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The role of past performance in export ventures: a short-term reactive approach

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Abstract

This paper employs organizational learning theory to examine the short-term effect of past export performance, and internal (management) and external (market) forces on marketing strategy adaptation and current export performance. Results from a survey of over 500 export managers indicate that current-period performance improvement (in terms of performance achievement, export intensity, and performance satisfaction in the current year) is influenced by the firm's commitment to exporting. Further, the authors found that while performance satisfaction feeds performance improvement in the following year, both the previous year's export intensity and export performance achievement produce a negative impact on current-period performance improvement. More importantly, the level of development in the export market facilitates marketing strategy adaptation in the short term, as does export intensity in the previous year. However, satisfaction with previous-year performance negatively influences the degree of distribution adaptation. Implications for international business researchers and practitioners are also discussed.

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Notes

  1. Earlier research on the impact of export market forces on export performance yields mixed findings (cf. Austin, 1990; Beamish, Craig, & McLellan, 1993; Sriram & Manu, 1995). In light of these mixed results, and the lack of strong theory based upon organizational learning to posit such relationships, we do not hypothesize the relationships between the export market forces and performance improvement in the current period.

  2. However, while taking into consideration the comment of an anonymous reviewer, we split the sample into exporters of consumer products (n=416) and exporters of industrial products (n=103). After analyzing the correlation matrices we found some support for H1. An analysis of the correlations revealed that, for industrial exporters, distribution adaptation is significantly correlated with current-period export intensity (r=0.21, p<0.05). This split also indicated that our initial finding, that product adaptation is negatively correlated with performance achievement, is found to be significant only in the case of consumer goods (r=−0.12, p<0.05).

  3. After splitting the sample, we found additional support for H2d because for industrial exporters a firm's commitment to exporting is significantly correlated with distribution adaptation (r=0.21, p<0.05). While taking into consideration the comment of an anonymous reviewer, we used the mean of the past performance factors to divide the sample into exporters with low/high past export intensity (n=265/n=254), low/high past performance achievement (n=240/n=279), and low/high past satisfaction (n=212/n=307). After splitting the sample, we found that commitment is correlated with promotion adaptation when past intensity (r=0.20, p<0.01) and past satisfaction (r=0.14, p<0.05) are high. Moreover, commitment is also correlated with distribution adaptation when both past intensity (r=0.16, p<0.05) and past satisfaction (r=0.12, p<0.05) are high.

  4. Surprisingly, we found that the correlations between commitment and the three dimensions of current performance (intensity, achievement, and satisfaction) are positive only for exporters of consumer goods (r=0.15, p<0.01; r=0.15, p<0.01; r=0.13, p<0.01, respectively). We also found that the relationship between commitment and the three dimensions of current performance is positive only when past intensity is low (r=0.20, p<0.01; r=0.17, p<0.01; r=0.16, p<0.05, respectively), past achievement is low (r=0.24, p<0.01; r=0.19, p<0.01; r=0.19, p<0.01, respectively), and past satisfaction is low (r=0.21, p<0.01; r=0.17, p<0.05; r=0.20, p<0.01, respectively).

  5. However, after dividing the sample we found some support for H3. For exporters of consumer products, experience is significantly correlated with distribution adaptation (r=0.10, p<0.05). Moreover, we also found that when satisfaction with past performance is low there is a positive correlation between experience and distribution adaptation (r=0.17, p<0.05).

  6. After splitting the sample we found partial support for H5. In the case of exporters of consumer products, experience is significantly correlated with current-export intensity (r=0.12, p<0.05), current performance achievement (r=0.16, p<0.01), and current performance satisfaction (r=0.15, p<0.01). Surprisingly, we also found that experience is correlated with the three dimensions of current performance (intensity, achievement and satisfaction) only when past intensity is high (r=0.12, n.s.; r=0.20, p<0.01; r=0.16, p<0.01, respectively), past achievement is low (r=0.18, p<0.01; r=0.17, p<0.01; r=0.17, p<0.01, respectively), and past satisfaction is low (r=0.18, p<0.05; r=0.21, p<0.01; r=0.23, p<0.01, respectively).

  7. After splitting the sample, we found that only in the case of consumer goods is export market development positively correlated to product (r=0.16, p<0.01), promotion (r=0.15, p<0.01) and distribution (r=0.16, p<0.05).

  8. Although we did not hypothesize specific effects between export market forces and current-period performance improvement, we estimated the effects, only to find that export market forces produces no significant effects on current-period export intensity (γ 53=−0.01, n.s. for market development and γ 54=0.06, n.s. for competition), performance achievement (γ 63=−0.02, n.s. for market development and γ 64=0.08, p<0.10 for competition) or current-period performance satisfaction (γ 73=−0.04, n.s. for market development and γ 74=0.01, n.s. for competition).

  9. However, we found some support for H7. When past export intensity is low, competition is correlated with product adaptation (r=0.14, p<0.05).

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Acknowledgements

This research was funded by the following research grants to the first author: by FCT-EU (2000–2001) while a Visiting Scholar at MIT Sloan School of Management and Stanford University Graduate School of Business; by NOVA EGIDE (2001–2007) and 6th European Framework Program (2004–2006) while affiliated with Universidade Nova de Lisboa; and by FCT-EU (2006) while a Visiting Scholar at London Business School. The authors acknowledge Tim Ambler, Pedro Pita Barros, James Harris, Jose Mata, David Montgomery, Aviv Shoham, Jose Tavares, JIBS' editors, and three anonymous reviewers for comments on earlier versions of the manuscript.

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Authors and Affiliations

  1. Deshpande Center for Technological Innovation, MIT School of Engineering, USA

    Luis Filipe Lages

  2. Faculdade de Economia, Universidade Nova de Lisboa, Portugal

    Luis Filipe Lages

  3. Goizueta Business School, Emory University, Atlanta, USA

    Sandy D Jap

  4. Eli Broad Graduate School of Business, Michigan State University, East Lansing, USA

    David A Griffith

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  1. Luis Filipe Lages
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  2. Sandy D Jap
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Accepted by Arie Y Lewin, Editor-in-Chief, 20 April 2007. This paper has been with the authors for three revisions.

APPENDIX: SCALE ITEMS AND RELIABILITIES

APPENDIX: SCALE ITEMS AND RELIABILITIES

α=Internal reliability (Cronbach, 1951)

ρ vc(n)=Variance extracted (Fornell & Larcker, 1981)

ρ=Composite reliability (Bagozzi, 1980)

Preceding Year's Performance

Performance achievement in preceding year (α=0.92; ρ vc(n) =0.67; ρ=0.91)

Question: How well did your company achieve the following objectives for the main export venture in 1997?

Scale: 1=very badly; 5=very well

  • Export sales volume (unit sales)

  • Export sales revenue

  • Export profitability

  • Market share in the main importing market

  • Overall export performance

Export intensity in preceding year (α=0.96; ρ vc(n)=0.86; ρ=0.95)

Question: With regard to your main export venture in 1997, how do you assess the following?

Scale: 0–9%; 10–29%; 30–59%; 60–84%; 85–100%

  • Percentage of exporting venture to total sales volume (unit sales)

  • Percentage of exporting venture to total sales revenue

  • Percentage of exporting venture to total profitability

Satisfaction with preceding year's performance (α=0.94; ρ vc(n) =0.77; ρ=0.94)

Question: How satisfied are you with the 1997 results of your main export venture?

Scale: 1=not satisfied at all; 5=extremely satisfied

  • Export sales volume (unit sales)

  • Export sales revenue

  • Export profitability

  • Market share in the main importing market

  • Overall export performance

Current Performance Improvement

Performance achievement improvement in current period (α=0.95; ρ vc (n)=0.79; ρ=0.95)

Question: How well did your company achieve the following objectives for the main export venture from 1997 to 1998?

Scale: 1=much worse in 1998 than in 1997; 5=much better in 1998 than in 1997

  • Export sales volume (unit sales)

  • Export sales revenue

  • Export profitability

  • Market share in the main importing market

  • Overall export performance

Export intensity improvement in current period (α=0.96; ρ vc(n)=0.87; ρ=0.95)

Question: With regard to your main export venture, to what extent did the following change from 1997 to 1998?

Scale: 1=large decrease from 1997 to 1998; 5=large increase from 1997 to 1998

  • Percentage of exporting venture to total sales volume (unit sales)

  • Percentage of exporting venture to total sales revenue

  • Percentage of exporting venture to total profitability

Satisfaction with performance improvement in current period (α=0.97; ρ vc(n)=0.84; ρ=0.96)

Question: How satisfied are you with the results of your main export venture from 1997 to 1998?

Scale: 1=much less satisfied in 1998 than in 1997; 5=much more satisfied in 1998 than in 1997

  • Export sales volume (unit sales)

  • Export sales revenue

  • Export profitability

  • Market share in the main importing market

  • Overall export performance

Adaptation of the Marketing Mix

Question: Consider the main export venture over the past year (1998). To what extent do the following aspects differ in comparing the main export market to the domestic market?

Scale: 1=no adaptation; 5=extensive adaptation

Product adaptation (α=0.81; ρ vc(n) =0.52; ρ=0.81)

  • Product brand name

  • Product design

  • Product labeling

  • Variety of the main exporting product line

Promotion adaptation (α=0.89; ρ vc(n)=0.62; ρ=0.89)

  • Advertising theme

  • Media channels for advertising

  • Promotion objectives

  • Budget for promotion

  • Direct marketing

Pricing adaptation (α=0.85; ρ vc(n)=0.59; ρ=0.85)

  • Determination of pricing strategy

  • Concession of credit

  • Price discounts policy

  • Margins

Distribution adaptation (α=0.87; ρ vc(n)=0.63; ρ=0.87)

  • Criteria for selection

  • Transportation strategy

  • Distribution budget

  • Distribution network

Internal (Management) Forces

Firm's commitment to exporting (α=0.81; ρ vc( n ) =0.53; ρ=0.82)

Question: Consider the main export venture over the past year (1998). To what extent do you agree or disagree with the following statements?

Scale: 1=strongly disagree; 5=strongly agree

  • There was substantial planning for this export venture

  • There was a significant amount of human resources involved in the exporting activity

  • There was a significant degree of management commitment to exporting

  • There were more financial resources for exporting than those used for the domestic market

Management international experience (α=0.75; ρ vc( n ) =0.45; ρ=0.76)

Question: Consider the people involved in your main export venture during the past year (1998). How would you classify their:

Scale: 1=None; 5=Substantial

  • Degree of professional exporting experience

  • Degree of overseas experience–live/work abroad

  • Degree of training in international business, for example, attended formal courses and export seminars

  • Ability to follow up on trade leads in the main importing market

External (Market) Forces

Export market development (α=0.77; ρ vc(n) =0.63; ρ=0.77)

Question: Considering the main export venture over the past year (1998), how would you characterize the following aspects of the export market?

Scale: 1=none; 5=substantial

  • Degree of country's development

  • Level of consumer education in the importing country

Export market competition (α=0.79; ρ vc( n ) =0.56; ρ=0.79)

Question: Considering the main export venture over the past year (1998), how would you characterize the following aspects of the export market?

Scale: 1=none; 5=substantial

  • Extent of price competition in the industry

  • Competition in the accomplishment of delivery deadlines

  • Competition in the industry

Covariates

Size of the firm

Question: What was the total number of full-time employees working in your firm last year (1998)?

Scale: 1–9; 10–19; 20–49; 50–99; 100–499; ⩾500

Distance of export market to Portugal

Question: Please indicate which was, in 1998, your company's main importing country of your main exporting product (or group of products): _______ (please indicate one country only)

Scale: The distance in kms was computed as the difference between Lisbon (Portugal) and the capital of the country.

Number of markets

Question: Last year (1998), how many countries imported your main exporting product?

Scale: 1; 2–4; 5–9; 10–25; >25

Export sales value

Question: What was your company's total export sales for last year (1998)?

Scale: ⩽€100,000; €100,001–350,000; €350,001–1.5m; €1.5m–3.5m; €3.5m–5m; €5m–35m; €35m–145M; ⩾€145M

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Lages, L., Jap, S. & Griffith, D. The role of past performance in export ventures: a short-term reactive approach. J Int Bus Stud 39, 304–325 (2008). https://doi.org/10.1057/palgrave.jibs.8400339

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