Antecedents of Firm Export Performance:
The Role of Export Promotion Programs

Submitted by

A. K. Shamsuddoha
B.Com. (Honours), M.Com. (Rajshahi), M.Com. (La Trobe)

A thesis submitted in fulfillment of
the requirements for the degree of
Doctor of Philosophy

School of Advertising, Marketing and Public Relations

Faculty of Business

Queensland University of Technology
Brisbane, Queensland 4000
Australia

2004


Key Words

Antecedents of export performance,
Impact of Export promotion programs,
Export Assistance Programs,
Developing country,
Bangladesh.

ii


Abstract
This study empirically investigates the direct and indirect effects of export promotion
programs (EPPs) on firm export performance. Government export promotion
programs normally define the premise for successful exporting activities of the
corporate sector and play a key role in stimulating international business activities of
firms (Cavusgil and Michael, 1990; Marandu, 1995; Seringhaus and Rosson, 1990).
While the extant literature on export performance mostly neglected EPPs as an
antecedent of export performance, the literature on export promotion fails to relate it
to export performance. A very few researchers in this area have focused on a direct
relationship between EPPs and firm export performance, however, no study has
investigated the effect of EPPs on other determinants of export performance toward
establishing any indirect relation between EPPs and export performance. This study
attempts to develop and test a comprehensive model of firm export performance that
investigates how EPPs directly and indirectly influence firm export performance.
Theoretical foundations are drawn from internationalization process and resourcebased theories as frameworks for the analysis of the study. The model integrates the
use of EPPs, management perception of export market environment, export
knowledge, export commitment, and export strategy that influence firm export
performance and develops a number of hypotheses. Export promotion programs are
classified into two categories according to their similarity of purpose- “market
development”, and “finance and guarantee” related programs. All other variables in
the model are latent and are measured by a set of observed items. The model is tested
on primary data obtained from a sample survey of exporting firms drawn from three
major export oriented industries in Bangladesh. Structural Equation Modeling (SEM)
techniques (in AMOS 5) are used to test the validity of the overall model and the
relationship between variables hypothesized in the model. A two stage process is
employed whereby the construct measurements are first evaluated, followed by an
evaluation of the structural relationships.

Analysis of the structural relationships supports most of the hypothesized
relationships. The dimensions of export promotion programs are found to positively
impact overall export performance. The research findings demonstrate that the use of
market development-related export promotion programs influence firm export
performance directly as well as indirectly through management perception of the
export market environment, export knowledge and commitment. However, finance
and guarantee-related export promotion programs indirectly influence export
performance through export commitment. The study provides a guideline for
managers of firms suggesting how they can benefit from EPPs in improving their
positive attitude towards the export market environment, building their knowledge
and enhancing commitment to exporting for better success in their international
operations. This study provides guidelines to policymakers in designing and targeting
export promotion programs effectively. The study also contributes to the literature by
examining the indirect impact of EPPs on firm export performance. Finally, the
limitations of the study are considered and possible directions for further research
outlined.

iii


Table of Contents

Key Words ……………………………………………………………………...
Abstract …………………………………………………………………………
List of Tables……………………………………………………………………
List of Figures…………………………………………………………………..
List of Abbreviations……………………………………………………………
Statement of Original Authorship……………………………………………….
Acknowledgements……………………………………………………………...
Publications and Conferences


ii
iii
vii
viii
ix
x
xi

Chapter 1 Introduction
1-8
1.1
The research focus ..………………………………………………….1
1.2
The research problem, the question and the objective .………….…...2
1.2.1 The research problem…………………………..………….… 2
1.2.2 Research question and objective of the study…..…………….5
1.3
1.4
1.5

The research significance……………….………………..…………...5
The research methodology……….………………………..………….7
Organization of the thesis………………………………….………....7

Chapter 2 Literature Review
9 - 61
2.1
Introduction…………………………………………………..……….9
2.2

Theoretical foundations of firm export performance…………..……. 9
2.2.1 International trade theory………………………………..…..10
2.2.2 Internationalization process/stage theory………………..…..13
2.2.3 Competitive strategy theory………………………………....15
2.3

Definitions, determinants and measures of export performance…....18
2.3.1 Conceptual definitions of firm export performance….……. 18
2.3.2 Determinants of export performance………………….…… 19
2.3.3 Models of export performance………………………….….. 29
2.3.4 Measures of export performance………………………...... 38

2.4

Export promotion related literature……………………………..….. 42
2.4.1 Studies on how to develop export promotion programs….…45
2.4.2 Studies on the impact of export promotion programs on firm
export performance……………………………………….…53

2.5

Conclusion..………………………………………………………... 59

Chapter 3 The Research Model and Hypotheses
63 - 81
3.1
Introduction……………………………………………………….…63
3.2
The research model and hypotheses ………………………………..63
3.3

Conclusion ……………………………………………………….....80

iv


Chapter 4 Research Methodology
83 - 118
4.1
Introduction…………………………………….……………………83
4.2
Operationalization of variables………………….…………………..83
4.3
Research methods……………………………….…………………..91
4.3.1 Nature of research ……………………….………………….91
4.3.2 Questionnaire – the research instrument….…………………92
4.3.3 Translation of research instrument ……….………………....93
4.3.4 Pre-test of research instrument…………….………………...95
4.3.5 Final questionnaire ………………….…….………….……...95
4.3.6 Key informant……………………………….……….………96
4.3.7 Population and sample……………………….……….……...97
4.3.8 Sample size…………………………………….…….……....98
4.3.9 Data collection, data editing and entry………….……….…100
4.3.10 Non-response bias………………………………...………..102
4.3.11 Check for outliers………………………………..……….. .103
4.3.12 Basic descriptive statistics of the sample………..……….. .104
4.3.13 Validity and reliability of research instrument….……….. .107
4.4

Data analysis procedures ……………………………….………… 108
4.4.1 Factor and reliability analysis……………………………...109

4.4.2 Structural equation modeling (SEM)……………………....110
4.4.2.1 Advantages of structural equation modelling…….. 112
4.4.2.2 Characteristics of structural equation modeling
application………………………………………… 113
4.4.2.3 Identification……………………………………… 113
4.4.2.4 Estimation……………………………………….. ..114
4.4.2.5 Assessment of overall model fit……………….…...115

4.5

Conclusion…………………………………………………….….. 118

Chapter 5 Analysis and Results
119 - 162
5.1
Introduction…………………………………………………….…. 119
5.2
Results of exploratory factor analysis ………………………….….119
5.2.1 Export commitment………………………………………..121
5.2.2 Export knowledge………………………………………….123
5.2.3 Export strategy……………………………………………..124
5.2.4 Management perception of export market environment…. .125
5.2.5 Export performance……………………………………… .128
5.2.6 Summary of the exploratory factor analysis results……….128
5.3

The structural equation model…………………………………… .129
5.3.1 Measurement models…………………………………….. .130
5.3.1.1 Export commitment……………………………… .132
5.3.1.2 Export knowledge……………………………….…134

5.3.1.3 Export strategy………………………………….… 135
5.3.1.4 Management perception of export market
Environment .………………………………………137
5.3.1.5 Export performance……………………………..…138
5.3.1.6 Summary of the measurement models………….….139

v


5.4
5.5
5.6

Results of structural equation model……………………….....…...141
Discussion of the results……………………………………....…...147
Conclusion…………………………………………………....……158

Chapter 6 Summary, Conclusions and Implications
163 - 179
6.1
Introduction…………………………………………….....………. 163
6.2
Overview of Research…………………………………….....……. 163
6.2.1 Previous research………………………………....…....…. 164
6.2.2 Proposed model…………………………………….........….67
6.2.3 Questionnaire development and administration……….......167
6.2.4 Model testing and research findings………………....…… 168
6.3

Contributions of the study………………………....….……………170

6.3.1 Theoretical perspective…………………….....……………170
6.3.2 Managerial perspective……………………….....…………173
6.3.3 Public policy maker perspective………………….....……..174

6.4
6.5
6.6

Strengths and limitations of the study……………………….....…. 176
Future research direction……………………………………….......177
Conclusion………………………………………………....……... 179

Appendix A: Letter from Supervisor and Head of School……………………..181
Appendix B: Survey Instrument (English version)………………………182 - 193
Appendix C: Survey Instrument (Bangla version)……………………….194 - 207
Bibliography …………………………………………………………… 209 - 229

vi


List of Tables
Table 2.1
Table 2.2
Table 3.1
Table 4.1
Table 4.2
Table 4.3
Table 4.4
Table 4.5
Table 4.6

Table 4.7
Table 4.8
Table 5.1
Table 5.1a
Table 5.2
Table 5.3
Table 5.4
Table 5.4a
Table 5.5
Table 5.6
Table 5.7
Table 5.8
Table 5.9
Table 5.10
Table 5.11
Table 5.12
Table 5.13
Table 5.14
Table 5.15
Table 5.16
Table 5.17

Determinants of Export Performance…………………………….
Past Empirical Studies on Export Promotion Programs………….
Summary of Hypothesized Relationships………………………..
Concept, Conceptual and Operational Definition, and
Measurement of Variables……………………………………….
Total Population, Sample Drawn and Response Rate……………
Distribution of Respondents by Industry Type…………………..
Distribution of Respondent Firms by the Number of Employees..

Distribution of Respondent Firms by Length of International
Experience………………………………………………………..
Summary of Respondents’ Personal Characteristics……………..
Reliability of the Purified Scales…………………………………
Goodness of Fit Criteria and Acceptable Fit Interpretation……..
Extracted Factors and Factors Loadings Related to Export
Commitment ……………………………………………………..
Extracted Factor and Factors Loadings Related to Export
Commitment ……………………………………………………..
Extracted Factor and Factor Loadings Related to Export
Knowledge………………………………………………………..
Extracted Factor and Factor Loadings Related to Export Strategy
Extracted Factors and Factor Loadings Related to Management
Perception of Export Market Environment………………………
Extracted Factors and Factor Loadings Related to Management
Perception of Export Market Environment …………………….
Extracted Factor and Factor Loadings Related to Export
Performance………………………………………………………
Model Fit Statistics………………………………………………
Export Commitment – Factor Loadings, Critical Ratios and PValues…………………………………………………………….
Export Knowledge – Factor Loadings, Critical Ratios and PValues…………………………………………………………….
Export Strategy – Factor Loadings, Critical Ratios and P-Values
Export Process – Factor Loadings, Critical Ratios and P-Values
Export Performance – Factor Loadings, Critical Ratios and PValues…………………………………………………………….
Correlation Matrix between the Constructs, Means and Standard
Deviation………………………………………………………….
Results of the Analysis of the Structural Equation Model……….
Standardized Direct, Indirect, and Total Effects Among the
Constructs…………………………………………………………
Standardized Solutions for the Structural Equation Model of

Export Performance………………………………………………
Hierarchical Regression Models………………………………….
Summary of Research Hypotheses and esults………………161 -

vii

21
44
81
85
102
104
105
106
107
108
117
122
122
123
124
126
127
128
133
134
135
136
138
139

140
143
144
146
158
162


List of Figures
Figure 2.1
Figure 2.2
Figure 2.3
Figure 2.4
Figure 2.5
Figure 2.6
Figure 2.7
Figure 2.8
Figure 2.9
Figure 2.10
Figure 3.1
Figure 4.1
Figure 5.1
Figure 5.2

The Aaby and Slater Model (1989)……………………………… 30
The Cavusgil and Zou Model (1994)…………………………….
31
The Katsikeas, Piercy, and Ioannidis Model (1996)……………..
33
The Lages Model (2000)…………………………………………

34
The Katsikeas, Leonidou, and Morgan Model (2000)…………
36
The Leonidou, Katsikeas, and Samiee Model (2002)
37
The Bruning Model (1995)………………………………………
46
The Singer and Czinkota Model (1994)…………………………
55
The Marandu Model (1995)……………………………………..
56
The Gencturk and Kotabe Model (2001)………………………..
58
A Conceptual Model of Firm Export Performance……………..
66
The Direct and Indirect Effects………………………………….. 111
A Testable Model……………………………………………….. 141
The Empirically Tested Structural Model of Firm Export
Performance……………………………………………………… 145

viii


List of Abbreviations
ADF
AGFI
AIC
AMOS
ANOVA
BFLLFEA

BG
BGMEA
BTTLMEA
CFA
CFI
CMIN/DF
CR
EFA
EPB
EPPs
FDI
FEP
GFI
H-O-S
IE
KMO
LDCs
ML
NFI
PLC
RMSEA
SEM
SPSS
TLI
ULS
US
USA

= Asymptotically Distribution free
= Adjusted Goodness-of-Fit Index

= Akaike Information Criterion
= Analysis of Moment Structures
= Analysis of Variance
= Bangladesh Finished Leather, Leather goods and Footwear
Exporters Association
= Born Global
= Bangladesh Garment Manufacturers and Exporters Association
= Bangladesh Terry Towel and Linen Manufacturers and Exporters
Association
= Confirmatory Factor Analysis
= Comparative Fit Index
= Chi-square/ Degree of freedom
= Critical Ratios
= Exploratory Factor Analysis
= Export Promotion Bureau
= Export Promotion Programs
= Foreign direct Investment
= Firm Export Performance
= Goodness-of-Fit Index
= Heckscher-Ohlin-Samuelson
= Initial Estimates
= Kaiser-Meyer-Olkin
= Less Developed Countries
= Maximum Likelihood
= Normed Fit Index
= Product Life Cycle
= Root Mean Square Error of Approximation
= Structural Equation Modelling
= Statistical Package for Social Science
= Tucker-Lewis Index

= Unweighted Least Squares Estimates
= United States
= United States of America

ix


Statement of original authorship
“The work contained in this thesis has not been previously submitted for a degree or
diploma at any other higher education institution. To the best of my knowledge and
belief, the thesis contains no material previously published or written by another
person except where due reference is made.”

Signed: __________________________
Date:

__________________________

x


Acknowledgements
A dissertation is a mosaic of contributions from several people; without their cooperation and unhesitating assistance the task would be impossible. First, I gratefully
acknowledge the privilege of having received an International Post Graduate
Research Scholarship (IPRS). Additional funding received from the School of
Advertising, Marketing and Public Relations (AMPR) and the Faculty of Business,
QUT, made this study possible. These sources of funding were greatly appreciated. I
am also grateful to the University of Rajshahi for providing me study leave during
this study.
I would like to express my deepest gratitude to my supervisor, Senior Lecturer Dr.

Yunus Ali for his invaluable advice, guidance, encouragement, patience and time
devoted throughout his supervision of this thesis. Without his patient criticism and
generous willingness to spend his valuable time with me discussing many issues, I
may never have reached the dissertation stage at all.
I am also sincerely grateful to my Associate Supervisor, Professor William Renforth
for his constructive suggestions, guidance, time, encouragement and support up to
data analysis stage of this thesis. A special thank must also go to Dr. Stephen Cox for
his support in data analysis and valuable advice on statistical issues. I would further
like to thank Dr. Mohammad Alauddin, Dr. A. B. M. Rabiul Alam Beg and Dr. M.
Jahangir Ali for their insight and helpful suggestions on different parts of this thesis. I
am also grateful to company executives who provided me valuable information in this
study. My special appreciation goes to Mr. Hafizur Rahman, Joint secretary,
BGMEA, Md. Fazle Hossain, Assistant secretary, BGMEA, Mr. Omar Farouq,
Deputy Director, EPB, and Mr. Rabi-Ul Hasan for their support and assistance during
the field studies in Bangladesh.
I would also like to thank Professor Charles Patti, the Head of School of AMPR,
QUT, and his administrative staff for their support by way of providing excellent
facilities and equipment to make it possible to complete this thesis.
This dissertation marks the culmination of many years of support and encouragement
on the part of my parents, brother, and sisters. My parents provided me with a love of
learning, the desire to achieve, and the determination and perseverance to succeed.
Without the support and encouragement of my family, this dissertation could never
have been completed.
I am especially indebted to my wife, Soji, for her patience and devotion. In fact, I
would “share” my degree with her. Without her love, trust, encouragement and
countless hours of work, my doctoral studies would never have been completed.
Throughout, my children, Puspo and Porag have been an important source of
inspiration.
Many friends assisted me in a variety of ways during my graduate studies. To all of
them, thank you.

Finally I wish to dedicate this thesis to the memory of my late father, late sister and
late grandmother. My only regret is that they were not with me to its completion.

xi


Publications and Conferences
Shamsuddoha, A. K., and M. Y. Ali, (2005), Causal Effects of Export Promotion
Programs on Internal Determinants of Firm Export Performance: Empirical Evidence
from a Developing Country, in the Proceeding of the 34th European Marketing
Academy Conference (Full paper on CD, ISBN ), Bocconi University, Milan, Italy, 23
– 27 May, 2005.
Shamsuddoha, A. K., and M. Y. Ali, (2005), Causal Effects of Export Promotion
Programs on Internal Determinants of Firm Export Performance: Empirical Evidence
from a Developing Country, in the Proceeding of the 34th European Marketing
Academy Conference (Abstract), Bocconi University, Milan, Italy, 23 – 27 May,
2005, p. 170.
Shamsuddoha, A. K., and M. Y. Ali, (2004), Direct and Indirect Impact of Export
Promotion Programs on Export Performance. Abstract in Marketing Accountabilities
and Responsibilities, Book of Abstracts and Program ANZMAC 2004, Victoria
University of Wellington, New Zealand, pp. 182.
Shamsuddoha, A. K., and M. Y. Ali, (2004), Direct and Indirect Impact of Export
Promotion Programs on Export Performance. Full paper in Australia New Zealand
Marketing Academy Conference Proceedings (On CD, ISBN CD 0-475-22215-1),
Victoria University of Wellington, New Zealand.
Shamsuddoha, A. K., and M. Y. Ali, (2002), The Role of Export Promotion Programs
in Economic Development of Bangladesh. Paper presented at the conference
Bangladesh in the New Millennium: Unveiling Development Challenges and Visions,
and abstract published in the Conference Proceedings, School of Economics,
University of Queensland, Australia, pp. 53.


xii


Chapter 1
Introduction

1.1 The Research Focus

Export can play a very important role in contributing to a nation’s economic
prosperity. Increased exports can result directly or indirectly in an increase of
domestic production, economic growth, a decrease in the unemployment rate, and the
generation of foreign currencies to meet import costs. A country’s ability to compete
successfully in world markets, maintain a favorable balance of trade and control its
external payments situation reflect its economic strength and marginal competence
over other nations. The government of a country is to some extent responsible for the
general economic health of a nation. It can directly and indirectly influence firms’
business objectives. Given the role exports play in constituting the wealth of a nation,
export development is certainly an aspect of economic development to which
responsible governments must pay attention. The government should intervene in
foreign trade, not aim to raise barriers to imports but to promote a nation’s exports. In
almost every developing country, government policy makers view exports as a top
priority in their national planning policies. This awareness of the importance of
exports also exists in most highly advanced countries as well.

Favorable macro environmental factors are thought to be preconditions for exporting
but whether a firm actually exports or not depends on the micro level firm factors
where the firm’s decisions affecting export success or failure are made. These micro
level factors include strategies to be used, organizational structures created to
formulate and carry out new strategies, and the caliber of management needed to

make decisions. Given the same combination of strategy, structure, and management
factors, a favorable macro environment raises overall export performance, while an
unfavorable environment lowers overall export performance (Marandu 1995). Some
external environmental factors, such as national export promotion measures, or the
competitive position of the firm’s product in foreign markets, usually define the
Chapter 1. Introduction

1


parameter for successful exporting activities. Governments can play a key role in
stimulating the international business activity of domestic firms through export
promotion programs (Cavusgil and Michael, 1990). From a government’s point of
view, offering export support programs is intended to improve the international
competitiveness of domestic firms. From a firm’s perspective, export promotion
measures attempt to reinforce the motivations of a firm to export. These motives
include exploitation of technological advantage, the ability to offer unique products,
the maximization of comparative marketing advantages, and the need for market
diversification (Seringhaus and Rosson, 1990). The use of export promotion
programs (EPPs) provides better pay off in terms of a firm’s competitive position
(overall strength of the firm) and efficiency (profitability) and is reflected in the
export performance of existing exporters and encouraging more firms to export
(Gencturk and Kotabe, 2001). Therefore, an assessment of the effectiveness of export
promotion programs is an important step toward achieving sustainable economic
development of a country. Despite increasing scholarly attention over how to improve
the efficiency of assistance programs (Kotabe and Czinkota, 1992; Moini, 1998;
Seringhaus and Botschen, 1991), the effectiveness of export promotion programs on
firm export performance (FEP) has not been examined conclusively. This study will
make a significant contribution to our understanding of the impact of export
promotion programs on firm export performance.


1.2 The Research Problem, the Question and the Objective
1.2.1 The Research Problem

The complexity of international business and the lack of know-how can place a firm
at a competitive disadvantage (Rabino, 1980; Ramaswami and Yang, 1989;
Seringhaus, 1986). It has become increasingly apparent that knowledge and expertise
are the critical factors in competing in foreign markets. In addition, several barriers to
exporting exist that can impede firms in seeking or expanding export sales.
Information, knowledge, experience, and resources are needed to overcome export
barriers and export promotion programs have emerged to provide information,
knowledge, experience and resources to firms. Export promotion, while only one

Chapter 1. Introduction

2


element in the export development process, potentially contributes in a critically
important area, namely in motivating the business community and helping in the
learning process so vital in the global competitive environment. Although the
importance of export promotion programs is well recognized in the literature and
accorded appropriate priority (Seringhaus and Rosson, 1990), however, the empirical
support to the influence of such programs on firm export performance is limited. The
issue can be examined to what extent export promotion programs influence firm
export capabilities and export strategies and ultimately export performance.

Several studies have examined firm related determinants (such as firm characteristics
and competencies, managerial characteristics, management support, and export
marketing strategy) and external determinants (industry characteristics, foreign

market characteristics and domestic market characteristics) of firm export
performance in the mainstream of the export performance literature. However, a
limited number of studies (Donthu and Kim, 1993; Katsikeas, Piercy and Ioannidis,
1996) have examined the impact of export promotion programs on a firm’s export
performance. As an example, Donthu and Kim (1993) suggested that those who used
more outside export assistance from federal, local and private agencies had higher
export growth. Katsikeas, Piercy and Ioannidis (1996) did not include export
promotion programs as an independent variable in their model as such, but they found
national export promotion policies serve as an export stimulus that positively
influences export performance (goal achievement). These studies that somehow
examined the effect of EPPs on firm export performance are not rigorous enough. As
such, the extant literature on export performance has mostly overlooked export
promotion programs as an antecedent of performance.

On the other hand, a number of studies have concentrated on export promotion
programs and these studies suggest how such programs can be more effective. Some
studies (Gencturk and Kotabe, 2001; Marandu, 1995; Singer and Czinkota, 1994; and
Wilkinson and Brouthers, 2000) examined the direct relationship between export
promotion programs and export performance. Wilkinson and Brouthers (2000)
examined the effectiveness of four government export promotion programs (trade
shows, trade mission, foreign offices, and objective market information programs) in
attracting FDI and export of high-tech product and found only trade shows were
Chapter 1. Introduction

3


positively associated with the volume of high-tech exports (dependent variables).
Singer and Czinkota (1994) revealed a significant positive relationship between the
numbers of export assistance services used (management commitment/persistence in

their model) and the number of export outcomes achieved. That study suggested that
those who committed to use a greater number of export assistance services, tended to
perform more pre-export activities (making a decision to export, export planning,
making overseas market contacts and establishing export channels) and have greater
export performance (beginning to export, increasing exports of current products in
current markets, exporting new products and exporting to new countries). Their
analysis, however, was limited to examining a bivariate relationship between export
outcome type and type of service used.

Marandu (1995) suggests on the basis of an empirical study on Tanzania that the level
of usage of, and satisfaction with, export promotion services does have a positive
impact on export performance i.e., export intensity. However, Marandu’s (1995)
study fails to clearly conceptualize the relational path between export promotion
programs and export performance. Gencturk and Kotabe (2001) integrated export
marketing involvement and the use of state export promotion assistance programs as
critical variables affecting export performance. Their study is more comprehensive
than prior studies in this literature stream which incorporated managerial and
organizational characteristics variables in the research model and adopted more
rigorous statistical techniques to examine the impact of export promotion programs
on export performance in terms of efficiency, effectiveness and competitive position.
The Gencturk and Kotabe (2001) results suggested that the usage of export promotion
programs had a positive impact on a firm’s efficiency and competitive position but no
effect on its effectiveness. Though, this study incorporated managerial and
organizational characteristics variables in the model it did not examine how export
promotion programs influence them in the export performance model.

In conclusion, few studies have explored the empirical link between export promotion
programs and other determinants of performance toward establishing any indirect
relation between export promotion programs and export performance. However, the
internationalization process theory indicates how gradual knowledge acquisition leads

to greater commitment to exporting and international operations (Johanson and
Chapter 1. Introduction

4


Vahlne, 1977). The resource-based theory of the firm proposes that human
competencies in the form of knowledge and expertise are critical to superior
organizational performance (Barney, 1991; Coff, 1997). While these competencies
are internal and are acquired by firms, export promotion programs help firms to
obtain the information, knowledge, experience, and resources they need to develop an
export strategy and achieve better performance (Singer and Czinkota, 1994). This
suggests that there is a link between export promotion programs and other
determinants of export performance. Therefore, export promotion programs may also
influence firm export performance indirectly through other determinants of export
performance.

1.2.2 Research Question and Objective of the Study

For each research problem a research question is necessary to provide a platform for
developing a theoretical framework, data collection and analysis of the study. An
appropriate research question encapsulating this research problem is: how do export
promotion programs directly and indirectly effect firm export performance? This is
the central question which will be pursued through the thesis.

To seek an answer to this research question, the main objective of this study is to
develop and test a comprehensive model to examine the direct and indirect effects of
export promotion programs on firm export performance. Drawing on the literature a
conceptual research model was developed and empirically tested with primary data
collected for the study.


1.3 The Research Significance

The study has significance in broadening research and empirical knowledge about the
impact of export promotion programs on firm export performance. The contribution
falls into three categories: theoretical advancement of existing export performance
literature, advances in public policy issues relating to export promotion and practical
assistance to exporting firms.

Chapter 1. Introduction

5


First, from a theoretical perspective, our knowledge on the impact of export
promotion programs on the export performance of a firm is very limited. While the
extant literature on export performance mostly neglects export promotion programs as
an antecedent of export performance, the literature on export promotion fails to relate
it to export performance. This study contributes to the literature as to how export
promotion programs directly and indirectly influence firm export performance by the
inclusion of export promotion programs as an independent determinant in the export
performance model and empirically tests a number of hypotheses linking export
promotion programs with other determinants of export performance. Moreover, most
studies in the literature used the direct impact of global measures (all export
promotion programs are measured collectively) of export promotion programs on
firm export performance but failed to identify the impact of different categories of
programs (designed for different purposes). This study contributes to the literature by
examining the direct and indirect impact of two main categories of export promotion
programs (foreign market development-related programs; and finance and guaranteerelated programs) on firm export performance.


Second, most of the theoretical development and empirical testing of theories in this
field has been conducted in developed country contexts. This study fills a muchneeded gap in the literature with empirical findings concerning export behavior of
developing country firms thereby increasing the generalizability of the findings.

Third, this study contributes to the extension of the Uppsala model of
internationalization. The Uppsala model places an emphasis on experiential
knowledge toward developing commitment to export. However, the model does not
explain why or how the export process starts and the sequence of conditions are not
discussed. This study suggests export promotion programs, as sources of educational
knowledge (such as, trade show, trade mission, and training), that facilitates firm
entry into the initial export stage to gain experiential knowledge. This is a significant
contribution to the literature. Similarly, this study also contributes to extend the
resource-based theory by adding export promotion programs as sources of resources
in terms of experience, knowledge, information and physical support-related services
to fill the gap of internal resources of a firm toward achieving export goals.

Chapter 1. Introduction

6


Fourth, the study provides a guideline for managers of exporting firms as to how they
can benefit from export promotion programs in improving their positive attitude
towards the export market environment, building their knowledge and enhancing
commitment to exporting for better success in their international operations.

Finally, this study also provides some guidelines to policy makers in designing and
targeting export promotion programs effectively.

1.4 The Research Methodology


The purpose of this study is to test a theoretical model to answer the narrowly defined
research question. The model is probed for its validity and statistical significances of
the variables in the model. Therefore, structural equation modeling techniques are
applied to test the validity of the overall model and to test the relationship between
variables hypothesized in the model. A single country, Bangladesh, has been selected
as the context of this research to control heterogeneity of export promotion programs
across countries. Firms in three industries: apparel, leather & leather products, and
specialized textiles, formed the population for the study. A cross-sectional single
source design is used where the unit of analysis is an organization. A mail survey
with telephone follow up was used to collect the data.

1.5 Organization of the Thesis
This thesis is developed through six chapters providing details of the theoretical
background of the research, research variables and their measurement methods, data
source, analysis and interpretation of the findings, conclusion and recommendations
of the research. Following this introduction, Chapter 2 reviews the literature related to
the topic with a specific focus on the major concepts that impact this research. The
literature is classified into three streams (theoretical background, empirical studies
conducted on firm export performance as well as export promotion programs), which
provide the theoretical framework within which this study fits and the platform on
which the research question is developed. A research model, conceptual definitions of
the variables and detailed hypotheses of the study are presented in Chapter 3.
Operational definitions and measurements of the variables, the survey procedures and
Chapter 1. Introduction

7


methods used to collect the data, an overview of the sample characteristics and the

statistical techniques for data analysis in this study are discussed in Chapter 4.
Findings of statistical analyses are reported and interpretations of the results are
discussed in Chapter 5. Finally, Chapter 6 concludes the work with an overview and
implications for management. The strengths and limitations of the study are also
discussed and recommendations for further research are presented in this chapter.

Chapter 1. Introduction

8


Chapter 2
Literature Review
2.1 Introduction
With the growing internationalization of the world economy, there has been
increasing concern regarding export performance (Donthu and Kim, 1993). Superior
export performance is of vital interest to three major groups: public policy makers,
business managers involved in export and marketing researchers. First, public policy
makers view exporting as a way to accumulate foreign exchange reserves, increase
employment levels, improve productivity, and enhance state prosperity (Czinkota,
1994). Second, business managers see exporting as a tool to boost corporate growth,
increase capacity utilization, improve financial performance, strengthen competitive
edge, and ensure company survival in a highly globalized marketplace (Kumcu,
Harcar and Kumcu, 1995; Samiee and Walters, 1990). Third, marketing researchers
consider exporting a challenging, but promising area, for theory building in
international marketing (Zou and Stan, 1998). The focus of this review is to draw and
consolidate knowledge from related literature to synthesize a model which examines
the extent to which export promotion programs influence the export performance of
firms. The following literature review serves a number of purposes. The theoretical
foundations describing the export performance of a firm are discussed in Section 2.2.

Section 2.3 reviews the determinants of export performance at the firm level,
including definition and measurement issues. The emphasis in this section will also be
on the theoretical framework used in those studies. Section 2.4 of the chapter reviews
in detail the export promotion program-related literature to understand its position in
the study of export performance. Finally, the literature synthesis is simplified and a
testable research model derived.
2.2 Theoretical Foundations of Firm Export Performance
Theory is a very useful tool for developing research ideas and then tying those ideas
to existing knowledge. Theories use a few principles to explain and summarize a
large number of facets, and they are a source of hypotheses that stimulate new
discoveries (Mitchell and Jolly, 1996). Three broad theories of international

Chapter 2. Literature Review

9


marketing/trade that provide the underpinnings to developing firm export
performance are critically reviewed below in brief.

2.2.1 International Trade Theory
A platform of scholarly contributions has been constructed to better understand the
phenomenon of export trade. Pioneers in this field were economists, who proposed
several theories on the engagement of nations in foreign trade. The most notable trade
theories are: absolute advantage (Smith, 1776), comparative advantage (Ricardo,
1817), factor endowment (Heckscher, 1919; Ohlin, 1933; Samuelson, 1948), and
product life cycle (Vernon, 1966; Wells, 1968). The basic idea of these theories is
that trade brings gains in national income through specialization and productive
efficiency.


Adam Smith wrote in “The Wealth of Nations” (1776) that nations should export
goods that are produced cheaply and import goods that are produced dearly, which is
known as the theory of absolute advantage. In addition, he also referred to trade as an
exchange of surplus commodities above their domestic demand. However, Smith saw
no possibility of trading between two countries when one was able to produce every
commodity at an absolutely lower real cost than the other.

David Ricardo (1817) later advanced Adam Smith’s theory of absolute advantage
with the concept of relative cost advantage. Ricardo contends that countries tend to
specialize in production and export those commodities for which they have a relative
cost advantage, and import commodities for which they have a relative cost
disadvantage.

These classical theories of trade were based on a number of important assumptions.
First, it assumed that transportation costs were zero and factors of production were
mobile domestically, but immobile internationally. Second, the law of comparative
advantage was based on a two-country model. Third, the amount and efficiency of
labour input was assumed to be the sole determinant of the cost of production. These
assumptions proved too simple for the real world. In recent years, countries have
traded in both commodities and factors of production. The neoclassical model of

Chapter 2. Literature Review

10


trade developed by Heckscher (1919), Ohlin (1933), and Samuelson (1948) addressed
some of the shortcomings of Smith and Ricardo’s classical theories.

The Heckscher-Ohlin-Samuelson (H-O-S) theory maintains that a nation’s

comparative advantage is determined by the relative abundance of its factors of
production, such as capital and labor. Export facilitates intensive use of the country’s
relatively abundant factors and import conserves the use of a country’s relatively
scarce factors. The H-O-S theory is based on a number of simplified assumptions.
First, the model consists of only two countries, two factors of production in fixed
amounts, and two goods. Second, each country possesses identical preferences
(demand patterns) and technology. Third, factors are fully mobile within countries,
but immobile between countries. Fourth, perfect competition in all markets and zero
transportation costs are assumed.

Leontief (1953) was the first economist to test the H-O-S model empirically. He used
United States data for the year 1947, expecting to find that the United States exported
capital-intensive goods and imported labor-intensive goods, since it was the most
capital- abundant nation in the world. However, the result was contrary to his
predictions. It showed that United States’ imports (calculated from import
substitution goods) were more capital-intensive than its exports (the Leontief
Paradox). Some explanations of the Leontief Paradox are: a) factor intensity reversal:
the capital- labor ratio of producing a particular good may vary according to wagerental ratios (Minhas, 1962); b) natural resources: when natural resources become
scarce and natural resources and capital are complimentary, those goods whose
production require large quantities of natural resources will also require large
quantities of capital (Vanek, 1959); c) skills and human capital: labor is not
homogenous and the export sector could use higher skills compared to the import
competing sector (Kravis, 1956; Keesing, 1966); and d) tariffs and other protection
measures imposed in foreign trade distort the pattern of trade (Travis, 1964).

In the 1960s researchers at the Harvard Business School (Vernon, 1966; Wells, 1968)
provided a new explanation of international trade and investment patterns in the
Product Life Cycle (PLC) theory. In the model, Vernon (1966), and Wells (1968),
identified four stages in the life cycle of a product: introduction stage, growth stage,
Chapter 2. Literature Review


11


maturity stage, and decline stage. The life cycle theory of world trade holds that
advanced countries like the US play the innovative role in product development.
These countries are producers and net exporters of the new product at the first stage.
Later on, other relatively less advanced countries take over the market position held
by the innovative country (Darlin, 1988). The second stage countries would go
through the same cycle as did the innovative country and, in turn, would lose their
markets to the next group of countries, such as third world countries as the
technology matures further and becomes more labor intensive compared to other new
generation products. Thus, a product initially produced in advanced countries would
eventually be produced only in less-developed countries (LDCs), with the result that
the innovating countries would meet their needs for that product through imports
from LDCs. Vernon (1966) and Wells (1968) suggest that market size and level of
economic development are important in explaining trade and investment patterns in
the early and middle stages of the product life cycle, while costs of the factors of
production are significant in explaining the role of developing countries in later
stages.

The theory suggests that a product is initially produced and consumed in an advanced
country and gradually its production shifted to relatively less advanced countries as
the product reaches its relative mature stages. Finally, the product is produced in lessdeveloped countries and exported to advanced countries at the maturity stage of its
PLC because LDCs are better endowed for its production than the advanced
countries. The PLC theory is effectively a theory explaining shifts in the production
of a commodity across countries and the consequent direction of trade in terms of
endowments of skills and technology.

In summary, although these international trade theories are useful for the analysis of

broad issues pertaining to international trade, their value is limited insofar as they can
only partially explain the export behavior of an individual firm (Wells, 1968; Bilkey,
1978; Cannon, 1980). In reality, international trade is far more complex than the
limiting assumptions upon which the theories of international trade are based. Despite
these limitations, however, the theory of comparative advantage does demonstrate
that trade between countries can lead to increases in world output and can be mutually
beneficial to all nations. Moreover, international trade theories, which explain why
Chapter 2. Literature Review

12


nations trade with each other, are related concepts to international marketing. These
theories are aimed at understanding product flows between countries, either in the
form of exports or imports. In this situation, international marketing and international
trade are concerned with the same phenomenon (Krugman and Obstfild, 1991;
Rivera-Batiz and Rivera-Batiz, 1994; Sachs and Larrain, 1993; Yarbough and
Yarbough, 1994).

2.2.2 Internationalization Process/Stages Theory
Because of the limited scope of economic theories, many researchers adopt a more
microscopic approach. Their studies produced a number of models that
conceptualized the process by which individual firms initiated, developed and
sustained their involvement in exporting (Haar and Ortiz-Buonafina, 1995). These
models focused not only on the economic rationale of the export development
process, as do international trade theories, but also concentrated on firm specific
aspects of behavior related to trade (Albaum, Strandskov, and Duerr, 1998). There are
two popular general models explaining the internationalization process: the Uppsala
international process model (Johanson and Wiedersheim-Paul, 1975; Johanson and
Vahlne, 1977), and the innovation related internationalization models (Bilkey and

Tesar, 1977; Cavusgil, 1980; Reid, 1981; Czinkota, 1982; Naidu and Rao, 1993).

The Uppsala internationalization model (Johanson and Wiedersheim-Paul, 1975;
Johanson and Vahlne, 1977, 1990) has received considerable attention over the last
two decades as an explanation of firm export behaviour. The model implies four
distinctive stages of gradually increasing foreign involvement which firms follow on
their way to becoming fully internationalized: 1) no regular export activities; 2)
export via independent representatives; 3) establishment of an overseas sales
subsidiary; and finally, 4) foreign processing and production. This process model
emphasizes the incremental path of internationalization through the gradual
acquisition, integration, and use of experiential knowledge about markets located
abroad. Internationalization hinges on two aspects: knowledge processed by the firm
about specific foreign markets and commitment of firm resources to those markets.
The model assumes that management will not commit higher levels of resources to a
market until it has acquired increasing levels of experiential knowledge through lower
level commitment such as unsolicited exporting. Because such learning is timeChapter 2. Literature Review

13