The Impact of Managers' Global Orientation on SME Export and Economic Performance.

Author:Freixanet, Joan
Position:RESEARCH ARTICLE
 
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1 Introduction

The factors that determine which companies are better equipped to achieve success in international markets has been widely acknowledged as a seminal research issue in both the international business and strategic management literatures (Leonidou et al. 2002; Chetty and Hamilton 1993), and it is particularly crucial in the present context of increasingly globalized and highly competitive markets.

Extensive evidence exists of the positive effects both at the micro- and macro-economic level of firms' higher exports. An increase in aggregate exports creates several benefits to national economies, such as improvements in the balance of payments, an increase in employment, and enhanced competitiveness (Seringhaus and Botschen 1991; Kotabe and Czinkota 1992). As a consequence, most countries have created export promotion programs (EPPs) to motivate and assist companies in their internationalization process, providing them with information, financial aid, contacts, and export know-how (Freixanet 2012). Identifying the factors that make some companies more internationally successful is fundamental to improve EPPs targeting and make promotion systems more effective and efficient.

An area that has attracted considerable attention is the role of the decision maker in a firm's success in international markets. Several studies have tried to elucidate the factors that enable some individuals rather than others to recognize and exploit opportunities across borders, resulting in improved export performance for their firms (Cavusgil and Nevin 1981; Knight 2001; Manalova et al. 2002). A subset of studies in this area has focused on the antecedents and effects of the so-called manager's global orientation (MGO), which refers to his/her positive attitude, vision, and commitment towards international business, and to his/her ability to adapt to different environments and cultures (Moen and Servais 2002; Nummela et al. 2004). These attitudinal and cognitive aspects derive from managers' international experiences and knowledge (Acedo and Jones 2007).

Previous studies have found that MGO is a prerequisite for the emergence of rapidly internationalizing firms (Harveston et al. 2000; Fletcher 2001; Townsend and Cairns 2003); that it increases the use of full-control foreign market entry modes (Nielsen and Nielsen 2011); and that it has a positive impact on international performance (Athanassiou and Nigh 2002; Dichtl et al. 1990; Gray 1997; Kyvik et al. 2013). As these early studies suggest, the link between MGO and firm export activity is a relevant and promising field with important management and public policy implications. However, despite calls for further research, the literature in this area is surprisingly underdeveloped. Besides an evident paucity of recent studies, earlier research exhibits important limitations, such as the measurement of the effects of MGO basically through only one financial outcome (export volume/intensity), the measurement of MGO only through managers' international experience, the neglect of long-term evolution, or the absence of any kind of industry analysis. We still know little about the full extent of the impact of MGO or the firm-specific factors that influence it. To date, no studies have entirely considered the different dimensions of export performance and firm heterogeneity in MGO impact, in relation to firm resources and industry contextual elements.

This paper aims to fill this gap by analyzing the relationship between selected managers' attitudinal and cognitive aspects, measured through observable demographic characteristics (Hambrick and Mason 1984), and the international and economic performance of firms of different sizes and industries. Drawing on the resource-based view (RBV), the upper echelons and internationalization process theories, we assume that the level of MGO will affect a firm's intermediate and final exports and economic outcomes, this impact being consistent in the long term, and different, depending on firm size and industry.

To analyze these hypothesized relationships, we studied a sample of 271 manufacturing firms operating in nine different sectors over the period 2005-2014 (2710 observations). The empirical results provide overall support for our hypotheses, showing a positive relationship between the level of MGO and export intensity, as well as with internationalization scope and speed. Accordingly, firms whose managers have a higher MGO implement a more rapid, first-time entry into a foreign market, they export to more countries, and they sell a higher percentage of their total turnover abroad. The level of MGO is also associated with some export marketing outcomes, namely the creation of a network of sales partners and export planning. Finally, a higher MGO is also related to increases in overall profitability, particularly for smaller firms and for the Manufacturing and wholesale industry.

This study yields several academic contributions. First, it provides stronger empirical accuracy and a more comprehensive view of the impact of MGO in a firm's exports-related outcomes (Leonidou et al. 2002; Diamantopoulos et al. 1993). While previous papers have examined the effects of managers' global mindset, this is the first one to qualify this impact considering several dimensions of export performance (scale and geographic spread), as well as speed of internationalization, and including both objective performance indicators and subjective managerial perceptions (Freixanet 2012; Gencturk and Kotabe 2001; Katsikeas et al. 1996). Second, this study helps to determine some firm-specific factors that shape the relationship between MGO and overall economic performance at the firm level, empirically analyzing the role of both firm size and industry (Kyvik et al. 2013; Chetty and Campbell-Hunt 2003; Acedo and Jones 2007). Third, it combines firm-level data from different sources into a unique, rich dataset, and conducts a longitudinal study enabling a dynamic perspective of the examined relationships and their long-term consistency (Filipescu et al. 2013; Leonidou and Katsikeas 2010). There are also relevant contributions for practitioners and policy makers. Our results provide managers with new insights on the importance of their cognition and attitudes regarding firm exports and performance, with significant implications for the process of hiring and training them. The conclusions also have important public policy implications with regard to the design and management of export promotion programs.

The remainder of the paper is organized as follows: Sect. 2 establishes the conceptual link between MGO, international, and economic performance, and sets out the hypotheses. Section 3 presents the methodology and data. Section 4 presents and analyzes the findings. Finally, Sect. 5 discusses the conclusions and the academic, managerial, and public policy implications.

2 Conceptual Framework and Hypotheses

This study draws basically on the resource-based view (RBV), complemented by the upper echelons perspective and the internationalization process theory. The RBV (Barney 1991; Peng 2001) centers on the exploitation of firms' resources and capabilities to obtain a sustainable competitive advantage (Galbreath 2005; Grant 2016). Of these resources, intangible human resources are considered crucial for enhancing firm performance (Surroca et al. 2010). Upper echelons theory (Hambrick and Mason 1984) analyzes the role of top management in firms' strategic choices and performance. This study centers specifically on selected decision makers' attitudinal and cognitive elements, proxied through observable demographic factors (Nielsen and Nielsen 2011), and reflected in his/her level of MGO.

Complementarily, the internationalization process, or Uppsala model (Johanson and Vahlne 1977, 1990), focuses on firms' gradual acquisition, assimilation, and use of foreign market knowledge leading to an increased commitment to internationalization. The internationalization process model has been challenged by the emergence of born-global firms (Oviatt and McDougall 1994; Knight 1997) or the big-step hypothesis (Pedersen and Shaver 2011), which may question some key assumptions of this theory, such as the slow progress in reaching further internationalization stages. In this sense, although some firms may internationalize shortly after their inception, leapfrog stages in the foreign market establishment chain, or follow a discontinuous process, previous research indicates that learning and accumulating experiential knowledge is both a requirement for, and a consequence of, more advanced levels of export involvement (Garcia et al. 2012; Salomon and Jin 2010; Petersen et al. 2008; Prashantham 2005; De Clercq et al. 2012).

Managerial and organizational resources and capabilities, together with environmental factors, have an impact on export marketing strategy and results, which in turn affect exports and economic performance, as shown in Fig. 1 (Leonidou et al. 2002). Export marketing results include such aspects as developing marketing skills, export planning, obtaining market information, creating distribution networks, or establishing alliances (Freixanet 2012). These different marketing achievements are essential for a company to increase its export competitiveness (Crick and Czinkota 1995), the foundations that will enable it to succeed across borders (Spence 2003). Considering these types of 'soft' indicators is necessary to obtain a complete view of the impact any factor will have on export performance (Madsen 1998).

From the perspective of the behavioral theory of the firm (Cyert and March 1963; March and Simon 1958), it is the managers' perceptions and attitudes towards these internal and external factors that may explain why firms with similar resource endowments that compete in the same environment, make different strategic choices (Simon et al. 2000). Perceptions are...

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