MARKET ENTRY GLOBE MARKETING

export performance

Luis Filipe Lages and Carlos M. P. Sousa

INTRODUCTION

The area of export performance is attracting both academic and managerial attention at an increasing pace. For more than three decades (1964–1998), work in the field was mostly concerned with understanding export-performance determinants. With the publication of a special issue on export per- formance measurement in the Journal of International Marketing in 1998, research in this topic received a new boost. Since then, several works have been presented to justify the exis- tence of divergent findings in this field (Lages and Lages, 2004; Lages, Lages, and Lages, 2005; Diamantopoulos and Kakkos, 2007). Simultaneously, new works appeared arguing that export managers are not only proactive but also reactive to past results. As a consequence, research should also start considering export performance as an independent variable (Lages et al., 2008b).

Today, after almost half a century of research in this theme, there is very little consensus on the key antecedents and outcomes of export performance as well as how export performance should be defined and measured (Sousa, 2004; Sousa, Martinez-Lopez, and Coelho, 2008). Not surprisingly, the current literature on export performance is fragmented, diverse, and inconsistent, hindering advancement in the field. It is fragmented because of numerous studies in the literature that are characterized for adopting a variety of analytical techniques and methodological approaches. It can be classified as diverse because of the different determinants and measures of export performance (see STRATEGIC EXPORT MARKETING–ACHIEVING SUCCESS IN A HARSH ENVIRONMENT). Finally, it is consid- ered inconsistent because of the different and often contradicting findings that exist in the export-performance literature. Despite the critical importance of this theme both from public policy making and managerial perspectives, in our view, no consensus will exist in the literature until an established measure of

export performance is used. The purpose of this article is to provide an overview of the literature on export performance and a list of potential directions for future research.

SUBJECTIVE OR OBJECTIVE MEASURES?

Over the last five decades, a wide diversity of measures has been used in the exporting liter- ature to assess performance (Diamantopoulos and Kakkos, 2007). A first choice to be made is between subjective and objective measures (see MARKETING METRICS). Supporters of subjective assessment argue that, although objective assessments in measuring actual export performance may be regarded as being ‘‘more trustworthy,’’ these measures raise different measurement problems. Obtaining accurate objective data on export performance is very hard because export managers are rarely willing to respond effectively to absolute values (Lages, Lages, and Lages, 2005). They will also argue that managers often disagree about which operational measures to use when setting targets because performance assessment is idiosyncratic to the type of firm and its environment, and some measures (e.g., profitability, sales, and ROI) raise comparability problems due to different accounting practices within strategic business units (SBUs) and across firms (Styles, 1998). Another major obstacle is that financial reports hardly ever make a distinction between the performance of domestic and export markets operations and even more seldom provide data on each export venture. As a consequence, objective metrics are rarely used because it is often impossible to establish a common defini- tion of success/failure or fixed reference points across firms. On the other hand, by measuring perceived performance, researchers are able to capture the degree to which performance has matched the aspiration levels of the firm from one year to the next. The imaginary line sepa- rating success from failure will be determined by the level of expected performance and will serve as a useful starting point for future decision making. In sum, one may assume that an indi- vidual export venture will be successful when targets are met or exceeded and unsuccessful when it is below this line (Lages et al., 2008b). Organizational learning theory posits that

Wiley International Encyclopedia of Marketing, edited by Jagdish N. Sheth and Naresh K. Malhotra. Copyright © 2010 John Wiley & Sons Ltd

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performance achievement and satisfaction are crucial in triggering action, because managers are assumed to have a set performance goals to which performance outcomes are compared. Subjective measures of performance capture the degree to which performance matched these goals and aspiration levels of the firm, and seem to be directly amenable to comparison across firms. Managerial perceptions of the achievement of these exporting goals and satisfaction with the exporting activity may play a key role in the definition of firms’ export activities (Lages et al., 2008b). Future research should consider both objective and subjective dimensions of export performance (Katsikeas, Leonidou, and Morgan, 2000; Sousa, 2004).

AGGREGATED OR DESEGREGATED MEASURES?

Past research suggests that no single measure is adequate to assess export performance. The use of multiple measures and ways to measure export performance is necessary to fully realize the strengths of each indicator and to minimize the impact of their shortcomings (Sousa, 2004). No approach is perfect, and through a combination of several approaches one may increase the likelihood of having solid findings. Hence, for testing the robustness of export-performance findings, future research is strongly encouraged to use a combination of different approaches: total item aggregation, intermediary aggrega- tion, and total desegregation approaches. While in the most aggregated approach, findings result in a loss of specific information, because the distinction among the independent items is lost, in the most disaggregated approach, it becomes harder to have an overall picture of export performance. As a consequence, the most common approach to assess export performance is an intermediary aggregation of various items into single performance measures (i.e., commonly denominated as factors or constructs) (Lages, Lages, and Lages, 2005). Although this combination of different measures into factors allows better contextualizing the complex performance construct (Katsikeas, Leonidou, and Morgan, 2000), this approach does not precisely capture the different dimensions of the performance phenomenon (Doyle and

Stern, 2006). In addition, some measures may correlate differently with other measures and different measures may have different weights depending on the context. For example, in the case of Western companies, rankings for specific performance variables have been created and profits became one of the most important performance measures. However, when managers focus on seeking outstanding profits, this may lead to poor results in other export performance metrics such as market share (Doyle and Stern, 2006). Likewise, when managers focus too much on sales volume, this might create problems on sales revenue, and, as a consequence, create image problems. As such, for future research, we strongly advocate the use of aggregation approaches in combination with single-performance items. This way, by using the most disaggregated approach, it will also be possible to treat each one of the items included in the model individually (Doyle and Stern, 2006).

STATIC OR DYNAMIC APPROACHES?

Although management research has been gradually moving from a static analysis to a more dynamic approach, research involving export performance predominantly follows a static approach. The literature on export performance rarely looks to change in terms of export performance and rarely implements a longitudinal research. This makes it difficult to implement dynamic models and limits effica- cious measurement of performance (Katsikeas, Leonidou, and Morgan, 2000). Future longi- tudinal research allows a better analysis of the relationship between export performance and its determinants. Future research is strongly encouraged to build on organizational learning theory and strategic dynamics to better understand how export performance change occurs in foreign markets. Notwithstanding the significant amount of research conducted in exporting, a review of the literature indicates several shortcomings in this field.

SHORT- OR LONG-TERM ASSESSMENT?

Although the majority of the literature assumes that managers undertake a proactive and

export performance 3

long-term perspective of export performance, a number of studies have suggested that western firms are often reactive and short-term oriented (Madsen, 1998; Lages and Lages, 2004). Most studies do not specify the time period and assume that export performance is a long-term issue (Diamantopoulos and Kakkos, 2007). Among the rare exceptions that do so, while some prefer to use a more dynamic approach by trying to capture performance over a 12-month period (Morgan, Kaleka, and Katsikeas, 2004; Lages and Lages, 2004), others follow a more static approach by assessing export performance levels in a specific year (Lages, Lages, and Lages, 2005). To organize the literature in terms of export performance measurement, future research should make this aspect clear. Indeed, short-term analysis is a critical issue from a managerial perspective as many top managers wish to see short-term performance effects and do not give enough time to observe the effects of strategy in the long term. However, being overly focused on short-term goals may be risky for the long-term development of a firm’s capabilities (Madsen, 1998). The importance of performance dimensions may also vary across stakeholder groups (e.g., investors, employees, and customers) and depend on whether the focus is on the short term or the long term (Sousa, 2004). A manager who focuses on the long term to increase the market share in a foreign market may not perceive export performance to be low when export sales or export profits are weak.

A DEPENDENT OR AN INDEPENDENT VARIABLE?

Interestingly, and despite the fact that the overwhelming majority of studies analyze performance as a dependent variable, it is uncertain which measures should be analyzed as causally dependent. Researchers tend to put export performance as a dependent variable even when the data collected on strategy and performance variables relate to the same period of time. However, managerial practice is expected to be dynamic. Past performance is highly likely to influence organizational change as managers tend to respond to performance feedback. However, to our knowledge, no study

has analyzed the impact of past performance on strategic change in international markets. Performance as an independent variable has been highly unexplored in an international marketing context (Lages and Montgomery, 2004; Lages et al., 2008b are two exceptions). As the underlying aspects of export-marketing strategy are driven by managerial action, greater understanding of managerial learning from past export performance can provide marketing academics and practitioners with strategic insights into enhancing export performance (see CONCEPT OF CAUSALITY AND CONDITIONS FOR CAUSALITY).

THEORETICAL OR MANAGERIAL APPROACHES?

In the late 1990s, some attempts were made to develop comprehensive and psychometrically sound measures of export performance (Styles, 1998; Zou, Taylor, and Osland, 1998). Despite these attempts, a major concern remained that export-performance assessment tends to be misaligned with the managerial world (Madsen, 1998; Lages and Lages, 2004). Several reasons justify the need for a sound managerial evalu- ation of export performance. If one considers that exporting actions have an impact on the overall failures/successes of firms, it becomes necessary to have tools that allow managers to monitor export performance. Proper measures will provide decision makers with a reference to support the definition of future short- and long-term actions, such as the allocation of human and financial resources to specific export ventures. Export performance evaluation is equally important at the public-policy level. The benefits provided by the exporting activity encourage public policy makers to implement export assistance programs to enhance firms’ global marketing strategies. As a consequence, a proper assessment of export-marketing strategy (Lages, Abrantes, and Lages, 2008a) and export performance will have an impact on any country’s economic health (Lages and Montgomery, 2005).

During the last four years, some export measurement tools have been developed with greater managerial- and public-policy flavor. One of these tools is the STEP scale (Lages and

4 export performance

Lages, 2004), which addresses the short-time horizon frequently used by managers and public-policy makers to assess performance. Two other managerial tools – the APEV scale and the PERFEX scorecard (Lages, Lages, and Lages, 2005) – were specifically designed to be included in annual reports and to assess export performance both at the corporate and exporting venture levels. The APEV scale was inspired by the EXPERF measure (Zou, Taylor, and Osland, 1998). All these three scales (EXPERF, STEP, and APEV) are of a reflective nature and were developed using CONFIRMATORY FACTOR ANALYSIS. More recently, Diamantopoulos and Kakkos (2007) suggest that this field should also use formative indicators. As such, the authors propose the AEP index as a composite measure of managerial-subjective evaluations of export performance. This index enables the assessment and comparison of multiple export objectives, both within and between firms, by allowing the setting of the weights of the different indicators to be zero. From a managerial perspective, the major advantage of using performance metrics of a formative nature is that, in contrast to reflective aggregated measures, it becomes possible to identify which particular indicators the managers have in mind when assessing export performance.

DETERMINANTS OF EXPORT PERFORMANCE

Two broad theoretical approaches, the resource- based paradigm and the contingency paradigm, provide the basis for classifying the determinants of export performance into internal and external factors. Specifically, internal determinants are justified by resource-based theory, while external determinants are supported by contin- gency theory. Resource-based theory focuses on how sustained competitive advantage is generated by the unique bundle of resources at the core of the firm. The contingency paradigm suggests that environmental factors influence the firm’s strategies and export performance (see STANDARDIZATION/ADAPTATION OF INTERNATIONAL MARKETING STRATEGY). The effects of various firm characteristics on export performance are dependent on the specific context of the firm. An extensive list

of studies has already identified key determi- nants of success in terms of the internal and external factors influencing successful export performance (Sousa, Martinez-Lopez, and Coelho, 2008). However, there is a lack of agreement on the domains and measurement of the determinants of export performance. This obstructs development of the theory on export performance, and makes it very difficult to compare the findings from different studies and literature. As a result, attempts should be made to develop clear conceptual domains and sound schemes to measure the variables. Nonetheless, after more than four decades of research on the analysis of the relationships among internal and external forces, export-marketing strategy and export performance, researchers now agree that export performance must be analyzed as a function of the fit between the firm’s environment and the selected export-marketing strategy.

Despite the argument that control variables deserve as much attention and respect as do inde- pendent and dependent variables, most export performance studies fail to include them (Sousa, Martinez-Lopez, and Coelho, 2008). This disre- gard for the role of control variables is an issue of concern, and researchers are encouraged to account for these effects in future studies. In addition to the analysis of possible direct rela- tionships (as undertaken by most investigators), future research is also encouraged to analyze the moderating effects of external forces and the indirect impact of environmental forces on export performance through their influence on strategy. The export-performance literature has reached a level of sophistication that researchers should be interested in detecting not only the main effects of independent variables but also their indirect and moderating effects.

UNIT OF ANALYSIS

There is no consensus in the literature regarding the level of performance assessment. Most export studies have looked at export performance at the firm level (Sousa, Martinez-Lopez, and Coelho, 2008). One possible explanation for this predilection by researchers could be the fact that respondents are more willing to disclose information at this broad level. The underlying

export performance 5

theoretical justification for firm-level studies is the theory on internalization (Rugman, 1980). This theory states that, in imperfect markets, firms should internalize the firm-specific advan- tages, both tangible and intangible, to extract maximum economic rent. Consequently, the study of export performance at the firm level has the benefit of capturing firm-specific advan- tages, which are derived not only from the development of a particular product but also from the total learning process of the firm. This allows examine the influence of potential determinants (e.g., overall firm strategy, organi- zational culture, organizational structure, R&D, etc.) that are not directly related to a specific venture. Other units that are commonly used are at the product level, strategic business-unit level, and product–market export venture level. Proponents of these three levels argue that it is unrealistic to expect that the same strategies can lead to the same results in all export products, SBUs, and product–market ventures. Naturally, the use of different levels of analysis will lead to different (and sometimes conflicting) insights on the topic.

FRAMES OF REFERENCE AND DIRECTIONS FOR FUTURE RESEARCH

Researchers use different frames of reference. In most cases, performance measurement tends to be self-driven. More recently, some works have explored performance assessment versus competitors (Morgan, Kaleka, and Katsikeas, 2004). Future research should consider the use of customer-, stakeholder-, and network-driven perspectives. In addition, employees within the same firm will hold different viewpoints of the same reality. As a consequence, the use of multiple informants within each firm will bring added value to assess this complex phenomenon (Sousa, 2004). With rare exceptions (Styles, 1998; Zou, Taylor, and Osland, 1998; Lages and Lages, 2004), most studies have used a single country or region as a frame of reference. The performance measures used in these studies often reflect the unique emphasis that different countries place on exporting (Zou, Taylor, and Osland, 1998). As a result, attempts should be made to validate scales across countries. However, considerable difficulties are likely to

be encountered in establishing equivalence and comparability of research in different studies. Researchers have to develop cross-cultural conceptualization and measurement that reflect true cultural differences among markets along the underlying construct under study. This can play an important part in advancing export-marketing theory by stimulating cross- cultural export-marketing studies that investi- gate specific similarities and differences among and between countries (Styles, 1998).

The United States is the most researched country in export-performance studies and despite a rise in the number of studies conducted outside the United States, there are still countries from certain parts of Asia, South and Central America, the Caribbean, and Africa that have received little or no attention from researchers (Sousa, Martinez-Lopez, and Coelho, 2008). Further research should consider the inclusion of such countries to investigate whether our current knowledge can be generalized to these countries, especially those from the developing world. Firms from developing countries are particularly interesting to study in future research because of their growing presence in an integrated global economy. In addition, most export performance studies involve samples drawn form manufac- turing industries with relatively few studies investigating export performance of service firms. While there are some determinants and measures of export performance that apply to both manufacturing goods and services, it is likely that additional variables must be taken into account that relate to the specific charac- teristics of services firms when operating in the international arena (Sousa, Martinez-Lopez, and Coelho, 2008). Considering that services account today for around 20–30% of world trade, there is an increasing need for researchers to test whether traditional theories of GLOBAL MARKETING STRATEGY: PERSPECTIVES

AND APPROACHES apply to the international marketing of services.

Taken together, the existing shortcomings in the export-performance literature create new research opportunities as they leave inter- national marketing academics and practitioners without a clear understanding of the effects of

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export performance as well as of the factors influencing it.

ACKNOWLEDGMENT

This work was funded by ‘‘Fundação para a Ciência e a Tecnologia’’ and NOVA FORUM.

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