Master Thesis WITHIN: Marketing

NUMBER OF CREDITS: 15

PROGRAMME OF STUDY: International marketing

AUTHOR: Nabeel Javeed Butt & Nayyab Ahmad

Tutor: Jalal Ahamaed

JÖNKÖPING December 2020

Firm heterogeneity and its effects on

Firm performance:

A study of Pakistani importing firm’s

performance

Master Thesis in Business Administration

Title: Firms’ Heterogeneity and Its Effects on Firm’s Performance

Authors: Nabeel Javeed Butt and Nayyab Ahmad

Tutor: Jalal Ahamed

Date: 2020-11-20

Key terms: Importing Firms, Firm Heterogeneity, Firm Performance, Importing Firms in

Pakistan

Background: Research on the firm's heterogeneity is a well-developed concept in the

export context; literature can found in the export context. Previous research can found

on firm heterogeneity and firm performance, but they are in export context. On the

other hand, importing firms' heterogeneity is less sought in the literature, which we

believe as a clear gap in the export-import research stream. Limited research has done

in the context of importing firms.

Purpose: The purpose of our thesis is to explore the different forms of heterogeneities

that Pakistani importing firms' practices are gaining a competitive advantage.

Furthermore, our goal is to examine the extent of heterogeneity dimensions to what

contributes to their performances. There is a significant gap in the research field of

import. As there is less research in the import context, this will be a fundamental goal

of research towards firms' heterogeneity and the importance of a country.

Method: We are using a qualitative research process followed with an exploratory

research design. The methodology which used called thematic analysis. The thematic

analysis method is a research method used to generate themes from the conducted

interview. Themes developed based on code. Several codes generated to finalize the

themes that helped us to build the framework of our study.

Conclusion: we developed a firm heterogeneity model based on four dimensions, i.e.

price, production, technology and innovation. We have shown how these dimensions

are inter-related to each other, which results in firm heterogeneity and performance.

Acknowledgements

Thesis writing at the master’s level is quite tricky. The journey becomes joyful when

you have generous support from your supervisor. Our supervisor for Master thesis is

Mr Jalal Ahmed. We want to express our honest gratitude to our supervisor and mentor

Prof. Jalal Ahamed for his continuous support, patience, time, motivation,

encouragement, and immense knowledge. His guidance helped us in a long process of

writing a thesis. His detailed and in-depth feedback enabled us to dig deep to find

something knowledgeable in our thesis. We are grateful to have him as our advisor

and tutor for our Master thesis. Beside our advisor, we would like to express thanks

to resting our thesis committee and all other faculty members who have delivered a

useful lecture about every thesis chapter that was helpful in our thesis completion.

Our sincere thanks to our participant companies from Pakistan, who have shown

courage and commitment to be able to finish our thesis on time. The current situation

of lockdown globally has affected all the markets. It is appreciable that the Pakistani

market has shown support in a difficult time, so we get the in-depth knowledge that

helps us to came out the conclusion of our thesis.

Lastly, we are grateful to our families, especially to our parents and siblings who have

shown trust in us and give us this opportunity to go and explore the world of education

that looks like beyond our expectation. This thesis would be not possible without their

Physical, Moral, Financial, and emotional support. Thank you so much for everything.

Spring Semester, 2020.

Nabeel Butt Nayyab Ahmad

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Table of Contents

1. Introduction ................................................................................... 11.1 Background ................................................................................................. 11.2 Problem discussion .................................................................................... 41.3 Research Purpose ...................................................................................... 51.4 Research questions .................................................................................... 61.5 Delimitation ................................................................................................. 6

2 Literature review: ........................................................................... 72.1 Heterogeneity .............................................................................................. 72.2 Heterogeneity Dimension ........................................................................ 102.3 Firms performance ................................................................................... 122.3.1 Financial performance: ............................................................................ 142.3.2 Strategic Performance ............................................................................. 152.3.3 Relationship Performance ....................................................................... 162.4 Firms Performance and Heterogeneity Dimension................................ 182.5 Heterogeneity conceptual model ............................................................ 19

3 Methodology ................................................................................ 223.1 Research Method ...................................................................................... 223.2 Research Approach .................................................................................. 233.3 Research Design....................................................................................... 243.4 Data Collection Method ............................................................................ 253.4.1 Interview .................................................................................................. 253.4.2 Selection of Interviewee ........................................................................... 263.4.2.1 Company A ................................................................................................................. 273.4.2.2 Interviewee B .............................................................................................................. 273.4.2.3 Interviewee C .............................................................................................................. 273.4.2.4 Interviewee D .............................................................................................................. 283.4.2.5 Interviewee E .............................................................................................................. 283.4.2.6 Interviewee F............................................................................................................... 28

3.5 Analysis ..................................................................................................... 303.6 Ethical Consideration ............................................................................... 323.7 Research quality ....................................................................................... 33

4 Findings and Analysis ................................................................ 354.1 Cost leadership ......................................................................................... 354.1.1 Profit maximization .................................................................................. 354.1.2 Direct buying ............................................................................................ 364.1.3 Monopoly ................................................................................................. 364.1.4 Price Variation ......................................................................................... 374.2 Product diversification ............................................................................. 374.2.1 Product range .......................................................................................... 384.2.2 Bulk quantity ............................................................................................ 384.2.3 Market Coverage ..................................................................................... 394.2.4 Business Expansion ................................................................................ 394.3 Technological innovation ........................................................................ 404.3.1 New technological models ....................................................................... 404.3.2 High Demand ........................................................................................... 404.3.3 Competitive advantage ............................................................................ 414.3.4 Relationship ............................................................................................. 41

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5 Analysis ........................................................................................ 445.1 Competitive Advantages .......................................................................... 445.2 Firm Performance Enhancement............................................................. 475.3 Firm Performance and Heterogeneity ..................................................... 50

6 Framework of Importing Firms’ heterogeneity and Firm’s Performance .................................................................................... 54

7 Discussion and conclusions ...................................................... 55

8 Implications .................................................................................. 598.1 Theoretical implications ........................................................................... 598.2 Practical Implications ............................................................................... 608.3 Future Research ....................................................................................... 618.4 Limitation .................................................................................................. 61

9 References ................................................................................... 63

Appendix 1 ...................................................................................... 6710.1 Protocol for interview ............................................................................. 67

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List of Tables and Appendices

Figures

Figure 1. Heterogeneity dimension (Literature)………………………………………………12

Figure 2. Firm performance (literature)…………………………………….............................13

Figure 3. Codes and Themes………………………………………………………………….31

Figure 4. Additionally, Supplementary Information………………………………………….43

Figure 5. Framework of Importing Firm Heterogeneity and Firms Performance…………….54

Tables

Table for Qualitative Interview……………………………………………………………….29

Appendix

Protocol for Interview…………………….…………………………………………………...67

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1. Introduction

Global exchange is among the principal channels through which firms enter into new and

valued relationships that further allow them to develop knowledge and facilitate

advancement (Grossman & Helpman, 1991). The primary involvement of our paper is to

present how firm heterogeneity matters and affects importing firms’ performance. Not

only the relation of dissimilarities between related segments but also the differences in

terms of characteristics and attributes to firms that belong to the same local sector or

industry. The distinct outcome of different firms in a definite area results in a firm’s

heterogeneity.

A well-accepted documented that firms with diverse specialties exist in the same industry

even if the industry was tiny (Bernard & Jensen, 1995). Export and Import have a

significant result in firms’ heterogeneity within an industry. Less consideration has shown

towards a potential relationship between firm heterogeneity and other major monetary

factors (such as gross margin or trade performance). The concept of firms’ heterogeneity

has important implications both at a micro and macro-economic level. Firms with greater

volume perform analytically better alongside several propositions, such as survival rate,

advanced activities, and contribution in international trade. At a macro level, the

difference and granularity of the firm volume supply affect the cumulative productivity,

welfare practices from trade, and the effect of distinctive and methodical shocks (Melitz

& Redding, 2015). Firms in the local sector or industrial cluster might be heterogeneous

(Clausen, 2013). Firms can act as a recipient and source of domestic knowledge equally

(Alc'acer & Chung, 2013).

1.1 Background

Firms are heterogeneous in nature. In an industry, firms can create heterogeneity no

matter how big or small firms it is. This heterogeneity of firms can then lead to firm

performance. Firm heterogeneity has an impact on the overall evaluation of

competitiveness which encompasses the production of both trade and productivity

performance. A lot of research has done on the firms’ heterogeneity. Many researchers

conducted several types of studies to understand the concept of firm heterogeneity. In the

past, models developed by many researchers for firm heterogeneity. These models and

theories by researchers presented in the exporting and trading context of the firm. Firms

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differ tremendously in size, estimated productivity, and export performance, particularly

in the smaller industries. From the exporting sectors, very few companies export and the

ones that do are more extensive and more competitive. Melitz (2003) presented the most

famous model which developed regarding firm heterogeneity and trade point of view.

In the beginning, a trade mode developed by Krugman (1980). The model of trade

integrated imperfect competition and growing return towards scale was developed by

Paul Krugman (Krugman, 1980). In this model, Krugman (1980) considers the firms

within the same industry to have the same level of production and have the exact fixed

cost. The main consequence behind this assumption was the export condition of the

country. This model does not fit well according to practical observation, and Krugman

criticized a lot.

Furthermore, after the criticism of Krugman’s (1980) model. Later, a model was

presented by Bernard and Jensen (1995) which explained the heterogeneity concept even

in small firms with different production volumes. In an industry, heterogeneity can exist

no matter if the firm is big or small. It all depends on how the firm production level is and

on what basis they have a competitive advantage through exportation. Based on this

background Antras and Helpman (2004) introduced a model to explain different

production levels that leads to multiple organization forms. Their model also explains

organization structure and supplier’s relation. The model suggests that a firm’s

productivity level would influence their strategic choice of outsourcing and insourcing of

organization. According to´ Antras and Helpman (2004) in an industry when importing

technology takes place between two countries then the firms which are importing are

heterogeneous. Heterogeneity exists among firms because of the Import.

One most recent study conducted by Costantini and Melitz (2007) mentioned the firm

heterogeneity with an innovative way to adjust trade liberalization. Firms’ heterogeneity

helps different firms to improve in relevant fields. Exporting firms perform differently in

comparison to non-exporting firms in several pertinent aspects. Like exporting firms are

more productive, pay high wages, more innovative, and more capital (Brakman et al.,

2019). Furthermore, another study done by Meltiz and Ottaviano (2008) explain the close

relationship between the market and price that will allow incorporating pro-competitive

effects from trade liberalization.

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On the contrary, a consumer takes benefits of a cheaper product due to international trade

as they import products at a lower cost (Blaum, Lelarge , & Peters, 2018). The imports of

goods also used in the process of final goods. Firms who have access to the foreign market

can trade for cheaper or for a higher quality product from abroad. In addition to this,

importing trade reduces the cost of production of the firm and benefits them to produce

cheaper products locally. In this sense, heterogeneity is developed in firms as they have

an advantage in an industry over imports. Importing creates a competitive advantage over

non-importing firms based on low-cost production and high-quality products.

Melitz (2003) developed the basic model of firm heterogeneity. In addition to this, Melitz

(2003) comes in support of Krugman, who introduced the concept of firm heterogeneity

and established a relationship with sunk cost to enter the foreign market. Melitz (2003)

developed a theoretical model that emphasizes production and defines productivity as a

crucial factor. He stated that firms should be productive enough to cover their market

expense to enter the foreign market. Firms need to fulfil the demands when demand for a

specific item of a firm’s maximum production exceeds. Not only for importing firms, but

the exporting firms also needed to import to finish their raw material in ending goods.

There are two main findings. First, high productivity is a critical need to go for

international trade, but not the only thing which affects the importing of goods. Firms’

other characteristics, like the firm size, also affect the decision.

Few concepts lead to firm heterogeneity within the market even though the market is tiny.

Sources on which firms compete with each other are cost reduction, quality, innovative

technology, high-profit margin, and production. Firms produce horizontally differentiated

goods, which allow them to benefit from some degree of market power, typical of

monopolistic competition. Firms vary in terms of productivity that is in the amount of

labour needed to produce the goods. If the productivity level is too low, expected profits

are harmful, and the firm is better exiting, thereby losing the entry sunk costs.

Alternatively, the firm operates in the domestic market and possibly in some foreign

markets. It explains that those firms with the highest productivity levels are also bigger

than average firms and export abroad, which is consistent with empirical facts. A

reduction in trade barriers (lower transport costs, import tariffs, etc.) makes it profitable

for more firms to export. The increased competition drives smaller, relatively inefficient

domestic firms out of the market.

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The other source of heterogeneity is based on quality. Within the industry, the quality of

imported goods results in heterogeneity. As a result of the firm’s heterogeneity, new

technology can use for local markets that can be differentiated. The importing of a large

number of goods helps them to have a big stock that shows high production that will

present them as a giant producer in the industry. Importing cheap goods from other

countries can benefit in increasing profit margin and creates a separate market reputation.

The concept heterogeneity developed in a firm because of different things like quality,

production, etc. Quality and presentation are a few of them. Firms have high-quality

products from foreign countries through import results in heterogeneity in industry.

Similarly, firms that are importing can have high production as Import lowers the labour

cost. Firms having high show can leads to heterogeneity as well. Heterogeneity is

produced in the industry when firms have diversity. Diversity can relate to production,

quality, cost, or anything.

1.2 Problem discussion

International trade becomes an integral part of the global world, as Import and export are

the media of international trade and both export and Import have a significant result in

firms’ heterogeneity within an industry. Export contributed and showed significant

effects on firms’ heterogeneity. Several studies can found in the export context explaining

a firm’s heterogeneity. Research on firms’ heterogeneity is a well-developed concept in

the export; literature can found in export context (Melitz, 2003). One most recent study

revealed that exporting firms perform differently in comparison to non-exporting firms in

several relevant aspects. Like exporting firms are more productive, pay high wages, more

innovative, and more capital intensive (Brakman et al., 2019). Similarly, another study

conducted by Costantini and Melitz (2007) mentioned that firms’ heterogeneity with an

innovative way to adjust trade liberalization. Firms’ heterogeneity helps different firms

to improve in relevant fields.

Firm heterogeneity is a highly consumed topic in international trade and especially in the

export context. Different contexts have been found in the literature that shows the

characteristics of exporting firms and how they are different in markets. The model of

Melitz (2003) highlights the importance of export and shows how trade influences a more

productive producer to go for export. Most of the study conducted in the export context

and developing countries has a quantitative method. On the other hand, importing firms’

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heterogeneity is a less sought topic in the literature, which we believe is a clear gap in the

export-import research stream. According to the importation point of view, there is no

detailed and particular study found in the developing country context. This study focuses

on the importation of developing of country, to see either importer have the same

advantages as an exporter, which is hard to find in a developing country context. While

comprehensive data of a particular industry is hard to find, the estimated import value of

Pakistan is 539,359.1 (Million Rupees) as of January 2020 (Pakistan Bureau of Statistics,

2020). However, the export has shown 136,129.2 (Million Rupees), a minimal number of

values in comparison to imports.

One rare study conducted in Pakistan is “An investigation of Firm Heterogeneity and

Constraints to Development and Growth” by Moghal and Pfau (2009) a quantitative study

showing the barriers that are going to be looked over by local traders. However, our study

focuses on ground factors. Limited research has done in the context of importing firms.

To analyze the factors affecting importers’ performance and those who create

differentiation among firms. The literature reviewed which shows rare positive signs of

Import and the firm’s heterogeneity. Research shows Articulate that imports are a

significant channel through which technology can transfer from developed to a

developing country (Keller & Yeaple, 2003).

1.3 Research Purpose

This study aims to examine heterogeneity dimension and firms performances. We address

the following research questions, “how DO heterogeneities affecting FIRMS

performance, what IS the relationship BETWEEN heterogeneity dimension and firms

performances, and how THE FIRMS heterogeneity HELP to BUILD FIRMS’

competitive advantages. The contextual study of the electronics industry of Pakistani

firms investigated to find out the heterogeneity existence. There are a few main aspects

of our research, does heterogeneity exist in Pakistani firms?

How Import helps them to be heterogeneous in the market? and To what extent they differ

in the market? Since the enhancement of trade and rapid increase in the market growth,

there is a gap to study the context of developing countries, the effect of Import, and the

basis on how they are different in the market. This study fills the gap that will be useful

for local firms to go for import and foreign business to enter the Pakistani markets while

considering basics on which they can compete.

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This thesis uses qualitative methods to analyze how importing firms are competing in the

market, how Import helps them be different on the ground. To discover the outcome of

the market, we opted the exploratory study is going to be used to find out the actual reality

from the experience and observation of the importers. This study involves 6 cases from

the market to add some universal significance to this phenomenon. Besides all this, we

will recommend some suggestions for future work and will provide a model that will be

useful for the Pakistani market.

1.4 Research questions

1. How different heterogeneities help them (the Pakistani importing firms’) to have

competitive advantages over others?

2. What extent the importing firm’s heterogeneity affect their performances?

3. How are heterogeneity dimensions and importing firm performance related?

1.5 Delimitation

• This study has mainly focused on the following delimitations.

• This study primarily focuses on Pakistan.

• We selected respondents through snowball sampling, who is the importer of

Pakistan.

• We developed a protocol for a semi-structured interview.

• This study is qualitatively based using the thematic analysis method to produce a

theory.

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2 Literature review:

In this chapter, we are going to provide a wide previous frameworks and researches that

base the concept of heterogeneity, that have relation with the purpose of our study. Within

the area of Firms’ Performance and Heterogeneity. It started with the detailed information

about Heterogeneity in industry, and different types of performance that are related to

heterogeneity.

2.1 Heterogeneity

In recent years there is a massive increase in the number of studies on firm heterogeneity

due to the fact of blooming availability of datasets of the Firm. Firms are heterogeneous

through diversification and popularity of the goods, the popularity fluctuates across

markets, and in each market, and firms are ambiguous about the popularity of their goods.

Heterogeneity is a term that refers to the composition of a service. Heterogeneity causes

fluctuations from one service to another or changes in the same benefit from day to day

or from one customer to another. Firm heterogeneity is the distinct outcome of different

companies in a given field. The recent research of firm heterogeneity in companies and

macroeconomics has presumed that firms can compete under the pre-requisite of

monopolistic competition (Meltiz & Ottaviano, 2008). A well-documented theory was

proposed by Bernard and Jensen (1995) that suggested the idea interprets the presence of

organizations with various strengths in a similar sector, even though the industry was

little.

Import and export have an essential impact on the heterogeneity of companies in the

industry. Theoretical research in global trade has increasingly emphasized the preferences

of individual factories and companies in understanding the enthusiasm and penalties for

comprehensive trade. The extension of smaller data sets and the progression of new

theories have pushed forward the people over the previous decade to consider moving

towards firm heterogeneity. In addition to that, the field of global communications and

macroeconomics has changed. Recent and previous research had many impact and

influence of the changes in firm performance, including differences in productivity,

associating applicants in the execution of a company, and comparisons of the degree of

innovation have considered. For instance, product quality (Melitz, 2003), markups

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(Johnson, 2012), fixed costs (Loecker and Frederic, 2012), and the ability to supply

multiple products (Arkolakis, Costinot, and Clare, 2012).

Paul Krugman's (1980) basic model is one of the production models with economies of

scale, and the company can reduce the cost of product differentiation. Trade theory

enlightens the actual trade patterns among countries with similar values, such as factor

counts, grades, and technology, as opposed to the classic trade theory between countries

with different end values. It involves monopolistic competition in product differentiation

or differentiation, mass production, reducing costs, or increasing returns. In this model,

each Firm has specific monopoly power, but entering the market will reduce the

monopoly profit to zero. If two imperfectly competing economies are allowed to trade,

even if these economies have the equivalent liking technology and factors, the increased

returns will generate trade and profit from it. Krugman's (1980) formalized internal

economies of scale argument allow economists to point out the particular perspective of

global trade that were not formerly explained by Richard's comparative advantage.

Suppose there are internal economies of scale and the company has monopolistic

competition. In that case, the market will provide a certain number of companies (less

than the number of companies in a fully competitive market), and each company will

produce more output than a similar competitive company. In these cases, even if there is

no difference in relative cost, liking, or technology, the trade will benefit at lower prices

and greater product diversity.

Furthermore, Melitz demonstrates conceptual heterogeneity. The international trade

model with heterogeneous firms illustrates export productivity and the relation between

productivity and export decisions (Melitz, 2003). The model Melitz (2003) presented is a

dynamic industry model that associates the heterogeneity of firm productivity into the

monopoly competition framework of (Krugman, 1979). The model presented by

Krugman (1979) explains that in each country, industry occupied by firms that

differentiated by productivity, and classifications that produced by the exporter. In

addition to this, Melitz (2003) developed a theoretical model that emphasizes production

and defines productivity as a critical factor. He enlightens that companies should have

sufficient productivity to pay for their market costs of entering foreign markets. In the

industry, almost every company faces the risk of future production. The trouble is making

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the irreversible expensive investment decisions to enter the foreign market. In addition to

joining the foreign market, firms should produce with different productivity levels.

The least productive company encounters negative profits and therefore exits. Due to the

high export costs, only companies with relatively high production capacity (among

surviving companies) chose to export, while the remaining companies only served the

domestic market. For these companies, exports are not profitable, either because it

involves fixed or sunk costs, or because import demand is driven to zero when prices are

lower than delivery costs. Once the market for a particular company's maximum output

exceeded, the company needs to import to meet the demand. This is not only for importing

companies, but exporting companies also need to import to complete the raw materials in

their final products. The cost of entering the export market is too high, but companies

must first understand their productivity after deciding to export. The basic idea of Melitz

(2003) is that only high-productivity companies can make enough profits to cover the

enormous fixed costs required for export operations.

The concept of heterogeneity has changed a lot. There can be several industries in the

market, and, you cannot judge a firm based on its size. The difference between the firms

in an industry is because of the heterogeneity concept. A Firm having heterogeneity not

only creates differences but is also far more competitive than other firms in an industry.

They can be marginally more productive than other firms and have had enough time to

grow and exploit this advantage (Luttmer, 2010).

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2.2 Heterogeneity Dimension

Heterogeneity has several dimensions. Since Bernard and Jensen (1995) have done

empirical work regarding heterogeneity. Their documents model explains the

heterogeneity concept even in small firms with different production volumes. Firms

within the same industry are very much different from each other based on the cost of

production, Work efficiency, Value-added per labour, productivity, and export and import

status (Brakman et al., 2019). To test these facts, the researcher has chosen a model to see

the firms' heterogeneity in the export business. These models based on factors like size

and productivity vary from market to market (Johnson, 2012).

From the literature, we have found several dimensions that different exporter and importer

are practising. We have chosen some of them to use in our study. For our research, we

have decided to select four dimensions: Price, Production, Technology Transformation,

and Innovation. The data and the importance of these dimensions have found in the

literature. Firstly, price used as a source of heterogeneity. Price is a valuable asset

concerning product quality. This information works very profoundly in the firms'

heterogeneity, especially in the field of exporting firms (Johnson, 2012). Furthermore,

Melitz (2003) used price as a standard in his model. Price also has a direct effect on

production.

The next dimension is productivity. In addition to this, Melitz (2003) Developed a

theoretical model in which he describes productivity as a crucial factor. He explained that

the firm should be productive enough to bear the cost to enter the foreign market. The

firm that produced more is more capable sufficient to handle the sunk cost. It is now a big

and established research plan using micro-level data that confirmed the strong self-belief

of higher productive firms in the export market. More recently in the literature branch

found the evidence for learning by exporting aspect

The other dimension to discuss here is a technology transformation. Through trade,

technology has transferred from one country to another. Several studies by international

economic literature show great interest in businesses and technology

transformation (Saggi, 2002; Keller, 2000). Research has focused on other promenades

of technology transformation like export, import, and foreign direct investment.

Researchers Eaton and Kortum (1996) Collect data from Organizing for Economic Co-

operation and development and analyzed that more than 50% of growth in a few countries

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originated from innovations of different countries like the USA, Japan, and Germany.

More literature included, country-level data that shows international technology scope

spread through different means, and trade plays a vital part to extend this technology (Coe

& Helpman 1995; Coe, Helpman, & Hoffmaister 1997).

Firms improve their efficiency after entering the export market. Innovation is also a

significant step-up in heterogeneity. Firms that want to make more trade, those firms are

investing more in their research and development department. Few researchers like

Costantini and Melitz (2007) and Atkeson and Burstein (2010) explained the importance

of developing a model of heterogeneous firms, by describing innovation concerning the

export market. The research paper of Costantini and Melitz (2007) and Atkeson and

Burstein (2010) explains the situation when firms are productively different initially and

when the innovation opportunity arises, and then the productive differentiation evolve.

After the innovation in the Melitz model, research shows that exporters invest a lot in

design and those firm who are entering in export market invests more in their research

and development department (Vannoorenberghe, 2008)

For our research work, we have selected these dimensions to study in the developing

country context to see either these dimensions have the same effects for importers. Our

heterogeneity model will base on these dimensions showing how and what extent these

dimensions are helping importing firms to gain advantages over others.

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Figure 1. Firm performance (literature)

2.3 Firms performance

The firm performance is a problematic term that may include different shadows of

meaning as long as it relates to organizational performance, functioning of the firm, and

outcomes of its operations. Usually, the firm's performance implies the organizational

performance, including the manufacturing of products and services, the functioning of

different units of the firm, the performance of its employees, and the outcomes of their

work in total. At the same time, the firm's performance can view in a broader context as

part of the business development of the firm. What is mean here is the fact that the

business development mirrors the firm's performance and allows it to assess the extent to

which the organizational performance is significant.

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Figure 2: Firm Performance (literature)

Performance variations in companies are frequently the concern of academic lookup and

government evaluation (Meyer & Verreynne, 2010). Traditionally, at the industry level,

there has been attention in considering various measures in firm performance, considering

that the organizational characteristics of the industry provide significant homogeneity

among firms within that industry subsequently to a more extensive extent firm

performance (Howell & Frazier, 1983). Performance explains the success of a company

over time. Investors and stakeholders always consider the company's performance for

investment. Firm performance reflects the results, efficiency, and effectiveness of the

organization's activities.

This thesis will conceptualize the Pakistani importing firms' performance based on the

categorization from different perspectives, including financial performance and non-

financial performance (Ngyten, 2019). This chapter will help you better understand the

term firms' performance and how we have categorized firms' performance into financial

and non-financial performance. In addition to this, elaborating firms' performance will

help the reader to understand the performance categories which are affected by the

heterogeneity in industry.

Firms Performance

Financial Strategic Relationship

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2.3.1 Financial performance:

A performance evaluation system is a concise set of metrics (financial or non-financial)

that supports the organization's decision-making process by collecting, processing, and

analyzing quantitative data on performance information (Gimbert, Bisbe , & Mendoza,

2010).

The core of the firm's effectiveness is financial performance such as profit maximization,

maximizing profit on assets, and maximizing shareholder's benefits (Mohammad & shah,

2014). Financial performance is the financial state of the business over a specified period

that involves the accumulation and use of funds evaluated by multiple indicators of capital

adequacy ratio, liquidity, debt, solvency, and profitability. Financial performance is the

management and control capacity of the company's capital. It involves measuring the

accumulation and use of capital in various ways.

Financial performance is a way of measuring the amount of income, profit, or revenue a

corporation is capable of making. The financial statements consist of; (a) Balance Sheet,

(b) Income, (c) Cash flow, (d) Changes in the capital. Financial statements are financial

records that cover cash flows, balance sheets, loss of income, and adjustments to

resources. These changes are essential for company managers who follow the company's

financial policies. Financial reports are the company's financial state comprising the

balance sheet of profit/loss calculation, and other financial information, such as cash

flows and retained earnings.

Financial performance is the financial achievement of the company; the managers of the

company must understand financial performance. The ratio of liquidity, solvency,

profitability efficiency and leverage can use as a benchmark of financial performance.

The data can extract from the financial statements; cash flow, balance sheet, profit-loss,

and capital changes but also fundamental and technical analysis.

The financial performance measures differ from each other in several ways, and many

questions concern the choice of which particular financial action to adopt. For example,

metrics can be absolute (e.g., sales, profit), revenue-based (e.g., profit/sales, profit/capital,

profit/equity), internal (e.g., profit/sales), external (e.g., company Market value), the level

of a single period (such as one year), the average cost or the variability of the average

growth rate or trend. A countless number of ways have brought forward to measure the

firms' financial performance, and among them, profit margin and return on revenue are

15

the measures that mostly used. Accountants and subject calculate profit margins to

standards set by the industry. Therefore, influenced by accounting practices as various

methods used to evaluate tangible and intangible assets (Kapopoulos & Lazaretou, 2007).

Profitability is a critical component of financial performance. The word profitability

described as the effectiveness of management's use of total and net assets recorded on the

balance sheet. Effectiveness can observe by associating net profit with the assets used to

generate profit. From the owner's perspective (in the case of the company, the

shareholder), profitability refers to the return obtained through management's efforts on

the funds invested by the owner.

Profit margin is a percentage measurement of profit that expresses the amount of a

company earns per sales. A relatively high-profit margin is desirable because it

corresponds to a lower expense ratio relative to sales. Small profit margins are not

necessarily bad. For instance, lowering the sales price usually increases the number of

units, but the profit margins will decrease. Total profit may still increase due to increased

sales (Ross, Westerfield, & Jordan, 2010).

2.3.2 Strategic Performance

Due to their global and complicated nature of measuring a firm’s performance, the

majority of researchers take the financial and economic parameters to define a firm’s

performance. Finding a suitable methodology to gather data is not easy due to the

diversity of the industry. To determine the firm’s success and failure in small level firms

and privately held-firms are due to a lack of clearly defined performance data.

The strategic measure is a measure which includes achievement of more significant, long

term objective such as building capabilities, entering a new market, and retaliating a

competitor. Furthermore, Strategic performance measurement help organization to

define, then achieve their strategic goals, align behaviour and attitude have a positive

effect on organization performance (Micheli & Manzoni, 2010). All previous studies that

explained a firm’s performance with sale and profit only, and do not consider strategic

and goal achieving model were later criticized a lot by (Aaby & Slater, 1989; Zou &

Cavusgil, 1994). The most popular measure to evaluate a firm’s performance is

economical and financial. Still, for accessing a small level firm’s performance, subjective

measures or strategic measures are often become necessary to evaluate a firm’s

performance. The Researcher Cavusgil and Shaoming (1994) identified four components

16

that lead an organization to achieved strategic goals. Various studies prove that Strategic

performance measurement is very efficient and useful for an organization to improve

organization performance. Research has proven that with appropriate measures of

performance, an organization can take advantages.

Since 1990, a lot of organizations have started investing more money and resources for

measuring performance. Several reports show that a company with an average sale of one

billion dollars spends on 25000 people a day per year for planning and measuring the

firm’s performance. The research also did in the public sector, the recent establishment

of “New Public Management” reforms in several OECD countries, the government has

paid great attention to measure strategic performance. United Kingdom department

freshly evaluates that they have spent 150 million pounds to monitor development on

national targets.

2.3.3 Relationship Performance

Relationship performance is considered a non-financial performance. A non-financial

firm performance means how the firm is performing other than money evaluation.

The relationship performance of a firm is a customer relationship with the firm how the

firms develop a relationship with their customer and business partner social capital.

Customer relationship considered as it is relevant to the research of the thesis topic.

Customer relationship defines as the customer's trust and commitment to the company.

Customer trust and loyalty reduces the uncertainty of customer transactions (for example,

customers avoid unpredictable performance and useful interactions with services), and

enhance meaningful connections, such as the customer's connection with the company's

brand, Customers connected with future businesses (Bendapudi, 1997). Customer

relationship is increasingly important to firms as they seek to improve their profits

through longer-term relationships with customers (Coltman, 2010). Customer

relationship is becoming an essential issue in marketing to gain customer loyalty, improve

customer retention rates, as well as increase profits (Shang, 2012). Firms can generate

profits and can also add value to their business, not in terms of money only but also

through relationship performance. Customer relationship plays a vital role in generating

profitability and loyalty towards the firm.

The development of customer relationships has enabled the company to increase profits

not only in short-term, but also in the long-term because customers who establish strong

17

relationships with the company spend more money O Brien and Jones (1995), and provide

a stable future customer flow (Oliver, 1999). Companies can improve performance by

developing strong customer relationships. Customer relationships are considered

essential firms' resources (Bendapudi, 1997). According to the commitment-trust theory

of relationship marketing, researchers conceptualize relationships as relationships

characterized by trust. For instance, when a party has confidence in the reliability and

integrity of its partners Morgan and Hunt (1994), and commitments (such as long-term

parties' long-term positioning of partners. (Morgan & Hunt, 1994; Srivastava, 2001),

believed that the establishment of a loyal and committed relationship between a company

and its customers is a vital relationship resource. Corporate performance and shareholder

value, as "any organization has the potential to develop close relationships with customers

so that competitors may be relatively rare and difficult to replicate (Srivastava , 2001).

Due to the advancement of technology, companies have invested in technology and

developed customer relations software. These customer relationship technology helps

firms to get a better relationship with their customers in terms of data and loyalty.

Customer relationship management refers to a management approach that seeks to create,

develop, and enhance relationships with carefully targeted customers to maximize

customer value and corporate profitability (Shang, 2012).

18

2.4 Firms Performance and Heterogeneity Dimension

One of the essential priorities in economic analysis in firms' performance is productivity.

The prosperity of an economy conclusively depends on its productivity which,

consecutively relies on the success of firms. Several factors affect the firm's performance.

The central aspect from the literature that selected for study is the heterogeneity

dimension which resulted in the firm's performance enhancement. In this section, we are

going to study how these dimensions are going to increase a firm's performance.

The four factors are price, technology, production, and innovation. One of the central and

most essential elements in the management of firms' performance is productivity.

Productivity generally considered to be an efficient use of the organization (Pilat &

Schreyer, 2002). At the company level, productivity is a measure of a company's ability

to use its inputs to produce as much output as possible. Increased productivity may lead

to better profitability for the company (Ngyten, 2019). Productivity means the

relationship between production and input over the same period (Mohanty & Rastogi,

1986). Productivity has many positive impacts on firm performance, and the significant

impact is on and ultimately on a firm's financial performance. Fisher's Principle

developed by Metcalfe (1994) discusses the aspects regarding productivity is the value of

total income as a ratio of cost. In addition to Fisher's theory (Metcalfe, 1994), one of the

collective and, of course, the most widely used explanations is the ratio of productivity to

input. In this analysis, productivity is a corresponding operation of productivity relative

to overall all employees: the output of each worker.

The other factor regarding firm performance is technology, which is also one of the vital

elements in firm performance. "Technological capability" is a term which referred to as

"the capability to achieve any appropriate technical function or volume activity within the

firm as well as the ability to develop new products and processes and to operate facilities

effectively" (Teece, Pisano, & Shuen, 1997). In the recent decade, Firms achieve a

competitive advantage within the industry, particularly in high tech industries. Firms

gaining a competitive advantage is because of technological capability, which is an

essential strategic resource (Duysters, Geert, & Hagedoorn, 2000). There is a direct and

robust correlation between technical competence and a firm's effective performance

(Vache, 2000). Finally, Tsai (2004) empirical analysis of a seven-year panel dataset of 45

large manufacturing firms quoted on the Taiwan stock market provides statistical

19

evidence that technological capability is a critical determinant of a firm's performance in

the electronic field. The study suggests from these opinions and arguments on firm

performance, and technological capabilities have a positive influence (Etemad & Lee,

2001; Afuah, 2002). Another important factor and element in the firms' performance are

innovation. Firms acquiring innovative products result in positive performance (Rubera

& Kirca, 2012). The literature of innovation shows many aspects on firms' but the most

important that design is one of the important elements for firms' success and survival

(Cho & Pucik, 2005), and sustainable competitive advantage (Mumford & Licuanan,

2004; Bartel & Garud, 2009; Standing & Kiniti, 2011).

There are four types of innovations that result in the firm's performance, i.e. product

innovation, process innovation, marketing innovation, and organizational innovation,

which results in firm performance. The critical performance ignition is pricing. The

implementation of a pricing strategy is, however, problematic. Pricing plays an integral

part as an enabler or obstacle to firm performance. The analysis of Dutta, Zabaracki, and

Bergen (2003) is concluded in this way that pricing is an essential factor, and a resource

can result in a continuous competitive advantage.

2.5 Heterogeneity conceptual model

The one source of heterogeneity is the price. Price use as a source of a firm's heterogeneity

separating them from completing the model. The exporting selection shows the bilateral

relationship of trade and price. Evaluation of participation, trade, and price shows the

relations for a broad range of countries and section helps to fill the gaps. Price also has a

direct link to productivity. Higher productivity shows an in-direct relationship with the

price. High productivity lowers the price of the marginal cost of output.

On the other hand, import also has a role in reducing the price of a product. In the

conceptual model of heterogeneity, price considered as financial performance. Price

decision is one of the most critical decisions of management because it affects

profitability, company returns, and market competitiveness. Price has a significant impact

on the company's profitability and pricing strategies widely between different industries

and market conditions. Pricing is related to financial performance because it is one of the

main factors, which is the critical element of firm profitability. The firms that have direct

access to foreign markets can buy the product from another country at a lower price and

can have a competitive advantage in the market. The other dimension of heterogeneity to

20

discuss is productivity. Production is a crucial factor (Melitz, 2003). Productivity raises

the profit of the firm (Melitz, 2003). Melitz (2003) explained that profit also reallocated

towards more productive firms. The firms that produced more are the ones who can sell

more, and that automatically raises their profit. Not only in terms of profit locally. Melitz

(2003) Focused his study on productivity and explained the firms that produced more are

more interesting to enter the foreign market. The firms that have higher productivity are

strong enough to enter the foreign market. Productivity is considered as financial

performance as it is a source of getting the right profit margin. In terms of company

performance, having good productivity gives its competitors a substantial competitive

advantage.

As a result, the overall company's performance cannot improve with increased

productivity. In recent literature, studies show that productivity affects the international

market as well as in the domestic market. Studies from Taiwan (Aw & Chung, 2000;

Clerides, Lach, & Tybout, 1998), have found strong evidence that more productive firms

self-selected themselves into the export market. The other ways have found to describe

heterogeneity about productivity. Researchers Aw and Chung (2000), show that the

exposure of trade for some firms forces the other least productive firms to quit the

industry. Furthermore, Pavcnik (2002) did research towards market share reallocation in

Chile after trade liberalization, and she finds that market share reallocation significantly

contributed to productivity and in the trade sector. A related study by Bernard and Jensen

(1995) in the USA, finds that share reallocation towards more productive firms

contributed 20% of exporting plants within a sector industry.

Technology transformation is another dimension which causes heterogeneity in industry.

Technology considered as a relationship performance in the conceptual heterogeneity

model. The constant changes in the market, influenced by technological advancement,

and by increasing growth in the customers' expectations, are leading organizations to

continually search for new products to continue being profitable and competitive.

Therefore, many firms in developing countries go through a learning process after

importing new technology which eventually enables them to build their technologies.

Firms providing technology to their customers create a relationship between them.

Through technology, transformation firms use more advanced products to

gain advantages over others. Studies in the past show the importance of technology

21

transformation. Most of the growth in developing countries is due to the usage of

technology transformation from other countries (Eaton & Kortum, 1996). Latest estimates

that include industry-level data Keller (2000) or the general data of trade they separated

from capital goods trade. Xu and Wang (2000) shows the role of technology transfer in

productivity. Recent work by (Blalock & Gertler, 2002; Javorcik, 2004) finds that an

external entry generated in the local market within the same industry produced new

technology for clients and suppliers.

Lastly, innovation is the dimension found in the literature, and we used for analysis.

Innovation considered as relationship performance. Innovation and production of new

products is a way to distinguish them from competitors, that added values to a product or

service to achieve a better outcome. Thus, the production of new products, the innovation

in products and processes are the essential factors in organizational performance to keep

business competitive and profitable in the market. Firms innovating their products create

a sense of strategy to perform better and attract the market.

.

22

3 Methodology

In this chapter, the research method and methodology have discussed our research

purpose. We start by describing our research method and explain our reasoning of choice

to follow the research approach. We further explain our research design as we used the

exploratory nature and inductive approach for our study. The research method is

fundamental to every academic study. The accuracy, certainty, and confusion can

maximize if the research method conducted critically and carefully. Furthermore, the

reliability of the result is not underline (Bell, Bryman, & Harley, 2018). A well-chosen

method and a good research design will affect the reliability of the latter outcomes in this

thesis. The methodology is a mixture of methods used to enquire about a specific

situation.

3.1 Research Method

There are two basic techniques used for conducting research that is Quantitative research

and Qualitative research. They both have advantages and preferable usage in different

situations. Quantitative research used for numeric data, and qualitative is more of

intention and actions. The quantitative research process gives reliable information used

for the larger populations and actions of people. This information is might more accurate

but does not give interpretations about personal intention (Steckler et al., 1992).

Quantitative research calls for objectivity (Easterby-Smith et al., 2018). The other way of

research conduction is qualitative research.

The research method we took for this particular topic was qualitative research. Qualitative

research methods have chosen as they are used to answer questions about experience,

meaning, and perspective, from the point of view of participants. These data are usually

not amenable to counting or measuring. Qualitative research techniques include small-

group discussions for investigating beliefs, attitudes and concepts of normative

behaviour. Semi-structured interviews conducted to seek views on a focused topic or,

with critical informants for background information or an institutional perspective, in-

depth interviews to understand a condition, experience, or event from a personal

perspective and analysis of texts and documents, such as government reports, media

articles, websites or diaries, to learn about distributed or personal knowledge. The

23

Qualitative research technique used to collect data is semi-structured interviews, as our

primary goal is to gather views on a focused topic.

Qualitative research is a creative process, which aims to gain the knowledge that

respondents share from their personal experience. If the research did well, the process of

data collection could be proven beneficial for everybody involved in the process. In

qualitative research, detailed information gathered from respondents and their

perspectives can be obtained and intact. The qualitative analysis is a continuous process

through which new questions generated. The study of our nature is exploratory. As the

nature of the study is exploratory, semi-structured interviews were selected to gather

useful information. It may help us to generate new phenomenon which can be proven

helpful for other Pakistani local traders and also for some foreign exporter. Also,

secondary data that existed has provided comprehensive information collected through a

developed country, but not in the context of developing countries like Pakistan.

No literature has found regarding this study, and the practical value of trade is not reliable

in Pakistan as they have not maintained previous records. The numeric figure is quite hard

to collect as the Pakistan Bureau of Statistics does not keep any proper records that can

use in quantitative analysis. Also, the respondent we took in our interviews is a micro part

of the industry, so that is why the qualitative approach is better for us to find out the

factors that influence the development. Qualitative research gives us the flexibility to

discover the factors that might prove helpful in our study (Murphy & Mattson, 1992).

3.2 Research Approach

To accomplish the purpose of our study, we have to establish a research approach. For

the case study, three main approaches identified. Deductive, Inductive, and abductive are

the main approaches. These three approaches have their terms and have shown different

characteristics. These approaches connected with propositions that developed from

existing theory or theory that is produced from collected data during the case, or add

findings and improve existing theoretical models.

Deductive reasoning is the logical process of developing a conclusion from a known

statement or something recognized as real (Ghauri, Grønhaug, & Strange, 2020). The

deductive approach is to test the theory while creating a hypothesis that we know it is

true. It is more likely to test the existing theory to have new findings. An inductive

approach is systematic reasoning of establishing a general proposal that bases on

24

observation and specific facts (Ghauri, Grønhaug, & Strange, 2020). In inductive

reasoning, the new theory has emerged from the selected case. The gathered data from

the case were observed with specific facts to come out with a conclusion. The third type

of reasoning is called abductive reasoning, and this type of reasoning is not that familiar

with business research as compared to deductive and inductive. Abduction discusses the

theoretical explanation of a practical problem that can guide to the establishment of a new

theory (Ghauri, Grønhaug, & Strange, 2020).

For our thesis, we use the inductive approach. The topic of the thesis is new, and research

questions that developed are on the problem. The deductive approach is a process by

which a researcher can draw a general conclusion from individual instances or

observations. The benefits of an inductive approach, as seen for example, in the case

study, that it allows flexibility, attends closely to context, and supports the generation of

new theory.

The most famous approaches to research design are deductive and inductive. The

deductive approach is basically to test the hypothesis or test the existing theory. In this

particular case, this approach is not suitable as the nature of the study is exploratory

(Sternberg, 2011). The thesis aims to draw a general conclusion from the collected

information from the case. The inductive approach is more suited for this type of research

(Copi, Cohen, & Flage, 2016). Furthermore, the research question based on “how” and

“why”, whom answers we are looking to explore.

3.3 Research Design

Research design has provided the structure for research activities that can enhance the

achievement of completing the research aim. Exploratory research is a valuable way to

find out what is going on to pursue more in-depth insights”. Similarly, a person can ask

questions and can measure new phenomena in a novel light. Through the literature review,

phenomena of a firm’s heterogeneity and importing firms’ performance identified as a

gap of research in the existing literature for developing country context. An exploratory

study design adopted for the research. As our purpose of the study is to find out importing

firms’ performance in Pakistan industry.

Furthermore, most of the recent researches on Firms heterogeneity has made in Europe,

and all these were in the context of export. Like, in the Netherland, Brakman et al. (2019),

in Italy, Castellani and Serti (2010), Melitz (2003) export model, and many others. There

25

is hardly any study in South Asia, especially in the import context. Lamentably, minimal

research has done on firms’ heterogeneity in Pakistan and there is scarce information

found in an import context. For the given reason above, this is an exploratory nature as

we are trying to dig deep towards firms’ heterogeneity and importer performance

phenomena in Pakistan.

We structured our three-research questions with our inductive approach and exploratory

aims of our study. A qualitative study used as it supports the purpose of the study.

Therefore, in this study, exploratory research was considered to understand better if there

is any positive impact made through import. The exploratory study is also useful when a

few facts are known, but to develop a practical framework, authors need more information

(Sekaran, 2003)

3.4 Data Collection Method

There are two necessary sources to gather data, primary data, and secondary data. The

data that the researchers collected directly from the interested variable for the particular

purpose of the study is called primary data (Sekaran, 2003). The other form of data is

called secondary data, which has already existed in literature in which a person has to

gather the information (Sekaran, 2003). The primary data for the thesis is the data

collected from interviews of an in-field importer who are currently doing imports in

Pakistan from different countries like China, Korea, and many other countries. The

secondary data we used in our thesis derived from the company’s websites, journals,

articles, and textbooks. There are three research methods of data collection, including

observing people, questionnaires, and interviews (Sekaran, 2003). For our research, we

are using interviews as a research method to collect data from the importer of Pakistan so

we can get the ground factor. These interviews will help us to identify the factors that

made an impact on firms’ performances.

3.4.1 Interview

We used interviewees as our data collection process. As mentioned above, exploratory

nature and qualitative research considered for our study. Interviews conducted to attract

someone who is articulate and can tell readers exciting things about the organization, or

those people who have been involved in the previous study and therefore have more to

tell about the academic research (Easterby-Smith et al., 2018).

26

A qualitative interview was the best choice for this study. Qualitative interviews

conducted to collect rich and detailed data from respondents to share the aspects of their

experience, livings, and understanding. It will give the information we need to find out

the factors and the effects of imports as well. Nowadays, the situation is more

complicated. Moreover, due to Coronavirus, there is a significant change in conducting

Interviews that affected our study as well. The interviewees are now more restricted and

difficult to conduct, as there is an environment fear all over the globe. Due to lockdown

in Pakistan, people restricted to go out, which means they are also avoiding going to their

office. Nature affects the whole dilemma. Hence some people hesitated to join our

interviewees.

We are doing the semi-structured Interview as we do not want to restrict the answers of

participants. The semi-structured interviews give a greater level of confidentiality as

respondents give more personal reply in nature. The semi-structured Interviews

conducted with an open-ended series of question to our respondents; all these questions

were unplanned and will ask as per their responses. By conducting the semi-structured

interviews, some main factors brought to the ground, and detailed questions give us

particular responses.

We have conducted the interviews through two different mediums, interviews conducted

through Skype and WhatsApp. The main reason for conducting the interviews online was

the geographical distance. The meeting fixed on text messages. The research purpose of

our thesis was shared with the interviewees while conducting the interviews—a surety

given to the interviewees for keeping the Interview confidential and anonymous. Six

interviews conducted, three interviews conducted on WhatsApp, and while the other three

conducted through skype. The duration of the Interview is between 25 to 40 minutes. The

interview protocol made for the Interviews which later asked from the interviews, The

Protocol of our study attached in Appendix 1 below. Interviews recorded after getting

their permission to make sure we understand all the points.

3.4.2 Selection of Interviewee

The strategy we are going to use for selecting multiple cases is Snowball sampling.

Snowball sampling is an exact sample structure where the criteria for adding samples are

well defined. Those persons who meet the criteria included, and then further entitles will

add by asking them either they know somebody. Easterby-Smith et al. (2018) suggets a

27

sampling involves peoples who are in the social circle of authors and doing business of

importation in the industry from different countries. Entitles in our cases are the small

firm importer of Pakistan. We have contacted some importers, and their circle has added

further. The other reason for choosing Snowball sampling is the current situation, i.e.

Covid19 is spreading all over the world and has affected the entire globe.

3.4.2.1 Company A

Interviewee A is the importing business of Office equipment that mainly includes

computers, laptops, and other relatable equipment. They have been in this importing

business since 2008. They are not only importing but also they are wholesalers in

Pakistan. They supply their goods to different companies in Pakistan. Their main office

is in Lahore, but they are covering all over Pakistan. They import mainly from the United

Kingdom, the United States, and Canada. The success of their business expansion is

through the channels of marketing, and they have a good reputation among their

customers. Thus, word of mouth plays an important part which creates a sense of brand

awareness in the mind of customers.

3.4.2.2 Interviewee B

Interviewee B is doing an importing business of HP printers in Pakistan and have been in

this importing business for the last 7-8 years. They import all of these HP printers from

china. The main reason for importing products from China is because China sells these

HP printers at a very reasonable price. The Interviewee warehouse is in Lahore, Pakistan.

In addition to this, they have customers all over Pakistan. In Pakistan, many universities

are in demand of these HP printers, and thus, most of the universities are their customers.

They have a good reputation in the market, and customers are satisfied with company B.

They expand their business through the medium of marketing. By the medium of

advertising and promotion, they expand their business which helps them to create a brand

in the customer.

3.4.2.3 Interviewee C

The interviewee C is running an importing business of printers and photocopy machine

in Pakistan. They import these products from foreign countries like Canada and the

United States for 7-8 years. Their main warehouse is in Lahore, Pakistan. They are not

only importing in Lahore but also all over Pakistan. The main importing client is

28

Afghanistan. Their average number of clients in Pakistan is 40-50 roughly. Also, they

expanded their business through different marketing channels. According to them, this

helped them to grow their business and develop a good reputation with other clients. The

relationship with their customers is also very satisfying. The customer’s response to them

is good.

3.4.2.4 Interviewee D

Interviewee D is doing a business of import of Hardware electronics in Pakistan by

importing hardware items from countries like Canada, Dubai, and sometimes from China

as well. They have been doing import business for the past 11 years. They are running

through three different channels. They are importing from china to Dubai, and from Dubai

to Pakistan, and from Pakistan to their end customers. They have some foreign clients as

well. They are expanding their business towards Dubai and china now. In Pakistan, they

have roughly around 150 clients who are buying products from them. Their business is

growing day by day due to the marketing services they are providing to their customer.

3.4.2.5 Interviewee E

The company is doing a business of hardware equipment purchase from abroad. They are

mainly dealing with importing items like printer machine and photocopier. They have

been doing this business for the past seven years. The interviewee has business all over

the country. They are importing items from abroad mainly from the UK and sometimes

from Europe, and selling them as a wholesaler into the market. Company E has roughly

more than 100 clients in their country.

3.4.2.6 Interviewee F

Company F is doing business of hardware import in Pakistan. They are doing business

for the past 14 years of the importing from Hong Kong and the USA and have more than

300 clients in Pakistan. They have three suppliers from the USA and 5 in Europe. They

have started container importation since the import initiative introduced in 2007. Before

2007, they were buying products from abroad through air travel after import permission

given in 2007. They start importing from Hong Kong. As they are doing the import, they

have expanded the business in Pakistan. For that reason, they moved to America as the

demand for products has increased, and the USA is a big market as compared to Hong

kong.

29

Table 1: Table details of Qualitative interview

Participant Gender Position Business

Nature

Length of

interview

A Male Owner Import of

hardware

30 min

B Male Joint Owner Import of

hardware

35 min

C Male Owner Import of

hardware

30 min

D Male Partner Import of

hardware

40 min

E Male Owner Import of

hardware

45 min

F Male Owner Import of

hardware

25 min

30

3.5 Analysis

The actual data gathered from the conducted semi-structured interview carried out by

using the thematic analysis. Thematic analysis is the method to identify, analyze, and

reporting of patterns within collected data (Braun & Clarke, 2006). This method used for

qualitative data that is related to the inductive study. This method allows finding out

similarities and dissimilarities that develop from the gathered information (Ryan &

Bernard, 2003). One of the main reasons to choose this method is his flexibility (Braun

& Clarke, 2006). It can use for inductive and deductive approaches.

Thematic analysis has six main phases developed by (Braun & Clarke, 2006). This six-

phase of thematic analysis is going to discuss in the analysis section. For this analysis,

the first step is to transcribe the interviews in writing. This process of transcribing of

interviews helps us to be familiar with the data received from the interviews. All the

interviews were written and read again and again to get a better understanding. The

second step is coding after writing interviews and in-depth knowledge, codes developed

by authors. Codes are repeated phrases, words, and data that seem interested in our

research. Developing codes can later relate to all interviews to that helps to generate

themes. Generating themes are the third phase. This case study is an inductive approach

where no codes established before the research started. All themes are, developed from

the gathered data, and categories constructed and developed from the participant's study.

To find out the themes from the transcribed interview, the authors developed the codes to

understand the meaning of this study and later added value in this study. The next phase

is reviewing themes. After generated the themes, authors developed codes, to examine in

this step. This review helps to find out that those first rendered themes have some value

to add this study or not. After the assessment, only those themes consider that later helped

to find the gaps in the research. This theoretical framework developed from literature,

have importers experiences and values from the practical field. In this part, the clear

connection of raw data can be seen by readers, which gathered through interviews and

the theoretical framework that was developed by authors. In the fifth part, names were

given by authors to themes which were more appropriate for our research study. We have

given names to our generated themes that help the reader to get a clear understanding of

codes. The last step is, produce a final report. This step involves making a final report

after analyzing the themes we had with the research question and findings. In this part,

31

the clear connection of the raw data can see which gathered through interviews and the

theoretical framework that was developed by authors. This connection carefully evaluated

and analyzed to assure the quality of the study in search of accurate results. The primary

data from the interviews established the base for the interpretation of the work.

Figure 3: Codes and Themes:

CODES THEMES

One of the most common ways to report findings from the data collected is by organizing

data and then go through the process of coding and themes. Authors further analyzed the

data collected through conducting the interviews in details. The process of coding and

themes was carried out by authors to get a clear overview of the data and to have the

findings for analysis. Firstly, data was transcribed on sheets and read several times to be

familiar with all the aspects. Written data used for understanding the interviews well, at

the same time as also having the purpose of the study in mind. Taking initial notes help

us to generate numerous amounts of codes from all the interviews. As the exploratory

phenomenon was the research design, the intention was to analyze the interviews as an

Profit

maximization

Direct buying

Monopoly

Price variation

Product range

Bulk Quality

Market coverage

Business expansion

New technological

models

High demand

Competitive advantage

Relationship

Product Development

Cost leadership

Product

Diversification

Technological

Innovation

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empty sheet so nothing can affect our inductive approach. The interviews were replayed

by authors to many times to understand all angles thoroughly and to determine what else

can explore. To perform the first step of coding, the phrases that authors use are; how,

when, and why. Authors used this approach to understand the phenomenon of

heterogeneity, being closest to our research questions. After creating first-level codes, we

searched for themes that can help us to explore our research questions. Furthermore, all

of the themes and codes compared with each other, and only essential codes were

selected.

More than 300 codes then written in an initial stage, including the principal codes listed

in the above figure which intended to support the thesis topic and the research questions.

Similarly, themes were also generated from the selected principal codes and also included

in the figure above. These generated themes were a bit different from the literature. Also,

the coding behind them was a new endeavor. The connection of these themes has explored

to help firms have competitive advantages over others.

3.6 Ethical Consideration

There are eleven categories of the ethical principles that were developed by Bell and

Bryman (2007) to protect the quality of research in business management. However,

management scholars have shown considerable desire in the principle of ethics, used by

professionals to regulate behavior. This consideration includes accountants, business

associations, public relations, and marketing executives, far less consideration has paid

towards ethical principle in the management business conduction (Bell & Bryman, 2007).

The primary purpose of developing this model is to avoid any conflict of interest because

many researchers are conducting the same research in a different situation and also has

the influence of affiliation. As some of the researches paid by the sponsors. The eleven-

principle used in our thesis mentioned below.

(i) Harm to participants: there was no harm caused to any of the participant interviewees,

physically or psychologically. As our research process is quite friendly and does not

include any wrong question or psychological effected scenario. (ii) Dignity: we respect

the dignity of the participants by showing them respect in communication and trusting

their experience and responses so they can speak without any pressure. (iii) Informed

consent: is fully kept in our mind as we asked their full permission and consent before

starting interviews and even asked about recording of interviews, so they do not feel

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betrayal. (iv) Privacy: were protected as no information or personal details like business

inside, and about their family, asked in interviews (v) Confidentiality: were kept as our

priority as we do not disclose their any information with anyone. By keeping the

interviews confidential, we ensure that they can speak the authentic experiences (vi)

Anonymity: is kept under consideration as we do not disclose their names or companies

details as it can create a problem for them. Also, by keeping their identity anonyms, we

make sure that they can speak their heart out without any fear. (vii) Deception: we avoid

any deception about our research aim or the purpose of the study, as we clearly state them

our educational purpose behind these interviews. (viii) Affili