Manufacturers Dilemma In International Expansion Business Essay

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The literature based on resource-based view (RBV) framework - one of the economic tools to determine the strategic resources available to a firm - the authors expressed on opinion that manufacturer need to increase strength of local market capability while reducing the cost of distributor opportunism in order to compete successfully in the export market. The researchers also try to study this dilemma by exploring the relation between organizational capabilities and corporate governance in managing export channels. They emphasize the value creation process of export channels rather than simply focusing on the avoidance of distributor opportunism by provides a new perspective for manufacturers to direct the above process. The writers also investigate the effects of three forms of governance mechanisms that may employed by the manufacturer - trust, knowledge sharing, and contract-based relationship - to facilitate the value maximization process in international channels.

The authors organized the research paper by provide a theoretical background exploring the related between the RBV and corporate governance in the context of their study. Then they offered a framework that incorporates a new perspective of collaboration between export channel partners. After that, the writers examined the three types of governance mechanism as well as their interactions in managing the relationship between culturally diverse channel partners. Then they discussed the methods and findings of the study. Finally, they explored implications for management and future research.

Literature review:

The writers gave the definition of organizational capability (OC). OC refers to the organization ability by using their knowledge to adapt the organization in the new environment. In this paper, the authors selected the manufacturer's attitude to consider how they create and expand their cooperation.

The writers define manufacturer's competitiveness that relates to the competitive standing of a manufacturer in the international market. Cultural and physical distance between their markets can obstruct local market knowledge accumulation and increase well intensive distributors opportunism in the foreign market. The authors stressed the most important thing for the manufacturer. To manage the value creating in international expansion among several partners need to improve their own capability to recognize and employ domestic market opportunities while lessening the distributor's opportunism.

The local market competence is defined in this paper as the capability of the manufacturer to realize and employ local market competence. Authors express an opinion that developing manufacturer's domestic market competence is the basis function to succeed the possible value through collaboration with foreign distributors. Developing local market competence can support the global market competence. Firstly, the development of a manufacturer's local market competence needs supports and cooperation from the foreign distributors who have more great opportunities to follow and understand customer's need. Secondly, the improvement of local market competence depends on the existing knowledge base and foreign market experience of the manufacturer.

The two ways for a manufacturer's local market to simplify its competitiveness (LMC) in the export market are provided. First, local market competence reflects location-specific and firm-specific intangible asset. Second, local market competence develops and improves over time as exporting manufacturers learn to apply routines to create capabilities and value (Gold et al., 2001)

The manufacturer opportunism, in order to archive the competitive advantage in the foreign market, it must associate with local market competence distributor. Three mechanisms; trust, knowledge sharing, and contract-based relationship, were expected by the researchers to show the significant role in developing a manufacturer's local market competence while reducing distributor opportunism. According to the researchers, trust reduces the risks of opportunism over a long-term exchange because it facilitates to orient the partner's attention through chase mutual advantage in the relationship rather than the avoidance of opportunism (Dyer and Singh, 1998). Knowledge-sharing-based can help to strengthen each partner by developing better workforce and skill in managing the international channel relationship, therefore, the researchers expect that knowledge sharing will increase opportunism behavior. There are two objectives of contract-based governance; to monitoring and control the behaviors of the channel partners to safeguard against partner opportunism, to coordinate the activities between the channel partners to ensure that strategic goals are archived (Dwyer et al., 1987; Poppo and Zenge, 2002). From these, the researchers assume that the contract relationship provides a means to promote value creation and minimizing costs.

There are four control variables in this study; firm size, environmental, foreign market experience, and culture distance. The researchers control these four effects while they are examining manufacturer in export market performance.


The researchers selected 12-seasoned international marketing executive who are involved with their companies' export operations and six international trade lawyers who are familiar with manufacturer -foreign distributor relationship. The in-depth interview was set; it provided insights into the nature of the relationship between manufacturer and foreign distributors. The data were collected from the mail surveys. 800 firms were randomly selected, 162 surveys were returned, 142 responses suits for analysis.

The constructs were obtained from the literature, modified and refine base on insights interview. Then the researchers asked selected group of managers and academic researchers to study their modified scales for face and validity. Consequently, the questionnaire were presented to sample of 35 respondents before create the final questionnaire.

It contained lists, the factor loading, and constructs reliability were presented in table 1 and descriptive statistics and correlation were presented in table 2. There are six constructs have been measured; trust, knowledge sharing, formal contract, local market competence, distributors opportunism, and manufacturer competitiveness.

Three stages least squares (3SLS) were used to analysis. Each construct was presented by its total score. The researchers evaluate the main effects of the model and include the interaction between the three governance mechanisms.


The writers followed the procedure suggested by Baron and Kenny (1986) to test the effect of local market competence and distributor opportunism, they found that the relationship between these two. Further analysis shows that the knowledge sharing is entirely mediated by local market competence but not by distributor opportunism as well as there is no formal relationship effect directly to manufacturer competitiveness. The additional analysis was created to check for model robustness and the results show that all alternative models have both direct and indirect effects on local market competence and distributor opportunism.

The main objective of this study is to emphasize maximizing value in international expansion by building upon previous research on the value creation aspects of interfirm collaboration (e.g., Madhok, 1996; Madhok and Tallman, 1998; Williamson, 1999). The writers propose and observation on a framework that mixes both organizational competence and transaction cost perspective to explain a firm strategy's behaviors and performance outcome in the export market. Their findings suggest that manufacturers need to develop higher organizational competence in the local market and lessen distributor opportunism for international opportunity by create effective governance strategies.

Trust, knowledge sharing and formal contract are considered as the significant role in managing the manufacturer-foreign distributor relationship. Trust create a positive environment and reduce associating costs between exchange parties. Knowledge sharing can counterpart trust to built a stronger local market competence, it can be considered as a tool to increase distributor opportunism. They conducted the analysis; the results show that knowledge sharing risks for the relationship.

Limitations and directions for future research:

This study emphasizes the significant of minimizing value for the exploiting manufacturer in international expansion. There are six limitations shown in this research paper. Each of them provided some solution and future research suggestion by the authors.

First, even though the data were collected through mail surveys, there were still some common neutral with this methods. Second, the research examines only the manufacturers. The writers suggested that to fill the gaps and have more perceptions, the research should cover both manufacturers and distributors. Future study should consider partner behavior when evaluating international channel relationship. Third, only a single manufacturer-distributor was investigated. Fourth, lack of details in the process of knowledge sharing as a governance firm might be concerned. Fifth, the constructs is easy to measure in the future. The writers suggested that future study can include financial measures as well as should evaluate the effectiveness of contract-based governance under specific contract terms. Sixth, to identify some of the gap, a longitudinal study with a qualitative research design might be useful. The authors offer the future research need to answer the effects of cultural distance.

Evaluating Published Research: analyze, criticize, and reflect on the paper

This section will analyze and criticize with reflect on the paper on these six focuses; research problem formulation, literature review, methodology, data collection, findings, and recommendations of the authors.

Research Problem Formulation

In this paper, the writers attempt to examine the way to overcome international business expansion barriers by introducing an interpretation from resource-based view as well as prior study. It is very important to increase local market capability and limit the costs of distributor opportunism. Although, this study did not directly answer the question what, where, when, why regarding to international business expansion, it benefits to follow readers to extend their business knowledge through this research problem. The researchers introduced the three governance mechanisms to develop the manufacturing competition in local market opportunity in this research. These appliances seem to be useful to conquer present situation. Even though, the research problem involves the complexity of international channel relationships, the writers explain this complex problem clearly with additional researchers' observation and previous theory from many quality papers, especially, the conceptual framework. The predictions were explained clearly. The researchers give very clear concept hypothesizes, logically plan and reasonable.

Literature Review

The literature review of this research not just followed the literature from previous research; the writers inserted their perspectives to expand the idea from prior literature research. They listed all the material published regarding with consideration how it fits together and how it can be synthesized into their research (Lee and Lings, 2008). The authors obviously added their own value and intellectual contribution in their project that proved they were familiar with pertinent literature. The writers show many prior studies relate to the research topic. According to Williamson (1999), he compared the governance and competence outlook for strategy research. Even though, there are not many studies that address these two perspectives, the writers have shown their familiar to this literature by well control the area of this study as well as fluently extend the empirical work. According to Lee and Lings (2008), this study is organized by the methodological structures. This structure is not only focus on the content of material, but also focus on the methods that researcher used. This is a useful way to organize writing in order to attract reader interest. This method generally aims to understand the concepts, models and frameworks used to describe and explore their idea of interest (Lee and Lings, 2008). The article constructs the literature review comprehensive while simultaneously provide a very well organize frameworks that aim to explore. First, they explore the linking between organizational capabilities and governance managerial exporting channel. Next, they explore the three effects of governance mechanisms methods - trust, knowledge-sharing, and contract-based relationships - that might use by the manufacturer to increase an opportunity of international channel.

To sum up, the aim of this literature review is to show that the researchers have studied existing work in their interested area and provide insights into their work (Lee and Lings, 2008). This research included an effective analyses and synthesizes material which relevant, appropriate and useful for the readers.


The personal interviews offer many advantages. According to Zigmund (2002), the face-to-face interaction between interviewer and respondent has several characteristics that help researchers obtain complete and precise information. The in-depth personal interviews set with specific interviewees to discover insights into manufacturers and foreign distributors. To get the best result of interview, first, the investigators should advance an interviewee to be prepared for an interview. Next, the interviewer should concern about time to interview. Last, interviewer need to be skilled in recording data (Bryman and Bell, 2007). Moreover, the researchers scope only the marketing manager or a senior executive from the manufacturing company who directly involved with strategic and tactical operations of the relationship. This can be considered as qualitative research strategy owing to the investigators emphasized words rather than quantification in the collection and analysis of data. The researchers emphasized an inductive approach to the relationship between theory and research (Bryman and Bell, 2007). The data were collected by a large proprietary database 'Thomas Export Directory' through e-mail surveys. Roy conducted his study in 2005. He found that a high rate of undeliverable would occur while using e-mail surveys. In this study, the response rate is 17.8%. It seemed to be that some problems were occur, but there were no explanation to this matter from the writers of this study. Next, the companies that involve in global market expansion using independent channels, for example, foreign distributors, were selected. The research also sorts out the companies with less than 50 employees, due not to arrange enough business with various foreign distributors.

The questionnaire was developed and modified by 35 responders before the final surveys and also rated from 1 to 7 scale which 1 refers to strongly disagree and 7 refers to strongly agree. The researchers have followed the measures from Anderson and Gerbing (1988) by evaluating the reliability together with each dimension of the construct. They, first, examine item-to-total correlations and sort out the items that less associates. Then, exposed the item by using the principal component analysis (PCA) and confirmatory factor analysis (CFA) using EQS (Bentler, 1998). As a result of these methods, Nunnally (1978) suggested that if the Cronbach alpha in each construct is greater than 0.7 it means that there are adequately reliabilities. These research designed are explicitly explained and lead to accurately evaluation to the specific area. The researchers show their familiarity to relevant methodological literature with skillful. There are six constructs were explained and in each construct was measured by differences item scale. They use the table wisely to explain the measurement with referable work from many researches expertise. They describe the table clearly with measurement building on prior theories and work as well as adapt their research to suit this international channel study.

The authors have set up the convergent validity to examine the important factor loading in each construct. As Anderson (1987) stated that convergent validity will be indicated when items on their designated latent variables significantly loaded. The researchers are also attempting their discriminant validity to ensure their constructs. Researchers have controlled sufficiently apprehend and given fairly explanation on methodological literature and techniques.

The three-stage squares (3SLS) analysis were used to conduct estimation and generalized from least squares to describe correlations in the error terms over equations. The benefit of this method is to test a system of equations and can estimate the complicated structural models with several internal variables at the same time (e.g., Doney and Cannon, 1997; Poppo and Zenger, 2002). As a result of this model estimation, it can lead the researcher evaluate the results easily.

Data Collection

The data investigators collected the data by mail surveys. They planned the realistic data collection with possible respondents which directly involved in export companies and have broadened view of foreign distributors' management. From 800 randomly selected firms and 162 surveys were returned with 142 responses were appropriated to analysis. The percentage of responding rate is 17.8% and most of respondents were company's vice presidents, senior managers, or directors who work directly related with export operations. This is an effective responding rate with a very pertinent target. The ethical issues were raise according to Armstrong and Overton (1977), the researchers have completed the test between early and late respondents, and furthermore, there are no significant differences in these variables. Furthermore, ethical issues cannot be ignored, especially, data protection, deception, invasion of privacy, lack of informed consent, harm to participants etc. Bryman and Bell (2007) argued that the researchers should concern with limited range of ethics in business research that might arise in the context of collecting and analyzing data. In this study, there are insufficient evidence that discuss as mentioned above.


The results were given concisely in separated tables. The first table was used to illustrate the lists of the measures used in the final study, the factor loadings, and construct reliability. The second table provided statistics description and correlations. The last table is used by the writers to show the effects of 3SLS analysis. From this aspect, the reader can easily understand the complexity of statistics and values.

In statistical aspect, the researchers have shown their findings wisely and provided sufficiently discuss with in the literature. Even though, there are many constructs to measure, investigators can articulate their findings as well as an additional analysis to ensure the model robustness.

The writers also discuss and implicate the results of their finding in accord with the RBV. They are not only showing the results of their literature, but also give well discussing in order to let the followers simply understand the international channel relationships with enough evidences.


The researchers exploit the limitation of this research to give the direction for the future research for this research area. They not only give precedence to point out the problems, but also give some possible solution and extension for the readers. Many suggestions are provided. In my point of view, even though there are some mistakes occur, the most important is the investigator should bring out errors. These raise the research's ethics and support data become more realistic. One of the most significant limitations that investigators have pointed out is the several of the control variables in this study. They suggested that future research should add individual dimension of culture distance in the competence process. Furthermore, they also suggested that in long term direction should add as one of the cultural distance measurements (Hofstede and Bond, 1988; Shenkar, 2001). This proves that the investigators give their recommendation for the future research based on their findings and well argued.


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Appendix 1: A model of achieving manufacturer competitiveness in export market

Source: 'Overcoming export manufacturers' dilemma in international expansion'. Journal of International Business Studies, 38(2), p.286.

Appendix 2: Statistical Tables

Source: 'Overcoming export manufacturers' dilemma in international expansion'. Journal of International Business Studies, 38(2), p.293.

Appendix 3: Statistical Tables

Source: 'Overcoming export manufacturers' dilemma in international expansion'. Journal of International Business Studies, 38(2), p.294.

Appendix 4: Statistical Tables

Source: 'Overcoming export manufacturers' dilemma in international expansion'. Journal of International Business Studies, 38(2), p.295.