IMPACT OF EXPORT PROMOTION PROGRAMS ON FIRM COMPETENCIES, STRATEGIES AND PERFORMANCE Group Rupee

Introduction Many companies are unable to pursue export sales due to Lack of experience Limited resources Other perceived or real obstacles Export promotion programs are provided by Governments Trade Associations Other Organizations Goal Enhance export performance by improving firms – capabilities –Resources –Strategies –Competitiveness

Purpose Investigate whether export promotion programs bolster export strategies and competencies as well as the achievement of firms’ export objectives. Focused on Measurable impact of export promotion programs on firms Investigate the effect of variety export promotion programs on achieving the objectives of export firms Technological Impact on export promotion programs Introduction cont…..

Study limited to one country –Programs across nations make comparison difficult According to the literature this is the first study to measure the impact across a broad range of outcomes and a variety of programs. Introduction cont…..

Literature Review process modelprocess model How export promotion programs have an impact on firms’ export performance. According to this model, export assistance influences export performance only indirectly. –Czinkota (1996) The firm’s level of internationalization has been identified as a critical factor in developing appropriate programs –Cavusgil, 1990; Diamantopoulos et al., 1993; Kotabe and Czinkota, 1992; Lesch et al., 1990 Response hierarchy modelResponse hierarchy model Explain the process by which firms might benefit from export promotion assistance programs at different stages of involvement. –Diamantopoulos et al. (1993)

Literature Review Cont…… Measurement is difficult because Export promotion is not a business activity, but it facilitates the firms’ own activities in wide variety of ways -(Model, of Czinkota (1996), Seringhaus and Rosson (1991) and Diamantopoulos et al.(1993) ) Export promotion programs influence only company’s export behaviuor and performance -(Seringhaus and Rosson, 1990). Methodological and measurement difficulties have led most researchers to use surrogate variables to evaluate export promotion programs -(Diamantopoulos et al., 1993).

Literature Review Cont…… Another stream of research measures the obstacles exporters face in order to identify potential needs to be fulfilled (Brooks and Frances, 1991; Cooper and Nyborg,1998; Dominguez and Sequeira, 1991; Ramaswami and Yang, 1990). While this research plays an important part in designing export promotion programs, it fails to provide evidence on the impact of these programs on firms’ capabilities and resources

Literature Review Cont…… The program use was associated with export performance at an individual program level, but was not able to find such a relationship at an aggregate level. Marandu (1995)

Literature Review Cont…… The one common finding in more recent research is that multiple measures are necessary to capture unique and valuable facets of performance (Diamantopoulos, 1999; Katsikeas et al., 2000; Shoham, 1998; Styles, 1998; Zou et al., 1998). Katsikeas et al.’s (2000) review of the export performance measurement literature identified some categories of performance outcomes: –Economic measures based on sales, profits and market share –Non-economic measures related to export markets (such as number of countriesexported to), products and miscellaneous items (including projection of export involvement) –Generic subjective measures (including perceived export success, achievement of export objectives, satisfaction with specific export performance indicators and in general).

Hypotheses There are four hypothesis as follows: H1 - For pre-exporters, number of export promotion programs used is positively associated with achievement of export market knowledge objectives, product marketing objectives, marketing and export marketing competence and export planning. H2- For sporadic exporters, number of export promotion programs used is positively associated with achievement of export market knowledge objectives, product objectives, product marketing objectives, marketing and export marketing competence, export planning as well as longer term and immediate export strategies.

Hypotheses Cont…… H3 - For active exporters, number of export promotion programs used is positively associated with achievement of export product objectives, short- and long-term market expansion strategies, export marketing competence and economic performance, and market diversification performance. H4 - For majority exporters, achievement of objectives, strategies and competencies is independent of number of export programs used and positively related to economic and market diversification performance.

Method Population – database of more than 3500 small and medium firms Sampling – Stratified Random Strata – Sub sector, Geographic region Self-administered survey questionnaireInstruments Questionnaire – Reviewed with export performance literature, in- depth interviews & pre testing

Method Cont…… Export objectives were measured on nine-point scales anchored by “missed objective” and “surpassed objective”. Firm competencies in marketing, and export marketing specifically, were measured by the following items: overall marketing competence competence with distribution developing contacts in export markets information acquisition in foreign markets

Method Cont…… Firms were asked to indicate which of the following best described their firm: Pre-exporters –may not export at all but are getting ready to export and may export to a limited degree Sporadic exporters – sporadically involved in export markets Active exporters – actively involved in exporting Majority exporters – derive a majority of their sales from exports Analysis Chi square test ANOVA

Results Response rate – 183 respondents (37% ) Annual sales were highly correlated with number of employees (r = 0.84, p<0.00) Significant differences in the export intensity (percentage of sales from exports) across the export involvement groups, which validates the firms’ self-categorization. Export intensity progressively increases to an average of 80 percent for majority exporters.

Results Cont…… program use is positively and significantly associated with the achievement of export objectives.Pre-exporters Greater use of export promotion programs by pre- exporters had positive effects on knowledge objectives as well as on export product marketing, significant correlations between use of export assistance programs and firms’ general marketing competence and export marketing Competence Export assistant programs positively related with the firms immediate market expansion priorities (although not statistically significant)

Results Cont…… Sporadic exporters Positively correlated with objectives related to establishing their products in new markets and developing export knowledge. Use of export assistance programs is significantly correlated with both measures of firm marketing competence as well as with their use of formal export planning, Also significantly correlated with their market diversification strategies in both the short and long terms, as well as with export intensity strategies in both the short and long terms.

Results Cont…… Active exporters use of a greater number of export assistance programs is significantly related to the overall marketing and export marketing competence measures, but not for formal export planning. use of export assistance programs is also significantly correlated with market diversification priorities Majority exporters Least affected by the use of export assistant programs Not significantly correlated with expansion strategies

Discussion This study provide evidence of and clarify the nature of the impact of these export assistance programs Greater use of export assistance programs contributed to the achievement of export knowledge and product market objectives. Further, use of programs had a different impact for firms with different levels of export involvement. Export assistance programs appear to have their greatest impact for firms at the beginning and developing stages of their export activity, and made more limited contributions to firms that were either essentially non-exporters or experienced exporters.

Discussion Cont…… Export assistance appears to have its most wide-ranging impact on sporadic and active exporters. Use of export assistance is associated with greater export competence, in a variety of areas, for both of these groups of exporters.

Limitations Study limits to one industry segment using one country export performance program Did not consider about the differences in perceptions of respondents Correlation analysis does not rule out possible type I error, where the impact may be falsely attributed to the program use