Corporate Social Responsibility, Product Differentiation Strategy and Export Performance

Dirk Michael Boehe

Insper Working PaperWPE: 186/2009

Copyright Insper. Todos os direitos reservados.

É proibida a reprodução parcial ou integral do conteúdo deste documento por qualquer meio de distribuição, digital ou im-

presso, sem a expressa autorização doInsper ou de seu autor.

A reprodução para fins didáticos é permitida observando-sea citação completa do documento

13568

1

Corporate Social Responsibility, Product Differentiation Strategy

and Export Performance

Abstract

This paper argues that corporate social responsibility (CSR) may contribute to product

differentiation in export markets and thus improve export performance. We test this argument

by observing a period of decreasing export competitiveness in a leading emerging economy

(Brazil). Using a large-scale survey design with 252 questionnaires completed by medium and

large sized Brazilian exporters, we used structural equations modeling to test our hypotheses.

The results suggest that CSR product differentiation predicts export performance better than

product quality differentiation and almost as well as product innovation differentiation. Multi-

group analysis further revealed that the positive and significant effect of CSR product

differentiation on export performance is likely to be contingent on the number and type

(developing vs. developed) of countries targeted. Our study contributes to literature on export

performance and CSR by introducing an important explanatory variable of firm performance.

Key words

Export performance, CSR, differentiation strategy, developing countries.

13568

2

INTRODUCTION

How can firms from developing countries differentiate themselves effectively and thus

improve their performance in export markets? What kind of export market scope determines

the success of different types of differentiation strategies? Although the literature on export

performance is rich (Styles, Patterson, Ahmed 2008; Rosson & Ford, 1982; Zhang, Cavusgil

& Roath 2003; Lages, Jap, Griffith, 2007; Abdel-Malek, 1974; Aulakh, Kotabe & Teegen,

2000; Baldauf, Cravens, and Wagner, 2000; Brouthers, O’Donnell and Hadjimarcou, 2005;

Brouthers & Xu, 2002; Cadogan, Diamantopoulos & Siguaw 2002; Christensen, da Rocha &

Gertner 1987; Lukas et al. 2007), there is, to our knowledge, a lack of studies dealing with the

performance of exporters based in developing countries and, more so, with the influence of

novel types of product differentiation, such as corporate social responsibility (CSR), on export

performance. This study intends to address both issues concurrently.

Some authors have noted that exporters based in developing countries face particular

difficulties when entering developed country markets, such as a lack of product quality, an

inferior image of their country labels, and lower self-confidence, among others (Bartlett &

Ghoshal, 2000). Because of these reasons, it seems to be self-explanatory that developing

country firms adopt cost leadership strategies instead of differentiation strategies. Thus, they

seek to exploit competitive advantages as low price suppliers in developed country markets.

Indeed, previous research found empirical evidence for the argument that successful

developing country firms use cost leadership instead of differentiation strategies when

exporting to developed countries (Aulakh, Kotabe & Teegen, 2000).

However, if exporters from all developing countries adopted cost leadership strategies,

those of those located in medium income (and medium cost) countries would probably lose

out against those from low income (and low cost) countries. In contrast to previous research,

13568

3

we therefore argue that different types of product differentiation can explain the performance

of exporters based in developing countries, especially within medium income countries. In

particular, we argue that certain novel types of product differentiation, such as products in

conformity with socially and environmentally sound standards (short CSR differentiation), are

likely to increase performance in developed country markets. Product differentiation,

particularly by developing country firms, is important because low cost advantages are likely

to deteriorate over time. Differentiation is particularly important because it creates barriers to

entry, protection against imitation and customer loyalty.

This study is motivated precisely by the fact that several major Latin American

countries are medium income countries. Therefore, many exporters from Latin America are in

a less favorable position compared to low cost exporters from China and India, among others.

This special position puts them under a double challenge: they are forced to work within a

limited margin to be cost competitive compared to low cost producers as well as a limited

margin for product differentiation, because developed country firms are believed to do better

as differentiators (see above).

Using a large-scale survey design with 252 responses completed mainly by medium-

and large-sized Brazilian exporters and structural equations modeling (SEM), our study

contributes to export performance and CSR literature by suggesting that CSR product

differentiation predicts export performance better than product quality differentiation and

almost as well as product innovation differentiation. Multi-group analysis further revealed

that the positive and significant effect of CSR product differentiation on export performance

is likely to be contingent on the number and type (developing vs. developed) of countries

targeted.

The reminder of this paper is structured as follows. In the first section, we develop the

theoretical underpinnings of this study and present our hypotheses. In the second section, we

13568

4

detail the methodological procedures and provide information on the sample and the measures

used. In the third section, we present the results and tests of the hypotheses. Finally, we

discuss the theoretical and practical implications of this study as well as its limitations and a

future research agenda.

THEORY & HYPOTHESES DEVELOPMENT

Export performance

According to Cavusgil & Zou (1994), "export performance is defined as the extent to which a

firm’s strategic and financial objectives are achieved through the firm’s export marketing

strategy." More precisely, export performance relates to sales volume, market share, or

profitability on export markets (Lages Jap & Griffith 2008). Previous research on export

performance has focused on the nature of exporter-importer relationships (Styles, Patterson,

Ahmed 2008; Rosson & Ford, 1982; Zhang, Cavusgil & Roath 2003), previous export

performance (Lages, Jap, Griffith, 2007), origin of the exporters’ capital (national, foreign)

(Abdel-Malek, 1974), market and brand strategy (Aulakh, Kotabe & Teegen, 2000; Baldauf,

Cravens, and Wagner, 2000; Brouthers, O’Donnell and Hadjimarcou, 2005; Brouthers & Xu,

2002), export market orientation (Cadogan, Diamantopoulos & Siguaw 2002), export

practices (Christensen, da Rocha & Gertner 1987), and export planning (Lukas et al. 2007),

among other factors.

This paper focuses on the relationship between different kinds of product

differentiation strategies and export performance. Product differentiation is one of Porter’s

(1985) generic strategies and has often been considered the opposite of a cost leadership

strategy. Firms may differentiate their products in several different ways; for instance,

13568

5

increasing their technological sophistication, increasing their innovative features, offering

higher quality standards, improving their image and by projecting a reputation as a socially

and environmentally responsive product, among others.

More specifically, we intend to explain under which export market scope several kinds

of differentiation strategies influence export performance. We define "export market scope"

as the firm’s approach to reach its performance goals on its external market. We classify

export market scopes in two types, horizontal and vertical export market scope. Horizontal

market scope refers to the diversification of export markets and is defined as the number of

countries served by the exporter. A firm exporting to a large number of countries would be

considered to have a highly diversified horizontal export market scope. Vertical market scope

refers to the target market development level. We differentiate between developing vs.

developed country vertical market scope. The research model containing all main

relationships is displayed in Figure 1. Before we specify the underlying hypotheses of this

model, some remarks on the research context might help to more precisely position this

research.

[INSERT FIGURE 1 ABOUT HERE]

Product Differentiation, Export Performance and the Institutional Environment

We argue that product differentiation strategies positively contribute to export performance in

international markets, especially in times of fierce cost competition (for example, caused by

low cost competitors entering international markets) or reduced-cost competitiveness due to

macro-economic conditions (for example, exchange rate appreciation of the exporter’s home

country).

13568

6

This rationale finds support in previous research, which has identified a positive

relationship between product differentiation and export performance (Baldauf, Cravens, and

Wagner, 2000; Brouthers, O’Donnell and Hadjimarcou, 2005). However, previous research

has also suggested that the relationship between product differentiation and export

performance depends on the target market. While one study suggested that this relationship

holds for firms from developing countries exporting to other developing countries, firms from

developing countries that export to developed countries would be better off using a cost

leadership strategy (Aulakh, Kotabe & Teegen, 2000). According to the authors of the

aforementioned cited study, such a pattern can be explained by the fact that exporters from

developing countries will hardly be able to establish competitive advantage in developed

countries using a product differentiation strategy given intense competition, highly

sophisticated consumer demands and exporters’ less established brands and reputation. Thus,

the main alternative for exporters from developing countries would be to opt for a cost

leadership strategy.

Although this argument sounds reasonable at first glance, it represents, to our

judgment, an inadequate generalization. Opting for a cost leadership strategy, exporters from

medium income / medium cost countries such as Brazil, Mexico and Chile, would probably

be less successful than exporters from low cost countries (China, India, among others).

As country cost competitiveness may be influenced by its institutional environment, it

is essential to take into account the institutional context of exporters located in the country

from which we drew our sample (Brazil). Among emerging economies, Brazil is exposed to

an institutional environment that is both different from that of other developing or emerging

economies and from that of developed countries. Considering the characteristics of specific

institutional environments may contribute to theory development as they indicated under what

conditions a theory is valid. Particularly, Peng, Wang & Jiang (2008) have emphasized the

13568

7

need to integrate the institutional environment into frameworks that explain the performance

of firm strategies in international business.

Simply speaking, institutions have been defined as the rules of the game (North,

1990). These institutions may be formal (laws, rules enacted by government, and so on) or

informal (norms, ethics, culture) character. Focusing on formal rules with an impact on

Brazil’s export cost competitiveness, the following elements seem to be noteworthy: first,

under a flexible exchange rate system, conservative macro-economic policy in general and

monetary policy in particular have lead to an increasing appreciation of the Brazilian currency

against the US$ between 2002 and 2008 (until the outbreak of the financial market crisis in

the US). Increasing export revenues since 2001 and foreign direct investment (FDI) inflows

have further contributed to a stronger currency against the US$. This has lead to a decreasing

cost competitiveness of Brazilian exports and a narrowing trade surplus that dropped from

US$ 44.7 bi in 2005 to US$ 24.7 bi in 2008. Secondly, there are higher wage costs due to less

flexible labor legislation, fringe benefits and a higher per capita GDP. Thirdly, the so-called

“Brazil cost” (high corporate taxes, infrastructure deficiencies, and bureaucracy at customs,

among others), have contributed to comparatively high costs of doing foreign-trade business

in Brazil. Owing to this institutional context, Brazil should be viewed as a medium rather than

low cost country. This implies that Brazilian exporters would probably be less successful if

they opted for a cost leadership strategy as compared to a differentiation strategy. Based on

this assumption, this article does not focus on whether exporters located in such an

environment should opt for a cost leadership or a differentiation strategy; rather, we focus on

the conditions, under which different kinds of differentiation strategies are likely to prove

successful.

13568

8

Product quality differentiation and export performance

In general terms, product differentiation may present itself with a differentiated image or as of

higher quality. Product quality is a competitive factor and may refer to several product

characteristics such as product performance, durability, reliability, and consistency with

specifications, among others. Previous research has found evidence for a positive relationship

between product quality and export performance (Brooks 2006; Calantone & Knight 2000;

Piercy, Kaleka & Katsikeas 1998). Superior product quality may translate into a superior

product quality image. Therefore, quality and product image may become associated. As a

consequence of higher perceived product quality, export sales may increase. Exporters may

also be in a position to charge a higher price for their products. Hence, performance measured

by sales volume, revenue, market share or profitability is likely to rise.

H 1: Product quality differentiation is positively related to export performance.

Product innovation differentiation and export performance

Innovation has long been considered as a key driver of internationalization and exporting has

been considered a firm-level innovation (Bilkey & Tesar, 1977; Cavusgil, 1980; Andersen,

1993). Literature in economics has also established a positive relationship between R&D

intensity and export performance (Hirsch & Bijaoui, 1985).

More specifically, exporters may add innovative features to their products, investing in

product or process related research and development (R&D) activities (input) which might

result in new product introductions into the market and even the development of revolutionary

innovations (output). In this sense, R&D may create internal resources and capabilities that

constitute one prerequisite for internationalization (Yiu, Lau & Bruton 2007). Empirical

studies have provided support for the proposition that resources and capabilities may increase

export performance (Flor & Oltra, 2005; Morgan, Kaleka & Katsikeas, 2004). Hence, we

13568

9

expect a positive relationship between the export firm’s innovation capabilities and export

performance.

H 2: Product innovation differentiation is positively related to export performance.

Corporate Social Responsibility (CSR) and export performance

Consistent with McWilliams and Siegel (2001), we define CSR as instances in which

companies go beyond compliance and engage in actions that can advance social causes. More

than that, we follow Porter & Kramer’s (2006) proposition that companies must incorporate

CSR in their strategies, aiming at improving their performance.

Having said this, one of the major concerns of scholars and managers is the potential

impact of CSR on company’s performance. Previous research has investigated whether the

financial benefits to the corporation can meet or exceed the costs of its contributions to social

welfare (Orlitzky at al. 2003, Waddock & Graves 1997). However, Barnett (2007: 794)

remembers, “after more than thirty years of research, we cannot clearly conclude whether a

one-dollar investment in social initiatives returns more or less than one dollar in benefit to

shareholders.” Regarding the uncertainty behind the potential benefits of CSR in corporate

strategy, we draw on approaches in strategy literature in order to explain under what

conditions CSR can lead to increasing export performance.

Specifically, a product differentiation strategy in terms of CSR is supposed to be

related to firms’ performance as well (Porter and Kramer, 2006). Siegel & Vitaliano (2007)

mention that recent literature on CSR emphasizes the fact that firms engage in “profit

maximizing” CSR (Baron, 2001; McWilliams and Siegel, 2001; Bagnoli and Watts, 2003).

This implies that companies engage in responsible activities because they anticipate a benefit

from these actions. As examples of these benefits, the authors point to improved reputation,

13568

10

the ability to charge a premium price, or the use of CSR to recruit and retain high quality

workers. The benefits would have the potential to offset the higher costs associated with CSR,

assuming that resources would be allocated to allow the company to achieve a CSR position.

The theoretical studies mentioned emphasize that CSR activities could be integrated into a

company’s differentiation strategy (Siegel and Vitaliano, 2007).

Therefore, CSR can represent a potential input to differentiation strategy. In this line,

Singh et al (2007) remember how important can CSR be to customers perception. They state

that even when customers do not show high levels of interest in CSR issues, firms should

maintain continuous marketing communication to sustain customers’ level of awareness.

When firms maintain the customers’ CSR perception, they are able to adopt a premium price,

realizing a differentiation strategy (Reinhardt, 1998).

Environmental and social international certifications, or other explicit CSR activities

(Matten and Moon, 2008), can improve product differentiation and permit firms to charge

premium prices in some specific international market segments. Thus, firms may reach a

unique position in international markets (Barin Cruz and Boehe, 2008).

Hence, if a CSR based product differentiation strategy contributes to superior firm

performance, then this is likely to also be true for export performance. Firms invest in CSR

and sell this to their international customers that will recognize CSR as something superior.

Hence, CSR related product attributes allow firms to charge premium prices on some

international markets. Therefore, we posit:

H 3: CSR product differentiation is positively related to export performance.

As mentioned in the beginning of this section, the three types of product differentiation

strategies can be regarded as three different emphases of an overall product differentiation

13568

11

strategy approach. Therefore, all three are likely to be related to each other. For instance,

innovation might contribute to the development of superior product quality and CSR product

attributes. Thus, CSR activities can be part of a company’s differentiation strategy (Siegel and

Vitaliano, 2007). Conversely, once a firm has chosen to adopt a differentiation strategy in

terms of CSR or product quality, it continuously needs to maintain innovative activities in

order to avoid imitation by competitors. Empirical studies support this view; for example,

studying Brazilian companies, Borger & Kruglianskas (2006) identified a strong relationship

between the adoption of a CSR strategy by the firm and an effective environmental and

innovative performance. These supposed relationships between different kinds of product

differentiation strategies can be summarized in the following three hypotheses:

H 4a: Product quality differentiation is related to product innovation differentiation.

H 4b: Product innovation differentiation is related to CSR product differentiation.

H 4c: Product quality differentiation is related to CSR product differentiation.

Moderator effects

Horizontal export market scope (diversification of target markets)

Horizontal market scope refers to the diversification of export markets. It is defined as the

number of countries served by the exporter. The larger the number of countries served by an

exporter, the more diversified is its horizontal export market scope.

Export diversification has previously been recognized as an important predictor of

export performance (Dominguez & Sequeira 1993), where there are two contradicting

arguments: on the one hand, diversification is seen as beneficial as it may help to spread

market and exchange rate risk and thus contribute to a steady revenue stream from exports.

On the other hand, diversification may lead to increased coordination and information costs

13568

12

that may have negative effects on export performance when firm resources are scarce,

especially when international diversification simultaneously covers geographically, culturally

and institutionally different countries (Ayal & Zif 1979; Cooper & Kleinschmidt 1985;

Dominguez & Sequeira 1993; Aulakh et al 2000; Contractor, Kundu & Hsu 2003; Peng, Lee

& Wang 2005).

Specifically, different markets would require different forms of product differentiation

according to varying customer profiles. Limited firm resources, however, would limit the

possibilities to develop differentiated products with quality and innovative characteristics

attractive for many different markets. Thus, a product differentiation strategy would be

hampered when many diversified markets were targeted at the same time.

Therefore, we claim that the effect of product differentiation on export performance is

mediated by the degree of diversification (horizontal market scope). Higher diversification is

likely to weaken the effect of product differentiation strategies on export performance while

lower diversification (the concentration of resources on a small number of countries) is likely

to strengthen the effect of a product differentiation strategy on export performance.

H 5a: The horizontal export market scope (degree of diversification) moderates the effect of

product quality differentiation on export performance. When the diversification of export

markets is high (low), the effect of product quality differentiation on export performance is

weaker (stronger).

H 5b: The horizontal export market scope (degree of diversification) moderates the effect of

product innovation differentiation on export performance. When the diversification of export

markets is high (low), the effect of product innovation differentiation on export performance

is weaker (stronger).

13568

13

With respect to CSR differentiation, the previously mentioned moderator effect is

expected to be particularly relevant. Even today, when the effects of environmental

destruction and social inequality can be observed almost daily on TV and other mass media,

consumers in only a very few countries seem to be willing to pay higher prices for products

with a social and environmentally responsible reputation (Barin-Cruz & Boehe 2008).

Similarly, there are only a limited number of producers, distributors and retailers that include

environmentally and socially responsible products in their assortments. If exporters with CSR

differentiated products focus on this minority (low diversification), they are likely to reap

benefits in terms of higher export performance. However, if exporters serve many different

markets (high diversification), the effect of CSR product differentiation on export

performance is likely to become diluted (non-significant). This effect may even become

negative because in countries with less environmentally and socially conscious populations,

higher costs due to CSR differentiation may translate into a competitive disadvantage.

H 5c: The horizontal export market scope (degree of diversification) moderates the effect of

CSR product differentiation on export performance. When the diversification of export

markets is high (low), the effect of CSR product differentiation on export performance is

weaker (stronger).

Vertical export market scope (development level of target markets)

Vertical market scope refers to the target market development level. We differentiate between

two development levels, developing and developed countries.

That the development level of target markets may be an important variable when

analyzing the export patterns of developing country-based firms has been evidenced by

13568

14

previous studies (Aulakh, Kotabe & Teegen 2000). However, it is less evident how the

development level of a target market may influence the effect of different types of product

differentiation strategies on export performance.

Previous research has suggested that the effect of product quality on export

performance may vary according to the development level of target export markets. Brooks

(2006), for example, explains the lower share of the export sector in smaller lower income

countries with an econometric model that assumes wealthier customers in higher income

developed nations to consume higher quality products. Therefore, quality differentiation is

likely to be important when exporters from developing countries choose higher income

developed country markets as their target. Conversely, quality differentiation is likely to be

less important when entering other developed country markets as clients with lower

purchasing power are probably less inclined to pay for highly differentiated products. Thus,

we propose that:

H 6a: The vertical scope of export markets (level of development) moderates the effect of

product quality differentiation on export performance. When exporters focus on developing

countries (developed countries), the effect of product quality differentiation on export

performance is weaker (stronger).

Innovation might focus on the development of cheaper products for less affluent markets or

on the development of cutting-edge products for highly demanding developed countries. This

distinction made, innovative activities intended to increase product sophistication would

probably enhance the chances of being successful in developed countries. Regarding

developing countries as target markets, however, higher product sophistication could reduce

13568

15

export performance because the majority of customers could probably not pay for the value

added by innovation.

H 6b: The vertical scope of export markets (level of development) moderates the effect of

product innovation differentiation on export performance. When exporters focus on

developing countries (developed countries), the effect of product innovation differentiation on

export performance is weaker (stronger).

Although CSR has become an increasingly important issue in several emerging

economies as well, in developed countries, a larger number of customers are conscious about

social and environmental issues for of several reasons: First, political movements demanding

environmental and social responsibility have been active since the 1980s and gained

representation in governments and legislative bodies of several countries. Second, wealthier

consumers tend to evaluate product characteristics other than only the price, while poorer

consumers (mainly at home in developing countries) are held to be more price sensitive due to

their lower purchasing power. Therefore, CSR product differentiation is likely to have a

stronger effect on export performance in developed countries compared to developing

countries and vice-versa.

H 6c: The vertical scope of export markets (level of development) moderates the effect of CSR

product differentiation on export performance. When exporters focus on developing countries

(developed countries), the effect of CSR product differentiation on export performance is

weaker (stronger).

13568

16

METHOD

Sample

We opted for a survey research design to test our hypotheses. Our population is the group of

medium and large sized Brazilian exporters that represent more than 90% of Brazilian

exports. We drew our sample from a sample frame with more than 3.356 Brazilian export

firms, which was obtained by a formal agreement with FUNCEX, a private research institute

on Brazilian foreign trade.

The unit of analysis was the export firm. As some firms may commercialize highly

diversified product ranges abroad, we asked our respondents to focus their answers on the

export product category that is most relevant to the firm. We used the key respondent

approach and defined key respondents for our survey as the main decision-maker and

negotiator for the firm’s export business. Respondents without this characteristic were

eliminated from the database (see below); thus, our questionnaire was responded by company

directors and export managers with at least two years of experience in their firms. Our

questionnaire also contained a filter question in order to verify whether the respondent firm is

currently exporting.

Our questionnaire was administered by the Internet using a professional online survey

service. All firms of the sample frame were contacted by e-mail and following the tailored

design method (Dillman 2007), ten different e-mail messages were sent to the key

respondents. The messages contained information on the aims of this research, its purely

academic character, benefits for participants and our guarantee to treat all kinds of

information confidentially. To provide an incentive for responding, we promised to deliver an

executive research report for all participants about two months after the successful completion

of our survey. About 300 randomly selected key respondents were contacted proactively by

13568

17

phone in order to inform them about the research project and to motivate them to respond the

questionnaire.

Altogether, 378 key respondents accessed the online questionnaire and less than 10

asked for a print version of the questionnaire, as they could not access the online version due

to their firms’ firewalls. Only 260 key respondents completed the entire questionnaire. Eight

firms completed the questionnaire twice. Thus, our final sample counted 252 export firms,

which corresponds to a response rate of roughly 7.5%. The main reasons for this low response

rate can be found in the increasing use of firewalls which block access to web-hosted

questionnaires, the fact that approximately 20% of the sample frame was outdated as well as

restrictive firm policies and finite resources of export managers (time).

In order to test for non-response bias, we applied the procedure suggested by

Armstrong & Overton (1977) and checked whether there are significant differences between

early and late respondents. No such differences were found with respect to the indicators used

in this research.

Our sample contained firms belonging to highly diversified industries, including

electronics, automotive parts, food industry, construction material, chemicals, among others.

The average firm achieved about US$ 3.8 million in export revenue. Approximately 35% of

the exporters are large firms (>500 employees), about 40% are medium-sized firms (between

100 and 499 employees) and roughly 25% are small firms with less than 100 full-time

employees.

The questionnaire consisted of indicators adapted from previous international surveys

(see measures section below) as well as indicators especially developed for this research using

the recommendations proposed by DeVellis (2003). Following Dillman’s (2007, p. 140-147)

recommendations, the questionnaire was pre-tested in four stages: a) experts (researchers with

several years of experience in quantitative research) analyzed and discussed the questionnaire

13568

18

during several meetings; b) cognitive personal interviews were conducted in 12 export firms

in order to find out whether the respondents understood the language used in the

questionnaire; c) a small sample pilot study of about 35 firms (obtained by telephone

interview and web survey) was used in order to identify some obvious problems with

indicators and distributions and d) a final online check was carried out by the responsible

researchers and their colleagues in order to rule out possible technical problems.

To reduce and avoid potential common method bias, we implemented some

recommendations proposed by Podsakoff et al. (2003, p. 887-888), such as the separation of

dependent and independent variables by several intercalated questionnaire pages, the use of

different measurement scales (e.g., Likert from 1 to 5, 1 to 6 and 1 to 7, percentage scales,

agreement, importance and comparison scales, among others). We directly tested for common

method bias using the Harman one factor test and CFA (see analytical techniques below).

Measures

Dependent variables

Export performance. In line with Lages et al. (2008, p. 323) export performance is measured

using a 5-point Likert scale with the following five items: “How would you rate the

performance of your main export product in 2008 (compared to 2007) for the following items:

(11) export volume, (12) export revenue, (13) export profitability, (14) market participation in

the main market abroad, (15) overall export performance”. The numbers in brackets behind

the indicators correspond to the indicator numbers in table 1. Scale reliability was very high

(alpha = .936).

13568

19

Independent variables

Quality product differentiation. Differentiation in terms of product quality was measured on

a 6-point Likert scale (totally disagree – totally agree) using two indicators: (1) ‘the product

offers a quality standard which is superior compared to that of competitors in the international

market’ and (2) ‘the product has a differentiated image compared to competitors on the

international market.’ Product image and quality are related because high product quality may

translate into a differentiated image in the eyes of the customers. Although both indicators

have been newly developed for this research in order to be in line with respondents’

characteristics and language, they have been inspired by previous studies, for instance

(Murray, Kotabe & Zhou 2005 and Knight & Cavusgil 2004). Construct reliability is very

good (alpha = 0.844).

Product innovation differentiation. This construct was measured using a four-item scale

adapted from Zahra et al. (2000) and Yiu, Lau & Bruton (2007). Adaptation was necessary in

order to be in line with the characteristics of our sample, which included both commodity

exporters and technology-based exporters. For example, as patent registration and cutting-

edge, revolutionary innovations are very rare when dealing with emerging market firms

(particularly in the Brazilian case, international patent statistics show a scarce use of this

protection mechanism), we formulated these indicators in a more ample sense (thus a highly

leftward skewed distribution should have been avoided) and dropped some indicators. Thus,

the four indicators included in our study were (3) ‘our firm invests in product related R&D’,

(4) ‘our firm invests in process related R&D’, (5) ‘our firm introduces new products into the

13568

20

market’, (6) ‘our firm develops revolutionary innovations.’ Construct reliability was very high

(alpha = 0.882).

CSR product differentiation. We developed four new indicators to measure the construct of

product differentiation by corporate social responsibility characteristics. Following

recommendations of DeVellis (2003), a process of several pretest, test and refinement stages

of construct development was used. The following four indicators were used in the final

construct: “the product differentiates itself from competitors’ products on the international

market by (7) owning a social or environmental certification, (8) having been produced using

supplies with a social or environmental certification, (9) having a reputation of being

environmentally responsible, (10) having a reputation of being socially responsible”. Scale

reliability is very high (alpha = 0.912). However, based on confirmatory factor analysis

results, we united indicators (7) and (8) due to highly correlated error terms (correlation

coefficient = .74). This high correlation between both error terms may be because social or

environmental certifications often encompass the whole supply chain from raw material

suppliers, through assembly, to final distribution. The resulting three-item construct’s

reliability (alpha) was 0.896.

Control variables

We controlled for size (16) of the export business using one indicator (export revenue in

2007, 10-item interval scale from ‘up to US$ 100.000’ to ‘Above US$ 100 million’).

Moderator variables

Horizontal export market scope (diversification) was operationalized using the number of

countries served by the focal exporter (18). For our two-group analysis, respondent firms with

13568

21

scores below zero (z-scores) were assigned to the group of “low number of countries served”

(coded “0”) and firms with scores above zero were assigned to the group of “high number of

countries served” (coded “1”).

Vertical export market scope (level of target country development) was operationalized by

asking for the most important export market (country) (17). Then we created a dummy

variable and coded industrialized or developed countries as “1” and developing or emerging

countries as “0.”

Analytical technique

In order to analyze a model that includes manifest and latent variables (constructs), structural

equations modeling (SEM) was used. A three-step procedure was adopted to test all six

hypotheses. First, we checked the measurement model using confirmatory factor analysis

(CFA) and established convergent as well as discriminant validity. Then, the structural model

was calculated, which permitted us to test hypotheses H1 through H4. Finally, we ran two-

group analyses in order to test the remaining hypotheses (H5 and H6), which included

interaction effects.

The maximum likelihood algorithm in the AMOS 5.0 software package was used. Due to

absence of multivariate normality, we used bootstrapping in order to estimate the standard

errors.

[PLEASE INSERT TABLE 1 ABOUT HERE]

[PLEASE INSERT TABLE 2 ABOUT HERE]

13568

22

RESULTS

We adopted the two-stage approach (Anderson & Gerbing 1998) and verified first the validity of the

measurement model and then the validity of several structural models.

Measurement model

A preliminary visual exploration of the correlations between the indicators (table 1) shows

intra-construct correlations are all above 0.582 while correlations between constructs (table 2)

do not exceed 0.39. This suggests good convergent and discriminant validity. Further

evidence for convergent validity are the Cronbach alpha and construct reliability coefficients;

all of them are above 0.84 indicating very good convergent validity (table 3). Good

discriminant validity is given when all average variance explained (AVE) coefficients are

higher than all squared correlations (shared variance) between constructs; as can be seen from

tables 2 and 3 this is also the case, being the lowest AVE 0.66 and the highest between-

construct correlation 0.39. Finally, all critical ratios of factor loadings are higher than 9.117

indicating highly significant loadings (see table 3).

[PLEASE INSERT TABLE 3 ABOUT HERE]

Structural models

As we can see from table 5, the χ2 statistics are significant (p values below 0.05 might suggest

a poor model fit at first glance). However, the χ2 fit index need to be adjusted for sample size

and the complexity of the model (the ratio of χ2 divided by the degrees of freedom) since the

χ2 fit index will almost always be significant with increasing sample size and model

complexity (Bagozzi & Yi 1988; Bentler and Bonnet, 1980). A χ2/df ratio ranging from one to

13568

23

three is indicative for an acceptable model fit which is the case for all four models (Byrne

2001). The normed fit index (NFI) and the comparative fit index (CFI) are higher than the

recommended benchmarks of 0.9 and 0.95, respectively, which also indicates acceptable

model fit. The root mean square error of approximation (RMSEA) should be below 0.08 (Hair

et al. 1998) for adequate model fit or ideally equal to or below 0.05 for very good model fit.

The RMSEA indices of all models are within the expected range and models 2 and 3 are in

the ideal range of less than 0.05. PCLOSE, the probability that RMSEA is greater than 0.05,

has been rejected in all four models (PCLOSE > =.05) which indicates good model fit. We

may therefore examine our hypotheses.

[PLEASE INSERT TABLE 4 ABOUT HERE]

According to table 4, most of our hypotheses were supported. However, the first hypothesis

(claiming that product quality differentiation positively affect export performance) has been

rejected in all four models. This is also the case for both interaction effects involving product

quality differentiation: models 3 and 4 show that the effect of product quality differentiation

on export performance remains non-significant even if we examine this effect for different

(horizontal and vertical) export market scopes. Hence, hypotheses 5a and 6a are also clearly

rejected.

[PLEASE INSERT TABLE 5 ABOUT HERE]

Hypothesis 2 (which suggests a positive effect of product innovation differentiation on export

performance) is supported by our data, because the coefficient is positive (0.28) and

significant (critical ratio = 3.658). As shown by model 2, the previously mentioned effect is

13568

24

slightly weaker for smaller firms (path coefficient = 0.20) compared to large firms (path

coefficient = 0.31).

Moreover, the effect of product innovation differentiation on export performance becomes

non-significant and small (path coefficient = 0.18) for firms with a broad horizontal export

market scope (high diversification), this is for firms which export to a large number of

different countries (model 3). This finding supports our hypothesis 5b.

Firms exporting predominantly to developed countries seem to reap slightly more benefits

from product innovation differentiation compared to firms focusing on developing countries

(model 4). Thus, hypothesis 6b is also supported by our data.

Hypothesis 3 (claiming that CSR product innovation positively influences export

performance) is also supported by our data (path coefficient of 0.17, critical ratio of 2.511).

As suggested by model 2, the coefficient increases to 0.23 for large firms; thus, this effect is

also stronger for larger firms.

Less diversified exporters seem to benefit more from CSR product differentiation than highly

diversified exporters (model 3). This suggests that export performance becomes less affected

by CSR product differentiation the larger the number of countries served by the exporter. This

supports hypothesis 5c.

Model 4 indicates that exporters which focus on developed countries may increase their

export performance by adopting a CSR product differentiation strategy (path coefficient =

0.23, p<0.01) while exporters that focus on developing countries do not (path coefficient =

0.11; p>0.05). This supports hypothesis 6c.

Finally, the three hypotheses (4a, 4b and 4c) asserting that all three types of product

differentiation are related and therefore possibly part of a higher order concept of product

differentiation were also strongly supported by our data. However, there is a notable

exception: in model 4, CSR product differentiation is not significantly related to product

13568

25

quality differentiation (path coefficient = 0.21) or to product innovation differentiation (path

coefficient = 0.14) when exporters predominantly target developed country markets. This

interesting finding could suggest CSR product differentiation has a status that goes beyond

conventional kinds of product differentiation. We will discuss this and other findings below.

DISCUSSION AND IMPLICATIONS

Implications for Theory

The results of this study suggest a number of theoretical implications for CSR and

international business literature. Firstly, concerning export performance, innovation and CSR

product differentiation are more important predictor variables than quality differentiation.

While previous research has already drawn attention to the importance of innovation for

export performance and internationalization in general, the significant positive effect of CSR

differentiation on export performance constitutes a new finding. This is a particularly

interesting result as Brazil’s cost competitiveness decreased in the reference period; therefore,

it is possible to argue that product innovation differentiation and CSR product differentiation

seem to be useful to counteract deteriorating cost competitiveness on the country level.

Secondly, the effect of a CSR or innovation product differentiation strategy on export

performance seems to be contingent on the market scope: firms that focus on a small group of

developed country markets will be more successful in increasing their export performance

using a CSR or innovation product differentiation strategy than exporters which direct their

exports to a large number of countries or focus on developing economies. This finding

essentially contradicts previous research that concluded that firms from emerging economies

(such as Brazil, Chile or Mexico) will fare better when using a cost leadership strategy when

exporting to developed nations (Aulakh, et al. 2000). These contrasting findings are probably

13568

26

due to the effects of different institutional environments in different developing countries.

While Aulakh et al. (2000) considered the developing countries of their study indiscriminately

as cost competitive, institutional constraints may reduce the cost competitiveness of some

developing countries compared to others. This may have been the case of Brazil during the

period covered by our study. Currency appreciation, logistics and wage costs, among others,

may have reduced Brazil’s cost competitiveness vis-à-vis China, India, other Asian or Eastern

European countries and minimized the effectiveness of cost leadership strategies. Thus, firms

may have chosen different kinds of product differentiation to make up for this reduced cost

competitiveness.

Thirdly, an open question is why some kinds of differentiation strategies (innovation

and CSR product differentiation) have had a positive and significant impact on export

performance, while others (quality product differentiation) had not. A possible explanation is

that product quality differentiation may be easier to imitate than CSR and innovation related

differentiation. There may be several reasons for this. Concerning CSR differentiation, firms

need to make sure that their whole supply chain works according to social and environmental

responsibility standards because ‘clean production’ of export products would not help much if

suppliers treated their employees like slaves. Eventually, consumer organizations or

certification agencies would find out. In addition, CSR product differentiation relies on

reputation, trust and awareness building (Barin Cruz & Boehe 2008), which may take several

years to become effective.

A similar argument may be put forward for product innovation differentiation: innovative

activities may take time due to path dependence (Dosi, 1988) and the time lag between

product idea, development and product launch. Time compression diseconomies have been

considered an important barrier to imitation of the resource and capability bundles that

underlie sustainable competitive advantage (Dierickx and Cool, 1989).

13568

27

Fourthly, another open question is why CSR product differentiation is not significantly

related to product quality differentiation or to product innovation differentiation when

exporters predominantly target developed country markets? That CSR product differentiation

may primarily be used when targeting a certain small group of developed economies where

consumers are particularly sensitive to social and environmental issues may be a possible

explanation. Though speculative, in such specific markets, CSR characteristics might become

entry barriers or minimum requirements for entering the target market: hence, they would

cease to be differentiating product characteristics.

Altogether, our results point to an important insight at the crossroads between CSR and

international business literature. While CSR has often been seen as the outcome of the

institutional environment of a firm’s country of origin (Matten & Moon 2008), the question of

how and under which conditions CSR might spread across different countries seems to be an

under-researched issue. Our results stress that international trade is likely to disseminate CSR

practices from export destination countries to exporter countries. Using data from a Latin

American medium income developing economy (Brazil) that exports both to developed and to

other developing countries showed to be a valuable approach to test this idea due to the

distinct institutional environments of origin, destination and possible competitor countries.

A further interesting insight regarding the impact of different kinds of institutional

environments on export strategy is that deteriorating competitiveness vis-à-vis low cost

competitors is likely to favor novel product differentiation (such as CSR) approaches which

go beyond traditional approaches of differentiation by quality, image, and innovation, among

others.

Having said this, we conclude that institutional environments of both the developing

country exporters’ country of origin and the country of export destination are likely to have an

impact on the adoption of CSR practices. However, in the case studied, both impacts are

13568

28

qualitatively different: while the country of origin’s institutional environment creates

pressures to adopt CSR as a product differentiation strategy, the destination country’s

institutional environment is likely to influence the nature and content of CSR differentiation.

Managerial Implications

This study also indicates some recommendations for export managers, mainly for those who

export from Brazil and other countries with similar characteristics. First of all, export

managers should consider CSR and innovation as potential sources for export performance.

However, they need to understand under what conditions different kinds of product

differentiation may influence export performance. In particular, exporters should focus on a

small number of developed countries when opting for innovation or CSR product

differentiation. The reason is that in these countries, consumers are more likely to be more

conscious about social and environmental problems and are more willing to pay a premium

price both for socially and environmentally responsible as well as technologically

sophisticated products. Conversely, the effect of CSR and innovation product differentiation

decrease when exporters use such selling propositions in many different markets, possibly

irrespective of the buyers’ proclivity to pay for it. This suggests that export managers should

focus on specific market segments and countries and tailor their resources related to CSR and

innovation to them. Finally, the low and insignificant effect of product quality differentiation

on export performance could imply that quality no longer differentiates products and that it

might be considered as an indispensable prerequisite.

Limitations and future research

This study has a certain number of limitations that should encourage future research on this

matter.

13568

29

Primarily, although we consider different types of export markets, this is a single

country study that limits the possibility to generalize our findings to other contexts.

Accordingly, we suggest replicating this study in other developing countries, especially (but

not exclusively) in low income countries. Thus, we could reexamine the assumption that the

choice of competitive strategies is contingent on the institutional environment of the home

and the target country.

Secondly, a further possible future research avenue would be to scrutinize how and

why exporters’ product differentiation strategies vary across different kinds of developed and

developing countries. Larger samples would be helpful to identify finer grained but cohesive

groups of target countries both in the developed and in the developing country spheres.

One of the main contributions of this paper has been to bring two different research

streams together, CSR and international business / international marketing. We believe that

there is still a large research potential at the intersection of both areas. Future research could

contribute with finer grained and multi-dimensional CSR strategy constructs. Moreover,

future research could advance examining the relationship between CSR strategies and other

international business / international marketing related issues such as international

partnerships (partner choice), global value-chain management, internalization of business

activities abroad, and sustainable international new ventures, among others.

13568

30

REFERENCES

Abdel-Malek, T. 1974. Foreign ownership and export performance. Journal of International

Business Studies, 2(5): 1-14.

Andersen, O. 1993 On the internationalization process of firms: a critical analysis, Journal of

International Business Studies, 24(2): 209-231.

Anderson, J. C., & Gerbing, D. W. 1988. Structural equation modeling in practice: A review and recommended two-step approach, Psychological Bulletin, 103: 411–423.

Armstrong, S., & Overton, T. 1977. Estimating nonresponse bias in mail surveys. Journal of

Marketing Research, 14(3): 396-402.

Aulakh, P.S., Kotabe, M., & Teegen, H. 2000. Export strategies and performance of firms from emerging economies: evidence from Brazil, Chile, and Mexico. Academy of

Management Journal, 43(3): 342-361.

Ayal, I., & Zif, J. 1979. Market expansion strategies in multinational marketing, Journal of

Marketing, 43: 84-94.

Bagnoli, M., & Watts, S. 2003. Selling to socially responsible consumers: Competition and the private provision of public goods. Journal of Economics & Management Strategy, 12(3): 419-445.

Bagnoli, M., & Watts, S.G. 2003. Selling to socially responsible consumers: Competition and private provision of public goods. Journal of Economics and Management Strategy, 12: 419–445.

Bagozzi, R., & Yi, Y. 1988. On the evaluation of structural equation models. Journal of the

Academy of Marketing Science, 16(1): 74–94.

Bagozzi, R., & Yi, Y. 1988. On the evaluation of structural equation models. Journal of the

Academy of Marketing Science, 16(1): 74–94.

Baldauf, A., Cravens, D. W., & Wagner, U. 2000. Examining determinants of export performance in small open economies. Journal of World Business, 35(1): 61-79.

Barin-Cruz, L., & Boehe, D. M. (2008). CSR in the global market place: Towards sustainable global value chains. Management Decision. 8(46): 1187-1209.

Barnett, M. L. 2007. Stakeholders influence capacity and the variability of financial returns to corporate social responsibility. Academy of Management Review. 3(32): 794-816.

Baron, D.P. 2001. Private politics, corporate social responsibility and integrated strategy. Journal of Economics & Management Strategy, 10(1): 7-45.

Bartlett, C.A., & Ghoshal, S. 2000. Going global: Lessons from late movers. Harvard

Business Review, 78(2):132-145.

Bentler, P.M. and Bonnet, D.C. (1980), "Significance Tests and Goodness of Fit in the Analysis of Covariance Structures," Psychological Bulletin, 88 (3), 588-606.

Bilkey, W.J., & George T. 1977. The export behavior of smaller Wisconsin manufacturing firms. Journal of International Business Studies, 9: 93-98.

13568

31

Borger, G.B. & Kruglianskas, I. 2006. Corporate social responsibility and environmental and technological innovation performance: case studies of Brazilian companies. International

Journal of Technology Policy and Management. 6(4) 399-412.

Brooks, E. 2006. Why don't firms export more? Product quality and Colombian plants. Journal of Development Economics, 80(1): 160-178.

Brouthers, L.E., O’Donnell & Hadjimarcou, J. 2005. Generic Product Strategies for Emerging Market Exports into Triad Nation Markets: A Mimetic Isomorphism Approach. Journal of

Management Studies, 42(1): 225-245.

Brouthers, L.E., & XU, K. 2002. Product Stereotypes, Strategy and Performance Satisfaction: The Case of Chinese Exporters. Journal of International Business Studies, 33(4): 657-677.

Byrne, B. 2001. Structural Equation Modeling with AMOS: Basic Concepts, Applications, and Programming, Lawrence Erlbaum Associates Publishers: Mahwah.

Cadogan, J., Diamantopoulos, A., & Siguaw, J. 2002. Export market-oriented activities: Their antecedents and performance consequence. Journal of International Business Studies, 33(3): 615-626.

Calantone, R., & Knight, G. 2000. The Critical Role of Product Quality in the International Performance of Industrial Firms. Industrial Marketing Management, 29(6): 493-506.

Cavusgil, S. T. 1980. On the internationalization process of firms. European Research, 8: 273-281

Cavusgil, S. T., & Zou, S. 1994. Marketing strategy-performance relationship: an investigation of the empirical link in export market ventures. Journal of Marketing, 56 (1):1-21.

Christensen, C.; da Rocha, A., & Gertner, R. 1987. An empirical investigation of the factors influencing exporting success of Brazilian firms. Journal of International Business Studies, 18(3): 61-77.

Contractor, F., Kundu, S., & Hsu, C.C. 2003. A three-stage theory of international expansion: the link between multinationality and performance in the service sector, Journal of

International Business Studies, 34: 5-18.

Cooper, R., & Kleinschmidt, E. 1985. The impact of export strategy on export sales performance. Journal of International Business Studies, 16: 37–55.

DeVellis, R. 2003. Scale development: theory and applications. London: Sage.

Dierickx, I., & Cool, K. 1989. Asset stock accumulation and sustainability of competitive advantage. Management Science, 35(12): 1504-1511.

Dillman, D.A. 2007. Mail and internet surveys: The tailored design method, 2nd Edition, Hoboken: Wiley.

Dominguez, L. V., & Sequeira, C. G. 1993. Determinants of LDC exporters' performance: A cross-national study, Journal of International Business Studies, 24 (1): 19-40.

Dosi, G. 1988. The nature of the innovative process. In: Dosi, G., Freeman, C., Nelson, R., Silverberg, G., Soete , L. (Eds.). Technical Change and Economic Theory Cap. 10, London, Pinter, 1988, p. 221-237.

Flor, M., & Oltra, M. 2005. The influence of firms' technological capabilities on export performance in supplier-dominated industries: the case of ceramic tiles firms, R&D

Management, 35(3): 333-347.

13568

32

Hirsch, S., & Bijaoui, I. 1985. R&D intensity and export performance: A micro view. Review

of World Economics, 121(2) 238-251.

Knight, G., & Cavusgil, T. S. 2004. Innovation, organizational capabilities, and the born-global firm. Journal of International Business Studies, 35, 124–141.

Lages, L. F., Jap, S., & Griffith, D. 2008. The role of past performance in export ventures: a short-term reactive approach. Journal of International Business Studies, 39(2): 304-325.

Lukas, B. A., Whitwell, G. J., & Hill, P. 2007. Export planning orientation and its antecedents: evidence from exporting IT products. Journal of Business Research, 60(12): 1282-1289.

Matten, D., & Moon, J. 2008. “Implicit” and “explicit” CSR: A conceptual framework for a comparative understanding of corporate social responsibility. Academy of Management

Review, 33(2): 404-424.

McWilliams, A., & Siegel D. 2001. Corporate social responsibility: A theory of the firm perspective. Academy of Management Review, 26: 117–127.

Morgan, N. A., Kaleka, A., Katsikeas, & Constantine S. 2004. Antecedents of export venture performance: a theoretical model and empirical assessment. Journal of Marketing, 68: 90-108.

Murray, J.Y., Kotabe, M, Zhou, J.N. 2005. Strategic alliance-based sourcing and market performance: evidence from foreign firms operating in China. Journal of International

Business Studies, 36(2): 187-208.

North, D.C. 1990. Institutions, Institutional Change and Economic Development. Cambrige: Cambrige University Press.

Orlitzky, M., Schmidt, F.L., & Rynes, S.L. 2003. Corporate social and financial performance: a meta-analysis. Organization Studies, 24: 403-441.

Peng, M. 2001. The resource-based view and international business. Journal of

Management, 27: 803-829.

Peng, M. W., Lee, S.H., & Wang, D. 2005. What determines the scope of the firm over time? A focus on institutional relatedness. Academy of Management Review, 30(3): 622–633.

Peng, M., Wang, D. & Jiang, Y. 2008. An institution-based view of international business strategy: a focus on emerging economies. Journal of International Business Studies, 39: 920-936.

Piercy, N.F., Kaleka, A., & Katsikeas, C.S. 1998. Sources of competitive advantage in high performing exporting companies. Journal of World Business, 33 (4): 378-393.

Podsakoff, P.M., Mackenzie, S., LEE, J.Y., & Podsakoff, N. 2003. Common Method Biases in Behavioral Research: A Critical Review of the Literature and Recommended Remedies. Journal of Applied Psychology, 88(5) 879-903.

Porter, M. E., & Kramer, M.R. 2006. Strategy and society: The link between competitive advantage and corporate social responsibility. Harvard Business Review, December, 78-92.

Porter, M.E. 1985. Competitive Advantage: Creating and Sustaining Superior Performance.

New York: Free Press.

Reinhardt, F. L.1998. Environmental Product Differentiation: Implications for corporate strategy. California Management Review, 40(4): 43-73.

13568

33

Rosson P., & Ford, D. 1982. Manufacturer-overseas distributor relations and export performance. Journal of International Business Studies, 13(2): 5 7-72.

Siegel, D. S., & Vialiano, D. F. 2007. An empirical analysis of the strategic use of corporate social responsibility. Journal of Economics & Management Strategy, 16(3): 773-792.

Singh, J., Sanchez, M. M. G. S., & Bosque, I. R. 2007. Understanding corporate social responsibility and product perceptions in consumer markets: A cross-cultural evaluation. Journal of Business Ethics, 80(3): 597-611

Styles, C., Patterson, P., Ahmed, F. 2008. A relational model of export performance. Journal

of International Business Studies, 39(5): 880-900.

Waddock, S., & Graves, S. 1997. The corporate social performance-financial link. Strategic

Management Journal, 18(4): 303-319.

Yiu, D., Lau, C. M., & Bruton, G. 2007. International venturing by emerging economy firms: the effects of firm capabilities, home country networks, and corporate entrepreneurship. Journal of International Business Studies, 38(4): 519-540.

Zahra, S.A., Irelane R.D., & Hitt, M.A. 2000. International expansion by new firms: International diversity, mode of marketing entry, technological learning and performance. Academy of Management Journal, 5: 925-950.

Zhang, C., Causgil, T., & Roath, A. 2003. Manufacturer governance of foreign distributor relationships: Do relational norms enhance competitiveness in the export market? Journal of

International Business Studies, 34(6): 550-566.

13568

34

TABLES & FIGURES

Figure 1 – Conceptual Model

Export

performance

ProductQuality

Differentiation

ProductInnovation

Differentiation

CSR ProductDifferentiation

Horizontal

Export Market

Scope(Diversification of

export markets)

Vertical

Export Market

Scope(Development level

of target markets)

H2

H1

H3

H5 a,b,c H6 a,b,c

H4a

H4b

H4c

13568

35

Table 1 – Correlation matrix of all indicators (N = 252)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

1 Quality diff. 1

2 Image diff. .732(**) 1

3 Product R&D .317(**) .301(**) 1

4 Process R&D .369(**) .385(**) .787(**) 1

5 New products .254(**) .295(**) .668(**) .625(**) 1

6 Revolut. Innov. .281(**) .325(**) .617(**) .662(**) .586(**) 1

7 CSR cert .229(**) .155(*) .161(*) .173(**) .029 .051 1

8 CSR supply .274(**) .178(**) .192(**) .223(**) .100 .090 .862(**) 1

9 Envir. Reput. .325(**) .258(**) .170(**) .248(**) .090 .164(**) .646(**) .697(**) 1

10 Social Reput. .317(**) .242(**) .217(**) .269(**) .102 .149(*) .616(**) .633(**) .887(**) 1

11 Export volume .093 .106 .196(**) .236(**) .145(*) .154(*) .169(**) .170(**) .183(**) .156(*) 1

12 Revenue .124(*) .074 .276(**) .321(**) .182(**) .207(**) .160(*) .165(**) .177(**) .151(*) .840(**) 1

13 Profitability .033 .061 .128(*) .210(**) .017 .144(*) .055 .061 .141(*) .111 .620(**) .729(**) 1

14 Participation .139(*) .122 .181(**) .268(**) .119 .198(**) .134(*) .150(*) .256(**) .223(**) .769(**) .698(**) .582(**) 1

15 Overall Export performance

.086 .118 .215(**) .260(**) .144(*) .221(**) .125(*) .135(*) .196(**) .133(*) .844(**) .853(**) .726(**) .788(**) 1

16 Size (export revenue)

-.038 .007 .003 .010 .047 .095 .120 .102 .109 .090 .130 .113 .009 .057 .043 1

17 Vertical Mkt scope

.100 .067 -.129(*) -.108 -.134(*) -.082 .126(*) .090 .163(**) .142(*) .063 .000 -.085 .005 .009 .203(**) 1

18 Horizontal Mkt scope

-.043 .015 .184(**) .100 .142(*) .098 .009 .000 .032 .011 .067 .118 .047 .076 .035 .234(**) -.114 1

Note: ** = significant at 0.01; * = significant at 0.05; a indicator is equivalent to US$ 3.8 million;

b dummy, ‘0’ corresponds to developing country, ‘1’ to developed country

Table 2 – Descriptive statistics: correlations, means, standard deviations (N = 252) Means S.D. 1 2 3 4 5 6 7

1 Product Quality Differentiation 4.45 1.15 0.73 2 Product Innovation Differentiation 4.10 1.18 0.39** 0.66 3 CSR Product Differentiation 3.59 1.42 0.30** 0.20** 0.76 4 Export Performance 3.04 1.03 0.11 0.25** 0.19** 0.76

5 Size (export revenue) 6.50 a 2.16 -0.02 0.05 0.12 0.08 1.00 6 Vertical market scope b 0.48 0.50 0.09 -0.13* 0.15* 0.00 0.20** 1.00 7 Horizontal market scopec 19.12 18.75 -0.01 0.15* 0.01 0.08 0.23** -0.11 1.00

Note: AVE (bold) in the diagonal; ** = significant at 0.01; * = significant at 0.05; a the mean is equivalent to US$ 3.8 million;

b dummy representing country development level, ‘0’ corresponds to developing country, ‘1’ to developed country;

c number of export target countries; N = 252

13568

36

Table 3 – Measurement Model

Construct Indicators Factor loadings Critical Ratios Average variance

explained (AVE)

Cronbach

alpha

Construct

reliability

Product quality differentiation 0.73 0.844 0.845 Superior quality standards 0.88 - Differentiated image 0.83 9.117

Product innovation differentiation 0.66 0.882 0.886 Product R&D investment 0.87 - Process R&D investment 0.90 18.167 New product introduction 0,73 13.691 Revolutionary innovations 0.74 13.448

CSR Product differentiation (optimized) 0.76 0.896 0.902 Product differentiation by CSR certification & Product differentiation by supply CSR certification 0.71 14.253 Product differentiation by reputation / environment 0.97 22.967 Product differentiation by reputation / social 0.91 -

Export performance (optimized) 0.89 0.956 0.960 Export volume & profitability 0.93 - Export revenue & market participation 0.96 29.389 Overall performance 0.94 27.745

Note: The constructs CSR product differentiation and export performance were optimized by uniting indicator pairs with high modification indices (high correlations between error terms).

13568

37

Table 4 – Structural models Model 1

Main effects

Model 2

Control by size

Model 3

Horizontal market scope

(Diversification)

Model 4

Vertical market scope

(Development level)

Hypotheses

Hi Full sample

(n = 252)

Small

(n= 121)

Large

(n= 131)

Hi Low

(n= 161)

High

(n= 91)

Hi Developing

(n= 131)

Developed

(n= 121)

Product quality differentiation�

Export performance

H1 -0.06

(-0.713)

-0.06

(-0.560)

-0.07

(-0.579)

H5a 0.07

(-0.780)

-0.06

(-0.368)

H6a -0.07

(-0.624)

-0.16

(-1.541)

Product innovation differentiation �

Export performance

H2 0.28

(3.658**)

0.20

(1.985*)

0.31

(2.636**)

H5b 0.30

(3.288**)

0.18

(1.296)

H6b 0.28

(2.472*)

0.33

(3.168**)

CSR Product differentiation �

Export performance

H3 0.17

(2.511*)

0.10

(1.005)

0.23

(2.242*)

H5c 0.20

(2.496*)

0.14

(1.169)

H6c 0.11

(1.083)

0.23

(2.564**)

Product quality differentiation �

product innovation differentiation

H4a 0.45

(5.694**)

0.27

(2.506*)

0.57

(4.936**)

0.41

(3.426**)

0.56

(3.837**)

0.53

(4.835**)

0.39

(2.900**)

Product innovation differentiation�

CSR product differentiation

H4b 0.24

(3.385**)

0.04

(0.459)

0.45

(4.314**)

0.26

(2.955**)

0.28

(2.367*)

0.41

(3.863**)

0.14

(1.374)

Product quality differentiation �

CSR product differentiation

H4c 0.36

(4.560**)

0.34

(3.232**)

0.39

(3.461**)

0.31

(3.426**)

0.40

(2.841**)

0.44

(4.153**)

0.21

(1.825)

Note: critical values in parentheses, * = significant at 0.05; ** = significant at 0.01; models calculated with optimized constructs (see table 3); i this column refers to the number of the hypothesis tested in the respective model

13568

38

Table 5 – Fit indices

Model # CMIN DF CMIN / DF p NFI CFI RMSEA RMSEA

(low – high)

PCLOSE

Model 1 – main effects 80.332 48 1.675 0.020 0.965 0.986 0.052 0.031 – 0.071 0.418

Model 2 – control by size 137.179 96 1.429 0.004 0.943 0.982 0.041 0.024 – 0.056 0.816

Model 3 – horizontal market scope

(diversification of target countries)

128.638 96 1.340 0.015 0.946 0.986 0.037 0.017 – 0.053 0.912

Model 4– vertical market scope

(development level of target countries)

165.065 96 1.719 0.000 0.932 0.970 0.054 0.039 – 0.067 0.319

Note: models calculated with optimized constructs (see table 3)