The Impact Of Export Assistance On Performance Commerce Essay

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Entrepreneurial orientation has become a central concept both in entrepreneurship and international entrepreneurship literatures. While export assistance is targeted at encouraging entrepreneurial strategic decisions by local entrepreneurs to participate in international markets, no studies tried to show this link. This is the first empirical study that shows the relationship between export assistance and entrepreneurship in international business setting. This study by using a sample of 647 INVs in a developing economy low-tech apparel industry provides supporting evidence for the direct and mediated effect of export assistance on export performance by entrepreneurial orientation.

INTRODUCTION

Small and medium enterprises (SMEs) from all over the world have been involved more and more in exporting. This has been possible due to their development of unique capabilities and innovativeness (Lefebvre et al. 2003). The role of government in SMEs' such initiative is now well accepted and appreciated. Most government has specific assistance programs to help SMEs to explore and exploit opportunities in international markets. Export promotion programs are aimed at creating a pro-exporting attitude and overcoming specific export problems faced while preparing for exploiting international markets (Diamantopoulos, Schlegelmilch and Tse, 1993). If exporters perceive that there are enough assistance programs and incentives readily available for exporting, then this will positively impact their perception of the net gain from exporting (Osuse-Frimpong and Mmieh, 2007). This pro-exporting attitude and a sense of 'safe' feeling help the firms develop innovative capabilities to produce unique products, proactively search for international opportunities and take the risks by investing in exporting activities. This very nature of entrepreneurial firms which is known as 'entrepreneurial orientation' (EO) both in entrepreneurship and IE literatures has not been explored with regards to how this is developed by export assistance.

Export assistance-export performance literature has mainly paid attention to traditional exporting firms in the western developed world. Despite INVs attracted huge attention from scholars throughout the last decade, little research was undertaken investigating the role of export assistance in rapid internationalization of such firms. INVs, especially from developing economies, provide a very interesting platform to uncover the impact of export assistance because of their different needs, prevalence and increasing importance in international business. Most IE scholars acknowledged the role of networks in INV internationalization, especially the ones developed between entrepreneurs, suppliers, and customers in recognizing and exploiting international opportunities. Network relationships with government and quasi-government agencies that either offer preferential policies or provide assistance services for the export development of these firms remain a largely unexplored area of empirical investigation (Farqoue and Takahashi, 2012).

While most export assistance-performance research assumes and establishes a direct relationship between them, this only provides a limited perspective on the nature and the direction of the relationship. Theoretical and empirical work addressing indirect relationship across various dimensions of performance is also scarce (Gencturk and Kotabe, 2001). Therefore, both the direct and indirect effects of export assistance on multiple performance measures linked to entrepreneurial orientation of INVs from developing economies and low-tech industries can significantly contribute to IE literature.

This study investigates the direct, indirect and total effects of export assistance with data collected through a survey of 647 INVs from a developing economy's apparel industry. The next section of the paper builds on the literature review and development of hypothesis. Thereafter, the hypotheses are tested. The results are then presented and discussed. Finally this paper concludes with interpretation and policy implications, contributions, limitations and future research avenues.

LITERATURE REVIEW AND HYPOTHESIS DEVELOPMENT

Export assistance

Export assistance is generally considered as a vehicle of economic development. In the developed world such assistance is provided as a means of increasing the competitiveness of businesses. Therefore, export assistance has become an integral part of each country's trade policy and government's political manifesto.

Although the concept of export assistance is as old as the history of international trade, the literature concerning it started its journey only during the 1960s. Based on a comprehensive review of export assistance literature between 1960s and 2000s, Faroque and Takahashi (2012) classified the studies into three groups: (a) attributive studies that investigate awareness, use, benefit, adequacy and importance of promotion programs; (b) need-based or gap-based studies that investigate the specific need of exporters and/or examine the gap between demand and supply of such programs; and c) impact studies that investigate the impact of export assistance on venture or firm performance).There is an additional group which advocate how to develop assistance programs, evaluate them as well as target candidates for getting assistance. They also reported a very interesting pattern in the five decades of export assistance research. There is significant chronological development and changes in terms of research progress and methodological sophistication observed (Figure 1). During the 1960s and 1970s researchers lacked a clear focus which is very usual in an emerging field. During the 1980s the number of studies increased and the focus of studies broadened with continuing use of weak research designs. The 1990s observed a large variation in terms of number of studies, method of analysis, research and country focus, and performance measurement. However, successful integration of export assistance and performance was made only in the first decade of the new millennium. Measured by the number of studies that investigated the impact of assistance on performance it seems that export assistance is "still in its infancy" (Faroque and Takahashi, 2012; p. 10). In addition, there are many other concerns which should be considered and incorporated in export assistance literature. For example, the emergence of INVs poses a threat to traditional business models which also influences the research in both fields of IB and IE. The internationalization process of INVs and entrepreneurial concepts in general leave much room for export assistance researchers.

Entrepreneurial orientation (EO)

Entrepreneurship has often been analyzed based on different levels: individuals, groups and firm. Firm level analysis of entrepreneurship, which is known as entrepreneurial orientation (EO), has emerged as an alternative concept to individual and group level analysis of entrepreneurship and gained much attention among researchers in entrepreneurship and IE. EO is referred to as proactive, innovative and risk taking behavior of the firm and emphasizes the process of entrepreneurship rather than the actors behind this. Wiklund (1999) offers two implications for using EO in entrepreneurship. First, these proactive, risk taking and innovative actions may be affected by any number of actors inside and outside the organization. Second, as opposed to narrower entrepreneurial framework focused on individual entrepreneur and his or her behavior, the study of EO gives entrepreneurship researchers the opportunity to put entrepreneurship into a much wider management framework consisting of traditional management terminology and variables such as strategy, performance and organizational structure.

In an internationalization context, innovativeness refers to a firm's capacity to generate new ideas, products, and services for foreign markets and its determination to develop creative solutions to challenges it faces (Knight, 2001). Proactiveness reflects a firm's proclivity to take initiatives, anticipate and pursue new opportunities, and participate in foreign markets, and it involves actively pursuing market opportunities rather than simply reacting to moves by competitors (Miller, 1983). Risk taking refers to the proclivity of a firm to undertake risky ventures in foreign markets (Dimitratos and Plakoyiannaki, 2003).

Development of Hypotheses

Export assistance in this paper is defined as the amount of assistance received from two different sources, government and exporters' associations. While government has both financial and marketing assistance schemes, exporters' associations mainly provide marketing assistance. Chrisman and McMullan (2004) reported that new firms participating in new venture support programmes have more survival rates than other new businesses. Export assistance researchers reported similar results that the effective use of export assistance provided by the government enhances export success (Denis and Depelteau, 1985; Donthu and Kim, 1993; Singer and Czinkota, 1994). Singer and Czinkota (1994) found that use of multiple export assistance services (marketing as well as financing) seems to play a significant role in a firm's achievement of export outcomes. Denis and Depelteau (1985) found among both new and experienced exporters that increased use of government export assistance is associated with greater export performance. In addition to government financial assistance, quasi-government institutions like trade and exporters' associations as well as private commercial banks, leasing and insurance companies through their special schemes for exporters in terms of loan and insurance help firms in a similar manner. Toften (2005) found that use of objective and experiential information received from various sources positively affects export performance. Sousa et al. (2008) in a review of export performance literature reported that export promotion programs provided by government and nongovernment agencies contributes positively to export performance of firms. Therefore, we have hypothesized that:

Hypothesis 1: The higher the use of export assistance, the greater the performance of INVs.

INVs are found to be characterized by an organizational culture that is innovative, proactive, and risk taking (Freeman et al., 2006). More than five decades ago, Schumpeter (1942, p. 194) stated that "the opening of a new market" is an innovation, which positions internationalization as an innovative entrepreneurial activity (Andersson 2000; Casson 2005; Knight and Cavusgil 2004). A firm with innovative capabilities and culture possesses a superior ability both to recognize and exploit opportunities in foreign markets (Jantunen et al. 2005). This indicates that innovativeness is vital to international performance.

The second component of EO is proactiveness which implies increased speed of international development, a criterion necessary for success (Frisharmmar and Andersson 2010). Internationalization process and export marketing literatures frequently refer to proactiveness with regard to international strategies. The INV perspective also underlines the significance of proactive and opportunity-seeking attitude. Proactiveness is an important factor explaining why some firms are international from inception and show high international performance (Andersson and Wictor 2003; Autio 2005; Oviatt and McDougall 1994). Pla-Barber and Escribá-Esteve (2006) found that a proactive attitude of managers toward international strategy increased the likelihood that firms would adopt an accelerated internationalization process.

The third component of EO is risk taking which occurs along a continuum ranging from relatively low risks (e.g., exporting) to very high risks (e.g., joint venture or foreign direct investment). Small firms, especially INVs considering their resource constraints often use direct export or sales through representatives. Luo and Tung (2007) argue that emerging market firms, as latecomers in the global market, need to embrace more aggressive and risk-taking measures in order to combat their competitive weaknesses.

Few researchers in IE have empirically investigated EO-international performance relationship. Jantunen et al. (2005) found a positive relationship between EO and international performance in a sample of Finnish firms. Dimitratos et al. (2004), drawing on data from Greece, also found partial support for the relationship between EO and international performance. Zahra and Garvis (2000) found a positive relationship between EO and international performance in a sample of US firms. Ibeh (2003), McAuley (1999) and Robertson and Chetty (2000) found that EO-international performance relationship exists even in low technology industries challenging the mere presence of such relationship only in high-tech and knowledge-intensive firms in IE literature. In summary, we can assert that three dimensions of EO positively influence performance of INVs.

Hypothesis 2: The greater the EO of the firm, the higher the performance of INVs.

Entrepreneurship has implications for export assistance scholars. It is not enough to investigate only the impact of export assistance on export performance of firm or venture because it has simultaneous impact on entrepreneurial orientation of the firm as well as on the entrepreneurial process involving opportunity search, recognition and subsequent exploitation in international markets. Export marketing assistance can give potential exporters the necessary information to enter a market. This in turn can initiate the risk taking behavior of firms; encourage them to be more proactive in searching for and capitalizing on emerging opportunities. Seringhaus (1986) identified three distinct roles of export marketing assistance. First, it emphasizes the role of risk taking and opportunities in foreign market involvement. Second, it acts as a stimulus to a firm's interest in and commitment to exporting. Finally, it serves as an external resource to build knowledge and experience vital for successful foreign market involvement. This also indicates a direct link between export marketing assistance and innovative, proactive and risk taking behavior of firms. In addition, export financial assistance can do the same by financing resource constrained exporters' new endeavor and innovative activities, thus having large influence on EO. Therefore, we have hypothesized:

Hypothesis 3: The higher the use of export assistance, the greater the EO of INVs.

Mediated relationship between export assistance and export performance. In addition to a direct relationship, Faroque and Takahashi (2011) reported a mediated relationship between export assistance and INV performance by market knowledge and commitment. Shamsuddoha and Ali (2007) found that export financial and marketing assistance has direct and indirect impact through market knowledge, commitment and export strategy. Lages and Montgomery (2005) found that while export assistance exerts positive direct effect on performance, the indirect effect through pricing strategy adaptation is negative. This makes the total effect of export assistance nonsignificant. Thus one can easily draw a misleading conclusion from a model using only direct effects. Through this research Lages and Montgomery (2005) stimulate researchers to develop future studies that examine both the antecedents and outcomes of export assistance while considering the mediating effects of strategy variables. EO as a strategic decision making process might have mediating influences on export assistance - performance relationship. Therefore, we have hypothesized that:

Hypothesis 4: The relationship between export assistance and export performance is partially mediated by EO of INVs.

MEASURES

Export assistance.

Entrepreneurial orientation.

Export performance. Following previous studies we measured export performance by using three items: export sales volume, export sales growth, and export profitability.

Control variables. In line with other export assistance studies, we included the size and age of the firm and INV's foreign market coverage as control variables for a better understanding of the relationships in this study (Bradley and Sousa 2009). In addition to firm age, size and market coverage, other variables might have influence on performance and EO. As Lumpkin and Dess (1996) note that the relationship between EO and performance is not as stratighforward as previously assumed. Therefore, we have used environmental dynamism, price competitiveness, technology dynamics, and market uncertainty as control variables in line with other studies on EO (Wiklund 1999, Zhou et al. 2010).

RESULTS

CONCLUSION AND IMPLICATIONS

Government assistance programs should also target the most powerful determinants of export performance (Lefebvre et al. 2003). Entrepreneurial orientation appears to be the highest influencing variable on performance which is as double as the direct impact of export assistance. The indirect effect of assistance is rather low compared to the direct effect. This implies that export assistance in the apparel industry is currently focused on achieving higher export performance. If much attention is given to improving EO of INVs, it could in turn improve export performance of INVs by exerting higher direct influence from EO as well as by higher indirect influence through assistance which would be reflected in higher total effects.

REFERENCES

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