39-3: 'A: .3. ,3 . Mk1" 4‘}? ‘ ‘ . I .1; VA , ‘ . '73:??- ‘9 55% . H. Samgx‘w We?» : w mg? : ‘Eh‘c' W 4‘13“!" ‘ " 1 9 7 I l , ’4 ‘55} 5513i f ‘4 WW ‘ H v ' ' .a “72%: .4“! W...“ ‘tflm- --5 ES“; _ :_4.¢ - THESIS mill!!!lllllllII/IINI/Ill/IIUIIHWIIMHHI L 'M ”and ichi an a e L "5,5,?! 1 This is to certify that the dissertation entitled AN EXAMINATION 0F FACTORS THAT ‘ INFLUENCE EXPORT INVOLVEMENT ‘ presented by CATHERINE NANCY AXINN has been accepted towards fulfillment of the requirements for _Ph-_D-__ degree in Market ing Major professor Ronald Savitt Date 7% 22/ /7g5 I , MSU RETURNING MATERIALS: Place in book drop to L15RAR155 remove this checkout from .—:—. your record. FINES will be charged if book is returned after the date ”Stamped below. PM ‘4 '7} .M. . le' Hi" 8178 a; K159 W’m». tall 57‘”. 100 A216 31 K182 _ not-W“? _ , , is Wywm ‘ ‘ N0 7001 16 WHZ 32 K099 AN EXAMINATION OF FACTORS THAT INFLUENCE EXPORT INVOLVEMENT By Catherine Nancy Axinn A DISSERTATION Submitted to Michigan State University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY Department of Marketing and Transportation 1985 Copyright by Catherine Nancy Axinn 1985 ABSTRACT AN EXAMINATION OF FACTORS THAT INFLUENCE EXPORT INVOLVEMENT By Catherine Nancy Axinn The purpose of this study was to enhance understanding of export behavior by examining critical factors in exporting. The research was conceptualized within the framework of adoption theory, with export involvement representing the degree to which a firm has adopted and implemented exporting. Field research was conducted by mailing questionnaires to top ex- ecutives of 383 firms in the machine tool industry located in the Province of Ontario and the State of Michigan. The analysis was based on responses obtained from 105 firms (an effective response rate of 27.4%). Examination of the factors which were expected to influence export involvement was the central focus of this research. These factors were of two types: perceived innovation attributes (indices of managers' perceptions of the characteristics of exporting), and adopter charac- teristics (characteristics of firms). Results indicate that a combination of both groups of factors provides the fullest explanation of export involvement. In addition, managers' perceptions of the relative advantage of exporting were shown to be the most important determinant of a firm's export involvement. Other significantly influential factors included two firm characteris— tics, the percent of managers with overseas work experience and market area, and managers' perceptions of the complexity of exporting. It is, therefore, suggested that in order to account for the var- iability in export involvement exhibited by firms in the same industry and location, we need to consider "behavioral" elements, such as the perceptions managers have of exporting, in addition to the structural variables proffered by economic theory. It is further suggested that involvement in exporting signifies that a choice has been made (either implicitly or explicitly) between alternate strategies for accomplish- ing firm goals and that future research should consider exporting with~ in the context of the strategic choice processes and procedures of firms, not as an isolated behavior. For my parents, whose spoken and unspoken expectations, love and encouragement have facilitated not only this accomplishment but many others. ii ACKNOWLEDGMENTS The support, encouragement and expectations of many people were an integral part of the graduate experience from which this dissertation emerged. The combined talents of the Dissertation Committee members, Dr. Ronald Savitt, Chair, and Dr. Forrest "Sam" Carter, Dr. John L. Hazard, and Dr. Richard V. Farace, ensured that the dissertation process was both enlightening and enriching. While stimulating and challenging the student in terms of subject matter, they also shared their life experiences to very positive effect. All of their efforts were greatly appreciated. A special note of thanks has been well earned by my Chair, whose sense of perspective and sense of humor were invaluable. The Canadian American Business Development Program funded by the Business Fund for Canadian Studies in the United States provided consid- erable support for this study, allowing me to give it my undivided attention foraiyearu My gratitude is also extended to the members of the faculty of the Department of Marketing and Transportation, particu- larly Dr. Donna Goehle, who first interested me in this topic, and to my doctoral colleagues, Sharon V. Thach and Paul M. Lane, without whose encouragement this may never have been accomplished. In addition, the assistance of many members of the School of Management at Syracuse University is also appreciated. iii To the members of my family, nuclear and extended, I am especially grateful. Their help and inspiration, concern and faith in me have been a continual source of strength, enabling me to persevere to this end, and beginnings beyond. iv TABLE OF CONTENTS List of Tables . . . . . . . . . . . . . . . . . . . . . . . . . vi List of Figures . . . . . . . . . . . . . . . . . . . . . . . . Vii Chapter One. INTRODUCTION . . . . . . . . . . . . . . . . . 1 Two. LITERATURE REVIEW . . . . . . . . . . . . . . . . . . . 8 Introduction . . . . . . . . . . . . . . . . . . 8 Perceived Characteristics . . . . . . . . . . . 9 Theoretical Frameworks . . . . . . . . . . . . . 21 A Model of the Export Development Process . . . . . 21 A Model of Incremental Internationalization . . . 23 A Model of the Role of the Individual in Export Decision Making . . . . . . . . . . . . 25 Empirical Research . . . . . . . . . . . . . . . . . 3O Comparative Studies . . . . . . . . . . . . . . . . 31 Predictive Studies . . . . . . . . . . . . . . . . 48 Summary . . . . . . . . . . . . . . . . . . . . . . . 69 Three. MODELS, DEFINITIONS AND HYPOTHESES . . . . . . . . . . 71 Models . . . . . . . . . . . . . . . . . . . . . 71 Introduction to Models . . . . . . . . . . . . . . 71 Definitions of Variables . . . . . . . . . . . . . . 73 Export Involvement . . . . . . . . . . . . . . . . 73 Perceived Characteristics of Exporting . . . . . . 74 Characteristics of Firms . . . . . . . . . . . . . 80 Hypotheses . . . . . . . . . . . . . . . . . . . . . 83 Four. METHODOLOGY . . . . . . . . . . . . . . . . . . . . . . 85 Introduction . . . . . . . . . . . . . . . . . . . . 85 Rationale . . . . . . . . . . . . . . . . . . . . . . 85 Population . . . . . . . . . . . . . . . . . . . . 85 Mail Survey . . . . . . . . . . . . . . . . . . . . 86 Developing Operational . . . . . . . . . . . . . . . 88 Preliminary Measures . . . . . . . . . . . . . . . 90 Pretest . . . . . . . . . . . . . . . . . . . . 96 Initial Measure Purification . . . . . . . . . . . 97 Measures of Other Variables . . . . . . . . . . . . 104 The Survey . . . . . . . . . . . . . . . . 108 Description of Respondents . . . . . . . . . . . . . 109 Measure Refinement . . . . . . . . . . . . . . . . '110 Preliminary Reliabilities . . . . . . . . . . . . . 110 Factor Analyses . . . . . . . . . . . . . . . . . . 117 Correlation Analysis . . . . . . . . . . . . . . . . 120 Final Reliabilities . . . . . . . . . . . . . . . . 123 Five. ANALYSIS: TESTING THE HYPOTHESES . . . . . . . . . . . 124 Hypothesis Testing . . . . . . . . . . . . . . . . 124 Discussion . . . . . . . . . . . . . . . . . . . . . . 129 Comparison of Explanations . . . . . . . . . . . 130 Importance of Independent Variables . . . . . . . . 133 Summary . . . . . . . . . . . . . . . . . . . . . . . 136 Six. SUMMARY, DISCUSSION AND THEORETICAL LINKAGES . . . . . . 137 Summary . . . . . . . . . . . . . . . . . . . . . . . 137 Discussion . . . . . . . . . . . . . . . . . . . . . . 138 Finding One . . . . . . . . . . . . . . . . . . . . 139 Finding Two . . . . . . . . . . . . . . . . . . . . 140 Finding Three . . . . . . . . . . . . . . . . . . . 140 Finding Four . . . . . . . . . . . . . . . . . . . . 141 Finding Five . . . . . . . . . . . . . . . . . . . . 143 Finding Six . . . . . . . . . . . . . . . . . . . . 143 Conclusions . . . . . . . . . . . . . . . . . . . . 144 Theoretical Linkages . . . . . . . . . . . . . . . . . 146 Appendices A—1 INTERVIEW SCHEDULE . . . . . . . . . . . . . . . . . . 151 A—2 INSIGHTS FROM INTERVIEWS . . . . . . . . . . . . . . . . 163 8-1 PRETEST INSTRUMENT . . . . . . . . . . . . . . . . . . . 164 C—1 SURVEY FOR MICHIGAN FIRMS . . . . . . . . . . . . . . . 172 C-2 SURVEY FOR ONTARIO FIRMS . . . . . . . . . . . . . . . . 188 D—l FIRST COVER LETTER . . . . . . . . . . . . . . . . . . . 204 D-2 SECOND COVER LETTER . . . . . . . . . . . . . . . . . . 205 D-3 THIRD COVER LETTER . . . . . . . . . . . . . . . . . . . 206 D—4 POST CARD REMINDER . . . . . . . . . . . . . . . . . . . 207 E-l RESPONSE RECORD . . . . . . . . . . . . . . . . . . . . 208 List of References . . . . . . . . . . . . . . . . . . . . . . . 209 vi o a o \OGDNO‘UIDUNH .o. LIST OF TABLES Factors Underlying Farmers' Perceptions of New Practices Comparison of Exporter and Non-Exporter Responses . . . . Summary of Reid's Results . . Perceived Relative Advantage Index Pretest Reliabilities Perceived Compatibility Index Pretest Reliabilities . . Perceived Complexity Index Pretest Reliabilities . . . . . Perceived Trialability Index Pretest Reliabilities . . . Perceived Observability Index Pretest Reliabilities . . . Summary Statistics for Studied Variables . . . . . Measurement Refinement: Perceived Relative Advantage Index Measure Refinement: Perceived Compatibility Index . . Measurement Refinement: Perceived Complexity Index . . . . Measurement Refinement: Perceived Trialability Index Measurement Refinement: Perceived Observability Index . Factor Analysis of Perception Indices Together Evaluation of Model I . . . . . . . . . . . . . . . . Evaluation of Model II . . . . . . . . . . . . . . . . . . Evaluation of Model III . . . . . . . . . . . . . . . . . 18 65-66 99 100 101 102 103 111 112 113 114 115 116 118 126 127 128 1. 14. 15. 16. 17. 18. 20. 21. 22. 23. 24. LIST OF FIGURES Paradigm of the Adoption of an Innovation by an Individual Within a Social System . . . . . . Summary of Characteristics of Innovations A Model of the Export Development Process A Model of Incremental Internationalization Process of a Firm . . The Role of the Individual in Export Decision Making Relevant Aspects of Export Adoption . . . . . . . . Profiles of Exporters and Non- Exporters . . . . . . Simpson and Kujawa' 3 Findings . . . . . . . . . Factors Motivating the Export Effort Bilkey and Tesar' 5 Regression Equations Model Testing Cavusgil' s First Dependent Variable Model Testing Cavusgil' 3 Second Dependent Variable Proposed Causal Relationships Among the Internal Determinants of Export Behavior Cavusgil and Nevin' s Significant and Nonsignificant Variables . . . . . . . . . . . . . Alternate Models to be Tested Churchill's Suggested Procedures for Developing Better Measures . . . Items 1 Pretested Relative Advantage Index . . . . Items 1 Pretested Compatibility Index . . . Items 1 Pretested Complexity Index . Items in Pretested Trialability Index Items in Pretested Observability Index Firm Characteristics Questions . . . . . . . . . . Index Inter- Item Correlations . . . . . . . . Adapted Product/Market Expansion Matrix . . . 553:3 viii 15 . 22 24 28 32 40 47 49-50 58 6O 72 89 91 92 93 94 105 121 . 149 CHAPTER ONE INTRODUCTION Exporting continues to be the primary means by which firms gain access to the international marketplace. Over the past two decades world- wide exports have expanded from $118 billion in 1960 to $1,766 billion in 1984 (International Monetary Fund, 1984 and 1985). This substantial growth has stimulated an increase in the volume of research concerned with understanding exporting; yet very little is known about the factors that influence a firm's involvement in this important activity. The export process and a firm's decision to export have been described in a number of ways. Writers have tended to include some combination of the following sets of variables in their models and analyses: 1) characteristics of firms, 2) characteristics of managers, 3) managers' expectations (perceptions) of their results of exporting, 4) the activities of outside agencies or change agents, and 5) environmental considerations. Theorists have developed several models which identify stages in the export process. Generally these flow from a point where management concentrates on the firm's efforts on the domestic market, with no interest exhibited in exporting, through several intermediate phases until management has developed a long-term commitment to exporting and actively seeks new export markets (Bilkey and Tesar, 1977; Cavusgil and Nevin, 1980; Czinkota and Johnston, 1981). These models indicate one of the major conclusions which previous research allows: involvement in exporting is a gradual process (Cavusgil and Nevin, 1980). Another conclusion which has been drawn is that the initial export involvement of a firm can be considered the adoption of an innovation. Simmonds and Smith (1968) state that: Entry into an export market is just as much an innovation as the adoption of a new production process, for example, so there is every reason to suspect that many of the findings concerning other innovations will apply. (p. 94) Building on this assertion, other writers have employed several diffusion of innovation/adoption process constructs in their models and investigations. Studies have 1) assessed the characteristics of adopters (exporters) and non-adopters (non-exporters) at both the manager and firm level (Snavely, et a1., 1964; Simpson and Kujawa, 1974; Cavusgil, Bilkey and Tesar, 1979); 2) explored the role of change agents (Simpson and Kujawa, 1974; Lee and Brasch, 1978); and, 3) modeled stages of the export process after stages in the adoption process (Bilkey and Tesar, 1977; Cavusgil and Nevin, 1980). Almost every major construct in Rogers'(1962) paradigm of the adoption of an innovation (Figure 1) has been explored by the research cited above. The focus of this research is on a set of constructs in this paradigm which has here-to-fore been excluded from major consideration in the context of exporting: the perceived characteristics. This study was designed to examine how managers' perceptions of the characteristics of exporting influence firm involvement in exporting. In addition, these perceptions are compared with the characteristics of .oom .a .AmomH .mmopm down one uxpow BoZV .mfioaum>o:cH we scamsmwfla .mpowom .z.m "mQMDOm EMBmwm AHDZH Z< wm ZOHH€>OZZH z< mo ZOHHQOQ< MIR mo 20Hm3K0—QEOU .n HU>:CUUC_ vco 225:3:30 .m £52.23 u_Eo:0um .N 0002560 3:23. ._ “353.9623 :0 “E5: 62;“ .oBom .— cozc>oc£ of do 35:33.95 “323:... ‘0UCODE2COUJQ Com—033W of .0 “co: 3.0m mmuUOmm ZOZLOQ< > >_ =_ : _ coznopo :ozno—ot‘ .2; co:o:_5>u .33.:— aocoak< an?“ A11. . 1 .3 no :95 . .23 * v + + + ano%o.__rao.;_wonuu .M _ m n u u 3.0: _o_uom .V _ _o:o€oQE_-_o:o:om .N :3» :o. a _ SocoanoEuoU ._ _ _ .3335”. use ._ 03 _ . _ _ _ 2:30 .252 .n _ _ . . _ :22, .n :ozaouo _ _ . _ _ r0720 poactcou 33.3w cat—253:. .rtauom .— NonE n._o_u< 953mm: mmeOg thmowUm~Z< firms and their managers to determine the relative contribution of each toward explaining variance in the export involvement of firms. Scholars exploring the adoption of innovations in the context of rural sociology have noted the necessity to include perceptions of the characteristics of innovations in their analyses of adoption behavior. In examining the use of adopter characteristics alone, Thio (1971) notes that: The implication is clear that there are still other important factors such as innovation attributes [characteristics] that should be con- sidered simultaneously in order to predict more successfully the likelihood of one's accepting an innovation.n[Thus], a consideration that takes into account both the innovation-attributes and the adopter-characteristicsu.may account for more variance in adoption rates. (p. 60) The research of Fliegel, Kivlin and Sekhon (1968) also indicates the importance of considering innovation attributes or characteristics. In summarizing their findings they state: The total variability accounted for [by innovation attributes] in rate of adoption was quite high”.We interpret [this] to mean that the approach to diffusion of innovations via their attributes is a meaningful and rewarding one. (p. 449) The dependent variable in this research is export involvement rather than rate of adoption or simply adoption/non-adoption. There are several reasons for this choice. First, as noted by Downs and Mohr (1976L "operationalizing innovation by the extent of implementation comes closer to capturing the variations in behavior that we really want to explainJ' (p.709) Second, because exporting is a marketing activity in which a firm can involve itself (adopt) for one sale and then not undertake again for a period of the time, level of export involvement becomes a more meaningful indicator of'the degree to which exporting has been adopted and implemented as a part of the permanent strategy of a firm. Also, several researchers have found significant differences between firms with varying levels of involvement in exporting (Bilkey and Tesar, 1977; Czinkota and Johnston, 1981). The third conclusion which has been drawn from the exporting literature is related to the relationality of the export decision making process (Cavusgil and Nevin, 1980). Lee and Brasch (1978) in their examination of the rationality of the export adoption decision found the majority of firms to be non-rational, with many moving ahead with exporting without much rational analysis or deliberate planning. These firms are reported to have only vague justifications for their actions. It is posited here that these 'vague justifications' may, in fact, be related to the managers' perceptions of the characteristics of exporting. This examination of the influence of managers' perceptions of exporting or firm export involvement has the potential to make several contributions, theoretical and practical. From a theoretical perspective, this fuller application of adoption/diffusion constructs to the study of exporting offers two important opportunities. First, it allows further assessment of the possible contribution of adoptive theory to the understanding of marketing practices. Adoption constructs have been usefully employed in research on new product adoption and diffusion (Rogers, 1976), but have not been similarly employed in the study of the adoption and implementation of marketing practices, such as exporting. Second, by focusing on export involvement, the study should be able to illustrate the usefulness of perceived characteristics as indicators of implementation and not just adoption. According to Tornatzky and Klein (1982): Innovation characteristics research studies should focus on both adoption and implementation as the dependent variables, and not simply dichotomous yes/no adoption decisions..“The failure to use degree-of—implementation as a dependent variable probably yields mis- leading correlations of innovation characteristics with innovation behavior. (pp.29,32) From a practical perspective, this study could have important implications for public policy makers concerned with export promotion and expansion and for export facilitating agents as well. First. if we can determine which perceived characteristics of exporting have a greater affect on export involvement then agencies concerned with export expansion may be able to make better use of limited resources by focusing their promotion on those characteristics. Further, if it is determined that export involvement is more greatly influenced by either characteristics of firms or managers' perceptions of exporting, it will be possible to develop better screening criteria for identifying potential exporters. Second, a fuller understanding of how managers perceive exporting will also be useful to export middlemen, such as freight forwarders and bankers. For instance, determining how manufacturing managers perceive the complexities of exporting can assist such agencies in designing the services they offer and in presenting them properly to their clients. In conclusion, this research is undertaken with the expectation that it can expand and enhance our understanding of export involvement. In summarizing the results of a recent study, Cavusgil and Nevin (1981) conclude that, "the reluctance of firms to export may be largely attributed to top management's lack of determination to export3'(p. 119) This could be interpreted to mean that some firms don't export because their managers don't want to export; or conversely, that other firms export because their managers do want to export. The current study is concerned, fundamentally, with understanding why the managers of some firms want to export and others do not. This issue is approached through examination of the perceived characteristics of exporting because, as illustrated in Figure l, perceived characteristics are thought to influence a potential adopter's evaluation of an innovation. Therefore, it is expected that this study will demonstrate how the evaluation of exporting, via its perceived characteristics, affects export involvement. The following chapter will begin with an examination of the nature of perceived characteristics, as evidenced in the literature and will continue with a review of the literature on exporting. The models, hypotheses and relevant definitions are presented in Chapter Three, while Chapter Four consists of a description of the methodology used to gather data and the procedures used to develop measures of the perceived characteristics of exporting and other variables. Chapter Five presents the results of testing the hypotheses, and a brief discussion of these results. A summary of the study and a discussion of its implications, limitations, and conclusions appear in Chapter Six. CHAPTER TWO LITERATURE REVIEW INTRODUCTION The following literature review serves a number of purposes. The first section examines some of the key issues which have emerged from the literature on the perceived characteristics of an innovator. It will also provide an indication of how perceived characteristics have been defined in previous research. The second section reviews several export- related models in order to illustrate how the current research, and particularly the perceived characteristics of exporting, fit into existing theoretical frameworks. The third, and major, section of this chapter reviews, in detail, the most relevant of the extant empirical literature. This review is conducted in two parts. The first part focuses on comparative research. The objective here is to identify variables which have been useful in distinguishing between exporters and non-exporters. The second part -focuses on predictive research. This is the research which is most similar, in design and intent, to the present study. In this instance, the objective is to identify variables which have been significant predictors of export behavior in previous studies. Throughout the examination of the empirical literature, particular attention will be paid to concepts and variables which may be meaningfully related to measures of the perceived characteristics of exporting. In addition, it is primarily on the basis of this review that the characteristics of firms inclUded in this study will be selected. PERCEIVED CHARACTERISTICS Throughout several decades the perceived characteristics of innova- tions have been repeatedly incorporated in innovation research. Innovation characteristics research describes the relationship between the attributes or characteristics of an innovation and the adoption or implementation of that innovation. This topic represents one of the classic issues in the innovation literature, albeit one that has been little studied in the last decade. (Tornatzky and Klein, 1982, p. 28) ' Over the course of years a plethora of characteristics has been ascribed to innovation. This multiplicity has resulted in the assertion by one author that, "we need a standard classification scheme for describing the perceived attributes of innovations in universal terms" (Rogers, 1983) while others (Downs and Mohr, 1976) have decried this line of research as fruitless. Several underlying issues provide the foundation for the controversy concerning innovation characteristics research. These issues pertain to the characteristics'l) basic nature, 2) multiplicity, 3) multidimen- sionality, and 4) intercorrelation. The likelihood that these issues are interrelated merely complicates their resolution. It is important to realize that innovation characteristics research is not the only field of study to be afflicted by problems such as these. Inquiries concerning such complex theoretical constructs as 'motivationfl 'culturefl and many other social science concepts face similar sets of issues. 10 Questions related to the basic nature of characteristics have been raised by Downs and Mohr (1976). They took issue with the inclusion of both primary and secondary characteristics in innovation research and with the failure of researchers "to pay sufficient attention to the distinction between the two" (Tornatzky and Klein, p. 28). The differentiation between primary and secondary characteristics espoused by Downs and Mohr was based on definitions given by Jeans (1966): Secondary qualities are those which are perceived by the senses and so may be differently estimated by different percipients; primary qualities are those which are essential to the object or substance and so are inherent in it whether they are perceived or not. (p. 196) Due to their 'perceived' nature, Downs and Mohr suggest that secondary characteristics should be viewed as measures of the relationship between the organization and the innovation and as such they "can be viewed as variables that characterize the circumstances surrounding a particular decision to innovatefl' (p. 706) Thus the essence of the Downs and Mohr criticism of perceived or secondary characteristics is that they vary naturally on a situational basis and cannot be expected to produce consistent results. The attendant implication is that primary characteristics are more stable. In an effort to answer this and other allegations made by Downs and Mohr a meta-analysis of innovation characteristics research was conducted by Tornatzky and Klein (1982). In rebuttal, they assert that: If anything, Downs and Mohr (1976) probably underplay the importance of 'subjective' factors. Downs and Mohr ignore the perceptual literature in social psychology and related fields which has for many years noted that even what is assumed to be invariate physical reality (e.g., a primary attribute) is always subject to social influences. n. Furthermore, while so-called primary attributes of innovations can be measured 'objectively', the meaning of the objec- tive measure of the characteristic is subjective, that is, in the 11 mind of the perceiver. Thus while an innovation may cost a fixed amount (and cost is a so-called primary attribute), the cost of the innovation is evaluated by the potential adopter relative to his or her financial resources. (p. 28) In accordance with this pursuasive argument and Rogers'suggestion that "it is the beholder's perceptions that influence the beholder's behavior"(l983, p.212),the current research considers only secondary or perceived characteristics of exporting in its analysis of export involvement. In a sense, the whole issue of primary versus secondary character- istics arises from the multiplicity of characteristics of innovations included in past research. How this multiplicity came about or, for that matter, how so-called primary characteristics came to be included in this line of research at all can only be surmised. It seems likely, however, that both developments resulted from efforts by researchers to cope with relatively inexact definitions of characteristics provided by Rogers (1962, 1971, 1983) and arrive at reasonably precise methods of measuring various aspects of innovations. Rogers himself has changed the names and definitions of the characteristics of innovations over the decades, yet even in his landmark synthesis of innovation research in 1962 the characteristics were clearly identified as "perceived" (See Figure 1). Over the years the word perceived has worked its way into his actual definitions of several characteristics. Rogers' (1983) most recent definitions of the perceived characteristics of innovations are presented below: Relative advantage is the degree to which an innovation is perceived as being better than the idea it supersedes. (p. 213) Compatibility is the degree to which an innovation is perceived as consistent with the existing values, past experiences, and needs of potential adopters. (p. 223) Complexity is the degree to which an innovator is perceived as relatively difficult to understand and use. (p. 230) Trialability is the degree to which an innovation may be experimented with on a limited basis. (p. 231) Observability is the degree to which the results of an innovation are visible to others. (p. 232) In introducing these definitions Rogers states that: Selection of these five characteristics is based upon past writings and research as well as on a desire for maximum generality and succinctness. We are working toward a comprehensive set of characteristics of innovations that are as mutually exclusive and as universally relevant as possible. (p. 211) No doubt the criteria of maximum generality and universal relevance account for the inexactness of the definitions, and considering the diverse innovations to which these general characteristics have been applied, it is not surprising that individual researchers have developed customized variants. Closely linked with the multiplicity of characteristics and the development of customized variants is the issue of multidimensionality. Several of the characteristics, as identified by Rogers, are multi- dimensional by definition while others are multidimensional by default. Both Compatibility and Complexity are multidimensional by definition. An innovation may be compatible if it is perceived as consistent with existing values or past experiences or the needs of potential adopters; it may be complex if it is relatively difficult to understand and (or) relatively difficult to use. In studying the adoption and implementation of specific innovations the relevance of each dimension of these two characteristics will vary and so will the customization of specific measures. Indeed, Tornatzky and Klein found that their ability to generalize about the relationship between Compatibility and adoption was "limited by the fact that some of the studies measured practical compatibility, some value compatibility and some a combination of the two." (p. 34) Relative Advantage, Trialability and Observability are characteris- tics which are multi-dimensional by default. A particular innovation may be perceived as being better than the idea (practice, product) it supersedes in any number of ways. Rogers followed his earliest definition of Relative Advantage by stating that: Profitability, the difference between economic returns resulting from adoption of an innovation and the innovation's economic costs, is one dimension of relative advantage. (1962, p. 146) Social approval or the status giving aspects of an innovation have also been associated with relative advantage (Rogers, 1983). Tornatzky and Klein assert that: Relative advantage is perhaps too broad and amorphous a characteristic to be of much use. Typically it is the garbage pail characteristic in innovation characteristics studies into which any number of innovation characteristics are dumped. (p 34) Trialability and Observability may also be perceived multidimen- sionally, depending on the specific nature of an innovation. Results may be made visible in various ways and different types of experimental uses ‘ may be possible, thus measurement customization may be necessary. Multidimensionalty contributes to the multiplicity of characteristics of innovations when measures developed to reflect specific aspects of an innovation are treated empirically and conceptually, not as components of more general characteristics of innovations but, as characteristics in and of themselves. Tornatzky and Klein's meta-analysis covered the ten characteristics of innovations which were most frequently employed in the seventy-five pieces of research they analyzed. These included (in order and with the number of studies using each in parentheses): Compatibility (41% Relative Advantage (29), Complexity (21), Cost (20), Communicability (13), Profit (10), Divisibility (10), Social Approval (8), Trialability (8), and Observability (7). Twenty additional characteristics were also found in the articles they reviewed, but these were not analyzed. In Figure 2 the characteristics analyzed by Tornatzky and Klein, and those not analyzed, are listed in association with the classic innovation characteristics (RogersW of which they may be considered components. Also listed in Figure 2 are the characteristics identified by Zaltman, Duncan and Holbek (1973), to be discussed presently. Examination of Figure 2 reveals that the multiplicity related to Relative Advantage is most pronounced. Indeed, the classification presented could be considered representative of the "garbage pail" syndrome mentioned by Tornatzky and Klein. On the other hand, a reasonable rationale could be presented to justify considering each of the separate "characteristics" as component dimensions or aspects of the classic characteristic, Relative Advantage. Based on earlier discussions of Rogers, both profitability and social approval should be construed as components of relative advantage. Cost, referred to previously by Tornatzky and Klein as a primary characteristic, is in reality a component of profitability as profit equals revenue minus cost. Similar reasoning can be applied to the "characteristics" not studied by Tornatzky and Klein, as well as those identified by Zaltman, et al. CLASSIC CHARACTERISTICS CHARACTERISTICS CHARACTERISTICS CHARACTERISTICS STUDIED BY NOT STUDIED BY IDENTIFIED BY (ROGERS-BASED) TORNAIZKY AND IORNATZKY AND ZALIMAN, DUNCAN KLEIN IN AND HOLBEK Relative Relative Continuing Financial cost Advantage advantage cost - initial Profitability Flexibility - continuing Social Importance Returns to approval Initial cost investment Cost Mechanical Efficiency attraction — overall time Payoff saving Rate of cost - avoidance of recovery bottlenecks Regularity of Risk and Uncer- reward tainty Reliability Scientific Riskiness status Specificity of Perceived rela- evaluation tive advantage Savings of Terminality discomfort Susceptability Saving of time to successive Scientific modification status Gateway capa- city (open avenues to 1 other innova- l tions Compatibility I Compatibility Pervasiveness Compatibility ' I Radicalness Pervasiveness l i Impact on interpersonal 1 relationships Complexity Complexity ] Ease of oper- Complexity i ation L Trialability Divisibility ! Reversibility Trialability I Divisibility | Degree of commitment Observability j Communicability Clarity of Communicability - Observability ’ results Clarity of I Visibility results 1 i Publicness vs. ' privateness I Gatekeepers FIGURE 2 SUMMARY OF CHARACTERISTICS OF INNOVATIONS SOURCES: E.M. Rogers, Diffusion of Innovations, New York: The Free Press, 1962. L.G. Tornatzky and K.J. Klein, "Innovation Charac— teristics and Innovation Adoption—Implementation: A Meta-Analysis of Findings," IEEE_Transactions on Engineering Management Vol. EM-29, No. 1 (February 1982), 28—45. G.R. Zaltman, R. Duncan and J. Holbek, Innovations and Organizations, New York: John Wiley & Sons, 1973. Somewhat more interesting is the treatment of Trialability and Observability by Tornatzky and Klein. In addition to these two classic characteristics, their evolutionary predecessors, Divisibility and Com- municability, were also analyzed. To justify separate treatment Trialability and Observability were defined according to the Rogers and Shoemaker(l971)definitions(actually identical to Rogers' definitions cited above). Divisibility was defined as the "extent to which an inno- vation can be tried on a small scale prior to adoption!‘ (Fliegel, Kivlin and Sekhon, 1968, p. 446) and Communicability was defined as "the degree to which aspects of an innovation may be conveyed to othersfl (Rothman, 1974, p. 441) Tornatzky and Klein admitted the "the notion of communicability is very similar to and obviously related to that of observabilityfl'(p. 36) They also asserted that although "the divisi- bility ofan innovation isclosely related toits trialability"(p.37) and "a highly divisible innovation is usually highly 'trialable"'(p. 37) but "not all 'trialable' innovations are divisiblefl (p. 37) It should be recognized that Tornatzky and Klein are not responsible for this confusing multiplicity of terms. They simply reported on the characteristics as they were used in the literature. Some researchers have studied 'observability', others 'communicability', some 'divisibilityfl and others'trialabilityH But are these conceptually distinct characteristics? Probably not, but depending on the specific nature of a particular innovation one or another term may appear more relevant, just as circumstances may dictate the appropriateness of various component aspects of relative advantage. This is similar to the reasoning used by Zaltman, et a1., in 17 introducing their long list of characteristics: Each of the various types of innovations can possess a varied combination of attributes that have been found to be relevant for describing, explaining, and predicting responses to innovations. (p. 33) Although it is probably true that each innovation possesses a variety of attributes, it is also possible to consider these attributes as components of the classic characteristics as defined by Rogers. This possibility has been demonstrated by Kivlin and Fliegel (1968) in a study of the adoption of farm practices. In analyzing their results they utilized a factor analysis of the dairy farmers' perceptions of fifteen attributes of modern farm practices. Although the study included both medium and small scale farmers, only the factor analysis of the medium sized farmery perceptions is reported here. Table 1 presents the five factors which resulted from Kivlin and Fliegel's analysis, along with the factor loadings for each of the innovation attributes, and the factor names they proposed. Their results indicate that the perceived innovation attributes can be empirically associated with underlying factors. Also, the factors which they identified, although not mirroring exactly the classic characteristics of an innovation, are good approximations of them (labeled in parentheses on Table 1). There are intriguing aspects of Kivlin and Fliegel's results. First, Factor A is composed, primarily, of aspects of Relative Advantage, as they are listed in Figure 2;the exception is'complexityK Complexity might reasonably be expected to appear on a factor of its own, but there are several plausible explanations for the result shown in Table l. 18 TABLE 1 FACTORS UNDERLYING FARMER'S PERCEPTIONS OF NEW PRACTICES FACTOR A: Long—run Investment Implications (Relative Advantage) .87 Rate of Cost Recovery .73 Continuing Cost .70 Regularity of Reward .61 Initial Cost .59 Complexity FACTOR B: Clear Results (Communicability) .86 Clarity of Results .82 Social Approval FACTOR C: Conservation of Time and Effort (Compatibility) .85 Saving of Discomfort .82 Saving of Time .80 Compatibility FACTOR D: Farm Reorganization (Divisibility) .87 Divisibility for Trial .85 Pervasiveness .71 Mechanical Attraction FACTOR E: Dairying for Profit .76 Association with Dairying .66 Payoff SOURCE: Adapted from, J.E. Kivlin and F.C. Fliegel, "Orienta- tions to Agriculture: A Factor Analysis of Farmers' Perceptions of New Practices," Rural Sociolog , Vol. 33 No. 2, June 1968, 127-140. 19 Since most of the other attributes on Factor A concern costs, perhaps less complex innovations cost less to adopt. llzis also possible that more complex innovations are assoCiated with higher long-run returns. A second and somewhat related aspect of the results is the apparent dispersion among several factors of various attributes which were associated with Relative Advantage in Figure 2. Social Approval appears on Factor B with Clarity of Results, an attribute which Zaltman, et a1” logically associate with Communicability. Savings of Discomfort and Time appear on Factor C with Compatibility. Mechanical Attraction appears on Factor D with Divisibility for Trial and Pervasiveness, which Zaltman, et a1., associate with Compatibility. Third is the independence of perceived payoff of adoption from perceived costs. Kivlin and Fliegel suggest that Factor E could represent short-run profit interest and Factor A long-run investment concerns. Were this true, the implications for export involvement would be very important as exporting is frequently considered a long-run strategy, and is not usually associated with short run profits (Thach and Axinn, 1983). The relatively unexpected associations evident in Kivlin and Fliegelds results stimulate doubt about the mutual exclusivity of the classic characteristics, which leads to consideration of the fourth innovation characteristics issue: the interrelatedness of the characteristics. Rogers contends that "eachcyf(the five characteris- tics) is somewhat empirically interrelated with the other four, but they are conceptually distinct." (p. 211) Tornatzky and Klein suggest that the very multiplicity of 20 characteristics: raises serious questions about the independence of these dimensions. In fact, one of the neglected areas of research in this area is analysis of the independence of perceived attributes. (p. 33) They also state that: Given the intercorrelation of the innovation characteristics in a study involving several characteristics, i1: is impossible to ascertain, from the regression coefficients alone, the first order relationship between a single independent variable and the dependent variable; multicollinearity of independent variables may actual(ly) reverse their regression coefficient signs in the equation. (p. 31) Although no single researcher can presume to resolve all these issues, each researcher must both acknowledge and address them with reapect to their own undertaking. The current research is based on the following suppositions: 1) Secondary or perceived characteristics of exporting are the most appropriate indicators of export involvement. 2) Multiple aspects of exporting can be treated empirically as components oftfimeclassic characteristics: Relative Advantage, Compatibility, Complexity, Trialability and Observability. 3) Each characteristic is expected tn) be empirically multidimensional. 4) Several aspects of each characteristic are expected to be interrelated with aspects of other characteristics. In addition, Rogers'(1983) definitions of perceived characteristics provide the general framework for defining the perceived characteristics of exporting used in this studyu These are provided below in order to serve as a point of reference for the following discussion of the export literature. Perceived Relative Advantage of Exporting is the degree to which exporting is perceived as better than marketing to domestic markets. Perceived Compatibility of Exporting is the degree to which exporting is perceived as consistent with the goals of the firm and with the firm's domestic marketing practices. 21 Perceived Complexity of Exporting is the degree to which exporting is perceived as difficult to implement or undertake. Perceived Trialability of Exporting is the degree to which exporting is perceived as possible to try on a limited basis. Perceived Observability of Exporting is the degree to which the results of exporting are perceived as visible. THEORETICAL FRAMEWORKS The following discussion reviews three models which are the most pertinent to the current research. Other export-related models which have been developed may be examined in Bilkey's (1978) comprehensive review of the export marketing literature. A Model of the Export Development Process Bilkey and Tesar (1977) were the first to propose a "stages" model of the export development process (Figure 3). This model intentionally follows the pattern of the adoption of an innovation developed by Rogers (see Figure 1L Thus, Stage One corresponds with Awareness, Stage Two with Interest, Stage Three with Evaluation, Stage Four with Trial and Stage Five with Adoption. In a sense, Stage Six represents an iteration back to Stage Three with the evaluation of additional foreign market entry opportunities. Managers' perceptions of the characteristics of exporting are relevant to the management activity at Stage Three of this model. This is especially appropriate because of the correspondence between Stage Three in the Bilkey and Tesar Model and Evaluation Stage in Rogers' Adoption Model. Examination of Rogers' model (Figure 1) reveals that the Stage One: Stage Two: Stage Three: Stage Four: Stage Five: Stage Six: And so on 22 Management is not interested in exporting, would not even fill an unsolicited export order. Management would fill an unsolicited ex- port order, but makes no effort to explore the feasibility of exporting. Management actively explores the feasibi— lity of exporting (can be skipped if unso- licited export orders are received). The firm exports on an experimental basis to some psychologically close country. The firm is an experienced exporter to that country and adjusts exports optimally to changing exchange rates, tariffs, etc. Management explores the feasibility of ex— porting to additional countries that, psychologically, are further away. FIGURE 3 A MODEL OF THE EXPORT DEVELOPMENT PROCESS SOURCE: W.J. Bilkey and G. Tesar, "The Export Behavior of Smaller-Sized Wisconsin Manufacturing Firms," Journal of International Business Studies, (Spring/Summer 1977), p. 93. 23 perceived characteristics of an innovation are explicitly represented as impacting the evaluation of the innovation. In relating this model of export development to the concept of export involvement, it could be said that a firm at Stage One is uninvolved in exporting and becomes progressively more involved as it moves through the later stages. Because this model specifies the nature of the markets to which a firm exports at different stages, its usefulness as a general model and its relevance to the current research is diminished. By stipulating that experimental exporting is focused on 'psychologically close' countries the model confounds its intent by introducing issues of market selection while apparently ignoring the demand-responsive motives of firms. Similarly, the intrusion of market selection considerations reduces the model's relevance to the primary concern of this research as our focus is on export involvement, 235 ES, regardless of the identity of specific export markets. A Model of Incremental Internationalization Cavusgil and Nevin (1980) present a model of the incremental involvement of a firm in the international marketplace (see Figure 4L ‘They suggest that movement from one stage to the next takes place "as a result of successive decisions made by management over a period of timeJ' (p. 69) In this model exporting plays a key role at the Experimental Involvement Stage. According to the authors, given "sufficient stimuli, decision makers in a non-exporting firm may become interested in exporting and may engage in subsequent evaluation of the desirability of 24 .mo .a .ome .cowumwoomm< wcwumxumz cmofluoa< .A.mvmv madam .z.m new pang .3.o .wcfiumxmmz :H mucosmon>mQ Hmowuouomne as :.wcflumxumz Hosea“ InasmucH as unwam>ao>cH HmwuwcH onu mo coaumuwamsuamocoo <= .cH>oz .m.h can Hme3>mo .H.m "momDOm zmHm mme mo mmmUOMm ZOHHOutside Influences [or external stimuli]. These same types of variables have been used in predictive research to predict a variety of 31 export-related behaviors. Comparative Studies - Profiles of Exporters and Non-Exporters Two groups of researchers have contributed profiles of exporting and non-exporting firms. Their findings are summarized in the chart shown in Figure 7. The first group” Snavely, Weinery Ulbrich and Enright (1964) were concerned with economic develOpment in Connecticut and thought the profiles would help identify potential exporters. Their research.tean1 conducted interviews with 145 managers of Connecticut firms that exported and 142 firms that had never exported. The exporter characteristics they identified are attributes which characterized a greater number of the exporting firms than non-exporting firms. The reverse is true for non- exporter characteristics. Although the research is weakened by a low level of measurement and the use of a judgment sample, the results give a general picture of the types of firms most and least likely to export. The profiles imply some interesting relationships between the marketing practices of fHJnns and managerial perceptions of the characteristics of exporting--particularly perceived compatibility. In this study exporters tended to: 1) Serve the entire U.S. market rather than only a local market. 2) Use a combination of selling techniques rather than personal selling alone. 3) Use diversified merchandising techniques. Given this composite description, one would expect these firms to 32 CHARACTERISTICS EXPORTERS NON-EXPORTERS Size *Gross sales were over Employ less than 100 l million (CBT) people (CBT) Product Have unique product Lacked )unique product (CH) an One or more products Non- technically oriented were patented (5) industry (CBT ) Held sole rights to patents used (5) Structure No formal structure fro exporting (CDT) Planning *Planned for exporting *Did NOT systematically (CBT) explore exporting (CBT) Systematically ex- plored feasibility of exporting (CBT) Marketing Used a combination of Firm sold directly to Practices selling techniques buyers 5) (S) Firm used only personal Used diversified selling (5) selling techniques (S) Had a price advantage in markets served \S) Market Area Served entire U.S. Firm had only local market ) market (5 Sold beyond local market (CBT) Goals High profit aspiration Lou profit aspiration (CBT) (CBT) *Low aspirations for firm growth (CBT) CHARACTERISTICS OF MANAGERS Attitude toward Management was willing foreign markets to study foreign markets (5) PERCEPTIONS MANAGERS HAVE RE: Effects of *Very favorable expec- “Neutral or unfavorable exporting on rations re effect of expectations re ef- firm goals exporting on firm's fects of exporting on growth (CBT) firm growth (CBT) *Favorable expectations of exporting on firm's market development (CBT) Exporting with Firm regarded its size respect to a barrier to export- their firm ing FIGURE 7 PROFILES OF EXPORTERS AND NON-EXPORTERS SOURCES: Adapted from, W.P. Snavely, et. a1., Exporter Survey of the Greater Hartford Area Vols I & II (1964), Washington, D C.: Small Business Administration (S). S.T. Cavusgil, W.J. Bilkey and G. Tesar, "A Note on the Export Behavior of Firms: Exporter Profiles," Journal of International Business Studies, (Spring/Summer 1979), 91—97 (CBT). 33 possess the characteristics identified by Cavusgil, Bilkey and Tesar (1979), iJL, to have a significant sales volume (over $1 million), placed a high value on growth and market development and to participate in activities, such as exporting, which present an opportunity for achieving these goals. These firms would be expected to rely on a number of middlemen tn) assist then: in achieving their goals. National distribution, in particular, is difficult to achieve without the assistance of intermediaries such as wholesalers. Non-exporting firms, in contrast, tended to sell directly to buyers rather than using any middlemen. This difference in customary selling methods and channel structure may be critical in managers' evaluation of exporting, particularly perceived compatibility. IExport marketing often relies on the useiof agents and middlemen. It would be highly unlikely for a firm which had never used such intermediaries in their domestic marketing activities to find it immediately acceptable to use them in entering foreign markets. A firm that usually sells directly to its customers may simply consider the use ofaniagent, domesticzor export, incompatible with its normal mode of operation. Operational congruence between domestic and export activities is one facet of compatibility considered in the current research. The other facet of compatibility included here is goal congruence. The significance of variables related to the expected effects of exporting on firm goals in Cavusgil, Bilkey and Tesar“s profile analysis reinforces the importance of goal congruence. Three of the seven primary variables (denoted by asterisks in Figure 7) used to describe exporters 34 and non-exporters relate to goal congruence. To develop their profiles, Cavusgil, Bilkey and Tesar used responses to a mail survey of 473 small and medium sized Wisconsin manufacturing firms. An AID Tree of the probability of exporting was then developed. Ninety-six percent of the firms possessing the four primary "exporter" characteristics were, in fact, exporting firms, while only five percent of the firms possessing the three primary ”non-exporter" characteristics exported. Four additional exporter characteristics and five additional non-exporter characteristics were also identified. (These appear without asterisks in Figure 7.) Caution is advised, however, in interpreting these results. It should not be concluded that 96% of exporting firms have exactly these "exporter" characteristics. For instance, 38% of the firms which did NOT plan for exporting, but which did have very favorable expectations of the effects of exporting on firm growth were, in fact, exporters. Nevertheless, the results are useful in addressing goal congruence with respect to the perceived compatibility of exporting. Firms which placed low value on growth tended not to export. Firms with favorable expectations of the effect of exporting on growth tended to export. This suggests that exporting may be a marketing practice which managers generally perceive as congruent with growth. Thus the implication that if a firm values growth, exporting should be perceived as a "consistent" activity, appropriate to consider undertaking in pursuit of the firm's growth goals. However, if a firm does not value growth, exporting would probably not be viewed as consistent with firm goals. In this case, the firm 35 should not be expected to evaluate the perceived compatibility of exporting favorably. - A Comparison of Exporters and Non-Exporters Simpson and Kujawa (1974) compared managers of exporting and non- exporting firms with regard to l) perceptions of the risks and cost/benefit relationship associated with exporting and 2) reactions to various hypothesized export stimuli. Their study involved interviews with a stratified sample of decision makers in 120 Tennessee manufac- turing firms. Fifty of the firms had begun exporting in the previous five years, seventy of the firms were non-exporters. Decision maker perceptions of selected export decision variables were recorded by the interviewer on a seven point ordinal scale. For example, response categories ranged from ”considerably less than domestic" to "considerably more than domesticJ'(p. 112) The weighted mean responses for each group (exporters and non-exporters) were compared for each variable and a Kolmogorov-Smirnov test was performed. The exporters and non-exporters did 325 differ significantly on several variables. These included: International Travel, Expropriations, Foreign Exchange Problems and the Cost of Product Adaptations. Variables on which the two groups differed significantly are displayed in Table 2. Several of these variables, risk, profit and cost items, may be related to perceived relative advantage. Note that exporters perceived exporting as offering appreciably higher profit and lower risks and costs than did non-exporters. This result suggests that 36 TABLE 2 COMPARISON OF EXPORTER AND NON—EXPORTER RESPONSES Exporters Noneexporters Difference Significance Mean Mean Level Variable Response Response Risk 4.08 4.86 -0.78 p<.02 Profit 4.26 3.01 +1.25 p<.001 Education 3.92 3.23 +0.59 p(.05 Communications 4.76 5.77 -l.01 p(.001 Costs 3.84 5.84 -2.00 p<.001 Executive Time 4.38 5.87 -l.49 p<.001 Packaging 4.76 5.77 -l.01 p(.001 Insurance 4.20 5.19 -.099 p(.001 Clerical Time 4.92 5.67 -0.75 p<.0l Shipping 4.58 6.06 -l.48 p(.001 SOURCE: Adapted from, C.L. Simpson and D. Kujawa, "The Export Decision Process: An Empirical Inquiry," Business Studies, (Spring/Summer 1974), 107-ll7. Journal of International NOTE: Responses were given on seven point ordinal scales and were obtained from 50 exporters and 70 non-exporters. 37 when managers perceive greater relative advantages.to exporting their firms are more likely to export. Executive Time and Communication (Barriers) may be related to the perceived complexity of exporting, with non-exporters perceiving a much greater level of executive effort and more communication barriers. This result suggests a negative relationship between perceived complexity and export involvement. The Education variable included by Simpson and Kujawa is really a characteristic of managers rather thanaaperception. lkitheir study a '4' was indicative of the manager obtaining a Bachelor's degree. Managers of firms which exported tended to have more education than managers of firms which did not export. The second issue examined by these researchers was the relative importance of internal and external stimuli to export. Internal stimuli were defined as including: 1) Excess Capacity 2) Production of a (Domestically) seasonal product 3) Entry of domestic competitors into export markets 4) Profit motivation According to Simpson and Kujawa: No non-exporting firm indicated having reacted to, analyzed or otherwise "received" any internal stimuli. Of the exporting firms, 21 percent [10 firms] , indicated that profit motives were of prime consideration. Other internal stimuli studied, such as seasonal products and competition, were apparently inconsequential for both exporters and non-exporters alike. (p. 110) Three of these'internal stimuli'(l, 2,40 are variables thatinost other researchers have treated as characteristics of firms. The fourth 'entry of domestic campetitors into export markets' has not been addressed in other research. The 'external stimuli' studied by Simpson 38 and Kujawa are much more comprehensive than those addressed by other researchers. External stimuli include: 1) Trade mission activities 2) Trade fairs 3) U.S. Department of Commerce Activity 4) Sales agent activity 5) Fortuitous orders from foreign customers Results indicated that of the non-exporting companies, 17 percent (12 firms) had been approached by foreign sales agents, while:7 percent (5 firms)luulbeen approached by thelLS. Department of Commerce. Under neither condition did they begin to export. None of the exporting firms reported receiving either of the above stimuli. Also, Trade Missions and Trade Fairs were not reported as stimuli by either group. The most frequently cited external stimulus reported was the fortuitous or unsolicited order. Eighty-two percent (41) of the exporting companies and thirty-two percent (21) export stimuli, and ‘hence tx> derive ea fuller understanding of export behavior. Another group of researchers has approached these same basic issues through other methods. This second group of researchers has employed many of the variables identified as useful in differentiating among groups of firms in an effort to predict various export related behaviors and activities. 47 PROACTIVE MOTIVATIONS REACTIVE MOTIVATIONS Exclusive information Managerial urge Unique products Profit advantage Marketing advantage Technological advantage DISC Other tax advantages Competitive pressures Over production Declining domestic sales Excess capacity Saturated domestic market Proximity to ports FIGURE 9 FACTORS MOTIVATING THE EXPORT EFFORT SOURCE: M.R. Czinkota and W.J. Johnston, "Segmenting U.S. Firms for Export Development," Journal of Business Research 9 (1981), 353— 365. 48 Predictive Studies - Testing a Model of the Export Development Process The first of the predictive Studies was an attempt by Bilkey and Tesar (1977) to provide a test of their Model of the Export Development Process (see Figure 3). Their analysis involved the deve10pment of regression equations to predict firm movement from one stage of the model to the next. The data used to develop the regression equations was collected in a mail survey of 473 small and medium sized Wisconsin manufacturing firms. Tesar conducted the survey as part of his dissertation research. Bilkey and Tesar focused their attention on identifying the determinants oftnovement between Stages Two and'Three, Three and Four and four and Five. They concluded the following: - The export deve10pment process of firms tends to proceed in stages... - Considerations that influence firms' progression from one stage to the next tend to differ by stage for the three stages examined - Within the size-range of firms studied, size was relatively unimportant when account was taken of the quality and dynamism of management (p. 95) The model testing conducted in this study is laudable and on a prima facie basis the conclusions have important implications. However, there ave complications im: the execution, raising both conceptual and methodological questions, which must be addressed. Equation One (see Figure 10) stimulated two conceptual concerns. The first concern centers on the nearly tautological relationship between the dependent variable, actively exploring the feasibility of exporting (X), and the independent variable, planning for exporting (L). One relevant EQUATION ONE 49 From Stage Two to Stage Three: X where: X I" II .020 + .465L + .O32C Whether or not management actively explored the feasibility of exporting (l = yes, 0 = no) Whether or not management planned for exporting (l = yes, 0 = no) Management's perceptions of the firm's competitive advantages ( score = -2 to +4) Unbiased R2 = .241 EQUATION TWO From Stage three to Stage Four: II A where: A = L X -.1393 + .OOOZE + .IOSM = .692U + .0463 Whether the firm exports experimentally (l = yes, 0 = no) Management's expectations as to what exporting would contribute to its firm (scale range = -1,000 to +l,OOO) - (partial cor = +.24l) Management, scale as a composite of the following five current con- siderations, all weighted equally: = Managerial views (Filley~House index - 5 pt. agree—disagree) = Whether the firm had a special structure, such as a department for evaluatin exports (1 = yes, 0 = no) = Whether management has a more or less fixed policy regarding exporting (1 = yes, 0 = no) = Whether management plans for exporting (l = yes, 0 = no) = Whether management has systematically explored the feasibility of exporting (l = yes, 0 = no) (partial cor = +.396) U: Whether the firm's first export order was unsolicited ( l = yes, 0 - no) (partial cor = +.735) The firm's size as measured by the number of employees (categorized as follows: 1 = <25; 2 = 25-99; 3 = lOO-249; 4 = 250 —499; 5 = 500- 1000; 6 = > 1000) (partial cor = +.183) Unbiased R2 - .690 SOURCE: Smaller—Sized Wisconsin Manufacturing Firms,‘ FIGURE 10 BILKEY AND TESAR'S REGRESSION EQUATIONS W.J. Bilkey and G. Tesar, "The Export Behavior of ' Journal of International Business Studies, (Spring/Summer 1977), 93-98. 50 E UATION THREE From Stage Four to Stage Five: 0 - .3151 + .0004E — .0488 -.041M where D - Per cent of firm's total sales, in value terms, currently being exported (range.10 to .45) E - Management's expectations as to what exporting would contribute to their firm (scale range: -1000 to +1000) (partial cor + .775) B - The number of barriers management perceives to exporting (range — 0 to 9) (partial cor - - .531) M - Management, scaled as a composite of the same five variables listed above (range a -.OS to +6.5) (partial cor = -.325) Unbiased Rz = .698 1 FIGURE 10 (cont'd.) 51 question pertains to the direction of the relationship between these two variables. Is not exploration of the feasibility'of an action part of the planning process? In many instances it is. Feasibility studies are often part of planning processes related to new product deve10pment, site selection, and major construction projects, such as dams and power plants. In each situation the feasibility study may be the result of preliminary planning and may, in turn, lead to additional planning. One must wonder, therefore, whether exploring feasibility (X) might not serve equally well as a predictor of planning (L). The second concern with EquationChuacenterscnithe calculation of the independent variable, competitive advantage (C). Respondents were asked "which of the following advantages have helped your firm compete more successfullyW'(p. 98) Responses of technology, efficient production methods, unique product and efficient marketing techniques each received a score of plus one, the response proximity to market received a score of minus two. The apparent assumption of this scoring procedure is that proximity to market is not a valid competitive advantage, or perhaps more accurately, that firms who consider proximity an advantage are less likely to export--but are they three times less likely than firms with efficient production methods? Equation Two is of particular interest to the current research because it: deals with xnovement fronl Stage Three, the exploring feasibility or ”evaluation" stage of the model to the experimental exporting or "trial" stage, Stage Four. This is the movement where, according to Rogers' model (Figure l), managers' perceptions of the characteristics of exporting should be expected to have an impact. 52 Independent variable (E), management's expectations of exporting% contribution to the firm may be considered roughly analogous to the perceived relative advantage of exporting. This variable was calculated as a weighted sum of the expected effect of exporting on firm profits, firm growth, the security of the firm's investment, development and/or security of the firm's markets, and contribution to the development of the U.S. economy. These components provide an indication of issues to be considered in preparing the index of relative advantage of exporting used in the current research. Also, independent variables (U), receipt and response to unsolicited orders, indicates an important feature of the perceived trialability of exporting. The independent variable, Management (M), however, provides some cause for concern. Both the dependent variable from Equation One (X), and the independent variable (L), are used as components of (ML Although it is quite reasonable in a progressive model to use the output of one equation as input for the next, the inclusion in Equation Two of the variable (L) amounts, in an sense, to double counting of that variable. If the legitimacy of Equation One is accepted this should be unnecessary. The measurement of the independent variable (S), firm size, provides another cause for concern. Regression assumes the use of inter-level measures, not categorical. While the use of "dummy" variables is common in regression, these are usually entered into the equation as either zeros or ones. In Equation Two, size of the firm (S) is represented in six categories. If these categories were of equal intervals this might not be as great a problem, however, in this instance one category has 25 53 members, another has 74, and another 500. This results in an inappropriate and perhaps misleading use of regression. The final comment about Equation Two involves Bilkey and Tesar's third conclusion. They suggest that firm size ian1really important, especially when the quality and dynamism of management is taken into consideration. It is assumed, on the basis of the data presented, that when they speak of quality and dynamism of management they are referring to variable (M). However, it is difficult to believe that the components of this variable (W, D, P, L, X), actually have much relationship to management quality and dynamism, the construct they presumably are intended toxneasure. These components are identical to the variables that Cavusgil and Nevin label ”Level of Commitment to Export Marketing" (see Figure 14L Is it a value judgment of the researchers that such commitment represents quality management? Equation Three is intended to predict movement to Stage Five, experienced exporting. This equation is of interest because the dependent variable 0))is measured as percent of sales from exporting. This same measure is used IX) represent Export Involvement, the independent variable in the current research. Although the dependent variable from Equation Two (A) is not used as a predictor in Equation Three, two of Equation Two's independent variables are used again. The management variable (M) was positively related to experimental exporting in Equation Two, however, in Equation Three the same variable is negatively related to experienced exporting. If, as discussed earlier, (M) is intended to represent management quality and dynamism, the obvious conclusion is that although quality and 54 dynamism lead firms to experiment with exporting inferiority and impotence lead firms to become experienced in it. Clearly this is unlikely. However,it serves to reinforce earlier questions regarding Bilkey and Tesar's third conclusion and suggests that further research is needed into the relationship between management variables and exporting. The other repeated variable is (E) management's expectations of the contribution of exporting to their firm. As noted previously, this variable may be considered conceptively similar to the perceived relative advantage of exporting. Therefore, its continued predictive usefulness and high partial correlation L775) provide evidence that perceived relative advantage should be strongly, and positively, related to Export Involvement. The third independent variable in Equation Three is also of special importancetx)the current research. This variable,(B)--the number of barriers management perceivestx>exporting, bearselstrong conceptual resemblance to the perceived complexity of exporting and its elements provide an indication of issues which should be addressed by items designed to measure perceived complexity. Values for (B) were derived by summing the number of barriers which respondents indicated in answering the following question: "Check which, if any, of the following barriers to exporting are so serious as to make it extremely difficult or impossible to export; ( ) foreign opportunities are difficult to determine; () it costs too much money to get started in exporting; ( ) adequate representa- tion in foreign markets is difficult to obtain; () it isfida one .SOHumupmmmww .Q.£m :.mfim%amc< HmoflwHaEm c< ”uofl>msom uuoaxm .mspfim mo mucmcfiaumumo HmcowumNHcmwwo: .wam:>mo .H.m "MQMDOm mqdem<> Hzmmzmmma HmmHm m.AHUm:>UHWHQ>HCD QLH “GOflumUHmmme omofim :oWHW%HmG< Hmoflwfidam a< ”Hoa>m£om uuoaxm .mEhHm wo mucmawawmuma Hmcowumuficmwuo: .mems>mo .H.m "mumDOm m4m¢Hm<> HZMszme 9200mm m.AHUmD>ov uoxuuz 231 2.3 “sec laws queue-I o» Aolsao> had-«soak coaumv cage 5...» Aouuvaaoluno>ad “waxy coaxed: no no hvuusoon poo-noao>on / .uou oaaaanuun-c aoauouqqun no nooaouon Anny oosooua cacao: Anuv hue-aqua an .959 59 analysis performed with "Percent of Sales Exported" as the dependent variable incorporated four independent variables: 1) type of industry, 2) market development expectations, 3) systematic exploration, and 4) the strength of aSpirations for security of investment. "All’predictors were significant, and they explained 17.6 percent of the variation." (p. 156) Only two of the independent variables in this regression analysis are relevant to the current research. First, market development expectations should be considered as a component of perceived relative advantage. Second, aspirations for security of investment should be considered conceptually similartx>the importance of stabilitytx3the firm. The importance of stability is one of the firm characteristics which will be assessed in this study. The primary contribution of Cavusgil's research to the current effort is that he provides a bench mark with which the results of this research may be compared. Cavusgil and Nevin (1981) investigated internal determinants of export marketing behavior, intending "to shed some light on the question of why firms have been reluctant to export3'(p. 114) Their dependent variable, Export Marketing Behavior, was dichotomous and indicated whether or not a firm was currently exporting. Data used in this analysis came, again, from the survey conducted by Tesar (1975). Howeverg as with Cavusgil's(l976) previous study, the techniques they employed allowed for the categorical nature of this data. The analysis conducted by Cavusgil and Nevin was based on a model (Figure 13) which is a simplified version of Cavusgil%;ear1ier model (Figure 11). Although the model presented in Figure 13 indicates possible "casual relationships” between the sets of variables, these 60 .oHHIqHH .Afiwmfi hwmsunmmv .noumomom wcwumxpmz mo abandon :.c0Humeumo>cH HmofiwHQEm c< ”Hoa>mnom waauoxumz updem mo muamcwaumuoo HmcuouoH: .:a>oz .m.h new Hawm=>mo .H.m mOH>cnon ocuuoa uuaz uuoaxu u4n<~¢<> FZUDZNQHO x7 < ocuuoxuqx uuoaxm cu ounce coocuoac no. acouuouuaq< «canon-cu: "MUMDOm conuuca>u< /\ acceu_e£ou .0 dose; mmqo<~x<> oz~zu>xwhz~ In“; -_ucocouuqc mn4n n2bouuxu8 present both the initial reliability analyses and the analyses which were done subsequent to the deletion of poorly correlated items for each of the five indices. For both the initial reliability analyses and the analyses of the revised indices, responses of "Don't know” were recoded as "Neither" (3% Final selection of items for inclusion in the survey instrument was only partially based on these results. Several items (from each index) 99 TABLE 4 PERCEIVED RELATIVE ADVANTAGE INDEX PRETEST RELIABILITIES Items Initial Reliabilities Revised Reliabilities Adjustments Corrected Alpha Corrected Alpha Item—to-total If Item Item-to-total If Item Correlation Deleted Correlation Deleted 1. -.23347* .46681 —.10632* .69906 Retained 2. .16596 .33776 -- -— Retained 3. .27282 .29384 .21597 .62615 4. —.O6607 .40817 —— -— 5. .29621 .30317 .25585 .60893 6. .54611 .16554 .56237 .49557 7. .43746 .25816 .39385 .57238 8. .34800 .28091 .53576 .52808 9. -- -- .50875 .51846 10. .15317 .33984 -- —— 11. .11102 .35228 -- -- 12. .13865 .34741 —- -- l3. —.O8884 .40784 —- -- 14. .06720 .36358 —- -— 15. -.30699 .40145 -- -— 16. —.00201 .37667 —— -— 17. -.12774 .42443 Alpha .36709 .62305 7': . Item was incorrectly coded in this analysis. 100 TABLE 5 PERCEIVED COMPATIBILITY INDEX PRETEST RELIABILITIES Items Initial Reliabilities Revised Reliabilities Adjustments Corrected Alpha Corrected Alpha Item—to-total If Item Item—to-total If Alpha Correlation Deleted Correlation Deleted 1.a .62228 .70532 .70490 .81889 1.b .63046 .70305 .71311 .81721 1.c .51097 .71528 .57624 .83197 1.d. .56239 .70890 .65592' .82311 1.e. .53011 .71717 .60979 .83023 1.f. .61188 .71057 .72898 .81983 1.g. .11494 .74654 -- -— Changed 2. .39442 .72659 .29464 .86153 3. .41907 .72401 .33881 .85755 4. .17206 .76976 -- -- Retained 5. .48804 .71670 .58258 .83145 6. .26890 .73800 —- —- Retained 7. .15841 .75085 -— -- 8. .12524 .75204 —— —— 9. .01772 .75399 —— -- 10. .13554 .74848 —- —- 11. .13243 .75192 -— -- Alpha .74476 .84881 101 TABLE 6 PERCEIVED COMPLEXITY INDEX PRETEST RELIABILITIES Items Initial Reliabilities Revised Reliabilities Adjustments Corrected Alpha Corrected Alpha Item—to-total If Item Item—to-total If Item Correlation Deleted Correlation Deleted 1. .49405 .45475 .43162 .62656 2. .32735 .48350 .20213 .68935 3. .22552 .50570 .34567 .65383 4. .38617 .47675 .30317 .65804 5. .47347 .46247 .48800 .61408 6. .42371 .46636 .62515 .57176 7. .38480 .49289 .30498 .65850 8. .04777* .53586 -- -- Retained 9. .24133 .50982 29188 66013 10. .00089 .54705 -- -- Retained 11. .03473 .54237 —- —- Retained 12. .11084 .57964 —— —- 13. .00517* .54499 -- -— 14. .07784 .55715 -— -- 15. .12521 .52531 -- -- 16. .05636 .54340 —— -- 17. .17302 .51762 -— —- 18. .19486 .51252 Alpha .53068 .67362 * Items were incorrectly coded in this analysis. 102 TABLE 7 PERCEIVED TRIALABILITY INDEX PRETEST RELIABILITIES Items Initial Reliabilities Revised Reliabilities Adjustments Corrected Alpha Corrected Alpha Item-to—total If Item Item-to-total If Item Correlation Deleted Correlation Deleted 1. .09985 .40407 -- —— Retained 2. .42700 .26279 .36144 .57888 3. .43924 .29970 .44320 .54576 4. .34405 .29821 .60590 .41976 5. .38599 .28323 .62414 .41283 , 6. -.39098 .49407 -.18601 .73300 Deleted 7. .03180 .42062 -- —— 8. .21570 .36269 -— -- Retained 9. .08596 .40353 -- -— Retained 10. .09569 .40049 -- —- Retained 11. —.05158 .44873 -- -— 12. -.05018 .46238 —- —- Alpha .40763 .62160 103 TABLE 8 PERCEIVED OBSERVABILITY INDEX PRETEST RELIABILITIES Items Initial Reliabilities Revised Reliabilities Adjustments Corrected Alpha Corrected Alpha Item-to-total If Item Item-to-total If Item Correlation Deleted Correlation Deleted 1. .43974 .54743 .70941 .74177 2. .54757 .51356 .64438 .77315 3. .52038 .53172 .76893 .72510 4. .48448 .53126 .48555 .85012 S. .0 .62644 -— -— 6. .28881 .59196 -- -- Retained 7. .24765 .60149 -- —— 8. —.06268 .66575 —— —- Alpha .61665 .82036 104 which performed poorly in the pretest analyses were retained in the survey because it was believed that they addressed components of their constructs which were not adequately captured by the other items in the index. Further, their performance may have been affected by the small number of subjects in the pretest. It was therefore believed that when the reliabilities were reassessed using the survey data, the performance of these items would be improved. Items retained under those conditions are identified by an 'R' in right hand columns of Tables 4-8. As shown in the tables, purification of the indices resulted in attainment of an acceptable coefficient alpha for each index. Measures pf Other Variables Justifications for each of the chosen firm characteristics were presented in Chapter Three. A brief description of how Firm Characteris- tics were measured follows. - Market Area (MA) The item used to measure market area was the first question on the survey questionnaire (see Figure 22). A value of one (1) was assigned to the "local market" response, and a value of six (6) to the "throughout the worlw'response. Values assigned to intermediate responses ranged from two (2) through five (5). 105 MARKET AREA 1. Which of the following statements best describes where you sell your products? [ ] WE SELL MOST OF OUR PRODUCTS LOCALLY (WITHIN 100 MILES OF OUR PLANT). [ ] WE SELL MOST OF OUR PRODUCTS IN ONTARIO. [ ] WE SELL MOST OF OUR PRODUCTS IN ONTARIO AND NEARBY AREAS OF THE UNITED STATES. [ ] WE SELL OUR PRODUCTS NATIONWIDE IN CANADA. [ ] WE SELL OUR PRODUCTS THROUGHOUT NORTH AMERICA. [ ] WE SELL OUR PRODUCTS THROUGHOUT THE WORLD. TECHNOLOGY 4. Are some of these machines numerically or computer numerically controlled (NC or CNC)? NONE ARE LESS THAN 25% ARE 26—SOZ ARE 51-75% ARE 76-]00Z ARE r—:.—.,—.v—-‘,.. SIZE 68. What was you firm's total sales volume in 1983? S: 69.3. How many employees does your firm have in Canada? b. How many in the world? GOALS 63. Please indicate the degree to which each of the following firm goals in IMPORTANT to your firm. VI‘VERY IMPORTANT QI=QUITE IMPORTANT SI=SLIGHTLY IMPORTANT N' NEITHER UI= UNIMPORTANT DK= DON'T KNOW VI QI S N UI DK . Profit 1 1 l 1 1 . Growth [ ] [ 1 [ Stability [ ] [ ] [ A! 0‘ I 1 [ 1 1 1 [ 1 1 I 1 [ 1 1 1 1 I 1 [ 1 [ 1 O s MANAGERS 70. How many managers are there in your firm? 71. How many of your managers have college degrees? 72. How many of your managers have a year or more of work experience outside Canada? FIGURE 22 FIRM CHARACTERISTICS QUESTIONS 106 - Technology (NC) The technology measure used in this study is industry specific. The leading edge of technological development in the machine tool industry is concerned with the production of numerically controlled (NC) and computer numerically controlled (CNC) machinery (Cremeans and Dalton, 1982). Thus item four on the questionnaire asked respondents what proportion of their machines were either numerically or computer controlled (see Figure 22X The response that none were was assigned a zero (0), less than 25% a one (1), and so on such that a response of 76-100% was assigned a value of four (4). - Size Size was initially measured by both total 1983 sales volume and number of employees, as indicated by items 68 and 69 in Figure 22. Analysis of responses indicated that over a third of the respondents would not reveal their firm's sales volume while they were considerably less reticent about the number of employees. A correlation analysis showed that these two measures were very highly correlated L99) and therefore it is the number of employees which a firm employees domestically (69.2) which is used as the measure of size in this study. - Goals The importance of the goals of profit, growth and stability was measured using non-symetric Likert-type response categories ranging from Very Important (5) to Unimportant (l), with the response of Neither being 107 assigned a value of two (2)(see item 63, Figure 22). The decision to include varying levels of importance but only one level of unimportance resulted from suggestions made by the interviewees during the preliminary phases of the research. Respondents were also allowed to indicate that they didnit know the importance of the goal. Cases containing "Don't Know" responses to these items were deleted from the data set for two reasons. First, it was not deemed possible to impute a meaning to this response with regard to the importance of goals. Second, there were very few cases in which this response occurred and therefore the deletions were not a serious impairment to the data set. - Managers Overseas Experience (PWOS) and Education (PCOL) The last two independent variables in this study were: 1) the percent of managers with overseas work experience, and 2) the percent of managers with college degrees. These two variables were calculated using responses to items 70, 71, and 72 (see Figure 22). - Export Involvement (EI) Export involvement was measured by asking what percent (%) of total 1983 sales volume came from export sales? Responses to this item were verified by independent calculations based on questions about total dollar sales volume and dollar export volume. Although this procedure uncovered no discrepancies, it did allow occasional inclusion into the data set of calculated responses when a respondent had omitted answering directly. 108 THE SURVEY Members of the survey population were identified.byncrosschecking several industry specific listings. Michigan machine tool manufacturers were included on the survey mailing list if their names appeared in at least two of the following sources: Pickis Michigan Purchasing Directogy (1984), Harris Michigan Industrial Directory 1983-84, and the 1983 Directory of the National Machine Tool Builders' Association. Ontario machine tool manufacturers were identified using the Canadian Trade Index (1983). The final survey mailing list included 305 Michigan firms and 78 Ontario firms. Dillman's (1978) Total Design Method (TDM) was the basis for both the questionnaire construction and the methodology used to execute the survey. This method rests on the premise that everything possible should be done to make the respondent wish to participate in the survey and also make it easy for the respondent to do so in.a:nanner that facilitates obtaining apprOpriate responses to the questions asked. Separate versions of the questionnaire were developed for subjects in Michigan and Ontario so that questions would contain the appropriate phraseology for each group (see Appendices C-1 and C-2). Each survey packet contained the questionnaire, a cover letter and a return envelope. Identification numbers were placed only on the return envelopes to help assure respondents of the anonymity of their completed questionnaires. Three mailings of the complete packet took place and a post card reminder was'sent one week after the first mailing. (See Appendices D-l, D-2 and D-3 for examples of the three cover letters; D-4 109 contains an example of the post card reminder.) These procedures resulted in responses from 180 Michigan firms apd 46 Ontario firms, giving overall response rates of 59.01% and 58.97%, respectively. Only 100 of the Michigan responses and 28 of the Ontario responses contained apparently usable and complete questionnaires; thus the effective response rates were 26.L%anu135.89%. (See Appendix E-l for a record of the responses received.) Non-usable responses consisted, for the most part, of questionnaires returned without being completed by firms which did not manufacture machine tools (although most performed other functions in thetnachine tool industry). Approximately forty percent of the intended subjects did not respond. Information to explain this non-response is unavailable. Data preparation revealed that 12 apparently usable questionnaires had to be discarded because they contained a very high proportion of "Don't Know” responses to items in the perceived characteristics of exporting indices. Therefore 116 cases make up the data set employed for the measure refinement analyses. ‘The final data set, used to test the hypotheses, consisted of 105 cases due to the deletion of 11 additional cases from vfidch responses to critical questions were missing. A des- cription of the respondents follows. DESCRIPTION OF RESPONDENTS The final data set included 24 firms from Ontario and 81 from Michigan. Machine tools production was the major line of business for 73% of these firms. The remaining firms manufactured machine tools as a 110 supplementary activity, or manufactured parts for machine tools. The majority of firms in this study were privately owned; only 16% were publicly traded. Nearly half (48%) were closely held corporations while 18% were family owned, 15% were proprietorships, and 3% were partnerships. Sixty percent (60%)cnfthe survey questionnaires were completed by the presidents or general managers to whom they were sent. Sales or marketing executives completed 14% and the remaining 26% were completed by other executives in the firm. Summary statistics for each of the variables examined in this research are provided in Table 9. MEASUREMENT REFINEMENT Several types of analyses were undertaken to examine and evaluate the relationships among the items comprising the perceived characteristics of exporting indices. These analytic procedures provide evidence of the reliability and validity of the indices. Preliminary Reliabilities According to Churchill (1979), "coefficient alpha is the basic statistic for determining the reliability of a measure based on internal consistency3'(p. 70) Therefore this statistic was examined in the preliminary reliability analyses (see column 1 of Tables 10-14). These analyses were'conducted using the listwise deletion of missing data option (SPSS), with."Donit‘Know" responses specified as missing, SUMMARY STATISTICS FOR STUDIED VARIABLES 111 TABLE 9 Variables Michigan Ontario Total Standard Range Mean Mean Mean Deviation Min. Max. (n=81) (n=24) (n=105) Dependent Variable: Export Involvement 8.62 36.39* 14.96 22.90 0.00 100.00 Independent Variables: Perceived Character- istics of Exporting Relative Advantage 27.15 29.54* 27.70 4.41 18.00 39.00 Compatibility 35.88 36.91 36.12 6.29 16.00 52.00 Complexity 41.66 40.95 41.50 6.39 30.00 60.50 Trialability 10.48 11.70* 10.76 2.30 4.00 15.00 Observability 16.80 18.29* 17.14 2.84 6.00 24.00 Characteristics of Firms Market Area 4.59 4.00 4.45 1.55 1.00 6.00 Technology 1.11 1.25 1.14 1.32 0.00 4.00 Size (Employment) 294.09 75.45 244.12 1279.34 3.00 13000. PCOL 52.11 29.75* 46.90 33.73 0.00 100.00 PWOS 9.18 48.44* 18.33 29.23 0.00 100.00 Importance of Profit 4.53 4.50 4.52 .83 1.00 5.00 Importance of Growth 4.07 4.08 4.07 .89 1.00 5.00 Importance of Stability 4.39 4.50 4.41 .71 3.00 5.00 * indicates that a significant difference exists between of the two groups at p = .05. the means 112 TABLE 10 MEASUREMENT REFINEMENT: PERCEIVED RELATIVE ADVANTAGE INDEX ITEMS PRELIMINARY FINAL Item-to-Total Item-to—Total 32. (9) 38 (6) 42. (6) 29. (3) 30. (4) 26. (2) 33 (5) 40. (7) 14 (1) e Sub-group R-l Exporting would improve my firm's market position at home. My firm will be better able to diversify its product lines if it exports. Selling in foreign markets could help my firm develop more compe— titive products as home. Sub—group R-2 Export markets for my firm's products could be more profit— able than the U.S. market. My firm could make higher margins on products sold in the U.S. than on products sold in foreign markets. Sub-group R—3 The cost of serving export markets is really more reasonable than most people think. Exporting offers better growth opportunities for my firm than the U.S. market does. The financial returns to the owners of my firm will be greater if we concentrate on our U.S. customers and don't get involved in exporting. Sub—group R—4 Exporting is not risky if you plan well. (* item was incorrectly coded) .45462 .29955 .60237 .29167 .55440 .32972 .43739 .30473 .54805 .31577 .48908 .40876 .37807 .30002 .58527 .46984 -.11029* .16723 N 54 116 Coefficient Alpha .75404 .64244 Guttman Split-half -— .54955 NOTE: Item numbers from Table 4 are in parentheses. 113 TABLE 11 MEASURE REFINEMENT: PERCEIVED COMPATIBILITY INDEX I TEMS PRELIMINARY Item—to—Total Item-to-Total FINAL Sub-group A—l (l) a. Profit .74861 .62695 b. Growth .69232 .65770 c. Stability .67280 .60632 d. Diversification .68070 .51419 e. Increase Market Share .70375 .67416 f. Returns to Owners .72743 .74541 g. Increase Sales Volume .69154 .62345 Sub—group A-2 28. My firm would probably use the same (2) price structure in selling to foreign buyers as we use in pricing our products for sale in the U.S. .36108 .15272 31. My firm could use pretty much the (3) same sales techniques in any market. .40888 .15573 37. In selling in foreign markets my (5) firm could evaluate sales agents/ distributors the same way we eval- uate them here. .30514 .16969 39. My firm could distribute its products (6) to buyers in foreign markets in the same way we distribute them to our customers here. .28402 .10414 Sub-group A-3 35. Sales agents/distributors like we (4) use here are available in most foreign markets. .24948 --- N 54 116 Coefficient Alpha .86201 .79456 Guttman Split-half -- .46176 NOTE: Item numbers from Table 5 are in parentheses. 114 TABLE 12 MEASUREMENT REFINEMENT: PERCEIVED COMPLEXITY INDEX _— ' ITEMS ' PRELIMINARY FINAL Item-to-Total Item-to-Total Sub-group E-l 13. Obtaining payment for sales made (1) to foreign buyers is relatively simple. .45581 -.36427 15. Obtaining export financing is a (2) complicated process. .43694 .37274 18. The paperwork involved in process- (4) ing an export sale is easy to understand. .36171 .14665 22. Export financing is easy to get. .52587 .52727 (7) 25. Locating sales agents/distributors (10)in foreign markets is easy. , .44976 .27958 Sub-group E-2 21. The paperwork necessary for (6) exporting is overwhelming. .46396 .30030 24. Exporting is just too complicated (9) to be bothered with. .32437 .22431 Sub-group E-3 17. Business people in other countries (3) are not like us. .12097 .32337 19. Evaluating the performance of sales (5) agents/distributors in foreign markets is difficult. .27753 .25773 23. Business practices are pretty much (3) the same in most countries. .32425 .41783 34. Specifications, regulations and codes for my firm's products vary from country to country. 27550 .21875 Sub-group E-4 49. My firm would check on the credit (T4)rating of a foreign buyer before responding to an inquiry. —- .28603 50. My firm would check into the (T5)credit standing of a country before replying to an inquiry from a buyer in that country. -- .28539 N 54 116 Coefficient Alpha .72415 .60383 Guttman Split—half -- .60959 NOTE: Item numbers from Table 6 are in parentheses. 115 TABLE 13 MEASUREMENT REFINEMENT: PERCEIVED TRIALABILITY INDEX ITEMS PRELIMINARY FINAL Item—to-Total Item-to—Total 49. (4) 50 (5) o 47. (2) 48. (3) 12. (8) 16. (9) 20. (1) 38. Sub-group T-l My firm would check on the credit rating of a foreign buyer before responding to an inquiry. My firm would check into the credit standing of a country before replying to an inquiry from a buyer in that country. Sub—group T-2 My firm would reply to any inquiry from a potential foreign buyer. My firm would reply to an inquiry from an import agent or distributor. Sub-group T—3 Exporting is the kind of activity that a firm can try once or twice and then re—evaluate. A firm can go in and out of export markets depending on how sales are going at home. Unsolicited inquiries from foreign buyers provide a good opportunity to test an export market. It would be costly for my firm (lO)to withdraw from exporting once we got into it. .13998 '.05114 .12326 .05825 .26858 .42460 .19826 .19666 .45498 .52024 .23371 54 116 Coefficient Alpha .41293 .60189 Guttman Split—half .62331 NOTE: Item numbers from Table 7 are in parentheses. 116 TABLE 14 MEASUREMENT REFINEMENT: PERCEIVED OBSERVABILITY INDEX ITEMS PRELIMINARY FINAL Item-to—Total Item-to-Total Sub—group 0-1 44. I have heard people from other (2) firms in our industry talk about problems they have had with exporting. .70093 .50538 46. I have read about the problems (4) that other firms in our industry have had with exporting. .63536 .58063 Sub-group 0-2 41. My firm would expect to see the (6) results of our export efforts directly on our income statement. .26730 .28620 43. I have heard people from other (1) firms in our industry talk about getting good results from exporting. .67911 .51111 45. I have read about the success of (3) other firms in our industry in export markets. .68269 .42811 N 54 116 Coefficient Alpha .81087 .70611 Guttman Split-half -- .69473 NOTE: Item numbers from Table 8 are in parentheses. 117 resulting in the inclusion of only 54 of the 116 cases. This severe reduction in the number of cases stimulated reexamination of the treat- ment of'Tknflt Know" responses. It was decided that not knowing could not be construed as either neutrality or agreement. Therefore a value of 2.5 (between neutral and disagree) was assigned to "Don‘t Know" responses for all further analyses. Preliminary reliability measures for four of the five indices were as good or better than the reliabilities achieved in the pretest analysis; the exception was the trialability index. It was determined, however, that further examination of the behavior of all index components would be done before taking steps to revise any of the indices. Factor Analyses Motivation for the factor analyses is derived, primarily, from expectations raised in the literature review concerning the nature of the five perceived characteristics of exporting, particularly their multi- dimensionality and interrelatedness. Multidimensionality was assessed by factor analyzing (SPSS, varimax rotation) each of the indices. The resulting factors are labeled as subgroups in Table 10 through 14. Factor analysis (again using SPSS varimax rotation) of all index items together was done to examine the interrelatedness of components of the various indices. The fifteen factors which resulted are presented in Table 15. Two disparate phenomena are revealed when the results of the combined factor analysis are compared with those of the factor analyses of the 118 TABLE 15 FACTOR ANALYSIS OF PERCEPTION INDICIES TOGETHER FACTORS FACTORS FACTORS Loading Number Index Loading Number Index Loading Number Index Factor One Factor Five Factor Ten Goal Compatibility Similar Bus. Pract. Relative Advantage 2 .73 a PAT .59 17 PLEX .67 33 RELAD .84 b FAT .70 23 PLEX .43 40 RELAD .66 c PAT —.53 31 PAT .68 d PAT —.47 39 PAT Factor Eleven .82 e PAT Paperwork Complexity .84 f PAT Factor Six . . .49 13 PLEX .86 g PAT General Difficulty .68 18 PLEX F t Two .39 20 TRIAL .36 21 PLEX 02C or bilit .40 24 PLEX serca y -.49 43 PLEX Factor Twelve .37 41 COM .53 28 PAT Trialability .55 43 COM .82 44 COM Factor Seven '80 12 TRIAL .41 :2 Egg Competitiveness Factor Thirteen ' .55 32 RELAD Agent Availability Factor Three '75 38 RELAD —.51 25 PLEX Financial Complexity '64 42 RELAD 66 35 PAT -.45 36 TRIAL ' .65 15 PLEX Factor Eight Factor Fourteen .80 22 PLEX Relative Advantage 1 Agent Performance Factor Four .35 26 RELAD _'23 is EEEQL Credit Check .45 29 RELAD ' 90 3O RELAD .50 37 PAT .84 49 PLEX ' .71 50 PLEX . Factor Fifteen Factor Nine Risk Response/Trial .89 47 TRIAL '55 14 RELAD .66 48 TRIAL NOTE: Each item is listed with the factor on which it had the highest factor loading. 119 separate indices: 1) several factors have remained stable and 2) many factors have exhibited considerable instability. Factors remaining stable include: Factor 1 (A-l), Factor 4 (T-l/E-4), Factor 9 (T-Z) and Factor 15 (R-4). The most positive change to take place is the integration into Factor 2 of Observability subgroups 0-1 and 0-2. Also somewhat encouraging is the near-stability of subgroups R-l, R-2 and R-3. (Factors 7, 8, and 10J Another minimal change involves the separation of subgroup E-l into Factors 3 and 11. Of greater interest is the apparent disintegration of the Compat- ibility, Complexity and Trialability indices exemplified by Factors 4, 6, 12, 13, and 14. However, scrutiny of the content of the items associated with each factor reveals that their behavior in this analysis probably reflects the expected interrelatedness between aspects of one construct and aspects of another. For instance, Factor 5 combines items intended to measure the perceived complexity of exporting due to differences in business practices and between business peOple with items intended to measure the perceived compatibility of exporting due to being able to use the same sales techniques and distribution methods in both domestic and export markets. Although these four items were designed to measure two separate constructs, it is not very surprising that they are related to each other. 120 Correlation Analysis Another indication of the interrelatedness of various aspects of the five characteristics of exporting was obtained through analysis of the correlation matrix from which these fifteen factors were derived. Analysis of inter-item correlations was also used to provide evidence of the construct validity of each of the indices. According to Churchill (1979): .uto establish the construct validity of a measure, the analystu.must determine (1) the extent to which the measure correlates with other measures designed to measure the same thing and (2) whether the measure behaves as expected. (p. 70) Because there are no other measures of the perceived characteristics of exporting it has been necessary to rely upon the second procedure in this study. This assessment was based on the following expectations about the behavior of each measure. 1) Perceived complexity is expected to be negatively related to perceived relative advantage, perceived compatibility, perceived trialability and perceived Observability. 2) Perceived relative advantage, perceived compatibility, perceived trialability and perceived Observability are all expected to be positively related to each other. Figure 23 presents all the significant (at.05 or better) positive and negative correlations between all the items in all five indices, facilitating several observations. First, all within-index correlations are positive; negative correlations would have been indicative of prob- lems. Second, the relationships which were expected between the five constructs have, by and large, been demonstrated. The greatest inconsistencies involve items from the perceived RELATIVE ADVANTAGE COMPAT- IBILITY COMPLEX- ITY TRIAL- ABILITY (p08) OBSERVA— BILITY (neg) NOTE: l21 RELATIVE COMPAT- COMPLEXITY TRIAL- OBSERVA- ADVANTAGE IBILITY ABILITY BILITY + + + + + + + + + + + + + + + + + + + + + +++++++++ + + + + + + + + + ++++ ++++ + + + + + + + + — — — — + + + + ---------- + + + + + + : : : : : : : : : : +:i:i:+:+:i: : _ _ - _ I : I I I +++++++++++ + + - + + + + + + + + + + + -- ------ +666 _ _ _ + + + + - - (j) C>C> + + + + + + + + + + + + — - - c) ++++++ + ++++ + + + + + + + + + + + + + — - - + + + + + + + + + + FIGURE 23 INDEX INTER-ITEM CORRELATIONS Circles identify correlations involving retained items from the trialability index. 122 trialability index. Indeed, it was by observing the correlations of items 49 and 50 (subgroup T-l/E4) that it became apparent that these items should be shifted from the trialability index to the complexity index. These items were negatively related to other trialability items and positively related to other complexity items. In addition, their correlations with items from the other indices followed the pattern of complexity items and were contrary to the pattern of trialability items. Items 49 and 50 were included with the complexity items in preparing Figure 23. Further examination of trialability correlations in Figure 23 indicates that items 12, 16 and 36 should also be dropped from this index. Therefore, only items 20, 47 and 48 are retained in the trial- ability index for the remaining analyses. Correlations involving the retained items are circled in Figure 23 and all but one conform to the expected relationships with other constructs. Another apparent inconsistency concerns correlations involving items from the perceived observability index. Of particular interest here is the large number of positive correlations with complexity items and the occasional negative correlations with compatibility items. On a prima facie basis these are contradictory to the expected relationships between these constructs. However, the observability index is made up of two types of items, observability of success and observability of problems, and the apparently contradictory correlations all concern items related to the observability of problems. This realization provides a reasonable and consistent explanation for the direction of the observed 123 correlations and therefore they are construed as evidence that the expected relationships are maintained. One other adjustment made prior to assessing the final reliabilities of the indices was the deletion of item 35 from the Compatibility index. This item was deleted for two reasons: it was consistently separated from the other compatibility items in the factor analyses and it had a very high proportion of "Don't Know" responses. Final Reliabilities The final reliability analyses of the indices were performed using 116 cases. At this stage, reliability was assessed using both coefficient alpha and Guttman split-half statistics. These statistics and the item-to-total correlations are presented in the second columns of Tables 10 to 14. Final alphas for all indices met or exceeded the.60 criterion. CHAPTER FIVE ANALYSIS: TESTING THE HYPOTHESES HYPOTHESES TESTING The hypotheses presented ix: Chapter' Three were tested. using regression programs developed by the SAS Institute (1982). This chapter contains the results of this hypothesis testing along with a discussion of their implications. The first three hypotheses concern whether ortunzthe three models represent significant linear relationships between the dependent variable, Export Involvement.(EI).and the varying sets of independent variables. The first three hypotheses (in null form) are stated as follows: H1: There is no significant linear relationship in Model I (Perceived Characteristics of Exporting). 2: There is ru) significant linear relationship ill Model II (Characteristics of Firms). H3: There is no significant linear relationdmnain Model III(Combined Model). As the assessment of these hypotheses involves the same procedure in each case, they arereject the hypotheses. All three models exceeded this criterion, each being significant at the <1 = .001 level or better. Therefore, in each case, the null hypotheses cannot be 124 125 accepted and, as each model has been shown to represent a significant linear relationship, the alternate hypotheses are accepted. The three models and relevant statistical information are presented in Tables 16 through 18. The fourth hypothesis is stated in null form as follows: H4: The amount of variance in Export Involvement (EI) explained by Model I is less than or equal to the amount of variance explained by Model II. A statistical statement of this hypothesis, using the Coefficients of Determination, may take either of the following forms: R2I g R2II or R2I - R2II g 0 To test whether or not the difference in R squares is less than or equal to zero, a confidence interval around zero was established using Fisher's Z' (Neter, Wasserman and Kutner, 1983). With a desired confidence level of .95, the resultant confidence interval is: - .196 S Z'O S .196 The computed 2' value for the difference between'Model I and Model II is :0487. Because this value falls within the confidence interval estab- lished, the null form of the hypothesis four cannot be rejected. This result leads to the conclusion that the levels of explanation provided by the Model I and II are not significantly different. The fifth hypothesis is stated in null form as follows: H5: The amount of variance in Export Involvement (EI) explained by Model III is less than or equal to the amount of variance explained by either Model I or Model II. Again, statistical statements of this hypothesis are as follows: 2 2 2 _ 2 R III 3 R I °r R III R I 5 O 126 TABLE 16 EVALUATION OF MODEL I Regression Equation E1 = .41 RELAD* + .04 COM + .02 TRIAL - .24 PLEX* - .13 PAT Adjusted R2 = .24 Analysis of Variance Source DF Sum of Mean F Prob > F Squares Square Value Model 4 14670.99 3667.75 9.195 0.0001 Error 100 39886.67 398.87 Total 104 54557.66 Significance of Independent Variables Variable Significance Standardized Level Estimate Relative Advantage (RELAD) .0001* .41 Observability (COM) .6417 .04 Trialability (TRIAL) .8178 .02 Complexity (PLEX) .0011* -.24 Compatibility (PAT) .1076 -.13 * Significant Variables 127 TABLE 17 EVALUATION OF MODEL II Regression Equation EI = .31 MA* + .10 NC - .01 SZ - .14 PCOL + .35 PWOS* + .05 PROFIT - .02 GROWTH - .09 STABLE Adjusted R2 = .19 Analysis of Variance Source DF Sum of Mean F Prob > F Squares Square Value Model 7 13633.72 1947.68 4.522 0.0002 Error 95 40915.52 430.69 Total 102 54549.24 Significance of Independent Variables Variable Significance Standardized Level Estimate Market Area (MA) .0004* .31 Technology (NC) .3311 .10 Size (82) .9273 —.01 Percent of Managers with College Degrees (PCOL) .1212 —.14 Percent of Managers with Overseas Work Experience (PWOS) .0002* .35 Importance of Profit (PROFIT) .5356 .05 Importance of Growth (GROWTH) .8709 -.02 Importance of Stability (STABLE) .2599 —.09 * Significant Variables 128 TABLE EVALUATION OF MODEL III 18 Regression Equation * EI = .23 MA*+ .09 NC - .03 52 — .14 PCOL + .24 PWOS * .11 PROFIT - .00 GROWTH — .09 STABLE + .31 RELAD * .01 COM + .02 TRIAL — .22 PLEX — .10 PAT + Adjusted R2 = .32 Analysis of Variance Source DF Sum of Mean F Prob > F Squares Square Value Model 12 21786.56 1815.55 4.987 0.0001 Error 90 32762.69 364.03 Total 102 54549.25 Significance of Independent Variables Variable Significance Standardized Level Estimate Market Area (MA) .0061* .23 Technology (NC) .3279 .09 Size (SZ) .7750 —.03 Percent of Managers with College Degrees (PCOL) .0991 —.14 Percent of Managers with Overseas Work Experience (PWOS) .0081* .24 Importance of Profit (PROFIT) .2458 .ll Importance of Growth (GROWTH) .9755 —.00 Importance of Stability (STABLE) .2360 —.09 Relative Advantage (RELAD) .0004* .31 Observability (COM) .9520 —.01 Trialability (TRIAL) .8046 .02 Complexity (PLEX) .0032* —.22 Compatibility (PAT) .2094 —.10 * Significant Variables 129 and R2111 5. R211 or R2111 ‘ R211 5 O Hypothesis five was tested using partial F tests to indicate whether or not the full model (Model III) provides a significantly greater level of explanation than each of the partial models (Models I and II). This test involves a comparison of the sums of squares associated with the explanatory power of each model. Again, a confidence level of .95 was used as the criterion. The test of Model I and Model III resulted in a partial F of 2544; in the test of Model 11 and Model III, partial F = 2.79. In both cases the partial F was significant at a confidence level of .975. These results, in combination, indicate that the full model (Model III) does indeed explain a significantly greater amount of the variance in Export Involvement than can be explained by either Model I or Model II separately. Therefore, the null form of hypothesis five is rejected and the alternate hypothesis is accepted. DISCUSSION The major conclusion derived from the foregoing analysis, and based on the results of the partial F tests, is that Model III provides the fullest explanation of export involvement, combining, as it does, both the perceived characteristics of«exporting and the characteristics of firms. In interpreting the meaning of this result two considerations are relevant. First, how does the explanation provided here compare with the explanations offered by previous researchers? Second, how important are 130 each of the independent variables in providing this explanation? Comparison of Explanations Several factors impinge upon any researcher%sability to explain human behavior, including the behavior of organizations such as a firmis export involvement. Most such efforts at explanation are predicated on the assumption that behavior is patterned. Therefore, the quality of all explanations depends on the extent to which such patterns exist, can be identified and their components isolated. Explanations of the phenomenon of exporting are no different. Each researcher begins by identifying a potential pattern and determining its components in her (his) view. The quality of the resulting explanation is thus determined by the accuracy with which the researcher's choices reflect the reality of the phenomenon. These efforts are hindered, somewhat, by the complexity of the phenomenon, the wide variety of possible component variables and the instability of analytic techniques to incorporate more than a relatively small proportion of all the potential variables. Thus perfect explanations are not expected. Attempts by other researchers to explain the phenomenon of exporting have resulted in the development of ten different regression-type models (or equations). These models (Bilkey and Tesar's 3 (1977), Cavusgil's 2 (1976), and Reid's 5 (1983)), provide a basis for comparison with Model III because they were developed or tested using similar methodology and analytic techniques. They did not, however, employ either uniform conceptualizations of patterns or identical measures of component 131 variables, and the levels of explanation achieved by these other models varied considerably. Coefficients of determinations for these models range from R2 =.08 to R2 = .698. Only two of the previous studies used percent of sales from exporting as the dependent variable (Bilkey and Tesar's Equation Three (1977) and Cavusgil's Model Two (1976)L In both instances the dependent variable was actually measured categorically and a substantially smaller number of independent variables (than used in the current research) were employed. Bilkey and Tesar's (1977) dependent variable in their Equation Three was not only measured categorically, but also limited to a range of 10% - 45%. Their dependent variables were a management scale (M) (- .05 to + 4.5), the number of barriers management perceives to exporting (B) (0 to 9), and management's expectation of exporting's contribution to the firm (E) (- 1000 to + 1000). This formulation achieved the highest level of explanation (R2 = .698) of any of the previous models. However, by limiting the dependent variable as described above, Bilkey and Tesar systematically excluded from their analysis firms with no or little (less than 10%) involvement in exporting, thus effectively restricting the range of behavior which their model attempts to explain. Also, it is quite likely that there are some attributes which all firms that export tend to have (as shown in the profile analysis earlier), attributes which firms that do not export may or may not also possess. Therefore, the limitation of firms included in this analysis may also result in less variability in the independent variables, contributing to their very high R2. 132 The other analysis using a similar dependent variable, Cavusgil's (1976) Model Two (see Figure 12), achieved a coefficient of determination of only .176. The performance of all three models developed in the current research were superior to this. This comparison is even more significant when it is recognized that in conducting his analysis of this model Cavusgil used only firms that exported. I Further comparisons with other models are both difficult and inappropriate due to the wide variation in dependent variables. However, it may be observed that Model III of the current research explained a greater amount of variance in Export Involvement than seven of the ten previous models of export behavior were able to explain in their respective dependent variables. Models with superior performance included Bilkey and Tesar's Equation Three (R2 =.698) discussed above, Bilkey and Tesar's Equation Two (R2 = .690) which used a categorical (exporter/nonexporter) dependent variable, and Reid's (1983) Equation One (R2 =.38), where the dependent variable was the likelihood of the firm exporting to new foreign markets in the next twelve months. The fact that Model III, with a coefficient of determination of .319, outperformed two-thirds of the previous export models has several implications. First, it suggests that export researchers should continue searching for both appropriate patterns to model and the appropriate components to include in them in order to obtain more perfect explana- tions. Second, it suggests the importance of identifying the components of Model III which were significant in this analysis, so that they may be used in future efforts. 133 Importance of Independent Variables All the independent variables in each of the three models were assessed to determine whether or not they were significant using a confidence level of .95. Unfortunately, although each of the models, in toto, was significant, most of the independent variables were not. In Model I, which used the indices of the perceived characteristics as predictors, only Relative Advantage (RELAD) and Complexity (PLEX) were significant, both at the level of 0. = .001. In terms of the relative importance of the independent variables in Model I, as indicated by the standardized parameter estimates (Beta coefficients), Relative Advantage is the most important with a Beta coefficient of .341. The Beta coefficient for Complexity was - .223. In Model II, which used the characteristics of firms as predictors, only two of the eight independent variables were significant. These were Market Area (MA: a = .001) and the percent of managers with overseas work experience (PWOS: a = .001). Of these two, the percent of managers with overseas work experience was the most important, with a Beta coefficient of .346; Market Area has a Beta coefficient of .308. In Model III, which contained the two sets of independent variables, the same four variables were significant. Again, they were all signifi- cant at a = .001. In this combined analysis Relative Advantage was the tnost important ((3 = .314), followed by percent of managers with overseas work eXperience ( B = .243), Market Area ( B = .320) and Complexity (B= - .223). These findings stimulate several observations. First, the stability 134 of the significant variables in both the partial and full models is worthy of note. None lost significance and no additional variables became significant in the full model. The full implications of this finding will require further research but it seems to indicate that these four variables alone account for a large part of the variance in Export Involvement. Second, a number of observations about the behavior of the perceived characteristics of exporting are relevant. Of particular importance is the dominant contribution made by perceived relative advantage. Further, the implied directions of the relationships between Relative Advantage, Complexity and time dependent variable, Export Involvement, are consistent with the expectations derived from previous perceived characteristics research. As suggested in Chapter Three, Relative Advan- tage is positively related to Export Involvement while Complexity is relatively related to Export Involvement. In addition, it should be noted that leative Advantage and Complexity are roughly equivalent to two of the three independent variables used by Bilkey and Tesar in their Equation Three, although they were measured differently. Indeed, items for the Relative Advantage Index were, in part, developed on the basis of considerations employed by Bilkey and Tesar in arriving at their measure (E)--the expected effects of exporting on the firm; and items for Complexity Index were based, in part, on some of the barriers to exporting incorporated in their measure (B). Further, the signs of Beta coefficients of Relative Advantage and (E) are both positive with signs of Beta coefficients of Complexity and 135 (B) are both negative, thus supporting their conceptual parallelism. Several comments are also pertinent to the firm characteristics which were significant in this analysis. First, Market Area, as it was used here,luuinot been incorporated into previous explanatoryxnodels. The closest approximation was Reid%:(l983) measure of the percent of sales obtained extra-regionally. As an independent variable in his Equation One (predicting the likelihood of exporting to new foreign markets in the next twelve months), this variable was only marginally significant ( d== .1) and was negatively related to the dependent variable. In explanation of the reasonably strong showing made by Market Area in both Models II and III in the current research, it must be remembered that responses to this measure included market areas described as "North America" and "world-widefl' thus allowing for a: potentially tautological relationship between this variableauuithe dependent variable, Export Involvement. Second, perhaps the same criticism might be applied to the PWOS variable (percent of managers with overseas work experience). In measuring this variable no attempt was made to control responses in terms of whether the managers obtained their overseas experience with the responding firm or pmevious to their employment with that firm. Therefore, it might be suggested that a firm with high export involvement should naturally be expected to have a high percent of managers with overseas experience. On the other hand, it is equally reasonable to argue that a firm which desires to increase its export involvement may seektx>hire managers whOIhave previous overseas work 136 experience. Unfortunately, the-data collect for this study do not allow for resolution of this dilemma and because this is a variable which has not appeared in any of the other regression-type models, it is impossible to seek either clarification of this issue or confirmation of the variable's importance in them. It may also be noted that both significant firm characteristics were found to be positively related to export involvement. SUMMARY Further discussion of the implications of the findings of this study will be presented in the next chapter. However, to summarize the analysis, the following points may be made: 1) All three models are significant. 2) There do not appear to be significant differences between Model I and Model II in terms of their ability to explain variation in Export Involvement. 3) The combination of the perceived characteristics(fifexporting and the characteristics of firms in Model III provides a better and more complete explanation of Export Involvement than either Model I CPerceived Characteristics of Exporting) or Model II (Firm Characteristics). 4) Only four (4) of the thirteen (13) independent variables in the analysis were significant predictors in any model. 5) Of the significant variables in Model III, Relative Advantage contributes the most toward explaining the variance in Export Involvement. CHAPTER SIX SUMMARY, DISCUSSION and THEORETICAL LINKAGES SUMMARY The purpose of this study was to enhance understanding of the factors that influence a firm's export involvement. The research was conceptualized within the framework of adoption theory so that export involvement represents the degree to which a firm has adopted and imple- mented exporting. This was measured as the percent of sales which a firm obtains by exporting. Examination of the factors which were expected to influence export involvement was the central focus of this research. These factors fell into two categories: perceived innovation-attributes (indices of managers' perceptions of the characteristics of exportingh and adopter characteristics (characteristics of firms). Results indicate that, for the 105 machine tool firms included in the study, a combination of both groups of factors provides the fullest explanation of export involvement. In addition, manager's perceptions of the relative advantage of exporting were shown to be the most important determinant of a firm's export involvement. Other significant determinants included two firm characteristics, the percent of managers with overseas work experience and market area, and managers' perceptions of the complexity of exporting. 137 138 DISCUSSION As preface to the following remarks several comments about the limitations to the generalizability of these findings are required. The most obvious constraints on generalizability concern the intentional restrictions of the population to firms in one specific industry (machine tools) and two specific geographic regions (the Province of Ontario and the State of Michigan). These restrictions necessarily limit the generalizability of the findings while at the same time suggesting several directions for future research. Although this particular industry/location combination was chosen, in part, because the machine tool industry is highly concentrated in these regions of each country, it is certainly possible that Michigan machine tool manufacturers are not representative of machine tool producers throughout the United States, and that Ontario firms are not representative ofaflJ.Canadian machine tool producers. Therefore, one direction suggested for future research is more nationwide study of the export involvement of firms. Czinkota and Johnston (1981) have conducted the only truly nationwide export-related study so far, and their emphasis was on segmenting firms rather than explaining involvement. Of potentially greater importance, however, are variations in export involvement which are likely to be found between industries. Indeed, it was due to the expectation of industry-based variation that this study was limited to one industry. Because machine tools are high-technology, high value, specialized industrial products, a study focused on the export involvement of firms producing low-technology, low value, 139 standardized consumer products should provide a valuable contrast to and extension of the findings presented here. Finding One By combining managers' perceptions of the characteristics of ex- porting with the characteristics of firms, it is possible to explain 327. of the variance in export involvement, a significantly greater level of explanation than is possible by examining either set of variables alone. The primary implication of this finding is that future research should not be limited to examination of either firm characteristics or perceptions of exporting separately. This finding substantively supports Thio%3(197l)contentnx1that,'%.consideration that takes into account .Egth the innotivatirnrwattributes and the adopter-characteristicsnumay account for more variance”. 3' (p.60) In order to substantiate the unique contributions made by managers' perceptions of the characteristics of exporting, regression analyses were performed using the firm characteristics as predictors of the perceptions of exportirmp Results indicated that none of the perceived character- istics of exporting were explained by any linear relationship of the firm characteristics. Itrnust therefore:be concluded that each of the significant independent variables adds something different to our understanding of export involvement and that both managers' perceptions of exporting and the characteristics of firms ought to be incorporated in future export research. 140 Finding Two Four variables have been identified as significant predictors of export involvement while nine others, which were expected to be meaningful, were not statistically significant in the analysis. The major implication of the second finding is that future research needs to be directed toward identifying variables which will be consistently meaningful (significant) across a variety of situations and applications. All of the firm characteristics which were not significant in the current study (size, technology, education, and the importance of profit, growth and stability) were selected because they had been meaningful in previous studies of exporting. 0n the other hand, the two firm characteristics which were significant here were either measured differently than they had been in previous research (market area) or had not been used in previous predictive research (percent of managers with overseas work experience). It is therefore also suggested that attention needs to be given to determining the most appropriate methods of measuring each variable. Finding Three Perceived relative advantage is the most important predictor and is positively related to export involvement. The signifiCance of perceived relative advantage in explaining export involvement suggests quite plainly that firms are likely to be more involved in exporting if their managers perceive it to be more advantageous than selling in their domestic market. 0r, put even more simply, people or firms are more likely to do things they think they will 141 benefit from. Indeed, according to the abstract of a recent disserta- tion, "The decision maker‘s expectation of expert's contributions to the firm," (Dissertation Abstracts International, 1985) is among the most important determinants of whether or not a firm will export. Firms may benefit from exporting in a number of ways, most of which were addressed by questions in the relative advantage index (see Table 10). Exporting cantuaprofitable;i¢:can offer higher margins, growth opportunities and greater returns to the owners of the firm. Exporting can also help a firm develop more competitive products and stimulate diversification of its produce line, thereby improving its market position at home as well as abroad. The pre-eminent role of perceived relative advantage in explaining export involvement is potentially the most important finding of this study. Agencies and organizations interested in encouraging exporting will be able to adjust their export promotion programs to reflect the advantages of exporting as perceived by managers. If the.appropriate benefits of exporting are incorporated into promotional programs they should be able to stimulate non-exporters to begin exporting and current exporters to increase their involvement in exporting. Finding Four The percent of managers with overseas work experience is thetnost important firm characteristic, and is positively related to export involvement. The fourth finding'indicates that a firnfls export involvement is positively related to and enhanced by the presence in the firm of 142 managers with overseas work experience. Several of the limitations of this finding were addressed in Chapter Five. The major concern, indicated at that time, pertains to the fact that there is no evidence as to whether these managers gained their overseas experience prior to joining the responding firm or afterward. Further research is required to determine whether or not this distinction is important. However, the fact that a linkage exists between a firm's export involvement and the percent of its managers who have overseas work experience remains important regardless of the source of their experience. The implications of this finding are particularly relevant to firms desiring to increase their export involvement. In this instance the firm's managers should consider two Options: 1) they may hire management personnel who already have overseas work experience, or 2) they may arrange for current personnel to gain this experience. There are many reasons why managers with overseas work experience can be important assetstx3a firm interestedimiexporting. Through living and working in foreign countries a manager can gain an understanding of the business practices prevalent there, thus potentially reducing the perceived complexities(fifexporting. In addition, such experience can provide the manager with greater knowledge of the foreign market environ- ment and thereby equip him to perceive the benefits of exporting to that market and assist him in doing so effectively. 143 Finding Five Market area is the next most important variable and is positively related to export involvement. The essence of this finding is that the larger the market area of a firm, the greater its involvement in exporting is likely to be. The potentially tautological character of this finding was addressed in Chapter Five. The implication remains, however, that a firm whose market covers an extensive geographic space may be more prone to extending that coverage even further than a firm whose market coverage is limited. It is also possible that this finding is indicative of something quite different. Perhaps the manager of the basically local or regional firm perceived the firm as just that--a local supplier. Perhaps, as is true for many smaller Michigan machine tool producers, the firm's origins lie in supplying the Detroit-based automotive industry. In this instance the manager may have neither the desire nor the need to extend his firm's market coverage, especially to include foreign markets. While, in a sense, these comments are purely speculative, they are also supported by information gathered in the interviews described in Chapter Four. What may, in fact, lie at the root of this finding are not variations in Amarket area but variations in firm ownership. However, ownership was not one of the variables included in this study and this therefore remains an issue for further research. Finding Six Perceived complexity is the least important of the significant pre- dictors and is negatively related to export involvement. 144 The implications of the sixth finding are similar to those discussed with respect to perceived relative advantage (Finding Three), but are in some senses broader reaching. Because perceived complexity is negatively related to export involvement, its components indicate areas of concern to managers which should be minimized or counteracted by export facili- tating agencies and organizations. These areascfl?concern.include: 1) paperwork involved in executing an export sale, 2) export financing, 3) obtaining payment for goods sold overseas, 4) checking the credit ratings of foreign buyers and the credit standings bf foreign countries, 5) locating and evaluating agents and distributors in foreign markets, 6) variations in specifications, regulations and codes in foreign markets, and 7) variations in business practices in foreign markets (see Table 12). Conclusions This study was undertaken in the expectation that it could make a) variety of contributions. Because the study involved an examination of' both perceived innovatjxnrnattributes and innovator-characteristics, it has provided a fuller application of adoption/diffusion constructs to the explanation of exporting than previous research. In addition, the study has demonstrated that export involvement is better explained by a combination of managers' perceptions of exporting and firm characteris- tics. This result, in itself, supports several theoretical conclusions. First, it reconfirms the relevance of adOption theory to marketing, not 145 in terms of new product adoption and diffusion, but specifically with respect to the study of marketing practices. In a field which habitually borrows from other disciplines, it can only be helpful to be reassured of the continuing appropriateness of the concepts which are borrowed. Second, the results of this study also support the premise that the perceived characteristics of innovations can be useful in explaining implementation as well as adoption. However, the study results related to this conclusion were mixed. .Although perceived relative advantage and perceived complexity were significant predictors of export involvement, perceived compatibility, perceived trialability and perceived observability were not significant. Therefore, additional research is recommended to continue exploration of the usefulness of perceived characteristics as explanatory variables. Such research might be directed toward perfecting the measurement of these constructs and also toward examining their role in the implementation of a variety of innovations. The results of this research also have implications for public policy makers and other export facilitating organizations. First, the results indicate that attention should be given to improving the relative advantage of exporting. Second, attention should be given to reducing the complexity of exporting. Export facilitators can also contribute to the reduction of complexity by offering a wider variety of services to their customers and by lobbying for standardized international product codes and world-wide credit reporting systems. In addition, it should be recognized that 146 facilitating agents, banks and freight forwarders, perform highly technical functions for exporters. Therefore, their personnel must be both well trained 5nd sensitive to potential confusion on the part of their clients. Finally, the contribution of this research to developing a clearer and more complete explanation of export involvement really remains to be seen. This kind of contribution can only be shown if the additional insights offered by the research stand the tests of time and duplication. If future researchers find that managers' perceptions of relative advantage and complexity and their overseas work experience and market area continue to explain export involvement, across industries and from nation to nation, then it may be said that this study has made a contribution to the understanding of exporting. THEORETICAL LINKAGES This study has been concerned with examining the influence of the perceptions managers have of exporting on the variability of the export involvement of firms. Historically, explanations of exporting have been based on economic theory. According to macro-economic theory trade takes place between nations because each nation has a comparative advantage in the production of some product or products. This theory has been used to explain the heavy involvement of the United States in exporting high technology products such as machine tools. Within this theoretical framework, the propensity'of a nation to export certain products has been attributed to various structural variables such as relative factor 147 endowments, price ratios, and cost ratios. An industryJS propensity to export has been attributed to another set of structural variables, including economies of scale,:uulproduct differentiation. It might, therefore, be reasonable to expect that two firms in the same industry and location, subject to similar structural conditions, would exhibit a similar propensity to export or level of export involvement. However, this was nottfluacase for the firms in the machine tool industry which were studied here. How then, can we account for the variability in export involvement exhibited by firms in the same location and industry? The results of this research indicate that in addition to developing a clearer under- standing of structural variables we also need to consider "behavioral" elements, such as the perceptions managers have of exporting. Inasmuch as this study has been concerned with the export involvement of firms, it must be acknowledged that exporting can and should be considered as one component of a firm's strategy. Earlier it was observed that perhaps Cavusgil and Nevinis (1981) conclusion should have been that the reluctance of firms to export may be largely attributed to top managementds lack of determination to grow (see Chapter Two” page 63). Indeed, previous export research provides substantial evidence linking a firm's interest in growth with its involvement (or non- involvement) in exporting. Perhaps it is time that we stop asking, "why do firms export?" and begin asking, "why do firms choose exporting as a means of obtaining growth or other goals instead of alternate available strategies?" 148 According to Ansoff (1957): There are four basic growth alternatives open to a business. It can grow through increased market penetration, through market development, through product development or through diversification. (p. 113) In discussing these alternatives, Kotler (1980) states that, "market development consists of the company‘s seeking increased sales by taking ' (p. 79) including international its current products into rmnv markets] markets. Hence, exporting can be placed directly into Ansoff's pro- duct/market expansion matrix (see Figure 24). A firm may choose to grow by marketing its existing products in export markets, international market development, or by developing new products for export markets, international diversification. Viewing export involvement in this context may, in the long run, enhance our understanding of the phenomenon in general and the role of managers' perceptions of growth strategies in particular. Hansen (1956) has observed that, "basically, growth for the individual firmmnrequires the existence of certain primary attitudes. These attitudes aretnore important than the availability'of capitalJ'(p.93) Certainly, in the current researct managers'perceptions of the relative advantage of (exporting were more important than any characteristic of the firm. Further support for this perspective is provided by Aaker (1984), who suggests thati1:is important forlnanagers ofaafirnxto understand the backgrounds of the managers of competing firms in order to understand, and perhaps predict, the kinds of strategies those competitors are likely to pursue. Likewise, it is apparent that both the backgrounds (overseas 149 EXISTING‘ NEW PRODUCTS PRODUCTS MARKET PRODUCT EXISTING g MARKETS 1 PENETRATION DEVELOPMENT DOMESTIC /’ ////' DOMESTIC , . 'ARKET //' DIVERSIFICATION DEVELOPMENT NEw MARKETS // //// INTERNATIONAL INTERNATIONAL //// MARKET DIVERSIFICATION , DEVELOPMENT (EXPORTING) / (EXPORTINC) FIGURE 24 ADAPTED PRODUCT/MARKET EXPANSION MATRIX SOURCE: Adapted from, H.I. Ansoff, "Strategies for Diversifica- tion,” Harvard Business Review, (September-October 1957), 113-124. 150 work experience) and perceptions/beliefs which managers possess are important in order to understand a firm's propensity to involve itself in exporting as a strategy. In conclusion, therefore, it is recommended that, in future, export research should be concerned with examining exporting within the context of the strategy choice processes and procedures of firms. In addition, it is suggested that this line of research may also reveal that the selection of any particular strategy (not just exporting) is conditioned, in part, by the perceptions managers have of that strategy. APPENDICIES 151 APPENDIX A-l INTERVIEW SCHEDULE I asked for your time and assistance today for two reasons: First, because I'm interested in your company's experience in the international market place, particularly with exporting. Second, because I am preparing to do a major study of machinery exporting from Michigan/Ontario and I need to be sure that I'm asking meaningful questions in a way that will be understood by those involved in the study. If at any time you feel that a question I have asked is either inap- propriate or vague, please stop me. 1. Does your company export? 2. Do you have a separate export department or division responsible for export sales? If yes: a. Did you make foreign sales before you had a separate division responsible for exporting? b. How important do you think it is to have a separate division responsible for exporting? WHY? 3. Do you have manufacturing subsidiaries and/or Joint Ventures outside the U.S.? a. Where are these located? b. 152 APPENDIX A-l (cont'd.) How important was each of the following factors in your choiCe of these locations? Entry into common market (or the like) 1 2 3 4 5 Language 1 2 3 4 5 Was approached by someone in that country 1 2 3 4 5 Financing 1 2 3 4 5 Host country government incentives 1 2 3 4 5 Host country government restrictions 1 2 3 4 5 U.S. government incentives 1 2 3 4 5 U.S. government restrictions 1 2 3 4 5 Other, please specify: Do you also have additional overseas sales offices? a. b. Are there assembly functions performed at these offices? Where are these located? 153 APPENDIX A-l (cont'd.) c. How important was each of the following factors in your choice of these locations? Entry into common market (or the like) 1 2 3 4 5 Language 1 2 3 4 5 Already had customers there 1 2 3 4 5 Was approached by someone in that country 1 2 3 4 5 Financing 1 2 3 4 5 Host country government incentives l 2 3 4 5 Host country government restrictions 1 2 3 4 5 U.S. government incentives l 2 3 4 5 U.S. government restrictions 1 2 3 4 5 Other, please specify: 5. Do you have licensing agreements with companies overseas? a. Where are these located? 154 APPENDIX A-l (cont'd.) b. How important was each of the following factors in your choice? Entry into common market (or the like) 1 2 3 4 5 Language 1 2 3 4 5 Already had customers in that country 1 2 3 4 5 Was approached by someone in that country 1 2 3 4 5 Financing 1 2 3 4 5 Host country government incentives 1 2 3 4 5 Host country government restrictions 1 2 3 4 5 U.S. government incentives 1 2 3 4 5 U.S. government restrictions 1 2 3 4 5 Other, please specify: Does each subsidiary have the freedom to respond to inquiries it receives OR are world—wide sales areas divided among the sub- sidiaries in a manner such that orders are forewarded to the appropriate subsidiary? Who started exporting first, a foreign subsidiary or headquarters? 155 APPENDIX A-l (cont'd.) 8. How important is each of the following factors in your company's decision to allocate resources from domestic to international marketing efforts OR from international to domestic marketing efforts? Expected Sales 1 2 3 4 5 Expected Profit 1 2 3 4 5 R01 1 2 3 4 5 Competitive Considerations 1 2 3 4 5 Risk Considerations 1 2 3 4 5 Economies of Scale 1 2 3 4 5 Combination 1 2 3 4 5 Other, please specify: 9. Do you receive unsolicited orders? a. Do you always respond? b. How do you decide when to reSpond? c. Who decides? 156 APPENDIX A-l (cont'd.) 10. How important is each of the following in distributing your products in your export markets? Foreign Agents (Manufacturer's Representatives) 1 2 3 4 5 Distributors l 2 3 4 5 Subsidiary Sales Force 1 2 3 4 5 Wholesalers 1 2 3 4 5 Direct Shipments to Customers l 2 3 4 5 Own Sales Force 1 2 3 4 5 Other, please specify: 11. Is this similar to or different from the way you distribute in your home market? IF DIFFERENT: In what way? 157 APPENDIX A—l (cont'd.) 12. How important is each of the following in promoting your products in your export markets? Trade Shows 1 2 3 4 5 Foreign Agents 1 2 3 4 5 Company Sales Force 1 2 3 4 5 Mailing of Brochures, etc. 1 2 3 4 5 Trade Journal Advertising 1 2 3 4 5 Magazine/Newspaper Advertising 1 2 3 4 5 Special Promotions 1 2 3 4 5 U.S. Embassy Promotions 1 2 3 4 5 Catalog Shows 1 2 3 4 5 Our foreign agents/distributors do their own 1 2 3 4 5 Other, please specify: 13. Is this similar to or different from the way you promote in your home market? IF DIFFERENT: In what way? 158 APPENDIX A-l (cont'd.) 14. Do you price for export markets in 15. In relation to your competitors in prices: Quite High A Little Higher About the 16. In relation to your competitors in Quite High A Little Higher About the dollars or foreign currency? your export markets, are you Same A Little Lower Lower the U.S. are your prices: Same A Little Lower Lower 17. Comparing your own prices here in the U.S. to the prices you charge in foreign markets, are your U.S. prices: Higher A Little Higher About the Same A little Lower Lower 18. How important are each of the following sources of export financing? Local Bank Commercial Credit 1 2 3 4 5 Major Bank (i.e., New York) Commercial Credit 1 2 3 4 5 Federal Export Promotion Guarantees 1 2 3 4 5 Foreign Government Financing 1 2 3 4 5 Other, please specify: 19. 21. 22. 23. 24. 159 APPENDIX A-l (cont'd.) How many product lines does your company produce? About what proportion (Z) of your products are exported? About how many different products is this? Does this vary by country? In your view, what are the major complicating factors in serving your export markets? Can you prioritize these? Are there particular markets where the complication effectively prohibit entry? Are there some markets which you consider so attractive or important that you make every effort to sell there regardless of the complications? Where? Why? 26. 27. 28. 29. 30. 160 APPENDIX A-l (cont'd.) Do you export to: EurOpe? Asia? South/Central America? Africa? Canada? Eastern Block Countries? Other? Which countries would you consider your MAJOR export markets? Do you systematically review markets to decide whether or not to remain? On what criteria? Is exporting a "Good Thing" for your company? Why or why not? What are the benefits/drawbacks? 31. 32. 33. 34. 35. 36. 37. 161 APPENDIX A-l (cont'd.) How important are each of the following goals to your company? Profitability 1 2 3 4 5 Sales/Firm Growth 1 2 3 4 5 Market Share Maintenance or Growth 1 2 3 4 5 Firm Stability 1 2 3 4 5 Maintenance & Growth of Shareholder Wealth l 2 3 4 5 THINK ABOUT THE MANAGERS IN YOUR COMPANY About how many are there? Is their average age: 25—34 [ ] 35—44 [ 1 45-54 [ ] 55—64 [ ] About what percent have a college degree? About what percent have worked overseas? About what percent can speak a foreign language? About what percent were born or have lived overseas? 38. 39. 40. 41. 42. 43. 44. 45. 162 APPENDIX A-l (cont'd.) THINK ABOUT YOUR COMPANY IN GENERAL Does your company sell its products nationwide in the U.S.? How many employees does your company have in the U.S.? About what percent of these employees are active in exporting? What was your company's total sales volume in 1982? About what percent of sales came from exporting from U.S. plants? Does this vary alot by product? In what way? Do you receive any newsletters from the government? Have you ever attended an export promotion seminar? 163 APPENDIX A-2 INSIGHTS FROM INTERVIEWS Insights about the Relative Advantage of Exporting - exporting firm — exporting - exporting - exporting — exporting - exporting - exporting contributes to broadening the market base of the can smooth the impact of business cycles can keep a firm competitive can be profitable helps achieve economies of scale can be risky can be costly Insights about the Compatibility of Exporting — with the goals of: growth, profit, stability, returns to owners, diversification — with practices including: direct sales, pricing — major contribution in this area was identification of the marketing practices relevant to this industry Insights about the Complexity of Exporting Related to: paperwork, language differences, variety of regulations, differences in business practices, difficulty with financing/payment, difficulties in penetrating markets, problems with agent selection and evaluation, problems with packaging shipping and service, exchange rates (mentioned only by U.S. firms) Insights about the Trialability of Exporting - responses to unsolicited inquiries might differ depending on whether they were from a potential customer, a potential agent/distributor, or a foreign subsidiary of a current CUS tomer Insights about the Observability of Exporting — managers at least occassionally read about the results of other firms' export efforts. 164 APPENDIX B-l PRETEST INSTRUMENT CANADIAN/AMERICAN BUSINESS DEVELOPMENT FORUM EXPORT STUDY This is a survey of business people's views about exporting. We ask for your cooperation and assistance in sharing your thoughts about exporting and your firm. Please take a few minutes to answer the following questions. THANK YOU FOR YOUR TIME. Conducted by the DEPARTMENT OF MARKETING AND TRANSPORTATION MICHIGAN STATE UNIVERSITY 165 APPENDIX B-l (cont'd) First we would like to know what you think about exporting in general. Please indicate the degree to which you AGREE or DISAGREB with each of the following statements by placing an X in the appropriate BOX: [X] SA-STRONGLY AGREE A-AGREE NINEITNER D-DISAGREE SD-STRONGLY DISAGREE DK-DON'T KNOW SA A N D SD 1. Any firm that has a competitive advan- tage would consider exporting a good opportunity. 1 1 1 1 1 1 1 1 1 1 2. Exporting is the kind of activity that a firm can try once or twice and then re-evaluate. 1 1 1 1 1 1 1 1 1 1 3. Obtaining payment for sales made to foreign buyers is relatively simple. 1 1 1 1 [ 1 [ 1 1 1 4. The strength of the 0.8. dollar today makes export sales more difficult. [ ] [ ] [ 1 [ 1 [ 1 5. Exporting is not risky if you plan well. [ 1 [ 1 [ ] 1 1 [ ] 6. Exporting is easy because you don't have to service the products you sell to foreign buyers. 1 1 1 1 1 1 1 1 1 1 7. Exporting requires having an Export Department. 1 1 1 1 1 1 1 1 1 1 8. Identifying the profits from exporting would be fairly difficult. I l I l I 1 l 1 I l 9. Because of the investment required, once a firm starts exporting it is committed. 1 1 I 1 1 1 1 1 1 1 10. Obtaining export financing is a com- plicated process. 1 1 1 1 1 1 1 1 1 1 11. A firm can go in and out of export markets depending on how sales are going at home. 1 1 1 1 1 1 1 1 1 1 12. Business peOple in other countries are not like us. 1 1 1 1 1 1 1 1 1 1 13. The paper work involved in processing an export sale is easy to understand. [ 1 [ 1 [ ] [ ] [ ] 14. Getting an adequate share of a foreign market would be easy if you sold a very special product. 1 1 1 1 1 1 1 1 1 1 DK 166 APPENDIX B-l (cont'd.) SA-STRONGLY AGREE A-AGREB N-NEITHER DK-DON'T Know 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. VC-VERY CONSISTENT C-CONSISTENT N-NEITHER Exchange rate variations make exporting difficult. Evaluating the performance of sales agents/distributors in foreign markets is difficult. Unsolicited inquiries from foreign buyers provide a good opportunity to test an export market. The paper work necessary for exporting is overwhelming. Making sales to foreign buyers is risky. Export financing is easy to get. Business practices are pretty much the same in most countries. Exporting is just too complicated to be bothered with. Locating sales agents/distributors in foreign markets is easy. The cost of serving export markets is really more reasonable than most people think. D-DISAGREE SA SD-STRONGLY DISAGREE [ Please indicate how CONSISTENT you think each of the following goals is with exporting. I-INCONSISTENT DK-DON'T KNOW a. Profit b. Growth c. Stability d. Diversification e. Increased Market Share f. Returns to Owners 3. Economies of Scale VC C VI-VERY INCONSISTENT 167 APPENDIX B-l (cont'd.) The following questions ask you for your thoughts about exporting in relation to your own firm. Please indicate the degree to which you AGREE or DISAGREE with each of the following statements by placing an X in the apprOpriate BOX: [X] SAPSTRONGLY AGREE A-AGREE N-NEITNER D-DISAGREE SD-STRONGLY DISAGREE DK-DON'T KNOW SA A N D SD 26. For my firm, exporting requires a _ permanent commitment. 1 1 1 1 1 1 1 1 1 1 27. My firm would probably use the same price structure in selling to foreign buyers as we use in pricing our products for sale in the 0.8. 1 1 1 1 1 1 1 1 1 1 28. Export markets for my firm's products could be more profitable than the U.S. 1 1 1 1 1 1 1 1 1 1 29. Exporting requires that my firm learn new packaging methods. 1 1 1 1 1 1 1 1 1 1 30. My firm could make higher margins on products sold in the U.S. than on products sold in foreign markets. 1 1 1 1 1 1 1 1 1 1 31. My firm could use pretty much the same sales techniques in any market. 1 1 1 1 1 1 1 1 1 1 32. My firm would expect to see the results of our export efforts directly on our balance sheet. 1 1 1 1 1 1 1 1 1 1 33. Getting an adequate share of a foreign market would be easy for my firm. 1 1 1 1 1 1 1 1 1 1 34. Exporting would improve my firm's market position at home. 1 1 1 1 1 1 1 1 1 1 35. Exporting offers better growth oppor- tunities for my firm than the U.S. market does. 1 1 1 1 1 1 1 1 1 1 36. Our employees won't need special training for us to export. 1 1 1 1 1 1 1 1 1 1 37. Exporting can stabilize my firm's sales. [ 1 1 1 1 1 1 1 1 1 38. We can use the same methods to ship to foreign buyers that we use to ship to our U.S. customers. 1 1 1 1 1 1 1 1 1 1 DK SA-STRONGLY AGREE 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. 168 APPENDIX A-AGREE N-NEITNER D-DISAGREE DK-DON'T KNOW Specifications, regulations and codes for my firm's products vary greatly from country to country. Increasing our investments in the U.S. market can provide more stable profits than investing in export markets. Sales agents/distributors like we use here are available in foreign markets. It would be costly for my firm to withdraw from exporting once we got into it. Exporting can provide important learn- ing experiences for my firm. In selling in foreign markets my firm could evaluate sales agents/distributors the same way we evaluate them here. My firm will be better able to diver- sify its product lines if it exports. For the same amount of money, my firm would expect to get more profit from export sales than from sales here in the U.S. My firm's products could be packaged the same for sales in foreign markets as they are packaged here. Exporting could help my firm get better economies of scale in production. My firm's profits could be hurt by exporting. My firm could distribute its products to buyers in foreign markets in the same way we distribute them to our customers here. The financial returns to the owners of my firm will be greater if we concen- trate on our U.S. customers and don't get involved in exporting. SA 1 B-l (cont'd.) 1 SD-STRONGLY DISAGREE 1 1 1 1 SD DK SA-STRONGLY ACRE! 52. 53. 56. 55. 56. The following questions ask what you think about your firm's possible responses to 169 APPENDIX B—l (cont'd.) A-AGREE N-NEITHER My firm would expect to see the results of our export efforts directly on our income statement. My firm could finance sales of its products to foreign buyers the same way it finances sales to customers here. Language differences are a barrier to exporting for my firm. Selling in foreign markets could help my firm develop more competitive products to sell at home. Current exchange rates give my firm an advantage in selling to foreign buyers. inquiries from foreign buyers. Please indicate the extent to which you AGREE or DISAGREE with each of the following [X] D-DISAGRE! DK-DON'T Know SA I I I statements by placing an X in the appropriate BOX: 57. 58. 59. 60. 61. 62. My firm would reply to an inquiry from a potential foreign buyer only if we already had customers in that country. Hy firn would reply to any inquiry from a potential foreign buyer. My firm would reply to an inquiry from an import agent or distributor. Hy firm would check on the credit rating of a foreign buyer before responding to an inquiry. Hy firm would check into the credit standing of a country before replying to an inquiry from a buyer in that country. ' My firm would reply to all inquiries from foreign firms which are subsid- iaries of our 0.8. customers. SA 1 l l I) I I II I] SD-STRONGLY DISAGRBZ I I I I I I I I I l I I l l I ' I I I I I I I l I 1 SD I I I I I I SD OK I I I l I I I 1 DK 170 APPENDIX B—l (cont'd.) The following questions ask you about how you get information about exporting. Please indicate the extent to which you AGREE or DISAGREE with each of the following statements by placing an X in the appropriate BOX: [XI SA-STRONGLY ACRE! A-AGREB N-NEITHER D-DISAGREE SD-STRONGLY DISACREE DK-DON'T Know 63. I've heard people from other firms in our industry talk about getting good results from exporting. I I I I I I I I I I I I 6‘. I've heard people from other firms in our industry talk about problems they have had with exporting. I I I I I I I I I I I I 65. I've read about the success of other firms in our industry in export markets. I I I ] I I I I I I I I 66. I've read about the problems that other firms in our industry have had with exporting. I I I I I I I I I I I I 0‘ 7. Most of my information about exporting comes from personal contact with people _ who have exported. I I I I I I I I I I I I These last few questions ask you about your firm and will be used for classification purposes only. 68. Please indicate the degree to which each of the following firm goals is IMPORTANT to your firm. VI-VERY IMPORTANT QI-QUITE IMPORTANT SI-SLIGHTLY IMPORTANT N-NEITHER UI-UNIMPORTANT DK-DON'T Know v1 QI SI N 01 DK a. Profit I I I I I I I I I I I I b. Growth I I I I I I I I I I I I c. Stability I I I I I I I I I I I I d. Diversification I I I I I I I I I I I I e. Increased Market Share I I I I I I I I I I I I f.MWmsmOwus II I] II I] II II g. Economies of Scale I I I I I I I I I I I I 69. 70. 71. 72. 73. 74. 75. 171 APPENDIX B-l (cont'd.) Has your firm exported in the past five (5) years? I I YES I I 30 I I DON'T KNOU Have you attended an export seminar before? I 1 YES I I NO I I DON'T Know What is your TITLE: How many years have you worked for this firm? IYEARSS How many years have you held your present position? YEARS What kinds of products does your company produce? (i.e., furniture, machinery, food, etc.) My firm is: I I FAMILY OWNED I I A CORPORATION [ I A DIVISION or SUBSIDIARY OF A CORPORATION I I OTHER, PLEASE SPECIFY: I I DON'T Know THANK YOU VERY MUCH FOR YOUR ASSISTANCE. If you choose to take this with you instead of completing it here at the conference, please ask for one of the self-addressed stamped enve10pes which are available. 172 APPENDIX C-l SURVEY FOR MICHIGAN FIRMS MACHINERY MARKETING AND EXPORT STUDY [[1 ‘.E7 (fii I ”‘1" “ 't:————-1r {b \ . This study is being conducted Please answer the following as part of the Canadian/American questions. If you wish to Business Studies Project to comment on any questions or assist machinery manufacturers qualify your answers, please in finding ways to increase use the margins or a separate sales both at home and abroad. sheet of paper. Return this questionnaire to: Machinery Marketing & Export Study Dept. of Marketing & Transportation Michigan State University ' East Lansing, Michigan 48824 173 APPENDIX c-1 (cont'd.) SECTION ONE: GENERAL BUSINESS PRACTICES (In answering the following questions please place an X in each of the appropriate boxes; IXI.) 1. Which of the fOIlowing statements best describes where you sell your products? I ] HE SELL MOST 0P OUR PRODUCTS LOCALLY (HITHIN lOO MILES OP OUR PLANT). I I WE SELL MOST OF OUR PRODUCTS IN MICHIGAN. I I HE SELL MOST OF OUR PRODUCTS IN MICHIGAN AND NEARBY AREAS OE CANADA. I I HE SELL OUR PRODUCTS NATIONUIDE IN THE U.S. I I HE SELL OUR PRODUCTS THROUGHOUT NORTH AMERICA. I I WE SELL OUR PRODUCTS THROUGHOUT THE NORLD. 2. Please identify the products your firm makes. (Mark as many as apply.) STANDARDIZED SPECIALIZED GRINDING MACHINES ................................... I I I BORING MACHINES ..................................... DRILLING MACHINES ................................... MILLING MACHINES .................................... MACHINE CENTERS ..................................... OTHER METAL CUTTING MACHINERY OOOOOOOOOOOOOOOOOOOOOOO v—fi DIE CASTING MACHINERY eeeeseseseeaeeeeeeeoeeseeoweooo OTHER METAL FORMING MACHINERY ....................... AUTOHATIC TRANSFER MACHINES OOOOOOOOOOOOOOOIOOOOOOOOO I I I I I I I I OTHER, PLEASE SPECIFY: I I I I I I I I I I HHHHI‘HHHH 3. Is this machinery your major line of business? I I YES I I NO-——+ IF NO, UHAT IS YOUR MAJOR BUSINESS? 4. Are some of these machines numerically or computer controlled (NC or CNC)? I I NONE ARE I I LESS THAT 25% ARE I I 26-502 ARE I I 51-7sz ARE I I 76-100z ARE 174 APPENDIX C-l (cont'd.) 5. How many patents does your company have? 6. Please indicate below how frequently you sell your products to each of the following customer groups. (Mark one category for each customer group.) REGULARLY FREQUENTLY SOMETIMES RARELY NEVER SELL TO SELL TO SELL To SELL TO SELL TO AUTOMOBILE/TRUCK Immsmxu.u.u.n.u.u.n. I I I I I I II II AEROSPACE/AIRPLANE INDUSTRY..................... I I I I I I I I I I APPLIANCE INDUSTRY .......... I I I I I I I I I I MILITARY EQUIPMENT INDUSTRY ..................... I I I I I I I I I I OIL INDUSTRY ................. I I I I I I I I I I OTHER MACHINERY MANUFACTURERS I I I I I I I I I I OTHER: I I I I I I I I I I PLEASE SPECIFY 7. Please indicate the extent to which each of the following is used sales inside the U.S. MAJOR FACTOR IN MOST SALES PRESIDENT/GENERAL MANAGER .............. I I I I I I SALES/MARKETING MANAGER ................ I I I I I I YOUR OwN SALES PERSONNEL ............... I I I I I I MANUFACTURER'S REPRESENTATIVES ......... I I I I I I DISTRIBUTORS/DEALERS ................... I I I I I I SUBSIDIARY SALES PERSONNEL ............. I I I I I I PARENT COMPANY SALES PERSONNEL ......... I I I I I I to obtain NOT A FACTOR 175 APPENDIX C-l (cont'd.) 8. Please 1ndicate the extent to which each of the following is used to promote your PrOdUCts to buyers inside the U.S.: MAJOR FACTOR NOT A IN PROMOTION FACTOR TRADE SHOVS ............................ I I I I I I I I I I MAILING 0F BR0CHURES,ETC. .............. I I I I I I I I I I TRADE JOURNAL ADVERTISING .............. I I I I I I I I I I COMPANY SALES PERSONNEL ................ I I I I I I I I I I AGENTS/REPRESENTATIVES ................. I I I I I I I I I I wORD OF MOUTH BETNEEN CUSTOMERS ........ I I I I I I I I I I 9. In relation to your competitors in the U.S. Market, are your prices... I I 5 £93 HIGHER THAN COMPETITORS? I I .5 LITTLE HIGHER THAN COMPETITORS? I I 52221 Egg EfiEE AS COMPETITORS? I I A_LITTLE LOHER THAN COMPETITORS? I I .A LOT LOWER THAN COMPETITORS? 10. Please indicate the extent to which each of the following is used to finance sales to buyers inside the U.S.: USED TO NEVER FINANCE USED MOST SALES INTERNAL COMPANY FINANCING ............. I I I I I I I I I I COMMERCIAL CREDIT FROM BANKS IN THE U.S. OOOOOOOOOOOCOOOOOOOOOO [] [l [I [l [1 COMMERCIAL CREDIT PROM BANKS IN CANADA OOOOOOOOOOOCOOOOOOOO... I] [l [I [I [1 OTHER THIRD PARTY FINANCING ............ I I I I I I I I I I BUYER ARRANGES FINANCING ............... I I I I I I I I I I 176 APPENDIX C-l (cont'd.) SECTION THO: THOUGHTS ABOUT EXPORTING The next several questions ask you what you think about exporting in general. (Please indicate the degree to which you AGREE or DISAGREE with each of the following statements by placing an X in the apprOpriate BOX: [X] ) SA-STRONGLY AGREE A-AGREE N-NEITHER D-DISAGREE SD-STRONGLY DISAGREE DK-DON'T KNow SA A N D SD 11. Any firm that has a competitive advantage would consider exporting a good opportunity. I I I I I I I I I I 12. Exporting is the kind of activity that a firm can try once or twice and then re-evaluate. I I I I I I I I I I 13. Obtaining payment for sales made to foreign buyers is relatively simple. I I I I I I I I I I 14. Exporting is not risky if you Plan well. I I I I I I I I I I 15. Obtaining export financing is a complicated process. I I I I I I I I I I 16. A firm can go in and out of export markets depending on how sales are going at home. I I I I I I I I I I 17. Business people in other countries are not like us. I I I I I I I I I I 18. The paper work involved in processing an export sale is easy to understand. I I I I I I I I I I 19. Evaluating the performance of sales agents/distributors in foreign markets is difficult. I I I I I I I I I I 20. Unsolicited inquiries from foreign buyers provide a good Opportunity to test an export market. I I I I I I I I I I 21. The paper work necessary for exporting is overwhelming. I I I I I I I I I I 22. Export financing is easy to get. I I I I I I I I I I 23. Business practices are pretty much the same in most countries. I I I I I I I I I I DK I I I I 177 APPENDIX C-l (cont'd.) SA-STRONCLY AGREE A-AGREE N-NBITHER D-DISAGREE DK-DON'T KNOH SD-STRONGLY DISAGREE SA A N D SD DK 24. Exporting is just too complicated to be bothered with. I I I I I I I I I I I I 25. Locating sales agents/distribu- tors in foreign markets is easy. I I I I I I I I I I I I 26. The cost of serving export markets is really more reason- able than most people think. I I I I I I I I I I I I 27. Please indicate how CONSISTENT you think each of the following goals is with exporting. VC-VERY CONSISTENT C-CONSISTENT N-NEITHER I-INCONSISTENT VI=VERY INCONSISTENT DK-DON'T KNOV VC C N I VI UK a. Profit I I I I I I I I I I I I b. Growth I I I I I I I I I I I I c. Stability I I I I I I I I I I I I d. Diversification I I I I I I I I I I I I e. Increase Market Share I I I I I I I I I I I I f. Returns to Owners I I I I I I I I I I I I g. Increase Sales Volume I I I I I I I I I I I I The following questions ask you for your thoughts about exporting in relation to our own firm. (Please indicate the degree to which you AGREE or DISAGREE with each of the following statements by placing an X in the appropriate BOX: IX] ) SA-STRONGLY AGREE A-AGREE NBNEITHER D-DISAGREE 28. 29. DK-DON'T KNOW SA A My firm would probably use the same price structure in selling to foreign buyers as we use in pricing our products for sale in the U.S. I I I I Export markets for my firm's products could be more profit- able than the U.S. market. I I I I S D- STRONGLY DISAGREE 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 178 APPENDIX C-l (cont'd.) My firm could make higher margins on products sold in the U.S. than on products sold in foreign markets. Hy firm could use pretty much the same sales techniques in any market. Exporting would improve my firm's market position at home. Exporting offers better growth Opportunities for my firm than the U.S. market does. Specifications, regulations and codes for my firm's products vary from country to country. Sales agents/distributors like we use here are available in most foreign markets. It would be costly for my firm to withdraw from exporting once we got into it. In selling in foreign markets my firm could evaluate sales agents/ distributors the same way we evaluate them here. My firm will be better able to diversify its product lines if it exports. My firm could distribute its products to buyers in foreign markets in the same way we dis- tribute them to our customers here. The financial returns to the owners of my firm will be greater if we concentrate on our U.S. customers and don't get involved in exporting. -__—_- My firm would expect to see the results of our export efforts directly on our income statement. Selling in foreign markets could help my firm develop more compe- titive products to sell at home. SA I I I SD I DK 179 APPENDIX C-l (cont'd.) The following questions ask you about how you get information about exporting. (Please indicate the extent to which you AGREE or DISAGREE with each of the following statements by placing an X in the appropriate BOX: [XI ) SA-STRONGLY AGREE A-AGREE N-NEITHER D-DISAGREE SD-STRONGLY DISAGREE DK-DON'T KNON SA A N D SD DK (03. I have heard people from other firms in our industry talk about getting good results from exporting. I I I I I I I I I I I I 44. I have heard people from other firms in our industry talk about problems they have had with exporting. I I I I I I I I I I I I 45. I have read about the success of other firms in our industry in export markets. I I I I I I I I I I I I 46. I have read about the problems that other firms in our industry have had with exporting. I I I I I I I I I I I I The following questions ask what you think about your firm's possible responses to inquiries from foreign buyers. (Please indicate the extent to which you AGREE or DISAGREE with each of the following statements by placing an X in the appro- priate BOX: [XI ) SA A N D SD DK 47. My firm would reply to any inquiry from a potential foreign buyer. I I I I I I I I I I I I 48. My firm would reply to an inquiry from an import agent or distributor. I I I I I I I I I I I I 49. My firm would check on the credit rating of a foreign buyer before responding to an inquiry. I I I I I I I I I I I I 50. My firm would check into the credit standing of a country before replying to an inquiry from a buyer in that country. I I I I I I I I I I I I 51. Which of the following statements best describes your sales activity outside the U.S.? I I NE REGULARLY EXPORT OUR PRODUCTS TO BUYERS IN FOREIGN MARKETS I I WE SOMETIMES EXPORT OUR PRODUCTS TO BUYERS IN FOREIGN MARKETS. [ 1 WE Do NOT SELL OUR PRODUCTS OUTSIDE OF THE U.S.—4EIEASE TURN TO QUESTION 63.] 180 APPENDIX C-l (cont'd.) SECTION THREE: BUSINESS PRACTICES OUTSIDE THE UNITED STATES The following questions ask you about the sales and marketing practices that your firm uses in selling its products outside the U.S. (In answering the ques- tions, please place an X in each of the appropriate boxes: IX].) 52. Considering your export activity during the past five years, please indicate the extent of your sales activity in each of the following areas: REGULARLY FREQUENTLY SOMETIMES RARELY NEVER SELL IN SELL IN SELL IN SELL IN SELL IN NESTERN EUROPE ............... I I I I I I I I I I CANADA ....................... I I I I I I I I I I ASIA ......................... I I I I I I I I I I CENTRAL/SOUTH AMERICA ........ I I I I I I I I I I AFRICA ....................... I I I I I I I I I I MIDDLE EAST .................. I I I I I I I I I I SOVIET/EASTERN BLOC .......... I I I I I I I I I I .OTHER: I I I I I I I I I I 53. Please name the three foreign countries'where you have your largest sales volume: FIRST: SECOND: THIRD: 54. Please indicate the extent to which each of the following is used to promote your products to buyers outside the U.S.: MAJOR FACTOR NOT A IN PROMOTION FACTOR TRADE SHOWS ............................ I I I I I I I I I I MAILING OF BROCHURES,ETC. .............. I I I I [ I I I I I TRADE JOURNAL ADVERTISING .............. I I I I I I I I I I CATALOG SHONS .......................... I I I I I I I I I I U.S. EMBASSY PROMOTIONS ................ I I I I I I I I I I COMPANY SALES PERSONNEL ................ I I I I I I I I I I FOREIGN AGENTS/REPRESENTATIVES ......... I I I I I I I I I I wORD OF MOUTH EETNEEN CUSTOMERS ........ I I I I I I I I I I 55. 181 APPENDIX C—l (cont'd.) Please indicate the extent to which each of the following is used to obtain sales outside the U.S.: ‘— MAJOR FACTOR ' NOT A IN MOST SALES FACTOR PRESIDENT/GENERAL MANAGER .............. I I I I I I I I I I SALES/MARKETING MANAGER ................ I I I I I I I I I I AGENTS/REPRESENTATIVES IN OTHER COUNTRIES ..._,.,,,,,,,........ I I I I I I I I I I DISTRIBUTORS/DEALERS IN OTHER COUNTRIES ..................... I I I I I I I I I I YOUR OWN SALES PERSONNEL IN OTHER COUNTRIES ..................... I I I I I I I I I I YOUR SALES PERSONNEL IN THE U.S. ....... I I I I I I I I I I SUBSIDIARY SALES PERSONNEL ............. I I I I I I I I I I PARENT COMPANY SALES PERSONNEL ......... I I I I I I I I I I EXPORT MANAGEMENT COMPANY OR OTHER U.S. AGENT .................... I 1 I I I I I I I I 56. I I I I I I I I How do you quote prices to buyers outside the U.S.? U.S. CURRENCY? CANADIAN CURRENCY? CURRENCY OF BUYER? OTHER? PLEASE SPECIFY: In relation to competitors in foreign (export) markets, are your prices: 'i‘EQT HIGHER THAN COMPETITORS? .A LITTLE HIGHER THAN COHPETITORS? ABOUT THE SAME AS COHPETITORS? _A LITTLE LOWER THAN COMPETITORS? A LQI‘LQEER THAN COMPETITORS? Comparing your own prices to buyers in the U.S. with your prices to buyers in other countries, are your prices in the U.S.: A E91 HIGHER THAN YOUR PRICES IN OTHER COUNTRIES. A LITTLE HIGHER THAN YOUR PRICES IN OTHER COUNTRIES. £2222 THE SAME AS YOUR PRICES IN OTHER COUNTRIES. .5 LITTLE LOWER THAN YOUR PRICES IN OTHER COUNTRIES. ié‘EQI‘EQEER THAN YOUR PRICES IN OTHER COUNTRIES. 182 APPENDIX C-l (cont'd.) 59. Please indicate the extent to which each of the following is used to finance sales to buyers outside the U.S.: USED TO NEVER FINANCE USED MOST SALES INTERNAL COMPANY FINANCING ............. I I I I I I I I I COMMERCIAL CREDIT FROM BANKS IN THE U.S. OOOOOOOOOOOOOOOOOOOOOO [] [l [l [l [ COMMERCIAL CREDIT FROM BANKS IN CANADA O0..OOOIOOOOOOOOOOOOOOOOOO0.0. [I [I [l [l I COMMERCIAL CREDIT FROM BANKS IN BUYER'S COUNTRY ..................... I I I I I ] I I I FEDERAL EXPORT PROMOTION GUARANTEES .... I I I I I I I I I FOREIGN GOVERNMENT FINANCING ........... I I I I I I I I I OTHER THIRD PARTY FINANCING ............ I I I I I I I I I BUYER ARRANGES FINANCING ............... I I I I I I I I I 60. Do you have a separate Export Department or Division which is responsible for sales made to customers outside the U.S.? I I YEs I I No I I DON'T KNON 61.a. What percent (Z) of your total 1983 sales volume came from export sales? X b. How much was this in dollars? $: 62. Which of the following statements best describes your expectations about your firm's future involvement with exporting? (Mark as many as apply.) WE ARE FULLY COMMITTED TO OUR EXPORT MARKETS FOR THE FORESEEABLE FUTURE. WE WILL CONTINUE EXPORTING WHENEVER OUR SALES IN THE U.S. ARE DOWN. NE WILL PROBABLY STOP EXPORTING TO SOME COUNTRIES SOON. WE ARE REVIEWING SEVERAL COUNTRIES AS POTENTIAL NEW MARKETS. WE WILL CONTINUE TO EXPORT AS LONG AS WE RECEIVE INQUIRIES FROM FOREIGN BUYERS. 183 APPENDIX C-l (cont'd.) SECTION FOUR: COMPANY INFORMATION These last few questions ask you about your firm and will be used for classification purposes only. 63. 64. figflfifl h—J—II—lh—‘h—l 6S. F‘r—qfiflH—‘HH a—lHH-dh‘du—ds—J Please indicate the degree to which each of the following firm goals is IMPORTANT to your firm. VI-VERY IMPORTANT QI'QUITE IMPORTANT SI-SLIGHTLY IMPORTANT UI-UNIMPORTANT DK-DON'T KNOW VI QI SI a. Profit I I I I I I I b. Growth I I I I I I I c. Stability I I I I I I I d. Diversification I I III I I I e. Increase Market Share I I I I I I I f. Returns to Owners I I I I I I I 3. Increase Sales Volume I I I I I I I Which of the following best describes the INDIVIDUAL OWNER PARTNERSHIP FAMILY OWNED CLOSELY HELD CORPORATION PUBLICLY TRADED CORPORATION ownership of your Which of the following best describes your firm (plant)? (Hark more than one if appropriate.) THIS IS OUR ONLY MANUFACTURING PLANT IN THE U.S. THIS IS ONE OF SEVERAL MANUFACTURING PLANTS IN THE U.S. WE ARE A SUBSIDIARY OF A CANADIAN FIRM. WE ARE A SUBSIDIARY OF A U.S. FIRM. WE ARE A SUBSIDIARY OF A FIRM HEADQUARTERED IN: firm? N=NEITHER UI WE ARE THE HEADQUARTERS, WITH SUBSIDIARIES IN CANADA. WE ARE THE HEADQUARTERS, WITH SUBSIDIARIES IN THE U.S. WE ARE THE HEADQUARTERS, WITH SUBSIDIARIES IN: DK 184 APPENDIX C—l (cont'd.) 66. Do you receive newsletters or other information from Federal or State government agencies about export opportunities? I ] YES I I NO I I DON'T KNOW 67. Have you ever attended an export promotion seminar? YES NO DON'T KNOW I I I 68. What was your firm's total sales volume in 1983? S: 69.a. How many employees does your firm have in the U.S.? b. How many in the world? 70. How many managers are there in your firm? 71. How many of your managers have college degrees? 72. How many of your managers have a year or more of work experience outside the U.S.? 73. How many of your managers can speak a language other than English? 74. What is the average age of the managers in your firm? I I 25 - 34 I I 35 - an I I as - 54 I I 55 - ea 75. What is your title? 185 APPENDIX C-l (cont'd.) te(If your firm exports, please answer question 76. If your firm does not export, please answer question 77) 76. Please briefly describe how your firm became involved in exporting. 77. Has your firm considered exporting? Why do you not? 186 APPENDIX C-l (cont'd.) ’8. What actions would you recommend be taken by the Department Of Commerce to assist your firm in increasing your sales in foreign markets? THANK YOU FOR YOUR ASSISTANCE 187 APPENDIX C—l (cont'd.) Is there anything else you would like to tell us about your firm's experiences with exporting? If so, please use this space for that purpose. Also, any comments you wish to make that you think may help us in future efforts to understand the marketing and export activities of manufacturers in your industry will be appreciated, either here or in a separate letter. Your contribution to this effort is very greatly appreciated. If you would like a summary of results, please print your name and address on the back of the return envelope (NOT on this questionnaire). We will see that you get it. 188 APPENDIX C-Z SURVEY FOR ONTARIO FIRMS MACHINERY MARKETING AND EXPORT STUDY “‘ “;::FI’ r 4’ \ . This study is being conducted Please answer the following as part of the Canadian/American questions. If you wish to Business Studies Project to comment on any questions or assist machinery manufacturers qualify your answers, please in finding ways to increase use the margins or a separate sales both at home and abroad. sheet of paper. Return this questionnaire to: Machinery Marketing & Export Study Dept. of Marketing & Transportation Michigan State University East Lansing, Michigan 48824 189 APPENDIX C-Z (cont'd.) SECTION ONE: GENERAL BUSINESS PRACTICES (In answering the following questions please place an X in each of the appropriate boxes: [X].) 1. Which of the following statements 2533 describes where you sell your products? [ I WE SELL MOST OF OUR PRODUCTS LOCALLY (WITHIN lOO MILES OF OUR PLANT). I I WE SELL MOST OF OUR PRODUCTS IN ONTARIO. I I WE SELL MOST OF OUR PRODUCTS IN ONTARIO AND NEARBY AREAS OF THE U.S. [ I WE SELL OUR PRODUCTS NATIONWIDE IN CANADA. I I WE SELL OUR PRODUCTS THROUGHOUT NORTH AMERICA. I I WE SELL OUR PRODUCTS THROUGHOUT THE WORLD. 2. Please identify the products your firm makes. (Mark as many as apply.) STANDARDIZED SPECIALIZED GRINDING MACHINES ................................... I I I I EORING MACHINES ..................................... I I DRILLING MACHINES ................................... I I MILLING MACHINES .................................... I I HACHINE CENTERS ..................................... I I OTHER METAL CUTTING MACHINERY ....................... I I DIE CASTING MACHINERY ............................... I I OTHER METAL FORMING MACHINERY ....................... I I AUTOMATIC TRANSFER MACHINES ......................... I I OTHER, PLEASE SPECIFY: I I 3. Is this machinery your major line of business? I I YES I I NO-—-s IF NO, WHAT IS YOUR MAJOR BUSINESS? 4. Are some of these machines numerically or computer controlled (NC or CNC)? I I NONE ARE I I LESS THAT 25% ARE I I 26-50% ARE I I 51-75z ARE I I 76-1OOZ ARE 190 APPENDIX C-2 (cont'd.) 5. How many patents does your company have? 6. Please indicate below how frequently you sell your products to each of the following customer groups. (Mark one category for each customer group.) REGULARLY FREQUENTLY SOMETIMES RARELY NEVER SELL To SELL TO SELL TO- SELL TO SELL To AUTOMOBILE/TRUCK Immmmn.u.n.n.u.n.u.. I] [I [I II [I AEROSPACE/AIRPLANE Immsmxu.u.u.u.u.u.n. I I II II I I II APPLIANCE INDUSTRY .......... I I I I I I I I I I MILITARY EQUIPMENT INDUSTRY ..................... I I I I I I I I I I OIL INDUSTRY ................. I I I I I I I I I I OTHER MACHINERY MANUFACTURERS I I I I I I I I I I 'onmR: II I I II I I II PLEASE SPECIFY 7. Please indicate the extent to which each of the following is used to obtain sales inside Canada. MAJOR FACTOR NOT A IN MOST SALES FACTOR PRESIDENT/GENERAL MANAGER .............. I I I I I I I I I I SALES/MARKETING MANAGER ................ I I I I I I I I I I YOUR OWN SALES PERSONNEL ............... I I I I I I I I I I MANUFACTURER'S REPRESENTATIVES ......... I I I I I I I I I I DISTRIBUTORS/DEALERS ................... I I I I I I I I I I SUBSIDIARY SALES PERSONNEL ............. I I I I I I I I I I PARENT COMPANY SALES PERSONNEL ......... I I I I I I I I I I 191 APPENDIX C-2 (cont'd.) 8. Please indicate the extent to which each of the following is used to promote your Products to buyers inside Canada: MAJOR FACTOR IN PROMOTION TRADE SHowS ............................ I I I I I I I MAILING OF BROCHURES,ETC. .............. I I I I I I I TRADE JOURNAL ADVERTISING .............. I I I I I I I COMPANY SALES PERSONNEL ................ I I I I I I I AGENTS/REPRESENTATIVES ................. I I I I I I I HORD OF MOUTH BETWEEN CUSTOMERS ........ I I I I I I I NOT \ FACTOR I I I I I I 9. In relation to your competitors in the Canadian Market, are your prices... I I .5 LOT HIGHER THAN COMPETITORS? I I A LITTLE HIGHER THAN COMPETITORS? I I ABOUT THE SAME As COMPETITORS? I I A_LITTLE LOWER THAN COMPETITORS? I I .i LOT LOVER THAN COMPETITORS? 10. Please indicate the extent to which each of the following is used finance sales to buyers inside Canada: USED To FINANCE MOST SALES INTERNAL COMPANY FINANCING ............. I I I I I I I COMMERCIAL CREDIT FROM BANKS IN CANADA OOOOOOOOOOOOOOOOOOOOOOOO [] [l [l I COMMERCIAL CREDIT FROM BANKS IN THE U.S. ..................... I I I I I I I OTHER THIRD PARTY FINANCING ............ I I I I I I I BUYER ARRANGES FINANCING ............... I I I I I l I to NEVER USED 192 APPENDIX C-Z (cont'd.) SECTION TVO: THOUGHTS ABOUT EXPORTING The next several questions ask you what you think about exporting in general. (Please indicate the degree to which you AGREE or DISAGREE with each of the following statements by P18¢108 ‘3 X 1“ the appropriate BOX: [X] ) SA-STRONGLY AGREE A-AGREE N-NEITHER D-DISAGREE SD-STRONGLY DISAGREE DK-DON'T KNow 3A A N D SD ll. Any firm that has a competitive advantage would consider exporting a good opportunity. [ ] I I I I I I I I 12. Exporting is the kind of activity that a firm can try once or twice and then re-evaluate. [ ] [ 1 I I I I I I 13. Obtaining payment for sales made to foreign buyers is relatively simple. I I I I I I I I I I lb. Exporting is not risky if you plan well. [ ] [ I [ I [ I I I 15. Obtaining export financing is a complicated process. [ ] [ 1 I 1 I I I I 16. A firm can go in and out of export markets depending on how sales are going at home. [ ] [ 1 [ 1 [ 1 I I 17. Business people in other countries are not like us. I I I I I I I I [ ] 18. The paper work involved in processing an export sale is easy to understand. [ I [ I [ ] I ] [ ] 19. Evaluating the performance of sales agents/distributors in foreign markets is difficult. I I I I I I I I I I 20. Unsolicited inquiries from foreign buyers provide a good opportunity to test an export market. I I I I I I I I I I 21. The paper work necessary for exporting is overwhelming. I I [ I I I I I I I 22. Export financing is easy to get. I I I I I I I I I I 23. Business practices are pretty much the same in most countries. I I I I I I I I I I DK 193 APPENDIX C-2 (cont'd.) SA-STRONGLY AGREE A-AGREE N-NEITHER D-DISAGREE SD-STRONGLY DISAGREE DK-DON'T KNOW SA A N D SD DK 24. Exporting is just too complicated to be bothered with. I I I I I I I I I I I I 25. Locating sales agents/distribu- tors in foreign markets is easy. I I I I I I I I I I I I 26. The cost of serving export markets is really more reason- able than most people think. I I I I I I I I I I I I 27. Please indicate how CONSISTENT you think each of the following goals is with exporting. VC-VERY CONSISTENT C-CONSISTENT N-NEITHER I-INCONSISTENT VI-VERY INCONSISTENT DK-DON'T Know vc c N I v1 DK a. Profit I I I I I l I I I I I I b. Growth I l I l I l I I I I I I c. Stability I I I I I I I I I I I I d. Diversification I I I l I I I l I l I I e. Increase Market Share I I I I I I I I I I I I f. Returns to Owners I I I l I l I I I l I l g. Increase Sales Volume I I I I I l I l I I I l The following questions ask you for your thoughts about exporting in relation to your own firm. (Please indicate the degree to which you AGREE or DISAGREE with each of the following statements by placing an X in the appropriate BOX: [XI ) SA=STRONGLY AGREE A-AGREE N-NEITHER D-DISAGREE SD=STRONGLY DISAGREE DK-DON'T KNOW SA A N D SD DK 28. My firm would probably use the same price structure in selling to foreign buyers as we use in pricing our products for sale in Canada. I I I I I I I I I I I I 29. Export markets for my firm's products could be more profit- able than the Canadian market. I I I I I I I I I I I I 30. 33. 34. 35. 36. 37. 38. 39. 40. Al. 42. 194 APPENDIX C-2 (cont'd.) Hy firm could make higher margins on products sold in Canada than on products sold in foreign markets. Hy firm could use pretty much the same sales techniques in any market. Exporting would improve my firm's market position at home. Exporting offers better growth opportunities for my firm than the Canadian market does. Specifications, regulations and codes for my firm's products vary from country to country. Sales agents/distributors like we use here are available in most foreign markets. It would be costly for my firm to withdraw from exporting once we got into it. In selling in foreign markets my firm could evaluate sales agents/ distributors the same way we evaluate them here. My firm will be better able to diversify its product lines if it exports. My firm could distribute its products to buyers in foreign markets in the same way we dis- tribute them to our customers here. The financial returns to the owners of my firm will be greater if we concentrate on our Canadian customers and don't get involved in exporting. _— My firm would expect to see the results of our export efforts directly on our income statement. Selling in foreign markets could help my firm develop more compe- titive products to sell at home. SA I I I I I SD DK 195 APPENDIX C-2 (cont'd.) The following questions ask you about how you get information about exporting. (Please indicate the extent to which you AGREE or DISAGREE with each of the following statements by placing an X in the appropriate BOX: [XI ) sa-srnoucLY AGREE A-AGREE N-NEITHER D-DISAGREE SD-STRONGLY DISAGREE DK-DON'T Know SA A N D SD DR 43. I have heard people from other firms in our industry talk about ~ getting good results from exportingo I I I I I I I I I I I I 44. I have heard peOple from other firms in our industry talk about problems they have had with exporting. I I I I I I I I I I I I 45. I have read about the success of other firms in our industry in export markets. I I I I I I I I I I I I 46. I have read about the problems that other firms in our industry have had with exporting. I I I I I I I I I I I I The following questions ask what you think about your firm's possible responses to inquiries from foreign buyers. (Please indicate the extent to which you AGREE or DISAGREE with each of the following statements by placing an X in the appro- priate BOX: [XI ) SA A N D SD DK 47. My firm would reply to any inquiry from a potential foreign buyer. I I I I I I I I I I I I 48. My firm would reply to an inquiry from an import agent or distributor. I I I I I I I I I I I I 49. My firm would check on the credit rating of a foreign buyer before responding to an inquiry. I I I I I I I I I I I I 50. My firm would check into the credit standing of a country before replying to an inquiry from a buyer in that country. I I I I I I I I I I I I 51. Which of the following statements best describes your sales activity outside Canada? I I WE REGULARLY EXPORT OUR PRODUCTS TO BUYERS IN FOREIGN MARKETS I I WE SOMETIMES EXPORT OUR PRODUCTS TO BUYERS IN FOREIGN MARKETS. I 1 WE 29.593 SELL OUR paonucrs OUTSIDE OF CANADA.-4§Etisr TURN ro QUESTION 63:] 196 APPENDIX C-2 (cont'd.) SECTION THREE: BUSINESS PRACTICES OUTSIDE CANADA The following questions ask you about the sales and marketing practices that your firm uses in selling its products outside Canada. (In answering the ques- tions, please place an X in each of the appropriate boxes: IX].) 52. Considering your export activity during the past five years, please indicate the extent of your sales activity in each of the following areas: RECULARLY FREQUENTLY SOMETIMES RARELY NEVER SELL IN SELL IN SELL IN SELL IN SELL IN NESTERN EUROPE ............... [ ] [ I I l [ I [ I THE UNITED STATES ............ I l I l I 1 I l l ] ASIA ......................... [ I I l I l I l [ ] CENTRAL/SOUTH AMERICA ........ [ l I l l l [ l I ] AFRICA ....................... I l I l I I I l I ] MIDDLE EAST .................. [ l I 1 I l I l I I SOVIET/EASTERN BLOC .......... I l l I I I I I I 1 OTHER: [ I I I I I [ l I I 53. Please name the three foreign countries where you have your largest sales volume: FIRST: SECOND: THIRD: 54. Please indicate the extent to which each of the following is used to promote your products to buyers outside Canada: MAJOR FACTOR NOT A IN PROMOTION FACTOR TRADE SHOWS ............................ I I [ l l l I l I I MAILING OF BROCHURES,ETC. .............. I l i I I l I 1 [ 1 TRADE JOURNAL ADVERTISING .............. [ l I l I ] I l [ ] CATALOG SHOHS .......................... [ ] [ l I l [ l l 1 THE TRADE COMMISSIONER SERVICE ......... [ I I 1 [ l I l [ 1 COMPANY SALES PERSONNEL ................ I l I l l l [ I I ] FOREIGN AGENTs/REPRESENTATIVES ......... I ] [ l I I I l I ] WORD OF MOUTH SETHEEN CUSTOMERS ........ [ 1 I l I l [ l I l 197 APPENDIX C—2 (cont'd.) 55. Please indicate the extent to which each 0f the following is used to obtain sales outside Canada: MAJOR EACTOR NOT A IN MOST SALES FACTOR PRESIDENT/GENERAL MANAGER .............- I I I I I I I I I I SALES/MARKETING MANAGER ...............- I I I I I I I I I I AGENTS/REPRESENTATIVES IN OTHER COUNTRIES 000.00.00.90000000". [] [l [l [l [] DISTRIBUTORS/DEALERS IN OTHER COUNTRIES ..................... I I I I [ ] I I I I YOUR OWN SALES PERSONNEL IN OTHER COUNTRIES ...............-.--.. I l I l I I I I I 1 YOUR SALES PERSONNEL IN CANADA ......... I I I I I I I I I I SUBSIDIARY SALES PERSONNEL ............. I I I I I I I I I I PARENT COHPANY SALES PERSONNEL ......... I I I I I I I I I I EXPORT MANAGEMENT COMPANY OR OTHER CANADIAN AGENT ................ I I I I [ I I I I I F-‘f—Hr—‘H How do you quote prices to buyers outside Canada? CANADIAN CURRENCY? U . S . CURRENCY? CURRENCY OF BUYER? OTHER? PLEASE SPECIFY: In relation to competitors in foreign (export) markets, are your prices: A_£21 HIGHER THAN COHPETITORS? ‘A LITTLE HIGHER THAN COMPETITORS? 529E: THE E552 AS COMPETITORS? fi_LITTLE LOWER THAN COMPETITORS? fi_£21‘£93§3 THAN COHPETITORS? Comparing your own prices to buyers in Canada with your prices to buyers in other countries, are your prices in Canada: 5.222 HIGHER THAN YOUR PRICES IN OTHER COUNTRIES. .5 LITTLE HIGHER THAN YOUR PRICES IN OTHER COUNTRIES. ABOUT IEE.§§E§ AS YOUR PRICES IN OTHER COUNTRIES. .A LITTLE LOWER THAN YOUR PRICES IN OTHER COUNTRIES. A.£21.22!E§ THAN YOUR PRICES IN OTHER COUNTRIES. 198 APPENDIX C—Z (cont'd.) 59. Please indicate the extent to which each of the following is used to finance sales to buyers 2232;25 Canada: USED TO NEVER FINANCE USED MOST SALES INTERNAL COMPANY FINANCING ............. I I I I I I I I I I COMMERCIAL CREDIT FROM BANKS IN CANADA ........................ I I I I I I I I I I COMMERCIAL CREDIT FROM BANKS IN THE UNITED STATES ................... I I [ I I I I I [ I COMMERCIAL CREDIT FROM BANKS IN BUYER'S COUNTRY ..................... I I I I I I I I I I FEDERAL EXPORT PROMOTION GUARANTEES .... I I I I I I I I I I FOREIGN GOVERNMENT FINANCING ........... I I [ I I I [ I I I OTHER THIRD PARTY FINANCING ............ I I I l I I I I I I BUYER ARRANGES FINANCING ............... I I I I I I I I I I 60. 61.a. Do you have a separate EXport Department or Division which is responsible for sales made to customers outside Canada? YES No DON'T KNOH What percent (Z) of your total 1983 sales volume came from export sales? Z b. How much was this in dollars? $(C): 62. I I I I I I I I Which of the following statements best describes your expectations about your firm's future involvement with exporting? (Mark as many as apply.) WE ARE FULLY COMMITTED TO OUR EXPORT MARKETS FOR THE FORESEEABLE FUTURE. WE WILL CONTINUE EXPORTING WHENEVER OUR SALES IN CANADA ARE DOWN. WE HILL PROBABLY STOP EXPORTING TO SOME COUNTRIES SOON. WE ARE REVIEWING SEVERAL COUNTRIES AS POTENTIAL NEH MARKETS. WE WILL CONTINUE TO EXPORT AS LONG AS WE RECEIVE INQUIRIES FROM FOREIGN BUYERS. 199 APPENDIX C-Z (cont'd.) SECTION FOUR: COMPANY INFORMATION These last few questions ask you about your firm and will be used for Classification purposes only. 63. 64. Hr-‘I-‘I—‘F—Q HHHHH Please indicate the degree to which each of the following firm goals is IMPORTANT to your firm. VI-VERY IMPORTANT QI-QUITE IMPORTANT SI=SLIGHTLY IMPORTANT UI=UNIMPORTANT DK-DON'T KNOW VI QI SI a. Profit I I I I I l I b. Growth I I I I I I I c. Stability I I I I I I I d. Diversification I I I I I I I e. Increase Market Share I I I I I I I f. Returns to Owners I I I I I I I 3. Increase Sales Volume I I I I I I I Which of the following best describes the ownership of your INDIVIDUAL OWNER PARTNERSHIP FAMILY OWNED CLOSELY HELD CORPORATION PUBLICLY TRADED CORPORATION Which of the following best describes your firm (plant)? (Mark more than one if appropriate.) THIS IS OUR ONLY MANUFACTURING PLANT IN CANADA. THIS IS ONE OF SEVERAL MANUFACTURING PLANTS IN CANADA. WE ARE A SUBSIDIARY OF A CANADIAN FIRM. WE ARE A SUBSIDIARY OF A U.S. FIRM. WE ARE A SUBSIDIARY OF A FIRM HEADQUARTERED IN: firm? N=NEITHER UI WE ARE THE HEADQUARTERS, WITH SUBSIDIARIES IN CANADA. WE ARE THE HEADQUARTERS, WITH SUBSIDIARIES IN THE U.S. WE ARE THE HEADQUARTERS, WITH SUBSIDIARIES IN: DK 20C) APPENDIX C-2 (cont'd.) 66. Do you receive newsletters or other information from Federal or Provincial government agencies about export opportunities? I I YES I I NO I I DON'T KNOW 67. Have you ever attended an export promotion seminar? I I YES I I NO I I DON'T KNOW 68. What was your firm's total sales volume in 1983? $(C); 69.a. How many employees does your firm have in Canada? b. How many in the world? 70. How many managers are there in your firm? 71. How many of your managers have college degrees? 72. How many of your managers have a year or more of work experience outside Canada? '_-‘_' 73. How many of your managers can speak a language other than English? 74. What is the average age of the managers in your firm? I I 25 - 34 I I 35 - as I I as - so I I s5 - 6A 75. What is your title? 201 APPENDIX C-2 (cont'd.) please answer question 76. '* rts (If your firm expo ' please answer question 77) If your firm does not export, 76. Please briefly describe how your firm became inVOIVed in eXporting. 77. Has your firm considered exporting? Why do you not? 202 APPENDIX C-Z (cont'd.) 78. What actions would vou recommend be taken by the Department of Industry, Trade and Commerce to assist your firm in increasing your sales in foreign markets? THANK YOU FOR YOUR ASSISTANCE 2(X3 APPENDIX C—2 (cont'd.) Is there anything else you would like to tell us about your firm's experiences with exporting? If so, please use this space for that purpose. Also, any comments you wish to make that you think may help us in future efforts to understand the marketing and export activities of manufacturers in your industry will be appreciated, either here or in a separate letter. Your contribution to this effort is very greatly appreciated. If you would like a summary of results, please print your name and address on the back of the return envelope (NOT on this questionnaire). We will see that you get it. 204 APPENDIX D-l FIRST COVER LETTER 3 AN TATE UNIVERSITY ‘K:HIG S March 6, 1984 I.R\In.\1r u H‘HIIIII lenxr~~ \I)HI\I\IR\IH)\ I-\sT I\N~I\(} WICIH(.AN 4sx2+II2I DIPARIWI‘sT III ~1\KKIII\(. \\I) TR\\\P()RI\IIM\ \I)\I|\I\TR\TII)\ ADDRESS Dear Mr. With business conditions improving one of the major questions facing machinery manufacturers today is: What should we do to increase sales? One option available to most firms is exporting. But is this the right answer for every firm? Can you successfully use the same marketing tech- niques in other markets that you use in the U.S.? And what actions should be taken by government agencies to assist you in your efforts to obtain export sales? Answers to these and other questions are sought in this study. Your firm is one of a small number of representative Michigan mach- inery manufacturers in which executives are being asked to share their company's marketing practices and give their opinions of exporting. In order that the results truly represent the thinking and practice of Michigan machine producers, it is important that each questionnaire_be completed and returned. You may be assured of complete confidentiality. The return envelope has an identification number so that we may check your name off the mail- ing list when your questionnaire is returned and not disturb you further. Neither your name nor your firm's will ever be placed on the questionnaire. The results of this research will be made available to all interest- ed study participants and will_also be sent to the appropriate government policy makers. You may receive your summary of the results by writing' "copy of results requested" on the back of the return envelope, and print- ing your name and address below it. Please dg_ngt_put this information on the questionnaire itself. I would be pleased to answer any questions you might have. Please write or call. The telephone number is (517) 353-6381. Thank you for your assistance. Sincerely, O ‘ ’ WWW» Catherine N. Axinn Project Director 205 APPENDIX D-2 SECOND COVER LETTER CANADIAN-AMERICAN BUSINESS STUDIES PROJECT MICHIGAN STATE UNIVERSITY Ha rch 27 ’ 198,, CRADLATE scuoor or» Bimbo «omsnmmos ADVISORY COMMITTEE ospurwm‘r or wuuunsc, ‘50 \I \.\'.E\. C HULL‘INDER MARKETING mssaonxnos «ommsmmos' \ILTOR Housxo, “moms: STLDltS EAST LANSLVG, mcmou mun“ ammo uurr mnunxc About three weeks ago I wrote to you seeking your views on marketing .and exporting machine tools. As of today we have not yet received your completed questionnaire. This study has been undertaken because we believe that by better un- derstanding how machinery is marketed both in Canada and abroad it will be possible to develop programs to help Canadian machine tool builders in- crease their sales throughout the world. I am writing to you again because of the significance each question- naire has to the usefulness of this study. It is critical that responses be obtained from firms which do not currently export as well as from those that do. Your firm was selected to represent manufacturers in Ontario through a scientific selection process. In order for the results of this study to be truly representative of the views and practices of Ontario machinery builders, it is essential that each person in the sample return their questionnaire. In the event that your questionnaire has been misplaced, a replace- ment is enclosed. If your firm does not produce machine tools and has therefore been included in our sample by mistake, please make a note of this on the questionnaire and return it to us. Your cooperation is greatly appreciated. Cordially, 7 :1 (s' ['7 / \ (U L1" are; //. 7,6,24” Catherine N. Axinn Project Director P.S. A number of managers have written to ask when results will be avail- able. We hope to have them out sometime this summer. 1‘ I III\ IIII...I| .II. 7 206 APPENDIX D-3 THIRD COVER LETTER MICHIGAN STATE UNIVERSITY April 24’ 1984 (.Rsm «If u Hunt Ul' BI\I\I\\ \I)\H\l\IR\TII)\ IuT L\_\\I.\o MICHIGAN QHNZ‘LIIZI I)I>P\RI\H;\T m \HRMTIM. «\D TRANSPI)RI\II()\ \I)\1I\lsTR\TI()\ Your thoughts about marketing and exporting machine tools are impor- tant to us, but we have not yet received your completed questionnaire. The results of this study should be useful to your firm since they will provide an indication of which marketing practices are associated with obtaining higher sales volumes. I would be happy to send you a copy of the results, if you want one. To obtain the results and preserve your anonymity, simply put your name, address, and ”copy of results requested" on the back of the return envelope (ngt_thg questionnaire). We expect to have the results ready sometime this summer. The large number of questionnaires returned is very encouraging. But, whether we will be able to describe accurately what Michigan machinery pro- ducers think about these important topics depends on you and the others who have not yet responded. This is because our past experience suggests that those of you who have not yet sent in your questionnaire may hold very different views than those who have already replied. This is the first state—wide study of this type that has ever been done. The usefulness of our results depends on how accurately we are able to describe the marketing practices currently being used by Michigan manufacturers. It is for these reasons that I am writing to you again. In case our other correSpondence did not reach you, a replacement questionnaire is enclosed. May I urge you to complete and return it as quickly as possible. Your contribution to the success of this study will be appreciated greatly. Most Sincerely, Catherine N. Axinn Project Director 207 APPENDIX D-4 POST CARD REMINDER March 13, 1984 Last week a questionnaire seeking your thoughts on marketing and exporting machine tools was mailed to you. If you have already completed and returned it to us, please accept our thanks. If not, please do so today. Because it has been sent to only a small number of Michigan manufacturers it is extremely important that yours also be included in the study if the results are to be accurate. If by some chance you did not receive the questionnaire, or it got misplaced, please call me right now, collect (517-351-7858) and I will get another in the mail to you today. Sincerely, Catherine N. Axinn Project Director 208 APPENDIX E-I RESPONSE RECORD 3/6 3/7 3/8 3/9 3/12 3/13 3/14 3/15 3/16 3/19 3/20 3/21 M * s 15 15 7 p 4 3 20 7 4 O l l 2 3‘ 1 3/22 3/23 3/26 3/27 3/28 3/29 3/30 4/2 4/3 4/4 4/5 4/6 3 l l ** 12 18 13 5 2 4 7 3 2 2 3‘ 34 2 4/9 4/10 4/11 4/12 4/13 4/16 4/17 4/18 4/19 4/20 4/23 3 3 3 4 l l S 7 1 5 2 1 4/24 4/25 4/26, 4/27 4/30 5/1 5/2 5/3 5/4 5/7 . 5/17 5/18 *** 2 6 7 3 l 2 1 1 P NOTES: M = Responses from Michigan firms in upper left = Responses from Ontario firms in lower right * — First mailing with questionnaires p = Post card reminder mailed as : First follow—up mailing aka = Second follow—up mailing LI ST OF REFERENCES LIST OF REFERENCES Aaker,IL A.Strategic Marketing Management.New Yorszohn Wiley and Sons, 1984. ' Abdel-Malek, T. ”Foreign Ownership and Export Performancefl' Journal of International Business Studies (Spring/Summer 1974): l-l4. Ansoff, H; I. "Strategies for DiversificationJ'Harvard Business Review (September-October 1957): 113-124. Bilkey, W. 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Dunne, eds., Chicago: American Marketing Association, (1980): 68-71. Cavusgil, S. T. and J. R. Nevin. "Internal Determinants of Export Marketing Behavior: An Emperical InvestigationJ'Journal of Marketing Research (February 1981): 114-119. 209 210 Churchill, G. As, Jr. "A Paradigm for Developing Better Measures of Marketing ConstructsJ'.Journal of MarketinggResearch (February 1979): 64-73. Cremeans, J. E. and D. H. Dalton. "UQS. Machine Tool Industry and International CompetitionJ'Industrial Economics Review (Spring 1982): 1'10. Czinkota, M.IL and W..L Johnston."SegmentingILS. Firms for Export Deve10pment.” Journal of Business Research 9 (1981): 353-365. Directory 1983. McLean, Virginia: National Machine Tool Builders' Association, 1982. Dissertation Abstracts International. Vol. 45 No. 07 (January 1985): 2185-A. Dillman, D. A. Mail and Telephone Surveys. New York: John Wiley & Sons, Inc., 1978. Downs, G. W} and L. B. Mohr. ”Conceptual Issues in the Study of Innovations.” Administrative Science Quarterly 21 (1976): 700-714. Fliegel, F. C., J. E. Kivlin and G. S. Sekhon. "A Cross-cultural Comparison of Farmers' Perceptions of Innovations as Related to Adoption Behavior." Rural Sociology 33 (December 1968): 437-449. Garnier, G. Characteristics and Problems of Small and Medium Exporting Firms in the Quebec Manufacturing Sector with Spgcial Emphasis on Those Using Advanced Production Techniques.Technological Innovation Studies Program (August), Ottawa: Department of Industry Trade and Commerce, 1974. Hansen, H. L. Marketing: Text, Cases, and Readings. Homewood, Illinois: Richard D. Irwin, Inc., 1956. Harris Michigan Indsutrial Directory 1983-84. Twinsburg,(flfirn Harris Publishing Co., 1983. Hull, C. H. and N. H. Nie, series editors. SPSS Update 7-9: New Procedures and Facilities for Releases 7-9. New York: McGraw-Hill Book Company, 1981. International Monetary Fund. International Financial Statistics Yearbook. Washington, D.C.: International Monetary Fund, 1984. International Monetary Fund. International Financial Statistics (July): Washington, DAL: International Monetary Fund, 1985. 211 Jeans, J.IL Physics and Philosophy.Ann.Arbor: University ofIMichigan Press, 1966. Kivlin,.L E.and F.C.F1iegel."0rientationstx>Argriculture:AiFactor Analysis of Farmers'Perceptions of New Practices." Rural Sociology 33 (June): 127-140. Kotler,Ih Principles of Marketing.Eng1ewood Cliffs,bLJa Prentice- Hall, Inc., 1980. Langston, C. M. and R.IC Teas.'Export Commitment and Characteristics of Managementfl Paper presented at the annual meetings of the Midwest Business Association. St. Louis, Missouri (April), 1976. Lee, W.‘&.and J..L Brasch.'Whe AdOption of Export As An Innovative Strategyx” Journad.