The impact of financial resources on the export performance

- the case of Portuguese exporting firms

Isabel Soares de Moura (ISCTE-IUL) and Jorge Lengler (ISCTE-IUL)

ABSTRACT Exports are seen by governments as one of the most important keys for driving economic

recovery. European countries encourage their firms to export when their primary markets are

saturated and depressed. Exports are the preferred mode of entry into foreign markets for

small and medium enterprises (SMEs). Export financing assumes even greater importance in

the context of the lack of liquidity in European countries such as Portugal, where a significant

part of the SMEs are embracing exports to diversify their markets and boost the portfolio of

clients, thereby decreasing the dependence on domestic market.

This paper seeks to build a new conceptual framework proposing: i) risk taking have direct

causal linkages with export financing resources, ii) the financing resources with innovation

orientation and learning orientation, iii) moderator effect of financial constraints between the

relations export financing resources-innovation orientation and export financing resources-

learning orientation, and iv) their the impact on the export performance. The proposed

conceptual model will be tested through a quantitative empirical research using data from

exporting Portuguese SMEs. Once tested, it can lead to useful insights for the export firms as

well as for the institutions responsible for ensuring higher extent of financing to Portuguese

SMEs. Keywords: risk taking, export financing resources, financial constraints, innovation orientation, learning

orientation, export performance

The impact of financial resources on the export performance

- the case of Portuguese exporting firms INTRODUCTION

There are several motivations for countries to export their production. Exports growth is seen

by governments as being a driver to economic recovery (Griffith and Czinkota, 2012), and it

also helps domestic industries to develop, improve productivity and create new jobs

(Czinkota, 1994; Sousa and Bradley, 2009). Besides this, at the corporate level, exports can

help firms to improve their prosperity and to expand into new markets (Leonidou, Katsikeas

and Samiee, 2002). For their international expansion, firms and SMEs, in particularly, use

exports as the most simple, attractive and generalized approach to foreign markets (Lages

and Montgomery, 2004).

Thus, in the recent decades, the idea that the exports are critical to successful businesses

and the prosperity of the countries has assumed a great prominence in research

(Diamantopoulos and Kakkos 2007; Katsikeas, Samiee and Theodosiou 2006).

Hence, it has been very important the study of the determinants of export performance. The

study’s purpose is to investigate the relationship of financial resources for exports with

learning orientation and with and innovation orientation and impact of these variables on

export performance of Portuguese SMEs. Once tested, it can lead to useful insights from

export firms as well as the institutions responsible for insuring higher extent of financing to

Portuguese SMEs.

THEORETICAL FRAMEWORK AND HYPOTHESES

Theoretical Background

The theoretical base of this study is developed through a review of the literature. The

conceptual framework is presented in this chapter.

Many authors consider the Uppsala Model as the theoretical point of departure to explain the

internationalization of SMEs (Andersson, Gabrielsson and Wictor, 2004).

Johanson and Vahlne (1977), from Uppsala School, developed a model to explain the

processes of internationalization based on the gradual acquisition and use of knowledge in

foreign markets as well as the successive increasing involvement in these markets.

According to this model, the international business involvement increases as the knowledge

about foreign markets and operations increases. The involvement is therefore measured

according to the resources committed to foreign operations, which grow with the experience.

Thus, the perception of risk decreases and involvement tends to grow.

This model, known as Model-U, has provided an explanation for the traditional

internationalization of the firms. Later, other researchers have argued about the relation

between that model and innovation (Model-I), Gankema, Snuif and Zwart, 2000. Based on

Vernon (1966), several studies (Czinkota, 1982; Cavusgil and Naor, 1987) compared the

internationalization process to the process of production, considering each later stage as

innovation for the firm (Gankema et al., 2000).

The dynamics of the behavior approach is driven by the growing purchasing information,

accumulating experience, gradual consolidation of learning processes, training and

involvement of knowledge of firm resources. (Leonidou and Katsikeas, 1996).

The export performance has been studied with considerable attention in many research

articles. Leonidou et al. (2002) conducted a survey of different performance studies and

identified twelve dimensions of export performance. More recently, Sousa, Martinez-Lopez

and Coelho (2008) developed a review and synthesized the knowledge on the determinants

of export performance, identifying key work in this area between 1998 and 2005, when it was

shown that this is a rather complex issue.

The constructs of the model are following presented.

Risk taking

In Covin and Slevin’s (1989) view, one of the measures for strategic posture is risk taking.

Naldi et al. (2007) found positive relations among risk taking and other aspects of

entrepreneurial behavior such as innovation and proactiveness. It is understood as a strong

risk taking propensity by top managers in order to obtain a competitive advantage for their

firms. Strategic posture can be generally defined as a firm's global competitive orientation. A

firm's entrepreneurial-conservation orientation is revealing of its strategic posture. Miller

(1983) argues that top managers who take risks can innovate in order to obtain a competitive

advantage for their firms.

Risk taking involves assuming brave actions by venturing into the unknown (Rauch et al.,

2004). It represents a willingness to commit resources to new projects, to pursue

opportunities in mind (Ahuja and Lampert, 2001; Baker and Sinkula, 2009), even though

such projects have uncertain outcomes (Li et al., 2010). Firms generating new products

based on technological innovations typically take risks, as the demand for the new product is

unknown. Managers who are willing to take risks in order a return for potential rewards.

Firm risk taking refers to “the degree to which managers are willing to make large and risky

resource commitments - i.e., those which have a reasonable chance of costly failures” (Miller

and Friesen, 1978, 923). Those firms act without strong prior experience (Hutt, Reingen and

Ronchetto, 1988), different from its current knowledge and markets and getting into an

exploration with unexpected results (Lubatkin et al., 2006). Other researchers use the

concepts for international entrepreneurship, defining it as “a combination of innovative,

proactive and risk-seeking behavior that crosses national borders” (McDougall and Oviatt,

2000, 903).

Export financing resources

Export financing resources relate to specific resources available to exporting firms and

allowing them to be in an effective competition in foreign markets. Financial support is

considered a fundamental resource to exporting SMEs in view of the international markets.

Financial resources are one of the most important elements for Borch, Huse and Senneseth

(1999) in the research based on SMEs resources and strategies. These resources allow to

finance the production, in a stage that precedes exports and to get financing in advance

since importers are often in arrears.

Classically, the most important financial theory has been the Theory of Capital Structure

(leverage), by the works of Modigliani and Miller (1958, 1963) and Myers and Majluf (1984).

In a recent study, researchers have summarized several other theories to explain the optimal

capital structure as a function of various costs and benefits from the financing by debt capital

and equity (Silva and Santos, 2012). The following could be highlighted: the Static Trade-off

Theory, the Agency Theory (Myers, 1977), the Pecking Order Theory (pioneered by Myers

(1984), and developed by Myers and Majluf (1984)) and Credit Rationing Theory (Stiglitz and

Weiss, 1981).

The Pecking Order Theory defends that firms first prefer internal sources of financing, then

external debt and new external equity as a last resource. However, considering that

exporters’ firms have growth strategies (Zahra, Ireland and Hitt, 2000), one could expect the

need for more external equity capital.

Even today, there seems to be a dearth of published studies on the subject of exporters’

needs to access financing (Riding et al., 2012). On the other hand, the OECD emphasises

that the limited access to external finance is an important obstacle faced by SMEs in many

countries, especially by exporter firms (OECD, 2006). And, according to the OECD, the

capacity to internationalise is often dependent on the available financing, especially for new

exporters, because owners’ personal and private sources are usually limited.

Moreover, SMEs are in general more informational opaque than larger firms, due to the

differences in asymmetric information, therefore, this type of enterprises relies more on

banks and trade credits for financing (Bartholdy and Mateus, 2008).

Consequently, it seems important to understand how SMEs access the financial capital,

particularly exporter SMEs. For SMEs, it is very important to access financing, as entering

international markets requires substantial finance resources (Zahra et al., 2000).

Beck et al. (2008) debate that firms with larger financing needs are more probable to rely on

different sources of external finance, and, in line to the pecking order theory of Myers and

Majluf (1984) the adverse selection in the market for external finance makes it efficient for

the firm to access equity last after all other sources of external finance are levered.

Therefore, Beck et al. (2008) examine financing source as the proportion of investment

financed by external sources: bank debt (includes financing from domestic as well as foreign

banks), equity, leasing, supplier credit, development banks (including finance from both

development and public sector banks), or informal sources.

Riding et al. (2012) also examine different sources of financing: external financing, external

equity capital, external debt capital and trade credit, and their findings indicate that growth-

oriented exporter enterprises are more likely to apply for financial capital.

Berger and Udell (1998) argue that firms’ growth cycle influences the sources of finance.

Considering small firms with high growth, venture capital, we can say that trade credit, short

and intermediate-term financial institution loans and mezzanine fund financing are the most

typical sources of finance used. Taking medium-sized firms and large firms into

consideration, then public equity, commercial paper, medium term notes and public debt

could be used. However, these two last sources are not adjusted to finance exports. Theirs

results are consistent with the findings of Cavusgil (1984) and Tannous (1997) show that

financial needs depending on which stage are exporting firms. In experimental and active

stages, financial export activities is more complicated, for example beause of the higher risk

of payment from foreign buyers and the lack of international experience, and therefore, they

should seek venture capital rather traditional financing. By the other hand, in committed

stages, export activities require large investments in working capital and, usually, banks are

the major sources of credit of SMEs.

And here is another point of view: since payment from firms in other countries involves

aspects of uncertainty much higher than those faced with domestic firms, credit risk becomes

more of an obstacle. That is why, since the financial crisis of 2008, firms have restarted to

use trade finance instruments to mitigate the risk inherent to exports. IMF (2011) refers to the

importance of letter of credit (letters of credit are used primarily in international trade for large

transactions between a supplier in one country and a customer in another), export credit

insurance, trade-related lending, trade credit and the products promoted by multilateral

development banks (MDBs).

Our concept of export financing resources is in line of Tannous (1997) and is the resources

for the export operation and for expanding capacity to make export products, or both.

According to Kawas (1997), exporters need financing resources essentially for two reasons:

working capital, through trade credit, to run the export business, to manufacture or acquire

goods to fill an order, and to reduce their cash cycle, anticipating revenues after shipping

goods, as firms often sell on credit and have to waiting to obtain payments at maturity.

In the first situation, the level of working capital varies significantly from firm to firm and

between different industries (Berk and DeMarzo, 2011). The major sources for theses first

needs are financing provided by banks and export credit insurance police by insurance credit

companies, assigning its rights to the amounts payable under the policy to a financial

institution to obtain financing and to mitigate risk.

In the second situation, exporter can discount a term draft for payment with an irrevocable

commercial letter of credit or discount a trade receivable guaranteed resource (forfaiting).

Many studies (Manova, 2008; Berman and Héricourt, 2010) explain how trade finance affects

the number of exporters and the size of their sales.

Financial constraints

Riding et al. (2012) defends that, considering the RBV of the firms, firms with broader

resources can better avoid barriers to export, such as finance, knowledge, experience, etc.

However the acquisition of the requisite resources depends on the process the

internationalisation including knowledge about foreign markets (Johanson and Vahlne,

1990). We pointed in this study, depending on stage whether firms are, the use of export

financing resources is different.

According to Economic Theory, in well-functioning marketplaces, the supply and the demand

regulate pricing so that business models will obtain financial capital at an appropriate cost.

However, markets are imperfects and the scepticism of the present functioning of capital

markets, as well as the transactions costs and the information asymmetries, reduces the

access to capital. This conduces to a financing gap and capital rationing. One of the most

used theories to explain these constraints is the Information Asymmetry Theory, because

differences in the level of information restrict the amount of financing to small size exporters.

Fundamentally, this theory posits that information asymmetry limits lenders’ and investor’s

ability to access – and price to – risk. Myers (1984) said that the borrower will be reluctant to

seek financing except for exceptional good projects while lenders will always be reluctant to

provide full financing. Also, Binks at al (1992) have the same opinion that reducing

information asymmetry could enlarge the supply of funds for small firms. These constraints -

related to access to finance to small businesses - are a common problem among different

countries, not only in European countries (EC, 2011), but also in the USA and in Canada

(Tannous, 1997). This last study suggests that the export financing constraints include the

lack of finance risky projects, the complexity of international trade instruments, inadequate

managerial resources, and small size of some exporters.

Some firms may have deferred growth and exporting goals because of financing constraints

(Riding et al., 2012; Griffith and Czinkota, 2012). Many researchers argue that the effect of

financial constraints is stronger to small firms than for large firms (Beck and Demirguc-Kunt,

2006; Bell, 1997; Berger and Udell, 1998; Galindo and Schiantarelli, 2003). Minetti and Zhu

(2011, 109) shows in their reseach the impact of these constraints: “The probability of

exporting is 39% lower for rationed firms and the rationing reduce foreign sales by more than

38%”.

Learning orientation

Learning orientation reflects firms’ involvement in learning (Sinkula, Baker and Noordewier,

1997), and their open-minded and sharing view. The learning-oriented enterprises create and

encourage a learning environment throughout the organization. Other authors contend that

the higher the export competence developed by firms the greater the ability to influence and

the firm's ability to make appropriate use of knowledge (Cavusgil and Zou, 1994).

Ghoshal (1987) suggested that learning is an important target for firms following international

diversification. And, as presented before, in international business transactions there are

different risks and payoffs, and the exporter learns from previous experience.

Firms with learning orientation learn from their successes and also from their mistakes and

thus tend to achieve better performance (Zahra, Ireland and Hutt, 2000). The process of

internationalization is a learning process for enterprises. Some authors argue that, when

companies learn to operate in different markets and with different cultures, they generate

knowledge and skills to deal with the new reality. (Porter, 1990; Zahra et al., 2000).

Julien and Ramangalahy (2003) use the term export competence as the export experience

and the enterprise’s domain to exploit them as a resource, this way increasing their

involvement with the export.

Learning enables enterprises to define and enter into foreign markets and improve the

performance. Many studies relate learning orientation and business performance; however,

this relationship is neglected in researches on entrepreneurial business ventures (Kropp,

Lindsay and Shoham, 2006).

Firms would benefit from becoming more learning-oriented because they could move up over

the learning curve on what concerns new production processes (Salomon and Shaver,

2005). Large and more competitive markets might push exporters to become more efficient

while the network widening of contacts - with clients, suppliers, competitors - could develop

the generation of efficiency improvements and the wider length of international markets could

provide the scale economies.

Learning-oriented values are manifested in a firm’s behaviour and processes of knowledge

acquisition, creation, and transfer as firms modify behaviour to reflect new knowledge and

insights (Garvin, 1993), existing values and norms are experiments, and new values are

implanted. Sinkula et al. (1997) estimated there are many ways and processes throughout

firms learn. The researchers propose a three values’ model to study what can influence the

firm’s learning propensity. First, commitment to learning refers to the extent to which a firm

places value on learning (Sackmann, 1991). Thus, firms must develop the ability to think and

purpose (Tobin, 1993), and to rate the need to recognize the causes and effects of their

actions. Second, shared vision offers individuals, as learning agents, the organizational

expectations, outcomes to be measured (Baker and Sinkula, 1999). Third, open-mindedness

refers to the extent to which a firm proactively questions long-held routines, and beliefs

(Sinkula et al., 1997). Individuals that are open-minded and committed to learning are

motivated to learn, but may find it difficult to know what to learn unless a shared vision is in

place (Sinkula et al., 1997). Firms learn from their previous realizations and failures, and

such information influence the method of thinking and acting.

Innovation orientation

The concept of innovation seems to have appeared with Schumpeter (1934) through

creativity, R&D activities, development of new processes, new products and services and

technological leadership (Kropp et al., 2006). The innovation orientation relates to R&D

activities, development of new processes, new products and services (Calanton, Cavusgil

and Zhao, 2002) and new markets (Kropp et al., 2006). The international innovation emerges

as a dimension related to the ability to develop and introduce new processes, new products

and ideas in international markets (Kandemir and Hult, 2005) and consequently enables

firms to offer internationally competitive products (Zhao and Zou, 2002).

While the model developed by the Scandinavian School pointed to the different stages of a

firm involved in the internationalization process (Johanson and Wiedersheim-Paul, 1975),

other current authors have focused on the internationalization process of the firm under the

perspective of innovation (Andersen, 1993). Leonidou and Katsikeas (1996) identified three

generic stages: pre-export, initial export and advanced export.

Innovativeness is the predisposition to support new ideas and changes (Ahuja and Lampert,

2001; Rauch et al., 2009). It embraces creativity and investigation in product development,

technology adoption and internal processes (Knight, 1997; Baker and Sinkula, 2009).

Export intensity

According to Cavusgil (1984), the decision to start exporting is an important commitment for

domestic firms and an important step towards internationalization. To Shoham (1998), export

earnings can be represented by the set of export intensity (export revenues and total

revenues), the absolute amount of export revenues and market share. Export intensity is a

variable that provides information on the firms’ orientation to export, and is measured as

international sales as a percentage of total sales – international sales/sales - (Filatotchev and

Piesse, 2009; Riding et al., 2012).

Calof (1994), Zhao and Zou (2002) define export behaviour as consisting of two dimensions:

the export propensity - whether the firm will export - and the export intensity - the proportion

of export production. Export intensity is a ratio between a firm’s export value and the

production output value (Zhao and Zou, 2002).

Export performance

With today’s complexity of our world, it seems relevant to measure the firm’s performance as

a level of their success. Considering the importance that exports hold in the world’s

economies, it is not surprising to find a greater number of researches on exports

performance in recent years (Sousa and Lengler, 2009).

Thus, despite some complexity in its measurement (Lages and Montgomery, 2004), the

literature states that export performance can be operationalized from several perspectives

(Diamantopoulos and Schlegelmilch 1994). Zou and Stan (1998) consider three types of

export performance: financial, strategic and in terms of satisfaction.

Another perspective presented as a result of his research is a three-dimension export

performance: export revenue, profitability and growth. It was underlined that the definition of

export performance should be consistent with the definition of firm performance in general

(Shoham, 1998). Therefore, if companies use sales growth as a performance measure, the

measure of export performance should be the growth in export sales.

Export performance is a multidimensional construct that needs multidimensional

conceptualizations (Sousa, 2004). Nevertheless, Sousa and Bradley (2009) utilized three

items: export market share, overall satisfaction, and how competitors rate the firm’s export

performance. Lages, Lages and Lages (2005) considered five aspects of export

performance: financial performance, strategic performance, achievement of objectives, and

contribution of individual unit of export (country-product-customer) for the export operations

of the firm, and satisfaction with the overall performance of export venture level.

The determinants considered in studies on export performance are both external and internal

to the firm (Grandinetti and Mason, 2012).

The export performance has been essentially measured in three different ways:

economically, strategically and financially (Julian and Ali, 2009). The first measure is the one

that is being increasingly used and includes indicators such as sales and market share.

Strategically, performance can be measured by an increase in market share, achieving a

competitive position in export markets. In financial terms, the performance is measureed

through attitudes or perceptions, such as perceived export success or satisfaction with

operations in foreign markets (Cavusgil and Zou, 1994).

Greenaway, Guariglia and Kneller (2007), in a study of British firms during the period of

1993-2003, concluded that there is a direct relationship between participation in foreign

markets and the increase of ex-post financial performance of firms. The results of this study

suggest that export promoting policies could be useful, reducing the level of financial

constraints faced by firms, and indirectly increase their investment and productivity. This

latter effect may be particularly relevant for SMEs, whose investment is often limited by lack

of funding.

In a recent study on Portuguese product exporter, Silva (2012) offered a postulation, also

supported by other researchers (Ganesh Kumar, Sen and Vaidya (2001); Greenaway et al.,

2007), according to which exports may have a positive effect on firm financial performance,

due to a revenue diversification effect and through the signal given to financial markets

(reducing informational asymmetries), that is, “only the best achieve to export”. This way,

companies improve the ability to obtain financing and reduce their dependence on suppliers.

Another research conducted with companies in the Czech Republic (Manole and

Spatareanu, 2010) shows that only ex ante firms will have sufficient liquidity to export.

Based on a review of the literature produced between 1998 and 2005 on the determinants of

export performance, Sousa et al. (2008) concluded that the existence of programs sponsored

by governments and non-government agencies positively contribute to the performance of

export enterprises. Also, researchers Sousa and Bradley (2009) concluded that the use of

export assistance programs is a major determinant of the export performance of Portuguese

firms. Therefore, the mentors of public policy should continue to invest in these programs

and encourage firms in these intensive programs.

Research hypotheses

Based on the literature review and on the importance of export financing resources,

innovation orientation and learning orientation for export performance, this research propose

twelve theoretical hypotheses. Those hypotheses take into account the managerial

characteristics and their influence on firm’s decision to undertake funding investments on its

export operation. Also, the conceptual framework of the model to be developed is based on

the resource-based view (RBV) theory. This theory emphasizes resources as the core

capability for the firm to achieve competitive advantage and thereby improve its performance.

This research regards the export performance as the dependent variable of the conceptual

model and considers three independent variables – export financial resources, learning

orientation and innovation orientation -, and export intensity as a mediator variable.

With the future empirical study, we expected to contribute to a better understanding of the

impact of export financial resources on export performance improvement.

In future field interviews and field research, the model could be supported. An overview of

the complete conceptual framework is presented in Figure 1.

Both, the traditional literature on international business (Buckley and Casson, 1976) and the

latest literature on entrepreneurship (Zahra et al., 2000), suggest that internationalization

should be driven by firms’ efforts to leverage its innovation capabilities and learning

orientation.

This study aims to investigate the different sources of financing used by Portuguese SMEs

in their export process, and examine three specific sources of competitive advantage, 'export

financial resources', 'innovation orientation' and 'learning orientation', and their impact on the

export performance. The review of the literature leads to a conceptual model from which the

work derives testable research hypotheses.

John et al. (2008) focus in managerial risk choices in firm investment decisions and their

consequent implications for firm value-maximizing and expected cash flows. This is in line of

what agency theory support that the extent of involvement in risky activities is likely to be

influenced by the ownership and governance of the firm (Fama, 1980; Fama and Jensen,

1983). Thus a firm’s risk taking can vary between managers and owners. Consequently,

some agency theory researchers suggest that equity ownership effects managers’risk taking

propensity (Zajac and Westphal, 1994), proposing that managers turn into risk averse as

their ownership in the firm growths (Beatty and Zajac, 1994). Under a low investor protection

environment risk taking is lower. One explanation could be given by the power of noneequity

stakeholders, such as banks that are in a dominant position, in terms of firms financing, and

may limit value-enhancing corporate risk taking to protect their interests, as well as provide

funds with higher cost of capital.

In fact, risk taking firms could be in an aggressive environment in terms of access funding.

Griffith and Czinkota (2012) said that true export growth is realized from taking risks and

being innovative and proactive and those operations need better priority financing.

Thus, the following hypothesis will be tested:

H1: The higher the manager's proclivity to take risks, the greater the level of needed export

financing resources.

Since the pioneering work of Schumpeter (1934) on innovation, the role of financial

resources in attaining superior levels of innovation has been pointed out by different authors.

King and Levine (1993) argued that better access to financial systems improves the degree

of innovation. The rationale behind that argument is that firms can benefit from innovations

when they manage to channel more financial resources into their process, which may lead to

the creation of the correct set of processes to enhance firm’s innovative capacity.

This leads us to the following hypothesis:

H2: The higher the level of export financing resources, the greater the innovation orientation

of the firm.

Wiklund and Shepherd (2005) argue that financial resources seem to have a great

importance to small firms and they have also found that entrepreneurial and learning

strategies require considerable financial resources to have success.

Moreover, as financial resources are liquid and flexible, firms can re-affect them into new

initiatives. The fundamental reason for this argument is that firms can benefit from learning

when they have more financial resources into their approach to international markets, which

may lead to the knowledge of the different risks, payoffs and other conditions of markets

abroad.

Thus, the following hypothesis will be tested in the future research:

H3: The higher the level of financial resources committed to support exports, the greater the

learning orientation of the firm.

Bell (1997) concluded that financial constraints, such as export financing resources, currency

fluctuations and delays in payments, can decrease international capabilities of small

innovative firms. On other hand, learning orientation is a broader concept that holds many

characteristics of adaptation and change. Therefore, it will be tested the impact of financing

export resources on the innovation orientation and learning orientation can decrease due to

the financial constraints that limit the investment on R&D as well as the capabilities to adapt

to firms environments.

Thus, we propose the following hypothesis:

H4: The positive relationship between export financing resources and innovation orientation

is moderated by financial constraints such that the relationship is weaker for higher levels of

financial constraints.

H5: The positive relationship between export financing resources and learning orientation is

moderated by financial constraints such that the relationship is weaker for higher levels of

financial constraints.

Learning orientation addresses subjects of information processing by concentrating on

knowledge, memory, error correction (Senge, 1990). For the production management’s point

of view learning is seen through the importance of learning curves, productivity and for

endogenous and exogenous sources of learning (Mavondo et al., 2005).

Many studies indicate that LO has significant impact on innovation (Chen et al., 2009; Hurley

and Hult, 1998; Mavondo, Chimhanzi and Stewart, 2005).

Calantone et al. (2002) believe the link between learning orientation and innovation

orientation could be established upon three ideas: the first is related to technological

innovation, the second is related to the emergence of new markets and the ability to

understand and anticipate the recent demand of consumers, and the third states that an

organization committed to learning is more innovative than their competitors. As a result,

researchers argue that, if the learning orientation can be considered an input/ an antecedent,

the innovation orientation should be an output of learning efforts (Calantone et al., 2002;

Hurley and Hult, 1998). The rational for this is the relationship between LO and innovation is

a lying on a continuum of explotation-explotation (Mavondo et al., 2005). To respond and

adapt quickly to customer needs firms must have the capacity to learn, thus they can use

knowledge in changing competitive climate, which is associated with innovation (Hurley and

Hult, 1998). Therefore, we intend to test the following hypothesis:

H6: The higher the level of learning orientation, the higher the innovation orientation.

Sousa et al. (2008) identified a positive influence of programs sponsored by governments

and non-governmental agencies on the export intensity. These resources are used by firms,

mostly as extra resources. Our review of previous studies has identified an important gap.

Besides these programs, empirical research on the financial support to exports is limited.

One of the few studies concluded that the availability of financial resources for export

activities affect export venture performance outcomes (Morgan et al., 2004).

It is interesting to study the relationship between financing resources and export intensity

(measured as the percentage of sales revenues obtained from exports). The essential

reason for this is because firms that gained the financial capital to produce products for

exportation, with working capital and liquidity requirements, are better positioned to improve

the level of exports.

Thus, the following hypothesis is:

H7: The higher the level of export financing resources the greater the export intensity.

Amine and Cavusgil (1986), in a study of the British firms from clothing sector, concluded

that there was a positive relationship between export intensity and export performance.

Lu and Beamish (2001) studied the effects of internationalisation on the SMEs performance,

identifying how firms become more competitive as they expand internationally their

businesses. The strategies studied were exports and foreign direct investment in listed

Japanese SMEs. The authors found that higher export intensity contributed positively to firm

performance, considering the effect of exchange rate (the results could change because of

the fluctuations of exchange rate). The conclusion is consistent when the yen was weaker.

The rationale behind that argument is that export performance can increase from export

intensity when firms manage to increase their export volume of sales and production in the

extended geographic markets, which may guide to gains related to scale and scope

economies.

This leads us to the following hypothesis:

H8: Export intensity positively affects export performance.

Several scholars support the importance of learning orientation on firm performance

(Calantone, Cavusgil and Zhao, 2002; Zahra et al., 2000; Baker and Sinkula, 1999).

Learning enables firms to reach and enter into new markets and increase performance

(Zahra et al., 2000). Kropp et al. (2006) tested a positive relationship between learning

orientation and IEBV (international entrepreneurial business venture). So, because of the

importance of learning in the export processes, we will test the following hypothesis:

H9: Learning orientation is positively related to the export performance.

Depending on industry or on the comparative advantages of a country, positive or negative

relationships between innovation and export intensity have been found. For example, Pla-

Barber and Alegre’s (2007) results, based on a sample of firms in the French biotechnology

industry, confirm a positive and significant link between innovation and export intensity.

However, if the firms researched belong to a country that is known for its comparative

advantage related with low labour and production costs, such as China, the results may be

the opposite (Zhao and Zou, 2002).

Calantone et al. (2002) defend that the ability to innovate is the most important determinant

of business performance. As argued by Knight and Cavusgil (2004), the international

innovation is a critical dimension for international success, and has a positive effect on the

international performance of SMEs.

Consequently, this leads to the following hypothesis:

H10: Innovation orientation is positively related to export performance.

Researchers have found that fundamental to export success is access to financial resources

(Ling-yee and Ogunmokun, 2001; Leonidous, 2004; Morgan, Kaleka and Katsikeas, 2004).

The need of working capital and financial liquidity for export operations means that access to

financial resources is an essential factor for the success of exporters (Morgan et al., 2004;

Griffith, 2011; Kaleka, 2011; Griffith and Czinkota, 2012). As the availability of financial

export resources is very import to export venture performance outcomes, we theorize:

H11: The higher the level of financial resources committed to support exports, the greater the

export performance of the firm.

The conceptual framework on Figure 1 presents our theoretical hypotheses.

Figure 1 Conceptual Framework

RESEARCH METHODOLOGY

As mentioned before, the research setting is the country of Portugal. The population consists

of all Portuguese SME exporters of goods. These SMEs are in the official database of INE.

These data will allow test the hypotheses and to estimate the population among SME

exporter firms in the sample and to extrapolate these estimates to the wider population.

Although, it is not evident what constitutes “exporting”, because database includes firms that

only have one-off transaction and at the other extreme firms export 100% of their production.

Sample and data collection procedure

Data description: exporters by sector and by regions

The population is 33,861 firms, representing 9.7% of total Portuguese SMEs, and their

turnover represents 40% of all SMEs in Portugal (INE, 2011). The most representative

sectors of exporting SMEs are: trade, manufacturing and construction, which, together,

represented 84% of total exports and 89% of turnover generated by the exporters in 2009.

Regionally, the north of Portugal is the region that creates more export (37%), followed by

the centre with 19% and the Lisbon region with 33% of the total.

Based on the randomly selected sample, a structured questionnaire will be constructed to

send to managers involved in export operations. It will be expect to refine measures through

interviews – exploratory qualitative analysis - with the experts in the field. Based on the

outputs of the interviews, the questionnaire will be pretested by a small number of managers

to reach the final version of the survey. The master questionnaire is being prepared in

English and will be back-translate to Portuguese.

Data analysis

To build the constructs and to verify if they fit with framework theory, it will be done an

exploratory factor analysis. Next step, it will be a confirmatory factor analysis to validate fit

indices of this factor structure and verify if the analyses are good fit for the model. And,

because it will be necessary to test the relationships between the different constructs

simultaneously, structural equation modeling will be used. Structural equation modeling

(SEM) consists of two stages: testing the measurement model and testing the structural

model (Anderson and Gerbing, 1988). The measurement model refers to the indicators

and/or sub-constructs that reflect the relevant constructs, while the structural model

addresses the relationships among the constructs.

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Isabel Soares de Moura PhD Student (ISCTE-IUL, Lisbon, Portugal) isabel_moura@iscte.pt Phone +351 962854883 Isabel Soares de Moura is a PhD student in Global Management, Strategy and Entrepreneurship (ISCTE-IUL Business School). She is an Invited Assistant Professor of Finance at Lusófona University. In addition to her academic experience, Isabel is a senior economist at International Business Department at Caixa Geral de Depósitos (Banking). She has spent many years managed numerous business strategy projects for international banking clients, and specialized in foreign investment and international multilaterals affairs. She holds a Master in Management Sciences, with thesis in Internationalization of Portuguese Banking (ISCTE, 2000) and a graduation in Management, with specialization in Strategy.

Jorge Bertinetti Lengler Assistant Professor of Strategy (ISCTE-IUL, Lisbon, Portugal) Jorge.lengler@iscte.pt Phone +351 217903402

Jorge Francisco Bertinetti Lengler is an Assistant Professor of Strategy at ISCTE IUL Business School. He holds a PhD in Competitive Strategy and Marketing (Federal University do Rio Grande do Sul, Brazil, and University of Oregon, USA). He did his post-doctorate studies in International Business in the University College Dublin (Ireland), where he is also a visiting professor. He has been working as an international consultant for numerous companies seeking to internationalise their strategies to developing countries. He has published scientific articles in numerous international journals and books, such as the Journal of Small Business Management, Journal of Marketing Management, Advances in International Marketing, among others.