Trade promotion and SME export performance

Trade promotion and SME export performance

Timothy Wilkinson a, Lance Eliot Brouthers b,*

Department of Marketing, University of Akron, CBA 306, Akron, OH 44325-4804, USA

Department of Management and Marketing, University of Texas at E1 Paso, E1 Paso, TX 79968, USA

Received 25 February 2005; received in revised form 28 February 2006; accepted 1 March 2006

Abstract

In this paper, we attempt to further develop an international resource-based view of small and medium-

sized enterprises (SMEs) by examining the effectiveness of a set of export promotion services. Specifically,

we investigate the impact of US state-sponsored export promotion activities on the international marketing

efforts of small to medium-sized enterprises. We hypothesize and find that, even after controlling for

internal firm resources, the use of trade shows and programs identifying agents and distributors contribute

positively to SME satisfaction with export performance. Managerial implications are discussed.

q 2006 Elsevier Ltd. All rights reserved.

Keywords: Export promotion; Resource-based view; Trade shows; Trade missions

Like their larger MNC rivals, the ability of smaller manufacturing firms to become successful

international competitors is dependent upon the resources they bring to bear on potential export

opportunities (Andersen & Kheam, 1998; Bloodgood, Sapienza, & Almeida, 1996; Crick &

Batstone, 2001). From a resource based perspective, American small to medium-sized firms

(SMEs) frequently lack necessary internal resources, know how, and information about foreign

markets (Acs, Morck, Shaver, & Yeung, 1997; Alvarez, 2004; Ramaswami & Yang, 1990; Wolff

& Pett, 2000). As a result, US based SMEs commonly view exporting as a high-risk venture

(Burpitt & Rondinelli, 2000). For this reason, they are often tempted to be ‘homebodies’, thereby

avoiding the uncertainties of overseas markets (Acs et al., 1997).

Smaller manufacturing firms can overcome the limitations of inadequate information about

foreign markets by choosing partners, either in their home countries or in targeted host country

markets, who possess such knowledge (Inkpen & Beamish, 1997). These partners include

international not-for-profit trade/export associations, distributors, and various types of export

International Business Review 15 (2006) 233–252

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0969-5931/$ - see front matter q 2006 Elsevier Ltd. All rights reserved.

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* Corresponding author. Tel.: C1 915 747 8919

E-mail address: [email protected] (L.E. Brouthers).

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T. Wilkinson, L.E. Brouthers / International Business Review 15 (2006) 233–252234

intermediaries. In addition, they may access the services of governments, an often aggressive

player in the field of export promotion.

In the US, government promotional activities are largely sponsored by individual states. The

economic justification for this activity is the inability of many American SMEs to successfully

export their products into overseas markets. This inability may be viewed as a condition of

market failure, thereby providing an economic justification for government involvement in

export promotion (Singer, 1990). State policymakers encourage small to medium-sized

manufacturers to sell overseas as a means of achieving increased employment, expanded tax

bases, and consistent capital formation (Eisinger, 1988). Government officials have become

adept at using a wide array of marketing tools to directly assist SMEs. These tools range from

computerized trade lead-matching programs to trade missions and trade shows. Such activities

can be used to complement the internal resources and capabilities of SMEs by providing what is,

essentially, a subsidization of international marketing efforts.1

Lages and Montgomery (2001) point out that much of the research on export promotion is of

little relevance to policymakers and mangers because it focuses on tangential issues (i.e.

program awareness) rather than on specific promotion activities. The present study fills a gap in

the literature by analyzing the impact of programs (trade missions, trade shows, and the

identification of agents and distributors) sponsored by state government EPOs on the export

performance of firms. While previous research has examined trade shows and trade missions, the

context has been (1) aggregate levels of state or national exports (e.g. Coughlin & Cartwright,

1987), or (2) firm level export performance as influenced by the private sector or by national

governments. In contrast, we analyze the effectiveness of state-sponsored export promotion

activities using the firm as the unit of analysis. In addition, no previous study has examined the

impact of state-sponsored programs identifying agents and distributors at the firm level.

The paper proceeds as follows: first, past studies on export promotion are discussed. Second,

the literature on export barriers is summarized. A theory section follows in which it is

hypothesized that both specified internal firm resources and export promotion programs are

positively associated with export performance. Finally, implications for policy makers and

managers are discussed.

1. Export studies

Research into small firm exporting has been largely empirical and descriptive, lacking the

kind of theoretical underpinnings that could lead to the development of a substantial export

strategy literature (Gemunden, 1991). Numerous empirical studies have examined the impact of

managerial attitudes, marketing mix variables, and organizational resources on a wide range of

export related activities (see Cadogan, Diamantopoulos, & Siguaw, 2002; Gray, 1997; Leonidou

and Katsikeas, 1996; Peng & Ilinitch, 1998).

In recent years the emphasis has remained empirical, but the data sets have become larger and

the methods used have become more sophisticated (Dhanaraj & Beamish, 2003). For example,

Lages and Montgomery (2001) used an asymptotically distribution free method of estimation in

1 It is not necessary to draw clear distinctions between resources and capabilities (Conner, 1991); the former is

considered to be the foundation of the latter (Amit & Schoemaker, 1993). Capabilities consist of the capacity of a

resource set to integratively perform a task (Grant, 1991). Here, we focus primarily on internal and external resources

rather than capabilities (particularly regarding services offered by external providers). As a convenience we use the two

terms interchangeably throughout the paper.

T. Wilkinson, L.E. Brouthers / International Business Review 15 (2006) 233–252 235

their examination of 519 Portuguese exporters while Dhanaraj and Beamish (2003) examined

157 firms using structural equation modeling.

Export theory has not kept pace with methodological technique nor has it particularly guided

much of this research. Theoretical development has been based largely on the ‘Uppsala

Internationalization Model’ (Johanson & Vahlne, 1977; Johanson & Widersheim-Paul, 1975),

suggesting that firms move through stages as they progress from being non-exporters to

becoming actively involved in export markets (Leonidou & Katsikeas, 1996).

These models have been challenged as lacking in explanatory power and testability

(Andersen, 1993), as being focused on the export decision rather than on ongoing export strategy

(Cavusgil & Zou, 1994), as overly simplified given forward and backward movements between

stages (Crick, 2004), and as out of date and inaccurate given the newer phenomenon of the ‘born

global’ firm (Knight & Cavusgil, 2004; Knight, Madsen, & Servais, 2004). Here, we follow the

advice of Singer (1990) who suggests that the first step in developing a theoretically based

understanding of export promotion is to address the problem posed by market imperfections

which inhibit the exporting efforts of SMEs.

2. Export barriers

Understanding how barriers or inhibitors impede the exporting process is of vital importance

in the attempt to understand why and how firms become involved in overseas markets (Bilkey,

1978; Wiedersheim-Paul, Olson, & Welch, 1978). Studies that examine the role of export

barriers either attempt to understand the structure and nature of export barriers or they address

the influence that barriers have on the export process of firms (Ramaswami & Yang, 1990). The

latter group of studies generally focuses either on external environmental factors or on the

decision-making process within Companies (Bauerschmidt, Sullivan, & Gillespie, 1985).

However, according to Ramaswami and Yang (1990, 190), “There seems to be no general

agreement on the relative importance of the barriers in explaining export entry or expansion

behavior of firms.”

Studies which examine the environmental factors that serve to encourage or discourage

businesses to export generally produce lists of specific export barriers (Bagchi-Sen, 1999; Bilkey

& Tesar, 1977; Czinkota & Johnson, 1983; Goodnow & Hansz, 1972; Kaynak & Vinay, 1984;

Rabino, 1980; Reid, 1985; Silva & Rocha, 2001). Another approach examines boundary

conditions within firms which influence the export decision-making process (Bagchi-Sen, 1999;

Brasch & Lee, 1978; Cavusgil & Nevin, 1981; Czinkota & Johnson, 1983; Simpson & Kujawa,

1974; Su’rez-Ortega, 2003; Weinrauch & Rao, 1974). A related body of literature suggests that

the attitudes exhibited by managers toward exporting play a significant role in whether or not

firms become involved in exporting and, if they do, their subsequent progress. According to this

stream, the major reason that most firms do not export is because their managers are not

motivated or determined to export (Bilkey & Tesar, 1977; Cavusgil & Nevin, 1981; Czinkota &

Johnson, 1983; Pavord & Bogard, 1975; Wiedersheim-Paul et al., 1978).

Seringhaus and Rosson (1989), place export barriers into four large categories: motivational,

informational, operational/resource-based, and knowledge. In a similar approach, Leonidou

(2004) conducts a comprehensive analysis of 32 studies and classifies 39 export barriers into

internal (incorporating informational, functional, and marketing) and external (comprising

procedural, governmental, task, and environmental) categories. The author suggests that policy

makers provide educational, operational, and promotional assistance for SMEs to help firms

overcome these barriers.


The literature cited above is important because it illustrates both the possibilities and the

limitations of export promotion programs. For example, the factor considered to be the most

important in Bauerschmidt et al. (1985), exogenous economic constraints, can be only partially

affected by national fiscal policy and is certainly beyond the control of sub-national

governments. Certain barriers simply cannot be overcome by either the private or public sectors.

In the US, it is at the sub-national level that the potential to overcome many export barriers

exists. This potential takes the form of either private companies that function as export

intermediaries or export promotion organizations sponsored by state and local governments. By

accessing the services of these organizations, SMEs may complement their internal firm

resources with external capabilities.2

3. The resource-based view of the firm

We draw upon the resource-based view of the firm (Barney, 1991) to advance a theoretical

linkage between the difficulties experienced by smaller firms in the international environment

and their ability to overcome these difficulties through the development of internal and external

resources. The resource-based view assumes that firms are collections of unique bundles of

resources which advance organizational performance based on: (1) the heterogeneity of

resource, and (2) the heterogeneity of firms in particular industries resulting from the lack

of perfect mobility across firms in these resources (Spanos & Lioukas, 2001).

While previous work in the area of export promotion has implicitly addressed many issues

related to firm resources (e.g. Westhead & Wright, 2001), Dhanaraj and Beamish (2003) have

forcefully argued that the resource-based view should be the foundation for more conceptually

rigorous theory building in the area of export strategy. According to Anderson and Kheam

(1998), the resource-based view can provide a theoretical underpinning for internationalization

models.

Prior empirical efforts suggest that firm resources have both a direct and indirect impact on

firm performance. For example, a study of 287 export ventures (Morgan, Kaleka, & Katsikeas,

2004) found that resources and capabilities had an impact on export venture competitive

2 Export barriers have resulted in the creation of international trade intermediaries (ITIs) who ‘engage in international

marketing activities on behalf of US manufacturers and that make up the US industry of international trade

intermediation’ (Perry, 1992, p. 19). These private firms handle between 5 and 10% of US exports and engage in

numerous activities. Activities include locating buyers, researching markets, developing packaging and label

instructions, assisting in modifying products, participating in trade shows, setting prices, advertising; warehousing,

locating and training agents and distributors, acting as freight-forwarders, and providing credit analysis, insurance, and

financing (Perry, 1992, p. 20). In addition to low utilization and limitations in the numbers and capabilities of private

sector ITIs, several other constraints circumscribe not only their effectiveness but also their desirability. These include

the possibility that, by relying on ITI, exporters will not become familiar with the export process and will depend on

intermediaries to their own, long-term detriment. Up-front costs charged by intermediaries may function as another type

of resource barrier, especially among small firms. Moreover, removing information barriers is not a significant function

of ITI (Singer, 1990, pp. 31–32). According to Singer (1990), these limitations constitute market failure and provide a

justification for government action: private export intermediaries can be expected to withhold services with low expected

returns or with risks exceeding expected returns. They also can fail to adequately serve certain types of firms, especially

those that are small, new to exporting, outside their field of product or market expertise, or located at too great a distance.

In each of these cases, government intervention to provide export intermediation would appear to be justified, given the

public benefits that flow both from improvement in the US balance of payments and from economic growth (increased

employment, personal income, tax revenues, etc). (Singer, 1990, pp. 34–35). Thus, the rationale for state-sponsored

export promotion activities is the existence of market failure.


strategy, which in turn, influenced export venture outcomes. Dhanaraj and Beamish (2003)

examined technological intensity and degree of internationalization as intervening variables,

while Cavusgil and Zou (1994) presented a model in which internal firm characteristics and

product characteristics led to an export marketing strategy and resultant firm performance. In

their meta-analysis of 36 studies, Leonidou, Katsikeas, and Samiee (2002) found that market

selection, segmentation, and marketing mix variables influence the impact of managerial

characteristics, organizational factors, and environmental forces on export performance. In each

of these studies an export strategy construct is presented as dependent upon firm resources and as

an antecedent to firm performance.

Other studies posit a direct relationship between firm resources and measures of export

performance. For instance, Bloodgood et al. (1996) found that firms with resources that are

suitable for international activities are more likely to engage in exporting than firms that do not

possess these resources. An earlier study by Yang, Yoo, Leone, and Alden (1992) found a

relationship between specific firm resources, such as extra marketing staff and managerial time,

and the likelihood that domestic firms would become involved in exporting. Westhead and

Wright (2001) examined the direct impact of multiple factors, including firm resources that

contributed to firms being exporters or non-exporters.

In addition to the resources described above, technological resources are frequently

mentioned in the literature as assets that can provide a firm with a stronger competitive position

in foreign markets (Aaby & Slater, 1989; Alvarez, 2004; Anand & Kogut, 1997). Competitive

advantage is enhanced by technological resources in terms of manufacturing (Zahra & Nielsen,

2002), new product development, and product superiority (Namiki, 1988). This is especially true

for small to medium-sized firms, where major opportunities exist in high tech sectors (Dhanaraj

& Beamish, 2003; Francis & Collins-Dodd, 2000; Mahone, 1994). Past research has associated

technological assets with larger profits and higher levels of employment (Armington, 1986;

Markusen, Hall, & Glasmeier, 1986; Schmandt, 1991), higher relative market share in

international markets (McDougall & Oviatt, 1996), and higher levels of absolute growth

(Westhead, 1995).

In summary, the potential for enhanced performance satisfaction is dependent upon resource

appropriateness, availability, and utilization in the effort to meet business objectives. A firm will

have greater satisfaction with export performance to the extent that it can leverage unique

resources in international markets. This discussion leads to our first hypothesis:

Hypothesis 1. The level of internal firm resources is positively associated with firm satisfaction

with export performance.

4. Export promotion

Like export research generally, the area of export promotion has also emphasized empirical

results over theoretical development. Earlier studies of export promotion programs (EPPs)

provided mixed opinions on the effectiveness of the services offered. Some previous work found

a positive relationship between export promotion programs and firm performance (Cavusgil &

Jacob, 1987; Pointon, 1978). For instance, experiential activities, such as trade shows and trade

missions, have been found to lead to higher levels of performance because they allow managers

to rapidly acquire information about export markets and the process of exporting (Denis &

Depelteau, 1985; Reid, 1985). Conversely, an analysis of 21 empirical studies of export


promotion concluded that no definitive answer could be given to the question of program

effectiveness in terms of performance or management of exporting SMEs (Seringhaus, 1986a,b).

Subsequent to Seringhaus’ review the literature has been less ambiguous. For example, in a

study of trade missions/fairs, Seringhaus and Rosson (1989, p. 290) found that trade mission

participants ‘generated 2.7 times the sales of fair participants—an average of $756,000 versus

$279,000, but that trade fairs generated more overall business due the larger number of

participants’. In a subsequent study of 367 firms that participated in trade shows, the same

authors found that this activity had a positive impact on aggregate sales (Seringhaus & Rosson,

1991).

In a study of 162 firms, Gencturk and Kotabe (2001) found that government export assistance

programs contributed to export success, but the extent of that contribution was dependent upon

the dimension of export performance being examined; EPO services did not contribute to firms’

sales, but enhanced the competitive position of firms. Committed exporters were in the best

position to take advantage of the cost-saving benefits that can be accessed through export

promotion organizations. Lages and Montgomery (2001) discovered that firms receiving EPO

services are better able to adapt their pricing strategy to international markets. They reported that

improved export performance results from export assistance and price adaptation to the extent

that these elements fit the international experience/expertise of firms and the competitive

environment of the industry.

Finally, in a qualitative study, Crick (2004) argued that firms that have quit exporting are not

a homogenous group. Rather, the decision to discontinue is often temporary. Companies that

decide to once again become involved with exporting need to be offered appropriate assistance

(e.g. finding overseas partners) rather than programs that are geared to SMEs just becoming

involved in exporting.

Only a handful of studies have examined the effectiveness of EPPs at the sub-national level.

Two studies have looked at the impact of state export promotion spending on state exports.

Coughlin and Cartwright (1987) conducted the first investigation of the effectiveness of state

export promotion spending. Using least-squares multiple regression analysis, the authors found

that an increase of $1000 in export promotion expenditures generated $432,000 in increased

exports (Coughing & Cartwright, 1987). Wilkinson and Brouthers (2000a,b) found a positive

relationship between trade shows and exports, but their studies used the states as the unit of

analysis rather than individual firms.

In summary, although there is ambiguity in the literature, previous research indicates that

state promotional activities can be fruitful under a variety of conditions. However, how fruitful

depends on the activities undertaken and the ability and/or willingness of firms to take advantage

of EPO services.

5. Trade shows

Although trade shows constitute an important promotional tool, academics have paid little

attention to this activity, both in terms of evaluation and theoretical development (Hansen,

2004), and no previous study has examined the effectiveness of US state government sponsored

trade shows using the firm as the unit of analysis. What empirical evidence does exist

demonstrates that trade shows can provide positive economic benefits to the firm, generating

both immediate sales and product awareness (Gopalakrishna, Lilien, Williams, & Sequeira,

1995). Through trade shows, representatives of companies which are export-ready can gain


customers, disseminate information, identify prospects, gather intelligence, and reinforce firm

morale (Bonoma, 1983; Seringhaus & Rosson, 1991).

Export managers view trade shows as an effective means of obtaining knowledge about

foreign markets (Ramaswami & Yang, 1990; Seringhaus & Rosson, 1998), export sales (Rosson

& Seringhaus, 1995; Seringhaus & Rosson, 1989), and increased profits (Gopalakrishna et al.,

1995). The discussion above suggests that state-sponsored trade shows, while problematic for

some companies, are typically an effective export promotion activity. This leads to the following

hypothesis:

Hypothesis 2. The use of state-sponsored trade shows is positively associated with firm

satisfaction with export performance.

6. Trade missions

Because of informational and operational similarities there is a superficial resemblance

between trade shows and trade missions (i.e. Chadwin, 1990; Denis & Depelteau, 1985; Lesch

et al., 1990). Both activities provide managers with the chance to investigate markets, meet

buyers and distributors, discuss exporting with more experienced participants, and make initial

international business contacts.

Trade missions are commonly led by a product specialist or high-level government official

who arranges meetings between buyers and sellers at an appropriate overseas location

(Jaramillo, 1992). They involve complicated planning and are a substantial challenge to execute

(Runci, 1994). Although participants are not restricted to an exhibit hall and can investigate

markets outside the confines of the developed nations (where most trade shows take place),

Seringhaus and Rosson (1989) concluded that major export targets are less accessible through

trade missions.

Although trade missions can result in immediate sales, they are considered to be more

appropriate for long-term export development (Seringhaus, 1989). One study of 462 firms found

that 8 in 10 participants did not recoup their costs and that 7 in 10 trade mission participants were

unable to achieve any sales. In contrast, 4 in 10 trade show participants had sales significant

enough to offset their costs (Seringhaus & Rosson, 1991). While trade missions may contribute

to sales in foreign markets, they generally accomplish this by enhancing the process of building

relationships between potential business partners over an extended period of time (Spence,

2003). In addition, previous studies have argued that trade missions may be best suited for

investment attraction purposes (Wilkinson & Brouthers, 2000b). Therefore, we do not anticipate

a significant relationship between trade missions and export performance.

7. Programs identifying agents and distributors

One of the greatest challenges for exporting SMEs is the identification, qualification, and

management of overseas agents and distributors. Previous studies indicate that distribution,

delivery, and service are important export success factors (Aaby & Slater, 1989). For smaller

firms, distributors are typically the most important link between the firm and the customer.

However, the ability of SMEs to access appropriate distributor channels can be hampered by

competitors that already control distribution, channel length which drives up costs to a

prohibitive level, or a system of distribution wherein a distributor has an inordinate amount of

control over the channel (Czinkota & Ronkainen, 2001).


Qualifying prospective distributors is a difficult undertaking. The relative scarcity of

candidates able to meet structural requirements (financial strength, facilities, coverage),

behavioral requirements (relationships with government officials, degree of cooperativeness,

reputation in the marketplace), and operational requirements (logistical capabilities, ware-

housing) are what make it difficult (Leonidou, 2004).

Unfortunately, SME activities can be severely hampered when an inappropriate distributor is

selected or when the relationship with the distributor is improperly managed. In one instance, an

American manufacturer of low-end motorcycles was completely closed out of the Costa Rican

market because the owner signed an agreement giving exclusive distribution rights to the local

Honda distributor. After receiving the first shipment from the American firm, the distributorship

cut-off all communications and began to import and sell low end motorcycles from Taiwan. The

distribution agreement was a tool used by the distributor to lock the American firm out of the

market (Thomas & Wilkinson, 2005). Clearly the ability to identify appropriate agents and

distributors should be a key element in the marketing strategy of exporting SMEs. Therefore, we

hypothesize the following:

Hypothesis 3. The use of state-sponsored programs which identify agents and distributors is

positively associated with firm satisfaction with export performance.

8. Methodology

A survey was developed based on an extensive review of the export promotion literature.

It covered a range of issues relating to firm characteristics, performance, strategy, and use of

state-sponsored export promotion programs. A state government export promotion organization

provided the names and addresses of 764 small, manufacturing businesses with which it had

been in contact from 1992 through 1999. Thus, the firms invited to participate included all of the

clients of the EPO over a 7 year period. The survey instrument was mailed with a cover letter

from the executive director of the state promotional agency encouraging managers to answer the

survey.

Because small businesses are the primary targets of export promotion organizations (Elvey,

1990; Luke, Ventriss, Reed, & Reed, 1988), we followed the general guidelines of the Small

Business Administration (SBA, 2004) in conjunction with the United Nations definition of small

firms and limited the sample to those companies with 500 or fewer employees (UNCTAD,

1993). One hundred and five surveys were returned, for a response rate of about 14%; similar to

previous mail surveys (Dillon, Madden, & Firtle, 1994) and typical of response rates for other

SME studies (c.f. Dhanaraj & Beamish, 2003; Julien & Ramangalahy, 2003; Westhead &

Wright, 2001). According to Menon, Bharadwaj, and Howell (1996) response rates for top

managers in US surveys average between 15 and 20%. Thus, the response rate is slightly below

average but in line with many other export studies. To evaluate non-response bias, we compared

early to late respondents. No significant differences were found relative to firm size or

experience (Armstrong & Overton, 1977).

The businesses that returned surveys were diverse both in terms of manufactured products

and level of international involvement. These firms had been in business an average of 46 years.

Most of the respondents were company executives. Thirty percent were top managers, with titles

such as owner, president or CEO. Twenty-two percent were vice presidents. The remaining 42%

consisted of managers, whose titles included marketing manager, international sales manager

and export marketing manager. The participation of key informants, such as senior level


executives or managers with direct responsibility over export operations, increases our

confidence in the reliability of the data gathered by the survey instrument (Huber, 1985; Kotabe

& Czinkota, 1992). Therefore, confidence in the representativeness and quality of the

respondents is quite high. Seven firms were eliminated because they had over 500 employees.

9. Dependent variables

In accordance with previous work (Dhanaraj & Beamish, 2003; Julien & Ramangalahy,

2003) the dependent variable consists of a four-item scale intended to measure the level of

satisfaction that respondents had with their export operations. Perceptual measures were used

instead of financial measures in order to avoid the typical reticence of respondents who are asked

to provide financial information. Previous research has found that perceptual measures are

highly correlated with ‘objective’ financial data (Dess & Robinson, 1984; Geringer & Hebert,

1991) and such an approach has been used in many studies (Brouthers & Xu, 2002; Luo,

Shenkar, & Nyaw, 2001; Nitisch, Beamish, & Makino, 1996; Woodcock, Beamish, & Makino,

1994).

Managers were asked to rate their satisfaction with four measures of firm performance in

foreign markets on a 10-point scale (1, very dissatisfied to 10, very satisfied); measures similar to

those used in previous studies (e.g. Francis & Collins-Dodd, 2004; Robertson & Chetty, 2000).

These were: sales growth in foreign markets, overseas market share, number of countries

exporting to, and overall export performance. The Cronbach’s Alpha for these variables was .90,

indicating that they are highly correlated. This conforms to a common understanding that

performance indicators tend to be complementary rather than mutually exclusive (Katsikeas,

Leonidou, &Morgan, 2000). The four items were used to create a new variable, satisfaction with

export performance3.

10. Control variables

Three models were analyzed. Model 1 consists only of the control variables. Four factors

mentioned in previous studies as being related to firm export success were used as controls:

number of employees, total company sales, export intensity, and export barriers. Firm size was

measured by two variables: employees (total number of employees) and sales volume (total

company sales over the previous 5 years) (Czinkota & Johnson, 1983). Following Reid (1985)

and Gray (1997), export intensity was defined as the percentage of total sales made outside the

US during the previous 5 years.

An important control variable when examining exports from the United States is that of

export barriers. An extensive body of literature has developed examining how barriers or

3 Like most previous work, export performance in this paper is measured at the corporate level. Leonidou et al. (2002)

found that 10 out of 11 studies published in the 1990s used firms rather than export ventures as the unit of analysis.

Katsikeas et al. (2000, 500) state that this ‘can be attributed to academics’ emphasis on the firm level in contrast to

practitioners’ focus on the successes/failure of individual projects’ and ‘greater willingness of key informants to disclose

information at this broad level.’ Cavusgil and Zou (1994) have disputed measuring export performance at the firm level

and have argued that individual export ventures should be examined instead. Katsikeas et al. (2000) point out that both

approaches are less than optimal, and instead argue in favor of export venture portfolios consisting of specific percentages

of the total number of the export ventures of firms. While being mindful of both suggestions and the limitations associated

with corporate level data, this paper follows the majority of previous studies and examines export performance at the firm

level.


inhibitors impede the exporting process. This literature indicates that 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 (Leonidou,

2004; Ramaswami & Yang, 1990; Seringhaus, 1986; Seringhaus & Botschen, 1991).

Respondents were given a list of potential export barriers based on Ramaswami and Yang

(1990) and were asked to select those that were applicable. These barriers were: poor knowledge

of potential markets, lack of ability/time to follow-up trade leads, lack of mechanisms to

generate trade leads, strong foreign competition, lack of staff, the (then) high value of the US

dollar, and trade barriers. These variables were combined to create the composite export barriers

variable. We expect this variable to be negatively associated with the dependent variables.

11. Internal resources

Model 2 includes two measures of firm resources. The first of these, technological resources,

is considered an important source of competitive advantage, both in terms of manufacturing

(Zahra & Nielsen, 2002) and as a driver of international exports (Anand & Kogut, 1997;

Armington, 1986; Chinkook & Schluter, 1999; Dhanaraj & Beamish, 2003; Mahone, 1994;

Markusen et al., 1986; Namiki, 1988; Preece & Grant, 1999; Schmandt, 1991; Wolff & Pett,

2000; Zahra & Covin, 1993; Zahra, Neubaum, & Huse, 1997). Respondents rated four variables

related to technology on a 10-point scale (1, strongly disagree to 10, strongly agree). These four

variables were found to have an acceptable degree of reliability (Cronbach’s Alpha, 77). The

variables were: technological leadership, technological innovation, learning about technology

and state-of-the art processes in manufacturing. These four items were combined to constitute

the variable used in this study, TR (technological resources).

The second measure of resources, Export Resources, is drawn from Yang et al. (1992). They

developed a measure that predicted whether a firm was likely to export based on the availability

of unused resources. The unused resources variable was operationalized as: (1) production

capacity, (2) marketing staffs, (3) management time, and (4) capital. Each variable was coded 1

if unused resources were present, and then summed to produce the composite variable

representing the number of different kinds of unused resources available to a firm.

Yang et al. (1992) examined factors that would influence non-exporting firms to become

involved in exporting. Here, we use their measures to look at the impact offirm resources on export

performance satisfaction for firms already involved in exporting products overseas. We did this by

summing the same fourmeasures to create our composite variable, but reversed their coding in order

to produce a variable measuring used rather than unused firm resources, ER (export resources).

12. Three specific export promotion activities

Model 3 includes the three export promotion variables that firms can use to supplement their

internal resources and capabilities. The first variable, trade missions, consists of the number of

state-sponsored trade missions that firms participated in during the previous 5 years. This

capability was included because some scholars have suggested that it can be a useful

developmental activity for internationalizing firms (Seringhaus, 1987, 1989), is experience

based (Seringhaus, 1986, 1987), and can result in immediate sales (Seringhaus & Rosson, 1989).

The second variable, Trade shows, consists of the number of times that firms participated in

trade shows sponsored by the state’s export promotion office during the previous 5 years.

Previous research indicates that this activity is most appropriate for ready-to-export firms and is


likely to result in immediate sales (Denis & Depelteau, 1985; Reid, 1985; Seringhaus & Rosson,

1989, 1991; Wilkinson & Brouthers, 2000a).

The last variable, agents/distributors, consists of the number of times that firms accessed EPO

programs to assist them in identifying agents and distributors during the previous 5 years. One of

the greatest challenges in international marketing is that of obtaining information about markets

and in employing appropriate distribution channels (Anonymous, 2003; Cavusgil, 1980; Kotabe

& Czinkota, 1992). Therefore, we expect greater use of these programs to be positively related to


13. Findings

Table 1, displays the means, standard deviations and correlations of the variables used in

the regression model. While there are significant correlations between several of the

variables, the largest correlation, rZ.59 (between the number of employees and sales) is

well below the cut-off where collinearity becomes a cause for concern (Mendenhall &

Sincich, 1986). Moreover, collinearity diagnostics reveal variance inflation factor (VIF)

scores of less than 2 for each of the variables. Studenmund (1992, p. 275) states, “a

common rule of thumb is that if VIF (i)O5, the multicollinearity is severe.” For this

reason, multicollinearity does not appear to be a problem. In addition, an examination of

the residuals did not indicate the presence of heteroskedasticity.

Table 2, displays the regression coefficients and significance of each of the regression models.

Model 1 examines the impact of the control variables on the dependent variable.

Three of the control variables are significant: total company sales (p!.01), export intensity

(p!.01), and export barriers (p!.05). Total number of employees was not significant in any of

the models.

Model 2 includes the control variables from Model 1 and adds two internal resource

variables. Technological resources, with a standardized coefficient of .32 (tZ3.46, p!.01), and

export resources, with a standardized coefficient of .20 (tZ2.22, p!.05) are both positively

related to satisfaction with export performance. Moreover, the change in R2 is a statistically

significant .13 (FZ8.43, p!.01). This indicates that the inclusion of the two internal resource

variables improves the overall fit of the equation. This finding supports our first hypothesis

which asserted that the level of internal firm resources is positively associated with firm


Model 3 includes the control and internal resource variables of Model 2 and adds three other

variables to the equation. Trade shows, with a standardized coefficient of .18 (tZ1.89; p!0.05)

and agents/distributors, with a coefficient of .16 (tZ1.82; p!0.05) are both positively

associated with the dependent variable. The third variable, trade missions, is not statistically

significant (tZ.36; pO.1). An R2 change of .06 is statistically significant (FZ2.92, p!.01).

This indicates that the inclusion of trade shows and agents/distributors improves the overall fit

of the equation. These results support the second and third hypotheses which state that both trade

shows and programs identifying agents and distributors are positively related with firm


14. Discussion

We began this paper by suggesting that smaller firms’ export success depends in large

measure upon their ability to marshal and deploy appropriate resources. The resource-based

Table 1

Correlation matrix of exports and independent variables

Variables Satisfaction

with export

performance

Total

number of

employees

Total

company

sales

Export

intensity

Barriers Technological

capabilities

Export

capabilities

Trade

shows

Trade

missions

ID agents/

Distributors

Mean 4.63 105.23 4.90 18.69 2.72 6.54 2.94 1.83 .38 1.04

SD 2.23 141.35 1.93 19.02 1.70 1.91 1.00 5.01 1.09 2.39

Satisfaction with export

performance

1.00

Total number of employees .16 1.00

Total company sales .30* .59* 1.00

Export intensity .26* K.18* K.21** 1.00

Barriers K.25** .02 .04 K.13 1.00

Technological capabilities .44* .02 .23** .11 K.12 1.00

Export capabilities .25* .10 .22** K.13 K.07 .05 1.00

Trade shows .12 .05 K.09 .02 .05 K.21** .09 1.00

Trade missions .10 .11 .08 K.04 K.10 K.05 K.07 .33* 1.00

ID agents/distributors .25* K.12 .00 .21** K.08 K.03 .14 .09 .06 1.00

Notes. *p!.01, **p!.05, two-tailed test.

T.

Wilkin

son

,L

.E.

Bro

uth

ers/

Intern

atio

na

lB

usin

essR

eview1

5(2

00

6)

23

3–

25

2244

Table 2

Satisfaction with export performance (standardized coefficients, t-statistics in parentheses)

Dependent variable Model 1 control variables Model 2 internal firm

resources/capabilities

Model 3 export promotion

Intercept (3.37) (K.47) (K.80)

Total number of employ-

ees

.00(.34) .40(.69) .04(.40)

Sales volume .37*** (3.06) .22** (1.87) .22** (1.90)

Export intensity .31*** (3.11) .28*** (3.02) .25** (2.52)

Export barriers K.22** (K2.29) K.17** (.65) K.16** (K1.85)

Technological resources .32*** (3.46) .38*** (4.10)

Export resources .20** (2.22) .16** (1.74)

Trade shows .18** (1.89)

Trade missions .03 (.36)

Agents/distributors .16** (1.82)

N 86 86 86

R2 .25 .38 .44

Adjusted R2 .21 .33 .38

F 6.63*** 8.04*** 6.72***

R2 change .13*** .06***

F change 8.43*** 2.92***

***p!.01, one-tailed test,**p!.05 one-tailed test, *p!.10, one-tailed test.


view of the firm provided a theoretical prism to link SME resources with SME export

performance. Beginning with classic resource based theory (Barney, 1991) it was hypothesized

that firm-specific internal resources were related to SME export success. It was also pointed out

that smaller firms are often resource poor and may not have the capacity to become successful

exporters without help from the outside. The services of state export promotion organizations

can complement internal firm resources thereby enabling firms to become effective in

international markets.

We hypothesized that the use of export promotion activities positively influences satisfaction

with export performance, even when controlling for internal resources. With respect to internal

resources, we found that firms that fully exploited their internal assets, including their

technological capabilities, demonstrated greater satisfaction with export performance than did

other firms. We also found that greater use of trade shows and programs that identified agents

and distributors was associated with firms reporting higher export performance satisfaction.

The findings of this study reinforce and extend previous work on export promotion. The

negative relationship between export barriers and export performance satisfaction conforms to

previous research (Bagchi-Sen, 1999; Bilkey & Tesar, 1977; Czinkota & Johnson, 1983;

Goodnow & Hansz, 1972; Kaynak & Kothari, 1984; Rabino, 1980; Ramaswami & Yang, 1990;

Reid, 1985; Silva & Rocha, 2001). While some successful exporters may think that reference to

‘export barriers’ is merely an excuse for not making the effort to become involved in export

markets, we believe that these barriers constitute a substantial challenge to SMEs and policy

makers that wish to internationalize their efforts.

The positive relationships between technological resources and export resources are also in

alignment with previous work. The presence of the former suggests that firms with technological

capacity are well positioned for success in international markets (Aaby & Slater, 1989; Alvarez,

2004; Anand & Kogut, 1997; Dhanaraj & Beamish, 2003; Francis & Collins-Dodd, 2000;


Mahone, 1994; McDougall & Oviatt, 1996; Westhead, 1995; Zahra & Nielsen, 2002) while the

latter reinforces previous findings suggesting that appropriate internal firm resources have a

positive impact on firm export performance (Bloodgood et al., 1996; Leonidou et al., 2002; Yang

et al., 1992).

Findings regarding the variables of interest are in agreement with the export promotion

literature. Trade shows have been shown to be positively related to aggregate state exports

(Wilkinson & Brouthers, 2000a,b) and export sales at the firm level (Seringhaus & Rosson,

1991). The findings presented here suggest that firms using trade shows sponsored by state

governments are also likely to have positive export performance outcomes. Finally, the positive

association between the use of agents and distributors provides an initial empirical indicator

pointing to the importance of these actors in the development of overseas markets for American

exporters. This finding is in accordance with statements by scholars working in the area of export

promotion (i.e. Aaby & Slater, 1989; Czinkota & Ronkainen, 2001).

15. Managerial implications

Our results have at least two managerial implications. First, reinforcing earlier work, we

found that for our sample of SMEs, technological resources help firms enjoy greater satisfaction

with export performance (Aaby & Slater, 1989; Alvarez, 2004; Anand & Kogut, 1997;

Armington, 1986; Chinkook & Schluter, 1999; Dhanaraj & Beamish, 2003; Francis & Collins-

Dodd, 2000; Mahone, 1994; Markusen et al., 1986; Schmandt, 1991; Zahra & Covin, 1993;

Zahra et al., 1997; Zahra & Nielsen, 2002). Thus, we propose that smaller firms with

technological resources pursue exporting as a possible expansion strategy.

Second, we found that smaller firms that tapped into available state export promotion

programs enjoyed greater export success. Based on our results it appears that in addition to

utilizing internal firm resources, managers can achieve better results by supplementing their

internal capabilities with appropriate state-supported promotional activities.

Services offered by export promotion organizations, particularly trade shows and programs

identifying agents and distributors, are essentially subsidized firm level competencies that can be

used by businesses lacking the capacity to operate overseas. For example, Artromick, the

world’s largest medication cart manufacturer, began its international marketing efforts by

sending representatives to a trade show arranged through the European office of a state export

promotion organization. Sixteen years later this company continued to access resources

provided by the state government in order to fine-tune its distribution network (Anonymous,

2001). By continuing to use government programs, the firm is avoiding the cost of fully

developing distribution capabilities.

Third, state government officials that manage EPPs should consider placing greater resources

into trade show activities and the identification of overseas agents and distributors. The ability to

gain export sales as well as experiential knowledge through trade shows is a common theme in

the export literature (Bonoma, 1983; Ramaswami & Yang, 1990; Seringhaus & Rosson, 1989,

1998, 1991; Rosson & Seringhaus, 1991). Moreover, the literature points to the importance of

identifying potential overseas partners as a key ingredient to the creation of successful export

ventures (Aaby & Slater, 1989; Thomas & Wilkinson, 2005). The findings presented here

suggest that state EPOs can play a constructive role in both trade show sponsorship and in the

facilitation of overseas partner development.


16. Limitations and conclusion

This paper has several limitations. First, it is cross-sectional in design. While time-series data

is desirable when examining a dynamic process such as exporting, such data simply does not

exist. Neither firms nor governmental entities keep records according to the dictates of academic

researchers.

Second, the sample came from a single state. While we believe that this sample is

representative, the only realistic corrective to this limitation is a replication conducted with data

from other states.

Third, the survey used a reflexive instrument to measure export performance. Although this is

the most common approach used in marketing studies, it has been challenged as potentially

unreliable in terms of internal consistency and construct-validity (Bagozzi, 1994; Diamanto-

poulos, 1999). In this paper, the scores of the four dependent items were summed up thereby

transforming the reflective instrument into a formative instrument. Reflective instruments should

be used with structural equation modeling in order to preserve their psychometric properties. In

future studies, researchers may wish to employ alternative approaches to measurement and

analysis.

Fourth, Katsikeas et al. (2000) have criticized the performance measures used in export

studies as problematic in terms of difficulties measuring, conceptualizing, and operationalizing

the export performance construct. It is hoped that researchers will eventually produce a readily

agreed upon set of performance indicators.

Fifth, although similar to previous studies, a response rate of 14% is low. Surveys of SMEs

tend to have lower response rates than those of large firms. Fewer slack resources and the

concentration of firm knowledge in CEOs (who tend to be too busy to fill out surveys and who

may not delegate the task as readily as a CEO of a big firm), lead to lower response rates for

smaller companies (Bartholomew & Smith, 2006). Lower response rates are problematic

because, ‘low response rate can lead to serious bias (non-response bias) because whether a

person responds to a mail survey is related to his or her interest in the topic’ (Malhotra, 1996,

p. 210).

Finally, we analyzed a limited number of export promotion activities. Others doubtless need

to be considered, such as the influence of trade associations and world trade centers. Moreover,

the analysis did not control for the possibility that some firms participated in independently

sponsored trade shows and non-government supported international venture assistance. Future

research could examine the role of other resources that firms might access in host countries.

While a great deal of literature has focused on strategic alliances, little has been written about

other capabilities that might be tapped into, including, host country governments, networks

accessed through formal and informal associations, and state operated foreign trade offices.

Based on our hypotheses and results we recommend that SMEs consider using effective

export promotion programs as a means of supplementing their firm specific resources. In an

intensively competitive world the ability to access resources external to the firm represents one

way that smaller businesses can increase sales, expand into new markets, locate new partners,

and create competitive advantage.

Locating and examining the usefulness of other resources external to the firm could be

productive for future research and may prove beneficial to smaller exporting firms. Such

research endeavors eventually may result in a model that contributes both to academic

knowledge and provides guidance for small firms in determining how to create greater export

success.


Appendix A

Description of the variables and sources (range in square brackets)

Satisfaction with export

performance

Satisfaction with sales growth in foreign markets, overseas market share, number of

countries exporting to, overall export performance. (Range 9, minimum 1, maximum 10)

Employees Total number of people employed by firm (Range 499, 1 minimum maximum 500)

Sales volume Total company sales during the last 5 years. Under $500,000–over $20 million. Scale

1–7. (Range 6, minimum 1, maximum 7)

Export intensity Percent of total sales made outside the US. (Range 100, minimum 0, maximum 100)

Export capabilities Production capacity, marketing staffs, management time, capital. 1, yes; 0, no.

Technological capabilities The sum of the scores on four variables: technological leadership, technological

innovation, learning about technology, state-of-the art processes in manufacturing. The

scale for each variable was 1Zstrongly disagree to 10Zstrongly agree. (Range 8,

minimum 2, maximum 10)

Export barriers Number of export barriers. (Range 11, minimum 0, maximum 11)

Trade shows Number of times that the respondent firm participated in trade shows sponsored by the

state during the last 12 months. (Range 25, minimum 0, maximum 25)

Trade missions Number of times that the respondent firm participated in trade shows sponsored by the

state during a 4 years period. This number was determined by subtracting the number of

trade missions that had occurred during the past year from the number of trade missions

during the previous 5 years. (Range 8, minimum 0, maximum 8)

Agents/distributors Number of times programs which identify agents and distributors were accessed during

the previous 5 years. (Range 15, minimum 0, maximum 15)

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