Determinants of export performance in a European context.
As a result of the increasing tendency towards a global economy and the severities of trade deficit pressures by many countries, firm behaviour and performance in export markets has received considerable research attention over the last two decades. A major part of this research has focused on the investigation of those factors underlying a firm's initial export involvement (Aaby and Slater, 1989; Bilkey, 1978; Gripsrud, 1990). Certainly, this stream of research has contributed to export marketing theory by concentrating on a critical early stage in the process of internationalization, where a wholly domestic firm faces the real challenges of the international environment (Douglas and Craig, 1992). However, less empirical attention has been paid to the export behaviour of firms that are already engaged in, and thus possess experiential knowledge of, exporting activities (Gripsrud, 1990). It should be noted that one possible way of increasing exports at a national level is through stimulating exporting companies to export more. It follows that the export behaviour and performance of current exporters is an area of legitimate interest, and such studies can be of importance to both public and private sector administrators concerned with future export development and success.
In addition, a systematic review of the pertinent empirical literature suggests that the vast majority of the research efforts have surveyed firms connected with exporting from highly industrialized countries, particularly the US and Canada. An implication of this is that it may be both dangerous and potentially misleading to infer generalizations from such findings to export marketing contexts in other countries, especially those at a different stage of development and/or with a different domestic market size.
In view of these limiting empirical considerations in the exporting literature, an attempt is made to synthesize and empirically test a model of export performance focusing on exporters from a small EU country. Specifically, the study constitutes part of a major project on the exporting activities of indigenous Greek manufacturers, trading with overseas distributors within the spectrum of the EU. The paper is formatted into several sections. First, the relevant literature is reviewed. Second, key theoretical and measurement problems and issues underlying export performance evaluation are systematically examined. Third, attention is paid to major exporting considerations contingent to Greek firms and governmental policies, thus providing a rationale for the study. Fourth, a conceptual model of export performance is developed through the statement of several hypotheses. Fifth, the research design and methodological procedures are described. Sixth, the study findings are presented and discussed. Finally, managerial and public policy implications are highlighted, and a set of directions for future research are identified.
A plethora of studies have been conducted under the aegis of export marketing, and many internal and external factors have been identified that influence firm behaviour and performance in export markets. The evaluation of these works is beyond the scope of this paper, as several attempts have been made to assess and synthesize the export marketing literature over a period of time (Aaby and Slater, 1989; Bilkey, 1978; Gemunden, 1991). However, considerable dissension has been witnessed in the field with respect to the nature and significance of many variables as determinants of export behaviour and performance (Aaby and Slater, 1989; Cavusgil and Zou, 1994; Dominguez and Sequeira, 1993; Walters and Samiee, 1990). Subsequently, attention is drawn to some important discrepancies most relevant in the context of this study:
* Firm size. Cavusgil and Naor (1987) and Christensen et al. (1987) concluded that the larger the company the more likely it is to export. Reid (1983) found that size has a significant effect on the decision to enter new export markets, while Czinkota and Johnston (1983) suggested that company size does not affect export activities. By contrast, Gripsrud (1990) revealed a negative relationship between firm size and the attitude towards future exports. Concerning the relationship between size and export intensity, Culpan (1989) established a positive relationship, Diamantopoulos and Inglis (1988) found no relationship, while Cooper and Kleinschmidt (1985) concluded a negative relationship.
* Export experience. It has been found that a firm's exporting experience has a positive effect on export performance (Madsen, 1989), the degree of internationalization (Dominguez and Sequeira, 1993), and attitudes towards future exports (Gripsrud, 1990). Nevertheless, other empirical evidence is inconsistent with these findings (Cavusgil, 1984; Diamantopoulos and Inglis, 1988; Moon and Lee, 1990).
* Production technology. Most findings indicate that perceived technological strengths are positively related to propensity to export (Aaby and Slater, 1989). In contrast, Reid (1986) concluded that there is only a weak relationship between technology and export performance, and Christensen et al. (1987) revealed no relationship.
* Price. It has been shown that competitive export price levels are positively related to export performance (Kirpalani and MacIntosh, 1980; Madsen, 1989) and export stage development (Moon and Lee, 1990). However, differential price advantage was not found to be significant in discriminating between systematic and non-systematic exporters (Bourandas and Halikias, 1991). Dominguez and Sequeira (1993) also reported that the importance of price as a competitive tool for LDC exports diminishes as firms progress along the export development path.
* Domestic market orientation. Findings suggest that domestic market orientation is a major obstacle to a firm's export involvement and commitment (Karafakioglu, 1986; Kaynak and Kothari, 1984). Moreover, a negative relationship has been reported between the attractiveness of the domestic market and export growth (Madsen, 1989). Contrary to this stream of findings, Cooper and Kleinschmidt (1985) revealed that export intensity was positively correlated with both domestic market potential and domestic market growth.
* Contextual environmental factors. Trade barriers, cultural differences and physical distance to export markets have been found to play an inhibitory role in export development and success (Cavusgil, 1984; Kaynak and Erol, 1989). Nevertheless, some empirical efforts run counter to the general pattern and revealed that these factors did not have a significant effect on export attitudes, behaviour and performance (Gripsrud, 1990; Madsen, 1989).
Prima facie, this diversity of empirical findings gives some credibility to the view that considering the characteristics of the specific exporting context leads to a better understanding of those factors that influence export performance. This implies that it may be difficult to suggest universally valid prescriptions for export success, and that situation-specific elements are recognized and emphasized in the process of designing and implementing effective models of export marketing behaviour (Walters and Samiee, 1990).
Nonetheless, several limitations of past research can be identified that are likely to account for many of the inconsistencies in the literature. First, much of the knowledge about successful export activity is fragmented, and the tradition of building on previous findings is not well-established in the export marketing field (Aaby and Slater, 1989; Cavusgil and Zou, 1994). Many studies have been conducted in isolation by focusing mainly on single factors affecting export behaviour. Attention has been given to such areas as: export motivation; export problems; firm size and export performance; and management's personal characteristics. There have been few efforts to develop and test models that incorporate a relatively wide range of relevant factors. Notable exceptions are the studies by Cavusgil and Nevin (1981), Cavusgil and Zou (1994) and Cooper and Kleinschmidt (1985).
Second, the vast majority of exporting studies have primarily examined independently the univariate effect of each variable on export behaviour, without analysing the effects of these independent variables together (Moon and Lee, 1990). However, it is clear, particularly in the various literature review efforts, that multiple factors play an important role in firms' export behaviour at the same time. It is thus essential that account be taken of the interaction among those independent variables considered in the determination of export performance.
Third, insufficient attention has often been given to the specific characteristics of the exporting situation. Most studies on export behaviour and performance have failed to control for potentially important confounding influences relating particularly to the export market entry mode, export destination, export stage development, or industrial sector. That in turn may cast doubts on the meaningfulness of certain findings.
Fourth, some of the discrepancies in the literature might also be attributable to differences regarding the way in which export performance has been assessed (Cavusgil and Zou, 1994; Walters and Samiee, 1990). Aaby and Slater's (1989) review of the export marketing literature suggests that researchers have followed two fundamental approaches. One stream of research pursues the distinction between exporting and non-exporting firms (e.g. Cavusgil and Naor, 1987; Cavusgil and Nevin, 1981; Yaprak, 1985). This approach is based on the implicit assumption that exporting per se attaches an element of success to the firm. Despite the importance of this set of studies, one innate deficiency in this approach is that no account is taken of potentially significant differences between different exporter groups in terms of export performance (Aaby and Slater, 1989).
The other approach focuses on exporting companies and measures export performance according to some criterion pertaining to the export position of the firm. The most commonly used criteria are: export-to-total sales ratio (Beamish and Munro, 1986; Dominguez and Sequeira, 1993); export sales volume (Czinkota and Johnston, 1983; Madsen, 1989); export sales growth (Cooper and Kleinschmidt, 1985; Madsen, 1989); and export profitability (Bilkey, 1978; Dominguez and Sequeira, 1993). Importantly, there appears to be considerable consensus, especially among recent studies, on the use of multi-measure approaches (e.g. Beamish and Munro, 1987; Craig and Beamish, 1989; Dominguez and Sequeira, 1993; Samiee and Walters, 1990). This tendency is grounded in that export performance evaluation on the basis of a single indicator is likely to capture only a particular aspect of the construct (Dominguez and Sequeira, 1993). Nevertheless, there has been serious concern about the use of the operational measures predominantly employed in the literature as appropriate export performance indicators (Aaby and Slater, 1989). This leads us to more closely scrutinize the issue of export performance assessment.
Problems and issues in assessing export performance
An examination is made of key theoretical issues and empirical findings in the general fields of both marketing and strategy, where the theme of business performance has received heightened research attention at conceptual and empirical levels (Deshpande et al., 1993; Dess and Robinson, 1984; Jaworski and Kohli, 1993; Slater and Narver, 1994; Venkatraman and Ramanujam, 1986). A systematic review of the literature in these areas reveals two major issues that are critical in the evaluation of firm performance in export markets. These refer to the mode of performance assessment (Dess and Robinson, 1984; Venkatraman and Ramanujam, 1987) and the choice of performance dimensions that should be measured (Deshpande et al., 1993; Szymanski et al., 1993).
The mode of performance assessment
The two principal modes of performance assessment identified in the general literature are objective (e.g. based mainly on records relating to absolute figures of company profitability, sales level and such like) and subjective (e.g. managers' perceptions) measures. In the context of export marketing, the vast majority of studies have utilized objective performance indicators.
Nevertheless, there are two different sources of problems with the use of objective measures in assessing export performance. One is concerned with research methodology. In this regard, two potentially important limiting issues warrant consideration. First, formal company 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 et al., 1992). The question which may then be raised is whether accurate objective indicators of export performance can always be obtained.
Second, a serious comparability caveat may arise as a result of inherent measurement weaknesses underlying most objective measures. For instance, profitability is contingent on factors such as the depreciation method followed and the way in which overheads are allocated. However, these aspects reflect internal accounting practices that often vary from one company to another. This problem becomes even more complex when the export dimension is incorporated. Similarly, objective export performance indicators, such as sales volume, sales growth and market share, might have little meaning in those cases where the firms surveyed belong to different industry or product groups (Covin, 1991). Major differences among industries or product subsectors, in terms of competition, technology intensiveness, or market structure, could lead to the comparison of measures that may not be entirely "like for like" across the sample firms.
The other major problem source underlying the use of objective export performance measures appears to be more fundamental, and is connected with theoretical considerations. It has been theorized that managers are in control of the process of strategy formulation and implementation, and thus can choose where and how to compete (e.g. Child, 1972; Hambrick and Mason, 1984). There is clearly a consistent thread in the literatures of marketing and strategy that links decision-maker cognitive biases and values with perception of strategic situations and strategic choice outcomes (e.g. Hambrick and Mason,1984; March and Simon, 1958). It follows that what is most relevant to organizational behaviour is how managers perceive the internal and external environments of the firm, rather than the objective reality of these environments. In relation specifically to performance evaluation, management action is driven by perceptions of company performance rather than by objective calibration of its performance characteristics (for a discussion see Bourgeois (1980)). This in turn gives credibility to the development and adoption of perceptual measures of export performance.
The choice of performance dimensions
Three considerations are of particular importance here. First, there is widespread agreement that firm performance in export markets is a multifaceted concept (e.g. Aaby and Slater, 1989; Buckley et al., 1988; Cavusgil and Zou, 1994). As noted earlier, a variety of measures have been suggested in the extant literature. Aaby and Slater's (1989) review effort concludes that firms' export performance must be assessed on the basis of the achievement of their export objectives. The characteristics of the exporting framework should certainly play a key role in the adoption of appropriate measures of export performance (Buckley et al., 1990; Madsen, 1989).
Second, different exporting firms are likely to set different export performance targets, depending on the nature of their export marketing strategy. However, when emphasis is placed, for instance, on export profitability export sales volume might suffer, whereas export market share sustenance or improvement would probably entail profitability sacrifices (for a discussion see Buckley et al., 1988). This, in turn, highlights the importance for developing composite export performance measures, that can take account of the dynamics relating to the underlying relationships of export performance facets.
Third, due to structural differences among various export markets, certain potentially important explanatory variables, such as perceptions of export stimuli, exporting problems and competitive advantages, may significantly differ across export destinations. In those circumstances where it is essential to control for such confounding influences, export performance must be assessed at the export destination level (Buckley et al., 1988).
Greece as a case for analysis
This study concentrates on the issue of export performance and its determinants among indigenous firms in Greece. The country's gradual shift from heavy reliance on import substitution strategies in the 1970s to contemporary export orientation makes it an interesting test case. Many other countries are in a similar stage of development policy, and/or experience structural characteristics and exporting contingencies resembling those notable in Greek firms. This is turn enhances the substantive character of this study.
Specifically, export marketing activities are of vital importance to the survival and growth of Greek companies. This is ascribed to the relatively small local market size which often restrains "domestic extra-regional expansion" (Welch and Wiedersheim-Paul, 1978), alongside the intensifying competitive climate in Greece as a result of the opening up of frontiers within the EU. In addition, it appears that most Greek firms are unable effectively to reach and sustain an advanced mode of international involvement, such as manufacturing overseas (Bourandas and Halikias, 1991), due primarily to their lack of adequate managerial and financial resources (Bourandas, 1988; Katsikeas, 1989). From a national viewpoint, exporting activities are an effective means of alleviating the pressures arising from Greece's growing trade deficit, which currently runs at the level of ECU973.5 million (OECD, 1993).
In comparison with the case of other more industrialized countries, such as the US and Canada, Greek national export policies are still in an embryonic phase and are characterized by a lack of focus on specific exporter needs. Certain financial incentives and tax credits, along with import duty reliefs for capital equipment and supplies directed towards export-oriented manufacturing, are the main public export policy tools in Greece (Katsikeas, 1989). In addition to resource constraints, the role of the Greek government in export promotion might have been hindered by the lack of parsimonious, empirically-tested models of export behaviour and performance. Such models would be of vital importance not only in guiding the formulation and implementation of optimal national export policies, but also for the adoption of effective export marketing strategies.
Research model and hypotheses
Two key issues have been taken into consideration in developing our model of export behaviour. First, as evidence suggests that different exporter categories vary in their characteristics and behaviour (Cavusgil, 1984; Samiee and Walters, 1991), we examine firms that are engaged in regular export activities. This exporter group represents a distinct, advanced stage in the process of export development (Naidu and Rao, 1993). Second, we focus on indigenous manufacturing firms exporting through overseas distributors. The use of overseas distributors is of vital importance in the establishment and development of international operations, whether serving as a permanent foreign market entry and expansion mode (Bello et al., 1991; Reid, 1983) or a transitional strategy in the process of internationalization (Bello et al., 1991; Johanson and Vahlne, 1990). It is a very common approach adopted by export manufacturers (Beamish et al., 1985; Rosson, 1984), especially those based in less industrialized countries (Dominguez and Sequeira, 1993), due mainly to such factors as their limited financial and/or human resources and insufficient export market knowledge.
A diagram of the model proposed in this study is shown in Figure 1. Based on our review of the export marketing literature, certain structural company characteristics, export commitment and export-related perception variables are integrated and viewed as potentially significant factors influencing export performance. Below, we consider the relational linkages in the proposed model and discuss specifically those variables that, according to existing theory, are likely to affect export performance.
There are three fundamental factors leading to the formation of expectations that company size is related positively to firms' behaviour and performance in export markets. These pertain to organizational resources, economies of scale, and the perception of risk in international activity. Specifically, larger exporting manufacturers are widely considered to possess more financial and human resources; enjoy higher levels of scale economies; and perceive lower levels of risks about foreign markets and operations (for a discussion, see Bonaccorsi, 1992). These size-related advantages are likely not only to facilitate understanding of foreign market characteristics, but to enhance a firm's ability to respond effectively to the requirements of overseas customers, thus potentially leading to higher export performance levels. Despite the existence of counter-arguments (Bonaccorsi, 1992), it is possible to hypothesize accordingly that:
H1: Firm size is positively related to export performance.
It has been theorized that experiential knowledge about overseas markets and operations is a driving force in the internationalization of the firm. This is considered to be so, whether international growth and development is conceptualized as an incremental, sequential stage process (Cavusgil, 1984) or as a steep, non-gradual approach (Sullivan and Bauerschmidt, 1990). Such experiential knowledge is vital especially for those Greek firms exporting to the EU, where competitive practices generally are more sophisticated than those employed domestically. It should be remembered that these firms have grown and developed in a domestic market framework, characterized by a relatively limited scope of marketing practice and orientation (Avlonitis and Gounaris, 1992).
The theoretical explanation for the relationship between exporting experience and export performance lies in the issue of uncertainty and the way firms cope with it (Erramilli, 1991). Less experienced exporters are likely to perceive considerable uncertainty, which in turn might adversely affect their perceptions of potential risks and returns about overseas markets and operations (Agarwal and Ramaswami, 1992; Davidson, 1982). Nonetheless, with increasing exporting experience, 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 programmes (Madsen, 1989). It may then be expected that more experienced exporters would do better in comparison with others. Hence:
H2: Company experience with exporting activities is positively related to export performance.
In focusing on firms' attempts to identify and exploit foreign market opportunities, export marketing researchers have distinguished between proactive and reactive export stimuli (Johnston and Czinkota, 1982; Piercy, 1981). Proactive stimuli are those associated with the firm's aggressive behaviour and deliberate search for export opportunities (pull factors). Reactive stimuli are those connected with the firm's reaction to changing conditions and reflect a passive attitude in seeking exporting opportunities, though possibly leading to an accidental or fortuitous export involvement (push factors). It is clear that these two motivation types reflect different patterns of export attitudes and behaviour, respectively. Therefore, they are likely to influence export performance in a different fashion. As export decision making may be driven by both proactive and reactive elements simultaneously (Johnston and Czinkota, 1982), it is then expected that:
H3: The higher the levels of proactive (reactive) export stimuli, the more likely a positive (inverse) relationship with export performance.
A major impetus for export development and success is the need to develop the capability required to manage exporting problems (Yang et al., 1992). The findings of Katsikeas and Piercy (1990) indicated that Greek manufacturers employed an opportunistic and non-methodical approach to exporting activities. However, the adoption of such an export approach is likely to affect adversely the development of experiential knowledge of overseas markets and operations. The implication is that these firms may be unable adequately to perceive the magnitude of, and in turn appreciate the difficulty and importance of overcoming exporting problems (Seringhaus, 1987). The existence of such problems would limit their ability to effectively seek, identify and exploit export market opportunities. This, in turn, may lead to unsatisfactory export performance levels. Hence:
H4: Perceptions of exporting problems experienced by firms are inversely related to export performance.
A firm's propensity and capacity to establish and maintain regular exporting activity depends on its competitive position in those overseas markets targeted in its export strategy. Firms may be able to choose among a number of different methods to compete in export markets. Each pattern of competitive export strategy is correspondingly connected with specific competitive advantages (Namiki, 1988). The market character of export destination might be an important factor influencing the adoption of a suitable export competitive posture, leading to export survival and success (Aaby and Slater, 1989). Nonetheless, the theoretical justification for a positive relationship between competitive advantages and performance in export markets lies in the intuitive sense that the firm's ability to serve these markets better than competitors could enhance its export performance. Hence:
H5: Perceptions of competitive advantages in export markets are positively related to export performance.
Managerial commitment to exporting activities is likely to have a particularly strong impact on the export behaviour and success of Greek manufacturers. This is primarily attributed to the existence of considerable differences in market characteristics between Greece and the more industrialized EU countries, traditionally the main export market targets for these firms (Katsikeas and Piercy, 1990). To ensure export survival and maintain regular exporting operations to such overseas markets, it is important that Greek firms understand different buying attitudes and employ more sophisticated marketing practices in comparison with those in the domestic market. In developing such a capability, resource commitment to exporting, reflected in such activities as export department organization, export planning and control, export marketing research and regular export market visits, is likely to be of major importance (Beamish et al., 1993; Bonaccorsi, 1993; Cavusgil and Naor, 1987). Accordingly, it is possible to expect that:
H6: Resource commitment to exporting is positively related to export performance.
Data were collected in a survey of indigenous Greek food export manufacturers, trading with overseas distributors in the EU. Food products occupy a major position in the composition of Greece's manufactured exports. The decision to study exporting firms in a single industry, alongside a specific export market entry mode and a single exporting country, was made to maintain sample heterogeneity as low as possible. Such heterogeneity could significantly diminish the meaningfulness of study findings (Bilkey, 1978; Cavusgil, 1984).
The following steps were integral to the design of the survey questionnaire. First, a review of the relevant literature was made for items effectively operationalizing the constructs in Figure 1. Second, the list of questionnaire items was further developed with the co-operation of four business professionals, three high-ranking officials from the Hellenic Export Promotion Organization and two academicians familiar with research on export marketing. Finally, the research instrument was extensively pretested and refined through personal interviews with export executives in Greece, thus ensuring that the questions were relevant and phrased in a meaningful manner.
Those Greek food manufacturers exporting to the EU were identified from current lists provided by the Confederation of Greek Exporters and the Hellenic Export Promotion Organization. These lists have been compiled over several years and updated on a regular basis. The combination of the two lists was the point of departure in defining the sampling frame for the study. All 341 firms listed were initially contacted by telephone. Ninety-four out of 126 food manufacturers reported that they were involved in regular exporting activity to the EU employing mainly overseas distributors, thus meeting the sampling frame requirements. All 94 companies exported to Germany and considered this country to be a key export market, while only 73 and 62 of these firms were found to export to the UK and France respectively. Hence, to control for potentially significant confounds, pertaining to export destination within the spectrum of the EU, the study was confined to the analysis of the exporting operations of Greek food manufacturing firms to Germany.
Personally-administered interviews were engaged to attain higher respondent participation and enhanced quality data. All 94 exporters were approached and asked to provide the information required. A total of 87 firms took part in the research, a response rate of 92.6 per cent. Of the responding firms, 51.7 per cent had a maximum of 100 employees, 26.5 per cent employed between 101 and 300 individuals, and the remainder (21.8 per cent) employed more than 300 personnel. Almost 55 per cent of the companies had an annual sales volume over ECU5 million. While 97.3 per cent of the firms were established over ten years ago, 77 per cent had been engaged in exporting for more than ten years.
In the data collection process, particular attention was given to the identification and selection of the most appropriate individual available in each responding firm to participate in the study. To assure reliability of the information provided, respondents (key informants) had to meet two main criteria: familiarity with the firm's exporting activities to the EU, especially Germany; and responsibility for determining relevant export marketing policy decision-making (Butaney and Wortzel, 1988). Key informants were found to be in executive positions, namely, export managers (mainly in larger firms) and managing directors or owners (particularly in smaller firms). The approach suggested by Butaney and Wortzel (1988) and Huber and Power (1985) for using a single, key informant was also followed during the interview process, with the view to minimizing the potential for systematic and random sources of error.
Dependent variable: export performance
Measurement of export performance was based on perceived values, rather than objective indicators, for several reasons. From a theoretical perspective, and in line with the "strategic choice" school of thought (e.g. Child, 1972; Hambrick and Mason, 1984), export decision makers are guided by their subjective evaluations of firm performance in export markets, rather than by objective, absolute performance ratings (Madsen, 1989). Further, our pre-study interviews revealed that managers would frequently be unwilling or unable to respond effectively to questions regarding absolute export performance values. This adds, in the context of the present study, to our earlier discussion of the theoretical and other methodological problems inherent in the use of objective indicators. In addition, there is empirical evidence supporting both the validity and reliability of subjective performance measures (e.g. Covin and Slevin, 1988; Dess and Robinson, 1984; Venkatraman and Ramanujam, 1987). Finally, a similar approach has been used by other major studies, primarily in the broad marketing management field (e.g. Deshpande et al., 1993; Jaworski and Kohli, 1993; Slater and Narver, 1993, 1994) and, to a limited extent, in the export marketing area (e.g. Cavusgil and Zou, 1994; Madsen, 1989).
In this study, export performance is assessed in relation to the extent to which firms achieve their export objectives, which is grounded in Aaby and Slater (1989). On the basis of the process described in the previous section, three export objectives were identified as relevant and important in the case of Greek firms: export sales, market share and profitability. Respondents were asked to indicate their perception of how well their company had performed in achieving each of these objectives, with regard to its exporting activities to Germany, over the last three years. A five-point scale, ranging from "very badly"(1) to "very well"(5), was used. Following Venkatraman and Ramanujam (1986), these data were factor analysed to assess the dimensionality of export performance. Principal components analysis results showed that all three items loaded heavily on a single factor, which accounted for 85.6 per cent of the total variance (Table 1). An eigenvalue of 2.57 and the scree test supported the selection of this single-factor solution. Factor scores were then calculated for use in subsequent analyses (Kim and Mueller, 1978).
Principal components analysis of perceived export performance items
Export performance item Factor loadings Communality
Market share 0.92 0.85 Sales volume 0.96 0.92 Profitability 0.89 0.80
Eigenvalues 2.57 Percentage of variance explained 85.6
Firm size. There is no universally accepted measure for capturing company size, and several size indicators have been suggested in the general literature. In export performance research, the most commonly used criteria for measuring firm size are the number of employees and/or total sales volume. Both of these measures are employed in this study.
Exporting experience. Two fundamental dimensions of a firm's exporting experience are considered in this study. These refer to the length, measuring the intensity of the firm's exporting experience, and scope, measuring the diversity of this experience (Erramilli, 1991). Length was operationalized as the number of years the manufacturer had been engaged in exporting activities. The scope of a firm's exporting experience was operationalized as the number of countries that the firm was involved in through regular exporting operations.
Export stimuli. The final survey instrument included 18 items representing perceived export stimuli (ES). Respondents were asked to rate the importance of these items on a five-point scale, extending from "not at all important"(1) to "extremely important"(5). The responses to the 18 ES items were factor analysed to assess construct dimensionality. One item, opportunity to reduce inventories, lacked variation, while another, reduction of tariffs in target countries, caused interpretation problems to the factor solution. Both were dropped from further analysis. The final principal components analysis, with varimax rotation, identified six factors that were selected on the basis of eigenvalues greater than one and using the scree test (Table II). The six factors accounted for 70 per cent of the total variance. The solution featured strong individual loadings on each factor, thus enabling conceptual interpretation. The six ES dimensions, in order of variance explained, are interpreted as follows: domestic market pressures (ES1), fortuitous conditions leading to export [TABULAR DATA FOR TABLE II OMITTED] involvement (ES2), international managerial outlook (ES3), national export policy (ES4), export product-market match (ES5), and exogenous market conditions (ES6). Based on these results, factor scores were calculated and used in further analyses.
Exporting problems. Twenty-four export problem (EP) items were selected for the study. As it has been advocated that one issue may be a frequent problem but not too important, while another may be of importance but rarely a problem (Czinkota and Ricks, 1983), each item. was measured along two attributes on a Likert-type scale. One attribute asked respondents to indicate how frequently each EP item was experienced during their exporting operations. The scale polarized from "never" having a problem(1) to "always" being a problem(5). The second dimension asked respondents to weight individual problems by their importance, by indicating the extent to which each EP item negatively affected their firm's export business operations. Responses were measured on a scale format, ranging from "no effect"(1) to "a very negative effect"(9) on exporting activities.
To assess construct dimensionality the EP items were factor analysed. Using an eigenvalue of one or greater as the criterion, along with the scree test, principal components analysis, with varimax rotation, resulted in an eight-factor solution which explained 71 per cent of the total variance (Table III). The solution was not plagued with split loadings and all items loaded heavily on individual factors, enabling straightforward interpretation. The eight factors are referred to as information/communication with the export market (EP1), product adaptation (EP2), export pricing constraints (EP3), marketing organization adaptation (EP4), exogenous logistical constraints (EP5), national export policy (EP6), perceived procedural complexity (EP7), and domestic currency devaluation (EP8). Factor scores were then calculated for use in further analyses.
Competitive advantages. Twenty items, representing perceived competitive advantages (CA) in the export market, were included in the survey instrument. Respondents were asked, for each of these items, to assess their firm's position relative to competition in the export market. A five-point scale, extending from "major disadvantage"(1) to "major advantage"(5), was employed. The responses to the 20 CA items were factor-analysed to explore the existence of possible underlying dimensions. Three items, overseas distributor/customer service, packaging and labelling, and access to external financial sources, were deleted due to their lack of variation. The final principal components analysis, with varimax rotation, revealed four factors that accounted for 68.2 per cent of the total variance (Table IV). These were interpreted as production capability (CA1), marketing capability (CA2), product superiority (CA3), and competitive pricing (CA4). Factor scores were also calculated for use in all subsequent analyses.
[TABULAR DATA FOR TABLE III OMITTED]
Export commitment. Five nominally scaled questions (i.e. "yes", "no") were employed for assessing managerial responses to resource commitment to exporting. These related to the existence of a separate export department (COM1); foreign market entry and customer selection criteria (COM2); regular export market visits (COM3); the use of export marketing research (COM4); and export planning and control activities (COM5). The reluctance of top management to allocate adequate resources to such export tasks is seen as a significant deterrent (Cavusgil and Naor, 1987).
Analysis of the correlation matrix revealed that few independent variables were correlated at relatively high levels (greater than 0.40). This in turn indicates substantial evidence of discriminant validity.
Analysis and results
The theoretical export performance model in Figure 1 was specified as a linear equation and estimated, in three steps, using an ordinary least squares regression procedure. Initially, we included all independent variables, namely size, exporting experience (two dimensions), export stimuli (six factors), exporting problems (eight factors), competitive advantages (four factors), and export commitment (five aspects). At this stage, the null hypothesis tested was that of their collective significance. The obtained value of the relevant test statistic, [F.sub.26,61] = 2.47, indicated that the null hypothesis of the collective significance of explanatory variables was rejected in favour of the alternative (p [less than] 0.01).
To achieve efficient coefficient estimates the model was re-estimated by excluding all those independent variables whose t-statistic took an absolute value lower than unity, as they did not contribute significantly to the explanatory power of the model (Green, 1993). As shown in Table V, the respecified (second-order) model included seven explanatory variables. To attain a further parsimonious specification and improve the efficiency of the estimates from the second-order model, only those variables found to be significant, at the conventional level of 5 per cent, were selected for the final regression model. Five significant variables were included in the final model ([F.sub.5,82] = 12.90, p [less than] 0.001), together accounting for 41 per cent of the total variance (Table V).
The results suggest that the export stimulus dimension of national export policy (ES4) is positively related to export performance (H3). As expected, the problem factor referred to as information/communication with the export market (EP1) has a very substantial negative impact on export performance (H4). Further, the positive sign of marketing capability (CA2) indicates that this competitive advantage dimension is related directly to export performance (H5).
Two export commitment variables, notably export marketing research (COM4) and export planning and control activities (COM5), are statistically significant at a = 0.05 level. The positive sign of the export marketing research (COM4) parameter estimate suggests a positive linkage with export [TABULAR DATA FOR TABLE IV OMITTED] [TABULAR DATA FOR TABLE V OMITTED] performance (H6). Contrary to that expected, export planning and control (COM5) is associated with export performance in a negative fashion.
As opposed to what was hypothesized (H1 and H2, respectively), both firm size and exporting experience (two dimensions) appeared not to be significant determinants of export performance. The results reported in Table V show that these structural variables failed to reach significance.
The final model was evaluated on the basis of the conventional criteria for the detection of the absence of misspecification. The relevant misspecification tests - homoskedasticity, normality and parameter stability - suggest that the reported test statistics pertaining to parameter and model significance are robust, since the regression model meets the preconditions for their validity (Table V).
Specifically, the estimated equation does not suffer from any form of heteroskedasticity, as the relevant test statistic computed ([[[Chi].sup.2].sub.20] = 25.29, p [greater than] 0.05) has assumed a value below the critical level of a = 0.05. Hence, the null hypothesis of homoskedastic residuals is supported (White, 1980). The Jarque-Bera (1980) test indicates that the null hypothesis of the normality of regression residuals is also supported ([[[Chi].sup.2].sub.2] = 1.23, p [greater than] 0.05). In addition, the Chow (1960) test (mid-point), which reports on the stability of the estimated regression coefficients, confirms the null hypothesis of constant parameters ([F.sub.5,81] = 5.52, p [greater than] 0.05).
Although those elements stimulating firms to export have been investigated by a plethora of studies, a dearth of empirical attention has been paid to assessing the effects that various stimuli have on the level of export performance. Our results indicate that, among the six ES dimensions, only national export policy (ES4) was found to be a determinant of export performance. Highlighting the crucial role that the government can play in the development of successful export activities, this finding gives credibility to the importance of those studies focusing on the appraisal of public policy programmes for export promotion (e.g. Kotabe and Czinkota, 1992; Seringhaus, 1986; Seringhaus and Botschen, 1991).
Internationalization theory suggests that managerial perceptions of export problems affect the general behaviour of the firm in overseas markets (Johanson and Vahlne, 1990). However, the effects (if any) of such problems on export performance are more often assumed than analysed. The study reveals that information/communication with the export market (EP1) is the only significant EP dimension related inversely to export performance. Consistent with previous evidence on export behaviour (Bonaccorsi, 1993; Yang et al., 1992; Yaprak, 1985), this finding implies that information/communication with the export market may be the most important barrier to overcome in attempts to maintain regular business activities and, subsequently, succeed in export markets.
In the light of the intensifying competitive climate throughout the EU, the direct linkage of marketing capability (CA2) with export performance may be connected with the importance, and considered a prerequisite for the adoption, of market-led strategies (Piercy, 1989) as a means of survival and long-term viability in export markets. It might be argued, however, that, for such strategies to be effectively designed and implemented, other firm competences, such as production capability, product superiority and competitive pricing, albeit not directly related to export performance, are also likely to be essential. This suggests that export marketing strategy may play a moderating role between the possession of competitive advantage and export performance, which in turn could explain the lack of significance in the relationships of export performance with those CA dimensions.
Turning to the effects of export commitment variables, the study has revealed a strong positive relationship of export marketing research (COM4) with export performance. Foreign market information acquisition reduces "psychic distance" and enhances knowledge of export market practices (Douglas and Craig, 1983; Seringhaus, 1986) thereby according with Johanson and Vahlne's (1990) contention that export market knowledge generates business opportunities and consequently drives the internationalization process.
Furthermore, in contrast with initial expectations, the study identified export planning and control (COM5) as a negative correlate of export performance. This result may be explained by the lack of specialized personnel in the planning and control function of Greek firms (Koufopoulos and Morgan, 1994). Hence, the cost associated with the development of export planning and control activities might be an inhibitor for those manufacturers, leading to lower export performance. It can further be upheld in view of Samiee and Walters' (1991) findings that a major source of strength for regular exporters is their capacity to be flexible and adaptable to.transient opportunities in export markets. Therefore, those firms instituting formal export planning and control procedures may be unable to capitalize on a considerable number of attractive overseas market opportunities, that necessitate immediate strategic response (Walters and Samiee, 1990).
The evidence provided here does not suggest that there is a direct relationship between firm size and export performance, as initially hypothesized. Although not directly comparable, this finding gives some credibility to Bonaccorsi's (1992) arguments questioning the validity of the assumptions underlying the widely accepted proposition of a positive relationship between firm size and export performance. Similarly, neither dimension of exporting experience appears to have a direct connection with export performance. This contradicts a widely held belief: firms possessing relatively high levels of experiential knowledge about exporting operations are likely to perform better than less experienced exporters. However, as the present finding may be attributable to our focus on firms engaged in regular export activity, more research is needed to investigate this issue across different export development stages before firm conclusions can be drawn.
The question which may further be raised is whether company size and exporting experience should be treated as antecedents of those variables, such as export stimuli, exporting problems, competitive advantages and export commitment, that directly affect the export performance of the firm. It may then be possible to provide an explanation for the importance attached in the extant literature to firm size and exporting experience as determinants of export behaviour.
Summary and conclusions
The present research effort differs from previous empirical export marketing studies in several ways. First, it is concerned with the exporting operations of firms from a relatively small EU country, whose economic development is highly dependent on its trading activities with the other Union members. Second, it focuses on the export performance of regular exporters, as distinct from the investigation of those elements that account for the initial export involvement of the firm. Third, the research design adopted considers firms' exporting activities within the context of both a specific export destination and a specific export market entry approach, rather than generalizing across foreign markets and entry modes. Fourth, following Aaby and Slater (1989), a robust unidimensional composite export performance measure has been developed, consistent with the thesis of Buckley et al. (1988) on the dynamics pertaining to the underlying relationships of export performance facets.
Based on the importance attached in the exporting literature to internal and external factors as determinants of export behaviour, a comprehensive model of export performance has been proposed herein. The model integrates key firm characteristics, export commitment and export-related perception variables. The relational connections of these variables with export performance have been examined collectively and simultaneously, rather than on a univariate basis. This identification of explanatory variables of firm performance in export markets can provide valuable guidelines on the formulation and implementation of both export marketing plans and national programmes for export promotion. In this final section, we begin with the conclusions drawn from the research findings in relation to business practitioners and public policy makers, and will follow with the limitations of the study, alongside the opportunities for future research.
Implications for management and public policy
The lack of significance in the relationships of firm size and exporting experience with export performance provide a crucial message for both smaller firms and less experienced exporters. It is important that top management of such companies should not consider their small size or limited exporting experience to be in dissonance with their ability not only to establish, develop and sustain regular export activity, but to attain satisfactory performance levels in overseas markets.
Since the adoption of an export approach based on marketing capability is intrinsic to export performance, it is essential that substantial export marketing skills be augmented and maintained among those firms pursuing regular export operations. Further, exporting manufacturers are more likely to perform well in export markets when they commit adequate resources to undertaking export marketing research. Despite the difficulties and costs involved, the adoption of such activities would be tantamount to reducing the relatively high level of uncertainty which is likely to surround international marketing decisions.
The study highlights the crucial role that the government can play in facilitating company performance in export markets, by stimulating regular export activity at the individual firm level. It is thus necessary that effective national export policies are formulated, with the focus on stimulating ongoing export activities by local manufacturers. Such policies should be regularly assessed and adjusted on the basis of both market developments and exporter requirements.
Knowledge-based programmes may become an important part of governmental export policies. Specifically, public export promotion administrators may find it prudent to prioritize the provision of information about foreign markets and operations. Particular attention may further be paid to the design and implementation of export marketing education and training programmes among business practitioners. The development of such a policy could be considered in the context of major programmes on general management education organized under the aegis of the EU, such as those incorporated into the Strategic Programme for Innovation and Technology Transfer among the Union members.
Limitations and implications for future research
The evidence reported in this paper should be interpreted in the light of several limitations. Notably, this research effort was restricted to manufacturing firms of a certain industrial sector within a specific "small country" context, thus caution may be exercised in generalizing the present findings too broadly. Testing the external validity of our findings would ideally necessitate replication of this study within other countries and/or industries. Realistically, nonetheless, generalizations of the study findings may be applicable to those exporting frameworks with similar structural characteristics and export marketing contingencies, of which there are many.
The cross-sectional nature of the data limits our ability to rule out cause-effect inferences. Research efforts involving dynamic phenomena such as firm performance in export markets may require a temporal focus. Although costly and time-consuming, the adoption of longitudinal approaches in future empirical studies can provide more insights into the dynamic aspects of export behaviour and performance.
Moreover, no account was taken of firm dependence on export markets in the determination of export performance. It has been found elsewhere that the extent to which a firm is dependent on exporting operations influences its export behaviour (e.g. Cavusgil, 1984; Cooper and Kleinschmidt, 1985; Diamantopoulos and Inglis, 1988). Future studies would contribute to existing knowledge by incorporating export dependence into the analysis of export performance. Based on Aaby and Slater's (1989) suggestion that export dependence could be a moderator between export performance and its proposed determinants, it might then be possible to provide an explanation for the lack of a relationship between several of the independent variables and export performance identified in the present study.
Although our study can further be extended in several directions, two would be particularly important to both corporate and public policy decision makers. One suggestion is grounded in recent evidence in the field of strategic alliances that future performance expectations affect current performance levels (Parkhe, 1993). It may also be intuitively appealing to suggest that a reverse relational connection is possible. The implication of this in the export marketing area is that future modelling frameworks may focus on the analysis of those factors that determine this simultaneous relationship between perceptions of export performance expectations and those of current export performance. Another interesting extension is connected with Gripsrud's (1990) conceptualization of decisions and attitudes towards future exports. Specifically, research efforts can be directed towards examining the extent to which export performance and its determinants affect firms' future behaviour in export markets.
The authors thank Robert Morgan and Neil Morgan for their comments on an earlier version of this article. They are also grateful to the anonymous EJM reviewers for their helpful insight and constructive comments and suggestions.
1. The magnitude of this problem may somewhat be moderated when relative market share evaluations are employed, as both the sum constraint (the individual market shares should add up to 100) and bound constraint (the individual market shares should range from zero to 100), two essential conditions here, are satisfied (Szymanski et al., 1993).
2. Buckley et al. (1988) provide a classificatory scheme of export performance assessment by level of analysis: country, industry, firm and product. In this instance, the authors' arguments, connected with the industry level of analysis, can well be extended to export performance evaluation at the firm level.
3. In an attempt to overcome certain innate drawbacks implicit in several exporter classification schemes identified in the literature, Samiee and Walters (1991) pursue a distinction between sporadic and regular exporters. It appears that the export function is underdeveloped among sporadic exporters. These firms pay relatively limited attention to their export marketing activities, in comparison with regular exporters. The authors also suggest that many sporadic exporters do not intend to follow a pattern of natural development to becoming regular exporters (p. 101) Thus, national export policies aiming to convince such firms to become more active in exporting are likely to be ineffective.
4. A distinction has been made in the literature between experiential and objective knowledge development in relation to overseas markets and operations (Johanson and Vahlne, 1990; Seringhaus, 1993). We refer to experiential knowledge which is developed on the basis of information obtained through direct market and customer contact (e.g. participation in trade fairs/missions, international market research, or personal visits overseas) (Kotabe and Czinkota, 1992; Seringhaus, 1987). Gaining such knowledge is critical to exporters as it facilitates the identification of foreign market opportunities, which in turn leads to export market commitment decisions (Bonaccorsi, 1993; Johanson and Vahlne, 1990; Seringhaus, 1991). It is different from objective knowledge which is linked to indirect foreign market information acquisition, primarily through published reports or statistics from various governmental agencies (Seringhaus, 1986/87).
5. It is widely accepted that firms typically grow and develop domestically before becoming involved in international activity (Welch and Wiedersheim-Paul, 1980; Yang et al., 1992).
6. The authors acknowledge the relevance of an anonymous EJM reviewer's suggestion that consideration be given also to the number of export transactions and customers served, in assessing the scope of a firm's exporting experience. This would be particularly important where different exporter categories are examined. Nonetheless, due to our focus on regular exporters, and concerns over the length of the survey instrument, in this study measurement of such experience was based on the number of countries to which the firm regularly exported, as in Kogut and Singh (1988).
7. Initially, both size proxies were included in the regression. Neither of them was found to be significant. To detect whether such a finding was due to the possible existence of collinearity between the two proxies, the model was rerun using one size indicator at a time. Again, they were found insignificant.
8.In addition to export performance (dependent variable), the inclusion of each of the ES, EP and CA dimensions (as independent variables) in regression analysis was based on factor scores calculated by the command SAVE REG (ALL FSULS) under the procedure FACTOR in SPSS. The evaluation of the final regression model was performed in the computer program TSP, which enables testing for the absence of misspecification.
9. These variables retained the same sign throughout the procedure for a parsimonious model. This indicates that the direction of their impact was independent of the other variables included in the initial model.
10. While the initial model included 26 independent variables, the final model included five significant variables. The implied exclusion restrictions of the 21 variables were tested on the basis of the sum of squared residuals of the initial and final models. The obtained value of the relevant test statistic, [F.sub.21,61] = 0.44, is well below the critical value at conventional levels of significance. Thus, the exclusion of those variables did not worsen the performance of the final regression model.
11. In the context of export stimuli, national export policy is seen as a proactive motivation factor to a firm's involvement in exporting activities (Johnston and Czinkota, 1982). Thus, the positive sign of the relevant regression coefficient supports H3.
12. The heteroskedasticity test is indicative of the absence of the exclusion of relevant explanatory variables. If such variables had been excluded from the model, then the residuals of the final regression would have exhibited heteroskedastic properties. This is because the variance would have been a function of the excluded exogenous variables (Green, 1993).
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About the authors
Dr Constantine Katsikeas is the Sir Julian Hedge Professor of Marketing and International Business at Cardiff Business School, in the University of Wales, UK. His research interests centre on international marketing and purchasing, distribution channels and industrial marketing. He has published widely in these areas, with papers appearing in the European Journal of Marketing, the Journal of Marketing Management, the Journal of International Marketing (USA), the Journal of Global Marketing, and International Marketing Review, among others. Dr Katsikeas has also acted as consultant to a variety of companies in the field of export marketing.
Nigel F. Piercy
Dr Nigel F. Piercy is the Sir Julian Hodge Chair in Marketing and Strategy at Cardiff Business School in the University of Wales, UK. His research interests are in the areas of marketing strategy development and implementation strategy. He has published more than 200 papers in journals including the Journal of Marketing, the Journal of Business Research, the Journal of the Academy of Marketing Science, and others, as well as eight books, including, most recently, Market-Led Strategic Change (Butterworth-Heinemann, Oxford, 1992). He is an active consultant and has worked with many companies in the UK, USA, Europe, South Africa and the Far East.
Dr Christos Ioannidis is at Cardiff Business School, in the University of Wales, UK, where he is Course Director of the MSc in International Economics, Banking and Finance. He lectures on international banking and international finance, and has published in journals such as the Journal of Forecasting, the Journal of the Royal Statistical Society, Managerial and Decision Economics, and he is author of a forthcoming book on international banking.
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|Author:||Katsikeas, Constantine S.; Piercy, Nigel F.; Ioannidis, Chris|
|Publication:||European Journal of Marketing|
|Date:||Jun 1, 1996|
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