Antecedents and consequences of export entrepreneurship

Depósito de Investigación de la Universidad de Sevilla https://idus.us.es/ This is an Accepted Manuscript of an article published by Elsevier in Journal of Business Research, 2015 Vol. 68, on February, available at: https://doi.org/10.1016/j.jbusres.2015.01.047 Copyright 2015 Elsevier. En idUS Licencia Creative Commons CC BY-NC-ND Antecedents and consequences of export entrepreneurship Antonio Navarro-García, Universidad de Sevilla Arturo Calvo-Mora Schmidt, Universidad de Sevilla Manuel Rey-Moreno, Universidad de Sevilla October 2014 Authors are grateful to the funding from the Andalusian Government through the research project, P11-SEJ-7042. Please, sendcorrespondenceto: Antonio Navarro- García, Departamento de Administración de empresas y Marketing, Facultad de Ciencias Económicas y Empresariales, Av. Ramón y Cajal, 1; 41018 Sevilla, Spain, Tel: +34 954 55 44 36; Fax: +34 954 55 69 89 ([email protected]); Arturo Calvo-Mora Schmidt, Departamento de Administración de empresas y Marketing, Facultad de Ciencias Económicas y Empresariales, Av. Ramón y Cajal, 1; 41018 Sevilla, Spain, Tel: +34 954 55 44 36; Fax: +34 954 55 69 89 ([email protected]); Manuel Rey-Moreno, Departamento de Administración de Empresas y Marketing, Facultad de Turismo y Finanzas, Avda. San Francisco Javier, s/n; 41005 Sevilla, Spain, Tel: +34 954 55 16 97; Fax: +34 954 55 69 89 (m[email protected]). 2 Abstract This paper has two main objectives. First objective involvesdefining export entrepreneurship as well as its dimensions of speed, degree, and scope. This objective responds to current literature scarcity and fragmentation. Second, to employ empirical analysis to exploreexport entrepreneurship determinants and consequences through resource-based view and contingency approach. A conceptual model with a multisectorial sample of 212 Spanish exporting companies isthe basis for empirical analysis. Results reveal that export entrepreneurship positively depends on internal factors such as managerial export commitment and resources regarding experience and structure. Likewise, export entrepreneurship depends on external environment contingency factors, such as competitive intensity and distance between export firm’s markets. This study also shows that export entrepreneurship positively affects export performance. Keywords: Export entrepreneurship; managerial export commitment; resources, competitive intensity; market distances; export performance. 3 1. Introduction Through new business creation and development, entrepreneurship and exports are essential for countries’ economic growth processes. Entrepreneurship contributes to economic growth by creating and transmitting knowledge, and increasing competitiveness and diversity (Hessels, 2007). Exports positively affect the quantity of national currency reserves and national prosperity, contributing to expand domestic industry, productivity, and employment (Hessels& van Stel, 2011). Individually, entrepreneurship and exports constantly appear in economic, management, and marketing literature. Nevertheless, export entrepreneurship (EE) knowledge is scarce (Hessels& van Stel, 2011). EE originstems from the fragmentation and absence of a theoretical framework in international entrepreneurship (Mainela et al., 2014; McDougall &Oviatt, 2000; Oviatt& McDougall, 1994). This field suffers from knowledge gaps, theoretical inconsistencies, and contradictory results (Keupp&Gassmann, 2009). Export-oriented new ventures and international entrepreneurship fieldreceive considerable attention from scholars in the last decade (Oviatt& McDougall, 2005a).However, the role of firms’ factors and environment in entrepreneurs’ export-oriented behavior remains unclear (Oviatt& McDougall, 2005b). Thus, analysis on their economic and performance effect remains insufficient (Zahra & George, 2002). Therefore, this paper first objective is to contribute to defining EE concept, and its dimensions (speed, degree, and scope). The second objective involves using empirical analysis to look into EE determinants and consequences by applying resource-based view (RBV) and contingency approach. The study has three main contributions. First, this study defines EEaccording to speed, degree, and scope. Second, following RBV, findings show that internal factors, both personal—managerial export commitment—and those of firm—experience and 4 structure—affect EE level. Using contingency approach, findings revealthat factors of the exporting firm’s external environment also affect EE. Thus, competitive intensity and, surprisingly, market distances between countries where exporters operate increase exporting firm’s entrepreneurship level. Third, this paper demonstrates that EE positively affects export performance (EP), both quantitatively (sales growth) and qualitatively (manager satisfaction). The study has the following structure:Section 2explores theoretical framework, conceptual model, and hypotheses. Section 3contains research methodology, sample details, and data analysis tools for empirical analysis. Section 4presents results. Section5deals with main conclusions and managerial implications. Section 6 analyses main limitations and future research openings. 2. Conceptual model and hypotheses Ibeh and Young (2001) define EE as, “the process by which people, either by themselves or within organizations, take advantage of market opportunities—foreign— taking into account the resources available and the environmental factors which affect them.” This definition highlights EE’s dependence on internal (e.g., resource) and external (e.g., environment) factors. However, Ibeh and Young’s (2001) definition considers that entrepreneurial exportersare those firmsthat start exporting. The question is: Are there different levels of entrepreneurship between firms already exporting? Ibeh (2003) adds to Ibeh and Young’s (2001) definition that export entrepreneurs are those who demonstrate to be proactive and aggressive in searching export opportunities regarding products-markets innovations. This description raises a debate in the EE area on export proactivity definition. This debate leadsto the incorporation of three new elements to EE literature: Speed, degree, and scope. 5 Speed refers to the time for firms to start exporting (Acedo& Jones, 2007). Therefore, firms exporting early are the most entrepreneurial, showing a clear international orientation (Gallego&Casillas, 2014; Oviatt& McDougall, 2005b). The cut-off point in the speed of entry into foreign markets is the key to determine exporters’ entrepreneurial orientation. Acedo and Jones (2007) consider 6 years as a good starting point to begin exporting. These factorsdifferentiate International New Ventures—INVs—or Born Globals—BGs (who begin exporting in the first five years) from traditional exporters (who do so after five years).Traditional exporters have a lower entrepreneurial orientation than INVs or BGs, which are paramount in export firm’s entrepreneurial behavior. Scope is the number of foreign markets in which export firms generate income. This concept appears in literature as export extension or diversification (Ruzo et al., 2011). Scope measurement also raises the problem on whereto put the cut-off point. Ruzo et al. (2011) consider that ten countries are necessary to distinguish between a firm tending to market concentration (firm exports to ≤ 10 countries) or to market diversification (firm exports to > 10 countries). Market diversification indicates a more entrepreneurial behavior. Export degree or intensity determines export firm’s orientation level toward foreign markets regarding domestic market (Kuivalainen et al., 2007), normally measuring through export sales/total sales ratio. Literature finds no agreement on what ratio to evaluate exporters’ entrepreneurial orientation, although some authors pointout a ratio around 20% (Pla-Barber &Alegre, 2007). In this context, the EE conceptualization is the process in which a firm uses exports to exploit opportunities in foreign markets almost immediately after launch— first 6 years of life. Regardless of their size, firms tend to commercialize their products 6 and/or services through a strategy of market diversification—they are usually present simultaneously in more than 10 countries—and have a high export degree or intensity— normally over 20%. The nature of EE is therefore tridimensional, according to speed, scope, and degree. Literature review reveals two groups of EE determinants: internal and external. Internal determinants have to do with personal factors of export decision-makers— export managers—and organization’s resources and capabilities. Among external factors influencing EE are contingency factors regarding organization’s environment, either of the country—domestic or foreign—or the industry in which the export firm works. In this study, internal factors include export managers’ attitude toward exporting, which their export commitment reflects. Following RBV,this study chooses structural resources—an export department and learning resources—and general and international experience as organizational internal factors. Regarding contingency approach, the study uses two groups of external factors. The first comprises external factors of destination country—market distances. The second comprises industry factors—competitive intensity. EP is essential for decision-making in international arena (Madsen, 1998). Cavusgil and Zou (1994) define EP as the extent to which firms achieve their objectives when exporting a product in a foreign market, whether economic (profits, sales, costs, etc.) or strategic (market expansion, market share increase abroad, etc.), through planning and executingtheir international marketing strategy. Literature review reveals three basic EP aspects that this study takes into account (Rose &Shoham, 2002; Sousa, 2004; Zou et al., 1998).First,EP is a multidimensional concept, whose assessment must take place through quantitative measures (sales, 7 profitability, growth, etc.) and qualitative measures (perceived success, satisfaction, objectives achievement, etc.).Second, EP evaluation should not take place at a specific point in time (short term) but across a time horizon (Lages& Montgomery, 2004).Third, assessment measures must reflect management perceptions of performance (e.g., management satisfaction with EP) (Lages et al., 2008). 2.1. Managerial export commitment and EE Managerial export commitment is export decision-makers willingness to allot appropriate financial, human, and managerial resources to firms’ export activity (Navarro et al., 2010). This willingness attenuates export risks and barriers that firms perceive and increases theirpredisposition to offer a stronger support to foreign distributors (Styles & Ambler, 2000). A greater willingness will encouragea business culture with an exports orientation, and would affectinternationalization process— speed, degree, and scope (Navarro et al., 2013). This arguments support the following hypothesis: H1: Managerial export commitment positively affects EE. 2.2. Resources and EE RBV considersresources as the basis of business results (Barney, 1991). Resources–results relationship is interesting for researchers on export activity (Cadogan et al., 2009; Colton et al., 2010). Nonetheless, resources–EE relationship suffers from a broad lack of awareness. This study considers two types of resources: Resources to do with experience—experiential resources—and resources to do with structure—structural resources. 8 Regarding experiential resources, a distinction exists between general and international experience. General experience has a relationship with business activity knowledge in a competitive industry and provides a basis for a process of internationalization (Majocchi et al., 2005). General experience reinforces planning stage and reduces improvisation levels, decreasing the likelihood of making erroneous decisions in non-domestic markets and driving EE degree and scope (Nemkova et al., 2012). International experience is the knowledge about foreign markets. This kind of experience generates specific learning about export activity, provides available information to facilitate firms’ adaptation to foreign markets needs, and facilitates international positioning (Morgan et al., 2004). International experience possession reduces the export risks and barriers that firms perceive, increases firms’ orientation toward foreign markets, and drives entrepreneurial spirit (Knight &Cavusgil, 2004). Moreover, an export department helps organizing and planning export activities and facilitates the gathering of information about foreign markets, accelerating the search for, and exploitation of new export opportunities (Vermeulen&Barkema, 2002). A greater export orientation—thataffects market diversification levels and accelerates organizations’ internal expansion—embodies the advantages of an export department (Ruzo et al., 2011).The following research hypothesis captures this idea. H2: Resources regarding experience and the existence of an export department in charge of export activity positively affect EE level. 2.3. Competitive intensity and EE Competitive intensity is the level of competitive rivalry in foreign markets. This concept evidences environment’s hostility (Auh&Menguc, 2005). In export context, competitive intensity usually corresponds to a greater adaptation of the marketing-mix 15 In summary, this paper significantly contributes to filling the broad gap in EE literature through RBV and contingency approach. Specifically, this study shows that firm’s EE level depends on management’s export commitment, resources available, and specificcontingency factors of organization’s external environment, such as industry’s competitive intensity and market distances. The effect of these internal and external factors explains an EE variance of 42%. EE effect on EP is significant. 5.2. Managerial implications Managers can use above findings to systematize decisions and actions regarding their firms’ export activity. The following implications of the study are noteworthy. First, export firm’s management must proactively focus on external markets, and allot the necessary human, financial, and managerial resources. This managerial export commitment encourages export firms to accelerate internalization process, diversify markets seeking business opportunities, and show a greater export tendency. Second, export firms must implement specific decision-making structures (e.g., an export department), thus facilitating export planning and accelerating decisionmaking. The result is an increase in organization’s entrepreneurial orientation. Learning—the outcome of experience—also facilitates export planning in industry and, particularly, foreign markets. Therefore, firms should accelerate their internationalization process to achieve the necessary international experience as soon as possible. Finally, export firms must develop monitoring mechanisms for environment, track competitors, and differences between markets when competitive intensity is high. This environmental monitoringfosters an entrepreneurial culture that affects exports’ speed, degree, and scope. For this purpose, firms should consider developing dynamic 16 capabilities, such as export market orientation. This action enables information gathering and dissemination for decision-making and for responding to foreign consumers’ desires and needs. 6. Limitations and future lines of research This study offers important, novel contributions to export marketing literature, but also has certain limitations. These limitations may lead to future research. First, this study is synchronic since this research takes information from a specific moment in time. Scholars should engage in a longitudinal study to analyze the relationships between internal/external factors and EE. Second, the sample comes from a single country. To make previous conclusions extensible, firms from a wider geographic area should feature in the analysis. 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Evaluation of measurement model CONSTRUCT/Dimension/Indicator Variance inflation factor Weight Factor Loading Composite Reliability (c) Average Variance Extracted MANAGERIAL EXPORT COMMIMENT (first-order reflective construct) 0.89 0.69 COMMITM1 0.84 COMMITM2 0.86 COMMITM3 0.84 COMMITM4 0.78 RESOURCES (first-order reflective construct) 0.87 0.70 GENERALEXPERIENCE 0.81 EXPORTEXPERIENCE 0.85 STRUCTURE 0.86 COMPETITIVE INTENSITY (first-order reflective construct) 0.84 0.64 INTENSCOMPET1 0.78 INTENSCOMPET2 0.91 INTENSCOMPET3 0.70 MARKET DISTANCE (second-order reflective construct) 0.94 0.89 Country Distance (first-order reflective construct) 0.95 0.90 0.60 ECODEVEL 0.71 COMMUNIC 0.77 MKTINFRA 0.73 TECREQUI 0.81 MKTCOMPE 0.80 LEGALREG 0.82 People Distance (first-order reflective construct) 0.75 0.87 0.58 PERCAPIT 0.81 PURCHASI 0.85 LIFESTYL 0.81 CONSUMER 0.72 LITERACY 0.61 EXPORT ENTREPRENEURSHIP (first-order formative construct) n.a. n.a. SPEED 0.46 DEGREE 0.57 SCOPE 0.67 EXPORT PERFORMANCE (second order formative Construct) n.a. n.a. Sales Growth (reflective construct) 2.14 0.29 0.86 0.70 Crev_2010 0.79 Crev_2011 0.89 Crev_2012 0.83 Manager Satisfaction (reflective construct) 1.97 0.85 0.94 0.73 SAT1 0.89 SAT2 0.81 SAT3 0.91 SAT4 0.82 SAT5 0.83 n.a.: not applicable