Change in international market strategy as a reaction to performance decline

JBR-07565; No of Pages 12 Journal of Business Research xxx (2012) xxx–xxx

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Journal of Business Research

Change in international market strategy as a reaction to performance decline☆ Luis Filipe Lages a,⁎, Jose Mata a, 1, David A. Griffith b, 2 a b

Nova School of Business and Economics, Faculdade de Economia, Campus de Campolide, 1099–032 Lisboa, Portugal College of Business and Economics, Lehigh University, 621 Taylor Street, Bethlehem, PA 18015-3117, USA

a r t i c l e

i n f o

Article history: Received 1 May 2011 Received in revised form 1 November 2011 Accepted 1 May 2012 Available online xxxx Keywords: International marketing Strategic change Competitive intensity Adaptation/standardization Local/global strategy Organizational learning

a b s t r a c t While a great deal of research has explored how international marketing strategy influences performance, researchers have paid scant attention to understanding changes to international marketing strategy resulting from firm reaction to past performance. In this study, organizational learning theory addresses when and how international marketing strategy will change. Employing data from over 500 exporters, the results, which are consistent with theoretical predictions, indicate that (1) firms are generally not prone to inertia and do, in fact, change their international marketing strategy when facing declines in performance, and (2) that the direction of change depends on the level of competition in the specific foreign market, with firms adapting their international marketing strategy in low competitive markets and standardizing their international marketing strategy in highly competitive markets. The paper includes implications for academics and practitioners. © 2012 Elsevier Inc. All rights reserved.

1. Introduction International marketing strategy's influence on performance continues to be a focus of marketing researchers (Çavuşgil & Zou, 1994; Kaleka, 2011; Morgan, Kaleka, & Katsikeas, 2004). While research provides insights into international marketing strategy's influence on performance, little is known about the factors affecting international marketing strategy. Although mounting evidence exists that past performance stimulates strategy change, a result of managers' efforts to learn from, and respond to, performance feedback (Burgelman & Grove, 2007; Iyer & Miller, 2008), limited research examines this issue (Lages, Jap, & Griffith, 2008; Lages, Lages, & Lages, 2006; Lages & Montgomery, 2004). More importantly, no study examines the impact of past performance change on international marketing strategy change.

☆ An earlier version of this paper received the IMR Award for the best paper on international marketing at the Academy of International Business 2009. The authors thank the editor and two anonymous JBR referees, referees from AIB 2009 and Academy of Management 2010 conferences, as well as Chris Ahmadjian, Daniel C. Bello, John Cadogan, Miguel Pina e Cunha, Violetta Gerasymenko, Costas Katsikeas, David Montgomery, John Huffstot and Jose Tavares for comments on earlier versions of the manuscript. This research was supported by Nova Forum and FCT- Fundação para a Ciência e a Tecnologia, Portugal. ⁎ Corresponding author. Tel.: + 351 21 380 1600; fax: + 351 21 388 6073. E-mail addresses: lfl[email protected] (L.F. Lages), [email protected] (J. Mata), griffi[email protected] (D.A. Griffith). URL: http://www.lflages.com (L.F. Lages). 1 Tel.: + 351 21 380 1653, + 351 21 380 1600x1347; fax: + 351 21 387 0933. 2 Tel./fax: + 610 758 4743.

This perspective (i.e., viewing international marketing strategy change as a consequence of performance rather than merely as an antecedent of performance) can help to understand a number of important issues related to when and how international marketing strategy changes. For example, do firms facing declining performance change their international marketing strategy or does inertia urge them to stay the course of their established strategy? If they do undertake change, do their foreign market strategy become more or less similar to the one they employ in their domestic market? And, more importantly, does competition in foreign markets influence how international marketing strategy changes? If yes, in which way? To address these questions the present study draws on organizational learning theory, which contends that managers look to past performance as a signal of success or failure in order to determine managerial action (Cyert & March, 1963; Levinthal & March, 1981). This study contributes to the international marketing literature in two manners. First, this study deepens the understanding of when international marketing strategy change occurs (examining the relationship of changes in past performance to international marketing strategy). The research extends the literature pertaining to organizational learning theory by demonstrating that changes in past performance can be an important antecedent of international marketing strategy change. Second, the present investigation reveals how changes in international marketing strategies take place by specifying how firms change their international marketing strategy (i.e., strategy standardization or adaptation) in a foreign market when responding to competitive intensity (i.e., the degree of competition a firm faces in a specific market (Çavuşgil & Zou, 1994; Porter, 1980)). This is important as there has been some disagreement as to whether the level of competition

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Please cite this article as: Lages, L.F., et al., Change in international market strategy as a reaction to performance decline, Journal of Business Research (2012), doi:10.1016/j.jbusres.2012.05.018

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L.F. Lages et al. / Journal of Business Research xxx (2012) xxx–xxx

in a foreign market increases or decreases a firm's desire to standardize its offering. For example, while James and Hill (1991) argue that firms are more likely to standardize their offerings when operating in less competitive markets, Aulakh, Kotabe, and Teegen (2000) argue that a lack of competition in a market allows a firm to incur the higher costs of meeting the needs of the local market. By advancing knowledge in these areas, this study enhances academic understanding while also providing guidance to the practicing international marketing manager. 2. Background literature 2.1. Organizational learning theory Researchers in strategy recognize the importance of past performance as an antecedent to strategy (Cyert & March, 1963; Lant, 1992; Lant, Milliken, & Batra, 1992; Levinthal & March, 1981). For example, researchers suggest that past performance influences subsequent organizational change when managers learn from and react to performance feedback (Boeker, 1997; Burgelman & Grove, 2007). Performance failure is a powerful motivation for managers to react without delay in launching improved versions of products or changing prices, in order to provide greater value to consumers (Miller & Chen 1994). Consistent with this logic, the argument that Western companies focus on the short term (Doyle, Saunders, & Wong, 1986) reiterates the notion that changes in performance serve as a stimulus to managerial action. Organizational learning theory argues that managers have clearly defined performance goals, which they compare to performance outcomes (Lant, 1992; Lant et al., 1992). This comparison effects success or failure (Cyert & March, 1963; Levinthal & March, 1981), which in turn influences managerial action (Lant & Mezias, 1992; Levitt & March, 1988). As such, organizational learning theory focuses on a process of trial and error (e.g., Sullivan & Nonaka, 1986) in which managers work to identify associations between behaviors (e.g., strategies) and outcomes (e.g., performance) (Cyert & March, 1963; Levinthal & March, 1981). With this perspective, the prior strategy serves as the foundational reference point for making adjustments. However, challenges exist regarding the application of organizational learning theory in the business domain. Specifically, researchers find that managers may be subject to the threat of inertia (cf., Miller, 1994). Inertia resists fundamental reorientations in policy (Hinings & Greenwood, 1988). When subject to inertia, managers retain their strategies in the face of deteriorating performance. To examine whether managers employ organizational learning or are subject to inertia, the current research looks at whether or not managers adjust strategy when experiencing declines in performance. 2.2. International marketing strategy The extent to which firms adapt or standardize their strategies when they operate in foreign markets is central to the field of international marketing strategy (Çavuşgil & Zou, 1994; Katsikeas, Samiee, & Theodosiou, 2006; Lages, Abrantes, & Lages, 2008; Schilke, Reimann, & Thomas, 2009). The arguments for and against standardization of international marketing strategy primarily derive from the differences in perspectives about how to maximize firm returns. Specifically, those supporting standardization argue that the firm can achieve a greater return by realizing cost savings gained through economies of scale across markets (cf., Levitt, 1983; Ryans, Griffith, & White, 2003). Alternatively, those supporting adaptation contend that firm returns will be greater through the enhancement of value delivery in the market by adapting the firm's strategy to local market needs (cf., Çavuşgil & Zou, 1994). However, opting for one or the other is not a simple binary strategy decision. The decision has something to do with the degree to which a firm standardizes or adapts its marketing strategy in a specified market in relation to a baseline comparison, e.g., the firm's domestic market strategy

(Çavuşgil & Zou, 1994; Lages, Abrantes, & Lages, 2008, Lages, Jap, & Griffith, 2008; Ryans et al., 2003). A vast array of operational strategies exists regarding adaptation and standardization (e.g., Schilke et al., 2009; Sousa & Lages, 2011). Consistent with Brouthers, Werner, and Matulich (2000), the current work builds on the price–quality relationship to capture a firm's generic international marketing strategy, focusing on the trade-off between price and quality, in which perceived value can increase by lowering price or improving product quality (Doyle, 2000). This approach allows us to examine the degree of consistency of the firm's price–quality strategy in its foreign market in comparison to its domestic market. 3. Hypotheses 3.1. Reacting to declining performance Organizational learning theory contends that managers look to past performance as a signal of success or failure, which then serves as a guide to determining managerial action (Cyert & March, 1963; Lant, 1992; Levinthal & March, 1981). Building on this belief, when managers meet or exceed performance goals (i.e., performance from one period to the next remains the same or increases) managers continue to employ their current strategy. The logic underlying this notion is that managers believe that their identification of the underlying associations in the market that drive performance is correct and that their strategy to stimulate desired outcomes is effective. In contrast, erosion of performance challenges managers' earlierheld beliefs about the accuracy of prior causal associations (i.e., if the prior associations between strategy and performance had held, then performance should not have declined). Managers react to declining performance by recognizing that their prior associations may no longer hold, demanding changes in strategy, as a result (March & Simon, 1958). For example, organizational learning theory suggests that when discrepancies between expected and actual outcomes occur, managers become less satisfied with their performance and grow more amenable to risk-taking (Lant & Montgomery, 1987). Furthermore, performance downturns stimulate managers to consider more alternatives, calling for environmental scanning and the analysis of past decisions in an attempt to infer which actions perhaps led to the poorer results (Boeker, 1997; Cyert & March, 1963). Managers then combine the information they obtain with their own heuristics of the strategy to performance relationship, placing greater emphasis on the strategies that they believe to be performance-enhancing (Lant, 1992; Lant & Mezias, 1992). Given these arguments, we hypothesize: H1. Firms whose performance declines change their international marketing strategy more often than those whose performance does not decline. 3.2. The moderating role of competitive intensity If firms do in fact react to performance declines through a change in international marketing strategy, the question remains as to how they adjust their strategy. The literature indicates that competitive intensity may influence a firm's international marketing strategy adaptation/standardization (Katsikeas et al., 2006; Morgan et al., 2004). Competitive intensity is the degree of competition a firm faces in a market, and is directly related to the activities of competing firms (Çavuşgil & Zou, 1994; Porter, 1980). We argue that competitive intensity moderates the relationship between a decline in performance and greater standardization or greater adaptation. Porter (1980) notes that competition in an industry drives down the rate of return toward the competitive floor rate of return. In markets of higher competition, customers have more options to serve their needs, increasing the difficulty of customer retention (Kohli & Jaworski, 1990). As a result, firms must strive to lower their overall

Please cite this article as: Lages, L.F., et al., Change in international market strategy as a reaction to performance decline, Journal of Business Research (2012), doi:10.1016/j.jbusres.2012.05.018

L.F. Lages et al. / Journal of Business Research xxx (2012) xxx–xxx

cost structures in order to maintain performance levels (due to heightened price competition and lower margins per unit). This logic suggests that managers observing falling performance coupled with higher levels of competitive intensity in a specific foreign market, leverage economies of scale to drive down their per unit cost via the implementation of a more standardized strategy (cf., Samiee & Roth, 1992). Alternatively, in foreign markets where competition is less intense, firms need not compete as fiercely for sales revenue (James & Hill, 1991). In such markets one could argue for or against adaptation. For instance, one could argue that low competition makes firms less conscious of being competitive, which is then reflected in less adaptation to the market (James & Hill, 1991). While this is reasonable, we believe that a stronger argument can be made in that the lack of competition affords firms higher profit margins, which allows them the opportunity to experiment with their strategy in order to more effectively meet local market needs by adapting to the local market. This logic is consistent with that of Aulakh et al. (2000), who note that in situations of lower competition firms can work to present alternatives to increase the value offer to the final consumer. The first mover argument also supports this logic, whereby first movers work to define the needs of the market, creating high switching costs, which in turn creates a competitive barrier in the market (Lieberman & Montgomery, 1988). Given these arguments, we hypothesize: H2. Firms respond to a decline in performance by making their international marketing strategy more standardized in high more often than in low competitive export markets. H3. Firms respond to a decline in performance by adapting their international marketing strategy to the foreign market in low more often than in high competitive export markets. 4. Methods 4.1. Research context Data were gathered via a self-administered questionnaire sent to Portuguese exporters. Portuguese exporters provide an excellent context, as the country's small size makes exporting an important business activity. For Portugal, exporting is particularly important because of the access to opportunities for scale economies, specialization, and access to technology (Organization for Economic Co-operation and Development, 2008). 4.2. Pre-test Before conducting the survey, the authors pre-tested the questionnaire in three stages: first, refining the English version of the survey instrument and cover letter, by developing the initial survey format with preexisting measures from the literature. Second, the instrument was translated and back-translated. To avoid errors, a different researcher translated the questionnaire into English. During this stage, four Portuguese judges (researchers at different universities) assessed the content and face validity of the items. Third, the revised instrument was reviewed with 15 managers involved in export operations to assure alignment with managerial views and interests (Madsen, 1998) and comprehension of the measures. 4.3. Data collection The database of the Portuguese government's export promotion agency randomly generated a sample of 2500 firms, with individuals responsible for foreign operations identified. The individuals thus identified received by post a questionnaire and international postage-paid business reply envelope. The cover letter asked that survey be completed by the

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person most involved with the daily administration of the main export venture. After four weeks a follow-up survey packet went out to nonrespondents. To enhance the response rate, the authors offered respondents a list of potential importers or clients in the respondents' main destination market. Of the 2500 questionnaires, 29 respondents returned information indicating that they no longer exported, and the post office returned 119 questionnaires as undeliverable. These firms had either ceased operations or had no forwarding information. The sample size thus fell to 2352. Of these, 519 usable questionnaires were returned, for a 22% response rate. In order to increase variance and generalizability of the results, we considered exporters in multiple industries and regions. The Portuguese exporting industry comprises mostly small to midsized firms. Of the firms in the sample, 27% had sales below €1.5 million, 34% had sales between €1.5 million and €5 million, 31% had sales between €5 million and €35 million, and 8% had sales over €35 million. With regard to the number of employees, 19% had fewer than 20, 27% had between 20 and 49, 22% had between 50 and 99, 27% had between 100 and 500, and 5% had more than 500 employees. More than 75% of respondents reported on ventures with other European countries. Respondent firms had significant international experience: 22% had 2 to 7 years, 39% had 8 to 15 years, 26% had 16 to 30 years, and 13% had more than 30 years. Respondents held positions such as president, marketing director, managing director, and exporting director. Of the respondents, 83% indicated that they had been responsible for the exporting operations of their firm for more than three years. Respondents also indicated their degree of experience in exporting on a five-point scale (1=none; 5=substantial). The mean response was 3.6 (SD=.84). These data indicate that all respondents have significant knowledge in the specific exporting activities of the firm and are experienced with exporting in general. Assessing the differences between the early and late respondents with regard to the means of all the variables (a test for non-response bias) reveals no significant differences, suggesting that nonresponse bias is not a significant issue. Early respondents are the first 75% of the returned questionnaires, with late respondents the remainder. These proportions approximate the actual way the questionnaires were returned. 4.4. Measurement issues Table 1 shows descriptive statistics and correlations of the measures. Appendix A provides measurement details. 4.4.1. International marketing strategy Consistent with earlier research (i.e., Brouthers et al., 2000), the current research uses the price–quality relationship to capture a firm's strategy. This relationship reflects the trade-off between price and quality, in which perceived value can increase by lowering price or improving product quality (Doyle, 2000). Three viable strategies emerge from the price–quality relationship: economy (low price and low quality), value (low price but high quality), and premium (both high price and high quality) (Brouthers et al., 2000). Plotting price and quality choices on a two-dimensional chart and drawing a “value line” between “compatible” prices and qualities, strategies above this line should define good value, and strategies below should reflect poor value (Doyle, 2000, p. 279). Price–quality strategy changes from 1 year to the next are of special concern here, as is whether or not the international marketing strategy in the export market is becoming more or less similar to the strategy in the domestic market. 4.4.2. Export performance Export performance attracts continuous attention in the business literature (Ahmed, Mohamed, Johnson, & Meng, 2002; Hortinha, Lages, & Lages, 2011; Kaleka & Berthon, 2006; Lages, Abrantes, & Lages, 2008,

Please cite this article as: Lages, L.F., et al., Change in international market strategy as a reaction to performance decline, Journal of Business Research (2012), doi:10.1016/j.jbusres.2012.05.018

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Table 1 Descriptive statistics and correlations among independent, control, and moderating variables.

1 2 3 4 5 6 7

Change in export performance Export market competition Export performance level Export performance clearly identified Adaptation of international strategy International experience Total sales value

Mean

Std Dev

Min

Max

1

0.07 3.86 0.03 3.36 2.37 2.54 4.70

1.00 0.87 0.97 1.09 1.30 1.21 1.42

− 2.51 1.00 − 2.51 1.00 1.00 1.00 1.00

2.05 5.00 2.54 5.00 5.00 5.00 8.00

0.07 0.09 0.16 0.03 0.07 0.18

** *** * ***

2

3

4

5

6

0.09 ** 0.02 0.04 0.08 * 0.04

0.07 0.04 0.18 *** 0.08 *

0.10 ** 0.13 *** 0.02

0.05 − 0.03

0.23 ***

Variables 1 and 3 are an aggregate score of 13 items (see Appendix A). ***, ** and * denote significance at the 1%, 5%, and 10% levels (two-sided tests) respectively.

Lages, Jap, & Griffith, 2008; Naidu & Prasad, 1994; Sousa & Bradley, 2008). The international marketing strategy literature indicates that export performance is a complex (e.g. Diamantopoulos & Kakkos, 2007; Katsikeas, Leonidou, & Morgan, 2000) and multi-faceted phenomenon (e.g. Lages, Silva, & Styles, 2009; Lages, Silva, Styles & Pereira, 2009). Whereas some authors argue for grouping indicators into constructs to capture overall performance (Katsikeas et al., 2000), others maintain that researchers should analyze performance variables at the individual level (Hult et al., 2008). The current study considers multiple dimensions of export performance and three general dimensions: export intensity, export achievement, and export satisfaction, all of which reflect performance levels and changes to these levels. Export intensity refers to the proportion of production output to exports, measuring the percentage of exports to the firm's total sales and profits (Katsikeas et al., 2000). Export performance achievement is the extent to which firms achieve their export objectives regarding different measures, such as sales volume (unit sales), sales revenue, profitability, market share, and overall performance. Finally, satisfaction is a psychological variable (an affective state) with respect to the exporting activity (cf., Diamantopoulos & Kakkos, 2007). The measures of satisfaction in the present study account for satisfaction with export sales volume, sales revenue, profitability, and market share, as well as overall performance. 4.4.3. Competitive intensity Competitive intensity is the degree of competition a firm faces in a specific export market (Çavuşgil & Zou, 1994). Following Çavuşgil and Zou (1994) this study measures managerial perception of the extent to which competition exists in the specific foreign market. 4.4.4. Control variables To minimize spuriousness, five control variables are used. The first control variable is the export performance level in the year before performance change occurred. Thus, in each regression, along with each measure of performance change (between years t‐2 and t‐1), the corresponding measure of export performance level in year t‐2 appears. The literature reveals that a frequent problem in exporting firms is that company reports rarely differentiate between domestic and export operations (Yang, Leone, & Alden, 1992). Thus, the second control variable identifies whether the export data are clearly identifiable vis-à-vis domestic performance. The third control variable identifies the type of marketing strategy used before the period under analysis. According to Zajac and Shortell (1989, p. 416), “the likelihood of an organization's changing its strategy may potentially be a function of an organization's prior generic strategy.” Although this study controls for prior strategy, the reader should bear in mind that firms employing an extreme strategy cannot change their strategy in the same direction. The fourth control variable is the degree of international experience (La, Patterson, & Styles, 2009). International experience tends to be a primary source of organizational learning (Hutzschenreuter, Pedersen, & Volberda, 2007). The degree of international experience of people involved with the export venture, such as having lived and worked

abroad, provides a broad knowledge base and cultivates self-confidence, both of which bring diversity of insight(s) to deal with complex issues of strategy adaptation to the foreign market. The fifth control variable is total sales value. The study includes this because larger firms tend to be more susceptible to inertia (less likely to alter strategies) than smaller firms (Audia & Greve, 2006).

4.4.5. Common method bias To minimize common method bias the study engages both of the procedural remedies that Podsakoff, MacKenzie, Lee and Podsakoff (2003) suggest, as well as ex post empirical testing. The procedure includes four tactics: (1) to minimize measurement context effects— the use of paper-and-pencil questionnaires as opposed to face-toface interviews, (2) to minimize common rater effects—protection of respondents' anonymity in order to diminish apprehension, and the assurance that no right or wrong answer exists, (3) to minimize item characteristics effects—simple, specific, and concise items, and (4) to minimize correlation effects—respondents were not aware of the study's conceptual model. Empirically, the study employs three ex post approaches to assess common method bias. First, we carefully examined the correlation matrix for suggestions of multicolinearity. The lack of highly correlated constructs (see Table 1) suggests that common method bias is minimal. Second, Harman's one factor test was used—finding a very poor fit for the single-factor model, suggesting an absence of common method bias. Third, in light of concerns about the rigor of Harman's one-factor test (cf., Podsakoff et al., 2003)—recourse to objective data for comparison purposes. The survey gathers subjective information on the evolution of export performance with respect to (1) achievement, (2) satisfaction, and (3) intensity of exporting activity to total activity. For each of these dimensions the study assesses two items: sales volume (unit sales) and sales revenue. The study also draws upon objective data from annual reports and compares these to the survey responses. Unfortunately, due to the make-up of the sample (public and private firms), such data were available for only a limited subsample, and even for these firms, the objective data refer to the overall firm, as opposed to the specific export venture. However, since the survey also collects information on sales and employment at the firm level, a comparison is possible between the questionnaire responses and the objective data. Compilation of data on sales and employees utilizes 8 and 6 point interval measures, respectively. Coding of the sales and employment data from the annual reports uses the same intervals, revealing correlations between the subjective and objective measures of 0.86 and 0.93, respectively (sample sizes of 155 and 82). In addition, while objective data on the firms' export ventures were unavailable, Table 2 reveals that the correlations between the objective percent growth in overall firm sales and the corresponding perceptual export-venture sales performance items are positive and significant, and increase considerably when restricted to firms for which the export venture accounts for at least 60% of total firm sales

Please cite this article as: Lages, L.F., et al., Change in international market strategy as a reaction to performance decline, Journal of Business Research (2012), doi:10.1016/j.jbusres.2012.05.018

L.F. Lages et al. / Journal of Business Research xxx (2012) xxx–xxx Table 2 Post hoc performance metrics. Performance variable

Achievement of export sales volume Achievement of export sales revenue Satisfaction with export sales volume Satisfaction with export sales revenue Export sales volume intensity Export revenue intensity

All firms (127)*

Firms for which the export venture accounts for at least 60% of firm sales (35)

0.31

0.73

0.32

0.63

0.25

0.73

0.25

0.64

0.23 0.23

0.61 0.58

Table 3 The impact of past performance change on foreign market strategy change (using a 13item aggregated measure of global export performance change). (1) change in export performance Strategy in the foreign market becomes more standardised with the change in export performance in low domestic market competitive markets change in export performance in highly competitive markets export market competition export performance level

*Note: Sample sizes are 124 and 126 for the intensity measures. All correlations are statistically significant at all conventional levels.

export performance clearly identified adaptation of strategy international experience

value. Considering the procedural and empirical approaches together suggests that common method bias is minimal.

total sales value constant

5. Analysis and results 5.1. Analysis approach and variable treatment The variable of interest is an indicator taking three possible values of whether the firm changed its international marketing strategy, and the goal is to investigate whether the observed change relates to the observed change in prior performance. Because the wish is to measure the influence of the covariates on the different directions of change, the study uses a multinomial logit model, in which the reference category is the “no-change” case. Thus, the reported coefficients indicate whether changes in one specific covariate changed the probability that the firm's export market strategy becomes more (or less) adapted, depending on the equation. The measure of change in strategy was a categorical variable taking three possible values: (1) whether the firm marketing strategy became more adapted to the foreign market between year t and year t‐1 (15% of the firms in the sample), (2) whether the strategy did not change (74%), and (3) whether the strategy became less adapted to the foreign market (i.e., became more standardized) (11%). The use of a 1-year period to assess strategy and performance is a well-established approach in strategy research (McDonald & Westphal, 2003). For testing the robustness of the findings, the current study uses three different approaches of performance measurement: total item aggregation, intermediary aggregation, and total disaggregation (Bagozzi & Foxall, 1996). The survey yields 13 performance change items. In the most aggregated approach, these 13 items convert into a unique factor score of “global export performance change” (for operationalization of the variables, see Appendix A). In an intermediary aggregation approach, the 13 individual items divide into three groups of performance change factors: export performance achievement (factor score of 5 items), export performance satisfaction (factor score of 5 items), and export intensity (factor score of 3 items). Finally, in the most disaggregated approach, the 13 items act individually. 5.2. Results Table 3 reports the regression results using an all-inclusive aggregate measure of export performance. The top panel of the Table shows the influence of the independent variables upon change to a more standardized marketing strategy, and the bottom panel shows the corresponding impact upon change to a more adapted marketing strategy. Table 4 reports results obtained using measures of export achievement, export satisfaction, and export intensity.

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Strategy becomes more adapted to the foreign market

change in export performance change in export performance in low competitive markets change in export performance in highly competitive markets export market competition export performance level export performance clearly identified adaptation of strategy international experience total sales value constant LR (zero slopes) Number of observations

(2)

− 0.490 b [0.039] 0.653 [0.313] − 0.579 b [0.024] 0.882 a [0.008] − 0.070 [0.728] 0.266 [0.323] 0.274 [0.273] − 0.393 c [0.077] 0.416 a [0.010] − 8,306 a [0.000] − 0.633 a [0.002]

1.064 a [0.003] − 0.071 [0.743] 0.251 [0.358] 0.251 [0.320] − 0.395 c [0.090] 0.445 a [0.010] − 9.166 a [0.000]

− 1.289 b [0.018] − 0.315 [0.203] − 0.185 0.004 [0.465] [0.990] 0.003 0.014 [0.990] [0.957] 0.316 0.271 [0.145] [0.221] 0.420 c 0.405 c [0.062] [0.073] 0.284 c 0.259 c [0.074] [0.097] − 0.043 − 0.0587 [0.752] [0.679] − 3,921 a − 4.342 a [0.010] [0.005] − 145.291 − 141.585 220 220

Note: p values in parenthesis; Letters a, b, c indicate significance at the 1%, 5% and 10% levels, respectively.

Tables 3 and 4 report two regressions for each measure. The first regressions (Table 3: column 1; Table 4: columns 1, 3, and 5) test Hypothesis 1. These columns include competitive intensity in the export market independently, that is, without any interaction with performance. The results in these first columns show that marketing strategy change is more likely when performance declines. The negative coefficients that associate with changes in performance indicate that improvement in performance significantly lowers the probability of change, and conversely, a decline in performance increases the probability of change. Furthermore, the results are consistent across the different measures of export performance. Overall, in support of H1, the results indicate that when a firm experiences a performance decline, the likelihood of changing its international marketing strategy increases. H2 and H3 theorize directional moderation effects based upon the level of competition in the specified foreign market. The effect of competitive intensity emerges most clearly in the second regression of each set (see Table 3: column 2; Table 4: columns 2, 4, and 6). These regressions reveal that the effect of a decline in performance is different between the two competitive conditions. Supporting H2, in

Please cite this article as: Lages, L.F., et al., Change in international market strategy as a reaction to performance decline, Journal of Business Research (2012), doi:10.1016/j.jbusres.2012.05.018

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L.F. Lages et al. / Journal of Business Research xxx (2012) xxx–xxx

Table 4 The impact of past performance change on foreign market strategy change (using three different factor scores of past performance change). Exp. performance achievement (factor score of 5 items) (1) Strategy in the foreign market becomes more standardised with the domestic market

change in export performance change in export performance in low competitive markets change in export performance in highly competitive markets export market competition export performance level export performance clearly identified adaption of strategy international experience total sales value constant

Strategy becomes more adapted to the foreign market

change in export performance change in export performance in low competitive markets change in export performance in highly competitive markets export market competition export performance level export performance clearly identified adaptation of strategy international experience total sales value constant LR (zero slopes) Number of observations

(2)

− 0.486 b [0.020]

Exp. performance satisfaction (factor score of 5 items) (3)

(4)

− 0.466 b [0.026] − 0.108 [0.858] − 0.513 b [0.029] 0.854 a [0.009] − 0.164 [0.468] 0.0427 [0.843] 0.371 [0.115] − 0.423 c [0.057] 0.415 a [0.006] − 7.722 a [0.000]

0.865 a [0.005] − 0.150 [0.500] 0.036 [0.868] 0.369 [0.117] − 0.415 c [0.056] 0.396 a [006] − 7,649 a [0.000] − 0.522 b [0.011]

− 0.172 [0.481] 0.072 [0.741] 0.345 c [0.079] 0.383 c [0.062] 0.227 [0.149] − 0.103 [0.437] − 3,550 b [0.012] − 165.758 249

− 1.114 b [0.021] − 0.255 [0.313] − 0.023 [0.932] 0.107 [0.653] 0.304 [0.133] 0.376 c [0.068] 0.205 [0.187] − 0.124 [0.376] − 3.845 a [0.007] − 163.541 249

0.942 a [0.003] − 0.023 [0.922] 0.070 [0.760] 0.421 c [0.074] − 0.370 c [0.080] 0.368 b [0.013] − 8,235 a [0.000] − 0.473 b [0.028]

− 0.191 [0.418] − 0.114 [0.659] 0.332 c [0.093] 0.386 c [0.064] 0.311 b [0.048] − 0.131 [0.340] 3,483 b [0.013] − 163.489 244

Export intensity (factor score of 3 items) (5)

(6)

− 0.712 a [0.010] 0.472 [0.273] −0.555 b [0.019] 1.071 a [0.001] − 0.066 [0.979] 0.085 [0.711] 0.407 c [0.083] − 0.383 c [0.084] 0.386 b [0.014] − 8.913 a [0.000]

− 1.131 b [0.032] − 0.191 [0.449] − 0.049 [0.854] − 0.108 [0.676] 0.303 [0.137] 0.379 c [0.074] 0.289 [0.061] − 0.139 [0.322] − 3.833 a [0.008] 160.002 244

0.844 a [0.010] − 0.124 [0.557] 0.261 [0.329] 0.267 [0.277] − 0.471 b [0.040] 0.444 a [0.004] − 8,120 a [0.000] − 0.719 a [0.000]

− 0.092 [0.719] 0.004 [0.988] 0.351 [0.117] 0.439 b [0.046] 0.303 [0.061] − 0.063 [0.649] − 4,506 a [0.002] − 149.800 237

− 0.034 [0.966] − 0.797 a 0.005] 0.830 b [0.016] − 0.136 [0.540] 0.267 [0.329] 0.260 [0.292] − 0.476 b [0.047] 0.471 a [0.005] − 8.203 a [0.000]

− 1.334 a [0.002] − 0.396 c [0.086] 0.147 [0.616] 0.001 [0.967] 0.306 [0.173] 0.423 c [0.056] 0.283 c [0.073] − 0.075 [0.599] − 5.208 a [0.001] − 146.561 237

Note: p values in parenthesis; Letters a, b and c indicate significance at the 1%, 5% and 10% levels, respectively.

high competition foreign markets firms respond to performance declines by aligning their marketing strategy more closely to the domestic market (i.e., more standardized). Similarly, supporting H3, in low competition foreign markets firms react to performance declines by adapting their marketing strategy more to the foreign market.

5.3. Control variables The results hold after controlling for several control variables. The first control variable is the level of performance in international markets. The findings indicate that the export performance level does not significantly influence strategy change. The results indicate that firms having a more adapted marketing strategy were more likely to change their strategy. The estimates indicate that firms beginning with a more adapted marketing strategy are more likely to adjust their strategy in both directions. The strategy of these firms is equally likely to become less or more adapted, although the effect of previous strategy upon change toward more standardized strategies shows no statistical significance.

Managers' international experience influences both the likelihood and the direction of change. More experienced managers are likely to change toward a more adapted marketing strategy, but they are less likely to move in the opposite direction. Managers dealing with international markets for a longer period seem to be more confident in their skills to correctly adapt than those with less international experience. The identification of international performance in company reports does not emerge as a significant factor. The coefficients are positive in both equations, indicating that, if anything, the identification of international operations in the company accounts makes change in both directions more likely, but are only marginally significant. Finally, larger firms tend to change to a more standardized marketing strategy. However, firm size does not relate to the probability of marketing strategy becoming less standardized. 5.4. Robustness Multiple performance metrics serve as a robustness test. Tables 3 and 4 show that the results are broadly consistent, regardless of

Please cite this article as: Lages, L.F., et al., Change in international market strategy as a reaction to performance decline, Journal of Business Research (2012), doi:10.1016/j.jbusres.2012.05.018

L.F. Lages et al. / Journal of Business Research xxx (2012) xxx–xxx

performance metric. The results (see Appendices B and C) confirm the previous findings. Changes in export performance relate significantly to change in 11 of the 13 cases in both equations. When accounting for the interaction between performance change and the level of competition, performance change relates significantly to greater standardization in 12 cases in highly competitive markets and in none of the 13 cases in low competition markets. Conversely, performance change relates significantly to greater adaptation in 13 cases in low competition markets and in only 4 of the highly competitive ones. Furthermore, the level of export performance does not relate with statistical significance to change in either a more or a less standardized marketing strategy. The identification of international performance in financial reports also yields weak results. While the coefficients are positive in all cases except 1, they are significant in only 8 cases (all in the same equation). Firms with more adapted marketing strategies are more likely to change both to more standardized (statistical significance in all 13 regressions) and to more adapted strategies (statistical significance in 11 of 13 cases). Managers' international experience clearly relates with the likelihood of the firm becoming more adapted in its strategy (statistically significant in 11 of the 13 cases). Larger firms and firms competing in more highly competitive markets are more likely to standardize their strategies (results for firm sales value and degree of competition hold in all 13 regressions), but no significant relationships exist between these variables and the probability of the firm becoming more adapted in its marketing strategy. 6. Discussion 6.1. Theoretical and managerial implications Existing research in international marketing strategy views performance primarily as the outcome of strategy execution. This study, which builds on the literature that past performance stimulates organizational change (Boeker, 1997; Burgelman & Grove, 2007), seeks to discover if international marketing strategic change employs prior performance changes as an antecedent under the theoretical perspective of organizational learning theory. This work theorizes that firms experiencing continued performance success (either maintaining or exceeding prior performance) will likely retain current international marketing strategies and that when facing declining performance, those firms will likely adjust their international marketing strategies. The results provide compelling evidence that (1) declining performance influences when strategic change occurs and (2) that organizational learning theory provides an important framework for understanding performance as an antecedent of international marketing strategy. However, while these findings provide strong support for organizational learning theory, the lack of a perfect association between performance decline and strategic change reflects the fact that not all managers change strategy in response to performance declines. Anchoring and adjustment heuristics help to explain this behavior (Tversky & Kahneman, 1974). With prior strategy serving as her/his anchor, a manager can react to deteriorating performance by either (1) adjusting strategy, working to learn from the past discrepancy (Lant & Mezias, 1992; Levitt & March, 1988), or (2) fall victim to inertia and fail to adjust from the prior anchor (e.g., Hinings & Greenwood, 1988; Miller, 1994). While the present findings show that managers predominately adjust from prior anchors, the results also reflect the existence of inertia, thus suggesting the potential importance of integrating anchoring and adjustment heuristics into studies employing organizational learning theory for understanding strategic reactions to declining performance. The results also extend the understanding of how firms engage in standardization/adaptation when considering their foreign market strategy in relation to their domestic market strategy. The idea that

7

firms use knowledge from the local environment to align their strategies with local market conditions resides at the heart of the standardization versus adaptation debate—thus viewing the environment as having an effect on strategy (e.g., Çavuşgil & Zou, 1994; Katsikeas et al., 2006). However, this literature focuses on the adoption of a given strategy, rather than on marketing strategy change over time. Extending this literature, the current study provides empirical evidence that firms adjust their marketing strategy to their local market (i.e., perceived level of competitive intensity) when their performance deteriorates. Specifically, the results demonstrate that when firms experience a performance decline, the determination as to whether to standardize or adapt marketing strategy depends on the level of competition within the specific foreign market. Current findings support the notion that competition in an industry continually works to drive the rate of return down toward the competitive floor rate of return (Porter, 1980). In light of this challenge, the results demonstrate that under such conditions firms seek to lower their overall cost structures via more standardized marketing strategies. Alternatively, when competition is less intensive, firms take advantage of the lower levels of competition in the local market to engage in marketing strategies more oriented toward the foreign market, thereby working to enhance value by meeting local market needs in the most aligned manner, maximizing value captured. The managerial implications of the current work are two-fold. First, this work serves to highlight the importance of learning and strategic dynamism. Managers must work to be continual learners and analyze how to make strategic adjustments when performance worsens. Second, the results demonstrate the managerial importance of perceptions of competition and how competition shapes the environment. The findings of this study are also interesting in that they contradict common beliefs that firms engage in more standardized strategies when competition is low (James & Hill, 1991). Contrary to James and Hill (1991), the present findings suggest that managers look to low competitive markets to explore opportunities to maximize value delivery to the customer, thereby gaining customers and creating barriers to entry.

7. Limitations and directions for future research Although advancing the literature, this study is not without its limitations. First, the focus of this study is on the short-term reaction to observed performance changes over a 1-year period, thus offering no insight into effects over the long run. Because managers may refine their knowledge through short-term adaptation, they might succumb to a self-reinforcing bias toward learning (i.e., using what worked in another market experiencing a performance decline as part of organizational learning theory's trial and error approach), which in turn may damage their overall aptitude for learning (Levinthal & March, 1993). Perhaps long-term success springs from the capability not only to learn when facing environmental changes but also to become creative, innovate and adapt continuously in the short run (Coelho, Augusto, & Lages, 2011) even when the firm is performing well. Further, although a long-term focus would seem to be desirable, international ventures that perform poorly are unlikely to survive in the long term (Skarmeas, Katsikeas, & Schlegelmilch, 2002). Thinking in the long term is a luxury that only surviving firms can afford. Second, although this study employs several measures of performance and finds consistent results for the influence of performance decline on marketing strategy change, one should not conclude that the results might not vary with other performance metrics. Furthermore, several scales used in this study are single-item measures. As such, future research should examine other performance metrics, use multi-item measures, and investigate the way(s) in which marketing managers respond to each.

Please cite this article as: Lages, L.F., et al., Change in international market strategy as a reaction to performance decline, Journal of Business Research (2012), doi:10.1016/j.jbusres.2012.05.018

8

L.F. Lages et al. / Journal of Business Research xxx (2012) xxx–xxx

Third, the study is limited regarding its single entry mode (exporting) from a single country (Portugal). Studies including a broader set of entry modes (e.g., comparison of exporting, alliances, and wholly-owned ventures) combined with a broader geographical base (e.g., comparison of different countries, regions and institutional environments) would advance this research area. Within this context, further international business research is particularly encouraged to explore how to “Go GloCal” (Lages, 2012), that is how to think and act both globally and locally, which is very different from “think global and act local” (the traditional definition of a GloCal approach).

Beyond addressing the limitations for advancement of this area, future researchers are also encouraged to explore the extent to which firm's adjustments to the foreign market are a function of the nature of the products that are exported (commodities or specialities) and stage of the product life cycle (PLC). It is likely that in later stages of the PLC, in which competition is intense, and in which consumers might have a number of alternatives that are not really differentiated, firms may use standardization of marketing strategy in order to achieve the price points necessary to compete. Research in this area is warranted.

Appendix A. Measures

Please select the Main Export Venture of your firm (the main product or group of products exported by your company to the most important foreign market in terms of sales revenue), which will be the focus of this questionnaire: a) the main export of your firm (product or group of products) in terms of sales revenue ______________________ b) the main importing country of your firm’s main export in terms of sales revenue __________________________ IMPORTANT: You have just defined the Main Export Venture, which this questionnaire is about. DEPENDENT VARIABLE: CURRENT STRATEGY CHANGE Question: Consider the main export venture. When comparing the domestic market with the market that imports the most from your company, to what extent the price-quality relationship was changed from “Year t-1” to “Year t”? Scale: 1= This year is much more similar between the two markets than it was in “Year t-1”; 2= This year is more similar …; 3- No change; 4= This year is more differentiated… ; 5= This year is much more differentiated between the two markets than it was in “Year t-1” The variable employed as the dependent variable in the study (StratChange), is defined as follows: StratChange = 0, if strategy did not change from “Year t-1” to “Year t”StratChange = 1, if strategy in “Year t” is more or much more similar than it was in “Year t-1”, 0 otherwise; StratChange = 2, if strategy in “Year t” is more or much more differentiated than it was in “Year t-1”, 0 otherwise; PAST PERFORMANCE CHANGE PAST PERFORMANCE ACHIEVEMENT IMPROVEMENT FROM “Year t-2” TO “Year t-1” (α=.97) Question: How well did your company achieve the following objectives for the main export venture from “Year t-2” to “Year t-1”? Scale: 1=Much Worse in “Year t-1” than in “Yeart-2”; 2= Worse …; 3= Equal to “Year t-2”; 4= Better …; 5=Much Better in “Year t-1” than in “Year t-2” a) Export sales volume (unit sales) b) Export sales revenue c) Export profitability d) Market share in the main importing market e) Overall export performance PAST SATISFACTION WITH PERFORMANCE IMPROVEMENT FROM “Year t-2” TO “Year t-1” (α= .97) Question: How satisfied are you with the results of your main export venture from “Year t-2” to “Year t-1”? Scale: 1=Much Less Satisfied in “Year t-1” than in “Year t-2”; 2=Less Satisfied …; 3=Equally Satisfied; 4= More Satisfied …; 5=Much More Satisfied in “Year t-1” than in “Year t-2” a) Export sales volume (unit sales) b) Export sales revenue c) Export profitability d) Market share in the main importing market e) Overall export performance PAST EXPORT INTENSITY IMPROVEMENT FROM “Year t-2” TO “Year t-1” (α= .96) Question: With regard to your main export venture, to what extent did the following change from “Year t-2” to “Year t-1”? Scale: 1= Largely Decrease from “Year t-2” to “Year t-1”; 2= Decreased …; 3= No change; 4= Increased … 5= Largely Increase from “Year t-2” to “Year t-1” a) Percentage of exporting venture to total sales volume (unit sales) b) Percentage of exporting venture to total sales revenue c) Percentage of exporting venture to total profitability MODERATING VARIABLE: EXPORT MARKET COMPETITION Question: Considering the main export venture over the past year (Year t-1), how would you characterize the competition in the industry in the export market? Scale: 1=None; 2= Little; 3= Moderate; 4= Considerable; 5=Substantial

Please cite this article as: Lages, L.F., et al., Change in international market strategy as a reaction to performance decline, Journal of Business Research (2012), doi:10.1016/j.jbusres.2012.05.018

L.F. Lages et al. / Journal of Business Research xxx (2012) xxx–xxx

CONTROL VARIABLES EXPORT PERFORMANCE LEVEL PAST PERFORMANCE ACHIEVEMENT IN “Year t-2” (α= .92) Question: How well did your company achieve the following objectives for the main export venture in “Year t-2”? Scale anchors: 1=Very Badly; 2- Badly; 3-Moderately; 4-Well; 5=Very Well a) Export sales volume (unit sales) b) Export sales revenue c) Export profitability d) Market share in the main importing market e) Overall export performance PAST SATISFACTION WITH PERFORMANCE IN “Year t-2” (α= .94) Question: How satisfied are you with the results of your main export venture in “Year t-2”? Scale anchors: 1=Not Satisfied at All; 2-A Little Satisfied; 3-Moderately Satisfied; 4-Very Satisfied; 5=Extremely Satisfied a) Export sales volume (unit sales) b) Export sales revenue c) Export profitability d) Market share in the main importing market e) Overall export performance PAST EXPORT INTENSITY IN “Year t-2” (α= .96) Question: With regard to your main export venture in “Year t-2”, how do you assess the following? Scale anchors: 0-9%; 10-29%; 30-59%; 60-84%; 85-100% a) Percentage of exporting venture to total sales volume (unit sales) b) Percentage of exporting venture to total sales revenue c) Percentage of exporting venture to total profitability EXPORT PERFORMANCE CLEARLY IDENTIFIED IN FINANCIAL REPORTS Question: What is your opinion on the following statement?“ Our financial reports clearly differentiate between domestic performance and export performance”. Scale: 1=Strongly Disagree; 2= Disagree; 3= Neither Agree nor Disagree; 4= Agree; 5=Strongly Agree STRATEGY ADAPTATION TO THE FOREIGN MARKET Question: Consider the main export venture over the past year (Year t-1). To what extent did the “price-quality relationship strategy” differ in comparing the main export market to the domestic market? Scale: 1=No Adaptation; 2= Little Adaptation; 3= Moderately Different; 4=Considerable Adaptation; 5=Extensive Adaptation INTERNATIONAL EXPERIENCE Question: Consider the people involved in your main export venture during the past year (Year t-1). How would you classify their degree of overseas experience (i.e. live/work abroad) Scale: 1=None; 2= Little; 3= Moderate; 4= Considerable; 5=Substantial TOTAL SALES VALUE Question: What was your company’s total sales value for last year (Year t-1)? Scale: ≤ €100,000; €100,001-€350,000; €350,001-€1.5M; €1.5M-3.5M; 3.5M-5M; 5M-35M; 35M-145M; ≥145M Note: Year t-2= 1997 Year t-1= 1998 Year t = 1999 (The survey was conducted in this year)

Please cite this article as: Lages, L.F., et al., Change in international market strategy as a reaction to performance decline, Journal of Business Research (2012), doi:10.1016/j.jbusres.2012.05.018

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10

Measures of performance Export performance achievement a

Strategy in the foreign market becomes more standardized with the domestic market

change in export performance export market competition export performance level export performance clearly identified adaptation of strategy international experience total sales value constant

Strategy becomes more adapted to the foreign change in export performance market export market competition export performance level export performance clearly identified adaptation of strategy international experience total sales value constant LR (zero slopes) Number of observations

b

c

Export performance satisfaction d

e

a

b

c

Export intensity d

e

a

b

c

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

(9)

(10)

(11)

(12)

(13)

− 0.458 b [0.029] 0.919 a [0.004] − 0.002 [0.993] 0.012 [0.958] 0.379 [0.103] − 0.402 c [0.056] 0.393 a [0.007] − 6.316 a [0.000] − 0.469 b [0.013] − 0.131 [0.596] 0.064 [0.798] 0.327 c [0.097] 0.388 c [0.057] 0.290 c [0.063] − 0.123 [0.365] − 2.395 [0.166] 40.76 [0.000] 259

− 0.431 b [0.029] 0.864 a [0.005] − 0.079 [0.746] 0.041 [0.855] 0.400 c [0.089] − 0.392 c [0.068] 0.379 a [0.007] − 6.071 a [0.001] − 0.420 b [0.026] − 0.157 [0.544] 0.296 [0.260] 0.344 c [0.077] 0.419 b [0.037] 0.284 c [0.074] − 0.154 [0.257] − 3.233 c [0.062] 41.12 [0.000] 258

− 0.296 [0.191] 0.791 b [0.017] − 0.236 [0.413] −0.211 [0.992] 0.368 [0.113] − 0.395 c [0.069] 0.356 a [0.016] − 5.463 a [0.009] − 0.370 [0.106] − 0.238 [0.336] −0.030 [0.918] 0.326 c [0.094] 0.372 c [0.073] 0.268 c [0.086] − 0.119 [0.365] − 1.992 [0.310] 34.64 [0.002] 258

− 0.488 b [0.049] 0.875 a [0.005] − 0.225 [0.333] 0.033 [0.877] 0.357 [0.134] − 0.393 c [0.065] 0.397 a [0.006] − 5.489 a [0.000] − 0.559 a [0.006] − 0.150 [0.566] 0.116 [0.589] 0.349 c [0.064] 0.387 c [0.056] 0.292 c [0.072] − 0.152 [0.267] − 2.171 [0.176] 42.60 [0.000] 252

− 0.448 b [0.022] 0.870 a [0.005] − 0.089 [0.741] 0.026 [0.906] 0.400 c [0.087] − 0.402 c [0.061] 0.375 a [0.008] − 5.936 a [0.000] − 0.431 b [0.038] − 0.181 [0.444] −0.186 [0.398] 0.357 c [0.073] 0.419 b [0.039] 0.300 c [0.052] − 0.123 [0.353] − 1.758 [0.256] 40.24 [0.000] 258

− 0.419 c [0.058] 0.968 a [0.003] 0.113 [0.680] 0.062 [0.791] 0.424 c [0.703] − 0.361 c [0.086] 0.347 b [0.022] − 7.311 a [0.000] − 441 b [0.022] − 0.716 [0.466] −0.022 [0.940] 0.315 [0.109] 0.413 b [0.049] 0.325 b [0.035] − 0.142 [0.298] − 2.150 [0.188] 39.85 [0.000] 254

− 0.391 c [0.051] 0.936 a [0.003] − 0.034 [0.906] 0.082 [0.725] 0.411 c [0.081] − 0.348 [0.106] 0.357 b [0.013] − 6.948 a [0.000] − 0.464 b [0.023] − 0.186 [0.451] 0.053 [0.859] 0.351 c [0.081] 0.410 c [0.052] 0.320 b [0.037] − 0.146 [0.290] − 2.350 [0.152] 39.86 [0.000] 254

− 0.446 b [0.026] 0.872 a [0.006] − 0.033 [0.901] 0.056 [0.812] 408 C [0.084] − 0.344 [0.108] 0.330 b [0.027] − 6.391 a [0.001] − 0.342 [0.126] − 0.246 [0.312] −0.201 [0.524] 0.325 [0.115] 0.388 c [0.063] 0.336 b [0.037] − 0.155 [0.251] − 1.669 [0.310] 38.69 [0.000] 252

− 0.618 b [0.011] 0.973 a [0.002] − 0.056 [0.851] 0.078 [0.734] 0.395 c [0.095] − 0.387 c [0.067] 0.405 a [0.008] − 6.458 a [0.000] − 0.506 b [0.030] − 0.166 [0.500] −0.290 [0.329] 0.311 [0.102] 0.353 c [0.088] 298 c [0.059] − 0.096 [0.494] − 1.247 [0.452] 46.72 [0.000] 247

− 0.375 c [0.090] 0.937 a [0.004] 0.036 [0.901] 0.060 [0.795] 0.406 c [0.084] − 0.369 c [0.081] 0.344 b [0.019] − 7.030 a [0.000] − 0.420 b [0.047] − 0.229 [0.347] −0.098 [0.746] 0.327 c [0.095] 0.397 c [0.057] 0.323 b [0.043] − 0.139 [0.312] − 1.845 [0.260] 38.71 [0.000] 253

− 0.631 a [0.006] 1.007 a [0.002] − 0.085 [0.569] 0.085 [0.712] 0.409 c [0.081] − 0.465 b [0.037] 0.380 a [0.007] − 5.978 a [0.000] − 0.547 a [0.001] − 0.052 [0.834] 0.0754 [0.629] 0.334 [0.101] 0.407 b [0.045] 0.252 [0.120] − 0.114 [0.388] − 2.466 c [0.083] 47.84 [0.000] 252

− 0.598 a [0.005] 1.015 a [0.002] − 0.080 [0.615] 0.053 [0.823] 0.422 c [0.076] − 0.450 b [0.037] 0.417 a [0.003] − 6.296 a [0.000] − 0.556 a [0.000] − 0.072 [0.772] 0.050 [0.746] 0.347 c [0.085] 0.428 b [0.038] 0.236 [0.140] − 0.085 [0.527] − 2.511 c [0.083] 48.32 [0.000] 251

−0.406 [0.107] 0.765 b [0.017] −0.122 [0.427] 0.177 [0.497] 0.224 [0.361] −0.415 c [0.060] 0.367 a [0.018] − 5.572 a [0.001] − 0.645 a [0.000] − 0.151 [0.557] 0.027 [0.872] 0.324 [0.162] 0.394 c [0.070] 0.339 b [0.038] -0.099 [0.472] −2.069 [0.174] 41.54 [0.000] 239

Note: p values in parenthesis; Letters a, b and c indicates significance at the 1%, 5% and 10% levels, respectively.

L.F. Lages et al. / Journal of Business Research xxx (2012) xxx–xxx

Please cite this article as: Lages, L.F., et al., Change in international market strategy as a reaction to performance decline, Journal of Business Research (2012), doi:10.1016/j.jbusres.2012.05.018

Appendix B. The impact of performance change on foreign market strategy change (detailed results over 13 performance indicators)

Measures of Performance Export performance achievement

Strategy in the foreign market becomes more standardised with the domestic market

change in export performance in low competitive markets change in export performance in highly competitive markets export market competition export performance level export performance clearly identified adaptation of strategy international experience total sales value constant

Strategy becomes more adapted to the foreign market

change in export performance in low competitive markets change in export performance in highly competitive markets export market competition

Export performance satisfaction

Export Intensity

a

b

c

d

e

a

b

c

d

e

a

b

c

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

(9)

(10)

(11)

(12)

(13)

− 0.264 [0.336]

− 0.252 [0.360]

− 0.233 [0.427]

− 0.300 [0.398]

− 0.332 [0.266]

− 0.244 [0.432]

− 0.220 [0.464]

− 0.353 [0.245]

− 0.483 [0.176]

− 0.200 [0.513]

− 0.400 [0.191]

− 0.368 [0.220]

−0.204 [0.527]

− 0.499 b [0.022]

− 0.467 b [0.022]

− 0.299 [0.199]

− 0.508 b [0.039]

− 0.459 b [0.022]

− 447 b [0.048]

− 0.416 b [0.042]

− 0.455 b [0.027]

− 0.621 b [0.012]

− 0.405 c [0.083]

− 0.677 a [0.003]

− 0.645 a [0.003]

−0.461 c [0.074]

1.200 a [0.006] 0.010 [0.969] 0.017 [0.939] 0.357 [0.127] − 0.416 c [0.062] 0.405 a [0.007] − 7.501 a [0.000] −0.775 a [0.003]

1.123 b [0.012] − 0.058 [0.815] 0.048 [0.830] 0.381 [0.107] − 0.401 c [0.073] 0.389 a [0.007] − 7.212 a [0.002] −0.704 a [0.006]

0.852 c [0.055] − 0.233 [0.423] 0.001 [0.995] 0.365 [0.116] − 0.401 c [0.070] 0.359 b [0.016] − 5.752 b [0.018] −583 b [0.037]

1.092 b [0.012] − 0.231 [0.329] 0.033 [0.878] 0.339 [0.153] − 0.400 c [0.072] 0.404 a [0.006] − 6.381 a [0.002] −0.795 a [0.008]

0.998 b [0.026] − 0.081 [0.765] 0.026 [0.904] 0.390 c [0.095] − 0.412 c [0.063] 0.381 a [0.007] − 6.503 a [0.006] −0.739 b [0.011]

1.183 a [0.006] − 0.124 [0.651] 0.066 [0.776] 0.408 c [0.084] − 0.374 c [0.091] 0.354 b [0.022] − 8.227 a [0.000] −0.719 a [0.008]

1.141 a [0.009] −0.021 [0.942] 0.086 [0.713] 0.396 c [0.092] − 0.358 [0.112] 0.364 b [0.013] − 7.842 a [0.001] −0.736 a [0.009]

0.958 b [0.025] − 0.023 [0.933] 0.058 [0.803] 0.402 c [0.088] − 0.350 [0.110] 0.332 b [0.027] − 6.787 a [0.003] −0.559 c [0.055]

1.084 b [0.012] − 0.047 [0.875] 0.079 [0.730] 0.387 [0.103] − 0.390 c [0.075] 0.405 a [0.009] − 6.971 a [0.001] −0.794 b [0.016]

1.153 b [0.011] 0.041 [0.887] 0.065 [0.776] 0.390 c [0.097] − 0.382 c [0.087] 0.350 b [0.019] − 7.930 a [0.001] −0.717 b [0.014]

1.311 a [0.003] − 0.064 [0.668] 0.091 [0.693] 0.384 [0.107] − 0.484 b [0.040] 0.392 a [0.005] − 7.257 a [0.000] −0.959 a [0.000]

1.320 a [0.003] − 0.062 [0.700] 0.052 [0.827] 0.389 [0.108] − 0.462 b [0.041] 0.430 a [0.003] − 7.546 a [0.000] −0.938 a [0.000]

1.078 b [0.022] −0.115 [0.456] 0.163 [0.538] 0.197 [0.424] − 0.425 c [0.067] 0.382 b [0.016] −6.777 a [0.001] −0.882 a [0.001]

−0.315 [0.113]

−0.299 [0.120]

−0.274 [0.234]

−0.470 b [0.025]

−0.344 [0.117]

−0.306 [0.128]

−0.338 [0.118]

−0.231 [0.307]

−0.384 [0.106]

-0.276 [0.202]

−0.399 b [0.023]

−0.414 b [0.013]

−0.536 a [0.003]

−0.805 c −0.784 c −0.693 −0.623 −0.746 c −0.735 c −0.734 c −0.698 c −0.707 −0.820 c −0.795 c −0.770 c −0.590 [0.070] [0.090] [0.109] [0.201] [0.086] [0.084] [0.094] [0.099] [0.115] [0.061] [0.078] [0.081] [0.158] export performance level 0.084 0.280 −0.031 0.138 −0.158 −0.019 0.062 −0.196 −0.295 0.076 0.064 0.029 0.017 [0.738] [0.289] [0.914] [0.526] [0.505] [0.970] [0.833] [0.534] [0.314] [0.803] [0.683] [0.849] [0.919] export performance clearly 0.340 c 0.357 c 0.341 c 0.361 c 0.379 c 0.338 c 0.372 c 0.342 c 0.326 c 0.346 c 0.344 0.368 c 0.358 identified [0.090] [0.069] [0.086] [0.059] [0.064] [0.091] [0.070] [0.100] [0.095] [0.088] [0.105] [0.081] [0.131] adaptation of strategy 0453 b 0.480 b 0.414 b 0.423 b 474 b 0.455 b 0.457 b 0.427 b 0.389 c 0.448 b 0.477 b 0.501 b 0.444 b [0.029] [0.018] [0.045] [0.036] [0.017] [0.030] [0.031] [0.037] [0.060] [0.032] [0.016] [0.013] [0.035] international experience − 0.280 c 0.272 c 0.258 c 0.282 c 0.283 c 0.311 b 0.304 b 0.326 b 0.289 c 0.304 c 0.249 0.240 0.337 b [0.069] [0.083] [0.095] [0.082] [0.065] [0.042] [0.044] [0.042] [0.065] [0.051] [0.116] [0.125] [0.036] total sales value − 0.124 − 0.152 − 0.114 − 0.158 − 0.119 − 0.139 − 0.145 − 0.148 − 0.095 − 0.136 − 0.115 − 0.090 −0.091 [0.355] [0.251] [0.380] [0.245] [0.366] [0.307] [0.288] [0.272] [0.496] [0.323] [0.385] [0.503] [0.506] constant − 0.250 − 1.053 − 0.471 − 0.546 0.124 − 0.337 − 0.544 − 0.209 0.638 0.066 0.074 − 0.153 −0.735 [0.899] [0.610] [0.832] [0.792] [0.946] [0.858] [0.773] [0.912] [0.753] [0.972] [0.967] [0.932] [0.684] LR (zero slopes) − 166.779 − 166.967 − 169.865 − 165.461 − 167.912 − 164.639 − 164.811 − 165.725 − 160.279 − 164.834 − 160.478 − 160.335 −151.255 Number of observations 259 258 258 252 258 254 254 252 247 253 252 251 239

L.F. Lages et al. / Journal of Business Research xxx (2012) xxx–xxx

Note: p values in parenthesis; Letters a, b and c indicates significance at the 1%, 5% and 10% levels, respectively.

11

Please cite this article as: Lages, L.F., et al., Change in international market strategy as a reaction to performance decline, Journal of Business Research (2012), doi:10.1016/j.jbusres.2012.05.018

Appendix C. The impact of performance change on foreign market strategy change with the moderating effect competition (detailed results over 13 performance indicators)

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L.F. Lages et al. / Journal of Business Research xxx (2012) xxx–xxx

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Please cite this article as: Lages, L.F., et al., Change in international market strategy as a reaction to performance decline, Journal of Business Research (2012), doi:10.1016/j.jbusres.2012.05.018