Local external influence on SME export marketing activity in Marshallian districts:
An investigation of the Danish Furniture Industry

by

Poul Houman Andersen
the Århus School of Business
Department of International Business

 

Introduction

To what extent do local industrial environments influence the export marketing activities of Small and Medium-sized Enterprises (SMEs)? This issue have gained increasing momentum in political as well as in academical circles. Diverse strands of economic and managerial thought have noted the importance of availability of supplementary resources in local environments for the export activities of SMEs. Regional economics has reflected on the specific economic characteristics of local environments as a distinctive international competitive advantage often associated with SMEs (Porter & Sölvell, 1998; Maskell, 1996; Storper, 1997, Christensen & Lindmark, 1993). Entrepreneurship researchers see the local socioeconomic texture as important for understanding the international market expansion of newly established manager-owned firms (Johannison, 1988; Christensen 1991). Also, students of comparative advantage and of competitive theory regard locally embedded resources as important for international expansion (Porter, 1990)

Even in an increasingly globalizing world, local economies remain important. According to some observers, economic forces of globalization ascribe more significance to unique locational attributes as an element for deriving differentiated competitive advantage in the global marketplace (Amin & Thrift, 1994). However, despite an ongoing interest in this subject only few attempts have been made to investigate empirically the impact of regional conditions on the export activity of SMEs. Empirical research has repeatedly been called for (Ried, 1983, Christensen & Lindmark, op. cit).

The purpose of the present contribution is to add to the body of knowledge concerning this important issue. More precisely we will investigate whether and, if confirmed, why and how economic facets of the local environment may affect the organization of export marketing activities between Danish SMEs in industrial districts. The paper is structured as follows. First, the export collaboration among SMEs is outlined. Then, the proposed significance of the local environment is identified through a literature survey. What are the economic mechanisms associated with local business environments and how are they believed to support export activities of SMEs? Based on this overview, a set of propositions and a research strategy are developed. Next, the propositions are tested, using data from the Danish furniture industry. In the concluding chapter, academical as well as political implications and implications for business are debated.

Collaborative international marketing among SMEs

How to demarcate SMEs from larger firms is an often debated issue, and definitions vary from country to country, depending on statistical conventions (Andersen, 1995; OECD, 1997). In Denmark, SMEs are typically defined as below 100 employees, which is the definition employed here.

A distinctive feature of SMEs which has been identified repeatedly in the business literature is their limited resource base. Especially in relation to international business the lack of resources has been characterized as a central problem of SMEs. A survey of the literature in this field concluded, that The most common hypothesis is that large companies have size-related advantages that enable them more efficiently in export (Aaby & Slater, 1989, p.17) Industrial economists of different sorts have seen market imperfections as impediments of SME internationalization. Universal consumer norms, removal of trade barriers and shortening product life cycles are among the numerous factors contributing to economies of scale and scope in large scale operations, tossing the competitive balance unfavourably for SMEs (Douglas & Craig, 1989; Leavitt, 1983, Ohmae, 1982).

A second, but related argument against SME internationalization has been the lack of managerial resources and the perceived greater risks of international operations among SME managers. As the perception of risk is associated with lack of information, the lack of resources for market investigation is expected to expose particularly SME managers to high risk perceptions associated with international marketing activities. Moreover, the share of total resources invested in the international operations is greater in SMEs ad compared to large enterprises, making larger firms less risk averse (Nooteboom, 1989). Thus, research in export behaviour and the internationalization of firms have seen both the propensity of being an exporting firm and the intensity of exports as positively correlated to size by a number of researchers, although with contradicting empirical findings (see Madsen, 1989 for an excellent overview of empirical findings).

However, an increasing bulk of empirical research in the internationalization of SMEs has countered the dense relationship between size and export intensity (Bonaccorsi, 1992; Czinkota & Johnston, 1983). This has lead to a questioning of whether SMEs follow the similar rationale as large firms in their international operations (Bell, 1995; Andersen & Christensen, 1999; Kristensen & Andersen, 1999). Whereas the establishment of large companies suggest an increasing internalisation along with growing exports, it has been suggested, that SMEs to a large extent dependent on their collaboration with co-specialized and external resources in the conduct of their export activities (Andersen, 1995). Hence, SMEs collaborate with foreign intermediaries, sharing operation costs or developing product programmes on specific export markets (Petersen, 1996; Andersen, 1995). Also, exporting SMEs have a higher propensity for working together with subcontractors than other firms (Bonaccorsi, 1992) Moreover, SMEs may collaborate with competitors in order to achieve economics of speed and variety (Best, 1990; Storper & Saias, 1997).

Although the co-alignment of external resources with internal skills holds some prosperous possibilities for the SME it also raises a number of questions. Valuable resources are rare and sharing them with business partners comes at a risk. What are the mechanisms allowing SMEs to coordinate and configure export activities together with other firms? The socioeconomic mechanisms suggested to be a central feature of locally agglomerated economies may hold a part of this answer. In the following we will discuss the advantages but also the mechanisms allowing for SMEs embedded in industrial districts to access and direct external local resources in favour of their export activities.

Industrial and technological districts and international business: An overview

For some time now, international business researchers have noticed the territorial clustering of firms within the same or within functionally related industries as important feature of internationally competitive industries. Local industrial districts or clusters are described in dimensions of economic space such industrial activities, actors and territory (Amin & Thrift, 1994; Dalum, 1995; Storper, 1995). Industrial districts are seen as thresholds of international competitive advantage, created through agglomeration of knowledge, skills, learning and experience (Dunning, 1998).

The virtues of geographical proximity have been discussed under various headlines. The concept of industrial districts has been (mis?)used to describe an eclectic smattering of industrial networks, including Silicon Valley (Saxenian, 1991), producers of apparel goods in Northern Italy (Brusco, 1982, Lazerson 1993) and Japanese producers of electronics and cars (Fujita & Ishi, 1998). These examples of Adistricts@ include networks of technically interdependent firms, both small and large, which may or may not be agglomerated in physical space. Hence, the concept of industrial districts is in need of some clarification and further conceptual development. A seminal contribution in this respect is provided by Storper & Harrison (1991). In order to define and classify various forms of production systems they develop a vocabulary, including the concept of input-output systems, production units and governance structures.

An input-output system is a collection of activity bundles which lead up to the production of a specific marketable output. The input-output system may be decomposed into production units, which denote a physically integrated set of activities occurring at a single location. Normally, input-output system will consist of more than one production unit, the propensity depending on whether such activities are subjected to internal and external economies of scale and scope. Hence in cases of external economies of scale and scope, network-like input-output systems prevail, whereas strong internal economies of scale and scope favour the emergence of integrated producers.

As their proceeding step in the development of a classification scheme for various production systems, the authors include the territorial dimension of production. Principally, network-like input-output systems may be dispersed over wide territories without any geographical core or they may be agglomerated. Hence, on the basis of these dimensions a classification of network-based input-output systems can be developed. Applying the dimensions of territoriality and internal and external economies of scale and scope, a scheme of input-output systems can be obtained (figure 1).

Figure 1: Types of input-output systems - developed from Storper & Harrison (1991)

 

 

 

Internal economies of scale and scope

 

 

 

 

 

Weak

Strong

 

External economies of scale and Scope

 

 

Weak

 

 

 

I.

Isolated

Workshops

(Dina=s Beauty Parlor)

II.

Process

Producers

(British Petrol)

 

Strong

 

 

Territorial Dispersion

 

III.

Dispersed Network Production

mostly small units

(Lamp producers)

IV.

Dispersed Network Production

some large units

(Wind Turbine producers)

 

Territorial Agglomeration

 

V.

Agglomerated Network

Production

mostly small units

(Italian Fashion wear)

VI.

Agglomerated Network

Production

some large units

(Toyota City)

 

Marshallian District


In the present context, the most interesting part of figure 1 is found in the bottom half of the figure. Here, we find a scheme for classifying the different types of industrial networks, all characterized by the presence of external economies of scale and scope.

The type of industrial networks described by type three may be found among small and medium-sized producers, where physical space is less problematic in relation to for instance external economies of scale and scope, for instance where product technology interfaces may be relatively standardized. This is the case among lamp producers, which collaborate internationally on the development of new designs. The network identified in cell four, is one where both internal and external economies may be present. For instance, in the case of Danish wind turbine producers, historically present external economies of scale and scope are largely being supplemented and in some cases even replaced by internal economies of scale and scope, as the production technology matures. Moreover, although the wind turbine industry primarily is located in Jutland, Denmark, a number of critical suppliers are located in other regions of Scandinavia (Karnøe, 1995).

Industrial districts, characterized by both internal and external economies of scale and scope, combined with territorial agglomeration are present in the Japanese production system. For instance, Toyota City is an example of first and second-tier suppliers closely located to the Aparent@ company, Toyota Motors (ref?).

The following discussion will focus on type five, which is the closest equivalent to a AMarshallian@ industrial district type. It may serve as a convenient denominator as it (despite some other definitions) includes both geographical and functional vectors in its dimensioning of economic space (Storper & Harrison, 1991; Brusco, 1982; Pedersen, 1994). Compared to other types of input-output systems in the Storper-Harrison scheme, Marshallian districts mainly consist of spatially close SMEs in the same broad industrial sector with both competing and complementary interests and limited internal economies of scale and scope on the firm level. This also means the absence of large producers which may act as configuring the export activities of the industrial district, as in the case of the stainless steel district in the Kolding area in Denmark (Christensen & Phillipsen, 1997).

Different accounts can be found, but industrial district economists broadly agree that both technical and spatial proximity contributes to the locational effects in economic space, although they may not be fully characterized by a technical or geographical boundary. Locational effects to international competitive advantage are considered as powerful and as somewhat neglected in dominating theories of international competitiveness (Krugman, 1991; Porter, 1990; Lundvall, 1985). Broadly, three classes of external economic effects of scale and scope connected to spatial clustering can be identified:

    1. Agglomeration effects
    2. Transaction cost minimization effects
    3. Flexibility, learning and innovation effects

First, concentration of local rivals in Marshallian districts gives rise to external economies of scale, including specialised suppliers, services, labour markets and other types of factor endowments, created by agglomeration of industrial activity (Krugman, 1991; Porter 1994 & 1996; Best, 1990; Piore & Sable, 1984). This means that SMEs may be able to reap advantages of scale and scope which previously were restricted to the vertically integrated mass producer (Vatne, 1995). Local organizations, which provide specialized services may arise in favour of the local firms export activities. The notion of the importance of the specialized labour market as pool of external economies of scale and scope is central in the concept of industrial districts. Moreover, theoretically, the agglomeration affects of industrial districts are (at least to some point) subjected to increasing returns of scale, consistent with the line developed by new growth theory (Romer, 1994).

Second, local surroundings promote economic cooperation and trust by embedding economic relations in a wider web of spatial relations, which clearly define and sanction acceptable and unacceptable forms of economic behaviour (Dei Ottati, 1994, Curran & Blackburn, 1994). These mechanisms lower transaction costs, and support the availability of venture capital (Christensen & Lindmark, 1993; Kristensen, 1996). For instance, local banks are often closely linked with local entrepreneurs, and holds private information on the person it provides credit. Hence, it is better capable of giving thrust to accumulation in the district than would a less well integrated bank (Becattini, 1991). In its turn it adds to the prosperity of the district. On the other hand, closely knitted trusting relationships may also act as a barrier to continued expansion of network relations. As firms find collaboration with other partners easier within the local area than outside, they may make decisions which are not optimal or feasible given the business conditions outside the local area (Enright, 1998).

Third, locally vested interaction of SMEs greatly favours the development of a shared grammar or technical language, which may support configurational flexibility as well as innovation and learning among participating firms (Lundvall, 1988; Maskell, 1996). Habitual patterns for inter-firm coordination and configuration of various activities arise from repeated interaction and mutual learning. These features may provide distinct competitive advantage to localised SME networks as compared to other forms of industrial organization. In the place of the large, vertically integrated business, reaping advantages of scale, but which is slow to respond to rapidly changing world market conditions, industrial districts emerge composed of networking SMEs can collectively reap the economies of speed and variety needed to cope effectively with volatile market conditions (Best, 1990; Pyke, 1992). The general assumption is that globalization has led to deepened inter-firm specialization and division of labour. Hence, SME export skills may not necessarily be present within the single SME as export from industrial districts to a growing extent depends on critical capabilities and contacts held by local but external specialists.

So far, we have addressed Marshallian effects, without directly identifying possible facilitators of such effects. The argument of the economic prevalence of industrial districts is basically a sociological one, claiming that economic relations are embedded in kinship ties and therefore must be understood as social constructions. According to various contributions the clustering of persons in the industrial districts is considered as the most important facilitator of Marshallian effects of external scale and scope in the district. First, local labour mobility fosters the development of social networks, which is an important factor concerning the formation of the social texture. The socio-economic texture reduce diseconomies of spatial separation of production units carrying information as well as credibility of network actors, thus leads to an overall reduction of transaction costs, including costs of contacting, contracting and control (Coase, 1937). Next, a transparent and dynamic labour market may support the generation of entrepreneurs, feeding into the local growth and dynamism of the industrial district in various ways. Finally, the rotation of the labour force between firms in the region, foster the transfer of tacit knowledge.

The influence of industrial districts on SME export activities: some propositions

So far, we have focussed on Marshallian districts as a form of industrial organization which may hold merits in terms of international competitive advantage. From the perspective of the individual SME, belonging to an industrial district provides a number of strategic benefits. SMEs within a district have larger operational latitude as they can mix and match internal and external resources to a greater extent that outsiders. However, supply side conditions, how favourable they may be, are not automatically activated in support of the firm. The utilization of local economic resource endowments depends on the ability of management to configure and coordinate relevant actors in favour of export activities. In the following a number of ways for utilizing local resources in favour of export activities are outlined.

Contributions to studies of export marketing behaviour traditionally have focussed on the internal determinants affecting export propensity and intensity. A crucial discussion has concerned the link between export behaviour and the availability of firm resources. Firm size has been seen as a convenient approximation of internal resources (Bonaccorsi, 1992). However, the ability to detect a positive correlation between the export propensity (do firms have export yes/no?) And the export intensity (usually measured as the degree of export turnover to total turnover) has been weak (see Madsen, 1989 for a useful overview of these contributions). Although these findings have not discouraged all, an increasing number of scholars have realized that the international market expansion of the firm should not be seen only in the light of its horizontal position in a chain of value added, but must also be related to its vertical position and the interface between internal and external resources and capabilities (Christensen, 1991, Vatne, 1995). A large, cross-sectional study of the Italian manufacturing sector revealed a partial support for the hypothesis, that small firms (measured in number of employees) are less likely to initiate exports than their larger counterparts. However, the study also revealed that significant differences only occurred when firm sizes were particularly small. Size effects seemed to level off, when the size class exceed 20 persons full-time employed, suggesting that critical mass is reached already at the micro-level (Bonaccorsi, 1992). Bonaccorsi also suggests the integration of external resources as an important contribution to the current export research, while Ried (1983), scolds traditional models of export behaviour for the lack of context specifity.

Hence, researchers have started to include external resources, such as the firms= access to external economies as part of their functional or territorial position (Christensen, 1991). Recent contributions describe processes of international expansion involving external resources through metaphors such as linking (Fletcher, 1995) and networking (Coviello & Munro, 1997) seeing these perspectives as challenges to more established views (Bell, 1995).Recent developments in the international business conditions have increased attention on the coupling between internal and external resources as determinant of export activities. First, economic volatility created by interdependent forces of cyclical crises in the accumulation of capital and the accelerating pace of technological change demands flexible responses from international as well as domestic oriented firms. Second, improvements in production and information technology have improved the economies of product customerization, thus decreasing the critical mass of scale economies in a number of industries. Lat but not least, the globalization of markets have led to new market expansion opportunities, but also to increased competitive pressure, and the pursuit for marshalling complementary, external resources in favour of export activities.

In these new economic realities, the paradigm of industrial mass-production and the economic rationale associated with it are challenged by economic rationales pertaining to speed and variety (Storper & Saias, 1997). These business conditions are expected to favour especially SMEs vested in local networks for a number of reasons.

Higher risks follow from the instability of economic conditions, and with this transaction costs are expected to increase. Variations in demand and customerized configuration of goods counteracts economies of scale and increases the vertical division of labour in industry as well as the demand for semi-specific assets (Vatne, 1995; Piore & Sable, 1984).

Several suggestions have been made concerning how territorial proximity supports the development of firms= export activities. The factors promoting trust and exchange of information in the local area may provide easier access to complementary resources for the local firm which can be mobilized in international market expansion (Christensen & Lindmark, 1993). Moreover, findings have shown that firms may draw upon the collective experience of other firms during their initial export experiences (Bonaccorsi, 1992) Thus it can be proposed, that:

Proposition1a: SMEs in industrial districts are more likely to initiate exports than SMEs in general

Proposition1b: SMEs in industrial districts are likely to have a higher export intensity than SMEs in general

More specifically, a number of areas can be suggested where local SMEs likely may cooperate with each other. One area may concern the organization of export activities. Export activities are often resource demanding in terms of initial investments and transaction costs. Even non-investments form of export organization may call for high monitoring costs (Anderson & Gatignon, 1986). The single firm may not have the necessary critical mass in terms of export turnover. Developing an export sales organization with complementary and even rival firms may therefore be an option for achieving scale economies which would not be reached individually (Andersen, 1995). Also, firms may entertain various forms of piggybacking arrangements in order to divide various forms of fixed costs in export marketing (Terpstra & Wu, 1990). Hence, it can be proposed that

Proposition2: SMEs in industrial districts are more likely to engage in collaboration regarding other forms of export activity with other firms than SMEs in general

Collaboration may also include international marketing activities, where complementary and even rival firms may co-invest in export market promotion activities. Some anecdotal evidence can be found in support of this proposition. For instance locally recruited supplier associations may jointly promote a certain region in order to attract potential customers (Andersen & Christensen, 1998). In a number of cases, local clusters of firms choose to collaborate on developing an export marketing campaign. For instance, Scottish Whiskey producers join efforts in order to promote the qualities of Scottish Whiskey abroad (Enright, 1998). Other examples include sharing of expenses relating to trade fair participation, distribution of promotion material, etc. Examples can be found within the tourism industry as well as in the district heating industry (Andersen, 1995).

Proposition3: SMEs in industrial districts are likely to collaborate on international promotion activities than SMEs in general

Also, because of inter-firm collaboration and the existing of highly efficient organizing grammars supporting complex patterns of coordination, industrial districts are expected to support flexible specialization. The patterns of flexible specialization allow the SME to compete on delivery times and entertain product ranges and product adaptation abilities beyond the internal capabilities of the individual firm. Thus by engaging in a flexible and fine-grained division of labour, the district adds systemic value to each participant which is able to draw on a collaborative and flexible production capacity. This also means, that markets can be entered and left without incurring specific investments, allowing the small firm the ability to react on limited export and/or risky market possibilities (Bonaccorsi, 1992). Studies have shown, that accessibility to local advanced users has a positive impact on export market potential (Maskell, 1996).

Proposition4: SMEs in industrial districts draw in other firms in support of product adaptation and product development for export markets more frequently than SMEs in general

An essential barrier to internationalisation is the lack of information on international market prospects. Incomplete or lack of information on foreign business opportunities hinder risk-aversive decision makers in considering these market alternatives in sufficient detail. Several investigations have shown, that lack of export information constitutes a major barrier for international expansion (Cavusgil, 1984). Local districts are referred to as information-rich and tapping into the local information sources in order to reach valuable information on export markets may be an important virtue of industrial districts. Thus, it can be proposed:

Proposition5: SMEs in industrial districts are more likely to exchange market information with other firms than SMEs in general

Data and Methodology

In order to test the propositions, survey data was gathered on Danish furniture producers. The Danish furniture industry is highly export-oriented, yielding an export specialization figure between 3 and f for the past three decades. The industrial branch is a significant part of the Danish industry, employing approximately 8% of the workforce in 10 % of the Danish industrial firms. More than 2900 firms are registered as furniture producers, and most of these firms are SMEs. According to the Danish Statistical bureau, less than 2% of the furniture producers have more than 100 employed. Danish furniture is well known for high quality standards and innovative design, and a substantial part of the industrial output is hand-crafted. In this sense, the industry has many similarities with the Italian fashion wear industry, which also known for artisan traditions and significantly high export rates.

Using a commercial database as sampling frame, 617 furniture producers with 5 employees or more were identified. This criterium was chosen to improve response rates and to weed out those addresses which did not represent business activities. The larger firms (more than 20 employees) were contacted telephonically prior to sending out the questionnaire, in order to identify a contact person, which could be addressed directly. Participating firms were promised anonymity (although their identity was known to the researcher) and a report of the research results. Two waves (one initial wave) and a follow-up wave 3 weeks later) yielded a formal response rate of 43.7%. However, several of the respondents turned out not to be furniture producers, returned a blank questionnaire or stated that they were not interested in participating in the investigation. Hence, the effective response rate was 34,5%, or 207 respondents, which is above average for industry questionnaires. Of these, fulfill the criteria of being SMEs. Comparing responses to industry data on size and turnover distribution show a fairly good representation of the underlying population in the sample.

Firms were asked a series of 20 questions, which combined with existing data on the firms yield a fairly rich base of information. The questionnaire was divided into two parts: A general part, which was completed by all firms and a part dealing with exportation and export collaboration filled out only by relevant firms.

The methodology applied here is one of comparing means and standard deviations for district versus non-district firms. Thus, a central task in developing this research strategy is identifying a district and delimiting it from the rest of the population. The furniture district of the Salling area was used in the present study. More than one sixth of all Danish furniture producers are found within this relatively small area of West Jutland, and its existence has been fairly well documented in several investigations (Lorenzen, 1999, Kristensen, 1996, Maskell & Malmberg, 1995) and is confirmed by the Danish association of Furniture producers, which organize more than 90% of all active Danish furniture producers. These rather anecdotal accounts of the prevalence of this district was followed up by an agglomeration analysis on the postal code area level, which shows that the postal code areas central and nearby the Salling Peninsula are specialised in furniture production both relatively (as compared to their share of total Danish industry) and absolutely (as compared to their total share of Danish furniture producers). The area was delimited using travel-to-work distances as a criterion for spatial demarcation of the district, using the Salling Peninsula as the centre of the circle. Thus, postal codes which are found either within this area or, where more than half of the area is included under the auspices of the circle have been assigned to the district. Hence respondents belonging to the district has been assigned with a dummy variable of A1", whereas firms outside the district are assigned the number A2". In total, 28 firms are found inside the Districts, whereas the remaining part of the 207 respondents is outside this area. The propositions have been operationalized, as shown in table 1, below.

Table 1: An overview of propositions, operationalisation measures and scale of measurement used

Proposition

Operationalisation

Type of measurement scale

1a: SMEs in industrial districts are more likely to initiate exports than SMEs in general

Do you export? yes/no

 

Nominal

1b: SMEs in industrial districts are likely to have a higher export ratio than SMEs in general

How did your export develop over the past three accounting years (in percent of total turnover)

Nominal/ratio

2: SMEs in industrial districts are more likely to engage in collaboration regarding other forms of export activity with other firms than SMEs in general

Do your firm collaborate (or did it collaborate within the past 3 years) with other local firms concerning other forms of export marketing activities not mentioned here?

Ordinal

3: SMEs in industrial districts are more likely to collaborate on export promotion activities than firms in general

Do your firm collaborate (or did it collaborate within the past 3 years)with other local firms concerning export marketing (shared material, shared trade fair participation, shared distribution of promotional material, other)

Ordinal

4: SMEs in industrial districts are more likely to collaborate on export sales activities than SMEs in general

Do your firm collaborate (or did it collaborate within the past 3 years) with other local firms concerning the development of shared package deals to foreign customers or export intermediaries

Ordinal

5: SMEs in industrial districts are more likely to exchange market information with other firms than SMEs in general

Do your firm exchange (or did it exchange within the past 3 years) export information with other local firms?

Ordinal


As can be seen from the table, both ordinal-scaled and ratio-scaled data are found, calling for a mixture of analytical techniques, in order to employ the most powerful techniques in each case. Chi-square analysis is utilised in testing proposition 1a, whereas one-way Anova is used for proposition 1b. Proposition 2 to 6 are tested using the Mann-Whitney test rank testing procedure for statistical analysis. This technique is powerful, when ordinal-scaled data are analysed. The statistical package used for this analysis is SPSS 8.0 for Windows.

Proposition 1a concerned the relationship between localisation of firms and the propensity to export. Here, it was proposed, that because of the generally supportive texture of local districts, small and medium-sized firms would have a higher propensity to export as compared to SMEs outside these areas. This proposition is rejected by the results of the statistical analysis. A large number of SMEs in the sample holds export activities, both in- and outside the district (84,2% inside and 67,5% outside). The results from testing proposition 1 are displayed in table 2, below.

Table 2: Results of Chi-Square test

 

Value

degrees of freedom

Asymptotic Significance (2-sided)

Pearson Chi-Square

2,228

1

0,136

Continuity Correction

1,512

1

0,219

Likelihood Ratio

2,488

1

0,115

Linear by Linear Association

2,216

1

0,137

N of valid cases

179

 

 

 

Although proposition 1a is rejected by the present sample, the role of districts in supporting especially small enterprises still is to be tested. In an Italian context, much similar to the present, Bonaccorsi (1992) suggests that size effects to export propensity levels off at a relatively modest level of employees (the size of 20 persons employed). However, in the present sample, the sub-group of firms from the Salling area with employees below 20 is too small to test.

In a similar line of reasoning than the relating to proposition 1a, the following proposition 1b suggests Marshallian effects on the export intensity of all firms. One-way ANOVA test was used for investigating this proposition. The results of testing this proposition are displayed below in table 3.

 

Table 3: Marshallian effects to export intensity for SMEs

 

 

Sum of Squares

df

Mean Square

F

Sig.

1998 Export in %

Between groups

Within groups

Total

3611,543

101405,758

105085,133

1

111

112

3679,375

984,522

3,632

.056

1997 Export in %

Between Groups

Within Groups

Total

3675,286

105687,866

109363,152

1

107

108

3675,286

987,737

3,711

*.054

1996 Export in %

Between Groups

Within groups

Total

3679,375

110380,422

113991,965

1

103

104

3679,375

984,522

3,737

.059

*): Significant at the .05-level

Testing proposition 1b show, that the average export intensity of SME exporters within the Salling area is higher than the mean of exporters outside the area. The ANOVA procedure is fluctuating around the .05 rejection level of the H0-hypothesis, offering some support to proposition 1b. Hence is a fairly strong association between industrial district affiliation and export intensity. This confirms the assumed Marshallian effects to SMEs export performance. However, the association is much stronger when the test includes all furniture producers, irrespective of size. Here, the H0 hypothesis is rejected Hence, it can be said that Marshallian effects to export intensity affects all firms, irrespective of size, as shown in table 4.

Table 4: Marshallian effects to export intensity for all firms, irrespective of size

 

 

Sum of Squares

df

Mean Square

F

Sig.

1998 Export in %

Between groups

Within groups

Total

8882,425

128292,824

137175,250

1

138

139

8882,425

929,658

9,555

***.002

1997 Export in %

Between Groups

Within Groups

Total

8698,502

122697,792

131396,294

1

133

134

8698,502

922,540

9,429

***.003

1996 Export in %

Between Groups

Within groups

Total

9116,715

120997,792

130114,259

1

129

130

9116,715

937,965

3,720

***.002

***): Significant at the .005-level

The data for testing the remaining set of propositions all involve ordinal scaled data. Therefore, non-parametric statistic procedures are used for testing these propositions. However, when data are ranked as ordinal-type data, a number of powerful statistics procedures are available, where the Wilcoxon rank test or test are among the most powerful (Conover, 1980). This test is also known as the Mann-Whitney test. The procedure seeks out to test whether the null hypothesis that two populations are identical can be rejected, by comparing their means and their cumulated rank values. The results of testing proposition 2-5 are presented in table 5, below.

Table 5: Export collaboration and District Affiliation among SMEs

Degree of collaboration on:

Location in Salling

N

Mean

Rank

Sum of Ranks

(Wilcoxon W)

Z

Asymp. Sig.

(2-tailed)

Other activities

Yes

No

Total

16

108

124

76,19

60,47

1219

6531

-2.024

*.043

Promotion

Yes

No

Total

16

108

124

76,56

60,42

1225

6525

-1.868

.062

Export sales

Yes

No

Total

16

108

124

81,59

59,67

1305.5

6444.5

-2.690

**.007

Information exchange

Yes

No

Total

16

108

124

68,81

61,56

1101

6649

-.816

0.415

* Significance at the .05-level; ** Significance at the .01-level

The propensity to collaborate on sales activities, i.e. develop shared product lines or otherwise is clearly stronger within the Salling district, confirming proposition 4 (significant at the .01-level). As this form of cooperative activity is the most resource-demanding and most complex in terms of inter-firm coordination, this is perhaps the strongest evidence for the role of Marshallian effects in export collaboration. Information exchange, on the other hand may be characterised as least demanding activity type in the bundle of export collaboration activities discussed here. Even though the mean rank is somewhat higher within the district than outside, the null-hypothesis is not rejected. Therefore, proposition 5 cannot be confirmed by the present data. Proposition 3 suggest that collaboration on export promotion are more frequently found among firms in industrial districts. Although the test value is close to rejecting the null-hypothesis (0.062), significant differences between the two populations are not found. However, for the last question on export collaboration activities: Other activities, there is significant differences between firms inside the district as compared to outside firms. Therefore, proposition 2 is confirmed by the data.

Concluding remarks and directions for future work

The role of industrial districts in the export activities of SMEs contributes to a very important topic in the political debate. SMEs are seen as important contributors to the creation and sustainment of wealth in the industrialized part of the world. SMEs have contributed to job creation. They are an essential part of the resource support structure utilized by larger firms. They form the hotbed from which the large enterprises of the future are developed. The internationalization of SMEs ranks high on the agenda world wide of industrial policy makers, and great resources have been issued in support programs, favouring the initiation, development and sustainment of SMEs. At the same time, the theoretical perspective which sees industrial districts as a socioeconomic texture of resources locally available is part of a novel approach to the analysis of SMEs international activities.

In general, this study provides empirical support to the notion of Marshallian effects on export collaboration. Both SMEs and larger firms are benefitting from their local affiliation in terms of export intensity. Moreover, small and medium-sized furniture producers in industrial districts holds specific behavioural patterns in terms of export collaboration activities, compared to small- and medium-sized furniture producers in general. The study showed, that in the furniture industry, SMEs in industrial districts more frequently join forces with other firms concerning export sales and other firms of export activities. In addition, they tend to collaborate more frequently on export promotion activities, albeit this is not statistically significant at the .05-level.

Seen from the perspective of academia these results are encouraging to the ongoing increasing interest in economic geography among international business scholars. Location do matter, and further research pursuit on the role of geography to patterns of trade, internationalisation and foreign direct investments seems promising.

Also, from a political perspective the presented findings hold merits. Taking into consideration, the geographical dimension of business may lead to a stronger and better differentiated industrial policy. Especially in programmes channelling support to SMEs, the role of districts may help in formulating new programmes better fitted to the realities of small business. Hence, studies attempting to investigate the role of industrial districts in marshalling export collaboration in other industrial branches are called for.

Finally, from the perspective of business managers, it is important to underline, that co-location means co-operation as well as competition. The results presented here points toward increasing return of scale to co-location, providing the localised actors with a supporting texture of other firms. However, much is still to be taken into consideration, such as to what extent this texture is accessible for the outside firm. These are all questions still waiting to an answer through future research efforts. Moreover, the results produced here needs to be further validated through the study of export collaboration in other industrial districts and in other industrial branches. This will be pursued in future contributions.

 

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