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Effect of Export Performance on Economy

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Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of UK Essays.

CHAPTER ONE: INTRODUCTION

In this chapter, first we introduce the study by highlighting its background followed by a brief description of Malaysia's economy and external trade based on relevant statistics related to economic growth trends and international trade, respectively. Next, we further proceed to look in detail at the export performance concept. Then, we indicate the current major products exported by Malaysian firms, and their main export destinations. Research problem, question, and objectives, followed by the significance, scope, limitations, and organization of the paper, are all discussed in the last part of the chapter.

1.1. Background of the Study

With the increasing trend of globalization, the arena of market and competition for business firms has expanded from domestic markets to the international markets. This has accentuated the importance of understanding the behavior of firms in foreign markets. Exporting represents a viable strategic option for firms to internationalize and has remained the most frequently used foreign market entry mode chosen (Zhao & Zou, 2002), as it provides the firm with the flexibility needed to penetrate and compete in new international markets.

In 2001, the World Bank published the report Globalization, Growth and Poverty: Building an Inclusive World Economy. The report shows that 24 developing countries, which increased their integration into the world economy, achieved higher growth in incomes, longer life expectancy and better schooling (Van Dijk, 2002). Exporting is considered to be one of the most important ways for developing countries to link with the world economy. Therefore, it is identified by governments and public policy makers as a priority (Morgan, 1997).

1.1.1. Malaysia's Economy and External Trade

The Malaysian economy has shown to be one of the most dynamic economies in the Asia Pacific region. The structure of the Malaysian economy had a dramatic transformation in the last five decades. Gradually over this period, it has displayed attributes of newly industrialized country and its economy has shown an impressive track record (Hamid, 2004).

The country had an impressive annual growth in the 1970's reaching 7.8%, and continued to grow at a rate of 8.8% in the 1980's except during recession in 1985 to 1986. The recovery started in 1988 and the economy sustained an annual growth of over 8% in the 1990's. However, the Asian financial crisis had the worst impact when the economy shrank by 11.2% year on year in the fourth quarter of 1998 (The Economist Intelligence Unit, 2009). This led the Malaysian government to implement several economic policy adjustments which started in 1999 in order to speed up the recovery. Consequently, the economy recorded a positive growth in seven consecutive years. After a strong take-off of 5.3% in 2003, the second half of 2006 recorded a higher than expected growth of 5.9% (Malaysia Economic Report , 2006). Recently, as a result of the global recession, Malaysia's real GDP contracted by 6.2% year on year in the first quarter of 2009 (The Economist Intelligence Unit, 2009). However, the economy recovered gradually later in the same year.

Malaysia's trade policy focuses on greater integration into the world economy and enhancing its global position as a trading nation. The country has consistently maintained its position as the 18th largest global exporter and the 20th largest importer in the last few years (WTO, 2005). Malaysia's trade with the world from 2000 to 2009 is illustrated in figure 1. The bar chart shows that Malaysia had a steady increase in total trade. The country reached a peak of approximately RM787.5 billion and RM643.1 billion in 2009 for exports and imports respectively, yielding a trade surplus of RM144.4 billion. This trend is expected to continue in the next few years as more economic reforms would take place, coincided with high growth rates expected.

1.1.2. Export Performance

Export performance is broadly defined as the outcome of a firm's activities in export markets (Shoham, 1996). The fundamental importance of export performance to international marketing has led to a substantial body of research. It is recognized that research on export performance is of vital interest to three major groups: public policy makers, managers and researchers.

First, export performance is important for public policy makers or governments as it contributes to the development of foreign exchange reserves, increases the level of imports a country can afford, provides a vehicle for job creation, improves employment opportunities, improves standards of living, and encourages better working conditions and more efficient business (Lages & Montgomery, 2004). Second, at a micro level, managers view exporting as a way to expand their firms' access to international markets, benefit from economies of scale, reduce the dependence on their domestic markets, and enjoy faster sales, employment, and growth (Freeman & Lawley, 2005). Third, as a result of its importance for both policy makers and managers, researchers consider exporting a challenging and promising area for theory building in international marketing (Zou & Stan, 1997).

Since gaining independence from Britain in 1957, Malaysia implemented a series of 5-year development plans in order to transform its economy from being an exporter of rubber and tin to emerge as one of the world's largest producers of palm oil products, timber, oil and manufactured products (Wheeler & Mohamad, 1993). Additionally, due to its impressive growth, the manufacturing sector has replaced agriculture as the number one sector in the economy. Table 1 shows Malaysia's major export products in January 2010.

The manufacturing sector remains a dynamic engine of growth for Malaysia with an estimated share of 31.5% of GDP in 2005 (WTO, 2005). It is considered to be the most dominant sector with approximately three quarters of total exports. This is mainly due to the significant contribution of electrical and electronic products as they are Malaysia's leading export earner with a value of RM21,372.3 billion, representing 40.75% of total exports in January 2010. Palm oil retained as the second largest export revenue earner with a total value of RM3,985 billion or 7.6% of exports. Third, liquefied natural gas (LNG) made up 6.5% of total exports with RM3,400.3 billion. Chemicals & chemical products were the fourth largest commodity accounting for 6% of total exports with RM3,173.9 billion. The remaining different products

Table 1:

Malaysia's major export products in January 2010 (Billion Ringgits)

Products

Value

Percentage

Electrical and electronic products

21,372.3

40.75%

Palm oil

3,985.0

7.60%

LNG

3,400.3

6.5%

Chemicals & chemical products

3,173.9

6.00%

Crude petroleum

2,447.1

4.67%

Refined petroleum products

1,862.1

3.56%

Machinery, appliances & parts

1,650.3

3.15%

Manufactures of metal

1,568.7

3.00%

Optical & scientific equipment

1,429.4

2.73%

Rubber products

1,247.8

2.38%

Others

10,310.4

19.66%

Total exports

52,447.3

100%

Source:

Department of Statistics Malaysia, January 2010,

Malaysia External Trade Statistics.

Retrieved on 16/2/2010 from: http://www.matrade.gov.my/cms/documentstorage/com.tms.cms.document.Document_2c11596d-7f000010-584c584c-f259ef13/Press%20release%20Jan10%20Eng.pdfCalculated based on the values of the table.

including crude petroleum, refined petroleum products, and others, formed approximately 40% of total exports in the same period.

For export destinations, the People's Republic of China (PRC) was Malaysia's major export market in January 2010, with RM7,094.9 billion (13.53% of total exports), as shown in table 2.

Table 2:

Malaysia's major export markets in January 2010 (Billion Ringgits)

Markets

Value

Percentage

PRC

7,094.9

13.53%

Singapore

6,953.5

13.26%

Japan

5,849.7

11.15%

USA

4,917.2

9.37%

Hong Kong

2,876.2

5.5%

Thailand

2,817.6

5.37%

ROK

2,125.6

4.05%

Netherlands

1,867.3

3.56%

Australia

1,642.1

3.13%

India

1,604.4

3.06%

Other countries

14,698.8

28.02%

Total exports

52,447.3

100%

Source:

Department of Statistics Malaysia, January 2010,

Malaysia External Trade Statistics.

Retrieved on 16/2/2010 from: http://www.matrade.gov.my/cms/documentstorage/com.tms.cms.document.Document_2c11596d-7f000010-584c584c-f259ef13/Press%20release%20Jan10%20Eng.pdf

Calculated based on the values of the table.

The next major export destination is Singapore (13.26%, RM6,953.5 billion), followed by Japan (11.15%, RM5,849.7 billion), USA (9.37%, RM4,917.2 billion), and Hong Kong (5.5.%, RM 2,876.2 billion). These top five export destinations accounted for more than half of Malaysia's total exports.

The statistics reflect the increasing significance of exporting as a key economic tool for growth and development in Malaysia. In addition, despite the downturn caused by the Asian financial crisis thirteen years ago, Malaysia has made rapid strides in economic development through the continuous adoption of appropriate policies and strategies to ensure sustainability of growth (WTO, 2005) as well as to transform the economic structure of the country into a manufacturing and export-based economy.

1.2. Problem Statement, Question, and Objectives of the Study

A problem is defined as any situation where a gap exists between the actual and the desired ideal state (Cavana et al., 2007). It is critical that the problem of the study is unambiguously identified, and followed by a clear, precise, and succinct statement of the question and objectives of the study.

1.2.1. Research Problem

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 & Slater, 1989). Many export performance studies focused only on a single factor affecting export performance, while there have been only few attempts to come up with models that incorporate a wide range of relevant factors. These exceptions include, (Cooper & Kleinschmidt, 1985); (Cavusgil & Zou, 1994).

Some of the discrepancies in the literature might be attributable to differences regarding the way in which export performance has been assessed (Walters & Samiee, 1990). In this context, the vast majority of studies have utilized objective performance indicators (Katsikeas et al., 1996). However, there are two problems with the use of certain objective measures:

First problem is concerned with research methodology i.e. accurate objective indicators of export performance are not easy to obtain since formal company financial statements and reports often make no clear distinction between domestic and export business operations, partially due to the fact that many firms view exporting as an extension of their domestic activities (Yang et al., 1992). Second, a serious comparability caveat may arise as a result of inherent measurement weaknesses underlying most objective measures (Katsikeas et al., 1996). Differences among industries and product subsectors in terms of competition or technology could lead to incoherent comparison across the sample firms. In other words, objective indicators of export performance, 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).

Accordingly, in order to fill this literature gap, it is important to use different indicators to measure the multi-dimensionality of export performance and increase the reliability of the results. In this research, we adopt three subjective indicators to measure export performance of Malaysian manufacturing firms by asking respondents three questions to indicate their perceptions in achieving objectives regarding export sales, export market share, and export profitability. We use this subjective composite indicator because, compared to other objective export indicators, it cancels the size effect and it also facilitates comparison between companies of different sizes and industries.

1.2.2. Research Question

Are firm's characteristics, export marketing strategy, management perceptions, and export commitment associated with export performance? If so, which of these contributes most to the variance of the dependant variable?

1.2.3. Research Objectives

This study aims to contribute to the meager but growing literature on firm-level export performance for developing countries by using Malaysia as the empirical platform. The study was designed to reexamine some determinants of export performance mentioned in the export marketing literature, more specifically, certain firm's characteristics, export marketing strategy adopted, management's attitudes and perceptions, and export commitment are integrated factors that viewed as significantly influencing export performance. In a nutshell, the study seeks to achieve the following two objectives:

  1. To investigate the relationships between export performance on one hand, and firm characteristics, export marketing strategy, management perceptions, and export commitment on the other hand.
  2. Establish the relative importance of each of the independent variables in influencing export performance of Malaysian manufacturing firms.

1.3. Significance, Scope, and Organization of the Study

In the next few paragraphs, we address the approaches deployed in this paper that contribute to the significance of this research in the context of export marketing field. Further, the scope, limitations, and organization of the paper, are all discussed subsequently.

1.3.1. Significance of the Study

With the increasing global business competition, it has become important, particularly for firms in developing countries, to understand the determinants of export performance as firms' survival and expansion, and consequent economic growth of many developing countries are strongly dependent on a better understanding of what determines the export performance (Sousa et al., 2008).

In spite of the numerous empirical studies of export performance published since the 1960's, the conclusions reached by researchers in this area have, however, varied widely. The significance of the present study is derived from its design to look anew at some determinants of export performance mentioned in the literature in order to examine their effect on export performance manufacturing firms in Malaysia where export marketing research is of extreme relevance for both practitioners and scholars, knowing that the country is considered to be the world's eighteenth largest exporter, and the trend is growing significantly over time. For example, exports posted a double digit growth in December 2009, year-on-year, rising significantly by 18.7% to RM54.7 billion, compared with December 2008 (Department of Statistics Malaysia, 2010).

1.3.2. Scope and Limitations of the Study

The evidence reported in this paper should be interpreted in the light of several limitations. That is, in addition to the relatively low response rate of just 17%, the research effort was restricted to manufacturing firms within a specific country context, thus caution may be exercised in generalizing the present findings too broadly. Nonetheless, generalizations of the study findings may be applicable to those exporting frameworks with similar structural characteristics of export marketing. Furthermore, the cross-sectional nature of the data limits our ability to rule out cause-effect inferences (Katsikeas et al., 1996). Such one-shot study may not be suitable for a research that involves a dynamic phenomenon, therefore, the adoption of longitudinal studies in future studies can provide more insights into the dynamic aspects of export behavior and performance.

Other limitations were related to time constraint, specifically during data collection period which started in mid-February 2010. This stage of the research was coincided with celebrations of the Chinese New Year, on February 14th, the period during which most companies in Malaysia had at least a one week holiday. As a result, it took us a relatively longer time than expected to receive responds in order to proceed for further analysis.

1.3.3. Organization of the Study

In this study, an attempt is made to synthesize and empirically test a model of export performance focusing on exporters from an ASEAN member. Specifically, the sudsy constitutes indigenous Malaysian manufacturers trading with overseas distributors. The paper is formatted into several sections. First, an in-depth literature is presented including key theoretical and measurement problems. Next, a conceptual framework of export performance is developed through the statement of several hypotheses. Then, the research design approach and methodological procedures including data analysis are described. Lastly, we present the findings of the study followed by a discussion, conclusions, and recommendations.

Summary of Chapter One

Through its external trade policy, Malaysia aims primarily for a greater integration into the world economy in order to maintain its position as one of the largest global exporters, specifically exports of manufactured products. At a micro level, export performance refers to the outcome of a firm's activities in export markets. It is a way to expand access to international markets, benefit from economies of scale, reduce the dependence on domestic markets, and enjoy faster sales, employment, and growth.

Studies within the export marketing field are characterized by the discrepancy and fragmentation of the findings. In this context, most export performance studies utilized objective export performance measures. However, this might result in the fragmentation of findings due to some issues related to research methodology and comparability caveat among firms. Therefore, subjective indicators are employed to measure the dimensionality of export performance in the Malaysian context. The objective is delineate the relationship between export performance (dependent variable) on one hand, and firm characteristics, export marketing strategy, management perceptions, and export commitment (independent variables) on the other hand.

CHAPTER TWO: LITERATURE REVIEW

In this chapter, a conceptual background of export performance is coherently addressed; starting with a relevant review of the export marketing performance literature and their main characteristics including the way in which export performance has been measured. We further proceed to identify and classify the multiple independent variables that have been frequently used in past studies. At the end of the chapter, some examples of the discrepancies in the findings of some studies are highlighted.

2.1. Export Marketing Performance Literature

The classical economic view tries to explain why it is beneficial for a country to engage in international trade based on the assumption that countries differ in their abilities to produce goods efficiently. The comparative advantage theory, for example, helps to explain the pattern of international trade that we observe in the world economy (Heckscher & Ohlin, 1991); (Ricardo, 1817); and (Smith, 1776). However, the assumptions underlying the principle of comparative advantage are unrealistic in many countries and industries. That is because competitive advantage depends on the capacity to innovate and upgrade. It also depends on the extent to which a home environment is dynamic, challenging, and forward looking. Therefore, competitive advantage is not inherited; in other words, it does not grow out of a country's natural endowments, its labor, its interest rates or its currency's value, as classical economics insist (Porter, 1990).

A plethora of studies have been published in the past 30 years on the determinants of export performance. This is mainly due to the increasing relevance of export marketing as an area of inquiry. Existing literature shows that the United States is the most researched country in export performance studies. However, an increasing number of studies have been conducted by European researchers from non-English-speaking countries who published in English-language journals. Examples include, (Bijmolt & Zwart, 1994), (Holzmuller & Kasper, 1991), and (Madsen, 1989). Some other studies have also been conducted in developing countries in Asia and Latin America. Characteristics of the studies reviewed are summarized in table 3. The main characteristics that we focused on are:

2.1.1. Size of the Sample

Except for one study which used a data base of 20,161 Indonesian firms from different manufacturing sectors, the size of the samples used in the studies reviewed ranges between 51 and 783. Most of them were drawn from multiple manufacturing industries, while just few such as (Cavusgil & Kirpalani, 1993), (Singer & Czinkota, 1994), and (Sriram & Manu, 1995), had included in the sampling, reselling and service firms in addition to manufacturing firms.

2.1.2. Industry Context of Studies

The vast majority of the reviewed studies employed samples drawn from multiple manufacturing industries. Only few have included in addition to manufacturers, reselling and service firms. Examples include (Cavusgil & Kirpalani, 1993), (Singer & Czinkota, 1994), and (Sriram & Manu, 1995). This reflects the importance of manufacturing firms in the world economy. However, findings cannot be generalized to other industry contexts.

Table 3:

Characteristics of the reviewed articles

Authors

Year

Country of study

Sample size

Industry type

Firm size

Data collection

Analytical approach

Unit analysis

Maurel

2009

France

158

one manuf

SM

Survey

Anova

firm

Duenas-Caparas

2006

Philippines

505

mult manuf

SML

Survey

regression

firm

Brouthers, Nakos

2005

Greece

112

mult manuf

SM

Survey

regression

firm

Cadogan et al.

2005

Finland

783

mult manuf

ML

Survey

SEM

firm

Contractor et al.

2005

India/Taiwan

47/61

one manuf

SM

Survey

anove/

regression

firm

Haahti et al.

2005

Finland/Norway

87/62

mult manuf

SM

survey

SEM

firm

Alvarez

2004

Chile

295

mult manuf

SML

survey

regression

firm

Francis, Collins-Dodd

2004

Canada

175

mult manuf

SM

survey

correlation, factor analysis

firm

Morgan et al.

2004

USA

287

mult manuf

SML

survey

SEM

exvent

Yeoh

2004

USA

258

mult manuf

SML

survey

correlation, factor analysis

firm

Akyol, Akehurst

2003

Turkey

103/163

one manuf

SML

survey

regression

firm

Balabanis, Katsikea

2003

UK

82

mult manuf

SML

survey

SEM

firm

Cadogan et al.

2003

Hong Kong

137

mult manuf

ML

survey

SEM

firm

Chung

2003

Australia/New Zealand

72/74

mult manuf

SML

survey

factor analysis/regression

firm

Dhanaraj, Beamish

2003

USA/Canada/Australia/New Zealand

87/70

mult manuf

SM

survey

SEM

firm

Deng et al.

2003

China

97

mult manuf

SM

survey

regression/factor analysis

firm

Zou et al.

2003

China

176

mult manuf

SML

survey

SEM

exvent

Cadogan et al.

2002

USA

206

mult manuf

SM

survey

SEM

firm

Cadogan et al.

2002

Finland

783

mult manuf

ML

survey

SEM

firm

Cicic et al.

2002

Australia

181

mult manuf

SML

survey

SEM

firm

Michiel van Dijk

2002

Indonesia

20,161

mult manuf

SML

data base

regression

firm

Shoham et al.

2002

Australia

193

mult manuf

SML

survey

regression

firm

Solberg

2002

Norway

150

mult manuf

SML

survey

correlation/

anova

firm

Albaum, Tse

2001

Hong Kong

183

mult manuf

SML

survey

regression

firm

Gencturk, Kotabe

2001

USA

162

mult manuf

SML

survey

anova

firm

Richey, Myers

2001

USA

404

mult manuf

ML

survey

SEM

exvent

Stottinger, Holzmuller

2001

USA

104

mult manuf

SM

survey

SEM

firm

Baldauf et al.

2000

Austria

184

mult manuf

SML

survey

regression

firm

Dean et al.

2000

New Zealand

95

one manuf

SM

survey

factor analysis/ discriminant analysis

firm

Francis, Collins-Dodd

2000

Canada

88

mult manuf

SM

survey

factor analysis/regression

firm

Styles, Ambler

2000

Australia/UK

232/202

mult manuf

SM

survey

SEM

exvent

Wolff, Pett

2000

USA

157

mult manuf

SM

survey

anova

firm

Yeoh

2000

USA

180

mult manuf

SML

survey

correlation/

regression/ factor analysis

firm

Beamish et al.

1999

Australia

185

mult manuf

SML

survey

correlation/

regression

firm

Hart, Tzokas

1999

UK

50

mult manuf

SML

survey

correlation/

regression

firm

Moen

1999

Norway

335

mult manuf

SM

survey

anova/factor analysis

firm

Myers

1999

USA

404

mult manuf

ML

survey

regression

exvent

Hoang

1998

New Zealand

355

mult manuf

SML

survey

SEM

firm

Lee

1998

Australia

105

mult manuf

SM

survey

SEM

exvent

Piercy et al.

1998

UK

312

mult manuf

SM

survey

correlation

exvent

Thirkell, Dau

1998

New Zealand

253

mult manuf

SML

survey

regression

firm

White et al.

1998

USA

124

mult manuf

SML

survey

regression

firm

Gray

1997

New Zealand

300

_

SM

survey

cluster/

anova

firm

Patterson, Cicic, Shoham

1997

Australia

181

Services

SML

survey

regression

firm

Zou, Andrus, Norvell

1997

Colombia

51

mult manuf

SL

survey

regression

firm

Axinn, Noordewier,Sinkula

1996

USA

75

mult manuf

SM

survey

regression/

structural eq

firm

Holzmuller, Stottinger

1996

Austria

101

mult manuf

SM

survey

structural eq

firm

Katsikeas, Piercy, Ioannidis

1996

Greece

87

one manuf

SM

interview

regression

firm

Lim, Sharkey, Kim

1996

USA

438

mult manuf

SM

survey

regression

firm

Atuahene-Gima

1995

Ausralia

275

_

_

survey

discriminant/

reg

exvent

Axinn, Savitt, Sinkula, Thach

1995

USA

77

mult manuf

SM

survey

anova

firm

Moini

1995

USA

102

mult manuf

SM

survey

anova/

discriminant

firm

Sriram, Manu

1995

USA

121

man/resel/serv

SML

survey

regression

exvent

Bijmolt, Zwart

1994

Netherlands

248

_

SM

survey

structural eq

firm

Bodur

1994

Turkey

88

mult manuf

_

interview

discriminant

firm

Cavusgil, Zou

1994

USA

202

mult manuf

M

interview

structural eq

exvent

Das

1994

India

58

_

SM

interview

discrim/chisq

firm

Diamantopoulos, Schlegelmilch

1994

USA/UK/Germany

296

one manuf

_

survey

regres/ancova

firm

Evangelista

1994

Australia

193

mult manuf

SM

survey

discriminant

firm

Naidu, Prasad

1994

USA

728

mult manuf

SM

survey

chisq/logreg

firm

Namiki

1994

USA

99

one manuf

SML

survey

anova

firm

Raven, McCullogh, Tansuhaj

1994

USA

118

Reseller

S

survey

regression

firm

Singer, Czinkota

1994

USA

89

man/resel/serv

SML

survey

chisq/logreg

firm

Beamish, Craig, McLellan

1993

UK/Canada

197

_

SM

survey

correlation

firm

Cavusgil, Kirpalani

1993

USA/Canada/Japan

130

mult manuf/res-eller service

SML

second

chi-square

exvent

De Luz

1993

Brazil

31

mult manuf

_

survey

regression

firm

Dominguez, Sequeira

1993

Central America

253

manuf/reseller

_

interview

cluster/ancova

firm

Ito, Pucik

1993

Japan

271

mult manuf

L

second

regression

firm

Kaynak, Kuan

1993

Taiwan

140

mult manuf

SML

survey

discriminant

firm

Walters

1993

USA

141

mult manuf

_

survey

anova

firm

Chan

1992

HK/Singapore

122

mult manuf

SM

survey

correlation

firm

Czinkota, Ursic

1991

USA

174

mult manuf

SM

survey

anova

firm

Holzmuller, Kasper

1991

Austria

103

mult manuf

SM

survey

structural eq

firm

Koh

1991

USA

233

mult manuf

_

survey

anova

firm

Louter, Ouwerkerk, Bakker

1991

Netherlands

165

manuf/rese-ller

SM

survey

structural eq

firm

Axinn, Thach

1990

USA/Canada

101

one manuf

_

survey

t-test

firm

Lee, Yang

1990

USA

52

mult manuf

SM

interview

anova

firm

Samiee, Walters

1990

USA

145

manuf/reseller

SL

survey

t-test/chisq

firm

Walters, Samiee

1990

USA

145

mult manuf

SL

survey

t-test/chisq/reg

firm

Culpan

1989

USA

210

miult manuf

SM

survey

chisq/discrim

firm

Madsen

1989

Denmark

134

mult manuf

SM

survey

regression

exvent

Namiki

1989

USA

106

one manuf

M

survey

anova

firm

Seifert, Ford

1989

USA

65

mult manuf

SM

survey

anova

firm

Axinn

1988

USA/Canada

105

one manuf

_

survey

regression

firm

Gomez-Mejia

1988

USA

388

mult manuf

SML

survey

regression

firm

Koh, Robicheaux

1988

USA

233

_

SML

survey

anova

firm

Bilkey

1987

USA

156

mult manuf

_

survey

_

exvent

Munra, Beamish

1987

Canada

116

_

SML

survey

correlation

firm

Source:

Adapted and modified from: Shaoming, Z and Simona, S (1998), The determinants of export performance: a review of the empirical literature between 1987 and 1997, International Marketing Review, Vol. 15, N 5, PP 333-356 & Sousa, M.P. et al. (2008), The determinants of export performance: a review of the research in the literature between 1998 and 2005, International Journal of Management Reviews, Vol. 10, N 4, PP 343-374

2.1.3. Types of Firms Targeted

The majority of studies focused on small and medium-sized firms. This suggests that SME's exports play an important role in many economies. In addition, encompassing SME's in the samples also leads to larger sampling frames since there are more small and medium-sized firms, and to easier identification of managerial characteristics since small and medium-sized firms are less diversified. Very few studies compared the determinants of export performance between larger firms and small and medium-sized firms. Yet, according to (Axinn, 1994) it is unclear whether or not there is a difference in the determinants of export performance between the two types.

2.1.4. Data Collection Methods

Because mail survey is the most dominant data collection method in export performance studies, it is adopted in this study. The wide use of mail survey compared to other approaches can be partly explained by reference to the difficulties in physically reaching firms that are geographically dispersed. These difficulties are exacerbated in the case of cross-cultural studies, where firms are located in different counties (Sousa et al., 2008). In addition, in most studies, data were collected from the export manager who is responsible for the international marketing activities. Nonetheless, other parties also provided the information requested including the CEO, president, vice president, and managing or marketing director.

Unlike export performance measures and determinants of export performance, data collection methods are considered to be at a high level of conformity. This implies that discrepancies in findings might be attributed to differences in measures and not to data collection methods. Therefore, we use a mail survey as a data collection method in this study.

2.1.5. Theoretical Basis Adopted

The literature of export performance is still has a long way to go before reaching theoretical maturity although there is an encouraging trend toward a more theoretical reasoning. Almost half of the studies reviewed developed the research questions and hypotheses without any theoretical reasoning. This is surprising given the fact that (Aaby & Slater, 1989) had proposed a strategic management model of export performance, while (Cavusgil & Zou, 1994) had provided a broad conceptual framework that delineates the relationships between the internal and external factors, export marketing strategy, and export performance (Shaoming & Simona, 1998).

2.1.6. Analytical Approach

The majority of studies used multivariate data analysis such as factor analysis, discriminant analysis, multiple regression analysis and structural equation modeling. This suggests that the level of statistical sophistication has improved compared with past studies. Although regression is the most dominant analytical approach adopted, yet, structural equation modeling had a noticeable increasing popularity. This could be explained by the growing complexity of the models used in the literature to assess export performance. In this study, as in most studies, data is analyzed using a regression method.

2.1.7. Unit of Analysis

Approximately three-quarters of studies used the firm as their unit of analysis, while only few researchers (Cavusgil & Zou, 1994) and (Cavusgil & Kirpalani, 1993) advocated export venture (a product and a market combination) to be the most appropriate unit of analysis in export performance.

The underlying theoretical justification for firm-level studies is the theory of internalization. It states that, in imperfect markets, firms should internalize the tangible and intangible firm-specific advantages, in order to extract maximum economic rent. Consequently, export performance could be investigated at the firm level because firm-specific advantages are derived not only form the development and marketing of a particular product but also from the total learning process of the firm (Sousa et al., 2008).

Nevertheless, some researchers argue that the proper unit of analysis in export performance is export venture: a single product or product line exported to a single foreign market (Cavusgil & Zou, 1994); (Morgan et al., 2004). The rational for this is that using the export venture as the unit of analysis could enable a deeper insight into more concrete and manageable key success factors in export marketing (Cavusgil & Kirpalani, 1993).

However, firms usually consider export venture as an alien concept, as they evaluate export performance using metrics such as sales volume and profitability over a period of time. Therefore, as export activities are continuous in these firms, they are not organized on the basis of export ventures, so it would not make sense to evaluate export success at the venture level, as it would not be a viable unit of analysis. Accordingly, consistently with the majority of previous studies, we use the firm as the unit of analysis.

2.2. Measures and Determinants of Export Performance

2.2.1. Measures of Export Performance

Researchers continue to use unique names to label their export performance measures, resulting in dozens of such names (Shaoming & Simona, 1998). Such non-conformity makes it hard to compare and contrast findings from different studies, which in turn might hamper the advancement of the literature. All measures of export performance (as shown in the figure below) are grouped into seven categories representing financial, nonfinancial, and composite scales.

Within the financial category, sales refer to measures of the absolute volume of export sales, whereas profit refers to the absolute measures of overall export profitability and relative measures such as export profit divided by total profit or by domestic market profit. Unlike sales and profits, growth is not static because it measures the changes in export sales or profits over a period of time. In sharp contrast to the objectivity of financial measures, nonfinancial measures of export performance are more subjective. “Success” comprises measures such as the managers' belief that export contributes to a firm's overall profitability and reputation (Shaoming & Simona, 1998). Additionally, “Satisfaction” refers to the managers' overall satisfaction with the company's export performance e.g. (Evangelista, 1994), and “goal achievement” refers to how managers assess performance compared to objectives e.g. (Katsikeas, Piercy, & Ioannidis, 1996). Finally, “composite scales” refer to measures that are based on overall scores of a variety of performance measures. Overall, export sales, profits, and composite scales are probably the most frequently used measures of export performance (Shaoming & Simona, 1998).

2.2.2. Determinants of export performance

A glaring problem of the export performance studies reviewed here is the multiplicity of independent variables used by researchers, measurement of these factors, and the lack of consistent theoretical framework. The result of these problems is a sea of complex, confusing and conflicting findings (Shaoming & Simona, 1998). There are two broad theoretical approaches in classifying the determinants of export performance into internal and external factors, the resource-based paradigm and the contingency paradigm, respectively.

First, the resource-based theory focuses on how sustained competitive advantage is generated by the unique bundle of resources at the core of the firm (Conner & Prahalad, 1996). The resource-based view addresses the central issue of how superior performance can be attained relative to other firms in the same market and suggests that superior performance results from acquiring and exploiting the unique resources of the firm (Dhanaraj & Beamish, 2003). Therefore, in explaining export performance, the resource-based paradigm focuses only on firm-level factors such as size, export experience, and competencies.

Second, the contingency paradigm focuses on environmental factors that affect firm's strategies and export performance. Hence, according to this approach, the effects of various firm characteristics on export performance are dependent on the specific context of the firm. According to (Cavusgil & Zou, 1994), this theory has its roots in the structure-conduct-performance framework of industrial organization and rests on two premises. First premise is

Export Marketing Strategy

General export strategy

Export planning

Export organization

Market research utilization

Product adaptation

Product strengths

Price adaptation

Price competitiveness

Price determination

Promotion adaptation

Promotion intensity

Distribution channel adaptation

Distribution channel relationships

Distribution channel type

Management Attitudes and Perceptions

Export commitment and support

International orientation

Proactive export motivation

Perceived export advantages

Perceived export barriers

 

Management Characteristics

Management's international experience

Management's education/experience

Firm's Characteristics and Competencies

Firm's size

Firm's international competence

Firm's age

Firm's technology

Firm's characteristics

Firm's capabilities/competencies

Industry Characteristics

Industry's technological intensity

Industry's level of instability

Foreign Market Characteristics

Export market attractiveness

Export market competitiveness

Export market barriers

Domestic Market Characteristics

Domestic market

that organizations are dependent on their environments for resources. Second premise is that organizations can manage this dependence by developing and maintaining appropriate strategies (Sousa, Martinez-Lopez, & Coelho, 2008).

For a summary of the factors affecting export performance according to existing literature, we use the 2 X 2 table in figure 2 to classify thirty-three independent variables based on two dimensions: internal vs. external and controllable vs. uncontrollable.

The classification of determinants of export performance into controllable and uncontrollable factors has strong practical relevance to both researchers and managers. (Bilkey, 1987), using a marketing model, distinguished among controllable factors, short-run uncontrollablefactors, and uncontrollable factors. For studies that emphasized on controllable factors as determinants of export performance, the assumption was made clear that export performance depends on how managers perform in their organizations. In contrast, studies that focus exclusively on uncontrollable factors essentially portrayed a fatalistic view of exporting. Therefore, discussing the findings of this review along the internal vs. external and controllable vs. uncontrollable dimensions is theoretically sound and practically significant (Shaoming & Simona, 1998).

2.3. Effects of Independent Factors on Export Performance

A considerable dissention has been noted in the literature regarding the nature and significance of the factors influencing export performance (Aaby & Slater, 1989). Examples of these discrepancies are:

2.3.1. Firm Size

Firm size is the most researched independent variable. It has mixed effects. This conclusion is in contrast to (Chetty & Hamilton, 1993) finding of a medium positive effect of firm size on export performance, but in accordance with the conclusions of (Aaby & Slater, 1989).

(Reid, 1983) found that size has a significant effect on entering new export markets, while (Czinkota & Johnston, 1983) suggested that size of the firm is insignificant in effecting export activities. (Cavusgil & Naor, 1987) found a positive relationship between the size of the firm and total exports. Further, (Culpan, 1989) established a positive relationship between size and export intensity, whereas (Diamantopoulos & Inglis, 1988) found no relationship, and (Cooper & Kleinschmidt, 1985) found a negative relationship.

2.3.2. Management's International Experience (Export Experience)

It has been found that a firm's export experience has a positive effect on export performance (Madsen, 1989), the degree of internationalization (Dominquez, 1993), and attitudes towards future exports (Gripsrud, 1990). Nevertheless, the results of other empirical studies are inconsistent with these findings (Cavusgil, 1984); (Diamantopoulos & Inglis, 1988), and (Moon & Lee, 1990).

2.3.3. Firm's Technology (Production Technology)

According to the findings of most reviewed studies, technological strengths have a positive relationship with the firm's export performance (Aaby & Slater, 1989). Inconsistently, (Reid, 1986) revealed that the effect is insignificant, while (Christensen et al., 1987) found no relationship.

2.3.4. Export problems

(Cavusgil, 1984)and(Kaynak, 1989)found that trade barriers, cultural differences and geographical distance play an inhibitory role in export development and success. Nonetheless, others found no significant effect on export attitudes, behavior and performance (Madsen, 1989); (Gripsrud, 1990).

Summary of Chapter Two

Because of its increasing relevance as an area of inquiry, export marketing field had witnessed a plethora of studies conducted in the past thirty years. In this paper, we reviewed 89 studies between 1987 and 2009. Their main common characteristics are, first, in the overwhelming majority of studies, samples were drawn from multiple manufacturing industries, with a sample size ranging between 51 and 783 firms. Second, mail survey was the dominant data collection method. Third, almost half studies had no clear theoretical reasoning, while regression is the most dominant analytical approach. Fourth, the firm used as the unit of analysis in three-quarters of the studies. Fifth, financial scales were used extensively as a measure of export performance, while the independent variables were classified, based on the literature, into internal vs. external and controllable vs. uncontrollable factors, from which some frequently adopted factors were selected for our study.

CHAPTER THREE: METHODOLOGY

First in this chapter, we present the research framework, and we consider the relationships in the proposed model to discuss specifically the variables that are likely to affect export performance of Malaysian manufacturing companies according to existing theory. Eight hypotheses are generated based on the specific arguments of the effect of each of the independent variables on export performance. Next, we proceed to the research design by beginning with a clear definition of the characteristics of the research including its nature, type of investigation, and unit of analysis. Then we discuss the sampling design which consists of the population, sampling frame, sampling method, size of sample, and data collection instrument. Lastly, we clearly describe the way in which variables are being measured, including the scales used to measure the dimensions of export performance (dependent variable), as well as the multiple items of the independent variables.

3.1.Research Framework and Hypotheses

Based on the export marketing literature reviewed, certain firm's characteristics, export marketing strategy adopted, management's attitudes and perceptions, and export commitment are integrated factors that viewed as significantly influencing export performance. A diagram of the model proposed in this study is


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