2.4.1 Overview
The concept of export performance has been studied for almost 60 years, starting with the work of Tookey (1964). Enhancing export performance is critical for public- policy-makers (in that export performance increases the employment level, improves productivity, etc.), business managers (because export performance encourages corporate growth and improves the company’s prospects of long-term survival) and
researchers (since export performance is often described as a promising area for the development of international marketing theory) (Sousa, Martinez-Lopez and Coelho, 2008). As a result, export performance and its antecedents have been studied widely (Haahti et al., 2005). Nevertheless, to date, it is ‘one of the most widely researched but least understood’ constructs of international marketing (Sousa, Martinez-Lopez and Coelho, 2008 p. 344).
2.4.2 Conceptualisation and Operationalisation
In spite of the fact that performance is studied widely, there is no consensus in the academic literature on its conceptual definition and measurement (Cavusgil and Zou, 1994; Shoham, 2002; Baldauf, Cravens and Wagner, 2000, Hult et al., 2008; Ogunmokun, 2012), with export performance often being defined as an outcome of the firm’s export activities (e.g. Shoham, 1998; Katsikeas, Leonidou and Morgan, 2000; Calantone et al., 2006), which allows evaluation of export success.
A conceptual definition of performance is missing in many export performance
papers. In other words, in most of the articles written on the topic the construct is not defined (Shoham, 1998). However, there is agreement that performance is a
multidimensional concept (Baldauf, Cravens and Wagner, 2000; Cadogan et al., 2005). Thus, there are different categorisations of export performance dimensions and agreement that ‘the use of multiple indicators is necessary for a reliable assessment of the construct’ (Sousa, Martinez-Lopez and Coelho, 2008 p. 367). First, the conceptualisation of export performance three-dimensionally is suggested. This results in effectiveness, efficiency and adaptiveness (Walker and Ruekert, 1987). Effectiveness is defined as the degree to which an organisation manages to achieve its goals and objectives (Cavusgil and Zou, 1994; Baldauf, Cravens and Wagner, 2000; Papadopoulos and Martin, 2010), and it can be measured by using sales-related and growth-related measures. Efficiency is viewed as the ratio of performance outcomes to the inputs needed to accomplish them (Cadogan, Cui and Li, 2003), and profitability is considered as the main measurement of this dimension (Styles, 1998). Adaptiveness is defined as a firm’s ability to be responsive to the changes in the external environment. It is possible to measure this dimension
organisation capitalises on new opportunities (Morgan et al., 2003). The last dimension is particularly important when considering the search for new market opportunities, competing with other players on the market and launching new products in the international environment (Styles, 1998).
Second, Hult et al. (2008) suggest another typology of performance dimensions: financial, operational and overall performance. The first dimension presents financial results and reflects the achievement of economic goals (profit margin, sales growth, earnings per share, return on investments, etc.), whilst the second dimension is related to the performance outcomes of one particular function of the firm and reflects non-financial dimensions (market share, new product introduction and innovation etc.). Overall performance is related to a general conceptualisation of performance, including reputation, survival, perceived overall performance, achievement of goals and perceived overall performance relative to competitors. Third, export performance could be operationalised as market, financial and customer performance (e.g. Hultman, Robson and Katsikeas, 2009). Market performance relates to sales figures (e.g. sales volume, sales growth) and market share whilst financial performance represents profit indicators (e.g. profit margins, profit growth) and customer performance is usually characterised by customer satisfaction and customer retention (Katsikeas, Samiee and Theodosiou, 2006; Hultman, Katsikeas and Robson, 2011). However, some authors refer to financial performance as a combination of sales and profit indicators (Zou, Fang and
Zhao, 2003; Sichtmann, von Salesinsky and Diamantopoulos, 2011) and to market performance as synonymous to customer performance (customer satisfaction, customer retention) (Leonidou, Palihawadana and Theodosiou, 2011).
Fourth, export performance is often categorised as economic and noneconomic (Katsikeas, Leonidou and Morgan, 2000). Economic performance is represented by financial indicators and is often operationalised as sales-related (e.g. the volume, growth of export sales), profit-related (e.g. export profitability and growth of profit) and market-related measures (export market share and growth of market share). Some authors divide economic performance into sales, profit and growth related measurements (Zou and Stan, 1998). However, the meaning of indicators remains
the same: they represent the financial figures of the company in relation to exporting activities.
Noneconomic performance is represented by non-financial indicators and is often operationalised as market-related measures (e.g. export country/market number, export market penetration), product-related measures (e.g. number of new products exported, the proportion of product groups exported, the contribution of exports to product development) and miscellaneous measures (e.g. the contribution of
exporting to economies of scale, company reputation) (e.g. Leonidou, Palihawadana and Theodosiou, 2011; Stoian, Rialp and Rialp, 2011).
Finally, some authors suggest considering export performance according to sales and profit dimensions (e.g. Madsen, 1987; Atuahene-Gima, 1994; Cadogan,
Kuivalaineni and Sundqvist, 2009). Over the long-term, sales and profit are expected to be related: an increase in sales provides profitability (Shoham, 1998). However, in the short term, the effect of export sales and export profit can be different (Cadogan et al., 2005). Export sales could be operationalised, for example, as a ratio of export- to-total sales, absolute sales, a ratio relative to industry, market share or as export sales during the past three years relative to expectations and industry norms (e.g. Julien and Ramangalahy, 2003; Katsikeas, Samiee and Theodosiou, 2006). Export profit could be operationlised as, for example, return on assets (ROA), return on investment (ROI), absolute size and change in market share, gross and operation profit margins, profits relative to industry standards (e.g. Brouthers and Nakos, 2005; Nes, Solberg and Silkoset, 2007; Sousa, Ruzo and Losada, 2010) or as a level of satisfaction with export profits during the past three years and an overall assessment of the firm’s export operations during the past financial year (e.g. Hortinha, Lages and Lages, 2011).
The lack of agreement on conceptualisation and operationalisation of export performance results in a variety of measurements of its different dimensions
(Diamantopoulos, 1998) some of which are already mentioned above (see Appendix 2.4 for more details). Nevertheless, there are two main approaches to measuring export performance: objective and subjective (e.g. Cavusgil and Zou, 1994; Francis and Collins-Dodd, 2000).
Objective measurements represent absolute values of export indicators. Among objective measurements sales-related (for example, export intensity, export sales growth) are the most commonly used (Baldauf, Cravens and Wagner, 2000;
Haahti et al., 2005). However, a considerable number of researchers have evaluated export performance using profit-related measures (Koh, 1990; Sousa, Ruzo and Losada, 2010). This group includes: export profitability, export profit margin and export profit margin growth, etc. The least commonly used measurements are market-related: export market share, export market share growth and market diversification. This is due to the fact that the market share is the most difficult indicator to measure (Julien and Ramangalahy, 2003; Sousa, 2004). Objective measures can be used if the company has export specific records (figures) and is willing to provide them to the researcher.
Subjective measures represent perceptual or attitudinal performance, including, for example, perceive export success, satisfaction with export sales and profit and achievement of expectations (Dhanaray and Beamish, 2003; Cadogan, Kuivalainen and Sundgvist, 2009; Navarro et al., 2010; Sichtman, von Selasinsky and
Diamantopoulos, 2011). There are several main reasons for using subjective measures (Venkatraman and Ramanujam, 1987; Day and Nedungadi, 1994; Katsikeas, Piercy and Ioannidis, 1996; Leonidou, Katsikeas and Samiee, 2002; Lages, Lages and Lages, 2005):
• First, managers can be unwilling to reveal confidential information about the company.
• Second, due to the fact that the majority of exporters are small or medium- sized companies, they do not always have separate records for exporting activities.
• Third, the interpretation of objective data can be difficult. It is not sufficient to consider pure financial figures without linking them to the company’s initial goals.
• Forth, export decision-making is mainly guided by the perception of a firm’s performance rather than by its absolute indicators.
• Fifth, the reliability and validity of subjective measurements are empirically supported.
The results of previous research indicate that there is a consistent positive relationship (the correlation around 0.60-0.70) between objective and subjective measures (Powell, 1992; Shoham, 1999). Thus, the choice of the relevant
measurements of export performance depends on the objectives of the particular research and data availability (Brouthers et al., 2009).