INITIAL EXPORT STIMULATION: ANY DIFFERENCE BETWEEN
DEVELOPED AND DEVELOPING COUNTRY FACTORS?

 

 

Kevin I.N. Ibeh (Ph.D.)
Lecturer
Department of Marketing
University of Strathclyde
173 Cathedral Street
Glasgow, G4 0RQ
Scotland, UK

Tel. 0141 548 4928
Fax: 0141 552 2802

E-mail: K.I.N.Ibeh@strath.ac.uk

 

 

 

The assistance of Prof. Stephen Young and Dr. Stephen Tagg, both of the Department of Marketing, University of Strathclyde, Glasgow, in the conceptual and statistical aspects of this paper, respectively, is gratefully acknowledged.

 

INITIAL EXPORT STIMULATION: ANY DIFFERENCE BETWEEN
DEVELOPED AND DEVELOPING COUNTRY FACTORS?

 

Abstract

This paper compares the findings from export stimulation studies undertaken in developing countries with the developed countries-dominated aggregate literature. It finds support for the proposition that proactive stimuli predominantly influence export initiation decisions of developing country firms. This diverges from the pre-eminent position of external-reactive stimuli (notably the receipt of fortuitous orders from abroad) in American and other developed countries’ studies, and adds to earlier calls for caution in generalising empirical findings across different environmental contexts. The possible reasons for the identified divergence are explored in the paper, replete with the policy and managerial challenges raised by the nature of initial export stimulation in developing countries.

 

Key words:

Export, stimuli, developed countries, developing countries, Nigeria.

INTRODUCTION

To initiate and develop international activity, a firm must first be influenced by attention evoking factors (Olson and Wiedersheim-Paul, 1978). Subsequent export behaviour and performance would, however, depend on the nature of these stimuli (Ramaseshan and Souter, 1996) as well as the characteristics associated with the decision maker, the organisation, and the environment (Leonidou, 1995b). Although a considerable body of literature exists on the nature of export stimulation, only a limited number of these studies were conducted in developing countries. Also, no systematic attempt has yet been made to review and integrate findings from developing countries’ export stimulation studies. There has, thus, persisted the tendency to generalise findings from developed countries’ export stimulation studies, and to use same as a basis for articulating support policies aimed at developing country firms. It should be noted that several researchers, including Bodur (1986) and Das (1994) have cautioned against such naïve and misguided practices, in view of the clear differences - political-legal, socio-economic, cultural, and infrastructural - between developed and developing countries.

Take the status of the receipt of unsolicited foreign order in initial export stimulation for example. While overwhelming empirical support exists for this factor in the overall export stimulation literature (see Ford and Leonidou, 1991; Leonidou, 1995a), doubts have been raised about its relevance to non-US and non-developed country firms. Bell and Young (1998), for example, have recently observed that non-US-based studies, including such developing countries’ research as Cheong and Chong (1988), Sharkey et al. (1989) and Weaver and Pak’s (1990), are much less fixated with the notion that indigenous firms are reluctant exporters. It is worth noting that this supports earlier conclusions by Leonidou (1995b) and Zafarullah, Ali and Young (1997), in their respective studies of Cypriot and Pakistani firms.

The objectives of this paper are threefold. One is to compare the findings from the limited number of export stimulation studies undertaken in developing countries with aggregate results from the more numerous developed countries’ studies. Two is to assess, using primary data from Nigeria, the proposition that in the context of a developing country, export initiation is more likely to be stimulated by proactive than reactive factors. The final part of the paper will discuss the issues raised, highlighting relevant implications and conclusions.

 

EXPORT STIMULATION LITERATURE

Export stimulation has been studied from three angles in the literature. These include: (a) role in initiating export (e.g. Garnier, 1982; Weaver and Pak, 1990); role in stimulating on-going export activities (e.g. Barker and Kaynak, 1992; Katsikeas and Piercy, 1993; Shoham et al., 1995); and role in export stimulation at both the initiation and subsequent stages of the export development process (e.g. Barker and Kaynak, 1992; Morgan and Katsikeas, 1997). The primary focus of this paper is on initial export stimulation, which is just as well because the bulk of empirical export stimulation research is devoted to the crucial point of turning non-exporting firms into exporters (Leonidou, 1995b).

Although researchers recognise that the existence of stimuli is not sufficient condition[1] for exporting to occur (see e.g. Olson and Wiedersheim-Paul, 1978), there is no doubt that the nature of the initial export stimulus offers some indication of the eventual success/failure of firms’ exporting activity (Ramaseshan and Souter, 1996). Building on previous typologies of export stimuli, Albaum et al. (1989) have identified the following four categories: (i) Internal-proactive (factors associated with the firm’s own initiative to exploit its unique internal competencies); (ii) Internal-reactive (responding to pressures from the internal environment); (iii) External-proactive (active exploitation by management of market possibilities); and (iv) External-reactive (reaction to factors from the external environment). See Table 1 below for a sample of empirical findings along the four dimensions.

Internal-Proactive stimuli

  1. the need to achieve of economies of scale (Joynt 1982; Ogram 1982);

  2. the existence of special managerial interest/urge (Diamantopolous et al. 1990; Morgan and Katsikeas 1997);

  3. possession of competitive advantage – technological, financial, and/or marketing (Karafakioglu 1986);

  4. to exploit the potential for extra growth, profits, and/or sales resulting from exporting (Weaver and Pak 1990; Kaynak 1990; Leonidou 1995b); and

  5. production of goods with unique qualities (Olson and Wiedersheim-Paul 1978; Karafakioglu 1986; Leonidou 1995b).

External-Proactive stimuli

  1. the encouragement by external agents/organisations (Barker and Kaynak 1992; Weaver and Pak 1990);

(ii) identification of better opportunities abroad (Wiedersheim-Paul et al. 1978; Brooks and Rosson 1982; Leonidou 1995b);

  1. possession of exclusive information on foreign markets (Brooks and Rosson, 1982);

  2. provision of government export-related incentives (Wiedersheim-Paul et al. 1978; Leonidou 1995b); and

  3. receipt of orders from trade fairs/missions (Simpson and Kujawa 1974; Ogram 1982).

Internal-Reactive stimuli

  1. the need to dispose accumulated inventory/overproduction (Joynt 1982);

  2. to utilise excess production capacity (Kaynak and Stevenson 1982; Ghauri and Kumar 1989; Morgan and Kasikeas 1997);

  3. maintain sales of a seasonal product (Weaver and Pak, 1990; Leonidou 1995b);

  4. to reduce dependence on (or risk) of domestic market (Pavord and Bogart 1975; Barker and Kaynak 1992); and

  5. to offset stagnation/decline in domestic sales/profits (Tesar and Tarleton 1982; Kaynak et al. 1989).

External-Reactive stimuli

  1. the initiation of exports by domestic competitors (Kaynak 1990);

  2. intense competition within domestic market (Wiedersheim-Paul et al. 1978; Kaynak 1990; Leonidou 1995b);

  3. prevalence of favourable foreign exchange rates (Brooks and Rosson 1982; Jain and Kapoor 1996);

  4. receipt of unsolicited orders from abroad (Simpson and Kujawa 1974; Kaynak and Kothari 1984; Leonidou, 1988);

  5. shrinkage of domestic market (Ogram 1982; Morgan and Katsikeas 1997).

Table I: Sample Findings from Export Stimulation Studies
Source: The Author

 

Integrative review of this empirical literature suggests that the export decision is dominantly triggered by factors within the external-reactive category. They, indeed, ranked first (receipt of unsolicited foreign orders) and third (saturation/shrinkage of domestic market) in two separate aggregate analyses undertaken by Leonidou (1995a, 1995b). The first of these integrative analyses – referred to as the state of the art analysis of the export stimulation literature by Morgan and Katsikeas (1997) - covered 30 studies undertaken between 1972 and 1992, while the second involved 20 studies focused on initial export stimulation.

It is significant that in none of these two aggregate rankings was an internal-proactive stimulus factor among the top three. The highest ranked was the need for extra profits, which placed fourth. External-proactive factors such as the encouragement by external agents/organisations and identification of better opportunities abroad did not also fare better, having both emerged ninth in the aggregate rankings (Leonidou, 1995b). The foregoing explains Leonidou’s (1995b, p.23) conclusion that ‘the prime force of stimulation consists basically of factors of an external-reactive nature, exemplifying a rather accidental engagement in export activities’. This echoes Cavusgil and Godiwilla’s (1980) remarks, after their review of the international decision making literature, that decisions tend to be reactive rather than proactive.

It should be indicated, however, that over 50% of the studies covered in above-mentioned integrative reviews were undertaken in North America, with Europe and Australia accounting for virtually the rest. This raises the question of the extent to which the above conclusion (the primacy of external-reactive factors) applies to non-US and non-developed country firms.

Table 2 below presents an aggregate ranking of findings from eight export stimulation studies conducted in developing countries. It can be seen that in none of the eight studies was the receipt of unsolicited foreign order ranked as the foremost export stimulus factor. It was ranked 13th in Leonidou’s (1995b) Cypriot study[1b]; 12th in Weaver and Pak’s (1990) Korean study; and 10th in another study of Cypriot firms by Leonidou (1988). Jain and Kapoor’s (1996, p.82) study of Indian firms, also, found unsolicited export order to be the least important stimulating factor - ‘less than seven per cent viewed it as an export motivating factor’…(and) ‘majority of the firms (61.2 percent) made their own efforts to locate the overseas buyers and secure orders from them’.

Research Study Export Stimulus

Karafakioglu, 1986

Leonidou, 1988

Kaynak & Erol, 1989

Weaver & Pak, 1990

Katsikeas & Piercy 1993

Leonidou, 1995b

Jain & Kapoor, 1996

Douglas 1996

Accumulation of unsold inventory

-

11

-

-

12

17

-

-

Achievement of scale economies

-

-

-

-

8

2

-

-

Availability of unutilised capacity

-

6

NA

-

6

16

5

9

Encouragement by external agents

-

-

NA

5-10

16

12

-

-

Special managerial interest

-

-

-

-

3

9

-

11

Better opportunities abroad

-

4

NA

-

-

8

-

-

Export start by home competitors

-

12

-

11

-

15

-

-

Intense domestic competition

-

9

NA

-

13

5

-

1

Sustain sales of a seasonal product

-

-

-

4

-

9

-

-

Reduce home market dependence

-

-

-

-

2

4

-

-

Technological competitive edge

7

-

-

-

-

11

-

3

Financial competitive advantage

-

-

-

-

-

-

-

-

Marketing competitive advantage

-

-

-

-

-

-

-

3

Exclusive info on foreign markets

-

7

-

1

7

-

-

7

Potential for extra growth

6

3

-

6

1

2

1

-

Potential for extra profits

-

5

-

7

1

3

6

3

Potential for extra sales

-

2

NA

-

-

1

-

-

Favourable foreign exchange rates

-

-

-

7

5

-

3

-

Unique product qualities

7

-

-

-

9

3

-

-

Government export incentives

4

-

-

-

15

7

2

-

Orders from trade fairs/missions

-

-

-

-

-

14

-

-

Unsolicited orders from abroad

2

10

NA

12

6

13

7

2

Saturation of domestic market

1

1

NA

9

14

10

-

8

Stagnation of home sales/profits

-

-

3

17

11

-

6

Proximity to ports

-

10

Gaining prestige

-

4

-

Others

NA

NA, NA, NA, NA

4, 5, 7, 10, 18, 19

4, 10, 11

-

8

-

Table 2: Developing Countries’ Export Stimulation Findings

 

It is also instructive that the foremost ranked stimuli in these developing country studies are all proactive factors, specifically potential for extra sales, growth, or profits resulting from exporting; and access to exclusive information on foreign markets (see Weaver and Pak, 1990; Leonidou, 1995b; Jain and Kapoor, 1996). Karafakioglu and Harcar (1990, p.106), for example, remarked that ‘among non-exporting Turkish companies studied, the growth objectives come first, and security is the second important goal’. The foregoing puts into perspective the earlier-mentioned remarks by Bell and Young (1998) that non-US (including developing countries’) research is much less fixated with the notion that indigenous firms are reluctant exporters.

It will be interesting to explore the insights which empirical evidence from Nigerian SMEs would offer on this issue.

 

PRIMARY RESEARCH

In order to assess the proposition that export initiation among developing country firms is more likely to be stimulated by proactive than reactive factors, primary data was collected from a sample of Nigerian firms using the questionnaire and depth interview methods. The questionnaire survey and all but one of the interviews took place during the last quarter of 1996.

In all, some 226 which met pre-specified criteria[2] were targeted, through the drop and pick technique (Kinnear and Taylor, 1996). The latter involved an average of four visits per sampled firm, and was intended to improve on the poor response rates that largely characterise research in developing countries. A total of 112 questionnaires were returned, 78 of which were useable: an overall response rate of 52.4%, and a useable response rate of 41.2%. These came from the following key informants: 23 Chief Executive Officers (CEOs), 14 General Managers, 30 Marketing Managers, and 11 Export Managers. Conscious of the limitations of the key informant technique (Philips, 1981), second responses were collected from some five randomly selected firms. Further analysis of these five pairs of responses through paired sample t-tests validated this key informant approach. A sub-sample of 16 firms was selected for depth interviews, which were eventually conducted with CEOs and 5 Marketing Managers from 9 firms. The last of these interviews was held in February 1998.

 

ANALYSIS AND RESULTS

In order to understand the critical factors underlying the initial export decision, respondents were asked to rate a list of 24 export stimuli identified from the literature on a five-point scale, where 1 represents ‘not important’ and 5 ‘very important’. The overall mean scores, as contained in Table 3, show that to achieve economies of scale from exporting (4.25) was ranked first, followed by to make extra profit from exporting (4.17), to gain extra sales (4.15), possession of unique product (4.04), and to achieve export-led growth (4.01), in that order.

Stimulus Factors

Mean

High level of unsold stock/over production

3.48

Benefit of large scale economies

4.25

Existence of spare production capacity

3.97

Encouragement by external agents

3.83

Special interest in exporting by managers

3.30

Identification of better opportunities abroad

3.89

Starting of exporting by competitors

2.68

Intense competition in home market

3.28

Need to maintain sales of a seasonal product

3.34

Need to reduce dependence on home market

3.65

Having some competitive advantage in technology

3.90

Having some competitive advantage in finance

3.53

Having some competitive advantage in marketing

3.32

Having exclusive information on foreign markets

3.72

Having products with unique qualities

4.04

Possibility of extra export-led growth

4.01

Possibility of extra profits from exporting

4.17

Possibility of extra sales from exporting

4.15

Favourable naira exchange rate

3.96

Government export-related incentives

3.79

Receipt of orders from trade fair/missions

3.46

Receipt of unsolicited orders from abroad

3.03

Lack of growth in the domestic market

3.45

Decline in domestic sales/profits

3.41

Table 3: Initial Export Stimuli for Nigerian SMEs

It should be observed that all these five most ranked factors are of a proactive nature. They, indeed, fall within the internal-proactive quadrant of Albaum et al. (1989) export stimulation model; suggesting that initial stimuli for exporting originate from within the firm, and are proactive. The lowest mean scores on the other hand went to such reactive stimuli as export start by competitors, the receipt of unsolicited orders from abroad, and intense domestic competition. As Table 4 shows, statistically significant differences were found between the proactive and reactive groups of stimuli through paired sample t-tests.

 

 Pairs

Mean (n=76)

Standard Deviation

Significance

Internal-Proactive versus

Internal-Reactive

3.80 /

3.57

0.66 /

0.88

.036

Internal-Proactive versus

External-Proactive

3.80 /

3.69

0.65 /

0.78

.000

Internal-Proactive versus

External-Reactive

3.80 /

3.23

0.66 /

0.72

.037

Internal-Reactive versus

External-Proactive

3.55 /

3.69

0.87 /

0.78

.000

Internal-Reactive versus

External-Reactive

3.57 /

3.23

0.88 /

0.72

.000

External-Proactive versus

External-Reactive

3.69 /

3.23

0.78 /

0.73

.000

Table 4: Paired Categories of Initial Stimulus Factors

Further support was obtained through a factor analysis procedure. This explored the fundamental dimensions (or composite factors) underlying the 24 variables above, and found among them four factors of a proactive nature (growth aspirations, export opportunities search, exploitation of internal strengths, managerial interest) and only two (weak domestic demand, competitors’ activities) of a reactive nature – see Table 5. Details of the factor analysis solution are available in Appendix 1.

Factor (% of Variance Explained)

Loading

Alpha

FACTOR 1 Weak Domestic Demand (21.8%)

0.80

Over production

.81

Domestic market stagnation

.77

Reduced dependence

.70

Domestic market decline

.70

FACTOR 2 Growth Aspirations ( 12%)

0.80

Extra growth

.81

Extra profit

.77

Extra sale

.71

Scale economies

.62

Foreign market information

.55

FACTOR 3 Search for Export Opportunities (9.8%)

0.50

Orders from abroad

.78

Opportunities abroad

.62

FACTOR 4 Managerial Interest and Support (7.6%)

Manager’s Interest

0.80

FACTOR 5 Internal Strength (5.8%)

0.58

Technical advantage

.80

Financial advantage

.68

FACTOR 6 Undefined (5.5%)

0.52

Marketing advantage

.80

Seasonal demand

.69

FACTOR 7 Competitors’ Activities (4.7%)

0.43

Domestic competition

.78

Competitors’ start

.70

FACTOR 8 Government Export Incentives (4.5%)

0.62

Favourable exchange rate

.87

Export incentives

.50

Loadings of less than .50 are suppressed.
Table 5: Reliability Coefficients for Revealed Factors (additive scales)

Evidence obtained from the depth interviews would appear to illustrate the foregoing. This is because the initial motivations reported by the interviewed exporters (including a former exporter of processed cocoa) were essentially proactive: managerial interest, possession of unique product, and pursuit of export profits and external opportunities (or growth). The Chief Executive of a fairly active plastics exporting firm recalled being attracted by the ‘huge opportunities in the West Coast’, adding that he had always wanted to take the business further than his founder-father. It also emerged from this researcher’s discussion with an owner manager of fashion designing firm that she had a strong personal interest in exporting. Her exact words were, ‘I want to show the world that we are the best in African designs’. This last remark should be understood in the context of her firm’s leading status in Nigerian fashion designing market. The extent to which this interest in exporting was driven by the then stagnating Nigerian fashion market was, however, not ascertained.

 

DISCUSSIONS

The above findings add to the mounting evidence from developing country studies, which suggest a preponderance of proactive motivations for firms’ initial export venturing. It should be reiterated that this contrasts with the primacy of reactive stimuli (the receipt of unsolicited foreign export orders, need to utilise excess production capacity, and to dispose unsold stock occasioned by domestic market stagnation/shrinkage) in the developed countries’-dominated aggregate literature. Possible explanations for this divergence are now explored, as a prelude to some reflections on policy implications.

Scholars have long recognised the large domestic markets available to developed countries’ (particularly USA) firms as a major explanation for their observed reluctance to export (see Zafarullah et al., 1997; Bell and Young, 1998). The virtual absence of domestic markets of corresponding size in developing countries may, thus, partly explain the minimal impact of unsolicited foreign order and other reactive stimuli in the export initiation decision of their firms. It is instructive that even studies of firms from small developed (mainly Scandinavian) countries did not find the receipt of unsolicited foreign orders to be important in initiating exporting (see e.g. Bell, 1995).

Another reason why the receipt of unsolicited foreign order may not be as important in stimulating exporting in developing countries is that firms from such economies largely lack the kind of positive association or image (i.e. Country-of-origin effect) which their developed country counterparts enjoy. Being mostly small and medium scale firms, they are also unlikely to have developed by themselves, such reputation for quality and reliability that are necessary to attract foreign inquiries and orders. It certainly does not help that developing countries’ firms are poorly represented in major international trade fairs/exhibitions, and that such events are hardly held in these countries.

Related to the above is the fact that communication (telephone, surface mail) infrastructure in many developing countries does not yet operate at the standard, which would encourage and attract external export inquiries. It is not unusual to spend a considerable amount of time trying to get through by telephone to major business cities in the developing world, and sometimes not getting through at all[3]. Business directories, also, are neither widely available nor regularly updated. Given such inadequacy in marketing infrastructure, unsolicited foreign orders are likely to remain less important in the initial export stimulation of developing country firms.

Availability of excess production capacity is another stimulus factor that is considered highly important in the developed countries’-dominated aggregate literature, but not in the developing country findings. The explanation for this may lie in the relative size and resource differences between developed and developing country firms[4]. Since the average developed country firm is larger and better resourced than its counterpart in a developing country, they are more likely to have excess production capacity than their counterparts in developing countries (see Leonidou, 1995b). It would, indeed, appear that the ‘normal’ experience for many developing country firms is to operate below capacity owing to the absence of needed inputs and spare parts. This researcher actually found this to be the case among the Nigerian firms investigated[5] - corroborating a recent Wall Street Journal (1998) report, which puts the average capacity utilisation in Nigerian industries for 1997 at just above 30%.

In summary, it can be posited that the realities of the business environment, including relative lack of sizeable domestic market and resource-base, have combined to minimise the incidence of external-reactive stimuli in the export initiation process of developing countries’ firms. In the absence of such stimulation, the export initiation process of developing country firms appears to be characterised by largely proactive and entrepreneurial motivations. The policy and managerial implications of the foregoing are discussed in the next section.

 

POLICY AND MANAGERIAL IMPLICATIONS

The key policy issue highlighted by this paper is the need for makers of export promotion policies to recognise the differences in the nature of initial export stimulation between the developed and developing world. This applies to relevant policy makers at both supranational (such organisations as the IMF and UNCTAD) and national levels. Such realisation would obviate the tendency to base export promotion policies in developing countries on findings from developed countries’ studies.

Given the relative importance of internal-proactive stimuli in the export initiation process of developing country firms, policy makers should focus more on programmes that seek to improve SMEs internal competencies, including entrepreneurial and international orientation. This implies active encouragement for the acquisition and emergence (through training) of managers with proactive and supportive interest in exporting. It also implies appropriate assistance to enable developing country firms develop such requisite competencies (in product/process technology, networking, finance) that would enhance their ability to compete in chosen export market(s).

Developing country firms should be encouraged to imbibe the message that exporting benefits will largely be reaped by firms which, having acquired the right mix of resources, are determined to take themselves abroad. Those that insist on waiting for fortuitous foreign order or encouragement of some foreign intermediaries may have a longer wait they anticipated, or even wait forever! Appropriate references to, and involvement of, successful local exporters should serve as useful positive reinforcement of the above message.

Nothing that has been suggested above should be interpreted to mean that external or foreign-induced export initiation is unwelcome or undesirable for developing country firms. The contention is that existing conditions in developing countries have made such stimuli less influential than they are in developed countries. There is, however, no reason why the rate of unsolicited export enquiries/orders from foreign customers and intermediaries should not increase if significant changes are made in the relevant variables.

National governments and support agencies in the developing world are therefore urged, yet again, to make necessary improvements in communication infrastructure and the overall accessibility and visibility (awareness, reputation and image) of their firms. Specific measures which may be useful would include regular publication/updating and well targeted distribution of business directories, sponsorship of local firms to international trade fairs/exhibitions, funding of trade missions to key target markets, and effective use of the commercial attachés in country embassies abroad. Active support for, and collaboration with, relevant private sector organisations (e.g. industry organisations, national export associations, chambers of commerce) would be particularly crucial in achieving set objectives.

The overall image of developing countries’ firms (and the attractiveness of their products) will undoubtedly benefit if they are known to speedily adopt new technology and innovative processes. It, therefore, behoves all interested parties – national governments, private sector bodies, supranational organisations, the firms themselves) to take practical steps to assist in the acquisition of relevant enabling technologies by firms in developing countries. For example, such programmes as the EUREKA and BC Net which have proved useful to European SMEs in technology acquisition and co-operation (OECD, 1997) should be replicated in various regions of the developing world - under the aegis of such regional institutions as the African Development Bank (ADB), Economic Community of West African States (ECOWAS), Caribbean Community (CARICOM), and South Asian Association for Regional Co-operation (SAARC).

Regional institutions in the developing world should, indeed, play more active role in facilitating technology access to firms within their regions as well as boosting the international profile and visibility of such firms. More specifically, they should partly sponsor worthy firms from their region to major international trade fairs. They may help, also, by organising such international trade fairs annually in different cities within their region.

It remains to make the case for networking by, and among, developing countries’ firms. Given the relative low resource base (and average size) of such firms, active inter-firm collaborations and co-operative arrangements, at industry or national levels, may assist in facilitating access to relevant technologies and improving country (product) image and impact in target export markets. Firms should, thus, be encouraged to actively participate in relevant private sector organisations and to explore and develop links with potentially useful market actors – competitors, intermediaries, suppliers. Wherever possible, policy makers should reward such affiliations as the networking skills and links developed therefrom may yield relevant foreign contacts and customers.

 

CONCLUDING REMARKS

This paper represents the first attempt at comparing the nature of export stimulation in developed and developing countries. More research is needed to further understand the motivations of developing country firms, not only in initiating exporting but in continuing the internationalisation experience.

 

NOTES

[1] For a stimulated firm (more specifically, decision maker), the eventual decision to export or not can be facilitated or inhibited by factors associated with the decision maker, organisation and environment.

[1b] Countries like Cyprus, Greece, and Turkey have been referred to as ‘European LDCs’ (see Katsikeas and Piercy, 1993).

[2] The relevant population were Nigerian firms which (i) manufacture/export such products as textiles and garments, leather, foods, plastics and furniture – labour intensive, light manufactures suggested by the relevant literature as suitable platforms for export development; (ii) listed in the most recent editions of the NEPC and MAN’s directories; (iii) located in one of the three major Nigerian industrial cities, namely Lagos, Kano, and Aba; (iv) have a minimum annual turnover of five million naira – about $50,000; (v) or represent an unexpected success story.

[3] This researcher found this to be the case in Lagos, Nigeria, where an arson attack on the Ikeja Area Exchange in 1996 left businesses in that industrial hub without telephone services for over one year.

[4] One North American study recently defined the SME as including firms whose annual sales fall between US$1million and US$1billion! Another included firms that have from 17 to 1000 staff!

[5] One textiles firm involved in the depth interviews had only resumed operations after nearly one year of inactivity caused by plant breakdown and lack of material inputs. Also, many listed companies were found to be under lock and key, or open but inactive owing to the above and related reasons.

 

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APPENDIX 1: DETAILS OF FACTOR ANALYSIS SOLUTION

Given that this analysis seeks to uncover the underlying relationships between the 24 listed variables, the R-type approach was used in calculating the correlation matrix. List wise elimination of cases with missing values brought the size of analysis sample from 78 to 71 - a good enough (3:1) ratio of observations to variables (Hair et al., 1992). The principal component model was used as there exist empirical evidence that the subjective choice of procedure ultimately has little bearing on the results of an analysis (Stewart, 1981). Adopted also was the orthogonal rotational (varimax) method which, more than the oblique approach, meets the need of this analysis to obtain uncorrelated, simple factor structure (Floyd and Widaman, 1995).

The more interesting aspects of this analysis start with a consideration of the produced correlation matrix. This shows that 59 of the variables are related at .30 level or above, thus providing an initial indication of the appropriateness of the matrix for factoring (Stewart, 1981). The vast number of relationships (276) involved however limits the clarity with which these relationships can be understood. A principal component analysis makes things much clearer.

The decision on the number of factors to retain for examination and possible rotation was made based on multiple criteria. These include the roots criterion, scree test, number of significant factor loading per factor, and stability of factor solution across different factor analytic methods (see Hair et al., 1992; Stewart, 1981; Churchill, 1996). Eight factors were extracted based on the latent roots criterion - a solution which an examination of the scree plot and factor loadings appear to support, and which held up even when common factor analysis procedure was applied. These eight factors retained account for 71.7% of the variance: a fairly high index which suggests that the variables are sufficiently related to each other (Hair et al. (1992). The first, as anticipated accounts for the largest amount of variance (21.8%), and is general factor. The second factor takes care of another 12%, with remaining factors accounting for successively less amount of variance. Also, the amount of variance in each of the variables extracted by the eight factors taken together (communalites) are generally high. It should be indicated that about 60% of the variables have communalities of .70+, with only one variable (‘Oppabrod’) recording a relatively low figure of .53.

The unrotated component analysis factor matrix, gives an idea of the factor loading patterns. Given the size of the analysis sample (less than 100) and the number of variables, a factor loading is considered significant here only if it is .30 and above. It can be seen that the first factor, which is a general factor, has all but 3 variables loading significantly on it. The second factor also has 10 significant loadings. More specifically, Variables 1, 10, 11, 12 load significantly on Factors 1 and 2; Variables 5, 6 on Factors 1 and 5; Variables 14, 15 on Factors 1 and 3; Variables 21, 22 on Factors 2 and 6; Variables 7, 9, 13 on Factors 1, 3 and 5; Variable 18 on Factors 1,2,3 and 4; and so on. No variable loads on only one factor. This meets Widaman’s (1993) criterion on number of indicators per factor. Clearly, not much sense can be made out of this factor loading pattern. Varimax rotation was therefore undertaken to obtain a simpler and theoretically more meaningful factor pattern.

The result was that variables ‘overprod’, ‘domktstg’, ‘rehmktdp’, ‘domktdcl’, and ‘extagent’ load significantly on factor 1; variables ‘extrgrth’, ‘extrprft’, ‘extrsale’, ‘scaleeco’, and ‘fmktinfo’ load significantly on factor 2; variables ‘ordersf’, ‘oppabrod’, ‘pdtqlity’ load significantly on factor 3; variables ‘technadv’, ‘finadv’, and ‘ordersun’ load significantly on factor 4; variables ‘seasonal’ and ‘mktadv’ load significantly on factor 5; variable ‘mgrintrs’ and ‘sparecap’ load signifcantly on factor 6; variables ‘domcomp’ and ‘compstat’ load significantly on factor 7; and variables ‘favforex’ and ‘exptince’ on factor 8. A number of variables also have significant loadings on more than one factor.

It should be noted that for interpretation purposes, the minimum acceptable level of significance for a factor loading was increased to .50. This cut-off point reflects the occurrence of high loadings, as well as the need to ensure simple structure factor solution (Hair et al., 1992). Factor 1 therefore now has four significant loadings; five significant loadings for Factor 2; two for Factor 3; one for Factor 4; two for Factor 5; two for Factor 6; two for Factor 7; and two for Factor 8.

The four variables with significant loadings on Factor 1 (‘overprod’, ‘domktstg’, ‘rehmktdp’, and ‘domktdcl’) all suggest the stimulating effect of weak domestic market demand on firms’ export initiation decision. The significant loadings on Factor 2 are attributed to ‘extrgrth’, ‘extrprft’, ‘extrsale’, ‘scaleeco’ and ‘fmktinfo’ which capture firms’ growth aspirations. Factor 3 is characterised by two variables (‘ordersf’ and ‘oppabrod’) both of which capture deliberate search for export opportunities. Factor 4 is best characterised by ‘mgrintrs’, which underlines the stimulating effect of managerial interest and support on export initiation. The significant loading variables on Factor 5 are ‘technadv’ and ‘finadv’, both of which suggest the stimulating effect of firm’s internal strengths on export initiation. Two variables have significant loadings on Factor 6, namely ‘mktgadv’ and ‘seasonal’. While ‘seasonal’ suggest that firms initiate exporting to meet seasonal flux in demand (a reactive posture), ‘mktgadv’ suggests export initiation motivated by firms’ need to exploit their marketing competence (a proactive posture). No meaningful interpretation has been found for these irreconcilable variables. Factor 6 is thus considered undefined. The two variables with significant loadings on Factor 7 (‘domcomp’ and ‘compstat’) both capture the impact of competitors’ activities on export initiation decision. Factor 8 clearly represents government export incentives, as indicated by the two variables which load significantly on it (‘favforex’ and ‘exptince’).

In order to evaluate the reliability of these revealed factors, the Cronbach (1951) alpha coefficient was applied on additive scales constructed therefrom. As can be seen from Table 5, all but one of these scales meet Nunally’s (1967) reliability criterion for exploratory research, that is, 0.5 or greater.

In summary, the composite factors which underlie the export initiation decision of Nigerian firms have been identified as weak domestic demand, growth aspirations, search for export opportunities, need to exploit internal strengths, managerial interest and support, response to competitors’ activities, and government export incentives. A cursory look would show that all but two of these factors (weak domestic demand and response to competitors’ activities) suggest proactive motivations. It is therefore safe to say that proactive considerations weigh more among factors influencing the export initiation decision of Nigerian factors than reactive factors.