A contingency-based approach to understanding export performance

International Business Review 9 (2000) 211–235www.elsevier.com/locate/ibusrev

A contingency-based approach to understandingexport performance

Christopher Robertson , Sylvie K. Chetty*

School of Business and Public Management, Victoria University of Wellington, Wellington,New Zealand

Abstract

To date, most export performance studies have focused on providing business practitionerswith set ‘prescriptions’ for export success. However, this approach has resulted in overwhelm-ingly inconsistent findings, so there is a need for alternative approaches. One alternative isthrough contingency theory, which posits that each firm’s export performance is dependenton the context in which the firm operates. This study therefore uses contingency theory toestablish if there is a relationship between export performance and the level of ‘fit’ betweena firm’s strategic orientation and its context.

This study focused on exporting firms in the apparel industry in New Zealand. Firms werecategorised as to whether they were entrepreneurial or conservative in their strategic orien-tation. The results showed that entrepreneurial firmscould operate successfully in hostile orbenign external environments, by using either organic or mechanistic export channel structures.But when entrepreneurial and conservative firms have a strategic orientation and channel struc-ture that matches their external environment then there are no real performance advantagesfor entrepreneurial firms. 2000 Published by Elsevier Science Ltd. All rights reserved.

Keywords:Contingency approach; Export performance; Strategy; Channel structure

1. Introduction

Most research on export performance has focused on providing firms with set‘prescriptions’ for export success. However, a review of the export performanceliterature indicates that there are a vast array of unknowns and uncertainties, which

* Corresponding author. Tel.:+64-4-495-5233; fax+64-4-495-5231.E-mail address:[email protected] (S.K. Chetty).

0969-5931/00/$ - see front matter 2000 Published by Elsevier Science Ltd. All rights reserved.PII: S0969 -5931(99 )00037-2

212 C. Robertson, S.K. Chetty / International Business Review 9 (2000) 211–235

make reliable and valid predictions of successful performance a formidable task(Kaynak & Kuan, 1993). Some researchers argue that export performance is depen-dent on the extent to which a firm’s behaviour complements or matches its individualcontext (Walters, 1993; Yeoh & Jeong, 1995). This paper takes that view and alsoresponds to requests in the literature for the development of “mid-range” theories inexporting (Day & Wensley, 1983; Frazier & Kale, 1989).

The contingency approach is considered to be such a mid-range theory becauseit holds the middle ground between two extreme positions. One extreme, the positionof most earlier export performance literature, says that set prescriptions and prin-ciples for export success exist. For example, the traditional view is that entrepreneur-ial firms are associated with business success so an entrepreneurial approach mustbe intrinsically good (Collins & Moore, 1970). The other extreme holds that eachorganisation is considered to be unique and, as such, each situation should beaddressed individually (Zeithaml, Varadarajan & Zeithaml, 1988). In the midst ofthese two extremes is contingency theory, which holds that export performance isdetermined by the extent to which a firm’s behaviour matches or fits with its internaland/or external context. While one type of behaviour position is not suitable for alloccasions, it is possible in certain contexts, to identify particular strategic actionsthat are more beneficial than others (Walters & Samiee, 1990). Covin and Slevin(1988) contradict the traditional view of an entrepreneurial approach and businesssuccess. They argue that from a contingency perspective an entrepreneurial approachis not suitable for all environmental contexts.

In this research a conceptual model of export performance, based on contingencytheory and developed by Yeoh and Jeong (1995), is selected as a framework. Thismodel is used to study the export performance of firms in the New Zealand apparelindustry. This industry had been heavily protected until 1984, but then had to inter-nationalise to survive in a liberalised trading environment. Until 1984, when econ-omic deregulation was introduced, New Zealand had the highest tariffs on importedmanufactured goods for any Organisation of Economic Co-operation and Develop-ment (OECD) country. The government removed legislation for import licenses andalso brought in tariff-reduction programmes. The result of the tariff-reductions, from40 per cent in 1992 to a proposed 15 per cent by 1 July 2000, will mean that NewZealand will have one of the most open apparel industries in the world (Davis, Fisher,O’Leary & Yong, 1993).

As a result of the environmental changes in this industry, respondents who havesurvived in this industry were expected to be able to discern, and hence make moreinformed decisions about critical variables, for example, the difference betweenbenign and hostile operating environments.

The objective of this paper is to use contingency theory in an exploratory studyto establish if there is a relationship between export performance and the level of‘fit’ between a firm’s strategic orientation and its context (channel structure andexternal environment).

The paper is divided into seven parts. The first part examines the limitations inthe current export performance literature and introduces the contingency approachas an alternative. The second part presents the hypotheses and the third part the

213C. Robertson, S.K. Chetty / International Business Review 9 (2000) 211–235

research method. The fourth part discusses the research findings. The fifth part pro-vides the managerial implications. The sixth part gives the limitations of this study.The paper ends with general conclusions.

2. A review of the current export performance literature

Reviews of the literature are provided by Aaby and Slater (1989), Bilkey (1978)and Chetty and Hamilton (1993). There is no consensus in the literature on theimportance of the many variables that have been identified as determinants of exportsuccess (Walters & Samiee, 1990).

Consequently, other alternatives have been put forward. One such is contingencytheory, which holds that export success depends on the context in which a firmis operating.

Walters and Samiee (1990) advocate this position:

..perspectives that emphasise the importance of the exporter’s contextual situ-ation offer a fruitful approach to a better understanding of determinants of exportsuccess. This implies that universally valid prescriptions for success are unlikelyto be found, and that account needs to be taken of the nature of the firm’s businessposition and the environmental context (p.35).

Central to contingency theory is the premise that no single structure is appropriatefor all tasks (Hickson et al., 1971; Ruekert, Walker & Roering, 1985). This theoryholds that, while effectiveness can be achieved in more than one way, selection ofthe method, which is most suitable, depends on circumstances. But at the same time,it is expected that certain contexts share similar, important, uniform characteristics,and consequently it is possible to identify common variables that account for a sig-nificant proportion of the variance in the export performance of individual firms(Walters & Samiee, 1990). Hence, the second fundamental premise of contingencytheory, that while it is possible to observe wide variations in effectiveness, thesevariations are not random. Effectiveness depends on the appropriate matching oforganisational contingency factors to ‘fit’ the firm’s context (Zeithaml et al., 1988).Therefore, contingency theory has the benefits of obtaining richer characteristics thantheory building while improving the ability to generalise from empirical research(Harrigan, 1983).

In their conceptual model (see Fig. 1 below), Yeoh and Jeong (1995) recognisethe importance that two contextual variables—the external environment and exportchannel structure—have in moderating the direct relationship between a firm’s stra-tegic orientation and export performance. The definitions of these contextual vari-ables and strategic orientation as used in this study are given below.

2.1. Export channel structure

Export channel structures are defined as the arrangement of workflow, communi-cation, and authority relationships within the exporter-distributor relationship


Fig. 1. Proposed conceptual model of export performance (Yeoh and Jeong, 1995).

(Covin & Slevin, 1991). In this paper each firm’s export channel structure is meas-ured according to Burns and Stalker’s (Burns & Stalker, 1961) original level ofstructural organicity, which is operationalised along a mechanistic-organic con-tinuum. Mechanistic structures are characterised by centralised decision-making,rigidity in administrative relations, formality, and strict adherence to practices andprinciples. Organic structures, on the other hand, are represented by decentraliseddecision-making, flexibility in administrative relations, informality, and authorityinvested in situation expertise (Covin & Slevin, 1988). In the traditions of contin-gency theory, however, neither structure is considered ‘good’ or ‘bad’ in relation tothe other; rather each is considered more appropriate under certain contexts.

2.2. Strategic orientation

Recent literature has advocated using an entrepreneurial-conservative dichotomyto establish a firm’s strategic orientation (Covin, 1991; Covin & Slevin 1988, 1989;Naman & Slevin, 1993; Yeoh, 1994). This dichotomy has been used extensively inthe literature to describe a wide range of organisational systems and firm differences(Yeoh, 1994).

Entrepreneurial firms are defined as those willing to take on high risk projects forthe chance of very high return; they are also bold and aggressive in pursuing opport-unities. Further, entrepreneurial firms often initiate actions (to which their competi-tors then respond) and they are frequently first to market with new products(Khandwalla, 1977). Conversely, conservative firms are defined as having a top man-agement style, which is risk-adverse, non-innovative, and passive, or reactive(Covin & Slevin, 1988).


2.3. External environment

The external environment has been conceptualised using a variety of methods(Yeoh & Jeong, 1995). Achrol, Reve and Stern (1983) have expressed concern overthe excessive detail and number of situational factors regularly used when framingthe environment. They argue that findings from such studies will have limited gener-alisation across situational differences. Instead, they propose an alternative approach,one, which frames the external environment in terms of its abstract qualities anddimensions. This approach is prevalent in research, which uses the contingency per-spective (Zeithaml et al., 1988). For example, the following dimensions have oftenbeen used to conceptualise the environment: hostility, heterogeneity, and dynamism(Miller, 1983; Yeoh, 1994), turbulence (Khandwalla, 1977; Naman & Slevin, 1993),and volatility (McKee et al., 1989). For the purpose of this study, it was decidedto operationalise the external environment according to its level of hostility, bothinternational and domestic, consistent with the specifications of Yeoh and Jeong(1995). This environment-framing method has regularly been used in the past, withresearchers making the distinction between hostile and benign environments(Covin & Slevin, 1989).

Hostile environments are described by Khandwalla, 1977, p. 335) as “risky, stress-ful and dominating”. Covin and Slevin (1989) describe hostile environments as thosecharacterised by precarious industry settings, intense competition, harsh overwhelm-ing business climates, and the relative lack of exploitable opportunities (p. 75). Con-versely, non-hostile or benign environments are those that have none of the foregoingcharacteristics, but provide an overall abundance and richness in investment andmarketing opportunities (Covin & Slevin, 1989; Khandwalla, 1977).

Literature recognising the importance of the entrepreneurial-environmental fit, sug-gests that both conservative and entrepreneurial firms develop different character-istics to better enable them to cope with their environments (Yeoh & Jeong, 1995).For example, environments characterised by high levels of uncertainty were foundto encourage higher levels of innovation and risk-taking that is by adopting entrepr-eneurial postures.

3. Hypotheses

These hypotheses are based on the conceptual model and propositions presentedby Yeoh and Jeong (1995). These hypotheses are presented together with the resultsin Table 1.

4. Method of research

This study was conducted in March and April 1996 and, as mentioned earlier, itfocused on the apparel industry in New Zealand. The following sources were usedin drafting the questionnaire: Miller and Friesen (1982), Covin and Slevin (1988),


Table 1Hypotheses and results

H1: Exporting organisations can be differentiated in terms of their level of entrepreneurial orientation.Compared to conservative exporting firms, entrepreneurial exporting firms are expected to be, moreinnovative, more proactive and greater risk takers.Result of testing hypothesis 1: ConfirmedH2: Export performance is enhanced where there is a ‘fit’ between entrepreneurial orientation andthe external environment. Specifically:H2(a): Firms with an entrepreneurial orientation operating in a hostile environment are expected tohave higher performance levels than entrepreneurial firms in benign environments.H2(b): Firms with a conservative orientation operating in a benign environment are expected to havehigher performance levels than conservative firms in a hostile environment.Result of testing hypothesis 2: ConfirmedH3: Export performance is enhanced when there is a ‘fit’ between entrepreneurial orientation andthe export channel structure. Specifically:H3(a): Firms with an entrepreneurial orientation which operate using an organic export channel struc-ture are expected to have higher performance levels, than entrepreneurial firms using a mechanisticexport channel structure.H3(b): Firms with a conservative orientation which operate using a mechanistic export channel struc-ture are expected to have higher performance levels, than conservative firms using an organic exportchannel structure.Result of testing hypothesis 3: ConfirmedH4: There is a positive relationship between export performance and the level of ‘fit’ between afirm’s strategic posture and its context.Result of testing hypothesis 4: ConfirmedH5: When firms with a similar level of ‘total fit’ (this represents the combined measure of fit of boththe strategic orientation-environment relationship, and the strategic orientation-export channel struc-ture relationship) in their context are compared, those firms with a higher level of entrepreneurialorientation will achieve higher levels of export performance.Result of testing hypothesis 5: Not Confirmed

Dau (1991), Gupta and Govindarajan (1984) and Khandwalla (1977). The measure-ments for the variables in the questionnaire designed for this study were adaptedfrom instruments used in the above studies. Three measures of convergent validitywere used to test the validity of the measuring instrument in this study. This is theextent to which alternative measures of the same construct correlate with each other(Spector, 1992). After multiple measures were taken for each of three independentvariables, each respondent was then asked to indicate, on three separate 7-point Likertscales, an overall measure for each individual construct as originally defined. Hence,comparisons between the averaged multiple (reliable) measures and the single (valid)measure for the construct could be made. The resulting correlation coefficients wererelatively strong in the positive direction and highly significant, providing statisticalsupport for the validity of these measures. For concepts measured by several itemsreliability was investigated by Cronbach’s Alpha (see Appendix 3 for reliabilitycoefficients). On all occasions but one the resulting reliability coefficient was greaterthan 70% (the exception being 62%).

A draft questionnaire was reviewed by three academics and pre-tested on threemarketing managers of different exporting companies. Each of these managers com-


pleted a questionnaire in the presence of the researcher, and was then asked severalquestions concerning the clarity of the instrument. The pilot study revealed that onlyminor revisions were needed in the questionnaire. A sample of the final questionnaireis shown in Appendix 4. The final questionnaire was then posted to senior managersinvolved in the decision-making process about exporting. The rationale for sendingthe questionnaire to senior managers was based on the traditional notion that theirvalues and management philosophies influence the strategic decisions of the firm(Andrews, 1980; Covin & Slevin, 1991; Guth & Tagiuri, 1965). Since the entrepren-eurial-conservative orientation of senior managers is determined by their willingnessto take risks, to adopt change and to aggressively compete with other firms (Covin &Slevin, 1989), senior managers were considered to be the appropriate respondentsfor both entrepreneurial and conservative firms.

A follow-up letter and questionnaire was sent two weeks after the initial mail out,thus providing two waves to solicit information from respondents. Three incentiveswere used to encourage respondents to participate in the study. First, the respondentwas sent a self addressed stamped envelope and a covering letter, addressed to therespondent, which explained the research, and guaranteed confidentiality. Second,the respondent was offered a summary of the findings if he/she indicated interest.Third, the covering letter mentioned the importance of this study to improve ourunderstanding of the export behaviour of New Zealand firms.

Using the sampling frame of the New Zealand Business Who’s Who (1994) (NewZealand Financial Press, 1994), a total of 210 questionnaires was sent to apparelexporters. Of these 210 questionnaires, 45 were returned uncompleted for the follow-ing reasons: the potential respondent had moved with no forwarding address or wasa non-exporter, or the business had closed. From the remaining 165 respondents, 82questionnaires were returned but 12 of these were not useable. In this research, there-fore, 70 questionnaires were retained and used to test the research hypotheses, indi-cating a net response rate of 42.4 per cent.

5. Operationalisation of the various constructs

5.1. Strategic orientation

Strategic orientation is a construct consisting of three distinct dimensions—inno-vation, risk-taking, and proactiveness. Although each dimension focuses on differentaspects of strategic orientation, the dimensions are empirically related, and thereforebrought together to represent the single unidimensional construct-strategic orientation(Covin & Slevin 1988, 1989, 1991; Naman & Slevin, 1993). Each dimension of theconstruct was measured using three separate sets of three-item scales (see Table 2).The first set dealt with the firm’s tendency towards innovation; the second set meas-ured the firm’s proactive orientation; and the third set assessed the firm’s propensityfor risk taking. Hence, nine responses were collected from each firm to gauge thatfirm’s strategic orientation.

The mean ratings of each of the nine items were used to represent the firm’s


Table 2Items used to measure constructs

Strategic OrientationInnovationIn general, firm favours...A strong emphasis on marketing1 to 7 A strong emphasis on marketingproducts and services that have products and services that have beenbeen tried, and proven in the recently developed through R & D, andindustry. innovation.How many new lines of products and services has your firm marketed in the past 5 years?No new lines of products or 1 to 7 Many new lines of products or services.servicesMost changes in product or 1 to 7 Most changes in product or serviceservice lines have generally been lines have usually been quite large.minorProactivenessIn dealing with its competitors, my firm...Typically responds to actions 1 to 7 Typically initiates actions to whichwhich competitors initiate competitors then respond.Is very seldom the first business1 to 7 Is very often the first business toto introduce new introduce new products/services,products/services, administrative administrative techniques, operatingtechniques, operating technologies, etc.technologies, etc.Typically seeks to avoid 1 to 7 Typically adopts a very competitivecompetitive clashes, preferring a ‘undo the competitors’ posture.‘live and let live’ posture.Risk takingIn general, my firm has...A strong tendency for low risk 1 to 7 A strong tendency for high riskprojects. (Projects with normal projects. (Projects with lower chancesand certain rates of return). of success, but very high return).In general, my firm believes that...Due to the conditions in which 1 to 7 Due to the conditions in which the firmthe firm operates, it is best to act operates, bold acts are necessary tocautiously, to achieve objectives. achieve objectives.When confronted with decision making situations involving uncertainty, my firm...Typically adopts a cautious, 1 to 7 Typically adopts a bold, aggressive‘wait and see’ posture in order to posture in order to maximise theminimise the probability of probability of exploiting potentialmaking costly decisions opportunities.Environmental HostilityHow would you characterise the external environment (both domestic and international) within whichyour firm operates?Very safe, little threat to the 1 to 7 Very risky, a false step can mean mysurvival and well-being of my firm’s undoing.firm.There is an abundance of 1 to 7 There are very few ‘free’ opportunities,investment and marketing it is very stressful, demanding, hostile,opportunities which can be easily hard to keep afloat.exploited.

(continued on next page)


Table 2 (continued)

An environment that my firm can1 to 7 A dominating environment in which mycontrol and manipulate to its firm’s initiatives count for very littleown advantage (an industry with against tremendous competitive,little competition and few political, or technological forces.hindrances).Export Channel StructureIn general, in its relationships with exporting distributors, my firm prefers...Highly structured channels of 1 to 7 Open channels of communication withcommunication and restricted important financial and operatingaccess to financial and operating information flowing freely throughoutinformation. the relationshipTo insist on a uniform 1 to 7 Distributor operating styles to rangemanagerial style throughout all freely from the very formal to the verydistribution channels. informalTo continue using management1 to 7 A strong emphasis on adapting freely totechniques that are already changing circumstances without tooproven in the company, despite much concern for past practice.changes in business conditions.That distributors follow formally 1 to 7 That distributors get things done, evenlaid down procedures to get if it means disregarding formalthings done. procedures.To place tight formal control on 1 to 7 Loose, informal control, and heavydistributors for most operations. dependence on informal relationships

for getting work done.Export PerformanceWhen you assess theperformance of your company as anexporter, how important are the followingcriteria?

Very Fairly Not so Not at allImportant Important Important Important

i) export profitability [ ] [ ] [ ] [ ]ii) export sales as a % of total [ ] [ ] [ ] [ ]salesiii) market diversification [ ] [ ] [ ] [ ]iv) export growth [ ] [ ] [ ] [ ]Thinking about theoverall performance of your company as anexporter, how would you rate theexport performance of your company:

Very Good Fairly Good Average Not So Not SoGood Good At All

i) five years ago? [ ] [ ] [ ] [ ] [ ]ii) at present? [ ] [ ] [ ] [ ] [ ]iii) three years from now? [ ] [ ] [ ] [ ] [ ]

overall strategic orientation. The higher the score (from a possible one to seven),the more entrepreneurial the firm’s strategic orientation. The scale had a mean of4.2, a standard deviation of 1.0, and the strategic orientation index ranged from 1.0to 6.0.


5.2. Environmental hostility

To measure environmental hostility, a three-item scale (see Table 2), developedby Khandwalla (1977), and which has been used in other research (Covin & Covin,1990; Covin & Slevin, 1989), was used. It was adapted to ensure responses wereregistered for both the domestic and international external environment confrontingeach firm. The respondents’ ratings for each of the three items were averaged togive a single environmental hostility index for each firm. The higher the index (froma possible one to seven), the more hostile the firm’s external environment. The scalehad a mean index score of 4.9, a standard deviation of 1.1, and the index rangedfrom 2.7 to 7.0.

5.3. Export channel structure

To measure export channel structure, an instrument developed by Khandwalla(1977) to gauge “organisational structure”, was used. To measure organicity—theextent to which a firm’s export channel is structured in an organic as opposed to amechanistic manner—a five-item scale was used (see Table 2). Respondents wereasked to indicate on a seven-point Likert scale the extent to which each item of themeasure represented the export channel structure of their firm. Again, a firm’s ratingof each of the five items was averaged to give an overall export channel structureindex for each firm. The higher the index (from one to seven), the more organic thefirm’s export channel structure. Firm’s index’s ranged from 1.8 to 6.8, averaged 4.5,and had a standard deviation of 1.1.

After multiple measures were taken for each of the above three independent vari-ables (strategic orientation, environmental hostility and export channel structure),each respondent was then asked to indicate on three separate, 7-point Likert scales,an overall measure for each individual construct as originally defined. Hence, com-parisons between the averaged multiple measures and the single measure for theconstruct could be made. Appendix 1 indicates that the resulting correlation coef-ficients were relatively strong in the positive direction, and that the level of signifi-cance for each measure was sufficient to provide statistical support for the validityof these measures. Support was therefore provided for both the reliability and validityfor all key research constructs.

5.4. Export performance

When determining export performance, it was noted that there is no consensusabout appropriate definition and measurement of this construct (Cadogan & Diaman-topoulos, 1996; Cavusgil & Zou, 1994). In this study, a measure of export perform-ance using subjective information was chosen over objective data for three reasons.First, small firms are notorious for their inability and reluctance to provide “hard”financial data (Fiorito & LaForge, 1986; Sapienza, Smith & Gannon, 1988). Second,objective financial data on all sampled firms is not publicly available, and thus itwould be impossible to check the accuracy of any reported financial performance


figures. Third, assuming that accurate financial data was received, such data is oftendifficult to interpret (Covin, 1991). Therefore it was felt that more complete infor-mation could be obtained for export performance through the use of subjective meas-ures.

As can be seen in Table 2 one of the measures used for export performance isself-evaluation from the respondent concerning the company’s overall performanceas an exporter over a period of time. The importance of self evaluation has regularlybeen stressed in the export marketing literature (Dau, 1991). Fenwick and Amineare among those to acknowledge the significance of this type of measure:

“it can be argued that the only reasonable measure of the success of a com-pany’s policy is its ability to meet the particular goals set for it. Thus any measureof export performance should include some assessment of the company’s successon its own terms, albeit measured subjectively” (1979, p. 748).

Seven separate indicators were used to build the measure for each company’sexport performance and all measures are self-reported or subjective (see Table 2).These seven indicators were: export intensity (export sales as a percentage of totalsales), export growth (changes in exports over a period of time), export profitability,market diversification, perception of export performance five years ago, perceptionof current export performance, and perception of export performance in threeyears time.

The first four export performance indicators — export intensity, growth, andprofitability, and market diversification were measured using a modified version ofa scale developed by Gupta and Govindarajan (1984), and the remaining three meas-ured by a replication of a scale used by Dau (1991). Since a 5-point Likert scalewas used successfully in both these studies, it was decided to use it in this study too.

On the first scale (Gupta & Govindarajan, 1984), respondents were asked to ratethe importance of each of the performance indicators to their company, ranging from‘not at all important’ to ‘very important’. The respondents were then asked to indicateon another scale their company’s level of satisfaction for each indicator, rangingfrom ‘very dissatisfied’ to ‘very satisfied’. On the second scale, (replicated fromDau, 1991), respondents were asked to rate their perception of their firm’s overallexport performance from ‘not so good at all’ to ‘very good’ for each, of three time-frames—‘five years ago’, ‘at present’, and ‘three years from now’. This measureschange in export performance over a certain period of time. Fenwick and Amine(1979) have used this as a measure of export performance. The main strength inusing changes in export performance over a period of time is that it is dynamic.

An export performance index was constructed for each firm through the summationof responses to each of the items measuring export performance, where the higherthe index, the superior the level of export performance. Support for the validity ofthis type of performance measure comes from Covin (1991) and Covin and Slevin(1988). The resulting index held a 40-point spread, ranging from 11 points, for poorexport performer, to 51 points for an excellent exporter. The scale had a mean valueof 35.9, a standard deviation of 5.4, and ranged from 22.0 to 46.0.


5.5. Measure of fit

The measure of fit assumes that, for each value of strategic orientation, there isa best value of environment hostility, and an export channel structure that will yieldthe highest performance (Randolph, Sapienza & Watson, 1991). The closer the firm’slevel of entrepreneurial posture to this best value, the higher its export performancewill be. Each firm was therefore assigned an index for each of the measures, rangingfrom one to seven. When the firm’s environment hostility index (or export channelstructure index) is subtracted from its strategic orientation index, it is expected thatthe smaller the absolute value remaining, then the better the “fit” between them (andvice versa), which is therefore reflected in their level of export performance(Randolph et al., 1991). Appendix 2 provides details on how the construct of fit wasoperationalised. It consists of three elements: environmental fit, export channel fitand total fit.

All key study constructs were measured consistently, using 7-point Likert scales.A primary reason for this selection, is that these scales communicate interval scaleproperties to respondents, and thus permit more rigid data analysis, at a parametriclevel (Dau, 1991). Another reason for choosing the 7-point Likert scale was that ithas been used successfully by other researchers doing similar research (Covin &Slevin, 1989; Khandwalla, 1977; Naman & Slevin, 1993). Appendix 3 shows thescale reliability for innovation, proactiveness, risk-taking, strategic orientation,environmental hostility, export channel structure and export performance.

6. Discussion of findings

6.1. General background

For analysis, respondents were categorised as being either entrepreneurial or con-servative, according to the measure of their firm’s strategic orientation. The strategicorientation index ranges from a possible score of one to seven with higher scoresindicating a greater entrepreneurial orientation. There were no tie scores and thefirms were classified according to their scores using the following cut off points; themid-point for the strategic orientation index was 4, entrepreneurial firms had a stra-tegic orientation index greater than or equal to 4, and conservative firms had a stra-tegic orientation index less than 4. By using these cut off points, from the 70 useablereplies, 47 were classified as being from entrepreneurial firms, and the remaining 23from firms deemed to be conservative. Since these cut off points were used to splitthe firms according to whether they were entrepreneurial or conservative this meansthat there were no borderline cases.

According to the findings of this study one-third of all companies rely on onlyone or two markets for their exports. For 55.2% of all firms, Australia was theirsingle biggest export market. Australia is New Zealand’s closest trading partner,both by psychic and geographical distance, and through economic arrangements, likeAustralia, New Zealand Closer Economic Relations (ANZCER, an agreement which


Table 3Entrepreneurial firms: export performance and the environmental fita

Predictor Beta T-value P-value

SO index 20.444 20.271 0.7877EH index 20.624 20.906 0.3698Fit (SO-EH) 1.296 0.996 0.3249

a n=47; R2=0.035.

Table 4Conservative firms: export performance and the environmental fita


SO index 28.033 21.613 0.1232EH index 28.707 1.806 0.0868Fit (SO-EH) 210.823 22.112 0.0481

a n=23; R2=0.319.

provides free trade between Australia and New Zealand). As Australia liberalises itseconomy, it will become more competitive than it is at present.

Nearly half of all companies surveyed (45.7%) have diversified their export mar-kets, and are operating in 3–10 countries. Of the entrepreneurial firms 78.7% rely onone market for over half their export sales compared to 54.5% of conservative firms.

6.2. Results of testing

It can be concluded from Tables 3 and 5 that entrepreneurial firms can operate inboth hostile and benign environments yet achieve similar levels of export perform-ance. However, the results indicate that for conservative firms (Tables 4 and 6), thefit between strategic orientation and environmental hostility (FIT (SO-EH)) is veryimportant in determining their export performance. Consequently, conservative firmsoperating in benign environments are likely to outperform conservative firmsoperating in hostile environments. These results are presented diagrammatically inFig. 2 below.

Table 5Entrepreneurial firms: export performance and channel structure fita


SO index 20.153 20.094 0.9257CS index 21.099 21.287 0.2051Fit (SO-CS) 0.527 0.390 0.6982

a n=47; r2 = 0.041.


Table 6Conservative firms: export performance and channel structure fita

Predictor Beta T-value P-Value

CS index 2.253 1.956 0.0646Fit (SO-CS) 25.274 23.044 0.0064

a n=23; R2=0.318.

Fig. 2. Results of environmental ‘Fit’ hypothesis. (Matrix format is adapted from Yeoh and Jeong, 1995and the Graph format from Covin and Slevin, 1988).

The results show that, for entrepreneurial firms, a match between their strategicposture and their context is not a necessary determinant of export performance. Butconversely, this match is very important in explaining the export performance ofconservative firms.

An exporting firm with an entrepreneurial strategic posture will continue to operatesuccessfully, in an environment, which is either hostile or benign, and with an exportchannel structure, which is either organic or mechanistic.

While it appears that entrepreneurial firms have the ability to operate successfully,using any combination of these contingency factors, it is also apparent that only onecombination will provide conservative firms with adequate export performance lev-els. The results show that conservative firms that maintain a close fit with theircontext, both internal and external, will outperform those conservative firms whosestrategic orientation is not consistent with their context. These results are presenteddiagrammatically in Fig. 3 below.

Fig. 3. Results of export channel ‘Fit’ hypothesis.


7. Managerial implications of this study

Since this study focused on exporters in the apparel industry in New Zealand,most of whom had Australia as their major market; the implications of this study areof particular relevance to such firms. These implications are therefore not necessarilydirectly applicable to all exporting firms, in all industries and in all countries. Asthis is an exploratory study it needs to be replicated in different industries, andcountries to provide a deeper understanding of the contingency-based approach toexport performance.

The implications of this study for managers in the apparel industry in New Zealandare that the strategic orientation of a firm should not be considered in isolation, butwithin its organisational and environmental context. In contrast to popular belief(Collins & Moore, 1970) the results show that an entrepreneurial approach is notnecessarily the best way to do business. In some contexts a conservative approachusing a mechanistic structure can provide a better performance than an entrepreneur-ial one. For example, conservative firms in a benign environment do not have toinvest resources in new product development and innovation. Actively seeking infor-mation about the environment is of lesser importance to conservative firms in abenign environment, as this environment is less competitive and hostile. Since anentrepreneurial approach has a high demand on resources and is risk-orientated, itis not suitable in a benign environment, which persists for a long time (Covin &Covin, 1990; Covin & Slevin, 1989).

Entrepreneurial firms are, however, more proactive and innovative than conserva-tive firms are, so they will be able to adapt their behaviour to various contextualsituations. The ability of entrepreneurial firms to perform successfully in all contex-tual situations makes the entrepreneurial approach desirable.

Increased export experience enables managers to improve their awareness of theexporting conditions, and possible barriers that they will confront. Hence, it couldbe proposed that the strategic orientation of managers in the apparel industry mightchange as their export experience increases. For example, conservative firms thatbegin exporting may discover through experience, that greater risks are required, andthat they have to behave in a proactive and innovative manner.

As managers of apparel firms diversify their export markets, they will face tradebarriers that did not exist in the Australian market. This means that they will haveto become flexible in their management practice when overcoming import barriers,such as local content requirements and country of origin stereotyping. They coulddo this by developing and maintaining a close relationship with their distributorsand agents in local markets. They could give these distributors and agents authorityand decision-making powers, using their local knowledge and expertise, being flex-ible in their management practice, and being informal when dealing with agents anddistributors. By behaving in this manner these managers can gain knowledge fromlocal expertise in situations where they have little knowledge. The managers ofapparel firms can thus use their relationships with agents and distributors to buildtheir own competencies.

The entrepreneurial approach becomes appropriate when exporters in the apparel


industry move beyond Australia and begin to diversify their markets, as the environ-ment might be hostile in some markets but benign in others. An entrepreneurialapproach alone is insufficient, as a flexible channel structure is also important. Onceapparel exporters start diversifying their markets, in particular conservative ones,they could form strategic alliances with their competitors in hostile environments toimprove their competencies, increase resources, acquire new technology, or developa new product.

The study confirms the view held by Reid (1981), that exporting must be con-sidered as a dynamic process, rather than as static and unchangeable. This is becausethe context of a firm changes continually throughout its exporting ventures. Forinstance, the hostility of a firm’s external environment changes as competitors enterand leave the market. Hence, managers will be required to diagnose and make adap-tations as these changes occur. The implication is that managers in the apparel indus-try need to develop the capabilities to monitor these environmental changes. Thesemanagers need to realise that the environment is influenced by factors beyond thecontrol of the firm. They need to behave in a manner that allows them to be proactiveand flexible in their strategic choices. A failure to do so can lead to poor performanceand lost opportunities.

Covin and Slevin (1991) propose the behavioural model of entrepreneurshipbecause it is manageable. They argue that a firm can manage entrepreneurial behav-iour by particular organisational strategies, structures, systems and cultures. It is,therefore, possible for measures to be taken to encourage or discourage certain behav-iour, depending on the context. This has important implications both for governmentand for managers of apparel firms in New Zealand. For example, entrepreneurialbehaviour should be encouraged in a hostile environment, but conservative behaviourwhen the environment is more stable and benign.

8. Limitations of this study

It should be emphasised that this study suffers from certain limitations. First, oneof its limitations is its single-industry focus. Undoubtedly, each industry is subjectto varying issues arising from government regulations, product form, competition,and level of technological advancement. Second, a reliance on subjective measures,due to an inability to source objective data, introduces an additional limitation tothis study. Although efforts were taken to guard against methodological biases, thisresearch is nevertheless subject to the potential weaknesses associated with the useof perceptual data. Third, no efforts were made to investigate the nature of causalitytherefore the inclusion of this issue in future research will be particularly useful. Ona similar note, it has also been argued that entrepreneurial firms could, in part, beresponsible for the hostility of their environments. For example, as innovationprompts imitation, the more innovative the firms in an industry, the more hostile andcompetitive their environment becomes (Covin & Slevin, 1991).


9. Conclusions

This paper is based on an exploratory study, which contributes to the export per-formance literature by using an alternative approach, contingency theory, to studyexport performance. It thus helps to fulfil requests in the export literature for moremid-range theories in exporting (Day & Wensley, 1983; Frazier & Kale, 1989). Itscontribution towards the export literature is that it tests a model that has been empiri-cally proven in the entrepreneurship and strategic management literature, but has notyet been tested in an exporting context (Yeoh & Jeong, 1995). The model used isby Yeoh and Jeong (1995) which addresses both the direct and moderating linksassociated with export performance. This model draws on the entrepreneurship litera-ture to contribute towards advancing export research. It also differs from the exportliterature by acknowledging the impact of two variables on exporting. These are theexternal environment along the hostile-benign continuum and export channel struc-ture along the organic-mechanistic continuum

The findings in this study contradict the traditional notion that entrepreneurialfirms are associated with business success (Collins & Moore, 1970). These resultsshow that when entrepreneurial and conservative firms have a strategic orientationand channel structure that matches their external environment then there are no realperformance advantages for entrepreneurial firms. In addition, entrepreneurial firmshave the ability to operate successfully in both hostile and benign external environ-ments and by using either organic or mechanistic export channel structures. It cantherefore be concluded that entrepreneurial firms have more freedom to make stra-tegic choices than conservative firms do without sacrificing their levels of export per-formance.

It is possible to conclude that a conservative firm in a benign environment,operating with a mechanistic channel structure, will do equally well as an entrepren-eurial firm operating in a hostile environment and with an organic channel structure.Both kinds of firms are equally well matched in their contexts, yet the conclusionholds that neither will significantly outperform the other.

Appendix A. Correlations between multiple and single measures

Correlation P-valueStrategic orientation (9 items) 0.665 0.000Environmental hostility (3 items) 0.534 0.000Export channel structure (5 items) 0.482 0.000

Appendix B

In this study the construct of ‘fit’ was operationalised as follows:

Environmental Fit=/SO index2EH index/


Export Channel Fit=/SO index2CS index/Total Fit=/SO index2EH index/+/SO index2CS index/

Where:

/.../=absolute value functionSO index=measure of the firm’s Strategic OrientationEH index=measure of the firm’s Environmental HostilityCS index=measure of the organicity of the firm’s Channel Structure.

Appendix C. Scale reliability

Standardised AlphaInnovation (3 items) 0.7914Proactiveness (3 items) 0.6161Risk-taking (3 items) 0.7346Strategic Orientation (9 items) 0.7973Environment Hostility (3 items) 0.7644Export Channel Structure (5 items) 0.7194Export Performance (11 items) 0.7247

Appendix D. Questionnaire

A. Does your Company Export any Products or Services to an Overseas Mar-ket? Y/NB. Are YOU a person with major responsibility in Export MarketingDecisions? Y/N

O If you answered “Y” to both of the questions please complete the entire question-naire.

O If you answered “N” to questionA, thank-you for your time, but this questionnaireis designed for exporting companies. Could you please indicate your response andreturn this questionnaire in the envelope provided so we can remove you fromthe study.

O If you answered “Y” to questionA, but “N” to questionB, then could you pleasepass this questionnaire to the person that has the major responsibility for exportmarketing decisions in your company.

D.1. Section A

For each question in Section ACircle the response that best represents your firm’s position


Example. In general, when filling out questionnaires...

I dislike it, and receive no1....2....3....4....5....6....7 I enjoy it, and receivesatisfaction large satisfaction.1. In general, firm favours...A strong emphasis on 1....2....3....4....5....6....7 A strong emphasis onmarketing products and marketing products andservices that have been services that have beentried, and proven in the recently developedindustry. through R&D, and

innovation.

2. How many new lines of products and services has your firm marketed in the past5 years?

2(a). No new lines of 1....2....3....4....5....6....7 Many new lines ofproducts or services products or services.2(b). Most changes in 1....2....3....4....5....6....7 Most changes in productproduct or service lines or service lines havehave generally been minor usually been quite large.

3. In dealing with its competitors, my firm...3(a). Typically responds to1....2....3....4....5....6....7 Typically initiates actionsactions which competitors to which competitors theninitiate respond.3(b). Is very seldom the 1....2....3....4....5....6....7 Is very often the firstfirst business to introduce business to introduce newnew products/services, products/services,administrative techniques, administrative techniques,operating technologies, etc operating technologies,

etc.3(c). Typically seeks to 1....2....3....4....5....6....7 Typically adopts a veryavoid competitive clashes, competitive “undo thepreferring a ‘live and let competitors” posture.live’ posture.

4. In general, my firm has...A strong tendency for low1....2....3....4....5....6....7 A strong tendency forrisk projects. (projects high risk projects.with normal and certain (projects with lowerrates of return). chances of success, but

very high return).

5. In general, my firm believes that...Due to the conditions in 1....2....3....4....5....6....7 Due to the conditions in


which the firm operates, it which the firm operates,is best to act cautiously, bold acts are necessary toto achieve objectives. achieve objectives.

6. When confronted with decision making situations involving uncertainty, my firm...Typically adopts a 1....2....3....4....5....6....7 Typically adopts a bold,cautious, ‘wait and see’ aggressive posture in orderposture in order to to maximise theminimise the probability probability of exploitingof making costly decisions potential opportunities

7. In general, in its relationships with exporting distributors, my firm prefers...7(a). Highly structured 1....2....3....4....5....6....7 Open channels ofchannels of communication withcommunication and important financial andrestricted access to operating informationfinancial and operating flowing freely throughoutinformation the relationship7(b). To insist on a 1....2....3....4....5....6....7 Distributor operatinguniform managerial style styles to range freely fromthroughout all distribution the very formal to thechannels very informal7(c). To continue using 1....2....3....4....5....6....7 A strong emphasis onmanagement techniques adapting freely tothat are already proven in changing circumstancesthe company, despite without too much concernchanges in business for past practice.conditions7(d). That distributors 1....2....3....4....5....6....7 That distributors get thingsfollow formally laid down done, even if it meansprocedures to get things disregarding formaldone. procedures.7(e). To place tight formal1....2....3....4....5....6....7 Loose, informal control,control on distributors for and heavy dependence onmost operations. informal relationships for

getting work done.

8. How would you characterise the external environment (both domestic andinternational) within which your firm operates?8(a). Very safe, little 1....2....3....4....5....6....7 Very risky, a false stepthreat to the survival and can mean my firm’swell-being of my firm. undoing.8(b). There is an 1....2....3....4....5....6....7 There are very few ‘free’abundance of investment opportunities, it is veryand marketing stressful, demanding,


opportunities which can be hostile, hard to keepeasily exploited. afloat.8(c). An environment that1....2....3....4....5....6....7 A dominating environmentmy firm can control and in which my firm’smanipulate to its own initiatives count for veryadvantage (an industry little against tremendouswith little competition and competitive, political, orfew hindrances). technological forces.

D.2. Section B

When you assess theperformance of your company as anexporter, howimportant are the following criteria?

Very important Fairly Not so Not at allimportant important important

(i) export [ ] [ ] [ ] [ ]profitability(ii) export sales [ ] [ ] [ ] [ ]as a % of totalsales(iii) market [ ] [ ] [ ] [ ]diversification(iv) export [ ] [ ] [ ] [ ]growth(v) other [ ] [ ] [ ] [ ](specify)10. For each of these criteria, how satisfied are you with your company’sexportperformance during the lastfive years?

Very Fairly Average Fairly Verysatisfied satisfied dissatisfied dissatisfied

(i) export [ ] [ ] [ ] [ ] [ ]profitability(ii) export [ ] [ ] [ ] [ ] [ ]sales as a %of total sales(iii) market [ ] [ ] [ ] [ ] [ ]diversification(iv) export [ ] [ ] [ ] [ ] [ ]growth(v) other [ ] [ ] [ ] [ ] [ ](specify)11. Thinking about theoverall performance of your company as anexporter, howwould you rate the export performance of your company:

Very good Fairly good Average Not so good Not so good


at all(i) five years [ ] [ ] [ ] [ ] [ ]ago?(ii) at [ ] [ ] [ ] [ ] [ ]present?(iii) three [ ] [ ] [ ] [ ] [ ]years fromnow?12. An entrepreneurial firm is one that is innovative, proactive and is risk-taking,how would you rate your firm on this scale?Conservative, ie. non- 1....2....3....4....5....6....7 Entrepreneurial, i.e.innovative, reactive, and innovative, proactive andrisk-adverse. risk-taking.13. How would you classify the relationship that your firm has with its overseas dis-tributors?Characterised by rigidity, 1....2....3....4....5....6....7 Characterised byformality and strict flexibility, informality, andfollowing of company authority placed invalues and practices. situational experience.14. A hostile environment is one that has intense competition, a harsh overwhelmingbusiness climate, and lacks exploitable opportunities. How would you rate the exter-nal environment (domestic and international) that your firm faces?Very placid, i.e. safe 1....2....3....4....5....6....7 Very hostile i.e. intensesetting for business, rich competition, a harshin opportunities. overwhelming business

climate, and lacking inexploitable opportunities.

15. What was the approximate range of your company’stotal sales in 1995? (TickONE only)

(i) Under $1 mill [ ] (iv) $15 mill– [ ]$24,999,999

(ii) $1 mill– [ ] (v) Over $25 mill [ ]$4,999,999(iii) $5 mill – [ ]$14,999,999

16. State your company’sexport salesas anapproximatepercentage oftotal salesfor the following years.

1993 %1994 %1995 %

17. For how many consecutiveyears has your company been engaged inexporting? year(s)18. To how many different countries does your company export? countries


19. Of the number of countries mentioned above, please name thethree main ones,and their approximate contribution toexportsales.Name of the Country % of Total Export Sales(i) %(ii) %(iii) %20. What percentage of your company’s sales isexportedthrough:(i) commission agent(s)? %(ii) foreign distributor(s)? %(iii) off-shore subsidiary? %(iv) selling directly to overseas buyers? %(v) joint venture? %(vi) other channels? (specify) %

100%Thank-you for completing this questionnaire and taking part in this exporters study.If you would like to receive a copy of findings of this study please tick the boxbelow and fill in your details in the space provided.Yes, I would like to receive a summary of the findings of this study [ ]This should be sent to:Name:Position:Company:Postal Address:

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Christopher Robertson is a postgraduate student in the School of Business and Public Management at VictoriaUniversity of Wellington, New Zealand. He has spent two years in Japan teaching English as a foreign language.

Sylvie Chetty is a senior lecturer in the School of Business and Public Management at Victoria Universityof Wellington, New Zealand. Her research interests are in internationalisation, export performance and thenetwork approach. She has published in such journals as International Marketing Review, European Journalof Marketing, International Small Business Journal, Journal of Strategic Marketing, Journal of Southern AfricanStudies, New Zealand Journal of Business and Small Enterprise Development.

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A contingency-based approach to understanding export performance