Centre for Marketing

A RELATIONAL EXPLANATION OFEXPORT MARKETING PERFORMANCE

Chris StylesTim Ambler

PAN’AGRA Working PaperNo. 96-901

February 1996

Chris Styles is a doctoral candidate at London Business School. Tim Ambler is the GrandMetropolitan Senior Research Fellow at London Business School. The authors wish

to thank the UK Department of Trade and Industry for their continuing support of the Pan’agraresearch programme at London Business School.

London Business School, Regent's Park, London NW1 4SA, U.K.Tel: +44 (0)171 262-5050 Fax: +44 (0)171 724-1145

TAMBLER@lbs.ac.uk http://www.lbs.ac.uk

© Chris Styles and Tim Ambler

�

A Relational Explanation of Export Marketing Performance

Abstract

This paper tests a relational model of export performance side-by-side a more traditional“marketing mix” model. The relational model is based on Johanson and Vahlne’s (1977)behavioural theory of internationalisation and uses additional constructs from the emergingrelationship marketing paradigm. The marketing mix model is based on previous exportperformance studies and “neo-classical” marketing theory. The two models are tested using asample of 202 export ventures originating from SME’s in the UK. The results suggest that therelational approach is a valid theoretical perspective in the export marketing context.Implications for export management and future research are discussed.

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1. Introduction

This paper presents a relational explanation of export performance as an alternative to themarketing mix approaches used previously (e.g. Aaby and Slater, 1989; Madsen, 1989;Cavusgil and Zou, 1994). The idea of relational factors being important to exportperformance has recently been introduced by Styles and Ambler (1994) through their “hybrid”model of export performance. However, the research reported here is the first study toempirically test a relational model beside a marketing mix model.

The paper is divided into six sections. Section two summarises the export performanceliterature and discusses relational theories of export behaviour. The differences between thetwo theoretical approaches are highlighted. Section three presents the two alternative modelsof export performance, in their operational forms, suggested by these two literature streams.Section four outlines the methodology used in this study to test the two models. Section fivediscusses the results and section six summarises the conclusions of the study and suggestsareas for further work.

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2. Literature review

2.1 Export performance literature

Research into export marketing performance can be traced back to Tookey’s (1964) researchinto British clothing manufacturers. Research during this 30 year period has looked at a rangeof variables linked to performance, including those associated with the firm itself, its strategyand the export market environment. These are summarised in Table 1 below.

Table 1: Variables influencing export performance

Independent variable Association withexport performance

Examples of relevant literature

EnvironmentExport market attractiveness + Madsen, 1989; Naidu and Prasad, 1994Infrastructure + Green, 1982Government barriers - McGuinness and Little, 1981; Rabino, 1980

FirmCommitment to exporting + Cavusgil and Kirpalani, 1993; Cavusgil and

Zou, 1994; Madsen, 1989; Naidu and Prasad,1994; Amine and Cavusgil, 1986; Koh, 1991

Planning Cavusgil, 1984, Christensen et. al, 1987; Reid,1986

Market knowledge/information + Tookey, 1964; Kirpalani and MacIntosh, 1980;Amine and Cavusgil, 1986

International experience + Cavusgil and Zou, 1994; Naidu and Prasad,1994; Amine and Cavusgil, 1986

Quality + Burton and Schlegelmilch, 1987; Christensenet. al., 1987

Resources/size mixed Bilkey and Tesar, 1977; Cooper andKleinschmidt, 1985; Reid, 1982; Tookey,1964; Naidu and Prasad, 1994

StrategyMarket segmentation + Cooper and Kleinschmidt, 1985Product adaption mixed Cavusgil and Zou, 1994; Christensen et al.,

1987; Kirpalani and MacIntosh, 1980; Koh,1991; Amine and Cavusgil, 1986; Tookey,1964

Price premium vs. domestic + profit/- sales Bilkey, 1982; Kahn, 1978; Koh, 1991Promotion + Kirpalani and MacIntosh, 1980; Amine and

Cavusgil, 1986Channel strategy/support + Bilkey, 1982; Cavusgil and Zou, 1994; Rosson

and Ford, 1982; Yaprak, 1985; Koh, 1991

In addition, review articles (Bilkey, 1978; Aaby and Slater, 1989; Ford and Leonidou, 1991)and meta-analytical techniques (Madsen, 1987; Chetty and Hamilton, 1993) have combinedstudies to develop and validate more general sets of guidelines and macro models of exportsuccess. However, the few studies which have attempted to test comprehensive models (vs.

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selected variables) empirically include Cooper and Kleinschmidt (1985), Madsen (1989), Koh(1991), and Cavusgil and Zou (1994). These studies are summarised in Table 2.

Table 2: Empirically tested models of export performance

Study Industry Sample size Country Independentvariables

Datacollectionmethod

Analysis

Cooper andKleinschmidt(1985)

Electronics 142 firms Canada - firm

- strategy

- market

Personalinterviews

ANOVA

Madsen(1989)

Manufacturers 134 venturesfrom 82 firms

Denmark - firm

- strategy

- market

Mail Regression

Koh (1991) Industrial

manufacturers

233 firms USA - firm

- strategy

Mail Chi-square

Cavusgil andZou, 1994

Manufacturers 202 ventures

from 79 firms

USA - firm

- product

- market

- strategy

Personalinterviews

Pathanalysis

2.2 The Relational Paradigm

By focusing on the variables summarised in Table 1 and Table 2, the research cited above canbe considered to have been primarily influenced by the traditional marketing mix, or whatCarman (1980) describes as the “neo-classical” marketing paradigm, whereby the firmdevelops a marketing strategy (via the marketing mix) as a rational response to objectiveinformation about the market environment. The central unit of analysis is a set of transactionse.g. sales (Bagozzi, 1975). This paradigm has tended to dominate international marketing asit is the paradigm on which most general marketing management theory is based (e.g. Kotler,1972; 1994), a situation that represents “a legacy of the discipline’s growth as an off shoot ofeconomics” (Parvatiyar and Sheth, 1994, p.1).

An alternative paradigm has been developing over the past decade that recognises “...theimportance of managing...buyer-seller relationships as strategic assets” (Webster, 1992, p.7).This body of work has its roots in Arndt’s (1983) political economy paradigm, which wasinfluential in changing marketing’s perspective from transactions to relationships by focusingon issues of power and conflict. This stream of literature has been brought together by Wilsonand Moller (1991) and Ambler (1994) under the Relational Paradigm (RP), also referred to inthe literature as relationship marketing (Gummesson, 1993; Gronroos, 1990; Morgan andHunt, 1994). The RP views the market as a network of “value laden relationships” (Kotler,1991), with each network consisting of relationships between the brand (or firm), customers atany level in the chain, and other influence groups such as advertising and market researchagencies (Styles and Ambler, 1995). Central is the notion that cooperation is morefundamental to marketing than competition.

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Turnbull (1987) contrasts the two paradigms:

The marketing mix approach...postulates that effective marketing consists ofthe process of analysis, planning, implementation and control...(whereasunder the relational, interaction approach)...aspects of product development,product quality, delivery and service criteria, price and other factors are allsubject in many cases to a process of negotiation and adaption...(which)...takes place through a complex interaction process.

The RP includes the IMP group interaction model (Hakanson, 1982; Turnbull and Valla,1985), channel relationship models (Anderson and Narus, 1984, 1990; Anderson and Weitz,1989; Heide and John, 1988), and models of buyer and seller relationships (Dwyer, Shur andOh, 1987; Frazier, Spekman and O’Neil, 1990). These models have sought to explainrelationship processes and outcomes, rather than business performance.

2.3 Relational approaches to exporting and associated findings

Johanson and Vahlne (1977), through their knowledge-based theory of internationalisationtook a behavioural, relationship-oriented approach to exporting. Under their theory, a firmbegins the exporting process by forming relationships that will deliver “experientialknowledge” about a market (i.e. knowledge gained through personal interactions in the localmarket), and then commits resources in accordance with the degree of experiential knowledgeit progressively gains through those relationships.

The emphasis on information through experience has two key implications for the practice ofexport marketing which contrast sharply with previous approaches. First, it affects the waydecisions are made - exporting is driven by the sequential development of relationships.Therefore, the decision to export is followed by interactions with key network members andthe appointment of a distributor, with marketing mix decisions taking place at the final stageand as a consequence of on-going interactions (Johanson and Vahlne, 1977; Turnbull, 1987;Styles and Ambler, 1994). The more traditional approach (e.g. Root, 1987; Kotler, 1994),reverses this process. Firms are assumed to make rationally optimising export decisions basedon the comprehensive collection and analysis of market research and other data. Thus, thedecision to export is followed by objective data collection and market analysis. Decisions onthe market and the marketing mix are then made. The appointment of a distributor is largely amatter of implementation.

Second, the relational approach suggests that exporters rely more heavily on the informationgathered via interactions with network members (experiential data) than formal consumerresearch, secondary market and other “objective” data (Johanson and Vahlne, 1977;Wiederscheim-Paul, Olson and Welch, 1978).

Johanson and Vahlne (1977) explain the importance of experiential information:

...experiential knowledge is the critical kind of knowledge...because it is not aseasily acquired as objective knowledge. In domestic operations we can to a largeextent rely on lifelong basic experiences to which we can add the specificexperiences of individuals, organizations and markets; in foreign operations,however, we have no such basic experiential knowledge to start with. (p.29)

Styles and Ambler (1994) found support for relational approaches to export marketing in threeareas:

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Success factors: Second to product quality, and other general competence measures,managers attributed their success in exporting to relational factors such as market visits,frequent two-way communication with distributors, word-of-mouth between customers, andmaintaining good relations with distributors. These were deemed more important thanmarketing mix factors such as pricing, advertising and promotions.

Decision-making: The results suggested that successful exporters appoint their distributorsbefore deciding key elements of the marketing mix (aside from product). This implied jointdecision-making with distributors on marketing plans vs. the neo-classical approach (e.g.Root, 1987; Kotler, 1994) of formulating marketing plans in isolation then appointingdistributors to help execute these pre-set plans. This finding is in line with domestic channelresearch that suggests joint decision-making is associated with better performance (Hunt andNevin, 1974; Pearson and Monoky, 1976).

Sources of information: The most valued information was experiential information gatheredvia discussions and visits (interactions) with key network members such as wholesalers,retailers, importers and distributors. Traditional marketing data such as consumer researchand secondary market data was rated a distant second in value. This is consistent withJohanson and Vahlne (1977) and studies which have found that formal market research is notlinked to export performance (e.g. Madsen, 1989).

3. Alternative models of export performance“An emerging consensus in structural equations modelling is that researchers should comparerival models, not just test a proposed model” (Morgan and Hunt, 1994, p.27). Following thisthinking, our study tests two alternative models of export performance.

Relational model: Figure 1 represents a proposed relational model of export performance.Its basic premise is that two processes have a direct impact on export performance: i) thedevelopment of a firm’s commitment to the export market; and ii) the development of thefirm’s commitment to the relationship with its foreign distributor. In terms of marketcommitment, this model uses Johanson and Vahlne’s (1977) theory of internationalisation inwhich exporting begins with the acquisition of experiential knowledge through relationships inthe local market e.g. through the exporter/distributor relationship. This theory suggests thathigher levels of experiential data collection (e.g. market visits, distributor discussions) leads tohigher levels of market knowledge (H1) as well as a more intense relationship with thedistributor (H4) i.e. greater contact through co-operation, joint decision-making.. High levelsof market knowledge in turn leads to higher commitment by the exporting firm to the exportmarket (H2). Finally, Johanson and Vahlne (1977) contend that market commitmentdecisions (e.g. allocation of resources) have a direct impact on the “current activities and theirconsequences”, including the venture’s business performance. Thus, a positive causal pathrelationship is hypothesised between the firm’s commitment to the venture and businessperformance (H3).

The model then expands upon Johanson and Vahlne’s (1977) work by drawing from the modelof buyer-seller relationships developed by Dwyer et. al. (1987). This model is based on thesocial psychologist Scanzoni’s (1979) conceptualisation of personal relationships developingthrough a series of sequential stages. It is used here with the exporter as the “seller” and thelocal distributor as the “buyer”. A similar model of relationship development from Levinger(1974), also a social psychologist, will be used to supplement this framework.

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The first stage in the development of the buyer-seller relationship, awareness, occurs whentwo parties first become aware of each other as potential exchange partners (Dwyer et. al.,1987). This is facilitated through situational proximity. In the exporting context, this relatesto the exporter becoming aware of a potential distributor(s) during market visits, or vice versa.

The second stage, exploration, involves initial contact and a “trial phase” in relationalexchange. It is characterised by an initial attraction by each party based on an assessment ofthe reward-cost outcome of the relationship. During this stage the two parties interact witheach other and norms and expectations are developed (Dwyer et. al, 1987). A key part of thisphase is each party sharing information about themselves with the other (Levinger, 1974).This helps them assess whether the relationship should continue.

Levinger (1974), refers to the initial meeting between two parties at the beginning of arelationship as either a “transitory” first meeting (e.g. through social network occasions suchas a party) or as a “segmental role relation”, whereby the two parties meet as a result ofcarrying out their respective roles (e.g. a bus driver meets a passenger). At this level the twoparties transmit information which helps them decide whether or not to go forward with therelationship (Levinger, 1974). In exporting, this level relates to initial contact betweenexporters and distributors. Recent research (Styles, 1995), and anecdotal evidence fromexporters, suggests that initial contacts with distributors can also be classified in terms ofwhether they came about because of transitory meetings (e.g. meetings through personalcontacts, friends) or as a result of role relations (e.g. distributor contacts exporter to place anorder, exporter advertises for a distributor). These first contacts with potential distributorsoften come about during the firm’s experiential data gathering efforts as distributors areviewed as key facilitators of market knowledge development. Through these initialinteractions, the parties will decide whether the relationship (and venture) should continue.

Thus, the relational model in Figure 2 hypothesises that as the exporting firm increases itscommitment to the venture, it will want to intensify its relationship with its distributor (H5)because: i) it will want to use this relationship as a part of its experiential data gathering; ii) itneeds to assess whether the relationship with a specific distributor should continue; and iii) itwill want to use the substantial market knowledge of the distributor as an input to venturemarketing decisions. The key construct relating to this phase is relationship intensity, definedas the closeness of the working relationship between the exporter and local distributor.Indicators of this construct are levels of communication, cooperation and joint decision-making with respect to key marketing activities. Through these activities, norms andexpectations will develop and information about each party will be exchanged.

The processes involved in the expansion stage “enable each party to gauge and test the goalcompatibility, integrity, and performance of the other” (Dwyer et. al., 1987, p.18). Thus, asthe relationship intensifies, the parties become closer and their relationship moves into thethird stage of development, the expansion stage. In this stage the parties assess the reward-cost outcome of the relationship based on their interaction experiences and develop a level ofsatisfaction with each other’s performance. By assessing integrity, a level of trust developsand the parties become more interdependent. Applying this theory to the exporter/distributorrelationship, the relational model of export performance hypothesises that as the relationshipbetween the exporter and distributor intensifies and the parties become more interdependent,the relationship is viewed by the exporter more favourably. Based on the terminology used byWish (1976), the key construct for this stage is relationship valence, defined as the extent towhich the relationship is viewed positively. The key indicators of this construct are

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satisfaction with the distributor and the level of trust the exporter has in the relationship withthe distributor. The model hypothesises that the greater the relationship intensity, the greaterwill be the relationship valence (H6).

The fourth stage of the relationship development framework is commitment. In this stagethere is an “implicit or explicit pledge of relational continuity between the exchange partners”(Dwyer et. al., 1987, p.19). Commitment follows positive assessments of the relationship beach party. It is characterised by high levels of effort being put into the relationship,durability, and consistency with which the “inputs” are made to the relationship. In a similarconceptualisation, Levinger (1974) proposes a mutuality stage, in which self-disclosure takesplace. This refers to the two parties sharing increasingly important and intimate informationabout themselves through more intense interaction, with the aim of developing a strongerrelationship that ultimately leads to a long-term commitment between them. At this level thetwo parties become more intimate and empathy develops.

Thus, the relational model hypothesises that the greater the relationship valence (evaluation ofthe relationship by the exporter), the greater will be the relationship commitment of theexporter (H8). Morgan and Hunt’s (1994) definition of commitment is used here: “anexchange partner (in this case the exporter) believing that an ongoing relationship with anotheris so important as to warrant maximum efforts at maintaining it; that is, the committed partybelieves the relationship is worth working on to ensure that it endures indefinitely” (p.23).

To complete the relational model we examine the links between the relationship developmentprocess and business performance. The model hypothesises that there is a positive effect ofboth relationship valence (H7) and relationship commitment (H9) on business performance.In terms of relationship valence, a more positive evaluation of the distributor would indicatehigher levels of distributor performance (distribution etc.). Further, the valence constructincluded aspects of trust, whereby the exporter is able to rely on the distributor to take actionsthat would be in their interests and to the benefit of the venture. In terms of the effect ofcommitment on performance, the channels literature in particular (e.g. Kalwani andNarakesari, 1995) report an increasing trend towards more stable, cooperative, long termrelationships between members of the supply chain that have a positive impact on performancefor both suppliers and manufacturers. This results from increasing investment and closer tiesaimed at improving the efficiency and effectiveness of the distribution system. In addition,there is support for this hypothesis from social exchange theory (Thibaut and Kelley, 1959),which suggests that goal achievement can be enhanced through cooperative relationships(Wichman, 1970; Caldwell, 1976).

Marketing mix model: Figure 2 represents a model of export performance suggested by theneo-classical, “marketing mix” stream of export performance literature reviewed in section2.1. This model focuses on formal planning and objective data collection, adapting themarketing mix strategy for the specific export market, and overcoming local industry barriers.Thus, it closely follows the approach taken by Cavusgil and Zou (1994), Maden (1989) andother studies featured in Table 2.

Specifically, this model hypothesises a positive causal path between both planning (H1) andadaption of the marketing mix (H5), and business performance, and a negative causal pathbetween the environmental barriers of competitive intensity (H6), poor local marketinfrastructure (H7) and import restrictions (H8), and business performance. Further, positivecausal paths between both planning (H2) and the collection of objective data (H4), and

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marketing mix adaption are hypothesised. The hypothesis is a positive relationship betweenplanning and the collection (H3).

Figure 1: Relational model of export performance (hypotheses indicated)

Figure 2: Marketing mix model of export performance (hypotheses indicated)

Export venturebusiness

performance

Experientialdata collection

Marketknowledge

Firmcommitment

Relationshipintensity

Relationshipvalence

Relationshipcommitment

Development of market commitment

Development of relationship commitment

H1 (+) H2 (+)

H3 (+)

H4 (+) H5 (+)

H6 (+) H8 (+)

H7 (+)

H9 (+)

9

Export venturebusiness

performance

Formal planning

Objectivedata collection

Marketing mixadaption

Importrestrictions

Competitiveintensity

Poorinfrastructure

H2 (+)

H4 (+)

H1 (+)

H5 (+)

H6 (-)

H7 (-)

H8 (-)

H3 (+)

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4. Methodology

4.1 Sample

The sample consists of 202 export “ventures” (a single product or product line exported to asingle foreign market). These ventures come from 202 separate firms identified by theregional exporter data base maintained by the UK Department of Trade and Industry (DTI).All firms included in the sample are SME1 manufacturers (see profiles in Table 3 below).

Table 3: Sample profileFirm size (no. employees): 10 or less 21%

11 - 50 39%

51 - 100 18%

101 - 200 13%

201 - 499 9%

Venture product type: Consumer 38%

Industrial 62%

Venture market: Western Europe 43%

Eastern Europe 3%

Middle East 5%

Asia 27%

Australia/New Zealand 5%

North America 20%

South America 3%

Africa 4%

4.2 ProcedureExport managers from 580 randomly selected firms listed on the UK Department of Trade andIndustry (DTI) exporter data base were contacted by telephone and then sent questionnaires.Respondents were asked to complete the questionnaire about the first five years of an exportventure that they have been closely involved in. Inducements for participation included a freecopy of the research results. A reminder telephone call was made a week after mailing. Of the580 questionnaires sent, 202 were returned after a three week period, giving a response rate of35%. Short telephone interviews were then conducted with a randomly selected sample of 60non-respondents to confirm that there was no systematic bias in the characteristics of our finalsample.

4.3 Measurement

The questionnaire contained measures used in previous export performance and channelrelationship studies, as well as new measures based on qualitative interviews with exportmanagers. The questionnaire was developed via a four step process: i) using previous studies,a draft questionnaire was designed and cross-checked with the authors’ own experience asexport managers; ii) the draft questionnaire was circulated to selected experts within the UKDTI involved in export promotion; iii) the amended questionnaire was pre-piloted amongst 12

1 SME’s are defined as firms with less than 500 employees (as per OECD (1994) definition).

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export managers via in-depth interviews; and iv) the final questionnaire was piloted amongst asmall sub-sample (n=25) of contacts taken from the DTI data base.

Factor analysis and co-efficient alpha have been used to confirm the unidimensionality andreliability of the measurement scales for each multi-item indicator, as recommended byAnderson and Gerbing (1982). These measures are summarised in Table 4. Note that forsome of the constructs (e.g. relationship intensity, relationship valence), measures have beencombined in new ways, while others (e.g. market knowledge) consisted of new measures. Forthese constructs co-efficient alphas of 0.7 were deemed acceptable under Nunnally’s (1978)guidelines.

4.4 ResultsThe hypothesised path for each model was were tested using LISREL8 (Joreskog andSorbom, 1993) with maximum likelihood estimation. Covariance matrices were used in theanalysis. Overall fit, explanatory power and the significance of the paths were considered.Table 5 shows fit indices for two models using the Chi-square test (Joreskog and Sorbom,1993), Bentler’s (1990) comparative fit index (1990), and the root mean square error ofapproximation (RMSEA). The RMSEA measures a lack of fit and takes parsimony intoconsideration by assessing the discrepancy per degree of freedom between the populationcovariance matrix and the fitted matrix i.e. it penalises for overfitting (Steiger, 1990). The R-square for the dependent variable of business performance is also given. Table 6 shows thepath estimates and t-vales for each model.

Relational model: The fit statistics in Table 5 show that the relational model provides a goodfit to the data (CFI=0.90; RMSEA=0.066). In terms of explanatory power, the three variablesof firm commitment, relationship valence and relationship commitment produced and R-squareof 0.28 for the dependent variable of business performance. In addition, Table 6 shows thateight out of the nine hypothesised paths in the relational model were significant (p<0.05). Theonly hypothesis not supported was the path between relationship valence and performance.

Marketing mix model: Table 5 indicates that the marketing mix model also provides a goodfit to the data (CFI=0.95; RMSEA=0.038) - marginally better than the relational model. Interms of explanatory power, however, the variables of planning, marketing mix adaption,competitive intensity, import restrictions and poor infrastructure produced an R-square of 0.16for the dependent variable of business performance - almost half the R-square of the threeindependent variables in the relational model. Further, Table 6 shows that only four of theeight hypothesised paths were significant (p<0.05). In terms of direct affects on performance,there was a significant positive path between planning and business performance, and asignificant negative path between competitive intensity and performance.

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5. Discussion

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The objective of this study was to compare rival models of export performance. The first modelwas relational. It was based on Johanson and Vahlne’s (1977) behavioural theory of exportbehaviour and expanded using the buyer-seller relationship framework of Dwyer et. al. (1987).This model was influenced by theories of personal relationships developed in social psychology(Scanzoni, 1979; Levinger, 1974; Thibaut and Kelley, 1959). The emphasis was on experientialdata collection and the formation and maintenance of long term relationships with localdistributors.

Table 4: Measures and Reliability

Relational model constructs:

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1. Experiential data collection (formative) Data collection through market visitsData collection through discussions with retailers/ wholesalersData collection through disccusions with distributor

2. Market knowledge (alpha=0.91) Culture and customsSocial valuesGeneral way people liveUsers/consumers of productCompetitorsCountry overall

3. Market commitment (alpha=0.78) Management commitment to ventureExtent of formal planningResource allocation to ventureResource allocation to exporting

4. Relationship intensity (alpha=0.75) Cooperation (sum of 8 areas of cooperation)Joint decision-making (sum of 13 areas of cooperation)[Communication was removed by the factor analysis]

5. Relationship valence (alpha=0.78) Trust (3 items)Satisfaction (2 items)

6. Relationship commitment (alpha=0.86) Commitment to relationshipIntention to maintain relationship indefinitelyDeserves maximum effort to maintain

Marketing mix model constructs:

1. Marketing mix adaption (alpha=0.85) Target consumerProductSales promotionAdvertising copyTypes of media

2. Planning (alpha=0.73) Extent of formal planningResource allocation to ventureResource allocation to exporting

3. Competitive intensity (alpha=0.79) Number of competitorsExtent of price competitionIntensity of rivalry

4. Local market infrastructure (alpha=0.89) Advertising agenciesTransportationPolitical stabilityAffluence of consumersDistribution systemMediaCommunicationsOverall infrastructure

5. Import restrictions (alpha=0.93) Import restrictions in generalCategory specific import restrictions

6. Objective data collection (formative) Data collection through published informationData collection through marketing research

Export venture business performance:

Business performance (alpha=0.71) First five years sales growthFirst five years profitabilityPerception of own successView on competitors perception of success

Table 5: Model fit

Relational model Marketing mix model

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Chi-square 588 399

df 314 309

CFI* 0.90 0.95

RMSEA** 0.066 0.038

R-square (Performance) 0.28 0.16

* CFI values close to 1 indicate a good fit** The lower the RMSEA value, the “better” the model is considered. Values below 0.10 suggest adequate fitto the data.

Table 6: Model paths

Path Estimate T-value Hypothesiseddirection

Result

Relational model:

H1 Experiential data → Market knowledge 0.53* 6.50 + +

H2 Market knowledge → Firm commitment 0.50* 6.09 + +

H3 Firm commitment → Performance 0.21* 2.88 + +

H4 Experiential data → Intensity 0.34* 3.92 + +

H5 Firm commitment → Intensity 0.26* 3.15 + +

H6 Intensity → Valence 0.35* 4.22 + +

H7 Valence → Performance 0.19 1.71 + ns

H8 Valence → Relationship commitment 0.70* 7.65 + +

H9 Relationship commitment → Performance 0.31* 2.75 + +

Marketing mix model:

H1 Planning → Performance 0.37* 3.95 + +

H2 Planning → Mix adaption 0.32* 3.48 + +

H3 Planning → Objective data 0.28* 3.28 + +

H4 Objective data → Mix adaption 0.14 1.63 + ns

H5 Mix adaption → Performance -0.11 -1.23 + ns

H6 Import restrictions → Performance -0.10 -1.24 - ns

H7 Competitive intensity → Performance -0.19* -2.19 - -

H8 Infrastructure → Performance 0.08 0.91 - ns

* p<0.05; ns = not significant

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The alternative model was based on the marketing mix approach which has influenced much ofthe export performance research of the past (e.g. Cooper and Kleinschmidt, 1985; Madsen,1979; Cavusgil and Zou, 1994). The emphasis of this model was on using formal planning andobjective secondary and primary data collection to adapt the marketing mix to the local exportenvironment. This model also considered local industry constraints such as competitiveintensity, import restrictions and poor infrastructure.

To evaluate each model we considered overall fit, explanatory power and the significance ofthe causal paths. In terms of fit, both models seemed to provide adequate fit to the data.However, in terms of both predictive power and causal paths, the relational model performedbetter than the marketing mix model (R-square on performance of 0.28 vs. 0.16; seven out ofeight paths significant vs. four out of eight paths). Thus, in terms of improving ourunderstanding of export performance, it seems that relational model provides us with a validapproach.

In addition, this research adds to the debate in international marketing which has focused onwhether a firm’s domestic marketing mix should be adapted for a foreign market or whether astandardised approach should be taken (Douglas and Craig, 1992). Levitt (1983), forexample, supports the notion of global standardisation:

the global corporation operates with resolute constancy - at low relative costas if the entire world (or major regions of it) were a single entity; it sells thesame things in the same way everywhere (p.92)

Others, however, point out the problems with this standardised approach:

many mistakes...have been made because managers have failed to recall thatbuyers differ from country to country. Buyers, influenced by local economicconstraints and by local values, attitudes, and tastes, differ in what they buy,why they buy, how they buy, when the buy, where they buy, and who makes thepurchasing decision (Ricks, 1983, pp.6-7)

Our result in the strategic marketing model with respect to marketing mix adaption andperformance does not seem to support either position. A significant positive path would havegiven support to the adaption hypothesis, while a significant negative path would have givensupport for the standardisation hypothesis. However, the path in our study was non-significant in either direction. In a sense this result is not surprising given the mixed resultsobtained in past studies with respect to specific marketing mix elements such as productadaption: Cavusgil and Zou (1994) found a positive link between product adaption andperformance while Christensen et. al. (1987) found standardisation to be more successful.One conclusion could be that adaption is a venture specific issue - certain elements of themarketing mix should be adapted in some circumstances but not in others.

6. Conclusions

This study represents a discontinuous step forward in export performance theory. Thepositive results for the relational model suggest the emphasis should shift from the traditionalfirm, marketing mix and environmental variables towards relational variables. Thus, theemerging literature in relationship marketing and its use of theories from social psychology

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have much to add to theory development in exporting. Specific conclusions for exportpractice and future research are as follows:

6.1 Implications for export management

1. The formation and maintenance of long term relationships with local distributors shouldbe a key priority for SME exporters. The relational model clearly demonstrates that theexporter/distributor relationship is critical to business performance. Export managersshould therefore focus on relational processes, and include these in marketing plans. Inparticular, the three key elements of relationship formation, relationship development, andrelationship commitment need attention:

• Relationship formation: In order to meet with potential distributors, exportersneed to put themselves in proximity with likely candidates. This means targetedmarket visits, attending trade shows etc. Managers should also draw on their owncontacts and personal networks.

• Relationship development: Exporters should take a partnership view ofinternational business ventures. They should encourage the exchange ofinformation between themselves and their local distributor and intensify theirrelationship through co-operation and joint decision-making. Marketing plansshould be outputs of this process. Further, the two parties can use this process toassess whether their relationship should be an ongoing one. Given the importanceof the relationship to performance, exporters and distributors need to give as muchconsideration to the issue of whether the relationship should end as they do towhether it should continue.

• Relationship commitment: The ultimate goal should be to form a mutuallybeneficial, long-term relationship with the most suitable distributor. When this isachieved, the two partners should in many respects be operating as one firm, withthe success of the venture being their common goal.

2. The emphasis for data gathering should be on experiential data rather than objective data.This does not suggest objective data is unimportant, but rather it is supplementary to thericher, more critical information gained through one’s own experience. Thus, the focusshould be on market visits during which managers meet and talk with retailers,wholesalers, potential distributors, advertising agencies etc. The necessary review ofobjective data (e.g. secondary data on an export market) which precedes market visitsshould be directed at making experiential data collection more efficient and effective,rather than viewed as providing valuable data in itself. Further, subsequent objective datacollection, such as consumer market research, should be driven by the insights collectedduring these market visits.

3. The choice of export managers should be driven by the need to find people who not onlypossess analytical and general marketing skills, but who also have strong relational skillsand preferably an extensive personal network.

4. Our results suggest that marketing mix adaption should not necessarily be a focal point inmarketing planning i.e. there was no significant relationship between marketing mixadaption and performance. This suggests that adapting various aspects of the marketingmix may be appropriate in some circumstances but not in others. An exporter’s ownexperiential knowledge of the market combined with input from the distributor and other

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local contacts can be used to determine in which circumstances, if at all, adaption ofspecific marketing mix elements is needed.

6.2 Future research

Support for relational theories of exporting suggest further research could focus on threeareas:

1. Further application of relational theories from social psychology can be used to improveour understanding of exporter/distributor relationships. This approach has already beenused in domestic channel relationship research (e.g. Anderson and Narus, 1990), but shouldbe expanded to cover international marketing situations. The key role that foreigndistributors play in generating local knowledge would provide an interesting point ofdifferentiation in theory development. The unit of analysis can be both the firm andindividual manager level. In particular, issues of attraction, co-operation, the effects ofmutual dependence, and their link to business performance should be explored. This wouldhelp us move towards the development of a comprehensive relational framework of exportmanagement.

2. Research from the distributor’s perspective is also needed. The current project focused onbusiness performance from the exporter (manufacturer) perspective. Future researchshould look at the drivers of distributors’ business performance as well as the relationalprocesses from this side of the dyadic relationship. This research could provide exporterswith a better understanding of distributor needs to help them attract the best distributors.

3. Experiential data collection has emerged as a key part of export management. While agreat deal of attention has been given to objective data collection, particularly marketresearch, there are few guidelines on how best to collect experiential data. Topics such aseffective and efficient market visits, how best to use business partners to gain access to keyinformation, and techniques for structured data collection all deserve attention.

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