Barriers to international purchasing: the relevance of firm characteristics

International Business Review 8 (1999) 487–512 www.elsevier.com/locate/ibusrev

Barriers to international purchasing: the relevance of firm characteristics Leonidas C. Leonidou Department of Public and Business Administration, School of Economics and Management, University of Cyprus, Kallipoleos 75, P.O. Box 20537, CY-1678 Nicosia, Cyprus

Abstract Despite trends towards growing globalization of the world economy, the further development of import trade is still hindered by a number of barriers. Based on a sample of 100 Cypriot importers, an attempt is made to assess the impact of these barriers on import behaviour. Overall, these barriers were found to have only a modest effect, with greatest concern expressed for those hindering competitiveness in buying from abroad. In analyzing barriers according to the principal origin of imports, with a few exceptions, no significant differences were observed. A factor analysis combined import barriers into six dimensions, with ‘competition-related problems’ being the most influential. In investigating the relevance of firm characteristics on import barrier dimensions, the latter were highly but inversely associated with business experience and company size. Of the six dimensions, ‘adverse foreign conditions’ exhibited a strong link with most of the firm attributes examined.  1999 Elsevier Science Ltd. All rights reserved. Keywords: International business; Import barriers; Firm characteristics; Cyprus

1. Introduction Increasing trade liberalization, rising living standards, growing economic integration, and advancing transportation, communication, and information technologies have been responsible for the worldwide growth in the volume and variety of imports during the last few decades (Scheuing, 1989; Keegan, 1995). Numerous benefits attract firms to purchase from abroad, the most widely recognized being: the supply of products with unique attributes and attractive features; the existence of brands with strong consumer franchise; the securing of lower costs for purchased goods; 0969-5931/99/$ - see front matter  1999 Elsevier Science Ltd. All rights reserved. PII: S 0 9 6 9 - 5 9 3 1 ( 9 9 ) 0 0 0 0 8 - 6

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the possibility of obtaining products of better quality and wider variety; the strengthening of the reliability and security of supply; the opportunity of having a larger buying capacity; and, the identification of goods with more competitive availability and delivery performance (Tookey, 1978; Beardon, 1985; Baily & Farmer, 1990; Dobler, Burt & Lee, 1990). Notwithstanding these benefits, the firm’s engagement in importing is not an easy task, but one obstructed by an array of barriers that can be ascribed to a number of reasons: the exposure to a much greater number and range of sources than those prevailing in the home market; the involvement of higher risks due to the greater geographic and psychological distance separating buyers from their overseas suppliers; the introduction of new parameters not otherwise found in domestic purchasing, such as foreign exchange controls, international documentation, and customs duties; the high complexity caused by operating in multiple, diverse, and dynamically changing foreign business set-ups; and the existence of differences between local and overseas purchasing environments, such as political-legal systems, economic conditions, and business practices (Cain, 1976; Beardon, 1985; Heinritz, Sarrel, Giunipero & Kolchin, 1991; Norquist, Lees, Morton & Tahmoush, 1992). Understanding how these factors obstruct import behaviour and trying to minimize their inhibiting effect can be crucial to the growth of international business. For example, the overseas competitiveness of indigenous manufacturers can be increased by importing the required raw materials, components, and other goods at the right time, quality and cost (Tookey, 1978). Moreover, foreign manufacturers can build and implement effective export business programmes, especially in a world market increasingly characterized by ‘buyer’s’ conditions (Liang & Stump, 1995). Furthermore, importers can switch to exporting through positive experiential knowledge gained from inward international operations (Korhonen, Luostarinen & Welch, 1996). Although crucial, import barriers have received scant research attention, especially within the context of reselling organizations (Ghymn & Jacobs, 1993; Deng & Wortzel, 1995; Liang & Parkhe, 1997).1 This article attempts to address the above issues by empirically investigating the factors obstructing the import behaviour of reselling organizations. In particular, it aims to: (1) assess the relative impact of barriers to importing and how this differs in relation to the principal origin of imports; (2) identify the fundamental dimensions assumed to underlie import barriers; and (3) evaluate the relevance of firm characteristics to each of the extracted import dimensions. The remainder of this article is arranged as follows: first, a review of the literature on import barriers is undertaken; then, the methodology employed in this research is explained; the next three sections present the findings of the study in conjunction with each of the set research objec-

1 This is in contrast to the field of exporting, where a plethora of studies have been conducted on the factors hindering the development of exports (Leonidou, 1995a). This can be partly attributed to the tendency of most nations to emphasize the growth of exports rather than imports, and the fact that it is much more difficult to succeed in exporting as opposed to restricting imports which is a relatively simple task (Kotabe & Helsen, 1998).

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tives. In the last part, some conclusions are derived from the study findings, as well as implications for managers and researchers.

2. Review of barriers to international purchasing Table 1 summarizes the objectives, methodologies, and findings of the extant empirical studies conducted in the field of barriers to international purchasing.2 This area of research is still underdeveloped for several reasons. Study of import barriers began only recently and the volume of research has been slow to increase; in fact, fewer than a dozen empirical inquiries have been conducted, and most have been uncoordinated ad hoc efforts. Moreover, most of the studies examined import barriers within the framework of a wider research agenda, and so give small insight into the field of international purchasing. Furthermore, both the research methodologies and the operationalizations of the import barrier construct were heterogeneous and in some cases incongruent. Finally, data analysis was merely descriptive, usually taking the form of percentage frequencies and mean scores. Despite the nascent and fragmented nature of this field of research, a number of frequently cited barriers to international purchasing can be extracted, most of which can also be found in the well-researched field of exporting. Drawing a parallel from the exporting literature, import barriers can be classified as internal or external, representing obstacles intrinsic to the firm or those arising from its exoteric environment. Barriers to importing can also be categorized as domestic or foreign, depending on whether these derive from the purchaser’s home country or the overseas source countries. Consequently, import barriers can be classified into four broad categories, namely internal-domestic, internal-foreign, external-domestic, and external-foreign (Leonidou, 1995a). Obviously, the more external and foreign the barrier, the more difficult it is for the importing firm to control and manage. The internal-domestic category includes barriers that arise from within the firm and relate to the home country. One such barrier refers to the organization’s limited information regarding the effective location and analysis of foreign sources of supply. Information on foreign sources is crucial not only for identifying suppliers in overseas markets, but also for minimizing the high levels of uncertainty surrounding international business (Cain, 1976; Norquist et al., 1992). This has been one of the most thoroughly examined barriers in the exporting literature, as it often represents a serious obstruction to export activity (e.g., Pavord & Bogart, 1975; Tesar & Tarleton, 1982; Kaynak & Kothari, 1984; Yaprak, 1985; Karafakioglu, 1986; Hook & Czinkota, 1988; Weaver & Pak, 1990; Tseng & Yu, 1991). Shortage of working capital may also play an inhibiting role in financing the import activity, especially in the case of small firms with only limited funds (Norquist et al., 1992). Sometimes,

2 For the purposes of this study, import barriers are defined as all those attitudinal, structural, operational and other constraints that obstruct the company’s ability to purchase goods from foreign suppliers (Leonidou, 1995a).

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Table 1 Empirical studies on barriers to international purchasing Study

Objectives

Research methodology

Empirical findings

Monczka and Giunipero (1984)

To identify how multinational corporations overcome barriers to international purchasing

Mail survey among 26 multinational firms (24 US and two non-US), supplemented by personal and telephone interviews— Focus on seven barriers to international purchasing— Analysis took the form of absolute frequencies

Logistics/inventory/distance and nationalism were the most important barriers, followed by differences in foreign business practices, language, and currency fluctuations—Lack of working knowledge about duty/custom regulations and lack of technology and capacity of foreign sources for specific products were mentioned less frequently

Keown (1985)

To pinpoint purchasing problems in dealing with US manufacturers and suggestions of Asian importers

Personal interviews with 28 importers from Japan, South Korea, Taiwan, Singapore, and Hong Kong—Problems centred on marketing mix issues, trade barriers, and personal interactions with American representatives— Information was analyzed qualitatively

Some of the problems encountered by Asian importers concerned: infrequent style changes, limited product variety, insufficient product modification, lack of price competitiveness, parallel distribution, delivery delays, lack of promotional support, different product standards, and documentation difficulties

Paliwoda and Vardar (1988)

To establish the frequency of problems encountered by British importers while dealing with foreign suppliers

Structured and personally administered interviews with purchasing managers of 12 companies situated in the United Kingdom— Examination of the frequency of appearance of 20 importing problems based on a five-point scale—Data were analyzed using descriptive statistics

The most frequently mentioned problems included exchange rates, unpunctual deliveries, and getting information—Bad reputation, lack of cooperation, and lack of personal contacts were seldom faced—Problems encountered more frequently were related more strongly to each other

Ellram (1991)

To review problems that have prevented firms from achieving successful international purchasing partnerships

Personal interviews with 10 individuals employed in the purchasing departments of six large manufacturing firms—List of 16 barriers inhibiting international purchasing partnerships measured on a five-point importance scale—Data were analyzed in terms of mean scores

Poor communication, lack of top management support/interest and lack of strategic direction were the most important barriers—Ten other barriers were of a moderate importance, while the least influential barriers were lack of knowledge of duties, too many suppliers to deal with effectively, and lack of distinctive supplier value-added

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Table 1 (continued) Study

Objectives

Research methodology

Empirical findings

Ghymn, Srinil and Johnson (1991)

To reveal areas and issues of most concern to Thai importers in order to improve their trade performance

Mail and in-depth interviews with 50 import managers based in Thailand— Information was restricted to situations involving common consumer goods—Focus on nine barriers to importing measuring their difficulty— Analysis was expressed in percentage frequencies

Timely delivery control and customs process/port regulations/import laws were the most difficult problems, followed by lost shipment/damages and sudden price change and exchange rate—Minor problems included higher import tax, unfair tax appraisal, and port too small/heavy traffic

Min and Galle (1991)

To identify the major obstacles to effective international sourcing encountered by multinational firms

Mail survey among a random sample of 141 multinational firms located in the US (17.6% response rate)—Investigation of the degree of seriousness of 13 importing obstacles based on a five-point scale—Results were analyzed using mean scores

The most serious barriers to effective international sourcing were transportation delays, followed by foreign exchange fluctuations, travel costs, quality assurance uncertainties and language difficulties—Obstacles of least importance included trade barriers, company integrity, and nationalism

Frear, Metcalf and Alguine (1992)

To find out what problems firms encounter in dealing with foreign suppliers, and in which countries are such problems most likely to arise

Mail questionnaire sent to 485 members of the US National Association of Purchasing Management obtaining 28% response rate—Identification of countries/regions in which performance problems were experienced in five key areas—Data were analyzed using absolute/percentage frequencies

The countries in which the greatest percentage of respondents encountered problems were Rumania, Venezuela, Hungary, Yugoslavia, USSR, India, China, Poland, Brazil, and Mexico—Most of the problems were found in the delivery area, followed by failure to meet quality requirements, difficulties with suppliers’ technical capabilities, geographic distance, and differences in business customs and practices

Ghymn and Jacobs (1993)

To identify the problems associated with importing from the US manufacturers as expressed by Japanese managers

Mail survey among 48 Japanese managers identified randomly from Honka directory (24% response rate) plus four responses from a group of Japanese purchasing managers surveyed during a visit to US suppliers—Focus on nine import problem areas— Analysis took the form of percentage frequencies

Quality control of the importing/imported product was the most frequently cited problem, followed by lack of dependable suppliers/distributors and timely delivery control—A fifth of the respondents also mentioned communication problems, supplier indifference, and price/exchange rate—Minor problems included lack of post-purchase service, Japanese import regulations/laws, and transportation/distribution costs (continued on next page)

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Table 1 (continued) Study

Objectives

Research methodology

Empirical findings

Katsikeas and Dalgic (1995)

To investigate the problems experienced by UK importers in their trading activities with US manufacturers, and examine how these vary by import involvement

Mail survey among a random sample of 268 importing distributors trading directly with US exporting manufacturers—List of 22 import problem items measured on a five-point importance scale—Data were analyzed by means of principal components analysis and discriminant analysis

Five factors were extracted from the principal components analysis, with product adaptation and exchange rate fluctuation being the most important—All import problem dimensions were rated more highly by sporadic importers as opposed to regular importers, the only exception being exchange rate fluctuations, where no statistically significant differences were observed between the two groups

this problem is due to low awareness and usage of institutions specializing in financing purchases from abroad (Baily & Farmer, 1990). Another internal-domestic barrier relates to inadequate or untrained staff handling import procedures. Indeed, it has been postulated that a prerequisite to import success is high calibre, specialized personnel who can calculate import benefits, analyze overseas country differences, and manage the complexities of international sourcing (Katsikeas & Dalgic, 1995). Internal-foreign barriers relate mainly to the firm’s purchasing strategy as regards foreign sources of supply. The perception that buying from abroad involves high business risks/costs is a serious impediment, and arises from such factors as legal requirements, political instability, and currency devaluations (Dobler et al., 1990). Differences in product standards/specifications between the home and foreign markets also constitute barriers to importing, which may create serious delays in delivery time and raise costs prohibitively (Paliwoda & Vardar, 1988; Ghymn, Srinil & Johnson, 1991; Ghymn & Jacobs, 1993; Katsikeas & Dalgic, 1995). Another barrier relating to the product itself is the importing firm’s inability to obtain adequate postpurchase service from its overseas suppliers, particularly for consumer durables and industrial goods (Norquist et al., 1992; Ghymn & Jacobs, 1993; Katsikeas & Dalgic, 1995). This problem is accentuated by the large geographic distances involved in international purchasing, which make it difficult to provide an immediate and lowcost service for imported products. Although one of the principal motives for sourcing from abroad is to secure satisfactory prices from foreign suppliers, difficulties can arise, mainly due to higher freights and excessive custom duties (Ghymn et al., 1991; Ghymn & Jacobs, 1993; Katsikeas & Dalgic, 1995). A final barrier in this group refers to the difficulty of locating and obtaining reliable suppliers from overseas sources, a task often complicated by resource constraints, lack of information, and communication problems (Paliwoda & Vardar, 1988; Ghymn et al., 1991; Ghymn & Jacobs, 1993). Notably, in the context of exporting, finding suitable partners abroad is one of the most frequently cited export barriers (e.g., Tesar & Tarleton,

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1982; Yaprak, 1985; Kaynak, Ghauri & Olofsson-Bredenlow, 1987; Cheong & Chong, 1988). The external-domestic category covers problems associated with the domestic environment, but outside the control of the individual importing firm. Complicated documentation and procedures are a serious obstacle encountered by exporters (Rabino, 1980; Kedia & Chhokar, 1986; Barker & Kaynak, 1992), and there are indications that this barrier may also apply to importers (Keown, 1985; Ghymn et al., 1991; Min & Galle, 1991; Katsikeas & Dalgic, 1995). The degree of difficulty presented by this barrier is not uniform, but will depend on the firm’s overseas experience and the particular domestic import administration procedures (Beardon, 1985). Another external-domestic obstacle refers to inadequate transportation, communication and other infrastructural facilities, which can seriously affect the purchasing cost and delivery time of goods purchased from abroad (Ghymn et al., 1991; Min & Galle, 1991; Katsikeas & Dalgic, 1995). An additional problem relates to the lack of government assistance and incentives given to firms planning to embark on or already engaged in import activities (Gripsrud & Benito, 1995). One would expect government assistance to importers to be negligible, since importing is usually regarded as undesirable economically—mainly because it is a drain on foreign exchange reserves, limits domestic growth possibilities, and increases national dependence on alien factors (Korhonen et al., 1996). High tariff and non-tariff barriers, such as import duties, quantitative restrictions, and government procurement also constitute serious impediments to international purchasing, substantially decreasing the competitiveness of imported goods in the home market (Keown, 1985; Paliwoda & Vardar, 1988; Ghymn et al., 1991; Min & Galle, 1991; Katsikeas & Dalgic, 1995). Similar effects—negatively affecting product availability and cost—can also be caused by a number of other rules and regulations (e.g., trade sanctions, special taxes, and import licences) imposed by the domestic government in an attempt to restrict imports (Ghymn et al., 1991; Ghymn & Jacobs, 1993; Katsikeas & Dalgic, 1995). Interestingly, this impediment has also become a serious concern for exporting firms, as shown by the large number of studies investigating it, as well as the high rankings it has received in terms of export obstruction (Groke & Kreidle, 1967; Kaynak & Kothari, 1984; Rao, 1990). The external-foreign group encompasses a series of barriers found in the overseas environment and which are outside the importing firm’s control. Unfamiliarity with foreign business practices, such as negotiation procedures, friendship patterns and ethical standards, is one such problem, and is a major source of psychological distance between buyers and sellers in international markets (Monczka & Giunipero, 1984; Ellram, 1991; Katsikeas & Dalgic, 1995). Cultural differences between the buyer and his/her trading partners abroad is a serious determinant of import success or failure, albeit frequently overlooked (Monczka & Giunipero, 1984; Ellram, 1991; Frear, Metcalf & Alguine, 1992). Especially important are language difficulties, which often lead to miscommunications with foreign suppliers (Baily & Farmer, 1990). Another cultural-bound barrier concerns differences in habits/attitudes, particularly in relation to products and their usage. Although this obstacle has not been extensively researched, the prevailing contention is that such differences are con-

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ducive to marketing mix adaptations (Ellram, 1991). Poor/deteriorating economic conditions abroad can also obstruct international purchasing, especially if this affects the cost of imported goods (Paliwoda & Vardar, 1988). An additional disincentive, negatively affecting final selling prices, refers to unfavourable exchange rates between the home currency and that of the firm’s trading partners (Monczka & Giunipero, 1984; Paliwoda & Vardar, 1988; Ellram, 1991; Min & Galle, 1991; Katsikeas & Dalgic, 1995). Another element, which can frequently add significant risk and uncertainty to international purchasing transactions, is the high level of political instability prevailing in certain foreign sources (Monczka & Giunipero, 1984; Min & Galle, 1991). Finally, the presence of keen competition in the international marketplace may act as a serious impediment for the purchasing firm, especially when many companies compete for the same sources of supply (Beardon, 1985). Notably, the intensity of competition in overseas markets poses a serious problem for exporting firms, particularly those of smaller size (Alexandrides, 1971; Kaynak & Kothari, 1984; Kar¨ ¨ afakioglu, 1986; Dichtl, Koglmayr & Muller, 1990; Kaleka & Katsikeas, 1995). The mere existence of the above-mentioned barriers is not sufficient to impede the firm’s involvement in import activities; rather, this will depend on background factors underlying their activation (Barrett & Wilkinson, 1985). In fact, the severity of a barrier often will differ according to variations in these background forces. A set of these forces refers to the characteristics of the buying organization per se, which, however, have been totally overlooked within the context of import research (Leonidou, 1998a). But even in the field of exporting, the role of firm characteristics in formulating barrier perceptions has been only partially researched. The few studies available have focused solely on company size (Barker & Kaynak, 1992; Katsikeas & Morgan, 1994; Leonidou, 1995b), product nature (Weekly & Bardi, 1975; Leonidou, 1995b), industry type (Alexandrides, 1971; Kedia & Chhokar, 1986), or business experience (Leonidou, 1995b).

3. Research methodology In order to investigate the factors obstructing international purchasing, a special study was conducted in Cyprus. Cyprus provides a typical example of an economy which is heavily dependent on foreign trade, with imports estimated to amount to approximately half of its gross national product (Central Bank of Cyprus, 1998).3 Imports into the island have increased more than tenfold during the period 1976– 1996, reaching US$4.09 billion in 1996, with the European Union—particularly the United Kingdom, Italy, Greece, and Germany—being the principal source of its imports (Cyprus Ministry of Commerce, Industry and Tourism, 1998). This can largely be attributed to the association agreement between Cyprus and the European 3 This growing dependence of Cyprus on imports has been ascribed, on the supply side, to shortages in domestic resources, the underdeveloped manufacturing sector, and the gradual liberalization of trade, and on the demand side, to the rising living standards of the indigenous population, the rapid growth of tourism in the island, and the inelastic demand for certain foreign brands (World Bank, 1988).

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Union, and the gradual abolition of customs duties between the two parties. In terms of structure, Cyprus imports had the following breakdown in 1996: intermediate input (39.9%), consumer goods (21.9%), transportation equipment (11.0%), capital goods (11.0%), fuels and lubricants (9.1%), and miscellaneous (7.1%). Importing firms were identified from the most recent directory of the island, which lists the entire population—approximately 1283 units—classified according to product category (Cyprus Chamber of Commerce and Industry, 1994). All firms were systematically contacted by telephone to explore the possibility of participating in the study, provided that three basic criteria were met. Eligible firms should: (1) be importing/trading organizations purchasing goods from abroad and subsequently reselling them in the domestic market; (2) have an indigenous ownership, rather than being controlled by a foreign firm or being a subsidiary of a multinational organization; and (3) be engaged in the trade of manufactured products, since agricultural, mineral, and other non-manufactured goods have an idiosyncratic import status. Only 669 firms met these eligibility criteria, of which 126 firms (18.8%) responded favourably. Major reasons for non-participation in the study included: difficulty in establishing contact due to company closures or change of address; unwillingness to participate due to time constraints; absence of the responsible manager; and reluctance to disclose information to outsiders.4 Of those firms that were willing to participate, the average number of years in business was 33.27, while the number of full-time personnel was 41.29. The mean number of suppliers of these firms was 25.46, from whom 57.76 orders had been placed on average during the previous year. On average, each importer bought from 5.92 foreign countries and handled 14.74 product lines. Moreover, 75% of the respondents focused mainly on consumer products, while the remainder (25%) handled industrial goods. With reference to financial indicators, the mean annual sales turnover of the participant companies was US$2.12 million, with business profits amounting to US$0.29 million. Personal interviews were conducted with individuals in each of the responding firms who had primary responsibility for international purchasing operations. They were based on a structured questionnaire consisting of three parts: the first gathered data on the firm’s history and its engagement in importing; the second focused on the factors obstructing the company’s ongoing import operations; while the purpose of the last part was to identify the demographic profile of the responding organizations.5 Because most of the literature on trade barriers derives from American and English sources, the questionnaire was originally written in English. It was first translated into Greek and then retranslated by a professional translator back into English in order to make certain that there were no communication problems caused by 4 To check for non-response bias, responding and non-responding firms were compared and contrasted based on three profile characteristics—namely, company size, geographic location, and product category— using the Wilcoxon’s distribution-free rank sum test, revealing no significant differences. 5 The questionnaire included an additional section on the factors stimulating the development of international purchasing activities, the results of which have been analyzed within the context of other articles written on the subject (Leonidou, 1997, 1998b).

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cultural differences. To ensure its workability—in terms of structure, comprehensiveness, and timing, the questionnaire was pre-tested with six import managers who recommended some minor alterations. The full-scale study took place in 1996 and covered all regions of the governmentcontrolled area of the island. Interviews were held after an appointment was fixed by telephone, although a few were carried out without notice due to difficulties in establishing prior contact with the key informant. In most cases, interviewees were the owners of the importing organizations, while in others they held the position of purchasing or import manager. Gathering information from more than one informant in the same organization and then assessing the equivalence of their responses was deemed unnecessary due to the centralized management system of firms in Cyprus.6 Despite time pressures, participant managers were very cooperative and informative, especially as this study provided the first venue for discussing their importing problems. The completed questionnaires were edited on a systematic basis, resulting in only 100 being suitable for data processing purposes.

4. Operationalization and measurement of variables The barriers used in this study were initially extracted after a systematic review of the pertinent literature on importing, and subsequently verified with input from exporting.7 Altogether, a list of 20 items was compiled covering the following areas: locating overseas sources; working capital constraints; inadequate/untrained staff; business risks/costs abroad; product standards/specifications; post-purchase service; securing satisfactory prices; obtaining reliable suppliers; import documentation/procedures; infrastructural facilities; government assistance/incentives; tariff/non-tariff barriers; import rules/regulations; foreign business practices; cultural differences; customer habits/attitudes; economic conditions abroad; foreign exchange rates; political instability/risk; and keen competition. All items were measured on a five-point Likert scale, assessing the respondent’s level of agreement or disagreement that the specific obstacle had a serious inhibiting impact on ongoing import operations.8 To adequately determine the relevance of firm characteristics in shaping import barrier perceptions, a wide range of items were included in the analysis. These comprised the company’s number of employees, sales turnover, size of assets, corporate

6 The existence of a highly centralized management can be attributed to the small size, family-controlled nature, and lack of separation between ownership and control, which characterizes most companies in Cyprus. 7 To check both the conceptual and practical validity of the compiled list of barriers, a focus group discussion with five academics and managers specializing in importing was undertaken, during which each barrier was thoroughly analyzed and discussed in order to ascertain its suitability for the full-scale study. 8 The initial idea was to find out which barriers were encountered by participant firms in each of the countries from which they imported their products; however, this idea was abandoned due to the fact that the questionnaire was becoming too repetitive, tedious, and time-consuming.

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profits, type of products handled, number of product lines, number of years in business, number of source countries, and number of suppliers. Some of the above organizational aspects, such as those referring to firm size, business experience, and source expansion strategy, have also been used in the exporting literature, while the remainder were used for the first time in this research. Respondents were asked to provide information on the above aspects, based on the company’s situation during the previous year. Most of the firm characteristics were measured on ratio scales, while in the case of items demanding confidentiality—such as those referring to financial aspects—interval measurement scales were additionally employed.

5. Inhibiting effect of barriers on import behaviour Table 2 presents the results of the study with respect to the inhibiting effect of each of the 20 barriers on the import behaviour of the participant firms. An attempt is also made to identify differences in barrier perceptions according to the principal area of imports. In this respect, two major groups of importers were formed: those primarily purchasing their products from the European Union (n ⫽ 46) and those buying mainly from non-European Union countries (n ⫽ 54).9 To check for variations between these two groups, the Student t-test for two-independent samples was employed, revealing statistically significant differences in only one-fifth of the import barriers examined. Analysis revealed two barriers relating to the cost of purchasing from abroad to have the greatest impact: the inability to secure satisfactory prices from foreign suppliers and the imposition of high tariff and non-tariff barriers on imported goods. Both barriers exerted a negative effect on the firm’s price competitiveness in the home market, especially in light of the fact that Cypriot customers are very priceconscious. Interestingly, the problems in securing better prices from abroad were stressed more by importers purchasing mainly from European countries (t ⫽ 2.13, p ⫽ 0.04), perhaps reflecting the high cost structures and mark-ups prevailing in their economies (Terpstra & Sarathy, 1997). Following very closely is the existence of keen competition in purchasing goods from abroad and the inadequate transportation/infrastructural facilities on the island, both seriously hurting sourcing costs and delivery performance. Ranked fourth was the shortage of working capital to fund the import activity. This problem was mainly associated with the inland’s underdeveloped financial market, as well as the government’s restrictive monetary policy in force at the time the study took place. Three barriers were ranked in fifth position, each having a mean score slightly above the average. The first relates to unfavourable foreign exchange rates with overseas supplier countries—particularly for importers dealing with the European Union (t ⫽ 2.11, p ⫽ 0.04), which suppresses profit margins or increases final prices

9 For a firm to be classified into one of the two groups, it had to buy at least two-thirds of its total import volume from countries in the specific group.

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Table 2 Inhibiting effect of barriers on import behaviour Import barriers

Internal-domestic barriers Inadequate or untrained import staff Limited info to identify/analyze foreign sources Shortage of working capital to finance imports Internal-foreign barriers Different product standards/specifications Difficulty in locating/obtaining overseas suppliers High business risks/costs in buying from abroad Inability to secure satisfactory prices Inability to obtain technical/post-purchase service External-domestic barriers Difficulty in handling import document/procedures Inadequate transportation/infrastructural facilities High tariff and non-tariff barriers Lack of government assistance/incentives Restrictions imposed by rules/regulations on imports External-foreign barriers Poor/deteriorating economic conditions abroad Different customer habits/attitudes Diverse cultural traits/language abroad High political risk/instability abroad Keen competition in overseas source countries Unfamiliarity with foreign business practices Unfavourable foreign exchange rates a

Alla (n ⫽ 100)

European Union (n ⫽ 46)

NonEuropean (n ⫽ 54)

t-valueb p-value

2.55 3.05

2.69 3.20

2.42 2.92

0.96 1.02

0.34 0.31

3.40

3.56

3.26

1.03

0.30

2.80 2.96

2.81 3.18

2.79 2.77

0.06 1.37

0.95 0.17

3.17

3.44

2.94

1.84

0.07

3.60 3.29

3.89 3.50

3.34 3.09

2.13 1.32

0.04 0.19

2.19

2.27

2.13

0.63

0.53

3.49

3.51

3.48

0.12

0.90

3.60 2.88 3.29

3.69 3.09 3.30

3.52 2.70 3.24

0.66 1.39 0.24

0.51 0.17 0.81

2.36

2.56

2.19

1.52

0.13

2.19 1.83 2.54 3.54

2.18 1.78 2.75 3.44

2.20 1.87 2.35 3.63

⫺0.10 ⫺0.47 1.58 ⫺0.83

0.92 0.63 0.11 0.41

2.32

2.55

2.13

1.90

0.06

3.29

3.52

3.09

2.11

0.04

Based on a five-point scale ranging from 1 ⫽ strongly disagree to 5 ⫽ strongly agree. Based on a two-tail Student t-test for two independent samples.

b

to end-users. The second barrier refers to home rules and regulations imposed on imported goods, for example, excise duties, luxury taxes, and contributions to special funds. The third concerns the inability to obtain post-purchase service from foreign suppliers, largely attributable to the small size of the home market. Another barrier, with an above-average impact, is the high risks and costs associated with import

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activity; surprisingly, this factor exerted a strong effect among companies sourcing their products from the European Union (t ⫽ 1.84, p ⫽ 0.07), in spite of the smaller geographical and psychological distance from countries in this region. The limited availability of information to locate/analyze overseas sources was ranked in seventh position, closely followed by the difficulty in locating/obtaining overseas suppliers. These two barriers indicate inefficiencies in the information system of the importing firm, as well as lack of governmental and other parastatal organization information assistance. However, the obstructing role of these factors was not as high as that observed in other studies examining the problems encountered ¨ by exporters (for a review, see Miesenbock (1988) and Leonidou (1995a)). Lack of government assistance/incentives to importers exhibited a below-average impact, in spite of the fact that state programmes to assist imports are virtually absent in Cyprus.10 In tenth position was the need to adapt products to local standards and specifications; the relatively low rank accorded to this barrier could be ascribed to the gradual harmonization of the island’s legislation on international product standards. Staff problems did not appear to be of serious concern to participant companies, as indicated by the low mean score this barrier received. Handling international documentation/procedures had a minimal obstructing effect since knowledge of these procedures is generally a prerequisite to undertaking import operations. The remaining five barriers were also ranked low, these being high political risk/instability abroad, poor/deteriorating economic conditions overseas, unfamiliarity with foreign business practices, different customer habits/attitudes, and diverse cultural traits/language. All these obstacles fall in the external-foreign category, implying that importers are not greatly concerned by the environmental idiosyncrasies prevailing in overseas source countries.11 In fact, this is true irrespective of the principal source of imports, the only exception being problems with understanding overseas business practices, which were emphasized more by firms purchasing mainly from countries of the European Union (t ⫽ 2.11, p ⫽ 0.04). 6. Underlying dimensions of import barriers To identify the underlying dimensions of import barriers, a principal components analysis with varimax orthogonal rotation was employed (see Table 3).12 This produced a six-dimensional structure, explaining 76% of the total variance. Items incor10 In contrast, a number of other countries have special programmes to facilitate imports, particularly from developing countries. Such programmes include the supply of trade information, trade fair participation, and the organization of seminars (Gripsrud & Benito, 1995). 11 To determine the relative importance of the four categories of import barriers, a one-way ANOVA test was performed, indicating statistically significant differences (F ⫽ 7.69, p ⫽ 0.00). By applying the ´ Schefe test, external-foreign barriers were shown to vary consistently with each of the remaining three categories (p ⬍ 0.05), which, however, showed no major differences among themselves. 12 The sample size of this study (n ⫽ 100) enables a factor analysis to be undertaken, because as a general rule the minimum should have at least five times as many observations as there are variables to be analyzed (Hair, Anderson, Tatham & Black, 1995, p. 373).

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Table 3 Results of the principal components analysis of import barriers Factor names (statistics)a

Dominant variablesb

Factor loadings

Communalities

Adverse foreign conditions (␭ ⫽ 7.90, s2 ⫽ 41.60, ␣ ⫽ 0.87, x¯ ⫽ 2.95)

High business risks/costs in buying from abroad Limited info to identify/analyze foreign sources Difficulty in locating/obtaining foreign suppliers Unfavourable foreign exchange rates Poor/deteriorating economic conditions abroad High political risk/instability abroad

0.67

0.81

0.69

0.71

0.76

0.77

0.88

0.80

0.68

0.69

0.69

0.74

0.68

0.74

0.71

0.72

0.79

0.74

0.67

0.68

0.88

0.79

Different cultural traits/language abroad

0.85

0.74

Import trade restrictions (␭ ⫽ 1.29, s2 ⫽ 6.80, ␣ ⫽ 0.69, x¯ ⫽ 3.42)

Restrictions imposed by rules and regulations High tariff and non-tariff barriers

0.74

0.73

0.84

0.79

Special standards/procedures (8 ⫽ 1.03, s2 ⫽ 5.40, ␣ ⫽ 0.66, x¯ ⫽ 2.52)

Different product standards/specifications Difficulty in handling documentation/procedures

0.79

0.76

0.71

0.78

Competition-related problems (␭ ⫽ 0.99, s2 ⫽ 4.20, ¯ ␣ ⫽ 0.70, x ⫽ 3.57)

Keen competition in overseas source countries Inability to secure satisfactory prices

0.89

0.85

0.65

0.79

Home country impediments (␭ ⫽ 2.07, s2 ⫽ 10.90, ␣ ⫽ 0.81, x¯ ⫽ 3.27)

Business/cultural diversity (␭ ⫽ 1.35, s2 ⫽ 7.10, ␣ ⫽ 0.68, x¯ ⫽ 2.14)

Shortage of working capital to finance imports Lack of government assistance/incentives Inadequate transportation/infrastructural facilities Unfamiliarity with foreign business practices Different customer habits/attitudes

¯ a Where ␭ ⫽ eigenvalue, s2 ⫽ % of variance explained, ␣ ⫽ Cronbach’s alpha, x ⫽ compound mean score. b ‘Inadequate/untrained staff’ and ‘Inability to obtain technical/post-purchase service’ were excluded from this analysis due to low individual loadings.

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porated in the resulting scales loaded at 0.65 or above, apart from ‘inadequate/untrained staff’ and ‘inability to obtain technical/post-purchase service’, which had to be excluded from the analysis due to low individual loadings. To ascertain the degree of correlation existing on average among items on each specific scale, the Cronbach’s alpha coefficient was estimated, revealing values ranging from ␣ ⫽ 0.66 to ␣ ⫽ 0.87.13 To estimate the composite inhibiting effect of each emerging dimension, additive scales were calculated, indicating values ranging from x¯ ⫽ 2.14 ¯ to x ⫽ 3.57. The first factor, adverse foreign conditions, includes the following six items: perception of high business risks/costs abroad, limited information to locate/analyze foreign sources, difficulty in locating/obtaining overseas suppliers, unfavourable foreign exchange rates, poor/deteriorating economic conditions, and high political risk/instability in source countries. The common denominator among these barriers is their referral to the risks, costs, and other adversities involved in purchasing goods from foreign suppliers, due to the unfamiliar, complex, and turbulent international business environment (Heinritz et al., 1991; Norquist et al., 1992). This situation is aggravated by the fact that many importing firms neither possess nor have access to sufficient, accurate, and timely information that would help reduce uncertainty when making purchasing decisions. The second dimension is called home country impediments and conceptually connects three barriers deriving from the importer’s home country: shortage of working capital to finance imports, lack of government assistance/incentives, and inadequate transportation/infrastructural facilities. Although working capital constraints constitute a problem internal to the firm, these are largely connected with the inefficiencies of the island’s monetary system. State assistance/incentives also indicate the orientation that the government economic policies, which, as indicated earlier, do not support import activity. Finally, infrastructural problems represent a country’s weakness as regards providing adequate facilities and services to importers. Business/cultural diversity is the third factor, linking three barriers to importing: unfamiliarity with foreign business practices, different customer habits/attitudes, and diverse cultural traits/language. Clearly, these items represent certain elements of the business and cultural environment prevailing in overseas source countries which differ from those of the home market. The prospective purchaser must both recognize and accommodate these differences, if misunderstandings, friction and frustration with overseas suppliers is to be avoided (Beardon, 1985; Baily & Farmer, 1990). The fourth dimension, import trade restrictions, comprises two highly related import barriers, home rules and regulations, and high tariff and non-tariff barriers. These two variables are conceptually consistent, since they represent government restrictions imposed on imported goods in an attempt to reduce trade deficits and protect the indigenous manufacturing sector (Norquist et al., 1992). Such restrictive measures are widely applicable in the case of Cyprus, which both suffers from per-

13 These coefficients are satisfactory, taking into consideration the criterion of Nunally and Bernstein (1994) for construct validation research, particularly in light of the exploratory status of this research.

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sistent balance of trade deficits and has an underdeveloped production base (Central Bank of Cyprus, 1998). The fifth factor, special standards/procedures, is heavily loaded on two other items that express difficulties in adopting different standards and procedures necessitated by the import function. These are different product standards/specifications and difficulties in handling import documentation procedures. The former shows problems in the effective and efficient adaptation of imported products with respect to home country legislation (Terpstra & Sarathy, 1997; Czinkota & Ronkainen, 1998). The latter refers to compliance with the procedural intricacies required by the local customs authorities when purchasing goods from abroad (Baily & Farmer, 1990; Norquist et al., 1992). The final dimension, competition-related problems, incorporates the remaining two barriers to importing, namely the keen competition among purchasers in international sources of supply and the difficulties in securing satisfactory prices from these sources. These are highly connected barriers in the sense that price is one—and perhaps the most important—aspect over which importing firms compete in the international marketplace. Other aspects include reliability and security of supply, delivery performance, and product uniqueness (Fagan, 1991). The fact that both these barriers were ranked highly in this study resulted in the emerging factor showing the strongest obstructing impact on import behaviour.

7. Impact of firm characteristics on import barrier dimensions The above analysis has shown that the six-dimensional structure provides a sound conceptual base for investigating the relevance of firm characteristics on barriers to importing. A series of regression analysis tests were conducted to examine the association of each of the eight company characteristics employed in this study (number of employees, sales turnover, size of assets, corporate profits, number of product lines, number of years in business, number of source countries, and number of suppliers) with each of the six import barrier dimensions emerging from the factor analysis (adverse foreign conditions, home country impediments, business/cultural diversity, import trade restrictions, special standards/procedures, and competitionrelated problems).14 The results of this exercise are presented in Table 4, with significant levels set at ␣ ⱕ 0.10.15 14 The choice of regression analysis in finding the impact of firm characteristics on import barrier dimensions was found more appropriate because: (1) most of the firm characteristics employed were measured on ratio scales; and (2) the compound mean score for each of the emerged import barrier dimensions was the average of the mean values received by the barriers loaded in each of them, which were measured on ordinal scales (Lapin, 1993). 15 One additional company characteristic examined was the nature of goods—whether consumer or industrial—handled by the importing organization which could not be used in the regression analysis due to the fact that this was measured on nominal scales. However, using a Student t-test, this parameter was found to play a significant differentiating role only as regards import trade restrictions, with this barrier stressed more by importers of consumer goods (t ⫽ 1.77, p ⬍ 0.01).

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Table 4 Firm characteristics and import barrier dimensions-regression analysis resultsa Firm characteristics

Adverse foreign conditions

Home Business/ country cultural impediments diversity

Import trade restrictions

Special standards/ procedures

Competitionrelated problems

Years in business

b ⴝ ⴚ0.22

b ⴝ ⴚ0.17

b ⴝ ⴚ0.20

b ⫽ ⫺0.15

b ⴝ ⴚ0.24

b ⫽ ⫺0.04

t ⴝ ⴚ2.18 p ⴝ 0.03**

t ⴝ ⴚ1.73 p ⴝ 0.09*

t ⴝ ⴚ1.99 p ⴝ 0.05**

t ⫽ ⫺1.52 p ⫽ 0.13

t ⴝ ⴚ2.41 p ⴝ 0.02**

t ⫽ ⫺0.45 p ⫽ 0.67

b ⴝ ⴚ0.27

b ⴝ ⴚ0.24

b ⫽ ⫺0.05

b ⫽ ⫺0.04

b ⫽ ⫺0.03

b ⫽ ⫺0.08

t ⴝ ⴚ2.71 t ⴝ 2.39 p ⴝ 0.01*** p ⴝ 0.02**

t ⫽ ⫺0.46 p ⫽ 0.64

t ⫽ 0.36 p ⫽ 0.72

t ⫽ ⫺0.30 p ⫽ 0.76

t ⫽ ⫺0.78 p ⫽ 0.43

b ⴝ ⴚ0.18 t ⴝ 1.76 p ⴝ 0.08*

b ⫽ ⫺0.12 t ⫽ ⫺1.17 p ⫽ 0.24

b ⴝ ⴚ0.22 t ⴝ ⴚ2.20 p ⴝ 0.03**

b ⫽ ⫺0.03

b ⴝ ⴚ0.18

b ⫽ ⫺0.15

b ⫽ ⫺0.07

t ⴝ ⴚ3.40 t ⴝ ⴚ4.44 t ⫽ ⫺0.26 p ⴝ 0.00*** p ⴝ 0.00*** p ⫽ 0.79

t ⴝ ⴚ1.80 p ⴝ 0.07*

t ⫽ ⫺1.48 p ⫽ 0.14

t ⫽ ⫺0.72 p ⫽ 0.47

b ⴝ ⴚ0.42

b ⫽ ⫺0.06

b ⴝ ⴚ0.22

b ⫽ ⫺0.10

b ⫽ ⫺ 0.10

t ⴝ ⴚ4.46 t ⴝ ⴚ5.06 t ⫽ ⫺0.61 p ⴝ 0.00*** p ⴝ 0.00*** p ⫽ 0.54

t ⴝ ⴚ2.20 p ⴝ 0.03**

t ⫽ ⫺0.99 p ⫽ 0.32

t ⫽ ⫺0.99 p ⫽ 0.32

b ⴝ 0.31

b ⴝ 0.25

b ⫽ ⫺0.06

b ⫽ ⫺0.01

t ⴝ 3.17 t ⴝ 3.74 t ⫽ 0.65 p ⴝ 0.00*** p ⴝ 0.00*** p ⫽ 0.51

t ⴝ 2.51 p ⴝ 0.01**

t ⫽ 0.57 p ⫽ 0.57

t ⫽ ⫺ 0.07 p ⫽ 0.95

b ⫽ 0.14

b ⫽ 0.14

b ⫽ 0.01

b ⫽ 0.12

b ⫽ 0.14

b ⫽ ⫺0.02

t ⫽ 1.35 p ⫽ 0.18

t ⫽ 1.42 p ⫽ 0.16

t ⫽ 0.08 p ⫽ 0.93

t ⫽ 1.18 p ⫽ 0.24

t ⫽ ⫺1.40 p ⫽ 0.16

t ⫽ ⫺0.19 p ⫽ 0.85

b ⴝ 0.18

b ⫽ 0.14

b ⫽ ⫺ 0.05 b ⫽ 0.11

b ⫽ ⫺0.14

b ⫽ ⫺0.04

t ⴝ 1.77 p ⴝ 0.08*

t ⫽ 1.37 p ⫽ 0.17

t ⫽ ⫺0.54 p ⫽ 0.59

t ⫽ ⫺1.39 p ⫽ 0.17

t ⫽ ⫺0.36 p ⫽ 0.72

Number of employees

Sales turnover b ⴝ ⴚ0.38 b ⴝ ⴚ0.42 b ⫽ ⫺0.01 t ⴝ ⴚ3.98 t ⴝ ⴚ4.53 t ⫽ 0.01 p ⴝ 0.00*** p ⴝ 0.00*** p ⫽ 0.99* Corporate assets

Business profits

Number of product lines

Number of countries

Number of suppliers

a

b ⴝ ⴚ0.34

b ⴝ ⴚ0.41

b ⴝ ⴚ0.46

b ⴝ 0.36

b ⫽ 0.07

t ⫽ 1.01 p ⫽ 0.27

Statistically significant at * ⫽ 0.10, ** ⫽ 0.05, *** ⫽ 0.01.

Among company characteristics, business experience was revealed as a strong determinant of import barrier perceptions, as it was significantly associated with four dimensions, namely adverse foreign conditions (p ⫽ 0.03), home country impediments (p ⫽ 0.09), business/cultural diversity (p ⫽ 0.05), and special standards/procedures (p ⫽ 0.02). Notably, the inverse relationship exhibited by this firm characteristic and the above barriers implies that less experienced importers are more sensitive to international business problems. However, both import trade restrictions and competition-related problems constitute serious impediments for importers irrespective of the number of years they have been in business.

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Sales turnover—one of the most common measurements of company size—also exhibited a strong link with four import barriers, namely adverse foreign conditions (p ⫽ 0.00), home country impediments (p ⫽ 0.00), import trade restrictions (p ⫽ 0.08), and competition-related problems (p ⫽ 0.03). These barriers were negatively associated with the company’s sales turnover, as were the remaining barriers that did not show statistically significant results. These findings can be interpreted from two different causal perspectives: either small importing firms with a low sales turnover lack the required resources to cope with international purchasing barriers, or these barriers negatively influence the company’s ability to sell its goods in the home market—due, for example, to higher prices, slow delivery, and interrupted supply— thereby restricting its sales potential. The number of product lines handled by the importing organization had statistically significant links with adverse foreign conditions (p ⫽ 0.00), home country impediments (p ⫽ 0.00), and import trade restrictions (p ⫽ 0.01). These associations were positive, indicating that the wider the range of products handled by importers, the more severely problems are perceived. The non-significant results shown by business/cultural differences and special standards/procedures are somewhat paradoxical, since one would expect firms with multiple product lines to be seriously affected by such product-related barriers. The negative association observed in regressing this company characteristic with competition-related problems could be explained by the fact that firms handling few products experience greater risk in competing with other purchasers in the international marketplace. Corporate profits were found to be significantly associated with three barriers, which exert pressure toward increasing purchasing costs: adverse foreign conditions (p ⫽ 0.00), home country impediments (p ⫽ 0.00), and import trade restrictions (p ⫽ 0.03). Surprisingly, this financial parameter showed no significant association with competition-related problems, which (because it involves strong competition abroad and difficulties in securing satisfactory prices) can also severely damage corporate profits. Similar findings were revealed when examining the impact of company assets (another proxy of firm size) on import barriers. Specifically, significant results were observed for adverse foreign conditions (p ⫽ 0.00), home country impediments (p ⫽ 0.00), and import trade restrictions (p ⫽ 0.07). These findings imply that firms with limited resources are more vulnerable to barriers adversely affecting international purchasing costs. The size of company assets also exhibited inverse associations with the remaining three import barriers, although these did not prove to be statistically valid. The number of persons employed by the firm has been used as an alternative measure of firm size (Leonidou, 1998a). However, this company characteristic was significantly related with only two import barrier dimensions, adverse foreign conditions (p ⫽ 0.01) and home country impediments (p ⫽ 0.02). Thus, firms with few employees are generally more sensitive to importing problems that can result in a climate of uncertainty when doing business with overseas suppliers. The number of company personnel was also negatively linked with the remaining barriers, even though weak results were obtained. These findings can be attributed to the limited

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expertise, competence, and knowledge of these issues, and also to the resource constraints—such as financial, marketing, and information—which are often endemic to small companies. The number of company suppliers was relevant only to the barrier of adverse foreign conditions (p ⫽ 0.08), although the level of statistical significance was not very high. This result implies that the greater the number of suppliers with whom the importing firm has transactions, the stronger the impact of problems associated with risks, costs, and other environmental adversities linked to international purchasing. This is to be expected, however, since dealing with many suppliers usually denotes involvement in manifold foreign business environments, which are diverse, complex, and, in many instances, risky (Heinritz et al., 1991; Norquist et al., 1992). This firm characteristic also showed positive associations with home country impediments and import trade restrictions, but had inverse links with the remaining three barriers. The results with regard to these barriers were not statistically significant to warrant in-depth interpretation. The last company parameter refers to the number of countries from which the importing firm sources its products. Despite evidence in the exporting literature that firms using a market concentration strategy face different problems than those adopting a spreading approach (Katsikeas & Leonidou, 1996), this study revealed no significant relationship between source country expansion strategy and any of the six import barrier dimensions. This finding could be justified on the grounds that most Cypriot importers buy from a limited number of countries, thereby reducing any variations between concentrators and spreaders.

8. Summary and conclusions One conclusion that can be drawn from this study is that Cypriot importers/resellers are only modestly affected by factors obstructing international purchasing. Although this is encouraging news, the dynamic nature of import problems implies that importers should not take a passive stance, but rather should constantly monitor, appraise, and search for solutions to them. Interestingly, the relative impact of obstacles in this study appeared to vary from that observed for exporting, reflecting perhaps the different degree of emphasis attached to international business by importers and exporters.16 The over-sensitivity observed for obstacles hindering firm competitiveness—especially in relation to final selling prices—is to be expected, particularly considering the intense competition currently found in both domestic and international markets (Douglas & Craig, 1995). On the other hand, the low importance attached to external-foreign obstacles can be attributed to the familiarity gained over years of exposure to foreign business environments. 16 The author acknowledges the relevance of an anonymous IBR reviewer’s comment that, although importing is a complementary function of exporting, the managerial motivations, competitive considerations, risk perceptions, and strategic orientations of importers may vary from those of exporters, thus causing differences in the nature and importance attached to international business barriers by each party.

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The fact that only a few obstacles varied significantly in relation to the principal source of imports, implies, prima facie, that country of origin has little effect in shaping barrier perceptions. However, a closer look at the results shows that these obstacles share some common points: (1) they are ranked high in terms of inhibiting impact on import behaviour; (2) they are associated mainly with the foreign rather than the domestic environment of the importing firm; (3) they have a direct or indirect negative effect on reselling prices; (4) they have mainly a country-specific rather than a generic status; and (5) they are emphasized more by firms importing mainly from the European Union. All these indicate that the source of imports, at least within the context of Cypriot importers, can have a discriminating effect on certain types of barriers, particularly those of a more foreign-oriented, country-specific, and price-sensitive nature. The results of the factor analysis revealed certain fundamental dimensions underlying import barriers. Interestingly, there is some consistency between the factors that emerged and the categorizations stipulated by the internal/external and domestic/foreign typologies. For instance, the barriers comprising import trade restrictions are of an external-domestic nature, business/cultural diversity is composed of external-foreign obstacles, while both competition-related problems and adverse foreign conditions consist essentially of foreign barriers. The fact that competition-related problems was the factor with the greatest impact confirms the view that the growing globalization of the world trading system has been responsible for increasing competitive pressures not only on manufacturers, but also on trade buyers (Heinritz et al., 1991). Moreover, the relatively high effect demonstrated by import trade restrictions denotes that, despite several rounds of multilateral negotiations among nations to liberalize international trade, there is still a long way to go before the complete abolishment of controls on imports. Firm characteristics were found to have some relevance on import barrier dimensions, particularly those referring to adverse foreign conditions, home country impediments, and import trade restrictions. However, their association with these specific dimensions is difficult to explain due to the multifarious nature of barriers comprising them. Both business experience and company size (expressed in terms of sales turnover, size of assets, and number of employees) were significantly and negatively related to most of the import barrier dimensions. This finding stresses the role of experiential knowledge and resource availability as a means of coping with foreign business problems and reducing uncertainty when dealing with overseas suppliers (Olson & Wiedersheim-Paul, 1978). Notably, these company parameters were found to play a similar role in the case of exporting organizations, although the nature of barriers affected was different (Katsikeas & Morgan, 1994; Leonidou, 1995b).

9. Managerial implications The strong emphasis placed on competition-related problems indicates that import managers should try to improve their competitiveness in purchasing from abroad. This could be achieved, for example, by taking the following courses of action: (1)

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setting up a sound information system within the importing organization that would improve alertness and responsiveness to purchasing opportunities arising in the international marketplace; (2) improving their knowledge and techniques in import operations by systematically attending courses, seminars, and workshops, specializing in such issues as purchasing strategy, physical distribution, and negotiating skills; (3) seeking consultative advice from experts in international purchasing, especially on matters that require specialized know-how and expertise; and (4) enhancing purchasing and bargaining power through collaboration with indigenous or foreign importers in the form of co-operatives, mergers, or strategic alliances. Perceived high levels of uncertainty and risk surrounding foreign business transaction should be reduced by illustrating to current and would-be importers, for example, the financial benefits gained from importing, the lucrative source opportunities in overseas countries, and the successful experience of other importing firms. Moreover, the fact that the participants of this study showed little concern for external-foreign barriers, such as those pertaining to the political, economic, and sociocultural environment prevailing in overseas source countries, is something which has to be questioned. In many instances, these parameters are often responsible for interrupting the flow of imported goods into the home market, thus negatively affecting delivery performance and product availability. Since these barriers were of greater concern for both small and inexperienced firms, more information assistance by government and other parastatal organizations—such as chambers of commerce, trade associations, and financial institutions—should be made available to them, in the form of country profiles, market studies, and statistical publications. The significant results for import trade restrictions and home country impediments stress the role of government authorities in providing assistance to importing firms, which is negligible at present in Cyprus. Public policy-makers should denounce the prevailing misconception that importing is harmful to the national economy, since the efficient and effective development of imports can actually determine the competitiveness of domestic exports and re-exports (Tookey, 1978).17 In fact, import promotion offices (IPOs) should be established, which would assist importers in locating overseas suppliers, participate in trade fairs, and provide legal advice (Gripsrud & Benito, 1995). Financial help, in the form of tax relief, low interest loans, and import insurance, would be particularly useful to Cypriot importers, as most suffer from serious cash-flow problems. To be effective, these government programmes should be designed to accommodate the specific needs of importing organizations, especially those that are new to the business and suffer from resource constraints.

17 In countries with open and trade-dependent economies, like Finland, it has been estimated that as much as 60% of the total imports are absorbed in the production of goods which are subsequently exported (Gripsrud & Benito, 1995).

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10. Future research directions Although this study has attempted to shed as much light as possible on the obstructing role of barriers on import behaviour, the results must be interpreted within the context of a number of limitations that further research could reduce or eliminate. Specifically, the following actions should be taken: 1. The fact that this research was conducted within a single country frame questions the generalizability of the findings. Replication studies in different environmental settings could clarify the role of home country-specific factors on import barrier perceptions. In this respect, it would be advisable to analyze countries with contrasting geographic locations, socio-economic levels and international trade involvement. 2. The ad hoc nature of this study implies that its results provide merely a snapshot of the inhibiting effect of barriers on import behaviour. However, because import barriers are dynamic phenomena, they require longitudinal research or, alternatively, the examination of the same panel of importers at different time intervals. Such studies could detect variations in the severity of import barriers related to changes in environmental, organizational, and other background forces. 3. This study has adopted a rather crude analytical approach in the sense that barriers to international purchasing were explored at the company, rather than the product/source venture level. Although difficult, such an approach could be useful in identifying differences in import barrier perceptions caused by product-specific and country-of-origin factors. 4. This research has focused on trading firms buying goods from abroad and subsequently reselling them to domestic buyers. Although this is the most common mode of importing, firms engaged in manufacturing or production type activities with different strategic considerations also pursue import activities. It would be enlightening, therefore, to compare and contrast the factors hindering the import behaviour of resellers with that of manufacturers. 5. As mentioned in the methodology section, in this study respondents were based in a single location. However, multinational corporations (MNCs) have the opportunity to maintain subsidiaries in multiple geographic points and engage in both internal and external global sourcing activities. Consequently, some empirical research should be directed to the problems faced by the purchasing departments of these subsidiaries, to compare internal and external sourcing. 6. Although the bulk of international trade concerns manufactured goods, it would be beneficial to investigate other more idiosyncratic product categories, such as commodities and services. With regard to the latter, there are indications that international trade activity has grown considerably during the last decade. 7. The list of firm characteristics used in this study could also be supplemented with other parameters, such as those referring to the structure, operation, and strategy of the importing organization. However, these characteristics constitute

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just one set of variables affecting managerial perceptions of barriers to importing. Decision-maker demographics, industry characteristics, and environmental forces might also shape import barrier perceptions, thus warranting examination. 8. The link between barriers and import performance should be further investigated, especially as this study has shown that corporate sales turnover and profits are closely associated with certain obstacles to international purchasing. In this respect, it would be interesting to classify importing firms into high and low performers based on a combination of qualitative and quantitative criteria, and determine any possible differences in the nature and severity of barriers. Undoubtedly, the implementation of the above research agenda would be timeand resource-consuming, and difficult for an individual researcher. Rather, it requires the collaboration of a multinational group of experts in the field, under the coordination of a central organizing body (such as the Institute of Purchasing and Supply in the United Kingdom or the National Association of Purchasing Management in the United States), and the financial and other support of an international organization (such as the World Trade Organization or the United Nations Conference on Trade and Development).

Acknowledgements The valuable insights and constructive comments of the Editor and the anonymous reviewers of the journal on earlier versions of this article are greatly appreciated.

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Dr L.C. Leonidou (Ph.D., M.Sc., University of Bath) is an associate professor at the School of Economics and Management of the University of Cyprus. Previously, he worked as a marketing analyst/consultant in various countries, where he was involved in numerous marketing research and consultancy projects. His current research interests are in the areas of international marketing/purchasing, relationship marketing, and marketing in emerging economies. He has published extensively in these fields and his articles have appeared in various journals, such as the European Journal of Marketing, European Management Journal, International Business

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Review, International Marketing Review, International Journal of Purchasing and Materials Management, International Small Business Journal, Journal of Applied Business Research, Journal of East-West Business, Journal of Global Business, Journal of Global Marketing, Journal of International Business Studies, Journal of International Marketing, Journal of International Marketing and Marketing Research, Journal of Managerial Psychology, Journal of Marketing Management, Journal of Marketing Practice, Journal of Strategic Marketing, Journal of the Market Research Society,Long Range Planning, Management Decision, Management International Review, Marketing and Research Today, Marketing Intelligence and Planning, and Spoudai. He has also contributed articles and chapters to several books on marketing and has written a book Marketing in Saudi Arabia.