Academic journal article Journal of Small Business Management

The Role of Systematic International Market Selection on Small Firms' Export Performance

Academic journal article Journal of Small Business Management

The Role of Systematic International Market Selection on Small Firms' Export Performance

Article excerpt

This article hypothesizes that, on average, small and medium-sized enterprises (SMEs) that use a systematic methodology in selecting foreign target markets (what we call systematic market selection) perform better than SMEs using an ad hoc international market selection methodology. Using a sample of Greek exporting firms, we found that systematic international market selection is a significant determinant of export performance, even when controlling for decision-maker and firm-specific characteristics previous studies found to be related to export success. Implications for managers, trade promotion agencies, and future research are discussed.


What factors determine a small or medium-sized enterprise's (SME) export success? Scholarly research on this question has tended to focus primarily on two factors. Past efforts have examined the influence of decision-maker characteristics on the export behavior of the firm and its performance (Axinn 1988; Reid 1983; Simpson and Kujawa 1974; Mayer and Flynn 1973). Studies have also examined firm-specific characteristics that influence a firm's international behavior (Julian 2003; Cavusgil and Zou 1994; Aaby and Slater 1989).

Previous research efforts found a number of firm characteristics linked with SME export performance. They include: firm size, international experience, dependence on exports, and adaptation of product for sale in foreign markets (Mittelstaedt, Harben, and Ward 2003; Calof 1994; Cavusgil and Zou 1994; Bonaccorsi 1992; Diamantopoulos and Inglis 1988; Cooper and Kleinschmidt 1985; Reid 1983). In addition, two decision-maker traits have also been linked to SME international success: age (Dichtl, Koeglemayr, and Mueller 1990; Aaby and Slater 1989; Bilkey 1978; Simpson and Kujawa 1974) and educational level of the decision-maker (Axinn 1988; Reid 1983; Simpson and Kujawa 1974; Mayer and Flynn 1973).

Past studies have concentrated on firm and managerial characteristics' influence on the international performance of a company (Axinn et al. 1995; Dichtl, Koeglemayr, and Mueller 1990). However, as Dhanaraj and Beamish (2003, p. 243) state, "the focus needs to move from developing explanatory variables to integrating the research to develop a normative model." Here we attempt to respond to Dhanarai and Beamish's call by developing and testing a normative model. We define a "normative model," as actions that, if followed by an SME, result in improved international performance. Thus, on average, SMEs that follow the "normative" action suggested in this article should perform better in international markets than SMEs that do not.

In this study we concentrate on a new question of interest, the criteria SMEs use in selecting export target markets. In particular, we examine the relationship between SMEs using systematic international market selection (SIMS) criteria and their export performance. As in Yip, Biscarri, and Monti (2000), we define systematic as using objective criteria to select export markets (such as systematic and formalized international market research activities in selecting suitable markets abroad, visits of foreign markets on fact-finding tours before entry, monitoring of national and international business press for product-related activities, and the use of published statistical sources in differentiating foreign markets). Higher company scores (using on our measure) indicate firms that use a greater number of systematic approaches; lower scores indicate that a firm uses fewer systematic methods to select foreign markets. Such firms may more heavily rely on intuition and/or personal feelings about a foreign country. We describe lower-score firms as using an ad hoc approach to select foreign markets.

More specifically, in this article, we examine the extent to which our sample of SMEs takes a systematic approach to export market selection and, controlling for other relevant factors, evaluate the performance differences between systematic and unsystematic approaches. …

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