Public sector promotion of exports: A needs-based approach

J BUSN RES 1993:27:85-101

Public Sector Promotion of Exports: A Needs-Based Approach

G. M. Naidu University of Wisconsin-Wha‘~ewat

T. R. Rao University c$ Wisconsin-Milwaukee

Export assistance programs in the United States tend to receive low national recog- nition and priority compared to other industrialized countries. Awareness, knowledge, and utilization of the existing export assistance programs by U.S. firms have also been very limited. This paper identifies the differences in needs for assistance by firms in different stages of the internationalization process and proposes strategies to overcome some of the deficiencies. In an attempt to formulate more suitable export assistance programs, this article proposes strategies based on the needs of the firms targeted for assistance.

Introduction

Exports generate close to 7.0% of the U. S. GNP (Czinkota, 1991) and employ about one-eighth of the U.S. work force and yet have not received the attention they do in other industrialized countries. In a recent rating, the U. S. ranked 16th in providing the export services to stimulate export market growth (Bowen, 1986). The ratings were based on an extensive evaluation of 17 export service programs such as government support, private sector support, national coverage, international coverage, trade missions, on-line data services, tailored advice, export credit agency, insurance schemes, low cost financing, etc. (Bowen, 1986). The top five export service providers in this ranking were: Austria, France, Canada, United Kingdom, and the Netherlands.

An in-house study conducted by the U. S. Department of Commerce also indicates that the U. S. export promotion activities lag far behind that of other major industrial nations. The study estimated that the U. S. spent $294 million on export promotion program compared to $546.8 million by Canada, $340.7 million by France, and $309.7 by Japan. Staff engaged in export promotion (FTE) were lower for the U. S. than Canada,

Address correspondence to Dr. G. M. Naidu, Professor of Marketing, University of Wisconsin-Whitewater. Wbitewater, WI 53190.

Journal of Business Research 27, 85-101 (1993) 0 1993 Elsevier Science Publishing Co., Inc. 655 Avenue of the Americas, New York, NY 10010

0148-2963/93/$6.00

86 J BUSN RES

1993:27:85-101 G. M. Naidu and T. R. Rao

France, or the U. K., and the expenditures on export promotion per $1000 of GNP/GDP as well as per $1000 exports were the lowest among the G-7 countries (U. S. Department of Commerce, 1988). As the trade deficit continues to persist, it is important to take a fresh look at the poor U. S. performance. This has received some attention from the government and industry, but not necessarily in proportion to its importance. This article offers some new directions for export assistance programs and sheds light on appropriate public policy measures that can enhance the international business performance of U. S. companies.

The U. S. Department of Commerce has traditionally spearheaded these efforts. Con- tributions to date include such programs as the trade opportunity program, agent/distributor services, trade fairs, seminars, market reports, and risk reduction programs. However, many of these existing programs appear to be relatively unknown to a large number of u. s. firms.

In addition to Commerce, an increasing number of state agencies and other local business support groups such as trade associations, world trade clubs, chambers of commerce, universities, and small business development centers have been stepping up efforts to provide trade assistance. These efforts have met with limited success (Cavusgil, 1983):

l Awareness of export assistance programs as well as their levels of utilization are low.

l Most of these programs are based on presumed needs rather than documented needs.

l These services are not targeted at segments in different stages of the intemational- ization process. Nonetheless, there is a definite need for programs based on actual needs of local and regional export business.

Global markets have become very competitive. For this reason, a compelling case for regional/state based “needs analysis .” is obvious. Seringhaus and Rosson (1990) empha- sized the importance of understanding the companies’ needs as a prerequisite for creating an effective government export promotion program. This article will report on an empirical investigation that attempts to reveal the export assistance needs of companies in the same geographic region. It is the belief of the authors that such locally based needs assessment efforts are the first step to designing and implementing successful export assistance programs. Such an approach will enable the public organizations to focus on improving the competence of companies to compete effectively in world markets (Ser- inghaus and Rosson, 1991).

The Need for Diflerentiuting Among Firms

Many studies of export marketing behavior have been reported (Bilkey, 1978; Bilkey and Tesar, 1977; Johanson and Wiedersheim-Paul, 197.5; Cavusgil, Bilkey and Tesar, 1979; Cavusgil, 1980; and Yaprak, 1985). However, a major weakness of these studies is their “global” nature-treating all responding firms alike, despite the presence of meaningful differences among them in terms of their international experience, resources, managerial commitment and outlook, degree of reliance on international sales, and so on. More recently, several researchers recognized the value of segmenting firms on the basis of these criteria first, and then examining company characteristics that are common to a segment.

Public Sector Promotion of Exports J BUSN RES 1993:27:85-101 87

Previous Studies on Segmentation

In examining the export performance of small- and medium-sized firms, various segmentation approaches have been developed by the researchers and government agencies (Bilkey and Tesar, 1977; Wiedersheim-Paul, Olson, Welch, 1978; Cavusgil, 1976, 1980, 1983, 1984; Yap&., 1985). The four major approaches suggested in the literature to segment firms are: (1) by level of internationalization of the firm (Bilkey and Tesar, 1977; Bilkey, 1978; Cavusgil, 1976, 1980, 1984; Czinkota and Johnston, 1981); (2) by managerial attitudes (Pavord and Bogart, 1975; Cavusgil, 1976; Czinkota and John- ston, 1981); (3) by size (Bilkey, 1978; Bilkey and Tesar, 1977; Cavusgil, Bilkey and Tesar, 1979; Czinkota and Johnston, 1981); and (4) by product/service orientation of firms (Widersheim-Paul, Olson, and Welch, 1978; Kahn, 1978; Czinkota and Johnston, 198 1).

Segmentation of exporting firms by level of internationalization has received more attention by far in the literature than the other three approaches. Czinkota and Johnston (1981) found that segmentation by level of internationalization is the most effective of the four approaches they investigated.

For example, Bilkey and Tesar (1977) identified six stages of export development based on a study of 816 Wisconsin manufacturers. Johanson and Vahlne (1977); Jo- hanson and Wiedersheim-Paul (1975) considered four stages in the internationalization of a firm. Cavusgil (1980), on the other hand, identified five stages as the firms move along the internationalization path. Czinkota and Johnston (1981) who studied a sample of 237 Ohio firms, proposed an eight-stage classification of firms. Some of these classifications are contrasted to the scheme used in this study in Figure 1.

The principal conclusion of previous studies is that the stage of internationalization is closely associated with the type and intensity of a firm’s needs for export market development. Ignoring the target firm’s level of internationalization can lead to misdirect efforts and unfulfilled objectives on the part of export promotion agencies. This will often create a credibility problem in the communication process between the providers of these programs and the client firms.

The present study continues in the tradition of the research stream that attempts to uncover meaningful distinctions among firms, which often go unnoticed when firms are combined into one large group. The underlying thesis of this approach is that differences among firms in different stages of internationalization offer useful insights and implications for designing needed assistance efforts.

Czinkota and Johnston (1981) indicated that segmentation by stage of the firm in the internationalization process is most beneficial in assessing the need for types of export promotion programs. Cavusgil (1990), while acknowledging the growing involvement of the state government and local agencies in the promotion of export assistance programs, identified gaps between “needs” and the “availability of programs” due to many factors such as lack of precise objectives, duplication of efforts, poor targeting of client groups, lack of understanding of user needs, credibility of sources, and lack of integration of past experience to guide present and future programs. The current study offers an empirical validation of how the needs of individual firms differ at various stages of the internationalization process. It is hoped that such an understanding can assist public policy makers in designing more effective assistance programs.

The following methodology was employed in the formulation of the four categories used in the present study. Based on the domestic and international activities of the firm, responding firms were classified into four distinct groups based on their level of export

88 .I BUSNRES 1993:27:X5-101 G. M. Naidu and T. R. Rao

activity. Executives were asked to indicate the extent of their firms’ involvement in exports. Those that were not participating in, or interested in, exports were classified as “Non-Exporters;” those who did not export until now, but would like to explore export opportunities were identified as “Export Intenders;” and those who export on a sporadic basis or a regular basis were classified as “Sporadic” and “Regular Exporters” respec- tively. This classification has three advantages: (1) the stages are simple and easy to understand and indicative of their current export status; (2) with the knowledge of sec- ondary data, it is possible to classify the firms into the defined stages; (eg, as the later analysis shows, two variables-percentage of competitors exporting and size of the firm serve as major determinants of the classification); and (3) this classification does not depend on the collection of extensive primary data such as managerial attitudes and motivations that are either explicit or implicit in other studies.

The Study

The analysis presented here is drawn from a comprehensive study of company needs for export assistance. A survey of firms was conducted in an industrial midwestem state from a variety of manufacturing businesses in different size categories.

Data were collected through a mail survey sponsored by the Alumni Association of this large state university and the World Trade Center. A seven-page questionnaire was developed and pretested. Questionnaires were mailed to a random sample of 2,300 small and medium sized (full-time employees of less than 300) manufacturing firms in the state. The survey that was addressed to the president/vice president/division manager covered information relevant to export activity of the firm. Among others, the following information was sought from the respondents: brief business history, domestic and foreign marketing activities, attitudes towards exports, perceived barriers for export expansion, familiarity and utilization of various export assistance programs, and perceived importance of support services offered by the public and private sectors. Some of the variables included in the survey were based on the review of literature whereas additional information, such as marketing-mix considerations (product adaptation, channels of distribu-

Figure 1. Stages of Internalization Process as Identified by Various Studies

Cavusgil Johanson & Current

(1980, 1983, Bilkey & Widersheim-Paul Study 1984) Tesar (1977) (1975) (Naidu/Rao)

Domestic marketing The unwilling firm No permanent export Non- The uninterested firm Exporters

Pre-export stage The interested firm Export Intenders

Experimental involvement The experimenting Export via agent Sporadic

firm Exporters

Active involvement The semi-experienced Export via sales Regular small exporter subsidiary Exporters

Committed involvement The experienced Production in a foreign large exporter subsidiary


tion, OEM sales experiences, etc.) for domestic and international marketing activities was sought to examine new dimensions of export behavior. Seven hundred and seventy-seven usable responses were received representing a response rate of 33%.

After classification of sample firms based on their level of internationalization (noted earlier), the following sample profile emerged:

1. Non-Exporters (34% of the sample) Median employment of 25 people, median sales of $2.3 million, export intensity as measured by percentage of domestic competitors exporting: 5.6%, and no export experience.

2. Export Intenders (25% of the sample). Median employment of 31 people, median sales of $2.9 million, export intensity of 6.6%, and no export experience.

3. Sporadic Exporters (19% of the sample). Median employment of 44 people, median sales of $4.2 million, export intensity of 11.6%, and high percent with low export experience.

4. Regular Exporters (2 1% of the sample). Median employment of 72 people, median sales of $6.7 million, export intensity of 38.2%, and two-thirds of the respondents having high export experience.

Limitations of the Study

Although the representativeness of the sample could not be validated due to the nona- vailability of the profile of population firms (those employing less than or equal to 300 employees) the 33% response rate to a single mailing should lend some validity support to the analysis.

Analysis

As an initial step, the focus was directed at bivariate analysis for identifying similarities and differences among the four categories of firms. Appropriate statistical tests of significance (analysis of variance and chi-square) were used to examine the differences between the four categories with respect to selected variables.

Significant differences were found among the four categories with respect to size, sales, level of export intensity, willingness to adapt marketing-mix variables to exports, managerial expectations, and resource allocation. This confirms the thesis that the four groups differ in terms of perceived needs for export development.

Perceived Importance of Factors in Initiating or Expanding Exports

Respondents were asked to indicate the importance of various factors in helping them either to initiate or expand their export efforts. The majority of these factors are perceived “needs” of the responding firms with respect to stimulating export activity. Executives were asked to weigh the importance of each factor, treating the importance of a standard factor as 100.

First, let’s consider the top five factors that appear to serve as impediments to either initiating or expanding exports. Based on normalized scores, these are:

90 J BUSN RES

1993:27:X5-101 G. M. Naidu and T. R. Rao

Factors affecting exports (impediments) Overall rank

Differences among the

four stages of

internalization

t-value

Poor knowledge of potential markets

Lack of ability/time to follow-up on trade leads

Lack of mechanisms to generate trade leads Strong foreign competition

Lack of staff for export program planning &

1 5.57** 2 I2.96**

3 4x5** 4 10.77**

implementation 5 3.18*

*Significant at a = .OS.

**Significant at a = 01

The results suggest that the importance of these factors differs significantly among companies depending on stages of internationalization. For example, poor knowledge of foreign markets is the primary impediment for those who are in the “Export Intender” or the “Sporadic Exporter” stages rather than those in the “Non-Exporter” or “Regular Exporter” stages (see Table 1 for specific rankings). Of the sixteen factors considered, there were no significant differences between stages of internationalization with respect to the importance of the four factors: “Risk of losing money,” “language and cultural barriers,” “ export documentation requirements,” and “unwillingness of banks to serve small and medium-sized businesses.” These four factors seem to affect all firms in the same manner irrespective of their position on the internationalization path.

Other than the above four factors, the relative importance of the remaining twelve factors listed in Table 1 is significantly impacted by the firm’s stage of intemationali- zation. “Lack of ability or time to adequately follow up on trade leads,” “strong foreign competition, ” “high value of U. S. dollar, ” “poor knowledge of potential markets,” and “trade barriers to U. S. exports,” in that order, are considered to be the top five impediments to expanding exports by the “Regular Exporters.” (It is important to note that even “Regular Exporters” feel that they have “poor knowledge of potential markets,” which can be easily overcome through targeting of promotional efforts.) Similarly, “unmet demands of domestic markets,” “ lack of commitment to the value of export-

ing, ” “poor knowledge of potential markets, ” “lack of staff for export program planning

and implementation,” and “lack of ability or time to adequately follow up on trade leads,” in that order, are the top five impediments for initiating exports by the “Non- Exporters.” (Some of these impediments are either organizational or managerial and as such could be overcome through education programs targeted initially at top management. A study by Singer and Czinkota (1991) concluded that management commitment and persistence is the single most important variable in increasing the effectiveness of export assistance programs.) Therefore, it is clear that assistance efforts that are not targeted on the particular nature and needs of the beneficiary group of firms are not likely to have any significant impact.

Relative importance of assistance needs is likely to vary by industry type and region. Hence, needs assessment at the national level may not be appropriate for developing public policy with respect to stimulation of exports. A targeted approach with segmentation of user groups promises to be more meaningful. The U. S. Department of Com- merce publishes a series of industry reports aimed at serving the needs of specific industries. If these reports are “needs-based” for local (state or regional) markets, in

Tab

le

1. P

erce

ived

Im

port

ance

of

Fa

ctor

s in

Ini

tiatin

g or

Exp

andi

ng

the

Exp

orts

(N

orm

aliz

ed

Wei

ght)

2 G

roup

no

rmal

ized

w

eigh

t =:

0

Exp

ort

Spor

adic

R

egul

ar

Non

-Exp

orte

rs

? in

tend

ers

expo

rter

s ex

port

ers

Tot

al

Q

1. L

ack

of a

bilit

y or

tim

e to

ade

quat

ely

,071

(3

) ,0

64

(4)

.079

(2

) .0

87

(1)

,075

12

fo

llow

-up

on t

rade

le

ads

151

[51

131

Cl1

[2

1 %

2.

Stro

ng

fore

ign

com

petit

ion

,059

(3

) .0

58

(4)

,072

(2

) .0

86

(1)

,069

10

5

[lO

I [I

II

r51

r21

r41

B

3.

Inad

equa

te

capi

tal

or c

redi

t ,0

57

(1)

,056

(2

) S

,045

(3

) .0

441

(4)

.05

I <

1121

[I

31

[I51

[I

41

[I41

%

4.

U

nmet

de

man

ds

of d

omes

tic

mar

kets

,0

82

(1)

.063

(3

) ,0

64

(2)

,060

(4

) ,0

66

5 t-

n

[II

161

[61

[91

[71

3

5.

Hig

h va

lue

of U

.S.

dolla

r ,0

48

(4)

.055

(3

) ,0

61

(2)

.079

(1

) .0

62

11

2

[I41

[I

41

I101

[3

1 r9

1 6.

L

ack

of s

taff

fo

r ex

port

pr

ogra

m

plan

ning

.0

73

(4)

,072

(2

) ,0

61

(4)

,065

(3

) ,0

68

and

impl

emen

tatio

n r4

1 [4

1 [9

1 [7

1 15

1 7.

Po

or

know

ledg

e of

pot

entia

l m

arke

ts

.074

(4

) .0

90

(1)

.080

(2

) .0

76

(3)

.081

5

[31

[II

Cl1

[4

1 [I

I 8.

U

nwill

ingn

ess

of b

anks

to

ser

ve

smal

l-

and

,048

(2

) .0

49

(1)

,041

(4

) ,0

43

(3)

,046

0

med

ium

-siz

ed

busi

ness

es

r151

[I

61

1161

11

51

[I51

9.

L

angu

age

and

cultu

ral

barr

iers

,0

56

(4)

.058

(3

) ,0

63

(2)

,065

(1

) ,0

61

1

[I31

[l

OI

[71

[81

[ItI

10

. E

xpor

t do

cum

enta

tion

requ

irem

ents

.0

62

(1)

,061

(2

) ,0

59

(3)

.053

(4

) .0

58

2

[81

[81

[ill

r121

[I

21

11.

Lac

k of

res

ourc

es

to s

uppo

rt

mar

ket

,061

(3

) ,0

73

(1)

,073

(2

) .0

59

(4)

.067

5

rese

arch

an

d de

velo

pmen

t r9

1 [3

1 [4

1 [l

OI

[61

12.

Lac

k of

mec

hani

sms

to g

ener

ate

trad

e le

ads

,063

(4

) ,0

74

(2)

,080

(1

) .0

67

(3)

.07

1 4

[71

121

[21

[61

[31

13.

Lac

k of

pri

vate

se

ctor

fi

rms

prov

idin

g ,0

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(3)

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(1

) ,0

49

(2)

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(4

) ,0

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4 ex

port

se

rvic

es

Cl6

1 [I

51

[I41

C

l61

Cl6

1 _-

14.

Tra

de

barr

iers

to

U.S

. ex

port

s ,0

57

(4)

,058

(3

) .0

62

(2)

,075

(1

) ,0

64

3 S?

z

[Ill

[91

[81

151

[81

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15.

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k of

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ing

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ey

,068

(1

) ,0

63

(2)

g?J

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(3

) ,0

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(4)

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1

‘W

[61

[71

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1 [i

ll [l

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0

16.

Lac

k of

com

mitm

ent

to t

he v

alue

of

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(1)

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(2

) ,0

54

(3)

,047

(4

) ,0

58

14

expo

rtin

g r2

1 [I

21

[I31

[I

31

Cl3

1

*Dif

fere

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gnif

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t at

a

=

.05.

**D

iffe

renc

es

are

sign

ific

ant

at

a =

.O

l.

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= r

ank w

ithin

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oup.

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(

) =

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nk

with

in

the

row

.

92 J BUSN RES

lYY3:27:85-101 G. M. Naidu and T. R. Rao

addition to taking into account stage of internationalization, the programs could be more effective.

Responding managers were asked to indicate the type of export assistance programs they would like to see offered. They were to rank the twelve programs between 1 and 12 with 1 being the “most important” and 12 being the “least important” program. Table 2 presents the analysis indicating significant differences (at a = .05) with respect to eight of the 12 export assistance programs. The top five programs overall emerged as:

Perceived tmportance of Different Export Assistance Programs

Export assistance program

Overall differences between four groups of firms

Overall rank F value

Export marketing consulting services

State and private sector programs to promote

states’ products

Education programs and workshops in export

related topics

ComputeriLed trade lead service

State sponsored international trade shows in

the state

*.%gniticant at a = .os. **Significant at a = .Ol.

1 3.87**

2 3.70*

3 3.30*

4 12.14**

s 0.32

As hypothesized, the importance firms assign to various export assistance programs seems to differ by the level of internationalization of the firm. As such, if export assistance programs are to be customer-oriented, the sponsors of these programs ought to incorporate these differences into the development of export assistance programs aimed at firms at different stages of the internationalization process. From Table 2, it is evident that “Export Intenders” needs differ significantly from those of other groups. In eight out of the 12 programs, these Iirrns give relatively more importance (horizontal rank #l) to each of the factors. Further, “computerized trade lead service,” and “overseas trade

shows,” are given higher importance by regular exporters than any other group. On the other hand, managers of firms at different levels of internationalization do not

perceive significant differences in: (Rank 5), “hosting services for foreign buyers or

delegations on behalf of companies” (Rank 9) “trade newsletter” (Rank 1 l), “mem- bership card with privileges at world centers world-wide” (Rank 12).

AwarenesslFamiliarity and Use of Various Export Assistance Programs

In the study, executives were also presented with a list of export assistance programs and were asked to indicate whether they used specific programs and, if not, whether they were familiar with each of them. Table 3 presents data on the awareness and use of various export assistance programs.

Lack of familiarity with the programs is found to be high for the regional District Export Councils (85.5%) the local World Trade Associations (7 1.6%) and public/private

Tab

le

2.

Perc

eive

d Im

port

ance

of

D

iffe

rent

E

xpor

t A

ssis

tanc

e Pr

ogra

ms

Exp

ort

Non

-Exp

orte

rs

inte

nder

s

Spor

adic

R

egul

ar

expo

rter

s ex

port

ers

1.

Stat

e sp

onso

red

trad

e m

issi

ons

2.

Stag

e sp

onso

red

inte

rnat

iona

l tr

ade

3.

Com

pute

rize

d tr

ade

lead

se

rvic

e

4.

Stat

e an

d pr

ivat

e se

ctor

pr

ogra

ms

to p

rom

ote

stat

e’s

prod

ucts

5.

6.

Ove

rsea

s tr

ade

show

s ab

road

sp

onso

red

by

the

publ

ic

and

priv

ate

sect

or

Org

aniz

ing

expo

rt

trad

ing

com

pani

es

7.

8.

9.

10.

11.

12.

Exp

ort

mar

ketin

g co

nsul

ting

serv

ices

Edu

catio

nal

prog

ram

s an

d w

ork-

shop

s in

expo

rt

rela

ted

topi

cs

Exp

ort

fina

ncin

g pr

ogra

ms

Hos

ting

serv

ices

fo

r fo

reig

n de

lega

tions

on

beha

lf

of c

om-

Mem

bers

hip

card

w

ith

priv

ilege

s at

wor

ld

cent

ers

wor

ld-w

ide

Tra

de

new

slet

ter

1.32

(3

) 6.

16

(1)

7.53

(4

) 7.

19

(2)

6.90

[91

[81

[Ill

[Ill

[lO

I 5.

80

(4)

5.38

(1

) 5.

66

(2)

5.68

(3

) 5.

59

[41

[61

[31

[51

[51

6.53

(4

) 5.

64

(3)

4.88

(2

) 4.

14

(1)

5.41

171

171

121

Cl1

[4

1 5.

02

(2)

4.43

(1

) 5.

71

(4)

5.62

(3

) 5.

10

[II

[31

[51

r41

r21

1.43

(4

) 7.

03

(3)

6.80

(2

) 5.

90

(1)

6.72

Cl1

1 [l

OI

171

[61

[81

6.26

(3

) 5.

16

(1)

6.00

(2

) 7.

01

(4)

6.06

[61

[41

I61

[91

[71

5.31

(3

) 4.

11

(1)

4.35

(2

) 5.

35

(4)

4.14

I21

[II

[II

121

r11

5.38

(2

) 4.

42

(1)

5.83

(4

) 5.

49

(3)

5.14

[31

[21

I41

[31

[31

5.86

(2

) 5.

24

(1)

7.48

(4

) 6.

15

(3)

5.99

[51

[51

[lO

I [7

1 [6

1 1.

34

(4)

6.24

(1

) 7.

14

(3)

6.90

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94 J BUSN RES


Table 3. Types of Export Assistance the Respondents are Familiar With or Used in the Past

Percent of the respondents

Non- Export Sporadic Regular All Chi- Exporters intenders exporters exporters respondents square p-value

U.S. Department

of Commerce

World Trade

Center

State Department of

Development

Local Chamber

of Commerce

State and local

trade missions

Private

consulting

fill?lS

Small Business

Administration

U.S. embassies

U.S. Customs

Service

Regional district

export

councils

Local world

trade

association

Local

commercial

bank Public/private

universities

U 3.6 12.4 33.0 S4.2 26.2

FBNU 50.4 38.0 37.5 32.9 39.7

NF 46.0 49.6 29.5 12.9 34.1

U 1.6 0.8 7.5 10.2 4.9

FBNU 30.2 20.0 36.3 44.5 32.8 NF 68.2 19.2 56.3 45.3 62.2

U 3.0 9.2 16.5 24.6 13.3 FBNU 38.8 28.3 35.3 40.8 36.2

NF 58.2 62.S 48.2 34.5 50.5

U 17.0 21.2 9.0 24.6 19.0

FBNU 49.7 35.8 48.7 39.6 42.9

NF 33.3 43.1 42.3 35.8 38.1

U I .5 5.9 8.9 14.1 7.6

FBNU 32.3 24.4 34.2 53.3 36.7

NF 66.2 69.7 57.0 32.6 5.5.7

U 10.4 13.5 25.3 29.5 19.3

FBNU 23.1 25.4 25.3 32.4 26.8

NF 66.4 61.1 49.4 38.1 53.9

U 10.4 13.1 7.3 17.6 12.6

FBNU 23.1 25.4 25.3 32.4 26.8

NF 36.1 46.9 45.1 39.7 41.5

U 0.0 5.8 22.6 31.8 15.3

FBNU 19.2 24.2 25.0 31.8 25.4

NF 80.8 70.0 52.4 36.5 59.3

U 6.3 12.5 23.3 36.2 19.7

FBNU 27.3 18.3 27.9 28.3 25.4

NF 66.4 69.2 48.8 35.5 54.9

U 0.0 5.9 2.6 5.5 3.6

FBNU 6.3 4.2 13.2 20.5 10.9

NF 93.7 89.9 84.2 74.0 85.5

U 1.6 25 10.1 17.0 7.8

FBNU 12.5 IS.1 22.8 31.9 20.6

NF 85.9 82.4 67.1 51.1 71.6

U 25.4 25.8 45.3 55.6 38.0

FBNU 30.4 22.7 15.1 22.5 23.5

NF 44.2 51.6 39,s 2 I .9 38.6

U 10.4 II.0 10.5 16.4 12.3

FBNU 24.4 22.0 25.0 32. I 26. I

NF 65.2 66.9 64.5 51.5 61.7

126.2 1.00001

41.3 <.OOOOl

42. I <.OOOOl

13.5 <.04

50. I <.Ooool

31.0 <.OOOOl

10.6 .I

85.3 <.OOOOl

55.4 <.oOOO I

29.3 <.OOOGl

53.9 <.OOoOl

47.6 <.OOoOl

8.6 .20

Abbreviations: U = used; FBNU = familiar but not used: NF = not famhar.

universities (61.7%), the local World Trade Center (62.2%), and U.S. embassies (59.3%). The level of awareness seems to vary by degree of internationalization in all cases except in the case of public/private universities. Promoting the awareness of the existence of various export assistance programs among “Non-Exporters” and “Export-1ntenders” is vital to initiating and enhancing their internationalization process.

The level of utilization of the specific export assistance programs also varies by the degree of internationalization of the firm.


Export assistance

Rank of

usage

Difference in familiarity between firms

in 4 stages with respect to various

export assistance offerings

Chi-square significance @-value)

Local commercial bank 1 <.ool

U.S. Department of Commerce 2 <.ool

U.S. Customs Service 3 <.ool

Private consulting firms 4 <.ool

Local Chamber of Commerce 5 <.05

The above analysis indicates that the greater the degree of internationalization, the greater the likelihood of using:

the export assistance service of a local commercial bank

the services of the U. S. Department of Commerce

the services of the U. S. Customs Services

private consulting services

the services of the Wisconsin Department of Development

the state and local trade missions

the services of U. S. embassies

the World Trade Association

While there is no clear-cut pattern, the “Regular Exporters” and “Export Intenders” tend to avail the services of local chambers of commerce more often than the other two segments.

Similarly, being familiar and not using the services is indicative of low “effectiveness” (ratio of “users” to “familiar,” see Table 4.) The level of “effectiveness” of the export assistance programs seem to differ significantly by the degree of intemationali- zation of the firm. The top five programs considered effective are: local commercial banks (with an effectiveness of 61.8%), U. S. Customs Service (43.7%), private consulting firms (41.9%), U. S. Department of Commerce (39.6%), and U. S. embassies (37.6%).

Discussion

The analysis lends support to the contention that the perceived “needs” in export market development, and hierarchy of these needs, differ by the degree of internationalization of the firm. This is consistent with earlier studies (Cavusgil, 1976, 1980, 1984; Czinkota and Johnston, 1981 and others). The proposed stages of internationalization appear to be a useful and meaningful basis for evaluating the firm’s needs at various stages of the internationalization process.

The study findings suggest that export assistance programs should be designed and implemented with clear target audiences in mind. Further, procedures should be developed to monitor the performance of various export assistance programs in relation to their predetermined objectives. These objectives may be aimed at creating impacts at the macro or micro level (Seringhaus and Rosson, 1990, 1991). At the macro level, one may assess the impacts on foreign trade position, growth of exports, export participation, trade missions and participation etc., and at the micro level, the impacts on awareness and

96 J BUSN RES 1993:27:85-101 G. M. Naidu and T. R. Rao

Table 4. Effectiveness (Users/Awareness X lOO)* of Selected Programs by Stage of Internationalization Process

Utilization as a Dercentage of total awareness

Stage of internalization

Non- Exporter

Exporter intender

Sporadic

exporter

Regular

exporter Total Chi-square

Local commercial bank

U.S. Departments of

Commerce

U.S. Customs Service

Private consulting firms

Local chamber of development

State departments of

development

Small Business Administration

U.S. embassies

45.5

6.7 24.6 46.8 62.2 39.8 60.06’ 18.6 40.6 45.5 56.1 43.7 16.82’

31.1 34.7 50.0 41.1 41.9 5.54

25.5 37.2 15.6 45.4 30.7 10.02**

7.2 24.5 31.9 37.6 26.9 17.34’ 16.3 24.6 13.3 29.3 21.5 6.52

0 19.4 41.5 50.0 37.6 27.36’

53.2 75.0 71.2 61.8 18.95+

*Effectiveness of an export assistance program is operationally defined in this study as a percentage of actual users to the number who are aware of the programs.

**Significant at Ct = .05. ‘Significant at a = .Ol.

utilization of programs by individual firms, participation in export-related activities, and progress of firms on the internationalization process. For example, if the objective is to increase the awareness of the existence of a specific export assistance program, periodic measures of awareness of the program can help assess its effectiveness. Similarly, if the goal is to increase the effective utilization of the program, the ratio of “users” to “aware” IS a good measure of the impact of the program as reviewed in Table 4. The impact, as measured by the ratio of users to those who are familiar with the program, seems to vary by degree of internationalization of the firm. Low “effectiveness” is often associated with non-exporters and high “effectiveness” with regular exporters.

Both the U. S. Department of Commerce and State Commerce/Development Agencies seem to have less impact among smaller business for stimulating export interests and activities of “Non-Exporters” and “Export-1ntenders.” (U. S. federal and state govem- ment agencies spend over $100 million annually on export promotion, and they don’t seem to address the problems of reaching the small businesses who are inactive currently, but have the potential for internationalization (GAO, 1989). A survey of users of a program (by keeping track of clientele services) may be aimed at measuring the level of satisfaction of users and to identify deficiencies for further refinement. A highly satisfied user group will be very effective in promoting the export assistance programs through word of mouth promotion.

Further, if more domestic competitors progress on the internationalization path, there is an increased pressure to internationalize the firm. It is clear from Table 5 that companies in export-intensive industries (measured by percent of domestic competitors engaged in exporting) are more likely to have progressed along the internationalization process. This supports the contention that competitive forces and activity encourage firms to look abroad more aggressively for sales opportunities. This bandwagon effect seems to have a profound impact on the internationalization process. This also implies that if programs are targeted at specific industries and export assistance programs stimulate firms


Table 5. Export Intensity of Industry (percentage of domestic competitors who export) by States of Internationalization Process

Stage of internationalization process

Percent of domestic Export Sporadic Regular competitors Non-Exporters intenders exporters exporters Total

Under 10%

IWO%

4cL70%

Over 70%

Total

209 (49) 122 (28) [901 [751

21 (16) 30 (23) [91 [I91

2 (3) g (13) [II [51

0 (0) 2 (4) CO1 [II

232 (34) 162 (24) [tool [lOOI

50 (12) [461

36 (27) [361

16 (25) [I51 3 (5)

[31 105 (15) I

Cl001

48 (11) [261

45 (34) ~251

31 (59) [201

52 (91) [291

182 (27) [l~l

429 (100) [631

132 (100) [I91

63 (100) [91

51 (100) [81

681 (100) [IO01

( ) = Row percent; [ 1 = Column percent; Chi-square = 272.1 I; Degree of Freedom = 9; p-value = ~IOO~

to reach a threshold level, then the bandwagon effect may initiate lower level firms to progress along the internationalization path. This is consistent with earlier studies on increasing the effectiveness of various export promotion programs (Walters, 1983; Denis and Depeltau, 1985; Czinkota and Johnston, 1981; Singer and Czinkota, 1991; Serin- ghaus, 1986-87).

Implications for Public Policy

Findings suggest the following implications for policy makers in export assistance. These reinforce some of the conclusions of Cavusgil (1990) in terms of designing effective export assistance programs.

Define Objectives Clearly: The objectives of each of the export assistance programs should be clearly defined. Some may be aimed at increasing awareness, whereas others may be aimed at increasing the level of utilization of various programs. It was demon- strated that awareness and effectiveness of various export assistance programs differ significantly by stage of the internationalization process of a firm. These programs may address different needs such as “motivational needs,” “information needs,” “resource- allocation needs,” and “risk reduction needs.”

Targeting the Market: If the federal government is committed to reversing its declin- ing share of world trade, it is important to stimulate exports. This may be achieved by helping current exporters (sporadic as well as regular exporters) to expand their markets. The “needs” of this group are significantly different from those who had no international experience (Non-Exporters and Export Intenders). Targeting the services to specific segments will increase the level of satisfaction of the clientele. This in turn serves as the best mode of promotion through word of mouth.

Assessment of Needs by Different Segments: Needs-based programs will create greater credibility and effectiveness. These needs are to be assessed periodically by type of industry, region, and degree of internationalization of the firm. It was clear that the needs

98 J BUSN RES


differ significantly by stages of internationalization of a firm. These needs could also vary by type of industry and region as well as over time. Therefore, once in three to five years, the regional offices of the U. S. Department of Commerce may initiate a study in collaboration with a local university with a strong international program to assess the needs of its clientele. Programming should be based on assessment of these needs.

Eliminate Duplication of Efforts: There is extensive duplication of efforts from various federal and state agencies and interested groups. One has to evaluate the effectiveness of these programs and incorporate the experience to build improved programs. Federal, state, and private sector agencies may get together to develop a unified strategy with minimal overlap and shared experiences to serve the market more effectively.

Specialization and Cross-Selling: Federal, state and other interested groups may work together to develop comprehensive specialized services such as “computerized trade lead service,” “ organizing export companies,” “export consulting services,” and “export financing programs,” and market them to clients with cross-selling. This will eliminate duplication and create a more cooperative and unified effort to promote exports.

Export-related Educational Programs: Educational programs and workshops in export-related topics ranks high (third) on the desirable export assistance services. These may be organized and conducted periodically combining the resources of the U. S. De- partment of Commerce, business executives with international experience, and acade- micians. Leading audio-visual cassettes on specialized topics to local business would be beneficial.

Promote the Awareness and Utilization of Existing Services from U. S. Department of Commerce.. Promote the awareness and utilization of existing services through direct mailing, dissemination of information through local chamber of commerce, and other trade and professional associations. Improving the existing services, such as a trade opportunities program, computerized trade lead service, and agent/distributor service, is vital to enhancing the value of these programs to the end-users.

Develop Measures of Performance: Assessing the impact of export promotion programs is very complex due to the presence of many intervening variables, interactive and lagged effects, the multidimensional nature of the phenomenon and the absence of precise measures (Seringhaus and Rosson, 1990, 1991). The methodological and meas- urement problems identified by Seringhaus and Rosson (1990,199l) are not necessarily unique to international business and are shared by many of the behavioral sciences. The progress is often slow with marginal incremental advances.

Development of measures to assess the impact of the export promotion programs at both the macro and micro levels is crucial. At the macro level, the progress may be assessed by observing the improvements in foreign trade position, increase in exports, growth in number of exporters, competitive performance of selected sectors, etc. and at the micro level, monitoring the awareness, utilization, ratio of utilization to awareness offer avenues to assess the impact of the programs. Due to the limitations of using the scientific experimental designs in the international business environment, some impacts


of export promotion programs may have to be assessed indirectly. Organizations like the International Trade Center (UNCTAD/GATT, 1987) can provide leadership in the dissemination of knowledge leading toward standardization of performance measures.

Export Marketing Consulting Services: It is of vital importance to tie the export promotion programs to the needs of the current and potential exporters. Export marketing consulting service is identified as the top desirable service by “Export Intenders” and “Sporadic Exporters” and ranked second by “Non-Exporters” and “Exporters.” Pos- sible approaches to meet this need are: (1) use of retired business executives, (2) a mentor program, and (3) student consulting services. Students from a local international program may work with a business client on an international marketing problem under the guid- ance of an instructor and receive credit for the service. For complex problems, faculty services may be available with a subsidization coming from the U. S. Department of Commerce.

U. S. Department of Commerce Increase Resources: The U. S. ranks low among industrialized countries in support services to promote international trade. We need each regional office to be manned by an international marketing consultant and an international education program specialist whose primary responsibilities are to coordinate the program and to provide facilitating services to area business.

Suggestions for Future Research

As suggested by the study, it is important to assess the needs based on local/regional industry inputs. Further, assessing the needs by type of business (industry-based) and stage of the firm in the internationalization path will result in developing a more meaningful and effective export promotion program by the government and interested groups. It is suggested that research efforts be directed to investigate differences in needs, if any, by type of business, stage of the firm in the internationalization process, and the effectiveness of cross-promotion of export services offered by federal, state governments, and other public and private groups. Export promotion programs should be need-based. Fur- ther, it may be appropriate to have a panel study of some 300 to 500 firms falling into different stages of internationalization examined on a historical basis for three to five years to assess their changing needs, awareness and utilization of various export promotion programs, and their incremental progress along the internationalization path. This means finding effective linkages between perceived export barriers and export assistance needs, and from export assistance needs to service awareness, and service awareness to service utilization, and utilization to export performance. In aggregation, this will be reflected in performance at the macro level. This will be a major contribution to export promotion theory and will offer valuable guidelines to practitioners. It is also desirable to initiate an experimental study in three or four states to identify the variables and assess their importance in increasing the effectiveness of various export promotion programs. Variables such as firm size, stage of internationalization, organizational characteristics including management commitment, intensity of domestic competition, competitive struc- ture, type and combination of services used, may be included in studying the export behavior of firms. The focus should be on identifying the factors that increase the effectiveness of export promotion programs. To increase the economic efficiency of these programs, and in times of budget squeeze, adopting a targeted strategy with focus on

100 J BUSN RES lYY3:27:xs~lo1 G. M. Naidu and T. R. Rao

“export-ready” firms could be more effective. A market expansion model advocated by Yang, Leone, and Alden (1992) to identify the potential exporters and develop need- based export promotion programs deserves consideration and further research efforts.

Conclusion

The U.S. share of world trade has been on a decline during the past two decades. This poor export performance is partially attributed to ineffective assistance and promotion programs on the part of federal and state governments and private agencies. Analyzing firms by segments reveals better insights. Internationalization theory suggests firms at different levels have different needs and aspirations. This study was aimed at finding whether segmenting exporters on the basis of internationalization leads to significant intergroup differences and public policy conclusions. Empirical analysis revealed significant differences in perceived needs, awareness, motivations, and effective utilization of programs between stages of internationalization of a firm. It is proposed that in order to increase the effectiveness of the programs being offered, assistance programs be tailored to specific needs of proper user groups. A periodic evaluation of measures of performance is suggested to enhance the effectiveness of these programs.

The authors acknowledge the support provided by the MBA Executive Curriculum Alumni Association, Uni-

versity of Wisconsin-Milwaukee. The authors express their thanks for constructive suggestions offered by Dr. S. Tamer Cavusgil, Director. International Business Development Programs, Michigan State University and

anonymous reviewers whose comments have contributed to the improvement of the paper.

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Public sector promotion of exports: A needs-based approach

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