural

equation modeling approach involves developing measurement models to define

latent variables and then establishing relationships or structural equations among the

latent variables. So the SEM consists of two parts, the measurement model and the

structural model:

The measurement model specifies how latent variables or hypothetical

constructs depend upon or are indicated by the observed variables. It

descr

The structural model specifies the causal relationships among the latent

variables, describes the causal effects, and assigns the explained and

unexplained variance.

The structural component of the model examines relationships among a set of

independent variables and the dependent variables they are hypothesized to

influence based on theoretical reasoning. This method differs from traditional

regression analysis, as it performs multiple regression analyses concurrently, and

allows the direct and indirect effects of variables to be simultaneously calculated

(Schumacker and Lomax, 1996). Direct effects are measured by a structure

coefficient, specifically a path coefficient, represented as ß1 (beta) in Figure 4.1 (A

– C). Path coefficients were computed on the hypothesized relationships between the


they appear in the analysis chapter, these ß (beta) values represent a standardized

partial regression coefficient. The value of this standardized parameter indicates the

esultant change in a dependent variable as a result of a one-unit change in an

tionship.

r

independent variable attributable to this direct rela

A dependent variable may also be indirectly influenced by an independent variable

through another mediating variable. Indirect effects exist when the dependent

variable may be reached from the independent variable via the paths connecting

each to one or more other variables. (See for example A – B – C in Figure 4.1). The

indirect effects were measured as a product of the structure coefficients involved,

represented as ß2 and ß3 in Figure 4.1. This value represents the resultant change in

the dependent variable as a result of a one-unit increase in an independent variable,

attributable to this indirect relationship. To calculate the total change in a dependent

variable as a result of a one-unit increase in an independent variable, the indirect and

direct effects were summed together (Schumacker and Lomax, 1996).

Figure 4.1

The Direct and Indirect Effects

Direct effect = ß1

Indirect effect = ß2 * ß3

Total effects = ß1 + ß2 * ß3

C

Bß2

ß3

ß1A


4.4.2.1 Advantages of Structural Equation Modeling

Multiple regression analysis, factor analysis, multivariate analysis of variance and

discriminant analysis provide the researcher with powerful tools for addressing a

ide range of managerial and theoretical questions. However, they all share one

wanting. It is,

erefore, advisable to use a second generation of multivariate analysis, namely

tructural equation modeling (Fornell, 1987). Structural equation modeling provides

for the explicit representation of t error, which is present in the

overwhelming majority social and educational

ciences, and yields parameter estimates possessing desirable optimality properties,

len, 1989; Joreskog and Sorbom, 1988).

Structural equ on modeling allows for testing causal hypotheses about studied

phenomena and their development across time at the construct level, permits

formulating and testing a wide range of theoretically relevant models, and can

contribute in important ways to theory development an

Structural equation modeling methods als ermit the study of empirically relevant

properties of measurement instruments and adequacy of observed measures, and can

help enhance the explanatory power of nonexperimental data that are often collected

behavioral, social and educational research (Schaie and Hertzog, 1982, 1985).

uctural equation modeling is the ability to incorporate both

d or measured indicator variables into a single model

ayduk, 1987). A latent construct refers to a concept or variable that cannot be

easured directly, but can be represented or measured in terms of one or more

w

common limitation: each technique can examine only a single relationship at a time

(Hair et al., 1998). Regression techniques cannot be used to examine multiple

dependence relationships of the theoretical model where some of the variables are

simultaneously dependent and independent.

Research on success factors in exporting is often characterized by multiple variables;

some of these variables are not directly observable, and sometimes there are

potentially high levels of multicolinearity. Such data are seldom free of noise or

measurement errors, so standard statistical approaches are difficult to apply, and the

level of a priori theoretical specification is in many cases somewhat

th

s

measuremen

of measures used in behavioral,

s

Bolsuch as consistency and efficiency (

ati

d construct validation.

o p

in

Another advantage of str

latent constructs and observe

(H

m


indicator variables. The proposed model (see Figure 3.1) contained five latent

ariables that cannot be directly measured, but rather, must be measured by the

mulates on the basis of a review of the

terature in a substantive area or postulating on the basis of a theory; (b)

is

ufficient to allow a unique solution to be found for the system of equations

v

indicators contained in the individual measurement scales described previously.

4.4.2.2 Characteristics of Structural Equation Modeling Application

Bollen and Long (1993) explained five steps that characterize most structural

equation modeling applications. These include: (a) model specification, refering to

the initial theoretical model the researcher for

li

identification, is to ask whether unique values can be found for the parameters to be

estimated in the theoretical model. In some instances, the analysis may not converge

or reach a solution (find unique parameter values), even after 100 iterations, because

the model is misspecified; (c) estimation, requires knowledge of the various

estimation techniques that are used depending on the variable scale and/or

distributional property of the variable(s) used in the model – least squares,

maximum likelihood, and so forth; (d) testing fit, involves interpreting model fit or

comparing fit indices for alternative or nested models. The researcher is faced with

choosing among numerous fit indices that subjectively indicate whether the data fit

the theoretical model; (e) respecification, usually occurs when the model fit indices

suggest a poor fit. In this instance, the researcher makes a decision regarding how to

delete, add, or modify paths in the model, and then subsequently returns to the

analysis. Model modification indices and /or tests of paths from the initial model

guide the researcher in this effort.

4.4.2.3 Identification

A fundamental consideration when specifying models in SEM is identification.

Model identification addresses whether the information provided by the data

s

containing the model parameters as proposed in the theoretical model (Schumacker

and Lomax, 1996). To calculate this, each potential parameter in a model was

specified as fixed, free, or constrained. A free parameter was unknown and therefore

calculated in the analysis. The fixed parameter was set to a specified value, typically


0 or 1. A constrained parameter was unknown but fixed to equal another unknown

parameter. The parameters of a specified model are combined to form one model-

implied variance covariance matrix (E). If two or more sets of parameter values

enerate the same matrix, E, then they are considered equivalent. If a parameter has

ed. This condition was met in this study.

g

the same value in all equivalent sets then that parameter is considered identified.

Structural models may be just-identified, overidentified, or underidentified. A just-

identified model is one in which there is a one-to-one correspondence between the

data and structural parameters. That is to say, the number of data variances and

covariances equals the number of parameters to be estimated. However, despite the

capability of the model to yield a unique solution for all parameters, the just-

identified model is not scientifically interesting because it has no degrees of freedom

and therefore can never be rejected. An overidentified model is one in which the

number of estimable parameters is less than the number of data points (i.e.,

variances, covariances of the observed variables). This situation results in positive

degrees of freedom that allow for rejection of the model, thereby rendering it of

scientific use. The aim in structural equation modeling, then, is to specify a model

that meets the criterion of overidentification. Finally, an underidentified model is

one in which the number of parameters to be estimated exceeds the number of

variances and covariances (i.e., data point). As such, the model contains insufficient

information (from the input data) for the purpose of attaining a determinate solution

of parameter estimation; that is, an infinite number of solutions are possible. Thus a

restriction on model specification is that for any model to be estimated it must be

either just-identified or overidentifi

4.4.2.4 Estimation

The general objective in estimating the factor model is to find estimates of the

parameters that reproduce the sample matrix of variance and covariances of the

observed variables as closely as possible in some well-defined sense. The estimation

of the model parameters can be achieved by three statistical methods: a) initial

estimates (IE), b) maximum likelihood estimates (ML), and c) the unweighted least

squares estimates (ULS). All three methods give a consistent estimate, which means

that they are very close to the true parameter values in large samples, under the


assumption that the model is correct. However, the three estimates differ in several

ways. The initial estimates are based on an ad hoc procedure, which is non iterative

and therefore very fast. The maximum likelihood estimates and the unweighted least

squares estimates are obtained by an iterative procedure designed to minimize a

definite fitting function by successively improving the parameter estimates starting

ith the initial estimates.

s

onnected with structural equation modeling. Bollen and Long (1993), MacCallum

89), and Steiger (1990) present a variety of viewpoints and

ecommendations on this topic. The AMOS program also provides powerful

w

The ML method is applicable only to rather large samples. The ULS method can be

used even for small samples. The ML method, in addition to providing the

parameter estimates, also gives the standard errors for the estimates. These are

measures of the precision of such an estimate. Standard errors are not available in

the program for the ULS method. Besides, a growing body of research indicates that

ML performs reasonably well under a variety of less-than-optimal analytical

conditions such as small sample size and excessive kurtosis (Hoyle, 1995). ML is

widely available and is the most widely researched estimator among those otherwise

available (the unweighted least squares, ordinary least squares). Therefore, the

analyses that are presented were all made by means of the ML method, as the

sample also permitted this (Boomsma, 1983; Hair et al 1998).

4.4.2.5 Assessment of Overall Model Fit

The focal point in analyzing structural equation models is the extent to which the

hypothesized model “fits,” or, in other words, adequately describes the sample data.

However, model evaluation is one of the most unsettled and difficult issue

c

(1995), Mulaik et al. (19

r

instruments to assess the fit and the detection of the lack of fit of the model. The

following quantities are used:

1. Parameter estimates

2. Standard errors (for ML only)

3. The coefficient of determination

4. Overall goodness-of-fit (GOF) measures


The first three quantities give reasonable estimates to assess the goodness of fit of

the model. If any of these quantities has an unreasonable value it is an indication that

the model is fundamentally wrong, and that it is not suitable for the data. Negative

variances and correlations larger than one in magnitude are examples of a bad

model.

The determination of overall model fit in structural equation modeling is not as

sted-goodness-of-fit

dex (AGFI), and the root-mean-square error of approximation (RMSEA). These

d covariance matrix with the model

plied covariance matrix (Schumacker and Lomax, 1996). A non-significant chi-

d and capitalizes on chance, or (b) models that do not

t the observed data and need improvement. Carmines and McIver (1981) indicate

chi- dom ratios in the range of 2 to 1 or 3 to 1 are indicative

of a hetical model and the sample data. Examining

the d fit index (NFI), and comparative fit index

(CF ese criteria typically compare the

straightforward as it is in other statistical approaches in multivariable procedures

such as the analysis of variance, multiple regression, path analysis, discriminant

analysis, and canonical analysis. These multivariable methods use observed

variables that are assumed to be measured without error, and they have statistical

tests with known distributions. Structural equation modeling fit indices have no

single statistical test of significance that identifies a correct model given the sample

data. Overall, the fit indices fall into the category of model fit, model comparison, or

model parsimony fit indices.

The model fit can be evaluated by examining the chi-square statistic relative to the

degree of freedom, the goodness-of-fit index (GFI), the adju

in

criteria are calculated by comparing the observe

im

square value, goodness-of-fit indices close to one, and a RMSEA less than .05

indicates that the observed and implied covariance matrices are not significantly

different and therefore the data can be assumed to fit the model. However, the chi-

square measure is sensitive to sample size and very sensitive to departures from

multivariate normality of the observed variables. Joreskog (1996) proposed that the

chi-square be adjusted by the degree of freedom to assess model fit. CMIN/DF (chi-

square/degree of freedom) measure can identify two kinds of inappropriate models:

(a) a model that is overidentifie

fi

square to degrees of free

n acceptable fit between the hypot

Tucker-Lewis index (TLI), the norme

I) can evaluate the model comparison. Th


proposed model with a null model; a value close to one indicates a perfect fit. The

model parsimony is most commonly evaluated by examining the Akaike information

criterion (AIC). An over-identified model is compared with a restrictive model to

ensure that an efficient number of estimated coefficients have been used to achieve a

specific level of fit (Schumacker and Lomax, 1996; Arbuckle and Wothke, 1999).

Criterionceptable Level Interpretation

The goodness-of-fit criteria used to evaluate the measurement models and their

acceptable fit interpretations are presented in Table 4.8. Some indices are more

dependent on sample size than others, and there is ongoing debate regarding the

appropriateness of some of the measures, hence a range of criteria were evaluated

(Schumacker and Lomax, 1996).

Table 4.8: Goodness of Fit Criteria and Acceptable Fit Interpretation

Goodness-of- Fit Ac

Chi-square Tabled chi-square value Compares obtained chi-square value with tabledvalue for given degree offreedom

Chi-square/Degree offreedom (CMIN/DF)

Less than 3 Less than 2 indicates anadequate fit

Root-Mean-SquareError of Approximation(RMSEA)

0 to 1 Value less than .05 indicatesa good model fit

Goodness-of-fit (GFI) 0 (no fit) to 1 (perfect fit) Value close to .90 reflects a good fit

Adjusted GFI (AGFI) 0 (no fit) to 1 (perfect fit) Value adjusted for df, with.90 a good model fit

Normed Fit Index(NFI)

0 (no fit) to 1 (perfect fit) Value adjusted for df, with.90 a good model fit

Tucker-Lewis Index(TLI)

0 (no fit) to 1 (perfect fit) Value close to .90 reflects agood model fit

Comparative Fit Index(CFI)

0 (no fit) to 1 (perfect fit) Value adjusted for df, with.90 a good model fit

Akaike InformationCriterion (AIC)

Compares values inalternative models

Source: Schumacker and Lomax(1996); Arbuckle and Wothke (1999).


4.5 Conclusion

This chapter addressed the research methodology adopted in gathering data to test

the hypothesized model. It explored the design and structure of the questionnaire

and found the measurement instrument to be reliable and valid. Operational

definitions and measurements of the variables and analysis procedure of the data

were described. Previous chapters have focused on explaining the background of the

research and the theoretical foundation for the hypotheses. The following chapters

provide the study's results and comments on the results in relation to testing the

hypotheses.


Chapter 5

ratory factor analysis was used to test dimensionality of the data with

of items that reflect a single underlying factor or construct.

Cronbach’s alpha was used to measure the reliability of the scales to examine how

well these items explain the construct. These results are presented in Section 5.2.

Confirmatory factor analysis was used using SEM in AMOS to achieve a more

rigorous estimation of reliability and test the unidimensionality of the scales, which

are described in Section 5.3. Finally, Section 5.4 describes the results of structural

equation modeling to test the a priori model that has been developed in Chapter 3.

5.2 Results of Exploratory Factor Analysis

The measurement of the variable “use of export promotion programs” was discussed

in Section 4.2. No exploratory or confirmatory factor analysis was used to test

dimensionality of this variable as it is an observed variable. However, all other

variables in the conceptual model were latent variables, which were measured by a set

of observed items. Factor analysis was used initially as an exploratory tool, which

assisted with two main purposes: summarization and data reduction. In summarizing

the data, factor analysis derived the underlying dimensions that, when interpreted and

understood, described the data in a much smaller number of items than the original

individual variables. Data reduction can be achieved by calculating scores for each

underlying dimension and substituting them for the original variables (Hair et al.,

1998). Thus, factor analysis facilitated combining the original set of variables into a

smaller set of constructs or underlying dimensions (Tabachnick and Fidell, 2001).

Factor analysis was also used to examine the scale item correlation matrix and to test

Analysis and Results

5.1 Introduction

This chapter analyzes survey data and tests the hypotheses set forth in Chapter 3.

These analyses were carried out by using structural equation modeling techniques.

Initially explo

the aim to produce a set

Chapter 5. Analysis and Results 119

the validity and reliability of t esults of the factor analysis

are presented in Tables 5.1 loadings of items and the

percentages of variance cts. Factor

analysis was applied eigenvalues set to

ity (Zwick and Velicer, 1986). Factors are interpreted by examining their

loadings, to the p original variables. This interpretation is often

cilitated by orthogonal rotation, the second stage of factor analysis, in which

be

ighly intercorrelated. In contrast, items that are not from the same domain will be

haracterized by low inter-item correlations. From a validity perspective (as discussed

high correlations with other items

overall reliability of the scale is assessed by computing Cronbach’s alpha. In addition,

he measurement scales. R

to 5.5 incl ding factoru

y accounted for b individual factors or constru

using principal component analysis, with

un

correlations, called

fa

original factors are redefined using different rotation techniques. Varimax rotation

was used in this research, which is a commonly used method of rotation. The goal of

this technique is to simplify factors by maximizing the variance of the loadings within

factors, across variables (Tabacknick and Fidell, 2001). The Bartlett Test of

Sphericity was significant and the Kaiser-Meyer-Olkin (KMO) measure of sampling

adequacy exceeded 0.60, indicating a very acceptable level of sampling adequacy for

the variable/item set.

In regard to the correlations of scale items, Churchill (1979) noted that if items

belong to the domain of a single construct then responses to those items should

h

c

in Section 4.4), convergent validity is indicated by

measuring the same construct. Discriminant validity is indicated by lower correlations

with items measuring other constructs. In the case of factor analysis, validity is

demonstrated when the rotated factor matrix reflects the underlying constructs

(Churchill, 1979; Parasuraman, Valerie and Leonard, 1988). More specifically,

convergent validity is indicated by significant loadings of items within a construct to

a common factor. Discriminant validity is evidenced by substantially lower loadings

on factors other than the one to which an item belongs. For the present study “very

significant” loadings of .50 were desired for the primary factor to which an item

belongs (Hair et al. 1998).

Cronbach’s alpha is the most commonly used and accepted means of assessing the

reliability of a multi-item measurement scale (Churchill, 1979). Reliability was

assessed using the scale reliability procedure in SPSS. Under this procedure the


the corrected item-total correlation for each item is provided, as well as the effect on

the alpha if the item is deleted.

5.2.1 Export Commitment

Eight items were used to operationalize the variable, export commitment, and the

result of the factor analysis for items constituting the constructs is presented in Table

5.1. Although the two dimensional structure was clearly indicated, the overall validity

of the measures was questionable as items (comit4) and (comit8) exhibited loadings

of only .56 and .48. Although these values were not low by usual standards (Hair et

al., 1998), they were well below the values obtained for the other items in the scale,

which typically offered loadings greater than .70 and with no item below .60. As a

result of the preceding analysis, items (comit4) and (comit8) were deleted and the

ctor analysis was rerun. Results indicated a much improved loading pattern with

also supported by the literature (Evangelista, 1994).

fa

only one factor. However, another two items - (comit5) and (comit6) - exhibited

loadings of only .45 and .44 where all other loadings greater than .70. Therefore,

items (comit5) and (comit6) were also deleted and the factor analysis was rerun.

Results indicated a much improved loading pattern (see Table 5.1a). The third and

final factor solution also produced one factor that was interpretable and significant

which explained 62.29% of the variance (with an eigenvalue of 2.49). Item content

for this factor related to “executive travel frequently (comit2)”, “appropriate

organizational structure (comit1)”, “adequate funds to develop overseas markets

(comit7)”, and “extensive in-house export market research facilities (comit3)”

grouped together strongly with a positive loadings of .82, .80, .78, and .77

respectively. Reliability was maintained as indicated by a Cronbach’s alpha of .79 for

this factor. In addition, the scale items loaded heavily on the same factor, providing

evidence of high convergent validity. Thus, this factor can be considered a dimension

of export commitment and is


Table 5.1

Extracted Factors and Factor Loadings Related to Export Commitment

Factor and Items Loaded in Each Factor Factor1 Factor2

Factor 1:Executives travel frequently (comit2)Appropriate organizational structure (comit1)

.82

.78Extensive in-house export market researchfacilities (comit3)Adequate funds to develop overseas markets(comit7)Exporting is a high priority activity (comit8)

.77

.64

.48.40

Factor 2:Use of specialized outside organizations (comit5)Respond rather than pursue export opportunities (comit6)Learning about exporting procedures and documentation (comit4)

EigenvaluePercentage of varianceCumulative variance explainedCronbach’s alpha

3.2941.0941.09.79

.79

.64

.56

1.0312.8453.93.49

Table 5.1a Extracted Factor and Factor Loadings Related to Export Commitment

Factor and Items Loaded in Each Factor Factor Loadings

Factor 1: Export Commitment (comitt)Executives travel frequently (comit2)Appropriate organizational structure (comit1)Adequate funds to develop overseas markets (comit7)Extensive in-house export market research facilities(comit3)

.82

.80

.78

.77

2.49EigenvaluePercentage of variance

Cronbach’s alpha62.29.79


5.2.2 Export Knowledge

s variable, export knowledge; and the

re ult of the factor analysis for items constituting the constr ct is presen d in Table

5 factor that s interp table and

signif n h an nvalue o 4.17. Item

conte f ge abou rkets we re serving

(know )” rnment regulations (know5)”,

“knowled out existing markets (know3)”, “economic situation of export

m rke s available from public and

private sources (know7)”, “skills and knowledge to c pe with c f

g arding activities (know1)”

and “ l kn w2)” group d together

stron .77, .74 .71, .70, . nd .61

respectiv

Table 5.2

ctor and Factor Loadings Related to Export Know

Factor and Items Loaded in Each Factor FactorLoadings

Eight items were used to operationalize thi

s u te

.2. eTh factor solution produced a single wa re

ica t, which explained 52.13% of the variance wit eige f

nt or this factor related to “sufficient knowled t ma a

4 , “current information about foreign gove

geable ab

a ts (know6)”, “international marketing service

o hallenge o

lobalization (know8)”, “able to arrange shipping and forw

ab e to prepare and handle export documentation ( o e

gly with a positive loadings of .83, .77,

ely.

, 62 a

Extracted Fa ledge

Factor 1: Export Knowledge (Kno)Sufficient knowledge about markets wCurrent information about foreign go

e are serving (know4vernment regulations

(know3)

nd

lizatio

to arrange shipping and forwarding activities (know1) nd handle export documentation (know2)

Percentage of varianceCronbach’s alpha

.77

.77

.74

.71

.70

.62

4.1752.13.87

) .83

(know5)Knowledgeable about existing marketsEconomic situation of export markets (kmow6)International marketing services available from public aprivate sources (know7) Skills and knowledge to cope with challenge of globa(know8)

n

AbleAble to prepare a

Eigenvalue

.61


Reliability was maintained as indicated by a Cronbach’s alpha of .87 for this

imension. Moreover, the set of items used to measure the construct loaded heavily

ompeting in export markets (strate2)”, “adequate capabilities to

Table 5.3

Extracted Factor and Factor Loadings Related to Export Strategy

Factor and Items Loaded in Each Factor FactorLoa

d

on the same factor indicating convergent validity. Thus, this factor can be considered

a dimension of export knowledge which is also supported by the literature (Kotabe

and Czinkota, 1992).

5.2.3 Export Strategy

Eight items were used to operationalize the variable, export strategy; and the result of

the factor analysis for items constituting the construct is presented in Table 5.3. The

factor solution produced one factor that was interpretable and significant, which

explained 57.74% of the variance (with an eigenvalue of 4.62). Items content for this

factor were related to “strategies to expand export markets over the years (strate8)”,

“strategies for c

dings

actor 1: Export Strategy (stra)Farkets over the years (strate8)

s (strate3)

rt customers to be served (strate1)

Eigercentage of variance

lpha

.82

.81

.81

.81

.76

.75

.63

4.657.74.89

Strategies to expand export mStrategies for competing in export markets (strate2)Adequate capabilities to collect necessary information(strate4)Export countries to be entered (strate6)Distinct goals and objectives for export operationStrategies to expand number of exportable product over theyears (strate7)Sufficient budget to exploit overseas markets (strate5)The expo

.67

envaluePCronbach’s a

2


collect necessary information (strate4)”, “export countries to be entered (strate6)”,

“distinct goals and objectives for export operations (strate3)”, “strategies to expand

number of exportable product over the years (strate7)”, “sufficient budget to exploit

overseas markets (strate5)”, and “the export customers to be served (strate1)”. All

items grouped together strongly with positive loadings of .82, .81, .81, .81, .76, .75,

7 and .63 respectively. Reliability was maintained as indicated by a Cronbach alpha

f .89 for this factor. The set of items used to measure the same construct loaded

r indicating convergent validity of the scale and provided

upport to the theoretical basis of the measurement.

on of

the export market environment. The result of the factor analysis for items constituting

is constructs is presented in Tabl negatively worded item “overseas

markets to any

orrelations amongst oth in the

factor for the purpose of calculating the reliability of the construc Five

f ith eigenvalues greater than one hat explained

58.8 e ere clearly

indic d le as a number of items

(envir4, envir9, envir11, g 0, .50, .56

and .51 r not low by usual st ds (Hair et

al., 1 8 e s in the scale,

which ty loadings greater than .70 and with no item In

addi n ively secondary

loadings on other factors (- .46, .45, and .53 respectively) indicating e overlap.

Moreover, it was found from the initial factor solution that the item alization

c s for export (envir16)” was not adequately contributing to the

factor 3. As a result, the six items (envir4, envir9, envir11, envir13,

) were deleted and the factor analysis was rerun.

.6

o

heavily on the same facto

s

5.2.4 Management Perception of Export Market Environment

Seventeen items were used to operationalize the variable management percepti

th e 5.4. One

for our product are not stable (envir9)” was reverse coded prior

analysis for consistent inter-item positive c er items

t measure.

actors were initially identified w t

5% of the variance. Although the five dimensional structur s w

ate , the overall validity of the measures was questionab

and envir13) exhibited relative low loadin s (.4

espectively). Although these values were andar

99 ), they were well below the values obtained for the other it

pically offered

m

below .60.

tio , these items (envir9, envir13, and envir14) had relat high

som

“glob

reated opportunitie

interpretation of

envir14 and envir16


Table 5.4 Extracted Factors and Factor Loadings Related to Management Perception of

Export Market EnvironmentFactors and Items Loaded in Each Factor Factor

1Factor2

Factor3

Factor4 Fact5

or

Factor 1:Paperwork involved in export sale is easyto understand (envir7)Obtaining payment is relatively simple(envir2)Making contacts is easy (envir1)Locating sales agents/distributors inforeign markets is easy (envir10)

.72

.71

.71

.65

Factor 2:Capability to successfully export its products (envir12)Able to compete in foreign markets(envir3)

Overseas markets are not stable (envir9)

.71

.62

.50 -.46

Business practices are same in mostcountries (envir13) .45 .51

Factor 3:Exchange rate variations make exportingdifficult (envir15)Experiencing difficulty adjusting to theglobalized environment (envir17)Globalization created opportunities forexport (envir16)

.78

.72

.65

Factor 4:Making sales to foreign buyers is risky(envir8)Tastes and preferences are difficult to understand (envir5)Political problems in foreign markets arebarriers to exporting (envir14) .53

.80

.76

.61

Factor 5:Competitor analysis is critical for exportsuccess (envir6)Export markets are more profitable thandomestic markets (envir11)Obtaining adequate share of marketswould be easy with firm’s specializedproduct (envir4)

EigenvaluePercentage of varianceCumulative variance explainedCronbach’s alpha

3.1718.6318.63.70

2.4514.4133.04.54

1.699.9342.97.61

1.428.3551.32.62

.86

.56

.40

1.287.5258.85.48


The second factor solution produce ors, however, item (envir6) had a

re

a third al so pr o

factors that were interpretable and signific , which explained 67.67% of the

vari rpreted as relating to export process,

forei et r nd globalization and

exchange. Moreover, the set of items used t asure the constructs loaded heavily

on ergent lidity. These factors are further

s mmar

ble 5 a

Ex c ings R lated to Manage ent Per eption ofet E vironm nt

Factors Factor 1 Facto Factor 3 Factor4

d four fact

latively high secondary loading of -.43. Therefore, the item (envir6) was deleted

nd the factor analysis was rerun. The and fin factor lution oduced f ur

ant

ance. The emergent four factors were inte

market and compegn tition, mark isks and taste, a

o me

the same factor indicating conv

ized in Table 5.4a.

va

u

Ta .4

tra ted Factors and Factor Load e m cExport Mark n e

and Items Loaded in Each Factor r 2

Factor 1:Export Process (enf1)

y to

ir10)

.75

.74

.69

.65

Obtaining payment is relatively simple(envir2)Paperwork involved in export sale is easunderstand (envir7)Making contacts is easy (envir1)Locating sales agents/distributors in foreignmarkets is easy (env

Facto 2 )r :Foreign Market and Competition (enf2

.87

.74

Capability to successfully export its products (envir12)Able to compete in foreign markets (envir3)

actor 3:Market Risks and Taste (enf3)Fstes and preferences are difficult to

ky.85

.82

Taunderstand (envir5)Making sales to foreign buyers is ris(envir8)

Fact 4or :Globalizationand Exchange (enf4)Exchange rate variations make exportindifficult (envir15)

g

Experiencing difficulty adjusting to thealized environment (envir17)

ce explainedCronbach’s alpha

.96.70

2.15

44.11.59

1.3113.057.1.64

.8

.79

1.1067.60

glob

EigenvaluePercentage of variCumulative varian

ance2.50

.962424

1.919 7

7

2

05.46.67


5.2.5 Export Performance

Four items were used to operationalize the variable, export performance; and the

result of the factor analysis for items constituting this construct is presented in Table

5.5. The factor solution produced one factor that was interpretable and significant,

which explained 68.32% of the variance. Item content for this factor related to

“export growth (perfor3)”, “export profit (perfor2)”, “export sales (perfor1)”, and

“new market entry (perfor4)” grouped together very strongly with a positive loadings

of .90, .88, .87, and .63 respectively. Reliability was maintained as indicated by a

ronbach alpha of .84 for this construct. The set of items used to measure the same

construct loaded heavily on the s indicating convergent validity and

p

annidis, 1996).

le 5.5

R ted to xport Performance

Fac Factor Loadings

C

ame factor

rovided support for similar results achieved in the literature (Katsikeas, Piercy and

Io

Tab

Extracted Factor and Factor Loadings ela E

tor and Items Loaded in Each Factor

actor 1: Export Performance (perf)F

Cro a

.90

.88

.87

.63

2.7368.32.84

Export growth (perfor3)Export profit (perfor2) Export sales (perfor1)New market entry (perfor4)

EigenvaluePerc nte age of variance

nb ch’s alpha

5.2.6 Su Exploratory Factor Analysis Results

As indicated by the results presented in Table 5.1 to 5.5, the set o items used to

m cts loaded heavily on th e fa a onver

v three for management percep f the rt m

environment (foreign market and competition “enf2”, market risks and taste “enf3”,

mmary of the

s f

easure the constru e sam ctor indic ting c gent

alidity. All factors, except tion o expo arket


and globalization and exchange “enf4”) had Cronbach’s alpha values greater that .70,

dicating a satisfactory level of reliability (Nunnally, 1978). The above mentioned

.3 The Structural Equation Model

tructural equation modeling (SEM) is a statistical method that takes a hypothesis-

stin eory

b is theory represents

t ariables (Bentler, 1988). he term structural

equa n portant aspects of the procedure

proc e resented by a series of structural (i.e., regression)

equa l relations can be modeled pi y to enable a

c conceptualization of the theory under study. The hypothesi odel can then

b a simultaneous analysis of the entire sys variables to

d which it is consistent with the data. And n and Gerbing

988) proposed a two step model-building approach that emphasize the analysis of

o conceptually distinct models: measurement model and structural model. The

easurement model specifies relationships among measure (observed) variables

t of the general

l that prescribes relations between latent variables and observed variables that

in

three factors (“foreign market and competition”, “market risks and taste”, and

“globalization and exchange”) had only two items in each with Cronbach’s alpha

values less than .70 (.59, .64 and .60). In assessing the adequacy of factors and factor

loadings, Zwick and Velicer (1986) suggest that a factor or construct of three or more

items with substantial loadings is considered as major component. Thus these three

factors have been excluded from further analysis. The remaining five factors and two

observed variables have been subjected to further analysis through application of

confirmatory factor analysis in the measurement model of SEM, for the purpose of

testing the a priori model.

5

S

te g (i.e., confirmatory) approach to the multivariate analysis of a structural th

earing on some phenomenon. Typically, th “causal” processes

hat generate observations on multiple v T

tio modeling conveys two im : (a) that the causal

ess s under study are rep

tions, and (b) that these structura ctoriall

lear zed m

e tested statistically in tem of

etermine the extent to erso

(1

tw

m

underlying the latent variables. The structural model is the componen

mode

are not indicators of latent variables. The measurement model provides an assessment

of convergent and discriminant validity, and the structural model provides an

assessment of nomological validity (Anderson and Gerbing, 1988). When the

measurement and structural components are combined, the result is a comprehensive


statistical model that can be used to evaluate relations among variables that are free of

measurement error.

The effect of non-normality on SEM depends on both its extent and its source (poorly

distributed continuous variables, coarsely categorized variables, or outliers). In

general, the greater the extent of nonnormality, the higher is the magnitude of the

problem. A number of procedures are available for assessing the univariate and

multivariate normality of the measured variables. Jarque-Bera (JB)-Statistics,

developed by Jarque and Bera (1981), are widely used to detect univariate normality

of the measured variables. The use of these statistics indicated non-normality of the

data for this study. A high multivariate kurtosis value (75.10) also indicated data non-

ormality. Bootstrapping procedure was used in this study as it has been

commended for SEM analysis of such non-normal data sets (Byrne, 2001).

rocedure by which the original sample is

onsidered to represent the population. Multiple subsamples of the same size as the

n

re

Bootstrapping serves as a resampling p

c

parent sample are then drawn randomly, with replacement, from this population and

provide the data for empirical investigation of the variability of parameter estimates

and indices of fit.

5.3.1 Measurement Models

Exploratory factor analysis is particularly suitable where no prior knowledge on

measurement is reported or when the underlying structure of the measures is not well

understood (Gerbing and Anderson, 1985). This traditional approach to scale

development has since been expanded with confirmatory factor analysis (Gerbing and

Anderson, 1988). The aim of confirmatory factor analysis is to test whether a

population factor model fits the observed sample data. So, relationships between

indicator items and the related constructs were also investigated through the use of

confirmatory factor analysis. This type of analysis is a subset of the general AMOS

model and is referred to as the measurement model. The measurement model

specifies how latent variables or hypothetical constructs depend upon or are indicated

by the observed variables. It describes the measurement properties (reliabilities and

validities) of the observed variables. Measurement models are commonly used to


assess the convergent validity of the construct, as they facilitate the analysis of the

adequacy of the observed items as measures for the construct (Churchill, 1979).

ncy of the construct indicators, depicting the degree to which they

ndicate” the common latent (unobserved) construct. Another measure of reliability

the variance extracted measure. This measure reflects the overall amount of

d for by the latent construct. Higher variance

xtracted values occur when the indicators are truly representative of the latent

Evaluations of models estimated by AMOS involve assessment of the fit or lack of fit

of the models to the data. To determine the adequacy of the measurement model,

multiple criteria are used to compare alternative models to each other and to general

standards that have arisen over the years. This included the internal structure of the

model and multiple adjunct fit indices broadly classified into model fit, model

comparison, and model parsimony (Arbuckle and Wothke, 1999; Bagozzi and Yi,

1988; Byrne, 2001; Hair et al., 1998; Hoyle, 1995; Tanaka, 1993). These indices have

already been discussed in Chapter 4.

The internal structure was established by an examination of parameter estimates and

the reliability of construct measures (Bagozzi and Yi, 1988). Parameter estimates

should be significant and in the hypothesized direction. The principal approach used

in assessing the measurement model is the composite reliability and variance

extracted measures for each construct (Hair et al., 1998). Reliability is a measure of

the internal consiste

“i

is

variance in the indicators accounte

e

construct. When the composite reliabilities of the constructs measures greater than .70

and the average variance extracted is greater than 50 percent then the measures are

acceptable (Bagozzi and Yi, 1988; Hair et al., 1998). These statistics also provide

evidence for the reliability and convergent validity of the construct in the

confirmatory factor analysis (Rice, 1993).

The overall fit of the model to the data was primarily assessed via the chi-square

statistic, the goodness-of-fit index (GFI), the adjusted goodness-of-fit index (AGFI),

the root mean square error of approximation (RMSEA), normed fit index (NFI),

Tucker-Lewis index (TLI), comparative fit index (CFI), and Akaike information

criterion (AIC). Good fit is indicated by a relative chi-square (chi-square

statistic/degrees of freedom, CMIN/DF) less than 3 (Carmines and McIver, 1981;


Krause, Scannell and Calantone, 2000), goodness-of-fit index greater than .90

(Bagozzi and Yi, 1988; Hair et al. 1998; Schumacker and Lomax, 1996), adjusted

oodness-of-fit index greater than .90 (Schumacker and Lomax, 1996), RMSEA less

ercent of the variance, suggesting good

pecification of the model. Thus, overall the proposed measurement model for

g

than .05 (Schumacker and Lomax, 1996), NFI greater than .90 (Bentler, 1992; Hu and

Bentler, 1999; Schumacker and Lomax, 1996), TLI greater than .90 (Schumacker and

Lomax, 1996), CFI greater than .90 (Bentler, 1992; Schumacker and Lomax, 1996)

and AIC comparing values in alternative models (saturated model or independent

model). The good fit statistics for the hypothesized model are substantially smaller

than either the independent or the saturated models (Byrne, 2001). Model fit statistics

of the measurement models are presented in Table 5.6 and are discussed below.

5.3.1.1 Export Commitment

The unmeasured factor of “export commitment (comitt)” was estimated by four

observed variables as shown in Table 5.1a. The chi-square statistic was 8.214 with 2

degrees of freedom, p = .016, indicating that the model should be rejected. However,

as a result of the problems already mentioned with the chi-square statistic, more

emphasis was placed on the other measures of goodness of fit. In fact, the alternative

measures indicated that the fit of the model to the data was quite good. Evidence of

the good fit of the model was provided by GFI 0.981, AGFI 0.906, except RMSEA

0.124. This model also compared well with the null model, given that the NFI, TLI,

and CFI were all above the recommended level of 0.90 (see Table 5.6). Moreover,

assessment of the internal structure provided additional support for the model.

Standardized parameter estimates were greater than .6 and highly significant,

indicating good convergent validity (see Table 5.7). The construct had a composite

reliability of 0.80 and accounted for 50 p

s

“export commitment (comitt)” demonstrated adequate reliability and convergent

validity and could be used in further analysis.


ysis

and

Res

ults

133

Oll

Mod

e

Tab

le5.

6

Mod

elFi

tSta

tistic

s

vera

lFit

Inte

rnal

Str

uctu

re o

fth

eM

odel

Mod

elFi

tM

odel

Com

pari

son

Mod

el P

arsi

mon

y

Lev

el o

f Goo

dM

odel

Fit/

Mea

sure

men

tM

odel

II

TL

Com

posi

teR

elia

bilit

y%

ofV

aria

nce

CM

IN/D

FR

MSE

AG

FIA

GF

NF

IC

FI

AIC

(P

ropo

sed

Mod

el)

AIC

(Sat

urat

edM

odel

)L

evel

of G

ood

Mod

el F

it>

.90

>.

.70

50 <

2

< .0

6 >

.90

> .9

0 90

> .9

0 C

ompa

res V

alue

s in

Alte

rnat

ive

Mod

els

Exp

ort C

omm

itm(c

omitt

).9

66.9

2en

t.8

050

4.10

7.1

24.9

81.9

061

.974

24.2

1420

.000

Expo

rt K

now

ledg

e(k

no)

.978

.98

.85

531.

745

.061

.983

.950

1.9

9028

.727

30.0

00

Expo

rt St

rate

gy(s

tra)

.988

.98

.86

601.

717

.060

.991

.957

5.9

9519

.436

20.0

00

Expo

rt Pr

oces

s (e

nf1)

.997

1.0

.70

44.2

36.0

00.9

99.9

9400

1.00

016

.473

20.0

00

Expo

rtPe

rfor

man

ce(p

erf)

.994

.999

1.00

018

.165

20.0

00.8

560

1.08

3.0

20.9

95.9

74

Cha

pter

5. A

nal


Table 5.7

Export Commitment– F s, tic a a P-Values

Export Commitment (c L indardized)

icRatios

P-Values

actor

itt)

Loadi

Fa(Sta

ng

ctor

Cri

oad

al R

ngs

tios

Crit

nd

alom

Executives travel(comit2) Appropriate organizstructure (comit1) Extensive in-house ex t market research s (comit3) Adequate fun s to develop overseas mar et 7)

.715 8.655

6

000

000

000

frequently

ational

por facilitie

s (codk mit

.761

.674

.670

8.28

8.245

5.3.1.2 Export Knowledge

The s for the unme fac ge (kno)” was

estimated b eight observed variables as shown in Table 5.2. Results of the

conf tor factor anal ight-item scale indicated a moderate lack of fit

between t a and th em l. n ncluded a chi-

square of 61.039 with 20 degrees of freedom (p= .000), CMIN/DF above 2.0 (3.052),

root mean square error of app re and adjusted

goodness-of-fit index margin lo 0

The modification indices (whi re used to indicate which items were primarily

responsible for the poor fit te fer e h i- re statistic that

would result from let a parameter. Items producing large modification

indices were consider chumacker and Lomax, 1996). This process

resulted in the eliminat n ) o ( this

modification, the confirmatory factor an is was rerun and finally the scale

contained five items. The standardized fac s of the variable easuring the

construct and critical rati esen in l

mea

irma

urement model

y

y

he dat

asured tor “export knowled

ysis f

e m

or the e

easur ent mode Specific i dicators i

rox

ally be

imation g

w .9

ater than .05 (.101),

(.878).

ch we

) indica d the dif enc in t e ch squa

the de

ed for d

ion of items (

ion of

eletion (S

k ow1 , (kn w2) and know8). After

alys

tor loading

Tab

s m

os are pr ted e 5.8.

Table 5.8

Export Knowledge– Factor Loadings, Critical Ratios and P-Values

Export Knowledge (kno) Factor Loadin(Standardized

g)

alos Values

s CriticRati

P-

Knowledgeable about existinmarkets (k

gnow3)

ing (know4

tions

t

International marketing servicesavailable from public and private sources (know7)

97

32

64

20

.607

147

46

73

7.768 000

Sufficient knowledge aboutmarkets we are serv ) .8Current information aboutforeign government regula(know5)Economic situation of expormarkets (know6)

.6

.7

.7

10.

9.5

9.0

000

000

000

The chi-square statistic of this modified measurement model (calculated as the sum of

y of 0.85 and accounted for 53

ercent of the variance, suggesting good specification of the model. Moreover, all the

priori model as a factor in

easuring export strategy of the exporting firms. This unmeasured factor was

estimated by eight observed variables as shown in Table 5.3. Results for the eight-

the squared residuals between the model-reproduced correlations and the

corresponding observed correlations) is found to be statistically nonsignificant (chi-

square = 8.727, df = 5, p = .120), suggesting that the deviation between the model-

reproduced correlations and the observed correlations is statistically minimal. This

suggests that the operational model fits the sample data. In addition, Table 5.6 shows

other model fit statistics are well above the acceptable levels indicating a good fit for

the model. The construct had a composite reliabilit

p

critical ratios (CR) were highly significant (greater than 1.96). Thus, the proposed

measurement model for “export knowledge (kno)” demonstrated adequate reliability

and convergent validity and could be used in further analysis.

5.3.1.3 Export Strategy

“Export strategy (stra)” has been proposed in the a

m


item scale indicated a moderate lack een the data and the measurement

model. es of

eedom (p= .000), CMIN/DF well above 2.0 (4.970), root mean square error of

a .05 (.140), goo m below .90

(.894 a f .808. The model comparison indexes (NFI)

.883, (T e recommended level of .90. As the measures of

overall ur mprovement cal veral

addi n modification indices were used to

identify which items we ponsible for the poor producing

large idere deletion (Schu r an max,

1996 T a n of items (strate1 , (strate2) (strate5),

and (stra atory factor an was and

finally th items. The standardized factor loadings of the

ariables measuring the construct and critical ratios are presented in Table 5.9.

s

of fit betw

Specific indicators included a chi-square of 99.397 with 20 degre

fr

pproximation greater than dness-of-fit index arginally

), djusted goodness of fit index o

LI) .865, were also below th

fit demonstrated the need for f ther i of the s e, se

tio al reiterations were undertaken. The

re primarily res fit. Items

modification indices were cons d for macke d Lo

). his process resulted in the elimin

te8). After this modification, the c

e scale contained four

tio ) ,

onfirm alysis rerun

v

Table 5.9

Export Strategy– Factor Loadings, Critical Ratios and P-Values

Export Strategy (stra) Factor Loadings (Standardized)

CriticalRatios

P-Value

Distinct goals and objectivesfor export operations (strate3)Adequate capabilities to collectnecessary information (strate4)Export countries to be entered (strate6)Strategies to expand number of exportable product over theyears (strate7)

.740

.782

.799

.638

9.915

10.044

8.279

000

000

000

The chi-square statistic of this modified measurement model is found to be

chi-square = 3.436, df = 2, p = .179), suggesting that the

perational model fits the sample data. In addition, Table 5.6. shows other model fit

statistically nonsignificant (

o

statistics were well above the acceptable levels indicating a good fit for the model.

The construct had a composite reliability of 0.86, accounting for 60 percent of the

variance, standardized parameter estimates were greater than .6 and highly


significant, indicating good convergent validity. Thus, overall, the proposed

measurement model for “export strategy (stra)” demonstrated adequate reliability and

convergent validity and could be used in further analysis.

5.3.1.4 Management Perception of Export Market Environment

As mentioned earlier (sub-section 5.2.4), three out of the four factors for management

perception of export market environment (foreign market and competition “enf2”,

market risks and taste “enf3”, and globalization and exchange “enf4”) were excluded

from further analysis because they had only two items in each scale with Cronbach’s

alpha values less than .70 (.59, .64, and .60). Therefore, the only one unmeasured

factor of management perception of export market environment, (export process

“enf1”) was estimated by four observed variables (“making contacts is easy”,

paperwork involved in export sale is easy to understand”, “obtaining payment is

relatively simple” and “locating sales agen /distributors in foreign markets is easy”).

The esti th non-

.473, df = 2, in e op

model fits the sample data. The values of EA nd AGFI were

also it m compared well with the null model,

give h l above the recommended level of 0.90. As

presente a composite reliabilit 0 but accounted

for only sp low rating fo ility to ain

variance p able. Moreover, all he critical rat s (CR)

were hig the proposed m ment model for

“ xport process (enf1)” demonstrated adequate reliability and convergent validity and

ould be used in further analysis.

“

ts

mated model fit statistics suggest a good fit for the model wi

significant (Chi-square = p = .790), suggest

CMIN/DF, RMS

g that th

, GFI a

erational

w hin the acceptable level. This odel

n t at the NFI, TLI, and CFI were a

d in Table 5.6, the construct had

l

y of 0.7

44 percent of the variance. De ite its r the ab expl

, other measures were quite acce

hly significant (see Table 5.10).

t t io

Thus, easure

e

c


Table 5.10

Export Process– Factor Loadings, Critical Ratios and P-Values

Export Process (enf1) FactorLoadings(Standardized)

CriticalRatios

P-Values

Making contacts is easy (envir1) .700Paperwork involved in export sale is easy to understand (envir7) .733 6.653 000Obtaining payment is relativelysimple (envir2)Locating sales agents/distributors in foreign markets is easy (envir10)

.530

.492

5.851

5.516

000

000

5.3.1.5 Export Performance

The unobserved factor of “export performance (perf)” was estimated by four

observed variables as shown in Table 5.5. The chi-square statistics of this

measurement model was found to be statistically nonsignificant (chi-square = 2.165,

df = 2, p = .339), suggesting that the operational model fits the sample data. In

addition, Table 5.6 shows other model fit statistics were well above the acceptable

levels indicating an excellent fit for the model. The construct had a composite

reliability of 0.85 and accounted for 60 percent of the variance, suggesting good

specification of the model. Moreover, all the critical ratios were highly significant

(see Table 5.11). Thus, the proposed measurement model for “export performance

(perf)” demonstrated adequate reliability and convergent validity and could be used in

further analysis.


Table 5.11

Ex s

erf) FactLoa(Sta

CritRati

-Va

port Performance– Factor Loadings, Critical Ratios and P-Value

Export Performance (p ordingsndardized)

icalos

Plues

Export sales (perfor1)Export profit (perfor2) Export sales growth (perfor3)

.8

.83021

.892

.491

13.20514.1 7.006

00000000New market Entry (perfor4)

73 0

.3.1.6 Summary of the Measurement Models

s presented in Table 5.6, five measurement models for the five constructs

d level of acceptance suggested by Bagozzi and Yi,

988), and Hair et al. (1998) for satisfactory reliability estimates and good fit of the

addition, a correlation matrix was produced to illustrate the nomological validity of

the constructs. The correlation matrix was examined to determine the extent to which

the scales correlated in theoretically predicted ways with measures of different, but

related constructs (Malhotra, 2004). The correlation matrix presented in Table 5.12

provided support for the nomological validity of the constructs. The direction and

weights of the correlation values were comparable with the anticipated relationships.

All of the constructs were significantly correlated at a significance level of p <0.01.

5

A

approached the minimum standar

(1

measurement models to the data. With regard to the internal structure of the model,

all parameter estimates for the indicator variables were greater than .6 and significant.

Reliability of the constructs was high with values of .80 for commitment, .85 for

knowledge, .86 for strategy, and .85 for performance, indicating excellent construct

reliability. Multiple adjunct fit indices were almost all above the desired acceptable

level, indicating good fit of all measurement models to the data. Convergent validity

was assessed by examining the magnitude and sign of the factor loadings of the

observed variables onto their respective latent variables. Each loading was in the

anticipated direction and magnitude, and each was highly significant (p .001),

indicating adequate convergent validity of the constructs.

In


No correlations greater than 0.80 we dicating multi collinearity was not a

concer t this

tage. Based on the above CFA description, there is sufficient evidence to judge these

m adequate t y in testin ose tructural

equation model.

b

Correlation Matrix between the Constructs, Means and Standard Deviation

A B C D E F G

re present, in

n (Tabachnick and Fidell, 2001). Thus, all constructs were retained a

s

easurement models as being o emplo g the prop d s

Ta le 5.12

A. market 1.000

B. nance .618 *** 1.000

C.

D. kno

E.

F.

G.

M

SD

fi

enf1 .183 * .020 NS 1.000

.218 ** .125 # .552 *** 1.000

comitt .195 ** .342 *** .024 NS .498 *** 1.000

stra .410 *** .239 ** .527 *** .799 *** .527 *** 1.000

perf .329 *** .300 *** .208 * .320 *** .448 *** .366 *** 1.000

ean 30.029 15.921 5.091 6.017 5.317 5.640 3.714

24.952 7.800 .977 .755 1.201 .922 1.168

Significance Level: *** p 0.001; ** p 0.01; * p 0.05; # p 0.10; NS = Non Significant

In the overall measurement model correlation between the constructs was allowed,

resulting in chi-square = 350.374, p 0.001 with 190 degrees of freedom. Although

the model chi-square in this case was significant,, the ratio of the chi-square to

degrees of freedom (1.844) was within the acceptable range of 2 to 1, which was

cative of an acceptable fit between the hypothetical model and the sample dataindi

(Krause, Scannell and Calantone, 2000; Schumacker and Lomax, 1996). Comparative

fit index (CFI = 0.917), and root mean square error of approximation (RMSEA =

0.065), indicated a good fit for the model. The goodness-of-fit index (GFI = 0.867)

and the adjusted goodness-of-fit (AGFI = 0.823), indicating a modest fit. These

indices indicate that the overall measurement model fit has a modest fit.


5.4 Results of Structural Equation Model

In the previous section, latent variables have been described, forming the

measurement models. Latent variables are unobserved variables implied by the

covariances among two or more indicators. The structural model describes the

hypothesized relationship linking the model constructs. The variables were divided

to six sets: use of export promotion programs, management perception of the export

market environment, export knowl commitment, export strategy and

export performance. Only one variable “use of export promotion programs” was

co e

composed a single construct. A total o even constructs we specifie n the

el. H ng satisf ed the requirement o meas ment model, the

al hip e tested as hypothesized. Accordingl , seven constructs

16 h ses lec r test ng and th u framework was

d in Figure 5.1.

ure 5.1 sta del

mmitment,

rategy and performance, first, all possible relations based on the hypotheses were

cluded in the structural equation model.

in

edge, export

mposed of two indices: market and finance. However, all other variables wer

of f s re d i

conceptual mod avi i f the ure

structur relations s wer y

with ypothe were se ted fo i e concept al

operationalized into the testable model as presente

Fig : A Te ble Mo

Enf1

Market

Finance

In order to accomplish this using the general hypotheses about the relations between

use of export promotion programs, management perception, knowledge, co

Kno

Comitt

Stra Perf

st

in


In this structural equation model correlation between the factors was allowed,

6.000). This also

emonstrates model parsimony. These indices indicate that the model fit the data

asonably well.

Table 5.13 provides the results of the anal is of the structural equation model. Most

port

e expected direction with a few exceptions. The

non-significant relations were also retained in the model, rather than re-specifying it,

as the proposed model satisfactorily fits the data. Although these relationships are not

significant, they explain a portion of t ntribution of export

performance and their removal may decrease the model fit. Thus, all variables and

the ere retained in the final structural equation model. The

standardized direct, indire total effects among the constructs were also

calculated using bootstrapping and are presented in Table 5.14. These effects were

calculated at a confidence level of 95% and the bootstrap was set equal to 1000.

MOS representation of the empirically tested structural model of export

resulting in a chi-square = 376.879, p 0.001 with 194 degrees of freedom. Although

the model chi-square in this case was significant, the ratio of the chi-square to degrees

of freedom (1.943) was within the acceptable range of 2 to 1. This ratio gives an

indication that the model adequately fits the data (Krause, Scannell and Calantone,

2000; Schumacker and Lomax, 1996). AMOS output includes many other fit indices,

including comparative fit index (CFI = 0.906), and root mean square error of

approximation (RMSEA = 0.068), indicating a good fit for the model. The goodness-

of-fit index and the adjusted goodness-of-fit values are 0.856 and 0.812 respectively

indicating a modest fit. The CFI is recommended to the normed fit index, mainly

because it is less affected by sample size (Bentler, 1988). A CFI-value of 0.906

exceeds the recommended value of 0.90 (Bentler, 1995), indicating an overall good

model fit. In addition, the Akaike information criterion for the proposed model

(494.879) is smaller than the AIC for the saturated model (50

d

re

ys

of the hypothesized relationships among the antecedent variables and firm ex

performance were significant in th

small he co firm

ir relationships w

ct and

A

performance is shown in Figure 5.2, and Table 5.15 shows the standardized solution

for the final model. Results of the model are interpreted and discussed in the

remainder of this sub-section.


Table 5.13

Results of the Analysis of the Structural Equation Model

Structural Model StandardizedEstimate

StandardError

CriticalRatios

Conclusion

Market Enf1 0.175 .003 1.76 * H1a: supported

Finance Enf1 - 0.148 .009 -1.54 NS H1b: not supported

Market Kno 0.251 .002 3.33 *** H2: supported

Market Comitt - 0.120 .005 -1.33 NS H3a: not supported

Finance Comitt 0.358 .015 3.98 *** H3b: supported

Market Perf 0.193 .004 2.19 ** H4a: supported

Finance Perf 0.039 .012 0.43 NS H4b: not supported

Kno Enf1 0.508 .155 4.28 *** H5: supported

Kno Comitt 0.460 .199 5.24 *** H6: supported

Kno Stra 0.572 .144 5.64 *** H7: supported

Kno Perf 0.034 .281 0.23 NS H8: not supported

Enf1 Stra 0.215 .094 2.49 ** H9: supported

Enf1 Perf 0.141 .159 1.30 NS H10: not supported

Comitt Stra 0.233 .046 3.13 *** H11: supported

Comitt Perf 0.379 .092 3.48 *** H12: supported

Stra Perf - 0.032 .232 - 0.19 NS H13: not supported

Significance Level: *** p 0.001; ** p 0.01; * p 0.10; NS = Non Significant


ysis

and

Res

ults

144

Tab

le 5

.14

Stan

dard

iz D

ire

Con

stru

ct

Mar

ket

Fice

a

ed nan

ct,I

ndir

ect, k

and

no

Tot

al E

ffec

tsam

enf1

ong

the

Con

stru co

cts

mitt

str

D

E IE

TEI

TED

EIE

TED

EIE

TET

TED

EE

DE

IEE

DE

IE

enf1

.175

.127

.302

-.148

.0-.1

48.5

08.0

00.5

08.0

00.0

00.0

00.0

00.0

00.0

00.0

00.0

0000

00.0

Kno

.251

.000

.251

.000

.0.0

00

0000

0.0

00.0

00.0

00.0

00.0

00.0

00.0

00.0

00.0

00.0

00.0

0.0

Com

itt-.1

20.1

15-.0

05.3

58.0

.300

000

0000

58.4

60.0

.460

.000

.000

.0.0

00.0

00.0

00.0

00.0

0.0

Stra

.000

.207

.207

.000

.0.0

52.5

72.2

16.7

89.2

15.0

00.2

15.2

33.0

00.2

33.0

000

52.0

0.0

00

Perf

.193

.043

.236

.039

.1.1

50

32-0

3.0

34.2

20.2

54.1

41-.0

07.1

34.3

79.0

07-

.371

-.032

.00

13

=D

irffe

cts,

IE=

Indi

rect

Effe

cts,

TE=

Tota

lEffe

cts

ectE

DE

Cha

pter

5. A

nal

Figu

re5

rman

ce

Figu

resw

ithin

bra

cket

s rep

rese

nt st

anda

rdiz

ed e

stim

ates

. Sta

ndar

dize

d es

timat

es a

re si

gnifi

cant

at p

0.

001

unle

ss sp

ecifi

ed a

s not

sign

ifica

nt (N

S).

The

coef

ficie

ntw

ith**

indi

cate

s sig

nific

ance

at p

0.

01 a

nd*

indi

cate

s sig

nific

ance

at p

0.

10.

.2: T

he E

mpi

rical

ly T

este

d St

ruct

ural

Mod

el o

f Firm

Exp

ortP

erfo

erce

ptEx

eEn

v

Man

agem

ent P

ion

of

port i

Mar

kro

nmen

tt

Use

of M

aet

Dev

e elat

eEx

port

rom

oti

nPr

ogra

msrk

lopm

ent

Rd

Po

Expo

rtw

eK

nole

dgEx

port

Stgy

rate

Expo

rtPe

rfor

man

cexp

ort

xpor

tof

itxp

ort

grow

thN

ewm

arke

ten

try

E sale

sE pr E sa

les

Expo

rt C

omm

itmen

t

Use

of

Fina

nce

and

Gua

rant

eeR

elat

edEx

port

Prom

otio

nPr

ogra

ms

H1a

(. 17

*)H

10(.

14 N

S)

H3a

(-. 1

2 N

S)

H6

(. 46

)

H11

(. 23

) H4b

(. 04

NS)

H13

H8

(. 03

NS)

H4a

(. 19

**)

H9

(. 22

**)

H5

(. 51

)

H2

(. 25

)

H1b

(-. 1

5 N

S)

H7

(. 57

)

H12

(. 38

)

H13

(-. 0

3 N

S)

H3b

(. 36

)

Res

1

Res

5R

es2

Res

3

Res

4

Cha

pter

5. A

naly

sis a

nd R

esul

ts14

5


Table 5.15

St t E t odel of E ort

Table 5.19 Standard r Structur quation Model of EPerf ance

perfor

orm

Standardized Solutions for thePerf

rucorman

ural quace

ion M xp

ized Solution fo al E xport

Estimate Error

envir1 (Making contacts is easy) = 0.74 enf1 +envir7 (Paperwork is easy to understand) = 0.70 enf1 +envir2 (Obtaining paymen = 0. nf1 + 0.71 err3 envir10 (L ating sales ag y) = 0.46 enf1 + 0.79 err4

know3 (Ex markets) = 0.71 kno + 0.49 err18 know4 (Market we are serving) = 0.83 kno + 0.32 err19 know5 (Foreign government regulations) = 0.75 kno + 0.43 err20 know6 (Economic situation of export mkt) + 0.50 err21 know7 (International marketing services) + 0.58 err22

comit2 (Executives travel frequently) +comit1 (Organiz = 0.68 comitt +comit3 (In-house r rch facilitie = 0.71 comitt +comit7 (Funds to develop overseas markets) = 0.68 comitt +

strate3 (Distinct d objectives) = 0.71 stra +strate4 (Capabilities to collect information) = +strate6 (Expo s to be entered) = 0.75 stra +strate7 (Expa o. of exp ble product) = 0.72 stra +

perfor1 (Export sales) + 0.37 err37 perfor2 (Export profit) + 0.31 err38 perfor3 (Ex wth) + 0.20 err39 perfor4 (New market entry) = 0.62 perf + 0.62 err40

oc

isting

port sales gro

ational structure)esea

goals an

rt countriend n

t is simple)ents is e

orta

s)

as

= 0.71 kno = 0.64 kno

= 0.75 comitt

= 0.79 perf = 0.83 perf = 0.89 perf

0.79 stra

54 e

0.43 err24 0.54 err25 0.49 err26 0.54 err27

0.49 err31 0.37 err32 0.44 err34 0.48 err35

0.45 err1 0.50 err2


5.5 Discussion of the Results

Relationship Between Use of Expo rograms (EPPs) and Managementrt Promotion PPerception of the Export Market Environment

ent pe ept

pot sized 1 Tabl .12 s

s a c

a al

but r ypoth H1

of arket ex p

e tions of the xpor

ve 5

o

st uted w aking onta

obtai g pa

easy.

por

inf ough trad

h rs to overcome the

ettlem nt of tr de dispu lps expor s to ove

g pay ent. e use of export

r nd

attitudes towards exporting. This result is consistent with similar findings

ed by Wiedersheim- Paul et al. (1978). They have proposed that pre-export

ctivity, particularly the level of a firm’s activity in information search, is a major

the likelihood of a firm to export. Their study suggests that this

port activity is important because it helps overcome the barriers created by

norance. Once the information is accumulated through information

using market development-related export promotion programs, uncertainty and

ed risk will decrease. This finding confirms that the greater the knowledge

ained about the export market, the less the degree of perceived risk. The use of EPPs

y assists exporters in gaining that knowledge.directl

g

perceiv

search

knowledge ig

pre-ex

indicator determining

a

report

positive

d

an

pr

fa

So

T

re atively simple and locating sales agents/distributors in foreign markets is

p

e

1

e

pr

o

p

a

h

ex

T

nalysis of the relationships. Results from the SEM estimate nd the critic ratio also

xport market environment’ was con it ith four items: m c ct is easy,

nvironment with only a 93% confidence le l (estimated coefficient 0.17 , with c.r.

aperwork involved in export sale is easy to understand, nin yment is

f the SEM suggest that the use m development-related port romotion

.76 at p< 0.07). In this study the measurement of ‘management percepti ns of the

rovide some support for hypothesis H1a no support fo h esis b. Results

evelopment-related EPPs helps overcome managers’ mental bar iers a develop

ypothesis H1a is supported and hypot H1b is not supported by orrelationhesi

hese items represent the favourable attitude of exporters about the ex t process.

he positive relationships between the use of EPPs and managem rc ion of the

l

irs, sales leads and experiential knowledge elp exporte ir export

ograms has a positive relation with manag ment percep e t market

ocess related barriers. S e a tes also he ter rcome

y perceived risk of obtainin m Therefore, th market

port market environment were hy he in H1a and H b. e 5 hows that

me of the EPPs such as export market ormation thr e missions, trade

In contrast, the correlation coefficient for the use of finance and guarantee-related

xport promotion programs and management perceptions of the export market

finance and guarantee-related export

e

environment is close to zero indicating that there is no linear relation between them.

he SEM results also show that the use of theT

promotion programs is not significantly related with management's perceptions of the

export environment (estimated coefficient -.148, with c.r. -1.54), thus hypothesis H1b

is not supported. This indicates that the finance and guarantee-related export

promotion programs are generally designed to provide support to established

exporters, not to enhance managers’ positive perception toward exporting. On the

other hand, market development-related programs are designed to enhance managers’

perception toward exporting as well as provide training, services in respect of market

information, contact with buyers and other support services, participation in trade

missions, international trade and marketing of products overseas. Therefore, the

exporters gained a positive perception of the export process through the use of market

development-related EPPs. Finance and guarantee-related EPPs neither help them to

overcome their export process-related barriers nor create positive perceptions of the

export process.

Relationship Between the Use of Export Promotion Programs and Export Knowledge

e the image of foreign market

portunities. Encouraging business firms to participate in trade fairs, a trade mission

is another good way to familiarize business firms with the opportunities present in

The relationship between the use of market development-related export promotion

programs and export knowledge was explored in hypothesis H2. Both the correlation

analysis (r = .218, at p 0.01 in Table 5.12) and the SEM results lend support to this

hypothesis. The use of market-related export promotion programs is seen to

significantly increase export knowledge (estimated coefficient 0.251, with c.r. 3.33 at

p < 0.001). The results suggest that export knowledge manifested as the use of market

development- related export assistance services seems to play a significant role in

firm export performance. Some of these programs (assistance in establishing contact

with foreign buyers, assistance in establishing sales and display centers abroad)

provide information such as potential profitability, foreign market needs and market

size to potential exporting firms in order to improv

op


world markets. This study also empirically supports Singer and Czinkota’s (1994)

argument that government export promotion programs help to accelerate and expand

management acquisition of objective and experiential knowledge and develop their

competitive competence. This is because participation in the international trade fairs

and specialized export fairs and inclusion in trade missions is designed to improve the

experiential knowledge of exporters. On the other hand, exporters gain objective

knowledge and export procedural knowledge through participation in the local

technical and practical training programs as well as in overseas training programs on

product development and marketing. Foreign missions also provide current

information about foreign government regulations, the economic situation and

sufficient knowledge of export markets. Information is a prerequisite for effective

planning activities, and for export strategy, a process of organizational learning needs

to be developed requiring the firm to identify, analyze and evaluate information from

pertinent environmental sources. As a result, firms should be able to articulate

coherent strategies and make decisions on the basis of informed judgments. Thus the

results suggest that the exporters gain their objective, procedural, and experiential

knowledge through the use of market development-related export promotion

rograms and construct a suitable platform for developing export strategy, enhancing

xport commitment and creating a favourable perception of the export market

p

e

environment, which ultimately influences export performance.

Relationship Between the Use of EPPs and Export Commitment

Hypotheses H3a and H3b were concerned with the relationship between the use of

export promotion programs and export commitment. As shown in Table 5.12, the

correlation coefficient between the use of market development-related EPPs and

export commitment is significant (r = .195, at p 0.01), thus hypothesis H3a is

supported. On the other hand, the SEM results suggest that the direct relationship

between the use of market development-related EPPs and export commitment is not

found to be significant (estimated coefficient -.0120, with c.r. - 1.33), thus this

hypothesis is not supported. However, it is believed that the essence of this

relationship is captured, as the use of these programs indirectly impacts (standardized

indirect effect = .115) upon export commitment through export knowledge which is


shown in Table 5.14. This indicates that the exporters gain their export knowledge

through the use of market development-related export promotion programs that

reduces their fear of export trade and ultimately motivate them to devote more

resources to export.

On the other hand, both the bivariate correlation analysis (r = .342, at p 0.001 in

Table 5.12) and SEM results support hypothesis H3b, that the use of finance and

guarantee-related export promotion programs has a significant positive impact on the

firm’s export commitment (estimated coefficient 0.358, with c.r. 3.98). This indicates

that firms are committing more financial resources to exporting with the use of

financial services which is supported by the literature (Cavusgil and Zou, 1994;

Evangelista, 1994). These studies suggest that management should increase its

commitment to exporting by investing greater resources in export management and

enhancing the firm’s competence to increase their export sale. The expenditure of

considerable effort and resources is associated with export related activities to

achieve competency. A substantial number of exporters perceive export to be risky, to

require more resources, export assistance, and tax incentives than may be required,

which leads them to believe that pre-export programs focusing on correcting

management misperceptions and erroneous beliefs may be worthwhile (Gencturk and

Kotabe, 2001). However, the finance and guarantee related-export promotion

rograms are designed to provide resources, reduce risk, and create a competitive

credit guarantees reduce the risk

income tax rebates

reate more profits from export trade. So, exporting has been more profitable and

p

position for the exporting firms. For example, export

on probable commercial and political risks occurring abroad and

c

attractive by introducing the export credit guarantee scheme, duty drawback scheme

and offering substantial tax benefits to firms that export. As a result, the exporters

were more committed to devote more resources to export-related activities by using

finance and guarantee-related export promotion programs.

Relationship Between the Use of EPPs and Export Performance

Hypotheses H4a and H4b were concerned with the relationship between the use of

market development-related, and finance and guarantee-related export promotion


programs and firm export performance. Both the correlation analysis (r = .329, at

0.001 in Table 5.12) and SEM results find that the use of market development-related

export promotion programs is significantly associated with export performance

(estimated coefficient 0.193, with c.r. 2.19), thus hypothesis H4a is supported. The

sults suggest that the use of market development-related export promotion programs

elationship Between Export Knowledge and Management Perception of Export

re

can make an important contribution to the export development of the firm to achieve

its objectives of export sales, profit, growth and new market entry. It suggests that

managers can increase their export knowledge and experience by availing themselves

of greater levels of export assistance, and that they can expect increased levels of

export achievement as a result. This study's finding also supports the export

promotion program related literature (Gencturk and Kotabe, 2001; Marandu, 1995).

These studies found that usage of government export promotion programs is an

important export success factor.

In contrast, the bivariate correlation analysis supports a positive relationship (r = .300,

at p 0.001 in Table 5.12) between the use of finance and guarantee-related export

promotion programs and export performance. However, the SEM results suggest that

the direct relationship between the use of the finance and guarantee-related export

promotion programs and export performance is not significant (estimated coefficient

0.039, with c.r. 0.43). However, the essence of this relationship is captured, as the use

of finance and guarantee-related export promotion programs indirectly (standardized

indirect effect = .113) influence export performance through export commitment

which is shown in Table 5.14. This indicates that the exporters are more committed to

devote resources to export by using finance and guarantee-related export promotion

programs, which creates a competitive position for the firms in international markets

to achieve better performance.

RMarket Environment

ment's perception of

favorable export market environment was explored in hypothesis H5. Both the

The relationship between a firm’s export knowledge and manage

a

correlation analysis (r = .552, at p 0.001 in Table 5.12) and the SEM results


revealed that firms’ export knowledge has a significant positive effect on

management's perception of a favorable export market environment (estimated

coefficient 0.508, with c.r. 4.28), thus hypothesis H5 is supported. This indicates that

firms with a high degree of knowledge about the export market environment and the

exporting process tends to help managers to manage and overcome potential barriers

in export processes/markets and gradually gain a positive perception of their export

market environment. This result is consistent with the findings of Davidson (1982)

and Johanson and Vahlne (1977, 1990). They suggest that acquisition of knowledge

through experience from business operations in a specific overseas market is the

primary means of reducing foreign market uncertainty and consequently a driving

force in the internationalization of the firm. Exporting managers gain experiential

knowledge through the use of market development-related export promotion

programs that help overcome the mental barriers of the export market environment

nd develop a positive perception in managers.a

Relationship Between Export Knowledge and Export Commitment

The relationship between firms’ export knowledge and export commitment was

explored in hypothesis H6. Both the correlation analysis (r = .498, at p 0.001 in

Table 5.12) and SEM results support this hypothesis. Export knowledge is seen to

significantly increase organizational commitment to export marketing activities.

(estimated coefficient 0.460, with c.r. 5.24). The results are supported by the

internationalization process theory (Johanson and Vahlne, 1977, 1990). Johanson and

Vahlne (1977) develop a theory about continuous process that takes place in firms

that enter foreign markets. The two key terms in their theory are “knowledge” and

commitment”; that is, knowledge obtained in and about foreign markets drives the

ecision to commit more resources to those markets. These decisions are

that drives posterior commitment. After these two logical steps

forms an ‘uncertainty reduction’ process that influences the nature of the firm's

“

d

implemented, and the increased commitment enables the firm to continue gathering

mproved knowledgei

that feed back into each other (knowledge commitment knowledge …) firms

increase their international operations consistently. It seems to be the interaction

between market knowledge and export commitment combined with learning that


international involvement. The findings of this research also indicate that once

managers gain better knowledge about the export market where export promotion

programs may have some impact, then they are committed to devote more resources

to export.

Relationship between Export Knowledge and Export Strategy

Firms’ export knowledge has a significant positive effect on firms’ export strategy

(estimated coefficient 0.572, with c.r. 5.64), thus hypothesis H7 is supported. There is

also a significant correlation between export knowledge and export strategy (r = .799,

at p 0.001 in Table 5.12). The results provide support to the contention of the

literature that firms with improved export knowledge can formulate and implement

proactive marketing strategies more effectively (Cavusgil and Zou, 1994; Singer and

zinkota, 1994). Knowledge, perhaps the most important intangible asset of the firm,

onsists of information that is internalized through the process of learning (Mahoney,

onmental factors

omprise the firm’s ‘stock of knowledge’, influencing corporate resources and uses to

C

c

1995). Information on technology, markets, and other envir

c

which they may be employed (Penrose, 1959). This study also suggests that

knowledge is particularly important to small and medium-sized firms because such

businesses may lack financial and other resources that are more common to larger

firms. So, knowledge of foreign markets and export strategies provides an important

means for profitable exploitation of existing product lines.

Relationship Between Export Knowledge and Export Performance

Hypothesis H8 was concerned with the relationship between firms’ export knowledge

and export performance. The analyses of this relationship provided mixed results.

Although there is a significant correlation between export knowledge and export

performance (r = .320 at p 0.001 in Table 5.12), that provide partial support for

hypothesis H8, its estimate in the model was not significant. The direct relationship


between firms’ export knowledge and export performance was not significant

(estimated coefficient 0.034, with c.r. 0.23) to support the hypothesis. However, it is

believed that the essence of this relationship is captured, as export knowledge

indirectly influences (standardized indirect effect = .220, in Table 5.14) export

erformance through export commitment. This is consistent with the

ternationalization process theory which suggests that firms’ gradual knowledge

turn leads to higher

ternational operations (Johanson and Vahlne, 1977, 1990).

p

in

acquisition leads to higher commitment to export and in

in

Relationship Between Management Perception of Export Market Environment andExport Strategy

The relationship between management's perception of a favourable export market

environment and export strategy was explored in hypothesis H9. Both the correlation

analysis (r = .527, at p 0.001 in Table 5.12) and SEM results support that favorable

management perceptions toward the foreign market environment has a significant

positive effect on firms’ export strategy (estimated coefficient 0.215, with c.r. 2.49).

Thus, hypothesis H9 is supported. Conditions in foreign markets pose both

opportunities and threats for exporters. Export strategy must be formulated in such a

way to match a firm’s strengths with market opportunities and neutralize the firm’s

strategic weaknesses, or to overcome market threats. Firms are drawn into export

marketing by growing opportunities for their product in foreign countries. In this

study, favorable foreign market conditions are represented by the perception of there

eing less risk in the export market. As shown in this study, if firms perceive that

reign markets are favorable, they develop efficient strategies to increase current

xport sales or export to new foreign markets. In this sense, favorable foreign market

y. That means

anagers who have a positive perception of the export market environment tend to

b

fo

e

conditions are seen to have a positive impact on export strateg

m

search and organize acquisition of environmental information to develop proactive

export strategies (Axinn, 1988; Nonaka, 1983; Sood and Adams (1984). Thus, the

findings of the present study clearly indicate that the managers of exporting firms

have favorable perceptions about the foreign market environment which influence

implementing an effective firm’s export strategy.


Relationship Between Management Perception of Export Market Environment andExport Performance

The relationship between management's perception of the export market environment

and export performance was explored in hypothesis H10. The analyses of this

relationship provided mixed results. As shown in Table 5.12, there is a statistically

significant correlation between them (r = .208, at p 0.05) which support the

hypothesis that management's perceptions of the export market environment and

export performance are positively related. However, the SEM results indicate that

anagement's perceptions of the export market environment have no significant

irect effect on firms’ export performance (estimated coefficient 0.141, with c.r.

nvironment have an influence in implementing an effective firm export strategy.

m

d

1.30). As discussed earlier, management's perceptions of a favourable export market

e

This finding makes sense that managers positive perceptions will not payoff unless it

is exploited through a proactive export strategy. The findings of this study also

indicate that management needs a more optimistic attitude about the foreign market

environment and should optimistically deal with the potential export barriers toward a

formulating proactive export strategy to achieve better export performance.

Relationship Between Export Commitment and Export Strategy

The relationship between export commitment and export strategy was explored in

hypothesis H11. Both the correlation analysis (r = .527, at p 0.001 in Table 5.12)

and the SEM results lend support to this hypothesis. Firms’ commitment to export has

a significant positive impact on firms’ export strategy (estimated coefficient 0.233,

with c.r. 3.13, at p 0.001). This indicates that the firms’ strong commitment to

export leads to the achievement of proper export strategies (Aaby and Slater, 1989).

Firms decide to continue or expand export by introducing new products, increasing

present export sales, and entering new foreign markets. This result is consistent with

similar findings reported by a number of studies (Aaby and Slater, 1989; Benito and

Welch, 1997; Cavusgil, 1982; Christensen, da Rocha and Gertner, 1987; Lim,

Sharkey and Kim, 1993). Benito and Welch (1997) suggest that different strategies

might be suitable for different competitive environments. But all these possible


strategies must share one feature: commitment. More dynamic markets demand more

ynamic and respond sive strategies, and these are not attainable without explicit

commitment and almost irrevocable involvement in the reality of the market. This

commitment will be manifested in several aspects of the firm: human resources,

organizational structure, funds to develop overseas markets, export market research

facilities, marketing strategies, and so on. Success will then stem from this

commitment, not only in purely economic terms but also in terms of competitive

advantage. Findings of this study also support the results that firms involved in

international marketing are characterized by visionary management, which is

committed, or in other words has mobilized resources, to support international

marketing efforts (Christensen, da Rocha and Gertner, 1987; Lim, Sharkey and Kim,

1993). Firms are committed to devote more resources in implementing effective

strategy in order to take advantage of international opportunities, avoid threats, and

overcome both internal and external barriers.

Relationship Between Export Commitment and Export Performance

Hypothesis H12 was concerned with the relationship between firms’ export

ommitment and export performance. Both the correlation analysis (r = .448, at p

thesis. Firms’ export

ommitment has a significant positive effect on export performance (estimated

c

0.001 in Table 5.12) and SEM results lend support to this hypo

c

coefficient 0.379, with c.r. 3.48, at p 0.001). This indicates that the firms that are

more committed to export in terms of human resources, organizational structure,

funds to develop overseas markets and theose that look for export opportunities,

achieve better performance (Cavusgil and Zou, 1994; Gomez-Mejia, 1988; Koh,

1991; Seifert and Ford, 1989; Madsen, 1994). Seifert and Ford (1989) found that

higher resource allocation for promotion registered higher levels of satisfaction with

their export results. Companies that placed a higher priority on exporting were also

found to perceive export profitability more positively (Koh, 1991). Ali (2004) also

found that behavioural commitment has a positive impact on export sales and export

intensity. From these results, it is evident that the reported findings regarding the

impact of commitment on export performance have been quite consistent. The results


also suggest that in firms where management is firmly committed to export, export

performance tends to be higher.

Relationship Between Export Strategy and Export Performance

Hypothesis H13 was concerned with the relationship between the firms’ export

strategy and export performance. Results are mixed for this hypothesized relationship.

A positive bivariate relationship (r = .366, at p 0.001) is found between them as

presented in the correlation matrix in Table 5.12. However, results from the SEM

estimate provide no support for this hypothesis (estimated coefficient - 0.032, with

c.r. - 0.19) which is contrary to the theoretical expectation. This unexpected result

may be due to co-sharing of the variances with other variables in a complex model.

Most of the previous studies theorized the positive impact of export strategy on

xport performance and found support for that expectation (Cavusgil and Zou, 1994;

onthu and Kim, 1993; Douglas and Craig, 1989). To test the likely sharing of the

SPSS was used

here a two-stage analysis was pursued. Theoretically, export strategy and

support the hypothesis H13 though it is not significant in the complex SEM model

e

D

variances in the model, a hierarchical multiple regression analysis in

w

commitment have a direct impact on a firm's export performance and is widely tested

in the literature (Ali, 2004; Cavusgil and Zou, 1994; Julian, 2003). Therefore, export

strategy and commitment were allowed to enter into the model first before market

development related EPPs which became a significant predictor in the SEM. The

multiple regression results in Table 5.16 support the theoretical expectation where

both commitment and strategy became significant predictors of firm export

performance in the first model. However, when market development-related EPPs

entered into the second model, the co-efficient beta for export strategy became

insignificant. The beta values for commitment in both models are significant and

nearly the same but the beta value for strategy is significant in the first model but not

significant in the second model while market development-related EPPs were entered

into the model. This indicates that both export strategy and market development-

related EPPs share the variances in firm export performance. However, the bivariable

correlation between these two variables (r = .366, at p 0.001) is not high enough to

signal multi collinearity (Tabachnick and Fidell, 2001). Therefore, overall results


due to the co-sharing of variances. This result suggests that exporting firms can

achieve better export performance through formulating a proactive strategy and

eliberate export strategy implementation (Cavusgil and Zou, 1994).

Hierarchical Regression Models

d

Table 5.16

Dependent Variable: Firm Export PerformanceIndependent VariablesModel 1 Model 2

Constantstracomittmarket

Model fit information

.918 *

.169 **

.308 ***

1.202 ** .089 NS .303 *** .221 ***

Multiple R R Square Adjusted R Square F-value (Sig. Level)DF

.412

.170

.16120.439 *** 2

.460

.212

.20017.837 *** 1

The reported values are standardized Beta Coefficients. The values within parentheses are t-value.Significance Level: *** p .01; ** p .05; and * p .10.

5.6 Conclusion

This chapter has reported the results and interpretation of the statistical analysis of the

data. Table 5.17 summarizes the results of the hypotheses of this study. The model

results presented in this chapter provide evidence that export promotion programs

plays an important role in the firm export development process by contributing to a

number of firms and management related antecedents of firm export performance as

well as directly influencing the firm's export performance.

Based on the findings, it can be concluded that the use of market development-related

export promotion programs influences a firm's export performance directly as well as

indirectly through management's perceptions of the export market environment,

export knowledge and commitment. The use of export market development-related


EPPs such as export market information through trade missions, trade fairs, export

workshops and seminars, overseas training programs on product development and

marketing helps overcome exporters’ mental barriers and develop positive attitudes

toward exporting that have an influence in mplementing an effective export strategy

to achieve better performance. E gain objective and experiential

knowledge through the us Ps, enhance their export

c mmitment and develop an effective and proactive export strategy, which eventually

i e. Th

theory and resource based theory. The inte onalization process theor ggests

t gradual knowledg sition leads to a highe ment to export

which in turn leads to more nal operations (Johanson and Vahlne, 1977,

1 itially firms are uninterested in foreign markets. Ex otion programs

creat xplore foreign market opportunities. With experience

a firm develo mpetencies to become mitted and regular

e suggests EPPs as sources of educational knowledge (such as

t sion, an the firm to commitment

port toward achieving better performance. The resour ry suggests

rm

conceive and implement strategies aimed at improving its efficiency and

ffectiveness (Barney, 1991). Government export promotion programs provide

sources in terms of experience, knowledge, information and physical support-

fill the gap of the internal resources of a firm towards achieving its

xport goals. The findings of this study indicate that the use of these resources

te a competitive position

r the exporting firms. Some finance and guarantee-related programs such as the

i

xporters also

e of market development-related EP

o

nfluence export performanc is is consistent with the internationalization process

rnati y su

hat firms’ e acqui r commit

internatio

990). In port prom

e interest in the firm to e

nd learning, the ps co a com

xporter. This study

rade shows, trade mis d training) facilitate enhance its

to ex ce based theo

that a firm as a unique bundle of tangible and intangible resources that enable the fi

to

e

re

related services to

e

through EPPs influence firms to enhance their commitment to export and formulate

an effective export strategy, which influences performance.

Finance and guarantee-related EPPs tend to influence export performance indirectly

through export commitment though not directly. The finance and guarantee-related

EPPs are generally designed to provide resources, and crea

fo

duty drawback scheme and income tax rebates creates more profitable export trade

and a competitive position for the exporting firms. The export credit guarantee

schemes provide much required security against trade and political risks. Therefore,

exporters are more committed to devote more resources to export-related activities by


using finance and guarantee-related export promotion programs. This is consistent

with the resource based theory. The next and final chapter presents conclusions,

implications, strengths, limitations of the study and recommendations for further

research.


ysis

and

Res

ults

161

Tab

le 5

.17

Sum

mar

y of

Res

earc

hH

ypot

hese

s and

Res

ults

Hyp

othe

sis

No.

Exp

ecte

dSi

gnH

ypot

hesi

s E

mpi

rica

Res

ult

l

H1a

H1b

+ +

The

use

of m

arke

t dev

elop

men

t-rel

ated

expo

rt pr

omot

ion

prog

ram

san

d m

anag

emen

t's p

erce

ptio

nsof

a fa

vour

able

exp

ort m

arke

t en

viro

nmen

t

The

use

of fi

nanc

ean

dgu

aran

tee-

rela

ted

expo

rt pr

omot

ion

prog

ram

san

d m

anag

emen

t's p

erce

ptio

n of

a fa

vour

able

exp

ort m

arke

t en

viro

nmen

t

Sign

ifica

nt su

ppor

t fou

nd

No

sign

ifica

nt re

latio

nshi

p fo

und

H2

+Th

e us

e of

mar

ket d

evel

opm

ent-r

elat

edex

port

prom

otio

n pr

ogra

ms

and

firm

s’ e

xpor

t kno

wle

dge

Sign

ifica

nt su

ppor

t fou

nd

H3a

H3b

+ +

The

use

of m

arke

t dev

elop

men

t-rel

ated

expo

rt pr

omot

ion

prog

ram

san

d fir

ms’

exp

ort c

omm

itmen

t

The

use

of fi

nanc

ean

dgu

aran

tee-

rela

ted

expo

rt pr

omot

ion

prog

ram

s and

firm

s’ e

xpor

t com

mitm

ent

Bi-v

aria

tere

sults

supp

ortb

utm

ode

estim

ate

non

sign

ifica

nt

Sign

ifica

nt su

ppor

t fou

nd

l

H4a

H4b

+ +

The

use

of m

arke

t dev

elop

men

t-rel

ated

expo

rt pr

omot

ion

prog

ram

san

d fir

ms’

exp

ort p

erfo

rman

ce

The

use

of fi

nanc

ean

dgu

aran

tee-

rela

ted

expo

rt pr

omot

ion

prog

ram

san

d fir

ms’

exp

ort p

erfo

rman

ce

Sign

ifica

nt su

ppor

t fou

nd

Bi-v

aria

tere

sults

supp

ortb

utm

ode

estim

ate

non

sign

ifica

nt

l

Cha

pter

5. A

nal

Hyp

othe

sis

No.

Exp

ecte

dSi

gnH

ypot

Em

piri

cal R

esul

the

sis

H5

+Fi

rms’

ex

favo

urab

le e

xpor

t mar

kete

nSi

gnifi

cant

supp

ort f

ound

port

know

ledg

e an

d m

anag

emnt

's pe

rcep

tions

of a

e

viro

nmen

tH

6+

Firm

s’ e

xpor

t kno

wle

dgSi

gnif

e an

d ex

port

com

mitm

ent

ican

t sup

port

foun

d

H7

+Fi

rms’

exp

ort k

now

ledg

e an

d ex

port

stra

tegy

Sign

ifica

nt su

ppor

t fou

nd

H8

+Fi

rms’

exp

ort k

now

ledg

e an

d ex

port

perf

orm

ance

i-var

iate

resu

ltssu

ppor

tbut

mod

elB es

timat

e no

n si

gnifi

cant

H9

+nd

expo

rt st

rate

gySi

gnifi

cant

supp

ort f

ound

Man

agem

ent's

per

cept

ions

of a

favo

urab

leex

port

mar

ket

nviro

nmen

tae

H10

+ce

estim

ate

non

sign

ifica

nt

Man

agem

ent's

per

cept

ions

ofa

favo

urab

leex

port

mar

ket

nviro

nmen

tand

expo

rt pe

rfor

man

eBi

-var

iate

resu

lts su

ppor

t but

mod

el

H11

+Fi

rms’

exp

ort c

omm

itmen

t and

expo

rt st

rate

gySi

gnifi

cant

supp

ort f

ound

H12

+Fi

rms’

exp

ort c

omm

itmen

t and

exp

ort p

erfo

rman

ceSi

gnifi

cant

supp

ort f

ound

H13

+e

Bot

h bi

-var

iate

res

ults

supp

ort

chic

aleg

ress

ion

anal

ysis

con

firm

ed th

e

Firm

s’ e

xpor

t stra

tegy

and

exp

ort p

erfo

rman

cbu

t mod

el e

stim

ate

non

igni

fican

t. H

owev

er, h

iera

rs r hy

poth

esiz

ed r

elat

ions

hip

Cha

pter

5. A

naly

sis a

nd R

esul

ts16

2

Chapter 6. Summar

S

y, Conclusion and Implications 163

Chapter 6

ummary, Co clusion and Imp ns

6.1 Introduction

This thesi ed t and i fect otion

programs on firm export ce. doin

and tested using primary data obtained from a sample survey of exporting firms

drawn from three major export oriented industries in Bangladesh. Structural equation

modeling techniques (in AMOS 5) were used to test the validity of the overall model

and the re etween the riable ypothesized in the model. This is

particularl elpful in developing a ear a e complete explanation of the

impact of ex or omotion grams on a 's export performance. This chapter

presents a a onc stud as we ations. Finally,

the nd limitations of the y a sugg r research are

provided. The chapte i iew o f summary of

the r

6.2 Overv ese

The present res ch was conduct es. First, the export

performan ckground,

determinant of ex t per e. The export promotion

literature was nde

prog nd firm export performance. Second, drawing on the literature a proposed

model of ex o e m was d for g. Third, a

questionnaire was developed and administered to obtain the primary data necessary to

test odel. Finally, the proposed model was tested on the primary data gathered.

n

he di

s

ndirect

g so a theoretical model was developed

licatio

f export proms has investigat

performan

rect

In

ef s o

lationships b

y h

p

summar

ths a

iew of

ce literatur

s and m

al

va

cl

the

stud

ed in

por

rstand

s h

nd mor

firm

y

nd

f the stud

ed in four phas

the areas of theor

formanc

e relationshi

t pr

y

R

ear

so

pro

lusion of

ns with an overv

ent

to u

nd c

r beg

arch

effort

e was review

easurem

iew

ll a

estions f

p between ex

s its implic

o

y and a brie

streng

esults.

future

etical ba

rev ed th port promotion

rams a

p rt p rfor ance formulate empirical testin

the m

6.2.1 Previous Research

Theoretical Background of the Study

Br e

eory, internationalization process/stages theory, and competitive strategy theory)

at directly or indirectly relate to firm export performance were reviewed and the

signed on the basis of the internationalization process theory and

source-based theory. The internationalization process theory suggests that firms’

t the principal determinants of a firm’s export performance and strategy

re the internal organizational resources (Barney, 1991; Collis, 1991). Therefore, the

basis of this theory to examine the impact of a firm’s

ternal organizational resources (particularly its knowledge and expertise) on its

re external (industry characteristics, foreign market characteristics,

oadly, three types of theories of international marketing/trade (international trad

th

th

present study was de

re

gradual knowledge acquisition leads to a higher commitment to export and

international operations (Johanson and Vahlne, 1977, 1990). This study was designed

(among other objectives) to examine the impact of a firm’s knowledge on its

commitment to export that in turn influences export performance. Therefore, the

framework of this study was partly built on the internationalization model. In that

process the aim was to examine the impact of government export promotion programs

on export knowledge and commitment. On the other hand, the resource-based theory

conceives that a firm as a unique bundle of tangible and intangible “resources”

(assets, capabilities, processes, managerial attributes, information, and knowledge)

that are controlled by a firm and that enable it to conceive and implement strategies

aimed at improving its efficiency and effectiveness (Barney, 1991). This theory also

contends tha

a

study was also designed on the

in

export performance. In doing so, this study explored how government export

promotion programs contribute to a firm’s resource base toward its international

marketing operations.

Determinants of Export Performance

The determinants of export performance are classified into two main groups, namely,

determinants internal to the firm (such as firm characteristics and competencies,

managerial characteristics, management support, and export marketing strategy) and

determinants that a

Chapter 6. Summary, Conclusion and Implications 164

and domestic market characteristics) (Reid, 1981). The internal determinants

onceivably are subject to management’s discrete decision-making power that can

Slater, 1989). Government export promotion

rograms as an external environmental factor define the premise for successful

oviders regarding the allocation of their resources and the

ontent of their programs (Henry, 1996; Kotabe and Czinkota, 1992; Seringhaus and

studies examined the direct relationship

etween the usages of export promotion programs and export performance (Gencturk

c

influence export performance (Aaby and

p

exporting activities of the corporate sector and play a key role in stimulating

international business activity of domestic firms (Cavusgil and Michael, 1990;

Seringhaus and Rosson, 1990; Marandu, 1995). However, an extensive search of the

literature revealed that most mainstream studies on export performance are narrowly

focused on firm-related determinants and only a few studies have explored the impact

of export promotion programs on firm export performance (Donthu and Kim, 1993;

Katsikeas, Piercy and Ioannidis, 1996). These two studies that somehow addressed

EPPs in examining the firm export performance are not rigorous enough. Donthu and

Kim (1993) suggested that those who used more outside export assistance from

federal, local and private agencies had higher export growth. Katsikeas, Piercy and

Ioannidis (1996) found national export promotion policy to be an export stimulus,

which positively influenced export performance (goal achievement). Therefore, the

extant literature on export performance mostly neglected export promotion programs

as an antecedent of export performance. Moreover, not many studies linked EPPs

with any internal determinants of firm export performance.

Export Promotion Literature

The empirical evaluations of export promotion programs in developed and developing

countries are scarce, however most of the studies in this area are based on a

developed country context, mainly United States. The majority of these studies have

explored how to develop export promotion programs and implicitly offered guidance

to export assistance pr

c

Botschen, 1991). However, only a few

b

and Kotabe, 2001; Marandu, 1995). Despite their significant contribution in

conceptualizing the effect of EPPs on firm export performance, not many studies

have explored any link between export promotion programs and other determinants of

export performance toward establishing any indirect relation between export


promotion programs and export performance. Singer and Czinkota (1994) revealed a

significant positive relationship between the “number of export assistance services

used” and the “number of export outcomes achieved”. Gencturk and Kotabe (2001)

empirically examined that the usage of EPPs influence a firm’s efficiency and

competitive position in exporting. However, the internationalization process theory

and resource-based theory suggest that export promotion assistance stimulates export

knowledge and experience that increases export market commitment and export

performance. So, further research is needed to examine the indirect effect of export

promotion programs on a firms’ export performance through other determinants of

export performance.

Measurements of Export Performance

There is no uniform measure of export performance in the literature. The different

measurement schemes e.g. export intensity, export growth, competitive position, and

perceived success, for export performance make it difficult to compare the findings of

different studies. In addition, considerable criticism has been leveled against studies

using a single performance measure as a sole indicator (Julian and O’Cass, 2004;

Reid, 1981; Rosson and Ford, 1982). Therefore, multiple measures are seeing

creased use because they offer a more complete picture of performance (Cavusgil

, 2002). Since different aspects of performance may

e affected by different types of firm characteristics, a multiple-measure approach

in

and Zou, 1994; Wang and Olsen

b

offers better guidance to decision makers. Moreover, objective measures of

performance are difficult to obtain due to the reluctance of private firms to disclose

figures, which are deemed confidential (Appiah-Adu, 1999). So, the accuracy and

comparability of the objective indicators of export performance has been questioned.

However, several empirical studies have supported the validity of the use of non-

financial and subjective terms to assess export performance (Dess and Robinson,

1984). Further, the method of subjective performance assessment, with an anchor

relative to expectations, allows better comparability across different industrial sectors

and situations, with varying standards of acceptable performance (Pelham and

Wilson, 1996). Therefore, this study used non-financial and subjective terms and a


composite measure of export performance to assess managers’ perceived level of

exporting goals.

6.2.2 Proposed model

The primary purpose of the study was to develop and test a comprehensive model of

firm export performance that investigates how EPPs directly and indirectly influence

firm export performance. The theories of internationalization and export performance

literature suggest that firm export performance is correlated with key decision

akers’ international business attitudes, commitment, knowledge and skills (Aaby

nd Slater, 1989; Cavusgil and Zou, 1994, Johanson and Vahlne, 1977; Wang and

promotion programs tend to contribute to

rms’ acquisition of competencies (export knowledge and skills), enhance

export commitment, export strategy and export performance using multi-item scales.

Nineteen export promotion programs used by Bangladeshi exporters were used for

m

a

Olsen, 2002). On the other hand, export

fi

management's perception, attitude and commitment to exporting, which eventually

influences a firm's export strategy and performance (Barney, 1991; Coff, 1997;

Johanson and Vahlne, 1977, 1990; Singer and Czinkota, 1994). The proposed model

integrates the use of EPPs, management's perceptions of the export market

environment, export knowledge, export commitment, and export strategy that

influence export performance. Export promotion programs were classified into two

categories according to their similarity of purpose- ‘market development”, and

“finance and guarantee” related programs. Unlike other limited studies about export

performance (Marandu, 1995; Gencturk and Kotabe, 2001), this study conceptualized

the direct and indirect impact of market development-related and finance and

guarantee-related export promotion programs on a firm's export performance and its

other determinants.

6.2.3 Questionnaire Development and Administration

The model was tested on data obtained from a questionnaire developed and

administered as part of the study. Drawing on the literature, measures were developed

for management's perceptions of the export market environment, export knowledge,


the measurement of EPPs usage. The questionnaire was then constructed using these

operational scales. However, several other criteria were also used in developing the

uestionnaire. Chiefly, an effort was made to ensure clarity, readability, and

ntinuity to maintain respondent interest and motivation. The questionnaire was then

angla, and mailed to a sample of 1200 firms in three major

xport oriented industries in Bangladesh: garments, leather products and specialized

llowed by a confirmatory factor analysis in the measurement

odel. The “use of export promotion programs” was composed of two indices: use of

arket development-related EPPs, and finance and guarantee-related EPPs. A total of

r the reliability and

alidity of the measurement model was demonstrated, the structural relationships

q

co

pre-tested, translated into B

e

textiles. A single country, Bangladesh, was selected as the context of this research to

control for heterogeneity of export promotion programs across countries. A telephone

follow-up was also used to solicit participation and remind Chief Executive Officers

to participate in the survey. A total of 223 usable responses were returned by the

cutoff date (18.6% response rate) but 15 cases were excluded because of incomplete

responses and five were removed because they were outliers. The mean difference

between the early and the late respondents’ responses to the questionnaire were found

to be not significant indicating no non-response bias. The results support the

contention that the sample is representative of the population under consideration.

6.2.4 Model Testing and Research Findings

The relationships hypothesized in the proposed model were tested through the use of

structural equation modeling as employed in AMOS 5. The independent variables -

management's perceptions of the export market environment, export knowledge,

export commitment, export strategy, and the dependent variable of export

performance - were latent. A two-stage process was employed for these variables

whereby the construct measurements were evaluated first through exploratory factor

analysis in SPSS fo

m

m

seven variables were specified in the conceptual model. Afte

v

were then tested.

The model results provided evidence that EPPs play an important role in the firm

export development process. Ten hypotheses out of 16 were fully supported. The


SEM results support hypotheses H1a, H2, and H4a indicating that the use of market

development-related EPPs influences management's perceptions of the export market

environment, firm export knowledge and export performance. On the other hand, the

results suggest that the direct relationship between the uses of market development-

related EPPs and export commitment is not significant though the bivariate

relationship was found to be significant. Thus hypothesis H3a is not completely

supported. However, it is believed that market-development related EPPs indirectly

influence export commitment through export knowledge. The use of finance and

guarantee-related export promotion programs directly influence export commitment

and indirectly influence export performance through export commitment but does not

influence management's perceptions of the export market environment. Therefore,

hypothesis H3b is supported but hypotheses H1b and H4b are not supported.

Export knowledge directly influences management's perceptions of the export market

environment, export strategy and export commitment and indirectly influences export

rformance through export commitment. Therefore, hypotheses H5, H6 and H7 were

bivariate result but the model

stimate is not significant. Management's perceptions of the export market

e the variances in firm export performance. This indicates that

xport strategy influences export performance though it is not significant in the

the use of market development-related export promotion programs influences firm

pe

fully supported. Hypothesis H8 is supported by a

e

environment directly influences export strategy, therefore hypothesis H9 is supported.

However, the SEM result for hypothesis H10 suggests that the direct relationship

between management's perceptions of the export market environment and export

performance is not significant though bivariate relationship was found to be

significant. Export commitment directly influences export strategy and performance

thereby supporting hypotheses H11 and H12. For hypothesis H13, the bivariate result

suggests that export strategy and export performance are significantly related but the

model estimate was not significant to suggest any impact of strategy on performance.

This may be due to the co-sharing of variances with other determinants in such a

complex model. To confirm this expectation a hierarchical regression analysis was

used and the results confirmed that both export strategy and market development-

related EPPs shar

e

complex SEM model due to the co-sharing of the variances. Therefore, the overall

results support hypothesis H13. In summary, the findings of this study suggest that


export performance directly as well as indirectly through management's perceptions

of the export market environment, export knowledge and commitment. On the other

hand, the use of finance and guarantee-related export promotion programs indirectly

influences export performance through export commitment, though it has no direct

impact on export performance.

6.3 Contributions of the Study

Assessment of export promotion program effectiveness is an important aspect of

export marketing. Export marketing academics have identified the importance of

export promotion assistance and have presented various models to evaluate these

assistances. However, most of these models are mere propositions. This work

ents an empirical investigation to examine the direct and indirect impact of repres

export promotion programs on export performance using more rigorous statistical

techniques (SEM). As such, the research makes contributions from different

perspectives.

6.3.1 Theoretical Perspective

First, our knowledge on the impact of export promotion programs on the export

performance of a firm is very limited. The mainstream of the export performance

literature has mostly neglected export promotion programs as an antecedent of firm

export performance. This study found that the use of export promotion programs has

a significant influence on firm export performance and lends valuable empirical

support to a few studies on this issue (Donthu and Kim, 1993; Katsikeas, Piercy and

Ioannidis, 1996). Therefore, this study contributes to the literature by validating

export promotion programs as an antecedent in the export performance model and

providing empirical support through rigorously testing the model using SEM.

Second, the mainstream export performance and export promotion related literature

mostly neglected any link between EPPs and other determinants of firm export

performance towards establishing an indirect relation between EPPs and firm export

performance. This study developed conceptual links between two categories of EPPs


and other determinants of export performance such as management's perceptions of

the export market environment, export knowledge and export commitment. Empirical

tests of the proposed relationships in a rigorous structural equation model found to be

valid for most of the proposed relationships, thus revealing the indirect impact of

EPPs on firm export performance through these determinants. Therefore, this study

ontributes to the literature by examining the indirect impact of EPPs on firms export

t are widely tested in the literature. This preliminary step and the

certain proposed hypotheses can provide a building block for an

tegrated and well-grounded framework for explaining and predicting export

over, most of the theoretical development and

mpirical testing of theories in this field has been conducted in developed country

reasing

xport knowledge, which eventually influences firm export strategy and performance.

c

performance.

Third, this study has contributed to the export promotion literature by providing

empirical evidence to confirm some of the theoretical expectations emphasizing the

effectiveness of EPPs on firm export performance. Linkages among antecedents and

predictors are first developed from a theoretical standpoint, then formalized to

explicitly state their assumptions and finally tested empirically. This study supports

most of the assumptions and suggests that export promotion programs can influence

export performance directly and indirectly through other antecedents of export

performance tha

empirical support of

in

promotion program actions. More

e

contexts as indicated in Chapter 2. This study provides an understanding of the export

behavior of developing country firms and therefore, enhances the generalizability of

the findings across countries.

Fourth, this study developed two construct measures of export promotion programs:

market development-related programs and finance and guarantee-related programs,

and examined its direct and indirect impact on firm export performance. The study

suggests that market development-related EPPs are more useful in improving

managers’ positive attitude towards the export market environment and inc

e

On the other hand, finance and guarantee-related EPPs enhance firms’ export

commitment but not other management factors. This is also a unique contribution to

the literature to identify the relative impact of different categories (similar purpose


programs) of EPPs on export performance, which cannot be identified when a global

measure (all programs measured collectively) of EPPs is used.

Fifth, this study contributes to the extension of the Uppsala model of

internationalization. The Uppsala model emphasizes the need for experiential

knowledge toward developing a commitment to export. However, the model does not

explain how the export process may start in a firm and the sequence of conditions in

rms’ export decision process. Initially firms are disinterested in foreign markets.

ith logistic-related problems, legal procedures and in

eveloping foreign market intelligence (Kotabe and Czinkota, 1992). EPPs represent

fi

EPPs may create interest in the firm to explore opportunities and start sporadic

exporting. With experience and learning, the firm develops competencies to become a

committed and regular exporter. This study suggests EPPs as sources of educational

knowledge (such as trade shows, trade missions, and training) that facilitate firm

entry into the initial export stage to gain experiential knowledge. The empirical

findings of this study support the contention that market development-related EPPs

directly influence managers’ perceptions of the export market environment and export

knowledge. Therefore, the normative logic is accepted for the relationship. This

contributes to the literature.

Sixth, this study also contributes to extend the resource-based theory by adding

export promotion programs as sources of resources in terms of experience,

knowledge, information and physical support-related services to fill the gap of the

internal resources of a firm towards achieving its export goals. Different types of

assistance are needed by firms w

d

a readily available external source of information and experiential knowledge and

provide the firm with an external capacity to cope with the complexities of exporting

(Gencturk and Kotabe, 2001).


6.3.2 Managerial Perspective

The study findings indicate that the use of EPPs has a positive effect on

s on product development and marketing. They enjoy a

ompetitive position and believe that exporting is more profitable and attractive by

adequate resources to undertaking export-related

ctivities. Once firms are involved in exporting, differential advantages in

anagement expertise are found to be important determinants of export performance.

irms need personnel who are able to develop export strategies and are

nowledgeable of export markets and procedures. Firms can hire new personnel or

ain present employees. In-house training is generally not available and thus small

xporting firms should send personnel to export seminars, workshops and

onferences organized by the government as part of the assistance programs. In

management's attitudes of the export market environment, export knowledge and

commitment. This indicates that firm managers who used more of the EPPs have a

positive attitude toward the export environment, are more knowledgeable about

export markets and export procedures, and are more committed to export. Results of

the total model also reveal that these three factors have a positive impact on export

strategy and performance. Export knowledge is found to be a determinant of

management's perceptions of the export market environment, export strategy and

commitment. EPPs help to overcome managers’ mental barriers and develop positive

attitudes towards exporting. Managers reduce their uncertainty and perceived risk of

exporting by using EPPs because some programs such as export market information

through trade missions, trade fairs and experiential knowledge help them to overcome

their export barriers. Managers also gain objective knowledge and export procedural

knowledge through participation in the local and practical training programs as well

as overseas training program

c

using some programs such as the export credit guarantee scheme, duty drawback, and

income tax rebate. As a result, managers commit more resources to exporting. So, this

study provides a guideline for managers of exporting firms as to how they can benefit

from export promotion programs in improving their positive attitude towards the

export market environment, building their knowledge and enhancing their

commitment to exporting for better success in their international operations.

It appears that managements are more likely to take full advantage of export market

potentials when they commit

a

m

F

k

tr

e

c


addition, it would seem that in order to continue or expand exports, existing exporting

rms should expose top management to the international environment by travel.

ents and

porter requirements.

fi

Overseas visits of various kinds (i.e., seminars and trade fairs) are an excellent

method of stimulating or maintaining good buyer-seller relationships and thereby

reinforcing the export activities. Therefore, export promotion services are a valuable

source of information, expertise, and resources for developing export markets. Firms

that are aware of, or engaged in, exporting as a strategic option should actively

consider government programs as a potentially useful source of export assistance.

Additionally, firms should seek to use services that address their particular export

barriers. Firms facing several barriers should identify programs that offer a variety of

services. They should seek to use multiple services from such programs to increase

their export results.

6.3.3 Public Policy Maker Perspective

The findings of this study have demonstrated the important roles of management's

positive perceptions of the foreign market environment, export knowledge and

commitment in achieving better export performance. The findings also identify other

factors, such as, the use of export promotion programs that have significant effects

upon these three determinants of export performance. Therefore, this study suggests

that policy makers should develop effective national export promotion programs to

ensure favorable impacts upon each of these influential factors. Such programs should

be regularly reviewed and adjusted on the basis of both market developm

ex

This study highlights the crucial role that government policy can play in facilitating

firm performance in export markets by stimulating regular export activity at the

individual firm level. The need for information about foreign markets is evidenced by

the result that favorable conditions in foreign markets were positively related to

strategy and performance. So, information regarding such aspects should be

disseminated to potential exporting firms in order to improve the image of foreign

market opportunities. Since awareness of the conditions prevailing in the export

market is critical for export success, efforts must be made in gathering up-to-date


information on export markets. In addition to general information such as economic

data and trade statistics (i.e., monthly or yearly trade balance, GNP, population, and

so on), more specific information must be provided to stimulate existing exporting

firms to continue or expand exports. This information should include the cultural

environment in foreign markets, foreign government regulations, restrictions on

imports, foreign government exchange rate policy, and multiple channels of

distribution in foreign markets. The perception of risks is an especially strong barrier

inhibiting a firm’s willingness to consider engaging in exporting. The government’s

ability to improve the competitive edge of a firm not only helps reduce the degree of

export risks perceived by the firm but also raises management’s confidence in the

firm’s ability to export successfully. Financial assistance is needed in greater volume

and for longer time periods to raise the firms’ competitive advantage. The

overnment should provide a competitive platform for its exporters through trade

olicies, market access initiatives, improved export opportunity awareness campaigns

s. Firms must be made aware of

ternational market opportunities and realize that export opportunities overseas are

s must be placed on market research so that exporters

ave more knowledge of foreign market conditions, the degree of competition and

g

p

and policies to minimize export disincentive

in

long-term growth markets.

Since management expertise and knowledge is found to be vital to export

performance, and export promotion programs help to increase knowledge, training

through government agencies is recommended to maintain management expertise.

Particular attention may further be paid to the design and implementation of export

marketing education and training programs among exporters. Seminars and

conferences emphasizing human resource management are also ways of reducing

market barriers. More emphasi

h

customer preferences in foreign markets. On the basis of market research, products

can be modified in terms of their functions, utility offerings, and other product

characteristics.

Another important determinant of the degree of firms’ commitment to export

information search is ‘size’. The larger-sized firms tend to have more information

search activities than smaller ones. This assumes that the larger a firm, the greater the

amount of financial and other resources available for information search activities.


Therefore, smaller sized firms need more help from governmental agencies to provide

them with the necessary information about exporting. However, the lack of

information might not only be due to the scarcity of a firm’s resources for searching

activities but a lack of knowledge of how and where the information can be obtained.

Thus, governments must perform not only a role as a center for information gathering

but also serve as a channel to ensure that the necessary information reaches the

appropriate firms in private sectors.

Overall, this research has academic, practical, managerial and government policy

implications. For academics it provides empirical evidence and opens up potential

new areas of further research. For practitioners, its findings are directly applicable to

their business activity; and for policy makers, it provides some guidelines in

designing export promotion programs more effectively.

6.4 Strengths and Limitations of the Study

The research has several key strengths. The conceptual research model for this study

based upon the extensive review of prior empirical research on export promotion.

xtent was not feasible because of resource and time constraints.

ccordingly, the findings of this research are tentative unless verified in other

is

Primary data were gathered specifically for the study and sophisticated statistical

techniques (SEM) were also used to analyze the data.

However, this research has a number of limitations which must be taken into

consideration in evaluating the above results and their implications. The most serious

of these involves the derivation of a sample of exporting firms from a single country.

The research has been conducted in a developing country context of Bangladesh,

which facilitates controlling the diversity of export promotion programs across

countries but limits generalization across countries. A study in several developing

countries would have been ideal to increase the generalizability of the findings but a

study of that e

A

country contexts.


Another limitation is related to the population specification of this research.

Manufacturing firms in three industries in Bangladesh were considered as elements of

the population for sampling purposes. To this extent the generalizability of the results

to other industries may be limited. Therefore, validation of the study findings to a

greater cross section of firms may contribute to its generalizability. Moreover, a basic

limitation of this study is that the data analysed for this study are cross-sectional

rather than longitudinal to review export promotion programs users’ reaction over

e. A longitudinal study can provide an in-depth view of the situation and the

this study and second, future

search can explore other dimensions of EPPs evaluation to broaden our knowledge.

licability in a different business environment. Moreover, attention

hould be given to investigating the universal applicability of the findings in this

study. Interesting insight could be gained by looking into comparative studies by

replicating the research design with other samples of firms such as agricultural

tim

changes that take place over time. Finally, 203 sample size used in this study is

enough for SEM analysis (Boomsma, 1983), but a larger sample to facilitate

validation of the findings could have been better. Therefore, this model needs to be

validated in a future research.

6.5 Future Research Direction

Study results and limitations provide the basis for future research. There are a number

of areas to which further research into the evaluation of EPPs could be directed. Two

general areas of future research are highlighted here for future researchers. First,

future research can be directed at the limitations of

re

The present research represents one of the first attempts to develop a model to

examine the direct and indirect effects of EPPs on firms’ export performance. Given

that the research represents an early effort in an emergent research stream, the results

should be taken as tentative. However, the research points out the need for additional

work in four primary areas.

First, this study has developed a model that contributes to measure the direct and

indirect impact of export promotion programs on export performance. It is

particularly important to validate the model with another sample in another country,

and confirm its app

s


commodities and services. The impact of export promotion programs on such

industries may be different from that of manufacturing, especially in terms of export

performance. As such, cross-industry comparisons would enhance the generalizability

of the findings reported in this study.

Second, this study has also developed constructs that contribute to measuring the

direct and indirect impact of export promotion programs on export performance and

their measurement scales. Operationalization of constructs is a potential problem in

most social science and business research. This research is not an exception. As

indicated in Chapter 4, this research develops new operationalization of three

constructs: use of market development-related export promotion programs, use of

finance and guarantee-related export promotion programs and export strategy. While

ese three measures have high reliability and proved useful for this study, further

search is required to test such scales for possible refinement and future usage by

xporters on the basis of export age, and provide a better

nderstanding of the impact of export promotion programs. It is hoped that the

th

re

other researcher.

Third, the research examined only the impact of similar categories of export

promotion programs (market development-related and finance and guarantee-related

programs) on export performance. The impact of individual programs was not

explored in the present study but could be investigated in the future research.

Fourth, this study is based on existing exporting firms with a long exporting

experience (more than three years and seven years on an average). Thus, it may be

difficult in inferring the impact of export promotion programs on less experienced

firms with the findings of this study. Further studies can classify firms into initial

exporters and experienced e

u

findings would give government policy makers the ability to develop more effective

export assistance programs.


6.6 Conclusion

The contribution of this research is to developing a clearer and more complete

explanation of the impact of export promotion programs on firms’ export

rformance. This kind of contribution can only be generalized if the additional pe

insights offered by the research stand the tests of time and replication. If future

researchers test this model across industries and countries, then it may be said that

this study has made a contribution to the understanding of the effectiveness of export

promotion programs. It is hoped that other research will seek to establish the validity

of the findings in this study by replicating the research design with other samples of

firms. Until this is accomplished, the conclusions of the study remain tentative.


Appendices 180

APPENDIX A

LETTER OF INTRODUCTION FROM THE PRINCIPAL SUPERVISOR AND

THE HEAD, SCHOOL OF ADVERTISING, MARKETING AND PR

Appendices 181

Appendices 182

APPENDIX B

SURVEY INSTRUMENT (ENGLISH VERSION) Pages 183 – 193

Appendices 183

Confidential

The objective of this research is to examine exporters’ perception on different issues related to exporting. Findings of this researc will be useful for exporters and policy makers. Your participation in the survey is e tremely important for the completion of the project. We do not need any company fi ncial information; we only need your viewpoint for different aspects of e approximately thirty minutes of your time at your own convenience

This research is conducted as part of my PhD thesis at Queensland University of Technologyparticipation will be assured by Q es. Neither your name nor that of your firm will be recorded and disclosed in any part of the report. Only aggregate scores and summary observations will be re rted.

Your participation in this study is completel ntary and you are under no obligation to participate. If you choose to participate, please complete the questionnaire and return it in the envelope provided.

In appreciation of your participation a summary report of this study may be made available to you. If you desire a copy, please complete the attached form and return it in a separate envelope.

If you have any specific enquiry regarding this research please contact Mr. A.K. Shamsuddoha, through the following telephone (Dhaka).

For any enquiry regarding the conduct of this research generally, contact the Secretary of the University Human Research Ethics Committee on 61 7 3864 2902 or email to: [email protected]

Thank you for your participation.

A.K.Shamsuddoha Dr. Yunus Ali Research Scholar Senior Lecturer School of Advertising, Marketing & PR School of Advertising, Marketing & PRQueensland University of Technology Queensland University of Technology Brisbane 4001, Australia Brisbane 4001, AustraliaEmail: [email protected] Tel: 61 7 3864 4329 Fax: 61 7 3864 1811 OR Email: [email protected]“Thain”, B/184 KhilgaonChowdhury Para [Matir Masjid, Jhillpar]Dhaka-1219, BangladeshTel: 88 02 7215521 E-mail: [email protected]

hx

naxporting. It will take.

(QUT) in Australia. The confidentiality and anonymity of your UT research procedur

po

y volu

Queensland University of Technology

Appendices 184

ART 1P

ectly by your firm, selling to foreign and localn

--------- --------------------------

t(s).

----------------------- --------------------------- ----------------------------------

---------------------- ------------------------- --------------------------

eople does your firm currently employ?

.......... ......... employ

.......... ......... mploy

firm been exporting? ......................... years

Please complete the following general information about your firm

1. List the principal product(s) that your organization exports.(Export includes exporting dirrepresentatives/offices, and through your sales agents (sales branch) in foreigmarkets).

----------------------- --------------------------- ---------------------------------------------- ---------------------

----------------------- --------------------------- --------------------------

2. Please indicate the names of the countries to which you export your produc

---------------------- ------------------------- ------------------

3. Approximately how many p

a) Full time ...... .. ees...b) Part time . .. .. e ees

rs 4. How long has your firm been in business? .................. yea

5. How long has your

Appendices 185

PART II

In this section, we would like to know your opinion regarding different aspects of export trade. Alternative answer collection has been arranged from No. 1 to 7 to know

ircle the response, hich you believe most appropriately reflects your judgement for your firm. There is no ht or wrong answer. It is your opinion that is most important.

E cle No. 7. If you

Please indicate by circling the response, which indicates the extent to which you h of the

er or

as to how much you agree with each of several statements. Please cwrig

xample: Suppose you strongly agree with statement “A” then cirsomehow disagree with statement “B” then circle No. 3.

6.agree or disagree with eac following statements.

Statements Strongly Disagree Somehow Neith Somehow Agree Strongly Disagree disagree disagree N

agree agree Agree

To

he firm has an appropriate rganizational structure to deal with ll export activities

1 2 3 4 5 6 7

aFexpor

irm executives travel frequently to 1 2 3 4 5 6 7t markets

Te

hexport market research facilities

6 7 firm has extensive in-house 1 2 3 4 5

Learninroceigh priority in this firm

3 4 5 6 7g about exporting p dures and documentation is a

1 2

hThe firm takes services from pecialized local and foreign

arket potential

1 2 3 4 5 6 7sorganization to gather foreign market information and assess mThe company tends to respond

opportunities

6 7rather than pursue export

1 2 3 4 5

The firm sets aside adequate funds to develop overseas markets

1 2 3 4 5 6 7

Exporting is a high priority activity in the firm

1 2 3 4 5 6 7

Statements Strongly disagree

Disagree Somehow disagree

Neither disagree nor

Somehow agree

Agree Strongly Agree

agree

"A" 1 2 3 4 6 5

"B" 1 2 4 5 6 7 3

7

Appendices 186

dicate by circling the response, which indicates the extent to which youagree or disagree with each of the following statements.

y

7. Please in

Statements StronglyDisagree

Disagree Somehowdisagree

Neither disagreeNor agree

Somehowagree

Agree StronglAgree

Tshany dif

he firm is able to arrangeipping and forwarding without

1 2 3 4 5 6 7

ficultyThehandle necessarydocumentation

6 7firm is able to prepare and export

1 2 3 4 5

The salespeople are sufficientlykno e aexisting foreign

1 2 4 5 6 7wledgeabl bout our

markets

3

Overall, we have sufficientknowledge about the foreignmarke are serv

1 2 3 4 5 6 7

ts we ingWe know about foreigngovernment regulations that affect our products in foreignm kets

1 2 3 4 5 6 7

arWe know the economic situationin

7our export markets

1 2 3 4 5 6

Wabout the international marketingservices avai ublicand private sour

4 5 6 7e have sufficient knowledge 1 2 3

lable from pces

Wkc

1 2 3 5 6e have the skills andnowledge to cope with the hallenge of globalization

4 7

Appendices 187

h you agree or disagree with each of the following statements.

Statementsr

agreagre

gr trAgre

8. We would like to know what you think about export market environment. Pleasecircle the response, which indicates the extent to whic

StronglyDisagree

Disagree Somehowdisagree

Neither disagree No

S

e

omehow e

A ee S ongly e

Making contacts in foreign markets (customers, distributors

1 2 3 4 5 6 7

etc) is easyObtaining payment for sato foreign buyer

les made s is relatively

1 2 3 4 5 6 7

simpleThe firm is able to competforeign markets

e in 1 2 3 4 5 6 7

Obtaining an adequate shareforeign market would be easythis firm’s specialized pr

of a for

oduct(s)

5 6 71 2 3 4

Foreign customer tastes apreferences are difficult to understand

nd 5 6 71 2 3 4

Competitor analysis is critical to 1 2 3 4 5 6 7our export success The paperwork involved in processing an export sale is easyunderstand

to 1 2 3 4 5 6 7

Making sales to foreign buyers risky

is 1 2 3 4 5 6 7

Overseas markets for ouare not stable

r product 5 6 71 2 3 4

Locating sales agents/distributorsin oreign markets is easy.

1 2 3 4 5 6 7 f

Export markets for this firm’s products are more profitable than the domestic market

1 2 3 4 5 6 7

The firm has the capability to successfully export its products

1 2 3 4 5 6 7

Business practices are pretty much the same in most countries

1 2 3 4 5 6 7

Political problems in foreign markets are barriers to exporting

1 2 3 4 5 6 7

Exchange rate variations make exporting difficult

1 2 3 4 5 6 7

Globalization has created opportunities for exports

1 2 3 4 5 6 7

The firm is experiencing difficulty adjusting to the globalized environment

1 2 3 4 5 6 7

Appendices 188

Statements Strongly Disagree Somehow Neither gree

Somehow Agree Strongly ree

9. Please indicate by circling the response, which indicates the extent to which you agree or disagree with each of the following statements about your firm.

Disagree disagree disaNor agree

agree Ag

The export customers to be served d

1 2 3 4 5 6 7have been clearly identifieStrategies for competing in expomarkets ha

rt ve been developed

1 2 3 4 5 6 7

Distinct goals and objectives for export operations have been established

5 6 71 2 3 4

Adequate capabilities to collenecessary infor

ct mation have been

5 6 7

developed

1 2 3 4

Sufficient budget to exploit overseas markets has been provided

1 2 3 4 5 6 7

Export countries to be enthave been

eredclearly identified

1 2 3 4 5 6 7

The firm has put in place strategto expand number

ies of exportable

5 6 7

product over the years

1 2 3 4

The firm has put in place strategiesto expand export markets over the

1 2 3 4 5 6 7

years

10. Please indicate by ticking thedistribution channels through

response how your firm use each of the following wh you roduc reach f ign cu omer

Not ll used

times d

Used ely

ich r p ts ore st s.

Channel of Distribution at a Someuse

wid

Local export trading house Foreign buyers’ local representative Ban desh in glaVisiting foreign buyers in Banglade shForeign buyers’ purchase house in B glad h an esDirect selling to foreign buyers Direct selling through internet Exporting through company sales re resent s in p ativeforeign markets Exporting through sales office (sales branch) in foreign markets Contact with customers and sale thr gh pa ipation ou rticin the international trade fare Selling through Bangladesh mission abroas d

Appendices 189

ht side of the following activities that you are aware and put a cross mark that you are not

. Please round ‘yes” at o tiv hi a eonce during last three years and round in any number from 1 to 7 indicating the

ink prop te for port trade.

aw e about "A" ctivity offered Bang desh ill be a follows:

Benefit

11. We are interested to know the usage of different Export Promotion activities offered by the Bangladesh Government. Please put tick mark in the rig

aware the right side f the ac ities w ch you h ve us d

degree of benefit that you th ap ria your ex

Example: Suppose, you are not ar a by laGovernment, then your answer w s

Export Apromotion

activity Not at all benefit

ware Use

Not mu

benefit

A tle b fit

Some how fit

fit C iderable nefit

Very much

benefit

verych

litene bene

Bene onsbe

"A" X Yes 1 2 6 7 3 4 5

Suppose you are aware about the "not used that then your answe

B" activity ffered the G ernme but yo r will be as follows:

Benefit

o by ov nt u have

Export promotion

Aware Use

activity Not at all benefit

Not very mu

bene

A little be it

Some how efit

Benefit Considerable fit

Very much

benefit ch fit

nef ben bene

"B" Yes 1 2 3 4 5 6 7

Suppose you are aware about "C" activity offered by the government and you have used our

exp

Be

that at least once during last three years and now you think considerable benefit for yort trade and then your answer will be as follows.

nefit Export Aware Use promotion

activity Not at all Not very A little Some ow ben it

Benef Considerabenefit

Very much

benefit benefit much

fit benefit

bene

hef

it ble

"C" Yes 1 2 3 4 5 7

Y ferent export promotion activities s ording to above examples.

ou are requested to provide your opinions about diftated overleaf acc

6

App

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190

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45

67

App

endi

ces

191

Appendices 192

12. Comments: Please write down if you any comments regarding export promotion activities offered by Bangladesh government ------

tent your firm has achieved the expected results for each of the ma r er th st 3 s.

Items Much below expectation

Below expectation

A little below expectation

Expectation Achieved

A bit more expectation

More expectation

Much above Expectation

13. Circle to what exfollowing tte s ov e la year

Expor les 3 4 5 6 7t sa 1 2

Export profit 1 2 3 4 5 6 7

Exgrow

port sales 1 2 3 4 5 6 7th

New market entry

1 2 3 4 5 6 7

PART Ill

ase provide the following biographical information fPle or aggregate statisticalurposes only.

4. How many years have you been involved in export activity? ….………years15. How many years are you involved with this organization? …………..years

16. Please indicate your designation in the organization.

[ ] Gener e[ ] Direc

nagermmerc ficerer (ple specify ……… …….

ge group do you belong?

[ ] Less than 30 years[ ] 30 to 40 years[ ] 41 to 50 years ] Over 50 years

An envelope has been enclosed for returning the duly filled up questionnaire. If the envelope has been mislaid, please forward to the following address.

A.K.Shamsuddoha“Thain”, B/184 KhilgaonChowdhury Para [Matir Masjid, Jhillpar]Dhaka-1219, BangladeshTel: 88 02 7215521

Thanks for your participation and time

p

1

[ ] Managing Director[ ] Chief Executive Officer

al Managtor

r

[ ] Ma[ ] Co ial Of

[ ] Oth ase ) … …

17. To which a

[

Appendices 193

APPENDIX C

SURVEY INSTRUMENT (BANGLA VERSION)

195 – 208 in Separate FilePages

Appendices 194

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Faculty of Business Queensland University of Technology · Chapter 1 Introduction 1 - 8 1.1 The research focus ... Figure 2.10 The Gencturk and Kotabe Model