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The effect of the environment on export performance among telecommunications new ventures.

The importance of exports for achieving business growth and superior financial performance is widely recognized in the literature. Consequently, researchers have sought to identify the variables that influence a company's export performance. Accumulated research findings highlight a need to document the effect of the domestic competitive environment on a firm's export performance. Adopting a multidimensional view of export performance, this study of 121 U.S. telecommunication new ventures concludes that dynamism, hostility, and heterogeneity in a firm's domestic environment are significantly associated with higher export performance, Further, while a venture's age, formal export planning, and technological sophistication are conducive to high expert performance, the impact of the venture's size and past financial performance on export performance are insignificant.

Exporting is an important means for expanding a firm's operations into international markets. This is especially true among new ventures, which may not have the resources or expertise to pursue broad global strategies (Dalli, 1995)? Exporting can help new ventures enter foreign markets, gain experience in international operations, and accumulate the resources and capabilities needed to pursue a more comprehensive global strategy (Root, 1994). Exporting can, therefore, enrich a new venture's financial performance by attracting new customers in new markets (Ramaseshan & Patton, 1994).

The importance of exporting for improving company performance has prompted considerable research on the variables that encourage companies to export. Most past research has focused on identifying the organizational factors that promote exporting, especially the firm's age, size, resources, management systems and structure, and formal planning processes (Bijmolt & Zwart, 1994). Even though contradictory results have been reported on the effect of these variables, it is clear that organizational variables alone do not fully explain the firm's decision to export or its success in exporting. Consequently, some researchers have called for additional empirical studies that document the effect of the conditions of the firm's external environment on export performance (Cavsguil, 1984a; Naidu & Prasad, 1994).

This paper focuses on the association of a firm's domestic competitive environment with export performance. It suggests that when new ventures' executives view their domestic environment as uncertain, exporting activities will intensify and export performance will increase. Controlling for several key organizational variables, the paper examines the impact of the domestic external environment on export performance (Naidu & Prasad, 1994). The results of this study help to overcome a gap in the new venture literature because "only a limited number of studies have focused on U.S. entrepreneurs competing in an international context" (McDougall, 1989, p. 389). Exporting, however, is one of the most important ways new ventures and entrepreneurs can enter international markets and expand globally.

To set the stage for the current research, the paper first discusses the theoretical links between managerial perceptions of the company's domestic competitive environment and export performance. Next, using data from U.S. telecommunications new ventures, the study's results are presented. The paper concludes by discussing the results' scholarly and practical implications.


Few topics in the international business literature have received as much attention as the issue of export performance. Export performance is multifaceted and can encompass the percentage of sales gained from exports (export intensity), the number of countries included in the export program. the contributions of experts to the new venture's profits, and managers' satisfaction with the firm's success in exporting. While most past studies have emphasized the relationship between organizational characteristics and export intensity (Bijmolt & Zwart, 1994), comparatively limited empirical research has explored the effect of the company's domestic competitive environment on other dimensions of export performance.

The scarcity of empirical studies on the relationship between a firm's external environment and export performance is surprising given the importance of this link. Johanson and Vahlne (1977) are among the first to note that the sequence of events in the internationalization process is determined, in part, by the conditions of a firm's domestic environment. Kirpalani and Macintosh (1980) also highlight the important influence of the firm's domestic environment in promoting exports. In addition, Cavusgil (1980) observes that a company's initial international marketing efforts (often through exporting) are explained by management's desire to overcome the unfavorable conditions in the domestic market, such as intense competition. Other researchers (e.g., Bilkey, 1987; Porter, 1990; Waiters & Samiee, 1990) also suggest that a firm's domestic environment influences its export efforts. Similarly, Eshghi (1992) proposes that environmental conditions, such as the saturation of the domestic market, pressure companies to become active exporters. Madsen (1994) also observes that "home market conditions" significantly influence exporting. Cavusgil and Zou (1994) also conclude that exporting is determined by industry characteristics. Despite this broad recognition of the potential effect of the firm's domestic environment on export performance, the specific links between the characteristics of the firm's external environment and export performance remain unclear because the limited empirical research has produced contradictory findings (Calof, 1994; Cavusgil & Nevin, 1981; Samiee & Walters, 1990).

This study, consequently, empirically examines the impact of executives' perceptions of the domestic environment on new ventures' export performance. This focus is consistent with the literature that suggests that perceptions of the firm's environment influence executives' strategic choices (Keats & Hitt, 1988; Miller, 1993; Milliken, 1987, 1990: Yeoh, 1994). These perceptions are also crucial to understanding the nature of the firms industry structure, a factor that can affect a new venture's international operations (Grant. 1995: Porter. 1980; McDougall, 1989; McDougall et al., 1994; Oviatt & McDougall, 1994). In addition, these perceptions may alert executives to threats in their fn-ms' domestic markets and opportunities in foreign markets and, therefore, encourage them to consider expanding internationally through exporting.

The paper contributes to the literature in two primary ways. First, the study's focus on new ventures in the telecommunication industry fills a gap in existing research, which hereto examined samples of established companies. Little information about the factors that spur or inhibit new ventures' exporting efforts exists because little systematic empirical effort has been devoted to examining the determinants of exporting among these firms. This is a major limitation of the literature because the internationalization of markets, especially those in high-technology industries, has prompted new venture managers and owners to explore exporting early in the lives of their companies, as has happened in the telecommunication industry (U.S. Department of Commerce, 1994), the focus of this study. The dynamism and the rapid growth of the telecommunication industry have intensified global competition, which has spurred the interest of high-technology new ventures in exporting or other international operations (McDougall et al., 1994; Oviatt & McDougall, 1994).

Second, the paper's focus on executives' perceptions of their venture's domestic competitive environment may help to clarify the inconclusive findings on the relationships between external environmental factors and export performance (Bijmolt & Zwart, 1994). These weak findings may have resulted from past researchers overlooking the nature of the firm's competitive environment (Gripsrud, 1990). For instance, while Cooper and Kleinschmidt (1985) find that the attractiveness of the firm's domestic market may encourage exporting, other researchers reach the opposite conclusion (e.g., Glejser, Jacquemin, & Petit, 1980). Thus, in his review of past research, Madsen (1987, p. 196) reports that "no clear conclusion can be drawn on ... the impact of domestic market attractiveness." Miesenbock (1988) reaches a similar conclusion based upon another extensive review of the literature on exporting by small companies. Consequently, resolving these contradictory findings not only requires additional empirical research, but also demands a significant shift in the focus away from examining the objective qualities of the domestic market and toward considering managers' perceptions of their firm's domestic competitive environment.

Perceptions of the venture's domestic environment are important because they can pressure or energize managers to initiate strategic actions (Dess, Ireland, & Hitt 1990; Keats & Hitt, 1988; Miles 1980). Even with the rapid globalization of competition, the firm's domestic environment remains a key frame of reference in determining strategic moves (Grant, 1995; Porter, 1990). A venture may attempt to counteract adverse environmental conditions by adopting both proactive and reactive measures (Hitt & Tyler, 1991), such as exporting. These environmental perceptions usually influence managerial attitudes on the viability of exporting (Cavusgil & Zou, 1994; Kedia & Chhokar, 1985, 1986), managers' disposition toward formal export planning (Reid, 1986), and managers' definition of the venture's target markets and marketing approach (Miles, 1980; Pfeffer & Salancik, 1978; Porter, 1980, 1990). If the venture managers decide to enter international markets, then the selection of a mode of entry (e.g., exporting) will be influenced by the managers' perceptions of the domestic environment and the venture's position therein (Kaynak & Kuan, 1993; Miller, 1994; Naidu & Prasad, 1994; Porter, 1980, 1990). Thus, while the current study does not devalue the importance of national or macro-environmental forces in explaining exporting, it emphasizes the effect of the domestic competitive environment in this regard. Further, by focusing on a single industry, the confounding influence of macro-environmental variables on exporting activities is reduced.


According to Aaby and Slater (1989), the exporting literature can he integrated at two levels: the external environment and the firm's competitive strategy. In a model based on a comprehensive review of the literature, however, these researchers devote most of their attention to firm and managerial-related issues while ignoring environmental factors. This is, perhaps, due to the paucity of empirical studies that directly link the environment to exporting. However, as Kirpalani and Macintosh (1980) observe, the omission of environmental variables can seriously hamper our understanding of the determinants of exporting.

The strategic choice approach offers a starting point for linking the new venture's external environment to its export activities. This approach suggests that a firm's capacity to cope with environmental uncertainty is critical to its continued viability (Grant, 1995). Uncertainty arises when the venture is unable to predict or control its external environment, a condition that can profoundly influence the venture's operations (Miller, 1993). The external environment also stimulates managerial attention to the threats and opportunities, which influences the venture's strategic choices (Keats & Hitt, 1988). Attention, therefore, should be given to the role of executives' perceptions of their venture's external environment in determining export performance (Calof, 1994; Naidu & Prasad, 1994; Samiee & Walters, 1990).

Exporting can be a reactive measure in the face of uncertain competitive environmental conditions (Miles, 1980; Porter, 1980). New ventures may increase their exports because they believe opportunities in their domestic markets are on the decline. In industries where domestic demand has plateaued, new ventures are more likely to export (Johanson & Vahlne, 1977; Porter, 1980). Intensive competition in the new venture's domestic market can also stimulate exporting activities.

Conversely, a new venture may take a proactive approach in its export activities to capitalize on significant opportunities in foreign markets (Yeoh, 1994). In some industries, such as telecommunications, the world markets are rapidly becoming homogeneous as international differences in product specifications grow less pronounced (Grant, 1995). Thus, the venture may actively seek exporting opportunities to achieve economies of scale in its operations, move more quickly down the learning curve, and manufacture more products at a lower unit cost than it could by competing solely in its domestic environment. Exporting is also important for learning about changing global market conditions and for building a basis for global expansion.

Even though research suggests that environmental uncertainty induces managerial action (Hitt & Tyler, 1991), disagreement persists on the best way to empirically capture managers' perceptions of this uncertainty (Miller, 1993). As the review by Boyd, Dess, and Rasheed (1993) concludes, researchers have found little correspondence between objective and subjective measures of a firm's environment. Managers' perceptions are often shaped by their experiences, cognitive limitations, aspirations, risk taking, and other personality variables. These perceptions are also affected by the quality and quantity of information the managers receive about their markets, customers, and competitors. Managerial perceptions are thus colored by a multitude of variables and, therefore, may not correspond directly to the objective indicators of the environment (Miller & Friesen, 1984). Still, there is a strong agreement that these perceptions trigger (or constrain) managerial actions, a factor that leads us to stress these perceptions in theorizing about the links between the environment and exporting performance. In doing so, this study follows the approach used by Dess and Beard (1984), Keats and Hitt (1988), and Miller and Friesen (1984), who have conceptualized the competitive environment by examining its dynamism, hostility, and heterogeneity. Even within the same industry, managers usually have significantly different perceptions of the external environment (Milliken, 1987, 1990), which can lead to variations in the ventures' exporting activities, as discussed next.


Dynamism refers to the continuity of change in the firm's competitive environment (Yeoh, 1994). A dynamic environment, such as telecommunications, is characterized by changes in its competitive conditions, such as shifts in technology and customer tastes and needs. These shifts usually create uncertainty for the firm and make long-term planning difficult. While dynamism may create opportunities for growth, it also induces turbulence that can reduce the venture's performance (Slater & Narver, 1994). Reducing the adverse impact of environmental uncertainty due to dynamism is a major managerial challenge (Grant, 1995).

Environmental dynamism and the ensuing turbulence can pressure a new venture to internationalize its sales (McDougall et al., 1994; Oviatt & McDougall, 1994). Of the different modes of foreign expansion, exporting can be attractive to new ventures because it does not require major investments (Erramilli & D'Souza, 1993; Root, 1994). This is important because environmental turbulence usually reduces organizational slack (Slater & Narver, 1994), which can limit the venture's ability to pursue more expensive international options such as foreign direct investment. Exporting also provides the firm with new market opportunities and reduces its reliance on a changing, uncertain domestic market. Thus, the venture can "hedge its bets"; exporting is similar to holding a portfolio of stocks because it reduces the impact of major fluctuations in the domestic market on new venture performance, Exporting can also help the venture achieve stability through market diversification (Barker & Kaynak, 1992).

The above discussion suggests a positive relationship between the perceived dynamism of a new venture's domestic environment and export performance. The firm will attempt to manage dynamism in its domestic environment and reduce the sources of turbulence by going international (Hitt, Hoskisson & Ireland, 1994) and becoming an active exporter. Therefore:

H1: Dynamism in the firm's domestic competitive environment is

positively associated with export performance;


A hostile environment is one where the changes in a firm's external environment are perceived as unfavorable to the firm's mission or outputs (Edelstein, 1992; Miller & Friesen, 1984). This environment can be characterized, for example, by intense competition, low margins, oppressive governmental regulations, and limited growth opportunities. Hostility pressures the new venture to intensify its exports (Root; 1994) rather than initiate a radical reorientation of product offerings (Edelstein, 1992).

When the new venture's domestic environment is viewed as hostile, the owners (managers) will search for ways to achieve higher performance. Under these hostile conditions, the firm has two strategic options: either change the markets where it competes or change the way it competes. Research supports the notion that firms may change the way they compete in the face of hostility. For example, in a study that compared domestic and international new ventures, McDougall (1989) found that international and domestic new ventures perceived different levels of competitive intensity in their domestic markets. Domestic ventures, however, appeared to react to this competitive intensity by adopting unique production expansion and following customer Specialization strategies. McDougall (1989) suggested that these strategies reflected a close relationship between domestic ventures and their customers, and this focus may have enabled those purely domestic ventures to be competitive against their more global counterparts.

Since a major strategic reorientation, however, is usually costly, difficult, and time-consuming (Miller & Friesen, 1984), a venture competing in a hostile environment may opt to enter new markets both at home and abroad. Given that the size and growth rate of the domestic market places natural upper limits on the firm's ability to grow, international expansion through exporting becomes attractive (Eshghi, 1992). In support of this argument, some researchers have found that firms that perceive their domestic environment as having few opportunities (i.e., hostility) are more likely to export than companies that believe they have growing opportunities in their domestic environments (Cooper & Kleinschmidt, 1985; Bauerschmidt, Sullivan & Gillespie, 1985). Also, McDougall (1989) found that those ventures that competed in international markets perceived higher levels of governmental regulations and restrictions within their environments than purely domestic ventures. Thus, the hostility associated with governmental regulations might have encouraged these ventures to seek less regulated and hostile international markets. Finally, Cavusgil (1984a) found that increased competition in the firm's domestic market (i.e., growing hostility) and other hostile domestic competitive conditions (e.g., market maturity) were associated with increased exporting efforts. Therefore:

H2: Hostility in the firm's domestic competitive environment is

positively associated with the firm's export performance.


This variable indicates the level of perceived diversity and complexity in the firm's environment (Dess & Beard, 1984; Miller & Friesen, 1984). Diversity results from Confronting multiple market segments with different needs and expectations, and from facing numerous and diverse competitors (Porter, 1980). Heterogeneity increases the perceived complexity of the venture's strategic decision-making process (Dess & Beard, 1984), taxes the firm's resources, and makes it harder for the venture to satisfy or retain customers.

Heterogeneity and export performance are expected to be positively related for two major masons. First, firms that operate in multiple market segments often become more adept at dealing with diverse and complex strategic issues than firms that compete on a smaller or more local basis. Over time, executives facing heterogeneity may grow accustomed to the complexity of the environment. As Axinn (1988) notes, executives who are proficient in competing in heterogeneous domestic environments are more likely to promote exporting activities, The diversity of the skills developed while managing heterogeneous domestic environments also prepares the venture's managers for the demands of export activities (Welch & Weidersheim-Paul, 1980).

Second, firms in heterogeneous environments may pursue a diversification strategy that emphasizes small market share tactics (Cooper & Kleinschmidt, 1985; Hammermesh, Anderson, & Harris, 1978). Thus, those ventures facing heterogeneous markets may view exporting as a logical extension of their market diversification strategy. Consistent with this proposition, Lee and Yang (1991) report a positive relationship between market diversity (an indicator of heterogeneity) and export intensity, a key dimension of export performance. Therefore:

H3: Heterogeneity of the firm's domestic competitive environment is

positively associated with the firm's export performance.


Sample and Data

To test the study's hypotheses, data were collected from U.S. telecommunications new ventures. Mall questionnaires were used to gather information from the companies' CEOs (or highest ranking officers) who were the most informed individuals about their firms' environmental and strategic issues (Keats & Hitt, 1988; McDougall et al., 1994; Miller & Friesen, 1984). Data from secondary sources were also used to validate and complement the survey-based measures.

The telecommunications industry was chosen because new ventures in this industry are increasingly active in international operations, especially exporting (U.S. Department of Commerce 1994). This is contrary to the conventional wisdom that exporting increases as products become mature (Vernon, 1966). Since both domestic and international opportunities abound in the telecommunications industry, exports are believed to be less likely to be a result of macro-environmental variables and more a result of the managers' perceptions of the domestic environment. Finally, the use of data from a single industry also helps to control for some sources of environmental influences (Dess et al., 1990).

Ventures targeted for survey were assembled from several references including the following trade publications for the 1991-93 period: Business Communication Review, Communications Week, Telegraphy, Telecom Market Review, Telecommunication Reports, Teleconnect Magazine, and Telephony. Given that the industry is in a state of flux, canvassing multiple trade publications (several of which publish annual lists of companies in different sectors of the industry) was necessary to develop a comprehensive list of industry membership. Porter (1980) and Grant (1995) observe that the composition of a young, dynamic industry, such as telecommunications, is difficult to determine.

The survey targeted ventures in the three largest segments in the telecommunications industry, namely the radio and TV broadcasting and communication equipment (SIC 3663), network equipment (SIC 3661), and navigation equipment (SIC 3812) sectors. Companies were included if they were eight years old or younger (McDougall et al., 1994), and manufactured and sold products within at least one of the three SIC groups just mentioned. Of the 531 questionnaires sent, 47 were undeliverable. Of the remaining surveys, 127 responses were returned, but six surveys that had missing data were excluded. Thus. 121 useable responses were received, for a response rate of 25%. The ventures averaged 84.18 (sd = 57.15) full-time employees and had been in business for 5.21 (sd = 1.83) years. The final sample consisted of 41 firms from SIC 3663.53 firms from SIC 3661, and 27 firms from SIC 3812.

Three steps were taken to ensure the reliability and validity of the data. First, the representativeness of the sample to its target population was examined by comparing responding and nonresponding ventures on their age (in years), size (using assets and full-time employees), and two measures of performance--return on assets (ROA) and return on sales (ROS). The t-tests showed no significant differences between responding and non-responding ventures.

Second, data were collected from a second manager from a subset of the responding firms to establish inter-rater reliability, on the study's measures. Thus, upon the receipt of the first response. a second survey was mailed to a randomly chosen executive in each venture (typically, a vice-president or higher). Two mailings were attempted to reach a second executive from each firm that responded to the study's survey. This process yielded 59 completed questionnaires. Thus, we received and later matched the responses of two executives from 59 companies. While there is no agreement on the most valid approach to establish inter-rater reliabilities, the use of simple r is the most common practice in strategic management and entrepreneurship research. However, Jones, Johnson, Butler, and Main (1983) have questioned the merits of this approach, notably because of semantic differences, differences in respondents' cognitive and information process styles, and data aggregation problems. The readers should be aware of these shortcomings. Still, the use of simple r is informative. Thus, consistent with the literature, inter-rater reliability was evaluated using simple correlations. Inter-rater reliabilities for the study's measures were significant (average r = .72, n = 59, p < .001). (2)

Third, wherever possible, secondary data were collected from multiple sources (e.g., trade publications) and were compared to the survey data to determine the reliability of the data collected from the mail survey. Secondary sources were used to collect objective data for validation purposes. These include Inc. magazine, the Lexis/Nexis database, and the Disclosure database. Also, we used the references mentioned previously in the method section to collect information on some individual ventures and measures of their environmental conditions, such as the R&D, advertising, and growth rates. These references included: Business Communication Review, Communications Week, Telegraphy, Telecom Market Review, Telecommunication Reports, Teleconnect Magazine, and Telephony. Data on a venture's age, size (both total assets and full-time employees), R&D spending, export intensity, and past performance were thus validated, as reported in the Appendix.


Data were collected on a new venture's export performance, perceptions of its domestic competitive environment, and statistical controls for organizational variables. Since the Appendix explains the details of the measures, this section provides only an overview of these variables.

Export Performance

Four measures were employed to evaluate the new venture's export performance. The use of four measures was necessary because export performance is a complex, multidimensional concept, a factor that caused several authors to suggest a need for multiple indicators (e.g., Bijmolt & Zwart, 1994; Moini, 1995). (3) These four measures are discussed below.

a. Export intensity defined as a percent of the venture's sales resulting from exports, has been widely used in prior research (Beamish, Craig, & McLeelan, 1993; Bijmolt & Zwart, 1994; Cavusgil, 1984b; Kaynak & Kuan, 1993; Moini, 1995; Waiters & Samiee, 1990). This measure, which has been shown to be closely related to other measures of the new venture's internationalization activities (e.g., McDougall, 1989), reflects the extent to which exports contributed to the firm's success (Cavusgil & Nevin, 1981; Moini, 1995). The export intensity measure may have serious limitations in the case of new ventures, which often have to work very hard for years to develop an extensive export program.

b. The scope of exporting activities was measured by the number of countries to which the firm exported its products (goods). This measure, which ganged a new venture's success in penetrating new foreign markets and diversifying the sources of its export resources, has also been used in previous research (Calof, 1993; Sood & Adams, 1984; Sriram & Manu, 1995).

c. Contribution of exports to profits was defined as the percent of a venture's overall profits that were generated from non-domestic sales. This measure, which was used to gain insights into the perceived contributions of exports to the firm's performance, has been employed in previous research (Waiters & Samiee, 1990). This measure was necessary because increased exporting does not always translate into higher profits (Kaynak & Kuan, 1993), since the ventures may have to spend heavily on developing and implementing a successful export program, Further, if exports are motivated by the managers' aspirations to improve their firms' profitability or overcome harsh domestic competitive pressures, then measuring export performance should account for the contributions of exports to the new venture's profits.

d. Executive satisfaction with export success was the final measure of export performance. This measure, which consisted of the average responses to three survey items, was important because it may take several years to develop a profitable export program. Given that the firms examined in this study were young, their export programs may have only been two or three years old. This meant that other export performance measures used (e.g., export intensity) are limited. For example, the success of exports might not be accurately captured by export intensity so quickly after the program's inception. The satisfaction with export performance measure, however, provided an assessment of the firm's success in launching and maintaining an export program. This measure also acknowledged the fact that venture managers are central in providing support for the export program; managers' satisfaction with the program is necessary to maintain support for export activities (e.g., Bijmolt & Zwart, 1994).

The three items used to measure satisfaction with the venture's exports followed a 5-point response format (1 = strongly disagree vs. 5 = strongly agree). The items, which were preceded by the statement "Over the past 3 years," were as follows: "This company has been successful in its exporting activities," "This company has outperformed its key competitors in exporting," and "This company has made satisfactory progress in its exporting activities." Responses to the three items were averaged to develop an index of satisfaction with export performance that was used in the analysis.

Perceptions of the Environment

Executives also responded to the measures of domestic environmental dynamism (5 items), hostility (5 items), and heterogeneity (3 items). These measures have been used in past research on medium and smaller-sized firms (Covin & Covin, 1990; Miller & Friesen, 1984). Executives were asked to evaluate their ventures' domestic competitive environment over the preceding three years, using a 5-point response scale (5 = strongly agree vs. 1 = strongly disagree). The items appear in the Appendix.

A comment on the validity of the environmental measures is in order. As mentioned previously, several researchers have found modest to low correlations between objective and subjective measures of the environment. Still, to ensure the validity of the measures of perceived environment, data were collected from secondary sources for several well-established indicators of the firm's environment. Next, the simple correlations between the objective and subjective measures of the environment were examined. For dynamism, two widely used indicators were utilized: the R&D-to-sales ratio (Dess & Beard, 1984) and the advertising-to-sales ratio (Grant, 1995; Porter, 1980). Correlations between these variables and the dynamism subjective index were .69 (n = 83) and .64 (n = 81), respectively, p < .001. Further, the industry's growth of shipments (Dess & Beard, 1984) was significantly correlated with the study's hostility index (r = -.72, p < .001).

However, we encountered greater difficulties in validating the heterogeneity measure, because the companies studied competed in the same industry (telecommunications). To gain an insight into this issue, we correlated the responses provided by the second executive respondents with the heterogeneity index (created using data from the primary respondents). Three indicators of heterogeneity were used. The first was "the number of products marketed by the company" (Sharfman & Dean, 1991); it was significantly correlated with the heterogeneity index (r = .63, n = 51, p <.001). The second indicator was the "number of market segments targeted by the company" (Sharfman & Dean, 1991) which was significantly correlated with the heterogeneity index (r = .59, n = 51, p < .001). The final indicator was the diversity of the firm's customer types (Dess & Beard, 1984; Miller & Friesen, 1984). Following Woo (1983), managers indicated which groups they targeted in their marketing activities. The total number of groups identified was summed and correlated with the heterogeneity index (r = .71, n = 49, p < .01). Coupled with the efforts of Miller and Friesen (1984), the results enhance confidence in the validity of the measure of heterogeneity.

Statistical Controls for Organizational Variables

Organizational variables can affect export performance (Samiee & Walters, 1990). Thus, to gain an accurate evaluation of the relationship of managers' environmental perceptions with export performance, the study controlled for export planning, technological sophistication, venture size, venture age, and past performance, as follows:

a. Formality of export planning. Success in exporting requires formal planning and analysis of the environment (Reid, 1986). Ventures that plan their exporting activities can usually achieve higher levels of export intensity because formal planning forces managers to allocate resources and develop a successful strategy for these activities (Cavusgil & Zou, 1994). Therefore, formal export planning is expected to be positively associated with export intensity and performance. The items used to measure formal export planning are reported in the Appendix.

b. Technological sophistication. Technology is fast becoming a major source of competitive advantage in international markets (Miller, 1994). Technological sophistication, measured as the venture's intensity of R&D expenditures, is expected to be positively associated with export intensity (Ito & Pucik, 1993). This is because technologically sophisticated telecommunication products (i.e., those that embody high levels of technical and scientific skills) are likely to be made in only a few countries. Consistent with the Heckscher-Ohlin theory of international trade (Learner, 1993), new ventures with technologically superior products will have greater opportunities to export than those firms that make less sophisticated products (Samiee & Waiters, 1990). This proposition has been empirically supported (Cavusgil, 1984b; Moini, 1995; Walter & Samiee, 1990). Consistent with past research, the venture's three-year average R&D spending was used to measure its technological sophistication (Ito & Pucik, 1993). This measure was validated using a three-item survey-based index, as reported in the Appendix.

c. Venture size. Venture size is expected to be positively associated with export performance; The larger the firm becomes, the greater its resources and the less likely its domestic environment can provide sufficient growth opportunities (Calof, 1994). Also, as the new venture grows, its ability to overcome export barriers increases and its incentives to export usually intensify. In fact, researchers reported a positive association between the size of the firm and its success in exporting (Kaynak & Kuan, 1993; Moini, 1995), and between size and export intensity (Cavusgil, 1984a). In this study, size was measured by the log of the three-year average of a venture's full-time employees.

d. Venture age. Calof (1994) notes that firms consider exporting a response to their progression through the organizational life cycle. As firms become more established, exporting becomes an increasingly viable strategic choice, A positive association between the venture's age and export performance was expected. In this study, age was measured by the number of years the new venture had been in existence.

e. Past financial performance. High performance indicated the existence of the slack resources necessary to engage in exporting (Root, 1994). A new venture with strong past financial performance was, therefore, expected to devote greater efforts to exporting than ventures with poor past performance records. The three-year average ROA was used as a control variable.


Table 1 presents the means, standard deviations, and intercorrelations among the study's variables. An examination of the correlations indicates the absence of multicolinearity among the study's independent variables. Table 1 also shows that the export intensity and the number of countries to which a new venture exports are highly correlated (r = .79, p < .001). Ordinarily, one of these two highly correlated measures would have been dropped. Despite this significant overlap, however, both measures are retained in the paper to ensure direct comparisons with the literature. Table 1 also shows that the correlations between other measures of export performance range between .36 and .43. These correlations reflect the fact that these measures are conceptually related because they gauge different aspects of export performance. Still, the less-than-perfect correlations among these measures indicate that they tap different aspects of export performance.
Table 1
Descriptive Statistics, Internal Reliabilities, and
Intercorrelations Among the Study's Variables *

Variables                Mean     sd     [alpha]    1      2

 1 Venture age            5.21    1.83      NA #     --
 2 Venture size          84.18   57.15        NA    .31    --
 3 Past ROA               4.48    1.67        NA    .23   .09
 4 Export planning        2.61    2.05       .71    .19   .14
 5 Technological
   sophistication         5.07    3.73        NA    .06   .12
 6 Dynamism               3.37    1.14       .76    .11   .06
 7 Hostility              3.17    1.06       .75   -.13   .12
 8 Heterogeneity          2.78    1.73       .76    .16   .19
 9 Export intensity      22.61   15.37        NA    .26   .02
10 # of countries        14.51    9.68        NA    .29   .06
11 Contributions
   to profits            17.03   11.64        NA    .36   .03
12 Export satisfaction    2.83    1.39       .71    .27   .14

Variables                 3      4     5      6      7

 1 Venture age
 2 Venture size
 3 Past ROA                --
 4 Export planning       -.07    --
 5 Technological
   sophistication         .16   .11     --
 6 Dynamism               .14   .29    .18     --
 7 Hostility             -.03   .17   -.08    .20     --
 8 Heterogeneity          .09   .21    .20   -.08    .19
 9 Export intensity       .08   .23    .32    .13    .31
10 # of countries         .08   .19    .23    .21    .26
11 Contributions
   to profits            -.17   .31    .24    .24   -.23
12 Export satisfaction    .05   .37    .25    .23    .23

Variables                 8     9    10    11    12

 1 Venture age
 2 Venture size
 3 Past ROA
 4 Export planning
 5 Technological
 6 Dynamism
 7 Hostility
 8 Heterogeneity          --
 9 Export intensity      .26    --
10 # of countries        .31   .79    --
11 Contributions
   to profits            .18   .36   .39    --
12 Export satisfaction   .27   .43   .41   .38    --

@ p < .10

* p < .05

** p < .01

*** p < .001

Hierarchial regression analysis was used to test the study's hypotheses. This analysis proceeded in two steps. In the first, each measure of the venture's export performance was regressed on the study's five control variables, hereafter the "restricted model." In the second step, each export performance measure was regressed on the control and independent variables, hereafter the "full model." The results from this two-step procedure appear in Table 2 and are summarized below.
Table 2
Results of Hypothesis Tests Using Hierarchial Regression

                                   Export Intensity

                                Restricted   Full

Constant                         6.57 *       9.21 *
Venture Age                       .23 *        .25 *
Venture Size                      .07          .05
Past Performance                  .04          .07
Export Planning                   .28 *        .23 *
  Sophistication                  .34 **       .25 *
Dynamism                                       .18 @
Hostility                                      .34 **
Heterogeneity                                  .31 **
[R.sup.2]                         .21          .34
F-value                          4.03 **     11.27 ***
Change in [R.sup.2]                            .13
F-value (change in [R.sup.2])                 2.63 *

                                   Number of Countries

                                Restricted   Full

Constant                          2.03       2.39
Venture Age                        .19 *      .23 *
Venture Size                       .05        .01
Past Performance                   .02        .03
Export Planning                    .23 *      .21 *
  Sophistication                   .28 *      .26 *
Dynamism                                      .29 *
Hostility                                     .31 **
Heterogeneity                                 .47 ***
[R.sup.2]                          .19        .31
F-value                           2.91 *     6.37 **
Change in [R.sup.2]                           .12
F-value (change in [R.sup.2])                2.32 *

                                     to Profits

                                Restricted   Full

Constant                          3.16 *     4.07
Venture Age                        .21 *      .19 *
Venture Size                       .01        .03
Past Performance                  -.13       -.09
Export Planning                    .25 *      .27 *
  Sophistication                   .23 *      .29 *
Dynamism                                      .31 **
Hostility                                    -.26 *
Heterogeneity                                 .21 *
[R.sup.2]                          .14        .25
F-value                           2.17 *     8.03 **
Change in [R.sup.2]                           .11
F-value (change in [R.sup.2])                1.97 *

                                    Satisfaction Index

                                Restricted   Full

Constant                          1.06       4.83    **
Venture Age                        .20 *      .21    *
Venture Size                       .01        .02
Past Performance                   .08        .03
Export Planning                    .19 *      .19    *
  Sophistication                   .37 **     .35    **
Dynamism                                      .27    *
Hostility                                     .21    *
Heterogeneity                                 .38    *
[R.sup.2]                          .17        .31
F-value                           3.17 *     9.41    ***
Change in [R.sup.2]                           .14
F-value (change in [R.sup.2])                2.71    *

@ p < .10

* p < .05

** p < .01

*** p < .001

Perceptions of the Environment

The results reported in Table 2 show that the new venture's perceptions of the environment explained a significant portion of variance in export performance. When export intensity was regressed on the study's five control variables, the equation for the restricted model was significant (p < .01) and explained 21% of the variance. After the three environmental measures were added to the analysis (the full model), the equation explained 34% of the variance in export intensity. The increase in R2 resulted in an F-value of 2.63, which was significant (p < .05). Similar results were found when the number of countries to which the venture exports its products was used as the dependent variable. The restricted and full models, respectively, explained, 19% and 31% of the variance, which resulted in an F-value of 2.32 (p < .05). Further, the restricted and full models explained 14% and 25% of the variance, respectively, in the exports' contributions to the ventures' profits. The incremental increase in R2 yielded an F-value of 1.97 (p < .05). Finally, as shown in Table 2, the restricted and full models explained 17% and 31% of the variance, respectively, in the ventures' managers' satisfaction with export performance. The inclusion of the three environmental measures improved the explanatory power of the regression equation, producing an F-value of 2.71 (p < .05).

The venture's perceived dynamism of its domestic environment was significantly and positively associated with exports' contribution to profits (p < .01), satisfaction with export performance (p < .055, and with the number of countries to which the venture exported (p < .05). Perceived environmental dynamism was also positively, albeit marginally, associated with export intensity (p = .083). Next, as shown in Table 2, hostility in the venture's domestic environment was significantly and positively associated with export intensity (p < .001), number of countries (p < .01), and satisfaction with the export's contribution to the new venture's profits (p < .055. The association between perceived hostility and exports' contribution to profits was significant but negative (p < .05). Finally, perceived heterogeneity was positively and significantly associated with the four export performance measures as follows: intensity (p < .01), satisfaction with success (p < .01), number of countries (p < .055, and contribution to profits (p < .05). (4)

Statistical Control Variables

As predicted, and as Table 2 shows, there was a positive association between a venture's age and the four measures of export performance (all at p < .05). These results are consistent with the literature (Bonaccorsi, 1992; Calof, 1994).

Contrary to the conclusion of some researchers (e.g., Cavusgil, 1984a; Kaynak & Kuan, 19935, the associations between venture size and export performance were positive, but insignificant in all four analyses. The ventures' small size and the lack of variance in this measure may explain the present results. Given the persistent debate on the relationship between firm size and age and export performance (Bonaccorsi, 1992; Calof, 1994), the results add clarity to this issue because the sampled companies were both young and small. In all analyses, venture age was more strongly associated with high export performance than was venture size. One reason for these findings is the fact that the ventures in global industries may initiate exporting programs soon after their inception, but it may take several years before these export programs become profitable. Therefore, managers should evaluate the success of their venture's export programs and view the resources devoted to these programs in the same way they view other long-term investments, such as R&D.

The association between past ROA and the four export performance measures was insignificant. Thus, past performance may not be a key predictor of the venture's export performance as suggested by Root (19945. Alternatively, other organizational and environmental factors may be of greater importance in determining export performance.

Formal export planning was positively and significantly associated with the four measures of export performance. These results were consistent with prior research (e.g., Reid, 1986; Waiters, 1991).

Finally; technological sophistication was also positively and significantly associated with all of the study's measures of export performance, which corroborates past findings (Cavusgil, 1984b; Ito & Pucik, 1993; Walter & Samiee, 1990). The positive association between technological sophistication and export performance holds even within the same industry, a finding that extends the literature.


This study's results show that mangers' perceptions of their domestic competitive environment explain a significant portion of variance in the new venture's export performance, above and beyond that explained by several key organizational variables. This finding highlights the importance of integrating a venture's perceptions of its domestic competitive environment into models of export performance. While understanding the determinants of export performance has been the subject of much discussion in the literature, little attention has been given to empirically documenting the impact of the external environment, especially among high-technology new ventures, on exporting. This section will review the study's key findings and then discuss their implications for managerial practice and future research.

The Perceived Environment and Export Performance

As Hypothesis 1 predicted, a venture's perceived environmental dynamism is positively and significantly associated with export performance in three of the four analyses and approaches statistical significance in the case of export intensity. These results support the proposition that a dynamic domestic market often increases venture managers' (owners') uncertainty about the firm's survival and, therefore, encourages exporting activities. While perceived dynamism creates opportunities for business growth, it can also profoundly alter the structure of the industry and change the rules of competition (Grant, 1995). As dynamism increases, major changes in product attributes and marketing programs often become necessary (Buzzell & Gale, 1987), as is happening today in the telecommunications industry. Consequently, venture managers need to weigh the costs of adapting their products to meet these changing competitive dynamics against future profits. As dynamism continues to accelerate, telecommunication new ventures must also consider the possibility that their products may become obsolete due to radical shifts in technology or customer needs. Thus, environmental dynamism can encourage ventures to seek additional sources of revenue by entering new foreign markets, which can result in higher export performance.

Moreover, consistent with Hypothesis 2, perceived hostility is positively and significantly associated with three of the four export performance measures: the exception is the contribution of exports to profits. These results, which support past research using established companies (Cavusgil, 1980; Cavusgil, 1984a; Cooper & Kleinschmidt, 1985), are also understandable because hostility can undermine a telecommunication venture's position in the industry (Slater & Narver, 1994). Unfavorable changes in the number or mix of competitors, increases in state or federal regulations of the industry, or declines in demand pressure the new venture to seek export opportunities in foreign markets in order to offset the hostility of their domestic markets.

Still, the negative and significant relationship between the venture's environmental hostility score and exports' contribution to profits is counter to the study's expectations. It is possible that while a firm may increase its exporting efforts in response to growing domestic market hostility, it may take years for exports to contribute positively to a company's profits. Thus, although hostility may be positively associated with export intensity, the number of export countries and managers' satisfaction with export programs, export efforts in hostile environments may remain unprofitable for several years. Given that building an extensive export program can be costly, short-term financial gains from exporting may be limited. Investments in initiating, building, and maintaining an active export program can be justified by the owners (managers) as necessary for developing a pathway to global expansion. In this context, short-term profits may be sacrificed to ensure access to international distribution channels and develop long-term relationships with clients in foreign markets. If this argument is correct, then the predicted positive relationship between hostility ,and contribution to profits should be observed in future longitudinal analyses. The current study s short timeframe does not allow an examination of this potential lagged relationship.

The results on environmental heterogeneity support Hypothesis 3; they show a significant and positive association between heterogeneity and all four measures of export performance. Young telecommunication ventures compete in a fast-growing industry characterized by rapid technological evolution, which often creates new market segments. From inception, these ventures have to compete in a global industry and, therefore, may view exporting as an integral part of participating in the industry. If managing the complexity of the firm's competitive markets begets additional complexity (Pfeffer & Salancik, 1978), then exporting is a natural response to the perceived heterogeneity of the telecommunication industry's domestic environment. Exporting is an important approach to diversifying the venture's sources of revenue and profits, and offsetting fluctuations in a venture's domestic earnings.


Having discussed the results, the study's limitations should be acknowledged. First, the research design does not allow an examination of causal relationships between environmental factors and export performance. As noted earlier, longitudinal designs are needed to establish causality among the variables. Second, the results may not be generalizable beyond the sample used. Third, while this study and its measures focus on a firm's domestic competitive environment, the effects of the globalization of industries on managers' perceptions of their domestic environment are unclear. Fourth, the study does not explore the modes of exporting and does not identify the conditions that lead to the adoption of each mode. Finally, this study examined only one aspect of internationalization: exporting. However, as other researchers (e.g., Jolly, Alahunta, & Jeannet, 1992; McDougall, 1989; McDougall et al, 1994; Oviatt & McDougall, 1991) suggest, some new ventures frequently engage in other international activities from inception (e.g., licensing). Thus, while the current study does not explore the possibility that exporting is a key gateway to other aspects of international activities (e.g., FDI), some of the sampled firms may actually possess significant international experiences in areas other than exporting, Future researchers should, therefore, explore the multi-dimensional aspects of ventures' internationalization efforts. Still, the above shortcomings should be kept in mind when interpreting the implications of the study's findings for managerial practice and future research.

Managerial Implications

The results suggest five areas for new venture managers. First, the finding that the characteristics of the ventures' competitive environment significantly influenced the intensity and performance of its exports has important implications. Given that these perceptions are usually grounded in executives' knowledge of the industry, the results highlight the need for managers to monitor, scan, and analyze their environments and spot changing conditions that might affect their new ventures' competitive standing. Yet, because some ventures are understaffed, managers may not devote the resources needed for such competitive analysis. Managers, nevertheless, can rely on their networks of suppliers, venture capitalists, banks, trade associations, and professional associates in understanding their competitive environments. Managers can also devote a part of their time to conduct formal analyses of their environment; these analyses are crucial for positioning the venture and guiding its strategic actions. Clearly, both formal and informal industry analyses and environmental scanning can play a key role in guiding the venture's decision to export.

Second, the results reinforce the importance of export planning. While some ventures may opportunistically engage in passive exporting, the results show that the benefits from formal planning increase when the domestic environment is dynamic and complex. This is because a formal export planning process helps manage the uncertainty in their environments. Formal export planning enables the venture to respond to growing uncertainty and change in its domestic markets. While the merits of exporting Cannot be disputed, it is a potentially risky strategy that has serious consequences for the venture's competitive and financial performance. Export planning represents an important means for dealing with uncertainty, an observation that is consistent with the literature on strategic planning. Past research suggests that as environmental dynamism and complexity increase, the need for planning becomes greater (Schwenk & Shrader, 1993).

Venture managers also need to engage in export planning for the obvious reason that it is positively associated with key measures of export performance. As reported earlier, export planning is positively associated with the intensity of the venture's exports, the number of countries to which the venture exports, the contributions exports make to the venture's profitability, and saris faction with export performance. These results are consistent with the spirit of a large body of research that suggests that new ventures that formally plan their operations gain an advantage and achieve higher performance (Schwenk & Shrader, 1993).

Third, the results highlight one of the strategies used by new ventures in response to environmental uncertainty. Specifically, it appears that in dynamic and complex environments, new ventures may opt to offer technologically sophisticated products as a means of differentiating themselves from the competition, both at home and abroad. These products are hard to imitate because they are "knowledge intensive," a factor that helps new ventures gain and maintain a competitive advantage (Grant, 1995).

Several actions are necessary before venture managers can take advantage of the positive association found between the technological sophistication of the venture's products and export performance. In particular, strong managerial and financial support for the venture's R&D activities is required to generate these technologically sophisticated products. Also, managers need to identify and develop those product attributes that can lead to a sustainable competitive advantage. This, in turn, requires a great deal of market knowledge in order to understand the product attributes desired by the customer and rewarded by the market. Market knowledge requires active for-real and informal competitive and environmental analysis and market research, frequent interaction with the customers, and experimentation with different combinations of product attributes. Market knowledge is important also for selecting and targeting particular countries to which the venture can export its products. Consequently, the analyses just mentioned should cover both foreign and domestic markets. Here, too, managerial dedication is needed to provide the financial and organizational support for these demanding and time-consuming activities. But the rewards for such commitment can be great, as the results indicate that technologically sophisticated products are positively associated with key measures of export performance.

Fourth, the results support a growing body of research that indicates that internationalization (at least through exporting) may occur early in the life of the firm (Oviatt & McDougall, 1991). This finding suggests a need for venture managers to adopt a global view in planning their firm's strategy. More and more young companies, both US and foreign, are active in international operations. Accepting this trend can set the stage for managers to explore the consequences of entry by foreign companies into their home market, an issue that was not examined in this study. This global view can also allow managers to consider whether or not to export their products. The fact is: many of today's growth industries are global in nature and those firms that ignore this fact might risk overlooking a major source of growth.

Fifth, in our analyses venture age was more strongly associated with export performance than was venture size. Perhaps ventures in global industries (such as telecommunications) may initiate exporting programs quickly after their inception, but it may take several years before these export programs become profitable. Frequently, managers must patiently invest in their ventures' exporting programs. Over time, the new venture gains experience in understanding the market, designing its products, and exporting.

The results also tell us more about the effect of venture age on export performance. Venture age is positively associated with export planning, a variable that is very important to success in exporting activities. This observation is consistent with the proposition that in dynamic, knowledge-based industries, organizational learning occurs frequently and quickly (Grant, 1995). New ventures may compensate for their limited resources and experience by learning about their competitors quickly and using this learning to develop effective strategic plans that guide their exporting efforts. If our speculations are correct, then venture managers should seek ways to learn from the competition, especially those companies that exhibit best practices, and then use this knowledge to plan ahead.

Future Research Directions

The results affirm the importance of the venture's domestic competitive environment in explaining export performance. Replications, with data from multiple countries or high-technology industries, should validate these findings. Of special interest are future studies which empirically clarify the lagged relationships between the firm's external environment and export performance, thereby overcoming a weakness in past research that hereto has emphasized static and cross-sectional designs.

Future studies should also explore the relationship between the new venture's environment and other indicators of export performance, particularly growth. While the present study has used multiple indicators of export performance, examining growth in exports is important because it serves to increase the venture's profitability while creating momentum m the firm's international operations.

Scholars should also consider the specific manifestations of environmental characteristics and their effects on export performance. These studies should examine different sources of environmental dynamism (e.g., market vs. technological changes), hostility (e.g., changes in government regulations vs. the entry of foreign rivals), and heterogeneity (e.g., diversification vs. market maturity). The use of such fine-grained measures of the firm's environment can lead to greater precision in delineating the impact of different environmental forces on export performance.

Causal paths among the environment, organizational characteristics, and export performance also deserve closer attention in future research. In this study, organizational variables have been treated as control variables to account for the added explanatory power offered by the venture's domestic environment. However, because organizational and environmental factors may interact to determine export performance, the joint effects of these forces should be explored in future studies

Miller's (1993) research also suggests a need to consider the impact of managers' perceptions of macro, micro, and organizational-specific variables on the firm's international business decisions. McDougall (1989) provided considerable insight into how competitive strategy and industry structure variables can successfully discriminate domestic from international new ventures. Oviatt and McDougall (1994) also note that new ventures' success in international operations depends on organizational resources (e.g., the existence of a salesforce dedicated to international sales). Consequently, researchers would benefit from designing future studies in a way that permits the integration of these variables and establishes their relative importance for different measures of export performance across countries and industries.

Researchers would benefit also from including foreign market variables in models of export intensity. The new venture's export performance is likely to be influenced significantly by its evaluation of the risks and rewards of the target foreign markets. Besides extending the current findings, by including foreign market-related measures, future studies can overcome a limitation of prior research--namely, the assumption that it is easier to enter foreign markets than it is to gain customers in a domestic market. This assumption may not be true, especially for those ventures in growing domestic markets or in industries where global competition is fierce.

Exporting has become an important means for creating new markets and improving a new venture's competitive and financial performance. Exporting also enables the new venture to enter growing global markets and compete on a worldwide stage. This study shows that a greater understanding of export performance can result from research that considers the characteristics of the new venture's domestic competitive environment. The results also indicate that researchers should continue to examine how environmental variables are associated with export performance. It is hoped that the current results will stimulate additional empirical research into the environmental determinants of successful export performance among high-technology new ventures.


Perceptions of the Competitive Environment

Executives were asked to evaluate their firm's competitive environment over the three preceding years, using the measures developed and validated by Miller and Friesen (1982a, b, c). These measures followed a 5-point response scale (5 = very high vs. 1 = very low). When the items were factor analyzed, the results supported the throe-factor structure suggested by Miller and Friesen.

Dynamism items were: "Intensity of industry-wide spending on advertising." "Intensity of industry-wide promotional activities," "Level of innovation in your industry," "Opportunities for product innovation," and "Opportunities for technological innovation."

Hostility items were: "Rate of obsolescence in product technology," "Unfavorability of demographic changes," "Unfavorability of market changes," "Unfavorability Of governmental regulations," and "Unfavorability of market conditions."

Heterogeneity items were: "Number of markets in which you compete," "Number of market Segments or groups which you serve," and "Diversity of your customers' needs and buying habits."

Formal Export Planning

A three-item index measured formal export planning. Responses to the three items were averaged and the resulting score was then used in the analysis. Executives rated their company's actual behavior over the past three years using a 5-point scale (1 = very low vs. 5 = very high). Executives rated their companies on the items: "Emphasis on developing a formal plan for export activities," "Emphasis on planning the growth of your export sales," and "Determining the number of foreign countries to which your products will be exported."

Technological Sophistication

As reported in the text, the firm's R&D as a percent of its sales was used as the measure of technological sophistication. To validate this measure, however, executives were asked to indicate their company's actual emphasis on three items over the past three-year period, using a 5-point scale (5 = high emphasis vs. 1 = low emphasis). The items were: "Being the first company to introduce new technology to the market," "Investing heavily in product-related R&D activities," and "Investing heavily in proprietary, breakthrough technologies." Together, the three items indicated a venture's commitment to offering technologically sophisticated products. The average score on the three items was significantly correlated with the objective R&D measure (r = .78, n = 103; p < .001).

Venture Size

The log of the three-year average of full-time employees was used to measure venture size. Data on a venture's assets were also available for 89 ventures. Analyses that were run using the log of assets generated very similar results to those produced by the log of employees.

Past Performance

The three-year average ROA was used to measure past performance. Survey data were also available for return on sales (ROS). However, because the results using ROA were very similar to those derived from ROS, only the ROA results were presented in the paper.

(1.) A new venture is defined as a firm that has existed eight years or less (see Lambkin, 1988; McDougall & Robinson, 1990; McDougall, Robinson, & DeNisi, 1992; McDougall, Covin, Robinson, & Herron, 1994).

(2.) For the 26 survey items used in this paper, inter-rater reliabilities (measured by simple r) ranged from .21 to .92, averaging .72. Four items had inter-rater reliabilities ranging between .21 and .50 (the value one would expect between the two management respondents). The remaining 22 items had correlations ranging between .53 and .92. The four items with low inter-rater reliabilities were: (1) "Opportunities for technological innovations," where respondents might have held different perceptions of the domain of their firm's industry or had different data about the opportunities in the industry; (2) "Unfavorability of market conditions," where low inter-rater reliabilities might have resulted from the wording of the item itself (which did not specify market conditions) or because of the managers' different perceptions of the opportunities in the industry due to different information sources; (3) "This company has been successful in its exporting activities," where low inter-rater reliabilities might have resulted from the working of the item which does not specify which exporting activities, or because the managers might have very different personal standards in measuring success in exporting; and (4) "Emphasis on planning the growth of our export sales," where the low inter-rater reliabilities might have resulted from different definitions of planning. In addition, cognitive and other factors might have affected managers' interpretation of the above four items. The reader should bear this possibility in mind. Still given the overall significant inter-rater reliability (p < .001), the results support the proposition that, for the most part, the two respondents held similar views of the issues explored in the paper.

(3.) In preparing the mailing list, we did not know a priori which ventures were active in exporting. Responding ventures reported a wide range of exporting intensity, between zero and 59%. Of the responding companies, only 17 indicated that they were not involved in exporting. While some researchers have examined the differences between exporters and non-exporters (McDougall, 1989), the objective of the current study was to establish the relationship between the managers' perceptions of the environment and exporting performance. This suggested that we should retain those firms that reported zero exports in the analyses, which centered on explaining variations (upward or downward) from the sample mean. Finally, the data gathered in the survey focused on a wide range of the ventures' strategic actions, not simply their export performance. Consequently, the broad scope of the survey minimized chances of self-selection by exporting or non-exporting ventures.

(4.) To test the robustness of the results reported in Table 2, each of the dependent variables was regressed on the measures of the environment, one at a time. This allowed us in test whether the addition of individual measures of environmental characteristics had a significant impact on individual measures of export performance. Analyses showed that adding the individual measures of the environment improved the R2 for the restricted models significantly (p < .05 or better). Therefore, individually or jointly, the dynamism, hostility, and heterogeneity of the environment affect a new venture's export performance.


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Shaker A. Zahra is Professor of Strategic Management at Georgia State University.

Donald O. Nenbaum is Assistant Professor of Management at the University of Central Florida..

Morten Huse is Research Associate, Center for Church Research, Oslo, Norway.

This research was supported, in part, by a research grant to the first author from the College of Business Administration at Georgia State University. The helpful comments of the anonymous reviewers are acknowledged with much appreciation.
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Author:Zahra, Shaker A.; Neubaum, Donald O.; Huse, Morten
Publication:Entrepreneurship: Theory and Practice
Date:Sep 22, 1997
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